FMC CORPORATION Item 2 of this report contains certain forward-looking statements that are based on our current views and assumptions regarding future events, future business conditions and the outlook for our company based on currently available information. Whenever possible, we have identified these forward-looking statements by such words or phrases as "will likely result," "is confident that," "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 or phrases. Such forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and the outlook for the company based on currently available information. The forward-looking 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. With respect to forward-looking statements made in connection with our acquisition ofBioPhero ApS , such factors include that (1) BioPhero is still in its early stages of development or growth and it may be affected by risks inherent in operating a business of its nature., and (2) that the products and technologies of BioPhero have not yet been implemented at large commercial scale, and thus our statements regarding the future, including potential revenue opportunities, are subject to uncertainties related to development, registration, production and commercialization of pheromones through use of the BioPhero production technology. In addition to the continued uncertainty generated by the ongoing COVID pandemic on our financial condition, results of operations, cash flows and performance, additional factors include, among other things, the risk factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2021 (the "2021 Form 10-K"), the section captioned "Forward-Looking Information" in Part II of the 2021 Form 10-K and to similar risk factors and cautionary statements in all other reports and forms filed with theSecurities and Exchange Commission ("SEC"). 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. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
We specifically decline to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements are prepared in conformity withU.S. generally accepted accounting principles. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have described our accounting policies in Note 1 to our consolidated financial statements included in our 2021 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 our Board of Directors. Critical accounting policies are central to our presentation of results of operations and financial condition and require management to make estimates and judgments on certain matters. We base our estimates and judgments on historical experience, current conditions and other reasonable factors. The following is a list of those accounting policies that we have deemed most critical to the presentation and understanding of our results of operations and financial condition. See the "Critical Accounting Policies" section in our 2021 Form 10-K for a detailed description of these policies and their potential effects on our results of operations and financial condition. •Revenue recognition and trade receivables •Environmental obligations and related recoveries •Impairment and valuation of long-lived assets and indefinite-lived assets •Pensions and other postretirement benefits •Income taxes
RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS AND REGULATORY ITEMS
See Note 2 to the condensed consolidated financial statements included in this Form 10-Q for a discussion of recently adopted accounting guidance and other new accounting guidance. OVERVIEW
We are an agricultural sciences company, providing innovative solutions to growers around the world with a robust product portfolio fueled by a market-driven discovery and development pipeline in crop protection, crop enhancement, and professional pest and turf management. We operate in a single distinct business segment. We develop, market and sell all three major classes
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of crop protection chemicals (insecticides, herbicides and fungicides) as well
as biologicals, crop nutrition, and seed treatment, which we group as plant
health. These products are used in agriculture to enhance crop yield and quality
by controlling a broad spectrum of insects, weeds and disease, as well as in
non-agricultural markets for pest control. This powerful combination of advanced
technologies includes leading insect control products based on Rynaxypyr® and
Cyazypyr® active ingredients; Authority®, Boral®, Centium®, Command® and Gamit®
branded herbicides; Isoflex™ active herbicide ingredient; Talstar® and Hero®
branded insecticides; and flutriafol-based fungicides and biologicals such as
Quartzo® and Presence® bionematicides as well as crop enhancers such as Accudo®.
The FMC portfolio also includes Arc™ farm intelligence.
In mid-April, we announced the decision to discontinue our operations and business inRussia . Our values as a company do not allow us to operate and grow our business inRussia . We recorded exit charges of approximately$76 million . See Note 9 for more information. We are closely monitoring any potential impacts on our raw material and supply chain costs arising out ofRussia's invasion ofUkraine . 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. We are closely monitoring raw material and supply chain costs including impacts by the continued COVID disruptions. 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. We have resumed in-office operations where permitted by local authorities and extended flexible work arrangements in some locations. In addition, we have thousands of employees who continue operating our manufacturing sites and distribution warehouses. 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 will continue to monitor the economic environment related to the pandemic on an ongoing basis and assess the impacts on our business.
