FMC 6.30.2011 10Q
Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________
 FORM 10-Q
_______________________________________________________________________
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2011
or
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number 1-2376
__________________________________________________________________________
FMC CORPORATION
(Exact name of registrant as specified in its charter)
__________________________________________________________________________ 
Delaware
 
94-0479804
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
1735 Market Street
Philadelphia, Pennsylvania
 
19103
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: 215-299-6000
__________________________________________________________________________
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS    YES  x    NO  o
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS SUBMITTED ELECTRONICALLY AND POSTED ON ITS CORPORATE WEBSITE, IF ANY, EVERY INTERACTIVE DATA FILE REQUIRED TO BE SUBMITTED AND POSTED PURSUANT TO RULE 405 OF REGULATION S-T DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO SUBMIT AND POST SUCH FILES)    YES  x    NO  o
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN ACCELERATED FILER, A NON-ACCELERATED FILER OR A SMALLER REPORTING COMPANY. SEE THE DEFINITIONS OF “LARGE ACCELERATED FILER,” “ACCELERATED FILER,” AND “SMALLER REPORTING COMPANY” IN RULE 12B-2 OF THE EXCHANGE ACT. (CHECK ONE):
LARGE ACCELERATED FILER
 
x
  
ACCELERATED FILER
 
o
 
 
 
 
 
 
 
NON-ACCELERATED FILER
 
o
  
SMALLER REPORTING COMPANY
 
o
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT)    YES  o    NO  x
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE
Class
 
Outstanding at June 30, 2011
Common Stock, par value $0.10 per share
 
71,657,750

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
 
 
Page
No.


2

Table of Contents

PART I - FINANCIAL INFORMATION
 
ITEM 1.    FINANCIAL STATEMENTS

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
(in Millions, Except Per Share Data)
Three Months Ended June 30,
 
Six Months Ended June 30,
2011
 
2010
 
2011
 
2010
 
(unaudited)
 
(unaudited)
Revenue
$
812.2

 
$
776.8

 
$
1,607.2

 
$
1,533.3

Costs and Expenses
 
 
 
 
 
 
 
Costs of sales and services
513.4

 
512.2

 
1,020.3

 
1,001.7

 
 
 
 
 
 
 
 
Gross Margin
298.8

 
264.6

 
586.9

 
531.6

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
108.9

 
95.6

 
214.8

 
186.5

Research and development expenses
25.0

 
22.3

 
47.7

 
45.8

Restructuring and other charges (income)
9.3

 
15.3

 
13.8

 
32.0

Total costs and expenses
656.6

 
645.4

 
1,296.6

 
1,266.0

Income from continuing operations before equity in (earnings) loss of affiliates, interest expense, net and income taxes
155.6

 
131.4

 
310.6

 
267.3

Equity in (earnings) loss of affiliates
(1.7
)
 

 
(2.6
)
 
(0.9
)
Interest expense, net
10.5

 
9.4

 
20.4

 
19.4

Income from continuing operations before income taxes
146.8

 
122.0

 
292.8

 
248.8

Provision for income taxes
25.7

 
33.8

 
66.3

 
74.5

Income from continuing operations
121.1

 
88.2

 
226.5

 
174.3

Discontinued operations, net of income taxes
(8.9
)
 
(19.3
)
 
(16.9
)
 
(25.0
)
Net income
112.2

 
68.9

 
209.6

 
149.3

Less: Net income attributable to noncontrolling interests
5.0

 
3.2

 
8.4

 
6.2

Net income attributable to FMC stockholders
$
107.2

 
$
65.7

 
$
201.2

 
$
143.1

Amounts attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations, net of income taxes
$
116.1

 
$
85.0

 
$
218.1

 
$
168.1

Discontinued operations, net of income taxes
(8.9
)
 
(19.3
)
 
(16.9
)
 
(25.0
)
Net income
$
107.2

 
$
65.7

 
$
201.2

 
$
143.1

Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
1.61

 
$
1.17

 
$
3.04

 
$
2.32

Discontinued operations
(0.12
)
 
(0.27
)
 
(0.24
)
 
(0.35
)
Net income
$
1.49

 
$
0.90

 
$
2.80

 
$
1.97

Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
1.61

 
$
1.16

 
$
3.02

 
$
2.29

Discontinued operations
(0.12
)
 
(0.26
)
 
(0.23
)
 
(0.34
)
Net income
$
1.49

 
$
0.90

 
$
2.79

 
$
1.95

The accompanying notes are an integral part of these condensed consolidated financial statements.


3

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(in Millions, Except Share and Par Value Data)
June 30, 2011
 
December 31, 2010
 
(unaudited)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
186.6

 
$
161.5

Trade receivables, net of allowance of $22.7 at June 30, 2011 and $21.7 at December 31, 2010
858.4

 
852.9

Inventories
421.3

 
347.8

Prepaid and other current assets
185.8

 
175.3

Deferred income taxes
101.0

 
108.7

Total current assets
1,753.1

 
1,646.2

Investments
25.4

 
22.4

Property, plant and equipment, net
957.4

 
918.5

Goodwill
210.2

 
194.4

Other assets
245.3

 
223.7

Deferred income taxes
274.8

 
314.7

Total assets
$
3,466.2

 
$
3,319.9

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Short-term debt
$
27.2

 
$
18.5

Current portion of long-term debt
110.2

 
116.4

Accounts payable, trade and other
320.9

 
389.3

Accrued and other liabilities
199.3

 
223.0

Accrued payroll
46.8

 
66.3

Accrued customer rebates
182.0

 
100.9

Guarantees of vendor financing
12.9

 
24.1

Accrued pension and other postretirement benefits, current
9.5

 
9.5

Income taxes
16.5

 
15.4

Total current liabilities
925.3

 
963.4

Long-term debt, less current portion
485.5

 
503.0

Accrued pension and other postretirement benefits, long-term
267.3

 
307.5

Environmental liabilities, continuing and discontinued
214.8

 
209.9

Reserve for discontinued operations
41.7

 
38.6

Other long-term liabilities
110.3

 
108.3

Commitments and contingent liabilities (Note 17)

 

Equity
 
 
 
Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 2011 or 2010

 

Common stock, $0.10 par value, authorized 130,000,000 shares in 2011 and 2010; 92,991,896 issued shares at June 30, 2011 and December 31, 2010, respectively
9.3

 
9.3

Capital in excess of par value of common stock
455.1

 
443.6

Retained earnings
2,032.7

 
1,853.0

Accumulated other comprehensive income (loss)
(270.0
)
 
(311.7
)
Treasury stock, common, at cost: 21,334,146 shares at June 30, 2011 and 21,506,052 shares at December 31, 2010
(866.4
)
 
(862.7
)
Total FMC stockholders’ equity
1,360.7

 
1,131.5

Noncontrolling interests
60.6

 
57.7

Total equity
1,421.3

 
1,189.2

Total liabilities and equity
$
3,466.2

 
$
3,319.9

The accompanying notes are an integral part of these condensed consolidated financial statements.


