XNYS:FMC FMC Corporation Quarterly Report 10-Q Filing - 6/30/2012

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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 June 30, 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 June 30, 2012
Common Stock, par value $0.10 per share
 
137,317,914



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 June 30
 
Six Months Ended June 30
2012
 
2011
 
2012
 
2011
 
(unaudited)
 
(unaudited)
Revenue
$
905.2

 
$
812.2

 
$
1,845.9

 
$
1,607.2

Costs and Expenses
 
 
 
 
 
 
 
Costs of sales and services
567.4

 
513.4

 
1,160.8

 
1,020.3

 
 
 
 
 
 
 
 
Gross margin
337.8

 
298.8

 
685.1

 
586.9

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
128.3

 
108.9

 
257.4

 
214.8

Research and development expenses
28.4

 
25.0

 
56.9

 
47.7

Restructuring and other charges (income)
5.6

 
9.3

 
7.3

 
13.8

Total costs and expenses
729.7

 
656.6

 
1,482.4

 
1,296.6

Income from continuing operations before equity in (earnings) loss of affiliates, interest expense, net and income taxes
175.5

 
155.6

 
363.5

 
310.6

Equity in (earnings) loss of affiliates
0.3

 
(1.7
)
 
0.2

 
(2.6
)
Interest expense, net
11.5

 
10.5

 
22.8

 
20.4

Income from continuing operations before income taxes
163.7

 
146.8

 
340.5

 
292.8

Provision for income taxes
45.3

 
25.7

 
90.1

 
66.3

Income from continuing operations
118.4

 
121.1

 
250.4

 
226.5

Discontinued operations, net of income taxes
(8.1
)
 
(8.9
)
 
(15.5
)
 
(16.9
)
Net income
110.3

 
112.2

 
234.9

 
209.6

Less: Net income attributable to noncontrolling interests
5.4

 
5.0

 
10.9

 
8.4

Net income attributable to FMC stockholders
$
104.9

 
$
107.2

 
$
224.0

 
$
201.2

Amounts attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations, net of income taxes
$
113.0

 
$
116.1

 
$
239.5

 
$
218.1

Discontinued operations, net of income taxes
(8.1
)
 
(8.9
)
 
(15.5
)
 
(16.9
)
Net income
$
104.9

 
$
107.2

 
$
224.0

 
$
201.2

Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
0.82

 
$
0.81

 
$
1.73

 
$
1.52

Discontinued operations
(0.06
)
 
(0.06
)
 
(0.11
)
 
(0.12
)
Net income
$
0.76

 
$
0.75

 
$
1.62

 
$
1.40

Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
0.82

 
$
0.80

 
$
1.72

 
$
1.51

Discontinued operations
(0.06
)
 
(0.06
)
 
(0.11
)
 
(0.12
)
Net income
$
0.76

 
$
0.74

 
$
1.61

 
$
1.39

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 June 30
 
Six Months Ended June 30
2012
 
2011
 
2012
 
2011
 
(unaudited)
 
(unaudited)
Net Income
$
110.3

 
$
112.2

 
$
234.9

 
$
209.6

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments (1)
(29.4
)
 
6.3

 
(18.2
)
 
28.0

 
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Unrealized hedging gains (losses) and other
(1.5
)
 
(4.1
)
 
(0.7
)
 
2.6

Reclassification of deferred hedging (gains) losses and other, included in net income
1.2

 

 
1.6

 
1.2

Total derivative instruments
(0.3
)
 
(4.1
)
 
0.9

 
3.8

 
 
 
 
 
 
 
 
Pension and other postretirement benefits:
 
 
 
 
 
 
 
Unrealized actuarial gains (losses) and prior service (costs) credits (2)
1.3

 
(0.2
)
 
0.4

 
(1.0
)
Reclassification of net actuarial and other (gain) loss and amortization of prior service costs, included in net income
7.9

 
5.6

 
15.8

 
11.2

Total pension and other postretirement benefits
9.2

 
5.4

 
16.2

 
10.2

 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
(20.5
)
 
7.6

 
(1.1
)
 
42.0

Comprehensive income
$
89.8

 
$
119.8

 
$
233.8

 
$
251.6

Less: Comprehensive income attributable to the noncontrolling interest
5.0

 
4.9

 
10.6

 
8.7

Comprehensive income attributable to FMC stockholders
$
84.8

 
$
114.9

 
$
223.2

 
$
242.9

____________________ 
(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)
June 30, 2012
 
December 31, 2011
 
(unaudited)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
75.5

 
$
158.9

Trade receivables, net of allowance of $25.0 at June 30, 2012 and $21.5 at December 31, 2011
993.7

