FMC CORPORATION 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 products, 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.
Russia's Invasion of Ukraine
In mid-April, we announced the decision to discontinue our operations and
business in Russia . Our values as a company did not allow us to operate and grow
our business in Russia . We recorded exit charges of approximately $76 million
during the second quarter. See Note 9 for more information. We are closely
monitoring any potential impacts on our raw material and supply chain costs
arising out of Russia's invasion of Ukraine .
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.
Third Quarter 2022 Highlights
The following items are the more significant developments or financial
highlights in our business during the three months ended
•Revenue of$1,377.2 million for the three months endedSeptember 30, 2022 increased$183.2 million or approximately 15 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 21 percent, sales inLatin America increased approximately 35 percent, sales inEurope ,Middle East andAfrica decreased approximately 12 percent, and sales inAsia decreased approximately 6 percent as foreign currency headwinds more than offset pricing gains in the region. The increase was mostly driven by volume growth primarily inLatin America andNorth America and price increases across all regions. Excluding foreign currency impacts, revenue increased 19 percent during the quarter. •Our gross margin of$477.5 million decreased versus the prior year quarter by$34.0 million driven by higher cost of goods sold, primarily resulting from inflation, and foreign currency headwinds. These were partially offset by higher volumes inLatin America andNorth America and higher prices in all regions. Gross margin percent of approximately 35 percent decreased compared to approximately 43 percent in the prior year period, driven by higher input costs and foreign currency headwinds. •Selling, general and administrative expenses decreased from$183.5 million to$179.4 million , or approximately 2 percent. The decrease in selling, general, and administrative expenses is a result of foreign currency gains. 46 --------------------------------------------------------------------------------
•Research and development expenses of
•Net income (loss) attributable to FMC stockholders decreased from$159.7 million for the three months endedSeptember 30, 2021 to$121.0 million for the three months endedSeptember 30, 2022 which represents a decrease of$38.7 million , or approximately 24 percent. The lower results were driven by lower gross margin and an increase in the provision for income taxes. This was partially offset by lower restructuring and other charges. Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of$155.6 million decreased compared to the prior year amount of$183.9 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$190 million was paid at closing onJuly 19, 2022 . See Note 5 for additional information.
During the quarter we made certain accounting policy changes for inventory costing and net periodic benefit cost. The effects of these changes in accounting principle have been retrospectively applied to all periods presented and as such certain prior period amounts have been adjusted. See Note 1 for further information.
2022 Outlook Update
With continued strength in market demand and successful pricing actions offsetting cost increases, we are raising our full-year 2022 revenue guidance to be in the range of approximately$5.6 billion to$5.8 billion , up approximately 13 percent at the midpoint versus 2021. We are narrowing the full year adjusted EBITDA(1) range to$1.37 billion to$1.43 billion , representing 7 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$7.10 to$7.60 per diluted share(1), representing a year over year increase of 7 percent at the midpoint. Full-year earnings growth drivers include pricing actions and strong volumes, partially offset by foreign currency impacts. 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. 47 --------------------------------------------------------------------------------
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. 48 --------------------------------------------------------------------------------
