# FMC Corp: Form 10-Q for the period ended Sep 30, 2022

- Company: [FMC Corp](/companies/fmc.md) (CIK 37785)
- Form: 10-Q
- Filed: 2022-11-02
- Accepted by EDGAR: Nov 2, 2022, 15:08 ET
- Period: 2022-09-30
- Accession: 0000037785-22-000090
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/37785/000003778522000090/fmc-20220930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/37785/000003778522000090/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $1.38bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $4.18bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $899.7m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $2.54bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $477.5m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $1.64bn | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2022-07-01 to 2022-09-30 | $179.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-01-01 to 2022-09-30 | $562.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | $210.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | $749.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $36.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $133.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | $121.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | $462.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.95 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | $3.65 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.96 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | $3.66 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 126,891,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 126,879,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | $15.7m | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $108.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2022-01-01 to 2022-09-30 | $200.6m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2022-01-01 to 2022-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2022-09-30 | $363.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $5.11bn | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $10.76bn | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $3.63bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2022-09-30 | $2.73bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-09-30 | $85.9m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2022-09-30 | $740.4m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2022-09-30 | $3.19bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2022-09-30 | 125,965,923 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 72,554 characters.

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 of BioPhero 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 ended December 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 the Securities 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 with U.S. generally accepted accounting principles. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have described our accounting policies in Note 1 to our consolidated financial statements included in our 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 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 all U.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 September 30, 2022:

- Revenue of $1,377.2 million for the three months ended September 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 in North America increased by approximately 21 percent, sales in Latin America increased approximately 35 percent, sales in Europe, Middle East and Africa decreased approximately 12 percent, and sales in Asia 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 in Latin America and North 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 in Latin America and North 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.
- Research and development expenses of $78.5 million remained relatively flat compared to the previous year.
- Net income (loss) attributable to FMC stockholders decreased from $159.7 million for the three months ended September 30, 2021 to $121.0 million for the three months ended September 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

On June 29, 2022 we announced a definitive agreement to acquire BioPhero ApS ("BioPhero"), a Denmark-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 on July 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 "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 with U.S. GAAP. Certain elements of the composition of the U.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, no U.S. GAAP outlook is provided.

### 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 with U.S. GAAP.

*(in Millions)*

*(unaudited)*

*(unaudited)*

| 2022 | Three Months Ended September 30, 2021 | 2022 | Nine Months Ended September 30, 2021 |  |
| --- | ---: | ---: | ---: | ---: |
| **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 | $749.8 | $762.5 |
| 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.

*ADJUSTED EARNINGS RECONCILIATION*

*(in Millions)*

*(unaudited)*

*(unaudited)*

| 2022 | Three Months Ended September 30, 2021 | 2022 | Nine Months Ended September 30, 2021 |  |
| --- | ---: | ---: | ---: | ---: |
| **Net income (loss) attributable to FMC stockholders (GAAP)** | $121.0 | $159.7 | $462.6 | $548.9 |
| 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.

### ORGANIC REVENUE GROWTH RECONCILIATION

|  | Three Months Ended September 30, 2022 vs. 2021 | Nine Months Ended September 30, 2022 vs. 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 September 30, 2022* vs. *2021*

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 September 30, 2022* vs. *2021*

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*

*(in Millions)*

|  | Three Months Ended September 30, 2022 | 2021 | Nine Months Ended September 30, 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 September 30, 2022 vs. 2021

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.

Latin America: Revenue increased approximately 35 percent versus the prior year period, driven by growth in Brazil and Argentina. Sales were strong for herbicides and insecticides on soy and corn.

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 in Germany 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 in Pakistan, more than offset price increases and strong demand for new products.

#### Nine Months Ended September 30, 2022 vs. 2021

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 herbicides, insecticides, and biologicals. In Canada 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 in Brazil and Argentina. 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 in India, and weather conditions. These impacts were partially offset by price actions and strong performance in Australia.

