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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, 2000
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.)
100 South Saunders Road
Lake Forest, Illinois 60045
(847) 739-1200
(Address and telephone number, including area code, of registrant's
principal executive offices)
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: 114,797,706 shares, excluding 10,387,683
treasury shares as of November 1, 2000.
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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, 1999, are unaudited but include all adjustments
which the Company's management considers necessary for a fair
presentation. These adjustments consist of normal recurring
accruals. Interim results are not necessarily indicative of
the results expected for the full year.
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 483.4 $ 521.5 $1,610.0 $1,849.1
Cost of goods sold 419.8 424.3 1,279.4 1,385.9
------- ------- -------- --------
Gross margins 63.6 97.2 330.6 463.2
Selling, general and administrative
expenses 31.2 32.6 101.9 104.2
Restructuring activity 1.3 - (1.2) -
------- ------- -------- --------
Operating earnings 31.1 64.6 229.9 359.0
Interest expense 37.4 36.5 115.6 115.6
Other (income) expense, net (1.8) 1.6 (3.4) (6.5)
------- ------- -------- --------
Earnings (loss) from continuing operations
before minority interest (4.5) 26.5 117.7 249.9
Minority interest (6.0) 3.1 (6.2) 27.7
------- ------- -------- --------
Earnings from continuing operations
before taxes 1.5 23.4 123.9 222.2
Provision (benefit) for income taxes (0.3) 8.8 45.6 83.5
------- ------- -------- --------
Earnings from continuing operations
before cumulative effect of a change
in accounting principle 1.8 14.6 78.3 138.7
Loss from discontinued operations (8.8) (1.4) (8.8) (5.1)
------- ------- -------- --------
Earnings (loss) before cumulative
effect of a change in accounting
principle (7.0) 13.2 69.5 133.6
Cumulative effect of a change in
accounting principle - - - (7.5)
------- ------- -------- --------
Net earnings (loss) $ (7.0) $ 13.2 $ 69.5 $ 126.1
======= ======= ======== ========
Basic and diluted earnings (loss) per share:
Earnings from continuing operations
before cumulative effect of a change
in accounting principle $ 0.02 $ 0.13 $ 0.68 $ 1.21
Loss from discontinued operations (0.08) (0.01) (0.08) (0.04)
Cumulative effect of a change in
accounting principle - - - (0.07)
------- ------- -------- --------
Net earnings (loss) per share $ (0.06) $ 0.12 $ 0.60 $ 1.10
======= ======= ======== ========
Basic weighted average number of
shares outstanding 114.4 114.4 114.4 114.3
Diluted weighted average number of
shares outstanding 114.9 114.5 114.8 114.6
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
<CAPTION>
(Unaudited)
September 30, December 31,
Assets 2000 1999
---------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 22.0 $ 80.8
Receivables, net 72.8 254.2
Note receivable from affiliate 59.2 -
Inventories, net 394.8 439.6
Deferred income taxes 135.3 135.3
Other current assets 4.6 18.0
-------- --------
Total current assets 688.7 927.9
Property, plant and equipment, net 3,182.0 3,250.7
Net assets of discontinued operations
held for sale 265.5 301.5
Other assets 731.5 715.8
-------- --------
Total assets $4,867.7 $5,195.9
======== ========
Liabilities and Stockholders' Equity
---------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 234.7 $ 200.9
Accrued liabilities 221.0 260.1
Short-term debt and current maturities of
long-term debt 37.5 29.9
-------- --------
Total current liabilities 493.2 490.9
Long-term debt, less current maturities 2,229.6 2,518.7
Deferred income taxes 573.6 589.6
Other noncurrent liabilities 472.0 516.6
Stockholders' equity:
Common stock, $1 par value, authorized
300,000,000 shares; issued 125,185,301 and
125,163,572 shares at September 30 and
December 31, respectively 125.2 125.2
Capital in excess of par value 1,693.3 1,698.1
Accumulated deficit (367.0) (411.1)
Accumulated other comprehensive loss (59.5) (37.3)
Treasury stock, at cost, 10,387,683 and
10,676,276 shares at September 30 and
December 31, respectively (292.7) (294.8)
-------- --------
Total stockholders' equity 1,099.3 1,080.1
-------- --------
Total liabilities and stockholders' equity $4,867.7 $5,195.9
======== ========
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