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(in Millions) (unaudited) (unaudited)
Revenue $ 1,377.2 $ 1,194.0 $ 4,180.3 $ 3,631.6
Costs and Expenses
Costs of sales and services 899.7 682.5 2,539.1 2,078.4
Gross margin $ 477.5 $ 511.5 $ 1,641.2 $ 1,553.2
Selling, general and administrative expenses 179.4 183.5 562.7 519.0
Research and development expenses 78.5 79.5 229.8 219.4
Restructuring and other charges (income) 9.0 32.8 98.9 52.3
Total costs and expenses $ 1,166.6 $ 978.3 $ 3,430.5 $ 2,869.1
Income from continuing operations before
non-operating pension and postretirement charges
(income), interest expense, net and income taxes (1) $ 210.6 $
215.7
Non-operating pension and postretirement charges (income) (1.7) 1.5 6.5 3.9 Income from continuing operations before interest expense, net and income taxes$ 212.3 $ 214.2 $ 743.3 $ 758.6 Interest expense, net 41.8 33.1 107.0 98.1 Income (loss) from continuing operations before income taxes$ 170.5 $ 181.1 $ 636.3 $ 660.5 Provision (benefit) for income taxes 36.0 9.2 133.0 75.8 Income (loss) from continuing operations$ 134.5 $ 171.9 $ 503.3 $ 584.7 Discontinued operations, net of income taxes (16.2) (9.7) (42.2) (32.4) Net income (loss) (GAAP)$ 118.3 $ 162.2 $ 461.1 $ 552.3 Adjustments to arrive at Adjusted EBITDA (Non-GAAP): Corporate special charges (income): Restructuring and other charges (income) (3)$ 9.0 $ 32.8 $ 98.9 $ 52.3 Non-operating pension and postretirement charges (income) (4) (1.7) 1.5 6.5 3.9 Total transaction-related charges (5) - - - 0.4 Discontinued operations, net of income taxes 16.2 9.7 42.2 32.4 Interest expense, net 41.8 33.1 107.0 98.1 Depreciation and amortization 41.4 43.4 126.6 128.5 Provision (benefit) for income taxes 36.0 9.2 133.0 75.8 Adjusted EBITDA (Non-GAAP) (2)$ 261.0 $ 291.9 $ 975.3 $ 943.7 ____________________
(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 September Nine Months Ended September
30, 30,
2022 2021 2022 2021
(in Millions) (unaudited) (unaudited)Net income (loss) attributable to FMC stockholders (GAAP)
$ 121.0 $
159.7
Corporate special charges (income), pre-tax (1) 7.3 34.3 105.4 56.6 Income tax expense (benefit) on Corporate special charges (income) (2) (1.0) (3.3) (2.8) (8.1) Corporate special charges (income), net of income taxes$ 6.3 $ 31.0 $ 102.6 $ 48.5 Discontinued operations attributable to FMC Stockholders, net of income taxes 16.2 9.7 42.2 32.4 Non-GAAP tax adjustments (3) 12.1 (16.5) 32.0 (12.7) Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP)$ 155.6 $ 183.9 $ 639.4 $ 617.1 ____________________ (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. 50
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ORGANIC REVENUE GROWTH RECONCILIATION
Three Months Ended Nine Months Ended
September 30, 2022 vs. September 30, 2022 vs.
2021 2021
Total Revenue Change (GAAP) 15 % 15 %
Less: Foreign Currency Impact (4) % (4) %
Organic Revenue Change (Non-GAAP) 19 % 19 %
Results of Operations
In the discussion below, all comparisons are between the periods unless otherwise noted.
Revenue
Three Months Ended
Revenue of$1,377.2 million increased$183.2 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 percent 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.
Nine Months Ended
Revenue of$4,180.3 million increased$548.7 million , or approximately 15 percent, versus the prior year period. The increase was primarily driven by volume and price increases, which benefited revenue by approximately 12 and 7 percent, respectively. Foreign currency had an unfavorable impact of approximately 4 percent on revenue. Excluding foreign currency impacts, revenue increased approximately 19 percent. Total Revenue by Region Three Months Ended September 30, Nine Months Ended September 30, (in Millions) 2022 2021 2022 2021 North America$ 241.2 $ 199.8 $ 995.6 $ 791.3 Latin America 697.1 516.9 1,394.5 1,019.7 Europe, Middle East & Africa (EMEA) 150.7 171.4 829.7 843.7 Asia 288.2 305.9 960.5 976.9 Total Revenue$ 1,377.2 $ 1,194.0 $ 4,180.3 $ 3,631.6
Three Months Ended
North America : Revenue increased approximately 21 percent versus the prior year period. The increase was driven by strong pricing actions. Fungicides grew rapidly in the quarter, especially on corn. Sales in the Midwest helped offset the impact of drought conditions in the West.
