FMC CORPORATION

FMC
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FMC : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/03/2020 | 12:49pm


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. Currently, one of the
most significant factors is the potential adverse effect of the current COVID-19
pandemic on our financial condition, results of operations, cash flows and
performance, which is substantially influenced by the potential adverse effect
of the pandemic on our customers and suppliers and the global economy and
financial markets. The extent to which COVID-19 impacts us will depend on future
developments, which are highly uncertain and cannot be predicted with
confidence, including the scope, severity and duration of the pandemic, the
actions taken to contain the pandemic or mitigate its impact, and the direct and
indirect economic effects of the pandemic and containment measures, among
others. Additional factors include, among other things, the risk factors
included in Part II, Item 1A of our Annual Report on Form 10-K for the year
ended December 31, 2019 (the "2019 Form 10-K"), the section captioned
"Forward-Looking Information" in Part II of the 2019 Form 10-K, the risk factor
in Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31,
2020
, and to similar risk factors and cautionary statements in all other reports
and forms filed with the Securities and Exchange Commission ("SEC"). Moreover,
investors are cautioned to interpret many of these factors as being heightened
as a result of the ongoing and numerous adverse impacts of COVID-19. We wish to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made.
We specifically decline to undertake any obligation to publicly revise any
forward-looking statements that have been made to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements are prepared in conformity with U.S.
generally accepted accounting principles. The preparation of our financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. We have
described our accounting policies in Note 1 to our consolidated financial
statements included in our 2019 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 2019
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

On January 1, 2020, ASU No. 2016-13, Financial Instruments - Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, became
effective. See Note 2 for more information. Our revenue recognition and trade
receivables critical accounting policy has been updated in order to comply with
the accounting standard update. The updated policy refines the process of
estimating the allowance for doubtful accounts receivables by incorporating past
events, current business conditions, and reasonable and supportable forecasts of
future economic conditions that affect the collectability of the reported
amounts.
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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, plant
health, and professional pest and turf management. We operate in a single
distinct business segment and develop, market and sell all three major classes
of crop protection chemicals: insecticides, herbicides and fungicides. These
products are used in agriculture to enhance crop yield and quality by
controlling a broad spectrum of insects, weeds and disease, 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; Talstar® and Hero® branded insecticides; and
flutriafol-based fungicides. The FMC portfolio also includes biologicals such as
Quartzo® and Presence® bionematicides.

COVID-19 Pandemic
In March 2020, the World Health Organization characterized COVID-19 as a
pandemic, and the President of the United States declared the COVID-19 outbreak
a national emergency. The rapid spread of the outbreak has caused significant
disruptions in the U.S. and global economies, and economists expect the impact
will continue to be significant during the remainder of 2020 and beyond.
As an agricultural sciences company, we are considered an "essential" industry
in the countries in which we operate; we have avoided significant plant closures
and all our manufacturing facilities and distribution warehouses remain
operational and fully staffed. We delivered strong financial performance and
navigated the challenges posed by COVID-19 and severe foreign currency
headwinds. While we have maintained business continuity and sustained our
operations with safety as a priority, 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.
We have implemented new 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. Although most FMC
office-based employees around the world have been working remotely during this
period, we have implemented procedures to safely return to the workplace in
regions where the pandemic is controlled and local health officials have deemed
this to be safe in compliance with any government regulations. 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-19 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. In
the first three quarters of 2020, we have made significant investments in our
employees as a result of the COVID-19 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-19 related furloughs or workforce reductions
to date.
In addition to addressing the needs of the Company and our employees, FMC has
been a leader in supporting the needs of the communities in which FMC has
operations and those generally in need as a result of the pandemic. Since the
advent of the pandemic, we have donated in excess of 233,000 personal protective
equipment supplies, including N95 masks, surgical masks, protective cover suits,
goggles and similar items. We have also donated more than 1,800 containers and
canisters used to transport alcohol-based disinfecting solution. Additional
efforts include financial contributions to hunger-relief organizations;
assisting with disinfecting schools and other public spaces in villages; and
supporting various community initiatives.
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In our supply chain, sourcing of raw materials and intermediates was not a
significant issue, although we continued to see some logistics challenges and
related higher costs. While we saw very strong demand for our products in all
four regions of the world in the third quarter, there were pockets of demand
reduction related to the pandemic. This impacted certain cotton and fruit and
vegetable markets. Underlying demand for our products remains healthy,
supplemented by market access expansion, new registrations, and an increasing
impact from our pricing actions as we enter the fourth quarter. We are conscious
of the potential downside risks in the remainder of the year and expect to
continue to experience disruption caused by COVID-19 in our supply chain,
logistics, and pockets of demand, as well as on farm worker labor required for
planting, harvesting and packing crops (especially fruits, vegetables and other
specialty crops) in the food chain going forward. As discussed in the first two
quarters of 2020, we implemented price increases and cost-saving measures across
the company to offset impacts of the COVID-19 pandemic and related foreign
currency headwinds. We amended our debt covenants with our banks on April 22,
2020
(see Note 11 for more details) to provide significant additional headroom
above any of the COVID-19 related scenarios assessed by the company. 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 2020 Highlights

