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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
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THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1997
Commission file number 1-9759
IMC GLOBAL INC.
(Exact name of Registrant as specified in its charter)
Delaware 36-3492467
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 Sanders Road
Northbrook, Illinois 60062
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 272-9200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $1 per share New York Stock Exchange
Preferred Share Purchase Rights Chicago 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 .
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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. [ ]
Aggregate market value of the voting stock held by non-affiliates of
the Registrant: $2,921,709,929 as of August 29, 1997. Market value is
based on the August 29, 1997 closing price of Registrant's common stock
as reported on the New York Stock Exchange Composite Transactions for
such date.
APPLICABLE ONLY TO CORPORATE REGISTRANTS: Indicate the number of
shares outstanding of each of the registrant's classes of common stock:
92,109,557 shares, excluding 9,798,620 treasury shares as of August 29,
1997.
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1997 FORM 10-K CONTENTS
Item Page
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Part I:
1. Business 1
Company Profile 1
Subsequent Event 2
Business Unit Information 2
Factors Affecting Demand 12
Other Matters 12
2. Properties 15
3. Legal Proceedings 16
4. Submission of Matters to a Vote of Security Holders 16
Part II:
5. Market for the Registrant's Common Stock and
Related Stockholder Matters 17
6. Selected Financial Data 18
7. Management's Discussion and Analysis of Results
of Operations and Financial Condition 19
8. Financial Statements and Supplementary Data 30
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 55
Part III:
10. Directors and Executive Officers of the Registrant 56
11. Executive Compensation 59
12. Security Ownership of Certain Beneficial Owners
and Management 68
13. Certain Relationships and Related Transactions 70
Part IV:
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 70
Signatures 81
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PART I.
Item 1. Business.(1)
COMPANY PROFILE
IMC Global Inc. (the Company) is one of the world's leading
producers of crop nutrients for the international agricultural
community and is one of the foremost distributors in the United States
of crop nutrients and related products through its retail and wholesale
distribution networks. The Company mines, processes and distributes
potash in the United States and Canada and is a joint venture partner
in IMC-Agrico Company (IMC-Agrico), a leading producer, marketer and
distributor of phosphate crop nutrients and animal feed ingredients.
The Company has a 56.5 percent economic interest in IMC-Agrico over the
term of the partnership; the remaining interest is held by
Freeport-McMoRan Resource Partners, Limited Partnership (FRP). (See
"Subsequent Event," in Part I, Item 1, "Business," of this Annual
Report on Form 10-K.) The Company believes that it is one of the most
efficient North American producers of concentrated phosphates and
potash. The Company's retail distribution network, which extends
principally to corn and soybean farmers in the eastern Midwest and to
cotton, peanut and vegetable farmers in the southeastern United States,
is one of the preeminent distributors of crop nutrients and related
products. The Company also manufactures nitrogen-based and other high-
value crop nutrients which are marketed on a dealer basis, principally
in the midwestern and southeastern United States. In addition, the
Company sells specialty lawn and garden, turf and nursery products on a
national basis and ice-melter products in the Midwest, the eastern
snowbelt states and Canada.
The three major nutrients required for plant growth are phosphorus,
contained in phosphate rock; potassium, contained in potash; and
nitrogen. Phosphorus plays a key role in the photosynthesis process.
Potassium is an important regulator of plants' physiological functions.
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(1) Except for statements of historical fact contained herein, the
statements appearing under Part I, Item 1, "Business;" Part I, Item 3,
"Legal Proceedings;" and Part II, Item 7, "Management's Discussion and
Analysis of Results of Operations and Financial Condition," presented
herein constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995.
Factors that could cause actual results to differ materially from those
expressed or implied by the forward-looking statements include, but are
not limited to, the following: the effect of general business and
economic conditions; conditions in and policies of the agriculture
industry; risks associated with investments and operations in foreign
jurisdictions and any future international expansion, including those
related to economic, political and regulatory policies of local
governments and laws or policies of the United States and Canada;
changes in governmental laws and regulations affecting environmental
compliance, taxes and other matters impacting the Company; the risks
attendant with mining operations; the potential impacts of increased
competition in the markets the Company operates within; and the risk
factors reported from time to time in the reports filed by the Company
with the SEC.
Nitrogen is an essential element for most organic compounds and plants.
These elements are naturally present in the soil but need to be
replaced through the use of crop nutrients as crops exhaust them.
Currently, no viable crop nutrient substitutes exist to replace the
role of phosphate, potash and nitrogen in the development and
maintenance of high-yield crops.
The Company's business strategy focuses on maintaining and growing
its leading position as a crop nutrient producer and distributor
through extensive customer service, efficient distribution and
transportation and supplying products worldwide at competitive prices
by taking advantage of economies of scale and state-of-the-art
technology to reduce costs. The Company intends to continue to expand
its product distribution and marketing throughout the world through
export associations and its international sales force.
On March 1, 1996, the Company completed a merger (Merger) with The
Vigoro Corporation (Vigoro), which resulted in Vigoro becoming a
subsidiary of the Company. The Merger enabled the Company to, among
other things, broaden its business mix and reduce the relative
importance of generally more price-volatile phosphate-based crop
nutrients to the Company's consolidated results. In addition, the
Merger expanded the Company's potash customer base to include
industrial customers, whereas shipments of potash were previously made
primarily to agricultural users. Vigoro also had a significant retail
distribution network, giving it direct contact with farmers, the
principal consumers of crop nutrient products. Prior to the Merger, a
limited amount of products were sold directly to farmers. Following
the Merger, the Company restructured its operations into five business
units corresponding to its major product lines as follows: IMC-Agrico
Crop Nutrients (phosphates), IMC Kalium (potash), IMC AgriBusiness
(wholesale and retail distribution), IMC-Agrico Feed Ingredients
(animal feed) and IMC Vigoro (specialty products). All information in
this Annual Report on Form 10-K has been adjusted to give effect to the
Merger.
SUBSEQUENT EVENT
In August 1997, the Company signed a definitive agreement with
Freeport-McMoRan Inc. (FTX), which holds a 51.6 percent interest in
FRP, providing for the merger of FTX into the Company. The Company
will be the surviving entity and the transaction will be accounted for
as a purchase. In the proposed merger (FTX Merger), each share of
common stock of FTX would be exchanged for 0.90 shares of the Company's
common stock plus one-third of a warrant, with each whole warrant
entitling the holder to purchase one share of the Company's common
stock at a price equal to $44.50 per share. Immediately prior to the
FTX Merger, the sulphur businesses of FRP and the Company (see
"Business Unit Information - IMC-Agrico Crop Nutrients - Sulphur," in
Part I, Item 1, "Business," of this Annual Report on Form 10-K) will be
transferred to Freeport Sulphur Company, a newly-formed subsidiary of
FRP. Shares of Freeport Sulphur Company will be distributed to all FRP
unitholders, including FTX. As of June 30, 1997, the net carrying
value of the Company's sulphur investment was approximately $200.0
million. The Company expects to record a significant non-cash charge
on the disposition of this investment in connection with the FTX
Merger. The FTX Merger is subject to various closing conditions,
including approval by stockholders of FTX and the Company.
BUSINESS UNIT INFORMATION
The amounts and relative proportions of net sales and operating
earnings contributed by the business units 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 as well as
technological developments.
The following business unit discussion should be read in
conjunction with the information contained in Part II, Item 7,
"Management's Discussion and Analysis of Results of Operations and
Financial Condition," of this Annual Report on Form 10-K.
IMC-Agrico Crop Nutrients
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Net sales for the IMC-Agrico Crop Nutrients (Crop Nutrients)
business unit were $1,562.2 million, $1,747.7 million and $1,559.0
million for the years ended June 30, 1997, 1996 and 1995, respectively.
Crop Nutrients is a leading United States miner of phosphate rock
with 25 million tons of annual capacity. Crop Nutrients' central
Florida phosphate mining operations and plants produce phosphate rock,
which is one of the primary raw materials used in the production of
concentrated phosphates.
Crop Nutrients is also a leading United States producer of
concentrated phosphates with an annual capacity of approximately four
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. Crop Nutrients'
concentrated phosphate products are marketed worldwide to crop nutrient
manufacturers, distributors and retailers.
Crop Nutrients' concentrated phosphate production facilities are
located in central Florida and Louisiana. Its annual capacity
represents approximately 31 percent of total United States concentrated
phosphate production capacity and ten percent of world capacity. The
Florida concentrated phosphate facilities consist of three plants: New
Wales, Nichols and South Pierce. The New Wales complex is the largest
concentrated phosphate plant in the world with an estimated annual
capacity of 1.8 million tons of phosphoric acid (P2O5 equivalent). New
Wales primarily produces four forms of concentrated phosphates:
diammonium phosphate (DAP), monoammonium phosphate (MAP), granular
triple superphosphate (GTSP) and merchant grade phosphoric acid. The
Nichols facility manufactures phosphoric acid, DAP and granular MAP.
The South Pierce plant produces phosphoric acid and GTSP. The
Louisiana concentrated phosphate facilities consist of three plants:
Uncle Sam, Faustina and Taft. The Uncle Sam plant produces phosphoric
acid which is then shipped to the Faustina and Taft plants where it is
used to produce DAP and granular MAP. The Faustina plant manufactures
phosphoric acid, DAP, granular MAP, urea and ammonia. The Taft
facility manufactures only DAP. Concentrated phosphate operations are
managed to balance Crop Nutrients' output with customer needs. The
Nichols and Taft complexes were temporarily idled during fiscal 1997.
Subsequent to June 30, 1997, Crop Nutrients resumed production at the
Nichols facility; Taft remains closed subject to improvement of market
conditions.
Phosphate rock, sulphur and ammonia are the three principal raw
materials used in the production of concentrated phosphates:
Phosphate Rock
Crop Nutrients' phosphate mining operations and beneficiation
plants are located in central Florida. Crop Nutrients extracts
phosphate ore through surface mining after removal of a ten to 50 foot
layer of sandy overburden and then processes the ore at one of its five
currently operating beneficiation plants where the ore goes through
washing, screening, sizing and flotation procedures designed to
separate it from sands, clays and other foreign materials. Crop
Nutrients has two additional beneficiation plants, one of which has
been idle since 1986 and one of which was idled in June 1997. Crop
Nutrients' phosphate rock production volume for the years ended
June 30, 1997, 1996 and 1995 totaled 22.5 million, 23.7 million and
24.4 million tons, respectively. Although Crop Nutrients sells
phosphate rock to other crop nutrient and animal feed ingredient
manufacturers, it primarily uses phosphate rock internally in the
production of concentrated phosphates. Tons used captively, primarily
in the manufacture of concentrated phosphates, totaled 14.2 million,
14.7 million and 14.3 million for the years ended June 30, 1997, 1996
and 1995, respectively, representing 63 percent, 62 percent and 59
percent, respectively, of total tons produced. Product shipments to
customers totaled 5.8 million, 7.6 million and 10.7 million tons for
the years ended June 30, 1997, 1996 and 1995, respectively. Customer
shipments have been reduced in order to maximize relative values of
rock and concentrated phosphates by utilizing high-quality reserves for
internal upgrading.
Crop Nutrients estimates its reserves to be 579 million tons of
phosphate rock as of June 30, 1997. These reserves are controlled by
Crop Nutrients through ownership, long-term lease, royalty or purchase
option agreements. Reserve grades range from 58.0 percent to 78.0
percent bone phosphate of lime (BPL), with an average grade of 66.6
percent BPL. BPL is the standard industry term used to grade the
quality of phosphate rock. The phosphate rock mined by Crop Nutrients
in the last three years averaged 65.8 percent BPL, which is typical for
phosphate rock mined in Florida during this period. Crop Nutrients
estimates its reserves based upon the performance of exploration core
drilling and technical and economic analyses to determine that reserves
so classified can be economically mined at market prices estimated to
prevail during the next five years.
During 1997, approximately 100 million tons were added to reserves
as a result of the agreement to purchase Pine Level. (See
"Contingencies - Pine Level Property Reserves," in Part II, Item 7, "
Management's Discussion and Analysis of Results of Operations and
Financial Condition," in this Annual Report on Form 10-K for further
detail.) In addition, approximately 100 million tons of mineralized
deposits (as described below) were moved to reserves during the year as
the necessary prospect data and analyses were completed.
Crop Nutrients also owns or controls phosphate rock resources in
the southern extension of the central Florida phosphate district.
Resources are mineralized deposits which may be economically
recoverable; however, additional prospect data and analyses, including
further geological work, drilling, permitting and mining feasibility
studies, are required before they may be classified as reserves. Based
upon its preliminary analyses of these resources, Crop Nutrients
believes that these mineralized deposits differ in physical and
chemical characteristics from those historically mined by Crop
Nutrients but are similar to some of the reserves being mined by
current operations. These resources contain estimated recoverable
phosphate rock of approximately 232 million tons with an average grade
of approximately 64.0 percent BPL. Some of these resources are located
in what may be classified as preservational wetland areas under
standards set forth in current county, state and federal environmental
protection laws and regulations.
Sulphur
The Company owns a 25 percent interest in a joint venture which
began mining sulphur reserves at Main Pass 299 (Main Pass) offshore
Louisiana in April 1992. In fiscal 1997, FRP, the operator of Main
Pass, produced 1.9 million long tons of sulphur. Using a hot-water
injection process, Main Pass is one of the most thermally efficient
sulphur mines in the industry. The Company and FRP have an agreement
to supply a significant portion of Crop Nutrients' sulphur
requirements. FRP supplies its portion of the requirements through its
sulphur division, and the Company supplies its portion of the
requirements through its share of Main Pass production and purchases
from FRP and third parties. (See "Subsequent Event," in Part I, Item
1, "Business," of this Annual Report on Form 10-K for further detail.)
Ammonia
Crop Nutrients' ammonia needs are supplied by its Faustina ammonia
production facility and by world suppliers, primarily under long-term
contracts. Production from the Faustina plant, which has an estimated
annual capacity of 560,000 tons of anhydrous ammonia, is primarily used
internally to produce DAP, granular MAP and urea.
Sales and Marketing
Domestically, Crop Nutrients sells its concentrated phosphates to
crop nutrient manufacturers, distributors and retailers in the spot
market. The Company also uses concentrated phosphates internally for
the production of animal feed ingredients (see IMC-Agrico Feed
Ingredients), high-value crop nutrients (see IMC AgriBusiness) and
consumer lawn and garden as well as professional turf and nursery
products (see IMC Vigoro). Virtually all of Crop Nutrients' export
sales of phosphate crop nutrients are marketed through the Phosphate
Chemicals Export Association (PhosChem), a Webb-Pomerene Act
organization. Outside of the United States, the countries which
account for the largest amount of Crop Nutrients' sales of concentrated
phosphates include China, Japan, Australia and Thailand. The table
below shows Crop Nutrients' shipments in thousands of tons of P2O5
equivalent:
1997 1996 1995
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Tons % Tons % Tons %
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Domestic
Customers 1,164 30% 1,383 34% 1,319 33%
Captive, to other
business units 587 15 487 12 504 13
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1,751 45 1,870 46 1,823 46
Export 2,113 55 2,187 54 2,138 54
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Total shipments 3,864 100% 4,057 100% 3,961 100%
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Crop Nutrients has contractual commitments from outside customers
for the shipment of concentrated phosphates amounting to approximately
800,000 tons (P2O5 equivalent) and phosphate rock amounting to
approximately five million tons in fiscal 1998.
Other
Crop Nutrients also manufactures and markets uranium oxide.
Phosphate rock is the source of uranium oxide, with the uranium content
varying from deposit to deposit. Uranium oxide production facilities
are located in Louisiana and Florida. In Louisiana, Crop Nutrients
owns and operates uranium oxide recovery and processing facilities
which are located adjacent to its Uncle Sam and Faustina concentrated
phosphate plants. In 1997, these facilities recovered 1.0 million
pounds of uranium oxide from phosphoric acid produced at these
facilities. Crop Nutrients also owns two uranium oxide recovery and
processing facilities in central Florida, one located adjacent to its
New Wales concentrated phosphate plant and another located adjacent to
a concentrated phosphate plant owned and operated by a subsidiary of CF
Industries, Inc. (CF). The New Wales and CF facilities have been
temporarily idled pending improvement of uranium market conditions.
Competition
Crop Nutrients operates in a highly competitive global market.
Among the competitors in the global phosphate crop nutrient market are
domestic and foreign companies, as well as foreign government-supported
producers. Phosphate crop nutrient producers compete primarily based
on price, and to a lesser extent based on product quality and
innovation.
IMC Kalium
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Net sales for the IMC Kalium business unit were $524.3 million,
$455.6 million and $472.0 million for the years ended June 30, 1997,
1996 and 1995, respectively.
IMC Kalium mines, processes and distributes potash in the United
States and Canada. IMC Kalium's products are marketed worldwide to
crop nutrient manufacturers, distributors and retailers and are also
used internally in the manufacture of mixed crop nutrients and, to a
lesser extent, animal feed ingredients (see IMC AgriBusiness and
IMC-Agrico Feed Ingredients, respectively). IMC Kalium's potash
products are also used by IMC Vigoro for consumer and professional lawn
and garden products as well as ice-melter (see IMC Vigoro). IMC Kalium
also sells potash to customers for industrial use. IMC Kalium operates
four potash mines in Canada and two potash mines in the United States.
With a total capacity in excess of nine million tons of product per
year, IMC Kalium is one of the leading private enterprise potash
producers in the world. In 1997, these operations accounted for
approximately 13 percent of world capacity.
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 (K2O). A K2O equivalent of 60.0 percent is the
customary minimum standard for muriate of potash products.
Canadian Operations
IMC Kalium's four potash mines in Canada are located in the
province of Saskatchewan, Canada. Two potash mines are interconnected
at Esterhazy, one is located at Belle Plaine and one is located at
Colonsay. The combined annual capacity of these four mines is
approximately eight million tons. Esterhazy and Colonsay utilize shaft
mining while Belle Plaine utilizes solution mining technology. Potash
shaft mining takes place underground at depths of over 3,000 feet where
continuous mining machines cut out the ore face and move jagged chunks
of ore to conveyor belts. The ore is then crushed and moved to storage
bins where it awaits hoisting to refineries above ground. In contrast,
IMC Kalium's solution mining process involves heated water which is
pumped through a "cluster" to dissolve the potash in the ore bed. A
cluster consists of a series of boreholes drilled into the potash ore
by a portable, all-weather electric drilling rig. A separate
distribution center at each cluster controls the brine flow. The
solution containing dissolved potash and salt is pumped to a refinery
where sodium chloride, a co-product of this process, is separated from
the potash through the use of evaporation and crystallization
techniques. Concurrently, solution is pumped into a 130-acre cooling
pond where additional crystallization occurs and the resulting product
is recovered via a floating dredge. Refined potash is dewatered, dried
and sized. The Canadian operations produce 26 different potash
products, including industrial grades, many through patented processes.
Potash Corporation of Saskatchewan Inc. (PCS) controls several
potash-producing properties in the province, including a property which
consists of reserves located in the vicinity of IMC Kalium's Esterhazy
mines. Under a long-term contract with PCS, the Company 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 Esterhazy but no more
than approximately 1.1 million tons. The current contract extends
through June 30, 2001 and is renewable at the option of PCS for five
additional five-year periods.
IMC Kalium controls the rights to mine 331,660 acres of
potash-bearing land in Saskatchewan. This land, of which 69,748 acres
have already been mined or abandoned, contains over 4.6 billion tons of
potash mineralization (calculated after estimated extraction losses) at
an average grade of about 21.0 percent. This ore is sufficient to
support current operations for more than a century and will yield more
than 1.4 billion tons of finished product with a K2O content of
approximately 61.0 percent.
IMC Kalium's mineral rights in Saskatchewan consist of 133,102
acres owned in fee, 175,241 acres leased from the province of
Saskatchewan and 23,317 acres leased from other parties. All leases
are renewable by the Company for successive terms of 21 years.
Royalties, established by regulation of the province of Saskatchewan,
amounted to approximately $6.4 million, $6.8 million and $6.0 million
in 1997, 1996 and 1995, respectively.
In August 1995, the Company was chosen by the Minister of State for
Mines and Energy for the Canadian province of New Brunswick to explore
the potash deposit near the town of Sussex. IMC Kalium is currently
performing a geological reassessment of the property and feasibility
study to determine whether to develop the deposit.
