<PAGE>
- --------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- ----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission file number 1-9759
IMC Global Inc.
(Exact name of Registrant as specified in its charter)
Delaware 36-3492467
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 Sanders Road 60062
Northbrook, Illinois (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (847) 272-9200
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X . No .
-------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock as of the latest
practicable date: 114,331,647 shares, excluding 10,738,520 treasury shares as
of November 9, 1998.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying interim condensed consolidated financial statements of
IMC Global Inc. (Company) do not include all disclosures normally
provided in annual financial statements. These financial statements,
which should be read in conjunction with the consolidated financial
statements contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, are unaudited but include all adjustments
which the Company's management considers necessary for a fair
presentation. These adjustments consist of normal recurring accruals
except as discussed in the following Notes to Condensed Consolidated
Financial Statements. Certain 1997 amounts have been reclassified to
conform to the 1998 presentation. Interim results are not necessarily
indicative of the results expected for the full year.
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In millions except per share amounts)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $ 756.8 $ 598.7 $2,655.4 $2,311.7
Cost of goods sold 565.2 449.4 1,996.7 1,732.4
-------- -------- -------- --------
Gross margins 191.6 149.3 658.7 579.3
Selling, general and administrative
expenses 64.8 65.1 212.8 197.7
Exploration expenses 0.6 - 19.5 -
-------- -------- -------- -------
Operating earnings 126.2 84.2 426.4 381.6
Interest expense 53.9 13.2 137.6 38.4
Other (income) expense, net 0.7 (2.7) (8.2) (2.7)
-------- -------- -------- -------
Earnings before minority interest 71.6 73.7 297.0 345.9
Minority interest 13.2 31.7 30.4 103.2
-------- -------- -------- -------
Earnings before taxes 58.4 42.0 266.6 242.7
Provision for income taxes 20.6 15.3 93.8 88.6
-------- -------- -------- -------
Earnings before extraordinary item 37.8 26.7 172.8 154.1
Extraordinary charge - debt retirement (0.9) - (3.6) (3.3)
-------- -------- -------- -------
Net earnings $ 36.9 $ 26.7 $ 169.2 $ 150.8
======== ======== ======== =======
Basic earnings per share:
Earnings before extraordinary item $ 0.33 $ 0.29 $ 1.51 $ 1.64
Extraordinary charge - debt retirement (0.01) - (0.03) (0.04)
-------- -------- -------- -------
Net earnings per share $ 0.32 $ 0.29 $ 1.48 $ 1.60
======== ======== ======== =======
Basic weighted average number of
shares outstanding 114.3 92.9 114.2 94.0
Diluted earnings per share:
Earnings before extraordinary item $ 0.33 $ 0.28 $ 1.50 $ 1.62
Extraordinary charge - debt retirement (0.01) - (0.03) (0.03)
-------- -------- -------- --------
Net earnings per share $ 0.32 $ 0.28 $ 1.47 $ 1.59
======== ======== ======== ========
Diluted weighted average number of
shares outstanding 114.6 93.8 114.9 94.9
(See Notes to Condensed Consolidated Financial Statements on Page 5)
</TABLE
<PAGE>
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
<CAPTION>
September 30, December 31,
Assets 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 71.6 $ 109.7
Receivables, net 439.0 288.1
Inventories 714.7 592.8
Deferred income taxes 82.5 54.2
Other current assets 23.5 17.4
-------- --------
Total current assets 1,331.3 1,062.2
Property, plant and equipment, net 3,861.9 2,506.0
Other assets 1,546.0 1,105.7
-------- --------
Total assets $6,739.2 $4,673.9
======== ========
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 263.4 $ 253.3
Accrued liabilities 312.1 230.9
Short-term debt and current maturities of
long-term debt 982.7 188.9
-------- --------
Total current liabilities 1,558.2 673.1
Long-term debt, less current maturities 1,965.2 1,235.2
Deferred income taxes 713.5 389.7
Other noncurrent liabilities 453.2 440.2
Stockholders' equity:
Common stock, $1 par value, authorized
300,000,000 shares; issued 125,067,817
and 124,668,286 shares at September 30
and December 31, respectively 125.0 124.6
Capital in excess of par value 1,697.0 1,690.3
Retained earnings 581.6 446.2
Accumulated other comprehensive income (58.3) (30.8)
Treasury stock, at cost, 10,738,520 and
10,691,520 shares at September 30 and
December 31, respectively (296.2) (294.6)
-------- --------
Total stockholders' equity 2,049.1 1,935.7
-------- --------
Total liabilities and stockholders' equity $6,739.2 $4,673.9
======== ========
(See Notes to Condensed Consolidated Financial Statements on Page 5)
</TABLE
<PAGE>
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Nine months ended
September 30,
1998 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
- ------------------------------------
Net earnings $ 169.2 $ 150.8
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, depletion and amortization 193.9 141.5
Minority interest 30.4 103.2
Deferred income taxes (12.3) 35.9
Other charges and credits, net (117.8) (33.7)
Changes in:
Receivables 16.5 8.8
Inventories (15.4) 28.7
Other current assets 3.6 (0.6)
Accounts payable (98.1) (25.4)
Accrued liabilities 82.0 46.5
-------- -------
Net cash provided by operating activities 252.0 455.7
-------- -------
Cash Flows from Investing Activities
- ------------------------------------
Capital expenditures (252.2) (157.9)
Acquisitions of businesses, net of cash acquired (393.3) (103.0)
Proceeds from sale of business 44.8 -
Proceeds from sales of property, plant and equipment 5.8 8.2
-------- -------
Net cash used in investing activities (594.9) (252.7)
-------- -------
Net cash provided (used) before financing activities (342.9) 203.0
-------- -------
Cash Flows from Financing Activities
- ------------------------------------
Joint venture cash distributions to Phosphate Resource
Partners Limited Partnership, net (55.1) (123.8)
Payments of long-term debt (997.2) (156.0)
Proceeds from issuance of long-term debt, net 1,194.7 312.0
Changes in short-term debt, net 252.1 (54.7)
Increase (decrease) in securitization of accounts
receivable, net (61.5) 5.2
Stock options exercised 8.8 5.0
Cash dividends paid (33.9) (22.4)
Purchase of treasury stock (3.1) (157.2)
-------- -------
Net cash provided by (used in) financing activities 304.8 (191.9)
-------- -------
Net change in cash and cash equivalents (38.1) 11.1
Cash and cash equivalents - beginning of period 109.7 63.3
-------- -------
Cash and cash equivalents - end of period $ 71.6 $ 74.4
======== =======
(See Notes to Condensed Consolidated Financial Statements on Page 5)
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share amounts)
1. Acquisitions
- ------------
1998 Acquisition
In April 1998, the Company completed its previously announced acquisition of
privately held Harris Chemical Group, Inc. and its Australian affiliate,
Harris Chemical Australia Pty Ltd. & Its Controlled Entities (collectively,
Harris), for approximately $1.4 billion (Harris Acquisition). Under the
terms of the Harris Acquisition, the Company purchased all Harris equity for
approximately $450.0 million in cash and assumed approximately $950.0 million
of debt. Harris, with annual sales of approximately $800.0 million, is a
leading producer of salt, soda ash, boron chemicals and other inorganic
chemicals, including potash crop nutrients.
For financial statement purposes, the Harris Acquisition was accounted for as
a purchase and, accordingly, Harris' results are included in the consolidated
financial statements since the date of acquisition. The purchase price,
which was initially financed through proceeds borrowed under credit
facilities, has been allocated to acquired assets and liabilities based on
estimated fair values at the date of acquisition. This allocation resulted
in an excess of purchase price over identifiable net assets acquired, or
goodwill, of approximately $319.0 million which is included in Other assets
in the Condensed Consolidated Balance Sheet. This goodwill is being
amortized on a straight-line basis over 40 years.
The unaudited pro forma information for the periods set forth below gives
effect to the Harris Acquisition as if it had occurred as of January 1, 1997.
The pro forma information is presented for informational purposes only and is
not necessarily indicative of the results of operations that actually would
have been achieved had the acquisition been consummated as of that time.
<TABLE>
<CAPTION>
Nine months ended
September 30,
1998 1997
---- ----
<S> <C> <C>
Net sales: $2,882.6 $2,891.5
Earnings before extraordinary item 179.6 82.4
Net earnings 173.5 79.1
Diluted earnings per share:
Earnings before extraordinary item $ 1.56 $ 0.70
Net earnings per share 1.51 0.67
</TABLE>
1997 Acquisitions
During the nine months ended September 30, 1997, the Company completed
several acquisitions, including a potash mine and processing facility
(Western Ag-Minerals Company); a precision farming operation (Top-Soil);
several retail distribution operations (Crop-Maker, So-Green, Frankfort
Supply, Sanderlin, 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
acquisitions during the nine months ended September 30, 1997 were $103.0
million, and approximately 200,000 shares of common stock of the Company were
issued for $7.9 million.
The acquisitions for the nine months ended September 30, 1997 were also
accounted for under the purchase method of accounting and, accordingly, the
results for the acquired businesses are included in the consolidated
financial statements since the respective dates of acquisition. Pro forma
consolidated operating results for the nine months ended September 30, 1997,
reflecting these acquisitions from the beginning of that period, would not
have been materially different from reported amounts.
<PAGE>
2. Divestitures
- ------------
Effective June 1, 1998, the Company completed the sale of its IMC Vigoro
business unit which consisted primarily of consumer lawn and garden and
professional products to privately held Pursell Industries, Inc. for $44.8
million in cash. In connection with the transaction, the Company recorded a
one-time restructuring charge of approximately $14.0 million, $9.1 million
after tax benefits or $0.08 per share.
In June 1998, the Company announced plans to explore strategic options,
including divestiture, for its IMC AgriBusiness business unit. The Company
is continuing to explore its strategic options for IMC AgriBusiness. Any
sale would be subject to certain conditions including the execution of a
definitive agreement and the receipt of certain approvals.
Currently, the Company is also exploring strategic options, including
divestiture, for its IMC Chemicals business unit. As with IMC AgriBusiness
discussed above, any sale would be subject to certain conditions including
the execution of a definitive agreement and the receipt of certain approvals.
3. Financing Activities
- --------------------
In September 1998, the Company redeemed $100.2 million of its 8.50 percent
senior notes due 2000. These notes were assumed by the Company as part of the
Harris Acquisition and were adjusted to fair value as of the acquisition date
in accordance with Accounting Principles Board Opinion (APB) No. 16. The
redemption reduced high-cost indebtedness and was funded by commercial paper
borrowings. Additionally, in September 1998, the Company purchased on the
open market $44.0 million of $355.9 million 10.75 percent senior subordinated
notes due 2003 (Senior Subordinated Notes), and $8.8 million of $261.9
million 10.25 percent senior notes due 2001 (Senior Notes). These notes were
assumed by the Company as part of the Harris Acquisition and were adjusted to
fair value as of the acquisition date in accordance with APB No. 16. The
open market purchase reduced high-cost indebtedness and was funded by
commercial paper borrowings.
Also in September 1998, the Company filed a registration statement on Form
S-3 (Form S-3) to increase the amount of debt and equity securities available
for issuance to $700.0 million. The Form S-3 was subsequently increased to
$800.0 million.
In August 1998, the Company issued, under a Form S-3, $200.0 million of 6.50
percent notes due 2003 and $100.0 million of 7.375 percent debentures due
2018. The proceeds of these issuances were used to repay short-term debt,
including commercial paper, and for general corporate purposes.
In January 1998, the Company prepaid $120.0 million of unsecured term loans
which bore interest at rates ranging between 7.12 percent and 7.18 percent
which were to mature at various dates between 2000 and 2005. In connection
with the prepayment of such unsecured term loans, the Company recorded an
extraordinary charge, net of taxes, of $2.7 million for redemption premiums
incurred. This prepayment was financed by net debt proceeds from the
issuance in January 1998 of $150.0 million 6.55 percent senior notes due 2005
and $150.0 million 7.30 percent debentures due 2028.
