<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 31, 1998
Amendment No. 1
IMC GLOBAL INC.
(Exact name of Registrant as specified in its charter)
Commission File Number: 1-9759
Delaware 36-3492467
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 Sanders Road 60062
Northbrook, Illinois (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (847) 272-9200
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<PAGE>
Item 5. The attached financial information has been restated to
reflect the IMC AgriBusiness segment as a discontinued
operation. See Note 24, "Discontinued Operations," of Notes
to Consolidated Financial Statements for more detail.
Management's Discussion and Analysis of Results of Operations
and Financial Condition.(1)
INTRODUCTION
Through the restructuring of the operations, and several
mergers and strategic acquisitions, IMC Global (Company) has
demonstrated its commitment to maintaining its position as
one of the world's leading producers of crop nutrients for
the international agricultural community as well as one of
the foremost domestic distributors of crop nutrients and
related products. Sales for 1997 decreased one percent over
the prior year, and generated $464.5 million of EBITDA
[earnings from continuing operations before minority
interest, interest charges, taxes, depreciation and
amortization, and after Phosphate Resource Partners Limited
Partnership (PLP) distributions], an 18 percent increase over
1996. These cash earnings will allow the Company to make the
investments necessary to continue to strengthen its prominent
position in the highly competitive crop nutrient market
place. All per share amounts are stated on a diluted basis
in accordance with SFAS No. 128, "Earnings Per Share." See
Note 1, "Summary of Significant Accounting Policies," of
Notes to Consolidated Financial Statements for more detail.
RESULTS OF OPERATIONS
Overview
- --------
<TABLE>
Net Sales
- ---------
(in millions)
<CAPTION>
1997 1996 1995
-------- -------- --------
<C> <C> <C>
$2,116.0 $2,143.3 $2,132.7
</TABLE
<PAGE>
</TABLE>
<TABLE>
Gross Margins
- -------------
(in millions)
<CAPTION>
1997 1996 1995
-------- -------- --------
<C> <C> <C>
$574.9 $617.1* $632.9
*Before special one-time charges.
</TABLE>
<TABLE>
Earnings from Continuing Operations
- -----------------------------------
(in millions)
<CAPTION>
1997 1996 1995
-------- -------- --------
<C> <C> <C>
$182.0* $181.6* $195.2
*Before special one-time charges.
</TABLE>
1997 Compared to 1996
Net sales of $2,116.0 million decreased one percent from
$2,143.3 million one year ago. Gross margins for 1997 were
$574.9 million, a decrease of seven percent from comparable
1996 margins of $617.1 million, excluding 1996 special
one-time charges of $20.8 million related to The Vigoro
Corporation (Vigoro Merger), which are more fully discussed
below.
Earnings from continuing operations, excluding the Main Pass
299 (Main Pass) write-down of $112.2 million or $1.19 per
share, were $182.0 million, or $1.92 per share. Net
earnings, which include (i) the Main Pass write-down
discussed above, (ii) earnings from discontinued operations
of $18.0 million, or $0.19 per share, and (iii) an
extraordinary charge of $24.9 million, or $0.26 per share,
related to the early extinguishment of high-cost debt, were
$62.9 million or $0.67 per share. In 1996, earnings from
continuing operations, excluding special one-time charges
related to the Vigoro Merger, as well as costs associated
with, among other things, a corporate restructuring, other
asset valuations and environmental issues of $59.9 million,
or $0.62 per share, were $181.6 million, or $1.87 per share.
See Note 3, "Vigoro Merger and Restructuring Charges," of
Notes to Consolidated Financial Statements for further
detail.
<PAGE>
Net earnings, which include (i) the special one-time charges
referred to above, (ii) earnings from discontinued operations
of $13.5 million, or $0.14 per share, and (iii) an
extraordinary charge of $8.1 million or $0.08 per share, were
$127.1 million, or $1.31 per share.
Sales and earnings for 1997 were driven by record-level sales
by IMC Kalium offset by a decline in sales at IMC-Agrico Crop
Nutrients (Crop Nutrients). IMC Kalium's net sales increased
33 percent while Crop Nutrients' net sales decreased 11
percent.
1996 Compared to 1995
Net sales of $2,143.3 million were essentially unchanged from
$2,132.7 million reported in 1995. Gross margins for 1996
were $617.1 million, excluding special one-time charges of
$20.8 million, related to the Vigoro Merger, which are more
fully discussed below, a decrease of two percent from
comparable 1995 margins of $632.9 million.
Earnings from continuing operations, excluding the special
one-time charges discussed above, were $181.6 million, or
$1.87 per share. Net earnings, which include (i) the special
one-time charges, (ii) earnings from discontinued operations
discussed above and (iii) the extraordinary charge discussed
above, were $127.1 million or $1.31 per share. In 1995,
earnings from continuing operations were $195.2 million, or
$2.09 per share. Net earnings, which include (i) earnings
from discontinued operations of $23.8 million, or $0.25 per
share, and (ii) an extraordinary charge of $3.5 million, or
$0.04 per share, related to the early extinguishment of high-
cost debt, were $215.5 million, or $2.30 per share.
Declines in sales of Crop Nutrients and IMC Kalium were
offset by the inclusion of a full year of results related to
Feed Ingredients which was acquired in October 1995. See
Note 4, "Other Business Acquisitions," of Notes to
Consolidated Financial Statements for further detail.
IMC-Agrico Crop Nutrients
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<TABLE>
<CAPTION>
(In millions)
Years ended December 31, % Increase (Decrease)
---------------------------------------------------
1997 1996 1995 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $1,484.8 $1,661.3 $1,711.6 (11%) (3%)
Gross margins $ 298.7 $ 411.4(c) $ 395.5 (27%) 4%
As a percentage
of net sales 20% 25% 23%
<PAGE>
Sales volumes
(000 tons)(a) 7,105 7,382 7,805 (4%) (5%)
Average DAP price
per short ton(b) $ 176 $ 186 $ 175 (5%) 6%
(a) Sales volumes include tons sold captively and represent
dry product tons, primarily DAP.
(b) FOB plant/mine.
(c) Before special one-time merger and restructuring charges
of $6.9 million.
</TABLE>
1997 Compared to 1996
Crop Nutrients' net sales of $1,484.8 million decreased 11
percent from $1,661.3 million in 1996. Sales volumes of
concentrated phosphates declined, in the aggregate, one
percent, or $45.0 million. The majority of the decline came
from reduced domestic shipments of diammonium phosphate (DAP)
and granular triple superphosphate (GTSP) which declined 17
and 11 percent, respectively, offset by increased granular
monoammonium phosphate (GMAP) volumes of 18 percent. The
decline in DAP and GTSP volumes was primarily due to overall
weakened demand and a focus on higher-margin GMAP
opportunities. International sales volumes were relatively
flat compared to the prior year as decreased shipments of DAP
and GTSP were offset by increased shipments of GMAP. In
addition, average sales realizations of concentrated
phosphates, particularly DAP, decreased five percent which
unfavorably impacted net sales by $49.2 million. Net sales
were also unfavorably impacted $56.7 million due to lower
phosphate rock sales volumes as a result of Crop Nutrients'
strategic decision to phase out third-party sales of
phosphate rock. This action is being taken to maximize
relative values of rock and concentrated phosphates by
utilizing high-quality reserves for internal upgrading.
Gross margins declined $112.7 million to $298.7 million from
$411.4 million, excluding special one-time charges of $6.9
million, one year ago primarily due to the lower volumes and
prices discussed above. In addition, gross margins reflect
the benefit of a change to market-based acid pricing to Feed
Ingredients.
1996 Compared to 1995
Crop Nutrients' net sales for 1996 of $1,661.3 million
decreased three percent as compared to $1,711.6 million for
1995. Lower phosphate rock volumes in 1996, primarily due to
the Company's strategic decision to phase out export sales
and the termination of a domestic sales contract, unfavorably
impacted net sales by $54.5 million compared to 1995. Higher
average concentrated phosphate prices in 1996, compared to
1995, partially offset the lower phosphate rock volumes.
Concentrated phosphate net sales increased, mainly as a
result of strong sales to India, Australia, Japan, Brazil,
<PAGE>
Chile and Ecuador. In addition, in December 1996, Crop
Nutrients, through PhosChem, successfully negotiated a
first-ever, two-year concentrated phosphate sales contract
with China for calendar years 1997 and 1998.
Gross margins increased $15.9 million, or four percent, to
$411.4 million for 1996, before special one-time charges of
$6.9 million, as compared to $395.5 million in 1995. This
increase was primarily due to higher sales realizations for
concentrated phosphates discussed above. The higher margins
on concentrated phosphate net sales in 1996, as compared to
1995, more than offset the margins lost to lower phosphate
rock sales. The favorable impact of price improvements,
however, was partially offset by higher phosphate rock
production costs, due in large part to higher electricity,
maintenance and fuel costs.
IMC Kalium
- ----------
<TABLE>
<CAPTION>
(In millions)
Years ended December 31, % Increase (Decrease)
--------------------------------------------------
1997 1996 1995 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 617.4 $ 464.8 $ 489.3 33% (5%)
Gross margins $ 237.7 $ 159.8(c) $ 204.2 49% (22%)
As a percentage
of net sales 39% 34% 42%
Sales volumes
(000 tons)(a) 8,941 7,290 7,712 23% (5%)
Average DAP price
per short ton(b) $ 70 $ 64 $ 64 9% -
(a) Sales volumes include tons sold captively.
(b) FOB plant/mine.
(c) Before special one-time merger and restructuring charges
of $7.9 million.
</TABLE>
1997 Compared to 1996
IMC Kalium's net sales increased 33 percent to $617.4 million
in 1997 from $464.8 million in 1996 as a result of increased
volumes and prices. Domestic volumes increased 22 percent or
$67.4 million primarily due to additional corn acreage
planted in 1997, favorable weather conditions and anticipated
corn price increases. Internationally, increased volumes
favorably impacted net sales $38.2 million primarily as a
result of increased demand from China. Average sales
realizations increased nine percent or $41.6 million as a
result of price increases effective in March, September and
November 1997. In addition, the inclusion of salt sales in
1997 contributed $5.4 million.
<PAGE>
Gross margins of $237.7 million increased 49 percent over the
prior year of $159.8 million, excluding 1996 special one-time
charges of $7.9 million, primarily as a result of the volume
and price increases discussed above.
1996 Compared to 1995
IMC Kalium's net sales of $464.8 million in 1996 decreased
five percent from $489.3 million in 1995. The decline in net
sales was primarily due to lower potash sales volumes. A
decline in domestic sales volumes unfavorably impacted net
sales $11.2 million as a result of unusually wet spring
weather in the midwestern United States. This, in turn, led
to price reductions as producers attempted to lower inventory
levels, further reducing net sales $8.2 million. Export
volumes also declined due to reduced sales to China, the
largest potash export customer, negatively impacting net
sales by $16.6 million. These decreases were partially
offset by the impact of higher potash export sales prices,
which improved net sales by $11.5 million.
Gross margins, before special one-time charges of $7.9
million, decreased $44.4 million, or 22 percent, to $159.8
million for 1996 as compared to $204.2 million in 1995. This
decrease was primarily the result of the lower sales volumes
and lower domestic sales prices, offset by higher export
prices, discussed above.
Other
- -----
1997 Compared to 1996
The remaining sales were comprised of the Feed Ingredients
and IMC Vigoro businesses and remained relatively unchanged.
The remaining decrease in gross margins was primarily due to
increased costs at Feed Ingredients as a result of a change
in the price of acid purchased from Crop Nutrients coupled
with inventory write-offs at IMC Vigoro.
1996 Compared to 1995
The remaining increase in net sales was primarily the result
of the inclusion in calendar 1996 of a full year of results
related to the Feed Ingredients acquisition in October 1995.
The remaining gross margins were comprised of the Feed
Ingredients and IMC Vigoro businesses and remained relatively
unchanged.
<PAGE>
Selling, General and Administrative Expenses
- --------------------------------------------
<TABLE>
<CAPTION>
(In millions)
Years ended December 31, % Increase (Decrease)
-------------------------------------------------
1997 1996 1995 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selling, general and
administrative
expenses $ 131.8 $ 132.4(a) $ 118.3 - 12%
(a) Before special one-time merger and restructuring charges
of $0.2 million.
</TABLE>
1997 Compared to 1996
Selling, general and administrative expenses for 1997
remained consistent with 1996.
1996 Compared to 1995
Selling, general and administrative expenses increased in
1996 primarily due to higher expenses associated with the
inclusion of a full year of operations of Feed Ingredients,
which was acquired in October 1995.
Merger and Restructuring Charges
- --------------------------------
See Note 3, "Vigoro Merger and Restructuring Charges," of
Notes to Consolidated Financial Statements for further
detail.
Other (Income) and Expense, Net
- --------------------------------
<TABLE>
<CAPTION>
(In millions)
Years ended December 31, % Increase (Decrease)
-------------------------------------------------
1997 1996 1995 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Other (income) and
expense, net $ (5.4) $ (5.9) $ (14.7) (8%) (60%)
</TABLE>
<PAGE>
Without giving effect to the 1996 non-recurring items
discussed below, other income and expense in 1997 decreased
as compared to 1996 due to a loss on the sale of a warehouse
and a slight decline in interest income as a result of
reduced short-term investments.
Results for 1996 included gains on the sale of properties of
$11.6 million offset by merger and restructuring charges of
$16.6 million. See Note 3, "Vigoro Merger and Restructuring
Charges," of Notes to Consolidated Financial Statements for
further detail. Without these non-recurring items, other
income would have been $10.9 million in 1996. The remaining
decrease as compared to 1995 was primarily due to a decrease
in interest income as a result of a reduction in short-term
investments.
