FMC CORPORATION Item 2 of this report contains certain forward-looking statements that are based on our current views and assumptions regarding future events, future business conditions and the outlook for our company based on currently available information. Whenever possible, we have identified these forward-looking statements by such words or phrases as "will likely result," "is confident that," "expect," "expects," "should," "could," "may," "will continue to," "believe," "believes," "anticipates," "predicts," "forecasts," "estimates," "projects," "potential," "intends" or similar expressions identifying "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including the negative of those words or phrases. Such forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and the outlook for the company based on currently available information. The forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. The potential adverse effect of the COVID pandemic on our financial condition, results of operations, cash flows and performance, which is substantially influenced by the potential adverse effect of the pandemic on our customers and suppliers and the global economy and financial markets, has been one of the most significant risk factors for our company. Thus far, we have mitigated the risks associated with the pandemic during the most intense periods of interruptions in global and nationwide economic activity and now expect the pandemic to represent less of a risk for ongoing operations. The extent to which COVID will continue to impact us will depend on future developments, many of which remain uncertain and cannot be predicted with confidence, including the duration of the pandemic, further actions to be taken to contain the pandemic or mitigate its impact, and the extent of the direct and indirect economic effects of the pandemic and containment measures, among others. Additional factors include, among other things, the risk factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2020 (the "2020 Form 10-K"), the section captioned "Forward-Looking Information" in Part II of the 2020 Form 10-K and to similar risk factors and cautionary statements in all other reports and forms filed with theSecurities and Exchange Commission ("SEC"). Moreover, investors are cautioned to interpret many of these factors as being heightened as a result of the ongoing and numerous adverse impacts of COVID. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We specifically decline to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. APPLICATION OF CRITICAL ACCOUNTING POLICIES Our consolidated financial statements are prepared in conformity withU.S. generally accepted accounting principles. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have described our accounting policies in Note 1 to our consolidated financial statements included in our 2020 Form 10-K. We have reviewed these accounting policies, identifying those that we believe to be critical to the preparation and understanding of our consolidated financial statements. We have reviewed these critical accounting policies with the Audit Committee of our Board of Directors. Critical accounting policies are central to our presentation of results of operations and financial condition and require management to make estimates and judgments on certain matters. We base our estimates and judgments on historical experience, current conditions and other reasonable factors. The following is a list of those accounting policies that we have deemed most critical to the presentation and understanding of our results of operations and financial condition. See the "Critical Accounting Policies" section in our 2020 Form 10-K for a detailed description of these policies and their potential effects on our results of operations and financial condition. •Revenue recognition and trade receivables •Environmental obligations and related recoveries •Impairment and valuation of long-lived assets and indefinite-lived assets •Pensions and other postretirement benefits •Income taxes RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS AND REGULATORY ITEMS See Note 2 to the condensed consolidated financial statements included in this Form 10-Q for a discussion of recently adopted accounting guidance and other new accounting guidance.
OVERVIEW
We are an agricultural sciences company, providing innovative solutions to growers around the world with a robust product portfolio fueled by a market-driven discovery and development pipeline in crop protection, crop enhancement, and professional
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pest and turf management. We operate in a single distinct business segment. We
develop, market and sell all three major classes of crop protection chemicals
(insecticides, herbicides and fungicides) as well as biologicals, crop
nutrition, and seed treatment, which we group as plant health. These products
are used in agriculture to enhance crop yield and quality by controlling a broad
spectrum of insects, weeds and disease, as well as in non-agricultural markets
for pest control. This powerful combination of advanced technologies includes
leading insect control products based on Rynaxypyr® and Cyazypyr® active
ingredients; Authority®, Boral®, Centium®, Command® and Gamit® branded
herbicides; Isoflex™ active herbicide ingredient; Talstar® and Hero® branded
insecticides; and flutriafol-based fungicides and biologicals such as Quartzo®
and Presence® bionematicides as well as crop enhancers such as Accudo®. The FMC
portfolio also includes Arc™ farm intelligence.
COVID-19 Pandemic
As an agricultural sciences company, we are considered an "essential" industry
in the countries in which we operate; we have avoided significant plant closures
and all our manufacturing facilities and distribution warehouses remain
operational and properly staffed. Our research laboratories and greenhouses also
have continued to operate throughout the pandemic. However, we did have a
third-party U.S. toller that was disrupted in the fourth quarter of 2020 because
of COVID-related staffing issues, which signifies one of the ongoing business
risks that the pandemic creates. We are closely monitoring raw material and
supply chain costs. Additionally, we are aware of the potential for disruptions
or lack of availability, at any price, of critical materials. The extent to
which COVID will continue to impact us will depend on future developments, many
of which remain uncertain and cannot be predicted with confidence, including the
duration of the pandemic, further actions to be taken to contain the pandemic or
mitigate its impact, and the extent of the direct and indirect economic effects
of the pandemic and containment measures, among others.