The following items are the more significant developments or financial
highlights in our business during the three months ended September 30, 2020:
•Revenue of $1,084.6 million for the three months ended September 30, 2020
increased $70.3 million or approximately 7 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
increased by approximately 8 percent, sales in Latin America increased
approximately 1 percent, sales in Europe, Middle East and Africa increased by
approximately 10 percent, and sales in Asia increased approximately 16 percent.
The increase was mostly driven by higher volumes and pricing. Excluding foreign
currency impacts, revenue increased 15 percent during the quarter and our
business saw double digit growth in India, Australia, Pakistan, Brazil, Germany,
Italy and Canada.
•Our gross margin of $466.4 million increased versus the prior year quarter by
$34.0 million driven by volume growth. Gross margin percent of approximately 43
percent remained flat compared to approximately 43 percent in the prior year
period.
•We previously implemented temporary cost-saving measures and are continuing to
eliminate or delay all non-essential expenditures to offset projected headwinds
from the effects of the COVID-19 pandemic. These efforts are primarily focused
on selling, general and administrative expenses and research and development
expenses. We are not cancelling any research and development projects, but we
are phasing some differently to allow for lower costs in the current year
without fundamentally impacting long-term timelines.
•Selling, general and administrative expenses decreased from $188.3 million to
$187.7 million. Selling, general and administrative expenses, excluding
transaction-related charges, of $173.3 million increased approximately 1 percent
compared to the prior year.
•Research and development expenses of $71.7 million decreased $5.7 million or
approximately 7 percent. As mentioned above, we did not cancel any research and
development projects, but we phased some differently to allow lower costs this
year in response to the pandemic without fundamentally impacting long-term
timelines. We maintain our commitment to invest resources to discover new active
ingredients and formulations that support resistance management and sustainable
agriculture.
•Net income (loss) attributable to FMC stockholders increased from $90.4 million
to $111.4 million which represents an increase of $21 million, or approximately
23 percent. Adjusted after-tax earnings from continuing operations attributable
to FMC stockholders of $160.1 million increased compared to the prior year
amount of $124.2 million. See the disclosure of our Adjusted Earnings Non-GAAP
financial measurement below, under the section titled "Results of
Operations" .


Other Highlights




On October 2, 2020, we closed on the previously disclosed transaction with
Isagro S.p.A ("Isagro") for a purchase price of approximately $65 million, which
will result in a charge in the fourth quarter of 2020. The Fluindapyr
acquisition will be treated as an asset acquisition for accounting purposes as
it does not meet the definition of a business. Therefore, any acquired
in-process research and development will be immediately expensed. See Note 20 in
the condensed consolidated financial statements included in this Form 10-Q for
further details.
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2020 Outlook Update




With a few months remaining in 2020, we continue to expect the overall global
crop protection market to be flat to down slightly, on a U.S. dollar basis,
although our view on the regions has slightly changed. The outlook for Europe
continues to worsen, following a hot and dry summer, and now we believe that
market will be down low-single digits year over year, versus flat in our prior
forecast. Offsetting this, we expect the Asian market to be up low-single
digits, versus our prior forecast of it being down slightly. Our forecasts for
the Latin American and North American markets are unchanged at down low- to
mid-single digits and up low- single digits, respectively.

