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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 September 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 offices) (Zip Code)
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: 114,479,876 shares, excluding 10,676,276
treasury shares as of November 3, 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)
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 625.5 $ 659.5 $2,160.3 $1,989.4
Cost of goods sold 513.9 480.9 1,655.1 1,442.9
------- ------- -------- --------
Gross margins 111.6 178.6 505.2 546.5
Selling, general and
administrative expenses 40.2 38.0 125.8 129.3
Exploration expenses 0.8 0.6 4.2 19.5
------- ------- -------- --------
Operating earnings 70.6 140.0 375.2 397.7
Interest expense 44.1 50.7 136.9 127.7
Other (income) expense, net 3.7 0.9 (1.9) (7.7)
------- ------- -------- --------
Earnings from continuing
operations before minority
interest 22.8 88.4 240.2 277.7
Minority interest 1.6 13.2 26.4 30.4
------- ------- -------- --------
Earnings from continuing
operations before taxes 21.2 75.2 213.8 247.3
Provision for income taxes 8.0 26.5 80.2 87.0
------- ------- -------- --------
Earnings from continuing
operations before extraordinary
item and cumulative effect
of a change in accounting
principle 13.2 48.7 133.6 160.3
Earnings (loss) from
discontinued operations - (10.9) - 12.5
------- ------- -------- --------
Earnings before extraordinary
item and cumulative effect
of a change in accounting
principle 13.2 37.8 133.6 172.8
Extraordinary charge - debt
retirement - (0.9) - (3.6)
Cumulative effect of a change
in accounting principle - - (7.5) -
------- ------- -------- --------
Net earnings $ 13.2 $ 36.9 $ 126.1 $ 169.2
======= ======= ======== ========
Basic earnings per share:
Earnings from continuing
operations before extraordinary
item and cumulative effect
of a change in accounting
principle $ 0.12 $ 0.43 $ 1.17 $ 1.40
Earnings (loss) from
discontinued operations - (0.10) - 0.11
Extraordinary charge - debt
retirement - (0.01) - (0.03)
Cumulative effect of a change
in accounting principle - - (0.07) -
------- ------- -------- --------
Net earnings per share $ 0.12 $ 0.32 $ 1.10 $ 1.48
======= ======= ======== =======
Basic weighted average number
of shares outstanding 114.4 114.3 114.3 114.2
Diluted earnings per share:
Earnings from continuing
operations before extraordinary
item and cumulative effect
of a change in accounting
principle 0.12 0.43 1.17 0.10
Earnings (loss) from
discontinued operations - (0.10) - 0.10
operations
Extraordinary charge - debt
retirement - (0.01) - (0.03)
Cumulative effect of a change
in accounting principle - - (0.07) -
------- ------- -------- --------
Net earnings per share $ 0.12 $ 0.32 $ 1.10 $ 1.47
======= ======= ======== ========
Diluted weighted average
number of shares outstanding 114.5 114.6 114.6 114.9
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
<CAPTION>
(Unaudited)
September 30, December 31,
Assets 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 64.7 $ 110.6
Receivables, net 357.3 421.5
Inventories, net 510.2 580.6
Assets of discontinued operations held
for sale - 273.3
Deferred income taxes 91.1 91.1
Other current assets 24.0 5.5
-------- --------
Total current assets 1,047.3 1,482.6
Property, plant and equipment, net 3,748.4 3,697.4
Other assets 1,224.6 1,276.9
-------- --------
Total assets $6,020.3 $6,456.9
======== ========
Liabilities and Stockholders' Equity
- ---------------------------------------------------------------------
Current liabilities:
Accounts payable $ 216.0 $ 255.9
Accrued liabilities 219.6 240.9
Short-term debt and current maturities
of long-term debt 17.8 408.3
-------- --------
Total current liabilities 453.4 905.1
Long-term debt, less current maturities 2,535.4 2,638.7
Deferred income taxes 569.6 566.6
Other noncurrent liabilities 474.2 486.1
Stockholders' equity:
Common stock, $1 par value, authorized
300,000,000 shares; issued 125,152,395
and 125,072,811 shares at September 30
and December 31, respectively 125.2 125.0
Capital in excess of par value 1,697.8 1,697.3
Retained earnings 497.7 400.6
Accumulated other comprehensive income (38.5) (66.3)
Treasury stock, at cost, 10,676,276 and
10,738,520 shares at September 30 and
December 31, respectively (294.5) (296.2)
-------- --------
Total stockholders' equity 1,987.7 1,860.4
-------- --------
Total liabilities and stockholders'
equity $6,020.3 $6,456.9
======== ========
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Nine months ended
September 30,
1999 1998
- ---------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net earnings $ 126.1 $ 169.2
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, depletion and amortization 203.8 193.9