Second Quarter 2022 Highlights
The following items are the more significant developments or financial
highlights in our business during the three months ended
•Revenue of$1,452.3 million for the three months endedJune 30, 2022 increased$210.3 million or approximately 17 percent versus the same period last year. A more detailed review of revenue is discussed under the section titled "Results of Operations" . On a regional basis, sales inNorth America increased by approximately 26 percent, sales inLatin America increased approximately 44 percent, sales inEurope ,Middle East andAfrica increased approximately 3 percent, and sales inAsia decreased approximately 1 percent as foreign currency headwinds more than offset pricing gains in the region. The increase was mostly driven by volume growth primarily inNorth America andLatin America and price increases across all regions. Excluding foreign currency impacts, revenue increased 21 percent during the quarter. •Our gross margin of$591.0 million increased versus the prior year quarter by$59.2 million driven by higher volumes inNorth America andLatin America and higher prices in all regions, partially offset by higher cost of goods sold, primarily resulting from inflation, and foreign currency headwinds. Gross margin percent of approximately 41 percent decreased compared to approximately 43 percent in the prior year period, driven by higher costs. •Selling, general and administrative expenses increased from$161.0 million to$194.8 million , or approximately 21 percent. The increase in selling, general, and administrative expenses is a result of higher revenues, investments in growth, and inflation. 35 -------------------------------------------------------------------------------- •Research and development expenses of$79.5 million increased$13.6 million or 21 percent. In the current year period the increase in spending on research and development projects relates to timing of project expenses and is consistent with our growth as a company. •Net income (loss) attributable to FMC stockholders decreased from$202.9 million to$134.2 million which represents a decrease of$68.7 million , or approximately 34 percent. The lower results were driven by higher restructuring and other charges, selling, general and administrative expense and the provision for income taxes. This was partially offset by our gross margin growth. Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of$245.1 million increased compared to the prior year amount of$235.2 million . See the disclosure of our Adjusted Earnings Non-GAAP financial measurement below, under the section titled "Results of Operations" .
Other Highlights
OnJune 29, 2022 we announced a definitive agreement to acquireBioPhero ApS ("BioPhero"), aDenmark -based pheromone research and production company. The acquisition adds state-of-the-art biologically produced pheromone insect control technology to our product portfolio and R&D pipeline, underscoring our role as a leader in delivering innovative and sustainable crop protection solutions. We expect pheromones and pheromone-based products to contribute approximately$1 billion in revenue at above company-average EBITDA margin by 2030.
The purchase price of approximately
2022 Outlook Update
In 2022, we now expect the global crop protection market will be up mid-to-high single digits, on aU.S. dollar basis versus our earlier expectation of low-to-mid single digit growth.Latin America is now expected to be up double digits, primarily driven by pricing of non-selective herbicides. We still expectNorth America to be up mid-single digits whileAsia is now expected to grow low-single digit. EMEA is still expected to be down low-single digits, including the impact of foreign currency. Excluding foreign currency impact, EMEA is expected to grow low-single digits. After a strong first half of the year, and reflecting the increased market growth expectations, we are raising the full-year 2022 revenue guidance to be in the range of approximately$5.50 billion to$5.70 billion , up approximately 11 percent at the midpoint versus 2021. We are narrowing the full year adjusted EBITDA(1) range to$1.36 billion to$1.44 billion , representing 6 percent growth at the midpoint versus 2021 results. 2022 adjusted earnings per share is narrowed and it is now expected to be in the range of$7.00 to$7.70 per diluted share(1), representing a year over year increase of 6 percent at the midpoint. Full-year earnings growth drivers include pricing actions and strong volumes, offset by foreign currency impacts, primarily in EMEA andAsia . Adjusted earnings estimates do not include the benefit of any future share repurchases. For cash flow outlook, refer to the "L iquidity 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. 36 --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
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. Organic Revenue Growth excludes the impacts of foreign currency changes, which we believe is a meaningful metric to evaluate our revenue changes. These items are discussed in detail within the "Other Results of Operations" section that follows. 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. 37 --------------------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(in Millions) (unaudited) (unaudited)
Revenue $ 1,452.3
861.3 710.2 1,639.4 1,393.4
Gross margin $ 591.0
194.8 161.0 383.3 335.5
Research and development expenses 79.5 65.9 151.3 139.9
Restructuring and other charges (income) 80.8 16.3 89.9 19.5
Total costs and expenses $ 1,216.4 $ 953.4 $ 2,263.9 $ 1,888.3
Income from continuing operations before
non-operating pension and postretirement charges
(income), interest expense, net and income taxes (1) $ 235.9 Non-operating pension and postretirement charges (income) 3.9 4.8 8.2 9.6 Income from continuing operations before interest expense, net and income taxes$ 232.0
35.3 32.6 65.2 65.0
Income (loss) from continuing operations before
income taxes $ 196.7
54.7 33.4 97.0 65.6
Income (loss) from continuing operations $ 142.0
(10.8) (14.6) (26.0) (22.7)
Net income (loss) (GAAP) $ 131.2
3.9 4.8 8.2 9.6
Total transaction-related charges (5) - - - 0.4
Discontinued operations, net of income taxes 10.8 14.6 26.0 22.7
Interest expense, net 35.3 32.6 65.2 65.0
Depreciation and amortization 42.8 42.5 85.2 85.1
Provision (benefit) for income taxes 54.7 33.4 97.0 65.6
Adjusted EBITDA (Non-GAAP) (2) $ 359.5 $ 347.4 $ 714.3 $ 654.3
____________________
(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 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)Represents transaction costs, costs for transitional employees, other acquired employees related costs, and transactional-related costs such as legal and professional third-party fees.
