-----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, UQIE3mwE1cn/fQX9OnQpOnK2YsxNz2wjTLRAnfgjV+BJ6hxErvyTESyi1Xdw4f+S tyymFlYiw1L/sElmpM/++g== 0000820626-99-000035.txt : 19991108 0000820626-99-000035.hdr.sgml : 19991108 ACCESSION NUMBER: 0000820626-99-000035 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991105 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: 99742019 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 09/30/99 ======================================================================= SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 Commission file number 1-9759 IMC Global Inc. (Exact name of Registrant as specified in its charter) Delaware 36-3492467 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2100 Sanders Road Northbrook, Illinois 60062 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (847) 272-9200 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ------ ------ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 114,479,876 shares, excluding 10,676,276 treasury shares as of November 3, 1999. ======================================================================= PART I. FINANCIAL INFORMATION Item 1. Financial Statements. The accompanying interim condensed consolidated financial statements of IMC Global Inc. (Company) do not include all disclosures normally provided in annual financial statements. These financial statements, which should be read in conjunction with the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, are unaudited but include all adjustments which the Company's management considers necessary for a fair presentation. These adjustments consist of normal recurring accruals except as discussed in the Notes to Condensed Consolidated Financial Statements. Certain 1998 amounts have been reclassified to conform to the 1999 presentation. Interim results are not necessarily indicative of the results expected for the full year. CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (In millions, except per share amounts) (Unaudited)
Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 - --------------------------------------------------------------------- Net sales $ 625.5 $ 659.5 $2,160.3 $1,989.4 Cost of goods sold 513.9 480.9 1,655.1 1,442.9 ------- ------- -------- -------- Gross margins 111.6 178.6 505.2 546.5 Selling, general and administrative expenses 40.2 38.0 125.8 129.3 Exploration expenses 0.8 0.6 4.2 19.5 ------- ------- -------- -------- Operating earnings 70.6 140.0 375.2 397.7 Interest expense 44.1 50.7 136.9 127.7 Other (income) expense, net 3.7 0.9 (1.9) (7.7) ------- ------- -------- -------- Earnings from continuing operations before minority interest 22.8 88.4 240.2 277.7 Minority interest 1.6 13.2 26.4 30.4 ------- ------- -------- -------- Earnings from continuing operations before taxes 21.2 75.2 213.8 247.3 Provision for income taxes 8.0 26.5 80.2 87.0 ------- ------- -------- -------- Earnings from continuing operations before extraordinary item and cumulative effect of a change in accounting principle 13.2 48.7 133.6 160.3 Earnings (loss) from discontinued operations - (10.9) - 12.5 ------- ------- -------- -------- Earnings before extraordinary item and cumulative effect of a change in accounting principle 13.2 37.8 133.6 172.8 Extraordinary charge - debt retirement - (0.9) - (3.6) Cumulative effect of a change in accounting principle - - (7.5) - ------- ------- -------- -------- Net earnings $ 13.2 $ 36.9 $ 126.1 $ 169.2 ======= ======= ======== ======== Basic earnings per share: Earnings from continuing operations before extraordinary item and cumulative effect of a change in accounting principle $ 0.12 $ 0.43 $ 1.17 $ 1.40 Earnings (loss) from discontinued operations - (0.10) - 0.11 Extraordinary charge - debt retirement - (0.01) - (0.03) Cumulative effect of a change in accounting principle - - (0.07) - ------- ------- -------- -------- Net earnings per share $ 0.12 $ 0.32 $ 1.10 $ 1.48 ======= ======= ======== ======= Basic weighted average number of shares outstanding 114.4 114.3 114.3 114.2 Diluted earnings per share: Earnings from continuing operations before extraordinary item and cumulative effect of a change in accounting principle 0.12 0.43 1.17 0.10 Earnings (loss) from discontinued operations - (0.10) - 0.10 operations Extraordinary charge - debt retirement - (0.01) - (0.03) Cumulative effect of a change in accounting principle - - (0.07) - ------- ------- -------- -------- Net earnings per share $ 0.12 $ 0.32 $ 1.10 $ 1.47 ======= ======= ======== ======== Diluted weighted average number of shares outstanding 114.5 114.6 114.6 114.9 (See Notes to Condensed Consolidated Financial Statements)
CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in millions)
(Unaudited) September 30, December 31, Assets 1999 1998 - ---------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 64.7 $ 110.6 Receivables, net 357.3 421.5 Inventories, net 510.2 580.6 Assets of discontinued operations held for sale - 273.3 Deferred income taxes 91.1 91.1 Other current assets 24.0 5.5 -------- -------- Total current assets 1,047.3 1,482.6 Property, plant and equipment, net 3,748.4 3,697.4 Other assets 1,224.6 1,276.9 -------- -------- Total assets $6,020.3 $6,456.9 ======== ======== Liabilities and Stockholders' Equity - --------------------------------------------------------------------- Current liabilities: Accounts payable $ 216.0 $ 255.9 Accrued liabilities 219.6 240.9 Short-term debt and current maturities of long-term debt 17.8 408.3 -------- -------- Total current liabilities 453.4 905.1 Long-term debt, less current maturities 2,535.4 2,638.7 Deferred income taxes 569.6 566.6 Other noncurrent liabilities 474.2 486.1 Stockholders' equity: Common stock, $1 par value, authorized 300,000,000 shares; issued 125,152,395 and 125,072,811 shares at September 30 and December 31, respectively 125.2 125.0 Capital in excess of par value 1,697.8 1,697.3 Retained earnings 497.7 400.6 Accumulated other comprehensive income (38.5) (66.3) Treasury stock, at cost, 10,676,276 and 10,738,520 shares at September 30 and December 31, respectively (294.5) (296.2) -------- -------- Total stockholders' equity 1,987.7 1,860.4 -------- -------- Total liabilities and stockholders' equity $6,020.3 $6,456.9 ======== ======== (See Notes to Condensed Consolidated Financial Statements)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In millions)
Nine months ended September 30, 1999 1998 - --------------------------------------------------------------------- Cash Flows from Operating Activities Net earnings $ 126.1 $ 169.2 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization 203.8 193.9 Minority interest 26.4 30.4 Deferred income taxes 3.0 (12.3) Other charges and credits, net (8.9) (166.4) Changes in: Receivables 64.1 16.5 Inventories 70.4 (15.4) Other current assets (9.0) 3.6 Accounts payable (40.0) (98.1) Accrued liabilities (12.7) 82.0 ------- ------- Net cash provided by operating activities 423.2 203.4 ------- ------- Cash Flows from Investing Activities Capital expenditures (211.1) (252.2) Acquisitions, net of cash acquired (7.9) (393.3) Proceeds from sale of business 263.9 44.8 Proceeds from sale of investment 12.8 - Other 16.6 5.8 ------- ------- Net cash provided by (used in) investing activities 74.3 (594.9) ------- ------- Net cash provided (used) before financing activities 497.5 (391.5) Cash Flows from Financing Activities Cash distributions to the unitholders of Phosphate Resource Partners Limited Partnership (21.5) (6.5) Payments of long-term debt (158.7) (997.2) Proceeds from issuance of long-term debt, net 53.1 1,194.7 Changes in short-term debt, net (391.3) 252.1 Decrease in securitization of accounts receivable, net - (61.5) Stock options exercised and restricted stock awards 2.5 8.8 Cash dividends paid (27.5) (33.9) Other - (3.1) ------- ------- Net cash provided by (used in) financing activities (543.4) 353.4 ------- ------- Net change in cash and cash equivalents (45.9) (38.1) Cash and cash equivalents - beginning of period 110.6 109.7 ------- ------- Cash and cash equivalents - end of period $ 64.7 $ 71.6 ======= ======= (See Notes to Condensed Consolidated Financial Statements)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) 1. Acquisitions ------------ In April 1998, the Company acquired privately held Harris Chemical Group, Inc. and its Australian affiliate, Harris Chemical Australia Pty Ltd. & Its Controlled Entities (collectively, Harris), for approximately $1.4 billion (Harris Acquisition). Under the terms of the Harris Acquisition, the Company purchased all Harris equity for approximately $450.0 million in cash and assumed approximately $1.0 billion of debt. Harris is a leading producer of salt, soda ash, boron chemicals and other inorganic chemicals, including potash crop nutrients. For financial statement purposes, the Harris Acquisition was accounted for as a purchase and, accordingly, Harris' results have been included in the consolidated financial statements since the date of acquisition. The purchase price has been allocated to acquired assets and liabilities based on estimated fair values at the date of acquisition. This allocation resulted in an excess of purchase price over identifiable net assets acquired, or goodwill, of approximately $326.0 million which is included in Other assets in the Condensed Consolidated Balance Sheet. This goodwill is being amortized on a straight-line basis over 40 years. 