<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
---
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1993
OR
---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 1-9759
IMC FERTILIZER GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3492467
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 Sanders Road
Northbrook, Illinois 60062
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 272-9200
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 .
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS: Indicate by check mark whether the
registrant has filed all documents and reports required to be filed by
Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by
a court. Yes . No .
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock as of the
latest practicable date: 25,574,692 shares, excluding 6,655,008
treasury shares as of January 31, 1994.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying interim consolidated financial statements of IMC
Fertilizer Group, Inc. (the Company) do not include all disclosures
normally provided in annual financial statements. These financial
statements, which should be read in conjunction with the consolidated
financial statements contained in the Company's 1993 Annual Report to
Shareholders, are unaudited but include all adjustments which the
Company's management considers necessary for a fair presentation.
These adjustments consist of normal recurring accruals except as
discussed in Notes 1 and 2 of Notes to Consolidated Financial
Statements. Certain 1992 amounts have been reclassified to conform to
the 1993 presentation. Interim results are not necessarily indicative
of the results expected for the fiscal year.
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions except per share amounts)
Quarter Ended Six Months Ended
December 31, December 31,
1993 1992 1993 1992
-----------------------------------------------------------------------
Net sales $ 329.0 $ 197.5 $ 595.4$ 418.4
Cost of goods sold 295.2 166.4 554.2 336.8
------- ------- --------------
Gross margins 33.8 31.1 41.2 81.6
Selling, general and administrative
expenses 15.7 14.2 29.6 30.8
Other operating (income) and
expense, net (Note 1) (3.1) (.8) (9.7) (10.8)
------- ------- --------------
Operating earnings 21.2 17.7 21.3 61.6
Equity in (earnings) loss of oil and
gas joint venture (Note 2) 20.6 (.4) 20.5 (3.6)
Interest earned and other non-operating
(income) and expense, net .1 2.9 3.3 6.5
Interest charges 20.3 10.0 42.8 20.7
------- ------- --------------
Earnings (loss) before minority
interest and items noted below (19.8) 5.2 (45.3) 38.0
Minority interest (Note 3) 6.5 5.3
------- ------- --------------
Earnings (loss) before items
noted below (26.3) 5.2 (50.6) 38.0
Provision (credit) for income taxes
(Note 4) (22.7) 2.3 (24.5) 16.5
------- ------- --------------
Earnings (loss) before extraordinary
item and cumulative effect of
accounting change (3.6) 2.9 (26.1) 21.5
Extraordinary loss-debt retirement (Note 6) (23.8)
Cumulative effect of accounting
change (Note 7) (47.1)
Net earnings (loss) $ (3.6)$ 2.9 $ (49.9)$ (25.6)
======= ======= ==============
Earnings (loss) per share (Note 5):
Earnings (loss) before extraordinary
item and cumulative effect of
<PAGE>
accounting change $ (.14)$ .13 $ (1.11)$ .97
Extraordinary loss-debt retirement
(Note 6) (1.01)
Cumulative effect of accounting
change (Note 7) (2.13)
------- ------- --------------
Net earnings (loss) $ (.14)$ .13 $ (2.12)$ (1.16)
======= ======= ==============
(See Notes to Consolidated Financial Statements on Page 5)
<PAGE>
CONSOLIDATED BALANCE SHEET
(Dollars in millions except per share amounts)
December 31,June 30,
Assets 1993 1993
-----------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 87.1 $ 111.6
Receivables, net 163.0 145.1
Inventories:
Products (principally finished) 228.5 120.1
Operating materials and supplies 65.8 44.2
-------- --------
294.3 164.3
Prepaid expenses 11.8 12.4
-------- --------
Total current assets 556.2 433.4
Investment in oil and gas joint venture (Note 2) 23.7 55.0
Property, plant and equipment 3,365.4 2,422.0
Accumulated depreciation and depletion (1,416.8) (1,095.5)
-------- --------
Net property, plant and equipment 1,948.6 1,326.5
Deferred income taxes 224.6 187.5
Other assets 73.2 53.2
-------- --------
$2,826.3 $2,055.6
======== ========
Liabilities and Stockholders' Equity
-----------------------------------------------------------------------
