<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 March 31, 1994
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: 25,577,217 shares, excluding 6,655,008
treasury shares as of April 30, 1994.
------------------------------------------------------------------
----------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying interim condensed 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 the following Notes to Condensed
Consolidated Financial Statements. Certain 1993 amounts have been
reclassified to conform to the 1994 presentation. Interim results are
not necessarily indicative of the results expected for the fiscal year.
All references to years are to fiscal years ended June 30 unless
otherwise stated.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions except per share amounts)
Three MonthsEnded Nine Months Ended
March 31, March 31,
1994 1993 1994 1993
-----------------------------------------------------------------------
Net sales $ 410.5 $ 222.8 $1,005.9 $ 641.2
Cost of goods sold 332.8 203.1 887.0 539.9
-------- -------- -------- --------
Gross margins 77.7 19.7 118.9 101.3
Selling, general and
administrative expenses 15.8 14.5 45.4 45.3
Sterlington litigation
settlement, net (Note
1) 169.1 169.1
Other operating (income)
and expense, net(Note 2) (3.8) (11.0)
(.2) (13.5)
-------- -------- -------- --------
Equity in (earnings) loss
of oil and gas joint
venture (Note 3) 1.2 20.6 (2.4)
.1
Interest earned and other
non-operating (income)
and expense, net 1.0 .3 4.3 6.8
Interest charges 19.9 10.3 62.7 31.0
-------- -------- -------- --------
Earnings (loss) before
minority interest and
items noted below (175.5)
44.7 (.6) (137.5)
Minority interest (Note
4) 23.0 28.3
<PAGE>
-------- -------- -------- --------
Earnings (loss) before
items noted below 21.7 (175.5) (28.9) (137.5)
Provision (credit) for
income taxes (Note 5) 16.3 (60.7) (8.2) (44.2)
-------- -------- -------- --------
Earnings (loss) before
extraordinary item
and cumulative effect
of accounting change 5.4 (114.8) (20.7) (93.3)
Extraordinary loss-debt (23.8)
retirement (Note 7)
Cumulative effect of
accounting change (Note
8) (47.1)
-------- -------- -------- --------
Net earnings (loss) $ 5.4 $ (114.8) $ (44.5) $ (140.4)
======== ======== ======== ========
Earnings (loss) per
share (Note 6):
Earnings (loss) before
extraordinary item
and cumulative effect
of accounting change $ .21 $ (5.20) $ (.85) $ (4.23)
Extraordinary loss-debt
retirement (Note 7) (.98)
Cumulative effect of
accounting change
(Note 8)
$ (2.13)
-------- -------- -------- --------
Net earnings (loss) $ .21 $ (5.20) $ (1.83) $ (6.36)
======== ======== ======== ========
(See Notes to Condensed Consolidated Financial Statements on Page 5)
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions except per share amounts)
March 31, June 30,
Assets 1994 1993
---------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 123.2 $ 111.6
Receivables, net 187.4 145.1
Inventories
Products (principally finished) 199.7 120.1
Operating materials and supplies 65.4 44.2
-------- --------
265.1 164.3
Prepaid expenses 12.4 12.4
-------- --------
Total current assets 588.1 433.4
Investment in oil and gas joint venture
(Note 3) 20.9 55.0
Property, plant and equipment 3,371.7 2,422.0
Accumulated depreciation and depletion (1,443.3) (1,095.5)
-------- --------
Net property, plant and equipment 1,928.4 1,326.5
Deferred income taxes 227.2 187.5
Other assets 77.8 53.2
-------- --------
$2,842.4 $2,055.6
======== ========
Liabilities and Stockholders' Equity
-----------------------------------------------------------------
Current liabilities:
Accounts payable $ 92.2 $ 75.9
Income taxes 15.3 10.0
Dividend payable to Mallinckrodt Group
Inc. (Note 9) 51.9
Accrued liabilities 108.8 67.2
Current maturities of long-term debt 50.5 33.3
-------- --------
Total current liabilities 266.8 238.3
Long-term debt, less current maturities
(Note 7) 822.6 893.4
Deferred income taxes 316.4 317.5
Accrued postretirement employee benefits 91.9 82.8
Accrued reclamation costs 86.4 51.4
Other noncurrent liabilities 54.9 41.8
Deferred gain (Note 4) 51.3
Minority interest (Note 4) 649.8
<PAGE>
Stockholders' equity:
Common stock, $1 par value authorized
50,000,000 shares; issued 32,230,480
shares and 32,156,920 shares at March 31
and June 30, respectively
32.2 32.2
Capital in excess of par value 750.9 768.4
Retained earnings (deficit) (22.0) 22.5
Treasury stock, at cost, 6,655,008 shares
and 10,097,808 shares of common stock at
March 31 and June 30, respectively (392.7)
(258.8)
-------- --------
Total stockholders' equity 502.3 430.4
-------- --------
$2,842.4 $2,055.6
======== ========
(See Notes to Condensed Consolidated Financial Statements on Page 5)
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Nine months ended
March 31,
1994 1993
----------------------------------------------------------------
Cash Flows from Operating Activities
------------------------------------
Net loss $ (44.5) $(140.4)
Adjustments to reconcile net loss to net
cash (used) provided by operating
activities:
Depreciation, depletion and amortization 82.9 48.0
Deferred income taxes (40.9) (93.0)
Cash distributions in excess of equity
in operating results of oil and gas
joint venture 34.2 15.8
Minority interest 28.3
Postretirement employee benefits 4.8 81.0
Sterlington litigation settlement 180.0
Other non-cash charges and credits, net (16.2) 2.9
Changes in:
Receivables 2.9 (43.3)
Inventories 37.6 (52.0)
Prepaid expenses 3.6
Accounts payable, accrued liabilities
and income taxes
(58.1) 71.1
------- -------
Net cash provided by operating
activities 73.7
31.0
------- -------
Cash Flows from Investing Activities
------------------------------------
Capital expenditures (19.7) (90.8)
Other 4.7 (.7)
------- -------
Net cash used by investing activities (15.0) (91.5)
------- -------
Net cash (used) provided before
financing activities
16.0 (17.8)
------- -------
Cash Flows from Financing Activities
------------------------------------
Payments of long-term debt (243.2)
Proceeds from issuance of long-term debt,
net 173.6 58.8
Issuance of common stock from treasury 113.4
Joint venture cash distribution to FRP (48.2)
Cash dividends paid (17.9)
<PAGE>
------- -------
Net cash (used) provided by financing
activities (4.4) 40.9
------- -------
Net increase in cash and cash equivalents 11.6 23.1
Cash and cash equivalents - beginning of
period 32.6
111.6
------- -------
Cash and cash equivalents - end of period $ 123.2 $ 55.7
======= =======
Supplemental cash flow disclosures:
Interest paid $ 42.6 $ 43.9
Income taxes paid $ 10.3 $ 5.3
Supplemental schedule of non-cash investing
and financing activities:
Acquisition of interest in joint venture -
Net assets acquired $ 715.2
Minority interest 652.5
-------
$ 62.7
=======
(See Notes to Condensed Consolidated Financial Statements on Page 5)
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In millions except per share amounts)
Nine months ended
March 31,
1994 1993
------------------------------------------------------------------
Common stock:
Balance at June 30 and March 31 $ 32.2 $ 32.1
Capital in excess of par value:
Balance at June 30 768.4 768.0
Issuance of common stock (Note 7) (20.6)
Restricted stock awards 3.0
Stock options exercised .1 .2
------ ------
Balance at March 31 750.9 768.2
Retained earnings:
Balance at June 30 22.5 207.4
Net loss (44.5) (140.4)
Dividends ($.81 a share in 1993) (17.9)
------ ------
Balance at March 31 (22.0) 49.1
Treasury stock:
Balance at June 30 (392.7) (392.1)
Issuance of common stock from treasury
(Note 7) 134.1
Acquisition of shares (.2)
Restricted stock awards (.2)
------ ------
Balance at March 31 (258.8) (392.3)
------ ------
Total stockholders' equity $502.3 $457.1
====== ======
<PAGE>
(See Notes to Condensed Consolidated Financial Statements on Page 5)
<PAGE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Sterlington Litigation
----------------------
Operating earnings for the three and nine months ended March 31,
1993 included a charge of $169.1 million, net of insurance
recoveries and legal fees, which reflected settlement of a lawsuit
by Angus Chemical Company (Angus) for damages arising out of an
explosion at a nitroparaffins plant in Sterlington, Louisiana. The
Company is defending other lawsuits for property damage and
personal injury arising out of this explosion.
