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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
---
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1994
OR
---TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ---------- to ----------
Commission file number 1-9759
IMC FERTILIZER GROUP, 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: (708)-272-9200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, par value $1 per share New York Stock Exchange
Midwest Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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 .
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant: $1,171,478,345 as of August 31, 1994.
Market value is based on the August 31, 1994, closing price of
Registrant's Common Stock.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS: Indicate by check mark whether the
registrant has filed all documents and reports required to be filed by
Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by
a court. Yes-------. No-------.
APPLICABLE ONLY TO CORPORATE REGISTRANTS: Indicate the number of
shares outstanding of each of the registrant's classes of common stock:
29,471,036 shares, excluding 2,770,259 treasury shares as of August 31,
1994.
DOCUMENTS INCORPORATED BY REFERENCE: Information required by Items 10,
11, 12, and 13 of Part III is incorporated by reference from pages 1
through 4, pages 7 through 14, pages 5 and 6 and page 6, respectively,
of the Registrant's definitive proxy statement for the annual meeting
of stockholders to be held on October 20, 1994.
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1994 FORM 10-K CONTENTS
Item Page
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Part I:
1. Business 1
Introduction 1
Product line information 2
International operations 15
Working capital 16
Relationship between the Company and Mallinckrodt
Group Inc. 16
Other activities 17
2. Properties 20
3. Legal Proceedings 20
4. Submission of Matters to a Vote of Security Holders 22
Executive Officers of the Registrant 22
Part II:
5. Market for the Registrant's Common Stock and Related
Stockholder Matters 23
6. Selected Financial Data 25
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 26
8. Financial Statements and Supplementary Data 33
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 57
Part III:
10. Directors and Executive Officers of the Registrant 57
11. Executive Compensation 57
12. Security Ownership of Certain Beneficial Owners
and Management 57
13. Certain Relationships and Related Transactions 57
Part IV:
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 58
Signatures 68
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PART I.
Item 1. Business.
INTRODUCTION
------------
Company Profile
---------------
IMC Fertilizer Group, Inc. is the parent corporation of several
subsidiaries and joint venture operations which together comprise one
of the world's leading producers of crop nutrients for the
international community. The Company mines and processes potash in the
United States and Canada, and is a joint venture partner in IMC-Agrico
Company, the nation's largest producer, marketer and distributor of
phosphate crop nutrients. The Company believes that it is one of the
lower cost North American producers of phosphate rock, potash and
concentrated phosphates. The Company also manufactures high-value crop
nutrients which are marketed principally in the southeastern United
States under the Rainbow (Registered Trademark) brand name. In
addition, it produces sulphur and oil at other joint venture businesses
and operates a railcar repair facility in Georgia.
On July 1, 1993, IMC Fertilizer, Inc. (IMCF), a wholly-owned
subsidiary of the Company, entered into a joint venture partnership
with Freeport-McMoRan Resource Partners, Limited Partnership (FRP)
pursuant to which IMCF and FRP contributed their respective phosphate
businesses to create IMC-Agrico Company (IMC-Agrico or the
Partnership). The activities of IMC-Agrico, which is operated by IMCF,
include the mining and sale of phosphate rock and the production,
distribution and sale of concentrated phosphates, uranium oxide and
related products.
The Company's business strategy focuses on maintaining its
worldwide position as a leading crop nutrient producer and supplier
through extensive customer service, efficient distribution and
transportation, and to supply crop nutrient products worldwide at
competitive prices by taking advantage of economies of scale and
state-of-the-art technology to reduce costs.
The corporate headquarters of the Company is located at 2100
Sanders Road, Northbrook, Illinois 60062-6198, and the telephone number
is (708) 272-9200.
Unless the context indicates otherwise, the term the "Company" or
"IMC" includes IMC Fertilizer Group, Inc. and its consolidated
subsidiaries, including, subsequent to June 30, 1993, IMC-Agrico.
Unless otherwise specified, references herein to years are fiscal years
ended June 30.
Seasonal and Other Factors Affecting the Company's Business
-----------------------------------------------------------
In general, the Company's product lines are not materially affected
by seasonal factors except in the case of its high-value crop nutrients
product line.
The Company's revenues are highly dependent upon conditions in the
domestic agriculture industry, and can be affected by crop failure,
changes in agricultural productivity and agricultural policies, and
weather, all of which are beyond the Company's control.
In addition, the Company's results of operations can also be
affected by other factors beyond its control such as the relative value
of the U.S. dollar and its impact upon costs to the importers of crop
nutrients; the status of domestic and foreign political subsidies of
agriculture, and other factors.
Methods of Competition
----------------------
The Company's products are commodities that are available from
other sources, and the marketplaces in which these products are sold,
both domestic and foreign, are highly competitive. Apart from
competitive pricing, the Company's principal method of competition is
in service to customers. Such service includes the maintenance of an
extensive North American transportation system made up of approximately
2,500 railroad cars, both leased and owned, the maintenance of in-
market warehouse networks to meet changing needs within the domestic
marketplace, and the operation of ocean terminals for the storage and
shipment of product to international markets.
PRODUCT LINE INFORMATION
------------------------
The Company's most significant investments in plants and properties
in the United States are in its phosphate operations in Florida and
Louisiana and its potash operations in New Mexico. The Company also
has 25 percent participation interests in joint ventures to mine
sulphur and oil & natural gas deposits offshore Louisiana. The most
significant investment outside the United States is in its potash
operations in the province of Saskatchewan, Canada. In February 1992,
the Company sold its two anhydrous ammonia plants located in
Sterlington, Louisiana.
The amounts and relative proportion of net sales and operating
earnings contributed by various product lines of the Company have
varied from year to year and may continue to do so in the future as a
result of changing business, economic and competitive conditions, and
technical developments.
The table below shows the Company's sales by product line in
millions of dollars for each of the past five years:
1994 1993 1992 1991 1990
--------------------------------------------------------------------
Phosphate rock $ 188.1 $ 167.0 $ 202.0 $ 224.2 $ 245.7
Concentrated 876.5 387.1 423.1 447.8 401.3
phosphates
Potash 210.5 221.8 224.1 231.3 219.1
High-value crop 98.4 103.3
97.9 96.6 100.9
nutrients
Uranium 9.2 6.7 63.9 70.9 85.7
Ammonia 34.3 52.1 40.8
Other 58.8 16.6 7.8 8.3 12.2
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Total net sales $1,441.5 $ 897.1 $1,058.5 $1,131.2 $1,105.7
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The Company is not dependent upon any single customer or group of
related or affiliated customers whose loss would have a material effect
on its sales or operating results.
IMC-Agrico Company
-------------------
On July 1, 1993, IMCF and FRP entered into a joint venture
partnership pursuant to which IMCF and FRP contributed their respective
phosphate businesses, including the mining and sale of phosphate rock
and the production, distribution and sale of concentrated phosphates,
uranium oxide and related products (the Business) to IMC-Agrico, a
Delaware general partnership. IMCF has a 56.5 percent interest in the
Partnership over the term of the Partnership. The Partnership is
governed by a Policy Committee which has equal representation from each
company and is being operated by IMCF. The Partnership Agreement
governing the Partnership contains a cash sharing arrangement under
which distributable cash (as defined in the Partnership Agreement) was
shared in 1994 at a ratio of 41.4 percent and 58.6 percent to IMCF and
FRP, respectively, and will be adjusted thereafter until 1998 when the
sharing ratio will be fixed at 59.4 percent and 40.6 percent to IMCF
and FRP, respectively. For the fiscal year ended June 30, 1993, the
assets contributed to the Partnership by IMCF and FRP accounted for
sales of approximately $1.2 billion and at June 30, 1993, such assets
had an aggregate net book value of approximately $1.6 billion.
The formation of the Partnership continues the Company's strategy
of pursuing competitive cost positions in its markets. As a result of
this transaction, IMC-Agrico has realized transportation and
distribution cost savings by reducing unit costs to transport product
between various IMC-Agrico locations, by taking advantage of multiple
shipping locations to reduce the cost to transport product to
customers, and by reducing per unit warehousing costs through
opportunities created by the size of the Partnership as compared to the
two partners. IMC-Agrico has reduced production costs by eliminating
duplicative plant administrative functions, by applying operational
technologies that have proven successful at each of the Partner's
respective plant locations to the other Partner's contributed plants
and by more efficiently utilizing in-process product at plants that
have previously had underutilized upgrading capacity. IMC's and FRP's
selling, general and administrative expenses have been reduced through
reduced headcount which was achieved by eliminating duplicative
headquarters functions and consolidating the Partners' sales forces.
The following discussion describes the Company's operations,
including those of IMC-Agrico. Subsequent to June 30, 1993, all of
IMC's phosphate rock and concentrated phosphate operations are
conducted through IMC-Agrico.
Phosphate Rock
--------------
IMC-Agrico's phosphate mining operations and production plants,
located in Polk, Hillsborough, Hardee and Manatee counties in central
Florida, produce phosphate rock, with production principally going into
the manufacture of concentrated phosphates. The Partnership sells
phosphate rock to crop nutrient manufacturers in the United States, to
foreign distributors and manufacturers, to animal feed manufacturers
for the production of feed phosphates, and uses it internally in the
production of concentrated phosphates at its New Wales, Nichols and
South Pierce production facilities located in central Florida and its
Faustina and Uncle Sam production facilities located in Louisiana.
Phosphate rock is generally mixed with sulfuric acid to produce
phosphoric acid from which various concentrated phosphates can be
produced. About 83 percent of U.S. phosphate rock is produced in
Florida and North Carolina. The Florida/North Carolina production rate
was at 64 percent of capacity for 1994, including idle and unused
facilities.
Production and Reserves
Phosphate deposits were formed 15 million years ago by mineral
precipitation from seawater. Varying in thickness from five to 25
feet, these deposits are covered by a 10 to 50 foot layer of sandy
overburden. The ore is extracted through surface mining after removal
of the overburden and is then processed at one of IMC-Agrico's 10
plants (three of which were temporary idled at June 30, 1994) where it
goes through washing, screening, sizing and flotation procedures
designed to separate it from sands, clays and other foreign materials.
IMC-Agrico's production capacity is approximately 31.5 million tons
of product per year. However, production has been at less than
capacity because of reduced demand and actions to control inventory.
IMC-Agrico's Kingsford mine, which was idled beginning May 1, 1993
due to weak market conditions, was reopened March 1, 1994. On October
1, 1993, IMC-Agrico resumed operations at its Clear Springs mine which
had been closed since September 1, 1991. On August 1, 1994, IMC-Agrico
resumed operations at its Payne Creek mine, idled since October 1,
1993.
The following table compares the Company's production in millions
of tons with total U.S. production, as reported by the U.S. Department
of the Interior:
1994 1993 1992 1991 1990
---------------------------------------------------------------
IMC-Agrico 18.1 13.5 15.5 16.6 16.7
Total United States 41.3 44.8 53.7 51.5 50.9
Percent 44% 30% 29% 32% 33%
---------------------------------------------------------------
The phosphate rock mines contributed by FRP to the Partnership
produced 8.8 million tons of phosphate rock in 1993.
IMC-Agrico has estimated reserves of 358 million tons of phosphate
rock in central Florida as of June 30, 1994 that are mineable from
existing operations. Certain mining setback restrictions imposed by
Hillsborough County, Florida authorities have impaired IMC-Agrico's
ability to mine approximately 13 million tons of phosphate rock
reserves at IMC-Agrico's Four Corners mine, which restrictions are
being challenged by IMC-Agrico. Central Florida reserves are contained
in 44,764 mineable acres owned by IMC-Agrico or controlled by it
through long-term lease or royalty agreements. Reserve grades range
from 58 percent to 78 percent bone phosphate of lime (BPL), with an
average grade of 68 percent BPL. (Bone phosphate of lime is the
standard industry term used to grade phosphate rock.) The phosphate
rock mined by the Company in the last three years averaged 69 percent
BPL, which is typical for phosphate rock mined in Florida during this
period.
In March 1994, IMC-Agrico and U.S. Agri-Chemicals (USAC) entered
into an agreement in which IMC-Agrico agreed to mine certain phosphate
rock reserves owned by USAC and process such reserves for its own use.
In return, IMC-Agrico agreed to supply all of USAC's internal phosphate
rock requirements (1.3 to 2.0 million tons per year) at its Fort Meade,
Florida, concentrated phosphate facility beginning October 1, 1994 at a
price based on IMC-Agrico's cost of production. This agreement will
end on September 30, 2004, at which time it may be renewed, if agreed
to by both parties, for an additional five years.
In July 1994, IMC-Agrico entered into an option agreement with
Mississippi Chemical Corporation (MCC) to purchase 9,472 acres of land
in Florida (the Property). The Property, along with 2,508 acres of
land previously purchased from MCC (the Adjacent Property), contains
approximately 87.5 million tons of phosphate rock reserves. The option
period began July 16, 1994 and will end January 15, 1998. During this
time, IMC-Agrico may exercise its option to purchase the Property or it
may continue to make annual payments ranging from $1.0 to $3.0 million
to keep the option in effect. If by the end of the option period
IMC-Agrico exercises its option to purchase the Property, the purchase
price will be financed by MCC over a six-year term at interest rates
approximating IMC-Agrico's borrowing rate. If at any time during the
option period IMC-Agrico fails to make an option payment or fails to
exercise its option by January 15, 1998, MCC has the right to sell the
Property to IMC-Agrico for a specified amount. If the option to
purchase the Property is not exercised by IMC-Agrico and MCC does not
exercise its right to sell the Property to IMC-Agrico, MCC has the
right to purchase the Adjacent Property from IMC-Agrico at an agreed
upon price.
In June 1994, the Company purchased two phosphate rock processing
plants which previously had been leased under a long-term contract with
Brewster Phosphates. The annual capacity of these two plants is
approximately five million tons. Currently, both plants are closed
indefinitely subject to improved market conditions.
In October 1989, the Company purchased phosphate rock reserves and
rock processing facilities from Hopewell Land Corporation. The mine is
located in eastern Hillsborough County and has an annual capacity of
approximately 500,000 tons. At June 30, 1994, the land tract contained
an estimated 8.3 million tons of reserves with an average product grade
of 72 BPL.
IMC-Agrico also owns or controls phosphate rock deposits in
Manatee, DeSoto and Hardee counties, Florida, about 40 miles south of
current mining operations, which are called the South Florida deposits.
(Reserves are ore bodies which are believed to be economically
recoverable at current costs and prices. Deposits are ore bodies which
require additional economic and mining feasibility studies before they
can be classified as reserves.) These deposits differ in physical and
chemical characteristics from the reserves now being mined in Polk,
Hillsborough and Manatee counties, Florida. The South Florida deposits
contain estimated recoverable phosphate rock of approximately 533
million tons (289 million tons of which are available under option
arrangements) with an average grade of approximately 65 percent BPL.
Some of these deposits are located in what may be classified as
unmineable wetland areas under standards set forth in current state and
federal dredge and fill regulations.
The Market
IMC-Agrico sells its phosphate rock under long-term contracts and
in the spot market. IMC-Agrico also consumes a significant portion of
its phosphate rock in the production of concentrated phosphates at its
New Wales, Nichols, South Pierce, Faustina and Uncle Sam facilities.
Most of IMC-Agrico's export sales of phosphate rock are made
through the Phosphate Rock Export Association, formed under the Webb-
Pomerene Act by IMC and certain other Florida phosphate rock producers.
Under that Act, members of an industry may form associations to
negotiate prices and other terms for the export sales of their products
in order to compete more effectively in foreign markets. Export
markets for phosphate rock are highly competitive, with the
nationally-controlled mines of Morocco and other countries being
significant factors in terms of supply and price.
IMC-Agrico's phosphate rock shipments in millions of tons for 1994
and 1993 were as follows:
1994 1993
-----------------------------------------------------------------
Tons % Tons %
-----------------------------------------------------------------
Domestic
Major long-term contracts
thru 2000 5.9 28% 5.3 39%
Spot market .8 4 .6 5
Export 2.2 10 1.4 10
Captive 12.3 58 6.3 46
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Total shipments 21.2 100% 13.6 100%
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The phosphate rock business contributed by FRP to the Partnership
shipped 7.9 million tons of phosphate rock in 1993, 900,000 tons of
which were exported and 7.0 million tons of which were used in FRP's
concentrated phosphate operations.
Overall, phosphate rock prices averaged $21.16 per ton in 1994 vs.
$22.72 per ton in 1993 .
Concentrated Phosphates
-----------------------
Once phosphate rock is mined, it can then be processed into
concentrated phosphates. Concentrated phosphate production facilities
are located in Florida and Louisiana. The Florida concentrated
phosphate facilities consist of three plants: New Wales, Nichols and
South Pierce. New Wales primarily manufactures four forms of
concentrated phosphates: diammonium (DAP) and monoammonium (MAP)
phosphates, granular triple superphosphate (GTSP), and merchant grade
phosphoric acid. The New Wales concentrated phosphate complex, located
near Mulberry, Florida, is the largest concentrated phosphate plant in
the world with an estimated annual capacity of 1.76 million tons of
phosphoric acid (P2O5 equivalent). P2O5 is an industry term indicating
a product's phosphate content measured chemically in units of
phosphorous pentoxide.
In December 1992, the Company acquired a DAP plant near Nichols,
Florida, formerly owned by Conserv, Inc. In May 1993, the Company
idled the Nichols plant, which represented approximately 20 percent of
the Company's DAP production capacity, in response to severe price
erosion. Operations were resumed in May 1994 in response to lower
finished goods inventories and to meet anticipated international
demand. The Nichols plant has an estimated annual capacity of 600,000
tons of DAP.
The South Pierce plant, located at Bartow, Florida, produces
sulfuric acid, phosphoric acid, GTSP, and technical grade DAP and MAP
for industrial uses. South Pierce has an estimated annual capacity of
520,000 tons of phosphoric acid or 760,000 tons GTSP.
The Louisiana concentrated phosphate facilities consist of three
plants: Faustina, Uncle Sam and Taft. Faustina has facilities for the
production of anhydrous ammonia, urea, sulfuric acid, phosphoric acid,
DAP and MAP. Uncle Sam has facilities for the production of sulfuric
acid, and phosphoric acid. These plants have an estimated annual
capacity to produce 530,000 tons of anhydrous ammonia, 260,000 tons of
urea, approximately 3.85 million tons of sulfuric acid and
approximately 1.47 million tons of phosphoric acid. Taft has
facilities with the annual estimated capacity to upgrade phosphoric
acid into 1.0 million tons of DAP and MAP.
IMC-Agrico's annual concentrated phosphate production capacity is
approximately four million tons of phosphoric acid (P2O5 equivalent),
or approximately 32 percent of total U.S. concentrated phosphate
production capacity, or 11 percent of world capacity.
As a result of the then current oversupply of, and reduced demand
for, DAP, IMC-Agrico reduced temporarily its DAP output by
approximately 40 percent of capacity in July 1993 by, among other
things, idling its Taft plant and reducing operations at New Wales.
Subsequently, IMC-Agrico gradually increased production at New Wales
and, in December 1993, the Taft plant resumed operations to meet the
demand of the U.S. spring planting season until May 1994, when it again
was idled.
Phosphate rock, sulphur and ammonia are the three principal raw
materials used in the production of concentrated phosphates. Phosphate
rock is supplied by IMC-Agrico's Florida mines. Sulphur, until
recently, was purchased exclusively from domestic suppliers. The
Company and FRP both have interests in a joint venture which began
mining sulphur reserves at Main Pass 299 (Main Pass) offshore Louisiana
in April 1992. Sulphur production achieved design operating rates of
5,500 long tons per day or approximately two million long tons per year
in December 1993 and has since sustained production at or above that
level. The Company and FRP have entered into an agreement to supply
IMC-Agrico's sulphur requirements. FRP supplies its share of the
requirements through its Sulphur Division and the Company supplies its
share of the requirements through its share of Main Pass production and
purchases from third parties. Nearly all of the Company's ammonia
needs were supplied by the Company's Louisiana production facilities
until February 1992, when the operations were sold. Since then,
IMC-Agrico's needs primarily have been fulfilled by its Faustina
ammonia production facility and by domestic suppliers under long-term
contracts.
The Market
IMC-Agrico sells its concentrated phosphates in the spot market and
under long-term contracts. Virtually all of IMC-Agrico's export sales
are marketed through the Phosphate Chemicals Export Association, a
Webb-Pomerene Act organization. The table below shows the Company's
1994 and 1993 shipments in thousands of tons of P2O5 equivalent:
1994 1993
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Tons % Tons %
-----------------------------------------------------------------
Domestic
Spot market 1,449 42% 755 40%
Contracts expiring in 1996 115 3 107 6
Mallinckrodt (for animal
feed ingredients) 279 8 276 15
Captive (for high-value
crop nutrients) 46 1 50 3
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1,889 55 1,188 64
Export 1,564 45 682 36
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Total shipments 3,453 100% 1,870 100%
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In 1993, the concentrated phosphate business contributed by FRP to
the Partnership sold 1.2 million tons of concentrated phosphates (P2O5
equivalent) domestically and 1.0 million tons of concentrated
phosphates (P2O5 equivalent) for export.
IMC-Agrico has contractual commitments from customers for the
shipment of concentrated phosphates amounting to approximately 500,000
tons (P2O5 equivalent) in fiscal 1995.
Animal Feed Ingredients Agreements
The Company has a management agreement with Mallinckrodt
Veterinary, Inc. (Mallinckrodt), formerly Pitman-Moore, Inc., a wholly-
owned subsidiary of Mallinckrodt Group Inc., formerly IMCERA Group
Inc., under which the Company operates certain Mallinckrodt facilities
at the New Wales concentrated phosphate complex, which manufacture
animal feed-grade phosphate products, and supplies utilities for the
operation of such facilities until at least June 30, 1997. There is
also a similar management agreement under which the Company operates a
limestone mine for Mallinckrodt Group Inc. to obtain limestone for use
in the animal feed plant. Under the management agreement, charges for
the conversion of raw materials, described below, into finished
products, as well as for supplying utilities to the plant, are based on
the Company's actual cost.
In addition, IMC-Agrico has supply agreements with Mallinckrodt
under which IMC-Agrico will supply Mallinckrodt's requirements of raw
materials for its animal feed plant. Under these agreements,
IMC-Agrico will supply phosphoric acid through at least June 30, 1997
and anhydrous ammonia on a year-to-year basis unless terminated by
either party. In addition, IMC-Agrico has an agreement to supply
Mallinckrodt 85,000 to 105,000 tons of phosphate rock annually until
June 30, 1998. The Company has also entered into an agreement to
supply Mallinckrodt with its requirements of animal feed-grade
potassium products from the Company's Carlsbad, New Mexico, potash
operations. These supply contracts extend year-to-year unless
terminated by either party. The Company also supplies Mallinckrodt
with railcars for transporting its product.
