Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1: Financial Information and Accounting Policies
In our opinion the condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applicable to interim period financial statements and reflect all adjustments necessary for a fair statement of results of operations for the
three and nine
months ended
September 30, 2016
and
2015
, cash flows for the
nine
months ended
September 30, 2016
and
2015
, and our financial positions as of
September 30, 2016
and
December 31, 2015
. All such adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the Notes. The results of operations for the
three and nine
months ended
September 30, 2016
and
2015
are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheets as of
September 30, 2016
and
December 31, 2015
, and the related condensed consolidated statements of income (loss), condensed consolidated statements of comprehensive income (loss) and condensed consolidated statements of cash flows for the
nine
months ended
September 30, 2016
and
2015
, have been reviewed by our independent registered public accountants. The review is described more fully in their report included herein. Our accounting policies are set forth in detail in Note 1 to the consolidated financial statements included with our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended
December 31, 2015
(the “
2015
10-K”).
Note 2: Recently Issued and Adopted Accounting Pronouncements and Regulatory Items
New accounting guidance and regulatory items
In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 is 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 are evaluating the effect the guidance will have on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments” (
"ASU 2016-13"
).
ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses. 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 is effective for fiscal years beginning after December 15, 2019 (i.e. a January 1, 2020 effective date), with early adoption permitted for fiscal years beginning after December 15, 2018. We are evaluating the effect the guidance will have on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation - Stock Compensation (Topic 718)
("ASU 2016-09"). ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years (i.e. a January 1, 2017 effective date). We are evaluating the effect the guidance will have on our consolidated financial statements.
In February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02,
Leases (Topic 842)
. Under the new guidance, lessees will 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 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 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). We are evaluating the effect the guidance will have on our consolidated financial statements.
In January 2016, the FASB issued ASU 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 is effective for fiscal years and interim periods beginning after December 15, 2017, 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. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
fair value option resulting from instrument-specific credit risk in other comprehensive income. We are evaluating the effect the guidance will have on our consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11,
Simplifying the Measurement of Inventory.
This new standard changes the criteria by which to measure inventory. Prior to the issuance of this new standard, inventory was measured at the lower of cost or market value. This required three separate data points in order to measure inventory. The three data points were cost, market with a ceiling of net realizable value and market with a floor of net realizable value less a normal profit margin. This amendment eliminates the two data points defining "market" and replaces them with one, net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This amendment does not impact inventory measured using last-in, first-out. We are required to adopt this standard in the first quarter of 2017 and early adoption is permitted. We believe the adoption will not have a material impact on our consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers
, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. We intend to adopt this standard for interim and annual periods beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. In 2016, the FASB issued final amendments to clarify the implementation guidance for principal versus agent considerations, identifying performance obligations and the accounting for licenses of intellectual property. We are evaluating the effect that ASU 2014-09 and subsequent amendments will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.
Recently adopted accounting guidance
In April 2015, the FASB issued ASU 2015-05,
Customer's Accounting for Fees Paid in Cloud Computing Arrangements
, which
provides guidance to determine when a customer's fees paid in a cloud computing arrangement include a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for a cloud computing arrangement as a service contract. The new standard was effective for annual reporting periods beginning after December 15, 2015 (i.e. January 1, 2016) and entities may elect to adopt the ASU prospectively or retrospectively. We have adopted the standard prospectively. There was no impact on our financial condition, results of operations or cash flows as a result of the adoption of this guidance.
Note 3: Acquisitions
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 hedged-related costs totaling
$0.6 billion
(the “Acquisition”). The Acquisition was funded with the October 10, 2014 term loan which was secured for the purposes of the Acquisition.
Cheminova is being 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 broadens our supply capabilities and strengthens our geographic footprint, particularly in Europe. Revenue and Income (Loss) from continuing operations before income taxes attributable to Cheminova, since the date of acquisition, for the
three and nine
months ended
September 30, 2015
were approximately
$137 million
and
$354 million
of revenues and
$(3) million
and
$24 million
of income (loss), respectively.
Purchase Price Allocation
The acquisition of Cheminova has been accounted for under the GAAP business combinations accounting guidance, and as such we have applied acquisition accounting. Acquisition accounting requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date using primarily Level 2 and Level 3 inputs (see Note 16 for an explanation of Level 2 and 3 inputs). These Level 2 and Level 3 valuation
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
inputs include an estimate of future cash flows and discount rates. Additionally, estimated fair values are based, in part, upon outside preliminary appraisals for certain assets, including specifically-identified intangible assets.
The purchase price allocation was finalized as of March 31, 2016. 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 the filing of our 2015 Form 10-K were primarily related to decreases in the estimated fair values of certain current assets, property, plant and equipment and income taxes payable. These decreases were offset by increases in current liabilities, intangible assets and deferred income taxes. The effect of all measurement-period adjustments in the first quarter of 2016 resulted in an increase to recognized goodwill of approximately
$20 million
.
The following table summarizes the consideration paid for Cheminova and the amounts of the assets acquired and liabilities assumed as of the acquisition date.
|
|
|
|
|
Purchase Price Allocation
|
(in Millions)
|
|
Trade receivables
|
$
|
488.1
|
|
Inventories
(1)
|
362.4
|
|
Other current assets
|
53.6
|
|
Property, plant & equipment
|
186.4
|
|
Intangible assets
(2)
|
|
Customer relationships
|
294.1
|
|
Brands
|
362.8
|
|
In-process research & development
|
1.4
|
|
Goodwill
(3)
|
468.8
|
|
Other assets
|
84.5
|
|
Total fair value of assets acquired
|
$
|
2,302.1
|
|
|
|
Short-term debt
|
140.5
|
|
Other current liabilities
|
432.3
|
|
Environmental reserves
|
47.2
|
|
Long-term debt
(4)
|
273.1
|
|
Deferred tax liabilities
|
165.1
|
|
Other liabilities
|
38.8
|
|
Total fair value of liabilities assumed
|
1,097.0
|
|
|
|
Total cash paid, less cash acquired
|
$
|
1,205.1
|
|
____________________
|
|
(1)
|
Fair value of finished goods inventory acquired included a step-up in the value of approximately
$57.8 million
, of which
$28.8 million
and
$48.1 million
was expensed in the
three and nine
months ended
September 30, 2015
, all of which was expensed in the full year 2015 and included in "Cost of sales and services" on the condensed consolidated income statement.
|
|
|
(2)
|
The weighted average useful life of the acquired finite-lived intangibles, which primarily represents the customer relationships, is approximately
20 years
.
|
|
|
(3)
|
Goodwill largely consists of expected cost synergies and economies of scale resulting from the business combination. None of the acquired goodwill will be deductible for income tax purposes.
|
|
|
(4)
|
Long-term debt assumed primarily consisted of mortgage debt and borrowings under existing Cheminova credit facilities that were settled by FMC’s term loan in the second quarter of 2015.
|
Unaudited Pro Forma Financial Information
The following unaudited pro forma results of operations assume that the Acquisition occurred at the beginning of the periods presented. The pro forma amounts include certain adjustments, including interest expense on the borrowings utilized to complete the acquisition, depreciation and amortization expense and income taxes. The pro forma amounts for the
three and nine
month
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
periods below 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 acquisition had occurred as of January 1, 2015, nor are they indicative of future results of operations.
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30
|
(in Millions)
|
2016
|
|
2015
|
Pro forma Revenue
(1)
|
$
|
2,416.8
|
|
|
$
|
2,739.2
|
|
Pro forma Diluted earnings per share
(1)
|
$
|
1.44
|
|
|
$
|
6.40
|
|
____________________
|
|
(1)
|
For the
three and nine
months ended
September 30, 2016
and for the three months ended September 30, 2015, pro forma results and actual results are the same.
|
Acquisition-related charges
Pursuant to GAAP, costs incurred to complete the Acquisition as well as costs incurred to integrate Cheminova into our operations are expensed as incurred. The following table summarizes the costs incurred associated with these combined activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
(in Millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Acquisition-related charges
|
|
|
|
|
|
|
|
|
|
|
|
Legal and professional fees
(1)
|
$
|
4.4
|
|
|
$
|
14.2
|
|
|
$
|
16.8
|
|
|
$
|
53.8
|
|
Inventory fair value amortization
(2)
|
—
|
|
|
28.8
|
|
|
—
|
|
|
48.1
|
|
(Gain)/loss on hedging purchase price
(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
172.1
|
|
Total Acquisition-related charges
(4)
|
$
|
4.4
|
|
|
$
|
43.0
|
|
|
$
|
16.8
|
|
|
$
|
274.0
|
|
Restructuring charges and asset disposals
|
|
|
|
|
|
|
|
|
|
Cheminova restructuring
|
5.8
|
|
|
50.7
|
|
|
14.7
|
|
|
55.5
|
|
Total Cheminova restructuring charges
(4) (5)
|
$
|
5.8
|
|
|
$
|
50.7
|
|
|
$
|
14.7
|
|
|
$
|
55.5
|
|
____________________
|
|
(1)
|
Represents transaction costs, costs for transitional employees, other acquired employees related costs and integration-related legal and professional third-party fees. These charges are recorded as a component of “Selling, general and administrative expense" on the condensed consolidated statements of income (loss).
|
|
|
(2)
|
On the condensed consolidated statements of income (loss), these charges are included in “Costs of sales and services.”
|
|
|
(3)
|
See "Cheminova Acquisition Hedge Costs" below for more information on these charges. These charges are recorded as a component of “Selling, general and administrative expense" on the condensed consolidated statements of income (loss).
|
|
|
(4)
|
Acquisition-related charges and restructuring charges to integrate Cheminova with Agricultural Solutions are expected to be completed in 2016.