<CAPTION>
Nine months ended
September 30
2000 1999
------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net earnings $ 69.5 $ 126.1
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion and amortization 163.0 203.8
Minority interest (6.2) 26.4
Deferred income taxes (16.0) 3.0
Other charges and credits, net (12.8) (8.9)
Changes in:
Receivables 181.4 64.1
Note receivable from affiliate (59.2) -
Inventories 44.7 70.4
Other current assets 17.5 (9.0)
Accounts payable 33.8 (40.0)
Accrued liabilities (39.2) (12.7)
Net current assets of discontinued operations 5.9 -
------- -------
Net cash provided by operating activities 382.4 423.2
------- -------
Cash Flows from Investing Activities
Capital expenditures (105.0) (211.1)
Acquisitions, net of cash acquired - (7.9)
Proceeds from sale of business - 263.9
Proceeds from sale of investment - 12.8
Proceeds from sale of property, plant and equipment 3.2 16.6
------- -------
Net cash provided by (used in) investing
activities (101.8) 74.3
------- -------
Net cash provided before financing activities 280.6 497.5
------- -------
Cash Flows from Financing Activities
Cash distributions to the unitholders of Phosphate
Resource Partners Limited Partnership (4.5) (21.5)
Payments of long-term debt (338.7) (158.7)
Proceeds from issuance of long-term debt, net 52.2 53.1
Changes in short-term debt, net 5.0 (391.3)
Cash distributions to Vigoro Corporation
preferred stockholders (28.2) -
Stock options exercised and restricted stock
awards 1.1 2.5
Cash dividends paid (26.3) (27.3)
------- -------
Net cash used in financing activities (339.4) (543.4)
------- -------
Net change in cash and cash equivalents (58.8) (45.9)
Cash and cash equivalents - beginning of period 80.8 110.6
------- -------
Cash and cash equivalents - end of period $ 22.0 $ 64.7
======= =======
(See Notes to Condensed Consolidated Financial Statements)
</TABLE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
1.Restructuring Activities
------------------------
1999 Restructuring Charge
During the fourth quarter of 1999, the Company announced and began
implementing a Company-wide rightsizing program (Rightsizing
Program) which was designed to simplify and focus the Company's core
businesses. The key components of the Rightsizing Program were: (i)
the shutdown and permanent closure of the Nichols and Payne Creek
facilities at IMC PhosFeed (PhosFeed) resulting from an optimization
program that will reduce rock and concentrate production costs
through higher utilization rates at the lowest-cost facilities; (ii)
an asset rightsizing program at IMC Potash (Potash) resulting from a
recently revised mine plan; (iii) the closure of a facility at IMC
Salt (Salt); and (iv) corporate and business unit headcount
reductions. In conjunction with the Rightsizing Program, the
Company recorded a special charge of $179.0 million, $95.6 million
after tax and minority interest, or $0.83 per share, in the fourth
quarter of 1999.
Activity related to accruals for the Rightsizing Program during the
period January 1, 2000 to September 30, 2000 was as follows:
<TABLE>
Accrual as of Accrual as of
January 1, 2000 Cash Paid September 30, 2000
--------------- --------- ------------------
<S> <C> <C> <C>
Non-employee exit costs:
Demolition and closure costs $ 46.6 $ 9.4 $ 37.2
Other 5.5 4.9 0.6
Employee headcount reductions:
Severance benefits 28.8 24.7 4.1
------ ------ ------
Total $ 80.9 $ 39.0 $ 41.9
====== ====== ======
</TABLE>
The timing and costs of the Rightsizing Program are generally on
schedule with the time and dollar estimates disclosed in the fourth
quarter of 1999. During the first nine months of 2000, 292
employees left the Company in accordance with their target departure
date.
1998 Restructuring Charge
During the fourth quarter of 1998, the Company developed and began
execution of a plan to improve profitability (Project Profit).
Project Profit was comprised of four major initiatives: (i) the
combination of certain activities within the Potash and PhosFeed
business units in an effort to realize certain operating and staff
function 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
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 Project
Profit, the Company recorded a special charge of $193.3 million,
$113.4 million after tax and minority interest, or $0.99 per share,
in the fourth quarter of 1998.