EMEA: Revenue decreased approximately 12 percent, or increased approximately 1 percent excluding foreign currency. The change in revenue from prior year was largely impacted by foreign currency headwinds. This was partially offset by pricing actions and growth inGermany and Central European countries. Diamides grew in fruits and vegetables and oil seed rape. Additionally, herbicides grew on cereals.Asia : Revenue decreased approximately 6 percent versus the prior year period, or increased approximately 2 percent excluding foreign currency. Foreign currency headwinds and weather conditions, including floods inPakistan , more than offset price increases and strong demand for new products.
Nine Months Ended
North America : Revenue increased approximately 26 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, growth was driven by sales of 51 -------------------------------------------------------------------------------- herbicides, insecticides, and biologicals. InCanada our results were driven by low channel inventory of insecticides, strength in selective herbicides, and the successful launch of Coragen® MaX insecticide.Latin America : Revenue increased approximately 37 percent versus the prior year period, or approximately 35 percent excluding foreign currency, driven by volume and price increases, particularly inBrazil andArgentina . Growth was led by insecticides and herbicides across a variety of crops. EMEA: Revenue decreased approximately 2 percent, or increased approximately 10 percent excluding foreign currency. The change in revenue from prior year was largely impacted by foreign currency headwinds. 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 fruits and vegetables.Asia : Revenue decreased approximately 2 percent, or increased approximately 4 percent excluding foreign currency. The change in revenue from prior year was impacted by foreign currency headwinds, a reduction in rice acres inIndia , and weather conditions. These impacts were partially offset by price actions and strong performance inAustralia . For 2022, full-year revenue is expected to be in the range of approximately$5.6 billion to$5.8 billion , which represents approximately 13 percent growth at the midpoint versus 2021. Gross margin
Three Months Ended
Gross margin of$477.5 million decreased$34.0 million , or approximately 7 percent versus the prior year period. The decrease was primarily due to cost inflation and foreign currency headwinds, which were partially offset by higher revenues driven by increased volumes inLatin America andNorth America and pricing gains. Gross margin percent of approximately 35 percent decreased compared to approximately 43 percent in the prior year period, driven primarily by higher input costs and foreign currency headwinds.
Nine Months Ended
Gross margin of$1,641.2 million increased$88.0 million , or approximately 6 percent versus the prior year period. The increase was primarily due to higher revenues driven by increased volumes inLatin America andNorth America and higher prices in all regions, partially offset by higher cost inflation and foreign currency headwinds. Gross margin percent of approximately 39 percent decreased compared to approximately 43 percent in the prior year period, driven primarily by higher input costs.
Selling, general and administrative expenses
Three Months Ended
Selling, general and administrative expenses of
Nine Months Ended
Selling, general and administrative expenses of$562.7 million increased$43.7 million , or 8 percent, versus the prior year period. Spending increased globally as a result of our revenue growth, investments in growth programs, labor cost increases, and inflation.
Research and development expenses
Three Months Ended
Research and development expenses of
Nine Months Ended
Research and development expenses of$229.8 million increased$10.4 million or 5 percent versus the prior year period. The increase in research and development expenditures is related to continued investment in our new active ingredient pipeline as well as inflation and labor cost increases.
Depreciation and amortization
Three Months Ended
Depreciation and amortization of
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Nine Months Ended
Depreciation and amortization of
Interest expense, net
Three Months Ended
Interest expense, net of$41.8 million increased$8.7 million compared to the prior year period of$33.1 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.
Nine Months Ended
Interest expense, net of$107.0 million increased$8.9 million compared to the prior year period of$98.1 million . The increase was primarily driven by higher short term interest rates and higher debt balances, partially offset by the benefits of the refinancing activity completed in the fourth quarter of 2021.
Corporate special charges (income)
Restructuring and other charges (income)
Three Months Ended September Nine Months Ended September
30, 30,
(in Millions) 2022 2021 2022 2021
Restructuring charges $ 2.0 $ 2.1 $ 16.6 $ 18.9
Other charges (income), net 7.0 30.7 82.3 33.4
Total restructuring and other charges (income)
Three Months Ended
Restructuring charges in 2022 of$2.0 million relate to employee separation costs and other exit costs associated with various restructuring initiatives across the globe. During the three month period endedSeptember 30, 2022 , these primarily relate to our regional realignment activities. Restructuring charges in 2021 of$2.1 million consist of$1.0 million of charges related to regional realignment activities, including severance and employee relocation costs, and$0.8 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$0.3 million .