|
|
|
(5)
|
See Note 8 for more information. These charges are recorded as a component of “Restructuring and other charges (income)” on the condensed consolidated statements of income (loss).
|
Cheminova Acquisition Hedge Costs
Pursuant to the terms and conditions set forth in the Purchase Agreement, we acquired all of the outstanding equity of Cheminova from Auriga for an aggregate purchase price of
8.5 billion
Danish krone ("DKK"). At the time we entered into the Purchase Agreement, the U.S. dollar ("USD" or “$”) to DKK exchange rate was USD
$1.00
to DKK
5.77
, resulting in a USD purchase price of
$1.47 billion
, excluding assumed debt of approximately
$0.3 billion
. In order to minimize our exposure to adverse changes in the USD to DKK exchange rate from September 8, 2014 to April 21, 2015 (the acquisition close date), we entered into a series of foreign currency forward contracts ("FX forward contracts"). The FX forward contracts provided us the ability to fix the USD to DKK exchange rate for most of the DKK
8.5 billion
purchase price, thereby limiting our exposure to foreign currency rate fluctuations. Over the period from September 2014 to April 21, 2015 the USD strengthened against the DKK by approximately
21 percent
to an exchange rate of USD
$1.00
to DKK
6.96
. The strengthening of the USD against the DKK results in a lower USD
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
purchase price for Cheminova. Partially offsetting this was a mark-to-market net loss settlement on the FX forward contracts of
$172.1 million
during the first
nine
months of 2015.
Note 4: Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by business segment are presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
FMC Agricultural
Solutions
|
|
FMC Health and Nutrition
|
|
FMC Lithium
|
|
Total
|
Balance, December 31, 2015
|
$
|
479.5
|
|
|
$
|
296.6
|
|
|
$
|
—
|
|
|
$
|
776.1
|
|
Acquisitions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Purchase price allocation adjustments (See Note 3)
|
20.4
|
|
|
—
|
|
|
—
|
|
|
20.4
|
|
Foreign currency adjustments
|
1.5
|
|
|
0.6
|
|
|
—
|
|
|
2.1
|
|
Balance, September 30, 2016
|
$
|
501.4
|
|
|
$
|
297.2
|
|
|
$
|
—
|
|
|
$
|
798.6
|
|
We perform our goodwill and indefinite life intangible asset impairment tests at least annually. Our fiscal year
2016
annual goodwill and indefinite life intangible asset impairment test was performed during the three months ended
September 30, 2016
. As a result, 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.
Our intangible assets, other than goodwill, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
(in Millions)
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
Intangible assets subject to amortization (finite-lived)
|
Customer relationships
|
$
|
449.7
|
|
|
$
|
(56.2
|
)
|
|
$
|
393.5
|
|
|
$
|
435.5
|
|
|
$
|
(40.8
|
)
|
|
$
|
394.7
|
|
Patents
|
2.2
|
|
|
(0.4
|
)
|
|
1.8
|
|
|
2.2
|
|
|
(0.3
|
)
|
|
1.9
|
|
Brands
(1)
|
15.7
|
|
|
(5.5
|
)
|
|
10.2
|
|
|
14.2
|
|
|
(2.7
|
)
|
|
11.5
|
|
Purchased and licensed technologies
|
72.2
|
|
|
(33.2
|
)
|
|
39.0
|
|
|
71.0
|
|
|
(29.5
|
)
|
|
41.5
|
|
Other intangibles
|
3.2
|
|
|
(2.3
|
)
|
|
0.9
|
|
|
3.5
|
|
|
(2.2
|
)
|
|
1.3
|
|
|
$
|
543.0
|
|
|
$
|
(97.6
|
)
|
|
$
|
445.4
|
|
|
$
|
526.4
|
|
|
$
|
(75.5
|
)
|
|
$
|
450.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets not subject to amortization (indefinite life)
|
Brands
(1) (2)
|
$
|
402.3
|
|
|
|
|
$
|
402.3
|
|
|
$
|
384.7
|
|
|
|
|
$
|
384.7
|
|
In-process research & development
|
1.5
|
|
|
|
|
1.5
|
|
|
1.4
|
|
|
|
|
1.4
|
|
|
$
|
403.8
|
|
|
|
|
$
|
403.8
|
|
|
$
|
386.1
|
|
|
|
|
$
|
386.1
|
|
Total intangible assets
|
$
|
946.8
|
|
|
$
|
(97.6
|
)
|
|
$
|
849.2
|
|
|
$
|
912.5
|
|
|
$
|
(75.5
|
)
|
|
$
|
837.0
|
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
(1) Represents brand portfolios, trademarks, trade names and know-how.
|
|
(2)
|
The majority of the Brands intangible asset in the table above relates to our proprietary brand portfolio for which the fair value was substantially in excess of the carrying value. During the 3rd quarter of 2016, we recorded a
$1.0 million
impairment charge in our generic brand portfolio which is part of the FMC Agricultural Solutions segment. The carrying value of the generic portfolio subsequent to the charge is approximately
$6.0 million
.
|
At
September 30, 2016
, the finite-lived and indefinite life intangibles were allocated among our business segments as follows:
|
|
|
|
|
|
|
|
|
(in Millions)
|
Finite-lived
|
|
Indefinite Life
|
FMC Agricultural Solutions
|
$
|
380.5
|
|
|
$
|
388.3
|
|
FMC Health and Nutrition
|
63.9
|
|
|
15.5
|
|
FMC Lithium
|
1.0
|
|
|
—
|
|
Total
|
$
|
445.4
|
|
|
$
|
403.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
(in Millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Amortization expense
|
$
|
7.6
|
|
|
$
|
7.3
|
|
|
$
|
22.1
|
|
|
$
|
15.4
|
|
The estimated pre-tax amortization expense for fiscal year 2016 is
$30 million
and is estimated to be
$30 million
for each fiscal year from 2017 to 2020. The estimated pre-tax amortization expense may fluctuate due to changes in foreign currency.
Note 5: Receivables
The following table displays a roll-forward of the allowance for doubtful trade receivables.
|
|
|
|
|
|
(in Millions)
|
|
|
Balance, December 31, 2014
|
|
$
|
37.2
|
|
Additions — charged to expense
|
|
5.9
|
|
Transfer to long-term allowance
|
|
(29.2
|
)
|
Balance, December 31, 2015
|
|
13.9
|
|
Additions — charged to expense
|
|
4.5
|
|
Transfer to allowance for credit losses (see below)
|
|
(7.8
|
)
|
Net Recoveries and write-offs
|
|
1.0
|
|
Balance, September 30, 2016
|
|
$
|
11.6
|
|
The company has financing 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
$109.5 million
as of
September 30, 2016
. These long-term customer receivable balances and the corresponding allowance are included in Other assets on the condensed consolidated balance sheet. For these long-term customer receivables, interest is no longer accrued when the receivable is determined to be delinquent and classified as long-term based on the estimated timing of collection.
A portion of these long-term receivables have payment contracts. We have no reason to believe payments will not be made based upon the credit quality of these customers. Additionally, we also hold significant collateral against these customers including rights to property or other assets as a form of credit guarantee. If the customer does not pay or gives indication that they will not pay, these guarantees allow us to start legal action to block the sale of the customer’s harvest. On an ongoing basis, we continue to evaluate the credit quality of our financing 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.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
|
|
|
|
(
in Millions
)
|
|
|
Balance, December 31, 2014
|
|
$
|
—
|
|
Transfer from allowance for doubtful accounts (see above)
|
|
29.2
|
|
Net Recoveries and write- offs
|
|
—
|
|
Balance, December 31, 2015
|
|
$
|
29.2
|
|
Additions - charged to expense
|
|
10.6
|
|
Transfer from allowance for doubtful accounts (see above)
|
|
7.8
|
|
Net Recoveries and write- offs
|
|
—
|
|
Balance September 30, 2016
|
|
$
|
47.6
|
|
Note 6: Inventories
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
(in Millions)
|
September 30, 2016
|
|
December 31, 2015
|
Finished goods
|
$
|
371.1
|
|
|
$
|
350.0
|
|
Work in process
|
255.1
|
|
|
275.4
|
|
Raw materials, supplies and other
|
347.1
|
|
|
335.6
|
|
First-in, first-out inventory
|
$
|
973.3
|
|
|
$
|
961.0
|
|
Less: Excess of first-in, first-out cost over last-in, first-out cost
|
(155.9
|
)
|
|
(160.8
|
)
|
Net inventories
|
$
|
817.4
|
|
|
$
|
800.2
|
|
Note 7: Property, Plant and Equipment
Property, plant and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
(in Millions)
|
September 30, 2016
|
|
December 31, 2015
|
Property, plant and equipment
|
$
|
1,821.1
|
|
|
$
|
1,784.6
|
|
Accumulated depreciation
|
(790.1
|
)
|
|
(768.2
|
)
|
Property, plant and equipment, net
|
$
|
1,031.0
|
|
|
$
|
1,016.4
|
|
Note 8: Restructuring and Other Charges (Income)
Our restructuring and other charges (income) are comprised of restructuring, asset disposals and other charges (income) as noted below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
(in Millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Restructuring charges and asset disposals
|
$
|
6.5
|
|
|
$
|
69.3
|
|
|
$
|
18.8
|
|
|
$
|
81.5
|
|
Other charges (income), net
|
7.9
|
|
|
(23.7
|
)
|
|
20.3
|
|
|
(3.3
|
)
|
Total restructuring and other charges
|
$
|
14.4
|
|
|
$
|
45.6
|
|
|
$
|
39.1
|
|
|
$
|
78.2
|
|
Restructuring charges and asset disposals
Detail on the
2016
restructuring charges and asset disposal activities is provided below. For detail on restructuring activities which commenced prior to
2016
, see Note 7 to our consolidated financial statements included with our 2015 Form 10-K.
