UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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X☒ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended December 31, 20182021
or
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| ☐ | 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)
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| Delaware | | 94-0479804 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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2929 Walnut Street Philadelphia, Pennsylvania
| 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:
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| Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common Stock, $0.10 par value $0.10 per share | | FMC | | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES Yes x NO No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES Yes ¨ NO No x
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 Yes x NO 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 Yes x NO No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨
Indicate by check mark whether the registrant is 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.
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| Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
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Large accelerated filer | | X | | Accelerated filer | | |
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| Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
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| | | | Emerging growth company | | ☐ |
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| 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. | | |
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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES ¨ NO xYes ☐ No ☒
The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2018,2021, the last day of the registrant’s second fiscal quarter was $11,914,150,346.$13,858,737,802. The market value of voting stock held by non-affiliates excludes the value of those shares held by executive officers and directors of the registrant.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
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Class | | December 31, 2018 |
Common Stock, par value $0.10 per share | | 132,281,614 |
As of December 31, 2021, there were 125,699,479 of the registrant's common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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| DOCUMENT | | FORM 10-K REFERENCE |
Portions of Proxy Statement for 20192022 Annual Meeting of Stockholders | | Part III |
FMC Corporation
20182021 Form 10-K
Table of Contents
PART I
FMC Corporation was incorporated in 1928 under Delaware law and has its principal executive offices at 2929 Walnut Street, Philadelphia, Pennsylvania 19104. Throughout this annual report on Form 10-K, except where otherwise stated or indicated by the context, “FMC”"FMC", the "Company", “We,” “Us,”"We," "Us," or “Our”"Our" means FMC Corporation and its consolidated subsidiaries and their predecessors. Copies of the annual, quarterly and current reports we file with the Securities and Exchange Commission (“SEC”("SEC"), and any amendments to those reports, are available on our website at www.fmc.com as soon as practicable after we furnish such materials to the SEC.
ITEM 1. BUSINESS
General
We areFMC Corporation is a diversified chemicalglobal agricultural sciences company serving agricultural, consumerdedicated to helping growers produce food, feed, fiber and industrial markets globally withfuel for an expanding world population while adapting to a changing environment. FMC’s innovative solutions, applications and market-leading products. We operate in two distinct business segments: FMC Agricultural Solutions and FMC Lithium. Our FMC Agricultural Solutions segment develops, markets and sells all three major classes of crop protection chemicals: insecticides, herbicidessolutions – including biologicals, crop nutrition, digital and fungicides. These productsprecision agriculture – enable growers, crop advisers and turf and pest management professionals to address their toughest challenges economically without compromising safety or the environment. FMC is committed to discovering new herbicide, insecticide and fungicide active ingredients, product formulations and pioneering technologies that are usedconsistently better for the planet.
FMC Strategy
We have streamlined our portfolio over the past ten years to become a tier-one leader and the fifth largest global innovation provider in agriculture to enhance crop yieldthe agricultural chemicals market. Our strong competitive position is driven by our technology and quality by controlling a broad spectrum of insects, weeds and disease,innovation, as well as our geographic balance and crop diversity, which helped FMC to take market share in non-agricultural markets2019, 2020, and 2021.
Our leading fungicides, herbicides, insecticides, and biological technologies that farmers throughout the world rely on to protect their crops from disease and pests were produced at five active ingredient plants, 18 formulation and packaging sites and sold in more than 120 countries. Helping farmers grow more food sustainably on less arable land requires a continual stream of new products and technologies. We are investing in the agricultural industry’s most productive crop protection pipeline, featuring more than 25 new active ingredients in discovery, 11 new active ingredients in development, and more than 20 molecules featuring new modes of action.
We own and operate a total of 23 manufacturing plants, and we have the scale to operate with strong resources and global reach to address changing market conditions. Our supply chain organization effectively managed to continue supplying our customers and growing our business, despite multiple shutdowns and other disruptions in the Chinese chemical sector in the last several years. 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 fully staffed. We will continue to assess the impacts of the pandemic on our business and enact commercial plans, cost savings, and/or liquidity actions as appropriate. We made significant investments in our employees as a result of the COVID pandemic, including through enhanced dependent care offerings, recognition bonuses, increased flexibility of work schedules 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.
Our revenues grew approximately 9 percent, or 8 percent organically(1) excluding the impacts of foreign currency, year over year in 2021, driven by strong volume growth and pricing gains in all regions. Approximately $400 million in sales for pest2021 came from products launched in the last five years, representing almost 8 percent of the total revenue. In 2021, we had new product launches in Australia including Vantacor™ insect control based on Rynaxypyr® active and Overwatch® herbicide based on our Isoflex™ active. We had new product launches in North America for Xyway fungicide and Vantacor™ insect control. Products launched in 2021 accounted for approximately $120 million in sales. Our diamides, Rynaxypyr® and Cyazypyr® active ingredients, continued to be a significant part of our portfolio, representing over $1.9 billion in combined sales and approximately 38 percent of the total revenue in 2021.We also grew our Plant Health program, which includes FMC’s Biologicals platform, by 20 percent. Plant Health is now approximately $220 million in sales and outpacing market growth.
FMC Lithium segment manufactures lithiumperformed better than the overall crop protection market in 2021, which we estimate grew in the mid-single digit percentage range versus 2020. Foreign currency was a minor tailwind to full year revenue. As mentioned above, our growth rate was 9 percent, and excluding the impact of foreign currency, our organic(1) growth rate was 8 percent. FMC’s innovation, starting with our current portfolio of advanced products and continuing through our R&D discovery, development and new formulations, contributed to our performance. Our technology portfolio includes specific innovations in plant health, application technology and delivery systems, as well as advanced agronomic insights through Arc™ farm intelligence, our precision agriculture tool that leverages artificial intelligence and machine learning.
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(1) Organic revenue growth is a non-GAAP term which excludes the impact of foreign currency changes. Refer to the "Results of Operations" section of our Management's Discussion and Analysis in Item 7 for useour organic revenue non-GAAP reconciliation.
Acquisitions and Divestitures
We did not have any acquisitions or divestitures in a wide range of lithium products,2021. However, we continued to make investments through FMC Ventures, our venture capital arm which we formed in 2020 to target strategic investments in start-ups and early-stage companies that are used primarilydeveloping and applying emerging technologies in energy storage, specialty polymers and chemical synthesis application.
FMC Lithium (Livent Corporation)the agricultural industry.
In March 2017,May 2020, FMC entered into a binding offer with Isagro S.p.A ("Isagro") to acquire the remaining rights for Fluindapyr active ingredient assets from Isagro. In July 2020, we announcedentered into an asset sale and purchase agreement with Isagro. On October 2, 2020, we closed on the transaction with a purchase price of approximately $65 million. Fluindapyr has been jointly developed by FMC and Isagro under a 2012 research and development collaboration agreement. The transaction provides FMC with full global rights to the Fluindapyr active ingredient, including key U.S., European, Asian, and Latin American fungicide markets. The transaction transferred to FMC all intellectual property, know-how, registrations, product formulations and other global assets of the proprietary broad-spectrum fungicide molecule. The acquired assets have been classified as in-process research and development. See Note 9 to the consolidated financial statements included within this Form 10-K for accounting considerations. The transaction has expanded our intentionfungicide portfolio by giving us full global rights to separatethe Fluindapyr active ingredient and is an important strategic addition to our product line. In 2022, we are launching Onsuva™ fungicide which is based on the Fluindapyr active in Argentina and Paraguay. Onsuva™ fungicide targets diseases in soy and peanut crops.
In 2019, we completed the separation of our FMC Lithium segment, (subsequentlywhich was renamed Livent Corporation, or "Livent") into a publicly traded company. The initial step of the separation, the, following its initial public offering ("IPO") of Livent,that closed on October 15, 2018. In connection with the IPO, Livent had granted the underwriters an option to purchase additional shares of common stock to cover over-allotments at the IPO price, less the underwriting discount. On November 8, 2018, the underwriters exercised in full their option to purchase additional shares. After completion of the IPO, and the underwriters' exercise to purchase additional shares of common stock, FMC owned 123 million shares of Livent's common stock, representing approximately 84 percent of the total outstanding shares of Livent's common stock. On March 1, 2019, we completed the distribution of 123 million shares of common stock of Livent as a pro rata dividend on shares of FMC. The relevant 2019 financial information within this filing has been recast to present the former FMC presently intends to distribute the remaining Livent shares to FMC stockholders (the "Distribution")Lithium as a discontinued operation retrospectively for periods until its disposition on March 1, 2019. We will continue to consolidate and present Livent as the FMC Lithium segment until the full separation date. At that time, results of FMC Lithium will be presented as a discontinued operation.
DuPont Crop Protection Business
On March 31, 2017, we entered into a definitive Transaction Agreement (the “Transaction Agreement”) with E. I. du Pont de Nemours and Company (“DuPont"). On November 1, 2017, pursuant to the terms and conditions set forth in the Transaction Agreement, we completed the acquisition of certain assets relating to DuPont's Crop Protection business and research and development organization ("DuPont Crop Protection Business") (collectively, the "DuPont Crop Protection Business Acquisition"). In connection with this transaction, we sold to DuPont our FMC Health and Nutrition segment and paid DuPont $1.2 billion in cash. Our FMC Health and Nutrition business and its results have been presented as a discontinued operation for all periods presented throughout this document.
FMC Strategy
FMC has streamlined its portfolio over the past eight years to focus on technology-driven end markets with attractive long-term demand trends. The actions we have taken over the past year have better positioned each of our businesses to capitalize on future growth opportunities.
2018 was another pivotal year for FMC, as we made substantial progress toward integrating the recently acquired DuPont Crop Protection Business into FMC Agricultural Solutions and toward separating our Lithium business into a standalone public company, Livent Corporation. Our Agricultural Solutions segment grew revenue by 11 percent, on a pro forma basis, due to robust demand for our acquired insecticides, Rynaxypr® and Cyazypyr ® insect control, and broad cross-selling opportunities for all our products around the world. Rynaxypr® is now the second largest active ingredient in the crop protection market. We also launched 30 new formulated products in 2018, which is key to life cycle management of our products. We far outperformed the crop protection market, which we estimate grew by just 2 to 3 percent in 2018. FMC will begin launching its technology pipeline of six new active ingredients, starting with our bixafen fungicide launch - under the Lucento brand - in North America in the first quarter of 2019.
The November 2017 acquisition of a significant portion of the DuPont Crop Protection Business transformed FMC into a tier-one leader and the fifth largest global provider in the agricultural chemicals market. The acquisition included DuPont’s industry-leading insecticides and herbicides (the majority of which are patented technologies), exceptional discovery research capabilities and a global manufacturing network. The acquisition also added 16 discovery leads to our pipeline, and we expect to spend approximately
7 percent of FMC Agricultural Solutions sales on research and development annually. FMC acquired 14 manufacturing plants from DuPont, and with 26 total plants today, we have the scale to operate this business with greater resources and global reach to address changing market conditions.
Livent Corporation, which is approximately 84 percent owned by FMC, is one of the leading global producers of specialty lithium products, and 2018 was another year of significant growth for the company's lithium products. As an independent company, Livent will have a focused investor base and strong balance sheet, ensuring it has the financial capacity to pursue its growth plans and be a leading force in this critical industry. We made several strategic decisions during the last few years to focus FMC Lithium on downstream, higher-value products. We convert most of our lithium carbonate and chloride production into high-purity materials, including lithium hydroxide used in electric vehicle ("EV") batteries, and butyllithium and lithium metals for specialty applications. In 2018, we had a full year of sales from our lithium hydroxide plant that we opened in China in the second half of 2017. That plant can produce 10,000 metric tons per year, in addition to the 10,000 metric tons of annual production capacity at our Bessemer City, NC plant, to meet accelerating demand for FMC’s hydroxide products.
We maintain our commitment to enterprise sustainability, including responsible stewardship. As we grow, we will do so in a responsible way. Safety and business ethics will remain of utmost importance. Meeting and exceeding our customers’ expectations will continue to be a primary focus.
Financial Information About Our Business Segments
(Financial Information in Millions)
See Note 20 "Segment Information" to our consolidated financial statements included in this Form 10-K. Also see below for selected financial information related to our segments.
The following table shows the principal products produced by our two business, segments, theirits raw materials and uses:
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SegmentProduct | Product | Raw Materials | Uses |
FMC Agricultural SolutionsInsecticides | Insecticides | Synthetic chemical intermediates | Protection of crops, including soybean, corn, fruits and vegetables, cotton, sugarcane, rice, and cereals, from insects and for non-agricultural applications including pest control for home, garden and other specialty markets |
| Herbicides | Herbicides | Synthetic chemical intermediates | Protection of crops, including cotton, sugarcane, rice, corn, soybeans, cereals, fruits and vegetables from weed growth and for non-agricultural applications including turf and roadsides |
| Fungicides | Fungicides | Synthetic and biological chemical intermediates | Protection of crops, including cereals, fruits and vegetables from fungal disease |
| Plant Health | Biological intermediates | | |
FMC Lithium | Lithium | Various lithium products | Batteries, polymers, pharmaceuticals, greasesProtection of crops, including soybean, corn, fruits and lubricants, glassvegetables, cotton, sugarcane, rice, and ceramicscereals, from insects and other industrial usesdiseases and enhancement of yields |
With a worldwide manufacturing and distribution infrastructure, we are better able to respond rapidly to global customer needs, offset downward economic trends in one region with positive trends in another and match local revenues to local costs to reduce the impact of currency volatility. The following charts below detail our sales by major geographic region and major product category.
The following table provides our long-lived assets by major geographic region.geographical region:
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| (in Millions) | December 31, |
| 2021 | | 2020 |
| Long-lived assets | | | |
| North America | $ | 1,091.3 | | | $ | 1,230.2 | |
| Latin America | 742.6 | | | 792.7 | |
| Europe, Middle East, and Africa | 1,499.0 | | | 1,513.9 | |
| Asia | 2,092.3 | | | 2,044.4 | |
| Total | $ | 5,425.2 | | | $ | 5,581.2 | |
FMC Agricultural Solutions
Overview
Our FMC Agricultural Solutions segment, which represents approximately 91 percent of our 2018 consolidated revenues, operates in the agrochemicals industry. This segment develops, manufactures and sells a portfolio of crop protection, professional pest control and lawn and garden products.
Products and Markets
FMC Agricultural Solutions'Our portfolio is comprised of three major pesticide categories: insecticides, herbicides and fungicides. The majority of our product lines consist of insecticides and herbicides, and we have a small but fast-growing portfolio of fungicides mainly used in high value crop segments. 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. WeIn addition, we are also investing substantially in a plant healthour Plant Health program thatwhich includes biological crop protection products, seed treatments and micro-nutrients. Biological technologies developed by FMC’s R&D team in Denmark offer excellent sustainability profiles and serve as strong complements to our synthetic products. Our biologicals feature attributes that exceed the competition, such as high stability, long shelf life, low use rates and compatibility with other chemistries.
We have our own sales and marketing organizations and access the market through a combination of distributors, retailers and co-ops in all four regions. In the Latin American region, which includes the large agricultural market of Brazil,addition, we sell directly to large growers through our own sales and marketing organization, and we access the market through independent distributors and co-ops. In North America,
we access the market through several major national and regional distributors and have our own sales and marketing organization in Canada. We access the European markets through our own sales and marketing organizations. With the 2017 acquisition of the DuPont Crop Protection Business, we now access key Asian markets through large distributors, in addition to either local independent distributors or our own sales and marketing organizations.select countries such as Brazil. Through these and other alliances, along with our own targeted marketing efforts, access to novel technologies and our innovation initiatives, we expect to maintain and enhance our access in key agricultural and non-crop markets and develop new products that will help us continue to compete effectively.
Industry Overview
The three principal categories of agricultural and non-crop chemicals are: herbicides, insecticides and fungicides, representing approximately 4340 percent, 2530 percent and 2927 percent of global industry revenue, respectively.
The agrochemicals industry is more consolidated following several recent mergers of the leading crop protection companies, which now include FMC, ChemChina (owners(owner of Syngenta Group, which includes the former Syngenta and Adama), Bayer AG (acquired Monsanto in 2018), BASF AG and DowDuPont (CortevaCorteva Agriscience the(the agricultural division of former DowDuPont, is expected to be spun out in June 2019). These five innovation companies currently represent approximately 7475 percent of the crop protection industry’s global sales. The next tiergroup of agrochemical producers include Sumitomo Chemical Company Ltd., Nufarm Ltd. and United PhosphorousUPL Ltd. (UPL also acquired Arysta onin February 1, 2019)., Sumitomo Chemical Company Ltd., and Nufarm Ltd. FMC employs various differentiated strategies and competes with unique technologies focusing on certain crops, markets and geographies, while also being supported by a low-cost manufacturing model.
Growth
The 2017 acquisition of a significant portion ofWe are among the DuPont Crop Protection Business positions FMC among leading agrochemical producers in the world. The acquired insecticidesSeveral products from our portfolio are predominantly based on patent-protected active ingredients and are growingcontinue to grow well above market patterns. Our complementary technologies combine improved formulation capabilities and a broader innovation pipeline, resulting in new and differentiated products. We will take advantage of enhanced market access positions and an expanded portfolio to deliver near-term growth.
We will continue to grow by obtaining new and approved uses for existing product lines and acquiring, accessing, developing, marketing, distributing and/or selling complementary chemistries and related technologies in order to strengthen our product portfolio and our capabilities to effectively service our target markets and customers.
Our growth efforts focus on developing environmentally compatible and sustainable solutions that can effectively increase farmers’ yields and provide cost-effective alternatives to chemistries which may be prone to resistance. We are committed to providing unique, differentiated products to our customers by acquiring and further developing technologies as well as investing in innovation to extend product life cycles. Our external growth efforts include product acquisitions, in-licensing of chemistries and technologies and alliances that bolster our market access, complement our existing product portfolio or provide entry into adjacent spaces. We have entered into a range of development and distribution agreements with other companies that provide access to new technologies and products which we can subsequently commercialize.
In FMC Precision Agriculture, we are broadening our award-winning Arc™ farm intelligence platform, a proprietary mobile solution that helps farmers better understand and manage pest pressure through predictive modeling based on real-time and historical data, entomological models, hyper-local weather information and in-field sensors. Arc™ farm intelligence, which is now available in more than 25 markets covering 16 million acres throughout Latin America, North America, Europe and Asia, allows farmers to address pest pressure more efficiently, manage infestations before they escalate and target applications in a more sustainable manner.
Our venture capital arm, FMC LithiumVentures, continued to build its portfolio in 2021 with new collaborations or strategic investments in start-ups and early stage companies working on new or disruptive technologies. These engagements, which support or augment our internal capabilities, span several important technology segments, including robotics, pathogen detection, soil health, peptides and pheromones.
Overview
Diamide Growth Strategy
Our FMC Lithium segment represents 9 percentproduct portfolio features two key diamide-class molecules – Rynaxypyr® (chlorantraniliprole) and Cyazypyr® (cyantraniliprole) actives – with combined annual revenues of our 2018 consolidated revenues.
FMC Lithiumapproximately $1.9 billion in 2021. These two molecules are industry-leading in terms of performance, combining highly effective low dose rates with fast-acting, systemic, long residual control. These attributes quickly established Rynaxypyr® active as the world’s leading insect control technology and we expect it to continue on a strong growth trajectory notwithstanding the expiration of composition of matter patents covering Rynaxypyr® active in certain countries starting in late 2022. Our Cyazypyr® active, a second-generation diamide, is a pure-play, fully integrated lithium company, with a long, proven history of producing performance lithium compounds. Our primary products, namely battery-grade lithium hydroxide, butyllithium and high purity lithium metal are critical inputs used in various performance applications. Our strategy isgrowing quickly as we obtain more product registrations. We expect Cyazypyr® active to focus on supplying high performance lithium compounds to the fast growing EV battery market, while continuing to maintain our position as a leading global producer of butyllithium and high purity lithium metal. With extensive global capabilities, over 60 years of continuous production experience, applications and technical expertise and deep customer relationships, we believe we are well positioned to capitalize on the accelerating trend of vehicle electrification.
FMC Lithium produces lithium compounds for use in applications that have specific performance requirements, including battery-grade lithium hydroxide for use in high performance lithium-ion batteries. We believe the demand for our compounds will continue to grow strongly notwithstanding the expiration of its active ingredient composition of matter patents starting in the mid-2020s. This expectation is based on not only our broad patent estate and the timing of key patent milestones, but also on other critical elements that will allow FMC to continue to profitably grow the diamide franchise well beyond the expiration of key patents. Some of the critical elements supporting diamide growth include registration and data protection, commercial strategies, brand recognition, as well as manufacturing and supply chain complexity and FMC efficiencies.
Patents and Trade Secrets. The FMC diamide insect control patent estate is made up of many different patent families which cover: Composition of matter – both active ingredients and certain intermediates; Manufacturing processes – both active ingredients and certain intermediates; Formulations; Uses; and Applications. For Rynaxypyr® and Cyazypyr® actives related patents, as of December 31, 2021, we had 34 families with granted patents filed in up to 76 countries, with a total of 857 active granted patents as well as numerous pending patent applications. See "Patents, Trademarks and Licenses" within this Item 1 for more details. FMC’s process patents cover the electrificationmanufacturing processes for both active ingredients – chlorantraniliprole and cyantraniliprole – as well as key intermediates that are used to make the final products. Chlorantraniliprole is a complex molecule to produce, requiring 16 separate steps; FMC owns granted patents covering many of transportation accelerates,these 16 process steps and several of the intermediate chemicals, and we protect other aspects of the manufacturing processes by trade secret. Cyantraniliprole is similarly complex and covered by a comparable range of intellectual property. Many of these intermediate process patents run well past the expiration of the composition of matter patents, and in some cases stretch until the end of this decade. Third parties that intend to manufacture and sell generic chlorantraniliprole or cyantraniliprole and rely on FMC’s extensive product safety data will be required to demonstrate that their product has the same regulatory safety profile as FMC's Rynaxypyr® and Cyazypyr® actives. To meet regulatory requirements for such difficult-to-manufacture molecules, we believe that third parties will have to produce these active ingredients using the same processes that are patented by FMC and if so, would be infringing before patent expiration and subject to our challenge for infringement. FMC also owns formulation patents which cover the use of high nickel content cathode materials increaseschlorantraniliprole or cyantraniliprole in specific formulations found in commercially important end-use products.
Regulatory Data Protection. In addition to the patent estate, various pesticide laws and regulations around the world offer added protection to the initial active ingredient registrant in the next generationform of battery technology products.data protection that can extend after the composition or process patents have expired. These rules can effectively provide a product innovator and initial active ingredient registrant such as FMC with a further period of exclusive use of the key reference data even after the applicable active ingredient composition of matter patents have expired. Further, in certain countries, even after the period of exclusive use has expired, a generic entrant seeking to rely on the initial registrant’s reference data may have to pay significant compensation to the initial registrant. For FMC’s diamide products, such rights apply in key markets including United States and the European Union.
Growing the FMC Diamide Franchise. FMC is executing a strategy to supply end-use products containing Rynaxypyr® and Cyazypyr® actives to a broad range of companies prior to patent expiration, and in return establishing long-term purchase commitments from these companies. These arrangements may also include limited patent, data and/or trademark licenses. Such partner relationships allow us to grow our business by having others develop and sell diamide-based products to meet farmers' needs not within our current portfolio, offering those farmers a better alternative to competing insecticides with product safety or efficacy profiles which are less attractive than Rynaxypyr® or Cyazypyr® actives. These agreements can require the third-party to use the well-known and trusted Rynaxypyr® or Cyazypyr® brand names on the end-use products formulated with active ingredient supplied by FMC. As of December 31, 2021, we had global agreements with five major multinational companies and approximately 50 separate local-country agreements covering 14 countries. We also supply butyllithium, whichare continuing to explore opportunities with additional companies beyond those with whom we are already engaged. Furthermore, FMC is used as a synthesizerdeveloping an extensive portfolio of new diamide-containing products to address grower needs around the world. The first of these products, Elevest® and Vantacor®, were launched in the productionUS in late 2020 and early 2021 and will be launched in additional countries in 2022 onward. Our current diamide pipeline contains approximately 20 new products to be launched this decade and we continue to explore further innovations based on the diamide chemistry.
Complexity of manufacturing. Today FMC manufactures all the required intermediates in the multi-step processes, as well as the final Rynaxypyr® and Cyazypyr® actives, at our own active ingredient manufacturing plants or through key contract manufacturers who produce under long-term exclusive technology-license agreements. For a rangethird-party to replicate this complex supply chain and manufacturing network would be a major undertaking with very large capital requirements. In addition, given our manufacturing know-how, scale of specialty lithium compounds including high purity lithium metal, which is usedour operations, and continual investment in manufacturing process improvement, we believe FMC’s manufacturing costs will be substantially lower than any other party seeking to produce these diamide products.
Collectively, these four factors – deep patent estate, proprietary regulatory data, strong commercial approach leveraging our brand recognition, and capabilities of managing large scale manufacturing complexity – provide us the productionbasis for our expectation that FMC will be the company of lightweight materials for aerospace applicationschoice to supply chlorantraniliprole and non-rechargeable batteries. It is in these applications that we have established a differentiated position incyantraniliprole products to third-party partners, and ultimately to farmers, well into the market through our ability to consistently produce and deliver performance lithium compounds.
Industry Overview
Lithium is a soft, naturally occurring, silvery-white metal that is widely used in a range of energy storage and industrial applications. Lithium is the lightest of all metals and has the highest specific heat capacity among all elements, a high charge density and low thermal expansion properties, enabling high-performance characteristics in end use applications that could not otherwise be achieved. These unique chemical and physical properties make it ideally suited for use in a variety of commercial applications.
Prior to 2000, lithium was primarily used in a wide range of industrial market applications, including air treatment, ceramics, glass, greases, metallurgy, non-rechargeable batteries, pharmaceuticals and polymers.
Lithium’s use in energy storage applications accelerated in the 1990’s with the introduction of a commercially viable, rechargeable, lithium-ion battery. Lithium-ion battery technology provided a more efficient, longer-lasting and lighter alternative to incumbent battery technologies. The introduction and adoption of portable electronic devices over the past two decades fueled the initial growth in demand for lithium compounds in energy storage applications. In recent years, advancements in lithium-ion battery technology have resulted in increased adoption of lithium-ion batteries for use in powering EVs.future.
Source and Availability of Raw Materials
RawWe utilize numerous vendors to supply raw materials used byand intermediate chemicals to support operations. These materials are sourced on a global basis to strategically balance FMC’s vendor portfolio.
Patents, Trademarks and Licenses
As an agricultural sciences company, FMC Agricultural Solutions, primarily processed chemicals, are obtained from a variety of suppliers worldwide. Our primary raw material used by FMC Lithium is lithium, which we extractbelieves in innovation and in protecting that innovation through solar evaporation and a proprietary process from naturally occurring lithium-rich brines located in the Andes Mountains of Argentina.
Patents
intellectual property rights. We own and license a significant number of U.S. and foreign patents, trademarks, trade secrets and other intellectual property that are cumulatively important to our business. In addition, we seek to license our proprietary technologies through partnering arrangements that effectively allow us to capitalize from our intellectual property. The FMC intellectual property estate provides us with an importanta significant competitive advantage. advantage which we seek to expand and renew on a continual basis. We manage our technology investment to discover and develop new active ingredients and biological products, as well as to continue to improve manufacturing processes and existing active ingredients through new formulations, mixtures or other concepts. FMC’s technology innovation processes capture those innovations and protect them through the most appropriate form of intellectual property rights. We also in-license certain active ingredients and other technologies under patents held by third parties, and have granted licenses to certain of our patents to third parties.
Our patents cover many aspects of our products,business, including our chemical and biological active ingredients, intermediate chemicals, manufacturing processes to produce such active ingredients or intermediates, formulations, and product uses, as well as many aspects of our research and development activities supportingthat support the FMC new product pipeline. Patents are granted by individual jurisdictions and the duration of our patents depends on their respective jurisdictions and payment of annuities.
As of December 31, 2021, the Company owned a total of approximately 200 active granted U.S. patents and 2,600 active granted foreign patents (includes Supplemental Patent Certificates); we also have approximately 1,700 patent applications pending globally.
In our current product portfolio, our diamide insect control products based on Rynaxypyr® (Chlorantraniliprole) and Cyazypyr® (Cyantraniliprole) active ingredients have a substantial patent estate which will remain in force well into the future. More details regarding our diamide granted patent estate are set forth in the tables below:
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| Numbers of active Granted Patents by type*: Chlorantraniliprole and Cyantraniliprole, as of December 31, 2021 |
| United States | | Foreign |
| Active Ingredients | 7 | | 221 |
| Intermediates and Methods of Manufacturing | 23 | | 257 |
| Formulations/Mixtures/Applications | 6 | | 343 |
| Total | 36 | | 821 |
*Patent families were only placed under one type but may cover several types.
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Remaining Life of Granted Patents: Chlorantraniliprole and Cyantraniliprole, as of December 31, 2021 |
| United States | | Foreign |
| Through December 31, 2026 | 19 | | 576 |
| 2027 - 2031 | 15 | | 216 |
| 2032 - 2037 | 2 | | 29 |
| Total | 36 | | 821 |
We also own many trademarks that are well recognized by customers or product end-users. Unlike patents, ownership rights in trademarks can be continued indefinitely so long as the trademarks are properly used and renewal fees are paid.
We actively monitor and manage our patents and trademarks to maintain our rights in these assets. Weassets and we strategically take aggressive action when we believe our intellectual property rights are being infringed. During 2021, we initiated proceedings to enforce several of our patents and trademarks against generic producers and infringers, resulting in multiple favorable judgments and settlements, including in India and China. In early 2022, we received notice that certain third parties are seeking to invalidate our Chinese patents on a certain intermediate involved in producing chlorantraniliprole and a process to produce chlorantraniliprole; we intend to defend vigorously the validity of both patents. While we believe that the invalidity or loss of any particular patent, trademark or license would be a remote possibility, and/or would not likely have aour patent and trademark estate related to our diamide insect control products based on Rynaxypyr® and Cyazypyr® active ingredients in the aggregate are of material adverse effect on the overall business of FMC.importance to our operations.
Seasonality
The seasonal nature of the crop protection market and the geographic spread of the FMC Agricultural Solutionsour business can result in significant variations in quarterly earnings among geographic locations. FMC Agricultural Solutions'Our products sold in the northern hemisphere (North America, Europe and parts of Asia) serve seasonal agricultural markets from March through September, generally resulting in significant earnings in the first and second quarters, and to a lesser extent in the fourth quarter. Markets in the southern hemisphere (Latin America and parts of the Asia Pacific region, including Australia) are served from July through February, generally resulting in earnings in the third, fourth and first quarters. The remainder of our business is generally not subject to significant seasonal fluctuations.
Competition
We encounter substantial competition in each of our two business segments.business. We market our products through our own sales organization and through alliance partners, independent distributors and sales representatives. The number of our principal competitors varies from segmentmarket to segment.market. In general, we compete by providing advanced technology, high product quality, reliability, quality customer and technical service, and by operating in a cost-efficient manner.
Our FMC Agricultural Solutions segmentbusiness competes primarily in the global chemical crop protection market for insecticides, herbicides and fungicides. Industry products include crop protection chemicals and biologicals, for certain major competitors, genetically engineered (crop biotechnology) products. Competition from generic agrochemical producers is significant as a number of key product patents have expired in the last decade.two decades. In general, we compete as an innovator by focusing on product development, including novel formulations, proprietary mixes, and advanced delivery systems and by acquiring or licensing (mostly) proprietary chemistries or technologies that complement our product and geographic focus. We also differentiate ourselves by our global cost-competitiveness through our manufacturing strategies, establishing effective product stewardship programs and developing strategic alliances that strengthen market access in key countries and regions.
FMC Lithium sells its performance lithium compounds worldwide. Most markets for lithium compounds are global, with significant growth occurring in Asia, driven primarily by the development and manufacture of lithium-ion batteries. The market for lithium compounds also faces some barriers to entry, including access to an adequate and stable supply of lithium, technical expertise and development lead time. We compete by providing advanced technology, high product quality, reliability, quality customer and technical service, and by operating in a cost-efficient manner. We believe we are a leading provider of battery-grade lithium hydroxide in EV battery applications and of performance greases and benefit from low production costs and a history of efficient capital deployment. We also believe we are one of only a few global suppliers of butyllithium. Our primary competitor for performance lithium compounds is Albemarle Corporation. We are the only producer of high purity lithium metal in the Western Hemisphere and enjoy competitive advantages from our vertically integrated manufacturing approach and low production costs. Our primary competitors within the lithium metal product category include Jiangxi Ganfeng Lithium and other Chinese producers.
Research and Development Expense
We perform research and development in both of our segments with the majority of our efforts focused in the FMC Agricultural Solutions segment. The developmentR&D efforts in the FMC Agricultural Solutions segmentour business focus on discovering and developing environmentally sound solutions — both new active ingredients and new product formulations — that cost-effectively increase farmers’meet the needs of farmers to maximize yields and provide alternativescontrol pests. On June 24, 2019, we announced our investment of more than $50 million at our FMC Stine Research Center in Newark, Delaware, to existingupgrade infrastructure and complete construction on a new, chemistries.state-of-the-art greenhouse and laboratory facility. We anticipate that the project will be completed by the end of 2023.
Environmental Laws and Regulations
A discussion of environmental related factors can be found in Item 7 “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations" and in Note 11 “Environmental Obligations”12 "Environmental Obligations" in the notes to our consolidated financial statements included in this Form 10-K.
Human Capital
Employees
We employ approximately 7,3006,400 people with about 1,9001,400 people in our domestic operations and 5,4005,000 people in our foreign operations. Approximately 800 of these employees are with Livent Corporation.
Approximately 23 percent of our U.S.-based and 3034 percent of our foreign-based employees, respectively, are represented by collective bargaining agreements. We have successfully concluded most of our recent contract negotiations without any material work stoppages. In those rare instances where a work stoppage has occurred, there has been no material effect on consolidated sales and earnings. We cannot predict, however, the outcome of future contract negotiations. In 2019, eight2022, seven foreign collective-bargaining agreements will be expiring. These contracts affect approximately 2023 percent of our foreign-based employees. There will beare no U.S. collective-bargaining agreements expiring in 2019.2022.
Talent Engagement and Retention
At FMC, it is important that we focus our programs and initiatives on sustaining strong leaders who are committed to engaging and developing their employees, so they can lead competitively, innovate change, improve business performance, and successfully maintain a competitive advantage. FMC’s leadership development program components include in-class and self-paced learning, development planning and stretch assignments, project-based action learning and rotational learning, mentoring and coaching, and leadership and functional assessments. Our programs are designed to provide engaging, collaborative, and creative learning environments. Employees leverage their experiences in these programs to develop their leadership abilities to their highest levels, enabling them to deliver innovative solutions, strong results and continued growth. Three of our signature leadership programs are science of leadership, the art of leadership, and keys to leadership. We hold quarterly Town Hall meetings and engage with our employees continuously through regular email updates, social media, webcasts, and other channels. We ask our employees to complete surveys and participate in focus groups, we distribute certain reports to keep our employees informed, we require our employees to complete specific trainings and we are piloting a voluntary e-learning program with other development and learning opportunities. We also reach out to new talent through social media.
FMC continually strives to meet the needs of our employees, shareholders, and customers through competitive rewards, policies, and practices that support the company as an employer of choice in every market where we compete for talent. FMC compensates employees through total reward programs that are aligned with performance and competencies. Performance-based direct pay programs include competitive base pay, annual bonus opportunities, sales incentive plans, and long-term incentives. These compensation elements along with benefits, work-life flexibility, recognition awards, talent and career development, enable FMC to offer a comprehensive total reward package designed for employees throughout their career. The following were initially offered to employees at the start of the COVID-19 pandemic to better support our employees and their families and are still currently in place:
•Fully covering the costs of COVID testing and vaccines
•Enhancing Employee Assistance Program presentations and offerings to assist employees with mental well being
•Flexible work opportunities
Culture and Inclusion
We strive to be an inclusive company where our employees reflect the community, are valued, find purpose in their work, grow and contribute to their fullest potential. We are building on our efforts to prioritize Diversity and Inclusion, ensuring our focus remains to create opportunities, remove barriers and implement meaningful programs and actions that build an inclusive workplace. We launched two task forces, one on Social Justice and Racial Equity, and the other focused on Gender Equity. Our goal for 2027 is to have Black/African American representation in our U.S. workforce to be 14 percent and female representation to be 50 percent of our global workforce across all regions and job levels. We established new Diversity and Inclusion goals in 2021. We continue to enhance our hiring, onboarding, and employee retention practices to help us achieve these goals as well as expanded onboarding efforts to support retention of U.S. Black/African American employees. We have made progress toward our representation goals in 2021, with notable FMC firsts including the first female salesperson in Pakistan, first female field technicians in the Philippines and first female production leader and quality manager in Brazil and India, respectively. Due to our diversity and inclusion strategy, women in senior management positions increased from 34 percent in 2020 to 37 percent in 2021, including the appointment of two female executive officers in 2021. Diverse views, backgrounds and experiences are key to our success. FMC has an active global framework of Employee Resource Groups ("ERGs") with more than twenty employee resource group chapters. ERGs are regionally implemented via Regional Inclusion Councils that host events and programs to celebrate diversity and partner with the Global Diversity, Equity & Inclusion Office and other stakeholders to address diversity, equity and inclusion needs in the region. FMC scored 100 percent for a third consecutive year on the Human Rights Campaign Foundation’s 2022 Corporate Equality Index, a U.S. benchmarking survey measuring corporate policies and practices related to lesbian, gay, bisexual, transgender and queer ("LGBTQ") workplace equality. We recognize building an inclusive workplace is a journey and believe diverse views, backgrounds and experiences remain keys to FMC’s success.
Safety
Safety is a core value of FMC. At FMC, people come first. We strive for an injury-free workplace, where every person returns home the same way they arrived. We encourage a culture of open reporting, to learn from our mistakes and work towards continuous improvement in behaviors and processes. As a result of our firm commitment to safety, our 2021 TRIR of 0.0662 continues to be among the lowest in the industry globally and in the upper decile of peer companies in North America, placing our company among the safest organizations in the chemical industry. This milestone underscores our collective commitment to work safely every day. We empower our people to always put safety first. 2021 continued to challenge us with issues related to the COVID pandemic ranging from staffing to supply chain constraints. FMC responded by collaborating across functions and continuing to utilize our robust Business Continuity Plans ("BCPs") to ensure continued safe operation at all of our manufacturing sites. These BCPs continue to be highly effective, resulting in zero FMC on-site transmissions of the virus during 2021. In 2022, we continue our journey, focusing on improving management systems and tools. These BCPs proved to
be highly effective at mitigating business or operational disruptions, even during peak periods of the pandemic. In addition, we continue to engage our global workforce through focused campaigns which address issues and trends identified through analysis of our environment, health and safety data.
Sustainability
We are committed to delivering products that maintain a safe and secure food supply and to do so in a way that protects the environment for future generations. To reflect this commitment, we reset our sustainability goals in October 2019 to challenge ourselves and ensure that we are helping to create a better world. Our goals include achieving (i) 100 percent research and development spend on developing sustainable products by 2025, (ii) <0.1 Total Recordable Incident Rate ("TRIR") by 2025, (iii) a 25 percent reduction in Energy Intensity by 2030, (iv) a 25 percent reduction in Greenhouse Gas ("GHG") emissions intensity by 2030, (v) a 20 percent reduction in Water-Use Intensity in High-Risk Locations by 2030, (vi) a sustained Waste Disposed Intensity through 2030 (from our 2018 base year level), and (vii) a 100 on the Community Engagement Index by 2025. In 2021, FMC continued to make progress towards meeting its commitments on the updated goals. In addition, to build on our progress towards energy and resource reduction, in August of 2021, FMC announced its goal of net-zero GHG emissions across its entire value chain (i.e., Scopes 1, 2 and 3) by 2035. FMC committed to the Science Based Target initiative (SBTi), Net-Zero Standard, in line with keeping the global temperature at 1.5°C above pre-industrial time. FMC anticipates submitting targets to SBTi in the first quarter of 2022.
FMC developed and utilizes its award-winning Sustainability Assessment Tool to determine the sustainability of new active ingredients and formulated products in the research and development pipeline. This assessment, along with other stewardship processes and tools, ensures the introduction and use of environmentally sustainable agricultural solutions.
At FMC we promote stewardship at each stage of the product life cycle, and stewardship priorities are built into the core of research and development, portfolio and marketing strategies for a truly proactive approach. We continue to strive for open and transparent communications about our product stewardship successes and challenges. FMC is continuing to phase out Highly Hazardous Pesticides ("HHPs") from our product portfolio. In 2021, HHPs accounted for approximately 0.4 percent of our total sales.
SEC Filings
SEC filings are available free of charge on our website, www.fmc.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are posted as soon as practicable after we furnish such materials to the SEC.
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-K as a textual reference only and the information on the website is not incorporated by reference into this Form 10-K.
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ITEM 1A. | ITEM 1A. RISK FACTORS |
Below lists our risk factors updated for these events.
Among the factors that could have an impact on our ability to achieve operating results and meet our other goals are:
Industry Risks:
Pricing and volumes in our markets are sensitive to a number of industry specific and global issues and events including:
Capacity utilization•Competition and new agricultural technologies - Our FMC Lithium segment is sensitive to industry capacity utilization. As a result, pricing tends to fluctuate when capacity utilization changes occur within the industry.
Competition - All of our segments facebusiness faces competition, which could affect our ability to maintain or raise prices, successfully enter certain markets or retain our market position. Competition for our FMC Agricultural Solutions segmentbusiness includes not only generic suppliers of the same pesticidal active ingredients but also alternative proprietary pesticide chemistries and crop protection technologies that are bred into or applied onto seeds. Increased generic presence in agricultural chemical markets has been driven by the number of significant product patents and product data protections that have expired in the last decade, and this trend is expected to continue. Also, there are changing competitive dynamics in the agrochemical industry as some of our competitors have consolidated, resulting in them having greater scale and diversity.diversity, as well as market reach. These competitive differences may not be overcome and may erode our business.
Changes Agriculture in our customer base - Our customer base hasmany countries is changing and new technologies (e.g., precision pest prediction or application, data management) continue to emerge. At this time, the scope and potential impact of these technologies are largely unknown but could have the potential to change, especially when long-term supply contracts are renegotiated. Our FMC Lithium segment is most sensitive to this risk.disrupt our business.
•Climatic conditions - Our FMC Agricultural Solutions markets are affected by climatic conditions, which could adversely impact crop pricing and pest infestations. For example, drought may reduce the need for fungicides, which could result in fewer sales and greater unsold inventories in the market, whereas excessive rain could lead to increased plant disease or weed growth requiring growers to purchase and use more pesticides. Adverse weather conditions can impact our abilityDrought and/or increased temperatures may change insect pest pressures, requiring growers to extract lithium efficiently from our lithium reserves in Argentina.use more, less, or different insecticides. Natural disasters can impact production at our facilities in various parts of the world. The nature of these events makes them difficult to predict.
•Geographic cyclicality - While our business is well balanced geographically, in any given calendar quarter a certain geography(ies) will predominate in light of seasonal variations in the demand for our products given the nature of the crop protection market and the geographic regions in which we operate. Unexpected market conditions in any such predominating geography(ies), such as adverse weather, pest pressures, or other risks described herein, may impact our business if occurring during a calendar quarter in which such geography(ies) is predominating.
•Changing regulatory environment and public perception - Changes in the regulatory environment, particularly in the United States,U.S., Brazil, China, India, Argentina and the European Union, could adversely impact our ability to continue producing and/or selling certain products in our domestic and foreign markets or could increase the cost of doing so. Our FMC Agricultural Solutions segment is mostWe are sensitive to this general regulatory risk given the need to obtain and maintain pesticide registrations in every country in which we sell our products. Many countries require re-registration of pesticides to meet new and more challenging requirements; while we defend our products vigorously, these re-registration processes may result in significant additional data costs, reduced number of permitted product uses, or potential product cancellation. Compliance with changing laws and regulations may involve significant costs or capital expenditures or require changes in business practice that could result in reduced profitability. In the European Union, the regulatory risk specifically includes the chemicals regulation known as REACH (Registration, Evaluation, and Authorization of Chemicals), which affects each of our business segmentsrequires manufacturers to varying degrees. The fundamental principle behind the REACH regulation is that manufacturers must verify through a special registration system that their chemicals can be marketed safely. Climate change may result in changes to the governmental regulation of greenhouse gases. Depending on their nature and scope, this could subject our manufacturing operations to significant additional costs or limits on operations and affect the sources and supply of energy. Changes to the regulatory environment may be influenced by non-government public pressure as a result of negative perception regarding the use of our crop protection products. Products reviewed by regulators and labeled safe for use may still be challenged by others which could lead to negative public perception or regulatory action. Competing products labeled safe for use were subject to lawsuits or claims, and a similar situation for our products could result in negative impacts.
•Geographic presence outside of United StatesU.S. - With the acquisition of the DuPont Crop Protection Business, FMC Agricultural Solutions hasWe have a strong presence in Latin America, Europe and Asia, as well as in the United States. Growth ofU.S. We have continued to grow our geographic footprint particularly in Europe and key Asian countries such as India, which means that developments outside the United StatesU.S. will generally have a more significant effect on our operations than in the past. Our operations outside the United StatesU.S. are subject to special risks and restrictions, including: fluctuations in currency values; exchange control
regulations; changes in local political or economic conditions; governmental pricing directives; import and trade restrictions;restrictions or tariffs; import or export licensing requirements and trade policy; restrictions on the ability to repatriate funds; and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad.
Pharmaceutical regulation•Climate change and land use impacts - Our FMC Lithium facilityClimate change may impact markets in Bessemer City, North Carolina, and some ofwhich we sell our manufacturing processes at that facility, as well as some of our customers, are subject to regulation by the U.S. Food and Drug Administration (FDA) and U.S. Department of Agriculture (USDA) or similar foreign agencies. Regulatory requirements of the FDA and USDA are complex, and any failure to comply with them including asproducts, where, for example, a prolonged drought may result of contamination due to acts of sabotage could subject us and/or our customers to fines, injunctions, civil penalties, lawsuits, recall or seizure of products, total or partial suspension of production, denial of government approvals, withdrawal of marketing approvals and criminal prosecution. Any of these actions could adversely impact our net sales, undermine goodwill established with our customers, damage commercial prospectsin decreased demand for our products and materially adversely affect our resultsproducts. The more gradual effects of operations.
Climatepersistent temperature change regulation - Changesin geographies with significant agricultural lands may result in changes in lands suitable for agriculture or changes in the mix of crops suitable for cultivation and the pests that may be present in such geographies. For example, prolonged increase in average temperature may make northern lands suitable for growing crops not grown historically in such climes, leading farmers to shift from crops such as wheat to soybean and may result in new or different weed, plant disease or insect pressures on such crops – such changes would impact the mix of pesticide products farmers would purchase, which may be adverse for us, depending on the local market and our product mix. Additionally, changes in the governmental regulation of greenhouse gases, depending on their nature and scope, could subject our manufacturing operations to significant additional costs or limits on operations.
•Fluctuations in commodity prices - Our operating results could be significantly affected by the cost of commodities - both chemical raw material commodities and harvested crop commodities. We may not be able to raise prices or improve productivity sufficiently to offset future increases in chemical raw material commodity pricing. Accordingly, increases in such commodity prices may negatively affect our financial results. We use hedging strategies to address material commodity price risks, where hedgehedging strategies are available on reasonable terms. However, we are unable to avoid the risk of medium- and long-term increases. Additionally, fluctuations in harvested crop commodity prices could negatively impact our customers' ability to sell their products at previously forecasted prices resulting in reduced customer liquidity. Inadequate customer liquidity could affect our customers’ abilities to pay for our products and, therefore, affect existing and future sales or our ability to collect on customer receivables.
•Supply arrangements - Certain raw materials are critical to our production processes and our purchasing strategy and supply chain design are complex. While we have made supply arrangements to meet planned operating requirements, an inability to obtain the critical raw materials or operate under contract manufacturing arrangements would adversely impact our ability to produce certain products and could lead to operational disruption and increase uncertainties
around business performance. We increasingly source critical intermediates and finished products from a number of suppliers, largely outside of the U.S. and principally in China. An inability to obtain these products or execute under contract sourcing arrangements would adversely impact our ability to sell products.
Economic
Operational Risks:
•COVID and political changeglobal pandemic cycles - Our businessThe persistence of the coronavirus (COVID-19) outbreak has beencaused significant disruptions in the U.S. and couldglobal economies, and economists expect the impact will continue to be adversely affected by economic and political changessignificant. As an agricultural sciences company, we are considered an "essential" industry 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 United States or any of the foreign countries in which we do business; changes in laws, taxation,operate; we have avoided significant plant closures and regulationsall our manufacturing facilities and distribution warehouses remain operational and properly staffed. Our research laboratories and greenhouses also have continued to operate throughout the pandemic and we have sustained our operations with safety as a priority. We are closely monitoring raw material and supply chain costs. 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 interpretationextent of the direct and applicationindirect economic effects of these laws, taxes,the pandemic and regulations; restrictions imposedcontainment measures, among others. External and internal factors and events related to COVID could result in employee isolation and burnout, leading to operational disruption and unexpected, regrettable attrition, which may impact the sustainability of our "high touch" agile culture. We have seen some logistics challenges, supply chain challenges, and shortages of packaging materials and containers, as many industries have increased e-commerce and delivery of goods, creating extra demand on packaging materials, as well as related higher costs and pockets of demand reduction. We may continue to experience disruption caused by the United States government or foreign governments through exchange controls or taxation policy; nationalization or expropriationCOVID in our supply chain, logistics, and pockets of property, undeveloped property rights,demand, as well as on farm worker labor required for planting, harvesting and legal systems or political instability; other governmental actions;packing crops (especially fruits, vegetables and other external factors overspecialty crops) in the food chain going forward. This outbreak may impact access to our production sites or our ability to adequately and safely staff these sites, the ability of raw material suppliers to produce and deliver goods to us, our ability to ship our products to production, warehousing or customer sites, the ability of our sales organization to make sales or for customers (or indirect customers such as farmers) to purchase our products, or the ability to collect on customer receivables. Our supply chain and business operations could be disrupted from the temporary closure of third-party supplier and manufacturer facilities, interruptions in product supply or restrictions on the export or shipment of our products. Any disruption of our suppliers and contract manufacturers could impact our sales and operating results. The outbreak, and governmental responses to the outbreak, have caused disruption in certain food distribution systems and labor markets for planting and harvesting, which in turn have created operational and financial pressures on some farmers who are the ultimate users of the vast majority of our products. If those pressures continue and grow more widespread or severe, and if farmers materially change their planting decisions or choose not to protect their crops with our products, such pressures on farmers could impact our sales and operating results. Other global health concerns could also result in social, economic, and labor instability in the countries in which we or our customers and suppliers operate. These uncertainties could have no control. Economica material adverse effect on our business and political conditions within the United Statesour results of operation and foreign jurisdictions or strained relations between countries can cause fluctuations in demand, price volatility, supply disruptions, or loss of property. In Argentina, continued inflation and foreign exchange controlsfinancial condition. A widespread health crisis could adversely affect the global economy, resulting in an economic downturn that could impact demand for our business. Realignmentproducts. Although our production operations that support agriculture have generally been viewed as "essential" and exempted from governmental lockdown orders, the future impact of change in regional economic arrangements couldthe outbreak is highly uncertain and cannot be predicted and there is no assurance that the outbreak will not have an operationala material adverse impact on our businesses. In China, unpredictable enforcementthe future results of environmental regulations could result in unanticipated shutdowns in broad geographic areas, impacting our contract manufacturersthe Company. The extent of the impact will depend on future developments, including the availability of vaccines and raw material suppliers.other actions taken to contain the coronavirus.
Operational Risks:
Market access risk - Our results may be affected by changes in distribution channels, which could impact our ability to access the market.
•Business disruptions - We produce productproducts through a combination of owned facilities and contract manufacturers. As a result of the DuPont Crop Protection Acquisition we nowWe own and operate large-scale active ingredient manufacturing facilities in the United StatesU.S. (Mobile), Puerto Rico (Manati) and, China (Pudong and Jinshan) in addition to our legacy active ingredient plants in(Jinshan), Denmark (Ronland), and India (Panoli). This presents us with additional operating risks as ourOur operating results will beare dependent in part on the continued operation of the acquiredthese production facilities. Interruptions at these facilities may materially reduce the productivity of a particular manufacturing facility, or the profitability of our business as a whole. Although we take precautions to enhance the safety of our operations and minimize the risk of disruptions, our operations and those of our contract manufacturers are subject to hazards inherent in chemical manufacturing and the related storage and transportation of raw materials, products and wastes. These potential hazards include explosions, fires, severe weather and natural disasters, mechanical failure, unscheduled downtimes, supplier disruptions, labor shortages or other labor difficulties, information technology systems outages, disruption in our supply chain or manufacturing and distribution operations, transportation interruptions, chemical spills, discharges or releases of toxic
or hazardous substances or gases, shipment of contaminated or off-specification product to customers, storage tank leaks, other environmental risks, cyberattacks, or other sudden disruption in business operations beyond our control as a result of events such as acts of sabotage, terrorism or war, civil or political unrest, natural disasters, pandemic situations and large scale power outages.outages and public health epidemics/pandemics. Some of these hazards may cause severe damage to or destruction of property and equipment or personal injury and loss of life and may result in suspension of operations or the shutdown of affected facilities.
Information technology security risks
•Climate change and physical risk to operation sites - As with all enterprise information systems,The effects of climate change such as rising sea levels, drought, flooding, hurricanes, excessive heat and general volatility in seasonal temperatures could adversely affect our information technology systems could be penetrated by outside parties’ intent on extracting information, corrupting information, or disrupting business processes. Our systems have in the past been, and likely will in the future be, subjectoperations globally. Extreme weather events attributable to unauthorized access attempts. Unauthorized access could disrupt our business operations and couldclimate change may result in, failures oramong other things, physical damage to our property and equipment, and interruptions into our computer systems and in the loss of assets and could have a material adverse effect on our business, financial condition or results of operations. In addition, breaches of our security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information or sensitive or confidential information about the Company, our employees, our vendors, or our customers, could result in litigation, violations of various data privacy regulations in some jurisdictions, and also potentially result in liability to us. While we have taken measures to assess the requirements of, and to comply with the European Union's General Data Protection Regulation and other data privacy regulations, these measures may be challenged by authorities that regulate data-related compliance. We could incur significant expense in facilitating and responding to investigations and if the measures we have taken prove to be inadequate, we could face fines or penalties. This could damage our reputation, or otherwise harm our business, financial condition, or results of operations.supply chain.
•Litigation and environmental risks - Current reserves relating to our ongoing litigation and environmental liabilities may ultimately prove to be inadequate. Products reviewed by regulators and labeled safe for use may still be challenged by others which could result in lawsuits or claims.
•Hazardous materials - We manufacture and transport certain materials that are inherently hazardous due to their toxic or volatile nature. While we take precautions to handle and transport these materials in a safe manner, if they are mishandled or released into the environment, they could cause property damage or result in personal injury claims against us.
•Environmental compliance - We are subject to extensive federal, state, local, and foreign environmental and safety laws, regulations, directives, rules and ordinances concerning, among other things, emissions in the air, discharges to land and water, and the generation, handling, treatment, disposal and remediation of hazardous waste and other materials. We may face liability arising out of the normal course of business, including alleged personal injury or property damage due to exposure to chemicals or other hazardous substances at our current or former facilities or chemicals that we manufacture, handle or own. We take our environmental responsibilities very seriously, but there is a risk of environmental impact inherent in our manufacturing operations and transportation of chemicals. Any substantial liability for environmental damage could have a material adverse effect on our financial condition, results of operations and cash flows.
Compliance with Laws and Regulations: The global regulatory environment is becoming increasingly complex and requires more resources to effectively manage, which may increase the potential for misunderstanding or misapplication of regulatory standards.
Workforce - The inability to recruit and retain key personnel or the unexpected loss of key personnel may adversely affect our operations. In addition, our future success depends in part on our ability to identify and develop talent to succeed senior management and other key members of the organization.
Technology Risks:
•Technological changeand new product discovery/development - Our ability to compete successfully depends in part upon our ability to maintain a superior technological capability and to continue to identify, develop and commercialize new and innovative, high value-added products for existing and future customers. Our investment in the discovery and development of new pesticidal active ingredients for FMC Agricultural Solutions relies on discovery of new chemical molecules.molecules or biological strains. Such discovery processes depend on our scientists being able to find new molecules and strains, which are novel and outside of patents held by others, and such moleculesmolecules/strains being efficacious against target pests, and our ability to develop those molecules and strains into new products without creating an undue risk to human health and the environment, and then meeting applicable regulatory criteria. The timeline from active ingredient discovery through full development and product launch averages 8-10 years depending on local regulatory requirements; the complexity and duration of developing new products create risks that product concepts may fail during development or, when launched, may not meet then-current market needs or competitive conditions.
Failure to make process improvements - Failure to continue to make process improvements to reduce costs could impede our competitive position.
Patents of competitors - Some of our competitors may secure patents on production methods or uses of products that may limit our ability to compete cost-effectively.
Portfolio Management and Integration Risks:
•Portfolio management risks - We continuously review our portfolio which includes the evaluation of potential business acquisitions that may strategically fit our business and strategic growth initiatives. If we are unable to successfully integrate and develop our acquired businesses, we could fail to achieve anticipated synergies which would include expected cost savings and revenue growth. Failure to achieve these anticipated synergies could materially and adversely affect our financial results. In addition to strategic acquisitions we evaluate the diversity of our portfolio in light of our objectives and alignment with our growth strategy. In implementing this strategy we may not be successful in separating underperforming or non-strategic assets. The gains or losses on the divestiture of, or lost operating income from, such
assets (e.g., divesting) may affect the Company’s earnings. Moreover, we may incur asset impairment charges related to acquisitions or divestitures that reduce earnings. Significant effort will likely be required to ensure that the right mix of resources are trained, engaged
•Innovation and focused on achieving business objectives while adhering to our core values of safety, ethics and compliance.
Intellectualintellectual property - Our innovation efforts are protected by patents, trade secrets and other intellectual property rights that cover many of our current products, manufacturing processes, and product uses, as well as many aspects of our research and development activities supporting our new product pipeline. Trademarks protect valuable brands associated with our products. Patents and trademarks are granted by individual jurisdictions and the duration of our patents depends on their respective jurisdictions and payment of annuities. Our future performance will depend on our ability to address active ingredient composition of matter patent expirations through effective enforcement of our patents that continue to cover key chemical intermediates and process patents, as well as portfolio life cycle management, particularly for our high value assets.diamide insecticides (see "Diamide Growth Strategy" and "Patents, Trademarks and Licenses" in Item 1 for more details). If our innovation efforts fail to continue to make process improvements to reduce costs, such conditions could impede our competitive position. Some of our competitors may secure patents on production methods or uses of products that may limit our ability to compete cost-effectively.
| |
◦ | System implementation and integration risks - Failure to successfully integrate the acquired DuPont Crop Protection Business and transition the management information systems of the DuPont Crop Protection Business from the ERP system provided under Transition Services Agreement by DuPont to a management information system integrated with FMC’s legacy processes could result in interruption of operations or failure to achieve synergies we expect. This could cause our future results of operations to be materially worse than expected. |
Major enterprise initiatives•Enforcement of intellectual property rights - The composition of matter patents on our Rynaxypyr® active ingredient is nearing its expiration in several key countries. We are working to spin off our FMC Lithium segment in parallel tohave a broad estate of additional patents regarding the continued integrationproduction of the DuPont Crop Protection Business assets into FMC Agricultural SolutionsRynaxypyr® active ingredient, as well as implementtrademark and data exclusivity protection in certain countries that extend well beyond the active ingredient composition of matter patents. (See "Diamide Growth Strategy" and "Patents,
Trademarks and Licenses" in Item 1). We intend to strategically and vigorously enforce our patents and other major initiativesforms of intellectual property and have done so already against several third parties. Other third parties may seek to enter markets with infringing products or may find alternative production methods that avoid infringement or we may not be successful in litigating to enforce our patents due to the risks inherent in any litigation. Patents involve complex factual and legal issues and, thus, the scope, validity or enforceability of any patent claims we have or may obtain cannot be clearly predicted. Patents may be challenged in the courts, as well as in various administrative proceedings before U.S. or foreign patent offices, and may be deemed unenforceable, invalidated or circumvented. We are currently and may in the future be a party to various lawsuits or administrative proceedings involving our patents. (See "Patents, Trademarks and Licenses" in Item 1.). Such challenges can result in some or all of the claims of the asserted patent being invalidated or deemed unenforceable. In such ascircumstances, an adverse patent enforcement decision which could lead to the migration toentry of competing chlorantraniliprole products in relevant markets may materially and adversely impact our financial results.
•ERP system stabilization and change governance - In the fourth quarter of 2020 we completed the go-live on a single global instance of SAP S4S/4 HANA. These three projects will place significant demands on certain functions whoThere are heavily involved in all three projects, particularly financeexecution and information technology. Failure to successfully execute such projects could materially and adverselychange management activities that may affect our expected performanceability to operationalize and monetize the investment made in FMC Agricultural Solutions and/the Enterprise Resource Planning ("ERP") system. Not using the system as designed or FMC Lithium.intended may result in inconsistencies across business units and functions if left unresolved. Changes made within our global ERP without proper governance could disable business transactions and disrupt or halt operations.
•Potential tax implications of FMC Lithium separation - We have received an opinion from outside counsel to the effect that the spin-off of FMC Lithium as a distribution to our stockholders, qualifiescompleted in March 2019, qualified as a non-taxable transaction for U.S. federal income tax purposes. The opinion is based on certain assumptions and representations as to factual matters from both FMC and FMC Lithium, as well as certain covenants by those parties. The opinion cannot be relied upon if any of the assumptions, representations or covenants is incorrect, incomplete or inaccurate or is violated in any material respect. The opinion of counsel is not binding upon the IRS or the courts and there is no assurance that the IRS or a court will not take a contrary position. It is possible that the IRS or a state or local taxing authority could take the position that aforementioned transaction results in the recognition of significant taxable gain by FMC, in which case FMC may be subject to material tax liabilities.
Financial Risks:
Cyclicality•Foreign exchange rate risks - We may experience seasonal variationsare an international company operating in many countries around the world, and thus face foreign exchange rate risks in the demandnormal course of our business. We are particularly sensitive to the Brazilian real, Chinese yuan, Indian rupee, euro, Mexican peso and Argentine peso. While we engage in hedging and other strategies to mitigate those risks, unexpected severe changes in foreign exchange may create risks that could materially and adversely affect our expected performance.
•Uncertain tax rates - Our future effective tax rates may be materially impacted by numerous items such as: a future change in the composition of earnings from foreign and domestic tax jurisdictions, as earnings in foreign jurisdictions are typically taxed at different statutory rates than the U.S. federal statutory rate; accounting for uncertain tax positions; business combinations; expiration of statute of limitations or settlement of tax audits; changes in valuation allowance; changes in tax law; currency gains and losses; and decisions to repatriate certain future foreign earnings on which U.S. or foreign withholding taxes have not been previously accrued.
•Uncertain recoverability of investments in long-lived assets - We have significant investments in long-lived assets and continually review the carrying value of these assets for recoverability in light of changing market conditions and alternative product sourcing opportunities. We may recognize future impairments of long-lived assets which could adversely affect our products givenresults of operations.
•Pension and postretirement plans - Our U.S. Qualified Plan has been fully funded for the naturelast several years and as such, the primary investment strategy is a liability hedging approach with an objective of maintaining the funded status of the crop protection marketplan such that the funded status volatility is minimized and the geographic regionslikelihood that we will be required to make significant contributions to the plan is limited. The portfolio is comprised of 100 percent fixed income securities and cash. Our plan assets and obligation under our U.S. Qualified Plan is in excess of $1 billion. Additionally, obligations related to our pension and postretirement plans reflect certain assumptions. To the extent actual experience differs from these assumptions, our costs and funding obligations could increase or decrease significantly. While we provide other defined benefit, defined contribution and postretirement benefits to our employees and retirees, our risk if focused on our U.S. Qualified Plan given its size to our consolidated financial position.
General Risk Factors:
•Market access risk - Our results may be affected by changes in distribution channels, which could impact our ability to access the market.
•Compliance with laws and regulations - The global regulatory environment is becoming increasingly complex and requires more resources to effectively manage, which may increase the potential for misunderstanding or misapplication of regulatory standards.
•Talent engagement and ethics/culture - The inability to recruit and retain key personnel, the unexpected loss of key personnel, or other external and internal factors and events could culminate in employee attrition and may adversely affect our operations. In addition, our future success depends in part on our ability to identify and develop talent to succeed senior management and other key members of the organization. We operate in markets where business ethics and local customs may differ from our company standards, increasing the risk of impropriety and regulatory enforcement. Significant effort will likely be required to ensure that the right mix of resources are trained, engaged and focused on achieving business objectives while adhering to our core values of safety, ethics and compliance.
•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 operate.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. The current military conflict between Russia and Ukraine, where we conduct limited operations, could disrupt or otherwise adversely impact those operations; and related sanctions, export controls or other actions that may be initiated by nations including the U.S., the European Union or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.) could adversely affect our business and/or our supply chain, business partners or customers in other countries beyond Russia and Ukraine.
•In Argentina, continued inflation and foreign exchange controls could adversely affect our business. Realignment of change in regional economic arrangements could have an operational impact on our businesses. In China, unpredictable enforcement of environmental regulations could result in unanticipated shutdowns in broad geographic areas, impacting our contract manufacturers and raw material suppliers.
•Information technology security and data privacy risks - As with all enterprise information systems, our information technology systems and systems operated by our vendors and third parties could be penetrated by outside parties’ intent on extracting information, corrupting information, deploying ransomware, or disrupting business processes. Remote and other work arrangements may leave the Company more vulnerable to a cyberattack. Our systems have in the past been, and likely will in the future be, subject to unauthorized access attempts. Not timely implementing system updates or security patches could leave our company exposed to security breaches. Unauthorized access could disrupt our business operations and could result in failures or interruptions in our computer systems, lockout from systems due to ransomware, or in the loss of assets and could have a material adverse effect on our business, financial condition or results of operations. We have not experienced a significant or material impact from these events to date. We may need to expend significant resources to maintain or expand our protective and preventative measures. Untimely implementation of system updates or security patches could leave our company exposed to security breaches. We engage in response planning, simulations, trainings, tabletop exercises, and other efforts to mitigate risks associated with cybersecurity. Breaches of our security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information or sensitive or confidential information about the Company, our employees, our vendors, or our customers, could result in litigation, violations of various data privacy regulations in some jurisdictions, and also potentially result in a liability. While we have taken measures to assess the requirements of, and to comply with the rapidly growing data privacy regulations in multiple jurisdictions, these measures may be challenged by authorities that regulate data-related compliance. We could incur significant expense in facilitating and responding to investigations and if the measures we have taken prove to be inadequate, we could face fines or penalties. This could damage our reputation, or otherwise harm our business, financial condition, or results of operations.
•Access to debt and capital markets - We rely on cash generated from operations and external financing to fund our growth and working capital needs. Limitations on access to external financing could adversely affect our operating results. Moreover, interest payments, dividends and the expansion of our business or other business opportunities may require significant amounts of capital. We believe that our cash from operations and available borrowings under our revolving credit facility will be sufficient to meet these needs in the foreseeable future. However, if we need external financing, our access to credit markets and pricing of our capital will be dependent upon maintaining sufficient credit ratings from credit rating agencies and the state of the capital markets generally. There can be no assurances that we would be able to obtain equity or debt financing on terms we deem acceptable, and it is possible that the cost of any
financings could increase significantly, thereby increasing our expenses and decreasing our net income. If we are unable to generate sufficient cash flow or raise adequate external financing, including as a result of significant disruptions in the global credit markets, we could be forced to restrict our operations and growth opportunities, which could adversely affect our operating results.
•Credit default risks - We may use our existing revolving credit facility to meet our cash needs, to the extent available. In the event of a default in this credit facility or any of our senior notes, we could be required to immediately repay all outstanding borrowings and make cash deposits as collateral for all obligations the facility supports, which we may not be able to do. Any default under any of our credit arrangements could cause a default under many of our other credit agreements and debt instruments. Without waivers from lenders party to those agreements, any such default could have a material adverse effect on our ability to continue to operate.
•Exposure to global economic conditions - Deterioration in the global economy and worldwide credit and foreign exchange markets could adversely affect our business. A worsening of global or regional economic conditions or financial markets could adversely affect both our own and our customers' ability to meet the terms of sale or our suppliers' ability to perform all their commitments to us. A slowdown in economic growth in our international markets, or a deterioration of credit or foreign exchange markets could adversely affect customers, suppliers and our overall business there. Customers in weakened economies may be unable to purchase our products, or it could become more expensive for them to purchase imported products in their local currency, or sell their commodities at prevailing international prices, and we may be unable to collect receivables from such customers.
Foreign exchange rate risks - We are an international company and face foreign exchange rate risks in the normal course of our business. We are particularly sensitive to the Brazilian real, the euro, the Indian rupee, the Chinese yuan, the Mexican peso, and the Argentine peso. Our acquisition of the DuPont Crop Protection Business has significantly expanded our operations and sales in certain foreign countries and correspondingly may increase our exposure to foreign exchange risks.
Uncertain tax rates - Our future effective tax rates may be materially impacted by numerous items including: a future change in the composition of earnings from foreign and domestic tax jurisdictions, as earnings in foreign jurisdictions are typically taxed at different rates than the United States federal statutory rate; accounting for uncertain tax positions; business combinations; expiration of statute of limitations or settlement of tax audits; changes in valuation allowance; changes in tax law; currency gains and losses; and the potential decision to repatriate certain future foreign earnings on which United States or foreign withholding taxes have not been previously accrued.
Uncertain recoverability of investments in long-lived assets - We have significant investments in long-lived assets and continually review the carrying value of these assets for recoverability in light of changing market conditions and alternative product sourcing opportunities.
Pension and postretirement plans - Obligations related to our pension and postretirement plans reflect certain assumptions. To the extent our plans' actual experience differs from these assumptions, our costs and funding obligations could increase or decrease significantly.
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ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
FMC leases executive offices in Philadelphia, Pennsylvania and operates 3223 manufacturing facilities in 20 countries as well as one mine in Argentina.17 countries. Our major research and development facilities are in Newark, Delaware; Shanghai, China and Copenhagen, Denmark.
We have long-term mineral rights to the Salar del Hombre Muerto lithium reserves in Argentina. Our FMC Lithium segment requires the lithium brine that is mined from these reserves, without which other sources of raw materials would have to be obtained.
