XNYS:FMC FMC Corporation Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

XNYS:FMC (FMC Corporation): Fair Value Estimate
Premium
XNYS:FMC (FMC Corporation): Consider Buying
Premium
XNYS:FMC (FMC Corporation): Consider Selling
Premium
XNYS:FMC (FMC Corporation): Fair Value Uncertainty
Premium
XNYS:FMC (FMC Corporation): Economic Moat
Premium
XNYS:FMC (FMC Corporation): Stewardship
Premium
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________
 FORM 10-Q
_______________________________________________________________________
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2012
or
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number 1-2376
__________________________________________________________________________
FMC CORPORATION
(Exact name of registrant as specified in its charter)
__________________________________________________________________________ 
Delaware
 
94-0479804
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
1735 Market Street
Philadelphia, Pennsylvania
 
19103
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: 215-299-6000
__________________________________________________________________________
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS    YES  x    NO  o
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS SUBMITTED ELECTRONICALLY AND POSTED ON ITS CORPORATE WEBSITE, IF ANY, EVERY INTERACTIVE DATA FILE REQUIRED TO BE SUBMITTED AND POSTED PURSUANT TO RULE 405 OF REGULATION S-T DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO SUBMIT AND POST SUCH FILES)    YES  x    NO  o
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN ACCELERATED FILER, A NON-ACCELERATED FILER OR A SMALLER REPORTING COMPANY. SEE THE DEFINITIONS OF “LARGE ACCELERATED FILER,” “ACCELERATED FILER,” AND “SMALLER REPORTING COMPANY” IN RULE 12B-2 OF THE EXCHANGE ACT. (CHECK ONE):
LARGE ACCELERATED FILER
 
x
  
ACCELERATED FILER
 
o
 
 
 
 
 
 
 
NON-ACCELERATED FILER
 
o
  
SMALLER REPORTING COMPANY
 
o
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT)    YES  o    NO  x
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE
Class
 
Outstanding at March 31, 2012
Common Stock, par value $0.10 per share
 
68,567,005



FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
 
 
Page
No.


2


PART I - FINANCIAL INFORMATION
 
ITEM 1.    FINANCIAL STATEMENTS

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
(in Millions, Except Per Share Data)
Three Months Ended March 31,
2012
 
2011
 
(unaudited)
Revenue
$
940.7

 
$
795.0

Costs and Expenses
 
 
 
Costs of sales and services
593.4

 
506.9

 
 
 
 
Gross Margin
347.3

 
288.1

 
 
 
 
Selling, general and administrative expenses
129.1

 
105.9

Research and development expenses
28.5

 
22.7

Restructuring and other charges (income)
1.7

 
4.5

Total costs and expenses
752.7

 
640.0

Income from continuing operations before equity in (earnings) loss of affiliates, interest expense, net and income taxes
188.0

 
155.0

Equity in (earnings) loss of affiliates
(0.1
)
 
(0.9
)
Interest expense, net
11.3

 
9.9

Income from continuing operations before income taxes
176.8

 
146.0

Provision for income taxes
44.8

 
40.6

Income from continuing operations
132.0

 
105.4

Discontinued operations, net of income taxes
(7.4
)
 
(8.0
)
Net income
124.6

 
97.4

Less: Net income attributable to noncontrolling interests
5.5

 
3.4

Net income attributable to FMC stockholders
$
119.1

 
$
94.0

Amounts attributable to FMC stockholders:
 
 
 
Continuing operations, net of income taxes
$
126.5

 
$
102.0

Discontinued operations, net of income taxes
(7.4
)
 
(8.0
)
Net income
$
119.1

 
$
94.0

Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
Continuing operations
$
1.82

 
$
1.42

Discontinued operations
(0.11
)
 
(0.11
)
Net income
$
1.71

 
$
1.31

Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
Continuing operations
$
1.82

 
$
1.41

Discontinued operations
(0.11
)
 
(0.11
)
Net income
$
1.71

 
$
1.30

The accompanying notes are an integral part of these condensed consolidated financial statements.


3


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
(in Millions)
Three Months Ended March 31,
2012
 
2011
 
(unaudited)
Net Income
$
124.6

 
$
97.4

Other comprehensive income, net of tax:
 
 
 
Foreign currency translation adjustments (1)
11.2

 
21.7

 
 
 
 
Derivative instruments:
 
 
 
Unrealized hedging gains (losses) and other
0.8

 
6.7

Reclassification of deferred hedging (gains) losses and other, included in net income
0.4

 
1.2

Total derivative instruments
1.2

 
7.9

 
 
 
 
Pension and other postretirement benefits:
 
 
 
Unrealized actuarial gains (losses) and prior service (costs) credits (2)
(0.9
)
 
(0.8
)
Reclassification of net actuarial and other (gain) loss and amortization of prior service costs, included in net income
7.9

 
5.6

Total pension and other postretirement benefits
7.0

 
4.8

 
 
 
 
Other comprehensive income, net of tax
19.4

 
34.4

Comprehensive income
$
144.0

 
$
131.8

Less: Comprehensive income attributable to the noncontrolling interest
5.6

 
3.8

Comprehensive income attributable to FMC stockholders
$
138.4

 
$
128.0

____________________ 
(1)
Income taxes are not provided on the equity in undistributed earnings of our foreign subsidiaries or affiliates since it is our intention that such earnings will remain invested in those affiliates permanently.
(2)
At December 31st of each year, we remeasure our pension and postretirement plan obligations at which time we record any actuarial gains (losses) and prior service (costs) credits to other comprehensive income. The interim adjustments noted above reflect the foreign currency translation impacts from the unrealized actuarial gains (losses) and prior service (costs) credits related to our foreign pension and postretirement plans.


4


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(in Millions, Except Share and Par Value Data)
March 31, 2012
 
December 31, 2011
 
(unaudited)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
70.8

 
$
158.9

Trade receivables, net of allowance of $25.0 at March 31, 2012 and $21.5 at December 31, 2011
1,051.1

 
931.3

Inventories
509.9

 
470.3

Prepaid and other current assets
168.3

 
173.4

Deferred income taxes
143.2

 
135.5

Total current assets
1,943.3

 
1,869.4

Investments
31.0

 
28.3

Property, plant and equipment, net
1,011.8

 
986.8

Goodwill
230.8

 
225.9

Other intangibles, net
185.2

 
187.3

Other assets
215.6

 
198.9

Deferred income taxes
233.9

 
246.9

Total assets
$
3,851.6

 
$
3,743.5

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Short-term debt
$
22.8

 
$
27.0

Current portion of long-term debt
13.3

 
19.5

Accounts payable, trade and other
376.1

 
458.3

Accrued and other liabilities
193.4

 
186.2

Accrued payroll
41.1

 
70.6

Accrued customer rebates
193.2

 
115.1

Guarantees of vendor financing
26.8

 
18.5

Accrued pension and other postretirement benefits, current
9.2

 
9.2

Income taxes
41.3

 
15.5

Total current liabilities
917.2

 
919.9

Long-term debt, less current portion
910.4

 
779.1

Accrued pension and other postretirement benefits, long-term
349.7

 
368.7

Environmental liabilities, continuing and discontinued
208.5

 
213.3

Reserve for discontinued operations
41.5

 
41.6

Other long-term liabilities
124.7

 
116.8

Commitments and contingent liabilities (Note 17)

 

Equity
 
 
 
Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 2012 or 2011

 

Common stock, $0.10 par value, authorized 130,000,000 shares in 2012 and 2011; 92,991,896 issued shares at March 31, 2012 and December 31, 2011, respectively
9.3

 
9.3

Capital in excess of par value of common stock
473.1

 
463.8

Retained earnings
2,282.9

 
2,176.2

Accumulated other comprehensive income (loss)
(370.7
)
 
(390.0
)
Treasury stock, common, at cost: 24,424,891 shares at March 31, 2012 and 23,154,738 shares at December 31, 2011
(1,157.1
)
 
(1,018.7
)
Total FMC stockholders’ equity
1,237.5

 
1,240.6

Noncontrolling interests
62.1

 
63.5

Total equity
1,299.6

 
1,304.1

Total liabilities and equity
$
3,851.6

 
$
3,743.5

The accompanying notes are an integral part of these condensed consolidated financial statements.