4

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(in Millions)
Six Months Ended June 30,
2011
 
2010
 
(unaudited)
Cash provided (required) by operating activities of continuing operations:
 
 
 
Net income
$
209.6

 
$
149.3

Discontinued operations
16.9

 
25.0

Income from continuing operations
$
226.5

 
$
174.3

Adjustments from income from continuing operations to cash provided (required) by operating activities of continuing operations:
 
 
 
Depreciation and amortization
62.7

 
66.5

Equity in (earnings) loss of affiliates
(2.6
)
 
(0.9
)
Restructuring and other charges (income)
13.8

 
32.0

Deferred income taxes
42.2

 
69.5

Pension and other postretirement benefits
19.8

 
15.4

Share-based compensation
8.9

 
8.0

Excess tax benefits from share-based compensation
(5.2
)
 
(8.4
)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
 
 
 
Trade receivables, net
3.4

 
(94.3
)
Guarantees of vendor financing
(11.3
)
 
(18.8
)
Inventories
(63.6
)
 
(13.5
)
Other current assets and other assets
(7.5
)
 
(23.1
)
Accounts payable
(75.2
)
 
8.3

Accrued and other current liabilities and other liabilities
(26.3
)
 
(11.3
)
Accrued payroll
(19.5
)
 
(7.7
)
Accrued customer rebates
80.5

 
76.3

Income taxes
(4.6
)
 
5.1

Accrued pension and other postretirement benefits, net
(41.6
)
 
(49.8
)
Environmental spending, continuing, net of recoveries
(4.2
)
 
(4.2
)
Restructuring and other spending
(33.2
)
 
(24.2
)
Cash provided (required) by operating activities
163.0

 
199.2

Cash provided (required) by operating activities of discontinued operations:
 
 
 
Environmental spending, discontinued, net of recoveries
(10.5
)
 
(2.2
)
Payments of other discontinued reserves
(8.7
)
 
(9.7
)
Cash provided (required) by operating activities of discontinued operations
(19.2
)
 
(11.9
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 
(in Millions)
Six Months Ended June 30,
2011
 
2010
 
(unaudited)
Cash provided (required) by investing activities:
 
 
 
Capital expenditures
$
(71.1
)
 
$
(59.2
)
Proceeds from disposal of property, plant and equipment
0.2

 
2.6

Other investing activities
(8.0
)
 
(9.0
)
Cash provided (required) by investing activities
(78.9
)
 
(65.6
)
Cash provided (required) by financing activities:
 
 
 
Net borrowings (repayments) under committed credit facilities

 

Increase (decrease) in short-term debt
8.4

 
1.0

Repayments of long-term debt
(23.9
)
 
(2.7
)
Distributions to noncontrolling interests
(5.8
)
 
(5.1
)
Issuances of common stock, net
7.8

 
8.1

Excess tax benefits from share-based compensation
5.2

 
8.4

Dividends paid
(19.8
)
 
(18.2
)
Repurchases of common stock
(13.7
)
 
(26.4
)
Cash provided (required) by financing activities
(41.8
)
 
(34.9
)
Effect of exchange rate changes on cash and cash equivalents
2.0

 
(1.0
)
Increase (decrease) in cash and cash equivalents
25.1

 
85.8

Cash and cash equivalents, beginning of period
161.5

 
76.6

Cash and cash equivalents, end of period
$
186.6

 
$
162.4

Supplemental disclosure of cash flow information: Cash paid for interest was $22.4 million and $18.7 million, and income taxes paid, net of refunds were $23.1 million and $11.4 million for the six months ended June 30, 2011 and 2010, respectively.
See Note 13 regarding quarterly cash dividend.
The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1: Financial Information and Accounting Policies
In our opinion the condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applicable to interim period financial statements and reflect all adjustments necessary for a fair statement of results of operations and cash flows for the six months ended June 30, 2011 and 2010, and our financial position as of June 30, 2011. All such adjustments are of a normal recurring nature. The results of operations for the three and six months ended June 30, 2011 and 2010 are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010, and the related condensed consolidated statements of income for the three and six months ended June 30, 2011 and 2010, and condensed consolidated statements of cash flows for the six months ended June 30, 2011 and 2010, have been reviewed by our independent registered public accountants. The review is described more fully in their report included herein.
Our accounting policies are set forth in detail in Note 1 to the consolidated financial statements included with our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2010 (the “2010 10-K”).

Note 2: Recently Issued and Adopted Accounting Pronouncements and Regulatory Items
New accounting guidance and regulatory items
Presentation of Comprehensive Income
In June 2011, the Financial Accounting Standards Board (“FASB”) issued its guidance regarding the presentation of comprehensive income. This new guidance, which we will adopt starting January 1, 2012, requires us to present total comprehensive income and its components and the components of net income in either a single continuous statement or two separate but consecutive statements. This guidance only impacts the location of the disclosure of comprehensive income within our consolidated financial statements and does not result in a change to the accounting treatment of comprehensive income.
Fair Value Measurements
In May 2011, the FASB amended its guidance about fair value measurement and disclosure. The new guidance was issued in conjunction with a new International Financial Reporting Standards ("IFRS") fair value measurement standard aimed at updating IFRS to conform with U.S. GAAP. The new FASB guidance will result in some additional disclosure requirements; however, it does not result in significant modifications to existing FASB guidance with respect to fair value measurement and disclosure. We are required to adopt this guidance starting on January 1, 2012. We are in the process of evaluating this guidance; however, we do not believe it will have a material effect on our consolidated financial statements upon adoption.
Accounting guidance and regulatory items adopted in 2011
Multiple Deliverable Revenue Arrangements
In October 2009, the FASB amended its guidance regarding the criteria for when to evaluate individual delivered items in a multiple deliverable arrangement and how to allocate consideration received. We adopted this guidance on January 1, 2011. There was no impact to our financial statements upon adoption.

Note 3: Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by business segment for the six months ended June 30, 2011, are presented in the table below:
(in Millions)
Agricultural
Products
 
Specialty
Chemicals
 
Industrial
Chemicals
 
Total
Balance, December 31, 2010
$
2.8

 
$
191.0

 
$
0.6

 
$
194.4

Foreign Currency Adjustments

 
15.8

 

 
15.8

Balance, June 30, 2011
$
2.8

 
$
206.8

 
$
0.6

 
$
210.2

Our indefinite life intangible assets totaled $2.4 million at June 30, 2011 and December 31, 2010. The indefinite life intangible

7

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

assets consist of trade names in our Agricultural Products segment.
Our finite-lived intangible assets totaled $54.8 million and $51.6 million at June 30, 2011 and December 31, 2010, respectively. At June 30, 2011, these finite-lived intangibles were allocated among our business segments as follows: $35.7 million in Agricultural Products, $18.2 million in Specialty Chemicals and $0.9 million in Industrial Chemicals. Finite-lived intangible assets consist primarily of patents, customer relationships, access and registration rights, industry licenses, developed formulations and other intangibles which are included in “Other assets” in the condensed consolidated balance sheets. The increase in finite-lived intangible assets during the six months ended June 30, 2011 was primarily due to the purchase of certain intangible assets from a third party in our Agricultural Products segment and foreign currency translation. Amortization was not significant in the periods presented.


