FMC 6.30.2013 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 June 30, 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 June 30, 2013
Common Stock, par value $0.10 per share
 
136,361,044

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 June 30
 
Six Months Ended June 30
2013
 
2012
 
2013
 
2012
 
(unaudited)
 
(unaudited)
Revenue
$
959.4

 
$
905.2

 
$
1,949.6

 
$
1,845.9

Costs and Expenses
 
 
 
 
 
 
 
Costs of sales and services
616.5

 
567.4

 
1,237.0

 
1,160.8

 
 
 
 
 
 
 
 
Gross margin
342.9

 
337.8

 
712.6

 
685.1

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
138.8

 
128.3

 
270.1

 
257.4

Research and development expenses
29.1

 
28.4

 
58.9

 
56.9

Restructuring and other charges (income)
6.5

 
5.6

 
16.4

 
7.3

Total costs and expenses
790.9

 
729.7

 
1,582.4

 
1,482.4

Income from continuing operations before equity in (earnings) loss of affiliates, interest expense, net and income taxes
168.5

 
175.5

 
367.2

 
363.5

Equity in (earnings) loss of affiliates
0.2

 
0.3

 
(0.3
)
 
0.2

Interest expense, net
12.3

 
11.5

 
24.0

 
22.8

Income from continuing operations before income taxes
156.0

 
163.7

 
343.5

 
340.5

Provision for income taxes
36.7

 
45.3

 
84.0

 
90.1

Income from continuing operations
119.3

 
118.4

 
259.5

 
250.4

Discontinued operations, net of income taxes
1.9

 
(8.1
)
 
(3.3
)
 
(15.5
)
Net income
121.2

 
110.3

 
256.2

 
234.9

Less: Net income attributable to noncontrolling interests
3.2

 
5.4

 
7.3

 
10.9

Net income attributable to FMC stockholders
$
118.0

 
$
104.9

 
$
248.9

 
$
224.0

Amounts attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations, net of income taxes
$
116.1

 
$
113.0

 
$
252.2

 
$
239.5

Discontinued operations, net of income taxes
1.9

 
(8.1
)
 
(3.3
)
 
(15.5
)
Net income
$
118.0

 
$
104.9

 
$
248.9

 
$
224.0

Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
0.85

 
$
0.82

 
$
1.84

 
$
1.73

Discontinued operations
0.01

 
(0.06
)
 
(0.02
)
 
(0.11
)
Net income
$
0.86

 
$
0.76

 
$
1.82

 
$
1.62

Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
0.85

 
$
0.82

 
$
1.83

 
$
1.72

Discontinued operations
0.01

 
(0.06
)
 
(0.02
)
 
(0.11
)
Net income
$
0.86

 
$
0.76

 
$
1.81

 
$
1.61

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 June 30
 
Six Months Ended June 30
2013
 
2012
 
2013
 
2012
 
(unaudited)
 
(unaudited)
Net Income
$
121.2

 
$
110.3

 
$
256.2

 
$
234.9

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments (1)
1.1

 
(29.4
)
 
(13.5
)
 
(18.2
)
 
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Unrealized hedging gains (losses) and other, net of tax of $(5.1) and $(1.5) for the three and six months ended 2013 and $(0.9) and $(0.6) for the three and six months ended 2012, respectively
(9.4
)
 
(1.5
)
 
(3.2
)
 
(0.7
)
Reclassification of deferred hedging (gains) losses and other, included in net income, net of tax of $(0.6) and $(1.0) for the three and six months ended 2013 and $0.7 and $1.1 for the three and six months ended 2012, respectively (3)
(1.4
)
 
1.2

 
(2.1
)
 
1.6

Total derivative instruments, net of tax of $(5.7) and $(2.5) for the three and six months ended 2013 and $(0.2) and $0.5 for the three and six months ended 2012, respectively
(10.8
)
 
(0.3
)
 
(5.3
)
 
0.9

 
 
 
 
 
 
 
 
Pension and other postretirement benefits:
 
 
 
 
 
 
 
Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax of zero and $0.1 for the three and six months ended 2013 and $0.6 and zero for the three and six months ended 2012, respectively (2)
(0.5
)
 
1.3

 
0.1

 
0.4

Reclassification of net actuarial and other (gain) loss and amortization of prior service costs, included in net income, net of tax of $6.6 and $13.0 for the three and six months ended 2013 and $4.8 and $9.7 for the three and six months ended 2012, respectively (3)
10.7

