FMC CORPORATION Overview
FMC Corporation is a global agricultural sciences company dedicated to helping growers produce food, feed, fiber and fuel for an expanding world population while adapting to a changing environment. We operate in a single distinct business segment. We develop, market and sell all three major classes of crop protection chemicals (insecticides, herbicides and fungicides) as well as biologicals, crop nutrition and seed treatment, which we group as plant health. FMC's innovative crop protection solutions enable growers, crop advisers and turf and pest management professionals to address their toughest challenges economically without compromising safety or the environment. FMC is committed to discovering new herbicide, insecticide and fungicide active ingredients, product formulations and pioneering technologies that are consistently better for the planet. FORWARD-LOOKING INFORMATION Statement under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995: FMC and its representatives may from time to time make written or oral statements that are "forward-looking" and provide other than historical information, including statements contained herein, in FMC's other filings with theSEC , and in reports or letters to FMC stockholders. In some cases, FMC has identified forward-looking statements by such words or phrases as "will likely result," "is confident that," "expect," "expects," "should," "could," "may," "will continue to," "believe," "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 and phrases. Such forward-looking statements are based on management's current views and assumptions regarding future events, future business conditions and the outlook for the company based on currently available information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. Currently, one of the most significant factors is the potential adverse effect of the current COVID pandemic on our financial condition, results of 21 -------------------------------------------------------------------------------- Table of Contents operations, cash flows and performance, which is substantially influenced by the potential adverse effect of the pandemic on our customers and suppliers and the global economy and financial markets. The extent to which COVID impacts us will depend on future developments, many of which remain uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Additional factors include, among other things, the risk factors and other cautionary statements filed with theSEC included within this Form 10-K as well as otherSEC filings and public communications. Moreover, investors are cautioned to interpret many of these factors as being heightened as a result of the ongoing and numerous adverse impacts of COVID. FMC cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Forward-looking statements are qualified in their entirety by the above cautionary statement. FMC undertakes no obligation, and specifically disclaims any duty, to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, except as otherwise required by law.
COVID-19 Pandemic
As an agricultural sciences company, we are considered an "essential" industry in the countries in which we operate; we have avoided significant plant closures and all our manufacturing facilities and distribution warehouses remain operational and properly staffed. Our research laboratories and greenhouses also have continued to operate throughout the pandemic. One of our third-party tollers experienced a short-term disruption earlier during the pandemic because of COVID-related staffing issues, which reflects one of the ongoing business risks that the pandemic creates. We are closely monitoring raw material and supply chain costs. Additionally, we are aware of the potential for disruptions or lack of availability, at any price, of critical materials. The extent to which COVID will continue to impact us will depend on future developments, many of which remain uncertain and cannot be predicted with confidence, including the duration of the pandemic, further actions to be taken to contain the pandemic or mitigate its impact, and the extent of the direct and indirect economic effects of the pandemic and containment measures, among others. We have implemented procedures to support the health and safety of our employees and we are following allU.S. Centers for Disease Control and Prevention , as well as state and regional health department guidelines. The well-being of our employees is FMC's top priority. Earlier this year, we introduced flexible work arrangements to facilitate the return of all staff to our headquarters inPhiladelphia , as well as some other locations in adherence with local guidelines. We enacted a policy that all employees, contractors and interns based in ourPhiladelphia headquarters, as well as visitors, must be fully vaccinated against COVID and must provide proof of their vaccination with exemptions granted in certain situations. In addition, we have thousands of employees who continue operating our manufacturing sites and distribution warehouses worldwide. In all our facilities, we are using a variety of best practices to address COVID risks, following the protocols and procedures recommended by leading health authorities. We are continuing to monitor the situation in all regions and adjust our health and safety protocols accordingly. We made significant investments in our employees as a result of the COVID pandemic, including through enhanced dependent care pay policies, recognition bonuses, increased flexibility of work schedules and hours of work to accommodate remote working arrangements, and investment in IT infrastructure to promote remote work. Through these efforts we have successfully avoided any COVID related furloughs or workforce reductions to date.
We will continue to monitor the economic environment related to the pandemic on an ongoing basis and assess the impacts on our business.
2021 Highlights
The following are the more significant developments in our businesses during the
year ended
•Revenue of$5,045.2 million in 2021 increased$403.1 million or approximately 9 percent versus last year. A more detailed review of revenues is included under the section entitled "Results of Operations" . On a regional basis, sales inNorth America increased 8 percent, driven by strong volume growth and price increases, sales inLatin America increased by 12 percent driven by strong volume growth and price increases, sales inEurope ,Middle East andAfrica decreased 1 percent with favorable currency and price tailwinds mostly offset by a decrease in volume due to weather challenges and sales inAsia increased 13 percent, driven by favorable currency, volume growth especially from launches, as well as price growth. Approximately$400 million in revenues came from products launched in the last five years. •Our gross margin of$2,171.7 million increased$119.7 million or approximately 6 percent versus last year. The increase in gross margin was primarily driven by top line revenue growth which was partially offset by higher costs due to rising input costs and increasing logistics expenses. Gross margin as a percent of revenue of 43 percent decreased slightly from 44 percent in the prior year period, driven by higher costs primarily increases in raw materials, packaging, and logistics. 22 -------------------------------------------------------------------------------- Table of Contents •Selling, general and administrative expenses decreased from$729.7 million to$714.1 million due to lower transaction-related charges resulting from the finalization of our worldwide ERP system in the first quarter 2021. Selling, general and administrative expenses, excluding transaction-related charges, of$713.7 million increased$37.3 million or approximately 6 percent. The increase was the result of resuming normal spending following cost-saving measures in the prior year due to the pandemic. Transaction-related charges are presented in our adjusted earnings Non-GAAP financial measurement below under the section titled
"Results of Operations" .
•Research and development expenses of$304.7 million increased$16.8 million or 6 percent. In the prior year, we phased some research and development projects differently to allow for lower costs in response to the pandemic without fundamentally impacting long-term timelines. In the current year, we have resumed research and development expenses related to these projects. We maintain our commitment to invest resources to discover new active ingredients and formulations that support resistance management and sustainable agriculture. •Net income (loss) attributable to FMC stockholders of$736.5 million increased$185 million or approximately 34 percent from$551.5 million in the prior year period. The higher results were driven by our gross margin growth as well as$52.9 million in lower transaction-related charges due to the completion of our integration of the Dupont Crop Protection business in 2020. See Note 5 to the consolidated financial statements included in this Form 10-K for additional information on the Dupont Crop Protection business. Further contributing to our increase in net income was$24.2 million in lower restructuring and other charges versus prior year primarily due to the charge of$65.6 million associated with the Isagro asset acquisition in 2020 somewhat offset by the$33.5 million charge for theIndia indirect tax matter in 2021. Interest expense, net decreased$20.1 million compared to the prior year due to lower outstanding debt and lower rates. Additionally, the provision for income taxes was lower by$59.3 million , primarily due to the geographic mix of earnings among our global subsidiaries as well as changes in various tax reserves. Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of$894.9 million increased$85.9 million or approximately 11 percent. See the disclosure of our adjusted earnings Non-GAAP financial measurement under the section titled "Results of Operations" .