2016
Restructuring Activities
Cheminova Restructuring
In 2015, we completed the acquisition of Cheminova; see Note 3 for more details. As part of the integration of Cheminova into our existing FMC Agricultural Solutions segment we implemented a restructuring plan. The restructuring plan includes
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
workforce reductions, relocation of current operating locations, lease termination fees and fixed asset accelerated depreciation as well as fixed asset disposal charges at several of our FMC Agricultural Solutions' facilities. In 2016, these restructuring activities continued; however, we expect the restructuring charges to be completed in 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Charges
|
(in Millions)
|
|
Severance and Employee Benefits
(1)
|
|
Other Charges (Income)
(2)
|
|
Asset Disposal Charges
(3)
|
|
Total
|
Cheminova Restructuring
|
|
$
|
3.0
|
|
|
$
|
—
|
|
|
$
|
2.8
|
|
|
$
|
5.8
|
|
Other Items
|
|
—
|
|
|
0.7
|
|
|
—
|
|
|
0.7
|
|
Three months ended September 30, 2016
|
|
$
|
3.0
|
|
|
$
|
0.7
|
|
|
$
|
2.8
|
|
|
$
|
6.5
|
|
|
|
|
|
|
|
|
|
|
Cheminova Restructuring
|
|
$
|
7.8
|
|
|
$
|
2.5
|
|
|
$
|
40.4
|
|
|
$
|
50.7
|
|
Health and Nutrition Restructuring
|
|
4.3
|
|
|
0.4
|
|
|
11.9
|
|
|
16.6
|
|
Other Items
|
|
2.0
|
|
|
—
|
|
|
—
|
|
|
2.0
|
|
Three months ended September 30, 2015
|
|
$
|
14.1
|
|
|
$
|
2.9
|
|
|
$
|
52.3
|
|
|
$
|
69.3
|
|
|
|
|
|
|
|
|
|
|
Cheminova Restructuring
|
|
$
|
8.1
|
|
|
$
|
1.3
|
|
|
$
|
5.3
|
|
|
$
|
14.7
|
|
Other Items
|
|
0.4
|
|
|
1.1
|
|
|
2.6
|
|
|
4.1
|
|
Nine months ended September 30, 2016
|
|
$
|
8.5
|
|
|
$
|
2.4
|
|
|
$
|
7.9
|
|
|
$
|
18.8
|
|
|
|
|
|
|
|
|
|
|
Cheminova Restructuring
|
|
$
|
12.2
|
|
|
$
|
2.8
|
|
|
$
|
40.5
|
|
|
$
|
55.5
|
|
Health and Nutrition Restructuring
|
|
5.9
|
|
|
0.5
|
|
|
14.1
|
|
|
20.5
|
|
Other Items
|
|
5.6
|
|
|
(0.1
|
)
|
|
—
|
|
|
5.5
|
|
Nine months ended September 30, 2015
|
|
$
|
23.7
|
|
|
$
|
3.2
|
|
|
$
|
54.6
|
|
|
$
|
81.5
|
|
____________________
|
|
(1)
|
Represents severance and employee benefit charges. Income represents adjustments to previously recorded severance and employee benefits.
|
|
|
(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 as recoveries associated with restructuring.
|
|
|
(3)
|
Primarily represents 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.
|
Roll forward of restructuring reserves
The following table shows a roll forward of restructuring reserves, continuing and discontinued, that will result in cash spending. These amounts exclude asset retirement obligations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
Balance at
12/31/15
(3)
|
|
Change in
reserves
(2)
|
|
Cash
payments
|
|
Other
|
|
Balance at
9/30/16
(3)
|
Cheminova Restructuring
|
$
|
8.7
|
|
|
$
|
9.4
|
|
|
$
|
(11.5
|
)
|
|
$
|
(4.4
|
)
|
|
$
|
2.2
|
|
Other Workforce Related and Facility Shutdowns
(1)
|
6.5
|
|
|
1.5
|
|
|
(4.6
|
)
|
|
(0.5
|
)
|
|
2.9
|
|
Restructuring activities related to discontinued operations
(4)
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
Total
|
$
|
15.6
|
|
|
$
|
10.9
|
|
|
$
|
(16.1
|
)
|
|
$
|
(4.9
|
)
|
|
$
|
5.5
|
|
____________________
|
|
(1)
|
Primarily severance costs related to workforce reductions and facility shutdowns noted in the "Other Items" sections above.
|
|
|
(2)
|
Primarily severance, exited lease, contract termination and other miscellaneous exit costs. Any accelerated depreciation and impairment charges noted above that impacted our property, plant and equipment balances or other long term assets and are not included in the above tables.
|
|
|
(3)
|
Included in "Accrued and other liabilities" on the condensed consolidated balance sheets.
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
(4)
|
Cash spending associated with restructuring activities of discontinued operations is reported within "Other discontinued reserves" on the condensed consolidated statements of cash flows.
|
Other charges (income), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
(in Millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Environmental charges, net
|
$
|
8.1
|
|
|
$
|
2.9
|
|
|
$
|
17.1
|
|
|
$
|
8.3
|
|
Argentina devaluation
|
—
|
|
|
—
|
|
|
4.2
|
|
|
—
|
|
Other items, net
|
(0.2
|
)
|
|
(26.6
|
)
|
|
(1.0
|
)
|
|
(11.6
|
)
|
Other charges (income), net
|
$
|
7.9
|
|
|
$
|
(23.7
|
)
|
|
$
|
20.3
|
|
|
$
|
(3.3
|
)
|
Environmental charges, net
Environmental charges represent the net charges associated with environmental remediation at continuing operating sites. See Note 11 for additional details.
Argentina Devaluation
On December 17, 2015, the Argentina government initiated actions to significantly devalue its currency. These actions continued into a portion of first quarter of 2016. These actions created an immediate loss associated with the impacts of the remeasurement of our local balance sheet. The loss was attributable to our Lithium and Agricultural Solutions operations. Because of the severity of the event and its immediate impact to our operations 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.
Other items, Net
In the three months ended September 30, 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 "Other income, net" on the condensed consolidated statements of income (loss). Additionally, we had a gain of
$3.0 million
from the sale of a Corporate fixed asset. The cash proceeds from these sales of
$6.8 million
is included within "Other investing activities" on the Condensed Consolidated Statement of Cash Flows.
In the three months ended September 30, 2015, we sold our remaining ownership interest in a Belgium-based pesticide distribution company, Belchim Crop Protection N.V. ("Belchim"). Prior to and subsequent to the sale, Belchim was accounted for as a cost method investment. The gain on the sale of approximately
$26.6 million
was recorded as "Other income, net" on the condensed consolidated statements of income (loss). The cash proceeds from the sale of
$27.5 million
are included within "Proceeds from sale of investment/business" on the Condensed Consolidated Statement of Cash Flows.
During 2015, our FMC Agricultural Solutions segment entered into collaboration and license agreements with various third parties for the purpose of obtaining certain technology and intellectual property rights relating to compounds under development. The rights and technology obtained is referred to as in-process research and development and in accordance with GAAP, the amounts paid are expensed as incurred since they were acquired outside of a business combination. During the nine months ended September 30, 2015, we entered into one such transaction, consisting of the acquisition of all global rights to a pre-development novel, proprietary broadleaf herbicide.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Note 9: Debt
Debt maturing within one year:
|
|
|
|
|
|
|
|
|
(in Millions)
|
September 30, 2016
|
|
December 31, 2015
|
Short-term foreign debt
(1)
|
$
|
60.8
|
|
|
$
|
87.2
|
|
Commercial paper
|
—
|
|
|
23.9
|
|
Total short-term debt
|
$
|
60.8
|
|
|
$
|
111.1
|
|
Current portion of long-term debt
|
2.4
|
|
|
1.5
|
|
Short-term debt and current portion of long-term debt
|
$
|
63.2
|
|
|
$
|
112.6
|
|
____________________
|
|
(1)
|
At
September 30, 2016
, the average interest rate on the borrowings was
8.4%
. We often provide parent-company guarantees to lending institutions that extend credit to our foreign subsidiaries.
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
September 30, 2016
|
|
|
|
|
Interest Rate Percentage
|
|
Maturity
Date
|
|
September 30, 2016
|
|
December 31, 2015
|
Pollution control and industrial revenue bonds (less unamortized discounts of $0.2 and $0.2 respectively)
|
1.0 - 6.5%
|
|
2021 - 2035
|
|
$
|
141.5
|
|
|
$
|
141.5
|
|
Senior notes (less unamortized discount of $1.4 and $1.7 respectively)
|
3.95 - 5.2%
|
|
2019 - 2024
|
|
998.6
|
|
|
998.3
|
|
Term Loan Facility
|
1.9%
|
|
2020
|
|
775.0
|
|
|
900.0
|
|
Credit Facility
(1)
|
3.0%
|
|
2019
|
|
—
|
|
|
—
|
|
Foreign debt
|
0 - 9.3%
|
|
2016 - 2024
|
|
11.4
|
|
|
9.9
|
|
Debt issuance cost
|
|
|
|
|
(10.8
|
)
|
|
(11.9
|
)
|
Total long-term debt
|
|
|
|
|
$
|
1,915.7
|
|
|
$
|
2,037.8
|
|
Less: debt maturing within one year
|
|
|
|
|
2.4
|
|
|
1.5
|
|
Total long-term debt, less current portion
|
|
|
|
|
$
|
1,913.3
|
|
|
$
|
2,036.3
|
|
____________________
|
|
(1)
|
Letters of credit outstanding under our Credit Facility totaled
$116.7 million
and available funds under this facility were
$1,383.3 million
at
September 30, 2016
.
|
Covenants
Among other restrictions, our Credit Facility and Term Loan Facility contain financial covenants applicable to FMC and its consolidated subsidiaries related to leverage (measured as the ratio of debt to adjusted earnings) and interest coverage (measured as the ratio of adjusted earnings to interest expense). Our actual leverage for the four consecutive quarters ended
September 30, 2016
, was
3.4
which is below the maximum leverage of
4.25
at
September 30, 2016
. Our actual interest coverage for the four consecutive quarters ended
September 30, 2016
, was
7.6
which is above the minimum interest coverage of
3.5
. We were in compliance with all covenants at
September 30, 2016
.
