SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment or Report Filed
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
IMC GLOBAL INC.
(Exact name of registrant as specified in charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following item, financial
statements, exhibits or other portions of its Form 8-K dated March 15, 1996 as
set forth in the pages attached hereto:
Item 2.Acquisition or Disposition of Assets.
Item 7.Financial Statements, Pro Forma Financial Information, and Exhibits
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
IMC Global Inc.
BRIAN J. SMITH
------------------------------
Brian J. Smith
Executive Vice President
and Chief Financial Officer
April 19, 1996
Item 2. Acquisition or Disposition of Assets.
On March 1, 1996, The Vigoro Corporation (Vigoro) became a
subsidiary of IMC Global Inc. (IMC or the Company) upon consummation of
the merger (the Merger) contemplated by the Agreement and Plan of
Merger dated as of November 13, 1995 (the Agreement). Under the terms
of the Agreement, each share of Vigoro common stock outstanding
immediately prior to the Merger was converted into the right to receive
1.6 shares of IMC common stock. As a result of the Merger, IMC is a
leading supplier of crop nutrients serving the global agriculture
industry and also has complementary retail distribution capabilities.
The Merger was structured to qualify as a tax-free reorganization
for income tax purposes and is being accounted for as a pooling of
interests.
The following supplemental consolidated financial statements,
accompanying notes and management's discussion and analysis of
financial condition and results of operations give retroactive effect
to the Merger but do not reflect the anticipated cost savings and
restructuring charges which will result from the restructuring of the
two companies and the resulting impacts on operating results.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) The Vigoro financial statements have been previously reported
by Vigoro and are included or incorporated by reference in the Joint
Proxy Statement/Prospectus which constitutes a part of IMC Global
Inc.'s Registration Statement on Form S-4 (Registration No. 333-00439).
(b) Set forth in this Current Report on Form 8-K are the
following: (i) Unaudited Pro forma Condensed Consolidated Financial
Statements for IMC Global Inc. as of December 31, 1995 and for each of
the six-month periods ended December 31, 1995 and 1994, including notes
thereto; (ii) Selected Supplemental Financial Information for IMC
Global Inc. for each of the years in the five-year period ended June
30, 1995; (iii) Management's Discussion and Analysis of Financial
Condition for each of the years in the three-year period ended June 30,
1995; and (iv) Audited Supplemental Consolidated Financial Statements
of IMC Global Inc. as of June 30, 1995 and 1994 and for each of the
years in the three-year period ended June 30, 1995.
Page
Unaudited Pro Forma Condensed Consolidated Financial Information 3
Selected Supplemental Consolidated Financial Information 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Audited Supplemental Consolidated Financial Statements 23
Quarterly Results (Unaudited) 48
Unaudited Pro Forma Condensed Consolidated Financial Information
The following Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of December 31, 1995 and Unaudited Pro Forma Condensed
Consolidated Statements of Earnings for the six months ended December
31, 1995 and 1994 have been prepared from the historical financial
statements of IMC and Vigoro.
The unaudited pro forma condensed consolidated financial information
gives effect to accounting for the Merger as a pooling of interests, in
accordance with Accounting Principles Board Opinion No. 16, based on
the conversion of each share of Vigoro common stock into 1.6 shares of
IMC common stock. The unaudited pro forma results of operations
presented herein have been prepared as if the Merger occurred on July
1, 1994. The Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of December 31, 1995 reflects the Merger as if it had occurred on
December 31, 1995.
The unaudited pro forma condensed consolidated financial information
for the respective periods presented should be read in conjunction with
the accompanying notes and the supplemental consolidated financial
statements and notes thereto of the Company presented elsewhere herein.
The unaudited pro forma condensed consolidated financial information
does not include pro forma financial information for certain
acquisition transactions consummated by IMC or Vigoro that
individually, or in the aggregate, are not material in relation to
IMC's or Vigoro's respective consolidated financial position or results
of operations.
The unaudited pro forma condensed consolidated information is not
necessarily indicative of the financial position or results which
actually would have been attained if the Merger had been consummated on
the dates indicated above, nor are the pro forma combined results of
operations for the six months ended December 31, 1995 necessarily
indicative of the results to be expected for the 1996 fiscal year.
IMC GLOBAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Six months ended December 31, 1995
(In millions except per share amounts)
Historical Historical Merger Pro Forma
IMC(a) Vigoro(a) Adjustments(e) Combined
---------- ----------- -------------- ---------
Net sales $1,034.5 $ 307.8 $ (33.4)(b) $1,308.9
Cost of goods sold 774.3 219.8 (33.4)(b) 960.7
-------- -------- -------- --------
Gross margins 260.2 88.0 348.2
Selling, general and
administrative
expenses 39.1 61.2 100.3
Other operating (income)
and expense, net (5.6) (5.6)
-------- -------- -------- --------
Operating earnings 226.7 26.8 253.5
Interest earned and
other non-operating
(income) and expense,
net (2.0) (3.1) (5.1)
Interest charges 22.5 11.5 34.0
-------- -------- -------- --------
Earnings before
minority interest,
income taxes, extra-
ordinary item and
cumulative effect of
accounting change 206.2 18.4 224.6
Minority interest 88.6 1.1 (c) 89.7
-------- -------- -------- --------
Earnings before income
taxes, extraordinary
item and cumulative
effect of accounting
change 117.6 18.4 (1.1) 134.9
Provision for income
taxes 43.8 4.9 48.7
-------- -------- -------- --------
Earnings before extra-
ordinary item and
cumulative effect of
accounting change 73.8 13.5 (1.1) 86.2
Preferred stock
dividends 1.1 (1.1)(c)
-------- -------- -------- --------
Earnings before extra-
ordinary item and
cumulative effect
of accounting change
applicable to common
stock $ 73.8 $ 12.4 $ $ 86.2
======== ======== ======== ========
Earnings per common
share (d) $ 1.23 $ .93
Weighted average
number of shares
and equivalent shares
outstanding (d) 59.9 92.3
The accompanying notes are an integral part of these unaudited pro
forma condensed consolidated financial statements.
IMC GLOBAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Six months ended December 31, 1994
(In millions except per share amounts)
Historical Historical Merger Pro Forma
IMC(a) Vigoro(a) Adjustments(e) Combined
---------- ----------- -------------- ---------
Net sales $ 872.6 $ 259.0 $ (26.9)(b) $1,104.7
Cost of goods sold 685.0 180.8 (26.9)(b) 838.9
-------- -------- -------- --------
Gross margins 187.6 78.2 265.8
Selling, general and
administrative
expenses 35.9 54.2 90.1
Other operating
(income) and expense,
net (5.9) (.6) (6.5)
-------- -------- -------- --------
Operating earnings 157.6 24.6 182.2
Interest earned and
other non-operating
(income) and expense,
net (3.4) (.5) (3.9)
Interest charges 28.3 6.1 34.4
-------- -------- -------- --------
Earnings before
minority interest,
income taxes, extra-
ordinary item and
cumulative effect of
accounting change 132.7 19.0 151.7
Minority interest 55.5 1.0 (c) 56.5
-------- -------- -------- --------
Earnings before income
taxes, extraordinary
item and cumulative
effect of accounting
change 77.2 19.0 (1.0) 95.2
Provision for income
taxes 27.5 7.2 34.7
-------- -------- -------- --------
Earnings before extra-
ordinary item and
cumulative effect of
accounting change 49.7 11.8 (1.0) 60.5
Preferred stock
dividends 1.0 (1.0) (c)
-------- -------- -------- --------
Earnings before
extraordinary item
and cumulative
effect of accounting
change applicable to
common stock $ 49.7 $ 10.8 $ $ 60.5
======== ======== ======== ========
Earnings per common
share (d) $ .84 $ .66
Weighted average
number of shares
and equivalent
shares outstanding (d) 59.1 90.9
The accompanying notes are an integral part of these unaudited pro
forma condensed consolidated financial statements.
IMC GLOBAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS
(a) Certain amounts in the historical financial statements of IMC and
Vigoro have been reclassified for the pro forma combined presentation.
(b) As a result of the Merger, sales from IMC to Vigoro were
eliminated. The impact of the related gross margin on inventories
purchased by Vigoro from IMC was not significant.
(c) After the Merger, the Vigoro preferred stock represented preferred
stock of a subsidiary and accordingly the related dividends were
classified as minority interest.
(d) All issued share and per share data appearing in the Unaudited Pro
Forma Condensed Consolidated Statements of Earnings give effect to
IMC's 2-for-1 stock split effected in the form of a 100 percent stock
dividend which was distributed on November 30, 1995.
The pro forma combined weighted average shares outstanding
calculation for each period presented assumes that each share of Vigoro
common stock was converted into 1.6 shares of IMC common stock.
(e) After the consummation of the Merger, the Company expects to
achieve cost savings through the consolidation and elimination of
certain duplicative functions and through operational and logistical
efficiencies. No adjustment has been included in the Unaudited Pro
Forma Condensed Consolidated Statements of Earnings for the anticipated
cost savings.
IMC GLOBAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
At December 31, 1995
(In millions)
Historical Historical Merger Pro Forma
IMC(a) Vigoro(a) Adjustments Combined
---------- ----------- -------------- ---------
Assets
Current assets:
Cash and cash
equivalents $ 128.4 $ 7.2 $ 135.6
Receivables, net 148.3 144.3 $ (5.2)(b) 287.4
Inventories 300.9 200.9 501.8
Deferred income taxes 70.0 8.7 78.7
Other current assets 7.5 4.4 11.9
-------- -------- -------- --------
Total current
assets 655.1 365.5 (5.2) 1,015.4
Property, plant and
equipment, net 1,925.9 416.4 2,342.3
Other assets 103.1 60.9 164.0
-------- -------- -------- --------
Total assets $2,684.1 $ 842.8 $ (5.2) $3,521.7
======== ======== ======== ========
Liabilities and Stock-
holders' Equity
Current liabilities:
Accounts payable,
accrued liabilities
and income taxes
payable $ 253.7 $ 131.6 $ 29.1 (b)(c)$ 414.4
Short-term debt and
current maturities
of long-term debt 8.8 138.8 147.6
-------- -------- -------- --------
Total current
liabilities 262.5 270.4 29.1 563.0
Long-term debt, less
current maturities 515.8 225.9 741.7
Deferred income taxes 252.0 65.6 (5.1)(d) 312.5
Other noncurrent
liabilities 284.6 .2 13.0 (d) 297.8
Minority interest 529.1 30.3 (e) 559.4
Preferred stock 30.3 (30.3)(e)
Stockholders' equity:
Common stock 65.1 .2 31.6 (f) 96.9
Capital in excess of
par value 716.7 116.2 (39.2)(f) 793.7
Retained earnings 165.7 150.1 (42.2)(c)(d) 273.6
Treasury stock (107.4) (7.6) 7.6 (f) (107.4)
Foreign currency
translation adjust-
ment (8.5) (8.5)
-------- -------- -------- --------
Total stockholders'
equity 840.1 250.4 (42.2) 1,048.3
-------- -------- -------- --------
Total liabilities and
stockholders' equity $2,684.1 $ 842.8 $ (5.2) $3,521.7
======== ======== ======== ========
The accompanying notes are an integral part of these unaudited pro
forma condensed consolidated financial statements.
IMC GLOBAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) Certain amounts in the historical financial statements of IMC and
Vigoro have been reclassified for the pro forma combined presentation.
(b) Elimination of IMC's receivable from Vigoro.
(c) Reflects the estimated liability and charge of $43.3 million ($34.3
million after taxes) for merger and restructuring costs related to the
Merger.
(d) Reflects the liability and charge of $13.0 million for the expected
cost of the transfer of
0.85 percent of IMC-Agrico Company (IMC-Agrico) distributable cash
interest from IMC to Freeport-McMoRan Resource Partners, Limited
Partnership (FRP). Also includes the related deferred tax benefit of
$5.1 million.
(e) After the Merger, the Vigoro preferred stock represented preferred
stock of a subsidiary and accordingly was classified as minority
interest.
(f) At December 31, 1995, Vigoro had 19.9 million shares of common
stock outstanding, which, upon consummation of the Merger, converted
into 31.8 million shares of IMC common stock having a par value of
$31.8 million. The merger adjustment to common stock reflected the
issuance of the IMC common stock and the elimination of Vigoro's common
stock having a par value of $.2 million. The offset was to capital in
excess of par value.
Vigoro's treasury stock retained no value after the Merger, and
therefore was eliminated as a merger adjustment. The offset was to
capital in excess of par value.
SELECTED SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION
The following historical financial information of the Company with
respect to each year in the five-year period ended June 30, 1995 gives
retroactive effect to the Merger of IMC and Vigoro. The information
for each year in the three-year period ended June 30, 1995 is derived
from the supplemental consolidated financial statements presented
elsewhere herein.
Years ended June 30,
- -----------------------------------------------------------------------
(Dollars in millions except
per share amounts) 1995(1) 1994(1) 1993(1) 1992(2) 1991(3)
- -----------------------------------------------------------------------
Statement of Operations Data:
Net sales $2,736.1 $2,125.3 $1,438.1 $1,621.1 $1,693.3
Sterlington litigation
settlement, net (169.1)
Earnings (loss) before
income taxes, extra-
ordinary item and cumula-
tive effect of accounting
changes 308.8 79.2 (117.0) 202.7 185.4
Provision (credit) for
income taxes 115.5 34.8 (39.1) 71.3 68.2
-------- -------- -------- -------- --------
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting changes 193.3 44.4 (77.9) 131.4 117.2
Extraordinary (loss)
gain-debt retirement (6.5) (25.2) (2.0) .2
Cumulative effect of
accounting changes (5.9) (47.1) (197.5)
-------- -------- -------- -------- --------
Net earnings (loss) $ 180.9 $ 19.2 $ (127.0)$ (66.1) $ 117.4
======== ======== ======== ======== =======
Earnings (loss) per share:
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting changes $ 2.12 $ .54 $ (1.02) $ 1.73$ 1.68
Extraordinary loss-debt
retirement (.07) (.31) (.03)
Cumulative effect of
accounting changes (.06) (.62) (2.60)
-------- -------- -------- -------- --------
Net earnings (loss) $ 1.99 $ .23 $ (1.67) $ (.87)$ 1.68
======== ======== ======== ======== ========
Balance Sheet Data (at end of period):
Total assets $3,323.2 $3,172.3 $2,343.3 $2,207.8 $2,164.5
Working capital 461.5 483.6 311.4 192.6 134.3
Working capital ratio 2.0:1 2.3:1 1.9:1 1.7:1 1.4:1
Long-term debt - less
current maturities $ 750.2 $ 801.6 $ 994.6 $ 740.9 $ 740.0
Total debt 824.3 847.7 1,063.2 782.3 812.2
Stockholders' equity 1,007.8 856.3 602.3 760.7 847.3
Total capitalization 1,832.1 1,704.0 1,665.5 1,543.0 1,659.5
Debt/total capitalization 45.0% 49.7% 63.8% 50.7% 48.9%
Other Financial Data:
Cash provided by operating
activities $ 558.2 $ 165.7 $ 73.4 $ 176.8 $ 349.9
Capital expenditures 114.9 76.0 137.1 204.8 189.1
Cash dividends paid 24.6 14.2 30.7 32.8 28.0
Dividends per share .26 .15 .32 .37 .29
Book value per share 11.09 9.46 7.91 10.00 11.25
(1) See Notes to Supplemental Consolidated Financial Statements for a
description of non-recurring items and accounting changes.