Potash
------
The Company mines potash, the second primary crop nutrient, at
three underground mines and modern refineries in the United States and
Canada. Two of the mines and refineries are located near the town of
Esterhazy in the Canadian province of Saskatchewan. The remaining mine
and refinery is located near Carlsbad, New Mexico. With a combined
capacity of over five million tons per year, the Company is one of the
largest private enterprise potash producers in the world. In 1994,
these operations accounted for approximately 8 percent of world output.
The term potash applies generally to the common salts of potassium.
Since the amount of potassium in these salts varies, the industry has
established a common standard of measurement by defining a product's
potassium content in terms of equivalent percentages of potassium oxide
(K20). A K20 equivalent of 60 percent is the customary minimum
standard for muriate of potash products.
The North American potash industry's production rate was at 75
percent of capacity for 1994, including idle and unused facilities.
Most of the potash produced by the Company was sold as crop nutrient
materials, while small portions were sold as animal feed ingredients
and to non-agricultural markets.
Saskatchewan Potash Operations
The Company's two interconnected potash mines in Saskatchewan are
owned and operated by a wholly-owned subsidiary, International Minerals
& Chemical Corporation (Canada) Limited (IMC-Canada). The total annual
production capacity of IMC-Canada's refinery facilities is estimated to
be 4.2 million tons of finished product.
Potash mining takes place under ground at depths of over 3,000 feet
where continuous mining machines cut out the ore face and move jagged
chunks of salt to conveyor belts. The ore is then crushed and moved to
storage bins where it awaits hoisting to refineries above ground. IMC-
Canada produces six different potash products, some through patented
processes. Product grades produced are Standard, Special Standard,
Coarse, Granular and White Muriate, and Refined KCL.
Potash Corporation of Saskatchewan Inc. (PCS) controls several
potash-producing properties in the province. The mining operations
associated with these properties give PCS control of approximately 55
percent of Saskatchewan's potash production capacity.
One of PCS's properties consists of reserves located in the
vicinity of IMC-Canada's potash operations. Under a long-term contract
with PCS, IMC-Canada is obligated to mine and refine these reserves for
a fee plus a pro rata share of production costs. The specified
quantities of potash to be produced for PCS may, at the option of PCS,
amount to an annual maximum of approximately one-fourth of the tons
produced by IMC-Canada, but no more than 1,050,000 tons. The current
contract can be continued in effect until June 30, 1996, and, at the
option of PCS, can be renewed on the same terms for six additional
five-year periods.
Since December 1985, the Company has experienced an inflow of water
into one of its two interconnected potash mines. As a result, the
Company has suffered losses and has been forced to take substantial
remedial efforts to stop the flooding. Remedial efforts are ongoing,
with $25 million (Canadian) having been expended in 1994 and $29
million (Canadian) expected to be spent in 1995.
The Company has significantly reduced the water inflow since the
initial discovery and has been able to meet all sales obligations and
requirements from production at the mines. Despite the relative
success of such measures, there can be no assurance that the amounts
required for remedial efforts in the future will not increase or that
inflows will not increase to a level which would cause the Company to
abandon the mine. There can be no assurance that such action would not
have a material adverse effect on the Company. The long-term trend of
the water inflow has caused the Company to consider alternatives to its
current mining operations and studies are under way in this regard.
Any solution to the water inflow situation at the mines could result in
substantial capital expenditures. The Company does not presently have
in place, nor can it reasonably obtain, any insurance to cover damage
to its underground potash operations.
Saskatchewan Potash Production
The table below shows total ore mined by IMC-Canada along with
potash production in thousands of tons over the past five years:
1994 1993 1992 1991 1990
--------------------------------------------------------------
Tons of ore mined 8,636 8,143 8,071 8,404 7,903
Average K2O content of
ore mined 24.5% 24.9% 24.4% 24.2% 24.6%
Tons of potash produced:
IMC-Canada 2,482 2,442 2,395 2,419 2,270
PCS 500 500 500 525 525
--------------------------------------------------------------
Total production 2,982 2,942 2,895 2,944 2,795
--------------------------------------------------------------
Average K2O content
of product 61.3% 61.3% 61.2% 61.1% 61.2%
--------------------------------------------------------------
In 1987, legislation was adopted in the province of Saskatchewan
that authorized the provincial government to control production at
potash mines located in the province. The provincial government stated
that the purpose of such legislation was to deal with an oversupply of
potash in world markets. The legislation was not self-implementing.
It permitted the Lieutenant Governor in Council of Saskatchewan to
create a Potash Resources Board to prescribe rates of potash production
in the province and to allocate production among the individual mines.
Increases in production capacity would be subject to provincial
approval. The Company understands that such regulations are in place
but that they have never been implemented. The Company cannot predict
if or when the legislation will be implemented or the effects of this
legislation on the profitability of its potash operations.
Saskatchewan Potash Reserves
IMC-Canada presently controls the rights to mine 204,446 acres of
potash-bearing land in southeastern Saskatchewan. This land, of which
50,284 acres have already been mined or abandoned, contains over 1.4
billion tons of recoverable ore at an average grade of 24.5 percent K2O
-- enough to support current operations for more than a century. This
ore will yield approximately 500 million tons of finished product with
a K2O content of approximately 61 percent.
IMC-Canada's mineral rights consist of 113,068 acres owned in fee,
70,613 acres leased from the province of Saskatchewan, and 20,765 acres
leased from other parties. All leases are renewable by IMC-Canada for
successive terms of 21 years. Royalties, established by regulation of
the province of Saskatchewan, amounted to $3.7 million (Canadian) in
1994 and $3.6 million (Canadian) 1993.
Agreement Suspending Potash Dumping Investigation
In January 1988, the U.S. Department of Commerce (Commerce) signed
an agreement with all of the potash producers in Canada, suspending an
investigation by Commerce to determine whether Canadian potash was, or
was likely to be, sold in the United States at less than "fair value."
The agreement stipulated that each such producer's minimum price for
potash sold in the United States, compared with its potash prices in
Canada, would be based upon a formula related to preliminary dumping
margins determined by Commerce for each producer, to assure that there
would be no dumping by that producer in the future. Compliance with
the agreement is being monitored by Commerce. Originally, this
agreement was to remain in effect until 1993 unless it was terminated
by Commerce or by the withdrawal from the agreement by producers having
15 percent or more of the total Canadian capacity, or unless there was
a violation of the terms of the agreement, in any of which events the
investigation could be renewed. In January 1993, this agreement was
extended by Commerce for an indefinite period. The intent of the
agreement is to prevent the sale of Canadian potash into the United
States at less than "fair value."
Saskatchewan Potash Production Costs
In addition to royalties, mining payments to the province of
Saskatchewan amounted to $5 million in 1994 and $8 million in 1993.
These payments are not deductible in determining Canadian federal
income taxes.
Carlsbad Potash Operations
The Company's Carlsbad mine, located in New Mexico with workings at
levels 700 to 900 feet under ground, has an annual production capacity
of over one million tons of finished product. The ore mined is of
three types: (1) sylvinite, a mixture of potassium chloride and sodium
chloride, the same as the ore mined in Saskatchewan; (2) langbeinite, a
double sulphate of potassium and magnesium; and (3) a mixed ore,
containing both potassium chloride and langbeinite.
Conventional mining methods are utilized for ore extraction. A
wide ore face is undercut and holes drilled to accept explosive
charges. After detonation, the loose ore is loaded and transported to
storage areas where it is hoisted above ground for further processing
at the refinery.
Three types of potash are produced at the refinery: muriate of
potash, which is the primary source of potassium for the crop nutrient
industry; a double sulphate of potash magnesia, marketed under the
brand name Sul-Po-Mag (Registered Trademark), containing significant
amounts of sulphur, potassium and magnesium, with low levels of
chlorine; and sulphate of potash, supplying sulphur and a high
concentration of potassium with low levels of chlorine. The Company
believes it is the larger of the two U.S. producers of double sulphate
of potash magnesia and the largest of several U.S. producers of
sulphate of potash.
Carlsbad Potash Production
The five-year table below shows Carlsbad production figures in
thousands of tons:
Years ended June 30 1994 1993 1992 1991 1990
--------------------------------------------------------------
Tons of ore mined 6,828 6,895 6,004 5,845 5,403
Average combined K2O content
of the ore (langbeinite plus
sylvinite) 11.0% 11.0% 13.1% 13.5% 14.1%
Tons of potash produced 1,093 1,106 1,036 1,082 1,059
---------------------------------------------------------------
Carlsbad Potash Reserves
The Company mines and refines potash from 43,239 acres of reserves
which the Company controls under long-term leases. These reserves
contain an estimated total of 169 million tons of recoverable ore in
four mining beds at thicknesses ranging from 5.5 to 12.0 feet. At
average refinery rates, these ore reserves are estimated to be
sufficient to yield 12.5 million tons of concentrate from sylvinite
with an average grade of 60 percent K2O and 29.3 million tons of
langbeinite concentrate with an average grade of approximately 22
percent K2O.
At current elevated rates of production, the Company's reserves of
sylvinite and langbeinite are estimated to be sufficient to support
operations for more than 24 years.
Total IMC Potash Production
In addition to the Company, there are 12 North American potash
producers -- seven in the United States and five in Canada. The
following five-year table compares the Company's combined U.S. and
Canadian production with total North American production, in thousands
of tons of K2O equivalent, as reported by the Potash and Phosphate
Institute:
Years ended June 30 1994 1993 1992 1991 1990
--------------------------------------------------------------
IMC
Esterhazy* 1,522 1,497 1,466 1,479 1,390
Carlsbad 446 452 428 457 437
--------------------------------------------------------------
1,968 1,949 1,894 1,936 1,827
--------------------------------------------------------------
Total North America production9,556 9,751 9,659 10,123 9,293
--------------------------------------------------------------
*Tons produced for PCS
excluded from Esterhazy
production above 307 306 306 321 321
--------------------------------------------------------------
The Market
Potash is sold throughout the world, with the Company's largest
markets being in the United States, People's Republic of China, Japan,
Malaysia, Korea and Latin America. Potash is also used internally in
the manufacture of high-value crop nutrients. The Company's exports
from Canada, except to the United States, are made through Canpotex
Limited, an export association of Saskatchewan potash producers.
The following table summarizes the Company's shipments of potash in
thousands of tons in 1994 and 1993:
1994 1993
----------------------------------------------------------------
Tons % Tons %
----------------------------------------------------------------
Domestic (United States
and Canada) 2,287 65% 2,297 65%
Foreign 963 27 943 27
Captive (principally for
crop nutrients) 280 8 269 8
----------------------------------------------------------------
3,530 100% 3,509 100%
----------------------------------------------------------------
The average selling price for all Company potash products was $64
per ton in 1994, compared with $68 per ton in 1993.
Rainbow Division
----------------
The Company's Rainbow Division produces high-value crop nutrients
through granulation and bulk-blending. Granulation is a process in
which various dry and liquid raw materials are chemically combined and
then pelletized. Bulk-blending is a simple physical mixing or blending
of suitable crop nutrient materials.
The Rainbow Division operates four large granulation plants which
are located in Americus, Georgia, Florence, Alabama, Hartsville, South
Carolina and Winston-Salem, North Carolina. It also operates 15
smaller facilities, primarily in the southeastern United States, for
bulk-blending and/or warehousing. Most of the potash and phosphate raw
materials used by these operations are supplied by the Company's mines
and plants.
The Products
Shipments of Rainbow (Registered Trademark) and Super Rainbow
(Registered Trademark) (premium high-value crop nutrients) accounted
for about 46 percent of the Company's total 1994 high-value crop
nutrient sales. These crop nutrients are formulated for specific kinds
of crops, soils, and soil conditions, and, in addition to the three
major plant nutrients, may contain as many as seven secondary elements
and micronutrients.
The Rainbow Division also sells phosphate rock, concentrated
phosphates, potash and nitrogen products for direct application to the
soil.
The Market
High-value crop nutrients are marketed in the United States and
sold principally to independent dealers, distributors and farmers, with
some sales made directly to other crop nutrient manufacturers. Sales
are largely concentrated in the spring planting season. Weather has
some impact on the timing and length of the planting season and can
have a significant effect on high-value crop nutrient prices.
High-value crop nutrient shipments in 1994 approximated 725,000 tons
vs. 727,000 tons in 1993.
The Company believes its share of the southeastern U.S. market, the
market in which it operates, was about 15 percent in 1994. The
competition consists of many relatively small enterprises and other
large high-value crop nutrient companies.
Uranium Oxide
-------------
Phosphate rock is the source of uranium oxide, with the uranium
content varying from deposit to deposit. When central Florida
phosphate rock is converted into phosphoric acid, there is about a
pound of uranium oxide in each ton of the acid (P2O5 equivalent).
Uranium oxide production facilities are located in Florida and
Louisiana. IMC-Agrico owns three plants in central Florida (all of
which are temporarily idle) for the extraction and processing of
uranium oxide as a by-product of phosphoric acid. Two of these plants
are primary recovery units and the third is a final processing
refinery.
One of the primary recovery units and the final processing refinery
adjoin IMC-Agrico's New Wales concentrated phosphate plant. The
primary recovery unit produced no uranium oxide in 1994 and a minimum
amount of uranium oxide in 1993. When operational, uranium oxide is
extracted from phosphoric acid manufactured at the New Wales plant.
Another primary recovery unit is located adjacent to a concentrated
phosphate plant owned and operated by a subsidiary of CF Industries
(CF), located in Plant City, Florida. This facility extracts uranium
oxide from CF's phosphoric acid production at that plant. The Company
had previously extracted and purchased CF's uranium oxide under a
contract that ran through December 31, 1992. However, due to the
expiration of its long-term sales contracts at June 30, 1992 and the
depressed market price of uranium oxide at that time, the Company
reached an agreement with CF to suspend production six months early.
Prior to June 30, 1992, uranium oxide was sold under seven
contracts which supplied uranium oxide to nuclear power plants.
Shipments under these contracts were delivered at prices which were
substantially above market price. Since the expiration of these
contracts, the Company has been unable to secure contracts with pricing
terms favorable enough, in relationship to production cost, to warrant
continued operation of the uranium oxide plants. Therefore, in
addition to the agreement with CF to suspend production at Plant City,
uranium oxide production at New Wales was suspended late in calendar
1992 after raw material inventories were depleted and work-in-process
was finished. The suspension of production at New Wales and Plant City
is expected to be temporary, and production will resume when future
uranium oxide prices warrant renewed operation.
In addition, the Company had previously owned a primary recovery
unit located adjacent to a concentrated phosphate facility owned and
operated by a subsidiary of CF in Bartow, Florida. In 1989, a
permanent shutdown of the facility was negotiated for economic reasons
(it had not operated since July 1985) at which time title to part of
this facility was transferred to CF. In 1994, the Bartow recovery unit
was dismantled.
IMC-Agrico also owns and operates uranium oxide recovery and
processing facilities which are located adjacent to its Uncle Sam and
Faustina concentrated phosphate plants in Louisiana. In 1994, these
production facilities recovered 974,359 pounds of uranium oxide from
phosphoric acid produced at these facilities.
Under a joint venture agreement with Denison Mines Ltd. (Denison),
IMC-Agrico is responsible for the production of uranium oxide at Uncle
Sam and Faustina, and Denison is responsible for marketing the uranium
oxide produced under long-term contracts through calendar 1995. These
contracts currently yield prices significantly above spot market
prices.
Ammonia
-------
IMC-Agrico produces ammonia at its Faustina plant located at
Donaldsonville, Louisiana. Production from the Faustina plant, which
has an estimated annual capacity of 530,000 tons of anhydrous ammonia,
is primarily used internally to produce urea, DAP and MAP.
Until early 1992, the Company produced anhydrous ammonia at two
plants located in Sterlington, Louisiana. This ammonia facility was
sold to Koch Industries, Inc. in February 1992. In connection with the
sale of this facility, the Company entered into contracts to meet its
ammonia requirements.
Sulphur and Oil & Natural Gas
-----------------------------
See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of the status of
the Company's sulphur and oil & natural gas ventures.
INTERNATIONAL OPERATIONS
------------------------
Foreign operations and investments are subject to risks customarily
encountered in such foreign operations and investments, including
fluctuations in foreign currency exchange rates and controls,
expropriation and other economic, political and regulatory policies of
local governments, and laws and policies of the United States affecting
foreign trade and investment.
Internationally, the Company's products are sold primarily through
one Canadian and three U.S. export associations. Due to economic and
political factors, customers can change dramatically from year to year.
In 1994, principal customer countries included the People's Republic of
China, India, Japan, Korea, Australia and several Latin American and
European countries. The Company maintains an international marketing
sales force which works with and provides a variety of agronomic and
technical services to foreign customers including government agencies
to help improve economic yields and agricultural technology. For
further information concerning the Company's foreign operations and
business, see the following captions in Item 1:
Heading Matter
----------------------------------------------------------------
Phosphate Rock Export sales of phosphate rock
Concentrated Phosphates Export sales of concentrated
phosphates
Potash Potash mining operations
-----------------------------------------------------------------
See also Note 20 - Operations by Geographic Area of Notes to
Consolidated Financial Statements for additional information.
WORKING CAPITAL
---------------
The working capital requirements for inventory and receivables of
the Company are not materially affected by seasonal or other factors
except for its high-value crop nutrient business. Sales of that
product are largely concentrated in the spring season, requiring a
higher than average level of inventory to meet anticipated customer
demand for the product.
The Company does not extend long-term credit to customers. The
Company believes this non-extension of credit as well as its working
capital requirements are not materially different from the credit
policies and working capital requirements of its competitors.
RELATIONSHIP BETWEEN THE COMPANY AND MALLINCKRODT GROUP INC.
------------------------------------------------------------
The Company was at one time a wholly-owned subsidiary of
Mallinckrodt Group Inc. As a result of a public offering of the
Company's common stock by Mallinckrodt Group Inc. and stock purchases
by the Company, Mallinckrodt Group Inc.'s ownership interest in the
Company was reduced to approximately 4,000,000 shares at the end of
fiscal year 1991, which shares were substantially all purchased by the
Company in July 1991.
Two Mallinckrodt Group Inc. officers were on the Company's Board of
Directors at the beginning of fiscal year 1992, but they were replaced
on July 2, 1991, when the aforementioned stock purchase took place.
On April 22, 1994, the Company's Board of Directors elected a new
board member who, at June 30, 1994, was also a member of the Board of
Directors for Mallinckrodt Group Inc.
The Company continues to have contractual relationships with
Mallinckrodt Group Inc., which originated at the time the Company was a
subsidiary of Mallinckrodt Group Inc. These include arrangements under
which the Company operates an animal feed-grade phosphate facility,
that is located at IMC-Agrico's New Wales concentrated phosphate
complex, for Mallinckrodt and supplies utilities and the requirements
of anhydrous ammonia and phosphate rock for the facility. The Company
also operates for Mallinckrodt Group Inc. a mine to obtain limestone
for use in Mallinckrodt's animal feed plant. Each company has agreed
to indemnify the other against certain liabilities.
See "Product Line Information - Concentrated Phosphates - Animal
Feed Ingredients Agreements" for discussion of various supply
agreements with Mallinckrodt Group Inc.
Other agreements between Mallinckrodt Group Inc. and the Company
provide for a tax sharing arrangement relating in part to the period
from July 1, 1987 to February 2, 1988 when the Company was included in
Mallinckrodt Group Inc.'s consolidated income tax returns. Also, if a
subsequent adjustment by any taxing authority were to result in an
increase in the tax liability of Mallinckrodt Group Inc. or the Company
or any of their domestic or foreign subsidiaries and result in a
corresponding reduction in the tax liability of the other party, then
an equitable reimbursement by the benefited party will be paid to the
other party.
OTHER ACTIVITIES
----------------
Environmental Matters
---------------------
The Company is subject to various environmental laws of federal and
local governments in the United States and Canada. Although
significant capital expenditures, as noted below, as well as operating
costs, have been incurred and will continue to be incurred on account
of these laws and regulations, the Company does not believe they have
had or will have a material adverse effect on its business. However,
the Company cannot predict the impact of new or changed laws or
regulations.
Most of the Company's environmental capital expenditures are in
response to provisions of the United States Clean Air Act, the United
States Water Pollution Control Act, the United States Resource
Conservation and Recovery Act, and the land use, air, and water
protection statutes and regulations of the various localities, states,
and Canadian provinces in which the Company operates.
Environmental capital expenditures were primarily related to air
emission control, wastewater purification, and solid waste disposal.
These expenditures totaled approximately $22 million in 1994. The
Company expects that environmental capital expenditures will average
between $15 million and $25 million per year over the next two years.
Land reclamation expenditures to remediate previously mined-out
areas totaled $10 million in 1994. IMC-Agrico estimates such
expenditures will total approximately $14 million in 1995.
The Company is the subject from time to time of investigations
relating to enforcement of various federal, state and provincial laws
and regulations by environmental authorities relating to properties the
Company owns or has owned and the disposal of wastes. Although there
can be no assurance in this regard, the Company believes that none of
the current investigations, other than those described below,
individually or collectively, will have a material adverse effect on
the Company.
In connection with the development order received from Polk County,
Florida, authorities in July 1990 for the New Wales gypsum stack
expansion at the Company's New Wales concentrated phosphate facility,
the Company agreed to sample groundwater through monitoring wells on a
quarterly basis. Under the terms of the development order, if the
samples indicated groundwater contamination in excess of specified
levels, the Company would have two years to take the cooling pond
relating to the gypsum stack out of service.
Beginning in July 1992, groundwater samples taken at New Wales
indicated substantially elevated levels of sulphate concentrations, a
non-toxic contaminant, above permitted levels. The Company immediately
began an investigation and believed, based on available information and
the advice of outside experts, that the likely sources of contamination
were one or more of the 12 former recharge wells located within the
cooling pond. By the end of September 1993, all of the recharge wells
had been located and plugged. The aggregate cost of locating and
plugging the 12 recharge wells was approximately $2.3 million.
