FMC 3.31.2013 10Q
Table of Contents


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, 2013
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, 2013
Common Stock, par value $0.10 per share
 
136,130,148

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
 
 
Page
No.


2
Table of Contents

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
2013
 
2012
 
(unaudited)
Revenue
$
990.2

 
$
940.7

Costs and Expenses
 
 
 
Costs of sales and services
620.5

 
593.4

 
 
 
 
Gross margin
369.7

 
347.3

 
 
 
 
Selling, general and administrative expenses
131.3

 
129.1

Research and development expenses
29.8

 
28.5

Restructuring and other charges (income)
9.9

 
1.7

Total costs and expenses
791.5

 
752.7

Income from continuing operations before equity in (earnings) loss of affiliates, interest expense, net and income taxes
198.7

 
188.0

Equity in (earnings) loss of affiliates
(0.5
)
 
(0.1
)
Interest expense, net
11.7

 
11.3

Income from continuing operations before income taxes
187.5

 
176.8

Provision for income taxes
47.3

 
44.8

Income from continuing operations
140.2

 
132.0

Discontinued operations, net of income taxes
(5.2
)
 
(7.4
)
Net income
135.0

 
124.6

Less: Net income attributable to noncontrolling interests
4.1

 
5.5

Net income attributable to FMC stockholders
$
130.9

 
$
119.1

Amounts attributable to FMC stockholders:
 
 
 
Continuing operations, net of income taxes
$
136.1

 
$
126.5

Discontinued operations, net of income taxes
(5.2
)
 
(7.4
)
Net income
$
130.9

 
$
119.1

Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
Continuing operations
$
0.99

 
$
0.91

Discontinued operations
(0.04
)
 
(0.05
)
Net income
$
0.95

 
$
0.86

Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
Continuing operations
$
0.98

 
$
0.90

Discontinued operations
(0.04
)
 
(0.05
)
Net income
$
0.94

 
$
0.85

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


3
Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
(in Millions)
Three Months Ended March 31
2013
 
2012
 
(unaudited)
Net Income
$
135.0

 
$
124.6

Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustments (1)
(14.6
)
 
11.2

 
 
 
 
Derivative instruments:
 
 
 
Unrealized hedging gains (losses) and other, net of tax of $3.6 and $0.3
6.2

 
0.8

Reclassification of deferred hedging (gains) losses and other, included in net income, net of tax of $(0.4) and $0.4 (3)
(0.7
)
 
0.4

Total derivative instruments, net of tax of $3.2 and $0.7
5.5

 
1.2

 
 
 
 
Pension and other postretirement benefits:
 
 
 
Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax of $0.1 and ($0.6) (2)
0.6

 
(0.9
)
Reclassification of net actuarial and other (gain) loss and amortization of prior service costs, included in net income, net of tax of $6.4 and $4.9 (3)
10.8

 
7.9

Total pension and other postretirement benefits, net of tax of $6.5 and $4.3
11.4

 
7.0

 
 
 
 
Other comprehensive income (loss), net of tax
2.3

 
19.4

Comprehensive income
$
137.3

 
$
144.0

Less: Comprehensive income attributable to the noncontrolling interest
4.0

 
5.6

Comprehensive income attributable to FMC stockholders
$
133.3

 
$
138.4

____________________ 
(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.
(3)
For more detail on the components of these reclassifications and the affected line item in the Condensed Consolidated Statements of Income see Note 14.


4
Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(in Millions, Except Share and Par Value Data)
March 31, 2013
 
December 31, 2012
 
(unaudited)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
82.6

 
$
77.1

Trade receivables, net of allowance of $27.9 at March 31, 2013 and $27.2 at December 31, 2012
1,223.1

 
1,124.5

Inventories
678.9

 
675.7

Prepaid and other current assets
180.5

 
181.1

Deferred income taxes
120.2

 
123.4

Total current assets
2,285.3

 
2,181.8

Investments
44.5

 
40.2

Property, plant and equipment, net
1,127.3

 
1,136.2

Goodwill
286.7

 
294.4

Other intangibles, net
210.2

 
215.7

Other assets
275.3

 
272.3

Deferred income taxes
218.7

 
233.3

Total assets
$
4,448.0

 
$
4,373.9

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Short-term debt
$
37.2

 
$
50.6

Current portion of long-term debt
6.0

 
5.7

Accounts payable, trade and other
361.9

 
443.2

Advance payments from customers
7.3

 
140.3

Accrued and other liabilities
194.7

 
192.0

Accrued payroll
46.2

 
75.1

Accrued customer rebates
263.0

 
142.9

Guarantees of vendor financing
17.3

 
31.4

Accrued pension and other postretirement benefits, current
21.3

 
21.3

Income taxes
32.8

 
32.9

Total current liabilities
987.7

 
1,135.4

Long-term debt, less current portion
1,233.9

 
908.8

Accrued pension and other postretirement benefits, long-term
359.4

 
375.8

Environmental liabilities, continuing and discontinued
188.1

 
200.2

Reserve for discontinued operations
44.8

 
44.4

Other long-term liabilities
150.9

 
154.5

Commitments and contingent liabilities (Note 18)

 

Equity
 
 
 
Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 2013 or 2012
—

 
—

Common stock, $0.10 par value, authorized 260,000,000 shares in 2013 and 2012; 185,983,792 issued shares at March 31, 2013 and December 31, 2012
18.6