8

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Note 4: Inventories
Inventories consisted of the following:
 (in Millions)
June 30, 2011
 
December 31, 2010
Finished goods and work in process
$
260.4

 
$
225.6

Raw materials
160.9

 
122.2

Net inventory
$
421.3

 
$
347.8


Note 5: Property, Plant and Equipment
Property, plant and equipment consisted of the following:
(in Millions)
June 30, 2011
 
December 31, 2010
Property, plant and equipment
$
2,834.4

 
$
2,777.2

Accumulated depreciation
1,877.0

 
1,858.7

Property, plant and equipment, net
$
957.4

 
$
918.5


Note 6: Asset Retirement Obligations
As of June 30, 2011, the balance of our asset retirement obligations was $29.1 million. This amount decreased $5.5 million from December 31, 2010, primarily due to payments against the reserve related to the Huelva and the Barcelona facility shutdowns. A more complete description of our asset retirement obligations can be found in Note 8 to our 2010 consolidated financial statements in our 2010 10-K.

Note 7: Restructuring and Other Charges (Income)
Our restructuring and other charges (income) are comprised of restructuring, asset disposals and other charges (income) as noted below:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in Millions)
2011
 
2010
 
2011
 
2010
Restructuring Charges and Asset Disposals
$
6.4

 
$
0.9

 
$
9.2

 
$
14.4

Other Charges (Income), Net
2.9

 
14.4

 
4.6

 
17.6

Total Restructuring and Other Charges
$
9.3

 
$
15.3

 
$
13.8

 
$
32.0



9

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

RESTRUCTURING CHARGES AND ASSET DISPOSALS
(in Millions)
 
Severance and Employee Benefits (1)
 
Asset Disposal Charges (2)
 
Other Charges (Income) (3)
 
Total
Sodium Percarbonate Phase-out
 
$
5.5

 
$

 
$

 
$
5.5

Huelva Shutdown
 

 

 
0.8

 
0.8

Other Items
 

 

 
0.1

 
0.1

Three months ended June 30, 2011
 
$
5.5

 
$

 
$
0.9

 
$
6.4

Alginates Restructuring
 

 
0.7

 
0.9

 
1.6

Barcelona Facility Shutdown
 
(0.2
)
 
1.1

 

 
0.9

Santa Clara Shutdown
 

 

 
(1.1
)
 
(1.1
)
Other Items
 
0.4

 

 
(0.9
)
 
(0.5
)
Three months ended June 30, 2010
 
$
0.2

 
$
1.8

 
$
(1.1
)
 
$
0.9

 
 
 
 
 
 
 
 
 
Sodium Percarbonate Phase-out
 
$
5.5

 
$

 
$

 
$
5.5

Alginates Restructuring
 

 
1.2

 
0.2

 
1.4

Huelva Shutdown
 

 

 
1.5

 
1.5

Santa Clara Shutdown
 

 
0.4

 

 
0.4

Other Items
 
0.4

 

 

 
0.4

Six months ended June 30, 2011
 
$
5.9

 
$
1.6

 
$
1.7

 
$
9.2

Alginates Restructuring
 

 
0.7

 
5.5

 
6.2

Bayport Butyllithium Shutdown
 

 

 
(0.9
)
 
(0.9
)
Barcelona Facility Shutdown
 
(0.2
)
 
9.6

 
0.2

 
9.6

Santa Clara Shutdown
 

 

 
(1.1
)
 
(1.1
)
Other Items
 
1.3

 

 
(0.7
)
 
0.6

Six months ended June 30, 2010
 
$
1.1

 
$
10.3

 
$
3.0

 
$
14.4

____________________ 
(1)
Represent severance and employee benefit charges. Income represents adjustments to previously recorded severance and employee benefits.
(2)
Primarily represent accelerated depreciation and impairment charges on plant and equipment, which were or are to be abandoned. Asset disposal charges also included the acceleration effect of re-estimating settlement dates and revised cost estimates associated with asset retirement obligations due to facility shutdowns, see Note 6.
(3)
Other Charges primarily represent costs associated with accrued lease payments, contract terminations, and other miscellaneous exit costs. Other Income primarily represents favorable developments on previously recorded exit costs as well as recoveries associated with restructuring.

The restructuring charges and asset disposals which occurred during 2011 are noted below. For further detail on the restructuring charges and asset disposals which occurred prior to 2011 see Note 7 to our consolidated financial statements included with our 2010 Form 10-K.
Sodium Percarbonate Phase-out
In June 2011, we made the decision to phase out operations of our Sodium Percarbonate plant assets in La Zaida, Spain and exit the sodium percarbonate business by December 2011. The facility is part of our Spanish subsidiary FMC Foret, S.A. ("Foret") and is included in our Industrial Chemicals segment. Competitive disadvantages and underperforming results, since the start-up of operations in 2001, have made it uneconomical for FMC to continue sodium percarbonate operations. The plant assets will operate through the fourth quarter of 2011 and therefore we will recognize approximately $14 million of accelerated depreciation through the end of 2011.

10

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FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Other Items
In addition to the restructurings described above, we have engaged in certain other restructuring activities, which have resulted in severance and asset disposal costs. We expect these restructuring activities to improve our global competitiveness through improved cost efficiencies.
Rollforward of Restructuring Reserves
The following table shows a rollforward of restructuring reserves that will result in cash spending. These amounts exclude asset retirement obligations, which are discussed in Note 6.
(in Millions)
Balance  at
12/31/10
 
Change in
reserves (2)
 
Cash
payments
 
Other (4)
 
Balance  at
6/30/11 (3)
Sodium Percarbonate Phase-out
$

 
$
5.5

 
$

 
$
0.1

 
$
5.6

Alginates Restructuring
4.3

 
0.2

 
(1.3
)
 

 
3.2

Huelva Restructuring
40.0

 
1.5

 
(30.7
)
 
1.4

 
12.2

Barcelona Facility Shutdown
1.5

 

 
(0.3
)
 
0.1

 
1.3

Other Workforce Related and Facility Shutdowns (1)
1.0

 
0.4

 
(0.9
)
 
0.2

 
0.7

Total
$
46.8

 
$
7.6

 
$
(33.2
)
 
$
1.8

 
$
23.0

____________________ 
(1)
Primarily severance costs related to workforce reductions and facility shutdowns described in the “Other Items” sections above.
(2)
Primarily severance, exited lease, contract termination and other miscellaneous exit costs. The accelerated depreciation and impairment charges noted above impacted our property, plant and equipment balances and are not included in the above tables.
(3)
Included in “Accrued and other liabilities” and “Other long-term liabilities” on the condensed consolidated balance sheets.
(4)
Primarily foreign currency translation adjustments.
OTHER CHARGES (INCOME), NET
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in Millions)
2011
 
2010
 
2011
 
2010
Environmental Charges, Net
$
1.9

 
$
6.1

 
$
3.0

 
$
8.4

Legal Matters

 
1.8

 

 
1.8

Other, net
1.0

 
6.5

 
1.6

 
7.4

Other Charges (Income), Net
$
2.9

 
$
14.4

 
$
4.6

 
$
17.6

Environmental Charges, Net
Environmental charges represent the net charges associated with environmental remediation at continuing operating sites, see Note 10 for additional details.
Legal Matters
Legal matters primarily represents legal settlements associated with the U.S. hydrogen peroxide matter in our Industrial Chemicals segment. See Note 17 for additional details.