Pursuant to an amended development order and related action plan, which
was approved by the Central Florida Regional Planning Council (the
CFRPC) and by Polk County authorities, (i) the Company had until April
30, 1994 to locate and plug the 12 recharge wells and has until October
30, 1994 for levels of contamination to return to permitted levels, and
(ii) if the October 30, 1994 deadline is not met, the Company will have
until September 1997 to obtain permits for and to accomplish the lining
or relocation of the cooling pond. The cost of such lining or
relocation, if necessary, is currently estimated to be between $35
million and $68 million, with the bulk of any such expenditures
expected to take place in 1996 and 1997. Test results show that the
levels of contamination slowly declined through June 1994 but did not
reach permitted levels. If the permitted levels are not reached by
October 30, 1994 but the trend has continued downward, the Company
would likely seek from the CFRPC and the Polk County authorities an
extension of the deadline, although there can be no assurance that such
extension would be granted.
On June 27, 1994, workers at IMC-Agrico Company's New Wales
concentrated phosphate production facility discovered a large hole
while performing a routine inspection of the top of the north
phosphogypsum storage stack. This stack has been used mainly for
process water storage only since the new south expansion area was
completed in mid-1993. The hole, more than 100 feet in diameter and
approximately 185 feet deep, is believed to have been caused by a
sinkhole that opened beneath the stack.
Shortly after the discovery, the Florida Department of Environmental
Protection (DEP) was notified. The primary concern at the time was
that the sinkhole may have allowed process water contained in and on
the phosphogypsum stack to flow down into the underlying aquifers and
contaminate drinking water supplies.
Test results from monitoring wells have documented that water in the
Floridan aquifer directly below the sinkhole has been impacted by the
sinkhole and elevated levels of phosphate, sodium sulfate, and total
dissolved solids have been indicated. At the maximum levels predicted
that these parameters will reach, there is no concern for health
effects. Tests are also being conducted to assure there are no
elevated levels of any other parameters which would cause a health
concern. Furthermore, it has been concluded that the pumping action of
the New Wales production wells have caused impacts from the sinkhole to
be contained on the plant site to date.
Holes have been drilled at an angle into the area surrounding the
sinkhole to conduct geological testing and obtain core samples to
determine the size and shape of the subsurface cavity. Once the
subsurface cavity is identified, the Partnership plans to pump a
grouting material, possibly concrete, (subject to DEP approval) into
the sinkhole to prevent a further collapse and contamination of the
Floridan aquifer. The Company has recorded a charge of $1.9 million to
cover the cost of drilling and grouting but no assurance can be given
that such expenditures will be adequate to contain the contamination.
IMCF believes that the cooling pond recharge wells discussed above
and the phosphogypsum sinkhole activity are distinct problems that have
resulted in similar groundwater impacts and that successful containment
of the sinkhole through grout injection will prevent further
contamination. The Company expects a resumption of the downward trend
of contamination levels to occur upon successful completion of the
grouting, although there can be no assurance in this regard.
Pursuant to the agreement for the formation of the Partnership
discussed above, any expenditures relating to the CFRPC development
order would be a liability retained by IMCF, provided that the first $5
million aggregate amount of expenditures incurred subsequent to the
formation of the Partnership that related to this contamination or
certain other environmental liabilities identified in the agreement for
the formation of the Partnership would be a liability assumed by the
Partnership.
The Wisconsin Department of Natural Resources (DNR) conducted tests
which indicated there may be herbicide and nitrate contamination of
soil at a former company-owned farm center at Edmund, Wisconsin, and of
drinking water wells near the farm center. No connection between the
contamination of the wells and the operations at the former
company-owned farm center has been established. The Company cleaned
the soil at the site to the satisfaction of the DNR. The Company is
currently conducting discussions with the DNR to determine the extent
to which groundwater remediation may be required. The magnitude of any
liability the Company may have has not been determined, but it is not
expected to be material to the Company.
The U.S. Environmental Protection Agency (EPA) has investigated the
Company's operations in Florida concerning possible exceedences of
waste water discharge levels and applicable permits. The Company and
EPA have tentatively agreed to a settlement under which the Company
will pay $835,000 and undertake supplementary environmental projects of
approximately $265,000. Pursuant to the terms of the Contribution
Agreement, all liabilities incurred in connection with this matter were
retained by the Company and not transferred to the Partnership.
The Company was recently notified by the EPA that it is alleged to
be a potentially responsible party for pollution of a site in
Woodstock, Illinois, designated to be on the U.S. Superfund list. The
Company has not had the opportunity to investigate the basis, if any,
for this allegation.
Employees
---------
The Company had approximately 6,300 employees at June 30, 1994.
The work force was comprised of 1,850 salaried, 4,400 hourly, and 50
temporary or part-time employees.
Labor Relations
---------------
The Company has 11 collective bargaining agreements with three
international unions or their affiliated local chapters. Four
agreements covering 35 percent of the hourly work force were negotiated
during calendar 1993. Resulting wage and benefit increases were
consistent with competitive industry and community patterns. Three
agreements covering 43 percent of the hourly workers will expire or are
subject to renegotiation in calendar 1994. The Company has not
experienced a significant work stoppage in recent years and considers
its employee relations to be good.
In connection with the Partnership, contract negotiations took
place between the Company, IMC-Agrico and the International Chemical
Workers Union. As a result, on June 2, 1994, IMC-Agrico employees at
the phosphate rock mineral operations reached their first labor
agreement.
Item 2. Properties.
Information regarding the plant and properties of the Company is
included in Item 1, ``
Business.''
Item 3. Legal Proceedings.
Pursuant to certain agreements between the Company and Mallinckrodt
Group Inc., the Company has agreed to indemnify Mallinckrodt Group Inc.
against any liability or costs attributable to, among other things,
litigation involving the crop nutrient business, whether or not the
events which give rise to the litigation predated July 1, 1987.
In the ordinary course of its business, the Company is and will
from time to time be involved in routine litigation. Except for the
matters discussed below, none of the litigation pending or known to be
threatened at this time is regarded by the Company as potentially
material.
Sterlington Litigation
----------------------
In May 1991, an explosion occurred at a nitroparaffins plant (the
NP Plant) in Sterlington, Louisiana, owned by Angus Chemical Company
(Angus) and operated by IMCF pursuant to a management agreement with
Angus. Approximately 240 personal injury lawsuits arising out of this
explosion remain unresolved in Louisiana courts. A Louisiana state
appellate court reversed the trial judges previous ruling which had
denied certification of a class or classes regarding these lawsuits.
The Company has established a reserve to cover the estimated cost of
resolving the remaining Louisiana litigation. Such reserve was
calculated based upon the advice of the Company's risk management
department, its broker's claims department and outside counsel. Such
advice was based upon Angus' experience settling over 1,600 Louisiana
bodily injury and/or property damage claims, the nature of the injuries
alleged by non-IMCF employees, the advice that, under Louisiana law,
workers compensation should be the exclusive remedy available to
injured IMCF employees and the experience of Louisiana counsel and of
Louisiana claims adjusters in settling claims in the judicial district
in which the claims are pending.
The Company is pursuing additional recoveries from its insurance
carriers relating to lawsuits arising out of the explosion. The
Company has received funds from three of its excess general liability
insurers and has reached a complete settlement with one of them and a
partial settlement with another. The third of these insurers has paid
its policy limits, but the Company has filed a lawsuit in Texas
attempting to recover additional amounts. The Company to date has
received $85.7 million from these three insurers and, under the terms
of the partial settlement, is seeking to recover additional amounts in
arbitration from one excess insurer. In that arbitration, the insurer
has filed a counterclaim which seeks the return of the $15 million paid
to the Company by that insurer.
In 1993, Angus filed, but has not yet served, a lawsuit in
Louisiana against the Company and two of its excess liability insurers
seeking damages in addition to those paid in the Sterlington litigation
discussed in Note 4 of Notes to Consolidated Financial Statements. The
Company has been informed by counsel to Angus that the suit seeks
damages allegedly related to (i) direct action claims against two of
the Company's insurers, with one of which there is an agreement which
that insurer might assert requires the Company to indemnify such
insurer, (ii) third party claims against Angus, and (iii) sums already
paid by Angus to third parties. The Company believes that there are
substantial defenses to the direct action claims against its insurers
and the claims for sums already paid by Angus to third parties, and
that, in any event, the Company's exposure, if any, for such direct
action claims is approximately $30 million.
Later in 1993 the Company filed a lawsuit in Texas against Angus
seeking a court determination that the settlement and final judgment
(discussed in Note 4) entered in April of 1993 between and among the
Company, Angus and its property insurer disposed of the Angus claims
described in items (i) and (iii) above. Angus filed a counterclaim
seeking reimbursement for sums already paid by Angus to third parties.
This lawsuit is still in the discovery phase, with trial of a portion
of the case scheduled for October of 1994 and the remaining portion, if
necessary, scheduled for February of 1995. The trial judge has ruled
that the terms of the April 1, 1993 settlement agreement with Angus do
not bar Angus from bringing direct action claims in Louisiana against
the Company's insurers, but did not rule as to whether such claims have
any merit under Louisiana law. The judge also ruled that the terms of
the same settlement agreement do not bar Angus from making claims
against the Company for sums already paid to third parties by Angus.
Angus' responses to discovery requests indicate that the Company's
exposure for sums already paid to third parties is approximately $10
million. Neither of the rulings addressed the question of whether the
final judgment acts as a bar to direct action claims by Angus or claims
by Angus for sums paid to third parties. The Company intends to
vigorously litigate these matters; however, given that the Texas
lawsuit is in its early stages and discovery is not complete, the
Louisiana lawsuit has not been served, and the uncertainties inherent
in litigation, no assurances can be given that the Company will prevail
in these matters.
Potash Antitrust Litigation
---------------------------
The Company has been named as a defendant, along with other
Canadian and U.S. potash producers, in lawsuits filed in federal court
in Minnesota and state court in California and Illinois. The
plaintiffs are purchasers of potash who allege a price fixing
conspiracy among North American potash producers beginning in 1987 and
continuing until the filing of the lawsuits. Discovery is being
conducted with respect to the limited question of whether the court
should certify a class of potash purchasers in the Minnesota
litigation. Cases filed in California and Illinois are still at an
early stage pending further proceedings concerning coordination of the
cases and other preliminary issues. While the Company believes that
the allegations in the complaints are without merit, until discovery
has been completed it is unable to evaluate possible defenses or to
make a reliable determination as to potential liability exposure, if
any.
The Company has also received a U.S. grand jury subpoena seeking
information related to the sale of potash in the United States from
1986 to the present. The Company is cooperating with the government
and is assembling the information needed to comply with the subpoena.
As in the civil litigation described above, while the Company does not
believe that violations of the antitrust laws have occurred, the
Company is unable to predict the outcome of the government
investigation or make a reliable determination as to potential
exposure, if any.
Environmental Proceedings
-------------------------
Information regarding environmental proceedings is included in Item
1, "Business - Other Activities."
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders,
through the solicitation of proxies or otherwise, during the three
months ended June 30, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The ages and five-year employment history of the Company's
executive officers at June 30, 1994, were as follows:
Wendell F. Bueche
-----------------
Age 63. President and Chief Executive Officer of the Company; joined
the Company in 1993; retired from full time employment from 1989 until
1993; member of the Board of Directors of the Company since 1991.
Robert C. Brauneker
-------------------
Age 56. Executive Vice President and Chief Financial Officer of the
Company; Senior Vice President and Chief Financial Officer from 1987
until 1992.
John E. Galvin
--------------
Age 62. Vice President and Treasurer of the Company; Treasurer from
1987 through 1990.
C. Steven Hoffman
-----------------
Age 45. Senior Vice President, Marketing of the Company; Vice
President from 1987 until 1990.
Allen C. Miller
---------------
Age 48. Vice President, Human Resources of the Company since 1988.
Marschall I. Smith
------------------
Age 49. Senior Vice President, Secretary and General Counsel of the
Company; joined the Company in 1993; Senior Vice President and General
Counsel of American Medical International from 1992 to 1993; Associate
General Counsel of Baxter International from 1980 until 1992.
James D. Speir
--------------
Age 54. Executive Vice President, Operations; Senior Vice President of
the Company from 1987 until 1992.
On August 2, 1994, the Company announced the following senior
management changes which were effective immediately:
Wendell F. Bueche was elected Chairman of the Board and remains
Chief Executive Officer of the Company. Mr. Bueche assumed the
chairmanship from Billie B. Turner, who was named Chairman Emeritus and
remained a director of the Company.
James D. Speir was elected President, Chief Operating Officer and
director of the Company and is responsible for all operating
activities. He previously was Executive Vice President, Operations.
Robert M. Felsenthal was elected an officer of the Company and was
named to the new position of Senior Vice President, Business
Development. He previously was Vice President, Financial Controls and
Planning.
Allen C. Miller was elected Senior Vice President, Human Resources.
He previously was Vice President of this function.
All of the Company's executive officers are elected annually, with
the terms of the officers listed above to expire in October 1994. No
"family relationships," as that term is defined in Item 401(d) of
Regulation S-K, exist among any of the listed officers.
PART II.
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
Common Stock Prices and Dividends
---------------------------------
Quarter First Second Third Fourth
----------------------------------------------------------------
Fiscal 1994
Dividends per common - - - -
share
Common stock prices
High $34 1/4 $47 1/4 $49 1/4 $44 1/4
Low 26 33 38 1/2 30 3/4
Quarter First Second Third Fourth
----------------------------------------------------------------
Fiscal 1993
Dividends per common $ .27 $ .27 $ .27 -
share
Common stock prices
High 45 7/8 45 3/8 45 5/8 36 5/8
Low 37 1/2 37 1/4 31 24 3/8
The Company's common stock is traded on the New York and Chicago
Stock Exchanges under the symbol IFL. As of August 31, 1994, the
Company had 29,471,036 shares of common stock outstanding, excluding
2,770,259 treasury shares. Common stock prices are from the composite
tape for New York Stock Exchange issues as reported in The Wall Street
Journal.
Pursuant to a Shareholders Rights Plan adopted by the Company in
June 1989, a dividend of one preferred stock purchase right (a Right)
for each outstanding share of common stock of the Company was issued on
July 12, 1989, to shareholders of record on that date. Under certain
conditions, each Right may be exercised to purchase one one-hundredth
of a share of Junior Preferred Stock, Series C, par value $1.00 per
share, at a price of $150. This preferred stock is designed to
participate in dividends and vote on essentially equivalent terms with
a whole share of common stock. The Rights become exercisable apart
from the common stock only if a person or group acquires 20 percent or
more of the common stock or makes a tender offer for 20 percent or more
of the outstanding common stock. However, the Rights do not become
exercisable if a person or group becomes the owner of 20 percent or
more of the common stock as a result of the purchase of common stock by
the Company to reduce the number of shares outstanding and increase the
proportionate number of shares owned by such person or group to 20
percent or more, unless such person or group subsequently becomes the
owner of any additional shares of the common stock. In addition, upon
the acquisition by a person or group of 20 percent or more of the
common stock, each Right will entitle the holder to purchase, at the
then-current exercise price of the Right, a number of shares of common
stock having a market value at that time of twice the exercise price.
The Rights may be redeemed at a price of $.01 per Right under certain
circumstances prior to their expiration on June 21, 1999. No event
during 1994 made the Rights exercisable.
As of August 31, 1994, the number of registered holders of common
stock as reported by the Company's registrar was 272. However, an
indeterminable number of shareholders beneficially own shares of the
Company's common stock through investment funds and brokers.
In April 1993, the Company's Board of Directors voted to suspend
cash dividend payments on its common stock. This action was taken in
light of certain financial demands resulting from a then recent
litigation settlement and a continued weakness in crop nutrient prices.
The Company's debt instruments contain provisions which limit the
Company's ability to pay dividends on its common stock. The most
restrictive of these provisions limit the amount of dividends payable
by the Company to 25 percent of the cumulative net income of the
Company earned subsequent to June 30, 1993. As a result, for the year
ended June 30, 1994, the Company was precluded from paying cash
dividends. At such time as the Company is no longer precluded from
paying cash dividends, the payment of such dividends will depend on the
Company's capital requirements, earnings, financial condition and such
other factors as the Board of Directors deems relevant at that time.
See Note 10 - Long-Term Debt of Notes to Consolidated Financial
Statements and Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Capital Resources and
Liquidity for information on dividend restrictions.
Item 6. Selected Financial Data.
June 30,
----------------------------------------------------------------------
(In millions except per
share amounts) 1994(1) 1993(1) 1992(1) 1991(2) 1990(3)
-----------------------------------------------------------------------
Net sales $1,441.5 $ 897.1 $1,058.5 $1,131.2$1,105.7
Earnings (loss) before
income taxes, extra-
ordinary item and cumu-
lative effect of
accounting changes 7.8 (177.3) 141.4 152.8 127.6
Provision (credit) for
income taxes 11.4 (57.3) 50.5 57.0 45.0
-------- -------- ---------------- --------
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting changes (3.6) (120.0) 90.9 95.8 82.6
Extraordinary loss - debt
retirement (25.2)
Cumulative effect of
accounting changes (47.1) (165.5)
-------- -------- ---------------- --------
Net earnings (loss) $ (28.8) $ (167.1)$ (74.6)$ 95.8$ 82.6
======== ======== ================ ========
Earnings (loss) per share:
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting changes $ (.14) $ (5.44)$ 4.12$ 3.85 $ 3.13
Extraordinary loss - debt
retirement (1.00)
Cumulative effect of
accounting changes (2.13) (7.50)
-------- -------- ---------------- --------
Net earnings (loss) $ (1.14) $ (7.57)$ (3.38)$ 3.85$ 3.13
======== ======== ================ ========
Dividends per share - $ .81 $ 1.08$ 1.08 $ 1.08
Book value per share $ 22.23 $ 19.51 $ 27.91$ 32.24 $ 31.13
OTHER DATA
June 30,
----------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1991 1990
---------------------------------------------------------------------
Total assets $2,778.3 $2,055.6 $1,838.4 $1,739.3$1,584.7
Working capital 324.6 195.1 80.2 48.1 33.9
Working capital ratio 2.6:1 1.8:1 1.4:1 1.2:1 1.2:1
Long-term debt - less
current maturities $ 688.1 $ 893.4 $ 630.6 $ 607.7$ 385.0
Total debt 689.2 926.7 642.8 630.6 406.5
Shareholders' equity 655.0 430.4 615.4 698.6 819.7
Total capitalization 1,344.2 1,357.1 1,258.2 1,329.2 1,226.2
Debt/total capitalization 51.3% 68.3% 51.1% 47.4% 33.2%
Cash provided by
operating activities $ 143.1 $ 26.2 $ 122.4 $ 174.4$ 246.6
Capital expenditures 40.7 106.1 177.7 168.5 94.3
Cash dividends paid - 17.8 23.8 28.0 28.5
(1) See "Notes to Consolidated Financial Statements" for a description
of non-recurring items and accounting changes. In 1994, operating
results reflect the consolidation of the joint venture partnership
formed on July 1, 1993 with FRP.
(2) Includes a gain of $17.9 million, $11.2 million after taxes, from
the installment sale of certain potash reserve interests to the
U.S. government.
(3) Includes a gain of $6.1 million, $4.6 million after taxes, from the
installment sale of such interests and a charge of $4.6 million,
$2.4 million after taxes, for an increase in a plant
decommissioning reserve.
Item 7.Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
1994 vs. 1993
-------------
IMC Fertilizer's results of operations for the year ended June 30,
1994 showed significant improvement over the previous year. In fiscal
1994, the Company incurred a net loss of $28.8 million, or $1.14 per
share. This compared to a net loss of $167.1 million. or $7.57 per
share, a year ago.
In 1994, the loss included an extraordinary charge of $25.2 million,
or $1.00 per share, related to the early extinguishment of debt, a
charge of $12.4 million, or $.49 per share, for the write-down of an
oil and gas investment, and a charge of $4.1 million, or $.16 per
share, for an adjustment to the Company's deferred tax liability for
the effect of changes in U.S. corporate tax rates. Partially
offsetting these charges was a gain of $1.9 million, or $.07 per share,
resulting from the sale by IMC-Agrico Company of its Florida cattle
ranch (while still retaining the rights to phosphate rock reserves
located on the property). See Notes to Consolidated Financial
Statements for further discussion of these non-recurring items.
In 1993, the loss included a one-time charge of $47.1 million, or
$2.13 per share, for the cumulative effect on prior years of a change
in accounting for postretirement benefits as a result of the adoption
of Statement of Financial Accounting Standards (SFAS) No. 106, as of
July 1, 1992, a charge of $109.1 million, or $4.94 per share, from the
settlement of litigation resulting from an explosion at a Sterlington,
Louisiana, nitroparaffins plant managed by the Company, and a charge of
$11.4 million, or $.52 per share, related to the settlement of an
insurance claim receivable resulting from a water inflow at the
Company's potash mines in Canada. See Notes to Consolidated Financial
Statements for further discussion of these non-recurring items.
Excluding the non-recurring items described above, the Company had
net earnings in 1994 of $11.0 million, or $.44 per share, compared to
1993 earnings of $.5 million, or $.02 per share.
IMC-Agrico, a joint venture partnership between the Company and FRP,
began operations July 1, 1993 and is consolidated for financial
reporting purposes. Comparisons between the years ended June 30, 1994
and 1993 have been made, where applicable, on a pro forma basis
assuming the Partnership had begun operations on July 1, 1992.
Net sales for 1994 were $1,441.5 million, compared to $897.1 million
in 1993. On a pro forma basis, 1993 sales would have been $1,470.3
million. The sales decline in 1994 as compared to 1993 on a pro forma
basis reflected the Company's decision to reduce production at its
concentrated phosphate production facilities consistent with its policy
to better match production with demand. Product line sales information
may be found on page 2 of this annual report.
Gross margins increased $82.7 million from 1993. On a pro forma
basis, gross margins would have increased $90.1 million, or 77 percent,
primarily due to higher margins for concentrated phosphates.
Concentrated phosphate margins increased primarily due to higher
prices throughout the year. DAP sales realizations were, at year end,
50 percent higher than last year as DAP prices rose from a 20-year low
of $100 per ton. Other related concentrated phosphate products showed
similar price improvements. Several factors contributed to this rise
in prices. Domestic crop nutrient consumption increased 4 percent as
farmers sought to recover from 1993's generally poor harvest due
primarily to flooding in the Midwest. Internationally, China, a major
concentrated phosphate customer, increased crop nutrient imports after
a reduction in exchange rate subsidies resulted in a 50 percent drop in
U.S. DAP imports in 1993. The Former Soviet Union reduced its exports
of crop nutrient products dramatically over 1993 when, in an attempt to
increase foreign exchange and hard currency reserves, it sold
concentrated phosphates at below market price levels. Unit production
costs were lower when compared to last year, in spite of sharply higher
ammonia prices, primarily due to lower raw material costs for sulphur.