5


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(in Millions)
Three Months Ended March 31,
2012
 
2011
 
(unaudited)
Cash provided (required) by operating activities of continuing operations:
 
 
 
Net income
$
124.6

 
$
97.4

Discontinued operations
7.4

 
8.0

Income from continuing operations
$
132.0

 
$
105.4

Adjustments from income from continuing operations to cash provided (required) by operating activities of continuing operations:
 
 
 
Depreciation and amortization
32.2

 
30.4

Equity in (earnings) loss of affiliates
(0.1
)
 
(0.9
)
Restructuring and other charges (income)
1.7

 
4.5

Deferred income taxes
13.0

 
35.6

Pension and other postretirement benefits
14.7

 
9.7

Share-based compensation
5.8

 
5.3

Excess tax benefits from share-based compensation
(4.7
)
 
(4.8
)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
 
 
 
Trade receivables, net
(117.3
)
 
(113.9
)
Guarantees of vendor financing
8.3

 
(3.3
)
Inventories
(36.3
)
 
(25.0
)
Other current assets and other assets
(0.3
)
 
(3.4
)
Accounts payable
(80.8
)
 
(44.4
)
Accrued and other current liabilities and other liabilities
12.3

 
(11.8
)
Accrued payroll
(29.4
)
 
(29.1
)
Accrued customer rebates
77.9

 
45.8

Income taxes
20.2

 
(2.8
)
Accrued pension and other postretirement benefits, net
(20.5
)
 
(20.5
)
Environmental spending, continuing, net of recoveries
0.1

 
(2.1
)
Restructuring and other spending
(4.4
)
 
(25.4
)
Cash provided (required) by operating activities
24.4

 
(50.7
)
Cash provided (required) by operating activities of discontinued operations:
 
 
 
Environmental spending, discontinued, net of recoveries
(3.7
)
 
(5.2
)
Payments of other discontinued reserves
(8.3
)
 
(3.7
)
Cash provided (required) by operating activities of discontinued operations
(12.0
)
 
(8.9
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

6


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 
(in Millions)
Three Months Ended March 31,
2012
 
2011
 
(unaudited)
Cash provided (required) by investing activities:
 
 
 
Capital expenditures
$
(38.8
)
 
$
(30.4
)
Proceeds from disposal of property, plant and equipment

 
0.2

Acquisitions, net of cash acquired
(21.2
)
 

Investments in nonconsolidated affiliates
(3.0
)
 

Other investing activities
(4.9
)
 
(2.3
)
Cash provided (required) by investing activities
(67.9
)
 
(32.5
)
Cash provided (required) by financing activities:
 
 
 
Net borrowings (repayments) under committed credit facilities
131.0

 
40.0

Increase (decrease) in short-term debt
(4.2
)
 
(9.5
)
Repayments of long-term debt
(7.0
)
 
(7.6
)
Proceeds from borrowings of long-term debt
0.1

 

Distributions to noncontrolling interests
(7.0
)
 
(5.8
)
Issuances of common stock, net
7.8

 
6.7

Excess tax benefits from share-based compensation
4.7

 
4.8

Dividends paid
(10.5
)
 
(9.0
)
Repurchases of common stock under publicly announced program
(144.9
)
 

Other repurchases of common stock
(3.0
)
 
(3.6
)
Cash provided (required) by financing activities
(33.0
)
 
16.0

Effect of exchange rate changes on cash and cash equivalents
0.4

 
0.6

Increase (decrease) in cash and cash equivalents
(88.1
)
 
(75.5
)
Cash and cash equivalents, beginning of period
158.9

 
161.5

Cash and cash equivalents, end of period
$
70.8

 
$
86.0

Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest was $2.6 million and $5.8 million, and income taxes paid, net of refunds were $6.9 million and $5.2 million for the three months ended March 31, 2012 and 2011, respectively.
See Note 13 regarding quarterly cash dividend.
The accompanying notes are an integral part of these condensed consolidated financial statements.

7


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1: Financial Information and Accounting Policies
In our opinion the condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applicable to interim period financial statements and reflect all adjustments necessary for a fair statement of results of operations and cash flows for the three months ended March 31, 2012 and 2011, and our financial position as of March 31, 2012. All such adjustments are of a normal recurring nature. The results of operations for the three months ended March 31, 2012 and 2011 are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheets as of March 31, 2012 and December 31, 2011, and the related condensed consolidated statements of income, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows for the three months ended March 31, 2012 and 2011, have been reviewed by our independent registered public accountants. The review is described more fully in their report included herein.
Our accounting policies are set forth in detail in Note 1 to the consolidated financial statements included with our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2011 (the “2011 10-K”).
Reclassifications. Certain prior year amounts have been reclassified to conform to the current year's presentation.

Note 2: Recently Issued and Adopted Accounting Pronouncements and Regulatory Items
New accounting guidance and regulatory items
Balance Sheet - Offsetting
In December 2011, the Financial Accounting Standards Board ("FASB") issued its updated guidance on balance sheet offsetting. This new standard provides guidance to determine when offsetting in the balance sheet is appropriate. The guidance is designed to enhance disclosures by requiring improved information about financial instruments and derivative instruments. The goal is to provide users of the financial statements the ability to evaluate the effect or potential effect of netting arrangements on an entity's statement of financial position. This guidance will only impact the disclosures within an entity's financial statements and notes to the financial statements and does not result in a change to the accounting treatment of financial instruments and derivative instruments. We are required to adopt this guidance on January 1, 2013. We are in the process of evaluating this guidance.
Accounting guidance and regulatory items adopted in 2012
Testing Goodwill for Impairment
In September 2011, the FASB issued its updated guidance for the testing of goodwill for impairment. The update allows us the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If after assessing qualitative factors it is determined that it is more likely than not the fair value of the reporting unit is less than its carrying amount, we will need to perform a more detailed goodwill impairment test which is used to identify potential goodwill impairments and to measure the amount of goodwill impairment losses to be recognized, if any. The objective of this new approach is to simplify how entities test goodwill for impairment. We adopted this new guidance on January 1, 2012.
Fair Value Measurements
In May 2011, the FASB amended its guidance about fair value measurement and disclosure. The new guidance was issued in conjunction with a new International Financial Reporting Standards ("IFRS") fair value measurement standard aimed at updating IFRS to conform with U.S. GAAP. We adopted this guidance on January 1, 2012. The adoption of this guidance did not result in significant modifications to our fair value measurements, however it resulted in some additional disclosures which are included within Note 16 to this Form 10-Q.
Presentation of Comprehensive Income
In June 2011, the FASB issued its guidance regarding the presentation of comprehensive income which was subsequently updated in December 2011. This guidance requires us to present total comprehensive income and its components and the components of net income in either a single continuous statement or two separate but consecutive statements. This guidance

8


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

only impacts the location of the disclosure of comprehensive income within our consolidated financial statements and does not result in a change to the accounting treatment of comprehensive income.
This guidance is effective in two stages: the requirement to present either a single continuous statement or two separate but consecutive statements was effective for us beginning January 1, 2012; however the requirement to present the reclassification adjustments from other comprehensive income to net income on the face of the financial statements has currently been deferred by the FASB indefinitely, pending further deliberations on this requirement.
Upon adoption of the first stage of this new guidance we have decided to present comprehensive income in a separate but consecutive statement. See the Condensed Consolidated Statements of Comprehensive Income as part of our financial statements for the new presentation.

Note 3: Acquisitions

We did not complete any acquisitions in the first quarter of 2012.

During the third and fourth quarters of 2011, we completed five acquisitions.  These acquisitions and related disclosures are described in more detail in Note 3 to the consolidated financial statements included in our 2011 Form 10-K.  During the first quarter of 2012, we made $0.3 million of adjustments to the preliminary purchase price and related allocation associated with these acquisitions. These adjustments were made primarily as a result of working capital adjustments that were finalized for some of the acquisitions. See Note 4 for a reconciliation of the carrying amount of goodwill at December 31, 2011 and March 31, 2012. 

The purchase price and related allocation associated with these five acquisitions is not considered final due to remaining working capital adjustments on certain acquisitions expected to occur in 2012.  This may result in additional adjustments to the preliminary purchase price and related allocation. We do not expect any additional adjustments that may occur to be material.  We will finalize the amounts recognized as we obtain the information necessary to complete the analysis, but no later than one year from the acquisition date. 