Other charges (income), net in 2022 of
Other charges, net in 2021 of$30.7 million primarily consists of$23.8 million charges related to the establishment of reserves for certain historicalIndia indirect tax matters that were triggered during the period.
Nine Months Ended
Restructuring charges in 2022 of$16.6 million consist of$9.5 million in fixed asset and other charges resulting from the closure of a manufacturing site during the period. Restructuring charges also include an additional$7.1 million in charges from various restructuring initiatives across the globe. Restructuring charges in 2021 of$18.9 million consist of$8.9 million of charges associated with regional realignment activities, including severance and employee relocation costs, and$5.8 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$4.2 million . Other charges (income), net in 2022 of$82.3 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 nine months endedSeptember 30, 2022 which consisted primarily of noncash asset write off charges. Other charges (income), net also includes charges related to environmental sites of$1.0 million and other miscellaneous charges of$5.2 million . 53 -------------------------------------------------------------------------------- Other charges, net in 2021 of$33.4 million primarily consists of$23.8 million charges related to the establishment of reserves for certain historicalIndia indirect tax matters that were triggered during the period. Additionally, there were charges related to environmental sites of$3.3 million .
Non-operating pension and postretirement charges (income)
Income for the three months endedSeptember 30, 2022 was$1.7 million compared to charges of$1.5 million for the three months endedSeptember 30, 2021 . Charges for the nine months endedSeptember 30, 2022 were$6.5 million compared to charges of$3.9 million for the nine months endedSeptember 30, 2021 . The increase in non-operating pension and postretirement charges (income) is attributable to lower expected return on plan assets and higher interest costs due to an increase in rates. As previously disclosed, we changed our method of accounting to the fair value approach for our liability-hedging asset class, which does not involve deferring the impact of excess plan asset gains or losses in the determination of these two components of net periodic benefit cost. This class of assets is comprised solely of fixed income securities and therefore, provides a natural hedge (liability-hedging assets) against the changes in the recorded amount of net periodic benefit cost. No change is being made to the accounting principle for the other classes of pension assets; however ourU.S. qualified pension plan reached fully funded status during 2018 and since that point the portfolio has been invested 100 percent in fixed income securities and cash. Provision for income taxes
Three Months Ended
Provision for income taxes for the three months endedSeptember 30, 2022 was$36.0 million resulting in an effective tax rate of 21.1 percent. Provision for income taxes for the three months endedSeptember 30, 2021 was$9.2 million resulting in an effective tax rate of 5.1 percent. The increase in the effective tax rate from GAAP continuing operations for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 was driven by the factors shown in the table below, the impact of certain provisions of the Tax Cuts and Jobs Act of 2017 that became effective in 2022, and geographic earnings mix. Our effective income tax rate from GAAP continuing operations for the three months endedSeptember 30, 2021 was impacted by a$17.7 million tax reserve release related to our domestic operations.
Three Months Ended
2022 2021
Tax Provision Effective Tax Income Tax Provision Effective Tax
(in Millions) Income (Expense) (Benefit) Rate (Expense) (Benefit) Rate
GAAP - Continuing operations
21.1 %$ 181.1 $ 9.2 5.1 % Corporate special charges (income) 7.3 1.0 34.3 3.3 Tax adjustments (1) (12.1) 16.5
Non-GAAP - Continuing operations
14.0 %$ 215.4 $ 29.0 13.5 %
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(1) Refer to Note 3 of the Adjusted Earnings Reconciliation table within this section of this Form 10-Q for an explanation of tax adjustments.