We expect continued headwinds from foreign currency, and to a lesser extent,
from impacts related to the pandemic. At the onset of the pandemic, there were
numerous contingencies to consider, but after several months of navigating in
this environment, we have better insight. We are raising the midpoints of our
adjusted EBITDA and adjusted EPS guidance and tightening those ranges. We now
expect 2020 revenue will be in the range of approximately $4.72 billion to $4.78
billion
, up approximately 3 percent at the midpoint versus 2019 or approximately
9 percent excluding the impacts of foreign currency. Full year adjusted
EBITDA(1) is now expected to be $1.295 billion to $1.315 billion, representing 7
percent growth at the midpoint versus 2019 results and an increase of 1 percent
versus prior guidance. 2020 adjusted earnings are expected to be in the range of
$6.45 to $6.57 per diluted share(1), representing a year over year increase of 7
percent at the midpoint and 6 cents higher than prior forecast. Full-year
earnings growth drivers include significant volume gains in Latin America and
Asia, global pricing improvement and continued cost discipline. Planned fourth
quarter share repurchases of $50 million are not expected to have any material
impact on FMC diluted shares outstanding in the current year. For cash flow
outlook, refer to the liquidity and capital resources section below.

(1)Although we provide forecasts for adjusted earnings per share and adjusted
EBITDA (Non-GAAP financial measures), we are not able to forecast the most
directly comparable measures calculated and presented in accordance with U.S.
GAAP. Certain elements of the composition of the U.S. GAAP amounts are not
predictable, making it impractical for us to forecast. Such elements include,
but are not limited to, restructuring, acquisition charges, and discontinued
operations. As a result, no U.S. GAAP outlook is provided.
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RESULTS OF OPERATIONS
Overview
The following charts provide a reconciliation of Adjusted EBITDA and Adjusted
Earnings, both of which are Non-GAAP financial measures, from the most directly
comparable GAAP measure. Adjusted EBITDA is 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. 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,



2020 2019 2020 2019
(in Millions) (unaudited) (unaudited)
Revenue $ 1,084.6 $ 1,014.3 $ 3,489.9 $ 3,412.5

Costs of sales and services 618.2 581.9 1,939.3 1,884.9
Gross margin $ 466.4 $ 432.4 $ 1,550.6 $ 1,527.6
Selling, general and administrative expenses 187.7 188.3 548.1 569.1
Research and development expenses 71.7 77.4 203.3 221.7
Restructuring and other charges (income) 11.0 6.8 43.9 27.3

Total costs and expenses $ 888.6 $ 854.4 $ 2,734.6 $ 2,703.0
Income from continuing operations before
non-operating pension and postretirement charges
(income), interest expense, net and income taxes (1) $ 196.0 $


159.9 $ 755.3 $ 709.5




Non-operating pension and postretirement charges
(income) 11.6 (1.2) 16.0 5.5

Interest expense, net 35.5 41.6 117.0 115.6
Income (loss) from continuing operations before
income taxes $ 148.9 $ 119.5 $ 622.3 $ 588.4
Provision (benefit) for income taxes 18.4 8.7 82.3 75.6
Income (loss) from continuing operations $ 130.5 $ 110.8 $ 540.0 $ 512.8
Discontinued operations, net of income taxes (18.4) (21.3) (36.7) (29.8)
Net income (loss) (GAAP) $ 112.1 $ 89.5 $ 503.3 $ 483.0
Adjustments to arrive at Adjusted EBITDA:
Corporate special charges (income):
Restructuring and other charges (income) (3) $ 11.0 $ 6.8 $ 43.9 $ 27.3
Non-operating pension and postretirement charges
(income) (4) 11.6 (1.2) 16.0 5.5
Total transaction-related charges (5) 14.4 16.0 40.4 52.6
Discontinued operations, net of income taxes 18.4 21.3 36.7 29.8
Interest expense, net 35.5 41.6 117.0 115.6
Depreciation and amortization 41.5 36.6 120.7 111.1
Provision (benefit) for income taxes 18.4 8.7 82.3 75.6
Adjusted EBITDA (Non-GAAP) (2) $ 262.9 $


219.3 $ 960.3 $ 900.5



____________________



(1) Referred to as operating profit.
(2) Adjusted EBITDA is defined as operating profit excluding corporate special
charges (income) and depreciation and amortization expense.
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(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. Except for the completion of certain
in-flight initiatives, primarily associated with the finalization of our
worldwide ERP system, we completed the integration of the DuPont Crop Protection
Business as of June 30, 2020. The TSA is now terminated and the last phase of
the ERP system transition went live in November 2020 with a stabilization period
that will go into the first quarter of 2021. We anticipate remaining expense of
approximately $15 million to $20 million for the completion of these defined
in-flight initiatives during the remaining time period.

