Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1: Financial Information and Accounting Policies
In our opinion the condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") applicable to interim period financial statements and reflect all adjustments necessary for a fair statement of results of operations for the three months ended March 31, 2020 and 2019, cash flows for the three months ended March 31, 2020 and 2019, changes in equity for the three months ended March 31, 2020 and 2019, and our financial positions as of March 31, 2020 and December 31, 2019. All such adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the Notes. The results of operations for the three months ended March 31, 2020 and 2019 are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, and the related condensed consolidated statements of income (loss) and condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2020 and 2019, condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019, and condensed consolidated statements of changes in equity for the three months ended March 31, 2020 and 2019 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, 2019 (the "2019 Form 10-K").
Given the COVID-19 pandemic, many countries, including the United States, subsequently imposed restrictions on both travel and business closures in an effort to mitigate the spread of COVID-19. As an agriculture sciences company, we are considered an "essential" industry in the countries in which we operate and have avoided significant plant closures and all our facilities are operational. While we have maintained business continuity and sustained our operations, we do not yet know the full extent of the disruptions on either our business and operations or the global economy nor the duration of the pandemic and its adverse effects.
Note 2: Recently Issued and Adopted Accounting Pronouncements and Regulatory Items
New accounting guidance and regulatory items
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for contracts and hedging relationships affected by reference rate reform. This applies to contracts that reference LIBOR or another rate that is expected to be discontinued as a result of rate reform and have modified terms that affect or have the potential to affect the amount and timing of contractual cash flows resulting from the discontinuance of reference rate. The new standard is effective March 12, 2020 through December 31, 2022. We are evaluating the impacts this standard will have on accounting for contracts and hedging relationships but do not believe it will have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions and simplification in several other areas. The new standard is effective for fiscal years beginning after December 15, 2020 (i.e., a January 1, 2021 effective date). We are evaluating the effect this guidance will have on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-14, Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The new standard is effective for fiscal years ending after December 15, 2020. We are evaluating the disclosure impacts this guidance will have on our consolidated financial statements.
Recently adopted accounting guidance
In August 2018, the FASB issued ASU No. 2018-15, Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new standard
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
became effective for fiscal years beginning after December 15, 2019 (i.e. a January 1, 2020 effective date). There was no material impact to our consolidated financial statements upon adoption.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU changes the subsequent measurement of goodwill impairment by eliminating Step 2 from the impairment test. Under the new guidance, an entity will measure impairment using the difference between the carrying amount and the fair value of the reporting unit. The new standard became effective for fiscal years beginning after December 15, 2019 (i.e. a January 1, 2020 effective date), with early adoption permitted for goodwill impairment tests with measurement dates after January 1, 2017. There was no material impact to our consolidated financial statements upon adoption.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss impairment methodology with a current expected credit loss ("CECL") model that immediately recognizes an estimate of credit losses that are expected to occur over the life of the financial instrument, including trade receivables. The update is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The new standard became effective January 1, 2020. As a result of the adoption, we have refined our allowance for doubtful trade receivables methodology which considers current economic conditions as well as forward-looking expectations about expected credit losses. Our accounting policy, as set forth in detail in Note 1 within the 2019 Form 10-K, follows a consistent methodology and incorporates the additional requirements under the new standard’s CECL framework. The adoption of the new standard did not result in a material impact to our consolidated financial statements.
Note 3: Revenue Recognition
Disaggregation of revenue
We disaggregate revenue from contracts with customers by geographical areas and major product categories. We have three major agricultural pesticide product categories: insecticides, herbicides, and fungicides. The disaggregated revenue tables are shown below for the three months ended March 31, 2020 and 2019.
The following table provides information about disaggregated revenue by major geographical region:
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Three Months Ended March 31,
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(in Millions)
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2020
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2019
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North America
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$
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327.6
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$
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318.3
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Latin America
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259.2
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206.5
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Europe, Middle East & Africa (EMEA)
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415.3
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412.0
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Asia
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247.9
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255.3
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Total Revenue
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$
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1,250.0
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$
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1,192.1
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The following table provides information about disaggregated revenue by major product category:
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Three Months Ended March 31,
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(in Millions)
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2020
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2019
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Insecticides
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$
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720.4
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$
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703.4
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Herbicides
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367.2
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361.6
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Fungicides
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83.3
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70.5
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Other
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79.1
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56.6
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Total Revenue
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$
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1,250.0
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$
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1,192.1
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We earn revenue from the sale of a wide range of products to a diversified base of customers around the world. Our portfolio is comprised of three major pesticide categories: insecticides, herbicides and fungicides. These products are used in agriculture to enhance crop yield and quality by controlling a broad spectrum of insects, weeds and disease, as well as in non-agricultural markets for pest control. The majority of our product lines consist of insecticides and herbicides, with a smaller portfolio of fungicides mainly used in high value crop segments. Our insecticides are used to control a wide spectrum of pests, while our
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
herbicide portfolio primarily targets a large variety of difficult-to-control weeds. Products in the other category include various agricultural products such as smaller classes of pesticides, growth promoters, and soil enhancements.
Sale of Goods
Revenue from product sales is recognized when (or as) we satisfy a performance obligation by transferring the promised goods to a customer, that is, when control of the good transfers to the customer. The customer is then invoiced at the agreed-upon price with payment terms generally ranging from 30 to 90 days, with some regions providing terms longer than 90 days. We do not typically give payment terms that exceed 360 days; however, in certain geographical regions such as Latin America, these terms may be given in limited circumstances. Additionally, a timing difference of over one year can exist between when products are delivered to the customer and when payment is received from the customer in these regions; however, the effect of these sales is not material to the financial statements as a whole. Furthermore, we have assessed the circumstances and arrangements in these regions and determined that the contracts with these customers do not contain a significant financing component.
In determining when the control of goods is transferred, we typically assess, among other things, the transfer of risk and title and the shipping terms of the contract. The transfer of title and risk typically occurs either upon shipment to the customer or upon receipt by the customer. As such, we typically recognize revenue when goods are shipped based on the relevant Incoterm for the product order, or in some regions, when delivery to the customer’s requested destination has occurred. When we perform shipping and handling activities after the transfer of control to the customer (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized. For FOB shipping point terms, revenue is recognized at the time of shipment since the customer gains control at this point in time.
We record amounts billed for shipping and handling fees as revenue. Costs incurred for shipping and handling are recorded as costs of sales and services. Amounts billed for sales and use taxes, value-added taxes, and certain excise and other specific transactional taxes imposed on revenue-producing transactions are presented on a net basis and excluded from sales in the consolidated income statements. We record a liability until remitted to the respective taxing authority.
Sales Incentives and Other Variable Considerations
As a part of our customary business practice, we offer a number of sales incentives to our customers including volume discounts, retailer incentives, and prepayment options. The variable considerations given can differ by products, support levels and other eligibility criteria. For all such contracts that include any variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Although determining the transaction price for these considerations requires significant judgment, we have significant historical experience with incentives provided to customers and estimate the expected consideration considering historical patterns of incentive payouts. These estimates are reassessed each reporting period as required.
In addition to the variable considerations described above, in certain instances, we may require our customers to meet certain volume thresholds within their contract term. We estimate what amount of variable consideration should be included in the transaction price at contract inception and continually reassess this estimation each reporting period to determine situations when the minimum volume thresholds will not be met.
Right of Return
We extend an assurance warranty offering customers a right of refund or exchange in case delivered product does not conform to specifications. Additionally, in certain regions and arrangements, we may offer a right of return for a specified period. Both instances are accounted for as a right of return and transaction price is adjusted for an estimate of expected returns. Replacement products are accounted for under the warranty guidance if the customer exchanges one product for another of the same kind, quality, and price. We have significant experience with historical return patterns and use this experience to include returns in the estimate of transaction price.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Contract asset and contract liability balances
We satisfy our obligations by transferring goods and services in exchange for consideration from customers. The timing of performance sometimes differs from the timing the associated consideration is received from the customer, thus resulting in the recognition of a contract asset or contract liability. We recognize a contract liability if the customer's payment of consideration is received prior to completion of our related performance obligation.