We have implemented procedures to support the health and safety of our employees
and we are following all U.S. Centers for Disease Control and Prevention , as
well as state and regional health department guidelines. The well-being of our
employees is FMC's top priority. In June 2021 , we introduced flexible work
arrangements to facilitate the return of all staff to our headquarters in
Philadelphia , as well as some other locations in adherence with local
guidelines. In August 2021 , the city of Philadelphia issued a new order to
encourage COVID vaccinations that allows Philadelphia businesses and
institutions to operate their indoor facilities without masking only if all
employees and visitors are vaccinated. As a result, FMC enacted a new policy
that all employees, contractors and interns based in Philadelphia , as well as
visitors, must be fully vaccinated against COVID and must provide proof of their
vaccination. Employees may request an exemption to this mandatory policy for
medical reasons or because of a sincerely held religious belief. Non-exempt
employees who did not provide proof of vaccination by September 3, 2021 were
placed on an unpaid leave of absence. On September 9, 2021 , President Biden
announced a new national strategy to combat COVID. This strategy includes an
executive order mandating vaccines for federal workers and contractors and a new
emergency rule requiring companies with 100 or more employees to ensure their
workers are either vaccinated or tested weekly. We expect that this national
strategy will affect operations at all U.S. locations and we are in the process
of implementing procedures at our U.S. sites to ensure compliance with the new
Emergency Temporary Standard. We have resumed in-office operations where
permitted by local authorities. In addition, we have thousands of employees who
continue operating our manufacturing sites and distribution warehouses. In all
our facilities, we are using a variety of best practices to address COVID risks,
following the protocols and procedures recommended by leading health
authorities. We are monitoring the situation in regions where the pandemic
continues to escalate and in such regions will remain in a remote working
environment until it is safe to return to the workplace.
We made significant investments in our employees as a result of the COVID
pandemic, including through enhanced dependent care pay policies, recognition
bonuses, increased flexibility of work schedules and hours of work to
accommodate remote working arrangements, and investment in IT infrastructure to
promote remote work. Through these efforts we have successfully avoided any
COVID related furloughs or workforce reductions to date.
We will continue to monitor the economic environment related to the pandemic on
an ongoing basis and assess the impacts on our business.
Third Quarter 2021 Highlights
The following items are the more significant developments or financial
highlights in our business during the three months ended September 30, 2021 :
•Revenue of $1,194.0 million for the three months ended September 30, 2021
increased $109.4 million or approximately 10 percent versus the same period last
year. A more detailed review of revenue is discussed under the section titled
"Results of Operations" . On a regional basis, sales in North America
decreased by approximately 6 percent, sales in Latin America increased
approximately 11 percent, sales in Europe , Middle East and Africa increased by
approximately 12 percent, and sales in Asia increased approximately 20 percent.
The increase was mostly driven by
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volume growth, reflecting robust demand for our products around the world.
Excluding foreign currency impacts, revenue increased 9 percent during the
quarter.
•Our gross margin of $512.8 million increased versus the prior year quarter by
$46.4 million driven by higher volumes in Asia , Latin America , and Europe ,
Middle East and Africa . Gross margin percent of approximately 43 percent
remained mostly flat compared to approximately 43 percent in the prior year
period.
•Selling, general and administrative expenses decreased from $187.7 million to
$183.5 million , or approximately 2 percent. Selling, general and administrative
expenses, excluding transaction-related charges, of $183.5 million increased
$10.2 million , or approximately 6 percent, compared to the prior year.
•Research and development expenses of $79.5 million increased $7.8 million or
approximately 11 percent. In the prior year period we phased some research and
development projects differently to allow for lower costs in response to the
pandemic without fundamentally impacting long-term timelines. In the current
year period we have resumed research and development expenses related to these
projects.
•Net income (loss) attributable to FMC stockholders increased from $111.4
million to $157.9 million which represents an increase of $46.5 million , or
approximately 42 percent. Adjusted after-tax earnings from continuing operations
attributable to FMC stockholders of $184.9 million increased compared to the
prior year amount of $160.1 million . See the disclosure of our Adjusted Earnings
Non-GAAP financial measurement below, under the section titled "Results of
Operations" .
2021 Outlook Update
In 2021, we continue to expect the global crop protection market to be up
mid-single digits, on a U.S. dollar basis. We continue to anticipate high-single
digit growth in the Latin American market, mid-single digit growth in the EMEA
market, low- to mid-single digit growth in the Asian market and low-single digit
growth in the North American market.
Our 2021 revenue forecast remains in the range of approximately $4.9 billion to
$5.1 billion , up approximately 8 percent at the midpoint versus 2020. Full year
adjusted EBITDA(1) remains in the range of $1.29 billion to $1.35 billion ,
representing 6 percent growth at the midpoint versus 2020 results. 2021 adjusted
earnings are now expected to be in the range of $6.59 to $6.99 per diluted
share(1), representing a year over year increase of 10 percent at the midpoint.