Activity related to accruals for Project Profit during the period
January 1, 2000 to September 30, 2000 was as follows:
<TABLE>
Accrual as of Accrual as of
January 1, 2000 Cash Paid September 30, 2000
--------------- --------- ------------------
<S> <C> <C> <C>
Non-employee exit costs:
Demolition and closure costs $ 26.9 $ 10.9 $ 16.0
Idled leased transportation
equipment 8.8 3.6 5.2
Other 2.0 0.2 1.8
Employee headcount reductions:
Severance benefits 0.4 0.4 -
------ ------ ------
Total $ 38.1 $ 15.1 $ 23.0
====== ====== ======
</TABLE>
The timing and costs of Project Profit are generally on schedule
with the time and dollar estimates disclosed in the fourth quarter
of 1999.
As part of Project Profit, the Company had written off certain
assets in 1998. However, in April and July 2000, certain of these
assets were sold to third parties. This activity was recorded in
the Statement of Operations as an adjustment to the restructuring
charge previously recognized for Project Profit.
2.Divestitures
------------
In the fourth quarter of 1999, the Company decided to discontinue
its oil and gas business which primarily consisted of Phosphate
Resource Partners Limited Partnership's (PLP) interest in a multi-
year oil and natural gas exploration program (Exploration Program)
with McMoRan Exploration Company. The Company sold its interest,
through PLP, in the Exploration Program for proceeds of $32.0
million.
In December 1999, the Company received Board of Director approval
for a plan to sell the entire IMC Chemicals (Chemicals) business
unit. The Company is currently continuing its discussions with
potential buyers regarding the sale of Chemicals, in whole or in
parts.
The Company is also exploring strategic options, including
divestiture, for Salt and a related production facility located in
Ogden, Utah (Ogden). Discussions are currently being held with
potential buyers for these businesses. If a decision is made to
sell these operations, a pre-tax loss on the sale could approximate
$500.0 million.
The Company believes that it is unlikely that it can achieve the
previously anticipated net proceeds in the range of $1.0 billion
from the sales of the Salt and Chemicals businesses. Any final
decision on asset sales will be based on what maximizes value now
and in the future in the judgment of the Company.
The Consolidated Statement of Operations has been restated for the
applicable 1999 periods presented to report the operating results of
the oil and gas and chemicals businesses as discontinued operations
in accordance with Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations."
For financial reporting purposes, the assets and liabilities of
Chemicals, net of the estimated loss on disposal, have been
classified as Net assets of discontinued operations held for sale.
See the table below for the detail of Chemicals' assets and
liabilities.
<TABLE>
September 30 December 31
2000 1999
------------ -----------
<S> <C> <C>
Assets:
Receivables, net $ 95.6 $ 106.0
Inventories, net 40.8 50.7
Other current assets 9.1 4.0
Property, plant and equipment, net 208.7 231.7
Other assets 1.8 6.5
-------- --------
Total assets 356.0 398.9
Liabilities:
Accounts payable 38.6 55.9
Accrued liabilities 36.7 31.9
Other noncurrent liabilities 15.2 9.6
-------- --------
Total liabilities 90.5 97.4
-------- --------
Net assets of discontinued operations
held for sale $ 265.5 $ 301.5
======== ========
</TABLE>
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 Company's outstanding indebtedness.
3.Adoption of SOP 98-5
--------------------
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
January 1, 1999 and, accordingly, recorded a charge for the
cumulative effect of an accounting change of $7.5 million, or $0.07
per share, after tax and minority interest, in order to expense
start-up costs that had been previously capitalized.
4.Sale of Accounts Receivable
---------------------------
In September 2000, the Company entered into an accounts receivable
securitization facility (Securitization Facility) which expires on
September 28, 2001, unless extended, and in any event no later than
September 26, 2003. The Securitization Facility allows the Company
to sell without recourse, on an on-going basis, certain of its trade
accounts receivable to a wholly-owned unconsolidated special purpose
vehicle (SPV). The SPV in turn may sell an interest in such
receivables to a financial conduit for up to a $100.0 million net
investment. The proceeds received by the SPV from the financial
conduit are used to pay the Company for a portion of the purchase
price of the receivables. The SPV pays for the remainder of the
purchase price of the receivables through the issuance of notes
payable to the Company, which bear interest at the Federal Funds
Rate (6.5% at September 30, 2000) and are due no later than one year
after the termination of the Securitization Facility.
At September 30, 2000, the outstanding balance of trade accounts
receivable sold to the SPV was $159.0 million and the net investment
by the financial conduit was approximately $93.0 million, which
represents the sale of substantially all eligible receivables at
that date. The proceeds of the net investment from the financial
conduit were used to reduce borrowings under the Company's
commercial paper program. The principal amount of notes issued by
the SPV to the Company in connection with the above sale, which is
reflected in the Condensed Consolidated Balance Sheet as "Note
receivable from affiliate," was $59.2 million.
