Item 2 of this report contains certain forward-looking statements that are based on our current views and assumptions regarding future events, future business conditions and the outlook for our company based on currently available information. Whenever possible, we have identified these forward-looking statements by such words or phrases as "will likely result," "is confident that," "expect," "expects," "should," "could," "may," "will continue to," "believe," "believes," "anticipates," "predicts," "forecasts," "estimates," "projects," "potential," "intends" or similar expressions identifying "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including the negative of those words or phrases. Such forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and the outlook for the company based on currently available information. The forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. The potential adverse effect of the COVID pandemic on our financial condition, results of operations, cash flows and performance, which is substantially influenced by the potential adverse effect of the pandemic on our customers and suppliers and the global economy and financial markets, has been one of the most significant risk factors for our company. Thus far, we have mitigated the risks associated with the pandemic during the most intense periods of interruptions in global and nationwide economic activity and now expect the pandemic to represent less of a risk for ongoing operations. 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. Additional factors include, among other things, the risk factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2021 (the "2021 Form 10-K"), the section captioned "Forward-Looking Information" in Part II of the 2021 Form 10-K and to similar risk factors and cautionary statements in all other reports and forms filed with theSecurities and Exchange Commission ("SEC"). Moreover, investors are cautioned to interpret many of these factors as being heightened as a result of the ongoing and numerous adverse impacts of COVID. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
We specifically decline to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements are prepared in conformity withU.S. generally accepted accounting principles. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have described our accounting policies in Note 1 to our consolidated financial statements included in our 2021 Form 10-K. We have reviewed these accounting policies, identifying those that we believe to be critical to the preparation and understanding of our consolidated financial statements. We have reviewed these critical accounting policies with the Audit Committee of our Board of Directors. Critical accounting policies are central to our presentation of results of operations and financial condition and require management to make estimates and judgments on certain matters. We base our estimates and judgments on historical experience, current conditions and other reasonable factors. The following is a list of those accounting policies that we have deemed most critical to the presentation and understanding of our results of operations and financial condition. See the "Critical Accounting Policies" section in our 2021 Form 10-K for a detailed description of these policies and their potential effects on our results of operations and financial condition. •Revenue recognition and trade receivables •Environmental obligations and related recoveries •Impairment and valuation of long-lived assets and indefinite-lived assets •Pensions and other postretirement benefits •Income taxes
RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS AND REGULATORY ITEMS
See Note 2 to the condensed consolidated financial statements included in this Form 10-Q for a discussion of recently adopted accounting guidance and other new accounting guidance. OVERVIEW
We are an agricultural sciences company, providing innovative solutions to growers around the world with a robust product portfolio fueled by a market-driven discovery and development pipeline in crop protection, crop enhancement, and professional
32 -------------------------------------------------------------------------------- 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, 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.
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 renewed COVID disruptions inChina . Additionally, we are aware of the potential for disruptions or lack of availability, at any price, of critical materials. The extent to which COVID will continue to impact us will depend on future developments, many of which remain uncertain and cannot be predicted with confidence, including the duration of the pandemic, further actions to be taken to contain the pandemic or mitigate its impact, and the extent of the direct and indirect economic effects of the pandemic and containment measures, among others. We have implemented procedures to support the health and safety of our employees and we are following allU.S. Centers for Disease Control and Prevention , as well as state and regional health department guidelines. The well-being of our employees is FMC's top priority. We have resumed in-office operations where permitted by local authorities and extended flexible work arrangements in some locations. In addition, we have thousands of employees who continue operating our manufacturing sites and distribution warehouses. In all our facilities, we are using a variety of best practices to address COVID risks, following the protocols and procedures recommended by leading health authorities. We are continuing to monitor the situation in all regions and adjust our health and safety protocols accordingly.
We will continue to monitor the economic environment related to the pandemic on an ongoing basis and assess the impacts on our business.
Russia-Ukraine War
In mid-April, we announced the decision to discontinue our operations and business inRussia . Our values as a company do not allow us to operate and grow our business inRussia . OurRussia operations were approximately 1.5 percent of our revenues and the impact to our operations both historically and projected are not material. See Note 19 for more information.