This reflects the impact of share repurchases completed year-to-date. Full-year
earnings growth drivers include robust volume growth and higher pricing, offset
in part by significant cost increases. Adjusted earnings estimates do not
include the benefit of any future share repurchases. For cash flow outlook,
refer to the "L iquidity and Capital Resources" section below.
(1)Although we provide forecasts for adjusted earnings per share and adjusted
EBITDA (Non-GAAP financial measures), we are not able to forecast the most
directly comparable measures calculated and presented in accordance with U.S.
GAAP. Certain elements of the composition of the U.S. GAAP amounts are not
predictable, making it impractical for us to forecast. Such elements include,
but are not limited to, restructuring, acquisition charges, and discontinued
operations. As a result, no U.S. GAAP outlook is provided.
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RESULTS OF OPERATIONS
Overview
The following charts provide a reconciliation of Adjusted EBITDA, Adjusted
Earnings, and Organic Revenue Growth, all of which are Non-GAAP financial
measures, from the most directly comparable GAAP measure. Adjusted EBITDA and
Organic Revenue are provided to assist the readers of our financial statements
with useful information regarding our operating results. Our operating results
are presented based on how we assess operating performance and internally report
financial information. For management purposes, we report operating performance
based on earnings before interest, income taxes, depreciation and amortization,
discontinued operations, and corporate special charges. Our Adjusted Earnings
measure excludes corporate special charges, net of income taxes, discontinued
operations attributable to FMC stockholders, net of income taxes, and certain
Non-GAAP tax adjustments. These are excluded by us in the measure we use to
evaluate business performance and determine certain performance-based
compensation. Organic Revenue Growth excludes the impacts of foreign currency
changes, which we believe is a meaningful metric to evaluate our revenue
changes. These items are discussed in detail within the "Other Results of
Operations" section that follows. In addition to providing useful information
about our operating results to investors, we also believe that excluding the
effect of corporate special charges, net of income taxes, and certain Non-GAAP
tax adjustments from operating results and discontinued operations allows
management and investors to compare more easily the financial performance of our
underlying business from period to period. These measures should not be
considered as substitutes for net income (loss) or other measures of performance
or liquidity reported in accordance with U.S. GAAP.
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(in Millions) (unaudited) (unaudited)
Revenue $ 1,194.0 $ 1,084.6 $ 3,631.6 $ 3,489.9
Costs of sales and services 681.2 618.2 2,074.6 1,939.3
Gross margin $ 512.8 $ 466.4 $ 1,557.0 $ 1,550.6
Selling, general and administrative expenses 183.5 187.7 519.0 548.1
Research and development expenses 79.5 71.7 219.4 203.3
Restructuring and other charges (income) 32.8 11.0 52.3 43.9
Total costs and expenses $ 977.0 $ 888.6 $ 2,865.3 $ 2,734.6
Income from continuing operations before
non-operating pension and postretirement charges
(income), interest expense, net and income taxes (1) $ 217.0 $
196.0
Non-operating pension and postretirement charges (income) 5.1 11.6 14.7 16.0 Interest expense, net 33.1 35.5 98.1 117.0 Income (loss) from continuing operations before income taxes$ 178.8 $ 148.9 $ 653.5 $ 622.3 Provision (benefit) for income taxes 8.7 18.4 74.3 82.3 Income (loss) from continuing operations$ 170.1 $ 130.5 $ 579.2 $ 540.0 Discontinued operations, net of income taxes (9.7) (18.4) (32.4) (36.7) Net income (loss) (GAAP)$ 160.4 $ 112.1 $ 546.8 $ 503.3 Adjustments to arrive at Adjusted EBITDA (Non-GAAP): Corporate special charges (income): Restructuring and other charges (income) (3)$ 32.8 $ 11.0 $ 52.3 $ 43.9 Non-operating pension and postretirement charges (income) (4) 5.1 11.6 14.7 16.0 Total transaction-related charges (5) - 14.4 0.4 40.4 Discontinued operations, net of income taxes 9.7 18.4 32.4 36.7 Interest expense, net 33.1 35.5 98.1 117.0 Depreciation and amortization 43.4 41.5 128.5 120.7 Provision (benefit) for income taxes 8.7 18.4 74.3 82.3 Adjusted EBITDA (Non-GAAP) (2)$ 293.2 $
262.9
____________________
(1) Referred to as operating profit.
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(2) Adjusted EBITDA is defined as operating profit excluding corporate special
charges (income) and depreciation and amortization expense.
(3) See Note 10 for details of restructuring and other charges (income).
(4) Our non-operating pension and postretirement charges (income) are defined
as those costs (benefits) related to interest, expected return on plan assets,
amortized actuarial gains and losses and the impacts of any plan curtailments or
settlements. These are excluded from our operating results and are primarily
related to changes in pension plan assets and liabilities which are tied to
financial market performance and we consider these costs to be outside our
operational performance. We continue to include the service cost and
amortization of prior service cost in our operating results noted above. These
elements reflect the current year operating costs to our business for the
employment benefits provided to active employees.