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FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Other, Net
In the third quarter of 2007, our Agricultural Products segment entered into a collaboration and license agreement with another third-party company for the purpose of obtaining certain technology and intellectual property rights. During the second quarter of 2011, we extended our rights under this agreement. We paid an additional $0.7 million and have recorded this amount as a charge to "Restructuring and other charges (income)" in the condensed consolidated statements of income for the three and six months ended June 30, 2011.
In the second quarter of 2010, our Agricultural Products segment acquired certain rights relating to a herbicide compound still under development. We recorded $5.7 million for these rights as a charge to "Restructuring and other charges (income)" in the condensed consolidated statements of income for the three and six months ended June 30, 2010.
Remaining other charges for 2011 and 2010 primarily represents the accrual of interest associated with the European Commission fine recorded during the year ended December 31, 2006.  See Note 17.

Note 8: Debt
Debt maturing within one year:
Debt maturing within one year consists of the following:
(in Millions)
June 30, 2011
 
December 31, 2010
Short-term debt
$
27.2

 
$
18.5

Current portion of long-term debt
110.2

 
116.4

Total debt maturing within one year
$
137.4

 
$
134.9

Short-term debt consisted of foreign credit lines at June 30, 2011 and December 31, 2010. We often provide parent-company guarantees to lending institutions providing credit to our foreign subsidiaries.
Long-term debt:
Long-term debt consists of the following:
(in Millions)
June 30, 2011
 
 
 
 
Interest Rate
Percentage
 
Maturity
Date
 
6/30/2011
 
12/31/2010
Pollution control and industrial revenue bonds (less unamortized discounts of $0.2 and $0.2, respectively)
0.1-6.5%


2011-2035

$
182.0


$
182.0

Debentures
7.8
%

2011

45.5


45.5

Senior notes (less unamortized discount of $0.9 and $0.9, respectively)
5.2
%

2019

299.1


299.1

European credit agreement
2.0
%

2012




Domestic credit agreement
0.5
%

2012




Foreign debt
0-14.3%


2013

69.1


92.8

Total long-term debt




595.7


619.4

Less: debt maturing within one year




110.2


116.4

Total long-term debt, less current portion




$
485.5


$
503.0

At June 30, 2011 and December 31, 2010, respectively, we had no revolving credit facility borrowings under the European credit agreement. Available funds under this facility were $316.3 million and $289.1 million at June 30, 2011 and December 31, 2010, respectively.
We had no borrowings under our domestic credit agreement at June 30, 2011 and December 31, 2010. Letters of credit outstanding under the domestic credit agreement totaled $146.8 million and $130.4 million at June 30, 2011 and December 31, 2010, respectively. Therefore, available funds under the domestic credit agreement were $453.2 million and $469.6 million at June 30, 2011 and December 31, 2010, respectively.
Among other restrictions, the domestic credit agreement and the European credit agreement contain financial covenants applicable to FMC and its consolidated subsidiaries related to leverage (measured as the ratio of debt to adjusted earnings) and interest coverage (measured as the ratio of adjusted earnings to interest expense). Our actual leverage for the four consecutive

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FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

quarters ended June 30, 2011, was 1.1 which is below the maximum leverage of 3.5. Our actual interest coverage for the four consecutive quarters ended June 30, 2011, was 14.6 which is above the minimum interest coverage of 3.5. We were in compliance with all covenants at June 30, 2011.

Note 9: Discontinued Operations
Our discontinued operations represent adjustments to retained liabilities primarily related to operations discontinued between 1976 and 2001. The primary liabilities retained include environmental liabilities, other postretirement benefit liabilities, self-insurance and long-term obligations related to legal proceedings.
Our discontinued operations comprised the following:
(in Millions)
Three Months Ended June 30,
 
Six Months Ended June 30,
2011
 
2010
 
2011
 
2010
Adjustment for workers’ compensation, product liability, and other postretirement benefits related to previously discontinued operations (net of income tax expense of zero for the three and six months ended June 30, 2011, and $0.1 and $0.2 for the three and six months ended June 30, 2010, respectively)
$

 
$
0.3

 
$

 
$
0.4

Provision for environmental liabilities and legal reserves and expenses related to previously discontinued operations, net of recoveries (net of income tax benefit of $5.4 and $10.4 for the three and six months ended June 30, 2011, and $11.9 and $15.5 for the three and six months ended June 30, 2010, respectively)
(8.9
)
 
(19.6
)
 
(16.9
)
 
(25.4
)
Discontinued operations, net of income taxes
$
(8.9
)
 
$
(19.3
)
 
$
(16.9
)
 
$
(25.0
)
Three and Six Months Ended June 30, 2011
During the three and six months ended June 30, 2011, we recorded a $14.3 million ($8.9 million after-tax) charge and a $27.3 million ($16.9 million after-tax) charge, respectively, to discontinued operations related primarily to environmental issues and legal reserves and expenses. Environmental charges of $8.6 million ($5.4 million after-tax) and $16.1 million ($10.0 million after-tax) for the three and six months ended June 30, 2011, respectively, related primarily to a provision increase for environmental issues at our Front Royal site as well as operating and maintenance activities. See a rollforward of our environmental reserves in Note 10. We also recorded increases to legal reserves and expenses in the amount of $5.7 million ($3.5 million after-tax) and $11.2 million ($6.9 million after-tax) for the three and six months ended June 30, 2011, respectively.
Three and Six Months Ended June 30, 2010
During the three and six months ended June 30, 2010, we recorded a $31.5 million ($19.6 million after-tax) charge and a $40.9 million ($25.4 million after-tax) charge, respectively, to discontinued operations related primarily to environmental issues and legal reserves and expenses. Environmental charges of $23.8 million ($14.8 million after-tax) and $28.5 million ($17.7 million after-tax) for the three and six months ended June 30, 2010, respectively, related primarily to a provision increase for environmental issues at our Middleport site as well as operating and maintenance activities. We also recorded increases to legal reserves and expenses in the amount of $7.7 million ($4.8 million after-tax) and $12.4 million ($7.7 million after-tax) for the three and six months ended June 30, 2010, respectively.

Note 10: Environmental Obligations
We have provided reserves for potential environmental obligations, which management considers probable and for which a reasonable estimate of the obligation could be made. Accordingly, reserves of $260.7 million and $241.8 million, excluding recoveries, have been provided at June 30, 2011 and December 31, 2010, respectively.
At June 30, 2011 and December 31, 2010 we recorded recoveries of $83.4 million and $68.6 million, respectively, representing probable realization of claims against U.S. government agencies, insurance carriers and other third parties. Recoveries are recorded as either an offset to the “Environmental liabilities, continuing and discontinued” totaling $22.9 million and $16.9 million at June 30, 2011 and December 31, 2010 or as “Other assets” totaling $60.5 million and $51.7 million at June 30, 2011 and December 31, 2010 in the condensed consolidated balance sheets, respectively. Cash recoveries were $2.8 million in the first six months of 2011. Total cash recoveries recorded for the year ended December 31, 2010, were $14.6 million.