5.Inventories
-----------
<TABLE>
September 30 December 31
2000 1999
------------ -----------
<S> <C> <C>
Products (principally finished) $ 313.1 $ 358.7
Operating materials and supplies 90.0 97.8
------- -------
403.1 456.5
Less: Inventory allowances 8.3 16.9
------- -------
Inventories, net $ 394.8 $ 439.6
======= =======
</TABLE>
6.Operating Segments(a)
---------------------
<TABLE>
IMC IMC IMC
PhosFeed(b) Potash Salt Other Total
----------- ------ ---- ----- -----
<S> <C> <C> <C> <C> <C>
Three months ended September 30, 2000
Net sales from external
customers $ 281.6 $ 150.5 $ 51.3 $ - $ 483.4
Intersegment net sales 17.6 9.6 0.5 - 27.7
Gross margins 13.4 46.6 10.5 (6.9) 63.6
Operating earnings (loss) 1.0 43.5 3.4 (16.8) 31.1
Nine months ended September 30, 2000
Net sales from external
customers $ 856.7 $ 546.4 $ 206.9 $ - $1,610.0
Intersegment net sales 55.2 28.2 1.7 - 85.1
Gross margins 87.3 210.5 51.4 (18.6) 330.6
Operating earnings (loss) 55.5 198.8 26.2 (50.6) 229.9
Three months ended September 30, 1999
Net sales from external
customers $ 325.4 $ 141.2 $ 55.0 $ (0.1) $ 521.5
Intersegment net sales 18.8 9.4 0.5 - 28.7
Gross margins 50.7 42.5 13.1 (9.1) 97.2
Operating earnings (loss) 40.5 42.1 4.9 (22.9) 64.6
Nine months ended September 30, 1999
Net sales from external
customers $1,122.2 $ 499.6 $ 227.9 $ (0.6) $1,849.1
Intersegment net sales 76.5 40.5 1.6 - 118.6
Gross margins 236.3 182.1 67.3 (22.5) 463.2
Operating earnings (loss) 205.0 172.4 41.0 (59.4) 359.0
(a)The operating results of Chemicals and the oil and gas business
have not been included in the segment information above as these
businesses have been classified as discontinued operations. See
Note 2.
(b)Effective January 1, 2000, the Company realigned its internal
management reporting structure by combining the previously
separate phosphates and feed ingredients segments. As a result
of this change, segment information for all periods has been
restated to combine IMC Phosphates and IMC Feed Ingredients
segments as the IMC PhosFeed segment.
</TABLE>
8.Comprehensive Income (Loss)
-------------------------
Comprehensive income (loss), net of taxes, was as follows:
<TABLE>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Comprehensive income (loss):
Net earnings (loss) $ (7.0) $ 13.2 $ 69.5 $126.1
Foreign currency
translation adjustment (8.1) 2.9 (22.2) 27.8
------ ------ ------ ------
Total comprehensive income
(loss) for the period $(15.1) $ 16.1 $ 47.3 $153.9
====== ====== ====== ======
</TABLE>
9.Earnings Per Share
------------------
The numerator for both basic and diluted earnings (loss) per share
(EPS) is: (i) earnings from continuing operations before the
cumulative effect of a change in accounting principle; (ii) loss
from discontinued operations; (iii) cumulative effect of a change in
accounting principle or; (iv) net earnings (loss), as applicable.
The denominator for basic EPS is the weighted-average number of
shares outstanding during the period (Denominator). The following
is a reconciliation of the Denominator for the basic and diluted
earnings (loss) per share computations:
<TABLE>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic EPS shares 114.4 114.4 114.4 114.3
Effect of dilutive securities 0.5 0.1 0.4 0.3
----- ----- ----- -----
Diluted EPS shares 114.9 114.5 114.8 114.6
===== ===== ===== =====
</TABLE>
Options to purchase approximately 7.9 million and 6.5 million shares
of common stock as of September 30, 2000 and 1999, respectively, and
warrants to purchase approximately 8.4 million shares of common
stock as of September 30, 2000 and 1999, were not included in the
computation of diluted EPS, because the exercise price was greater
than the average market price of the Company's common stock and,
therefore, the effect of their inclusion would be antidilutive.
