Summary of FMC CORP - Yahoo! Finance

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2 of this report contains certain forward-looking statements that are based
on our current views and assumptions regarding future events, future business conditions and the outlook for our company based on currently available information.
Whenever possible, we have identified these forward-looking statements by such words or phrases as "will likely result", "is confident that", "expects", "should", "could", "may", "will continue to", "believes", "anticipates", "predicts", "forecasts", "estimates", "projects", "potential", "intends" or similar expressions identifying "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including the negative of those words or phrases. Such forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and the outlook for our company based on currently available information. The forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. These statements are qualified by reference to the section "Forward-Looking Statements" in Part II of our Annual Report on Form 10-K for the year ended December 31, 2011 (the "2011 10-K") and to similar disclaimers in all other reports and forms filed with the Securities and Exchange Commission ("SEC"). We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
We further caution that the list of risk factors in Item 1A in Part I of the 2011 10-K may not be all-inclusive, and we specifically decline to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
APPLICATION OF CRITICAL ACCOUNTING POLICIES Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have described our accounting policies in Note 1 to our consolidated financial statements included in our 2011 10-K. We have reviewed these accounting policies, identifying those that we believe to be critical to the preparation and understanding of our consolidated financial statements. We have reviewed these critical accounting policies with the Audit Committee of our Board of Directors. Critical accounting policies are central to our presentation of results of operations and financial condition and require management to make estimates and judgments on certain matters. We base our estimates and judgments on historical experience, current conditions and other reasonable factors. The following is a list of those accounting policies that we have deemed most critical to the presentation and understanding of our results of operations and financial condition. See the "Application of Critical Accounting Policies" section in our 2011 10-K for a detailed description of these policies and their potential effects on our results of operations and financial condition.
• Environmental obligations and related recoveries

• Impairment and valuation of long-lived assets

• Pensions and other postretirement benefits

• Income taxes

We adopted new accounting pronouncements related to indefinite-lived intangible asset and goodwill impairment testing in the current period. The adoption of the new guidance did not have an effect on our results of operations or financial condition. Aside from the adoption of this new accounting policy, we did not make any changes to our accounting policies that would have changed our critical accounting policies.
RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS AND REGULATORY ITEMS See Note 2 to our condensed consolidated financial statements included in this Form 10-Q for a discussion of recently adopted accounting guidance and other new accounting guidance.

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OVERVIEW

We are a diversified chemical company serving agricultural, consumer and industrial markets globally with innovative solutions, applications and market-leading products. We operate in three distinct business segments:
Agricultural Products, Specialty Chemicals and Industrial Chemicals. Our Agricultural Products segment develops, markets and sells all three major classes of crop protection chemicals - insecticides, herbicides and fungicides - with particular strength in insecticides and herbicides. These products are used in agriculture to enhance crop yield and quality by controlling a broad spectrum of insects, weeds and disease, as well as pest control in non-agricultural markets. Specialty Chemicals consists of our BioPolymer and lithium businesses. This segment focuses on food ingredients that are used to enhance texture, color, structure and physical stability, pharmaceutical additives for binding, encapsulation and disintegrant applications, ultrapure biopolymers for medical devices and lithium for energy storage, specialty polymers and pharmaceutical synthesis. Our Industrial Chemicals segment manufactures a wide range of inorganic materials, including soda ash, hydrogen peroxide, specialty peroxygens and silicates. This segment serves a diverse group of markets, from economically-sensitive industrial sectors to technology-intensive specialty markets. The products in this segment are sought by customers for their critical reactivity or specific functionality in markets such as glass, detergents, chemicals and pulp and paper.
Third Quarter 2012 Highlights

The following are the more significant developments in our businesses during the three months ended September 30, 2012:
• Revenue of $902.4 million for the three months ended September 30, 2012 increased $40.3 million or five percent versus the same period last year. Included in this increase was approximately $23 million associated with recently completed acquisitions. Revenue increases are primarily associated with our Agricultural Products and Specialty Chemicals businesses. A more detailed review of revenues by segment is discussed under the section titled "Results of Operations" . On a regional basis, sales in Asia were up two percent, sales in Latin America grew 18 percent and sales in North America were up 4 percent, while sales in Europe, Middle East and Africa decreased by 13 percent.