 
18.6

Capital in excess of par value of common stock
433.2

 
481.9

Retained earnings
2,649.0

 
2,536.5

Accumulated other comprehensive income (loss)
(406.5
)
 
(408.9
)
Treasury stock, common, at cost: 49,853,644 shares at March 31, 2013 and 48,313,414 shares at December 31, 2012
(1,258.2
)
 
(1,147.8
)
Total FMC stockholders’ equity
1,436.1

 
1,480.3

Noncontrolling interests
47.1

 
74.5

Total equity
1,483.2

 
1,554.8

Total liabilities and equity
$
4,448.0

 
$
4,373.9

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

5
Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(in Millions)
Three Months Ended March 31
2013
 
2012
 
(unaudited)
Cash provided (required) by operating activities of continuing operations:
 
 
 
Net income
$
135.0

 
$
124.6

Discontinued operations
5.2

 
7.4

Income from continuing operations
$
140.2

 
$
132.0

Adjustments from income from continuing operations to cash provided (required) by operating activities of continuing operations:
 
 
 
Depreciation and amortization
33.7

 
32.2

Equity in (earnings) loss of affiliates
(0.5
)
 
(0.1
)
Restructuring and other charges (income)
9.9

 
1.7

Deferred income taxes
15.2

 
13.0

Pension and other postretirement benefits
18.6

 
14.7

Share-based compensation
5.5

 
5.8

Excess tax benefits from share-based compensation
(4.3
)
 
(4.7
)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
 
 
 
Trade receivables, net
(101.7
)
 
(117.3
)
Guarantees of vendor financing
(14.1
)
 
8.3

Inventories
(6.2
)
 
(36.3
)
Other current assets and other assets
3.1

 
(0.3
)
Accounts payable
(59.5
)
 
(12.7
)
Accrued and other current liabilities and other liabilities
(9.7
)
 
12.3

Advance payments from customers
(133.0
)
 
(68.1
)
Accrued payroll
(28.8
)
 
(29.4
)
Accrued customer rebates
120.1

 
77.9

Income taxes
2.6

 
20.2

Pension and other postretirement benefit contributions
(17.9
)
 
(20.5
)
Environmental spending, continuing, net of recoveries
(1.0
)
 
0.1

Restructuring and other spending
(4.1
)
 
(4.4
)
Cash provided (required) by operating activities
(31.9
)
 
24.4

Cash provided (required) by operating activities of discontinued operations:
 
 
 
Environmental spending, discontinued, net of recoveries
(7.6
)
 
(3.7
)
Payments of other discontinued reserves
(5.0
)
 
(8.3
)
Cash provided (required) by operating activities of discontinued operations
(12.6
)
 
(12.0
)
The accompanying notes are an integral part of these condensed consolidated financial statements.
(continued)

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Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 
(in Millions)
Three Months Ended March 31
2013
 
2012
 
(unaudited)
Cash provided (required) by investing activities:
 
 
 
Capital expenditures
$
(47.6
)
 
$
(38.8
)
Proceeds from disposal of property, plant and equipment
1.3

 
—

Acquisitions, net of cash acquired
(0.2
)
 
(21.2
)
Investments in nonconsolidated affiliates
(3.2
)
 
(3.0
)
Other investing activities
(5.5
)
 
(4.9
)
Cash provided (required) by investing activities
(55.2
)
 
(67.9
)
Cash provided (required) by financing activities:
 
 
 
Net borrowings (repayments) under committed credit facilities
325.0

 
131.0

Increase (decrease) in short-term debt
(13.4
)
 
(4.2
)
Repayments of long-term debt
(0.3
)
 
(7.0
)
Proceeds from borrowings of long-term debt
0.4

 
0.1

Distributions to noncontrolling interests
(6.6
)
 
(7.0
)
Acquisition of noncontrolling interests
(72.0
)
 
—

Issuances of common stock, net
2.9

 
7.8

Excess tax benefits from share-based compensation
4.3

 
4.7

Dividends paid
(18.7
)
 
(10.5
)
Repurchases of common stock under publicly announced program
(109.9
)
 
(144.9
)
Other repurchases of common stock
(6.4
)
 
(3.0
)
Cash provided (required) by financing activities
105.3

 
(33.0
)
Effect of exchange rate changes on cash and cash equivalents
(0.1
)
 
0.4

Increase (decrease) in cash and cash equivalents
5.5

 
(88.1
)
Cash and cash equivalents, beginning of period
77.1

 
158.9

Cash and cash equivalents, end of period
$
82.6

 
$
70.8

Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest was $9.3 million and $2.6 million, and income taxes paid, net of refunds were $27.3 million and $6.9 million for the three months ended March 31, 2013 and 2012, respectively. Non-cash additions to property, plant and equipment were $11.7 million and $3.8 million for March 31, 2013 and 2012.
See Note 13 regarding quarterly cash dividend and acquisition of noncontrolling interest.

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

7
Table of Contents

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, 2013 and 2012, and our financial position as of March 31, 2013. All such adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the Notes. The results of operations for the three months ended March 31, 2013 and 2012 are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheets as of March 31, 2013 and December 31, 2012, 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, 2013 and 2012, 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, 2012 (the “2012 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 to the condensed consolidated financial statements have been reclassified to conform to the current year's presentation.