Interest Expense
- ----------------
<TABLE>
<CAPTION>
Years ended December 31, % Increase (Decrease)
-------------------------------------------------
1997 1996 1995 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest expense $ 40.2 $ 43.6 $ 57.8 (8%) (25%)
</TABLE>
The decrease in interest expense over the prior two years was
a direct result of the Company refinancing high-cost debt
with lower-cost revolver financings. For additional detail,
see "Capital Resources and Liquidity - Financing" and Note
13, "Financing Arrangements," of Notes to Consolidated
Financial Statements.
Income Taxes
- ------------
The effective tax rate from continuing operations for 1997,
1996 and 1995, before special one-time charges, was 35.9,
36.9 and 36.6 percent, respectively.
Year 2000
- ---------
As the millennium approaches, the Company has begun to
address the Year 2000 issue and the effect it will have on
its information systems and overall operations. The Company
has completed an assessment of its information systems and is
in the process of developing a Year 2000 conversion plan to
address all necessary code changes, testing and
implementation. The information systems conversion project
is planned to be completed by the middle of 1999 at an
<PAGE>
estimated total cost of approximately $1.8 million. A
significant portion of these costs is not likely to be
incremental to the Company but, rather, will represent the
redeployment of existing information technology resources.
In addition, the Company is starting the process of assessing
the effect the Year 2000 will have on its operations. An
assessment will be made and conversion plan developed,
requiring all modifications implemented and operational by
year-end 1999. The cost of this project is yet undetermined
but is not expected to be material to the Company.
The Company expects these Year 2000 conversion projects to be
completed on a timely basis. However, there can be no
assurance that the systems of the companies on which the
Company's systems rely also will be converted or that any
such failure to convert by another company would not have an
adverse effect on the Company's systems. In 1998, the
Company will be initiating formal communications with all of
its significant suppliers and large customers to determine
the extent to which the Company is vulnerable to those third
parties' failures to remediate their own Year 2000 issues.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
Net Debt to Total Capitalization
- --------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<C> <C>
40.4% 32.8%
</TABLE>
<TABLE>
EBITDA
- --------------------
(in millions)
<CAPTION>
Earnings from continuing operations before minority interest
charges, taxes, depreciation and authorization, and after PLP
distributions
1997 1996
---- ----
<C> <C>
$464.5 $395.0
</TABLE>
<TABLE>
Cash Provided by Operations
- ---------------------------
(in millions)
<CAPTION>
1997 1996
---- ----
<C> <C>
$563.4 $486.7
</TABLE>
Liquidity and Operating Cash Flow
- ---------------------------------
The Company's cash flow strengthened in the current year due
to increased cash from operating activities and an increase
in net proceeds from borrowings under available credit
facilities. Cash generated from operating activities
increased $76.7 million over the prior year to $563.4
million. Excluding the effects of acquisitions in 1997, cash
generated from operating working capital increased primarily
due to decreased inventory levels, increased royalties and
higher income taxes payable. However, the Company's working
capital ratio at December 31, 1997 of 1.6:1 decreased from
2.7:1 at December 31, 1996, primarily due to the assumption
of accounts payable, accrued liabilities and short-term debt
as a result of the Freeport-McMoRan Inc. Merger (FTX Merger).
Net cash used in investing activities increased $122.9
million over the prior year, primarily due to increased
capital expenditures and acquisitions. Capital expenditures
for 1997 were $244.0 million, an increase of $35.0 million
over the prior year. See Capital Spending below.
Acquisitions, net of cash acquired, increased to $91.4
million in 1997 compared to $7.1 million in 1996. See Note
4, "Other Business Acquisitions," of Notes to Consolidated
Financial Statements for further detail.
Net cash used in financing activities decreased from $355.3
million in 1996 to $190.4 million in 1997, primarily due to
net debt proceeds of $167.7 million in 1997 compared to net
debt payments of $73.0 million in 1996 and decreased
distributions to PLP of $119.4 million. The net debt
proceeds were used to repurchase approximately 5.4 million
shares of the Company's stock for $187.5 million. Debt, net
of cash on hand, to total capitalization increased to 40.4
percent at December 31, 1997, compared to 32.8 percent one
year ago, due in part to additional revolver borrowings
coupled with the assumption of debt and issuance of equity
associated with the FTX Merger of $520.0 million and $763.9
million, respectively.
<PAGE>
In conjunction with the FTX Merger, the Company, through its
interest in PLP, participates in an aggregate $210.0 million,
multi-year oil and natural gas exploration program with
McMoRan Oil & Gas Co. (MOXY). In accordance with the
exploration program agreement, the Company, MOXY and an
individual investor (Investor) will fund 56.4 percent, 37.6
percent and 6.0 percent, respectively, of the exploration
costs. All revenue and other costs will be allocated 47.0
percent to PLP, 48.0 percent to MOXY and 5.0 percent to the
Investor.
<TABLE>
Capital Expenditures
- --------------------
(in millions)
<CAPTION>
1997 1996
---- ----
<C> <C>
$244.0 $209.0
</TABLE>
<TABLE>
Total Debt
- --------------------
(in millions)
<CAPTION>
1997 1996
---- ----
<C> <C>
$1,424.1 $ 711.9
</TABLE>
Capital Spending
- ----------------
The Company estimates that its capital expenditures for 1998
will approximate $300.0 million. The Company expects to
finance these expenditures primarily from operations.
Financing
- ---------
In December 1997, the Company entered into credit facilities
with a group of banks. Under the terms of the credit
facilities, the Company and certain of its subsidiaries may
borrow up to $350.0 million on a revolving basis (Revolving
Credit Facility) expiring in December 1998 and $650.0 million
under a long-term credit facility (Long-Term Credit Facility)
expiring in December 2002. Commitment fees associated with
these facilities are 8.5 basis points and 6.5 basis points
for the Long-Term Credit Facility and Revolving Credit
Facility, respectively. Simultaneously with the consummation
of the FTX Merger, certain of the Company's Canadian
<PAGE>
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. Commitment fees associated with the Canadian Facility
are 8.5 basis points. In addition, the Company has a maximum
availability of approximately $70.0 million under uncommitted
money market lines (Money Market Lines). At February 27,
1998, the Company and its subsidiaries had borrowed $60.0
million under the Revolving Credit Facility, $600.0 million
under the Long-Term Credit Facility and $47.0 million under
the Canadian Facility. Additionally, as of February 27,
1998, $37.8 million was drawn under the Long-Term Credit
Facility as letters of credit principally to support
industrial revenue bonds and other debt and credit risk
guarantees.
Under an agreement with a financial institution, IMC-Agrico
Receivables Company, L.L.C. (IMC-Agrico L.L.C.), a
special-purpose limited liability company of which IMC-Agrico
is the sole equity owner, may sell, on an ongoing basis, an
undivided percentage interest in a designated pool of
receivables, subject to limited recourse provisions related
to the international receivables, in an amount not to exceed
$65.0 million. The net residual interest included in the
receivables shown on the Consolidated Balance Sheet is owned
by IMC-Agrico L.L.C. At December 31, 1997, IMC-Agrico L.L.C.
had transferred $61.5 million of such receivable interests,
$32.5 million of which were classified as short-term debt in
the Consolidated Balance Sheet. Costs, primarily from
discount fees and other administrative costs, totaled $3.3
million, $3.6 million and $3.7 million in 1997, 1996 and
1995, respectively.
In 1997, the Company continued with its strategy to reduce
high-cost debt and, consequently, purchased a total of $133.7
million principal amount of its senior notes bearing interest
at rates ranging between 9.25 percent and 10.75 percent
(Senior Notes). As a result, the Company recorded an
extraordinary charge, net of taxes, of $19.9 million
primarily for the redemption premium incurred and write-off
of previously deferred finance charges.
In connection with the FTX Merger, the Company assumed $456.0
million of debt related to PLP, consisting of $156.0 million
of revolving debt, $150.0 million of 7.0 percent senior
debentures due 2008 and $150.0 million of 8.75 percent senior
subordinated notes (Senior Subordinated Notes) due 2004, and
$64.0 million of FTX revolving debt. Immediately following
the FTX Merger, the Company utilized proceeds obtained from
its revolving credit facilities to extinguish the PLP and FTX
revolving credit facilities and substantially all of the
Senior Subordinated Notes. As a result, the Company recorded
an extraordinary charge of $5.0 million, net of minority
<PAGE>
interest and taxes, primarily for the redemption premium
incurred and write-off of previously deferred finance
charges. In addition, the Company now guarantees debt
related to FM Properties Inc. totaling $39.1 million at
December 31,1997.
In May and December 1997, the Company filed registration
statements on Form S-3 to increase the amount of debt and
equity securities available for issuance from $140.0 million
to $500.0 million. In July 1997, the Company issued $150.0
million of 6.875 percent senior debentures due 2007, the
proceeds of which were used to purchase portions of the
Senior Notes. In January 1998, the Company issued $150.0
million of 7.30 percent debentures due January 2028 and
$150.0 million of 6.55 percent senior notes due 2005. The
proceeds of these issuances were used to refinance higher
cost indebtedness. In addition, in January 1998, the Company
prepaid $120.0 million of unsecured term loans.
MARKET RISK
The Company is exposed to the impact of interest rate
changes, fluctuations in the Canadian currency, and the
impact of fluctuations in the purchase price of natural gas
consumed in operations, as well as changes in the market
value of its financial instruments. The Company periodically
enters into derivatives in order to minimize these risks, but
not for trading purposes.
For the Company's Canadian subsidiaries, the functional
currency is the Canadian dollar. The cumulative translation
effects for the Canadian subsidiaries is included in the
cumulative translation adjustment in stockholders' equity.
The Company uses foreign currency forward exchange contracts,
which typically expire within one year, to hedge transaction
exposure related to United States dollar-denominated assets
and liabilities. Realized gains and losses on these
contracts are recognized in the same period as the hedged
transaction. The Company had foreign exchange forward
contracts on hand at December 31, 1997 of $183.8 million.
The Company prepared sensitivity analyses of its derivatives
and other financial instruments assuming the following: (i)
a one percentage point adverse change in interest rates; (ii)
a five percent adverse change in the Canadian currency; and
(iii) a ten percent adverse change in the purchase cost of
natural gas, all from their levels at December 31, 1997.
Holding all other variables constant, the hypothetical
adverse changes would not materially affect the Company's
financial position. These analyses did not consider the
effects of the reduced level of economic activity that could
exist in such an environment and certain other factors.
<PAGE>
Further, in the event of a change of such magnitude,
management would likely take actions to further mitigate its
exposure to possible changes. However, due to the
uncertainty of the specific actions that would be taken and
their possible effects, the sensitivity analyses assume no
changes in the Company's financial structure.
CONTINGENCIES
Reference is made to Note 21, "Contingencies," of Notes to
Consolidated Financial Statements.
<PAGE>
<TABLE>
QUARTERLY RESULTS (UNAUDITED)
(In millions except per share amounts)
<CAPTION>
Quarter(1)
-----------------------------------------------
First Second Third Fourth Year
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Net sales $ 524.9 $ 558.4 $ 499.8 $ 532.9 $2,116.0
Gross margins 149.3 155.6 135.0 135.0 574.9
Earnings (loss) from
continuing operations
before income taxes 69.3 76.0 59.6 (104.7) 100.2
Earnings (loss) from
discontinued operations (4.4) 36.5 (10.2) (3.9) 18.0
Earnings (loss) before
extraordinary item 39.1 88.3 26.7 (66.3) 87.8
Net earnings (loss) 39.1 85.0 26.7 (87.9) 62.9
Basic earnings (loss)
per share (2):
Earnings (loss)
from continuing
operations before
extraordinary item $ 0.46 $ 0.55 $ 0.40 $ (0.67) $ 0.74
Earnings (loss) from
from discontinued
operations (0.05) 0.39 (0.11) (0.04) 0.19
Extraordinary charge -
debt retirement - (0.03) - (0.23) (0.26)
-------- -------- -------- -------- -------
Earnings (loss) per
share $ 0.41 $ 0.91 $ 0.29 $ (0.94) $ 0.67
======== ======== ======== ======== =======
Diluted earnings (loss)
per share (2):
Earnings (loss)
from continuing
operations before
extraordinary item $ 0.46 $ 0.55 $ 0.39 $ (0.66) $ 0.74
Earnings (loss) from
discontinued
operations (0.05) 0.38 (0.11) (0.04) 0.19
Extraordinary charge -
debt retirement - (0.03) - (0.23) (0.26)
-------- -------- -------- -------- --------
Earnings (loss) per
share $ 0.41 $ 0.90 $ 0.28 $ (0.93) $ 0.67
======== ======== ======= ======== ========
<PAGE>
- -----------------------------------------------------------------------
1996
Net sales $ 568.8 $ 536.5 $ 497.7 $ 540.3 $2,143.3
Gross margins 166.2 132.3 135.8 162.0 596.3
Earnings from continuing
operations before
income taxes 20.0 47.4 54.4 81.2 203.0
Earnings (loss) from
discontinued operations (10.7) 33.0 (5.8) (3.0) 13.5
Earnings (loss) before
extraordinary item (8.3) 66.4 28.6 48.5 135.2
Net earnings (loss) (8.3) 66.4 21.1 47.9 127.1
Basic earnings (loss)
per share (2):
Earnings from continuing
operations before
extraordinary item $ 0.03 $ 0.36 $ 0.37 $ 0.54 $ 1.31
Earnings (loss)
from discontinued
operations (0.12) 0.36 (0.06) (0.03) 0.15
Extraordinary charge -
debt retirement - - (0.08) (0.01) (0.09)
-------- -------- -------- -------- -------
Earnings (loss) per
share $ (0.09) $ 0.72 $ 0.23 $ 0.50 $ 1.37
======== ======== ======== ======== =======
Diluted earnings (loss)
per share (2):
Earnings from continuing
operations before
extraordinary item $ 0.02 $ 0.35 $ 0.35 $ 0.53 $ 1.25
Earnings (loss)
from discontinued
operations (0.11) 0.34 (0.06) (0.03) 0.14
Extraordinary charge -
debt retirement - - (0.08) (0.01) (0.08)
-------- -------- -------- -------- -------
Earnings (loss) per
share $ (0.09) $ 0.69 $ 0.21 $ 0.49 $ 1.31
======== ======== ======== ======== =======
(1) All quarterly amounts have been restated to reflect IMC
AgriBusiness as discontinued operations.