(5) Represents transaction costs, costs for transitional employees, other
acquired employees related costs, and transactional-related costs such as legal
and professional third-party fees. We completed the integration of the DuPont
Crop Protection Business as of June 30, 2020 , except for the completion of
certain in-flight initiatives, primarily associated with the finalization of our
worldwide ERP system. The TSA is now terminated and the last phase of the ERP
system transition went live in November 2020 with a stabilization period that
went into the first quarter of 2021.
Three Months Ended September 30, Nine Months Ended September 30,
(in Millions) 2021 2020 2021 2020
DuPont Crop Protection Business Acquisition
Legal and professional fees (1) $ - $ 14.4 $ 0.4 $ 40.4
Total Transaction-related charges $ - $ 14.4 $ 0.4 $ 40.4 ____________________
(1) Represents transaction costs, costs for transitional employees, other
acquired employees related costs, and transactional-related costs such as legal
and professional third-party fees. These charges are recorded as a component of
"Selling, general and administrative expense" on the condensed consolidated
statements of income (loss).
ADJUSTED EARNINGS RECONCILIATION
Three Months Ended September Nine Months Ended September
30, 30,
2021 2020 2021 2020
(in Millions) (unaudited) (unaudited)Net income (loss) attributable to FMC stockholders (GAAP)
$ 157.9 $
111.4
Corporate special charges (income), pre-tax (1) 37.9 37.0 67.4 100.3 Income tax expense (benefit) on Corporate special charges (income) (2) (4.1) (6.1) (10.4) (16.9) Corporate special charges (income), net of income taxes$ 33.8 $ 30.9 $ 57.0 $ 83.4 Discontinued operations attributable to FMC Stockholders, net of income taxes 9.7 18.4 32.4 36.7 Non-GAAP tax adjustments (3) (16.5) (0.6) (12.7) 1.6 Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP)$ 184.9 $ 160.1 $ 620.1 $ 623.7 ____________________ (1) Represents restructuring and other charges (income), non-operating pension and postretirement charges (income), and transaction-related charges. (2) The income tax expense (benefit) on corporate special charges (income) is determined using the applicable rates in the taxing jurisdictions in which the corporate special charge (income) occurred and includes both current and deferred income tax expense (benefit) based on the nature of the Non-GAAP performance measure. (3) We exclude the GAAP tax provision, including discrete items, from the Non-GAAP measure of income, and instead include a Non-GAAP tax provision based upon the annual Non-GAAP effective tax rate. The GAAP tax provision includes certain discrete tax items including, but not limited to: income tax expenses or benefits that are not related to current year ongoing business operations; tax adjustments associated with fluctuations in foreign currency remeasurement of certain foreign operations; certain changes in estimates of tax matters related to prior fiscal years; certain changes in the realizability of deferred tax assets; and changes in tax law. Management believes excluding these discrete tax items assists investors and securities analysts in understanding the tax provision and the effective tax rate related to ongoing operations thereby providing investors with useful supplemental information about FMC's operational performance. 39
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ORGANIC REVENUE GROWTH RECONCILIATION
Three Months Ended
September 30, 2021 vs.
2020
Total Revenue Change (GAAP) 10 %
Less: Foreign Currency Impact 1 %
Organic Revenue Change (Non-GAAP) 9 %
Results of Operations
In the discussion below, all comparisons are between the periods unless
otherwise noted.
Revenue
Three Months Ended September 30, 2021 vs. 2020
Revenue of $1,194.0 million increased $109.4 million , or approximately 10
percent, versus the prior year period. The increase was primarily driven by
volume increases and favorable foreign currencies, which benefited revenue by
approximately 9 percent and 1 percent, respectively. While invoice level prices
increased in the period by approximately 1 percent, the increase was fully
offset by favorable rebate and other adjustments in the prior period that did
not repeat this quarter. Excluding foreign currency impacts, revenue increased
approximately 9 percent during the quarter.
Nine Months Ended September 30, 2021 vs. 2020
Revenue of $3,631.6 million increased $141.7 million , or approximately 4
percent, versus the prior year period, driven by volume increases and favorable
foreign currencies which contributed an approximate 2 percent and 2 percent
increase, respectively. Excluding foreign currency impacts, revenue increased
approximately 2 percent. See below for a discussion of revenue by region.