10.Recently Issued Accounting Guidance
-----------------------------------
In December 1999 the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in
Financial Statements," which provides guidance regarding revenue
recognition. The Company is in the process of determining the
impact, if any, this new guidance will have on the Company's
financial statements. The effect of any change will be reflected by
the cumulative effect of an accounting change as of January 1, 2000.
In May 2000, the SEC deferred the required effective date for
implementation of SAB No. 101 until the fourth quarter of 2000.
Effective in the fourth quarter 2000, the Company will adopt the
provisions of Emerging Issues Task Force (EITF) Issue No. 00-10,
"Accounting for Shipping and Handling Fees and Costs," which
provides guidance regarding classification of shipping and handling
costs in the Consolidated Statement of Operations. The Company is
in the process of determining the impact this reclassification of
costs will have on the Company's financial statements.
The Company believes that Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which the Company is required to adopt on
January 1, 2001, will not have a material impact on the Company's
financial statements.
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations.(1)
Results of Operations
---------------------
Three months ended September 30, 2000 vs. three months ended
September 30, 1999
----------------------------------------------------------------
Overview
Net sales for the third quarter of 2000 were $483.4 million and
gross margins were $63.6 million. Earnings from continuing
operations for the third quarter of 2000 were $1.8 million, or
$0.02 per share. A net loss of $7.0 million, or $0.06 per
share, included a loss from discontinued operations of $8.8
million, or $0.08 per share. Net sales for the third quarter
of 1999 were $521.5 million and gross margins were $97.2
million. Earnings from continuing operations for the third
quarter of 1999 were $14.6 million, or $0.13 per share. Net
earnings for the third quarter of 1999 of $13.2 million, or
$0.12 per share, included a loss from discontinued operations
of $1.4 million, or $0.01 per share. See Note 2 of Notes to
Condensed Consolidated Financial Statements.
Net sales for the third quarter of 2000 decreased seven percent
from the prior year period while gross margins decreased 35
percent. The decrease in sales and margins was the result of
significantly reduced phosphate pricing, higher idle plant
costs from temporary production cutbacks, increased raw
material costs as well as slightly lower potash pricing. These
decreases were partially offset by continued savings from cost
reduction programs as well as strong potash volumes.
The operating results of the Company's significant business
units are discussed in more detail below.
IMC PhosFeed
PhosFeed's net sales for the third quarter of 2000 declined 13
percent to $299.2 million compared to $344.2 million for the
same period last year largely as a result of lower average
sales realizations and lower volumes. Lower average concentrate
sales prices, driven by decreased average diammonium phosphate
(DAP) realizations, reduced sales by $32.3 million. Average
DAP prices fell 14 percent to $134 per short ton in the third
quarter of 2000 from $156 per short ton in the third quarter of
1999. Concentrated phosphates domestic sales volumes,
primarily DAP, rose 36 percent in the third quarter of 2000
while export shipments fell 20 percent. Overall, decreased
shipments of concentrated phosphates, primarily DAP,
unfavorably impacted net sales by $9.7 million.
Gross margins decreased 74 percent to $13.4 million for the
third quarter of 2000 compared to $50.7 million for the third
quarter of last year. This decrease was mainly the result of
the lower prices discussed above, higher idle plant costs from
temporary production cutbacks and increased ammonia and natural
gas costs, partially offset by savings from cost reduction
programs of approximately $15.7 million and lower sulphur
costs.
Demand for phosphate products remained depressed during the
third quarter of 2000 and PhosFeed responded with the
curtailment of full operating capacity to stabilize phosphate
inventories. PhosFeed balanced phosphate rock inventory with
demand by suspending production throughout all phosphate mining
operations for an approximate two-week period during the third
quarter of 2000. Additionally, PhosFeed curtailed phosphate
fertilizer production at its Louisiana facilities for
approximately two months in the third quarter of 2000; however,
partial production resumed in September 2000 to fulfill
customer requirements.
IMC Potash
Potash's net sales for the third quarter of 2000 increased six
percent to $160.1 million compared to $150.6 million for the
same period last year mainly as a result of higher volumes.
Gross margins increased ten percent to $46.6 million for the
third quarter of 2000 from $42.5 million for the same period in
1999. Gross margins were positively impacted by higher volumes
and savings from cost reduction programs. These increases were
partially offset by lower prices.
IMC Salt
Salt's net sales decreased seven percent to $51.8 million for
the third quarter of 2000 compared to $55.5 million for the
same period in 1999 mainly as a result of reduced North
American highway deicing volumes and prices.