The following table presents the opening and closing balances of our receivables, net of allowances and contract liabilities from contracts with customers:
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(in Millions)
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Balance as of December 31, 2019
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Balance as of March 31, 2020
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Increase (Decrease)
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Receivables from contracts with customers, net of allowances
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$
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2,354.3
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$
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2,585.8
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$
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231.5
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Contract liabilities: Advance payments from customers
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492.7
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213.5
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(279.2)
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The amount of revenue recognized in the three months ended March 31, 2020 that was included in the opening contract liability balance is $279.2 million.
The balance of receivables from contracts with customers listed in the table above include both current trade receivables and long-term receivables, net of allowance for doubtful accounts. The allowance for receivables represents our best estimate of the probable losses associated with potential customer defaults. We determine the allowance based on historical experience, current collection trends, and external business factors such as economic factors, including regional bankruptcy rates, and political factors. The change in allowance for doubtful accounts for both current trade receivables and long-term receivables is representative of the impairment of receivables as of March 31, 2020. Refer to Note 7 for further information.
We periodically enter into prepayment arrangements with customers and receive advance payments for product to be delivered in future periods. Prepayment terms are extended to customers/distributors in order to capitalize on surplus cash with growers. Growers receive bulk payments for their produce, which they leverage to buy our products from distributors through prepayment options. This in turn creates opportunity for distributors to make large prepayments to us for securing the future supply of products to be sold to growers. Prepayments are typically received in the fourth quarter of the fiscal year and are for the following marketing year indicating that the time difference between prepayment and performance of corresponding performance obligations does not exceed one year.
We recognize these prepayments as a liability under "Advance Payments from customers" on the condensed consolidated balance sheets when they are received. Revenue associated with advance payments is recognized as shipments are made and transfer of control to the customer takes place. Advance payments from customers was $492.7 million as of December 31, 2019 and $213.5 million as of March 31, 2020.
Note 4: Leases
We lease office space, vehicles and other equipment under non-cancellable leases with initial terms typically ranging from 1 to 20 years, with some leases having terms greater than 20 years. Our lease portfolio includes agreements with renewal options, purchase options and clauses for early termination based on the terms specific to the agreement.
At contract inception, we review the facts and circumstances of the arrangement to determine if the contract is a lease. We follow the guidance in ASC 842-10-15 and consider the following: whether the contract has an identified asset; if we have the right to obtain substantially all economic benefits from the asset; and if we have the right to direct the use of the underlying asset. When determining if a contract has an identified asset, we consider both explicit and implicit assets, and whether the supplier has the right to substitute the asset. When determining if we have the right to obtain substantially all economic benefits from the asset, we consider the primary outputs of the identified asset throughout the period of use and determine if we receive greater than 90 percent of those benefits. When determining if we have the right to direct the use of an underlying asset, we consider if we have the right to direct how and for what purpose the asset is used throughout the period of use and if we control the decision-making rights over the asset. All leased assets are classified as operating or finance under ASC 842. The lease term is determined as the non-cancellable period of the lease, together with all of the following: periods covered by an option to extend the lease which are reasonably certain to be exercised, periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option, and periods covered by an option to extend (or not to terminate) the lease in
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
which exercise of the option is controlled by the lessor. At commencement, we assess whether any options included in the lease are reasonably certain to be exercised by considering all economic factors relevant including, contract-based, asset-based, market-based, and company-based factors.
To determine the present value of future minimum lease payments, we use the implicit rate when readily determinable or our incremental borrowing rate at the lease commencement date. When determining our incremental borrowing rate, we consider our centralized treasury function and our current credit profile. We then make adjustments to this rate for securitization, the length of the lease term, and leases denominated in foreign currencies. Minimum lease payments are expensed over the term of the lease on a straight-line basis. Some leases may require additional contingent or variable lease payments based on factors specific to the individual agreement. Variable lease payments for which we are typically responsible for include payment of vehicle insurance, real estate taxes, and maintenance expenses.
Most leases within our portfolio are classified as operating leases under the standard. Operating leases are included in "Other assets including long-term receivables, net", "Accrued and other liabilities", and "Other long-term liabilities" in our condensed consolidated balance sheet. Operating lease right-of-use ("ROU") assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of any lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Operating leases relate to office spaces, IT equipment, transportation equipment, machinery equipment, furniture and fixtures, and plant and facilities under non-cancellable lease agreements. Leases primarily have fixed rental periods, with many of the real estate leases requiring additional payments for property taxes and occupancy-related costs. Leases for real estate typically have initial terms ranging from 1 to 20 years, with some leases having terms greater than 20 years. Leases for non-real estate (transportation, IT) typically have initial terms ranging from 1 to 10 years. We have elected not to record short-term leases on the balance sheet whose term is 12 months or less and does not include a purchase option or extension that is reasonably certain to be exercised.
We rent or sublease a small number of assets including equipment and office space to third party companies. These third-party arrangements include a small number of TSA arrangements from recent acquisitions. We also sublease a floor of our Corporate headquarters to our former subsidiary, Livent Corporation. Rental income from all subleases is not material to our business.
The ROU asset and lease liability balances as of March 31, 2020 and December 31, 2019 were as follows:
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(in Millions)
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Classification
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March 31, 2020
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December 31, 2019
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Assets
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Operating lease ROU assets
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Other assets including long-term receivables, net
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$
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155.8
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$
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164.7
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Liabilities
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Operating lease current liabilities
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Accrued and other liabilities
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$
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28.0
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$
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31.5
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Operating lease noncurrent liabilities
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Other long-term liabilities
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|
156.1
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163.2
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The components of lease expense for the three months ended March 31, 2020 and 2019 were as follows:
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Three Months Ended March 31,
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(in Millions)
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Lease Cost Classification
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2020
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2019
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Lease Cost
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Operating lease cost
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Costs of sales and services / Selling, general and administrative expenses
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$
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10.0
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$
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10.0
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Variable lease cost
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Costs of sales and services / Selling, general and administrative expenses
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1.4
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1.3
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Total lease cost
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$
|
11.4
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$
|
11.3
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FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
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March 31, 2020
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Operating Lease Term and Discount Rate
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Weighted-average remaining lease term (years)
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9.9
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Weighted-average discount rate
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4.2
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%
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Three Months Ended March 31,
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(in Millions)
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2020
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2019
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Other Information
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Cash paid for amounts included in the measurement of lease liabilities:
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Operating cash flows from operating leases
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$
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(10.1)
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$
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(10.3)
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Supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets:
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Right-of-use assets obtained in exchange for new operating lease liabilities
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$
|
0.9
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$
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0.3
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The following table represents our future minimum operating lease payments as of, and subsequent to, March 31, 2020 under ASC 842:
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(in Millions)
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Operating Leases Total
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Maturity of Lease Liabilities
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2020 (excluding the three months ending March 31, 2020)
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$
|
27.2
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2021
|
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27.6
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2022
|
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23.8
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2023
|
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18.9
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2024
|
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16.3
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Thereafter
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116.2
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Total undiscounted lease payments
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$
|
230.0
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Less: Present value adjustment
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(45.9)
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Present value of lease liabilities
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$
|
184.1
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Note 5: Acquisitions
DuPont Crop Protection Business
On November 1, 2017, pursuant to the terms and conditions set forth in the Transaction Agreement entered into with E. I. du Pont de Nemours and Company ("DuPont"), we completed the acquisition of certain assets relating to DuPont's Crop Protection business and research and development ("R&D") organization (the "DuPont Crop Protection Business") (collectively, the "DuPont Crop Protection Business Acquisition").
As part of the DuPont Crop Protection Business Acquisition, we acquired various manufacturing contracts. The manufacturing contracts have been recognized as an asset or liability to the extent the terms of the contract are favorable or unfavorable compared with market terms of the same or similar items at the date of the acquisition.
