<PAGE>
- -----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 31, 1998
IMC GLOBAL INC.
(Exact name of Registrant as specified in its charter)
Commission File Number: 1-9759
Delaware 36-3492467
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 Sanders Road 60062
Northbrook, Illinois (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (847) 272-9200
- ----------------------------------------------------------------------
<PAGE>
Item 5. Other Events.
The attached financial statements at December 31, 1997 and
1996 and for the three years then ended have been restated to
reflect the IMC AgriBusiness segment as a discontinued
operation.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of IMC Global Inc.
We have audited the accompanying consolidated balance sheet of IMC
Global Inc. as of December 31, 1997 and 1996 and the related
consolidated statements of earnings, cash flows and changes in
stockholders' equity for each of the three years in the period ended
December 31, 1997. 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 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 consolidated financial
position of IMC Global Inc. at December 31, 1997 and 1996, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
January 26, 1998, except for Note 24
as to which the date is December 15, 1998.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF EARNINGS
(In millions except per share amounts)
<CAPTION>
Years ended December 31,
1997 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,116.0 $2,143.3 $2,132.7
Cost of goods sold 1,541.1 1,547.0 1,499.8
-------- -------- --------
Gross margins 574.9 596.3 632.9
Selling, general and
administrative expenses 131.8 132.6 118.3
Main Pass write-down 183.7 - -
Merger and restructuring
charges - 37.3 -
-------- -------- --------
Operating earnings 259.4 426.4 514.6
Other (income) expense, net (5.4) (5.9) (14.7)
Interest expense 40.2 43.6 57.8
-------- -------- --------
Earnings from continuing operations
before minority interest 224.6 388.7 471.5
Minority interest 124.4 185.7 163.6
-------- -------- --------
Earnings from continuing operations
before taxes 100.2 203.0 307.9
Provision for income taxes 30.4 81.3 112.7
-------- -------- --------
Earnings from continuing operations
before extraordinary item 69.8 121.7 195.2
Discontinued operations:
Earnings from discontinued operations,
net of income taxes 18.0 13.5 23.8
-------- -------- --------
Earnings before extraordinary item 87.8 135.2 219.0
Extraordinary charge - debt retirement (24.9) (8.1) (3.5)
-------- -------- --------
Net earnings $ 62.9 $ 127.1 $ 215.5
======== ======== ========
Basic earnings per share:
Earnings from continuing operations
before extraordinary item $ 0.74 $ 1.31 $ 2.15
Earnings from discontinued
operations 0.19 0.15 0.26
Extraordinary charge - debt
retirement (0.26) (0.09) (0.04)
-------- -------- --------
Net earnings per share $ 0.67 $ 1.37 $ 2.37
======== ======== ========
<PAGE>
Basic weighted average number of
shares outstanding 94.0 92.7 91.0
Diluted earnings per share:
Earnings from continuing operations
before extraordinary item $ 0.74 $ 1.25 $ 2.09
Earnings from discontinued
operations 0.19 0.14 0.25
Extraordinary charge -
debt retirement (0.26) (0.08) (0.04)
-------- -------- --------
Net earnings per share $ 0.67 $ 1.31 $ 2.30
======== ======== ========
Diluted weighted average number
of shares outstanding 94.7 97.0 95.5
(See Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
(In millions except per share amounts)
<CAPTION>
At December 31,
Assets 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 109.7 $ 63.3
Receivables, net 288.1 226.8
Inventories, net 592.8 571.5
Deferred income taxes 54.2 55.3
Other current assets 17.4 16.7
-------- --------
Total current assets 1,062.2 933.6
Property, plant and equipment, net 2,506.0 2,381.4
Other assets 1,105.7 170.2
-------- --------
Total assets $4,673.9 $3,485.2
======== ========
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------
Current liabilities:
Accounts payable $ 253.3 $ 183.9
Accrued liabilities 230.9 112.0
Short-term debt and current maturities
of long-term debt 188.9 55.1
-------- --------
Total current liabilities 673.1 351.0
Long-term debt, less current maturities 1,235.2 656.8
Deferred income taxes 389.7 323.7
Other noncurrent liabilities 440.2 355.0
Minority interest - 472.5
Stockholders' equity:
Common stock, $1 par value, authorized
300,000,000 and 250,000,000 shares in
1997 and 1996, respectively; issued
124,668,286 and 101,639,885 shares in
1997 and 1996, respectively 124.6 101.6
Capital in excess of par value 1,690.3 936.1
Retained earnings 446.2 413.0
Treasury stock, at cost, 10,691,520 and
5,545,884 shares in 1997 and 1996,
respectively (294.6) (107.3)
Foreign currency translation adjustment (30.8) (17.2)
-------- --------
Total stockholders' equity 1,935.7 1,326.2
-------- --------
Total liabilities and stockholders' equity $4,673.9 $3,485.2
======== ========
(See Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Years ended December 31
1997 1996 1995
- ----------------------------------------------------------------------
Cash Flows from Operating Activities
- ------------------------------------
<S> <C> <C> <C>
Net earnings $ 62.9 $ 127.1 $ 215.5
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 183.2 171.0 166.4
Minority interest 124.4 175.7 163.6
Main Pass write-down 112.2 - -
Merger and restructuring charges - 67.3 -
Deferred income taxes 58.4 27.9 8.5
Other charges and credits, net 2.4 (26.3) (4.4)
Changes in:
Receivables (12.3) 69.1 (45.5)
Inventories 3.9 (66.9) (47.7)
Other current assets 2.1 18.9 16.7
Accounts payable (2.8) (21.8) 3.4
Accrued liabilities 29.0 (55.3) 37.3
------- ------- -------
Net cash provided by
operating activities 563.4 486.7 513.8
------- ------- -------
Cash Flows from Investing Activities
- ------------------------------------
Capital expenditures (244.0) (209.0) (146.0)
Acquisitions, net of cash acquired (91.4) (7.1) (203.8)
Proceeds from sale of investments - 11.6 -
Proceeds from sale of property, plant
and equipment 8.8 0.8 0.8
------- ------- -------
Net cash used in investing
activities (326.6) (203.7) (349.0)
------- ------- -------
Net cash provided before
financing activities 236.8 283.0 164.8
------- ------- -------
Cash Flows from Financing Activities
- ------------------------------------
Joint venture cash distributions
to Phosphate Resource Partners
Limited Partnership (146.4) (265.8) (222.2)
<PAGE>
Payments of long-term debt (515.9) (232.7) (64.4)
Proceeds from issuance of long-term
debt, net 805.3 244.6 116.3
Changes in short-term debt, net (127.7) (75.4) 42.3
Increase (decrease) in securitization
of accounts receivable, net 6.0 (9.5) 25.3
Stock options exercised 5.5 18.0 14.2
Cash dividends paid (29.7) (34.5) (33.2)
Purchase of treasury stock (187.5) - -
Other - - 10.0
------- ------- -------
Net cash used in financing
activities (190.4) (355.3) (111.7)
------- ------- -------
Net change in cash and cash equivalents 46.4 (72.3) 53.1
Cash and cash equivalents -
beginning of year 63.3 135.6 82.5
------- ------- -------
Cash and cash equivalents -
end of year $ 109.7 $ 63.3 $ 135.6
======= ======= =======
(See Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In millions except per share amounts)
<CAPTION>
Foreign
Capital in Currency
Common Excess of Retained Treasury Translation
Stock Par Value Earnings Stock Adjustment
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 $ 96.0 $ 777.6 $ 131.1 $ (107.2) $ (14.3)
Net earnings - - 215.5 - -
Dividends
($0.31 per share) - - (30.8) - -
Stock options
exercised and other 0.9 12.1 - (0.7) -
Issuance of common
stock pursuant to
acquisitions - 3.9 - 0.5 -
Foreign currency
translation
adjustment - - - - 5.8
-------- -------- -------- -------- --------
Balance at
December 31, 1995 96.9 793.6 315.8 (107.4) (8.5)
Net earnings - - 127.1 - -
Dividends
($0.32 per share) - - (29.9) - -
Stock options
exercised 0.7 17.2 - 0.1 -
Issuance of common
stock pursuant to
acquisitions 0.4 14.5 - - -
Conversion of
convertible notes 3.6 110.8 - - -
Foreign currency
translation
adjustment - - - - (8.7)
-------- -------- -------- -------- --------
<PAGE>
Balance at
December 31,1996 101.6 936.1 413.0 (107.3) (17.2)
Net earnings - - 62.9 - -
Dividends
($0.32 per share) - - (29.7) - -
Stock options
exercised 0.3 5.2 - - -
Issuance of common
stock pursuant to
acquisitions 22.7 749.0 - 0.2 -
Purchase of treasury
shares - - - (187.5) -
Foreign currency
translation
adjustment - - - - (13.6)
-------- -------- -------- -------- --------
Balance at
December 31,1997 $ 124.6 $1,690.3 $ 446.2 $ (294.6) $ (30.8)
======== ======== ======== ======== ========
(See Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share amounts)
1. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
The consolidated financial statements include the accounts of IMC
Global Inc. (Company) and all subsidiaries which are more than
50.0 percent owned and controlled; the Company proportionately
consolidates its interest in certain oil and gas investments and
proportionately consolidated its 25.0 percent interest in the
sulphur operations of Main Pass 299 (Main Pass). Additionally,
its interest in McMoRan Oil & Gas Co. (MOXY) is proportionately
consolidated at a rate of 56.4 percent of the exploration costs
and 47.0 percent of the profits derived from oil and gas producing
properties. All significant intercompany accounts and
transactions are eliminated in consolidation. Certain amounts in
the consolidated financial statements for periods prior to
December 31, 1997, have been reclassified to conform to the
current presentation.