We believe our facilities are in good operating conditions.condition. The number and location of our owned or leased production properties for continuing operations are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Latin America | | Europe, Middle East and Africa | | Asia | | Total |
| | | | | | | | | |
| | | | | | | | | |
| Total | 5 | | 2 | | 6 | | 10 | | 23 |
|
| | | | | | | | | |
| | North America | | Latin America | | Europe, Middle East and Africa | | Asia- Pacific | | Total |
| FMC Agricultural Solutions | 5 | | 2 | | 6 | | 13 | | 26 |
| FMC Lithium | 1 | | 2 | | 1 | | 2 | | 6 |
| Total | 6 | | 4 | | 7 | | 15 | | 32 |
| |
ITEM 3. | ITEM 3. LEGAL PROCEEDINGS |
Like hundreds of other industrial companies, we have been named as one of many defendants in asbestos-related personal injury litigation. Most of these cases allege personal injury or death resulting from exposure to asbestos in premises of FMC or to asbestos-containing components installed in machinery or equipment manufactured or sold by discontinued operations. The machinery and equipment businesses we owned or operated did not fabricate the asbestos-containing component parts at issue in the litigation, and to this day, neither the U.S. Occupational Safety and Health Administration nor the Environmental Protection Agency has banned the use of these components. Further, the asbestos-containing parts for this machinery and equipment were accessible only at the time of infrequent repair and maintenance. A few jurisdictions have permitted claims to proceed against equipment manufacturers relating to insulation installed by other companies on such machinery and equipment. We believe that, overall, the claims against FMC are without merit.
As of December 31, 2018,2021, there were approximately 9,4009,650 premises and product asbestos claims pending against FMC in several jurisdictions. Since the 1980s, approximately 115,000118,000 asbestos claims against FMC have been discharged, the overwhelming majority of which have been dismissed without any payment to the claimant. Since the 1980s, settlements with claimants have totaled approximately $99$162 million.
We intend to continue managing these asbestos-related cases in accordance with our historical experience. We have established a reserve for this litigation within our discontinued operations and believe that any exposure of a loss in excess of the established reserve cannot be reasonably estimated. Our experience has been that the overall trends in asbestos litigation have changed over
time. Over the last several years, we have seen changes in the jurisdictions where claims against FMC are being filed and changes in the mix of products named in the various claims. Because these claim trends have yet to form a predictable pattern, we are presently unable to reasonably estimate our asbestos liability with respect to claims that may be filed in the future.
Please see Note 1 “Principal"Principal Accounting Policies and Related Financial Information" - Environmental obligations, Note 11 “Environmental Obligations”12 "Environmental Obligations" and Note 19 “Guarantees,20 "Guarantees, Commitments and Contingencies”Contingencies" in the notes to our consolidated financial statements included in this Form 10-K, the content of which are incorporated by reference to this Item 3.
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ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
| |
ITEM 4A. | EXECUTIVE OFFICERS OF THE REGISTRANT |
ITEM 4A. INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The executive officers of FMC Corporation, the offices they currently hold, their business experience since at least January 1, 2010during the previous five years and their ages as of December 31, 2018,2021, are as follows:
follows. Each executive officer has been employed by the Company for more than five years. |
| | | | | | | | | | | | | |
| Name | | Age on 12/31/2018
| | Office and year of election and other information
|
Pierre R. BrondeauMark A. Douglas | | 6159 | | President, Chief Executive Officer, and Chairman of the Board (10-present); President (10-18), President and Chief Executive Officer of Dow Advanced Materials, a specialty materials company (08-09)Director (20-present); President and Chief Operating Officer of Rohm and Haas Company, a predecessor of Dow Advanced Materials (07-08); Board Member, T.E. Connectivity Electronics (07-present); Board Member, American Chemistry Council (17-present); Board Trustee, Franklin Institute (17-present), Board Member, Livent Corporation (18-present) |
Andrew D. Sandifer | | 49 | | Executive Vice President and Chief Financial Officer (18-present); Vice President and Treasurer (16-18); Vice President, Corporate Transformation (14-16); Vice President, Strategic Development (10-14); Vice President, Strategic Initiatives of ARAMARK (10); Board Member, Philabundance (14-present); Board Trustee, Germantown Academy (17-present) |
Andrea E. Utecht | | 70 | | Executive Vice President, General Counsel and Secretary (01-present); Board Member, Livent Corporation (18-present) |
Mark A. Douglas | | 56 | | President and Chief Operating Officer (18-present)(18-19), President, FMC Agricultural Solutions (12-18); President, Industrial Chemicals Group (11-12); Vice President, Global Operations and International Development (10-11); Vice President, President Asia, Dow Advanced Materials (09-10); Board Member, Quaker ChemicalHoughton (13-present); Board Member CropLife International (17-present); Board Member Pennsylvania Academy of the Fine Arts (16-present) |
| Andrew D. Sandifer | | 52 | | Executive Vice President and Chief Financial Officer (18-present); Vice President and Treasurer (16-18); Vice President, Corporate Transformation (14-16); Vice President, Strategic Development (10–14); Board Member, Philabundance (14-present); Board Trustee, Germantown Academy (17-present) |
| Ronaldo Pereira | | 49 | | Executive Vice President and President, FMC Americas (21-Present); President, FMC Americas (19-21); Vice President, FMC LATAM (17-19); General Director, Brazil (16); Regional Head Brazil, Rotam (14-15); various Director positions, FMC Corporation (06-14) |
| Michael F. Reilly | | 58 | | Executive Vice President, General Counsel, Chief Compliance Officer and Secretary (19-present); Vice President, Associate General Counsel and Chief Compliance Officer (16-19); Associate General Counsel (13-16); Board Member, First State Montessori Academy, Inc. (18-present) |
| Dr. Kathleen Shelton | | 60 | | Executive Vice President, Chief Technology Officer (21-present); Vice President, Chief Technology Officer (17-21); Global Science and Technology Director, DuPont Crop Protection (14-17); Director, Haskell Global Centers for Health and Environmental Science (12-13) |
| Diane Allemang | | 62 | | Executive Vice President, Chief Marketing Officer (21-present); Vice President, Chief Marketing Officer (18-21); Global Marketing Director (15-18); Executive Vice President, North America, Cheminova Inc (11-15); Vice President, Global Regulatory Affairs, Cheminova Inc (08-11) |
All officers are elected to hold office for one year or until their successors are elected and qualified. No family relationships exist among any of the above-listed officers, and there are no arrangements or understandings between any of the above-listed officers and any other person pursuant to which they serve as an officer. The above-listed officers have not been involved in any legal proceedings during the past ten years of a nature for which the SEC requires disclosure that are material to an evaluation of the ability or integrity of any such officer.
| | | | | | | | | | |
| Executive Officer Diversity |
| Gender: | Male | Female | | |
| Number of executive officers based on gender identity | 4 | 2 | | |
| Ethnically/Racially diverse | 1 | 0 | | |
PART II
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ITEM 5. | MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
FMC common stock of $0.10 par value is traded on the New York Stock Exchange (Symbol: FMC). There were 2,5702,269 registered common stockholders as of December 31, 2018.2021.
FMC’s annual meeting of stockholders will be held at 2:00 p.m. on Tuesday,Thursday, April 30, 2019,28, 2022 via live webcast at FMC Tower, 2929 Walnut Street Philadelphia, Pennsylvania.https://www.virtualshareholdermeeting.com/FMC2022. Notice of the meeting, together with instructions on how to access proxy materials, will be mailed approximately five weeks prior to the meeting to stockholders of record as of March 6, 2019.2, 2022.
Transfer Agent and Registrar of Stock:
| | | | | | | | |
| EQ Shareowner Services | | |
| 1110 Centre Pointe Curve, Suite 101 | or | P.O. Box 64874 |
| Mendota Heights, MN 55120-4100 | St. Paul, MN 55164-0874 |
| | |
EQ Shareowner ServicesPhone: 1-800-468-9716 | | |
1110 Centre Pointe Curve, Suite 101 | or | P.O. Box 64874 |
Mendota Heights, MN 55120-4100 | St. Paul, MN 55164-0854 |
| | |
Phone: 1-800-468-9716 | | |
| (651-450-4064 local and outside the U.S.) | | |
| https://equiniti.com/us/ |
Stockholder Return Performance Presentation
The graph that follows shall not be deemed to be incorporated by reference into any filing made by FMC under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The following Stockholder Performance Graph compares the five-year cumulative total return on FMC’s Common Stock with the S&P 500 Index and the S&P 500 Chemicals Index. The comparison assumes $100 was invested on December 31, 2013,2016, in FMC’s Common Stock and in both of the indices, and the reinvestment of all dividends.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | 2017 | | 2018 | | 2019 | | 2020 | | 2021 |
| FMC Corporation | $ | 100.00 | | | $ | 168.53 | | | $ | 132.85 | | | $ | 182.18 | | | $ | 212.96 | | | $ | 207.18 | |
| S&P 500 Index | 100.00 | | | 121.67 | | 116.54 | | 152.92 | | 180.57 | | 232.04 |
| S&P 500 Chemicals Index | 100.00 | | | 126.53 | | 112.05 | | 136.45 | | 160.44 | | 201.65 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | 2018 |
| FMC Corporation | $ | 100.00 |
| | $ | 76.37 |
| | $ | 53.28 |
| | $ | 77.92 |
| | $ | 131.32 |
| | $ | 103.52 |
|
| S&P 500 Index | 100.00 |
| | 113.52 |
| | 115.07 |
| | 128.61 |
| | 156.48 |
| | 149.88 |
|
| S&P 500 Chemicals Index | 100.00 |
| | 110.64 |
| | 106.08 |
| | 116.67 |
| | 147.62 |
| | 130.72 |
|
The following table summarizes information with respect to the purchase of our common stock during the three months ended December 31, 2018:2021:
ISSUER PURCHASES OF EQUITY SECURITIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 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 |
| October | 653 | | | $ | 92.40 | | | — | | | $ | — | | | $ | 250,014,808 | |
| November | 3,002 | | | 105.24 | | | — | | | — | | | 250,014,808 | |
| December | 947,755 | | | 105.54 | | | 947,547 | | | 99,999,925 | | | 150,014,884 | |
| Total | 951,410 | | | $ | 105.54 | | | 947,547 | | | $ | 99,999,925 | | | |
|
| | | | | | | | | | | | | | | | | |
| | | | | | Publicly Announced Program (1) |
| Period | Total Number of Shares Purchased (2) | | Average Price Paid Per Share | | Total Number of Shares Purchased | | Total Dollar Amount Purchased | | Maximum Dollar Value of Shares that May Yet be Purchased |
| October 1-31, 2018 | — |
| | $ | — |
| | — |
| | $ | — |
| | $ | 238,779,078 |
|
| November 1-30, 2018 | 4,216 |
| | 81.69 |
| | 2,250,000 |
| | 183,793,605 |
| | 54,985,473 |
|
| December 1-31, 2018 | 13,236 |
| | 85.07 |
| | 189,495 |
| | 16,206,368 |
| | 1,000,000,000 |
|
| Total | 17,452 |
| | $ | 81.97 |
| | 2,439,495 |
| | $ | 199,999,973 |
| | $ | 1,000,000,000 |
|
____________________
| |
(1) | This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be(1) Includes shares purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market conditions and other factors. |
| |
(2) | We also reacquire shares from time to time from employees in connections with vesting, exercise, and forfeiture of awards under our equity compensation plans. |
On December 3, 2018, our Board authorized the repurchase of up to $1 billion of our common shares. This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be repurchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market conditions and other factors.
On November 5, 2018, we announced a plan to repurchase $200 million in shares by the end of 2018 under our previous share repurchase authorization that was approved in 2013. We completed the announced repurchase in its entirety and the remaining authority expired at the completionindependent trustee of the $200 million repurchase. FMC Corporation Non-Qualified Savings and Investment Plan ("NQSP").
In 2018, 2.42021, 4.0 million shares were repurchased under the publicly announced repurchase program. At December 31, 2018, $1.0 billion2021, approximately $150 million remained unused under our Board-authorized repurchase program. However, 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. 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.
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ITEM 6. | SELECTED FINANCIAL DATA |
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial and other data presented below for, and as of the end of, each of the years in the five-year period ended December 31, 2018, are derived from our consolidated financial statements. The selected consolidated financial data should be read in conjunction with our consolidated financial statements for the year ended December 31, 2018.
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| | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions, except per share data) | 2018 | | 2017 | | 2016 | | 2015 | | 2014 |
| Income Statement Data: | | | | | | | | | |
| Revenue | $ | 4,727.8 |
|
| $ | 2,878.6 |
| | $ | 2,538.9 |
| | $ | 2,491.0 |
| | $ | 2,430.5 |
|
| Income from continuing operations before equity in (earnings) loss of affiliates, non-operating pension and postretirement charges (income), interest expense, net and income taxes | 880.5 |
|
| 278.0 |
| | 266.6 |
| | (116.7 | ) | | 256.8 |
|
| Income (loss) from continuing operations before income taxes | 743.7 |
|
| 180.8 |
| | 180.8 |
| | (207.4 | ) | | 206.8 |
|
| Income (loss) from continuing operations | $ | 654.9 |
|
| $ | (83.3 | ) | | $ | 130.7 |
| | $ | (212.6 | ) | | $ | 190.4 |
|
Discontinued operations, net of income taxes (1) | (143.4 | ) |
| 621.7 |
| | 81.0 |
| | 711.1 |
| | 131.7 |
|
| Net income (loss) | $ | 511.5 |
| | $ | 538.4 |
| | $ | 211.7 |
| | $ | 498.5 |
| | $ | 322.1 |
|
| Less: Net income (loss) attributable to noncontrolling interest | 9.4 |
| | 2.6 |
| | 2.6 |
| | 9.5 |
| | 14.6 |
|
| Net income (loss) attributable to FMC stockholders | $ | 502.1 |
| | $ | 535.8 |
| | $ | 209.1 |
| | $ | 489.0 |
| | $ | 307.5 |
|
| Amounts attributable to FMC stockholders: | | | | | | | | | |
| Continuing operations, net of income taxes | $ | 645.5 |
|
| $ | (85.9 | ) | | $ | 128.4 |
| | $ | (222.0 | ) | | $ | 180.6 |
|
| Discontinued operations, net of income taxes | (143.4 | ) |
| 621.7 |
| | 80.7 |
| | 711.0 |
| | 126.9 |
|
| Net income (loss) | $ | 502.1 |
| | $ | 535.8 |
| | $ | 209.1 |
| | $ | 489.0 |
| | $ | 307.5 |
|
| Basic earnings (loss) per common share attributable to FMC stockholders: | | | | | | | | | |
| Continuing operations | $ | 4.78 |
|
| $ | (0.64 | ) | | $ | 0.96 |
| | $ | (1.66 | ) | | $ | 1.35 |
|
| Discontinued operations | (1.06 | ) |
| 4.63 |
| | 0.60 |
| | 5.32 |
| | 0.95 |
|
| Net income (loss) | $ | 3.72 |
| | $ | 3.99 |
| | $ | 1.56 |
| | $ | 3.66 |
| | $ | 2.30 |
|
| Diluted earnings (loss) per common share attributable to FMC stockholders: | | | | | | | | | |
| Continuing operations | $ | 4.75 |
|
| $ | (0.64 | ) | | $ | 0.96 |
| | $ | (1.66 | ) | | $ | 1.34 |
|
| Discontinued operations | (1.06 | ) |
| 4.63 |
| | 0.60 |
| | 5.32 |
| | 0.95 |
|
| Net income (loss) | $ | 3.69 |
| | $ | 3.99 |
| | $ | 1.56 |
| | $ | 3.66 |
| | $ | 2.29 |
|
| Balance Sheet Data: | | | | | | | | | |
| Total assets | $ | 9,974.3 |
|
| $ | 9,206.3 |
| | $ | 6,139.3 |
| | $ | 6,325.9 |
| | $ | 5,326.0 |
|
| Long-term debt | 2,565.0 |
|
| 3,094.2 |
| | 1,801.2 |
| | 2,037.8 |
| | 1,140.9 |
|
| Other Data: | | | | | | | | | |
| Cash dividends declared per share | $ | 0.900 |
| | $ | 0.660 |
| | $ | 0.660 |
| | $ | 0.660 |
| | $ | 0.600 |
|
____________________
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(1) | Discontinued operations, net of income taxes includes, in periods up to their respective sales, our discontinued FMC Health and Nutrition, FMC Peroxygens and FMC Alkali Chemicals division. It also includes other historical discontinued gains and losses related to adjustments to our estimates of our retained liabilities for environmental exposures, general liability, workers’ compensation, postretirement benefit obligations, legal defense, property maintenance and other costs, losses for the settlement of litigation and gains related to property sales. Amount in 2017 includes the divestiture gain associated with FMC Health and Nutrition. Amount in 2015 includes the divestiture gain associated with the FMC Alkali Chemicals division sale while 2014 includes charges associated with the sale of the FMC Peroxygens business. |
FORWARD-LOOKING INFORMATION
Statement under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995: We and our representatives maynon-qualified deferred compensation plan reacquires shares from time to time make written or oral statements that are “forward-looking” and provide other than historical information, including statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations within,through open-market purchases relating to investments by employees in our other filings with the SEC, and in reports or letters to our stockholders.
In some cases, we have identified forward-looking statements by such words or phrases as “will likely result,” “is confident that,” “expect,” “expects,” “should,” “could,” “may,” “will continue to,” “believe,” “believes,” “anticipates,” “predicts,” “forecasts,” “estimates,” “projects,” “potential,” “intends” or similar expressions identifying “forward-looking statements” within the meaningcommon stock, one of the Private Securities Litigation Reform Act of 1995, includinginvestment options available under the negative of those words and 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. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the risk factors listed in Item 1A of this Form 10-K. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.Plan.
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ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We areFMC Corporation is a diversified chemicalglobal agricultural sciences company serving agricultural, consumerdedicated to helping growers produce food, feed, fiber and industrial markets globally with innovative solutions, applications and market-leading products.fuel for an expanding world population while adapting to a changing environment. We operate in twoa single distinct business segments: FMC Agricultural Solutionssegment. We develop, market and FMC Lithium. Our FMC Agricultural Solutions segment develops, markets and sellssell all three major classes of crop protection chemicals: insecticides,chemicals (insecticides, herbicides and fungicides. These products are used in agriculture to enhance crop yield and quality by controlling a broad spectrum of insects, weeds and disease,fungicides) as well as biologicals, crop nutrition and seed treatment, which we group as plant health. FMC’s innovative crop protection solutions enable growers, crop advisers and turf and pest management professionals to address their toughest challenges economically without compromising safety or the environment. FMC is committed to discovering new herbicide, insecticide and fungicide active ingredients, product formulations and pioneering technologies that are consistently better for the planet.
FORWARD-LOOKING INFORMATION
Statement under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995: FMC and its representatives may from time to time make written or oral statements that are "forward-looking" and provide other than historical information, including statements contained herein, in non-agricultural marketsFMC’s other filings with the SEC, and in reports or letters to FMC stockholders.
In some cases, FMC has identified forward-looking statements by such words or phrases as "will likely result," "is confident that," "expect," "expects," "should," "could," "may," "will continue to," "believe," "believes," "anticipates," "predicts," "forecasts," "estimates," "projects," "potential," "intends" or similar expressions identifying "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including the negative of those words and phrases. Such forward-looking statements are based on management’s current views and assumptions regarding future events, future business conditions and the outlook for pest control.the company based on currently available information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. Currently, one of the most significant factors is the potential adverse effect of the current 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. The extent to which COVID impacts us will depend on future developments, many of which remain uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Additional factors include, among other things, the risk factors and other cautionary statements filed with the SEC included within this Form 10-K as well as other SEC filings and public communications. 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. FMC cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Forward-looking statements are qualified in their entirety by the above cautionary statement. FMC undertakes no obligation, and specifically disclaims any duty, to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, except as otherwise required by law.
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 FMC Lithium segment manufactures lithiumresearch laboratories and greenhouses also have continued to operate throughout the pandemic. One of our third-party tollers experienced a short-term disruption earlier during the pandemic because of COVID-related staffing issues, which reflects one of the ongoing business risks that the pandemic creates. We are closely monitoring raw material and supply chain costs. Additionally, we are aware of the potential for usedisruptions 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. Earlier this year, 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. We enacted a wide rangepolicy that all employees, contractors and interns based in our Philadelphia headquarters, as well as visitors, must be fully vaccinated against COVID and must provide proof of lithium products, whichtheir vaccination with exemptions granted in certain situations. In addition, we have thousands of employees who continue operating our manufacturing sites and distribution warehouses worldwide. In all our facilities, we are used primarilyusing a variety of best practices to address COVID risks, following the protocols and procedures recommended by leading health authorities. We are continuing to monitor the situation in energy storage, specialty polymersall regions and chemical synthesis application.adjust our health and safety protocols accordingly. We made significant investments in our employees as a result of the COVID pandemic, including through enhanced dependent care pay policies, recognition bonuses, increased flexibility of work schedules 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.
2018We will continue to monitor the economic environment related to the pandemic on an ongoing basis and assess the impacts on our business.
2021 Highlights
The following are the more significant developments in our businesses during the year ended December 31, 2018:2021:
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• | Revenue of $4,727.8 million in 2018 increased $1,849.2 million or approximately 64•Revenue of $5,045.2 million in 2021 increased $403.1 million or approximately 9 percent versus last year. A more detailed review of revenues is included under the section entitled "Results of Operations". On a regional basis, sales in North America increased 8 percent, driven by strong volume growth and price increases, sales in Latin America increased by 12 percent driven by strong volume growth and price increases, sales in Europe, Middle East and Africa decreased 1 percent with favorable currency and price tailwinds mostly offset by a decrease in volume due to weather challenges and sales in Asia increased 13 percent, driven by favorable currency, volume growth especially from launches, as well as price growth. Approximately $400 million in revenues came from products launched in the last five years. •Our gross margin of $2,171.7 million increased $119.7 million or approximately 6 percent versus last year. A more detailed review of revenues by segment is included under the section entitled “Results of Operations”. On a regional basis, sales in North America increased 66 percent, sales in Asia increased 81 percent and sales in Europe, Middle East and Africa (EMEA) increased by 78 percent and sales in Latin America increased by 40 percent. |
Our gross margin, excluding transaction-related charges, of $2,156.5 million increased $1,035.0 million or approximately 92 percent versus last year. Gross margin, excluding transaction-related charges, as a percent of revenue is approximately 46 percent versus 39 percent in 2017. The increase in gross margin was primarily driven by top line revenue growth which was partially offset by higher costs due to rising input costs and increasing logistics expenses. Gross margin products in FMC Agricultural Solutions as well as a fullpercent of revenue of 43 percent decreased slightly from 44 percent in the prior year period, driven by higher costs primarily increases in raw materials, packaging, and logistics.
•Selling, general and administrative expenses decreased from $729.7 million to $714.1 million due to lower transaction-related charges resulting from the acquired DuPont Crop Protection Business.finalization of our worldwide ERP system in the first quarter 2021. Selling, general and administrative expenses, excluding transaction-related charges, of $713.7 million increased $37.3 million or approximately 6 percent. The increase was the result of resuming normal spending following cost-saving measures in the prior year due to the pandemic. Transaction-related charges are presented in our adjusted earnings Non-GAAP financial measurement below under the section titled "Results of Operations". | |
• | Selling, general and administrative expenses increased 42 percent from $600.4 million to $851.2 million primarily due to the acquisition of the DuPont Crop Protection Business which is being integrated into our FMC Agricultural Solutions segment. Selling, general and administrative expenses, excluding transaction-related charges, of $728.7 million increased $258.5 million or approximately 55 percent primarily due to a full year of operations of the acquired DuPont Crop Protection Business. Transaction-related charges are presented in our Adjusted Earnings Non-GAAP financial measurement below under the section titled “Results of Operations”. |
•Research and development expenses of $291.5$304.7 million increased $150.0$16.8 million or 1066 percent. In the prior year, 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, we have resumed research and development expenses related to these projects. We maintain our commitment to invest resources to discover new active ingredients and formulations that support resistance management and sustainable agriculture.
•Net income (loss) attributable to FMC stockholders of $736.5 million increased $185 million or approximately 34 percent from $551.5 million in the prior year period. The higher results were driven by our gross margin growth as well as $52.9 million in lower transaction-related charges due to the completion of our integration of the Dupont Crop Protection business in 2020. See Note 5 to the consolidated financial statements included in this Form 10-K for additional information on the Dupont Crop Protection business. Further contributing to our increase in net income was $24.2 million in lower restructuring and other charges versus prior year primarily due to investmentsthe charge of $65.6 million associated with the Isagro asset acquisition in discovery and product development from2020 somewhat offset by the newly acquired state of the art facilities from the DuPont Crop Protection Business Acquisition.
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• | Net income (loss) attributable to FMC stockholders of $502.1$33.5 million decreased approximately $33.7 million from $535.8 million in the prior year period. Net income in 2017 included the gain on sale of our discontinued FMC Health and Nutrition of approximately $727 million, net of tax which was partially offset by a provisional income tax charge of approximately $316 million related to the Tax Cuts and Jobs Act ("the Act"). Additionally, in 2018, we recorded a charge of $106.3 million related to active negotiations for a settlement agreement primarily to address discontinued operations at our environmental site in Middleport, New York. These were partially offset by higher income from continuing operations in the current year driven by a full year of results from the DuPont Crop Protection Business. Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of $854.7 million increased approximately $486.4 million or 132 percent primarily due to higher results in FMC Agricultural Solutions. See the disclosure of our Adjusted Earnings Non-GAAP financial measurement below under the section titled “Results of Operations”. |
Other 2018 Highlights
On October 15, 2018, Livent closed on its IPO. After completion of the IPO and the underwriters' exercise to purchase additional shares of common stock, FMC owned 123 million shares of Livent's common stock, representing approximately 84 percent of the total outstanding shares of Livent's common stock. FMC presently intends to distribute the remaining Livent shares on March 1, 2019. We will continue to consolidate Livent as the FMC Lithium reporting segment until the full separation date. At that time, results of Livent will move to discontinued operations.
We began and advanced the implementation of the SAP S/4 HANA platform during 2018 as part of our transformation process.
2019 Outlook
Our 2019 expectation for the
overallIndia indirect tax matter in 2021. Interest expense, net decreased $20.1 million compared to the prior year due to lower outstanding debt and lower rates. Additionally, the provision for income taxes was lower by $59.3 million, primarily due to the geographic mix of earnings among our global
crop protection market growth is that it will be flat to up low-single digits in U.S. dollars. We expect that FMC’s above-market growth in 2019 will be driven by the continued strength in global demand for our diamides, pre-emergent herbicide growth, sales expansions in Brazil, sulfonylurea herbicide growth in key European countriessubsidiaries as well as
newchanges in various tax reserves. Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of $894.9 million increased $85.9 million or approximately 11 percent. See the disclosure of our adjusted earnings Non-GAAP financial measurement under the section titled "Results of Operations".
Other 2021 Highlights
In March 2021, we announced our agreement with UPL Ltd. ("UPL"), a global provider of sustainable agriculture products and solutions, to expand access of Rynaxypyr® active to growers around the world and increase the manufacturing capacity for this critical molecule. Under the multi-year agreement, we will provide UPL access to products containing Rynaxypyr® active for distribution in select markets. In the future, we will supply Rynaxypyr® active to UPL for use in product introductions. formulations developed and marketed by UPL around the world. Additionally, UPL will toll manufacture Rynaxypyr® active for us in India for the India market. This arrangement will significantly increase our manufacturing footprint and capacity for Rynaxypyr® active, expanding our ability to supply the growing demand.
2022 Outlook
We expect North America, EMEA and Asia will also be flat to up low-single digits - driven by a variety of factors - and Latin America will grow in the low- to mid-single digits. In North America, growth will come from an increase in corn acreage and normalized pest pressures.
We expect 20192022 revenue for FMC will be in the range of approximately $4.45$5.25 billion to $4.55$5.55 billion, up approximately 57 percent at the midpoint year over year versus 2018 sales, excluding FMC Lithium.2021. We also expect total company adjusted EBITDA(1) of $1.165$1.32 billion to $1.205$1.48 billion, which represents 76 percent growth at the midpoint versus 2018 recast2021 results. Our results excluding FMC Lithium(2). 2019may be impacted if cost inflation becomes more severe, which would trend our results towards the lower end of guidance. Mid-to-high single digit price increases or the easing of foreign currency headwinds may drive our results towards the high end of the range. We are prepared to navigate certain challenges such as rising input costs, inconsistent raw material availability, increasing logistic expenses, long lead times for ocean freight, labor cost inflation and emerging currency headwinds. 2022 adjusted earnings are expected to be in the range of $5.55$6.80 to $5.75$8.10 per diluted share(1), up 8 percent at the midpoint versus recast 2018,2021, excluding any impact from potential share repurchases in 2019(2).2022. For cash flow outlook, refer to the liquidity and capital resources section below.
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(1) | Although we provide forecasts for adjusted earnings per share and total company adjusted EBITDA (non-GAAP financial measures), we are not able to forecast the most directly comparable measures calculated and presented in accordance with GAAP. Certain elements of the composition of the 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 GAAP outlook is provided. |
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(2) | Recast calculations for 2018 exclude the Lithium segment entirely, as we intend to show a true year-over-year comparable metric for the 2019 periods. The recast represents our best estimate at this time. Due to complexities including U.S. Tax Reform, the full recasting is not yet completed. The completed recast results will be filed on a Form 8-K in March 2019. |
(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 — 2018, 20172021, 2020 and 20162019
Overview
The following presentscharts provide a reconciliation of our segmentadjusted EBITDA, to net income (loss) attributable to FMC stockholders as seen throughadjusted earnings and organic revenue growth, all of which are Non-GAAP financial measures, from the eyes of our management. For management purposes, we report the operating performance of each of our business segments based on earnings before interest, income taxesmost directly comparable GAAP measure. Adjusted EBITDA and depreciation and amortization excluding corporate expenses, other income (expense), net and corporate special income (charges).
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| SEGMENT RESULTS RECONCILIATION |
| (in Millions) | Year Ended December 31, |
| 2018 | | 2017 | | 2016 |
| Revenue | | | | | |
| FMC Agricultural Solutions | $ | 4,285.3 |
| | $ | 2,531.2 |
| | $ | 2,274.8 |
|
| FMC Lithium | 442.5 |
| | 347.4 |
| | 264.1 |
|
| Total | $ | 4,727.8 |
| | $ | 2,878.6 |
| | $ | 2,538.9 |
|
| Earnings before interest, taxes and depreciation and amortization (EBITDA) | | | | | |
| FMC Agricultural Solutions | $ | 1,217.8 |
| | $ | 576.1 |
| | $ | 480.7 |
|
| FMC Lithium | 195.7 |
| | 141.9 |
| | 85.0 |
|
| Corporate and other | (108.9 | ) | | (95.1 | ) | | (79.6 | ) |
| Operating profit before the items listed below | $ | 1,304.6 |
| | $ | 622.9 |
| | $ | 486.1 |
|
| Depreciation and amortization | (168.2 | ) | | (113.0 | ) | | (100.6 | ) |
| Interest expense, net | (133.1 | ) | | (79.1 | ) | | (62.9 | ) |
Restructuring and other (charges) income (1) | (63.7 | ) | | (81.4 | ) | | (95.0 | ) |
Non-operating pension and postretirement (charges) income (2) | (3.8 | ) | | (18.2 | ) | | (23.4 | ) |
Transaction-related charges (3) | (192.1 | ) | | (150.4 | ) | | (23.4 | ) |
| (Provision) benefit for income taxes | (88.8 | ) | | (264.1 | ) | | (50.1 | ) |
| Discontinued operations, net of income taxes | (143.4 | ) | | 621.7 |
| | 81.0 |
|
| Net (income) loss attributable to noncontrolling interests | (9.4 | ) | | (2.6 | ) | | (2.6 | ) |
| Net income (loss) attributable to FMC stockholders | $ | 502.1 |
| | $ | 535.8 |
| | $ | 209.1 |
|
____________________
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(1) | See Note 8 to the consolidated financial statements included within this Form 10-K for details of restructuring and other (charges) income by segment: |
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
| FMC Agricultural Solutions | $ | (33.3 | ) | | $ | (49.9 | ) | | $ | (62.4 | ) |
| FMC Lithium | (2.3 | ) | | (7.8 | ) | | (0.6 | ) |
| Corporate | (28.1 | ) | | (23.7 | ) | | (32.0 | ) |
| Restructuring and other (charges) income | $ | (63.7 | ) | | $ | (81.4 | ) | | $ | (95.0 | ) |
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(2) | Our non-operating pension and postretirement charges (income)organic revenue 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 segments 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 segments results noted above. These elements reflect the current year operating costs to our businesses for the employment benefits provided to active employees. |
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(3) | Charges relate to the expensing of the inventory fair value step-up resulting from the application of purchase accounting, transaction costs, costs for transitional employees, other acquired employee related costs, integration related legal and professional third-party fees. Amounts represent the following: |
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| | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
Acquisition-related charges - DuPont Crop | | | | | |
Legal and professional fees (1) | $ | 86.9 |
| | $ | 130.2 |
| | $ | — |
|
Inventory fair value amortization (2) | 69.6 |
| | 20.2 |
| | — |
|
Acquisition-related charges - Cheminova (3) | | | | | |
Legal and professional fees (1) | — |
| | — |
| | 23.4 |
|
Separation-related charges - FMC Lithium | | | | | |
Legal and professional fees (1) | 35.6 |
| | — |
| | — |
|
| Total transaction-related charges | $ | 192.1 |
| | $ | 150.4 |
| | $ | 23.4 |
|
____________________
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(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 consolidated statements of income (loss). |
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(2) | These charges are included in “Costs of sales and services” on the consolidated statements of income (loss). |
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(3) | Acquisition-related charges and restructuring charges to integrate Cheminova with FMC Agricultural Solutions were completed at the end of 2016. |
ADJUSTED EARNINGS RECONCILIATION
The following chart, which is provided to assist the readers of our financial statements depictswith 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 after-tax charges (gains).Non-GAAP tax adjustments. These items are excluded fromby us in the measuresmeasure we use to evaluate business performance and determine certain performance-based compensation. These after-tax items are discussed in detail within the “Other results"Other Results of operations”Operations" section that follows. Additionally,Organic revenue growth excludes the chart below disclosesimpacts of foreign currency changes, which we believe is a meaningful metric to evaluate our Non-GAAP financial measure “Adjusted after-tax earnings from continuing operations attributablerevenue changes. In addition to FMC stockholders” reconciled from the GAAP financial measure “Net income (loss) attributable to FMC stockholders.” We believe that this measure providesproviding useful information about our operating results to investors. Weinvestors, we also believe that excluding the effect of restructuringcorporate special charges, net of income taxes, and other income and charges, non-operating pension and postretirement charges, 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 businessesbusiness from period to period. This measureThese measures should not be considered as a substitutesubstitutes for net income (loss) or other measures of performance or liquidity reported in accordance with U.S. GAAP.
| | | | | | | | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Revenue | $ | 5,045.2 | | | $ | 4,642.1 | | | $ | 4,609.8 | |
| Costs and Expenses | | | | | |
| Costs of sales and services | 2,873.5 | | | 2,590.1 | | | 2,526.2 | |
| Gross Margin | $ | 2,171.7 | | | $ | 2,052.0 | | | $ | 2,083.6 | |
| Selling, general and administrative expenses | 714.1 | | | 729.7 | | | 792.9 | |
| Research and development expenses | 304.7 | | | 287.9 | | | 298.1 | |
| Restructuring and other charges (income) | 108.0 | | | 132.2 | | | 171.0 | |
| | | | | |
| Total costs and expenses | $ | 4,000.3 | | | $ | 3,739.9 | | | $ | 3,788.2 | |
Income from continuing operations before non-operating pension and postretirement charges (income), interest income, interest expense, and provision for income taxes (1) | $ | 1,044.9 | | | $ | 902.2 | | | $ | 821.6 | |
| | | | | |
| Non-operating pension and postretirement charges (income) | 20.0 | | | 21.2 | | | 8.1 | |
| Interest income | — | | | (0.1) | | | (1.9) | |
| Interest expense | 131.1 | | | 151.3 | | | 160.4 | |
| Income from continuing operations before income taxes | $ | 893.8 | | | $ | 729.8 | | | $ | 655.0 | |
| Provision for income taxes | 91.6 | | | 150.9 | | | 111.5 | |
| Income (loss) from continuing operations | $ | 802.2 | | | $ | 578.9 | | | $ | 543.5 | |
| Discontinued operations, net of income taxes | (68.2) | | | (28.3) | | | (63.3) | |
| Net income (loss) (GAAP) | $ | 734.0 | | | $ | 550.6 | | | $ | 480.2 | |
| Adjustments to arrive at Adjusted EBITDA (Non-GAAP): | | | | | |
| Corporate special charges (income): | | | | | |
Restructuring and other charges (income) (3) | $ | 108.0 | | | $ | 132.2 | | | $ | 171.0 | |
Non-operating pension and postretirement charges (income) (4) | 20.0 | | | 21.2 | | | 8.1 | |
Transaction-related charges (5) | 0.4 | | | 53.3 | | | 77.8 | |
| Discontinued operations, net of income taxes | 68.2 | | | 28.3 | | | 63.3 | |
| Interest expense, net | 131.1 | | | 151.2 | | | 158.5 | |
| Depreciation and amortization | 170.9 | | | 162.7 | | | 150.1 | |
| Provision (benefit) for income taxes | 91.6 | | | 150.9 | | | 111.5 | |
Adjusted EBITDA (Non-GAAP) (2) | $ | 1,324.2 | | | $ | 1,250.4 | | | $ | 1,220.5 | |
|
| | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2018 | | 2017 | | 2016 |
| Net income (loss) attributable to FMC stockholders (GAAP) | $ | 502.1 |
| | $ | 535.8 |
| | $ | 209.1 |
|
| Corporate special charges (income), pre-tax | 259.6 |
| | 250.0 |
| | 141.8 |
|
Income tax expense (benefit) on Corporate special charges (income) (1) | (59.4 | ) | | (67.5 | ) | | (44.9 | ) |
| Corporate special charges (income), net of income taxes | $ | 200.2 |
| | $ | 182.5 |
| | $ | 96.9 |
|
| Adjustment for noncontrolling interest, net of tax on Corporate special charges (income) | (1.5 | ) | | — |
| | — |
|
| Discontinued operations attributable to FMC Stockholders, net of income taxes | 143.4 |
| | (621.7 | ) | | (80.7 | ) |
Non-GAAP tax adjustments (2) | 10.5 |
| | 271.7 |
| | 32.4 |
|
| Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP) | $ | 854.7 |
| | $ | 368.3 |
| | $ | 257.7 |
|
____________________
| |
(1) | 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 or income occurred and includes both current and deferred income tax expense (benefit) based on the nature of the non-GAAP performance measure. |
| |
(2) | 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 which includes the impact of the Act enacted on December 22, 2017. Management believes excluding these discrete tax items assists investors |
____________________
(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 9 to the consolidated financial statements included within this Form 10-K 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)Charges relate to transaction costs, costs for transitional employees, other acquired employee related costs, integration related legal and professional third-party fees. We completed the integration of the DuPont Crop Protection Business in 2020, other than the completion of certain in-flight initiatives associated with the finalization of our worldwide ERP system in early 2021.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
DuPont Crop Protection Business Acquisition (1) | | | | | |
Legal and professional fees (2) | $ | 0.4 | | | $ | 53.3 | | | $ | 77.8 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Total transaction-related charges | $ | 0.4 | | | $ | 53.3 | | | $ | 77.8 | |
____________________
(1)As previously disclosed, in November 2017, we acquired certain assets relating to the crop protection business of E. I. du Pont de Nemours and Company, and the related research and development organization (the "DuPont Crop Protection Business").
(2)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 consolidated statements of income (loss).
ADJUSTED EARNINGS RECONCILIATION
| | | | | | | | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Net income (loss) attributable to FMC stockholders (GAAP) | $ | 736.5 | | | $ | 551.5 | | | $ | 477.4 | |
Corporate special charges (income), pre-tax (1) | 128.4 | | | 206.7 | | | 256.9 | |
Income tax expense (benefit) on Corporate special charges (income) (2) | (23.4) | | | (23.8) | | | (49.2) | |
| Corporate special charges (income), net of income taxes | $ | 105.0 | | | $ | 182.9 | | | $ | 207.7 | |
| | | | | |
| Discontinued operations attributable to FMC Stockholders, net of income taxes | 68.2 | | | 28.3 | | | 63.3 | |
Non-GAAP tax adjustments (3) | (14.8) | | | 46.3 | | | 55.3 | |
| Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP) | $ | 894.9 | | | $ | 809.0 | | | $ | 803.7 | |
____________________
(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 or 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
| | | | | |
| Twelve Months Ended December 31, 2021 vs. 2020 |
| Total Revenue Change (GAAP) | 9 | % |
| Less: Foreign Currency Impact | (1%) |
| Organic Revenue Change (Non-GAAP) | 8 | % |
| |
Results of Operations
In the discussion below,
please refer to our chart titled "Segment Results Reconciliation" within the Results of Operations section. Allall comparisons are between the periods unless otherwise noted.Segment Results
For management purposes, segment EBITDA is defined as segment revenue less operating expenses (segment operating expenses consist of costs of sales and services, selling, general and administrative expenses, research and development expenses), excluding depreciation and amortization. We have excluded the following items from segment EBITDA: corporate staff expense, interest income and expense associated with corporate debt facilities and investments, income taxes, gains (or losses) on divestitures of businesses, restructuring and other charges (income), non-operating pension and postretirement charges, investment gains and losses, loss on extinguishment of debt, asset impairments, Last-in, First-out ("LIFO") inventory adjustments, transaction-related charges, and other income and expense items.Revenue
Information about how each of these items relates to our businesses at the segment level and results by segment are discussed below and in Note 20 to our consolidated financial statements included in this Form 10-K.
FMC Agricultural Solutions
|
| | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2018 |
| 2017 | | 2016 |
| Segment Revenue | $ | 4,285.3 |
|
| $ | 2,531.2 |
|
| $ | 2,274.8 |
|
| Segment EBITDA | 1,217.8 |
|
| 576.1 |
|
| 480.7 |
|
20182021 vs. 20172020
Revenue of $4,285.3$5,045.2 million increased $1,754.1$403.1 million, or approximately 699 percent versus the prior year period. The increase was driven by higher volumes, which accounted for an approximate 7 percent increase, as well as favorable pricing which accounted for an approximate 1 percent increase. Growth in volumes was broad-based across synthetic and biological portfolios, with North America, Latin America and Asia delivering strong results. Foreign currency tailwinds had a favorable impact of approximately 1 percent on revenue. Excluding foreign currency impacts, revenue increased approximately 8 percent.
2020 vs. 2019
Revenue of $4,642.1 million increased $32.3 million, or approximately 1 percent versus the prior year period. The increase was driven by higher volumes, primarily in Latin America and Asia, which accounted for an approximate 4 percent increase, as well as favorable pricing which accounted for an approximate 3 percent increase. Foreign currency headwinds had an unfavorable impact of approximately 6 percent on revenue. Excluding foreign currency impacts, revenue increased approximately 7 percent.
See below for a discussion of revenue by region.
| | | | | | | | | | | | | | | | | |
| Total Revenue by Region |
| Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
| North America | $ | 1,117.2 | | | $ | 1,032.5 | | | $ | 1,121.1 | |
| Latin America | 1,633.4 | | | 1,456.5 | | | 1,441.7 | |
| Europe, Middle East and Africa (EMEA) | 1,040.0 | | | 1,046.3 | | | 1,001.8 | |
| Asia | 1,254.6 | | | 1,106.8 | | | 1,045.2 | |
| Total Revenue | $ | 5,045.2 | | | $ | 4,642.1 | | | $ | 4,609.8 | |
2021 vs. 2020
North America: Revenue increased approximately 8 percent in the year ended December 31, 2021, driven by sales growth for herbicides and diamides, and strong product launches of Xyway™ fungicide and Vantacor™ insect control. The increase was partially offset by a shift of diamide partner sales from North America to other regions.
Latin America: Revenue increased approximately 12 percent, or approximately 14 percent excluding foreign currency headwinds, for the year ended December 31, 2021 compared to the prior year period due to strong volume growth across all countries and pricing actions. Growth was broad-based across segments with insecticides, fungicides and biologicals increasing double digits.
EMEA: Revenue decreased approximately 1 percent versus the prior year period, or approximately 4 percent excluding foreign currency tailwinds, driven by a shift of diamide partner sales from EMEA to other regions. Volume and price contributed to the region’s revenue driven by diamides, herbicides, biologicals and fungicides.
Asia: Revenue increased approximately 13 percent versus the prior year period, or approximately 10 percent excluding foreign currency tailwinds, primarily driven by growth in Australia, India, ASEAN zone and Korea. We had strong sales for our new Overwatch® herbicide and Vantacor™ insect control. Sales of our diamides were robust across the region despite erratic rainfall in several countries.
For 2022, full-year revenue is expected to be in the range of approximately $5.25 billion to $5.55 billion, which represents approximately 7 percent growth at the midpoint versus 2021.
2020 vs. 2019
North America: Revenue decreased approximately 8 percent in the year ended December 31, 2020. Sales were impacted due to supply chain disruptions, including COVID-related factors associated with logistics and a tolling partner in the fourth quarter. Additionally, we had channel destocking in the first half of the year. We continued market expansion of the Lucento® fungicide, which had a strong second year, and Elevest™ insect control had a good launch year.
Latin America: Revenue increased approximately 1 percent, or approximately 17 percent excluding foreign currency headwinds, for the year ended December 31, 2020 compared to the prior year period due primarily to high-single digit volume growth and solid price increases. Brazil had robust demand for our products for soybeans and sugarcane, while there was reduced acreage for cotton.
EMEA: Revenue increased approximately 4 percent versus the prior year period, or approximately 6 percent excluding foreign currency headwinds. Demand was driven by diamides on specialty crops, Battle® Delta herbicide on cereals and Spotlight® Plus herbicide on potatoes.
Asia: Revenue increased approximately 6 percent versus the prior year period, or approximately 9 percent excluding foreign currency headwinds, primarily driven by market expansion and share gains in India and the very strong market rebound in Australia. Our diamides were in high demand throughout the region in 2020, as we continue to grow on specialty crops like rice and fruit and vegetables.
Gross margin
2021 vs. 2020
Gross margin of $2,171.7 million increased by $119.7 million, or approximately 6 percent versus the prior year period. The increase was primarily due to higher revenues driven by increased volumes, partially offset by higher cost of goods sold.
Gross margin percent of approximately 43 percent slightly decreased from 44 percent in the revenue from the DuPont Crop Protection Acquisition, which was completed on November 1, 2017,prior year period, driven by higher costs primarily increases in raw materials, packaging, and contributed approximately $1,742logistics.
2020 vs. 2019
Gross margin of $2,052.0 million to the increase.
Segment EBITDA of $1,217.8 million increaseddecreased by $641.7$31.6 million, or approximately 111 percent, compared to the prior year period. The increase was primarily driven by the addition of the results from the acquired DuPont Crop Protection Business.
Refer to the FMC Agricultural Solutions Pro Forma Financial Results with the DuPont Crop Protection Business section below for further discussion.
2017 vs. 2016
Revenue of $2,531.2 million increased approximately 112 percent versus the prior year period. Higher volumes contributed 12 percentThe decrease was primarily due to the increase while favorableunfavorable foreign currency had an impactimpacts.
Gross margin percent of 1 percent. The acquired DuPont Crop Protection Business contributed 8approximately 44 percent slightly decreased from approximately 45 percent in the prior year period, primarily due to these higher volumes,unfavorable foreign currency headwinds.
Selling, general, and administrative expenses
2021 vs. 2020
Selling, general and administrative expenses of $714.1 million decreased by $15.6 million, or approximately $193 million. These increases were partially offset by lower pricing which impacted revenue by 2 percent.
Segment EBITDA of $576.1 million increased approximately 20 percent compared toversus the year-ago period. The higher volumes discussed above impacted the change in EBITDA by approximately 43 percent and favorable foreign currency impacted the change in EBITDA by approximately 5 percent. The acquired business represented a majority of these higher volumes. Offsetting these increases were lower pricing which had an unfavorable impact of approximately 11 percent as well as higher costs which unfavorably impacted the segment by approximately 17 percent to the increase. The higher costs were alsoprior year period due to lower transaction-related charges resulting from the recently acquired business.
FMC Agricultural Solutions Pro Forma Financial Results with the DuPont Crop Protection Business
We began to present pro forma combined results for the FMC Agricultural Solutions segmentfinalization of our worldwide ERP system in the first quarter 2021. Selling, general and administrative expenses, excluding transaction-related charges, increased $37.3 million, or approximately 6 percent, versus the prior year driven by resuming normal spending following cost-saving measures taken in the prior year due to the pandemic.
2020 vs. 2019
Selling, general and administrative expenses of 2018. We believe that reviewing our operating results$729.7 million decreased by combining actual and pro forma results for the FMC Agricultural Solutions segment is more useful in identifying trends in,$63.2 million, or reaching conclusions regarding, the overall operating performance of this segment. Our pro forma segment information includes adjustments as if the DuPont Crop Protection Business Acquisition had occurred on January 1, 2016. Our pro forma data is also adjusted for the effects of acquisition accounting but does not include adjustments for
costs related to integration activities, cost savings or synergies that might be achieved by the combined businesses. Pro forma amounts presented are not necessarily indicative of what our results would have been had we operated the DuPont Crop Protection Business since January 1, 2016, nor our future results.
|
| | | | | | | | | | | |
| FMC Agricultural Solutions Pro Forma Financial Results |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
| Revenue | | | | | |
Revenue, FMC Agricultural Solutions, as reported (1) | $ | 4,285.3 |
| | $ | 2,531.2 |
| | $ | 2,274.8 |
|
Revenue, DuPont Crop Protection Business, pro forma (2) | — |
| | 1,325.4 |
| | 1,439.3 |
|
Pro Forma Combined, Revenue (3) (4) | $ | 4,285.3 |
| | $ | 3,856.6 |
| | $ | 3,714.1 |
|
| EBITDA | | | | | |
EBITDA, FMC Agricultural Solutions, as reported (1) | $ | 1,217.8 |
| | $ | 576.1 |
| | $ | 480.7 |
|
EBITDA, DuPont Crop Protection Business, pro forma (2) | — |
| | 486.5 |
| | 562.3 |
|
Pro Forma Combined, EBITDA (3) (4) | $ | 1,217.8 |
| | $ | 1,062.6 |
| | $ | 1,043.0 |
|
___________________
| |
(1) | As reported amounts are the results of operations of FMC Agricultural Solutions, including the results of the DuPont Crop Protection Acquisition from November 1, 2017 onward. |
| |
(2) | DuPont Crop Protection Business pro forma amounts include the historical results of the DuPont Crop Protection Business, prior to November 1, 2017. These amounts also include adjustments as if the DuPont Crop Protection Business Acquisition had occurred on January 1, 2016, including the effects of acquisition accounting. The pro forma amounts do not include adjustments for expenses related to integration activities, cost savings or synergies that may have been or may be achieved by the combined segment. |
| |
(3) | The pro forma combined amounts are not necessarily indicative of what the results would have been had we acquired the DuPont Crop Protection Business on January 1, 2016 or indicative of future results. |
| |
(4) | For the year ended December 31, 2018, pro forma results and actual results are the same. |
|
| | | | | | | | | | | |
FMC Agricultural Solutions Pro Forma Combined Revenue by Region (1) (2) |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
Europe, Middle East and Africa (EMEA) (3) | $ | 966.0 |
| | $ | 920.8 |
| | $ | 902.8 |
|
North America (4) | 1,090.8 |
| | 941.3 |
| | 859.1 |
|
Latin America (5) | 1,210.1 |
| | 1,021.1 |
| | 1,023.1 |
|
Asia (6) | 1,018.4 |
| | 973.4 |
| | 929.1 |
|
| Total | $ | 4,285.3 |
| | $ | 3,856.6 |
| | $ | 3,714.1 |
|
___________________ | |
(1) | For the year ended December 31, 2018, pro forma results and actual results are the same. |
| |
(2) | Pro forma combined revenue by region for the years ended December 31, 2017 and 2016 includes the results of the DuPont Crop Protection Business of $1,325.4 million and $1,439.3 million, respectively, assuming the acquisition occurred on January 1, 2016. These amounts include adjustments as if the DuPont Crop Protection Business Acquisition had occurred on January 1, 2016. The pro forma combined revenue by region amounts are not necessarily indicative of what the results would have been had we acquired the DuPont Crop Protection Business on January 1, 2016 or indicative of future results. |
| |
(3) | Increase in the year ended December 31, 2018 was due primarily to strong growth of the acquired insecticides and herbicides, the move to direct market access in France, as well as sales synergies of legacy FMC products. These were partially offset by a forced divestiture (anti-trust remedy), unfavorable weather conditions that led to a shorter growing season and lower demand in Northern and Central Europe. |
| |
(4) | Increase in the year ended December 31, 2018 was due to very strong demand for the acquired insecticides, growth in U.S. soy acreage in 2018, and strong demand across niche crops. These were partially offset by unfavorable impacts from the delayed start to the Spring season. |
| |
(5) | Increase in the year ended December 31, 2018 was due to strong growth for the acquired insecticides in soybean and other crops, strong acreage growth in cotton and higher prices in Brazil as well as higher wheat acreage in Argentina. Partially offsetting these increases were unfavorable foreign currency impacts and severe drought in Argentina. |
| |
(6) | Increase in the year ended December 31, 2018 was due to strong performance in rice and soy insecticides in India and growth in rice herbicides in China which was partially offset by a forced divestiture in India (anti-trust remedy), the rationalization of the legacy portfolio in India and extreme drought conditions in Australia. |
Pro Forma Combined Results - 2018 vs. 2017
Pro forma combined revenue of $4,285.3 million increased by approximately 118.0 percent versus the prior year period. ReferSelling, general and administrative expenses, excluding transaction-related charges, decreased $38.7 million, or approximately 5 percent, versus the prior year period due to cost-saving measures implemented in response to the FMC Agricultural Solutions Pro Forma Combined Revenue by Region chart above for further discussion.pandemic.
Pro forma combined segment EBITDAResearch and development expenses
2021 vs. 2020
Research and development expenses of $1,217.8 million increased approximately 15 percent compared to the prior year. The increase was primarily driven by revenue growth discussed above as our sales organization leveraged valuable cross-selling opportunities due to minimal customer overlap with DuPont. Additionally, we reduced expected operating costs for the acquired DuPont Crop Protection Business through accelerated functional integration, leveraging our back office infrastructure and reducing manufacturing costs at the acquired plants. These were partially offset by higher raw material costs which have had a negative impact on results year over year. This is impacting the chemical industry broadly as the Chinese government has been shutting down industrial parks as part of their environmental program. We have been able to mitigate and manage the impact on our ability to supply our customer due to our diversified supply chain network.
For 2019, full-year segment revenue is expected to be approximately $4.45 billion to $4.55 billion.
FMC Lithium
|
| | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2018 | | 2017 | | 2016 |
| Segment Revenue | $ | 442.5 |
| | $ | 347.4 |
| | $ | 264.1 |
|
| Segment EBITDA | 195.7 |
| | 141.9 |
| | 85.0 |
|
2018 vs. 2017
Revenue of $442.5$304.7 million increased by $16.8 million, or approximately 276 percent versus the prior-year period primarily driven by higher volumes which impacted revenue by approximately 21 percent. Additionally, improved pricingprior year period. During 2020, we phased some research and mix added approximately 8 percentdevelopment projects differently to allow for lower costs in response to the change in revenue. Foreign currency had an unfavorable impact onpandemic without fundamentally impacting long-term timelines. In the change in revenue of approximately 2 percent.
Segment EBITDA of $195.7 million increased approximately $54 million versus thecurrent year, ago period. The higher volumes noted above impacted EBITDA by $46 million while improved pricingwe have resumed research and mix had an approximately $27 million impact. These increases were offset by approximately $20 million in costs due to higher raw material prices as well as standalone costsdevelopment expenses related to the separationthese projects.
We announced that we will distribute the remaining Livent shares on March 1, 2019. At that time, results2020 vs. 2019
Research and development expenses of FMC Lithium will move to discontinued operations.
2017 vs. 2016
Revenue of $347.4$287.9 million increaseddecreased by $10.2 million, or approximately 323 percent versus the prior-yearprior year period driven by improved pricing and mix, which accounted for a 23 percent increase. Additionally, higher volumes impacted revenue by 9 percent. Foreign currency had a minimal impact on the changeprimarily due to cost-saving measures taken in revenue.
Segment EBITDA of $141.9 million increased approximately $57 million versus the year ago period. The improved pricing and mix noted above impacted EBITDA by approximately $60 million while volume contributedresponse to the change by approximately $11 million. These increases were offset by higher raw material pricesCOVID pandemic, but we did not cancel any research and energy prices as well as expansion relateddevelopment projects. We phased some projects differently to allow lower costs by approximately $13 million. Foreign currency had a negative impact of less than $1 million on the change in EBITDA.
Corporate and other
Corporate expenses are included as a component of the line item “Selling, general and administrative expenses” except for last in, first-out (LIFO) related charges that are included as a component of "Cost of sales and other services" on our consolidated statements of income (loss).
2018 vs. 2017
Corporate and other expenses of $108.9 million increased by $13.8 million from $95.1 million in 2017. The increase was primarily driven by higher LIFO expense of approximately $5 million comparedresponse to the prior year. Additionally, the increase was due to negative foreign currency impactspandemic without fundamentally impacting long-term timelines.
Other Results of approximately $3 million, which was mainly due to the foreign exchange impacts on intercompany fund movements in 2018.
2017 vs. 2016
Corporate and other expenses of $95.1 million increased by $15.5 million from $79.6 million in 2016. The increase was driven by approximately $6 million of corporate incentives due to higher business results and share-based compensation. Additionally, the prior period included approximately $7 million of LIFO income that did not recur in 2017. The remaining increase was due to other corporate items including corporate facility costs, foreign exchange losses and other shared corporate costs.
Operations
Depreciation and amortization
20182021 vs. 20172020
Depreciation and amortization of $168.2$170.9 million increased $55.2$8.2 million, or approximately 5 percent, as compared to 20172020 of $113.0$162.7 million. Approximately $56 millionThe increase was mostly driven by the impacts of the increase was due to the increase in intangible assets and property, plant and equipment acquired as a resultamortization effects of the DuPont Crop Protection Business.completion of various phases of our ERP implementation which increased amortization expense by approximately $5 million.
20172020 vs. 20162019
Depreciation and amortization of $113.0$162.7 million increased $12.4$12.6 million, or approximately 8 percent, as compared to 2019 of $150.1 million. The increase was mostly driven by the prior year of $100.6 million. Approximately $14 millionimpacts of the increase was due to the increase in intangible assets and property, plant and equipment acquired as a resultamortization effects of the DuPont Crop Protection Business partially offset by decreased depreciation andcompletion of various phases of our ERP implementation which increased amortization expense in the legacy FMC Agricultural Solutions segment.by approximately $10 million.
Interest expense, net
20182021 vs. 20172020
Interest expense, net of $133.1$131.1 million increaseddecreased by $20.1 million, or approximately 6813 percent, compared to $79.1$151.2 million in 2017.2020. The increasedecrease was driven by lower foreign debt balances and rates which decreased interest expense by approximately $9 million and, lower short term interest rates which decreased interest expense by approximately $10 million.
2020 vs. 2019
Interest expense, net of $151.2 million decreased by $7.3 million, or approximately 5 percent, compared to $158.5 million in 2019. The decrease was driven by lower term loan balances which decreased interest expense by approximately $17 million, lower LIBOR rates which decreased interest expense by approximately $20 million and partially offset by the additionimpacts of the 2017 Term Loan Facilityour third quarter 2019 debt offering which increased interest expense by approximately $30 million, and higher interest rates which increased interest expense by approximately $6 million. The remaining increase of approximately $17 million was due to zero interest allocated to discontinued operations in 2018 as compared to 2017, due to the divestment of the FMC Health and Nutrition business to DuPont in 2017. Interest was previously allocated in accordance with relevant discontinued operations accounting guidance.
2017 vs. 2016
Interest expense, net of $79.1 million increased by approximately 26 percent compared to $62.9 million in 2016. The increase was driven by the impacts of higher foreign debt balances of approximately $6 million, the addition of the 2017 Term Loan Facility of $6 million, and increases in interest rates of approximately $4 million.
Corporate special charges (income)
Restructuring and other charges (income)
Our restructuring and other charges (income) are comprised of restructuring, assets disposals and other charges (income) as described below:
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
| Restructuring charges | $ | 126.4 |
| | $ | 16.3 |
| | $ | 43.4 |
|
| Other charges (income), net | (62.7 | ) | | 65.1 |
| | 51.6 |
|
Total restructuring and other charges (income) (1) | $ | 63.7 |
| | $ | 81.4 |
| | $ | 95.0 |
|
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
| Restructuring charges | $ | 41.1 | | | $ | 42.6 | | | $ | 62.2 | |
| Other charges (income), net | 66.9 | | | 89.6 | | | 108.8 | |
Total restructuring and other charges (income) (1) | $ | 108.0 | | | $ | 132.2 | | | $ | 171.0 | |
_______________
(1) See Note 89 to the consolidated financial statements included in this Form 10-K for more information.
20182021
Restructuring and asset disposal charges in 2018 were2021 primarily consisted of $16.7 million of charges associated with the integration of the DuPont Crop Protection Business which was completed in 2020 except for certain in-flight initiatives. These charges primarily reflect non-cash charges and to a lesser extent remaining severance. Restructuring charges associated with the DuPont program are largely complete and any future charges are not expected to be material. There were other restructuring charges of $13.4 million related to various actions to improve organizational structure as well as regional alignment activities which primarily included the move of our European headquarters. Types of costs primarily relate to facility-related shut down costs including asset impairments as well as employee-related costs.
Other charges (income), net in 2021 includes $33.5 million of charges related to the establishment of reserves for certain historical India indirect tax matters that were triggered during the period of which approximately half are non-cash charges. See Note 20 to the consolidated financial statements included within FMC Agricultural Solutionsthis Form 10-K for further information regarding this matter. Additional charges of $27.1 million consists of charges of environmental sites.
2020
Restructuring charges in 2020 primarily consisted of $40.2 million of charges associated with the integration of the DuPont Crop Protection Business which was completed in 2020 except for certain in-flight initiatives. These charges included severance, accelerated depreciation on certain fixed assets, and other costs (benefits). There were other miscellaneous restructuring charges $2.4 million.
Other charges (income), net in 2020 includes $65.6 million of charges related to our acquisition of the remaining rights for Fluindapyr active ingredient assets from Isagro. See Note 9 to the consolidated financial statements included within this Form 10-K for further information regarding this matter. Additional charges of $24.9 million consists of charges of environmental sites.
2019
Restructuring charges in 2019 primarily consisted of $34.1 million of charges related to our decision to exit sales of all carbofuran formulations globally and $26.4 million of charges associated with the integration of the DuPont Crop Protection Business. These charges primarily consisted of approximately $59 million of charges related to the change in our market access model in Indiaincluded severance, accelerated depreciation on certain fixed assets, and approximately $28 million of charges due to our decision to exit the Ewing R&D center as discussed above. Refer to Note 8 for more information. Other restructuring charges within FMC Agricultural Solutions as we continue to integrate the acquired DuPont Crop Protection Business totaled approximately $22 million.
Other charges (income), net in 2018 primarily consists of income from the gain on sales of $87.2 million from the divestment of a portion of FMC's European herbicide portfolio to Nufarm Limited and certain products of our India portfolio to Crystal Crop Protection Limited. These divestitures satisfied FMC's commitment to the European Commission and the Competition Commission of India, respectively, for regulatory requirements in order to complete the DuPont Crop Protection Acquisition. Additionally, there were environmental related charges of $21.9 million for remediation activities and $2.6 million of other charges.
2017
Restructuring and asset disposal charges in 2017 were primarily associated with charges in our FMC Lithium segment of $7.8 million related to miscellaneous restructuring.costs (benefits). There were also impairment charges of intangible assets within FMC Agricultural Solutions of $2.2 million. In Corporate, there were asset write-downs of approximately $5.5 million. Amounts also includeother miscellaneous restructuring charges of $0.8$1.7 million.
Other charges (income), net in 2017 consisted2019 primarily consists of charges of environmental sites. During the fourth quarter of 2019, we recorded a $42.1charge of $72.8 million impairment on certain indefinite-lived intangible assets from the acquired DuPont Crop Protection Business Acquisition as a result of a triggering event duean unfavorable court ruling we received in relation to the Act. Other charges (income) also includes $16.6 million for continuing environmental sites treated as Corporate charges. Additionally, we incurred exit costs of $4.8 million resulting from the termination and de-consolidationPocatello Tribal Litigation at one of our interest in a variable interest entity that was previouslyenvironmental sites. See Note 12 to the consolidated and was part of our FMC Agricultural Solutions segment. We had other miscellaneous charges, net of approximately $1.6 million.financial statements included within this Form 10-K for further information regarding this matter.
2016
Restructuring and asset disposal charges in 2016 totaled $43.4 million. Included in this were final charges totaling $42.3 million associated with the integration of Cheminova into our existing FMC Agricultural Solutions segment. This amount included final adjustments to severances, long lived asset write offs, contract termination costs and other miscellaneous items. There were miscellaneous restructuring charges of $1.1 million.
Other charges (income), net in 2016 consisted of $36.8 million for continuing environmental sites treated as Corporate charges, $13.2 million associated with a license agreement to obtain certain technology and intellectual property rights for new compounds still under development and $4.2 million as a result of the Argentina government's action to devalue its currency. These charges were partially offset by other miscellaneous income of $2.6 million.
Non-operating pension and postretirement (charges) incomecharges (income)
Non-operating pension and postretirement (charges) income are included in “Selling, general and administrative expenses” on our consolidated statements of income (loss).
20182021 vs. 20172020
The charge for 20182021 was $3.8$20.0 million compared to $18.2$21.2 million in 2017. 2017 included $35.7 million of settlement charges primarily related to the termination of our U.K. Plan. The decrease in settlements2020 and was partially offset by lower expected return on plan assets due to the shift tonot a primarily fixed income investment portfolio of $15.5 million versus 2017. See Note 14 for more information.material change.
20172020 vs. 20162019
The charge for 20172020 was $18.2$21.2 million compared to $23.4$8.1 million in 2016.2019. The decrease wasincrease in non-operating pension and post retirement charges (income) is attributable to the resultcontinued approach of $22.8 million lower amortizationusing the smoothed market related value of net actuarial lossesassets (MRVA) as a resultopposed to the actual fair value of a changeplan assets in estimatethe determination of 2020 expense. This continued approach will create some volatility in fiscal 2017 to amortize the gains and losses over the expected life time of the inactive population rather than the average remaining service period of the active participants which was partially offset by an increase of $15.4 million for recognized losses due toour non-operating periodic pension cost since our qualified pension plan settlements. See Note 14 for more information.is 100 percent fixed income securities.
Transaction-related charges
A detailed description of the transaction related charges is included in Note 205 to the consolidated financial statements included within this Form 10-K and10-K. Transaction related charges, which consisted entirely of those for the DuPont Crop acquisition, ended in the Segment Results Reconciliation above within the "Results of Operations" section of the Management's Discussion and Analysis.early 2021.
Provision for income taxes
A significant amount of our earnings is generated by our foreign subsidiaries (e.g., Singapore and Hong Kong), which tax earnings at lower rates than the United States federal statutory rate. Our future effective tax rates may be materially impacted by numerous items including: a future change in the composition of earnings from foreign and domestic tax jurisdictions, as earnings in foreign jurisdictions are typically taxed at more favorable rates than the United States federal statutory rate; accounting for uncertain tax positions; business combinations; expiration of statute of limitations or settlement of tax audits; changes in valuation allowance;
changes in tax law; and the potential decision to repatriate certain future foreign earnings on which United States or foreign withholding taxes have not been previously accrued.
Provision for income taxes for 20182021 was expense of $88.8$91.6 million resulting in an effective tax rate of 11.910.2 percent. Provision for income taxes for 20172020 was expense of $264.1$150.9 million resulting in an effective tax rate of 146.1 percent primarily attributable to the $315.9 million of provisional tax expense associated with the Act.20.7 percent. Provision for income taxes for 20162019 was $50.1expense of $111.5 million resulting in an effective tax rate of 27.717.0 percent. Note 1213 to the consolidated financial statements included in this Form 10-K includes more details on the drivers of the GAAP effective rate and year-over-year changes. We believe showing the reconciliation below of our GAAP to Non-GAAP effective tax rate provides investors with useful supplemental information about our tax rate on the core underlying business.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| (in Millions) | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate | | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate | | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate |
| GAAP - Continuing operations | $ | 893.8 | | $ | 91.6 | | 10.2 | % | | $ | 729.8 | | $ | 150.9 | | 20.7 | % | | $ | 655.0 | | $ | 111.5 | | 17.0 | % |
| Corporate special charges (income) | 128.4 | | 23.4 | | | | 206.7 | | 23.8 | | | | 256.9 | | 49.2 | | |
Tax adjustments (1) | | 14.8 | | | | | (46.3) | | | | | (55.3) | | |
| Non-GAAP - Continuing operations | $ | 1,022.2 | | $ | 129.8 | | 12.7 | % | | $ | 936.5 | | $ | 128.4 | | 13.7 | % | | $ | 911.9 | | $ | 105.4 | | 11.6 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Twelve Months Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| (in Millions) | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate | | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate | | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate |
| GAAP - Continuing operations | $ | 743.7 |
| $ | 88.8 |
| 11.9 | % | | $ | 180.8 |
| $ | 264.1 |
| 146.1 | % | | $ | 180.8 |
| $ | 50.1 |
| 27.7 | % |
| Corporate special charges | 259.6 |
| 59.4 |
| | | 250.0 |
| 67.5 |
| | | 141.8 |
| 44.9 |
| |
Tax adjustments (1) | | (10.5 | ) | | | | (271.7 | ) | | | | (32.4 | ) | |
| | $ | 1,003.3 |
| $ | 137.7 |
| 13.7 | % | | $ | 430.8 |
| $ | 59.9 |
| 13.9 | % | | $ | 322.6 |
| $ | 62.6 |
| 19.4 | % |
_______________ (1)Tax adjustments in 2021, 2020, and 2019 are materially attributable to the effects of certain changes in various tax reserves. See Note 13 to the consolidated financial statements included within this Form 10-K.
| |
(1) | Tax adjustments in 2018 and 2017 are materially attributable to the effects of the Act and primarily relate to the one-time transition tax, the decrease in the U.S. federal tax rate, and the realizability of certain U.S. state deferred tax assets. Tax adjustments in 2017 were primarily associated with the provisional income tax expense recorded as a result of the enactment of the Act in December 2017. See Note 12 to the consolidated financial statements included within this Form 10-K for additional discussion. Tax adjustments in 2016 were primarily associated with valuation allowance adjustments to U.S. state deferred tax balances. |
The primary drivers for the decreasefluctuations in the year-to-date effective tax rate for 2018 compared to 2017 and 2017 compared to 2016each period are shownprovided in the table above. The remaining change for 2017 compared to 2016 wasExcluding the items in the table above, the changes in the non-GAAP effective tax rate were primarily due to reduced domestic earnings in our FMC Agricultural Solutions business and the impact of the full integrationgeographic mix of Cheminova intoearnings among our global supply chain.subsidiaries. See Note 13 to the consolidated financial statements included within this Form 10-K for additional details related to the provisions for income taxes on continuing operations, as well as items that significantly impact our effective tax rate.
Discontinued operations, net of income taxes
Our discontinued operations in periods up to its sale, represent our discontinued FMC Health and Nutrition and FMC Alkali Chemicals business results as well asprimarily reflect adjustments to retained liabilities from other previously discontinued operations. The primary liabilities retainedoperations and include environmental liabilities, other postretirement benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities. Discontinued operations also includes the results of our discontinued FMC Lithium business in periods up to its disposition on March 1, 2019. See Note 1011 to the consolidated financial statements included within this Form 10-K for additional details on our discontinued operations.