(2) Due to weighted average share differences, when stated
on a quarter and year-to-date basis, the earnings per
share for the years ended December 31, 1997 and 1996 do
not equal the sum of the respective earnings per share
for the four quarters then ended.
</TABLE>
<PAGE>
1997
Third and fourth quarter operating results reflected the
acquisition of Western Ag-Minerals Company in September 1997.
Fourth quarter operating results included an after-tax charge
of $112.2 million, or $1.19 per share, from charges related
to the write-down of the Company's 25 percent ownership in
the Main Pass sulphur, oil and gas joint venture in
connection with the FTX Merger.
1996
First quarter operating results included an after-tax charge
of $69.6 million, or $0.72 per share, from charges related to
the Vigoro Merger, as well as costs associated with, among
other things, a corporate restructuring, other asset
valuations and environmental issues.
The first quarter results reflected above also give effect to
the Vigoro Merger discussed in Note 3, "Vigoro Merger and
Restructuring Charges," of Notes to Consolidated Financial
Statements.
<TABLE>
FIVE YEAR COMPARISON
(In millions except per share amounts)
<CAPTION>
Years ended December 31,
--------------------------------------------------
1997(1)(3) 1996(2)(3) 1995(2)(3) 1994(2)(4) 1993(2)(5)(6)
- -----------------------------------------------------------------------
Statement of Operations Data(7):
<S> <C> <C> <C> <C> <C>
Net sales $2,116.0 $2,143.3 $2,132.7 $1,675.2 $ 995.7
Main Pass write-down 183.7 - - - -
Sterlington litigation
settlement, net - - - - 169.1
Earnings (loss) from
continuing operations
before income taxes 100.2 203.0 307.9 180.9 (232.9)
Provision (credit) for
income taxes 30.4 81.3 112.7 81.1 (88.1)
-------- -------- -------- -------- --------
Earnings (loss) from
continuing operations
before extraordinary
item and cumulative
effect of accounting
change 69.8 121.7 195.2 99.8 (144.8)
Earnings from discontinued
operations 18.0 13.5 23.8 24.4 18.9
Extraordinary charge -
debt retirement (24.9) (8.1) (3.5) (4.4) (25.2)
<PAGE>
Cumulative effect of
accounting change - - - (5.9) -
-------- -------- -------- -------- --------
Net earnings (loss) $ 62.9 $ 127.1 $ 215.5 $ 113.9 $ (151.1)
======== ======== ======== ======== ========
Basic earnings (loss) per share:
Earnings (loss) from
continuing operations
before extraordinary
item and cumulative
effect of accounting
change $ 0.74 $ 1.31 $ 2.15 $ 1.17 $ (1.86)
Earnings from discontinued
operations 0.19 0.15 0.26 0.29 0.24
Extraordinary charge -
debt retirement (0.26) (0.09) (0.04) (0.05) (0.33)
Cumulative effect of
accounting change - - - (0.07) -
-------- -------- -------- -------- --------
Net earnings (loss) $ 0.67 $ 1.37 $ 2.37 $ 1.34 $ (1.95)
======== ======== ======== ======== ========
Diluted earnings (loss) per share:
Earnings (loss) from
from continuing
operations before
extraordinary item and
cumulative effect of
accounting change $ 0.74 $ 1.25 $ 2.09 $ 1.17 $ (1.73)
Earnings from discontinued
operations 0.19 0.14 0.25 0.28 0.23
Extraordinary charge -
debt retirement (0.26) (0.08) (0.04) (0.05) (0.31)
Cumulative effect of
accounting change - - - (0.07) -
-------- -------- -------- -------- --------
Net earnings (loss) $ 0.67 $ 1.31 $ 2.30 $ 1.33 $ (1.81)
======== ======== ======== ======== ========
Balance Sheet Data (at end of period):
Total assets $4,673.9 $3,485.2 $3,521.8 $3,275.1 $3,280.9
Working capital 389.1 582.6 507.6 355.2 427.7
Working capital ratio 1.6:1 2.7:1 2.0:1 1.9:1 2.2:1
Long-term debt, less
current maturities 1,235.2 656.8 741.7 699.1 950.0
Total debt, net of cash
on hand 1,314.4 648.6 753.9 708.7 975.6
Stockholders' equity 1,935.7 1,326.2 1,090.4 883.3 653.1
<PAGE>
Total capitalization 3,250.1 1,974.8 1,844.3 1,592.0 1,628.7
Net debt/total
capitalization 40.4% 32.8% 40.9% 44.5% 59.9%
Other Financial Data:
Cash provided by operating
activities $ 563.4 $ 486.7 $ 513.8 $ 403.2 $ 18.6
Capital expenditures 244.0 209.0 146.0 97.7 74.1
Cash dividends paid 29.7 34.5 33.2 14.7 19.7
Dividends declared per
share 0.32 0.32 0.31 0.19 0.21
Book value per share 16.98 13.80 11.25 9.20 7.94
(1) Earnings before income taxes included a charge of $183.7
million, $112.2 million after tax benefits, or $1.19 per
share, resulting from the write-down of the historical
carrying value of the Company's 25 percent interest in
Main Pass.
(2) Restated to reflect the Vigoro Merger which was
accounted for as a pooling of interests.
(3) See Notes to Consolidated Financial Statements for a
description of acquisitions and non-recurring items.
(4) Net earnings reflected the cumulative effect of adopting
Statement of Financial Accounting Standards (SFAS) No.
112, "Employers' Accounting for Postemployment
Benefits."
(5) Loss from continuing operations before income taxes
included a charge of $169.1 million, net of insurance
recoveries and legal fees, $109.1 million after tax
benefits, or $1.34 per share, resulting from the
settlement of a lawsuit for damages arising out of an
explosion at a nitroparaffins plant in Sterlington,
Louisiana.
(6) Operating results reflect the consolidation of the joint
venture partnership formed on July 1, 1993 with PLP.
(7) Restated to reflect IMC AgriBusiness as discontinued
operations.
</TABLE>
<PAGE>
QUARTERLY RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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.
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In millions except per share amounts)
<CAPTION>
Three Months Ended
March 31,
1998 1997
- -----------------------------------------------------------------------
<S> <C> <C>
Net sales $536.5 $524.9
Cost of goods sold 382.6 375.6
------ ------
Gross margins 153.9 149.3
Selling, general and administrative expenses 37.4 36.1
Exploration expenses 9.5 -
------ ------
Operating earnings 107.0 113.2
Interest expense 21.2 9.6
Other (income) and expense, net (3.9) (1.0)
------ ------
Earnings from continuing operations before
minority interest 89.7 104.6
Minority interest 5.4 35.3
------ ------
Earnings from continuing operations before taxes 84.3 69.3
Provision for income taxes 29.6 25.8
------ ------
Earnings from continuing operations
before extraordinary item 54.7 43.5
Loss from discontinued operations (6.7) (4.4)
------ ------
Earnings before extraordinary item 48.0 39.1
Extraordinary charge - debt retirement (2.7) -
------ ------
Net earnings $ 45.3 $ 39.1
====== ======
Basic earnings per share:
Earnings from continuing operations
before extraordinary item $ 0.48 $ 0.46
Loss from discontinued operations (0.06) (0.05)
Extraordinary charge - debt retirement (0.02) -
------ ------
Net earnings per share $ 0.40 $ 0.41
====== ======
Basic weighted average number of
shares outstanding 114.0 95.3
<PAGE>
Diluted earnings per share:
Earnings from continuing operations
before extraordinary item $ 0.48 $ 0.46
Loss from discontinued operations (0.06) (0.05)
Extraordinary charge - debt retirement (0.02) -
------ ------
Net earnings per share $ 0.40 $ 0.41
====== ======
Diluted weighted average number of shares
outstanding 114.8 96.3
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions except per share amounts)
<CAPTION>
March 31, December 31,
Assets 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 123.8 $ 109.7
Receivables, net 298.0 288.1
Inventories 679.5 592.8
Deferred income taxes 54.3 54.2
Other current assets 17.6 17.4
-------- --------
Total current assets 1,173.2 1,062.2
Property, plant and equipment, net 2,544.5 2,506.0
Other assets 1,126.0 1,105.7
-------- --------
Total assets $4,843.7 $4,673.9
======== ========
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------
Current liabilities:
Accounts payable $ 319.9 $ 253.3
Accrued liabilities 200.5 230.9
Short-term debt and current maturities of
long-term debt 106.9 188.9
-------- --------
Total current liabilities 627.3 673.1
Long-term debt, less current maturities 1,393.2 1,235.2
Deferred income taxes 396.9 389.7
Other noncurrent liabilities 447.6 440.2
Stockholders' equity:
Common stock, $1 par value authorized
300,000,000 shares issued 125,017,239 shares
and 124,668,286 shares at March 31 and
December 31, respectively 125.0 124.6
Capital in excess of par value 1,696.2 1,690.3
Retained earnings 482.1 446.2
Accumulated other comprehensive income (28.4) (30.8)
Treasury stock, at cost, 10,738,520 shares and
10,691,520 shares at March 31 and December 31,
respectively (296.2) (294.6)
-------- --------
Total stockholders' equity 1,978.7 1,935.7
-------- --------
Total liabilities and stockholders' equity $4,843.7 $4,673.9
======== ========
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Three months ended
March 31,
1998 1997
- -----------------------------------------------------------------------
Cash Flows from Operating Activities
- ------------------------------------
<S> <C> <C>
Net earnings $ 45.3 $ 39.1
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion and amortization 48.2 43.3
Minority interest 5.4 35.3
Deferred income taxes 6.3 6.3
Other charges and credits, net (14.7) (15.5)
Changes in:
Receivables (13.3) (30.9)
Inventories (86.7) (107.9)
Other current assets (0.2) 4.0
Accounts payable 66.5 145.1
Accrued liabilities (17.4) 9.0
------- -------
Net cash provided by operating activities 39.4 127.8
------- -------
Cash Flows from Investing Activities
- ------------------------------------
Capital expenditures (88.7) (39.0)
Acquisitions of businesses, net of cash acquired (1.0) (11.4)
Proceeds from sales of property, plant and
equipment 2.3 0.7
------- -------
Net cash used in investing activities (87.4) (49.7)
------- -------
Net cash provided (used) before financing
activities (48.0) 78.1
------- -------
Cash Flows from Financing Activities
- ------------------------------------
Joint venture cash distributions to Phosphate
Resource Partners Limited Partnership, net (13.1) (47.0)
Payments of long-term debt (728.3) (128.2)
Proceeds from issuance of long-term debt, net 886.3 235.3
Changes in short-term debt, net (82.0) (50.0)
Increase (decrease) in securitization of
accounts receivable, net 3.5 (12.5)
Stock options exercised 7.9 1.4
Cash dividends paid (9.1) (7.5)
Purchase of treasury stock (3.1) (79.8)
------- -------
<PAGE>
Net cash provided by (used in) financing
activities 62.1 (88.3)
------- -------
Net change in cash and cash equivalents 14.1 (10.2)
Cash and cash equivalents - beginning of period 109.7 63.3
------- -------
Cash and cash equivalents - end of period $ 123.8 $ 53.1
======= =======
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In millions except per share amounts)
<CAPTION>
Three months ended
March 31,
1998 1997
- -----------------------------------------------------------------------
Common stock:
<S> <C> <C>
Balance at December 31 $ 124.6 $ 101.6
Restricted stock awards (0.1) -
Stock options exercised and other 0.5 0.1
-------- --------
Balance at March 31 125.0 101.7
Capital in excess of par value:
Balance at December 31 1,690.3 936.1
Restricted stock awards 0.3 -
Stock options exercised and other 5.6 1.3
-------- --------
Balance at March 31 1,696.2 937.4
Retained earnings:
Balance at December 31 446.2 413.0
Net earnings 45.3 39.1
Dividends ($.08 per share in 1998 and 1997) (9.1) (7.5)
Other (0.3) -
-------- --------
Balance at March 31 482.1 444.6
Accumulated other comprehensive income:
Balance at December 31 (30.8) (17.2)
Foreign currency translation adjustment 2.4 (5.0)
-------- --------
Balance at March 31 (28.4) (22.2)
Treasury stock:
Balance at December 31 (294.6) (107.3)
Restricted stock awards and other 1.5 -
Purchase of treasury stock (3.1) (79.8)
-------- --------
Balance at March 31 (296.2) (187.1)
-------- --------
Total stockholders' equity at March 31 $1,978.7 $1,274.4
======== ========
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share amounts)
1. Extraordinary Charge - Debt Retirement
--------------------------------------
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 and 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 premium
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.
2. Earnings Per Share
------------------
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 128,
"Earnings Per Share," which is required to be adopted for
financial statements for periods ending after December 15, 1997.