In May 1997, the Company purchased certain senior notes from a single holder
and recorded an extraordinary charge, net of taxes, of $3.3 million for
redemption premiums incurred and the write-off of previously deferred finance
charges. The repurchase of the senior notes was financed at lower interest
rates under the Company's credit facility.
4. Restructuring Charge
- --------------------
The Company recently announced the consolidation of its phosphate and potash
businesses into a new operating entity, IMC Crop Nutrients. Concurrent with
forming IMC Crop Nutrients, the Company is undertaking an extensive program
of performance improvement in the phosphate business, targeting productivity
increases, operating cost reductions and major asset restructuring.
Additionally, cost reductions are expected to be realized through staff
reductions at the Company's headquarters and administrative offices. The
Company is in the process of evaluating the accounting impact of the
foregoing restructuring activities and currently expects to record a charge
to earnings related to such restructuring activities, in an as yet
undetermined amount, in the fourth quarter of 1998.
5. Operating Segments
- ------------------
Segment information for 1998 and 1997 was as follows(a):
<TABLE>
<CAPTION>
IMC-Agrico IMC IMC IMC
Phosphates Kalium AgriBusiness Chemicals Other(c) Total
---------- ------ ---------- -------- -------- -----
Three months ended September 30, 1998
<S> <C> <C> <C> <C> <C> <C>
Net sales from
external customers $ 316.3 $ 148.1 $ 97.3 $ 103.0 $ 92.1 $ 756.8
Intersegment net sales 36.4 26.3 - - 0.8 63.5
Gross margins 86.4 70.9 13.0 14.7 6.6 191.6
Operating earnings 77.2 64.3 (13.7) 8.9 (10.5) 126.2
Total assets at
September 30, 1998(b) 1,818.9 1,324.0 451.5 623.8 2,521.0 6,739.2
Nine months ended September 30, 1998
Net sales from
external customers $1,039.5 $ 484.1 $ 666.0 $ 205.8 $ 260.0 $2,655.4
Intersegment net sales 134.3 70.4 - - 3.8 208.5
Gross margins 273.7 226.1 112.2 27.0 19.7 658.7
Operating earnings 244.7 205.1 28.8 15.1 (67.3) 426.4
IMC-Agrico IMC IMC IMC
Phosphates Kalium AgriBusiness Chemicals Other(c) Total
---------- ------ ---------- -------- -------- -----
Three months ended September 30, 1997
Net sales from
external customers $ 314.7 $ 134.6 $ 98.9 $ - $ 50.5 $ 598.7
Intersegment net sales 39.6 19.9 - - 8.6 68.1
Gross margins 77.9 54.1 14.3 - 3.0 149.3
Operating earnings 68.3 48.4 (14.9) - (17.6) 84.2
Total assets at
September 30, 1997(b) 1,694.7 847.1 459.8 - 644.5 3,646.1
Nine months ended September 30, 1997
Net sales from
external customers $ 985.4 $ 394.0 $ 728.6 $ - $ 203.7 $2,311.7
Intersegment net sales 128.9 58.7 - - 30.6 218.2
Gross margins 242.5 169.8 139.4 - 27.6 579.3
Operating earnings 211.2 153.6 47.0 - (30.2) 381.6
(a) The operating results and assets of Great Salt Lake Minerals (GSL), IMC
Salt and IMC Chemicals, acquired as part of the Harris Acquisition, are
included in the segment information since the date of acquisition, April
1998. See Note 1, "Acquisitions," of Notes to Condensed Consolidated
Financial Statements.
(b) The increase in IMC Kalium's total assets as compared to December 31,
1997 results from the purchase of GSL as part of the Harris Acquisition.
(c) Segment information below the quantitative thresholds is attributable to
three business units (IMC-Agrico Feed Ingredients, IMC Salt and IMC
Vigoro) and corporate headquarters. The Company produces and markets
animal feed ingredients through IMC-Agrico Feed Ingredients. IMC Salt
produces salt for use in road de-icing, food processing, water softeners
and industrial applications. IMC Vigoro manufactured and distributed
consumer lawn and garden products; produced and marketed professional
products for turf, nursery and horticulture markets; and produced and
distributed potassium-based ice melter products. IMC Vigoro was sold in
June 1998. See Note 2, "Divestitures," of Notes to Condensed
Consolidated Financial Statements. Corporate headquarters includes the
elimination of inter-business unit transactions and oil and gas
activities through its interest in Phosphate Resource Partners Limited
Partnership.
</TABLE>
6. Comprehensive Income
- --------------------
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income." An analysis of comprehensive
income, net of taxes, is provided below:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Comprehensive income:
Net earnings $ 36.9 $ 26.7 $ 169.2 $ 150.8
Foreign currency translation
adjustment (11.5) (0.3) (27.5) (1.9)
------ ------ ------- -------
Total comprehensive income
for the period $ 25.4 $ 26.4 $ 141.7 $ 148.9
====== ====== ======= =======
</TABLE>
7. Subsequent Events
- -----------------
In October 1998, the Company redeemed $311.7 million of Senior Subordinated
Notes and $253.1 million of Senior Notes. In connection with the redemption
of the Senior Subordinated Notes and the Senior Notes, the Company recorded
an extraordinary gain, net of taxes, of $7.1 million. These redemptions
represented the final payments on the total outstanding balances of the
Senior Subordinated Notes and Senior Notes and were made to reduce high-cost
indebtedness. Also, in October 1998, the Company issued, under a Form S-3,
$200.0 million of 6.625 percent notes due 2001. The proceeds of this
issuance were used to redeem the Senior Subordinated Notes and Senior Notes
discussed above.
In November 1998, the Company issued, under a Form S-3, $300.0 million of
7.40 percent notes due 2002 and $300.0 million of 7.625 percent notes due
2005. The proceeds of these issuances were used to repay short-term debt,
including commercial paper.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.(1)
Results of Operations
- ---------------------
Three months ended September 30, 1998 vs. three months ended
September 30, 1997
- ------------------------------------------------------------------------
Overview
Net sales for the third quarter ended September 30, 1998 were $756.8
million and gross margins were $191.6 million. Earnings, before an
extraordinary charge, were $37.8 million, or $0.33 per share. An
extraordinary charge of $0.9 million, or $0.01 per share, related to the
early extinguishment of debt, reduced net earnings to $36.9 million, or
$0.32 per share.
Net sales for the third quarter ended September 30, 1997 were $598.7
million and gross margins were $149.3 million. Net earnings were $26.7
million, or $0.28 per share.
Net sales increased 26 percent from the prior year third quarter while
gross margins increased 28 percent from the same period one year ago.
The improvement was largely due to strong performances by two of the
Company's core businesses -- IMC Kalium and IMC-Agrico Phosphates. The
sales improvements were largely attributable to continued strong demand
and higher prices for potash and phosphate crop nutrients, increased
demand for animal feed ingredients, and additional revenues from the
purchase of Harris Chemical Group, Inc. and its Australian affiliate,
Harris Chemical Australia Pty Ltd. & Its Controlled Entities
(collectively, Harris). The purchase of Harris is hereinafter referred
to as the "Harris Acquisition."
The operating results of the Company's significant business units are
discussed in more detail below.
IMC-Agrico Phosphates
Phosphates' net sales for the third quarter remained relatively
unchanged as they decreased $1.6 million from $354.3 million in 1997 to
$352.7 million in 1998, primarily as a result of lower concentrates
sales volumes, partially offset by higher average sales realizations of
concentrates and higher sales volumes of phosphate rock. Sales volumes
of concentrated phosphates, primarily granular triple superphosphate
(GTSP) and diammonium phosphate (DAP) declined $22.8 million. The
decreased shipments were mainly attributable to aggressive pricing from
competitors and lower shipments to Brazil and China due to severe
weather and weakened economic conditions. Higher concentrate sales
prices of $8.7 million were mainly caused by higher DAP realizations,
while the increase in phosphate rock volumes of $11.0 million primarily
resulted from additional sales to a large contract customer.
Gross margins increased 11 percent to $86.4 million in the quarter
compared to $77.9 million in the prior year quarter, mainly due to lower
production costs and the higher prices discussed above, partially offset
by the lower volumes discussed above. Production costs decreased
compared to the prior year's third quarter primarily as a result of
lower raw material costs for purchased ammonia and sulphur.
IMC Kalium
IMC Kalium's net sales increased 13 percent to $174.4 million in the
current quarter from $154.5 million in the prior year quarter. The
increase was due primarily to average sales realization improvements.
Sales realizations increased when compared to the same period in the
prior year by virtue of multiple price increases and a positive change
in sales mix. Additionally, export sales volumes increased as a result
of strong demand. These increases were slightly offset by lower
domestic sales volumes created by lower domestic demand because of an
above average corn and soybean harvest coupled with low commodity
prices.
Gross margins increased 31 percent to $70.9 million for the quarter from
$54.1 million in the same period one year ago. This increase was
primarily due to the impact of the increased average realizations
discussed above, partially offset by lower domestic sales volumes
discussed above and higher production costs. The higher production
costs were primarily due to additional costs related to the purchase of
GSL as part of the Harris Acquisition in April 1998.
IMC AgriBusiness
IMC AgriBusiness' net sales decreased two percent to $97.3 million in
the current quarter from $98.9 million in the prior year quarter. Lower
volumes for DAP, solutions, ammonia, mixed goods and potash, combined
with weaker average prices for ammonia and nitrogen solutions, were the
primary factors for this decrease. This decrease was partially offset
by higher volumes in crop protection products which resulted from
planting delays during the spring planting season pushing sales into the
current quarter.
Gross margins decreased nine percent from $14.3 million in the third
quarter one year ago to $13.0 million in the current quarter, primarily
due to the lower volumes and realizations discussed above.
<PAGE>
IMC Salt
IMC Salt's net sales were $51.0 million with gross margins of $9.9
million in the current quarter. IMC Salt, a new core business for the
Company, was created following the Harris Acquisition. Current quarter
salt demand was strong among customers in the water conditioning, food
processing and animal feed industries.
Other
The addition of IMC Chemicals, as a result of the Harris Acquisition,
increased sales by $103.0 million and gross margins by $14.7 million.
Sales at IMC-Agrico Feed Ingredients (Feed Ingredients) increased 12
percent to $41.8 million for the current quarter as compared to $37.4
million for the prior year period. The Feed Ingredients sales increase
was driven by increased domestic and international volumes. Partially
offsetting these increases in third quarter sales and gross margins, as
compared to the same period in the prior year, was the absence of sales
and margins for IMC Vigoro as a result of the divestiture of this
business during the second quarter of 1998. See Note 2, "Divestitures,"
of Notes to Condensed Consolidated Financial Statements.
Key Statistics
The following table summarizes the Company's core business sales volumes
and average selling prices for the three months ended September 30th:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales volumes (in thousands of short tons)(a):
IMC-Agrico Phosphates 1,575 1,753
IMC Kalium 2,081 2,213
IMC Salt 1,554 n/a
Average price per ton(b):
DAP $182 $175
Potash 82 71
Salt 33 n/a
(a) Sales volumes include tons sold captively. IMC-Agrico Phosphates'
volumes represent dry product tons, primarily DAP.
(b) Average prices represent sales made FOB mine/plant.
n/a Not applicable as a result of the Harris Acquisition in April 1998.
</TABLE>
Interest Expense
Interest expense totaled $53.9 million in the current quarter, an
increase of $40.7 million from the same period in the prior year. The
increase in interest expense was due to increased activity under
revolver/commercial paper loans along with debt assumed in conjunction
with Freeport-McMoRan Inc.'s (FTX) merger with the Company (FTX Merger)
in December 1997 and the Harris Acquisition, as well as the issuance of:
(i) $200.0 million 6.50 percent notes due 2003 in August 1998; (ii)
$100.0 million 7.375 percent debentures due 2018 in August 1998; (iii)
$150.0 million 6.55 percent senior notes due 2005 in January 1998; and
(iv) $150.0 million 7.30 percent debentures due 2028 in January 1998.
The increase in interest expense was partially offset by the tender of
higher interest bearing notes.