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 September 30, 2022 vs. 2021

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 in Latin America and North 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 September 30, 2022 vs. 2021

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 in Latin America and North 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 September 30, 2022 vs. 2021

Selling, general and administrative expenses of $179.4 million decreased $4.1 million, or 2 percent, versus the prior year period as a result of foreign currency gains.

#### Nine Months Ended September 30, 2022 vs. 2021

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 September 30, 2022 vs. 2021

Research and development expenses of $78.5 million remained relatively flat compared to the previous year.

#### Nine Months Ended September 30, 2022 vs. 2021

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 September 30, 2022 vs. 2021

Depreciation and amortization of $41.4 million decreased $2.0 million or 5 percent as compared to the prior year period of $43.4 million.

#### Nine Months Ended September 30, 2022 vs. 2021

Depreciation and amortization of $126.6 million decreased $1.9 million or 1 percent as compared to the prior year period of $128.5 million.

### Interest expense, net

#### Three Months Ended September 30, 2022 vs. 2021

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 September 30, 2022 vs. 2021

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)

*(in Millions)*

|  | Three Months Ended September 30, 2022 | 2021 | Nine Months Ended September 30, 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)** | **$9.0** | **$32.8** | **$98.9** | **$52.3** |

#### Three Months Ended September 30, 2022 vs. 2021

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 ended September 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 $7.0 million is primarily the result of $3.4 million of environmental charges.

Other charges, net in 2021 of $30.7 million primarily consists of $23.8 million charges related to the establishment of reserves for certain historical India indirect tax matters that were triggered during the period.

#### Nine Months Ended September 30, 2022 vs. 2021

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 in Russia during the second quarter of 2022. As a result, we recorded a charge of approximately $76.1 million during the nine months ended September 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.

Other charges, net in 2021 of $33.4 million primarily consists of $23.8 million charges related to the establishment of reserves for certain historical India 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 ended September 30, 2022 was $1.7 million compared to charges of $1.5 million for the three months ended September 30, 2021. Charges for the nine months ended September 30, 2022 were $6.5 million compared to charges of $3.9 million for the nine months ended September 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 our U.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 September 30, 2022 vs. 2021

Provision for income taxes for the three months ended September 30, 2022 was $36.0 million resulting in an effective tax rate of 21.1 percent. Provision for income taxes for the three months ended September 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 ended September 30, 2022 compared to the three months ended September 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 ended September 30, 2021 was impacted by a $17.7 million tax reserve release related to our domestic operations.

*(in Millions)*

|  | Three Months Ended September 30, 2022 Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate | 2021 Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **GAAP - Continuing operations** | $170.5 | $36.0 | 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** | **$177.8** | **$24.9** | **14.0%** | **$215.4** | **$29.0** | **13.5%** |

(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 September 30, 2022 vs. 2021

Provision for income taxes for the nine months ended September 30, 2022 was $133.0 million resulting in an effective tax rate of 20.9 percent. Provision for income taxes for the nine months ended September 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 ended September 30, 2022 compared to the nine months ended September 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 in Russia, and geographic earnings mix. Our effective income tax rates from continuing operations for the nine months ended September 30, 2021 were impacted by a $17.7 million tax reserve release related to our domestic operations.

*(in Millions)*

|  | Nine Months Ended September 30, 2022 Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate | 2021 Income (Expense) | Tax Provision (Benefit) | Effective Tax 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%** |

(1) Primarily our decision to cease operations and business in Russia during the nine months ended September 30, 2022. As a result, we recorded a pre-tax charge of $76.1 million during the nine months ended September 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 September 30, 2022 vs. 2021

Discontinued operations, net of income taxes represented a loss of $16.2 million for the three months ended September 30, 2022 compared to a loss of $9.7 million for the three months ended September 30, 2021. The loss during both the three months ended September 30, 2022 and 2021 was primarily due to adjustments related to the retained liabilities from our previously discontinued operations.