20182021 vs. 20172020
Discontinued operations, net of income taxes represented a loss of $143.4$68.2 million in 20182021 compared to incomea loss of $621.7$28.3 million in 2017.2020. The decreaseloss during both periods was primarily driven bydue to adjustments related to the divestitureretained liabilities from our previously discontinued operations. Offsetting the losses in 2021 and 2020 were the gain on sales of FMC Healthland in our discontinued sites of $15 million and Nutrition to DuPont in the fourth quarter of 2017 which resulted in an after-tax gain of approximately $727 million, which did not recur in 2018. Discontinued operations, net of income taxes, in 2017 also includes the impairment charge of approximately $148$24 million, net of tax, to reflect the write down of our Omega-3 business to its sales price. During 2018, we recorded a charge of approximately $106 million as a result of active negotiations for a settlement agreement primarily to address discontinued operations at our Middleport, New York plant which was the subject of an Administrative Order on Consent entered into with the EPA and NYSDEC in 1991. The charge consists of incremental estimated costs of remediation for certain offsite operable units associated with historic site operations as we engage in settlement discussions with NYSDEC to resolve the path forward regarding remediation. Refer to Note 11 for further details.taxes, respectively.
20172020 vs. 20162019
Discontinued operations, net of income taxes represented incomea loss of $621.7$28.3 million in 20172020 compared to incomea loss of $81.0$63.3 million in 2016.2019. The increaseloss during both periods was primarily driven bydue to adjustments related to the divestitureretained liabilities from our previously discontinued operations. Offsetting the loss in both 2019 and 2020 were the gain on sale of FMC Healthtwo parcels of land in our discontinued site in Newark, California of $21 million and Nutrition to DuPont which resulted in an after-tax gain of approximately $727 million. Amount also includes the impairment charge of approximately $148$24 million, net of tax,taxes, respectively. Additionally, during 2019, we included the net loss from our discontinued FMC Lithium segment, primarily due to reflect the write down our Omega-3 businessseparation-related costs, up to its sales price.separation date on March 1, 2019.
Net income (loss)
2021 vs. 2020
29
The only difference between Net income (loss) and Net income (loss) attributable to FMC stockholders is noncontrolling interest, which period over period is immaterial.
20182020 vs. 20172019
Net income (loss) increased to $550.6 million from $480.2 million. The higher results were driven by a slight increase in revenue as well as cost-saving measures in selling, general, and administrative and research and development expenses in response to the pandemic. Restructuring and other charges were $38.8 million lower versus prior year and discontinued operations expense decreased $35.0 million compared to the prior year. These increases to income were partially offset by
higher tax expense and higher provision for income taxes of $39.4 million and higher non-operating pension and postretirement charges of $13.1 million.
The only difference between Net income (loss) and Net income (loss) attributable to FMC stockholders decreased to $502.1is noncontrolling interest, which period over period is immaterial.
Adjusted EBITDA (Non-GAAP)
2021 vs. 2020
Adjusted EBITDA of $1,324.2 million from $535.8 million.increased $73.8 million, or approximately 6 percent versus the prior year period. The decreaseincrease was primarily due to higher volumes and higher pricing which accounted for approximately 20 percent and 3 percent increases respectively. These factors more than offset cost increases in raw materials, packaging, and logistics costs, and to a lesser extent the gain on sale recorded in discontinued operations, netreversal of income taxessome temporary cost savings in the prior year, as well as charges related towhich had an unfavorable impact of approximately 15 percent and foreign currency fluctuations which had an unfavorable impact of approximately 2 percent on adjusted EBITDA.
2020 vs. 2019
Adjusted EBITDA of $1,250.4 million increased $29.9 million, or approximately 2 percent versus the Middleport environmental settlement as discussed above. These were offset by higher income from continuing operations driven by a fullprior year of results from the Dupont Crop Protection Business, which was completed on November 1, 2017.
2017 vs. 2016
Net income attributable to FMC stockholders increased to $535.8 million from $209.1 million.period. The increase was primarily due to the gainhigher volumes, higher pricing, and strong cost management which accounted for approximately 9 percent, 9 percent, and 6 percent increases respectively. These factors offset foreign currency fluctuations which had an unfavorable impact of approximately 22 percent on sale recorded in discontinued operations, net of income taxes as discussed above, offset by the impacts of U.S. Tax Reform and increases in acquisition-related charges. Refer to Note 12 to the consolidated financial statements included within this Form 10-K.
adjusted EBITDA.
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. Information involving our material cash requirements is detailed below.
Cash
Cash and cash equivalents at December 31, 20182021 and 2017,2020, were $161.7$516.8 million and $283.0$568.9 million, respectively. Of the cash and cash equivalents balance at December 31, 2018, $107.22021, $510.3 million was held by our foreign subsidiaries. As a resultDuring the third quarter of the Act, in 20172021, we recognized a one-time transitionestablished plans to repatriate cash from certain foreign subsidiaries with minimal tax on the deemed repatriation ofa go forward basis. Other cash held by foreign earningssubsidiaries is generally used to finance subsidiaries’ operating activities and the remeasurement of the Company’s U.S. net deferred tax asset.future foreign investments. See Note 1213 to the consolidated financial statements included within this Form 10-K for more information. The cash held by foreign subsidiaries for permanentinformation on our indefinite reinvestment is generally used to finance the subsidiaries’ operating activities and future foreign investments. We have not provided income taxes for any additional outside basis differences inherent in our investments in subsidiaries because the investments and related unremitted earnings are essentially permanent in duration or we have concluded that no additional tax liability will arise upon disposal. See Note 12 to the consolidated financial statements included within this Form 10-K for more information.assertion.
Pursuant to the terms of the separation and distribution agreement, on October 18, 2018, we received a net distribution of approximately $317 million from Livent representing the proceeds from the sale of its common stock as part of the IPO, net of underwriting discounts and commissions and other offering related expenses. On October 31, 2018, we used $150 million of those proceeds to further pay down term loan debt. This increased our cumulativeOutstanding debt reduction in 2018 to approximately $550 million. On November 15, 2018, we received an additional net distribution of approximately $48 million from Livent representing the proceeds from the exercise by the underwriters of their option to purchase additional shares.
At December 31, 2018,2021, we had total debt of $2,726.7$3,172.5 million as compared to $3,185.6$3,267.8 million at December 31, 2017.2020. Total debt included $2,179.0$2,731.7 million and $2,993.0$2,929.5 million of long-term debt (excluding current portions of $386.0$84.5 million and $101.2$93.6 million) at December 31, 20182021 and 2020, respectively. On May 26, 2021, we amended our Revolving Credit Agreement. On November 22, 2021, we borrowed $1.0 billion under our previously announced senior unsecured term loan facility. The proceeds were used to pay off our 2017 respectively.Term Loan Facility and Senior Notes maturing in 2022. As of December 31, 2018,2021, we were in compliance with all of our debt covenants. See Note 13 in14 to the consolidated financial statements included inwithin this Form 10-K for further details. We remain committed to solid investment grade credit metrics, and expect full-year average leverage to be in line with this commitment in 2021.
The decrease in long-term debt was primarily due to the repaymentpaying down $200 million of the 2014 Term Loan Facility. At December 31, 2018, $1,400.0 million remained outstanding under the 20172021 Term Loan Facility which is scheduled to mature on November 1, 2022. The borrowings under the 2017 Term Loan Facility will bear interest at a floating rate, which will be a base rate or a Eurocurrency rate equal to the London interbank offered rate for the relevant interest period, plus in each case an applicable margin, as determined in accordance with the provisions of the 2017 Term Loan Facility.December.
Our short-term debt consists of foreign borrowings and borrowings under our commercial paper program. Foreign borrowings increased from $91.4$98.4 million at December 31, 20172020 to $106.5$112.2 million at December 31, 20182021 while outstanding commercial paper increased $55.2from $146.3 million from zero at December 31, 2017.2020 to $244.1 million at December 31, 2021. We provide parent-company guarantees to lending institutions providing credit to our foreign subsidiaries.
Our total debt maturities, excluding discounts, is $3,191.0 million at December 31, 2021, with $440.8 million payable in the next 12 months. As of December 31, 2021, we had contractual interest obligations of $936.5 million outstanding, with $84.2 million payable in the next 12 months. Contractual interest is the interest we are contracted to pay on our long-term debt obligations. We had $800.0 million of long-term debt subject to variable interest rates at December 31, 2021. The rate assumed for the variable interest component of the contractual interest obligation was the rate in effect at December 31, 2021. Variable rates are determined by the market and will fluctuate over time.
Access to credit and future liquidity and funding needs
At December 31, 2021, our remaining borrowing capacity under our credit facility was $1,093.4 million. See Note 14 to the consolidated financial statements included within this Form 10-K for discussion of the 2021 Term Loan Agreement as well as the amendments to the Revolving Credit Facility and Term Loan Agreements undertaken in the current year. Our commercial paper program allows us to borrow at rates generally more favorable than those available under our credit facility. At December 31, 2018,2021, we had $55.2$244.1 million borrowings outstanding under the commercial paper program at an average borrowing rate of 0.45 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 average effective interest rate on these borrowings during the period was 3.1 percent.
Revolving Credit Agreement Amendment
On September 28, 2018, we entered into Amendment No. 1 (“Revolving Credit Amendment”) toassociated payments are included in operating activities within our Consolidated Statements of Cash Flows. We do not believe that certain Second Amended and Restated Credit Agreement, dated as of May 2, 2017. The Revolving Credit Amendment amends the Revolving Credit Agreement in order to permit the previously disclosed separation and spin-off of FMC Lithium, as set forthchanges in the Revolving Credit Amendment.
2017 Term Loan Agreement Amendment
On September 28, 2018, we entered into Amendment No. 1 (“2017 Term Loan Amendment”) to that certain Term Loan Agreement, dated as of May 2, 2017. The 2017 Term Loan Amendment amends the 2017 Term Loan Agreement in order to permit our previously disclosed separation and spin-offavailability of the FMC Lithium segment,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 set forth inwell as other factors where the 2017 Term Loan Amendment.
2014 Term Loan Agreement Amendment
On September 28, 2018, we entered into Amendment No. 4 (“2014 Term Loan Amendment”) to that certain Term Loan Agreement, dated as of October 10, 2014. The 2014 Term Loan Amendment amends the 2014 Term Loan Agreement in order to permit our previously disclosed separation and spin-off of the FMC Lithium business, as set forth in the 2014 Term Loan Amendment.
receivables may lay.
FMC Lithium Revolving Credit Facility
On September 28, 2018, our Lithium segment entered intoWe account for these transactions as sales which result in a credit agreement among its subsidiary, FMC Lithium USA Corp., as borrowers (the “Borrowers”), certain of FMC Lithium's wholly owned subsidiaries as guarantors,reduction in accounts receivables because the lenders party thereto (the “Lenders”), Citibank, N.A., as administrative agent,agreements transfer effective control and certain other financial institutions party thereto, as joint lead arrangers (the “Credit Agreement”). The Credit Agreement provides for a $400 million senior secured revolving credit facility, $50 million of which is available for the issuance of letters of credit for the account of the Borrowers, with an option, subject to certain conditions and limitations, to increase the aggregate amount of the revolving credit commitments to $600 million (the “Revolving Credit Facility”). The issuance of letters of credit and the proceeds of revolving credit loans made pursuantrisk related to the Revolving Credit Facility are available, and will be used, for general corporate purposes, including capital expenditures and permitted acquisitions, of the Borrowers and their subsidiaries.
Amounts under the Revolving Credit Facility may be borrowed, repaid and re-borrowed from time to time until the final maturity date of the Revolving Credit Facility, which will be the fifth anniversary of the Revolving Credit Facility’s effective date. Voluntary prepayments and commitment reductions under the Revolving Credit Facility are permitted at any time without any prepayment premium upon proper notice and subject to minimum dollar amounts.
Revolving loans under the Credit Agreement will bear interest at a floating rate, which will be a base rate or a Eurodollar rate equalreceivables to the London interbank offered rate for the relevant interest period, plus, in each case, an applicable margin based on the Lithium segment's leverage ratio, as determined in accordance with the provisions of the Credit Agreement.buyers. The base rate will be the greatest of: the rate of interest announced publicly by Citibank, N.A. in New York City from time to time as its “base rate”; the federal funds effective rate plus 0.5%; and a Eurodollar rate for a one-month interest period plus 1%. Each borrower on a joint and several basis is required to pay a commitment fee quarterly in arrears on the average daily unused amount of each Lender’s revolving credit commitment at a rate equal to an applicable percentage based on the Lithium segment’s leverage ratio, as determined in accordance with the provisions of the Credit Agreement. The applicable margin and the commitment feenet cash proceeds received are subject to adjustment aspresented within cash provided in the Credit Agreement.
The Borrowers’ present and future domestic material subsidiaries (the “Guarantors”) will guarantee the obligations of the Borrowers under the Revolving Credit Facility. The obligations of the Borrowers and the Guarantors are secured by all of the present and future assets of the Borrowers and the Guarantors, including the Borrowers’ facility and real estate in Bessemer City, North Carolina, subject to certain exceptions and exclusions as set forth in the Credit Agreement and other security and collateral documents.
The Credit Agreement contains certain affirmative and negative covenants that are binding on the Borrowers and their subsidiaries, including, among others, restrictions (subject to exceptions and qualifications) on the ability of the Borrowers and their subsidiaries to create liens, to undertake fundamental changes, to incur debt, to sell or dispose of assets, to make investments, to make restricted payments such as dividends, distributions or equity repurchases, to change the nature of their businesses, to enter into transactions with affiliates and to enter into certain burdensome agreements.
Statement of Cash Flows
Cash provided (required) by operating activities was $446.0 million, $314.5 millionwithin 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 $368.9 million for 2018, 2017 and 2016, respectively.
The table below presents the components of net cash provided (required) by operating activities.
|
| | | | | | | | | | | |
| (in Millions) | Twelve months ended December 31, |
| 2018 | | 2017 | | 2016 |
| Income (loss) from continuing operations before equity in (earnings) loss of affiliates, non-operating pension expense and postretirement charges, interest expense, net and income taxes | $ | 880.5 |
| | $ | 278.0 |
| | $ | 266.6 |
|
| Restructuring and other charges (income), transaction-related charges and depreciation and amortization | 424.0 |
| | 344.8 |
| | 219.5 |
|
| Operating income before depreciation and amortization (Non-GAAP) | $ | 1,304.5 |
| | $ | 622.8 |
| | $ | 486.1 |
|
Change in trade receivables, net (1) | (302.2 | ) | | (262.4 | ) | | 11.8 |
|
Change in inventories (2) | (224.2 | ) | | (96.8 | ) | | 79.0 |
|
Change in accounts payable (3) | 182.3 |
| | 331.7 |
| | (29.7 | ) |
Change in accrued customer rebates (4) | 104.1 |
| | 16.9 |
| | (5.2 | ) |
Change in advance payments from customers (5) | 78.4 |
| | 140.5 |
| | (10.0 | ) |
Change in all other operating assets and liabilities (6) | (213.7 | ) | | (166.9 | ) | | 84.8 |
|
| Operating cash flows (Non-GAAP) | $ | 929.2 |
| | $ | 585.8 |
| | $ | 616.8 |
|
Restructuring and other spending (7) | (26.5 | ) | | (8.2 | ) | | (18.0 | ) |
Environmental spending, continuing, net of recoveries (8) | (20.5 | ) | | (20.5 | ) | | (28.1 | ) |
Pension and other postretirement benefit contributions (9) | (37.5 | ) | | (56.5 | ) | | (65.8 | ) |
Net interest payments (10) | (133.4 | ) | | (82.2 | ) | | (62.0 | ) |
Tax payments, net of refunds (11) | (135.3 | ) | | (25.0 | ) | | (50.2 | ) |
Excess tax benefits from share-based compensation (12) | — |
| | — |
| | (0.4 | ) |
Transaction-related legal and professional fees (13) | (130.0 | ) | | (78.9 | ) | | (23.4 | ) |
| Cash provided (required) by operating activities of continuing operations | $ | 446.0 |
| | $ | 314.5 |
| | $ | 368.9 |
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(1) | The changes in cash flows related to trade receivables in 2018 and 2017 were primarily driven by timing of collections largely due to seasonality. Additionally, the change in 2018 was related to receivable build from the acquired DuPont Crop Protection Business as we did not acquire any receivables as part of the transaction. Collection timing is more pronounced in our FMC Agricultural Solutions business where sales, particularly in Brazil, can have a longer collection period. 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 2018, we collected approximately $900 million of receivables in Brazil. A significant proportion of the collections in Brazil are coming from those accounts that were past due at the start of the year, improving the quality of the remaining receivable balance.
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(2) | Changes in inventory are a result of inventory levels being adjusted to take into consideration the change in market conditions primarily in FMC Agricultural Solutions. The increase was also driven by higher sales and recovering inventory levels due to a faster return to full production from our China toll manufacturing partners. |
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(3) | Accounts payable in both 2018 and 2017 was primarily impacted by the payable build from the acquired DuPont Crop Protection Business as we did not acquire any payables as part of the transaction, as well as the timing of payments made to suppliers and vendors. |
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(4) | These rebates are associated with our FMC Agricultural Solutions segment in North America and Brazil and generally settled in the fourth quarter of each year. The changes year over year are primarily associated with the mix in sales eligible for rebates and incentives in 2018 compared to 2017 and timing of rebate payments, and we did not acquire the rebates of the DuPont Crop Protection Business. |
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(5) | The advance payments from customers represent advances from our FMC Agricultural Solutions segment customers. Revenue associated with advance payments is recognized, generally in the first quarter of each year, as shipments are made and title, ownership and risk of loss pass to the customer. |
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(6) | Changes in all periods presented primarily represent timing of payments associated with all other operating assets and liabilities, including guarantees issued to vendors under our vendor finance program. Additionally, the 2018 period includes the effects of the unfavorable contracts amortization of approximately $103 million. |
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(7) | See Note 8 to the consolidated financial statements included in this Form 10-K for further details. |
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(8) | Included in our results for each of the years presented are environmental charges for environmental remediation at our operating sites of $21.9 million, $16.6 million and $36.8 million, respectively. The amounts in 2018 will be spent in future years. The amounts represent environmental remediation spending at our operating sites which were recorded against pre-existing reserves, net of recoveries. |
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.
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(9) | Amounts include voluntary contributions to our U.S. qualified defined benefit plan of $30.0 million, $44.0 million and $35.0 million, respectively. |
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(10) | The increase in interest payments is primarily due to higher foreign debt balances, the addition of the 2017 Term Loan Facility, and increases in interest rates. |
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(11) | Tax payments in 2018 primarily represent the payments of tax attributable to the FMC Health and Nutrition segment disposition, transition tax and tax payments related to the integration of the DuPont Crop Protection Business. |
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(12) | Amounts are presented as a financing activity in the consolidated statement of cash flows in 2016 from share-based compensation. |
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(13) | 2018 and 2017 activity primarily 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 well as spending for separation related activities. 2016 activity represents payments for legal and professional fees associated with the Cheminova acquisition. See Note 4 to the consolidated financial statements for more information. |
Cash provided (required) by operating activities of discontinued operations was $(77.6) million, $21.0 million and $128.9 million for 2018, 2017 and 2016, respectively.
Cash 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.
Amounts in 2017 and 2016 included the operating activities of our discontinued FMC Health and Nutrition segment. Amounts in 2017 were partially offset by divestiture costs associated with the sale of FMC Health and Nutrition, which was completed on November 1, 2017.
Cash provided (required) by investing activities of continuing operations was $(115.9) million, $(1,349.5) million and $(100.8) million for 2018, 2017 and 2016, respectively.
Cash required in 2018 is primarily due to the sale of product portfolios of approximately $88.0 million that were required to complete the DuPont Crop Protection Business Acquisition, fully offset by higher capital expenditure spending in 2018 as well as incremental capitalizable corporate level spending associated with the implementation of a new SAP system.
The change in cash required by investing activities in 2017 is primarily due to the acquisition of the DuPont Crop Protection Business.
Cash provided (required) by investing activities of discontinued operations was $(15.0) million, $15.7 million and $(34.4) million for 2018, 2017 and 2016, respectively.
Cash required by investing activities of discontinued operations in 2018 represents the working capital payment associated with the divestiture of FMC Health and Nutrition.
Cash provided by investing activities of discontinued operations in 2017 includes the cash proceeds from the sale of the Omega-3 business for $38.0 million.
Cash provided (required) by financing activities was $(363.3) million, $1,213.1 million and $(377.0) million in 2018, 2017 and 2016, respectively.
The change in cash required by financing activities in 2018 is due to higher repayments of long-term debt of approximately $200 million as compared to 2017 and $200 million in repurchases of common stock in the current year as part of the publicly announced repurchase program. Additionally, there were borrowings of long-term debt in the prior year. The cash required in the current period was partially offset by the proceeds received from the IPO of FMC Lithium of $363.6 million.
The change in cash provided by financing activities in 2017 primarily related to the increase in proceeds from borrowings of long-term debt mostly to fund the DuPont Crop Protection Business Acquisition, partially offset by higher repayments of long-term debthas been inconsequential during the year.
2019 outlook and other potential liquidity needs
In 2019, we expect a continued improvement in cash generation. In aggregate, we expect operating cash flow (Non-GAAP) to increase driven by higher earnings, including the continued benefits from the integration of the DuPont Crop Protection Business, partially offset by higher working capital requirements in 2019.
Our cash needs for 2019 outside of costs to separate FMC Lithium include operating cash requirements, capital expenditures, scheduled mandatory payments of long-term debt, dividend payments, share repurchases, contributions to our pension plans, environmental and asset retirement obligation spending and restructuring. Additionally, we expect to continue to incur costs associated with integrating the DuPont Crop Protection Business due to its significance and complexity. The majority of these costs are expected to completed by the first quarter of 2020. 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 December 31, 2018 our remaining borrowing capacity under our credit facility was $1,245.8 million.
Projected 2019 capital expenditures and expenditures related to contract manufacturers are expected to increase, excluding FMC Lithium, to approximately $150 million. The increase is primarily driven by capacity expansion. Additionally, we will continue to incur spending associated with the two-year implementation of a new SAP system.
Projected 2019 spending includes approximately $75 million to $80 million of net environmental remediation spending at both our continuing and discontinued sites. This projected spending for 2019 includes spending as a result of active negotiations for a settlement agreement primarily to address discontinued operations at our Middleport, New York site. We expect the settlement will result in spending of approximately $20 million to $30 million per year for years 2019 - 2021, due to front loading of reimbursement in installments of past costs, and a $10 million maximum per year, on average, until the remediation is complete. This projected spending does not include expected spending on capital projects relating to environmental control facilities or expected spending for environmental compliance costs, which we will include as a component of "Costs of sales and services" in our consolidated statements of income (loss) since these amounts are not covered by established reserves. Capital spending to expand, maintain or replace equipment at our production facilities may trigger requirements for upgrading our environmental controls, which may increase our spending for environmental controls over the foregoing projections.
As a result of the Act, we will continue to pay the remaining $161.3 million of transition tax over the next seven years.
Our U.S. Pension Plan assets decreased from $1,334.9 million at December 31, 2017 to $1,265.0 million at December 31, 2018. Our U.S. Pension Plan assets comprise approximately all of our total plan assets with the difference representing plan assets related to foreign pension plans. See Note 14 to the consolidated financial statements included within this Form 10-K for details on how we develop our long-term rate of return assumptions. We made contributions of $30.0 million and $44.0 million in 2018 and 2017, respectively, and intend to contribute $7 million in 2019. Our contributions in 2017, 2018 and our intended contribution in 2019 are all in excess of the minimum requirements. Our contributions in excess of minimums are done with the objective of avoiding variable rate Pension Benefit Guaranty Corporation ("PBGC") premiums as well as potentially reducing future funding volatility. In 2017, we changed our U.S. qualified pension plan’s investment strategy to a liability hedging approach with an objective of minimizing funded status volatility. As a result, we expect lower contributions in future periods. The portfolio is comprised of 100 percent fixed income securities and cash. Investment performance and related risks are measured and monitored on an ongoing basis through monthly liability measurements, periodic asset liability studies, and quarterly investment portfolio reviews.
During the year ended December 31, 2018, 2.4 million shares were repurchased under the prior publicly announced repurchase program adopted in 2013. At December 31, 2018, $1.0 billion remained unused under our Board-authorized repurchase program. We intend to purchase a total of up to $500 million of our common shares in 2019. 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 connections with vesting, exercise and forfeiture of awards under our equity compensation plans.
Dividends
On January 17, 2019, we paid dividends aggregating $53.2 million to our shareholders of record as of December 31, 2018. This amount is included in “Accrued and other liabilities” on the consolidated balance sheet as of December 31, 2018. For the years ended December 31, 2018, 2017 and 2016, we paid $89.2 million, $88.8 million and $88.6 million in dividends, respectively.
each reporting period.
Commitments
We provide guarantees to financial institutions on behalf of certain FMC Agricultural Solutions customers, principally Brazilian customers in Brazil, for their seasonal borrowing. The total of these guarantees was $71.3$215.9 million at December 31, 2018.2021. These guarantees arise during the ordinary course of business from relationships with customers and nonconsolidated 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.
Short-term debt consisted of foreign credit lines and commercial paper at December 31, 2018 and foreign credit lines at December 31, 2017. We provide parent-company guarantees to lending institutions providing credit to our foreign subsidiaries.
In connection with certain of 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. Our indemnification obligations with respect to these liabilities may be indefinite as to duration and may or may not be subject to a deductible, minimum claim amount or cap. In cases where 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, no specific liability has been recorded. If triggered, we may be able to recover
certain of the indemnity payments from third parties. In cases where it is possible, we have recorded a specific liability within our Reserve for Discontinued Operations. Refer to Note 1011 to the consolidated financial statements included within this Form 10-K for further details.
Taxes, Pension, Environmental, and Other Discontinued Liabilities
As of December 31, 2021, the liability for uncertain tax positions was $45.5 million. We also have a liability attributable to the transition tax on deemed repatriated foreign earnings incurred as a result of the Act of $92.1 million. Our consolidated balance sheets contain accrued pension and other postretirement benefits, our environmental liabilities, and our other discontinued liabilities for which we are unable to make a reasonably reliable estimate of the amount and periods in which these liabilities might be paid beyond 2022. See our discussion under 2022 Cash Flow Outlook in the Free Cash Flow section within this Form 10-K for information on these liabilities and the related expected payments in 2022.
Derivatives
At times we can be in a derivative liability position that can require future cash obligations; however as of December 31, 2021, we had no such obligations.
Leases
We have lease arrangements for equipment and facilities, including office spaces, IT equipment, transportation equipment, machinery equipment, furniture and fixtures, and plant and facilities. As of December 31, 2021, we had fixed lease payment obligations of $217.2 million, with $29.2 million payable within 12 months.
Purchase obligations
Purchase obligations consist of agreements to purchase goods and services that are enforceable and legally binding and specify all significant terms, including fixed or minimum quantities to be purchased, price provisions and timing of the transaction. We have entered into a number of purchase obligations for the sourcing of materials and energy where take-or-pay arrangements apply. As of December our purchase obligations were $702.9 million, with $225.9 million payable in the first 12 months. The majority of the minimum obligations under these contracts are take-or-pay commitments over the life of the contract and not a year by year take-or-pay, and as such, the obligations related to these types of contacts are presented in the earliest period in which the minimum obligation could be payable under these types of contracts.
Statement of Cash Flows
Cash provided (required) by operating activities was $898.6 million, $736.8 million and $555.6 million for 2021, 2020 and 2019, respectively.
The table below presents the components of net cash provided (required) by operating activities of continuing operations.
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| (in Millions) | Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Income (loss) from continuing operations before equity in (earnings) loss of affiliates, non-operating pension expense postretirement charges, interest expense, net and income taxes (GAAP) | $ | 1,044.9 | | | $ | 902.2 | | | $ | 821.6 | |
| Restructuring and other charges (income), transaction-related charges and depreciation and amortization | 279.3 | | | 348.2 | | | 398.9 | |
| Operating income before depreciation and amortization | $ | 1,324.2 | | | $ | 1,250.4 | | | $ | 1,220.5 | |
Change in trade receivables, net (1) | (241.1) | | | (71.8) | | | (123.5) | |
| Change in guarantees of vendor financing | 65.6 | | | 64.8 | | | 8.6 | |
Change in advance payments from customers (2) | 283.6 | | | (145.5) | | | 34.1 | |
Change in accrued customer rebates (3) | 108.7 | | | 17.2 | | | (85.8) | |
Change in inventories (4) | (331.1) | | | (59.7) | | | 6.4 | |
Change in accounts payable (5) | 144.4 | | | 61.8 | | | 103.0 | |
Change in all other operating assets and liabilities (6) | (77.6) | | | (68.2) | | | (208.5) | |
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Restructuring and other spending (7) | (34.7) | | | (17.9) | | | (18.6) | |
Environmental spending, continuing, net of recoveries (8) | (63.6) | | | (1.9) | | | (18.3) | |
Pension and other postretirement benefit contributions (9) | (5.3) | | | (4.6) | | | (13.4) | |
Net interest payments (10) | (125.8) | | | (141.8) | | | (140.9) | |
Tax payments, net of refunds (11) | (139.2) | | | (82.1) | | | (130.9) | |
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Transaction and integration costs (12) | (9.5) | | | (63.9) | | | (77.1) | |
| Cash provided (required) by operating activities of continuing operations (GAAP) | $ | 898.6 | | | $ | 736.8 | | | $ | 555.6 | |
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(1)The change in trade receivables in all periods include the impacts of seasonality and the receivable build intrinsic in our business. The change in cash flows related to trade receivables in 2021 was driven by timing of collections as well as higher sales year over 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 all periods include carry-over balances remaining to be collected in Latin America, where collection periods are measured in months rather than weeks. During 2021, we collected approximately $1,118 million of receivables in Brazil.
(2)Advance payments are typically received in the fourth quarter of each year, primarily in our North America operations as revenue associated with advance payments is recognized, generally in the first half of each year following the seasonality of that business, as shipments are made and title, ownership and risk of loss pass to the customer. The change in 2021 was primarily related to substantially higher overall payments received due to 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 in 2021 compared to 2020 are mostly associated with higher North Americarevenue, primarily volume related, as well as with the mix in sales eligible for rebates and incentives and timing of certain rebate payments.
(4)The change in cash flows during 2021 reflect the inventory build required to meet business demand and to help manage supply chain volatility as well as higher input costs. Changes in inventory in 2019 are a result of inventory levels being adjusted to take into consideration the change in market conditions.
(5)The change in cash flows related to accounts payable in 2021, 2020 and 2019 is primarily due to timing of payments made to suppliers and vendors as well as in 2021 in line with the inventory build.
(6)Changes in all periods presented primarily represent timing of payments associated with all other operating assets and liabilities. Additionally, the 2021, 2020 and 2019 period includes the effects of the unfavorable contracts amortization of approximately $103 million, $120 million and $116 million, respectively.
(7)See Note 9 to the consolidated financial statements included within this Form 10-K for further details.
(8)Included in our results for each of the years presented are environmental charges for environmental remediation of $27.1 million, $24.9 million and $108.7 million, respectively. The amounts in 2021 will be spent in future years. The amounts represent environmental remediation spending which were recorded against pre-existing reserves, net of recoveries.
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. Amounts in 2021 include payments of $32.2 million related to the Pocatello Tribal Litigation. Additionally, 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. Refer to Note 12 to the consolidated financial statements included within this Form 10-K for more details.
(9)There were no voluntary contributions to our U.S. qualified defined benefit plan in 2021 or 2020. Amounts in 2019 include voluntary contributions to our U.S. qualified defined benefit plan of $7.0 million. As our U.S. qualified plan is fully funded, we do not anticipate making voluntary contributions for the next several years.
(10)Interest payments were lower during 2021 largely due to lower foreign debt balances and rates as well as lower LIBOR rates in the US.
(11)Amounts shown in the chart represent net tax payments of our continuing operations. The increase in net tax payments in 2021 is primarily attributable to the 2021 remittance of previously deferred income tax payments in various jurisdictions as a result of the COVID pandemic. Tax payments in 2019 primarily represent the payments of tax attributable to the Nufarm Limited Sale, transition tax, and tax payments related to the acquired DuPont Crop Protection Business.
(12)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. We completed the integration of the DuPont Crop Protection Business in 2020, other than the completion of certain in-flight initiatives associated with the finalization of our worldwide ERP system in early 2021. See Note 5 to the consolidated financial statements included within this Form 10-K for more information.
Cash provided (required) by operating activities of discontinued operations was $(78.5) million, $(89.0) million and $(67.1) million for 2021, 2020 and 2019, respectively.
Cash 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 $(131.7) million, $(200.4) million and $(195.9) million for 2021, 2020 and 2019, respectively.
Cash required in 2021 is primarily due to capital expenditures and spending related to our contract manufacturing arrangements. We completed the final stage of our SAP system implementation during the early part of 2021, therefore a reduction in those payments year over year.
Cash required in 2020 primarily due to capital expenditures and spending related to our contract manufacturing arrangements, as well as continued spending associated with the final stages of our new SAP system implementation. 2020 also includes payments of $65.6 million to acquire the remaining rights for Fluindapyr from Isagro S.p.A ("Isagro") in an asset acquisition.
Cash required in 2019 is primarily due to capital expenditures and spending related to our contract manufacturing arrangements, as well as continued spending during that period associated with the implementation of a new SAP system.
Cash provided (required) by investing activities of discontinued operations was $19.7 million, $31.1 million and $9.2 million for 2021, 2020 and 2019, respectively.
Cash provided by investing activities of discontinued operations in 2021 represents the proceeds from the sale of land of our discontinued sites. This resulted in a gain recognized within discontinued operations of approximately $15.4 million, net of taxes.
Cash provided by investing activities of discontinued operations in 2020 and 2019 represents the proceeds of approximately $31 million and $26 million from the sale of our two parcels of land of our discontinued site in Newark, California. These sales resulted in a gain recognized within discontinued operations in each period of approximately $24 million and $21 million, net of taxes, respectively. In 2019, this was partially offset by capital expenditures of our discontinued FMC Lithium segment.
Cash provided (required) by financing activities was $(747.9) million, $(250.3) million and $(87.0) million in 2021, 2020 and 2019, respectively.
The change in cash required by financing activities in 2021 is primarily driven due to the payment of long term debt and the increase in share repurchases under our publicly announced program.
The change in cash required by financing activities in 2020 is primarily driven by the prior year proceeds from the Senior Notes and higher dividend payments offset by a reduction in the payment of long term debt and a reduction of repurchases of common stock under our publicly announced program.
The change in cash required by financing activities in 2019 is primarily due to the proceeds from the Senior Notes offset by cash outflows including higher repurchases of common stock, repayment of long-term debt, and higher dividend payments in 2019 as compared to the prior period.
Cash provided (required) by financing activities of discontinued operations was zero , zero and $(37.2) million in 2021, 2020 and 2019, respectively.
Cash required by financing activities of discontinued operations in 2019 represents debt repayments on FMC Lithium's external debt as well as cash payments associated with its separation.
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 significantincrease 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) | Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| Cash provided (required) by operating activities of continuing operations (GAAP) | $ | 898.6 | | | $ | 736.8 | | | $ | 555.6 | |
Transaction and integration costs (1) | 9.5 | | | 63.9 | | | 77.1 | |
Adjusted cash from operations (2) | $ | 908.1 | | | $ | 800.7 | | | $ | 632.7 | |
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Capital expenditures (3) | (100.1) | | | (67.2) | | | (93.9) | |
Other investing activities (3)(4) | (13.7) | | | (20.4) | | | (54.0) | |
| Capital additions and other investing activities | $ | (113.8) | | | $ | (87.6) | | | $ | (147.9) | |
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Cash provided (required) by operating activities of discontinued operations (5) | (78.5) | | | (89.0) | | | (67.1) | |
Cash provided (required) by investing activities of discontinued operations (5) | 19.7 | | | 31.1 | | | 9.2 | |
Transaction and integration costs (1) | (9.5) | | | (63.9) | | | (77.1) | |
Investment in Enterprise Resource Planning system (3) | (12.7) | | | (47.2) | | | (48.0) | |
Legacy and transformation (6) | $ | (81.0) | | | $ | (169.0) | | | $ | (183.0) | |
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| Free cash flow (Non-GAAP) | $ | 713.3 | | | $ | 544.1 | | | $ | 301.8 | |
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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 consolidated financial statements included within this Form 10-K 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 $18.8 million, $17.4 million and $51.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.
(5) Refer to the above discussion for further details.
(6) Includes our legacy liabilities such as environmental remediation and other legal matters and our discontinued investing activities that are reported in discontinued operations. It also includes business integration costs associated with the DuPont Crop Protection Business Acquisition and the implementation of our new SAP system.
2022 Cash Flow Outlook
Our cash needs for 2022 include operating cash requirements (which are impacted by contributions to our pension plan, as well as 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 contractsrevolving credit facility. At December 31, 2021 our remaining borrowing capacity under our credit facility was $1,093.4 million.
We expect 2022 free cash flow (Non-GAAP) to fall within a range of approximately $515 million to $735 million. At the mid-point of the range there is a reduction year over year driven by reduced adjusted cash from operations primarily due to working capital growth and higher capital expenditures. We expect a year over year increase in capital additions as we expand capacity to meet growing demand, especially for our new products.
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
We expect equal or lower cash from operating activities, excluding the effects of transaction-related cash flows, to be in the range of approximately $750 million to $910 million. Working capital growth reflects our current expectations of a return to more normal advance payment levels in North America among other factors negatively impacting working capital in 2022. 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 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 believe will affect cash overbe required to make significant contributions to the next four yearsplan is limited.
Environmental
Projected 2022 spending, net of recoveries includes approximately $25 million to $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.
Projected 2022 spending, net of recoveries includes approximately $45 million to $55 million of net environmental remediation spending for our discontinued sites, which is part of legacy and beyond aretransformation noted below. These projections include spending as follows:a result of a settlement reached in the second quarter of 2019 at our Middleport, New York site. The settlement will result in spending $10 million maximum per year on average, until the remediation is complete.
Total projected 2022 environmental spending, inclusive of sites accounted for within both continuing operations and discontinued sites, is expected to be in the range of $70 million to $90 million.
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| Contractual Commitments | Expected Cash Payments by Year |
| (in Millions) | 2019 | | 2020 | | 2021 | | 2022 | | 2023 & beyond | | Total |
Debt maturities (1) | $ | 547.7 |
| | $ | 2.2 |
| | $ | 200.7 |
| | $ | 1,501.8 |
| | $ | 484.2 |
| | $ | 2,736.6 |
|
Contractual interest (2) | 100.3 |
| | 85.9 |
| | 82.7 |
| | 71.7 |
| | 60.6 |
| | 401.2 |
|
Lease obligations (3) | 36.7 |
| | 31.7 |
| | 21.0 |
| | 17.5 |
| | 121.0 |
| | 227.9 |
|
Certain long-term liabilities (4) | 2.9 |
| | 2.9 |
| | 3.1 |
| | 3.1 |
| | 7.4 |
| | 19.4 |
|
Derivative contracts (5) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Purchase obligations (6) | 380.3 |
| | 355.0 |
| | 358.0 |
| | 88.7 |
| | 72.2 |
| | 1,254.2 |
|
Total (7) | $ | 1,067.9 |
| | $ | 477.7 |
| | $ | 665.5 |
| | $ | 1,682.8 |
| | $ | 745.4 |
| | $ | 4,639.3 |
|
____________________We expect to make payments of approximately $30 to $40 million in 2022, of which approximately $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).
| |
(2) | Contractual interest is the interest we are contracted to pay on our long-term debt obligations. We had $1,200 million of long-term debt subject to variable interest rates at December 31, 2018. The rate assumed for the variable interest component of the contractual interest obligation was the rate in effect at December 31, 2018. Variable rates are determined by the market and will fluctuate over time. |
| |
(3) | Obligations associated with operating leases, before sub-lease rental income. |
| |
(4) | Obligations associated with our Shanghai, China research and technology center. |
| |
(5) | Derivative contracts were in a net asset position as of December 31, 2018. See Note 18 to the consolidated financial statements included within this Form 10-K. As a result, they are excluded from the table above. |
| |
(6) | Purchase obligations consist of agreements to purchase goods and services that are enforceable and legally binding and specify all significant terms, including fixed or minimum quantities to be purchased, price provisions and timing of the transaction. We have entered into a number of purchase obligations for the sourcing of materials and energy where take-or-pay arrangements apply. Since the majority of the minimum obligations under these contracts are take-or-pay commitments over the life of the contract and not a year by year take-or-pay, the obligations in the table related to these types of contacts are presented in the earliest period in which the minimum obligation could be payable under these types of contracts. |
| |
(7) | As of December 31, 2018, the liability for uncertain tax positions was $82.4 million. This liability is excluded from the table above. Additionally, accrued pension and other postretirement benefits and our environmental liabilities as recorded on our consolidated balance sheets are excluded from the table above. Due to the high degree of uncertainty regarding the timing of potential future cash flows associated with these liabilities, we are unable to make a reasonably reliable estimate of the amount and periods in which these liabilities might be paid. Also excluded from the table above is the liability attributable to the transition tax on deemed repatriated foreign earnings incurred as a result of the Act of $161.3 million. |
Capital additions and other investing activities
Projected 2022 capital expenditures and expenditures related to contract manufacturers are expected to be in the range of approximately $145 million to $175 million. The spending is mainly driven by continuing to expand capacity to meet growing demand, especially for our new products. Expenditures related to contract manufacturers are included within "other investing activities".
Legacy and transformation
Projected 2022 legacy and transformation spending are expected to be in the range of approximately $30 million to $60 million. This is primarily driven by environmental remediation spending for our discontinued sites, discussed above, and other legacy liabilities. We completed the integration of the DuPont Crop Protection Business in 2020, other than the completion of certain in-flight initiatives associated with the finalization of our worldwide ERP system in early 2021. As such, transformation spending in 2022 is not expected to be material.
Share repurchases
During the year ended December 31, 2021, 4.0 million shares were repurchased under the publicly announced repurchase program for approximately $400 million. At December 31, 2021, approximately $150 million remained unused under our Board-authorized repurchase program. However, 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. 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 connections with vesting, exercise and forfeiture of awards under our equity compensation plans.
We intend to purchase between $500 million to $600 million of our common shares in 2022.
Dividends
On January 20, 2022, we paid dividends aggregating $66.8 million to our shareholders of record as of December 31, 2021. This amount is included in "Accrued and other liabilities" on the consolidated balance sheet as of December 31, 2021. For the years ended December 31, 2021, 2020 and 2019, we paid $247.2 million, $228.5 million and $210.3 million in dividends, respectively. 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.
Contingencies
See Note 1920 to our consolidated financial statements included inwithin this Form 10-K.
Climate Change
As a global corporate citizen, we are concerned about the consequences of climate change and will take prudent and cost effective actions that reduce Green House Gas (GHG) emissions to the atmosphere.
FMC is committed to doingcontinuing to do its part to address climate change and its impacts. We have set 2025 goals that we will reduceOur 2030 intensity reduction targets for energy and greenhouse gas emissions are both energy intensity and GHG intensity for our operations by 1525 percent from our 20132018 baseline year. To date, our FMC Agricultural Solutions and FMC Lithium segments have reduced energy use by 18 percent and 13 percent and GHG intensity by 12 percent and 18 percent, respectively. FMC has been reporting its GHG emissions and mitigation strategy to CDP (formerly Carbon Disclosure Project) since 2016. FMC detailed the business risks and opportunities we have due to climate change and its impacts in our CDP climate change reports. FMC received a "B" in the CDP Climate Change questionnaire in 2021. As part of FMC’s continued commitment to address climate change, in August of 2021, FMC announced its goal to achieve net-zero GHG emissions by 2035 FMC. FMC committed to the Science Based Target initiative (SBTi) Net-Zero Standard, aligned with keeping the global temperature at 1.5°C above pre-industrial times.FMC anticipates submitting targets to SBTi in the first quarter of 2022.
Even as we take action to control the release of GHGs, additional warming is anticipated. Long-term, higher average global temperatures could result in induced changes in natural resources, growing seasons, precipitation patterns, weather patterns, species distributions, water availability, sea levels, and biodiversity. These impacts could cause changes in supplies of raw materials used to maintain FMC’s production capacity and could lead to possible increased sourcing costs. Depending on how
pervasive the climate impacts are in the different geographic locations experiencing changes in natural resources, FMC’s customers could be impacted. Demand for FMC’s products could increase if our products meet our customers’ needs to adapt to climate change impacts or decrease if our products do not meet their needs. WithinIn addition, extreme weather events attributable to climate change may result in, among other things, physical damage to our own operations, we continually assessproperty and equipment, and interruptions to our manufacturing sites worldwide forsupply chain.
Though the nature of these events makes them difficult to predict, to respond to the uncertainty and better understand our risks and opportunities as they relate to increase our preparednessclimate change, we are conducting climate related scenario analyses consistent with the recommendations provided by the Taskforce for climate change. WeClimate-Related Financial Disclosures ("TCFD"). As part of the TCFD scenario analysis, we are continuingcurrently evaluating the potential risks at operation sites, leveraging scenarios published by the International Energy Agency (IEA) and the United Nations’ Intergovernmental Panel on Climate Change (IPCC).Results of this analysis will help determine where strategic capital could be deployed to evaluate sea leveladdress risks and opportunities.
rise and storm surge at our plants located within 4 meters of sea level to understand timing of potential impacts and response actions that may need to be taken. To lessen FMC’s overall environmental footprint, we have taken actions to increase the energy efficiency in our manufacturing sites. We have also committed to 2025new 2030 goals to reduce our water use intensity in high-risk areas by 20 percent and to maintain our 2018 waste disposed intensity which otherwise would increase by 55 percent due to expected growth and shifts in production mix. Along with our ambitious net-zero GHG emissions goal, FMC will also be re-evaluating our waste intensities by 15 percent. To date, FMC Agricultural Solutions and FMC Lithium have reduced our water usereduction targets in high risk areas by 25 percent and 14 percent and our waste disposal intensity by 28 percent and 18 percent, respectively.
Recently FMC has undergone significant changes with the acquisition of the DuPont Crop Protection Business, the divestiture of FMC Health and Nutrition, and the anticipated separation of FMC Lithium. Therefore, we are revising our goalsorder to reflect these changes and they will be published in our 2018 Sustainability Report.set more aggressive goals.
In our product portfolio, we see market opportunities for our products to address climate change and its impacts. For example, FMC's agricultural productssolutions can help customers increase yield, energy and water efficiency, and decrease greenhouse gas emissions. Our productssolutions can also help growers adapt to more unpredictable growing conditions and the effects these types of threats have on crops. FMC has committed to invest 100 percent of our research and development pipeline budget to developing sustainable products and solutions for future use.
We are improving existing products and developing new platforms and technologies that help mitigate impacts of climate change. FMC Agricultural Solutions is developing products with a lighter environmental footprint in its biologicals products. These opportunities could lead to new products and services for our existing and potential customers. Beyond our products and operations, FMC recognizes that energy consumption throughout our supply chain can impact climate change and product costs. FMC has committed to net-zero GHG emissions across our entire value, which includes reductions across our entire supply chain. Therefore, we will actively work with our entire value chain - suppliers, contractors, and customers - to improve their energy efficiencies and to reduce their GHG emissions.
We continue to follow legislative and regulatory developments regarding climate change because the regulation of greenhouse gases, depending on their nature and scope, could subject some of our manufacturing operations to additional costs or limits on operations. In December 2015, 195 countries at the United Nations Climate Change Conference in Paris reached an agreement to reduce GHGs. ItIn November 2021, the above parties reconvened at the United Nations Climate Change Conference in Glasgow to reaffirm the Paris Agreement and urged countries to reach 1.5°C level reductions by the 2030s to lessen the impacts of climate change. Although it remains to be seen how and when each of these countries will implement this agreement. The United States is a signatoryagreement, FMC has echoed this commitment with our net-zero by 2035 goal which allows us to the Paris Agreement, but on June 1, 2017, President Trump announced that the United States would withdraw from the Paris Agreement and on August 4, 2017, the United States delivered notice of its intention to withdraw to United Nations. On October 16, 2017, the United States Environmental Protection Agency ("EPA") Filed notice of a rulemaking to repeal the lean Power Plan. EPA followed this action with the issuance of an advance notice of proposed rulemaking seeking comment on the proper roles of the state and federal governmentdo our part in regulating emissions from electric power plants, and also seeking information on technologies and strategies for reducing emissions from existing plants.reaching 1.5°C level reductions.
Notwithstanding the United States’ withdrawal from the Paris Agreement,FMC will actively manage climate risks and incorporate them in our decision making as indicated in our responses to the CDP Climate Change Module. The United States Climate Alliance, a coalition of 21 states and unincorporated self-governing territoriesFMC will also use recommendations outlined in the United States have expressed their commitmentTCFD to upholding the objectives of the 2015 Paris Agreement on climate change within their borders. Several ofevaluate potential risks and opportunities and incorporate these into our manufacturingoverall strategy and R&D sites fall within this alliance territory. FMC remains deeply committed to reducing our GHG emissions and energy consumption at all of our facilities around the world.risk management.
Some of our foreign operations are subject to national or local energy management or climate change regulation, such as our plant in Denmark that is subject to the EU Emissions Trading Scheme. At present, that plant’s emissions are below its designated cap.
In December 2019, the European Commission approved the European Green Deal, with the goal of making the EU carbon neutral by 2050. The Green Deal includes investment plans and a roadmap to fight against climate change. FMC is closely following updates and the discussion surrounding the Green Deal. The costs of complying with possible future requirements are difficult to estimate at this time.
Future GHG regulatory requirements may result in increased costs of energy, additional capital costs for emissions control or new equipment, and/or costs associated with cap and trade or carbon taxes. We are currently monitoring regulatory developments. The costs of complying with possible future climate change requirements are difficult to estimate at this time.
See Item IA. Risk Factors for additional considerations related to risks of climate change and sustainability.
Recently Adopted and Issued Accounting Pronouncements and Regulatory Items
See Note 2 "Recently Issued and Adopted Accounting Pronouncements and Regulatory Items" to our consolidated financial statements included inwithin this Form 10-K.
Off-Balance Sheet Arrangements
See Note 19 to our consolidated financial statements included in this Form 10-K and Part I, Item 3 - Legal Proceedings for further information regarding any off-balance sheet arrangements.Fair Value Measurements
See Note 1819 to our consolidated financial statements included in this Form 10-K for additional discussion surrounding our fair value measurements.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). The preparation of these financial statements requires us 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 "Principal Accounting Policies and Related Financial Information" to our consolidated financial statements included in this 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 the Board of Directors. Critical accounting policies are central to our presentation of results of operations and financial condition in accordance with U.S. GAAP 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. Our most critical accounting estimates and assumptions, which are those that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations, include: Impairments and valuation of long-lived and indefinite-lived assets, Pension and other postretirement benefits, and the Allowance for credit losses on our trade receivables. Additional critical accounting policies are included within the list below:
Revenue recognition and trade receivables
We recognize revenue when (or as) we satisfy our performance obligation which is when the customer obtains control of the good or service. Rebates due to customers are accrued as a reduction of revenue in the same period that the related sales are recorded based on the contract terms. Refer to Note 3 to our consolidated financial statements included in this Form 10-K for more information.
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.
We periodically enter into prepayment arrangements with customers primarily in our FMC Agricultural Solutions segment, and receive advance payments for product to be delivered in future periods. These advance payments are recorded as deferred revenue and classified as “Advance"Advance payments from customers”customers" on the consolidated balance sheet. Revenue associated with advance payments is recognized as shipments are made and transfer of control to the customer takes place.
Trade receivables consist of amounts owed to us from customer sales and are recorded when revenue is recognized. The allowance for trade receivables represents our best estimate of the probable losses associated with potential customer defaults. In developing our allowance for trade receivables, we use a two stage process which includes calculating a general formula to develop an allowance to appropriately address the uncertainty surrounding collection risk of our entire portfolio and specific allowances for customers where the risk of collection has been reasonably identified either due to liquidity constraints or disputes over contractual terms and conditions.
Our method of calculating the general formula consists of estimating the recoverability of trade receivables based on historical experience, current collection trends, and external business factors such as economic factors, including regional bankruptcy rates, and political factors. Our analysis of trade receivable collection risk is performed quarterly, and the allowance is adjusted accordingly.
We also hold long-term receivables that represent long-term customer receivable balances related to past-due accounts which are not expected to be collected within the current year. Our policy for the review of the allowance for these receivables is consistent with the discussion in the preceding paragraph above on trade receivables. Therefore on an ongoing basis, we continue to evaluate the credit quality of our long-term receivables utilizing aging of receivables, collection experience and write-offs, as well as existing economic conditions, to determine if an additional allowance is necessary.
We believe our allowance for credit losses is a critical accounting estimate because the underlying assumptions used for the reserve can change from time to time and potentially have a material impact on our results of operations. Based on a combination of historical trends as well as current economic factors, we apply judgment to reserve for expected credit losses in the period in which the sale is recorded. A substantial change in the operating environments in any of our key locations (driven by weather conditions, industry specific events, and macroeconomic conditions) may result in actual adjustments that differ from our original assumptions.
On January 1, 2018, Accounting Standards Update 2014-09, Revenue from Contracts with Customers, became effective. See Note 2 to these consolidated financial statements for more information.
Environmental obligations and related recoveries
We provide for environmental-related obligations when they are probable and amounts can be reasonably estimated. Where the available information is sufficient to estimate the amount of liability, that estimate has been used. Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any other, the lower end of the range has been used.
Estimated obligations to remediate sites that involve oversight by the United States Environmental Protection Agency (“EPA”("EPA"), or similar government agencies, are generally accrued no later than when a Record of Decision (“ROD”("ROD"), or equivalent, is issued, or upon completion of a Remedial Investigation/Feasibility Study (“("RI/FS”FS"), or equivalent, that is submitted by us to the appropriate government agency or agencies. Estimates are reviewed quarterly by our environmental remediation management, as well as by
financial and legal management and, if necessary, adjusted as additional information becomes available. The estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, required remediation methods, and other actions by or against governmental agencies or private parties.
Our environmental liabilities for continuing and discontinued operations are principally for costs associated with the remediation and/or study of sites at which we are alleged to have released hazardous substances into the environment. Such costs principally include, among other items, RI/FS, site remediation, costs of operation and maintenance of the remediation plan, management costs, fees to outside law firms and consultants for work related to the environmental effort, and future monitoring costs. Estimated site liabilities are determined based upon existing remediation laws and technologies, specific site consultants’ engineering studies or by extrapolating experience with environmental issues at comparable sites.
Included in our environmental liabilities are costs for the operation, maintenance and monitoring of site remediation plans (OM&M)("OM&M"). Such reserves are based on our best estimates for these OM&M plans. Over time we may incur OM&M costs in excess of these reserves. However, we are unable to reasonably estimate an amount in excess of our recorded reserves because we cannot reasonably estimate the period for which such OM&M plans will need to be in place or the future annual cost of such remediation, as conditions at these environmental sites change over time. Such additional OM&M costs could be significant in total but would be incurred over an extended period of years.
Included in the environmental reserve balance, other assets balance and disclosure of reasonably possible loss contingencies are amounts from third partythird-party insurance policies, which we believe are probable of recovery.
Provisions for environmental costs are reflected in income, net of probable and estimable recoveries from named Potentially Responsible Parties (“PRPs”("PRPs") or other third parties. SuchIn the fourth quarter of 2019, we increased our reserves for the Pocatello Tribal Matter by $72.8 million, which represents both the historical and discounted present value of future annual use permit fees as well as the associated legal costs. See Note 12 to the consolidated financial statements included within this Form 10-K for further information. All other environmental provisions incorporate inflation and are not discounted to their present values.value.
In calculating and evaluating the adequacy of our environmental reserves, we have taken into account the joint and several liability imposed by Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”("CERCLA") and the analogous state laws on all PRPs and have considered the identity and financial condition of the other PRPs at each site to the extent possible. We have also considered the identity and financial condition of other third parties from whom recovery is anticipated, as well as the status of our claims against such parties. Although we are unable to forecast the ultimate contributions of PRPs and other third parties with absolute certainty, the degree of uncertainty with respect to each party is taken into account when determining the environmental reserve by adjusting the reserve to reflect the facts and circumstances on a site-by-site basis. Our liability includes our best estimate of the costs expected to be paid before the consideration of any potential recoveries from third parties. We believe that any recorded recoveries related to PRPs are realizable in all material respects. Recoveries are recorded as either an offset in “Environmental"Environmental liabilities, continuing and discontinued”discontinued" or as “Other assets”"Other assets" in our consolidated balance sheets in accordance with U.S. accounting literature.
See Note 1112 to our consolidated financial statements included inwithin this Form 10-K for changes in estimates associated with our environmental obligations.
Impairments and valuation of long-lived and indefinite-lived assets
Our long-lived assets primarily include property, plant and equipment, goodwill and intangible assets. The assets and liabilities of acquired businesses are measured at their estimated fair values at the dates of acquisition. The excess of the purchase price over the estimated fair value of the net assets acquired, including identified intangibles, is recorded as goodwill. The determination and allocation of fair value to the assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment, including estimates based on historical information, current market data and future expectations. The principal assumptions utilized in our valuation methodologies include revenue growth rates, operating margin estimates and discount rates. Although the estimates were deemed reasonable by management based on information available at the dates of acquisition, those estimates are inherently uncertain.
We test for impairment whenever events or circumstances indicate that the net book value of our property, plant and equipment may not be recoverable from the estimated undiscounted expected future cash flows expected to result from their use and eventual disposition. In cases where the estimated undiscounted expected future cash flows are less than net book value, an impairment loss is recognized equal to the amount by which the net book value exceeds the estimated fair value of assets, which is based on discounted cash flows at the lowest level determinable. The estimated cash flows reflect our assumptions about selling prices, volumes, costs and market conditions over a reasonable period of time.
We perform an annual impairment test of goodwill and indefinite-lived intangible assets in the third quarter of each year, or more frequently whenever an event or change in circumstances occurs that would require reassessment of the recoverability of those assets. In performing our evaluation we assess qualitative factors such as overall financial performance of our reporting units,
anticipated changes in industry and market structure, competitive environments, planned capacity and cost factors such as raw material prices. Based on our assessment for 2018, we determined that no goodwill impairment charge to our continuing operations was required. The majority of the Brands intangible asset relates to our proprietary brand portfolio for which
We estimate the fair value wasof the reporting unit using a discounted cash flow model as part of the Income Approach. We assess the appropriateness of projected financial information by comparing projected revenue growth rates, profit margins and tax rates to historical performance, industry data and selected guideline companies, where applicable. Our key assumptions include future cash flow projections, tax rates, terminal growth rates and discount rates.
We employ the relief from royalty method of the Income Approach to value our brand portfolios (indefinite-lived intangible assets). The principle behind this method is that the value of the intangible asset is equal to the present value of the after-tax royalty savings attributable to owning the intangible asset. Primary inputs and key assumptions include revenue forecasts attributable to each portfolio, royalty rates (considering both external market data and internal arrangements), tax rates, terminal growth rates and discount rates.
Estimating the fair value requires significant judgment and actual results may differ due to changes in the overall market conditions. We believe we have applied reasonable assumptions which considers both internal and external factors.
We believe that an accounting estimate relating to asset impairment is a critical accounting estimate because of the inherent uncertainty within the underlying assumptions. An adverse change in any of these assumptions could result in an impairment charge which would potentially have a material impact on our results of operations.
Based on the annual assessment, we concluded the fair value of the reporting unit substantially in excess ofexceeded the carrying value. DuringAdditionally, the third quarterfair value of 2018, we recorded an impairment charge of approximately $2 million in our generic brand portfolio which is part of the FMC Agricultural Solutions segment. Theeach indefinite-lived intangible asset exceeded its carrying value of the generic portfolio subsequent to the charge is approximately $3 million.by at least 20%.
See Note 89 to our consolidated financial statements included inwithin this Form 10-K for charges associated with long-lived asset disposal costs and the activity associated with the restructuring reserves.
Pension and other postretirement benefits
We provide qualified and nonqualified defined benefit and defined contribution pension plans, as well as postretirement health care and life insurance benefit plans to our employees and retirees. The costs (benefits) and obligations related to these benefits reflect key assumptions related to general economic conditions, including interest (discount) rates, healthcare cost trend rates, expected rates of return on plan assets and the rates of compensation increase for employees. The costs (benefits) and obligations for these benefit programs are also affected by other assumptions, such as average retirement age, mortality, employee turnover, and plan participation. To the extent our plans’ actual experience, as influenced by changing economic and financial market conditions or by changes to our own plans’ demographics, differs from these assumptions, the costs and obligations for providing these benefits, as well as the plans’ funding requirements, could increase or decrease. When actual results differ from our assumptions, the difference is typically recognized over future periods. In addition, the unrealized gains and losses related to our pension and postretirement benefit obligations may also affect periodic benefit costs (benefits) in future periods.
We use several assumptions and statistical methods to determine the asset values used to calculate both the expected rate of return on assets component of pension cost and to calculate our plans’ funding requirements. The expected rate of return on plan assets is based on a market-related value of assets that recognizes investment gains and losses over a five-year period. We use an actuarial value of assets to determine our plans’ funding requirements. The actuarial value of assets must be within a certain range, high or low, of the actual market value of assets, and is adjusted accordingly.
We select the discount rate used to calculate pension and other postretirement obligations based on a review of available yields on high-quality corporate bonds as of the measurement date. In selecting a discount rate as of December 31, 2018,2021, we placed particular emphasis on a discount rate yield-curve provided by our actuary. This yield-curve, when populated with projected cash flows that represent the expected timing and amount of our plans' benefit payments, produced an effective discount rate of 4.352.84 percent for our U.S. qualified plan, 3.972.18 percent for our U.S. nonqualified, and 4.082.39 percent for our U.S. other postretirement benefit plans.
The discount rates used to determine projected benefit obligation at our December 31, 20182021 and 20172020 measurement dates for the U.S. qualified plan were 4.352.84 percent and 3.682.49 percent, respectively. The effect of the change in the discount rate from 3.682.49 percent to 4.352.84 percent at December 31, 20182021 resulted in a $91.3$55.7 million decrease to our U.S. qualified pension benefit obligations. The effect of the change in the discount rate used to determine net annual benefit cost (income) from 4.223.22 percent at December 31, 20162020 to 3.682.49 percent at December 31, 20172021 resulted in a $0.1$4.4 million increasedecrease to the 20182021 U.S. qualified pension expense.
The change in discount rate from 3.682.49 percent at December 31, 20172020 to 4.352.84 percent at December 31, 20182021 was attributable to an increase in yields on high quality corporate bonds with cash flows matching the timing and amount of our expected future benefit payments between the 20172020 and 20182021 measurement dates. Using the December 31, 20182021 and 20172020 yield curves, our U.S. qualified plan cash flows produced a single weighted-average discount rate of approximately 4.352.84 percent and 3.682.49 percent, respectively.
In developing the assumption for the long-term rate of return on assets for our U.S. Plan, we take into consideration the technical analysis performed by our outside actuaries, including historical market returns, information on the assumption for long-term real returns by asset class, inflation assumptions, and expectations for standard deviation related to these best estimates. We also consider the historical performance of our own plan’s trust, which has earned a compound annual rate of return of approximately 6.9 percent over the last 20 years (which is in excess of comparable market indices for the same period) as well as other factors which are discussed in Note 14 to our consolidated financial statements in this Form 10-K. Our long-term rate of return for the fiscal year ended December 31, 2018, 20172021, 2020 and 20162019 was 5.002.25 percent, 6.503.00 percent and 7.004.25 percent, respectively.
For the sensitivity of our pension costs to incremental changes in assumptions see our discussion below.
Sensitivity analysis related to key pension and postretirement benefit assumptions.
A one-half percent increase in the assumed discount rate would have decreased pension and other postretirement benefit obligations by $62.4$66.1 million and $73.6$72.6 million at December 31, 20182021 and 2017,2020, respectively, and decreasedincreased pension and other postretirement benefit costs by $0.4 million, $0.4 millionzero and $5.2$0.6 million for 2018, 20172021, 2020 and 2016,2019, respectively. A one-half percent decrease in the assumed discount rate would have increased pension and other postretirement benefit obligations by $68.3$72.1 million and $81.3$79.3 million at December 31, 20182021 and 2017,2020, respectively, and increaseddecreased pension and other postretirement benefit costcosts by $0.4 million in 2021, $0.1 million $0.4in 2020, and increased costs by $0.5 million and $5.7 million for 2018, 2017 and 2016, respectively.in 2019.
A one-half percent increase in the assumed expected long-term rate of return on plan assets would have decreased pension costs by $6.4$6.3 million, $6.0$6.2 million and $6.0$6.3 million for 2018, 20172021, 2020 and 2016,2019, respectively. A one-half percent decrease in the assumed long-term rate of return on plan assets would have increased pension costs by $6.4$6.3 million, $6.0$6.2 million and $6.0$6.3 million for 2018, 20172021, 2020 and 2016,2019, respectively.
Further details on our pension and other postretirement benefit obligations and net periodic benefit costs (benefits) are found in Note 1415 to our consolidated financial statements in this Form 10-K.
Income taxes
We have recorded a valuation allowance to reduce deferred tax assets in certain jurisdictions to the amount that we believe is more likely than not to be realized. In assessing the need for this allowance, we have considered a number of factors including future taxable income, the jurisdictions in which such income is earned and our ongoing tax planning strategies. In the event that we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Similarly, should we conclude that we would be able to realize certain deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made.
Additionally, we file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Certain income tax returns for FMC entities taxable in the U.S. and significant foreign jurisdictions are open for examination and adjustment. We assess our income tax positions and record a liability for all years open to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. We adjust these liabilities, if necessary, upon the completion of tax audits or changes in tax law.
On December 22, 2017, the Act was enacted in the United States. The Act reduced the U.S. federal corporate tax rate from 35 percent to 21 percent, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign sourced earnings. At December 31, 2018, the Company had completed its accounting for the impacts of the enactment of the Act.
See Note 1213 to our consolidated financial statements included inwithin this Form 10-K for additional discussion surrounding income taxes.
| |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 December 31, 2018,2021, our net financial instrument position was a net asset of $10.2$19.4 million compared to a net assetliability of $4.4$25.3 million at December 31, 2017.2020. The change in the net financial instrument position was primarily due to exchange rate fluctuations in our foreign exchange portfolio.
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 coal, 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 by entering into fixed-price contracts for the purchase of coal and fuel oil. 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 December 31, 2018 and 2017, with all other variables (including interest rates) held constant. Note, as of December 31, 2018 and December 31, 2017, 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, theBrazilian real, Chinese yuan, the Brazilian realIndian rupee, euro, 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 December 31, 20182021 and 2017,2020, with all other variables (including interest rates) held constant.
|
| | | | | | | | | | | |
| | | | Hedged Currency vs. Functional Currency |
| (in Millions) | Net Asset / (Liability) Position on Consolidated Balance Sheets | | Net Asset / (Liability) Position with 10% Strengthening | | Net Asset / (Liability) Position with 10% Weakening |
| Net asset/(liability) position at December 31, 2018 | $ | 10.4 |
| | $ | 28.4 |
| | $ | (31.0 | ) |
| | | | | | |
| Net asset/(liability) position at December 31, 2017 | $ | 4.4 |
| | $ | 10.8 |
| | $ | (3.2 | ) |
| | | | | | | | | | | | | | | | | |
| | | Hedged Currency vs. Functional Currency |
| (in Millions) | Net Asset / (Liability) Position on Consolidated Balance Sheets | | Net Asset / (Liability) Position with 10% Strengthening | | Net Asset / (Liability) Position with 10% Weakening |
| Net asset/(liability) position at December 31, 2021 | $ | 15.6 | | | $ | 84.1 | | | $ | (50.8) | |
| | | | | |
| Net asset/(liability) position at December 31, 2020 | (24.5) | | | 8.4 | | | (9.6) | |
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. In the quarter ended December 31, 2018,2021, we had outstanding interest rate swap contracts in place to swap portions of our variable-rate debt to fixed-rate debt with an aggregate notional value of $200.0$100.0 million. There were no interest rate swap agreements as of December 31, 2017.