 
931.3

Inventories
559.6

 
470.3

Prepaid and other current assets
171.6

 
173.4

Deferred income taxes
152.3

 
135.5

Total current assets
1,952.7

 
1,869.4

Investments
33.0

 
28.3

Property, plant and equipment, net
1,021.0

 
986.8

Goodwill
261.3

 
225.9

Other intangibles, net
213.5

 
187.3

Other assets
222.3

 
198.9

Deferred income taxes
203.8

 
246.9

Total assets
$
3,907.6

 
$
3,743.5

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Short-term debt
$
41.6

 
$
27.0

Current portion of long-term debt
4.9

 
19.5

Accounts payable, trade and other
366.4

 
458.3

Accrued and other liabilities
176.0

 
186.2

Accrued payroll
51.2

 
70.6

Accrued customer rebates
257.3

 
115.1

Guarantees of vendor financing
29.1

 
18.5

Accrued pension and other postretirement benefits, current
9.2

 
9.2

Income taxes
60.7

 
15.5

Total current liabilities
996.4

 
919.9

Long-term debt, less current portion
810.0

 
779.1

Accrued pension and other postretirement benefits, long-term
337.9

 
368.7

Environmental liabilities, continuing and discontinued
203.9

 
213.3

Reserve for discontinued operations
43.1

 
41.6

Other long-term liabilities
129.8

 
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 260,000,000 shares in 2012 and 2011; 185,983,792 issued shares at June 30, 2012 and December 31, 2011, respectively
18.6

 
18.6

Capital in excess of par value of common stock
470.0

 
454.5

Retained earnings
2,375.4

 
2,176.2

Accumulated other comprehensive income (loss)
(390.8
)
 
(390.0
)
Treasury stock, common, at cost: 48,665,878 shares at June 30, 2012 and 46,309,476 shares at December 31, 2011
(1,153.8
)
 
(1,018.7
)
Total FMC stockholders’ equity
1,319.4

 
1,240.6

Noncontrolling interests
67.1

 
63.5

Total equity
1,386.5

 
1,304.1

Total liabilities and equity
$
3,907.6

 
$
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)
Six Months Ended June 30
2012
 
2011
 
(unaudited)
Cash provided (required) by operating activities of continuing operations:
 
 
 
Net income
$
234.9

 
$
209.6

Discontinued operations
15.5

 
16.9

Income from continuing operations
$
250.4

 
$
226.5

Adjustments from income from continuing operations to cash provided (required) by operating activities of continuing operations:
 
 
 
Depreciation and amortization
66.7

 
62.7

Equity in (earnings) loss of affiliates
0.2

 
(2.6
)
Restructuring and other charges (income)
7.3

 
13.8

Deferred income taxes
23.8

 
42.2

Pension and other postretirement benefits
29.4

 
19.8

Share-based compensation
10.2

 
8.9

Excess tax benefits from share-based compensation
(6.2
)
 
(5.2
)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
 
 
 
Trade receivables, net
(64.1
)
 
3.4

Guarantees of vendor financing
10.6

 
(11.3
)
Inventories
(90.7
)
 
(63.6
)
Other current assets and other assets
(18.1
)
 
(7.5
)
Accounts payable
(87.5
)
 
(75.2
)
Accrued and other current liabilities and other liabilities
12.6

 
(26.3
)
Accrued payroll
(19.3
)
 
(19.5
)
Accrued customer rebates
142.9

 
80.5

Income taxes
40.6

 
(4.6
)
Pension and other postretirement benefit contributions
(33.2
)
 
(41.6
)
Environmental spending, continuing, net of recoveries
(2.3
)
 
(4.2
)
Restructuring and other spending
(5.4
)
 
(33.2
)
Cash provided (required) by operating activities
267.9

 
163.0

Cash provided (required) by operating activities of discontinued operations:
 
 
 
Environmental spending, discontinued, net of recoveries
(8.7
)
 
(10.5
)
Payments of other discontinued reserves
(12.2
)
 
(8.7
)
Cash provided (required) by operating activities of discontinued operations
(20.9
)
 
(19.2
)
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)
Six Months Ended June 30
2012
 
2011
 
(unaudited)
Cash provided (required) by investing activities:
 
 
 
Capital expenditures
$
(81.2
)
 
$
(71.1
)
Proceeds from disposal of property, plant and equipment
0.1

 
0.2

Acquisitions, net of cash acquired
(98.4
)
 

Investments in nonconsolidated affiliates
(6.8
)
 

Other investing activities
(12.7
)
 
(8.0
)
Cash provided (required) by investing activities
(199.0
)
 
(78.9
)
Cash provided (required) by financing activities:
 
 
 
Net borrowings (repayments) under committed credit facilities
26.0

 

Increase (decrease) in short-term debt
15.4

 
8.4

Repayments of long-term debt
(15.0
)
 
(23.9
)
Proceeds from borrowings of long-term debt
5.4

 

Distributions to noncontrolling interests
(7.0
)
 
(5.8
)
Issuances of common stock, net
11.0

 
7.8

Excess tax benefits from share-based compensation
6.2

 
5.2

Dividends paid
(22.9
)
 
(19.8
)
Repurchases of common stock under publicly announced program
(144.9
)
 
(10.0
)
Other repurchases of common stock
(3.1
)
 
(3.7
)
Contingent consideration paid
(2.0
)
 

Cash provided (required) by financing activities
(130.9
)
 