2. Restructuring Activities ------------------------ During the fourth quarter of 1998, the Company developed and began execution of a plan to improve profitability (Restructuring Plan). The Restructuring Plan was comprised of four major initiatives: (i) the combination of the potash and phosphates business units in an effort to realize certain operating and staff reduction synergies; (ii) restructuring of the phosphate rock mining, concentrated phosphate and salt production/distribution operations and processes in an effort to reduce costs; (iii) simplification of the current business activities by eliminating businesses not deemed part of the Company's core competencies; and (iv) reduction of operational and corporate headcount. In conjunction with the Restructuring Plan, the Company recorded pre-tax charges totaling $193.3 million ($162.0 million net of minority interest) in the fourth quarter of 1998. The following table summarizes the activity during the period January 1, 1999 to September 30, 1999 of the accruals recorded in conjunction with the Restructuring Plan.
Accrual at Accrual at January 1, 1999 Cash Paid September 30, 1999 --------------- --------- ------------------ Non-employee exit costs: Demolition and closure costs $ 33.6 $ 4.3 $ 29.3 Idled leased transporation equipment 13.2 3.6 9.6 Other 5.3 3.3 2.0 Employee headcount reductions: Severance benefits 17.4 17.0 0.4 ------ ------ ------ Total $ 69.5 $ 28.2 $ 41.3 ====== ====== ======
The timing and costs of the Restructuring Plan are generally on schedule with the original time and dollar estimates disclosed in the fourth quarter of 1998. During the first nine months of 1999, 63 employees, who had accepted a voluntary retirement plan as of December 31, 1998, left the Company in accordance with their target retirement date. 3. Discontinued Operations ----------------------- In April 1999, the Company completed the sale of IMC AgriBusiness (AgriBusiness) and received proceeds of $263.9 million which were used to reduce the amount of the Company's outstanding indebtedness. The final sale proceeds still remain subject to the settlement of certain items outlined in the definitive sales agreement. The Company expects final settlement in the fourth quarter of 1999. 4. Divestitures ------------ In June 1998, the Company completed the sale of its IMC Vigoro business unit (IMC Vigoro) which consisted primarily of consumer lawn and garden and professional products for $44.8 million in cash. In connection with this transaction, the Company recorded a non-recurring charge of approximately $14.0 million, $9.1 million after tax benefits, or $0.08 per share. Of the $14.0 million charge, $4.1 million was included in Cost of goods sold and $9.9 million was included in Selling, general, and administrative expenses in the Consolidated Statement of Operations. 5. Extraordinary Charge - Debt Retirement -------------------------------------- In January 1998, the Company prepaid $120.0 million of unsecured term loans which bore interest at rates ranging between 7.12 percent and 7.18 percent which were to mature at various dates between 2000 and 2005. In connection with the prepayment of such unsecured term loans, the Company recorded an extraordinary charge, net of taxes, of $2.7 million for redemption premiums incurred. This prepayment was financed by net debt proceeds from the issuance in January 1998 of $150.0 million 6.55 percent senior notes due 2005 and $150.0 million 7.30 percent debentures due 2028. 6. Change in Accounting Principle ------------------------------ In April 1998, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities," which mandated that costs related to start-up activities be expensed as incurred, effective January 1, 1999. Prior to the adoption of SOP 98-5, the Company capitalized its start-up costs (i.e., pre-operating costs). The Company adopted the provisions of SOP 98-5 in its financial statements beginning on January 1, 1999 and in accordance with SOP 98-5 recorded a charge for the cumulative effect of an accounting change of $7.5 million or $0.07 per share, net of tax benefits and minority interest, in order to expense start-up costs that had been previously capitalized. The future impact of SOP 98-5 is not expected to be material to the Company's operating results. 7. Inventories ----------- Inventories as of September 30, 1999 and December 31, 1998 were as follows:
September 30, December 31, 1999 1998 ------------ ------------ Products (principally finished) $ 407.6 $ 468.2 Operating materials and supplies 117.0 136.3 ------- ------- 524.6 604.5 Less: Inventory allowances 14.4 23.9 ------- ------- Inventories, net $ 510.2 $ 580.6 ======= =======
8. Operating Segments ------------------ Segment information for 1999 and 1998 was as follows(c):
IMC IMC IMC IMC Phosphates Potash Salt Chemicals Other(b) Total ---------- ------ ---- --------- -------- ----- Three months ended September 30, 1999 Net sales from external customers $ 283.1 $141.2 $ 55.0 $100.7 $ 45.5 $ 625.5 Intersegment net sales 18.8 9.4 0.5 - - 28.7 Gross margins 39.8 42.5 13.1 14.6 1.6 111.6 Operating earnings (loss) 31.2 42.1 4.9 7.0 (14.6) 70.6 Nine months ended September 30, 1999 Net sales from external customers $ 994.6 $499.6 $227.9 $302.4 $135.8 $2,160.3 Intersegment net sales 76.5 40.5 1.6 - - 118.6 Gross margins 206.8 182.1 67.3 38.4 10.6 505.2 Operating earnings (loss) 180.1 172.4 41.0 16.8 (35.1) 375.2 Three months ended September 30, 1998 Net sales from external customers $ 316.3 $148.1 $ 50.2 $103.0 $ 41.9 $ 659.5 Intersegment net sales 36.4 26.3 0.8 - - 63.5 Gross margins 86.4 70.9 9.9 14.7 (3.3) 178.6 Operating earnings (loss) 77.2 64.3 2.1 8.9 (12.5) 140.0 Nine months ended September 30, 1998 Net sales from external customers $1,039.5 $484.1 $ 93.5 $205.8 $166.5 $1,989.4 Intersegment net sales 134.3 70.4 0.8 - 3.0 208.5 Gross margins(c) 273.7 226.3 17.2 27.0 6.4 550.6 Operating earning (loss)(d) 244.7 205.4 0.5 15.1 (54.0) 411.7 (a)The operating results and assets of Great Salt Lake Minerals (GSL), IMC Salt (Salt) and IMC Chemicals (Chemicals), acquired as part of the Harris Acquisition, are included in the segment information since the date of acquisition, April 1998. See Note 1, "Acquisitions." The operating results of AgriBusiness have not been included in the segment information provided as this business had been classified as discontinued operations until its divestiture in April 1999. See Note 3, "Discontinued Operations." (b)Segment information below the quantitative thresholds is attributable to two business units (IMC Feed Ingredients (Feed Ingredients) and IMC Vigoro) and corporate headquarters. The Company produces and markets animal feed ingredients through Feed Ingredients. IMC Vigoro manufactured and distributed consumer lawn and garden products; produced and marketed professional products for turf, nursery and horticulture markets; and produced and distributed potassium-based ice melter products. IMC Vigoro was sold in June 1998. See Note 4, "Divestitures." Corporate headquarters includes the elimination of inter-business unit transactions and oil and gas activities through its interest in Phosphate Resource Partners Limited Partnership. (c)Before non-recurring charges of $4.1 million related to the sale of IMC Vigoro in June 1998. See Note 4, "Divestitures." (d)Before non-recurring charges of $14.0 million related to the sale of IMC Vigoro in June 1998. See Note 4, "Divestitures."