Since December 1985, IMC Kalium has experienced an inflow of water
into one of its two interconnected potash mines at Esterhazy. As a
result, IMC Kalium has incurred expenditures, certain of which due to
their nature were capitalized while others were charged to expense, to
control the inflow. Since the initial discovery of the inflow, IMC
Kalium has been able to meet all sales obligations from production at
the mines. IMC Kalium has considered, and continues to evaluate,
alternatives to the operational methods employed at Esterhazy.
However, recent changes in the procedures utilized to control the water
inflow have proven successful to date and IMC Kalium currently intends
to continue conventional shaft mining. Despite the relative success of
these modified measures, there can be no assurance that the amounts
required for remedial efforts will not increase in future years or that
the water inflow or remediation costs will not increase to a level
which would cause IMC Kalium to change its mining process or abandon
the mines.
Like other potash producers' shaft mines, IMC Kalium's Colonsay
mine is also subject to the risks of inflow of water as a result of its
shaft mining operations.
The Saskatchewan potash mining industry generally has been unable
to secure insurance to cover other risks associated with underground
operations. Therefore, IMC Kalium's underground mine operations are
not presently insured against, and are not insurable against, business
interruption or risk from catastrophic perils, including collapse,
floods and other water inflow.
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 to assure that such
product was sold in the United States at a price no less than "fair
value." In January 1993, this agreement was extended by Commerce for
an indefinite period.
The Saskatchewan Department of Environmental and Resource
Management (Saskatchewan Department) published regulations requiring
all potash mine operators to submit facility decommissioning and
reclamation plans for approval by the Saskatchewan Department and to
provide assurances that the plans will be carried out when the facility
is closed. The Company believes the expected life of its facilities in
Saskatchewan to be more than 100 years. On April 18, 1997, IMC Kalium
filed decommissioning and reclamation plans with the Saskatchewan
Department pursuant to the regulations. IMC Kalium is currently in
discussions regarding the decommissioning and reclamation plans.
Pending completion of these discussions, the Company is unable to
estimate with certainty the financial impact of any required
decommissioning and reclamation.
United States Operations
IMC Kalium's two United States potash mines are located in
Carlsbad, New Mexico, and Hersey, Michigan.
The Carlsbad mine has an annual production capacity of over one
million tons of finished product. The ore reserves are 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. At this time only the
sylvinite and langbeinite ores are mined.
Continuous and conventional underground mining methods are utilized
for ore extraction at Carlsbad. In the continuous mining sections,
drum type mining machines are used to cut sylvinite ore from the face.
Mining heights are as low as four feet. In the conventional areas, a
wide ore face is undercut and holes drilled to accept explosive
charges. Ore from both continuous and conventional sections is loaded
onto conveyors, transported to storage areas and then hoisted above
ground for further processing at the refinery.
Three types of potash are produced at the Carlsbad refinery:
muriate of potash, which is the primary source of potassium for the
crop nutrient industry; 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. IMC
Kalium believes it is the leading United States producer of double
sulphate of potash magnesia and a leading United States producer of
sulphate of potash.
At Carlsbad, IMC Kalium mines and refines potash from 46,434 acres
of reserves which are controlled under long-term leases. These
reserves contain an estimated total of 161 million tons of potash
mineralization (calculated after estimated extraction losses) in four
mining beds evaluated at thicknesses ranging from four to 12 feet. At
average refinery rates, these ore reserves are estimated to be
sufficient to yield 10.8 million tons of concentrate from sylvinite
with an average grade of 60.0 percent K2O and 26.3 million tons of
langbeinite concentrate with an average grade of approximately 22.0
percent K2O. At current rates of production, IMC Kalium's reserves of
sylvinite and langbeinite are estimated to be sufficient to support
operations for approximately ten years and for more than 22 years,
respectively.
IMC Kalium is currently constructing a 240,000 ton per year
Sul-Po-Mag granulation facility at Carlsbad. This facility will convert
standard grade Sul-Po-Mag into premium granular grade which has
expanded sales opportunities. The $20.0 million project is scheduled to
commence production in January 1998.
In May 1997, the Company announced that it had reached a definitive
agreement to acquire Western Ag-Minerals Company (Western Ag), a
subsidiary of Toronto-based Rayrock Yellowknife Resources Inc., for
$53.0 million. Western Ag, located in Carlsbad, New Mexico, has annual
capacity of 400,000 tons of potash and had calendar-year 1996 gross
revenues of approximately $41.0 million. On September 5, 1997, the
acquisition of Western Ag was consummated.
Since October 1989, IMC Kalium has mined a small amount of potash
at Hersey, Michigan, using solution mining technology. The objective
of this pilot plant was to test the feasibility of solution mining in
the Hersey area and to test new technologies which could be applied to
improve efficiencies at both the Belle Plaine and Hersey facilities.
IMC Kalium has completed the construction phase of its $60.0 million
expansion of this facility and operation has commenced. The plant's
current annual potash production capacity is approximately 160,000
tons, and salt capacity is approximately 300,000 tons per year. The
Company believes that the commencement of operations at the Hersey
plant is an important step forward in its strategy to increase sales
and earnings in multiple markets with multiple products.
Sales and Marketing
Potash is sold throughout the world, with IMC Kalium's largest
amount of sales outside of the United States made to China, Japan,
Malaysia, Korea, Australia, New Zealand and Latin America. Potash is
also used internally in the manufacture of high-value crop nutrients by
IMC AgriBusiness and by IMC Vigoro as a major ingredient in its
ice-melter product as well as one of the primary nutrients in the
consumer lawn and garden and professional turf and nursery products.
IMC Kalium's exports from Canada, except to the United States, are made
through Canpotex Limited (Canpotex), an export association of
Saskatchewan potash producers. Exports from Carlsbad are sold through
the Sulphate of Potash Magnesia Association, formed by the Company
under the Webb-Pomerene Act. In 1997, 83 percent of the potash
produced by IMC Kalium was sold as crop nutrients, while 17 percent was
sold for non-agricultural uses. The table below shows IMC Kalium's
shipments of potash in thousands of tons:
1997 1996 1995
------------ ------------ ------------
Tons % Tons % Tons %
-------------------------------------------
Domestic (includes Canada)
Wholesale 4,471 56% 4,112 57% 4,014 55%
Captive, to other
business units 1,178 15 1,239 17 1,058 14
----- --- ----- --- ----- ---
5,649 71 5,351 74 5,072 69
Export 2,357 29 1,864 26 2,281 31
----- --- ----- --- ----- ---
Total shipments 8,006 100% 7,215 100% 7,353 100%
===== === ===== === ===== ===
IMC Kalium has contractual commitments from outside customers for
the shipment of potash amounting to approximately 1.8 million tons in
fiscal 1998.
Competition
Potash is a commodity available from many sources and the market is
highly competitive. In addition to IMC Kalium, there are six North
American producers -- three in the United States and three in Canada,
some of which may have greater production capacity than IMC Kalium.
Through its participation in Canpotex, IMC Kalium competes outside of
North America with various independent potash producers and consortia
and other export organizations, including state-owned organizations.
IMC Kalium's principal methods of competition, with respect to the sale
of potash, include pricing; offering consistent, high-quality products
and superior service; as well as developing new industrial and consumer
uses for potash.
IMC AgriBusiness
- ----------------
Net sales for the IMC AgriBusiness business unit were $860.7
million, $802.9 million and $760.8 million for the years ended June 30,
1997, 1996 and 1995, respectively. IMC AgriBusiness operates
approximately 260 facilities consisting of retail distribution centers,
manufacturing plants and terminals and warehouses. For the year ended
June 30, 1997, approximately 52 percent, 46 percent and two percent of
IMC AgriBusiness' net sales were from agricultural retail, agricultural
wholesale and industrial operations, respectively.
Retail Operations
IMC AgriBusiness believes it is one of the largest retail crop
nutrients distributors in the United States. It operates a network of
approximately 215 FARMARKET (registered trademark)s, each of which
offers a broad array of IMC AgriBusiness' crop nutrients and related
products and services. Approximately 70 percent of the FARMARKETs are
located in the eastern Midwest and the remaining in the southeastern
regions of the United States, and are generally located in rural areas,
primarily serving farmers located within a 15-20 mile radius. The
FARMARKETs are clustered near and are partially supplied by IMC
AgriBusiness' production plants and terminals, many of which are
located on major rivers and have storage facilities for liquid or dry
crop nutrient materials.
Each FARMARKET custom blends and bulk blends crop nutrients to meet
the needs of individual farmers for the specific crops grown in their
areas. Crop protection products and seed are also purchased by IMC
AgriBusiness and sold through its FARMARKETs. One of the most
successful FARMARKET programs is the Balanced Fertility Program which
is designed to improve crop production through increased yields per
acre. Key elements of this program include soil testing and programs
to correct soil deficiencies. FARMARKETs also offer farmers the option
of having IMC AgriBusiness' employees apply crop nutrient and crop
protection chemicals, thereby saving time, labor costs and the cost of
investment in specialized equipment required for such applications.
FARMARKETs are generally staffed by a manager, one or two
salespeople and two to three hourly employees, some of whom are
seasonal employees. IMC AgriBusiness extensively trains its full-time
FARMARKET employees in crop nutrient application and agronomics,
business management and environmental compliance. This training is
deemed to be essential to customer service. The majority of IMC
AgriBusiness' salaried FARMARKET employees have obtained certification
from the Certified Crop Advisors Program as Certified Crop Advisors.
Approximately ten percent of IMC AgriBusiness' FARMARKETs are owned
and operated by independent dealers who purchase IMC AgriBusiness'
products on consignment. Blending and storage are performed at the
dealer's place of business, and the dealer is paid a commission
determined by a sliding scale based on the volume and profit margin of
the products sold. IMC AgriBusiness recommends prices, approves credit
extended by these dealers, owns the FARMARKETs' working capital and
often owns its blending equipment.
FARMARKET sales, as well as wholesale sales discussed below, are
largely concentrated in the spring planting season. Weather has a
significant impact on the timing and length of the planting season and,
therefore, can have a significant effect on crop nutrient sales prices
and volumes.
IMC AgriBusiness also offers high technology agricultural advisory
services to its retail customers through its Top Soil Precision Ag (Top
Soil) operations. Top Soil offers soil sampling via global
positioning; crop scouting; yield monitor mapping and interpretation;
statistical analysis for yield variation and other crop management
services.
Wholesale Operations
IMC AgriBusiness sells agricultural crop nutrient and crop
protection products on a wholesale basis to independent dealers and
distributors, including those that perform services similar to those
offered by FARMARKETs.
The wholesale sales in the southeastern region of the United States
include products sold under the brand names RAINBOW (registered
trademark) and SUPER RAINBOW (registered trademark) which are produced
from granulation plants in Americus, Georgia; Florence, Alabama;
Winston Salem, North Carolina and Hartsville, South Carolina. The
combined annual production from these plants approximates 650,000 tons.
IMC AgriBusiness sells nitrogen-based products, which include
anhydrous ammonia, nitrogen solutions and urea, on a wholesale basis in
the eastern Midwest region of the United States. A portion of these
sales are produced from IMC AgriBusiness' nitrogen plant in East
Dubuque, Illinois, which annually produces approximately 290,000 tons
of anhydrous ammonia and 220,000 tons of nitrogen solutions.
In addition, IMC AgriBusiness markets potash and concentrated
phosphates produced by the Company's IMC Kalium and IMC-Agrico Crop
Nutrients business units, respectively, on a wholesale basis to
independent dealers and distributors in the eastern Midwest and
southeastern regions of the United States.
Seed, Industrial and Other Operations
IMC AgriBusiness sells corn, soybean and wheat planting seed
through its FARMARKET system and through its Ohio-based Farmer-Dealer
system. The FARMARKETs sell Vigoro (registered trademark) brand seeds
as well as most national brands, and the Farmer-Dealer system sells
Green Land (registered trademark) brand seeds. IMC AgriBusiness is
also actively involved in the breeding and production of
identity-preserved crops and is a supplier of proprietary soybeans to
Japanese food producers through a partnership with Honda Trading
America Corporation.
IMC AgriBusiness' primary products sold in the industrial market
include nitric acid, liquid ammonium nitrate and food-grade carbon
dioxide produced from a nitric acid plant in Cincinnati, Ohio, and the
nitrogen plant in East Dubuque, Illinois. The nitric acid plant
produces approximately 90,000 tons of nitric acid and 50,000 tons of
liquid ammonium nitrate, while the nitrogen plant produces
approximately 160,000 tons of food-grade carbon dioxide.
IMC AgriBusiness operates a granulation plant in Columbus, Ohio,
and several liquid and dry terminal facilities in southern Illinois,
southern Indiana and Kentucky along with numerous smaller facilities,
which are used for bulk-blending and/or warehousing in connection with
its retail and wholesale operations.
Raw Materials
Substantially all of the potash and phosphate raw materials used by
IMC AgriBusiness are supplied by the Company's IMC Kalium and
IMC-Agrico Crop Nutrients business units, respectively. IMC
AgriBusiness' nitrogen-based products are produced at its plants in
East Dubuque and/or purchased from domestic suppliers under long-term
contracts based on current market prices.
Other Products
IMC AgriBusiness produces a broad range of nitrogen-based crop
nutrients and related products, including anhydrous ammonia, ammonium
nitrate solutions, liquid urea, urea granules and other nitrogen-based
solutions. These products are sold alone or mixed with phosphates,
potash, micronutrients, non-liquid ammonium nitrate and other materials
to produce a variety of bulk-blend crop nutrients in either dry or
liquid form. Certain of these products are marketed under the CERTIFIED
HARVEST KING (registered trademark) brand. Liquid and dry products are
blended according to the specific needs of the farmer. IMC
AgriBusiness also mixes dicyandiamide (DCD) with nitrogen solutions
under the name N TECH SR (trademark), providing farmers with a more
efficient and environmentally-sensitive nitrogen source. The slow
release DCD increases absorption of nitrogen by crops, thereby reducing
the amount of nitrogen released into the environment. IMC AgriBusiness
has a year-to-year renewable purchase agreement with the world's
largest producer of DCD.
IMC AgriBusiness also produces nitric acid, aqua ammonia and
refrigerant-grade ammonia. Nitric acid is sold in various formulations
to a wide variety of industrial users for use in metal platings,
coatings and water treatment. IMC AgriBusiness also produces
food-grade carbon dioxide as a by-product of its ammonia production
process. Food-grade carbon dioxide is used in carbonated beverages and
as a refrigerant in food processing.
Competition
The marketing of crop nutrients to farmers on a national basis is
highly fragmented. Since crop nutrients are a basic commodity, the
principal means of differentiating competing products is through
competitive pricing coupled with offering personal services and
agronomically-efficient products which allow maximum yields while being
sensitive to environmental concerns. IMC AgriBusiness' FARMARKETs were
developed to enhance the personal service concept and thereby
differentiate IMC AgriBusiness' products from those of competitors.
Most of IMC AgriBusiness' FARMARKETs are leaders in their respective
area of operation. IMC AgriBusiness believes its nitrogen-based crop
nutrients and related products are well positioned in both the retail
and wholesale agricultural market sectors and in the industrial market
sector. IMC AgriBusiness' principal competitors in the agricultural
crop nutrients market include cooperatives, which have the largest
market share in a majority of the locations served by the Company,
national producers, major grain companies and independent distributors
and brokers.
IMC-Agrico Feed Ingredients
- ----------------------------
In October 1995, the Company acquired the animal feed ingredients
business of Mallinckrodt Group Inc. and subsequently contributed it to
IMC-Agrico. Net sales for the IMC-Agrico Feed Ingredients business
unit were $159.2 million for 1997 and $113.6 million for the partial
year 1996. IMC-Agrico Feed Ingredients is one of the world's foremost
producers and marketers of phosphate-based animal feed ingredients with
an annual capacity in excess of 700,000 tons. IMC-Agrico Feed
Ingredients supplies phosphate and potassium based feed ingredients for
poultry and livestock to markets in North America, Latin America and
Asia. The principal production facilities of IMC-Agrico Feed
Ingredients are located adjacent to, and utilize raw materials from,
IMC-Agrico's concentrated phosphate complex at New Wales in central
Florida. IMC-Agrico Feed Ingredients also markets potassium-based feed
products produced at the Company's potash facilities. IMC-Agrico Feed
Ingredients has a strong brand position in the $1 billion global market
with products such as Biofos (registered trademark), Dynafos
(registered trademark), Multifos (registered trademark), Dyna-K
(registered trademark) and Dynamate (registered trademark).
IMC-Agrico Feed Ingredients operates in a competitive global
market. Major integrated producers of feed phosphates and feed grade
potassium are located in the United States and Europe. Many smaller
producers are located in emerging markets around the world. These
producers are not manufacturers of P2O5 and are required to purchase
this raw material on the open market. Competition in this global
market is driven by quality, service and price.
IMC Vigoro
- ----------
Net sales for the IMC Vigoro business unit were $102.8 million,
$95.1 million and $96.8 million for the years ended June 30, 1997, 1996
and 1995.
IMC Vigoro manufactures and sells specialty crop nutrient products
consisting of lawn and garden and turf and nursery products as well as
packages and sells potassium-based ice melter products. The lawn and
garden products are sold throughout the United States primarily to
major national retail chains under private label and Vigoro brands, and
the turf and nursery products are sold to golf courses, nurseries,
landscape contractors and institutions directly and through independent
distributors. The environmentally-sensitive, potassium-based ice
melter products are sold under various brands throughout the Midwest,
the eastern snowbelt states and Canada.
FACTORS AFFECTING DEMAND
The Company's results of operations historically have reflected the
effects of several external factors which are beyond the Company's
control and have in the past produced significant downward and upward
swings in the Company's operating results. The Company's revenues,
approximately 69 percent of which have come from North American sales
over the past five years, are highly dependent upon conditions in the
North American agriculture industry and can be affected by crop
failure, changes in agricultural production practices, government
policies and weather. Furthermore, because of the high percentage of
its revenues coming from North American sales, the Company's crop
nutrients business is seasonal to the extent United States farmers and
agricultural enterprises purchase more crop nutrient products during
the spring and fall.
Approximately 31 percent of the Company's revenues has come from
sales outside North America over the past five years. The Company's
foreign operations and investments and any future international
expansion by the Company are subject to numerous risks, 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 and Canada
affecting foreign trade and investment. Due to economic and political
factors, customer needs can change dramatically from year to year. See
also Note 21, "Operations by Geographic Area," of Notes to Consolidated
Financial Statements in Part II, Item 8, "Financial Statements and
Supplementary Data," of this Annual Report on Form 10-K for further
detail.
In 1997, sales of concentrated phosphates and potash to China
accounted for approximately 13 percent of the Company's net sales. No
single customer or group of affiliated customers accounted for more
than ten percent of the Company's net sales.
OTHER MATTERS
Environmental Matters
- ---------------------
General
In the normal course of its business, the Company mines phosphate
and potash, manufactures and blends crop nutrients, and blends crop
nutrients with pesticide products. These operations are subject to
federal, state, provincial and local environmental, health and safety
laws in the United States and Canada, including laws related to air and
water quality; management of hazardous and solid wastes; management and
handling of raw materials and products; and land reclamation. The
Company has expended, and anticipates that it will continue to expend,
substantial resources, both financial and managerial, to comply with
environmental regulations, permitting and reclamation requirements, and
health and safety standards. Additionally, although the Company
believes that its operations generally satisfy environmental standards,
there can be no assurance that unexpected or additional costs,
penalties or liabilities will not be incurred. The Company believes
that its expenditures for environmental, health or safety compliance
have been significant and expects that these costs will continue to be
significant.
For fiscal year 1997, environmental capital expenditures were
approximately $24 million and were primarily related to air emissions
permitting and control; ground and surface water protection; wastewater
treatment and control; and solid waste management. Additional
expenditures for land reclamation activities totaled approximately $25
million. For fiscal year 1998, the Company expects environmental
capital expenditures to be approximately $46 million and expenditures
for land reclamation activities to be approximately $24 million.
Environmental capital is expected to increase in 1998 as a result of
phosphogypsum stack and settling area expansion projects as well as
spending for air emissions control and storage tank containment
projects. No assurance can be given that greater environmental
expenditures will not be required for fiscal year 1998 or that
environmental expenditures in future years will not increase.
Environmental, health and safety laws and regulations in the United
States and Canada relating to the manufacture and application of crop
nutrients and to mining activities have changed substantially and
rapidly in recent years, and the Company anticipates that these changes
will continue. It is the Company's policy to comply with all
applicable environmental, health and safety laws and regulations. It
is difficult to estimate future compliance costs, however, since
certain implementing regulations have not yet been finalized or are
subject to varying and conflicting interpretations. Nevertheless,
because new environmental standards generally are more restrictive than
current requirements, the costs of complying with such regulations
could increase substantially.