Other (Income) Expense, Net
Other expense for the current quarter increased $3.4 million from the
same period last year to $0.7 million. The increase was primarily due
to the following: (i) the absence in the current year of a gain from the
disposal of mineral rights; and (ii) the write-off of deferred revenue
recorded at IMC Chemicals, necessitated by purchase price accounting,
partially offset by (iii) increased interest income from interest-
bearing cash balances and the absence of losses attributable to oil and
gas operations as a result of the Company's contribution of the Main
Pass Block 299 sulphur and oil operations (Main Pass) to Freeport-
McMoRan Sulphur Inc. (FSC) in connection with the FTX Merger.
<PAGE>
Income Taxes
The effective income tax rate for the current quarter was 35.2 percent,
compared to 36.5 percent for the same period in the prior year,
primarily as a result of improvements recognized in tax costs associated
with international sales and operations.
Nine months ended September 30, 1998 vs. nine months ended
September 30, 1997
- ------------------------------------------------------------------------
Overview
Net sales for the nine months ended September 30, 1998 were $2,655.4
million and gross margins, before special one-time charges, were $662.8
million. Earnings, before an extraordinary charge and special one-time
charges, were $181.9 million, or $1.58 per share. An extraordinary
charge of $3.6 million, or $0.03 per share, and special one-time charges
of $9.1 million, or $0.08 per share, reduced net earnings for the nine
months of 1998 to $169.2 million, or $1.47 per share. The extraordinary
charge related to the early extinguishment of debt, and the special one-
time charges, totaling $14.0 million before tax benefits, related to
restructuring charges associated with the sale of IMC Vigoro, the
Company's consumer lawn and garden and professional products business.
See Note 2, "Divestitures," of Notes to Condensed Consolidated Financial
Statements.
Net sales for the nine months ended September 30, 1997 were $2,311.7
million, gross margins were $579.3 million and earnings, before an
extraordinary charge, were $154.1 million, or $1.62 per share. An
extraordinary charge of $3.3 million, or $0.03 per share, related to the
early extinguishment of debt, reduced net earnings to $150.8 million, or
$1.59 per share.
Net sales for the nine months of 1998 increased 15 percent when compared
to the nine months of the prior year period while gross margins, before
special one-time charges, increased 14 percent from the comparable
period one year ago. The improvement was largely due to strong
performances by two of the Company's core businesses -- IMC Kalium and
IMC-Agrico Phosphates. The sales improvements were largely attributable
to continued strong demand and higher prices for potash and phosphate
crop nutrients, and additional revenues from the former Harris
operations. See Note 1, "Acquisitions," of Notes to Condensed
Consolidated Financial Statements. Partially offsetting growth in potash
and phosphate revenues were lower net sales at IMC AgriBusiness and the
absence of sales due to the divestiture of IMC Vigoro in June 1998. See
Note 2, "Divestitures," of Notes to Condensed Consolidated Financial
Statements.
The operating results of the Company's significant business units are
discussed in more detail below.
IMC-Agrico Phosphates
Phosphates' net sales for the first nine months of 1998 improved five
percent to $1,173.8 million compared to $1,114.3 million for the same
period last year primarily due to increased concentrate sales volumes
and higher average sales realizations. Sales volumes of concentrated
phosphates, primarily domestic shipments of DAP and domestic and
international shipments of granular monoammonium phosphate, increased by
$41.6 million from the same prior year period. These favorable volume
variances reflected the following factors: (i) a strong spring season;
(ii) an increase in the number of supply contracts over the prior
period; (iii) an active summer fill program; and (iv) significant spot
sales to co-ops. Average sales realizations for the first nine months
of 1998 increased $12.2 million as compared to the prior year period
primarily as a result of higher international GTSP realizations and an
increase in the transfer price of phosphoric acid sold to Feed
Ingredients.
<PAGE>
Gross margins increased 13 percent to $273.7 million for the first nine
months of 1998 compared to $242.5 million for the first nine months of
last year, mainly due to lower production costs and the higher volumes
and prices discussed above. Production costs decreased compared to the
prior year's first nine months primarily as a result of lower raw
material costs for purchased ammonia and sulphur, partially offset by
increased costs for phosphate rock operations.
IMC Kalium
IMC Kalium's net sales for the first nine months of 1998 increased 22
percent to $554.5 million compared to $452.7 million for the first nine
months of 1997. This increase was primarily by virtue of average sales
realization improvements. Average sales realizations increased over the
prior year as a result of multiple price increases and a positive change
in sales mix.
Gross margins increased 33 percent to $226.1 million for the first nine
months of 1998 from $169.8 million for the same period one year ago,
primarily as a result of the impact of the increased average
realizations discussed above, partially offset by higher production
costs. This resulted from the addition of costs related to the purchase
of GSL as part of the Harris Acquisition in April 1998 coupled with
increased provincial levies.
IMC AgriBusiness
IMC AgriBusiness' net sales decreased nine percent to $666.0 million for
the first nine months of 1998 from $728.6 million for the same prior
year period. Lower volumes for mixed goods and ammonia, combined with
wet field conditions during the spring and weaker average prices for
nitrogen solutions and ammonia, were the primary factors for this
decrease.
Gross margins decreased 20 percent from $139.4 million for the nine
months ended September 30, 1997 to $112.2 million for the first nine
months of 1998, by virtue of the lower volumes and average realizations
discussed above.
IMC Salt
The IMC Salt business unit was established in April 1998 concurrent with
the Harris Acquisition; consequently, results for the nine months ended
September 30, 1998 include only second and third quarter activity. See
Note 1, "Acquisitions," of Notes to Condensed Consolidated Financial
Statements.
IMC Salt's net sales were $91.9 million with gross margins of $17.1
million for the nine months ended September 30, 1998. Current year-to-
date salt demand was strong among customers in the water conditioning,
food processing and animal feed industries.
Other
The IMC Chemicals business unit was established in April 1998 concurrent
with the Harris Acquisition; consequently, results for the nine months
ended September 30, 1998 include only second and third quarter activity.
See Note 1, "Acquisitions," of Notes to Condensed Consolidated Financial
Statements. IMC Chemical's net sales were $205.8 million with gross
margins of $27.0 million for the nine months ended September 30, 1998.
The offsets to the sales and gross margin increases described above for
the current year period, as compared to the same period in the prior
year, were primarily the result of lower volumes and average sales
realizations at Feed Ingredients coupled with lower sales at IMC Vigoro
as a result of the divestiture of this business during the second
quarter of 1998. See Note 2, "Divestitures," of Notes to Condensed
Consolidated Financial Statements.
<PAGE>
Key Statistics
The following table summarizes the Company's core business sales volumes
and average selling prices for the nine months ended September 30th:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales volumes (in thousands of short tons)(a):
IMC-Agrico Phosphates 5,494 5,321
IMC Kalium 6,802 6,723
IMC Salt(c) 2,770 n/a
Average price per ton(b):
DAP $177 $177
Potash 80 68
Salt(c) 33 n/a
(a) Sales volumes include tons sold captively. IMC-Agrico Phosphates'
volumes represent dry product tons, primarily DAP.
(b) Average prices represent sales made FOB mine/plant.
(c) Results reflect activity for the second and third quarters only as a
result of the Harris Acquisition. See Note 1, "Acquisitions," of
Notes to Condensed Consolidated Financial Statements.
n/a Not applicable as a result of Harris Acquisition in April 1998.
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $5.2 million, or
three percent, to $202.9 million, before special one-time charges of
$9.9 million, for the first nine months of 1998 compared to $197.7
million for the first nine months of 1997. This increase was primarily
due to the inclusion of the results of operations of businesses acquired
since September 1997 in the Company's nine month 1998 results of
operations. The special one-time charges related to restructuring
charges associated with the divestiture of IMC Vigoro. See Note 2,
"Divestitures," of Notes to Condensed Consolidated Financial Statements.
Interest Expense
Interest expense totaled $137.6 million for the first nine months of
1998, an increase of $99.2 million from the same period in the prior
year. The increase in interest expense was due to increased activity
under revolver/commercial paper loans along with debt assumed in
conjunction with the Harris Acquisition and the FTX Merger as well as
the issuance of: (i) $200.0 million 6.50 percent notes due 2003 in
August 1998; (ii) $100.0 million 7.375 percent debentures due 2018 in
August 1998; (iii) $150.0 million 6.55 percent senior notes due 2005 in
January 1998; (iv) $150.0 million 7.30 percent debentures due 2028 in
January 1998; and (v) $150.0 million 6.875 percent senior debentures due
2007 in July 1997. The increase in interest expense was partially
offset by the tender of higher interest notes and the early payment of
certain unsecured term loans.
Other (Income) Expense, Net
Other income for the nine months ended September 30, 1998 increased $5.5
million from the same period in the prior year. The increase was
primarily due to the following: (i) increased interest income from
interest-bearing cash balances; (ii) the absence of current year
amortization of a merger and restructuring charge; and (iii) the absence
of losses attributable to oil and gas operations as a result of the
Company's contribution of Main Pass to FSC in connection with the FTX
Merger.
Income Taxes
The effective income tax rate for the nine months of 1998 was 35.2
percent, compared to 36.5 percent for the same period in the prior year,
primarily as a result of improvements recognized in tax costs associated
with international sales and operations.
<PAGE>
Capital Resources and Liquidity
- -------------------------------
Liquidity and Operating Cash Flow
Cash generated from operating activities decreased $203.7 million in the
first nine months of 1998 to $252.0 million. The decrease was primarily
due to: (i) cash used to fund Phosphate Resource Partners Limited
Partnership (PLP) operations, primarily related to oil & gas; (ii)
increased litigation payments; and (iii) higher debt fee payments
associated with debt issuances. Also, when compared to December 31,
1997, the Company's working capital ratio decreased to 0.9:1 at
September 30, 1998 from 1.6:1 at December 31, 1997, primarily due to the
assumption of short-term debt in conjunction with the Harris Acquisition
in April 1998. See "Financing" for further details.
Net cash used in investing activities increased $342.2 million over 1997
levels primarily due to acquisitions and increased capital expenditures,
partially offset by $44.8 million of proceeds from the sale of IMC
Vigoro. See Note 1, "Acquisitions," and Note 2, "Divestitures," of
Notes to Condensed Consolidated Financial Statements. Capital
expenditures for the first nine months of 1998 increased $94.3 million
when compared with the first nine months of the prior year primarily due
to the following: (i) PLP's share of McMoRan Oil & Gas Company (MOXY)
exploration and development costs of $40.1 million; (ii) enterprise-wide
systems development expenditures of $23.8 million; and (iii)
expenditures for IMC Salt and IMC Chemicals of $19.8 million.
Cash from financing activities increased $496.7 million for the first
nine months of 1998 when compared with the comparable period in the
prior year from a use of funds of $191.9 million to a source of funds of
$304.8 million at September 30, 1998. This increase in funds available
was primarily due to higher net debt proceeds for the current year
period of $281.6 million and decreased stock repurchases of $154.1
million. The net debt proceeds were used, in part, to finance the
Harris Acquisition, which was funded through the Company's commercial
paper borrowings. Debt to total capitalization increased to 57.1
percent from 42.4 percent at December 31, 1997, primarily as a result of
increased commercial paper borrowings, partially offset by the
prepayment of certain unsecured loans in January 1998 and the redemption
of $100.2 million of the 8.50 percent senior notes in September 1998.
See "Financing" below for further details. Additionally, net PLP
distributions decreased $68.7 million as a result of the Company's
increased ownership in IMC-Agrico due to the FTX Merger, further
impacting cash generated from financing activities.
Financing
The Company has credit facilities with a group of banks from which it
and certain of its subsidiaries may borrow up to $1,350.0 million on a
revolving basis under two separate agreements (Revolving Credit
Facilities) expiring in December 1998 and March 1999, and $650.0 million
under a long-term revolving credit facility (Long-Term Credit Facility)
expiring in December 2002. As of September 30, 1998, commitment fees
associated with the Revolving Credit Facilities were 7.5 basis points
and 11.0 basis points for the Long-Term Credit Facility.
