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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission file number 1-9759
IMC Global Inc.
(Exact name of Registrant as specified in its charter)
Delaware 36-3492467
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 Sanders Road
Northbrook, Illinois 60062
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (847) 272-9200
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X . No .
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock as of the
latest practicable date: 114,476,119 shares, excluding 10,676,276
treasury shares as of August 9, 1999.
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PART I.FINANCIAL INFORMATION
Item 1.Financial Statements.
The accompanying interim condensed consolidated financial
statements of IMC Global Inc. (Company) do not include all
disclosures normally provided in annual financial statements.
These financial statements, which should be read in conjunction
with the consolidated financial statements contained in the
Company's Annual Report on Form 10-K for the year ended December
31, 1998, 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 Notes to Condensed
Consolidated Financial Statements. Certain 1998 amounts have
been reclassified to conform to the 1999 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,
1999 1998 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 765.4 $ 793.4 $1,534.8 $1,329.9
Cost of goods sold 582.7 579.4 1,141.2 962.0
-------- -------- -------- --------
Gross margins 182.7 214.0 393.6 367.9
Selling, general and
administrative expenses 43.3 53.9 85.6 91.3
Exploration expenses 1.9 9.4 3.4 18.9
-------- -------- -------- --------
Operating earnings 137.5 150.7 304.6 257.7
Interest expense 45.5 55.8 92.8 77.0
Other (income) expense, net (3.1) (4.7) (5.6) (8.6)
-------- -------- -------- --------
Earnings from continuing
operations before
minority interest 95.1 99.6 217.4 189.3
Minority interest 11.6 11.8 24.8 17.2
-------- -------- -------- --------
Earnings from continuing
operations before taxes 83.5 87.8 192.6 172.1
Provision for income taxes 31.3 30.9 72.2 60.5
-------- -------- -------- --------
Earnings from continuing
operations before extraordinary
item and cumulative effect of a
change in accounting principle 52.2 56.9 120.4 111.6
Earnings from discontinued
operations - 30.1 - 23.4
-------- -------- -------- --------
Earnings before extraordinary item
and cumulative effect of a change
in accounting principle 52.2 87.0 120.4 135.0
Extraordinary charge - debt
retirement - - - (2.7)
Cumulative effect of a change in
accounting principle - - (7.5) -
-------- -------- -------- --------
Net earnings $ 52.2 $ 87.0 $ 112.9 $ 132.3
======== ======== ======== ========
Basic earnings per share:
Earnings from continuing
operations before extraordinary
item and cumulative effect of a
change in accounting principle $ 0.46 $ 0.50 $ 1.06 $ 0.98
Earnings from discontinued
operations - 0.26 - 0.20
Extraordinary charge - debt
retirement - - - (0.02)
Cumulative effect of a change in
accounting principle - - (0.07) -
-------- -------- -------- --------
Net earnings per share $ 0.46 $ 0.76 $ 0.99 $ 1.16
======== ======== ======== ========
Basic weighted average number of
shares outstanding 114.4 114.3 114.3 114.1
Diluted earnings per share:
Earnings from continuing
operations before extraordinary
item and cumulative effect of a
change in accounting principle $ 0.46 $ 0.50 $ 1.06 $ 0.98
Earnings from discontinued
operations - 0.26 - 0.20
Extraordinary charge - debt
retirement - - - (0.02)
Cumulative effect of a change in
accounting principle - - (0.07) -
-------- -------- -------- --------
Net earnings per share $ 0.46 $ 0.76 $ 0.99 $ 1.16
======== ======== ======== ========
Diluted weighted average number of
shares outstanding 114.6 115.0 114.6 114.8
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
<CAPTION
June 30, December 31,
Assets 1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 64.9 $ 110.6
Receivables, net 325.7 421.5
Inventories, net 490.5 580.6
Assets of discontinued operations held
for sale - 273.3
Deferred income taxes 91.1 91.1
Other current assets 16.8 5.5
---------- ----------
Total current assets 989.0 1,482.6
Property, plant and equipment, net 3,752.0 3,697.4
Other assets 1,220.6 1,276.9
---------- ----------
Total assets $ 5,961.6 $ 6,456.9
========== ==========
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------
Current liabilities:
Accounts payable $ 176.2 $ 255.9
Accrued liabilities 246.5 240.9
Short-term debt and current maturities
of long-term debt 19.1 408.3
---------- ----------
Total current liabilities 441.8 905.1
Long-term debt, less current maturities 2,480.6 2,638.7
Deferred income taxes 574.0 566.6
Other noncurrent liabilities 484.6 486.1
Stockholders' equity:
Common stock, $1 par value, authorized
300,000,000 shares; issued 125,150,730
and 125,072,811 shares at June 30 and
December 31, respectively 125.1 125.0
Capital in excess of par value 1,697.8 1,697.3
Retained earnings 493.6 400.6
Accumulated other comprehensive income (41.4) (66.3)
Treasury stock, at cost, 10,676,276 and
10,738,520 shares at June 30 and
December 31, respectively (294.5) (296.2)
---------- ----------
Total stockholders' equity 1,980.6 1,860.4
---------- ----------
Total liabilities and stockholders'
equity $ 5,961.6 $ 6,456.9
========== ==========
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Six months ended
June 30,
1999 1998
- -------------------------------------------------------------------
Cash Flows from Operating Activities
<S> <C> <C>
Net earnings $ 112.9 $ 132.3
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion and amortization 135.3 124.6
Minority interest 24.8 17.2
Deferred income taxes 7.4 (56.7)