Note 2: Recently Issued and Adopted Accounting Pronouncements and Regulatory Items
Accounting guidance and regulatory items adopted in 2013
Reclassification from Accumulated Other Comprehensive Income
In February 2013, the Financial Accounting Standards Board ("FASB") issued its guidance requiring new disclosures for the reclassification from accumulated other comprehensive income (AOCI) to net income. This new guidance requires that we present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. We adopted this new guidance on January 1, 2013. Upon adoption, we decided to present the required disclosures in a new footnote to our condensed consolidated financial statement. For the new disclosures refer to the Reclassifications of Accumulated Other Comprehensive Income footnote, Note 14.
Balance Sheet - Offsetting
In December 2011, the 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. We adopted this new guidance on January 1, 2013. The adoption of this guidance resulted in additional disclosure included within our Financial Instruments, Risk Management and Fair Value Measurements footnote. See Note 17.

Note 3: Acquisitions

In the first quarter of 2013 we completed the purchase of additional ownership interest in FMC Wyoming. See Note 13 for more information.

We completed three acquisitions during 2012. These acquisitions and related disclosures are described in more detail in Note 3 to the consolidated financial statements included in our 2012 Form 10-K. During the first quarter of 2013, we made $2.1 million of adjustments to the preliminary purchase price allocations associated with these acquisitions. These adjustments were

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

made primarily as a result of working capital adjustments that were finalized during the quarter, however did not result in any changes to previously established goodwill balances.

Additionally, during the first quarter we paid $0.2 million of additional purchase price related to acquisitions prior to 2012. These additional amounts were accrued for as “non-contingent consideration payable” on our December 31, 2012 condensed consolidated balance sheet. The amount of this outstanding payable at March 31, 2013 was $0.7 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 $1.0 million at both March 31, 2013 and December 31, 2012.


Note 4: Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by business segment for the three months ended March 31, 2013, are presented in the table below:
(in Millions)
Agricultural
Products
 
Specialty
Chemicals
 
Industrial
Chemicals
 
Total
Balance, December 31, 2012
$
31.0

 
$
246.6

 
$
16.8

 
$
294.4

Foreign currency adjustments
—

 
(7.4
)
 
(0.3
)
 
(7.7
)
Balance, March 31, 2013
$
31.0

 
$
239.2

 
$
16.5

 
$
286.7

Our intangible assets, other than goodwill, consist of the following:
 
March 31, 2013
 
December 31, 2012
(in Millions)
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Accumulated Amortization
 
Net
Intangible assets subject to amortization (finite-lived)
Customer relationships
$
129.2

 
$
(10.0
)
 
$
119.2

 
$
131.4

 
$
(8.6
)
 
$
122.8

Patents
0.6

 
(0.2
)
 
0.4

 
0.6

 
(0.2
)
 
0.4

Trademarks and trade names
1.4

 
(0.3
)
 
1.1

 
1.5

 
(0.2
)
 
1.3

Purchased and licensed technologies
63.6

 
(15.8
)
 
47.8

 
63.6

 
(14.4
)
 
49.2

Other intangibles
4.9

 
(2.2
)
 
2.7

 
4.9

 
(1.9
)
 
3.0

 
$
199.7

 
$
(28.5
)
 
$
171.2

 
$
202.0

 
$
(25.3
)
 
$
176.7

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
$
238.7

 
$
(28.5
)
 
$
210.2

 
$
241.0

 
$
(25.3
)
 
$
215.7

At March 31, 2013, the finite-lived and indefinite life intangibles were allocated among our business segments as follows:
(in Millions)
Finite-lived
 
Indefinite life
Agricultural Products
$
109.9

 
$
35.2

Specialty Chemicals
52.3

 
3.2

Industrial Chemicals
9.0

 
0.6

Total
$
171.2

 
$
39.0



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Table of Contents

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

Note 5: Inventories
Inventories consisted of the following:
 (in Millions)
March 31, 2013
 
December 31, 2012
Finished goods and work in process
$
430.0

 
$
416.0

Raw materials
248.9

 
259.7

Net inventory
$
678.9

 
$
675.7



Note 6: Property, Plant and Equipment
Property, plant and equipment consisted of the following:
(in Millions)
March 31, 2013
 
December 31, 2012
Property, plant and equipment
$
3,028.2

 
$
3,037.4

Accumulated depreciation
1,900.9

 
1,901.2

Property, plant and equipment, net
$
1,127.3

 
$
1,136.2


Note 7: 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)
2013
 
2012
Restructuring Charges and Asset Disposals
$
8.4

 
$
1.1

Other Charges (Income), Net
1.5

 
0.6

Total Restructuring and Other Charges
$
9.9

 
$
1.7


RESTRUCTURING CHARGES AND ASSET DISPOSALS

For further detail on the restructuring charges and asset disposals which commenced prior to 2013, see Note 7 to our consolidated financial statements included with our 2012 Form 10-K.
 