The credit facilities described above (collectively, Credit Facilities),
support the Company's commercial paper borrowings and are available for
other corporate purposes. The amount available for borrowing under the
Credit Facilities is reduced by the balance of outstanding commercial
paper.
Simultaneously with the consummation of the FTX Merger, the Company and
its Canadian subsidiaries entered into a credit facility with a group of
banks to borrow up to $100.0 million under a revolving credit facility
(Canadian Facility) that will expire in December 2002. The Company
guarantees all loans made to its subsidiaries under the Canadian
Facility. As of September 30, 1998, commitment fees associated with the
Canadian Facility were 11.0 basis points.
<PAGE>
In September 1998, the Company redeemed $100.2 million of its 8.50
percent senior notes due 2000. These notes were assumed by the Company
as part of the Harris Acquisition and were adjusted to fair value as of
the acquisition date in accordance with Accounting Principles Board
Opinion (APB) No. 16. The redemption reduced its high-cost indebtedness
and was funded by commercial paper borrowings. See Note 3, "Financing
Activities," of Notes to Condensed Consolidated Financial Statements.
Additionally, in September 1998, the Company purchased on the open
market $44.0 million of $355.9 million 10.75 percent senior subordinated
notes due 2003 (Senior Subordinated Notes), and $8.8 million of $261.9
million 10.25 percent senior notes due 2001 (Senior Notes). These notes
were assumed by the Company as part of the Harris Acquisition and were
adjusted to fair value as of the acquisition date in accordance with APB
No. 16. The open market purchase reduced high-cost indebtedness and
was funded by commercial paper borrowings.
Also in September 1998, the Company filed a registration statement on
Form S-3 (Form S-3) to increase the amount of debt and equity securities
available for issuance to $700.0 million. The Form S-3 was subsequently
increased to $800.0 million.
In August 1998, the Company issued, under the Form S-3, $200.0 million
of 6.50 percent notes due 2003 and $100.0 million of 7.375 percent
debentures due 2018. The proceeds of these issuances were used to repay
short-term debt, including commercial paper, and for general corporate
purposes.
During June 1998, $0.2 million of $355.9 million Senior Subordinated
Notes, and $3.1 million of $104.3 million 8.50 percent senior notes due
2000 were presented for purchase by holders of the notes.
In April 1998, the Company acquired Harris for a total purchase price of
$1.4 billion. As a result, the Company assumed approximately $950.0
million of debt and paid approximately $450.0 million for the equity of
Harris, the payment of which was funded by commercial paper borrowings.
See Note 1, "Acquisitions," of Notes to Condensed Consolidated Financial
Statements.
In January 1998, the Company prepaid $120.0 million of unsecured term
loans to reduce its high-cost indebtedness. See Note 3, "Financing
Activities," of Notes to Condensed Consolidated Financial Statements.
In July 1997, the Company issued, under an existing shelf registration
statement, $150.0 million of 6.875 percent senior debentures due 2007.
The proceeds of this issuance were used to reduce high-cost
indebtedness.
In May 1997, the Company completed a tender offer to purchase portions
of its high-cost senior notes. See Note 3, "Financing Activities," of
Notes to Condensed Consolidated Financial Statements.
Recent Developments
In October 1998, the Company redeemed $311.7 million of Senior
Subordinated Notes and $253.1 million of Senior Notes. In connection
with the redemption of the Senior Subordinated Notes and the Senior
Notes, the Company recorded an extraordinary gain, net of taxes, of $7.1
million. These redemptions represented the final payments on the total
outstanding balances of the Senior Subordinated Notes and Senior Notes
and were made to reduce high-cost indebtedness. Also in October 1998,
the Company issued, under the Form S-3, $200.0 million of 6.625 percent
notes due 2001. The proceeds of this issuance were used to redeem a
portion of the Senior Subordinated Notes and Senior Notes.
In November 1998, the Company issued, under the Form S-3, $300.0 million
of 7.40 percent notes due 2002 and $300.0 million of 7.625 percent notes
due 2005. The proceeds of these issuances were used to repay short-term
debt, including commercial paper.
<PAGE>
Restructuring Charge
- --------------------
The Company recently announced the consolidation of its phosphate and
potash businesses into a new operating entity, IMC Crop Nutrients.
Concurrent with forming IMC Crop Nutrients, the Company is undertaking
an extensive program of performance improvement in the phosphate
business, targeting productivity increases, operating cost reductions
and major asset restructuring. Additionally, cost reductions are
expected to be realized through staff reductions at the Company's
headquarters and administrative offices. The Company is in the process
of evaluating the accounting impact of the foregoing restructuring
activities and currently expects to record a charge to earnings related
to such restructuring activities, in an as yet undetermined amount, in
the fourth quarter of 1998.
Year 2000 Compliance
- --------------------
Like other businesses dependent on modern technology, the Company must
address potential Year 2000-related issues. The Company is progressing
through a comprehensive program (Year 2000 Program) to evaluate and
address the impact of Year 2000-related issues on its operational
systems, business application software, computer hardware, facilities
infrastructure and equipment with embedded technology, and Year 2000-
related risks associated with its vendors and customers.
The Company's Year 2000-related effort is a cooperative venture
coordinated among business units and appropriate members of the
Company's senior management. Progress reviews are held periodically
with senior management and the Board of Directors. As an additional
step, the Company has created the position of Year 2000 Risk Manager to
provide Company-wide leadership, oversight and coordination of its Year
2000 project.
State of Readiness
The Company is using both internal and external resources to implement
its Year 2000 Program, which includes the following overlapping phases:
system inventory and analysis; remediation, testing and implementation;
and vendor and customer review. The Company expects that its Year 2000
Program will be substantially complete by the end of the third quarter
of 1999.
System Inventory and Analysis Phase
- -----------------------------------
The system inventory and analysis phase consists of compiling a detailed
inventory of all of the Company's systems and platforms to determine
which items are date sensitive, affected by the Year 2000, and therefore
require remediation. Each of the Company's business units has focused
specifically on the following seven target areas: business application
software, mainframe hardware and software, network servers, desktop
environment, network and telephone systems, non-information technology
assets and facilities, and major suppliers and service providers. This
analysis has involved both an internal assessment conducted by Company
engineers, technicians, and business unit managers, as well as contact
with the manufacturers of computer systems and equipment used by the
Company in its operations. Each of the Company's business units has
substantially completed its system inventory and analysis phase. The
principal business application systems requiring remediation that were
identified by the Company during this stage include the following
systems: equipment maintenance, spare parts inventory, distribution,
customer order entry, and financial/accounting. In addition, some
Company plants have identified certain production control systems that
will require Year 2000-related remediation in order to remain operative.
Remediation, Testing and Implementation Phase
- ---------------------------------------------
The remediation, testing and implementation phase involves determining
and implementing a remediation method (upgrade, replace or discontinue)
that is most appropriate for each specific date sensitive item. The
remediated item is then tested and returned to normal operations when
Year 2000-related issues have been addressed. Testing includes
functional testing of remedial measures and regression testing to
validate that changes have not altered existing functionality. Several
system manufacturers have provided testing procedures for their
equipment and have been available for consultations about Year 2000-
related testing. In certain limited cases, the Company has also
retained special consultants to assist with its remediation efforts.
As a separate initiative, the Company is implementing its Global Vision
Project, an enterprise-wide resource planning (ERP) software package.
Its scope includes accounts payable, inventory, purchasing, general
ledger, payroll, human resources and plant maintenance. This new ERP
software and the improvements to the infrastructure hardware required to
support the Global Vision Project should further remediate issues
associated with the Year 2000.
Vendor and Customer Review
- --------------------------
Vendor reviews consist of assessing vendor readiness, and if necessary,
identifying alternate channels to receive critical materials and/or
supplies. Each business unit has developed a questionnaire that has
been submitted to the primary suppliers and vendors to determine their
Year 2000-related status. The business units currently are analyzing
the information provided in these responses, and will determine the best
way to address any specific issues. As an additional precaution, each
business unit's purchase orders now contain a Year 2000-related clause
to help ensure that any newly purchased equipment adequately addresses
Year 2000-related issues.
Although the Company is attempting to monitor and validate the efforts
of other parties, it may not have control over the success of these
efforts. In the event that satisfactory commitments from key suppliers
are not received, the Company is forming plans for the continuing
availability of critical materials and supplies through alternate
channels. In general, however, the Company is satisfied with the
progress made by critical vendors to date and no critical issues have
been identified.
In addition to investigating the Company's key suppliers, the Company's
business units are also contacting key customers to explain the
Company's Year 2000-related efforts and to solicit certain information
about each customer's Year 2000-related efforts to assess potential Year
2000-related problems that could affect future orders from such
customers.
Costs
The Company does not currently expect that the costs of addressing its
Year 2000-related issues will have a material effect on its financial
position, results of operations or liquidity. Costs related to Year
2000-related issues are expensed as incurred and are funded through
operating cash flows. In a few limited instances, some business units
have deferred certain non-Year 2000-related information technology
projects due to their respective Year 2000-related efforts. The Company
believes, however, that these deferred projects are not critical to its
present or future financial performance or business operations. The
Company estimates its total Year 2000-related technology and non-
information technology systems remediation costs to be approximately
$5.7 million, of which $1.8 million will be expended in 1998. The
remaining costs will be incurred during 1999. A sizable portion of
these costs represents the redeployment of existing employee resources
rather than incremental expenses.
Risks
Progress reports on the Year 2000 Program are presented regularly to the
Company's Board of Directors and senior management. As the program
continues, the Company may discover additional Year 2000-related
challenges, including that remediation plans are not feasible or that
the cost of such plans exceed current expectations. In many cases, the
Company is relying on written assurances from vendors that the current
systems are, or that new or upgraded systems acquired by the Company
will adequately address Year 2000-related issues. The Company believes
that one of its principal Year 2000-related risks is the effect Year
2000-related issues will have on its vendors, especially its utilities
vendors. A substantial part of the Company's day-to-day operations is
dependent on power, transportation systems, and telecommunication
services, as to which alternative sources of service may not be
available. The Company will continue to investigate the readiness of
its suppliers, including utilities, and pursue the availability of
alternatives to further diminish the extent of any impact Year 2000-
related issues may have on the Company. Although there can be no
assurance that the Company will be able to complete all of the
modifications in the required time frame or that no unanticipated events
will occur, it is management's belief that the Company is taking
adequate action to address Year 2000-related issues. However, because
of the range of possible issues and the large number of variables
involved, it is impossible to quantify the potential cost of problems
should the Company's remediation efforts or the efforts of those it does
business with not be successful. If either the Company, or the
Company's vendors fail to adequately address Year 2000-related issues,
the Company may suffer business interruptions. If such interruptions
cause the Company to be unable to fulfill its obligations to third
parties, the Company may potentially be exposed to third party
liability.
Contingency Planning
At the present time, the Company has plans to develop contingency
measures to address the possibility that it will not have fully
addressed Year 2000-related issues by December 31, 1999. The Company's
Year 2000-related strategy is currently emphasizing remediation,
testing, and implementation activities. The Company will initiate
contingency planning in early 1999.
Item 3. Market Risk.
The Company is exposed to the impact of interest rate changes,
fluctuations in the Canadian currency, and 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. At September 30, 1998, the Company's exposure to
these market risk factors was not significant and had not materially
changed from December 31, 1997.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.(1)
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 (Court of Appeals). The Court
of Appeals is expected to rule during calendar 1998.
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
litigation, all proceedings have been stayed pending the decision of
the Court of Appeals.
<PAGE>
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.
In May 1998, IMC and PLP (collectively, Plaintiffs) filed a lawsuit
(IMC Action) in Delaware Chancery Court against certain former
directors of FTX (the Director Defendants), and MOXY. IMC alleges that
the Director Defendants, as the directors of PLP's administrative
managing general partner FTX, owed duties of loyalty to PLP and its
limited partnership unitholders. IMC further alleges that the Director
Defendants breached their duties by causing PLP to enter into a series
of interrelated non-arm's-length transactions with MOXY, an affiliate
of FTX. IMC also alleges that MOXY knowingly aided and abetted and
conspired with the Director Defendants to breach their fiduciary
duties. On behalf of the PLP public unitholders, IMC seeks to reform
or rescind the contracts that PLP entered into with MOXY and to recoup
the monies lost as a result of PLP's participation in those agreements.