We also entered into supply agreements with DuPont, with terms of up to five years, to supply technical insecticide products required for their retained seed treatment business at cost. The unfavorable liability is recorded within both "Accrued and other liabilities" and "Other long-term liabilities" on the condensed consolidated balance sheets and is reduced and recognized to revenues within earnings as sales are made. The amount recognized in revenue for the three months ended March 31, 2020 and 2019 was approximately $31 million and $27 million, respectively.
The DuPont Crop Protection Business is being integrated into our business and has been included within our results of operations since the date of acquisition.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Transaction-related charges
Pursuant to U.S. GAAP, costs incurred associated with acquisition activities are expensed as incurred. Historically, these costs have primarily consisted of legal, accounting, consulting, and other professional advisory fees associated with the preparation and execution of these activities. Given the significance and complexity around the integration of the DuPont Crop Protection Business, we have incurred to date, and expect to incur, costs associated with integrating the DuPont Crop Protection Business, which includes planning for the exit of the transitional service agreement ("TSA") as well as implementation of a new worldwide Enterprise Resource Planning ("ERP") system as a result of the TSA exit, the majority of which will be capitalized in accordance with the relevant accounting literature. These costs have been, and are expected to be, significant and we anticipate the majority of these charges will be completed by the first half of 2020 which coincides with significant portions of the ERP system adoption and the TSA exit. The following table summarizes the costs incurred associated with these activities.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(in Millions)
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
DuPont Crop Protection Business Acquisition
|
|
|
|
|
|
|
|
|
Legal and professional fees (1)
|
|
|
|
|
$
|
13.0
|
|
|
$
|
16.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Transaction-related charges
|
|
|
|
|
$
|
13.0
|
|
|
$
|
16.5
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges
|
|
|
|
|
|
|
|
|
DuPont Crop restructuring (2)
|
|
|
|
|
$
|
7.0
|
|
|
$
|
3.9
|
|
|
Total DuPont Crop restructuring charges
|
|
|
|
|
$
|
7.0
|
|
|
$
|
3.9
|
|
____________________
(1) Represents transaction costs, costs for transitional employees, other acquired employees related costs, and transactional-related costs such as legal and professional third-party fees. These charges are recorded as a component of "Selling, general and administrative expense" on the condensed consolidated statements of income (loss).
(2) See Note 10 for more information. These charges are recorded as a component of "Restructuring and other charges (income)" on the condensed consolidated statements of income (loss).
Note 6: Goodwill and Intangible Assets
The changes in the carrying amount of goodwill are presented in the table below:
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|
|
|
|
|
|
|
|
|
(in Millions)
|
|
|
|
|
|
|
Total
|
|
Balance, December 31, 2019
|
|
|
|
|
|
|
$
|
1,467.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency and other adjustments
|
|
|
|
|
|
|
(7.9)
|
|
|
Balance, March 31, 2020
|
|
|
|
|
|
|
$
|
1,459.6
|
|
There were no events or circumstances indicating that goodwill might be impaired as of March 31, 2020.
Our intangible assets, other than goodwill, consist of the following:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
(in Millions)
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Intangible assets subject to amortization (finite-lived)
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
$
|
1,137.4
|
|
|
$
|
(198.3)
|
|
|
$
|
939.1
|
|
|
$
|
1,139.7
|
|
|
$
|
(184.7)
|
|
|
$
|
955.0
|
|
|
Patents
|
1.7
|
|
|
(1.0)
|
|
|
0.7
|
|
|
1.7
|
|
|
(0.9)
|
|
|
0.8
|
|
|
Brands (1)
|
16.6
|
|
|
(6.8)
|
|
|
9.8
|
|
|
16.7
|
|
|
(6.7)
|
|
|
10.0
|
|
|
Purchased and licensed technologies
|
60.2
|
|
|
(35.9)
|
|
|
24.3
|
|
|
60.2
|
|
|
(35.2)
|
|
|
25.0
|
|
|
Other intangibles
|
2.3
|
|
|
(1.8)
|
|
|
0.5
|
|
|
1.9
|
|
|
(1.8)
|
|
|
0.1
|
|
|
|
$
|
1,218.2
|
|
|
$
|
(243.8)
|
|
|
$
|
974.4
|
|
|
$
|
1,220.2
|
|
|
$
|
(229.3)
|
|
|
$
|
990.9
|
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets not subject to amortization (indefinite-lived)
|
|
|
|
|
|
|
|
|
|
|
|
|
Crop Protection Brands (2)
|
$
|
1,259.1
|
|
|
|
|
$
|
1,259.1
|
|
|
$
|
1,259.1
|
|
|
|
|
$
|
1,259.1
|
|
|
Brands (1)
|
378.2
|
|
|
|
|
378.2
|
|
|
379.0
|
|
|
|
|
379.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,637.3
|
|
|
|
|
$
|
1,637.3
|
|
|
$
|
1,638.1
|
|
|
|
|
$
|
1,638.1
|
|
|
Total intangible assets
|
$
|
2,855.5
|
|
|
$
|
(243.8)
|
|
|
$
|
2,611.7
|
|
|
$
|
2,858.3
|
|
|
$
|
(229.3)
|
|
|
$
|
2,629.0
|
|
____________________
(1) Represents trademarks, trade names and know-how.
(2) Represents proprietary brand portfolios, consisting of trademarks, trade names and know-how, of our crop protection brands.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(in Millions)
|
|
|
|
|
2020
|
|
2019
|
|
Amortization expense
|
|
|
|
|
$
|
15.3
|
|
|
$
|
15.6
|
|
The full year estimated pre-tax amortization expense for the year ended December 31, 2020 and each of the succeeding five years is approximately $62 million, $62 million, $62 million, $62 million, $60 million, and $60 million, respectively.
Note 7: Receivables
The following table displays a roll forward of the allowance for doubtful trade receivables.
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|
|
|
|
|
|
|
(in Millions)
|
|
|
Balance, December 31, 2018
|
$
|
22.4
|
|
|
Additions - charged to expense
|
3.6
|
|
|
Transfer from (to) allowance for credit losses (see below)
|
3.4
|
|
|
Net recoveries, write-offs and other
|
(3.1)
|
|
|
Balance, December 31, 2019
|
$
|
26.3
|
|
|
Additions - charged to expense
|
1.8
|
|
|
Transfer from (to) allowance for credit losses (see below)
|
(2.9)
|
|
|
Net recoveries, write-offs and other
|
(2.3)
|
|
|
Balance, March 31, 2020
|
$
|
22.9
|
|
We have non-current receivables that represent long-term customer receivable balances related to past due accounts which are not expected to be collected within the current year. The net long-term customer receivables were $125.7 million as of March 31, 2020. These long-term customer receivable balances and the corresponding allowance are included in "Other assets including long-term receivables, net" on the condensed consolidated balance sheets.
