-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Js5m+vMEjHMPDcCHof4zH1UMVCZB7p/EPUbVUnS3LUzA+iXZ5oniIsDD7oTd3BXI tzVFy3iJUmTmdf4PBsJpoQ== 0000820626-97-000031.txt : 19971117 0000820626-97-000031.hdr.sgml : 19971117 ACCESSION NUMBER: 0000820626-97-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMC GLOBAL INC CENTRAL INDEX KEY: 0000820626 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 363492467 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09759 FILM NUMBER: 97718781 BUSINESS ADDRESS: STREET 1: 2100 SANDERS RD CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 8472729200 MAIL ADDRESS: STREET 1: 2345 WAUKEGAN ROAD - SUITE E-200 CITY: BANNOCKBURN STATE: IL ZIP: 60015-5516 FORMER COMPANY: FORMER CONFORMED NAME: IMC FERTILIZER GROUP INC DATE OF NAME CHANGE: 19920703 10-Q 1 FOR QUARTER ENDED 09/30/97 - --------------------------------------------------------------------- ------------------------------------------------------------------ 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, 1997 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: 91,662,523 shares, excluding 10,265,430 treasury shares as of November 11, 1997. ------------------------------------------------------------------ - ---------------------------------------------------------------------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements. The accompanying interim condensed consolidated financial statements of IMC Global Inc. (the 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 1997 Annual Report on Form 10-K, are unaudited but include all adjustments which the Company's management considers necessary for a fair presentation. These adjustments consist of normal recurring accruals except as discussed in the following Notes to Condensed Consolidated Financial Statements. On June 24, 1997, the Company announced it was changing its fiscal year end from June 30 to December 31. As such, a December 31, 1996 unaudited Condensed Consolidated Balance Sheet has been included for comparative purposes. Additionally, nine month year-to-date data is included where appropriate. Certain calendar year 1996 amounts have been reclassified to conform to the calendar year 1997 presentation. Interim results are not necessarily indicative of the results expected for the calendar year. CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (In millions except per share amounts) Three months ended Nine months ended September 30, September 30, 1997 1996 1997 1996 - ----------------------------------------------------------------------- Net sales $ 598.7 $ 603.6 $2,311.7 $2,275.6 Cost of goods sold 449.4 448.1 1,732.4 1,715.1 -------- -------- -------- -------- Gross margins 149.3 155.5 579.3 560.5 Selling, general and administrative expenses 65.1 56.4 197.7 182.1 Merger and restructuring charges - - - 43.3 -------- -------- -------- -------- Operating earnings 84.2 99.1 381.6 335.1 Other (income) and expense, net (2.7) (2.6) (2.7) (2.8) Interest expense 13.2 15.1 38.4 45.9 -------- -------- -------- -------- Earnings before minority interest 73.7 86.6 345.9 292.0 Minority interest 31.7 41.6 103.2 143.4 -------- -------- -------- -------- Earnings before taxes 42.0 45.0 242.7 148.6 Provision for income taxes 15.3 16.4 88.6 61.9 -------- -------- -------- -------- Earnings before extraordinary item 26.7 28.6 154.1 86.7 Extraordinary charge - debt retirement - (7.5) (3.3) (7.5) -------- -------- -------- -------- Net earnings $ 26.7 $ 21.1 $ 150.8 $ 79.2 ======== ======== ======== ======== Earnings per share: Earnings before extraordinary item $ 0.28 $ 0.31 $ 1.62 $ 0.93 Extraordinary charge - debt retirement - (0.08) (0.03) (0.08) -------- -------- -------- -------- Net earnings $ 0.28 $ 0.23 $ 1.59 $ 0.85 ======== ======== ======== ======== Weighted average number of shares and equivalent shares outstanding 93.8 93.6 94.9 93.3 (See Notes to Condensed Consolidated Financial Statements on Page 5) CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in millions except per share amounts) September 30, December 31, Assets 1997 1996 - ---------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 74.4 $ 63.3 Receivables, net 263.6 226.8 Inventories 572.3 571.5 Deferred income taxes 54.2 55.3 Other current assets 18.9 16.7 -------- -------- Total current assets 983.4 933.6 Property, plant and equipment, net 2,445.7 2,381.4 Other assets 217.0 170.2 -------- -------- Total assets $3,646.1 $3,485.2 ======== ======== Liabilities and Stockholders' Equity - ------------------------------------------------------------------- Current liabilities: Accounts payable $ 189.2 $ 183.9 Accrued liabilities 186.7 112.0 Short-term debt and current maturities of long-term debt 33.5 55.1 -------- -------- Total current liabilities 409.4 351.0 Long-term debt, less current maturities 809.9 656.8 Deferred income taxes 360.3 323.7 Other noncurrent liabilities 341.2 355.0 Minority interest 416.9 472.5 Stockholders' equity: Common stock, $1 par value authorized 250,000,000 shares; issued 101,916,355 shares and 101,639,885 shares at September 30 and December 31, respectively 101.9 101.6 Capital in excess of par value 948.5 936.1 Retained earnings 541.4 413.0 Treasury stock, at cost, 9,798,430 shares and 5,545,884 shares at September 30 and December 31, respectively (264.3) (107.3) Foreign currency translation adjustment (19.1) (17.2) -------- -------- Total stockholders' equity 1,308.4 1,326.2 -------- -------- Total liabilities and stockholders' equity $3,646.1 $3,485.2 ======== ======== (See Notes to Condensed Consolidated Financial Statements on Page 5) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In millions) Nine months ended September 30, 1997 1996 - --------------------------------------------------------------------- Cash Flows from Operating Activities - ------------------------------------ Net earnings $ 150.8 $ 79.2 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization 141.5 129.3 Minority interest 103.2 133.4 Merger and restructuring charges - 67.3 Deferred income taxes 35.9 17.0 Other charges and credits, net (33.7) (17.7) Changes in: Receivables 8.8 62.0 Inventories 28.7 (9.8) Other current assets (0.6) 8.2 Accounts payable (25.4) (26.7) Accrued liabilities 46.5 (35.6) ------- ------- Net cash provided by operating activities 455.7 406.6 ------- ------- Cash Flows from Investing Activities - ------------------------------------ Capital expenditures (157.9) (134.6) Acquisitions of businesses, net of cash acquired (103.0) (7.1) Proceeds from sale of investment - 11.6 Proceeds from sales of property, plant and equipment 8.2 0.6 ------- ------- Net cash used in investing activities (252.7) (129.5) ------- ------- Net cash provided before financing activities 203.0 277.1 ------- ------- Cash Flows from Financing Activities - ------------------------------------ Joint venture cash distributions to Freeport-McMoRan Resource Partners, Limited Partnership (123.8) (201.5) Payments of long-term debt (156.0) (232.6) Proceeds from issuance of long-term debt, net 312.0 191.1 Changes in short-term debt, net (54.7) (105.9) Increase in securitization of accounts receivable, net 5.2 - Stock options exercised 5.0 17.6 Cash dividends paid (22.4) (26.9) Purchase of treasury stock (157.2) - ------- ------- Net cash used in financing activities (191.9) (358.2) ------- ------- Net change in cash and cash equivalents 11.1 (81.1) Cash and cash equivalents - beginning of period 63.3 135.6 ------- ------- Cash and cash equivalents - end of period $ 74.4 $ 54.5 ======= ======= Supplemental cash flow disclosures: Interest paid $ 43.8 $ 50.6 Income taxes paid, net of refunds $ 31.7 $ 55.2 Non-cash financing activity: Conversion of long-term debt to common stock $ 62.5 $ 14.9 (See Notes to Condensed Consolidated Financial Statements on Page 5) CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (In millions except per share amounts) Nine months ended September 30, 1997 1996 - --------------------------------------------------------------------- Common stock: Balance at December 31 $ 101.6 $ 96.8 Issuance of common stock pursuant to acquisitions - 0.4 Stock options exercised 0.3 0.8 -------- -------- Balance at September 30 101.9 98.0 Capital in excess of par value: Balance at December 31 936.1 793.6 Issuance of common stock pursuant to acquisitions 7.7 14.5 Stock options exercised and other 4.7 16.8 -------- -------- Balance at September 30 948.5 824.9 Retained earnings: Balance at December 31 413.0 315.8 Net earnings 150.8 79.2 Dividends declared ($0.24 per share and $0.24 per share in 1997 and 1996, respectively) (22.4) (22.3) -------- -------- Balance at September 30 541.4 372.7 Treasury stock: Balance at December 31 (107.3) (107.5) Issuance of common stock pursuant to acquisitions 0.2 0.2 Share repurchases (157.2) - -------- -------- Balance at September 30 (264.3) (107.3) -------- -------- Foreign currency translation adjustment: Balance at December 31 (17.2) (8.5) Foreign currency translation adjustment (1.9) (5.9) -------- -------- Balance at September 30 (19.1) (14.4) -------- -------- Total stockholders' equity $1,308.4 $1,173.9 ======== ======== (See Notes to Condensed Consolidated Financial Statements on Page 5) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Vigoro Merger ------------- On March 1, 1996, the Company completed the merger with The Vigoro Corporation (Vigoro) which resulted in Vigoro becoming a subsidiary of the Company (Vigoro Merger). Upon consummation of the Vigoro Merger, the Company issued approximately 32.4 million shares of its common stock in exchange for all of the outstanding shares of Vigoro. The Vigoro Merger was structured to qualify as a tax-free reorganization for income tax purposes and was accounted for as a pooling of interests. Accordingly, the Company's financial statements have been restated for all periods prior to the Vigoro Merger to include the accounts and operations of Vigoro. 2. Merger and Restructuring Charges -------------------------------- In connection with the Vigoro Merger during the first quarter of 1996, the Company recorded charges totaling $20.2 million, primarily for consulting, legal and accounting services. Immediately following the Vigoro Merger, the Company adopted a plan to restructure its business operations into a decentralized organizational structure into five stand-alone business units. As a result, the Company recorded restructuring charges totaling $23.1 million. The charges consisted of: (a) $16.6 million for severance and related benefits from staff reductions resulting from the termination of approximately 120 employees, primarily middle management personnel, and other related actions; and (b) $6.5 million for lease terminations resulting from office consolidations. As of September 30, 1997, the following amounts were paid: (a) $20.2 million for charges relating to the Vigoro Merger, (b) $5.6 million for lease terminations resulting from office consolidations, and (c) $14.0 million for severance and related benefits