Minority interest 26.4 30.4
Deferred income taxes 3.0 (12.3)
Other charges and credits, net (8.9) (166.4)
Changes in:
Receivables 64.1 16.5
Inventories 70.4 (15.4)
Other current assets (9.0) 3.6
Accounts payable (40.0) (98.1)
Accrued liabilities (12.7) 82.0
------- -------
Net cash provided by operating activities 423.2 203.4
------- -------
Cash Flows from Investing Activities
Capital expenditures (211.1) (252.2)
Acquisitions, net of cash acquired (7.9) (393.3)
Proceeds from sale of business 263.9 44.8
Proceeds from sale of investment 12.8 -
Other 16.6 5.8
------- -------
Net cash provided by (used in) investing
activities 74.3 (594.9)
------- -------
Net cash provided (used) before financing
activities 497.5 (391.5)
Cash Flows from Financing Activities
Cash distributions to the unitholders of
Phosphate Resource Partners Limited
Partnership (21.5) (6.5)
Payments of long-term debt (158.7) (997.2)
Proceeds from issuance of long-term debt, net 53.1 1,194.7
Changes in short-term debt, net (391.3) 252.1
Decrease in securitization of accounts
receivable, net - (61.5)
Stock options exercised and restricted stock
awards 2.5 8.8
Cash dividends paid (27.5) (33.9)
Other - (3.1)
------- -------
Net cash provided by (used in) financing
activities (543.4) 353.4
------- -------
Net change in cash and cash equivalents (45.9) (38.1)
Cash and cash equivalents - beginning of period 110.6 109.7
------- -------
Cash and cash equivalents - end of period $ 64.7 $ 71.6
======= =======
(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 Activities
------------------------
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.
<TABLE>
The following table summarizes the activity during the period
January 1, 1999 to September 30, 1999 of the accruals recorded in
conjunction with the Restructuring Plan.
<CAPTION>
Accrual at Accrual at
January 1, 1999 Cash Paid September 30, 1999
--------------- --------- ------------------
<S> <C> <C> <C>
Non-employee exit costs:
Demolition and closure
costs $ 33.6 $ 4.3 $ 29.3
Idled leased transporation
equipment 13.2 3.6 9.6
Other 5.3 3.3 2.0
Employee headcount reductions:
Severance benefits 17.4 17.0 0.4
------ ------ ------
Total $ 69.5 $ 28.2 $ 41.3
====== ====== ======
</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 nine months of 1999,
63 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 in the fourth
quarter of 1999.
4. Divestitures
------------
In June 1998, the Company completed the sale of its IMC Vigoro
business unit (IMC Vigoro) 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. Inventories
-----------
<TABLE>
Inventories as of September 30, 1999 and December 31, 1998 were as
follows:
<CAPTION>
September 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Products (principally finished) $ 407.6 $ 468.2
Operating materials and supplies 117.0 136.3
------- -------
524.6 604.5
Less: Inventory allowances 14.4 23.9
------- -------
Inventories, net $ 510.2 $ 580.6
======= =======
</TABLE>
8. Operating Segments
------------------
<TABLE>
Segment information for 1999 and 1998 was as follows(c):
<CAPTION>
IMC IMC IMC IMC
Phosphates Potash Salt Chemicals Other(b) Total
---------- ------ ---- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Three months ended September 30, 1999
Net sales
from external
customers $ 283.1 $141.2 $ 55.0 $100.7 $ 45.5 $ 625.5
Intersegment net
sales 18.8 9.4 0.5 - - 28.7
Gross margins 39.8 42.5 13.1 14.6 1.6 111.6
Operating
earnings (loss) 31.2 42.1 4.9 7.0 (14.6) 70.6
Nine months ended September 30, 1999
Net sales from
external
customers $ 994.6 $499.6 $227.9 $302.4 $135.8 $2,160.3
Intersegment net
sales 76.5 40.5 1.6 - - 118.6
Gross margins 206.8 182.1 67.3 38.4 10.6 505.2
Operating
earnings (loss) 180.1 172.4 41.0 16.8 (35.1) 375.2
Three months ended September 30, 1998
Net sales from
external
customers $ 316.3 $148.1 $ 50.2 $103.0 $ 41.9 $ 659.5
Intersegment net
sales 36.4 26.3 0.8 - - 63.5
Gross margins 86.4 70.9 9.9 14.7 (3.3) 178.6
Operating
earnings (loss) 77.2 64.3 2.1 8.9 (12.5) 140.0
Nine months ended September 30, 1998
Net sales from
external
customers $1,039.5 $484.1 $ 93.5 $205.8 $166.5 $1,989.4
Intersegment net
sales 134.3 70.4 0.8 - 3.0 208.5
Gross margins(c) 273.7 226.3 17.2 27.0 6.4 550.6
Operating
earning (loss)(d) 244.7 205.4 0.5 15.1 (54.0) 411.7
(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 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>
9.Comprehensive Income
--------------------
<TABLE>
Comprehensive income, net of taxes, was as follows:
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
-------------------------------------
<S> <C> <C> <C> <C>
Comprehensive income:
Net earnings $ 13.2 $ 36.9 $126.1 $169.2
Foreign currency translation
adjustment 2.9 (11.5) 27.8 (27.5)
------ ------ ------ ------