 
7.9

 
21.5

 
15.8

Total pension and other postretirement benefits, net of tax of $6.6 and $13.1 for the three and six months ended 2013 and $5.4 and $9.7 for the three and six months ended 2012, respectively
10.2

 
9.2

 
21.6

 
16.2

 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
0.5

 
(20.5
)
 
2.8

 
(1.1
)
Comprehensive income
$
121.7

 
$
89.8

 
$
259.0

 
$
233.8

Less: Comprehensive income attributable to the noncontrolling interest
3.9

 
5.0

 
7.9

 
10.6

Comprehensive income attributable to FMC stockholders
$
117.8

 
$
84.8

 
$
251.1

 
$
223.2

____________________ 
(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)
June 30, 2013
 
December 31, 2012
 
(unaudited)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
77.4

 
$
77.1

Trade receivables, net of allowance of $28.0 at June 30, 2013 and $27.2 at December 31, 2012
1,092.1

 
1,124.5

Inventories
661.2

 
675.7

Prepaid and other current assets
223.4

 
181.1

Deferred income taxes
128.6

 
123.4

Total current assets
2,182.7

 
2,181.8

Investments
43.4

 
40.2

Property, plant and equipment, net
1,147.3

 
1,136.2

Goodwill
289.2

 
294.4

Other intangibles, net
207.4

 
215.7

Other assets
275.7

 
272.3

Deferred income taxes
204.0

 
233.3

Total assets
$
4,349.7

 
$
4,373.9

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Short-term debt
$
286.4

 
$
50.6

Current portion of long-term debt
21.8

 
5.7

Accounts payable, trade and other
344.8

 
443.2

Advance payments from customers
5.2

 
140.3

Accrued and other liabilities
181.7

 
192.0

Accrued payroll
53.5

 
75.1

Accrued customer rebates
320.6

 
142.9

Guarantees of vendor financing
14.4

 
31.4

Accrued pension and other postretirement benefits, current
21.3

 
21.3

Income taxes
19.2

 
32.9

Total current liabilities
1,268.9

 
1,135.4

Long-term debt, less current portion
762.4

 
908.8

Accrued pension and other postretirement benefits, long-term
343.6

 
375.8

Environmental liabilities, continuing and discontinued
174.0

 
200.2

Reserve for discontinued operations
47.2

 
44.4

Other long-term liabilities
155.0

 
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 June 30, 2013 and December 31, 2012
18.6

 
18.6

Capital in excess of par value of common stock
441.1

 
481.9

Retained earnings
2,748.4

 
2,536.5

Accumulated other comprehensive income (loss)
(406.7
)
 
(408.9
)
Treasury stock, common, at cost: 49,622,748 shares at June 30, 2013 and 48,313,414 shares at December 31, 2012
(1,253.8
)
 
(1,147.8
)
Total FMC stockholders’ equity
1,547.6

 
1,480.3

Noncontrolling interests
51.0

 
74.5

Total equity
1,598.6

 
1,554.8

Total liabilities and equity
$
4,349.7

 
$
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)
Six Months Ended June 30
2013
 
2012
 
(unaudited)
Cash provided (required) by operating activities of continuing operations:
 
 
 
Net income
$
256.2

 
$
234.9

Discontinued operations
3.3

 
15.5

Income from continuing operations
$
259.5

 
$
250.4

Adjustments from income from continuing operations to cash provided (required) by operating activities of continuing operations:
 
 
 
Depreciation and amortization
68.0

 
66.7

Equity in (earnings) loss of affiliates
(0.3
)
 
0.2

Restructuring and other charges (income)
16.4

 
7.3

Deferred income taxes
15.0

 
23.8

Pension and other postretirement benefits
36.2

 
29.4

Share-based compensation
9.4

 
10.2

Excess tax benefits from share-based compensation
(6.3
)
 
(6.2
)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
 
 
 
Trade receivables, net
27.2

 
(64.1
)
Guarantees of vendor financing
(17.0
)
 
10.6

Inventories
9.0

 
(90.7
)
Other current assets and other assets
(27.2
)
 
(18.1
)
Accounts payable
(74.4
)
 
(16.1
)
Accrued and other current liabilities and other liabilities
(19.0
)
 
12.6

Advance payments from customers
(135.1
)
 
(71.4
)
Accrued payroll
(21.6
)
 
(19.3
)
Accrued customer rebates
178.7

 
142.9

Income taxes
(18.1
)
 
40.6

Pension and other postretirement benefit contributions
(43.0
)
 
(33.2
)
Environmental spending, continuing, net of recoveries
(2.9
)
 