Restructuring Charges
 
 
 
(in Millions)
Severance and Employee Benefits (1)
 
Other Charges (Income) (2)
 
Asset Disposal Charges (3)
Total
Lithium Restructuring
2.6

 
2.2

 
1.0

5.8

Other Items
1.8

 
0.8

 
—

2.6

Three months ended March 31, 2013
$
4.4

 
$
3.0

 
$
1.0

$
8.4

Other Items
—

 
0.7

 
0.4

1.1

Three months ended March 31, 2012
$
—

 
$
0.7

 
$
0.4

$
1.1

____________________ 
(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 8.


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

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 8.
(in Millions)
Balance  at
12/31/12 (4)
 
Change in
reserves (2)
 
Cash
payments
 
Other (3)
 
Balance at
3/31/13 (4)
Lithium Restructuring
$
—

 
$
4.8

 
$
(2.5
)
 
$
—

 
$
2.3

Zeolites Shutdown
1.5

 
0.4

 
(0.4
)
 
—

 
1.5

Huelva Restructuring
3.0

 
0.3

 
(0.3
)
 
(0.1
)
 
2.9

Other Workforce Related and Facility Shutdowns (1)
6.0

 
1.9

 
(0.9
)
 
—

 
7.0

Total
$
10.5

 
$
7.4

 
$
(4.1
)
 
$
(0.1
)
 
$
13.7

____________________ 
(1)
Primarily severance costs related to workforce reductions and facility shutdowns noted 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” on the condensed consolidated balance sheets.
OTHER CHARGES (INCOME), NET
 
Three Months Ended March 31
(in Millions)
2013
 
2012
Environmental Charges, Net
$
1.0

 
$
1.0

Other, Net
0.5

 
(0.4
)
Other Charges (Income), Net
$
1.5

 
$
0.6

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

Note 8: Asset Retirement Obligations
As of March 31, 2013, the balance of our asset retirement obligations was $22.2 million compared to $25.5 million at December 31, 2012. A more complete description of our asset retirement obligations can be found in Note 8 to our 2012 consolidated financial statements in our 2012 10-K.

Note 9: Debt
Debt maturing within one year:
Debt maturing within one year consists of the following:
(in Millions)
March 31, 2013
 
December 31, 2012
Short-term debt
$
37.2

 
$
50.6

Current portion of long-term debt
6.0

 
5.7

Total debt maturing within one year
$
43.2

 
$
56.3

Short-term debt consisted of foreign credit lines at March 31, 2013 and December 31, 2012. We often provide parent-company guarantees to lending institutions that extend credit to our foreign subsidiaries.

11
Table of Contents

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, 2013
 
 
 
 
Interest Rate
Percentage
 
Maturity
Date
 
3/31/2013
 
12/31/2012
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 $1.8 and $1.8, respectively)
3.95-5.2%


2019-2022

598.2


598.2

2011 credit agreement (1)
1.2
%
 
2016
 
455.0

 
130.0

Foreign debt
0-10.3%


2013-2023

10.0


9.6

Total long-term debt




$
1,239.9


$
914.5

Less: debt maturing within one year




6.0


5.7

Total long-term debt, less current portion




$
1,233.9


$
908.8

____________________
(1)
Letters of credit outstanding under the 2011 Credit Agreement totaled $73.3 million and available funds under this facility were $971.7 million at March 31, 2013.
Covenants
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, 2013, was 1.7 which is below the maximum leverage of 3.5. Our actual interest coverage for the four consecutive quarters ended March 31, 2013, was 17.5 which is above the minimum interest coverage of 3.5. We were in compliance with all covenants at March 31, 2013.

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
2013
 
2012
Adjustment for workers’ compensation, product liability, and other postretirement benefits, net of income tax benefit (expense) of $(0.1) and $(0.1)
$
0.1

 
$
0.1

Provision for environmental liabilities, net of recoveries, net of income tax benefit of $1.3 and $1.5 (1)
(2.0
)
 
(2.6
)
Provision for legal reserves and expenses, net of recoveries, net of income tax benefit of $2.0 and $3.1
(3.3
)
 
(4.9
)
Discontinued operations, net of income taxes
$
(5.2
)
 
$
(7.4
)
____________________
(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 $230.8 million and $236.5 million, excluding recoveries, at March 31, 2013 and December 31, 2012, respectively.

12
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FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

The estimated reasonably possible environmental loss contingencies, net of expected recoveries, exceed amounts accrued by approximately $160 million at March 31, 2013. 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.
The table below is a roll forward of our total environmental reserves, continuing and discontinued, from December 31, 2012 to March 31, 2013:
 
(in Millions)
Operating and
Discontinued
Sites Total
Total environmental reserves, net of recoveries at December 31, 2012
$
216.0

 

Provision
5.3

Spending, net of recoveries
(11.5
)
Net change
(6.2
)
Total environmental reserves, net of recoveries at March 31, 2013
$
209.8

Environmental reserves, current, net of recoveries (1)
21.7

Environmental reserves, long-term continuing and discontinued, net of recoveries (2)
188.1

Total environmental reserves, net of recoveries at March 31, 2013
$
209.8

____________________
(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.
(2)
These amounts are included in “Environmental liabilities, continuing and discontinued” on the condensed consolidated balance sheets.
At March 31, 2013 and December 31, 2012, we have recorded recoveries 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” or as “Other assets” in the condensed consolidated balance sheets. The table below is a roll forward of our total recorded recoveries from December 31, 2012 to March 31, 2013:
(in Millions)
12/31/2012
 
Increase in Recoveries
 
Cash Received
 
3/31/2013
Environmental liabilities, continuing and discontinued
$
20.5

 
$
0.5

 
$
—

 
$
21.0

Other assets
51.6

 
1.0

 
(2.8
)
 
49.8

Total
$
72.1

 
1.5

 
$
(2.8
)
 
$
70.8


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 March 31
(in Millions)
2013
 
2012
Continuing operations (1)
$
1.0

 
$
1.0

Discontinued operations (2)
3.3

 
4.1

Net environmental provision
$
4.3

 
$
5.1

____________________
(1) Recorded as a component of “Restructuring and other charges (income)” on our condensed consolidated statements of income. See Note 7.
(2) Recorded as a component of “Discontinued operations, net of income taxes" on our consolidated statements of income. See Note 10.