(41.8
)
Effect of exchange rate changes on cash and cash equivalents
(0.5
)
 
2.0

Increase (decrease) in cash and cash equivalents
(83.4
)
 
25.1

Cash and cash equivalents, beginning of period
158.9

 
161.5

Cash and cash equivalents, end of period
$
75.5

 
$
186.6

Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest was $13.5 million and $19.4 million, and income taxes paid, net of refunds were $22.0 million and $23.1 million for the six months ended June 30, 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 six months ended June 30, 2012 and 2011, and our financial position as of June 30, 2012. All such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2012 and 2011 are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheets as of June 30, 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 six months ended June 30, 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”).
Stock Split. On April 24, 2012, the Board of Directors of FMC declared a two-for-one split of our common stock (the “Stock Split”) to be effected in the form of a distribution of one newly issued share payable on May 24, 2012 for each share held as of the close of business on May 11, 2012. Trading in the common stock on a post-split adjusted basis began on May 25, 2012.
The number of shares outstanding and related prices, per share amounts, share conversions and share-based data throughout this Form 10-Q have been adjusted to reflect the Stock Split for all prior periods presented.
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 impacts 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. There was no impact to our financial statements upon adoption.
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.

8


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

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 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

2012 Acquisitions
In June 2012, we acquired 100% of the stock of Phytone Ltd (Phytone). Phytone is a natural colors producer based in the United Kingdom. Phytone's natural products and formulations are used by global customers in the food, beverage, personal care and nutrition sectors. Phytone will be consolidated into our existing BioPolymer division within our Specialty Chemicals segment.
The results of operations related to Phytone have been included in our results since its acquisition date. This acquisition was considered a business under the U.S. GAAP business combinations accounting guidance, and therefore we applied acquisition accounting. Acquisition accounting requires, among other things, that assets and liabilities assumed be recognized at their fair values as of the acquisition date. The net assets of the Phytone acquisition were recorded at the estimated fair values using Level 3 inputs (see Note 16 for an explanation of Level 3 inputs). In valuing acquired assets and liabilities, valuation inputs include an estimate of future cash flows and discount rates based on the internal rate of return and the weighted average rate of return. Transaction related costs were expensed as incurred.
The fair value of the purchase price for our 2012 acquisition was preliminarily allocated in the table below to the assets and liabilities acquired as part of the acquisition.
Preliminary Purchase Price Allocation
(in Millions)
 
Current assets (primarily inventory and trade receivables) (1)
$
10.0

Property, plant & equipment
2.0

Finite-lived intangible assets (2)
32.5

Goodwill (3)
41.8

Total fair value of assets acquired
86.3

Current liabilities
3.0

Deferred tax liabilities
7.5

Other liabilities
1.0

Total fair value of liabilities assumed
11.5

 
 
Total Cash Paid
$
74.8

___________________
(1)
Fair value of finished good inventories acquired included a step-up in the value of approximately $0.6 million, which will be expensed to cost of sales and services during 2012.
(2)
See Note 4 for the major classes of intangible assets acquired, which primarily represent customer relationships. The weighted average useful life of the acquired finite-lived intangibles is approximately 25 years.
(3)
Goodwill largely consisted of expected revenue synergies resulting from the business combination. None of the acquired goodwill will be deductible for income tax purposes.

9


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

Unaudited pro forma revenue and net income related to 2012 acquisition is not presented because the pro forma impact is not material for prior periods.

2011 Acquisitions
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 six months 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 June 30, 2012. 
The purchase price and related allocation for these five acquisitions is not considered final due to potential working capital adjustments. We do not expect any additional adjustments 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. 
During the first six months of 2012 we paid $23.6 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 outstanding amount to be paid at June 30, 2012 was $2.3 million. During 2012 we paid $2.0 million in contingent consideration associated with the 2011 acquisitions for which we had accrued $3.5 million at December 31, 2011. The remaining amount of contingent consideration payable at June 30, 2012 was $1.5 million.

Note 4: Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by business segment for the six months ended June 30, 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

Acquisitions

 
41.8

 

 
41.8

Purchase price allocation adjustments (See Note 3)

 
0.4

 
(0.1
)
 
0.3

Foreign currency adjustments
(0.1
)
 
(6.3
)
 
(0.3
)
 
(6.7
)
Balance, June 30, 2012
$
12.3

 
$
232.9

 
$
16.1

 
$
261.3

Our intangible assets, other than goodwill, consist of the following:
 
June 30, 2012
 
December 31, 2011
(in Millions)
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Accumulated Amortization
 
Net
Intangible assets subject to amortization (finite-lived)
Customer relationships
$
129.8

 
$
(5.1
)
 
$
124.7

 
$
102.0

 
$
(2.2
)
 
$
99.8

Patents
0.6

 
(0.1
)
 
0.5

 
0.6

 
(0.1
)
 
0.5

Trademarks and trade names
1.4

 

 
1.4

 
0.2

 

 
0.2

Purchased and licensed technologies
56.6

 
(12.1
)
 
44.5

 
54.6

 
(9.9
)
 