Note 10: Discontinued Operations
FMC Alkali:
On April 1, 2015, we completed the previously disclosed sale of our FMC Alkali Chemicals division ("ACD") for
$1,649.8 million
to a wholly owned subsidiary of Tronox Limited ("Tronox"). The sale resulted in approximately
$1,198.5 million
in after-tax cash proceeds. The sale resulted in a pre-tax gain of
$1,080.2 million
(
$702.1 million
net of tax) in the second quarter of 2015.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
The results of our discontinued FMC ACD operations are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
194.0
|
|
Costs of sales and services
|
—
|
|
|
—
|
|
|
—
|
|
|
149.2
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations before income taxes
(1)
|
—
|
|
|
7.7
|
|
|
—
|
|
|
1,096.4
|
|
Provision for income taxes
|
—
|
|
|
6.0
|
|
|
—
|
|
|
378.4
|
|
Total discontinued operations of FMC ACD, net of income taxes
|
$
|
—
|
|
|
$
|
1.7
|
|
|
$
|
—
|
|
|
$
|
718.0
|
|
Less: discontinued operations of FMC ACD attributable to noncontrolling interests
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Discontinued operations of FMC ACD, net of income taxes, attributable to FMC Stockholders
|
$
|
—
|
|
|
$
|
1.7
|
|
|
$
|
—
|
|
|
$
|
718.0
|
|
____________________
|
|
(1)
|
For the
nine
months ended
September 30, 2015
, amounts include
$2.2 million
of allocated interest expense,
$15.0 million
of divestiture related charges and
$5.3 million
of a pension curtailment charge. Interest was allocated in accordance with relevant discontinued operations accounting guidance.
|
In addition to our discontinued FMC Alkali Chemicals division, our other discontinued operations include adjustments to retained liabilities. The primary liabilities retained include environmental liabilities, other postretirement benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities.
Our discontinued operations comprised the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Adjustment for workers’ compensation, product liability, other postretirement benefits and other, net of income tax benefit (expense) of ($1.0) and ($0.8) for the three and nine months ended September 30, 2016 and ($0.8) and ($1.1) for the three and nine months ended September 30, 2015, respectively
|
$
|
3.4
|
|
|
$
|
(1.5
|
)
|
|
$
|
3.3
|
|
|
$
|
(1.6
|
)
|
Provision for environmental liabilities, net of recoveries, net of income tax benefit of $1.8 and $4.2 for the three and nine months ended September 30, 2016 and $1.7 and $6.3 for the three and nine months ended September 30, 2015, respectively
(1)
|
(3.4
|
)
|
|
(2.9
|
)
|
|
(8.3
|
)
|
|
(10.9
|
)
|
Provision for legal reserves and expenses, net of recoveries, net of income tax benefit (expense) of $1.7 and $5.7 for the three and nine months ended September 30, 2016 and $1.5 and $3.9 for the three and nine months ended September 30, 2015, respectively
|
(3.0
|
)
|
|
(2.3
|
)
|
|
(9.9
|
)
|
|
(6.7
|
)
|
Discontinued operations of FMC Alkali Chemicals, net of income tax benefit (expense) of zero and zero for the three and nine months ended September 30, 2016 and ($6.0) and ($378.4) for the three and nine months ended September 30, 2015, respectively
|
—
|
|
|
1.7
|
|
|
—
|
|
|
718.0
|
|
Discontinued operations, net of income taxes
|
$
|
(3.0
|
)
|
|
$
|
(5.0
|
)
|
|
$
|
(14.9
|
)
|
|
$
|
698.8
|
|
____________________
|
|
(1)
|
See a roll forward of our environmental reserves, as well as, discussion on significant environmental issues that occurred during the
2016
in Note 11.
|
Note 11: Environmental Obligations
We have reserves for potential environmental obligations which management considers probable and which management can reasonably estimate. The table below is a roll forward of our total environmental reserves, continuing and discontinued:
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
Gross
|
|
Recoveries
(3)
|
|
Net
|
Total environmental reserves at December 31, 2015
|
$
|
348.2
|
|
|
$
|
(7.3
|
)
|
|
$
|
340.9
|
|
Provision/(benefit)
|
31.4
|
|
|
—
|
|
|
31.4
|
|
(Spending)/recoveries
|
(36.9
|
)
|
|
3.0
|
|
|
(33.9
|
)
|
Foreign currency translation adjustments
|
1.8
|
|
|
—
|
|
|
1.8
|
|
Net change
|
(3.7
|
)
|
|
3.0
|
|
|
(0.7
|
)
|
Total environmental reserves at September 30, 2016
|
$
|
344.5
|
|
|
$
|
(4.3
|
)
|
|
$
|
340.2
|
|
|
|
|
|
|
|
Environmental reserves, current
(1)
|
84.1
|
|
|
(1.6
|
)
|
|
82.5
|
|
Environmental reserves, long-term
(2)
|
260.4
|
|
|
(2.7
|
)
|
|
257.7
|
|
Total environmental reserves at September 30, 2016
|
$
|
344.5
|
|
|
$
|
(4.3
|
)
|
|
$
|
340.2
|
|
____________________
|
|
(1)
|
These amounts are included within "Accrued and other liabilities" on the condensed consolidated balance sheets.
|
|
|
(2)
|
These amounts are included in "Environmental liabilities, continuing and discontinued" on the condensed consolidated balance sheets.
|
|
|
(3)
|
These recorded recoveries represent probable realization of claims against U.S. government agencies and are recorded as an offset to our environmental reserves in the condensed consolidated balance sheets.
|
The estimated reasonably possible environmental loss contingencies, net of expected recoveries, exceed amounts accrued by approximately
$230 million
at
September 30, 2016
. This reasonably possible estimate is based upon information available as of the date of the filing but the actual future losses may be higher given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of potentially responsible parties, technology and information related to individual sites. Potential environmental obligations that have not been reserved may be material to any one quarter's or year's results of operations in the future. However, we believe any such liability arising from such potential environmental obligations is not likely to have a material adverse effect on our liquidity or financial condition as it may be satisfied over many years.
The table below provides a roll forward of our environmental recoveries representing probable realization of claims against insurance carriers and other third parties. These recoveries are recorded as "Other assets" in the condensed consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
12/31/2015
|
|
Increase in Recoveries
|
|
Cash Received
|
|
9/30/2016
|
Environmental recoveries
|
$
|
22.7
|
|
|
1.8
|
|
|
(1.0
|
)
|
|
$
|
23.5
|
|
Our net environmental provisions relate to costs for the continued cleanup of both continuing and discontinued manufacturing operations from previous years. The net provisions are comprised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
(in Millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Environmental provisions, net - recorded to liabilities
(1)
|
$
|
13.3
|
|
|
$
|
7.5
|
|
|
$
|
31.4
|
|
|
$
|
25.5
|
|
Environmental provisions, net - recorded to assets
(2)
|
—
|
|
|
—
|
|
|
(1.8
|
)
|
|
—
|
|
Environmental provision, net
|
$
|
13.3
|
|
|
$
|
7.5
|
|
|
$
|
29.6
|
|
|
$
|
25.5
|
|
|
|
|
|
|
|
|
|
Continuing operations
(3)
|
8.1
|
|
|
2.9
|
|
|
17.1
|
|
|
8.3
|
|
Discontinued operations
(4)
|
5.2
|
|
|
4.6
|
|
|
12.5
|
|
|
17.2
|
|
Environmental provision, net
|
$
|
13.3
|
|
|
$
|
7.5
|
|
|
$
|
29.6
|
|
|
$
|
25.5
|
|
____________________
|
|
(1)
|
See above roll forward of our total environmental reserves as presented on the condensed consolidated balance sheets.
|
|
|
(2)
|
See above roll forward of our total environmental recoveries as presented on the condensed consolidated balance sheets.
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
(3)
|
Recorded as a component of “Restructuring and other charges (income)” on the condensed consolidated statements of income (loss), 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.
|
|
|
(4)
|
Recorded as a component of “Discontinued operations, net of income taxes" on the condensed consolidated statements of income (loss), see Note 10.
|
A more complete description of our environmental contingencies and the nature of our potential obligations are included in Notes 1 and 10 to our consolidated financial statements in our 2015 Form 10-K. See Note 10 to our consolidated financial statements in our 2015 Form 10-K for a description of significant updates to material environmental sites. There have been no significant updates since the information included in our 2015 Form 10-K other than the update provided below.
Portland Harbor
On June 21, 2016, the Environmental Protection Agency (“EPA”) issued its Proposed Cleanup Plan for the Portland Harbor Superfund Site (“the Proposed Plan”). The Proposed Plan was open for public comment through September 6, 2016. The EPA will include responses to all comments in a responsiveness summary that will accompany the final cleanup plan. Any potential liability to FMC will represent a portion of the costs of the remedy the EPA selects for Portland Harbor. Based on the current information available in the Proposed Plan 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.