(2.3
)
Restructuring and other spending
(9.2
)
 
(5.4
)
Cash provided (required) by operating activities
245.3

 
267.9

Cash provided (required) by operating activities of discontinued operations:
 
 
 
Environmental spending, discontinued, net of recoveries
(17.2
)
 
(8.7
)
Payments of other discontinued reserves, net of recoveries
5.0

 
(12.2
)
Cash provided (required) by operating activities of discontinued operations
(12.2
)
 
(20.9
)
The accompanying notes are an integral part of these condensed consolidated financial statements.
(continued)

6
Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 
(in Millions)
Six Months Ended June 30
2013
 
2012
 
(unaudited)
Cash provided (required) by investing activities:
 
 
 
Capital expenditures
$
(96.5
)
 
$
(81.2
)
Proceeds from disposal of property, plant and equipment
1.9

 
0.1

Acquisitions, net of cash acquired
(0.2
)
 
(98.4
)
Investments in nonconsolidated affiliates
(4.5
)
 
(6.8
)
Other investing activities
(13.4
)
 
(12.7
)
Cash provided (required) by investing activities
(112.7
)
 
(199.0
)
Cash provided (required) by financing activities:
 
 
 
Net borrowings (repayments) under committed credit facilities
(130.0
)
 
26.0

Increase (decrease) in short-term debt
236.6

 
15.4

Repayments of long-term debt
(0.4
)
 
(15.0
)
Proceeds from borrowings of long-term debt
0.5

 
5.4

Distributions to noncontrolling interests
(6.6
)
 
(7.0
)
Acquisition of noncontrolling interests
(80.0
)
 
—

Issuances of common stock, net
8.4

 
11.0

Excess tax benefits from share-based compensation
6.3

 
6.2

Dividends paid
(37.1
)
 
(22.9
)
Repurchases of common stock under publicly announced program
(109.9
)
 
(144.9
)
Other repurchases of common stock
(6.4
)
 
(3.1
)
Contingent consideration paid
(0.5
)
 
(2.0
)
Cash provided (required) by financing activities
(119.1
)
 
(130.9
)
Effect of exchange rate changes on cash and cash equivalents
(1.0
)
 
(0.5
)
Increase (decrease) in cash and cash equivalents
0.3

 
(83.4
)
Cash and cash equivalents, beginning of period
77.1

 
158.9

Cash and cash equivalents, end of period
$
77.4

 
$
75.5

Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest was $22.4 million and $13.5 million, and income taxes paid, net of refunds were $89.5 million and $22.0 million for the six months ended June 30, 2013 and 2012, respectively. Non-cash additions to property, plant and equipment were $9.7 million and $3.8 million for June 30, 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 six months ended June 30, 2013 and 2012, and our financial position as of June 30, 2013. All such adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the Notes. The results of operations for the six months ended June 30, 2013 and 2012 are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheets as of June 30, 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 six months ended June 30, 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”).

2013 Segment realignment and presentation change
In April 2013, we made the decision to simplify our organizational structure to focus on three core business segments. The new segments better reflect the markets where we participate and lead today, and where we expect to grow in the future. We have recast all the data within this filing to reflect the above changes in our reportable segments to conform to the current year presentation. For more information on this presentation change see Note 19.

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 effective 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, see 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.



8
Table of Contents

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

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 six months ended June 30, 2013, we made $2.1 million of adjustments to the preliminary purchase price allocations associated with these acquisitions. These adjustments were 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.

See Note 20 for the acquisition completed in July 2013.


Note 4: Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by business segment for the six months ended June 30, 2013, are presented in the table below:
(in Millions)
FMC Agricultural
Solutions
 
FMC Health and Nutrition
 
FMC Minerals
 
FMC Peroxygens
 
Total
Balance, December 31, 2012
$
31.0

 
$
246.6

 
$
—

 
$
16.8

 
$
294.4

Foreign currency adjustments
—

 
(5.0
)
 
—

 
(0.2
)
 
(5.2
)
Balance, June 30, 2013
$
31.0

 
$
241.6

 
$
—

 
$
16.6

 
$
289.2

Our intangible assets, other than goodwill, consist of the following:
 
June 30, 2013
 
December 31, 2012
(in Millions)
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Accumulated Amortization
 
Net
Intangible assets subject to amortization (finite-lived)
Customer relationships
$
129.6

 
$
(11.8
)
 
$
117.8

 
$
131.4

 
$
(8.6
)
 
$
122.8

Patents
0.6

 
(0.2
)
 