Current liabilities:
Accounts payable $ 70.6 $ 75.9
Income taxes 10.0
Dividend payable to IMCERA (Note 8) 51.9
Accrued liabilities 88.7 67.2
Current maturities of long-term debt 46.8 33.3
-------- --------
Total current liabilities 206.1 238.3
Long-term debt, less current maturities (Note 6) 847.2 893.4
Deferred income taxes 336.1 317.5
Accrued postretirement employee benefits 90.8 82.8
Accrued reclamation costs 85.5 51.4
Other noncurrent liabilities 55.5 41.8
Deferred gain (Note 3) 56.0
Minority interest (Note 3) 655.4
Stockholders' equity:
Common stock, $1 par value, authorized
50,000,000 shares; issued 32,158,240 shares
and 32,156,920 shares at December 31 and
June 30, respectively 32.2 32.2
Capital in excess of par value 747.7 768.4
Retained earnings (deficit) (27.4) 22.5
Treasury stock, at cost, 6,655,008 shares
and 10,097,808 shares of common stock at
December 31 and June 30, respectively (258.8) (392.7)
-------- --------
Total stockholders' equity 493.7 430.4
-------- --------
$2,826.3 $2,055.6
======== ========
<PAGE>
(See Notes to Consolidated Financial Statements on Page 5)
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Six months ended
December 31,
1993 1992
-----------------------------------------------------------------------
Cash Flows from Operating Activities
------------------------------------
Net loss $ (49.9) $ (25.6)
Adjustments to reconcile net loss to net
cash (used) provided by operating activities:
Depreciation, depletion and amortization 54.0 31.9
Cash distributions in excess of equity in
operating results of oil and gas joint venture31.3 13.8
Deferred income taxes (18.5) (24.3)
Minority interest 5.3
Postretirement employee benefits 3.3 79.3
Other non-cash charges and credits, net (13.7) 5.6
Changes in:
Receivables 27.2 (31.5)
Inventories 11.7 (45.3)
Prepaid expenses .6 2.9
Accounts payable, accrued liabilities
and income taxes (115.2) (9.7)
------- -------
Net cash used by operating activities (63.9) (2.9)
------- -------
Cash Flows from Investing Activities
------------------------------------
Capital expenditures (12.5) (75.3)
Other 4.4 (1.0)
------- -------
Net cash used by investing activities (8.1) (76.3)
------- -------
Net cash used before financing activities (72.0) (79.2)
------- -------
Cash Flows from Financing Activities
------------------------------------
Payments of long-term debt (220.4)
Proceeds from issuance of long-term debt, net 171.6 61.1
Issuance of common stock from treasury 113.5
Joint venture cash distribution to FRP (17.2)
Cash dividends paid (11.9)
------- -------
Net cash provided by financing activities 47.5 49.2
------- -------
Net decrease in cash and cash equivalents (24.5) (30.0)
------- -------
Cash and cash equivalents-beginning of period 111.6 32.6
------- -------
Cash and cash equivalents-end of period $ 87.1 $ 2.6
======= =======
Supplemental cash flow disclosures:
Interest paid $ 37.1 $ 27.3
Income taxes (refunded) paid $ (4.1) $ 13.0
<PAGE>
Supplemental schedule of non-cash investing
and financing activities:
Acquisition of interest in joint venture -
Net assets acquired $713.0
Minority interest 649.3
------
$ 63.7
(See Notes to Consolidated Financial Statements on Page 5)
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In millions except per share amounts)
Six months ended
December 30,
1993 1992
-----------------------------------------------------------------------
Common stock:
Balance at June 30 and December 31 $ 32.2 $ 32.1
Capital in excess of par value:
Balance at June 30 768.4 768.0
Issuance of common stock (Note 6) (20.6)
Restricted stock award (.1)
------ ------
Balance at December 31 747.7 768.0
Retained earnings:
Balance at June 30 22.5 207.4
Net loss (49.9) (25.6)
Dividends ($.54 a share in 1992) (11.9)
------ ------
Balance at December 31 (27.4) 169.9
Treasury stock:
Balance at June 30 (392.7) (392.1)
Issuance of common stock from treasury (Note 6)134.1
Acquisition of shares (.2)
------ ------
Balance at December 31 (258.8) (392.1)
------ ------
Total stockholders' equity $493.7 $577.9
====== ======
(See Notes to Consolidated Financial Statements on Page 5)
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Resolution of Contract Dispute
------------------------------
Other operating (income) and expense, net, for the six months ended
December 31, 1992, included a gain of $8.1 million from the resolution
of a contract dispute with a major uranium oxide customer.