Total Revenue by Region
Three Months Ended September 30, Nine Months Ended September 30,
(in Millions) 2021 2020 2021 2020
North America $ 199.8 $ 212.3 $ 791.3 $ 851.8
Latin America 516.9 464.9 1,019.7 985.3
Europe, Middle East & Africa (EMEA) 171.4 152.8 843.7 833.5
Asia 305.9 254.6 976.9 819.3
Total Revenue $ 1,194.0 $ 1,084.6 $ 3,631.6 $ 3,489.9
Three Months Ended September 30, 2021 vs. 2020
North America : Revenue decreased approximately 6 percent versus the prior year
period. Similar to prior quarter, the decrease was driven by the shift of
diamide partner sales from North America to other regions. Excluding revenue
from our global diamide partnerships, the North America region grew more than 20
percent, driven by strong demand for our diamides and fall herbicide
applications. We also successfully introduced Vantacor™ insect control in the
U.S.
Latin America : Revenue increased approximately 11 percent versus the prior year
period, or approximately 9 percent excluding foreign currency, driven by double
digit growth of insecticides in Brazil and Argentina . Corn, soy, and cotton were
the key crops driving growth in the quarter, while Plant Health growth was led
by biologicals and seed treatment. Sales in Chile nearly doubled in the quarter,
leveraging enhanced market presence. The growth in Latin America was partially
offset by registration cancellations and rationalization of products in the
quarter.
EMEA: Revenue increased approximately 12 percent versus the prior year period,
or approximately 10 percent excluding foreign currency. The increase was driven
by strong demand for our herbicides and diamides across the whole region. Among
others, Russia , France , Germany , and the U.K. grew double-digits in the quarter,
primarily driven by demand for herbicide applications in cereals and oil seed
rape. South Africa also doubled its sales compared to the prior year, driven by
continued penetration of diamides. The broad revenue growth was partially offset
by registration cancellations.
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Asia : Revenue increased approximately 20 percent versus the prior year period,
or approximately 19 percent excluding foreign currency, driven by strong diamide
sales and pricing actions across the region. Growth in India , driven by diamide
sales in rice and continued expansion of the rest of our portfolio, was slightly
offset by weather related challenges in India . The Australian market benefited
from positive grower sentiment, favorable weather conditions and strong insect
pressure.
Nine Months Ended September 30, 2021 vs. 2020
North America : Revenue decreased approximately 7 percent versus the prior year
period, or approximately 8 percent excluding foreign currency, driven by a shift
of diamide partner sales from North America to other regions. The decrease was
partially offset by sales growth for herbicides and diamides, and strong product
launches of Xyway™ fungicide and Vantacor™ insect control.
Latin America : Revenue increased approximately 3 percent versus the prior year
period, or approximately 4 percent excluding foreign currency. This was
primarily driven by a return to growth in Brazil , strong contributions from
Mexico and the Andean subregion in the second quarter of 2021, and strong
contributions from Brazil , Argentina , and Chile in the third quarter of 2021.
EMEA: Revenue increased approximately 1 percent versus the prior year period, or
decreased approximately 3 percent excluding foreign currency, primarily due to
strong sales of diamides and herbicides. This was partially offset by
discontinued registrations and a delayed start to Spring which resulted in lost
applications.
Asia : Revenue increased approximately 19 percent versus the prior year period,
or approximately 15 percent excluding foreign currency tailwinds, driven by
growth in Australia and India . We had strong sales for our new Overwatch®
herbicide and sales of our diamides were robust across the region.
For 2021, full-year revenue is expected to be in the range of approximately $4.9
billion to $5.1 billion , which represents approximately 8 percent growth at the
midpoint versus 2020.
Gross margin
Three Months Ended September 30, 2021 vs. 2020
Gross margin of $512.8 million increased $46.4 million , or approximately 10
percent versus the prior year period. The increase was primarily due to higher
revenues driven by increased volumes in Asia , EMEA, and Latin America . Gross
margin percent of approximately 43 percent remained mostly flat compared to
approximately 43 percent in the prior year period.
Nine Months Ended September 30, 2021 vs 2020
Gross margin of $1,557.0 million increased $6.4 million versus the prior year
period.
Gross margin percent of approximately 43 percent decreased slightly from
approximately 44 percent in the prior year period. The decline in gross margin
percent is driven by higher costs primarily increases in raw materials,
packaging, and logistics.
Selling, general and administrative expenses
Three Months Ended September 30, 2021 vs. 2020
Selling, general and administrative expenses of $183.5 million decreased $4.2
million , or 2 percent, versus the prior year period. A large portion of the
decrease was related to the fact that we did not incur any transaction-related
expenses after the first quarter of 2021. Spending increased globally, primarily
in Latin America , Asia , and EMEA. Selling, general and administrative expenses,
excluding transaction-related charges, increased $10.2 million , or approximately
6 percent, versus the prior year period.
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Nine Months Ended September 30, 2021 vs. 2020
Selling, general and administrative expenses of $519.0 million decreased $29.1
million , or approximately 5 percent versus the prior year period due to the
cessation of transaction-related expenses, as mentioned above. Selling, general
and administrative expenses, excluding transaction-related charges, increased
$10.9 million , or approximately 2 percent versus the prior year period.