2. Resolution of Contract Dispute
------------------------------
Other operating (income) and expense, net, for the nine months
ended March 31, 1993, included a gain of $8.1 million from the
resolution of a contract dispute with a major uranium oxide
customer.
3. Write-Down of Investment in Oil and Gas Joint Venture
------------------------------------------------------
Operating results for the nine months ended March 31, 1994 included
a charge of $20.3 million for the write-down of the Company's
investment in an oil and gas joint venture due to the low price of
crude oil in the three months ended December 31, 1993.
4. 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 $62.7 million which is recognized in the
statement of operations as the related FRP assets are being used in
operations, generally over 20 years. Other operating (income) and
expense, net included $3.7 and $11.4 million of such gain for the
quarter and nine months ended March 31, 1994. The Partnership's
results of operations for the nine months ended March 31, 1994 were
consolidated with those of the Company, and FRP's 43.5 percent
interest in the 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 three months ended March 31, 1994, the total
amount of distributable cash generated by the Partnership was $93
million, of which $54.5 million was distributed to FRP in May 1994.
<PAGE>
The following summary of the Company's Condensed Consolidated
Statement of Operations for the three and nine months ended March
31, 1994 and 1993 is presented for comparative purposes. For the
three and nine months ended March 31, 1993, unaudited pro forma
Condensed Consolidated Statement of Operations data give effect to
formation of the joint venture partnership as if the formation
occurred on July 1, 1992.
Three MonthsEnded Nine Months Ended
March 31, March 31,
(Pro forma) (Pro forma)
(In millions except per share amounts)1994 1993 1994 1993
-----------------------------------------------------------------------
Net sales $ 410.5 $ 348.0 $1,005.9 $1,058.5
Operating earnings (loss) 65.7 (177.0) 87.0 (135.4)
Earnings (loss) before minority
interest, income taxes,
extraordinary item and
cumulative effect of accounting
change 44.7 (189.6) (.6) (171.8)
Minority interest 23.0 9.1 28.3 4.7
-------- ---------------- --------
Earnings (loss) before income
taxes, extraordinary item and
cumulative effect of accounting
change 21.7 (180.5) (28.9) (167.1)
Earnings (loss) before extra-
ordinary item and cumulative
effect of accounting change 5.4 (117.9) (20.7) (111.6)
Extraordinary loss - debt
retirement (Note 7) (23.8)
Cumulative effect of accounting
change (47.1)
-------- ---------------- --------
Net earnings (loss) $ 5.4 $ (117.9) $ (44.5) $(158.7)
======== ======== ======= =======
Net earnings (loss) per share:
Earnings (loss) before extra-
ordinary item and cumulative
effect of accounting change $ .21 $ (5.34)$ (.85) $(5.05)
Extraordinary loss - debt
retirement (.98)
Cumulative effect of accounting
change (2.13)
-------- ---------------- --------
Net earnings (loss) $ .21 $ (5.34)$ (1.83) $ (7.18)
======== ================ =======
5. Income Taxes
------------
For the nine months ended March 31, 1994, 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 and for the three
months ended March 31, 1994, included a charge of $5 million which
<PAGE>
reflected a change in the annual effective tax rate due to an
improved earnings outlook.
6. 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 25.7 and 24.3 million shares for the three and
nine months ended March 31, 1994 and 22.1 million shares for the
three and nine months ended March 31, 1993.
7. Extraordinary Loss-Debt Retirement
----------------------------------
In October 1993, the Company completed its purchase of $220 million
principal amount of its 11 1/4 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. 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 1/4 percent Notes
and the write-off of previously deferred finance charges associated
with such Notes, net of income taxes.
8. 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 nine months ended March 31, 1993 reflected a charge, net of
taxes, for the cumulative effect of the adoption of SFAS No. 106 as
of July 1, 1992.
9. Dividend Payable to Mallinckrodt
--------------------------------
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 Mallinckrodt Group Inc., formerly IMCERA Group Inc., of
$51.9 million relating to amounts Mallinckrodt Group Inc. paid for
water inflow control prior to its disposition of the Company.