Three Months Ended September 30, Nine Months Ended September 30,
(in Millions) 2020 2019 2020 2019

DuPont Crop Protection Business Acquisition
Legal and professional fees (1) $ 14.4 $ 16.0 $ 40.4 $ 52.6

Total Transaction-related charges $ 14.4 $ 16.0 $ 40.4 $ 52.6



____________________



(1) 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
30, Nine Months Ended September 30,
2020 2019 2020 2019
(in Millions) (unaudited) (unaudited)
Net income (loss) attributable to FMC
stockholders (GAAP) $ 111.4 $ 90.4


$ 502.0 $ 480.6




Corporate special charges (income), pre-tax
(1) 37.0 21.6 100.3 85.4
Income tax (expense) benefit on Corporate
special charges (income) (2) (6.1) 0.8 (16.9) (12.0)
Corporate special charges (income), net of
income taxes $ 30.9 $ 22.4 $ 83.4 $ 73.4
Discontinued operations attributable to FMC
Stockholders, net of income taxes 18.4 21.3 36.7 29.8
Non-GAAP tax adjustments (3) (0.6) (9.9) 1.6 (10.1)
Adjusted after-tax earnings from continuing
operations attributable to FMC stockholders
(Non-GAAP) $ 160.1 $ 124.2 $ 623.7 $ 573.7


____________________
(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; and certain changes in the realizability of deferred tax
assets. 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.
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Results of Operations
In the discussion below, all comparisons are between the periods unless
otherwise noted.
Revenue
Three Months Ended September 30, 2020 vs. 2019
Revenue of $1,084.6 million increased $70.3 million, or approximately 7 percent,
versus the prior year period. The increase was driven by higher volumes, which
accounted for an approximate 12 percent increase, as well as favorable pricing
which accounted for an approximate 3 percent increase. Foreign currency
headwinds had an unfavorable impact of approximately 8 percent on revenue.
Excluding foreign currency impacts, revenue increased approximately 15 percent
during the quarter.
Nine Months Ended September 30, 2020 vs. 2019
Revenue of $3,489.9 million increased $77.4 million, or approximately 2 percent,
versus the prior year period. The increase was driven by higher volumes, which
accounted for an approximate 7 percent increase, as well as favorable pricing
which accounted for an approximate 2 percent increase. Foreign currency
fluctuations had an unfavorable impact of approximately 7 percent on revenue.
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) 2020 2019 2020 2019
North America $ 212.3 $ 196.3 $ 851.8 $ 848.1
Latin America 464.9 460.2 985.3 923.4
Europe, Middle East & Africa (EMEA) 152.8 138.4 833.5 854.7
Asia 254.6 219.4 819.3 786.3
Total Revenue $ 1,084.6 $ 1,014.3 $ 3,489.9 $ 3,412.5