Permitting
The Company holds numerous environmental and other permits
authorizing operations at each of its facilities. A decision by a
government agency to deny an application for a new or renewed permit,
or to revoke or substantially modify an existing permit, could have a
material adverse effect on the Company's ability to continue operations
at the affected facility. Expansion of Company operations also is
predicated upon securing the necessary environmental and other permits.
IMC-Agrico signed an agreement with Consolidated Minerals, Inc. (CMI)
for the purchase of real property (Pine Level) containing approximately
100 million tons of phosphate rock reserves in Florida. In connection
with the purchase, IMC-Agrico has agreed to obtain all environmental,
regulatory and related permits necessary to commence mining on the
property. Successful achievement of such permitting remains to be
accomplished in the next five to eight years. Although the Company has
successfully permitted mining properties in Florida, if permits were
denied or if compliance with permit conditions became cost prohibitive,
a complete or substantial inability to mine this property would
adversely impact the Company. (See "Contingencies - Pine Level
Property Reserves," in Part II, Item 7, "Management's Discussion and
Analysis of Results of Operations and Financial Condition," in this
Annual Report on Form 10-K for further detail.)
Air Quality
The 1990 Amendments to the Clean Air Act require certain sources to
increase controls on emissions of conventional and hazardous air
pollutants. During 1997, several of the Company's facilities have
applied for, or will apply for, such operating permits. In addition,
by the year 2000, the United States Environmental Protection Agency is
scheduled to promulgate control standards for hazardous air pollutants
applicable to certain of the Company's operations. Capital
expenditures, which could be significant, might be necessary to meet
the regulatory or permit requirements. Because the operating permits
have not been issued and the regulatory requirements have not been
finalized, the Company cannot estimate the extent of these
expenditures.
Process Safety Management and Risk Management Planning
Several of the Company's facilities are subject to Process Safety
Management (PSM) standards under the Occupational Safety and Health Act
and to the Risk Management Planning (RMP) requirements under the Clean
Air Act. PSM standards require covered facilities with processes that
utilize certain chemicals to implement written safety management plans,
procedures and employee training. RMP rules require covered facilities
to establish comprehensive plans for preventing and responding to
accidental releases. Under RMP, facilities also must release to the
public information about regulated processes and release prevention
programs, the potential for accidental releases and the facility's
"worst case" release scenarios and their potential effects on nearby
populations. The Company continues to implement the required programs.
As process safety and risk management efforts proceed, the Company will
incur costs to complete projects, planning processes and related
measures and these costs could be substantial.
Management of Residual Materials
Phosphate and potash mining and processing produce residual
materials that must be managed. Phosphate residuals, consisting
primarily of phosphogypsum, typically are stored in phosphogypsum stack
systems. Other phosphate mining residuals, clay and other tailings,
are used in reclamation. Potash producers generally store tailings,
which contain primarily salt, iron compounds and clay, in surface
disposal sites. The Company has incurred and will continue to incur
significant costs to manage its phosphate and potash residual materials
in accordance with environmental laws, regulations and permit
requirements.
To address concerns about potash tailings management, the
Saskatchewan Department published regulations in 1994 requiring all
potash mine operators: (i) to submit facility decommissioning and
reclamation plans for approval and (ii) to provide assurances that the
plans will be carried out. The decommissioning and reclamation plans
and related assurances cover all facilities at a mine, including
surface disposal sites for potash tailings. In 1997, the Company has
filed its decommissioning plans for its three Saskatchewan potash
mines. Implementation of the plans will be deferred until an affected
facility is permanently closed which the Company does not anticipate in
the foreseeable future at any of the locations. Based on potash
reserves, each of the mine sites could continue to operate for more
than 100 years. Each plan will be renewed every five years until
anticipated closure or as requirements of the regulations change. The
Company, like all members of the Saskatchewan potash industry, is
unable to predict with certainty the financial impact of the
regulations on the Company due to the anticipated life of each mine,
prospective advances in tailings management technology, and changes
from time to time in rules and regulations. The plans are currently
under consideration and have been neither approved nor disapproved by
the Provincial agency. The mechanism for required financial assurances
has not yet been determined by the Province. Costs for decommissioning
are likely to be significant although funds are not anticipated to be
expended in the foreseeable future.
With regard to phosphate processing, Florida law may require IMC-
Agrico to close one or more of its unlined phosphogypsum stacks and/or
associated cooling ponds after March 25, 2001, if the stack system is
demonstrated to cause a violation of Florida's water quality standards.
IMC-Agrico has already filed an application with Florida's Department
of Environmental Protection to close the unlined gypsum stack at its
New Wales facility in central Florida. Closure activities would begin
on July 1, 1998 if the plan is accepted and would cost approximately
$2.5 million, net of recorded accruals, for construction activities
over a period of five years. IMC-Agrico cannot predict at this time
whether Florida will require closure of any of its other stack systems.
The costs of any such closures could be significant.
IMC-Agrico continues to address elevated levels of sulphate and
sodium indicators in groundwater at its New Wales facility. In 1992,
elevated sulphate levels were detected in groundwater beneath the
cooling pond. In response, the Central Florida Regional Planning
Council required IMC-Agrico to plug former recharge wells and either
show that groundwater indicator levels have returned to acceptable
levels or line or relocate the cooling pond. Recent monitoring data
have evidenced an improving trend in the sulphate and sodium indicator
levels. If the trend continues, IMC-Agrico is expected to obtain an
operating permit which will expire in July 1998. If indicators do not
reach acceptable levels, options will be pursued to meet the operating
needs of the facility. The estimated cost to line or relocate the
cooling pond is estimated to be approximately $50.0 million.
Remedial Activities
The historical use and handling of regulated chemical substances
and crop nutrient products in the normal course of the Company's
business has resulted in contamination at facilities presently or
previously owned or operated by the Company. The Company has also
purchased facilities that were contaminated by previous owners through
their use and handling of regulated chemical substances. Spills or
other unintended releases of regulated substances have occurred in the
past, and potentially could occur in the future, possibly requiring the
Company to undertake or fund cleanup efforts. The Company cannot
estimate the level of expenditures that may be required in the future
to clean up contamination from the handling of regulated chemical
substances or crop nutrients.
At some locations, the Company has agreed, pursuant to consent
orders with the appropriate governmental agencies, to undertake certain
investigations (which currently are in progress) to determine whether
remedial action may be required to address contamination. The cost of
any remedial actions that ultimately may be required at these sites
currently cannot be determined.
The Company believes that it is entitled to at least partial
indemnification for a portion of the costs that may be expended by the
Company to remedy environmental issues at certain facilities and
operations pursuant to indemnification agreements. These agreements
address contamination that is attributable to activities occurring
prior to the Company's acquisition of facilities from parties including
PPG Industries, Inc.; Kaiser Aluminum & Chemical Corporation; BFEL,
Ltd.; Estech, Inc. and certain other parties. The Company has already
received and anticipates receiving amounts pursuant to certain
indemnification agreements for all or some of its expenses incurred to
date.
Superfund
The Comprehensive Environmental Response Compensation Liability Act
(CERCLA), also known as "Superfund," imposes liability without regard
to fault or to the legality of a party's conduct on certain categories
of persons that are considered to have contributed to the release of
"hazardous substances" into the environment. Currently, the Company is
involved in, or concluding involvement at, a number of Superfund sites.
At none of these sites alone, nor in the aggregate, is the Company's
liability currently expected to be material. As more information is
obtained regarding the sites and the potentially responsible parties
involved, this expectation could change.
Employees
- ---------
The Company had approximately 9,200 employees at June 30, 1997.
The work force consisted of
3,603 salaried, 5,520 hourly and 50 temporary or part-time employees.
Labor Relations
- ---------------
The Company has 18 collective bargaining agreements with eight
international unions or their affiliated local chapters. Three
agreements covering two percent of the hourly work force were
negotiated during calendar 1996, and five agreements covering 50
percent of the hourly work force have been negotiated to date in
calendar 1997. Resulting wage and benefit increases were consistent
with competitive industry and community standards. One agreement
covering less than two percent of the hourly work force will expire
during the remainder of calendar 1997. The Company has not experienced
a significant work stoppage in recent years and considers its employee
relations to be good.
Item 2. Properties.
Information regarding the plant and properties of the Company is
included in Part I, Item 1, "Business," of this Annual Report on Form
10-K.
Item 3. Legal Proceedings.
Environmental Proceedings
- -------------------------
Reference is made to "Other Matters - Environmental Matters," in
Part I, Item 1, "Business," of this Annual Report on Form 10-K.
Sterlington Litigation
- ----------------------
ANGUS Chemical Company (ANGUS), numerous third parties alleging
personal injury and the Company are involved in various litigation
arising out of a May 1991 explosion at a nitroparaffins plant located
in Sterlington, Louisiana. The Company continues to litigate each of
the matters arising out of the Sterlington explosion. Approximately
1,300 class action plaintiffs seek damages for personal injuries, "fear
and fright," and punitive damages against ANGUS, the Company and other
defendants arising from the explosion. Discovery is still not
complete, and the trial date has been postponed indefinitely. The
Company is unable to estimate the magnitude of its exposure at this
time.
The Company has settled actions filed by ANGUS with respect to
claims for amounts ANGUS paid for settled claims in connection with the
explosion and has settled actions filed by ANGUS for claimed rights of
direct action against the Company's insurers. In addition, ANGUS'
claims for certain environmental claims were dismissed by the trial
court and are on appeal.
Potash Antitrust Litigation
- ---------------------------
The Company was a defendant, along with other Canadian and United
States potash producers, in a class action antitrust lawsuit filed in
federal court in 1993. The plaintiffs alleged a price-fixing
conspiracy among North American potash producers beginning in 1987 and
continuing until the filing of the complaint. The class action
complaint against all defendants, including the Company, was dismissed
by summary judgment in January 1997. The summary judgment dismissing
the case is currently on appeal by the plaintiffs to the United States
Court of Appeals for the Eighth Circuit. The Court of Appeals is
expected to rule during calendar 1998.
In addition, in 1993 and 1994, class action antitrust lawsuits with
allegations similar to those made in the federal case were filed
against the Company and other Canadian and United States potash
producers in state courts in Illinois and California. The Illinois
case was dismissed for failure to state a claim. In the California
case, merits discovery has been stayed and the case is currently
inactive.
Other
- -----
In the ordinary course of its business, the Company is involved in
routine litigation.
Item 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, 1997.
PART II.
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
COMMON STOCK PRICES AND DIVIDENDS
Quarter
----------------------------------------
Fiscal 1997 First Second Third Fourth
- ----------------------------------------------------------------------
Dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.08
Common stock prices:
High $44.500 $41.000 $42.500 $39.375
Low 35.125 33.875 33.125 33.125
Quarter
----------------------------------------
Fiscal 1996 First Second Third Fourth
- ----------------------------------------------------------------------
Dividends per common share $ 0.05 $ 0.08 $ 0.08 $ 0.08
Common stock prices:
High $33.313 $40.875 $43.250 $39.875
Low 27.000 30.313 33.625 32.250
The Company's common stock is traded on the New York and Chicago
Stock Exchanges under the symbol IGL. As of August 29, 1997, the
Company had 92,109,557 shares of common stock outstanding, excluding
treasury shares. Common stock prices are from the composite tape for
New York Stock Exchange issues as reported in The Wall Street Journal.
Data in the table above have been restated to reflect a 2-for-1 stock
split, effected in the form of a 100 percent stock dividend distributed
on November 30, 1995.
As of August 29, 1997, the number of registered holders of common
stock as reported by the Company's registrar was 451. However, an
indeterminable number of stockholders beneficially own shares of the
Company's common stock through investment funds and brokers.
For the year ended June 30, 1997, the Company paid $30.1 million of
cash dividends. The Company's debt instruments contain provisions
which limit the Company's ability to pay dividends on its common stock.
See "Capital Resources and Liquidity - Financing," in Part II, Item 7,
"Management's Discussion and Analysis of Results of Operations and
Financial Condition," of this Annual Report on Form 10-K for further
detail.
Item 6. Selected Financial Data.
FIVE YEAR COMPARISON
(Dollars in millions except per share amounts)
Years ended June 30,
1997 1996(1)(2) 1995(1)(2)
1994(1)(2) 1993(1)(3)
- ----------------------------------------------------------------------
Statement of Operations
Data:
Net sales $2,982.0 $2,981.0 $2,736.1 $2,125.3 $1,438.1
Sterlington litigation
settlement, net - - - - (169.1)
Earnings (loss) before
income taxes, extra-
ordinary item and cumu-
lative effect of
accounting changes 322.0 238.4 308.8 79.2 (117.0)
Provision (credit) for
income taxes 117.5 94.1 115.5 34.8 (39.1)
-------- -------- -------- -------- -------
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting changes 204.5 144.3 193.3 44.4 (77.9)
Extraordinary charge -
debt retirement (11.4) - (6.5) (25.2) (2.0)
Cumulative effect of
accounting changes - - (5.9) - (47.1)
-------- -------- -------- -------- -------
Net earnings (loss) $ 193.1 $ 144.3 $ 180.9 $ 19.2 $ (127.0)
Earnings (loss) per share:
Earnings (loss) before
extraordinary item and
cumulative effect of
accounting changes $ 2.15 $ 1.56 $ 2.12 $ .54$
(1.02)
Extraordinary charge -
debt retirement (.12) - (.07) (.31)
(.03)
Cumulative effect of
accounting changes - - (.06) -
(.62)
-------- -------- -------- -------- -------
Net earnings (loss) $ 2.03 $ 1.56 $ 1.99 $ .23$
(1.67)
======== ======== ======== ======== =======
Balance Sheet Data (at end of period):
Total assets $3,611.6 $3,436.8 $3,323.2 $3,172.3 $2,343.3
Working capital 592.6 551.8 484.2 499.3 322.7
Working capital ratio 2.4:1 2.5:1 2.1:1 2.4:1 1.9:1
Long-term debt, less
current maturities $ 694.8 $ 736.7 $ 750.2 $ 801.6 $ 994.6
Total debt, net of cash
on hand 692.1 754.9 620.6 672.1 946.9
Stockholders' equity 1,339.9 1,156.3 1,007.8 856.3 602.3
Total capitalization 2,032.0 1,911.2 1,628.4 1,528.4 1,549.2
Debt/total capitalization 34.1% 39.5% 38.1% 44.0% 61.1%
Other Financial Data:
Cash provided by
operating activities $ 573.0 $ 342.0 $ 554.5 $ 165.5 $ 73.4
Capital expenditures 223.4 172.7 114.9 76.0 137.1
Cash dividends paid 30.1 35.5 24.6 14.2 30.7
Dividends per share .32 .33 .26 .15 .32
Book value per share 14.32 12.52 11.09 9.46 7.91
(1) Restated to reflect the Merger which was accounted for as a pooling
of interests.
(2) See Notes to Consolidated Financial Statements for a description
of acquisitions, accounting change and non-recurring items. Beginning
in 1994, operating results reflect the consolidation of the joint
venture partnership formed on July 1, 1993 with FRP.
(3) Includes 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, partially offset by a gain of $8.1
million from the resolution of a contract dispute with a major uranium
customer. Also includes charges of $169.1 million, net of insurance
recoveries and legal fees, resulting from the settlement of a lawsuit
for damages arising out of an explosion at a nitroparaffins plant in
Sterlington, Louisiana, and $47.1 million for the cumulative effect on
prior years of adopting Statement of Financial Accounting Standard
(SFAS) No. 106, "Employers Accounting for Postretirement Benefits Other
Than Pensions," on July 1, 1992.
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition.
INTRODUCTION
The Company is one of the world's leading producers of crop
nutrients for the international agricultural community and is one of
the foremost domestic distributors of crop nutrients and related
products through its retail and wholesale distribution networks.
Through its IMC-Agrico joint venture with FRP, the Company is one of
the world's leading producers and marketers of phosphate crop nutrients
(IMC-Agrico Crop Nutrients) and animal feed ingredients (IMC-Agrico
Feed Ingredients). The Company is also a world leading producer and
marketer of potash crop nutrients and industrial grade potash through
various operations in the United States and Canada (collectively, IMC
Kalium). In addition, IMC is one of the nation's leading distributors
of crop nutrients and related products, including nitrogen, through its
FARMARKET (registered trademark) and Rainbow (registered trademark)
distribution networks (collectively, IMC AgriBusiness). The Company
also manufactures and distributes consumer lawn and garden products;
produces and markets professional products for turf, nursery and
horticulture markets; and produces and distributes potassium-based ice
melter products (collectively, IMC Vigoro). Through other joint
venture operations, the Company produces sulphur and oil and gas. (See
"Subsequent Event," in Part I, Item 1, "Business," of this Annual
Report on Form 10-K.)
The Company's fiscal year ends June 30 and all yearly references
herein refer to fiscal years unless otherwise noted. Shares and per
share amounts have been restated to reflect a 2-for-1 stock split,
effected in the form of a 100 percent stock dividend distributed on
November 30, 1995.
Change in Fiscal Year
Effective with the calendar year ending December 31, 1997, the
Company will change from a fiscal year end of June 30 to December 31 in
order to permit more effective business planning, including annual
budgeting, government reporting and audit functions, as well as align
statistical and financial reporting with competitors. The Company will
file a transition report on Form 10-K for the calendar year ended
December 31, 1997.
Merger
The Company completed the Merger with Vigoro on March 1, 1996,
which resulted in Vigoro becoming a subsidiary of the Company. In
connection with the Merger, the Company issued approximately 32.4
million shares of common stock in exchange for all of the outstanding
common stock of Vigoro. The Merger has been accounted for as a pooling
of interests. Accordingly, the Company's results of operations for all
appropriate prior periods presented reflect the Merger.
Acquisitions
The Company's results of operations have been impacted by several
acquisitions consummated during 1995, 1996 and 1997:
In January 1995, the Company acquired substantially all of the
assets of the Central Canada Potash division (CCP) of Noranda, Inc. for
$121.1 million, plus $16.2 million for working capital.
In October 1995, the Company acquired Feed Ingredients and
subsequently contributed the business to IMC-Agrico. The Company's
portion of the purchase price was $67.5 million. In addition, during
fiscal 1996 the Company completed several smaller acquisitions,
including several retail distribution operations (Agri-Supply) and seed
operations (Madison Seed).
The Company completed several acquisitions during 1997, including a
precision farming operation (Top-Soil); several retail distribution
operations (Crop-Maker, Frankfort Supply, Sanderlin and Hutson Ag
Services, Inc.); a storage terminal company (Hutson Company, Inc.); and
the remaining interest in a subsidiary. Total cash payments for
acquisitions during fiscal 1997 were $48.6 million and approximately
200,000 shares of common stock were issued.
These acquisitions were accounted for under the purchase method of
accounting, and accordingly, results of operations for the acquired
companies have been included in the Company's results of operations
from their respective dates of acquisition.
RESULTS OF OPERATIONS
Overview
- --------
[CHART]
Net Sales
- ---------
(in millions)
1997 1996 1995
-------- -------- --------
$2,982.0 $2,981.0 $2,736.1
[CHART]
Gross Margins
- -------------
(in millions)
1997 1996(1) 1995
------ ------ ------
$770.0 $783.5 $694.6
(1) Before special one-time charges
[CHART]
Net Earnings
- ------------
(in millions)
1997 1996(1) 1995
------ ------ ------
$193.1 $213.9 $180.9
(1) Before special one-time charges
1997 Compared to 1996
Net sales of $2,982.0 million were essentially unchanged from
$2,981.0 million reported in 1996. Gross margins for 1997 were $770.0
million, a decrease of two percent from comparable 1996 margins of
$783.5 million, excluding special one-time charges of $26.3 million as
discussed below.
Net earnings, before an extraordinary charge, of $204.5 million, or
$2.15 per share, decreased four percent compared with 1996 net
earnings, excluding special one-time charges, of $213.9 million, or
$2.31 per share. An extraordinary charge of $11.4 million, or $0.12
per share, related to the early extinguishment of debt, reduced 1997
net earnings to $193.1 million, or $2.03 per share. In 1996, special
one-time charges of $69.6 million, or $0.75 per share, reduced net
earnings to $144.3 million, or $1.56 per share. These charges,
totaling $98.6 million before tax benefits, covered costs related to
the Merger, as well as costs associated with, among other things, a
corporate restructuring, other asset valuations and environmental
issues.