0.4

 
0.6

 
(0.2
)
 
0.4

Trademarks and trade names
1.5

 
(0.4
)
 
1.1

 
1.5

 
(0.2
)
 
1.3

Purchased and licensed technologies
63.5

 
(16.9
)
 
46.6

 
63.6

 
(14.4
)
 
49.2

Other intangibles
4.9

 
(2.4
)
 
2.5

 
4.9

 
(1.9
)
 
3.0

 
$
200.1

 
$
(31.7
)
 
$
168.4

 
$
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
$
239.1

 
$
(31.7
)
 
$
207.4

 
$
241.0

 
$
(25.3
)
 
$
215.7

At June 30, 2013, the finite-lived and indefinite life intangibles were allocated among our business segments as follows:
(in Millions)
Finite-lived
 
Indefinite life
FMC Agricultural Solutions
$
107.6

 
$
35.2

FMC Health and Nutrition
50.7

 
3.2

FMC Minerals
1.2

 
—

FMC Peroxygens
8.9

 
0.6

Total
$
168.4

 
$
39.0


9
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)
June 30, 2013
 
December 31, 2012
Finished goods and work in process
$
401.8

 
$
416.0

Raw materials
259.4

 
259.7

Net inventory
$
661.2

 
$
675.7



Note 6: Property, Plant and Equipment
Property, plant and equipment consisted of the following:
(in Millions)
June 30, 2013
 
December 31, 2012
Property, plant and equipment
$
3,058.0

 
$
3,037.4

Accumulated depreciation
1,910.7

 
1,901.2

Property, plant and equipment, net
$
1,147.3

 
$
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 June 30
 
Six Months Ended June 30
(in Millions)
2013
 
2012
 
2013
 
2012
Restructuring charges and asset disposals
$
4.4

 
$
4.3

 
$
12.8

 
$
5.4

Other charges (income), net
2.1

 
1.3

 
3.6

 
1.9

Total Restructuring and Other Charges
$
6.5

 
$
5.6

 
$
16.4

 
$
7.3



10
Table of Contents

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

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
1.1

 
1.4

 
1.0

3.5

Other Items
—

 
0.9

 
—

0.9

Three months ended June 30, 2013
$
1.1

 
$
2.3

 
$
1.0

$
4.4

Other Items
2.4

 
0.5

 
1.4

4.3

Three months ended June 30, 2012
$
2.4

 
$
0.5

 
$
1.4

$
4.3

 
 
 
 
 
 
 
Lithium Restructuring
3.7

 
3.6

 
2.0

9.3

Other Items
1.8

 
1.7

 
—

3.5

Six months ended June 30, 2013
$
5.5

 
$
5.3

 
$
2.0

$
12.8

Other Items
2.4

 
1.2

 
1.8

5.4

Six months ended June 30, 2012
$
2.4

 
$
1.2

 
$
1.8

$
5.4

____________________ 
(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 long-lived assets, which were or are to be abandoned. To the extent incurred, the acceleration effect of re-estimating settlement dates and revised cost estimates associated with asset retirement obligations due to facility shutdowns are also included within the asset disposal charges, see Note 8.

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
6/30/13 (4)
Lithium Restructuring
$
—

 
$
7.3

 
$
(4.9
)
 
$
—

 
$
2.4

Zeolites Shutdown
1.5

 
0.8

 
(1.0
)
 
—

 
1.3

Huelva Restructuring
3.0

 
0.5

 
(0.4
)
 
(0.2
)
 
2.9

Other Workforce Related and Facility Shutdowns (1)
6.0

 
2.2

 
(2.9
)
 
(0.2
)
 
5.1

Total
$
10.5

 
$
10.8

 
$
(9.2
)
 
$
(0.4
)
 
$
11.7

____________________ 
(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.

11
Table of Contents

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)
2013
 
2012
 
2013
 
2012
Environmental Charges, Net
$
1.0

 
$
1.5

 
$
2.0

 
$
2.5

Other, Net
1.1

 
(0.2
)
 
1.6

 
(0.6
)
Other Charges (Income), Net
$
2.1

 
$
1.3

 
$
3.6

 
$
1.9

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 June 30, 2013, the balance of our asset retirement obligations was $22.0 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)
June 30, 2013
 
December 31, 2012
Short-term Foreign debt (1)
$
22.4

 
$
50.6

Commercial Paper
264.0

 
—

Total Short-term debt
286.4

 
50.6

Current portion of long-term debt
21.8

 
5.7

Total debt maturing within one year
$
308.2

 
$
56.3

____________________
(1)     We often provide parent-company guarantees to lending institutions that extend credit to our foreign subsidiaries.
Commercial Paper
In June 2013, we commenced a $1.5 billion commercial paper program supported by our 2011 Credit Agreement. This program allows the Company to borrow at rates generally more favorable that those available under our 2011 Credit Agreement. The Company has used proceeds from the commercial paper program for general corporate purposes. At June 30, 2013, the average effective interest rate on these borrowings was 0.3%.