10. Public Offering of Common Stock
-------------------------------
On May 5, 1994, the Company completed a public offering of
4,000,000 shares of common stock at $37.00 per share (the
Offering). Net proceeds of the Offering, after deducting
applicable issuance costs and expenses, totaled approximately
$141.9 million, and are being used to reduce long-term indebtedness
of the Company. Through May 13, 1994, the Company has utilized
$61.9 million of the proceeds to retire portions of its 9 1/4
percent Senior Notes due 2000, 10 1/8 percent Senior Notes due
2001, and 10 3/4 percent Senior Notes due 2003. As a result of the
reduction of long-term indebtedness noted above and the reduction
of approximately $3.5 million of additional long-term indebtedness
on April 1, 1994, the Company would record in its fourth quarter
<PAGE>
financial statements an after-tax extraordinary charge of $1.2
million for premiums paid and the write-off of deferred financing
charges incurred in connection with the issuance of the retired
debt. There could be additional extraordinary charges in the
fourth quarter depending on the specific debt retired with the
remaining proceeds.
Assuming the Offering was completed on January 1, 1994 and the
entire amount of the proceeds was used to reduce long-term
indebtedness on the same basis as the $61.9 million of notes
already retired, pro forma net earnings for the three months ended
March 31, 1994 would have been $5.1 million, or $.17 per share,
reflecting the increased number of shares outstanding, interest
savings on lower debt balances, and the extraordinary charge. For
the nine months ended March 31, 1994, assuming the Offering and use
of such proceeds, and the purchase of the 11 1/4 percent Notes from
Prudential and the sale of the related common stock and Senior
Notes that occurred in October 1993 had all occurred on July 1,
1993, the Company would have incurred a pro forma net loss of $29.3
million, or $1.04 per share.
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
---------------------
Three months ended March 31, 1994 vs. three months ended March 31, 1993
-----------------------------------------------------------------------
Net earnings for the three months amounted to $5.4 million, or $.21
per share, compared to a net loss of $114.8 million, or $5.20 per
share, a year ago. The net loss for 1993 included a charge of $109.1
million, or $4.94 per share, attributable to the settlement of
litigation resulting from the May 1991 explosion at a nitroparaffins
plant managed by a subsidiary of the Company in Sterlington, Louisiana.
See Note 1 of Notes to Condensed 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 three months ended March 31, 1994
and March 31, 1993 have been made, where applicable, on a pro forma
basis assuming the Partnership had begun operations on July 1, 1992.
Sales for the three months ended March 31, 1994 were $410.5
million, compared to $222.8 million last year. On a pro forma basis,
sales for the three-month period a year ago would have been $348
million. Sales in 1994, as compared to 1993 on a pro forma basis,
increased 18 percent primarily due to higher phosphate chemical market
prices.
Gross margins increased $58 million from the same period a year
ago. On a pro forma basis, gross margins would have increased $61.8
million, primarily due to higher margins for phosphate fertilizers, a
$57 million increase on a pro forma basis, and potash, a $4 million
increase.
The improved third quarter financial performance reflected
increased demand for the Company's phosphate fertilizer products along
<PAGE>
with a corresponding increase in market prices. Sales realizations for
diammonium phosphate (DAP), a major phosphate fertilizer product, have
risen steadily since the spring of 1993. For the quarter, average DAP
prices were 24 percent higher versus the same period a year ago. Unit
production costs were lower when compared to last year, in spite of
sharply higher ammonia prices, primarily due to lower raw material
costs for sulphur. Potash margins increased primarily due to increased
domestic demand ($4 million) and a 1 percent decrease in production
costs ($4 million), partially offset by a 13 percent decrease in
average sales realizations ($4 million). Sulphur production at Main
Pass exceeded design capacity (5,500 tons per day) as production
averaged 5,600 tons per day during the quarter. It is expected that
production can be sustained at or near 6,000 tons per day in the near
future.
In March 1994, the Company announced that it planned to resume
operations at its Nichols, Florida, DAP facility in May 1994. The
facility had been idled since May 1993. The start-up was in response
to a near-term outlook of continued strong international demand for
phosphate fertilizers, the market the Nichols facility primarily
serves. However, on May 9, 1994 the Company shut down its Taft,
Louisiana, facility. This action was taken in response to an
earlier-than-normal seasonal decline in demand for phosphate
fertilizers after a period of strong domestic demand throughout the
spring planting season.