As discussed more thoroughly in Note 24, the IMC AgriBusiness
business unit has been presented as a discontinued operation.
Change in Fiscal Year
Effective with the year ended December 31, 1997, the Company
changed from a June 30 fiscal year-end in order to permit more
effective business planning, including annual budgeting,
government reporting and audit functions, as well as align
statistical and financial reporting with competitors.
Use of Estimates
Management is required to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
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.
Concentration of Credit Risk
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
two North American export associations. In 1997, sales of
concentrated phosphates and potash to China accounted for
approximately 21 percent of the Company's net sales. No single
customer or group of affiliated customers accounted for more than
ten percent of the Company's net sales.
<PAGE>
Receivables
Under an agreement with a financial institution, IMC-Agrico
Receivables Company, L.L.C. (IMC-Agrico L.L.C.), a special-purpose
limited liability company of which IMC-Agrico Company (IMC-Agrico)
is the sole equity owner, may sell, on an ongoing basis, an
undivided percentage interest in a designated pool of receivables
in an amount not to exceed $65.0 million. Effective, January 1,
1997, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities," which
requires receivables transferred which do not meet the criteria
under SFAS No. 125 to be accounted for as short-term borrowings.
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, except for repair and
maintenance overhauls (Turnarounds), are charged to operations
when incurred. Expenditures for Turnarounds are deferred when
incurred and amortized into cost of goods sold on a straight-line
basis, generally over an 18-month period. Turnarounds are
large-scale maintenance projects that are performed regularly,
usually every 18 to 24 months, on average. Turnarounds are
necessary to maintain the operating capacity and efficiency rates
of the production plants. The deferred portion of the Turnaround
expenditures is classified in other assets in the Company's
Consolidated Balance Sheet.
Depreciation and depletion expenses for mining 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 as follows: buildings, 17 to 45 years; machinery and
equipment, three to 25 years; and leasehold improvements, over the
lesser of the remaining useful life of the asset or the remaining
term of the lease.
<PAGE>
In 1997, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." The statement requires the recognition of an
impairment loss on a long-lived asset held for use when events and
circumstances indicate that the estimate of undiscounted future
cash flows expected to be generated by the asset are less than its
carrying amount.
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 December 31, 1997 and 1996, goodwill, included in other
assets in the Consolidated Balance Sheet, totaled $839.7 million
and $67.4 million, respectively. See Note 2, "Freeport-McMoRan
Inc. Merger," for detail regarding the increase in goodwill.
Stock-Based Compensation Plans
In December 1995, the Financial Accounting Standards Board issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which
establishes a fair value-based method of accounting for
stock-based compensation plans. Under SFAS No. 123, the Company
has the option of either accounting for its stock-based
compensation plans under the fair value method or continuing under
the accounting provisions of Accounting Principles Board Opinion
No. 25 (APB No. 25). The Company continues to account for its
stock-based compensation plans under the provisions of APB No. 25
and, accordingly, no compensation cost has been charged to
operations for options granted. See also Note 19, "Stock Plans."
Accrued Environmental Costs
The Company's activities include the mining of phosphate and
potash, the manufacturing and blending of crop nutrients, and the
blending of crop nutrients with pesticide 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; management of
hazardous and solid wastes; management and handling of raw
materials and products; and the restoration of lands disturbed by
mining and production activities. Expenditures that relate to an
existing condition caused by past operations of the Company or
prior land owners, and which do not contribute to current or
future revenue generation, are charged to operations. Liabilities
are recorded for identified sites when litigation has commenced
or, a claim or assessment has been asserted or is probable and the
likelihood of an unfavorable outcome is probable.
<PAGE>
In 1997, the Company adopted Statement of Position 96-1,
"Environmental Remediation Liabilities," promulgated by the
American Institute of Certified Public Accountants, which provides
new guidance for the accrual of environmental remediation costs.
Adoption of this statement did not have a material adverse effect
on the Company's financial statements.
Derivatives
The Company is exposed to the impact of interest rate
changes, fluctuations in the Canadian currency, and the impact of
fluctuations in the purchase price of natural gas consumed in
operations, as well as changes in the market value of its
financial instruments. The Company periodically enters into
derivatives in order to minimize these risks, but not for trading
purposes.
For the Company's Canadian subsidiaries, the functional currency
is the Canadian dollar. The cumulative translation effects for
the Canadian subsidiaries are included in the cumulative
translation adjustment in stockholders' equity. The Company uses
foreign currency forward exchange contracts, which typically
expire within one year, to hedge transaction exposure related to
United States dollar-denominated assets and liabilities. Realized
gains and losses on these contracts are recognized in the same
period as the hedged transaction. The Company had foreign
currency exchange forward contracts on hand at December 31, 1997
of $183.8 million.
Foreign Currencies
As of December 31, 1997, the Company's cumulative foreign currency
translation adjustment resulted in a reduction of stockholders'
equity of $30.8 million.
Earnings Per Share
All share and per share information appearing in the consolidated
financial statements and notes herein give effect to the Company's
2-for-1 stock split effected in the form of a 100 percent stock
dividend which was distributed on November 30, 1995.
In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings Per Share," which is required to be
adopted for financial statements for periods ending after December
15, 1997. As a result, the basic and diluted earnings per share
amounts reported for 1997 have been calculated in accordance with
SFAS No. 128. Similarly, all earnings per share amounts reported
for prior periods have been restated to comply with this
statement.
<PAGE>
Recently Issued Accounting Standards
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
issued. This statement establishes standards of reporting and
display of comprehensive income and its components in a full set
of general purpose financial statements. This statement will be
effective for the Company's year ending December 31, 1998 and
requires restatement of prior periods. Adoption of this statement
is not expected to significantly alter the Company's financial
statement presentation.
2. Freeport-McMoRan Inc. Merger
----------------------------
In December 1997, the Company completed a merger with
Freeport-McMoRan Inc. (FTX). The combination was accounted for as
a purchase and resulted in the dissolution of FTX (FTX Merger).
In connection with the FTX Merger, each share of common stock of
FTX was exchanged for 0.90 share of the Company's common stock
plus one-third of a warrant, with each whole warrant entitling the
holder to purchase one share of the Company's common stock for
$44.50 per share. As a result of the transaction, 22.7 million
shares were issued at an average market price of $32.28 per share.
The warrants, which are publicly traded on the New York Stock
Exchange and expire on the third anniversary of the FTX Merger,
were valued at $3.56 per warrant. As a result of the FTX Merger,
goodwill of $719.6 million was recorded and is amortized on a
straight-line basis over 40 years.
The FTX Merger resulted in the Company relinquishing its 25
percent interest in the Main Pass operations to Freeport-McMoRan
Sulphur Co., a newly formed public entity consisting of the former
sulphur business of Phosphate Resource Partners Limited
Partnership (PLP), formerly Freeport-McMoRan Resource Partners,
Limited Partnership, and the Main Pass operations. In connection
with the FTX Merger, the Company recorded a charge of $183.7
million, included in operating earnings in the Consolidated
Statement of Earnings, to write down the assets of Main Pass to
their fair value of approximately $14.1 million.
The following unaudited pro forma information presents a summary
of results of the Company and FTX as if the acquisition, including
the contribution of Main Pass, had occurred on January 1, 1996.
<TABLE>
<CAPTION
1997 1996
-------- --------
<S> <C> <C>
Net sales $2,116.3 $2,143.7
Earnings from continuing operations
before extraordinary item 212.9 65.8
Net earnings 211.0 66.2
Net earnings per diluted share 1.80 0.55
</TABLE>
<PAGE>
3. Vigoro Merger and Restructuring Charges
---------------------------------------
In March 1996, the Company completed a merger with The Vigoro
Corporation (Vigoro) that resulted in Vigoro becoming a subsidiary
of the Company (Vigoro Merger). Upon consummation of the Vigoro
Merger, the Company issued approximately 32.4 million shares of
its common stock in exchange for all of the outstanding shares of
Vigoro. The Vigoro Merger was structured to qualify as a tax-free
reorganization for income tax purposes and was accounted for as a
pooling of interests. Accordingly, the Company's financial
statements for periods prior to the merger date have been restated
to reflect the Vigoro Merger.