Other 2021 Highlights
InMarch 2021 , we announced our agreement with UPL Ltd. ("UPL"), a global provider of sustainable agriculture products and solutions, to expand access of Rynaxypyr® active to growers around the world and increase the manufacturing capacity for this critical molecule. Under the multi-year agreement, we will provide UPL access to products containing Rynaxypyr® active for distribution in select markets. In the future, we will supply Rynaxypyr® active to UPL for use in product formulations developed and marketed by UPL around the world. Additionally, UPL will toll manufacture Rynaxypyr® active for us inIndia for theIndia market. This arrangement will significantly increase our manufacturing footprint and capacity for Rynaxypyr® active, expanding our ability to supply the growing demand. 2022 Outlook We expect 2022 revenue will be in the range of approximately$5.25 billion to$5.55 billion , up approximately 7 percent at the midpoint versus 2021. We also expect adjusted EBITDA(1) of$1.32 billion to$1.48 billion , which represents 6 percent growth at the midpoint versus 2021 results. Our results may be impacted if cost inflation becomes more severe, which would trend our results towards the lower end of guidance. Mid-to-high single digit price increases or the easing of foreign currency headwinds may drive our results towards the high end of the range. We are prepared to navigate certain challenges such as rising input costs, inconsistent raw material availability, increasing logistic expenses, long lead times for ocean freight, labor cost inflation and emerging currency headwinds. 2022 adjusted earnings are expected to be in the range of$6.80 to$8.10 per diluted share(1), up 8 percent at the midpoint versus 2021, excluding any impact from potential share repurchases in 2022. For cash flow outlook, refer to the liquidity and capital resources section below. (1)Although we provide forecasts for adjusted earnings per share and adjusted EBITDA (Non-GAAP financial measures), we are not able to forecast the most directly comparable measures calculated and presented in accordance withU.S. GAAP. Certain elements of the composition of theU.S. GAAP amounts are not predictable, making it impractical for us to forecast. Such elements include, but are not limited to, restructuring, acquisition charges, and discontinued operations. As a result, noU.S. GAAP outlook is provided. 23
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Results of Operations - 2021, 2020 and 2019
Overview
The following charts provide a reconciliation of adjusted EBITDA, adjusted earnings and organic revenue growth, all of which are Non-GAAP financial measures, from the most directly comparable GAAP measure. Adjusted EBITDA and organic revenue are provided to assist the readers of our financial statements with useful information regarding our operating results. Our operating results are presented based on how we assess operating performance and internally report financial information. For management purposes, we report operating performance based on earnings before interest, income taxes, depreciation and amortization, discontinued operations, and corporate special charges. Our adjusted earnings measure excludes corporate special charges, net of income taxes, discontinued operations attributable to FMC stockholders, net of income taxes, and certain Non-GAAP tax adjustments. These are excluded by us in the measure we use to evaluate business performance and determine certain performance-based compensation. These items are discussed in detail within the "Other Results of Operations" section that follows. Organic revenue growth excludes the impacts of foreign currency changes, which we believe is a meaningful metric to evaluate our revenue changes. In addition to providing useful information about our operating results to investors, we also believe that excluding the effect of corporate special charges, net of income taxes, and certain Non-GAAP tax adjustments from operating results and discontinued operations allows management and investors to compare more easily the financial performance of our underlying business from period to period. These measures should not be considered as substitutes for net income (loss) or other measures of performance or liquidity reported in accordance withU.S. GAAP. Year Ended December 31, (in Millions) 2021 2020 2019 Revenue$ 5,045.2 $ 4,642.1 $ 4,609.8 Costs and Expenses Costs of sales and services 2,873.5 2,590.1 2,526.2 Gross Margin$ 2,171.7 $ 2,052.0 $ 2,083.6 Selling, general and administrative expenses 714.1 729.7 792.9 Research and development expenses 304.7 287.9 298.1 Restructuring and other charges (income) 108.0 132.2 171.0 Total costs and expenses$ 4,000.3
$ 1,044.9
Non-operating pension and postretirement charges (income) 20.0 21.2 8.1 Interest income - (0.1) (1.9) Interest expense 131.1 151.3 160.4 Income from continuing operations before income taxes$ 893.8 $ 729.8 $ 655.0 Provision for income taxes 91.6 150.9 111.5 Income (loss) from continuing operations$ 802.2 $ 578.9 $ 543.5 Discontinued operations, net of income taxes (68.2) (28.3) (63.3) Net income (loss) (GAAP)$ 734.0 $ 550.6 $ 480.2 Adjustments to arrive at Adjusted EBITDA (Non-GAAP): Corporate special charges (income): Restructuring and other charges (income) (3)$ 108.0 $ 132.2 $ 171.0 Non-operating pension and postretirement charges (income) (4) 20.0 21.2 8.1 Transaction-related charges (5) 0.4 53.3 77.8 Discontinued operations, net of income taxes 68.2 28.3 63.3 Interest expense, net 131.1 151.2 158.5 Depreciation and amortization 170.9 162.7 150.1 Provision (benefit) for income taxes 91.6 150.9 111.5 Adjusted EBITDA (Non-GAAP) (2)$ 1,324.2 $ 1,250.4 $ 1,220.5 24
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____________________
(1)Referred to as operating profit.
(2)Adjusted EBITDA is defined as operating profit excluding corporate special
charges (income) and depreciation and amortization expense.
(3)See Note 9 to the consolidated financial statements included within this Form
10-K for details of restructuring and other charges (income).
(4)Our non-operating pension and postretirement charges (income) are defined as
those costs (benefits) related to interest, expected return on plan assets,
amortized actuarial gains and losses and the impacts of any plan curtailments or
settlements. These are excluded from our operating results and 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 continue to include the service cost and
amortization of prior service cost in our operating results noted above. These
elements reflect the current year operating costs to our business for the
employment benefits provided to active employees.
(5)Charges relate to transaction costs, costs for transitional employees, other
acquired employee related costs, integration related legal and professional
third-party fees. We completed the integration of the DuPont Crop Protection
Business in 2020, other than the completion of certain in-flight initiatives
associated with the finalization of our worldwide ERP system in early 2021.
Year Ended December 31,
(in Millions) 2021 2020 2019
DuPont Crop Protection Business Acquisition (1)
Legal and professional fees (2) $ 0.4 $ 53.3 $ 77.8
Total transaction-related charges $ 0.4 $ 53.3 $ 77.8
____________________
(1)As previously disclosed, in November 2017 , we acquired certain assets
relating to the crop protection business of E. I. du Pont de Nemours and
Company , and the related research and development organization (the "DuPont Crop
Protection Business").
(2)Represents transaction costs, costs for transitional employees, other
acquired employees related costs, and transactional-related costs such as legal
and professional third-party fees. These charges are recorded as a component of
"Selling, general and administrative expense" on the consolidated statements of
income (loss).
ADJUSTED EARNINGS RECONCILIATION
Year Ended December 31,
(in Millions) 2021 2020 2019
Net income (loss) attributable to FMC stockholders (GAAP)
$ 551.5 $ 477.4 Corporate special charges (income), pre-tax (1) 128.4 206.7 256.9
Income tax expense (benefit) on Corporate special charges (income) (2)
(23.4) (23.8) (49.2)
Corporate special charges (income), net of income taxes
Discontinued operations attributable to FMC Stockholders, net of income taxes
68.2 28.3 63.3
Non-GAAP tax adjustments (3) (14.8) 46.3 55.3
Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP)
$ 894.9 $ 809.0 $ 803.7 ____________________ (1) Represents restructuring and other charges (income), non-operating pension and postretirement charges (income) and transaction-related charges. (2) The income tax expense (benefit) on Corporate special charges (income) is determined using the applicable rates in the taxing jurisdictions in which the Corporate special charge or income occurred and includes both current and deferred income tax expense (benefit) based on the nature of the non-GAAP performance measure. (3) We exclude the GAAP tax provision, including discrete items, from the Non-GAAP measure of income, and instead include a Non-GAAP tax provision based upon the annual Non-GAAP effective tax rate. The GAAP tax provision includes certain discrete tax items including, but not limited to: income tax expenses or benefits that are not related to current year ongoing business operations; tax adjustments associated with fluctuations in foreign currency remeasurement of certain foreign operations; certain changes in estimates of tax matters related to prior fiscal years; certain changes in the realizability of deferred tax assets; and changes in tax law. Management believes excluding these discrete tax items assists investors and securities analysts in understanding the tax provision and the effective tax rate related to ongoing operations thereby providing investors with useful supplemental information about FMC's operational performance. 25
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ORGANIC REVENUE GROWTH RECONCILIATION
Twelve Months Ended
December 31, 2021 vs.
2020
Total Revenue Change (GAAP) 9 %
Less: Foreign Currency Impact (1%)
Organic Revenue Change (Non-GAAP) 8 %
Results of Operations
In the discussion below, all comparisons are between the periods unless otherwise noted.
Revenue 2021 vs. 2020 Revenue of$5,045.2 million increased$403.1 million , or approximately 9 percent versus the prior year period. The increase was driven by higher volumes, which accounted for an approximate 7 percent increase, as well as favorable pricing which accounted for an approximate 1 percent increase. Growth in volumes was broad-based across synthetic and biological portfolios, withNorth America ,Latin America andAsia delivering strong results. Foreign currency tailwinds had a favorable impact of approximately 1 percent on revenue. Excluding foreign currency impacts, revenue increased approximately 8 percent.
2020 vs. 2019
Revenue of$4,642.1 million increased$32.3 million , or approximately 1 percent versus the prior year period. The increase was driven by higher volumes, primarily inLatin America andAsia , which accounted for an approximate 4 percent increase, as well as favorable pricing which accounted for an approximate 3 percent increase. Foreign currency headwinds had an unfavorable impact of approximately 6 percent on revenue. Excluding foreign currency impacts, revenue increased approximately 7 percent.
See below for a discussion of revenue by region.
Total Revenue by Region
Year Ended December 31,
(in Millions) 2021 2020 2019
North America $ 1,117.2 $ 1,032.5 $ 1,121.1
Latin America 1,633.4 1,456.5 1,441.7
Europe, Middle East and Africa (EMEA) 1,040.0 1,046.3 1,001.8
Asia 1,254.6 1,106.8 1,045.2
Total Revenue $ 5,045.2 $ 4,642.1 $ 4,609.8
2021 vs. 2020
North America : Revenue increased approximately 8 percent in the year ended
December 31, 2021 , driven by sales growth for herbicides and diamides, and
strong product launches of Xyway™ fungicide and Vantacor™ insect control. The
increase was partially offset by a shift of diamide partner sales from North
America to other regions.
Latin America : Revenue increased approximately 12 percent, or approximately 14
percent excluding foreign currency headwinds, for the year ended December 31,
2021 compared to the prior year period due to strong volume growth across all
countries and pricing actions. Growth was broad-based across segments with
insecticides, fungicides and biologicals increasing double digits.
EMEA: Revenue decreased approximately 1 percent versus the prior year period, or
approximately 4 percent excluding foreign currency tailwinds, driven by a shift
of diamide partner sales from EMEA to other regions. Volume and price
contributed to the region's revenue driven by diamides, herbicides, biologicals
and fungicides.
Asia : Revenue increased approximately 13 percent versus the prior year period,
or approximately 10 percent excluding foreign currency tailwinds, primarily
driven by growth in Australia , India , ASEAN zone and Korea . We had strong sales
for our new Overwatch® herbicide and Vantacor™ insect control. Sales of our
diamides were robust across the region despite erratic rainfall in several
countries.