First Quarter 2022 Highlights
The following items are the more significant developments or financial
highlights in our business during the three months ended
•Revenue of$1,350.8 million for the three months endedMarch 31, 2022 increased$155.2 million or approximately 13 percent versus the same period last year. A more detailed review of revenue is discussed under the section titled "Results of Operations" . On a regional basis, sales inNorth America increased by approximately 30 percent, sales inLatin America increased approximately 31 percent, sales inEurope ,Middle East andAfrica remained relatively flat, and sales inAsia increased approximately 2 percent. The increase was mostly driven by volume growth primarily inNorth America andLatin America and solid price increases across all regions. Excluding foreign currency impacts, revenue increased 16 percent during the quarter. •Our gross margin of$572.7 million increased versus the prior year quarter by$60.3 million driven by higher volumes inNorth America andLatin America and higher prices in all regions, partially offset by higher cost of goods sold primarily resulting from inflation. Gross margin percent of approximately 42 percent decreased slightly compared to approximately 43 percent in the prior year period, driven by higher costs, primarily raw materials, packaging, logistics, and labor costs. •Selling, general and administrative expenses increased from$174.5 million to$188.5 million , or approximately 8 percent. The increase in costs is a result of top line higher revenues as well as investments in growth programs.
•Research and development expenses of
•Net income (loss) attributable to FMC stockholders increased from
33 -------------------------------------------------------------------------------- which were partially offset by higher selling, general and administrative expenses and the provision for income taxes. Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of$238.7 million increased compared to the prior year amount of$200.0 million . See the disclosure of our Adjusted Earnings Non-GAAP financial measurement below, under the section titled "Results of Operations" .
2022 Outlook Update
In 2022, we continue to expect the global crop protection market to be up low-to-mid single digits, on aU.S. dollar basis. We expectLatin America ,North America , andAsia to be up mid-single digits while EMEA is now expected to be down low single digits. The war inUkraine may further reduce market growth in the EMEA region. Commodity prices for many of the major crops remain elevated and stock-to-use ratios are near historical lows, creating a favorable backdrop for crop protection products. FX is projected to be a headwind for EMEA andAsia markets on aU.S. dollar basis. Despite the volatile supply and geopolitical environment, we anticipate solid growth in 2022. Our revenue is forecasted to be in the range of approximately$5.25 billion to$5.55 billion , up approximately 7 percent at the midpoint versus 2021. Full year adjusted EBITDA(1) is expected to be in the range of$1.32 billion to$1.48 billion , representing 6 percent growth at the midpoint versus 2021 results. 2022 adjusted earnings are expected to be in the range of$6.70 to$8.00 per diluted share(1), representing a year over year increase of 6 percent at the midpoint. Full-year earnings growth drivers include pricing actions and strong volumes, offset by rising costs and supply disruptions. Adjusted earnings estimates do not include the benefit of any future share repurchases. For cash flow outlook, refer to the "L iquidity and Capital Resources" section below. (1)Although we provide forecasts for adjusted earnings per share and adjusted EBITDA (Non-GAAP financial measures), we are not able to forecast the most directly comparable measures calculated and presented in accordance withU.S. GAAP. Certain elements of the composition of theU.S. GAAP amounts are not predictable, making it impractical for us to forecast. Such elements include, but are not limited to, restructuring, acquisition charges, and discontinued operations. As a result, noU.S. GAAP outlook is provided. 34 --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Overview
The following charts provide a reconciliation of Adjusted EBITDA, Adjusted Earnings, and Organic Revenue Growth, all of which are Non-GAAP financial measures, from the most directly comparable GAAP measure. Adjusted EBITDA and Organic Revenue are provided to assist the readers of our financial statements with useful information regarding our operating results. Our operating results are presented based on how we assess operating performance and internally report financial information. For management purposes, we report operating performance based on earnings before interest, income taxes, depreciation and amortization, discontinued operations, and corporate special charges. Our Adjusted Earnings measure excludes corporate special charges, net of income taxes, discontinued operations attributable to FMC stockholders, net of income taxes, and certain Non-GAAP tax adjustments. These are excluded by us in the measure we use to evaluate business performance and determine certain performance-based compensation. Organic Revenue Growth excludes the impacts of foreign currency changes, which we believe is a meaningful metric to evaluate our revenue changes. These items are discussed in detail within the "Other Results of Operations" section that follows. In addition to providing useful information about our operating results to investors, we also believe that excluding the effect of corporate special charges, net of income taxes, and certain Non-GAAP tax adjustments from operating results and discontinued operations allows management and investors to compare more easily the financial performance of our underlying business from period to period. These measures should not be considered as substitutes for net income (loss) or other measures of performance or liquidity reported in accordance withU.S. GAAP. Three Months Ended March 31, 2022 2021 (in Millions) (unaudited) Revenue$ 1,350.8 $ 1,195.6 Costs of sales and services 778.1 683.2 Gross margin $ 572.7$ 512.4 Selling, general and administrative expenses 188.5 174.5 Research and development expenses 71.8 74.0 Restructuring and other charges (income) 9.1 3.2 Total costs and expenses $