The Director Defendants and MOXY have filed motions to dismiss
Plaintiffs' claims. IMC intends to pursue this action vigorously.
Subsequently, in May 1998, Jacob Gottlieb filed an action (Gottlieb
Action) on behalf of himself and all other PLP unitholders against the
Director Defendants, MOXY, and IMC asserting the same claims that IMC
asserts in the IMC action. Because IMC and PLP had already asserted
these claims, IMC has filed a motion to dismiss the Gottlieb Action.
The court has not set a briefing schedule for IMC's motion to dismiss.
IMC intends to defend this action vigorously.
Other
- -----
In the ordinary course of its business, the Company is and will from
time to time be involved in legal proceedings of a character normally
incident to its business. The Company believes that its potential
liability in any such pending or threatened proceedings will not have a
material adverse effect on the financial condition or results of
operations of the Company.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description
----------- ---------------------------------------------
10.1 Employment Agreement by and between
Douglas A. Pertz and the Company dated
as of September 15, 1998
11.1 Earnings Per Share Computation
27 Financial Data Schedule
(b) Reports on Form 8-K.
Up to the date of this report, the following reports on Form 8-K
were filed:
A report under Items 2 and 7 dated September 15, 1998.
A report under Items 5 and 7 dated October 26, 1998.
**************************
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMC GLOBAL INC.
/s/ Anne M. Scavone
----------------------------------
Anne M. Scavone
Vice President and Controller
(on behalf of the Registrant and
as Chief Accounting Officer)
Date: November 16, 1998
- ------------------------------------------------
(1)Except for statements of historical fact contained herein, the statements
appearing under Part I, Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and Part II, Item 1, "Legal
Proceedings," presented herein constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
Factors that could cause actual results to differ materially from those
expressed or implied by the forward-looking statements include, but are not
limited to, the following: general business and economic conditions in
localities where the Company operates; the impact of competitive products;
pressure on prices realized by the Company for its products; constraints on
supplies of raw materials used in manufacturing certain of the Company's
products; capacity constraints limiting the production of certain products;
difficulties or delays in the development, production, testing and marketing of
products; difficulties or delays in receiving required governmental and
regulatory approvals; market acceptance issues, including the failure of
products to generate anticipated sales levels; difficulties in integrating
acquired businesses and in realizing related cost savings and other benefits;
the effects of and change in trade, monetary and fiscal policies, laws and
regulations; foreign exchange rates and fluctuations in those rates; the costs
and effects of legal, including environmental, and administrative proceedings
involving the Company, the completion of the Company's Year 2000 plan, and the
other risk factors reported from time to time in the Company's SEC reports.
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is dated as of
September 15, 1998 (the "Effective Date") between Douglas A. Pertz (the
"Executive") and IMC Global Inc., a Delaware corporation (the "Company").
WHEREAS, the Company desires to employ the Executive as its
President and Chief Operating Officer and the Executive desires to accept
such employment upon the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and
covenants contained herein, the sufficiency of which is acknowledged, the
Executive and the Company hereby agree as follows:
ARTICLE I
Employment
Section 1.01 Term. The term of this Agreement (the "Term")
shall commence on the Effective Date and shall terminate on the third
anniversary of the Effective Date; provided, however, that unless (i) the
Company gives written notice of its intent to terminate the Agreement at
least three (3) months prior to the third anniversary of the Effective
Date or (ii) the Executive gives notice of his intent to terminate the
Agreement at least three (3) months prior to the third anniversary of the
Effective Date, this Agreement shall renew automatically for an additional
one year term and shall continue to renew automatically for additional one
year terms unless (i) written notice of the Company's intent to terminate
the Agreement is given at least three (3) months prior to the expiration
of the then current term or (ii) written notice of the Executive's intent
to terminate the Agreement is given at least three (3) months prior to the
expiration of the then current term.
Section 1.02. Position; Responsibilities. The Company shall
employ the Executive as its President and Chief Operating Officer and, if
elected, as a member of the Company's Board of Directors (the "Board" or
the "Board of Directors"). The Executive shall have responsibility and
authority for the management of the Company's business units and those
departments of the Company so designated by the Board or the Chief
Executive Officer of the Company. The Executive shall also perform other
operating and administrative duties (consistent with the position of
President and Chief Operating Officer) as the Executive may reasonably be
expected to perform on behalf of the Company or as may from time to time
be authorized or directed by the Board or its duly authorized designee.
The Executive agrees to be employed by the Company in all such capacities
subject to the covenants and conditions hereinafter set forth.
Section l.03. Duties. During the Term of this Agreement, the
Executive shall perform faithfully the duties assigned to him hereunder to
the best of his abilities and devote his full and undivided business time
and attention to the transaction of the Company's business and not engage
in any other business activities except with the prior written approval of
the Board or its duly authorized designee.
ARTICLE II
Compensation
Section 2.01. Base Salary. As compensation for his services
hereunder, during employment the Company shall pay the Executive salary at
the rate of $600,000 per year, less required or authorized deductions,
payable in installments in accordance with the Company's normal payment
schedule for senior management of the Company. The Executive's salary may
be increased from time to time by the Board or its duly authorized
designee in its sole discretion. The Executive's annual salary in effect
from time to time under this Section 2.01 is hereinafter called his "Base
Salary."
Section 2.02. Annual Bonus. During employment, the
Company shall provide the Executive the opportunity to earn an annual
bonus, pursuant to the Company's Management Incentive Compensation Program
(the "MICP") or successor annual bonus plan as in effect from time to
time, with an annual target bonus of at least 60% of the salary earned by
the Executive for the year. With respect to the Executive's annual bonus
for the Company's 1998 fiscal year, such bonus shall be at least equal to
60% of the salary earned by the Executive for such 1998 fiscal year.
Nothing in this Section 2.02 shall be construed as limiting the Company's
right to revise, amend or terminate the MICP or other annual bonus plan in
effect.
Section 2.03. Long-Term Incentives. During employment,
the Company shall provide the Executive the opportunity to earn long-term
incentive awards under the Company's 1996 Long-Term Incentive Plan (the
"LTIP") and 1988 Stock Option and Award Plan, as amended (the "Stock
Option Plan), or successor long-term incentive plan or plans as in effect
from time to time. The Executive's annual target award under the LTIP
will be at least equal to 80% of the Executive's salary grade midpoint.
With respect to the Executive's LTIP award for the Company's 1998 fiscal
year, such LTIP award shall be at least equal to 80% of the Executive's
salary grade midpoint for 1998 ($495,000); provided, however, that such
LTIP award shall be prorated to reflect the Executive's actual service
during such 1998 fiscal year. Nothing in this Section 2.03 shall be
construed as limiting the Company's right to revise, amend or terminate
any of the Company's LTIP, Stock Option Plan or other long-term incentive
plans.
Section 2.04. Retirement Benefits. Subject to Section
2.09, the Company shall provide the Executive with participation in the
Company's Profit Sharing and Savings Plan, 1998 Restoration Plan and 1998
Supplemental Executive Retirement Plan or successor qualified and
nonqualified retirement plans in effect from time to time and provided by
the Company to senior executive officers, subject to the participation and
eligibility requirements of such plans.
Section 2.05. Initial Stock Option Awards. The Company
will provide the Executive with an option to purchase 320,000 shares of
common stock of the Company at a price of $18.1875 per share. Such option
shall vest in annual increments of one-third over the three year period
commencing on the Executive's date of hire and shall have a ten year term.
In addition, the Company will provide the Executive with an option to
purchase 180,000 shares of common stock of the Company at the
aforementioned price per share. Such option to purchase 180,000 shares
shall have a ten year term and shall vest in full on the fifth anniversary
of the date of grant or, if earlier, in increments of one-third with the
first third vesting on the date on which the fair market value of the
Company's common stock is at least equal to $30.00 per share, the second
third vesting on the date on which the fair market value of the Company's
common stock is at least equal to $35.00 per share and the final third
vesting on the date on which the fair market value of the Company's common
stock is at least equal to $40.00 per share; provided, however, that no
portion of such option to purchase 180,000 shares shall be exercisable
prior to the first anniversary of the date of grant and not more than 50%
of the total number of shares subject to the Executive's option may be
exercised by the Executive during the one-year period beginning on the
first anniversary of the date of grant, as provided under the Company's
1988 Stock Option and Award Plan. The terms and conditions of such
options shall be governed by the Executive's individual stock option award
agreements and the Company's 1988 Stock Option and Award Plan, as amended
from time to time.
Section 2.06. Other Employee Benefits. Subject to Section
2.09, during employment, the Executive shall be entitled to participate in
all employee benefit plans, including, without limitation, group medical,
dental, short and long-term disability and life insurance. The Executive
shall also receive four weeks vacation and all other fringe benefits as
are from time to time made available generally to the senior management of
the Company. The Executive's participation shall be in accordance with
the terms and conditions of the various plans, programs and policies, and
as they are modified from time to time.
Section 2.07. Perquisites. During employment, the Company
also shall pay or reimburse the Executive for (i) a country club
membership up to a maximum of $50,000 for the initiation fee and $500 per
month in dues; (ii) his reasonable expenses up to a maximum of $7,500 per
calendar year for financial, tax, and estate planning advice provided by
the Ayco Company, L.P. or such other advisor chosen by the Executive;
(iii) the cost of his annual medical examination; (iv) the purchase price
of the automobile leased by him as of the Effective Date of this
Agreement; and (v) his legal fees incurred in preparing this Agreement.
Subject to Section 2.09, the Company shall provide to the Executive all
perquisites to which other senior executive officers of the Company
generally are entitled to receive and such other perquisites as the Board
or the Board's designee deems appropriate.
Section 2.08. Expense Reimbursements. The Company shall
reimburse the Executive for all proper expenses incurred by him in the
performance of his duties hereunder in accordance with the policies and
procedures established by the Board.
Section 2.09. Right to Change Plans. By reason of
Sections 2.04 through 2.08, the Company shall not be obligated to
institute, maintain, or refrain from changing, amending or discontinuing
any benefit plan, program, policy or any perquisite, so long as such
changes are similarly applicable to other senior executive officers of the
Company.
ARTICLE III
Termination of Employment
Section 3.01. Termination. The Executive's employment
may be terminated as follows. Regardless of the reason for the
termination of employment or by whom initiated, the Executive remains
obligated under the provisions of Article IV of this Agreement. Upon
termination for any reason, the Executive or his estate shall receive
payment for any accrued but unpaid Base Salary under Section 2.01,
vacation or bonus and any unreimbursed expenses under Section 2.08. He
shall also receive benefits under those plans described in Sections 2.03,
2.04 and 2.05 as determined in accordance with the terms of the applicable
plan and any applicable award agreement. Unless otherwise stated in this
Agreement or in any applicable benefit plans, the Executive shall have no
right to salary, bonus or benefits after employment is terminated and the
Company shall have no further obligations to the Executive.
(a) Death: The Executive's employment will terminate upon
the Executive's death.
(b) Inability to Perform: The Company may terminate the
Executive's employment upon the Executive's incapacity or inability to
perform his essential duties and responsibilities, with or without
reasonable accommodation, for ninety (90) calendar consecutive days or
periods aggregating ninety (90) calendar days in any twelve (12)-month
period because of an impairment of the Executive's physical or mental
health. Upon such termination, the Executive shall continue to receive
his Base Salary from the date of termination until the earlier of: (i) the
end of the Term of the Agreement, (ii) the Executive's eligibility for
retirement benefits under any Company retirement plans, or (iii) the
Executive's death. Such payments shall be made in accordance with the
Company's regular payroll procedures and shall be reduced by any amounts
received by the Executive pursuant to any insurance policy, plan or other
employee benefit provided to the Executive by the Company.