44.7

Other intangibles
4.7

 
(1.3
)
 
3.4

 
4.1

 
(1.0
)
 
3.1

 
$
193.1

 
$
(18.6
)
 
$
174.5

 
$
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
$
232.1

 
$
(18.6
)
 
$
213.5

 
$
200.5

 
$
(13.2
)
 
$
187.3


10


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

At June 30, 2012, the finite-lived and indefinite life intangibles were allocated among our business segments as follows:
(in Millions)
Finite-lived
 
Indefinite life
Agricultural Products
$
108.7

 
$
35.2

Specialty Chemicals
56.1

 
3.2

Industrial Chemicals
9.7

 
0.6

Total
$
174.5

 
$
39.0


Note 5: Inventories
Inventories consisted of the following:
 (in Millions)
June 30, 2012
 
December 31, 2011
Finished goods and work in process
$
339.1

 
$
298.6

Raw materials
220.5

 
171.7

Net inventory
$
559.6

 
$
470.3


Note 6: Property, Plant and Equipment
Property, plant and equipment consisted of the following:
(in Millions)
June 30, 2012
 
December 31, 2011
Property, plant and equipment
$
2,894.3

 
$
2,850.0

Accumulated depreciation
1,873.3

 
1,863.2

Property, plant and equipment, net
$
1,021.0

 
$
986.8


Note 7: Asset Retirement Obligations
As of June 30, 2012, the balance of our asset retirement obligations was $24.1 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.

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 June 30
 
Six Months Ended June 30
(in Millions)
2012
 
2011
 
2012
 
2011
Restructuring Charges and Asset Disposals
$
4.3

 
$
6.4

 
$
5.4

 
$
9.2

Other Charges (Income), Net
1.3

 
2.9

 
1.9

 
4.6

Total Restructuring and Other Charges
$
5.6

 
$
9.3

 
$
7.3

 
$
13.8


RESTRUCTURING CHARGES AND ASSET DISPOSALS

There were no significant restructuring charges and asset disposals that occurred 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.


11


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

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

 
0.3

 

0.3

Other Items (4)
2.4

 
0.2

 
1.4

4.0

Three months ended June 30, 2012
$
2.4

 
$
0.5

 
$
1.4

$
4.3

Sodium Percarbonate Phase-out
5.5

 

 

5.5

Huelva Shutdown

 
0.8

 

0.8

Other Items (4)

 
0.1

 

0.1

Three months ended June 30, 2011
$
5.5

 
$
0.9

 
$

$
6.4

Huelva Shutdown

 
0.7

 

0.7

Other Items (4)
2.4

 
0.5

 
1.8

4.7

Six months ended June 30, 2012
$
2.4

 
$
1.2

 
$
1.8

$
5.4

Sodium Percarbonate Phase-out
5.5

 

 

5.5

Huelva Shutdown

 
1.5

 

1.5

Other Items (4)
0.4

 
0.2

 
1.6

2.2

Six months ended June 30, 2011
$
5.9

 
$
1.7

 
$
1.6

$
9.2

____________________ 
(1)
Represents severance and employee benefit charges. Income represents adjustments to previously recorded severance and employee benefits.
(2)
Primarily represents 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 represents 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.
Roll forward of Restructuring Reserves
The following table shows a roll forward 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
6/30/12 (4)
Sodium Percarbonate Phase-out
$
1.1

 
$
0.2

 
$
(1.3
)
 
$

 
$

Alginates Restructuring
2.8

 
0.1

 
(0.3
)
 

 
2.6

Huelva Restructuring
7.3

 
0.7

 
(3.2
)
 
(0.2
)
 
4.6

Barcelona Facility Shutdown
0.2

 
0.2

 
(0.4
)
 

 

Other Workforce Related and Facility Shutdowns (1)
1.0

 
2.4

 
(0.2
)
 

 
3.2

Total
$
12.4

 
$
3.6

 
$
(5.4
)
 
$
(0.2
)
 
$
10.4

____________________ 
(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.

12


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

OTHER CHARGES (INCOME), NET
 
Three Months Ended June 30
 
Six Months Ended June 30
(in Millions)
2012
 
2011
 
2012
 
2011
Environmental Charges, Net
$
1.5

 
$
1.9

 
$
2.5

 
$
3.0

Other, net
(0.2
)
 
1.0

 
(0.6
)
 
1.6

Other Charges (Income), Net
$
1.3

 
$
2.9

 
$
1.9

 
$
4.6

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)
June 30, 2012
 
December 31, 2011
Short-term debt
$
41.6

 
$
27.0

Current portion of long-term debt
4.9

 
19.5

Total debt maturing within one year
$
46.5

 
$
46.5

Short-term debt consisted of foreign credit lines at June 30, 2012 and December 31, 2011. We often provide parent-company guarantees to lending institutions that extend credit to our foreign subsidiaries.
Long-term debt:
Long-term debt consists of the following:
(in Millions)
June 30, 2012
 
 
 