9.Comprehensive Income -------------------- Comprehensive income, net of taxes, was as follows:
Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 ------------------------------------- Comprehensive income: Net earnings $ 13.2 $ 36.9 $126.1 $169.2 Foreign currency translation adjustment 2.9 (11.5) 27.8 (27.5) ------ ------ ------ ------ Total comprehensive income for the period $ 16.1 $ 25.4 $153.9 $141.7 ====== ====== ====== ======
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.(1) Results of Operations --------------------- Three months ended September 30, 1999 vs. three months ended September 30, 1998 --------------------------------------------------------------- Overview Net sales for the third quarter of 1999 were $625.5 million and gross margins were $111.6 million. Earnings from continuing operations for the third quarter of 1999 were $13.2 million, or $0.12 per share. Net sales for the third quarter of 1998 were $659.5 million and gross margins were $178.6 million. Earnings from continuing operations for the third quarter of 1998 were $48.7 million, or $0.43 per share. Net earnings for the third quarter of 1998 of $36.9 million, or $0.32 per share, were reduced by a loss from discontinued operations of $10.9 million, or $0.10 per share, and an extraordinary charge of $0.9 million, or $0.01 per share, related to an early extinguishment of debt. See Note 5, "Extraordinary Charge - Debt Retirement," of Notes to Condensed Consolidated Financial Statements. Net sales for the third quarter of 1999 decreased five percent from the prior year third quarter while gross margins decreased 38 percent. The decrease in sales was mainly attributable to significantly reduced phosphate pricing at IMC Phosphates (Phosphates), lower domestic potash sales volumes at IMC Potash (Potash) and unfavorable cost variances resulting from extended plant shutdowns to balance supply with demand. These decreases were partially offset by higher sales at Salt resulting from increased rock and general trade salt sales volumes, coupled with sales from the addition of two distributorships in the United Kingdom during the first quarter of 1999. The gross margin decrease was primarily attributable to the reduced sales prices and volumes as well as the unfavorable cost variances discussed above. The operating results of the Company's significant business units are discussed in more detail below. IMC Phosphates Phosphates' net sales for the third quarter of 1999 declined 14 percent to $301.9 million compared to $352.7 million for the same period last year largely due to lower average sales realizations. Lower average concentrate sales prices, driven by lower average diammonium phosphate (DAP) realizations, reduced sales by $42.7 million. Additionally, sales of urea decreased $5.7 million. Gross margins decreased 54 percent to $39.8 million in the third quarter of 1999 compared to $86.4 million for the third quarter of last year, mainly due to the lower prices discussed above as well as higher production costs. Production costs increased compared to the prior year's third quarter primarily as a result of higher idle plant costs, partially offset by lower uranium costs and raw material prices. IMC Potash Potash's net sales decreased 14 percent to $150.6 million in the third quarter of 1999 from $174.4 million for the same period in 1998. Significantly lower domestic volumes and slightly reduced domestic prices as a result of the weak North American farm economy contributed to the sales decrease. Gross margins decreased 40 percent to $42.5 million for the third quarter of 1999 from $70.9 million for the same period in 1998. Gross margins were negatively impacted by reduced volumes and prices, as discussed above, as well as by plant shutdowns in the current quarter in an effort to balance supply with demand. While potash production cost per ton increased 15 percent compared to the year-earlier period as a result of the shutdowns, the program resulted in a significant reduction in North American potash producer inventories during the third quarter of 1999. Additionally, higher provincial tax levies and natural gas costs at Potash's Canadian facilities further impacted gross margins. IMC Salt Salt's net sales increased nine percent to $55.5 million in the third quarter of 1999 compared to $51.0 million in the third quarter of 1998. This increase in sales was attributable to higher rock salt volumes in the United Kingdom and higher general trade salt volumes in North America, coupled with the addition of two distributorships in the United Kingdom. Gross margins increased 32 percent to $13.1 million for the third quarter of 1999 from $9.9 million for the same period in 1998 as a result of increased sales volumes, particularly for restocking rock salt with deicing customers in the United Kingdom. Other The Company's net sales and gross margins in the current quarter also included results for Feed Ingredients and Chemicals. Sales at Feed Ingredients were essentially unchanged at $42.3 million in the third quarter of 1999 as compared to $41.8 million in the prior year quarter. However, gross margins at Feed Ingredients increased 36 percent to $10.9 million as compared to the prior year period primarily as a result of lower costs for internally sourced raw materials. Sales at Chemicals decreased two percent to $100.7 million from $103.0 million in the prior year quarter. Gross margins at Chemicals for the third quarter of 1999 remained essentially unchanged at $14.6 million. See Note 8, "Operating Segments," of Notes to Condensed Consolidated Financial Statements. Key Statistics The following table summarizes the Company's core business sales volumes and average selling prices for the three months ended September 30:
1999 1998 ---- ---- Sales volumes (in thousands of short tons)(a): IMC Phosphates 1,574 1,575 IMC Potash 1,769 2,081 IMC Salt 1,649 1,554 Average price per ton(b): DAP $156 $182 Potash $81 $82 Salt $34 $33 (a)Sales volumes include tons sold captively. Phosphates' volumes represent dry product tons, primarily DAP. (b)Average prices represent sales made FOB mine/plant.