13
Table of Contents

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


On our condensed consolidated balance sheets, the net environmental provisions are recorded to the following balance sheet captions:
 
Three Months Ended March 31
(in Millions)
2013
 
2012
Environmental reserves (1)
$
5.3

 
$
5.1

Other assets (2)
(1.0
)
 
—

Net environmental provision
$
4.3

 
$
5.1

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

There were no significant developments in any of our environmental contingencies during the quarter ended March 31, 2013, except that the suspension of proceedings in the Tribal Appellate Court with respect to the appeal regarding our Pocatello site has been lifted and further proceedings are expected. A more complete description of our environmental contingencies, the Pocatello legal matter and the nature of our potential obligations are included in Notes 1 and 10 to our 2012 consolidated financial statements in our 2012 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, 2013 and 2012.
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:

14
Table of Contents

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

(in Millions, Except Share and Per Share Data)
Three Months Ended March 31
2013
 
2012
Earnings (loss) attributable to FMC stockholders:
 
 
 
Income from continuing operations attributable to FMC stockholders
$
136.1

 
$
126.5

Discontinued operations, net of income taxes
(5.2
)
 
(7.4
)
Net income
$
130.9

 
$
119.1

Less: Distributed and undistributed earnings allocable to restricted award holders
(0.5
)
 
(0.6
)
Net income allocable to common stockholders
$
130.4

 
$
118.5

 
 
 
 
Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
Continuing operations
$
0.99

 
$
0.91

Discontinued operations
(0.04
)
 
(0.05
)
Net income
$
0.95

 
$
0.86

 
 
 
 
Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
Continuing operations
$
0.98

 
$
0.90

Discontinued operations
(0.04
)
 
(0.05
)
Net income
$
0.94

 
$
0.85

 
 
 
 
Shares (in thousands):
 
 
 
Weighted average number of shares of common stock outstanding - Basic
137,133

 
138,336

Weighted average additional shares assuming conversion of potential common shares
950

 
1,138

Shares – diluted basis
138,083

 
139,474




15
Table of Contents

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 three months ended March 31, 2013: 
(in Millions, Except Per Share Data)
FMC’s
Stockholders’
Equity
 
Noncontrolling
Interest
 
Total
Equity
Balance at December 31, 2012
$
1,480.3

 
$
74.5

 
$
1,554.8

Net income
130.9

 
4.1

 
135.0

Stock compensation plans
8.6

 
—

 
8.6

Excess tax benefits from share-based compensation
4.3

 
—

 
4.3

Shares for benefit plan trust
(0.4
)
 
—

 
(0.4
)
Net pension and other benefit actuarial gains/(losses) and prior service costs, net of income tax (1)
11.4

 
—

 
11.4

Net hedging gains/(losses) and other, net of income tax (1)
5.5

 
—

 
5.5

Foreign currency translation adjustments (1)
(14.5
)
 
(0.1
)
 
(14.6
)
Dividends ($0.135 per share)
(18.5
)
 
—

 
(18.5
)
Repurchases of common stock
(116.3
)
 
—

 
(116.3
)
Acquisition of noncontrolling interests (2)
(55.2
)
 
(24.8
)
 
(80.0
)
Distributions to noncontrolling interests
—

 
(6.6
)
 
(6.6
)
Balance at March 31, 2013
$
1,436.1

 
$
47.1

 
$
1,483.2

____________________
(1)
See Condensed Consolidated Statements of Comprehensive Income.
(2)
See "FMC Wyoming" discussion below.

FMC Wyoming
We purchased an additional 6.25 percent ownership interest in FMC Wyoming Corporation (FMC WY) in March 2013 from Nippon Sheet Glass Company Ltd. for $80.0 million which increased our ownership from 87.5 percent to 93.75 percent. FMC WY is our majority owned joint venture that manufactures, markets and sells soda ash products. The 6.25 percent was owned by one of two noncontrolling interest holders of FMC WY stock. The purchase price was paid in two increments. In March 2013, $72.0 million was paid which is classified as financing within our Condensed Consolidated Statements of Cash Flow. In April 2013 the remaining $8.0 million was paid. The $8.0 million was recorded as "Accrued and other liabilities" on our condensed consolidated balance sheet as of March 31, 2013.
Dividends and Share Repurchases
For the three months ended March 31, 2013 and 2012, we paid $18.7 million and $10.5 million, respectively, in dividends declared in previous periods. On April 18, 2013, we paid dividends totaling $18.5 million to our shareholders of record as of March 28, 2013. This amount is included in “Accrued and other liabilities” on the condensed consolidated balance sheets as of March 31, 2013.
 
During the three months ended March 31, 2013, we repurchased 1,843,200 shares under the publicly announced repurchase program for $109.9 million. At March 31, 2013, $134.9 million remained unused under our Board-authorized repurchase program.

On April 23, 2013 our Board authorized the repurchase of up to $500 million of our common shares. This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market conditions and other factors. The authorization of April 23, 2013, replaced the previous authority under which $134.9 million was unused.