• Our gross margin, excluding acquisition-related charges, increased by $28.7 million or approximately 10 percent to $316.1 million versus last year's third quarter driven by higher volumes and selling prices partially offset by negative exchange rate impacts. Gross margin percent of 35 percent increased approximately two percent, driven by higher selling prices and improved mix partially offset by higher costs.

• Selling, general and administrative expenses, excluding non-operating pension and postretirement charges, increased approximately $12.3 million or 11 percent to $119.5 million, largely due to increased spending on targeted growth initiatives and to meet the growth in our business. The majority of these increases were experienced in our Agricultural Products segment.

• Research and Development expenses of $29.5 million increased $1.7 million or six percent, largely due to increased spending in Agricultural Products associated with various innovation projects.

• Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of $109.4 million increased $10.2 million or 10 percent primarily due to higher operating results in our Agricultural Products. See the disclosure of our Adjusted Earnings Non-GAAP financial measurement below, under the section titled "Results of Operations" .

• We made the decision to phase out our zeolite operations in Spain and exit the product line by fourth quarter 2012. The majority of the restructuring charges associated with this announcement will take place in the third and fourth quarters of 2012 as operations at the plant wind down.

• We also completed the following growth initiatives:

?            In August 2012, we acquired the assets of Pectine Italia S.p.A.
             (PI). PI produces pectin, a stabilizer and thickening agent used
             widely in many foods and derived predominately from lemon
             peels. This acquisition will enable us to enter the pectin market
             which complements our portfolio of texturant product lines which is
             part of our BioPolymer division within our Specialty Chemicals
             segment.


?            In September 2012, our Agricultural Products segment entered into a
             collaboration and license agreement with a third-party company for
             the purpose of obtaining certain technology and intellectual
             property rights relating to a new fungicide compound still under
             development. This new carboximide-class broad spectrum fungicide
             will expand of our current fungicide portfolio.

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RESULTS OF OPERATIONS
Overview
The following presents a reconciliation of our segment operating profit to net income attributable to FMC stockholders as seen through the eyes of our management. For management purposes, we report the operating performance of each of our business segments based on earnings before interest and income taxes excluding corporate expenses, other income (expense), net and corporate special income/(charges).

                                                 SEGMENT RESULTS RECONCILIATION
                                                   Three Months Ended September 30            Nine Months Ended September 30
(in Millions)                                        2012                   2011                 2012                 2011
Revenue
Agricultural Products                         $         423.6         $         382.1     $       1,271.4       $       1,055.3
Specialty Chemicals                                     226.3                   217.9               677.6                 656.5
Industrial Chemicals                                    254.2                   264.0               803.8                 761.3
Eliminations                                             (1.7 )                  (1.9 )              (4.5 )                (3.8 )
Total                                         $         902.4         $         862.1     $       2,748.3       $       2,469.3
Income (loss) from continuing operations
before income taxes
Agricultural Products                         $          99.8         $          80.9     $         340.8       $         275.7
Specialty Chemicals                                      44.0                    47.6               141.0                 148.5
Industrial Chemicals                                     36.5                    36.0               127.4                 112.5
Eliminations                                                -                       -                   -                     -
Segment operating profit                                180.3                   164.5     $         609.2       $         536.7
Corporate                                               (15.3 )                 (12.8 )             (44.2 )               (45.2 )
Other income (expense), net (1)                          (3.0 )                  (2.9 )             (18.5 )               (15.1 )
Operating profit before the items listed
below (2)                                               162.0                   148.8               546.5                 476.4