Three Months Ended September 30, 2020 vs. 2019
North America: Revenue increased approximately 8 percent versus the prior year
period driven by increased planted acres in soybean, corn and rice, as well as
continued market expansions of our fungicides Lucento® and Rhyme®. Sales in
Canada were robust, driven by cereal herbicide blends from our patented
PrecisionPac® technology and insecticides.
Latin America: Revenue increased approximately 1 percent versus the prior year
period, or approximately 18 percent excluding foreign currency headwinds. The
beginning of the season was slow due to hot and dry weather in Brazil, Argentina
and Paraguay. Pricing actions across the region offset some of the currency
headwind. In Brazil, sales grew double digits organically, led by our growth in
the soybean market. Mexico sales grew organically but were still impacted
somewhat by COVID-19 related pressures on the growers that export fruits and
vegetables. Sales in the Andean zone grew significantly as conditions in that
sub-market improved.
EMEA: Revenue increased approximately 10 percent versus the prior year period,
with no foreign currency impact. We saw strong demand for Rynaxypyr® insect
control applications for specialty crops as well as Battle® Delta herbicides for
cereals, particularly in France and Germany.
Asia: Revenue increased approximately 16 percent versus the prior year period,
or approximately 19 percent excluding foreign currency headwinds, partially due
to favorable weather in both India and Australia. Sales in India grew over 20
percent organically, as the favorable monsoon drove demand from growers of rice,
soybeans, pulses, sugarcane and fruit and vegetables in the south and central
markets. Herbicide sales in Australia were up over 50 percent, led by cereals
and canola. Pakistan also grew in double-digits, driven primarily by
insecticides in rice and cotton.
Nine Months Ended September 30, 2020 vs. 2019
North America: Revenue increased slightly versus the prior year period due to
strong demand for our new pre-emergent herbicide Authority® Edge and fungicides.
Double digit growth in Canada was driven by cereal herbicide blends from our
PrecisionPac® technology and insecticides and continued adoption of our
Authority® herbicides due to resistance concerns. This was partially offset by
continued focus on drawing down inventories of our pre-emergent herbicides at
our distributors.
Latin America: Revenue increased approximately 7 percent versus the prior year
period, or approximately 24 percent excluding foreign currency headwinds, driven
by strong growth in Argentina and double-digit growth in Brazil. Insecticide
growth in Brazil was driven by sugarcane and soybeans, and herbicide growth was
driven by sugarcane replanting. In Argentina, insecticide and herbicide demand
drove sales for soybeans and wheat.
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EMEA: Revenue decreased approximately 2 percent versus the prior year period, or
remained flat excluding foreign currency headwinds, primarily due to hot, dry
conditions across Northern and Eastern Europe and Ukraine, as well as expected
registration cancellations and product rationalizations. This was partially
offset by strong demand for Rynaxypyr® insect control applications for specialty
crops as well as Battle® Delta herbicides for cereals.
Asia: Revenue increased approximately 4 percent versus the prior year period, or
approximately 9 percent excluding foreign currency headwinds, primarily driven
by volume growth in India, Australia and Pakistan, as well as modest pricing
increases across the region. Herbicide sales, including for the newly launched
Authority® NXT, were robust for soybeans in India.
For 2020, full-year revenue is expected to be in the range of approximately
$4.72 billion to $4.78 billion, which represents approximately 3 percent growth
at the midpoint versus 2019 or approximately 9 percent excluding the impacts of
foreign currency.
Gross margin
Three Months Ended September 30, 2020 vs. 2019
Gross margin of $466.4 million increased $34.0 million, or approximately 8
percent versus the prior year period. The increase was primarily due to higher
revenues which were driven by volume growth.
Gross margin percent of approximately 43 percent remained flat compared to
approximately 43 percent in the prior year period.
Nine Months Ended September 30, 2020 vs. 2019
Gross margin of $1,550.6 million increased $23 million, or approximately 2
percent versus the prior year period.
Gross margin percent of approximately 44 percent decreased slightly from
approximately 45 percent in the prior year period.
Selling, general and administrative expenses
Three Months Ended September 30, 2020 vs. 2019
Selling, general and administrative expenses of $187.7 million decreased $0.6
million
, or remained relatively flat, versus the prior year period. Selling,
general and administrative expenses, excluding transaction-related charges,
increased $1.0 million, or approximately 1 percent, versus the prior year
period.
Nine Months Ended September 30, 2020 vs. 2019
Selling, general and administrative expenses of $548.1 million decreased $21.0
million
, or approximately 4 percent versus the prior year period. Selling,
general and administrative expenses, excluding transaction-related charges,
decreased $8.8 million, or approximately 2 percent, versus the prior year period
due to cost-saving measures implemented in response to the pandemic.
Research and development expenses
Three Months Ended September 30, 2020 vs. 2019
Research and development expenses of $71.7 million decreased $5.7 million, or
approximately 7 percent versus the prior year period. As noted above, we
eliminated or delayed certain non-essential expenditures to offset effects of
the COVID-19 pandemic, but we did not cancel any research and development
projects. We phased some projects differently to allow lower costs this year in
response to the pandemic without fundamentally impacting long-term timelines.
Nine Months Ended September 30, 2020 vs. 2019
Research and development expenses of $203.3 million decreased $18.4 million, or
approximately 8 percent versus the prior year period. As noted above, the
decrease in research and development expenditures is related to cost-saving
measures taken in response to the COVID-19 pandemic.
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Adjusted EBITDA (Non-GAAP)
Three Months Ended September 30, 2020 vs. 2019
Adjusted EBITDA of $262.9 million increased $43.6 million, or approximately 20
percent versus the prior year period. The increase was mainly driven by volume
increases, primarily in Latin America and Asia, which accounted for an
approximate 32 percent increase. Cost control actions and price increases
accounted for approximately 15 percent and 12 percent increases, respectively.
These more than offset foreign currency fluctuations which had an unfavorable
impact of approximately 39 percent on Adjusted EBITDA.
Nine Months Ended September 30, 2020 vs. 2019
Adjusted EBITDA of $960.3 million increased $59.8 million, or approximately 7
percent versus the prior year period. The increase was due to higher pricing and
higher volumes which accounted for approximately 7 percent and 13 percent
increases, respectively. Cost control actions accounted for an approximate 8
percent increases. These factors more than offset the foreign currency
fluctuations which had an unfavorable impact of approximately 21 percent on
Adjusted EBITDA.
For 2020, full-year Adjusted EBITDA is expected to be in the range of $1.295
billion
to $1.315 billion, which represents approximately 7 percent growth at
the midpoint versus 2019. We expect strong pricing and higher volumes to cover
the full impact of the negative foreign currency impacts. Although we provide a
forecast for Adjusted EBITDA, a Non-GAAP financial measure, we are not able to
forecast the most directly comparable measure calculated and presented in
accordance with U.S. GAAP. See Note 1 to our 2020 Outlook Update within this
section of the Form 10-Q.
Other Results of Operations