(c) For Cause: The Company may terminate the Executive's
employment for Cause immediately if, in the Company's reasonable
determination, the Executive (i) "grossly neglects" his duties; (ii)
engages in "misconduct"; or (iii) breaches a material provision of this
Agreement including but not limited to Article IV. "Gross neglect" means
the failure to perform the functions of the Executive's job or the failure
to carry out the Board's reasonable directions with respect to material
duties after the Executive is notified by the Board that the Executive is
failing to perform these functions or failing to carry out the reasonable
directions of the Board. Such notice shall specify the functions or
directions that the Executive is failing to perform and what steps need to
be taken to cure and shall set forth the reasonable time frame, which
shall be at a minimum forty-five (45) days, within which to cure. If
Executive fails to cure within the time frame the Company may terminate
Executive's employment by giving him thirty (30) days notice or pay in
lieu thereof. "Misconduct" means: embezzlement or misappropriation of
corporate funds, or other acts of fraud, dishonesty, or self-dealing
provided, however, that Executive shall be given notice and an opportunity
within the next forty-five (45) days to explain his position and actions
to the Company, which shall then make a final decision; any significant
violation of any statutory or common law duty of loyalty to the Company;
conviction for a felony; or any significant violation of Company policy or
any inappropriate workplace conduct that seriously disrupts or interferes
with Company operations; provided, however, that if the policy violation
or inappropriate conduct can be cured, then the Executive shall be given
written notice of the policy violation or inappropriate conduct and a
reasonable opportunity to cure, which shall be at a minimum forty-five
(45) days. If the Executive fails to cure within this time frame, the
Company may terminate Executive's employment by giving him thirty (30)
days notice or pay in lieu thereof.
(d) By the Company: The Company may terminate the
Executive's employment without cause or reason by giving the Executive
written notice, which shall set forth the date of termination which shall
be within ninety (90) days of the date of notice. During any notice
period, the Executive shall cooperate fully with the Company in achieving
a smooth transition of the Executive's duties and responsibilities to such
person(s) as may be designated by the Company. Upon such termination and
execution of a general release of all claims against the Company and other
related entities or persons, and upon the expiration of any applicable
revocation period and upon Executive's resignation from all positions,
including but not limited to, as an officer or director of the Company or
any of its subsidiaries or affiliates, the Executive shall be entitled to
receive the following "Severance Benefits":
1. An amount equal to three times the Executive's then
current Base Salary, payable in accordance with regular payroll procedures
of the Company;
2. An amount equal to three times the highest annual bonus
earned under the Company's Management Incentive Compensation Program, or
successor annual bonus plan in effect from time to time, during the three
consecutive complete bonus years immediately preceding the date on which
the Executive's termination of employment occurs; provided, however, that
in the event the Executive's employment is terminated prior to December
31, 2001, any prorated annual bonus received by the Executive shall be
annualized and the bonus years in which the Executive's employment
commences or terminates shall be deemed to be "complete bonus years" for
purposes of determining the highest annual bonus earned by the Executive
during the three consecutive complete bonus years immediately preceding
the date on which the Executive's termination of employment occurs.
3. An amount equal to three times the highest annual award
earned under the Company's 1996 Long-Term Incentive Plan, or successor
long-term incentive plan in effect from time to time, during the three
consecutive complete LTIP years immediately preceding the date on which
the Executive's termination of employment occurs; provided, however, that
in the event the Executive's employment is terminated prior to December
31, 2001, any prorated long-term incentive plan award received by the
Executive shall be annualized and the LTIP years in which the Executive's
employment commences or terminates shall be deemed to be "complete bonus
years" for purposes of determining the highest annual long-term incentive
award earned by the Executive during the three consecutive complete LTIP
years immediately preceding the date on which the Executive's termination
of employment occurs.
4. If the Executive timely and appropriately exercises his
right to continue his coverage under the Company's medical and dental
plans as provided under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), then the Company will pay the employer
portion (and the Executive will pay the employee portion) of the premiums
in effect under such plans for the Executive until the earlier of: (i)
the expiration of the three year period following the date on which the
Executive's termination of employment occurs and (ii) the date on which
the Executive is no longer eligible to continue such coverage under clause
4980B(f)(2)(B)(ii), (iii), (iv) or (v) of COBRA. Except as provided in
this paragraph, the Executive's continued participation and coverage under
the group health insurance plans shall be governed by COBRA;
5. The Company shall continue the Executive's coverage
under its life and disability insurance policies until the earlier of (i)
the expiration of the three year period following the date of termination
and (ii) the date on which the Executive becomes eligible to participate
in and receive similar benefits under a plan or arrangement sponsored by
another employer or under any Company sponsored retirement plan.
Participation shall be on the same terms and conditions as are applicable
to active employees;
6. The Executive's outstanding stock options shall become
immediately exercisable as of the date of the Executive's termination of
employment and shall remain exercisable during the two year period
following the Executive's termination of employment (but not after the
expiration of ten years from the date of grant); and
7. The Executive's account balance under the Company's 1998
Supplemental Executive Retirement Plan or successor supplemental
retirement plan in effect shall become fully vested as of the date of the
Executive's termination of employment.
Severance Benefits shall be subject to all applicable federal, state and
local deductions and withholdings. At the option of the Company, the
present value of the Severance Benefits or balance thereof due to the
Executive under paragraphs 3.01(d)(1), (2) or (3), determined pursuant to
section 280G(d)(4) of the Internal Revenue Code, may be paid in a lump
sum; provided, however, that in the event a Change in Control (as defined
in Article V herein) of the Company occurs while the Executive is
receiving Severance Benefits, a lump sum payment equal to the sum of the
remaining amounts due under Sections 3.01(d)(1), (2) and (3) shall be paid
to the Executive within thirty (30) days of such Change in Control. The
Company's obligation to continue Severance Benefits shall, subject to the
rights of any "qualified beneficiary" under COBRA, cease immediately if:
(i) the Executive has not satisfied his reasonable obligations to
cooperate fully with a smooth transition; or (ii) the Company has grounds
to terminate the Executive's employment immediately as specified above in
Section 3.01 (c)(iii). In the event the Executive dies before all
Severance Benefits are paid to him, the remaining amounts due to him as of
the date of his death under Sections 3.01(d)(1), (2) and (3) shall be
reduced by the proceeds the Executive's estate receives under any life
insurance policy with respect to which the premiums are paid by the
Company. The Executive understands and acknowledges that the Severance
Benefits constitute his sole benefits upon termination.
Section 3.02. Termination for Good Reason. If the
Executive reasonably believes he has "Good Reason," as defined herein, to
terminate employment, he must give the Board written notice which sets
forth in reasonable detail the facts and circumstances claimed to provide
a basis for such termination and a reasonable opportunity to cure, which
shall be at a minimum forty-five (45) days. If the Board fails to cure
the Good Reason within such reasonable time, the Executive may terminate
employment by giving the Board thirty (30) days written notice of his
intention to terminate this Agreement. "Good Reason" means: (i) the
permanent assignment of the Executive without his consent to duties
inconsistent with the Executive's authorities, duties, responsibilities,
provided, however, that an assignment of duties due to the Executive's
incapacity, temporary or otherwise, as determined by the Board or its duly
authorized designee, shall not trigger the Executive's right to terminate
for Good Reason; (ii) the failure to promote the Executive to the position
of Chief Executive Officer of the Company on or before January 1, 2000
and/or to promote the Executive to the position of Chairman of the Board
of Directors of the Company on or before November 1, 2000; (iii) the
failure to elect the Executive as a member of the Board of Directors of
the Company on or before the next regularly scheduled meeting of the Board
of Directors of the Company following the Effective Date of this Agreement
or to retain the Executive as a member of the Board of Directors of the
Company; or (iv) a change, without the Executive's consent, in the
Executive's primary employment location to a location that is more than 50
miles from the primary location of the Executive's employment as in effect
immediately prior to the Effective Date. Upon such termination and
execution of a general release of all claims against the Company and other
related entities and persons, and upon the expiration of any applicable
revocation period, the Executive shall receive the Severance Benefits
provided in Section 3.01(d) herein, subject to the terms, conditions and
limitations stated therein.
Section 3.03. Termination at Expiration of Agreement. If
the Executive's employment is terminated at the expiration of this
Agreement as provided in Section 1.01, the Executive shall be entitled to
receive the Severance Benefits described above in Section 3.01(d)(1)-(7);
provided, however, that wherever the word "three" appears in Section 3.01,
it shall be replaced with the word "two."
ARTICLE IV
Exclusivity of Services and Confidential/Proprietary Information
Section 4.01. Exclusivity of Services. Executive
acknowledges that during his employment with the Company he has developed,
acquired, and had access to and will develop, acquire and have access to
trade secrets or other proprietary or confidential information belonging
to the Company and that such information gives the Company a substantial
business advantage over others who do not have such information.
Accordingly, the Executive agrees to the following obligations that he
acknowledges to be reasonably designed to protect the Company's legitimate
business interests without unnecessarily or unreasonably restricting his
post-employment opportunities:
(a) during employment and for the period during which the
Executive is receiving Severance Benefits under Section 3.01, 3.02, or
3.03 he will not engage or assist others in engaging in competition with
the Company, directly or indirectly, whether as an employer, proprietor,
partner, stockholder (other than the holder of less than 5% of the stock
of a corporation the securities of which are traded on a national
securities exchange or in the over-the-counter market), director, officer,
employee, consultant, agent, or otherwise, in the business of producing
and distributing potash, phosphate, animal feed ingredients or salt or any
other significant business in which the Company is engaged or is preparing
to engage in at the time of termination;
(b) during employment and for the period during which the
Executive is receiving Severance Benefits under Section 3.01, 3.02, or
3.03 he will not solicit, in competition with the Company, directly or
indirectly, any person who is a client, customer or prospect (as such
terms are defined below) (including, without limitation, purchasers of the
Company's products) for the purpose of performing services and/or
providing goods and services of the kind performed and/or provided by the
Company in the business of producing and distributing potash, phosphate,
animal feed ingredients or salt or any other significant business in which
the Company is engaged or is preparing to engage in at the time of
termination;
(c) during employment and for the period during which the
Executive is receiving Severance Benefits under Section 3.01, 3.02, or
3.03 he will not induce or persuade or attempt to induce or persuade any
employee or agent of the Company to terminate his or her employment,
agency, or other relationship with the Company in order to enter into any
employment agency or other relationship in competition with the Company;
(d) the covenants contained in this Article IV(a) shall
apply within any jurisdiction of North America, it being understood that
the geographic scope of the business and strategic plans of the Company
extend throughout North America and are not limited to any particular
region thereof and that such business may be engaged in effectively from
any location in such area; and
(e) as used herein, the terms "client," "customer" and
"prospect" shall be defined as any client, customer or prospect of any
business in which the Company is or has been substantially engaged within
the one year period prior to the Executive's termination of employment (a)
to which or to whom the Executive submitted or assisted in the submission
of a presentation or proposal of any kind on behalf of the Company; (b)
with which or with whom the Executive had substantial contact relating to
the business of the Company; or (c) about which or about whom the
Executive acquired substantial confidential or other information as a
result of or in connection with the Executive's employment, at any time
during the one year period preceding the Executive's termination of
employment for any reason.
Notwithstanding the foregoing, if the Company consents in writing, it
shall not be a violation of this Article IV(a) for the Executive to engage
in conduct otherwise prohibited by this Section.
Section 4.02. Confidential/Proprietary Information. The
Executive agrees that he will not at any time during employment or
thereafter for the longest time permitted by applicable law, use,
disclose, or take any action which may result in the use or disclosure of
any trade secrets or other proprietary or confidential information of the
Company, except to the extent that the Company may specifically authorize
in writing. This obligation shall not apply when and to the extent that
any trade secret, proprietary or confidential information of the Company
becomes publicly available other than due to the Executive's act or
omission. In connection with this Article IV, the Executive has executed
and shall abide by the terms of the separate agreement attached hereto as
Exhibit A.