In connection with the Vigoro Merger, the Company recorded charges
totaling $20.2 million, primarily for consulting, legal and
accounting services. Immediately following the Merger, the
Company adopted a plan to restructure its business operations into
a decentralized organizational structure with five stand-alone
business units. As a result, the Company recorded restructuring
charges totaling $23.1 million. Of these amounts $6.0 million has
been included in discontinued operations. The charges consisted
of: (i) $6.5 million for lease terminations resulting from office
consolidations; and (ii) $16.6 million for severance and related
benefits from staff reductions resulting from the termination of
approximately 120 employees, primarily middle management
personnel, and other related actions. As of December 31, 1997,
the following amounts were paid: (a) $20.2 million for charges
relating to the Vigoro Merger; (b) $5.6 million for lease
terminations resulting from office consolidations; and (c) $15.0
million relating to the termination of approximately 120 employees
and other actions.
In connection with the 1996 restructuring plan, the Company
undertook a detailed review of its accounting records and
valuation of various assets and liabilities. As a result, the
Company recorded charges totaling $58.3 million ($55.3 million net
of minority interest) comprised of: (i) $26.3 million ($23.3
million net of minority interest) to cost of goods sold of which
$17.5 million was primarily related to the write-off of certain
idle plant facilities and other obsolete assets, $5.0 million for
environmental matters and $3.8 million for other matters; (ii)
$2.4 million of general and administrative expenses for the
write-off of miscellaneous assets; (iii) $16.6 million to other
income and expense, net, to reduce certain long-term assets to net
realizable value and other provisions; and (iv) $13.0 million to
minority interest for the transfer of 0.85 percent interest of
IMC-Agrico Distributable Cash as defined in the IMC-Agrico
Partnership Agreement (Partnership Agreement), from the Company to
PLP. Of these amounts $7.7 million has been included in
discontinued operations. As of December 31, 1997, $28.2 million
of non-cash write-offs were charged against the reserve.
<PAGE>
4. Other Business Acquisitions
---------------------------
In January 1995, the Company acquired substantially all of the
assets of the Central Canada Potash division (CCP) of Noranda,
Inc. for $121.1 million, plus $16.2 million for working capital.
The Company used proceeds borrowed under a credit facility to
finance the purchase price, while using operating cash 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, at the time of acquisition, of 120 years at current
production levels.
In October 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.
In 1996, the Company acquired several retail distribution
operations (Madison Seed and Agri-Supply) and a precision farming
operation, Top-Soil. Total cash payments for acquisitions during
the year were $7.1 million.
During 1997, the Company completed several acquisitions, including
Western Ag-Minerals Company; additional retail distribution
operations (Frankfort Supply, Sanderlin, Crop-Maker, So-Green and
Hutson Ag Services, Inc.); a storage terminal company, Hutson
Company, Inc.; and the purchase of the preferred stock of a
subsidiary held by an unrelated third party. Total cash payments
for these acquisitions were $91.4 million, and approximately
200,000 shares of common stock were issued.
These acquisitions were accounted for under the purchase method of
accounting, and, accordingly, results of operations for the
acquired businesses have been included in the Company's
Consolidated Statement of Earnings since the respective dates of
acquisition. Pro forma consolidated operating results reflecting
these acquisitions would not have been materially different from
reported amounts.
Common stock issued for acquisitions was $771.9 million, $14.9
million and $4.4 million for 1997, 1996 and 1995, respectively.
Liabilities assumed in acquisitions were $357.5 million and $6.6
million in 1997 and 1996, respectively.
<PAGE>
5. IMC-Agrico Cash Sharing
------------------------
IMC-Agrico makes cash distributions to each partner based on
formulas and sharing ratios as defined in the Partnership
Agreement. For the year ended December 31, 1997, the total amount
of cash generated by IMC-Agrico was $304.6 million, of which $99.3
million was distributed to PLP during the year and $50.0 million
is to be distributed to PLP in 1998.
In January 1996, the Company and PLP entered into certain
amendments to the Partnership Agreement. Effective March 1, 1996,
there was a shift of 0.85 percent cash interest in IMC-Agrico from
the Company to PLP. Effective July 1, 1997, the Company's share
of cash distributions increased to approximately 58.6 percent.
See also Note 2, "Freeport-McMoRan Inc. Merger," for further
detail.
6. Non-Recurring Items
-------------------
In addition to non-recurring items described in Notes 2 and 3,
other non-recurring items included the following:
Sale of Investments and Land
In 1996, the Company realized a gain of $11.6 million from the
sale of investment properties. In 1995, a gain of $5.0 million
was realized from the sale of land in Florida. These amounts were
included in other income and expense, net in the Consolidated
Statement of Earnings.
Remediation
In 1995, provisions totaling $10.3 million ($5.8 million net of
minority interest) were included in cost of goods sold in the
Consolidated Statement of Earnings for remediation costs
associated with a sinkhole beneath a phosphogypsum storage stack
at IMC-Agrico's New Wales crop nutrient production facility in
Florida and for repair and clean-up costs related to earthen dam
breaches at IMC-Agrico's Payne Creek and Hopewell phosphate mining
facilities in Florida.
<PAGE>
7. Earnings Per Share
------------------
The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Basic earnings per share computation:
Earnings from continuing operations
available before extraordinary item $ 69.8 $121.7 $195.2
Earnings from discontinued operations 18.0 13.5 23.8
Extraordinary charge - debt retirement (24.9) (8.1) (3.5)
------ ------ ------
Earnings available to common
stockholders $ 62.9 $127.1 $215.5
====== ====== ======
Basic weighted average common shares
outstanding 94.0 92.7 91.0
Earnings per share from continuing
operations before extraordinary
item $ 0.74 $ 1.31 $ 2.15
Earnings from discontinued operations 0.19 0.15 0.26
Extraordinary charge-debt retirement (0.26) (0.09) (0.04)
------ ------ ------
Basic earnings per share $ 0.67 $ 1.37 $ 2.37
====== ====== ======
Diluted earnings per share computation:
Earnings from continuing operations
available before extraordinary item $ 69.8 $121.7 $195.2
Interest associated with convertible
debt - - 4.4
------ ------ ------
Earnings from continuing operations
available before extraordinary item 69.8 121.7 199.6
Earnings from discontinued operations 18.0 13.5 23.8
Extraordinary charge - debt retirement (24.9) (8.1) (3.5)
------ ------ ------
Earnings available to common
stockholders $ 62.9 $127.1 $219.9
====== ====== ======
<PAGE>
Basic weighted average common shares
outstanding 94.0 92.7 91.0
Unexercised stock options 0.7 1.1 0.9
Convertible debt - 3.2 3.6
------ ------ ------
Diluted weighted average common shares
outstanding 94.7 97.0 95.5
====== ====== ======
Earnings per share from continuing
operations before extraordinary item $ 0.74 $ 1.25 $ 2.09
Earnings from discontinued operations 0.19 0.14 0.25
Extraordinary charge - debt retirement (0.26) (0.08) (0.04)
------ ------ ------
Diluted earnings per share $ 0.67 $ 1.31 $ 2.30
====== ====== ======
</TABLE>
Options to purchase approximately 3.1 million, 0.8 million and 0.8
million shares of common stock were outstanding during 1997, 1996
and 1995, respectively, but were not included in the computation
of diluted earnings per share because the exercise price was
greater than the average market price of the common shares and,
therefore, the effect would be antidilutive. Additionally,
warrants to purchase approximately 8.4 million shares of common
stock were outstanding during 1997 but were not included in the
computation of diluted earnings per share for the same reason as
the options noted above. See Note 2, "Freeport-McMoRan Inc.
Merger."
8. Receivables, Net
----------------
<TABLE>
Accounts receivable as of December 31 were as follows:
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Trade accounts $270.8 $245.4
Non-trade receivables 53.8 43.9
------ ------
324.6 289.3
Less:
Allowances 7.5 7.0
Receivable interests sold 29.0 55.5
------ ------
Receivables, net $288.1 $226.8
====== ======
</TABLE>
<PAGE>
The carrying value of accounts receivable was equal to the
estimated fair value of such assets due to their short maturity.
Under an agreement with a financial institution, IMC-Agrico L.L.C.
may sell, on an ongoing basis, an undivided percentage interest in
a designated pool of receivables, subject to limited recourse
provisions related to the international receivables, in an amount
not to exceed $65.0 million. At December 31, 1997, IMC-Agrico
L.L.C. had transferred $61.5 million of such receivable interests,
$32.5 million of which are classified as short-term debt in the
Consolidated Balance Sheet as they did not meet the criteria for
off-balance sheet financing as defined by SFAS No. 125. The net
residual interest included in the receivables shown on the
Consolidated Balance Sheet is owned by IMC-Agrico L.L.C. Costs,
primarily from discount fees and other administrative costs,
totaled $3.3 million, $3.6 million and $3.7 million in 1997, 1996
and 1995, respectively.