Interest Expense Interest expense totaled $44.1 million in the current quarter, a decrease of $6.6 million from the same period in the prior year. The decrease in interest expense was the result of a decrease in outstanding debt primarily as a result of the paydown of debt assumed in connection with the Harris Acquisition. Other (Income) Expense, Net Other expense for the current quarter increased $2.8 million to $3.7 million from $0.9 million for the same period in 1998. The increase was mainly attributable to a loss on the sale of the Company's interest in an oil and gas property as well as higher foreign conversion exchange rates related to foreign transactions. Minority Interest Minority interest decreased $11.6 million from the same period last year to $1.6 million. The decrease in minority interest expense was primarily attributable to significantly lower IMC- Agrico Company earnings as compared to the prior year period. Nine months ended September 30, 1999 vs. nine months ended September 30, 1998 --------------------------------------------------------------- Overview Net sales for the nine months ended September 30, 1999 were $2,160.3 million and gross margins were $505.2 million. Earnings from continuing operations before a cumulative effect of a change in accounting principle, were $133.6 million, or $1.17 per share. A cumulative effect of a change in accounting principle of $7.5 million, or $0.07 per share, reduced net earnings to $126.1 million, or $1.10 per share. Net sales for the nine months ended September 30, 1998 were $1,989.4 million and gross margins, excluding non-recurring charges of $4.1 million, related to the divestiture of IMC Vigoro, were $550.6 million. Earnings from continuing operations, excluding non- recurring charges of $9.1 million, or $0.08 per share, related to the divestiture of IMC Vigoro, were $169.4 million, or $1.48 per share. Including the non-recurring charges, earnings from continuing operations before an extraordinary charge were $160.3 million, or $1.40 per share. Net earnings of $169.2 million, or $1.47 per share, included earnings from discontinued operations of $12.5 million, or $0.10 per share, and were reduced by an extraordinary charge of $3.6 million, or $0.03 per share, related to an early extinguishment of debt. See Note 4, "Divestitures," of Notes to Condensed Consolidated Financial Statements. Net sales for the nine months ended September 30, 1999 increased nine percent when compared to the same nine month period of the prior year while gross margins, before non- recurring charges, decreased eight percent from the comparable period one year ago. This improvement was largely a consequence of additional revenues from the former Harris operations partially offset by decreased sales at Phosphates as a result of significantly reduced phosphate pricing and sales volumes. Additionally, the absence of sales in the current period from IMC Vigoro as a result of its divestiture during the second quarter of 1998 further reduced the Company's overall sales improvement from the prior year period. See Note 4, "Divestitures," of Notes to Condensed Consolidated Financial Statements. The gross margin decrease was primarily attributable to unfavorable margins from reduced sales volumes and prices at Phosphates, as discussed above, lower margins at Potash caused by plant shutdowns to control inventory and the absence of margins from IMC Vigoro as a result of its divestiture during the second quarter of 1998. The gross margin decrease was partially offset by favorable margins from the Harris Acquisition. See Note 4, "Divestitures," of Notes to Condensed Consolidated Financial Statements. The operating results of the Company's significant business units are discussed in more detail below. IMC Phosphates Phosphates' net sales for the first nine months of 1999 declined nine percent to $1,071.1 million compared to $1,173.8 million for the same period last year primarily as a consequence of lower average sales realizations and decreased concentrate sales volumes. Decreased shipments of granular monoammonium phosphate and granular triple superphosphate, partially offset by an increase in shipments of DAP, reduced sales by $45.8 million. The unfavorable volume variances reflected a depressed agricultural economy and lower international sales realizations. Average sales realizations for the first nine months of 1999 decreased as compared to the prior year period primarily as a result of lower domestic and international DAP realizations. Gross margins declined 24 percent to $206.8 million for the first nine months of 1999 compared to $273.7 million for the first nine months of last year, mainly because of the lower volumes and prices discussed above as well as increased production costs. Production costs were higher when compared to the same period of the prior year primarily as a result of unfavorable variances from concentrated phosphate operations created by decreased volumes and higher idle plant costs. IMC Potash Potash's net sales for the nine months ended September 30, 1999 decreased three percent to $540.1 million as compared to $554.5 million in the prior year period. As with the three months ended September 30, 1999, the sales decrease for the nine months of 1999 was caused by significantly lower domestic volumes and slightly reduced domestic prices as a result of the weak North American farm economy. Gross margins for the nine months ended September 30, 1999 decreased 20 percent to $182.1 million from $226.3 million in the same period one year ago. Gross margins were negatively impacted by reduced volumes, as discussed above, as well as by plant shutdowns in the current period in an effort to balance supply with demand. Additionally, increased water control expenditures and resource taxes in the current period led to further margin erosion. IMC Salt Salt's net sales for the nine months ended September 30, 1999 were $229.5 million with gross margins of $67.3 million. These results were higher than comparable pre-acquisition amounts for the same period in 1998 of $184.1 million and $56.7 million, respectively. Salt was established in April 1998 concurrent with the Harris Acquisition; consequently, operating results for the nine months ended September 30, 1998 included only partial year activity. Increased sales volumes, particularly with highway deicing product from the more severe winter weather experienced in the early months of 1999 and the addition of two distributorships in the United Kingdom, lifted current period sales above those of the prior year period. The rise in gross margins primarily resulted from increased sales volumes, which led to a higher absorption of costs. Other The Company's net sales and gross margins for the nine months ended September 30, 1999 also included results for Feed Ingredients and Chemicals. Sales at Feed Ingredients increased six percent to $127.6 million in the current period of 1999 as compared to $120.0 million in the prior year period from increased domestic and international sales volumes. Gross margins at Feed Ingredients increased 36 percent to $29.5 million as compared to the prior year period as a result of lower production costs related to increased production volumes and lower costs for internally sourced raw materials. Chemicals, with sales and gross margins for the nine months of 1999 of $302.4 million and $38.4 million, respectively, was established concurrent with the Harris Acquisition in April 1998; consequently, operating results for the nine month period ended September 30, 1998 included only partial year activity. Partially offsetting these increases in current period sales and gross margins, as compared to the same period in the prior year, was the absence of sales and gross margins for IMC Vigoro as a result of its divestiture during the second quarter of 1998. See Note 4, "Divestitures" and Note 8, "Operating Segments," of Notes to Condensed Consolidated Financial Statements. Key Statistics The following table summarizes the Company's core business sales volumes and average selling prices for the nine months ended September 30:
1999 1998 ---- ---- Sales volumes (in thousands of short tons)(a): IMC Phosphates 5,237 5,494 IMC Potash 6,281 6,802 IMC Salt(c) 8,294 2,770 Average price per ton(b): DAP $167 $177 Potash $84 $80 Salt(c) $28 $33 (a)Sales volumes include tons sold captively. Phosphates' volumes represent dry product tons, primarily DAP. (b)Average prices represent sales made FOB mine/plant. (c)Salt was established in April 1998 concurrent with the Harris Acquisition. Information for the nine months ended September 30, 1998 is provided for comparative purposes only.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased $6.4 million, or five percent, to $125.8 million, before non- recurring charges of $9.9 million related to the divestiture of IMC Vigoro in June 1998. This increase was primarily due to the Harris Acquisition as the prior year's amount for Salt and Chemicals represented activity for only the six months ended September 30, 1998. This increase was partially offset by the divestiture of IMC Vigoro in June 1998 and the reduction of incentive compensation accruals based on lower earnings for the current year. See Note 1, "Acquisitions" and Note 4, "Divestitures," of Notes to Condensed Consolidated Financial Statements. Exploration Expenses Exploration expenses totaled $4.2 million for the nine months ended September 30, 1999, a decrease of $15.3 million from the same period in the prior year as a result of the absence of dry hole costs in the current period as compared to $14.4 million of dry hole costs for the same period in 1998. Interest Expense Interest expense for the nine months ended September 30, 1999 totaled $136.9 million, an increase of $9.2 million from the same period in the prior year. The increase in interest expense was due to increased debt outstanding primarily as a result of debt assumed in connection with the Harris Acquisition. Other (Income) Expense, Net Other income for the nine months ended September 30, 1999 decreased $5.8 million to $1.9 million from $7.7 million in the same period in the prior year. The decrease was mainly attributable to the absence of income received from interest rate locks associated with January 1998 debt issuances, higher debt fee amortization as a result of refinancing debt assumed as part of the Harris Acquisition, a loss on the sale of the Company's interest in an oil and gas property and higher foreign conversion exchange rates related to foreign transactions. Minority Interest Minority interest for the nine months ended September 30, 1999 decreased $4.0 million from the same period last year to $26.4 million. The decrease in minority interest expense was primarily attributable to significantly lower IMC-Agrico Company earnings as compared to the prior year period. Restructuring Activities ------------------------ 1998 Restructuring Plan The timing and costs of the 1998 Restructuring Plan are generally on schedule with the original time and dollar estimates disclosed in the fourth quarter of 1998. During the nine months ended September 30, 1999, 63 employees, who had accepted a voluntary retirement plan as of December 31, 1998, left the Company in accordance with their target retirement date. See Note 2, "Restructuring Activities," of Notes to Condensed Consolidated Financial Statements. 1999 Restructuring In October 1999, the Company announced an extensive program of asset restructuring, consolidation of facilities and operating cost reductions, primarily for the phosphate and potash businesses, as well as for the Company's headquarters and administrative offices. This program will include a review of the carrying value and recoverability of certain assets, including those related to recent acquisitions. The Company is in the process of evaluating the accounting impact of the foregoing restructuring activities and currently expects to record a major charge to earnings in the fourth quarter, predominately non-cash, related to such restructuring activities, in an as yet undetermined amount. Non-core Businesses ------------------- The Company is continuing its discussions with several potential buyers regarding the sale or spin-off of IMC Chemicals. The ultimate disposition could occur in the next several quarters which could necessitate an additional loss being recorded. The Company is accelerating its efforts to exit the oil & gas business. The ultimate disposition is expected to be completed in the fourth quarter and could necessitate a loss being recorded. Capital Resources and Liquidity ------------------------------- The Company generates significant cash from operations and has sufficient borrowing capacity to meet its operating and discretionary spending requirements. Operating activities generated $423.2 million of cash for the nine months of 1999 compared with $203.4 million for the same period in 1998. The increase of $219.8 million was primarily a result of a decrease in working capital, favorable foreign currency translation rates from foreign operations, lower litigation payments and lower debt fee payments as a result of a reduction in debt issuances. The change in working capital was primarily the result of lower inventory levels based on market conditions along with the recognition of certain income tax benefits. Net cash provided by investing activities for the first nine months of 1999 increased $669.2 million compared with the same period in 1998 from a use of funds of $594.9 million to a source of funds of $74.3 million. In April 1999, the Company completed the sale of AgriBusiness and received proceeds of approximately $265.0 million, which were used to reduce the amount of the Company's outstanding indebtedness. In the prior year, proceeds of $44.8 million were received from the sale of IMC Vigoro while $393.3 million was expended to fund the Harris Acquisition. See Note 1, "Acquisitions," Note 3, "Discontinued Operations," and Note 4, "Divestitures," of Notes to Condensed Consolidated Financial Statements. Additionally, current period capital expenditures decreased $41.1 million as a consequence of the absence of capital expenditures for AgriBusiness and a significant reduction in well exploration activity. The Company estimates that its capital expenditures for 1999 will be approximately $260.0 million and will be financed primarily through operations. Cash generated from financing activities decreased $896.8 million for the nine months of 1999 from a source of funds of $353.4 million to a use of funds of $543.4 million. This decrease in financing funds was primarily a result of lower net debt proceeds. In the prior year, the net debt proceeds were used, in part, to finance the Harris Acquisition which was funded through the Company's commercial paper borrowings. In April 1999, the Company terminated its Amended and Restated Credit Agreement, which had provided $250.0 million of credit support for the Company's commercial paper program. This termination was made possible through the reduction of the Company's commercial paper using proceeds from the sale of AgriBusiness as discussed above. Year 2000 Compliance -------------------- Like other businesses dependent on modern technology, the Company must address potential Year 2000-related issues. The Company is progressing through a comprehensive program (Year 2000 Program) to evaluate and address the impact of Year 2000- related issues on its operational systems, business application software, computer hardware, facilities infrastructure and equipment with embedded technology, and Year 2000-related risks associated with its vendors and customers. The Company's Year 2000-related effort is a cooperative venture coordinated among business units and appropriate members of the Company's senior management. Progress reviews are held regularly with senior management and the audit committee of the Board of Directors. As an additional step, the Company has created the position of Year 2000 Risk Manager to provide Company-wide leadership, oversight and coordination of its Year 2000 Program. State of Readiness The Company is using both internal and external resources to implement its Year 2000 Program, which includes the following overlapping phases: (i) system inventory and analysis; (ii) remediation, testing and implementation; and (iii) vendor and customer review. As of the end of the third quarter of 1999, the Company has substantially completed its Year 2000 Program. System Inventory and Analysis Phase: The system inventory and analysis phase consists of compiling a detailed inventory of all of the Company's systems and platforms to determine which items are date sensitive, affected by the Year 2000, and therefore require remediation. Each of the Company's business units has focused specifically on the following seven target areas: (i) business application software; (ii) mainframe hardware and software; (iii) network servers; (iv) desktop environment; (v) network and telephone systems; (vi) non- information technology assets and facilities; and (vii) major suppliers and service providers. This analysis has involved both an internal assessment conducted by Company engineers, technicians and business unit managers, as well as contact with the manufacturers of systems and equipment used by the Company in its operations. Each of the Company's business units has completed its system inventory and analysis phase. The principal business application systems requiring remediation that were identified by the Company during this stage included the following systems: (i) equipment maintenance; (ii) spare parts inventory; (iii) distribution; (iv) customer order entry; and (v) financial/accounting. In addition, some Company plants identified certain production control systems that required Year 2000-related remediation in order to remain operative. Remediation, Testing and Implementation Phase: The remediation, testing and implementation phase involves determining and implementing a remediation method (upgrade, replace or discontinue) that is most appropriate for each specific date-sensitive item. The remediated item is then tested and returned to normal operations when Year 2000- related issues have been addressed. Testing includes functional testing of remedial measures and regression testing to validate that changes have not altered existing functionality. Several system manufacturers have provided testing procedures for their equipment and have been available for consultations about Year 2000-related testing. In