Potash margins remain largely unchanged as favorable production
costs ($11 million), primarily from lower water inflow control
spending, were almost totally offset by a 9 percent decrease in prices
($9 million) and lower sales volume ($1 million). Sulphur production
at Main Pass continued to exceed design capacity (5,500 tons per day)
and is now averaging 6,250 tons per day.
Selling, general and administrative costs increased $5.6 million
primarily resulting from higher legal expenses and increased sales
commissions.
Interest charges were $36.2 million higher than last year as a
result of higher average debt balances and lower capitalized interest
as the Company's Main Pass sulphur mine became operational in 1994.
The Company's effective tax rate of 146.2 percent for 1994 reflected
the impact of foreign earnings (at higher foreign tax rates) and the
inclusion of non-recurring items which impacted domestic operating
results for 1994. If such non-recurring items (described above) were
excluded, the effective tax rate would have been 53.9 percent. See
Note 15 of Notes to Consolidated Financial Statements for further
discussion of income taxes.
1993 vs. 1992
-------------
IMC Fertilizer incurred a net loss of $167.1 million, or $7.57 per
share, in 1993. This compares to a 1992 net loss of $74.6 million, or
$3.38 per share. Included in 1993 results was a one-time charge of
$47.1 million, or $2.13 per share, for the cumulative effect on prior
years of a change in accounting for postretirement benefits as a result
of the adoption of SFAS No. 106, as of July 1, 1992. 1992 results
included a one-time charge of $165.5 million, or $7.50 per share, for
the cumulative effect on prior years of a change in accounting for
income taxes as a result of the adoption of SFAS No. 109, as of July 1,
1991.
Net sales in 1993 were $897.1 million, a 15 percent decrease from
1992 when net sales were $1.059 billion. The Company continued to
experience severe price declines and decreased demand for its products
throughout the year, particularly concentrated phosphates where prices
fell to their lowest level in 20 years, due primarily to economic and
political uncertainties in key foreign markets, especially China and
India.
Fiscal 1993 results also included a pre-tax charge of $169.1
million related to the settlement of litigation resulting from the May
1991 explosion at a Sterlington, Louisiana, nitroparaffins plant owned
by Angus but operated by the Company. See Note 4 of Notes to
Consolidated Financial Statements for further discussion of this
matter.
Included in 1993 results was a pre-tax charge of $32.4 million
related to the settlement of a dispute over an insurance claim
receivable resulting from a water inflow at the Company's potash mines
in Canada and a gain of $8.1 million from the resolution of a contract
dispute with a major uranium oxide customer. In 1992, operating
results included a pre-tax gain of $34.2 million from the sale of the
Company's ammonia production facility at Sterlington, Louisiana, and a
charge of $5.3 million from the temporary shutdown and mothballing of
the Company's uranium production facilities. These items are included
in the Consolidated Statement of Operations under "Other operating
income and expense, net."
Gross margins decreased $105 million from a year ago, primarily due
to lower margins for concentrated phosphates ($53 million), phosphate
rock ($19 million), and potash ($4 million). Also affecting margins
was the impact of the Company's decision to sell its ammonia business
and, after the sales contracts which supported the facilities expired,
to temporarily shut down its uranium oxide production facilities. This
resulted in lost margins for ammonia and uranium of $7 million and $21
million, respectively.
Concentrated phosphate margins were lower as a result of a decrease
in prices ($75 million) as prices plummeted during the year. Partially
offsetting this decrease were lower production costs ($17 million) and
increased shipping volume ($5 million). Phosphate rock margins
decreased primarily due to lower shipping volume ($12 million) and
higher production costs ($7 million). Potash margins were lower as a
result of a decrease in prices ($6 million), partially offset by lower
production costs ($2 million).
Administrative costs decreased $8 million principally as a result
of reduced management compensation awards in 1993 ($4 million) and
lower rent expense due to equipment leases which were cancelled and
bought out in 1992 ($3 million).
See Note 15 of Notes to Consolidated Financial Statements for
information on income taxes.
Supply Contracts
----------------
The Company and the Partnership purchase sulphur and ammonia
(beginning in 1992 after the sale of the Company's ammonia production
facility) from third parties and sell phosphate rock and concentrated
phosphates to third parties under contracts extending in some cases for
multiple years. Purchases and sales under these contracts are
generally at prevailing market prices, except for certain phosphate
rock sales which are at prices based on the Partnership's cost of
production.
In March 1994, the Partnership and U.S. Agri-Chemicals (USAC)
entered into an agreement in which the Partnership agreed to mine
certain phosphate rock reserves owned by USAC and process such reserves
for its own use. In return, the Partnership agreed to supply all of
USAC's internal phosphate rock requirements (1.3 to 2.0 million tons
per year) at its Fort Meade, Florida, concentrated phosphate facility
beginning October 1, 1994 at a price based on the Partnership's cost of
production. This agreement will end on September 30, 2004, at which
time it may be renewed for an additional five years.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary sources of liquidity are provided by operating
activities and financing activities. Information on the Company's
consolidated cash flows for the past three years may be found on the
Consolidated Statement of Cash Flows on page 37 of this annual report.
There were no significant foreign exchange contracts, interest rate
contracts or any other derivative type contracts entered into by the
Company in 1994.
Working capital at June 30, 1994 was $325 million compared with $195
million at June 30, 1993. The increase was due primarily to higher
levels of cash and inventory resulting from the formation of a joint
venture partnership described in Note 3 of Notes to Consolidated
Financial statements, partially offset by lower current debt maturities
and the payment of a dividend owed to Mallinckrodt Group Inc. The
working capital ratio at June 30, 1994 was 2.6 to 1, up from 1.8 to 1 a
year ago.
The Company made great strides in reducing its leverage ratio as two
public stock offerings (described below) were successfully completed,
the proceeds of which were used to reduce outstanding debt.
Consolidated indebtedness decreased to $689.2 million from $926.7
million at June 30, 1993. Correspondingly, the Company's ratio of
indebtedness to total capitalization declined to 51.3 percent at June
30, 1994, down significantly from 68.3 percent at June 30, 1993.
In October 1993, the Company completed its purchase of $220 million
principal amount of its 11.25 percent Notes which were originally
scheduled to be due in annual installments beginning in 1995. These
Notes were redeemed with the proceeds from the sale of $160 million of
9.25 percent Senior Notes due 2000 and 3,450,000 shares of common stock
previously held in treasury.
In May 1994, the Company completed a public offering of 4,000,000
shares of common stock previously held in treasury. Net proceeds of
this offering were used to purchase the Company's 8 percent Note and
portions of its 9.25 percent Senior Notes due 2000, 10.125 percent
Senior Notes due 2001, and 10.75 percent Senior Notes due 2003.
The Company has an agreement with a group of banks to provide the
Company with an unsecured revolving credit facility (the Working
Capital Facility) under which the Company may borrow up to $100 million
until June 30, 1996. At June 30, 1994, $29.6 million was drawn down in
the form of letters of credit principally to support industrial revenue
bonds and other debt and credit risk guarantees. There were no other
borrowings under the agreement at June 30, 1994.
In February 1994, the Partnership entered into an agreement with a
group of banks to provide it with a $75 million unsecured revolving
credit facility (the Partnership Working Capital Facility). At June
30, 1994, $4.9 million was drawn down in the form of letters of credit.
There were no other borrowings under this agreement at June 30, 1994.
The Senior Notes and the Working Capital Facility contain provisions
which restrict the Company's ability to make capital expenditures and
dispose of assets, limit the payment of dividends or other
distributions to stockholders, and limit the incurrence of additional
indebtedness. The Working Capital Facility also contains financial
ratios and tests which must be met with respect to interest and fixed
charge coverage, tangible net worth, working capital and debt to total
capitalization. In addition, the Partnership Working Capital Facility
contains financial ratios and tests with respect to fixed charge,
current ratio and minimum net Partners' capital requirements, and
places limitations on indebtedness of the Partnership and restricts the
ability of the Partnership to make cash distributions in excess of
Distributable Cash (as defined). The Company and the Partnership are
currently in compliance with all of the covenants in the indentures and
other agreements governing their indebtedness.
In July 1994, IMC-Agrico entered into an option agreement with MCC
to purchase 9,472 acres of land in Florida. The Property, along with
2,508 acres of land previously purchased from MCC (the Adjacent
Property), contains approximately 87.5 million tons of phosphate rock
reserves. The option period began July 16, 1994 and will end January
15, 1998. During this time, IMC-Agrico may exercise its option to
purchase the Property or it may continue to make annual payments
ranging from $1.0 to $3.0 million to keep the option in effect. If by
the end of the option period IMC-Agrico exercises its option to
purchase the Property, the purchase price will be financed by MCC over
a six-year term at interest rates approximating IMC-Agrico's borrowing
rate. If at any time during the option period IMC-Agrico fails to make
an option payment or fails to exercise its option by January 15, 1998,
MCC has the right to sell the Property to IMC-Agrico for a specified
amount. If the option to purchase the Property is not exercised by
IMC-Agrico and MCC does not exercise its right to sell the Property to
IMC-Agrico, MCC has the right to purchase the Adjacent Property from
IMC-Agrico at an agreed upon price.
The Company estimates that its capital expenditures for 1995 will
total approximately $63 million (including $45 million by the
Partnership). The Company expects to finance these expenditures
(including its portion of the Partnership's capital expenditures) from
operations. See "Other Matters" for a discussion of environmental
capital expenditures.
Since December 1985, the Company has experienced an inflow of water
into one of its two interconnected potash mines in Saskatchewan,
Canada. As a result, the Company has suffered losses and has been
forced to undertake substantial remedial efforts to stop the flooding.
Remedial efforts are ongoing, with $25 million (Canadian) having been
expended in 1994 and $29 million (Canadian) expected to be spent in
1995.
The Company has significantly reduced the water inflow since the
initial discovery and has been able to meet all sales obligations and
requirements from production at the mines. Despite the relative
success of such measures, there can be no assurance that the amounts
required for remedial efforts in future years will not increase or that
inflows will not increase to a level which would cause the Company to
abandon the mine. There can be no assurance that such action would not
have a material adverse effect on the Company. The long-term trend of
the water inflow has caused the Company to consider alternatives to its
current mining operations and studies are under way in this regard.
Any solution to the water inflow situation at the mines could result in
substantial capital expenditures. The Company does not presently have
in place, nor can it reasonably obtain, any insurance to cover damage
to its underground potash operations.
The Company does not consider the impact of inflation to be
significant in the business in which it operates.
In April 1993, the Company's Board of Directors voted to suspend
cash dividend payments on its common stock. This action was taken in
light of certain financial demands resulting from a litigation
settlement and a continued weakness in crop nutrient prices.
The Company's debt instruments contain provisions which limit the
Company's ability to pay dividends on its common stock. The most
restrictive of these provisions limit the amount of dividends payable
by the Company to 25 percent of cumulative net income of the Company
earned subsequent to June 30, 1993. As a result, for the year ended
June 30, 1994, the Company was precluded from paying cash dividends.
JOINT VENTURE PARTNERSHIP
On July 1, 1993, IMCF, a wholly-owned subsidiary of the Company,
and FRP contributed their respective phosphate businesses, including
the mining and sale of phosphate rock and the production, distribution
and sale of concentrated phosphates, uranium oxide and related
products, to a joint venture partnership in return for a 56.5 percent
and 43.5 percent economic interest, respectively, in the Partnership,
over the term of the Partnership. The Partnership is governed by a
Policy Committee which has equal representation from each company and
is being operated by an affiliate of IMC. The Partnership agreement
contained a cash sharing arrangement under which distributable cash, as
defined in the agreement, was shared at a ratio of 41.4 percent and
58.6 percent in 1994 to IMCF and FRP, respectively, and will be
adjusted thereafter until 1998 when the sharing ratio will be fixed at
59.4 percent and 40.6 percent to IMCF and FRP, respectively.
SULPHUR AND OIL & NATURAL GAS VENTURES
The Company has a 25 percent interest in the Main Pass 299 sulphur
mine located in the Gulf of Mexico. At June 30, 1994, the underwater
sulphur deposit contained an estimated 65.3 million long tons of
recoverable sulphur, or 16.3 million long tons net to the Company,
before royalties. During the year, production gradually increased. In
December 1993, Main Pass achieved full design operating rates (5,500
long tons per day or approximately two million long tons per year) and
FRP, the joint venture operator, has since sustained production at or
above that level. The Company's share of sulphur produced is used to
satisfy a portion of the Company's obligations to supply sulphur to the
Partnership for the production of concentrated phosphates.
Oil and gas reserves which are located in the same immediate area
are also being developed. At June 30, 1994, the field contained proved
and probable reserves of 17.2 million barrels of oil and 1.9 billion
cubic feet of natural gas. All gas production is consumed internally
in heating water for extraction of sulphur.
OTHER MATTERS
The Company is subject to various environmental laws of federal and
local governments in the United States and Canada. Although
significant capital expenditures, as well as operating costs, have been
incurred and will continue to be incurred on account of these laws and
regulations, the Company does not believe they have had or will have a
material adverse effect on its business. However, the Company cannot
predict the impact of new or changed laws or regulations.
In connection with the development order received from Polk County,
Florida, authorities in July 1990 for the New Wales gypsum stack
expansion at its New Wales concentrated phosphate facility, the Company
agreed to sample groundwater through monitoring wells on a quarterly
basis. Under the terms of the development order, if the samples
indicated groundwater contamination in excess of specified levels, the
Company would have two years to take the cooling pond associated with
the phosphogypsum stack out of service.
Beginning in July 1992, groundwater samples taken at New Wales
indicated substantially elevated levels of sulphate concentrations, a
non-toxic contaminant, above permitted levels. The Company immediately
began an investigation and believed, based on available information and
the advice of outside experts, that the likely sources of contamination
were one or more of the 12 former recharge wells located within the
cooling pond. By the end of September 1993, all of the recharge wells
had been located and plugged. The aggregate cost of locating and
plugging the 12 recharge wells was approximately $2.3 million.
Pursuant to an amended development order and related action plan, which
was approved by the CFRPC and by Polk County authorities, (i) the
Company had until April 30, 1994 to locate and plug the 12 recharge
wells and has until October 30, 1994 for levels of contamination to
return to permitted levels, and (ii) if the October 30, 1994 deadline
is not met, the Company will have until September 1997 to obtain
permits for and to accomplish the lining or relocation of the cooling
pond. The cost of such lining or relocation, if necessary, is
currently estimated to be between $35 million and $68 million, with the
bulk of any such expenditures expected to take place in 1996 and 1997.
Test results show that the levels of contamination slowly declined
through June 1994 but did not reach permitted levels. If the permitted
levels are not reached by October 30, 1994 but the trend has continued
downward, the Company would likely seek from the CFRPC and the Polk
County authorities an extension of the deadline, although there can be
no assurance that such extension would be granted.
On June 27, 1994, workers at IMC-Agrico Company's New Wales
concentrated phosphate production facility discovered a large hole
while performing a routine inspection of the top of the north
phosphogypsum storage stack. This stack has been used mainly for
process water storage only since the new south expansion area was
completed in mid-1993. The hole, more than 100 feet in diameter and
approximately 185 feet deep, is believed to have been caused by a
sinkhole that opened beneath the stack.
Shortly after the discovery, the Florida DEP was notified. The
primary concern at the time was that the sinkhole may have allowed
process water contained in and on the phosphogypsum stack to flow down
into the underlying aquifers and contaminate drinking water supplies.
Test results from monitoring wells have documented that water in the
Floridan aquifer directly below the sinkhole has been impacted by the
sinkhole and elevated levels of phosphate, sodium sulfate, and total
dissolved solids have been indicated. At the maximum levels predicted
that these parameters will reach, there is no concern for health
effects. Tests are also being conducted to assure there are no
elevated levels of any other parameters which would cause a health
concern. Furthermore, it has been concluded that the pumping action of
the New Wales production wells have caused impacts from the sinkhole to
be contained on the plant site to date.
Holes have been drilled at an angle into the area surrounding the
sinkhole to conduct geological testing and obtain core samples to
determine the size and shape of the subsurface cavity. Once the
subsurface cavity is identified, the Partnership plans to pump a
grouting material, possibly concrete, (subject to DEP approval) into
the sinkhole to prevent a further collapse and contamination of the
Floridan aquifer. The Company has recorded a charge of $1.9 million to
cover the cost of drilling and grouting but no assurance can be given
that such expenditures will be adequate to contain the contamination.
IMCF believes that the cooling pond recharge wells discussed above
and the phosphogypsum sinkhole activity are distinct problems that have
resulted in similar groundwater impacts and that successful containment
of the sinkhole through grout injection will prevent further
contamination. The Company expects a resumption of the downward trend
of contamination levels to occur upon successful completion of the
grouting, although there can be no assurance in this regard.
Pursuant to the agreement for the formation of the Partnership
discussed above, any expenditures relating to the CFRPC development
order would be a liability retained by IMCF, provided that the first $5
million aggregate amount of expenditures incurred subsequent to the
formation of the Partnership that related to this contamination or
certain other environmental liabilities identified in the agreement for
the formation of the Partnership would be a liability assumed by the
Partnership.
Environmental capital expenditures were primarily related to air
emission control, wastewater purification and solid waste disposal.
These expenditures totaled approximately $22 million in 1994. The
Company expects that environmental capital expenditures will average
between $15 million and $25 million per year over the next two years.
Land reclamation expenditures to remediate previously mined-out
areas totaled $10 million in 1994. The Partnership estimates such
expenditures to total approximately $14 million in 1995.
Item 8.Financial Statements and Supplementary Data.
Page
----
Report of Independent Auditors 34
Consolidated Statement of Operations 35
Consolidated Balance Sheet 36
Consolidated Statement of Cash Flows 37
Consolidated Statement of Changes in Stockholders' Equity 38
Notes to Consolidated Financial Statements 39-54
Supplementary Financial Information - Quarterly Results
(Unaudited) 55
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
of IMC Fertilizer Group, Inc.
We have audited the accompanying consolidated balance sheets of IMC
Fertilizer Group, Inc. as of June 30, 1994 and 1993, and the related
consolidated statements of operations, cash flows, and changes in
stockholders' equity for each of the three years in the period ended
June 30, 1994. Our audits also included the financial statement
schedules listed in the index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of IMC Fertilizer Group, Inc. at June 30, 1994 and
1993, and the consolidated results of its operations and its cash flows
for each of the three years in the period ended June 30, 1994, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present
fairly in all material respects the information set forth therein.
As discussed in the Notes to Consolidated Financial Statements, the
Company changed its method of accounting for postretirement benefits
other than pensions in 1993.