1,047.5
$
303.3
Non-operating pension and postretirement charges (income) 4.3 4.8 Interest expense, net 29.9 32.4
Income (loss) from continuing operations before income taxes $ 269.1
42.3 32.2 Income (loss) from continuing operations $ 226.8$ 191.3 Discontinued operations, net of income taxes (15.2) (8.1) Net income (loss) (GAAP) $ 211.6$ 183.2 Adjustments to arrive at Adjusted EBITDA (Non-GAAP): Corporate special charges (income): Restructuring and other charges (income) (3) $ 9.1$ 3.2 Non-operating pension and postretirement charges (income) (4) 4.3 4.8 Total transaction-related charges (5) - 0.4 Discontinued operations, net of income taxes 15.2 8.1 Interest expense, net 29.9 32.4 Depreciation and amortization 42.4 42.6 Provision (benefit) for income taxes 42.3 32.2 Adjusted EBITDA (Non-GAAP) (2) $ 354.8$ 306.9 ____________________
(1)Referred to as operating profit.
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(2)Adjusted EBITDA is defined as operating profit excluding corporate special charges (income) and depreciation and amortization expense.
(3)See Note 8 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 Three Months EndedMarch 31, 2022 2021 (in Millions) (unaudited)
Net income (loss) attributable to FMC stockholders (GAAP)
Corporate special charges (income), pre-tax (1) 13.4 8.4
Income tax expense (benefit) on Corporate special charges (income) (2)
(0.9) (1.6)
Corporate special charges (income), net of income taxes $ 12.5
15.2 8.1 Non-GAAP tax adjustments (3) 3.6 2.5
Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP)
$ 238.7 $ 200.0 ____________________ (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. 36
-------------------------------------------------------------------------------- ORGANIC REVENUE GROWTH RECONCILIATION Three Months EndedMarch 31, 2022
vs. 2021
Total Revenue Change (GAAP) 13 % Less: Foreign Currency Impact (3) % Organic Revenue Change (Non-GAAP) 16 % Results of Operations
In the discussion below, all comparisons are between the periods unless otherwise noted.
Revenue
Three Months Ended
Revenue of$1,350.8 million increased$155.2 million , or approximately 13 percent, versus the prior year period. The increase was primarily driven by volume and price increases, which benefited revenue by approximately 8 percent each. The strong volume growth was in part due to supply uncertainty in the industry, which caused some customers to place orders in advance to secure material. Foreign currency had an unfavorable impact of approximately 3 percent on revenue. Excluding foreign currency impacts, revenue increased approximately 16 percent during the quarter. Total Revenue by Region Three Months Ended March 31, (in Millions) 2022 2021 North America $ 389.8$ 301.0 Latin America 265.9 203.2
Europe ,Middle East &Africa (EMEA) 398.2
399.4 Asia 296.9 292.0 Total Revenue$ 1,350.8 $ 1,195.6
Three Months Ended
North America : Revenue increased approximately 30 percent versus the prior year period. The increase was driven by broad-based growth across a variety of crops such as tree fruits, nuts, vines, corn, and soy. In the US, sales of biologicals almost doubled, led by products for corn and soybean. InCanada our results were driven by low channel inventory of insecticides and strength in selective herbicides.Latin America : Revenue increased approximately 31 percent versus the prior year period, or approximately 25 percent excluding foreign currency, driven by volume and price increases, particularly inBrazil andArgentina . InBrazil , we saw growth in our herbicide brands Aurora® and Gamit® on soy, corn, sugarcane, and coffee. We also saw insecticides growth on soy, corn, and cotton.Colombia ,Peru , andEcuador grew double-digits in the quarter. EMEA: Revenue remained relatively flat versus the prior year period, or increased approximately 11 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 as well as demand for our diamides on corn and top fruit and for selective herbicides on cereals and sunflower applications.Asia : Revenue increased approximately 2 percent versus the prior year period, or approximately 5 percent excluding foreign currency, driven by price actions and strong performance inAustralia and theASEAN countries, offset by a reduction in rice acres inIndia . 37 --------------------------------------------------------------------------------
Gross margin
Three Months Ended
Gross margin of$572.7 million increased$60.3 million , or approximately 12 percent versus the prior year period. The increase was primarily due to higher revenues driven by increased volumes inNorth America andLatin America and higher prices in all regions offset by higher costs due to rising input costs and increasing logistics expenses. Cost inflation continued to be a challenge, and at a higher rate than anticipated, so we moved price more aggressively in all regions to offset these increasing headwinds. Gross margin percent of approximately 42 percent decreased slightly compared to approximately 43 percent in the prior year period, driven by higher costs, primarily raw materials, packaging, logistics, and labor costs.