As a result, the basic and diluted earnings per share amounts
reported for 1998 have been calculated in accordance with SFAS No.
128. Similarly, all earnings per share amounts reported for prior
periods have been restated to comply with this statement.
The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Basic earnings per share computation:
Earnings available from continuing operations
before extraordinary item $54.7 $43.5
Loss from discontinued operations (6.7) (4.4)
Extraordinary charge - debt retirement (2.7) -
----- -----
Earnings available to common stockholders $45.3 $39.1
===== =====
Basic weighted average common shares outstanding 114.0 95.3
Earnings per share from continuing operations
before extraordinary item $0.48 $0.46
Loss from discontinued operations (0.06) (0.05)
Extraordinary charge - debt retirement (0.02) -
----- -----
Basic earnings per share $0.40 $0.41
===== =====
<PAGE>
Diluted earnings per share computation:
Earnings available from continuing operations
before extraordinary item $54.7 $43.5
Loss from discontinued operations (6.7) (4.4)
Extraordinary charge - debt retirement (2.7) -
----- -----
Earnings available to common stockholders $45.3 $39.1
===== =====
Basic weighted average common shares
outstanding 114.0 95.3
Unexercised stock options 0.8 1.0
----- -----
Diluted weighted average common shares
outstanding 114.8 96.3
===== =====
Earnings per share from continuing operations
before extraordinary item $0.48 $0.46
Loss from discontinued operations (0.06) (0.05)
Extraordinary charge - debt retirement (0.02) -
----- -----
Diluted earnings per share $0.40 $0.41
===== =====
</TABLE>
Options to purchase approximately 2.3 million and 1.2 million
shares of common stock were outstanding during the March 1998 and
1997 quarters, respectively, but were not included in the
computation of diluted earnings per share because the exercise
price was greater than the average market price of the common
shares and, therefore, the effect would be antidilutive.
Additionally, warrants to purchase approximately 8.4 million
shares of common stock were outstanding during the March 1998
quarter but were not included in the computation of diluted
earnings per share for the same reason as the options noted above.
3. Operating Segments
------------------
In June 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," was issued effective for
fiscal years beginning after December 15, 1997. The statement
allows, and the Company chose, the early adoption of this
statement for the year ended December 31, 1997 and all subsequent
reporting periods.
The Company's reportable segments and related accounting policies
are consistent with those as disclosed in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
<PAGE>
Segment information for the years 1998 and 1997 was as follows(a):
<TABLE>
<CAPTION>
Three months ended March 31, 1998
-----------------------------------------
IMC-Agrico IMC
Crop Nutrients Kalium Other(b) Total
-------------- ------ -------- -----
<S> <C> <C> <C> <C>
Net sales from
external customers $316.2 $150.2 $ 70.1 $536.5
Intersegment net sales 48.3 25.4 3.0 76.7
Gross margins 71.3 76.6 6.0 153.9
Operating earnings 61.1 69.9 (24.0) 107.0
Three months ended March 31, 1997
------------------------------------------
IMC-Agrico IMC
Crop Nutrients Kalium Other(b) Total
-------------- ------ -------- -----
Net sales from
external customers $312.1 $125.3 $ 87.5 $524.9
Intersegment net sales 43.6 23.0 13.4 80.0
Gross margins 79.9 55.4 14.0 149.3
Operating earnings 69.3 50.3 (6.4) 113.2
(a) Results of operations from IMC AgriBusiness were not included
in these tables due to its reclassification to discontinued
operations.
(b) Segment information below the quantitative thresholds is
attributable to two business units (IMC-Agrico Feed
Ingredients and IMC Vigoro) and corporate headquarters. The
Company produces and markets animal feed ingredients through
IMC-Agrico Feed Ingredients. IMC Vigoro manufactures and
distributes consumer lawn and garden products; produces and
markets professional products for turf, nursery and
horticulture markets; and produces and distributes
potassium-based ice melter products. Corporate headquarters
includes the elimination of inter-business unit transactions
and oil and gas activities through its interest in Phosphate
Resource Partners Limited Partnership (PLP).
</TABLE>
4. Comprehensive Income
--------------------
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," which is required to be adopted for fiscal
years beginning after December 15, 1997. Under SFAS No. 130,
interim financial statements are required to report total
comprehensive income for the period, which is as follows:
<PAGE>
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
- -----------------------------------------------------------------
<S> <C> <C>
Comprehensive income:
Net earnings $45.3 $39.1
Foreign currency translation adjustment 2.4 (5.0)
----- -----
Total comprehensive income for the period $47.7 $34.1
===== =====
</TABLE>
5. Subsequent Events
-----------------
Harris Acquisition
In April 1998, the Company completed its previously announced
acquisition of privately held Harris Chemical Group, Inc. and its
Australian affiliate, Penrice Soda Products Pty. Ltd.,
(collectively, HCG), for $1.4 billion (HCG Acquisition). Under
the terms of the HCG Acquisition, the Company purchased all HCG
equity for $450.0 million in cash and assumed approximately $950.0
million of debt. HCG, with annual sales of approximately $785.0
million, is a leading producer of salt, soda ash, boron chemicals
and other inorganic chemicals, including potash crop nutrients.
IMC Vigoro
In April 1998, the Company entered into a definitive agreement for
the sale of the Company's consumer lawn and garden and
professional products businesses to privately held Pursell
Industries, Inc. The consumer lawn and garden and professional
products businesses, together with a consumer and commercial ice
melter unit, comprise the IMC Vigoro business unit. The Company
will retain the ice melter business. The sale, which has received
the required regulatory approval, is expected to be finalized by
the end of the second quarter. In connection with the
transaction, the Company will record a one-time, pre-tax
restructuring charge of approximately $14.0 million, $9.0 million
after tax benefits or $0.08 per share, in the second quarter.
<PAGE>
6. Discontinued Operations
-----------------------
In December 1998, the Company's Board of Directors adopted a
formal plan to sell its IMC AgriBusiness retail and wholesale
distribution operations. The Company anticipates the sale to be
completed in the first quarter of 1999. The estimated loss on
disposal, net of income tax benefits, is $60.0 million and will be
recorded in the fourth quarter of 1998. The condensed
consolidated statement of earnings of the Company has been
restated to report separately the operating results of IMC
AgriBusiness as discontinued operations. Interest expense has
been allocated to discontinued operations based on the portion of
the Company's short-term borrowing program that is specifically
attributable to IMC AgriBusiness and amounted to $2.9 million and
$3.1 million for the three months ended March 31 1998 and 1997,
respectively.
A benefit for income taxes associated with the discontinued
operations of IMC AgriBusiness was $3.6 million and $3.3 million
for the three months ended March 31 1998 and 1997, respectively.
For the three months ended March 31, 1998 and 1997, IMC
AgriBusiness' revenues were $140.3 million and $139.9 million,
respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.(1)
Results of Operations
- ---------------------
Three months ended March 31, 1998 vs. three months ended March 31, 1997
- ---------------------------------------------------------------
Overview
Net sales for the first quarter ended March 31, 1998 were $536.5
million and gross margins were $153.9 million. Net earnings from
continuing operations, before an extraordinary charge, were $54.7
million, or $0.48 per share. A loss from discontinued operations of
$6.7 million or $0.06 per share, and an extraordinary charge of $2.7
million, or $0.02 per share, related to the early extinguishment of
debt, reduced net earnings to $45.3 million, or $0.40 per share. These
results compare to net sales for the first quarter ended March 31, 1997
of $524.9 million, gross margins of $149.3 million, net earnings from
continuing operations of $43.5 million, or $0.46 per share, a loss from
discontinued operations of $4.4 million, or $0.05 per share, and net
earnings of $39.1 million, or $0.41 per share.
Net sales increased two percent from the prior year first quarter while
gross margins increased three percent from one year ago. The sales
improvement was largely attributable to continued strong demand for
potash by both domestic and export customers as well as a 13 percent
increase in average potash prices. Potash sales rose 18 percent
compared to the year-earlier quarter and volumes increased two percent.
Sales of concentrated phosphates by IMC-Agrico Crop Nutrients also
<PAGE>
increased as strong domestic demand resulted in a net sales improvement
of two percent over the year-earlier quarter. Largely offsetting
increased potash and phosphate revenues were lower net sales at IMC-
Agrico Feed Ingredients and IMC Vigoro.
The operating results of the Company's significant business units are
discussed in more detail below.
IMC-Agrico Crop Nutrients
IMC-Agrico Crop Nutrients' net sales for the first quarter increased
two percent to $364.5 million compared to $355.7 million last year due
to higher sales volumes, which were partially offset by lower sales
realizations as compared to the same period one year ago. Overall
volumes of concentrated phosphates, primarily diammonium phosphate
(DAP) and granular monoammonium phosphate, increased by $28.6 million
from the prior year. The higher volumes resulted from strong winter
fill movements, an early start to the spring season and favorable
logistic conditions related to product movement. Lower average prices
of concentrated phosphates, driven by reduced international DAP
realizations, negatively impacted net sales $7.1 million. Furthermore,
urea sales decreased $7.1 million from the prior year primarily due to
a decrease in volumes sold to a large customer during the first quarter
of 1998 in comparison to the first quarter of 1997 coupled with
unfavorable pricing conditions primarily resulting from China's exit
from the market in mid-1997. In addition, rock sales declined $3.8
million, mainly due to the Company's strategic decision to phase out
export sales of rock. This action is being taken to maximize relative
values of rock and concentrated phosphates by utilizing high-quality
reserves for internal upgrading.
Gross margins declined 11 percent to $71.3 million for the quarter
compared to $79.9 million last year, mainly due to higher production
costs, partially offset by the combination of the higher volumes and
lower prices discussed above.
Production costs increased compared to the prior year's first quarter
due to higher rock costs, increased operating expenses associated with
record rainfall in Florida, and the temporary shutdown of the Faustina,
Louisiana, plant in January due to utility power outages.
IMC Kalium
IMC Kalium's net sales increased 18 percent to $175.6 million in the
current quarter from $148.3 million in the prior year quarter. The
increase was due to both volume and average sales realization
improvements. The average sales realizations increased $23.5 million
over the prior year as a result of multiple price increases over this
time period. Domestic sales volumes increased $4.9 million over the
prior year due to the inclusion of Western Ag-Minerals Company, which
was acquired in September 1997, in the current quarter partially offset
by lower intercompany domestic volumes.
Gross margins increased 38 percent to $76.6 million for the quarter
from $55.4 million one year ago, primarily due to the impact of higher
volumes and increased average realizations discussed above.
<PAGE>
Other
The remaining offsets to the increases in first quarter net sales and
gross margins compared to the same period in the prior year were
primarily the result of lower volumes at IMC-Agrico Feed Ingredients
and IMC Vigoro.
The following table summarizes the Company's sales of crop nutrient
products and average selling prices for the three months ended March
31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales volumes (in thousands of short tons)(a):
IMC-Agrico Crop Nutrients 1,758 1,610
IMC Kalium 2,287 2,232
Average price per ton(b):
DAP $171 $178
Potash $ 77 $ 68
(a) Sales volumes include tons sold captively. IMC-Agrico Crop
Nutrients' volumes represent dry product tons, primarily DAP.
(b) Average prices represent sales made FOB mine/plant.
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1.3 million, or
four percent, to $37.4 million for the first quarter compared to $36.1
million one year ago. This increase was primarily due to the inclusion
of the results of operations of businesses acquired since March 1997 in
the Company's first quarter 1998 results of operations, partially
offset by workforce reductions and savings from restructuring.
Other Income and Expense, Net
Other income for the current quarter increased $2.9 million from the
same period last year to $3.9 million. The increase was primarily a
result of income received from interest rate locks associated with
January 1998 debt issuances.
Interest Expense
Interest expense totaled $21.2 million in the current quarter, an
increase of $11.6 million from the same period in the prior year. The
increase in interest expense was a direct result of increased activity
under revolver loans and the issuance of: (i) $150.0 million 6.875
senior debentures due 2007 in July 1997; (ii) $150.0 million 6.55
percent senior notes due 2005 in January 1998; and (iii) $150.0 million
debentures due 2028 in January 1998. The increase in interest expense
was partially offset by the tender of higher interest notes and the
early payment of certain unsecured term loans. As a result of the
Company's refinancings, the weighted average interest rate for the
first quarter 1998 decreased seven basis points to 6.40 percent
compared to 7.10 percent for the same period in the prior year.
<PAGE>
Income Taxes
The effective income tax rate for the current quarter was 35.1 percent,
compared to an effective tax rate of 37.2 percent one year ago
primarily as a result of greater utilization of foreign tax credits.
Capital Resources and Liquidity
- -------------------------------
Liquidity and Operating Cash Flow
Cash generated from operating activities decreased $88.4 million from
the same period last year to $39.4 million. The decrease was primarily
due to: (i) a reduction in the change in accounts payable in the
current quarter when compared to the prior year primarily as a result
of decreased customer advances; and (ii) lower accrued liabilities due
primarily to payouts related to the settlement of certain litigation.
In contrast, when compared to December 31, 1997, the Company's working
capital ratio increased to 1.9:1 at March 31, 1998 from 1.6:1 at
December 31, 1997, primarily due to an increase in inventory levels in
response to the upcoming planting season and a decrease in short-term
debt as a result of recent refinancings.