In connection with the Merger in 1996, the Company recorded charges
totaling $20.2 million, primarily for consulting, legal and accounting
services. Immediately following the Merger, the Company adopted a plan
to restructure its business operations into a decentralized
organizational structure with five stand-alone business units. As a
result, the Company recorded restructuring charges totaling $23.1
million. The charges consisted of: (i) $6.5 million for lease
terminations resulting from office consolidations and (ii) $16.6
million for severance and related benefits from staff reductions
resulting from the termination of approximately 120 employees,
primarily middle management personnel, and other related actions. As
of June 30, 1997, the following amounts were paid: (a) $20.2 million
for charges relating to the Merger; (b) $5.6 million for lease
terminations resulting from office consolidations and (c) $13.4 million
relating to the termination of approximately 120 employees and other
actions.
In connection with the 1996 restructuring plan, the Company
undertook a detailed review of its accounting records and valuation of
various assets and liabilities. As a result, the Company recorded
charges totaling $58.3 million ($55.3 million net of minority interest)
comprised of: (i) $26.3 million ($23.3 million net of minority
interest) to cost of goods sold of which $17.5 million was primarily
related to the write-off of certain idle plant facilities and other
obsolete assets, $5.0 million for environmental matters and $3.8
million for other matters; (ii) $2.4 million of general and
administrative expenses for the write-off of miscellaneous assets;
(iii) $16.6 million to other income and expense, net, to reduce certain
long-term assets to net realizable value and other provisions and (iv)
$13.0 million to minority interest for the transfer of 0.85 percent
interest of IMC-Agrico Distributable Cash (as defined in the IMC-Agrico
Partnership Agreement (Partnership Agreement)) from the Company to FRP.
As of June 30, 1997, $29.5 million of non-cash write-offs were charged
against the reserve.
Fiscal 1997 sales and earnings were driven by Crop Nutrients'
results which essentially offset sales and earnings growth in the other
business units. Crop Nutrients' sales realizations and volumes
declined primarily due to a more competitive marketplace characterized
by additional supply made available by other producers which resulted
in an 11 percent decline in sales and an 18 percent decline in margins
for that business unit when compared to the prior year.
1996 Compared to 1995
Net sales increased nine percent to $2,981.0 million from $2,736.1
million in 1995. Gross margins for 1996 of $783.5 million, excluding
special one-time charges, increased 13 percent over 1995 margins of
$694.6 million.
Net earnings, excluding special one-time charges, of $213.9
million, or $2.31 per share, increased 11 percent over comparable 1995
net earnings of $193.3 million, or $2.12 per share, excluding
extraordinary charges and the cumulative effect of an accounting
change. As discussed above, special one-time charges of $69.6 million,
or $0.75 per share, reduced net earnings for 1996 to $144.3 million, or
$1.56 per share. In 1995, a charge of $5.9 million, or $0.06 per
share, for the cumulative effect on prior years of a change in
accounting for postemployment benefits resulting from the adoption of
SFAS No. 112 , "Employers' Accounting for Postemployment Benefits," on
July 1, 1994 and an extraordinary charge of $6.5 million, or $0.07 per
share, related to the early extinguishment of debt, reduced net
earnings to $180.9 million, or $1.99 per share.
The increases in 1996 net sales, gross margins and net earnings
compared to 1995 reflected improved operating results from the
Company's three largest business units and the net impact of various
other operating and non-operating factors.
IMC-Agrico Crop Nutrients
- -------------------------
% Increase
Years ended June 30, (Decrease)
------------------------------ -----------
1997 1996 1995 1997 1996
------ ------ ------ ----- -----
Net sales (in $1,562.2 $1,747.7 $1,559.0 (11%) 12%
millions)
Gross margins (in $ 357.8 $ 435.3(c) $ 335.4 (18%) 30%
millions)
As a percentage 23% 25% 22%
of net sales
Sales volumes (000 7,281 7,723 7,389 (6%) 5%
tons)(a)
Average DAP price $ 179 $ 186 $ 162 (4%) 15%
per short ton(b)
(a)Sales volumes include tons sold captively and
represent dry product tons, primarily DAP.
(b)FOB plant/mine.
(c)Before special one-time charges of $6.9 million.
1997 Compared to 1996
Crop Nutrients' net sales in 1997 decreased 11 percent to $1,562.2
million from $1,747.7 million in 1996. Overall sales volumes of
concentrated phosphates, primarily DAP, declined six percent, mainly
due to lower domestic shipments of concentrated phosphates resulting
from a more competitive marketplace characterized by additional supply
made available by other producers, which unfavorably impacted net sales
by $52.7 million. International concentrates volumes declined by $29.7
million primarily due to lower GTSP shipments, mainly to Pakistan,
Bangladesh and Chile, coupled with management's decision to terminate a
long-term tolling agreement in order to pursue more profitable
business. In addition, Crop Nutrients, through PhosChem, successfully
negotiated, for the first time ever, a two-year concentrated phosphate
sales contract with China. In addition, overall sales realizations for
concentrated phosphates, particularly DAP, declined four percent as
compared to stronger prices in the prior year, which unfavorably
impacted net sales by $47.8 million. Net sales were also affected by
lower phosphate rock revenues of $47.1 million, resulting primarily
from Crop Nutrients' strategic decision to phase out export sales of
rock. This action is being taken to maximize relative values of rock
and concentrated phosphates by utilizing high-quality reserves for
internal upgrading.
Gross margins declined 18 percent to $357.8 million in the current
year compared to $435.3 million, excluding special one-time charges of
$6.9 million, in the prior year, primarily due to the lower volumes and
prices discussed above.
1996 Compared to 1995
Crop Nutrients' net sales in 1996 increased 12 percent to $1,747.7
million as compared to $1,559.0 million for 1995. Higher concentrated
phosphate prices in 1996, primarily due to increased world demand
compared to 1995, favorably impacted sales by $185.0 million.
Concentrated phosphate volumes increased, mainly as a result of strong
sales to India, Australia, Japan, New Zealand, Pakistan and Brazil. In
addition, Crop Nutrients, through PhosChem, successfully negotiated a
first-ever calendar year concentrated phosphate sales contract with
China. These increases were partially offset by lower phosphate rock
shipments due to the Company's strategic decision to phase out export
sales of rock as discussed above.
Gross margins, before special one-time charges of $6.9 million,
increased $99.9 million, or 30 percent, to $435.3 million for 1996 as
compared to $335.4 million in 1995. This increase was primarily due to
the higher sales realizations for concentrated phosphates discussed
above, as well as improvements in phosphate rock sales prices. The
favorable impact of price improvements, however, was partially offset
by higher phosphate rock production costs, due in large part to higher
electricity and maintenance costs, as well as higher fuel costs.
IMC Kalium
% Increase
Years ended June 30 (Decrease)
------------------------------- ------------
1997 1996 1995 1997 1996
------- ------- ------- ---- ----
Net sales (in $ 524.3 $ 455.6 $ 472.0 15%
millions) (3%)
Gross margins (in $ 197.0 $ 160.3(c) $ 209.0 23% (23%)
millions)
As a percentage 38% 35% 44%
of net sales
Sale volumes 8,006 7,215 7,353 11%
(000 tons)(a) (2%)
Average potash $ 66 $ 64 $ 65 3% (2%)
price per short
ton(b)
(a) Sales volumes include
tons sold captively.
(b) FOB plant/mine.
(c) Before special one-time charges of $7.9 million.
1997 Compared to 1996
IMC Kalium's net sales increased 15 percent to $524.3 million in
1997 from $455.6 million in 1996. Sales increased in 1997 due to
higher volumes and sales realizations when compared to the prior year.
Overall potash sales volumes increased 11 percent, primarily due to
higher international sales volumes, which favorably impacted net sales
by $36.2 million, mainly resulting from increased sales to China. In
addition, higher domestic sales volumes favorably impacted net sales by
$19.6 million, primarily as a result of greater potash demand in North
America because of improved weather conditions and additional corn
acreage planted in 1997, as well as higher sales of industrial-grade
potash. Average sales realizations improved nearly three percent as a
result of price increases in September and March, as well as
management's decision to eliminate low-margin business, increasing net
sales by $12.9 million.
Gross margins increased $36.7 million, or 23 percent, to $197.0
million for 1997 as compared to $160.3 million in 1996, excluding
special one-time charges of $7.9 million. In addition to the price and
volume impacts discussed above, reduced Canadian provincial resource
taxes and benefits realized from the renegotiation of transportation
terms favorably impacted margins.
1996 Compared to 1995
IMC Kalium's net sales decreased three percent to $455.6 million
in 1996 from $472.0 million in 1995. The decline in net sales in 1996
was primarily the result of lower potash export sales volumes due to
reduced sales to China, the largest potash export customer, which
impacted net sales $27.0 million, coupled with lower average domestic
potash sales prices due to excess producer inventories, which impacted
revenues by $13.1 million. These decreases were partially offset by
the impact of higher potash export sales prices as well as increased
domestic shipments, which collectively improved net sales by $23.7
million. Results for 1996 reflected the impact of the inclusion of a
full year of net sales for CCP, which was acquired in January 1995.
Gross margins, before special one-time charges of $7.9 million,
decreased $48.7 million, or 23 percent, to $160.3 million for 1996 as
compared to $209.0 million in 1995. This decrease reflected the impact
of lower export sales volumes and lower domestic sales prices discussed
above. The decrease in domestic prices reflected the intense pressure
to lower inventory levels that had risen due to unusually wet spring
weather in the midwestern United States. These adverse conditions
ultimately necessitated a reduction in potash production to balance
output with market requirements. Accordingly, the Company temporarily
reduced potash output at four of its six mines by accelerating
maintenance schedules and summer vacation shutdowns, beginning in early
June 1996 and concluding in mid-August 1996.
IMC AgriBusiness
- ----------------
(In millions)
% Increase
Years ended June 30, (Decrease)
------------------------------ ------------
1997 1996 1995 1997 1996
------ ------ ------ ---- ----
Net sales $ 860.7 $ 802.9 $ 760.8 7% 6%
Gross margins $ 167.3 $ 146.6(a) $ 134.8 14% 9%
As a percentage 19% 18% 18%
of net sales
(a) Before special one-time charges of $5.5 million.
1997 Compared to 1996
IMC AgriBusiness' net sales increased seven percent to $860.7
million in 1997 from $802.9 million in 1996. Higher sales volumes were
primarily due to the inclusion of sales from businesses acquired during
1997 in the current year results of operations, coupled with increased
sales of ammonia, nitrogen solutions and crop protection products which
favorably impacted net sales by $93.1 million in the aggregate. Higher
average sales realizations also favorably impacted net sales by $5.1
million, mainly due to management's allocation of business between the
various channels of distribution to maximize profits. These increases
were partially offset by lower sales volumes of DAP, potash and mixed
goods, which unfavorably impacted net sales by $40.4 million.
Gross margins of $167.3 million in 1997 increased 14 percent from
comparable margins of $146.6 million in 1996, excluding special one-
time charges of $5.5 million, mainly due to the impact of volumes and
prices discussed above.
1996 Compared to 1995
IMC AgriBusiness' net sales increased six percent to $802.9 million
in 1996 as compared to $760.8 million in 1995. The increase in net
sales in 1996 reflected the impact of a four percent increase in
average sales prices, which favorably impacted revenues by $27.7
million. The increase in sales realizations was the result of improved
pricing on select products as well as a change in the mix of products
sold. Increased sales volumes, which favorably impacted 1996 net sales
by $14.4 million, were primarily the result of the inclusion of sales
from the Agri-Supply and Madison Seed operations which were acquired
during 1996.
Gross margins, before special one-time charges of $5.5 million,
increased $11.8 million, or nine percent, to $146.6 million for 1996 as
compared to $134.8 million in 1995. The increase in gross margins was
primarily the result of increases in sales prices and sales volumes due
to the factors discussed above. These increases were partially offset
by the impact of higher purchased product and raw material costs.
Other
- -----
1997 Compared to 1996
The remaining increases in net sales and gross margins for the year
ended June 30, 1997, as compared to the prior year, were primarily the
result of the inclusion in fiscal 1997 of a full year of results
related to the Feed Ingredients acquisition and higher sales
realizations on IMC-Agrico Feed Ingredients' products.
1996 Compared to 1995
The remaining increases in sales and gross margins were primarily
the result of the inclusion in fiscal 1996 of a partial year of results
related to the Feed Ingredients acquisition in October 1995.
Selling, General and Administrative Expenses
- --------------------------------------------
(In millions)
% Increase
Years ended June 30, (Decrease)
------------------------------- ----------
1997 1996 1995 1997 1996
------ ------ ------ ---- ----
Selling, general
and administra- $ 247.2 $ 227.3(a) $ 200.6 9% 13%
tive expenses
(a)Before special one-time charges of $2.4 million.
In 1997, selling, general and administrative expenses increased
primarily as a result of: (i) the inclusion of a full year of
operations of the Feed Ingredients, Agri-Supply and Madison Seed
acquisitions during 1996; (ii) the inclusion of a partial year of the
operations of the businesses acquired through the Top-Soil, Crop-Maker,
Frankfort Supply, Sanderlin, Hutson Ag Services, Inc. and Hutson
Company, Inc. acquisitions during 1997; (iii) costs associated with
increased sales volumes to The Home Depotr and (iv) Company-wide
strategic sourcing and systems projects. Selling, general and
administrative expenses increased in 1996 primarily due to higher
expenses associated with the inclusion of a full year of operations of
CCP, which was acquired during 1995, and a partial year of operations
of the businesses acquired through the Feed Ingredients, Agri-Supply
and Madison Seed acquisitions during 1996.
Merger and Restructuring Charges
- --------------------------------
See "Results of Operations - Overview," in Part I, Item 7,
"Management's Discussion and Analysis of Results of Operations and
Financial Condition," of this Annual Report on Form 10-K.
Other (Income) and Expense, Net
- --------------------------------
(In millions)
% Increase
Years ended June 30, (Decrease)
------------------------------- -----------
1997 1996 1995 1997 1996
------ ------ ------ ---- ----
Other (income) and $ (5.7) $ (10.5) $ (15.4) (46%) (32%)
expense, net
A reduction in average cash invested during 1997 resulted in lower
interest income of $5.2 million compared to 1996. Results for 1996
included gains on the sale of investments and properties of $14.1
million offset by merger and restructuring charges of $16.6 million.
(See "Results of Operations - Overview," in Part I, Item 7,
"Management's Discussion and Analysis of Results of Operations and
Financial Condition," of this Annual Report on Form 10-K.) In 1995,
other income and expense, net included a gain of $5.0 million from the
sale of land in Florida.
Interest Expense
- ----------------
(In millions)
% Increase
Years ended June 30, (Decrease)
----------------------------
1997 1996 1995 1997 1996
------ ------ ------ ---- ----
Interest expense $ 51.1 $ 64.8 $ 70.2 (21%) (8%)
In 1997, the decrease in interest expense was a direct result of:
(i) lower average overall credit line and short-term borrowings as
compared to the prior year; (ii) the refinancing of higher cost, long-
term indebtedness at lower interest rates and (iii) the redemption of
convertible subordinated notes in November 1996. Interest charges in
1996 were lower than the prior year as the Company reduced a portion of
its higher cost, long-term indebtedness during the prior fiscal year.
Partially offsetting this decrease were interest charges resulting from
increases in long-term debt used to fund the acquisition of CCP and
other acquisitions during 1995.
Income Taxes
- ------------
The effective tax rate of 36.5 percent for 1997, while the same as
the 1996 rate before special one-time charges, decreased from the 1995
rate of 37.4 percent. The lower effective rate is the result of post-
merger planning and restructuring efforts.
CAPITAL RESOURCES AND LIQUIDITY
Liquidity and Operating Cash Flow
- ---------------------------------
[CHART]
Debt to Total Capitalization
- ----------------------------
1997 1996 1995
---- ---- ----
34.1% 39.5% 38.1%
[CHART]
EBITDA (in millions)
- -------
Earnings before minority interest, interest
charges, taxes, depreciation and amortization,
and net of FRP distributions
1997 1996 1995
------ ------ ------
$491.7 $509.9 $447.7
[CHART]
Cash Provided by Operations
- ---------------------------
(in millions)
1997 1996 1995
------ ------ ------
$573.0 $342.0 $554.5
Cash and cash equivalents as of June 30, 1997 were $43.2 million as
compared to $9.6 million at June 30, 1996. Cash inflows in 1997 of
$573.0 million generated from operating activities coupled with $79.8
million net proceeds from borrowings under available credit facilities
were used to fund capital expenditures of $223.4 million, distributions
to FRP of $221.2 million, open market purchase of outstanding common
stock of $105.1 million, acquisitions of businesses for aggregate
consideration of $48.6 million and common stock dividend payments of
$30.1 million. The Company generates significant cash from operations
and has substantial borrowing capacity to meet its operating and
discretionary spending requirements.
Net cash provided by operating activities was $573.0 million,
$342.0 million and $554.5 million in 1997, 1996 and 1995, respectively.
In 1997, working capital increased slightly, mainly due to increased
inventory levels, primarily phosphate rock. The decrease in operating
cash flow in 1996 reflected the impact of increased working capital
levels, largely related to higher receivables and inventories as a
result of prolonged wet weather in the spring of 1996. The Company's
working capital ratio at June 30, 1997 was 2.4:1 versus 2.5:1 at June
30, 1996.
Net cash used in investing activities was $269.9 million, $234.5
million, and $242.7 million in 1997, 1996 and 1995, respectively.
These results reflect increased capital spending over the three years.
Results for 1997 reflected the Top-Soil, Crop-Maker, Frankfort Supply,
Sanderlin, and Hutson acquisitions during the year. The impact of the
Feed Ingredients and Madison Seed acquisitions are reflected in the
1996 results, and the CCP acquisition impacted 1995 results. (See
"Introduction - Acquisitions," in Part II, Item 7, "Management's
Discussion and Analysis of Results of Operations and Financial
Condition," of this Annual Report on Form 10-K for further detail.)
Net cash used in financing activities was $269.5 million, $301.6
million and $283.7 million for 1997, 1996 and 1995, respectively. Net
debt proceeds for 1997 were $79.8 million while net repayments in 1996
and 1995 were $60.1 million and $33.0 million, respectively. Debt to
total capitalization improved to 34.1 percent at June 30, 1997 compared
to 39.5 percent one year ago, primarily due to a reduction in higher
cost, long-term indebtedness. Distributions to FRP reflect the
earnings of IMC-Agrico, which increased in 1996, but declined in 1997.
Distributions to FRP included in net cash used in financing activities
were $221.2 million, $242.0 million and $228.1 million for 1997, 1996
and 1995, respectively. The Company's share of cash distributions from
IMC-Agrico increased by 13 percentage points to 58.6 percent effective
July 1, 1997. (See "Subsequent Event," in Part I, Item 1, "Business,"
of this Annual Report on Form 10-K.) Dividends paid for 1997, 1996 and
1995 were $30.1 million, $35.5 million and $24.6 million, respectively.
Also, during 1997, $105.1 million was used to finance the repurchase of
approximately 2.9 million shares of outstanding common stock. On
August 26, 1997, the Board of Directors of the Company authorized the
repurchase from time to time in open market transactions of up to an
additional five million shares. The Company received cash of $7.1
million, $25.8 million and $2.0 million related to the exercise of
stock options in 1997, 1996 and 1995, respectively.
Capital Spending
- ----------------
[CHART]
Capital Expenditures
- --------------------
(in millions)
1997 1996 1995
------ ------ ------
$223.4 $172.7 $114.9
Capital expenditures for 1997 were $223.4 million, an increase of
$50.7 million over 1996 expenditures of $172.7 million, due largely to
spending related to a salt plant expansion at the Company's Hersey,
Michigan facility and the acquisition of the Pine Level property. (See
"Contingencies - Pine Level Property Reserves," in Part II, Item 7,
"Management's Discussion and Analysis of Results of Operations and
Financial Condition," of this Annual Report on Form 10-K for further
detail.) The Company estimates that its capital expenditures for
fiscal 1998 will approximate $300.0 million. The Company expects to
finance these expenditures primarily from operations. (See "Other
Matters - Environmental Matters," in Part I, Item 1, "Business," of
this Annual report on Form 10-K for a discussion of environmental
capital expenditures which are included in the foregoing estimate.)