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ADJUSTED EARNINGS RECONCILIATION
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(in Millions) (unaudited) (unaudited)
Net income (loss) attributable to FMC
stockholders (GAAP) $ 134.2 $
202.9
Corporate special charges (income), pre-tax (1) 84.7 21.1 98.1 29.5 Income tax expense (benefit) on Corporate special charges (income) (2) (0.9) (4.7) (1.8) (6.3) Corporate special charges (income), net of income taxes $ 83.8$ 16.4 $ 96.3 $ 23.2 Discontinued operations attributable to FMC Stockholders, net of income taxes 10.8 14.6 26.0 22.7 Non-GAAP tax adjustments (3) 16.3 1.3 19.9 3.8 Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP)$ 245.1 $ 235.2 $ 483.8 $ 435.2 ____________________ (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 (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. 39
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ORGANIC REVENUE GROWTH RECONCILIATION
Three Months Ended Six Months Ended
June 30, 2022 vs. June 30, 2022 vs.
2021 2021
Total Revenue Change (GAAP) 17 % 15 %
Less: Foreign Currency Impact (4) % (4) %
Organic Revenue Change (Non-GAAP) 21 % 19 %
Results of Operations
In the discussion below, all comparisons are between the periods unless otherwise noted.
Revenue
Three Months Ended
Revenue of$1,452.3 million increased$210.3 million , or approximately 17 percent, versus the prior year period. The increase was primarily driven by volume and price increases, which benefited revenue by approximately 14 percent and 7 percent, respectively. Foreign currency had an unfavorable impact of approximately 4 percent on revenue. Excluding foreign currency impacts, revenue increased approximately 21 percent during the quarter.
Six Months Ended
Revenue of$2,803.1 million increased$365.5 million , or approximately 15 percent, versus the prior year period. The increase was primarily driven by volume and price increases, which benefited revenue by approximately 12 and 7 percent, respectively. Foreign currency had an unfavorable impact of approximately 4 percent on revenue. Excluding foreign currency impacts, revenue increased approximately 19 percent during the quarter. Total Revenue by Region Three Months Ended June 30, Six Months Ended June 30, (in Millions) 2022 2021 2022 2021 North America$ 364.6 $ 290.5 $ 754.4 $ 591.5 Latin America 431.5 299.6 697.4 502.8 Europe, Middle East & Africa (EMEA) 280.8 272.9 679.0 672.3 Asia 375.4 379.0 672.3 671.0 Total Revenue$ 1,452.3 $ 1,242.0 $ 2,803.1 $ 2,437.6
Three Months Ended
North America : Revenue increased approximately 26 percent versus the prior year period. The increase was driven by demand for herbicides and insecticides, particularly for application in fruits and vegetables, corn, and soy. Growth inCanada was driven by the successful launch of Coragen® MaX insecticide.Latin America : Revenue increased approximately 44 percent versus the prior year period, or approximately 42 percent excluding foreign currency, driven by growth inBrazil ,Mexico andArgentina . Sales were strong for insecticides on soy, corn, and cotton. EMEA: Revenue increased approximately 3 percent, or approximately 15 percent excluding foreign currency, driven by volume and price increases. Growth in the region was driven by diamides, selective herbicides, andPlant Health . The change in revenue from prior year was largely impacted by foreign currency headwinds.Asia : Revenue decreased approximately 1 percent versus the prior year period, or increased approximately 4 percent excluding foreign currency. Price increases were largely impacted by foreign currency headwinds.
Six Months Ended
North America : Revenue increased approximately 28 percent versus the prior year period. The increase was driven by broad-based growth across a variety of crops such as tree fruits, nuts, vines, corn, and soy. In the US, sales of biologicals almost doubled, led by products for corn and soybean. InCanada our results were driven by low channel inventory of insecticides, 40 --------------------------------------------------------------------------------
strength in selective herbicides, and the successful launch of Coragen® MaX insecticide.