Total comprehensive income
for the period $ 16.1 $ 25.4 $153.9 $141.7
====== ====== ====== ======
</TABLE>
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations.(1)
Results of Operations
---------------------
Three months ended September 30, 1999 vs. three months ended
September 30, 1998
---------------------------------------------------------------
Overview
Net sales for the third quarter of 1999 were $625.5 million and
gross margins were $111.6 million. Earnings from continuing
operations for the third quarter of 1999 were $13.2 million, or
$0.12 per share. Net sales for the third quarter of 1998 were
$659.5 million and gross margins were $178.6 million. Earnings
from continuing operations for the third quarter of 1998 were
$48.7 million, or $0.43 per share. Net earnings for the third
quarter of 1998 of $36.9 million, or $0.32 per share, were
reduced by 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 an early
extinguishment of debt. See Note 5, "Extraordinary Charge -
Debt Retirement," of Notes to Condensed Consolidated Financial
Statements.
Net sales for the third quarter of 1999 decreased five percent
from the prior year third quarter while gross margins decreased
38 percent. The decrease in sales was mainly attributable to
significantly reduced phosphate pricing at IMC Phosphates
(Phosphates), lower domestic potash sales volumes at IMC Potash
(Potash) and unfavorable cost variances resulting from extended
plant shutdowns to balance supply with demand. These decreases
were partially offset by higher sales at Salt resulting from
increased rock and general trade salt sales volumes, coupled
with sales from the addition of two distributorships in the
United Kingdom during the first quarter of 1999.
The gross margin decrease was primarily attributable to the
reduced sales prices and volumes as well as the unfavorable
cost variances discussed above.
The operating results of the Company's significant business
units are discussed in more detail below.
IMC Phosphates
Phosphates' net sales for the third quarter of 1999 declined 14
percent to $301.9 million compared to $352.7 million for the
same period last year largely due to lower average sales
realizations. Lower average concentrate sales prices, driven by
lower average diammonium phosphate (DAP) realizations, reduced
sales by $42.7 million. Additionally, sales of urea decreased
$5.7 million.
Gross margins decreased 54 percent to $39.8 million in the third
quarter of 1999 compared to $86.4 million for the third quarter
of last year, mainly due to the lower prices discussed above as
well as higher production costs. Production costs increased
compared to the prior year's third quarter primarily as a result
of higher idle plant costs, partially offset by lower uranium
costs and raw material prices.
IMC Potash
Potash's net sales decreased 14 percent to $150.6 million in
the third quarter of 1999 from $174.4 million for the same
period in 1998. Significantly lower domestic volumes and
slightly reduced domestic prices as a result of the weak North
American farm economy contributed to the sales decrease.
Gross margins decreased 40 percent to $42.5 million for the
third quarter of 1999 from $70.9 million for the same period in
1998. Gross margins were negatively impacted by reduced volumes
and prices, as discussed above, as well as by plant shutdowns
in the current quarter in an effort to balance supply with
demand. While potash production cost per ton increased 15
percent compared to the year-earlier period as a result of the
shutdowns, the program resulted in a significant reduction in
North American potash producer inventories during the third
quarter of 1999. Additionally, higher provincial tax levies
and natural gas costs at Potash's Canadian facilities further
impacted gross margins.
IMC Salt
Salt's net sales increased nine percent to $55.5 million in the
third quarter of 1999 compared to $51.0 million in the third
quarter of 1998. This increase in sales was attributable to
higher rock salt volumes in the United Kingdom and higher
general trade salt volumes in North America, coupled with the
addition of two distributorships in the United Kingdom.
Gross margins increased 32 percent to $13.1 million for the
third quarter of 1999 from $9.9 million for the same period in
1998 as a result of increased sales volumes, particularly for
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 Feed Ingredients were essentially
unchanged at $42.3 million in the third quarter of 1999 as
compared to $41.8 million in the prior year quarter. However,
gross margins at Feed Ingredients increased 36 percent to $10.9
million as compared to the prior year period primarily as a
result of lower costs for internally sourced raw materials.