For 2022, full-year revenue is expected to be in the range of approximately
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Table of Contents 2020 vs. 2019North America : Revenue decreased approximately 8 percent in the year endedDecember 31, 2020 . Sales were impacted due to supply chain disruptions, including COVID-related factors associated with logistics and a tolling partner in the fourth quarter. Additionally, we had channel destocking in the first half of the year. We continued market expansion of the Lucento® fungicide, which had a strong second year, and Elevest™ insect control had a good launch year.Latin America : Revenue increased approximately 1 percent, or approximately 17 percent excluding foreign currency headwinds, for the year endedDecember 31, 2020 compared to the prior year period due primarily to high-single digit volume growth and solid price increases.Brazil had robust demand for our products for soybeans and sugarcane, while there was reduced acreage for cotton. EMEA: Revenue increased approximately 4 percent versus the prior year period, or approximately 6 percent excluding foreign currency headwinds. Demand was driven by diamides on specialty crops, Battle® Delta herbicide on cereals and Spotlight® Plus herbicide on potatoes.Asia : Revenue increased approximately 6 percent versus the prior year period, or approximately 9 percent excluding foreign currency headwinds, primarily driven by market expansion and share gains inIndia and the very strong market rebound inAustralia . Our diamides were in high demand throughout the region in 2020, as we continue to grow on specialty crops like rice and fruit and vegetables.
Gross margin
2021 vs. 2020
Gross margin of$2,171.7 million increased by$119.7 million , or approximately 6 percent versus the prior year period. The increase was primarily due to higher revenues driven by increased volumes, partially offset by higher cost of goods sold.
Gross margin percent of approximately 43 percent slightly decreased from 44 percent in the prior year period, driven by higher costs primarily increases in raw materials, packaging, and logistics.
2020 vs. 2019
Gross margin of
Gross margin percent of approximately 44 percent slightly decreased from approximately 45 percent in the prior year period, primarily due to unfavorable foreign currency headwinds.
Selling, general, and administrative expenses
2021 vs. 2020
Selling, general and administrative expenses of$714.1 million decreased by$15.6 million , or approximately 2 percent versus the prior year period due to lower transaction-related charges resulting from the finalization of our worldwide ERP system in the first quarter 2021. Selling, general and administrative expenses, excluding transaction-related charges, increased$37.3 million , or approximately 6 percent, versus the prior year driven by resuming normal spending following cost-saving measures taken in the prior year due to the pandemic. 2020 vs. 2019
Selling, general and administrative expenses of
Research and development expenses
2021 vs. 2020
Research and development expenses of$304.7 million increased by$16.8 million , or approximately 6 percent versus the prior year period. During 2020, we phased some research and development projects differently to allow for lower costs in response to the pandemic without fundamentally impacting long-term timelines. In the current year, we have resumed research and development expenses related to these projects. 27
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2020 vs. 2019
Research and development expenses of$287.9 million decreased by$10.2 million , or approximately 3 percent versus the prior year period primarily due to cost-saving measures taken in response to the COVID pandemic, but we did not cancel any research and development projects. We phased some projects differently to allow lower costs in response to the pandemic without fundamentally impacting long-term timelines.
Other Results of Operations
Depreciation and amortization
2021 vs. 2020
Depreciation and amortization of$170.9 million increased$8.2 million , or approximately 5 percent, as compared to 2020 of$162.7 million . The increase was mostly driven by the impacts of the amortization effects of the completion of various phases of our ERP implementation which increased amortization expense by approximately$5 million . 2020 vs. 2019 Depreciation and amortization of$162.7 million increased$12.6 million , or approximately 8 percent, as compared to 2019 of$150.1 million . The increase was mostly driven by the impacts of the amortization effects of the completion of various phases of our ERP implementation which increased amortization expense by approximately$10 million . Interest expense, net 2021 vs. 2020 Interest expense, net of$131.1 million decreased by$20.1 million , or approximately 13 percent, compared to$151.2 million in 2020. The decrease was driven by lower foreign debt balances and rates which decreased interest expense by approximately$9 million and, lower short term interest rates which decreased interest expense by approximately$10 million .
2020 vs. 2019
Interest expense, net of$151.2 million decreased by$7.3 million , or approximately 5 percent, compared to$158.5 million in 2019. The decrease was driven by lower term loan balances which decreased interest expense by approximately$17 million , lower LIBOR rates which decreased interest expense by approximately$20 million and partially offset by the impacts of our third quarter 2019 debt offering which increased interest expense by approximately$30 million .
Corporate special charges (income)
Restructuring and other charges (income)
Our restructuring and other charges (income) are comprised of restructuring, assets disposals and other charges (income) as described below:
Year Ended December 31,
(in Millions) 2021 2020 2019
Restructuring charges $ 41.1 $ 42.6 $ 62.2
Other charges (income), net 66.9 89.6 108.8
Total restructuring and other charges (income) (1)
$ 171.0 _______________
(1) See Note 9 to the consolidated financial statements included in this Form 10-K for more information.
2021 Restructuring charges in 2021 primarily consisted of$16.7 million of charges associated with the integration of the DuPont Crop Protection Business which was completed in 2020 except for certain in-flight initiatives. These charges primarily reflect non-cash charges and to a lesser extent remaining severance. Restructuring charges associated with the DuPont program are largely complete and any future charges are not expected to be material. There were other restructuring charges of$13.4 million related to various actions to improve organizational structure as well as regional alignment activities which primarily included the move of our European headquarters. Types of costs primarily relate to facility-related shut down costs including asset impairments as well as employee-related costs. 28 -------------------------------------------------------------------------------- Table of Contents Other charges (income), net in 2021 includes$33.5 million of charges related to the establishment of reserves for certain historicalIndia indirect tax matters that were triggered during the period of which approximately half are non-cash charges. See Note 20 to the consolidated financial statements included within this Form 10-K for further information regarding this matter. Additional charges of$27.1 million consists of charges of environmental sites.
2020
Restructuring charges in 2020 primarily consisted of$40.2 million of charges associated with the integration of the DuPont Crop Protection Business which was completed in 2020 except for certain in-flight initiatives. These charges included severance, accelerated depreciation on certain fixed assets, and other costs (benefits). There were other miscellaneous restructuring charges$2.4 million . Other charges (income), net in 2020 includes$65.6 million of charges related to our acquisition of the remaining rights for Fluindapyr active ingredient assets from Isagro. See Note 9 to the consolidated financial statements included within this Form 10-K for further information regarding this matter. Additional charges of$24.9 million consists of charges of environmental sites.
2019
Restructuring charges in 2019 primarily consisted of$34.1 million of charges related to our decision to exit sales of all carbofuran formulations globally and$26.4 million of charges associated with the integration of the DuPont Crop Protection Business. These charges included severance, accelerated depreciation on certain fixed assets, and other costs (benefits). There were other miscellaneous restructuring charges$1.7 million . Other charges (income), net in 2019 primarily consists of charges of environmental sites. During the fourth quarter of 2019, we recorded a charge of$72.8 million a result of an unfavorable court ruling we received in relation to the Pocatello Tribal Litigation at one of our environmental sites. See Note 12 to the consolidated financial statements included within this Form 10-K for further information regarding this matter.
Non-operating pension and postretirement charges (income)
2021 vs. 2020
The charge for 2021 was
2020 vs. 2019
The charge for 2020 was
Transaction-related charges
A detailed description of the transaction related charges is included in Note 5 to the consolidated financial statements included within this Form 10-K. Transaction related charges, which consisted entirely of those for the DuPont Crop acquisition, ended in early 2021.
Provision for income taxes
Provision for income taxes for 2021 was expense of$91.6 million resulting in an effective tax rate of 10.2 percent. Provision for income taxes for 2020 was expense of$150.9 million resulting in an effective tax rate of 20.7 percent. Provision for income taxes for 2019 was expense of$111.5 million resulting in an effective tax rate of 17.0 percent. Note 13 to the consolidated financial statements included in this Form 10-K includes more details on the drivers of the GAAP effective rate and year-over-year changes. We believe showing the reconciliation below of our GAAP to Non-GAAP effective tax rate provides investors with useful supplemental information about our tax rate on the core underlying business. 29
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Year Ended December 31,
2021 2020 2019
Income Tax Provision Effective Tax Income Tax Provision Effective Tax Income Tax Provision Effective Tax
(in Millions) (Expense) (Benefit) Rate (Expense) (Benefit) Rate (Expense) (Benefit) Rate
GAAP - Continuing operations $ 893.8 $ 91.6 10.2 % $ 729.8 $ 150.9 20.7 % $ 655.0 $ 111.5 17.0 %
Corporate special charges (income) 128.4 23.4 206.7 23.8 256.9 49.2
Tax adjustments (1) 14.8 (46.3) (55.3)
Non-GAAP - Continuing operations
12.7 %$ 936.5 $ 128.4 13.7 %$ 911.9 $ 105.4 11.6 % _______________
(1)Tax adjustments in 2021, 2020, and 2019 are materially attributable to the effects of certain changes in various tax reserves. See Note 13 to the consolidated financial statements included within this Form 10-K.
The primary drivers for the fluctuations in the effective tax rate for each period are provided in the table above. Excluding the items in the table above, the changes in the non-GAAP effective tax rate were primarily due to the impact of geographic mix of earnings among our global subsidiaries. See Note 13 to the consolidated financial statements included within this Form 10-K for additional details related to the provisions for income taxes on continuing operations, as well as items that significantly impact our effective tax rate.
Discontinued operations, net of income taxes
Our discontinued operations primarily reflect adjustments to retained liabilities from previously discontinued operations and include environmental liabilities, other postretirement benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities. Discontinued operations also includes the results of our discontinued FMC Lithium business in periods up to its disposition onMarch 1, 2019 . See Note 11 to the consolidated financial statements included within this Form 10-K for additional details on our discontinued operations.
2021 vs. 2020
Discontinued operations, net of income taxes represented a loss of$68.2 million in 2021 compared to a loss of$28.3 million in 2020. The loss during both periods was primarily due to adjustments related to the retained liabilities from our previously discontinued operations. Offsetting the losses in 2021 and 2020 were the gain on sales of land in our discontinued sites of$15 million and$24 million , net of taxes, respectively.