Nine Months Ended
Provision for income taxes for the nine months endedSeptember 30, 2022 was$133.0 million resulting in an effective tax rate of 20.9 percent. Provision for income taxes for the nine months endedSeptember 30, 2021 was$75.8 million resulting in an effective tax rate of 11.5 percent. The increase in the effective tax rate for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 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, our decision to cease operations inRussia , and geographic earnings mix. Our effective income tax rates from continuing operations for the nine months endedSeptember 30, 2021 were impacted by a$17.7 million tax reserve release related to our domestic operations. 54 --------------------------------------------------------------------------------
Nine Months Ended
2022 2021
Tax Provision Effective Tax Income Tax Provision Effective Tax
(in Millions) Income (Expense) (Benefit) Rate (Expense) (Benefit) Rate
GAAP - Continuing operations $ 636.3 $ 133.0 20.9 % $ 660.5 $ 75.8 11.5 %
Corporate special charges (income)
(1) 105.4 2.8 56.6 8.1
Tax adjustments (2) (32.0) 12.7
Non-GAAP - Continuing operations $ 741.7 $ 103.8 14.0 % $ 717.1 $ 96.6 13.5 %
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(1) Primarily our decision to cease operations and business inRussia during the nine months endedSeptember 30, 2022 . As a result, we recorded a pre-tax charge of$76.1 million during the nine months endedSeptember 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$16.2 million for the three months endedSeptember 30, 2022 compared to a loss of$9.7 million for the three months endedSeptember 30, 2021 . The loss during both the three months endedSeptember 30, 2022 and 2021 was primarily due to adjustments related to the retained liabilities from our previously discontinued operations.
Nine Months Ended
Discontinued operations, net of income taxes represented a loss of$42.2 million for the nine months endedSeptember 30, 2022 compared to a loss of$32.4 million for the nine months endedSeptember 30, 2021 . The loss during both the nine months endedSeptember 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$118.3 million from income of$162.2 million in the prior year period primarily from a decrease in gross margin of approximately$34.0 million and an increase of$26.8 million to the provision for income taxes. This was partially offset by a decrease of$23.8 million to restructuring and other charges.
Nine Months Ended
Net income (loss) decreased to$461.1 million from income of$552.3 million in the prior year period. This decrease in net income was primarily due to an increase in restructuring and other charges of approximately$47 million , an increase in selling, general and administrative costs of approximately$44 million , and an increase in provision for income taxes of$57 million , respectively, as compared to the prior period. This was partially offset by an increase in gross margin of approximately$88 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.
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--------------------------------------------------------------------------------Adjusted EBITDA (Non-GAAP)
The Adjusted EBITDA amounts discussed below for three and nine months endedSeptember 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$261.0 million decreased$30.9 million , or approximately 11 percent versus the prior year period. The decrease was mainly driven by higher costs and foreign currency fluctuations which had an unfavorable impact of approximately 58 percent and 9 percent, respectively, on adjusted EBITDA. These were partially offset by higher pricing in all regions and volume growth which accounted for approximately 29 percent and 27 percent increases, respectively. These pricing actions were taken to offset the sustained cost inflation we are experiencing across our supply chain.
Nine Months Ended
Adjusted EBITDA of$975.3 million increased$31.6 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 28 percent and 22 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 40 percent and 7 percent, respectively, on adjusted EBITDA. For 2022, full-year Adjusted EBITDA is expected to be in the range of$1.37 billion to$1.43 billion , which represents approximately 7 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. 56 --------------------------------------------------------------------------------
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 at
Outstanding debt
AtSeptember 30, 2022 , we had total debt of$3,558.8 million as compared to$3,172.5 million atDecember 31, 2021 . Total debt included$2,732.5 million and$2,731.7 million of long-term debt (excluding current portions of$85.9 million and$84.5 million ) atSeptember 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$826.3 million atSeptember 30, 2022 . See Note 10 in the condensed consolidated financial statements included in this Form 10-Q for further details. As ofSeptember 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
AtSeptember 30, 2022 , our remaining borrowing capacity under our credit facility was$1,179.7 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. AtSeptember 30, 2022 , we had$660.3 million commercial paper borrowings under the commercial paper program. AtSeptember 30, 2022 , the average effective interest rate on the borrowings was 3.52 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
condensed consolidated balance sheets and the associated payments are included
in operating activities within our condensed 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. See Note 6 for more information on receivables factoring.
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