Additionally, during the first quarter we paid $21.2 million of additional purchase price related to these five acquisitions.  These additional amounts were accrued for as “non-contingent consideration payable” on our December 31, 2011 condensed consolidated balance sheet and included in our purchase price allocation. The amount of this outstanding payable at March 31, 2012 was $4.7 million. There were no changes to the contingent consideration payable related to these acquisitions during this quarterly period. The amount of the contingent consideration payable was $3.5 million at both March 31, 2012 and December 31, 2011. 

Note 4: Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by business segment for the three months ended March 31, 2012, are presented in the table below:
(in Millions)
Agricultural
Products
 
Specialty
Chemicals
 
Industrial
Chemicals
 
Total
Balance, December 31, 2011
$
12.4

 
$
197.0

 
$
16.5

 
$
225.9

Purchase price allocation adjustments (See Note 3)

 
0.4

 
(0.1
)
 
0.3

Foreign Currency Adjustments
(0.1
)
 
4.4

 
0.3

 
4.6

Balance, March 31, 2012
$
12.3

 
$
201.8

 
$
16.7

 
$
230.8


9


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Our intangible assets, other than goodwill, consist of the following:
 
March 31, 2012
 
December 31, 2011
(in Millions)
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Accumulated Amortization
 
Net
Intangible assets subject to amortization (finite-lived)
Customer relationships
$
102.0

 
$
(3.5
)
 
$
98.5

 
$
102.0

 
$
(2.2
)
 
$
99.8

Patents
0.6

 
(0.1
)
 
0.5

 
0.6

 
(0.1
)
 
0.5

Trademarks and trade names
0.2

 

 
0.2

 
0.2

 

 
0.2

Purchased and licensed technologies
54.6

 
(10.6
)
 
44.0

 
54.6

 
(9.9
)
 
44.7

Other intangibles
4.1

 
(1.1
)
 
3.0

 
4.1

 
(1.0
)
 
3.1

 
$
161.5

 
$
(15.3
)
 
$
146.2

 
$
161.5

 
$
(13.2
)
 
$
148.3

Intangible assets not subject to amortization (indefinite life)
Trademarks and trade names
$
36.3

 
$

 
$
36.3

 
$
36.3

 
$

 
$
36.3

In-process research & development
2.7

 

 
2.7

 
2.7

 

 
2.7

 
$
39.0

 
$

 
$
39.0

 
$
39.0

 
$

 
$
39.0

Total intangible assets
$
200.5

 
$
(15.3
)
 
$
185.2

 
$
200.5

 
$
(13.2
)
 
$
187.3

At March 31, 2012, the finite-lived and indefinite life intangibles were allocated among our business segments as follows:
(in Millions)
Finite-lived
 
Indefinite life
Agricultural Products
$
111.9

 
$
35.2

Specialty Chemicals
24.1

 
3.2

Industrial Chemicals
10.2

 
0.6

Total
$
146.2

 
$
39.0


Note 5: Inventories
Inventories consisted of the following:
 (in Millions)
March 31, 2012
 
December 31, 2011
Finished goods and work in process
$
323.2

 
$
298.6

Raw materials
186.7

 
171.7

Net inventory
$
509.9

 
$
470.3


Note 6: Property, Plant and Equipment
Property, plant and equipment consisted of the following:
(in Millions)
March 31, 2012
 
December 31, 2011
Property, plant and equipment
$
2,911.4

 
$
2,850.0

Accumulated depreciation
1,899.6

 
1,863.2

Property, plant and equipment, net
$
1,011.8

 
$
986.8


Note 7: Asset Retirement Obligations
As of March 31, 2012, the balance of our asset retirement obligations was $26.4 million compared to $27.0 million at December 31, 2011. A more complete description of our asset retirement obligations can be found in Note 8 to our 2011 consolidated financial statements in our 2011 10-K.



10


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Note 8: Restructuring and Other Charges (Income)
Our restructuring and other charges (income) are comprised of restructuring, asset disposals and other charges (income) as noted below:
 
Three Months Ended March 31,
(in Millions)
2012
 
2011
Restructuring Charges and Asset Disposals
$
1.1

 
$
2.8

Other Charges (Income), Net
0.6

 
1.7

Total Restructuring and Other Charges
$
1.7

 
$
4.5


RESTRUCTURING CHARGES AND ASSET DISPOSALS

There were no significant restructuring charges and asset disposals that commenced during 2012. For further detail on the restructuring charges and asset disposals which commenced prior to 2012 see Note 7 to our consolidated financial statements included with our 2011 Form 10-K.

 
Restructuring Charges
 
 
 
(in Millions)
Severance and Employee Benefits (1)
 
Other Charges (Income) (2)
 
Asset Disposal Charges (3)
Total
Huelva Shutdown

 
0.4

 

0.4

Other Items (4)

 
0.3

 
0.4

0.7

Three months ended March 31, 2012
$

 
$
0.7

 
$
0.4

$
1.1

Huelva Shutdown

 
0.7

 

0.7

Other Items (4)
0.4

 
0.1

 
1.6

2.1

Three months ended March 31, 2011
$
0.4

 
$
0.8

 
$
1.6

$
2.8

____________________ 
(1)
Represent severance and employee benefit charges. Income represents adjustments to previously recorded severance and employee benefits.
(2)
Other Charges primarily represent costs associated with accrued lease payments, contract terminations, and other miscellaneous exit costs. Other Income primarily represents favorable developments on previously recorded exit costs as well as recoveries associated with restructuring.
(3)
Primarily represent accelerated depreciation and impairment charges on plant and equipment, which were or are to be abandoned. Asset disposal charges also included the acceleration effect of re-estimating settlement dates and revised cost estimates associated with asset retirement obligations due to facility shutdowns, see Note 7.
(4)
Represents charges associated with certain other restructuring activities, which have resulted in severance and asset disposal costs. These other restructuring items are not significant enough to require individual separate disclosure.


11


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Rollforward of Restructuring Reserves
The following table shows a rollforward of restructuring reserves that will result in cash spending. These amounts exclude asset retirement obligations, which are discussed in Note 7.
(in Millions)
Balance  at
12/31/11 (4)
 
Change in
reserves (2)
 
Cash
payments
 
Other (3)
 
Balance at
3/31/12 (4)
Sodium Percarbonate Phase-out
$
1.1

 
$
0.1

 
$
(1.2
)
 
$

 
$

Alginates Restructuring
2.8

 
0.1

 
(0.2
)
 

 
2.7

Huelva Restructuring
7.3

 
0.4

 
(2.6
)
 
0.2

 
5.3

Barcelona Facility Shutdown
0.2

 

 
(0.2
)
 

 

Other Workforce Related and Facility Shutdowns (1)
1.0

 
0.1

 
(0.2
)
 

 
0.9

Total
$
12.4

 
$
0.7

 
$
(4.4
)
 
$
0.2

 
$
8.9

____________________ 
(1)
Primarily severance costs related to workforce reductions and facility shutdowns described in the “Other Items” sections above.
(2)
Primarily severance, exited lease, contract termination and other miscellaneous exit costs. The accelerated depreciation and impairment charges noted above impacted our property, plant and equipment balances and are not included in the above tables.
(3)
Primarily foreign currency translation adjustments.
(4)
Included in “Accrued and other liabilities” and “Other long-term liabilities” on the condensed consolidated balance sheets.
OTHER CHARGES (INCOME), NET
 
Three Months Ended March 31,
(in Millions)
2012
 
2011
Environmental Charges, Net
$
1.0

 
$
1.1

Other, net
(0.4
)
 
0.6

Other Charges (Income), Net
$
0.6

 
$
1.7

Environmental Charges, Net
Environmental charges represent the net charges associated with environmental remediation at continuing operating sites, see Note 11 for additional details.

Note 9: Debt
Debt maturing within one year:
Debt maturing within one year consists of the following:
(in Millions)
March 31, 2012
 
December 31, 2011
Short-term debt
$
22.8

 
$
27.0

Current portion of long-term debt
13.3

 
19.5

Total debt maturing within one year
$
36.1

 
$
46.5

Short-term debt consisted of foreign credit lines at March 31, 2012 and December 31, 2011. We often provide parent-company guarantees to lending institutions providing credit to our foreign subsidiaries.