2020 vs. 2019
Discontinued operations, net of income taxes represented a loss of$28.3 million in 2020 compared to a loss of$63.3 million in 2019. The loss during both periods was primarily due to adjustments related to the retained liabilities from our previously discontinued operations. Offsetting the loss in both 2019 and 2020 were the gain on sale of two parcels of land in our discontinued site inNewark, California of$21 million and$24 million , net of taxes, respectively. Additionally, during 2019, we included the net loss from our discontinued FMC Lithium segment, primarily due to separation-related costs, up to its separation date onMarch 1, 2019 .
Net income (loss)
2021 vs. 2020
Net income increased to$734.0 million from$550.6 million . The higher results were driven by higher revenues and margins as well as lower selling, general, and administrative costs primarily resulting from lower transaction-related charges. Additionally, we had lower restructuring and other charges of$24.2 million , interest expense, net of$20.1 million , and tax expense of$59.3 million . These reductions were offset by higher discontinued operations charges of$39.9 million resulting from higher adjustments to retained liabilities and lower gains from real estate sales.
The only difference between Net income (loss) and Net income (loss) attributable to FMC stockholders is noncontrolling interest, which period over period is immaterial.
2020 vs. 2019
Net income (loss) increased to$550.6 million from$480.2 million . The higher results were driven by a slight increase in revenue as well as cost-saving measures in selling, general, and administrative and research and development expenses in response to the pandemic. Restructuring and other charges were$38.8 million lower versus prior year and discontinued operations expense decreased$35.0 million compared to the prior year. These increases to income were partially offset by 30
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higher tax expense and higher provision for income taxes of
The only difference between Net income (loss) and Net income (loss) attributable to FMC stockholders is noncontrolling interest, which period over period is immaterial.
Adjusted EBITDA (Non-GAAP) 2021 vs. 2020 Adjusted EBITDA of$1,324.2 million increased$73.8 million , or approximately 6 percent versus the prior year period. The increase was due to higher volumes and higher pricing which accounted for approximately 20 percent and 3 percent increases respectively. These factors more than offset cost increases in raw materials, packaging, and logistics costs, and to a lesser extent the reversal of some temporary cost savings in the prior year, which had an unfavorable impact of approximately 15 percent and foreign currency fluctuations which had an unfavorable impact of approximately 2 percent on adjusted EBITDA.
2020 vs. 2019
Adjusted EBITDA of$1,250.4 million increased$29.9 million , or approximately 2 percent versus the prior year period. The increase was due to higher volumes, higher pricing, and strong cost management which accounted for approximately 9 percent, 9 percent, and 6 percent increases respectively. These factors offset foreign currency fluctuations which had an unfavorable impact of approximately 22 percent on adjusted EBITDA. 31 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources As a global agricultural sciences company, we require cash primarily for seasonal working capital needs, capital expenditures, and return of capital to shareholders. We plan to meet these liquidity needs through available cash, cash generated from operations, commercial paper issuances and borrowings under our committed revolving credit facility as well as other liquidity facilities, and in certain instances access to debt capital markets. We believe our strong financial standing and credit ratings will ensure adequate access to the debt capital markets on favorable conditions. Information involving our material cash requirements is detailed below.
Cash
Cash and cash equivalents atDecember 31, 2021 and 2020, were$516.8 million and$568.9 million , respectively. Of the cash and cash equivalents balance atDecember 31, 2021 ,$510.3 million was held by our foreign subsidiaries. During the third quarter of 2021, we established plans to repatriate cash from certain foreign subsidiaries with minimal tax on a go forward basis. Other cash held by foreign subsidiaries is generally used to finance subsidiaries' operating activities and future foreign investments. See Note 13 to the consolidated financial statements included within this Form 10-K for more information on our indefinite reinvestment assertion.
Outstanding debt
AtDecember 31, 2021 , we had total debt of$3,172.5 million as compared to$3,267.8 million atDecember 31, 2020 . Total debt included$2,731.7 million and$2,929.5 million of long-term debt (excluding current portions of$84.5 million and$93.6 million ) atDecember 31, 2021 and 2020, respectively. OnMay 26, 2021 , we amended our Revolving Credit Agreement. OnNovember 22, 2021 , we borrowed$1.0 billion under our previously announced senior unsecured term loan facility. The proceeds were used to pay off our 2017 Term Loan Facility and Senior Notes maturing in 2022. As ofDecember 31, 2021 , we were in compliance with all of our debt covenants. See Note 14 to the consolidated financial statements included within this Form 10-K for further details. We remain committed to solid investment grade credit metrics, and expect full-year average leverage to be in line with this commitment in 2021.
The decrease in long-term debt was primarily due to paying down
Our short-term debt consists of foreign borrowings and borrowings under our commercial paper program. Foreign borrowings increased from$98.4 million atDecember 31, 2020 to$112.2 million atDecember 31, 2021 while outstanding commercial paper increased from$146.3 million atDecember 31, 2020 to$244.1 million atDecember 31, 2021 . We provide parent-company guarantees to lending institutions providing credit to our foreign subsidiaries. Our total debt maturities, excluding discounts, is$3,191.0 million atDecember 31, 2021 , with$440.8 million payable in the next 12 months. As ofDecember 31, 2021 , we had contractual interest obligations of$936.5 million outstanding, with$84.2 million payable in the next 12 months. Contractual interest is the interest we are contracted to pay on our long-term debt obligations. We had$800.0 million of long-term debt subject to variable interest rates atDecember 31, 2021 . The rate assumed for the variable interest component of the contractual interest obligation was the rate in effect atDecember 31, 2021 . Variable rates are determined by the market and will fluctuate over time.
Access to credit and future liquidity and funding needs
AtDecember 31, 2021 , our remaining borrowing capacity under our credit facility was$1,093.4 million . See Note 14 to the consolidated financial statements included within this Form 10-K for discussion of the 2021 Term Loan Agreement as well as the amendments to the Revolving Credit Facility and Term Loan Agreements undertaken in the current year. Our commercial paper program allows us to borrow at rates generally more favorable than those available under our credit facility. AtDecember 31, 2021 , we had$244.1 million borrowings outstanding under the commercial paper program at an average borrowing rate of 0.45 percent. Our commercial paper balances fluctuate from year to year depending on working capital needs. Working Capital Initiatives The Company works with suppliers to optimize payment terms and conditions on accounts payable to improve working capital and cash flows. The Company offers to a select group of suppliers a voluntary Supply Chain Finance ("SCF") program with a global financial institution. The suppliers, at their sole discretion, may sell their receivables to the financial institution based on terms negotiated between them. Our obligations to our suppliers are not impacted by our suppliers' decisions to sell under these arrangements. Agreements under these supplier financing programs are recorded within Accounts payable in our Consolidated Balance Sheets and the associated payments are included in operating activities within our Consolidated Statements of Cash Flows. We do not believe that changes in the availability of the supply chain finance program would have a significant impact on our liquidity. From time to time, the Company may sell receivables on a non-recourse basis to third-party financial institutions. These sales are normally driven by specific market conditions, including, but not limited to, foreign exchange environments, customer credit management, as well as other factors where the receivables may lay. 32 -------------------------------------------------------------------------------- Table of Contents We account for these transactions as sales which result in a reduction in accounts receivables because the agreements transfer effective control and risk related to the receivables to the buyers. The net cash proceeds received are presented within cash provided by operating activities within our Consolidated Statements of Cash Flows. The cost of factoring these accounts receivables is recorded as an expense within the Consolidated Statements of Income and has been inconsequential during each reporting period.
Commitments
We provide guarantees to financial institutions on behalf of certain customers, principally customers inBrazil , for their seasonal borrowing. The total of these guarantees was$215.9 million atDecember 31, 2021 . These guarantees arise during the ordinary course of business from relationships with customers and nonconsolidated affiliates. Non-performance by the guaranteed party triggers the obligation requiring us to make payments to the beneficiary of the guarantee. Based on our experience these types of guarantees have not had a material effect on our consolidated financial position or on our liquidity. Our expectation is that future payment or performance related to the non-performance of others is considered unlikely. In connection with certain of our property and asset sales and divestitures, we have agreed to indemnify the buyer for certain liabilities, including environmental contamination and taxes that occurred prior to the date of sale. Our indemnification obligations with respect to these liabilities may be indefinite as to duration and may or may not be subject to a deductible, minimum claim amount or cap. In cases where 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, no specific liability has been recorded. If triggered, we may be able to recover certain of the indemnity payments from third parties. In cases where it is possible, we have recorded a specific liability within our Reserve for Discontinued Operations. Refer to Note 11 to the consolidated financial statements included within this Form 10-K for further details.
Taxes, Pension, Environmental, and Other Discontinued Liabilities
As ofDecember 31, 2021 , the liability for uncertain tax positions was$45.5 million . We also have a liability attributable to the transition tax on deemed repatriated foreign earnings incurred as a result of the Act of$92.1 million . Our consolidated balance sheets contain accrued pension and other postretirement benefits, our environmental liabilities, and our other discontinued liabilities for which we are unable to make a reasonably reliable estimate of the amount and periods in which these liabilities might be paid beyond 2022. See our discussion under 2022 Cash Flow Outlook in the Free Cash Flow section within this Form 10-K for information on these liabilities and the related expected payments in 2022.