Pursuant to the Partnership Agreement, IMC-Agrico is required to obtain
the approval of the Policy Committee of IMC-Agrico (which consists of
two representatives each from the Company and FRP) prior to making
capital expenditures for expansion of its business in any fiscal year
in excess of $5.0 million (adjusted annually for inflation). In the
event that the Policy Committee fails to approve future capital
expenditures, IMC-Agrico's ability to expand its business could be
adversely affected. (See "Subsequent Event," in Part I, Item 1,
"Business," of this Annual Report on Form 10-K.)
Financing
- ---------
[CHART]
Total Debt
- ----------
(in millions)
1997 1996 1995
------ ------ ------
$735.3 $764.5 $824.3
In February 1996, the Company entered into an unsecured credit
facility (Credit Facility) with a group of banks. Under the terms of
the Credit Facility, the Company and certain of its subsidiaries may
borrow up to $450.0 million under a revolving credit facility which
matures on March 1, 1999 and $50.0 million under a long-term credit
facility which matures on March 2, 2001. In addition, the Company has
a maximum availability of approximately $283.0 million under
uncommitted money market lines. On August 29, 1997, the Company and
its subsidiaries had borrowed $10.0 million under the revolving credit
facility, $46.9 million under the long-term credit facility and $84.2
million under the money market lines. The Company has classified
borrowings under revolving credit facilities and money market lines as
long-term debt since the Company has the ability and the intent to
maintain these obligations for longer than one year. Additionally, as
of August 29, 1997, $33.3 million was drawn under the Credit Facility
as letters of credit principally to support industrial revenue bonds
and other debt and credit risk guarantees.
Simultaneously with the execution of the Credit Facility, the
Company and one of its subsidiaries refinanced certain of its unsecured
term loans. The new $120.0 million unsecured term loans (Term Loans)
bear interest at rates between 7.12 percent and 7.18 percent and mature
at various times between 2000 and 2005.
The Credit Facility, Term Loans and Senior Notes (as defined
hereinafter) 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. These debt
instruments also contain various financial ratio requirements and other
covenants.
IMC-Agrico has several agreements with a group of banks to provide
it with an aggregate revolving credit facility of $125.0 million
(collectively, IMC-Agrico Revolving Credit Facility or Agreements)
maturing September 1997, December 1997 and February 1998. The
IMC-Agrico Revolving Credit Facility has a letter of credit subfacility
for up to $25.0 million. Borrowings under the IMC-Agrico Revolving
Credit facility are unsecured with a negative pledge on substantially
all of IMC-Agrico's assets and bear interest at rates based on a base
rate or an adjusted Eurodollar rate. On August 29, 1997, IMC-Agrico
had drawn $8.4 million under the letter of credit subfacility and had
borrowings of $88.6 million under the remainder of the IMC-Agrico
Revolving Credit Facility. IMC-Agrico has classified borrowings under
the IMC-Agrico Revolving Credit Facility as long-term debt since
IMC-Agrico has the ability and the intent to maintain these obligations
for longer than one year.
The Agreements have restrictive covenants including minimum net
partners' capital, fixed charge and current ratio requirements; place
limitations on indebtedness of IMC-Agrico; and restrict the ability of
IMC-Agrico to make cash distributions in excess of Distributable Cash.
The Agreements require IMC-Agrico to repay all revolving loans for a
minimum of 30 consecutive days within each calendar year. In addition,
pursuant to the Partnership Agreement, IMC-Agrico is required to obtain
the approval of the Policy Committee of IMC-Agrico prior to incurring
more than an aggregate of $5.0 million (adjusted annually for
inflation) in indebtedness (excluding a total of $125.0 million of
indebtedness under the IMC-Agrico Revolving Credit Facility). (See
"Subsequent Event," in Part I, Item 1, "Business," of this Annual
Report on Form 10-K.)
The net residual interest included in the receivables shown on the
Consolidated Balance Sheet are owned by IMC-Agrico Receivables Company
L.L.C. (IMC-Agrico L.L.C.), a special-purpose limited liability company
of which IMC-Agrico is the sole equity owner. Under an agreement with
a financial institution, IMC-Agrico L.L.C. may sell, on an ongoing
basis, an undivided percentage interest in a designated pool of
receivables, subject to limited recourse provisions related to the
international receivables, in an amount not to exceed $65.0 million.
At June 30, 1997, IMC-Agrico L.L.C. had sold a total of $49.3 million
of such receivable interests, $32.5 million of which are classified as
short-term debt in the Consolidated Balance Sheet. Costs, primarily
from discount fees and other administrative costs, totaled $3.4
million, $3.6 million and $2.5 million in 1997, 1996 and 1995,
respectively.
In fiscal 1997, the Company purchased a total of $166.4 million
principal amount of its 9.25 percent senior notes due 2000, 10.125
percent senior notes due 2001 and 10.75 percent senior notes due 2003
(collectively, Senior Notes) prior to maturity in an effort to reduce
higher cost indebtedness. As a result, the Company recorded an
extraordinary charge, net of taxes, of $10.8 million for the redemption
premium and write-off of previously deferred finance charges. In
addition, in fiscal 1997, the Company completed the redemption of its
outstanding $114.9 million, 6.25 percent convertible subordinated notes
due 2001 (Subordinated Notes). In connection with the conversion of
the Subordinated Notes, the Company recorded an extraordinary charge,
net of taxes, of $0.6 million for write-off of previously deferred
finance charges. The Company issued approximately 3.6 million shares
of common stock to holders of $114.4 million principal amount of the
Subordinated Notes who converted the Subordinated Notes prior to the
redemption date. The balance of $0.5 million principal amount was
redeemed by the Company for cash.
In May 1997, the Company filed a registration statement on Form S-3
to increase debt and equity securities from $140.0 million to $300.0
million. In July 1997, the Company issued $150.0 million of 6.875
percent senior debentures due 2007. The proceeds were used to reduce
higher cost indebtedness.
DERIVATIVES
The Company periodically enters into options to purchase natural
gas and entered into DAP futures contracts to manage its exposure to
price fluctuations. Net hedging gains and losses are recognized as
part of the transactions hedged and were not material during 1997, 1996
or 1995. The Company monitors its market risk on an ongoing basis and
currently considers such risk to be minimal.
CONTINGENCIES
Reference is made to "Sterlington Litigation" and "Potash
Antitrust Litigation," in Part I, Item 3, "Legal Proceedings," of this
Annual Report on Form 10-K.
Pine Level Property Reserves
- ----------------------------
In October 1996, IMC-Agrico signed an agreement with CMI for the
purchase of real property, Pine Level, containing approximately 100
million tons of phosphate rock reserves. In connection with the
purchase, IMC-Agrico has agreed to obtain all environmental, regulatory
and related permits necessary to commence mining on the property.
Within five years from the date of this agreement, IMC-Agrico is
required to provide notice to CMI regarding one of the following: (i)
whether they have obtained the permits necessary to commence mining any
part of the property; (ii) whether they wish to extend the permitting
period for an additional three years or (iii) whether they wish to
decline to extend the permitting period. If the permits necessary to
commence mining the property have been obtained, IMC-Agrico is
obligated to pay CMI an Initial Royalty payment of $28.9 million. In
addition to the Initial Royalty payment described above, IMC-Agrico is
required to pay CMI a mining royalty on phosphate rock mined from the
property to the extent the permits are obtained.
Mississippi Chemical Corporation Property Reserves
- --------------------------------------------------
In July 1994, IMC-Agrico entered into an option agreement with
Mississippi Chemical Corporation (MCC) to purchase land in Florida.
The property, along with land previously purchased from MCC, contains
approximately 87.5 million tons of phosphate rock reserves. Prior to
January 16, 1998, IMC-Agrico may exercise its option to purchase the
property for $57.0 million. If IMC-Agrico fails to exercise its option
by that date, MCC has the right to sell the property to IMC-Agrico and
IMC-Agrico will be obligated to purchase the property for $50.0
million.
Other
- -----
Reference is made to "IMC Kalium - United States Operations,"
regarding the Western Ag acquisition, in Part I, Item 1, "Business," of
this Annual Report on Form 10-K.
Reference is made to "IMC Kalium - Canadian Operations," regarding
mining risks, in Part I, Item 1, "Business," of this Annual Report on
Form 10-K.
The Company does not consider the impact of inflation to be
significant in the business in which it operates.
ENVIRONMENTAL MATTERS
Reference is made to "Other Matters - Environmental Matters," in
Part I, Item 1, "Business," of this Annual Report on Form 10-K.
SUBSEQUENT EVENT
Reference is made to "Subsequent Event," in Part I, Item 1,
"Business," of this Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data.
Page
----
Report of Independent Auditors 31
Consolidated Statement of Earnings 32
Consolidated Balance Sheet 33
Consolidated Statement of Cash Flows 34
Consolidated Statement of Changes in Stockholders' Equity 35
Notes to Consolidated Financial Statements 36
Supplementary Financial Information -
Quarterly Results (Unaudited) 55
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of IMC Global Inc.
We have audited the accompanying consolidated balance sheet of IMC
Global Inc. (formed as a result of the consolidation of IMC Global Inc.
and The Vigoro Corporation) as of June 30, 1997 and 1996 and the
related consolidated statements of earnings, cash flows and changes in
stockholders' equity for each of the three years in the period ended
June 30, 1997. The consolidated financial statements give retroactive
effect to the merger of IMC Global Inc. and The Vigoro Corporation on
March 1,1996, which has been accounted for using the pooling of
interests method as described in the notes to the consolidated
financial statements. These consolidated financial statements are the
responsibility of the management of IMC Global Inc. Our responsibility
is to express an opinion on these consolidated financial statements
based on our audits. We did not audit the 1995 financial statements of
The Vigoro Corporation which statements reflect net sales of
approximately 34 percent of the consolidated financial statement total
for the year ended June 30, 1995. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion,
insofar as it relates to data included for The Vigoro Corporation, is
based solely on the report of the other auditors.
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 and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of IMC Global Inc. at June 30, 1997 and 1996, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended June 30, 1997, after giving
retroactive effect to the merger of The Vigoro Corporation, as
described in notes to the consolidated financial statements, in
conformity with generally accepted accounting principles.
As discussed in the notes to consolidated financial statements,
the Company changed its method of accounting for postemployment
benefits in 1995.
Ernst & Young LLP
Chicago, Illinois
July 23, 1997, except for Note 22, as to which the date is September 5,
1997
CONSOLIDATED STATEMENT OF EARNINGS
(In millions except per share amounts)
Years ended June 30,
1997 1996 1995
- -----------------------------------------------------------------------
Net sales $2,982.0 $2,981.0 $2,736.1
Cost of goods sold 2,212.0 2,223.8 2,041.5
Gross margins 770.0 757.2 694.6
Selling, general and administrative
expenses 247.2 229.7 200.6
Merger and restructuring charges - 43.3 -
-------- -------- --------
Operating earnings 522.8 484.2 494.0
Other (income) expense, net (5.7) (10.5) (15.4)
Interest expense 51.1 64.8 70.2
-------- -------- --------
Earnings before minority interest 477.4 429.9 439.2
Minority interest 155.4 191.5 130.4
-------- -------- --------
Earnings before taxes 322.0 238.4 308.8
Provision for income taxes 117.5 94.1 115.5
-------- -------- --------
Earnings before extraordinary item and
cumulative effect of accounting change 204.5 144.3 193.3
Extraordinary charge - debt retirement (11.4) - (6.5)
Cumulative effect on prior years of
change in accounting for postemployment
benefits - - (5.9)
-------- -------- --------
Net earnings $ 193.1 $ 144.3 $ 180.9
======== ======== ========
Earnings per share:
Earnings before extraordinary item
and cumulative effect of accounting
change $ 2.15 $ 1.56 $ 2.12
Extraordinary charge - debt retirement (.12) - (.07)
Cumulative effect of accounting change - - (.06)
-------- -------- --------
Net earnings $ 2.03 $ 1.56 $ 1.99
======== ======== ========
Weighted average number of shares and
equivalent shares outstanding 95.0 92.7 91.0
(See Notes to Consolidated Financial Statements)
CONSOLIDATED BALANCE SHEET
(Dollars in millions except per share amounts)
At June 30,
Assets 1997 1996
- -----------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 43.2 $ 9.6
Receivables, net 362.5 350.2
Inventories 534.2 476.7
Deferred income taxes 54.2 61.4
Other current assets 20.3 20.3
-------- --------
Total current assets 1,014.4 918.2
Property, plant and equipment, net 2,409.2 2,351.3
Other assets 188.0 167.3
-------- --------
Total assets $3,611.6 $3,436.8
======== ========
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------
Current liabilities:
Accounts payable $ 243.0 $ 193.5
Accrued liabilities 138.3 145.1
Short-term debt and current maturities
of long-term debt 40.5 27.8
-------- --------
Total current liabilities 421.8 366.4
Long-term debt, less current maturities 694.8 736.7
Deferred income taxes 373.3 315.7
Other noncurrent liabilities 344.5 352.0
Minority interest 437.3 509.7
Stockholders' equity:
Common stock, $1 par value, authorized
250,000,000 shares; issued 101,819,151
and 97,863,784 shares in 1997 and 1996,
respectively 101.8 97.9
Capital in excess of par value 947.0 821.7
Retained earnings 522.1 359.1
Treasury stock, at cost, 8,256,620
and 5,545,884 shares in 1997 and
1996, respectively (212.2) (107.3)
Foreign currency translation adjustment (18.8) (15.1)
-------- --------
Total stockholders' equity 1,339.9 1,156.3
-------- --------
Total liabilities and stockholders'
equity $3,611.6 $3,436.8
======== ========
(See Notes to Consolidated Financial Statements)
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Years ended June 30,
1997 1996 1995
- -------------------------------------------------------------------
Cash Flows from Operating Activities
- ------------------------------------
Net earnings $ 193.1 $ 144.3 $ 180.9
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion and amortization 184.4 168.6 166.4
Minority interest 155.4 181.5 130.4
Merger and restructuring charges - 67.3 -
Deferred income taxes 63.5 0.3 16.9
Postemployment employee benefits - - 9.5
Other charges and credits, net (11.1) (5.8) (11.2)
Changes in:
Receivables 9.5 (96.0) 49.3
Inventories (35.3) (55.4) (27.7)
Other current assets 0.5 (7.2) 0.3
Accounts payable 19.3 (20.2) 14.1
Accrued liabilities (6.3) (35.4) 25.6
------- ------- -------
Net cash provided by operating
activities 573.0 342.0 554.5
------- ------- -------
Cash Flows from Investing Activities
- ------------------------------------
Capital expenditures (223.4) (172.7) (114.9)
Acquisitions of businesses, net of
cash acquired (48.6) (74.6) (142.4)
Sale of investment - 11.6 -
Sales of property, plant and equipment 2.1 1.2 14.6
------- ------- -------
Net cash used in investing activities (269.9) (234.5) (242.7)
------- ------- -------
Net cash provided before financing
activities 303.1 107.5 311.8
------- ------- -------
Cash Flows from Financing Activities
- ------------------------------------
Joint venture cash distributions to
Freeport-McMoRan Resource Partners,
Limited Partnership (221.2) (242.0) (228.1)
Payments of long-term debt (175.4) (93.2) (182.0)
Proceeds from issuance of long-term
debt, net 245.3 75.6 131.5
Changes in short-term debt, net 9.9 (42.5) 17.5
Cash dividends paid (30.1) (35.5) (24.6)
Stock options exercised 7.1 25.8 2.0
Purchase of treasury stock (105.1) - -
Other - 10.2 -
------- ------- -------
Net cash used in financing activities (269.5) (301.6) (283.7)
------- ------- -------
Net change in cash and cash equivalents 33.6 (194.1) 28.1
Cash and cash equivalents - beginning of year 9.6 203.7 175.6
------- ------- -------
Cash and cash equivalents - end of year $ 43.2 $ 9.6 $ 203.7
======= ======= =======
(See Notes to Consolidated Financial Statements)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In millions except per share amounts)
Foreign
Capital in Currency
Common Excess of Retained Treasury Translation
Stock Par Value Earnings Stock Adjustment
- ---------------------------------------------------------------------
Balance at June 30,
1994 $ 96.0 $ 777.2 $ 90.2 $(107.1) $ -
Net earnings - - 180.9 - -
Dividends ($.26
per share) - - (25.0) - -
Restricted stock
awards - 0.3 - - -
Stock options
exercised and other 0.4 5.1 - (0.3) -
Foreign currency
translation adjustment - - - - (9.9)
------ ------ ------ ------ ------
Balance at June 30,
1995 96.4 782.6 246.1 (107.4) (9.9)
Net earnings - - 144.3 - -
Dividends ($.33 per
share) - - (31.3) - -
Stock options exercised
and other 1.1 24.6 - (0.1) -
Issuance of common stock
pursuant to
acquisitions 0.4 14.5 - 0.2 -
Foreign currency
translation adjustment - - - - (5.2)
------ ------ ------ ------ ------
Balance at June 30,
1996 97.9 821.7 359.1 (107.3) (15.1)
Net earnings - - 193.1 - -
Dividends ($.32 per
share) - - (30.1) - -
Stock options exercised
and other 0.3 6.8 - - -
Issuance of common stock
pursuant to
acquisitions - 7.7 - 0.2 -
Conversion of
convertible notes 3.6 110.8 - - -
Purchase of treasury
shares - - - (105.1) -
Foreign currency
translation adjustment - - - - (3.7)
------ ------ ------ ------ ------
Balance at June 30,
1997 $ 101.8 $ 947.0 $ 522.1 $(212.2) (18.8)
====== ====== ====== ====== ======
(See Notes to Consolidated Financial Statements)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except as otherwise indicated)
1. Business of the Company
-----------------------
IMC Global Inc. (the Company), which operates in a single industry
segment, is the parent corporation of several subsidiaries and joint
venture operations which together comprise one of the world's leading
producers of phosphate and potash crop nutrients as well as animal feed
ingredients. The Company mines and processes potash in the United
States and Canada and has a 56.5 percent economic interest in
IMC-Agrico Company (IMC-Agrico), the nation's leading producer,
marketer and distributor of phosphate crop nutrients and animal feed
ingredients. The remaining interest is held by Freeport-McMoRan
Resource Partners, Limited Partnership (FRP). The Company also markets
and distributes crop nutrients and related products on a wholesale
basis through independent dealers and cooperatives, and on a retail
basis through its farm service outlets. In addition, the Company sells
potash and certain other products to industrial users in the United
States and Canada. Through its interests in other joint ventures, the
Company also produces sulphur and oil and natural gas. (See also Note
22, "Subsequent Events," of Notes to Consolidated Financial
Statements.)
2. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and all subsidiaries which are more than 50 percent owned and
controlled; the Company proportionately consolidates its 25 percent
interest in the sulphur joint venture. All significant intercompany
accounts and transactions are eliminated in consolidation. Certain
amounts in the consolidated financial statements for periods prior to
June 30, 1997 have been reclassified to conform to the current
presentation. The Company's fiscal year ends June 30.
Change in Fiscal Year
Effective with the calendar year ending December 31, 1997, the
Company will change from a fiscal year end of June 30 to December 31 in
order to permit more effective business planning, including annual
budgeting, government reporting and audit functions, as well as align
statistical and financial reporting with competitors. The Company will
file a transition report on Form 10-K for the calendar year ended
December 31, 1997.
Use of Estimates
Management is required to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less 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.
Concentration of Credit Risk
Domestically, the Company sells its products to farmers primarily in
the midwestern and southeastern United States. Internationally, the
Company's products are sold primarily through one Canadian and two U.S.
export associations. In 1997, sales of concentrated phosphates and
potash to China accounted for approximately 13 percent of the Company's
net sales. No single customer or group of affiliated customers
accounted for more than ten percent of the Company's net sales.
Receivables
Under an agreement with a financial institution, IMC-Agrico
Receivables Company, L.L.C. (IMC-Agrico L.L.C.), a special purpose
limited liability company of which IMC-Agrico is the sole equity owner,
may sell, on an ongoing basis, an undivided percentage interest in a
designated pool of receivables, in an amount not to exceed $65.0
million. Effective, January 1, 1997, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which requires the sale of receivables sold with recourse
to be classified as short-term debt.
Inventories
Inventories are valued at the lower of cost or market (net
realizable value). Cost for substantially all of the Company's
inventories is calculated on a cumulative annual-average cost basis.
Cost for the remaining portion of inventories, primarily for products
sold through the Company's retail farm service outlets, is determined
using the first-in, first-out method.
Property, Plant and Equipment
Property (including mineral deposits), 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, except for repair and maintenance
overhauls (Turnarounds), are charged to operations when incurred.