Interest expense, net                                   (11.0 )                  (9.1 )             (33.8 )               (29.5 )
Corporate special (charges) income:
Restructuring and other (charges) income                (11.6 )                 (13.4 )             (18.9 )               (27.2 )
Non-operating pension and postretirement
charges (3)                                              (8.1 )                  (3.4 )             (26.3 )               (12.4 )
Acquisition-related charges                              (0.6 )                     -                (7.2 )                   -
Provision for income taxes                              (34.4 )                 (29.8 )            (124.5 )               (96.1 )
Discontinued operations, net of income taxes             (6.3 )                  (6.3 )             (21.8 )               (23.2 )
Net income attributable to FMC stockholders   $          90.0         $          86.8     $         314.0       $         288.0


____________________

(1) Other income (expense), net is comprised primarily of last-in first-out ("LIFO") inventory adjustments and certain employee benefits, including incentive compensation. Our business segments account for their inventory utilizing a first-in first-out ("FIFO") basis of accounting. The LIFO inventory adjustments are not allocated to the business segments and therefore are recorded to "Other income (expense), net".

(2) Results for all segments including corporate expense and other income (expense) are net of noncontrolling interest of $4.6 million and $4.1 million for the three months ended September 30, 2012 and 2011 and $15.5 million and $12.5 million for the nine months ended September 30, 2012 and 2011, respectively. The majority of the noncontrolling interest pertains to our Industrial Chemicals segment.

(3) Our non-operating pension and postretirement costs are defined as those costs related to interest, expected return on plan assets, amortized actuarial gains and losses and the impacts of any plan curtailments or settlements. These costs are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance and we consider these costs to be outside our operational performance. We exclude these non-operating pension and postretirement costs from our segments as we believe that removing them provides a better understanding of the underlying profitability of our businesses, provides increased transparency and clarity in the performance of our retirement plans and enhances period-over-period comparability. We continue to include the service cost and amortization of prior service cost in our operating segments noted above. We believe these elements reflect the current year operating costs to our businesses for the employment benefits provided to active employees.

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The following chart, which is provided to assist the readers of our financial statements, depicts certain after-tax charges (gains). These items are excluded in the measures we use to evaluate business performance and determine certain performance-based compensation. These after-tax items are discussed in detail within the "Other results of operations" section that follows. Additionally, the chart below discloses our Non-GAAP financial measure "Adjusted after-tax earnings from continuing operations attributable to FMC stockholders" reconciled from the GAAP financial measure "Net income attributable to FMC stockholders". We believe that this measure provides useful information about our operating results to investors and securities analysts. We also believe that excluding the effect of restructuring and other income and charges, non-operating pension and postretirement charges, acquisition-related charges and certain tax adjustments from operating results allows management and investors to compare more easily the financial performance of our underlying businesses from period to period. This measure should not be considered as a substitute for net income (loss) or other measures of performance or liquidity reported in accordance with GAAP.

                                             ADJUSTED EARNINGS RECONCILIATION
                                                Three Months Ended September 30           Nine Months Ended September 30
(in Millions)                                       2012                  2011               2012                2011
Net income attributable to FMC stockholders
(GAAP)                                      $           90.0         $        86.8     $       314.0       $       288.0
Corporate special charges (income), pre-tax             20.3                  16.8              52.4                39.6
Income tax expense (benefit) on Corporate
special charges (income)                                (7.1 )                (5.5 )           (18.8 )             (13.2 )
Corporate special charges (income), net of
income taxes                                            13.2                  11.3              33.6                26.4
Discontinued operations, net of income
taxes                                                    6.3                   6.3              21.8                23.2
Tax adjustments                                         (0.1 )                (5.2 )             2.3               (20.3 )
Adjusted after-tax earnings from continuing
operations attributable to FMC stockholders
(Non-GAAP)                                  $          109.4         $        99.2     $       371.7       $       317.3