A portion of these long-term receivables have payment contracts. We have no reason to believe payments will not be made based upon the credit quality of these customers. Additionally, we also hold significant collateral against these customers including rights to property or other assets as a form of credit guarantee. If the customer does not pay or gives indication that they will not pay, these guarantees allow us to start legal action to block the sale of the customer’s harvest. On an ongoing basis, we continue to evaluate the credit quality of our non-current receivables using aging of receivables, collection experience and write-offs, as well as evaluating existing economic conditions, to determine if an additional allowance is necessary.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
The following table displays a roll forward of the allowance for credit losses related to long-term customer receivables:
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|
|
|
|
|
|
|
(in Millions)
|
|
|
Balance, December 31, 2018
|
$
|
60.5
|
|
|
Additions - charged to expense
|
17.6
|
|
|
Transfer from (to) allowance for doubtful accounts (see above)
|
(3.4)
|
|
|
Foreign currency adjustments
|
(0.5)
|
|
|
Net recoveries, write-offs and other
|
(13.1)
|
|
|
Balance, December 31, 2019
|
$
|
61.1
|
|
|
Additions - charged to expense
|
(1.1)
|
|
|
Transfer from (to) allowance for doubtful accounts (see above)
|
2.9
|
|
|
Foreign currency adjustments
|
(8.0)
|
|
|
|
|
|
Balance, March 31, 2020
|
$
|
54.9
|
|
Note 8: Inventories
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
March 31, 2020
|
|
December 31, 2019
|
|
Finished goods
|
$
|
200.1
|
|
|
$
|
372.2
|
|
|
Work in process
|
788.1
|
|
|
559.4
|
|
|
Raw materials, supplies and other
|
206.7
|
|
|
217.3
|
|
|
First-in, first-out inventory
|
$
|
1,194.9
|
|
|
$
|
1,148.9
|
|
|
Less: Excess of first-in, first-out cost over last-in, first-out cost
|
(132.2)
|
|
|
(131.9)
|
|
|
Net inventories
|
$
|
1,062.7
|
|
|
$
|
1,017.0
|
|
Note 9: Property, Plant and Equipment
Property, plant and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
March 31, 2020
|
|
December 31, 2019
|
|
Property, plant and equipment
|
$
|
1,094.9
|
|
|
$
|
1,109.2
|
|
|
Accumulated depreciation
|
(359.2)
|
|
|
(351.2)
|
|
|
Property, plant and equipment, net
|
$
|
735.7
|
|
|
$
|
758.0
|
|
Note 10: 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 March 31,
|
|
|
|
(in Millions)
|
|
|
|
|
2020
|
|
2019
|
|
Restructuring charges
|
|
|
|
|
$
|
6.6
|
|
|
$
|
5.2
|
|
|
Other charges (income), net
|
|
|
|
|
6.8
|
|
|
2.6
|
|
|
Total restructuring and other charges (income)
|
|
|
|
|
$
|
13.4
|
|
|
$
|
7.8
|
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Restructuring charges
For detail on restructuring activities which commenced prior to 2020, see Note 9 to our consolidated financial statements included within our 2019 Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
Severance and Employee Benefits
|
|
Other Charges (Income) (1)
|
|
Asset Disposal Charges (Income) (2)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DuPont Crop restructuring
|
$
|
5.6
|
|
|
$
|
0.3
|
|
|
$
|
1.1
|
|
|
$
|
7.0
|
|
|
|
|
|
|
|
|
|
|
|
Other items
|
—
|
|
|
—
|
|
|
(0.4)
|
|
|
(0.4)
|
|
|
Three Months Ended March 31, 2020
|
$
|
5.6
|
|
|
$
|
0.3
|
|
|
$
|
0.7
|
|
|
$
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
DuPont Crop restructuring
|
$
|
2.7
|
|
|
$
|
1.0
|
|
|
$
|
0.2
|
|
|
$
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
Other items
|
—
|
|
|
—
|
|
|
1.3
|
|
|
1.3
|
|
|
Three Months Ended March 31, 2019
|
$
|
2.7
|
|
|
$
|
1.0
|
|
|
$
|
1.5
|
|
|
$
|
5.2
|
|
____________________
(1)Primarily represents third-party costs associated with miscellaneous restructuring activities. Other income, if applicable, primarily represents favorable developments on previously recorded exit costs and recoveries associated with restructuring.
(2)Primarily represents asset write-offs (recoveries) and accelerated depreciation 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
12/31/19 (3)
|
|
Change in
reserves (4)
|
|
Cash
payments
|
|
|
|
Balance at
3/31/20 (3)
|
|
DuPont Crop restructuring (1)
|
$
|
14.5
|
|
|
$
|
5.9
|
|
|
$
|
(1.9)
|
|
|
|
|
$
|
18.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other workforce related and facility shutdowns (2)
|
0.1
|
|
|
—
|
|
|
—
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
14.6
|
|
|
$
|
5.9
|
|
|
$
|
(1.9)
|
|
|
|
|
$
|
18.6
|
|
____________________
(1)Primarily consists of real estate exit costs and severance associated with DuPont Crop restructuring activities.
(2)Primarily severance costs related to workforce reductions and facility shutdowns described in the Other items section of the Restructuring charges table above.
(3)Included in "Accrued and other liabilities" and "Other long-term liabilities" on the condensed consolidated balance sheets.
(4)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 are not included in this table.
Other charges (income), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(in Millions)
|
|
|
|
|
2020
|
|
2019
|
|
Environmental charges, net
|
|
|
|
|
$
|
6.4
|
|
|
$
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
Other items, net
|
|
|
|
|
0.4
|
|
|
—
|
|
|
Other charges (income), net
|
|
|
|
|
$
|
6.8
|
|
|
$
|
2.6
|
|
Environmental charges, net
Environmental charges represent the net charges associated with environmental remediation at continuing operating sites. See Note 13 for additional details. Environmental obligations for continuing operations primarily represent obligations at shut down or abandoned facilities within businesses that do not meet the criteria for presentation as discontinued operations.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Note 11: Debt
Debt maturing within one year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
March 31, 2020
|
|
December 31, 2019
|
|
Short-term foreign debt (1)
|
$
|
186.3
|
|
|
$
|
144.9
|
|
|
|
|
|
|
|
Total short-term debt
|
$
|
186.3
|
|
|
$
|
144.9
|
|
|
Current portion of long-term debt
|
63.9
|
|
|
82.8
|
|
|
Total short-term debt and current portion of long-term debt
|
$
|
250.2
|
|
|
$
|
227.7
|
|
____________________
(1) At March 31, 2020, the average effective interest rate on the borrowings was 13.6 percent.
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
March 31, 2020
|
|
|
|
|
|
|
|
|
Interest Rate Percentage
|
|
Maturity
Date
|
|
March 31, 2020
|
|
December 31, 2019
|
|
Pollution control and industrial revenue bonds (less unamortized discounts of $0.1 and $0.2, respectively)
|
4.0% - 6.5%
|
|
2021 - 2032
|
|
$
|
51.7
|
|
|
$
|
51.6
|
|
|
Senior notes (less unamortized discount of $1.2 and $1.3, respectively)
|
3.2% - 4.5%
|
|
2022 - 2049
|
|
2,198.8
|
|
|
2,198.7
|
|
|
|
|
|
|
|
|
|
|
|
2017 Term Loan Facility
|
2.2%
|
|
2022
|
|
800.0
|
|
|
800.0
|
|
|
Revolving Credit Facility (1)
|
1.9%
|
|
2024
|
|
500.0
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
0% - 7.2%
|
|
2020 - 2024
|
|
64.6
|
|
|
83.8
|
|
|
Debt issuance cost
|
|
|
|
|
(19.4)
|
|
|
(20.2)
|
|
|
Total long-term debt
|
|
|
|
|
$
|
3,595.7
|
|
|
$
|
3,113.9
|
|
|
Less: debt maturing within one year
|
|
|
|
|
63.9
|
|
|
82.8
|
|
|
Total long-term debt, less current portion
|
|
|
|
|
$
|
3,531.8
|
|
|
$
|
3,031.1
|
|
____________________
(1)Letters of credit outstanding under our Revolving Credit Facility totaled $215.1 million and available funds under this facility were $784.9 million at March 31, 2020.
Revolving Credit Facility Agreement Amendment
On April 22, 2020, the Company entered into Amendment No. 1 (the "Revolving Credit Amendment") to that certain Third Amended and Restated Credit Agreement, dated as of May 17, 2019, among the Company, as U.S. Borrower, certain foreign subsidiaries of the Company party thereto, as Euro Borrowers, the lenders (the "Revolving Credit Lenders") and issuing banks party thereto, Citibank, N.A., as administrative agent, Citibank, N.A. and BofA Securities, Inc., as joint lead arrangers, Bank of America, N.A., as syndication agent, and certain other financial institutions party thereto as co-documentation agents (the "Revolving Credit Agreement"). Among other things, the Revolving Credit Amendment amends the maximum leverage ratio financial covenant in the Revolving Credit Agreement and adds a negative covenant restricting purchases of the Company’s stock if at any time the maximum leverage ratio exceeds 3.5 through the period ending June 30, 2021.