Derivatives
At times we can be in a derivative liability position that can require future
cash obligations; however as of
Leases
We have lease arrangements for equipment and facilities, including office spaces, IT equipment, transportation equipment, machinery equipment, furniture and fixtures, and plant and facilities. As ofDecember 31, 2021 , we had fixed lease payment obligations of$217.2 million , with$29.2 million payable within 12 months. Purchase obligations Purchase obligations consist of agreements to purchase goods and services that are enforceable and legally binding and specify all significant terms, including fixed or minimum quantities to be purchased, price provisions and timing of the transaction. We have entered into a number of purchase obligations for the sourcing of materials and energy where take-or-pay arrangements apply. As of December our purchase obligations were$702.9 million , with$225.9 million payable in the first 12 months. The majority of the minimum obligations under these contracts are take-or-pay commitments over the life of the contract and not a year by year take-or-pay, and as such, the obligations related to these types of contacts are presented in the earliest period in which the minimum obligation could be payable under these types of contracts. 33 -------------------------------------------------------------------------------- Table of Contents Statement of Cash Flows
Cash provided (required) by operating activities was
The table below presents the components of net cash provided (required) by operating activities of continuing operations.
Year ended December 31,
(in Millions) 2021 2020 2019
Income (loss) from continuing operations before equity in (earnings) loss of affiliates, non-operating pension expense postretirement charges, interest expense, net and income taxes (GAAP)
$ 1,044.9
279.3 348.2 398.9
Operating income before depreciation and amortization
$ 1,250.4 $ 1,220.5 Change in trade receivables, net (1) (241.1) (71.8) (123.5) Change in guarantees of vendor financing 65.6 64.8 8.6 Change in advance payments from customers (2) 283.6 (145.5) 34.1 Change in accrued customer rebates (3) 108.7 17.2 (85.8) Change in inventories (4) (331.1) (59.7) 6.4 Change in accounts payable (5) 144.4 61.8 103.0 Change in all other operating assets and liabilities (6) (77.6) (68.2) (208.5) Restructuring and other spending (7) (34.7) (17.9) (18.6)
Environmental spending, continuing, net of recoveries (8) (63.6)
(1.9) (18.3)
Pension and other postretirement benefit contributions (9) (5.3)
(4.6) (13.4)
Net interest payments (10) (125.8) (141.8) (140.9)
Tax payments, net of refunds (11) (139.2) (82.1) (130.9)
Transaction and integration costs (12) (9.5) (63.9) (77.1)
Cash provided (required) by operating activities of continuing
operations (GAAP) $ 898.6 $ 736.8 $ 555.6
____________________
(1)The change in trade receivables in all periods include the impacts of
seasonality and the receivable build intrinsic in our business. The change in
cash flows related to trade receivables in 2021 was driven by timing of
collections as well as higher sales year over year. Collection timing is more
pronounced in certain countries such as Brazil where there may be terms
significantly longer than the rest of our business. Additionally, timing of
collection is impacted as amounts for all periods include carry-over balances
remaining to be collected in Latin America , where collection periods are
measured in months rather than weeks. During 2021, we collected approximately
$1,118 million of receivables in Brazil .
(2)Advance payments are typically received in the fourth quarter of each year,
primarily in our North America operations as revenue associated with advance
payments is recognized, generally in the first half of each year following the
seasonality of that business, as shipments are made and title, ownership and
risk of loss pass to the customer. The change in 2021 was primarily related to
substantially higher overall payments received due to a strong North America
season.
(3)These rebates are primarily associated within North America , and to a lesser
extent Brazil , and in North America generally settle in the fourth quarter of
each year given the end of the respective crop cycle. The changes in 2021
compared to 2020 are mostly associated with higher North America revenue,
primarily volume related, as well as with the mix in sales eligible for rebates
and incentives and timing of certain rebate payments.
(4)The change in cash flows during 2021 reflect the inventory build required to
meet business demand and to help manage supply chain volatility as well as
higher input costs. Changes in inventory in 2019 are a result of inventory
levels being adjusted to take into consideration the change in market
conditions.
(5)The change in cash flows related to accounts payable in 2021, 2020 and 2019
is primarily due to timing of payments made to suppliers and vendors as well as
in 2021 in line with the inventory build.
(6)Changes in all periods presented primarily represent timing of payments
associated with all other operating assets and liabilities. Additionally, the
2021, 2020 and 2019 period includes the effects of the unfavorable contracts
amortization of approximately $103 million , $120 million and $116 million ,
respectively.
(7)See Note 9 to the consolidated financial statements included within this Form
10-K for further details.
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(8)Included in our results for each of the years presented are environmental
charges for environmental remediation of $27.1 million , $24.9 million and $108.7
million , respectively. The amounts in 2021 will be spent in future years. The
amounts represent environmental remediation spending which were recorded against
pre-existing reserves, net of recoveries.
Environmental obligations for continuing operations primarily represent
obligations at shut down or abandoned facilities within businesses that do not
meet the criteria for presentation as discontinued operations. Amounts in 2021
include payments of $32.2 million related to the Pocatello Tribal Litigation.
Additionally, during the first quarter of 2020, we entered into a confidential
insurance settlement pertaining to coverage at a legacy environmental site,
which settlement resulted in a cash payment to FMC in the amount of $20.0
million . Refer to Note 12 to the consolidated financial statements included
within this Form 10-K for more details.
(9)There were no voluntary contributions to our U.S. qualified defined benefit
plan in 2021 or 2020. Amounts in 2019 include voluntary contributions to our
U.S. qualified defined benefit plan of $7.0 million . As our U.S. qualified plan
is fully funded, we do not anticipate making voluntary contributions for the
next several years.
(10)Interest payments were lower during 2021 largely due to lower foreign debt
balances and rates as well as lower LIBOR rates in the US.
(11)Amounts shown in the chart represent net tax payments of our continuing
operations. The increase in net tax payments in 2021 is primarily attributable
to the 2021 remittance of previously deferred income tax payments in various
jurisdictions as a result of the COVID pandemic. Tax payments in 2019 primarily
represent the payments of tax attributable to the Nufarm Limited Sale,
transition tax, and tax payments related to the acquired DuPont Crop Protection
Business.
(12)Represents payments for legal and professional fees associated with the
DuPont Crop Protection Business Acquisition in addition to costs related to
integrating the DuPont Crop Protection Business. We completed the integration of
the DuPont Crop Protection Business in 2020, other than the completion of
certain in-flight initiatives associated with the finalization of our worldwide
ERP system in early 2021. See Note 5 to the consolidated financial statements
included within this Form 10-K for more information.
Cash provided (required) by operating activities of discontinued operations was
$(78.5) million , $(89.0) million and $(67.1) million for 2021, 2020 and 2019,
respectively.
Cash required by operating activities of discontinued operations is directly related to environmental, other postretirement benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities.
Cash provided (required) by investing activities of continuing operations was$(131.7) million ,$(200.4) million and$(195.9) million for 2021, 2020 and 2019, respectively.
Cash required in 2021 is primarily due to capital expenditures and spending related to our contract manufacturing arrangements. We completed the final stage of our SAP system implementation during the early part of 2021, therefore a reduction in those payments year over year.
Cash required in 2020 primarily due to capital expenditures and spending related to our contract manufacturing arrangements, as well as continued spending associated with the final stages of our new SAP system implementation. 2020 also includes payments of$65.6 million to acquire the remaining rights for Fluindapyr from Isagro S.p.A ("Isagro") in an asset acquisition.
Cash required in 2019 is primarily due to capital expenditures and spending related to our contract manufacturing arrangements, as well as continued spending during that period associated with the implementation of a new SAP system.
Cash provided (required) by investing activities of discontinued operations was
Cash provided by investing activities of discontinued operations in 2021 represents the proceeds from the sale of land of our discontinued sites. This resulted in a gain recognized within discontinued operations of approximately$15.4 million , net of taxes. Cash provided by investing activities of discontinued operations in 2020 and 2019 represents the proceeds of approximately$31 million and$26 million from the sale of our two parcels of land of our discontinued site inNewark, California . These sales resulted in a gain recognized within discontinued operations in each period of approximately$24 million and$21 million , net of taxes, respectively. In 2019, this was partially offset by capital expenditures of our discontinued FMC Lithium segment.
Cash provided (required) by financing activities was
The change in cash required by financing activities in 2021 is primarily driven
due to the payment of long term debt and the increase in share repurchases under
our publicly announced program.
The change in cash required by financing activities in 2020 is primarily driven
by the prior year proceeds from the Senior Notes and higher dividend payments
offset by a reduction in the payment of long term debt and a reduction of
repurchases of common stock under our publicly announced program.
The change in cash required by financing activities in 2019 is primarily due to
the proceeds from the Senior Notes offset by cash outflows including higher
repurchases of common stock, repayment of long-term debt, and higher dividend
payments in 2019 as compared to the prior period.
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Cash provided (required) by financing activities of discontinued operations was
zero , zero and $(37.2) million in 2021, 2020 and 2019, respectively.
Cash required by financing activities of discontinued operations in 2019 represents debt repayments on FMC Lithium's external debt as well as cash payments associated with its separation.
Free Cash Flow
We define free cash flow, a Non-GAAP financial measure, as all cash inflows and outflows excluding those related to financing activities (such as debt repayments, dividends, and share repurchases) and acquisition related investing activities. Free cash flow is calculated as all cash from operating activities reduced by spending for capital additions and other investing activities as well as legacy and transformation spending. Therefore, our calculation of free cash flow will almost always result in a lower amount than cash from operating activities from continuing operations, the most directly comparableU.S. GAAP measure. However, the free cash flow measure is consistent with management's assessment of operating cash flow performance and we believe it provides a useful basis for investors and securities analysts about the cash generated by routine business operations, including capital expenditures, in addition to assessing our ability to repay debt, fund acquisitions including cost and equity method investments, and return capital to shareholders through share repurchases and dividends. Our use of free cash flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results underU.S. GAAP. First, free cash flow is not a substitute for cash provided (required) by operating activities of continuing operations, as it is not a measure of cash available for discretionary expenditures since we have non-discretionary obligations, primarily debt service, that are not deducted from the measure. Second, other companies may calculate free cash flow or similarly titled Non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison. Additionally, the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for a given period. Because of these and other limitations, free cash flow should be considered along with cash provided (required) by operating activities of continuing operations and other comparable financial measures prepared and presented in accordance withU.S. GAAP.