Ernst & Young LLP
Chicago, Illinois
July 28, 1994
IMC FERTILIZER GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions except per share amounts)
Years ended June 30,
1994 1993 1992
-----------------------------------------------------------------
Net sales $1,441.5 $ 897.1 $1,058.5
Cost of goods sold 1,233.9 772.2 829.0
-------- -------- --------
Gross margins 207.6 124.9 229.5
Selling, general and administra-
tive expenses 66.0 60.4 68.1
Sterlington litigation settlement,
net 169.1
Other operating (income) and
expense, net (25.7) 25.1 (30.0)
-------- -------- --------
Operating earnings (loss) 167.3 (129.7) 191.4
Equity in (earnings) loss of oil
and gas joint venture 20.0 (3.3) (1.4)
Interest earned and other
non-operating (income) and
expense, net 3.4 6.1 6.9
Interest charges 81.0 44.8 44.5
-------- -------- --------
Earnings (loss) before minority
interest and items noted below 62.9 (177.3) 141.4
Minority interest in earnings of
consolidated joint venture 55.1
-------- -------- --------
Earnings (loss) before items
noted below 7.8 (177.3) 141.4
Provision (credit) for income
taxes 11.4 (57.3) 50.5
-------- -------- --------
Earnings (loss) before extra-
ordinary item and cumulative
effect of accounting changes (3.6) (120.0) 90.9
Extraordinary loss - debt retirement (25.2)
Cumulative effect on prior years
of changes in accounting for
postretirement benefits other
than pensions (net of income
taxes) in 1993 and income
taxes in 1992 (47.1) (165.5)
-------- -------- --------
Net loss $ (28.8) $ (167.1) $ (74.6)
======== ======== ========
Earnings (loss) per share:
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting changes $ (.14) $ (5.44)$ 4.12
Extraordinary loss - debt
retirement (1.00)
Cumulative effect of
accounting changes (2.13) (7.50)
-------- -------- --------
Net loss $ (1.14) $ (7.57)$ (3.38)
======== ======== ========
(See Notes to Consolidated Financial Statements)
IMC FERTILIZER GROUP, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in millions except per share amounts)
At June 30,
Assets 1994 1993
------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 169.0 $ 111.6
Receivables, net 109.1 145.1
Inventories
Products (principally finished) 185.5 120.1
Operating materials and supplies 67.6 44.2
-------- --------
253.1 164.3
Prepaid expenses 2.8 12.4
-------- --------
Total current assets 534.0 433.4
Investment in oil and gas joint venture 19.0 55.0
Property, plant and equipment 3,394.1 2,422.0
Accumulated depreciation and depletion (1,466.7) (1,095.5)
-------- --------
Net property, plant and equipment 1,927.4 1,326.5
Deferred income taxes 223.6 187.5
Other assets 74.3 53.2
-------- --------
Total assets $2,778.3 $2,055.6
======== ========
Liabilities and Stockholders' Equity
-----------------------------------------------------------------
Current liabilities:
Accounts payable $ 110.3 $ 75.9
Accrued liabilities 98.0 77.2
Dividend payable to Mallinckrodt Group Inc. 51.9
Current maturities of long-term debt 1.1 33.3
-------- --------
Total current liabilities 209.4 238.3
Long-term debt, less current maturities 688.1 893.4
Deferred income taxes 372.6 317.5
Other noncurrent liabilities 275.1 176.0
Minority interest in consolidated
joint venture 578.1
Stockholders' equity:
Common stock, $1 par value, authorized
50,000,000 shares; issued 32,232,865 and
32,156,920 shares in 1994 and 1993,
respectively 32.2 32.2
Capital in excess of par value 736.2 768.4
Retained earnings (deficit) (6.3) 22.5
Treasury stock, at cost, 2,770,259 and
10,097,808 shares in 1994 and 1993,
respectively (107.1) (392.7)
-------- --------
Total stockholders' equity 655.0 430.4
-------- --------
Total liabilities and stockholders' equity$2,778.3 $2,055.6
-------- --------
(See Notes to Consolidated Financial Statements)
IMC FERTILIZER GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Years ended June 30,
1994 1993 1992
------------------------------------------------------------------
Cash Flows from Operating Activities
------------------------------------
Net loss $ (28.8) $(167.1) $ (74.6)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 122.4 61.5 83.3
Deferred income taxes 1.6 (78.4) 170.2
Minority interest in earnings
of consolidated joint venture 55.1
Cash distributions in excess of
equity in operating results of oil
and gas joint venture (including a
$20.3 write-down in 1994) 36.1 18.6 9.2
Postretirement employee benefits 8.4 82.8
Sterlington litigation settlement 180.0
Payment of Sterlington litigation
settlement (80.0) (100.0)
Loss on insurance claim settlement 11.4
Gain on sale of ammonia production
facility (34.2)
Other charges and credits, net (42.9) 8.0 (3.9)
Changes in:
Receivables, net 81.2 22.3 17.5
Inventories 46.6 3.5 8.8
Prepaid expenses 9.5 (2.3) (2.7)
Accounts payable (32.3) (18.9) (34.8)
Accrued liabilities (33.8) 4.8 (16.4)
------- ------- -------
Net cash provided by
operating activities 143.1 26.2 122.4
------- ------- -------
Cash Flows from Investing Activities
------------------------------------
Capital expenditures (40.7) (106.1) (177.7)
Sales of property, plant and
equipment (including $81.1 from
sale of ammonia production
facility in 1992) 19.9 .5 81.7
Investment in oil and gas joint
venture (3.3) (21.0)
------- ------- -------
Net cash used by investing
activities (20.8) (108.9) (117.0)
------- ------- -------
Cash Flows from Financing Activities
------------------------------------
Payments of long-term debt (349.0) (66.9) (312.1)
Proceeds from issuance of long-
term debt, net 175.4 246.4 324.3
Issuances of common stock from
treasury 255.5
Joint venture cash distribution
to FRP (146.8)
Cash dividends paid (17.8) (23.8)
------- ------- -------
Net cash (used) provided by
financing activities (64.9) 161.7 (11.6)
------- ------- -------
Net increase (decrease) in cash
and cash equivalents 57.4 79.0 (6.2)
Cash and cash equivalents -
beginning of year 111.6 32.6 38.8
------- ------- -------
Cash and cash equivalents -
end of year $ 169.0 $ 111.6 $ 32.6
======= ======= =======
Supplemental cash flow disclosures:
Interest paid $ 78.0 $ 73.0 $ 67.2
Income taxes (refunded) paid $ (4.8) $ 8.8 $ 53.8
Supplemental schedule of non-cash
investing and financing activities:
Issuances of common stock for
compensation awards $ 3.2 $ 8.9
(See Notes to Consolidated Financial Statements)
IMC FERTILIZER GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In millions except per share amounts)
Capital Retained
Common in Excess Earnings Treasury
Stock of Par Value (Deficit) Stock
--------------------------------------------------------------------
Balance at June 30, 1991 $ 31.7 $ 751.8 $ 305.8 $(390.7)
Net loss (74.6)
Dividends ($1.08 per share) (23.8)
Restricted stock awards .2 10.8 (.8)
Stock options exercised .2 5.4 (.3)
Acquisition of shares (.3)
------- ------- ------- -------
Balance at June 30, 1992 32.1 768.0 207.4 (392.1)
Net loss (167.1)
Dividends ($.81 per share) (17.8)
Restricted stock awards .1 .3 (.6)
Stock options exercised .1
------- ------- ------- -------
Balance at June 30, 1993 32.2 768.4 22.5 (392.7)
Net loss (28.8)
Issuances of common stock (34.1) 289.7
Restricted stock awards 1.7 (4.1)
Stock options exercised .2
------- ------- ------- -------
Balance at June 30, 1994 $ 32.2 $ 736.2 $ (6.3) $(107.1)
======= ======= ======= =======
(See Notes to Consolidated Financial Statements)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except as otherwise indicated)
1. Business of the Company
-----------------------
IMC Fertilizer Group, Inc. (the Company), which operates in a
single industry segment, is engaged in the mining, processing,
production and sale of phosphate rock and potash, two basic crop
nutrient materials, and in the production and sale of concentrated
phosphates. The Company also produces crop nutrient products for
retail distribution and, through interests in two joint ventures,
produces sulphur and oil & natural gas.
2. Accounting Policies
-------------------
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of IMC
Fertilizer Group, Inc. and all subsidiaries which are more than 50
percent owned and controlled. The consolidated financial statements
also include the accounts of IMC-Agrico Company, a joint venture
partnership with FRP formed on July 1, 1993. The Company also
consolidates its proportionate share of the assets and liabilities of
the Company's sulphur venture, while its 25 percent investment in its
oil and natural gas venture is accounted for using the equity method.
All significant intercompany accounts and transactions are eliminated
in consolidation. Certain amounts in the consolidated financial
statements for periods prior to June 30, 1994 have been reclassified to
conform to the current presentation. The Company's fiscal year ends
June 30.
Cash Equivalents
----------------
The Company considers all highly liquid investments with a maturity
date of three months or less when purchased to be cash equivalents
which are reflected at their approximate fair value. The effect of
foreign currency exchange rate fluctuations on the total cash and cash
equivalents balance was not significant.
Inventories
-----------
Inventories are valued at the lower of cost or market (net
realizable value). Cost for substantially all inventories is
determined on a cumulative annual average basis.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are carried at cost. Cost of
significant assets includes capitalized interest incurred during the
construction and development period. Expenditures for replacements and
improvements are capitalized; maintenance and repair expenditures are
charged to operations when incurred.
Depreciation and depletion expenses for mining and production
operations, including mineral interests, are determined using the unit-
of-production method based on estimates of recoverable reserves. Other
asset classes or groups are depreciated or amortized on a straight-line
basis over their estimated useful lives as follows: buildings, 17 to
50 years; machinery and equipment, five to 25 years.
Accrued Reclamation Costs
-------------------------
The Company is subject to various laws and regulations which
require the reclamation of certain mineral and related properties. The
cost of restoring lands disturbed by mining and concentrated phosphate
production activities includes earthmoving, dewatering and revegetation
activities. The Company accrues for reclamation costs in accordance
with approved reclamation plans using estimates of future expenditures
based on an inflation rate of 3 percent and discount rates
approximating 7 percent at June 30, 1994. As reclamation laws and
regulations change, revisions to current estimates are made.
Earnings Per Share
------------------
Earnings per share are based on the weighted average number of
shares and equivalent shares outstanding. Shares used in the
calculations were 25,256,999, 22,082,053 and 22,068,090 shares for the
years ended June 30, 1994, 1993 and 1992, respectively. Fully diluted
earnings per share are not significantly different from primary
earnings per share and, accordingly, are not presented.
3. Joint Venture Partnership
-------------------------
On July 1, 1993, IMCF and FRP entered into a joint venture
partnership in which both companies contributed their respective
phosphate businesses to create IMC-Agrico Company, a Delaware general
partnership, in return for a 56.5 percent and a 43.5 percent economic
interest, respectively, in the Partnership. The estimated fair value
of the assets contributed by the Company was $1.2 billion. The
activities of the Partnership, which is operated by the Company,
include the mining and sale of phosphate rock, and the production,
distribution and sale of concentrated phosphates, uranium oxide and
related products.
For financial reporting purposes, the acquisition of 56.5 percent
of FRP's phosphate business net assets is being accounted for using the
purchase method. This transaction resulted in a deferred gain of $62.7
million which is recognized in the Consolidated Statement of Operations
as the related FRP assets are being used in operations, generally over
20 years. Other operating income and expense, net included $16.0
million of such gain (including $12.7 million related to finished goods
inventory) for the year ended June 30, 1994. FRP's 43.5 percent
interest in the Partnership has been reported as minority interest in
consolidated joint venture on the Company's Consolidated Balance Sheet;
and the earnings therefrom have been reported as minority interest in
earnings of consolidated joint venture on the Company's Consolidated
Statement of Operations.
The Partnership makes cash distributions to each partner based on
formulas and sharing ratios as defined in the Partnership agreement.
For the year ended June 30, 1994, distributable cash generated by the
Partnership totaled $257.9 million, of which $149.1 million was
distributed to FRP, including $19.5 million to be distributed in August
1994.
The following summary of the Company's Consolidated Statement of
Operations for the years ended June 30, 1994 and 1993 is presented for
comparative purposes. For the year ended June 30, 1993, unaudited pro
forma Consolidated Statement of Operations data give effect to
formation of the joint venture partnership as if the formation occurred
on July 1, 1992.
Years ended June 30,
--------------------------
Pro forma
(In millions except per share amounts) 1994 1993
----------------------------------------------------------------------
(Unaudited)
Net sales $1,441.5 $1,470.3
Operating earnings (loss) 167.3 (169.9)
Earnings (loss) before minority interest,
income taxes, extraordinary item and
cumulative effect of accounting change 62.9 (217.7)
Minority interest in earnings (loss) of
consolidated joint venture 55.1 (11.5)
-------- --------
Earnings (loss) before income taxes,
extraordinary item and cumulative effect
of accounting change 7.8 (206.2)
Loss before extraordinary item and
cumulative effect of accounting change (3.6) (137.9)
Extraordinary loss - debt retirement (25.2)
Cumulative effect of accounting change (47.1)
-------- --------
Net loss $ (28.8) $ (185.0)
======== ========
Net loss per share:
Loss before extraordinary item and
cumulative effect of accounting change $ (.14) $ (6.25)
Extraordinary loss - debt retirement (1.00)
Cumulative effect of accounting change (2.13)
-------- --------
Net loss $ (1.14) $ (8.38)
======== ========
4. Sterlington Litigation
----------------------
Operating earnings for the year ended June 30, 1993 included a
charge of $169.1 million, net of insurance recoveries and legal fees,
which reflected settlement of a lawsuit with Angus for damages arising
out of an explosion at a nitroparaffins plant in Sterlington,
Louisiana. The Company is defending other lawsuits for property damage
and personal injury arising out of this explosion and has established a
reserve to cover the estimated cost of resolving the remaining
lawsuits. See Note 19 for further discussion of this litigation.
5. Other Non-Recurring Operating Items
-----------------------------------
In addition to the amortization of the deferred gain discussed in
Note 3, other operating income and expense, net, in 1994, included a
gain of $5.5 million from the Partnership's sale of its Florida cattle
ranch. In 1993, other operating income and expense, net included
charges of $32.4 million from the settlement of a claim relating to
losses arising out of a water inflow at one of the Company's potash
mines in Canada and $3.0 million from the settlement of an
environmental issue. 1993 also included a gain of $8.1 million from
the resolution of a contract dispute with a major uranium oxide
customer. In 1992, other operating income and expense, net included a
gain of $34.2 million from the Company's sale of its Sterlington,
Louisiana, ammonia production facility and a charge of $5.3 million
from the temporary shutdown and mothballing of the Company's uranium
production facilities.
6. Write-Down of Investment in Oil and Gas Joint Venture
-----------------------------------------------------
The Company's investment in its oil and gas joint venture is
subject to a quarterly ceiling limitation test based on a computed
value of the Company's share of future net revenues from proved
reserves using current prices. Due to the low price of crude oil at
December 31, 1993, the Company was required to reduce the carrying
value of its investment in its oil and gas joint venture. As a result,
the Company recorded a charge of $20.3 million to reflect this
reduction.
7. Receivables, Net
----------------
Accounts receivable at June 30 were as follows:
1994 1993
------- -------
Trade accounts $ 94.5 $ 68.9
Non-trade:
Insurance claim 43.3
Foreign, state and local income taxes 14.3
Other 16.8 20.7
------ ------
111.3 147.2
Less:
Allowances 2.2 2.1
------ ------
$109.1 $145.1
====== ======
8. Property, Plant and Equipment
-----------------------------
The Company's investment in property, plant and equipment (at cost)
at June 30 is summarized as follows:
1994 1993
---------- ----------
Land $ 79.8 $ 19.7
Mineral properties and rights 488.4 352.1
Buildings and leasehold improvements 406.0 342.1
Machinery and equipment 2,383.9 1,468.8
Construction in progress 36.0 239.3
-------- --------
3,394.1 2,422.0
Accumulated depreciation 1,325.3 1,004.9
Accumulated depletion 141.4 90.6
-------- --------
1,466.7 1,095.5
-------- --------
Net property, plant and equipment $1,927.4 $1,326.5
======== ========
9. Accrued Liabilities
-------------------
Accrued liabilities at June 30 were as follows:
1994 1993
------ ------
Salaries, wages and bonuses $19.2 $14.6
Taxes other than income taxes 16.2 11.8
Land reclamation 13.5 5.7
Interest 8.0 5.4
Income taxes 4.4 10.0
Other 36.7 29.7
----- -----
$98.0 $77.2
===== =====
10. Long-Term Debt
--------------
Long-term debt at June 30 consisted of the following:
1994 1993
------- -------
10.125% Senior notes, due 2001 $116.5 $135.0
10.75% Senior notes, due 2003 113.6 125.0
9.25% Senior notes, due 2000 111.2
6.25% Convertible subordinated notes,
due 2001 115.0 115.0
9.45% Senior debentures, due 2011 100.0 100.0
7.525% Industrial revenue bonds,
due 2015 75.0 75.0
7.7% Industrial revenue bonds, due 2022 25.6
11.25% Notes, due in annual installments 220.0
8% Note, due in quarterly installments 80.0
Other debt 32.3 76.7
------ ------
689.2 926.7
Less current maturities 1.1 33.3
------ ------
$688.1 $893.4
====== ======
On June 30,1994, the estimated fair value of long-term debt
described above was approximately the same as the carrying amount of
such debt on the Consolidated Balance Sheet. The fair value was
calculated in accordance with the requirements of SFAS No. 107,
``
Disclosures About the Fair Value of Financial Instruments,'' and was
estimated by discounting the future cash flows using rates currently
available to the Company for debt instruments with similar terms and
remaining maturities.
In June 1993, the Company entered into an agreement with a group of
banks to provide the Company with an unsecured revolving credit
facility (the Working Capital Facility) under which the Company may
borrow up to $100 million for general corporate purposes until June 30,
1996. Borrowings under the Working Capital Facility are limited to $25
million during a specified period in any year and bear interest at
rates based on a base rate, a three-month certificate of deposit rate
or a Federal Funds rate. There is a 1/2 percent commitment fee on the
unused portion of the credit line. At June 30, 1994, $29.6 million was
drawn down in the form of standby letters of credit principally to
support the industrial revenue bonds and other debt and credit risk
guarantees. There were no other borrowings under the Working Capital
Facility at June 30, 1994.
In February 1994, the Partnership entered into an agreement with a
group of banks to provide the Partnership with a $75 million credit
facility (the Partnership Working Capital Facility). The Partnership
Working Capital Facility, which has a letter of credit subfacility for
up to $25 million, provides for a three year maturity. Borrowings
under the Partnership Working Capital Facility are unsecured with a
negative pledge on substantially all of the Partnership's assets.
Borrowings under the Partnership Working Capital Facility bear interest
at rates based on a base rate or an adjusted Eurodollar rate. The
Partnership Working Capital Facility has minimum net Partners' capital,
fixed charge and current ratio requirements, and places limitations on
indebtedness of the Partnership and restricts the ability of the
Partnership to make cash distributions in excess of Distributable Cash
(as defined). At June 30, 1994, the Partnership was in compliance with
all of the covenants governing this agreement. There is a 1/4 percent
commitment fee on the unused portion of the credit line. At June 30,
1994, the Partnership had drawn down $4.9 million under the letter of
credit subfacility and had no borrowings under the remainder of the
Partnership Working Capital Facility.
In October 1993, the Company completed its purchase of $220 million
principal amount of its 11.25 percent Notes for $248.1 million which
were originally scheduled to be due in annual installments from 1995 to
2004. The Notes were redeemed with the proceeds from the sale, on the
same date, of $160 million of 9.25 percent Senior Notes due 2000 and
3,450,000 shares of common stock. In connection with this purchase,
the Company recorded an extraordinary loss of $23.8 million, net of
income taxes, for the redemption premium incurred and write-off of
previously deferred finance charges.
In May 1994, the Company completed a public offering of 4,000,000
shares of common stock. Net proceeds of this offering were used to
purchase the Company's 8 percent Note and portions of its 9.25 percent
Senior Notes due 2000, 10.125 percent Senior Notes due 2001, and 10.75
percent Senior Notes due 2003. In connection with these purchases, the
Company recorded an extraordinary loss of $1.4 million, net of income
taxes, for the write-off of previously deferred finance charges
associated with the Senior Notes, partially offset by a discount
realized on the purchase of such Notes.
Assuming the debt purchase and common stock offerings in the
preceding two paragraphs had occurred on July 1, 1993, the pro forma
net loss for the year ended June 30, 1994 would have been $17.5
million, or $.59 per share, reflecting the increased number of shares
outstanding, interest savings on lower debt balances, and the
extraordinary charge.
The Senior Notes and the Working Capital Facility contain
provisions which (i) restrict the Company's ability to make capital
expenditures and dispose of assets, (ii) limit the payment of dividends
or other distributions to stockholders, and (iii) limit the incurrence
of additional indebtedness. The Working Capital Facility also contains
financial ratios and tests which must be met with respect to interest
and fixed charge coverage, tangible net worth, working capital and
total debt to capitalization. The Company is currently in compliance
with all of the covenants in the indentures and other agreements
governing its indebtedness.
The Convertible Subordinated Notes are exchangeable for
approximately 1.8 million shares of the Company's common stock at
$63.50 per share.
Scheduled maturities of long-term debt for the next five years are
as follows:
1995 $1.1
1996 8.8
1997 1.7
1998 1.8
1999 2.0
11. Interest Charges
----------------
The Company capitalizes interest costs relating to the financing of
major projects under development. All other interest is expensed as
incurred.
1994 1993 1992
----- ----- -----
Amount charged to expense $81.0 $44.8 $44.5
Amount capitalized .7 19.4 19.2
----- ----- -----
$81.7 $64.2 $63.7
===== ===== =====
12. Other Noncurrent Liabilities
----------------------------
Other noncurrent liabilities at June 30 were as follows:
1994 1993
------- ------
Postretirement employee
benefits $ 91.2 $ 82.8
Land reclamation 85.2 51.4
Deferred gain 46.7
Other 52.0 41.8
------ ------
$275.1 $176.0
====== ======
13. Pension Plans
-------------
The Company has non-contributory pension plans that cover
substantially all of its employees. Benefits are based on a
combination of years of service and compensation levels, depending on
the plan. Generally, contributions to the U.S. plans are made to meet
minimum funding requirements of the Employee Retirement Income Security
Act of 1974 (ERISA), while contributions to Canadian plans are made in
accordance with Pension Benefits Acts, instituted by the provinces of
Saskatchewan and Ontario.
Employees in the United States whose pension benefits exceed ERISA
limitations are covered by a supplementary non-qualified, unfunded
pension plan which is provided for by charges to earnings sufficient to
meet the projected benefit obligation.
The components of net pension expense, computed actuarially, were
as follows:
U.S. Plans Canadian Plans
-------------------- --------------------
1994 1993 1992 1994 1993 1992
------------ ----- ------ ------ ------
Service cost for
benefits earned
during the year $ 7.9 $ 5.6 $ 5.7 $ 1.0 $ .9 $ .8
Interest cost on
projected benefit
obligation 10.6 11.0 10.9 2.5 2.4 2.2
Return on plan assets (4.8) (12.3) (15.2) (2.5) (2.5) (3.0)
Net amortization and
deferral (4.7) 5.0 7.0 .3 .3 .2
------ ------ ------ ------ ------ ------
Net pension expense $ 9.0 $ 9.3 $ 8.4 $ 1.3 $ 1.1 $ .2
====== ====== ====== ====== ====== ======
Net pension expense for U.S. plans, in 1993, included $1.6 million
related to the settlement of certain pension obligations.
The plans' assets consist mainly of corporate equity and U.S.
government and corporate debt securities, and units of participation in
a collective short-term investment fund.
In a number of these plans, the plan assets exceed the accumulated
benefit obligations (overfunded plans) and in the remainder of the
plans, the accumulated benefit obligations exceed the plan assets
(underfunded plans).
The funding status of the Company's pension plans, including
Canadian plans and amounts recognized in the Consolidated Balance
Sheet, was as follows:
Overfunded Underfunded
Plans Plans
----------- ------------
1994 1993 1994 1993
------ ------ ------ ------
Plans' assets at fair value $119.0 $124.5 $ 26.4 $ 22.4
Actuarial present value of
projected benefit obligations:
Vested benefits 95.0 88.4 33.2 27.6
Non-vested benefits .6 .5 .2 .9
------ ------ ------ ------
Accumulated benefit obligations 95.6 88.9 33.4 28.5
Projected future salary
increases 33.7 31.6 9.2 3.4
------ ------ ------ ------
Total projected benefit
obligations 129.3 120.5 42.6 31.9
------ ------ ------ ------
Plans' assets in excess of
(less than) projected benefit
obligations (10.3) 4.0 (16.2) (9.5)
Items not yet recognized in
earnings:
Unrecognized net (gain) loss .1 (9.9) (2.9) (.1)
Unrecognized transition
(asset) liability (.8) (1.1) (.1) .1
Unrecognized prior service
cost 7.2 4.4 13.5 5.9
Additional minimum liability (8.4) (3.4)
------ ------ ------ ------
Accrued pension liability $ (3.8) $ (2.6)$(14.1) $ (7.0)
====== ====== ====== ======
1994 1993 1992
---- ---- ----
Significant actuarial assumptions were as follows:
Discount rate 8.4% 8.6% 8.6%
Long-term rate of return on assets:
U.S. plans 7.5% 9.0% 9.0%
Canadian plans 9.5% 10.0% 12.6%
---- ---- ----
7.9% 9.2% 9.7%
==== ==== ====
Rate of increase in compensation levels 5.3% 5.3% 6.1%
14. Other Postretirement Plans
--------------------------
The Company provides certain health care benefit plans for retired
employees. The plans may be either contributory or non-contributory
and contain certain other cost sharing features such as deductibles and
coinsurance. The plans are unfunded. Employees are not vested and
such benefits are subject to change. Health care benefits of those
employees who retired prior to February 1, 1988 are paid by
Mallinckrodt Group Inc.; the Company is charged for one-half of such
costs, not exceeding $.8 million in any fiscal year.
The Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" effective July 1, 1992.