Gross margins decreased 20 percent to $10.5 million for the
third quarter of 2000 from $13.1 million for the same period in
1999. This decrease resulted from the lower North American
highway deicing volumes and prices discussed above.
Key Statistics
The following table summarizes the Company's significant sales
volumes and average selling prices for the three months ended
September 30:
<TABLE>
2000 1999
---- ----
<S> <C> <C>
Sales volumes (in thousands of short tons)(a):
IMC Phosphates 1,522 1,574
IMC Potash 1,943 1,769
IMC Salt 1,523 1,649
Average price per ton(b):
DAP $134 $156
Potash $79 $81
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 plant/mine.
</TABLE>
Other (Income) Expense, net
Other (income) expense, net for the third quarter of 2000
increased $3.4 million to $1.8 million of income from expense
of $1.6 million for the same period in 1999. This fluctuation
was mainly caused by foreign currency transactions and the
absence of a 1999 charge for an insurance deductible payment.
Minority Interest
Minority interest decreased $9.1 million from the same period
last year. This decrease in minority interest expense was
primarily the result of significantly lower earnings for IMC
Phosphates Company, a 78.9 percent owned subsidiary of the
Company, as compared to the prior year period.
Nine months ended September 30, 2000 vs. nine months ended
September 30, 1999
----------------------------------------------------------------
Overview
Net sales for the first nine months of 2000 were $1.6 billion
and gross margins were $330.6 million. Earnings from
continuing operations for the first nine months of 2000 were
$78.3 million, or $0.68 per share. Net earnings for the first
nine months of 2000 of $69.5 million, or $0.60 per share,
included a loss from discontinued operations of $8.8 million,
or $0.08 per share. Net sales for the first nine months of
1999 were $1.8 billion and gross margins were $463.2 million.
Earnings from continuing operations for the first nine months
of 1999 were $138.7 million, or $1.21 per share. Net earnings
for the first nine months of 1999 of $126.1 million, or $1.10
per share, included a loss from discontinued operations of $5.1
million, or $0.04 per share, and a cumulative effect of a
change in accounting principle of $7.5 million, or $0.07 per
share. See Notes 2 and 3 of Notes to Condensed Consolidated
Financial Statements.
Net sales for the first nine months of 2000 decreased 13
percent from the prior year period while gross margins
decreased 29 percent. The decrease in sales and margins was
mainly the result of significantly reduced phosphate pricing
and volumes, reduced salt volumes, lower potash pricing and
higher raw material costs. These decreases were partially
offset by savings from cost reduction programs as well as
strong potash volumes.
The operating results of the Company's significant business
units are discussed in more detail below.
IMC PhosFeed
PhosFeed's net sales for the first nine months of 2000 declined
24 percent to $911.9 million compared to $1.2 billion for the
same period last year largely as a result of lower phosphate
average sales realizations and volumes. Lower average
concentrate sales prices, driven by decreased average DAP
realizations, reduced sales by $161.3 million. Average DAP
prices fell 21 percent to $132 per short ton in the first nine
months of 2000 from $167 per short ton in the first nine months
of 1999. Concentrated phosphates export sales volumes,
primarily DAP, fell 27 percent for the first nine months of
2000 while domestic shipments rose 13 percent. Overall,
decreased shipments of concentrated phosphates unfavorably
impacted net sales by an additional $110.1 million. Also,
sales of uranium and urea decreased $20.2 million as a result
of exiting these two businesses as part of Project Profit.
Gross margins decreased 63 percent to $87.3 million for the
first nine months of 2000 compared to $236.3 million for the
first nine months of the prior year. This decrease was mainly
the result of the lower prices and volumes discussed above,
partially offset by savings from cost reduction programs of
approximately $53.9 million.
IMC Potash
Potash's net sales increased six percent to $574.6 million for
the first nine months of 2000 compared to $540.1 million for
the same period in 1999. Significantly higher domestic and
export sales volumes more than offset reduced prices.
Gross margins increased 16 percent to $210.5 million for the
first nine months of 2000 from $182.1 million for the same
period in 1999. Gross margins improved as a result of higher
volumes, favorable plant performance from higher operating
rates and savings from cost reduction programs, partially
offset by lower sales realizations.
IMC Salt
Salt's net sales decreased nine percent to $208.6 million for
the first nine months of 2000 compared to $229.5 million for
the same period in 1999. This decrease was mainly attributable
to lower volumes as a result of the milder winter weather
experienced in the 1999/2000 winter season.