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 December 31, 2018,2021 and 2020, with all other variables held constant.
| | | | | | | | | | | | | | | | | |
| (in Millions) | Net Asset / (Liability) Position on Consolidated Balance Sheets | | 1% Increase | | 1% Decrease |
| Net asset/(liability) position at December 31, 2021 | $ | 3.7 | | | $ | 13.1 | | | $ | (5.6) | |
| | | | | |
| Net asset/(liability) position at December 31, 2020 | (0.8) | | | 8.8 | | | (10.4) | |
|
| | | | | | | | | | | |
| (in Millions) | Net Asset / (Liability) Position on Condensed Consolidated Balance Sheets | | 1% Increase | | 1% Decrease |
| Net asset (liability) position at December 31, 2018 | $ | (0.2 | ) | | $ | 2.2 |
| | $ | (2.7 | ) |
Our debt portfolio at December 31, 20182021 is composed of 5264 percent fixed-rate debt and 4836 percent variable-rate debt. The variable-rate component of our debt portfolio principally consists of borrowings under our 20172021 Term Loan Facility, commercial paper
program, 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 December 31, 2018,2021, a one percentage point increase in interest rates would have increased gross interest expense by $13.2$11.4 million and a one percentage point decrease in interest rates would have decreased gross interest expense by $13.2$2.9 million for the year ended December 31, 2018.2021.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FMC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
| | | | | | | | | | | | | | | | | |
| (in Millions, Except Per Share Data) | Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Revenue | $ | 5,045.2 | | | $ | 4,642.1 | | | $ | 4,609.8 | |
| Costs and Expenses | | | | | |
| Costs of sales and services | 2,873.5 | | | 2,590.1 | | | 2,526.2 | |
| | | | | |
| Gross Margin | $ | 2,171.7 | | | $ | 2,052.0 | | | $ | 2,083.6 | |
| | | | | |
| Selling, general and administrative expenses | 714.1 | | | 729.7 | | | 792.9 | |
| Research and development expenses | 304.7 | | | 287.9 | | | 298.1 | |
| Restructuring and other charges (income) | 108.0 | | | 132.2 | | | 171.0 | |
| | | | | |
| Total costs and expenses | $ | 4,000.3 | | | $ | 3,739.9 | | | $ | 3,788.2 | |
| Income from continuing operations, non-operating pension and postretirement charges (income), interest expense, net and income taxes | $ | 1,044.9 | | | $ | 902.2 | | | $ | 821.6 | |
| | | | | |
| Non-operating pension and postretirement charges (income) | 20.0 | | | 21.2 | | | 8.1 | |
| | | | | |
| Interest income | — | | | (0.1) | | | (1.9) | |
| Interest expense | 131.1 | | | 151.3 | | | 160.4 | |
| Income (loss) from continuing operations before income taxes | $ | 893.8 | | | $ | 729.8 | | | $ | 655.0 | |
| Provision (benefit) for income taxes | 91.6 | | | 150.9 | | | 111.5 | |
| Income (loss) from continuing operations | $ | 802.2 | | | $ | 578.9 | | | $ | 543.5 | |
| Discontinued operations, net of income taxes | (68.2) | | | (28.3) | | | (63.3) | |
| Net income (loss) | $ | 734.0 | | | $ | 550.6 | | | $ | 480.2 | |
| Less: Net income (loss) attributable to noncontrolling interests | (2.5) | | | (0.9) | | | 2.8 | |
| Net income (loss) attributable to FMC stockholders | $ | 736.5 | | | $ | 551.5 | | | $ | 477.4 | |
| Amounts attributable to FMC stockholders: | | | | | |
| Continuing operations, net of income taxes | $ | 804.7 | | | $ | 579.8 | | | $ | 540.7 | |
| Discontinued operations, net of income taxes | (68.2) | | | (28.3) | | | (63.3) | |
| Net income (loss) attributable to FMC stockholders | $ | 736.5 | | | $ | 551.5 | | | $ | 477.4 | |
| Basic earnings (loss) per common share attributable to FMC stockholders: | | | | | |
| Continuing operations | $ | 6.25 | | | $ | 4.46 | | | $ | 4.12 | |
| Discontinued operations | (0.53) | | | (0.22) | | | (0.48) | |
| Net income (loss) attributable to FMC stockholders | $ | 5.72 | | | $ | 4.24 | | | $ | 3.64 | |
| Diluted earnings (loss) per common share attributable to FMC stockholders: | | | | | |
| Continuing operations | $ | 6.23 | | | $ | 4.44 | | | $ | 4.10 | |
| Discontinued operations | (0.53) | | | (0.22) | | | (0.48) | |
| Net income (loss) attributable to FMC stockholders | $ | 5.70 | | | $ | 4.22 | | | $ | 3.62 | |
|
| | | | | | | | | | | |
| (in Millions, Except Per Share Data) | Year Ended December 31, |
| 2018 | | 2017 | | 2016 |
| Revenue | $ | 4,727.8 |
| | $ | 2,878.6 |
| | $ | 2,538.9 |
|
| Costs and Expenses | | | | | |
| Costs of sales and services | 2,640.9 |
| | 1,777.3 |
| | 1,607.7 |
|
| | | | | | |
| Gross Margin | $ | 2,086.9 |
| | $ | 1,101.3 |
| | $ | 931.2 |
|
| | | | | | |
| Selling, general and administrative expenses | 851.2 |
| | 600.4 |
| | 435.1 |
|
| Research and development expenses | 291.5 |
| | 141.5 |
| | 134.5 |
|
| Restructuring and other charges (income) | 63.7 |
| | 81.4 |
| | 95.0 |
|
| Total costs and expenses | $ | 3,847.3 |
| | $ | 2,600.6 |
| | $ | 2,272.3 |
|
| Income from continuing operations before equity in (earnings) loss of affiliates, non-operating pension and postretirement charges (income), interest expense, net and income taxes | $ | 880.5 |
| | $ | 278.0 |
| | $ | 266.6 |
|
| Equity in (earnings) loss of affiliates | (0.1 | ) | | (0.1 | ) | | (0.5 | ) |
| Non-operating pension and postretirement charges (income) | 3.8 |
| | 18.2 |
| | 23.4 |
|
| Interest income | (1.4 | ) | | (0.9 | ) | | (0.6 | ) |
| Interest expense | 134.5 |
| | 80.0 |
| | 63.5 |
|
| Income (loss) from continuing operations before income taxes | $ | 743.7 |
| | $ | 180.8 |
| | $ | 180.8 |
|
| Provision (benefit) for income taxes | 88.8 |
| | 264.1 |
| | 50.1 |
|
| Income (loss) from continuing operations | $ | 654.9 |
| | $ | (83.3 | ) | | $ | 130.7 |
|
| Discontinued operations, net of income taxes | (143.4 | ) | | 621.7 |
| | 81.0 |
|
| Net income (loss) | $ | 511.5 |
| | $ | 538.4 |
| | $ | 211.7 |
|
| Less: Net income (loss) attributable to noncontrolling interests | 9.4 |
| | 2.6 |
| | 2.6 |
|
| Net income (loss) attributable to FMC stockholders | $ | 502.1 |
| | $ | 535.8 |
| | $ | 209.1 |
|
| Amounts attributable to FMC stockholders: | | | | | |
| Continuing operations, net of income taxes | $ | 645.5 |
| | $ | (85.9 | ) | | $ | 128.4 |
|
| Discontinued operations, net of income taxes | (143.4 | ) | | 621.7 |
| | 80.7 |
|
| Net income (loss) attributable to FMC stockholders | $ | 502.1 |
| | $ | 535.8 |
| | $ | 209.1 |
|
| Basic earnings (loss) per common share attributable to FMC stockholders: | | | | | |
| Continuing operations | $ | 4.78 |
| | $ | (0.64 | ) | | $ | 0.96 |
|
| Discontinued operations | (1.06 | ) | | 4.63 |
| | 0.60 |
|
| Net income (loss) attributable to FMC stockholders | $ | 3.72 |
| | $ | 3.99 |
| | $ | 1.56 |
|
| Diluted earnings (loss) per common share attributable to FMC stockholders: | | | | | |
| Continuing operations | $ | 4.75 |
| | $ | (0.64 | ) | | $ | 0.96 |
|
| Discontinued operations | (1.06 | ) | | 4.63 |
| | 0.60 |
|
| Net income (loss) attributable to FMC stockholders | $ | 3.69 |
| | $ | 3.99 |
| | $ | 1.56 |
|
The accompanying notes are an integral part of these consolidated financial statements.
FMC CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
| | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2018 | | 2017 | | 2016 |
| Net income (loss) | $ | 511.5 |
| | $ | 538.4 |
| | $ | 211.7 |
|
| Other comprehensive income (loss), net of tax: | | | | | |
| Foreign currency adjustments: | | | | | |
| Foreign currency translation gain (loss) arising during the period | $ | (100.8 | ) | | $ | 172.7 |
| | $ | (48.7 | ) |
| Reclassification of foreign currency translations losses | — |
| | 13.9 |
| | — |
|
Total foreign currency adjustments (1) | $ | (100.8 | ) | | $ | 186.6 |
| | $ | (48.7 | ) |
| | | | | | |
| Derivative instruments: | | | | | |
| Unrealized hedging gains (losses) and other, net of tax of $2.6, $0.5 and ($0.2) | $ | 13.7 |
| | $ | (1.2 | ) | | $ | 7.3 |
|
Reclassification of deferred hedging (gains) losses and other, included in net income, net of tax of ($3.1), ($0.1) and $3.3 (3) | (7.7 | ) | | (0.7 | ) | | 6.0 |
|
| Total derivative instruments, net of tax of ($0.5), $0.4 and $3.1 | $ | 6.0 |
| | $ | (1.9 | ) | | $ | 13.3 |
|
| | | | | | |
| Pension and other postretirement benefits: | | | | | |
Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax of $1.3, $1.9 and ($7.7) (2) | $ | 4.2 |
| | $ | 0.6 |
| | $ | (26.9 | ) |
Reclassification of net actuarial and other (gain) loss, amortization of prior service costs and settlement charges, included in net income, net of tax of $4.3, $14.5 and $20.6 (3) | 16.5 |
| | 51.6 |
| | 39.2 |
|
| Total pension and other postretirement benefits, net of tax of $5.6, $16.4 and $12.9 | $ | 20.7 |
| | $ | 52.2 |
| | $ | 12.3 |
|
| | | | | | |
| Other comprehensive income (loss), net of tax | $ | (74.1 | ) | | $ | 236.9 |
| | $ | (23.1 | ) |
| Comprehensive income (loss) | $ | 437.4 |
| | $ | 775.3 |
| | $ | 188.6 |
|
| Less: Comprehensive income (loss) attributable to the noncontrolling interest | 3.9 |
| | 1.4 |
| | 0.6 |
|
| Comprehensive income (loss) attributable to FMC stockholders | $ | 433.5 |
| | $ | 773.9 |
| | $ | 188.0 |
|
| | | | | | | | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Net income (loss) | $ | 734.0 | | | $ | 550.6 | | | $ | 480.2 | |
| Other comprehensive income (loss), net of tax: | | | | | |
| Foreign currency adjustments: | | | | | |
| Foreign currency translation gain (loss) arising during the period | $ | (87.0) | | | $ | 102.0 | | | $ | (18.5) | |
| | | | | |
Total foreign currency adjustments (1) | $ | (87.0) | | | $ | 102.0 | | | $ | (18.5) | |
| | | | | |
| Derivative instruments: | | | | | |
| Unrealized hedging gains (losses) and other, net of tax of $5.4, $1.9 and $(16.7) | $ | 44.1 | | | $ | (2.5) | | | $ | (69.0) | |
Reclassification of deferred hedging (gains) losses and other, included in net income, net of tax of $1.7, $1.7 and $(3.0) (3) | 5.5 | | | (4.3) | | | (8.2) | |
| Total derivative instruments, net of tax of $7.1, $3.6 and $(19.7) | $ | 49.6 | | | $ | (6.8) | | | $ | (77.2) | |
| | | | | |
| Pension and other postretirement benefits: | | | | | |
Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax of $(3.8), $5.2 and $(1.4) (2) | $ | (14.5) | | | $ | 18.9 | | | $ | (6.5) | |
Reclassification of net actuarial and other (gain) loss, amortization of prior service costs and settlement charges, included in net income, net of tax of $4.8, $4.2 and $2.6 (3) | 17.9 | | | 16.0 | | | 9.9 | |
| Total pension and other postretirement benefits, net of tax of $1.0, $9.4 and $1.2 | $ | 3.4 | | | $ | 34.9 | | | $ | 3.4 | |
| | | | | |
| Other comprehensive income (loss), net of tax | $ | (34.0) | | | $ | 130.1 | | | $ | (92.3) | |
| Comprehensive income (loss) | $ | 700.0 | | | $ | 680.7 | | | $ | 387.9 | |
| Less: Comprehensive income (loss) attributable to the noncontrolling interest | (3.0) | | | (0.6) | | | (0.5) | |
| Comprehensive income (loss) attributable to FMC stockholders | $ | 703.0 | | | $ | 681.3 | | | $ | 388.4 | |
____________________
| |
(1) | Income taxes are not provided for any additional outside basis differences inherent in our investments in subsidiaries because the investments and related unremitted earnings are essentially permanent in duration or we have concluded that no additional tax liability will arise upon disposal. Note, in the first quarter of 2017, we changed our assertion on unremitted earnings for certain foreign subsidiaries as a result of the sale of our FMC Health and Nutrition segment. |
| |
(2) | At December 31 of each year, we remeasure our pension and postretirement plan obligations at which time we record any actuarial gains (losses) and prior service (costs) credits to other comprehensive income. During the years ended December 31, 2018 and 2017, due to the announced plans to separate FMC Lithium and divest FMC Health and Nutrition, respectively, we triggered a curtailment of our U.S. pension plans. As a result, we revalued our pension plans as of October 31, 2018 and March 31, 2017, respectively, in addition to the normal December 31st remeasurement, which resulted in adjustments to comprehensive income. See Note 14 for more information. |
| |
(3) | For more detail on the components of these reclassifications and the affected line item in the consolidated statements of income (loss) see Note 16 within these consolidated financial statements. |
(1)Income taxes are not provided for foreign currency translation because the related investments are essentially permanent in duration.
(2)At December 31 of each year, we remeasure our pension and postretirement plan obligations at which time we record any actuarial gains (losses) and prior service (costs) credits to other comprehensive income. See Note 15 to the consolidated financial statements included within this Form 10-K for further details.
(3)For more detail on the components of these reclassifications and the affected line item in the consolidated statements of income (loss) see Note 17 to the consolidated financial statements included within this Form 10-K for further details.
The accompanying notes are an integral part of these consolidated financial statements.
FMC CORPORATION
CONSOLIDATED BALANCE SHEETS | | | | | | | | | | | |
| December 31, |
| (in Millions, Except Share and Par Value Data) | 2021 | | 2020 |
| ASSETS | | | |
| Current assets | | | |
| Cash and cash equivalents | $ | 516.8 | | | $ | 568.9 | |
| Trade receivables, net of allowance of $37.4 in 2021 and $27.9 in 2020 | 2,583.7 | | | 2,330.3 | |
| Inventories | 1,405.7 | | | 1,095.6 | |
| Prepaid and other current assets | 431.4 | | | 380.8 | |
| | | |
| | | |
| Total current assets | $ | 4,937.6 | | | $ | 4,375.6 | |
| Investments | 9.2 | | | 3.1 | |
| Property, plant and equipment, net | 817.0 | | | 771.7 | |
| Goodwill | 1,463.3 | | | 1,468.9 | |
| Other intangibles, net | 2,521.9 | | | 2,625.2 | |
| Other assets including long-term receivables, net | 613.8 | | | 712.3 | |
| Deferred income taxes | 218.5 | | | 229.6 | |
| | | |
| Total assets | $ | 10,581.3 | | | $ | 10,186.4 | |
| LIABILITIES AND EQUITY | | | |
| Current liabilities | | | |
| Short-term debt and current portion of long-term debt | $ | 440.8 | | | $ | 338.3 | |
| Accounts payable, trade and other | 1,135.0 | | | 946.7 | |
| Advance payments from customers | 630.7 | | | 347.1 | |
| Accrued and other liabilities | 631.2 | | | 674.7 | |
| Accrued customer rebates | 406.7 | | | 295.2 | |
| Guarantees of vendor financing | 206.2 | | | 140.6 | |
| Accrued pension and other postretirement benefits, current | 4.3 | | | 4.2 | |
| Income taxes | 65.4 | | | 82.2 | |
| | | |
| Total current liabilities | $ | 3,520.3 | | | $ | 2,829.0 | |
| Long-term debt, less current portion | 2,731.7 | | | 2,929.5 | |
| Accrued pension and other postretirement benefits, long-term | 41.8 | | | 46.4 | |
| Environmental liabilities, continuing and discontinued | 415.9 | | | 443.5 | |
| Deferred income taxes | 342.4 | | | 350.0 | |
| | | |
| Other long-term liabilities | 477.3 | | | 603.8 | |
| Commitments and contingent liabilities (Note 20) | 0 | | 0 |
| 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 in 2021 and 2020; 185,983,792 shares issued in 2021 and 2020 | 18.6 | | | 18.6 | |
| Capital in excess of par value of common stock | 880.4 | | | 860.2 | |
| Retained earnings | 4,991.3 | | | 4,506.4 | |
| Accumulated other comprehensive income (loss) | (315.7) | | | (282.2) | |
| Treasury stock, common, at cost - 2021: 60,284,313 shares, 2020: 56,630,209 shares | (2,542.1) | | | (2,141.2) | |
| Total FMC stockholders’ equity | $ | 3,032.5 | | | $ | 2,961.8 | |
| Noncontrolling interests | 19.4 | | | 22.4 | |
| Total equity | $ | 3,051.9 | | | $ | 2,984.2 | |
| Total liabilities and equity | $ | 10,581.3 | | | $ | 10,186.4 | |
|
| | | | | | | |
| | December 31, |
| (in Millions, Except Share and Par Value Data) | 2018 | | 2017 |
| ASSETS | | | |
| Current assets | | | |
| Cash and cash equivalents | $ | 161.7 |
| | $ | 283.0 |
|
| Trade receivables, net of allowance of $22.4 in 2018 and $38.7 in 2017 | 2,285.2 |
| | 2,043.5 |
|
| Inventories | 1,097.3 |
| | 992.5 |
|
| Prepaid and other current assets | 486.0 |
| | 326.4 |
|
| Current assets of discontinued operations | — |
| | 7.3 |
|
| Total current assets | $ | 4,030.2 |
| | $ | 3,652.7 |
|
| Investments | 0.7 |
| | 1.4 |
|
| Property, plant and equipment, net | 1,032.6 |
| | 1,025.2 |
|
| Goodwill | 1,468.1 |
| | 1,198.9 |
|
| Other intangibles, net | 2,704.3 |
| | 2,631.8 |
|
| Other assets including long-term receivables, net | 465.2 |
| | 443.6 |
|
| Deferred income taxes | 273.2 |
| | 252.7 |
|
| Total assets | $ | 9,974.3 |
| | $ | 9,206.3 |
|
| LIABILITIES AND EQUITY | | | |
| Current liabilities | | | |
| Short-term debt and current portion of long-term debt | $ | 547.7 |
| | $ | 192.6 |
|
| Accounts payable, trade and other | 867.5 |
| | 714.2 |
|
| Advance payments from customers | 458.4 |
| | 380.6 |
|
| Accrued and other liabilities | 594.4 |
| | 497.7 |
|
| Accrued customer rebates | 365.3 |
| | 266.6 |
|
| Guarantees of vendor financing | 67.1 |
| | 51.5 |
|
| Accrued pension and other postretirement benefits, current | 6.2 |
| | 5.7 |
|
| Income taxes | 86.8 |
| | 99.2 |
|
| Current liabilities of discontinued operations | — |
| | 1.3 |
|
| Total current liabilities | $ | 2,993.4 |
| | $ | 2,209.4 |
|
| Long-term debt, less current portion | 2,179.0 |
| | 2,993.0 |
|
| Accrued pension and other postretirement benefits, long-term | 47.2 |
| | 59.3 |
|
| Environmental liabilities, continuing and discontinued | 464.4 |
| | 346.2 |
|
| Deferred income taxes | 330.8 |
| | 173.2 |
|
| Other long-term liabilities | 749.1 |
| | 718.1 |
|
| Commitments and contingent liabilities (Note 19) |
| |
|
| Equity | | | |
| Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 2018 or 2017 | $ | — |
| | $ | — |
|
| Common stock, $0.10 par value, authorized 260,000,000 shares in 2018 and 2017; 185,983,792 shares issued in 2018 and 2017 | 18.6 |
| | 18.6 |
|
| Capital in excess of par value of common stock | 776.2 |
| | 450.7 |
|
| Retained earnings | 4,334.3 |
| | 3,952.4 |
|
| Accumulated other comprehensive income (loss) | (308.9 | ) | | (240.3 | ) |
| Treasury stock, common, at cost - 2018: 53,702,178 shares, 2017: 51,653,236 shares | (1,699.1 | ) | | (1,499.6 | ) |
| Total FMC stockholders’ equity | $ | 3,121.1 |
| | $ | 2,681.8 |
|
| Noncontrolling interests | 89.3 |
| | 25.3 |
|
| Total equity | $ | 3,210.4 |
| | $ | 2,707.1 |
|
| Total liabilities and equity | $ | 9,974.3 |
| | $ | 9,206.3 |
|
The accompanying notes are an integral part of these consolidated financial statements.
FMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2018 | | 2017 | | 2016 |
| Cash provided (required) by operating activities of continuing operations: | | | | | |
| Net income (loss) | $ | 511.5 |
| | $ | 538.4 |
| | $ | 211.7 |
|
| Discontinued operations, net of income taxes | 143.4 |
| | (621.7 | ) | | (81.0 | ) |
| Income (loss) from continuing operations | $ | 654.9 |
| | $ | (83.3 | ) | | $ | 130.7 |
|
| Adjustments from income (loss) from continuing operations to cash provided (required) by operating activities of continuing operations: | | | | | |
| Depreciation and amortization | $ | 168.2 |
| | $ | 113.0 |
| | $ | 100.6 |
|
| Equity in (earnings) loss of affiliates | (0.1 | ) | | (0.1 | ) | | (0.5 | ) |
| Restructuring and other charges (income) | 63.7 |
| | 81.4 |
| | 95.0 |
|
| Deferred income taxes | (47.4 | ) | | 104.2 |
| | 53.3 |
|
| Pension and other postretirement benefits | 10.4 |
| | 25.9 |
| | 32.5 |
|
| Share-based compensation | 23.0 |
| | 21.1 |
| | 20.2 |
|
| Excess tax benefits from share-based compensation | — |
| | — |
| | (0.4 | ) |
| Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | | | | | |
| Trade receivables, net | $ | (302.2 | ) | | $ | (262.4 | ) | | $ | 11.8 |
|
| Guarantees of vendor financing | 15.4 |
| | (54.7 | ) | | 55.0 |
|
| Inventories | (224.2 | ) | | (96.8 | ) | | 79.0 |
|
| Accounts payable, trade and other | 182.3 |
| | 331.7 |
| | (29.7 | ) |
| Advance payments from customers | 78.4 |
| | 140.5 |
| | (10.0 | ) |
| Accrued customer rebates | 104.1 |
| | 16.9 |
| | (5.2 | ) |
| Income taxes | (94.9 | ) | | 122.1 |
| | (31.9 | ) |
| Pension and other postretirement benefit contributions | (37.5 | ) | | (56.5 | ) | | (65.8 | ) |
| Environmental spending, continuing, net of recoveries | (20.5 | ) | | (20.5 | ) | | (28.1 | ) |
| Restructuring and other spending | (26.5 | ) | | (8.2 | ) | | (18.0 | ) |
| Transaction-related spending | (130.0 | ) | | (78.9 | ) | | (23.4 | ) |
Change in other operating assets and liabilities, net (1) | 28.9 |
| | 19.1 |
| | 3.8 |
|
| Cash provided (required) by operating activities of continuing operations | $ | 446.0 |
| | $ | 314.5 |
| | $ | 368.9 |
|
| Cash provided (required) by operating activities of discontinued operations: | | | | | |
| Environmental spending, discontinued, net of recoveries | $ | (41.0 | ) | | $ | (32.3 | ) | | $ | (21.8 | ) |
| Operating activities of discontinued operations, net of divestiture costs | (8.8 | ) | | 86.1 |
| | 176.3 |
|
| Other discontinued spending | (27.8 | ) | | (32.8 | ) | | (25.6 | ) |
| Cash provided (required) by operating activities of discontinued operations | $ | (77.6 | ) | | $ | 21.0 |
| | $ | 128.9 |
|
| | | | | | | | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Cash provided (required) by operating activities of continuing operations: | | | | | |
| Net income (loss) | $ | 734.0 | | | $ | 550.6 | | | $ | 480.2 | |
| Discontinued operations, net of income taxes | 68.2 | | | 28.3 | | | 63.3 | |
| Income (loss) from continuing operations | $ | 802.2 | | | $ | 578.9 | | | $ | 543.5 | |
| Adjustments from income (loss) from continuing operations to cash provided (required) by operating activities of continuing operations: | | | | | |
| Depreciation and amortization | $ | 170.9 | | | $ | 162.7 | | | $ | 150.1 | |
| Restructuring and other charges (income) | 108.0 | | | 132.2 | | | 171.0 | |
| Deferred income taxes | 9.7 | | | 33.6 | | | 46.1 | |
| Pension and other postretirement benefits | 24.9 | | | 25.8 | | | 12.6 | |
| Share-based compensation | 17.8 | | | 18.9 | | | 25.6 | |
| | | | | |
| Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | | | | | |
| Trade receivables, net | $ | (241.1) | | | $ | (71.8) | | | $ | (123.5) | |
| Guarantees of vendor financing | 65.6 | | | 64.8 | | | 8.6 | |
| Advance payments from customers | 283.6 | | | (145.5) | | | 34.1 | |
| Accrued customer rebates | 108.7 | | | 17.2 | | | (85.8) | |
| Inventories | (331.1) | | | (59.7) | | | 6.4 | |
| Accounts payable, trade and other | 144.4 | | | 61.8 | | | 103.0 | |
| Income taxes | (90.3) | | | 36.2 | | | (25.0) | |
| Pension and other postretirement benefit contributions | (5.3) | | | (4.6) | | | (13.4) | |
| Environmental spending, continuing, net of recoveries | (63.6) | | | (1.9) | | | (18.3) | |
Restructuring and other spending (1) | (34.7) | | | (17.9) | | | (18.6) | |
| Transaction and integration costs | (9.5) | | | (63.9) | | | (77.1) | |
Change in other operating assets and liabilities, net (2) | (61.6) | | | (30.0) | | | (183.7) | |
| Cash provided (required) by operating activities of continuing operations | $ | 898.6 | | | $ | 736.8 | | | $ | 555.6 | |
| Cash provided (required) by operating activities of discontinued operations: | | | | | |
| Environmental spending, discontinued, net of recoveries | $ | (57.5) | | | $ | (58.9) | | | $ | (51.7) | |
| Operating activities of discontinued operations, net of divestiture costs | — | | | (0.2) | | | 9.0 | |
| Other discontinued spending | (21.0) | | | (29.9) | | | (24.4) | |
| Cash provided (required) by operating activities of discontinued operations | $ | (78.5) | | | $ | (89.0) | | | $ | (67.1) | |
____________________
| |
(1) | Changes in all periods represent timing of payments associated with all other operating assets and liabilities. |
(1)The restructuring and other spending amount includes spending of $6.0 million related to the Furadan® asset retirement obligations and also includes $4.4 million of payments for certain historical India indirect tax matters. For additional detail on restructuring and other charges activities, see Note 9 to our consolidated financial statements included within this Form 10-K.
(2)Changes in all periods represent timing of payments associated with all other operating assets and liabilities.
The accompanying notes are an integral part of these consolidated financial statements.
FMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
| | | (in Millions) | Year Ended December 31, | (in Millions) | Year Ended December 31, |
| 2018 | | 2017 | | 2016 | 2021 | | 2020 | | 2019 |
| Cash provided (required) by investing activities of continuing operations: | | | | | | Cash provided (required) by investing activities of continuing operations: | | | | | |
| Capital expenditures | $ | (156.6 | ) | | $ | (85.7 | ) | | $ | (91.2 | ) | Capital expenditures | $ | (100.1) | | | $ | (67.2) | | | $ | (93.9) | |
| Proceeds from disposal of property, plant and equipment | 3.0 |
| | 2.2 |
| | 1.9 |
| |
Acquisitions, net (2) | 19.6 |
| | (1,225.6 | ) | | — |
| |
| Proceeds from sale of product portfolios | 88.0 |
| | — |
| | — |
| |
| | Investment in Enterprise Resource Planning system | (48.5 | ) | | — |
| | — |
| Investment in Enterprise Resource Planning system | (12.7) | | | (47.2) | | | (48.0) | |
| Other investing activities | (21.4 | ) | | (40.4 | ) | | (11.5 | ) | |
Acquisitions, including cost and equity method, net (3) | | Acquisitions, including cost and equity method, net (3) | (5.2) | | | (65.6) | | | — | |
| Other investing activities (4) | | Other investing activities (4) | (13.7) | | | (20.4) | | | (54.0) | |
| Cash provided (required) by investing activities of continuing operations | $ | (115.9 | ) | | $ | (1,349.5 | ) | | $ | (100.8 | ) | Cash provided (required) by investing activities of continuing operations | $ | (131.7) | | | $ | (200.4) | | | $ | (195.9) | |
| Cash provided (required) by investing activities of discontinued operations: | | | | | | Cash provided (required) by investing activities of discontinued operations: | | | | | |
| Proceeds from divestiture | $ | — |
| | $ | 38.0 |
| | $ | — |
| |
| Proceeds from disposal of property, plant and equipment | | Proceeds from disposal of property, plant and equipment | $ | 19.7 | | | $ | 31.1 | | | $ | 26.2 | |
| Other discontinued investing activities | (15.0 | ) | | (22.3 | ) | | (34.4 | ) | Other discontinued investing activities | — | | | — | | | (17.0) | |
| Cash provided (required) by investing activities of discontinued operations | $ | (15.0 | ) | | $ | 15.7 |
| | $ | (34.4 | ) | Cash provided (required) by investing activities of discontinued operations | $ | 19.7 | | | $ | 31.1 | | | $ | 9.2 | |
| Cash provided (required) by financing activities of continuing operations: | | | | | | Cash provided (required) by financing activities of continuing operations: | | | | | |
| | Increase (decrease) in short-term debt | $ | 79.5 |
| | $ | (3.1 | ) | | $ | (19.4 | ) | Increase (decrease) in short-term debt | $ | 104.9 | | | $ | 97.0 | | | $ | (11.9) | |
| Proceeds from borrowing of long-term debt | 34.0 |
| | 1,598.9 |
| | 2.8 |
| Proceeds from borrowing of long-term debt | 1,000.0 | | | 27.1 | | | 1,500.0 | |
| Financing fees | (3.1 | ) | | (11.0 | ) | | (0.7 | ) | |
| Financing fees and interest rate swap settlements | | Financing fees and interest rate swap settlements | (2.4) | | | (3.5) | | | (97.4) | |
| Repayments of long-term debt | (552.0 | ) | | (302.3 | ) | | (242.6 | ) | Repayments of long-term debt | (1,203.1) | | | (100.0) | | | (901.9) | |
| Acquisitions of noncontrolling interests | — |
| | — |
| | (20.0 | ) | Acquisitions of noncontrolling interests | — | | | (7.4) | | | — | |
| Transactions with noncontrolling interests | — |
|
| (0.5 | ) | | — |
| |
Net proceeds received from initial public offering of FMC Lithium (3) | 363.6 |
|
| — |
| | — |
| |
Dividends paid (4) | (89.2 | ) | | (88.8 | ) | | (88.6 | ) | |
| Distributions to noncontrolling interests | | Distributions to noncontrolling interests | — | | | (1.3) | | | — | |
Dividends paid (5) | | Dividends paid (5) | (247.2) | | | (228.5) | | | (210.3) | |
| Issuances of common stock, net | 10.7 |
| | 22.5 |
| | 4.1 |
| Issuances of common stock, net | 7.9 | | | 24.7 | | | 50.7 | |
| Excess tax benefits from share-based compensation | — |
| | — |
| | 0.4 |
| |
| | Repurchases of common stock under publicly announced program | (200.0 | ) | | — |
| | (11.2 | ) | Repurchases of common stock under publicly announced program | (400.0) | | | (50.0) | | | (400.0) | |
| Other repurchases of common stock | (6.8 | ) | | (2.6 | ) | | (1.8 | ) | Other repurchases of common stock | (8.0) | | | (8.4) | | | (16.2) | |
| Cash provided (required) by financing activities | $ | (363.3 | ) | | $ | 1,213.1 |
| | $ | (377.0 | ) | |
| | Cash provided (required) by financing activities of continuing operations | | Cash provided (required) by financing activities of continuing operations | $ | (747.9) | | | $ | (250.3) | | | $ | (87.0) | |
| Cash provided (required) by financing activities of discontinued operations: | | Cash provided (required) by financing activities of discontinued operations: | | | | | |
| | Payment of Livent external debt | | Payment of Livent external debt | — | | | — | | | (27.0) | |
| Cash transfer to Livent due to spin | | Cash transfer to Livent due to spin | — | | | — | | | (10.2) | |
| Cash provided (required) by financing activities of discontinued operations | | Cash provided (required) by financing activities of discontinued operations | $ | — | | | $ | — | | | $ | (37.2) | |
| Effect of exchange rate changes on cash and cash equivalents | 4.5 |
| | 4.0 |
| | — |
| Effect of exchange rate changes on cash and cash equivalents | (12.3) | | | 1.6 | | | (0.2) | |
| Increase (decrease) in cash and cash equivalents | $ | (121.3 | ) | | $ | 218.8 |
| | $ | (14.4 | ) | Increase (decrease) in cash and cash equivalents | $ | (52.1) | | | $ | 229.8 | | | $ | 177.4 | |
| | Cash and cash equivalents of continuing operations, beginning of period | | Cash and cash equivalents of continuing operations, beginning of period | $ | 568.9 | | | $ | 339.1 | | | $ | 134.4 | |
Cash and cash equivalents of discontinued operations, beginning of period (6) | | Cash and cash equivalents of discontinued operations, beginning of period (6) | — | | | — | | | 27.3 | |
| Cash and cash equivalents, beginning of period | 283.0 |
| | 64.2 |
| | 78.6 |
| Cash and cash equivalents, beginning of period | $ | 568.9 | | | $ | 339.1 | | | $ | 161.7 | |
| | Cash and cash equivalents, end of period | $ | 161.7 |
| | $ | 283.0 |
| | $ | 64.2 |
| Cash and cash equivalents, end of period | $ | 516.8 | | | $ | 568.9 | | | $ | 339.1 | |
____________________
| |
(2) | Represents the cash portion of the total purchase consideration paid for the DuPont Crop Protection Business Acquisition. See Note 4 for more information on the non-cash consideration transferred to DuPont. |
| |
(3) | Pursuant to the terms of the separation and distribution agreement, we received a net distribution of approximately $364 million from the public offering of Livent representing the proceeds from the sale of its common stock and the underwriters' exercise to purchase additional shares as part of the initial public offering ("IPO"), net of underwriting discounts and commissions, financing fees and other offering related expenses. |
| |
(4) | See Note 16 regarding our quarterly cash dividend. |
(3) The acquisitions, net amount in 2020 represents payments made on October 2, 2020 to acquire the remaining rights for Fluindapyr from Isagro S.p.A ("Isagro") in an asset acquisition. For additional detail on this transaction, see Note 9 to our consolidated financial statements included within this Form 10-K.
(4) Cash spending associated with contract manufacturers was $18.8 million, $17.4 million and $51.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.
(5) See Note 17 to the consolidated financial statements included within this Form 10-K regarding our quarterly cash dividend.
(6) Reflected within "Current assets of discontinued operations" on the consolidated balance sheets.
Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest was $133.4$125.8 million, $98.8$141.8 million and $81.6$140.9 million, and income taxes paid, net of refunds was $135.3$139.2 million, $33.3$82.1 million and $62.8$130.9 million in December 31, 2018, 20172021, 2020 and 2016, respectively. Net interest payments of zero, $16.6 million, and $19.6 million and tax payments, net of refunds of zero, $8.3 million, and $12.6 million were allocated to discontinued operations for the years ended December 31, 2018, 2017 and 2016,2019, respectively. Accrued additions to property, plant and equipment and other assets at December 31, 2018, 20172021, 2020 and 20162019 were $6.8$45.5 million, $11.6$14.7 million and $3.4$18.2 million, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
FMC CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | FMC Stockholders’ 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 December 31, 2015 | $ | 18.6 |
| | $ | 417.7 |
| | $ | 3,385.0 |
| | $ | (457.3 | ) | | $ | (1,498.3 | ) | | $ | 42.6 |
| | $ | 1,908.3 |
|
| Net income (loss) | | | | | 209.1 |
| | | | | | 2.6 |
| | 211.7 |
|
| Stock compensation plans | | | 19.9 |
| | | | | | 4.3 |
| | | | 24.2 |
|
| Excess tax benefits from share-based compensation | | | (0.4 | ) | | | | | | | | | | (0.4 | ) |
| Shares for benefit plan trust | | | | | | | | | 0.4 |
| | | | 0.4 |
|
| Net pension and other benefit actuarial gains (losses) and prior service cost, net of income tax | | | | | | | 12.3 |
| | | | | | 12.3 |
|
| Net hedging gains (losses) and other, net of income tax | | | | | | | 13.3 |
| | | | | | 13.3 |
|
| Foreign currency translation adjustments | | | | | | | (46.7 | ) | | | | (2.0 | ) | | (48.7 | ) |
| Dividends ($0.66 per share) | | | | | (88.6 | ) | | | | | | | | (88.6 | ) |
| Repurchases of common stock | | | | | | | | | (13.0 | ) | | | | (13.0 | ) |
Transactions with noncontrolling interests (1) | | | (18.6 | ) | | | | | | | | (7.9 | ) | | (26.5 | ) |
| Balance December 31, 2016 | $ | 18.6 |
| | $ | 418.6 |
| | $ | 3,505.5 |
| | $ | (478.4 | ) | | $ | (1,506.6 | ) | | $ | 35.3 |
| | $ | 1,993.0 |
|
| Net income (loss) | | | | | 535.8 |
| | | | | | 2.6 |
| | 538.4 |
|
| Stock compensation plans | | | 33.0 |
| | | | | | 9.6 |
| | | | 42.6 |
|
| Shares for benefit plan trust | | | | | | | | | (0.2 | ) | | | | (0.2 | ) |
| Net pension and other benefit actuarial gains (losses) and prior service cost, net of income tax | | | | | | | 52.2 |
| | | | | | 52.2 |
|
| Net hedging gains (losses) and other, net of income tax | | | | | | | (1.9 | ) | | | | | | (1.9 | ) |
| Foreign currency translation adjustments | | | | | | | 187.8 |
| | | | (1.2 | ) | | 186.6 |
|
| Dividends ($0.66 per share) | | | | | (88.9 | ) | | | | | | | | (88.9 | ) |
| Repurchases of common stock | | | | | | | | | (2.4 | ) | | | | (2.4 | ) |
Noncontrolling interests associated with an acquisition (1) | | | | | | | | | | | 12.7 |
| | 12.7 |
|
Transactions with noncontrolling interests (1) | | | (0.9 | ) | | | | | | | | (24.1 | ) | | (25.0 | ) |
| Balance December 31, 2017 | $ | 18.6 |
| | $ | 450.7 |
| | $ | 3,952.4 |
| | $ | (240.3 | ) | | $ | (1,499.6 | ) | | $ | 25.3 |
| | $ | 2,707.1 |
|
| Net income (loss) | | | | | 502.1 |
| | | | | | 9.4 |
| | 511.5 |
|
| Stock compensation plans | | | 26.5 |
| | | | | | 7.2 |
| | | | 33.7 |
|
| Shares for benefit plan trust | | | | | | | | | 0.1 |
| | | | 0.1 |
|
| Net pension and other benefit actuarial gains (losses) and prior service cost, net of income tax | | | | | | | 20.7 |
| | | | | | 20.7 |
|
| Net hedging gains (losses) and other, net of income tax | | | | | | | 6.0 |
| | | | | | 6.0 |
|
| Foreign currency translation adjustments | | | | | | | (95.3 | ) | | | | (5.5 | ) | | (100.8 | ) |
| Dividends ($0.90 per share) | | | | | (120.2 | ) | | | | | | | | (120.2 | ) |
| Repurchases of common stock | | | | | | | | | (206.8 | ) | | | | (206.8 | ) |
Transactions with noncontrolling interests (1)(2) | | | 299.0 |
| | | | | | | | 60.1 |
| | 359.1 |
|
| Balance December 31, 2018 | $ | 18.6 |
| | $ | 776.2 |
| | $ | 4,334.3 |
| | $ | (308.9 | ) | | $ | (1,699.1 | ) | | $ | 89.3 |
| | $ | 3,210.4 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | FMC Stockholders’ 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 December 31, 2018 | $ | 18.6 | | | $ | 776.2 | | | $ | 4,334.3 | | | $ | (308.9) | | | $ | (1,699.1) | | | $ | 89.3 | | | $ | 3,210.4 | |
| Adoption of accounting standards (Note 2) | | | | | 55.5 | | | (53.1) | | | | | | | 2.4 | |
| Net income (loss) | | | | | 477.4 | | | | | | | 2.8 | | | 480.2 | |
| Stock compensation plans | | | 53.5 | | | | | | | 21.6 | | | | | 75.1 | |
| Shares for benefit plan trust | | | | | | | | | (1.0) | | | | | (1.0) | |
| Net pension and other benefit actuarial gains (losses) and prior service cost, net of income tax | | | | | | | 3.4 | | | | | | | 3.4 | |
| Net hedging gains (losses) and other, net of income tax | | | | | | | (77.2) | | | | | | | (77.2) | |
| Foreign currency translation adjustments | | | | | | | (15.2) | | | | | (3.3) | | | (18.5) | |
| Dividends ($1.64 per share) | | | | | (214.1) | | | | | | | | | (214.1) | |
| Repurchases of common stock | | | | | | | | | (414.3) | | | | | (414.3) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Distribution of FMC Lithium (2) | | | | | (464.3) | | | 39.0 | | | | (59.7) | | | (485.0) | |
| Balance December 31, 2019 | $ | 18.6 | | | $ | 829.7 | | | $ | 4,188.8 | | | $ | (412.0) | | | $ | (2,092.8) | | | $ | 29.1 | | | $ | 2,561.4 | |
| | | | | | | | | | | | | |
| Net income (loss) | | | | | 551.5 | | | | | | | (0.9) | | | 550.6 | |
| Stock compensation plans | | | 33.1 | | | | | | | 10.4 | | | | | 43.5 | |
| Shares for benefit plan trust | | | | | | | | | (0.4) | | | | | (0.4) | |
| Net pension and other benefit actuarial gains (losses) and prior service cost, net of income tax | | | | | | | 34.9 | | | | | | | 34.9 | |
| Net hedging gains (losses) and other, net of income tax | | | | | | | (6.8) | | | | | | | (6.8) | |
| Foreign currency translation adjustments | | | | | | | 101.7 | | | | | 0.3 | | | 102.0 | |
| Dividends ($1.80 per share) | | | | | (233.9) | | | | | | | | | (233.9) | |
| Repurchases of common stock | | | | | | | | | (58.4) | | | | | (58.4) | |
| | | | | | | | | | | | | |
Acquisition of noncontrolling interests (1) | | | (2.6) | | | | | | | | | (4.8) | | | (7.4) | |
| Distributions to noncontrolling interests | | | | | | | | | | | (1.3) | | | (1.3) | |
| | | | | | | | | | | | | |
| Balance December 31, 2020 | $ | 18.6 | | | $ | 860.2 | | | $ | 4,506.4 | | | $ | (282.2) | | | $ | (2,141.2) | | | $ | 22.4 | | | $ | 2,984.2 | |
| | | | | | | | | | | | | |
| Net income (loss) | | | | | 736.5 | | | | | | | (2.5) | | | 734.0 | |
| Stock compensation plans | | | 20.2 | | | | | | | 5.5 | | | | | 25.7 | |
| Shares for benefit plan trust | | | | | | | | | 1.6 | | | | | 1.6 | |
| Net pension and other benefit actuarial gains (losses) and prior service cost, net of income tax | | | | | | | 3.4 | | | | | | | 3.4 | |
| Net hedging gains (losses) and other, net of income tax | | | | | | | 49.6 | | | | | | | 49.6 | |
| Foreign currency translation adjustments | | | | | | | (86.5) | | | | | (0.5) | | | (87.0) | |
| Dividends ($1.96 per share) | | | | | (251.6) | | | | | | | | | (251.6) | |
| Repurchases of common stock | | | | | | | | | (408.0) | | | | | (408.0) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Balance December 31, 2021 | $ | 18.6 | | | $ | 880.4 | | | $ | 4,991.3 | | | $ | (315.7) | | | $ | (2,542.1) | | | $ | 19.4 | | | $ | 3,051.9 | |
____________________
| |
(1) | See Notes 4 and 16 for more detail on the acquisitions of noncontrolling interest and transactions with noncontrolling interest, respectively. |
| |
(2) | Primarily represents the noncontrolling interest of our FMC Lithium as a result of the IPO. Refer to Note 1 for further information. |
(1) See Note 17 to the consolidated financial statements included within this Form 10-K for more detail on transactions with noncontrolling interest.
(2) Represents the effects of the distribution of FMC Lithium. Refer to Note 1 to the consolidated financial statements included within this Form 10-K for further information.
The accompanying notes are an integral part of these consolidated financial statements.
FMC CORPORATION
Notes to Consolidated Financial Statements
Note 1: Principal Accounting Policies and Related Financial Information
Nature of operations. We are a diversified chemicalglobal agricultural sciences company serving agricultural, consumerdedicated to helping growers produce food, feed, fiber and industrial markets globally with innovative solutions, applications and market-leading products.fuel for an expanding world population while adapting to a changing environment. We operate in twoa single distinct business segments: FMC Agricultural Solutionssegment and FMC Lithium. Our FMC Agricultural Solutions segment develops, marketsdevelop, market and sellssell all three3 major classes of crop protection chemicals –chemicals: insecticides, herbicides and fungicides.fungicides, as well as biologicals, crop nutrition, seed treatment, which we group as plant health, and digital and precision agriculture. 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. Our FMC Lithium segment manufactures lithium for use
COVID-19. Given the COVID pandemic, many countries, including the United States, subsequently imposed restrictions on both travel and business closures in a wide rangean effort to mitigate the spread of products,COVID. As an agricultural 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 used primarily in portable energy storage, specialty polymers and chemical synthesis applications.
In March 2017, we announced our intentionoperational. The extent to separate our FMC Lithium segment (subsequently renamed Livent Corporation, or "Livent") into a publicly traded company. The initial step of the separation, the initial public offering ("IPO") of Livent, closed on October 15, 2018. In connection with the IPO, Livent had granted the underwriters an option to purchase additional shares of common stock to cover over-allotments at the IPO price, less the underwriting discount. On November 8, 2018, the underwriters exercised in full their option to purchase additional shares. After completion of the IPO and the underwriters' exercise to purchase additional shares of common stock, FMC owned 123 million shares of Livent's common stock, representing approximately 84 percent of the total outstanding shares of Livent's common stock. We have announced that we will distribute the remaining Livent shares (the "Distribution") on March 1, 2019. Wewhich COVID will continue to consolidateimpact us will depend on future developments, many of which remain uncertain and present Livent ascannot be predicted with confidence, including the FMC Lithium segment until March 1, 2019. At that time, results of FMC Lithium will be presented as a discontinued operation.
In connection with the IPO, we have entered into certain agreements with Livent that govern various interim and ongoing relationships between the parties. These agreements include a separation and distribution agreement, a transition services agreement, a shareholders’ agreement, a tax matters agreement, a registration rights agreement, an employee matters agreement and a trademark license agreement. The tax matters agreement allocates responsibility between the parties with respect to taxes incurred as a result of any failureduration of the Distributionpandemic, further actions to qualify as tax-free for U.S. federal income tax purposes. Furthermore, we have received an opinion from outside counselbe taken to contain the effect thatpandemic or mitigate its impact, and the Distribution, together with certain related transactions, will qualify as a "reorganization" within the meaning of Section 368(a)(1)(D)extent of the Internal Revenue Code of 1986, amended (the "Code")direct and a tax-free distribution pursuant to Section 355indirect economic effects of the Code.pandemic and containment measures, among others.
Basis of consolidation and basis of presentation. The accompanying consolidated financial statements of FMC Corporation and its subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Our consolidated financial statements include the accounts of FMC and all entities that we directly or indirectly control. All significant intercompany accounts and transactions are eliminated in consolidation.
Certain prior year amounts have been reclassified to conform to current year's presentation. Refer to the discussion within Note 2 for the impact of adopting guidance related to the presentation of net benefit cost.
Estimates and assumptions. In preparing the financial statements in conformity with U.S. GAAP we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results are likely to differ from those estimates, but we do not believe such differences will materially affect our financial position, results of operations or cash flows.
Cash equivalents. We consider investments in all liquid debt instruments with original maturities of 3 months or less to be cash equivalents.
Trade receivables, net of allowance. Trade receivables consist of amounts owed to us from customer sales and are recorded when revenue is recognized. The allowance for trade receivables represents our best estimate of the probable losses associated with potential customer defaults. In developing our allowance for trade receivables, we use a two stagetwo-stage process which includes calculating a general formula to develop an allowance to appropriately address the uncertainty surrounding collection risk of our entire portfolio and specific allowances for customers where the risk of collection has been reasonably identified either due to liquidity constraints or disputes over contractual terms and conditions.
Our method of calculating the general formula consists of estimating the recoverability of trade receivables based on historical experience, current collection trends, and external business factors such as economic factors, including regional bankruptcy rates, and political factors. Our analysis of trade receivable collection risk is performed quarterly, and the allowance is adjusted accordingly.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
We also hold long-term receivables that represent long-term customer receivable balances related to past-due accounts which are not expected to be collected within the current year. Our policy for the review of the allowance for these receivables is consistent with the discussion in the preceding paragraph above on trade receivables. Therefore on an ongoing basis, we continue to evaluate the credit quality of our long-term receivables utilizing aging of receivables, collection experience and write-offs, as well as existing economic conditions, to determine if an additional allowance is necessary.
The allowance for trade receivablereceivables was $22.4$37.4 million and $38.7$27.9 million as of December 31, 20182021 and 2017,2020, respectively. The allowance for long-term receivables was $60.5$27.7 million and $47.1$24.7 million at December 31, 20182021 and 2017.2020, respectively. The provision to the allowance for receivables charged against operations was $71.3$21.1 million, $22.1$4.7 million and $21.9$21.2 million for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively. See Note 9 for more information. The provision in 2018 includes10 to the effects of the stranded accounts receivables written off as part of the restructuring in India. See Note 8consolidated financial statements included within this Form 10-K for more information.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Investments. Investments in companies in which our ownership interest is 50 percent or less and in which we exercise significant influence over operating and financial policies are accounted for using the equity method. Under the equity method, original investments are recorded at cost and adjusted by our share of undistributed earnings and losses of these investments. Majority owned investments in which our control is restricted are also accounted for using the equity method. All other investments are carried at their fair values or at cost, as appropriate. Weappropriate and are partynot material to several jointour consolidated financial statements. In June 2020, we launched FMC Ventures, our new venture capital arm targeting strategic investments throughoutin start-ups and early-stage companies that are developing and applying emerging technologies in the world,agricultural industry. The accounting guidance requires these nonmarketable equity securities to be recorded at cost and adjusted to fair value each reporting period. However, the guidance allows for a measurement alternative, which is to record the investment at cost, less impairment, if any, and subsequently adjust for observable price changes. Each reporting period, we review the portfolio for any observable price changes or potential indicators of impairment. At December 31, 2021, our investments made through FMC Ventures individually and in the aggregate are not significant to our financial results.
Inventories. Inventories are stated at the lower of cost or marketnet realizable value. Inventory costs include those costs directly attributable to products before sale, including all manufacturing overhead but excluding distribution costs. All domestic inventories, excluding materials and supplies, are determined on a last-in, first-out (“LIFO”("LIFO") basis and our remaining inventories are recorded on either a first-in, first-out (“FIFO”("FIFO") basis or average cost. The method for the acquired DuPont Crop Protection Business includes LIFO and average cost.basis. See Note 67 to the consolidated financial statements included within this Form 10-K for more information.
Property, plant and equipment. We record property, plant and equipment, including capitalized interest, at cost. We recognize acquired property, plant and equipment, from acquisitions at its estimated fair value. Depreciation is provided principally on the straight-line basis over the estimated useful lives of the assets (land improvements — 20 years, buildings and building equipment — 2015 to 40 years, and machinery and equipment — three3 to 18 years). Gains and losses are reflected in income upon sale or retirement of assets. Expenditures that extend the useful lives of property, plant and equipment or increase productivity are capitalized. Ordinary repairs and maintenance are expensed as incurred through operating expense.
Capitalized interest. We capitalized interest costs of $5.0$3.4 million, $3.5 million, and $4.7 million in 2018, $3.1 million in 20172021, 2020, and $3.2 million in 2016.2019, respectively. These costs were primarily associated with the construction of certain long-lived assets and have been capitalized as part of the cost of those assets. We amortize capitalized interest over the assets’ estimated useful lives.
Impairments of long-lived assets. We review the recovery of the net book value of long-lived assets whenever events and circumstances indicate that the net book value of an asset may not be recoverable from the estimated undiscounted future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the net book value, we recognize an impairment loss equal to an amount by which the net book value exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Asset retirement obligations. We record asset retirement obligations (“AROs”("AROs") at fair value at the time the liability is incurred if we can reasonably estimate the settlement date. The associated AROs are capitalized as part of the carrying amount of related long-lived assets. In future periods, the liability is accreted to its present value and the capitalized cost is depreciated over the useful life of the related asset. We also adjust the liability for changes resulting from the passage of time and/or revisions to the timing or the amount of the original estimate. Upon retirement of the long-lived asset, we either settle the obligation for its recorded amount or incur a gain or loss.
In our FMC Lithium segment, we have mining operations and legal reclamation obligations related to these facilities upon closure of the mines. Also, weWe have obligations at the majority of our manufacturing facilities in the event of permanent plant shutdown. Certain of these obligations are recorded in our environmental reserves described in Note 11. For certain AROs not already accrued, we have calculated the fair value of these AROs and concluded that the present value of these obligations was inconsequential at December 31, 20182021 and 2017.2020.
The carrying amounts for the AROs for the years ended December 31, 20182021 and 20172020 are $2.7$24.2 million and $1.9$30.7 million, respectively. These amounts are included in "Accrued and other liabilities" and "Other long-term liabilities" on the consolidated balance sheet.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Restructuring and other charges. We continually perform strategic reviews and assess the return on our businesses.business. This sometimes results in a plan to restructure the operations of aour business. We record an accrual for severance and other exit costs under the provisions of the relevant accounting guidance.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Additionally, as part of these restructuring plans, write-downs of long-lived assets may occur. Two types of assets are impacted: assets to be disposed of by sale and assets to be abandoned. Assets to be disposed of by sale are measured at the lower of carrying amount or estimated net proceeds from the sale. Assets to be abandoned with no remaining future service potential are written down to amounts expected to be recovered. The useful life of assets to be abandoned that have a remaining future service potential are adjusted and depreciation is recorded over the adjusted useful life.
Capitalized software. We capitalize the costs of internal use software in accordance with accounting literature which generally requires the capitalization of certain costs incurred to develop or obtain internal use software. We assess the recoverability of capitalized software costs on an ongoing basis and record write-downs to fair value as necessary. We amortize capitalized software costs over expected useful lives ranging from three3 to 10 years. See Note 2122 to the consolidated financial statements included within this Form 10-K for the net unamortized computer software balances.
Goodwill and intangible assets. Goodwill and other indefinite life intangible assets are not subject to amortization. Instead, they are subject to at least an annual assessment for impairment by applying a fair value-based test.
We test goodwill and indefinite life intangibles for impairment annually using the criteria prescribed by U.S. GAAP accounting guidance for goodwill and other intangible assets. Based upon our annual impairment assessments conducted in 20182021, 2020 and 2017,2019, we did not record any goodwill impairments. See Note 5 for more information on indefinite life intangibles. In 2017, we recorded a $42.1 million impairment charge to write down certain indefinite-livedor intangible assets of the acquired DuPont Crop Protection Business as a result of the Tax Cuts and Jobs Act (“the Act”) passed in the fourth quarter of 2017. See Note 12 for more details. In 2016, we recorded indefinite life intangible impairments of $9.3 million. These amounts were associated with Cheminova integration and restructuring activities within FMC Agricultural Solutions.asset impairments.
Finite-lived intangible assets consist of primarily customer relationships andas well as patents, brands, registration rights, industry licenses, and other intangibles and are generally being amortized over periods of approximately three3 to 20 years. See Note 56 to the consolidated financial statements included within this Form 10-K for additional information on goodwill and intangible assets.
Revenue recognition. We recognize revenue when (or as) we satisfy our performance obligation which is when the customer obtains control of the good or service. Rebates due to customers are accrued as a reduction of revenue in the same period that the related sales are recorded based on the contract terms. Refer to Note 3.3 to the consolidated financial statements included within this Form 10-K for further details.
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.
We periodically enter into prepayment arrangements with customers primarily in our FMC Agricultural Solutions segment, and receive advance payments for product to be delivered in future periods. These advance payments are recorded as deferred revenue and classified as “Advance"Advance payments from customers”customers" on the consolidated balance sheet. Revenue associated with advance payments is recognized as shipments are made and transfer of control to the customer takes place.
On January 1, 2018, Accounting Standards Update 2014-09, Revenue from Contracts with Customers, became effective. See Note 2 to these consolidated financial statements for more information.
Research and development.Research and development costs are expensed as incurred. In-process research and development acquired as part of asset acquisitions, which include license and development agreements, are expensed as incurred and included as a component of “Restructuring"Restructuring and other charges (income)" on the consolidated statements of income (loss).
Income and other taxes. We provide current income taxes on income reported for financial statement purposes adjusted for transactions that do not enter into the computation of income taxes payable. We recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. We have not provided income taxes for any additionalother outside basis differences inherent in our investments in subsidiaries because the investments and related unremitted earnings are essentially permanent in duration or we have concluded that no additional tax liability will arise upon disposal.disposal or remittance.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Foreign currency. We translate the assets and liabilities of our foreign operations at exchange rates in effect at the balance sheet date. For foreign operations for which the functional currency is not the U.S. dollar we record translation gains and losses as a component of accumulated other comprehensive income (loss) in equity. The foreign operations' income statements are translated at the monthly exchange rates for the period.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
We record remeasurement gains and losses on monetary assets and liabilities, such as accounts receivables and payables, which are not in the functional currency of the operation. These remeasurement gains and losses are recorded in income as they occur. We generally enter into foreign currency contracts to mitigate the financial risk associated with these transactions. See “Derivative"Derivative financial instruments”instruments" below and Note 18.19 to the consolidated financial statements included within this Form 10-K.
Derivative financial instruments. We mitigate certain financial exposures, including currency risk, interest rate risk and to a lesser extent commodity price exposures, through a controlled program of risk management that includes the use of derivative financial instruments. We enter into foreign exchange contracts, including forward and purchased option contracts, to reduce the effects of fluctuating foreign currency exchange rates.
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 either a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge) or a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge). We record in accumulated other comprehensive income (loss) 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 earnings as the underlying hedged item affects earnings. We record immediately in earnings changes in the fair value of derivatives that are not designated as cash flow hedges.
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 formally assess, both at the inception of the hedge and throughout its term, whether each derivative is highly effective in offsetting changes in fair value 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.
Treasury stock. We record shares of common stock repurchased at cost as treasury stock, resulting in a reduction of stockholders’ equity in the consolidated balance sheets. When the treasury shares are contributed under our employee benefit plans or issued for option exercises, we use a FIFO method for determining cost. The difference between the cost of the shares and the market price at the time of contribution to an employee benefit plan is added to or deducted from the related capital in excess of par value of common stock.
Segment information. We determined our reportable segments based on our strategicoperate as a single business units,segment providing innovative solutions to growers around the commonalities among the products and services within each segment and the manner in which we review and evaluate operating performance.
We have identified FMC Agricultural Solutions and FMC Lithium as our reportable segments. Segment disclosures are included in Note 20. Segment EBITDAworld. The business is defined as segment revenue less operating expenses (segment operating expenses consist of costs of sales and services, selling, general and administrative expenses, research and development expenses), excluding depreciation and amortization. We have excluded the following items from segment EBITDA:supported by global corporate staff expense, interest incomefunctions. The determination of a single segment is consistent with the financial information regularly reviewed by the chief executive officer for purposes of evaluating performance, allocating resources, setting incentive compensation targets and expense associated with corporate debt facilitiesboth planning and investments, income taxes, gains (or losses)forecasting future periods. Refer to Note 3 to the consolidated financial statements included within this Form 10-K for further information on divestitures of businesses, restructuringproduct and other charges (income), non-operating pension and postretirement charges (income), investment gains and losses, loss on extinguishment of debt, asset impairments, LIFO inventory adjustments, transaction-related charges, and other income and expense items. Information about how restructuring and other charges (income) relate to our businesses at the segment level is discussed in Note 8.
Segment assets and liabilities are those assets and liabilities that are recorded and reported by segment operations. Segment operating capital employed represents segment assets less segment liabilities. Segment assets exclude corporate and other assets, which are principally cash equivalents, the LIFO reserve on inventory, deferred income taxes, eliminations of intercompany receivables and property and equipment not attributable to a specific segment, such as capitalized interest. Segment liabilities exclude substantially all debt, income taxes, pension and other postretirement benefit liabilities, environmental reserves and related recoveries, restructuring reserves, fair value of currency contracts, intercompany eliminations, and reserves for discontinued operations.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
regional revenues.
Geographic segment revenue is based on the location of our customers. Geographic segment long-lived assets include goodwill and other intangibles, net, property, plant and equipment, net and other non-current assets. Geographic segment data isRefer to Note 21 to the consolidated financial statements included in Note 20.within this Form 10-K for further details.
Stock compensation plans. We recognize compensation expense in the financial statements for all share options and other equity-based arrangements. Share-based compensation cost is measured at the date of grant, based on the fair value of the award, and is recognized over the employee’s requisite service period. See Note 1516 to the consolidated financial statements included within this Form 10-K for further discussion on our share-based compensation.
Environmental obligations. We provide for environmental-related obligations when they are probable and amounts can be reasonably estimated. Where the available information is sufficient to estimate the amount of liability, that estimate has been used. Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any other, the lower end of the range has been used.
Estimated obligations to remediate sites that involve oversight by the United States Environmental Protection Agency (“EPA”("EPA"), or similar government agencies, are generally accrued no later than when a Record of Decision (“ROD”("ROD"), or equivalent, is issued, or upon completion of a Remedial Investigation/Feasibility Study (“("RI/FS”FS"), or equivalent, that is submitted by us and the appropriate government agency or agencies. Estimates are reviewed quarterly and, if necessary, adjusted as additional information becomes available. The estimates can change substantially as additional information becomes available regarding
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
the nature or extent of site contamination, required remediation methods, and other actions by or against governmental agencies or private parties.
Our environmental liabilities for continuing and discontinued operations are principally for costs associated with the remediation and/or study of sites at which we are alleged to have released hazardous substances into the environment. Such costs principally include, among other items, RI/FS, site remediation, costs of operation and maintenance of the remediation plan, management costs, fees to outside law firms and consultants for work related to the environmental effort, and future monitoring costs. Estimated site liabilities are determined based upon existing remediation laws and technologies, specific site consultants’ engineering studies or by extrapolating experience with environmental issues at comparable sites.
Included in our environmental liabilities are costs for the operation, maintenance and monitoring ("OM&M") of site remediation plans ("OM&M").plans. Such reserves are based on our best estimates for these OM&M plans. Over time we may incur OM&M costs in excess of these reserves. However, we are unable to reasonably estimate an amount in excess of our recorded reserves because we cannot reasonably estimate the period for which such OM&M plans will need to be in place or the future annual cost of such remediation, as conditions at these environmental sites change over time. Such additional OM&M costs could be significant in total but would be incurred over an extended period of years.
Included in the environmental reserve balance, other assets balance and disclosure of reasonably possible loss contingencies are amounts from third partythird-party insurance policies which we believe are probable of recovery.
Provisions for environmental costs are reflected in income, net of probable and estimable recoveries from named Potentially Responsible Parties (“PRPs”("PRPs") or other third parties. SuchIn the fourth quarter of 2019, we increased our reserves for the Pocatello Tribal Matter by $72.8 million, which represents both the historical and discounted present value of future annual use permit fees as well as the associated legal costs at the time the charge was recorded. We remeasure this discounted liability balance according to current interest rates. See Note 12 to the consolidated financial statements included within this Form 10-K for further information. All other environmental provisions incorporate inflation and are not discounted to their present values.value.
In calculating and evaluating the adequacy of our environmental reserves, we have taken into account the joint and several liability imposed by Comprehensive Environmental Remediation, Compensation and Liability Act (“CERCLA”("CERCLA") and the analogous state laws on all PRPs and have considered the identity and financial condition of the other PRPs at each site to the extent possible. We have also considered the identity and financial condition of other third parties from whom recovery is anticipated, as well as the status of our claims against such parties. Although we are unable to forecast the ultimate contributions of PRPs and other third parties with absolute certainty, the degree of uncertainty with respect to each party is taken into account when determining the environmental reserve on a site-by-site basis. Our liability includes our best estimate of the costs expected to be paid before the consideration of any potential recoveries from third parties. We believe that any recorded recoveries related to PRPs are realizable in all material respects. Recoveries are recorded as either an offset in “Environmental"Environmental liabilities, continuing and discontinued”discontinued" or as “Other"Other assets including long-term receivables, net”net" in our consolidated balance sheets in accordance with U.S. accounting literature.
Pension and other postretirement benefits. We provide qualified and nonqualified defined benefit and defined contribution pension plans, as well as postretirement health care and life insurance benefit plans to our employees and retirees. The costs (or benefits) and obligations related to these benefits reflect key assumptions related to general economic conditions, including interest (discount) rates, healthcare cost trend rates, expected rates of return on plan assets and the rates of compensation increase for
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
employees. The costs (or benefits) and obligations for these benefit programs are also affected by other assumptions, such as average retirement age, mortality, employee turnover, and plan participation. To the extent our plans’ actual experience, as influenced by changing economic and financial market conditions or by changes to our own plans’ demographics, differs from these assumptions, the costs and obligations for providing these benefits, as well as the plans’ funding requirements, could increase or decrease. When actual results differ from our assumptions, the difference is typically recognized over future periods. In addition, the unrealized gains and losses related to our pension and postretirement benefit obligations may also affect periodic benefit costs (or benefits) in future periods. See Note 1415 to the consolidated financial statements included within this Form 10-K for additional information relating to pension and other postretirement benefits.
Discontinued operations. In March 2017, we announced our intention to separate our FMC Lithium segment (subsequently renamed Livent Corporation, or "Livent") into a publicly traded company. The initial step of the separation, the initial public offering ("IPO") of Livent, closed on October 15, 2018. On March 1, 2019, we completed the previously announced distribution of 123 million shares of common stock of Livent as a pro rata dividend on shares of FMC common stock outstanding at the close of business on the record date of February 25, 2019. We have recast all the relevant data within
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
this filing to present FMC Lithium as a discontinued operation, retrospectively for all periods through its full distribution on March 1, 2019.
Note 2: Recently Issued and Adopted Accounting Pronouncements and Regulatory Items
New accounting guidance and regulatory items
In March 2020, the FASB issued 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 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.
Recently adopted accounting guidance
In December 2019, 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 is effective for fiscal years beginning after December 15, 2020 (i.e., a January 1, 2021 effective date). There were no material impacts to the consolidated financial statements upon adoption, but amendments will be applied prospectively if applicable to FMC.
In August 2018, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”)ASU No. 2018-14, Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The new standard is effective for fiscal years ending after December 15, 2020. There was no impact to our consolidated financial statements upon adoption, however, we have updated our disclosures within to comply with the ASU.
In August 2018, the FASB issued ASU No. 2018-15, Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new standard isbecame effective for fiscal years beginning after December 15, 2019 (i.e. a January 1, 2020 effective date). We are evaluating the effect the guidance will have onThere was no material impact to our consolidated financial statements.statements upon adoption.
In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This new standard permits a company to reclassify the income tax effects of the change in the U.S federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances as well as other income tax effects related to the application of the Act within Accumulated other comprehensive income ("AOCI") to retained earnings. There are also new required disclosures such as a description of the accounting policy for releasing income tax effects from AOCI as well as certain disclosures in the period of adoption if a company elects to reclassify the income tax effects. The new standard is effective for fiscal years beginning after December 15, 2018 (i.e. a January 1, 2019 effective date), and interim periods within those fiscal years, with early adoption permitted. The impacts of this standard is limited to a reclassification of certain income tax effects from AOCI to retained earnings.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815). This ASU amends and simplifies existing hedge accounting guidance and allows for more hedging strategies to be eligible for hedge accounting. In addition, the ASU amends disclosure requirements and how hedge effectiveness is assessed. The new standard is effective for fiscal years beginning after December 15, 2018 (i.e. a January 1, 2019 effective date), with early adoption permitted in any interim period after issuance of this ASU. We believe the adoption will not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU changes the subsequent measurement of goodwill impairment by eliminating Step 2 from the impairment test. Under the new guidance, an entity will measure impairment using the difference between the carrying amount and the fair value of the reporting unit. The new standard isbecame effective for fiscal years beginning after December 15, 2019 (i.e. a January 1, 2020 effective date), with early adoption permitted for goodwill impairment tests with measurement dates after January 1, 2017. We believe the adoption will not have aThere was no material impact onto our consolidated financial statements.statements upon adoption.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments” Instruments ("ASU 2016-13"). ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflectscurrent expected credit losses.loss ("CECL") model that immediately recognizes an estimate of credit losses that are expected to occur over the life of the financial instrument, including trade receivables. The update is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The new standard became effective January 1, 2020. As a result of the adoption, we have refined our allowance for doubtful trade receivables methodology which considers current economic conditions as well as forward-looking expectations about expected credit losses. The adoption of the new standard did not result in a material impact to our consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220):Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This new standard permits a company to reclassify the income tax effects of the change in the U.S federal corporate income tax rate on the gross deferred tax amounts
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
and related valuation allowances as well as other income tax effects related to the application of the Tax Cuts and Jobs Act (the "Act") within accumulated other comprehensive income ("AOCI") to retained earnings. The new standard also requires certain disclosures about stranded tax effects. The new standard is effective for fiscal years beginning after December 15, 20192018 (i.e., a January 1, 20202019 effective date), and interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2018.permitted. We are evaluatingadopted this standard prospectively as of January 1, 2019 and reclassified $53.1 million of the stranded income tax effects from accumulated other comprehensive income (loss) to retained earnings. The reclassification was related to the change in the U.S. federal corporate tax rate and the effect of the guidance will haveAct on our pension plans and derivative instruments. This reclassification is reflected within the consolidated financial statements.statements of changes in equity for the current period.
In February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"ASC 842"). Under the new guidance, lessees arewill be required to recognize for all leases (with the exception of short-term leases) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis and a right-of-use ("ROU") asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The new standard, including related amendments, is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., a January 1, 2019 effective date). In adopting this standard, we performed a detailed review of contracts of our business and assessed the terms under ASC 842. Additionally, we assessed potential impacts on our internal controls and processes related to both the implementation and ongoing compliance of the new guidance.
We have adopted this standard as of January 1, 2019 utilizing a modified retrospective approach and have elected the optional transition practical expedient.expedient package. Under this transition practical expedient package, ASC 842 was only applied to contracts that existexisted as of, or arewere entered into on or
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
after, January 1, 2019, are transitioned, withand a cumulative effect adjustment was made as of January 1, 2019. All comparative periods prior to January 1, 2019 will retain the financial reporting and disclosure requirements of ASC 840.
While we are still finalizing the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures, we have performed various assessment, lease abstraction, and operational activities as part of our established project plan to support the implementation of the new lease standard. As part of our impact assessment, we have performed scoping exercises and also verified our lease population, which is approximately 1,400 leases as of February 2019. This population includes leases identified in our embedded lease assessment process. Information from these leases have been abstracted into our lease accounting software, which will assist us in the quantification of the expected impact on the consolidated balance sheets and facilitate the calculations of the related accounting entries and disclosures. We continue to update this population in our software as new leases are entered or modified and reassess the impact, accordingly. We have also assessed any potential impacts on our internal controls, business processes, and accounting policies related to both the implementation and ongoing compliance of the new guidance. We have made updates and/or created new controls and processes to address the significant changes as a result of the The adoption of ASU 2016-02. Additionally, we are in the process of developing drafts of our new footnote disclosures required under the new standard that will be disclosed in our first quarter Form 10-Q, but will continue to work on finalizing them during the first quarter of 2019. As previously noted, although we are still finalizing the quantitative effects of ASU 2016-02, we expect total assets and total liabilities will increase between $180 million and $220 million in the period of adoption (this range represents the discounted impact). A large majority of that increase relates toASC 842 had a few key real estate leases including our Corporate headquarters, regional innovation centers, and centers of excellence.
Recently adopted accounting guidance
In March 2018, the FASB issued ASU No. 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 related to the Tax Cuts and Jobs Act. This update amends several paragraphs in ASC 740, Income Taxes, that contain SEC guidance related to SAB 118, which was previously issued in December 2017 by the SEC. In accordance with SAB 118, income tax effects of the Act were refined upon obtaining, preparing, or analyzing additional information during the measurement period. During the year ended December 31, 2018, we recorded an adjustment to our provisional expense of $8.5 million. Our analysis under SAB 118 is complete. Refer to Note 12 for more information.
In May 2017, the FASB issued ASU No. 2017-09, StockCompensation - Scope of Modification Accounting. This ASU provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The new standard was effective for fiscal years beginning after December 15, 2017 (i.e. a January 1, 2018 effective date). We adopted this standard beginning in 2018. We will apply the new guidance for any non-substantive changes in our share-based awards in future periods. There was no impact to our consolidated financial statements upon adoption.