Beginning in 1994, financial information reflects the consolidation
of the joint venture partnership formed on July 1, 1993 with FRP.
(2) Includes a gain of $34.2 million, $18.2 million after taxes, from
the Company's sale of its Sterlington, Louisiana, ammonia
production facility, a charge of $5.3 million, $3.3 million after
taxes, from the temporary shutdown and mothballing of the Company's
uranium production facilities, and a charge of $197.5 million for
the cumulative effect on prior years of adopting Statement of
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes"
on July 1, 1991.
(3) Includes a gain of $17.9 million, $11.2 million after taxes, from
the installment sale of certain potash reserve interests to the
U.S. government.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
On March 1, 1996, IMC Global Inc. completed a previously announced
merger with The Vigoro Corporation which resulted in Vigoro becoming a
subsidiary of the Company. As a joint venture partner in IMC-Agrico,
IMC is the nation's leading producer, marketer and distributor of
phosphate crop nutrients and a leading producer and marketer of animal
feed ingredients. IMC also mines and processes potash in the United
States and Canada. Vigoro is one of the world's leading producers and
distributors of potash and one of the largest distributors in the
United States of crop nutrients and related products through its retail
distribution network. Vigoro also sells potash and certain other
products to industrial users in the United States and Canada.
The Merger created a single company which is a leading supplier of
crop nutrients serving the global agricultural industry and which also
has complementary retail distribution capabilities. The Company used
the pooling of interests method to account for this transaction. The
following comparisons between the years ended June 30, 1995 and 1994
and between the years ended June 30, 1994 and 1993 have been made
assuming the Merger had occurred on July 1, 1992.
Year ended June 30, 1995 vs. year ended June 30, 1994
Earnings for the year ended June 30, 1995 totaled $180.9 million, or
$1.99 per share, up significantly over 1994 when earnings totaled $19.2
million, or $.23 per share. Included in 1995 operating results were an
extraordinary charge of $6.5 million, or $.07 per share, related to the
early extinguishment of debt; and a one-time charge of $5.9 million, or
$.06 per share, for the cumulative effect on prior years of a change in
accounting for postemployment benefits resulting from the adoption of
SFAS No. 112 on July 1,1994. In 1994, operating results included an
extraordinary charge of $25.2 million, or $.31 per share, related to
the early extinguishment of debt; a charge of $20.3 million, $12.4
million after taxes, or $.15 per share, related to the write-down of
the Company's investment in an oil and gas joint venture; and a charge
of $4.5 million, or $.05 per share, for an adjustment to the Company's
net deferred tax liability for the effect of changes in U.S. corporate
tax rates. Partially offsetting these charges was a gain of $1.9
million, or $.02 per share, resulting from the sale by IMC-Agrico of
its Florida cattle ranch (IMC-Agrico still retains the rights to
phosphate rock reserves located on this property). See Notes to
Supplemental Consolidated Financial Statements for further discussion
of these non-recurring items.
Net sales for the year ended June 30, 1995 totaled $2,736.1 million,
an increase of $610.8 million, or 29 percent, over 1994 when sales were
$2,125.3 million. Sales were higher primarily due to strong
concentrated phosphate and nitrogen based product demand, the inclusion
of sales from the acquisition of the Central Canada Potash division
(CCP) of Noranda, Inc. in 1995 and record purchases of potash and
concentrated phosphates by China.
Gross margins for the year ended June 30, 1995 increased $307.3
million or 80 percent over 1994, primarily due to higher margins for
phosphates, a $200 million increase; potash, a $75 million increase;
and agricultural products & distribution, a $26 million increase.
Gross margins as a percentage of net sales increased to 25 percent in
1995 compared to 18 percent in 1994.
Phosphate margins increased significantly over 1994, due primarily
to higher prices stemming from increasing world demand ($225 million)
as average concentrated phosphate sales prices increased 20 percent
over 1994 and higher shipping volume ($53 million) which increased 18
percent over 1994. Domestically, sales volume for concentrated
phosphates was marginally lower, due primarily to abnormally wet
weather conditions in the spring which delayed fieldwork, planting and,
therefore, concentrated phosphate shipments. However, record purchases
by China resulted in a 38 percent increase in export volume when
compared to 1994. The increase in export volume contributed to
increased demand in the marketplace and resulted in higher sales
realizations. In addition, phosphate rock sales volume also increased,
mostly due to the addition of a new long-term supply contract to 1995
operating results. Partially offsetting the price and volume increases
were higher production costs ($78 million) primarily due to higher raw
material costs and, to a lesser degree, remediation costs associated
with a sinkhole at IMC-Agrico's New Wales concentrated phosphate
production facility in Florida. See "Environmental Matters" below and
Note 6 of Notes to Supplemental Consolidated Financial Statements for
further discussion of the sinkhole.
Agricultural products & distribution margins (which include crop
nutrients and related products sold through the Company's FARMARKET
(registered trademark) and Rainbow (registered trademark) distribution
networks) increased 19 percent over 1994, and reflected the impact of
an 8 percent increase in overall average sales prices ($69 million) and
a 7 percent increase in sales volume ($6 million). The increase in
sales prices and volume primarily reflected the impact of tight
supplies of nitrogen product in the U.S. due to agricultural demand
exceeding capacity. The increase in sales volume in 1995 was partially
offset by the sale of 17 FARMARKETs in August 1994. Partially
offsetting the price and volume increases were higher product costs
($49 million), primarily due to higher purchased product and raw
material costs.
Potash margins for 1995 increased 57 percent over 1994, due
primarily to the impact of a 30 percent increase in potash sales volume
($39 million), mostly due to the acquisition of CCP in 1995 and
increased potash export shipments, reflecting record purchases by
China. Production costs were also lower ($21 million) and reflected
increased production rates and lower water inflow control spending at
the Company's Esterhazy, Saskatchewan potash mine. In addition, potash
sales prices increased 3 percent as producer inventory levels were
below normal which resulted in higher prices ($15 million).
Selling, general and administrative expenses increased $30.2 million
over 1994 primarily due to the acquisition of CCP, higher
volume-related expenses, higher legal expenses and charges related to
shifting the marketing and administrative functions of Phosphate
Chemicals Export Association to its member companies.
Other operating income and expense, net, in 1995, included $5.0
million ($3.1 million net of minority interest) from the sale of land
in Florida and $3.0 million from the amortization of a deferred gain
resulting from the exchange of the Company's phosphate business in 1994
for a 56.5 percent interest in IMC-Agrico. In 1994, other operating
income and expense included $16.0 million (including $12.7 million
related to finished goods inventory) of such amortization.
Equity in earnings of the Company's oil and gas joint venture, in
1994, included a charge of $20.3 million related to the write-down of
the Company's investment in its oil and gas joint venture discussed in
Note 7 of Notes to Supplemental Consolidated Financial Statements.
Interest charges in 1995 were $21.0 million lower than in 1994 as
the Company purchased and retired a significant portion of its
high-cost, long-term indebtedness throughout the year. Partially
offsetting this decrease were higher interest charges resulting from
long-term debt increases used to fund the acquisition of CCP and other
acquisitions of the Company.
Income taxes in 1994 included a charge of $4.5 million for an
adjustment to the Company's net deferred tax liability for the effect
of changes in U.S. corporate tax rates previously discussed.
Year ended June 30, 1994 vs. year ended June 30, 1993
IMC's results of operations for the year ended June 30, 1994 showed
a significant improvement over 1993. In fiscal 1994, earnings totaled
$19.2 million, or $.23 per share. This compared to a net loss of
$127.0 million, or $1.67 per share, in 1993.
In 1994, earnings included an extraordinary charge of $25.2 million,
or $.31 per share, related to the early extinguishment of debt; a
charge of $20.3 million, $12.4 million after taxes, or $.15 per share,
related to the write-down of the Company's investment in an oil and gas
joint venture; and a charge of $4.5 million, or $.05 per share, for an
adjustment to the Company's net deferred tax liability for the effect
of changes in U.S. corporate tax rates. Partially offsetting these
charges was a gain of $1.9 million, or $.02 per share, resulting from
the sale by IMC-Agrico of its Florida cattle ranch (IMC-Agrico still
retains the rights to phosphate rock reserves located on this
property.)
In 1993, the loss included a one-time charge of $47.1 million, or
$.62 per share, for the cumulative effect on prior years of a change in
accounting for postretirement benefits as a result of the adoption of
SFAS No. 106 as of July 1, 1992; an extraordinary charge of $2.0
million, or $.03 per share, related to the early extinguishment of
debt; a charge of $109.1 million, or $1.43 per share, from the
settlement of litigation resulting from an explosion at a Sterlington,
Louisiana, nitroparaffins plant managed by the Company; and a charge of
$11.4 million, or $.15 per share, related to the settlement of an
insurance claim receivable resulting from a water inflow at the
Company's potash mines in Esterhazy, Saskatchewan.
Net sales for the year ended June 30, 1994 totaled $2,125.3 million,
an increase of $687.2 million or 48 percent over 1993 when sales were
$1,438.1 million. Sales were higher primarily due to higher phosphate
sales (due primarily to the formation of the joint venture partnership
with FRP) and nitrogen-based sales, while potash sales remained
relatively unchanged.
Gross margins for the year ended June 30, 1994 increased $101.9
million or 36 percent over 1993, primarily due to higher margins for
phosphates, a $81 million increase, and agricultural products &
distribution, a $39 million increase. These margin increases were
partially offset by $12 million of negative margins from sulphur
operations and a $3 million decrease in potash margins.
In 1994, phosphate margins increased over 1993, due primarily to a
92 percent increase in concentrated phosphate shipping volume resulting
from the formation of the joint venture partnership between the Company
and FRP on July 1, 1993. Also contributing to higher margins was a 16
percent increase in concentrated phosphate sales prices. Diammonium
phosphate (DAP) sales realizations were, at year end, 50 percent higher
than last year as DAP prices rose from a 20-year low of $100 per ton.
Several factors contributed to this rise in prices. Domestic crop
nutrient consumption increased 4 percent as farmers sought to recover
from 1993's generally poor harvest due primarily to flooding in the
Midwest. Internationally, China, a major concentrated phosphate
customer, increased crop nutrient imports after a reduction in exchange
rate subsidies resulted in a 50 percent drop in U.S. DAP imports in
1993. Also, the former Soviet Union reduced its exports of crop
nutrient products dramatically over 1993 when, in an attempt to
increase foreign exchange and hard currency reserves, it sold
concentrated phosphates at below market price levels.
Agricultural products & distribution margins in 1994 increased
primarily as a result of a 25 percent increase in sales volume ($34
million), combined with an 8 percent increase in sales prices ($45
million). The increase in sales volume primarily reflected the impact
of the Company's acquisition of three related farm service businesses
(collectively, "Mid-Ohio") in April 1994, favorable spring weather
conditions, an increase in the number of acres planted and an increase
in crop nutrient application rates. The increase in sales volume in
1994 also reflected the impact of poor weather conditions in the 1993
period which negatively impacted sales volume in the comparison period.
Partially offsetting the price and volume increases were higher
production costs ($40 million) primarily due to higher raw material
costs.
Potash margins for 1994 decreased 2 percent from 1993, due primarily
to the impact of a 5 percent decrease in potash sales prices ($18
million), partially offset by a 3 percent increase in potash sales
volume ($4 million) and lower production costs ($11 million).
Selling, general and administrative expenses increased $17.1 million
over 1993 primarily due to the Company's Mid-Ohio acquisition, higher
volume-related expenses and higher legal expenses.
Other operating income and expense, net, in 1994, included $16.0
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 and a gain of $5.5 million ($3.1 million net of
minority interest) resulting from the sale by IMC-Agrico of its Florida
cattle ranch. In 1993, other operating income and expense, net
primarily consisted of a $32.4 million charge resulting from the
settlement of an insurance claim receivable resulting from a water
inflow at the Company's potash mines in Esterhazy, Saskatchewan.
Equity in earnings of the Company's oil and gas joint venture, in
1994, included a charge of $20.3 million related to the write-down of
the Company's investment in an oil and gas joint venture discussed
above.
Interest charges were $35.6 million higher than last year as a
result of higher average debt balances and lower capitalized interest
as the Company's Main Pass sulphur mine became operational in 1994.
Income taxes in 1994 included a charge of $4.5 million for an
adjustment to the Company's net deferred tax liability for the effect
of changes in U.S. corporate tax rates previously discussed.
Capital Resources and Liquidity
Working capital at June 30, 1995 was $461.5 million compared to
$483.6 million at June 30, 1994. The decrease reflected higher current
liabilities at June 30, 1995 and the sale of $50 million of receivable
interests in October 1994 discussed in Note 8 of Notes to Supplemental
Consolidated Financial Statements. The Company's working capital ratio
at June 30, 1995 was 2.0 versus 2.3 at June 30, 1994. Debt to total
capitalization improved to 45.0 percent at June 30, 1995 compared to
49.7 percent at June 30, 1994. The decrease was primarily due to
increased earnings along with a reduction in indebtedness resulting
from management's efforts to reduce a portion of its high-cost,
long-term indebtedness, partially offset by an increase in indebtedness
from the Company's acquisition of CCP.