 
Interest Rate
Percentage
 
Maturity
Date
 
6/30/2012
 
12/31/2011
Pollution control and industrial revenue bonds (less unamortized discounts of $0.2 and $0.2, respectively)
0.2-6.5%


2013-2035

$
176.7


$
176.7

Senior notes (less unamortized discount of $1.9 and $2.1, respectively)
3.95-5.2%


2019-2022

598.1


597.9

2011 credit agreement
3.2
%
 
2016
 
26.0

 

Foreign debt
0-13.5%


2013

14.1


24.0

Total long-term debt




$
814.9


$
798.6

Less: debt maturing within one year




4.9


19.5

Total long-term debt, less current portion




$
810.0


$
779.1


Letters of credit outstanding under the 2011 Credit Agreement totaled $73.8 million and $75.5 million at June 30, 2012 and December 31, 2011, respectively. Therefore, available funds under this facility were $1,400.2 million and $1,424.5 million at June 30, 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 June 30, 2012, was 1.3 which is below the maximum leverage of 3.5. Our actual interest coverage for the four consecutive quarters ended June 30, 2012, was 17.2 which is above the minimum interest coverage of 3.5. We were in compliance with all covenants at June 30, 2012.


13


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

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 June 30
 
Six Months Ended June 30
2012
 
2011
 
2012
 
2011
Adjustment for workers’ compensation, product liability, and other postretirement benefits (net of income tax expense of zero and $0.1 for the three and six months ended June 30, 2012 and zero for the three and six months June 30, 2011, respectively)
$
0.1

 
$

 
$
0.3

 
$

Provision for environmental liabilities, net of recoveries (net of income tax benefit of $3.0 and $4.5 for the three and six months ended June 30, 2012 and $3.2 and $6.1 for the three and six months ended June 30, 2011, respectively) (1)
(4.9
)
 
(5.4
)
 
(7.5
)
 
(10.0
)
Provision for legal reserves and expenses, net of recoveries (net of income tax benefit of $2.0 and $5.1 for the three and six months ended June 30, 2012 and $2.2 and $4.3 for the three and six months ended June 30, 2011, respectively)
(3.3
)
 
(3.5
)
 
(8.3
)
 
(6.9
)
Discontinued operations, net of income taxes
$
(8.1
)
 
$
(8.9
)
 
$
(15.5
)
 
$
(16.9
)
____________________
(1)
See a roll forward of our environmental reserves as well as discussion on significant environmental issues that occurred during the year in Note 11.

Note 11: Environmental Obligations
We have reserves for potential environmental obligations, which management consider probable and for which a reasonable estimate of the obligation could be made. Accordingly, we have reserves of $246.3 million and $251.2 million, excluding recoveries, at June 30, 2012 and December 31, 2011, respectively.
At June 30, 2012 and December 31, 2011, we have recorded recoveries of $74.2 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 June 30, 2012 and December 31, 2011, or as “Other assets” totaling $52.7 million and $58.3 million at June 30, 2012 and December 31, 2011, in the condensed consolidated balance sheets, respectively. Cash recoveries were $8.4 million in the first six 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 $203.9 million and $213.3 million at June 30, 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.
The estimated reasonably possible environmental loss contingencies, net of expected recoveries, exceed amounts accrued by approximately $160 million at June 30, 2012. This amount has been increased by $50 million during the second quarter of 2012 due to events that have occurred at our Pocatello and Middleport sites described further below within this note. 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's or year's results of operations in the future. However, we believe any such liability arising from such potential environmental obligations is not likely to have a material adverse effect on our liquidity or financial condition as it may be satisfied over many years.




14


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

The table below is a roll forward of our total environmental reserves, continuing and discontinued, from December 31, 2011 to June 30, 2012:
 
(in Millions)
Operating and
Discontinued
Sites Total
Total environmental reserves, net of recoveries at December 31, 2011
$
226.9

 

Provision
14.5

Spending, net of recoveries
(16.6
)
Net change
(2.1
)
Total environmental reserves, net of recoveries at June 30, 2012
$
224.8

Environmental reserves, current, net of recoveries (1)
20.9

Environmental reserves, long-term continuing and discontinued, net of recoveries
203.9

Total environmental reserves, net of recoveries at June 30, 2012
$
224.8

____________________
(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.

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:
 
Three Months Ended June 30
 
Six Months Ended June 30
(in Millions)
2012
 
2011
 
2012
 
2011
Continuing operations (1)
$
1.5

 
$
1.9

 
$
2.5

 
$
3.0

Discontinued operations (2)
7.9

 
8.6

 
12.0

 
16.1

Net environmental provision
$
9.4

 
$
10.5

 
$
14.5

 
$
19.1

____________________
(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:
 
Three Months Ended June 30
 
Six Months Ended June 30
(in Millions)
2012
 
2011
 
2012
 
2011
Environmental reserves (1)
$
9.4

 
$
19.4

 
$
14.5

 
$
30.1

Other assets (2)

 
(8.9
)
 

 
(11.0
)
Net environmental provision
$
9.4

 
$
10.5

 
$
14.5

 
$
19.1

____________________
(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. The following represents significant updates that occurred in 2012 to these contingencies.