Depreciation and amortization
Three Months Ended September 30, 2020 vs. 2019
Depreciation and amortization of $41.5 million increased $4.9 million, or
approximately 13 percent, as compared to the prior year period of $36.6 million.
The increase was mostly driven by the impacts of the amortization effects of the
completion of various phases of our ERP implementation.
Nine Months Ended September 30, 2020 vs. 2019
Depreciation and amortization of $120.7 million increased $9.6 million, or
approximately 9 percent, as compared to the prior year period of $111.1 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, 2020 vs. 2019
Interest expense, net of $35.5 million decreased compared to the prior year
period of $41.6 million. The decrease was driven by lower term loan and foreign
debt balances, lower LIBOR rates and partially offset by the impacts of our
third quarter 2019 debt offering which was settled at the end of third quarter
2019.
Nine Months Ended September 30, 2020 vs. 2019
Interest expense, net of $117.0 million increased compared to the prior year
period of $115.6 million. The increase was driven by impacts of our third
quarter 2019 debt offering partially offset by lower term loan, commercial paper
and foreign debt balances and lower LIBOR rates.

Corporate special charges (income)
Restructuring and other charges (income)
Three Months Ended September 30, Nine Months Ended September 30,
(in Millions) 2020 2019 2020 2019
Restructuring charges $ 6.9 $ 2.6 $ 29.7 $ 14.9
Other charges (income), net 4.1 4.2 14.2 12.4


Total restructuring and other charges (income) $ 11.0 $ 6.8 $


43.9 $ 27.3




Three Months Ended September 30, 2020 vs. 2019



45
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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).
Restructuring charges in 2019 of $2.6 million comprised of charges associated
with the integration of the DuPont Crop Protection Business. These charges
include severance, accelerated depreciation on certain fixed assets, and other
costs (benefits).
Other charges, net in 2020 of $4.1 million consists of charges related to
environmental sites.
Other charges, net in 2019 of $4.2 million consists of charges related to
environmental sites
Nine Months Ended September 30, 2020 vs. 2019
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).
Restructuring charges in 2019 of $14.9 million primarily comprised of charges
associated with the integration of the DuPont Crop Protection Business. These
charges include severance, accelerated depreciation on certain fixed assets, and
other costs (benefits) of $13.2 million. There were other miscellaneous
restructuring charges of $1.7 million.
Other charges, net in 2020 of $14.2 million primarily consists of charges
related to environmental sites of $13.7 million.
Other charges, net in 2019 of $12.4 million primarily consists of charges
related to environmental sites.
Non-operating pension and postretirement charges (income)
Charges for the three months ended September 30, 2020 were $11.6 million
compared to income of $1.2 million for the three months ended September 30,
2019
. The increase in non-operating pension and post retirement charges (income)
is attributable to the continued approach of using the smoothed market related
value of assets (MRVA) as opposed to the actual fair value of plan assets in the
determination of 2020 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, 2020 were $16.0 million compared
to $5.5 million for the nine months ended September 30, 2019. As mentioned
above, the increase in non-operating pension and post retirement charges
(income) is attributable to the continued approach of using the MRVA as opposed
to the actual fair value of plan assets in determining the 2020 expense.