On February 28, 1996, the Company entered into an unsecured credit
facility (the Credit Facility) with a group of banks. Under the terms
of the Credit Facility, the Company and certain of its subsidiaries may
borrow up to $450 million under a revolving credit facility which
matures on March 1, 1999 and $50 million under a long-term credit
facility which matures March 2, 2001. At March 1, 1996, the Company and
its subsidiaries had borrowed $26 million under the revolving credit
facility and $50 million under the long-term facility.
Simultaneously with the execution of the Credit Facility, the
Company and one of its subsidiaries refinanced unsecured term loans of
Vigoro and one of its subsidiaries. The new $120 million unsecured
term loans (the Term Loans) bear interest at rates between 7.37 percent
and 7.43 percent and mature at various times between 2000 and 2005.
IMC-Agrico also has an agreement with a group of banks to provide it
with a $75 million unsecured revolving credit facility (the Partnership
Working Capital Facility) initially until February 1997. At June 30,
1995, $12.5 million was drawn down in the form of letters of credit.
There were no other borrowings under this agreement at June 30, 1995.
The Credit Facility and Term Loans contain customary negative
covenants and financial ratios and other tests which must be met with
respect to interest coverage, tangible net worth and leverage. The
Partnership Working Capital Facility contains financial ratios and
tests with respect to fixed charge coverage, current ratio and minimum
net partners' capital requirements. The Partnership Working Capital
Facility also places limitations on indebtedness of IMC-Agrico and
restricts the ability of IMC-Agrico to make cash distributions in
excess of Distributable Cash (as defined). In addition, pursuant to
the Partnership Agreement, IMC-Agrico is required to obtain the
approval of the Policy Committee of IMC-Agrico (which consists of two
representatives from each of the Company and FRP) prior to incurring
more than an aggregate of $5 million (adjusted annually for inflation)
in indebtedness (excluding indebtedness under the Partnership Working
Capital Facility).
In December 1994, Vigoro amended and restated its revolving credit
agreement (Vigoro Credit Agreement) to: (i) include a new non-
revolving credit facility, $121.1 million of which was used to fund the
acquisition of CCP; and (ii) increase the line of credit available to
Vigoro to $255 million. The Vigoro Credit Agreement was terminated at
the time the Company entered into the Credit Facility.
At June 30, 1995, IMC had an unsecured revolving credit facility
(the Working Capital Facility) under which IMC could borrow up to $100
million for general corporate purposes until June 30, 1996. The
Working Capital Facility was also terminated at the time the Company
entered into the Credit Facility.
In October 1994, IMC-Agrico entered into a one-year agreement with a
financial institution to sell, on an ongoing basis, an undivided
percentage interest in a designated pool of receivables in an amount
not to exceed $75 million. At June 30, 1995, IMC-Agrico had sold $50
million of such receivable interests. The Company's portion of the
proceeds from the initial sale of receivable interests ($32.5 million)
was used primarily to retire long-term debt. In October 1995, this
agreement was renewed for an additional one-year period and the limit
on the designated pool of receivables was reduced to $65 million.
The Company periodically enters into DAP futures contracts and
options to purchase natural gas to manage its exposure to price
fluctuations. The Company also has entered into forward exchange
contracts to hedge the effect of Canadian dollar exchange rate changes
on a portion of identifiable foreign currency exposures from
operations. Net hedging gains and losses are recognized as a part of
the transactions hedged and were not significant in 1995. The Company
monitors its market risk on an ongoing basis and considers its risk to
be minimal.
The Company estimates that its capital expenditures for 1996 will
total approximately $186 million (including $70 million by IMC-Agrico
and $22 million relating to environmental matters). The Company
expects to finance these expenditures (including its portion of
IMC-Agrico's capital expenditures) from operations. Pursuant to the
Partnership Agreement, IMC-Agrico is required to obtain the approval of
the Policy Committee of IMC-Agrico prior to making capital expenditures
in any fiscal year in excess of $5 million (adjusted annually for
inflation) for expansion of its business. In the event that the Policy
Committee fails to approve future capital expenditures, IMC-Agrico's
ability to expand its business could be adversely affected. See
"Environmental Matters" for a discussion of environmental capital
expenditures.
Since December 1985, the Company has experienced an inflow of water
into one of its two interconnected potash mines located in Esterhazy,
Saskatchewan. As a result, the Company has suffered losses and has
been forced to undertake substantial remedial efforts to stop the
flooding. The Company's share of expenditures for ongoing remedial
efforts totaled $14 million in 1995 and is expected to total
approximately $15 million in 1996.
The Company has significantly reduced the water inflow since the
initial discovery and has been able to meet all sales obligations and
requirements from production at the mines. Despite the relative
success of such measures, there can be no assurance that the amounts
required for remedial efforts in future years will not increase or that
inflows will not increase to a level which would cause the Company to
abandon the mines. There can be no assurance that such action would
not have a material adverse effect on the Company. However, the
long-term outlook of the water inflow has caused the Company to
consider alternatives to its current mining operations and studies are
under way in this regard. Any solution to the water inflow situation
at the mines could result in substantial capital expenditures and/or
charges to operations. As is common in the industry, the Company does
not presently have in place, nor can it reasonably obtain, any
insurance to cover damage to its underground potash operations.
In July 1994, IMC-Agrico entered into an option agreement with
Mississippi Chemical Corporation (MCC) to purchase 9,472 acres of land
in Florida (the Property). The Property, along with 2,508 acres of
land previously purchased from MCC (the Adjacent Property), contains
approximately 87.5 million tons of phosphate rock reserves. The option
period began July 16, 1994 and will expire January 16, 1998. During
this time, IMC-Agrico may exercise its option to purchase the Property
or it may continue to make annual payments ranging from $1.0 million to
$3.0 million to keep the option in effect. If IMC-Agrico exercises its
option prior to its expiration, the purchase price will be financed by
MCC over a six-year term at interest rates approximating IMC-Agrico's
borrowing rate. If IMC-Agrico fails to make an option payment during
the option period or fails to exercise its option by January 16, 1998,
MCC has the right to sell the Property to IMC-Agrico , and IMC-Agrico
will be obligated to purchase the property for a specified amount. If
the option to purchase the Property is not exercised by IMC-Agrico and
MCC does not exercise its right to sell the Property to IMC-Agrico, MCC
has the right to purchase the Adjacent Property from IMC-Agrico for a
specified amount. In fiscal 1995, IMC-Agrico paid $3.0 million to keep
the option in effect.
During fiscal 1995, the Company utilized $558.2 million of cash from
operations to distribute $228.1 million of cash sharing distributions
to FRP, $182.0 million to purchase and retire portions of the Company's
outstanding indebtedness and $114.9 million to fund capital
expenditures. Also in fiscal 1995, the Company acquired the assets and
businesses of CCP along with certain other businesses for $142.4
million, funded primarily from borrowings under the Vigoro Credit
Agreement.
In April 1993, the Company's Board of Directors reduced cash
dividend payments on its common stock in light of financial demands of
litigation arising out of an explosion at a nitroparaffins plant
operated by the Company in Sterlington, Louisiana, and weakness in
concentrated phosphate prices. Although dividend payments have since
increased, any future cash dividends will be at the discretion of the
Company's Board of Directors and will be dependent on the Company's
results of operations and financial condition.
The Company does not consider the impact of inflation to be
significant in the business in which it operates.
Joint Venture Partnership
On July 1, 1993, IMC and FRP contributed their respective phosphate
businesses, including the mining and sale of phosphate rock and the
production, distribution and sale of concentrated phosphates, uranium
oxide and related products, to a joint venture partnership in return
for a 56.5 percent and 43.5 percent economic interest, respectively, in
IMC-Agrico, over the term of the partnership. IMC-Agrico is governed
by a Policy Committee which has equal representation from each company
and is being operated by an affiliate of the Company. The Partnership
Agreement contains a cash sharing arrangement under which Distributable
Cash, as defined in the agreement, was shared at a ratio of 45.0
percent and 55.0 percent in 1995 to IMC and FRP, respectively.
On January 23, 1996, IMC and FRP entered into certain amendments to
the Partnership Agreement in part to reflect possible changes in the
nature of the business of the Company resulting from the Vigoro merger.
These amendments provide for (i) a shift of 0.85 percent of
Distributable Cash interest of IMC-Agrico from the Company to FRP
beginning March 1, 1996, (ii) changes to certain IMC-Agrico governance
procedures, including the establishment of a new office of President
for IMC-Agrico, who is appointed by the Company subject to the approval
of the Policy Committee, and a related clarification of management and
reporting responsibilities, (iii) the modification of certain product
pricing and sourcing provisions with respect to transactions between
IMC-Agrico and affiliates of the Company, including the FARMARKET
network of Vigoro and (iv) the establishment of criteria under which
certain acquisitions by the Company's Rainbow Division or FARMARKET
network would not be required to be offered to IMC-Agrico.
If the shift of Distributable Cash from IMC to FRP contemplated by
the amendments to the Partnership Agreement had been effective as of
July 1, 1994, Distributable Cash to FRP for the fiscal year ended June
30, 1995 (which aggregated $254.9 million) would have increased by $4.0
million.
Cash sharing percentages will be adjusted until 1998, when the
sharing ratios will be fixed at 58.5 percent and 41.5 percent to IMC
and FRP, respectively.
Sulphur and Oil & Natural Gas Ventures
The Company has a 25 percent interest in the Main Pass 299 sulphur
mine located in the Gulf of Mexico. In fiscal 1995, FRP, the joint
venture operator, produced sulphur at levels which averaged 6,263 long
tons per day or 2.3 million long tons per year. This production level
exceeded the plant's designed operating rate of 5,500 long tons per
day. Using a hot-water injection process, Main Pass is one of the most
thermally efficient sulphur mines ever operated. The Company's share
of sulphur produced is used to satisfy a portion of the Company's
obligations to supply sulphur to IMC-Agrico for the production of
concentrated phosphates. At June 30, 1995, the underwater sulphur
deposit contained an estimated 69.2 million long tons of recoverable
sulphur, or 17.3 million long tons net to the Company, before
royalties.
Oil and gas reserves which are located in the same immediate area
are also being developed. At June 30, 1995, the field contained proved
and probable reserves of 3.2 million barrels of oil. All gas
production is consumed internally in heating water for extraction of
sulphur.
Environmental Matters
General
- -------
In the normal course of its business, the Company mines phosphate
and potash, manufactures and blends crop nutrients, and blends
pesticides and related products. These operations are subject to
federal, state, provincial and local environmental, health and safety
laws in the United States and Canada, including laws related to air and
water quality, handling of hazardous and solid wastes, chemical
management and land reclamation. The Company has expended substantial
resources, both financial and managerial, to comply with environmental
regulations and permitting and reclamation requirements, and
anticipates that it will continue to do so in the future.
Additionally, although the Company believes that its operations
generally are in compliance with environmental standards, there can be
no assurance that costs, penalties, or liabilities will not be
incurred. The Company does not believe that its expenditures for
environmental compliance have had a material adverse effect on its
operations or financial condition.
In fiscal year 1995, environmental capital expenditures totaled
approximately $8.8 million, and were primarily related to air emissions
control, wastewater treatment and control, and solid waste disposal.
Additional expenditures for land reclamation activities totaled $14.5
million. For fiscal year 1996, the Company expects environmental
capital expenditures to be approximately $22.0 million and expenditures
for land reclamation activities to be approximately $18.0 million;
however, no assurance can be given that greater environmental
expenditures will not be required.
Environmental laws and regulations in the United States and Canada
have changed substantially and rapidly in recent years, and the Company
anticipates that these changes will continue. It is the Company's
policy to comply with all applicable environmental, health and safety
laws and regulations. When regulations implementing a statute have not
been finalized or when final regulations are subject to varying and
conflicting interpretations, it is difficult to estimate future
compliance costs. Nevertheless, because new environmental standards
generally are more restrictive than current requirements, the costs of
complying with such regulations likely will increase.
Permitting
- ----------
The Company holds numerous environmental and other permits for
operations at each of its facilities. If a government agency were to
deny a permit application or permit renewal, or revoke or substantially
modify an existing permit, such agency action could have a material
adverse effect on the Company's ability to continue operations at the
affected facility. Expansion of Company operations also is predicated
upon securing the necessary environmental and other permits.
Air Quality
- -----------
The 1990 Amendments to the Clean Air Act require certain sources to
control their emissions of hazardous air pollutants. By the year 2000,
the United States Environmental Protection Agency will have promulgated
control standards applicable to certain of the Company's operations,
and capital expenditures may be necessary to meet these standards.
Because the regulatory requirements have not been finalized, the
Company cannot estimate the extent of these expenditures.
Management of Residual Materials
- --------------------------------
The mining and processing of potash and phosphate produce tailings
or other residual materials that must be managed. Phosphate residuals
consisting primarily of phosphogypsum typically are stored in
phosphogypsum stack systems. Potash producers generally store
tailings, which contain primarily sodium chloride, iron and clay, in
surface disposal sites. Recently, a process was developed whereby the
Company returns potash tailings, produced in its solution mining
process, to mined-out underground shafts, which minimizes surface
disposal sites. The Company has incurred and will continue to incur
significant costs to manage such residual materials in accordance with
environmental laws, regulations, and permit requirements. The
magnitude of future management costs is difficult to estimate and there
can be no assurances that such costs will not have a material adverse
effect on the Company.