Latin America : Revenue increased approximately 39 percent versus the prior year period, or approximately 35 percent excluding foreign currency, driven by volume and price increases, particularly inBrazil ,Argentina , andMexico . Growth was led by insecticides and herbicides across a variety of crops. EMEA: Revenue increased approximately 1 percent, or approximately 13 percent excluding foreign currency. Results were driven by strong pricing actions across the region, demand for selective herbicides on cereals and other crops, and demand for our diamides on corn and top fruit. The change in revenue from prior year was largely impacted by foreign currency headwinds.
For 2022, full-year revenue is expected to be in the range of approximately$5.5 billion to$5.7 billion , which represents approximately 11 percent growth at the midpoint versus 2021. Gross margin
Three Months Ended
Gross margin of$591.0 million increased$59.2 million , or approximately 11 percent versus the prior year period. The increase was primarily due to higher revenues driven by increased volumes inNorth America andLatin America and pricing gains, which more than offset cost inflation and foreign currency headwinds. Gross margin percent of approximately 41 percent decreased compared to approximately 43 percent in the prior year period, driven primarily by higher costs.
Six Months Ended
Gross margin of$1,163.7 million increased$119.5 million , or approximately 11 percent versus the prior year period. The increase was primarily due to higher revenues driven by increased volumes inNorth America andLatin America and higher prices in all regions, partially offset by higher cost inflation and foreign currency headwinds. Gross margin percent of approximately 42 percent decreased compared to approximately 43 percent in the prior year period, driven primarily by higher costs.
Selling, general and administrative expenses
Three Months Ended
Selling, general and administrative expenses of
Six Months Ended
Selling, general and administrative expenses of$383.3 million increased$47.8 million , or 14 percent, versus the prior year period. Spending increased globally as a result of our revenue growth, investments in growth programs, and inflation.
Research and development expenses
Three Months Ended
Research and development expenses of
Six Months Ended
Research and development expenses of$151.3 million increased$11.4 million or 8 percent versus the prior year period. As noted above, the increase in research and development expenditures is related to increased spending in proportion to our overall growth. Depreciation and amortization
Three Months Ended
Depreciation and amortization of
Six Months Ended
Depreciation and amortization of
41
--------------------------------------------------------------------------------Interest expense, net
Three Months Ended
Interest expense, net of$35.3 million increased compared to the prior year period of$32.6 million . The increase was primarily driven by higher short-term interest rates and higher debt balances, partially offset by benefits of the refinancing activity completed in the fourth quarter of 2021.
Six Months Ended
Interest expense, net of
Corporate special charges (income)
Restructuring and other charges (income)
Three Months Ended June 30, Six Months Ended June 30,
(in Millions) 2022 2021 2022 2021
Restructuring charges $ 3.4 $ 10.5 $ 14.6 $ 16.8
Other charges (income), net 77.4 5.8 75.3 2.7
Total restructuring and other charges (income)
16.3 $ 89.9
Three Months Ended
Restructuring charges in 2022 of
Restructuring charges in 2021 of$10.5 million consist of$7.2 million of charges related to regional realignment activities, including severance and employee relocation costs, and$1.7 million associated with the integration of the DuPont Crop Protection Business which was completed during the second quarter of 2020 except for certain in-flight initiatives, including severance, accelerated depreciation on certain fixed assets, and other costs (benefits). Additionally, there were other miscellaneous restructuring charges of$1.6 million Other charges (income), net in 2022 of$77.4 million is primarily the result of our decision to cease operations and business inRussia during the second quarter of 2022. As a result, we recorded a charge of$76.1 million during the three months endedJune 30, 2022 which consisted primarily of noncash asset write off charges. Refer to Note 9 for additional information.
In 2021, we had charges of
Six Months Ended
Restructuring charges in 2022 of$14.6 million consist of$8.9 million in fixed asset and other charges resulting from the closure of a manufacturing site during the period. Restructuring charges also include an additional$5.7 million in charges from various restructuring initiatives across the globe. Restructuring charges in 2021 of$16.8 million consist of$7.9 million of charges associated with regional realignment activities, including severance and employee relocation costs, and$5.0 million related to the integration of the DuPont Crop Protection Business which was completed during the second quarter of 2020 except for certain in-flight initiatives. Additionally, there were other miscellaneous restructuring charges of$3.9 million . Other charges (income), net in 2022 of$75.3 million is primarily the result of our decision to cease operations and business inRussia during the second quarter of 2022. As a result, we recorded a charge of approximately$76.1 million during the six months endedJune 30, 2022 which consisted primarily of noncash asset write off charges. Other charges (income), net in 2021 of 2.7 million primarily consists of in-process research and development charges.