12
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)
June 30, 2013
 
 
 
 
Interest Rate
Percentage
 
Maturity
Date
 
6/30/2013
 
12/31/2012
Pollution control and industrial revenue bonds (less unamortized discounts of $0.2 and $0.2, respectively)
0.1-6.5%


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
 
—

 
130.0

Foreign debt
0-10.6%


2013-2023

9.3


9.6

Total long-term debt




$
784.2


$
914.5

Less: debt maturing within one year




21.8


5.7

Total long-term debt, less current portion




$
762.4


$
908.8

____________________
(1)
Letters of credit outstanding under the 2011 Credit Agreement totaled $73.0 million and available funds under this facility were $1,163.0 million at June 30, 2013 (which reflects borrowings under our commercial paper program).
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 June 30, 2013, was 1.4 which is below the maximum leverage of 3.5. Our actual interest coverage for the four consecutive quarters ended June 30, 2013, was 17.1 which is above the minimum interest coverage of 3.5. We were in compliance with all covenants at June 30, 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 June 30
 
Six Months Ended June 30
2013
 
2012
 
2013
 
2012
Adjustment for workers’ compensation, product liability, and other postretirement benefits, net of income tax benefit (expense) of $0.1 and ($0.1) for the three and six months ended 2013 and zero and ($0.1) for the three and six months ended 2012, respectively
$
(0.1
)
 
$
0.1

 
$
0.1

 
$
0.3

Provision for environmental liabilities, net of recoveries, net of income tax benefit of $1.2 and 2.4 for the three and six months ended 2013 and $3.0 and $4.5 for the three and six months ended 2012, respectively (1)
(2.0
)
 
(4.9
)
 
(4.1
)
 
(7.5
)
Provision for legal reserves and expenses, net of recoveries, net of income tax benefit (expense) of ($2.5) and ($0.4) for the three and six months ended 2013 and $2.0 and $5.1 for the three and six months ended 2012, respectively (2)
4.0

 
(3.3
)
 
0.7

 
(8.3
)
Discontinued operations, net of income taxes
$
1.9

 
$
(8.1
)
 
$
(3.3
)
 
$
(15.5
)
____________________
(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.
(2)
Discontinued operations for the three and six months ended June 30, 2013, includes a gain of $13.9 million associated with an insurance recovery related to previously discontinued operations legal matters. No such gain existed in 2012.


13
Table of Contents

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

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 $219.1 million and $236.5 million, excluding recoveries, at June 30, 2013 and December 31, 2012, respectively.
The estimated reasonably possible environmental loss contingencies, net of expected recoveries, exceed amounts accrued by approximately $160 million at June 30, 2013. This reasonably possible estimate is based upon information available as of the date of the filing but 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. Potential environmental obligations that have not been reserved 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 June 30, 2013:
 
(in Millions)
Operating and
Discontinued
Sites Total
Total environmental reserves, net of recoveries at December 31, 2012
$
216.0

 

Provision
10.3

Spending, net of recoveries
(27.9
)
Net change
(17.6
)
Total environmental reserves, net of recoveries at June 30, 2013
$
198.4

Environmental reserves, current, net of recoveries (1)
24.4

Environmental reserves, long-term continuing and discontinued, net of recoveries (2)
174.0

Total environmental reserves, net of recoveries at June 30, 2013
$
198.4

____________________
(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 June 30, 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 June 30, 2013:
(in Millions)
12/31/2012
 
Increase in Recoveries
 
Cash Received
 
6/30/2013
Environmental liabilities, continuing and discontinued
$
20.5

 
$
0.9

 
$
(0.7
)
 
$
20.7

Other assets
51.6

 
1.8

 
(7.8
)
 
45.6

Total
$
72.1

 
2.7

 
$
(8.5
)
 
$
66.3



14
Table of Contents

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

Our net environmental provisions relate to costs for the continued cleanup of both operating sites and for certain discontinued manufacturing operations from previous years. The net provisions are comprised as follows:
 