Other charges and credits, net 14.1 (117.4)
Changes in:
Receivables 95.8 (53.8)
Inventories 90.1 46.7
Other current assets (1.8) 43.0
Accounts payable (79.7) (66.5)
Accrued liabilities 14.2 105.2
--------- ---------
Net cash provided by operating activities 413.1 174.6
--------- ---------
Cash Flows from Investing Activities
Capital expenditures (156.8) (174.0)
Acquisitions, net of cash acquired - (393.3)
Proceeds from sale of business 263.9 44.8
Proceeds from sale of investment 12.8 -
Other (5.7) 5.1
---------- ---------
Net cash provided by (used in) investing
activities 114.2 (517.4)
---------- ---------
Net cash provided (used) before financing
activities 527.3 (342.8)
---------- ---------
Cash Flows from Financing Activities
Cash distributions to the unitholders of
Phosphate Resource Partners Limited
Partnership (6.5) -
Payments of long-term debt (90.0) (842.6)
Proceeds from issuance of long-term
debt, net 3.0 912.1
Changes in short-term debt, net (463.7) 332.0
Decrease in securitization of accounts
receivable, net - (15.8)
Stock options exercised and restricted stock
awards 2.5 8.6
Cash dividends paid (18.3) (18.3)
Other - (3.1)
---------- ---------
Net cash provided by (used in) financing
activities (573.0) 372.9
---------- ---------
Net change in cash and cash equivalents (45.7) 30.1
Cash and cash equivalents - beginning of
period 110.6 109.7
---------- ---------
Cash and cash equivalents - end of period $ 64.9 $ 139.8
========== =========
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
1.Acquisitions
------------
In April 1998, the Company acquired 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 $1.0
billion of debt. Harris 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 have
been included in the consolidated financial statements since the
date of acquisition. The purchase price 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 $326.0 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.
2.Restructuring Plan
------------------
During the fourth quarter of 1998, the Company developed and began
execution of a plan to improve profitability (Restructuring Plan).
The Restructuring Plan was comprised of four major initiatives: (i)
the combination of the potash and phosphates business units in an
effort to realize certain operating and staff reduction synergies;
(ii) restructuring of the phosphate rock mining, concentrated
phosphate and salt production/distribution operations and processes
in an effort to reduce costs; (iii) simplification of the current
business activities by eliminating businesses not deemed part of the
Company's core competencies; and (iv) reduction of operational and
corporate headcount. In conjunction with the Restructuring Plan,
the Company recorded pre-tax charges totaling $193.3 million ($162.0
million net of minority interest) in the fourth quarter of 1998.
The following table summarizes the activity during the period
January 1, 1999 to June 30, 1999 of the accruals recorded in
conjunction with the Restructuring Plan.
<TABLE>
<CAPTION>
Accrual at Accrual at
January 1, 1999 Cash Paid June 30, 1999
--------------- --------- -------------
<S> <C> <C> <C>
Non-employee exit costs:
Demolition and closure $ 33.6 $ 2.3 $ 31.3
costs
Idled leased
transportation equipment 13.2 2.2 11.0
Other 5.3 3.1 2.2
Employee headcount reductions:
Severance benefits 17.4 16.3 1.1
-------- -------- ---------
Total $ 69.5 $ 23.9 $ 45.6
======== ======== =========
</TABLE>
The timing and costs of the Restructuring Plan are generally on
schedule with the original time and dollar estimates disclosed in
the fourth quarter of 1998. During the first six months of 1999, 62
employees, who had accepted a voluntary retirement plan as of
December 31, 1998, left the Company in accordance with their target
retirement date.
3.Discontinued Operations
-----------------------
In April 1999, the Company completed the sale of IMC AgriBusiness
(AgriBusiness) and received proceeds of $263.9 million which were
used to reduce the amount of the Company's outstanding indebtedness.
The final sale proceeds still remain subject to the settlement of
certain items outlined in the definitive sales agreement. The
Company expects final settlement during the third quarter of 1999.
4.Divestitures
------------
In June 1998, the Company completed the sale of its IMC Vigoro
business unit which consisted primarily of consumer lawn and garden
and professional products for $44.8 million in cash. In connection
with this transaction, the Company recorded a non-recurring charge
of approximately $14.0 million, $9.1 million after tax benefits, or
$0.08 per share. Of the $14.0 million charge, $4.1 million was
included in Cost of goods sold and $9.9 million was included in
Selling, general, and administrative expenses in the Consolidated
Statement of Operations.
5.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 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.
6.Change in Accounting Principle
------------------------------
In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position (SOP) 98-5, "Reporting on
the Costs of Start-Up Activities," which mandated that costs related
to start-up activities be expensed as incurred, effective January 1,
1999. Prior to the adoption of SOP 98-5, the Company capitalized
its start-up costs (i.e., pre-operating costs). The Company adopted
the provisions of SOP 98-5 in its financial statements beginning on
January 1, 1999 and in accordance with SOP 98-5 recorded a charge
for the cumulative effect of an accounting change of $7.5 million or
$0.07 per share, net of tax benefits and minority interest, in order
to expense start-up costs that had been previously capitalized. The
future impact of SOP 98-5 is not expected to be material to the
Company's operating results.