Non-operating pension and postretirement charges (income)
Charges for the three months endedJune 30, 2022 were$3.9 million compared to charges of$4.8 million for the three months endedJune 30, 2021 . Charges for the six months endedJune 30, 2022 were$8.2 million compared to charges of$9.6 million for the six months endedJune 30, 2021 . The decrease in non-operating pension and postretirement charges (income) is attributable to higher expected return on plan assets and lower amortization of net actuarial losses. These decreases were partially offset by higher interest costs due to an increase in rates. As previously disclosed, we continued to use the smoothed market related value of assets (MRVA) as opposed to the actual fair value of plan assets in the determination of pension expense. This continued approach will create some volatility in our non-operating periodic pension cost since our qualified pension plan is 100 percent fixed income securities. 42 --------------------------------------------------------------------------------
Provision for income taxes
Three Months Ended
Provision for income taxes for the three months endedJune 30, 2022 was$54.7 million resulting in an effective tax rate of 27.8 percent. Provision for income taxes for the three months endedJune 30, 2021 was$33.4 million resulting in an effective tax rate of 13.3 percent. The increase in the effective tax rate for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 was driven by the factors shown in the table below as well as the impact of certain provisions of the Tax Cuts and Jobs Act of 2017 that became effective in 2022 and geographic earnings mix. Three Months Ended June 30, 2022 2021 Income Tax Provision Effective Tax Income Tax Provision Effective Tax (in Millions) (Expense) (Benefit) Rate (Expense) (Benefit) Rate GAAP - Continuing operations$ 196.7 $ 54.7 27.8 %$ 251.2 $ 33.4 13.3 % Corporate special charges (income) (1) 84.7 0.9 21.1 4.7 Tax adjustments (2) (16.3) (1.3) Non-GAAP - Continuing operations$ 281.4 $ 39.3 14.0 %$ 272.3 $ 36.8 13.5 %
_______________
(1) Primarily our decision to cease operations and business inRussia during the three months endedJune 30, 2022 . As a result, we recorded a pre-tax charge of$76.1 million during the three months endedJune 30, 2022 with minimal tax benefit. (2) Refer to Note 3 of the Adjusted Earnings Reconciliation table within this section of this Form 10-Q for an explanation of tax adjustments.
Six Months Ended
Provision for income taxes for the six months endedJune 30, 2022 was$97.0 million resulting in an effective tax rate of 20.8 percent. Provision for income taxes for the six months endedJune 30, 2021 was$65.6 million resulting in an effective tax rate of 13.8 percent. The increase in the effective tax rate for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 was driven by the factors shown in the table below as well as the impact of certain provisions of the Tax Cuts and Jobs Act of 2017 that became effective in 2022 and geographic earnings mix. Six Months Ended June 30, 2022 2021 Income Tax Provision Effective Tax Income Tax Provision Effective Tax (in Millions) (Expense) (Benefit) Rate (Expense) (Benefit) Rate GAAP - Continuing operations 465.8 97.0 20.8 % 474.7 65.6 13.8 % Corporate special charges (income) (1) 98.1 1.8 29.5 6.3 Tax adjustments (2) (19.9) (3.8) Non-GAAP - Continuing operations$ 563.9 $ 78.9 14.0 %$ 504.2 $ 68.1 13.5 %
_______________
(1) Primarily our decision to cease operations and business inRussia during the six months endedJune 30, 2022 . As a result, we recorded a pre-tax charge of$76.1 million during the six months endedJune 30, 2022 with minimal tax benefit. (2) Refer to Note 3 of the Adjusted Earnings Reconciliation table within this section of this Form 10-Q for an explanation of tax adjustments.
Discontinued operations, net of income taxes
Our discontinued operations include provisions, net of recoveries, for environmental liabilities and legal reserves and expenses related to previously discontinued operations and retained liabilities.
Three Months Ended
Discontinued operations, net of income taxes represented a loss of$10.8 million for the three months endedJune 30, 2022 compared to a loss of$14.6 million for the three months endedJune 30, 2021 . The loss during both the three months endedJune 30, 2022 and 2021 was primarily due to adjustments related to the retained liabilities from our previously discontinued operations. 43 --------------------------------------------------------------------------------
Six Months Ended
Discontinued operations, net of income taxes represented a loss of$26 million for the six months endedJune 30, 2022 compared to a loss of$22.7 million for the six months endedJune 30, 2021 . The loss during both the six months endedJune 30, 2022 and 2021 was primarily due to adjustments related to the retained liabilities from our previously discontinued operations.