12


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Long-term debt:
Long-term debt consists of the following:
(in Millions)
March 31, 2012
 
 
 
 
Interest Rate
Percentage
 
Maturity
Date
 
3/31/2012
 
12/31/2011
Pollution control and industrial revenue bonds (less unamortized discounts of $0.2 and $0.2, respectively)
0.3-6.5%


2013-2035

$
176.7


$
176.7

Senior notes (less unamortized discount of $2.0 and $2.1, respectively)
3.95-5.2%


2019-2022

598.0


597.9

2011 credit agreement
3.2
%
 
2016
 
131.0

 

Foreign debt
0-11.3%


2013

18.0


24.0

Total long-term debt




923.7


798.6

Less: debt maturing within one year




13.3


19.5

Total long-term debt, less current portion




$
910.4


$
779.1


Letters of credit outstanding under the 2011 Credit Agreement totaled $74.8 million and $75.5 million at March 31, 2012 and December 31, 2011, respectively. Therefore, available funds under this facility were $1,294.2 million and $1,424.5 million at March 31, 2012 and December 31, 2011, respectively.
Among other restrictions, the 2011 Credit Agreement contains financial covenants applicable to FMC and its consolidated subsidiaries related to leverage (measured as the ratio of debt to adjusted earnings) and interest coverage (measured as the ratio of adjusted earnings to interest expense). Our actual leverage for the four consecutive quarters ended March 31, 2012, was 1.5 which is below the maximum leverage of 3.5. Our actual interest coverage for the four consecutive quarters ended March 31, 2012, was 16.6 which is above the minimum interest coverage of 3.5. We were in compliance with all covenants at March 31, 2012.

Note 10: Discontinued Operations
Our discontinued operations represent adjustments to retained liabilities primarily related to operations discontinued prior to 2002. The primary liabilities retained include environmental liabilities, other postretirement benefit liabilities, self-insurance and long-term obligations related to legal proceedings.
Our discontinued operations comprised the following:
(in Millions)
Three Months Ended March 31,
2012
 
2011
Adjustment for workers’ compensation, product liability, and other postretirement benefits related to previously discontinued operations (net of income tax expense of $0.1 and zero for the three months ended March 31, 2012 and 2011, respectively)
$
0.1

 
$

Provision for environmental liabilities and legal reserves and expenses related to previously discontinued operations, net of recoveries (net of income tax benefit of $4.6 and $4.9 for the three months ended March 31, 2012 and 2011, respectively)
(7.5
)
 
(8.0
)
Discontinued operations, net of income taxes
$
(7.4
)
 
$
(8.0
)
Three Months Ended March 31, 2012
During the three months ended March 31, 2012, we recorded a $12.1 million ($7.5 million after-tax) charge to discontinued operations related primarily to environmental issues and legal reserves and expenses. Environmental charges of $4.1 million ($2.6 million after-tax) related primarily to a provision increase for environmental operating and maintenance activities for a number of environmental sites. See a rollforward of our environmental reserves in Note 11. We also recorded increases to legal reserves and expenses in the amount of $8.0 million ($4.9 million after-tax).

13


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Three Months Ended March 31, 2011
During the three ended March 31, 2011, we recorded a $12.9 million ($8.0 million after-tax) charge to discontinued operations related primarily to environmental issues and legal reserves and expenses. Environmental charges of $7.3 million ($4.5 million after-tax) related primarily to a provision increase for environmental issues at our Middleport site as well as operating and maintenance activities for a number of environmental sites. We also recorded increases to legal reserves and expenses in the amount of $5.6 million ($3.5 million after-tax).

Note 11: Environmental Obligations
We have provided reserves for potential environmental obligations, which management considers probable and for which a reasonable estimate of the obligation could be made. Accordingly, reserves of $247.5 million and $251.2 million, excluding recoveries, have been provided at March 31, 2012 and December 31, 2011, respectively.
At March 31, 2012 and December 31, 2011, we recorded recoveries of $77.4 million and $82.6 million, respectively, representing probable realization of claims against U.S. government agencies, insurance carriers and other third parties. Recoveries are recorded as either an offset to the “Environmental liabilities, continuing and discontinued” totaling $21.5 million and $24.3 million at March 31, 2012 and December 31, 2011, or as “Other assets” totaling $55.9 million and $58.3 million at March 31, 2012 and December 31, 2011, in the condensed consolidated balance sheets, respectively. Cash recoveries were $5.2 million in the first three months of 2012. Total cash recoveries recorded for the year ended December 31, 2011, were $12.4 million.
The long-term portion of environmental reserves, net of recoveries, totaling $208.5 million and $213.3 million at March 31, 2012 and December 31, 2011, respectively, is included in “Environmental liabilities, continuing and discontinued” on the condensed consolidated balance sheets. The short-term portion of continuing obligations is recorded as “Accrued and other liabilities” on the condensed consolidated balance sheets.
We have estimated that reasonably possible environmental loss contingencies, net of expected recoveries, may exceed amounts accrued by approximately $110 million at March 31, 2012. This reasonably possible estimate is based upon information available as of the date of the filing and the actual future losses may be higher given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of potentially responsible parties, technology and information related to individual sites. The liabilities arising from potential environmental obligations that have not been reserved for at this time may be material to any one quarter or year's results of operations in the future. However, we believe any such liability arising from potential environmental obligations is not likely to have a material adverse effect on our liquidity or financial condition as it may be satisfied over the next 20 years or longer.
The table below is a roll forward of our total environmental reserves, continuing and discontinued, from December 31, 2011 to March 31, 2012:
 
(in Millions)
Operating and
Discontinued
Sites Total
Total environmental reserves, net of recoveries at December 31, 2011
$
226.9

 

Provision
5.1

Spending, net of recoveries
(6.0
)
Net change
(0.9
)
Total environmental reserves, net of recoveries at March 31, 2012
$
226.0

Environmental reserves, current, net of recoveries (1)
17.5

Environmental reserves, long-term continuing and discontinued, net of recoveries
208.5

Total environmental reserves, net of recoveries at March 31, 2012
$
226.0

____________________
(1)
“Current” includes only those reserves related to continuing operations. These amounts are included within "Accrued and other liabilities" on the condensed consolidated balance sheets.


14


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Our net environmental provisions relate to costs for the continued cleanup of both operating sites and for certain discontinued manufacturing operations from previous years. The net provisions  are comprised as follows:
(in Millions)
Three months ended March 31, 2012
 
Three months ended March 31, 2011
Continuing operations (1)
$
1.0

 
$
1.1

Discontinued operations (2)
4.1

 
7.3

Net environmental provision
$
5.1

 
$
8.4

____________________
(1) Recorded as a component of “Restructuring and other charges (income)” on our condensed consolidated statements of income. See Note 8.
(2) Recorded as a component of “Discontinued operations, net of income taxes" on our consolidated statements of income. See Note 10.

On our condensed consolidated balance sheets, the net environmental provisions are recorded as follows:
(in Millions)
Three months ended March 31, 2012
 
Three months ended March 31, 2011
Environmental reserves (1)
$
5.1

 
$
10.7

Other assets (2)

 
(2.3
)
Net environmental provision
$
5.1

 
$
8.4

______________
(1)     See above roll forward of our total environmental reserves as presented on our condensed consolidated balance sheets.
(2)     Represents certain environmental recoveries.

A more complete description of our environmental contingencies and the nature of our potential obligations are included in Notes 1 and 10 to our 2011 consolidated financial statements in our 2011 Form 10-K.

Note 12: Earnings Per Share
Earnings per common share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period on a basic and diluted basis.
Our potentially dilutive securities include potential common shares related to our stock options, restricted stock and restricted stock units. Diluted earnings per share (“Diluted EPS”) considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our common stock for the period. There were no potential common shares excluded from Diluted EPS for the three months ended March 31, 2012. There were 215,952 potential common shares excluded from Diluted EPS for the three months ended March 31, 2011.
Our non-vested restricted stock awards contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing EPS. The two-class method determines EPS by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. In calculating the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average shares outstanding during the period.