from staff reductions resulting from the termination of approximately 120 employees, primarily middle management personnel, and other related actions. In connection with the 1996 restructuring plan, the Company undertook a detailed review of its accounting records and valuation of various assets and liabilities. As a result, the Company recorded charges totaling $58.3 million ($55.3 million net of minority interest) comprised of: (a) $26.3 million ($23.3 million net of minority interest) to cost of goods sold of which $17.5 million was primarily related to the write-off of certain idle plant facilities and other obsolete assets, $5.0 million for environmental matters and $3.8 million for other matters; (b) $2.4 million of general and administrative expenses for the write-off of miscellaneous assets; (c) $16.6 million to other income and expense, net, to reduce certain long-term assets to net realizable value and other provisions, and (d) $13.0 million to minority interest for the transfer of 0.85 percent interest of IMC-Agrico Company (IMC-Agrico) Distributable Cash, as defined in the IMC-Agrico Partnership Agreement (Partnership Agreement), from the Company to Freeport-McMoRan Resource Partners, Limited Partnership (FRP) pursuant to certain amendments to the Partnership Agreement. As of September 30, 1997, $30.9 million of non-cash write-offs were charged against the reserve. 3. Sales of Investments -------------------- Other income and expense, net, for the nine months ended September 30, 1996 included a gain of $11.6 million from the sale of the Company's 50 percent investment in Chinhae Chemical Company. 4. Extraordinary Charge - Debt Retirement -------------------------------------- During the quarter ended September 30, 1996, the Company completed a tender offer to purchase certain of its higher cost senior notes (Senior Notes). In connection with the purchase of such Senior Notes, the Company recorded an extraordinary charge, net of taxes, of $7.5 million for redemption premiums incurred and write-off of previously deferred finance charges. The repurchase of the Senior Notes was financed at lower interest rates under the Company's credit facility and/or money market lines of credit. In May 1997, the Company purchased additional Senior Notes from a single holder. In September 1996, the Company completed the tender offer discussed above. As a result of these transactions, the Company recorded an extraordinary charge, net of taxes, of $3.3 million and $7.5 million for the nine months ended September 30, 1997 and 1996, respectively, for redemption premiums incurred and write-off of previously deferred finance charges. The repurchase of the Senior Notes was financed at lower interest rates under the Company's credit facility and/or money market lines of credit. 5. Earnings Per Share ------------------ Earnings per share were based on the weighted average number of shares and equivalent shares outstanding. The effect of common stock equivalents on earnings per share is not material. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," which is required to be adopted for financial statements for periods ending after December 15, 1997. The Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. The Company's primary earnings per share as reflected in the accompanying Condensed Consolidated Statement of Earnings are not materially different from basic and diluted earnings per share calculated under the new methodology. 6. Receivables ----------- Under an agreement with a financial institution, IMC-Agrico Receivables Company, L.L.C. (IMC-Agrico L.L.C.), a special purpose limited liability company of which IMC-Agrico is the sole equity owner, may sell, on an ongoing basis, an undivided percentage interest in a designated pool of receivables, in an amount not to exceed $65.0 million. At December 31, 1996, IMC-Agrico L.L.C. had sold a total of $55.5 million of such receivable interests. Effective, January 1, 1997, the Company adopted SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." At September 30, 1997, IMC-Agrico L.L.C. had transferred a total of $60.7 million of such receivable interests, of which $25.2 million did not meet the criteria under SFAS No. 125 to be accounted for as sales and as a result these are recorded as short-term debt in the Condensed Consolidated Balance Sheet. 7. Acquisitions ------------ In the quarter ended September 30, 1997, the Company completed its acquisition of Western Ag-Minerals Company, a potash mine and processing facility, for a cash payment totaling $54.4 million. During the nine months ended September 30, 1997, the Company completed several acquisitions, including Western Ag-Minerals Company; a precision farming operation, Top-Soil; several retail distribution operations, Crop-Maker, So-Green, and Hutson Ag Services, Inc.; a storage terminal company, Hutson Company, Inc.; and the purchase of the preferred stock of a subsidiary held by an unrelated third party. Total cash payments for acquisitions during the nine months ended September 30, 1997 were $103.0 million, and approximately 200,000 shares of common stock were issued. Common stock issued for acquisitions was $7.9 million and $14.9 million for the nine months ended September 30, 1997 and 1996, respectively. These acquisitions were accounted for under the purchase method of accounting, and, accordingly, results of operations for the acquired businesses have been included in the Company's Consolidated Statement of Earnings since the respective dates of acquisition. Pro forma consolidated operating results reflecting these acquisitions would not have been materially different from reported amounts. 