2. Write-Down of Investment in Oil and Gas Joint Venture
-----------------------------------------------------
The Company's investment in its oil and gas joint venture is
subject to a ceiling limitation test based on a computed value of the
Company's share of future net revenues from proved reserves using
current prices. Due to the current low price of crude oil, the Company
was required to reduce the carrying value of its investment in its oil
and gas joint venture at December 31, 1993. As a result, the Company
recorded a charge of $20.3 million for the quarter and six months ended
December 31, 1993 to reflect this reduction.
3. Joint Venture Partnership
-------------------------
On July 1, 1993, the Company and Freeport-McMoRan Resource
Partners, Limited Partnership (FRP) entered into a joint venture
partnership in which both companies contributed their respective
phosphate fertilizer businesses to create IMC-Agrico Company, a
Delaware general partnership (the Partnership), in return for a 56.5
percent and 43.5 percent economic interest, respectively, in the
Partnership. The activities of the Partnership, which is operated by
the Company, include the mining and sale of phosphate rock, and the
production, distribution and sale of phosphate chemicals, uranium
oxide and related products.
For financial reporting purposes, the acquisition of 56.5 percent
of FRP's phosphate fertilizer business net assets is being accounted
for using the purchase method. This transaction resulted in a deferred
gain of $63.7 million which is recognized in the statement of
operations as the related FRP assets are being used in operations,
generally over 20 years. The Partnership's results of operations for
the six months ended December 31, 1993 were consolidated with those of
the Company, and FRP's 43.5 percent interest in the joint venture
partnership was included in the Company's statement of operations as
minority interest.
The Partnership makes cash distributions to each partner based on
formulas and sharing ratios as defined in the Partnership agreement.
For the quarter ended December 31, 1993, the total amount of
distributable cash generated by the Partnership was $52.8 million, of
which $30.9 million was distributed to FRP in early February 1994.
<PAGE>
The Company's unaudited pro forma results for the quarter and six
months ended December 31, 1992, giving effect to formation of the joint
venture partnership as if the formation occurred on July 1, 1992, were
as follows:
(In millions except per share amounts) Quarter Six Months
------- ----------
Sales $349.9 $710.5
Earnings (loss) before cumulative effect of
accounting change $ (4.1) $ 6.3
Cumulative effect of accounting change (47.1)
------ ------
Net loss $ (4.1) $(40.8)
====== ======
Net loss per share $ (.19) $(1.85)
4. Income Taxes
------------
For the six months ended December 31, 1993, the provision (credit)
for income taxes included a charge of $4.1 million for an adjustment to
the Company's net deferred tax liability for the effect of changes in
U.S. corporate tax rates.
5. Earnings (Loss) Per Share
-------------------------
Earnings (loss) per share were based on the weighted average number
of shares and equivalent shares outstanding. Shares used in the
calculations were 25.1 and 23.5 million shares for the quarter and six
months ended December 31, 1993 and 22.1 million shares for the quarter
and six months ended December 31, 1992.
6. Extraordinary Loss-Debt Retirement
----------------------------------
In October 1993, the Company completed its purchase of $220 million
principal amount of its 11.25 percent notes from The Prudential
Insurance Company of America for $248.1 million. The notes originally
were scheduled to be due in annual installments from 1995 to 2004. The
notes were redeemed with the proceeds from the sale, on the same date,
of $160 million of 9.25 percent senior notes due 2000 and 3,450,000
shares of common stock. In connection with this purchase, the Company
recorded an extraordinary loss on September 30, 1993 for the redemption
premium incurred on the Company's 11.25 percent notes and the write-off
of previously deferred finance charges associated with such notes, net
of income taxes.
7. Accounting For Postretirement Benefits
--------------------------------------
In fiscal 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." As a result, results for
the six months ended December 31, 1992 reflected a charge, net of
taxes, for the cumulative effect of the adoption of SFAS No. 106 as of
July 1, 1992.