Three Months Ended June 30
 
Six Months Ended June 30
(in Millions)
2013
 
2012
 
2013
 
2012
Continuing operations (1)
$
1.0

 
$
1.5

 
$
2.0

 
$
2.5

Discontinued operations (2)
3.2

 
7.9

 
6.5

 
12.0

Net environmental provision
$
4.2

 
$
9.4

 
$
8.5

 
$
14.5

____________________
(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.

On our condensed consolidated balance sheets, the net environmental provisions are recorded to the following balance sheet captions:
 
Three Months Ended June 30
 
Six Months Ended June 30
(in Millions)
2013
 
2012
 
2013
 
2012
Environmental reserves (1)
$
5.0

 
$
9.4

 
$
10.3

 
$
14.5

Other assets (2)
(0.8
)
 
—

 
(1.8
)
 
—

Net environmental provision
$
4.2

 
$
9.4

 
$
8.5

 
$
14.5

____________________
(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 2012 consolidated financial statements in our 2012 Form 10-K. The following represents significant updates that occurred in 2013 to these contingencies.
Pocatello
During the second quarter of 2013, the Tribal Appellate Court with respect to the appeal regarding our Pocatello site has scheduled an evidentiary hearing for the fourth quarter of 2013 on certain jurisdictional issues. The Tribes have filed additional litigation to recover the permit fees for the years since 2007, but that litigation has been stayed pending the outcome of the appeal in the Tribal Court of Appeals. 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.
Middleport
During the quarter ended June 30, 2013 we received from the United States Environmental Protection Agency and New York State Department of Environmental Conservation, collectively the “Agencies”, the Final Statement of Basis (FSOB). This FSOB is consistent with the Preliminary Statement of Basis (PSOB) previously received from Agencies in June 2012. The FSOB includes the same Corrective Action Management Alternative (“CMA”) as the PSOB. We continue to believe that the CMA is overly conservative and not supported under New York State law. In order to negotiate with the Agencies with respect to the CMA, we entered into a tolling agreement with the Agencies. The tolling agreement serves as a “standstill” agreement to the FSOB so that time spent negotiating with the Agencies does not go against the statute of limitations under the FSOB.
The amount of the reserve for this site is $41.0 million at June 30, 2013 and $42.4 million at December 31, 2012. Our reserve continues to include the estimated liability for clean-up to reflect the costs associated with our recommended CMA. Our estimated reasonably possible environmental loss contingencies exposure reflects the additional cost of the CMA proposed in the FSOB. A more complete description of our environmental contingencies pertaining to our Middleport environmental site, is included in Note 10 to our 2012 consolidated financial statements in our 2012 Form 10-K.



15
Table of Contents

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 and six months ended June 30, 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:
(in Millions, Except Share and Per Share Data)
Three Months Ended June 30
 
Six Months Ended June 30
2013
 
2012
 
2013
 
2012
Earnings (loss) attributable to FMC stockholders:
 
 
 
 
 
 
 
Income from continuing operations attributable to FMC stockholders
$
116.1

 
$
113.0

 
$
252.2

 
$
239.5

Discontinued operations, net of income taxes
1.9

 
(8.1
)
 
(3.3
)
 
(15.5
)
Net income
$
118.0

 
$
104.9

 
$
248.9

 
$
224.0

Less: Distributed and undistributed earnings allocable to restricted award holders
(0.4
)
 
(0.5
)
 
(0.9
)
 
(1.1
)
Net income allocable to common stockholders
$
117.6

 
$
104.4

 
$
248.0

 
$
222.9

 
 
 
 
 
 
 
 
Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
0.85

 
$
0.82

 
$
1.84

 
$
1.73

Discontinued operations
0.01

 
(0.06
)
 
(0.02
)
 
(0.11
)
Net income
$
0.86

 
$
0.76

 
$
1.82

 
$
1.62

 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
0.85

 
$
0.82

 
$
1.83

 
$
1.72

Discontinued operations
0.01

 
(0.06
)
 
(0.02
)
 
(0.11
)
Net income
$
0.86

 
$
0.76

 
$
1.81

 
$
1.61

 
 
 
 
 
 
 
 
Shares (in thousands):
 
 
 
 
 
 
 
Weighted average number of shares of common stock outstanding - Basic
136,328

 
137,247

 
136,810

 
137,870

Weighted average additional shares assuming conversion of potential common shares
813

 
1,006

 
926

 
1,121

Shares – diluted basis
137,141

 
138,253

 
137,736

 
138,991



16
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 six months ended June 30, 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
248.9