7.Operating Segments
------------------
Segment information for 1999 and 1998 was as follows(a):
<TABLE>
<CAPTION>
IMC-Agrico IMC IMC IMC
Phosphates Kalium Salt Chemicals Other(b) Total
---------- ------ ---- --------- -------- -----
Three months ended June 30, 1999
<S> <C> <C> <C> <C> <C> <C>
Net sales from
external
customers $373.7 $197.2 $ 47.9 $101.3 $ 45.3 $ 765.4
Intersegment net
sales 20.7 5.3 0.5 - - 26.5
Gross margins 80.3 69.7 9.5 12.3 10.9 182.7
Operating
earnings (loss) 71.3 65.4 (0.1) 5.6 (4.7) 137.5
Six months ended June 30, 1999
Net sales from
external customers $711.5 $358.4 $172.9 $201.7 $ 90.3 $1,534.8
Intersegment net
sales 57.7 31.1 1.1 - - 89.9
Gross margins 167.0 139.6 54.2 23.8 9.0 393.6
Operating
earnings (loss) 148.9 130.3 36.1 9.8 (20.5) 304.6
IMC-Agrico IMC IMC IMC
Phosphates Kalium Salt Chemicals Other(b) Total
---------- ------ ---- --------- -------- -----
Three months ended June 30, 1998
Net sales from
external customers $407.0 $185.8 $ 40.9 $102.8 $ 56.9 $ 793.4
Intersegment net
sales 49.6 18.7 - - - 68.3
Gross margins(c) 116.0 78.6 7.2 12.3 4.0 218.1
Operating
earnings (loss)(d) 106.4 70.9 (0.9) 6.2 (17.9) 164.7
Six months ended June 30, 1998
Net sales from
external customers $723.2 4336.0 $ 43.3 $102.8 $124.6 $1,329.9
Intersegment net
sales 97.9 44.1 - - 3.0 145.0
Gross margins(c) 187.3 155.4 7.3 12.3 9.7 372.0
Operating
earnings (loss)(d) 167.5 141.1 (1.6) 6.2 (41.5) 271.7
(a) The operating results and assets of Great Salt Lake Minerals
(GSL), IMC Salt (Salt) and IMC Chemicals (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." The operating results of AgriBusiness have
not been included in the segment information provided as this
business had been classified as discontinued operations until
its divestiture in April 1999. See Note 3, "Discontinued
Operations."
(b) Segment information below the quantitative thresholds is
attributable to two business units (IMC-Agrico Feed Ingredients
(Feed Ingredients) and IMC Vigoro) and corporate headquarters.
The Company produces and markets animal feed ingredients through
Feed Ingredients. 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 4,
"Divestitures." Corporate headquarters includes the elimination
of inter-business unit transactions and oil and gas activities
through its interest in Phosphate Resource Partners Limited
Partnership.
(c) Before non-recurring charges of $4.1 million related to the sale
of IMC Vigoro in June 1998. See Note 4, "Divestitures."
(d) Before non-recurring charges of $14.0 million related to the
sale of IMC Vigoro in June 1998. See Note 4, "Divestitures."
</TABLE>
8.Comprehensive Income
--------------------
Comprehensive income, net of taxes, was as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Comprehensive income:
Net earnings $ 52.2 $ 87.0 $112.9 $132.3
Foreign currency translation
adjustment 13.3 (18.4) 24.9 (16.0)
------- ------- ------ ------
Total comprehensive income
for the period $ 65.5 $ 68.6 $137.8 $116.3
======= ======= ====== ======
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.(1)
Results of Operations
Three months ended June 30, 1999 vs. three months ended June
30, 1998
Overview
Net sales for the second quarter of 1999 were $765.4 million and
gross margins were $182.7 million. Earnings from continuing
operations for the second quarter of 1999 were $52.2 million, or
$0.46 per share. Net sales for the second quarter of 1998 were
$793.4 million and gross margins, excluding non-recurring
charges of $4.1 million, related to the divestiture of IMC
Vigoro, were $218.1 million. Earnings from continuing
operations for the second quarter of 1998, excluding non-
recurring charges of $9.1 million, or $0.08 per share, related
to the divestiture of IMC Vigoro, were $66.0 million, or $0.58
per share. Including the non-recurring charges, earnings from
continuing operations were $56.9 million, or $0.50 per share.
Net earnings for the second quarter of 1998 of $87.0 million, or
$0.76 per share included earnings from discontinued operations
of $30.1 million, or $0.26 per share.
Net sales for the second quarter of 1999 decreased four percent
from the prior year second quarter while gross margins, before
non-recurring charges, decreased 16 percent. The decrease in
sales was mainly attributable to reduced domestic sales volumes
and prices at IMC-Agrico Phosphates (Phosphates) as well as the
absence of sales in the current quarter for IMC Vigoro, which
was divested in June 1998. See Note 4, "Divestitures," of Notes
to Condensed Consolidated Financial Statements. These decreases
were partially offset by higher sales at Salt resulting from
increased demand across all product lines and improved sales,
both to domestic and international customers, at Feed
Ingredients.
The gross margin decrease was primarily attributable to reduced
sales volumes and prices at Phosphates, as discussed above, and
lower margins at IMC Kalium (Kalium) caused by plant shutdowns
to balance supply with demand.
The operating results of the Company's significant business
units are discussed in more detail below.
IMC-Agrico Phosphates
Phosphates' net sales for the second quarter of 1999 declined 14
percent to $394.4 million compared to $456.6 million for the
same period last year largely due to decreased sales volumes and
lower average sales realizations. Decreased shipments of
granular monoammonium phosphate (GMAP) and granular triple
superphosphate (GTSP), partially offset by a slight increase in
shipments of diammonium phosphate (DAP) reduced sales by $35.3
million. These decreased volumes were mainly attributable to
lower international shipments to certain countries as well as
lower domestic shipments resulting from cutbacks in overall
application rates coupled with aggressively priced imports.