The following table summarizes the Company's sales of fertilizer
products and average selling prices for the three months ended March
31, 1994 and 1993. Where applicable, sales tons and prices for 1993
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)
1994 1993
-------- --------
Phosphate fertilizers
Diammonium phosphate
--------------------
Sales tons:
Florida .468
Louisiana .584
Warehouse .076
-------- --------
Total sales tons 1.128 .992
Average price per ton:
Florida $134.49
Louisiana $143.85
Warehouse $146.57
-------- --------
Average price per ton $140.16 $112.72
Monoammonium phosphate
----------------------
Sales tons:
Granular .186 .208
Powdered .080 .093
-------- --------
Total sales tons .266 .301
<PAGE>
Average price per ton:
Granular $152.50 $117.87
Powdered $122.40 $ 92.64
Granular triple superphosphate
------------------------------
Sales tons .271 .250
Average price per ton $107.38 $ 91.32
Phosphate rock
Sales tons 2.246 1.945
Average price per ton $ 20.67 $ 22.05
Potash
Sales tons 1.009 .798
Average price per ton $ 57.93 $ 66.48
Mixed fertilizers
Sales tons .254 .224
Average price per ton $134.96 $132.90
Other operating income and expense increased primarily due to a
gain of $3.7 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.
Interest costs were $9.6 million higher than last year primarily as
a result of costs incurred on increased debt levels and the
discontinuation of capitalization of interest on the Main Pass sulphur
project.
As a result of an improved earnings outlook, the Company revised
its expected annual effective tax rate in the third quarter of fiscal
1994. The revised effective tax rate resulted in a $5 million charge,
or $.20 per share, to reflect a reduction of the tax benefit recorded
for the six months ended December 31, 1993.
Nine months ended March 31, 1994 vs. nine months ended March 31, 1993
---------------------------------------------------------------------
The Company incurred a net loss of $44.5 million, or $1.83 per
share, for the nine months ended March 31, 1994 compared to a net loss
of $140.4 million, or $6.36 per share, a year ago. In 1994, the loss
included an after-tax charge of $12.4 million, or $.51 per share, for
an oil and gas investment write-down and an extraordinary charge of
$23.8 million, or $.98 per share, related to the early extinguishment
of $220 million of debt held by The Prudential Insurance Company of
America. In 1993, the loss included an after-tax charge of $109.1
million, or $4.94 per share, related to the Sterlington litigation
settlement and 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 1, 3, 7 and 8 of Notes to Condensed 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 nine months ended March 31, 1994 and
<PAGE>
March 31, 1993 have been made, where applicable, on a pro forma basis
assuming the Partnership had begun operations on July 1, 1992.
Sales for the nine months ended March 31, 1994 were $1,005.9
million, compared to $641.2 million last year. On a pro forma basis,
sales for the nine-month period a year ago would have been $1,058.5
million. The sales decline in 1994 as compared to 1993 on a pro forma
basis reflected the Company's decision to reduce production at its
phosphate chemical facilities earlier in the year.
Gross margins increased $17.6 million from the same period a year
ago. On a pro forma basis, gross margins would have increased $23.1
million, primarily due to higher margins for phosphate fertilizers, a
$33 million increase on a pro forma basis, partially offset by lower
potash margins of $7 million and higher distribution costs of $3
million.
The weakness in the phosphate fertilizer market combined with high
inventories in July 1993 prompted the Company to idle its Taft,
Louisiana, production facility and reduce production at other of its
phosphate production facilities. By the end of March 1994, spot prices
for DAP had increased approximately 45 percent from a low of
approximately $100 per short ton (f.o.b. central Florida) during the
spring of 1993. In order to meet increased demand, the Company has
steadily increased production at its operating plants and, in
anticipation of stronger demand, in mid-December the Company reopened
the Taft facility. In March 1994, the Company announced that it
planned to resume operations at the Nichols plant in May 1994 due to
lower finished goods inventories and in order to meet anticipated
international demand. However, on May 9, 1994 the Company shut down
the Taft facility. This action was taken in response to an
earlier-than-normal seasonal decline in demand for phosphate
fertilizers after a period of strong domestic demand throughout the
spring planting season. As a result of this shutdown, it is
anticipated that phosphate fertilizer inventories, at the adjusted
production level, will be appropriate for meeting customers' near-term
needs.
Potash margins decreased primarily due to lower domestic and export
demand ($4 million) and a 9 percent decrease in market prices ($10
million), partially offset by a 1 percent decrease in production costs
($7 million). However, potash demand should return to more normal
levels in the near term as China placed one of its largest potash
orders ever with Canpotex, the Company's potash export and marketing
arm. The supply contract, for 700,000 metric tons of muriate of
potash, will be filled by Canpotex member companies of which the
Company's Canadian operations will supply approximately 17 percent.