The table below presents a reconciliation of free cash flow from the most
directly comparable
FREE CASH FLOW RECONCILIATION
Year ended December 31,
(in Millions) 2021 2020 2019
Cash provided (required) by operating activities of continuing operations (GAAP)
$ 898.6 $ 736.8 $ 555.6 Transaction and integration costs (1) 9.5 63.9 77.1 Adjusted cash from operations (2)$ 908.1 $
800.7
Capital expenditures (3) (100.1) (67.2) (93.9) Other investing activities (3)(4) (13.7) (20.4) (54.0)
Capital additions and other investing activities
(87.6)
Cash provided (required) by operating activities of discontinued operations (5)
(78.5) (89.0) (67.1)
Cash provided (required) by investing activities of discontinued operations (5)
19.7 31.1 9.2
Transaction and integration costs (1) (9.5) (63.9) (77.1)
Investment in Enterprise Resource Planning system (3) (12.7) (47.2) (48.0)
Legacy and transformation (6) $ (81.0) $ (169.0) $ (183.0)
Free cash flow (Non-GAAP) $ 713.3 $ 544.1 $ 301.8
___________________
(1) Represents payments for legal and professional fees associated with the
DuPont Crop Protection Business Acquisition in addition to costs related to
integrating the DuPont Crop Protection Business. See Note 5 to the consolidated
financial statements included within this Form 10-K for more information.
(2) Adjusted cash from operations is defined as cash provided (required) by
operating activities of continuing operations excluding the effects of
transaction-related cash flows, which are included within Legacy and
transformation.
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(3) Components of cash provided (required) by investing activities of
continuing operations. Refer to the below discussion for further details.
(4) Cash spending associated with contract manufacturers was $18.8 million ,
$17.4 million and $51.7 million for the years ended December 31, 2021 , 2020 and
2019, respectively.
(5) Refer to the above discussion for further details.
(6) Includes our legacy liabilities such as environmental remediation and other
legal matters and our discontinued investing activities that are reported in
discontinued operations. It also includes business integration costs associated
with the DuPont Crop Protection Business Acquisition and the implementation of
our new SAP system.
2022 Cash Flow Outlook
Our cash needs for 2022 include operating cash requirements (which are impacted
by contributions to our pension plan, as well as environmental, asset retirement
obligation, and restructuring spending), capital expenditures, and legacy and
transformation spending, as well as mandatory payments of debt, dividend
payments, and share repurchases. We plan to meet our liquidity needs through
available cash, cash generated from operations, commercial paper issuances and
borrowings under our committed revolving credit facility. At December 31, 2021
our remaining borrowing capacity under our credit facility was $1,093.4 million .
We expect 2022 free cash flow (Non-GAAP) to fall within a range of approximately
$515 million to $735 million . At the mid-point of the range there is a reduction
year over year driven by reduced adjusted cash from operations primarily due to
working capital growth and higher capital expenditures. We expect a year over
year increase in capital additions as we expand capacity to meet growing demand,
especially for our new products.
Although we provide a forecast for free cash flow, a Non-GAAP financial measure,
we are not able to forecast the most directly comparable measure calculated and
presented in accordance with U.S. GAAP, which is cash provided (required) by
operating activities of continuing operations. Certain elements of the
composition of the U.S. GAAP amount are not predictable, making it impractical
for us to forecast. Such elements include, but are not limited to,
restructuring, acquisition charges, and discontinued operations. As a result, no
U.S. GAAP outlook is provided.
Cash from operating activities of continuing operations
We expect equal or lower cash from operating activities, excluding the effects of transaction-related cash flows, to be in the range of approximately$750 million to$910 million . Working capital growth reflects our current expectations of a return to more normal advance payment levels inNorth America among other factors negatively impacting working capital in 2022. Transaction-related cash flows are included within Legacy and transformation, which is consistent with how we evaluate our business operations from a cash flow standpoint. See below for further discussion. Cash from operating activities includes cash requirements related to our pension plans, environmental sites, restructuring and asset retirement obligations, taxes and interest on borrowings. Pension We do not expect to make any voluntary cash contributions to ourU.S. qualified defined benefit pension plan in 2022. The plan is slightly overfunded and our portfolio is comprised of 100 percent fixed income securities and cash. Our investment strategy is a liability hedging approach with an objective of maintaining the funded status of the plan such that the funded status volatility is minimized and the likelihood that we will be required to make significant contributions to the plan is limited.
Environmental
Projected 2022 spending, net of recoveries includes approximately$25 million to$35 million of net environmental remediation spending for our sites accounted for within continuing operations. Environmental obligations for continuing operations primarily represent obligations at shut down or abandoned facilities within businesses that do not meet the criteria for presentation as discontinued operations. Projected 2022 spending, net of recoveries includes approximately$45 million to$55 million of net environmental remediation spending for our discontinued sites, which is part of legacy and transformation noted below. These projections include spending as a result of a settlement reached in the second quarter of 2019 at ourMiddleport, New York site. The settlement will result in spending$10 million maximum per year on average, until the remediation is complete. Total projected 2022 environmental spending, inclusive of sites accounted for within both continuing operations and discontinued sites, is expected to be in the range of$70 million to$90 million . 37 -------------------------------------------------------------------------------- Table of Contents Restructuring and asset retirement obligations We expect to make payments of approximately$30 to$40 million in 2022, of which approximately$10 million is related to exit and disposal costs as a result of our previous decision in 2019 to exit sales of all carbofuran formulations (including Furadan® insecticide/nematicide, as well as Curaterr® insecticide/nematicide and any other brands used with carbofuran products).
Capital additions and other investing activities
Projected 2022 capital expenditures and expenditures related to contract manufacturers are expected to be in the range of approximately$145 million to$175 million . The spending is mainly driven by continuing to expand capacity to meet growing demand, especially for our new products. Expenditures related to contract manufacturers are included within "other investing activities".
Legacy and transformation
Projected 2022 legacy and transformation spending are expected to be in the range of approximately$30 million to$60 million . This is primarily driven by environmental remediation spending for our discontinued sites, discussed above, and other legacy liabilities. We completed the integration of the DuPont Crop Protection Business in 2020, other than the completion of certain in-flight initiatives associated with the finalization of our worldwide ERP system in early 2021. As such, transformation spending in 2022 is not expected to be material.
Share repurchases
During the year endedDecember 31, 2021 , 4.0 million shares were repurchased under the publicly announced repurchase program for approximately$400 million . AtDecember 31, 2021 , approximately$150 million remained unused under our Board-authorized repurchase program. However, inFebruary 2022 the Board of Directors authorized the repurchase of up to$1 billion of the Company's common stock. The$1 billion share repurchase program is replacing in its entirety the previous authorization. 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. We also reacquire shares from time to time from employees in connections with vesting, exercise and forfeiture of awards under our equity compensation plans.
We intend to purchase between
Dividends OnJanuary 20, 2022 , we paid dividends aggregating$66.8 million to our shareholders of record as ofDecember 31, 2021 . This amount is included in "Accrued and other liabilities" on the consolidated balance sheet as ofDecember 31, 2021 . For the years endedDecember 31, 2021 , 2020 and 2019, we paid$247.2 million ,$228.5 million and$210.3 million in dividends, respectively. We expect to continue to make quarterly dividend payments. Future cash dividends, as always, will depend on a variety of factors, including earnings, capital requirements, financial condition, general economic conditions and other factors considered relevant by us and is subject to final determination by our Board of Directors. Contingencies
See Note 20 to our consolidated financial statements included within this Form 10-K.