Selling, general and administrative expenses
Three Months Ended
Selling, general and administrative expenses of$188.5 million increased$14.0 million , or 8 percent, versus the prior year period. Spending increased globally as a result of our top line revenue growth as well as investments in growth programs.
Research and development expenses
Three Months Ended
Research and development expenses of
Depreciation and amortization
Three Months Ended
Depreciation and amortization of
Interest expense, net
Three Months Ended
Interest expense, net of
Corporate special charges (income)
Restructuring and other charges (income)
Three Months Ended March 31, (in Millions) 2022 2021 Restructuring charges $ 11.2 $ 6.3 Other charges (income), net (2.1) (3.1) Total restructuring and other charges (income) $
9.1 $ 3.2
Three Months Ended
Restructuring charges in 2022 of$11.2 million consist of$8.4 million fixed asset and other charges resulting from the closure of certain manufacturing sites during the period. Restructuring charges also include$2.8 million from various restructuring programs. Restructuring charges in 2021 of$6.3 million consist of charges associated with the integration of the DuPont Crop Protection Business which was completed during the second quarter of 2020 except for certain in-flight initiatives, including severance, accelerated depreciation on certain fixed assets, and other costs (benefits). Additionally, we incurred severance charges under separate restructuring initiatives following the implementation of our worldwide Enterprise Resource Planning system. Other charges (income), net in 2022 of$(2.1) million and 2021 of$(3.1) million primarily is the result of the remeasurement of an environmental liability to present value which can result in charges or income depending on the movement in discount rates. 38
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Non-operating pension and postretirement charges (income)
Charges for the three months endedMarch 31, 2022 were$4.3 million compared to charges of$4.8 million for the three months endedMarch 31, 2021 . The decrease in non-operating pension and post retirement charges (income) is attributable to higher expected return on plan assets and lower amortization of net actuarial losses. As previously disclosed, we continued to use the smoothed market related value of assets (MRVA) as opposed to the actual fair value of plan assets in the determination of pension expense. This continued approach will create some volatility in our non-operating periodic pension cost since our qualified pension plan is 100 percent fixed income securities. These decreases were partially offset by higher interest costs due to an increase in rates.
Provision for income taxes
Three Months Ended
Provision for income taxes for the three months endedMarch 31, 2022 was$42.3 million resulting in an effective tax rate of 15.7 percent. Provision for income taxes for the three months endedMarch 31, 2021 was$32.2 million resulting in an effective tax rate of 14.4 percent. The increase in the effective tax rate for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 was primarily driven by the impact of certain provisions of the Tax Cuts and Jobs Act of 2017 that became effective in 2022 and geographic earnings mix. Other factors are shown in the table below. Three Months Ended March 31, 2022 2021 Income Tax Provision Effective Tax Income Tax Provision (in Millions) (Expense) (Benefit) Rate (Expense) (Benefit) Effective Tax Rate GAAP - Continuing operations$ 269.1 $ 42.3 15.7 %$ 223.5 $ 32.2 14.4 % Corporate special charges (income) 13.4 0.9 8.4 1.6 Tax adjustments (1) (3.6) (2.5) Non-GAAP - Continuing operations$ 282.5 $ 39.6 14.0 %$ 231.9 $ 31.3 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.
Discontinued operations, net of income taxes
Our discontinued operations include provisions, net of recoveries, for environmental liabilities and legal reserves and expenses related to previously discontinued operations and retained liabilities.