Expenditures for major Turnarounds are deferred when incurred and
amortized into cost of goods sold on a straight-line basis, generally
over an 18-month period. Turnarounds are large-scale maintenance
projects that are performed regularly, usually every 18 to 24 months,
on average. Turnarounds are necessary to maintain the operating
capacity and efficiency rates of the production plants. The deferred
portion of the Turnaround expenditures is classified in other assets in
the Company's Consolidated Balance Sheet.
Depreciation and depletion expenses for mining 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 45 years; machinery
and equipment, 3 to 25 years.
In fiscal 1997, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." The statement requires the recognition of an impairment
loss on a long-lived asset held for use when events and circumstances
indicate that the estimate of undiscounted future cash flows expected
to be generated by the asset are less than its carrying amount.
Goodwill
Goodwill, representing the excess of purchase cost over the fair
value of net assets of acquired companies, is generally amortized using
the straight-line method over periods not exceeding 40 years. At June
30, 1997 and 1996, goodwill, included in other assets in the
Consolidated Balance Sheet, totaled $89.8 million and $68.1 million,
respectively.
Postemployment Benefits
The Company provides benefits such as workers' compensation and
disabled employee medical care to certain former or inactive employees
after employment but before retirement. Effective July 1, 1994, the
Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," which requires the Company to accrue the cost of providing
such postemployment benefits when the event occurs giving rise to the
obligation.
Stock-Based Compensation Plans
In December 1995, the Financial Accounting Standards Board issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which
establishes a fair value-based method of accounting for stock-based
compensation plans. Under SFAS No. 123, the Company has the option of
either accounting for its stock-based compensation plans under the fair
value method or continuing under the accounting provisions of
Accounting Principles Board Opinion No. 25 (APB No. 25). The Company
continues to account for its stock-based compensation plans under the
provisions of APB No. 25 and, accordingly, no compensation cost has
been charged to operations for options granted. (See also Note 18,
"Stock Plans," of Notes to Consolidated Financial Statements.)
Accrued Environmental Costs
The Company's activities include the mining of phosphate and potash,
the manufacturing and blending of crop nutrients, and the blending of
crop nutrients with pesticide products. These operations are subject to
extensive federal, state, provincial and local environmental
regulations in the United States and Canada, including laws related to
air and water quality; management of hazardous and solid wastes;
management and handling of raw materials and products; and the
restoration of lands disturbed by mining and production activities.
Expenditures that relate to an existing condition caused by past
operations of the Company or prior land owners, and which do not
contribute to current or future revenue generation, are charged to
operations. Liabilities are recorded when environmental remedial
efforts are probable and the cost of such efforts can be reasonably
estimated. Revisions to current estimates are made when costs of
required remedial efforts change.
In 1997, the Company adopted Statement of Position 96-1,
"Environmental Remediation Liabilities," promulgated by the American
Institute of Certified Public Accountants, which provides new guidance
for the accrual of environmental remediation costs. Adoption of this
statement did not have a material adverse effect on the Company's
financial statements.
Derivatives
The Company periodically enters into options to purchase natural gas
and entered into diammonium phosphate (DAP) futures contracts to manage
its exposure to price fluctuations. Net hedging gains and
losses are recognized as a part of the transactions hedged and were not
significant in the years ended June 30, 1997, 1996 and 1995. The
Company monitors its market risk on an ongoing basis and considers such
risk to be minimal.
Foreign Currencies
The functional currency of the Company's Canadian operations is the
Canadian dollar. As of June 30, 1997, the Company's cumulative foreign
currency translation adjustment resulted in a reduction of
stockholders' equity of $18.8 million.
Earnings Per Share
All share and per share information appearing in the consolidated
financial statements and notes herein give effect to the Company's
2-for-1 stock split effected in the form of a 100 percent stock
dividend which was distributed on November 30, 1995.
Earnings per share are based on the weighted average number of
shares and equivalent shares outstanding. Fully diluted earnings per
share are not significantly different from primary earnings per share
and, accordingly, are not presented.
In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings Per Share," which is required to be adopted for
financial statements for periods ending after December 15, 1997. The
Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. The Company's
primary earnings per share as reflected in the accompanying
Consolidated Statement of Earnings are not materially different from
basic and diluted earnings per share calculated under the new
methodology.
Recently Issued Accounting Standards
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
issued. This statement establishes standards of reporting and display
of comprehensive income and its components in a full set of general
purpose financial statements. This statement will be effective for the
Company's year ending December 31, 1998. Adoption of this statement is
not expected to have a significant effect on the Company's financial
statements.
In June 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," was issued. This statement
changes the way public companies report segment information in annual
financial statements and also requires those companies to report
selected segment information in interim financial reports to
stockholders. This statement will be effective for the Company's year
ending December 31, 1998. Adoption of this statement will result in
additional disclosures.
3. Vigoro Merger
-------------
In March 1996, the Company completed a merger with The Vigoro
Corporation (Vigoro) that resulted in Vigoro becoming a subsidiary of
the Company (Merger). Upon consummation of the Merger, the Company
issued approximately 32.4 million shares of its common stock in
exchange for all of the outstanding shares of Vigoro. The Merger was
structured to qualify as a tax-free reorganization for income tax
purposes and was accounted for as a pooling of interests. Accordingly,
the Company's financial statements for periods prior to the merger date
have been restated to reflect the Merger.
Summarized operating results of the Company and Vigoro for the eight
months ended February 29, 1996 and the year ended June 30, 1995 were as
follows:
Eight months Year
ended ended
February 29, June 30,
1996 1995
-------- --------
IMC GLOBAL INC.
Net sales $1,413.5 $1,924.0
Extraordinary item - (6.5)
Accounting change - (5.9)
Net earnings 102.8 114.7
THE VIGORO CORPORATION
Net sales $ 406.5 $ 871.4
Net earnings 12.7 66.2
INTERCOMPANY SALES ELIMINATION $ (41.1) $ (59.3)
COMBINED
Net sales $1,778.9 $2,736.1
Extraordinary item - (6.5)
Accounting change - (5.9)
Net earnings 115.5 180.9
4. Merger and Restructuring Charges
--------------------------------
In connection with the Merger in 1996, the Company recorded charges
totaling $20.2 million, primarily for consulting, legal and accounting
services. Immediately following the Merger, the Company adopted a plan
to restructure its business operations into a decentralized
organizational structure with five stand-alone business units. As a
result, the Company recorded restructuring charges totaling $23.1
million. The charges consisted of: (i) $6.5 million for lease
terminations resulting from office consolidations and (ii) $16.6
million for severance and related benefits from staff reductions
resulting from the termination of approximately 120 employees,
primarily middle management personnel, and other related actions. As
of June 30, 1997, the following amounts were paid: (a) $20.2 million
for charges relating to the Merger; (b) $5.6 million for lease
terminations resulting from office consolidations and (c) $13.4 million
relating to the termination of approximately 120 employees and other
actions.
In connection with the 1996 restructuring plan, the Company
undertook a detailed review of its accounting records and valuation of
various assets and liabilities. As a result, the Company recorded
charges totaling $58.3 million ($55.3 million net of minority interest)
comprised of: (i) $26.3 million ($23.3 million net of minority
interest) to cost of goods sold of which $17.5 million was primarily
related to the write-off of certain idle plant facilities and other
obsolete assets, $5.0 million for environmental matters and $3.8
million for other matters; (ii) $2.4 million of general and
administrative expenses for the write-off of miscellaneous assets;
(iii) $16.6 million to other income and expense, net, to reduce certain
long-term assets to net realizable value and other provisions and (iv)
$13.0 million to minority interest for the transfer of 0.85 percent
interest of IMC-Agrico Distributable Cash (as defined in the IMC-Agrico
Partnership Agreement (Partnership Agreement)) from the Company to FRP.
(See also Note 22, "Subsequent Events," of Notes to Consolidated
Financial Statements.) As of June 30, 1997, $29.5 million of non-cash
write-offs were charged against the reserve.
5. Acquisitions
------------
In January 1995, the Company acquired substantially all of the
assets of the Central Canada Potash division (CCP) of Noranda, Inc. for
$121.1 million, plus $16.2 million for working capital. The Company
used proceeds borrowed under a credit facility to finance the purchase
price, while using operating cash to acquire the working capital. The
CCP potash mine, located in Colonsay, Saskatchewan, utilizes shaft
mining technology and has a current annual capacity of 1.5 million tons
and estimated recoverable reserves of 120 years at current production
levels.
In October 1995, the Company acquired the animal feed ingredients
business (Feed Ingredients) of Mallinckrodt Group Inc. and subsequently
contributed the business to IMC-Agrico. The Company's portion of the
purchase price was $67.5 million.
In 1997, the Company completed several acquisitions, including a
precision farming operation (Top-Soil); several retail distribution
operations (Crop-Maker, Frankfort Supply, Sanderlin, and Hutson Ag
Services, Inc.); a storage terminal company (Hutson Company, Inc.); and
the remaining interest in a subsidiary. Total cash payments for
acquisitions during the year were $48.6 million and approximately
200,000 shares of common stock were issued.
These acquisitions were accounted for under the purchase method of
accounting, and, accordingly, results of operations for the acquired
businesses have been included in the Company's Consolidated Statement
of Earnings since the respective dates of acquisition. Pro forma
consolidated operating results reflecting these acquisitions would not
have been materially different from reported amounts.
Common stock issued for acquisitions was $7.9 million, $14.9 million
and $4.5 million for 1997, 1996 and 1995, respectively. In fiscal year
1997, liabilities assumed in acquisitions were $40.7 million.
6. IMC-Agrico Cash Sharing
------------------------
IMC-Agrico makes cash distributions to each partner based on
formulas and sharing ratios as defined in the Partnership Agreement.
For the year ended June 30, 1997, the total amount of cash generated by
IMC-Agrico was $382.5 million, of which $210.7 million was distributed
to FRP, including $49.8 million payable as of June 30, 1997.
On January 23, 1996, the Company and FRP entered into certain
amendments to the Partnership Agreement. Effective March 1, 1996,
there was a shift of 0.85 cash interest in IMC-Agrico from the Company
to FRP. Effective July 1, 1997, the Company's share of cash
distributions increased to approximately 58.6 percent. (See also Note
22, "Subsequent Events," of Notes to Consolidated Financial
Statements.)
7. Non-Recurring Items
--------------------
Non-recurring items included the following:
Sale of Investments and Land
In 1996, the Company realized a gain of $11.6 million from the sale
of a 50 percent interest in Chinhae Chemical Company, a producer of
crop nutrients located in South Korea. In 1995, a gain of $5.0 million
was realized from the sale of land in Florida. These amounts were
included in other income and expense, net in the Consolidated Statement
of Earnings.
Remediation
In 1995, provisions totaling $10.3 million ($5.8 million net of
minority interest) were included in cost of goods sold, in the
Consolidated Statement of Earnings, for remediation costs associated
with a sinkhole beneath a phosphogypsum storage stack at IMC-Agrico's
New Wales crop nutrient production facility in Florida and for repair
and cleanup costs related to earthen dam breaches at IMC-Agrico's Payne
Creek and Hopewell phosphate mining facilities in Florida.
8. Receivables, Net
----------------
Accounts receivable as of June 30 were as follows:
1997 1996
Trade accounts $315.1 $379.0
Non-trade receivables 71.0 37.0
------ ------
386.1 416.0
Less:
Allowances 6.8 6.3
Receivable interests sold 16.8 59.5
------ ------
$362.5 $350.2
====== ======
The carrying value of accounts receivable was equal to the estimated
fair value of such assets due to their short maturity.
The net residual interest included in the receivables shown on the
Consolidated Balance Sheet are owned by IMC-Agrico L.L.C., a
special-purpose limited liability company of which IMC-Agrico is the
sole equity owner. Under an agreement with a financial institution,
IMC-Agrico L.L.C. may sell, on an ongoing basis, an undivided
percentage interest in a designated pool of receivables, subject to
limited recourse provisions related to the international receivables,
in an amount not to exceed $65.0 million. At June 30, 1997, IMC-Agrico
L.L.C. had sold a total of $49.3 million of such receivable interests,
$32.5 million of which are classified as short-term debt in the
Consolidated Balance Sheet. Costs, primarily from discount fees and
other administrative costs, totaled $3.4 million, $3.6 million and $2.5
million in 1997, 1996 and 1995, respectively.
9. Inventories
-----------
Inventories as of June 30 were as follows:
1997 1996
------ ------
Products (principally finished) $432.8 $377.8
Operating materials and supplies 110.3 103.9
------ ------
Gross inventories 543.1 481.7
Less: Inventory allowances 8.9 5.0
------ ------
Net inventories $534.2 $476.7
====== ======
10. Property, Plant and Equipment
-----------------------------
The Company's investment in property, plant and equipment as of June
30 is summarized as follows:
1997 1996
-------- --------
Land $ 112.2 $ 104.9
Mineral properties and rights 693.7 658.9
Buildings and leasehold improvements 474.0 483.5
Machinery and equipment 2,848.6 2,755.3
Construction in progress 208.7 121.0
-------- --------
4,337.2 4,123.6
Accumulated depreciation and
depletion (1,928.0) (1,772.3)
-------- --------
Net property, plant and equipment $2,409.2 $2,351.3
======== ========
As of June 30, 1997, idle facilities of the Company included two
phosphate rock mines, two concentrated phosphates plants and two
uranium oxide extraction and processing facilities, all of which remain
closed subject to improved market conditions. The net book value of
these facilities totaled $62.9 million. In the opinion of management,
the net book value of its idle facilities is not in excess of net
realizable value. Subsequent to June 30, 1997, the Company announced
the temporary closure of one additional phosphate rock mine and resumed
production at one of its concentrated phosphate plants.
11. Accrued Liabilities
-------------------
Accrued liabilities as of June 30 were as follows:
1997 1996
------ ------
Salaries, wages and bonuses $ 38.6 $ 38.3
Taxes other than income taxes 33.3 28.1
Income taxes 21.7 11.8
Environmental 14.7 14.1
Interest 11.6 11.7
Restructuring 1.8 14.9
Other 16.6 26.2
------ ------
$138.3 $145.1
====== ======
12. Financing Arrangements
----------------------
Short-term borrowings were $32.5 million and $22.7 million as of
June 30, 1997 and 1996, respectively, which primarily consisted of
revolving credit facilities with various financial institutions, vendor
financing arrangements and sale of receivables classified as short-term
debt as of June 30, 1997, as required by SFAS No. 125.
The weighted-average interest rate on short-term borrowings was 5.8
percent, 6.3 percent and 6.3 percent for 1997, 1996 and 1995,
respectively. Long-term debt at June 30 consisted of the following:
1997 1996
------ ------
Revolving and long-term credit
facilities, variable rates $175.4 $ 95.4
Money market borrowings 162.1 -
Term loans, maturing through 2005 120.0 120.0
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 27.1 27.1
9.25% Senior notes, due 2000 4.0 61.6
10.125% Senior notes, due 2001 2.6 60.4
10.75% Senior notes, due 2003 3.4 54.3
6.25% Convertible subordinated notes,
due 2001 - 114.9
Other debt 33.2 33.1
------ ------
702.8 741.8
Less current maturities 8.0 5.1
------ ------
$694.8 $736.7
====== ======
As of June 30, 1997, the estimated fair value of long-term debt
described above was approximately the same as the carrying amount of
such debt in the Consolidated Balance Sheet. The fair value was
calculated in accordance with the requirements of SFAS No. 107,
"Disclosures of 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 fiscal 1997, the Company purchased a total of $166.4 million
principal amount of its 9.25 percent senior notes due 2000, 10.125
percent senior notes due 2001 and 10.75 percent senior notes due 2003
(collectively, Senior Notes) prior to maturity in an effort to reduce
higher cost indebtedness. As a result, the Company recorded an
extraordinary charge of $10.8 million, net of taxes, for the redemption
premium and write-off of previously deferred finance charges. In
addition, in fiscal 1997, the Company completed the redemption of its
outstanding $114.9 million, 6.25 percent convertible subordinated notes
due 2001 (Subordinated Notes). In connection with the conversion of
the Subordinated Notes, the Company recorded an extraordinary charge,
net of taxes, of $0.6 million for write-off of previously deferred
finance charges associated with the Subordinated Notes. The Company
issued approximately 3.6 million shares of common stock to holders of
$114.4 million principal amount of the Subordinated Notes who converted
the Subordinated Notes prior to the redemption date. The balance of
$0.5 million principal amount was redeemed by the Company for cash.
In 1995, the Company purchased $165.0 million principal amount of
its Senior Notes prior to maturity in an effort to reduce higher cost
indebtedness. As a result, the Company recorded an extraordinary
charge of $6.5 million, net of taxes, for the redemption premium and
write-off of previously deferred finance charges.
In February 1996, the Company entered into an unsecured credit
facility (Credit Facility) with a group of banks. Under the terms of
the Credit Facility, the Company and certain of its subsidiaries may
borrow up to $450.0 million under a revolving credit facility which
matures on March 1, 1999 and $50.0 million under a long-term credit
facility which matures on March 2, 2001. In addition, the Company has
a maximum availability of approximately $283.0 million under
uncommitted money market lines. On June 30, 1997, the Company and its
subsidiaries had borrowed $50.0 million under the revolving credit
facility, $46.9 million under the long-term credit facility and $162.1
million under the money market lines. The Company has classified
borrowings under revolving credit facilities and money market lines as
long-term debt since the Company has the ability and the intent to
maintain these obligations for longer than one year. Additionally,
$33.3 million was drawn under the Credit Facility as letters of credit
principally to support industrial revenue bonds and other debt and
credit risk guarantees.
Simultaneously with the execution of the Credit Facility, the
Company and one of its subsidiaries refinanced certain of its unsecured
term loans. The new $120.0 million unsecured term loans (Term Loans)
bear interest at rates between 7.12 percent and 7.18 percent and mature
at various times between 2000 and 2005.
The Credit Facility, Term Loans and Senior Notes 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. These debt instruments also contain various
financial ratio requirements and other covenants.
IMC-Agrico has several agreements with a group of banks to provide
it with an aggregate revolving credit facility of $125.0 million
(collectively, IMC-Agrico Revolving Credit Facility or Agreements)
maturing September 1997, December 1997 and February 1998. The
IMC-Agrico Revolving Credit Facility has a letter of credit subfacility
for up to $25.0 million. Borrowings under the IMC-Agrico Revolving
Credit facility are unsecured with a negative pledge on substantially
all of IMC-Agrico's assets and bear interest at rates based on a base
rate or an adjusted Eurodollar rate. As of June 30, 1997, IMC-Agrico
had drawn $8.7 million under the letter of credit subfacility and had
borrowings of $78.5 million under the remainder of the IMC-Agrico
Revolving Credit Facility. IMC-Agrico has classified borrowings under
the IMC-Agrico Revolving Credit Facility as long-term debt since
IMC-Agrico has the ability and the intent to maintain these obligations
for longer than one year.
The Agreements have restrictive covenants including minimum net
partners' capital, fixed charge and current ratio requirements; place
limitations on indebtedness of IMC-Agrico; and restrict the ability of
IMC-Agrico to make cash distributions in excess of Distributable Cash
(as defined in the Partnership Agreement). The Agreements require
IMC-Agrico to repay all revolving loans for a minimum of 30 consecutive
days within each calendar year. In addition, pursuant to the
Partnership Agreement, IMC-Agrico is required to obtain the approval of
the Policy Committee of IMC-Agrico prior to incurring more than an
aggregate of $5.0 million (adjusted annually for inflation) in
indebtedness (excluding a total of $125.0 million of indebtedness under
the IMC-Agrico Revolving Credit Facility). (See also Note 22,
"Subsequent Events," of Notes to Consolidated Financial Statements.)
Cash payments for interest were $52.6 million, $67.0 million and
$70.6 million in 1997, 1996 and 1995, respectively. In 1997, $114.4
million of long-term debt was converted to common stock.
Scheduled maturities, excluding the revolving credit facilities, for
the next five years are as follows:
1998 $ 8.0
1999 8.7
2000 3.3
2001 83.3
2002 5.1
In May 1997, the Company increased its existing registration
statement on Form S-3 to issue up to $300.0 million of debt and equity
securities. In July 1997, the Company issued $150.0 million of 6.875
percent senior debentures due 2007. The proceeds were used to reduce
higher cost indebtedness.