Sales at Chemicals decreased two percent to $100.7 million from
$103.0 million in the prior year quarter. Gross margins at
Chemicals for the third quarter of 1999 remained essentially
unchanged at $14.6 million. See Note 8, "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 September 30:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Sales volumes (in thousands of short
tons)(a):
IMC Phosphates 1,574 1,575
IMC Potash 1,769 2,081
IMC Salt 1,649 1,554
Average price per ton(b):
DAP $156 $182
Potash $81 $82
Salt $34 $33
(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>
Interest Expense
Interest expense totaled $44.1 million in the current quarter,
a decrease of $6.6 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.
Other (Income) Expense, Net
Other expense for the current quarter increased $2.8 million to
$3.7 million from $0.9 million for the same period in 1998.
The increase was mainly attributable to a loss on the sale of
the Company's interest in an oil and gas property as well as
higher foreign conversion exchange rates related to foreign
transactions.
Minority Interest
Minority interest decreased $11.6 million from the same period
last year to $1.6 million. The decrease in minority interest
expense was primarily attributable to significantly lower IMC-
Agrico Company earnings as compared to the prior year period.
Nine months ended September 30, 1999 vs. nine months ended
September 30, 1998
---------------------------------------------------------------
Overview
Net sales for the nine months ended September 30, 1999 were
$2,160.3 million and gross margins were $505.2 million.
Earnings from continuing operations before a cumulative effect
of a change in accounting principle, were $133.6 million, or
$1.17 per share. A cumulative effect of a change in accounting
principle of $7.5 million, or $0.07 per share, reduced net
earnings to $126.1 million, or $1.10 per share. Net sales for
the nine months ended September 30, 1998 were $1,989.4 million
and gross margins, excluding non-recurring charges of $4.1
million, related to the divestiture of IMC Vigoro, were $550.6
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 $169.4 million, or $1.48
per share. Including the non-recurring charges, earnings from
continuing operations before an extraordinary charge were
$160.3 million, or $1.40 per share. Net earnings of $169.2
million, or $1.47 per share, included earnings from
discontinued operations of $12.5 million, or $0.10 per share,
and were reduced by an extraordinary charge of $3.6 million, or
$0.03 per share, related to an early extinguishment of debt.
See Note 4, "Divestitures," of Notes to Condensed Consolidated
Financial Statements.
Net sales for the nine months ended September 30, 1999
increased nine percent when compared to the same nine month
period of the prior year while gross margins, before non-
recurring charges, decreased eight 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 sales
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 decrease was primarily attributable to
unfavorable margins from reduced sales volumes and prices at
Phosphates, as discussed above, lower margins at Potash caused
by plant shutdowns to control inventory and the absence of
margins from IMC Vigoro as a result of its divestiture during
the second quarter of 1998. The gross margin decrease was
partially offset by favorable margins from the Harris
Acquisition. 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 Phosphates
Phosphates' net sales for the first nine months of 1999
declined nine percent to $1,071.1 million compared to $1,173.8
million for the same period last year primarily as a
consequence of lower average sales realizations and decreased
concentrate sales volumes. Decreased shipments of granular
monoammonium phosphate and granular triple superphosphate,
partially offset by an increase in shipments of DAP, reduced
sales by $45.8 million. The unfavorable volume variances
reflected a depressed agricultural economy and lower
international sales realizations. Average sales realizations
for the first nine 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 24 percent to $206.8 million for the
first nine months of 1999 compared to $273.7 million for the
first nine months of last year, mainly because of the lower
volumes and prices discussed above as well as increased
production costs. Production costs were higher when compared to
the same period of the prior year primarily as a result of
unfavorable variances from concentrated phosphate operations
created by decreased volumes and higher idle plant costs.
IMC Potash
Potash's net sales for the nine months ended September 30, 1999
decreased three percent to $540.1 million as compared to $554.5
million in the prior year period. As with the three months
ended September 30, 1999, the sales decrease for the nine
months of 1999 was caused by significantly lower domestic
volumes and slightly reduced domestic prices as a result of the
weak North American farm economy.
Gross margins for the nine months ended September 30, 1999
decreased 20 percent to $182.1 million from $226.3 million in
the same period one year ago. Gross margins were negatively
impacted by reduced volumes, as discussed above, as well as by
plant shutdowns in the current period in an effort to balance
supply with demand. Additionally, increased water control
expenditures and resource taxes in the current period led to
further margin erosion.
IMC Salt
Salt's net sales for the nine months ended September 30, 1999
were $229.5 million with gross margins of $67.3 million. These
results were higher than comparable pre-acquisition amounts for
the same period in 1998 of $184.1 million and $56.7 million,
respectively. Salt was established in April 1998 concurrent
with the Harris Acquisition; consequently, operating results
for the nine months ended September 30, 1998 included only
partial year activity. Increased sales volumes, particularly
with highway deicing product from the more severe winter
weather experienced in the early months of 1999 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 primarily resulted from increased sales
volumes, which led to a higher absorption of costs.