Pocatello
Our decommissioned Pocatello plant partially resides on fee land of the Shoshone-Bannock Tribes' (the “Tribes”) reservation. For a number of years, we engaged in disputes with the Tribes concerning their attempts to regulate our activities on the reservation. On March 6, 2006, a U.S. District Court Judge found that the Tribes were a third-party beneficiary of a 1998 RCRA Consent Decree and ordered us to apply for any applicable Tribal permits relating to the nearly-complete RCRA Consent Decree work. The third-party beneficiary ruling was later reversed by the Ninth Circuit Court of Appeals, but the

15


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

permitting process continued in the tribal legal system. We applied for the tribal permits, but preserved objections to the Tribes' jurisdiction.
In addition, in 1998, the Tribes and we entered into an agreement (“1998 Agreement”) that required us to pay the Tribes $1.5 million per year for waste generated from operating our Pocatello plant and stored on site. We paid $1.5 million per year until December 2001 when the plant closed. In our view the agreement was terminated, as the plant was no longer generating waste. The Tribes claim that the 1998 Agreement has no end date.
On April 25, 2006 the Tribes' Land Use Policy Commission issued us a Special Use Permit for the “disposal and storage of waste” at the Pocatello plant and imposed a $1.5 million per annum permit fee. The permit and fee was affirmed by the Tribal Business Council on July 21, 2006. We sought review of the permit and fee in Tribal Court, in which the Tribes also brought a claim for breach of the 1998 Agreement. On May 21, 2008, the Tribal Court reversed the permit and fee, finding that they were not authorized under tribal law, and dismissed the Tribes' breach of contract claim. The Tribes appealed to the Tribal Court of Appeals.
On May 8, 2012, the Tribal Court of Appeals reversed the May 21, 2008 Tribal Court decision and issued a decision finding the permit and fee validly authorized and ordering us to pay waste permit fees in the amount of $1.5 million per annum for the years 2002-2007 ($9.0 million in total), the Tribes' demand as set forth in the lawsuit. It also reinstated the breach of contract claim. To date, the Tribes have not demanded fees for any years subsequent to 2007. After exhausting the Tribal administrative and judicial process, we intend to file an action in the United States District Court seeking declaratory and injunctive relief on the grounds that the Tribes lacked jurisdiction over us. We will argue that in accordance with a U.S. Supreme Court decision, we neither consented to jurisdiction, nor engaged in conduct that threatened the political integrity, economic security or health and welfare of tribal members; therefore the exceptions under which Tribes may assert jurisdiction over non-Indian owners of fee land within a reservation have not been met. Should we prevail on that theory and the Tribes subsequently try to enforce the 1998 Agreement in federal court, we have a number of defenses, including the termination of the agreement.
We have estimated a reasonably possible loss for this matter and it has been reflected in our total reasonably possible loss estimate previously discussed within this note. Please see our 2011 Form 10-K for additional Pocatello environmental matters.

Middleport
At our Middleport, NY facility our decommissioned arsenic operations were the subject of an Administrative Order on Consent (“AOC”) entered into with the EPA and New York State Departments of the Environment and Health (the “Agencies”). The AOC requires us to (1) define the nature and extent of contamination caused by our historical plant operations, (2) take interim corrective measures and (3) evaluate Corrective Action Management Alternatives (“CMA”) for discrete contaminated areas.
We have previously defined the nature and extent of the contamination and have constructed an engineered cover, closed the RCRA regulated surface water impoundments and are collecting and treating both surface water runoff and ground water, all of which has satisfied the first two requirements of the AOC.
We continue to work with the Agencies to come to an acceptable remedy for two off-site areas for which we have submitted a draft corrective measures study (“CMS”). We recommended a CMA that would remediate approximately 150 residential properties to a standard of 20 parts per million (ppm) on average, with a maximum arsenic concentration that varies based on land use considerations. In the second quarter of 2010 we adjusted our estimated liability for clean up to reflect the costs associated with our recommended CMA.
On June 15, 2012, the Agencies issued a draft Statement of Basis under RCRA that proposes a CMA that would require us to remediate contamination in approximately 180 residential properties in Middleport to a standard of 20 ppm on a point-to-point basis. We believe that this proposed CMA is overly conservative and not supported under New York State law. The Middleport community has expressed objections to the Agencies' draft Statement of Basis on the grounds that it is not supported by site-specific risk assessment and would be disruptive to the community. The public comment period for the proposed action runs through August 13, 2012.
The amount of our reserve recorded for this site is $50.8 million and $47.0 million at June 30, 2012 and December 31, 2011, respectively. Our reserve continues to include the estimated liability for clean-up to reflect the costs associated with our recommended CMA. However, we have increased our estimated reasonably possible environmental loss contingencies exposure to reflect the additional cost of the CMA proposed in the draft Statement of Basis.