9. Inventories, Net
----------------
<TABLE>
Inventories as of December 31 were as follows:
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Products (principally finished) $499.7 $467.8
Operating materials and supplies 109.9 111.8
------ ------
Gross inventories 609.6 579.6
Less: Inventory allowances 16.8 8.1
------ ------
Inventories, net $592.8 $571.5
====== ======
</TABLE>
10. Property, Plant and Equipment, Net
----------------------------------
The Company's investment in property, plant and equipment as of
December 31 is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land $ 121.3 $ 107.2
Mineral properties and rights 713.4 689.7
Buildings and leasehold improvements 481.2 470.1
Machinery and equipment 2,958.0 2,836.2
Construction in progress 188.2 139.0
-------- --------
4,462.1 4,242.2
<PAGE>
Accumulated depreciation and
depletion (1,956.1) (1,860.8)
-------- --------
Property, plant and equipment, net $2,506.0 $2,381.4
======== ========
</TABLE>
As of December 31, 1997, idle facilities of the Company included
three phosphate rock mines, one concentrated phosphate plant and
two uranium oxide extraction and processing facilities, all of
which remain closed subject to improved market conditions. The
net book value of these facilities totaled $26.7 million. In the
opinion of management, the net book value of its idle facilities
is not in excess of net realizable value.
11. Other Assets
------------
<TABLE>
Other assets as of December 31 were as follows:
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Goodwill $ 839.7 $ 67.4
Deferred income taxes 65.2 2.0
Minority interest 44.9 -
Other 155.9 100.8
-------- --------
Total other assets $1,105.7 $ 170.2
======== ========
</TABLE>
Increases in other assets were primarily due to the FTX Merger.
See Note 2, "Freeport-McMoRan Inc. Merger."
12. Accrued Liabilities
-------------------
<TABLE>
Accrued liabilities as of December 31 were as follows:
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Legal reserve $ 40.8 $ -
Salaries, wages and bonuses 35.3 31.2
Income taxes 33.1 10.7
Taxes other than income taxes 17.0 12.3
Environmental 16.6 19.2
Interest 14.4 10.8
Other 73.7 27.8
------ ------
Total accrued liabilities $230.9 $112.0
====== ======
</TABLE>
<PAGE>
The income tax increase was primarily due to the assumption of
deferred taxes as part of the FTX Merger. Certain components of
other accrued liabilities increased as a result of accruals
assumed as part of the FTX Merger and increased royalties payable.
See Note 2, "Freeport-McMoRan Inc. Merger."
13. Financing Arrangements
----------------------
Short-term borrowings were $179.7 million and $50.0 million as of
December 31, 1997 and 1996, respectively, which primarily
consisted of revolving credit facilities, vendor financing
arrangements and the portion of the sale of receivables classified
as short-term debt as of December 31, 1997, as required by SFAS
No. 125. The weighted average interest rate on short-term
borrowings was 6.0 percent and 6.5 percent for 1997 and 1996,
respectively. Long-term debt at December 31 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revolving and long-term credit
facilities, variable rates $ 655.0 $ 244.0
6.875% debentures, due 2007 150.0 -
7.0% Senior Debentures, due 2008 150.0 -
Term loans, maturing through 2005 120.0 120.0
Industrial revenue bonds, maturing
through 2022 102.1 102.1
Senior Notes, maturing through 2011 28.6 162.3
Other debt 38.7 33.5
-------- --------
1,244.4 661.9
Less current maturities 9.2 5.1
-------- --------
Total long-term debt, less
current maturities $1,235.2 $ 656.8
======== ========
</TABLE>
In December 1997, the Company entered into a $650.0 million, five-
year revolving credit agreement which matures in December 2002
(Long-Term Credit Facility) and a $350.0 million, 364-day
revolving credit agreement (Revolving Credit Facility) which
matures in December 1998 (collectively, U.S. Credit Agreements)
with a group of banks in order to refinance and replace the
then-outstanding unsecured indebtedness of the Company, PLP and
IMC-Agrico under their respective revolving loan facilities and to
provide borrowing capacity for general business purposes.
Commitment fees associated with these facilities are 8.5 basis
points and 6.5 basis points for the Long-Term Credit Facility and
Revolving Credit Facility, respectively. On December 31, 1997,
<PAGE>
the Company and its subsidiaries had borrowed $600.0 million at
6.20 percent (LIBOR plus 19 basis points) under the Long-Term
Credit Facility and $155.0 million at 6.21 percent (LIBOR plus 20
basis points) under the Revolving Credit Facility. In addition,
the Company has a maximum availability of approximately $70.0
million under uncommitted money market lines. The Company has
classified certain portions of its borrowings under the U.S.
Credit Agreements as long-term debt since the Company has the
ability and the intent to maintain these obligations for longer
than one year. At December 31, 1997, $41.5 million was drawn
under the Long-Term Credit Facility as letters of credit
principally to support industrial revenue bonds and other debt and
credit risk guarantees.
Simultaneously with the consummation of the FTX Merger, certain
Canadian subsidiaries of the Company entered into a $100.0
million, five-year revolving credit agreement which matures in
December 2002 (Canadian Facility) with a group of Canadian banks
in order to refinance and replace the outstanding unsecured
indebtedness under the Company's then-existing term loan facility
and to provide working capital for certain of the Company's
Canadian subsidiaries. Commitment fees associated with the
Canadian Facility are 8.5 basis points. The Company guarantees
the obligations of its Canadian subsidiaries under the Canadian
Facility. As of December 31, 1997, the aggregate outstanding
principal amount was $47.0 million at 6.20 percent (LIBOR plus 19
basis points) under the Canadian Facility.
In March 1996, the Company and one of its subsidiaries refinanced
its unsecured term loans. The $120.0 million unsecured term loans
(Term Loans) bear interest at rates between 7.12 percent and 7.18
percent and mature at various dates between 2000 and 2005. In
December 1997, the Company agreed to prepay the Term Loans in full
in January 1998. See Note 23, "Subsequent Events."
The U.S. Credit Agreements contain provisions which: (i) restrict
the Company's ability to dispose of a substantial portion of its
consolidated assets; (ii) limit the creation of additional liens
on the Company's and its subsidiaries' assets; and (iii) limit the
Company's subsidiaries' incurrence of additional debt. The
Canadian Facility contains similar covenants applicable to both
the Canadian subsidiaries and the Company. The U.S. Credit
Agreements and Canadian Facility also contain a leverage ratio
test and other covenants.
In 1997, the Company continued with its strategy to reduce high-
cost debt and, consequently, purchased a total of $133.7 million
principal amount of its Senior Notes bearing interest at rates
between 9.25 percent and 10.75 percent. As a result, the Company
recorded an extraordinary charge of $19.9 million, net of taxes,
primarily for the redemption premium incurred and the write-off of
previously deferred finance charges.
<PAGE>
In connection with the FTX Merger, the Company assumed $456.0
million of debt related to PLP, consisting of $156.0 million of
revolving debt, $150.0 million of 7.0 percent Senior Debentures
due 2008 and $150.0 million of 8.75 percent senior subordinated
notes (Senior Subordinated Notes) due 2004, and $64.0 million of
FTX revolving debt. Immediately following the FTX Merger, the
Company utilized proceeds obtained from its revolving credit
facilities to extinguish the PLP and FTX revolving credit
facilities and substantially all of the Senior Subordinated Notes.
As a result, the Company recorded an extraordinary charge of $5.0
million, net of minority interest and taxes, primarily for the
redemption premium incurred and the write-off of previously
deferred finance charges. In addition, the Company now guarantees
debt related to FM Properties Inc. totaling $39.1 million at
December 31, 1997.
The Company currently guarantees the payment of $75.0 million
principal amount of industrial revenue bonds due 2015 issued by
the Florida Polk County Industrial Development Authority (Polk
County Bonds). As a result of the FTX Merger, the Company is not
in technical compliance with one covenant in such guaranty. The
Company has notified The Bank of New York, trustee for the holders
of the Polk County Bonds, regarding this issue. Although the
holders of the Polk County Bonds have not requested that any
action be taken, such acceleration of the Polk County Bonds, if
requested, would not create a cross-default or cross-acceleration
to any other indebtedness of the Company. Because solicitation of
a unanimous waiver is impractical, the Company currently intends
to take no action. The Company does not believe that any
redemption or refinancing of the Polk County Bonds would have a
material adverse effect on the Company and its subsidiaries.