Other
The Company's net sales and gross margins for the nine months
ended September 30, 1999 also included results for Feed
Ingredients and Chemicals. Sales at Feed Ingredients increased
six percent to $127.6 million in the current period of 1999 as
compared to $120.0 million in the prior year period from
increased domestic and international sales volumes. Gross
margins at Feed Ingredients increased 36 percent to $29.5
million as compared to the prior year period as a result of
lower production costs related to increased production volumes
and lower costs for internally sourced raw materials.
Chemicals, with sales and gross margins for the nine months of
1999 of $302.4 million and $38.4 million, respectively, was
established concurrent with the Harris Acquisition in April
1998; consequently, operating results for the nine month period
ended September 30, 1998 included only partial year activity.
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 gross margins for IMC Vigoro
as a result of its divestiture during the second quarter of
1998. See Note 4, "Divestitures" and Note 8, "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 nine months
ended September 30:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Sales volumes (in thousands of short tons)(a):
IMC Phosphates 5,237 5,494
IMC Potash 6,281 6,802
IMC Salt(c) 8,294 2,770
Average price per ton(b):
DAP $167 $177
Potash $84 $80
Salt(c) $28 $33
(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 nine months ended
September 30, 1998 is provided for comparative purposes
only.
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $6.4
million, or five percent, to $125.8 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 six months
ended September 30, 1998. This increase was partially offset
by the divestiture of IMC Vigoro in June 1998 and the
reduction of incentive compensation accruals based on lower
earnings for the current year. See Note 1, "Acquisitions" and
Note 4, "Divestitures," of Notes to Condensed Consolidated
Financial Statements.
Exploration Expenses
Exploration expenses totaled $4.2 million for the nine months
ended September 30, 1999, a decrease of $15.3 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 $14.4
million of dry hole costs for the same period in 1998.
Interest Expense
Interest expense for the nine months ended September 30, 1999
totaled $136.9 million, an increase of $9.2 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 nine months ended September 30, 1999
decreased $5.8 million to $1.9 million from $7.7 million in
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, higher
debt fee amortization as a result of refinancing debt assumed
as part of the Harris Acquisition, a loss on the sale of the
Company's interest in an oil and gas property and higher
foreign conversion exchange rates related to foreign
transactions.
Minority Interest
Minority interest for the nine months ended September 30, 1999
decreased $4.0 million from the same period last year to $26.4
million. The decrease in minority interest expense was
primarily attributable to significantly lower IMC-Agrico
Company earnings as compared to the prior year period.
Restructuring Activities
------------------------
1998 Restructuring Plan
The timing and costs of the 1998 Restructuring Plan are
generally on schedule with the original time and dollar
estimates disclosed in the fourth quarter of 1998. During the
nine months ended September 30, 1999, 63 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 Activities," of Notes to
Condensed Consolidated Financial Statements.
1999 Restructuring
In October 1999, the Company announced an extensive program of
asset restructuring, consolidation of facilities and operating
cost reductions, primarily for the phosphate and potash
businesses, as well as for the Company's headquarters and
administrative offices. This program will include a review of
the carrying value and recoverability of certain assets,
including those related to recent acquisitions. The Company
is in the process of evaluating the accounting impact of the
foregoing restructuring activities and currently expects to
record a major charge to earnings in the fourth quarter,
predominately non-cash, related to such restructuring
activities, in an as yet undetermined amount.
Non-core Businesses
-------------------
The Company is continuing its discussions with several
potential buyers regarding the sale or spin-off of IMC
Chemicals. The ultimate disposition could occur in the next
several quarters which could necessitate an additional loss
being recorded.
The Company is accelerating its efforts to exit the oil & gas
business. The ultimate disposition is expected to be completed
in the fourth quarter and could necessitate a loss being
recorded.
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 $423.2 million of cash for the
nine months of 1999 compared with $203.4 million for the same
period in 1998. The increase of $219.8 million was primarily
a result of a decrease in working capital, favorable foreign
currency translation rates from foreign operations, 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 along with the recognition of certain income
tax benefits.
Net cash provided by investing activities for the first nine
months of 1999 increased $669.2 million compared with the same
period in 1998 from a use of funds of $594.9 million to a
source of funds of $74.3 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
$41.1 million as a consequence of the absence of capital
expenditures for AgriBusiness and a significant reduction in
well exploration activity. The Company estimates that its
capital expenditures for 1999 will be approximately $260.0
million and will be financed primarily through operations.
Cash generated from financing activities decreased $896.8
million for the nine months of 1999 from a source of funds of
$353.4 million to a use of funds of $543.4 million. This
decrease in financing funds was primarily a result of lower
net debt proceeds. 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 audit
committee of 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 Program.