13. Other Noncurrent Liabilities
----------------------------
Other noncurrent liabilities as of June 30 were as follows:
1997 1996
------ ------
Employee and retiree benefits $143.0 $127.2
Environmental 102.5 102.3
Deferred gain 37.8 40.6
Restructuring charges 28.2 33.4
Other 33.0 48.5
------ ------
$344.5 $352.0
====== ======
14. Pension Plans
-------------
The Company has non-contributory pension plans that cover
approximately 73 percent of its employees. Benefits are based on a
combination of years of service and compensation levels, depending on
the plan. Generally, contributions to the United States 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. Certain other employees are
covered by defined contribution pension plans.
Employees in the United States and Canada whose pension benefits
exceed Internal Revenue Code and Revenue Canada limitations,
respectively, are covered by supplementary non-qualified, unfunded
pension plans.
The components of net pension expense for the years ended June 30,
computed actuarially, were as follows:
1997 1996 1995
----- ----- -----
Service cost for benefits earned
during the year $12.5 $10.0 $ 9.0
Interest cost on projected
benefit obligation 17.7 15.8 14.7
Return on plan assets (16.8) (28.8) (11.8)
Net amortization and deferral 1.9 17.5 (0.1)
----- ----- -----
Net pension expense $15.3 $14.5 $11.8
===== ===== =====
The plans' assets consist mainly of corporate equity and United
States 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 funded status, based on an April 1
measurement date, of the Company's pension plans and amounts recognized
in the Consolidated Balance Sheet as of June 30 were as follows:
Overfunded Underfunded
Plans Plans
--------------- ---------------
1997 1996 1997 1996
------ ------ ------ ------
Plans' assets at fair value $173.7 $163.8 $ 29.8 $ 28.9
Actuarial present value of
projected benefit obligations:
Vested benefits 136.8 124.2 36.5 34.8
Non-vested benefits 14.4 16.1 5.9 3.0
Accumulated benefit
obligations 151.2 140.3 42.4 37.8
Projected future salary
increases 46.9 54.6 17.7 3.8
------ ------ ------ ------
Total projected benefit
obligations 198.1 194.9 60.1 41.6
------ ------ ------ ------
Plans' assets less than projected
benefit obligations 24.4 31.1 30.3 12.7
Items not yet recognized in earnings:
Unrecognized net gain (13.9) (20.0) (9.8) (2.0)
Unrecognized transition
liability (asset) 2.2 0.9 (0.7) (0.2)
Unrecognized prior service cost (7.7) (10.4) (15.2) (9.5)
Additional minimum liability - - 1.8 11.0
Fourth quarter contributions (0.4) (0.6) (1.0) (0.5)
------ ------ ------ ------
Accrued pension liability $ 4.6 $ 1.0 $ 5.4 $ 11.5
====== ====== ====== ======
Significant actuarial
assumptions were as follows:
1997 1996 1995
---- ---- ----
Discount rate 7.5% 7.6% 8.2%
Long-term rate of return on assets 9.5% 9.6% 7.8%
Rate of increase in compensation levels 5.1% 5.2% 5.2%
The Company also has defined contribution pension and investment
plans (Plans) for certain of its employees. Under each of the Plans,
participants are permitted to defer a portion of their compensation.
Company contributions to the Plans are based on a percentage of wages
earned by the eligible employees or by matching a percentage of
employee contributions. The Company's contributions to the Plans
totaled $7.3 million, $9.7 million and $9.7 million for the years ended
June 30, 1997, 1996 and 1995, respectively.
15. Postretirement and Postemployment Benefit Plans
-----------------------------------------------
The Company provides certain health care benefit plans for certain
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.
The components of postretirement benefits other than pensions
(OPEBS) expense for years ended June 30 were as follows:
1997 1996 1995
---- ---- ----
Service cost $1.9 $1.7 $1.5
Interest cost 5.0 5.3 5.3
Net amortization and deferral (1.9) (1.8) (1.5)
---- ---- ----
$5.0 $5.2 $5.3
==== ==== ====
The significant assumptions used in determining OPEBS costs were as
follows:
1997 1996 1995
---- ---- ----
Discount rate 7.5% 7.5% 8.2%
Health care trend rate:
Under age 65 8.6% (1) 9.2% (1) 9.8% (1)
Over age 65 5.8% (2) 6.0% (2) 6.3% (2)
(1) Decreasing gradually to 5.5% in 2003 and thereafter.
(2) Decreasing gradually to 5.5% in 1999 and thereafter.
If the health care trend rate assumptions were increased by 1.0
percent, the accumulated postretirement benefit obligation would
increase by 6.2 percent as of June 30, 1997. This would have the
effect of an 8.1 percent increase on OPEBS expense in 1997.
The components of the Company's OPEBS liability as of June 30 were
as follows:
1997 1996
------ ------
Retirees $ 33.8 $ 35.1
Actives:
Fully eligible 11.3 13.0
Not fully eligible 31.1 26.6
------ ------
Total 76.2 74.7
Items not yet recognized in earnings:
Unrecognized transition obligation 1.8
Unrecognized prior service cost 10.7 12.1
Unrecognized net gain 11.5 10.5
------ ------
Accrued postretirement benefits liability $100.2 $ 97.3
====== ======
The Company also provides benefits such as workers' compensation and
disability to certain former or inactive employees after employment but
before retirement. The plans are unfunded. Employees are not vested
and plan benefits are subject to change.
Effective July 1, 1994, the Company adopted SFAS No. 112 to account
for disability benefits of certain employees. Prior to July 1, 1994,
the Company recognized the cost of providing certain of these benefits
on a cash basis. SFAS No. 112 requires the cost of providing these
benefits be recognized when it becomes probable that such benefits will
be paid and when sufficient information exists to make reasonable
estimates of the amounts to be paid. Consequently, the Company
recognized a $13.3 million liability for postemployment benefits as of
July 1, 1994 and recorded a charge of $5.9 million, net of taxes, for
the cumulative effect of the Company's unfunded obligation prior to
July 1, 1994. The effect of the adoption of SFAS No. 112 on 1995
earnings before the cumulative effect of the accounting change was not
material.
16. Income Taxes
------------
Two of the Company's three potash operations that are subject to
Canadian taxes, Kalium Canada and Central Canada Potash, are included
in the consolidated United States federal income tax return filed by
the Company.
Deferred income taxes reflect the net tax effects of temporary
differences between the amounts of assets and liabilities for
accounting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and
assets as of June 30 were as follows:
1997 1996
------ ------
Deferred tax liabilities
Property, plant and equipment $455.6 $437.4
Taxes on undistributed foreign earnings 1.9 19.6
Other liabilities 76.2 50.0
------ ------
Total deferred tax liabilities 533.7 507.0
------ ------
Deferred tax assets
Alternative minimum tax credit
carryforwards 69.9 82.8
Postretirement and postemployment benefits 42.6 39.6
Foreign tax credit carryforward 33.5 27.5
Sterlington litigation settlement 28.6 31.1
Reclamation and decommissioning accruals 24.1 27.4
Restructuring accruals 9.5 25.3
Other assets 39.9 46.5
------ ------
Total deferred tax assets 248.1 280.2
Valuation allowance (33.5) (27.5)
------ ------
Net deferred tax assets 214.6 252.7
------ ------
Net deferred tax liabilities $319.1 $254.3
====== ======
As of June 30, 1997, the Company had alternative minimum tax credit
carryforwards of approximately $69.9 million, which can be carried
forward indefinitely. In addition, the Company has a foreign tax
credit carryforward of approximately $33.5 million. The foreign tax
credit carryforward will expire in 2001 to the extent it is not
utilized. The realization of the foreign tax credit carryforward is
dependent upon the Company's future foreign earnings and taxes. Due to
the uncertainty of its ultimate realization, the Company has
established a full valuation allowance against this carryforward
benefit.
The provision for income taxes for the years ended June 30 consisted
of the following:
1997 1996 1995
------ ------ ------
Current
Federal $ 22.4 $ 74.0 $ 33.6
State and local 7.0 2.8 8.6
Foreign 26.6 14.9 52.9
------ ------ ------
56.0 91.7 95.1
Deferred
Federal 42.7 (7.4) 8.1
State and local 2.8 4.4 (0.9)
Foreign 16.0 5.4 13.2
------ ------ ------
61.5 2.4 20.4
------ ------ ------
$117.5 $ 94.1 $115.5
====== ====== ======
The components of earnings before income taxes, extraordinary charge
and cumulative effect of accounting change and the effects of
significant adjustments to tax computed at the federal statutory rate
were as follows:
1997 1996 1995
------ ------ ------
Domestic $245.8 $195.7 $193.6
Foreign 76.2 42.7 115.2
------ ------ ------
Earnings before income taxes,
extraordinary charge and
cumulative effect of
accounting change $322.0 $238.4 $308.8
====== ====== ======
Computed tax at the federal
statutory rate of 35% $112.7 $ 83.4 $108.1
Foreign income and withholding
taxes 11.0 12.7 19.5
Percentage depletion in excess
of basis (12.5) (10.4) (18.1)
Merger expenses not deductible
for tax purposes - 7.1 -
State income taxes, net of
federal income tax benefit 6.3 4.8 4.9
Benefit of foreign sales
corporation (5.6) (4.3) (2.3)
Federal taxes on undistributed
foreign earnings - - 4.4
Other items (none in excess of
5% of computed tax) 5.6 0.8 (1.0)
------ ------ ------
Provision for income taxes $117.5 $ 94.1 $115.5
====== ====== ======
Effective tax rate 36.5% 39.5% 37.4%
United States 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
$211.7 million at June 30, 1997 and, accordingly, no deferred tax
liability has been established relative to these earnings. If these
amounts were not considered permanently reinvested, a deferred tax
liability of $42.2 million would have been required.
Income taxes paid, net of refunds received, were $91.6 million,
$125.3 million and $84.7 million for 1997, 1996 and 1995, respectively.
17. Capital Stock
-------------
Changes in the number of shares of common stock issued and in
treasury were as follows:
1997 1996
---------- ----------
S>
Common stock issued
Balance, beginning of year 97,863,784 96,408,200
Common stock issued - 442,653
Stock options exercised 351,001 1,009,466
Conversion of convertible debt 3,604,366 2,265
Award of restricted shares - ,200
---------- ----------
Balance, end of year 101,819,151 97,863,784
Treasury common stock
Balance, beginning of year 5,545,884 5,552,840
Common stock issued (208,364) (9,396)
Purchases 2,919,100 2,440
---------- ----------
Balance, end of year 8,256,620 5,545,884
---------- ----------
Common stock outstanding, end of year 93,562,531 92,317,900
========== ==========
Pursuant to a Shareholders Rights Plan adopted by the Company in
June 1989, a dividend of one preferred stock purchase right (Right) for
each outstanding share of common stock of the Company was issued on
July 12, 1989 to stockholders of record on that date. Under certain
conditions, each Right may be exercised to purchase one two-hundredth
of a share of Junior Participating Preferred Stock, Series C, par value
$1 per share, at a price of $75, subject to adjustment. This preferred
stock is designed to participate in dividends and vote on essentially
equivalent terms with a whole share of common stock. The Rights
generally become exercisable apart from the common stock only if a
person or group acquires 15 percent or more of the common stock or
makes a tender offer for 15 percent or more of the outstanding common
stock. Upon the acquisition by a person or group of 15 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 $.005 per Right under
certain circumstances prior to their expiration on June 21, 1999. No
event during 1997 made the Rights exercisable.
18. Stock Plans
-----------
The Company has various stock option plans (Stock Plans) under which
it may grant non-qualified stock options and stock appreciation rights
(SARs) to officers and key managers of the Company, accounted for under
APB Opinion No. 25. The Stock Plans, as amended, provide for the
issuance of a maximum of 9.2 million shares of common stock of the
Company which may be authorized but unissued shares or treasury shares.
Under the terms of the Stock Plans, the option price per share may
not be less than 100 percent of the fair market value on the date of
the grant. Stock options and SARs granted under the Stock Plans extend
for ten years and generally become exercisable either 50 percent one
year after the date of the grant and 100 percent two years after the
date of the grant, or in one-third increments: one-third one year after
the date of the grant, two-thirds two years after the date of the
grant, and 100 percent three years after the date of the grant.
The Company also adopted a long-term incentive plan in fiscal 1994
under which officers and key managers were awarded shares of restricted
common stock of the Company along with contingent stock units. Based
on performance objectives, these shares and units were intended to vest
in whole or in part during and at the end of a three-year performance
period ending June 30, 1997. On June 30, 1996, the long-term incentive
plan was deemed to be fully vested, one year prior to the completion of
the performance period, and 141,480 shares of common stock were
distributed. Restricted stock was valued on the issuance date, and the
related expense amortized over the vesting period.
At the Company's 1996 Annual Meeting, the stockholders approved the
1996 long-term incentive plan which replaced the 1994 long-term
incentive plan discussed in the preceding paragraph. The new plan
became effective October 17, 1996. Under the plan, officers and key
managers may be awarded stock or cash upon achievement of specified
objectives over a three-year period beginning July 1, 1996. Final
payouts are made at the discretion of the Compensation Committee of the
Company's Board of Directors whose members are not participants of the
plan. In 1997, $5.1 million was charged to earnings for the cost of
performance awards earned for the relevant three year period under the
1996 long-term incentive plan.
SARs granted totaled 65,250 shares in fiscal 1996. The market price
for the SARs was $38.00 in fiscal 1996. A total of 10,650 shares and
69,375 shares were exercised in fiscal 1997 and 1996, respectively.
The following table summarizes stock option activity:
1997 1996
------------------------- -------------
- ----------
Weighted Average Weighted
Average
Shares Exercise Price Shares
Exercise Price
--------- ------------- -------- ------------
- -
Outstanding at July 1 3,215,892 $23.64 3,592,669 $20.24
Granted 1,902,240 39.00 771,511 35.58
Exercised (350,402) 20.34 (1,006,866) 20.09
Cancelled (72,075) 35.11 (141,422) 27.39
--------- ---------
Outstanding at June 30 4,695,655 $29.93 3,215,892 $23.65
========= =========
Exercisable at June 30 2,216,600 $22.29 1,732,273 $20.37
========= =========
Available for future
grant at June 30 2,296,316 4,126,481
========= =========
Data related to significant option ranges as of June 30, 1997 and
related weighted average price and contract life information follows:
Options Outstanding Options Exercisable
-------------------------------- ------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices of Options Life Price of Options Price
- ----------------------------------------------------------------------
$11.00 to 16.50 173,7776 years $15.06 173,777 $15.06
16.51 to 24.75 1,459,5058 years 19.74 1,321,077 19.49
24.76 to 37.13 872,5588 years 27.50 555,246 26.48
37.14 to 40.88 2,189,8151 years 38.87 166,500 38.10
- ----------------------------------------------------------------------
$11.00 to 40.88 4,695,6555 years $29.93 2,216,600 $22.29
The assumption regarding the stock options contractual life was that
100 percent of such options vested in the first year after issuance
rather than ratably according to the applicable vesting period as
provided by the terms of the grants.
If the Company's stock option plans' compensation cost had been
determined based on the fair value at the grant date for awards
beginning in fiscal 1996 consistent with the provisions of SFAS No.
123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:
1997 1996
------ ------
Net earnings - pro forma $188.8 $142.7
Earnings per share - pro forma 1.99 1.54
Weighted average fair value of
options granted 39.04 35.48
For the pro forma disclosures, the estimated fair value of the
options is amortized to expense over their expected six year life.
These pro forma amounts are not indicative of anticipated future
disclosures because SFAS No. 123 does not apply to grants before fiscal
1996.
The fair value of these options was estimated at the date of grant
using the Black Scholes option pricing model using the following
weighted average assumptions:
1997 1996
------ ------
Expected dividend yield 0.85% 0.85%
Expected stock price
volatility 25.4% 26.6%
Risk-free interest rate
(5 year government) 6.4% 6.5%
Expected life of options 6 years 6 years
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion the existing models do not
provide a reliable single measure of the value of the employee stock
options.
Another stock option plan provides for the granting of awards of up
to 200,000 shares of common stock to directors of the Company who were
directors prior to the Merger and who were not also employees of the
Company. Options may be exercised at any time the director holding the
option remains a director of the Company and within two years after the
director ceases to be a director of the Company. Under the terms of
the plan, options granted are exercisable over ten years beginning with
the grant date of the option. Options were granted to purchase 24,000
shares and 14,000 shares of common stock in 1997 and 1996,
respectively, at an option price of $41.94 and $29.75 per share,
respectively. A total of 500 shares and 2,600 shares were exercised in
1997 and 1996, respectively.
19. Commitments
-----------
The Company purchases sulphur, natural gas and ammonia from third
parties under contracts extending, in some cases, for multiple years.
Purchases under these contracts are generally at prevailing market
prices. These contracts generally range from one to four years.
The Company and FRP have an agreement to supply a portion of the
Company's sulphur requirements to IMC-Agrico over the life of the joint
venture partnership. Since the term of the sulphur purchase commitment
is indeterminable, the dollar value of such commitments has been
excluded from the schedule below after the year 2002. (See also Note
22, "Subsequent Events," of Notes to Consolidated Financial
Statements.)
The Company leases plants, warehouses, terminals, office facilities,
railcars and various types of equipment under operating leases. Lease
terms generally range from three to five years, although some leases
have longer terms.
Summarized below is a schedule of future minimum long-term purchase
commitments and minimum lease payments under non-cancelable operating
leases as of June 30, 1997:
Purchase Lease
Commitments Commitments
----------- -----------
1998 $260.4 $ 19.9
1999 204.0 17.1
2000 120.4 13.9
2001 114.8 11.9
2002 109.7 8.4
Subsequent years 17.5 21.7
------ ------
$826.8 $ 92.9
====== ======
Rental expense for 1997, 1996 and 1995 amounted to $31.9 million,
$45.6 million and $39.7 million, respectively.
International Minerals & Chemical (Canada) Global Limited is
committed under a service agreement with Potash Corporation of
Saskatchewan Inc. (PCS) to produce annually from mineral reserves
specified quantities of potash for a fixed fee plus a pro rata share of
total production and capital costs at the potash mines located in
Esterhazy, Saskatchewan. The agreement extends through June 30, 2001
and is renewable at the option of PCS for five additional five-year
periods. Potash produced for PCS may, at PCS's option, amount to an
annual maximum of approximately one-fourth of the Esterhazy mines'
production capacity but no more than approximately 1.1 million tons.
During 1997, production of potash for PCS amounted to 500,000 tons, or
16 percent of the Esterhazy mines' total tons produced.
Mississippi Chemical Corporation Property Reserves
In July 1994, IMC-Agrico entered into an option agreement with
Mississippi Chemical Corporation (MCC) to purchase land (Property) in
Florida. The Property, along with land previously purchased from MCC,
contains approximately 87.5 million tons of phosphate rock reserves.
Prior to January 16, 1998, IMC-Agrico may exercise its option to
purchase the Property for $57.0 million. If IMC-Agrico fails to
exercise its option by that date, MCC has the right to sell the
Property to IMC-Agrico and IMC-Agrico will be obligated to purchase the
Property for $50.0 million.
20. Contingencies
-------------
Mining Risks
Since December 1985, the Company has experienced an inflow of water
into one of its two interconnected potash mines located at Esterhazy,
Saskatchewan. As a result, the Company has incurred expenditures,
certain of which due to their nature were capitalized while others were
charged to expense, to control the inflow. Since the initial discovery
of the inflow, the Company has been able to meet all sales obligations
from production at the mines. The Company has considered, and
continues to evaluate, alternatives to the operational methods employed
at Esterhazy. However, recent changes in the procedures utilized to
control the water inflow have proven successful to date, and the
Company currently intends to continue conventional shaft mining.
Despite the relative success of these modified measures, there can be
no assurance that the amounts required for remedial efforts will not
increase in future years or that the water inflow or remediation costs
will not increase to a level which would cause the Company to change
its mining process or abandon the mines.
Sterlington Litigation
ANGUS Chemical Company (ANGUS), numerous third parties alleging
personal injury and the Company are involved in various litigation
arising out of a May 1991 explosion at a nitroparaffins plant located
in Sterlington, Louisiana. The Company continues to litigate each of
the matters arising out of the Sterlington explosion. Approximately
1,300 class action plaintiffs seek damages for personal injuries, "fear
and fright," and punitive damages against ANGUS, the Company and other
defendants arising from the explosion. Discovery is still not
complete, and the trial date has been postponed indefinitely. The
Company is unable to estimate the magnitude of its exposure at this
time.