In 1996, the Company purchased a total of $114.0 million principal
amount of its Senior Notes and, as a result, recorded an
extraordinary charge of $7.6 million, net of taxes, primarily for
the redemption premium incurred and the write-off of previously
deferred finance charges.
In addition, in 1996, the Company completed the redemption of its
then-outstanding $114.9 million, 6.25 percent convertible
subordinated notes due 2001 (Subordinated Notes). In connection
with the conversion of the Subordinated Notes, the Company
recorded an extraordinary charge, net of taxes, of $0.5 million
for write-off of previously deferred finance charges. The Company
issued approximately 3.6 million shares of common stock to holders
of $114.4 million principal amount of the Subordinated Notes who
converted the Subordinated Notes prior to the redemption date.
The balance of $0.5 million principal amount was redeemed by the
Company for cash.
<PAGE>
In 1995, the Company purchased $50.4 million principal amount of
its then-outstanding Senior Notes prior to maturity in an effort
to reduce higher cost indebtedness. As a result, the Company
recorded an extraordinary charge of $3.5 million, net of taxes,
primarily for the redemption premium incurred and write-off of
previously deferred finance charges.
As of December 31, 1997, the estimated fair value of long-term
debt described above was approximately the same as the carrying
amount of such debt in the 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.
Cash payments for interest were $56.8 million, $68.3 million and
$68.5 million in 1997, 1996 and 1995, respectively.
Scheduled maturities, excluding the revolving credit facilities,
for the next five years are as follows:
1998 $ 41.9
1999 1.1
2000 13.7
2001 2.6
2002 and beyond 562.8
In May 1997, the Company increased its existing registration
statement on Form S-3 to issue up to $300.0 million of debt and
equity securities. In July, the Company issued $150.0 million of
6.875 percent debentures, the proceeds of which were used to
purchase the Senior Notes. In December 1997, the Company further
increased its existing registration statement on Form S-3 to issue
up to $500.0 million of debt and equity securities. See Note 23,
"Subsequent Events."
<PAGE>
14. Other Noncurrent Liabilities
----------------------------
Other noncurrent liabilities as of December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Employee and retiree benefits $231.0 $132.2
Environmental 105.8 105.1
Deferred gain 36.8 39.0
Restructuring 13.3 31.7
Other 53.3 47.0
------ ------
Total noncurrent liabilities $440.2 $355.0
====== ======
</TABLE>
The increase in employee and retiree benefits was primarily due to
the assumption of certain liabilities as a result of the FTX
Merger. See Note 2, "Freeport-McMoRan Inc. Merger."
15. Pension Plans
-------------
The Company has non-contributory pension plans that cover
approximately 73 percent of its employees. Benefits are based on
a combination of years of service and compensation levels,
depending on the plan. Generally, contributions to the United
States 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. Certain other employees are covered by defined
contribution pension plans.
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.
The components of net pension expense, including discontinued
operations, for the years ended December 31, computed actuarially,
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost for benefits
earned during the year $ 5.9 $ 13.5 $ 10.3
Interest cost on projected
benefit obligation 14.8 16.8 15.2
<PAGE>
Return on plan assets (32.6) (16.8) (15.3)
Net amortization and deferral 17.3 2.6 2.2
------ ------ ------
Net pension expense $ 5.4 $ 16.1 $ 12.4
====== ====== ======
</TABLE>
The plans' assets consist mainly of corporate equity, United
States government securities, 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, based on an October 1 measurement date, of the
Company's pension plans and amounts recognized in the Consolidated
Balance Sheet as of December 31 were as follows:
<TABLE>
<CAPTION>
Overfunded Underfunded
Plans Plans
------------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Plans' assets at fair value $341.5 $174.8 $ 2.7 $ 27.4
Actuarial present value of
projected benefit obligations:
Vested benefits 238.8 135.5 39.5 32.0
Non-vested benefits 14.2 13.6 0.1 4.5
------ ------ ------ ------
Accumulated benefit
obligations 253.0 149.1 39.6 36.5
Projected future salary
increases 34.8 47.8 1.4 14.0
------ ------ ------ ------
Total projected benefit
obligations 287.8 196.9 41.0 50.5
------ ------ ------ ------
Plans' assets in excess of
(less than) projected
benefit obligations 53.7 (22.1) (38.3) (23.1)
Items not yet recognized
in earnings:
Unrecognized net (gain) loss (7.1) 12.8 (0.1) 7.6
Unrecognized transition
liability (asset) (1.9) (1.6) 0.6 0.8
Unrecognized prior service
cost 5.3 7.6 3.2 11.5
Additional minimum liability - - (3.2) (1.9)
<PAGE>
Fourth quarter contributions 4.7 0.9 - 1.2
------ ------ ------ ------
Accrued pension liability
(asset) $ 54.7 $ (2.4) $(37.8) $ (3.9)
====== ====== ====== ======
</TABLE>
The changes in the pension amounts were primarily a result of the
FTX Merger as certain pension liabilities and assets were assumed.
See Note 2, "Freeport-McMoRan Inc. Merger."
<TABLE>
Significant actuarial assumptions were as follows:
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 8.2%
Long-term rate of return on assets 9.6% 9.5% 9.5%
Rate of increase in compensation levels 5.1% 5.2% 5.2%
</TABLE>
The Company also has defined contribution pension and investment
plans (Plans) for certain of its employees. Under each of the
Plans, participants are permitted to defer a portion of their
compensation. Company contributions to the Plans are based on a
percentage of wages earned by the eligible employees or by
matching a percentage of employee contributions.
Effective January 1, 1998, the Company transitioned from a defined
benefit pension plan to a defined contribution pension plan for
certain employees who elected to do so (Transition). The Company
accounted for the Transition in accordance with SFAS No. 88,
"Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits." The impact of the
curtailment as a result of the Transition was not material.
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.
The components of postretirement benefits other than pensions
(OPEBS) expense, including discontinued operations, for the years
ended December 31 were as follows:
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost $0.8 $1.7 $1.6
Interest cost 4.3 5.2 5.3
Net amortization and deferral (1.8) (1.8) (1.6)
---- ---- ----
$3.3 $5.1 $5.3
==== ==== ====
</TABLE>
The significant assumptions used in determining OPEBS costs were
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 8.2%
Health care trend rate:
Under age 65 8.0%(1) 9.2% 9.8%
Over age 65 7.9%(2) 6.0% 6.3%
(1) Decreasing gradually to 4.8% in 2004 and thereafter.
(2) Decreasing gradually to 5.0% in 2004 and thereafter.
</TABLE>
If the health care trend rate assumptions were increased by one
percent, the accumulated postretirement benefit obligation would
have increased by 5.6 percent as of December 31, 1997. This would
have increased OPEBS expense in 1997 by 9.5 percent.
<TABLE>
The components of the Company's OPEBS liability as of December 31
were as follows:
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Retirees $123.4 $ 29.2
Actives:
Fully eligible 11.7 13.3
Not fully eligible 16.2 29.3
------ ------
Total 151.3 71.8
<PAGE>
Items not yet recognized in earnings:
Unrecognized transition obligation - 1.9
Unrecognized prior service cost 10.3 11.3
Unrecognized net gain 14.3 13.8
------ ------
Accrued postretirement benefits liability $175.9 $ 98.8
====== ======
</TABLE>
The increase in the postretirement benefits liabilities was
primarily due to the assumption of certain liabilities as a result
of the FTX Merger. See Note 2, "Freeport-McMoRan Inc. Merger."
The Company also provides benefits such as workers' compensation
and disability to certain former or inactive employees after
employment but before retirement. As of December 31, 1997 and
1996, this liability was $21.6 million and $18.6 million,
respectively. These plans are unfunded. Employees are not vested
and plan benefits are subject to change.
17. Income Taxes
------------
Two of the Company's three potash operations that are subject to
Canadian taxes, Kalium Canada and Central Canada Potash, 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
accounting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities
and assets as of December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Deferred tax liabilities
Property, plant and equipment $433.4 $446.5
Other liabilities 114.8 63.9
------ ------
Total deferred tax liabilities 548.2 510.4
Deferred tax assets
Alternative minimum tax credit carryforwards 124.4 76.2
Postretirement and postemployment benefits 43.1 42.1
Foreign tax credit carryforward 30.6 36.0
Sterlington litigation settlement 22.4 30.9
Reclamation and decommissioning accruals 23.8 26.8
Restructuring accruals 9.5 21.4
<PAGE>
Other assets 61.4 46.3
------ ------
Total deferred tax assets 315.2 279.7
Valuation allowance 37.3 36.0
------ ------
Net deferred tax assets 277.9 243.7
------ ------
Net deferred tax liabilities $270.3 $266.7
====== ======
</TABLE>
As of December 31, 1997, the Company had alternative minimum tax
credit carryforwards of approximately $124.4 million. In
addition, the Company had a foreign tax credit carryforward of
approximately $30.6 million, investment tax credit and other
general business credit carryforwards of approximately $11.2
million, and a carryover of charitable contributions of
approximately $17.4 million.