<PAGE>
8. Dividend Payable to IMCERA
--------------------------
In May 1993, the Company reached a settlement with its insurance
carriers in connection with a claim filed resulting from an inflow of
water into one of the Company's two inter-connected potash mines in
Saskatchewan, Canada. From the settlement proceeds, all of which were
received by late July 1993, the Company reimbursed Potash Corporation
of Saskatchewan Inc. (PCS) $23 million (Canadian) for amounts that PCS
had previously contributed under an agreement with the Company and also
paid a previously declared dividend to IMCERA Group Inc. (IMCERA) of
$51.9 million relating to amounts IMCERA paid for water inflow control
prior to its disposition of the Company.
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
---------------------
Three months ended December 31, 1993 vs. three months ended December
--------------------------------------------------------------------
31, 1992
--------
The Company incurred a net loss of $3.6 million, or $.14 per share,
for the quarter, compared to net earnings of $2.9 million, or $.13 per
share, a year ago. The second quarter loss included a charge of $20.3
million, ($12.4 million after taxes), or $.49 per share, related to the
write-down of the Company's investment in an oil and gas joint venture
resulting from the current low market price for crude oil. See Note 2
of Notes to Consolidated Financial Statements for further discussion of
this matter.
IMC-Agrico, a joint venture partnership between the Company and
Freeport-McMoRan Resource Partners, Limited Partnership, began
operations July 1, 1993 and is consolidated for financial reporting
purposes. Comparisons between the quarters ended December 31, 1993 and
December 31, 1992 have been made, where applicable, on a pro forma
basis assuming the Partnership had begun operations on July 1, 1992.
Sales for the quarter were $329 million, compared to $197.5 million
for the quarter a year ago. On a pro forma basis, sales for the
quarter a year ago would have been $349.9 million.
Gross margins increased $2.7 million from the same period a year
ago. On a pro forma basis, gross margins would have decreased $17.5
million, primarily due to lower margins for phosphate fertilizers, a
$12 million decrease on a pro forma basis, sulphur, a $3 million
decrease, and potash, a $1 million decrease.
Second quarter market conditions continued to improve, primarily
for phosphate chemicals, as prices continued to rise from the record
low levels experienced in the spring of 1993 and as China and India,
traditionally the world's largest importers of crop nutrients, returned
to the market place. From the Company's ongoing cost reduction
programs and the realization of efficiencies and cost savings of the
IMC-Agrico Company joint venture, the Company began to benefit from
lower production costs. However, despite these developments, phosphate
fertilizer margins for the quarter were still lower than a year ago.
Production continued to increase at the Main Pass sulphur mine which
reached its design capacity of 5,500 tons per day in December 1993, and
<PAGE>
has since sustained production at or above that level. Potash margins
decreased primarily due to lower prices ($3 million), lower production
costs ($3 million) and reduced demand ($1 million).
The following table summarizes the Company's sales of fertilizer
products and average selling prices for the three months ended December
31, 1993 and 1992. Where applicable, sales tons and prices for 1992
have been reported on a pro forma basis assuming the joint venture
partnership began operations on July 1, 1992.
(Tons in millions of short tons)
1993 1992
-------- --------
Phosphate fertilizers
Diammonium phosphate
--------------------
Sales tons:
Florida .553
Louisiana .471
Warehouse .116
-------- --------
Total sales tons 1.140 1.177
Average price per ton:
Florida $114.65
Louisiana $125.70
Warehouse $129.87
-------- --------
Average price per ton $120.76 $119.26
Monoammonium phosphate
----------------------
Sales tons:
Granular .120 .126
Powdered .060 .032
-------- --------
Total sales tons .180 .158
Average price per ton:
Granular $135.87 $128.89
Powdered $107.75 $102.96
Granular triple superphosphate
------------------------------
Sales tons .283 .234
Average price per ton $ 93.90 $ 95.42
Phosphate rock
Sales tons 2.460 2.108
Average price per ton $ 19.47 $ 23.40
Potash
Sales tons .610 .700
Average price per ton $ 68.02 $ 74.09
Mixed fertilizers
Sales tons .098 .108
Average price per ton $126.19 $131.59
Selling, general and administrative expenses increased $1.5 million
due to higher legal and cost of risk expenses.