Net cash used in investing activities increased $37.7 million over the
prior year's first quarter primarily due to increased capital
expenditures partially offset by a decrease in expenditures associated
with acquisitions in the first quarter of the current year. Capital
expenditures for the current quarter increased $49.7 million over the
same period in the prior year primarily due to the following: (i)
Phosphate Resource Partners Limited Partnership's (PLP) share of
McMoRan Oil & Gas Co. (MOXY) exploration and development costs of $19.2
million (see "Capital Expenditures" below for further detail); and (ii)
enterprise-wide systems development expenditures of $9.5 million.
Cash from financing activities increased $150.4 million from the
comparable period in the prior year from a use of funds of $88.3
million at March 31, 1997 to a source of funds of $62.1 million at
March 31, 1998. This increase in funds available was primarily due to
decreased stock repurchases of $76.7 million and higher net debt
proceeds for the current quarter of $34.9 million as compared to the
same period last year. Additionally, net PLP distributions decreased
$33.9 million as a result of IMC's increased ownership of IMC-Agrico
Company (IMC-Agrico) due to IMC's merger with Freeport-McMoRan Inc.
(FTX Merger). The Company used proceeds from the issuance of $150.0
million 6.55 percent senior notes due 2005 and $150.0 million 7.30
percent debentures due 2028 (collectively, Debt Issuances) in January
1998 to prepay $120.0 million of unsecured term loans. See "Financing"
below for further detail. As a result of these Debt Issuances, debt to
total capitalization increased slightly to 43.1 percent from 42.4
percent at December 31, 1997.
<PAGE>
Capital Expenditures
In conjunction with the FTX Merger, the Company, through its interest
in PLP, participates in an aggregate $210.0 million, multi-year oil and
natural gas exploration program with MOXY (MOXY Exploration Program).
In accordance with the MOXY Exploration Program agreement, the Company,
MOXY and an individual investor (Investor) will fund 56.4 percent, 37.6
percent and six percent, respectively, of the exploration costs. All
revenue and other costs will be allocated 47.0 percent to PLP, 48.0
percent to MOXY and five percent to the Investor.
Financing
The Company has credit facilities with a group of banks from which it
and certain of its subsidiaries may borrow up to $350.0 million on a
revolving basis (Revolving Credit Facility) expiring in December 1998
and $650.0 million under a long-term revolving credit facility (Long-
Term Credit Facility) expiring in December 2002. As of March 31, 1998,
commitment fees associated with the facilities were 8.5 basis points
and 6.5 basis points for the Long-Term Credit Facility and Revolving
Credit Facility, respectively. On April 1, 1998 the Company entered
into amendments to the Revolving Credit Facility and the Long-Term
Credit Facility, which retroactively, from December 15, 1997, increased
the commitment fees associated with the Revolving Credit Facility and
the Long-Term Credit Facility to 7.5 basis points and 11.0 basis
points, respectively. Additionally on April 1, 1998, the Company
entered into an additional credit facility with a group of banks under
which the Company and certain of its subsidiaries may borrow up to $1.0
billion on a revolving basis (364-day Revolving Credit Facility)
expiring in March 1999. The commitment fees associated with the 364-
day Revolving Credit Facility are 7.5 basis points.
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. Commercial paper outstanding at March
31, 1998 is classified as long-term since the Company intends to
refinance these borrowings on a long-term basis utilizing available
Credit Facilities.
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 March 31, 1998 commitment fees associated
with the Canadian Facility were 8.5 basis points. On April 1, 1998 the
Company and its subsidiaries entered into an amendment to the Canadian
Facility which retroactively, from December 22, 1997, increased the
commitment fees associated with the Canadian Facility to 11.0 basis
points
<PAGE>
In April 1998, the Company completed its previously announced
acquisition of privately held Harris Chemical Group, Inc. and its
Australian affiliate, Penrice Soda Products Pty. Ltd., (collectively,
HCG), for $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 HCG, the payment of which was funded by the commercial paper
borrowings.
QUARTERLY RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
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 Six months ended
June 30, June 30,
1998 1997 1998 1997
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 793.4 $ 558.4 $1,329.9 $1,083.3
Cost of goods sold 579.4 402.8 962.0 778.4
-------- -------- -------- --------
Gross margins 214.0 155.6 367.9 304.9
Selling, general and
administrative expenses 53.9 33.3 91.3 69.4
Exploration expenses 9.4 - 18.9 -
-------- -------- -------- --------
Operating earnings 150.7 122.3 257.7 235.5
Interest expense 55.8 8.6 77.0 18.2
Other (income) expense,
net (4.7) 1.5 (8.6) 0.5
-------- -------- -------- --------
Earnings from continuing
operations before
minority interest 99.6 112.2 189.3 216.8
Minority interest 11.8 36.2 17.2 71.5
-------- -------- -------- --------
<PAGE>
Earnings from continuing
operations before taxes 87.8 76.0 172.1 145.3
Provision for income taxes 30.9 24.2 60.5 50.0
-------- -------- -------- --------
Earnings from continuing
operations before
extraordinary item 56.9 51.8 111.6 95.3
Earnings from discontinued
operations 30.1 36.5 23.4 32.1
-------- -------- -------- --------
Earnings before
extraordinary item 87.0 88.3 135.0 127.4
Extraordinary charge -
debt retirement - (3.3) (2.7) (3.3)
-------- -------- -------- --------
Net earnings $ 87.0 $ 85.0 $ 132.3 $ 124.1
======== ======== ======== ========
Basic earnings per share:
Earnings from continuing
operations before
extraordinary item $ 0.50 $ 0.55 $ 0.98 $ 1.00
Earnings from discontinued
operations 0.26 0.39 0.20 0.34
Extraordinary charge -
debt retirement - (0.03) (0.02) (0.03)
-------- -------- -------- --------
Net earnings per share $ 0.76 $ 0.91 $ 1.16 $ 1.31
======== ======== ======== ========
Basic weighted average number
of shares outstanding 114.3 93.9 114.1 94.6
Diluted earnings per share:
Earnings from continuing
operations before
extraordinary item $ 0.50 $ 0.55 $ 0.98 $ 1.00
Earnings from discontinued
operations 0.26 0.38 0.20 0.33
Extraordinary charge - debt
retirement - (0.03) (0.02) (0.03)
-------- -------- -------- --------
Net earnings per share $ 0.76 $ 0.90 $ 1.16 $ 1.30
======== ======== ======== ========
Diluted weighted average number
of shares outstanding 115.0 94.9 114.8 95.6
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions except per share amounts)
<CAPTION>
June 30, December 31,
Assets 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 139.8 $ 109.7
Receivables, net 497.4 288.1
Inventories 652.7 592.8
Deferred income taxes 90.9 54.2
Other current assets 26.0 17.4
-------- --------
Total current assets 1,406.8 1,062.2
Property, plant and equipment, net 3,681.2 2,506.0
Other assets 1,653.1 1,105.7
-------- --------
Total assets $6,741.1 $4,673.9
======== ========
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------
Current liabilities:
Accounts payable $ 296.3 $ 253.3
Accrued liabilities 352.4 230.9
Short-term debt and current maturities
of long-term debt 1,294.1 188.9
-------- --------
Total current liabilities 1,942.8 673.1
Long-term debt, less current maturities 1,639.1 1,235.2
Deferred income taxes 646.5 389.7
Other noncurrent liabilities 475.4 440.2
Stockholders' equity:
Common stock, $1 par value, authorized
300,000,000 shares; issued 125,058,361
and 124,668,286 shares at June 30 and
December 31, respectively 125.0 124.6
Capital in excess of par value 1,695.1 1,690.3
Retained earnings 560.2 446.2
Accumulated other comprehensive income (46.8) (30.8)
Treasury stock, at cost, 10,738,520 and
10,691,520 shares at June 30 and
December 31, respectively (296.2) (294.6)
-------- --------
Total stockholders' equity 2,037.3 1,935.7
-------- --------
Total liabilities and stockholders'
equity $6,741.1 $4,673.9
======== ========
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Six months ended
June 30,
1998 1997
- ----------------------------------------------------------------------
Cash Flows from Operating Activities
- ------------------------------------
<S> <C> <C>
Net earnings $ 132.3 $ 124.1
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion and amortization 124.6 100.5
Minority interest 17.2 71.5
Deferred income taxes (56.7) 48.9
Other charges and credits, net (80.4) (13.6)
Changes in:
Receivables (53.8) (140.2)
Inventories 46.7 59.5
Other current assets 43.0 (3.1)
Accounts payable (66.5) 28.9
Accrued liabilities 105.2 24.1
------- -------
Net cash provided by operating activities 211.6 300.6
------- -------
Cash Flows from Investing Activities
- ------------------------------------
Capital expenditures (174.0) (105.0)
Acquisitions of businesses, net of
cash acquired (393.3) (48.6)
Proceeds from sale of business 44.8 -
Proceeds from sales of property, plant
and equipment 5.1 1.9
------- -------
Net cash used in investing activities (517.4) (151.7)
------- -------
Net cash provided (used) before financing
activities (305.8) 148.9
------- -------
Cash Flows from Financing Activities
- ------------------------------------
Joint venture cash distributions to
Phosphate Resource Partners Limited
Partnership, net (37.0) (96.6)
Payments of long-term debt (842.6) (35.9)
Proceeds from issuance of long-term debt, net 912.1 71.3
Changes in short-term debt, net 332.0 15.1
Decrease in securitization of accounts
receivable, net (15.8) (6.2)
Stock options exercised 8.6 3.4
<PAGE>
Cash dividends paid (18.3) (15.0)
Purchase of treasury stock (3.1) (105.1)
------- -------
Net cash provided by (used in)
financing activities 335.9 (169.0)
------- -------
Net change in cash and cash equivalents 30.1 (20.1)
Cash and cash equivalents - beginning
of period 109.7 63.3
------- -------
Cash and cash equivalents - end of period $ 139.8 $ 43.2
------- -------
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In millions except per share amounts)
<CAPTION>
Six months ended
June 30,
1998 1997
- -----------------------------------------------------------------------
<S> <C> <C>
Common stock:
Balance at December 31 $ 124.6 $ 101.6
Stock options exercised 0.4 0.2
-------- --------
Balance at June 30 125.0 101.8
Capital in excess of par value:
Balance at December 31 1,690.3 936.1
Restricted stock awards 0.3 -
Issuance of common stock pursuant to acquisitions - 7.7
Stock options exercised 6.4 3.2
Other (1.9) -
-------- --------
Balance at June 30 1,695.1 947.0
Retained earnings:
Balance at December 31 446.2 413.0
Net earnings 132.3 124.1
Dividends ($.16 per share in 1998 and 1997) (18.3) (15.0)
-------- --------
Balance at June 30 560.2 522.1
Accumulated other comprehensive income:
Balance at December 31 (30.8) (17.2)
Foreign currency translation adjustment,
net of taxes (16.0) (1.6)
-------- --------
Balance at June 30 (46.8) (18.8)
Treasury stock:
Balance at December 31 (294.6) (107.3)
Restricted stock awards 1.5 -
Issuance of common stock pursuant to acquisitions - 0.2
Purchase of treasury stock (3.1) (105.1)
-------- --------
Balance at June 30 (296.2) (212.2)
-------- --------
Total stockholders' equity at June 30 $2,037.3 $1,339.9
======== ========
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share amounts)
1. Acquisitions
------------
Harris
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 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 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 $457.0 million and 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 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>
Six months ended
June 30,
1998 1997
---- ----
<S> <C> <C>
Net sales $1,557.1 $1,496.6
Earnings from continuing operations
before extraordinary item 117.2 52.3
Net earnings 135.4 81.1
Diluted earnings per share:
Earnings from continuing operations
before extraordinary item $ 1.02 $ 0.44
Net earnings per share 1.18 0.69
</TABLE>
<PAGE>
1997 Acquisitions
During the six months ended June 30, 1997, the Company completed
several acquisitions, including retail distribution operations
(Crop-Maker, Frankfort Supply, Sanderlin, and Hutson Ag Services,
Inc.) and Hutson Company, Inc., a storage terminal company. Total
cash payments for acquisitions during the six months ended June 30,
1997 were $48.6 million, and approximately 200,000 shares of common
stock of the Company were issued for $7.9 million.
The acquisitions for the six months ended June 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
six months ended June 30, 1997, reflecting these acquisitions from
the beginning of that period, would not have been materially
different from reported amounts.
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.
3. Extraordinary Charge - Debt Retirement
--------------------------------------
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 and 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 premium 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.
<PAGE>
4. Earnings Per Share
------------------
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 128,
"Earnings Per Share." As a result, the basic and diluted earnings
per share amounts reported for 1998 have been calculated in
accordance with SFAS No. 128. Similarly, all earnings per share
amounts reported for prior periods have been restated to comply
with this statement.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per share computation:
Earnings from continuing
operations available before
extraordinary item $ 56.9 $ 51.8 $ 111.6 $ 95.3
Earnings from discontinued
operations 30.1 36.5 23.4 32.1
Extraordinary charge - debt
retirement - (3.3) (2.7) (3.3)
------- ------- ------- -------
Earnings available to common
stockholders $ 87.0 $ 85.0 $ 132.3 $ 124.1
======= ======= ======= =======
Basic weighted average common
shares outstanding 114.3 93.9 114.1 94.6
Earnings per share from
continuing operations
before extraordinary item $ 0.50 $ 0.55 $ 0.98 $ 1.00
Earnings from discontinued
operations 0.26 0.39 0.20 0.34
Extraordinary charge - debt
retirement - (0.03) (0.02) (0.03)
------- ------- ------- -------
Basic earnings per share $ 0.76 $ 0.91 $ 1.16 $ 1.31
======= ======= ======= =======
Diluted earnings per share computation:
Earnings available from
continuing operations before
extraordinary item $ 56.9 $ 51.8 $ 111.6 $ 95.3
Earnings from discontinued
operations 30.1 36.5 23.4 32.1
<PAGE>
Extraordinary charge - debt
retirement - (3.3) (2.7) (3.3)
------- ------- ------- -------
Earnings available to common
stockholders $ 87.0 $ 85.0 $ 132.3 $ 124.1
======= ======= ======= =======
Basic weighted average common
shares outstanding 114.3 93.9 114.1 94.6
Unexercised stock options 0.7 1.0 0.7 1.0
------- ------- ------- -------
Diluted weighted average common
shares outstanding 115.0 94.9 114.8 95.6
======= ======= ======= =======
Earnings per share from
continuing operations before
extraordinary item $ 0.50 $ 0.55 $ 0.98 $ 1.00
Earnings from discontinued
operations 0.26 0.38 0.20 0.33
Extraordinary charge - debt
retirement - (0.03) (0.02) (0.03)
------- ------- ------- -------
Diluted earnings per share $ 0.76 $ 0.90 $ 1.16 $ 1.30
======= ======= ======= =======
</TABLE>
Options to purchase approximately 2.6 million and 2.2 million
shares of common stock were outstanding during the six months ended
June 30, 1998 and 1997, respectively, but were not included in the
computation of diluted earnings per share because the exercise
prices were greater than the average market price of the common
shares and, therefore, the effect would be antidilutive.