The alternative minimum tax credit carryforwards can be carried
forward indefinitely. The foreign tax credit carryforward will
expire in 2001 to the extent it remains unutilized. The
investment tax credit and other general business credit
carryforwards have expiration dates ranging from 1999 through
2008. The charitable contributions carryover has expiration dates
ranging from 1998 through 2001.
Due to the uncertainty of the realization of certain tax
carryforwards, the Company has established a valuation allowance
against these carryforward benefits in the amount of $37.3
million.
Some of these carryforward benefits may be subject to limitations
imposed by the Internal Revenue Code. Except to the extent that
valuation allowances have been established, the Company believes
these limitations will not prevent the carryforward benefits from
being realized.
<TABLE>
The provision for income taxes from continuing operations for the
years ended December 31 consisted of the following:
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Current
Federal $ 11.9 $ 42.0 $ 47.1
State and local 3.7 2.2 7.3
Foreign 48.3 12.0 39.6
------ ------ ------
63.9 56.2 94.0
<PAGE>
Deferred
Federal (37.0) 3.3 12.8
State and local (8.4) 0.7 2.0
Foreign 11.9 21.1 3.9
------ ------ ------
(33.5) 25.1 18.7
------ ------ ------
$ 30.4 $ 81.3 $112.7
====== ====== ======
</TABLE>
<TABLE>
The components of earnings from continuing operations before
income taxes and extraordinary charge, and the effects of
significant adjustments to tax computed at the federal statutory
rate were as follows:
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Domestic $ (5.0) $151.7 $218.5
Foreign 105.2 51.3 89.4
------ ------ ------
Earnings from continuing operations
before income taxes and
extraordinary charge $100.2 $203.0 $307.9
====== ====== ======
Computed tax at the federal
statutory rate of 35% $ 35.1 $ 70.9 $107.7
Foreign income and withholding
taxes 4.9 11.3 17.3
Percentage depletion in excess
of basis (9.5) (9.0) (19.5)
Vigoro Merger expenses not
deductible for tax purposes - 7.1 -
State income taxes, net of
federal income tax benefit (3.0) 1.9 6.0
Benefit of foreign sales
corporation (5.6) (3.9) (4.3)
Federal taxes on undistributed
foreign earnings - - 2.8
Other items (none in excess of
5% of computed tax) 8.5 3.0 2.7
------ ------ ------
Provision for income taxes $ 30.4 $ 81.3 $112.7
====== ====== ======
Effective tax rate 30.3% 40.0% 36.6%
====== ====== ======
</TABLE>
<PAGE>
United States 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 $211.5 million at December 31,
1997, 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
$42.2 million would have been required.
Income taxes paid, net of refunds received, were $51.6 million,
$73.8 million and $89.9 million for 1997, 1996 and 1995,
respectively.
18. Capital Stock
-------------
<TABLE>
Changes in the number of shares of common stock issued and in
treasury were as follows:
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Common stock issued
Balance, beginning of year 101,639,885 96,927,080
Common stock issued 22,737,681 426,925
Stock options exercised 290,720 679,941
Conversion of convertible debt - 3,605,939
----------- -----------
Balance, end of year 124,668,286 101,639,885
Treasury common stock
Balance, beginning of year 5,545,884 5,552,840
Common stock issued (211,364) (9,396)
Purchases 5,357,000 2,440
----------- -----------
Balance, end of year 10,691,520 5,545,884
----------- -----------
Common stock outstanding, end
of year 113,976,766 96,094,001
=========== ===========
</TABLE>
In connection with the FTX Merger, each share of common stock of
FTX was exchanged for 0.90 share of the Company's common stock
plus one-third of a warrant, with each whole warrant entitling the
holder to purchase one share of the Company's common stock for
$44.50 per share. As a result of the FTX Merger, 22.7 million
shares were issued at an average market price of $32.28 per share.
In addition, approximately 8.4 million warrants were issued, which
are publicly traded on the New York Stock Exchange and will expire
on the third anniversary of the FTX Merger. These warrants were
<PAGE>
valued at $3.56 per warrant and are convertible into approximately
8.4 million shares of common stock.
Pursuant to a Shareholders Rights Plan adopted by the Company in
June 1989, a dividend of one preferred stock purchase right
(Right) for each outstanding share of common stock of the Company
was issued on July 12, 1989, to stockholders of record on that
date. Under certain conditions, each Right may be exercised to
purchase one two-hundredth of a share of Junior Participating
Preferred Stock, Series C, par value $1 per share, at a price of
$75, subject to adjustment. This preferred stock is designed to
participate in dividends and vote on essentially equivalent terms
with a whole share of common stock. The Rights generally 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.
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 1997 made the Rights
exercisable.
19. Stock Plans
-----------
The Company has various stock option plans (Stock Plans) under
which it may grant non-qualified stock options and stock
appreciation rights (SARs) to officers and key managers of the
Company, accounted for under APB Opinion No. 25. The Stock Plans,
as amended, provide for the issuance of a maximum of 10.6 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 ten 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.
In conjunction with the FTX Merger, outstanding FTX stock options
for officers and key managers were converted into options of the
Company to acquire approximately 1.4 million Company shares at a
weighted average exercise price of $25.02 per share. Outstanding
FTX stock options for non-employee directors of FTX were converted
into options of the Company to acquire approximately 0.1 million
<PAGE>
Company shares at a weighted average exercise price of $18.50 per
share. Additionally, FTX SARs and stock incentive units (SIUs)
were converted into approximately 0.1 million SARs and
approximately 0.2 million SIUs based on the Company's common stock
at weighted average exercise prices of $15.63 and $24.44 per
share, respectively. Due to change of control provisions, all
converted FTX options, SARs and SIUs were considered fully vested
at the date of the FTX Merger. See Note 2, "Freeport-McMoRan Inc.
Merger."
The Company adopted a long-term incentive plan in 1993 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 were intended to
vest in whole or in part during and at the end of a three-year
performance period ending June 30, 1997. On June 30, 1996, the
long-term incentive plan was deemed fully vested, one year prior
to the completion of the performance period, and approximately 0.1
million shares of common stock and $3.4 million were distributed.
Restricted stock was valued on the issuance date, and the related
expense amortized over the vesting period.
At the Company's 1996 Annual Meeting, the stockholders approved
the 1996 long-term incentive plan which replaced the 1993
long-term incentive plan discussed in the preceding paragraph.
The new plan became effective in October 1996. Under the plan,
officers and key managers may be awarded stock or cash upon
achievement of specified objectives over a three-year period
beginning July 1, 1996. Final payouts are made at the discretion
of the Compensation Committee of the Company's Board of Directors
whose members are not participants in the plan. Approximately
$8.6 million and $4.4 million was charged to earnings in 1997 and
1996, respectively, for performance awards earned for the relevant
three-year period under the 1996 long-term incentive plan. As a
result of the Company's change in year-end, the payout period was
changed commensurately.
Excluding the SARs converted in conjunction with the FTX Merger,
discussed above, there were no SARs granted in 1997 or 1996. A
total of 8,525 shares and 26,775 shares were exercised in 1997 and
1996, respectively.
<PAGE>
<TABLE>
The following table summarizes stock option activity:
<CAPTION>
1997 1996
-------------------- --------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
----- -------------- ----- -------------
<S> <C> <C> <C> <C>
Outstanding at
January 1 3,805,519 $27.31 3,816,654 $22.98
Granted 1,222,219 37.63 841,500 40.78
Exercised 297,162 18.88 670,727 19.02
Cancelled 161,419 36.68 181,908 29.13
Converted FTX
options 1,403,193 25.02 - -
--------- ------ --------- ------
Outstanding at
December 31 5,972,350 $29.05 3,805,519 $27.33
========= ====== ========= ======
Exercisable at
December 31 4,216,057 $25.26 2,294,731 $21.92
========= ====== ========= ======
Available for
future grant at
December 31 2,307,770 3,368,570
========= =========
</TABLE>
Data related to significant option ranges as of December 31, 1997,
and related weighted average price and contract life information
follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------- -------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices of Options Life Price of Options Price
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10.17 to 16.50 557,585 5 years $15.91 557,585 $15.91
16.51 to 24.16 1,431,562 6 years 19.60 1,415,562 19.56
24.17 to 37.13 1,745,854 7 years 28.56 1,674,295 28.39
37.14 to 40.88 2,237,349 4 years 38.76 568,615 39.41
- -----------------------------------------------------------------
$10.17 to 40.88 5,972,350 6 years $29.05 4,216,057 $25.26
</TABLE>
<PAGE>
The assumption regarding the stock options contractual life was
that 100 percent of such options vested in the first year after
issuance rather than ratably according to the applicable vesting
period as provided by the terms of the grants.