<PAGE>
Other operating income and expense increased $2.3 million primarily
due to the amortization of a deferred gain in 1993 resulting from the
exchange of the Company's phosphate business for a 56.5 percent
interest in IMC-Agrico.
Interest costs were $10.3 million higher than last year primarily
as a result of costs incurred on increased debt levels.
As a result of an improved earnings outlook, the Company revised
its expected annual effective tax rate in the second quarter of 1993.
The revised effective tax rate resulted in a $10.6 million positive tax
benefit for the quarter ended September 30, 1993 which was included in
the second quarter tax benefit.
Six months ended December 31, 1993 vs. six months ended December 31,
--------------------------------------------------------------------
1992
----
The Company incurred a net loss of $49.9 million, or $2.12 per
share, for the quarter, compared to a net loss of $25.6 million, or
$1.16 per share, a year ago. In 1993, the loss included an
extraordinary charge of $23.8 million, or $1.01 per share, related to
the early extinguishment of $220 million of debt held by The Prudential
Insurance Company of America. In 1992, the loss included a one-time
charge of $47.1 million, or $2.13 per share, related to the Company's
adoption of SFAS No. 106 as of July 1, 1992, to reflect a change in
accounting for postretirement benefits other than pensions. See Notes
6 and 7 of Notes to Consolidated Financial Statements for more
information regarding these non-recurring items.
IMC-Agrico, a joint venture partnership between the Company and
Freeport-McMoRan Resource Partners, Limited Partnership, began
operations July 1, 1993 and is consolidated for financial reporting
purposes. Comparisons between the six months ended December 31, 1993
and December 31, 1992 have been made, where applicable, on a pro forma
basis assuming the Partnership had begun operations on July 1, 1992.
Sales for the six months were $595.4 million, compared to $418.4
million last year. On a pro forma basis, sales for the six month
period a year ago would have been $710.5 million.
Gross margins decreased $40.4 million from the same period a year
ago. On a pro forma basis, gross margins would have decreased $64.7
million, primarily due to lower margins for phosphate fertilizers, a
$43 million decrease on a pro forma basis, potash, an $11 million
decrease, sulphur, a $7 million decrease, and mixed fertilizers, a $1
million decrease.
Phosphate fertilizer market conditions for the six month period,
although still less favorable than the comparable period last year,
have shown strong signs of rebounding. The weakness in the phosphate
fertilizer market and high inventories in July 1993 prompted IMC-Agrico
to idle its Taft, Louisiana, production facility and reduce production
at other of its phosphate production facilities. The resulting lower
inventory levels, combined with increased export demand and an
anticipated stronger second half, have resulted in phosphate chemical
prices increasing as much as $35 per ton late in the first half of
fiscal 1994 to a level approximately 35 percent higher than the spring
of 1993. In order to meet increased demand, in mid-December IMC-Agrico
reopened its Taft, Louisiana, phosphate production facility. Potash
margins decreased primarily due to lower domestic and export demand ($7
<PAGE>
million) and lower prices ($6 million), partially offset by lower
production costs ($2 million). It is anticipated that potash demand
will return to more normal levels during the second half of fiscal
1994. Sulphur production increased significantly since July 1993 and
reached design capacity of 5,500 tons per day in December 1993. The
mine has since sustained production at or above that level. As a
result of the production increases, Main Pass sulphur became
operational for accounting purposes beginning July 1, 1993 and costs
were no longer capitalized. Mixed fertilizer margins declined
primarily as a result of lower prices.
The following table summarizes the Company's sales of fertilizer
products and average selling prices for the six months ended December
31, 1993 and 1992. Where applicable, sales tons and prices for 1992
have been reported on a pro forma basis assuming the joint venture
partnership began operations on July 1, 1992.