Lower average concentrate sales prices, driven by lower average
DAP realizations, reduced sales by $16.2 million. Additionally,
sales of uranium, ammonia and urea decreased $3.7 million, $2.2
million and $1.9 million, respectively.
Gross margins decreased 31 percent to $80.3 million for the
second quarter of 1999 compared to $116.0 million last year,
mainly due to higher production costs as well as the lower
volumes and prices discussed above. Production costs increased
compared to the prior year's second quarter primarily as a
result of higher idle plant costs, partially offset by reduced
spending and lower raw material prices.
IMC Kalium
Kalium's net sales were essentially unchanged at $202.5 million
in the second quarter of 1999 as compared to $204.5 million in
the prior year quarter.
Gross margins decreased 11 percent to $69.7 million for the
second quarter of 1999 from $78.6 million in the same period one
year ago. Gross margins were negatively impacted by a change in
product mix as well as by plant shutdowns in the current quarter
in an effort to balance supply with demand. As a result of the
shutdowns, current quarter production costs increased eight
percent.
IMC Salt
Salt's net sales increased 18 percent to $48.4 million in the
second quarter of 1999 compared to $40.9 million in the second
quarter of 1998. This increase in sales was attributable to
higher demand for salt products across all product lines,
coupled with a new midwest marketing strategy and the addition
of two distributorships in the United Kingdom.
Gross margins increased 32 percent to $9.5 million for the
second quarter of 1999 from $7.2 million in the same period one
year ago as a result of increased sales volumes, particularly
for consumer products and restocking rock salt with deicing
customers in the United Kingdom.
Other
The Company's net sales and gross margins in the current quarter
also included results for Feed Ingredients and Chemicals. Sales
at Chemicals of $101.3 million remained essentially unchanged
from prior period sales of $102.8 million. Gross margins at
Chemicals for the second quarter of 1999 remained unchanged at
$12.3 million. Sales and gross margins at Feed Ingredients for
the second quarter of 1999 increased ten percent and 52 percent,
respectively, to $41.9 million and $9.4 million, respectively,
as compared to the prior year period. The Feed Ingredients
increases were driven by improved sales, both to domestic and
international customers, and positive leveraging of lower
production costs related to increased production volumes.
Partially offsetting these increases in current 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 its divestiture during the second quarter of 1998.
See Note 4, "Divestitures" and Note 7, "Operating Segments," of
Notes to Condensed Consolidated Financial Statements.
Key Statistics
The following table summarizes the Company's core business sales
volumes and average selling prices for the three months ended
June 30:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Sales volumes (in thousands of short tons)(a):
IMC-Agrico Phosphates 1,973 2,161
IMC Kalium 2,355 2,435
IMC Salt 1,435 1,216
Average price per ton(b):
DAP $168 $178
Potash 85 82
Salt 34 34
(a) Sales volumes include tons sold captively. Phosphates'
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 decreased $0.7
million, or two percent, to $43.3 million, before non-recurring
charges of $9.9 million related to the divestiture of IMC Vigoro
in June 1998. See Note 4, "Divestitures," of Notes to Condensed
Consolidated Financial Statements.
Exploration Expenses
The Company participates in the exploration and production of
oil and gas (Exploration Program) through its ownership of PLP.
Exploration expenses relate to the Exploration Program and are
largely comprised of geological and geophysical expenses.
Exploration expenses totaled $1.9 million in the second quarter
of 1999, a decrease of $7.5 million from the same period in the
prior year as a result of the absence of dry hole costs in the
current quarter compared to $7.1 million of dry hole costs for
the same period in 1998.
Interest Expense
Interest expense totaled $45.5 million in the current quarter, a
decrease of $10.3 million from the same period in the prior
year. The decrease in interest expense was the result of a
decrease in outstanding debt primarily as a result of the
paydown of debt assumed in connection with the Harris
Acquisition.
Six months ended June 30, 1999 vs. six months ended June 30,
1998
Overview
Net sales for the first six months of 1999 were $1,534.8 million
and gross margins were $393.6 million. Earnings from continuing
operations before a cumulative effect of a change in accounting
principle, were $120.4 million, or $1.06 per share. A cumulative
effect of a change in accounting principle of $7.5 million, or
$0.07 per share, reduced net earnings to $112.9 million, or
$0.99 per share. Net sales for the first six months of 1998
were $1,329.9 million and gross margins, excluding non-recurring
charges of $4.1 million, related to the divestiture of IMC
Vigoro, were $372.0 million. Earnings from continuing
operations, excluding non-recurring charges of $9.1 million, or
$0.08 per share, related to the divestiture of IMC Vigoro, were
$120.7 million, or $1.06 per share. Including the non-recurring
charges, earnings from continuing operations before an
extraordinary charge were $111.6 million, or $0.98 per share.
Net earnings of $132.3 million, or $1.16 per share included
earnings from discontinued operations of $23.4 million, or $0.20
per share and were reduced by an extraordinary charge of $2.7
million, or $0.02 per share, related to an early extinguishment
of debt. See Note 4, "Divestitures," of Notes to Condensed
Consolidated Financial Statements.
Net sales for the first six months of 1999 increased 15 percent
when compared to the first six months of the prior year period
while gross margins, before non-recurring charges, increased six
percent from the comparable period one year ago. This
improvement was largely a consequence of additional revenues
from the former Harris operations partially offset by decreased
sales at Phosphates as a result of significantly reduced
phosphate pricing and lower domestic volumes. Additionally, the
absence of sales in the current period from IMC Vigoro as a
result of its divestiture during the second quarter of 1998
further reduced the Company's overall sales improvement from the
prior year period. See Note 4, "Divestitures," of Notes to
Condensed Consolidated Financial Statements.