This statement required that the cost of providing other postretirement
benefits (OPEBS) be accrued during the active service period of the
employees. The Company recognized a $75.9 million liability for OPEBS
as of July 1, 1992 and recorded an after-tax charge of $47.1 million
for the cumulative effect of this accounting change. This change
increased the 1993 loss before accounting changes by $6.9 million, $4.3
million after taxes, or $.19 per share.
The components of OPEBS expense for years ending June 30 were as
follows:
1994 1993
---- ----
Service cost $1.5 $2.3
Interest cost 5.2 6.3
Net amortization and deferral (1.6)
---- ----
$5.1 $8.6
==== ====
Prior to 1993, the Company recognized expense in the year health
claims were paid. The total cost to the Company of all postretirement
health care costs was $1.7 million for the year ended June 30, 1992.
On July 1, 1993, the Company amended its postretirement plans in an
effort to control cash outlays while protecting the interests of those
employees who have retired or will retire in the near future. This
plan amendment had the effect of reducing the accumulated
postretirement benefit liability on July 1, 1993 by $15.9 million. As
a result, OPEBS expense was reduced by $1.1 million to reflect the
amortization of this plan change over 13.8 years.
The significant assumptions used in determining postretirement
benefit costs were as follows:
1994 1993
---- ----
Discount rate 8.4% 8.5%
Health care trend rate:
Under age 65 10.4% 15.0%
Over age 65 7.0% (1) 8.2% (1)
(1) Decreasing gradually to 5.5% in 2003 and thereafter.
If the health care trend rate assumptions were increased by 1.0
percent, the accumulated postretirement benefit obligation would
increase by 5.9 percent and 10.0 percent as of June 30, 1994 and 1993,
respectively. This would have the effect of an 8.2 percent and 11.0
percent increase on OPEBS expense in 1994 and 1993, respectively.
The components of the Company's postretirement benefit liability at
June 30 were as follows:
1994 1993
------ ------
Retirees $29.3 $35.6
Actives:
Fully eligible 11.6 15.3
Not-fully eligible 23.3 31.9
----- -----
Total 64.2 82.8
Items not yet recognized in earnings:
Unrecognized prior service cost 14.3
Unrecognized net gain 12.7
----- -----
Accrued postretirement benefits
liability $91.2 $82.8
===== =====
15. Income Taxes
------------
The Company adopted SFAS No. 109, "Accounting for Income Taxes,"
effective July 1, 1991. The cumulative effect of this accounting
change decreased 1992 earnings by $165.5 million.
Deferred income taxes reflect the net tax effects of temporary
differences between the amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities
and assets at June 30 were as follows:
1994 1993
-------- --------
Deferred tax liabilities:
Tax over book depreciation $315.2 $280.5
Taxes on undistributed foreign
earnings 29.8 31.0
Other liabilities 27.6 6.0
------ ------
Total deferred tax liabilities 372.6 317.5
------ ------
Deferred tax assets:
Net operating loss carryforwards 105.6 29.5
Postretirement benefit reserves 33.4 31.4
Sterlington litigation settlement 29.9 51.6
Reclamation and decommissioning
reserves 25.8 25.1
Alternative minimum tax credit
carryforward 9.3 25.3
Other assets 19.6 24.6
------ ------
Total deferred tax assets 223.6 187.5
------ ------
Net deferred tax liabilities $149.0 $130.0
====== ======
At June 30, 1994, the Company had net operating loss carryforwards
for U.S. federal tax purposes of $264.5 million. If not utilized
against taxable income, $83.2 million of the federal tax loss
carryforwards will expire in 2008 and $181.3 million will expire in
2009. The tax benefit of these loss carryforwards has been provided in
the 1994 and 1993 Consolidated Balance Sheets as deferred tax assets.
The provision (credit) for income taxes consisted of the following:
1994 1993 1992
-------- -------- --------
Current
Federal $(24.0) $(15.2) $ 24.4
State and local 1.2 1.4 6.5
Foreign 13.8 10.0 12.4
------ ------ ------
(9.0) (3.8) 43.3
Deferred
Federal 16.9 (34.3) 3.3
State and local (3.8) (13.1) 1.4
Foreign 7.3 (6.1) 2.5
------ ------ ------
20.4 (53.5) 7.2
------ ------ ------
$ 11.4 $(57.3) $ 50.5
====== ====== ======
The components of earnings (loss) before income taxes, accounting
changes and extraordinary loss, and the effects of significant
adjustments to tax computed at the federal statutory rate were as
follows:
1994 1993 1992
-------- -------- --------
Domestic $ (23.0) $(175.5) $ 112.1
Foreign 30.8 (1.8) 29.3
------- ------- -------
Earnings (loss) before income
taxes, accounting changes and
extraordinary loss $ 7.8 $(177.3) $ 141.4
======= ======= =======
Computed tax at the federal statutory
rate of 35% (34% in 1993 and 1992) $ 2.7 $ (60.3) $ 48.1
Foreign income and withholding taxes 10.3 4.5 5.0
Percentage depletion (7.4) (9.4) (10.7)
Deferred tax adjustment for the effect
of changes in U.S. corporate tax rates 4.1
Federal taxes on undistributed
foreign earnings 2.9 5.6 3.9
State income taxes, net of federal
income tax benefit (1.7) (7.7) 6.3
Sterlington litigation settlement 3.3
Other items (none in excess of 5%
of computed tax) .5 6.7 (2.1)
------- ------- -------
Provision (credit) for income
taxes $ 11.4 $ (57.3) $ 50.5
======= ======= =======
Effective tax rate 146.2% 32.3% 35.7%
======= ======= =======
The effective tax rate for 1994 reflected the write-down of an
investment in an oil and gas venture (see Note 6) and a deferred tax
adjustment resulting from an increase in U.S. corporate income tax
rates. If these items were excluded, the Company's effective tax rate
would have been 53.9 percent.
U.S. income and foreign withholding taxes are provided on the
earnings of foreign subsidiaries that are expected to be remitted to
the extent that taxes on the distribution of such earnings would not be
offset by foreign tax credits. The Company has no present intention of
remitting undistributed earnings of foreign subsidiaries aggregating
$105.0 million at June 30, 1994, and accordingly, no deferred tax
liability has been established relative to these earnings.
16. Capital Stock
-------------
Changes in the number of shares of common stock issued and in
treasury were as follows:
1994 1993 1992
---------- ---------- ----------
Common stock issued
Balance, beginning of
year 32,156,920 32,130,080 31,734,930
Stock options exercised 5,565 8,675 205,700
Award of restricted
shares 70,380 18,165 189,450
---------- ---------- ----------
Balance, end of year 32,232,865 32,156,920 32,130,080
---------- ---------- ----------
Treasury common stock
Balance, beginning of
year 10,097,808 10,082,779 10,063,465
Common stock issued (7,450,000)
Purchases 122,451 15,029 19,314
---------- ---------- ----------
Balance, end of year 2,770,259 10,097,808 10,082,779
---------- ---------- ----------
Common stock outstanding,
end of year 29,462,606 22,059,112 22,047,301
========== ========== ==========
On October 5, 1993 and May 5, 1994, the Company completed public
offerings of 3,450,000 shares and 4,000,000 shares of common stock at
$34.50 and $37.00 per share, respectively. Net proceeds of these
offerings, net of issuance costs and expenses, were used to reduce
long-term indebtedness.
Pursuant to a Shareholders Rights Plan adopted by the Company in
June 1989, a dividend of one preferred stock purchase right (a Right)
for each outstanding share of common stock of the Company was issued on
July 12, 1989 to shareholders of record on that date. Under certain
conditions, each Right may be exercised to purchase one one-hundredth
of a share of Junior Preferred Stock, Series C, par value $1.00 per
share, at a price of $150. This preferred stock is designed to
participate in dividends and vote on essentially equivalent terms with
a whole share of common stock. The Rights become exercisable apart
from the common stock only if a person or group acquires 20 percent or
more of the common stock or makes a tender offer for 20 percent or more
of the outstanding common stock. However, the Rights do not become
exercisable if a person or group becomes the owner of 20 percent or
more of the common stock as a result of the purchase of common stock by
the Company to reduce the number of shares outstanding and increase the
proportionate number of shares owned by such person or group to 20
percent or more, unless such person or group subsequently becomes the
owner of any additional shares of the common stock. In addition, upon
the acquisition by a person or group of 20 percent or more of the
common stock, each Right will entitle the holder to purchase, at the
then-current exercise price of the Right, a number of shares of common
stock having a market value at that time of twice the exercise price.
The Rights may be redeemed at a price of $.01 per Right under certain
circumstances prior to their expiration on June 21, 1999. No event
during 1994 made the Rights exercisable.
17. Stock Plans
-----------
A non-qualified stock option plan adopted in 1988, as amended,
provides for the granting of options to purchase up to two million
shares of common stock at prices not less than 100 percent of market
price at the date of the grant. Options are exercisable over 10 years
beginning one year after the date of the grant and are limited to 50
percent during the second year. A total of 1,630,974 shares was
granted under this plan through June 30, 1994.
Information on options follows:
1994 1993 1992
--------- --------- ---------
Outstanding, beginning
of year 442,430 476,285 373,980
Granted 428,650 343,100
Exercised (5,565) (8,675) (205,700)
Cancelled (7,360) (25,180) (35,095)
-------- -------- --------
Outstanding, end of
year 858,155 442,430 476,285
======== ======== ========
Price range $22 to $51.125 $22 to $51.125$22 to $51.125
At June 30
Exercisable 431,805 299,430 165,185
Available for
future grants 369,026 738,245 716,201
The average purchase price of outstanding stock options at June 30,
1994 was $39.76 per share, based on an aggregate purchase price of
$34.1 million. Outstanding stock options will expire over a period
ending no later than December 16, 2003.
The Company also adopted a long-term incentive plan in 1991 under
which officers and key managers were awarded shares of restricted
common stock of the Company and contingent stock units. Under the
plan, these shares and units vested in whole or in part during and at
the end of a three-year performance period which ended June 30, 1994.
Out of a total of 207,615 shares of restricted common stock which was
awarded under this plan, 122,451 shares did not vest and were
cancelled, due to the non-attainment of objectives during the
performance period.
In fiscal 1994, the Company adopted a new long-term performance
incentive plan beginning January 1, 1994. A total of 70,380 shares of
restricted common stock was awarded under this plan. In accordance
with these awards, shares of restricted common stock and contingent
stock units will vest in whole or in part during and at the end of the
three-year performance period ending June 30, 1997.
18. Commitments
-----------
The Company leases various types of properties, including
buildings, railcars, data processing equipment, and machinery and
equipment through operating leases. Included in selling, general and
administrative expenses in 1992 is a charge of $3.2 million relating to
the cancellation and buy out of equipment leases.
Summarized below is a schedule of future minimum lease payments
under non-cancellable operating leases as of June 30, 1994:
1995 $16.7
1996 15.6
1997 11.9
1998 10.1
1999 9.2
Subsequent years 20.1
-----
Future minimum lease payments $83.6
=====
Rental expense charged to earnings for 1994, 1993 and 1992 amounted
to $21.9 million, $18.3 million and $25.0 million, respectively.
The Company participated in a consortium that won bids in 1988 on
11 federal off-shore sulphur leases in the Gulf of Mexico. Sulphur was
subsequently discovered in one of these leases and is being extracted
under a joint venture agreement with FRP and Felmont Oil Corporation.
In connection with these leases, three of which still remain
unexplored, the Company has committed to contribute its share of costs
incurred in exploration and development of the remaining unexplored
leases. The Company has issued collateral mortgage notes totaling
$145.8 million which will become effective only if the Company fails to
meet its obligations under the Joint Operating Agreement covering each
remaining lease.
The Company's Canadian subsidiary is committed under a service
agreement with PCS to produce annually from mineral reserves specified
quantities of potash for a fixed fee plus a pro rata share of
production and capital costs. The agreement extends through June 30,
1996 and is renewable at the option of PCS for six additional five-year
periods. Potash produced for PCS may, at PCS's option, amount to an
annual maximum of approximately one-fourth of the Canadian subsidiary's
production capacity. During 1994, production of potash for PCS
amounted to 500,000 tons, or 17 percent of tons produced.
19. Contingencies
-------------
Since December 1985, the Company has experienced an inflow of water
into one of its two interconnected potash mines in Saskatchewan,
Canada. The long-term trend of the water inflow has caused the Company
to consider alternatives to its current mining operations and studies
are under way in this regard. Any solution to the water inflow
situation at the mines could result in substantial capital
expenditures.
In 1993, Angus filed, but has not yet served, a lawsuit in
Louisiana against the Company and two of its excess liability insurers
seeking damages in addition to those paid in the Sterlington litigation
discussed in Note 4. The Company has been informed by counsel to Angus
that the suit seeks damages allegedly related to (i) direct action
claims against two of the Company's insurers, with one of which there
is an agreement which that insurer might assert requires the Company to
indemnify such insurer, (ii) third party claims against Angus, and
(iii) sums already paid by Angus to third parties. The Company
believes that there are substantial defenses to the direct action
claims against its insurers and the claims for sums already paid by
Angus to third parties, and that, in any event, the Company's exposure,
if any, for such direct action claims is approximately $30 million.
Later in 1993 the Company filed a lawsuit in Texas against Angus
seeking a court determination that the settlement and final judgment
(discussed in Note 4) entered in April of 1993 between and among the
Company, Angus and its property insurer disposed of the Angus claims
described in items (i) and (iii) above. Angus filed a counterclaim
seeking reimbursement for sums already paid by Angus to third parties.
This lawsuit is still in the discovery phase, with trial of a portion
of the case scheduled for October of 1994 and the remaining portion, if
necessary, scheduled for February of 1995. The trial judge has ruled
that the terms of the April 1, 1993 settlement agreement with Angus do
not bar Angus from bringing direct action claims in Louisiana against
the Company's insurers, but did not rule as to whether such claims have
any merit under Louisiana law. The judge also ruled that the terms of
the same settlement agreement do not bar Angus from making claims
against the Company for sums already paid to third parties by Angus.
Angus' responses to discovery requests indicate that the Company's
exposure for sums already paid to third parties is approximately $10
million. Neither of the rulings addressed the question of whether the
final judgment acts as a bar to direct action claims by Angus or claims
by Angus for sums paid to third parties. The Company intends to
vigorously litigate these matters; however, given that the Texas
lawsuit is in its early stages and discovery is not complete, the
Louisiana lawsuit has not been served, and the uncertainties inherent
in litigation, no assurances can be given that the Company will prevail
in these matters.
The Company has been named as a defendant, along with other
Canadian and U.S. potash producers, in lawsuits filed in federal court
in Minnesota and state court in California. The plaintiffs are
purchasers of potash who allege a price fixing conspiracy among North
American potash producers beginning in 1987 and continuing until the
filing of the lawsuits. Discovery is being conducted with respect to
the limited question of whether the court should certify a class or
classes of potash purchasers in the Minnesota litigation. The parties
in the cases filed in California are awaiting judicial determination as
to whether the cases should proceed in federal court in Minnesota or
state court in California. While the Company believes that the
allegations in the complaints are without merit, until discovery has
been completed it is unable to evaluate possible defenses or to make a
reliable determination as to potential liability exposure, if any.
The Company has also received a U.S. grand jury subpoena seeking
information related to the sale of potash in the United States from
1986 to the present. The Company is cooperating with the government
and is assembling the information needed to comply with the subpoena.
As in the civil antitrust matters described above, while the Company
does not believe that violations of the antitrust laws have occurred,
the Company is unable to predict the outcome of the government
investigation or make a reliable determination as to potential
exposure, if any.
The Company also has certain other contingent liabilities with
respect to litigation, claims and guarantees of debt obligations to
third parties arising in the ordinary course of business. The Company
does not believe that any of these contingent liabilities will have a
material adverse impact on the Company's financial position.
20. Operations by Geographic Area
-----------------------------
Net operating results of consolidated foreign subsidiaries, before
consolidation eliminations, amounted to earnings of $10.0 million in
1994, a loss of $6.0 million in 1993 and earnings of $19.5 million in
1992. Net assets of such subsidiaries were $173.0 million and $220.1
million at June 30, 1994 and 1993, respectively.
Financial information relating to the Company's operations in
various geographic areas was as follows:
Net Sales
------------------------------------
1994 1993 1992
---------- ---------- ---------
United States $1,405.2 $ 856.8 $1,019.0
Canada 137.5 138.0 145.0
Other 1.3 4.2 5.8
Transfers between geographic
areas (principally from
Canada) (102.5) (101.9) (111.3)
-------- -------- --------
Consolidated $1,441.5 $ 897.1 $1,058.5
======== ======== ========
Earnings (Loss)
Before Income Taxes,
Accounting Changes
and Extraordinary Loss Identifiable Assets
----------------------------
---------------------------
1994 1993 1992 1994 1993 1992
---------------- -------- -------- ----------------
United States $ 136.5$ (130.5)$ 156.8 $2,565.1 $1,763.9$1,545.8
Canada 30.8 (1.9) 33.3 223.0 281.4 290.3
Other (.4) 2.0 4.8 8.1 12.5 13.8
Elim
inations .4 .7 (3.5) (17.9) (2.2) (11.5)
---------------- --------
Operating earnings167.3 (129.7) 191.4
Interest earned
and other non-
operating (income)
and expense, net 23.4 2.8 5.5
Interest charges 81.0 44.8 44.5
Minority interest 55.1
---------------- -------- -------- ----------------
Consolidated $ 7.8$ (177.3)$ 141.4 $2,778.3 $2,055.6$1,838.4
================ ======== ======== ================
Transfers of product between geographic areas were at prices
approximating those charged to unaffiliated customers.
Sales from the United States, as shown in the preceding table,
included sales to unaffiliated customers in other geographic areas as
follows:
1994 1993 1992
------ ------ ------
Far East $377.1 $190.7 $208.1
Latin America 113.0 25.9 37.5
Europe 6.6 22.6 22.0
------ ------ ------
$496.7 $239.2 $267.6
====== ====== ======
QUARTERLY RESULTS (UNAUDITED)
(In millions except per share amounts)
Quarter
---------------------------------
First Second Third Fourth Year
-----------------------------------------------------------------------
Fiscal 1994
Net sales $ 266.4 $ 329.0 $ 410.5 $ 435.6$1,441.5
Gross margins 7.4 33.8 77.7 88.7 207.6
Earnings (loss) before
income taxes and extra-
ordinary loss (24.3) (26.3) 21.7 36.7 7.8
Earnings (loss) before
extraordinary loss (22.5) (3.6) 5.4 17.1 (3.6)
Extraordinary loss -
debt retirement (23.8) (1.4) (25.2)
-------- -------- -------- -------- -------
Net earnings (loss) (46.3) (3.6) 5.4 15.7 (28.8)
Earnings (loss) per
share:
Earnings (loss)
before extra-
ordinary loss (1.02) (.14) .21 .61 (.14)
Extraordinary loss -
debt retirement (1.08) (.05) (1.00)
-------- -------- -------- -------- -------
Net earnings (loss) $ (2.10) $ (.14)$ .21$ .56 $ (1.14)
-----------------------------------------------------------------------
Fiscal 1993
Net sales $ 220.9 $ 197.5 $ 222.8 $ 255.9$ 897.1
Gross margins 50.5 31.1 19.7 23.6 124.9
Earnings (loss) before
income taxes and
accounting change 32.8 5.2 (175.5) (39.8) (177.3)
Earnings (loss) before
cumulative effect of
accounting change 18.6 2.9 (114.8) (26.7) (120.0)
Cumulative effect of
accounting change (47.1) (47.1)
-------- -------- -------- -------- -------
Net earnings (loss) (28.5) 2.9 (114.8) (26.7) (167.1)
Earnings (loss) per share:
Earnings (loss) before
cumulative effect of
accounting change .84 .13 (5.20) (1.21) (5.44)
Cumulative effect of
accounting change (2.13) (2.13)
-------- -------- -------- -------- -------
Net earnings (loss) $ (1.29) $ .13 $ (5.20)$ (1.21)$ (7.57)
----------------------------------------------------------------------
Fiscal 1994
Second quarter results included an after-tax charge of $12.4
million, or $.49 per share, from the write-down of the Company's
investment in an oil and gas joint venture due to the low price of
crude oil.
Fourth quarter results included an after-tax gain of $1.9 million,
or $.07 per share, from the Partnership's sale of its Florida
cattle ranch.
----------------------------------------------------------------------
Fiscal 1993
Quarterly results for the first three quarters of fiscal 1993 have
been restated to reflect the adoption of SFAS No. 106 effective
July 1, 1992. This resulted in after-tax charges to operations
(before the cumulative effect of the accounting change) of $1.1
million, or $.05 per share, in the first quarter, $1.0 million, or
$.05 per share, in the second quarter and $1.1 million, or $.05 per
share, in the third quarter.
First quarter results included an after-tax gain of $5.0 million,
or $.23 per share, from the resolution of a contract dispute with a
major uranium oxide customer.
Third quarter results included an after-tax charge of $109.1
million, or $4.94 per share, from the settlement of litigation
resulting from the May 1991 explosion at a nitroparaffins plant
managed by the Company in Sterlington, Louisiana.
Fourth quarter results included after-tax charges of $11.4 million,
or $.52 per share, from the settlement of an insurance claim
arising out of a water inflow at one of the Company's potash mines
in Canada and $1.8 million, or $.08 per share, from the settlement
of an environmental issue.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial
Disclosure.
Not applicable.
PART III.
Item 10.Directors and Executive Officers of the Registrant.
For information concerning directors of the Registrant, see pages 1
through 4, incorporated herein by reference, of IMC's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held on
October 20, 1994. Information concerning executive officers of the
Registrant is included in Part I of this report.
Item 11.Executive Compensation.
For information concerning management remuneration, see pages 7
through 14, incorporated herein by reference, of IMC's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held on October
20, 1994.
Item 12.Security Ownership of Certain Beneficial Owners and
Management.
For information concerning security ownership of certain beneficial
owners and management, see pages 5 and 6, incorporated herein by
reference, of IMC's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on October 20, 1994.
Item 13.Certain Relationships and Related Transactions.
For information concerning certain relationships and related
transactions, see page 6, incorporated herein by reference, of IMC's
definitive Proxy Statement for the Annual Meeting of Stockholders to be
held on October 20, 1994.
PART IV.
Item 14.Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
(1)See index on page 67 for a listing of financial statements and
schedules filed with this report.