Three months ended September 30, 2012 compared to three months ended September 30, 2011
In the discussion below, please refer to our chart titled "Segment Results Reconciliation" within the Results of Operations section. All comparisons are between the periods unless otherwise noted. Segment Results
For management purposes, segment operating profit is defined as segment revenue less operating expenses (segment operating expenses consist of costs of sales and services, selling, general and administrative expenses and research and development expenses). We have excluded the following items from segment operating profit: corporate staff expense, interest income and expense associated with corporate debt facilities and investments, income taxes, gains (or losses) on divestitures of businesses, restructuring and other charges (income), non-operating pension and postretirement charges, investment gains and losses, loss on extinguishment of debt, asset impairments, Last-in, First-out ("LIFO") inventory adjustments, acquisition-related charges, and other income and expense items.
Information about how some of these items relate to our businesses at the segment level is discussed in Note 18 of our condensed consolidated financial statements filed in this Form 10-Q and in Note 19 of our 2011 consolidated financial statements in our 2011 10-K.

Agricultural Products

                                         Three Months Ended September 30             Increase/(Decrease)
($ in Millions)                                2012              2011                  $                   %
Revenue                                 $          423.6     $    382.1     $        41.5                    11 %
Operating Profit                                    99.8           80.9              18.9                    23

Revenue of $423.6 million increased approximately 11 percent versus the prior year quarter due to volume growth in Latin America, North America and Asia, offset by a decline Europe/Middle East/Africa ("EMEA"). Revenue for the three months ended September 30, 2012 included approximately $12 million primarily associated with the Rovral and Sportak acquisitions that closed in the fourth quarter of 2011.

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Revenue in Latin America of $268.1 million increased 18 percent reflecting continued strong market conditions in the region particularly Brazil, driven by increased planted area for key crops, growth in soybean markets and sales from our joint venture, Ruralco, in Argentina which we acquired in 2011. Sales in North America of $55.2 million increased 12 percent driven by increased demand for our proprietary insecticides due to strong pest pressure in the quarter. Revenue in Asia of $66.5 million increased three percent while sales in EMEA of $33.8 million decreased 17 percent versus the prior period due to unfavorable product mix and unfavorable currency impacts.
Agricultural Products' operating profit of $99.8 million increased approximately 23 percent compared to the year-ago quarter, reflecting the preceding paragraph's sales growth partially offset by a $8.6 million increase in selling, general and administrative costs mainly for focused growth initiatives and to support growth in the business.

Specialty Chemicals

                        Three Months Ended September 30              Increase/(Decrease)
($ in Millions)                 2012                     2011          $              %

Revenue $ 226.3 $ 217.9 $ 8.4 4 % Operating Profit 44.0 47.6 (3.6 ) (8 )

Revenue in Specialty Chemicals was $226.3 million, an increase of approximately four percent versus the prior-year quarter. The increase was driven primarily by incremental revenue of $6 million associated with recently completed acquisitions. Higher selling prices across the segment also drove higher revenues which were partially offset by unfavorable currency impacts. BioPolymer revenue of $173.7 million increased approximately six percent from the prior-year quarter. This increase was due to favorable pricing which increased sales by six percent and revenue from acquisitions which increased sales by four percent. Offsetting these increases were unfavorable currency impacts, primarily due to the weaker Euro of four percent as compared to prior-year quarter.
Lithium revenue of $52.6 million decreased approximately one percent compared to the prior-year quarter. During the quarter Lithium experienced higher pricing which increased sales by six percent but which were offset by reduced volumes of six percent and unfavorable currency impacts of one percent. Lithium continues to be impacted by the lingering impacts of operational issues which has impacted volumes.
Segment operating profit of $44.0 million decreased by eight percent versus the year ago quarter. The increase in revenue was more than offset by higher operating costs, particularly from the extended planned outage in Lithium's Argentina facility, as well as higher raw material costs, growth related spending in BioPolymer and unfavorable exchange rate impacts. Industrial Chemicals