The gross margin increase was primarily attributable to
favorable margins from the Harris Acquisition partially offset
by reduced sales volumes and prices at Phosphates, as discussed
above, lower margins at Kalium caused by plant shutdowns to
control inventory and the absence of sales from IMC Vigoro as a
result of its divestiture during the second quarter of 1998. See
Note 4, "Divestitures," of Notes to Condensed Consolidated
Financial Statements.
The operating results of the Company's significant business
units are discussed in more detail below.
IMC-Agrico Phosphates
Phosphates' net sales for the first six months of 1999 declined
six percent to $769.2 million compared to $821.1 million for the
same period last year primarily as a consequence of decreased
concentrate sales volumes and lower average sales realizations.
Decreased shipments of GMAP and GTSP, partially offset by an
increase in shipments of DAP reduced sales by $42.3 million.
These unfavorable volume variances reflected the following
factors: (i) a cutback in overall domestic application rates,
(ii) continued availability of aggressively priced GTSP imports,
and (iii) lower international shipments. Average sales
realizations for the first six months of 1999 decreased as
compared to the prior year period primarily as a result of lower
domestic and international DAP realizations.
Gross margins declined 11 percent to $167.0 million for the
first six months of 1999 compared to $187.3 million for the
first six months of last year, mainly because of the lower
volumes and prices discussed above, partially offset by
decreased production costs. Production costs were lower when
compared to the prior year's first six months primarily as a
result of the following: (i) lower raw material costs for
purchased ammonia and natural gas; (ii) favorable variances from
phosphate rock operations due to reduced spending; partially
offset by (iii) unfavorable variances from concentrated
phosphate operations created by lower bone phosphate of lime
levels and higher turnaround amortization.
IMC Kalium
Kalium's net sales for the first six months of 1999 increased
two percent to $389.5 million as compared to $380.1 million in
the prior year period.
Gross margins for the first six months of 1999 decreased ten
percent to $139.6 million from $155.4 million in the same period
one year ago. Gross margins were affected by plant shutdowns in
the current period for inventory control. Gross margins were
also negatively impacted by additional costs related to the
acquisition of GSL as part of the Harris Acquisition. Finally,
increased water control expenditures and resource taxes in the
current period led to a further margin erosion.
IMC Salt
Salt's net sales for the first six months of 1999 were $174.0
million with gross margins of $54.2 million. These results were
higher than comparable pre-acquisition amounts in the first six
months of 1998 of $133.1 million and $46.8, respectively. Salt
was established in April 1998 concurrent with the Harris
Acquisition; consequently, operating results for the six months
ended June 30, 1998 included only partial year activity.
Increased demand for salt products across all product lines, a
new midwest marketing strategy and the addition of two
distributorships in the United Kingdom lifted current period
sales above those of the prior year period. The rise in gross
margins resulted from increased sales volumes, particularly for
consumer products and restocking rock salt with deicing
customers in the United Kingdom.
Other
The Company's net sales and gross margins for the first six
months of 1999 also included results from Feed Ingredients and
Chemicals. Chemicals, with sales and gross margins for the
first six months of 1999 of $201.7 million and $23.8 million,
respectively, was established concurrent with the Harris
Acquisition in April 1998; consequently, operating results for
the six months ended June 30, 1998 included only partial year
activity. Sales and gross margins at Feed Ingredients for the
first six months of 1999 increased nine percent and 36 percent,
respectively, to $85.3 million and $18.6 million, respectively,
as compared to the prior year period. The Feed Ingredients
increases were driven by improved sales, both to domestic and
international customers, lower production costs related to
increased production volumes, and overall lower raw material
costs. Partially offsetting these increases in current period
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 its divestiture during the second quarter of
1998. See Note 4, "Divestitures" and Note 7, "Operating
Segments," 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 six months ended June
30:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Sales volumes (in thousands of short tons)(a):
IMC-Agrico Phosphates 3,663 3,919
IMC Kalium 4,512 4,722
IMC Salt(c) 6,645 4,960
Average price per ton(b):
DAP $171 $175
Potash 85 80
Salt(c) 26 26
(a) Sales volumes include tons sold captively. Phosphates'
volumes represent dry product tons, primarily DAP.
(b) Average prices represent sales made FOB mine/plant.
(c) Salt was established in April 1998 concurrent with the
Harris Acquisition. Information for the six months ended
June 30, 1998 is provided for comparative purposes only.
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $4.2
million, or five percent, to $85.6 million, before non-recurring
charges of $9.9 million related to the divestiture of IMC Vigoro
in June 1998. This increase was primarily due to the Harris
Acquisition as the prior year's amount for Salt and Chemicals
represented activity for only the three months ended June 30,
1998. This increase was partially offset by the divestiture of
IMC Vigoro in June 1998. See Note 1, "Acquisitions" and Note 4,
"Divestitures," of Notes to Condensed Consolidated Financial
Statements.
Exploration Expenses
Exploration expenses totaled $3.4 million for the first six
months of 1999, a decrease of $15.5 million from the same period
in the prior year as a result of the absence of dry hole costs
in the current period as compared to $14.3 million of dry hole
costs for the same period in 1998.
Interest Expense
Interest expense for the first six months of 1999 totaled $92.8
million, an increase of $15.8 million from the same period in
the prior year. The increase in interest expense was due to
increased debt outstanding primarily as a result of debt assumed
in connection with the Harris Acquisition.