Gross margins decreased 24 percent to $51.4 million for the
first nine months of 2000 from $67.3 million for the same
period in 1999. The decrease primarily resulted from the
decreased volumes discussed above coupled with higher logistics
costs.
Key Statistics
The following table summarizes the Company's significant sales
volumes and average selling prices for the nine months ended
September 30:
<TABLE>
2000 1999
---- ----
<S> <C> <C>
Sales volumes (in thousands of short tons)(a):
IMC Phosphates 4,597 5,237
IMC Potash 6,971 6,281
IMC Salt 7,274 8,294
Average price per ton(b):
DAP $132 $167
Potash $80 $84
Salt $29 $28
(a)Sales volumes include tons sold captively. Phosphates'
volumes represent dry product tons, primarily DAP.
(b)Average prices represent sales made FOB plant/mine.
</TABLE>
Other (Income) Expense, net
Other (income) expense, net for the first nine months of 2000
decreased $3.1 million to $3.4 million of income from $6.5 million
of income for the same period in 1999. This fluctuation was
mainly caused by the absence of proceeds received from the sale of
an investment in the prior year, partially offset by foreign
currency transactions.
Minority Interest
Minority interest decreased $33.9 million from the same period
last year. This decrease in minority interest expense was
primarily the result of significantly lower earnings for IMC
Phosphates Company as compared to the prior year period.
Restructuring Activities
------------------------
The timing and costs of the Rightsizing Program and Project Profit
are generally on schedule with the time and dollar estimates
disclosed in the fourth quarter of 1999. During the first nine
months ended September 30, 2000, 292 employees left the Company as
part of the Rightsizing Program in accordance with their target
departure date. See Note 1 of Notes to Condensed Consolidated
Financial Statements.
Divestitures
------------
In December 1999, the Company received Board of Director approval
for a plan to sell the entire Chemicals business unit. The Company
is currently continuing its discussions with potential buyers
regarding the sale of Chemicals, in whole or in parts. For
financial reporting purposes, the assets and liabilities of
Chemicals, net of the estimated loss on disposal, have been
classified as Net assets of discontinued operations held for sale.
The Company is also exploring strategic options, including
divestiture, for Salt and Ogden. Discussions are currently being
held with potential buyers for these businesses. If a decision is
made to sell these operations, a pre-tax loss on the sale could
approximate $500.0 million.
The Company believes that it is unlikely that it can achieve the
previously anticipated net proceeds in the range of $1.0 billion
from the sales of the Salt and Chemicals businesses. Any final
decision on asset sales will be based on what maximizes value now
and in the future in the judgment of the Company.
Sale of Accounts Receivables
----------------------------
In September 2000, the Company entered into a Securitization
Facility which expires on September 28, 2001, unless extended, and
in any event no later than September 26, 2003. The Securitization
Facility allows the Company to sell without recourse, on an on-
going basis, certain of its trade accounts receivable to a SPV.
The SPV in turn may sell an interest in such receivables to a
financial conduit for up to a $100.0 million net investment. The
proceeds received by the SPV from the financial conduit are used
to pay the Company for a portion of the purchase price of the
receivables. The SPV pays for the remainder of the purchase price
of the receivables through the issuance of notes payable to the
Company, which bear interest at the Federal Funds Rate (6.5% at
September 30, 2000) and are due no later than one year after the
termination of the Securitization Facility.
At September 30, 2000, the outstanding balance of trade accounts
receivable sold to the SPV was $159.0 million and the net
investment by the financial conduit was approximately $93.0
million, which represents the sale of substantially all eligible
receivables at that date. The proceeds of the net investment from
the financial conduit were used to reduce borrowings under the
Company's commercial paper program. The principal amount of notes
issued by the SPV to the Company in connection with the above
sale, which is reflected in the Condensed Consolidated Balance
Sheet as "Note receivable from affiliate," was $59.2 million.
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 $382.4 million of cash in the first
nine months of 2000 compared with $423.2 million for the same
period in 1999. The decrease of $40.8 million was primarily
driven by the depressed agricultural economy which reduced
operating cash flows. However, the decrease in operating cash
flows was partially offset by net proceeds received from the sale
of a portion of the Company's receivable interests. See Note 4 of
Notes to Condensed Consolidated Financial Statements.