2017 Term Loan Agreement Amendment
On April 22, 2020, the Company entered into Amendment No. 2 (the "Term Loan Amendment") to that certain Term Loan Agreement, dated as of May 2, 2017, among the Company, as U.S. Borrower, certain foreign subsidiaries of the Company party thereto, as Euro Borrowers, the lenders party thereto (the "Term Loan Lenders"), Citibank, N.A., as administrative agent, Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers, Bank of America, N.A., as syndication agent, and certain other financial institutions party thereto as co-documentation agents (as previously amended, the "Term Loan Agreement"). Among other things, the Term Loan Amendment amends the maximum leverage ratio financial covenant in the Term Loan Agreement and adds a negative covenant restricting purchases of the Company’s stock if at any time the maximum leverage ratio exceeds 3.5 through the period ending June 30, 2021.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Covenants
Among other restrictions, our Revolving Credit Facility and 2017 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 March 31, 2020 was 3.2, which is below the maximum leverage of 4.0 at March 31, 2020. As amended pursuant to the Revolving Credit Amendment and the Term Loan Amendment discussed above, the maximum leverage ratio has been increased to 4.25 through the period ending December 31, 2020. The maximum leverage ratio will step down to 4.0 for the quarter ending March 31, 2021 and then to 3.5 for future quarters. Our actual interest coverage for the four consecutive quarters ended March 31, 2020 was 7.5, which is above the minimum interest coverage of 3.5. We were in compliance with all covenants at March 31, 2020.
Note 12: Discontinued Operations
FMC Lithium (Livent Corporation):
On March 1, 2019, we completed the previously announced distribution of 123 million shares of common stock of Livent as a pro rata dividend on shares of FMC common stock outstanding at the close of business on the record date of February 25, 2019.
The results of our discontinued FMC Lithium operations are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Revenue
|
|
|
|
|
$
|
—
|
|
|
$
|
52.1
|
|
|
Costs of sales and services
|
|
|
|
|
—
|
|
|
41.3
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations before income taxes
|
|
|
|
|
$
|
—
|
|
|
$
|
1.1
|
|
|
Provision (benefit) for income taxes
|
|
|
|
|
—
|
|
|
6.0
|
|
|
Total discontinued operations of FMC Lithium, net of income taxes, before separation-related costs and other adjustments
|
|
|
|
|
$
|
—
|
|
|
$
|
(4.9)
|
|
|
Separation-related costs and other adjustments of discontinued operations of FMC Lithium, net of income taxes
|
|
|
|
|
1.0
|
|
|
(5.1)
|
|
|
Discontinued operations of FMC Lithium, net of income taxes
|
|
|
|
|
$
|
1.0
|
|
|
$
|
(10.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations include the results of FMC Lithium and adjustments to retained assets and liabilities as well as provisions, net of recoveries, for environmental liabilities and legal reserves and expenses related to previously discontinued operations and retained liabilities. The primary liabilities retained include environmental liabilities, other postretirement benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities.
Our discontinued operations comprised the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Adjustment for workers’ compensation, product liability, other postretirement benefits and other, net of income tax benefit (expense) of $0.1 and $(4.6) for the three months ended March 31, 2020 and 2019, respectively (1)
|
|
|
|
|
$
|
0.9
|
|
|
$
|
23.0
|
|
|
Provision for environmental liabilities, net of recoveries, net of income tax benefit of $0.5 and zero for the three months ended March 31, 2020 and 2019, respectively
|
|
|
|
|
(1.9)
|
|
|
0.2
|
|
|
Provision for legal reserves and expenses, net of recoveries, net of income tax benefit $2.0 and $1.0 for the three months ended March 31, 2020 and 2019, respectively
|
|
|
|
|
(7.5)
|
|
|
(3.6)
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations of FMC Lithium, net of income tax benefit (expense) of $(0.2) and $(4.7) for the three months ended March 31, 2020 and 2019, respectively
|
|
|
|
|
1.0
|
|
|
(10.0)
|
|
|
Discontinued operations, net of income taxes
|
|
|
|
|
$
|
(7.5)
|
|
|
$
|
9.6
|
|
____________________
(1)During the three months ended March 31, 2019, we finalized the sale of the first of two parcels of land of our discontinued site in Newark, California and recorded a gain of approximately $21 million, net of tax.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Note 13: Environmental Obligations
We have reserves for potential environmental obligations which management considers probable and which management can reasonably estimate. The following table is a roll forward of our total environmental reserves, continuing and discontinued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
Gross
|
|
Recoveries (3)
|
|
Net
|
|
Total environmental reserves at December 31, 2019
|
$
|
595.8
|
|
|
$
|
(10.0)
|
|
|
$
|
585.8
|
|
|
Provision (Benefit)
|
5.6
|
|
|
(0.3)
|
|
|
5.3
|
|
|
(Spending) Recoveries
|
(15.2)
|
|
|
0.6
|
|
|
(14.6)
|
|
|
Foreign currency translation adjustments
|
(0.4)
|
|
|
—
|
|
|
(0.4)
|
|
|
Net change
|
$
|
(10.0)
|
|
|
$
|
0.3
|
|
|
$
|
(9.7)
|
|
|
Total environmental reserves at March 31, 2020
|
$
|
585.8
|
|
|
$
|
(9.7)
|
|
|
$
|
576.1
|
|
|
|
|
|
|
|
|
|
Environmental reserves, current (1)
|
$
|
127.3
|
|
|
$
|
(1.2)
|
|
|
$
|
126.1
|
|
|
Environmental reserves, long-term (2)
|
458.5
|
|
|
(8.5)
|
|
|
450.0
|
|
|
Total environmental reserves at March 31, 2020
|
$
|
585.8
|
|
|
$
|
(9.7)
|
|
|
$
|
576.1
|
|
____________________
(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 $150 million at March 31, 2020. 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 including long-term receivables, net" in the condensed consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
December 31, 2019
|
|
Increase (Decrease) in recoveries
|
|
Cash received (1)
|
|
|
|
March 31, 2020
|
|
Environmental recoveries
|
$
|
27.3
|
|
|
(3.5)
|
|
|
(20.1)
|
|
|
|
|
$
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1) During the first quarter of 2020, we entered into a confidential insurance settlement pertaining to coverage at a legacy environmental site, which settlement resulted in a cash payment to FMC in the amount of $20.0 million.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Our net environmental provisions relate to costs for the continued cleanup of both continuing and discontinued manufacturing operations from previous years. The net provisions are comprised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(in Millions)
|
|
|
|
|
2020
|
|
2019
|
|
Environmental provisions, net - recorded to liabilities (1)
|
|
|
|
|
$
|
5.3
|
|
|
$
|
2.5
|
|
|
Environmental provisions, net - recorded to assets (2)
|
|
|
|
|
3.5
|
|
|
(0.1)
|
|
|
Environmental provision, net
|
|
|
|
|
$
|
8.8
|
|
|
$
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (3)
|
|
|
|
|
$
|
6.4
|
|
|
$
|
2.6
|
|
|
Discontinued operations (4)
|
|
|
|
|
2.4
|
|
|
(0.2)
|
|
|
Environmental provision, net
|
|
|
|
|
$
|
8.8
|
|
|
$
|
2.4
|
|
____________________
(1) See above roll forward of our total environmental reserves as presented on the condensed consolidated balance sheets.
(2) See above roll forward of our total environmental recoveries as presented on the condensed consolidated balance sheets.
(3) Recorded as a component of "Restructuring and other charges (income)" on the condensed consolidated statements of income (loss). See Note 10. Environmental obligations for continuing operations primarily represent obligations at shut down or abandoned facilities within businesses that do not meet the criteria for presentation as discontinued operations.
(4) Recorded as a component of "Discontinued operations, net of income taxes" on the condensed consolidated statements of income (loss). See Note 12.
A more complete description of our environmental contingencies and the nature of our potential obligations are included in Notes 1 and 12 to our consolidated financial statements in our 2019 Form 10-K. See Note 12 to our consolidated financial statements in our 2019 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 2019 Form 10-K other than the update provided below.