In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU provides requirements for the presentation and disclosure of net benefit cost on the financial statements. The service cost component of net benefit cost is required to be presented in the income statement line item where the associated compensation cost is reported, while the other components of net benefit cost are required to be presented outside of operating income. The new standard was effective for fiscal years beginning after December 15, 2017 (i.e. a January 1, 2018 effective date). We adopted this standard on a retrospective basis. As a result, we have reclassified non-operating pension and postretirement charges (income) from "Selling, general and administrative expenses" to "Non-operating pension and postretirement charges (income)" within the consolidated statements of income (loss). For the years ended December 31, 2017 and 2016, we reclassified $18.2 million and $23.4 million of non-operating pension and postretirement charges. There was no impact to our net income. Refer to the table below.
|
| | | | | | | | | | | |
| | Year ended December 31, 2017 |
| (in Millions) | As Reported | | Reclassification | | As adjusted |
| Selling, general and administrative expenses | $ | 618.6 |
| | $ | (18.2 | ) | | $ | 600.4 |
|
| Non-operating pension and postretirement charges (income) | — |
| | 18.2 |
| | 18.2 |
|
|
| | | | | | | | | | | |
| | Year ended December 31, 2016 |
| (in Millions) | As Reported | | Reclassification | | As adjusted |
| Selling, general and administrative expenses | $ | 458.5 |
| | $ | (23.4 | ) | | $ | 435.1 |
|
| Non-operating pension and postretirement charges (income) | — |
| | 23.4 |
| | 23.4 |
|
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations. This new ASU clarified the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard was effective for fiscal years beginning after December 15, 2017 (i.e. a January 1, 2018 effective date) and will be applied prospectively. We adopted this standard beginning in 2018. We expect these provisions to impact future transactions of acquisitions or disposals. However, there was no impact to our consolidated financial statements upon adoption.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory. Under the new guidance, an entity will recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new standard was effective for fiscal years beginning after December 15, 2017 (i.e. a January 1, 2018 effective date), with early adoption permitted only in the first quarter of a fiscal year. We adopted this standard beginning in 2018. There was no material impact to our consolidated financial statements upon adoption.
In August 2016, the FASB issued ASU No. 2016-15, Statements of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. This ASU addresses eight specific cash flow issues with the goal of reducing the existing diversity in practice in how certain cash receipts and cash payments are both presented and classified in the statement of cash flows. The new standard was effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years (i.e. a January 1, 2018 effective date), with early adoption permitted. We adopted this standard beginning in 2018. Based on our review of the eight cash flow issues, there were no significant changes to our presentation of certain cash receipts and payments within our consolidated cash flow statement.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The new standard was effective for fiscal years and interim periods beginning after December 15, 2017 (i.e. a January 1, 2018 effective date), and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. We adopted this standard beginning in 2018. There was no material impact on our consolidated financial statements upon adoption.
In May 2014,balance sheet but did not have a material impact on the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers(Topic 606). This standard requires an entity to recognize the amountconsolidated statement of revenue to which it expects to be entitled for the transferincome (loss), consolidated statement of promised goodscomprehensive income (loss), consolidated statement of cash flows, or services to customers. This guidance replaced most existing revenue recognition guidanceconsolidated statement of changes in U.S. GAAP. On January 1, 2018,equity. As a result of adoption, we adopted ASU 2014-09recorded additional ROU lease assets and its related amendments (collectively known aslease liabilities of $185.3 million and $215.9 million, respectively. ROU lease assets includes a reclassification of $30.6 million of prepaid rent, accrued rent, and lease incentives previously recorded under ASC 606) using the modified retrospective adoption method.
In order to adopt this standard, we performed an impact assessment by analyzing revenue transactions and arrangements that are representative of our business segments and their revenue streams.840. Additionally, we assessed any potential impacts on our internal controls and processes related to both the implementation and ongoing compliancerecorded a retained earnings impact of the new guidance. Our assessment procedures included the DuPont Crop Protection Business, which was acquired on November 1, 2017.
The standard impacted our disclosures including disclosures presenting further disaggregation of revenue. Refer to Note 3 for further information. Based on our assessment, there was no cumulative catchup effect of initially applying ASC 606 that required an adjustment to our retained earnings; however, we have recognized balance sheet adjustments related to the presentation of sales returns liabilities and corresponding refund assets. The comparative information has not been adjusted and continues to be reported under ASC 605.
Utilizing the practical expedients and exemptions allowed under the modified retrospective method, ASC 606 was only applied to existing contracts (i.e. those for which FMC has remaining performance obligations)$2.4 million as of January 1, 2018, and new2019. Refer to Note 4 to the consolidated financial statements included within this Form 10-K for further information.
The expedient package allowed us not to reassess whether existing contracts entered into after January 1, 2018. ASC 606 was not applied to contracts that were completed prior to December 31, 2017. The impacts of the adoption of ASC 606 are set out below.
The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASC 606, Revenue from Contracts with Customers, was as follows:
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | |
| | Balance at December 31, 2017 | | Adjustments due to ASC 606 | | Balance at January 1, 2018 |
| (in Millions) | Amounts as originally reported | | Adjustment | | Amounts as adjusted |
| Assets | | | | | |
| Prepaid and other current assets | $ | 326.4 |
| | $ | 84.8 |
| | $ | 411.2 |
|
| Liabilities and Equity | | | | | |
| Accrued and other liabilities | $ | 497.7 |
| | $ | 84.8 |
| | $ | 582.5 |
|
In accordance withcontain a lease under the new revenue standard requirements,definition of a lease, the disclosurelease classification of existing leases, and initial direct cost for existing leases including whether such costs would qualify for capitalization under the impactstandard. Additionally, we elected the practical expedient to not separate non-lease components from lease components. In addition to these practical expedients, we elected the following exemption permissible under ASC 842: the exclusion of adoption on our consolidated balance sheet was as follows:leases with terms 12 months or less that do not have a purchase option or extension that is reasonably certain to exercise.
|
| | | | | | | | | | | |
| | December 31, 2018 |
| (in Millions) | Amounts as reported | | Adjustment due to ASC 606 | | Amounts without ASC 606 adjustment |
| Balance Sheet | | | | | |
| Assets | | | | | |
| Prepaid and other current assets | $ | 486.0 |
| | $ | (49.7 | ) | | $ | 436.3 |
|
| Liabilities and Equity | | | | | |
| Accrued and other liabilities | $ | 594.4 |
| | $ | (49.7 | ) | | $ | 544.7 |
|
The adoption of ASC 606 requires FMC842 required adjustments to record its estimated product returns grossour initial ROU asset and lease liability on the balance sheet. Therefore, a refund liability is recognized for the consideration paid by a customer to which FMC does not expect to be entitled, together with a corresponding asset to recover the product from the customer. Presenting estimated product returns gross on the balance sheet resulted in impacts to the aboveThe initial right of use asset and lease liability line items.are presented on a discounted basis by our incremental borrowing rate at transition.
Note 3: Revenue Recognition
Disaggregation of revenue
FMC disaggregatesWe disaggregate revenue from contracts with customers by business segmentgeographical areas and by geographical areas. Our FMC Agricultural Solutions segmentmajor product categories. We have 3 major agricultural product categories: insecticides, herbicides, and fungicides. Additionally, this table includes plant health, which is further disaggregated into three major pesticide product categories - Insecticides, Herbicides, and Fungicides - anda growing part of our FMC Lithium segment is disaggregated into four product categories - Lithium Hydroxide, Butyllithium, High Purity Lithium Metal and Other Specialty Compounds, and Lithium Carbonate and Lithium Chloride.business. The disaggregated revenue tables below are reconciled to FMC’s reportable segments, as defined in Note 20,shown below for the yearyears ended December 31, 2018.2021, 2020 and 2019.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The following table provides information about disaggregated revenue by major geographical region:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
North America (1) | $ | 1,117.2 | | | $ | 1,032.5 | | | $ | 1,121.1 | |
Latin America (1) | 1,633.4 | | | 1,456.5 | | | 1,441.7 | |
| Europe, Middle East & Africa | 1,040.0 | | | 1,046.3 | | | 1,001.8 | |
| Asia | 1,254.6 | | | 1,106.8 | | | 1,045.2 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Total Revenue | $ | 5,045.2 | | | $ | 4,642.1 | | | $ | 4,609.8 | |
____________________
58
Table(1)Countries with sales in excess of Contents10 percent of consolidated revenue consisted of the U.S. and Brazil. Sales for the years ended December 31 2021 , 2020, and 2019 for the U.S. totaled $1,018.1 million, $941.2 million and $1,044.1 million , respectively, and for Brazil totaled $1,224.4 million, $1,083.4 million and $1,094.1 million, respectively.FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
|
| | | |
| (in Millions) | Year ended December 31, 2018 |
| FMC Agricultural Solutions | |
| North America | $ | 1,090.8 |
|
| Latin America | 1,210.1 |
|
| Europe, Middle East & Africa | 966.0 |
|
| Asia Pacific | 1,018.4 |
|
| Total FMC Agricultural Solutions Revenue | $ | 4,285.3 |
|
| | |
| FMC Lithium | |
| North America | $ | 84.4 |
|
| Latin America | 2.0 |
|
| Europe, Middle East & Africa | 74.5 |
|
| Asia Pacific | 281.6 |
|
| Total FMC Lithium Revenue | $ | 442.5 |
|
| | |
| Total FMC Revenue | $ | 4,727.8 |
|
The following table provides information about disaggregated revenue by major product category: | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
| Insecticides | $ | 3,020.0 | | | $ | 2,836.8 | | | $ | 2,773.6 | |
| Herbicides | 1,375.3 | | | 1,187.2 | | | 1,228.8 | |
| Fungicides | 325.5 | | | 275.5 | | | 271.4 | |
| Plant Health | 216.8 | | | 180.2 | | | 168.8 | |
| Other | 107.6 | | | 162.4 | | | 167.2 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Total Revenue | $ | 5,045.2 | | | $ | 4,642.1 | | | $ | 4,609.8 | |
|
| | | |
| (in Millions) | Year ended December 31, 2018 |
| FMC Agricultural Solutions | |
| Insecticides | $ | 2,476.5 |
|
| Herbicides | 1,251.2 |
|
| Fungicides | 268.7 |
|
| Other | 288.9 |
|
| Total FMC Agricultural Solutions Revenue | $ | 4,285.3 |
|
| | |
| FMC Lithium | |
| Lithium Hydroxide | $ | 222.7 |
|
| Butyllithium | 99.0 |
|
| High Purity Lithium Metal and Other Specialty Compounds | 62.5 |
|
| Lithium Carbonate and Lithium Chloride | 58.3 |
|
| Total FMC Lithium Revenue | $ | 442.5 |
|
| | |
| Total FMC Revenue | $ | 4,727.8 |
|
FMC Agricultural Solutions
We earn revenue from the sale of a wide range of products to a diversified base of customers around the world. FMC Agricultural Solutions' portfolio is comprisedWe develop, market and sell all 3 major classes of three major pesticide categories: insecticides,crop protection chemicals (insecticides, herbicides and fungicides.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, and we havewith a small but fast-growingsmaller 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 soil enhancements.
FMC Lithium
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The FMC Lithium segment manufactures lithium for use in a wide range of products, which are used primarily in portable energy storage, specialty polymers and chemical synthesis applications. The FMC Lithium segment focuses on producing specialty products - Lithium hydroxide and Butyllithium. These products are developed and sold to global and regional customers in the electronic vehicle, polymer and specialty alloy metals market. Lithium hydroxide products are used in advanced batteries for hybrid electric, plug-in hybrid, and all-electric vehicles as well as other products that require portable energy storage such as smart phones, tablets, laptop computers, and military devices. Butyllithium products are primarily used as polymer initiators and in the synthesis of pharmaceuticals. High purity lithium metal and other specialty products include lithium phosphate, pharmaceutical-grade lithium carbonate, high purity lithium chloride and specialty organics. Additionally, FMC sells whatever Lithium carbonate and Lithium chloride it does not use internally to its customers for various applications.miscellaneous revenue sources.
Sale of Goods
Revenue from product sales is recognized when (or as) FMC satisfieswe 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 extended 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.
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, FMCwe typically recognizesrecognize 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
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
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 describedescribed 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. 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.
Right of Return
FMC extendsWe 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,
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
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 assetAsset and contract liability balancesContract Liability Balances
FMC satisfies itsWe 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. FMC recognizesWe recognize a contract liability if the customer's payment of consideration is received prior to completion of FMC'sour related performance obligation.
The following table presents the opening and closing balances of FMC'sour receivables, (netnet of allowances)allowances and contract liabilities from contracts with customers.customers:
| | | | | | | | | | | | | | | | | |
| (in Millions) | Balance as of December 31, 2020 | | Balance as of December 31, 2021 | | Increase (Decrease) |
| | | | | |
| Receivables from contracts with customers, net of allowances | $ | 2,433.8 | | | $ | 2,641.1 | | | $ | 207.3 | |
| Contract liabilities: Advance payments from customers | 347.1 | | | 630.7 | | | 283.6 | |
|
| | | | | | | | | | | |
| (in Millions) | Balance as of December 31, 2017 | | Balance as of December 31, 2018 | | Increase (Decrease) |
| Receivables from contracts with customers, net of allowances | $ | 2,150.2 |
| | $ | 2,369.7 |
| | $ | 219.5 |
|
| Contract liabilities: Advance payments from customers | 380.6 |
| | 458.4 |
| | 77.8 |
|
The amount of revenue recognized in the year ended December 31, 20182021 that was included in the opening contract liability balance is $380.6 million, which primarily relates to revenue from prepayment contracts with customers in the FMC Agricultural Solutions segment.was $347.1 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 December 31, 2018.2021. Refer to Note 910 to the consolidated financial statements included within this Form 10-K for further information.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
We periodically entersenter into prepayment arrangements with customers and receivesreceive 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 FMCour products from distributors through prepayment options. This in turn creates opportunity for distributors to make large prepayments to FMCus 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. FMC recognizes
We recognize these prepayments as a liability under “Advance Payments"Advance payments from customers”customers" on the 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 $380.6$347.1 million as of December 31, 20172020 and $458.4$630.7 million as of December 31, 2018.2021.
Performance obligationsObligations
At contract inception, FMC assesseswe assess the goods and services promised in itsour contracts with customers and identifiesidentify a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, we consider all the goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. Based on our evaluation, we have determined that our current contracts do not contain more than one performance obligation. Revenue is recognized when (or as) the performance obligation is satisfied, which is when the customer obtains control of the good or service.
Periodically, in both FMC Agricultural Solutions and FMC Lithium, FMCwe may enter into contracts with customers which require them to submit a forecast of non-binding purchase obligations to us. These forecasts are typically provided by the customer to FMCus in good faith, and there are no penalties or obligations if the forecasts are not met. Accordingly, we have determined that these are optional purchases and do not represent material rights and are not considered as unsatisfied (or partially satisfied) performance obligations for the purposes of this disclosure.
In separate and less common circumstances, FMCwe may have contracts with customers which have binding purchase requirements for just one quarter of their annual forecasts. Additionally, as noted in the Contract Liabilities section above, FMCwe periodically entersenter into agricultural prepayment arrangements with customers, and receivesreceive advance payments for product to be delivered in
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
future periods within one year. We have elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for these two types of contracts as they have an expected duration of one year or less and the revenue is expected to be recognized within the next year.
Occasionally, our FMC Lithium business may enter into multi-year take-or-pay supply agreements with customers. The aggregate amount of revenue expected to be recognized related to these contracts’ performance obligations that are unsatisfied or partially satisfied is approximately $66 million in 2019 and $49 million in 2020. These approximate revenues do not include amounts of variable consideration attributable to contract renewals or contract contingencies. Based on our past experience with the customers under these arrangements, we expect to continue recognizing revenue in accordance with the contracts as we transfer control of the product to the customer (refer to the sales of goods section for our determination of transfer of control). However, in the case a shortfall of volume purchases occurs, we will recognize the amount payable by the customer ratably over the contract term.
Other arrangementsArrangements
Data Licensing
FMCWe sometimes grantsgrant to third parties a license and right to rely upon pesticide regulatory data filed with government agencies. Such licenses allow a licensee to cite and rely upon FMC’sour data in connection with the licensee’s application for pesticide registrations as required by law; these licenses can be granted through contract or through a mandatory statutory license, depending on circumstances. In the most common occurrence, when a license is embedded in a contract for supply of pesticide active ingredient from FMCus to the licensee, the license grant is not considered as distinct from other promised goods or services. Accordingly, all promises are treated as a single performance obligation and revenue is recognized at a point when the control of the pesticide products is transferred to the licensee-customer. In the less frequent occurrence, when the license and right to use data is granted without a supply contract, FMC accountswe account for the revenue attributable to the data license as a performance obligation satisfied at a single point in time and recognizesrecognize revenue on the effective date of such contract. Finally, in those circumstance of mandatory data licensing by statute, such as under U.S. pesticide law, FMC recognizeswe recognize the data compensation upon the effective date of the data compensation settlement agreement. Payment terms for these arrangements may vary by contract.
Service Arrangements
In limited cases, FMC engageswe engage in providing certain tolling services, such as filling and packing services using raw and packing materials supplied by the customer. However, as a result of the DuPont Crop Protection Business Acquisition, on November 1, 2017, DuPont and FMCwe entered into an agreement with DuPont to provide tolling services to one another for up to five years from the acquisition date. Depending on the nature of the tolling services, FMC determineswe determine the appropriate method of satisfaction of the performance obligation, which may be the input or output method. Compared to other goods and services provided by FMC,us, service arrangements do not represent a significant portion of sales each year. Payment terms for service arrangements may vary by contract; however, payment is typically due within 30 days of the invoice date.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Practical Expedients and Exemptions
FMC hasWe have elected the following practical expedients following the adoption of ASC 606:
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a. | Costs of obtaining a contract: FMC incurs certain costs such as sales commissions which are incremental to obtaining the contract. We have taken the practical expedient of expensing such costs to obtain a contract, as and when they are incurred, as their expected amortization period is one year or less.
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b. | Significant financing component: We elected not to adjust the promised amount of consideration for the effects of a significant financing component if FMC expects, at contract inception, that the period between the transfer of a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
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c. | Remaining performance obligations: We elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts that are one year or less, as the revenue is expected to be recognized within one year. Additionally, we have elected not to disclose information about variable considerations for remaining, wholly unsatisfied performance obligations for which the criteria in paragraph 606-10-32-40 have been met.
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d. | Shipping and handling costs: We elected to account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities (i.e., an expense) rather than as a promised service.
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e. | Measurement of transaction price:We have elected to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer.
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a.Costs of obtaining a contract: FMC incurs certain costs such as sales commissions which are incremental to obtaining the contract. We have taken the practical expedient of expensing such costs to obtain a contract, as and when they are incurred, as their expected amortization period is one year or less.
b.Significant financing component: We elected not to adjust the promised amount of consideration for the effects of a significant financing component if FMC expects, at contract inception, that the period between the transfer of a promised good or service to a customer and when the customer pays for that good or service will be one year or less. c.Remaining performance obligations: We elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts that are one year or less, as the revenue is expected to be recognized within one year. Additionally, we have elected not to disclose information about variable considerations for remaining, wholly unsatisfied performance obligations for which the criteria in paragraph 606-10-32-40 have been met.
d.Shipping and handling costs: We elected to account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities (i.e., an expense) rather than as a promised service.
e.Measurement of transaction price:We have elected to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer.
Note 4: AcquisitionsLeases
We lease office space, vehicles and other equipment under non-cancellable leases with initial terms typically ranging from 1 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 new standard. Operating leases are included in "Other assets including long-term receivables, net", "Accrued and other liabilities", and "Other long-term liabilities" in our consolidated balance sheet. 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.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
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 1 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 1 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.
2017 AcquisitionWe 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 transition service arrangements from recent acquisitions. Rental income from all subleases is not material to our business.
The ROU asset and lease liability balances as of December 31, 2021 were as follows:
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| (in Millions) | | Classification | | December 31, 2021 | | December 31, 2020 |
| Assets | | | | | | |
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| Operating lease ROU assets | | Other assets including long-term receivables, net | | $ | 135.2 | | | $ | 147.3 | |
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| Liabilities | | | | | | |
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| Operating lease current liabilities | | Accrued and other liabilities | | $ | 23.5 | | | $ | 25.6 | |
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| Operating lease noncurrent liabilities | | Other long-term liabilities | | 140.0 | | | 151.1 | |
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The components of lease expense for the year ended December 31, 2021 were as follows:
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| (in Millions) | Lease Cost Classification | | 2021 | | 2020 | | 2019 |
| Lease Cost | | | | | | | |
| Operating lease cost | Costs of sales and services / Selling, general and administrative expenses | | $ | 33.9 | | | $ | 39.5 | | | $ | 41.3 | |
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| Variable lease cost | Costs of sales and services / Selling, general and administrative expenses | | 4.7 | | | 4.7 | | | 5.2 | |
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| Total lease cost | | | $ | 38.6 | | | $ | 44.2 | | | $ | 46.5 | |
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| | December 31, 2021 | | |
| Operating Lease Term and Discount Rate | | | | |
| Weighted-average remaining lease term (years) | | 9.2 | | |
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| Weighted-average discount rate | | 4.1 | % | | |
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| (in Millions) | Year ended December 31, 2021 | Year ended December 31, 2020 |
| Other Information | | |
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| Cash paid for amounts included in the measurement of lease liabilities: | | |
| Operating cash flows from operating leases | $ | (33.1) | | $ | (40.8) | |
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| 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 | $ | 18.4 | | $ | 8.4 | |
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FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The following table represents our future minimum operating lease payments as of, and subsequent to, December 31, 2021 under ASC 842:
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| (in Millions) | | | | | Operating Leases Total |
| Maturity of Lease Liabilities | | | | | |
| 2022 | | | | | $ | 29.2 | |
| 2023 | | | | | 23.6 | |
| 2024 | | | | | 19.4 | |
| 2025 | | | | | 18.3 | |
| 2026 | | | | | 17.4 | |
| Thereafter | | | | | 109.3 | |
| Total undiscounted lease payments | | | | | $ | 217.2 | |
| Less: Present value adjustment | | | | | (53.7) | |
| Present value of lease liabilities | | | | | $ | 163.5 | |
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"("DuPont"), we completed the acquisition of certain assets relating to DuPont's Crop Protection business and research and development ("("R&D") organization (the "DuPont"DuPont Crop Protection Business"Business") (collectively, the "DuPont"DuPont Crop Protection Business Acquisition"Acquisition"). In connection with this transaction, we sold to DuPont our FMC Health and Nutrition segment and paid DuPont $1.2 billion in cash which was funded with the 2017 Term Loan Facility which was secured for the purposes of the Acquisition. See Note 13 for more details. The following table illustrates each component of the consideration paid as part of the DuPont Crop Protection Business Acquisition:
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| (in Millions) | Amount |
| Cash purchase price, net | $ | 1,225.6 |
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| Cash proceeds from working capital and other adjustments | (21.5 | ) |
| Fair value of FMC Health and Nutrition sold to DuPont | 1,968.6 |
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| Total purchase consideration | $ | 3,172.7 |
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The Transaction Agreement also contained a provision for working capital adjustments. The DuPont Crop Protection Business is beinghas been integrated into our FMC Agricultural Solutions segmentbusiness and has been included within our results of operations since the date of acquisition. Revenue and U.S. GAAP Income (loss) from continuing operations before income taxes attributable to the DuPont Crop Protection Business, since the date of acquisition, and for the twelve months ended December 31, 2017 was approximately $193.5 million and $27.6 million, respectively. The Income (loss) from continuing operations before income taxes attributable to the DuPont Crop Protection Business includes the inventory fair value step-up amortization recorded in "Cost of sales and services" on the consolidated statements of income (loss).
In connection with the DuPont Crop Protection Business Acquisition, we entered into a customary transitional services agreement with DuPont to provide for the orderly separation and transition of various functions and processes. These services will be provided by DuPont to us for up to 24 months after closing, with an optional six months extension. These services include information technology services, accounting, human resource and facility services among other services, while we assume the operations of the DuPont Crop Protection Business.
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 are 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"Accrued and other liabilities" liabilities" and "Other"Other long-term liabilities"liabilities" on the consolidated balance sheets and is reduced and recognized to revenues within earnings as sales are made. The amount recognized in revenue for the years ended December 31, 20182021, 2020, and 20172019 was approximately $92$103 million, $111 million, and $2$105 million, respectively.
Certain manufacturing sites and R&D sites will be transferred to us at a later date due to various local timing constraints; however, we will still obtain the economic benefit from these sites during the period from November 1, 2017 to when the sites legally transfer. No additional consideration will be paid at the date of transfer. All sites except for portions of one that did not transfer on November 1, 2017 legally transferred to us on July 1, 2018 and October 1, 2018. The remaining portions of this one site are expected to transfer in the third quarter of 2019.
In the third quarter of 2017, both the European Commission and Competition Commission of India had conditionally approved our acquisition of certain assets of DuPont’s Crop Protection business. The DuPont Crop Protection Business Acquisition was conditioned upon us divesting the portfolio of products required by the respective regulatory bodies. These divestitures impacted FMC Agricultural Solutions’ annual 2018 operating profit by approximately $20 million. On February 1, 2018, we sold a portion of FMC's European herbicide Portfolio to Nufarm Limited and received proceeds of approximately $85 million plus $2 million of working capital. We recorded a gain on sale of approximately $85 million. This divestiture satisfied FMC's commitments to the European Commission related to the DuPont Crop Protection Business Acquisition. In December 2017, the Competition Commission of India issued its final order describing the required Indian remedy. We received anti-trust approval from the Competition Commission of India on August 1, 2018 to complete the sale of the products to Crystal Crop Protection Limited in
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
compliance with that final order. The sale closed on August 16, 2018 and satisfied our commitments to the Competition Commission of India related to the DuPont Crop Protection Business Acquisition. We recorded a gain of approximately $3 million.
Purchase Price Allocation
We applied acquisition accounting under the U.S. GAAP business combinations guidance. Acquisition accounting requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The net assets of the DuPont Crop Protection Business Acquisition will be recorded at the estimated fair values using primarily Level 2 and Level 3 inputs (see Note 18 for an explanation of Level 2 and Level 3 inputs). In valuing acquired assets and assumed liabilities, valuation inputs include an estimate of future cash flows and discount rates based on the internal rate of return and the weighted average rate of return.
The purchase price allocation is considered complete. The allocation was subject to change within the measurement period (up to one year from the acquisition date) as additional information concerning final asset and liability valuations was obtained. Any changes to the initial allocation are referred to as measurement-period adjustments. Measurement-period adjustments since our initial preliminary estimates reported in our 2017 10-K were primarily related to increases in the estimated fair values of intangible assets, deferred tax liabilities, and the unfavorable supply contract. The cumulative effect of all measurement-period adjustments resulted in an increase to recognized goodwill of approximately $283 million.
The following table summarizes the consideration paid for the DuPont Crop Protection Business and the amounts of the assets acquired and liabilities assumed as of the acquisition date.
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| Purchase Price Allocation |
| (in Millions) | |
Trade receivables (1) | $ | 45.8 |
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Inventories (2) | 379.7 |
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| Other current assets | 51.3 |
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| Property, plant & equipment | 424.7 |
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| Intangible assets: | |
| Indefinite-lived brands | 1,301.2 |
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Customer relationships (3) | 763.7 |
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Goodwill (4) | 974.7 |
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| Deferred tax assets | 79.7 |
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| Other noncurrent assets | 14.2 |
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| Total fair value of assets acquired | $ | 4,035.0 |
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Accounts payable, trade and other (1) | $ | 32.9 |
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Accrued and other current liabilities (5) | 156.2 |
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| Accrued pension and other postretirement benefits, long-term | 9.1 |
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Environmental liabilities (6) | 2.6 |
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| Deferred tax liabilities | 196.0 |
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Other long-term liabilities (5) | 452.3 |
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| Total fair value of liabilities assumed | $ | 849.1 |
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| Total consideration paid | $ | 3,185.9 |
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| Less: Noncontrolling interest | (13.2 | ) |
| Total consideration paid less noncontrolling interest | $ | 3,172.7 |
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____________________
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(1) | Represents the accounts receivable and accounts payable of the legal entity stock sales as part of the DuPont Crop Protection Acquisition. As part of the Transaction Agreement, these balances will be settled subsequent to the closing date through reimbursement between FMC and DuPont. The offsetting amounts due from and due to DuPont were recorded within Other current assets and Accrued and other current liabilities, respectively, as of December 31, 2017. |
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(2) | Fair value of finished goods inventory acquired included a step-up in the value of approximately $89.8 million, of which $69.6 million and $20.2 million was amortized during 2018 and 2017, respectively, and included in "Cost of sales and services" on the consolidated |
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
statements of income (loss).
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(3) | The weighted average useful life of the acquired customer relationships is approximately 20 years. |
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(4) | Goodwill largely consists of expected cost synergies and economies of scale resulting from the business combination. |
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(5) | Includes the short-term and long-term portions of the unfavorable supply contract with Dupont recorded in Accrued and other current liabilities and Other long-term liabilities, respectively. |
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(6) | Represents both the short-term and long-term portion of the environmental obligations at certain sites of the acquired DuPont Crop Protection Business that is indemnified by DuPont as part of the Transaction Agreement. The indemnification asset was recorded within Other current assets and Other noncurrent assets. |
2015 Acquisition
Cheminova A/S
On April 21, 2015, pursuant to the terms and conditions set forth in the Purchase Agreement, we completed the acquisition of 100 percent of the outstanding equity of Cheminova A/S, a Denmark Aktieselskab ("Cheminova") from Auriga Industries A/S, a Denmark Aktieselskab for an aggregate purchase price of $1.2 billion, excluding assumed net debt and hedge-related costs totaling $0.6 billion (the “Cheminova Acquisition”). The Cheminova Acquisition was funded with the October 10, 2014 term loan which was secured for the purposes of the Cheminova Acquisition. See Note 13 for more information.
Cheminova has been integrated into our FMC Agricultural Solutions segment and has been included within our results of operations since the date of acquisition. The acquisition of Cheminova broadened our supply capabilities and strengthened our geographic footprint, particularly in Europe.
Unaudited Pro Forma Financial Information
The following unaudited pro forma results of operations assume that the DuPont Crop Protection Business Acquisition occurred at the beginning of the periods presented. The pro forma amounts include certain adjustments, including interest expense on the borrowings used to complete the acquisition, depreciation and amortization expense and income taxes. The pro forma amounts below for the years ended December 31, 2017 and 2016 exclude acquisition-related charges. The pro forma results do not include adjustments related to cost savings or other synergies that are anticipated as a result of the acquisition. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been if the acquisitions had occurred as of January 1, 2016, nor are they indicative of future results of operations.
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| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
Pro forma Revenue (1) | $ | 4,727.8 |
| | $ | 4,204.0 |
| | $ | 3,978.2 |
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| Pro forma Diluted earnings per share from continuing operations | 4.75 |
| | 2.62 |
| | 4.00 |
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(1) | For the year ended December 31, 2018, pro forma results and actual results are the same. |
Transaction-related charges
Pursuant to U.S. GAAP, costs incurred associated with acquisition and separation 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 to date, and expect to incur, costs associated with integrating the DuPont Crop Protection Business, which included planning for the exittermination of the transitional service agreement ("TSA") as well as implementation of a new worldwide Enterprise Resource Planning ("ERP") system as a resultin connection with the termination of the transitional service agreement exit,TSA, of which the majority of which will becosts were capitalized in accordance with the relevant accounting literature. These costs have been, and are expected to be, significant and we anticipate the majority of theseTransaction-related charges will be completed by the first quarter of 2020. Additionally, we expect to continue to incur costs associated with the previously announced separation of FMC Lithium up through the date of separation. Costs incurred to date are primarily comprised of advisory and other professional fees. The following table summarizes the costs incurred associated with these activities.
were not material in 2021.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The following table summarizes the costs incurred associated with these activities:
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| Year Ended December 31, |
| (in Millions) | 2018 |
| 2017 |
| 2016 |
| Transaction-related charges | | | | | |
Acquisition-related charges - DuPont Crop |
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Legal and professional fees (1) | $ | 86.9 |
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| $ | 130.2 |
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| $ | — |
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Inventory fair value amortization (2) | 69.6 |
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| 20.2 |
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| — |
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Acquisition-related charges - Cheminova (3) |
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Legal and professional fees (1) | — |
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| — |
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| 23.4 |
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Separation-related charges - FMC Lithium | | | | | |
Legal and professional fees (1) | 35.6 |
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| — |
| | — |
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| Total transaction-related charges | $ | 192.1 |
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| $ | 150.4 |
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| $ | 23.4 |
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| Restructuring charges |
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| DuPont Crop restructuring | $ | 108.3 |
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| $ | — |
| | $ | — |
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Cheminova restructuring (3) | — |
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| — |
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| 42.3 |
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Total restructuring charges (4) | $ | 108.3 |
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| $ | — |
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| $ | 42.3 |
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| Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
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| DuPont Crop Protection Business Acquisition | | | | | |
Legal and professional fees (1) | $ | 0.4 | | | $ | 53.3 | | | $ | 77.8 | |
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| Total transaction-related charges | $ | 0.4 | | | $ | 53.3 | | | $ | 77.8 | |
| Restructuring charges | | | | | |
DuPont Crop restructuring (2) | $ | 16.7 | | | $ | 40.2 | | | $ | 26.4 | |
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| Total restructuring charges | $ | 16.7 | | | $ | 40.2 | | | $ | 26.4 | |
____________________
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(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 consolidated statements of income (loss). |
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(2) | These charges are included in “Costs of sales and services” on the consolidated statements of income (loss). |
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(3) | Acquisition-related charges and restructuring charges to integrate Cheminova with FMC Agricultural Solutions were completed at the end of 2016. |
| |
(4) | See Note 8 for more information. These charges are recorded as a component of “Restructuring and other charges (income)” on the consolidated statements of income (loss). |
(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 consolidated statements of income (loss).
(2)See Note 9 to the consolidated financial statements included within this Form 10-K for more information. These charges are recorded as a component of "Restructuring and other charges (income)" on the consolidated statements of income (loss). We completed the integration of the DuPont Crop Protection Business in 2020, other than the completion of certain in-flight initiatives associated with the finalization of our worldwide ERP system in early 2021. Restructuring charges associated with the DuPont program are largely complete as of December 31, 2021 and any future charges are not expected to be material. Refer to Note 9 to the consolidated financial statements included within this Form 10-K for further information.
Note 5:6: Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by business segment for the years ended December 31, 20182021 and 20172020 are presented in the table below:
|
| | | | | | | | | | | |
| (in Millions) | FMC Agricultural Solutions | | FMC Lithium | | Total |
| Balance, December 31, 2016 | $ | 498.7 |
| | $ | — |
| | $ | 498.7 |
|
Acquisitions (1) | 691.8 |
| | — |
| | 691.8 |
|
| Foreign currency adjustments | 8.4 |
| | — |
| | 8.4 |
|
| Balance, December 31, 2017 | $ | 1,198.9 |
| | $ | — |
| | $ | 1,198.9 |
|
| Purchase price allocation adjustments (See Note 4) | 282.9 |
| | — |
| | 282.9 |
|
| Foreign currency and other adjustments | (13.7 | ) | | — |
| | (13.7 | ) |
| Balance, December 31, 2018 | $ | 1,468.1 |
| | $ | — |
| | $ | 1,468.1 |
|
____________________
| | | | | | | | | |
(1)(in Millions) | Represents goodwill recorded as a result of the DuPont Crop Protection Business Acquisition. See Note 4 for more details. | | | | Total |
| Balance, December 31, 2019 | | | | | $ | 1,467.5 | |
| | | | | |
| Foreign currency and other adjustments | | | | | 1.4 | |
| | | | | |
| Balance, December 31, 2020 | | | | | $ | 1,468.9 | |
| | | | | |
| | | | | |
| Foreign currency and other adjustments | | | | | (5.6) | |
| Balance, December 31, 2021 | | | | | $ | 1,463.3 | |
Our fiscal year 20182021 annual goodwill and indefinite life impairment test was performed during the third quarter ended September 30, 2018.2021. We determined no goodwill impairment existed and that the fair value was substantially in excess of the carrying value for each of our goodwill reporting units.value. There were no events or circumstances indicating that goodwill might be impaired as of December 31, 2018. However, we recorded an immaterial impairment charge in our generic brand portfolio which is part2021. Additionally, the estimated fair values also substantially exceeded the carrying value for each of our FMC Agricultural Solutions segment. Refer to Note 18 for further details.indefinite-lived intangible assets.
Our intangible assets, other than goodwill, consist of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 |
| (in Millions) | Weighted avg. useful life remaining at December 31, 2021 | Gross | | Accumulated Amortization | | Net | | Gross | | Accumulated Amortization | | Net |
| Intangible assets subject to amortization (finite life) | | | | | | | | | | | | |
| Customer relationships | 15 years | $ | 1,147.1 | | | $ | (301.3) | | | $ | 845.8 | | | $ | 1,169.4 | | | $ | (249.7) | | | $ | 919.7 | |
| Patents | 5 years | 1.8 | | | (1.3) | | | 0.5 | | | 1.9 | | | (1.2) | | | 0.7 | |
Brands (1) | 7 years | 17.1 | | | (9.9) | | | 7.2 | | | 18.3 | | | (8.9) | | | 9.4 | |
| Purchased and licensed technologies | 8 years | 60.2 | | | (40.7) | | | 19.5 | | | 61.1 | | | (38.1) | | | 23.0 | |
| Other intangibles | 1 year | 2.3 | | | (1.7) | | | 0.6 | | | 3.4 | | | (2.6) | | | 0.8 | |
| | $ | 1,228.5 | | | $ | (354.9) | | | $ | 873.6 | | | $ | 1,254.1 | | | $ | (300.5) | | | $ | 953.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Intangible assets not subject to amortization (indefinite life) | | | | | | | | | | | | |
Crop Protection Brands (2) | | $ | 1,259.1 | | | | | $ | 1,259.1 | | | $ | 1,259.1 | | | | | $ | 1,259.1 | |
Brands (1) | | 389.2 | | | | | 389.2 | | | 412.5 | | | | | 412.5 | |
| | | | | | | | | | | | |
| | $ | 1,648.3 | | | | | $ | 1,648.3 | | | $ | 1,671.6 | | | | | $ | 1,671.6 | |
| Total intangible assets | $ | 2,876.8 | | | $ | (354.9) | | | $ | 2,521.9 | | | $ | 2,925.7 | | | $ | (300.5) | | | $ | 2,625.2 | |
____________________
66(1) Represents trademarks, trade names and know-how.
FMC CORPORATION | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
| Amortization expense | $ | 62.7 | | | $ | 61.9 | | | $ | 62.6 | |
Notes to Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2018 | | December 31, 2017 |
| (in Millions) | Weighted avg. useful life at December 31, 2018 | Gross | | Accumulated Amortization | | Net | | Gross | | Accumulated Amortization | | Net |
| Intangible assets subject to amortization (finite life) | | | | | | | | | | | | |
| Customer relationships | 18 years | $ | 1,146.2 |
| | $ | (128.7 | ) | | $ | 1,017.5 |
| | $ | 1,122.5 |
| | $ | (73.3 | ) | | $ | 1,049.2 |
|
| Patents | 7 years | 2.0 |
| | (0.9 | ) | | 1.1 |
| | 2.0 |
| | (0.6 | ) | | 1.4 |
|
Brands (1) | 10 years | 17.0 |
| | (5.9 | ) | | 11.1 |
| | 15.7 |
| | (6.2 | ) | | 9.5 |
|
| Purchased and licensed technologies | 10 years | 61.3 |
| | (32.1 | ) | | 29.2 |
| | 57.3 |
| | (28.9 | ) | | 28.4 |
|
| Other intangibles | 45 years | 2.9 |
| | (2.1 | ) | | 0.8 |
| | 2.9 |
| | (2.0 | ) | | 0.9 |
|
| | | $ | 1,229.4 |
| | $ | (169.7 | ) | | $ | 1,059.7 |
| | $ | 1,200.4 |
| | $ | (111.0 | ) | | $ | 1,089.4 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Intangible assets not subject to amortization (indefinite life) | | | | | | | | | | | | |
Crop Protection Brands (2) | | $ | 1,259.1 |
| | | | $ | 1,259.1 |
| | $ | 1,136.1 |
| | | | $ | 1,136.1 |
|
Brands (1) (3) | | 384.8 |
| | | | 384.8 |
| | 405.6 |
| | | | 405.6 |
|
| In-process research and development | | 0.7 |
| | | | 0.7 |
| | 0.7 |
| | | | 0.7 |
|
| | | $ | 1,644.6 |
| | | | $ | 1,644.6 |
| | $ | 1,542.4 |
| | | | $ | 1,542.4 |
|
| Total intangible assets | | $ | 2,874.0 |
| | $ | (169.7 | ) | | $ | 2,704.3 |
| | $ | 2,742.8 |
| | $ | (111.0 | ) | | $ | 2,631.8 |
|
____________________ | |
(1) | Represents trademarks, trade names and know-how. |
| |
(2) | Represents the proprietary brand portfolios, consisting of trademarks, trade names and know-how, acquired from the DuPont Crop Protection Business Acquisition. In the fourth quarter of 2017, the Act was enacted and was identified to be a triggering event. As a result we performed an impairment assessment on the recently acquired brand portfolio and we recorded an impairment charge of approximately $42 million solely due to the new tax legislation. See Note 12 for more details. |
| |
(3) | The majority of the Brands relate to our proprietary brand portfolios acquired from the Cheminova acquisition. |
At December 31, 2018, the finite life and indefinite life intangibles were allocated among our business segments as follows:
|
| | | | | | | |
| (in Millions) | Finite life | | Indefinite life |
| FMC Agricultural Solutions | $ | 1,058.8 |
| | $ | 1,644.6 |
|
| FMC Lithium | 0.9 |
| | — |
|
| Total | $ | 1,059.7 |
| | $ | 1,644.6 |
|
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
| Amortization Expense | $ | 62.9 |
| | $ | 27.4 |
| | $ | 23.6 |
|
The estimated pre-tax amortization expense for each of the five years ending December 31, 20192022 to 20232026 is $62.4$62.1 million, $62.2$61.8 million, $62.0$60.9 million, $61.9$60.5 million, and $61.8$60.4 million, respectively.
Note 7: Inventories
Inventories consisted of the following: | | | | | | | | | | | |
| December 31, |
| (in Millions) | 2021 | | 2020 |
| Finished goods | $ | 559.2 | | | $ | 434.6 | |
| Work in process | 730.8 | | | 621.9 | |
| Raw materials, supplies and other | 231.9 | | | 165.7 | |
| FIFO inventory | $ | 1,521.9 | | | $ | 1,222.2 | |
| Less: Excess of FIFO cost over LIFO cost | (116.2) | | | (126.6) | |
| Net inventories | $ | 1,405.7 | | | $ | 1,095.6 | |
Approximately 41 percent and 33 percent of our inventories in 2021 and 2020, respectively, were recorded on the LIFO basis.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Note 6: Inventories
Inventories consisted of the following:
|
| | | | | | | |
| | December 31, |
| (in Millions) | 2018 | | 2017 |
| Finished goods | $ | 452.6 |
| | $ | 353.7 |
|
| Work in process | 555.4 |
| | 542.4 |
|
| Raw materials, supplies and other | 221.4 |
| | 224.1 |
|
| FIFO inventory | $ | 1,229.4 |
| | $ | 1,120.2 |
|
| Less: Excess of FIFO cost over LIFO cost | (132.1 | ) | | (127.7 | ) |
| Net inventories | $ | 1,097.3 |
| | $ | 992.5 |
|
Approximately 23% and 22% of our inventories in 2018 and 2017, respectively were recorded on the LIFO basis.
Note 7:8: Property, Plant and Equipment
Property, plant and equipment consisted of the following: | | | | | | | | | | | |
| December 31, |
| (in Millions) | 2021 | | 2020 |
| Land and land improvements | $ | 103.8 | | | $ | 103.1 | |
| | | |
| Buildings and building equipment | 528.4 | | | 513.7 | |
| Machinery and equipment | 551.4 | | | 501.1 | |
| Construction in progress | 145.9 | | | 73.6 | |
| Total cost | $ | 1,329.5 | | | $ | 1,191.5 | |
| Accumulated depreciation | (512.5) | | | (419.8) | |
| Property, plant and equipment, net | $ | 817.0 | | | $ | 771.7 | |
|
| | | | | | | |
| | December 31, |
| (in Millions) | 2018 | | 2017 |
| Land and land improvements | $ | 178.1 |
| | $ | 166.9 |
|
| Buildings | 451.8 |
| | 462.6 |
|
| Machinery and equipment | 747.9 |
| | 753.1 |
|
| Construction in progress | 136.0 |
| | 78.5 |
|
| Total cost | $ | 1,513.8 |
| | $ | 1,461.1 |
|
| Accumulated depreciation | (481.2 | ) | | (435.9 | ) |
| Property, plant and equipment, net | $ | 1,032.6 |
| | $ | 1,025.2 |
|
Depreciation expense was $88.9$70.8 million, $65.7$71.5 million, and $55.5$69.7 million in 2018, 20172021, 2020 and 2016,2019, respectively.
Note 8:9: Restructuring and Other Charges (Income)
The following table shows total restructuring and other charges (income) included in the respective line items of the consolidated statements of income (loss):
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
| Restructuring charges | $ | 41.1 | | | $ | 42.6 | | | $ | 62.2 | |
| Other charges (income), net | 66.9 | | | 89.6 | | | 108.8 | |
| Total restructuring and other charges (income) | $ | 108.0 | | | $ | 132.2 | | | $ | 171.0 | |
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
| Restructuring charges | $ | 126.4 |
| | $ | 16.3 |
| | $ | 43.4 |
|
| Other charges (income), net | (62.7 | ) | | 65.1 |
| | 51.6 |
|
| Total restructuring and other charges (income) | $ | 63.7 |
| | $ | 81.4 |
| | $ | 95.0 |
|
Restructuring charges | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| (in Millions) | Severance and Employee Benefits | | Other Charges (Income) (1) | | Asset Disposal Charges (2) | | Total |
| DuPont Crop restructuring | $ | 1.2 | | | $ | 4.5 | | | $ | 11.0 | | | $ | 16.7 | |
| Regional realignment | 5.5 | | | 5.3 | | | 0.2 | | | 11.0 | |
| Other items | 6.0 | | | 0.5 | | | 6.9 | | | 13.4 | |
| Year ended December 31, 2021 | $ | 12.7 | | | $ | 10.3 | | | $ | 18.1 | | | $ | 41.1 | |
| DuPont Crop restructuring | $ | 9.2 | | | $ | 3.8 | | | $ | 27.2 | | | $ | 40.2 | |
| Other items | 2.8 | | | — | | | (0.4) | | | 2.4 | |
| Year ended December 31, 2020 | $ | 12.0 | | | $ | 3.8 | | | $ | 26.8 | | | $ | 42.6 | |
| DuPont Crop restructuring | $ | 9.1 | | | $ | 5.2 | | | $ | 12.1 | | | 26.4 | |
| Furadan® product exit | — | | | — | | | 34.1 | | | 34.1 | |
| Other items | 1.7 | | | — | | | — | | | 1.7 | |
| Year ended December 31, 2019 | $ | 10.8 | | | $ | 5.2 | | | $ | 46.2 | | | $ | 62.2 | |
____________________
(1)Primarily represents third-party costs associated with miscellaneous restructuring activities. 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 and impairment charges 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.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Regional realignment
In April 2021, we began to consolidate our EMEA regional headquarters to a new office location in Geneva, Switzerland. Restructuring Chargescharges related to regional realignment activities are primarily related to severance and employee relocation costs as well as other costs associated with the European headquarter relocation. |
| | | | | | | | | | | | | | | |
| | Restructuring Charges | | | | |
| (in Millions) | Severance and Employee Benefits (1) | | Other Charges (Income) (2) | | Asset Disposal Charges (3) | | Total |
| DuPont Crop restructuring | $ | 16.3 |
| | $ | 16.9 |
| | $ | 75.1 |
| | $ | 108.3 |
|
| FMC Lithium restructuring | — |
| | 1.9 |
| | 0.5 |
| | 2.4 |
|
| Other items | 5.7 |
| | 3.1 |
| | 6.9 |
| | 15.7 |
|
| Year ended December 31, 2018 | $ | 22.0 |
| | $ | 21.9 |
| | $ | 82.5 |
| | $ | 126.4 |
|
| Other items | 0.1 |
| | 4.6 |
| | 11.6 |
| | 16.3 |
|
| Year ended December 31, 2017 | $ | 0.1 |
| | $ | 4.6 |
| | $ | 11.6 |
| | $ | 16.3 |
|
| Cheminova restructuring | $ | 18.6 |
| | $ | 6.0 |
| | $ | 17.7 |
| | $ | 42.3 |
|
| Other items | — |
| | 1.1 |
| | — |
| | 1.1 |
|
| Year ended December 31, 2016 | $ | 18.6 |
| | $ | 7.1 |
| | $ | 17.7 |
| | $ | 43.4 |
|
____________________
| |
(1) | Represents severance and employee benefit charges. |
| |
(2) | Primarily represents costs associated with lease payments, contract terminations, and other miscellaneous exit costs. Other income primarily represents favorable developments on previously recorded exit costs and recoveries associated with restructuring. |
| |
(3) | Primarily represents asset write-offs, accelerated depreciation and impairment charges 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. |
During the fourth quarter of 2019, we decided to exit sales of all carbofuran formulations (including Furadan® insecticide/nematicide, Curaterr® insecticide/nematicide and any other brands used with carbofuran products) globally effective December 31, 2019. As a result of this decision, we accelerated the recognition of asset retirement obligations and asset write offs associated with the exit.
DuPont Crop Restructuring
On November 1, 2017, we completed the acquisition of the DuPont Crop Protection Business. See Note 45 "Acquisitions" to the consolidated financial statements included within this Form 10-K for more details. As also discussed in Note 5, we continue to integratecompleted the integration of the DuPont Crop Protection Business into our existing FMC Agricultural Solutions segment, we have started to, and continue to expect to, engage in various restructuring activities. These restructuring activities may include workforce reductions, relocationas of current operating locations, lease and other contract termination costs and fixed asset accelerated depreciation as well as other asset disposal charges at severalJune 30, 2020 except for the completion of our FMC Agricultural Solutions' operations. We anticipate these restructuring activities will be substantially complete by the first quarter of 2020 as the majority of the integration will be completed. Details of key activities to date are as follows.
Subsequent to the acquisition, we conducted an in-depth analysis of key competitive capabilities of the combined business in India which resulted in a significant change to how we operate in the market and therefore a restructuring of our business in India. On July 3, 2018, we announced the adoption of an innovation-focused product strategy that uses a unique market access model anchored by our key, large scale distributors rather than the vast customer base we served prior tocertain in-flight initiatives including the DuPont Crop Protection Acquisition. Additionally, we rationalized our product portfolio and decisively exited a vast majority of the low margin product range. As a result of the change to our market access, we incurred charges of approximately $59 million forrestructuring program. For the year ended December 31, 2018,2021, we incurred restructuring charges of $16.7 million, which primarily included the write-off of stranded accounts receivablesreflects non-cash charges and inventory. We also had workforce reductions which resulted in severance and other employee benefit charges of approximately $4 million forto a lesser extent remaining severance. For the year ended December 31, 2018.
As part of the acquisition, we acquired the Stine R&D facilities ("Stine") from DuPont. Due to its proximity to our previously existing Ewing R&D center ("Ewing"), in March 2018, we decided to migrate our Ewing R&D activities and employees into the newly acquired Stine facilities. As a result of this decision2020, we incurred restructuring charges of approximately $28 million. We accelerated the depreciation of certain fixed assets that will no longer be used when we exit the facility and incurred charges of $17.4$40.2 million, of accelerated depreciation charges for the year ended December 31, 2018. The cease use criteria was met as of September 30, 2018 as all employees had exited the Ewing facility and the facility became available for use. We recorded the estimated future liability associated with the rental obligation on the cease use date which resulted in a charge of $11.2 million for the year ended December 31, 2018. This charge was offset by the reduction of the capital lease liability previously recorded in "Other long-term liabilities" of $6.0 million. In addition to lease termination costs, we incurredprimarily represented severance relocation and other employee related charges of $5.2 million for the year ended December 31, 2018.
FMC Lithium Restructuring
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
In 2018, we implemented a formal plan to restructure our operations at the FMC Lithium manufacturing site located in Bessemer City, North Carolina. The objective of this restructuring plan was to optimize both the assets and cost structure by reducing certain production lines at the plant. The restructuring decision resulted primarily in shutdown costs which are reflected in the table above.
Cheminova Restructuring
In 2015, we completed the acquisition of Cheminova; see Note 4 for more details. As part of the integration of Cheminova into our existing FMC Agricultural Solutions segment we engaged in various restructuring activities. These restructuring activities included workforce reductions, relocation of current operating locations, lease and other contract termination costs and fixed asset accelerated depreciation as well as other long-term asset disposalaccelerated depreciation on fixed assets for the planned exit of certain facilities. Restructuring charges at several of our FMC Agricultural Solutions' facilities. In 2016, these restructuring activities continued; however,associated with the restructuringDuPont program are largely complete and any future charges were completed at the end of 2016.are not expected to be material.
Roll forward of restructuring reserves
The following table shows a roll forward of restructuring reserves that will result in cash spending. These amounts exclude asset retirement obligations.obligations:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in Millions) | Balance at 12/31/16 | | Change in reserves (4) | | Cash payments | | Other (5) | | Balance at 12/31/17 (6) | | Change in reserves (4) | | Cash payments | | Other (5) | | Balance at 12/31/18 (6) |
DuPont Crop restructuring (1) | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 33.2 |
| | $ | (15.8 | ) | | $ | (1.2 | ) | | $ | 16.2 |
|
| FMC Lithium restructuring | 0.3 |
| | 3.8 |
| | (0.9 | ) | | (0.2 | ) | | 3.0 |
| | 1.9 |
| | (1.3 | ) | | — |
| | 3.6 |
|
| Cheminova restructuring | 11.1 |
| | — |
| | (6.5 | ) | | (3.4 | ) | | 1.2 |
| | — |
| | (1.2 | ) | | — |
| | — |
|
Other workforce related and facility shutdowns (2) | 1.1 |
| | 0.9 |
| | (0.8 | ) | | 1.1 |
| | 2.3 |
| | 8.8 |
| | (8.2 | ) | | (1.9 | ) | | 1.0 |
|
Restructuring activities related to discontinued operations (3) | 3.4 |
| | 8.1 |
| | (10.5 | ) | | (1.0 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
| Total | $ | 15.9 |
| | $ | 12.8 |
| | $ | (18.7 | ) | | $ | (3.5 | ) | | $ | 6.5 |
| | $ | 43.9 |
| | $ | (26.5 | ) | | $ | (3.1 | ) | | $ | 20.8 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in Millions) | Balance at 12/31/19 | | Change in reserves (3) | | Cash payments | | Other (4) | | Balance at 12/31/20 (6) | | Change in reserves (3) | | Cash payments (5) | | Other (4) | | Balance at 12/31/21 (6) |
DuPont Crop restructuring (1) | $ | 14.5 | | | $ | 13.0 | | | $ | (14.2) | | | $ | 0.3 | | | $ | 13.6 | | | $ | 5.7 | | | $ | (10.5) | | | $ | (0.2) | | | $ | 8.6 | |
| Regional realignment | — | | | — | | | — | | | — | | | — | | | 10.8 | | | (6.8) | | | — | | | 4.0 | |
| | | | | | | | | | | | | | | | | |
Other workforce related and facility shutdowns (2) | 0.1 | | | 2.8 | | | (0.1) | | | — | | | 2.8 | | | 6.5 | | | (7.0) | | | — | | | 2.3 | |
| | | | | | | | | | | | | | | | | |
| Total | $ | 14.6 | | | $ | 15.8 | | | $ | (14.3) | | | $ | 0.3 | | | $ | 16.4 | | | $ | 23.0 | | | $ | (24.3) | | | $ | (0.2) | | | $ | 14.9 | |
____________________
| |
(1) | Primarily consists of real estate exit costs associated with DuPont Crop restructuring activities. |
| |
(2) | Primarily severance costs related to workforce reductions and facility shutdowns described in the Other Items sections above. |
| |
(3) | Cash spending associated with restructuring activities of discontinued operations is reported within "Other discontinued spending" on the consolidated statements of cash flows. |
| |
(4) | Primarily severance, exited lease, contract termination and other miscellaneous exit costs. The accelerated depreciation and impairment charges noted above impacted our property, plant and equipment or intangible balances and are not included in the above tables. |
| |
(5) | Primarily foreign currency translation adjustments. |
| |
(6) | Included in “Accrued and other liabilities” on the consolidated balance sheets. |
(1)Primarily consists of real estate exit costs and severance associated with DuPont Crop restructuring activities.
(2)Primarily severance costs related to workforce reductions and facility shutdowns described in the Other items section of the Restructuring charges table above.
(3)Primarily severance, exited lease, contract termination and other miscellaneous exit costs. The accelerated depreciation and impairment charges noted above impacted our property, plant and equipment or intangible balances and are not included in this table.
(4)Primarily foreign currency translation adjustments.
(5)In addition to the spend above there was also $3.6 million and $6.0 million spending related to the Furadan® asset retirement obligation for the years ended December 31, 2020 and 2021 and also includes $4.4 million of payments for certain historical India indirect tax matters for the year ended December 31, 2021.
(6)Included in "Accrued and other liabilities" and "Other long-term liabilities" on the consolidated balance sheets.
Other charges (income), net
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
| Environmental charges, net | $ | 27.1 | | | $ | 24.9 | | | $ | 108.7 | |
| | | | | |
| Isagro Fluindapyr Acquisition | — | | | 65.6 | | | — | |
| | | | | |
| Other items, net | 39.8 | | | (0.9) | | | 0.1 | |
| Other charges (income), net | $ | 66.9 | | | $ | 89.6 | | | $ | 108.8 | |
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
| Environmental charges, net | $ | 21.9 |
| | $ | 16.6 |
| | $ | 36.8 |
|
| Product portfolio sales | (87.2 | ) | | — |
| | — |
|
| Impairment of intangibles | — |
| | 42.1 |
| | — |
|
| Argentina devaluation | — |
| | — |
| | 4.2 |
|
| Other items, net | 2.6 |
| | 6.4 |
| | 10.6 |
|
| Other charges (income), net | $ | (62.7 | ) | | $ | 65.1 |
| | $ | 51.6 |
|
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Environmental charges, net
Environmental charges represent the net charges associated with environmental remediation at continuing operating sites. 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.
Product Portfolio Sales
On February 1, 2018, we sold a portion During the fourth quarter of our European herbicide portfolio to Nufarm Limited. Additionally, on August 16, 2018, we completed the sale of certain products of our India portfolio to Crystal Crop Protection Limited. Both sales were required by
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
regulatory authorities as part of closing conditions for the DuPont Crop Protection Business Acquisition. Refer to Note 4 for more information. The gain on these sales are recorded within "Restructuring and other charges (income)" on the consolidated statements of income (loss). Proceeds from these sales are included in investing activities on the consolidated statements of cash flows.
Impairment of intangibles
In 2017,2019, we recorded an impairmenta charge on certain acquired indefinite-lived intangible assets from the DuPont Crop Protection Business Acquisition solelyof $72.8 million as a result of an unfavorable court ruling we received in relation to the United States' enactmentPocatello Tribal Litigation at one of the Act.our environmental sites. We remeasure our discounted liability balance associated with this matter according to current interest rates. See Note 12 to the consolidated financial statements included within this Form 10-K for more details.further information regarding this matter.
Argentina DevaluationIsagro Fluindapyr Acquisition
On December 17, 2015, the Argentina government initiated actions to significantly devalue its currency. These actions continuedIn May 2020, we entered into a portionbinding offer with Isagro S.p.A ("Isagro") to acquire the remaining rights for Fluindapyr active ingredient assets from Isagro. In July 2020, we entered into an asset sale and purchase agreement with Isagro. On October 2, 2020, we closed on the transaction with a purchase price of first quarterapproximately $65 million. Fluindapyr has been jointly developed by FMC and Isagro under a 2012 research and development collaboration agreement. The transaction provided us with full global rights to the Fluindapyr active ingredient, including key U.S., European, Asian, and Latin American fungicide markets. The transaction transfers to FMC all intellectual property, know-how, registrations, product formulations and other global assets of 2016. These actions createdthe proprietary broad-spectrum fungicide molecule.
The Fluindapyr acquisition did not meet the criteria within ASC 805 to qualify as a business and as a result it was treated as an asset acquisition. Based on the current development stage of the technology, the acquired assets have been classified as in-process research and development. As part of our evaluation, we consider the current development phase of the molecule being acquired. Molecules that have not received formal regulatory approval are still considered in process due to the inherent uncertainty with the approval process. As a result, these assets were immediately expensed. While this transaction resulted in an immediate loss associated with the impactsexpense of the remeasurement ofpurchase price under the accounting rules, this acquisition expands our local balance sheet. The loss was attributablefungicide portfolio by giving us full global rights to the Fluindapyr active ingredient and is an important strategic addition to our Lithium and Agricultural Solutions operations. Because of the severity of the event and its immediate impact to our operationsproduct line. We recorded charges totaling $65.6 million in the country, the charge associated with the remeasurement was included within restructuring and other charges in our condensed consolidated income statement during the period. We believe these actions have ended and do not expect further charges for remeasurement to be included within restructuring and other charges. 2020, including transaction costs.
Other items, net
In 2018, other items, net primarily represents a milestone payment on an agreement related to our in-process research and development. Other items, net alsoin 2021 includes $33.5 million of charges for the loss associated withestablishment of reserves for certain historical India indirect tax matters that were triggered during the divestment of a joint ventureperiod. See Note 20 to the consolidated financial statements included within FMC Agricultural Solutions.
In 2017, otherthis Form 10-K for further information. Other items, net primarily relates to exit costs resulting from the terminationin 2020 and de-consolidation of our interest in a variable interest entity that was previously consolidated and was part of our FMC Agricultural Solutions segment.2019 were not material.
In 2016, we sold our remaining ownership interest in several joint ventures. The aggregate loss on the sale of the various interests of $2.9 million was recorded as "Restructuring and other charges (income)" on the consolidated statements of income (loss). Additionally, we had a gain of $2.1 million from the sale of certain Corporate fixed assets. The cash proceeds from this sale of $6.8 million is included within "Other investing activities" on the consolidated statements of cash flows.
During 2016, our FMC Agricultural Solutions segment entered into collaboration and license agreements with various third parties for the purposes of obtaining certain technology and intellectual property rights relating to compounds still under development. The rights and technology obtained is referred to as in-process research and development and in accordance with U.S. GAAP, the amounts paid were expensed as incurred since they were acquired outside of a business combination. The charges related to these arrangements were $13.2 million.
Note 9:10: Receivables
The following table displays a roll forward of the allowance for doubtful trade receivables for fiscal years 20172020 and 2018.
|
| | | |
| (in Millions) | |
| Balance, December 31, 2016 | $ | 17.6 |
|
| Additions — charged to expense | 8.4 |
|
| Transfer from (to) allowance for credit losses (see below) | 9.5 |
|
| Net recoveries, write-offs and other | 3.2 |
|
| Balance, December 31, 2017 | $ | 38.7 |
|
Additions — charged to expense (1) | 57.9 |
|
| Transfer from (to) allowance for credit losses (see below) | (17.3 | ) |
Net recoveries, write-offs and other (1) | (56.9 | ) |
| Balance, December 31, 2018 | $ | 22.4 |
|
____________________
2021: | | | | | |
(1)(in Millions) | Includes the charge and write-off of approximately $42 million associated with the stranded accounts receivables written off as part of the restructuring in India. The charge was recorded as a component of "Restructuring |
| Balance, December 31, 2019 | $ | 26.3 | |
| Additions — charged (credited) to expense | 8.2 | |
| Transfer from (to) allowance for credit losses (see below) | (2.9) | |
Net recoveries, write-offs and other charges (income)" on the consolidated statements of income (loss). Refer | (3.7) | |
| Balance, December 31, 2020 | $ | 27.9 | |
Additions — charged (credited) to Note 8expense | 17.2 | |
Transfer from (to) allowance for further information.credit losses (see below) | (0.6) | |
| Net recoveries, write-offs and other | (7.1) | |
| Balance, December 31, 2021 | $ | 37.4 | |
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
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 $84.5$57.4 million as of December 31, 2018.2021. These long-term customer receivable balances and the corresponding allowance are included in "Other assets including long-term receivables, net" on the 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
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
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 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 for fiscal years 20172020 and 2018.2021:
| | | | | |
(in Millions) | |
| Balance, December 31, 2019 | $ | 61.1 | |
| Additions — charged (credited) 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 (credited) to expense | 3.9 | |
| Transfer from (to) allowance for doubtful accounts (see above) | 0.6 | |
| Foreign currency adjustments | (1.5) | |
| Net recoveries, write-offs and other | — | |
| Balance, December 31, 2021 | $ | 27.7 | |
|
| | | |
(in Millions) | |
| Balance, December 31, 2016 | $ | 49.1 |
|
| Additions — charged to expense | 13.7 |
|
| Transfer from (to) allowance for doubtful accounts (see above) | (9.5 | ) |
| Net recoveries, write-offs and other | (6.2 | ) |
| Balance, December 31, 2017 | $ | 47.1 |
|
| Additions — charged to expense | 13.4 |
|
| Transfer from (to) allowance for doubtful accounts (see above) | 17.3 |
|
| Foreign currency adjustments | (4.1 | ) |
| Net recoveries, write-offs and other | (13.2 | ) |
| Balance, December 31, 2018 | $ | 60.5 |
|
Note 10:11: Discontinued Operations
FMC Health and Nutrition:Lithium (Livent Corporation):
On AugustMarch 1, 2017, we completed the sale of the Omega-3 business to Pelagia AS for $38 million.
On November 1, 2017,2019, we completed the previously disclosed saleannounced distribution of our FMC Health and Nutrition business to DuPont. The sale resulted in123 million shares of common stock of Livent as a gain of approximately $918 million ($727 million, net of tax). In connection with the sale, we entered into a customary transitional services agreement with DuPont to provide for the orderly separation and transition of various functions and processes. These services will be provided by us to DuPont for up to 24 months after closing, with an additional six months extension. These services include information technology services, accounting, human resource and facility services among other services, while DuPont assumes the operationspro rata dividend on shares of FMC Health and Nutrition.common stock outstanding at the close of business on the record date of February 25, 2019.
Certain sites were to transfer at a later date due to various local timing constraints. In May 2018, the last site transferred to DuPont. The results of our discontinued FMC Health and NutritionLithium operations are summarized below, including the results of these delayed sites included in the year ended December 31, 2018.below:
| | | | | | | | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Revenue | $ | — | | | $ | — | | | $ | 52.1 | |
| Costs of sales and services | — | | | — | | | 41.3 | |
| | | | | |
| Income (loss) from discontinued operations before income taxes | $ | — | | | $ | — | | | $ | 1.1 | |
| Provision (benefit) for income taxes | — | | | — | | | 6.0 | |
| Total discontinued operations of FMC Lithium, net of income taxes, before separation-related costs | $ | — | | | $ | — | | | $ | (4.9) | |
| Separation-related costs and other adjustments of discontinued operations of FMC Lithium, net of income taxes | — | | | — | | | (16.4) | |
| Discontinued operations of FMC Lithium, net of income taxes | $ | — | | | $ | — | | | $ | (21.3) | |
| Less: Discontinued operations of FMC Lithium attributable to noncontrolling interests | — | | | — | | | — | |
| Discontinued operations of FMC Lithium, net of income taxes, attributable to FMC Stockholders | $ | — | | | $ | — | | | $ | (21.3) | |
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2018 | | 2017 | | 2016 |
| Revenue | $ | 3.8 |
| | $ | 562.9 |
| | $ | 743.5 |
|
| Costs of sales and services | 4.0 |
| | 370.5 |
| | 474.9 |
|
| | | | | | |
Income (loss) from discontinued operations before income taxes (1) | $ | 2.0 |
| | $ | 113.7 |
| | $ | 158.5 |
|
| Provision for income taxes | 3.8 |
| | 9.7 |
| | 43.8 |
|
Total discontinued operations of FMC Health and Nutrition, net of income taxes, before divestiture related costs and adjustments (2) | $ | (1.8 | ) | | $ | 104.0 |
| | $ | 114.7 |
|
Gain on sale of FMC Health and Nutrition, net of income taxes (3) | — |
| | 727.1 |
| | — |
|
Adjustment to gain on sale of FMC Health and Nutrition, net of income taxes (4) | 7.8 |
| | — |
| | — |
|
Adjustment to FMC Health and Nutrition Omega-3 net assets held for sale, net of income taxes (5) | — |
| | (147.8 | ) | | — |
|
| Discontinued operations of FMC Health and Nutrition, net of income taxes, attributable to FMC Stockholders | $ | 6.0 |
| | $ | 683.3 |
| | $ | 114.7 |
|
____________________
| |
(1) | Results for the year ended December 31, 2018 include an adjustment to retained liabilities of the disposed FMC Health and Nutrition business. For the years ended December 31, 2017 and 2016, amounts include $16.6 million and $19.8 million of allocated interest expense and $8.1 million and $12.3 million of restructuring and other charges (income), respectively. For the year ended December 31, 2017 amount includes $3.9 million of a pension curtailment charge. See Note 14 for more information of the pension curtailment charge. Interest was allocated in accordance with relevant discontinued operations accounting guidance. |
| |
(2) | In accordance with U.S. GAAP, effective March 2017 we stopped amortizing and depreciating all assets classified as held for sale. Assets held for sale under U.S. GAAP are required to be reported at the lower of carrying value or fair value, less costs to sell. However, the fair value of the Omega-3 business, which was previously part of the broader FMC Health and Nutrition reporting unit, was significantly less than its carrying value, which included accumulated foreign currency translation adjustments that were subsequently reclassified to earnings after completion of the sale. |
| |
(3) | Includes $27.9 million of divestiture related costs, net of tax as well as incremental tax cost of $14.7 million related to certain legal entity restructuring executed during the third quarter of 2017 to facilitate the FMC Health and Nutrition divestiture. |
| |
(4) | Amount represents the settlement of working capital adjustments subsequent to the sale. |
| |
(5) | Represents the impairment charge for the year ended December 31, 2017 of approximately $168 million ($148 million, net of tax) associated with the disposal activities of the Omega-3 business to write down the carrying value to its fair value. |
The following table presents the major classes of assets and liabilities of FMC Health and Nutrition: |
| | | | | | | |
| | December 31, |
| (in Millions) | 2018 | | 2017 |
| Assets | | | |
Current assets of discontinued operations held for sale (1) | $ | — |
| | $ | 7.2 |
|
| Property, plant and equipment | — |
| | 0.1 |
|
Total assets of discontinued operations held for sale (2) | $ | — |
| | $ | 7.3 |
|
| Liabilities | | | |
| Current liabilities of discontinued operations held for sale | — |
| | (1.3 | ) |
Total liabilities of discontinued operations held for sale (3) | $ | — |
| | $ | (1.3 | ) |
Total net assets (4) | $ | — |
| | $ | 6.0 |
|
____________________ | |
(1) | Primarily consists of trade receivables and inventories. |
| |
(2) | Presented as "Current assets of discontinued operations held for sale" on the consolidated balance sheet as of December 31, 2017. |
| |
(3) | Presented as "Current liabilities of discontinued operations held for sale" on the consolidated balance sheet as of December 31, 2017. |
| |
(4) | In connection with the divestiture of FMC Health and Nutrition, certain sites transferred to DuPont subsequent to November 1, 2017 due to various local timing constraints. Amounts at December 31, 2017 represent the net assets of FMC Health and Nutrition ultimately transferred to DuPont, subsequent to the closing date, in 2018. |
In addition to our discontinued FMC Health and Nutrition,Lithium segment, our discontinued operations in our financial statements includesinclude adjustments to retained liabilities from previous discontinued operations. The primary liabilities retained include environmental
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
liabilities, other postretirement benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Our discontinued operations comprised the following:
|
| | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2018 | | 2017 | | 2016 |
| Adjustment for workers’ compensation, product liability, and other postretirement benefits and other, net of income tax benefit (expense) of ($5.2), ($0.1) and ($0.5), respectively | $ | (1.7 | ) | | $ | 3.0 |
| | $ | 2.5 |
|
Provision for environmental liabilities, net of recoveries, net of income tax benefit (expense) of $32.5, $24.9 and $12.9, respectively (1) | (121.4 | ) | | (51.2 | ) | | (24.0 | ) |
| Provision for legal reserves and expenses, net of recoveries, net of income tax benefit (expense) of $6.9, $7.2 and $6.6, respectively | (26.3 | ) | | (13.4 | ) | | (12.2 | ) |
| Discontinued operations of FMC Health and Nutrition, net of income tax benefit (expense) of ($7.1), ($180.1) and ($43.8), respectively | 6.0 |
| | 683.3 |
| | 114.7 |
|
| Discontinued operations, net of income taxes | $ | (143.4 | ) | | $ | 621.7 |
| | $ | 81.0 |
|
| | | | | | | | | | | | | | | | | |
| (in Millions) | Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Adjustment for workers’ compensation, product liability, and other postretirement benefits and other, net of income tax benefit (expense) of $(10.2), $(3.7) and $(18.6), respectively | $ | (8.3) | | | $ | 1.0 | | | $ | (15.9) | |
Provision for environmental liabilities, net of recoveries, net of income tax benefit (expense) of $8.2, $6.0 and $6.3, respectively (1) | (29.7) | | | (24.1) | | | (23.5) | |
| Provision for legal reserves and expenses, net of recoveries, net of income tax benefit (expense) of $12.2, $7.6 and $6.3, respectively | (45.6) | | | (28.9) | | | (23.3) | |
Gain on sales of land, net of income tax benefit (expense) of $(4.1), $(6.3) and $(5.5), respectively (2) | 15.4 | | | 23.7 | | | 20.7 | |
| Discontinued operations of FMC Lithium, net of income tax benefit (expense) of zero, zero, and $(12.3), respectively | — | | | — | | | (21.3) | |
| Discontinued operations, net of income taxes | $ | (68.2) | | | $ | (28.3) | | | $ | (63.3) | |
____________________
| |
(1) | See a roll forward of our environmental reserves as well as discussion on significant environmental issues that occurred during the year in Note 11. |
(1)See a roll forward of our environmental reserves as well as discussion on significant environmental issues that occurred during the year in Note 12 to the consolidated financial statements included within this Form 10-K.