15


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Earnings applicable to common stock and common stock shares used in the calculation of basic and diluted earnings per share are as follows:
(in Millions, Except Share and Per Share Data)
Three Months Ended March 31,
2012
 
2011
Earnings (loss) attributable to FMC stockholders:
 
 
 
Income from continuing operations attributable to FMC stockholders
$
126.5

 
$
102.0

Discontinued operations, net of income taxes
(7.4
)
 
(8.0
)
Net income
$
119.1

 
$
94.0

Less: Distributed and undistributed earnings allocable to restricted award holders
(0.6
)
 
(0.5
)
Net income allocable to common stockholders
$
118.5

 
$
93.5

 
 
 
 
Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
Continuing operations
$
1.82

 
$
1.42

Discontinued operations
(0.11
)
 
(0.11
)
Net income
$
1.71

 
$
1.31

 
 
 
 
Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
Continuing operations
$
1.82

 
$
1.41

Discontinued operations
(0.11
)
 
(0.11
)
Net income
$
1.71

 
$
1.30

 
 
 
 
Shares (in thousands):
 
 
 
Weighted average number of shares of common stock outstanding - Basic
69,168

 
71,477

Weighted average additional shares assuming conversion of potential common shares
569

 
632

Shares – diluted basis
69,737

 
72,109


Note 13: Equity
Refer to the table below for a reconciliation of equity, equity attributable to the parent, and equity attributable to noncontrolling interests for the three months ended March 31, 2012: 
(in Millions, Except Per Share Data)
FMC’s
Stockholders’
Equity
 
Noncontrolling
Interest
 
Total
Equity
Balance at December 31, 2011
$
1,240.6

 
$
63.5

 
$
1,304.1

Net income
119.1

 
5.5

 
124.6

Stock compensation plans
13.6

 

 
13.6

Excess tax benefits from share-based compensation
4.7

 

 
4.7

Shares for benefit plan trust
0.5

 

 
0.5

Net pension and other benefit actuarial gains/(losses) and prior service cost credits, net of income tax expense of $4.3
7.0

 

 
7.0

Net hedging gains (losses) and other, net of income tax expense of $0.7
1.2

 

 
1.2

Foreign currency translation adjustments
11.1

 
0.1

 
11.2

Dividends ($0.18 per share)
(12.4
)
 

 
(12.4
)
Repurchases of common stock
(147.9
)
 

 
(147.9
)
Distributions to noncontrolling interests

 
(7.0
)
 
(7.0
)
Balance at March 31, 2012
$
1,237.5

 
$
62.1

 
$
1,299.6


16


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Dividends and Share Repurchases
On April 19, 2012, we paid dividends totaling $12.4 million to our shareholders of record as of March 30, 2012. This amount is included in “Accrued and other liabilities” on the condensed consolidated balance sheets as of March 31, 2012. For the three months ended March 31, 2012 and March 31, 2011, we paid $10.5 million and $9.0 million in dividends, respectively.
 
On February 17, 2012, the Board authorized the repurchase of up to an additional $250 million of our common stock. At March 31, 2012, $244.8 million remained unused under the Board-authorized repurchase program. The repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market conditions and other factors. During the three months ended March 31, 2012, 1,536,270 shares were repurchased under the publicly announced repurchase program for $144.9 million.

See Note 19 for stock split subsequent event information.

Note 14: Pensions and Other Postretirement Benefits
The following table summarizes the components of net annual benefit cost (income) for the three months ended March 31, 2012 and 2011:
(in Millions)
Three Months Ended March 31,
Pensions
 
Other Benefits
2012
 
2011
 
2012
 
2011
Components of net annual benefit cost (income):
 
 
 
 
 
 
 
Service cost
$
5.1

 
$
4.9

 
$

 
$
0.1

Interest cost
15.3

 
15.4

 
0.3

 
0.6

Expected return on plan assets
(19.2
)
 
(20.6
)
 

 

Amortization of prior service cost (gain)
0.5

 
0.5

 

 
(0.1
)
Recognized net actuarial and other (gain) loss
13.2

 
9.2

 
(0.5
)
 
(0.1
)
Net periodic benefit cost from continuing operations
$
14.9

 
$
9.4

 
$
(0.2
)
 
$
0.5

We made voluntary cash contributions to our U.S. defined benefit pension plan of $17.5 million in the three months ended March 31, 2012. We expect that our total voluntary cash contributions to the plan for 2012 will be approximately $65 million.

Note 15: Income Taxes
Provision for income taxes was $44.8 million resulting in an effective tax rate of 25.3 percent compared to expense of $40.6 million resulting in an effective tax rate of 27.8 percent for the three months ended March 31, 2012 and 2011, respectively. The decrease in the effective tax rate was primarily the result of the change in the mix of domestic income compared to income earned outside of the U.S. A larger portion of our earnings were earned by our foreign operations which have lower tax rates than the U.S.

Note 16: Financial Instruments, Risk Management and Fair Value Measurements
Our financial instruments include cash and cash equivalents, trade receivables, other current assets, accounts payable, and amounts included in investments and accruals meeting the definition of financial instruments. The carrying value of these financial instruments approximates their fair value. Our other financial instruments include the following:
Financial Instrument
  
Valuation Method
 
 
 
Foreign Exchange Forward Contracts
  
Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on current market prices for applicable currencies.
 
 
 
Commodity Forward and Option Contracts
  
Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices for applicable commodities.
 
 
 
Debt
  
Our estimates and information obtained from independent third parties using market data, such as bid/ask spreads for the last business day of the reporting period.

17


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)



The estimated fair value of the financial instruments in the above table have been determined using standard pricing models which take into account the present value of expected future cash flows discounted to the balance sheet date. These standard pricing models utilize inputs derived from or corroborated by observable market data such as interest rate yield curves and currency and commodity spot and forward rates. In addition, we test a subset of our valuations against valuations received from the transaction's counterparty to validate the accuracy of our standard pricing models. Accordingly, the estimates presented may not be indicative of the amounts that we would realize in a market exchange at settlement date and do not represent potential gains or losses on these agreements. The estimated fair values of foreign exchange forward contracts and commodity forward and option contracts are included in the tables within this Note. The estimated fair value of debt is $1,006.6 million and $866.8 million and the carrying amount is $946.5 million and $825.6 million as of March 31, 2012 and December 31, 2011, respectively.
We enter into various financial instruments with off-balance-sheet risk as part of the normal course of business. These off-balance sheet instruments include financial guarantees and contractual commitments to extend financial guarantees under letters of credit, and other assistance to customers (Note 17). Decisions to extend financial guarantees to customers, and the amount of collateral required under these guarantees is based on our evaluation of creditworthiness on a case-by-case basis.

Use of Derivative Financial Instruments to Manage Risk
We mitigate certain financial exposures, including currency risk, commodity purchase exposures and interest rate risk, through a program of risk management that includes the use of derivative financial instruments. A detailed description of these risks including a discussion on the concentration of credit risk is provided in Note 17 to our consolidated financial statements on our 2011 Form 10-K.
We formally document all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes relating derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. We also formally assess both, at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If we determine that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting with respect to that derivative prospectively.

Accounting for Derivative Instruments and Hedging Activities
Cash Flow Hedges
We recognize all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, we generally designate the derivative as a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge). We record in accumulated other comprehensive income or loss (“AOCI”) changes in the fair value of derivatives that are designated as and meet all the required criteria for a cash flow hedge. We then reclassify these amounts into earnings as the underlying hedged item affects earnings. We record immediately in earnings changes in the fair value of derivatives that are not designated as cash flow hedges.
As of March 31, 2012, we had open foreign currency forward contracts in AOCI in a net gain position of $1.7 million, before-tax ($0.9 million, after-tax), designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until December 31, 2012. At March 31, 2012, we had open forward contracts with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $513.2 million.
As of March 31, 2012, we had current open commodity contracts in AOCI in a net loss position of $9.6 million, before-tax ($5.9 million after-tax), designated as cash flow hedges of underlying forecasted purchases, primarily natural gas. Current open commodity contracts hedge forecasted transactions until December 31, 2013. At March 31, 2012, we had 8.7 million mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity forward contracts to hedge forecasted purchases.
Of the $5.0 million of net losses after-tax, representing both, open foreign currency exchange contracts and open commodity contracts, $4.6 million of these losses would be realized in earnings during the twelve months ending March 31, 2013, if spot rates in the future are consistent with forward rates as of March 31, 2012. Approximately $0.4 million of net losses would be realized at various times, subsequent to March 31, 2013. The actual effect on earnings will be dependent on actual spot rates

18


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

when the forecasted transactions occur. We recognize derivative gains and losses in the “Costs of sales and services” line in the condensed consolidated statements of income.
 