Research and development expenses
Three Months Ended September 30, 2021 vs. 2020
Research and development expenses of $79.5 million increased $7.8 million , or
approximately 11 percent versus the prior year period. In the current year
period we returned to spending on some research and development projects that
were paused last year for cost control measures. In the full year 2020 we
eliminated or delayed certain non-essential expenditures to offset effects of
the COVID pandemic and phased some projects differently to allow lower costs in
response to the pandemic without fundamentally impacting long-term timelines.
Nine Months Ended September 30, 2021 vs. 2020
Research and development expenses of $219.4 million increased $16.1 million , or
approximately 8 percent versus the prior year period. As noted above, the
increase in research and development expenditures is related to cost-saving
measures taken in the prior year in response to the COVID pandemic.
Other Results of Operations
Depreciation and amortization
Three Months Ended September 30, 2021 vs. 2020
Depreciation and amortization of $43.4 million increased $1.9 million , or
approximately 5 percent, as compared to the prior year period of $41.5 million .
Nine Months Ended September 30, 2021 vs. 2020
Depreciation and amortization of $128.5 million increased $7.8 million , or
approximately 6 percent, as compared to the prior year period of $120.7 million .
The increase was mostly driven by the impacts of the amortization effects of the
completion of various phases of our ERP implementation.
Interest expense, net
Three Months Ended September 30, 2021 vs. 2020
Interest expense, net of $33.1 million decreased compared to the prior year
period of $35.5 million . The decrease was driven by lower foreign debt balances
and the benefit of lower LIBOR rates.
Nine Months Ended September 30, 2021 vs. 2020
Interest expense, net of $98.1 million decreased $18.9 million compared to the
prior year period of $117.0 million . The decrease was driven by a $9.5 million
benefit of lower LIBOR rates as well as an $8.7 million benefit of lower debt
balances.
Corporate special charges (income)
Restructuring and other charges (income)
Three Months Ended September Nine Months Ended September
30, 30,
(in Millions) 2021 2020 2021 2020
Restructuring charges $ 2.1 $ 6.9 $ 18.9 $ 29.7
Other charges (income), net 30.7 4.1 33.4 14.2
Total restructuring and other charges (income)
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Three Months Ended September 30, 2021 vs. 2020
Restructuring charges in 2021 of $2.1 million consist of $1.0 million of charges
related to regional realignment activities, including severance and employee
relocation costs, and $0.8 million associated with the integration of the DuPont
Crop Protection Business which was completed during the second quarter of 2020
except for certain in-flight initiatives, including severance, accelerated
depreciation on certain fixed assets, and other costs (benefits). Additionally,
there were other miscellaneous restructuring charges of $0.3 million .
Restructuring charges in 2020 of $6.9 million primarily represent charges
associated with the integration of the DuPont Crop Protection Business which was
completed during the second quarter of 2020 except for certain in-flight
initiatives. These charges include severance, accelerated depreciation on
certain fixed assets, and other costs (benefits).
Other charges, net in 2021 of $30.7 million primarily consists of $23.8 million
charges related to the establishment of reserves for certain historical India
indirect tax matters that were triggered during the period. A detailed
description of this matter is included in Note 19 to the condensed consolidated
financial statements within this Form 10-Q.
Other charges, net in 2020 of $4.1 million primarily consists of charges related
to environmental sites.
Nine Months Ended September 30, 2021 vs. 2020
Restructuring charges in 2021 of $18.9 million consist of $8.9 million of
charges associated with regional realignment activities, including severance and
employee relocation costs, and $5.8 million related to the integration of the
DuPont Crop Protection Business which was completed during the second quarter of
2020 except for certain in-flight initiatives. Additionally, there were other
miscellaneous restructuring charges of $4.2 million .
Restructuring charges in 2020 of $29.7 million primarily comprised of charges
associated with the integration of the DuPont Crop Protection Business which was
completed during the second quarter of 2020 except for certain in-flight
initiatives. These charges include severance, accelerated depreciation on
certain fixed assets, and other costs (benefits) of $23.2 million as well as
other miscellaneous restructuring benefits of $0.4 million .
Other charges, net in 2021 of $33.4 million primarily consists of $23.8 million
charges related to the establishment of reserves for certain historical India
indirect tax matters that were triggered during the period. A detailed
description of this matter is included in Note 19 to the condensed consolidated
financial statements within this Form 10-Q. Additionally, there were charges
related to environmental sites of $3.3 million .
Other charges, net in 2020 of $14.2 million primarily consists of charges
related to environmental sites of $13.7 million .
Non-operating pension and postretirement charges (income)
Charges for the three months ended September 30, 2021 were $5.1 million compared
to charges of $11.6 million for the three months ended September 30, 2020 . The
decrease in non-operating pension and post retirement charges (income) is
attributable to lower amortization of net actuarial losses. As previously
disclosed, we continued to use the smoothed market related value of assets
(MRVA) as opposed to the actual fair value of plan assets in the determination
of pension expense. This continued approach will create some volatility in our
non-operating periodic pension cost since our qualified pension plan is 100
percent fixed income securities.