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FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

The long-term portion of environmental reserves, net of recoveries, totaling $214.8 million and $209.9 million at June 30, 2011 and December 31, 2010, respectively, is included in “Environmental liabilities, continuing and discontinued” on the condensed consolidated balance sheets. The short-term portion of continuing obligations is recorded as “Accrued and other liabilities” on the condensed consolidated balance sheets.
We have estimated that reasonably possible environmental loss contingencies, net of expected recoveries, may exceed amounts accrued by approximately $110 million at June 30, 2011. The liabilities arising from potential environmental obligations that have not been reserved for at this time may be material to any one quarter or year's results of operations in the future. However, we believe any such liability arising from potential environmental obligations is not likely to have a material adverse effect on our liquidity or financial condition and may be satisfied over the next 20 years or longer.
The table below is a rollforward of our total environmental reserves, continuing and discontinued, from December 31, 2010 to June 30, 2011:
 
(in Millions)
Operating and
Discontinued
Sites Total
Total environmental reserves, net of recoveries at December 31, 2010
$
224.9

 

Provision
30.1

Spending, net of recoveries
(17.2
)
Net change
12.9

Total environmental reserves, net of recoveries at June 30, 2011
$
237.8

Environmental reserves, current, net of recoveries (1)
23.0

Environmental reserves, long-term continuing and discontinued, net of recoveries
214.8

Total environmental reserves, net of recoveries at June 30, 2011
$
237.8

____________________
(1)
“Current” includes only those reserves related to continuing operations. These amounts are included within "Accrued and other liabilities" on the condensed consolidated balance sheets.
The increase in our provision for environmental reserves for the period December 31, 2010 to June 30, 2011 is primarily due to an increase in reserves for our Front Royal site. A summary of these events is described below.
Front Royal
On October 21, 1999, the Federal District Court for the Western District of Virginia approved a Consent Decree signed by FMC, the EPA (Region III) and the Department of Justice ("DOJ") regarding past response costs and future clean-up work at the discontinued fiber-manufacturing site in Front Royal, Virginia. In January 2010, the EPA issued a Record of Decision (ROD) for Operable Unit 7 (OU-7) primarily addressing waste basins and ground water, which should be the last operable unit to be remediated at the site. The reserve prior to this quarter included a provision for OU-7 and previously approved work for other operable units under the Consent Decree. During the second quarter extensive design work occurred, providing the basis for an improved cost estimate for the construction of the groundwater treatment plant. The groundwater treatment plant is an integral component of the remedy required to address the OU-7 ROD. We recorded an increase to the reserve associated with the new treatment plant estimate during the quarter ended June 30, 2011. As the design progresses, we expect to receive, during the third quarter of 2011, a further refined cost estimate associated with the construction of the groundwater treatment plant. As part of a prior settlement, government agencies have reimbursed us for approximately one-third of the clean-up costs due to the government's role at the site, and we expect reimbursement to continue in the future. The amount of the reserve for this site was $40.5 million and $28.5 million at June 30, 2011 and December 31, 2010, respectively.
A more complete description of our environmental contingencies and the nature of our potential obligations are included in Notes 1 and 10 to our 2010 consolidated financial statements in our 2010 10-K.

Note 11: Earnings Per Share
Earnings per common share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period on a basic and diluted basis.
Our potentially dilutive securities include potential common shares related to our stock options, restricted stock and restricted stock units. Diluted earnings per share (“Diluted EPS”) considers the impact of potentially dilutive securities except in periods

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FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our common stock for the period. There were no potential common shares excluded from Diluted EPS for the three months ended June 30, 2011, however for the six months ended June 30, 2011, 215,406 potential common shares were excluded from Diluted EPS. There were no potential common shares excluded from Diluted EPS for the three and six months ended June 30, 2010.
Our non-vested restricted stock awards contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing EPS. The two-class method determines EPS by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. In calculating the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average shares outstanding during the period.
Earnings applicable to common stock and common stock shares used in the calculation of basic and diluted earnings per share are as follows:
(in Millions, Except Share and Per Share Data)
Three Months Ended June 30,
 
Six Months Ended June 30,
2011
 
2010
 
2011
 
2010
Earnings (loss) attributable to FMC stockholders:
 
 
 
 
 
 
 
Income from continuing operations attributable to FMC stockholders
$
116.1

 
$
85.0

 
$
218.1

 
$
168.1

Discontinued operations, net of income taxes
(8.9
)
 
(19.3
)
 
(16.9
)
 
(25.0
)
Net income
$
107.2

 
$
65.7

 
$
201.2

 
$
143.1

Less: Distributed and undistributed earnings allocable to restricted award holders
(0.5
)
 
(0.5
)
 
(1.0
)
 
(0.9
)
Net income allocable to common stockholders
$
106.7

 
$
65.2

 
$
200.2

 
$
142.2

 
 
 
 
 
 
 
 
Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
1.61

 
$
1.17

 
$
3.04

 
$
2.32

Discontinued operations
(0.12
)
 
(0.27
)
 
(0.24
)
 
(0.35
)
Net income
$
1.49

 
$
0.90

 
$
2.80

 
$
1.97

 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
Continuing operations
$
1.61

 
$
1.16

 
$
3.02

 
$
2.29

Discontinued operations
(0.12
)
 
(0.26
)
 
(0.23
)
 
(0.34
)
Net income
$
1.49

 
$
0.90

 
$
2.79

 
$
1.95

 
 
 
 
 
 
 
 
Shares (in thousands):
 
 
 
 
 
 
 
Weighted average number of shares of common stock outstanding - Basic
71,606

 
72,483

 
71,528

 
72,383

Weighted average additional shares assuming conversion of potential common shares
579

 
915

 
631

 
987

Shares – diluted basis
72,185

 
73,398

 
72,159

 
73,370


Note 12: Comprehensive Income
Comprehensive income includes all changes in equity during the period except those resulting from investments by owners and distributions to owners. Our comprehensive income for the three and six months ended June 30, 2011 and 2010 consisted of the following:

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FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

(in Millions)
Three Months Ended June 30,
 
Six Months Ended June 30,
2011
 
2010
 
2011
 
2010
Net income
$
112.2

 
$
68.9

 
$
209.6

 
$
149.3

Reclassification adjustments for losses (gains) included in net income, net of income tax expense of $3.5 and $7.8 for the three and six months ended June 30, 2011, respectively, and $1.7 and $4.1 for the three and six months ended June 30, 2010, respectively
5.6

 
3.1

 
12.4

 
6.8

Foreign currency translation adjustment
6.3

 
(33.0
)
 
28.0

 
(53.9
)
Net deferral of hedging gains (losses) and other
(4.1
)
 
3.2

 
2.6

 
0.1

Net unrealized pension and other benefit actuarial gains/(losses) and prior service (cost) credits
(0.2
)
 
0.9

 
(1.0
)
 