certain cases, the Company has also retained special consultants to assist with its remediation efforts. As of the end of the third quarter of 1999, each of the Company's business units has substantially completed the remediation, testing and implementation phase. As a separate initiative, the Company is has implemented its Global Vision Project, an enterprise-wide resource planning (ERP) software package. Its scope includes accounts payable, inventory, purchasing, general ledger, payroll, human resources and plant maintenance. This new ERP software and the improvements to the infrastructure hardware required to support the Global Vision Project has further remediated any issues associated with the Year 2000. Vendor and Customer Review Phase: Vendor reviews consist of assessing vendor readiness, and if necessary, identifying alternate channels to receive critical materials and/or supplies. Each business unit has developed a questionnaire that has been submitted to its primary suppliers and vendors to determine their Year 2000-related status. The business units continue to analyze the information provided in these responses, but have not identified any material problem areas to date. As an additional precaution, when appropriate, each business unit's purchase orders now contain a Year 2000- related clause to help ensure that any newly purchased equipment adequately addresses Year 2000-related issues. Although the Company is attempting to monitor and validate the efforts of other parties, it may not have control over the success of these efforts. In the event that satisfactory commitments from key suppliers are not received, the Company has formed plans for the continuing availability of critical materials and supplies through alternate channels. In general, however, the Company is satisfied with the progress made by key vendors to date and no critical issues have been identified. In addition to investigating the Company's key suppliers, the Company's business units have also contacted key customers to explain the Company's Year 2000-related efforts and to solicit certain information about each customer's Year 2000-related efforts to assess potential Year 2000-related problems that could affect future orders from such customers. While the Company's business units continue to be apprised of the progress made by these key customers in addressing their own Year 2000 issues, no guarantees can be made that these key customers will adequately address Year 2000-related issues by December 31, 1999. If these key customers fail in their attempts to adequately address Year 2000-related issues, the Company could potentially experience a delay in order processing. In general, however, the Company's business units are satisfied with the progress made to date by these key customers. Costs The Company does not currently expect that the costs of addressing its Year 2000-related issues will have a material effect on its financial position, results of operations or liquidity. Modification costs for Year 2000-related issues are expensed as incurred and are funded through operating cash flows. In a few limited instances, some business units have deferred certain non-Year 2000-related information technology projects due to their respective Year 2000-related efforts. The Company believes, however, that these deferred projects are not critical to its present or future financial performance or business operations. The Company estimates its total Year 2000-related technology and non-information technology systems remediation costs to be approximately $7.3 million, of which approximately $2.0 million was expended in 1998. The remaining costs will be incurred during 1999. A sizable portion of these costs represent the redeployment of existing employee resources rather than incremental expenses. Risks Progress reports on the Year 2000 Program are presented regularly to the Company's audit committee of the Board of Directors and senior management. As the program continues, the Company may discover additional Year 2000-related challenges, including that any remaining remediation plans are not feasible or that the cost of such plans exceeds current expectations. In many cases, the Company is relying on written assurances from vendors that the current systems are, or that new or upgraded systems acquired by the Company will adequately address Year 2000-related issues. The Company believes that one of its principal Year 2000-related risks is the effect Year 2000-related issues will have on its vendors, especially its utilities vendors. A substantial part of the Company's day-to-day operations is dependent on power, transportation systems, and telecommunication services, as to which alternative sources of service may not be available. The Company will continue to investigate the readiness of its suppliers, including utilities, and pursue the availability of alternatives to further diminish the extent of any impact Year 2000-related issues may have on the Company. Although there can be no assurance that the Company will be able to complete all of the modifications in the required time frame or that no unanticipated events will occur, it is management's belief that the Company is taking adequate action to address Year 2000-related issues. However, because of the range of possible issues and the large number of variables involved, it is impossible to quantify the potential cost of problems should the Company's remediation efforts or the efforts of those it does business with not be successful. If either the Company, or the Company's vendors, fail to adequately address Year 2000-related issues, the Company may suffer business interruptions. If such interruptions cause the Company to be unable to fulfill its obligations to third parties, the Company may potentially be exposed to third-party liability. Contingency Planning The Company has developed contingency measures to address the possibility that it will not have fully addressed Year 2000- related issues by December 31, 1999. These contingency measures provide the Company with an alternative plan of action if the Company experiences a shutdown in one of its mission critical systems, or a failure in the delivery of needed supplies, services, or equipment. Each of the Company's business units has developed a contingency plan based upon templates and suggested procedures that have been provided by the Year 2000 Risk Manager. Each business unit contingency plan identifies the risk and documents the steps that need to be taken to allow the Company to continue to meet the needs of its customers in the event of a Year 2000-related failure. As part of the on-going contingency planning effort, the Company's business units continue to identify alternative channels for receiving critical supplies from alternate vendors. Although each of the Company's business units has substantially completed its respective contingency plan, each business unit will continue to revise and supplement its contingency plan through December 31, 1999. The above section, even if incorporated by reference into other documents or disclosures, is a Year 2000 Readiness Disclosure as defined under the Year 2000 Information and Readiness Disclosure Act of 1998. Item 3. Market Risk. The Company is exposed to the impact of interest rate changes, fluctuations in foreign currency, and fluctuations in the purchase price of natural gas, ammonia and sulphur consumed in operations, as well as changes in the market value of its financial instruments. The Company periodically enters into derivatives in order to minimize these risks, but not for trading purposes. At September 30, 1999, the Company's exposure to these market risk factors was not significant and had not materially changed from December 31, 1998. In September 1999, the Company sold Canadian Dollar forward contracts with maturity dates throughout 2000. As of September 30, 1999, the notional amount of these forward contracts was $137.1 million. Part II.OTHER INFORMATION Item 1. Legal Proceedings.