Middleport
On October 20, 2016, the New York Supreme Court Appellate Division, Third Department, issued a unanimous decision on our appeal of the August 20, 2015 dismissal of our action challenging the New York State Department of Environmental Conservation's ("NYSDEC") unilateral implementation of a remedy that is not consistent with the 1991 Administrative Order on Consent ("AOC"). The Third Department found that NYSDEC does not have the authority to unilaterally implement a remedy prior to issuing an order, which must be preceded by notice and opportunity for a hearing, and remanded the case to NYSDEC for further proceedings not inconsistent with the Court’s decision. As disclosed in our 2015 Form 10-K, our reserve continues to included the estimated liability for clean-up to reflect the costs associated with our recommended Corrective Action Management Alternatives ("CMA").
Note 12: Earnings Per Share
Earnings per common share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period on a basic and diluted basis.
Our potentially dilutive securities include potential common shares related to our stock options, restricted stock and restricted stock units. Diluted earnings per share (“Diluted EPS”) considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our common stock for the period. For the
three and nine
months ended
September 30, 2016
, there were
1.2 million
and
1.9 million
potential common shares excluded from Diluted EPS. There were
1.4 million
potential common shares excluded from Diluted EPS for the three months ended
September 30, 2015
. For the
nine
months ended
September 30, 2015
, we had a net loss from continuing operations attributable to FMC stockholders; as such all
1.7 million
potential common shares were excluded from Diluted EPS.
Our non-vested restricted stock awards contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing EPS. The two-class method determines EPS by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. In calculating the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average number of shares outstanding during the period.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Earnings applicable to common stock and common stock shares used in the calculation of basic and diluted earnings per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions, Except Share and Per Share Data)
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Earnings (loss) attributable to FMC stockholders:
|
|
|
|
|
|
|
|
Continuing operations, net of income taxes
|
$
|
82.7
|
|
|
$
|
2.6
|
|
|
$
|
208.1
|
|
|
$
|
(5.7
|
)
|
Discontinued operations, net of income taxes
|
(3.0
|
)
|
|
(5.0
|
)
|
|
(14.9
|
)
|
|
698.8
|
|
Net income (loss) attributable to FMC stockholders
|
$
|
79.7
|
|
|
$
|
(2.4
|
)
|
|
$
|
193.2
|
|
|
$
|
693.1
|
|
Less: Distributed and undistributed earnings allocable to restricted award holders
|
(0.3
|
)
|
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
Net income (loss) allocable to common stockholders
|
$
|
79.4
|
|
|
$
|
(2.4
|
)
|
|
$
|
192.6
|
|
|
$
|
693.1
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share attributable to FMC stockholders:
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.62
|
|
|
$
|
0.02
|
|
|
$
|
1.55
|
|
|
$
|
(0.04
|
)
|
Discontinued operations
|
(0.03
|
)
|
|
(0.04
|
)
|
|
(0.11
|
)
|
|
5.22
|
|
Net income (loss) attributable to FMC stockholders
|
$
|
0.59
|
|
|
$
|
(0.02
|
)
|
|
$
|
1.44
|
|
|
$
|
5.18
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share attributable to FMC stockholders:
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.61
|
|
|
$
|
0.02
|
|
|
$
|
1.55
|
|
|
$
|
(0.04
|
)
|
Discontinued operations
|
(0.02
|
)
|
|
(0.04
|
)
|
|
(0.11
|
)
|
|
5.22
|
|
Net income (loss) attributable to FMC stockholders
|
$
|
0.59
|
|
|
$
|
(0.02
|
)
|
|
$
|
1.44
|
|
|
$
|
5.18
|
|
|
|
|
|
|
|
|
|
Shares (in thousands):
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock outstanding - Basic
|
133,973
|
|
|
133,764
|
|
|
133,890
|
|
|
133,679
|
|
Weighted average additional shares assuming conversion of potential common shares
|
725
|
|
|
611
|
|
|
601
|
|
|
—
|
|
Shares – diluted basis
|
134,698
|
|
|
134,375
|
|
|
134,491
|
|
|
133,679
|
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Note 13: Equity
The table provides a roll forward of equity, equity attributable to FMC stockholders, and equity attributable to noncontrolling interests.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions, Except Per Share Data)
|
FMC
Stockholders’
Equity
|
|
Noncontrolling
Interest
|
|
Total
Equity
|
Balance at December 31, 2015
|
$
|
1,865.7
|
|
|
$
|
42.6
|
|
|
$
|
1,908.3
|
|
Net income (loss)
|
193.2
|
|
|
2.1
|
|
|
195.3
|
|
Stock compensation plans
|
17.9
|
|
|
—
|
|
|
17.9
|
|
Excess tax benefits from share-based compensation
|
(0.5
|
)
|
|
—
|
|
|
(0.5
|
)
|
Shares for benefit plan trust
|
0.2
|
|
|
—
|
|
|
0.2
|
|
Net pension and other benefit actuarial gains/(losses) and prior service costs, net of income tax
(1)
|
18.1
|
|
|
—
|
|
|
18.1
|
|
Net hedging gains/(losses) and other, net of income tax
(1)
|
7.0
|
|
|
—
|
|
|
7.0
|
|
Foreign currency translation adjustments
(1)
|
50.7
|
|
|
(0.4
|
)
|
|
50.3
|
|
Dividends ($0.165 per share)
|
(66.4
|
)
|
|
—
|
|
|
(66.4
|
)
|
Repurchases of common stock
|
(1.6
|
)
|
|
—
|
|
|
(1.6
|
)
|
Divestiture of noncontrolling interests
(2)
|
—
|
|
|
(7.9
|
)
|
|
(7.9
|
)
|
Balance at September 30, 2016
|
$
|
2,084.3
|
|
|
$
|
36.4
|
|
|
$
|
2,120.7
|
|
____________________
|
|
(1)
|
See condensed consolidated statements of comprehensive income (loss).
|
|
|
(2)
|
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.
|
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
(3)
|
50.7
|
|
|
0.9
|
|
|
—
|
|
|
$
|
51.6
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
6.1
|
|
|
18.1
|
|
|
$
|
24.2
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net of tax at September 30, 2016
|
$
|
(96.6
|
)
|
|
$
|
0.8
|
|
|
$
|
(285.7
|
)
|
|
$
|
(381.5
|
)
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2014
|
$
|
(50.4
|
)
|
|
$
|
(3.9
|
)
|
|
$
|
(321.5
|
)
|
|
$
|
(375.8
|
)
|
2015 Activity
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
(3)
|
(80.3
|
)
|
|
3.7
|
|
|
(7.4
|
)
|
|
$
|
(84.0
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
(2.3
|
)
|
|
29.4
|
|
|
$
|
27.1
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net of tax at September 30, 2015
|
$
|
(130.7
|
)
|
|
$
|
(2.5
|
)
|
|
$
|
(299.5
|
)
|
|
$
|
(432.7
|
)
|
____________________
(1) See Note 16 for more information.
(2) See Note 14 for more information.
(3) Excludes foreign currency translation adjustments attributable to noncontrolling interests.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Reclassifications of accumulated other comprehensive income (loss)
The table below provides details about the reclassifications from Accumulated Other Comprehensive Income (Loss) and the affected line items in the condensed consolidated statements of income (loss) for each of the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details about Accumulated Other Comprehensive Income Components
|
|
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)
(1)
|
|
Affected Line Item in the Condensed Consolidated Statements of Income (Loss)
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
|
|
(in Millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
$
|
(5.4
|
)
|
|
$
|
11.1
|
|
|
(8.5
|
)
|
|
29.0
|
|
|
Costs of sales and services
|
Energy contracts
|
|
(0.5
|
)
|
|
(1.3
|
)
|
|
(2.1
|
)
|
|
(3.8
|
)
|
|
Costs of sales and services
|
Foreign currency contracts
|
|
2.5
|
|
|
(9.0
|
)
|
|
1.0
|
|
|
(20.9
|
)
|
|
Selling, general and administrative expenses
|
Total before tax
|
|
(3.4
|
)
|
|
0.8
|
|
|
(9.5
|
)
|
|
4.3
|
|
|
|
|
|
1.2
|
|
|
(0.4
|
)
|
|
3.3
|
|
|
(2.0
|
)
|
|
Provision for income taxes
|
Amount included in net income
|
|
$
|
(2.2
|
)
|
|
$
|
0.4
|
|
|
$
|
(6.2
|
)
|
|
$
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other postretirement benefits
(2)
:
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service costs
|
|
$
|
(0.1
|
)
|
|
$
|
(0.1
|
)
|
|
(0.5
|
)
|
|
(0.7
|
)
|
|
Selling, general and administrative expenses
|
Amortization of unrecognized net actuarial and other gains (losses)
|
|
(9.3
|
)
|
|
(12.3
|
)
|
|
(29.6
|
)
|
|
(40.0
|
)
|
|
Selling, general and administrative expenses
|
Recognized loss due to settlement and curtailment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.3
|
)
|
|
Selling, general and administrative expenses
(3)
|
Total before tax
|
|
$
|
(9.4
|
)
|
|
$
|
(12.4
|
)
|
|
(30.1
|
)
|
|
(46.0
|
)
|
|
|
|
|
4.7
|
|
|
4.4
|
|
|
12.0
|
|
|
16.6
|
|
|
Provision for income taxes
|
Amount included in net income
|
|
(4.7
|
)
|
|
(8.0
|
)
|
|
(18.1
|
)
|
|
(29.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
(6.9
|
)
|
|
$
|
(7.6
|
)
|
|
$
|
(24.3
|
)
|
|
$
|
(27.1
|
)
|
|
Amount included in net income
|
____________________
|
|
(1)
|
Amounts in parentheses indicate charges to the condensed consolidated statements of income (loss).
|
|
|
(2)
|
Pension and other postretirement benefits amounts include the impact from both continuing and discontinued operations. For detail on the continuing operations components of pension and other postretirement benefits, see Note 14.
|
|
|
(3)
|
The loss due to curtailment for the
nine
months ended
September 30, 2015
related to the disposal of our FMC Alkali Chemicals division and was recorded to "Discontinued operations, net of income taxes" on the condensed consolidated statements of income (loss).
|
Dividends and Share Repurchases
For the
nine
months ended
September 30, 2016
and
2015
, we paid dividends
$66.4 million
and
$64.3 million
, respectively. On
October 20, 2016
, we paid dividends totaling
$22.2 million
to our shareholders of record as of
September 30, 2016
. This amount is included in “Accrued and other liabilities” on the condensed consolidated balance sheet as of
September 30, 2016
.