In 1994, the Saskatchewan Department of Environmental and Resource
Management (the Department) published regulations requiring each potash
mine operator to submit a facility decommissioning and reclamation plan
for approval and to provide assurances that the plan will be carried
out. The plan and related assurances would cover all mining facilities
including surface disposal sites for potash tailings. The Company
expects that the filing of the plan will be required during 1996;
however, implementation of the plan probably will be deferred until an
affected facility is closed (which is not anticipated at any time in
the foreseeable future). At the Company's Kalium mining operations,
the solution mining process can be adapted to return tailings now
stored above ground to previously mined locations, at relatively low
cost. However, at the Company's Esterhazy and CCP mining operations,
shaft mining methods are utilized and, as a result, the cost to
eliminate the surface tailings and to comply with requirements such as
those contained in the regulations may be greater. The Company
believes that until the plans have been prepared and the responses
received from the Department, the Company, like all members of the
Saskatchewan potash industry, will be unable to predict with certainty
the financial impact of the proposed regulation on the Company.
With regard to phosphate processing, Florida law may require
IMC-Agrico to close one or more of its unlined phosphogypsum stacks
and/or associated cooling ponds after March 25, 2001, if the stack
system is causing a violation of Florida's water quality standards.
IMC-Agrico cannot predict at this time whether Florida will require
closure of any of its stack systems; however, the cost of closure and
replacement facilities could be significant.
In June 1994 during a routine inspection, IMC-Agrico discovered a
deep, cylindrical hole (caused by a sinkhole) in the north gypsum stack
at its New Wales, Florida concentrated phosphate production facility.
The Florida Department of Environmental Protection (FDEP) was notified
and approved IMC-Agrico's plan to plug the sinkhole by grouting, at a
cost of $ 6.8 million. After grouting, IMC-Agrico filled the hole with
gypsum slurry. FDEP also required IMC-Agrico to continue monitoring
groundwater quality. Samples from the plant production well confirm
that the sinkhole has been plugged. Monitoring data also confirm that
all groundwater constituents attributable to the sinkhole have been
contained within IMC-Agrico's property. Based on discussions with
state officials, IMC-Agrico may be required to close this gypsum stack,
possibly beginning July 1, 1998. The estimated cost of closure is $2.5
million, net of recorded accruals.
IMC-Agrico continues to address elevated sulfate levels in
groundwater at its New Wales, Florida facility. In 1992, elevated
sulfate levels were detected in groundwater beneath the cooling pond.
In response, the Central Florida Regional Planning Council required
IMC-Agrico to plug former recharge wells (believed to be the source of
the elevated sulfate levels) and either to show, by September 1997,
that groundwater sulfate levels have returned to acceptable levels or
to line or relocate the cooling pond. Monitoring data gathered between
July 1993 and June 1994 evidenced a consistent downward trend in the
sulfate levels; however, when the hole in the gypsum stack, discussed
above, was discovered, sulfate levels increased sharply. After the
hole was grouted, sulfate levels again trended downward. If the
downward trend continues, IMC-Agrico likely will meet the 1997
deadline. If sulfate levels do not reach acceptable levels, IMC-Agrico
will request an extension of the 1997 deadline. The estimated cost to
line or relocate the cooling pond would be between $35 million and $68
million.
Water Management
- ----------------
Two earthen dams used to contain mining water from IMC-Agrico's
phosphate rock mining facilities in Florida were breached during
calendar year 1994. The appropriate governmental agencies were
notified and corrective measures promptly were implemented. Property
damage to neighbors has been estimated to be no more than $1.5 million;
IMC-Agrico's insurers covered some of this amount. The state issued a
notice of violations to IMC-Agrico for each breach, and, based on
current negotiations, potential penalties are not expected to be
material.
Superfund
- ---------
The Comprehensive Environmental Response Compensation Liability Act
(CERCLA), also known as "Superfund," imposes liability without regard
to fault or to the legality of a party's conduct, on certain categories
of persons that are considered to have contributed to the release of
"hazardous substances" into the environment. Currently, the Company is
involved in or concluding involvement at a number of Superfund sites.
With possible exceptions, discussed below, at none of these sites
alone, nor in the aggregate, is the Company's liability currently
expected to be material. As more information is obtained regarding the
sites and the potentially responsible parties (PRPs) involved, this
expectation may change.
At the Old Marsh Aviation Site, Arizona, the lack of information
regarding the Company's level of involvement, if any, makes it very
difficult to estimate the Company's share of the investigative and
cleanup costs. A third-party plaintiff has brought a contribution
action against approximately 60 PRPs, including the Company, to
allocate among them the $11.5 million spent by Goodyear to clean up the
Old Marsh Site. [Goodyear Farms, Inc., et al. v. Estrella Flying
Service, Inc., et al., No. Civ 94-1608PHXPGR (D.C. Ariz)]. In 1995,
the Company received a vague and ambiguous summons and third-party
complaint in this case which was dismissed. The plaintiff has recently
served another complaint which alleges that the Company "arranged for
the aerial application of chemicals from the site" and is, therefore,
an owner/operator of the facility. The Company is currently evaluating
its response to the complaint.
IMC-Agrico is one of 70 PRPs participating in investigation of the
Petroleum Products Site. To date, the PRP group has spent
approximately $2.7 million to address waste oil remaining on site, and
expects to spend up to $6.0 million on these activities. Remedial cost
estimates to clean up on-site soils and structures range from $2.0
million to $40.0 million. Cost estimates have not yet been developed
for groundwater remediation. IMC-Agrico tentatively has been allocated
20,774 gallons of waste oil based on ledger entries, which places
IMC-Agrico 27th on the list of 70 members within the PRP group. The
group also has identified approximately 1,000 additional PRPs. Because
investigation of the site is incomplete and the required remedy has not
been selected, a reliable estimate of cleanup costs, and IMC-Agrico's
contribution to those costs, cannot be made at this time.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Auditors 22
Supplemental Consolidated Statement of Operations for the
three fiscal years ended June 30, 1995 23
Supplemental Consolidated Balance Sheet at June 30,
1995 and 1994 24
Supplemental Consolidated Statement of Cash Flows for
the three fiscal years ended June 30, 1995 25
Supplemental Consolidated Statement of Changes in
Stockholders' Equity for the three fiscal years ended
June 30, 1995 26
Notes to Supplemental Consolidated Financial Statements 27
Quarterly Results (Unaudited) 48
Report of Independent Auditors
To the Board of Directors and Stockholders of
IMC Global Inc.
We have audited the supplemental consolidated balance sheet of IMC
Global Inc. (formed as a result of the consolidation of IMC Global Inc.
and The Vigoro Corporation) as of June 30, 1995 and 1994 and the
related supplemental consolidated statements of operations, cash flows
and changes in stockholders' equity for each of the three years in the
period ended June 30, 1995. The supplemental consolidated financial
statements give retroactive effect to the merger of IMC Global Inc. and
The Vigoro Corporation on March 1,1996, which has been accounted for
using the pooling of interests method as described in the notes to the
supplemental consolidated financial statements. These supplemental
consolidated financial statements are the responsibility of the
management of IMC Global Inc. Our responsibility is to express an
opinion on these supplemental consolidated financial statements based
on our audits. We did not audit the financial statements of The Vigoro
Corporation which statements reflect total assets constituting 24% for
1995 and 18% for 1994 of the related supplemental consolidated
financial statement totals, and which reflect net sales constituting
approximately 34% of the related supplemental consolidated financial
statement totals for the three year period ended June 30, 1995. Those
statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to data
included for The Vigoro Corporation, is based solely on the report of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors,
the supplemental consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of IMC Global Inc. at June 30, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended June 30, 1995, after giving
retroactive effect to the merger of The Vigoro Corporation, as
described in the notes to the supplemental consolidated financial
statements, in conformity with generally accepted accounting
principles.
As discussed in the notes to supplemental consolidated financial
statements, the Company changed its method of accounting for
postemployment benefits in 1995.
Ernst & Young LLP
Chicago, Illinois
March 1, 1996
IMC GLOBAL INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS
(In millions except per share amounts)
Years ended June 30,
1995 1994 1993
- ----------------------------------------------------------------------
Net sales $2,736.1 $2,125.3 $1,438.1
Cost of goods sold 2,046.1 1,742.6 1,157.3
-------- -------- --------
Gross margins 690.0 382.7 280.8
Selling, general and administrative
expenses 196.0 165.8 148.7
Sterlington litigation settlement, net 169.1
Other operating (income) and expense,
net (9.1) (27.7) 25.1
-------- -------- --------
Operating earnings (loss) 503.1 244.6 (62.1)
Equity in (earnings) loss of oil and
gas joint venture (3.1) 20.0 (3.3)
Interest earned and other non-operating
(income) and expense, net (3.2) (1.4) 2.6
Interest charges 70.2 91.2 55.6
-------- -------- --------
Earnings (loss) before minority interest
and items noted below 439.2 134.8 (117.0)
Minority interest 130.4 55.6
-------- -------- --------
Earnings (loss) before items noted
below 308.8 79.2 (117.0)
Provision (credit) for income taxes 115.5 34.8 (39.1)
-------- -------- --------
Earnings (loss) before extraordinary
item and cumulative effect of
accounting changes 193.3 44.4 (77.9)
Extraordinary loss - debt retirement (6.5) (25.2) (2.0)
Cumulative effect on prior years of
changes in accounting for post-
employment benefits in 1995 and
postretirement benefits other than
pensions in 1993 (5.9) (47.1)
-------- -------- --------
Net earnings (loss) $ 180.9 $ 19.2 $ (127.0)
======== ======== ========
Earnings (loss) per share:
Earnings (loss) before extra-
ordinary item and cumulative
effect of accounting changes $ 2.12 $ .54 $ (1.02)
Extraordinary loss - debt retirement (.07) (.31) (.03)
Cumulative effect of accounting
changes (.06) (.62)
-------- -------- --------
Net earnings (loss) $ 1.99 $ .23 $ (1.67)
======== ======== ========
Weighted average number of shares and
equivalent shares outstanding 91.0 82.3 76.3
(See Notes to Supplemental Consolidated Financial Statements)
IMC GLOBAL INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEET
(Dollars in millions except per share amounts)
At June 30,
Assets 1995 1994
- ----------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 203.7 $ 175.6
Receivables, net 236.5 274.3
Inventories
Products (principally finished) 274.7 240.4
Operating materials and supplies 118.2 106.6
-------- --------
392.9 347.0
Deferred income taxes 79.5 52.1
Other current assets 13.6 6.6
-------- --------
Total current assets 926.2 855.6
Property, plant and equipment 3,971.3 3,754.6
Accumulated depreciation and depletion (1,714.1) (1,575.1)
Net property, plant and equipment 2,257.2 2,179.5
Other assets 139.8 137.2
-------- --------
Total assets $3,323.2 $3,172.3
======== ========
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------
Current liabilities:
Accounts payable $ 197.2 $ 178.4
Accrued liabilities 193.4 147.5
Short-term debt and current maturities of
long-term debt 74.1 46.1
-------- --------
Total current liabilities 464.7 372.0
Long-term debt, less current maturities 750.2 801.6
Deferred income taxes 306.2 260.8
Other noncurrent liabilities 284.1 275.3
Minority interest 510.2 606.3
Stockholders' equity:
Common stock, $1 par value, authorized 250,000,000
shares; issued 96,408,200 and 96,011,235 shares
in 1995 and 1994, respectively 96.4 96.0
Capital in excess of par value 782.6 777.2
Retained earnings 246.1 90.2
Treasury stock, at cost, 5,552,840 and 5,540,518
shares in 1995 and 1994, respectively (107.4) (107.1)
Foreign currency translation adjustment (9.9)
-------- --------
Total stockholders' equity 1,007.8 856.3
-------- --------
Total liabilities and stockholders' equity $3,323.2 $3,172.3
======== ========
(See Notes to Supplemental Consolidated Financial Statements)
IMC GLOBAL INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Years ended June 30,
1995 1994 1993
- ----------------------------------------------------------------------
Cash Flows from Operating Activities
- ------------------------------------
Net earnings (loss) $ 180.9 $ 19.2 $(127.0)
Adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities:
Depreciation, depletion and
amortization 166.4 147.1 85.6
Minority interest 130.4 55.6
Deferred income taxes 16.9 (4.5) (79.0)
Postemployment employee benefits 9.5
Cash distributions in excess of equity
in operating results
of oil and gas joint venture (including
a $20.3 write-down in 1994) 4.7 36.1 18.6
Postretirement employee benefits 8.4 82.8
Sterlington litigation settlement (80.0) 80.0
Loss on insurance claim settlement 11.4
Other charges and credits, net (19.2) (77.4) (.6)
Changes in:
Receivables, net 49.3 60.7 1.7
Inventories (27.7) 92.0 (7.1)
Other current assets .3 9.3 (1.2)
Accounts payable 14.1 (81.8) .5
Accrued liabilities 32.6 (19.0) 7.7
------- ------- -------
Net cash provided by operating
activities 558.2 165.7 73.4
------- ------- -------
Cash Flows from Investing Activities
- ------------------------------------
Acquisitions of businesses, net of
cash acquired (142.4)
Capital expenditures (114.9) (76.0) (137.1)
Sales of property, plant and equipment 14.6 33.3 2.6
Investment in oil and gas joint venture (1.7) (3.3)
------- ------- -------
Net cash used in investing
activities (244.4) (42.7) (137.8)
------- ------- -------
Net cash provided (used) before
financing activities 313.8 123.0 (64.4)
------- ------- -------
Cash Flows from Financing Activities
- ------------------------------------
Joint venture cash distributions to FRP (228.1) (146.8)
Payments of long-term debt (182.0) (437.2) (119.7)
Proceeds from issuance of long-term
debt, net 131.5 276.0 281.1
Changes in short-term debt, net 17.5 2.9 14.4
Cash dividends paid (24.6) (14.2) (30.7)
Issuances of common stock from treasury 255.6
------- ------- -------
Net cash (used in) provided by
financing activities (285.7) (63.7) 145.1
------- ------- -------
Net increase in cash and cash equivalents 28.1 59.3 80.7
Cash and cash equivalents - beginning
of year 175.6 116.3 35.6
------- ------- -------
Cash and cash equivalents - end of year $ 203.7 $ 175.6 $ 116.3
======= ======= =======
Supplemental cash flow disclosures:
Interest paid $ 70.6 $ 86.9 $ 84.3
Income taxes paid, net of refunds $ 84.7 $ 12.8 $ 28.3
(See Notes to Supplemental Consolidated Financial Statements)
IMC GLOBAL INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In millions except per share amounts)
Foreign
Capital Currency
Common in Excess Retained Treasury Translation
Stock of Par Value Earnings Stock Adjustment
- -----------------------------------------------------------------------
Balance at
June 30, 1992 $ 96.3 $ 812.6 $ 243.7 $(392.1) $ .2
Net loss (127.0)
Dividends ($.32
per share) (31.1)
Restricted stock
awards .4 (.6)
Stock options
exercised .1
Foreign currency
translation
adjustment (.2)
------- ------- ------- ------- -------
Balance at
June 30, 1993 96.3 813.1 85.6 (392.7) -
Net earnings 19.2
Sale of common
stock (34.1) 289.7
Dividends ($.15
per share) (14.6)
Restricted stock
awards .2 1.5 (4.1)
Stock options exer-
cised and other (.5) (3.3)
------- ------- ------- ------- -------
Balance at
June 30, 1994 96.0 777.2 90.2 (107.1) -
Net earnings 180.9
Dividends ($.26 per
share) (25.0)
Restricted stock
awards .3
Stock options exer-
cised and other .4 5.1 (.3)
Foreign currency
translation
adjustment (9.9)
------- ------- ------- ------- -------
Balance at
June 30, 1995 $ 96.4 $ 782.6 $ 246.1 $(107.4) $ (9.9)
======= ======= ======= ======= =======
(See Notes to Supplemental Consolidated Financial Statements)
IMC GLOBAL INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except as otherwise indicated)
1. Business of the Company
-----------------------
IMC Global Inc., which operates in a single industry segment, is
the parent corporation of several subsidiaries and joint venture
operations which together comprise one of the world's leading producers
of crop nutrients for the international agricultural community. The
Company mines and processes potash in the United States and Canada and
is a joint-venture partner in IMC-Agrico, the nation's leading
producer, marketer and distributor of phosphate crop nutrients. The
Company also markets and distributes crop nutrients and related
products on a wholesale basis through independent dealers and
cooperatives, and on a retail basis, through its farm service outlets.