#### Nine Months Ended September 30, 2022 vs. 2021

Discontinued operations, net of income taxes represented a loss of $42.2 million for the nine months ended September 30, 2022 compared to a loss of $32.4 million for the nine months ended September 30, 2021. The loss during both the nine months ended September 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 September 30, 2022 vs. 2021

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 September 30, 2022 vs. 2021

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.

### Adjusted EBITDA (Non-GAAP)

The Adjusted EBITDA amounts discussed below for three and nine months ended September 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 September 30, 2022 vs. 2021

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 September 30, 2022 vs. 2021

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 with U.S. GAAP. See Note 1 to our *2022 Outlook Update* within this section of the Form 10-Q.

### 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 September 30, 2022 and December 31, 2021, were $363.8 million and $516.8 million, respectively. Of the cash and cash equivalents balance at September 30, 2022, $330.5 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

At September 30, 2022, we had total debt of $3,558.8 million as compared to $3,172.5 million at December 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) at September 30, 2022 and December 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 at December 31, 2021 to $826.3 million at September 30, 2022. See Note 10 in the condensed consolidated financial statements included in this Form 10-Q for further details. As of September 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

At September 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. At September 30, 2022, we had $660.3 million commercial paper borrowings under the commercial paper program. At September 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.

### Statement of Cash Flows

*Cash provided (required) by operating activities of continuing operations was $15.7 million and $298.2 million for the nine months ended September 30, 2022 and 2021, respectively.*

The table below presents the components of net cash provided (required) by operating activities of continuing operations.

*(in Millions)*

| 2022 | Nine Months Ended September 30, 2021 |  |
| --- | ---: | ---: |
| Income from continuing operations before non-operating pension and postretirement charges (income), interest expense, net and income taxes (GAAP) | $749.8 | $762.5 |
| Restructuring and other charges (income), total transaction-related charges and depreciation and amortization | 225.5 | 181.2 |
| **Operating income before depreciation and amortization** | **$975.3** | **$943.7** |
| Change in trade receivables, net (1) | (203.5) | (170.8) |
| Change in guarantees of vendor financing | (22.0) | 14.5 |
| Change in advance payments from customers (2) | (627.1) | (343.9) |
| Change in accrued customer rebates (3) | 475.0 | 378.4 |
| Change in inventories (4) | (282.3) | (367.4) |
| Change in accounts payable (5) | (19.1) | 147.2 |
| Change in all other operating assets and liabilities (6) | (50.1) | (46.9) |
| Restructuring and other spending (7) | (25.7) | (21.9) |
| Environmental spending, continuing, net of recoveries (8) | (18.4) | (51.2) |
| Pension and other postretirement benefit contributions (9) | (3.0) | (2.9) |
| Net interest payments (10) | (91.2) | (85.0) |
| Tax payments, net of refunds (10) | (91.7) | (87.2) |
| Transaction and integration costs (11) | (0.5) | (8.4) |
| **Cash provided (required) by operating activities of continuing operations (GAAP)** | **$15.7** | **$298.2** |

(1) Both periods include the impacts of seasonality and the receivable build intrinsic in our business. The change in cash flows related to trade receivables in 2022 was driven by timing of collections as well as higher volumes for revenue 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 both periods include carry-over balances remaining to be collected in Latin America, where collection periods are measured in months rather than weeks. During the nine months ended September 30, 2022, we collected approximately $1,046 million of receivables in Brazil.

(2) Advance payments are primarily within North America and these payments are received in the fourth quarter of each year and recorded as deferred revenue on the balance sheet at December 31. Revenue associated with advance payments is recognized, generally in the first half of each year, as shipments are made and control to the customer takes place. The change year over year is primarily related to substantially higher overall payments received in the fourth quarter of 2021 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 year over year are associated with the mix in sales eligible for rebates and incentives which includes higher revenues for products eligible for rebates compared to the prior year and timing of certain rebate payments.

(4) Changes in inventory are a result of inventory levels being adjusted to take into consideration the change in market conditions. Inventory build in 2022 is in line with the projected demand for the year as well as our decision to build inventory to help manage continued supply chain volatility. Inventory build in the prior year period was higher primarily due to increased diamide production and recovery in the second quarter.