16
Table of Contents

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

Note 14: Reclassifications of Accumulated Other Comprehensive Income

The table below provides details about the reclassifications from Accumulated Other Comprehensive Income and the affected line items in the Condensed Consolidated Statements of Income for each of the periods presented.
Details about Accumulated Other Comprehensive Income Components
 
Amounts Reclassified from Accumulated Other Comprehensive Income (1)
 
Affected Line Item in the Condensed Consolidated Statements of Income
 
 
Three Months Ended March 31
 
 
(in Millions)
 
2013
 
2012
 
 
Derivative Instruments:
 
 
 
 
 
 
Foreign Currency Contracts
 
(0.1
)
 
2.5

 
Costs of sales and services
Energy Contracts
 
(0.3
)
 
(2.4
)
 
Costs of sales and services
Foreign Currency Contracts
 
1.5

 
(0.8
)
 
Selling, general and administrative expenses
Other Contracts
 
—

 
(0.1
)
 
Interest expense, net
 
 
$
1.1

 
$
(0.8
)
 
Total before tax
 
 
(0.4
)
 
0.4

 
Income tax (expense) benefit
 
 
$
0.7

 
$
(0.4
)
 
Amount included in net income
 
 
 
 
 
 
 
Pension and postretirement benefits (2):
 
 
 
 
 
 
Amortization of prior service costs
 
$
(0.5
)
 
$
(0.5
)
 
Selling, general and administrative expenses
Amortization of unrecognized net actuarial and other gains (losses)
 
(16.7
)
 
(12.3
)
 
Selling, general and administrative expenses
 
 
$
(17.2
)
 
$
(12.8
)
 
Total before tax
 
 
6.4

 
4.9

 
Income tax (expense) benefit
 
 
$
(10.8
)
 
$
(7.9
)
 
Amount included in net income
 
 
 
 
 
 
 
Total reclassifications for the period
 
$
(10.1
)
 
$
(8.3
)
 
Amount included in net income
____________________
(1)
Amounts in parentheses indicate charges to the Condensed Consolidated Statements of Income.
(2)
Pension and postretirement benefits amounts include the impact from both continuing and discontinued operations. For detail on the continuing operations components of pension and postretirement benefits, see Note 15.



17
Table of Contents

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

Note 15: Pensions and Other Postretirement Benefits
The following table summarizes the components of net annual benefit cost (income) for the three months ended March 31, 2013 and 2012:
(in Millions)
Three Months Ended March 31
Pensions
 
Other Benefits
2013
 
2012
 
2013
 
2012
Components of net annual benefit cost (income):
 
 
 
 
 
 
 
Service cost
$
5.4

 
$
5.1

 
$
—

 
$
—

Interest cost
14.5

 
15.3

 
0.3

 
0.3

Expected return on plan assets
(19.2
)
 
(19.2
)
 
—

 
—

Amortization of prior service cost (credit)
0.5

 
0.5

 
—

 
—

Recognized net actuarial and other (gain) loss
17.5

 
13.2

 
(0.4
)
 
(0.5
)
Net periodic benefit cost from continuing operations
$
18.7

 
$
14.9

 
$
(0.1
)
 
$
(0.2
)
We made voluntary cash contributions to our U.S. defined benefit pension plan of $13.0 million in the three months ended March 31, 2013. We expect that our total voluntary cash contributions to the plan for 2013 will be approximately $40 million.

Note 16: Income Taxes
Provision for income taxes was $47.3 million resulting in an effective tax rate of 25.2 percent compared to expense of $44.8 million resulting in an effective tax rate of 25.3 percent for the three months ended March 31, 2013 and 2012, respectively.

Note 17: Financial Instruments, Risk Management and Fair Value Measurements
Our financial instruments include cash and cash equivalents, trade receivables, other current assets, certain receivables classified as other long-term assets, accounts payable, and amounts included in investments and accruals meeting the definition of financial instruments. The carrying value of these financial instruments approximates their fair value. Our other financial instruments include the following:
Financial Instrument
  
Valuation Method
 
 
 
Foreign Exchange Forward Contracts
  
Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on current market prices for applicable currencies.
 
 
 
Commodity Forward 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 $1,372.5 million and $1,057.0 million and the carrying amount is $1,277.1 million and $965.1 million as of March 31, 2013 and December 31, 2012, 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 18). 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.

18
Table of Contents

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

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 2012 Form 10-K.
We formally document all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes relating derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. We also assess both, at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If we determine that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting with respect to that derivative prospectively.
Accounting for Derivative Instruments and Hedging Activities
Cash Flow Hedges
We recognize all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, we generally designate the derivative as a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge). We record in 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 March 31, 2013, we had open foreign currency forward contracts in AOCI in a net after tax gain position of $3.6 million designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until August 1, 2014. At March 31, 2013, we had open forward contracts with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $392.7 million.
As of March 31, 2013, we had current open commodity contracts in AOCI in a net after tax gain position of $1.6 million designated as cash flow hedges of underlying forecasted purchases, primarily natural gas. Current open commodity contracts hedge forecasted transactions until December 31, 2014. At March 31, 2013, 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 $5.2 million of net gains after-tax, representing both open foreign currency exchange contracts and open commodity contracts, approximately $5.0 million of these gains would be realized in earnings during the twelve months ending March 31, 2014 and $0.2 million of net gains will be realized subsequent to March 31, 2014, if spot rates in the future are consistent with forward rates as of March 31, 2013. 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 $473.2 million at March 31, 2013. We held an immaterial amount of bushels, in aggregate notional volume of outstanding soybean contracts, to hedge outstanding barter contracts at March 31, 2013.