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.

Provision for income taxes
Given the geographic footprint of our operations globally, a significant amount
of our earnings are generated by foreign subsidiaries and taxed at lower
statutory rates than the United States federal statutory rate (e.g., Singapore,
Hong Kong, and Switzerland). Our future effective tax rates may be materially
impacted by numerous items including: a future change in the composition of
earnings from foreign and domestic tax jurisdictions, as earnings in foreign
jurisdictions are typically taxed at more favorable rates than the United States
federal statutory rate; accounting for uncertain tax positions; business
combinations; expiration of statute of limitations or settlement of tax audits;
changes in valuation allowance; changes in tax rates or laws; and the potential
decision to repatriate certain future foreign earnings on which United States or
foreign withholding taxes have not been previously accrued.
Three Months Ended September 30, 2020 vs. 2019
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. Provision for
income taxes for the three months ended September 30, 2019 was $8.7 million
resulting in an effective tax rate of 7.3 percent.

46
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Three Months Ended September 30,



2020 2019
Tax Provision Effective Tax Income Tax Provision
(in Millions) Income (Expense) (Benefit) Rate (Expense) (Benefit) Effective Tax Rate
GAAP - Continuing operations $ 148.9 $ 18.4 12.4 % $ 119.5 $ 8.7 7.3 %
Corporate special charges
(income) 37.0 6.1 21.6 (0.8)
Tax adjustments (1) 0.6 9.9



Non-GAAP - Continuing operations $ 185.9 $ 25.1


13.5 % $ 141.1 $ 17.8 12.6 %



_______________



(1) Refer to Note 3 of the Adjusted Earnings Reconciliation table within this
section of this Form 10-Q for an explanation of tax adjustments.




The primary drivers for the increase in the effective tax rate for the three
months ended September 30, 2020 compared to three months ended September 30,
2019
are shown in the table above. The remaining changes were primarily due to
the impact of geographic mix of earnings among our global subsidiaries.

Nine Months Ended September 30, 2020 vs. 2019
Provision for income taxes for the nine months ended September 30, 2020 was
$82.3 million resulting in an effective tax rate of 13.2 percent. Provision for
income taxes for the nine months ended September 30, 2019 was $75.6 million
resulting in an effective tax rate of 12.8 percent.
Nine Months Ended September 30,
2020 2019
Tax Provision Income Tax Provision
(in Millions) Income (Expense) (Benefit)


Effective Tax Rate (Expense) (Benefit) Effective Tax Rate
GAAP - Continuing operations


$ 622.3 $ 82.3 13.2 % $ 588.4 $ 75.6 12.8 %
Corporate special charges (income) 100.3 16.9 85.4 12.0
Tax adjustments (1) (1.6) 10.1


Non-GAAP - Continuing operations $ 722.6 $ 97.6



13.5 % $ 673.8 $ 97.7 14.5 %



_______________



(1) Refer to Note 3 of the Adjusted Earnings Reconciliation table within this
section of this Form 10-Q for an explanation of tax adjustments.




The primary drivers for the decrease in the year-to-date effective tax rate for
2020 compared to 2019 are shown in the table above. The remaining changes were
primarily due to the impact of geographic mix of earnings among our global
subsidiaries.