(5) The change in cash flows related to accounts payable is primarily due to the timing of payments made to suppliers and vendors.

(6) Changes in all periods presented primarily represent timing of payments associated with all other operating assets and liabilities. Additionally, both periods include the effects of the unfavorable contracts amortization of approximately $82 million and $77 million, respectively.

(7) See Note 9 in our condensed consolidated financial statements included in this Form 10-Q for further details.

(8) The amounts represent environmental remediation spending at our operating sites which were recorded against pre-existing reserves, net of recoveries. Refer to Note 12 for more details. During the first quarter of 2021, FMC made $21.4 million in payments for the Pocatello Tribal Litigation judgement plus interest charges. In the second quarter of 2021, FMC made a further payment to the Tribes of $10.8 million to pay fees and interest incurred from 2015 to 2021.

(9) There were no voluntary contributions to our U.S. qualified defined benefit plan, which is slightly overfunded, for the nine months ended September 30, 2022 and 2021.

(10) Amounts shown in the chart represent net payments of our continuing operations.

(11) Represents payments for legal and professional fees associated with integrating the DuPont Crop Protection Business. The integration is considered complete and the 2022 payments are associated with settlement of final amounts payable to various vendors.

*Cash provided (required) by operating activities of discontinued operations was $(51.8) million and $(53.9) million for the nine months ended September 30, 2022 and 2021, respectively.*

Cash provided (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. Period over period the cash flow impacts of these activities were consistent, as expected.

*Cash provided (required) by investing activities of continuing operations was $(294.2) million and $(115.9) million for the nine months ended September 30, 2022 and 2021, respectively.*

The change in cash from investing activities of continuing operations during the nine months ended September 30, 2022, as compared to the same period in 2021, was primarily due to the acquisition of Biophero. The purchase price of approximately $190 million was paid at closing on July 19, 2022. See Note 5 for further information. Additionally, the 2021 period included spending associated with the implementation of our new SAP system in 2021 which did not repeat in the current year. This was offset partially with higher capital expenditure spending.

*Cash provided (required) by investing activities of discontinued operations was $0.0 million and $16.8 million for the nine months ended September 30, 2022 and 2021, respectively.*

Cash provided by investing activities of discontinued operations for the nine months ended September 30, 2021 represents the proceeds from the sale of land of our discontinued site in Richmond, California which was sold in the nine months ended September 30, 2021.

*Cash provided (required) by financing activities of continuing operations was $197.7 million and $(367.0) million for the nine months ended September 30, 2022 and 2021, respectively.*

The change period over period in financing activities of continuing operations is primarily due to higher commercial paper borrowings in the current period and zero repurchases of common stock under our publicly announced program in the current period versus $300 million of repurchases of common stock in 2021. See below discussion for dividend payments which are a component of cash provided (required) by financing activities of continuing operations.

### 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 comparable U.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 under U.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 with U.S. GAAP.

The table below presents a reconciliation of free cash flow from the most directly comparable U.S. GAAP measure:

### FREE CASH FLOW RECONCILIATION

*(in Millions)*

| 2022 | Nine Months Ended September 30, 2021 |  |
| --- | ---: | ---: |
| **Cash provided (required) by operating activities of continuing operations (GAAP)** | $15.7 | $298.2 |
| Transaction and integration costs (1) | 0.5 | 8.4 |
| **Adjusted cash from operations (2)** | $16.2 | $306.6 |
| Capital expenditures (3) | (108.4) | (76.4) |
| Other investing activities (3)(4) | 5.7 | (22.2) |
| **Capital additions and other investing activities** | $(102.7) | $(98.6) |
| Cash provided (required) by operating activities of discontinued operations (5) | (51.8) | (53.9) |
| Cash provided (required) by investing activities of discontinued operations (5) | — | 16.8 |
| Transaction and integration costs (1) | (0.5) | (8.4) |
| Investment in Enterprise Resource Planning system (3) | — | (12.7) |
| **Legacy and transformation (6)** | $(52.3) | $(58.2) |
| **Free cash flow (Non-GAAP)** | **$(138.8)** | **$149.8** |

(1) Represents payments for legal and professional fees associated with integrating the DuPont Crop Protection Business.