 
7.3

 
256.2

Stock compensation plans
17.9

 
—

 
17.9

Excess tax benefits from share-based compensation
6.3

 
—

 
6.3

Shares for benefit plan trust
0.5

 
—

 
0.5

Net pension and other benefit actuarial gains/(losses) and prior service costs, net of income tax (1)
21.6

 
—

 
21.6

Net hedging gains/(losses) and other, net of income tax (1)
(5.3
)
 
—

 
(5.3
)
Foreign currency translation adjustments (1)
(14.1
)
 
0.6

 
(13.5
)
Dividends ($0.27 per share)
(37.0
)
 
—

 
(37.0
)
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 June 30, 2013
$
1,547.6

 
$
51.0

 
$
1,598.6

____________________
(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 87.50 percent to 93.75 percent. FMC WY is our majority owned joint venture that manufactures, markets and sells soda ash products. The seller of the 6.25 percent interest was one of two noncontrolling interest holders of FMC WY stock.
Dividends and Share Repurchases
For the six months ended June 30, 2013 and 2012, we paid $37.1 million and $22.9 million, respectively, in dividends declared in previous periods. On July 18, 2013, we paid dividends totaling $18.5 million to our shareholders of record as of June 28, 2013. This amount is included in “Accrued and other liabilities” on the condensed consolidated balance sheets as of June 30, 2013.
 
During the six months ended June 30, 2013, we repurchased 1,843,200 shares under the publicly announced repurchase program for $109.9 million.

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. At June 30, 2013, $500 million remained unused under our Board-authorized repurchase program.

See Note 20 Subsequent Event for accelerated share repurchase program entered in July 2013.


17
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 June 30
 
Six Months Ended June 30
 
 
(in Millions)
 
2013
 
2012
 
2013
 
2012
 
 
Derivative Instruments:
 
 
 
 
 
 
 
 
 
 
Foreign Currency Contracts
 
$
0.5

 
$
4.5

 
$
0.4

 
$
7.0

 
Costs of sales and services
Energy Contracts
 
0.5

 
(3.9
)
 
0.2

 
(6.3
)
 
Costs of sales and services
Foreign Currency Contracts
 
1.1

 
(2.5
)
 
2.6

 
(3.3
)
 
Selling, general and administrative expenses
Other Contracts
 
(0.1
)
 
—

 
(0.1
)
 
(0.1
)
 
Interest expense, net
 
 
$
2.0

 
$
(1.9
)
 
3.1

 
(2.7
)
 
Total before tax
 
 
(0.6
)
 
0.7

 
(1.0
)
 
1.1

 
Income tax (expense) benefit
 
 
$
1.4

 
$
(1.2
)
 
2.1

 
(1.6
)
 
Amount included in net income
 
 
 
 
 
 
 
 
 
 
 
Pension and other postretirement benefits (2):
 
 
 
 
 
 
 
 
 
 
Amortization of prior service costs
 
$
(0.5
)
 
$
(0.5
)
 
$
(1.0
)
 
$
(1.0
)
 
Selling, general and administrative expenses
Amortization of unrecognized net actuarial and other gains (losses)
 
(16.8
)
 
(12.2
)
 
(33.5
)
 
(24.5
)
 
Selling, general and administrative expenses
 
 
$
(17.3
)
 
$
(12.7
)
 
$
(34.5
)
 
$
(25.5
)
 
Total before tax
 
 
6.6

 
4.8

 
13.0

 
9.7

 
Income tax (expense) benefit
 
 
$
(10.7
)
 
$
(7.9
)
 
$
(21.5
)
 
$
(15.8
)
 
Amount included in net income
 
 
 
 
 
 
 
 
 
 
 
Total reclassifications for the period
 
$
(9.3
)
 
$
(9.1
)
 
$
(19.4
)
 
$
(17.4
)
 
Amount included in net income
____________________
(1)
Amounts in parentheses indicate charges to the Condensed Consolidated Statements of Income.
(2)
Pension and other postretirement benefits amounts include the impact from both continuing and discontinued operations. For detail on the continuing operations components of pension and other postretirement benefits, see Note 15.