19
Table of Contents

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

Fair Value of Derivative Instruments
The following table provides the gross fair value and net balance sheet presentation of our derivative instruments as of March 31, 2013 and December 31, 2012.
 
March 31, 2013
 
Gross Amount of Derivatives
 
 
 
 
 
 
(in Millions)
Designated as Cash Flow Hedges
 
Not Designated as Hedging Instruments
 
Total Gross Amounts
 
Gross Amounts Offset in the Consolidated Balance Sheet (3)
 
Net Amounts
Derivatives
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
10.1

 
$
2.0

 
$
12.1

 
$
(6.1
)
 
$
6.0

Energy contracts
2.9

 
—

 
2.9

 
(0.1
)
 
2.8

Other contracts
0.2

 
—

 
0.2

 
—

 
0.2

Total Derivative Assets (1)
$
13.2

 
$
2.0

 
$
15.2

 
$
(6.2
)
 
$
9.0

 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
(4.4
)
 
$
(2.6
)
 
$
(7.0
)
 
$
6.1

 
$
(0.9
)
Energy contracts
(0.4
)
 
—

 
(0.4
)
 
0.1

 
(0.3
)
Total Derivative Liabilities (2)
$
(4.8
)
 
$
(2.6
)
 
$
(7.4
)
 
$
6.2

 
$
(1.2
)
 
 
 
 
 
 
 
 
 
 
Net Derivative Assets/(Liabilities)
$
8.4

 
$
(0.6
)
 
$
7.8

 
$
—

 
$
7.8

 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
Gross Amount of Derivatives
 
 
(in Millions)
Designated as Cash Flow Hedges
 
Not Designated as Hedging Instruments
 
Gross Amounts
 
Gross Amounts Offset in the Consolidated Balance Sheet (3)
 
Net Amounts
Derivatives
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
5.7

 
$
—

 
$
5.7

 
$
(4.2
)
 
$
1.5

Energy contracts
0.2

 
—

 
0.2

 
(0.2
)
 
—

Other contracts
0.2

 
—

 
0.2

 
—

 
0.2

Total Derivative Assets (1)
$
6.1

 
$
—

 
$
6.1

 
$
(4.4
)
 
$
1.7

 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
(4.7
)
 
$
(1.9
)
 
$
(6.6
)
 
$
4.2

 
$
(2.4
)
Energy contracts
(1.7
)
 
—

 
(1.7
)
 
0.2

 
(1.5
)
Total Derivative Liabilities (2)
$
(6.4
)
 
$
(1.9
)
 
$
(8.3
)
 
$
4.4

 
$
(3.9
)
 
 
 
 
 
 
 
 
 
 
Net Derivative Assets/(Liabilities)
$
(0.3
)
 
$
(1.9
)
 
$
(2.2
)
 
$
—

 
$
(2.2
)
____________________
(1)
Net balance is included in “Prepaid and other current assets” in the condensed consolidated balance sheets.
(2)
Net balance is included in “Accrued and other liabilities” in the condensed consolidated balance sheets.
(3)
Represents net derivatives positions subject to master netting arrangements.








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

The tables below summarizes the gains or losses related to our cash flow hedges and derivatives not designated as hedging instruments for the three months ended March 31, 2013 and 2012.

Derivatives in Cash Flow Hedging Relationships

 
Three Months Ended March 31
 
Contracts
 
 
 
 
 
Foreign exchange
 
Energy
 
Other
 
Total
(in Millions)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Unrealized hedging gains (losses) and other, net of tax
$
3.8

 
$
3.3

 
$
2.4

 
$
(2.5
)
 
$
—

 
$
—

 
$
6.2

 
$
0.8

Reclassification of deferred hedging (gains) losses, net of tax (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Portion
(0.8
)
 
(1.1
)
 
0.2

 
1.6

 
—

 
—

 
(0.6
)
 
0.5

Ineffective Portion
(0.1
)
 
(0.1
)
 
—

 
—

 
—

 
—

 
(0.1
)
 
(0.1
)
Total derivative instrument impact on comprehensive income
$
2.9

 
$
2.1

 
$
2.6

 
$
(0.9
)
 
$
—

 
$
—

 
$
5.5

 
$
1.2

____________________
(1)
See Note 14 for classification of amounts within 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)
 
2013
 
2012
Foreign Exchange contracts
Cost of Sales and Services
$
(1.9
)
 
$
3.4

Total
 
$
(1.9
)
 
$
3.4



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, 2013 and December 31, 2012. During the periods presented there were no transfers between fair-value hierarchy levels.
 