16


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

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 June 30, 2012 and 2011. For the six months ended June 30, 2012 there were no potential common shares excluded from Diluted EPS, however for the six months ended June 30, 2011, 430,812 potential common shares were excluded from Diluted EPS.
Our non-vested restricted stock awards contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing EPS. The two-class method determines EPS by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. In calculating the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average number of shares outstanding during the period.
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 June 30
 
Six Months Ended June 30
2012
 
2011
 
2012
 
2011
Earnings (loss) attributable to FMC stockholders:
 
 
 
 
 
 
 
Income from continuing operations attributable to FMC stockholders
$
113.0

 
$
116.1

 
$
239.5

 
$
218.1

Discontinued operations, net of income taxes
(8.1
)
 
(8.9
)
 
(15.5
)
 
(16.9
)
Net income
$
104.9

 
$
107.2

 
$
224.0

 
$
201.2

Less: Distributed and undistributed earnings allocable to restricted award holders
(0.5
)
 
(0.5
)
 
(1.1
)
 
(1.0
)
Net income allocable to common stockholders
$
104.4

 
$
106.7

 
$
222.9

 
$
200.2

 
 
 
 
 
 
 
 
Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
0.82

 
$
0.81

 
$
1.73

 
$
1.52

Discontinued operations
(0.06
)
 
(0.06
)
 
(0.11
)
 
(0.12
)
Net income
$
0.76

 
$
0.75

 
$
1.62

 
$
1.40

 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
0.82

 
$
0.80

 
$
1.72

 
$
1.51

Discontinued operations
(0.06
)
 
(0.06
)
 
(0.11
)
 
(0.12
)
Net income
$
0.76

 
$
0.74

 
$
1.61

 
$
1.39

 
 
 
 
 
 
 
 
Shares (in thousands):
 
 
 
 
 
 
 
Weighted average number of shares of common stock outstanding - Basic
137,247

 
143,212

 
137,870

 
143,056

Weighted average additional shares assuming conversion of potential common shares
1,006

 
1,158

 
1,121

 
1,262

Shares – diluted basis
138,253

 
144,370

 
138,991

 
144,318




17


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

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 six months ended June 30, 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
224.0

 
10.9

 
234.9

Stock compensation plans
21.3

 

 
21.3

Excess tax benefits from share-based compensation
6.2

 

 
6.2

Shares for benefit plan trust
0.9

 

 
0.9

Net pension and other benefit actuarial gains/(losses) and prior service cost credits, net of income tax expense of $10.0 (1)
16.2

 

 
16.2

Net hedging gains (losses) and other, net of income tax expense of $0.6 (1)
0.9

 

 
0.9

Foreign currency translation adjustments (1)
(17.9
)
 
(0.3
)
 
(18.2
)
Dividends ($0.09 per share)
(24.8
)
 

 
(24.8
)
Repurchases of common stock
(148.0
)
 

 
(148.0
)
Distributions to noncontrolling interests

 
(7.0
)
 
(7.0
)
Balance at June 30, 2012
$
1,319.4

 
$
67.1

 
$
1,386.5

____________________
(1)
See Condensed Consolidated Statements of Comprehensive Income.
Dividends and Share Repurchases
On July 19, 2012, we paid dividends totaling $12.4 million to our shareholders of record as of June 29, 2012. This amount is included in “Accrued and other liabilities” on the condensed consolidated balance sheets as of June 30, 2012. For the six months ended June 30, 2012 and June 30, 2011, we paid $22.9 million and $19.8 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 June 30, 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 six months ended June 30, 2012, 3,072,540 shares were repurchased under the publicly announced repurchase program for $144.9 million.

See Note 1 regarding the stock split.

Note 14: Pensions and Other Postretirement Benefits
The following table summarizes the components of net annual benefit cost (income) for the three and six months ended June 30, 2012 and 2011:
(in Millions)
Three Months Ended June 30
 
Six Months Ended June 30
Pensions
 
Other Benefits
 
Pensions
 
Other Benefits
2012
 
2011
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Components of net annual benefit cost (income):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
5.1

 
$
4.9

 
$

 
$
0.1

 
$
10.2

 
$
9.8

 
$

 
$
0.2

Interest cost
15.3

 
15.4

 
0.3

 
0.6

 
30.6

 
30.8

 
0.6

 
1.2

Expected return on plan assets
(19.2
)
 
(20.6
)
 

 

 
(38.4
)
 
(41.2
)
 

 

Amortization of prior service cost (gain)
0.5

 
0.5

 

 
(0.1
)
 
1.0

 
1.0

 

 
(0.2
)
Recognized net actuarial and other (gain) loss
13.2

 
9.2

 
(0.5
)
 
(0.1
)
 
26.4

 
18.4

 
(1.0
)
 
(0.2
)
Net periodic benefit cost from continuing operations
$
14.9

 
$
9.4

 
$
(0.2
)
 
$
0.5

 
$
29.8

 
$
18.8

 
$
(0.4
)
 
$
1.0


18


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

We made voluntary cash contributions to our U.S. defined benefit pension plan of $28.0 million in the six months ended June 30, 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 $45.3 million resulting in an effective tax rate of 27.7 percent compared to expense of $25.7 million resulting in an effective tax rate of 17.5 percent for the three months ended June 30, 2012 and 2011, respectively. The increase in the effective tax rate was primarily a result of a reduction recorded in 2011 in our liability for unrecognized tax benefits of approximately $14.1 million as a result of settlements of audits.
Provision for income taxes was $90.1 million resulting in an effective tax rate of 26.5 percent compared to expense of $66.3 million resulting in an effective tax rate of 22.6 percent for the six months ended June 30, 2012 and 2011, respectively. The decrease in the effective tax rate was consistent with the change in the three months ended June 30, 2012, as discussed in the previous paragraph.