2.2

Comprehensive income
119.8

 
43.1

 
251.6

 
104.5

Less: Comprehensive income attributable to the noncontrolling interest
4.9

 
2.9

 
8.7

 
6.0

Comprehensive income attributable to FMC stockholders
$
114.9

 
$
40.2

 
$
242.9

 
$
98.5


Note 13: Equity
Refer to the below table for a reconciliation of equity, equity attributable to the parent, and equity attributable to noncontrolling interests: 
(in Millions, Except Per Share Data)
FMC’s
Stockholders’
Equity
 
Noncontrolling
Interest
 
Total
Equity
Balance at December 31, 2010
$
1,131.5


$
57.7

 
$
1,189.2

Net income
201.2

 
8.4

 
209.6

Stock compensation plans
16.7



 
16.7

Excess tax benefits from share-based compensation
5.2



 
5.2

Shares for benefit plan trust
(0.3
)


 
(0.3
)
Reclassification adjustments for losses (gains) included in net income, net of income tax expense of $7.8
12.4



 
12.4

Net unrealized pension and other benefit actuarial gains/(losses) and prior service cost credits, net of income tax benefit of ($0.7)
(1.0
)


 
(1.0
)
Net deferral of hedging gains (losses) and other, net of income tax expense of $1.6
2.6



 
2.6

Foreign currency translation adjustments
27.7


0.3

 
28.0

Dividends ($0.15 per share)
(21.6
)


 
(21.6
)
Repurchases of common stock
(13.7
)


 
(13.7
)
Distributions to noncontrolling interests


(5.8
)
 
(5.8
)
Balance at June 30, 2011
$
1,360.7

 
$
60.6

 
$
1,421.3

Dividends and Share Repurchases
On July 21, 2011, we paid dividends totaling $10.8 million to our shareholders of record as of June 30, 2011. This amount is included in “Accrued and other liabilities” on the condensed consolidated balance sheets as of June 30, 2011. For the six months ended June 30, 2011 and June 30, 2010, we paid $19.8 million and $18.2 million in dividends, respectively.
 
On October 24, 2008, the Board of Directors authorized the repurchase of up to $250.0 million of our common stock. At December 31, 2010, $54.8 million remained unused of the 2008 authorization. On February 18, 2011, the Board authorized the repurchase of up to an additional $250.0 million of our common stock for a total of $304.8 million. The 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. During the three and six months ended June 30, 2011, 118,578 shares were repurchased

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FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

under the publicly announced repurchase program for $10.0 million. We intend to purchase up to $100 million of our common stock in the third quarter of 2011. From time to time we acquire shares from employees in connection with the vesting, exercise and forfeiture of awards under our equity compensation plans.


Note 14: Pensions and Other Postretirement Benefits
The following table summarizes the components of net annual benefit cost (income) for the three and six months ended June 30, 2011 and 2010:
(in Millions)
Three Months Ended June 30,
 
Six Months Ended June 30,
Pensions
 
Other Benefits
 
Pensions
 
Other Benefits
2011
 
2010
 
2011
 
2010
 
2011
 
2010
 
2011
 
2010
Components of net annual benefit cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
4.9

 
$
4.7

 
$
0.1

 
$
0.1

 
$
9.8

 
$
9.4

 
$
0.2

 
$
0.1

Interest cost
15.4

 
15.7

 
0.6

 
0.6

 
30.8

 
31.4

 
1.2

 
1.2

Expected return on plan assets
(20.6
)
 
(20.0
)
 

 

 
(41.2
)
 
(40.0
)
 

 

Amortization of prior service cost
0.5

 
0.2

 
(0.1
)
 
(0.1
)
 
1.0

 
0.4

 
(0.2
)
 
(0.1
)
Recognized net actuarial and other (gain) loss
9.2

 
6.6

 
(0.1
)
 
(0.1
)
 
18.4

 
13.2

 
(0.2
)
 
(0.2
)
Net periodic benefit cost from continuing operations
$
9.4

 
$
7.2

 
$
0.5

 
$
0.5

 
$
18.8

 
$
14.4

 
$
1.0

 
$
1.0

We made voluntary cash contributions to our U.S. defined benefit pension plan of $36 million in the six months ended June 30, 2011. We expect that our total voluntary cash contributions to the plan for 2011 will be approximately $55 million.

Note 15: Income Taxes
Provision for income taxes was $25.7 million resulting in an effective tax rate of 17.5 percent compared to expense of $33.8 million resulting in an effective tax rate of 27.7 percent for the three months ended June 30, 2011 and 2010, respectively. The decrease in the effective tax rate was primarily a result of a reduction in our liability for unrecognized tax benefits of approximately $14.1 million as a result of settlements of audits.
Provision for income taxes was $66.3 million resulting in an effective tax rate of 22.6 percent compared to expense of $74.5 million resulting in an effective tax rate of 29.9 percent for the six months ended June 30, 2011 and 2010, respectively. The decrease in the effective tax rate is consistent with the change in the three months ended June 30, 2011, as discussed in the previous paragraph. The decrease was also impacted by a tax adjustment of $3.5 million recorded during the six months ended June 30, 2010, due to a change in the tax treatment of the Medicare Part D subsidy which was enacted as part of the recent U.S. health care reform legislation,that did not repeat in 2011.
In addition, the change in the mix of domestic income compared to income earned outside of the U.S. also impacted the effective tax rate for both periods. Income we earn domestically is typically taxed at rates higher than income earned outside the U.S.

Note 16: Financial Instruments, Risk Management and Fair Value Measurements
Our financial instruments include cash and cash equivalents, trade receivables, other current assets, accounts payable, and amounts included in investments and accruals meeting the definition of financial instruments. The carrying value of these financial instruments approximates their fair value. Our other financial instruments include the following:
Financial Instrument
  
Valuation Method
 
 
 
Foreign Exchange Forward Contracts
  
Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on current market prices for applicable currencies.
 
 
 
Commodity Forward and Option Contracts
  
Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices for applicable commodities.
 
 
 
Debt
  
Our estimates and information obtained from independent third parties using market data, such as bid/ask spreads for the last business day of the reporting period.

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FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)


The estimated fair value of the financial instruments in the above table has been determined using available market information and appropriate valuation methods. Accordingly, the estimates presented may not be indicative of the amounts that we would realize in a market exchange at settlement date and do not represent potential gains or losses on these agreements. The estimated fair values of foreign exchange forward contracts and commodity forward and option contracts are included in the tables within this Note. The estimated fair value of debt is $646.1 million and $648.8 million and the carrying amount is $622.9 million and $637.9 million as of June 30, 2011 and December 31, 2010, respectively.

Use of Derivative Financial Instruments to Manage Risk
We mitigate certain financial exposures, including currency risk, interest rate risk, and commodity purchase exposures, through a program of risk management that includes the use of derivative financial instruments. We enter into foreign exchange contracts, including forward and purchased option contracts, to reduce the effects of fluctuating foreign currency exchange rates.
We formally document all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes relating derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. We also formally assess both, at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If we determine that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting with respect to that derivative prospectively.