Three Months Ended September 30 Increase/(Decrease) ($ in Millions) 2012 2011 $ % Revenue $ 254.2 $ 264.0 $ (9.8 ) (4 )% Operating Profit 36.5 36.0 0.5 1

Revenue in Industrial Chemicals was $254.2 million, a decrease of approximately four percent versus the prior-year quarter. Revenue decreased due to lower volumes and unfavorable currency impacts which reduced revenue by five and two percent, respectively. Slightly offsetting these decreases is the impact of acquisitions completed in the fourth quarter of 2011 of two percent and higher pricing which resulted in an increase to revenue of two percent. Alkali revenues of $173.5 million decreased two percent as higher overall pricing was more than offset by lower volumes, of which nearly half the volume shortfall was related to a delay in certain export shipments at the end of September.
Peroxygens revenues of $80.7 million decreased seven percent compared to the prior year quarter. The decrease was due to unfavorable currency impacts and lower volumes primarily in the persulfate market.
Segment operating profit of $36.5 million increased approximately one percent versus the year ago quarter. The increase was a result of higher average pricing in Alkali, partially offset by lower volumes in Peroxygens and Alkali and the negative impacts of the poor performance of the zeolites product line which we have announced we are exiting by the end of this year.

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Other Results of Operations
Corporate expenses
Corporate expenses of $15.3 million in the third quarter of 2012 increased slightly by $2.5 million from $12.8 million in the same period in 2011. The increase was related to higher costs to support growth activities. Corporate expenses are included as a component of the line item "Selling, general and administrative expenses" on our condensed consolidated statements of income. Other income (expense), net
Other expense increased slightly to $3.0 million in the third quarter of 2012 from $2.9 million in the same period in 2011. Other income (expense), net is included as a component of the line item "Costs of sales and services" on our condensed consolidated statements of income. Interest expense, net
Interest expense, net for the third quarter of 2012 was $11.0 million as compared to the third quarter of 2011 of $9.1 million. The increase was primarily due to higher debt levels associated with the issuance of our 3.95% senior notes during the 4th quarter of 2011. The interest expense on these notes was $3.0 million in the third quarter of 2012. The higher interest associated with our senior notes was slightly offset by a decrease in our foreign debt interest expense during the quarter ended September 30, 2012 as compared to 2011 of approximately $1.4 million.
Corporate special (charges) income
Restructuring and other charges (income) These charges totaled $11.6 million in the third quarter of 2012 compared to $13.4 million in the third quarter of 2011. Our restructuring and other charges (income) are comprised of restructuring, asset disposals and other charges (income). See the table and further discussion regarding our restructuring and other charges (income) in Note 8 to our condensed consolidated financial statements included in this Form 10-Q. Restructuring and asset disposal charges in 2012 of $6.2 million were primarily associated with the announced Zeolites shutdown. Other charges (income) net in 2012 of $5.4 million was primarily associated with a charge of $4.4 million for a collaboration and license agreement entered into by our Agricultural Products segment for the purpose of obtaining certain technology and intellectual property rights relating to a new fungicide compound still under development.
Restructuring and asset disposal charges of $12.3 million in 2011 were primarily associated with charges associated with our Sodium Percarbonate shutdown. Other charges (income) net in 2011 of $1.1 million was primarily associated with charges for environmental remediation at operating sites.
The liabilities associated with the restructuring charges listed above are also included within Note 8 to our condensed consolidated financial statements included in this Form 10-Q. We believe the restructuring plans implemented are on schedule and the benefits and savings either have been or will be achieved. Non-operating pension and postretirement charges The charge for the three months ended September 30, 2012 was $8.1 million compared to $3.4 million for the three months ended September 30, 2011. The increase in charges was primarily the result of higher amortization impacts of . . .