(2)This represents the gain on sale of land at various discontinued sites.
Reserves for Discontinued Operations, other than Environmental at December 31, 20182021 and 2017
|
| | | | | | | |
| (in Millions) | December 31, |
| 2018 |
| 2017 |
| Workers’ compensation, product liability, and indemnification reserves | $ | 23.6 |
| | $ | 22.6 |
|
| Postretirement medical and life insurance benefits reserve, net | 7.0 |
| | 7.6 |
|
| Reserves for legal proceedings | 41.6 |
| | 33.0 |
|
Reserve for discontinued operations (1) | $ | 72.2 |
| | $ | 63.2 |
|
| | | | | | | | | | | |
| (in Millions) | December 31, |
| 2021 | | 2020 |
| Workers’ compensation, product liability, and indemnification reserves | $ | 10.2 | | | $ | 12.9 | |
| Postretirement medical and life insurance benefits reserve, net | 4.7 | | | 5.5 | |
| Reserves for legal proceedings | 93.4 | | | 58.2 | |
Reserve for discontinued operations (1) | $ | 108.3 | | | $ | 76.6 | |
____________________
| |
(1) | Included in “Other long-term liabilities” on the consolidated balance sheets. Refer to Note 8 for discontinued restructuring reserves and Note 11 for discontinued environmental reserves. |
(1)Included in "Other long-term liabilities" on the consolidated balance sheets. See Note 12 to the consolidated financial statements included within this Form 10-K on discontinued environmental reserves.
The discontinued postretirement medical and life insurance benefits liability equals the accumulated postretirement benefit obligation. Associated with this liability is a net pre-tax actuarial gain and prior service credit of $5.4$3.6 million ($4.9 ($2.2 million after-tax) and $8.4$4.4 million ($5.6 ($3.6 million after-tax) at December 31, 20182021 and 2017,2020, respectively. The estimated net pre-tax actuarial gain and prior service credit that will be amortized from accumulated other comprehensive income into discontinued operations during 2019 are $1.0 million and zero, respectively.
Net spending in 2018, 20172021, 2020 and 20162019 was $5.4$1.6 million, $2.4$1.0 million and $1.3$3.8 million, respectively, for workers’ compensation, product liability and other claims; $1.1$0.4 million, $1.0$0.5 million and $1.1$0.4 million, respectively, for other postretirement benefits; and $21.3$19.0 million, $18.9$28.4 million and $15.3$20.2 million, respectively, related to reserves for legal proceedings associated with discontinued operations.
Note 11:12: Environmental Obligations
We are subject to various federal, state, local and foreign environmental laws and regulations that govern emissions of air pollutants, discharges of water pollutants, and the manufacture, storage, handling and disposal of hazardous substances, hazardous wastes and other toxic materials and remediation of contaminated sites. We are also subject to liabilities arising under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”("CERCLA") and similar state laws that impose responsibility on persons who arranged for the disposal of hazardous substances, and on current and previous owners and operators of a facility for the clean-up of hazardous substances released from the facility into the environment. We are also subject to liabilities under the Resource Conservation and Recovery Act (“RCRA”("RCRA") and analogous state laws that require owners and operators of facilities that have treated, stored or disposed of hazardous waste pursuant to a RCRA permit to follow certain waste management practices and to clean up releases of hazardous substances into the environment associated with past or present practices. In addition, when deemed appropriate, we enter certain sites with potential liability into voluntary remediation compliance programs, which are also
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
subject to guidelines that require owners and operators, current and previous, to clean up releases of hazardous substances into the environment associated with past or present practices.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Environmental liabilities consist of obligations relating to waste handling and the remediation and/or study of sites at which we are alleged to have released or disposed of hazardous substances. These sites include current operations, previously operated sites, and sites associated with discontinued operations. We have provided reserves for potential environmental obligations that we consider probable and for which a reasonable estimate of the obligation can be made. Accordingly, total reserves of $535.8$514.6 million and $432.1$574.7 million,, respectively, before recoveries, existed at December 31, 20182021 and 2017.2020.
The estimated reasonably possible environmental loss contingencies, net of expected recoveries, exceed amounts accrued by approximately $190$160 million at December 31, 2018.2021. This reasonably possible estimate is based upon information available as of the date of the filing andbut 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.
Additionally, although potential environmental remediation expenditures in excess of the reserves and estimated loss contingencies could be significant, the impact on our future consolidated financial results is not subject to reasonable estimation due to numerous uncertainties concerning the nature and scope of possible contamination at many sites, identification of remediation alternatives under constantly changing requirements, selection of new and diverse clean-up technologies to meet compliance standards, the timing of potential expenditures and the allocation of costs among Potentially Responsible Parties ("PRPs") as well as other third parties. The liabilities arising from potential environmental obligations that have not been reserved for at this time may be material to any one quarter's or year's results of operations in the future. However, we believe any 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 is a roll forward of our total environmental reserves, continuing and discontinued, from December 31, 20152018 to December 31, 2018.2021.
|
| | | |
| (in Millions) | Operating and Discontinued Sites Total |
| Total environmental reserves, net of recoveries at December 31, 2015 | $ | 340.9 |
|
| 2016 | |
| Provision | 81.0 |
|
| Spending, net of recoveries | (52.6 | ) |
| Foreign currency translation adjustments | (2.6 | ) |
| Net Change | $ | 25.8 |
|
| Total environmental reserves, net of recoveries at December 31, 2016 | $ | 366.7 |
|
| | |
| 2017 | |
| Provision | 106.0 |
|
| Spending, net of recoveries | (63.6 | ) |
Acquisitions (1) | 2.6 |
|
| Foreign currency translation adjustments | 6.5 |
|
| Net Change | $ | 51.5 |
|
| Total environmental reserves, net of recoveries at December 31, 2017 | $ | 418.2 |
|
| | |
| 2018 | |
| Provision | 178.4 |
|
| Spending, net of recoveries | (65.9 | ) |
| Foreign currency translation adjustments | (2.8 | ) |
| Net Change | $ | 109.7 |
|
| Total environmental reserves, net of recoveries at December 31, 2018 | $ | 527.9 |
|
______________ | | | | | |
| (in Millions) | Operating and Discontinued Sites Total |
| Total environmental reserves, net of recoveries at December 31, 2018 | $ | 521.5 | |
| 2019 | |
| Provision | 138.8 | |
| Spending, net of recoveries | (73.8) | |
| |
(1)Foreign currency translation adjustments | See Note 4 for more details. Amount relates to(0.7) | |
| Net Change | $ | 64.3 | |
Total environmental obligationsreserves, net of recoveries at certain sitesDecember 31, 2019 | $ | 585.8 | |
| |
| 2020 | |
| Provision | 53.2 | |
Spending, net of the acquired DuPont Crop Protection Business.recoveries | (81.1) | |
| |
| Foreign currency translation adjustments | 6.5 | |
| Net Change | $ | (21.4) | |
| Total environmental reserves, net of recoveries at December 31, 2020 | $ | 564.4 | |
| |
| 2021 | |
| Provision | 65.8 | |
| Spending, net of recoveries | (121.8) | |
| |
| Foreign currency translation adjustments and other adjustments | (5.2) | |
| Net Change | $ | (61.2) | |
| Total environmental reserves, net of recoveries at December 31, 2021 | $ | 503.2 | |
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
To ensure we are held responsible only for our equitable share of site remediation costs, we have initiated, and will continue to initiate, legal proceedings for contributions from other PRPs. At December 31, 20182021 and 2017,2020, we have recorded recoveries representing probable realization of claims against U.S. government agencies, insurance carriers and other third parties. Recoveries are recorded as either an offset to the “Environmental"Environmental liabilities, continuing and discontinued”discontinued" or as “Other"Other assets including long-term receivables, net”net" on the consolidated balance sheets.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The table below is a roll forward of our total recorded recoveries from December 31, 20162019 to December 31, 2018: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in Millions) | December 31, 2016 | | Increase (Decrease) in Recoveries | | Cash Received | | December 31, 2017 | | Increase (Decrease) in Recoveries | | Cash Received | | December 31, 2018 |
| Environmental liabilities, continuing and discontinued | $ | 11.4 |
| | $ | 2.5 |
| | $ | — |
| | $ | 13.9 |
| | $ | (5.5 | ) | | $ | (0.5 | ) | | $ | 7.9 |
|
Other assets (1) | 27.2 |
| | 15.9 |
| | (10.8 | ) | | 32.3 |
| | 2.6 |
| | (4.4 | ) | | 30.5 |
|
| Total | $ | 38.6 |
| | $ | 18.4 |
| | $ | (10.8 | ) | | $ | 46.2 |
| | $ | (2.9 | ) | | $ | (4.9 | ) | | $ | 38.4 |
|
______________ | |
(1) | The amounts are included within “Prepaid and other current assets" and "Other assets including long-term receivables, net" on the consolidated balance sheets. See Note 21 for more details. Increase in recoveries in 2017 includes $2.6 million related to indemnification for the acquired environmental liability from the DuPont Crop Protection Business Acquisition that existed prior to the closing of the transaction. |
2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in Millions) | December 31, 2019 | | Increase (Decrease) in Recoveries | | Cash Received (2) | | Other | | December 31, 2020 | | Increase (Decrease) in Recoveries | | Cash Received | | | | December 31, 2021 |
| Environmental liabilities, continuing and discontinued | $ | 10.0 | | | $ | 0.9 | | | $ | (0.6) | | | $ | — | | | $ | 10.3 | | | $ | 1.8 | | | $ | (0.7) | | | | | $ | 11.4 | |
Other assets (1) | 27.3 | | | (1.8) | | | (21.1) | | | — | | | 4.4 | | | 0.8 | | | (0.7) | | | | | 4.5 | |
| Total | $ | 37.3 | | | $ | (0.9) | | | $ | (21.7) | | | $ | — | | | $ | 14.7 | | | $ | 2.6 | | | $ | (1.4) | | | | | $ | 15.9 | |
______________
(1) The amounts are included within "Prepaid and other current assets" and "Other assets including long-term receivables, net" on the consolidated balance sheets. See Note 22 to the consolidated financial statements included within this Form 10-K for more details.
(2) 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.
The table below provides detail of current and long-term environmental reserves, continuing and discontinued.
|
| | | | | | | |
| | December 31, |
| (in Millions) | 2018 | | 2017 |
Environmental reserves, current, net of recoveries (1) | $ | 63.5 |
| | $ | 72.0 |
|
Environmental reserves, long-term continuing and discontinued, net of recoveries (2) | 464.4 |
| | 346.2 |
|
| Total environmental reserves, net of recoveries | $ | 527.9 |
| | $ | 418.2 |
|
| | | | | | | | | | | |
| December 31, |
| (in Millions) | 2021 | | 2020 |
Environmental reserves, current, net of recoveries (1) | $ | 87.3 | | | $ | 120.9 | |
Environmental reserves, long-term continuing and discontinued, net of recoveries (2) | 415.9 | | | 443.5 | |
| Total environmental reserves, net of recoveries | $ | 503.2 | | | $ | 564.4 | |
______________
| |
(1) | These amounts are included within “Accrued and other liabilities” on the consolidated balance sheets. |
| |
(2) | These amounts are included in "Environmental liabilities, continuing and discontinued" on the consolidated balance sheets. |
(1)These amounts are included within "Accrued and other liabilities" on the consolidated balance sheets.
(2)These amounts are included in "Environmental liabilities, continuing and discontinued" on the consolidated balance sheets.
Our net environmental provisions relate to costs for the continued remediation of both operating sites and for certain discontinued manufacturing operations from previous years. The net provisions are comprised as follows:
| | | | Year Ended December 31, | | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 | (in Millions) | 2021 | | 2020 | | 2019 |
Continuing operations (1) | $ | 21.9 |
| | $ | 16.6 |
| | $ | 36.8 |
| Continuing operations (1) | $ | 27.1 | | | $ | 24.9 | | | $ | 108.7 | |
Discontinued operations (2) | 153.9 |
| | 76.1 |
| | 36.9 |
| Discontinued operations (2) | 37.9 | | | 30.1 | | | 29.8 | |
| Net environmental provision | $ | 175.8 |
| | $ | 92.7 |
| | $ | 73.7 |
| Net environmental provision | $ | 65.0 | | | $ | 55.0 | | | $ | 138.5 | |
______________
| |
(1) | Recorded as a component of “Restructuring and other charges (income)” on our consolidated statements of income. See Note 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. |
| |
(2) | Recorded as a component of “Discontinued operations, net of income taxes" on our consolidated statements of income (loss). See Note 10. |
(1)Recorded as a component of "Restructuring and other charges (income)" on our consolidated statements of income. See Note 9 to the consolidated financial statements included within this Form 10-K. 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.
(2)Recorded as a component of "Discontinued operations, net of income taxes" on our consolidated statements of income (loss). See Note 11 to the consolidated financial statements included within this Form 10-K for further details.
On our consolidated balance sheets, the net environmental provisions affect assets and liabilities as follows:
| | | | Year Ended December 31, | | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 | (in Millions) | 2021 | | 2020 | | 2019 |
Environmental reserves (1) | $ | 178.4 |
| | $ | 106.0 |
| | $ | 81.0 |
| Environmental reserves (1) | $ | 65.8 | | | $ | 53.2 | | | $ | 138.8 | |
Other assets (2) | (2.6 | ) | | (13.3 | ) | | (7.3 | ) | Other assets (2) | (0.8) | | | 1.8 | | | (0.3) | |
| Net environmental provision | $ | 175.8 |
| | $ | 92.7 |
| | $ | 73.7 |
| Net environmental provision | $ | 65.0 | | | $ | 55.0 | | | $ | 138.5 | |
______________
(1)See above roll forward of our total environmental reserves as presented on our consolidated balance sheets.
(2)Represents certain environmental recoveries. See Note 22 to the consolidated financial statements included within this Form 10-K for details of "Other assets including long-term receivables, net" as presented on our consolidated balance sheets.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
| |
(1) | See above roll forward of our total environmental reserves as presented on our consolidated balance sheets. |
| |
(2) | Represents certain environmental recoveries. See Note 21 for details of "Other assets including long-term receivables, net" as presented on our consolidated balance sheets. |
Significant Environmental Sites
Pocatello
From 1949 until 2001, we operated the world's largest elemental phosphorus plant in Power County, Idaho, just outside the city of Pocatello. Since the plant's closure, FMC has worked with the EPA, the State of Idaho, and the Shoshone-Bannock Tribes ("Tribes") to develop a proposed cleanup plan for the property. In September 2012, the EPA issued an Interim Record of Decision ("IROD") that is environmentally protective and that ensures the health and safety of both workers and the general public. Since the plant's closure, we have successfully decommissioned our Pocatello plant, completed closure of the RCRA ponds and formally requested that the EPA acknowledge completion of work under a June 1999 RCRA Consent Decree. Future remediation costs include completion of the IROD that addresses groundwater contamination and existing waste disposal areas on the Pocatello plant portion of the Eastern Michaud Flats Superfund Site. In June 2013, the EPA issued a Unilateral Administrative Order to us under which we will implement the IROD remedy. Our current reserves factor in the estimated costs associated with implementing the IROD. In addition to implementing the IROD, we continue to conduct work pursuant to CERCLA unilateral administrative orders to address air emissions from beneath the cap of several of the closed RCRA ponds. Actions also involve impacts of the Tribal Litigation discussed below.
The amount of the reserve for this site, which includes the Pocatello Tribal Litigation described below, was $33.1$79.3 million and $35.2$117.8 million at December 31, 20182021 and 2017,2020, respectively.
Pocatello Tribal Litigation
For a number of years, we engaged in disputes with the Tribes concerning their attempts to regulate our activities on the reservation. On March 6, 2006, a U.S. District Court Judge found that the Tribes were a third-party beneficiary of a 1998 RCRA Consent Decree and ordered us to apply for any applicable Tribal permits relating to the nearly-complete RCRA Consent Decree work. The third-party beneficiary ruling was later reversed by the Ninth Circuit Court of Appeals, but the permitting process continued in the tribal legal system. We applied for the tribal permits, but preserved objections to the Tribes' jurisdiction.
In addition, in 1998, we entered into an agreement (“1998 Agreement”) that required us to pay the Tribes $1.5$1.5 million per year for waste generated from operating our Pocatello plant and stored on site. We paid $1.5 million per year until December 2001 when the plant closed. In our view the agreement was terminated, as the plant was no longer generating waste. The Tribes claimed that the 1998 Agreement has no end date.
On April 25, 2006, the Tribes' Land Use Policy Commission issued us a Special Use Permit for the “disposal"disposal and storage of waste”waste" at the Pocatello plant and imposed a $1.5 million per annum permit fee. The permit and
FMC challenged this fee were affirmed by the Tribal Business Council on July 21, 2006. We sought reviewat various levels of the permit and fee in Tribal Court, in which the Tribes also brought a claim for breach of the 1998 Agreement. On May 21, 2008, the Tribal Court reversedsystem and subsequently before the permitU.S. District Court and fee, finding that they were not authorized under tribal law, and dismissed the Tribes' breach of contract claim. The Tribes appealed to the Tribal Court of Appeals.
On May 8, 2012, the TribalUnited States Court of Appeals reversed the May 21, 2008 Tribal Court decision and issued a decision finding the permit and fee validly authorized and ordering us to pay waste permit fees in the amount of $1.5 million per annum for the years 2002-2007 ($9.0 million in total), the Tribes' demand as set forth in the lawsuit. It also reinstated the breach of contract claim. The Tribes have filed additional litigation to recover the permit fees for the years since 2007, but that litigation has been stayed pending the outcome of the appeal in the Tribal Court of Appeals.
Following a trial on certain jurisdictional issues which occurred during April 2014, the Shoshone-Bannock Tribal Appellate Court issued a Statement of Decision finding in favor of the Tribes’ jurisdiction over FMC and awarding costs on appeal to the Tribes. The Tribal Appellate Court conducted further post-trial proceedings and on May 6, 2014 issued Finding and Conclusions and a Final Judgment consistent with its earlier Statement of Decision.Ninth Circuit.
On September 28, 2017,November 15, 2019, the Ninth Circuit affirmed the District Court issued aCourt's decision finding that the Tribal Court has jurisdiction over FMC to require FMC to pay athe $1.5 million per year fee to the Tribes for hazardous wastes “stored”Tribes. As a result of the unfavorable court decision issued on November 15, 2019, we increased our reserves by $72.8 million, which represents both the Reservation. We do not believe it is probable that we will incurhistorical and discounted present value of future annual use permit fees as well as the associated legal costs incurred through December 31, 2019.
On March 16, 2020, FMC filed a loss for this matter due to legal principles established bypetition in the United States Supreme Court and the United States Court of Appeals forto review the Ninth Circuit that we believe were not followed by the District Court. Our reasonably possible estimate continues to include the estimated costs of an adverseCircuit’s decision and does not needon January 11, 2021, FMC’s petition was denied. Expenditures in 2021 totaled $32.2 million. This includes a $21.4 million payment to be adjustedthe Tribes for attorney's fees and unpaid permit fees incurred from 2002 to 2014 plus another payment of $10.8 million for incurred past years' permit fees from 2015 through 2021 plus interest associated with these payments. There was no change to our existing reserves as a result of our denied petition.
In calculating the District Court's decision. On October 12, 2017,net present value of future annual permit fees, we filedused a noticediscount rate of appeal1.94%, 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. Estimates for expenditures for 2022 and beyond are $1.5 million in annual fees payable each year thereafter. The expected aggregate undiscounted amount related to the Ninth Circuit. The District Court Judgmentthis matter is $75.0 million of which $$47.7 million, on a discounted basis, has been stayed pendingrecognized in environmental liabilities on the outcome of the appeal to the Ninth Circuit.
We have estimated a reasonably possible loss for this matter and it has been reflected in our total reasonably possible loss estimate previously discussed within this note.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
balance sheet.
Middleport
Our Middleport, NY facility is currently an Agricultural Solutionsa formulation and packaging plant that formerly manufactured arsenic-based and other products. As a result of past manufacturing operations and waste disposal practices at this facility, releases of hazardous substances have occurred at the site that have affected soil, sediment, surface water and groundwater at the facility's property and also in adjacent off-site areas. The impact of our discontinued operations was the subject of an Administrative Order on Consent (“("1991 AOC”AOC") entered into with the EPA and New York State Department of Environmental Conservation (“NYSDEC”("NYSDEC", and collectively with EPA, the “Agencies”"Agencies") in 1991. The1991, which was replaced by a New Order on Consent and Administrative Settlement with the NYSDEC, effective June 6, 2019 ("2019 Order"). Like the 1991 AOC, the 2019 Order
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
requires us to (1) define the nature and extent of contamination caused by our historical plant operations, (2) take interim corrective measures and (3) evaluate Corrective Action ManagementMeasure Alternatives (“CMA”("CMA") for discrete contaminated areas, known as “operable units”"operable units" of which there are eleven.11.
We have defined the nature and extent of the contamination in certain areas, have constructed an engineered cover, taken certain closure actions regarding RCRA regulated surface water impoundments and are collecting and treating both surface water runoff and ground water, which has satisfied the first two requirements of the 1991 AOC.water. To date, we have evaluated and proposed CMAs for five6 of the eleven11 identified operable units.
Middleport Litigation
In the fourth quarter of 2018, FMC and NYSDEC began engaging in settlement discussions and have reached agreement in principle on the terms of a global resolution with the intent of agreeing to a document to replace the 1991 AOC (upon EPA concurrence), that would, among other things, settle past costs, govern onsite and off-site remediation of historic contamination attributed to FMC Middleport operations within a defined area, as well as resolve the necessity for a Hazardous Waste Management Permit (“Part 373 permit”). In the interim, the Part 373 Permit Administrative Proceeding and the federal appeal are being temporarily held in abeyance pending completion of the settlement. The paragraphs below provide the litigation history for Middleport, which began in 2013.
In 2013, we received from the NYSDEC, a Final Statement of Basis ("FSOB") with NYSDEC’s selected CMA for three of the operable units that had been combined for evaluative purposes (“OUs 2, 4 and 5”), which we continue to believe is overly conservative and is not consistent with the 1991 AOC. After unsuccessful negotiations with NYSDEC regarding the FSOB, on May 1, 2014, we submitted a Notice of Dispute to the EPA pursuant to the terms of the 1991 AOC seeking review of the remedy chosen by the NYSDEC. EPA refused to act on the Notice of Dispute via letter correspondence.
NY State Litigation
On May 30, 2014, we filed an action in the Supreme Court of New York formally challenging the NYSDEC's FSOB as a breach of the 1991 AOC. On August 20, 2015, the Supreme Court of New York dismissed our state action on procedural grounds. We appealed that dismissal to the New York Supreme Court Appellate Division, Third Department. On October 20, 2016, the New York Supreme Court Appellate Division, Third Department, issued a decision on our appeal holding that NYSDEC does not have the authority to implement a remedy unilaterally using state funds prior to issuing an order and remanded the case to NYSDEC for further proceedings not inconsistent with the Court’s decision. On February 2, 2017, the Third Department granted NYSDEC's motion for leave to appeal the decision to the New York Court of Appeals. Certiorari was granted by the New York Court of Appeals (the “Court”), and oral arguments were held on March 21, 2018. On May 1, 2018, the Court issued its opinion reversing the Appellate Division’s decision and holding that NYSDEC has the authority to unilaterally spend state superfund money to cleanup sites and then seek reimbursement from FMC in a separate proceeding. In June 2017, in parallel with the ongoing state litigation over the 1991 AOC and the FSOB, NYSDEC started the formal process of issuing to FMC a Part 373 Permit. A draft permit was issued, which, as written, would supersede the 1991 AOC, and ultimately result in its termination. FMC proceeded to challenge the Part 373 Permit through the administrative process, which is still pending.
Federal Litigation
On June 20, 2014, we separately filed an action against EPA in the United States District Court for the Western District of New York seeking a declaratory judgment that the EPA is obligated under the 1991 AOC to review our Notice of Dispute. On January 31, 2017, the District Court dismissed FMC's complaint, ruling that EPA's letter was not a final agency action subject to review. FMC responded to the Court’s dismissal of FMC’s action by filing a Motion to Vacate Judgment and For Leave to Amend Complaint on March 2, 2017. On June 7, 2018, the District Court denied FMC’s motion. On August 6, 2018, FMC filed a notice of appeal in the Second Circuit, appealing both the underlying dismissal and the denial of the motion, which is still pending.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Middleport Reserves
In the fourth quarter of 2018, we increased the reserve by $106.3 million, which includesincluded our best estimate for remediation costs for OUs 2,4 and 5 in line with the drafted settlement terms between FMC and NYSDEC. Of the $106.3 million reserve increase, $60.6 million relatesrelated to our best estimate for remediation costs associated with the operable unit that comprises the southern portion of the tributary (“("OU 6”6") plus the impact of inflation. The $60.6 million increase iswas in addition to a previously established reserve of $29.1 million related to this operable unit.
The remaining $45.7 million reserve increase relatesrelated to costs associated with the implementation and completion of NYSDEC’s selected remedy for OUs 2,4, and 5. Prior to settlement discussions, our reserve balance for OUs 2,4, and 5 of $31.1 million included the estimated liability for clean-up to reflect the costs associated with our recommended CMAs. Our total reserve for all of Middleport is $180.8$114.5 million and $73.9$142.7 million at December 31, 20182021 and 2017,2020, respectively. FMC is in various stages of evaluating the remaining operable units.
TheIn 2021 and 2020, the Middleport settlement will resultresulted in cash outflows of approximately $20$14.2 million and $17.9 million respectively. In 2021, the final payment to $30 million per year for years 2019 - 2021 due to front loading of reimbursement in installments ofreimburse past costs was made. In 2022 and thereafter an amountbeyond, in accordance with the settlement agreement, cash outflows will not to exceed an average of $10 million per year until the remediation is complete.
Portland Harbor
FMC is listed as a PRP is the Portland Harbor Superfund Site ("Portland Harbor"), that consists of the river sediment and upland area of a 10 mile section of the Lower Willamette River in Portland, Oregon that runs through an industrialized area. Portland Harbor is listed on the NPL. FMC formerly owned and operated a manufacturing site adjacent to this section of the river and has since sold its interest in this business.
FMC and several other parties have been sued by the Confederated Bands and Tribes of the Yakama Nation for reimbursement of cleanup costs and the costs of performing a natural damage assessment. Based on the information known to date, we are unable to develop a reasonable estimate of our potential exposure of loss at this time. We intend to defend this matter. In addition, the Portland Harbor Natural Resource Trustee Council ("Trustee Council"), composed of federal, state and tribal trustees, was formed in 2002 to develop and coordinate an assessment of injury to natural resources associated with the Portland Harbor Superfund Site, the restoration of injured natural resources associated with Portland Harbor, and pursue the recovery of natural resources damages associated with Portland Harbor. The Trustee Council has advised the Company that it intends to pursue litigation for the recovery of natural resources damages and of the costs of assessment. To date no lawsuit has been filed by the Trustee Council against the Company.
On January 6, 2017, the U.S. Environmental Protection Agency ("EPA") issued its Record of Decision ("ROD") for Portland Harbor. On December 30, 2019, FMC and EPA entered into an Administrative Settlement Agreement and Order on Consent to perform the remedial design for the area at and around FMC's former operations. The cost of performing predesign investigation work and preparing the basis of design report is included in our reserves. Based on the current information available in the ROD as well as the large number of responsible parties for Portland Harbor, we are unable to develop a reasonable estimate of our potential exposure of loss for Portland Harbor at this time.
Currently, FMC and approximately 100 other parties are involved in a non-judicial allocation process to determine each party’s respective share of the cleanup costs. Briefing on the allocation process has begun in November 2021 and the allocation process will be ongoing for the next two years or more under the current schedule. We intend to continue defending this matter vigorously. Because of this uncertainty related to the cost of the remedy and the potential share allocable to FMC, we cannot say whether the ultimate resolution of our potential obligations at Portland Harbor will have a material adverse effect on our consolidated financial position, liquidity or results of operations. However, adverse results in the outcome of the allocation could have a material adverse effect on our consolidated financial position, results of operations in any one reporting period, or liquidity.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Other Potentially Responsible Party (“PRP”("PRP") Sites
WeIn addition to Portland Harbor, we have been named a PRP at 3228 sites on the federal government’s National Priorities List (“NPL”("NPL"), at which our potential liability has not yet been settled. We have received notice from the EPA or other regulatory agencies that we may be a PRP, or PRP equivalent, at other sites, including 5347 sites at which we have determined that it is probable that we have an environmental liability for which we have recorded an estimate of our potential liability in the consolidated financial statements. In cooperation with appropriate government agencies, we are currently participating in, or have participated in, a Remedial Investigation/Feasibility Study (“("RI/FS”FS"), or equivalent, at most of the identified sites, with the status of each investigation varying from site to site. At certain sites, a RI/FS has only recently begun, providing limited information, if any, relating to cost estimates, timing, or the involvement of other PRPs; whereas, at other sites, the studies are complete, remedial action plans have been chosen, or a ROD has been issued.
One site where FMC is listed as a PRP is the Portland Harbor Superfund Site (“Portland Harbor”), that includes the river and sediments of a 12 mile section of the lower reach of the Willamette River in Portland, Oregon that runs through an industrialized area. Portland Harbor is listed on the NPL. FMC formerly owned and operated a manufacturing site adjacent to this section of the river and has since sold its interest in this business. Currently, FMC and approximately 70 other parties are involved in a non-judicial allocation process to determine each party’s respective share of the cleanup costs. FMC and several other parties have been sued by the Confederated Bands and Tribes of the Yakama Nation for reimbursement of cleanup costs and the costs of performing a natural damage assessment. Based on the information known to date, we are unable to develop a reasonable estimate of our potential exposure of loss at this time. We intend to defend this matter.
On January 6, 2017, EPA issued its Record of Decision (“ROD”) for the Portland Harbor Superfund Site. Any potential liability to FMC will represent a portion of the costs of the remedy the EPA has selected for Portland Harbor. Based on the current information available in the ROD as well as the large number of responsible parties for the Superfund Site, we are unable to develop a reasonable estimate of our potential exposure for Portland Harbor at this time. We have no reason to believe that the ultimate resolution of our potential obligations at Portland Harbor will have a material adverse effect on our consolidated financial position, liquidity or results of operations. However, adverse results in the outcome of the EPA allocation could have a material adverse effect on our consolidated financial position, results of operations in any one reporting period, or liquidity.
Note 12:13: Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act (“the Act”) was enacted in the United States. The Act significantly revised the U.S. corporate income tax structure resulting in changes to the Company’s expected U.S. corporate taxes due for 2017 and in future periods. Effective January 1, 2018, the Act, among other things, reduced the U.S. federal corporate tax rate from 35 percent to 21 percent, created new provisions related to foreign sourced earnings, and eliminated the deduction for domestic production activities. The Act also required companies to pay a one-time transition tax ("transition tax") on the cumulative earnings and profits of foreign subsidiaries that were previously not repatriated and therefore not taxed for U.S. income tax purposes. Taxes due on the one-time transition tax are payable as of December 31, 2017 and will be paid to the tax authority over eight years.
For the year ended December 31, 2017, we recognized provisional expense of $315.9 million comprised of $202.7 million of expense related to the transition tax and $113.2 million of tax expense for the remeasurement of the Company’s U.S. net deferred tax assets. During 2018, in accordance with Staff Accounting Bulletin 118 ("SAB 118"), income tax effects of the Act were refined upon obtaining, preparing, or analyzing additional information during the measurement period. For the year ended December 31,
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
2018, we recorded an adjustment to our provisional expense in the amount of $8.5 million. At December 31, 2018, the Company had completed its accounting for the impacts of the enactment of the Act.
For tax years beginning after December 31, 2017, the Act introduced new provisions for U.S. taxation of certain global intangible low-taxed income (“GILTI”) and we made an accounting policy election to account for GILTI as it is incurred. Additionally, during the fourth quarter of 2017 we recorded an impairment charge to write down certain indefinite-lived intangible assets of the acquired DuPont Crop Protection Business as a result of the triggering event associated with the Act. The triggering event represented the expected tax rate increase from the GILTI minimum tax to be imposed on certain of our foreign subsidiaries where these intangible assets are recorded.
We have not provided income taxes for any additional outside basis differences inherent in our investments in subsidiaries because the investments and related unremitted earnings are essentially permanent in duration or we have concluded that no additional tax liability will arise upon disposal. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings is not practicable due to the complexity of the hypothetical calculation.
Domestic and foreign components of income (loss) from continuing operations before income taxes are shown below:
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
| Domestic | $ | (61.5) | | | $ | (36.5) | | | $ | (227.4) | |
| Foreign | 955.3 | | | 766.3 | | | 882.4 | |
| Total | $ | 893.8 | | | $ | 729.8 | | | $ | 655.0 | |
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
| Domestic | $ | (214.5 | ) | | $ | (155.9 | ) | | $ | (48.5 | ) |
| Foreign | 958.2 |
| | 336.7 |
| | 229.3 |
|
| Total | $ | 743.7 |
| | $ | 180.8 |
| | $ | 180.8 |
|
The provision (benefit) for income taxes attributable to income (loss) from continuing operations consisted of:
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
| Current: | | | | | |
| Federal | $ | (15.1) | | | $ | 24.9 | | | $ | (12.0) | |
| Foreign | 96.6 | | | 91.7 | | | 77.0 | |
| State | 0.4 | | | 0.7 | | | 0.4 | |
| Total current | $ | 81.9 | | | $ | 117.3 | | | $ | 65.4 | |
| Deferred: | | | | | |
| Federal | $ | 17.5 | | | $ | 15.0 | | | $ | (1.2) | |
| Foreign | (7.1) | | | 7.7 | | | 42.7 | |
| State | (0.7) | | | 10.9 | | | 4.6 | |
| Total deferred | $ | 9.7 | | | $ | 33.6 | | | $ | 46.1 | |
| Total | $ | 91.6 | | | $ | 150.9 | | | $ | 111.5 | |
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
| Current: | | | | | |
Federal (1) | $ | 23.6 |
| | $ | 97.5 |
| | $ | (24.6 | ) |
| Foreign | 112.5 |
| | 58.4 |
| | 21.6 |
|
| State | 0.1 |
| | 4.0 |
| | (0.2 | ) |
| Total current | $ | 136.2 |
| | $ | 159.9 |
| | $ | (3.2 | ) |
| Deferred: | | | | | |
Federal (2) | $ | (5.1 | ) | | $ | 119.4 |
| | $ | 27.6 |
|
| Foreign | (34.3 | ) | | (14.8 | ) | | 9.5 |
|
| State | (8.0 | ) | | (0.4 | ) | | 16.2 |
|
| Total deferred | $ | (47.4 | ) | | $ | 104.2 |
| | $ | 53.3 |
|
| Total | $ | 88.8 |
| | $ | 264.1 |
| | $ | 50.1 |
|
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
____________________
| |
(1) | The years ended December 31, 2018 and December 31, 2017 include the one-time impacts of the of the Act, primarily related to transition tax, further discussed above within Note 12.
|
| |
(2) | The years ended December 31, 2018 and December 31, 2017 include the one-time impacts of the Act, primarily related to the measurement of the Company’s U.S. domestic net deferred tax assets, further discussed above within Note 12.
|
The effective income tax rate applicable to income from continuing operations before income taxes was different from the statutory U.S. federal income tax rate due to the factors listed in the following table:
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
U.S. Federal statutory rate (1) | $ | 156.2 |
| | $ | 63.3 |
| | $ | 63.3 |
|
Impacts of Tax Cuts and Jobs Act Enactment (2) | 8.5 |
| | 315.9 |
| | — |
|
Foreign earnings subject to different tax rates (3) | (158.4 | ) | | (79.0 | ) | | (49.3 | ) |
| Capital loss on internal restructuring | — |
| | (45.3 | ) | | — |
|
| State and local income taxes, less federal income tax benefit | 3.6 |
| | (1.5 | ) | | 16.0 |
|
| Manufacturer's production deduction and miscellaneous tax credits | (3.7 | ) | | (10.1 | ) | | 0.8 |
|
Tax on dividends, deemed dividends, and GILTI (4) | 41.5 |
| | 10.6 |
| | 2.1 |
|
| Changes to unrecognized tax benefits | 3.1 |
| | 7.2 |
| | 4.9 |
|
| Nondeductible expenses | 11.7 |
| | 12.2 |
| | 5.7 |
|
| Change in valuation allowance | 8.0 |
| | (32.0 | ) | | 7.9 |
|
Exchange gains and losses (5) | 3.6 |
| | 29.4 |
| | (12.1 | ) |
| Other | 14.7 |
| | (6.6 | ) | | 10.8 |
|
| Total Tax Provision | $ | 88.8 |
| | $ | 264.1 |
| | $ | 50.1 |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | | | |
| (in Millions) | 2021 | | 2020 | | 2019 | | | | |
| U.S. Federal statutory rate | $ | 187.7 | | | $ | 153.3 | | | $ | 137.5 | | | | | |
| | | | | | | | | |
Foreign earnings subject to different tax rates (1) | (182.4) | | | (127.6) | | | (137.7) | | | | | |
| | | | | | | | | |
| State and local income taxes, less federal income tax benefit | 7.6 | | | 2.7 | | | (2.9) | | | | | |
| Research and development and miscellaneous tax credits | (8.6) | | | (6.2) | | | (3.8) | | | | | |
Tax on dividends, deemed dividends, and GILTI (2) | 44.5 | | | 46.5 | | | 46.8 | | | | | |
| Changes to unrecognized tax benefits | (28.7) | | | 5.8 | | | (5.4) | | | | | |
| Nondeductible expenses | 11.5 | | | 5.5 | | | 3.5 | | | | | |
Change in valuation allowance (3) | 84.7 | | | 52.1 | | | 49.9 | | | | | |
Exchange gains and losses (4) | (8.6) | | | (2.1) | | | (2.1) | | | | | |
Other (5) | (16.1) | | | 20.9 | | | 25.7 | | | | | |
| Total Tax Provision | $ | 91.6 | | | $ | 150.9 | | | $ | 111.5 | | | | | |
____________________
| |
(1) | The year ended December 31, 2018 includes twelve months of earnings associated with the operations of the DuPont Crop Protection Business acquired November 1, 2017. See Note 4 for additional information. |
| |
(2) | Includes the one-time impacts of the of the Act, primarily related to transition tax and the decrease to the U.S. tax rate, further discussed above within Note 12. |
| |
(3) | The year ended December 31, 2018 reflects the income mix associated with twelve months of foreign earnings of the DuPont Crop Protection business acquired November 1, 2017. |
| |
(4) | The year ended December 31, 2018 includes tax expense of $36.4 million associated with the GILTI provisions of the Act. |
| |
(5) | Includes the impact of transaction gains or losses on net monetary assets for which no corresponding tax expense or benefit is realized and the tax provision for statutory taxable gains or losses in foreign jurisdictions for which there is no corresponding amount in income before taxes. |
(1) 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.
(2) The years ended December 31, 2021, 2020 and 2019 includes tax expense of $36.2 million, $40.7 million and $41.6 million, respectively, associated with the global intangible low-taxed income (GILTI) provisions.
(3) The year ended December 31, 2021 is primarily related to net operating losses and other deferred tax assets within our Brazil and Luxembourg operations. The year ended December 31, 2020 is primarily related to net operating losses within our Brazil operations. The year ended December 31, 2019 is primarily related to net operating losses with limited carryforward associated within our India operations.
(4) Includes the impact of transaction gains or losses on net monetary assets for which no corresponding tax expense or benefit is realized and the tax provision for statutory taxable gains or losses in foreign jurisdictions for which there is no corresponding amount in income before taxes.
(5) 2021 includes a $37.1 million decrease related to deferred tax liabilities associated with intercompany investments in foreign subsidiaries.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Significant components of our deferred tax assets and liabilities were attributable to:
| | | | | | | | | | | |
| | December 31, |
| (in Millions) | 2021 | | 2020 |
| Reserves for discontinued operations, environmental and restructuring | $ | 107.5 | | | $ | 161.7 | |
| Accrued pension and other postretirement benefits | 5.8 | | | 1.8 | |
| | | |
| Capital loss, foreign tax and other credit carryforwards | 11.1 | | | 5.5 | |
| Net operating loss carryforwards | 294.5 | | | 311.4 | |
| Deferred expenditures capitalized for tax | 41.1 | | | 39.6 | |
| Other accruals and reserves | 216.7 | | | 163.3 | |
| Deferred tax assets | $ | 676.7 | | | $ | 683.3 | |
| Valuation allowance, net | (398.7) | | | (335.6) | |
| Deferred tax assets, net of valuation allowance | $ | 278.0 | | | $ | 347.7 | |
| Intangibles, Property, plant and equipment, and Investments, net | 401.9 | | | 468.1 | |
| Deferred tax liabilities | $ | 401.9 | | | $ | 468.1 | |
| Net deferred tax assets (liabilities) | $ | (123.9) | | | $ | (120.4) | |
|
| | | | | | | |
| | December 31, |
| (in Millions) | 2018 | | 2017 |
| Reserves for discontinued operations, environmental and restructuring | $ | 151.0 |
| | $ | 101.6 |
|
| Accrued pension and other postretirement benefits | 3.0 |
| | 19.3 |
|
| Capital loss, foreign tax and other credit carryforwards | 6.0 |
| | 4.0 |
|
| Net operating loss carryforwards | 221.9 |
| | 207.0 |
|
| Deferred expenditures capitalized for tax | 15.2 |
| | 4.0 |
|
| Other | 149.8 |
| | 153.3 |
|
| Deferred tax assets | $ | 546.9 |
| | $ | 489.2 |
|
| Valuation allowance, net | (263.5 | ) | | (272.0 | ) |
| Deferred tax assets, net of valuation allowance | $ | 283.4 |
| | $ | 217.2 |
|
| Intangibles and property, plant and equipment, net | 341.0 |
| | 137.9 |
|
| Deferred tax liabilities | $ | 341.0 |
| | $ | 137.9 |
|
| Net deferred tax assets (liabilities) | $ | (57.6 | ) | | $ | 79.3 |
|
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
We evaluate our deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. GAAP accounting guidance requires companies to assess whether valuation allowances should be established against deferred tax assets based on all available evidence, both positive and negative, using a “more"more likely than not”not" standard. In assessing the need for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of deferred tax assets. This assessment considers, among other matters, the nature and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, and tax planning alternatives. We operate and derive income from multiple lines of business across multiple jurisdictions. As each of the respective lines ofour business experiences changes in operating results across its geographic footprint, we may encounter losses in jurisdictions that have been historically profitable, and as a result might require additional valuation allowances to be recorded. We are committed to implementing tax planning actions, when deemed appropriate, in jurisdictions that experience losses in order to realize deferred tax assets prior to their expiration.
For the year ended December 31, 2018, our analysis of the realizability of U.S. state deferred tax assets and state conformity with the GILTI provisions of the Act resulted in change in our assertion as it pertains to the realizability of certain U.S. state deferred tax assets and we reduced the valuation allowance provided for on U.S. state deferred tax assets by $11.6 million.
At December 31, 2018,2021, we had net operating loss and tax credit carryforwards as follows: U.S. state net operating loss carryforwards of $25.7$27.0 million (tax-effected) expiring in future tax years through 2038,2040, foreign net operating loss carryforwards of $196.9$267.5 million (tax-effected) expiring in various future years, $0.7 million of capital loss carryforwards expiring in 2020 and other tax credit carryforwards of $3.2$11.1 million expiring in various future years.
The increaseDuring 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 $1.6 million for the netyear ended December 31, 2021. 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 associated with Intangibles and property, plant and equipment, net asrelated to indefinitely reinvested earnings of December 31, 2018 as comparedour foreign subsidiaries is not practicable due to December 31, 2017, is driven by the completioncomplexity of the purchase accounting for intangibles acquired with the DuPont Crop Protection Businessmulti-jurisdictional tax environment in Singapore and Puerto Rico.
which we operate.
Uncertain Income Tax Positions
U.S. GAAP accounting guidance for uncertainty in income taxes prescribes a model for the recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure and transition.
We file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. The income tax returns for FMC entities taxable in the U.S. and significant foreign jurisdictions are open for examination and adjustment. As of December 31, 2018,2021, the U. S. federal and state income tax returns are open for examination and adjustment for the years 20152017 - 20182021 and 19982001 - 2018,2021, respectively. Our significant foreign jurisdictions, which total 16,10, are open for examination and adjustment during varying periods from 20082011 - 2018.2021.
As of December 31, 2018,2021, we had total unrecognized tax benefits of $79.1$41.9 million, of which $29.5$23.6 million would favorably impact the effective tax rate from continuing operations if recognized. As of December 31, 2017,2020, we had total unrecognized tax benefits of $84.0$76.2 million, of which $22.5$34.6 million would favorably impact the effective tax rate if recognized. Interest and penalties related to unrecognized tax benefits are reported as a component of income tax expense. For the years ended December 31, 2018, 20172021, 2020 and 2016,2019, we recognizedhad interest and penalties for a net expense (benefit) of $0.9$(4.5) million, $5.2$(1.5) million,
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
and $4.4$1.4 million, respectively, in the consolidated statements of income (loss). As of December 31, 20182021 and 2017,2020, we have accrued interest and penalties in the consolidated balance sheets of $14.0$9.4 million and $13.1$13.9 million, respectively.
Due to the potential for resolution of federal, state, or foreign examinations, and the expiration of various jurisdictional statutes of limitation, it is reasonably possible that our liability for unrecognized tax benefits will decrease within the next 12 months by a range of $10.1$2.6 million to $16.5$22.2 million.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| | | (in Millions) | 2018 | | 2017 | | 2016 | (in Millions) | 2021 | | 2020 | | 2019 |
| Balance at beginning of year | $ | 84.0 |
| | $ | 111.6 |
| | $ | 97.1 |
| Balance at beginning of year | $ | 76.2 | | | $ | 68.2 | | | $ | 79.1 | |
| Increases related to positions taken in the current year | 11.8 |
| | 9.4 |
| | 22.3 |
| Increases related to positions taken in the current year | 2.4 | | | 1.1 | | | 4.1 | |
| | Increases and decreases related to positions taken in prior years | (1.8 | ) | | (4.6 | ) | | 2.6 |
| Increases and decreases related to positions taken in prior years | (26.4) | | | 25.7 | | | 3.4 | |
| Decreases related to lapse of statutes of limitations | (13.5 | ) | | (14.2 | ) | | (10.2 | ) | Decreases related to lapse of statutes of limitations | (10.3) | | | (18.8) | | | (13.0) | |
| Settlements during the current year | (1.4 | ) | | (0.3 | ) | | (0.2 | ) | Settlements during the current year | — | | | — | | | (2.8) | |
| Decreases for tax positions on dispositions | — |
| | (17.9 | ) | | — |
| Decreases for tax positions on dispositions | — | | | — | | | (2.6) | |
Balance at end of year (1) | $ | 79.1 |
| | $ | 84.0 |
| | $ | 111.6 |
| Balance at end of year (1) | $ | 41.9 | | | $ | 76.2 | | | $ | 68.2 | |
____________________
| |
(1) | At December 31, 2018, 2017, and 2016 we recognized an offsetting non-current deferred asset of $45.3 million, $59.8 million, and $74.4(1) At December 31, 2021, 2020, and 2019 we recognized an offsetting non-current asset of $14.4 million, $27.4 million, and $34.0 million respectively, relating to the indirect income tax benefits associated with specific uncertain tax positions presented above. |
Note 13:14: Debt
Debt maturing within one year:
Debt maturing within one year consists of the following:
|
| | | | | | | |
| | December 31, |
| (in Millions) | 2018 | | 2017 |
Short-term foreign debt (1) | $ | 106.5 |
| | $ | 91.4 |
|
Commercial paper (2) | 55.2 |
| | — |
|
| Total short-term debt | $ | 161.7 |
| | $ | 91.4 |
|
| Current portion of long-term debt | 386.0 |
| | 101.2 |
|
| Short-term debt and current portion of long-term debt | $ | 547.7 |
| | $ | 192.6 |
|
| | | | | | | | | | | |
| December 31, |
| (in Millions) | 2021 | | 2020 |
Short-term foreign debt (1) | $ | 112.2 | | | $ | 98.4 | |
Commercial paper (2) | 244.1 | | | 146.3 | |
| Total short-term debt | $ | 356.3 | | | $ | 244.7 | |
| Current portion of long-term debt | 84.5 | | | 93.6 | |
Total Short-term debt and current portion of long-term debt (3) | $ | 440.8 | | | $ | 338.3 | |
____________________
| |
(1) | At December 31, 2018, the average effective interest rate on the borrowings was 7.1%. |
| |
(2) | At December 31, 2018, the average effective interest rate on the borrowings was 3.1%. |
(1) At December 31, 2021, the average effective interest rate on the borrowings was 12.4 percent.
Long-term debt:(2) At December 31, 2021, the average effective interest rate on the borrowings was 0.45 percent.
Long-term(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 consistscapital markets, we have adequate liquidity to meet any of the following:company's debt obligations in the near term.
|
| | | | | | | | | | | |
| (in Millions) | December 31, 2018 | | December 31, |
Interest Rate Percentage | | Maturity Date | | 2018 | | 2017 |
| Pollution control and industrial revenue bonds (less unamortized discounts of $0.2 and $0.2, respectively) | 1.9% - 6.5% | | 2021 - 2032 | | $ | 51.6 |
| | $ | 51.6 |
|
| Senior notes (less unamortized discounts of $0.8 and $1.1, respectively) | 3.95% - 5.2% | | 2019 - 2024 | | 999.2 |
| | 998.9 |
|
| 2014 Term Loan Facility | —% | | 2020 | | — |
| | 450.0 |
|
| 2017 Term Loan Facility | 3.8% | | 2022 | | 1,400.0 |
| | 1,500.0 |
|
Revolving Credit Facility (1) | 5.1% | | 2022 | | — |
| | — |
|
FMC Lithium Revolving Credit Facility (2) | 5.2% | | 2023 | | 34.0 |
| | — |
|
| Foreign debt | 0 - 7.2% | | 2019 - 2024 | | 89.1 |
| | 106.9 |
|
| Debt issuance cost | | | | | (8.9 | ) | | (13.2 | ) |
| Total long-term debt | | | | | $ | 2,565.0 |
| | $ | 3,094.2 |
|
| Less: debt maturing within one year | | | | | 386.0 |
| | 101.2 |
|
| Total long-term debt, less current portion | | | | | $ | 2,179.0 |
| | $ | 2,993.0 |
|
____________________
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Long-term debt:
| |
(1) | Long-term debt consists of the following: | | | | | | | | | | | | | | | | | | | | | | | | | (in Millions) | December 31, 2021 | | December 31, | Interest Rate Percentage | | Maturity Date | | 2021 | | 2020 | | Pollution control and industrial revenue bonds (less unamortized discounts of $0.1 and $0.1, respectively) | 6.45% | | 2032 | | $ | 49.9 | | | $ | 51.6 | | | Senior notes (less unamortized discounts of $0.7 and $1.0, respectively) | 3.20% - 4.50% | | 2024 - 2049 | | 1,899.3 | | | 2,199.0 | | | | | | | | | | | 2017 Term Loan Facility | N/A | | N/A | | — | | | 700.0 | | | 2021 Term Loan Facility | 1.1% | | 2024 | | 800.0 | | | — | | Revolving Credit Facility (1) | 2.8% | | 2026 | | — | | | — | | | | | | | | | | | Foreign debt | 0% - 7.9% | | 2022 - 2024 | | 84.7 | | | 92.3 | | | Debt issuance cost | | | | | (17.7) | | | (19.8) | | | Total long-term debt | | | | | $ | 2,816.2 | | | $ | 3,023.1 | | | Less: debt maturing within one year | | | | | 84.5 | | | 93.6 | | | Total long-term debt, less current portion | | | | | $ | 2,731.7 | | | $ | 2,929.5 | |
____________________ (1)Letters of credit outstanding under the Revolving Credit Facility totaled $162.5 million and available funds under this facility were $1,093.4 million at December 31, 2021.
Revolving Credit Facility totaled $199.0 million and available funds under this facility were $1,245.8 million at December 31, 2018. |
| |
(2) | As of December 31, 2018, there were $10.3 million letters of credit outstanding under our FMC Lithium Revolving Credit Facility. |
2014 Term Loan Agreement Amendment
On September 28, 2018,May 26, 2021, we entered into Amendment No. 4 (“2014 Term Loan Amendment”) to that certain Term Loan Agreement, dated as of October 10, 2014. The 2014 Term Loan Amendment amends the 2014 Term Loan Agreement in order to permitamended our previously disclosed separation and spin-off of the FMC Lithium business, as set forth in the 2014 Term Loan Amendment. The 2014 Term Loan was subsequently paid down in full during the fourth quarter of 2018 using a portion of the proceeds from the Livent IPO.
2017 Term Loan Agreement Amendment
On September 28, 2018, we entered into Amendment No. 1 (“2017 Term Loan Amendment”) to that certain Term Loan Agreement, dated as of May 2, 2017. The 2017 Term Loan Amendment amends the 2017 Term Loan Agreement in order to permit our previously disclosed separation and spin-off of the FMC Lithium segment, as set forth in the 2017 Term Loan Amendment. Refer to the original terms of the 2017 Term Loan Agreement described below.
Revolving Credit Agreement Amendment
On September 28, 2018, we entered into Amendment No. 1 (“Revolving Credit Amendment”) to that certain Second Amended and Restated Credit Agreement, dated as of May 2, 2017. The Revolving Credit Amendment amends the Revolving Credit Agreement in order to permit the previously disclosed separation and spin-off of FMC Lithium, as set forth in the Revolving Credit Amendment. Refer to the original terms of the Revolving Credit Agreement described below.
FMC Lithium Revolving Credit Facility
On September 28, 2018, our Lithium segment entered into a credit agreement among its subsidiary, FMC Lithium USA Corp., as borrowers (the “Borrowers”), certain of FMC Lithium's wholly owned subsidiaries as guarantors, the lenders party thereto (the “Lenders”), Citibank, N.A., as administrative agent, and certain other financial institutions party thereto, as joint lead arrangers (the “Credit Agreement”). The Credit Agreement provides for a $400 million senior secured revolving credit facility, $50 million of which is available for the issuance of letters of credit for the account of the Borrowers, with an option, subject to certain conditions and limitations, to increase the aggregate amount of the revolving credit commitments to $600 million (the “FMC Lithium Revolving Credit Facility”). The issuance of letters of credit and the proceeds of revolving credit loans made pursuant to the FMC Lithium Revolving Credit Facility are available, and will be used, for general corporate purposes, including capital expenditures and permitted acquisitions, of the Borrowers and their subsidiaries.
Amounts under the FMC Lithium Revolving Credit Facility may be borrowed, repaid and re-borrowed from time to time until the final maturity date of the FMC Lithium Revolving Credit Facility, which will be the fifth anniversary of the FMC Lithium Revolving Credit Facility’s effective date. Voluntary prepayments and commitment reductions under the FMC Lithium Revolving Credit Facility are permitted at any time without any prepayment premium upon proper notice and subject to minimum dollar amounts.
Revolving loans under the Credit Agreement will bear interest at a floating rate, which will be a base rate or a Eurodollar rate equal to the London interbank offered rate for the relevant interest period, plus, in each case, an applicable margin based on the Lithium segment's leverage ratio, as determined in accordance with the provisions of the Credit Agreement. The base rate will be the greatest of: the rate of interest announced publicly by Citibank, N.A. in New York City from time to time as its “base rate”; the federal funds effective rate plus 0.5%; and a Eurodollar rate for a one-month interest period plus 1%. Each borrower on a joint and several basis is required to pay a commitment fee quarterly in arrears on the average daily unused amount of each Lender’s revolving credit commitment at a rate equal to an applicable percentage based on the Lithium segment’s leverage ratio, as determined in accordance with the provisions of the Credit Agreement. The applicable margin and the commitment fee are subject to adjustment as provided in the Credit Agreement.
The Borrowers’ present and future domestic material subsidiaries (the “Guarantors”) will guarantee the obligations of the Borrowers under the FMC Lithium Revolving Credit Facility. The obligationsCredit Facility Amendment primarily extended the maturity date by an additional two years to May 26, 2026 and adjusted the maximum leverage ratio. See below for additional information on covenants. The borrowing capacity under the credit facility was not affected by the amendment and remains unchanged.
Deferred financing fees totaling $1.7 million associated with the amendment has been deferred and is being recognized to interest expense over the life of the Borrowers and the Guarantors are secured by all of the present and future assets of the Borrowers and the Guarantors, including the Borrowers’ facility and real estate in Bessemer City, North Carolina, subject to certain exceptions and exclusions as set forth in the Credit Agreement and other security and collateral documents.agreement.
The Credit Agreement contains certain affirmative and negative covenants that are binding on the Borrowers and their subsidiaries, including, among others, restrictions (subject to exceptions and qualifications) on the ability of the Borrowers and their subsidiaries to create liens, to undertake fundamental changes, to incur debt, to sell or dispose of assets, to make investments, to make restricted
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
payments such as dividends, distributions or equity repurchases, to change the nature of their businesses, to enter into transactions with affiliates and to enter into certain burdensome agreements.
2021 Term Loan Facility
On November 1, 2017,22, 2021, we borrowed $1.5$1.0 billion under our previously announced senior unsecured term loan facility ("20172021 Term Loan Facility"). The proceeds of the borrowing were used to financepay off the Acquisition2017 Term Loan Facility and will also be used to pay anticipated taxes associated with the gain on the sale of FMC Health and Nutrition and other transaction costs.
Senior Notes maturing in 2022. The scheduled maturity of the 20172021 Term Loan Facility is on the fifththird anniversary of this closing date. The 2017 Term Loan Facility will bear interest at a floating rate, which will be a base rate or a Eurocurrency rate equal to the London interbank offered rate for the relevant interest period, plus in each case an applicable margin, as determined in accordance with the provisions of the related agreement to the 2017 Term Loan Facility. The base rate will be the highest of: the rate of interest announced publicly by Citibank, N.A. in New York, New York from time to time as its “base rate”; the federal funds effective rate plus 1/2 of one percent; and the Eurocurrency rate for a one-month period plus one percent.
The 20172021 Term Loan Facility contains financial and other covenants, which are consistent with those in the covenants of the Revolving Credit Facility, including a maximum leverage ratio of 4.753.5 and minimum interest coverage ratio of 3.5 immediately following the DuPont Crop Protection Business Acquisition. The 2017 Term Loan Facility also contains a cross-default provision whereby a default under our other indebtedness in excess of $50 million, after grace periods and absent a waiver from the lenders, would be an event of default under the agreementas of the 2017 Term Loan Facility and could result in a demand for paymentlast day of all amounts outstanding under this facility.
Revolving Credit Facility
On May 2, 2017, we entered into an amended and restated credit agreement (the "Revolving Credit Agreement"). The unsecured Revolving Credit Agreement provides for a $1.5 billion revolving credit facility, with an option, subject to certain conditions and limitations, to increase the aggregate amount of the revolving credit commitments to $2.25 billion (the "Revolving Credit Facility"). The current termination date of the Revolving Credit Facility is May 2, 2022.
Revolving loans under the Revolving Credit Facility will bear interest at a floating rate, which will be a base rate or a Eurocurrency rate equal to the London interbank offered rate for the relevant interest period, plus, in each case, an applicable margin, as determined in accordance with the provisions of the Revolving Credit Agreement. The base rate will be the highest of: the rate of interest announced publicly by Citibank, N.A. in New York, New York from time to time as its “base rate”; the federal funds effective rate plus 1/2 of one percent; and the Eurocurrency rate for a one-month period plus one percent. We are also required to pay a facility fee on the average daily amount (whether used or unused) at a rate per annum equal to an applicable percentage in effect from time to time for the facility fee, as determined in accordance with the provisions of the Revolving Credit Agreement. The initial facility fee is 0.15 percent per annum. The applicable margin and the facility fee are subject to adjustment as provided in the Revolving Credit Agreement.
The Revolving Credit Agreement contains customary financial and other covenants, including a maximum leverage ratio and minimum interest coverage ratio. The financial covenant levels have been amended in order to permit the debt incurred under the 2017 Term Loan Facility discussed above along with certain other changes to permit the expected transaction.
Fees incurred to secure the Revolving Credit Facility have been deferred and will be amortized over the term of the arrangement.fiscal quarter.
Maturities of long-term debt
Maturities of long-term debt outstanding, excluding discounts, at December 31, 2018,2021, are $386.0 million in 2019, $2.2 million in 2020, $200.7 million in 2021, $1,501.8$84.5 million in 2022, $34.1$0.0 million in 2023, $1,200.2 million in 2024, $0.0 million in 2025, $500.0 million in 2026 and $450.1$1,050.0 million thereafter.
Covenants
Among other restrictions, the 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 December 31, 20182021 was 2.32.57 which is below the maximum leverage of 4.5. By3.5. Pursuant to the end of 2019,Revolving Credit Amendment and the 2021 Term Loan Facility discussed above, the maximum leverage ratio will stepstepped down to 4.0 in accordance with3.50 for the provisions of the Revolving Credit Facilityperiod ending December 31, 2021 and the 2017 Term Loan Facility.for future quarters. Our actual interest coverage for the four consecutive quarters ended December 31, 20182021 was 9.69.53 which is above the minimum interest coverage of 3.5. We were in compliance with all covenants at December 31, 2018.2021.
Among other restrictions, the FMC Lithium Revolving Credit Facility contains financial covenants applicable to FMC Lithium and its consolidated subsidiaries related to leverage (measured as the ratio of debt to adjusted earnings) and interest coverage
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
(measured as the ratio of adjusted earnings to interest expense). FMC Lithium was in compliance with all covenants at December 31, 2018.
Compensating Balance Agreements
We maintain informal credit arrangements in many foreign countries. Foreign lines of credit, which include overdraft facilities, typically do not require the maintenance of compensating balances, as credit extension is not guaranteed but is subject to the availability of funds.
Note 14:15: Pension and Other Postretirement Benefits
The funded status of our U.S. qualified and nonqualified defined benefit pension plans, our United Kingdom, Germany, France, and Belgium defined benefit pension plans, plus our U.S. other postretirement healthcare and life insurance benefit plans for continuing operations, together with the associated balances and net periodic benefit cost recognized in our consolidated financial statements as of December 31, are shown in the tables below.
We are required to recognize in our consolidated balance sheets the overfunded and underfunded status of our defined benefit postretirement plans. The overfunded or underfunded status is defined as the difference between the fair value of plan assets and the projected benefit obligation. We are also required to recognize as a component of other comprehensive income the actuarial gains and losses and the prior service costs and credits that arise during the period.
The following table summarizes the weighted-average assumptions used to determine the benefit obligations at December 31 for the U.S. Plans:
| | | | | | | | | | | |
| Pensions and Other Benefits |
| December 31, |
| 2021 | | 2020 |
| Discount rate qualified | 2.84 | % | | 2.49 | % |
| Discount rate nonqualified plan | 2.18 | % | | 1.62 | % |
| Discount rate other benefits | 2.39 | % | | 1.91 | % |
| Rate of compensation increase | 3.10 | % | | 3.10 | % |
|
| | | | | |
| | Pensions and Other Benefits |
| | December 31, |
| | 2018 | | 2017 |
| Discount rate qualified | 4.35 | % | | 3.68 | % |
| Discount rate nonqualified plan | 3.97 | % | | 3.29 | % |
| Discount rate other benefits | 4.08 | % | | 3.41 | % |
| Rate of compensation increase | 3.10 | % | | 3.10 | % |
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The following table summarizes the components of our defined benefit postretirement plans and reflect a measurement date of December 31:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Pensions | | Other Benefits (1) |
| | | | December 31, |
| (in Millions) | | | | 2021 | | 2020 | | 2021 | | 2020 |
| Change in projected benefit obligation | | | | | | | | | | |
| Projected benefit obligation at January 1 | | | | $ | 1,450.3 | | | $ | 1,379.1 | | | $ | 15.3 | | | $ | 15.8 | |
| Service cost | | | | 4.7 | | | 4.4 | | | — | | | — | |
| Interest cost | | | | 24.5 | | | 36.7 | | | 0.3 | | | 0.4 | |
Actuarial loss (gain) (2) | | | | (38.6) | | | 115.5 | | | (0.6) | | | 0.3 | |
| | | | | | | | | | |
| | | | | | | | | | |
| Foreign currency exchange rate changes and other | | | | (0.5) | | | — | | | — | | | — | |
| Plan participants’ contributions | | | | — | | | — | | | 0.4 | | | 0.5 | |
| | | | | | | | | | |
| Settlements | | | | (2.5) | | | (1.5) | | | — | | | — | |
| | | | | | | | | | |
| | | | | | | | | | |
| Benefits paid | | | | (83.9) | | | (83.9) | | | (1.7) | | | (1.7) | |
| Projected benefit obligation at December 31 | | | | $ | 1,354.0 | | | $ | 1,450.3 | | | $ | 13.7 | | | $ | 15.3 | |
| Change in plan assets | | | | | | | | | | |
| Fair value of plan assets at January 1 | | | | $ | 1,484.6 | | | $ | 1,390.6 | | | $ | — | | | $ | — | |
| Actual return on plan assets | | | | (26.2) | | | 176.5 | | | — | | | — | |
| Foreign currency exchange rate changes | | | | (0.3) | | | — | | | — | | | — | |
| Company contributions | | | | 3.8 | | | 2.9 | | | 1.3 | | | 1.2 | |
| Plan participants’ contributions | | | | — | | | — | | | 0.4 | | | 0.5 | |
| | | | | | | | | | |
| Settlements | | | | (6.0) | | | (1.5) | | | — | | | — | |
| | | | | | | | | | |
| Benefits paid | | | | (83.9) | | | (83.9) | | | (1.7) | | | (1.7) | |
| Fair value of plan assets at December 31 | | | | $ | 1,372.0 | | | $ | 1,484.6 | | | $ | — | | | $ | — | |
| Funded Status | | | | | | | | | | |
| U.S. plans with assets | | | | $ | 50.4 | | | $ | 69.5 | | | $ | — | | | $ | — | |
| U.S. plans without assets | | | | (22.1) | | | (23.9) | | | (13.7) | | | (15.3) | |
| Non-U.S. plans with assets | | | | (2.8) | | | (3.0) | | | — | | | — | |
| All other plans | | | | (7.5) | | | (8.3) | | | — | | | — | |
| Net funded status of the plan (liability) | | | | $ | 18.0 | | | $ | 34.3 | | | $ | (13.7) | | | $ | (15.3) | |
| Amount recognized in the consolidated balance sheets: | | | | | | | | | | |
Pension asset (3) | | | | $ | 50.4 | | | $ | 69.5 | | | $ | — | | | $ | — | |
Accrued benefit liability (4) | | | | (32.4) | | | (35.2) | | | (13.7) | | | (15.3) | |
| Total | | | | $ | 18.0 | | | $ | 34.3 | | | $ | (13.7) | | | $ | (15.3) | |
____________________
(1) Refer to Note 11 to the consolidated financial statements included within this Form 10-K for information on our discontinued postretirement benefit plans.
(2) The actuarial gain in 2021 and loss in 2020 was primarily driven by the change in discount rate on the U.S. qualified plan. Additionally, the Society of Actuaries released an updated mortality table projection scale for measurement of retirement program obligations in both 2021 and 2020. Adoption of the most recent projection scale for each applicable year increased the U.S. defined benefit obligations by approximately $3 million and $10 million at December 31, 2021 and 2020, respectively.
(3) Recorded as "Other assets including long-term receivables, net" on the consolidated balance sheets.