In addition, the Company sells potash and certain other products to
industrial users in the United States and Canada. Through its
interests in other joint ventures, the Company also produces sulphur
and oil & natural gas. In October 1995, the Company acquired the
animal feed ingredients business of Mallinckrodt Group Inc.
2. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
- ---------------------
The supplemental consolidated financial statements include the
accounts of the Company and all subsidiaries which are more than 50
percent owned and controlled. The supplemental consolidated financial
statements also include the accounts of IMC-Agrico, a joint venture
partnership with FRP formed on July 1, 1993. In addition, the Company
consolidates its proportionate share of the assets and liabilities of
the Company's sulphur venture, while its 25 percent investment in its
oil and natural gas venture is accounted for using the equity method.
All significant intercompany accounts and transactions are eliminated
in consolidation. Certain amounts in the consolidated financial
statements of IMC and Vigoro have been reclassified for the combined
presentation. The Company's fiscal year ends June 30.
Cash Equivalents
- ----------------
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents which
are reflected at their approximate fair value. The effect of foreign
currency exchange rate fluctuations on the total cash and cash
equivalents balance was not significant.
Concentration of Credit Risk
- ----------------------------
The Company's customer base consists of many customers, both
domestic and international. Domestically, the Company sells its
products to farmers primarily in the Midwestern and Southeastern United
States. Internationally, the Company's products are sold primarily
through one Canadian and three U.S. export associations. Although the
Company is affected by the economic well being of its customers, the
Company does not believe it has any significant credit risks beyond
normal risks inherent in the Company's receivables for which allowances
have been provided for.
Inventories
- -----------
Inventories are valued at the lower of cost or market (net
realizable value). Cost for substantially all of the Company's
inventories is calculated on a cumulative annual average cost basis.
Cost for the remaining portion of inventories, primarily for products
sold through the Company's retail farm service outlets, is determined
using the first-in, first-out method.
Property, Plant and Equipment
- -----------------------------
Property (including mineral deposits), plant and equipment are
carried at cost. Cost of significant assets includes capitalized
interest incurred during the construction and development period.
Expenditures for replacements and improvements are capitalized;
maintenance and repair expenditures are charged to operations when
incurred.
Depreciation and depletion expenses for mining and production
operations, including mineral interests, are determined using the unit-
of-production method based on estimates of recoverable reserves. Other
asset classes or groups are depreciated or amortized on a straight-line
basis over their estimated useful lives.
Goodwill
- --------
Goodwill, representing the excess of purchase cost over the fair
value of net assets of acquired companies, is generally amortized using
the straight-line method over periods not exceeding 40 years. At June
30, 1995 and 1994, goodwill, included in other assets in the
Supplemental Consolidated Balance Sheet, totaled $32.9 million and
$21.8 million, respectively.
Postemployment Benefits
- -----------------------
The Company provides benefits such as workers' compensation and
disabled employee medical care to certain former or inactive employees
after employment but before retirement. Effective July 1, 1994, the
Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," which requires the Company to accrue the cost of providing
such postemployment benefits when the event occurs giving rise to the
obligation.
Accrued Environmental Costs
- ---------------------------
The Company's activities include the mining of phosphate and
potash, and the manufacturing and blending of crop nutrients,
pesticides and related products. These operations are subject to
extensive federal, state, provincial and local environmental
regulations in the United States and Canada including laws related to
air and water quality, handling of hazardous and solid wastes, chemical
management and the restoration of lands disturbed by mining and
production activities. Expenditures that relate to an existing
condition caused by past operations, and which do not contribute to
current or future revenue generation, are charged to operations.
Liabilities are recorded when environmental assessments and/or remedial
efforts are probable, and the cost can be reasonably estimated. As
environmental laws and regulations change, revisions to current
estimates are made.
Provincial Resource Taxes
- -------------------------
The Company's Canadian potash mining operations are subject to
certain royalty and production taxes (provincial resource taxes).
These taxes are based on a number of factors related to the production
and sale of potash. Accordingly, provincial resource taxes have been
included in cost of goods sold in the Supplemental Consolidated
Statement of Operations.
Derivatives
- -----------
The Company periodically enters into DAP futures contracts and
options to purchase natural gas to manage its exposure to price
fluctuations. In addition, the Company has entered into forward
exchange contracts to hedge the effect of Canadian dollar exchange rate
changes on a portion of identifiable foreign currency exposures from
operations. Net hedging gains and losses are recognized as a part of
the transactions hedged and were not significant in the years ended
June 30, 1995, 1994 and 1993. The Company monitors its market risk on
an ongoing basis and considers its risk to be minimal.
Foreign Currencies
- ------------------
The functional currency used by the Company in measuring the
assets, liabilities and operations of one of its Canadian subsidiaries,
International Minerals & Chemical (Canada) Global Ltd. (IMC Canada), is
the U.S. dollar. Exchange gains and losses realized on foreign
currency translation are recorded in other non-operating income and
expense in the Company's Supplemental Consolidated Statement of
Operations.
Effective July 1, 1994, the functional currency of one of the
Company's Canadian subsidiaries, Kalium Canada Ltd. (Kalium Canada),
was changed to the Canadian dollar. The prospective change was made in
accordance with the provisions of SFAS No. 52, "Foreign Currency
Translation." In addition, in January 1995, the Company acquired CCP
and designated the Canadian dollar as the functional currency to be
used to measure the assets, liabilities and operations of this
subsidiary. Accordingly, exchange gains and losses arising from
translation are accumulated as a separate component of stockholders'
equity.
As of June 30, 1995, the Company's cumulative foreign currency
translation adjustment resulted in a reduction of stockholders' equity
of $9.9 million which was offset principally by a decrease to property,
plant and equipment, net, and an increase in deferred income taxes.
In accordance with the requirements of SFAS No. 52, on March 1,
1996, the Company determined the functional currency to be the Canadian
dollar for all of its Canadian operations.
Earnings Per Share
- ------------------
All share and per share information appearing in the supplemental
consolidated financial statements and notes herein give effect to IMC's
2-for-1 stock split effected in the form of a 100 percent stock
dividend which was distributed on November 30, 1995.
Earnings per share are based on the weighted average number of
shares and equivalent shares outstanding. Fully diluted earnings per
share are not significantly different from primary earnings per share
and, accordingly, are not presented.
3. Merger and Acquisitions
-----------------------
On March 1, 1996, IMC issued 32.4 million shares of common stock to
complete the previously announced merger with Vigoro. The Company used
the pooling of interests method to account for this transaction and,
accordingly, the Company's financial statements have been restated for
all periods prior to the acquisition to include the accounts and
operations of Vigoro. These supplemental consolidated financial
statements, giving retroactive effect to the merger with Vigoro, will
become the Company's historical financial statements upon the filing of
its quarterly financial statements for the period ended March 31, 1996.
Operating results of IMC and Vigoro for the three years ended June
30, 1995, prior to restatement were:
Year ended June 30,
1995 1994 1993
---------- ---------- ----------
IMC
Net sales $1,924.0 $1,441.5 $ 897.1
Extraordinary item (6.5) (25.2)
Accounting changes (5.9) (47.1)
Net earnings (loss) 114.7 (28.8) (167.1)
Vigoro
Net sales $ 871.4 $ 719.6 $ 571.3
Extraordinary item (2.0)
Net earnings 66.2 48.0 40.1
Intercompany sales elimination $ (59.3) $ (35.8) $ (30.3)
Combined
Net sales $2,736.1 $2,125.3 $1,438.1
Extraordinary item (6.5) (25.2) (2.0)
Accounting changes (5.9) (47.1)
Net earnings (loss) 180.9 19.2 (127.0)
In January 1995, the Company acquired substantially all of the
assets of CCP for $121.1 million, plus $16.2 million for working
capital. The Company used proceeds borrowed under a newly created
acquisition credit facility to finance the purchase price, while using
cash on hand to acquire the working capital. The CCP potash mine,
located in Colonsay, Saskatchewan, utilizes shaft mining technology and
has a current annual capacity of 1.5 million tons and estimated
recoverable reserves of 120 years at current production levels.
On October 16, 1995, the Company acquired the animal feed
ingredients business (Feed Ingredients) of Mallinckrodt Group Inc. and
subsequently contributed the business to IMC-Agrico. The Company's
portion of the purchase price was $67.5 million and was paid out of
operating cash. The acquisition was accounted for under the purchase
method of accounting.
4. Joint Venture Partnership
-------------------------
On July 1, 1993, IMC and FRP entered into a joint venture
partnership in which both companies contributed their respective
phosphate businesses to create IMC-Agrico, a Delaware general
partnership, in return for a 56.5 percent and a 43.5 percent economic
interest, respectively, in IMC-Agrico. The activities of IMC-Agrico,
which is operated by the Company, include the mining and sale of
phosphate rock, and the production, distribution and sale of
concentrated phosphates, uranium oxide and related products.
For financial reporting purposes, the acquisition of 56.5 percent
of FRP's phosphate business net assets is being accounted for as a
purchase and resulted in a deferred gain which is recognized in the
Supplemental Consolidated Statement of Operations as the related FRP
assets are being used in operations, generally over 20 years. Other
operating income and expense, net included $3.0 million from the
amortization of such gain for the year ended June 30, 1995 versus $16.0
million (including $12.7 million related to finished goods inventory)
in 1994. FRP's 43.5 percent interest in IMC-Agrico has been reported
as minority interest on the Company's Supplemental Consolidated Balance
Sheet; and the earnings therefrom have been reported as minority
interest on the Company's Supplemental Consolidated Statement of
Operations.
IMC-Agrico makes cash distributions to each partner based on
formulas and sharing ratios as defined in the Partnership Agreement.
For the year ended June 30, 1995, the total amount of Distributable
Cash generated by IMC-Agrico was $467.4 million, of which $254.9
million was distributed to FRP, including $49.0 million distributed in
August 1995.
On January 23, 1996, the Company and FRP entered into certain
amendments to the Partnership Agreement. Effective March 1, 1996,
there will be a shift of 0.85 percent of Distributable Cash interest of
IMC-Agrico from the Company to FRP. If the shift of Distributable Cash
from the Company to FRP contemplated by the amendments to the
IMC-Agrico Partnership Agreement had been effective as of July 1, 1994,
cash distributions to FRP for the fiscal year ended June 30, 1995 would
have increased by $4.0 million.
5. Sterlington Litigation
----------------------
Operating earnings for the year ended June 30, 1993 included a
charge of $169.1 million, net of insurance recoveries and legal fees,
which reflected settlement of a lawsuit 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 and has established a reserve to
cover the estimated cost of resolving the remaining lawsuits. See Note
21 for further discussion of this litigation.
6. Other Non-Recurring Operating Items
-----------------------------------
In addition to the amortization of the deferred gain discussed in
Note 4, operating earnings, in 1995, included provisions totaling $10.3
million ($5.8 million net of minority interest) for remediation costs
associated with a sinkhole beneath a phosphogypsum storage stack at
IMC-Agrico's concentrated phosphate production facility in Florida and
repair and cleanup costs related to earthen dam breaches at
IMC-Agrico's Payne Creek and Hopewell phosphate mining facilities in
Florida. These charges were partially offset by a gain of $5.0 million
from the sale of land in Florida. In 1994, operating earnings included
a gain of $7.6 million from the sale of 18 FARMARKETs and three
satellite locations and a gain of $5.5 million ($3.1 million net of
minority interest) from IMC-Agrico's sale of its Florida cattle ranch.
These gains were partially offset by a charge of $5.6 million which
consisted principally of a provision to adjust the carrying values of
certain investments of the Company's FARMARKETs in Florida to estimated
net realizable values. In 1993, operating earnings included charges of
$32.4 million from the settlement of a claim relating to losses arising
out of a water inflow at one of the Company's potash mines in Canada
and $3.0 million from the settlement of an environmental issue. 1993
also included a gain of $8.1 million from the resolution of a contract
dispute with a major uranium customer.
7. 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 quarterly 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 low price of crude oil at
December 31, 1993, the Company was required to reduce the carrying
value of its investment in its oil and gas joint venture. As a result,
the Company recorded a charge of $20.3 million in fiscal 1994 to
reflect this reduction.