Section 4.03. Return of Company Property. The Executive
agrees that upon termination of his employment he will immediately
surrender and return to the Company all records and other documents
obtained by him, entrusted to him, or otherwise in his possession or
control during the course of his employment by the Company, together with
all copies thereof; provided, however, that subject to Company review and
authorization, the Executive may retain copies of such documents as
necessary for the Executive's personal records for federal income tax
purposes.
Section 4.04. Remedies.
(a) The Executive acknowledges that his breach of this
Article IV will result in immediate and irreparable harm to the Company's
business interests, for which damages cannot be calculated easily and for
which damages are an inadequate full remedy. Accordingly, and without
limiting the right of the Company to pursue all other legal or equitable
remedies available for the violation by the Executive of the covenants
contained in this Article IV, it is expressly agreed that remedies other
than injunctive relief cannot fully compensate the Company for the
irreparable injury that the Company could suffer due to any such
violation, threatened violation or continuing violation and that the
Company shall be entitled to injunctive relief, without the necessity of
proving actual monetary loss, to prevent any such violation, threatened
violation or continuing violation thereof.
(b) The Executive acknowledges that the provisions contained
in this Article IV are reasonable and necessary because of the substantial
harm that would be caused to the Company by the Executive engaging in any
of the activities prohibited or restricted herein. Nevertheless, it is
the intent and understanding of each party hereto that if, in any action
before any court, agency or other tribunal legally empowered to enforce
the covenants contained in this Article IV, any term, restriction,
covenant or promise contained therein is found to be unenforceable due to
unreasonableness or due to any other reason, then such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to
make it enforceable by such court or agency.
ARTICLE V
Change in Control
Section 5.01. Effective Date. For purposes of this
Article V, the term "Effective Date" shall mean the date on which a Change
in Control of the Company (as defined in Section 5.10) occurs. If there
is a Change in Control this Article shall become effective and this
Article shall govern the terms and conditions of the Executive's
employment after the Change in Control and the termination thereof on or
after the date which is ninety (90) days before the Effective Date and not
the provisions of Articles I, II, III and IV of this Agreement.
Section 5.02. Right to Change in Control Severance
Benefits. The Executive shall be entitled to receive from the Company
Change in Control Severance Benefits as described in Section 5.07 herein,
if during the term of this Agreement there has been a Change in Control of
the Company and there is a Termination (as defined in Section 5.06) prior
to the expiration of the Employment Term (as defined in Section 5.03).
Section 5.03. Employment Term. For purposes of this
Article V, the term "Employment Term" shall mean the period commencing on
the Effective Date of this Article V and ending on the earlier to occur of
(a) the last day of the month in which occurs the third anniversary of the
Effective Date of this Article V or (b) the last day of the month in which
the Executive attains mandatory retirement age pursuant to the terms of a
mandatory retirement plan of the Company as such were in effect and
applicable to the Executive immediately prior to the Effective Date of
this Article V.
Section 5.04. Employment. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company, until the expiration of the
Employment Term. During the Employment Term, the Executive shall exercise
such position and authority and perform such responsibilities as are
commensurate with the position and authority being exercised and duties
being performed by the Executive immediately prior to the Effective Date
of this Article V, which services shall be performed at the location where
the Executive was employed immediately prior to the Effective Date of this
Article V or at such other location as the Company may reasonably require;
provided, that the Executive shall not be required to accept another
location that he deems unreasonable in the light of his personal
circumstances.
Section 5.05. Compensation and Benefits. During the
Employment Term, the Executive shall receive the following compensation
and benefits:
(a) He shall receive an annual base salary which is not less
than his Base Salary immediately prior to the Effective Date of this
Article V, with the opportunity for increases, from time to time
thereafter, which are in accordance with the Company's regular executive
compensation practices.
(b) He shall be eligible to participate on a reasonable
basis, and to continue his existing participation, in annual incentive,
stock option, restricted stock, long-term incentive performance and any
other compensation plan which provides opportunities to receive
compensation in addition to his Base Salary which is the greater of (i)
the opportunities provided by the Company for executives with comparable
duties or (ii) the opportunities under any such plans in which he was
participating immediately prior to the Effective Date of this Article V.
(c) He shall be entitled to receive and participate in
salaried employee benefits (including, but not limited to, medical, life
and accident insurance, investment, stock ownership and disability
benefits) and perquisites which are the greater of (i) the employee
benefits and perquisites provided by the Company to executives with
comparable duties or (ii) the employee benefits and perquisites to which
he was entitled or in which he participated immediately prior to the
Effective Date of this Article V.
(d) He shall be entitled to continue to accrue credited
service for retirement benefits and to be entitled to receive retirement
benefits under and pursuant to the terms of the Company's qualified
retirement plan for salaried employees, the Company's supplemental
executive retirement plan, and any successor or other retirement plan or
agreement in effect on the Effective Date of this Article V in respect of
his retirement, whether or not a qualified plan or agreement, so that his
aggregate monthly retirement benefit from all such plans and agreements
(regardless when he begins to receive such benefit) will be not less than
it would be had all such plans and agreements in effect immediately prior
to the Effective Date of this Article V continued to be in effect without
change until and after he begins to receive such benefit.
Section 5.06. Termination. The term "Termination" shall
mean termination, on or after the date which is ninety (90) days before
the Effective date and prior to the expiration of the Employment Term, of
the employment of the Executive with the Company for any reason other than
death, disability (as described below), cause (as described below), or
voluntary resignation (as described below).
(a) The term "disability" means physical or mental
incapacity qualifying the Executive for long-term disability under the
Company's long-term disability plan.
(b) The term "cause" means (i) the willful and continued
failure of the Executive substantially to perform his duties with the
Company (other than any failure due to physical or mental incapacity)
after a demand for substantial performance is delivered to him by the
Board of Directors which specifically identifies the manner in which the
Board believes he has not substantially performed his duties or (ii)
willful misconduct materially and demonstrably injurious to the Company.
No act or failure to act by the Executive shall be considered "willful"
unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of
the Company. The unwillingness of the Executive to accept any or all of a
change in the nature or scope of his position, authorities or duties, a
reduction in his total compensation or benefits, a relocation that he
deems unreasonable in light of his personal circumstances, or other action
by or request of the Company in respect of his position, authority or
responsibility that he reasonably deems to be contrary to this Agreement,
may not be considered by the Board of Directors to be a failure to perform
or misconduct by the Executive. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for cause for
purposes of this Article V unless and until there shall have been
delivered to him a copy of a resolution, duly adopted by a vote of three-
quarters of the entire Board of Directors of the Company at a meeting of
the Board called and held (after reasonable notice to the Executive and an
opportunity for the Executive and his counsel to be heard before the
Board) for the purpose of considering whether the Executive has been
guilty of such a willful failure to perform or such willful misconduct as
justifies termination for cause hereunder, finding that in the good faith
opinion of the Board the Executive has been guilty thereof and specifying
the particulars thereof.
(c) The resignation of the Executive shall be deemed
"voluntary" if it is for any reason other than one or more of the
following:
(i) The Executive's resignation or retirement (other than
mandatory retirement, as aforesaid) is requested by the Company
other than for cause;
(ii) Any significant change in the nature or scope of the
Executive's position, authorities or duties from those described in
Sections 1.02 and 1.03 of this Agreement;
(iii) Any reduction in his total compensation or benefits from
that provided in Section 5.04;
(iv) The breach by the Company of any other provision of this
Article V; or
(v) The reasonable determination by the Executive that, as a
result of a Change in Control of the Company and a change in
circumstances in his position, he is unable to exercise the
authorities and responsibility attached to his position and
contemplated by Sections 1.02 and 1.03 of this Agreement.
(d) Termination that entitles the Executive to the payments
and benefits provided in Section 5.07 shall not be deemed or treated by
the Company as the termination of the Executive's employment or the
forfeiture of his participation, award or eligibility for the purpose of
any plan, practice or agreement of the Company referred to in Section
5.05.
Section 5.07. Change in Control Severance Payments. In
the event of and within thirty (30) days following Termination, the
Company shall pay to the Executive the following benefits (collectively,
"Change in Control Severance Payments"):
(a) His Base Salary and all other benefits due him as if he
had remained an employee pursuant to this Article V through the remainder
of the month in which Termination occurs, less applicable withholding
taxes and other authorized payroll deductions;
(b) The amount equal to the target award for the Executive
under the Company's annual bonus plan for the fiscal year in which
Termination occurs, reduced pro rata for that portion of the fiscal year
not completed as of the end of the month in which Termination occurs;
provided, that if the Executive has deferred his award for such year under
the plan, the payment due the Executive under this Paragraph (b) shall be
paid in accordance with the terms of the deferral;
(c) The amount equal to the target award for the Executive
under the Company's long-term incentive plan for the fiscal year in which
Termination occurs, reduced pro rata for that portion of the fiscal year
not completed as of the end of the month in which Termination occurs;
(d) A lump sum severance allowance in an amount which is
equal to the sum of the amounts determined in accordance with the
following subparagraphs (i), (ii) and (iii):
(i) an amount equivalent to three times the Executive's Base
Salary at the rate in effect immediately prior to Termination;
(ii) an amount equal to three times the highest annual bonus
earned under the Company's Management Incentive Compensation
Program, or successor annual bonus plan in effect from time to time,
during the three consecutive complete bonus years immediately
preceding the date on which the Executive's termination of
employment occurs; provided, however, that in the event the
Executive's employment is terminated prior to December 31, 2001, any
prorated annual bonus received by the Executive shall be annualized
and the bonus years in which the Executive's employment commences or
terminates shall be deemed to be "complete bonus years" for purposes
of determining the highest annual bonus earned by the Executive
during the three consecutive complete bonus years immediately
preceding the date on which the Executive's termination of
employment occurs; and
(iii) an amount equal to three times the highest annual award
earned under the Company's 1996 Long-Term Incentive Plan, or
successor long-term incentive plan in effect from time to time,
during the three consecutive complete LTIP years immediately
preceding the date on which the Executive's termination of
employment occurs; provided, however, that in the event the
Executive's employment is terminated prior to December 31, 2001, any
prorated long-term incentive plan award received by the Executive
shall be annualized and the LTIP years in which the Executive's
employment commences or terminates shall be deemed to be "complete
bonus years" for purposes of determining the highest annual long-
term incentive award earned by the Executive during the three
consecutive complete LTIP years immediately preceding the date on
which the Executive's termination of employment occurs; and
(e) The Executive's account balance under the Company's 1998
Supplemental Executive Retirement Plan or successor supplemental
retirement plan in effect shall become fully vested upon the Executive's
Termination.
Section 5.08. Outstanding Stock Options. The Executive's
outstanding stock options shall become immediately exercisable upon the
occurrence of a Change in Control of the Company and shall remain
exercisable for the two year period following such Change in Control.
Section 5.09. Non-Competition and Confidentiality. The
Executive agrees that:
(a) There shall be no obligation on the part of the Company
to provide any further Change in Control Severance Benefits (other than
payments or benefits already earned or accrued) described in Section 5.07
if, when and so long as the Executive shall be employed by or otherwise
engage in any business which is competitive with any business of the
Company or of any of its subsidiaries, as such business existed as of the
Effective Date of this Article V, in which the Executive was engaged
during his employment, and if such employment or activity is likely to
cause serious damage to the Company or any of its subsidiaries; and
(b) during and after the Employment Term, he will not
divulge or appropriate to his own use or the use of others any secret or
confidential information pertaining to the businesses of the Company or
any of its subsidiaries obtained during his employment by the Company, it
being understood that this obligation shall not apply when and to the
extent any of such information becomes publicly known or available other
than because of his act or omission.