(4) Recorded as "Accrued pension and other postretirement benefits, current" and "Accrued pension and other postretirement benefits, long-term" on the consolidated balance sheets.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | |
| | Pensions | | Other Benefits (1) |
| | December 31, |
| (in Millions) | 2018 | | 2017 | | 2018 | | 2017 |
| Change in projected benefit obligation | | | | | | | |
| Projected benefit obligation at January 1 | $ | 1,385.8 |
| | $ | 1,378.7 |
| | $ | 19.0 |
| | $ | 19.2 |
|
| Service cost | 6.3 |
| | 7.3 |
| | — |
| | — |
|
| Interest cost | 44.5 |
| | 44.8 |
| | 0.7 |
| | 0.7 |
|
Actuarial loss (gain) (2) | (89.9 | ) | | 82.2 |
| | 0.6 |
| | 1.7 |
|
| Amendments | — |
| | — |
| | (0.1 | ) | | (0.1 | ) |
Acquisitions (3) | — |
| | 7.6 |
| | — |
| | — |
|
| Foreign currency exchange rate changes and other | (0.4 | ) | | 3.4 |
| | — |
| | — |
|
| Plan participants’ contributions | — |
| | — |
| | 0.7 |
| | 0.7 |
|
| Special termination benefits | 3.9 |
| | 2.3 |
| | — |
| | — |
|
| Settlements | (4.4 | ) | | (54.3 | ) | | — |
| | — |
|
| Transfer of liabilities from continuing to discontinued operations | — |
| | — |
| | — |
| | (0.9 | ) |
| Curtailments | (0.9 | ) | | (5.0 | ) | | 0.2 |
| | 0.4 |
|
| Benefits paid | (83.6 | ) | | (81.2 | ) | | (2.2 | ) | | (2.7 | ) |
| Projected benefit obligation at December 31 | $ | 1,261.3 |
| | $ | 1,385.8 |
| | $ | 18.9 |
| | $ | 19.0 |
|
| Change in plan assets | | | | | | | |
| Fair value of plan assets at January 1 | $ | 1,339.9 |
| | $ | 1,253.5 |
| | $ | — |
| | $ | — |
|
| Actual return on plan assets | (18.0 | ) | | 165.2 |
| | — |
| | — |
|
| Foreign currency exchange rate changes | (0.2 | ) | | 3.2 |
| | — |
| | — |
|
| Company contributions | 36.0 |
| | 54.5 |
| | 1.5 |
| | 2.0 |
|
| Plan participants’ contributions | — |
| | — |
| | 0.7 |
| | 0.7 |
|
| Actual expenses | — |
| | (1.0 | ) | | — |
| | — |
|
| Settlements | (4.4 | ) | | (54.3 | ) | | — |
| | — |
|
| Benefits paid | (83.6 | ) | | (81.2 | ) | | (2.2 | ) | | (2.7 | ) |
| Fair value of plan assets at December 31 | $ | 1,269.7 |
| | $ | 1,339.9 |
| | $ | — |
| | $ | — |
|
| Funded Status | | | | | | | |
| U.S. plans with assets | $ | 42.8 |
| | $ | (6.6 | ) | | $ | — |
| | $ | — |
|
| U.S. plans without assets | (24.6 | ) | | (29.8 | ) | | (18.9 | ) | | (19.0 | ) |
| Non-U.S. plans with assets | (1.9 | ) | | (7.6 | ) | | — |
| | — |
|
| All other plans | (7.9 | ) | | (1.9 | ) | | — |
| | — |
|
| Net funded status of the plan (liability) | $ | 8.4 |
| | $ | (45.9 | ) | | $ | (18.9 | ) | | $ | (19.0 | ) |
| Amount recognized in the consolidated balance sheets: | | | | | | | |
Pension asset (4) | $ | 42.8 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Accrued benefit liability (5) | (34.4 | ) | | (45.9 | ) | | (18.9 | ) | | (19.0 | ) |
| Total | $ | 8.4 |
| | $ | (45.9 | ) | | $ | (18.9 | ) | | $ | (19.0 | ) |
____________________
| |
(1) | Refer to Note 10 for information on our discontinued postretirement benefit plans. |
| |
(2) | The actuarial gain in 2018 was primarily driven by the increase in discount rate on the U.S. qualified plan. Additionally, the Society of Actuaries released an updated mortality table projection scale for measurement of retirement program obligations. Adoption of this new projection scale has decreased the U.S. defined benefit obligations by approximately $4 million at December 31, 2018. |
| |
(3) | Refer to Note 4 for information on our acquired pension plans as part of the DuPont Crop Protection Acquisition. |
| |
(4) | Recorded as "Other assets including long-term receivables, net" on the consolidated balance sheets. |
| |
(5) | Recorded as "Accrued pension and other postretirement benefits, current and long-term" on the consolidated balance sheets. |
The amounts in accumulated other comprehensive income (loss) that have not yet been recognized as components of net periodic benefit cost are as follows:
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
| | | | Pensions | | Other Benefits (1) | | Pensions | | Other Benefits (1) |
| | December 31, | | December 31, |
| (in Millions) | 2018 | | 2017 | | 2018 | | 2017 | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 |
| | Prior service (cost) credit | $ | (1.1 | ) | | $ | (1.9 | ) | | $ | (0.1 | ) | | $ | (0.2 | ) | Prior service (cost) credit | $ | (0.5) | | | $ | (0.7) | | | $ | — | | | $ | — | |
| Net actuarial (loss) gain | (370.6 | ) | | (398.3 | ) | | 4.2 |
| | 5.5 |
| Net actuarial (loss) gain | (315.9) | | | (321.9) | | | 4.0 | | | 4.2 | |
| Accumulated other comprehensive income (loss) – pretax | $ | (371.7 | ) | | $ | (400.2 | ) | | $ | 4.1 |
| | $ | 5.3 |
| Accumulated other comprehensive income (loss) – pretax | $ | (316.4) | | | $ | (322.6) | | | $ | 4.0 | | | $ | 4.2 | |
| Accumulated other comprehensive income (loss) – net of tax | (226.1 | ) | | (248.4 | ) | | 2.6 |
| | 3.5 |
| Accumulated other comprehensive income (loss) – net of tax | (235.7) | | | (240.7) | | | 2.5 | | | 2.7 | |
____________________
| |
(1) | Refer to Note 10 for information on our discontinued postretirement benefit plans.(1) Refer to Note 11 to the consolidated financial statements included within this Form 10-K for information on our discontinued postretirement benefit plans.
|
The accumulated benefit obligation for all pension plans was $1,248.8$1,340.8 million and $1,359.6$1,435.9 million at December 31, 20182021 and 2017,2020, respectively.
| | | | | | | | | | | |
| (in Millions) | December 31 |
| Information for pension plans with projected benefit obligation in excess of plan assets | 2021 | | 2020 |
| Projected benefit obligations | $ | 36.2 | | | $ | 42.9 | |
| Accumulated benefit obligations | 36.2 | | | 43.3 | |
| Fair value of plan assets | 3.8 | | | 7.7 | |
| | | (in Millions) | December 31 | (in Millions) | December 31 |
| Information for pension plans with projected benefit obligation in excess of plan assets | 2018 | | 2017 | |
| Information for pension plans with accumulated benefit obligation in excess of plan assets | | Information for pension plans with accumulated benefit obligation in excess of plan assets | 2021 | | 2020 |
| Projected benefit obligations | $ | 39.1 |
| | $ | 1,385.8 |
| Projected benefit obligations | $ | 36.2 | | | $ | 42.9 | |
| Accumulated benefit obligations | 39.2 |
| | 1,359.6 |
| Accumulated benefit obligations | 36.2 | | | 43.3 | |
| Fair value of plan assets | 4.7 |
| | 1,339.9 |
| Fair value of plan assets | 3.8 | | | 7.7 | |
|
| | | | | | | |
| (in Millions) | December 31 |
| Information for pension plans with accumulated benefit obligation in excess of plan assets | 2018 | | 2017 |
| Projected benefit obligations | $ | 39.1 |
| | $ | 39.2 |
|
| Accumulated benefit obligations | 39.2 |
| | 37.5 |
|
| Fair value of plan assets | 4.7 |
| | 5.0 |
|
Other changes in plan assets and benefit obligations for continuing operations recognized in other comprehensive loss (income) are as follows:
| | | | Pensions | | Other Benefits (1) | | Pensions | | Other Benefits (1) |
| | Year Ended December 31, | | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2018 | | 2017 | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Current year net actuarial loss (gain) | $ | (8.7 | ) | | $ | (2.6 | ) | | $ | 0.8 |
| | $ | 2.1 |
| Current year net actuarial loss (gain) | $ | 18.4 | | | $ | (23.5) | | | $ | (0.6) | | | $ | 0.4 | |
| Current year prior service cost (credit) | — |
| | — |
| | (0.1 | ) | | (0.1 | ) | |
| | Amortization of net actuarial (loss) gain | (16.0 | ) | | (16.4 | ) | | 0.5 |
| | 1.0 |
| Amortization of net actuarial (loss) gain | (23.4) | | | (21.3) | | | 0.8 | | | 0.9 | |
| Amortization of prior service (cost) credit | (0.4 | ) | | (0.5 | ) | | 0.1 |
| | 0.1 |
| Amortization of prior service (cost) credit | (0.2) | | | (0.2) | | | — | | | — | |
| Recognition of prior service cost due to curtailment | (0.3 | ) | | — |
| | — |
| | (0.3 | ) | |
| Transfer of actuarial (loss) gain from continuing to discontinued operations | — |
| | — |
| | (0.1 | ) | | 0.6 |
| |
Curtailment loss (2) | (0.9 | ) | | (5.0 | ) | | — |
| | — |
| |
| | Settlement loss | (1.8 | ) | | (47.3 | ) | | — |
| | — |
| Settlement loss | (1.0) | | | (0.6) | | | — | | | — | |
| Foreign currency exchange rate changes on the above line items | (0.4 | ) | | 0.4 |
| | — |
| | — |
| |
| | Total recognized in other comprehensive (income) loss, before taxes | $ | (28.5 | ) | | $ | (71.4 | ) | | $ | 1.2 |
| | $ | 3.4 |
| Total recognized in other comprehensive (income) loss, before taxes | $ | (6.2) | | | $ | (45.6) | | | $ | 0.2 | | | $ | 1.3 | |
| Total recognized in other comprehensive (income) loss, after taxes | (22.3 | ) | | (52.2 | ) | | 0.9 |
| | 2.1 |
| Total recognized in other comprehensive (income) loss, after taxes | (5.0) | | | (36.5) | | | 0.2 | | | 1.0 | |
____________________
| |
(1) | Refer to Note 10 for information on our discontinued postretirement benefit plans. |
| |
(2) | During the years ended December 31, 2018 and 2017, due to the announced plans to separate FMC Lithium and divest FMC Health and Nutrition, respectively, we triggered a curtailment of our U.S. pension plans. As a result, we revalued our pension plans as of October 31, 2018 and March 31, 2017, respectively, in addition to the normal December 31st remeasurement, which resulted in adjustments to comprehensive income. The $0.9 million in 2018 reflects the adjustment to the continuing operations liability and other |
(1) Refer to Note 11 to the consolidated financial statements included within this Form 10-K for information on our discontinued postretirement benefit plans.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
comprehensive income based on the revaluation of the plan. The associated curtailment expense is recorded within "Non-operating pension and postretirement charges (income)". The $5.0 million in 2017 also reflects the adjustment to the continuing operations liability and other comprehensive income based on the revaluation of the plan. The associated curtailment expense was recorded under "Discontinued operations, net of income taxes", as discussed below.
The estimated net actuarial loss and prior service cost for our pension plans that will be amortized from accumulated other comprehensive income (loss) into our net annual benefit cost (income) during 2019 are $18.4 million and $0.2 million, respectively. The estimated net actuarial gain and prior service cost for our other benefits that will be amortized from accumulated other comprehensive income (loss) into net annual benefit cost (income) during 2019 will be $(0.7) million and $0.1 million, respectively.
The following table summarizes the weighted-average assumptions used for and the components of net annual benefit cost (income):
| | | | Year Ended December 31, | | Year Ended December 31, |
| | Pensions | | Other Benefits (1) | | Pensions | | Other Benefits (1) |
| (in Millions, except for percentages) | 2018 | | 2017 | | 2016 | | 2018 | | 2017 | | 2016 | (in Millions, except for percentages) | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
| Discount rate | 3.68 | % | | 4.22 | % | | 4.50 | % | | 3.41 | % | | 3.77 | % | | 3.97 | % | Discount rate | 2.49 | % | | 3.22 | % | | 4.36 | % | | 1.91 | % | | 2.89 | % | | 4.08 | % |
| Expected return on plan assets | 5.00 | % | | 6.50 | % | | 7.00 | % | | — |
| | — |
| | — |
| Expected return on plan assets | 2.25 | % | | 3.00 | % | | 4.25 | % | | — | | | — | | | — | |
| Rate of compensation increase | 3.10 | % | | 3.60 | % | | 3.60 | % | | — |
| | — |
| | — |
| Rate of compensation increase | 3.10 | % | | 3.10 | % | | 3.10 | % | | — | | | — | | | — | |
| Components of net annual benefit cost: | | | | | | | | | | | | Components of net annual benefit cost: | |
| Service cost | $ | 6.3 |
| | $ | 7.3 |
| | $ | 8.0 |
| | $ | — |
| | $ | — |
| | $ | — |
| Service cost | $ | 4.7 | | $ | 4.4 | | $ | 4.2 | | $ | — | | $ | — | | $ | — |
| Interest cost | 44.5 |
| | 44.8 |
| | 49.8 |
| | 0.7 |
| | 0.7 |
| | 0.8 |
| Interest cost | 24.5 | | 36.7 | | 47.6 | | 0.3 | | 0.4 | | 0.6 |
| Expected return on plan assets | (63.0 | ) | | (78.5 | ) | | (85.5 | ) | | — |
| | — |
| | — |
| Expected return on plan assets | (28.2) | | (37.1) | | (53.4) | | — | | — | | — |
| | Amortization of prior service cost | 0.4 |
| | 0.5 |
| | 0.7 |
| | (0.1 | ) | | (0.1 | ) | | — |
| Amortization of prior service cost | 0.2 | | 0.2 | | 0.2 | | — | | — | | 0.1 |
| Amortization of net actuarial and other (gain) loss | 16.0 |
| | 16.4 |
| | 39.2 |
| | (0.5 | ) | | (0.9 | ) | | (1.2 | ) | Amortization of net actuarial and other (gain) loss | 23.2 | | 21.4 | | 12.9 | | (0.8) | | (0.9) | | (1.0) |
Recognized (gain) loss due to special termination benefit (2) | 3.9 |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Recognized (gain) loss due to curtailments (2) | 0.3 |
| | — |
| | — |
| | 0.1 |
| | — |
| | — |
| |
| | Recognized (gain) loss due to settlement | 1.8 |
| | 35.7 |
| | 20.3 |
| | — |
| | — |
| | — |
| Recognized (gain) loss due to settlement | 1.0 | | 0.7 | | 1.4 | | — | | — | | — |
| Net annual benefit cost (income) | $ | 10.2 |
| | $ | 26.2 |
| | $ | 32.5 |
| | $ | 0.2 |
| | $ | (0.3 | ) | | $ | (0.4 | ) | Net annual benefit cost (income) | $ | 25.4 | | $ | 26.3 | | $ | 12.9 | | $ | (0.5) | | $ | (0.5) | | $ | (0.3) |
___________________
| |
(1) | (1) Refer to Note 11 to Note 10 for information on our discontinued postretirement benefit plans. |
| |
(2) | For the year ended December 31, 2018, we recognized a $4.3 million loss due to curtailment and special termination benefits associated with the planned separation of FMC Lithium. |
For the year ended December 31, 2017, we recognized a combined curtailment and termination benefits loss of $3.9 million associated with the disposal of our FMC Health and Nutrition Business, which was recorded within "Discontinued operations, net of income taxes" within the consolidated financial statements of income (loss).included within this Form 10-K for information on our discontinued postretirement benefit plans.
For the year ended December 31, 2017, we recorded a settlement charge of $35.7 million. The settlement charge includes $3.2 million related to the non-qualified plan in the U.S. and a $32.5 million settlement charge related to the termination of the U.K. pension plan.
Our U.S. qualified defined benefit pension plan (“("U.S. Plan”Plan") holds the majority of our pension plan assets. The expected long-term rate of return on these plan assets was 5.02.25 percent for the year ended December 31, 2018 (except for the period between the November 1, 2018 remeasurement and December 31, 2018 during which it was 4.5 percent), 6.52021, 3.00 percent for the year ended December 31, 20172020, and 7.04.25 percent for the year ended December 31, 2016.2019. The expected long-term rate of return on these plan assets decreased by 1.50.75 percent in 20182021 compared to 2017,2020 primarily due to a change in investment strategy.fluctuating yields on corporate bonds. In developing the assumption for the long-term rate of return on assets for our U.S. Plan, we take into consideration the technical analysis performed by our outside actuaries, including historical market returns, information on the assumption for long-term real returns by asset class, inflation assumptions and expectations for standard deviation related to these best estimates. Given an actively managed investment portfolio, the expected annual rates of return by asset class for our portfolio, assuming an estimated inflation rate of approximately 2.32.2 percent, is in line with our assumption for the rate of return on assets. The target asset allocation at December 31, 20182021 by asset category iscontinues to be 100 percent fixed income investments.
Our U.S. qualified pension plan reachedPlan has been fully funded status during 2018. Thefor the last several years and as such, the primary 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
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
likelihood that we will be required to make significant contributions to the plan is also limited. The portfolio is comprised of 100 percent fixed income securities and cash. Investment performance and related risks are measured and monitored on an ongoing basis through monthly liability measurements, periodic asset liability studies, and quarterly investment portfolio reviews. The fluctuation in our non-operating pension and post retirement charges (income) is attributable to the continued approach of using 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.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The following tables present our fair value hierarchy for our major categories of pension plan assets by asset class. See Note 1819 to the consolidated financial statements included within this Form 10-K for the definition of fair value and the descriptions of Level 1, 2 and 3 in the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | |
| (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) |
| Cash and short-term investments | $ | 32.7 | | | $ | 32.2 | | | $ | 0.5 | | | $ | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Fixed income investments: | | | | | | | |
| Investment contracts | 144.7 | | | — | | | 144.7 | | | — | |
| U.S. Government Securities | 309.5 | | | 309.5 | | | — | | | — | |
| Mutual funds | 41.5 | | | 41.5 | | | — | | | — | |
| Corporate debt instruments | 843.6 | | | — | | | 843.6 | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total assets | $ | 1,372.0 | | | $ | 383.2 | | | $ | 988.8 | | | $ | — | |
| | | (in Millions) | 12/31/2018 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | (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) |
| Cash and short-term investments | $ | 92.5 |
| | $ | 92.5 |
| | $ | — |
| | $ | — |
| Cash and short-term investments | $ | 24.7 | | | $ | 24.6 | | | $ | 0.1 | | | $ | — | |
| | Fixed income investments: | | | | | | | | Fixed income investments: | |
| Investment contracts | 144.9 |
| | — |
| | 144.9 |
| | — |
| Investment contracts | 151.4 | | | — | | | 151.4 | | | — | |
| U.S. Government Securities | 469.9 |
| | 465.1 |
| | 4.8 |
| | — |
| U.S. Government Securities | 307.0 | | | 297.9 | | | 9.1 | | | — | |
| Mutual funds | 55.7 |
| | 55.7 |
| |
|
| | — |
| Mutual funds | 70.5 | | | 70.5 | | | — | | | — | |
| Corporate debt instruments | 506.7 |
| | — |
| | 506.7 |
| | — |
| Corporate debt instruments | 931.0 | | | — | | | 931.0 | | | — | |
| | Total assets | $ | 1,269.7 |
| | $ | 613.3 |
| | $ | 656.4 |
| | $ | — |
| Total assets | $ | 1,484.6 | | | $ | 393.0 | | | $ | 1,091.6 | | | $ | — | |
|
| | | | | | | | | | | | | | | |
| (in Millions) | 12/31/2017 | | Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) |
| Cash and short-term investments | $ | 123.0 |
| | $ | 123.0 |
| | $ | — |
| | $ | — |
|
| Equity securities: | | | | | | | |
| Common stock | 194.1 |
| | 194.1 |
| | — |
| | — |
|
| Mutual funds and other investments | 27.3 |
| | 27.3 |
| | — |
| | — |
|
| Fixed income investments: | | | | | | | |
| Investment contracts | 150.8 |
| | — |
| | 150.8 |
| | — |
|
| U.S. Government Securities and Mutual funds | 805.6 |
| | 805.6 |
| | — |
| | — |
|
Investments measured at net asset value (1) | 39.1 |
| | | | | | |
| Total assets | $ | 1,339.9 |
| | $ | 1,150.0 |
| | $ | 150.8 |
| | $ | — |
|
____________________
| |
(1) | Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position. These investments are redeemable with the fund at net asset value under the original terms of the partnership agreements and/or subscription agreements and operations of the underlying funds. However, it is possible that these redemption rights may be restricted or eliminated by the funds in the future in accordance with the underlying fund agreements. Due to the nature of the investments held by the funds, changes in market conditions and the economic environment may significantly impact the net asset value of the funds and, consequently, the fair value of the interests in the funds. Furthermore, changes to the liquidity provisions of the funds may significantly impact the fair value of the interest in the funds. |
We made the following contributions to our pension and other postretirement benefit plans:
|
| | | | | | | |
| Year Ended December 31, |
| (in Millions) | 2018 | | 2017 |
| U.S. qualified pension plan | $ | 30.0 |
| | $ | 44.0 |
|
| U.S. nonqualified pension plan | 6.0 |
| | 9.4 |
|
| Non-U.S. plans | — |
| | 1.1 |
|
| Other postretirement benefits, net of participant contributions | 1.5 |
| | 2.0 |
|
| Total | $ | 37.5 |
| | $ | 56.5 |
|
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
In 2016, we made a $21 million payment into our U.K. pension plan in order to annuitize our remaining pension obligation. This action removed all future funding requirements for this plan. The assets of approximately $45 million supporting the remaining pension obligation were moved into an annuity at December 31, 2016 which qualified as a Level 3 investment in the fair value hierarchy. In October 2017, we completed the buy-out of the annuity, completing the plan termination and relieving us of the pension liability for the U.K. pension plan. The termination resulted in a settlement charge of $32.5 million.
We expect our voluntary cash contributions to our U.S. qualified pension plan to be approximately $7 million in 2019. | | | | | | | | | | | |
| Year Ended December 31, |
| (in Millions) | 2021 | | 2020 |
| U.S. qualified pension plan | $ | — | | | $ | — | |
| U.S. nonqualified pension plan | 3.8 | | | 2.9 | |
| Non-U.S. plans | 0.2 | | | 0.5 | |
| Other postretirement benefits | 1.3 | | | 1.2 | |
| Total | $ | 5.3 | | | $ | 4.6 | |
The following table reflects the estimated future benefit payments for our pension and other postretirement benefit plans. These estimates take into consideration expected future service, as appropriate:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Estimated Net Future Benefit Payments |
| (in Millions) | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 - 2031 |
| Pension Benefits | $ | 86.8 | | | $ | 86.4 | | | $ | 86.8 | | | $ | 85.1 | | | $ | 85.1 | | | $ | 397.3 | |
| Other Benefits | 1.6 | | | 1.5 | | | 1.4 | | | 1.3 | | | 1.2 | | | 4.6 | |
|
| | | | | | | | | | | | | | | | | | |
| | Estimated Net Future Benefit Payments |
| (in Millions) | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 - 2028 |
| Pension Benefits | $ | 90.1 |
| $ | 86.5 |
| $ | 87.0 |
| $ | 86.5 |
| $ | 85.6 |
| $ | 415.8 |
|
| Other Benefits | 2.1 |
| 2.0 |
| 1.9 |
| 1.8 |
| 1.7 |
| 7.0 |
|
Assumed health care cost trend rates have an effect on the other postretirement benefit obligations and net periodic other postretirement benefit costs reported for the health care portion of the other postretirement plan. A one-percentage point change in the assumed health care cost trend rates would be immaterial to our net periodic other postretirement benefit costs for the year ended December 31, 2018, and our other postretirement benefit obligation at December 31, 2018.
FMC Corporation Savings and Investment Plan. The FMC Corporation Savings and Investment Plan is a qualified salary-reduction plan under Section 401(k) of the Internal Revenue Code in which substantially all of our U.S. employees may participate by contributing a portion of their compensation. For eligible employees participating in the Plan, except for those employees covered by certain collective bargaining agreements, the Company makes matching contributions of 80 percent of the portion of those contributions up to five5 percent of the employee’s compensation. Eligible employees participating in the Plan
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
that do not participate in the U.S. qualified pension plan are entitled to receive an employer contribution of five5 percent of the employee’s eligible compensation. Charges against income for all contributions were $15.2$15.6 million in 2018, $9.72021, $16.6 million in 2017,2020, and $7.7$15.3 million in 2016.2019.
Note 15:16: Share-based Compensation
Stock Compensation Plans
We have a share-based compensation plan, which has been approved by the stockholders, for certain employees, officers and directors. This plan is described later below.
Impacts of Livent Distribution
Pursuant to the employee matters agreement, effective as of the Distribution date, outstanding FMC equity awards held by a Livent employee will be converted into a Livent equity award. The number of Livent shares subject to each converted award (and in the case of stock options, the exercise price of the award) will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original FMC equity awards as measured before and after the Distribution, subject to rounding. Each converted Livent equity award will remain subject to the same terms and conditions, including vesting and payment schedules, as were applicable immediately prior to the Distribution except that the converted Livent equity awards held by Livent employees will not be subject to any performance-based vesting conditions.
Each outstanding award of FMC RSUs and PRSUs granted prior to 2019 held by FMC employees will be converted into adjusted FMC RSUs and PRSUs and Livent RSUs and PRSUs, respectively, using the final distribution ratio of 0.935301, which was determined as of the record date of February 25, 2018. Each outstanding awards of FMC RSUs granted in 2019 held by FMC employees will be converted into adjusted FMC RSUs, based on the relative value of FMC shares before and after the Distribution. Each outstanding award of FMC stock options, whether vested or unvested, held by a FMC employee will be converted into adjusted FMC stock options, based on the relative value of FMC shares before and after the Distribution. The above described adjustments are intended to preserve the aggregate intrinsic value of the original FMC awards as measured before and after the Distribution, subject to rounding. Each such adjusted FMC equity award will remain subject to the same terms and conditions, including vesting and payment schedules, as were applicable immediately prior to the Distribution.
FMC Corporation Incentive Compensation and Stock Plan
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The FMC Corporation Incentive Compensation and Stock Plan (the “Plan”"Plan") provides for the grant of a variety of cash and equity awards to officers, directors, employees and consultants, including stock options, restricted stock, performance units (including restricted stock units), stock appreciation rights, and multi-year management incentive awards payable partly in cash and partly in common stock. The Compensation and Organization Committee of the Board of Directors (the “Committee”"Committee"), subject to the provisions of the Plan, approves financial targets, award grants, and the times and conditions for payment of awards to employees. The total number of shares of common stock authorized for issuance under the Plan is 30.2 million of which approximately 4.92.6 million shares of common stock are available for future grants of share based awards under the Plan as of December 31, 2018.2021. The FMC Corporation Non-Employee Directors’ Compensation Policy, administered by the Nominating and Corporate Governance Committee of the Board of Directors, sets forth the compensation to be paid to the directors, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based restricted stock units, and cash awards to be made to directors under the Plan.
Stock options granted under the Plan may be incentive or nonqualified stock options. The exercise price for stock options may not be less than the fair market value of the stock at the date of grant. Awards granted under the Plan vest or become exercisable or payable at the time designated by the Committee, which has generally been three years from the date of grant. Incentive and nonqualified options granted under the Plan expire notno later than 10 years from the grant date.
Under the Plan, awards of restricted stock and restricted stock units may be made to selected employees. The awards vest over periods designated by the Committee, which has generally been three years, with vesting conditional upon continued employment. Compensation cost is recognized over the vesting periods based on the market value of the stock on the date of the award. Restricted stock units granted to directors under the Plan vest immediately if granted as part of, or in lieu of, the annual retainer; other restricted stock units granted to directors vest at the Annual Meeting of Shareholders in the calendar year following the May 1 annual grant date (but are subject to forfeiture on a pro rata basis if the director does not serve the full year except under certain circumstances).
At December 31, 20182021 and 2017,2020, there were restricted stock units representing an aggregate of 248,465267,524 shares and 228,366267,988 shares of common stock, respectively, credited to the directors’ accounts.
Livent Corporation Incentive Compensation and Stock Plan
Effective October 11, 2018, Livent registered shares of its common stock for issuance pursuant to awards under the Livent Corporation Incentive Compensation and Stock Plan (the "Livent Plan"). The Livent Plan provides for the grant of a variety of cash and equity awards to officers, directors, employees and consultants, including stock options, restricted stock, restricted stock units (including performance units), stock appreciation rights, and management incentive awards to Livent employees. The Compensation and Organization Committee of the Livent Board of Directors has the authority to amend the Livent Plan at any time, approve financial targets, award grants, establish performance objectives and conditions and the times and conditions for payment of awards. In connection with its IPO, Livent granted certain of their employees, directors and executives equity awards pursuant to the Livent Plan.
Stock Compensation
We recognized the following stock compensation expense:
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| (in Millions) | 2018 | | 2017 | | 2016 |
Stock option expense, net of taxes of $1.3, $2.4 and $2.6 (1) | $ | 4.9 |
| | $ | 4.5 |
| | $ | 4.4 |
|
Restricted stock expense, net of taxes of $2.3, $3.5 and $3.8 (2) | 8.4 |
| | 6.4 |
| | 6.5 |
|
| Performance based expense, net of taxes of $1.2, $1.5 and $1.1 | 4.4 |
| | 2.8 |
| | 1.8 |
|
| Livent Plan stock expense, net of taxes of $0.1, zero and zero | 0.4 |
| | — |
| | — |
|
Total stock compensation expense, net of taxes of $4.9, $7.4 and $7.5 (3) | $ | 18.1 |
| | $ | 13.7 |
| | $ | 12.7 |
|
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
Stock option expense, net of taxes of $1.0, $1.1 and $1.5 (1) | $ | 3.7 | | | $ | 4.0 | | | $ | 5.7 | |
Restricted stock expense, net of taxes of $1.9, $2.0 and $2.2 (2) | 7.2 | | | 7.4 | | | 8.2 | |
| Performance based expense, net of taxes of $0.8, $0.9 and $1.7 | 3.2 | | | 3.5 | | | 6.3 | |
| | | | | |
Total stock compensation expense, net of taxes of $3.7, $4.0 and $5.4 (3) | $ | 14.1 | | | $ | 14.9 | | | $ | 20.2 | |
____________________
| |
(1) | (1) We applied an estimated forfeiture rate of 4.0% per stock option grant in the calculation of the expense. |
| |
(2) | We applied an estimated forfeiture rate of 2.0% of outstanding grants in the calculation of the expense. |
| |
(3) | This expense is classified as "Selling, general and administrative expenses" in our consolidated statements of income (loss). Total stock compensation expense, net of tax, not included in the above table of $3.6 million, $4.4 million, and zero for the years ended |
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
(3) This expense is classified as "Selling, general and administrative expenses" in our consolidated statements of income (loss). Total stock compensation expense, net of tax, not included in the above table of zero , $2.2 million, and $0.1 million for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively, is included in "Discontinued operations, net of income taxes" in the consolidated statements of income (loss).
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
We received $10.7$7.9 million,, $22.5 $24.7 million and $4.1$50.7 million in cash related to stock option exercises for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively. The shares used for the exercise of stock options occurring during the years ended December 31, 2018, 20172021, 2020 and 20162019 came from treasury shares.
For tax purposes, share-based compensation expense is deductible inImpacts of Livent Distribution
On March 1, 2019, we completed the yearpreviously announced distribution of exercise or vesting based123 million shares of common stock of Livent as a pro rata dividend on shares of FMC common stock outstanding at the close of business on the intrinsic value of the award on therecord date of exercise or vesting. For financial reporting purposes, share-based compensation expense is based upon grant-date fair valueFebruary 25, 2019. All outstanding and amortized overnonvested equity awards relating to FMC’s stock immediately prior to the vesting period. Excess tax benefits representeffective date were generally converted into FMC and Livent units pursuant to the difference between the share-based compensation expense for financial reporting purposes and the deduction taken for tax purposes. The excess tax expense recorded in stockholders' equity for the year ended December 31, 2016 totaled $0.4 million. Beginning in 2017, these excess tax benefits were recorded directly to income tax expense which totaled $3.8 million and $2.9 million in 2018 and 2017, respectively.employee matters agreement.
Stock Options
The grant-date fair values of the stock options we granted in the years ended December 31, 2018, 20172021, 2020 and 20162019 were estimated using the Black-Scholes option valuation model, the key assumptions for which are listed in the table below. The dividend yield assumption reflects anticipated dividends on our common stock. The expected volatility assumption is based on the actual historical experience of our common stock. The expected life represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on U.S. Treasury securities with terms equal to the expected timing of stock option exercises as of the grant date. The dividend yield assumption reflects anticipated dividends on our common stock. Employee stock options generally vest after a three year period and expire ten years from the date of grant.
Black Scholes valuation assumptions for stock option grants:
| | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | 2019 |
| Expected dividend yield | 1.83% | | 1.91% | | 1.83% |
| Expected volatility | 32.75% | | 26.60% | | 26.07% |
| Expected life (in years) | 6.5 | | 6.5 | | 6.5 |
| Risk-free interest rate | 0.92% | | 1.19% | | 2.53% |
|
| | | | | |
| | 2018 | | 2017 | | 2016 |
| Expected dividend yield | 0.77% | | 1.15% | | 1.77% |
| Expected volatility | 26.85% | | 27.04% | | 26.57% |
| Expected life (in years) | 6.5 | | 6.5 | | 6.5 |
| Risk-free interest rate | 2.79% | | 2.10% | | 1.39% |
The weighted-average grant-date fair value of options granted during the years ended December 31, 2018, 20172021, 2020 and 20162019 was $25.70, $15.66$28.31, $20.28 and $8.54$18.66 per share, respectively.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The following summary shows stock option activity for employees under the Plan for the three years ended December 31, 2018:2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| (Shares in Thousands) | Number of Options Granted But Not Exercised | | Weighted-Average Remaining Contractual Life | | Weighted-Average Exercise Price Per Share | | Aggregate Intrinsic Value (in Millions) |
| December 31, 2018 (1,044 shares exercisable and 1,287 shares expected to vest or be exercised) | 2,364 | | | 6.0 years | | $ | 52.87 | | | $ | 52.5 | |
| Granted | 380 | | | | | 75.76 | | | |
Conversion impact from Livent spin (1) | 210 | | | | | 53.09 | | | |
| Exercised | (1,414) | | | | | 39.17 | | | 67.2 | |
| Forfeited | (36) | | | | | 67.82 | | | |
| December 31, 2019 (628 shares exercisable and 835 shares expected to vest or be exercised) | 1,504 | | | 6.5 years | | $ | 58.06 | | | $ | 62.8 | |
| Granted | 302 | | | | | 92.24 | | | |
| Exercised | (549) | | | | | 48.02 | | | 31.3 | |
| Forfeited | (22) | | | | | 81.84 | | | |
| December 31, 2020 (388 shares exercisable and 818 shares expected to vest or be exercised) | 1,235 | | | 7.0 years | | $ | 70.44 | | | $ | 54.9 | |
| Granted | 235 | | | | | 105.00 | | | |
| | | | | | | |
| Exercised | (166) | | | | | 49.56 | | | 9.8 | |
| Forfeited | (50) | | | | | 89.18 | | | |
| December 31, 2021 (605 shares exercisable and 622 shares expected to vest or be exercised) | 1,254 | | | 6.2 years | | $ | 78.95 | | | $ | 38.8 | |
93____________________
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | |
| (Shares in Thousands) | Number of Options Granted But Not Exercised | | Weighted-Average Remaining Contractual Life | | Weighted-Average Exercise Price Per Share | | Aggregate Intrinsic Value (in Millions) |
| December 31, 2015 (1,200 shares exercisable and 832 shares expected to vest or be exercised) | 2,071 |
| | 5.6 years | | $ | 47.52 |
| | $ | 8.7 |
|
| Granted | 933 |
| | | | 37.39 |
| | |
| Exercised | (171 | ) | | | | 25.59 |
| | 3.5 |
|
| Forfeited | (84 | ) | | | | 51.17 |
| | |
| December 31, 2016 (1,292 shares exercisable and 1,373 shares expected to vest or be exercised) | 2,749 |
| | 6.1 years | | $ | 45.34 |
| | $ | 37.6 |
|
| Granted | 370 |
| | | | 57.63 |
| | |
| Exercised | (590 | ) | | | | 39.93 |
| | 20.1 |
|
| Forfeited | (94 | ) | | | | 49.10 |
| | |
| December 31, 2017 (920 shares exercisable and 1,452 shares expected to vest or be exercised) | 2,435 |
| | 6.3 years | | $ | 48.37 |
| | $ | 112.7 |
|
| Granted | 250 |
| | | | 85.19 |
| | |
| Exercised | (260 | ) | | | | 41.80 |
| | 11.7 |
|
| Forfeited | (61 | ) | | | | 52.51 |
| | |
| December 31, 2018 (1,044 shares exercisable and 1,287 shares expected to vest or be exercised) | 2,364 |
| | 6.0 years | | $ | 52.87 |
| | $ | 52.5 |
|
The number of stock options indicated in the above table as being exercisable as of December 31, 2018,2021, had an intrinsic value of $19.4$26.6 million,, a weighted-average remaining contractual term of 4.04.2 years,, and a weighted-average exercise price of $55.43.$65.97.
As of December 31, 2018,2021, we had total remaining unrecognized compensation cost related to unvested stock options of $5.4$5.2 million which will be amortized over the weighted-average remaining requisite service period of approximately 1.56 years.1.79 years.
Restricted and Performance Based Equity Awards
The grant-date fair value of restricted stock awards and stock units under the Plan is based on the market price per share of our common stock on the date of grant, and thegrant. The related compensation cost is amortized to expense on a straight-line basis over the vesting period during which the employees perform related services, which is typically three years except for those eligible for retirement prior to the stated vesting period as well as non-employee directors.
Starting in 2015, we began granting performance based restricted stock awards. The performance based share awards represent a number of shares of common stock to be awarded upon settlement based on the achievement of certain market-based performance criteriaa total shareholder return ("TSR") relative to peer companies over a three year period. These awards generally vest upon the completion of a three year period from the date of grant; however, starting with the 2016 grants, certain performance criteria is measured on an annual basis. Starting with the 2019 grants, vesting was based on a TSR relative to peer companies and a cumulative operating cash flow metric. The fair value of the equity classified performance-based share awards is determined based on the number of shares of common stock expected to be awarded and a Monte Carlo valuation model.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The following table shows our employee restricted award activity for the three years ended December 31, 2018:2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Restricted Equity | | Performance Based Equity |
| (Number of Awards in Thousands) | Number of awards | | Weighted-Average Grant Date Fair Value Per Share | | Number of
awards | | Weighted-Average Grant Date Fair Value Per Share |
| Nonvested at December 31, 2018 | 459 | | | $ | 55.75 | | | 335 | | | $ | 56.42 | |
| Granted | 108 | | | 76.22 | | | 106 | | | 83.89 | |
Conversion impact from Livent spin (1) | (29) | | | 67.46 | | | (12) | | | 84.58 | |
| Vested | (223) | | | 37.54 | | | (222) | | | 42.18 | |
| Forfeited | (13) | | | 69.69 | | | (1) | | | 78.92 | |
| Nonvested at December 31, 2019 | 302 | | | $ | 67.89 | | | 206 | | | $ | 72.06 | |
| Granted | 92 | | | 91.83 | | | 111 | | | 108.74 | |
| Vested | (84) | | | 50.14 | | (115) | | | 58.37 |
| Forfeited | (12) | | | 77.42 | | | — | | | — | |
| Nonvested at December 31, 2020 | 298 | | | $ | 79.91 | | | 202 | | | $ | 88.48 | |
| Granted | 95 | | | 102.10 | | | 79 | | | 103.26 | |
| | | | | | | |
| Vested | (108) | | | 73.82 | | | (86) | | | 77.44 | |
| Forfeited | (15) | | | 90.05 | | | — | | | — | |
| Nonvested at December 31, 2021 | 270 | | | $ | 89.56 | | | 195 | | | $ | 96.18 | |
|
| | | | | | | | | | | | | |
| | Restricted Equity | | Performance Based Equity |
| (Number of Awards in Thousands) | Number of awards | | Weighted-Average Grant Date Fair Value Per Share | | Number of
awards | | Weighted-Average Grant Date Fair Value Per Share |
| Nonvested at December 31, 2015 | 376 |
| | $ | 57.36 |
| | 32 |
| | $ | 81.06 |
|
| Granted | 271 |
| | 37.44 |
| | 126 |
| | 41.66 |
|
| Vested | (120 | ) | | 56.12 |
| | — |
| | — |
|
| Forfeited | (31 | ) | | 52.67 |
| | — |
| | — |
|
| Nonvested at December 31, 2016 | 496 |
| | $ | 48.56 |
| | 158 |
| | $ | 49.55 |
|
| Granted | 121 |
| | 57.66 |
| | 105 |
| | 66.93 |
|
| Vested | (98 | ) | | 64.75 |
| | — |
| | — |
|
| Forfeited | (30 | ) | | 47.60 |
| | (3 | ) | | 52.74 |
|
| Nonvested at December 31, 2017 | 489 |
| | $ | 47.63 |
| | 260 |
| | $ | 53.36 |
|
| Granted | 137 |
| | 84.94 |
| | 133 |
| | 88.65 |
|
| Vested | (154 | ) | | 55.14 |
| | (58 | ) | | 81.15 |
|
| Forfeited | (13 | ) | | 65.39 |
| | — |
| | — |
|
| Nonvested at December 31, 2018 | 459 |
| | $ | 55.75 |
| | 335 |
| | $ | 56.42 |
|
(1)Awards transferred to Livent employees as a result of March 1, 2019 Livent separation.
As of December 31, 2018,2021, we had total remaining unrecognized compensation cost related to unvested restricted awards of $14.0$13.0 million which will be amortized over the weighted-average remaining requisite service period of approximately 1.65 years.1.84 years.
Note 16:17: Equity
The following is a summary of our capital stock activity over the past three years: | | | | | | | | | | | |
| Common Stock Shares | | Treasury Stock Shares |
| December 31, 2018 | 185,983,792 | | | 53,702,178 | |
| Stock options and awards | — | | | (1,563,307) | |
| Repurchases of common stock, net | — | | | 4,720,627 | |
| December 31, 2019 | 185,983,792 | | | 56,859,498 | |
| Stock options and awards | — | | | (677,827) | |
| Repurchases of common stock, net | — | | | 448,538 | |
| December 31, 2020 | 185,983,792 | | | 56,630,209 | |
| Stock options and awards | — | | | (300,594) | |
| Repurchases of common stock, net | — | | | 3,954,698 | |
| December 31, 2021 | 185,983,792 | | | 60,284,313 | |
|
| | | | | |
| | Common Stock Shares | | Treasury Stock Shares |
| December 31, 2015 | 185,983,792 |
| | 52,328,015 |
|
| Stock options and awards | — |
| | (244,329 | ) |
| Repurchases of common stock, net | — |
| | 210,000 |
|
| December 31, 2016 | 185,983,792 |
| | 52,293,686 |
|
| Stock options and awards | — |
| | (640,450 | ) |
| December 31, 2017 | 185,983,792 |
| | 51,653,236 |
|
| Stock options and awards | — |
| | (390,553 | ) |
| Repurchases of common stock, net | — |
| | 2,439,495 |
|
| December 31, 2018 | 185,983,792 |
| | 53,702,178 |
|
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Accumulated other comprehensive income (loss)
Summarized below is the roll forward of accumulated other comprehensive income (loss), net of tax.
|
| | | | | | | | | | | | | | | |
| (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, 2015 | $ | (147.3 | ) | | $ | (6.2 | ) | | $ | (303.8 | ) | | $ | (457.3 | ) |
| 2016 Activity | | | | | | | |
| Other comprehensive income (loss) before reclassifications | $ | (46.7 | ) | | $ | 7.3 |
| | $ | (26.9 | ) | | $ | (66.3 | ) |
| Amounts reclassified from accumulated other comprehensive income (loss) | — |
| | 6.0 |
| | 39.2 |
| | 45.2 |
|
| | | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2016 | $ | (194.0 | ) | | $ | 7.1 |
| | $ | (291.5 | ) | | $ | (478.4 | ) |
| 2017 Activity | | | | | | | |
| Other comprehensive income (loss) before reclassifications | $ | 173.9 |
| | $ | (1.2 | ) | | $ | 0.6 |
| | $ | 173.3 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | 13.9 |
| | (0.7 | ) | | 51.6 |
| | 64.8 |
|
| | | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2017 | $ | (6.2 | ) | | $ | 5.2 |
| | $ | (239.3 | ) | | $ | (240.3 | ) |
| 2018 Activity | | | | | | | |
| Other comprehensive income (loss) before reclassifications | $ | (95.3 | ) | | $ | 13.7 |
| | $ | 4.2 |
| | $ | (77.4 | ) |
| Amounts reclassified from accumulated other comprehensive income (loss) | — |
| | (7.7 | ) | | 16.5 |
| | 8.8 |
|
| | | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2018 | $ | (101.5 | ) | | $ | 11.2 |
| | $ | (218.6 | ) | | $ | (308.9 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| (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, 2018 | $ | (101.5) | | | $ | 11.2 | | | $ | (218.6) | | | $ | (308.9) | |
| 2019 Activity | | | | | | | |
| Other comprehensive income (loss) before reclassifications | $ | (15.2) | | | $ | (69.0) | | | $ | (6.5) | | | $ | (90.7) | |
| Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (8.2) | | | 9.9 | | | 1.7 | |
| Net current period other comprehensive income (loss) | $ | (15.2) | | | $ | (77.2) | | | $ | 3.4 | | | $ | (89.0) | |
| Adoption of accounting standard (Note 2) | — | | | 1.0 | | | (54.1) | | | (53.1) | |
Distribution of FMC Lithium (3) | 39.0 | | | — | | | — | | | 39.0 | |
| | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2019 | $ | (77.7) | | | $ | (65.0) | | | $ | (269.3) | | | $ | (412.0) | |
| 2020 Activity | | | | | | | |
| Other comprehensive income (loss) before reclassifications | $ | 101.7 | | | $ | (2.5) | | | $ | 18.9 | | | $ | 118.1 | |
| Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (4.3) | | | 16.0 | | | 11.7 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2020 | $ | 24.0 | | | $ | (71.8) | | | $ | (234.4) | | | $ | (282.2) | |
| 2021 Activity | | | | | | | |
| Other comprehensive income (loss) before reclassifications | $ | (86.5) | | | $ | 44.1 | | | $ | (14.5) | | | $ | (56.9) | |
| Amounts reclassified from accumulated other comprehensive income (loss) | — | | | 5.5 | | | 17.9 | | | 23.4 | |
| | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2021 | $ | (62.5) | | | $ | (22.2) | | | $ | (231.0) | | | $ | (315.7) | |
____________________
| |
(1) | See Note 18 for more information. |
| |
(2) | See Note 14 for more information. |
(1)See Note 19 to the consolidated financial statements included within this Form 10-K for more information.
(2)See Note 15 to the consolidated financial statements included within this Form 10-K for more information.
(3)Represents the effects of the distribution of FMC Lithium.
FMC CORPORATION
Notes to Consolidated Financial Statements — (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 consolidated statements of income (loss) for each of the periods presented.
| | Details about Accumulated Other Comprehensive Income (Loss) Components | | Details about Accumulated Other Comprehensive Income (Loss) Components | | Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (1) | | Affected Line Item in the Consolidated Statements of Income (Loss) |
| | | | Year Ended December 31, | | |
| (in Millions) | | (in Millions) | | 2021 | | 2020 | | 2019 | |
| | | Details about Accumulated Other Comprehensive Income Components | | Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (1) | | Affected Line Item in the Consolidated Statements of Income (Loss) | |
| | | Year Ended December 31, | | |
| (in Millions) | | 2018 | | 2017 | | 2016 | | |
| Foreign currency translation adjustments: | | | | | | | | |
Divestiture of FMC Health and Nutrition (2) | | $ | — |
| | $ | (13.9 | ) | | $ | — |
| | Discontinued operations, net of income taxes | |
| | | | | | | | | |
| Derivative instruments: | | | | | | | | Derivative instruments: | | | | | | | |
| Foreign currency contracts | | $ | 18.9 |
| | $ | (10.0 | ) | | $ | (11.2 | ) | | Costs of sales and services | Foreign currency contracts | | $ | (4.7) | | | $ | 24.6 | | | $ | 10.0 | | | Costs of sales and services |
| Energy contracts | | — |
| | 0.8 |
| | (2.3 | ) | | Costs of sales and services | |
| | Foreign currency contracts | | (8.0 | ) | | 10.0 |
| | 4.2 |
| | Selling, general and administrative expenses | Foreign currency contracts | | 1.7 | | | (19.3) | | | 1.9 | | | Selling, general and administrative expenses |
| Other contracts | | (0.4 | ) | | — |
| | — |
| | Interest expense, net | |
| Interest rate contracts | | Interest rate contracts | | (4.2) | | | (2.7) | | | (0.7) | | | Interest expense |
| Total before tax | | $ | 10.5 |
| | $ | 0.8 |
| | (9.3 | ) | | Total before tax | | $ | (7.2) | | | $ | 2.6 | | | $ | 11.2 | | |
| | | (2.8 | ) | | (0.1 | ) | | 3.3 |
| | Provision for income taxes | | 1.7 | | | 1.7 | | | (3.0) | | | Provision for income taxes |
| Amount included in net income | | $ | 7.7 |
| | $ | 0.7 |
| | (6.0 | ) | | Amount included in net income | | $ | (5.5) | | | $ | 4.3 | | | $ | 8.2 | | |
| | | | | | | | | | | | | | | |
Pension and other postretirement benefits (3): | | | | | | | | |
Pension and other postretirement benefits (2): | | Pension and other postretirement benefits (2): | |
| Amortization of prior service costs | | $ | (0.3 | ) | | $ | (0.5 | ) | | $ | (0.8 | ) | | Selling, general and administrative expenses | Amortization of prior service costs | | $ | (0.2) | | | $ | (0.3) | | | $ | (0.3) | | | Selling, general and administrative expenses |
| Amortization of unrecognized net actuarial and other gains (losses) | | (14.4 | ) | | (14.4 | ) | | (38.4 | ) | | Selling, general and administrative expenses | Amortization of unrecognized net actuarial and other gains (losses) | | (21.5) | | | (19.2) | | | (10.8) | | | Non-operating pension and postretirement charges (income) |
| Recognized loss due to settlement/curtailment | | (6.1 | ) | | (51.2 | ) | | (20.6 | ) | | Selling, general and administrative expenses; Discontinued operations, net of income taxes (4) | Recognized loss due to settlement/curtailment | | (1.0) | | | (0.7) | | | (1.4) | | | Non-operating pension and postretirement charges (income); Discontinued operations, net of income taxes |
| Total before tax | | $ | (20.8 | ) | | $ | (66.1 | ) | | $ | (59.8 | ) | | Total before tax | | $ | (22.7) | | | $ | (20.2) | | | $ | (12.5) | | |
| | | 4.3 |
| | 14.5 |
| | 20.6 |
| | Provision for income taxes | | 4.8 | | | 4.2 | | | 2.6 | | | Provision for income taxes; Discontinued operations, net of income taxes |
| Amount included in net income | | $ | (16.5 | ) | | $ | (51.6 | ) | | $ | (39.2 | ) | | Amount included in net income | | $ | (17.9) | | | $ | (16.0) | | | $ | (9.9) | | |
| | | | | | | | | | | | | | | |
| Total reclassifications for the period | | $ | (8.8 | ) | | $ | (64.8 | ) | | $ | (45.2 | ) | | Amount included in net income | Total reclassifications for the period | | $ | (23.4) | | | $ | (11.7) | | | $ | (1.7) | | | Amount included in net income |
____________________
| |
(1) | Amounts in parentheses indicate charges to the consolidated statements of income (loss). |
| |
(2) | The reclassification of historical cumulative translation adjustments was the result of the sale of our FMC Health and Nutrition and Omega-3 business. The loss recognized from this reclassification is considered permanent for tax purposes and therefore no tax has been provided. See Note 10 within these consolidated financial statements for more information. In accordance with accounting guidance, this amount was previously factored into the lower of cost or fair value test associated with the Omega-3 asset held for sale write-down charges. |
| |
(3) | 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 14. |
| |
(4) | The loss due to curtailment for the twelve months ended December 31, 2017 related to the disposal of FMC Health and Nutrition was recorded to "Discontinued operations, net of income taxes" on the condensed consolidated statements of income (loss). |
(1)Amounts in parentheses indicate charges to the 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 15 to the consolidated financial statements included within this Form 10-K.
Transactions with Noncontrolling Interest
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.
As a result of the IPO and underwriters' exercise to purchase additional shares of common stock in the fourth quarter of 2018, our controlling interest in FMC Lithium iswas approximately 84 percent. On March 1, 2019, we completed the previously announced distribution of the remaining shares of common stock of Livent. See Note 1 to the consolidated financial statements included within this Form 10-K for further information regarding the IPO.
As part of the DuPont Crop Protection Business Acquisition, we acquired an 80 percent controlling interest in DuPont Agricultural Chemicals Limited, Shanghai, a joint venture registered in the People's Republic of China.
During the first quarter of 2017, we terminated our interest in a variable interest entity. See Note 8 for more information.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
During the third quarter 2016, we terminated a joint venture in Argentina for which we had a controlling interest. See Note 8 for more information. During the fourth quarter 2016, we also acquired the remaining noncontrolling interest in a joint venture in China.
Dividends and Share Repurchases
On January 17, 2019,20, 2022, we paid dividends totaling $53.2$66.8 million to our shareholders of record as of December 31, 2018.2021. This amount is included in “Accrued"Accrued and other liabilities”liabilities" on the consolidated balance sheets as of December 31, 2018.2021. For the years ended December 31, 2018, 20172021, 2020 and 2016,2019, we paid $89.2$247.2 million, $88.8$228.5 million and $88.6$210.3 million in dividends, respectively.
On December 3, 2018, our Board authorized the repurchase of up to $1 billion of our common shares. This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be repurchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market conditions and other factors.
On November 5, 2018, we announced a plan to repurchase $200 million in shares by the end of 2018 under our previous share repurchase authorization that was approved in 2013. We completed the announced repurchase in its entirety and the remaining authority expired at the completion of the $200 million repurchase. In 2018, 2.42021, 4.0 million shares were repurchased under the publicly announced repurchase program. At December 31, 2018, $1.0 billion2021, approximately $150 million remained unused under our Board-authorized repurchase program. However, 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. This repurchase program does not include a specific
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
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.
Note 17:18: 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”EPS") considers the impact of potentially dilutive securities except in periods in which there is a loss 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 yearyears ended December 31, 2018,2021, 2020 and 2019 there were 0.2 million, 0.2 million and 0.3 million potential common shares excluded from Diluted EPS. For the year ended December 31, 2017, we had a net loss from continuing operations attributable to FMC stockholders. As a result, all 1.5 million potential common shares were excluded from Diluted EPS. For the year ended December 31, 2016, there were 0.6 million potential common shares excluded from Diluted EPS.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 shares outstanding during the period.
FMC CORPORATION
Notes to Consolidated Financial Statements — (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) | Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Earnings (loss) attributable to FMC stockholders: | | | | | |
| Continuing operations, net of income taxes | $ | 804.7 | | | $ | 579.8 | | | $ | 540.7 | |
| Discontinued operations, net of income taxes | (68.2) | | | (28.3) | | | (63.3) | |
| Net income (loss) attributable to FMC stockholders | $ | 736.5 | | | $ | 551.5 | | | $ | 477.4 | |
| Less: Distributed and undistributed earnings allocable to restricted award holders | (1.8) | | | (1.4) | | | (1.5) | |
| Net income (loss) allocable to common stockholders | $ | 734.7 | | | $ | 550.1 | | | $ | 475.9 | |
| | | | | |
| Basic earnings (loss) per common share attributable to FMC stockholders: | | | | | |
| Continuing operations | $ | 6.25 | | | $ | 4.46 | | | $ | 4.12 | |
| Discontinued operations | (0.53) | | | (0.22) | | | (0.48) | |
| Net income (loss) | $ | 5.72 | | | $ | 4.24 | | | $ | 3.64 | |
| | | | | |
| Diluted earnings (loss) per common share attributable to FMC stockholders: | | | | | |
| Continuing operations | $ | 6.23 | | | $ | 4.44 | | | $ | 4.10 | |
| Discontinued operations | (0.53) | | | (0.22) | | | (0.48) | |
| Net income (loss) | $ | 5.70 | | | $ | 4.22 | | | $ | 3.62 | |
| | | | | |
| Shares (in thousands): | | | | | |
| Weighted average number of shares of common stock outstanding - Basic | 128,403 | | | 129,701 | | | 130,761 | |
| Weighted average additional shares assuming conversion of potential common shares | 743 | | | 883 | | | 1,241 | |
| Shares – diluted basis | 129,146 | | | 130,584 | | | 132,002 | |
|
| | | | | | | | | | | |
| (in Millions, Except Share and Per Share Data) | Year Ended December 31, |
| 2018 | | 2017 | | 2016 |
| Earnings (loss) attributable to FMC stockholders: | | | | | |
| Continuing operations, net of income taxes | $ | 645.5 |
| | $ | (85.9 | ) | | $ | 128.4 |
|
| Discontinued operations, net of income taxes | (143.4 | ) | | 621.7 |
| | 80.7 |
|
| Net income (loss) attributable to FMC stockholders | $ | 502.1 |
| | $ | 535.8 |
| | $ | 209.1 |
|
| Less: Distributed and undistributed earnings allocable to restricted award holders | (2.9 | ) | | — |
| | (0.4 | ) |
| Net income (loss) allocable to common stockholders | $ | 499.2 |
| | $ | 535.8 |
| | $ | 208.7 |
|
| | | | | | |
| Basic earnings (loss) per common share attributable to FMC stockholders: | | | | | |
| Continuing operations | $ | 4.78 |
| | $ | (0.64 | ) | | $ | 0.96 |
|
| Discontinued operations | (1.06 | ) | | 4.63 |
| | 0.60 |
|
| Net income (loss) | $ | 3.72 |
| | $ | 3.99 |
| | $ | 1.56 |
|
| | | | | | |
| Diluted earnings (loss) per common share attributable to FMC stockholders: | | | | | |
| Continuing operations | $ | 4.75 |
| | $ | (0.64 | ) | | $ | 0.96 |
|
| Discontinued operations | (1.06 | ) | | 4.63 |
| | 0.60 |
|
| Net income (loss) | $ | 3.69 |
| | $ | 3.99 |
| | $ | 1.56 |
|
| | | | | | |
| Shares (in thousands): | | | | | |
| Weighted average number of shares of common stock outstanding - Basic | 134,406 |
| | 134,255 |
| | 133,890 |
|
| Weighted average additional shares assuming conversion of potential common shares | 1,473 |
| | — |
| | 648 |
|
| Shares – diluted basis | 135,879 |
| | 134,255 |
| | 134,538 |
|
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Note 18:19: 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 |
| | |
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 and option 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 and option contracts, and interest rate contracts are included in the tables within this Note. The estimated fair value of debt is $2,749.2$3,409.8 million and $3,250.6$3,640.0 million and the carrying amount is $2,726.7$3,172.5 million and $3,185.6$3,267.8 million as of December 31, 20182021 and December 31, 2017,2020, respectively.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
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 19 for more information. Decisions to extend financial guarantees to customers, and the amount of collateral required under these guarantees is 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 foreign exchange contracts, including forward and purchased option contracts, to reduce the effects of fluctuating foreign currency exchange rates.
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.
Foreign Currency Exchange Risk Management
We conduct business in many foreign countries, exposing earnings, cash flows, and our financial position to foreign currency risks. The majority of these risks arise as a result of foreign currency transactions. Our policy is to minimize exposure to adverse changes in currency exchange rates. This is accomplished through a controlled program of risk management that includes the use of foreign currency debt and forward foreign exchange contracts. We also use forward foreign exchange contracts to hedge firm and highly anticipated foreign currency cash flows, with an objective of balancing currency risk to provide adequate protection from significant fluctuations in the currency markets.
The primary currencies for which we have exchange rate exposure are the U.S. dollar versus the Brazilian Real, the Euro, thereal, Chinese yuan, theIndian rupee, euro, Mexican peso and the Argentine peso.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Commodity Price Risk
We are exposed to risks in energy costs due to fluctuations in energy prices, particularly natural gas. WeThough our current and expected future annual exposure is insignificant, we attempt to mitigate our exposure to increasing energy costs by hedging the cost of future deliveries of natural gas.
Interest Rate Risk
We use various strategies to manage our interest rate exposure, including entering into interest rate swap agreements to achieve a targeted mix of fixed and variable-rate debt. In the agreements we exchange, at specified intervals, the difference between fixed and variable-interest amounts calculated on an agreed-upon notional principal amount.
Concentration of Credit Risk
Our counterparties to derivative contracts are primarily major financial institutions. We limit the dollar amount of contracts entered into with any one financial institution and monitor counterparties’ credit ratings. We also enter into master netting agreements with each financial institution, where possible, which helps mitigate the credit risk associated with our financial instruments. While we may be exposed to credit losses due to the nonperformance of counterparties, we consider this risk remote.
Financial Guarantees and Letter-of-Credit Commitments
We enter into various financial instruments with off-balance-sheetoff-balance sheet risk as part of the normal course of business. These off-balance-sheetoff-balance sheet instruments include financial guarantees and contractual commitments to extend financial guarantees under letters of credit and other assistance to customers. See Notes 1 and 1920 to the consolidated financial statements included within this Form 10-K for more information. Decisions to extend financial guarantees to customers, and the amount of collateral required under these guarantees, is based on our evaluation of creditworthiness on a case-by-case basis.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Accounting for Derivative Instruments and Hedging Activities
Cash Flow Hedges
We recognize all derivatives on the balance sheet at fair value. On the date we enter into the derivative instrument, 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 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 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 December 31, 2018,2021, we had open foreign currency forward contracts in AOCI in a net after-tax gain position of $10.4$31.1 million designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until December 31, 2019.2022. At December 31, 2018,2021, we had open forward contracts with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $1,331.6$2,015.4 million.
As of December 31, 2018,2021, we had open interest rate contracts in AOCI in a net after tax lossafter-tax gain position of $0.2$3.0 million designated as cash flow hedges of underlying floatingthe anticipated fixed rate interest payments oncoupon of debt forecasted to be issued within a portion of our variable-rate debt.designated window. At December 31, 20182021 we had interest rate swap contracts outstanding with a total aggregate notional value of $200.0approximately $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. Refer to Note 14 to the consolidated financial statements included within this Form 10-K for further details on the Senior Notes.
As of December 31, 2018,2021, we had no open commodity contracts in AOCI designated as cash flow hedges of underlying forecasted purchases. At December 31, 2018,2021, we had no mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity forward contracts.
Approximately $10.2$31.1 million of net after-tax gains, representing open foreign currency exchange contracts, interest rate contracts, and commodity contracts will be realized in earnings during the twelve months ending December 31, 20192022 if spot rates in the future are consistent with forward rates as of December 31, 2018.2021. The actual effect on earnings will be dependent on the actual spot rates when the forecasted transactions
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
occur. We recognize derivative gains and losses in the “Costs"Costs of sales and services”services" line in the consolidated statements of income (loss).
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 $1,075.2$2,321.4 million at December 31, 2018.2021.
Fair Value of Derivative Instruments
The following tables provide the gross fair value and net balance sheet presentation of our derivative instruments as of December 31, 20182021 and 2017.2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 Consolidated Balance Sheet (3) | | Net Amounts |
| Derivatives | | | | | | | | | |
| 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 Consolidated Balance Sheet (3) | | Net Amounts |
| Derivatives | | | | | | | | | |
| 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) | |
____________________
(1) Net balance is included in "Prepaid and other current assets" in the consolidated balance sheets.
(2) Net balance is included in "Accrued and other liabilities" in the consolidated balance sheets.
(3) Represents net derivatives positions subject to master netting arrangements.
|
| | | | | | | | | | | | | | | | | | | |
| | December 31, 2018 |
| | Gross Amount of Derivatives | | | | | | |
| (in Millions) | Designated as Cash Flow Hedges | | Not Designated as Hedging Instruments | | Total Gross Amounts | | Gross Amounts Offset in the Consolidated Balance Sheet (3) | | Net Amounts |
| Derivatives | | | | | | | | | |
| Foreign exchange contracts | $ | 18.3 |
| | $ | 1.5 |
| | $ | 19.8 |
| | $ | (8.1 | ) | | $ | 11.7 |
|
Total derivative assets (1) | $ | 18.3 |
| | $ | 1.5 |
| | $ | 19.8 |
| | $ | (8.1 | ) | | $ | 11.7 |
|
| | | | | | | | | | |
| Foreign exchange contracts | $ | (9.2 | ) | | $ | (0.2 | ) | | $ | (9.4 | ) | | $ | 8.1 |
| | $ | (1.3 | ) |
| Interest rate contracts | (0.2 | ) | | — |
| | (0.2 | ) | | $ | — |
| | (0.2 | ) |
Total derivative liabilities (2) | $ | (9.4 | ) | | $ | (0.2 | ) | | $ | (9.6 | ) | | $ | 8.1 |
| | $ | (1.5 | ) |
| | | | | | | | | | |
| Net derivative assets (liabilities) | $ | 8.9 |
| | $ | 1.3 |
| | $ | 10.2 |
| | $ | — |
| | $ | 10.2 |
|
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| | Gross Amount of Derivatives | | |
| (in Millions) | Designated as Cash Flow Hedges | | Not Designated as Hedging Instruments | | Total Gross Amounts | | Gross Amounts Offset in the Consolidated Balance Sheet (3) | | Net Amounts |
| Derivatives | | | | | | | | | |
| Foreign exchange contracts | $ | 7.0 |
| | $ | 1.2 |
| | $ | 8.2 |
| | $ | (1.5 | ) | | $ | 6.7 |
|
Total derivative assets (1) | $ | 7.0 |
| | $ | 1.2 |
| | $ | 8.2 |
| | $ | (1.5 | ) | | $ | 6.7 |
|
| | | | | | | | | | |
| Foreign exchange contracts | $ | (3.6 | ) | | $ | (0.2 | ) | | $ | (3.8 | ) | | $ | 1.5 |
| | $ | (2.3 | ) |
Total derivative liabilities (2) | $ | (3.6 | ) | | $ | (0.2 | ) | | $ | (3.8 | ) | | $ | 1.5 |
| | $ | (2.3 | ) |
| | | | | | | | | | |
| Net derivative assets (liabilities) | $ | 3.4 |
| | $ | 1.0 |
| | $ | 4.4 |
| | $ | — |
| | $ | 4.4 |
|
____________________
| |
(1) | Net balance is included in “Prepaid and other current assets” in the consolidated balance sheets. |
| |
(2) | Net balance is included in “Accrued and other liabilities” in the consolidated balance sheets. |
| |
(3) | Represents net derivatives positions subject to master netting arrangements. |
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
The following tables summarize the gains or losses related to our cash flow hedges and derivatives not designated as hedging instruments.instruments:
Derivatives in Cash Flow Hedging Relationships
|
| | | | | | | | | | | | |
| | Contracts | |
| (in Millions) | Foreign exchange | Energy | Other | Total |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2015 | $ | (6.1 | ) | $ | (1.3 | ) | $ | 1.2 |
| $ | (6.2 | ) |
| 2016 Activity | | | | |
| Unrealized hedging gains (losses) and other, net of tax | $ | 6.1 |
| $ | 1.2 |
| $ | — |
| $ | 7.3 |
|
| Reclassification of deferred hedging (gains) losses, net of tax | | | | |
Effective Portion (1) | $ | 5.1 |
| $ | 1.5 |
| $ | (0.1 | ) | $ | 6.5 |
|
Ineffective Portion (1) | (0.5 | ) | — |
| — |
| (0.5 | ) |
| Total derivative instrument impact on comprehensive income, net of tax | $ | 10.7 |
| $ | 2.7 |
| $ | (0.1 | ) | $ | 13.3 |
|
| | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2016 | $ | 4.6 |
| $ | 1.4 |
| $ | 1.1 |
| $ | 7.1 |
|
| 2017 Activity | | | | |
| Unrealized hedging gains (losses) and other, net of tax | $ | (0.4 | ) | $ | (0.8 | ) | $ | — |
| $ | (1.2 | ) |
| Reclassification of deferred hedging (gains) losses, net of tax | | | | |
Effective Portion (1) | $ | 0.3 |
| $ | (0.6 | ) | $ | (0.3 | ) | $ | (0.6 | ) |
Ineffective Portion (1) | (0.1 | ) | — |
| — |
| (0.1 | ) |
| Total derivative instrument impact on comprehensive income, net of tax | $ | (0.2 | ) | $ | (1.4 | ) | $ | (0.3 | ) | $ | (1.9 | ) |
| | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2017 | $ | 4.4 |
| $ | — |
| $ | 0.8 |
| $ | 5.2 |
|
| 2018 Activity | | | | |
| Unrealized hedging gains (losses) and other, net of tax | $ | 14.2 |
| $ | — |
| $ | (0.5 | ) | $ | 13.7 |
|
| Reclassification of deferred hedging (gains) losses, net of tax | | | | |
Effective Portion (1) | $ | (8.1 | ) | $ | — |
| $ | 0.5 |
| $ | (7.6 | ) |
Ineffective Portion (1) | (0.1 | ) | — |
| — |
| (0.1 | ) |
| Total derivative instrument impact on comprehensive income, net of tax | $ | 6.0 |
| $ | — |
| $ | — |
| $ | 6.0 |
|
| | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2018 | $ | 10.4 |
| $ | — |
| $ | 0.8 |
| $ | 11.2 |
|
| | | | | | | | | | | | | | | |
| Contracts | | | | |
| (in Millions) | Foreign exchange | | Interest rate | Total | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2018 | $ | 10.4 | | | $ | 0.8 | | $ | 11.2 | | | | |
| 2019 Activity | | | | | | | |
| Unrealized hedging gains (losses) and other, net of tax | $ | (3.1) | | | $ | (65.9) | | $ | (69.0) | | | | |
Reclassification of deferred hedging (gains) losses, net of tax (1) | (8.7) | | | 0.5 | | (8.2) | | | | |
| Total derivative instrument impact on comprehensive income, net of tax | $ | (11.8) | | | $ | (65.4) | | $ | (77.2) | | | | |
| Adoption of accounting standard (Note 2) | $ | — | | | $ | 1.0 | | $ | 1.0 | | | | |
| | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2019 | $ | (1.4) | | | $ | (63.6) | | $ | (65.0) | | | | |
| 2020 Activity | | | | | | | |
| Unrealized hedging gains (losses) and other, net of tax | $ | (3.8) | | | $ | 1.3 | | $ | (2.5) | | | | |
Reclassification of deferred hedging (gains) losses, net of tax (1) | (6.4) | | | 2.1 | | (4.3) | | | | |
| Total derivative instrument impact on comprehensive income, net of tax | $ | (10.2) | | | $ | 3.4 | | $ | (6.8) | | | | |
| | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2020 | $ | (11.6) | | | $ | (60.2) | | $ | (71.8) | | | | |
| 2021 Activity | | | | | | | |
| Unrealized hedging gains (losses) and other, net of tax | $ | 40.5 | | | $ | 3.6 | | $ | 44.1 | | | | |
Reclassification of deferred hedging (gains) losses, net of tax (1) | 2.2 | | | 3.3 | | 5.5 | | | | |
| Total derivative instrument impact on comprehensive income, net of tax | $ | 42.7 | | | $ | 6.9 | | $ | 49.6 | | | | |
| | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2021 | $ | 31.1 | | | $ | (53.3) | | $ | (22.2) | | | | |
____________________
| |
(1) | Amounts are included in “Cost of sales and services” and "Interest expense" on the consolidated statements of income (loss). |
(1)Amounts are included in "Costs of sales and services", "Selling, general and administrative expenses", and "Interest expense" on the consolidated statements of income (loss).