Pocatello Tribal Litigation
On March 16, 2020, FMC filed a petition in the United States Supreme Court to review the Ninth Circuit’s decision. At this time the Supreme Court has not issued a ruling on our petition. Payment of the judgement, if necessary, will not take place until final disposition by the United States Supreme Court. There was no change to our existing reserves as a result of the filed petition.
Note 14: Earnings Per Share
Earnings per common share ("EPS") is computed by dividing net income by the weighted average number of common shares outstanding during the period on a basic and diluted basis.
Our potentially dilutive securities include potential common shares related to our stock options, restricted stock and restricted stock units. Diluted earnings per share ("Diluted EPS") considers the impact of potentially dilutive securities except in periods in which there is a loss from continuing operations because the inclusion of the potential common shares would have an antidilutive effect. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our common stock for the period. For the three months ended March 31, 2020 and 2019, there were 0.1 million and 0.4 million potential common shares excluded from Diluted EPS, respectively.
Our non-vested restricted stock awards contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing EPS. The two-class method determines EPS by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. In calculating the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average number of shares outstanding during the period.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Earnings applicable to common stock and common stock shares used in the calculation of basic and diluted earnings per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions, Except Share and Per Share Data)
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Earnings (loss) attributable to FMC stockholders:
|
|
|
|
|
|
|
|
|
Continuing operations, net of income taxes
|
|
|
|
|
$
|
213.7
|
|
|
$
|
206.1
|
|
|
Discontinued operations, net of income taxes
|
|
|
|
|
(7.5)
|
|
|
9.6
|
|
|
Net income (loss) attributable to FMC stockholders
|
|
|
|
|
$
|
206.2
|
|
|
$
|
215.7
|
|
|
Less: Distributed and undistributed earnings allocable to restricted award holders
|
|
|
|
|
(0.5)
|
|
|
(0.7)
|
|
|
Net income (loss) allocable to common stockholders
|
|
|
|
|
$
|
205.7
|
|
|
$
|
215.0
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share attributable to FMC stockholders:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
|
$
|
1.65
|
|
|
$
|
1.56
|
|
|
Discontinued operations
|
|
|
|
|
(0.06)
|
|
|
0.07
|
|
|
Net income (loss) attributable to FMC stockholders
|
|
|
|
|
$
|
1.59
|
|
|
$
|
1.63
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share attributable to FMC stockholders:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
|
$
|
1.64
|
|
|
$
|
1.55
|
|
|
Discontinued operations
|
|
|
|
|
(0.06)
|
|
|
0.07
|
|
|
Net income (loss) attributable to FMC stockholders
|
|
|
|
|
$
|
1.58
|
|
|
$
|
1.62
|
|
|
|
|
|
|
|
|
|
|
|
Shares (in thousands):
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock outstanding - Basic
|
|
|
|
|
129,527
|
|
|
131,887
|
|
|
Weighted average additional shares assuming conversion of potential common shares
|
|
|
|
|
939
|
|
|
1,327
|
|
|
Shares – diluted basis
|
|
|
|
|
130,466
|
|
|
133,214
|
|
Note 15: Equity
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, 2019
|
$
|
(77.7)
|
|
|
$
|
(65.0)
|
|
|
$
|
(269.3)
|
|
|
$
|
(412.0)
|
|
|
2020 Activity
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
(33.6)
|
|
|
27.5
|
|
|
—
|
|
|
(6.1)
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
(10.3)
|
|
|
1.6
|
|
|
(8.7)
|
|
|
Net current period other comprehensive income (loss)
|
$
|
(33.6)
|
|
|
$
|
17.2
|
|
|
$
|
1.6
|
|
|
$
|
(14.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net of tax at March 31, 2020
|
$
|
(111.3)
|
|
|
$
|
(47.8)
|
|
|
$
|
(267.7)
|
|
|
$
|
(426.8)
|
|
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, 2018
|
$
|
(101.5)
|
|
|
$
|
11.2
|
|
|
$
|
(218.6)
|
|
|
$
|
(308.9)
|
|
|
2019 Activity
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
(2.1)
|
|
|
0.9
|
|
|
—
|
|
|
(1.2)
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
(3.6)
|
|
|
3.4
|
|
|
(0.2)
|
|
|
Net current period other comprehensive income (loss)
|
$
|
(2.1)
|
|
|
$
|
(2.7)
|
|
|
$
|
3.4
|
|
|
$
|
(1.4)
|
|
|
Adoption of accounting standard
|
—
|
|
|
1.0
|
|
|
(54.1)
|
|
|
(53.1)
|
|
|
Distribution of FMC Lithium (3)
|
39.0
|
|
|
—
|
|
|
—
|
|
|
39.0
|
|
|
Accumulated other comprehensive income (loss), net of tax at March 31, 2019
|
$
|
(64.6)
|
|
|
$
|
9.5
|
|
|
$
|
(269.3)
|
|
|
$
|
(324.4)
|
|
____________________
(1) See Note 18 for more information.
(2) See Note 16 for more information.
(3) Represents the effects of the distribution of FMC Lithium.
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 March 31,
|
|
|
|
|
(in Millions)
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
|
|
|
$
|
14.3
|
|
|
$
|
3.3
|
|
Costs of sales and services
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
|
|
|
(1.7)
|
|
|
1.3
|
|
Selling, general and administrative expenses
|
|
Interest rate contracts
|
|
|
|
|
0.5
|
|
|
—
|
|
Interest expense, net
|
|
Total before tax
|
|
|
|
|
$
|
13.1
|
|
|
$
|
4.6
|
|
|
|
|
|
|
|
|
(2.8)
|
|
|
(1.0)
|
|
Provision for income taxes
|
|
Amount included in net income (loss)
|
|
|
|
|
$
|
10.3
|
|
|
$
|
3.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other postretirement benefits (2)
|
|
|
|
|
|
|
|
|
|
Amortization of prior service costs
|
|
|
|
|
$
|
(0.1)
|
|
|
$
|
(0.1)
|
|
Selling, general and administrative expenses
|
|
Amortization of unrecognized net actuarial and other gains (losses)
|
|
|
|
|
(2.0)
|
|
|
(4.2)
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
Total before tax
|
|
|
|
|
$
|
(2.1)
|
|
|
$
|
(4.3)
|
|
|
|
|
|
|
|
|
0.5
|
|
|
0.9
|
|
Provision for income taxes
|
|
Amount included in net income (loss)
|
|
|
|
|
$
|
(1.6)
|
|
|
$
|
(3.4)
|
|
|
|
Total reclassifications for the period
|
|
|
|
|
$
|
8.7
|
|
|
$
|
0.2
|
|
Amount included in net income
|
____________________
(1)Amounts in parentheses indicate charges to the condensed consolidated statements of income (loss).
(2)Pension and other postretirement benefits amounts include the impact from both continuing and discontinued operations. For detail on the continuing operations components of pension and other postretirement benefits, see Note 16.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Dividends and Share Repurchases
During the three months ended March 31, 2020 and March 31, 2019, we paid dividends of $57.0 million and $53.2 million, respectively. On April 16, 2020, we paid dividends totaling $57.1 million to our shareholders of record as of March 31, 2020. This amount is included in "Accrued and other liabilities" on the condensed consolidated balance sheet as of March 31, 2020.
During the three months ended March 31, 2020, zero shares were repurchased under the publicly announced repurchase program. At March 31, 2020, approximately $600 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 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 16: Pensions and Other Postretirement Benefits
The following table summarizes the components of net annual benefit cost (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
|
|
Other Benefits
|
|
|
|
(in Millions)
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Service cost
|
|
|
|
|
|
|
|
|
$
|
0.9
|
|
|
$
|
1.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest cost
|
|
|
|
|
|
|
|
|
9.1
|
|
|
12.2
|
|
|
0.1
|
|
|
0.2
|
|
|
Expected return on plan assets
|
|
|
|
|
|
|
|
|
(9.3)
|
|
|
(13.4)
|
|
|
—
|
|
|
—
|
|
|
Amortization of prior service cost (credit)
|
|
|
|
|
|
|
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
Recognized net actuarial and other (gain) loss
|
|
|
|
|
|
|
|
|
2.5
|
|
|
4.6
|
|
|
(0.2)
|
|
|
(0.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (income)
|
|
|
|
|
|
|
|
|
$
|
3.3
|
|
|
$
|
4.6
|
|
|
$
|
(0.1)
|
|
|
$
|
—
|
|
Note 17: Income Taxes
We determine our interim tax provision using an Estimated Annual Effective Tax Rate methodology ("EAETR") in accordance with U.S. GAAP. The EAETR is applied to the year-to-date ordinary income, exclusive of discrete items. The tax effects of discrete items are then included to arrive at the total reported interim tax provision.