(1) Potash Antitrust Litigation --------------------------- The Company was a defendant, along with other Canadian and United States potash producers, in a class action antitrust lawsuit filed in federal court in 1993. The plaintiffs alleged a price-fixing conspiracy among North American potash producers beginning in 1987 and continuing until the filing of the complaint. The class action complaint against all defendants, including the Company, was dismissed by summary judgment in January 1997. The summary judgment dismissing the case was appealed by the plaintiffs to the United States Court of Appeals for the Eighth Circuit (Court of Appeals). The Court of Appeals in a divided opinion (2 to 1) rendered its decision reversing the grant of summary judgment as to certain defendants, including the Company, and affirming as to certain other defendants. The dissent strongly disagreed with the majority opinion, stating that the majority had erred in not affirming the dismissal of the case as to all of the defendants. According to the dissent, all of the defendants were entitled to summary judgment. The Company, along with the other defendants remaining in the case, sought rehearing of the case from the entire Court of Appeals. Rehearing was granted and the decision of the Court of Appeals was vacated. The case was reargued before the entire Court of Appeals on September 13, 1999, and the Company is awaiting the decision on rehearing by the full Court of Appeals. In addition, in 1993 and 1994, class action antitrust lawsuits with allegations similar to those made in the federal case were filed against the Company and other Canadian and United States potash producers in state courts in Illinois and California. The Illinois case was dismissed for failure to state a claim. In the California litigation, all proceedings have been stayed pending the decision of the Court of Appeals. FTX Merger Litigation --------------------- In August 1997, five identical class action lawsuits were filed in Chancery Court in Delaware by unitholders of PLP. Each case named the same defendants and broadly alleged that Freeport-McMoRan Inc. (FTX) and FMRP Inc. (FMRP) had breached fiduciary duties owed to the public unitholders of PLP. The Company was alleged to have aided and abetted these breaches of fiduciary duty. In November 1997, an amended class action complaint was filed with respect to all cases. The amended complaint named the same defendants and raised the same broad allegations of breaches of fiduciary duty against FTX and FMRP for allegedly favoring the interests of FTX and FTX's common stockholders in connection with the merger between FTX and IMC (FTX Merger). The plaintiffs claimed specifically that, by virtue of the FTX Merger, the public unitholders' interests in PLP's ownership of IMC-Agrico would become even more subject to the dominant interest of the Company. The amended complaint seeks certification as a class action and an injunction against the proposed FTX Merger or, in the alternative, rescissionary damages. The defendants' moved the court to dismiss the amended complaint in November 1998. In May 1999, the plaintiffs agreed to dismiss the action. Final terms of the dismissal have not yet been determined. In May 1998, the Company and PLP (collectively, Plaintiffs) filed a lawsuit (IMC Action) in Delaware Chancery Court against certain former directors of FTX (Director Defendants), and McMoRan Oil & Gas Co., an affiliate of FTX (MOXY). The Plaintiffs allege that the Director Defendants, as the directors of PLP's administrative managing general partner FTX, owed duties of loyalty to PLP and its limited partnership unitholders. The Plaintiffs further allege that the Director Defendants breached their duties by causing PLP to enter into a series of interrelated non-arm's-length transactions with MOXY, which the Plaintiffs allege unfairly benefited MOXY and the Director Defendants to PLP's detriment. The Plaintiffs also allege that MOXY knowingly aided and abetted and conspired with the Director Defendants to breach their fiduciary duties. On behalf of the PLP public unitholders, the Plaintiffs seek to rescind the contracts that PLP entered into with MOXY and to recoup the monies expended as a result of PLP's participation in those agreements. The Director Defendants and MOXY have filed motions to dismiss the Plaintiffs' claims. The defendants filed their briefs in support of their motions in January 1999. The Plaintiffs filed their amended complaint, and their response to the motions to dismiss in February 1999. In response, the Director Defendants filed renewed motions to dismiss, which are awaiting argument. No trial date has been scheduled. The Plaintiffs intend to pursue this action vigorously. In May 1998, Jacob Gottlieb filed an action (Gottlieb Action) on behalf of himself and all other PLP unitholders against the Director Defendants, MOXY and the Company asserting the same claims that the Plaintiffs assert in the IMC Action. Because the Plaintiffs had already asserted these claims, the Company has filed a motion to dismiss the Gottlieb Action. The court has not set a briefing schedule for the Company's motion to dismiss. The Company intends to defend this action vigorously. Other ----- In the ordinary course of its business, the Company is and will from time to time be involved in legal proceedings of a character normally incident to its business. The Company believes that its potential liability in any such pending or threatened proceedings will not have a material adverse effect on the financial condition or results of operations of the Company. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit No. Description ----------- -------------------------------------- 10.1 Retirement Agreement dated as of October 8, 1999 between IMC Global Inc. and Robert E. Fowler, Jr. 11 Earnings Per Share Computation 27 Financial Data Schedule (b) Reports on Form 8-K. Up to the date of this report, the following reports on Form 8- K were filed: Up to the date of this report, no reports on Form 8-K were filed. ************************** SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IMC GLOBAL INC. by: /s/ Anne M. Scavone ----------------------------- Anne M. Scavone Vice President and Controller (on behalf of the Registrant and as Chief Accounting Officer) Date: November 5, 1999 - ------------------------------- (1)All statements, other than statements of historical fact, appearing under Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Part II, Item 1, "Legal Proceedings," constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following: general business and economic conditions in the agricultural industry or in localities where the Company or its customers operate; weather conditions; the impact of competitive products; pressure on prices realized by the Company for its products; constraints on supplies of raw materials used in manufacturing certain of the Company's products; capacity constraints limiting the production of certain products; difficulties or delays in the development, production, testing and marketing of products; difficulties or delays in receiving required governmental and regulatory approvals; market acceptance issues, including the failure of products to generate anticipated sales levels; difficulties in integrating acquired businesses and in realizing related cost savings and other benefits; the effects of and change in trade, monetary and fiscal policies, laws and regulations; foreign exchange rates and fluctuations in those rates; the costs and effects of legal proceedings, including environmental, and administrative proceedings involving the Company; the completion of the Company's Year 2000 program; and the other risk factors reported from time to time in the Company's Securities and Exchange Commission reports. EX-10.1 2 RETIREMENT AGREEMENT DATED AS OF OCTOBER 8, 1999 BETWEEN IMC GLOBAL INC. AND ROBERT E. FOWLER, JR. Exhibit 10.1 October 8, 1999 Mr. Robert E. Fowler, Jr. 1115 Fairway Northbrook, IL 60062 Dear Bob: The purpose of this letter is to set forth the terms of your retirement from employment with IMC Global Inc. (the "Company"). 1. Retirement Date. You will remain an active employee of the Company through October 31, 2000 ("Retirement Date"); however, you agree to resign as Chief Executive Officer, Chairman of the Board of Directors and Director effective October 1, 1999. 2. Compensation. For the period commencing October 1, 1999 and ending on your Retirement Date, you will receive compensation totaling $3,599,680, made up of the following components: Base Salary (13 months) $ 812,500 1999 MICP Award (@ 1.0) 487,500 2000 MICP Award (@ 1.0; prorated for 10 mo.) 406,250 1999 PTIP Payout (@ 1.0) 1,036,730 2000 LTIP Payout (@ 1.0; prorated for 10 mo.) 856,700 This total amount will be paid to you in thirteen monthly installments commencing on October 15, 1999. Alternatively, you may make an irrevocable election to defer some or all of this compensation until some designated future date by completing the attached election form. Please keep in mind that, in the unlikely event of the Company's insolvency, you will have rights no greater than those of an unsecured creditor of the Company with respect to any deferred amounts owed to you. 3. Pension Benefit. Approximately three months prior to your Retirement Date, you will receive information regarding the distribution of you qualified pension benefit under the Company's Retirement Plan for Salaried Employees of IMC Global Operations Inc. 4. SERP Benefit. As with your pension, you will receive information regarding the distribution of your SERP benefit in advance of your Retirement Date. You will have the same distribution options (i.e. lump sum, life annuity, 10-year certain and life annuity, joint and survivor annuity) for your SERP benefit as you have for your qualified plan benefit, plus the additional option of a lump sum paid out in annual installments not to exceed 5 years. As was previously agreed, your SERP benefit will be based upon your combined IMC/Vigoro service. 5. Executive Life Insurance. As of your Retirement Date, the Company will cease paying premiums on both your term insurance policy and your permanent life policy; however, you may continue these policies by picking up the premium payments. A representative of The Securus Group will contact you to discuss your options. 