With large international demand, production levels should remain high,
particularly since domestic potash demand during the spring season has
met or exceeded expectations. This should translate into relatively
low inventory levels through June 1994.
The following table summarizes the Company's sales of fertilizer
products and average selling prices for the nine months ended March 31,
1994 and 1993. Where applicable, sales tons and prices for 1993 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)
1994 1993
<PAGE>
-------- --------
Phosphate fertilizers
Diammonium phosphate
--------------------
Sales tons:
Florida 1.496
Louisiana 1.437
Warehouse .268
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Total sales tons 3.201 3.386
Average price per ton:
Florida $116.50
Louisiana $129.45
Warehouse $128.87
-------- --------
Average price per ton $123.35 $118.66
Monoammonium phosphate
----------------------
Sales tons:
Granular .432 .446
Powdered .188 .170
-------- --------
Total sales tons .620 .616
Average price per ton:
Granular $137.03 $124.28
Powdered $110.42 $ 98.47
Granular triple superphosphate
------------------------------
Sales tons .755 .773
Average price per ton $ 96.74 $ 95.10
Phosphate rock
Sales tons 6.915 6.185
Average price per ton $ 20.03 $ 23.07
Potash
Sales tons 2.209 2.299
Average price per ton $ 63.36 $ 69.88
Mixed fertilizers
Sales tons .407 .384
Average price per ton $132.21 $133.15
Other operating income and expense increased $2.5 million primarily
due to a gain in 1994 of $11.4 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 1993 from the resolution of a contract dispute.
The Company's share of operating results from its 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 decline in oil
prices discussed in Note 3 of Notes to Condensed Consolidated Financial
Statements.
<PAGE>
Interest earned and other non-operating income and expense
decreased $2.5 million primarily due to higher interest income and
favorable foreign currency conversion rates, partially offset by
increased debt amortization fees.
Interest costs were $31.7 million higher than last year primarily
as a result of costs incurred on increased debt levels and the
discontinuation of capitalization of interest on the Main Pass sulphur
project.
Financial Condition
-------------------
In October 1993, in order to reduce its debt service obligations
and strengthen its balance sheet, the Company completed its purchase of
$220 million principal amount of its 11 1/4 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 1/4 percent Senior Notes
due 2000 and 3,450,000 shares of common stock, thereby reducing annual
interest costs by approximately $7 million in 1994 and by approximately
$10 million thereafter.
Since June 30, 1993, cash and cash equivalents have increased $11.6
million. Primary sources of cash included $43.8 million which remained
after the Company completed its financing activities and $31.0 million
which was provided by operating activities. Partially offsetting these
cash inflows was a cash sharing distribution of $30.9 million and a
joint venture settlement totaling $17.2 million, both of which were
paid to FRP, and capital expenditures which totaled $19.7 million.
Working capital at March 31, 1994 was $321.3 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 discussed in Note 9 of Notes
to Condensed Consolidated Financial Statements. The working capital
ratio at March 31, 1994 was 2.2 to 1 compared to 1.8 to 1 at June 30,
1993.
Although the Company is still highly leveraged, consolidated
indebtedness decreased to $873.1 million at March 31, 1994 from $926.7
million at June 30, 1993, due primarily to the Company's debt
restructuring discussed above and the early redemption on March 31,
1994 of three promissory notes held by Brewster Phosphates. The ratio
of indebtedness to total capitalization correspondingly decreased to
63.5 percent at March 31, 1994 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 (IMC Working Capital Facility) under which the Company may
borrow up to $100 million for general corporate purposes, including
financing of seasonal working capital needs. The IMC Working Capital
Facility includes a $38 million subfacility for standby letters of
credit. As of March 31, 1994, $32 million was drawn down in the form
of standby letters of credit, principally to support tax free revenue
bonds and pollution control bonds, leaving available borrowings for
<PAGE>
working capital purposes of $68 million. Borrowings under the IMC
Working Capital Facility are limited to $25 million during a specified
period in any year, which provision has been satisfied for 1994. There
were no other borrowings outstanding under the IMC Working Capital
Facility at March 31, 1994.