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.

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 $942.8 million and $866.8 million and the carrying amount is $856.5 million and $825.6 million as of June 30, 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

19


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

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 immediately record in earnings changes in the fair value of derivatives that are not designated as cash flow hedges.
As of June 30, 2012, we had open foreign currency forward contracts in AOCI in a net loss position of $3.4 million, before-tax ($2.4 million, after-tax), designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until December 31, 2013. At June 30, 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 $357.6 million.
As of June 30, 2012, we had current open commodity contracts in AOCI in a net loss position of $4.2 million, before-tax ($2.6 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 June 30, 2012, we had 8.5 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, $5.1 million of these losses would be realized in earnings during the twelve months ending June 30, 2013 and $0.1 million of net gains will be realized subsequent to June 30, 2013, if spot rates in the future are consistent with forward rates as of June 30, 2012. The actual effect on earnings will be dependent on actual spot rates 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 $470.8 million at June 30, 2012. We held 0.3 million bushels in aggregate notional volume of outstanding soybean contracts to hedge outstanding barter contracts at June 30, 2012.
The following table provides the fair value and balance sheet presentation of our derivative instruments as of June 30, 2012 and December 31, 2011.

20


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

(in Millions)
 
 
 
June 30, 2012
 
December 31, 2011
 
 
Balance Sheet Location
 
Fair Value
Derivatives Designated as Cash Flow Hedges
 
 
 
 
 
 
Foreign exchange contracts
 
Prepaid and other current assets
 
$
3.8


$
8.4

Commodity contracts:
 
 
 
 
 
 
Energy contracts
 
Prepaid and other current assets
 
0.1

 
0.5

Total Derivative Assets
 
 
 
$
3.9

 
$
8.9

 
 
 
 
 
 
 
Foreign exchange contracts
 
Accrued and other liabilities
 
(7.2
)

(10.3
)
Commodity contracts:
 
 
 
 
 
 
Energy contracts
 
Accrued and other liabilities
 
(4.4
)
 
(8.0
)
Total Derivative Liabilities
 
 
 
$
(11.6
)
 
$
(18.3
)
Net Derivative Assets/(Liabilities)
 
 
 
$
(7.7
)
 
$
(9.4
)
 
 
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments
 
 
 
 
 
 
Foreign exchange contracts
 
Prepaid and other current assets
 
$
1.5


$
3.5

Total Derivative Assets
 
 
 
$
1.5

 
$
3.5

 
 
 
 
 
 
 
Foreign exchange contracts
 
Accrued and other liabilities
 



Total Derivative Liabilities
 
 
 
$

 
$

Net Derivative Assets/(Liabilities)
 
 
 
$
1.5

 
$
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 and six months ended June 30, 2012 and 2011.

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 June 30
 
Three Months Ended June 30
 
Three Months Ended June 30
 
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Foreign exchange contracts
 
$
(3.3
)
 
$
0.9

 
$
2.0

 
$
1.6

 
$

 
$
0.2

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Energy contracts
 
3.3

 
0.6

 
(3.9
)
 
(1.7
)
 

 

Total
 
$

 
$
1.5

 
$
(1.9
)
 
$
(0.1
)
 
$

 
$
0.2

(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)
 
 
Six Months Ended June 30
 
Six Months Ended June 30
 
Six Months Ended June 30
 
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Foreign exchange contracts
 
$
(1.1
)
 
$
1.8

 
$
3.7

 
$
1.8

 
$
0.2

 
$
0.2

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Energy contracts
 
2.0

 
1.8

 
(6.4
)
 
(3.8
)
 

 

Other
 

 

 
0.1

 

 

 

Total
 
$
0.9

 
$
3.6

 
$
(2.6
)
 
$
(2.0
)
 
$
0.2

 
$
0.2

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

21


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


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 June 30
 
Six Months Ended June 30
(in Millions)
 
2012
 
2011
 
2012
 
2011
Foreign Exchange contracts
Cost of Sales and Services
$
15.9

 
$
(1.3
)
 
$
19.3


$
(2.5
)
Commodity contracts:
 
 
 
 
 
 
 
 
Energy contracts
Cost of Sales and Services

 
(0.1
)
 

 
(0.2
)
Total
 
$
15.9

 
$
(1.4
)
 
$
19.3

 
$
(2.7
)

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 June 30, 2012 and December 31, 2011. During the periods presented there were no transfers between fair-value hierarchy levels.
 
(in Millions)
June 30, 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
0.1