8. Subsequent Event ---------------- In August 1997, the Company signed a definitive agreement with Freeport-McMoRan Inc. (FTX), which holds a 51.6 percent interest in FRP, providing for the merger of FTX into the Company (FTX Merger). If stockholder approval of the FTX Merger is obtained, the Company anticipates that the FTX Merger will be completed during the quarter ended December 31, 1997. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (1) Results of Operations - --------------------- Three months ended September 30, 1997 vs. three months ended September 30, 1996 - --------------------------------------------------------------------- Overview Net sales for the third quarter ended September 30, 1997 were $598.7 million and gross margins were $149.3 million. Net earnings were $26.7 million, or $0.28 per share. These results compare to net sales for the third quarter ended September 30, 1996 of $603.6 million, gross margins of $155.5 million and earnings, before an extraordinary charge, of $28.6 million, or $0.31 per share. An extraordinary charge of $7.5 million, or $0.08 per share, reduced net earnings for the three months ended September 30, 1996 to $21.1 million or $0.23 per share. Net sales for the quarter were virtually unchanged from the prior year third quarter while gross margins decreased four percent as compared to the same period one year ago. Significant improvements at IMC Kalium were offset by sales declines at IMC AgriBusiness and IMC-Agrico Crop Nutrients. At IMC AgriBusiness, lower revenues were largely due to unique conditions that led to record results in the prior year. These unique conditions resulted from a late start to the spring planting season which shifted additional sales into the third calendar quarter. Dealers also purchased early in the 1996 fall fill season in anticipation of price increases, further adding to the record sales levels in the comparable period one year ago. Similar conditions resulted in reduced domestic volumes and lower average prices for IMC-Agrico Crop Nutrients, the primary contributing factors to its sales decline. While IMC-Agrico Crop Nutrients' and IMC AgriBusiness' results decreased in the current quarter, the other business units, particularly IMC Kalium, posted improved revenues for the quarter. The operating results of the Company's three largest business units are discussed in more detail below. IMC-Agrico Crop Nutrients Operations IMC-Agrico Crop Nutrients' net sales for the third quarter decreased nine percent to $354.3 million compared to $391.2 million last year, due to lower average sales realizations and lower sales volumes as compared to the same period one year ago. Average sales realizations for concentrated phosphates, particularly diammonium phosphate (DAP), declined three percent compared to the prior year, which unfavorably impacted net sales by $6.2 million. Overall sales volumes of concentrated phosphates, primarily DAP, declined three percent from the prior year. Domestic concentrated phosphate volumes, primarily DAP, declined $20.0 million, due principally to unseasonable sales that occurred in the prior year as discussed above. In contrast, international concentrate volumes increased $11.0 million compared to the same period of the prior year. Rock volumes decreased $18.7 million due principally to the Company's strategic decision to phase out export rock sales. This action is being taken to better utilize high-quality rock reserves for internal upgrading. Gross margins declined 20 percent to $77.9 million for the quarter compared to $97.5 million last year, mainly due to the lower prices and volumes discussed above and higher production costs primarily resulting from higher average sulphur costs. IMC Kalium Operations IMC Kalium's net sales increased 41 percent to $154.5 million in the current quarter from $109.9 million in the prior year third quarter. The increase was due to both volume and average sales realization improvements. Domestic sales volumes increased $23.3 million over the prior year as a result of strong domestic demand in the current quarter. Average sales realizations increased $15.5 million due primarily to price increases effective during September 1996 and March 1997. Gross margins increased 67 percent to $54.1 million for the quarter from $32.3 million one year ago, primarily due to the impacts of higher volumes and increased average sales realizations coupled with lower production costs per ton. IMC AgriBusiness Operations IMC AgriBusiness' net sales decreased seven percent to $98.9 million in the third quarter as compared to $106.0 million for the same prior year period. The decline in sales was primarily due to record level sales for the quarter in the prior year. A late spring planting season in the prior year resulted in sales being delayed to the third quarter. In addition, anticipated price increases in the prior year led dealers to buy early in the season. Gross margins decreased 27 percent from $19.7 million in the third quarter one year ago to $14.3 million in the current quarter, primarily due to the lower volumes discussed above. The following table summarizes the Company's sales of crop nutrient products and average selling prices for the three months ended September 30: 1997 1996 ----- ----- Sales volumes (in thousands of short tons)(1): IMC-Agrico Crop Nutrients 1,753 1,804 IMC Kalium 2,213 1,750 Average price per ton(2): DAP $175 $181 Potash $ 71 $ 63 (1) Sales volumes include tons sold captively. IMC-Agrico Crop Nutrients' volumes represent dry product tons, primarily DAP. (2) Average prices represent sales made FOB mine/plant. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $8.7 million, or 15 percent, to $65.1 million for the third quarter compared to $56.4 million one year ago, primarily due to the inclusion of the results of operations of businesses acquired in the current calendar year. Additionally, current quarter results include non-recurring expenditures attributable to the Company's strategic purchasing and systems initiatives and restructuring charges related to the IMC Vigoro operations. Interest Expense Interest expense totaled $13.2 million in the current quarter, down $1.9 million or 13 percent from the same period last year when interest expense totaled $15.1 million. The Company realized interest savings by refinancing higher cost debt and taking advantage of favorable interest rates on money market borrowings, consistent with the Company's overall financing strategy. Income Taxes The effective tax rate for the third quarter was 36.5 percent, compared to an effective tax rate of 36.4 percent one year ago. Nine months ended September 30, 1997 vs. nine months ended September 30, 1996 - ---------------------------------------------------------------------- Overview Net sales for the nine months ended September 30, 1997 were $2,311.7 million, gross margins were $579.3 million while earnings before an extraordinary charge were $154.1 million, or $1.62 per share. An extraordinary charge of $3.3 million, or $0.03 per share, related to the early extinguishment of debt, reduced net earnings to $150.8 million, or $1.59 per share. Net sales for the nine months ended September 30, 1996 were $2,275.6 million. Gross margins, before special one-time charges, were $586.8 million and earnings before special one-time charges were $156.3 million, or $1.68 per share. Special one-time charges of $69.6 million, or $0.75 per share, reduced earnings before an extraordinary charge for the nine months to $86.7 million, or $0.93 per share. These one-time charges, totaling $98.6 million before tax benefits, covered costs related to the Company's merger with The Vigoro Corporation (Vigoro) which resulted in Vigoro becoming a subsidiary of the Company, as well as costs associated with, among other things, a corporate restructuring, other asset valuations and environmental issues. An extraordinary charge of $7.5 million, or $0.08 per share, reduced net earnings to $79.2 million, or $0.85 per share. Net sales for the nine months increased two percent over the prior year nine- month period while gross margins, before special one-time charges, decreased one percent as compared to the same period one year ago. These variances were primarily due to enhanced performance at IMC Kalium and IMC AgriBusiness, offset by declines at IMC-Agrico Crop Nutrients. The operating results of the Company's three largest business units are discussed in more detail below. IMC-Agrico Crop Nutrients Operations IMC-Agrico Crop Nutrients' net sales for the nine months decreased 11 percent to $1,114.3 million compared to $1,250.3 million one year ago. Overall concentrated phosphates volumes declined three percent primarily due to lower shipments of DAP, which decreased net sales by $52.8 million, partially offset by increased shipments of granular monoammonium phosphate (GMAP) of $39.5 million. Average sales realizations for concentrated phosphates, primarily DAP, decreased net sales by $58.6 million as stronger international demand in the first quarter of the prior year resulted in higher average sales realizations. Phosphate rock sales declined $44.2 million primarily due to the Company's strategic decision to phase out export sales of rock. This action is being taken to maximize relative values of rock and concentrated phosphates by utilizing high-quality reserves for internal upgrading. Gross margins for the nine months declined 23 percent from $315.7 million, before special one-time charges of $6.9 million, in the prior year nine-month period compared to $242.5 million in the current year, mainly due to the impact of the conditions highlighted above. IMC Kalium Operations IMC Kalium's net sales increased 30 percent to $452.7 million in the current nine-month period from $348.6 million in the prior year nine-month period. Higher international sales volumes, mainly due to increased sales to China, favorably impacted net sales by $14.0 million. Higher domestic volumes increased net sales by $11.3 million and resulted from increased demand in the Midwest due to favorable weather conditions and an anticipated corn price increase. Additionally, two domestic price increases effective in September 1996 and March 1997 favorably impacted net sales by $28.9 million. In addition, as a result of the Hersey, Michigan facility becoming fully operational in August 1997, salt operations contributed $2.6 million to the overall net sales increase. Gross margins increased 53 percent to $169.8 million for the nine months from $110.8 million one year ago, before special one-time charges of $7.9 million, mainly due to the impact of higher volumes and increased average sales realizations coupled with lower production costs per ton. IMC AgriBusiness Operations IMC AgriBusiness' net sales increased eight percent