Derivatives Not Designated As Hedging Instruments
We hold certain forward contracts that have not been designated as cash flow hedging instruments for accounting purposes. Contracts used to hedge the exposure to foreign currency fluctuations associated with certain monetary assets and liabilities are not designated as cash flow hedging instruments, and changes in the fair value of these items are recorded in earnings. We hold call options that are effective as economic hedges of a portion of our natural gas exposure and the change in fair value of this instrument is also recorded in earnings. We periodically hold soybean barter contracts which qualify as derivatives and we have entered into offsetting commodity contracts to hedge our exposure. Both the change in fair value of the soybean barter contracts and the offsetting commodity contracts are recorded in earnings.
We had open forward contracts not designated as cash flow hedging instruments for accounting purposes with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $187.5 million at March 31, 2012. We held 0.3 million bushels in aggregate notional volume of outstanding soybean contracts to hedge outstanding barter contracts at March 31, 2012.
The following table provides the fair value and balance sheet presentation of our derivative instruments as of March 31, 2012 and December 31, 2011.
(in Millions)
 
 
 
March 31, 2012
 
December 31, 2011
 
 
Balance Sheet Location
 
Fair Value
Derivatives Designated as Cash Flow Hedges
 
 
 
 
 
 
Foreign exchange contracts
 
Prepaid and other current assets
 
$
6.2


$
8.4

Commodity contracts:
 
 
 
 
 
 
Energy contracts
 
Prepaid and other current assets
 
0.4

 
0.5

Total Derivative Assets
 
 
 
$
6.6

 
$
8.9

 
 
 
 
 
 
 
Foreign exchange contracts
 
Accrued and other liabilities
 
(4.2
)

(10.3
)
Commodity contracts:
 
 
 
 
 
 
Energy contracts
 
Accrued and other liabilities
 
(10.1
)
 
(8.0
)
Total Derivative Liabilities
 
 
 
$
(14.3
)
 
$
(18.3
)
Net Derivative Assets/(Liabilities)
 
 
 
$
(7.7
)
 
$
(9.4
)
 
 
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments
 
 
 
 
 
 
Foreign exchange contracts
 
Prepaid and other current assets
 
$
3.7


$
3.5

Total Derivative Assets
 
 
 
$
3.7

 
$
3.5

 
 
 
 
 
 
 
Foreign exchange contracts
 
Accrued and other liabilities
 
(0.1
)


Total Derivative Liabilities
 
 
 
$
(0.1
)
 
$

Net Derivative Assets/(Liabilities)
 
 
 
$
3.6

 
$
3.5

The information included in the above chart is also presented in our fair value table included below.
The following tables provide the impact of derivative instruments and related hedged items on the condensed consolidated statements of income for the three months ended March 31, 2012 and 2011.












19


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)


Derivatives in Cash Flow Hedging Relationships

(in Millions)
 
Amount of Gain or (Loss)
Recognized in OCI on
Derivatives, net of tax
(Effective Portion)
 
Amount of Pre-tax Gain or
(Loss) Reclassified from
AOCI into  Income (Effective
Portion) (a)
 
Amount of Pre-tax Gain or
(Loss) Recognized in Income
on Derivative (Ineffective
Portion and Amount Excluded
from Effectiveness Testing) (a)
 
 
Three Months Ended March 31,
 
Three Months Ended March 31,
 
Three Months Ended March 31,
 
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Foreign exchange contracts
 
$
2.2

 
$
0.9

 
$
1.8

 
$
0.2

 
$
0.2

 
$

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Energy contracts
 
(1.4
)
 
1.2

 
(2.4
)
 
(2.2
)
 

 

Other
 

 

 
(0.1
)
 

 

 

Total
 
$
0.8

 
$
2.1

 
$
(0.7
)
 
$
(2.0
)
 
$
0.2

 
$

____________________
(a)
Amounts are included in “Cost of sales and services” on the condensed consolidated statements of income.
 

Derivatives Not Designated as Hedging Instruments
 
 
Location of Gain or (Loss)
Recognized in Income on Derivatives
Amount of Pre-tax Gain or (Loss) 
Recognized in Income on Derivatives
 
 
Three Months Ended March 31,
(in Millions)
 
2012
 
2011
Foreign Exchange contracts
Cost of Sales and Services
$
3.4

 
$
(1.2
)
Commodity contracts:
 
 
 
 
Energy contracts
Cost of Sales and Services

 
(0.1
)
Total
 
$
3.4

 
$
(1.3
)

Fair-Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principle or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability.

Fair-Value Hierarchy
We have categorized our assets and liabilities that are recorded at fair value, based on the priority of the inputs to the valuation technique, into a three-level fair-value hierarchy. The fair-value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets and liabilities fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair-value measurement of the instrument.
The following tables present our fair-value hierarchy for those assets and liabilities measured at fair-value on a recurring basis in our condensed consolidated balance sheets as of March 31, 2012 and December 31, 2011. During the periods presented there were no transfers between fair-value hierarchy levels.
 

20


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

(in Millions)
March 31, 2012
 
Quoted
Prices
in  Active
Markets  for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Derivatives – Commodities: (2)
 
 
 
 
 
 
 
Energy contracts
0.4

 

 
0.4

 

Derivatives – Foreign Exchange (2)
9.9

 

 
9.9

 

Other (3)
26.0

 
26.0

 

 

Total Assets
$
36.3

 
$
26.0

 
$
10.3

 
$

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Derivatives – Commodities: (4)
 
 
 
 
 
 
 
Energy contracts
$
10.1

 
$

 
$
10.1

 
$

Derivatives – Foreign Exchange (4)
4.3

 

 
4.3

 

Acquisition (5)
3.5

 

 

 
3.5

Other (6)
37.5

 
37.5

 

 

Total Liabilities
$
55.4

 
$
37.5

 
$
14.4

 
$
3.5

 
(in Millions)
December 31, 2011
 
Quoted
Prices
in  Active
Markets  for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
Common Stock (1)
$
0.1

 
$
0.1

 
$

 
$

Derivatives – Commodities: (2)
 
 
 
 
 
 
 
Energy contracts
0.5

 

 
0.5

 

Derivatives – Foreign Exchange (2)
11.9

 

 
11.9

 

Other (3)
20.9

 
20.9

 

 

Total Assets
$
33.4

 
$
21.0

 
$
12.4

 
$

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Derivatives – Commodities: (4)
 
 
 
 
 
 
 
Energy contracts
$
8.0

 
$

 
$
8.0

 
$

Derivatives – Foreign Exchange (4)
10.3

 

 
10.3

 

Acquisition (5)
3.5

 

 

 
3.5

Other (6)
31.8

 
31.8

 

 

Total Liabilities
$
53.6

 
$
31.8

 
$
18.3

 
$
3.5

____________________
(1)
Amounts included in “Investments” in the condensed consolidated balance sheets.
(2)
Amounts included in “Prepaid and other current assets” in the condensed consolidated balance sheets.
(3)
Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheet. Both the asset and liability are recorded at fair value. Asset amounts included in “Other assets” in the condensed consolidated balance sheets.
(4)
Amounts included in “Accrued and other liabilities” in the condensed consolidated balance sheets.
(5)
Represents contingent consideration associated with the acquisitions during 2011. See Note 3 for more information. The changes in this Level 3 liability were not material for the periods presented.
(6)
Consists of a deferred compensation arrangement recognized on our balance sheet. Both the asset and liability are recorded at fair value. Liability amounts included in “Other long-term liabilities” in the condensed consolidated

21


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

balance sheets.
The following tables present our fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis in our condensed consolidated balance sheets during the three months ended March 31, 2012 and the year ended December 31, 2011.
(in Millions)
Three Months Ended March 31, 2012
 
Quoted
Prices
in Active
Markets  for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Gains (Losses) (Three Months Ended March 31, 2012)
Assets
 
 
 
 
 
 
 
 
 
Long-lived assets to be abandoned (1)
$

 
$


$


$


$
(0.4
)
Total Assets
$

 
$

 
$

 
$

 
$
(0.4
)
____________________
(1)
We recorded charges to write down the value of certain long-lived assets to be abandoned within our Agricultural Products segment to their salvage value of zero. The majority of these long-lived assets have a fair value of zero as they have no future use and are anticipated to be demolished. The loss noted in the above table represents the accelerated depreciation of these assets recorded during the period. These assets will operate through the second quarter of 2012 and therefore we will recognize additional accelerated depreciation of approximately $1 million during the second quarter of 2012.