Additionally, warrants to purchase approximately 8.4 million shares
of common stock were outstanding during 1998 but were not included
in the computation of diluted earnings per share for the same
reason as the options noted above.
5. Operating Segments
------------------
The Company has chosen to early adopt SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information."
Accordingly, all subsequent reporting periods have been presented
on the same basis for each reportable segment.
The Company's reportable segments and related accounting policies
are consistent with those disclosed in the Company's Form 10-K for
the year ended December 31, 1997.
<PAGE>
Segment information for 1998 and 1997 was as follows(a):
<TABLE>
<CAPTION>
IMC-Agrico
Crop IMC IMC
Nutrients Kalium Chemicals Other(c)(d) Total
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Three months ended June 30, 1998
Net sales from
external
customers $ 407.0 $ 185.8 $102.8 $ 97.8 $ 793.4
Intersegment net
sales 49.6 18.7 - - 68.3
Gross margins 116.0 78.6 12.3 7.1 214.0
Operating earnings 106.4 70.9 6.2 (32.8) 150.7
Total assets at
June 30, 1998(b) 1,790.8 1,077.2 441.7 3,431.4 6,741.1
Six months ended June 30, 1998
Net sales from external
customers $ 723.2 $ 336.0 $102.8 $ 167.9 $1,329.9
Intersegment net
sales 97.9 44.1 - 3.0 145.0
Gross margins 187.3 155.2 12.3 13.1 367.9
Operating earnings 167.5 140.8 6.2 (56.8) 257.7
IMC-Agrico
Crop IMC IMC
Nutrients Kalium Chemicals Other(c)(d) Total
- -------------------------------------------------------------------
Three months ended June 30, 1997
Net sales from external
customers $ 358.6 $134.1 - $ 65.7 $ 558.4
Intersegment net
sales 45.7 15.8 - 8.6 70.1
Gross margins 84.7 60.3 - 10.6 155.6
Operating earnings 73.6 54.9 - (6.2) 122.3
Total assets at
June 30, 1997 1,684.8 769.6 - 1,157.2 3,611.6
Six months ended June 30, 1997
Net sales from external
customers $ 670.7 $259.4 - $ 153.2 $1,083.3
Intersegment net
sales 89.3 38.8 - 22.0 150.1
Gross margins 164.6 115.7 - 24.6 304.9
Operating earnings 142.9 105.2 - (12.6) 235.5
<PAGE>
(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
presented below since the date of acquisition, April 1998. See
Note 1, "Acquisitions," of Notes to Condensed Consolidated
Financial Statements. The operating results of IMC
AgriBusiness have not been included in the segment information
provided as they have been classified as a discontinued
operation. However, IMC AgriBusiness' assets have been
included as part of total assets in the Other column.
(b) The increase in IMC Kalium's total assets as compared to
December 31, 1997 results from the purchase of GSL.
(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 manufactures
and distributes consumer lawn and garden products; produces and
markets professional products for turf, nursery and
horticulture markets; and produces and distributes
potassium-based ice melter products. 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 (PLP).
(d) Total assets at June 30, 1998 includes goodwill and step-up of
book value to fair value of property, plant and equipment
recorded in accordance with Accounting Principles Board Opinion
No. 16 (APB No. 16) as part of the Harris Acquisition (Purchase
Price) in April 1998. The Company has not yet completed the
Purchase Price allocation to or among the impacted business
units.
</TABLE>
6. Comprehensive Income
--------------------
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," which is required to be adopted for fiscal
years beginning after December 15, 1997. Under SFAS No. 130,
interim financial statements are required to report total
comprehensive income, net of taxes, for the period, which is as
follows:
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Comprehensive income:
Net earnings $ 87.0 $ 85.0 $132.3 $124.1
Foreign currency translation
adjustment (18.4) 3.4 (16.0) (1.6)
------ ------ ------ ------
Total comprehensive income
for the period $ 68.6 $ 88.4 $116.3 $122.5
====== ====== ====== ======
</TABLE>
7. Subsequent Events
-----------------
In August 1998, the Company issued $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.
8. Discontinued Operations
-----------------------
In December 1998, the Company's Board of Directors adopted a formal
plan to sell its IMC AgriBusiness retail and wholesale distribution
operations. The Company anticipates the sale to be completed in
the first quarter of 1999. The estimated loss on disposal, net of
income tax benefits, is $60.0 million and will be recorded in the
fourth quarter of 1998. The condensed consolidated statement of
earnings of the Company has been restated to report separately the
operating results of IMC Agribusiness as discontinued operations.
Interest expense has been allocated to discontinued operations
based on the portion of the Company's short-term borrowing program
that is specifically attributable to IMC AgriBusiness and amounted
to $6.7 million and $7.0 million for the six months ended June 30,
1998 and 1997, respectively.
Income taxes associated with the discontinued operations of IMC
AgriBusiness were $12.7 million and $23.3 million for the six
months ended June 30, 1998 and 1997, respectively. For the six
months ended June 30, 1998 and 1997, IMC AgriBusiness' revenues
were $568.7 million and $629.7 million, respectively.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results
of Operations.(1)
Results of Operations
- ---------------------
Three months ended June 30, 1998 vs. three months ended June 30, 1997
- ---------------------------------------------------------------------
Overview
Net sales for the second quarter ended June 30, 1998 were $793.4
million and gross margins, before special one-time charges, were $218.1
million. Earnings from continuing operations, before special one-time
charges, were $66.0 million, or $0.57 per share. Earnings from
discontinued operations were $30.1 million, or $0.26 per share. Net
earnings, before special one-time charges, were $96.1 million, or $0.84
per share. Special one-time charges of $9.1 million, or $0.08 per
share, reduced net earnings for the quarter to $87.0 million, or $0.76
per share. These one-time charges, totaling $14.0 million before tax
benefits, related to restructuring charges associated with the sale of
IMC Vigoro, IMC Global Inc.'s (Company) consumer lawn and garden and
professional products businesses.
Net sales for the second quarter ended June 30, 1997 were $558.4
million, gross margins were $155.6 million and earnings from continuing
operations, before an extraordinary charge, were $51.8 million, or
$0.55 per share. Earnings from discontinued operations of $36.5
million, or $0.38 per share, partially offset by an extraordinary
charge of $3.3 million, or $0.03 per share, related to the early
extinguishment of debt, increased net earnings to $85.0 million, or
$0.90 per share.
Net sales increased 42 percent from the prior year second quarter while
gross margins, before special one-time charges, increased 40 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 Crop Nutrients. The sales improvements were
largely attributable to continued strong demand for potash and
phosphate crop nutrients by both domestic and export customers, 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
herein referred to as the "Harris Acquisition." Substantially
offsetting growth in potash and phosphate revenues were lower net sales
at IMC-Agrico Feed Ingredients (Feed Ingredients) and IMC Vigoro.
The operating results of the Company's significant business units are
discussed in more detail below.
<PAGE>
IMC-Agrico Crop Nutrients
IMC-Agrico Crop Nutrients' net sales for the second quarter improved 13
percent to $456.6 million compared to $404.3 million for the same
period last year largely due to increased sales volumes and higher
average sales realizations. Shipments of concentrated phosphates,
primarily diammonium phosphate (DAP) and granular monoammonium
phosphate (GMAP), increased by $37.9 million from the same quarter in
the prior year. The higher volumes resulted from an early start to the
spring planting season, an increase in the number of supply contracts
over the comparable period in the prior year and favorable logistic
conditions related to product movement. Higher average prices of
concentrated phosphates, driven by increased international DAP
realizations as well as an increase in the transfer price of phosphoric
acid sold to Feed Ingredients, positively impacted net sales by $8.8
million. See Feed Ingredients discussion below.
Gross margins increased 37 percent to $116.0 million for the quarter
compared to $84.7 million 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 second quarter primarily
due to lower raw material prices for purchased ammonia and sulphur.
IMC Kalium
IMC Kalium's net sales increased 36 percent to $204.5 million in the
current quarter from $149.9 million in the prior year quarter. The
increase was due to both volume and average sales realization
improvements. Sales volumes increased $11.3 million when compared to
the same period in the prior year due to increased export sales to
China and Brazil, as well as the acquisition of Great Salt Lake
Minerals (GSL) as part of the Harris Acquisition in April 1998 and the
purchase of Western Ag-Minerals (Western Ag) in September 1997. This
increase was slightly offset by lower domestic sales as a result of
poor weather conditions. Average sales realizations increased $43.3
million when compared to last year's second quarter as a result of
multiple price increases.
Gross margins increased 30 percent to $78.6 million for the quarter
from $60.3 million in the same period one year ago, primarily due to
the impact of the higher volumes and increased average realizations
discussed above, partially offset by 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
and the acquisition of Western Ag in September 1997.
IMC Salt
IMC Salt's net sales were $40.9 million with gross margins of $7.2
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 sectors.
<PAGE>
Other
The addition of IMC Chemicals, as a result of the Harris Acquisition,
increased sales by $102.8 million and gross margins by $12.3 million.
Offsets to the increases in second quarter sales and gross margins, 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. See Note 2,
"Divestitures," of Notes to Condensed Consolidated Financial
Statements.
Key Statistics
The following table summarizes the Company's core business sales and
average selling prices for the three months ended June 30:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales volumes (in thousands of short tons(a):
IMC-Agrico Crop Nutrients 2,161 1,958
IMC Kalium 2,435 2,278
IMC Salt 1,216 n/a
Average price per ton(b):
DAP $178 $176
Potash 82 66
IMC Salt 34 n/a
(a) Sales volumes include tons sold captively. IMC-Agrico Crop
Nutrients' 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>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $10.7 million,
or 32 percent, to $44.0 million, before special one-time charges of
$9.9 million, for the second quarter compared to $33.3 million one year
ago. This increase was primarily due to the inclusion of the results
of operations of businesses acquired since June 1997 in the Company's
second quarter 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.
<PAGE>
Other (Income) Expense, Net
Other income for the current quarter increased $6.2 million from the
same period last year to $4.7 million. The increase was primarily due
to the following: (i) favorable foreign exchange rates; (ii) increased
interest income from interest-bearing cash balances; and (iii) 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 Freeport-McMoRan Inc.'s (FTX) merger with the Company
(FTX Merger) in December 1997.
Interest Expense
Interest expense totaled $55.8 million in the current quarter, an
increase of $47.2 million from the same period in the prior year. The
increase in interest expense was due to increased activity under
revolver loans along with debt assumed in conjunction with the Harris
Acquisition and the FTX Merger, as well as the issuance of: (i) $150.0
million 6.875 percent senior debentures due 2007 in July 1997; (ii)
$150.0 million 6.55 percent senior notes due 2005 in January 1998; and
(iii) $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 notes and the early payment of certain unsecured term
loans.
Income Taxes
The effective income tax rate for the current quarter was 35.2 percent,
compared to 31.8 percent for the same period in the prior year.
Six months ended June 30, 1998 vs. six months ended June 30, 1997
- -----------------------------------------------------------------
Overview
Net sales for the six months ended June 30, 1998 were $1,329.9 million
and gross margins, before special one-time charges, were $372.0
million. Earnings from continuing operations, before an extraordinary
charge and special one-time charges, were 120.7, or $1.05 per share.
Earnings from discontinued operations of $23.4 million, or $0.20 per
share, partially offset by an extraordinary charge of $2.7 million, or
$0.02 per share, and special one-time charges of $9.1 million, or $0.08
per share, increased net earnings for the first six months of 1998 to
$132.3 million, or $1.16 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.
<PAGE>
Net sales for the six months ended June 30, 1997 were $1,083.3 million,
gross margins were $304.9 million and earnings from continuing
operations, before an extraordinary charge, were $ 95.3 million, or
$1.00 per share. Earnings from discontinued operations of $32.1
million, or $0.33 per share, partially offset by an extraordinary
charge of $3.3 million, or $0.03 per share, related to the early
extinguishment of debt, reduced net earnings to $124.1 million, or
$1.30 per share.
Net sales for the first six months of 1998 increased 23 percent when
compared to the first six months of the prior year period while gross
margins, before special one-time charges, increased 22 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 Crop Nutrients. The net sales improvement was
largely attributable to continued strong demand for potash and
phosphate crop nutrients by both domestic and export customers, and
additional revenues from the former Harris operations. See Note 1,
"Acquisitions," of Notes to Condensed Consolidated Financial
Statements. Substantially offsetting growth in potash and phosphate
revenues were lower net sales at Feed Ingredients and IMC Vigoro.