8. Receivables, Net
----------------
Accounts receivable at June 30 were as follows:
1995 1994
------ ------
Trade accounts $259.9 $251.6
Non-trade receivables 33.1 28.3
------ ------
293.0 279.9
Less:
Allowances 6.5 5.6
Receivable interests sold 50.0
------ ------
$236.5 $274.3
------ ------
The carrying value of accounts receivable was equal to the
estimated fair value of such assets due to their short maturity.
In October 1994, IMC-Agrico entered into a one-year agreement with
a financial institution to sell, on an ongoing basis, an undivided
percentage interest in a designated pool of receivables, subject to
limited recourse provisions, in an amount not to exceed $75 million.
In October 1995, this agreement was renewed for an additional one-year
period and the limit on the designated pool of receivables was reduced
to $65 million. Related costs, charged to interest earned and other
non-operating income and expense, totaled $2.5 million in 1995. The
Company's portion of the proceeds from the initial sale of receivable
interests ($32.5 million) was used primarily to retire long-term debt.
9. Property, Plant and Equipment
-----------------------------
The Company's investment in property, plant and equipment (at cost)
at June 30 is summarized as follows:
1995 1994
-------- --------
Land $ 96.2 $ 94.1
Mineral properties and rights 656.9 581.2
Buildings and leasehold improvements 459.9 438.8
Machinery and equipment 2,668.2 2,584.9
Construction in progress 90.1 55.6
-------- --------
3,971.3 3,754.6
Accumulated depreciation and
depletion 1,714.1 1,575.1
-------- --------
Net property, plant and equipment $2,257.2 $2,179.5
======== ========
10. Accrued Liabilities
-------------------
Accrued liabilities at June 30 were as follows:
1995 1994
------ ------
Salaries, wages and bonuses $ 40.4 $ 29.9
Income taxes 35.0 22.1
Taxes other than income taxes 33.2 19.3
Environmental 21.1 16.2
Interest 9.8 10.3
Other 53.9 49.7
------ ------
$193.4 $147.5
11. Vigoro Refinancing
------------------
In August 1993, Vigoro refinanced a portion of its existing
short-term and long-term debt to provide it with additional financial
flexibility and to take advantage of favorable interest rates in the
long-term debt market (Vigoro Refinancing). As part of the Vigoro
Refinancing, Vigoro entered into a new, unsecured $200.0 million
revolving credit agreement with a syndicate of commercial banks. The
Vigoro Credit Agreement replaced secured and unsecured credit
facilities previously available to Vigoro's subsidiaries.
Also as part of the Vigoro Refinancing, Vigoro entered into
unsecured term loans of $72.0 million. These term loans were used to
refinance secured and unsecured indebtedness. In addition, Vigoro
entered into a private shelf facility for $68.0 million, of which $18.0
million was drawn down at June 30, 1995. These unsecured term loans
bear interest at approximately 6.7 percent and will mature at various
times from 2002 to 2005.
In connection with the Vigoro Refinancing, the Company recorded an
extraordinary loss of $1.4 million, net of taxes, in 1993 for
redemption premium incurred and write-off of previously deferred
finance charges.
In December 1994, Vigoro amended and restated the Vigoro Credit
Agreement to: (i) include a new non-revolving facility, $121.1 million
of which was used to fund the acquisition of CCP discussed in Note 3;
and (ii) increase the line of credit available to Vigoro to $255.0
million.
In July 1995, Vigoro borrowed $30.0 million on a long-term basis at
a fixed rate of 6.64 percent under the remaining uncommitted $50.0
million shelf facility. The borrowing refinanced variable rate debt at
comparable, but floating, interest rates.
12. Long-Term Debt
--------------
Long-term debt at June 30 consisted of the following:
1995 1994
------- -------
Revolving credit facility, variable rate $131.8 $ 10.5
Term loans, maturing through 2005 90.0 90.0
9.25% Senior notes, due 2000 61.6 111.2
10.125% Senior notes, due 2001 60.4 116.5
10.75% Senior notes, due 2003 54.3 113.6
6.25% Convertible subordinated notes,
due 2001 115.0 115.0
9.45% Senior debentures, due 2011 100.0 100.0
7.525% Industrial revenue bonds, due 2015 75.0 75.0
7.7% Industrial revenue bonds, due 2022 26.8 25.6
Other debt 44.3 45.9
------ ------
759.2 803.3
Less current maturities 9.0 1.7
------ ------
$750.2 $801.6
====== ======
On June 30, 1995, the estimated fair value of long-term debt
described above was approximately the same as the carrying amount of
such debt on the Supplemental Consolidated Balance Sheet. The fair
value was calculated in accordance with the requirements of SFAS No.
107 "Disclosures of Fair Value of Financial Instruments" and was
estimated by discounting the future cash flows using rates currently
available to the Company for debt instruments with similar terms and
remaining maturities.
In 1995, the Company purchased $165.0 million principal amount of
its Senior Notes prior to maturity in an effort to reduce higher cost
indebtedness. As a result, the Company recorded an extraordinary loss
of $6.5 million, net of taxes, for redemption premium incurred and
write-off of previously deferred finance charges in connection with the
purchase of such Notes. In 1994, the Company recorded an extraordinary
loss of $25.2 million, net of taxes, in connection with the purchase of
$220.0 million principal amount of its 11.25 percent Notes and $78.6
million principal amount of its Senior Notes. In 1993, the Company
recorded an extraordinary loss of $1.4 million, net of taxes, in
connection with the Vigoro Refinancing discussed in Note 11.
In addition to the indebtedness related to the Vigoro Refinancing,
IMC had an agreement (Working Capital Facility) with a group of banks
whereby IMC could borrow up to $100.0 million for general corporate
purposes. At June 30, 1995, $29.6 million was drawn in the form of
standby letters of credit principally to support the industrial revenue
bonds and other debt and credit risk guarantees. There were no other
borrowings under the Working Capital Facility at June 30, 1995. In
July 1995, IMC amended the Working Capital Facility, increasing
available borrowings to $150.0 million.
On February 28, 1996, the Company entered into an unsecured credit
facility (Credit Facility) with a group of banks. Under the terms of
the Credit Facility, the Company and certain of its subsidiaries may
borrow up to $450 million under a revolving credit facility which
matures on March 1, 1999 and $50 million under a long-term credit
facility which matures March 2, 2001. On March 1, 1996, the Company
and its subsidiaries had borrowed $26 million under the revolving
credit facility and $50 million under the long-term facility. The
Vigoro Credit Agreement and the Working Capital Facility were
terminated at the time the Company entered into the Credit Facility.
Simultaneously with the execution of the Credit Facility, the
Company and one of its subsidiaries refinanced unsecured term loans of
Vigoro and one of its subsidiaries. The new $120 million unsecured
term loans (the Term Loans) bear interest at rates between 7.37 percent
and 7.43 percent and mature at various times between 2000 and 2005.
The Working Capital Facility, Senior Notes and Vigoro Credit
Agreement contain provisions which (i) restrict the Company's ability
to make capital expenditures and dispose of assets, (ii) limit the
payment of dividends or other distributions to stockholders, and (iii)
limit the incurrence of additional indebtedness. These debt
instruments also contain financial ratios and tests which must be met
with respect to interest and fixed charge coverage, tangible net worth,
working capital and debt to total capitalization. The Credit Agreement
and Term Loans contain customary negative covenants and financial
ratios and other tests which must be met with respect to interest
coverage, tangible net worth and leverage.
IMC-Agrico also has an agreement with a group of banks to provide
it with a $75 million Partnership Working Capital Facility. The
Partnership Working Capital Facility, which has a letter of credit
subfacility for up to $25 million, expires on February 9, 1997.
Borrowings under the Partnership Working Capital Facility are unsecured
with a negative pledge on substantially all of IMC-Agrico's assets.
Borrowings under the Partnership Working Capital Facility bear interest
at rates based on a base rate or an adjusted Eurodollar rate. The
Partnership Working Capital Facility has minimum net Partners' capital,
fixed charge and current ratio requirements, and places limitations on
indebtedness of IMC-Agrico and restricts the ability of IMC-Agrico to
make cash distributions in excess of Distributable Cash (as defined).
At June 30, 1995, IMC-Agrico was in compliance with all of the
covenants governing this agreement. There is a .25 percent commitment
fee on the unused portion of the credit line. At June 30, 1995,
IMC-Agrico had drawn down $12.5 million under the letter of credit
subfacility and had no borrowings under the remainder of the
Partnership Working Capital Facility.
The Convertible Subordinated Notes are exchangeable for
approximately 3.6 million shares of the Company's common stock at
$31.75 per share.
Scheduled maturities and sinking fund requirements for the next
five years are as follows:
1996 $ 9.0
1997 20.4
1998 49.1
1999 15.6
2000 75.3
13. Interest Charges
----------------
The Company capitalizes interest costs relating to the financing of
major projects under development. All other interest is expensed as
incurred.
1995 1994 1993
----- ----- -----
Amount charged to expense $70.2 $91.2 $55.6
Amount capitalized .2 .7 19.4
----- ----- -----
$70.4 $91.9 $75.0
===== ===== =====
14. Other Noncurrent Liabilities
----------------------------
Other noncurrent liabilities at June 30 were as follows:
1995 1994
------ ------
Postretirement employee benefits $ 93.8 $ 91.2
Environmental 1.2 85.2
Deferred gain 3.7 46.7
Postemployment employee benefits 15.9
Other 49.5 52.2
------ ------
284.1 $275.3
====== ======
15. Pension Plans
-------------
The Company has non-contributory pension plans that cover
approximately 78 percent of its employees. Certain other employees are
covered by defined contribution pension plans. Benefits are based on a
combination of years of service and compensation levels, depending on
the plan. Generally, contributions to the U.S. plans are made to meet
minimum funding requirements of the Employee Retirement Income Security
Act of 1974 (ERISA), while contributions to Canadian plans are made in
accordance with Pension Benefits Acts, instituted by the provinces of
Saskatchewan and Ontario.
Employees in the United States and Canada whose pension benefits
exceed Internal Revenue Code and Revenue Canada limitations,
respectively, are covered by supplementary non-qualified, unfunded
pension plans which are provided for by charges to earnings sufficient
to meet projected benefit obligations.
The components of net pension expense, computed actuarially, were
as follows:
1995 1994 1993
------ ------ ------
Service cost for benefits earned
during the year $ 9.0 $ 8.9 $ 6.5
Interest cost on projected benefit
obligation 14.7 13.1 13.4
Return on plan assets (11.8) (7.3) (14.8)
Net amortization and deferral (.1) (4.4) 5.3
----- ----- -----
Net pension expense $11.8 $10.3 $10.4
----- ----- -----
Net pension expense in 1993 included $1.6 million related to the
settlement of certain pension obligations.
The plans' assets consist mainly of corporate equity and U.S.
government and corporate debt securities, and units of participation in
a collective short-term investment fund.
In a number of these plans, the plan assets exceed the accumulated
benefit obligations (overfunded plans) and in the remainder of the
plans, the accumulated benefit obligations exceed the plan assets
(underfunded plans).
The funded status of the Company's pension plans and amounts
recognized in the Supplemental Consolidated Balance Sheet were as
follows:
Overfunded Underfunded
Plans Plans
1995 1994 1995 1994
------ ------ ------ ------
Plans' assets at fair value $133.0 $119.0 $ 26.2 $ 26.4
Actuarial present value of
projected benefit obligations:
Vested benefits 111.5 95.0 31.4 33.2
Non-vested benefits .8 .6 .4 .2
------ ------ ------ ------
Accumulated benefit
obligations 112.3 95.6 31.8 33.4
Projected future salary
increases 37.3 33.7 11.9 9.2
------ ------ ------ ------
Total projected benefit
obligations 149.6 129.3 43.7 42.6
------ ------ ------ ------
Plans' assets less than
projected benefit obligations 16.6 10.3 17.5 16.2
Items not yet recognized
in earnings:
Unrecognized net loss (gain) (8.2) (.1) (1.3) 2.9
Unrecognized transition
(asset) liability .9 .8 (.2) .1
Unrecognized prior service
cost (7.0) (7.2) (12.3) (13.5)
Additional minimum liability 7.4 8.4
------ ------ ------ ------
Accrued pension liability $ 2.3 $ 3.8 $ 11.1 $ 14.1
====== ====== ====== ======
Significant actuarial assumptions were as follows:
1995 1994 1993
---- ---- ----
Discount rate 8.2% 8.4% 8.6%
Long-term rate of return on assets:
U.S. plans 7.5% 7.5% 9.0%
Canadian plans 9.0% 9.5% 10.0%
---- ---- ----
7.8% 7.9% 9.2%
==== ==== ====
Rate of increase in compensation
levels 5.2% 5.3% 5.3%
The Company also has defined contribution pension and investment
plans (the Plans) for certain of its employees. Under each of the
Plans, participants are permitted to defer a portion of their
compensation and Company contributions to the Plans are based on a
percentage of wages earned by the eligible employees. The Company's
contributions to the Plans totaled $9.7 million, $4.6 million and $4.0
million for the years ended June 30, 1995, 1994 and 1993, respectively.
16. Postretirement and Postemployment Benefit Plans
-----------------------------------------------
The Company provides certain health care benefit plans for certain
retired employees. The plans may be either contributory or
non-contributory and contain certain other cost sharing features such
as deductibles and coinsurance. The plans are unfunded. Employees are
not vested and such benefits are subject to change. Health care
benefits of those employees who retired prior to February 1, 1988 are
paid by Mallinckrodt Group Inc.; the Company is charged for one-half of
such costs, not exceeding $.8 million in any fiscal year.
The Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," effective July 1, 1992.
This statement requires that the cost of providing other postretirement
benefits (OPEBS) be accrued during the active service period of the
employees. The Company recorded an after-tax charge of $47.1 million
for the cumulative effect of this accounting change.
The components of OPEBS expense for years ending June 30 were as
follows:
1995 1994 1993
---- ---- ----
Service cost $1.5 $1.5 $2.3
Interest cost 5.3 5.2 6.3
Net amortization and deferral (1.5) (1.6)
---- ---- ----
$5.3 $5.1 $8.6
On July 1, 1993, the Company amended its postretirement plans in an
effort to control cash outlays while protecting the interests of those
employees who have retired or will retire in the near future. This
plan amendment had the effect of reducing the accumulated
postretirement benefit liability on July 1, 1993 by $15.9 million. As
a result, OPEBS expense was reduced by $1.1 million in 1995 and 1994 to
reflect the amortization of this plan change over 13.8 years.