Other (Income) Expense, Net
Other income for the first six months of 1999 decreased $3.0
million from the same period in the prior year. The decrease
was mainly attributable to the absence of income received from
interest rate locks associated with January 1998 debt issuances
and higher debt fee amortization for the first six months of
1999 as a result of refinancing debt assumed as part of the
Harris Acquisition.
Minority Interest
Minority interest for the first six months of 1999 increased
$7.6 million from the same period last year to $24.8 million.
The increase in minority interest expense was attributable to
significantly reduced dry hole cost expenditures in the current
period partially offset by lower IMC-Agrico Company earnings.
Restructuring Plan
The timing and costs of the Restructuring Plan are generally on
schedule with the original time and dollar estimates disclosed
in the fourth quarter of 1998. During the first six months of
1999, 62 employees, who had accepted a voluntary retirement plan
as of December 31, 1998, left the Company in accordance with
their target retirement date. See Note 2, "Restructuring
Plan," of Notes to Condensed Consolidated Financial Statements.
Capital Resources and Liquidity
The Company generates significant cash from operations and has
sufficient borrowing capacity to meet its operating and
discretionary spending requirements.
Operating activities generated $413.1 million of cash for the
first six months of 1999 compared with $174.6 million for the
same period in 1998. The increase of $238.5 million was
primarily a result of a decrease in working capital, lower
litigation payments and lower debt fee payments as a result of a
reduction in debt issuances. The change in working capital was
primarily the result of lower inventory levels based on market
conditions and increased collection of receivables.
Net cash provided by investing activities for the first six
months of 1999 increased $631.6 million compared with the same
period in 1998 from a use of funds of $517.4 million to a source
of funds of $114.2 million. In April 1999, the Company
completed the sale of AgriBusiness and received proceeds of
approximately $265.0 million which were used to reduce the
amount of the Company's outstanding indebtedness. In the prior
year, proceeds of $44.8 million were received from the sale of
IMC Vigoro while $393.3 million was expended to fund the Harris
Acquisition. See Note 1, "Acquisitions," Note 3, "Discontinued
Operations," and Note 4, "Divestitures," of Notes to Condensed
Consolidated Financial Statements. Additionally, current period
capital expenditures decreased $17.2 million as a consequence of
the absence of capital expenditures for AgriBusiness and a
significant reduction in PLP well exploration activity. The
Company estimates that its capital expenditures for 1999 will be
approximately $265.0 million and will be financed primarily
through operations.
Cash generated from financing activities decreased $945.9
million for the first six months of 1999 from a source of funds
of $372.9 million to a use of funds of $573.0 million. This
decrease in financing funds was primarily a result of lower net
debt proceeds in 1999 of $952.2 million. In the prior year, the
net debt proceeds were used, in part, to finance the Harris
Acquisition which was funded through the Company's commercial
paper borrowings. In April 1999, the Company terminated its
Amended and Restated Credit Agreement which had provided $250.0
million of credit support for the Company's commercial paper
program. This termination was made possible through the
reduction of the Company's commercial paper using proceeds from
the sale of AgriBusiness as discussed above.
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
regularly 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: (i) system inventory and analysis; (ii)
remediation, testing and implementation; and (iii) 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: (i)
business application software; (ii) mainframe hardware and
software; (iii) network servers; (iv) desktop environment; (v)
network and telephone systems; (vi) non-information technology
assets and facilities; and (vii) 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 completed its system inventory and analysis phase. The
principal business application systems requiring remediation
that were identified by the Company during this stage include
the following systems: (i) equipment maintenance; (ii) spare
parts inventory; (iii) distribution; (iv) customer order entry;
and (v) 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 cases, the Company has also
retained special consultants to assist with its remediation
efforts. The Company expects all of its business units to have
substantially completed the remediation, testing and
implementation phase in the third quarter of 1999.
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 Phase: 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 its primary suppliers and vendors to
determine their Year 2000-related status. The business units
are currently analyzing the information provided in these
responses, and will determine the best way to address any
specific issues. As an additional precaution when appropriate,
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 key
vendors to date and no critical issues have been identified.
In addition to investigating the Company's key suppliers, the
Company's business units have also contacted 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. While the
Company's business units continue to be apprised of the progress
made by these key customers in addressing their own Year 2000
issues, no guarantees can be made that these key customers will
be Year 2000 compliant by December 31, 1999. If these key
customers fail in their attempts to be Year 2000 compliant, the
Company could potentially experience a delay in order
processing. In general, however, the Company's business units
are satisfied with the progress made to date by these key
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. Modification costs for 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 $7.3 million, of which
approximately $2.0 million was expended in 1998. The remaining
costs will be incurred during 1999. A sizable portion of these
costs represent 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 exceeds current expectations. In many cases, the Company
is relying on written assurances from vendors that the current
systems are, or that new or upgraded systems acquired by the
Company will adequately address Year 2000-related issues. The
Company believes that one of its principal Year 2000-related
risks is the effect Year 2000-related issues will have on its
vendors, especially its utilities vendors. A substantial part
of the Company's day-to-day operations is dependent on power,
transportation systems, and telecommunication services, as to
which alternative sources of service may not be available. The
Company will continue to investigate the readiness of its
suppliers, including utilities, and pursue the availability of
alternatives to further diminish the extent of any impact Year
2000-related issues may have on the Company. Although there can
be no assurance that the Company will be able to complete all of
the modifications in the required time frame or that no
unanticipated events will occur, it is management's belief that
the Company is taking adequate action to address Year 2000-
related issues. However, because of the range of possible
issues and the large number of variables involved, it is
impossible to quantify the potential cost of problems should the
Company's remediation efforts or the efforts of those it does
business with not be successful. If either the Company, or the
Company's vendors, fail to adequately address Year 2000-related
issues, the Company may suffer business interruptions. If such
interruptions cause the Company to be unable to fulfill its
obligations to third parties, the Company may potentially be
exposed to third-party liability.