If the Company's stock option plans' compensation cost had been
determined based on the fair value at the grant date for awards
beginning in 1995, consistent with the provisions of SFAS No. 123,
the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Net earnings:
As reported $ 62.9 $127.1 $215.5
Pro forma for basic earnings per share 51.4 123.6 214.7
Pro forma for diluted earnings per share 51.4 123.6 219.1
Earnings per share:
Basic earnings per share as reported $ 0.67 $ 1.37 $ 2.37
Pro forma basic earnings per share 0.55 1.33 2.36
Diluted earnings per share as reported 0.67 1.31 2.30
Pro forma diluted earnings per share 0.54 1.27 2.29
</TABLE>
For the pro forma disclosures, the estimated fair value of the
options is amortized to expense over their expected six-year life.
These pro forma amounts are not indicative of anticipated future
disclosures because SFAS No. 123 does not apply to grants before
1995.
The fair value of these options was estimated at the date of grant
using the Black Scholes option pricing model using the following
weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Expected dividend yield 0.85% 0.85% 0.85%
Expected stock price volatility 25.0% 26.0% 27.3%
Risk-free interest rate (7 year government) 5.8% 6.3% 5.5%
Expected life of options 6 years 6 years 6 years
</TABLE>
<PAGE>
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion the existing
models do not provide a reliable single measure of the value of
the employee stock options.
A stock option plan for non-employee members of the Board of
Directors provides for the granting of awards of up to 0.2 million
shares of common stock. Members of the Board of Directors who
served on the Vigoro Board of Directors also received options to
purchase common stock pursuant to a stock option plan of Vigoro.
No options have been issued under this plan since the effective
date of the Vigoro Merger. 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 a maximum of ten years beginning with the grant
date of the option. Options were granted to purchase 18,000
shares and 24,000 shares of common stock in 1997 and 1996,
respectively, at a weighted average exercise price of $35.03 and
$41.94 per share, respectively. A total of 412 shares and 2,500
shares were exercised in 1997 and 1996, respectively.
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 has entered into a third-party
sulphur purchase commitment, the term of which is indeterminable.
Therefore, the dollar value of the sulphur commitments has been
excluded from the schedule below after the year 2002.
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-cancelable operating leases as of December 31, 1997 (including
discontinued operations):
<PAGE>
<TABLE>
<CAPTION>
Purchase Lease
Commitments Commitments
----------- -----------
<S> <C> <C>
1998 $ 363.0 $ 24.3
1999 303.0 23.4
2000 176.4 22.2
2001 165.6 20.9
2002 165.2 16.5
Subsequent years 34.9 34.6
-------- --------
$1,208.1 $ 141.9
======== ========
</TABLE>
Rental expense for 1997, 1996 and 1995 amounted to $35.0 million,
$31.5 million and $27.6 million, respectively.
International Minerals & Chemical (Canada) Global Limited 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 total production and capital costs at the potash mines
located at Esterhazy, Saskatchewan. 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 Esterhazy mines' production capacity, but no
more than approximately 1.1 million tons. During 1997, production
of potash for PCS amounted to 549,000 tons, or 15 percent of the
Esterhazy mines' total tons produced.
In conjunction with the FTX Merger, the Company, through its
interests in PLP, participates in an aggregate $210.0 million,
multi-year oil and natural gas exploration program with MOXY. In
accordance with the exploration program agreement, the Company,
MOXY and an individual investor (Investor) will fund 56.4 percent,
37.6 percent and 6.0 percent, respectively, of the exploration
costs. All revenue and other costs will be allocated 47.0 percent
to PLP, 48.0 percent to MOXY and 5.0 percent to the Investor.
21. Contingencies
-------------
Mining Risks
Since December 1985, the Company has experienced an inflow of
water into one of its two interconnected potash mines located at
Esterhazy, Saskatchewan. As a result, the Company has incurred
expenditures, certain of which due to their nature have been
capitalized while others have been charged to expense, to control
<PAGE>
the inflow. Since the initial discovery of the inflow, the
Company has been able to meet all sales obligations from
production at the mines. The Company has considered, and
continues to evaluate, alternatives to the operational methods
employed at Esterhazy. However, the procedures utilized to
control the water inflow have proven successful to date, and the
Company currently intends to continue conventional shaft mining.
Despite the relative success of these modified measures, there can
be no assurance that the amounts required for remedial efforts
will not increase in future years or that the water inflow, risk
to employees or remediation costs will not increase to a level
which would cause the Company to change its mining process or
abandon the mines.
Sterlington Litigation
In early 1998, the Company entered into a Preliminary Settlement
Agreement with the plaintiffs in connection with the Louisiana
class action arising out of a May 1991 explosion at a
nitroparaffins plant located in Sterlington, Louisiana. The
agreement settles all claims that members of the class have
against the Company and releases the Company from further
potential liabilities based on the claims of the members of the
class. The Preliminary Settlement Agreement must be approved by
the court at a fairness hearing. The Company also has settled all
the known claims of individuals and entities who opted out of the
Louisiana class action. Settlement of the Louisiana third-party
claims is intended to resolve the Company's known potential future
liabilities in connection with the Sterlington explosion. In
addition, the settlement is intended to protect the Company from
the remaining claims filed by ANGUS Chemical Company with respect
to the Sterlington explosion.
Potash Antitrust Litigation
The Company was a defendant, along with other Canadian and United
States potash producers, in a class action antitrust lawsuit filed
in federal court in 1993. The plaintiffs alleged a price-fixing
conspiracy among North American potash producers beginning in 1987
and continuing until the filing of the complaint. The class
action complaint against all defendants, including the Company,
was dismissed by summary judgment in January 1997. The summary
judgment dismissing the case is currently on appeal by the
plaintiffs to the United States Court of Appeals for the Eighth
Circuit. The Court of Appeals is expected to rule during calendar
1998.
<PAGE>
In addition, in 1993 and 1994, class action antitrust lawsuits
with allegations similar to those made in the federal case were
filed against the Company and other Canadian and United States
potash producers in state courts in Illinois and California. The
Illinois case was dismissed for failure to state a claim. In the
California case, merits discovery has been stayed and the case is
currently inactive.
FTX Merger Litigation
In August 1997, five identical class action lawsuits were filed in
Chancery Court in Delaware by unitholders of PLP. Each case named
the same defendants and broadly alleged that FTX and FMRP Inc.
(FMRP) had breached fiduciary duties owed to the public
unitholders of PLP. The Company was alleged to have aided and
abetted these breaches of fiduciary duty.
In November 1997, an amended class action complaint was filed with
respect to all cases. The amended complaint named the same
defendants and raised the same broad allegations of breaches of
fiduciary duty against FTX and FMRP for allegedly favoring the
interests of FTX and FTX's common stockholders in connection with
the FTX Merger. The plaintiffs claimed specifically that, by
virtue of the FTX Merger, the public unitholders' interests in
PLP's ownership of IMC-Agrico would become even more subject to
the dominant interest of the Company. The amended complaint seeks
certification as a class action and an injunction against the
proposed FTX Merger or, in the alternative, rescissionary damages.
The defendants' time to answer or otherwise plead to the amended
complaint has been extended indefinitely by agreement.
Pine Level Property Reserves
In October 1996, IMC-Agrico signed an agreement with Consolidated
Minerals, Inc. (CMI) for the purchase of real property, Pine
Level, containing approximately 100 million tons of phosphate rock
reserves. In connection with the purchase, IMC-Agrico has agreed
to obtain all environmental, regulatory and related permits
necessary to commence mining on the property.
Within five years from the date of this agreement, IMC-Agrico is
required to provide notice to CMI regarding one of the following:
(i) whether they have obtained the permits necessary to commence
mining any part of the property; (ii) whether they wish to extend
the permitting period for an additional three years; or (iii)
whether they wish to decline to extend the permitting period. If
the permits necessary to commence mining the property have been
obtained, IMC-Agrico is obligated to pay CMI an initial royalty
payment of $28.9 million. In addition to the initial royalty
payment described above, IMC-Agrico is required to pay CMI a
mining royalty on phosphate rock mined from the property to the
extent the permits are obtained.
<PAGE>
Environmental Matters
The historical use and handling of regulated chemical substances
and crop nutrient products in the normal course of the Company's
business has resulted in contamination at facilities presently or
previously owned or operated by the Company. The Company has also
purchased facilities that were contaminated by previous owners
through their use and handling of regulated chemical substances.
Spills or other unintended releases of regulated substances have
occurred in the past, and potentially could occur in the future,
possibly requiring the Company to undertake or fund cleanup
efforts. The Company cannot estimate the level of expenditures
that may be required in the future to clean up contamination from
the handling of regulated chemical substances or crop nutrients.