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

(in Millions)
March 31, 2013
 
Quoted
Prices
in  Active
Markets  for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Derivatives – Commodities (1):
 
 
 
 
 
 
 
Energy contracts
$
2.8

 
$
—

 
$
2.8

 
$
—

Other contracts
0.2

 
—

 
0.2

 
—

Derivatives – Foreign Exchange (1)
6.0

 
—

 
6.0

 
—

Other (2)
36.1

 
36.1

 
—

 
—

Total Assets
$
45.1

 
$
36.1

 
$
9.0

 
$
—

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Derivatives – Commodities (1):
 
 
 
 
 
 
 
Energy contracts
$
0.3

 
$
—

 
$
0.3

 
$
—

Derivatives – Foreign Exchange (1)
0.9

 
—

 
0.9

 
—

Acquisition (3)
1.0

 
—

 
—

 
1.0

Other (4)
42.5

 
42.5

 
—

 
—

Total Liabilities
$
44.7

 
$
42.5

 
$
1.2

 
$
1.0

 
(in Millions)
December 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 (1):
 
 
 
 
 
 
 
Energy contracts
$
—

 
$
—

 
$
—

 
$
—

Other contracts
0.2

 
—

 
0.2

 
—

Derivatives – Foreign Exchange
1.5

 
—

 
1.5

 
—

Other (2)
33.0

 
33.0

 
—

 
—

Total Assets
$
34.7

 
$
33.0

 
$
1.7

 
$
—

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Derivatives – Commodities (1):
 
 
 
 
 
 
 
Energy contracts
$
1.5

 
$
—

 
$
1.5

 
$
—

Derivatives – Foreign Exchange (1)
2.4

 
—

 
2.4

 
—

Acquisition (3)
1.0

 
—

 
—

 
1.0

Other (4)
39.8

 
39.8

 
—

 
—

Total Liabilities
$
44.7

 
$
39.8

 
$
3.9

 
$
1.0

____________________
(1)
See the Fair Value of Derivative Instruments table within this Note for classification on our condensed consolidated balance sheet.
(2)
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.
(3)
Represents contingent consideration associated with acquisitions completed during 2011. See Note 3 for more information. The changes in this Level 3 liability represented payments made against the liability.
(4)
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 balance sheets.

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

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, 2013 and the year ended December 31, 2012.
(in Millions)
Three months ended March 31, 2013
 
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, 2013)
Assets
 
 
 
 
 
 
 
 
 
Long-lived assets to be abandoned (1)
$
—

 
$
—


$
—


$
—


$
(1.0
)
Total Assets
$
—

 
$
—

 
$
—

 
$
—

 
$
(1.0
)
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Liabilities associated with exit activities (2)
$
4.8

 
$
—

 
$
4.8

 
$
—

 
$
(4.8
)
Total Liabilities
$
4.8

 
$
—

 
$
4.8

 
$
—

 
$
(4.8
)
____________________
(1)
We recorded charges to write down the value of certain long-lived assets to be abandoned within our Specialty Chemicals segment, related to our Lithium restructuring, to their salvage value of zero as these long-lived assets have no future use and are anticipated to be demolished.
(2)
This amount represents severance liabilities associated with the Lithium restructuring as further described in Note 7.

(in Millions)
Year ended December 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)
(Year Ended
December 31,
2012)
Assets
 
 
 
 
 
 
 
 
 
Long-lived assets to be abandoned (1)
$
3.1

 
$
—

 
$
—

 
$
3.1

 
$
(15.9
)
Total Assets
$
3.1

 
$
—

 
$
—

 
$
3.1

 
$
(15.9
)
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Liabilities associated with exit activities (2)
5.6

 
—

 
5.6

 
—

 
(5.6
)
Total Liabilities
$
5.6

 
$
—

 
$
5.6

 
$
—

 
$
(5.6
)
____________________
(1)
We recorded charges to write down the value of certain long-lived assets to be abandoned within our Agricultural Products and Specialty Chemicals segments to zero and in our Industrial Chemicals segments to their salvage value of $3.1 million, respectively. These long-lived assets 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.
(2)
This amount represents severance liabilities associated with the Zeolites shutdown.


Note 18: 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.

23
Table of Contents

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, 2013: 
(in Millions)
 
Guarantees:
 
Guarantees of vendor financing
$
17.3

Foreign equity method investment debt guarantees
7.6

Other debt guarantees
14.7

Total
$
39.6

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 $17.3 million and $31.4 million at March 31, 2013 and December 31, 2012, 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.
Excluded from the chart above, 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 or maximum individual or aggregate claim amounts. 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 Canadian 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 lawsuit 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 referral to the ECJ normally takes 12-18 months for completion after the formal reference. The judge has not yet formally made the referral . 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. The court instead stayed the litigation pending resolution by the Canadian Supreme Court of the viability of indirect purchaser claims. The Canadian Supreme Court heard argument on that issue in October 2012. 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.

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Table of Contents

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

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 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.
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.
See Note 11 for the Pocatello tribal litigation for a legal proceeding associated with our environmental contingencies.


Note 19: Segment Information 

Effective in fiscal year 2013, our segment presentations including allocation of certain corporate expenses were updated to reflect how we currently make financial decisions and allocate resources. We believe the changes provide a better understanding of the underlying profitability of each individual business segment. The changes were the following:

•
Allocation of certain long-term incentives, primarily stock-based compensation, from the category other income (expense), net to each business segment.
•
Allocation of the depreciation on capitalized interest associated with completed construction projects from the category other income (expense), net to each business segment.
•
The presentation of the impact of noncontrolling interest as its own line item. Noncontrolling interest impacts were previously netted within each individual segment. The majority of the noncontrolling interest pertains to our Industrial Chemicals segment.
•
We have combined other income (expense), net and corporate expense into one line item renamed “Corporate and other”.

The segment information provided below for all periods presented has been updated to reflect this presentation change for all periods presented.


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

(in Millions)
Three Months Ended March 31
2013
 
2012
Revenue
 
 
 
Agricultural Products
$
495.2

 
$
454.2

Specialty Chemicals
236.0