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. As of the end of the third quarter of 1999,
the Company has substantially completed its Year 2000 Program.
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 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 included 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 identified certain production
control systems that required 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. As of the end of the
third quarter of 1999, each of the Company's business units
has substantially completed the remediation, testing and
implementation phase.
As a separate initiative, the Company is has implemented 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 has further remediated any
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 continue to analyze the information provided in these
responses, but have not identified any material problem areas
to date. 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
has formed 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 adequately address Year 2000-related issues by
December 31, 1999. If these key customers fail in their
attempts to adequately address Year 2000-related issues, 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 audit committee of the Board of
Directors and senior management. As the program continues,
the Company may discover additional Year 2000-related
challenges, including that any remaining 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 has developed 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 if 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 has developed a contingency plan
based upon templates and suggested procedures that have been
provided by the Year 2000 Risk Manager. Each business unit
contingency plan identifies the risk and documents 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 each of the Company's business units has
substantially completed its respective contingency plan, 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 September 30, 1999, the Company's
exposure to these market risk factors was not significant and
had not materially changed from December 31, 1998.
In September 1999, the Company sold Canadian Dollar forward
contracts with maturity dates throughout 2000. As of
September 30, 1999, the notional amount of these forward
contracts was $137.1 million.
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). 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. Rehearing was
granted and the decision of the Court of Appeals was vacated.
The case was reargued before the entire Court of Appeals on
September 13, 1999, and the Company is awaiting the decision
on rehearing by the full Court of Appeals.
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
Freeport-McMoRan Inc. (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 merger between FTX and IMC (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, the Company and PLP (collectively, Plaintiffs)
filed a lawsuit (IMC Action) in Delaware Chancery Court
against certain former directors of FTX (Director Defendants),
and McMoRan Oil & Gas Co., an affiliate of FTX (MOXY). The
Plaintiffs allege 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. The Plaintiffs further allege that the Director
Defendants breached their duties by causing PLP to enter into
a series of interrelated non-arm's-length transactions with
MOXY, which the Plaintiffs allege unfairly benefited MOXY and
the Director Defendants to PLP's detriment.
The Plaintiffs also allege that MOXY knowingly aided and
abetted and conspired with the Director Defendants to breach
their fiduciary duties. On behalf of the PLP public
unitholders, the Plaintiffs seek 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. The Plaintiffs
filed their amended complaint, and their response 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. The
Plaintiffs intend 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 the Company asserting the same
claims that the Plaintiffs assert in the IMC Action. Because
the Plaintiffs had already asserted these claims, the Company
has filed a motion to dismiss the Gottlieb Action. The court
has not set a briefing schedule for the Company's motion to
dismiss. The Company 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
----------- --------------------------------------
10.1 Retirement Agreement dated as of October 8, 1999
between IMC Global Inc. and Robert E. Fowler, Jr.
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:
Up to the date of this report, no reports on Form
8-K were filed.
**************************
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: November 5, 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 10.1
October 8, 1999
Mr. Robert E. Fowler, Jr.
1115 Fairway
Northbrook, IL 60062
Dear Bob:
The purpose of this letter is to set forth the terms of your retirement
from employment with IMC Global Inc. (the "Company").
1. Retirement Date. You will remain an active employee of the Company
through October 31, 2000 ("Retirement Date"); however, you agree to
resign as Chief Executive Officer, Chairman of the Board of Directors
and Director effective October 1, 1999.
2. Compensation. For the period commencing October 1, 1999 and ending
on your Retirement Date, you will receive compensation totaling
$3,599,680, made up of the following components:
Base Salary (13 months) $ 812,500
1999 MICP Award (@ 1.0) 487,500
2000 MICP Award (@ 1.0; prorated for 10 mo.) 406,250
1999 PTIP Payout (@ 1.0) 1,036,730
2000 LTIP Payout (@ 1.0; prorated for 10 mo.) 856,700
This total amount will be paid to you in thirteen monthly
installments commencing on October 15, 1999. Alternatively, you
may make an irrevocable election to defer some or all of this
compensation until some designated future date by completing the
attached election form. Please keep in mind that, in the unlikely
event of the Company's insolvency, you will have rights no greater
than those of an unsecured creditor of the Company with respect to
any deferred amounts owed to you.
3. Pension Benefit. Approximately three months prior to your
Retirement Date, you will receive information regarding the
distribution of you qualified pension benefit under the Company's
Retirement Plan for Salaried Employees of IMC Global Operations
Inc.