Exhibits
(2)
Exhibit Incorporated Herein Filed
No. Description By Reference to Herewith
------------------------------------------------------------------
3.1 Restated Certificate of Exhibit 3(a) to
Incorporation, as amended 1990 10-K
3.2 Bylaws, amended as of July Company's Report on
2, 1991, and as currently in Form 8-K dated July
effect 2, 1991
3.3 Rights Agreement dated June Exhibit 10.35 to
21, 1989, with The First 1989 10-K
National Bank of Chicago
(including the Shareholder
Rights Plan)
4.1 Indenture dated as of Exhibit 4.4 to the
December 1, 1991 between the Company's Form SE
Registrant and The Bank of filed on December
New York, as Trustee, 3, 1991
relating to $100,000,000
aggregate principal amount
of 9.45% Senior Debentures
due 2011
4.2 Form of Senior Debentures Exhibit 4.5 to the
due 2011 Company's Form SE
filed on December
3, 1991
4.3 Indenture dated as of Exhibit 4.6 to the
December 1, 1991 between the Company's Form SE
Registrant and The Bank of filed on December
New York, as Trustee, 3, 1991
relating to $115,000,000
aggregate principal amount
of 6 1/4% Convertible
Subordinated Notes due 2001
4.4 Form of Convertible Exhibit 4.7 to the
Subordinated Notes due 2001 Company's Form SE
filed on December
3, 1991
Exhibit Incorporated Herein Filed
No. Description By Reference to Herewith
------------------------------------------------------------------
4.5 Supplemental Indenture, Exhibit 4.5 to the
dated as of June 29, 1993, Company's
between the Registrant and Registration
The Bank of New York, as Statement on Form
Trustee, relating to the S-4, (No. 33-49795)
Senior Debentures
4.6 Supplemental Indenture, Exhibit 4.6 to the
dated as of June 29, 1993, Company's
between the Registrant and Registration
The Bank of New York, as Statement on Form
Trustee, relating to the S-4, (No. 33-49795)
Convertible Subordinated
Notes
4.7 Indenture, dated as of June Exhibit 4.7 to the
15, 1993, between IMC Company's
Fertilizer Group, Inc. and Registration
NationsBank of Georgia, Statement on Form
National Association, as S-4, (No. 33-49795)
Trustee
4.8 First Supplemental Exhibit 4.1 to the
Indenture, dated as of Company's Report on
October 13, 1993, between Form 8-K dated
IMC Fertilizer Group, Inc. October 12, 1993
and NationsBank of Georgia,
National Association, as
Trustee
10.1 Intercorporate Agreement Exhibit 10.1 to the
dated as of July 1, 1987, by Company's
and between Mallinckrodt and Registration
IMC Fertilizer, Inc. with Statement on Form
Exhibits, including the S-1, (Amendment No.
Restated Certificate of 2)
Incorporation of IMC (No. 33-17091)
Fertilizer Group, Inc., as
amended; Bylaws of IMC
Fertilizer Group, Inc.;
Preliminary Agreement for K-
2 Advances; Registration
Rights Agreement; Services
Agreement; Management
Services Agreement;
Agreement regarding
Pollution Control and
Industrial Revenue Bonds;
License Agreement; office
lease and sublease;
management agreements;
supply agreements; supply
agreements; and
transportation service
agreements
10.2 Supply agreements (Included Exhibit 10.1 to the
in Exhibit 10.1) Company's
Registration
Statement on Form
S-1, (No. 33-17091)
Exhibit Incorporated Herein Filed
No. Description By Reference to Herewith
------------------------------------------------------------------
10.3 Agreement dated June 27, Exhibit 10.6 to the
1985, supplementing, Company's
amending and continuing Registration
Potash Resource Payment Statement on Form
Agreement dated October 15, S-1, (Amendment No.
1979, between Mallinckrodt 2)
and the Province of (No. 33-22914)
Saskatchewan
10.4 Mining and Processing Exhibit 10.7 to the
Agreement dated January 31, Company's
1978, between Potash Registration
Corporation of Saskatchewan Statement on Form
Inc. and International S-1, (No. 33-17091)
Minerals & Chemical
Corporation (Canada) Limited
10.5 Management Incentive Exhibit 10.7 to the
Compensation Program, as Company's
amended through July 2, Registration
1991, and as currently in Statement on Form
effect S-1, (No. 33-17091)
10.6 1991 Long-Term Performance Exhibit 10.7 to the
Incentive Plan, as amended Company's
through July 2, 1991, and as Registration
currently in effect Statement on Form
S-1
(No. 33-17091)
10.7 1988 Stock Option & Award Exhibit 10.7 to the
Plan, as amended through Company's
July 2, 1991, and as Registration
currently in effect Statement on Form
S-1
(No. 33-17091)
10.8 Retirement Plan for Salaried Exhibit 10.11 to
Employees, restated, 1990 10-K
including Amendment No. 1
effective December 31, 1992
10.9 Supplemental Benefit Plan Exhibit 10.12 to
the Company's
Registration
Statement on Form
S-1
(No. 33-17091)
10.10 Supplemental Executive Exhibit 10.7 to the
Retirement Plan, as amended Company's
through June 30, 1992, and Registration
as currently in effect Statement on Form
S-1
(No. 33-17091)
10.11 Investment Plan for Salaried Exhibit 10.7 to the
Employees, as amended Company's
through January 1, 1992, and Registration
as currently in effect Statement on Form
S-1
(No. 33-17091)
Exhibit Incorporated Herein Filed
No. Description By Reference to Herewith
------------------------------------------------------------------
10.12 Suspension Agreement Exhibit 10.17 to
concerning Potassium the Company's
Chloride from Canada among Registration
the U.S. Department of Statement on Form
Commerce and the signatory S-1
purchasers/exporters of (No. 33-17091)
potassium chloride from
Canada dated January 7, 1988
10.13 Settlement Agreement dated Exhibit 10.18 to
as of November 3, 1987, by the Company's
and among the Board of Registration
Trustees of the Internal Statement on Form
Improvement Trust Fund of S-1
the State of Florida, the (No. 33-17091)
Department of Natural
Resources of the State of
Florida and Mallinckrodt
10.14 Management Compensation and Exhibit 10.17 to
Benefit Assurance Program, the Company's
as amended through June 30, Registration
1992, and as currently in Statement on Form
effect S-1
(No. 33-17091)
10.15 Corporate Staff Employee Exhibit 10.32 to
Severance & Benefit 1989 10-K
Assurance Policy
10.16 Form of Trust Agreement with Exhibit 10.33 to
Wachovia Bank & Trust Co., 1992 10-K
N.A., as amended through
August 15, 1991
10.17 Form of Contingent Exhibit 10.34 to
Employment Agreement dated 1989 10-K
October 18, 1988, with
Officers of Corporation
10.18 Directors Retirement Service Exhibit 10.36 to
Plan 1989 10-K
10.19 Form of ``Gross Up'' Exhibit 10.37 to
Agreement dated August 24, 1990 10-K
1990, with Officers of
Corporation
10.20 Sulphur Joint Operating Exhibit 10.40 to
Agreement dated as of May 1, 1990 10-K
1988, among Freeport-McMoRan
Resource Partners, IMC
Fertilizer, Inc. and Felmont
Oil Corporation
10.21 Oil/Gas Operating Agreement Exhibit 10.41 to
dated as of June 5, 1990, 1990 10-K
among Freeport-McMoRan
Resource Partners, IMC
Fertilizer, Inc. and Felmont
Oil Corporation
Exhibit Incorporated Herein Filed
No. Description By Reference to Herewith
------------------------------------------------------------------
10.22 Agreement in Principle dated Exhibit 10.43 to
September 7, 1990, with 1990 10-K
Mallinckrodt
10.23 Agreement dated as of Exhibit 10.44 to
September 12, 1990, with 1990 10-K
Mallinckrodt
10.24 Memorandum of Agreement as Exhibit 10.51 to
of December 21, 1990, 1991 10-K
amending Mining and
Processing Agreement of
January 31, 1978, between
Potash Corporation of
Saskatchewan Inc. and
International Minerals &
Chemical Corporation
(Canada) Limited
10.25 Division of Proceeds Exhibit 10.52 to
Agreement dated December 21, 1991 10-K
1990, between Potash
Corporation of Saskatchewan
Inc. and International
Minerals & Chemical
Corporation (Canada) Limited
10.26 Directors' Retirement Exhibit 10.54 to
Services Plan Effective July 1992 10-K
1, 1989
10.27 Contribution Agreement dated Exhibit 10.55 to
April 5, 1993 between the Company's March
Freeport-McMoRan Resource 31, 1993 Form 10-
Partners, Limited Q/A (Amendment No.
Partnership and IMC 1) filed on May 19,
Fertilizer, Inc. 1993
10.28 Form of Partnership Exhibit 10.56 to
Agreement between IMC-Agrico the Company's March
GP Company, Agrico L.P. and 31, 1993 Form 10-
IMC-Agrico MP Inc., Q/A (Amendment No.
including Schedule of 1) filed on May 19,
definitions 1993
10.29 Form of Parent Agreement Exhibit 10.57 to
between IMC Fertilizer, the Company's March
Inc., Freeport-McMoRan 31, 1993 Form 10-
Resource Partners, Limited Q/A (Amendment No.
Partnership, Freeport- 1) filed on May 19,
McMoRan Inc. and IMC-Agrico 1993
Company
10.30 Sterlington Settlement Exhibit 10.58 to
Agreement between IMC the Company's March
Fertilizer Group, Inc., 31, 1993 Form 10-
Angus Chemical Company and Q/A (Amendment No.
Industrial Risk Insurers 1) filed on May 19,
dated April 1, 1993 1993
Exhibit Incorporated Herein Filed
No. Description By Reference to Herewith
------------------------------------------------------------------
10.31 First Amendment to Exhibit 10.59 to
Contribution Agreement, the Company's
dated as of July 1, 1993, Report on Form 8-K
between Freeport-McMoRan dated July 16, 1993
Resource Partners, Limited
Partnership and IMC
Fertilizer, Inc.
10.32 Amended and Restated Exhibit 10.60 to
Partnership Agreement, dated the Company's
as of July 1, 1993 between Report on Form 8-K
IMC-Agrico GP Company, dated July 16, 1993
Agrico, L.P. and IMC Agrico
MP Inc., including Schedule
of Definitions
10.33 Parent Agreement, dated as Exhibit 10.61 to
of July 1, 1993 between IMC the Company's
Fertilizer, Inc., Report on Form 8-K
Freeport-McMoRan Resource dated July 16, 1993
Partners, Limited
Partnership,
Freeport-McMoRan Inc. and
-Agrico Company
IMC
10.34 Credit Agreement, dated as Exhibit 10.63 to
of June 29, 1993, between the Company's
IMC Fertilizer, Inc., IMC Registration
Fertilizer Group, Inc. and Statement on Form
the Banks Listed Therein S-4, (No. 33-49795)
10.35 Loan Agreement, dated as of Exhibit 10.64 to
December 1, 1991, between the Company's
IMC Fertilizer, Inc. and the Registration
Polk County Industrial Statement on Form
Development Authority S-4, (No. 33-49795)
(Florida)
10.36 Amended and Restated Exhibit 10.65 to
Unconditional Guaranty, the Company's
dated as of December 1, 1991 Registration
of IMC Fertilizer Group, Statement on Form
Inc. with respect to Polk S-4, (No. 33-49795)
County Industrial
Development Authority
(Florida) Industrial
Development Revenue Bonds
(IMC Fertilizer, Inc.
Project) 1991 Tax-Exempt
Series A and 1992 Tax-Exempt
Series A
10.37 Supplemental Loan Agreement, Exhibit 10.66 to
dated as of January 1, 1992, the Company's
between IMC Fertilizer, Inc. Registration
and the Polk County Statement on Form
Industrial Development S-4, (No. 33-49795)
Authority (Florida)
Exhibit Incorporated Herein Filed
No. Description By Reference to Herewith
------------------------------------------------------------------
10.38 Second Supplemental Loan Exhibit 10.67 to
Agreement, dated as of June the Company's
30, 1993, between IMC Registration
Fertilizer, Inc. and the Statement on Form
Polk County Industrial S-4, (No. 33-49795)
Development Authority
(Florida)
10.39 Amendment to Guaranty, dated Exhibit 10.68 to
June 30, 1993, with respect the Company's
to Polk County Industrial Registration
Development Authority Statement on Form
(Florida) Industrial S-4, (No. 33-49795)
Development Revenue Bonds
(IMC Fertilizer, Inc.
Project) 1991 Tax-Exempt
Series A and 1992 Tax-Exempt
Series A
10.40 Indenture of Trust, dated as Exhibit 10.69 to
of December 1, 1991, between the Company's
Polk County Industrial Registration
Development Authority (the Statement on Form
Authority
`` ) and The Bank
'' S-4, (No. 33-49795)
of New York, as Trustee (the
IRB Trustee
`` ) relating to
''
the Industrial Development
Revenue Bonds (IMC
Fertilizer, Inc. Project)
1991 Tax-Exempt Series A
``
(the Series 1991 Bonds'')
10.41 Supplemental Indenture of Exhibit 10.70 to
Trust, dated as of January the Company's
1, 1992, between the Registration
Authority and the IRB Statement on Form
Trustee, relating to the S-4, (No. 33-49795)
Industrial Development
Revenue Bonds (IMC
Fertilizer, Inc. Project)
1992 Tax-Exempt Series A
``
(the Series 1992 Bonds'')
10.42 Second Supplemental Exhibit 10.71 to
Indenture of Trust, dated as the Company's
of June 30, 1993, between Registration
the Authority and the IRB Statement on Form
Trustee, relating to the S-4, (No. 33-49795)
Series 1991 Bonds and the
Series 1992 Bonds
10.43 Amendment Number 2 to Exhibit 10.44 to
Investment Plan for Salaried the Company's
Employees effective March 1, Registration
19888 and restated effective Statement on Form
January 1, 1992 S-4, (No. 33-49795)
10.44 First Amendment, dated July Exhibit 10.45 to
2, 1991, to form of the Company's
Contingent Employment Registration
Agreement with Officers of Statement on Form
Corporation S-4, (No. 33-49795)
Exhibit Incorporated Herein Filed
No. Description By Reference to Herewith
------------------------------------------------------------------
10.45 Amendment, dated July 2, Exhibit 10.46 to
1991, to Form of Gross Up
`` '' the Company's
Agreement with Officers of Registration
Corporation Statement on Form
S-4, (No. 33-49795)
10.46 Employment Agreement, dated Exhibit 10.47 to
April 15, 1993, between The Company's
Wendell F. Bueche and IMC Registration
Fertilizer Group, Inc. Statement on Form
S-4, (No. 33-49795)
10.47 Consulting Agreement, dated Exhibit 10.48 to
July 19, 1993, between the Company's
Wendell F. Bueche and IMC Registration
Fertilizer Group, Inc. Statement on Form
S-4, (No. 33-49795)
10.48 Consulting Agreement, dated Exhibit 10.49 to
March 1, 1993, between the Company's
Billie B. Turner and IMC Registration
Fertilizer Group, Inc. Statement on Form
S-4, (No. 33-49795)
10.49 Amendment No. 1 and Waiver Exhibit 10.51 to
No. 1, dated as of June 30, 1993 10-K
1993, to Credit Agreement
dated as of June 29, 1993
among IMC Fertilizer, Inc.,
IMC Fertilizer Group, Inc.
and the Banks Listed Therein
10.50 Amendment No. 2, Waiver No. Exhibit 10.52 to
2 and Consent No. 1, dated 1993 10-K
as of September 3, 1993, to
Credit Agreement dated as of
June 29, 1993 among IMC
Fertilizer Inc., IMC
Fertilizer Group, Inc. and
the Banks Listed Therein
10.51 Credit Agreement, dated as Exhibit 99.1 to the
of February 9, 1994, between Company's
IMC-Agrico Company, Registration
NationsBank of Georgia, and Statement on Form
the Banks Listed Therein S-3, (Amendment No.
1) (No. 33-52377)
10.52 Amendment No. 3, dated as of
December 30, 1993, to Credit
Agreement dated as of June
29, 1993 among IMC
Fertilizer, Inc., IMC X(1)
Fertilizer Group, Inc. and
the Banks Listed Therein
Exhibit Incorporated Herein Filed
No. Description By Reference to Herewith
------------------------------------------------------------------
10.53 Amendment No. 4, dated as of
March 10, 1994, to Credit
Agreement dated as of June
29, 1993 among IMC
Fertilizer, Inc., IMC X(1)
Fertilizer Group, Inc. and
the Banks Listed Therein
10.54 Amendment No. 5, dated as of
June 30, 1994, to Credit
Agreement dated as of June
29, 1993 among IMC
Fertilizer, Inc., IMC X(1)
Fertilizer Group, Inc. and
the Banks Listed Therein
11.1 Fully diluted earnings
(loss) per share for the
years ended June 30, 1994, X(1)
1993 and 1992
23.2 Consent of Ernst & Young LLP X(1)
27.1 Registrant's Definitive Registrant's Proxy
Proxy Statement for Annual Statement filed
Meeting on October 20, 1994 September 12, 1994
(1) Exhibit filed with electronic submission
(b) REPORTS ON FORM 8-K
During the fourth quarter and through the date of this filing, the
following reports were filed:
1 A report under Item 5 Dated July 28, 1994
2 A report under Item 5 Dated August 2, 1994
INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA,
AND FINANCIAL STATEMENT SCHEDULES
Page References
---------------
Consolidated balance sheet at June 30, 1994 and 1993 36
For the years ended June 30, 1994, 1993, and 1992:
Consolidated statement of operations 35
Consolidated statement of cash flows 37
Consolidated statement of changes in
stockholders' equity 38
Notes to consolidated financial statements 39-54
Supplementary financial information - quarterly
results (unaudited) 55
Consolidated schedules for years ended June 30, 1994, 1993, and 1992:
II - Amounts receivable from related parties
and underwriters, promoters, and employees
other than related parties 69
V- Property, plant, and equipment 70-71
VI - Accumulated depreciation, depletion, and
amortization of property, plant, and equipment 72-73
X - Supplementary income statement information 74
---------------------
All other schedules are omitted as the required information is not
present in sufficient amounts or the required information is included
in the consolidated financial statements or notes thereto.
Financial statements and schedules and summarized financial
information of 50 percent or less owned persons are omitted as none of
such persons are individually or in the aggregate significant under the
tests specified in Regulation S-X under Article 3.09 of general
instructions to the financial statements.
SIGNATURES
Pursuant to the requirements of 13 or 15(d) 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 FERTILIZER GROUP, INC.
--------------------------
(Registrant)
Robert C. Brauneker
-------------------------------------
Robert C. Brauneker
Executive Vice President
and Chief Financial Officer
Date: September 26, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
Signature Title Date
---------------------------------------------------------------
Wendell F. Bueche
-----------------
Wendell F. Bueche President September 26, 1994
(Chief Executive Officer)
Billie B. Turner
----------------
Billie B. Turner Chairman September 26, 1994
Robert C. Brauneker
-------------------
Robert C. Brauneker Executive Vice President September 26, 1994
(Chief Financial Officer)
(Principal Accounting Officer)
Raymond F. Bentele
------------------
Raymond F. Bentele Director September 26, 1994
Frank W. Considine
------------------
Frank W. Considine Director September 26, 1994
Dr. James M. Davidson
---------------------
Dr. James M. Davidson Director September 26, 1994
Rowland C. Frazee
-----------------
Rowland C. Frazee Director September 26, 1994
Richard A. Lenon
----------------
Richard A. Lenon Director September 26, 1994
Thomas H. Roberts, Jr.
----------------------
Thomas H. Roberts, Jr. Director September 26, 1994
Schedule II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS,
AND EMPLOYEES OTHER THAN RELATED PARTIES
Years Ended June 30, 1992, 1993, and 1994
($ in thousands)
Balance at End
Deductions of Period
---------- ---------------
Balance
at
BeginningAdditions Amounts Not
Name of Debtor of Period Collected Current Current
-------------------- ------- ------- --------------- -------
1992:
U.S. employee reloca-
tion loans (A) $124 $113 $220 $ 17
Number of loans 2 3 4 1
Canadian employee
housing loans (B) $282 $ 60 $ 28 $194
Number of loans 15 15 13
----------------------------------------------------------------
1993:
U.S. employee reloca-
tion loans (A) $ 17 $ 82 $ 82 $ 17
Number of loans 1 4 4 1
Canadian employee
housing loans (B) $222 $ 41 $ 23 $158
Number of loans 15 2 13 13
----------------------------------------------------------------
1994
U.S. employee reloca-
tion loans (A) $ 17 $357 $350 $ 24
Number of loans 1 8 7 2
Canadian employee
housing loans (B) $181 $ 43 $ 19 $138
Number of loans 13 2 11 11
----------------------------------------------------------------
(A)Generally non-interest bearing and repayable upon the sale of the
employee's former residence.
(B)Interest at rates ranging from six to 10 percent per annum and
repayable over 16 years.
Schedule V
(Page 1 of 2)
PROPERTY, PLANT, AND EQUIPMENT
Years Ended June 30, 1992, 1993, and 1994
($ in millions)
Balance
at Other Balance
Beginning Additions Changes-- at End
of Period at CostRetirements Add (Deduct) of Period
----------------- --------- ------------------- ------------ ---------
1992:
Land $ 19.1 $ .5 $ (2.1)(B)$ 17.5
Mineral
properties
and rights 318.6 17.5 336.1
Buildings and
leasehold
improvements 355.5 9.3 $ 11.5 (20.0)(B) 333.3
Machinery and
equipment 1,506.5 108.6 40.0 (138.6)(B)1,436.5
Construction in
progress 158.6 41.8 (1.4)(B) 202.2
3.2 (C)
--------------------------------------------------------------------
$2,358.3 $ 177.7 $ 51.5 $ (158.9) $2,325.6
--------------------------------------------------------------------
1993:
Land 17.5 $ 1.9 $ .3 $ 19.7
Mineral
properties and
rights 336.1 16.0 352.1
Buildings and
leasehold
improvements 333.3 8.8 $ .7 .7 (A) 342.1
Machinery and
equipment 1,436.5 55.3 22.3 (.7)(A)1,468.8
Construction in
progress 202.2 24.1 13.0 (C) 239.3
---------------------------------------------------------------------
$2,325.6 $ 106.1 $ 23.0 $ 13.3 $2,422.0
---------------------------------------------------------------------
Schedule V
(Page 2 of 2)
PROPERTY, PLANT, AND EQUIPMENT
Years Ended June 30, 1992, 1993, and 1994
($ in millions)
Balance
at Other Balance
Beginning Additions Changes-- at End
of Period at Cost Retirements Add (Deduct)of Period
---------------- --------- -------- ----------- ----------- ---------
1994:
Land $ 19.7 $ .7 $ 60.8 (D)$ 79.8
Mineral
properties and
rights 352.1 $ 1.1 9.9 129.2 (D) 488.4
15.9 (C)
Buildings and
leasehold
improvements 342.1 12.7 2.3 53.5 (D) 406.0
Machinery and
equipment 1,468.8 26.7 11.3 202.3 (A) 2,383.9
697.4 (D)
Construction in
progress 239.3 .2 (202.3)(A) 36.0
(17.6)(C)
16.4 (D)
--------------------------------------------------------------------
$2,422.0 $ 40.7 $ 24.2 $ 955.6 $3,394.1
--------------------------------------------------------------------
Notes:
(A) Transfers between accounts.