The determination of the EAETR is based upon a number of estimates, including the estimated annual pretax ordinary income in each tax jurisdiction in which we operate. As our projections of ordinary income change throughout the year, the EAETR will change period-to-period. The tax effects of discrete items are recognized in the tax provision in the period they occur in accordance with U.S. GAAP. Depending on various factors, such as the item’s significance in relation to total income and the rate of tax applicable in the jurisdiction to which it relates, discrete items in any quarter can materially impact the reported effective tax rate. As a global enterprise, our tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors. As a result, there can be significant volatility in interim tax provisions.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
The below chart provides a reconciliation between our reported effective tax rate and the EAETR of our continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
(in Millions)
|
Before Tax
|
Tax
|
Effective Tax Rate %
|
|
Before Tax
|
Tax
|
Effective Tax Rate %
|
|
Continuing operations
|
$
|
248.4
|
|
$
|
34.7
|
|
14.0
|
%
|
|
$
|
243.9
|
|
$
|
36.3
|
|
14.9
|
%
|
|
Discrete items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency remeasurement (1)
|
$
|
1.1
|
|
$
|
—
|
|
|
|
$
|
1.9
|
|
$
|
0.9
|
|
|
|
Other discrete items (2)
|
49.5
|
|
2.7
|
|
|
|
46.0
|
|
3.3
|
|
|
|
Tax only discrete items (3)
|
—
|
|
2.9
|
|
|
|
—
|
|
2.4
|
|
|
|
Total discrete items
|
$
|
50.6
|
|
$
|
5.6
|
|
|
|
$
|
47.9
|
|
$
|
6.6
|
|
|
|
Continuing operations, before discrete items
|
$
|
299.0
|
|
$
|
40.3
|
|
|
|
$
|
291.8
|
|
$
|
42.9
|
|
|
|
Estimated Annualized Effective Tax Rate (EAETR)
|
|
|
13.5
|
%
|
|
|
|
14.7
|
%
|
___________________
(1)Represents transaction gains or losses for currency remeasurement offset by associated hedge gains or losses, which are accounted for discretely in accordance with U.S. GAAP. Certain transaction gains or losses for currency remeasurement are not taxable, while offsetting hedge gains or losses are taxable.
(2)U.S. GAAP generally requires subsidiaries for which a full valuation allowance has been provided to be excluded from the EAETR. For the three months ended March 31, 2020 and 2019, other discrete items were materially comprised of the accounting for excluded pretax losses of subsidiaries for which a full valuation allowance has been provided.
(3)For the three months ended March 31, 2020 and 2019, tax only discrete items are primarily comprised of the tax effect of currency remeasurement associated with foreign statutory operations, excess tax benefits associated with share-based compensation, changes in uncertain tax liabilities and related interest, and changes in tax law.
Note 18: Financial Instruments, Risk Management and Fair Value Measurements
Our financial instruments include cash and cash equivalents, trade receivables, other current assets, certain receivables classified as other long-term assets, accounts payable, and amounts included in investments and accruals meeting the definition of financial instruments. The carrying value of these financial instruments approximates their fair value. Our other financial instruments include the following:
|
|
|
|
|
|
|
|
|
|
|
Financial Instrument
|
|
Valuation Method
|
|
Foreign exchange forward contracts
|
|
Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on current market prices for applicable currencies.
|
|
|
|
|
|
Commodity forward contracts
|
|
Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices for applicable commodities.
|
|
|
|
|
|
Debt
|
|
Our estimates and information obtained from independent third parties using market data, such as bid/ask spreads for the last business day of the reporting period.
|
The estimated fair value of the financial instruments in the above table have been determined using standard pricing models which take into account the present value of expected future cash flows discounted to the balance sheet date. These standard pricing models utilize inputs derived from or corroborated by observable market data such as interest rate yield curves and currency and commodity spot and forward rates. In addition, we test a subset of our valuations against valuations received from the transaction's counterparty to validate the accuracy of our standard pricing models. Accordingly, the estimates presented may not be indicative of the amounts that we would realize in a market exchange at settlement date and do not represent potential gains or losses on these agreements. The estimated fair values of foreign exchange forward contracts and commodity forward contracts are included in the tables within this Note. The estimated fair value of debt is $3,872.5 million and $3,393.8 million and the carrying amount is $3,782.0 million and $3,258.8 million as of March 31, 2020 and December 31, 2019, 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 19 for more information. Decisions to extend financial guarantees to
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
customers and the amount of collateral required under these guarantees are based on our evaluation of creditworthiness on a case-by-case basis.
Use of Derivative Financial Instruments to Manage Risk
We mitigate certain financial exposures, including currency risk, commodity purchase exposures and interest rate risk, through a program of risk management that includes the use of derivative financial instruments. We enter into derivative contracts, including forward contracts and purchased options, to reduce the effects of fluctuating currency exchange rates, interest rates, and commodity prices. A detailed description of these risks including a discussion on the concentration of credit risk is provided in Note 19 to our consolidated financial statements on our 2019 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 March 31, 2020, we had open foreign currency forward contracts in AOCI in a net after tax gain position of $18.5 million designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until December 31, 2020. At March 31, 2020, we had open forward contracts designated as cash flow hedges with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $1,129 million.
As of March 31, 2020, we had open interest rate contracts in AOCI in a net after tax loss position of $4.2 million designated as cash flow hedges of underlying floating rate interest payments on a portion of our variable-rate debt and the anticipated fixed rate coupon of debt forecasted to be issued within a designated window. At March 31, 2020, we had interest rate swap contracts outstanding with a total aggregate notional value of approximately $300 million.
In conjunction with the issuance of the Senior Notes, on September 20, 2019 we settled on various interest rate swap agreements which were entered into to hedge the variability in treasury rates. This settlement resulted in a loss of $83.1 million which was recorded in other comprehensive income and will be amortized over the various terms of the Senior Notes.
As of March 31, 2020, we had no open commodity contracts in AOCI designated as cash flow hedges of underlying forecasted purchases. At March 31, 2020, we had zero mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity forward contracts to hedge forecasted purchases.
Approximately $17.7 million of the net gains after-tax, representing open foreign currency exchange contracts and interest rate contracts, will be realized in earnings during the twelve months ending March 31, 2021 if spot rates in the future are consistent with forward rates as of March 31, 2020. The actual effect on earnings will be dependent on the actual spot rates when the forecasted transactions occur.
Derivatives Not Designated As Hedging Instruments
We hold certain forward contracts that have not been designated as cash flow hedging instruments for accounting purposes. Contracts used to hedge the exposure to foreign currency fluctuations associated with certain monetary assets and liabilities are not designated as cash flow hedging instruments, and changes in the fair value of these items are recorded in earnings.