At some locations, the Company has agreed, pursuant to consent
orders with the appropriate governmental agencies, to undertake
certain investigations (which currently are in progress) to
determine whether remedial action may be required to address
contamination. The cost of any remedial actions that ultimately
may be required at these sites currently cannot be determined.
The Company believes that, pursuant to several indemnification
agreements, it is entitled to at least partial, and in many
instances complete, indemnification for a portion of the costs
that may be expended by the Company to remedy environmental issues
at certain facilities. These agreements address issues that
resulted from activities occurring prior to the Company's
acquisition of facilities or businesses from parties including
Kaiser Aluminum & Chemical Corporation, Beatrice Companies, Inc.,
Estech, Inc. and certain other public and private entities. The
Company has already received and anticipates receiving amounts
pursuant to the indemnification agreements for certain of its
expenses incurred to date.
Other
Most of the Company's export sales of phosphate and potash crop
nutrients are marketed through two North American export
associations. As a member, the Company is, subject to certain
conditions, contractually obligated to reimburse the export
association for its pro rata share of any losses or other
liabilities incurred. There were no such operating losses or
other liabilities in 1997, 1996 and 1995.
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.
<PAGE>
22. Operating Segments
------------------
In June 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," was issued effective for
fiscal years ending after December 15, 1998. The statement
allows, and the Company has chosen, the early adoption of this
statement for the year ended December 31, 1997.
The Company's reportable segments are strategic business units
that offer different products and services. They are managed
separately because each business requires different technology and
marketing strategies. The Company's operations were restructured
into a decentralized organizational structure with five
stand-alone business units in July 1996. Financial data for
periods reported prior to the restructuring have been restated to
conform to presentation according to SFAS No. 131. See also Note
3, "Vigoro Merger and Restructuring Charges."
The Company has two reportable segments: IMC-Agrico Crop Nutrients
and IMC Kalium. The Company produces and markets phosphate crop
nutrients through the IMC-Agrico Crop Nutrients business unit.
Potash crop nutrients, industrial grade potash and salt are
produced and marketed through the IMC Kalium business unit.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. All
intersegment sales prices are market based. The Company evaluates
performance based on operating earnings of the respective business
units.
<TABLE>
Segment information for the years 1997, 1996 and 1995 was as
follows:
<CAPTION>
1997
----------------------------------------
IMC-Agrico
Crop IMC
Nutrients Kalium Other(a) Total
----------------------------------------
<S> <C> <C> <C> <C>
Net sales from external
customers $1,312.5 $ 537.7 $ 265.8 $2,116.0
Intersegment net sales 172.3 79.7 32.3 284.3
Gross margins 298.7 237.7 38.5 574.9
Operating earnings 257.4 214.8 (212.8) 259.4
Depreciation, depletion
and amortization 100.5 35.9 26.0 162.4
Total assets 1,752.2 891.1 2,030.6 4,673.9
Capital expenditures 82.3 123.3 38.4 244.0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996
----------------------------------------
IMC-Agrico
Crop IMC
Nutrients Kalium Other(a) Total
----------------------------------------
<S> <C> <C> <C> <C>
Net sales from external
customers $1,492.5 $ 392.2 $ 258.6 $2,143.3
Intersegment net sales 168.8 72.6 155.8 397.2
Gross margins(b) 411.4 159.8 45.9 617.1
Operating earnings 365.7 130.5 (69.8) 426.4
Depreciation, depletion
and amortization 96.3 30.1 27.2 153.6
Total assets 1,670.8 697.4 1,117.0 3,485.2
Capital expenditures 84.1 83.3 41.6 209.0
</TABLE>
<TABLE>
<CAPTION>
1995
----------------------------------------
IMC-Agrico
Crop IMC
Nutrients Kalium Other(a) Total
----------------------------------------
<S> <C> <C> <C> <C>
Net sales from external
customers $1,581.6 $ 418.9 $ 132.2 $2,132.7
Intersegment net sales 130.0 70.4 109.2 309.6
Gross margins 395.5 204.2 33.2 632.9
Operating earnings 357.3 177.5 (20.2) 514.6
Depreciation, depletion
and amortization 93.3 31.6 23.2 148.1
Total assets 1,597.9 617.1 1,306.8 3,521.8
Capital expenditures(c) - - - 146.0
</TABLE>
<PAGE>
(a) Segment information below the quantitative thresholds are
attributable to two business units (IMC-Agrico Feed
Ingredients and IMC Vigoro) and corporate headquarters. The
Company produces and markets animal feed ingredients through
IMC-Agrico Feed Ingredients. IMC Vigoro manufactures and
distributes consumer lawn and garden products; produces and
markets professional products for turf, nursery and
horticulture markets; and produces and distributes
potassium-based ice melter products. Corporate headquarters
includes the elimination of inter-business unit transactions,
the write-down of the Company's Main Pass interest and the
goodwill recorded as a result of the FTX Merger in 1997. See
Note 2, "Freeport-McMoRan Inc. Merger." See also Note 3,
"Vigoro Merger and Restructuring Charges." IMC AgriBusiness'
results of operations were not included as a result of their
classification as discontinued operations. However, IMC
AgriBusiness' total assets and capital expenditures for each
year presented have been included in this column. See Note
24, "Discontinued Operations," for further detail.
(b) Before special one-time merger and restructuring charges of
$20.8 million related to the Vigoro Merger. See Note 3,
"Vigoro Merger and Restructuring Charges."
(c) Due to restructuring of the Company into business units as of
July 1, 1996, it is impracticable to disclose this data on a
restated segment basis.
<TABLE>
Financial information relating to the Company's operations by
geographic area was as follows:
<CAPTION>
Net Sales(d)
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
United States $1,044.2 $ 999.1 $ 991.6
China 459.6 485.0 509.9
Other 612.2 659.2 631.2
-------- -------- --------
Consolidated $2,116.0 $2,143.3 $2,132.7
======== ======== ========
</TABLE>
(d) Revenues are attributed to countries based on location of
customer. Sales through Canpotex Limited (Canpotex), one of
the Company's export associations, have been allocated based
on the Company's share of total Canpotex sales. Amounts
reflect continuing operations only.
<PAGE>
<TABLE>
<CAPTION>
Long-Lived Assets
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
United States $3,233.2 $2,188.8 $2,151.6
Canada 378.5 362.8 354.5
-------- -------- --------
Consolidated $3,611.7 $2,551.6 $2,506.1
======== ======== ========
</TABLE>
23. Subsequent Events
-----------------
Harris Acquisition
In December 1997, the Company entered into a definitive agreement
to acquire privately held Harris Chemical Group, Inc. and its
Australian affiliate, Penrice Soda Products Pty. Ltd. (HCG).
Under the agreement the Company will purchase all HCG equity for
$450.0 million in cash and assume approximately $950.0 million of
debt. HCG, with sales of $785.0 million, is a leading producer of
salt, soda ash, boron chemicals and other inorganic chemicals
including potash crop nutrients. This acquisition is expected to
be completed in early 1998.
Debt Issuance
In January 1998, the Company issued $150.0 million of 7.30 percent
debentures due 2028 and $150.0 million of 6.55 percent notes due
2005. The proceeds of these issuances were used to refinance
higher cost indebtedness. In addition, in January 1998, the
Company prepaid $120.0 million of unsecured term loans.
IMC Vigoro
Currently, the Company is negotiating the sale of its IMC Vigoro
business unit. Any sale would be subject to certain conditions
including the execution of a definitive agreement and the receipt
of certain approvals.
24. Discontinued Operations
-----------------------
In December 1998, the Company's Board of Directors adopted a
formal plan to sell its IMC AgriBusiness retail and wholesale
distribution operations. The Company anticipates the sale to be
completed in the first quarter of 1999. The loss on disposal, net
of income tax benefits, is estimated to be $60.0 million and will
be recorded in the fourth quarter of 1998. The consolidated
statement of earnings of the Company has been restated to report
separately the operating results of
<PAGE>
IMC AgriBusiness as discontinued operations. Interest expense has
been allocated to discontinued operations based on the portion of
the Company's short-term borrowing program that is specifically
attributable to IMC AgriBusiness and amounted to $13.3 million,
$13.1 million and $12.0 million in 1997, 1996 and 1995,
respectively.
Income taxes associated with the discontinued operations of IMC
AgriBusiness were $13.1 million, $8.4 million and $16.7 million
for 1997, 1996 and 1995, respectively. The difference between the
effective tax rate for discontinued operations and the federal
statutory rate is primarily due to state taxes. For 1997, 1996
and 1995, IMC AgriBusiness' revenues were $872.6 million, $797.7
million and $807.7 million, respectively.
SIGNATURES
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.
/s/ J. Bradford James
-------------------------------
J. Bradford James
Senior Vice President
and Chief Financial
Officer
Date: December 31, 1998