Derivatives Not Designated as Hedging Instruments
|
| | | | | | | | | | | | |
| | Location of Gain or (Loss) Recognized in Income on Derivatives | Amount of Pre-tax Gain or (Loss) Recognized in Income on Derivatives (1) |
| | | Year Ended December 31, |
| (in Millions) | | 2018 | | 2017 | | 2016 |
| Foreign Exchange contracts | Cost of Sales and Services | $ | (11.1 | ) | | $ | (12.2 | ) | | $ | (42.7 | ) |
| Total | | $ | (11.1 | ) | | $ | (12.2 | ) | | $ | (42.7 | ) |
| | | | | | | | | | | | | | | | | |
| Amount of Pre-tax Gain (Loss) Recognized in Income on Derivatives (1) |
| Year Ended December 31, |
| (in Millions) | 2021 | | 2020 | | 2019 |
| Foreign exchange contracts | $ | (47.7) | | | $ | (62.9) | | | $ | (26.7) | |
| | | | | |
| Total | $ | (47.7) | | | $ | (62.9) | | | $ | (26.7) | |
____________________
| |
(1) | Amounts in the columns represent the gain or loss on the derivative instrument offset by the gain or loss on the hedged item. |
(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.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
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.
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 our consolidated balance sheets.sheets:
| | | | | | | | | | | | | | | | | | | | | | | |
| (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 | | | $ | — | |
| | | (in Millions) | December 31, 2018 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | (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 | | | | | | | | Assets | | | | | | | |
| Derivatives – Foreign exchange (1) | $ | 11.7 |
| | $ | — |
| | $ | 11.7 |
| | $ | — |
| Derivatives – Foreign exchange (1) | $ | 0.2 | | | $ | — | | | $ | 0.2 | | | $ | — | |
Derivatives - Interest Rate (1) | | Derivatives - Interest Rate (1) | 0.1 | | | — | | | 0.1 | | | — | |
Other (2) | 17.7 |
| | 17.7 |
| | — |
| | — |
| Other (2) | 24.1 | | | 24.1 | | | — | | | — | |
| Total Assets | $ | 29.4 |
| | $ | 17.7 |
| | $ | 11.7 |
| | $ | — |
| Total Assets | $ | 24.4 | | | $ | 24.1 | | | $ | 0.3 | | | $ | — | |
| | | | | | | | | | | | | | | | |
| Liabilities | | | | | | | | Liabilities | |
| Derivatives – Foreign exchange (1) | $ | 1.3 |
| | $ | — |
| | $ | 1.3 |
| | $ | — |
| Derivatives – Foreign exchange (1) | $ | 24.7 | | | $ | — | | | $ | 24.7 | | | $ | — | |
Derivatives - Interest Rate (1) | 0.2 |
| | — |
| | 0.2 |
| | — |
| Derivatives - Interest Rate (1) | 0.9 | | | — | | | 0.9 | | | — | |
Other (3) | 27.4 |
| | 24.3 |
| | 3.1 |
| | — |
| Other (3) | 35.2 | | | 35.2 | | | — | | | — | |
| Total Liabilities | $ | 28.9 |
| | $ | 24.3 |
| | $ | 4.6 |
| | $ | — |
| Total Liabilities | $ | 60.8 | | | $ | 35.2 | | | $ | 25.6 | | | $ | — | |
____________________
| |
(1) | See the Fair Value of Derivative Instruments table within this Note for classifications on our consolidated balance sheets. |
| |
(2) | Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheet. Both the asset and liability are recorded at fair value. Asset amounts included in “Other assets including long-term receivables, net” in the consolidated balance sheets. |
| |
(3) | Primarily consists of a deferred compensation arrangement recognized on our balance sheet. Both the asset and liability are recorded at fair value. Liability amounts included in “Other long-term liabilities” in the consolidated balance sheets. |
(1)See the Fair Value of Derivative Instruments table within this Note for classifications on our consolidated balance sheets.
(2)Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheet. Both the asset and liability are recorded at fair value. Asset amounts included in "Other assets including long-term receivables, net" in the consolidated balance sheets.
(3)Primarily consists of a deferred compensation arrangement recognized on our balance sheet. Both the asset and liability are recorded at fair value. Liability amounts included in "Other long-term liabilities" in the consolidated balance sheets.
Nonrecurring Fair Value Measurements
There were no non-recurring fair value measurements in the consolidated balance sheets during the periods presented.
|
| | | | | | | | | | | | | | | |
| (in Millions) | December 31, 2017 | | 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) | $ | 6.7 |
| | $ | — |
| | $ | 6.7 |
| | $ | — |
|
Other (2) | 30.1 |
| | 30.1 |
| | — |
| | — |
|
| Total Assets | $ | 36.8 |
| | $ | 30.1 |
| | $ | 6.7 |
| | $ | — |
|
| | | | | | | | |
| Liabilities | | | | | | | |
Derivatives – Foreign exchange (1) | $ | 2.3 |
| | $ | — |
| | $ | 2.3 |
| | $ | — |
|
Other (3) | 46.6 |
| | 38.8 |
| | 7.8 |
| | — |
|
| Total Liabilities | $ | 48.9 |
| | $ | 38.8 |
| | $ | 10.1 |
| | $ | — |
|
____________________
| |
(1) | See the Fair Value of Derivative Instruments table within this Note for classifications on our consolidated balance sheets. |
| |
(2) | Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheet. Both the asset and liability are recorded at fair value. Asset amounts included in “Other assets including long-term receivables, net” in the consolidated balance sheets. |
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
| |
(3) | Primarily consists of a deferred compensation arrangement recognized on our balance sheet. Both the asset and liability are recorded at fair value. Liability amounts included in “Other long-term liabilities” in the consolidated balance sheets. |
Nonrecurring Fair Value Measurements
The following tables present our fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis in our consolidated balance sheets during the year ended December 31, 2018 and 2017. See Note 4 for the assets and liabilities measured on a non-recurring basis at fair value associated with our acquisitions.
|
| | | | | | | | | | | | | | | | | | | |
| (in Millions) | December 31, 2018 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total Gains (Losses) (Year Ended December 31, 2018) |
| Assets | | | | | | | | | |
Impairment of intangibles (1) | $ | 3.1 |
| | $ | — |
| | $ | — |
| | $ | 3.1 |
| | $ | (1.8 | ) |
| Total Assets | $ | 3.1 |
| | $ | — |
| | $ | — |
| | $ | 3.1 |
| | $ | (1.8 | ) |
____________________ | |
(1) | We recorded an impairment charge, related to our FMC Agricultural Solutions segment, to write down the carrying value of the generic brand portfolio of approximately $2 million to its fair value. |
|
| | | | | | | | | | | | | | | | | | | |
| (in Millions) | December 31, 2017 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total Gains (Losses) (Year Ended December 31, 2017) |
| Assets | | | | | | | | | |
Impairment of Crop Protection intangibles (1) | $ | 1,136.1 |
| | $ | — |
| | $ | — |
| | $ | 1,136.1 |
| | $ | (42.1 | ) |
Impairment of intangibles (2) | 4.3 |
| | — |
| | — |
| | 4.3 |
| | (1.3 | ) |
| Total Assets | $ | 1,140.4 |
| | $ | — |
| | $ | — |
| | $ | 1,140.4 |
| | $ | (43.4 | ) |
____________________
| |
(1) | Represents impairment charge to write down certain indefinite-lived intangible assets of the acquired DuPont Crop Protection Business as a result of a triggering event for the United States' enactment of the Act. See Note 12 for further details on the tax legislation. |
| |
(2) | We recorded an impairment charge, related to our FMC Agricultural Solutions segment, to write down the carrying value of the generic brand portfolio of approximately $1 million to its fair value. |
Note 19:20: 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.
The following table provides the estimated undiscounted amount of potential future payments for each major group of guarantees at December 31, 2018.2021. These guarantees arise during the ordinary course of business from relationships with customers and nonconsolidated 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) | $ | 67.1 |
|
Other debt guarantees (2) | 4.2 |
|
| Total | $ | 71.3 |
|
____________________ | | | | | |
| (in Millions) | |
| Guarantees: | |
Guarantees of vendor financing - short term (1) | $ | 206.2 | | | | (1)Other debt guarantees (2) | Represents guarantees to financial institutions on behalf of certain FMC Agricultural Solutions customers for their seasonal borrowing. The short-term amount is recorded on the consolidated balance sheets as “Guarantees of vendor financing.” |
| 9.7 | | (2)Total | These guarantees represent support provided to third-party banks for credit extended to various FMC Agricultural Solutions customers and nonconsolidated affiliates. The liability for the guarantees is recorded at an amount that approximates fair value (i.e. representing$ | 215.9 | |
____________________ 105
FMC CORPORATION
Notes(2)These guarantees represent support provided to Consolidated Financial Statements — (Continued)
third-party banks for credit extended to various customers and nonconsolidated 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 believeIn the past, the fair value of these guarantees is immaterial. Thehas been immaterial and the majority of these guarantees have had an expiration date of less than one year.
Excluded from the chart above are parent companyparent-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 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 buyersbuyer 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 thesecertain 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. WeTherefore, we have not recorded any specific liabilities for these guarantees.
Commitments
Leases
We lease office space, plants and facilities, and various types of manufacturing, data processing and transportation equipment. Leases of real estate generally provide for our payment of property taxes, insurance and repairs. During 2018, we migrated our Ewing R&D activities and employees into the newly acquired Stine facilities and exited the Ewing facilities. Refer to Note 8 for further details. As of December 31, 2018, we had one capital lease For certain obligations related to our researchdivestitures for which we can make a reasonable estimate of the maximum potential loss or range of loss and technology centeris probable, a liability in China. Our capital lease asset balances (net of accumulated amortization of $1.9 million and $2.3 million), which are classified as buildings within our property, plant and equipment on our consolidated balance sheets, were $13.0 million and $16.4 million as of December 31, 2018 and 2017, respectively. Amortization of capital lease assets is included within depreciation expense. See Note 21 within these consolidated financial statements for obligations associated with our capital leases.those instances has been recorded.
| | | | | | | | | | | | | | | Year ended December 31, | | (in Millions) | 2018 | | 2017 | | 2016 | | Operating leases rent expense | $ | 41.1 |
| | $ | 27.6 |
| | $ | 21.2 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | Future Minimum Lease Payments | | (in Millions) | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | Thereafter | | Operating Leases | $ | 36.7 |
| | $ | 31.7 |
| | $ | 21.0 |
| | $ | 17.5 |
| | $ | 13.5 |
| | $ | 107.5 |
| | Capital Lease | 2.9 |
| | 2.9 |
| | 3.1 |
| | 3.1 |
| | 3.1 |
| | 4.3 |
|
Commitments
Purchase Obligations Our minimum commitments under our take-or-pay purchase obligations associated with the sourcing of materials and energy total approximately $1,254$702.9 million. Since the majority of our minimum obligations under these contracts are over the life of the contract on a year-by-year basis, we are unable to determine the periods in which these obligations could be payable under these contracts. However, we intend to fulfill the obligations associated with these contracts through our purchases associated with the normal course of business. Contingencies Competition / antitrust litigationLivent 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 discontinued FMC Peroxygens segment. We are subject to actions brought by private plaintiffsIPO. 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 alleged violations of Europeanthe Livent IPO, including the claims in both the state and Canadian competition and antitrust laws, as further described below.
European competition action. Multiple European purchasers of hydrogen peroxide who claimfederal actions. There is no financial impact to have been harmedFMC as a result of alleged violations of European competition law by hydrogen peroxide producers assigned their legal claims to a single entity formed by a law firm. The single entity then filed a lawsuit in Germany in March 2009 against European producers, including our wholly-owned Spanish subsidiary, Foret. Initial defense briefs were filed in April 2010, and an initial hearing was held during the first quarter of 2011, at which time case management issues were discussed. At a subsequent hearing in October 2011, the Court indicated that it was considering seeking guidance from the European Court of Justice (“ECJ”) as to whether the German courts have jurisdiction over these claims. After submission of written comments on this issue by the parties, on March 1, 2012, the judge announced that she would refer the jurisdictional issues to the ECJ, which she did onsettlement.
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
April 29, 2013. On May 21, 2015, the ECJ issued its decision, upholding the jurisdiction of the German court. The case is now back before the German judge. We filed a motion to dismiss the proceedings in September 2015. We anticipate a response by the court in the first half of 2019. Since the case is in the preliminary stages and is based on a novel procedure - namely the attempt to create a cross-border “class action” which is not a recognized proceeding under EU or German law - we are unable to develop a reasonable estimate of our potential exposure of loss at this time. We intend to vigorously defend this matter.
Canadian antitrust actions. In 2005, after public disclosures of the U.S. federal grand jury investigation into the hydrogen peroxide industry, which resulted in no charges brought against us, and the filing of various class actions in U.S. federal and state courts, which have all been settled, putative class actions against us and five other major hydrogen peroxide producers were filed in provincial courts in Ontario, Quebec and British Columbia under the laws of Canada. The other five defendants have settled these claims for a total of approximately $20.6 million. On September 28, 2009, the Ontario Superior Court of Justice certified a class of direct and indirect purchasers of hydrogen peroxide from 1994 to 2005. Our motion for leave to appeal the class certification decision was denied in June 2010. The case was largely dormant while the Canadian Supreme Court considered, in different litigation, whether indirect purchasers may recover overcharges in antitrust actions. In October 2013 the Court ruled that such recovery is permissible. Thereafter, the plaintiffs' moved to dismiss certain downstream purchasers (those who purchased products that contain hydrogen peroxide or were made using hydrogen peroxide) from the case and to reduce the class period to November 1, 1998 through December 31, 2003 - thereby eliminating six of the eleven years of the originally certified class period. The Court approved this request. Following an active period of discovery the plaintiffs approached FMC for settlement negotiations in July 2018. The plaintiffs and FMC subsequently reached agreement and signed a settlement agreement on September 27, 2018, providing for a payment of CAD 3.25 million ($2.5 million) to plaintiffs. The settlement payment was made in the fourth quarter of 2018. This was recorded within "Discontinued operations, net of income taxes" on the consolidated statements of income (loss). Subject to court approval, which is expected, the settlement agreement fully and finally resolved the Canadian litigation.
Asbestos claims. Like hundreds of other industrial companies, we have been named as one of many defendants in asbestos-related personal injury litigation. Most of these cases allege personal injury or death resulting from exposure to asbestos in premises of FMC or to asbestos-containing components installed in machinery or equipment manufactured or sold by discontinued operations.
FMC CORPORATION Notes to Consolidated Financial Statements — (Continued)
We intend to continue managing these asbestos-related cases in accordance with our historical experience. We have established a reserve for this litigation within our discontinued operations and believe that any exposure of a loss in excess of the established reserve cannot be reasonably estimated. Our experience has been that the overall trends in asbestos litigation have changed over time. Over the last several years, we have seen changes in the jurisdictions where claims against FMC are being filed and changes in the mix of products named in the various claims. Because these claim trends have yet to form a predictable pattern, we are presently unable to reasonably estimate our asbestos liability with respect to claims that may be filed in the future. Other contingent liabilities. In addition to the matters disclosed above, we have certain other contingent liabilities arising from litigation, claims, products we have sold, guarantees or warranties we have made, contracts we have entered into, indemnities we have provided, and other commitments or obligations incident to the ordinary course of business. In Brazil, we are subject to claims from various governmental agencies regarding alleged additional indirect (non-income) taxes or duties as well as product liability matters and labor cases related to our operations. These disputes take many years to resolve as the matters move through administrative or judicial courts. We have provided reserves for such Brazilian matters that we consider probable and for which a reasonable estimate of the obligation can be made in the amount of $1.7$3.3 million and $2.2$4.1 million as of December 31, 20182021 and 2017,2020, respectively. The aggregate estimated reasonably possible loss contingencies related to such Brazilian matters exceed amounts accrued by approximately $77 million at December 31, 2018.2021. 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 ultimate decision by administrative or judicial authorities in Brazil. In India, we are subject to audits or other proceedings by tax authorities regarding certain alleged additional indirect taxes related to our operations. Indian tax authorities have recently begun auditing or investigating many companies, including our FMC subsidiary in India, on the goods and service tax ("GST") indirect tax law which came into force in 2017. Such proceedings and potential future litigations, in which the tax authorities are challenging the technical tax position taken by the Company, take many years to resolve as the matters are heard and decided upon by tax authorities or courts. We have provided reserves for such historical Indian tax matters that we consider probable and a reasonable estimate of the obligation can be made in the amount of approximately $33.5 million, as of December 31, 2021. Regarding other contingencies arising from operations, some of these contingencies are known - for example pending product liability litigation or claims - but are so preliminary that the merits cannot be determined, or if more advanced, are not deemed material based on current knowledge. Some contingencies are unknown - for example, claims with respect to which we have no notice or claims which may arise in the future, resulting from products we have sold, guarantees or warranties we have made, or indemnities we have provided. Therefore, we are unable to develop a reasonable estimate of our potential exposure of loss for these contingencies, either individually or in the aggregate, at this time. Based on information currently available and established reserves, we have no reason to believe that the ultimate resolution of our known contingencies, including the matters described in this Note, will have a material adverse effect on our consolidated financial position, liquidity or results of operations. However, there can be no assurance that the outcome of these contingencies will be favorable, and adverse
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
results in certain of these contingencies could have a material adverse effect on our consolidated financial position, results of operations in any one reporting period, or liquidity. See Note 1112 to the consolidated financial statements included within this Form 10-K for the Pocatello tribalTribal litigation, Middleport litigation, and Portland Harbor litigationsite for legal proceedings associated with our environmental contingencies.
Note 20:21: Segment Information | | | | | | | | | | | | | | (in Millions) | Year Ended December 31, | | 2018 |
| 2017 |
| 2016 | Revenue (1) |
|
|
|
|
| | FMC Agricultural Solutions | $ | 4,285.3 |
|
| $ | 2,531.2 |
|
| $ | 2,274.8 |
| | FMC Lithium | 442.5 |
|
| 347.4 |
|
| 264.1 |
| | Total | $ | 4,727.8 |
|
| $ | 2,878.6 |
|
| $ | 2,538.9 |
| | Earnings before interest, taxes and depreciation and amortization (EBITDA) | |
|
|
|
| | FMC Agricultural Solutions | $ | 1,217.8 |
|
| $ | 576.1 |
|
| $ | 480.7 |
| | FMC Lithium | 195.7 |
|
| 141.9 |
|
| 85.0 |
| | Corporate and other | (108.9 | ) |
| (95.1 | ) |
| (79.6 | ) | | Operating profit before the items listed below | $ | 1,304.6 |
|
| $ | 622.9 |
|
| $ | 486.1 |
| | Depreciation and amortization | (168.2 | ) |
| (113.0 | ) |
| (100.6 | ) | | Interest expense, net | (133.1 | ) |
| (79.1 | ) |
| (62.9 | ) | Restructuring and other (charges) income (2) | (63.7 | ) |
| (81.4 | ) |
| (95.0 | ) | Non-operating pension and postretirement (charges) income (3) | (3.8 | ) |
| (18.2 | ) |
| (23.4 | ) | Transaction-related charges (4) | (192.1 | ) |
| (150.4 | ) |
| (23.4 | ) | | (Provision) benefit for income taxes | (88.8 | ) |
| (264.1 | ) |
| (50.1 | ) | | Discontinued operations, net of income taxes | (143.4 | ) |
| 621.7 |
|
| 81.0 |
| | Net (income) loss attributable to noncontrolling interests | (9.4 | ) |
| (2.6 | ) |
| (2.6 | ) | | Net income (loss) attributable to FMC stockholders | $ | 502.1 |
|
| $ | 535.8 |
|
| $ | 209.1 |
|
____________________
| | (1) | Refer to Note 3 for further disaggregation of revenue in accordance with ASC 606. |
| | (2) | See Note 8 for details of restructuring and other (charges) income. Below provides the detail the (charges) income by segment: |
| | | | | | | | | | | | |
| Year Ended December 31, | | (in Millions) | 2018 |
| 2017 |
| 2016 | | FMC Agricultural Solutions | $ | (33.3 | ) |
| $ | (49.9 | ) |
| $ | (62.4 | ) | | FMC Lithium | (2.3 | ) |
| (7.8 | ) |
| (0.6 | ) | | Corporate | (28.1 | ) |
| (23.7 | ) |
| (32.0 | ) | | Restructuring and other (charges) income | $ | (63.7 | ) |
| $ | (81.4 | ) |
| $ | (95.0 | ) |
| | (3) | 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 segments 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 Adjusted Earnings results noted above. These elements reflect the current year operating costs to our businesses for the employment benefits provided to active employees. |
| | (4) | Charges relate to the expensing of the inventory fair value step-up resulting from the application of purchase accounting, transaction costs, costs for transitional employees, other acquired employee related costs, integration related legal and professional third-party fees. Amounts represent the following: |
FMC CORPORATION Notes to Consolidated Financial Statements — (Continued)
For revenue by major geographical region, refer to Note 3 to the consolidated financial statements included within this Form 10-K. The following table provides our long-lived assets by major geographical region:
| | | | | | | | | | | | |
| Year Ended December 31, | | (in Millions) | 2018 |
| 2017 |
| 2016 | Acquisition-related charges - DuPont Crop |
|
|
|
|
|
|
|
| Legal and professional fees (1) | $ | 86.9 |
|
| $ | 130.2 |
|
| $ | — |
| Inventory fair value amortization (2) | 69.6 |
|
| 20.2 |
|
| — |
| Acquisition-related charges - Cheminova (3) |
|
|
|
|
|
|
|
| Legal and professional fees (1) | — |
|
| — |
|
| 23.4 |
| Separation-related charges - FMC Lithium |
|
|
|
|
|
|
|
| Legal and professional fees (1) | 35.6 |
|
| — |
|
| — |
| | Total transaction-related charges | $ | 192.1 |
|
| $ | 150.4 |
|
| $ | 23.4 |
|
____________________
| | (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 consolidated statements of income (loss). |
| | (2) | These charges are included in “Costs of sales and services” on the consolidated statements of income (loss). |
| | (3) | Acquisition-related charges and restructuring charges to integrate Cheminova with FMC Agricultural Solutions were completed at the end of 2016. |
| | | | | | | | | | (in Millions) | December 31, | | 2018 | | 2017 | Operating capital employed (1) | | | | | FMC Agricultural Solutions | $ | 6,326.3 |
| | $ | 6,216.3 |
| | FMC Lithium | 537.7 |
| | 393.9 |
| | Total operating capital employed | $ | 6,864.0 |
| | $ | 6,610.2 |
| | Segment liabilities included in total operating capital employed | 2,444.4 |
| | 1,957.9 |
| | Assets of discontinued operations held for sale | — |
| | 7.3 |
| | Corporate items | 665.9 |
| | 630.9 |
| | Total assets | $ | 9,974.3 |
| | $ | 9,206.3 |
| Segment assets (2) | | | | | FMC Agricultural Solutions | $ | 8,660.4 |
| | $ | 8,094.0 |
| | FMC Lithium | 648.0 |
| | 474.1 |
| | Total segment assets | $ | 9,308.4 |
| | $ | 8,568.1 |
| | Assets of discontinued operations held for sale | — |
| | 7.3 |
| | Corporate items | 665.9 |
| | 630.9 |
| | Total assets | $ | 9,974.3 |
| | $ | 9,206.3 |
|
| | | | | | | | | | | | | (in Millions) | December 31, | | 2021 | | 2020 | Long-lived assets (1) | | | | North America (2) | $ | 1,091.3 | | | $ | 1,230.2 | | | Latin America | 742.6 | | | 792.7 | | Europe, Middle East, and Africa (2) | 1,499.0 | | | 1,513.9 | | Asia (2) | 2,092.3 | | | 2,044.4 | | | Total | $ | 5,425.2 | | | $ | 5,581.2 | |
____________________ | | (1) | We view operating capital employed, which consists of assets, net of liabilities, reported by our operations and excluding corporate items such as cash equivalents, debt, pension liabilities, income taxes and LIFO reserves, as our primary measure of segment capital. |
| | (2) | Segment assets are assets recorded and reported by the segments and are equal to segment operating capital employed plus segment liabilities. See Note 1. |
(1)Geographic long-lived assets exclude long-term deferred income taxes and assets of discontinued operations on the consolidated balance sheets.
Table(2)The countries with long-lived assets in excess of Contents10 percent of consolidated long-lived assets at December 31, 2021 and 2020 are Singapore, which totaled $1,622.8 million and $1,582.5 million, the U.S., which totaled $1,083.8 million and $1,221.3 million and Denmark, which totaled $1,081.9 million and $1,104.6 million, respectively.FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | (in Millions) | Capital Expenditures (1) | | Depreciation and Amortization | | Research and Development Expense | | 2018 | | 2017 | | 2016 | | 2018 | | 2017 | | 2016 | | 2018 | | 2017 | | 2016 | | FMC Agricultural Solutions | $ | 74.5 |
| | $ | 26.2 |
| | $ | 23.1 |
| | $ | 143.6 |
| | $ | 90.5 |
| | $ | 80.8 |
| | $ | 287.7 |
| | $ | 138.4 |
| | $ | 131.4 |
| | FMC Lithium | 73.6 |
| | 47.4 |
| | 24.4 |
| | 18.0 |
| | 15.2 |
| | 14.8 |
| | 3.8 |
| | 3.1 |
| | 3.1 |
| | Corporate | 8.5 |
| | 12.1 |
| | 43.7 |
| | 6.6 |
| | 7.3 |
| | 5.0 |
| | — |
| | — |
| | — |
| | Total | $ | 156.6 |
| | $ | 85.7 |
| | $ | 91.2 |
| | $ | 168.2 |
| | $ | 113.0 |
| | $ | 100.6 |
| | $ | 291.5 |
| | $ | 141.5 |
| | $ | 134.5 |
|
___________________
| | (1) | Cash spending associated with contract manufacturers in our FMC Agricultural Solutions segment, which are not included in the table above was $17.8 million, $15.9 million and $10.4 million for the years ended December 31, 2018. 2017 and 2016, respectively. |
Geographic Segment Information
| | | | | | | | | | | | | | (in Millions) | Year Ended December 31, | | 2018 | | 2017 | | 2016 | | Revenue from continuing operations (by location of customer) | | | | | | North America (1) | $ | 1,175.2 |
| | $ | 708.1 |
| | $ | 623.0 |
| | Europe, Middle East, and Africa | 1,040.5 |
| | 583.4 |
| | 558.5 |
| Latin America (1) | 1,212.1 |
| | 868.6 |
| | 761.2 |
| | Asia Pacific | 1,300.0 |
| | 718.5 |
| | 596.2 |
| | Total | $ | 4,727.8 |
| | $ | 2,878.6 |
| | $ | 2,538.9 |
|
____________________
| | (1) | In 2018, countries with sales in excess of 10 percent of consolidated revenue consisted of the U.S. and Brazil. Sales for the years ended December 31, 2018, 2017 and 2016 for the U.S. totaled $1,074.2 million, $655.2 million and $596.4 million and for Brazil totaled $913.7 million, $598.5 million and $490.9 million, respectively. |
| | | | | | | | | | (in Millions) | December 31, | | 2018 | | 2017 | Long-lived assets (1) | | | | North America (2) | $ | 1,176.4 |
| | $ | 981.1 |
| Europe, Middle East, and Africa (2) | 1,438.3 |
| | 1,493.3 |
| | Latin America | 1,009.9 |
| | 925.0 |
| | Asia Pacific | 2,046.3 |
| | 1,901.5 |
| | Total | $ | 5,670.9 |
| | $ | 5,300.9 |
|
____________________
| | (1) | Geographic segment long-lived assets exclude long-term deferred income taxes and assets of discontinued operations held for sale on the consolidated balance sheets. |
| | (2) | The countries with long-lived assets in excess of 10 percent of consolidated long-lived assets at December 31, 2018 are Singapore, which totaled $1,558.9 million, the U.S., which totaled $1,167.7 million, and Denmark, which totaled $1,044.2 million, respectively. The long-lived assets over the threshold at December 31, 2017 were Singapore, which totaled $1,414.9 million, the U.S., which totaled $976.9 million, and Denmark, which totaled $1,096.2 million, respectively. |
FMC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Note 21:22: Supplemental Information
The following tables present details of prepaid and other current assets, other assets including long-term receivables, net, accrued and other liabilities and other long-term liabilities as presented on the consolidated balance sheets: | | | | | | | | | | | | | (in Millions) | December 31, | | 2021 | | 2020 | | Prepaid and other current assets | | | | | Prepaid insurance | $ | 12.0 | | | $ | 11.1 | | | | | | | | | | | Tax related items including value added tax receivables | 226.2 | | | 197.7 | | Refund asset (1) | 36.4 | | | 28.4 | | | Environmental obligation recoveries (Note 12) | 2.2 | | | 0.8 | | | Derivative assets (Note 19) | 23.4 | | | 0.3 | | | | | | | Acquisition related items | 3.0 | | | 3.0 | | | | | | | Other prepaid and current assets | 128.2 | | | 139.5 | | | Total | $ | 431.4 | | | $ | 380.8 | |
| | | | | | | | | | (in Millions) | December 31, | | 2018 | | 2017 | | Prepaid and other current assets | | | | | Prepaid insurance | $ | 8.1 |
| | $ | 8.2 |
| Bank acceptance drafts (1) | 29.1 |
| | — |
| | Tax related items including value added tax receivables | 219.3 |
| | 127.3 |
| Refund asset (2) | 49.7 |
| | — |
| | Environmental obligation recoveries (Note 11) | 6.2 |
| | 7.0 |
| | Derivative assets (Note 18) | 11.7 |
| | 6.7 |
| Argentina government receivable (3) | 3.2 |
| | 3.2 |
| Acquisition related items (4) | 3.4 |
| | 54.7 |
| | Other prepaid and current assets | 155.3 |
| | 119.3 |
| | Total | $ | 486.0 |
| | $ | 326.4 |
|
| | | | | | | | | | | | | (in Millions) | December 31, | | 2021 | | 2020 | | Other assets including long-term receivables, net | | | | | Non-current receivables (Note 10) | $ | 57.4 | | | $ | 103.5 | | | Advance to contract manufacturers | 129.0 | | | 122.2 | | | Capitalized software, net | 143.8 | | | 158.0 | | | Environmental obligation recoveries (Note 12) | 2.3 | | | 3.6 | | | | | | | Income taxes indirect benefits | 33.4 | | | 37.9 | | | Operating lease ROU asset (Note 4) | 135.2 | | | 147.3 | | | Deferred compensation arrangements (Note 19) | 21.1 | | | 24.1 | | | Pension and other postretirement benefits (Note 15) | 50.4 | | | 69.5 | | | Other long-term assets | 41.2 | | | 46.2 | | | Total | $ | 613.8 | | | $ | 712.3 | |
(1) In accordance with revenue standard requirements, a sales return liability is recognized for the consideration paid by a customer to which FMC does not expect to be entitled, together with a corresponding refund asset to recover the product from the customer. See (2) below. | | | | | | | | | | (in Millions) | December 31, | | 2018 | | 2017 | | Other assets including long-term receivables, net | | | | | Non-current receivables (Note 9) | $ | 84.5 |
| | $ | 106.7 |
| | Advance to contract manufacturers | 85.2 |
| | 79.1 |
| | Capitalized software, net | 63.2 |
| | 26.6 |
| | Environmental obligation recoveries (Note 11) | 24.3 |
| | 25.3 |
| Argentina government receivable (3) | 47.1 |
| | 44.5 |
| | Income taxes deferred charges | 45.2 |
| | 67.2 |
| | Deferred compensation arrangements | 17.7 |
| | 30.1 |
| | Pension and other postretirement benefits (Note 14) | 42.8 |
| | — |
| | Other long-term assets | 55.2 |
| | 64.1 |
| | Total | $ | 465.2 |
| | $ | 443.6 |
|
____________________
| | (1) | Bank acceptance drafts are a common Chinese finance note used to settle trade transactions. FMC Lithium accepts these notes from Chinese customers based on criteria intended to ensure collectability and limit working capital usage. |
| | (2) | In accordance with the new revenue standard requirements, a sales return liability is recognized for the consideration paid by a customer to which FMC does not expect to be entitled, together with a corresponding refund asset to recover the product from the customer. Refer to Note 2 for further information. |
| | (3) | We have various subsidiaries that conduct business within Argentina, primarily in our FMC Agricultural Solutions and FMC Lithium segments. At December 31, 2018 and 2017, $38.0 million and $37.9 million of outstanding receivables due from the Argentina government, which primarily represent export tax and export rebate receivables, were denominated in U.S. dollars. As with all outstanding receivable balances we continually review recoverability by analyzing historical experience, current collection trends and regional business and political factors among other factors. |
| | (4) | Amount in 2017 represents $32.9 million of accounts payable of the legal entity stock sales as part of the DuPont Crop Protection Acquisition as well as $21.8 million of deferred goodwill as a result of the delayed sites. As part of the Transaction Agreement, the accounts payable will be settled subsequent to the closing date through reimbursement between FMC and DuPont. This amount represents the offsetting asset recorded for amounts due back from DuPont. The deferred goodwill will be recognized as the sites are transferred to FMC. See Note 4 for more details. |
FMC CORPORATION Notes to Consolidated Financial Statements — (Continued)
| | | | | | | | | | | | | (in Millions) | December 31, | | 2021 | | 2020 | | Accrued and other liabilities | | | | | Restructuring reserves (Note 9) | $ | 10.4 | | | $ | 11.9 | | | Dividend payable (Note 17) | 66.8 | | | 62.3 | | | Accrued payroll | 89.8 | | | 87.0 | | | | | | | Environmental reserves, current, net of recoveries (Note 12) | 87.3 | | | 120.9 | | | Derivative liabilities (Note 19) | 4.0 | | | 24.8 | | | Furadan® product exit asset retirement obligations | 10.0 | | | 10.0 | | Unfavorable contracts (1) | 82.0 | | | 105.8 | | | Operating lease current liabilities (Note 4) | 23.5 | | | 25.6 | | Other accrued and other liabilities (2) | 257.4 | | | 226.4 | | | Total | $ | 631.2 | | | $ | 674.7 | |
| | | | | | | | | | (in Millions) | December 31, | | 2018 | | 2017 | | Accrued and other liabilities | | | | | Restructuring reserves (Note 8) | $ | 20.8 |
| | $ | 6.5 |
| | Dividend payable (Note 16) | 53.2 |
| | 22.3 |
| | Accrued payroll | 95.5 |
| | 92.4 |
| | Environmental reserves, current, net of recoveries (Note 11) | 63.5 |
| | 72.0 |
| | Derivative liabilities (Note 18) | 1.5 |
| | 2.3 |
| Acquisition related items (1) | — |
| | 45.8 |
| Unfavorable contracts (2) | 103.1 |
| | 65.7 |
| Other accrued and other liabilities (3) | 256.8 |
| | 190.7 |
| | Total | $ | 594.4 |
| | $ | 497.7 |
|
| | | (in Millions) | December 31, | (in Millions) | December 31, | | 2018 | | 2017 | 2021 | | 2020 | | Other long-term liabilities | | | | Other long-term liabilities | | | | | Restructuring reserves (Note 9) | | Restructuring reserves (Note 9) | $ | 4.5 | | | $ | 4.5 | | | Asset retirement obligations, long-term (Note 1) | $ | 2.7 |
| | $ | 1.9 |
| Asset retirement obligations, long-term (Note 1) | 14.2 | | | 20.7 | | Transition tax related to Tax Cuts and Jobs Act (4)(3) | 145.6 |
| | 186.5 |
| 92.1 | | | 107.8 | | | Contingencies related to uncertain tax positions (Note 12) | 82.4 |
| | 93.9 |
| | | Deferred compensation arrangements (Note 18) | 24.3 |
| | 38.8 |
| | | Contingencies related to uncertain tax positions (Note 13) | | Contingencies related to uncertain tax positions (Note 13) | 45.5 | | | 83.1 | | | Deferred compensation arrangements (Note 19) | | Deferred compensation arrangements (Note 19) | 26.2 | | | 35.2 | | | Derivative liabilities (Note 19) | | Derivative liabilities (Note 19) | — | | | 0.8 | | | Self-insurance reserves (primarily workers' compensation) | 4.6 |
| | 6.1 |
| Self-insurance reserves (primarily workers' compensation) | 6.1 | | | 1.9 | | | Lease obligations | 17.3 |
| | 22.5 |
| | | Reserve for discontinued operations (Note 10) | 72.2 |
| | 63.2 |
| | | Guarantees of vendor financing (Note 19) | — |
| | 0.2 |
| | Unfavorable contracts (2) | 327.6 |
| | 243.9 |
| | | Lease obligations (Note 4) | | Lease obligations (Note 4) | 140.0 | | | 151.1 | | | Reserve for discontinued operations (Note 11) | | Reserve for discontinued operations (Note 11) | 108.3 | | | 76.6 | | | Unfavorable contracts (1) | | Unfavorable contracts (1) | 10.3 | | | 89.4 | | | Other long-term liabilities | 72.4 |
| | 61.1 |
| Other long-term liabilities | 30.1 | | | 32.7 | | | Total | $ | 749.1 |
| | $ | 718.1 |
| Total | $ | 477.3 | | | $ | 603.8 | |
____________________ | | (1) | Represents the accounts receivable of the legal entity stock sales as part of the DuPont Crop Protection Acquisition. As part of the Transaction Agreement, this balance will be settled subsequent to the closing date through reimbursement between FMC and DuPont. Amount represents the offsetting liability recorded for amounts due back to DuPont. |
| | (2) | Primarily represents the technical insecticide product supply agreements with DuPont for use in their retained seed treatment business. Refer to Note 4(1) The amount presented within accrued and other liabilities primarily represents the technical insecticide product supply agreements with DuPont for use in their retained seed treatment business for 2021 and 2020. The 2020 amount presented within other long-term liabilities primarily represents the technical insecticide product supply agreements with DuPont for use in their retained seed treatment business. Refer to Note 5 to the consolidated financial statements included within this Form 10-K for more details. |
| | (3) | Other accrued and other liabilities in 2018 includes the gross up of the estimated sales returns as part of our adoption of the new revenue standard. The impact of the adoption increased accrued and other liabilities by $49.7 million. Refer to Note 2 for further information. |
| | (4) | Represents noncurrent portion of overall transition tax to be paid over eight years. |
(2) Other accrued and other liabilities includes our estimated liability for sales returns.
(3) Represents noncurrent portion of overall transition tax to be paid over the next four years.
FMC CORPORATION Notes to Consolidated Financial Statements — (Continued)
Note 22:23: Quarterly Financial Information (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in Millions, Except Share and Per Share Data) | 2021 | | 2020 | | 1Q | | 2Q | | 3Q | | 4Q | | 1Q | | 2Q | | 3Q | | 4Q | | Revenue | $ | 1,195.6 | | | $ | 1,242.0 | | | $ | 1,194.0 | | | $ | 1,413.6 | | | $ | 1,250.0 | | | $ | 1,155.3 | | | $ | 1,084.6 | | | $ | 1,152.2 | | | Gross margin | 512.4 | | | 531.8 | | | 512.8 | | | 614.7 | | | 561.5 | | | 522.7 | | | 466.4 | | | 501.4 | | | Income (loss) from continuing operations before equity in (earnings) loss of affiliates, non-operating pension and postretirement charges (income), interest expense, net and income taxes | 260.7 | | | 288.6 | | | 217.0 | | | 278.6 | | | 291.4 | | | 267.9 | | | 196.0 | | | 146.9 | | | Income (loss) from continuing operations | 191.3 | | | 217.8 | | | 170.1 | | | 223.0 | | | 213.7 | | | 195.8 | | | 130.5 | | | 38.9 | | | Discontinued operations, net of income taxes | (8.1) | | | (14.6) | | | (9.7) | | | (35.8) | | | (7.5) | | | (10.8) | | | (18.4) | | | 8.4 | | | Net income (loss) | $ | 183.2 | | | $ | 203.2 | | | $ | 160.4 | | | $ | 187.2 | | | $ | 206.2 | | | $ | 185.0 | | | $ | 112.1 | | | $ | 47.3 | | | Less: Net income (loss) attributable to noncontrolling interests | 0.6 | | | 0.3 | | | 2.5 | | | (5.9) | | | — | | | 0.6 | | | 0.7 | | | (2.2) | | | Net income (loss) attributable to FMC stockholders | $ | 182.6 | | | $ | 202.9 | | | $ | 157.9 | | | $ | 193.1 | | | $ | 206.2 | | | $ | 184.4 | | | $ | 111.4 | | | $ | 49.5 | | | Amounts attributable to FMC stockholders: | | | | | | | | | | | | | | | | | Continuing operations, net of income taxes | $ | 190.7 | | | $ | 217.5 | | | $ | 167.6 | | | $ | 228.9 | | | $ | 213.7 | | | $ | 195.2 | | | $ | 129.8 | | | $ | 41.1 | | | Discontinued operations, net of income taxes | (8.1) | | | (14.6) | | | (9.7) | | | (35.8) | | | (7.5) | | | (10.8) | | | (18.4) | | | 8.4 | | | Net income (loss) | $ | 182.6 | | | $ | 202.9 | | | $ | 157.9 | | | $ | 193.1 | | | $ | 206.2 | | | $ | 184.4 | | | $ | 111.4 | | | $ | 49.5 | | Basic earnings (loss) per common share attributable to FMC stockholders (1): | | | | | | | | | | | | | | | | | Continuing operations | $ | 1.47 | | | $ | 1.68 | | | $ | 1.30 | | | $ | 1.80 | | | $ | 1.65 | | | $ | 1.50 | | | $ | 1.00 | | | $ | 0.32 | | | Discontinued operations | (0.06) | | | (0.11) | | | (0.08) | | | (0.28) | | | (0.06) | | | (0.08) | | | (0.14) | | | 0.06 | | | Basic net income (loss) per common share | $ | 1.41 | | | $ | 1.57 | | | $ | 1.22 | | | $ | 1.52 | | | $ | 1.59 | | | $ | 1.42 | | | $ | 0.86 | | | $ | 0.38 | | Diluted earnings (loss) per common share attributable to FMC stockholders (1): | | | | | | | | | | | | | | | | | Continuing operations | $ | 1.46 | | | $ | 1.67 | | | $ | 1.30 | | | $ | 1.80 | | | $ | 1.64 | | | $ | 1.49 | | | $ | 0.99 | | | $ | 0.32 | | | Discontinued operations | (0.06) | | | (0.11) | | | (0.08) | | | (0.28) | | | (0.06) | | | (0.08) | | | (0.14) | | | 0.06 | | | Diluted net income (loss) per common share | $ | 1.40 | | | $ | 1.56 | | | $ | 1.22 | | | $ | 1.52 | | | $ | 1.58 | | | $ | 1.41 | | | $ | 0.85 | | | $ | 0.38 | | | Weighted average shares outstanding: | | | | | | | | | | | | | | | | | Basic | 129.5 | | | 129.1 | | | 128.3 | | | 126.6 | | | 129.5 | | | 129.7 | | | 129.9 | | | 129.8 | | | Diluted | 130.3 | | | 129.9 | | | 129.0 | | | 127.4 | | | 130.5 | | | 130.6 | | | 130.8 | | | 130.7 | |
____________________ (1)The sum of quarterly earnings per common share may differ from the full-year amount. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in Millions, Except Share and Per Share Data) | 2018 | | 2017 | | 1Q | | 2Q | | 3Q | | 4Q | | 1Q | | 2Q | | 3Q | | 4Q | | Revenue | $ | 1,210.7 |
| | $ | 1,262.3 |
| | $ | 1,035.6 |
| | $ | 1,219.2 |
| | $ | 596.0 |
| | $ | 656.8 |
| | $ | 646.2 |
| | $ | 979.6 |
| | Gross margin | 554.7 |
| | 544.1 |
| | 446.2 |
| | 541.9 |
| | 216.2 |
| | 234.4 |
| | 265.9 |
| | 384.8 |
| | Income (loss) from continuing operations before equity in (earnings) loss of affiliates, non-operating pension and postretirement charges (income), interest expense, net and income taxes | 366.1 |
| | 174.7 |
| | 141.8 |
| | 197.9 |
| | 65.4 |
| | 65.0 |
| | 74.1 |
| | 73.5 |
| Income (loss) from continuing operations (1) | 263.1 |
| | 138.5 |
| | 79.5 |
| | 173.8 |
| | 45.0 |
| | 48.7 |
| | 70.9 |
| | (247.9 | ) | Discontinued operations, net of income taxes (2) | 6.5 |
| | (6.0 | ) | | (4.7 | ) | | (139.2 | ) | | (168.8 | ) | | 26.6 |
| | (15.1 | ) | | 779.0 |
| | Net income (loss) | $ | 269.6 |
| | $ | 132.5 |
| | $ | 74.8 |
| | $ | 34.6 |
| | $ | (123.8 | ) | | $ | 75.3 |
| | $ | 55.8 |
| | $ | 531.1 |
| | Less: Net income (loss) attributable to noncontrolling interests | 2.4 |
| | 2.8 |
| | 2.0 |
| | 2.2 |
| | 0.4 |
| | 0.6 |
| | 0.6 |
| | 1.0 |
| | Net income (loss) attributable to FMC stockholders | $ | 267.2 |
| | $ | 129.7 |
| | $ | 72.8 |
| | $ | 32.4 |
| | $ | (124.2 | ) | | $ | 74.7 |
| | $ | 55.2 |
| | $ | 530.1 |
| | Amounts attributable to FMC stockholders: | | | | | | | | | | | | | | | | | Continuing operations, net of income taxes | $ | 260.7 |
| | $ | 135.7 |
| | $ | 77.5 |
| | $ | 171.6 |
| | $ | 44.5 |
| | $ | 48.2 |
| | $ | 70.4 |
| | $ | (249.0 | ) | | Discontinued operations, net of income taxes | 6.5 |
| | (6.0 | ) | | (4.7 | ) | | (139.2 | ) | | (168.7 | ) | | 26.5 |
| | (15.2 | ) | | 779.1 |
| | Net income (loss) | $ | 267.2 |
| | $ | 129.7 |
| | $ | 72.8 |
| | $ | 32.4 |
| | $ | (124.2 | ) | | $ | 74.7 |
| | $ | 55.2 |
| | $ | 530.1 |
| Basic earnings (loss) per common share attributable to FMC stockholders (3): | | | | | | | | | | | | | | | | | Continuing operations | $ | 1.93 |
| | $ | 1.00 |
| | $ | 0.57 |
| | $ | 1.28 |
| | $ | 0.33 |
| | $ | 0.36 |
| | $ | 0.52 |
| | $ | (1.85 | ) | | Discontinued operations | 0.05 |
| | (0.04 | ) | | (0.03 | ) | | (1.04 | ) | | (1.26 | ) | | 0.20 |
| | (0.11 | ) | | 5.79 |
| | Basic net income (loss) per common share | $ | 1.98 |
| | $ | 0.96 |
| | $ | 0.54 |
| | $ | 0.24 |
| | $ | (0.93 | ) | | $ | 0.56 |
| | $ | 0.41 |
| | $ | 3.94 |
| Diluted earnings (loss) per common share attributable to FMC stockholders (3): | | | | | | | | | | | | | | | | | Continuing operations | $ | 1.91 |
| | $ | 1.00 |
| | $ | 0.57 |
| | $ | 1.27 |
| | $ | 0.33 |
| | $ | 0.36 |
| | $ | 0.52 |
| | $ | (1.85 | ) | | Discontinued operations | 0.05 |
| | (0.04 | ) | | (0.03 | ) | | (1.03 | ) | | (1.25 | ) | | 0.20 |
| | (0.11 | ) | | 5.79 |
| | Diluted net income (loss) per common share | $ | 1.96 |
| | $ | 0.96 |
| | $ | 0.54 |
| | $ | 0.24 |
| | $ | (0.92 | ) | | $ | 0.56 |
| | $ | 0.41 |
| | $ | 3.94 |
| | Weighted average shares outstanding: | | | | | | | | | | | | | | | | | Basic | 134.6 |
| | 134.8 |
| | 134.9 |
| | 133.7 |
| | 134.0 |
| | 134.2 |
| | 134.4 |
| | 134.5 |
| | Diluted | 136.2 |
| | 136.2 |
| | 136.4 |
| | 135.1 |
| | 135.1 |
| | 135.6 |
| | 135.9 |
| | 134.5 |
|
____________________
| | (1) | The Company recorded a provisional income tax expense of $315.9 million as a result of the enactment of the Act during the fourth quarter of 2017. See Note 12 for more details. |
| | (2) | In the first quarter of 2017, we recorded an impairment charge associated with our discontinued Omega-3 business. In the fourth quarter of 2017, we recorded a gain on sale of the FMC Health and Nutrition business. See Note 10 for more details. |
| | (3) | The sum of quarterly earnings per common share may differ from the full-year amount. |
Notes to Consolidated Financial Statements — (Continued)
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors FMC Corporation: Opinion on the ConsolidatedFinancial Statements We have audited the accompanying consolidated balance sheets of FMC Corporation and subsidiaries (the Company) as of December 31, 20182021 and 2017,2020, the related consolidated statements of income (loss), comprehensive income (loss), changes in equity, and cash flows for each of the years in the three‑year period ended December 31, 2018,2021, and the related notes and financial statement schedule II -– valuation and qualifying accounts and reserves (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2018,2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 201925, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of the allowance for trade receivables and long-term receivables associated with customers located in Brazil As discussed in Notes 1 and 10 to the consolidated financial statements, the Company develops an analysis of trade receivables and long-term receivables to determine its best estimate of the probable losses associated with potential customer defaults. The most significant portion of the allowance for trade receivables and long-term receivables is related to customers located in Brazil. We identified the evaluation of the allowance for trade receivables and long-term receivables associated with customers located in Brazil as a critical auditing matter. Specifically, the length of standard credit terms offered and customer liquidity may be significantly influenced by economic conditions and unfavorable weather conditions impacting crop quality. This increased the need for subjective judgment and knowledge in assessing customer liquidity constraints to estimate probable losses.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s collectability determination process, including controls over the identification of at-risk trade receivables and long-term receivables balances and related estimate of probable losses associated with such balances. We inspected underlying documentation for collateral
arrangements, legal disputes, and historical trends and analysis performed by the Company for historical collection results. The Company’s assumptions underlying the collectability of trade receivables and long-term receivables were tested by evaluating: •The Company’s rationale for and appropriateness of changes in assumptions from those used in the prior year related to its expected collection period for specific customers; •Local Brazil economic and weather conditions that might impact the assumptions; •Adjustments to the prior period reserve and assessing if those adjustments provided information that was contradictory to the current year’s assumptions; and •Deterioration of trade receivables and long-term receivables balances subsequent to year-end, to identify the presence of trends not considered by the Company when it developed its assumptions. Evaluation of unrecognized tax benefits As discussed in Note 13, the Company has $41.9 million of unrecognized tax benefits as of December 31, 2021. The Company recognizes the largest amount of tax benefit that it believes is more than 50 percent likely to be sustained. A significant amount of the Company’s earnings are generated by certain foreign subsidiaries whose earnings are taxed at lower rates than the United States federal statutory rate. We identified the evaluation of the Company’s unrecognized tax benefits related to the earnings of certain foreign subsidiaries as a critical audit matter. Complex auditor judgment was required in evaluating the Company’s interpretation of tax law, the transfer pricing structure, and its analysis of the recognition of its tax benefits. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the unrecognized tax benefits process, including controls related to the transfer pricing structure which affects the determination of earnings of certain foreign subsidiaries. We also involved tax and transfer pricing professionals with specialized skills and knowledge, who assisted in: •Examining the Company’s tax positions, including the methodology for evaluating unrecognized tax benefits; •Assessing transfer pricing studies with applicable laws and regulations; •Evaluating the Company’s interpretation of tax laws and income tax consequences of intercompany transactions; •Considering applicable settlements with taxing authorities; and •Evaluating the Company’s determination of unrecognized tax benefits.
/s/ KPMG LLP
We have served as the Company's auditor since 1928.
Philadelphia, Pennsylvania February 28, 2019
25, 2022
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). FMC’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those written policies and procedures that: •pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of FMC; •provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles; •provide reasonable assurance that receipts and expenditures of FMC are being made only in accordance with authorization of management and directors of FMC; and •provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements. Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We assessed the effectiveness of our internal control over financial reporting as of December 31, 2018.2021. We based this assessment on criteria for effective internal control over financial reporting described in “Internal"Internal Control—Integrated Framework (COSO 2013)”" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. We reviewed the results of our assessment with the Audit Committee of our Board of Directors. Based on this assessment, we determined that, as of December 31, 2018,2021, FMC has effective internal control over financial reporting. KPMG LLP, our independent registered public accounting firm, has issued an attestation report on the effectiveness of internal control over financial reporting as of December 31, 2018,2021, which appears on the following page.
Report of Independent Registered Public Accounting Firm
TheTo the Stockholders and Board of Directors and Stockholders
FMC Corporation:
Opinion on Internal Control Over Financial Reporting We have audited FMC Corporation and subsidaries’subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2018,2021, based on criteria established inInternal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20182021 and 2017,2020, the related consolidated statements of income (loss), comprehensive income (loss), changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2018,2021, and the related notes and financial statement schedule II -– valuation and qualifying accounts and reserves (collectively, the consolidated financial statements), and our report dated February 28, 201925, 2022 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP Philadelphia, Pennsylvania February 28, 201925, 2022
FMC CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES | | | | | | | | | | | | | | | | | | | | | | Provision (Benefit) | | | | | | (in Millions) | Balance, Beginning of Year | | Charged to Costs and Expenses | | Charged to Other Comprehensive Income | | Net recoveries, write-offs and other (1) | | Balance, End of Year | | December 31, 2018 | | | | | | | | | | Reserve for doubtful accounts (2) (3) | $ | 85.8 |
| | 71.3 |
| | — |
| | (74.2 | ) | | $ | 82.9 |
| | Deferred tax valuation allowance | 272.0 |
| | (6.7 | ) | | (1.8 | ) | | — |
| | 263.5 |
| | December 31, 2017 | | | | | | | | | | Reserve for doubtful accounts (2) | $ | 66.7 |
| | 22.1 |
| | — |
| | (3.0 | ) | | $ | 85.8 |
| | Deferred tax valuation allowance | 289.6 |
| | (20.2 | ) | | 2.6 |
| | — |
| | 272.0 |
| | December 31, 2016 | | | | | | | | | | | Reserve for doubtful accounts | $ | 43.1 |
| | 21.9 |
| | — |
| | 1.7 |
| | $ | 66.7 |
| | Deferred tax valuation allowance | 273.2 |
| | 19.8 |
| | (3.4 | ) | | — |
| | 289.6 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Provision (Benefit) | | | | | | (in Millions) | Balance, Beginning of Year | | Charged to Costs and Expenses | | Charged to Other Comprehensive Income | | Net recoveries, write-offs and other (1) | | Balance, End of Year | | December 31, 2021 | | | | | | | | | | Reserve for doubtful accounts (2) | $ | 52.6 | | | 21.1 | | | — | | | (8.6) | | | $ | 65.1 | | | Deferred tax valuation allowance | 335.6 | | | 61.4 | | | 1.7 | | | — | | | 398.7 | | | December 31, 2020 | | | | | | | | | | Reserve for doubtful accounts (2) | $ | 87.4 | | | 4.7 | | | — | | | (39.5) | | | $ | 52.6 | | | Deferred tax valuation allowance | 303.3 | | | 34.0 | | | (1.7) | | | — | | | 335.6 | | | December 31, 2019 | | | | | | | | | | Reserve for doubtful accounts (2) | $ | 82.9 | | | 21.2 | | | — | | | (16.7) | | | $ | 87.4 | | | Deferred tax valuation allowance | 261.4 | | | 42.2 | | | (0.3) | | | — | | | 303.3 | |
____________________ | | (1) | Write-offs are net of recoveries. |
| | (2) | Includes short-term and long-term portion. |
| | (3) | Includes the charge and write-off of approximately $42 million associated with the stranded accounts receivables written off as part of the restructuring in India. The charge was recorded as a component of "Restructuring and other charges (income)" on the consolidated statements of income (loss). Refer to Note 8 for further information. |
(1)Write-offs are net of recoveries.
(2)Includes short-term and long-term portion.
| | ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. 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 the end of the period covered by this report, 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 SEC’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.
Management’s annual report on internal control over financial reporting. Refer to Management’s Annual Report on Internal Control Over Financial Reporting which is included in Item 8 of Part II of this Annual Report on Form 10-K and is incorporated by reference to this Item 9A.
Audit report of the independent registered public accounting firm. Refer to Report of Independent Registered Public Accounting Firm which is included in Item 8 of Part II of this Annual Report on Form 10-K and is incorporated by reference to this Item 9A.
(b) Change in Internal Controls. There have been no changes in internal controls over financial reporting that occurred during the quarter ended December 31, 20182021 that materially affected or are reasonably likely to materially affect our internal controlcontrols over financing reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning directors, appearing under the caption “III."III. Board of Directors”Directors" in our Proxy Statement to be filed with the SEC in connection with the Annual Meeting of Stockholders scheduled to be held on April 30, 201928, 2022 (the “Proxy Statement”"Proxy Statement"), information concerning executive officers, appearing under the caption “Item"Item 4A. Information about our Executive Officers of the Registrant”Officers" in Part I of this Annual Report on Form 10-K, information concerning the Audit Committee, appearing under the caption “IV."IV. Information About the Board of Directors and Corporate Governance - Committees and Independence of Directors - Audit Committee”Committee" in the Proxy Statement, and information concerning the Code of Ethics, appearing under the caption “IV."IV. Information About the Board of Directors and Corporate Governance - Corporate Governance - Code of Ethics and Business Conduct Policy” in the Proxy Statement, and information about compliance with Section 16(a) of the Securities Exchange Act of 1934 appearing under the caption “VII. Other Matters - Section 16(a) Beneficial Ownership Reporting Compliance”Policy" in the Proxy Statement, is incorporated herein by reference in response to this Item 10.
ITEM 11. EXECUTIVE COMPENSATION The information contained in the Proxy Statement in the section titled “VI."VI. Executive Compensation”Compensation" with respect to executive compensation, in the section titled “IV."IV. Information About the Board of Directors and Corporate Governance—Director Compensation”Compensation" and “—"—Corporate Governance—Compensation and Organization Committee Interlocks and Insider Participation”Participation" is incorporated herein by reference in response to this Item 11.
| | ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information contained in the section titled “V."V. Security Ownership of FMC Corporation”Corporation" in the Proxy Statement, with respect to security ownership of certain beneficial owners and management, is incorporated herein by reference in response to this Item 12. Equity Compensation Plan Information The table below sets forth information with respect to compensation plans under which equity securities of FMC are authorized for issuance as of December 31, 2018.2021. All of the equity compensation plans pursuant to which we are currently granting equity awards have been approved by stockholders.
(Shares in thousands)
| | | Plan Category | | Number of Securities to be issued upon exercise of outstanding options and restricted stock awards (A) (2) | | Weighted-average exercise price of outstanding options awards (B) (1) | | Number of Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) (C) | | | (Shares in thousands) | | (Shares in thousands) | | Number of Securities to be issued upon exercise of outstanding options and restricted stock awards (A) (2) | | Weighted-average exercise price of outstanding options awards (B) (1) | | Number of Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) (C) | | Equity Compensation Plans approved by stockholders | | 3,406 |
| | $ | 52.87 |
| | 4,900 |
| Equity Compensation Plans approved by stockholders | | 1,987 | | | $ | 78.95 | | | 2,600 | |
____________________ | | (1) | Taking into account all outstanding awards included in this table, the weighted-average exercise price of such stock options is $52.87 and the weighted-average term-to-expiration is 6.0 years. |
| | (2) | Includes 2,364 thousand stock options and 794 thousand restricted stock awards granted to employees and 248 thousand restricted stock units held by directors. |
(1)Taking into account all outstanding awards included in this table, the weighted-average exercise price of such stock options is $78.95 and the weighted-average term-to-expiration is 6.2 years. (2)Includes 1,254 thousand stock options and 465 thousand restricted stock awards granted to employees and 268 thousand restricted stock units held by directors.
| | ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information contained in the Proxy Statement concerning our independent directors and related party transactions under the caption “IV."IV. Information About the Board of Directors and Corporate Governance—Committees and Independence of Directors,”" and the information contained in the Proxy Statement concerning our related party transactions policy, appearing under the caption “IV."IV. Information About the Board of Directors and Corporate Governance—Corporate Governance—Related Party Transactions Policy,”" is incorporated herein by reference in response to this Item 13.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information contained in the Proxy Statement in the section titled “II."II. The Proposals to be Voted On—Ratification of Appointment of Independent Registered Public Accounting Firm”Firm" is incorporated herein by reference in response to this Item 14.
Our independent registered public accounting firm is KPMG LLP, Philadelphia, PA. Auditor Firm ID: PCAOB ID 185
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | | (a) | Documents filed with this Report |
(a)Documents filed with this Report 1. Consolidated financial statements of FMC Corporation and its subsidiaries are incorporated under Item 8 of this Form 10-K. 2. The following supplementary financial information is filed in this Form 10-K: | | | | | | | Page | Financial Statements Schedule II – Valuation and qualifying accounts and reserves for the years ended December 31, 2018, 20172021, 2020, and 20162019 | |
The schedules not included herein are omitted because they are not applicable or the required information is presented in the financial statements or related notes. 3. Exhibits – The following exhibits are filed as a part of, or incorporated by reference into, this Form 10-K:
(a)Exhibits | | | | | Exhibit No. | Exhibit Description | (2(2) | ) | Plan of acquisition, reorganization, arrangement, liquidation or succession | | | | *2.1a |
| | | | *2.1b |
| | | | *2.1c |
2.1b | | | | (3(3) | ) | Articles of Incorporation and By-Laws | | | | *3.1 |
| | | | | *3.2 |
| | | | (4(4) | ) | Instruments defining the rights of security holders, including indentures. FMC Corporation undertakes to furnish to the SEC upon request, a copy of any instrument defining the rights of holders of long-term debt of FMC Corporation and its consolidated subsidiaries and for any of its unconsolidated subsidiaries for which financial statements are required to be filed. | | | | *4.1 |
| | | | | *4.2 |
| | | | | *4.3 |
| | | | | *4.4 |
| | | | (10 | ) | Material contracts | | |
| | | | *10.1 |
4.5 | Credit Agreement,Fourth Supplemental Indenture, dated as of August 5, 2011, among FMC CorporationSeptember 20, 2019, by and certain Foreign Subsidiaries,between the Lenders and Issuing Banks Parties Thereto, Citibank, N.A., as Administrative Agent, Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arrangers, Bank of America, N.A., as Syndication Agent, DNB NOR Bank ASA, The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Sumitomo Mitsui Banking Corp., as Co-Documentation Agents, and DNB NOR Bank ASA, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Sumitomo Mitsui Banking Corp., BNP Paribas, HSBC Bank USA, National Association,Company and U.S. Bank National Association, as Co-Senior Managing Agentstrustee (including the forms of the Notes attached as Exhibit A, Exhibit B and Exhibit C thereto) (Exhibit 10.14.2 to the Current Report on Form 8-K filed on August 8, 2011)September 23, 2019) | | | *10.1a |
4.6 | Amendment and Consent No. 1, dated asDescription of August 5, 2013,Capital Stock (Exhibit 4.6 to the Credit Agreement, dated as of August 5, 2011, among FMC Corporation, certain subsidiaries of FMC Corporation party thereto, the lenders and issuing banks party thereto, and Citibank, N.A., as Administrative Agent for such lenders (Exhibit 10.1 to the QuarterlyAnnual Report on Form 10-Q10-K filed on October 29, 2013)February 28, 2020) | | | *10.1b(10) |
| Material contracts | | |
| | | | | | *10.1c |
10.1a | | | | *10.1d |
| Amendment No. 2, dated as of March 24, 2016, to the Amended and Restated Credit Agreement, dated as of October 10, 2014, among FMC Corporation, certain subsidiaries of FMC Corporation party thereto, the lenders and issuing party thereto, and Citibank, N.A., as Administrative Agent for such lenders (Exhibit 10.1 to the Current Report on Form 8-K filed on March 28, 2016) | | | *10.1e |
| Amendment No. 2, dated as of March 24, 2016, to the Term Loan Agreement, dated as of October 10, 2014, among FMC Corporation, certain subsidiaries of FMC Corporation party thereto, the lenders and issuing party thereto, and Citibank, N.A., as Administrative Agent for such lenders (Exhibit 10.2 to the Current Report on Form 8-K filed on March 28, 2016) | | | *10.1f |
| Amendment No. 3, dated as of May 2, 2017, to the Term Loan Agreement, dated as of October 10, 2014, among FMC Corporation, certain subsidiaries of FMC Corporation party thereto, the lenders and issuing party thereto, and Citibank, N.A., as Administrative Agent for such lenders (Exhibit 10.3 to the Current Report on Form 8-K filed on May 2, 2017) | | | *10.1g |
| | | | *10.1h |
| SecondThird Amended and Restated Credit Agreement, dated as of May 2, 2017,17, 2019, among FMC Corporation, certain subsidiaries of FMC Corporation party thereto, the lenders and issuing banks party thereto, and Citibank, N.A., as Administrative Agent for such lenders. (Exhibit 10.1 to the Current Report on Form 8-K filed on May 2, 2017)20, 2019) | | | *10.1i |
10.1b | Amendment No. 1, dated September 28, 2018,as of April 22, 2020, to the SecondThird Amended and Restated Credit Agreement, dated as of May 2, 2017,17, 2019, among FMC Corporation, certain subsidiaries of FMC Corporation from time to time party thereto, as borrowers,the lenders and issuing banks party thereto, and Citibank, N.A., as Administrative Agent and each lender and issuing bank from time to time party thereto.for such lenders. (Exhibit 10.1 to the Current Report on Form 8-K filed on October 3, 2018)April 22, 2020) | | | *10.1j |
10.1c | Amendment No. 1, dated September 28, 2018, to the Term LoanFourth Amended and Restated Credit Agreement, dated as of May 2, 2017,26, 2021, among FMC Corporation, certain subsidiaries of FMC Corporation from time to time party thereto, as borrowers,the lenders and issuing banks party thereto, and Citibank, N.A., as Administrative Agent each lender from time to time party thereto and the other parties thereto. (Exhibit 10.2 for such lenders.(Exhibit 10.1 to the Current Report on Form 8-K filed on October 3, 2018)May 28, 2021) | | | *10.1k |
10.1d | Amendment No. 4, dated September 28, 2018, to the Term Loan Agreement, dated as of October 10, 2014,November 22, 2021, among FMC Corporation, certain subsidiaries of FMC Corporation from time to timethe lenders party thereto, as borrowers,and Citibank, N.A., as Administrative Agent each lender from time to time party thereto and the other parties thereto.for such lenders. (Exhibit 10.310.1 to the Current Report on Form 8-K filed on October 3, 2018)November 23, 2021) | | | | †*10.2 |
| | | | †*10.3 |
| | | | †*10.3.a |
10.2.a | | | |
| | | | †*10.3.b |
10.2.b | | | | †*10.4 |
10.3 | | | | †*10.5 |
10.4 | | | | †*10.6 |
10.5 | | | | †*10.7 |
10.5a | | | | | †*10.5b | | | | | †*10.6 | | | | †* 10.7.a |
10.6a | | | | †* 10.7.b |
10.6b | | | | †*10.7.c |
10.6c | | | | †*10.7.d |
10.6d | | | | †*10.7.e |
10.6e | | | | †*10.7.f |
10.6f | | | |
| | | | | | †*10.7.g |
10.6g | | | | †*10.8 |
10.7 | | | | †*10.8a |
10.7a | | | | †*10.8b |
10.7b | | | | †*10.8c |
10.7c | | | | *10.8d |
10.7d | | | | †*10.9 |
10.7e | | | | | †*10.7f | | | | | †*10.8 | | | | †*10.10 |
10.9 | | | | †*10.11 |
10.10 | | | | †*10.12 |
| | | |
| | | | *10.13 |
10.11 | | | | *10.13.a |
| | | | *10.13.b |
| | | | *10.13.c |
| | | | *10.13.d |
| | | | *10.14 |
| | | | †*10.15 |
| | | | †*10.15.a |
| | | | †*10.16 |
| | | | *10.17 |
| | | | *10.18 |
10.12 | | | | *10.19 |
10.13 | | | | *10.20 |
10.14 | | | | *10.21 |
10.15 | | | | †10.22 |
*10.16 | | | | *10.23 |
10.17 | | | | †*10.24 |
10.18 | | | | †*10.25 |
| | | | †*10.26 |
| | | | †10.27 |
| | | | †10.28 |
| | | | 21 |
†*10.19 | | | | | †*10.20 | | | | | 21 | | | | |
| | | | | 32.1 |
| | | | | 32.2 |
| | | | | 101 |
| Interactive Data File |
* Incorporated by reference † Management contract or compensatory plan or arrangement
| | ITEM 16. | FORM 10-K SUMMARY |
ITEM 16. FORM 10-K SUMMARY Optional disclosure, not included in this Report.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. FMC CORPORATION
(Registrant)
| | | | | | | FMC CORPORATION | | (Registrant) | | | | By: | /S/ ANDREW D. SANDIFER | | Andrew D. Sandifer Executive Vice President and Chief Financial Officer | | | | Date: February 25, 2022 |
Date: February 28, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. | | | | | | | | | | Signature | Title | Date | /S/ ANDREW D. SANDIFER Andrew D. Sandifer | Executive Vice President and Chief Financial Officer | February 28, 201925, 2022 | | | | /S/ NICHOLAS L. PFEIFFER Nicholas L. Pfeiffer | Vice President, Corporate Controller and Chief Accounting Officer, and Corporate Controller | February 28, 201925, 2022 | | | | /S/ PIERRE R. BRONDEAU Pierre R. Brondeau | Chief Executive
Officer and Chairman of the Board
| February 28, 201925, 2022 | | | | /S/ G. PETER D’ALOIA MARK A. DOUGLAS G. Peter D’AloiaMark A. Douglas
| President, Chief Executive Officer, and Director | February 28, 201925, 2022 | | | | /S/ EDUARDO E. CORDEIRO Eduardo E. Cordeiro | Director | February 28, 201925, 2022 | | | | /S/ CAROL ANTHONY ("JOHN") DAVIDSON Carol Anthony ("John") Davidson | Director | February 25, 2022 | | | | /S/ C. SCOTT GREER C. Scott Greer | Director | February 28, 201925, 2022 | | | | /S/K'LYNNE JOHNSON K'Lynne Johnson | Director | February 25, 2022 | | | | /S/ DIRK A. KEMPTHORNE Dirk A. Kempthorne | Director | February 28, 201925, 2022 | | | | /S/ PAUL J. NORRIS Paul J. Norris | Director | February 28, 201925, 2022 | | | | /S/ MARGARETHØVRUM Margareth Øvrum | Director | February 25, 2022 | | | | /S/ ROBERT C. PALLASH Robert C. Pallash | Director | February 28, 201925, 2022 | | | | /S/ VINCENT R. VOLPE, JR. Vincent R. Volpe, Jr. | Director | February 28, 2019 | | | | /S/WILLIAM H. POWELL
William H. Powell
| Director | February 28, 2019 | | | | /S/ MARGARETH OEVRUM
Margareth Oevrum
| Director | February 28, 2019 | | | | /S/K'LYNNE JOHNSON
K'Lynne Johnson
| Director | February 28, 201925, 2022 |
|