(B) Sale of an ammonia production facility.
(C) Reclassification (to) from other assets.
(D) FRP fixed asset contribution
Schedule VI
(Page 1 of 2)
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF PROPERTY, PLANT, AND EQUIPMENT
Years Ended June 30, 1992, 1993, and 1994
($ in millions)
Balance Additions
at Charged to Other Balance
BeginningCost and Changes-- at End
of Period Expenses Retirements Add (Deduct)of Period
-------------------------- -------- ----------- ---------------------
1992:
Mineral
properties and
rights $ 72.5 $ 8.7 $ .4 (C)$ 81.6
Buildings and
leasehold
improvements 196.0 15.3 $ 11.0 (16.0)(B) 184.6
.3 (D)
Machinery and
equipment 866.5 59.3 39.7 (99.3)(B) 787.0
.2 (D)
Allowance for
plant closings (E) 2.4 2.4
---------------------------------------------------------------------
$1,137.4 $ 83.3 $ 50.7 $ (114.4) $1,055.6
---------------------------------------------------------------------
1993:
Mineral
properties and
rights $ 81.6 $ 8.5 $ .5 (C)$ 90.6
Buildings and
leasehold
improvements 184.6 12.3 $ .7 .3 (D) 196.7
.2 (A)
Machinery and
equipment 787.0 40.7 21.9 (.2)(A) 805.8
.2 (D)
Allowance for
plant closings (E) 2.4 2.4
---------------------------------------------------------------------
$1,055.6 $ 61.5 $ 22.6 $ 1.0 $1,095.5
---------------------------------------------------------------------
Schedule VI
(Page 2 of 2)
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF PROPERTY, PLANT, AND EQUIPMENT
Years Ended June 30, 1992, 1993, and 1994
($ in millions)
Balance Additions
at Charged to Other Balance
Beginning Cost and Changes-- at End
of Period Expenses Retirements Add (Deduct)of Period
---------------- --------- -------- ----------- ---------------------
1994:
Mineral properties
and rights $ 90.6 $ 11.9 $ 38.2(E)$ 141.3
.6(C)
Buildings and
leasehold
improvements 196.7 14.8 $ 1.0 22.0(E) 232.5
Machinery and
equipment 805.8 81.6 10.8 213.9(E) 1,090.5
Allowance for
plant closings (F) 2.4 2.4
---------------------------------------------------------------------
$1,095.5 $ 108.3 $ 11.8 $ 274.7 $1,466.7
---------------------------------------------------------------------
Notes:
(A) Transfers between accounts.
(B) Sale of an ammonia production facility.
(C) Difference between average and actual depletion rates on certain
Florida phosphate ore reserves which has been offset against
deferred charges in the consolidated balance sheet.
(D) Amortization of pre-operating plant expenses.
(E) FRP fixed asset contribution
(F) This account is used to provide for losses on disposals of
property, plant and equipment. Charges to the account consist of
losses, net of gains, on such disposals.
Schedule X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years ended June 30
($ in millions)
Charged to Costs and Expenses
of Operations
--------------------------------------
1994 1993 1992
----------- ----------- -----------
Maintenance and repairs $170.0 $107.0 $123.4
====== ====== ======
Taxes, other than payroll and
income taxes:
Severance taxes $ 35.4 $ 30.1 $ 31.8
Other taxes and fees 28.3 22.3 21.7
------ ------ ------
$ 63.7 $ 52.4 $ 53.5
====== ====== ======
Royalties $ 5.9 $ 9.3 $ 9.9
====== ====== ======
Amounts for amortization of intangible assets and advertising are not
presented as such amounts are less than one percent of total sales.
EX-10.52
2
AMENDMENT NO. 3
Exhibit 10.52
AMENDMENT NO. 3, dated as of December 30, 1993, to the Credit
Agreement dated as of June 29, 1993 (as amended as of June 30, 1993,
September 1, 1993 and September 3, 1993, and as the same may further be
amended, modified, supplemented or restated from time to time in
accordance with its terms, the ``Credit Agreement''
), among IMC
Fertilizer, Inc., a Delaware corporation (the ``Borrower''
), IMC
Fertilizer Group, Inc., a Delaware corporation, the lenders party
thereto (the ``
Lenders''), Citibank, N.A. (``Citibank''), as
administrative agent, and Citibank, NationsBank of North Carolina, N.A.
and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., as co -agents
for the Lenders.
WHEREAS, the Borrower desires to establish, as a wholly owned
subsidiary, IMC Potash Corporation, a Delaware corporation, to purchase
and hold up to $5,000,000 of Senior Subordinated Preferred Stock (the
``
Preferred Stock'') of Ashta Chemicals, Inc., all as further described
generally in the memorandum attached hereto as Exhibit A (the
``
Preferred Stock Purchase'').
WHEREAS, the Borrower wishes to amend Sections 1.01, 5.02(e)
and 5.02(f) of the Credit Agreement in order for the Borrower to
consummate the Preferred Stock Purchase and hold the Preferred Stock as
an Investment.
NOW THEREFORE, the parties hereto agree as follows:
1. Unless otherwise specifically defined herein, all
capitalized terms used herein shall have the respective meanings
ascribed to such terms in the Credit Agreement.
2. Section 1.01 of the Credit Agreement is hereby amended
by adding the following definition in proper alphabetical order:
``
''Potash'' means IMC Potash Corporation, a Delaware
corporation and wholly owned Subsidiary of the Borrower.''
3. Section 5.02(e) of the Credit Agreement is hereby
amended by deleting the ``and'' at the end of Section 5.02(e)(iv), by
adding ``and'' at the end of Section 5.02(e)(v), and by adding the
following Section 5.02(e)(vi):
``
(vi) sales of inventory for fair value by the Borrower to
Ashta Chemicals, Inc., in consideration of which the Borrower
will receive cash and Potash will purchase senior
subordinated preferred stock of Ashta Chemicals, Inc., in an
aggregate amount of such senior subordinated preferred stock
not to exceed $5,000,000;''
4. Section 5.02(f) of the Credit Agreement is hereby
amended by deleting the ``and''
at the end of Section 5.0-2(f)(ii), by
replacing the''
.'' on the sixth line of Section 5.02(f)(iii) with ``;'',
and by adding the following Sections 5.02(f)(iv) and 5.02(f)(v):
``
(iv) Investments by the Borrower in Potash in an aggregate
amount not to exceed $5,000,000; and
(v) Investments by Potash of an aggregate amount not to
exceed $5,000,000 of senior subordinated preferred stock for
Ashta Chemicals, Inc.''
5. This amendment shall be applicable solely to the matters
specified in paragraphs 2, 3 and 4 hereof.
6. Upon the effectiveness of this Amendment, on and after
the date hereof each reference in the Credit Agreement to ``this
Agreement''
, ``hereunder'', ``hereof''
or words of like import referring
to the Credit Agreement, and each reference in the other Loan Documents
to ``the Credit Agreement'', ``thereunder'', ``thereof'' or words of
like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as amended hereby. Except as
expressly provided herein, all terms and conditions of the Credit
Agreement and the other Loan Documents shall remain in full force and
effect, and are hereby in all respects ratified and confirmed.
7. The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of any Lender, the Administrative
Agent or the Co-Agent under any of the Loan Documents, nor constitute a
waiver of any provision of any of the Loan Documents.
8. This Amendment shall be deemed effective only upon due
execution and delivery of counterparts of this Amendment to the
Administrative Agent by the Borrower, the Guarantor and the Required
Lenders.
9. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute but one and
the same agreement. Delivery of an executed counterpart of a signature
page to the Amendment by telecopier shall be effective as delivery of a
manually executed counterpart of this Amendment.
10. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
2
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective officers thereunder
duly authorized as of the date first above written.
IMC FERTILIZER, INC. as
Borrower
By ALLEN C. MILLER
----------------------------------
Name: Allen C. Miller
Title: Vice President
IMC FERTILIZER GROUP, INC., as Guarantor
By ALLEN C. MILLER
-----------------------------------
Name: Allen C. Miller
Title: Vice President
CITIBANK, N.A., as Administrative Agent,
Co-Agent and a Lender
By JAMES N. SIMPSON
-----------------------------------
Name: James N. Simpson
Title: Citibank, N.A. Attorney-In-Fact
COOPERATIVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., as Co-Agent and a
Lender
By JOANNA M. SOLOWSKI
-----------------------------------
Name: Joanna M. Solowski
Title: Vice President
By AUGUST BRAAKSMA
-----------------------------------
Name: August Braaksma
Title: Vice President
NATIONSBANK OF NORTH CAROLINA, N.A.
as Co-Agent and a Lender
By CHRISTOPHER B. TORIE
-----------------------------------
Name: Christopher B. Torie
Title: Senior Vice President
ARAB BANKING CORPORATION, as a Lender
By GRANT E. McDONALD
-----------------------------------
Name: Grant E. McDonald
Title: Vice President
3
EXHIBIT A
Draft Dated
December 14, 1993
PROPOSED PURCHASE OF
$5 MILLION OF SENIOR SUBORDINATED PREFERRED STOCK OF
ASHTA CHEMICALS, INC.
Ashta Chemicals, Inc. (``Ashta'') is a major potash customer
of IMC Fertilizer, Inc. (``IMC''
). Ashta was the subject of a
leveraged buyout in 1989 and has been in and out of financial
difficulty since that time. Ashta is currently in default under a
$65,000,000 secured credit facility from General Electric Capital
Corporation (``
GECC'') and has been negotiating w ith GECC in an effort
to restructure its debt.
To help keep Ashta's potash business, IMC would like to grant
Ashta a $7.50 per ton price concession for potash purchased from IMC,
such price concession to be made in the form of an investment in Ashta
senior subordinated preferred stock.
The preferred stock investment would be made by a special
purpose subsidiary of IMC and would be an integral part of a proposed
debt restructuring for Ashta the basic structure of which is as
follows:
$22 million of secured credit from GECC provided through a
lending partnership;
$15 million of senior preferred stock issued to a lending
partnership and held for the benefit of GECC;
$5 million of senior subordinated preferred stock issued to a
special purpose subsidiary of IMC;
$5 million of junior subordinated preferred stock issued to a
lending partnership and held for the benefit of GECC.
The purchase of Ashta's senior subordinated preferred stock
by the special purpose subsidiary of IMC would be made as follows:
For each ton of potash purchased by Ashta from IMC during the
period commencing November 1, 1992 and ending October 31,
1997 IMC's subsidiary (using funds contributed by IMC) would
purchase $7.50 of Ashta senior subordinated preferred stock
up to a maximum of $5,000,000 of senior subordinated
preferred stock. IMC's subsidiary would make an initial
purchase of up to $1,500,000 of senior subordinated preferred
stock in December 1993 - approximately $750,000 of that
initial purchase would recognize potash purchases made by
Ashta through December 1993 and would be paid in the form of
cash. The remaining amount of that initial purchase would be
in anticipation of potash purchases Ashta would be required
to make from January 1994 through February 1995 (and for
which Ashta would make a cash downpayment) and would be paid
in the form of cash.
The senior subordinated preferred stock would have a par
value of $1,000 per share and would yield a cumulative quarterly
dividend at the rate of 6% per annum. The senior subordinated
preferred stock would be redeemed in 8 equal quarterly installments
commencing June 30, 2000 and ending March 31, 2003 subject to Ashta
having funds legally available for such redemption.
* * * *
The proposed purchase of Ashta senior subordinated preferred
stock is, essentially, a $7.50 per ton price concession in a form that
makes it possible for IMC to recapture the price concession (with
interest) at a later date. Additionally, the proposed purchase of
Ashta senior subordinated preferred stock will aid Ashta in
restructuring its debt and thereby help ensure Ashta's vitality as a
major consumer of potash into the future.
EX-10.53
3
AMENDMENT NO. 4
EXHIBIT 10.53
EXECUTION COPY
AMENDMENT NO. 4
March 10, 1994
To the Lenders party to the
Credit Agreement referred to
below
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of June 29, 1993,
as amended by Amendment No. 1 and Waiver No. 1 dated as of June 30,
1993, Amendment No. 2, Waiver No. 2 and Consent No. 1 dated as of
September 1, 1993, Amendment No. 2, Waiver No. 2 and Consent No. 1
dated as of September 3, 1993, and Amendment No. 3 dated as of December
30, 1993 (the ``
Credit Agreement'') among IMC Fertilizer, Inc., as
Borrower, IMC Fertilizer Group, Inc., as Guarantor, each of you,
Citibank, N.A. (``
Citibank''), as Administrative Agent, and
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., as Co-Agents.
Unless otherwise defined herein, the terms defined in the Credit
Agreement are used herein as therein defined.
The Guarantor plans to make an offering of its common stock
in an approximate amount of $150,000,000, the proceeds of which will be
used to pay outstanding debt. We have requested that you agree to
amend the Credit Agreement to permit such offering and debt payment,
and to allow the issuance and sale of capital stock and prepayment of
debt in the future. You have indicated your willingness to so agree.
Accordingly, it is hereby agreed by you and us as follows:
The Credit Agreement is, effective as of the date first above
written, hereby amended as follows:
(a) Section 5.02(g) is amended by adding the words ``
of the
Borrower''
in the ninth and tenth lines thereof after the words
``
capital stock''.
(b) Section 5.02(g) is further amended by deleting
subsections (iv), (v) and (vi) in full.
(c) Section 5.02(k) is deleted in full.
2
On and after the effective date of this Amendment, each
reference in the Credit Agreement to ``
this Agreement'', ``hereunder'',
``
hereof'' or words of like import referring to the Credit Agreement,
and each reference in the Notes to the Credit Agreement, thereunder,
thereof or words of like import referring to the Credit Agreement,
shall mean and be a reference to the Credit Agreement as amended by
this Amendment. The Credit Agreement, as amended by this Amendment, is
and shall continue to be in full force and effect and is hereby in all
respects ratified and confirmed.
If you agree to the terms and provisions hereof, please
evidence such agreement by executing and telecopying a signature page
counterpart of this Amendment to (212) 826-2371, Attention of Goran
Sare, and returning at least six counterparts of this Amendment to
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022,
Attention of Kimberly Marroni. This Amendment shall become effective
as of the date first above written when and if counterparts of this
Amendment shall have been executed by the Required Lenders. This
Amendment is subject to the provisions of Section 9.01 of the Credit
Agreement.
This Amendment may be executed in any number of counterparts
and by any combination of the parties hereto in separate counterparts,
each of which counterparts shall be an original and all of which taken
together shall constitute one and the same Amendment. Delivery of an
executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
Very truly yours,
IMC FERTILIZER, INC., as
Borrower
By JOHN E. GALVIN
-----------------------------------
Title:
IMC FERTILIZER GROUP, INC.,
as Guarantor
By JOHN E. GALVIN
-----------------------------------
Title:
3
Agreed as of the date
first above written:
CITIBANK, N.A., as Administrative Agent,
Co-Agent and a Lender
By JAMES N. SIMPSON
---------------------------------------
Title: Citibank, N.A. Attorney-In-Fact
NATIONSBANK OF NORTH CAROLINA, N.A., as
Co-Agent and a Lender
By CHRISTOPHER B. TORIE
---------------------------------------
Title: Senior Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., as Co-Agent and
a Lender
By JOANNA M. SOLOWSKI
---------------------------------------
Title: Vice President
By AUGUST BRAAKSMA
---------------------------------------
Title: Vice President
ARAB BANKING CORPORATION, as
a Lender
By GRANT E. McDONALD
---------------------------------------
Title: Vice President
EX-10.54
4
AMENDMENT NO. 5
EXHIBIT 10.54
AMENDMENT NO. 5
June 30, 1994
To the Lenders party to the
Credit Agreement referred to
below
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of June 29, 1993,
as amended by Amendment No. 1 and Waiver No. 1 dated as of June 30,
1993, Amendment No. 2, Waiver No. 2 and Consent No. 1 dated as of
September 3, 1993, Amendment No. 3 dated as of December 30, 1993, and
Amendment No. 4 dated as of March 10, 1994 (the ``
Credit Agreement'')
among IMC Fertilizer, Inc., as Borrower, IMC Fertilizer Group, Inc., as
Guarantor, each of you, Citibank, N.A. (``
Citibank:), as Administrative
Agent, and Citibank, NationsBank of North Carolina, N.A., and
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., as Co-Agents.
Unless otherwise defined herein, the terms defined in the Credit
Agreement are used herein as therein defined.
It is hereby agreed by you and us that Section 5.02(f)(iii)
of the Credit Agreement is, effective as of the date first above
written, hereby amended by deleting after the words ``
Cash
Equivalents''
the words ``in an aggregate principal amount not to
exceed $50,000,000 at any time outstanding''
.
On and after the effective date of this Amendment, each
reference in the Credit Agreement to ``
this Agreement'', ``hereunder'',
``
hereof'' or words of like import referring to the Credit Agreement,
and each reference in the Notes to the Credit Agreement, thereunder,
thereof or words of like import referring to the Credit Agreement,
shall mean and be a reference to the Credit Agreement as amended by
this Amendment. The credit Agreement, as amended by this Amendment, is
and shall continue to be in full force and effect and is hereby in all
respects ratified and confirmed.
If you agree to the terms and provisions hereof, please
evidence such agreement by executing and telecopying a signature page
counterpart of this Amendment to (212) 826-2371, Attention of Goran
Sare, and returning at least six counterparts of this Amendment to
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022,
Attention of Kimberly Marroni. This Amendment shall become effective
as of the date first above written when and if counterparts of this
Amendment shall have been executed by the Required Lenders. This
Amendment is subject to the provisions of Section 9.01 of the Credit
Agreement.
2
This Amendment may be executed in any number of counterparts
and by any combination of the parties hereto in separate counterparts,
each of which counterparts shall be an original and all of which taken
together shall constitute one and the same Amendment. Delivery of an
executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
Very truly yours,
IMC FERTILIZER, INC., as
Borrower
By JOHN E. GALVIN
--------------------------------
Title: TREASURER
IMC FERTILIZER GROUP, INC.,
as Guarantor
By JOHN E. GALVIN
--------------------------------
Title: TREASURER
Agreed as of the date
first above written:
CITIBANK, N.A., as Administrative Agent,
Co-Agent and a Lender
By JAMES N. SIMPSON
-----------------------------------
Title: Citibank, N.A. Attorney-In-Fact
3
NATIONSBANK OF NORTH CAROLINA, N.A., as
Co-Agent and a Lender
By CHRISTOPHER B. TORIE
-----------------------------------
Title: Senior Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., as Co-Agent and
a Lender
By JOANNA M. SOLOWSKI
-----------------------------------
Title: Vice President
By AUGUST BRAAKSMA
-----------------------------------
Title: Vice President
ARAB BANKING CORPORATION, as
a Lender
By GRANT E. McDONALD
-----------------------------------
Title: Vice President
EX-11.1
5
FULLY DILUTED EARNINGS PER SHARE
Exhibit 11.1
EARNINGS (LOSS) PER SHARE
FULLY DILUTED COMPUTATION
FOR THE YEARS ENDED JUNE 30, 1994, 1993 and 1992
(IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
At June 30,
-------------------------------------
1994 1993 1992
---- ---- ----
Basis for computation of fully
diluted earnings per share:
Earnings (loss) before extra-
ordinary item and cumulative
effect of accounting change,
as reported $ (3.6) $ (120.0) $ 90.9
Add interest charges on
convertible debt 7.2 7.2 3.9
Less provision for taxes (2.8) (2.7) (1.5)
---------- ---------- ----------
Earnings (loss) before extra-
ordinary item and cumulative
effect of accounting changes,
as adjusted .8 (115.5) 93.3
Extraordinary loss - debt
retirement (25.2)
Cumulative effect of
accounting changes (47.1) (165.5)
---------- ---------- ----------
Net loss applicable to common
stock $ (24.4) $ (162.6) $ (72.2)
========== ========== ==========
Number of shares:
Weighted average shares
outstanding 25,256,999 22,082,053 22,068,090
Conversion of convertible
subordinated notes into
common stock 1,811,024 1,811,024 972,847
---------- ---------- ----------
Total common and common
equivalent shares assuming
full dilution 27,068,023 23,893,077 23,040,937
========== ========== ==========
Fully diluted earnings (loss)
per share:
Earnings (loss) before extra-
ordinary item and cumulative
effect of accounting changes $ .03 $ (4.84) $ 4.05
Extraordinary loss - debt
retirement (.93)
Cumulative effect of
accounting changes (1.97) (7.18)
---------- ---------- ----------
Net loss $ (.90) $ (6.81) $ (3.13)
========== ========== ==========
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-23.2
6
CONSENT OF INDEPENDENT AUDITORS
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following
registration statements and related prospectuses filed by IMC
Fertilizer Group, Inc. under the Securities Act of 1933 of our report
dated July 28, 1994, with respect to the consolidated financial
statements of IMC Fertilizer Group, Inc. included in this Annual Report
(Form 10-K) for the year ended June 30, 1994.
Commission File No.
--------------------
Form S-8, No. 33-22079
Form S-8, No. 33-22080
Form S-8, No. 33-38423
Form S-8, No. 33-42074
ERNST & YOUNG LLP
Ernst & Young LLP
Chicago, Illinois
September 26, 1994
Docket No. 072267
EX-27
7
FINANCIAL DATA SCHEDULE
5
1000
YEAR
JUN-30-1994
JUN-30-1994
(17,700)
186,700
94,500
2,200
253,100
534,000
3,394,100
1,466,700
2,778,300
209,400
688,100
32,200
0
0
622,800
2,778,300
1,441,500
1,471,000
1,233,900
1,303,700
78,500
0
81,000
7,800
11,460
(3,600)
0
(25,200)
0
(28,800)
(1.14)
(.90)