(Tons in millions of short tons)
1993 1992
-------- --------
Phosphate fertilizers
Diammonium phosphate
--------------------
Sales tons:
Florida 1.028
Louisiana .853
Warehouse .192
-------- --------
Total sales tons 2.073 2.394
Average price per ton:
Florida $108.32
Louisiana $119.59
Warehouse $121.82
-------- --------
Average price per ton $114.20 $121.12
Monoammonium phosphate
----------------------
Sales tons:
Granular .246 .237
Powdered .108 .077
-------- --------
Total sales tons .354 .314
Average price per ton:
Granular $125.33 $129.91
Powdered $101.58 $105.50
<PAGE>
Granular triple superphosphate
------------------------------
Sales tons .484 .523
Average price per ton $ 90.78 $ 96.91
Phosphate rock
Sales tons 4.669 4.241
Average price per ton $ 19.73 $ 23.54
Potash
Sales tons 1.200 1.502
Average price per ton $ 67.92 $ 71.69
Mixed fertilizers
Sales tons .153 .161
Average price per ton $127.65 $133.51
Other operating income and expense decreased $1.1 million primarily
due to a gain in 1993 of $7.7 million from the amortization of a
deferred gain resulting from the exchange of the Company's phosphate
business for a 56.5 percent interest in IMC-Agrico, offset by a gain of
$8.1 million (in 1992) from the resolution of a contract dispute.
The Company's share of earnings from its equity interest in an oil
and gas joint venture decreased primarily due to a write-down to market
of the Company's investment resulting from a recent decline in oil
prices discussed in Note 2 of Notes to Consolidated Financial
Statements.
Interest costs were $22.1 million higher than last year primarily
as a result of costs incurred on increased debt levels.
Financial Condition
-------------------
In October 1993, the Company completed its purchase of $220 million
principal amount of its 11.25 percent notes from The Prudential
Insurance Company of America for $248.1 million. The notes were
originally scheduled to be due in annual installments from 1995 to
2004. However, the notes were redeemed with the proceeds from the
sale, on the same date, of $160 million of 9.25 percent senior notes
due 2000 and 3,450,000 shares of common stock.
Since June 30, 1993, cash and cash equivalents have decreased $24.5
million. Primary uses of cash included $63.9 million used in operating
activities, $17.2 million to complete a joint venture distribution
settlement with FRP and $12.5 million of capital expenditures.
Partially offsetting this cash outflow was $64.7 million of net
proceeds from the completion of the Company's financing activities.
Working capital at December 31, 1993 was $350.1 million compared
with $195.1 million at June 30, 1993. The increase was due primarily
to working capital contributions by FRP to the joint venture
partnership partially offset by reimbursements of insurance proceeds
related to the May 1993 settlement of an insurance claim receivable
discussed in Note 8 of Notes to Consolidated Financial Statements. The
working capital ratio at December 31, 1993 was 2.7 to 1 compared to 1.8
to 1 at June 30, 1993.
Although the Company is still highly leveraged, consolidated
indebtedness decreased to $894 million at December 31, 1993 from $926.7
<PAGE>
million at June 30, 1993, due primarily to the Company's debt
restructuring discussed above. The ratio of indebtedness to total
capitalization correspondingly decreased to 64.4 percent at December
31, 1993 from 68.3 percent at June 30, 1993.
In June 1993, the Company entered into an agreement with a group of
banks to provide the Company with an unsecured revolving credit
facility under which the Company can borrow up to $100 million for
general corporate purposes until June 30, 1996. At December 31, 1993,
$32 million was drawn down in the form of standby letters of credit
principally to support the Company's industrial revenue bonds.
Borrowings under the revolving credit facility are limited to $25
million during a specified period in any year. There were no other
borrowings outstanding under the revolving credit facility at December
31, 1993.
Certain debt agreements contain provisions which restrict the
Company's ability to make capital expenditures and dispose of assets,
limit the payment of dividends or other distributions to stockholders,
and prohibit the incurrence of additional indebtedness except under
certain conditions. The Company's revolving credit facility also
contains financial ratios and other tests which must be met in
accordance with the agreement. At December 31, 1993, the Company was
in compliance with its debt instrument covenants.
In February 1994, IMC-Agrico entered into a $75 million Revolving
Credit Facility (the Facility) with a group of banks. The Facility,
which has a $25 million Letter of Credit sub facility, provides for a
three year maturity with IMC-Agrico having the right to request one
year extensions of the revolving period. Borrowings under the Facility
are unsecured, with a negative pledge on substantially all of
IMC-Agrico's assets. The Facility has provisions which require minimum
net partners' capital, fixed charge and minimum current ratio
requirements, and also places limitations on indebtedness.