to $728.6 million in the nine-month period as compared to $672.7 million for the same prior year period. The increased sales are primarily as a result of acquisitions of several retail distribution operations and a storage terminal company. As a result of these acquisitions, net sales increased $51.3 million. Moreover, favorable weather conditions during the second quarter allowed early planting and long stretches of dealer activity of ammonia and nitrogen solutions, as well as increased application of crop protection products, all of which increased net sales by $16.1 million. Partially offsetting these increases was a decline in DAP and potash volumes, decreasing net sales by $8.8 million. These volume declines were due to the Company's allocation of business between the various channels of distribution in order to maximize profits. Gross margins of $139.4 million were six percent higher than the same nine month period one year ago of $131.9 million, excluding special one-time charges of $5.5 million. The increased margins were due to the impact of the items highlighted above. Other The remaining increase in net sales for the nine months ended September 30, 1997, as compared to the prior year, was primarily the result of higher volumes and average sales realizations at IMC-Agrico Feed Ingredients and IMC Vigoro. The following table summarizes the Company's sales of crop nutrient products and average selling prices for the nine months ended September 30: 1997 1996 ----- ----- Sales volumes (in thousands of short tons)(1): IMC-Agrico Crop Nutrients 5,321 5,473 IMC Kalium 6,723 5,544 Average price per ton(2): DAP $177 $188 Potash $ 68 $ 63 (1) Sales volumes include tons sold captively. IMC-Agrico Crop Nutrients' volumes represent dry product tons, primarily DAP. (2) Average prices represent sales made FOB mine/plant. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $15.6 million, or nine percent, to $197.7 million for the nine months compared to $182.1 million one year ago, primarily due to the inclusion of the results of operations of businesses acquired during the current calendar year in the Company's current year results of operations. Additionally, year-to-date results include special non-recurring charges related to strategic purchasing initiatives, systems initiatives and restructuring charges related to the IMC Vigoro operations. Other Income and Expense, Net Other income and expense, net, for the nine months ended September 30, 1996 included $16.6 million of restructuring charges, as described in Note 2, "Merger and Restructuring Charges," of Notes to Condensed Consolidated Financial Statements, which were partially offset by $11.6 million of gains from the sale of the Company's 50 percent investment in Chinhae Chemical Company. Interest Expense Interest expense totaled $38.4 million in the current nine months, down $7.5 million or 16 percent from the same period last year when interest expense totaled $45.9 million. The Company realized interest savings by refinancing higher cost debt and taking advantage of favorable interest rates on money market borrowings, consistent with the Company's overall financing strategy. Income Taxes The effective tax rate for the nine months was 36.5 percent, compared to an effective tax rate of 36.8 percent, before special one-time charges, one year ago. Extraordinary Charge - Debt Retirement See Note 4, "Extraordinary Charge - Debt Retirement," of Notes to Condensed Consolidated Financial Statements. Capital Resources and Liquidity - ------------------------------- Liquidity and Operating Cash Flow The Company's financial condition strengthened in the current year due to increased cash from operating activities and an increase in net proceeds from borrowings under available credit facilities. Cash generated from operating activities increased $49.1 million over the prior year to $455.7 million. Cash generated from operating working capital increased primarily due to higher phosphate rock inventory levels, accrued distributions to Freeport McMoRan Resource Partners, Limited Partnership (FRP), increased potash royalties, higher deferred income taxes, and liabilities recorded as a result of the Western Ag-Minerals acquisition. See Note 7, "Acquisitions," of Notes to Condensed Consolidated Financial Statements. However, when compared to December 31, 1996, the Company's working capital ratio decreased to 2.4:1 at September 30, 1997 from 2.7:1 at December 31, 1996, primarily due to increased current liabilities at September 30, 1997 as a result of the items mentioned above. Net cash used in investing activities increased $123.2 million over the prior year primarily due to increased capital expenditures and acquisitions. Capital expenditures for the nine months ended September 30, 1997 were $157.9 million, an increase of $23.3 million over the prior year. Acquisitions increased to $103.0 million for the nine months ended September 30, 1997 compared to $7.1 million for the comparable period one year ago. See Note 7, "Acquisitions," of Notes to Condensed Consolidated Financial Statements. Net cash used in financing activities decreased from $358.2 million in the prior year to $191.9 million for the same period in the current year. This was primarily as a result of net debt proceeds for the nine months ended September 30, 1997 of $101.3 million versus net payments in the prior year of $147.4 million. These proceeds were used, in part, to purchase approximately 4.5 million shares of the