During the
nine
months ended
September 30, 2016
, no shares were repurchased under the publicly announced repurchase program. At
September 30, 2016
,
$250.0 million
remained unused under our Board-authorized repurchase program. This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
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 14: Pensions and Other Postretirement Benefits
The following table summarizes the components of net annual benefit cost (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
Pensions
|
|
Other Benefits
|
|
Pensions
|
|
Other Benefits
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Components of net annual benefit cost (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
1.4
|
|
|
$
|
2.2
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
6.6
|
|
|
$
|
9.8
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
Interest cost
|
12.8
|
|
|
15.2
|
|
|
0.2
|
|
|
0.2
|
|
|
38.2
|
|
|
45.9
|
|
|
0.6
|
|
|
0.7
|
|
Expected return on plan assets
|
(21.8
|
)
|
|
(22.3
|
)
|
|
—
|
|
|
—
|
|
|
(65.6
|
)
|
|
(66.8
|
)
|
|
—
|
|
|
—
|
|
Amortization of prior service cost (credit)
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|
0.6
|
|
|
—
|
|
|
0.1
|
|
Recognized net actuarial and other (gain) loss
|
9.3
|
|
|
12.8
|
|
|
(0.4
|
)
|
|
(0.4
|
)
|
|
29.9
|
|
|
41.0
|
|
|
(1.0
|
)
|
|
(0.9
|
)
|
Recognized loss due to curtailment
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.8
|
|
|
—
|
|
|
0.5
|
|
Net periodic benefit cost
(2)
|
$
|
1.8
|
|
|
$
|
8.0
|
|
|
$
|
(0.2
|
)
|
|
$
|
(0.1
|
)
|
|
$
|
9.6
|
|
|
$
|
35.3
|
|
|
$
|
(0.4
|
)
|
|
$
|
0.5
|
|
____________________
|
|
(1)
|
Curtailment loss is associated with the disposal of our FMC Alkali Chemicals division and was recorded to discontinued operations within the condensed consolidated statements of income (loss).
|
|
|
(2)
|
Net periodic benefit cost represents both continuing and discontinued operations.
|
We made voluntary cash contributions to our U.S. defined benefit pension plan in the
nine
months ended
September 30, 2016
and
September 30, 2015
of
$35.0 million
and
$65.0 million
, respectively. We do not expect to make any further contributions to our U.S. defined benefit pension plan during
2016
.
Note 15: Income Taxes
We determine our interim tax provision using an Estimated Annual Effective Tax Rate methodology (“EAETR”) in accordance with GAAP. The EAETR is applied to the year-to-date ordinary income, exclusive of discrete items. The tax effects of discrete items are then included to arrive at the total reported interim tax provision.
The determination of the EAETR is based upon a number of estimates, including the estimated annual pretax ordinary income in each tax jurisdiction in which we operate. As our projections of ordinary income change throughout the year, the EAETR will change period-to-period. The tax effects of discrete items are recognized in the tax provision in the period they occur in accordance with GAAP. Depending on various factors, such as the item’s significance in relation to total income and the rate of tax applicable in the jurisdiction to which it relates, discrete items in any quarter can materially impact the reported effective tax rate. As a global enterprise, our tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors. As such, there can be significant volatility in interim tax provisions.
The below chart provides a reconciliation between our reported effective tax rate and the EAETR.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
2016
|
|
2015
|
(in Millions)
|
Before Tax
|
|
Tax
|
Effective Tax Rate % Impact
|
|
Before Tax
|
|
Tax
|
Effective Tax Rate % Impact
|
Continuing operations
|
$
|
95.2
|
|
|
$
|
12.6
|
|
13.2
|
%
|
|
$
|
(19.7
|
)
|
|
$
|
(25.1
|
)
|
127.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Discrete items:
|
|
|
|
|
|
|
|
|
|
Acquisition-related charges
(1)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Currency remeasurement
(2)
|
8.1
|
|
|
1.1
|
|
|
|
2.2
|
|
|
(2.1
|
)
|
|
Other discrete items
(3)
|
(1.3
|
)
|
|
(0.1
|
)
|
|
|
48.7
|
|
|
5.0
|
|
|
Tax only discrete items
(4)
|
—
|
|
|
6.0
|
|
|
|
—
|
|
|
19.0
|
|
|
Total discrete items
|
$
|
6.8
|
|
|
$
|
7.0
|
|
|
|
$
|
50.9
|
|
|
$
|
21.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations, before discrete items
|
$
|
102.0
|
|
|
$
|
19.6
|
|
|
|
$
|
31.2
|
|
|
$
|
(3.2
|
)
|
|
Quarterly effect of changes in the EAETR
(5)
|
|
|
|
19.2
|
%
|
|
|
|
|
(10.3
|
)%
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30
|
|
2016
|
|
2015
|
(in Millions)
|
Before Tax
|
|
Tax
|
Effective Tax Rate % Impact
|
|
Before Tax
|
|
Tax
|
Effective Tax Rate % Impact
|
Continuing operations
|
$
|
285.7
|
|
|
$
|
75.5
|
|
26.4
|
%
|
|
$
|
(54.0
|
)
|
|
$
|
(56.4
|
)
|
104.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discrete items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related charges
(1)
|
—
|
|
|
—
|
|
|
|
|
211.7
|
|
|
77.8
|
|
|
|
Currency remeasurement
(2)
|
15.3
|
|
|
0.6
|
|
|
|
|
26.2
|
|
|
1.8
|
|
|
|
Other discrete items
(3)
|
100.4
|
|
|
3.8
|
|
|
|
|
84.1
|
|
|
14.2
|
|
|
|
Tax only discrete items
(4)
|
—
|
|
|
2.8
|
|
|
|
|
—
|
|
|
19.9
|
|
|
|
Total discrete items
|
$
|
115.7
|
|
|
$
|
7.2
|
|
|
|
|
$
|
322.0
|
|
|
$
|
113.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations, before discrete items
|
$
|
401.4
|
|
|
$
|
82.7
|
|
|
|
$
|
268.0
|
|
|
$
|
57.3
|
|
|
Year-to-date effect of changes in the EAETR
(5)
|
|
|
|
20.6
|
%
|
|
|
|
|
21.4
|
%
|
___________________
|
|
(1)
|
Due to the nature of acquisition-related charges incurred during 2016, these charges are not treated discretely in accordance with GAAP. As such, the amounts differ from total acquisition-related charges as presented in Note 3. Acquisition-related charges for the
nine
months ended
September 30, 2015
are primarily taxed at domestic tax rates resulting in a material tax benefit. The acquisition-related charges are comprised of legal and professional fees and a loss incurred from hedging activity associated with the purchase price of Cheminova. See Note 3 for more information. As noted in footnote (2), below, hedge gains or losses are accounted for discretely for GAAP purposes.
|
|
|
(2)
|
Represents transaction gains or losses for currency remeasurement offset by associated hedge gains or losses, both of which are accounted for discretely in accordance with GAAP. Certain transaction gains or losses are considered non-taxable permanent items, while offsetting hedge gains or losses are taxable.
|
|
|
(3)
|
In accordance with GAAP, subsidiaries for which a full valuation allowance has been provided generally are not accounted for as a component of the EAETR. For the
three and nine
months ended
September 30, 2016
, the Other discrete items component of the EAETR reconciliation primarily relates to the discrete accounting for these pretax losses. For the three and nine months ended September 30, 2015, the Other discrete items primarily related to certain restructuring and other charges.
|
|
|
(4)
|
For the three and
nine
months ended
September 30, 2016
tax only discrete items is comprised primarily of the tax effect of currency remeasurement associated with foreign statutory operations, changes in uncertain tax and interest liabilities, and changes in prior year estimates of subsidiary tax liabilities. For the three and
nine
months ended
September 30, 2015
, this component was comprised primarily of currency remeasurement associated with foreign statutory operations and changes in realizability or measurement of certain deferred tax assets.
|
|
|
(5)
|
The decrease in the EAETR for the
nine
months ended
September 30, 2016
is primarily driven by lower current year projected domestic earnings and domestic tax legislation enacted during the fourth quarter of 2015, which decreased the amount of projected domestic tax expense. The increase in the EAETR for the three months ended September 30, 2016 is primarily driven by changes in market conditions experienced by our FMC Agricultural Solutions segment in Brazil that significantly impacted the EAETR for the three months ended September 30, 2015.
|
Note 16: 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:
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
|
|
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 are included in the tables within this Note. The estimated fair value of debt is
$2,087.3 million
and
$2,214.0 million
and the carrying amount is
$1,976.5 million
and
$2,148.9 million
as of
September 30, 2016
and
December 31, 2015
, respectively.