Foreign Currency Exchange Risk Management
We conduct business in many foreign countries, exposing earnings, cash flows, and our financial position to foreign currency risks. The majority of these risks arise as a result of foreign currency transactions. Our policy is to minimize exposure to adverse changes in currency exchange rates. This is accomplished through a controlled program of risk management that includes the use of foreign currency debt and forward foreign exchange contracts. We also use forward foreign exchange contracts to hedge firm and highly anticipated foreign currency cash flows, with an objective of balancing currency risk to provide adequate protection from significant fluctuations in the currency markets.
The primary currency movements for which we have exchange-rate exposure are the U.S. dollar versus the euro, the U.S. dollar versus the Chinese yuan and the U.S. dollar versus the Brazilian real.

Commodity Price Risk
We are exposed to risks in energy costs due to fluctuations in energy prices, particularly natural gas. We attempt to mitigate our exposure to increasing energy costs by hedging the cost of future deliveries of natural gas and entering into fixed-price contracts for the purchase of coal and fuel oil.
Our Agricultural Products segment enters into contracts with certain customers in Brazil whereby we would exchange our products for physical delivery of soybeans from the customer. In order to mitigate the price risk associated with this barter contract, we have entered into offsetting derivatives to hedge our exposure.

Interest Rate Risk
We use various strategies to manage our interest rate exposure, including entering into interest rate swap agreements to achieve a targeted mix of fixed and variable-rate debt. In the agreements, we exchange, at specified intervals, the difference between fixed and variable-interest amounts calculated on an agreed-upon notional principal amount. As of June 30, 2011 and December 31, 2010, we had no such swap agreements in place.

Concentration of Credit Risk
Our counterparties to derivative contracts are primarily to major financial institutions. We limit the dollar amount of contracts entered into with any one financial institution and monitor counterparties’ credit ratings. We also enter into master netting agreements with each financial institution, where possible, which helps mitigate the credit risk associated with our financial instruments. While we may be exposed to credit losses due to the nonperformance of counterparties, we consider this risk remote.


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FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

Financial Guarantees and Letter-of-Credit Commitments
We enter into various financial instruments with off-balance-sheet risk as part of the normal course of business. These off-balance sheet instruments include financial guarantees and contractual commitments to extend financial guarantees under letters of credit, and other assistance to customers (Note 17). Decisions to extend financial guarantees to customers, and the amount of collateral required under these guarantees is based on our evaluation of creditworthiness on a case-by-case basis.

Accounting for Derivative Instruments and Hedging Activities
Cash Flow Hedges
We recognize all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, we generally designate the derivative as a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge). We record in accumulated other comprehensive income or loss (“AOCI”) changes in the fair value of derivatives that are designated as and meet all the required criteria for a cash flow hedge. We then reclassify these amounts into earnings as the underlying hedged item affects earnings. We record immediately in earnings changes in the fair value of derivatives that are not designated as cash flow hedges.
As of June 30, 2011, we had open foreign currency forward contracts in AOCI in a net gain position of $3.0 million, before-tax ($2.1 million, after-tax), designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until December 31, 2012. At June 30, 2011, we had open forward contracts with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $429.2 million.
As of June 30, 2011, we had current open commodity contracts in AOCI in a net loss position of $3.0 million, before-tax ($1.9 million after-tax), designated as cash flow hedges of underlying forecasted purchases, primarily natural gas. Current open commodity contracts hedge forecasted transactions until December 31, 2012. At June 30, 2011, we had 6.9 million mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity forward contracts to hedge forecasted purchases.
Of the $0.2 million of net gains after-tax, representing both, open foreign currency exchange contracts and open commodity contracts, none of these gains would be realized in earnings during the twelve months ending June 30, 2012, if spot rates in the future are consistent with forward rates as of June 30, 2011. Approximately $0.2 million of net gains would be realized at various times, subsequent to June 30, 2012. The actual effect on earnings will be dependent on actual spot rates when the forecasted transactions occur. We recognize derivative gains and losses in the “Costs of sales and services” line in the condensed consolidated statements of income.
 
Derivatives Not Designated As Hedging Instruments
We hold certain forward contracts that have not been designated as cash flow hedging instruments for accounting purposes. Contracts used to hedge the exposure to foreign currency fluctuations associated with certain monetary assets and liabilities are not designated as cash flow hedging instruments, and changes in the fair value of these items are recorded in earnings. We hold call options that are effective as economic hedges of a portion of our natural gas exposure and the change in fair value of this instrument is also recorded in earnings. We periodically hold soybean barter contracts which qualify as derivatives and we have entered into offsetting commodity contracts to hedge our exposure. Both the change in fair value of the soybean barter contracts and the offsetting commodity contracts are recorded in earnings.
We had open forward contracts not designated as cash flow hedging instruments for accounting purposes with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $425.2 million at June 30, 2011. We hold natural gas option instruments with a notional amount of approximately 0.8 million mmBTUs and 0.7 million bushels in aggregate notional volume of outstanding soybean contracts to hedge outstanding barter contracts at June 30, 2011.

19

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

The following table provides the fair value and balance sheet presentation of our derivative instruments as of June 30, 2011 and December 31, 2010.
(in Millions)
 
 
 
June 30, 2011
 
December 31, 2010
 
 
Balance Sheet Location
 
Fair Value
Derivatives Designated as Cash Flow Hedges
 
 
 
 
 
 
Foreign exchange contracts
 
Prepaid and other current assets
 
$
4.4


$
0.7

Commodity contracts:
 
 
 
 
 
 
Energy contracts
 
Prepaid and other current assets
 
0.5

 

Total Derivative Assets
 
 
 
$
4.9

 
$
0.7

 
 
 
 
 
 
 
Foreign exchange contracts
 
Accrued and other liabilities
 
(1.2
)

(0.5
)
Commodity contracts:
 
 
 
 
 
 
Energy contracts
 
Accrued and other liabilities
 
(3.5
)
 
(6.0
)
Total Derivative Liabilities
 
 
 
$
(4.7
)
 
$
(6.5
)
Net Derivative Assets/(Liabilities)
 
 
 
$
0.2

 
$
(5.8
)
 
 
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments
 
 
 
 
 
 
Foreign exchange contracts
 
Prepaid and other current assets
 
$


$
0.4

Commodity contracts:
 
 
 
 
 
 
Energy contracts
 
Prepaid and other current assets
 

 
0.2

Soybean contracts
 
Prepaid and other current assets
 
0.1

 

Total Derivative Assets
 
 
 
$
0.1

 
$
0.6

 
 
 
 
 
 
 
Foreign exchange contracts
 
Accrued and other liabilities
 
(2.3
)

(1.6
)
Commodity contracts:
 
 
 
 
 
 
Energy contracts
 
Accrued and other liabilities
 

 

Soybean contracts
 
Accrued and other liabilities
 
(0.1
)
 

Total Derivative Liabilities
 
 
 
$
(2.4
)
 
$
(1.6
)
Net Derivative Assets/(Liabilities)
 
 
 
$
(2.3
)
 
$
(1.0
)
The information included in the above chart is also presented in our fair value table included below.
The following tables provide the impact of derivative instruments and related hedged items on the condensed consolidated statements of income for the three and six months ended June 30, 2011 and 2010.