Charges for the nine months ended September 30, 2021 were $14.7 million compared
to charges of $16.0 million for the nine months ended September 30, 2020 . The
decrease in non-operating pension and post retirement charges (income) is
attributable to a decrease in interest cost due to falling discount rates,
partially offset by a lower expected return on plan assets, with rates changing
from 4.25 percent to 3 percent.
Transaction-related charges
A detailed description of the transaction-related charges is included in Note 5
to the condensed consolidated financial statements included within this Form
10-Q.
43
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Provision for income taxes
Three Months Ended September 30, 2021 vs. 2020
Provision for income taxes for the three months ended September 30, 2021 was
$8.7 million resulting in an effective tax rate of 4.9 percent. Provision for
income taxes for the three months ended September 30, 2020 was $18.4 million
resulting in an effective tax rate of 12.4 percent. The primary drivers for the
decrease in the effective tax rate for the three months ended September 30, 2021
compared to the three months ended September 30, 2020 are shown in the table
below.
Three Months Ended
2021 2020
Tax Provision Effective Tax Income Tax Provision
(in Millions) Income (Expense) (Benefit) Rate (Expense) (Benefit) Effective Tax Rate
GAAP - Continuing operations $ 178.8 $ 8.7 4.9 % $ 148.9 $ 18.4 12.4 %
Corporate special charges
(income) 37.9 4.1 37.0 6.1
Tax adjustments (1) 16.5 0.6
Non-GAAP - Continuing operations
13.5 %$ 185.9 $ 25.1 13.5 %
_______________
(1) Tax adjustments for the three months endedSeptember 30, 2021 include$17.7 million tax reserve release related to our domestic operations. Refer to Note 3 of the Adjusted Earnings Reconciliation table within this section of this Form 10-Q for further explanation of tax adjustments. Nine Months EndedSeptember 30, 2021 vs. 2020 Provision for income taxes for the nine months endedSeptember 30, 2021 was$74.3 million resulting in an effective tax rate of 11.4 percent. Provision for income taxes for the nine months endedSeptember 30, 2020 was$82.3 million resulting in an effective tax rate of 13.2 percent. The primary drivers for the decrease in the effective tax rate for the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 are shown in the table below.
Nine Months Ended
2021 2020
Tax Provision Effective Tax Income Tax Provision
(in Millions) Income (Expense) (Benefit) Rate (Expense) (Benefit) Effective Tax Rate
GAAP - Continuing operations $ 653.5 $ 74.3 11.4 % $ 622.3 $ 82.3 13.2 %
Corporate special charges
(income) 67.4 10.4 100.3 16.9
Tax adjustments (1) 12.7 (1.6)
Non-GAAP - Continuing operations
13.5 %$ 722.6 $ 97.6 13.5 %
_______________
(1) Tax adjustments for the nine months endedSeptember 30, 2021 include$17.7 million tax reserve release related to our domestic operations. Refer to Note 3 of the Adjusted Earnings Reconciliation table within this section of this Form 10-Q for further explanation of tax adjustments. Discontinued operations, net of income taxes Our discontinued operations include provisions, net of recoveries, for environmental liabilities and legal reserves and expenses related to previously discontinued operations and retained liabilities. Three Months EndedSeptember 30, 2021 vs. 2020 Discontinued operations, net of income taxes represented a loss of$9.7 million for the three months endedSeptember 30, 2021 compared to a loss of$18.4 million for the three months endedSeptember 30, 2020 . The loss during both the three months endedSeptember 30, 2021 and 2020 was primarily due to adjustments related to the retained liabilities from our previously discontinued operations. In the three months endedSeptember 30, 2021 , the loss was partially offset by a gain of approximately$13 million , net of tax, from the sale of land at our discontinued site inRichmond, California . 44 -------------------------------------------------------------------------------- Nine Months EndedSeptember 30, 2021 vs. 2020 Discontinued operations, net of income taxes represented a loss of$32.4 million for the nine months endedSeptember 30, 2021 compared to a loss of$36.7 million for the nine months endedSeptember 30, 2020 . The loss during both the nine months endedSeptember 30, 2021 and 2020 was primarily related to adjustments related to the retained liabilities from our previously discontinued operations. In the nine months endedSeptember 30, 2021 , we had higher adjustments for retained liabilities compared to prior year, which were offset by a gain on sale of land at our discontinued site inRichmond, California , discussed above. Net income (loss) Three Months EndedSeptember 30, 2021 vs. 2020 Net income (loss) increased to$160.4 million from income of$112.1 million in the prior year period. The higher results were primarily driven by an increase in gross margin of approximately$46 million from higher volume and a decrease in provision for income taxes of approximately$10 million as compared to the prior period. Additionally, non-operating pension and postretirement charges were lower by approximately$7 million and losses from our discontinued operations, net of income taxes, were lower by approximately$9 million as compared to the prior period. This was partially offset by higher restructuring and other charges and research and development expenses of approximately$22 million and$8 million , respectively. The only difference between Net income (loss) and Net income (loss) attributable