Company's stock for $157.2 million. Debt, net of cash on hand, to total capitalization increased to 37.0 percent from 32.8 percent at December 31, 1996, due in part to the issuance of $150.0 million senior debentures in July 1997. See "Financing" below for further details. Capital Expenditures The Company estimates that its capital expenditures for 1997 will total approximately $230.0 million. The Company expects to finance these expenditures primarily from operations. Pursuant to the IMC-Agrico Partnership Agreement (Partnership Agreement), IMC-Agrico Company (IMC-Agrico) is required to obtain the approval of the Policy Committee of IMC-Agrico (which consists of two representatives each from the Company and FRP) prior to making capital expenditures for expansion of its business in any calendar year in excess of $5.0 million (adjusted annually for inflation). In the event that the Policy Committee fails to approve future capital expenditures, IMC-Agrico's ability to expand its business could be adversely affected. See Note 8, "Subsequent Event," of Notes to Condensed Consolidated Financial Statements. Financing The Company has unsecured credit facilities from which it and certain of its subsidiaries may borrow up to $450.0 million and $50.0 million on a revolving and long-term basis, respectively. In addition, the Company has available approximately $273.0 million under uncommitted money market lines. At November 11, 1997, the Company and its subsidiaries had borrowed $100.0 million under the revolving credit facility, $46.9 million under the long-term credit facility and $73.4 under the money market lines. The Company has classified borrowings under revolving credit facilities and money market lines as long term since the Company has the ability and intent to maintain these obligations for longer than one year. Additionally, $33.3 million was drawn under the credit facility as letters of credit principally to support industrial revenue bonds and other debt and credit risk guarantees. IMC-Agrico has several agreements with a group of banks to provide it with an aggregate revolving credit facility of $125.0 million (collectively, IMC-Agrico Revolving Credit Facility or Agreements). On November 11, 1997, IMC-Agrico had borrowings of $75.9 million under the IMC-Agrico Revolving Credit Facility and had drawn $8.2 million under the credit facility as letters of credit. IMC-Agrico has classified borrowings under the IMC-Agrico Revolving Credit Facility as long-term debt since IMC-Agrico has the ability and intent to maintain these obligations for longer than one year. The Agreements have restrictive covenants including minimum net Partners' capital, fixed charge and current ratio requirements; place limitations on indebtedness of IMC-Agrico; and restrict the ability of IMC-Agrico to make cash distributions in excess of Distributable Cash (as defined in the Partnership Agreement). The Agreements require IMC-Agrico to repay all revolving loans for a minimum of 30 consecutive days within each calendar year. In addition, pursuant to the Partnership Agreement, IMC-Agrico is required to obtain the approval of the Policy Committee of IMC-Agrico prior to incurring more than an aggregate of $5.0 million (adjusted annually for inflation) in indebtedness (excluding a total of $125.0 million of indebtedness under the IMC-Agrico Revolving Credit Facility). See Note 8, "Subsequent Event," of Notes to Condensed Consolidated Financial Statements. Under an agreement with a financial institution, IMC-Agrico L.L.C., a special purpose limited liability company of which IMC-Agrico is the sole equity owner, may sell, on an ongoing basis, an undivided percentage interest in a designated pool of receivables, subject to limited recourse provisions related to the international receivables, in an amount not to exceed $65.0 million. At September 30, 1997, IMC-Agrico had sold $60.7 million of such receivable interests, $25.2 million of which are classified as short-term debt in the Condensed Consolidated Balance Sheet. In July 1997, the Company issued under an existing shelf registration statement $150.0 million of 6.875 percent senior debentures due 2007. The proceeds of this issuance were used to reduce higher cost indebtedness. In May 1997, the Company completed a tender offer to purchase portions of its higher cost senior notes. See Note 4, "Extraordinary Charge - Debt Retirement," of Notes to Condensed Consolidated Financial Statements. In September 1996, the Company completed a tender offer to purchase portions of its higher cost senior notes. See Note 4, "Extraordinary Charge - Debt Retirement," of Notes to Condensed Consolidated Financial Statements. Part II. OTHER INFORMATION Item 1. Legal Proceedings.