18
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 and six months ended June 30, 2013 and 2012:
(in Millions)
Three Months Ended June 30
 
Six Months Ended June 30
Pensions
 
Other Benefits
 
Pensions
 
Other Benefits
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Components of net annual benefit cost (income):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
5.4

 
$
5.1

 
$
—

 
$
—

 
$
10.8

 
$
10.2

 
$
—

 
$
—

Interest cost
13.5

 
15.3

 
0.3

 
0.3

 
28.0

 
30.6

 
0.6

 
0.6

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

 
—

 
(38.4
)
 
(38.4
)
 
—

 
—

Amortization of prior service cost (credit)
0.6

 
0.5

 
—

 
—

 
1.1

 
1.0

 
—

 
—

Recognized net actuarial and other (gain) loss
17.5

 
13.2

 
(0.5
)
 
(0.5
)
 
35.0

 
26.4

 
(0.9
)
 
(1.0
)
Net periodic benefit cost from continuing operations
$
17.8

 
$
14.9

 
$
(0.2
)
 
$
(0.2
)
 
$
36.5

 
$
29.8

 
$
(0.3
)
 
$
(0.4
)
We made voluntary cash contributions to our U.S. defined benefit pension plan of $27.0 million in the six months ended June 30, 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 $36.7 million resulting in an effective tax rate of 23.5 percent compared to expense of $45.3 million resulting in an effective tax rate of 27.7 percent for the three months ended June 30, 2013 and 2012, respectively. The decrease in the effective tax rate was primarily the result of the change in the mix of domestic income compared to income earned outside of the U.S. A larger portion of our earnings were earned by our foreign operations which have lower tax rates than the U.S.
Provision for income taxes was $84.0 million resulting in an effective tax rate of 24.5 percent compared to expense of $90.1 million resulting in an effective tax rate of 26.5 percent for the six months ended June 30, 2013 and 2012, respectively. The decrease in the effective tax rate was consistent with the change in the three months ended June 30, 2013, as discussed in the previous paragraph.

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 $1,134.0 million and $1,057.0 million and the carrying amount is $1,070.6 million and $965.1 million as of June 30, 2013 and December 31, 2012, respectively.

19
Table of Contents

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

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.
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. In contrast, we immediately record in earnings changes in the fair value of derivatives that are not designated as cash flow hedges.
As of June 30, 2013, we had open foreign currency forward contracts in AOCI in a net after tax loss position of $4.4 million designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until August 1, 2014. At June 30, 2013, we had open forward contracts designated as cash flow hedges with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $460.0 million.
As of June 30, 2013, we had current open commodity contracts in AOCI in a net after tax loss position of $1.1 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 June 30, 2013, we had 7.5 million mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity forward contracts to hedge forecasted purchases.
Of the $5.5 million of net losses after-tax, representing both open foreign currency exchange contracts and open commodity contracts, approximately $3.6 million of these losses would be realized in earnings during the twelve months ending June 30, 2014 and $1.9 million of net losses will be realized subsequent to June 30, 2014, if spot rates in the future are consistent with forward rates as of June 30, 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 occasionally 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 $515.8 million at June 30, 2013. We held an immaterial amount of bushels, in aggregate notional volume of outstanding soybean contracts, to hedge outstanding barter contracts at June 30, 2013.

20
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 June 30, 2013 and December 31, 2012.
 
June 30, 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
$
5.4

 
$
9.2

 
$
14.6

 
$
(5.4
)
 
$
9.2

Energy contracts
0.2

 
—

 
0.2

 
(0.2
)
 
—

Other contracts
0.1

 
—

 
0.1

 
—

 
0.1

Total Derivative Assets (1)
$
5.7

 
$
9.2

 
$
14.9

 
$
(5.6
)
 
$
9.3

 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
(12.0
)
 
$
(0.4
)
 
$
(12.4
)
 
$
5.4

 
$
(7.0
)
Energy contracts
(1.9
)
 
—

 
(1.9
)
 
0.2

 
(1.7
)
Total Derivative Liabilities (2)
$
(13.9
)
 
$
(0.4
)
 
$
(14.3
)
 
$
5.6

 
$
(8.7
)
 
 
 
 
 
 
 
 
 
 
Net Derivative Assets/(Liabilities)
$
(8.2
)
 
$
8.8

 
$
0.6

 
$
—

 
$
0.6

 
 
 
 
 
 
 
 
 
 
 
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.







21
Table of Contents

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 June 30, 2013 and 2012.

Derivatives in Cash Flow Hedging Relationships

 
Three Months Ended June 30
 
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
$
(7.0
)
 
$
(2.2
)
 
$
(2.4
)
 
$
0.7

 
$
—

 
$
—

 
$
(9.4
)
 
$
(1.5
)
Reclassification of deferred hedging (gains) losses, net of tax (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Portion
(1.0
)
 
(1.2