The Partnership makes cash distributions to each partner based on
formulas and sharing ratios as defined in the Partnership agreement.
For the quarter ended December 31, 1993, the total amount of
distributable cash generated by the Partnership was $52.8 million, of
which $30.9 million was distributed to FRP in early February 1994.
There was no distributable cash for the quarter ended September 30,
1993.
Capital expenditures for the fiscal year ending June 30, 1994 are
estimated to total $59 million (including $48 million by the
Partnership). The Company expects to finance these expenditures
(including its portion of the Partnership's capital expenditures) from
operations.
There were no other material changes in the Company's financial
condition, capital resources, or liquidity from that described in the
Company's Annual Report on Form 10-K for the year ended June 30, 1993.
Part II.OTHER INFORMATION
Item 1.Legal Proceedings.
Pursuant to certain agreements between the Company and IMCERA, the
Company has agreed to indemnify IMCERA against any liability or costs
<PAGE>
attributable to, among other things, litigation involving the
fertilizer business, whether or not the events which give rise to the
litigation predated July 1, 1987.
In the ordinary course of its business, the Company is and will
from time to time be involved in routine litigation. Except for the
matters discussed below, which matters were previously discussed in the
Company's 1993 Annual Report on Form 10-K and Quarterly Report on Form
10-Q for the quarter ended September 30, 1993, none of the litigation
pending or known to be threatened at this time is regarded by the
Company as potentially material.
Sterlington Litigation
On April 22, 1993, Angus Chemical Company (Angus) filed a lawsuit
in Louisiana relating to an explosion at a nitroparaffin plant in
Sterlington, Louisiana, owned by Angus but operated by the Company
pursuant to a management agreement, naming the Company and certain of
its insurers as defendants and seeking damages allegedly in addition to
those settled on April 1, 1993, in Texas litigation between the parties
relating to this matter. The Company has been informed by counsel to
Angus that the alleged damages relate to (i) direct action claims
against two of the Company's insurers, with one of which the Company
has agreed to an indemnity provision which such insurer might assert
requires the Company to indemnify such insurer, (ii) third-party claims
against Angus and (iii) sums already paid by Angus to third parties.
With respect to the potential impact on the Company of the direct
action claims against its insurers and the claims for sums already paid
by Angus to third parties, the Company believes that there are
substantial defenses and the Company believes that, in any event, the
Company's exposure, if any, for such direct action claims is
approximately $30 million. This amount represents the difference
between the policy limits of one of the Company's excess liability
policies and the amount paid to the Company by the insurer under such
policy. In connection with settling the Company's insurance coverage
dispute with such insurer, the Company agreed to an indemnity provision
which such insurer might assert requires the Company to indemnify such
insurer for any amounts in excess of the settlement amount. The
Company has not had the opportunity to analyze fully any specific
damage claims which might be made by Angus in such new lawsuit, or to
make a definitive judgment as to potential liability exposure, if any.
However, on August 26, 1993 the Company filed in Texas a lawsuit
seeking a declaration that the direct action claims against the
Company's insurers and the claims for sums already paid by Angus to
third parties (items (i) and (iii) respectively above) were disposed of
in the settlement of the previous Texas litigation. Angus has filed a
motion for partial summary judgment and a counterclaim in this Texas
lawsuit. The Company has also filed a motion for summary judgment.
The trial judge has heard arguments on both motions but has not issued
a ruling as to either.
Potash Antitrust Litigation
The Company is a party, along with other Canadian and U.S. potash
producers, in a number of class action antitrust lawsuits filed in 1993
in courts in several states. These have now been consolidated in
federal court in Minnesota. The plaintiffs are purchasers of potash
who allege a price fixing conspiracy among North American potash
producers beginning in 1987 and continuing until the filing of the
complaints. Upon motion of the defendants, the court has disqualified
many of the plaintiff law firms on the ground that they received
<PAGE>
information used in the litigation from the formal general counsel of
one of the defendants, in violation of his obligation to his client.