(1) Sterlington Litigation - ---------------------- ANGUS Chemical Company (ANGUS), numerous third parties alleging personal injury and the Company are involved in various litigation arising out of a May 1991 explosion at a nitroparaffins plant located in Sterlington, Louisiana. The Company continues to litigate each of the matters arising out of the Sterlington explosion. Approximately 1,300 class action plaintiffs seek damages for personal injuries, "fear and fright," and punitive damages against ANGUS, the Company and other defendants arising from the explosion. Discovery is still not complete, and the trial date has been postponed indefinitely. The Company is unable to estimate the magnitude of its exposure at this time. The Company has settled actions filed by ANGUS with respect to claims for amounts ANGUS paid for settled claims in connection with the explosion and has settled actions filed by ANGUS for claimed rights of direct action against the Company's insurers. In addition, ANGUS' claims for certain environmental claims were dismissed by the trial court and are on appeal. Potash Antitrust Litigation - --------------------------- The Company was a defendant, along with other Canadian and United States potash producers, in a class action antitrust lawsuit filed in federal court in 1993. The plaintiffs alleged a price-fixing conspiracy among North American potash producers beginning in 1987 and continuing until the filing of the complaint. The class action complaint against all defendants, including the Company, was dismissed by summary judgment in January 1997. The summary judgment dismissing the case is currently on appeal by the plaintiffs to the United States Court of Appeals for the Eighth Circuit. The Court of Appeals is expected to rule during calendar 1998. In addition, in 1993 and 1994, class action antitrust lawsuits with allegations similar to those made in the federal case were filed against the Company and other Canadian and United States potash producers in state courts in Illinois and California. The Illinois case was dismissed for failure to state a claim. In the California case, merits discovery has been stayed and the case is currently inactive. Other - ----- In the ordinary course of its business, the Company is involved in routine litigation. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit No. Description ------------------------------------------------------------ 11.3 Fully diluted earnings per share computation for the three and nine months ended September 30, 1997 27 Financial Data Schedule (b) Reports on Form 8-K. Up to the date of this report, the following reports on Form 8-K were filed: A report under Items 5 and 7 dated July 17, 1997. A report under Item 5 dated July 28, 1997. A report under Item 5 dated August 26, 1997. * * * * * * * * * * * * * * * * SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IMC GLOBAL INC. /s/Anne M. Scavone ---------------------------------- Anne M. Scavone Vice President and Controller (on behalf of the Registrant and as Chief Accounting Officer) Date: November 14, 1997 - --------------------------------------------------------------------- (1) Except for statements of historical fact contained herein, the statements appearing under Part I, Item 1, "Business;" Part I, Item 3, "Legal Proceedings;" and Part II, Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition," presented herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following: the effect of general business and economic conditions; conditions in and policies of the agriculture industry; risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws or policies of the United States and Canada; changes in governmental laws and regulations affecting environmental compliance, taxes and other matters impacting the Company; the risks attendant with mining operations; the potential impacts of increased competition in the markets the Company operates within; and the risk factors reported from time to time in the reports filed by the Company with the SEC. EX-11.3 2 EARNINGS PER SHARE EXHIBIT 11.3 EARNINGS (LOSS) PER SHARE FULLY DILUTED COMPUTATION FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS) Three months ended Nine months ended September 30, September 30, ----------------------- ---------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Basis for computation of fully diluted earnings per share: Earnings before extra- ordinary item, as reported $ 26.7 $ 28.6 $ 154.1 $ 86.7 Add interest charges on convertible debt - 1.8 - 5.4 Less provision for taxes - (.7) - (2.1) ---------- ---------- ---------- ---------- Earnings before extra- ordinary item, as adjusted 26.7 29.7 154.1 90.0 Extraordinary charge - debt retirement - 7.5 3.3 7.5 ---------- ---------- ---------- ---------- Net earnings applicable to common stock $ 26.7 $ 22.2 $ 150.8 $ 82.5 ========== ========== ========== ========== Number of shares: Weighted average shares outstanding 93,764,658 93,629,449 94,921,057 93,262,415 Conversion of convertible sub- ordinated notes into common stock - 3,619,783 - 3,620,664 Additional common stock equivalents - - - 20,938 ---------- ---------- ---------- ---------- Total common and common equivalent shares assuming full dilution 93,764,658 97,249,232 94,921,057 96,904,017 ========== ========== ========== ========== Fully diluted earnings per share: Earnings before extraordinary item $ .28 $ .31 $ 1.62 $ .93 Extraordinary charge - debt retirement - (.08) (.03) (.08) ---------- ---------- ---------- ---------- Net earnings $ .28 $ .23 $ 1.59 $ .85 ========== ========== ========== ========== This calculation is submitted in accordance with Regulation S-K item 601(b)(11). However, under APB Opinion No. 15, calculation of fully diluted earnings (loss) per share would exclude the conversion of convertible securities which would have an antidilutive effect on earnings (loss) per share for each period. EX-27.2 3 FINANCIAL DATA SCHEDULE
5 1000 9-MOS DEC-31-1997 SEP-30-1997 21,900 52,500 272,400 8,800 572,300 983,400 4,404,800 1,959,100 3,646,100 409,400 809,900 101,900 0 0 1,206,500 3,646,100 2,311,700 2,311,700 1,732,400 1,930,100 100,500 0 38,400 242,700 88,600 154,100 0 3,300 0 150,800 1.59 1.59
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