Three Months Ended
Discontinued operations, net of income taxes represented a loss of$15.2 million for the three months endedMarch 31, 2022 compared to a loss of$8.1 million for the three months endedMarch 31, 2021 . The loss during both the three months endedMarch 31, 2022 and 2021 was primarily due to adjustments related to the retained liabilities from our previously discontinued operations.
Net income (loss)
Three Months Ended
Net income (loss) increased to$211.6 million from income of$183.2 million in the prior year period. The higher results were primarily driven by an increase in gross margin of approximately$60 million from higher volume. This was offset by an increase in selling, general and administrative costs, provision for income taxes, and restructuring and other charges of approximately$14 million ,$10 million , and$6 million , respectively, as compared to the prior period .
The only difference between Net income (loss) and Net income (loss) attributable to FMC stockholders is noncontrolling interest, which period over period is immaterial.
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Adjusted EBITDA (Non-GAAP)
The Adjusted EBITDA amounts discussed below for three months endedMarch 31, 2022 and 2021 are reconciled to Net Income (loss) within this Form 10-Q. Refer to our Overview under the section titled "Results of Operations" above.
Three Months Ended
Adjusted EBITDA of$354.8 million increased$47.9 million , or approximately 16 percent versus the prior year period. The increase was mainly driven by higher pricing in all four regions and volume growth which accounted for approximately 31 percent and 10 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 20 percent and 5 percent, respectively, on adjusted EBITDA. For 2022, full-year Adjusted EBITDA is expected to be in the range of$1.32 billion to$1.48 billion , which represents approximately 6 percent growth at the midpoint versus 2021. Although we provide a forecast for Adjusted EBITDA, a Non-GAAP financial measure, we are not able to forecast the most directly comparable measure calculated and presented in accordance withU.S. GAAP. See Note 1 to our 2022 Outlook Update within this section of the Form 10-Q. 40 --------------------------------------------------------------------------------
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 atMarch 31, 2022 andDecember 31, 2021 , were$365.1 million and$516.8 million , respectively. Of the cash and cash equivalents balance atMarch 31, 2022 ,$325.7 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
AtMarch 31, 2022 , we had total debt of$3,772.8 million as compared to$3,172.5 million atDecember 31, 2021 . Total debt included$2,732.4 million and$2,731.7 million of long-term debt (excluding current portions of$98.6 million and$84.5 million ) atMarch 31, 2022 andDecember 31, 2021 , respectively. Short-term debt and current portion of long-term debt, which consists of short-term foreign borrowings, commercial paper borrowings, and the current portion of long-term debt, increased from$440.8 million atDecember 31, 2021 to$1,040.4 million atMarch 31, 2022 . See Note 9 in the condensed consolidated financial statements included in this Form 10-Q for further details. As ofMarch 31, 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
AtMarch 31, 2022 , our remaining borrowing capacity under our credit facility was$499.8 million . Our commercial paper program allows us to borrow at rates generally more favorable than those available under our credit facility. AtMarch 31, 2022 , we had$840.6 million commercial paper borrowings under the commercial paper program. AtMarch 31, 2022 , the average effective interest rate on the borrowings was 1.05 percent. Our commercial paper balances fluctuate from year to year depending on working capital needs.
Working Capital Initiatives
The Company works with suppliers to optimize payment terms and conditions on accounts payable to improve working capital and cash flows. The Company offers to a select group of suppliers a voluntary Supply Chain Finance ("SCF") program with a global financial institution. The suppliers, at their sole discretion, may sell their receivables to the financial institution based on terms negotiated between them. Our obligations to our suppliers are not impacted by our suppliers' decisions to sell under these arrangements. Agreements under these supplier financing programs are recorded within Accounts payable in our Consolidated Balance Sheets and the associated payments are included in operating activities within our Consolidated Statements of Cash Flows. We do not believe that changes in the availability of the supply chain finance program would have a significant impact on our liquidity. From time to time, the Company may sell receivables on a non-recourse basis to third-party financial institutions. These sales are normally driven by specific market conditions, including, but not limited to, foreign exchange environments, customer credit management, as well as other factors where the receivables may lay. We account for these transactions as sales which result in a reduction in accounts receivables because the agreements transfer effective control and risk related to the receivables to the buyers. The net cash proceeds received are presented within cash provided by operating activities within our Consolidated Statements of Cash Flows. The cost of factoring these accounts receivables is recorded as an expense within the Consolidated Statements of Income and has been inconsequential during each reporting period. 41
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