We had open forward contracts not designated as cash flow hedging instruments for accounting purposes with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $1,472 million at March 31, 2020.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Fair Value of Derivative Instruments
The following tables provide the gross fair value and net balance sheet presentation of our derivative instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Gross Amount of Derivatives
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
Designated as Cash Flow Hedges
|
|
Not Designated as Hedging Instruments
|
|
Total Gross Amounts
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheet (3)
|
|
Net Amounts
|
|
Foreign exchange contracts
|
$
|
52.4
|
|
|
$
|
21.3
|
|
|
$
|
73.7
|
|
|
$
|
(8.2)
|
|
|
$
|
65.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets (1)
|
$
|
52.4
|
|
|
$
|
21.3
|
|
|
$
|
73.7
|
|
|
$
|
(8.2)
|
|
|
$
|
65.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
(27.2)
|
|
|
$
|
—
|
|
|
$
|
(27.2)
|
|
|
$
|
8.2
|
|
|
$
|
(19.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
(5.3)
|
|
|
—
|
|
|
(5.3)
|
|
|
—
|
|
|
(5.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities (2)
|
$
|
(32.5)
|
|
|
$
|
—
|
|
|
$
|
(32.5)
|
|
|
$
|
8.2
|
|
|
$
|
(24.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative assets (liabilities)
|
$
|
19.9
|
|
|
$
|
21.3
|
|
|
$
|
41.2
|
|
|
$
|
—
|
|
|
$
|
41.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Gross Amount of Derivatives
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
Designated as Cash Flow Hedges
|
|
Not Designated as Hedging Instruments
|
|
Total Gross Amounts
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheet (3)
|
|
Net Amounts
|
|
Foreign exchange contracts
|
$
|
8.0
|
|
|
$
|
0.3
|
|
|
$
|
8.3
|
|
|
$
|
(8.1)
|
|
|
$
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets (1)
|
$
|
8.0
|
|
|
$
|
0.3
|
|
|
$
|
8.3
|
|
|
$
|
(8.1)
|
|
|
$
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
(12.1)
|
|
|
$
|
(4.2)
|
|
|
$
|
(16.3)
|
|
|
$
|
8.1
|
|
|
$
|
(8.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
(0.9)
|
|
|
—
|
|
|
(0.9)
|
|
|
—
|
|
|
(0.9)
|
|
|
Total derivative liabilities (2)
|
$
|
(13.0)
|
|
|
$
|
(4.2)
|
|
|
$
|
(17.2)
|
|
|
$
|
8.1
|
|
|
$
|
(9.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative assets (liabilities)
|
$
|
(5.0)
|
|
|
$
|
(3.9)
|
|
|
$
|
(8.9)
|
|
|
$
|
—
|
|
|
$
|
(8.9)
|
|
____________________
(1) Net balance is included in "Prepaid and other current assets" in the condensed consolidated balance sheets.
(2) Net balance is included in "Accrued and other liabilities" in the condensed consolidated balance sheets.
(3) Represents net derivatives positions subject to master netting arrangements.
The tables below summarize the gains or losses related to our cash flow hedges and derivatives not designated as hedging instruments.
Derivatives in Cash Flow Hedging Relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange
|
|
|
|
|
|
|
|
Interest rate
|
|
|
|
Total
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
2020
|
|
2019
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Unrealized hedging gains (losses) and other, net of tax
|
$
|
29.7
|
|
|
$
|
6.9
|
|
|
|
|
|
|
$
|
(2.2)
|
|
|
$
|
(6.0)
|
|
|
$
|
27.5
|
|
|
$
|
0.9
|
|
|
Reclassification of deferred hedging (gains) losses, net of tax (1)
|
(9.8)
|
|
|
(3.6)
|
|
|
|
|
|
|
(0.5)
|
|
|
—
|
|
|
(10.3)
|
|
|
(3.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative instrument impact on comprehensive income, net of tax
|
$
|
19.9
|
|
|
$
|
3.3
|
|
|
|
|
|
|
$
|
(2.7)
|
|
|
$
|
(6.0)
|
|
|
$
|
17.2
|
|
|
$
|
(2.7)
|
|
___________________
(1)See Note 15 for classification of amounts within the condensed consolidated statements of income (loss).
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Pre-tax Gain (Loss)
Recognized in Income on Derivatives (1)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(in Millions)
|
Location of Gain or (Loss)
Recognized in Income on Derivatives
|
|
|
|
|
2020
|
|
2019
|
|
Foreign exchange contracts
|
Cost of sales and services
|
|
|
|
|
$
|
11.0
|
|
|
$
|
(2.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
11.0
|
|
|
$
|
(2.9)
|
|
___________________
(1)Amounts represent the gain or loss on the derivative instrument offset by the gain or loss on the hedged item.
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)
|
March 31, 2020
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives – Foreign exchange (1)
|
$
|
65.5
|
|
|
$
|
—
|
|
|
$
|
65.5
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Other (2)
|
17.9
|
|
|
17.9
|
|
|
—
|
|
|
—
|
|
|
Total assets
|
$
|
83.4
|
|
|
$
|
17.9
|
|
|
$
|
65.5
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives – Foreign exchange (1)
|
$
|
19.0
|
|
|
$
|
—
|
|
|
$
|
19.0
|
|
|
$
|
—
|
|
|
Derivatives – Interest rate (1)
|
5.3
|
|
|
—
|
|
|
5.3
|
|
|
—
|
|
|
Other (3)
|
27.1
|
|
|
26.0
|
|
|
1.1
|
|
|
—
|
|
|
Total liabilities
|
$
|
51.4
|
|
|
$
|
26.0
|
|
|
$
|
25.4
|
|
|
$
|
—
|
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Millions)
|
December 31, 2019
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives – Foreign exchange (1)
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
Other (2)
|
20.2
|
|
|
20.2
|
|
|
—
|
|
|
—
|
|
|
Total assets
|
$
|
20.4
|
|
|
$
|
20.2
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives – Foreign exchange (1)
|
$
|
8.2
|
|
|
$
|
—
|
|
|
$
|
8.2
|
|
|
$
|
—
|
|
|
Derivatives – Interest rate (1)
|
0.9
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
Other (3)
|
32.8
|
|
|
29.7
|
|
|
3.1
|
|
|
—
|
|
|
Total liabilities
|
$
|
41.9
|
|
|
$
|
29.7
|
|
|
$
|
12.2
|
|
|
$
|
—
|
|
____________________
(1)See the Fair Value of Derivative Instruments table within this Note for classification on the condensed consolidated balance sheets.
(2)Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheets. Both the asset and liability are recorded at fair value. Asset amounts are included in "Other assets including long-term receivables, net" in the condensed consolidated balance sheets.
(3)Primarily consists of a deferred compensation arrangement recognized on our balance sheets. Both the asset and liability are recorded at fair value. Liability amounts are included in "Other long-term liabilities" in the condensed consolidated balance sheets.
Nonrecurring Fair Value Measurements
There were no non-recurring fair value measurements in the condensed consolidated balance sheets during the periods presented.
Note 19: 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 March 31, 2020. 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)
|
$
|
64.3
|
|
|
|
|
|
Other debt guarantees (2)
|
2.1
|
|
|
Total
|
$
|
66.4
|
|
____________________
(1)Represents guarantees to financial institutions on behalf of certain customers for their seasonal borrowing. This short-term amount is recorded within "Guarantees of vendor financing" on the condensed consolidated balance sheets.
(2)These guarantees represent support provided to third-party banks for credit extended to various customers and 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 are parent-company guarantees we provide to lending institutions that extend credit to our foreign subsidiaries. Since these guarantees are provided for consolidated subsidiaries, the consolidated financial position is not affected by the issuance of these guarantees. Also excluded from the chart, in connection with our property and asset sales and
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
divestitures, we have agreed to indemnify the buyer for certain liabilities, including environmental contamination and taxes that occurred prior to the date of sale or provided guarantees to third parties relating to certain contracts assumed by the buyer. Our indemnification or guarantee obligations with respect to certain liabilities may be indefinite as to duration and may or may not be subject to a deductible, minimum claim amount or cap. As such, it is not possible for us to predict the likelihood that a claim will be made or to make a reasonable estimate of the maximum potential loss or range of loss. If triggered, we may be able to recover some of the indemnity payments from third parties. Therefore, we have not recorded any specific liabilities for these guarantees. For certain obligations related to our divestitures for which we can make a reasonable estimate of the maximum potential loss or range of loss and is probable, a liability in those instances has been recorded.
Contingencies
A detailed discussion related to our outstanding contingencies can be found in Note 20 to our consolidated financial statements included within our 2019 Form 10-K.