Discontinued operations, net of income taxes
Our discontinued operations include results of our discontinued FMC Lithium
segment, in periods up to its separation on March 1, 2019, as well as
adjustments to retained liabilities from other previously discontinued
operations. The primary liabilities retained include environmental liabilities,
other post-retirement benefit liabilities, stock compensation, self-insurance,
long-term obligations related to legal proceedings and historical restructuring
activities.
Three Months Ended September 30, 2020 vs. 2019
Discontinued operations, net of income taxes represented a loss of $18.4 million
for the three months ended September 30, 2020 compared to a loss of $21.3
million
for the three months ended September 30, 2019. The loss during both the
third quarter of 2020 and 2019 was primarily related to adjustments related to
the retained liabilities from our previously discontinued operations.
Nine Months Ended September 30, 2020 vs. 2019
Discontinued operations, net of income taxes represented a loss of $36.7 million
for the nine months ended September 30, 2020 compared to loss of $29.8 million
for the nine months ended September 30, 2019. The loss during both the nine
months ended September 30, 2020 and September 30, 2019 was primarily due to
adjustments related to the retained liabilities from our previously discontinued
operations. Additionally, during the nine months ended September 30, 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. The gain on sale was fully offset by results of our discontinued FMC
Lithium segment, which was a net loss due to separation-related costs, as well
as charges from other previously discontinued operations. These events did not
47
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recur in the current period. Refer to Note 12 to the condensed consolidated
financial statements included within this Form 10-Q for further information.




Net income (loss)
Three Months Ended September 30, 2020 vs. 2019
Net income (loss) increased to $112.1 million from income of $89.5 million in
the prior year period. The higher results were driven by higher revenues and
cost-saving measures in selling, general, and administrative and research and
development expenses due to the pandemic. This was partially offset by higher
non-operating pension charges as discussed above.
Nine Months Ended September 30, 2020 vs. 2019
Net income (loss) increased to $503.3 million from income of $483.0 million in
the prior year period. The higher results were driven by higher revenues and
reduced selling, general, and administrative and research and development
expenses due to the pandemic. This was partially offset by higher non-operating
pension charges as discussed above.
48
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LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at September 30, 2020 and December 31, 2019, were
$297.1 million and $339.1 million, respectively. Of the cash and cash
equivalents balance at September 30, 2020, $257.0 million were held by our
foreign subsidiaries. The cash held by foreign subsidiaries for permanent
reinvestment is generally used to finance the subsidiaries' operating activities
and future foreign investments. We have not provided income taxes for other
additional outside basis differences inherent in our investments in subsidiaries
because the investments are essentially permanent in duration or we have
concluded that no additional tax liability will arise upon disposal or
remittance. Determining the amount of unrecognized deferred tax liability
related to permanent undistributed foreign earnings is not practicable due to
the complexity of the hypothetical calculation.
At September 30, 2020, we had total debt of $3,222.4 million as compared to
$3,258.8 million at December 31, 2019. Total debt included $3,028.3 million and
$3,031.1 million of long-term debt (excluding current portions of $77.9 million
and $82.8 million) at September 30, 2020 and December 31, 2019, respectively.
Early in the second quarter of 2020 we amended the Revolving Credit Facility and
2017 Term Loan Agreements to increase the maximum leverage ratio, in order to
address potential liquidity constraints that might arise due to the COVID-19
pandemic. Although we had not then, and have not since, experienced any
liquidity issues as a result of the economic impacts of the pandemic, we
determined that it would be prudent to take this step, as the higher leverage
ratio provides significant headroom above any of the COVID-19 related scenarios
assessed by the company. Additionally, during the second quarter we fully repaid
the $500 million revolver draw made late in the first quarter at the height of
the pandemic's impact on short-term financing markets. At September 30, 2020,
our remaining borrowing capacity under our credit facility was $1,284.8 million.
As of September 30, 2020, we were in compliance with all of our debt covenants.
See Note 11 in the condensed consolidated financial statements included in this
Form 10-Q for further details. We remain committed to solid investment grade
credit metrics, and expect full-year average leverage to be in line with this
commitment in 2020.
Short-term debt, which consists of short-term foreign borrowings and commercial
paper borrowings, decreased from $227.7 million at December 31, 2019 to $194.1
million
at September 30, 2020. We provide parent-company guarantees to lending
institutions providing credit to our foreign subsidiaries.
Our commercial paper program allows us to borrow at rates generally more
favorable than those available under our credit facility. At September 30, 2020,
we had no borrowings under the commercial paper program.

Revolving Credit Facility and 2017 Term Loan Agreement Amendments
On April 22, 2020, we amended both our Revolving Credit Agreement and 2017 Term
Loan Agreement which, among other things, increased the maximum leverage ratio
financial covenant and added 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. See Note 11 for further details.
49



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