Contingency Planning
The Company continues to develop contingency measures to address
the possibility that it will not have fully addressed Year 2000-
related issues by December 31, 1999. These contingency measures
provide the Company with an alternative plan of action in the
event the Company experiences a shutdown in one of its mission
critical systems, or a failure in the delivery of needed
supplies, services, or equipment. Each of the Company's
business units is developing a contingency plan based upon
templates and suggested procedures that have been provided by
the Year 2000 Risk Manager. Each business unit contingency plan
will identify the risk and document the steps that need to be
taken to allow the Company to continue to meet the needs of its
customers in the event of a Year 2000-related failure. As part
of the on-going contingency planning effort, the Company's
business units continue to identify alternative channels for
receiving critical supplies from alternate vendors. Although
the Company expects each business unit to complete its
contingency plan in the third quarter of 1999, each business
unit will continue to revise and supplement its contingency plan
through December 31, 1999.
The above section, even if incorporated by reference into other
documents or disclosures, is a Year 2000 Readiness Disclosure as
defined under the Year 2000 Information and Readiness Disclosure
Act of 1998.
Item 3. Market Risk.
The Company is exposed to the impact of interest rate changes,
fluctuations in foreign currency, and fluctuations in the
purchase price of natural gas, ammonia and sulphur consumed in
operations, as well as changes in the market value of its
financial instruments. The Company periodically enters into
derivatives in order to minimize these risks, but not for
trading purposes. At June 30, 1999, the Company's exposure to
these market risk factors was not significant and had not
materially changed from December 31, 1998.
Part II.OTHER INFORMATION
Item 1. Legal Proceedings.(1)
Potash Antitrust Litigation
The Company was a defendant, along with other Canadian and
United States potash producers, in a class action antitrust
lawsuit filed in federal court in 1993. The plaintiffs
alleged a price-fixing conspiracy among North American potash
producers beginning in 1987 and continuing until the filing of
the complaint. The class action complaint against all
defendants, including the Company, was dismissed by summary
judgment in January 1997. The summary judgment dismissing the
case was appealed by the plaintiffs to the United States Court
of Appeals for the Eighth Circuit (Court of Appeals).
Recently, the Court of Appeals in a divided opinion (2 to 1)
rendered its decision reversing the grant of summary judgment
as to certain defendants, including the Company, and affirming
as to certain other defendants. The dissent strongly
disagreed with the majority opinion, stating that the majority
had erred in not affirming the dismissal of the case as to all
of the defendants. According to the dissent, all of the
defendants were entitled to summary judgment. The Company,
along with the other defendants remaining in the case, sought
rehearing of the case from the entire Court of Appeals, which
has been granted.
In addition, in 1993 and 1994, class action antitrust lawsuits
with allegations similar to those made in the federal case
were filed against the Company and other Canadian and United
States potash producers in state courts in Illinois and
California. The Illinois case was dismissed for failure to
state a claim. In the California litigation, all proceedings
have been stayed pending the decision of the Court of Appeals.
FTX Merger Litigation
In August 1997, five identical class action lawsuits were
filed in Chancery Court in Delaware by unitholders of PLP.
Each case named the same defendants and broadly alleged that
FTX and FMRP Inc. (FMRP) had breached fiduciary duties owed to
the public unitholders of PLP. The Company was alleged to
have aided and abetted these breaches of fiduciary duty.
In November 1997, an amended class action complaint was filed
with respect to all cases. The amended complaint named the
same defendants and raised the same broad allegations of
breaches of fiduciary duty against FTX and FMRP for allegedly
favoring the interests of FTX and FTX's common stockholders in
connection with the FTX Merger. The plaintiffs claimed
specifically that, by virtue of the FTX Merger, the public
unitholders' interests in PLP's ownership of IMC-Agrico would
become even more subject to the dominant interest of the
Company. The amended complaint seeks certification as a class
action and an injunction against the proposed FTX Merger or,
in the alternative, rescissionary damages. The defendants'
moved the court to dismiss the amended complaint in November
1998. In May 1999, the plaintiffs agreed to dismiss the
action. Final terms of the dismissal have not yet been
determined.
In May 1998, IMC and PLP (collectively, Plaintiffs) filed a
lawsuit (IMC Action) in Delaware Chancery Court against
certain former directors of FTX (Director Defendants), and
MOXY. IMC alleges that the Director Defendants, as the
directors of PLP's administrative managing general partner
FTX, owed duties of loyalty to PLP and its limited partnership
unitholders. IMC further alleges that the Director
Defendants breached their duties by causing PLP to enter into
a series of interrelated non-arm's-length transactions with
MOXY, an affiliate of FTX, which IMC alleges unfairly
benefited MOXY and the Director Defendants to PLP's detriment.
IMC also alleges that MOXY knowingly aided and abetted and
conspired with the Director Defendants to breach their
fiduciary duties. On behalf of the PLP public unitholders,
IMC seeks to rescind the contracts that PLP entered into with
MOXY and to recoup the monies expended as a result of PLP's
participation in those agreements. The Director Defendants
and MOXY have filed motions to dismiss the Plaintiffs' claims.