We enter into various financial instruments with off-balance-sheet risk as part of the normal course of business. These off-balance-sheet instruments include financial guarantees and contractual commitments to extend financial guarantees under letters of credit, and other assistance to customers see Note 17 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 options contracts, to reduce the effects of fluctuating foreign currency exchange rates. A detailed description of these risks including a discussion on the concentration of credit risk is provided in Note 17 to our consolidated financial statements on our 2015 Form 10-K.
We formally document all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes relating derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. We also assess both, at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If we determine that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting with respect to that derivative prospectively.
Accounting for Derivative Instruments and Hedging Activities
Cash Flow Hedges
We recognize all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, we generally designate the derivative as a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge). We record in 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
September 30, 2016
, we had open foreign currency forward contracts in AOCI in a net after tax loss position of
$0.2 million
designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until December 29, 2017. At
September 30, 2016
, we had open forward contracts designated as cash flow hedges with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately
$430 million
.
As of
September 30, 2016
, we had current open commodity contracts in AOCI in a net after tax loss position of
$0.1 million
designated as cash flow hedges of underlying forecasted purchases, primarily related to natural gas. Current open commodity contracts hedge forecasted transactions until December 31, 2017. At
September 30, 2016
, we had an equivalent of
1.7 million
mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity forward contracts to hedge forecasted purchases.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Of the
$0.3 million
of net losses after-tax, representing both open foreign currency exchange contracts and commodity contracts, approximately
$0.4 million
of these losses would be realized in earnings during the twelve months ending
September 30, 2017
and
$0.1 million
of net gains would be realized subsequent to
September 30, 2017
, if spot rates in the future are consistent with forward rates as of
September 30, 2016
. The actual effect on earnings will be dependent on the actual spot rates when the forecasted transactions occur.
Derivatives Not Designated As Hedging Instruments
We hold certain forward contracts that have not been designated as cash flow hedging instruments for accounting purposes. Contracts used to hedge the exposure to foreign currency fluctuations associated with certain monetary assets and liabilities are not designated as cash flow hedging instruments, and changes in the fair value of these items are recorded in earnings. We occasionally hold call options that are effective as economic hedges of a portion of our natural gas exposure and the change in fair value of this instrument is also recorded in earnings. We periodically hold soybean barter contracts which qualify as derivatives and we have entered into offsetting commodity contracts to hedge our exposure. Both the change in fair value of the soybean barter contracts and the offsetting commodity contracts 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
$1,594 million
at
September 30, 2016
.
Fair-Value of Derivative Instruments
The following tables provide the gross fair value and net balance sheet presentation of our derivative instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
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
|
$
|
8.0
|
|
|
$
|
1.7
|
|
|
$
|
9.7
|
|
|
$
|
(9.7
|
)
|
|
$
|
—
|
|
Energy contracts
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
(0.1
|
)
|
|
0.2
|
|
Total derivative assets
(1)
|
8.3
|
|
|
1.7
|
|
|
10.0
|
|
|
(9.8
|
)
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
(10.1
|
)
|
|
(2.4
|
)
|
|
(12.5
|
)
|
|
9.7
|
|
|
(2.8
|
)
|
Energy contracts
|
(0.4
|
)
|
|
—
|
|
|
(0.4
|
)
|
|
0.1
|
|
|
(0.3
|
)
|
Total derivative liabilities
(2)
|
(10.5
|
)
|
|
(2.4
|
)
|
|
(12.9
|
)
|
|
9.8
|
|
|
(3.1
|
)
|
|
|
|
|
|
|
|
|
|
|
Net derivative assets/(liabilities)
|
$
|
(2.2
|
)
|
|
$
|
(0.7
|
)
|
|
$
|
(2.9
|
)
|
|
$
|
—
|
|
|
$
|
(2.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
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
|
$
|
6.1
|
|
|
$
|
5.2
|
|
|
$
|
11.3
|
|
|
$
|
(11.3
|
)
|
|
$
|
—
|
|
Energy contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total derivative assets
(1)
|
6.1
|
|
|
5.2
|
|
|
11.3
|
|
|
(11.3
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
(15.4
|
)
|
|
(7.3
|
)
|
|
(22.7
|
)
|
|
11.3
|
|
|
(11.4
|
)
|
Energy contracts
|
(2.0
|
)
|
|
—
|
|
|
(2.0
|
)
|
|
—
|
|
|
(2.0
|
)
|
Total derivative liabilities
(2)
|
(17.4
|
)
|
|
(7.3
|
)
|
|
(24.7
|
)
|
|
11.3
|
|
|
(13.4
|
)
|
|
|
|
|
|
|
|
|
|
|
Net derivative assets/(liabilities)
|
$
|
(11.3
|
)
|
|
$
|
(2.1
|
)
|
|
$
|
(13.4
|
)
|
|
$
|
—
|
|
|
$
|
(13.4
|
)
|
____________________
|
|
(1)
|
Net balance is included in “Prepaid and other current assets” in the condensed consolidated balance sheets.
|
|
|
(2)
|
Net balance is included in “Accrued and other liabilities” in the condensed consolidated balance sheets.
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
(3)
|
Represents net derivatives positions subject to master netting arrangements.
|
The tables below summarize the gains or losses related to our cash flow hedges and derivatives not designated as hedging instruments.
Derivatives in Cash Flow Hedging Relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
Contracts
|
|
|
|
Foreign Exchange
|
|
Energy
|
|
Other
|
|
Total
|
(in Millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Unrealized hedging gains (losses) and other, net of tax
|
$
|
0.2
|
|
|
$
|
(1.0
|
)
|
|
$
|
(0.1
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
(1.5
|
)
|
Reclassification of deferred hedging (gains) losses,
net of tax
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective portion
(1)
|
1.9
|
|
|
(1.2
|
)
|
|
0.3
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
2.2
|
|
|
(0.4
|
)
|
Ineffective portion
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total derivative instrument impact on
comprehensive income, net of tax
|
$
|
2.2
|
|
|
$
|
(2.2
|
)
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2.3
|
|
|
$
|
(1.9
|
)
|
|
|
Nine Months Ended September 30
|
|
Contracts
|
|
|
|
Foreign Exchange
|
|
Energy
|
|
Other
|
|
Total
|
(in Millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Unrealized hedging gains (losses) and other, net of tax
|
$
|
1.0
|
|
|
$
|
2.6
|
|
|
$
|
(0.1
|
)
|
|
$
|
1.2
|
|
|
$
|
—
|
|
|
$
|
(0.1
|
)
|
|
$
|
0.9
|
|
|
$
|
3.7
|
|
Reclassification of deferred hedging (gains) losses,
net of tax
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective portion
(1)
|
4.9
|
|
|
(4.5
|
)
|
|
1.4
|
|
|
2.4
|
|
|
(0.1
|
)
|
|
—
|
|
|
6.2
|
|
|
(2.1
|
)
|
Ineffective portion
(1)
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
Total derivative instrument impact on
comprehensive income, net of tax
|
$
|
5.9
|
|
|
$
|
(2.1
|
)
|
|
$
|
1.3
|
|
|
$
|
3.6
|
|
|
$
|
(0.1
|
)
|
|
$
|
(0.1
|
)
|
|
$
|
7.1
|
|
|
$
|
1.4
|
|
___________________
|
|
(1)
|
See Note 13 for classification of amounts within the condensed 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)
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
(in Millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Foreign exchange contracts
|
Cost of sales and services
|
$
|
10.2
|
|
|
$
|
(7.0
|
)
|
|
$
|
37.6
|
|
|
$
|
(14.8
|
)
|
|
Selling, general & administrative
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
(172.1
|
)
|
Total
|
|
$
|
10.2
|
|
|
$
|
(7.0
|
)
|
|
$
|
37.6
|
|
|
$
|
(186.9
|
)
|
___________________
|
|
(1)
|
Amounts in the columns represent the gain or loss on the derivative instrument offset by the gain or loss on the hedged item.
|
|
|
(2)
|
Charges represent a loss on the Cheminova acquisition hedge. See Note 3 within these condensed consolidated financial statements for more information.
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Fair-Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principle or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability.
Fair-Value Hierarchy
We have categorized our assets and liabilities that are recorded at fair value, based on the priority of the inputs to the valuation technique, into a three-level fair-value hierarchy. The fair-value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets and liabilities fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair-value measurement of the instrument.
Recurring Fair-Value Measurements
The following tables present our fair-value hierarchy for those assets and liabilities measured at fair-value on a recurring basis in the condensed consolidated balance sheets. During the periods presented there were no transfers between fair-value hierarchy levels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
September 30, 2016
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets
|
|
|
|
|
|
|
|
Derivatives – Commodities:
|
|
|
|
|
|
|
|
Energy contracts
(1)
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
Other
(2)
|
25.8
|
|
|
25.8
|
|
|
—
|
|
|
—
|
|
Total assets
|
$
|
26.0
|
|
|
$
|
25.8
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Derivatives – Commodities:
|
|
|
|
|
|
|
|
Energy contracts
(1)
|
$
|
0.3
|
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
$
|
—
|
|
Derivatives – Foreign exchange
(1)
|
2.8
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
Other
(3)
|
30.7
|
|
|
30.3
|
|
|
0.4
|
|
|
—
|
|
Total liabilities
|
$
|
33.8
|
|
|
$
|
30.3
|
|
|
$
|
3.5
|
|
|
$
|
—
|
|
____________________
|
|
(1)
|
See the Fair Value of Derivative Instruments table within this Note for classifications on the condensed consolidated balance sheet.
|
|
|
(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” in the condensed consolidated balance sheets.
|
|
|
(3)
|
Consists of a deferred compensation arrangement recognized on our balance sheet. Both the asset and liability are recorded at fair value. Liability amounts due are included in “Other long-term liabilities” in the condensed consolidated balance sheets. Level 2 liabilities represent liability-based awards associated with non-employees.