(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.

(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 $4.9 million and $15.2 million for the nine months ended September 30, 2022 and 2021, respectively.

(5) Refer to the above discussion for further details.

(6) Includes our legacy liabilities such as environmental remediation and other legal matters that are reported in discontinued operations as well as business integration costs associated with the DuPont Crop Protection Business Acquisition and the implementation of our new SAP system which were completed in prior years.

### 2022 Cash Flow Outlook

Our cash needs for 2022 include operating cash requirements (particularly working capital, 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 September 30, 2022, our remaining borrowing capacity under our credit facility was $1,179.7 million.

We are lowering the range of our full year 2022 free cash flow (Non-GAAP) guidance to be approximately $440 million to $560 million due to higher expected sales in the fourth quarter that will not be collected in the fiscal year, maintaining targeted year-end inventory levels despite higher sales, and other inflationary impacts on working capital. For the nine months ended September 30, 2022, free cash flow decreased approximately $288.6 million from the prior year period. Adjusted cash from operations decreased from the prior year period, driven by higher working capital. Strong sales growth was the key driver of increased cash consumption of working capital. Capital additions were slightly higher the prior year period. Legacy and transformation spending decreased compared to last year. Slightly higher legacy expenses were more than offset by the absence of transformation spending this year.

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 forecast cash from operating activities, excluding the effects of transaction-related cash flows, to be in the range of approximately $650 million to $710 million. 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 our U.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 $40 million to $50 million of net environmental remediation spending for our discontinued sites. These projections include spending as a result of a settlement reached in 2019 at our Middleport, New York site of $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 approximately $65 million to $85 million.

#### Restructuring and asset retirement obligations

We expect to make payments of approximately $35 million to $45 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 $125 million to $145 million. The spending is primarily driven by capacity growth as well as catching up on deferred projects. Expenditures related to contract manufacturers are included within "Other investing activities" on the condensed consolidated statement of cash flows.

### Legacy and transformation

Projected 2022 legacy and transformation spending are expected to be in the range of approximately $40 million to $50 million. This is primarily driven by environmental remediation spending. We expect lower legacy costs and minimal transformation spending in 2022.

### Share repurchases

In February 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 the previous authorization in its entirety. During the nine months ended September 30, 2022, no shares were repurchased under the publicly announced repurchase program. At September 30, 2022, $1 billion remained unused under our Board-authorized repurchase program. 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 plan to repurchase a total of $200 million in shares by the end of 2022 under our existing share repurchase authorization, including $100 million completed in October 2022.

### Dividends

During the nine months ended September 30, 2022 and September 30, 2021, we paid dividends of $200.6 million and $186.2 million, respectively. On October 20, 2022, we paid dividends totaling $66.9 million to our shareholders of record as of September 30, 2022. 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.

### Acquisitions

As noted, in July we spent approximately $190 million on the acquisition of BioPhero.

### Commitments and Contingencies

See Note 19 to the condensed consolidated financial statements included in this Form 10-Q.

### Contractual Commitments

Information related to our contractual commitments at December 31, 2021 can be found within Part II, Item 7 of our 2021 Form 10-K. There have been no significant changes to our contractual commitments during the nine months ended September 30, 2022.

### Climate Change

A detailed discussion related to climate change can be found in Part II, Item 7 of our 2021 Form 10-K.

### Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

### Fair Value Measurements

See Note 18 to the condensed consolidated financial statements in this Form 10-Q for additional discussion surrounding our fair value measurements.