The significant assumptions used in determining postretirement
benefit costs were as follows:
1995 1994 1993
---- ---- ----
Discount rate 8.2% 8.4% 8.5%
Health care trend rate:
Under age 65 9.8% (1) 10.4% (1) 15.0% (1)
Over age 65 6.3% (2) 7.0% (2) 8.2% (2)
(1) Decreasing gradually to 5.5% in 2003 and thereafter.
(2) Decreasing gradually to 5.5% in 1999 and thereafter.
If the health care trend rate assumptions were increased by 1.0
percent, the accumulated postretirement benefit obligation would
increase by 6.3 percent as of June 30, 1995. This would have the
effect of an 8.7 percent increase on OPEBS expense in 1995.
The components of the Company's postretirement benefit liability at
June 30 were as follows:
1995 1994
----- -----
Retirees $33.1 $29.3
Actives:
Fully eligible 12.0 11.6
Not-fully eligible 24.3 23.3
Total 69.4 64.2
Items not yet recognized in earnings:
Unrecognized prior service cost 13.2 14.3
Unrecognized net gain 11.6 12.7
----- -----
Accrued postretirement benefits
liability $94.2 $91.2
===== =====
The Company also provides benefits such as workers' compensation
and disability to certain former or inactive employees after employment
but before retirement. The plans are unfunded. Employees are not
vested and plan benefits are subject to change.
Effective July 1, 1994, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," to account for
disability benefits of certain employees. Prior to July 1, 1994, the
Company recognized the cost of providing certain of these benefits on a
cash basis. SFAS No. 112 requires the cost of providing these benefits
be recognized when it becomes probable that such benefits will be paid
and when sufficient information exists to make reasonable estimates of
the amounts to be paid. Consequently, the Company recognized a $13.3
million liability for postemployment benefits as of July 1, 1994 and
recorded a charge of $5.9 million, net of taxes, for the cumulative
effect of the Company's unfunded obligation prior to July 1, 1994. The
effect of the adoption of SFAS No. 112 on 1995 earnings before the
cumulative effect of the accounting change was not material. As
permitted by SFAS No. 112, prior year financial statements have not
been restated to reflect the change in accounting method.
17. Income Taxes
------------
Two of the Company's three potash operations that are subject to
Canadian taxes, Kalium Canada and CCP, are included in the consolidated
United States federal income tax return filed by the Company.
Deferred income taxes reflect the net tax effects of temporary
differences between the amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities
and assets at June 30 were as follows:
1995 1994
------ ------
Deferred tax liabilities
Property, plant and equipment $436.5 $403.8
Taxes on undistributed foreign earnings 28.6 29.8
Other liabilities 38.7 29.3
------ ------
Total deferred tax liabilities 503.8 462.9
------ ------
Deferred tax assets
Net operating loss carryforwards 78.2 105.6
Postretirement and postemployment benefits 35.7 33.4
Sterlington litigation settlement 31.5 29.9
Reclamation and decommissioning reserves 26.2 25.8
Alternative minimum tax credit carryforward 34.4 9.3
Utilization of foreign tax credits 26.1 21.6
Other assets 45.0 28.6
------ ------
Total deferred tax assets 277.1 254.2
------ ------
Net deferred tax liabilities $226.7 $208.7
====== ======
At June 30, 1995, the Company had net operating loss carryforwards
for U.S. federal tax purposes of $196.7 million. If not utilized
against taxable income, the federal tax loss carryforwards will expire
in 2009. The tax benefit of these loss carryforwards has been provided
in the 1995 and 1994 Supplemental Consolidated Balance Sheet as
deferred tax assets.
The provision (credit) for income taxes consisted of the following:
1995 1994 1993
------ ------ ------
Current
Federal $ 33.6 $(10.2) $(7.5)
State and local 8.6 4.8 3.3
Foreign 52.9 22.1 15.7
------ ------ ------
95.1 16.7 11.5
Deferred
Federal 8.1 14.5 (33.5)
State and local (.9) (4.2) (13.1)
Foreign 13.2 7.8 (4.0)
------ ------ ------
20.4 18.1 (50.6)
------ ------ ------
$115.5 $ 34.8 $(39.1)
====== ====== ======
The components of earnings (loss) before income taxes,
extraordinary loss and cumulative effect of accounting changes, and the
effects of significant adjustments to tax computed at the federal
statutory rate were as follows:
1995 1994 1993
-------- -------- --------
Domestic $ 193.6 $ 24.1 $(139.0)
Foreign 115.2 55.1 22.0
------- ------- -------
Earnings (loss) before income
taxes, extraordinary loss and
cumulative effect of accounting
changes $ 308.8 $ 79.2 $(117.0)
======= ======= =======
Computed tax at the federal statutory
rate of 35% (34% in 1993) $ 108.1 $ 27.7 $ (39.8)
Foreign income and withholding taxes 19.5 9.2 5.2
Percentage depletion in excess of
basis (18.1) (11.3) (14.2)
Deferred tax adjustment for the effect
of changes in U.S. corporate tax rates 4.5
Federal taxes on undistributed
foreign earnings 4.4 2.9 5.6
State income taxes, net of federal
income tax benefit 4.9 .4 (6.6)
Sterlington litigation settlement 3.3
Other items (none in excess of 5%
of computed tax) (3.3) 1.4 7.4
------- ------- -------
Provision (credit) for income taxes $ 115.5 $ 34.8 $ (39.1)
======= ======= =======
Effective tax rate 37.4% 43.9% 33.4%
======= ======= =======
U.S. income and foreign withholding taxes are provided on the
earnings of foreign subsidiaries that are expected to be remitted to
the extent that taxes on the distribution of such earnings would not be
offset by foreign tax credits. The Company has no present intention of
remitting undistributed earnings of foreign subsidiaries aggregating
$187.8 million at June 30, 1995 and, accordingly, no deferred tax
liability has been established relative to these earnings. If these
amounts were not considered permanently reinvested, a deferred tax
liability of $44.6 million would have been required.
18. Capital Stock
-------------
Changes in the number of shares of common stock issued and in
treasury were as follows:
1995 1994 1993
---------- ---------- ----------
Common stock issued
Balance, beginning of
year 96,011,235 96,312,177 96,258,497
Common stock issued 204,293 963,168
Common stock purchased (1,416,000)
Stock options exercised 172,992 11,130 17,350
Award of restricted shares 19,680 140,760 36,330
---------- ---------- ----------
96,408,200 96,011,235 96,312,177
Treasury common stock
Balance, beginning of year 5,540,518 20,195,616 20,165,558
Common stock issued (14,900,000)
Purchases 12,322 244,902 30,058
---------- ---------- ----------
Balance, end of year 5,552,840 5,540,518 20,195,616
---------- ---------- ----------
Common stock outstanding,
end of year 90,855,360 90,470,717 76,116,561
========== ========== ==========
On October 5, 1993 and May 5, 1994, the Company completed public
offerings of 6,900,000 shares and 8,000,000 shares of common stock at
$17.25 and $18.50 per share, respectively. Net proceeds of these
offerings, net of issuance costs and expenses, were used to reduce
long-term indebtedness.
Pursuant to a Shareholders Rights Plan adopted by the Company in
June 1989, a dividend of one preferred stock purchase right (a Right)
for each outstanding share of common stock of the Company was issued on
July 12, 1989 to shareholders of record on that date. Under certain
conditions, each Right may be exercised to purchase one two-hundredth
of a share of Junior Preferred Stock, Series C, par value $1.00 per
share, at a price of $75. This preferred stock is designed to
participate in dividends and vote on essentially equivalent terms with
a whole share of common stock. The Rights become exercisable apart
from the common stock only if a person or group acquires 15 percent or
more of the common stock or makes a tender offer for 15 percent or more
of the outstanding common stock. However, the Rights do not become
exercisable if a person or group becomes the owner of 15 percent or
more of the common stock as a result of the purchase of common stock by
the Company to reduce the number of shares outstanding and increase the
proportionate number of shares owned by such person or group to 15
percent or more, unless such person or group subsequently becomes the
owner of any additional shares of the common stock. In addition, upon
the acquisition by a person or group of 15 percent or more of the
common stock, each Right will entitle the holder to purchase, at the
then-current exercise price of the Right, a number of shares of common
stock having a market value at that time of twice the exercise price.
The Rights may be redeemed at a price of $.005 per Right under certain
circumstances prior to their expiration on June 21, 1999. No event
during 1995 made the Rights exercisable.
19. Stock Plans
-----------
The Company has various Stock Option Plans (the Stock Plans) under
which the Company may grant non-qualified stock options, stock
appreciation rights (SARs) and restricted stock to officers and key
managers of the Company. The Stock Plans, as amended, provide for the
issuance of a maximum of 7.2 million shares of common stock of the
Company which may be authorized but unissued shares or treasury shares.
Under the terms of the Stock Plans, the option price per share may
not be less than 100 percent of the fair market value on the date of
the grant. Stock options and SARs granted under the Stock Plans extend
for 10 years and generally become exercisable either 50 percent one
year after the date of the grant and 100 percent two years after the
date of the grant, or in one-third increments; one-third one year after
the date of the grant, two-thirds two years after the date of the
grant, and 100 percent three years after the date of the grant. At
June 30, 1995, no SARs had been granted under the Stock Plans.
The Company also adopted a long-term incentive plan in fiscal 1994
under which officers and key managers were awarded shares of restricted
common stock of the Company along with contingent stock units. Based
on performance objectives, these shares and units will vest in whole or
in part during and at the end of a three-year performance period ending
June 30, 1997. Restricted stock is valued on the issuance date, and
the related expense is amortized over the vesting period.
The Company had a similar long-term incentive plan in 1991 which
expired June 30, 1994. Out of a total of 343,472 shares (net of
cancellations) granted under this plan, 230,502 shares were cancelled
on June 30, 1994 due to non-attainment of performance objectives.
Stock options and restricted stock activities were as follows:
Stock Stock Restricted Available
Options Options Stock for
Outstanding Exercisable Outstanding Grant
----------- ----------- ----------- ----------
Balance at
June 30, 1992 952,570 330,370 351,600 3,032,402
Granted 310,341 36,330 (346,671)
Vested 311,100
Exercised (17,350) (17,350) (35,190)
Cancelled (51,547) (25,260) (30,058) 81,605
--------- --------- ------- ---------
Balance at
June 30, 1993 1,194,014 598,860 322,682 2,767,336
Granted 1,379,975 140,760 (1,520,735)
Vested 594,616
Exercised (11,130) (11,130) (41,050)
Cancelled (15,336) (10,120) (244,902) 260,238
--------- --------- ------- ---------
Balance at
June 30, 1994 2,547,523 1,172,226 177,490 1,506,839
Plan addition 1,600,000
Granted 1,275,152 19,680 (1,294,832)
Vested 654,693
Exercised (168,504) (168,504) (43,768)
Cancelled (61,502) (17,888) (11,922) 73,424
--------- --------- ------- ---------
Balance at
June 30, 1995 3,592,669 1,640,527 141,480 1,885,431
========= ========= ======= =========
Market prices for stock options granted ranged from $17.50 to
$24.79 per share in fiscal 1995 and from $16.50 to $25.37 per share in
fiscal 1994. Market prices for stock options exercised ranged from $11
to $26.25 per share in fiscal 1995 and from $11 to $16 per share in
fiscal 1994 and 1993. The average purchase price of outstanding stock
options at June 30, 1995 was $20.20 per share, based on an aggregate
purchase price of $72.6 million. Outstanding stock options will expire
over a period of time ending no later than July 31, 2005.
For the six months ended December 31, 1995, options were granted to
purchase approximately 769,500 shares of common stock at option prices
ranging from $29.75 to $38.00 per share.
Another stock option plan provides for the granting of awards of up
to 100,000 shares of common stock to directors of the Company who were
directors prior to the Merger and who were not also employees of the
Company. Options may be exercised at any time the director holding the
option remains a director of the Company and within two years after the
director ceases to be a director of the Company. Under the terms of
the plan, options granted are exercisable over 10 years beginning with
the grant date of the option. In fiscal 1995, options were granted to
purchase 14,000 shares of common stock at an option price of $19.06 per
share. A total of 4,488 shares were exercised during the year.
20. Commitments
-----------
The Company purchases sulphur, natural gas and ammonia from third
parties under contracts extending, in some cases, for multiple years.
Purchases under these contracts are generally at prevailing market
prices. These contracts generally range from one to four years.
The Company and FRP have an agreement to supply a portion of the
Company's sulphur requirements to IMC-Agrico over the life of the joint
venture partnership. Since the term of the sulphur purchase commitment
is indeterminable, the dollar value of such commitments has been
excluded from the schedule below after the year 2000.
The Company leases plants, warehouses, terminals, office
facilities, railcars and various types of equipment under operating
leases. Lease terms generally range from three to five years, although
some leases have longer terms.
Summarized below is a schedule of future minimum long-term purchase
commitments and minimum lease payments under non-cancellable operating
leases as of June 30, 1995:
Purchase Lease
Commitments Commitments
1996 $ 279.2 $ 23.7
1997 218.9 17.5
1998 188.1 13.7
1999 163.7 11.3
2000 141.0 7.2
Subsequent years 19.6 17.9
-------- --------
$1,010.5 $ 91.3
======== ========
Rental expense for 1995, 1994 and 1993 amounted to $39.7 million,
$34.9 million and $30.9 million, respectively.
IMC Canada is committed under a service agreement with Potash
Corporation of Saskatchewan Inc. (PCS) to produce annually from mineral
reserves specified quantities of potash for a fixed fee plus a pro rata
share of production and capital costs. The agreement extends through
June 30, 2001 and is renewable at the option of PCS for five additional
five-year periods. Potash produced for PCS may, at PCS's option,
amount to an annual maximum of approximately one-fourth of the Canadian
subsidiary's production capacity. During 1995, production of potash
for PCS amounted to 500,000 tons, or 15 percent of tons produced.