Climate Change
As a global corporate citizen, we are concerned about the consequences of
climate change and will take prudent and cost effective actions that reduce
FMC is committed to continuing to do its part to address climate change and its impacts. Our 2030 intensity reduction targets for energy and greenhouse gas emissions are both 25 percent from our 2018 baseline year. FMC has been reporting its GHG emissions and mitigation strategy to CDP (formerlyCarbon Disclosure Project ) since 2016. FMC detailed the business risks and opportunities we have due to climate change and its impacts in our CDP climate change reports. FMC received a "B" in the CDP Climate Change questionnaire in 2021. As part of FMC's continued commitment to address climate change, in August of 2021, FMC announced its goal to achieve net-zero GHG emissions by 2035 FMC. FMC committed to the Science Based Target initiative (SBTi) Net-Zero Standard, aligned with keeping the global temperature at 1.5°C above pre-industrial times. FMC anticipates submitting targets to SBTi in the first quarter of 2022. Even as we take action to control the release of GHGs, additional warming is anticipated. Long-term, higher average global temperatures could result in induced changes in natural resources, growing seasons, precipitation patterns, weather patterns, species distributions, water availability, sea levels, and biodiversity. These impacts could cause changes in supplies of raw materials used to maintain FMC's production capacity and could lead to possible increased sourcing costs. Depending on how 38 -------------------------------------------------------------------------------- Table of Contents pervasive the climate impacts are in the different geographic locations experiencing changes in natural resources, FMC's customers could be impacted. Demand for FMC's products could increase if our products meet our customers' needs to adapt to climate change impacts or decrease if our products do not meet their needs. In addition, extreme weather events attributable to climate change may result in, among other things, physical damage to our property and equipment, and interruptions to our supply chain. Though the nature of these events makes them difficult to predict, to respond to the uncertainty and better understand our risks and opportunities as they relate to climate change, we are conducting climate related scenario analyses consistent with the recommendations provided by theTaskforce for Climate-Related Financial Disclosures ("TCFD"). As part of the TCFD scenario analysis, we are currently evaluating the potential risks at operation sites, leveraging scenarios published by theInternational Energy Agency (IEA) and theUnited Nations' Intergovernmental Panel on Climate Change (IPCC). Results of this analysis will help determine where strategic capital could be deployed to address risks and opportunities. To lessen FMC's overall environmental footprint, we have taken actions to increase the energy efficiency in our manufacturing sites. We have also committed to new 2030 goals to reduce our water use intensity in high-risk areas by 20 percent and to maintain our 2018 waste disposed intensity which otherwise would increase by 55 percent due to expected growth and shifts in production mix. Along with our ambitious net-zero GHG emissions goal, FMC will also be re-evaluating our waste and water reduction targets in order to set more aggressive goals. In our product portfolio, we see market opportunities for our products to address climate change and its impacts. For example, FMC's agricultural solutions can help customers increase yield, energy and water efficiency, and decrease greenhouse gas emissions. Our solutions can also help growers adapt to more unpredictable growing conditions and the effects these types of threats have on crops. FMC has committed to invest 100 percent of our research and development pipeline budget to developing sustainable products and solutions for future use. We are improving existing products and developing new platforms and technologies that help mitigate impacts of climate change. These opportunities could lead to new products and services for our existing and potential customers. Beyond our products and operations, FMC recognizes that energy consumption throughout our supply chain can impact climate change and product costs. FMC has committed to net-zero GHG emissions across our entire value, which includes reductions across our entire supply chain. Therefore, we will actively work with our entire value chain - suppliers, contractors, and customers - to improve their energy efficiencies and to reduce their GHG emissions. We continue to follow legislative and regulatory developments regarding climate change because the regulation of greenhouse gases, depending on their nature and scope, could subject some of our manufacturing operations to additional costs or limits on operations. InDecember 2015 , 195 countries at theUnited Nations Climate Change Conference inParis reached an agreement to reduce GHGs. InNovember 2021 , the above parties reconvened at theUnited Nations Climate Change Conference inGlasgow to reaffirm the Paris Agreement and urged countries to reach 1.5°C level reductions by the 2030s to lessen the impacts of climate change. Although it remains to be seen how and when each of these countries will implement this agreement, FMC has echoed this commitment with our net-zero by 2035 goal which allows us to do our part in reaching 1.5°C level reductions. FMC will actively manage climate risks and incorporate them in our decision making as indicated in our responses to the CDP Climate Change Module. FMC will also use recommendations outlined in the TCFD to evaluate potential risks and opportunities and incorporate these into our overall strategy and risk management. Some of our foreign operations are subject to national or local energy management or climate change regulation, such as our plant inDenmark that is subject to the EU Emissions Trading Scheme. At present, that plant's emissions are below its designated cap. InDecember 2019 , theEuropean Commission approved the European Green Deal, with the goal of making the EU carbon neutral by 2050. The Green Deal includes investment plans and a roadmap to fight against climate change. FMC is closely following updates and the discussion surrounding the Green Deal. The costs of complying with possible future requirements are difficult to estimate at this time. Future GHG regulatory requirements may result in increased costs of energy, additional capital costs for emissions control or new equipment, and/or costs associated with cap and trade or carbon taxes. We are currently monitoring regulatory developments. The costs of complying with possible future climate change requirements are difficult to estimate at this time.
See Item IA. Risk Factors for additional considerations related to risks of climate change and sustainability.
Recently Adopted and Issued Accounting Pronouncements and Regulatory Items
See Note 2 "Recently Issued and Adopted Accounting Pronouncements and Regulatory Items" to our consolidated financial statements included within this Form 10-K.
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Fair Value Measurements
See Note 19 to our consolidated financial statements included in this Form 10-K for additional discussion surrounding our fair value measurements.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in conformity withU.S. generally accepted accounting principles ("U.S. GAAP"). The preparation of these financial statements requires us 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 "Principal Accounting Policies and Related Financial Information" to our consolidated financial statements included in this Form 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 the Board of Directors. Critical accounting policies are central to our presentation of results of operations and financial condition in accordance withU.S. GAAP 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. Our most critical accounting estimates and assumptions, which are those that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations, include: Impairments and valuation of long-lived and indefinite-lived assets, Pension and other postretirement benefits, and the Allowance for credit losses on our trade receivables. Additional critical accounting policies are included within the list below: Revenue recognition and trade receivables We recognize revenue when (or as) we satisfy our performance obligation which is when the customer obtains control of the good or service. Rebates due to customers are accrued as a reduction of revenue in the same period that the related sales are recorded based on the contract terms. Refer to Note 3 to our consolidated financial statements included in this Form 10-K for more information. We record amounts billed for shipping and handling fees as revenue. Costs incurred for shipping and handling are recorded as costs of sales and services. Amounts billed for sales and use taxes, value-added taxes, and certain excise and other specific transactional taxes imposed on revenue-producing transactions are presented on a net basis and excluded from sales in the consolidated income statements. We record a liability until remitted to the respective taxing authority. We periodically enter into prepayment arrangements with customers and receive advance payments for product to be delivered in future periods. These advance payments are recorded as deferred revenue and classified as "Advance payments from customers" on the consolidated balance sheet. Revenue associated with advance payments is recognized as shipments are made and transfer of control to the customer takes place. Trade receivables consist of amounts owed to us from customer sales and are recorded when revenue is recognized. The allowance for trade receivables represents our best estimate of the probable losses associated with potential customer defaults. In developing our allowance for trade receivables, we use a two stage process which includes calculating a general formula to develop an allowance to appropriately address the uncertainty surrounding collection risk of our entire portfolio and specific allowances for customers where the risk of collection has been reasonably identified either due to liquidity constraints or disputes over contractual terms and conditions.
Our method of calculating the general formula consists of estimating the recoverability of trade receivables based on historical experience, current collection trends, and external business factors such as economic factors, including regional bankruptcy rates, and political factors. Our analysis of trade receivable collection risk is performed quarterly, and the allowance is adjusted accordingly.
We also hold long-term receivables that represent long-term customer receivable
balances related to past-due accounts which are not expected to be collected
within the current year. Our policy for the review of the allowance for these
receivables is consistent with the discussion in the preceding paragraph above
on trade receivables. Therefore on an ongoing basis, we continue to evaluate the
credit quality of our long-term receivables utilizing aging of receivables,
collection experience and write-offs, as well as existing economic conditions,
to determine if an additional allowance is necessary.
We believe our allowance for credit losses is a critical accounting estimate
because the underlying assumptions used for the reserve can change from time to
time and potentially have a material impact on our results of operations. Based
on a combination of historical trends as well as current economic factors, we
apply judgment to reserve for expected credit losses in the period in which the
sale is recorded. A substantial change in the operating environments in any of
our key locations (driven by weather conditions, industry specific events, and
macroeconomic conditions) may result in actual adjustments that differ from our
original assumptions.
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Environmental obligations and related recoveries We provide for environmental-related obligations when they are probable and amounts can be reasonably estimated. Where the available information is sufficient to estimate the amount of liability, that estimate has been used. Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any other, the lower end of the range has been used. Estimated obligations to remediate sites that involve oversight by theUnited States Environmental Protection Agency ("EPA "), or similar government agencies, are generally accrued no later than when a Record of Decision ("ROD"), or equivalent, is issued, or upon completion of a Remedial Investigation/Feasibility Study ("RI/FS"), or equivalent, that is submitted by us to the appropriate government agency or agencies. Estimates are reviewed quarterly by our environmental remediation management, as well as by financial and legal management and, if necessary, adjusted as additional information becomes available. The estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, required remediation methods, and other actions by or against governmental agencies or private parties. Our environmental liabilities for continuing and discontinued operations are principally for costs associated with the remediation and/or study of sites at which we are alleged to have released hazardous substances into the environment. Such costs principally include, among other items, RI/FS, site remediation, costs of operation and maintenance of the remediation plan, management costs, fees to outside law firms and consultants for work related to the environmental effort, and future monitoring costs. Estimated site liabilities are determined based upon existing remediation laws and technologies, specific site consultants' engineering studies or by extrapolating experience with environmental issues at comparable sites. Included in our environmental liabilities are costs for the operation, maintenance and monitoring of site remediation plans ("OM&M"). Such reserves are based on our best estimates for these OM&M plans. Over time we may incur OM&M costs in excess of these reserves. However, we are unable to reasonably estimate an amount in excess of our recorded reserves because we cannot reasonably estimate the period for which such OM&M plans will need to be in place or the future annual cost of such remediation, as conditions at these environmental sites change over time. Such additional OM&M costs could be significant in total but would be incurred over an extended period of years.
Included in the environmental reserve balance, other assets balance and disclosure of reasonably possible loss contingencies are amounts from third-party insurance policies, which we believe are probable of recovery.
Provisions for environmental costs are reflected in income, net of probable and
estimable recoveries from named Potentially Responsible Parties ("PRPs") or
other third parties. In the fourth quarter of 2019, we increased our reserves
for the Pocatello Tribal Matter by $72.8 million , which represents both the
historical and discounted present value of future annual use permit fees as well
as the associated legal costs. See Note 12 to the consolidated financial
statements included within this Form 10-K for further information. All other
environmental provisions incorporate inflation and are not discounted to their
present value.