4. SERP Benefit. As with your pension, you will receive information
regarding the distribution of your SERP benefit in advance of your
Retirement Date. You will have the same distribution options
(i.e. lump sum, life annuity, 10-year certain and life annuity,
joint and survivor annuity) for your SERP benefit as you have for
your qualified plan benefit, plus the additional option of a lump
sum paid out in annual installments not to exceed 5 years. As was
previously agreed, your SERP benefit will be based upon your
combined IMC/Vigoro service.
5. Executive Life Insurance. As of your Retirement Date, the Company
will cease paying premiums on both your term insurance policy and
your permanent life policy; however, you may continue these
policies by picking up the premium payments. A representative of
The Securus Group will contact you to discuss your options.
6. Consulting Arrangement. For the period commencing October 1, 1999
and ending October 31, 2000, you agree to provide consulting
services on an as needed basis. Such services may be required by
phone and/or in person. For the period commencing November 1,
2000 and ending October 31, 2001, you agree to provide consulting
services on an as needed basis not to exceed fifteen days per
month. These services may be required by phone and/or in person.
In exchange for the services commencing November 1, 2000, you will
be paid at a rate of $1,500 per day and will be paid monthly.
7. Stock Options. For purposes of your outstanding stock options, you
will be considered to be continuing in employment with the Company
during the period for which you are providing consulting services
to the Company, i.e. until October 31, 2001. You will have three
years following the end of your consulting arrangement to exercise
your outstanding stock options; provided, however, that none of
your options may be exercised beyond the tenth anniversary of
their date of grant.
The 6-year term attached to certain of your "Vigoro options" (now
representing 200,000 shares) will be extended for four years such
that they expire on August 4, 2004.
8. Restricted Stock. The 33,000 shares of restricted stock you
received pursuant to your employment agreement will vest upon your
attainment of age 65. the 39,054 shares you received as one-half
of your 1998 LTIP payout will vest on your Retirement Date.
Shortly after the vesting of each of these awards, the Company
will send to you the requisite stock certificates.
9. Office Space Allowance. For the five-year period commencing on
October 1, 1999, you will receive an annual allowance of $5,000 to
cover the cost of off-site office space.
10. Health Care Coverage. Your active health care coverage will
continue through your Retirement Date. Commencing on your
Retirement Date and continuing for the balance of your life, the
Company will provide you with $1,000 per year to help defray the
cost of the individual health insurance coverage that you
purchase.
11. Waiver and Release of Claims. In exchange for the compensation
described in paragraph 2 above, you agree to execute the Waiver
and Release of Claims (attached hereto as Exhibit A). In exchange
for the special treatment of your stock options as described in
paragraph 7 above, you agree to sign an additional Waiver and
Release of Claims (attached hereto as Exhibit B) after your
Retirement Date, relating to claims arising during the period
beginning October 1, 1999 and ending on your Retirement Date.
12. Termination of Prior Agreements. If you accept the terms of this
letter agreement, this agreement will supersede any prior
agreements made between you and the company regarding your
employment and separation from employment with the Company,
including but not limited to your Employment Agreement, dated
January 29, 1998.
The foregoing constitutes our entire understanding and agreement with
respect to the terms of your retirement from employment with the
Company. If the terms of this letter meet with your understanding and
approval, please indicate your acceptance thereof by signing where
indicated below and on the attached Waiver and Release of Claims
(Exhibit A). Please make copies for your records and return the
originals to me.
Sincerely,
/s/ Doug Pertz
- --------------------
********************
AGREED AND ACCEPTED:
/s/ Robert E. Fowler, Jr. Date: 10/13/99
- ------------------------- ----------------
Robert E. Fowler, Jr.
EXHIBIT A
WAIVER AND RELEASE OF CLAIMS
In exchange for the payments and benefits described in the
attached letter, which I acknowledge I would not otherwise be entitle
to receive, I freely and voluntarily agree to this WAIVER AND RELEASE
OF CLAIMS ("WAIVER"):
1. I am resigning my position as Chief Executive Officer and Chairman
of the Board of Directors of IMC Global Inc. effective October 1, 1999.
2. I acknowledge that the payments described in the attached letter
are the sole payments to which I am entitled and that I am not entitled
to any additional payments for salary, bonus or otherwise.
3. I, and anyone claiming through me, hereby waive and release any
and all claims that I may have ever had or that I may now have against
IMC Global Inc., its parents, divisions, partnerships, affiliates,
subsidiaries, and other related entities and their successors and
assigns, and past, present and future officers, directors, employees,
agents and attorneys of each of them in their individual or official
capacity (hereinafter collectively referred to as "Released Parties").