Derivatives in Cash Flow Hedging Relationships
 

(in Millions)
 
Amount of Gain or (Loss)
Recognized in OCI on
Derivatives, net of tax
(Effective Portion)
 
Amount of Pre-tax Gain or
(Loss) Reclassified from
AOCI into  Income (Effective
Portion) (a)
 
Amount of Pre-tax Gain or
(Loss) Recognized in Income
on Derivative (Ineffective
Portion and Amount Excluded
from Effectiveness Testing) (a)
 
 
Three Months Ended June 30,
 
Three Months Ended June 30,
 
Three Months Ended June 30,
 
 
2011
 
2010
 
2011
 
2010
 
2011
 
2010
Foreign exchange contracts
 
$
0.9

 
$
0.7

 
$
1.6

 
$
0.7

 
$
0.2

 
$
0.1

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Energy contracts
 
0.6

 
1.6

 
(1.7
)
 
(2.3
)
 

 

Total
 
$
1.5

 
$
2.3

 
$
(0.1
)
 
$
(1.6
)
 
$
0.2

 
$
0.1



20

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

(in Millions)
 
Amount of Gain or (Loss)
Recognized in OCI on
Derivatives, net of tax
(Effective Portion)
 
Amount of Pre-tax Gain or
(Loss) Reclassified from
AOCI into  Income (Effective
Portion) (a)
 
Amount of Pre-tax Gain or
(Loss) Recognized in Income
on Derivative (Ineffective
Portion and Amount Excluded
from Effectiveness Testing) (a)
 
 
Six Months Ended June 30,
 
Six Months Ended June 30,
 
Six Months Ended June 30,
 
 
2011
 
2010
 
2011
 
2010
 
2011
 
2010
Foreign exchange contracts
 
$
1.8

 
$
1.9

 
$
1.8

 
$
1.3

 
$
0.2

 
$
0.2

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Energy contracts
 
1.8

 
(2.6
)
 
(3.8
)
 
(2.9
)
 

 

Total
 
$
3.6

 
$
(0.7
)
 
$
(2.0
)
 
$
(1.6
)
 
$
0.2

 
$
0.2

____________________
(a)
Amounts are included in “Cost of sales and services” on the condensed consolidated statements of income.

Derivatives Not Designated as Hedging Instruments
 
 
 
Location of Gain or (Loss)
Recognized in Income on Derivatives
Amount of Pre-tax Gain or (Loss) 
Recognized in Income on Derivatives
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in Millions)
 
 
2011
 
2010
 
2011
 
2010
Foreign Exchange contracts
 
Cost of Sales and Services
$
(1.3
)
 
$
(1.1
)
 
$
(2.5
)

$
(1.1
)
Commodity contracts:
 
 
 
 
 
 
 
 
 
Energy contracts
 
Cost of Sales and Services
(0.1
)
 
(0.1
)
 
(0.2
)
 
(0.4
)
Soybean contracts
 
Cost of Sales and Services

 

 

 

Total
 
 
$
(1.4
)
 
$
(1.2
)
 
$
(2.7
)
 
$
(1.5
)

Fair-Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principle or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability.

Fair-Value Hierarchy
We have categorized our assets and liabilities that are recorded at fair value, based on the priority of the inputs to the valuation technique, into a three-level fair-value hierarchy. The fair-value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets and liabilities fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair-value measurement of the instrument.
The following tables present our fair-value hierarchy for those assets and liabilities measured at fair-value on a recurring basis in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010.
 

21

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

(in Millions)
June 30, 2011
 
Quoted
Prices
in  Active
Markets  for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
Common Stock (1)
$
0.2

 
$
0.2

 
$

 
$

Derivatives – Commodities: (2)
 
 
 
 
 
 
 
Energy contracts
0.5

 

 
0.5

 

Soybean contracts
0.1

 

 
0.1

 

Derivatives – Foreign Exchange (2)
4.4

 

 
4.4

 

Other (3)
23.7

 
23.7

 

 

Total Assets
$
28.9

 
$
23.9

 
$
5.0

 
$

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Derivatives – Commodities: (2)
 
 
 
 
 
 
 
Energy contracts
$
3.5

 
$

 
$
3.5

 
$

Soybean contracts
0.1

 

 
0.1

 

Derivatives – Foreign Exchange (4)
3.5

 

 
3.5

 

Other (5)
34.5

 
34.5

 

 

Total Liabilities
$
41.6

 
$
34.5

 
$
7.1

 
$

 
(in Millions)
December 31, 2010
 
Quoted
Prices
in  Active
Markets  for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
Common Stock (1)
$
0.1

 
$
0.1

 
$

 
$

Derivatives – Commodities: (2)
 
 
 
 
 
 
 
Energy contracts
0.2

 

 
0.2

 

Soybean contracts

 

 

 

Derivatives – Foreign Exchange (2)
1.1

 

 
1.1

 

Other (3)
22.1

 
22.1

 

 

Total Assets
$
23.5

 
$
22.2

 
$
1.3

 
$

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Derivatives – Commodities: (2)
 
 
 
 
 
 
 
Energy contracts
$
6.0

 
$

 
$
6.0

 
$

Soybean contracts

 

 

 

Derivatives – Foreign Exchange (4)
2.1

 

 
2.1

 

Other (5)
32.2

 
32.2

 

 

Total Liabilities
$
40.3

 
$
32.2

 
$
8.1

 
$

____________________
(1)
Amounts included in “Investments” in the condensed consolidated balance sheets.
(2)
Amounts included in “Prepaid and other current assets” in the condensed consolidated balance sheets.
(3)
Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheet. Both the asset and liability are recorded at fair value. Asset amounts included in “Other assets” in the condensed consolidated balance sheets.

22

Table of Contents

FMC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)—(Continued)

(4)
Amounts included in “Accrued and other liabilities” in the condensed consolidated balance sheets.
(5)
Consists of a deferred compensation arrangement recognized on our balance sheet. Both the asset and liability are recorded at fair value. Liability amounts included in “Other long-term liabilities” in the condensed consolidated balance sheets.
The following tables present our fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis in our condensed consolidated balance sheets during the six months ended June 30, 2011 and the year ended December 31, 2010.
(in Millions)
Six months ended June 30, 2011
 
Quoted
Prices
in Active
Markets  for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Gains (Losses) (Six Months Ended June 30, 2011)
Liabilities
 
 
 
 
 
 
 
 
 
Liabilities associated with exit activities (1)
$
5.5

 
$

 
$
5.5

 
$

 
$
(5.5
)
Total Liabilities
$
5.5

 
$

 
$
5.5

 
$

 
$
(5.5
)
____________________
(1)
This amount represents severance liabilities associated with the Sodium Percarbonate phase-out as further described in Note 7.
(in Millions)
Year
Ended
12/31/2010
 
Quoted
Prices
in  Active
Markets  for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Gains
(Losses)
(Year Ended
December 31,
2010)
Assets
 
 
 
 
 
 
 
 
 
Long-lived assets to be abandoned (1)
$
6.0

 
$

 
$

 
$
6.0

 
$
(71.6
)
Total Assets
$
6.0

 
$

 
$

 
$
6.0

 
$
(71.6
)