### DERIVATIVE FINANCIAL INSTRUMENTS AND MARKET RISKS

Our earnings, cash flows, and financial position are exposed to market risks relating to fluctuations in commodity prices, interest rates, and foreign currency exchange rates. Our policy is to minimize exposure to our cash flow over time caused by changes in commodity, interest, and currency exchange rates. To accomplish this, we have implemented a controlled program of risk management consisting of appropriate derivative contracts entered into with major financial institutions.

The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market rates and prices. The range of changes chosen reflects our view of changes that are reasonably possible over a one-year period. Market-value estimates are based on the present value of projected future cash flows considering the market rates and prices chosen.

At September 30, 2022, our financial instrument position was a net asset of $34.9 million compared to a net asset of $19.4 million at December 31, 2021. The change in the net financial instrument position was primarily due to changes in foreign exchange and interest rates.

Since our risk management programs are generally highly effective, the potential loss in value for each risk management portfolio described below would be largely offset by changes in the value of the underlying exposure.

### Commodity Price Risk

Energy costs are diversified among electricity and natural gas. We attempt to mitigate our exposure to increasing energy costs by hedging the cost of future deliveries of natural gas and electricity. To analyze the effect of changing energy prices, we perform a sensitivity analysis in which we assume an instantaneous 10 percent change in energy market prices from their levels at September 30, 2022 and December 31, 2021, with all other variables (including interest rates) held constant. Note, as of September 30, 2022 and December 31, 2021, we had no open commodity contracts. As a result, there was no sensitivity analysis performed over commodity price risk for the periods presented.

### Foreign Currency Exchange Rate Risk

The primary currencies for which we have exchange rate exposure are the U.S. dollar versus the Euro, the Chinese yuan, the Brazilian real, Mexican peso, and the Argentine peso. Foreign currency debt and foreign exchange forward contracts are used in countries where we do business, thereby reducing our net asset exposure. Foreign exchange forward contracts are also used to hedge firm and highly anticipated foreign currency cash flows.

To analyze the effects of changing foreign currency rates, we have performed a sensitivity analysis in which we assume an instantaneous 10 percent change in the foreign currency exchange rates from their levels at September 30, 2022 and December 31, 2021, with all other variables (including interest rates) held constant.

*(in Millions)*

|  | Net Asset / (Liability) Position on Condensed Consolidated Balance Sheets | 10% Strengthening | 10% Weakening |
| --- | ---: | ---: | ---: |
| **Net asset (liability) position at September 30, 2022** | $6.3 | $60.8 | $(49.3) |
| **Net asset (liability) position at December 31, 2021** | 15.6 | 84.1 | (50.8) |

### Interest Rate Risk

One of the strategies that we can use to manage interest rate exposure is to enter into interest rate swap agreements. In these agreements, we agree to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated on an agreed-upon notional principal amount. As of September 30, 2022, we had outstanding interest rate swap contracts in place with an aggregate notional value of $200.0 million.

To analyze the effects of changing interest rates, we have performed a sensitivity analysis in which we assume an instantaneous one percent change in the interest rates from their levels at September 30, 2022 and December 31, 2021, with all other variables held constant.

*(in Millions)*

|  | Net Asset / (Liability) Position on Condensed Consolidated Balance Sheets | 1% Increase | 1% Decrease |
| --- | ---: | ---: | ---: |
| **Net asset (liability) position at September 30, 2022** | $28.6 | $49.9 | $7.5 |
| **Net asset (liability) position at December 31, 2021** | 3.7 | 13.1 | (5.6) |

Our debt portfolio, at September 30, 2022, is composed of 57 percent fixed-rate debt and 43 percent variable-rate debt. The variable-rate component of our debt portfolio principally consists of borrowings under our 2021 Term Loan Facility, Credit Facility, commercial paper program, variable-rate industrial and pollution control revenue bonds, and amounts outstanding under foreign subsidiary credit lines. Changes in interest rates affect different portions of our variable-rate debt portfolio in different ways.

Based on the variable-rate debt in our debt portfolio at September 30, 2022, a one percentage point increase in interest rates then in effect would have increased gross interest expense by $11.5 million and a one percentage point decrease in interest rates then in effect would have decreased gross interest expense by $11.5 million for the nine months ended September 30, 2022.