Net cash used in investing activities in the first nine months of
2000 of $101.8 million decreased $176.1 million from a source of
funds of $74.3 million in the first nine months of 1999. Capital
expenditures in the first nine months of 2000 were $106.1 million
lower than the prior year as a result of a disciplined program by
the Company to control the level of expenditures in the current
year. The Company estimates that its capital expenditures from
continuing operations for 2000 will approximate $150.0 million,
after minority interest, and will be financed primarily from
operations. The remaining fluctuation in investing activities was
the result of significant proceeds received from the sale of
AgriBusiness in the prior year.
Cash used in financing activities in the first nine months of 2000
of $339.4 million decreased $204.0 million from $543.4 million in
the first nine months of 1999. This decrease in cash used in
financing activities was primarily a result of lower net debt
payments of $215.4 million in the current year.
In the third quarter of 2000, the Company amended and restated its
$650.0 million long-term credit facility, maturing in December
2002, by reducing the amount available to borrow under the
facility to $550.0 million, and by amending interest rates, fees
and financial covenants. Additionally, the Company renewed its
$350.0 million short-term credit facility, extending its maturity
date to September 2001, reducing the amount available to borrow
under the facility to $250.0 million, and amending interest rates,
fees and financial covenants.
In the first quarter of 2000, the Company's Board of Directors
authorized the purchase of up to 5.4 million shares of the
Company's stock through the use of a forward stock repurchase
program executed by a third party financial institution. Under
this authorization, the Company entered into a forward repurchase
contract pursuant to which a financial institution purchased the
entire 5.4 million shares during the first quarter of 2000. The
forward allows, but does not require, the Company to acquire the
shares by March 18, 2002.
Item 3. Market Risk.
The Company is exposed to the impact of interest rate changes
on borrowings, fluctuations in the functional currency of
foreign operations and the impact of 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 reduce foreign currency risks and the
effects of changing raw material prices, but not for trading
purposes. At September 30, 2000, the Company's exposure to
these market risk factors was not significant and had not
materially changed from December 31, 1999.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
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 which began in 1987 and continued 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 defendants.
According to the dissent, all of the defendants were entitled
to summary judgment. The Company, along with the other
defendants that remained in the case, obtained a rehearing of
the case from the entire Court of Appeals 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 Court of Appeals found that the class had failed to
present evidence of collusion sufficient to create a genuine
issue of material fact and affirmed the dismissal of the
complaint by summary judgment. The plaintiffs filed a
petition for a writ of certiorari with the Supreme Court of
the United States. In October 2000, the Supreme Court of the
United States denied the petition for a writ of certiorari.
During 1999, under a consent order with the state of South
Carolina and under the supervision of the United States
Environmental Protection Agency (EPA), the Company
successfully deconstructed its former fertilizer production
facility in Spartanburg, South Carolina. Subsequently, the
EPA performed an expanded site investigation at this facility.
The Company is negotiating with the EPA regarding any
additional remedial activities that will be conducted at the
location. In a related development, on August 31, 2000,
approximately 1,200 plaintiffs filed claims against the
Company in the United States District Court for the District
of South Carolina, Adams et al. v. IMC Global Inc. et al.,
over operation of the Spartanburg plant. These plaintiffs
allege that the Company generated materials during plant
operation that were distributed throughout the surrounding
neighborhood. According to plaintiffs, these activities
violated plaintiffs' civil rights and resulted in personal
injury, wrongful death, fear of disease, and property damage.
The case is in its early stages and the Company is unable to
evaluate the merits of the claims or the magnitude of its
potential exposure; however, the Company intends to vigorously
contest this action.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description
----------- -----------------------------------------------
4 Second Amended and Restated Five-Year Credit
Agreement dated as of September 29, 2000 among
IMC Global Inc., the financial institutions
parties thereto and Bank of America, N.A., as
Administrative Agent
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter
ended September 30, 2000.
**************************
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 9, 2000
Exhibit Index
Filed with
Exhibit Incorporated Electronic
No. Description Herein by Reference to Submission
------- ---------------------------------- ---------------------- ----------
4 Second Amended and Restated Five- X
Year Credit Agreement dated as of
September 29, 2000 among IMC
Global Inc., the financial
institutions parties thereto and
Bank of America, N.A., as
Administrative Agent
27 Financial Data Schedule X
SEC File No. 1-9164
-------------------------------
(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 and governmental policies affecting the
agricultural industry 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, environmental 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; success in implementing the Company's various initiatives
including the divestiture of Chemicals and achieving successful
strategic alternatives for the Salt business unit and a production
facility located in Ogden, Utah; and other risk factors reported
from time to time in the Company's Securities and Exchange
Commission reports.