Certain debt agreements contain provisions which restrict the
Company's ability to make capital expenditures, dispose of assets,
limit the payment of dividends or other distributions to shareholders,
and prohibit the incurrence of additional indebtedness except under
certain conditions. The IMC Working Capital Facility also contains
ratios and other tests which must be met in accordance with the
agreement. The Company is currently in compliance with all of the
covenants in the indentures and other agreements governing its
indebtedness.
In February 1994, IMC-Agrico entered into the $75 million
Partnership Working Capital Facility with a group of banks. The
Partnership Working Capital Facility, which has a letter of credit
subfacility for up to $25 million, provides for a three year maturity.
Borrowings under the Partnership Working Capital Facility are
unsecured, with a negative pledge on substantially all of IMC-Agrico's
assets. The Partnership Working Capital Facility has minimum net
Partners' capital, fixed charge and current ratio requirements, and
places limitations on indebtedness of the Partnership and restricts the
ability of the Partnership to make cash distributions in excess of
Distributable Cash (as defined). At March 31, 1994, IMC-Agrico had
drawn down $2.8 million under the letter of credit subfacility and had
no borrowings under the remainder of the Partnership Working Capital
Facility. Available borrowings under the Partnership Working Capital
Facility at March 31, 1994 were $72.2 million.
The Partnership makes cash distributions to each partner based on
formulas and sharing ratios as defined in the Partnership Agreement.
For the three months ended March 31, 1994, the total amount of
Distributable Cash (as defined) generated by the Partnership was $93
million, of which $54.5 million was distributed to FRP in May 1994.
Capital expenditures for the fiscal year ending June 30, 1994 are
estimated to total $41 million (including $31 million by the
Partnership). The Company expects to finance these expenditures
(including its portion of the Partnership's capital expenditures) from
operations.
On May 5, 1994, the Company completed a public offering of
4,000,000 shares of common stock at $37.00 per share (the Offering).
Net proceeds of the Offering, after deducting applicable issuance costs
and expenses, totaled approximately $141.9 million, and are being used
to reduce long-term indebtedness of the Company. Through May 13,
1994, the Company has utilized $61.9 million of the proceeds to retire
portions of its 9 1/4 percent Senior Notes due 2000, 10 1/8 percent
Senior Notes due 2001, and 10 3/4 percent Senior Notes due 2003. As a
result of the reduction of long-term indebtedness noted above and the
reduction of approximately $3.5 million of additional long-term
indebtedness on April 1, 1994, the Company would record in its fourth
quarter financial statements an after-tax extraordinary charge of $1.2
million for premiums paid and the write-off of deferred financing
charges incurred in connection with the issuance of the retired debt.
There could be additional extraordinary charges in the fourth quarter
depending on the specific debt retired with the remaining proceeds.
<PAGE>
Assuming the Offering was completed on January 1, 1994 and the
entire amount of the proceeds was used to reduce long-term indebtedness
on the same basis as the $61.9 million of notes already retired, pro
forma net earnings for the three months ended March 31, 1994 would have
been $5.1 million, or $.17 per share, reflecting the increased number
of shares outstanding, interest savings on lower debt balances, and the
extraordinary charge. For the nine months ended March 31, 1994,
assuming the Offering and use of such proceeds, and the purchase of the
11 1/4 percent Notes from Prudential and the sale of the related common
stock and Senior Notes that occurred in October 1993 had all occurred
on July 1, 1993, the Company would have incurred a pro forma net loss
of $29.3 million, or $1.04 per share.
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
Mallinckrodt, the Company has agreed to indemnify Mallinckrodt against
any liability or costs 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 (other than the "Recent
Environmental Matter" and the "Mining Setback Restriction Matter"
described below) were previously discussed in the Company's 1993 Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q for the quarters
ended September 30, 1993 and December 31, 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 filed a lawsuit in
Louisiana relating to an explosion at a nitroparaffins 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,
which sums Angus had indicated approximate $10 million to $12 million.
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
<PAGE>
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. The trial judge
has ruled that, on the basis of the existing terms of the settlement
agreement with Angus and the related April 1993 final judgment, Angus
is not barred from bringing direct action claims in Louisiana against
the Company's insurers, but did not rule as to whether such claims have
any merit under Louisiana law. Unless the judge reverses herself on
motion for reconsideration, the Company will likely appeal this ruling.