Net income (loss)
Three Months Ended
Net income (loss) decreased to$131.2 million from income of$203.2 million in the prior year period. Restructuring and other charges increased approximately$65 million as compared to the prior period, primarily due to the charge associated with the exit of ourRussia operations. Additionally, selling, general and administrative costs and provision for income taxes increased approximately$34 million and$21 million , respectively. This was partially offset by an increase in gross margin of approximately$59 million from higher volume.
Six Months Ended
Net income (loss) decreased to$342.8 million from income of$386.4 million in the prior year period. This decrease in net income was primarily due to an increase in restructuring and other charges of approximately$70 million , largely attributable to our exit fromRussia operations as mentioned above, as well as an increase in selling, general and administrative costs and provision for income taxes of approximately$48 million and$31 million , respectively, as compared to the prior period. This was partially offset by an increase in gross margin of approximately$120 million from higher volume.
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) The Adjusted EBITDA amounts discussed below for three and six months endedJune 30, 2022 and 2021 are reconciled to Net Income (loss) within this Form 10-Q. Refer to our Overview under the section titled "Results of Operations" above.
Three Months Ended
Adjusted EBITDA of$359.5 million increased$12.1 million , or approximately 3 percent versus the prior year period. The increase was mainly driven by higher pricing in all regions and volume growth which accounted for approximately 24 percent and 29 percent increases, respectively. These pricing actions were taken to offset the sustained cost inflation we are experiencing across our supply chain. Higher costs and foreign currencies fluctuations had an unfavorable impact of approximately 43 percent and 7 percent, respectively, on adjusted EBITDA.
Six Months Ended
Adjusted EBITDA of$714.3 million increased$60.0 million , or approximately 9 percent versus the prior year period. The increase was mainly driven by higher pricing in all regions and volume growth which accounted for approximately 27 percent and 20 percent increases, respectively. These pricing actions were taken to offset the sustained cost inflation we are experiencing across our supply chain. Higher costs, including raw material, energy, logistics, packaging, and labor costs, and foreign currencies fluctuations had an unfavorable impact of approximately 32 percent and 6 percent, respectively, on adjusted EBITDA. For 2022, full-year Adjusted EBITDA is expected to be in the range of$1.36 billion to$1.44 billion , which represents approximately 6 percent growth at the midpoint versus 2021. Although we provide a forecast for Adjusted EBITDA, a Non-GAAP financial measure, we are not able to forecast the most directly comparable measure calculated and presented in accordance withU.S. GAAP. See Note 1 to our 2022 Outlook Update within this section of the Form 10-Q. 44 --------------------------------------------------------------------------------
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.
Cash
Cash and cash equivalents atJune 30, 2022 andDecember 31, 2021 , were$591.5 million and$516.8 million , respectively. Of the cash and cash equivalents balance atJune 30, 2022 ,$562.0 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.
Outstanding debt
AtJune 30, 2022 , we had total debt of$3,886.8 million as compared to$3,172.5 million atDecember 31, 2021 . Total debt included$2,731.7 million and$2,731.7 million of long-term debt (excluding current portions of$89.2 million and$84.5 million ) atJune 30, 2022 andDecember 31, 2021 , respectively. Short-term debt and current portion of long-term debt, which consists of short-term foreign borrowings, commercial paper borrowings, and the current portion of long-term debt, increased from$440.8 million atDecember 31, 2021 to$1,155.1 million atJune 30, 2022 . See Note 10 in the condensed consolidated financial statements included in this Form 10-Q for further details. As ofJune 30, 2022 , we were in compliance with all of our debt covenants. We remain committed to solid investment grade credit metrics, and expect full-year average leverage to be in line with this commitment in 2022.
Access to credit and future liquidity and funding needs
AtJune 30, 2022 , our remaining borrowing capacity under our credit facility was$875.6 million . See Note 10 in the condensed consolidated financial statements included in this Form 10-Q for discussion of the amendments to the Revolving Credit Facility and Term Loan Agreements undertaken in the quarter. Our commercial paper program allows us to borrow at rates generally more favorable than those available under our credit facility. AtJune 30, 2022 , we had$964.4 million commercial paper borrowings under the commercial paper program. AtJune 30, 2022 , the average effective interest rate on the borrowings was 2.15 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. 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. 45
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