Among the claims that I am waiving are claims relating to my employment
or termination of employment, including, but not limited to, claims of
discrimination in employment brought under the Age Discrimination in
Employment Act, Title VII of the Civil Rights Act of 1964, the
Americans With Disabilities Act, the Illinois Human Rights Act, or
other federal, state or local employment discrimination, employment,
wage laws, ordinances or regulations or any common law or statutory
claims of wrongful discharge and any other common law or statutory
claims; whether for damages, vacation pay, lost wages, bonus
compensation or for any other relief or remedy. I accept the Special
Payments and Benefits offered in the attached letter as being in full
accord, satisfaction, compromise and settlement of any and all claims
or potential claims, and I expressly agree that I am not entitled to
and shall not receive any further recovery of any kind from IMC Global
Inc. or any of the Released parties, and that in the event of any
further proceedings whatsoever based upon any matter released herein,
IMC Global and each of the Released Parties shall have no further
monetary or other obligation of any kind to me, including any
obligation for costs, expenses and attorney's fees incurred on my
behalf.
4. I understand and agree that this WAIVER will be binding on me and
my heirs, administrators and assigns. I acknowledge that I have not
assigned any claims of filed or initiated any legal proceedings against
any of the Released Parties.
5. Except as may be required by law, I agree that I will not disclose
the existence or terms of this WAIVER to anyone except my accountant,
attorney or spouse, each of whom shall be bound by this confidentiality
provision.
6. I understand that I have twenty-one (21) days to consider whether
to sign this WAIVER and return it to Michele Miller, Manager, Human
Resources. IMC Global Inc. hereby advises me of my right to consult
with an attorney before signing the WAIVER and I acknowledge that I
have had an opportunity to consult with an attorney and have either
held such consultation or have determined not to consult with an
attorney.
7. I understand that I may revoke my acceptance of this WAIVER by
delivering notice of my revocation to Michele Miller with seven (7)
days of the day I sign the WAIVER. If I do not revoke my acceptance of
this WAIVER within seven days of the day I sign it, it will be legally
binding and enforceable.
IMC GLOBAL INC. AGREED AND ACCEPTED:
By: /s/ Doug Pertz /s/ Robert E. Fowler, Jr.
------------------------ -------------------------
Title: President and CEO Robert E. Fowler, Jr.
------------------------ -------------------------
Print Name
Date: 10/8/99 Date: 10/13/99
------------------------ --------------------
EXHIBIT 11
<TABLE>
EARNINGS PER SHARE
DILUTED COMPUTATION
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<CAPTION>
Three months ended Nine months ended
September 30, September 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 $ 13.2 $ 48.7 $ 133.6 $ 160.3
Earnings (loss) from
discontinued operations - (10.9) - 12.5
Extraordinary charge -
debt retirement - (0.9) - (3.6)
Cumulative effect of a
change in accounting
principle - - (7.5) -
---------- ---------- ---------- -----------
Net earnings
applicable to
common stock $ 13.2 $ 36.9 $ 126.1 $ 169.2
========== ========== ========== ===========
Number of shares:
Weighted average
shares outstanding 114,369,107 114,283,410 114,339,454 114,189,503
Common stock equivalents 130,853 344,318 226,442 708,075
----------- ----------- ----------- -----------
Total common and common
equivalent shares assuming
dilution 114,499,960 114,627,728 114,565,896 114,897,578
=========== =========== =========== ===========
Diluted earnings per share:
Earnings from continuing
operations before
extraordinary item and
cumulative effect of a
change in accounting
principle $ 0.12 $ 0.43 $ 1.17 $ 1.40
Earnings (loss) from
discontinued operations - (0.10) - 0.10
Extraordinary charge -
debt retirement - (0.01) - (0.03)
Cumulative effect of a
change in accounting
principle - - (0.07) -
---------- ---------- ---------- -----------
Net earnings $ 0.12 $ 0.32 $ 1.10 $ 1.47
========== ========== ========== ===========
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> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<CASH> 57,700
<SECURITIES> 7,000
<RECEIVABLES> 363,700
<ALLOWANCES> 6,400
<INVENTORY> 510,200
<CURRENT-ASSETS> 1,047,300
<PP&E> 6,161,500
<DEPRECIATION> 2,413,100
<TOTAL-ASSETS> 6,020,300
<CURRENT-LIABILITIES> 453,400
<BONDS> 2,535,400
<COMMON> 125,200
0
0
<OTHER-SE> 1,862,500
<TOTAL-LIABILITY-AND-EQUITY> 6,020,300
<SALES> 2,160,300
<TOTAL-REVENUES> 2,160,300
<CGS> 1,655,100
<TOTAL-COSTS> 1,785,100
<OTHER-EXPENSES> 24,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136,900
<INCOME-PRETAX> 213,800
<INCOME-TAX> 80,200
<INCOME-CONTINUING> 133,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (7,500)
<NET-INCOME> 126,100
<EPS-BASIC> 1.10
<EPS-DILUTED> 1.10
<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>