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
December 31, 2015
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets
|
|
|
|
|
|
|
|
Derivatives – Commodities:
|
|
|
|
|
|
|
|
Other
(2)
|
$
|
25.4
|
|
|
$
|
25.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total assets
|
$
|
25.4
|
|
|
$
|
25.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Derivatives – Commodities:
|
|
|
|
|
|
|
|
Energy contracts
(1)
|
$
|
2.0
|
|
|
$
|
—
|
|
|
$
|
2.0
|
|
|
$
|
—
|
|
Derivatives – Foreign exchange
(1)
|
11.4
|
|
|
—
|
|
|
11.4
|
|
|
—
|
|
Other
(3)
|
29.1
|
|
|
29.1
|
|
|
—
|
|
|
—
|
|
Total liabilities
|
$
|
42.5
|
|
|
$
|
29.1
|
|
|
$
|
13.4
|
|
|
$
|
—
|
|
____________________
|
|
(1)
|
See the Fair -Value of Derivative Instruments table within this Note for classification on the condensed consolidated balance sheet.
|
|
|
(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” in the condensed consolidated balance sheets.
|
|
|
(3)
|
Consist 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 condensed consolidated balance sheets.
|
Nonrecurring Fair - Value Measurements
The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis in the condensed consolidated balance sheets during the periods ended
September 30, 2016
and
December 31, 2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
September 30, 2016
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total Gains
(Losses)
(Period Ended
September 30, 2016)
|
Assets
|
|
|
|
|
|
|
|
|
|
Impairment of intangibles
|
$
|
5.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.9
|
|
|
$
|
(1.0
|
)
|
Total assets
|
$
|
5.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.9
|
|
|
$
|
(1.0
|
)
|
|
|
(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
$1.0 million
to its fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
December 31, 2015
|
|
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,
2015)
|
Assets
|
|
|
|
|
|
|
|
|
|
Long-lived assets associated with exit activities
(1)
|
$
|
35.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
35.4
|
|
|
$
|
(70.5
|
)
|
Total assets
|
$
|
35.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
35.4
|
|
|
$
|
(70.5
|
)
|
____________________
|
|
(1)
|
We recorded charges, within our FMC Health and Nutrition segment, to write down the value of certain long-lived assets of approximately
$70.5 million
to salvage value in the case of fixed assets and fair value in the case of indefinite lived intangible assets.
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Note 17: Guarantees, Commitments, and Contingencies
We continue to monitor the conditions that are subject to guarantees and indemnifications to identify whether a liability must be recognized in our financial statements.
Guarantees and Other Commitments
The following table provides the estimated undiscounted amount of potential future payments for each major group of guarantees at
September 30, 2016
. 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)
|
$
|
88.0
|
|
Guarantees of vendor financing - long-term
(1)
|
12.8
|
|
Other debt guarantees
(2)
|
2.3
|
|
Total
|
$
|
103.1
|
|
____________________
|
|
(1)
|
Represents guarantees to financial institutions on behalf of certain FMC Agricultural Solutions customers for their seasonal borrowing. This short term amount is recorded on the condensed consolidated balance sheets as “Guarantees of vendor financing.” The long term amount is recorded on the condensed consolidated balance sheet within "Other long term liabilities."
|
|
|
(2)
|
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 the stand-ready obligation) based on our historical collection experience and a current assessment of credit exposure. We believe the fair-value of these guarantees is immaterial. The majority of these guarantees have an expiration date of less than one year.
|
Excluded from the chart above, in connection with our property and asset sales and divestitures, we have agreed to indemnify the buyer for certain liabilities, including environmental contamination and taxes that occurred prior to the date of sale or provided guarantees to third parties relating to certain contracts assumed by the buyer. Our indemnification or guarantee obligations with respect to these 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. We have not recorded any specific liabilities for these guarantees.
Contingencies
A detailed discussion related to our outstanding contingencies can be found in Note 18 to our consolidated financial statements included within our 2015 Form 10-K.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Note 18: Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
|
|
|
|
|
|
|
FMC Agricultural Solutions
|
$
|
558.9
|
|
|
$
|
577.6
|
|
|
$
|
1,657.0
|
|
|
$
|
1,595.6
|
|
FMC Health and Nutrition
|
178.9
|
|
|
195.9
|
|
|
566.3
|
|
|
613.5
|
|
FMC Lithium
|
69.9
|
|
|
57.2
|
|
|
193.5
|
|
|
168.1
|
|
Total
|
$
|
807.7
|
|
|
$
|
830.7
|
|
|
$
|
2,416.8
|
|
|
$
|
2,377.2
|
|
Income from continuing operations before income taxes
|
|
|
|
|
|
|
|
FMC Agricultural Solutions
|
$
|
90.1
|
|
|
$
|
59.4
|
|
|
$
|
272.8
|
|
|
$
|
262.6
|
|
FMC Health and Nutrition
|
45.1
|
|
|
47.0
|
|
|
137.3
|
|
|
148.5
|
|
FMC Lithium
|
17.5
|
|
|
1.8
|
|
|
48.9
|
|
|
11.9
|
|
Segment operating profit
(a)
|
$
|
152.7
|
|
|
$
|
108.2
|
|
|
$
|
459.0
|
|
|
$
|
423.0
|
|
Corporate and other
|
(18.2
|
)
|
|
(13.6
|
)
|
|
(54.0
|
)
|
|
(46.0
|
)
|
Operating profit before the items listed below
|
$
|
134.5
|
|
|
$
|
94.6
|
|
|
$
|
405.0
|
|
|
$
|
377.0
|
|
Interest expense, net
|
(20.3
|
)
|
|
(20.2
|
)
|
|
(61.1
|
)
|
|
(58.9
|
)
|
Restructuring and other (charges) income
(1)
|
(14.4
|
)
|
|
(45.6
|
)
|
|
(39.1
|
)
|
|
(78.2
|
)
|
Non-operating pension and postretirement (charges) income
(2)
|
(0.2
|
)
|
|
(5.5
|
)
|
|
(2.3
|
)
|
|
(19.9
|
)
|
Acquisition-related charges
(3)
|
(4.4
|
)
|
|
(43.0
|
)
|
|
(16.8
|
)
|
|
(274.0
|
)
|
(Provision) benefit for income taxes
|
(12.6
|
)
|
|
25.1
|
|
|
(75.5
|
)
|
|
56.4
|
|
Discontinued operations, net of income taxes
|
(3.0
|
)
|
|
(5.0
|
)
|
|
(14.9
|
)
|
|
698.8
|
|
Net income (loss) attributable to noncontrolling interests
|
0.1
|
|
|
(2.8
|
)
|
|
(2.1
|
)
|
|
(8.1
|
)
|
Net income (loss) attributable to FMC stockholders
|
$
|
79.7
|
|
|
$
|
(2.4
|
)
|
|
$
|
193.2
|
|
|
$
|
693.1
|
|
____________________
(a) Referred to as Segment Earnings.
|
|
(1)
|
See Note 8 of the condensed consolidated financial statements included within this Form 10-Q for details of restructuring and other (charges) income. Below provides the detail the (charges) income by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
(in Millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
FMC Agricultural Solutions
|
$
|
(8.7
|
)
|
|
$
|
(24.1
|
)
|
|
$
|
(21.2
|
)
|
|
$
|
(47.2
|
)
|
FMC Health and Nutrition
|
(0.7
|
)
|
|
(16.6
|
)
|
|
(4.0
|
)
|
|
(20.6
|
)
|
FMC Lithium
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
(0.5
|
)
|
Corporate
|
(5.0
|
)
|
|
(4.9
|
)
|
|
(13.3
|
)
|
|
(9.9
|
)
|
Restructuring and other (charges) income
|
$
|
(14.4
|
)
|
|
$
|
(45.6
|
)
|
|
$
|
(39.1
|
)
|
|
$
|
(78.2
|
)
|
|
|
(2)
|
Our non-operating pension and postretirement costs are defined as those costs related to interest, expected return on plan assets, amortized actuarial gains and losses and the impacts of any plan curtailments or settlements. These costs 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 exclude these non-operating pension and postretirement costs from our segments as we believe that removing them provides a better understanding of the underlying profitability of our businesses, increased transparency and clarity in the performance of our retirement plans and enhances period-over-period comparability. We continue to include the service cost and amortization of prior service cost in the operating segments noted above. We believe these elements reflect the current year operating costs to our businesses for the employment benefits provided to active employees. These expenses are included as a component of the line item “Selling, general and administrative expenses” on the condensed consolidated statements of income (loss).
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
(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 and gains or losses on hedging purchase price associated with the planned or completed acquisitions. Amounts represent the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
(in Millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Acquisition-related charges -
Cheminova
|
|
|
|
|
|
|
|
Legal and professional fees
(1)
|
$
|
4.4
|
|
|
$
|
14.2
|
|
|
$
|
16.8
|
|
|
$
|
53.8
|
|
Inventory fair value amortization
(2)
|
—
|
|
|
28.8
|
|
|
—
|
|
|
48.1
|
|
(Gain)/loss on hedging purchase price
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
172.1
|
|
Acquisition-related charges
|
$
|
4.4
|
|
|
$
|
43.0
|
|
|
$
|
16.8
|
|
|
$
|
274.0
|
|
____________________
|
|
(1)
|
On the condensed consolidated statements of income (loss), these charges are included in “Selling, general and administrative expense.” For more information see Note 3.
|
(2) On the condensed consolidated statements of income (loss), these charges are included in “Costs of sales and services.”