Section 5.10. Definition of "Change in Control". "Change
in Control" of the Company means, and shall be deemed to have occurred
upon, the first to occur of any of the following events:
(a) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 15% or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding Common
Stock") or (ii) the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Voting Securities"); excluding, however, the
following: (A) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or
exchange privilege unless the security being so exercised, converted or
exchanged was acquired directly from the Company), (B) any acquisition by
the Company, (c) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii)
of subsection (c) of this Section 5.10;
(b) individuals who, as of the effective date of this
Article V, constitute the Board of Directors (the "Incumbent Board") cease
for any reason to constitute at least a majority of such Board; provided,
that any individual who becomes a director of the Company subsequent to
the effective date of this Article V, whose election, or nomination for
election by the Company's stockholders, was approved by the vote of at
least a majority of the directors then comprising the Incumbent Board
shall be deemed a member of the Incumbent Board; and provided further,
that any individual who was initially elected as a director of the Company
as a result of an actual or threatened election contest, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act,
or any other actual or threatened solicitation of proxies or consents by
or on behalf of any Person other than the Board shall not be deemed a
member of the Incumbent Board;
(c) approval by the stockholders of the Company of a
reorganization, merger or consolidation of the Company or sale or other
disposition of all or substantially all of the assets of the Company (a
"Corporate Transaction"); excluding, however, a Corporate Transaction
pursuant to which (i) all or substantially all of the individuals or
entities who are the beneficial owners, respectively, of the Outstanding
Common Stock and the Outstanding Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock,
and the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all of
the Company's assets either directly or indirectly) in substantially the
same proportions relative to each other as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Common Stock and
the Outstanding Voting Securities, as the case may be, (ii) no Person
(other than: the Company; any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by
the Company; the corporation resulting from such Corporate Transaction;
and any Person which beneficially owned, immediately prior to such
Corporate Transaction, directly or indirectly, 25% or more of the
Outstanding Common Stock or the Outstanding Voting Securities, as the case
may be) will beneficially own, directly or indirectly, 25% or more of,
respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of
the outstanding securities of such corporation entitled to vote generally
in the election of directors and (iii) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction; or
(d) the consummation of a plan of complete liquidation or
dissolution of the Company.
Section 5.11. Excise Tax Payments. If any of the payments
to be made under Articles III or V of this Agreement (which payments shall
constitute the "Employment Agreement Payments") are subject to the tax
(the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") (or any similar tax that may hereafter be
imposed), the Company shall pay to the Executive at the time specified in
Paragraph (c) below an additional amount (the "Gross-up Payment") such
that the net amount retained by the Executive, after deduction of any
Excise Tax on the Total Payments (as hereinafter defined) and any federal,
state and local income tax and Excise Tax upon the Gross-up Payment
provided for by this paragraph, but before deduction for any federal,
state or local income tax on the Employment Agreement Payments, shall be
equal to the Total Payments.
(a) For purposes of determining whether any of the
Employment Agreement Payments are subject to the Excise Tax and the amount
of such Excise Tax, (i) any other payments or benefits received or to be
received by the Executive in connection with a Change in Control (as that
term is defined in Section 5.10) of the Company or the Executive's
termination of employment pursuant to the terms of any other plan,
arrangement or agreement with the Company, any person whose actions result
in a Change of Control of the Company or any person affiliated with the
Company or such person (which, together with the Employment Agreement
Payments, shall constitute the "Total Payments") shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code,
and all "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of
the base amount within the meaning of Section 280G(b)(3) of the Code or
are otherwise not subject to the Excise Tax, (ii) the amount of the Total
Payments which shall be treated as subject to the Excise Tax shall be
equal to the lesser of (A) the total amount of the Total Payments or (B)
the amount of excess parachute payments within the meaning of Section
280G(b)(1) of the Code (after applying clause (i) above), and (iii) the
value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
(b) For purposes of determining the amount of the Gross-up
Payment, the Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation for the calendar year in
which the Gross-up Payment is to be made and the applicable state and
local income taxes at the highest marginal rate of taxation for the
calendar year in which the Gross-up Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, the Executive shall
repay to the Company at the time that the amount of such reduction in
Excise Tax is finally determined the portion of the Gross-up Payment
attributable to such reduction (plus the portion of the Gross-up Payment
attributable to the Excise Tax and federal and state and local income tax
imposed on the portion of the Gross-up Payment being repaid by the
Executive if such repayment results in a reduction in Excise Tax and/or a
federal and state and local income tax deduction), plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time the Gross-up Payment is
made (including by reason of any payment, the existence or amount of which
cannot be determined at the time of the Gross-up Payment), the Company
shall make an additional Gross-up Payment in respect of such excess (plus
any interest payable with respect of such excess) at the time that the
amount of such excess is finally determined.
(c) The Gross-up Payment or portion thereof provided for in
Paragraphs (a) and (b) above shall be paid not later than the thirtieth
day following the later of payment of any amounts which are subject to the
Excise Tax or the date on which the Change in Control of the Company
occurs; provided, however, that if the amount of such Gross-up Payment or
portion thereof cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as determined
in good faith by the Company, of the minimum amount of such payments and
shall pay the remainder of such payments (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined, but in no event later than the forty-fifth day
after the later of payment of any amounts which are subject to the Excise
Tax or the date on which the Change in Control of the Company occurs.
(d) In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Company to the Executive, payable on the
fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(e) All Gross-up Payments will be paid to the Executive from
the Trust established under the Trust Agreement between IMC Global Inc.
and Wachovia Bank Trust Company, N.A., which has been established to
protect payment obligations of the Company under this Agreement. Any
repayment due the Company from the Executive as a result of the
circumstances described in the last sentence of the preceding paragraph
shall be made by the Executive after the Executive has received such
excess amounts from the Trust.
ARTICLE VI
Miscellaneous
Section 6.01. Dispute Resolution. The Executive and the
Company shall not initiate legal proceedings relating in any way to this
Agreement or to the Executive's employment or termination from employment
with the Company until thirty (30) days after the party against whom the
claim is made ("respondent") receives written notice from the claiming
party of the specific nature of any purported claims and the amount of any
purported damages attributable to each such claim. The Executive and the
Company further agree that if respondent submits the claiming party's
claim to the CPR Institute for Dispute Resolution or JAMS/Endispute for
nonbinding mediation prior to the expiration of such thirty (30) day
period, the claiming party may not institute arbitration or other legal
proceedings against respondent until the earlier of: (a) the completion of
good-faith mediation efforts or (b) ninety (90) days after the date on
which the respondent received written notice of the claimant's claim(s);
provided, however, that nothing in this Section shall prohibit the Company
from pursuing injunctive or other equitable relief against the Executive
prior to, contemporaneous with, or subsequent to invoking or participating
in these dispute resolution processes. The Company shall pay the cost of
the mediator. In any subsequent litigation, including but not limited to
arbitration proceedings, the prevailing party shall be awarded, in
addition to any other relief awarded, his or its reasonable attorneys'
fees.
Section 6.02. Notices. All notices, requests or other
communications provided for in this Agreement shall be made, if to the
Company, to the Senior Vice President, Human Resources, and if to the
Executive, to Douglas A. Pertz. All notices, requests or other
communications provided for in this Agreement shall be made in writing
either (a) by personal delivery to the party entitled thereto, (b) by
facsimile with confirmation of receipt, (c) by mailing in the United
States mails or (d) by express courier service. The notice, request, or
other communication shall be deemed to be received upon personal delivery,
upon confirmation of receipt of facsimile transmission, or upon receipt by
the party entitled thereto if by United States mail or express courier
service; provided, however, that if a notice, request, or other
communication is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.
Section 6.03. Authority; No Conflict. The Executive
represents and warrants to the Company that he has full right and
authority to execute and deliver this Agreement and to comply with the
terms and provisions hereof and that the execution and delivery of this
Agreement and compliance with the terms and provisions hereof by the
Executive will not conflict with or result in a breach of the terms,
conditions or provisions of any agreement, restriction or obligation by
which the Executive is bound.
Section 6.04. Assignment and Succession. This Agreement
shall be binding upon and shall operate for the benefit of the parties
hereto and their respective legal representatives, legatees, distributees,
heirs, successors and assigns. The rights and obligations of the Company
under this Agreement may be assigned to and shall inure to the benefit of
and be binding upon its successors and assigns. The Executive
acknowledges that the services he renders pursuant to this Agreement are
unique and personal. Accordingly, the Executive may not delegate or
assign any of his duties hereunder.
Section 6.05. Headings. The Article, Section, paragraph and
subparagraph headings are for convenience of reference only and shall not
define or limit the provisions hereof.
Section 6.06. Applicable Law. This Agreement shall at all
times be governed by and construed, interpreted and enforced in accordance
with the internal laws (as opposed to conflict of laws provisions) of the
State of Illinois.
Section 6.07. Entire Agreement, Amendment, Waiver. This
Agreement constitutes the entire agreement between the Company and the
Executive with respect to the subject matter hereof. This Agreement
supersedes any prior agreement made between the parties, including, but
not limited to, the Executive's offer letter dated August 28, 1998. The
parties may not amend this Agreement except by written instrument signed
by both parties. No waiver by either party at any time of any breach by
the other of any provision of this Agreement shall be deemed a waiver of
similar or dissimilar provision at the same time or any prior or
subsequent time.
Section 6.08. Severability. The provisions of this Agreement
shall be regarded as durable, and if any provision or portion thereof is
declared invalid or unenforceable by a court of competent jurisdiction,
the validity and enforceability of the remainder and applicability thereof
shall not be affected.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be signed by its duly authorized officer and the Executive has signed this
Agreement as of the day and year first above written.
IMC GLOBAL INC.
By:
/s/ Douglas A. Pertz
--------------------------------- -------------------------------
Douglas A. Pertz
Title:
---------------------------------
EXHIBIT 11.1
EARNINGS PER SHARE
DILUTED COMPUTATION
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
Basis for computation of
diluted earnings per share:
Earnings before
extraordinary item $ 37.8 $ 26.7 $ 172.8 $ 154.1
Extraordinary charge -
debt retirement 0.9 - 3.6 3.3
----------- ---------- ----------- ----------
Net earnings applicable
to common stock $ 36.9 $ 26.7 $ 169.2 $ 150.8
=========== ========== =========== ==========
Number of shares:
Weighted average shares
outstanding 114,283,410 92,852,684 114,189,503 93,986,819
Common stock equivalents 344,318 911,974 708,075 934,238
----------- ---------- ----------- ----------
Total common and common
equivalent shares
assuming dilution 114,627,728 93,764,658 114,897,578 94,921,057
=========== ========== =========== ==========
Diluted earnings per share:
Earnings before
extraordinary item $ 0.33 $ 0.28 $ 1.50 $ 1.62
Extraordinary charge -
debt retirement (0.01) - (0.03) (0.03)
----------- ---------- ----------- ----------
Net earnings $ 0.32 $ 0.28 $ 1.47 $ 1.59
=========== ========== =========== ==========
This calculation is submitted in accordance with Regulation S-K item 601(b)
(11).
<TABLE> <S> <C>
<PAGE>
<S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 33,800
<SECURITIES> 37,800
<RECEIVABLES> 450,800
<ALLOWANCES> 11,800
<INVENTORY> 714,700
<CURRENT-ASSETS> 1,331,300
<PP&E> 6,379,300
<DEPRECIATION> 2,517,400
<TOTAL-ASSETS> 6,739,200
<CURRENT-LIABILITIES> 1,558,200
<BONDS> 1,965,200
<COMMON> 125,000
0
0
<OTHER-SE> 1,924,100
<TOTAL-LIABILITY-AND-EQUITY> 6,739,200
<SALES> 2,655,400
<TOTAL-REVENUES> 2,655,400
<CGS> 1,996,700
<TOTAL-COSTS> 2,229,000
<OTHER-EXPENSES> 22,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137,600
<INCOME-PRETAX> 266,600
<INCOME-TAX> 93,800
<INCOME-CONTINUING> 172,800
<DISCONTINUED> 0
<EXTRAORDINARY> 3,600
<CHANGES> 0
<NET-INCOME> 169,200
<EPS-PRIMARY><F1> 1.48
<EPS-DILUTED><F1> 1.47
<FN>
<F1>
Earnings per share has been calculated in accordance with Statement of Financial
Accounting Standard No. 128, "Earnings Per Share," and is, therefore, stated on
a basic and diluted basis.
</FN>
</TABLE>