to FMC stockholders is noncontrolling interest, which period over period is immaterial. Nine Months EndedSeptember 30, 2021 vs. 2020 Net income (loss) increased to$546.8 million from income of$503.3 million in the prior year period. The higher results were primarily driven by lower selling, general and administrative costs of approximately$29 million , driven by the lack of transaction costs compared to the prior year, as well as lower interest expense of approximately$19 million compared to the prior year. The only difference between Net income (loss) and Net income (loss) attributable to FMC stockholders is noncontrolling interest, which period over period is immaterial. Adjusted EBITDA (Non-GAAP) The Adjusted EBITDA amounts discussed below for three and nine months endedSeptember 30, 2021 and 2020 are reconciled to Net Income (loss) within this Form 10-Q. Refer to our Overview under the section titled "Results of Operations" above. Three Months EndedSeptember 30, 2021 vs. 2020 Adjusted EBITDA of$293.2 million increased$30.3 million , or approximately 12 percent versus the prior year period. The increase was mainly driven by volume growth, which benefited Adjusted EBITDA by approximately 14 percent. Favorable foreign currencies contributed to a 4 percent increase on Adjusted EBITDA. This was partially offset by a 6 percent unfavorable impact from higher selling, general, and administrative costs and research and development spending, as well as higher raw materials, packaging, and logistics costs. Nine Months EndedSeptember 30, 2021 vs. 2020 Adjusted EBITDA of$947.5 million decreased$12.8 million , or approximately 1 percent versus the prior year period. The decrease was driven by higher cost, primarily increases in raw materials, packaging, and logistics costs, as well as higher research and development and selling, general, and administrative spending, which collectively had an impact of approximately 7 percent. Price had an unfavorable impact of 1 percent. These factors more than offset volume growth which contributed an approximate 7 percent increase. For 2021, full-year Adjusted EBITDA is expected to be in the range of$1.29 billion to$1.35 billion , which represents approximately 6 percent growth at the midpoint versus 2020. Although we provide a forecast for Adjusted EBITDA, a Non-GAAP financial measure, we are not able to forecast the most directly comparable measure calculated and presented in accordance withU.S. GAAP. See Note 1 to our 2021 Outlook Update within this section of the Form 10-Q. 45 -------------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES As a global agricultural sciences company, we require cash primarily for seasonal working capital needs, capital expenditures, and return of capital to shareholders. We plan to meet these liquidity needs through available cash, cash generated from operations, commercial paper issuances and borrowings under our committed revolving credit facility as well as other liquidity facilities, and in certain instances access to debt capital markets. We believe our strong financial standing and credit ratings will ensure adequate access to the debt capital markets on favorable conditions. Cash Cash and cash equivalents atSeptember 30, 2021 andDecember 31, 2020 , were$341.0 million and$568.9 million , respectively. Of the cash and cash equivalents balance atSeptember 30, 2021 ,$301.2 million was held by our foreign subsidiaries. During the third quarter, we established plans to repatriate cash from certain foreign subsidiaries with minimal tax on a go forward basis. Other cash held by foreign subsidiaries is generally used to finance subsidiaries' operating activities and future foreign investments. See Note 17 to the consolidated financial statements included within this Form 10-Q for more information on our indefinite reinvestment assertion. Outstanding debt AtSeptember 30, 2021 , we had total debt of$3,393.7 million as compared to$3,267.8 million atDecember 31, 2020 . Total debt included$2,631.7 million and$2,929.5 million of long-term debt (excluding current portions of$386.6 million and$93.6 million ) atSeptember 30, 2021 andDecember 31, 2020 , respectively. Short-term debt and current portion of long-term debt, which consists of short-term foreign borrowings, commercial paper borrowings, and the current portion of long-term debt, increased from$338.3 million atDecember 31, 2020 to$762.0 million atSeptember 30, 2021 . See Note 11 in the condensed consolidated financial statements included in this Form 10-Q for further details. As ofSeptember 30, 2021 , we were in compliance with all of our debt covenants. We remain committed to solid investment grade credit metrics, and expect full-year average leverage to be in line with this commitment in 2021. Access to credit and future liquidity and funding needs AtSeptember 30, 2021 , our remaining borrowing capacity under our credit facility was$994.3 million . See Note 11 in the condensed consolidated financial statements included in this Form 10-Q for discussion of the amendments to the Revolving Credit Facility and Term Loan Agreements undertaken in the prior quarter. Our commercial paper program allows us to borrow at rates generally more favorable than those available under our credit facility. AtSeptember 30, 2021 , we had$267.5 million commercial paper borrowings under the commercial paper program. AtSeptember 30, 2021 , the average effective interest rate on the borrowings was 0.45 percent. 46
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