The operating results of the Company's significant business units are
discussed in more detail below.
IMC-Agrico Crop Nutrients
IMC-Agrico Crop Nutrients' net sales for the first six months of 1998
improved eight percent to $821.1 million compared to $760.0 million for
the same period last year primarily due to increased concentrate sales
volumes and higher average sales realizations, which were partially
offset by lower urea sales. Sales volumes of concentrated phosphates,
primarily domestic shipments of DAP and domestic and international
shipments of GMAP, increased by $65.9 million from the same prior year
period. These favorable volume variances reflected the following
factors: (i) an earlier start to the spring planting season; (ii) an
increase in the number of supply contracts over the prior period; (iii)
favorable logistic conditions related to product movement; and (iv) low
inventory levels throughout the distribution system. Average sales
realizations for the first six months of 1998 increased slightly as
compared to the prior year period primarily as a result of an increase
in the transfer price of phosphoric acid sold to Feed Ingredients. In
contrast, urea sales for the current six month period decreased $12.0
million from the prior year period. This was mainly due to a decrease
in volumes sold to a large customer as well as unfavorable pricing
conditions primarily resulting from China's exit from the market in
mid-1997.
Gross margins increased 14 percent to $187.3 million for the first six
months of 1998 compared to $164.6 million for the first six 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 six months primarily as a result of lower raw
material costs for purchased ammonia and sulphur.
<PAGE>
IMC Kalium
IMC Kalium's six-month net sales increased 27 percent to $380.1 million
compared to $298.2 million for the first six months of 1997. This
increase was due to both volume and average sales realization
improvements. Sales volumes increased over the prior year period by
virtue of increased export sales to China and Brazil as well as the
acquisition of Western Ag in September 1997 and GSL in April 1998.
Average sales realizations increased over the prior year as a result of
multiple price increases.
Gross margins increased 34 percent to $155.2 million for the first six
months of 1998 from $115.7 million for the same period one year ago,
primarily due to the impact of the higher volumes and increased average
realizations discussed above.
IMC Salt
The IMC Salt business unit was established in April 1998 concurrent
with the Harris Acquisition. See Note 1, "Acquisitions," of Notes to
Condensed Consolidated Financial Statements. Therefore, results for
the six months ended June 30, 1998 include only second quarter
activity. See "Three months ended June 30, 1998 vs. three months ended
June 30, 1997" discussion.
Other
The IMC Chemicals business unit was established in April 1998
concurrent with the Harris Acquisition; consequently results for the
six months ended June 30, 1998 include only second quarter activity.
See Note 1, "Acquisitions," of Notes to Condensed Consolidated
Financial Statements and "Three months ended June 30, 1998 vs. Three
months ended June 30, 1997."
The remaining offsets to the sales and gross margin increases 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. See Note 2, "Divestitures," of Notes to Condensed
Consolidated Financial Statements.
Key Statistics
The following table summarizes the Company's core business sales and
average selling prices for the six months ended June 30:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales volumes (in thousands of short tons)(a):
IMC-Agrico Crop Nutrients 3,919 3,568
IMC Kalium 4,722 4,475
IMC Salt 1,216 n/a
<PAGE>
Average price per ton(b):
DAP $175 $177
Potash 80 67
IMC Salt(c) 34 n/a
(a) Sales volumes include tons sold captively. IMC-Agrico Crop
Nutrients' volumes represent dry product tons, primarily DAP.
(b) Average prices represent sales made FOB mine/plant.
(c) Results reflect activity for the second quarter 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 $12.0 million,
or 17 percent, to $81.4 million, before special one-time charges of
$9.9 million, for the first six months of 1998 compared to $69.4
million for the first six months of 1997. This increase was primarily
due to the inclusion of the results of operations of businesses
acquired since June 1997 in the Company's six 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.
Other (Income) Expense, Net
Other income for the six months ended June 30, 1998 increased $9.1
million from the same period in the prior year. The increase was
primarily due to the following: (i) favorable foreign exchange rates;
(ii) increased interest income from interest-bearing cash balances;
(iii) income received from interest rate locks associated with January
1998 debt issuances; and (iv) 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.
Interest Expense
Interest expense totaled $77.0 million for the first six months of
1998, an increase of $58.8 million from the same period in the prior
year. The increase in interest expense was due to increased activity
under revolver loans along with debt assumed in conjunction with the
Harris Acquisition and the FTX Merger as well as the issuance of: (i)
$150.0 million 6.875 percent senior debentures due 2007 in July 1997;
(ii) $150.0 million 6.55 percent senior notes due 2005 in January 1998;
and (iii) $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 notes and the early payment of certain
unsecured term loans.
<PAGE>
Income Taxes
The effective income tax rate for the first six months of 1998 was 35.2
percent, compared to 34.4 percent for the same period in the prior
year.
Capital Resources and Liquidity
- -------------------------------
Liquidity and Operating Cash Flow
Cash generated from operating activities decreased $89.0 million in the
first six months of 1998 to $211.6 million. The decrease was primarily
due to: (i) a reduction in minority interest as a result of the
Company's increased ownership in IMC-Agrico Company (IMC-Agrico)
resulting from the FTX Merger; (ii) higher deferred income taxes
recorded in the current year as a result of the Harris Acquisition; and
(iii) lower accounts payable balances as a result of increased payments
of obligations. Also, when compared to December 31, 1997, the
Company's working capital ratio decreased to 0.7:1 at June 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 $365.7 million over
1997 levels primarily due to acquisitions and increased capital
expenditures, partially offset by proceeds from the sale of IMC Vigoro.
Acquisitions increased to $393.3 million for the current period
compared to $48.6 million for the same period one year ago. Proceeds
from the sale of IMC Vigoro were $44.8 million. See Note 1,
"Acquisitions," and Note 2, "Divestitures," of Notes to Condensed
Consolidated Financial Statements. Capital expenditures for the first
six months of 1998 increased $69.0 million when compared with the first
six months of the prior year primarily due to the following: (i)
Phosphate Resource Partners Limited Partnership's (PLP) share of
McMoRan Oil & Gas Company (MOXY) exploration and development costs of
$33.6 million; and (ii) enterprise-wide systems development
expenditures of $17.7 million.
Cash from financing activities increased $504.9 million for the first
six months of 1998 when compared with the comparable period in the
prior year from a use of funds of $169.0 million to a source of funds
of $335.9 million at June 30, 1998. This increase in funds available
was primarily due to higher net debt proceeds for the current year
period of $341.4 million and decreased stock repurchases of $102.0
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 59.0
percent from 42.4 percent at December 31, 1997, primarily as a result
of increased commercial paper borrowings and the prepayment of certain
unsecured loans in January 1998. See "Financing" below for further
details. Additionally, net PLP distributions decreased $59.6 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.
<PAGE>
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 June 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 June 30, 1998, commitment fees associated
with the Canadian Facility were 11.0 basis points.
During June 1998, $0.2 million of $355.9 million 10.75 percent senior
subordinated notes due 2003, and $3.1 million of $104.3 million 8.50
percent senior notes due 2000 were presented for purchase by holders of
the 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 Accounting Principles Board Opinion
No. 16.
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 higher-cost indebtedness. See Note 3,
"Extraordinary Charge - Debt Retirement," of Notes to Condensed
Consolidated Financial Statements.
In May 1997, the Company completed a tender offer to purchase portions
of its higher-cost senior notes. See Note 3, "Extraordinary Charge -
Debt Retirement," of Notes to Condensed Consolidated Financial
Statements.
Recent Development
In August 1998, the Company issued $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.
<PAGE>
QUARTERLY RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998
AND 1997
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 $ 659.5 $ 499.8 $1,989.4 $1,583.1
Cost of goods sold 480.9 364.8 1,442.9 1,143.2
-------- -------- -------- --------
Gross margins 178.6 135.0 546.5 439.9
Selling, general and administrative
expenses 38.0 35.9 129.3 105.3
Exploration expenses 0.6 - 19.5 -
-------- -------- -------- -------
Operating earnings 140.0 99.1 397.7 334.6
Interest expense 50.7 10.4 127.7 28.6
Other (income) expense, net 0.9 (2.6) (7.7) (2.1)
-------- -------- -------- -------
Earnings from continuing
operations before
minority interest 88.4 91.3 277.7 308.1
Minority interest 13.2 31.7 30.4 103.2
-------- -------- -------- -------
Earnings from continuing
operations before taxes 75.2 59.6 247.3 204.9
Provision for income taxes 26.5 22.7 87.0 72.7
-------- -------- -------- -------
<PAGE>
Earnings from continuing
operations before
extraordinary item 48.7 36.9 160.3 132.2
Earnings (loss) from
discontinued operations (10.9) (10.2) 12.5 21.9
-------- -------- -------- -------
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 from continuing
operations before
extraordinary item $ 0.43 $ 0.40 $ 1.40 $ 1.41
Earnings (loss) from
discontinued operations (0.10) (0.11) 0.11 0.23
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 from continuing
operations before
extraordinary item $ 0.43 $ 0.39 $ 1.40 $ 1.39
Earnings (loss) from
discontinued operations (0.10) (0.11) 0.10 0.23
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)
</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)
</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)
-------- -------
<PAGE>
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)
</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 $2,216.6 $2,162.9
Earnings from continuing operations before
extraordinary item 167.1 60.5
Net earnings 173.5 79.1
Diluted earnings per share:
Earnings from continuing operations before
extraordinary item $ 1.45 $ 0.51
Net earnings per share 1.51 0.67
</TABLE>
<PAGE>
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.
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.
Currently, the Company is also exploring strategic options,
including divestiture, for its IMC Chemicals business unit. 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
<PAGE>
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.
<PAGE>
5. Operating Segments
------------------
Segment information for 1998 and 1997 was as follows(a):
<TABLE>
<CAPTION>
IMC-Agrico IMC IMC
Phosphates Kalium Chemicals Other(c) Total
----------- ------- ---------- --------- ------
Three months ended September 30, 1998
<S> <C> <C> <C> <C> <C>
Net sales from
external customers $ 316.3 $ 148.1 $ 103.0 $ 92.1 $ 659.5
Intersegment net sales 36.4 26.3 - 0.8 63.5
Gross margins 86.4 70.9 14.7 6.6 178.6
Operating earnings 77.2 64.3 8.9 (10.4) 140.0
Total assets at
September 30, 1998(b) 1,818.9 1,324.0 623.8 2,972.5 6,739.2
Nine months ended September 30, 1998
Net sales from
external customers $1,039.5 $ 484.1 $ 205.8 $ 260.0 $1,989.4
Intersegment net sales 134.3 70.4 - 3.8 208.5
Gross margins 273.7 226.1 27.0 19.7 546.5
Operating earnings 244.7 205.1 15.1 (67.2) 397.7
IMC-Agrico IMC IMC
Phosphates Kalium Chemicals Other(c) Total
----------- ------- ---------- --------- ------
Three months ended September 30, 1997
Net sales from
external customers $ 314.7 $ 134.6 $ - $ 50.5 $ 499.8
Intersegment net sales 39.6 19.9 - 8.6 68.1
Gross margins 77.9 54.1 - 3.0 135.0
Operating earnings 68.3 48.4 - (17.6) 99.1
Total assets at
September 30, 1997(b) 1,694.7 847.1 - 1,104.3 3,646.1
Nine months ended September 30, 1997
Net sales from
external customers $ 985.4 $ 394.0 $ - $ 203.7 $1,583.1
Intersegment net sales 128.9 58.7 - 30.6 218.2
Gross margins 242.5 169.8 - 27.6 439.9
Operating earnings 211.2 153.6 - (30.2) 334.6
(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. The
operating results of IMC AgriBusiness have not been included in
the segment information provided as they have been classified as
a discontinued operation. However, IMC AgriBusiness' assets have
been included as part of total assets in the Other column.
<PAGE>
(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>
<PAGE>
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.
8. Discontinued Operations
-----------------------
In December 1998, the Company's Board of Directors adopted a formal
plan to sell its IMC AgriBusiness retail and wholesale distribution
operations. The Company anticipates the sale to be completed in the
first quarter of 1999. The estimated loss on disposal, net of
income tax benefits, is $60.0 million and will be recorded in the
fourth quarter of 1998. The condensed consolidated statement of
earnings of the Company has been restated to report separately the
operating results of IMC AgriBusiness as discontinued operations.
Interest expense has been allocated to discontinued operations based
on the portion of the Company's short-term borrowing program that is
specifically attributable to IMC AgriBusiness and amounted to $9.9
million and $9.8 million for the nine months ended September 30,
1998 and 1997, respectively.
Income taxes associated with the discontinued operations of IMC
AgriBusiness were $6.8 million and $15.9 million for the nine months
ended September 30, 1998 and 1997, respectively. For the nine months
ended September 30, 1998 and 1997, IMC AgriBusiness' revenues were
$666.0 million and $728.6 million, respectively.
<PAGE>
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 $659.5
million and gross margins were $178.6 million. Earnings from
continuing operations, before an extraordinary charge, were $48.7
million, or $0.43 per share. A loss from discontinued operations of
$10.9 million, or $0.10 per share, and 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 $499.8
million and gross margins were $135.0 million. Earnings from
continuing operations were $36.9 million, or $0.39 per share. A loss
from discontinued operations of $10.2 million, or $0.11 per share,
reduced net earnings to $26.7 million, or $0.28 per share.
Net sales increased 32 percent from the prior year third quarter while
gross margins increased 32 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.