The judge also ruled that, under the same settlement agreement and
related final judgment, Angus did not release the Company from claims
for sums already paid by Angus to third parties. Remaining unresolved
are the Company's claims that the terms of these documents relating to
the claims for sums already paid by Angus to third parties were
improperly procured by Angus. Also unresolved is Angus' counterclaim
relating to third party claims against Angus. Trial of the latter two
matters is now set for October of 1994 and February of 1995,
respectively.
As previously reported, the Company, in connection with the
Sterlington explosion, has received $85.7 million from three excess
insurers and, under the terms of a partial settlement with one of them,
is pursuing additional amounts in arbitration with that insurer. In
that arbitration, the insurer has filed a counterclaim which seeks the
return of the $15 million paid to the Company by that insurer.
Potash Antitrust Litigation
The Company was named as a defendant, 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 lawsuits were
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 grounds that they
received information used in the litigation from the former general
counsel of one of the defendants, in violation of the general counsel's
obligation to his client. Following this ruling, some of the
plaintiffs retained new counsel and filed new complaints alleging many
of the same facts. The court has now chosen January 1996 as the target
date for trial of these cases. Discovery is expected to continue into
at least the middle of calendar 1995. In March 1994, a class action
lawsuit with similar allegations was filed in state court in
California. While the Company believes that the allegations in the
complaints are without merit, until discovery is completed, the Company
is unable to make a reliable determination as to any potential
liability exposure.
<PAGE>
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
any potential exposure.
Recently Dismissed 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 voluntarily dismissed this
litigation 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 the Company in federal district court seeking civil
penalties and other relief. The EPA representatives have stated a
willingness to settle the case by the entry of a consent decree calling
for the payment of $3 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 made a counterproposal to the EPA. There can be no
assurance that this matter will be disposed of by settlement, for $3
million or otherwise.
Recent Environmental Matter
The Company was recently notified by the U.S. EPA that it is
alleged to be a ``
potentially responsible party'' for pollution of a
site in Woodstock, Illinois, designated to be on the U.S. Superfund
list. The Company has not had the opportunity to investigate the
basis, if any, for this allegation.
Mining Setback Restriction Matter
IMC-Agrico Company has filed two petitions against the Board of
Commissioners of Hillsborough County, Florida (the Board) in the Civil
Division of the Circuit Court in Hillsborough County, Florida,
challenging mining setback restrictions imposed by the Board that
impair IMC-Agrico's ability to fully mine its Mining Unit No. 7 of the
IMC-Agrico Four Corners Mine. IMC-Agrico estimates that 13 million
tons of phosphate rock reserves in Mining Unit No. 7 are affected by
the setback requirements. This litigation raises administrative and
constitutional challenges to the Board's decisions to apply the setback
restrictions to Mining Unit No. 7 and also challenges the
constitutionality of the ordinances that establish the restrictions.
The Company is unable to predict the outcome of this litigation.
<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
nine months ended March 31, 1994
(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 March 29, 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: May 13, 1994
<PAGE>
EXHIBIT 11.3
EARNINGS (LOSS) PER SHARE
FULLY DILUTED COMPUTATION
FOR THE NINE MONTHS ENDED MARCH 31, 1994 AND 1993
(IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
At March 31,
-----------------------
1994 1993
----------- -----------
Basis for computation of fully diluted
earnings per share:
Earnings (loss) before extraordinary item
and cumulative effect of accounting change,
as reported $ (20.7)$ (93.3)
Add interest charges on convertible debt 4.8 4.8
Less provision for taxes (1.8) (1.8)
---------- ----------
Earnings (loss) before extraordinary item
and cumulative effect of accounting change,
as adjusted (17.7) (90.3)
Extraordinary loss - debt retirement (23.8)
Cumulative effect of accounting change (47.1)
---------- ----------
Net earnings (loss) applicable to
common stock $ (41.5) $ (137.4)
========== ==========
Number of shares:
Weighted average shares outstanding 24,259,699 22,072,067
Conversion of convertible subordinated
notes into common stock 1,811,024 1,811,024
---------- ----------
Total common and common equivalent
shares assuming full dilution 26,070,723 23,883,091
========== ==========
Fully diluted earnings (loss) per share:
Earnings (loss) before extraordinary item
and cumulative effect of accounting change $ (.68) $ (3.78)
Extraordinary loss - debt retirement (.91)
Cumulative effect of accounting change (1.97)
---------- ----------
Net earnings (loss) $ (1.59) $ (5.75)
========== ==========
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.
<PAGE>