21. Contingencies
-------------
Mining Risks
- ------------
Since December 1985, the Company has experienced an inflow of water
into one of its two interconnected potash mines located in Esterhazy,
Saskatchewan. In recent years, the trend of the water inflow has
stabilized and the Company has successfully reduced the per ton
spending required to contain the inflow. However, the long-term
outlook of the water inflow has caused the Company to consider
alternatives to its current mining operations and studies are under way
in this regard. Any solution to the water inflow situation at the
mines could result in substantial capital expenditures and/or charges
to operations.
Sterlington Litigation
- ----------------------
Angus Chemical Company (Angus) and the Company are involved in
various litigation arising out of the May 1991 explosion at a
nitroparaffins plant located in Sterlington, Louisiana. Angus wants the
Company to assume responsibility for a class action lawsuit currently
pending in Louisiana against the Company, Angus, and other defendants
for injuries arising out of the explosion, and to reimburse Angus for
amounts that Angus has paid for settled claims in connection with the
Sterlington explosion. With respect to the settled demands, Angus, in
pleadings filed in Louisiana and Texas, states that it is seeking
approximately $9.5 million, plus interest, fees, and costs. In
addition, Angus is seeking direct payment from the Company's insurers,
X.L. Insurance Company, Ltd. (XL) and A.C.E. Insurance Company, Ltd.
(ACE) for certain damages in an action pending in Louisiana state
court. Angus has not specified how much it is seeking from the
Company's insurers. Angus may be asserting claims against XL for the
difference between the limits of the XL policy of $75.0 million and the
$45.7 million that XL has paid to the Company under the policy. In
addition, Angus may be asserting claims against ACE for the difference
between the limit of the ACE policy of $100.0 million and the $15.0
million that ACE has previously paid to the Company. The Company may
have obligations to indemnify certain of the insurers if Angus is
successful in this case. The Company is unable to estimate the
magnitude of its exposure at this time.
The Company continues to vigorously litigate each of the matters
arising out of the Sterlington explosion. A jury trial is scheduled to
commence in October 1996 in Texas state court with respect to Angus'
and the Company's claims for contribution and indemnity for the settled
demands. Discovery is still not complete with respect to the lawsuits
scheduled for trial in October 1996, and all of the other lawsuits are
in early stages. In addition, Angus has filed an action in federal
court in Louisiana seeking reimbursement for amounts allegedly expended
to remediate certain environmental sites at the Sterlington plant. In
its pleadings filed with the Louisiana federal court, Angus states that
it is seeking approximately $1.8 million for amounts expended, plus
interest, fees, costs and reimbursement for any future expenses. The
Company is unable to estimate the magnitude of its exposure at this
time. The Company is also pursuing additional recoveries from one of
its insurance carriers relating to Sterlington.
Antitrust Litigation
- --------------------
The Company has been named as a defendant, along with other
Canadian and U.S. potash producers, in lawsuits filed in federal court
in Minnesota and state court in California. 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 lawsuits in 1994. Discovery is nearly complete in the
Minnesota case, following certification of a class of all U.S. potash
purchasers as plaintiffs. While the Company believes that the
allegations in the complaints are without merit, until discovery is
completed it is unable to evaluate possible defenses or to make a
reliable determination as to the potential liability exposure, if any.
The Company has also received a U.S. grand jury subpoena seeking
information related to the sale of potash in the United States from
1986 to the present. The Company is cooperating with the government
and has provided the information needed to comply with the subpoena.
As in the civil antitrust matters 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 the government
investigation or make a reliable determination as to the potential
exposure, if any.
FTC Phosphate Operations Inquiry
- --------------------------------
The Company was notified on October 2, 1995 by the Federal Trade
Commission (FTC) that the FTC is conducting an investigation to
determine whether manufacturers of concentrated phosphates may have
violated Section 5 of the Federal Trade Commission Act, as amended, by
agreeing to restrict output or raise prices. The FTC has requested
that the Company provide certain information and documents regarding
the Company's phosphate operations. The Company has submitted
responsive information and documents to the FTC. The FTC has stated
that neither its request for information and documents nor the fact it
has commenced an investigation should be construed as indicating that a
violation has occurred or is occurring.
Environmental Matters
- ---------------------
Governmental regulatory agencies have identified several of the
Company's facilities for investigation or possible environmental
cleanup pursuant to applicable laws and regulations. At some
locations, the Company has agreed, pursuant to consent orders with the
appropriate governmental agencies, to undertake certain remedial
actions dependent upon the results of investigations, which currently
are in progress. The cost of any remedial actions that ultimately may
be required at these sites, cannot currently be determined. The
Company is the beneficiary of certain indemnification agreements with
PPG Industries, Inc., Kaiser Aluminum & Chemical Corporation (Kaiser
Aluminum), Beatrice Companies, Inc., Estech, Inc. and certain private
parties with respect to certain facilities and operations of the
Company purchased from those parties including two of the sites subject
to the consent orders. While there can be no assurance that the
Company will obtain full indemnification in these two or other such
cases, the Company believes it is entitled to indemnification from
parties to these agreements for a portion of the expenditures which the
Company may be required to incur to remedy environmental problems that
are attributable to activities occurring prior to the Company's
acquisition of such facilities. In that regard, the Company has
received and anticipates receiving amounts pursuant to these agreements
for certain of its expenses incurred to date.
The Company was a defendant or third party defendant, generally
with numerous other defendants in the processing and distribution
chain, in 97 New Jersey state court lawsuits, in each case in
connection with the sale of an agricultural crop nutrient solution to
Hoover Treated Wood Products, Inc. and its predecessor (collectively,
"Hoover") used by Hoover to treat wood. Sales to Hoover were commenced
by Kaiser Aluminum and continued by the Company from 1985 until they
were discontinued in 1988. Only a few of the complaints specify a
dollar amount of damages. In some cases, punitive damages are also
sought by the plaintiffs.
In October 1995, the claims against the Company in 62 New Jersey
state court lawsuits were dismissed as the result of a court-sponsored
mediation program. The Special Master assisting the Court in the
mediation program reports that the claimants against the Company in the
35 remaining lawsuits have either settled or committed to a settlement
model which should result in a settlement. To the Company's knowledge,
there are no pending damage claims against the Company not reported to
be settled or committed to settlement.
In May 1993, the Company executed two agreements with Hoover and
certain interested parties relating to the Hoover litigation. Under
those agreements, the Company paid Hoover $2.0 million, a substantial
portion of which was paid by the Company's insurance carriers. In
return, Hoover released the Company from all present and future
asserted claims arising from the sale and distribution of wood treated
by Hoover and agreed to indemnify and hold the Company harmless from
all present and future asserted claims arising from the sale and
distribution of the wood treated by Hoover and agreed to indemnify and
hold the Company harmless from all present and future asserted claims
by other parties related to such wood. In addition, Hoover agreed to
us its best efforts to cause all the other parties to dismiss their
claims against the Company. The Company had accrued the $2.0 million
in gross damages referred to above in its consolidated financial
statements. In December 1994, based on advice from counsel, the
reduced level of litigation activity and ongoing negotiations with the
Company's insurance carriers, the Company reduced the $2.0 million
reserve by $1.5 million. While the Company cannot assure that Hoover
can obtain dismissals of all other parities' claims or will be able to
meet its obligation to indemnify and hold the Company harmless, the
Company believes the agreements with Hoover, coupled with the Company's
existing insurance coverage and substantial meritorious defenses,
should result in the resolution of all pending claims without any
material adverse effect on the financial condition or results of
operations of the Company.
The Company also has certain other contingent liabilities with
respect to litigation, claims and guarantees of debt obligations to
third parties arising in the ordinary course of business. The Company
does not believe that any of these contingent liabilities will have a
material adverse impact on the Company's financial position.
22. Operations by Geographic Area
-----------------------------
Financial information relating to the Company's operations in
various geographic areas was as follows:
Net Sales
----------------------------------
1995 1994 1993
-------- -------- --------
United States $2,589.0 $2,055.6 $1,365.7
Canada 388.6 244.9 239.6
Other 11.7 1.3 4.2
Transfers between geographic
areas (principally from
Canada) (253.2) (176.5) (171.4)
-------- -------- --------
Consolidated $2,736.1 $2,125.3 $1,438.1
======== ======== ========
<TABLE>
<CAPTIONS>
Earnings (Loss)
Before Income Taxes,
Extraordinary Loss and
Accounting Changes Identifiable Assets
------------------------- ------------------------
1995 1994 1993 1995 1994 1993
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
United States $ 361.1 $ 176.6 $ (100.8)$2,788.9$2,871.0 $1,736.3
Canada 130.2 59.6 36.6 734.9 434.1 478.2
Other 10.2 (.4) 2.0 8.2 8.1 12.5
Eliminations 1.6 8.8 .1 (274.8) (140.9) 116.3
------- ------- ------- ------- ------- -------
Operating earnings
(loss) 503.1 244.6 (62.1)
Interest earned
and other non-
operating (income)
and expense, net (6.3) 18.6 (.7)
Interest charges 70.2 91.2 55.6
Minority interest 130.4 55.6
------- ------- ------- ------- ------- -------
Consolidated $ 308.8 $ 79.2 $ (117.0)$3,257.2$3,172.3 $2,343.3
======= ======= ======= ======= ======= =======
</TABLE>
Transfers of product between geographic areas were at prices
approximating those charged to unaffiliated customers.
Sales from the United States, as shown in the preceding table,
included sales to unaffiliated customers in other geographic areas as
follows:
1995 1994 1993
------ ------ ------
Far East $643.9 $377.1 $190.7
Latin America 121.7 113.0 25.9
Europe 27.1 6.6 22.6
------ ------ ------
$792.7 $496.7 $239.2
------ ------ ------
QUARTERLY RESULTS (UNAUDITED)
(In millions except per share amounts)
Quarter
First Second Third Fourth Year
- --------------------------------------------------------------------
Fiscal 1995
Net sales $ 517.2 $ 587.5 $ 729.9 $ 901.5 $2,736.1
Gross margins 107.4 158.4 208.1 216.1 690.0
Earnings before income
taxes, extraordinary
item and cumulative
effect of accounting
change 36.9 58.3 96.3 117.3 308.8
Earnings before extra-
ordinary item and cumu-
lative effect of
accounting change 24.0 36.5 59.6 73.2 193.3
Extraordinary loss -
debt retirement (1.2) (1.8) (.7) (2.8) (6.5)
Cumulative effect of
accounting change (5.9) (5.9)
-------- -------- -------- -------- --------
Net earnings $ 16.9 $ 34.7 $ 58.9 $ 70.4 $ 180.9
======== ======== ======== ======== ========
Earnings per share:
Earnings before
extraordinary item
and cumulative
effect of account-
ing change $ .26 $ .40 $ .66 $ .80 $ 2.12
Extraordinary loss
- debt retirement (.01) (.02) (.01) (.03) (.07)
Cumulative effect of
accounting change (.06) (.06)
-------- -------- -------- -------- --------
Net earnings $ .19 $ .38 $ .65 $ .77 $ 1.99
======== ======== ======== ======== ========
Fiscal 1994
Net sales $ 339.9 $ 422.4 $ 520.0 $ 843.0 $2,125.3
Gross margins 27.4 65.0 110.1 180.2 382.7
Earnings (loss)
before income taxes
and extraordinary
item (23.7) (17.7) 31.4 89.2 79.2
Earnings (loss)
before extraordinary
item (21.6) 2.3 12.4 51.3 44.4
Extraordinary loss
- debt retirement (23.8) (1.4) (25.2)
-------- -------- -------- -------- --------
Net earnings (loss) $ (45.4) $ 2.3 $ 12.4 $ 49.9 $ 19.2
======== ======== ======== ======== ========
Earnings (loss) per share:
Earnings (loss)
before extraordinary
item $ (.29) $ .03 $ .15 $ .58 $ .54
Extraordinary loss
- debt retirement (.31) (.02) (.31)
-------- -------- -------- -------- --------
Net earnings (loss)$ (.60) $ .03 $ .15 $ .56 $ .23
======== ======== ======== ======== ========
In fiscal 1995, third and fourth quarter operating results reflected the
acquisition of CCP in January 1995.
In fiscal 1994, second quarter results included an after-tax charge of $12.4
million, or $.15 per share, from the write-down of the Company's investment in
an oil and gas joint venture due to the low price of crude oil.
(c) Exhibits.
No. Description
------------------------------------------------------------
13.1 Report of Arthur Andersen LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Arthur Andersen LLP
EXHIBIT 13.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of The Vigoro Corporation
We have audited the accompanying consolidated balance sheets of The Vigoro
Corporation (a Delaware corporation) and subsidiaries as of June 30, 1995 and
1994, and the consolidated statements of income, shareholders' equity and cash
flows for the years ended June 30, 1995, 1994 and 1993. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the financial statements of
Central Canada Potash, Inc. which statements reflect total assets and total
revenues of 21 percent and 6 percent, respectively, in 1995 of the consolidated
totals. Those statements were audited by other auditors whose report has been
furnished to us and our opinion, insofar as it relates to the amounts included
for that entity, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Vigoro
Corporation and subsidiaries as of June 30, 1995 and 1994, and the results of
its operations and cash flows for the years ended June 30, 1995, 1994 and 1993
in conformity with U.S. generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 22, 1996
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following registration
statements and related prospectuses filed by IMC Global Inc. under the
Securities Act of 1933 of our report dated March 1, 1996, with respect to the
supplemental consolidated financial statements of IMC Global Inc. included in
this Amendment No. 1 to the Current Report (Form 8-K/A) dated April 19,1996.
Commission File No.
---------------------------
Form S-8, No. 33-22079
Form S-8, No. 33-22080
Form S-8, No. 33-38423
Form S-8, No. 33-42074
Form S-8, No. 33-56911
Amendment No. 1 to Form S-4, No. 333-00439
Form S-8, No. 333-189
Ernst & Young LLP
Chicago, Illinois
April 19, 1996
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the incorporation of
our reports incorporated by reference in this Form 8-K/A, into IMC Global
Inc.'s previously filed Registration Statement No. 333-00439.
Arthur Andersen LLP
Chicago, Illinois
April 17, 1996