The defendants filed their briefs in support of their motions
in January 1999. IMC filed its amended complaint, and its
responses to the motions to dismiss in February 1999. In
response, the Director Defendants filed renewed motions to
dismiss which are awaiting argument. No trial date has been
scheduled. IMC intends to pursue this action vigorously.
In May 1998, Jacob Gottlieb filed an action (Gottlieb Action)
on behalf of himself and all other PLP unitholders against the
Director Defendants, MOXY and IMC asserting the same claims
that IMC asserts in the IMC Action. Because IMC and PLP had
already asserted these claims, IMC has filed a motion to
dismiss the Gottlieb Action. The court has not set a briefing
schedule for IMC's motion to dismiss. IMC intends to defend
this action vigorously.
Other
In the ordinary course of its business, the Company is and
will from time to time be involved in legal proceedings of a
character normally incident to its business. The Company
believes that its potential liability in any such pending or
threatened proceedings will not have a material adverse effect
on the financial condition or results of operations of the
Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description
----------- --------------------------------------------
11 Earnings Per Share Computation
27 Financial Data Schedule
(b) Reports on Form 8-K.
Up to the date of this report, the following reports on Form 8-
K were filed:
Report under Items 5 and 7 dated May 27, 1999.
**************************
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
IMC GLOBAL INC.
by: /s/ Anne M. Scavone
----------------------------------
Anne M. Scavone
Vice President and Controller
(on behalf of the Registrant
and as Chief Accounting
Officer)
Date: August 13, 1999
- -----------------------------
(1)All statements, other than statements of historical fact, appearing
under Part I, Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and Part II, Item
1, "Legal Proceedings," constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995.
Factors that could cause actual results to differ materially from
those expressed or implied by the forward-looking statements
include, but are not limited to, the following: general business
and economic conditions in the agricultural industry or in
localities where the Company or its customers operate; weather
conditions; the impact of competitive products; pressure on prices
realized by the Company for its products; constraints on supplies
of raw materials used in manufacturing certain of the Company's
products; capacity constraints limiting the production of certain
products; difficulties or delays in the development, production,
testing and marketing of products; difficulties or delays in
receiving required governmental and regulatory approvals; market
acceptance issues, including the failure of products to generate
anticipated sales levels; difficulties in integrating acquired
businesses and in realizing related cost savings and other
benefits; the effects of and change in trade, monetary and fiscal
policies, laws and regulations; foreign exchange rates and
fluctuations in those rates; the costs and effects of legal
proceedings, including environmental, and administrative
proceedings involving the Company; the completion of the Company's
Year 2000 program; and the other risk factors reported from time to
time in the Company's Securities and Exchange Commission reports.
EXHIBIT 11
<TABLE>
EARNINGS PER SHARE
DILUTED COMPUTATION
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999
AND 1998
(IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basis for computation of
diluted earnings per share:
Earnings from continuing
operations before
extraordinary item and
cumulative effect of a
change in accounting
principle $ 52.2 $ 56.9 $ 120.4 $ 111.6
Earnings from
discontinued operations - 30.1 - 23.4
Extraordinary charge -
debt retirement - - - (2.7)
Cumulative effect of a
change in accounting
principle - - (7.5) -
----------- ----------- ----------- -----------
Net earnings applicable
to common stock $ 52.2 $ 87.0 $ 112.9 $ 132.3
=========== =========== =========== ===========
Number of shares:
Weighted average shares
outstanding 114,353,541 114,259,700 114,323,038 114,132,765
Common stock equivalents 280,407 745,281 312,721 755,554
------------ ----------- ----------- -----------
Total common and common
equivalent shares
assuming dilution 114,633,948 115,004,981 114,635,759 114,888,319
=========== =========== =========== ===========
Diluted earnings per share:
Earnings from continuing
operations before
extraordinary item and
cumulative effect of a
change in accounting
principle $ 0.46 $ 0.50 $ 1.06 $ 0.98
Earnings from
discontinued operations - 0.26 - 0.20
Extraordinary charge -
debt retirement - - - (0.02)
Cumulative effect of a
change in accounting
principle - - (0.07) -
----------- ----------- ----------- -----------
Net earnings $ 0.46 $ 0.76 $ 0.99 $ 1.16
=========== =========== =========== ===========
This calculation is submitted in accordance with Regulation S-K Item
601(b)(11).
</TABLE>
<TABLE> <S> <C>
<CAPTION>
<S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Jun-30-1999
<CASH> 42,800
<SECURITIES> 22,100
<RECEIVABLES> 333,800
<ALLOWANCES> 8,100
<INVENTORY> 490,500
<CURRENT-ASSETS> 989,000
<PP&E> 6,109,800
<DEPRECIATION> 2,357,800
<TOTAL-ASSETS> 5,961,600
<CURRENT-LIABILITIES> 441,800
<BONDS> 2,480,600
<COMMON> 125,100
0
0
<OTHER-SE> 1,855,500
<TOTAL-LIABILITY-AND-EQUITY> 5,961,600
<SALES> 1,534,800
<TOTAL-REVENUES> 1,534,800
<CGS> 1,141,200
<TOTAL-COSTS> 1,230,200
<OTHER-EXPENSES> 19,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,800
<INCOME-PRETAX> 192,600
<INCOME-TAX> 72,200
<INCOME-CONTINUING> 120,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (7,500)
<NET-INCOME> 112,900
<EPS-BASIC> 0.99
<EPS-DILUTED> 0.99
<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.
</TABLE>