In calculating and evaluating the adequacy of our environmental reserves, we
have taken into account the joint and several liability imposed by Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") and the
analogous state laws on all PRPs and have considered the identity and financial
condition of the other PRPs at each site to the extent possible. We have also
considered the identity and financial condition of other third parties from whom
recovery is anticipated, as well as the status of our claims against such
parties. Although we are unable to forecast the ultimate contributions of PRPs
and other third parties with absolute certainty, the degree of uncertainty with
respect to each party is taken into account when determining the environmental
reserve by adjusting the reserve to reflect the facts and circumstances on a
site-by-site basis. Our liability includes our best estimate of the costs
expected to be paid before the consideration of any potential recoveries from
third parties. We believe that any recorded recoveries related to PRPs are
realizable in all material respects. Recoveries are recorded as either an offset
in "Environmental liabilities, continuing and discontinued" or as "Other assets"
in our consolidated balance sheets in accordance with U.S. accounting
literature.
See Note 12 to our consolidated financial statements included within this Form 10-K for changes in estimates associated with our environmental obligations.
Impairments and valuation of long-lived and indefinite-lived assets
Our long-lived assets primarily include property, plant and equipment, goodwill
and intangible assets. The assets and liabilities of acquired businesses are
measured at their estimated fair values at the dates of acquisition. The excess
of the purchase price over the estimated fair value of the net assets acquired,
including identified intangibles, is recorded as goodwill. The determination and
allocation of fair value to the assets acquired and liabilities assumed is based
on various assumptions and valuation methodologies requiring considerable
management judgment, including estimates based on historical information,
current market data and future expectations. Although the estimates were deemed
reasonable by management based on information available at the dates of
acquisition, those estimates are inherently uncertain.
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We test for impairment whenever events or circumstances indicate that the net
book value of our property, plant and equipment may not be recoverable from the
estimated undiscounted expected future cash flows expected to result from their
use and eventual disposition. In cases where the estimated undiscounted expected
future cash flows are less than net book value, an impairment loss is recognized
equal to the amount by which the net book value exceeds the estimated fair value
of assets, which is based on discounted cash flows at the lowest level
determinable. The estimated cash flows reflect our assumptions about selling
prices, volumes, costs and market conditions over a reasonable period of time.
We perform an annual impairment test of goodwill and indefinite-lived intangible
assets in the third quarter of each year, or more frequently whenever an event
or change in circumstances occurs that would require reassessment of the
recoverability of those assets. In performing our evaluation we assess
qualitative factors such as overall financial performance of our reporting
units, anticipated changes in industry and market structure, competitive
environments, planned capacity and cost factors such as raw material prices.
We estimate the fair value of the reporting unit using a discounted cash flow
model as part of the Income Approach. We assess the appropriateness of projected
financial information by comparing projected revenue growth rates, profit
margins and tax rates to historical performance, industry data and selected
guideline companies, where applicable. Our key assumptions include future cash
flow projections, tax rates, terminal growth rates and discount rates.
We employ the relief from royalty method of the Income Approach to value our
brand portfolios (indefinite-lived intangible assets). The principle behind this
method is that the value of the intangible asset is equal to the present value
of the after-tax royalty savings attributable to owning the intangible asset.
Primary inputs and key assumptions include revenue forecasts attributable to
each portfolio, royalty rates (considering both external market data and
internal arrangements), tax rates, terminal growth rates and discount rates.
Estimating the fair value requires significant judgment and actual results may differ due to changes in the overall market conditions. We believe we have applied reasonable assumptions which considers both internal and external factors.
We believe that an accounting estimate relating to asset impairment is a critical accounting estimate because of the inherent uncertainty within the underlying assumptions. An adverse change in any of these assumptions could result in an impairment charge which would potentially have a material impact on our results of operations.
Based on the annual assessment, we concluded the fair value of the reporting unit substantially exceeded the carrying value. Additionally, the fair value of each indefinite-lived intangible asset exceeded its carrying value by at least 20%.
See Note 9 to our consolidated financial statements included within this Form 10-K for charges associated with long-lived asset disposal costs and the activity associated with the restructuring reserves.
Pension and other postretirement benefits
We provide qualified and nonqualified defined benefit and defined contribution pension plans, as well as postretirement health care and life insurance benefit plans to our employees and retirees. The costs (benefits) and obligations related to these benefits reflect key assumptions related to general economic conditions, including interest (discount) rates, healthcare cost trend rates, expected rates of return on plan assets and the rates of compensation increase for employees. The costs (benefits) and obligations for these benefit programs are also affected by other assumptions, such as average retirement age, mortality, employee turnover, and plan participation. To the extent our plans' actual experience, as influenced by changing economic and financial market conditions or by changes to our own plans' demographics, differs from these assumptions, the costs and obligations for providing these benefits, as well as the plans' funding requirements, could increase or decrease. When actual results differ from our assumptions, the difference is typically recognized over future periods. In addition, the unrealized gains and losses related to our pension and postretirement benefit obligations may also affect periodic benefit costs (benefits) in future periods. We use several assumptions and statistical methods to determine the asset values used to calculate both the expected rate of return on assets component of pension cost and to calculate our plans' funding requirements. The expected rate of return on plan assets is based on a market-related value of assets that recognizes investment gains and losses over a five-year period. We use an actuarial value of assets to determine our plans' funding requirements. The actuarial value of assets must be within a certain range, high or low, of the actual market value of assets, and is adjusted accordingly. We select the discount rate used to calculate pension and other postretirement obligations based on a review of available yields on high-quality corporate bonds as of the measurement date. In selecting a discount rate as ofDecember 31, 2021 , we placed particular emphasis on a discount rate yield-curve provided by our actuary. This yield-curve, when populated with projected cash flows that represent the expected timing and amount of our plans' benefit payments, produced an effective discount rate of 2.84 percent for ourU.S. qualified plan, 2.18 percent for ourU.S. nonqualified, and 2.39 percent for ourU.S. other postretirement benefit plans. 42
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The discount rates used to determine projected benefit obligation at ourDecember 31, 2021 and 2020 measurement dates for theU.S. qualified plan were 2.84 percent and 2.49 percent, respectively. The effect of the change in the discount rate from 2.49 percent to 2.84 percent atDecember 31, 2021 resulted in a$55.7 million decrease to ourU.S. qualified pension benefit obligations. The effect of the change in the discount rate used to determine net annual benefit cost (income) from 3.22 percent atDecember 31, 2020 to 2.49 percent atDecember 31, 2021 resulted in a$4.4 million decrease to the 2021 U.S. qualified pension expense. The change in discount rate from 2.49 percent atDecember 31, 2020 to 2.84 percent atDecember 31, 2021 was attributable to an increase in yields on high quality corporate bonds with cash flows matching the timing and amount of our expected future benefit payments between the 2020 and 2021 measurement dates. Using theDecember 31, 2021 and 2020 yield curves, ourU.S. qualified plan cash flows produced a single weighted-average discount rate of approximately 2.84 percent and 2.49 percent, respectively. In developing the assumption for the long-term rate of return on assets for ourU.S. Plan, we take into consideration the technical analysis performed by our outside actuaries, including historical market returns, information on the assumption for long-term real returns by asset class, inflation assumptions, and expectations for standard deviation related to these best estimates. Our long-term rate of return for the fiscal year endedDecember 31, 2021 , 2020 and 2019 was 2.25 percent, 3.00 percent and 4.25 percent, respectively.
For the sensitivity of our pension costs to incremental changes in assumptions see our discussion below.
Sensitivity analysis related to key pension and postretirement benefit assumptions.
A one-half percent increase in the assumed discount rate would have decreased pension and other postretirement benefit obligations by$66.1 million and$72.6 million atDecember 31, 2021 and 2020, respectively, and increased pension and other postretirement benefit costs by$0.4 million , zero and$0.6 million for 2021, 2020 and 2019, respectively. A one-half percent decrease in the assumed discount rate would have increased pension and other postretirement benefit obligations by$72.1 million and$79.3 million atDecember 31, 2021 and 2020, respectively, and decreased pension and other postretirement benefit costs by$0.4 million in 2021,$0.1 million in 2020, and increased costs by$0.5 million in 2019. A one-half percent increase in the assumed expected long-term rate of return on plan assets would have decreased pension costs by$6.3 million ,$6.2 million and$6.3 million for 2021, 2020 and 2019, respectively. A one-half percent decrease in the assumed long-term rate of return on plan assets would have increased pension costs by$6.3 million ,$6.2 million and$6.3 million for 2021, 2020 and 2019, respectively. Further details on our pension and other postretirement benefit obligations and net periodic benefit costs (benefits) are found in Note 15 to our consolidated financial statements in this Form 10-K.
Income taxes
We have recorded a valuation allowance to reduce deferred tax assets in certain jurisdictions to the amount that we believe is more likely than not to be realized. In assessing the need for this allowance, we have considered a number of factors including future taxable income, the jurisdictions in which such income is earned and our ongoing tax planning strategies. In the event that we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Similarly, should we conclude that we would be able to realize certain deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. Additionally, we file income tax returns in theU.S. federal jurisdiction and various state and foreign jurisdictions. Certain income tax returns for FMC entities taxable in theU.S. and significant foreign jurisdictions are open for examination and adjustment. We assess our income tax positions and record a liability for all years open to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. We adjust these liabilities, if necessary, upon the completion of tax audits or changes in tax law.
See Note 13 to our consolidated financial statements included within this Form 10-K for additional discussion surrounding income taxes.
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