The disqualified law firms asked the 8th Circuit Court of Appeals to
hear an appeal on this decision but were refused. While the Company
believes that the allegations in the complaints are without merit,
until such time as the Company has completed the investigation of the
specific allegations, it is unable to evaluate all possible defenses or
to make a reliable determination as to potential liability exposure, if
any.
The Company has also received a subpoena issued by a federal grand
jury sitting in Cleveland, Ohio, seeking various documents relating to
the sale of potash in the United States from 1986 to the present. The
Company is cooperating with the government in this investigation and is
assembling the documents to be produced. As in the civil matter
described above, while the Company does not believe that violations of
the antitrust laws have occurred, the Company is unable to predict the
outcome of this investigation or to make a reliable determination as to
potential exposure, if any.
Purported Louisiana Class Action
The plaintiff in this lawsuit, which alleges that IMC Fertilizer,
Inc. and FRP affiliates discharged contaminants into the Mississippi
River which made their way into the New Orleans water supply and
thereby injured New Orleans residents, has stated that he wishes to
have this lawsuit voluntarily dismissed. Upon such dismissal, this
litigation would be terminated without payment by the defendants.
Environmental Investigation
The U.S. Environmental Protection Agency (EPA) has been
investigating the Company's operations in Florida concerning possible
exceedences of waste water discharge levels under applicable permits.
On November 4, 1993, Company representatives were informed by EPA
representatives that approval had been issued for the filing of a civil
action against IMC in federal district court seeking civil penalties
and other relief. The EPA representatives stated a willingness to
settle the case by the entry of a consent decree calling for the
payment of $6 million to $10 million in some combination of penalty
payment and implementation of supplemental environmental projects.
The Company has taken action to bring itself into compliance with
the federal waste water discharge permits and has responded to the EPA
allegations and suggested a settlement range. There can be no
assurance that this matter will be disposed of by settlement, for an
amount in the $6 million to $10 million range, or otherwise.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
No. Description
-------------------------------------------------------------
11.3 Fully diluted earnings per share computation for the
six months ended December 31, 1993
(b) Reports on Form 8-K.
Up to the date of this report, the following reports on Form
8-K were filed:
A report under Item 5 dated October 12, 1993.
A report under Item 5 dated November 30, 1993
A report under Item 5 dated January 7, 1994
* * * * * * * * * * * * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
IMC FERTILIZER GROUP, INC.
Robert C. Brauneker
--------------------------------------------
Robert C. Brauneker
Executive Vice President
and Chief Financial Officer
Date: February 11, 1994
<PAGE>
EXHIBIT 11.3
EARNINGS (LOSS) PER SHARE
FULLY DILUTED COMPUTATION
FOR THE SIX MONTHS ENDED DECEMBER 31, 1993 AND 1992
(IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
At December 31,
-----------------------
1993 1992
----------- -----------
Basis for computation of fully diluted
earnings per share:
Earnings (loss) before extraordinary item
and cumulative effect of accounting change,
as reported $ (26.1)$ 21.5
Add interest charges on convertible debt 3.6 3.6
Less provision for taxes (1.4) (1.4)
---------- ----------
Earnings (loss) before extraordinary item
and cumulative effect of accounting change,
as adjusted (23.9) 23.7
Extraordinary loss - debt retirement (23.8)
Cumulative effect of accounting change (47.1)
---------- ----------
Net earnings (loss) applicable to
common stock $ (47.7) $ (23.4)
========== ==========
Number of shares:
Weighted average shares outstanding 23,585,531 22,095,379
Conversion of convertible subordinated
notes into common stock 1,811,024 1,811,024
---------- ----------
Total common and common equivalent
shares assuming full dilution 25,396,555 23,906,403
========== ==========
Fully diluted earnings (loss) per share:
Earnings (loss) before extraordinary item
and cumulative effect of accounting change $ (.94) $ .99
Extraordinary loss - debt retirement (.94)
Cumulative effect of accounting change (1.97)
---------- ----------
Net earnings (loss) $ (1.88) $ (.98)
========== ==========
This calculation is submitted in accordance with Regulation S-K item
601(b)(11). However, under APB Opinion No. 15, calculation of fully
diluted earnings (loss) per share would exclude the conversion of
convertible securities which would have an antidilutive effect on
earnings (loss) per share for each period.