6. Consulting Arrangement. For the period commencing October 1, 1999 and ending October 31, 2000, you agree to provide consulting services on an as needed basis. Such services may be required by phone and/or in person. For the period commencing November 1, 2000 and ending October 31, 2001, you agree to provide consulting services on an as needed basis not to exceed fifteen days per month. These services may be required by phone and/or in person. In exchange for the services commencing November 1, 2000, you will be paid at a rate of $1,500 per day and will be paid monthly. 7. Stock Options. For purposes of your outstanding stock options, you will be considered to be continuing in employment with the Company during the period for which you are providing consulting services to the Company, i.e. until October 31, 2001. You will have three years following the end of your consulting arrangement to exercise your outstanding stock options; provided, however, that none of your options may be exercised beyond the tenth anniversary of their date of grant. The 6-year term attached to certain of your "Vigoro options" (now representing 200,000 shares) will be extended for four years such that they expire on August 4, 2004. 8. Restricted Stock. The 33,000 shares of restricted stock you received pursuant to your employment agreement will vest upon your attainment of age 65. the 39,054 shares you received as one-half of your 1998 LTIP payout will vest on your Retirement Date. Shortly after the vesting of each of these awards, the Company will send to you the requisite stock certificates. 9. Office Space Allowance. For the five-year period commencing on October 1, 1999, you will receive an annual allowance of $5,000 to cover the cost of off-site office space. 10. Health Care Coverage. Your active health care coverage will continue through your Retirement Date. Commencing on your Retirement Date and continuing for the balance of your life, the Company will provide you with $1,000 per year to help defray the cost of the individual health insurance coverage that you purchase. 11. Waiver and Release of Claims. In exchange for the compensation described in paragraph 2 above, you agree to execute the Waiver and Release of Claims (attached hereto as Exhibit A). In exchange for the special treatment of your stock options as described in paragraph 7 above, you agree to sign an additional Waiver and Release of Claims (attached hereto as Exhibit B) after your Retirement Date, relating to claims arising during the period beginning October 1, 1999 and ending on your Retirement Date. 12. Termination of Prior Agreements. If you accept the terms of this letter agreement, this agreement will supersede any prior agreements made between you and the company regarding your employment and separation from employment with the Company, including but not limited to your Employment Agreement, dated January 29, 1998. The foregoing constitutes our entire understanding and agreement with respect to the terms of your retirement from employment with the Company. If the terms of this letter meet with your understanding and approval, please indicate your acceptance thereof by signing where indicated below and on the attached Waiver and Release of Claims (Exhibit A). Please make copies for your records and return the originals to me. Sincerely, /s/ Doug Pertz - -------------------- ******************** AGREED AND ACCEPTED: /s/ Robert E. Fowler, Jr. Date: 10/13/99 - ------------------------- ---------------- Robert E. Fowler, Jr. EXHIBIT A WAIVER AND RELEASE OF CLAIMS In exchange for the payments and benefits described in the attached letter, which I acknowledge I would not otherwise be entitle to receive, I freely and voluntarily agree to this WAIVER AND RELEASE OF CLAIMS ("WAIVER"): 1. I am resigning my position as Chief Executive Officer and Chairman of the Board of Directors of IMC Global Inc. effective October 1, 1999. 2. I acknowledge that the payments described in the attached letter are the sole payments to which I am entitled and that I am not entitled to any additional payments for salary, bonus or otherwise. 3. I, and anyone claiming through me, hereby waive and release any and all claims that I may have ever had or that I may now have against IMC Global Inc., its parents, divisions, partnerships, affiliates, subsidiaries, and other related entities and their successors and assigns, and past, present and future officers, directors, employees, agents and attorneys of each of them in their individual or official capacity (hereinafter collectively referred to as "Released Parties"). Among the claims that I am waiving are claims relating to my employment or termination of employment, including, but not limited to, claims of discrimination in employment brought under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Illinois Human Rights Act, or other federal, state or local employment discrimination, employment, wage laws, ordinances or regulations or any common law or statutory claims of wrongful discharge and any other common law or statutory claims; whether for damages, vacation pay, lost wages, bonus compensation or for any other relief or remedy. I accept the Special Payments and Benefits offered in the attached letter as being in full accord, satisfaction, compromise and settlement of any and all claims or potential claims, and I expressly agree that I am not entitled to and shall not receive any further recovery of any kind from IMC Global Inc. or any of the Released parties, and that in the event of any further proceedings whatsoever based upon any matter released herein, IMC Global and each of the Released Parties shall have no further monetary or other obligation of any kind to me, including any obligation for costs, expenses and attorney's fees incurred on my behalf. 4. I understand and agree that this WAIVER will be binding on me and my heirs, administrators and assigns. I acknowledge that I have not assigned any claims of filed or initiated any legal proceedings against any of the Released Parties. 5. Except as may be required by law, I agree that I will not disclose the existence or terms of this WAIVER to anyone except my accountant, attorney or spouse, each of whom shall be bound by this confidentiality provision. 6. I understand that I have twenty-one (21) days to consider whether to sign this WAIVER and return it to Michele Miller, Manager, Human Resources. IMC Global Inc. hereby advises me of my right to consult with an attorney before signing the WAIVER and I acknowledge that I have had an opportunity to consult with an attorney and have either held such consultation or have determined not to consult with an attorney. 7. I understand that I may revoke my acceptance of this WAIVER by delivering notice of my revocation to Michele Miller with seven (7) days of the day I sign the WAIVER. If I do not revoke my acceptance of this WAIVER within seven days of the day I sign it, it will be legally binding and enforceable. IMC GLOBAL INC. AGREED AND ACCEPTED: By: /s/ Doug Pertz /s/ Robert E. Fowler, Jr. ------------------------ ------------------------- Title: President and CEO Robert E. Fowler, Jr. ------------------------ ------------------------- Print Name Date: 10/8/99 Date: 10/13/99 ------------------------ -------------------- EX-11 3 EARNINGS PER SHARE EXHIBIT 11 EARNINGS PER SHARE DILUTED COMPUTATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 ---- ---- ---- ---- Basis for computation of diluted earnings per share: Earnings from continuing operations before extraordinary item and cumulative effect of a change in accounting principle $ 13.2 $ 48.7 $ 133.6 $ 160.3 Earnings (loss) from discontinued operations - (10.9) - 12.5 Extraordinary charge - debt retirement - (0.9) - (3.6) Cumulative effect of a change in accounting principle - - (7.5) - ---------- ---------- ---------- ----------- Net earnings applicable to common stock $ 13.2 $ 36.9 $ 126.1 $ 169.2 ========== ========== ========== =========== Number of shares: Weighted average shares outstanding 114,369,107 114,283,410 114,339,454 114,189,503 Common stock equivalents 130,853 344,318 226,442 708,075 ----------- ----------- ----------- ----------- Total common and common equivalent shares assuming dilution 114,499,960 114,627,728 114,565,896 114,897,578 =========== =========== =========== =========== Diluted earnings per share: Earnings from continuing operations before extraordinary item and cumulative effect of a change in accounting principle $ 0.12 $ 0.43 $ 1.17 $ 1.40 Earnings (loss) from discontinued operations - (0.10) - 0.10 Extraordinary charge - debt retirement - (0.01) - (0.03) Cumulative effect of a change in accounting principle - - (0.07) - ---------- ---------- ---------- ----------- Net earnings $ 0.12 $ 0.32 $ 1.10 $ 1.47 ========== ========== ========== =========== This calculation is submitted in accordance with Regulation S-K Item 601(b)(11).
EX-27 4 FINANCIAL DATA SCHEDULE
5 1000 9-MOS Dec-31-1999 Sep-30-1999 57,700 7,000 363,700 6,400 510,200 1,047,300 6,161,500 2,413,100 6,020,300 453,400 2,535,400 125,200 0 0 1,862,500 6,020,300 2,160,300 2,160,300 1,655,100 1,785,100 24,500 0 136,900 213,800 80,200 133,600 0 0 (7,500) 126,100 1.10 1.10 Earnings per share has been calculated in accordance with Statement of Financial Accounting Standard No. 128, "Earnings Per Share," and is, therefore, stated on a basic and diluted basis.
-----END PRIVACY-ENHANCED MESSAGE-----