### REGULATION FD DISCLOSURES

The Company’s investor relations website, located at https://investors.fmc.com, should be considered as a recognized channel of distribution, and the Company may periodically post important information to the web site for investors, including information that the Company may wish to disclose publicly for purposes of complying with the federal securities laws and our disclosure obligations under the SEC's Regulation FD. We encourage investors and others interested in the Company to monitor our investor relations website for material disclosures. Our website address is included in this Form 10-Q as a textual reference only and the information on the website is not incorporated by reference into this Form 10-Q.

## Market risk

As filed, 207 characters.

The information required by this item is provided in "Derivative Financial Instruments and Market Risks," under ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.

## Controls and procedures

As filed, 3,889 characters.

(a) Evaluation of disclosure controls and procedures. Based on management’s evaluation (with the participation of the Company’s Chief Executive Officer and Chief Financial Officer), the Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2022, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to provide reasonable assurance that information required to be disclosed by the Company in reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Change in Internal Controls. There have been no changes in internal controls over financial reporting that occurred during the quarter ended September 30, 2022 that materially affected or are reasonably likely to materially affect our internal controls over financing reporting.

### Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

FMC Corporation:

#### Results of Review of Interim Financial Information

We have reviewed the condensed consolidated balance sheet of FMC Corporation and subsidiaries (the Company) as of September 30, 2022, the related condensed consolidated statements of income (loss), comprehensive income (loss), and changes in equity for the three-month and nine-month periods ended September 30, 2022 and 2021, and the related condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2022 and 2021, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statements of income (loss), comprehensive income (loss), changes in equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

#### Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

**/s/** KPMG LLP

Philadelphia, Pennsylvania

November 2, 2022

## Risk factors

As filed, 2,997 characters.

The following updates the Risk Factor captioned “Portfolio Management Risks – Enforcement of intellectual property rights” in Item 1A – “Risk Factors” in our 2021 Form 10-K.

Enforcement of intellectual property rights - The composition of matter patents on our Rynaxypyr® active ingredient are nearing their expiration in several key countries. We have a broad estate of additional patents regarding the production of Rynaxypyr® active ingredient, as well as trademark and data exclusivity protection in certain countries that extend well beyond the active ingredient composition of matter patents. (See "Diamide Growth Strategy" and "Patents, Trademarks and Licenses" in Item 1 of our 2021 Form 10-K.) We intend to strategically and vigorously enforce our patents and other forms of intellectual property and have done so already against several third parties. Other third parties may seek to enter markets with infringing products or may find alternative production methods that avoid infringement or we may not be successful in litigating to enforce our patents due to the risks inherent in any litigation. Patents involve complex factual and legal issues and, thus, the scope, validity or enforceability of any patent claims we have or may obtain cannot be clearly predicted. Patents may be challenged in the courts, as well as in various administrative proceedings before U.S. or foreign patent offices, and may be deemed unenforceable, invalidated or circumvented. We are currently and may in the future be a party to various lawsuits or administrative proceedings involving our patents. Such challenges can result in some or all of the claims of the asserted patent being invalidated or deemed unenforceable. Two such proceedings in China are currently on appeal. (See Part II, Item 5 of this Form 10-Q for additional information.) In such circumstances, an adverse patent enforcement decision which could lead to the entry of competing chlorantraniliprole products in relevant markets may materially and adversely impact our financial results.

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A "Risk Factors" of our 2021 Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") for the year ended December 31, 2021, the risk factor in Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and the Company’s other filings with the SEC, which are available at www.sec.gov and on the Company’s website at www.fmc.com.

### Forward-Looking Information

We wish to caution readers not to place undue reliance on any forward-looking statements contained herein, 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.

Filed Nov 2, 2022.
Source: SEC EDGAR, the filing index for accession 0000037785-22-000090. Last ingested by Listed: Nov 10, 2026, 16:54 ET. No prices; not investment advice.