<PAGE>
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 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.
<PAGE>
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 $50.7 million in the current quarter, an
increase of $40.3 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 $3.5 million from the
same period last year to $0.9 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 continuing operations for the current
quarter was 35.2 percent, compared to 38.1 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 $1,989.4
million and gross margins, before special one-time charges, were $550.6
million. Earnings from continuing operations, before an extraordinary
charge and special one-time charges, were $169.4 million, or $1.47 per
share. Earnings from discontinued operations of $12.5 million, or
$0.10 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 $1,583.1
million, gross margins were $439.9 million and earnings from continuing
operations, before an extraordinary charge, were $132.2 million, or
$1.39 per share. Earnings from discontinued operations of $21.9
million, or $0.23 per share, partially offset by an extraordinary
charge of $3.3 million, or $0.03 per share, related to the early
extinguishment of debt, increased net earnings to $150.8 million, or
$1.59 per share.
Net sales for the nine months of 1998 increased 26 percent when
compared to the nine months of the prior year period while gross
margins, before special one-time charges, increased 25 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 was 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.
<PAGE>
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.
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 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.
<PAGE>
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.
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>
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $14.1 million,
or 13 percent, to $119.4 million, before special one-time charges of
$9.9 million, for the first nine months of 1998 compared to $105.3
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 $127.7 million for the first nine months of
1998, an increase of $99.1 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
$5.6 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 continuing operations for the nine
months of 1998 was 35.2 percent, compared to 35.5 percent for the same
period in the prior year.
<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.
<PAGE>
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.
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.
<PAGE>
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.
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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 7. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description
----------- ---------------------------------------
11 Earnings Per Share Computation
12 Ratio of Earnings to Fixed Charges
27 Restated 1997, 1996 and 1995 Annual
Financial Data Schedule
27.1 Restated 1998 Quarterly Financial
Data Schedule
27.2 Restated 1997 Quarterly Financial
Data Schedule
27.3 Restated 1996 Quarterly Financial
Data Schedule
SIGNATURES
Pursuant to the requirements of 13 or 15(d) 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.
---------------
(Registrant)
/s/ J.Bradford James
-------------------------------
J.Bradford James
Senior Vice President and
Chief Financial Officer
Date: January 13, 1999
- -----------------------------------------------------------------------
(1) Except for statements of historical fact contained herein, the
statements appearing under "Management's Discussion and Analysis
of Results of Operations and Financial Condition," presented
herein constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Factors
<PAGE>
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: the effect of general
business and economic conditions; conditions in and policies of
the agriculture industry; risks associated with investments and
operations in foreign jurisdictions and any future international
expansion, including those related to economic, political and
regulatory policies of local governments and laws or policies of
the United States and Canada; changes in governmental laws and
regulations affecting environmental compliance, taxes and other
matters impacting the Company; the risks attendant with mining
operations; the potential impacts of increased competition in the
markets the Company operates within; risks attendant with supply
of and demand for oil and gas; the Company's ability to integrate
certain acquired businesses and realize certain expected
acquisition-related synergies and the risk factors reported from
time to time in the reports filed by the Company with the SEC.
<PAGE>
EXHIBIT 11
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 from continuing
operations before
extraordinary item $ 48.7 $ 36.9 $ 160.3 $ 132.2
Earnings (loss)
from discontinued
operations (10.9) (10.2) 12.5 21.9
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 from continuing
operations before
extraordinary item $ 0.43 $ 0.39 $ 1.40 $ 1.39
Earnings (loss) from
discontinued
operations (0.10) (0.11) 0.10 0.23
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).
<PAGE>
EXHIBIT 12
IMC Global Inc.
Computation of Ratio of Earnings to Fixed Charges
Years Ended December 31,
--------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
Fixed charges:
Interest charges $ 40.2 $ 43.6 $ 57.8 $ 69.4 $ 70.1
Rent expense 6.0 5.8 5.0 4.7 4.4
------- ------- ------- ------- -------
Total fixed charges $ 46.2 $ 49.4 $ 62.8 $ 74.1 $ 74.5
======= ======= ======= ======= =======
Earnings:
Net earnings (loss) $ 62.9 $ 127.1 $ 215.5 $ 113.9 $(151.1)
Extraordinary charge 24.9 8.1 3.5 4.4 25.2
Earnings from discontinued
operations (18.0) (13.5) (23.8) (24.4) (18.9)
Cumulative effect of
accounting change - - - 5.9 -
Provision (credit) for
income taxes 30.4 81.3 112.7 81.1 (88.1)
Minority interest 124.4 185.7 163.6 106.8 5.3
Interest charges 40.2 43.6 57.8 69.4 70.1
Rent expense 6.0 5.8 5.0 4.7 4.4
------- ------- ------- ------- -------
Total earnings
(loss) $ 270.8 $ 438.1 $ 534.3 $ 361.8 $(153.1)
======= ======= ======= ======= =======
Ratio of earnings (loss)
to fixed charges 5.86 8.87 8.51 4.88 (2.06)
Adjusted ratio of
earnings to
fixed charges(1) 9.84 10.59 8.51 4.88 0.21
(1) The adjusted ratio of earnings to fixed charges for the year ended
December 31, 1997 excludes a charge of $183.7 million relating to
the write down of the historical carrying value of the Company's
25 percent interest in Main Pass 299. The adjusted ratio of
earnings to fixed charges for the year ended December 31, 1996
excludes a charge of $84.9 million relating to the merger of The
Vigoro Corporation into a wholly-owned subsidiary of the Company.
The adjusted ratio of earnings to fixed charges for the year ended
December 31,1993 excludes a charge of $169.1 million relating to
the settlement of litigation resulting from a May 1991 explosion
at a nitroparaffins plant in Sterlington, Louisiana.
<TABLE> <S> <C>
<PAGE>
<S> <C> <C> <C>
<ARTICLE> 5 5 5
<RESTATED>
<MULTIPLIER> 1000
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 21,800 (7,400) (2,700)
<SECURITIES> 87,900 70,700 138,400
<RECEIVABLES> 295,600 234,700 295,200
<ALLOWANCES> 7,500 7,900 8,300
<INVENTORY> 592,800 571,500 501,800
<CURRENT-ASSETS> 1,062,200 933,600 1,015,700
<PP&E> 4,462,100 4,241,400 4,111,400
<DEPRECIATION> 1,956,100 1,860,000 1,769,100
<TOTAL-ASSETS> 4,673,900 3,485,200 3,521,800
<CURRENT-LIABILITIES> 673,100 351,000 508,100
<BONDS> 1,235,200 656,800 741,700
<COMMON> 124,600 101,600 96,900
0 0 0
0 0 0
<OTHER-SE> 1,811,100 1,224,600 993,500
<TOTAL-LIABILITY-AND-EQUITY> 4,673,900 3,485,200 3,521,800
<SALES> 2,116,000 2,143,300 2,132,700
<TOTAL-REVENUES> 2,116,000 2,143,300 2,132,700
<CGS> 1,541,100 1,547,000 1,499,800
<TOTAL-COSTS> 1,856,600 1,716,900 1,618,100
<OTHER-EXPENSES> 119,000 179,800 148,900
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 40,200 43,600 57,800
<INCOME-PRETAX> 100,200 203,000 307,900
<INCOME-TAX> 30,400 81,300 112,700
<INCOME-CONTINUING> 69,800 121,700 195,200
<DISCONTINUED> 18,000 13,500 23,800
<EXTRAORDINARY> (24,900) (8,100) (3,500)
<CHANGES> 0 0 0
<NET-INCOME> 62,900 127,100 215,500
<EPS-PRIMARY><F1> 0.67 1.37 2.37
<EPS-DILUTED><F1> 0.67 1.31 2.30
<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>
<TABLE> <S> <C>
<PAGE>
<S> <C> <C> <C>
<ARTICLE> 5 5 5
<RESTATED>
<MULTIPLIER> 1000
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998 SEP-30-1998
<CASH> 5,100 36,600 33,800
<SECURITIES> 118,700 103,200 37,800
<RECEIVABLES> 306,800 509,200 450,800
<ALLOWANCES> 8,800 11,800 11,800
<INVENTORY> 679,500 652,700 714,700
<CURRENT-ASSETS> 1,173,200 1,406,800 1,331,300
<PP&E> 4,544,800 6,157,400 6,379,300
<DEPRECIATION> 2,000,300 2,476,200 2,517,400
<TOTAL-ASSETS> 4,843,700 6,741,100 6,739,200
<CURRENT-LIABILITIES> 627,300 1,942,800 1,558,200
<BONDS> 1,393,200 1,639,100 1,965,200
<COMMON> 125,000 125,000 125,000
0 0 0
0 0 0
<OTHER-SE> 1,853,700 1,912,300 1,924,100
<TOTAL-LIABILITY-AND-EQUITY> 4,843,700 6,741,100 6,739,200
<SALES> 536,500 1,329,900 1,989,400
<TOTAL-REVENUES> 536,500 1,329,900 1,989,400
<CGS> 382,600 962,000 1,442,900
<TOTAL-COSTS> 429,500 1,072,200 1,591,700
<OTHER-EXPENSES> 1,500 8,600 22,700
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 21,200 77,000 127,700
<INCOME-PRETAX> 84,300 172,100 247,300
<INCOME-TAX> 29,600 60,500 87,000
<INCOME-CONTINUING> 54,700 111,600 160,300
<DISCONTINUED> (6,700) 23,400 12,500
<EXTRAORDINARY> (2,700) (2,700) (3,600)
<CHANGES> 0 0 0
<NET-INCOME> 45,300 132,300 169,200
<EPS-PRIMARY><F1> 0.40 1.16 1.48
<EPS-DILUTED><F1> 0.40 1.16 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>
<TABLE> <S> <C>
<PAGE>
<S> <C> <C> <C>
<ARTICLE> 5 5 5
<RESTATED>
<MULTIPLIER> 1000
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 11,000 20,600 21,900
<SECURITIES> 42,100 22,600 52,500
<RECEIVABLES> 323,000 369,300 272,400
<ALLOWANCES> 9,100 6,800 8,800
<INVENTORY> 681,900 534,200 572,300
<CURRENT-ASSETS> 1,117,300 1,014,400 983,400
<PP&E> 4,277,500 4,337,200 4,404,800
<DEPRECIATION> 1,897,500 1,928,000 1,959,100
<TOTAL-ASSETS> 3,675,100 3,611,600 3,646,100
<CURRENT-LIABILITIES> 503,500 421,800 409,400
<BONDS> 760,200 694,800 809,900
<COMMON> 101,700 101,800 101,900
0 0 0
0 0 0
<OTHER-SE> 1,172,700 1,238,100 1,206,500
<TOTAL-LIABILITY-AND-EQUITY> 3,675,100 3,611,600 3,646,100
<SALES> 524,900 1,083,300 1,583,100
<TOTAL-REVENUES> 524,900 1,083,300 1,583,100
<CGS> 375,600 778,400 1,143,200
<TOTAL-COSTS> 411,700 847,800 1,248,500
<OTHER-EXPENSES> 34,300 72,000 101,100
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 9,600 18,200 28,600
<INCOME-PRETAX> 69,300 145,300 204,900
<INCOME-TAX> 25,800 50,000 72,700
<INCOME-CONTINUING> 43,500 95,300 132,200
<DISCONTINUED> (4,400) 32,100 21,900
<EXTRAORDINARY> 0 (3,300) (3,300)
<CHANGES> 0 0 0
<NET-INCOME> 39,100 124,100 150,800
<EPS-PRIMARY><F1> 0.41 1.31 1.60
<EPS-DILUTED><F1> 0.41 1.30 1.59
<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>
<TABLE> <S> <C>
<PAGE>
<S> <C> <C> <C>
<ARTICLE> 5 5 5
<RESTATED>
<MULTIPLIER> 1000
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996
<CASH> 2,100 (4,700) 1,600
<SECURITIES> 47,100 14,300 52,900
<RECEIVABLES> 265,600 380,600 232,100
<ALLOWANCES> 4,900 3,600 7,700
<INVENTORY> 609,200 476,700 514,400
<CURRENT-ASSETS> 1,023,900 918,200 876,000
<PP&E> 4,101,500 4,123,600 4,171,200
<DEPRECIATION> 1,756,900 1,772,300 1,821,800
<TOTAL-ASSETS> 3,526,200 3,436,800 3,386,300
<CURRENT-LIABILITIES> 608,500 366,400 328,700
<BONDS> 696,100 736,700 717,800
<COMMON> 97,500 97,900 98,000
0 0 0
0 0 0
<OTHER-SE> 986,700 1,058,400 1,075,900
<TOTAL-LIABILITY-AND-EQUITY> 3,526,200 3,436,800 3,386,300
<SALES> 568,800 1,105,300 1,603,000
<TOTAL-REVENUES> 568,800 1,105,300 1,603,000
<CGS> 402,600 806,800 1,168,700
<TOTAL-COSTS> 473,900 912,100 1,304,200
<OTHER-EXPENSES> 61,300 101,100 140,600
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 13,600 24,700 36,400
<INCOME-PRETAX> 20,000 67,400 121,800
<INCOME-TAX> 17,600 31,600 51,600
<INCOME-CONTINUING> 2,400 35,800 70,200
<DISCONTINUED> (10,700) 22,300 16,500
<EXTRAORDINARY> 0 0 (7,500)
<CHANGES> 0 0 0
<NET-INCOME> (8,300) 58,100 79,200
<EPS-PRIMARY><F1> (0.09) 0.63 0.86
<EPS-DILUTED><F1> (0.09) 0.60 0.82
<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>