(in Millions)
Year ended December 31, 2011
 
Quoted
Prices
in  Active
Markets  for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Gains
(Losses)
(Year Ended
December 31,
2011)
Assets
 
 
 
 
 
 
 
 
 
Long-lived assets to be abandoned (1)
$
2.3

 
$

 
$

 
$
2.3

 
$
(16.4
)
Total Assets
$
2.3

 
$

 
$

 
$
2.3

 
$
(16.4
)
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Liabilities associated with exit activities (2)
5.5

 

 
5.5

 

 
(5.5
)
Total Liabilities
$
5.5

 
$

 
$
5.5

 
$

 
$
(5.5
)
____________________
(1)
In connection with the Sodium Percarbonate phase-out, we recorded charges to write down the value of the related long-lived assets to be abandoned to their salvage value of $0.7 million. The majority of the long-lived assets have a fair value of zero as they have no future use and are anticipated to be demolished. We also recognized a $1.6 million charge to write down certain other assets to fair value in our Industrial Chemicals segment during the year ended December 31, 2011. The loss noted in the above table represents the accelerated depreciation and write-down of these assets recorded during the period.
(2)
This amount represents severance liabilities associated with the Sodium Percarbonate phase-out as further described in Note 8.

Note 17: Guarantees, Commitments, and Contingencies
We continue to monitor the conditions that are subject to guarantees and indemnifications to identify whether a liability must be recognized in our financial statements.

22


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Guarantees and Other Commitments
The following table provides the estimated undiscounted amount of potential future payments for each major group of guarantees at March 31, 2012: 
(in Millions)
 
Guarantees:
 
Guarantees of vendor financing
$
26.8

Foreign equity method investment debt guarantees
6.2

Other debt guarantees
2.7

Total
$
35.7

We provide guarantees to financial institutions on behalf of certain Agricultural Products customers, principally in Brazil and Mexico, for their seasonal borrowing. The total of these guarantees was $26.8 million and $18.5 million at March 31, 2012 and December 31, 2011, respectively, and are recorded on the condensed consolidated balance sheets for each date as “Guarantees of vendor financing”. The change in the guarantees is generally due to the seasonality of the Agricultural Products business.
In connection with our property and asset sales and divestitures, we have agreed to indemnify the buyer for certain liabilities, including environmental contamination and taxes that occurred prior to the date of sale. Our indemnification obligations with respect to these liabilities may be indefinite as to duration and may or may not be subject to a deductible, minimum claim amount or cap. As such, it is not possible for us to predict the likelihood that a claim will be made or to make a reasonable estimate of the maximum potential loss or range of loss. If triggered, we may be able to recover some of the indemnity payments from third parties. We have not recorded any specific liabilities for these guarantees.
Contingencies

Hydrogen Peroxide competition / antitrust litigation. We are subject to actions brought by private plaintiffs relating to alleged violations of European and U.S. competition and antitrust laws, as further described below.

European competition action. Multiple European purchasers of hydrogen peroxide who claim to have been harmed as a result of alleged violations of European competition law by hydrogen peroxide producers assigned their legal claims to a single entity formed by a law firm. The single entity then filed a law suit in Germany in March 2009 against European producers, including our wholly-owned Spanish subsidiary, Foret. Initial defense briefs were filed in April 2010, and an initial hearing was held during the first quarter of 2011, at which time case management issues were discussed. At a subsequent hearing in October 2011, the Court indicated that it was considering seeking guidance from the European Court of Justice (“ECJ”) as to whether the German courts have jurisdiction over these claims. After submission of written comments on this issue by the parties, on March 1, 2012, the judge announced that she would refer the jurisdictional issues to the ECJ. Such a reference to the ECJ normally takes 12-18 months for completion. Since the case is in the preliminary stages and is based on a novel procedure - namely the attempt to create a cross-border “class action” which is not a recognized proceeding under EU or German law - we are unable to develop a reasonable estimate of our potential exposure of loss at this time. We intend to vigorously defend this matter.

Canadian antitrust actions. In 2005 after public disclosures of the U.S. federal grand jury investigation into the hydrogen peroxide industry (which resulted in no charges brought against us) and the filing of various class actions in U.S. federal and state courts, which have all been settled, putative class actions against us and five other major hydrogen peroxide producers were filed in provincial courts in Ontario, Quebec and British Columbia under the laws of Canada. The other five defendants have settled these claims for a total of approximately $20.6 million. On September 28, 2009, the Ontario Superior Court of Justice certified a class of direct and indirect purchasers of hydrogen peroxide from 1994 to 2005. Our motion for leave to appeal the class certification decision was denied in June 2010. Since then, the case has been largely dormant. In early 2012 the parties began a more detailed dialogue on discovery and at a hearing on April 5, 2012, they requested the judge to issue more specific guidance on document production. Since the proceedings are in the preliminary stages with respect to the merits, we are unable to develop a reasonable estimate of our potential exposure of loss at this time. We intend to vigorously defend these matters.

Asbestos claims. Like hundreds of other industrial companies, we have been named as one of many defendants in asbestos-related personal injury litigation. Most of these cases allege personal injury or death resulting from exposure to asbestos in premises of FMC or to asbestos-containing components installed in machinery or equipment manufactured or sold by

23


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

businesses classified as discontinued operations. We intend to continue managing these cases in accordance with our historical experience. We have established a reserve for this litigation within our discontinued operations and are unable to develop a reasonable estimate of any exposure of a loss in excess of the established reserve. Our experience has been that the overall trends in terms of the rate of filing of asbestos-related claims with respect to all potential defendants has changed over time, and that filing rates as to us in particular have varied significantly over the last several years. We are a peripheral defendant - that is, we have never manufactured asbestos or asbestos-containing components. As a result, claim filing rates against us have yet to form a predictable pattern, and we are unable to project a reasonably accurate future filing rate and thus, we are presently unable to reasonably estimate our asbestos liability with respect to claims that may be filed in the future.

New York environmental claim. In late June 2004, we were served in a lawsuit captioned “Lewis et al v. FMC Corporation”, which was filed in United States District Court for the Western District of New York. The suit was brought by thirteen residents of Middleport, New York who alleged that we violated certain state and federal environmental laws and sought injunctive relief and monetary damages for personal injuries and property damage in connection with such alleged violations. A motion for summary judgment was decided in our favor on March 29, 2011. On April 28, 2011, the plaintiffs filed an appeal of that decision to the U.S. Court of Appeals for the Second Circuit, but failed to perfect the appeal, and the case was dismissed. The plaintiffs filed a new complaint in New York state court in late September 2011 on the state law claims on which the federal district judge did not rule in granting the summary judgment motion in the original lawsuit (nuisance, personal injury and property damage). In October 2011, we removed the new lawsuit from the state court to federal court based on diversity of citizenship and filed a motion to dismiss the case on the basis of improper and untimely service of process, which remains pending.

Other contingent liabilities. In addition to the matters disclosed above, we have certain other contingent liabilities arising from litigation, claims, products we have sold, guarantees or warranties we have made, contracts we have entered into, indemnities we have provided, and other commitments incident to the ordinary course of business. Some of these contingencies are known - for example, pending product liability litigation or claims - but are so preliminary that the merits cannot be determined, or if more advanced, are not deemed material based on current knowledge; and some are unknown - for example, claims with respect to which we have no notice or claims which may arise in the future, resulting from products we have sold, guarantees or warranties we have made, or indemnities we have provided. Therefore, we are unable to develop a reasonable estimate of our potential exposure of loss for these contingencies, either individually or in the aggregate, at this time.

Based on information currently available and established reserves, we have no reason to believe that the ultimate resolution of our known contingencies, including the matters described in this Note, will have a material adverse effect on our consolidated financial position, liquidity or results of operations. However, there can be no assurance that the outcome of these contingencies will be favorable, and adverse results in certain of these contingencies could have a material adverse effect on our consolidated financial position, results of operations in any one reporting period, or liquidity.




24


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Note 18: Segment Information 
(in Millions)
Three Months Ended March 31,
2012
 
2011
Revenue
 
 
 
Agricultural Products
$
454.2

 
$
343.6

Specialty Chemicals
215.9

 
210.1

Industrial Chemicals
272.6

 
242.5

Eliminations
(2.0
)
 
(1.2
)
Total
$
940.7

 
$
795.0

Income (loss) from continuing operations before income taxes
 
 
Agricultural Products
$
129.7

 
$
100.5

Specialty Chemicals
44.3

 
44.9

Industrial Chemicals
48.1

 
40.3

Eliminations
0.1

 
(0.1
)
Segment operating profit
222.2

 
185.6

Corporate
(14.2
)
 
(16.8
)
Other income (expense), net (1)
(11.2
)
 
(7.3
)
Operating profit before the items listed below (2)
196.8

 
161.5

Interest expense, net
(11.3
)
 
(9.9
)
Restructuring and other income (charges) (3)
(1.7
)
 
(4.5
)
Non-operating pension and postretirement (charges) income (4)
(9.1
)
 
(4.5
)
Acquisition-related charges (5)
(3.4
)
 

Provision for income taxes
(44.8
)
 
(40.6
)
Discontinued operations, net of income taxes
(7.4
)
 
(8.0
)
Net income (loss) attributable to FMC stockholders
$
119.1

 
$
94.0

_________________________________________
(1)
Other income (expense), net is comprised primarily of last-in, first-out (“LIFO”) inventory adjustments and certain employee benefits, including incentive compensation. Our business segments account for their inventory utilizing a first-in-first-out ("FIFO") basis of accounting. The LIFO inventory adjustments are not allocated to the business segments and therefore are recorded to "Other income (expense), net".
(2)
Results for all segments including corporate expense and other income (expense) are net of noncontrolling interests of $5.5 million in the three months ended March 31, 2012, and $3.4 million in the three months ended March 31, 2011. The majority of the noncontrolling interests pertain to our Industrial Chemicals segment.
(3)
See Note 8 for details of restructuring and other charges (income). Amounts for the three months ended March 31, 2012, relate to Agricultural Products ($0.4 million), Specialty Chemicals ($0.2 million-gain), Industrial Chemicals ($0.9 million) and Corporate ($0.6 million). Amounts for the three months ended March 31, 2011, relate to Specialty Chemicals ($1.5 million), Industrial Chemicals ($1.9 million) and Corporate ($1.1 million).
(4)
Our non-operating pension and postretirement costs are defined as those costs related to interest, expected return on plan assets, amortized actuarial gains and losses and the impacts of any plan curtailments or settlements. These costs are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance and we consider these costs to be outside our operational performance. We exclude these non-operating pension and postretirement costs as we believe that removing them provides a better understanding of the underlying profitability of our businesses, provides increased transparency and clarity in the performance of our retirement plans and enhances period-over-period comparability. We continue to include the service cost and amortization of prior service cost in our operating segments noted above. We believe these elements reflect the current year operating costs to our businesses for the employment benefits provided to active employees.
(5)
These charges were related to the expensing of the inventory fair value step-up resulting from the application of purchase accounting. The charges for three months ended March 31, 2012 relate to a number of acquisitions completed in 2011, further described in Note 3. On the condensed consolidated statements of income, the charges presented are included in “Costs of sales and services”. No such charges occurred for the period ended March 31, 2011.



25


FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Note 19: Subsequent Event

On April 24, 2012, the Board of Directors declared a two-for-one split of FMC's common stock. The Board's action followed the approval by FMC stockholders of an amendment to FMC's certificate of incorporation to increase the number of authorized shares. The stock split will be effected in the form of a distribution payable on May 24, 2012 to shareholders of record of its common stock as of the close of business on May 11, 2012. Each shareholder will receive one share of common stock for every share held. Trading will begin on a post-split adjusted basis on May 25, 2012. Our historical share data will be retroactively adjusted upon the completion of the stock split. Earnings per share information is provided below on an estimated post-stock split pro forma, unaudited basis:

Estimated Post-Stock Split Pro Forma
(unaudited)
Three Months Ended March 31,
2012
 
2011
Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
Continuing operations
$
0.91

 
$
0.71

Discontinued operations
(0.05
)
 
(0.05
)
Net income
$
0.86

 
$
0.66

 
 
 
 
Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
Continuing operations
$
0.91

 
$
0.70

Discontinued operations
(0.05
)
 
(0.05
)
Net income
$
0.86

 
$
0.65

 
 
 
 
Shares (in thousands):
 
 
 
Weighted average number of shares of common stock outstanding - Basic
138,336

 
142,954

Weighted average additional shares assuming conversion of potential common shares
1,138

 
1,264

Shares – diluted basis
139,474

 
144,218




26


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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”, “expects”, “should”, “could”, “may”, “will continue to”, “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 our company based on currently available information. The forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. These statements are qualified by reference to the section “Forward-Looking Statements” in Part II of our Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 10-K”) and to similar disclaimers in all other reports and forms filed with the Securities and Exchange Commission (“SEC”). 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 further caution that the list of risk factors in Item 1A in Part I of the 2011 10-K may not be all-inclusive, and 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 2011 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 “Application of Critical Accounting Policies” section in our 2011 10-K for a detailed description of these policies and their potential effects on our results of operations and financial condition.
Environmental obligations and related recoveries
Impairment and valuation of long-lived assets
Pensions and other postretirement benefits
Income taxes
We did not adopt any changes in the current period that had a material effect on these critical accounting policies nor did we make any changes to our accounting policies that would have changed these critical accounting policies.
RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS AND REGULATORY ITEMS
See Note 2 to our 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 a diversified chemical company serving agricultural, consumer and industrial markets globally with innovative solutions, applications and market-leading products. We operate in three distinct business segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. Our Agricultural Products segment develops, markets and sells all three major classes of crop protection chemicals – insecticides, herbicides, and fungicides – with particular strength in insecticides and herbicides. 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 pest control in non-agricultural markets. Specialty Chemicals consists of our BioPolymer and lithium businesses. This segment focuses on food ingredients that are used to enhance texture, color, structure and physical stability, pharmaceutical additives for binding, encapsulation and disintegrant applications, ultrapure biopolymers for medical devices and lithium for energy storage specialty polymers and pharmaceutical synthesis. Our Industrial Chemicals segment

27


manufactures a wide range of inorganic materials, including soda ash, hydrogen peroxide, specialty peroxygens, zeolites and silicates. This segment serves a diverse group of markets, from economically-sensitive industrial sectors to technology-intensive specialty markets. The products in this segment are sought by customers for their critical reactivity or specific functionality in markets such as glass, detergents, chemicals and pulp and paper.
2012 Highlights

Our businesses continue to experience positive results primarily from higher volumes and higher pricing. Results for the three months ended March 31, 2012, reflect increases in both consolidated revenues and earnings driven by solid performance.

The following are the more significant developments in our businesses during the three months ended March 31, 2012:

Revenue of $940.7 million for the three months ended March 31, 2012 increased $145.7 million or 18 percent versus the same period last year.  Revenue increased in all businesses and in all regions. A more detailed review of revenues by segment are discussed further on under the section titled "Results of Operations". On a regional basis, sales in Europe, Middle East and Africa increased 8 percent, sales in Asia were up 14 percent, sales in Latin America grew 38 percent and sales in North America were up 14 percent. 

Our gross margin of $347.3 million increased by $59.2 million or approximately 21 percent versus last year's first quarter. Gross margin percent of 37 percent increased approximately one basis point over last year, primarily driven by higher selling prices experienced in most product lines.

Selling, general and administrative expenses, excluding non-operating pension and postretirement charges, of $120.0 million increased approximately $18.6 million or 18 percent, largely due to increased spending on targeted growth initiatives and to meet the growth in our business. The majority of these increases were experienced in our Agricultural Products segment.

Research and Development expenses of $28.5 million increased approximately $5.8 million or 26 percent, largely due to increased spending in Agricultural Products associated with various innovation projects.

Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of $135.4 million increased approximately $27.8 million or 26 percent primarily due to higher operating results in Agricultural Products and Industrial Chemicals. See the disclosure of our Adjusted Earnings Non-GAAP financial measurement below, under the section titled "Results of Operations".



28


RESULTS OF OPERATIONS
Overview
The following presents a reconciliation of our segment operating profit to net income attributable to FMC stockholders as seen through the eyes of our management. For management purposes, we report the operating performance of each of our business segments based on earnings before interest and income taxes excluding corporate expenses, other income (expense), net and corporate special income/(charges).
SEGMENT RESULTS RECONCILIATION
(in Millions)
Three Months Ended March 31,
2012
 
2011
Revenue
 
 
 
Agricultural Products
$
454.2

 
$
343.6

Specialty Chemicals
215.9

 
210.1

Industrial Chemicals
272.6

 
242.5

Eliminations
(2.0
)
 
(1.2
)