The Company has settled actions filed by ANGUS with respect to
claims for amounts ANGUS paid for settled claims in connection with the
explosion and has settled actions filed by ANGUS for claimed rights of
direct action against the Company's insurers. In addition, ANGUS'
claims for certain environmental claims were dismissed by the trial
court and are on appeal.
Potash Antitrust Litigation
The Company was a defendant, along with other Canadian and United
States potash producers, in a class action antitrust lawsuit filed in
federal court in 1993. The plaintiffs alleged a price-fixing
conspiracy among North American potash producers beginning in 1987 and
continuing until the filing of the complaint. The class action
complaint against all defendants, including the Company, was dismissed
by summary judgment in January 1997. The summary judgment dismissing
the case is currently on appeal by the plaintiffs to the United States
Court of Appeals for the Eighth Circuit. The Court of Appeals is
expected to rule during calendar 1998.
In addition, in 1993 and 1994, class action antitrust lawsuits with
allegations similar to those made in the federal case were filed
against the Company and other Canadian and United States potash
producers in state courts in Illinois and California. The Illinois
case was dismissed for failure to state a claim. In the California
case, merits discovery has been stayed and the case is currently
inactive.
Pine Level Property Reserves
In October 1996, IMC-Agrico signed an agreement with Consolidated
Minerals, Inc. (CMI) for the purchase of real property, Pine Level,
containing approximately 100 million tons of phosphate rock reserves.
In connection with the purchase, IMC-Agrico has agreed to obtain all
environmental, regulatory and related permits necessary to commence
mining on the property.
Within five years from the date of this agreement, IMC-Agrico is
required to provide notice to CMI regarding one of the following: (i)
whether they have obtained the permits necessary to commence mining any
part of the property; (ii) whether they wish to extend the permitting
period for an additional three years or (iii) whether they wish to
decline to extend the permitting period. If the permits necessary to
commence mining the property have been obtained, IMC-Agrico is
obligated to pay CMI an Initial Royalty payment of $28.9 million. In
addition to the Initial Royalty payment described above, IMC-Agrico is
required to pay CMI a mining royalty on phosphate rock mined from the
property to the extent the permits are obtained.
Environmental Matters
The historical use and handling of regulated chemical substances and
crop nutrient products in the normal course of the Company's business
has resulted in contamination at facilities presently or previously
owned or operated by the Company. The Company has also purchased
facilities that were contaminated by previous owners through their use
and handling of regulated chemical substances. Spills or other
unintended releases of regulated substances have occurred in the past,
and potentially could occur in the future, possibly requiring the
Company to undertake or fund cleanup efforts. The Company cannot
estimate the level of expenditures that may be required in the future
to clean up contamination from the handling of regulated chemical
substances or crop nutrients.
At some locations, the Company has agreed, pursuant to consent
orders with the appropriate governmental agencies, to undertake certain
investigations (which currently are in progress) to determine whether
remedial action may be required to address contamination. The cost of
any remedial actions that ultimately may be required at these sites
currently cannot be determined.
The Company believes that it is entitled to at least partial
indemnification for a portion of the costs that may be expended by the
Company to remedy environmental issues at certain facilities and
operations pursuant to indemnification agreements. These agreements
address issues that resulted from activities occurring prior to the
Company's acquisition of facilities from parties including: PPG
Industries, Inc.; Kaiser Aluminum & Chemical Corporation; Beatrice
Companies, Inc.; Estech, Inc. and certain private parties. The Company
has already received and anticipates receiving amounts pursuant to the
indemnification agreements for certain of its expenses incurred to
date.
Other
Most of the Company's export sales of phosphate and potash crop
nutrients are marketed through three export associations. As a member,
the Company is contractually obligated to reimburse the export
association for any losses or other liabilities incurred. There were
no such operating losses or other liabilities in 1997, 1996 and 1995.
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.
21. Operations by Geographic Area
-----------------------------
Financial information relating to the Company's operations in
various geographic areas was as follows:
Net Sales
---------------------------------
1997 1996 1995
-------- -------- --------
United States $2,939.8 $2,910.8 $2,589.0
Canada 306.7 326.9 388.6
Other 24.9 20.9 11.7
Transfers between
geographic areas (289.4) (277.6) (253.2)
-------- -------- --------
Consolidated $2,982.0 $2,981.0 $2,736.1
======== ======== ========
Operating Earnings Identifiable Assets
--------------------------- ---------------------------
1997 1996 1995 1997 1996 1995
-------- -------- -------- -------- -------- --------
United States $ 399.0 $ 445.5 $ 352.0 $3,095.8 $2,828.0 $2,854.9
Canada 100.5 29.0 130.2 865.4 845.7 734.9
Other 23.5 18.9 10.2 8.4 7.8 8.2
Eliminations (0.2) (9.2) 1.6 (358.0) (244.7) (274.8)
-------- -------- -------- -------- -------- --------
Consolidated $ 522.8 $ 484.2 $ 494.0 $3,611.6 $3,436.8 $3,323.2
======== ======== ======== ======== ======== ========
Transfers of product between geographic areas were at prices
approximating those charged to unaffiliated customers.
Net sales from the United States, as shown in the preceding table,
included sales to unaffiliated customers in other geographic areas as
follows:
1997 1996 1995
------ ------ ------
Far East $641.4 $753.5 $643.9
Latin America 212.6 190.3 121.7
Europe 10.7 10.5 27.1
------ ------ ------
$864.7 $954.3 $792.7
====== ====== ======
22. Subsequent Events
-----------------
In August 1997, the Company signed a definitive agreement with
Freeport-McMoRan Inc. (FTX), which holds a 51.6 percent interest in
FRP, providing for the merger of FTX into the Company. The Company
will be the surviving entity and the transaction will be accounted for
as a purchase. In the proposed merger (FTX Merger), each share of
common stock of FTX would be exchanged for 0.90 shares of the Company's
common stock plus one-third of a warrant, with each whole warrant
entitling the holder to purchase one share of the Company's common
stock at a price equal to $44.50 per share. Immediately prior to the
FTX Merger, the sulphur businesses of FRP and the Company will be
transferred to Freeport Sulphur Company, a newly-formed subsidiary of
FRP. Shares of Freeport Sulphur Company will be distributed to all FRP
unitholders, including FTX. As of June 30, 1997, the net carrying
value of the Company's sulphur investment was approximately $200.0
million. The Company expects to record a significant non-cash charge
on the disposition of this investment in connection with the FTX
Merger. The FTX Merger is subject to various closing conditions,
including approval by stockholders of FTX and the Company.
In May 1997, the Company announced that it had reached a definitive
agreement to acquire Western Ag-Minerals Company (Western Ag), a
subsidiary of Toronto-based Rayrock Yellowknife Resources Inc., for
$53.0 million. Western Ag, located in Carlsbad, New Mexico, has annual
capacity of 400,000 tons of potash and had calendar-year 1996 revenues
of approximately $41.0 million. On September 5, 1997, the acquisition
of Western Ag was consummated.
QUARTERLY RESULTS (UNAUDITED)
(In millions except per share amounts)
Quarter
-------------------------------------
First Second Third Fourth Year
- ---------------------------------------------------------------------
Fiscal 1997
Net sales $ 603.6 $ 665.4 $ 664.8 $1,048.2 $2,982.0
Gross margins 155.5 184.5 171.5 258.5 770.0
Earnings before
income taxes 45.0 76.3 61.6 139.1 322.0
Earnings before extra-
ordinary item 28.6 48.5 39.1 88.3 204.5
Net earnings 21.1 47.9 39.1 85.0 193.1
Earnings per share:
Earnings before extra-
ordinary item $ .31 $ .51 $ .41 $ .93$
2.15(1)
Net earnings .23 .50 .41 .90
2.03(1)
- ----------------------------------------------------------------------
Fiscal 1996(2)
Net sales $ 599.4 $ 709.6 $ 716.9 $ 955.1 $2,981.0
Gross margins 150.7 201.5 185.5 219.5 757.2
Earnings before
income taxes 51.7 83.2 2.6 100.9 238.4
Net earnings (loss) 32.1 54.1 (8.3) 66.4 144.3
Earnings (loss) per
share $ .35 $ .58 $ (.09)$ .71$
1.56(1)
- -----------------------------------------------------------------------
(1) Due to weighted average share differences, when stated on a
quarter and year-to-date basis, the earnings per share for the
fiscal years ended June 30, 1997 and 1996 do not equal the sum of
the respective earnings per share for the four quarters then ended.
(2) The quarterly results reflected above give retroactive effect to
the Merger discussed in Note 3 of Notes to Consolidated Financial
Statements and, accordingly, the amounts have been restated for all
periods prior to the Merger to include the accounts and operations
of Vigoro.
Fiscal 1997
Fourth quarter operating results reflected the acquisition of
Hutson's Ag Services, Inc. and Hutson Company, Inc. in May 1997.
Fiscal 1996
Second, third and fourth quarter operating results reflected the
acquisition of Feed Ingredients in October 1995.
Third quarter operating results included an after-tax charge of
$69.6 million, or $0.75 per share, from charges related to the
Merger, as well as costs associated with, among other things, a
corporate restructuring, other asset valuations and environmental
issues.
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.
DIRECTORS OF THE REGISTRANT
The ages and five-year employment history of each member of the
Board of Directors at August 29, 1997 is as follows:
Raymond F. Bentele
- -------------------
Age 60. Retired President and Chief Executive Officer, Mallinckrodt
Inc. Mr. Bentele was Executive Vice President of Mallinckrodt Group
Inc. (formerly known as IMCERA Group Inc.) from 1989 until his
retirement. He is also a director of the Kellwood Company,
Mallinckrodt Inc., Legett & Platt Inc. and was previously a director of
IMC Global from 1990 to 1991. Mr. Bentele has served as an IMC Global
Director since June 1994, and his term expires in April 1998.
Mr. Bentele currently serves as Chairman of the Compensation Committee
and as a member of the Committee on Directors and Board Affairs.
Wendell F. Bueche
- ------------------
Age 66. Chairman of the Board of the Company. Mr. Bueche served as
Chairman and Chief Executive Officer from August 1994 through June
1997. From February 1993 until August 1994, he served as President and
Chief Executive Officer. Mr. Bueche was Chairman of the Board, Chief
Executive Officer and President of Allis-Chalmers Corporation from 1986
through 1988. He retired from full-time employment from 1989 until
February 1993. Mr. Bueche is also a director of Marshall & Ilsley
Corporation, M&I Marshall & Ilsley Bank, WICOR, Inc., Wisconsin Gas
Company and Executive Association, American Industrial Partners, L. P.
Mr. Bueche has served as an IMC Global Director since July 1991, and
his term expires in April 1999. Mr. Bueche currently serves on the
Executive Committee and is a non-voting member of the Committee on
Directors and Board Affairs.
Rod F. Dammeyer
- ----------------
Age 56. Managing Director of Equity Group Investments, Inc. Since
January 1993, Mr. Dammeyer has served as Chief Executive Officer of
Anixter International, Inc. In addition, he has served as President
and as a director of Anixter International, Inc. since October 1985.
Mr. Dammeyer is a trustee of Van Kampen American Capital, Inc. closed
end investment companies and a member of the Chase Manhattan
Corporation National Advisory Board. Mr. Dammeyer is also a director
of Antec Corporation, Capsure Holdings Corp., Inc.; Jacor
Communications, Inc.; Lukens Inc.; Sealy Corporation and TeleTech
Holdings, Inc. He previously served as a director of Vigoro from
August 1993 until March 1996 and has served as an IMC Global Director
since March 1996. His term expires in April 1998. Mr. Dammeyer
currently serves on the Compensation Committee.
James M. Davidson, Ph.D.
- -------------------------
Age 63. Vice President for Agriculture and Natural Resources,
University of Florida. Dr. Davidson joined the University of Florida in
1974, became Professor and Assistant Dean for Research in 1979,
Professor and Dean for Research, Institute of Food and Agricultural
Sciences, and Director, Florida Agricultural Experiment Station,
Gainesville, Florida in 1986, and assumed his present position in 1992.
Dr. Davidson has served as an IMC Global Director since July 1991, and
his term expires in April 1999. Dr. Davidson currently serves as
Chairman of the Audit Committee and as a member of the Environmental,
Health and Safety Committee.
Robert E. Fowler, Jr.
- ----------------------
Age 61. President and Chief Executive Officer of the Company. Mr.
Fowler served as President and Chief Operating Officer from March 1996
through June 1997. He served as President and Chief Executive Officer
of Vigoro from September 1994 through February 1996 and as President
and Chief Operating Officer from July 1993 to September 1994.
Mr. Fowler served as President and Chief Executive Officer of BCC
Industrial Services from June 1991 to June 1993. He is a director of
Anixter International, Inc. Mr. Fowler previously served as a director
of Vigoro from August 1993 through February 1996 and has served as an
IMC Global Director since March 1996. His term expires in April 2000.
Mr. Fowler currently serves on the Executive Committee and is a non-
voting member of the Committee on Directors and Board Affairs.
Harold H. MacKay
- ----------------
Age 57. Partner of the law firm MacPherson Leslie & Tyerman in Regina,
Saskatchewan, Canada. Mr. MacKay served as managing partner of
MacPherson Leslie & Tyerman from 1989 through 1996 and as Chairman of
the firm after January 1997, a position from which he is presently on
leave of absence while serving as Chair of the Task Force on the Future
of the Canadian Financial Services Sector. He is a director of IPSCO
Inc. and Weyerhaeuser Canada Ltd. Mr. MacKay previously served as a
director of Vigoro from November 1993 until March 1996 and has served
as an IMC Global Director since March 1996. His term expires in April
2000. Mr. MacKay currently serves as Chairman of the Environmental,
Health and Safety Committee and as a member of the Audit Committee.
David B. Mathis
- ---------------
Age 59. Chairman and Chief Executive Officer of Kemper Insurance
Companies. Mr. Mathis served as Chairman, President and Chief
Executive Officer of Kemper Insurance Companies from March 1996 to
September 1996. From February 1992 through February 1996, he served as
Chairman and Chief Executive Officer of Kemper Corporation. Mr. Mathis
has been employed by Kemper since 1960 in management positions of
successively increasing importance. He is currently a director of
Kemper Insurance Companies. Mr. Mathis also serves on the board of
trustees of Lake Forest College and is an advisory board member of the
J. L. Kellogg Graduate School of Management of Northwestern University.
He also serves on the board of directors of Evanston Hospital
Corporation and the board of trustees of the Chicago Symphony
Orchestra. Mr. Mathis has served as an IMC Global Director since
February 1995, and his term expires in April 2000. Mr. Mathis
currently serves as Chairman of the Committee on Directors and Board
Affairs and as a member of the Executive Committee and the Compensation
Committee.
Thomas H. Roberts, Jr.
- ----------------------
Age 73. Retired Chairman and Chief Executive Officer of DEKALB Energy
Company (formerly known as DEKALB Corporation). Mr. Roberts is a
director of Pride Petroleum Services. From 1968 through 1988
Mr. Roberts served as a director of International Minerals & Chemical
Corporation. Mr. Roberts has served as an IMC Global Director since
February 1988, and his term expires in April 1998. Mr. Roberts
currently serves on the Audit Committee and the Compensation Committee.
Joseph P. Sullivan
- ------------------
Age 64. Retired Chairman of the Board of Vigoro, a position he held
from March 1991 through February 1996. From March 1991 to
September 1994, Mr. Sullivan served as Chief Executive Officer of
Vigoro. He served as Chief Operating Officer of Vigoro from March 1991
to July 1993 and as President from January 1986 to March 1991.
Mr. Sullivan served as a director of Vigoro from January 1986 through
February 1996. He is a director of American Classic Voyages Co. Mr.
Sullivan has served as an IMC Global Director since March 1996, and his
term expires in April 1999. Mr. Sullivan currently serves as Chairman
of the Executive Committee and as a member of the Environmental, Health
and Safety Committee.
Richard L. Thomas
- -----------------
Age 66. Retired Chairman of First Chicago NBD Corporation and The
First National Bank of Chicago. Mr. Thomas is also a director of First
Chicago NBD Corporation; CNA Financial Corporation; The PMI Group;
Inc.; The Sabre Group Holdings, Inc. and Sara Lee Corporation.
Mr. Thomas is a life trustee of the Orchestral Association of Chicago,
a trustee of Rush-Presbyterian-St. Luke's Medical Center (Chicago) and
a trustee of Northwestern University. He is also Chairman of the Board
of Trustees of Kenyon College. Mr. Thomas has served as an IMC Global
Director since June 1996, and his term expires in April 2000.
Mr. Thomas currently serves on the Executive Committee and the
Committee on Directors and Board Affairs.
Billie B. Turner
- ----------------
Age 66. Chairman Emeritus of the Board. Retired President and Chief
Executive Officer, a capacity in which he served from the Company's
incorporation in 1987 until his retirement in February 1993. He is a
director of Cyprus-Amax Minerals Company. Mr. Turner has served as an
IMC Global Director since 1987, and his term expires in April 1999.
Mr. Turner currently serves on the Environmental, Health and Safety
Committee.
EXECUTIVE OFFICERS OF THE REGISTRANT
The ages and five-year employment history of the Company's
executive officers at August 29, 1997 is as follows:
Wendell F. Bueche
- -----------------
Age 66. Chairman of the Board of the Company. Mr. Bueche served as
Chairman and Chief Executive Officer from August 1994 through June
1997. From February 1993 until August 1994, he served as President and
Chief Executive Officer. Mr. Bueche was Chairman of the Board, Chief
Executive Officer and President of Allis-Chalmers Corporation from 1986
through 1988. He retired from full-time employment from 1989 until
February 1993. Mr. Bueche is also a director of Marshall & Ilsley
Corporation, M&I Marshall & Ilsley Bank, WICOR, Inc., Wisconsin Gas
Company and Executive Association, American Industrial Partners, L. P.
Mr. Bueche has served as an IMC Global Director since July 1991, and
his term expires in April 1999. Mr. Bueche currently serves on the
Executive Committee and is a non-voting member of the Committee on
Directors and Board Affairs.
Robert E. Fowler, Jr.
- ---------------------
Age 61. President and Chief Executive Officer of the Company. Mr.
Fowler served as President and Chief Operating Officer from March 1996
through June 1997. He served as President and Chief Executive Officer
of Vigoro from September 1994 through February 1996 and as President
and Chief Operating Officer from July 1993 to September 1994.
Mr. Fowler served as President and Chief Executive Officer of BCC
Industrial Services from June 1991 to June 1993. He is a director of
Anixter International, Inc. Mr. Fowler previously served as a director
of Vigoro from August 1993 through February 1996 and has served as an
IMC Global Director since March 1996. His term expires in April 2000.
Mr. Fowler currently serves on the Executive Committee and is a non-
voting member of the Committee on Directors and Board Affairs.
C. Steven Hoffman
- -----------------
Age 48. Senior Vice President of the Company. Mr. Hoffman served as
Senior Vice President, Marketing from 1993 until 1994; Senior Vice
President, Sales from 1992 until 1993; Senior Vice President, Wholesale
Marketing from 1990 until 1992.
John U. Huber
- -------------
Age 59 . Senior Vice President of the Company and President of the IMC
Kalium business unit. Mr. Huber has served as President of the IMC
Kalium business unit since joining the Company in March 1996. Prior to
joining the Company, Mr. Huber served as Executive Vice President of
The Vigoro Corporation from June 1993 to March 1996. Prior thereto he
served as President of Kalium Chemicals, Ltd. (now known as IMC Kalium
Ltd.) and as President of Kalium Canada, Ltd. (now known as IMC Kalium
Canada Ltd.) from August 1991 to March 1996.
B. Russell Lockridge
- --------------------
Age 47. Senior Vice President, Human Resources of the Company since
joining the Company in July 1996. Mr. Lockridge served as Corporate
Director, Executive Compensation and Development at FMC Corporation
from 1992 to 1996 and as Human Resource Director for FMC's Chemical
Business from 1986-1992.
Anne M. Scavone
- ---------------
Age 34. Controller of the Company. Ms. Scavone served as Director,
Joint Venture Finances from April 1995 to April 1996 and as Joint
Venture Financial Coordinator from April 1993 to April 1995. Prior to
joining the Company, Ms. Scavone was a Manager at Ernst & Young from
July 1990 to April 1993.
Brian J. Smith
- --------------
Age 53. Executive Vice President and Chief Financial Officer of the
Company since joining the Company in February 1996. From June 1996 to
February 1997, Mr. Smith served as Treasurer. Mr. Smith served as
Executive Vice President and Chief Financial Officer at W. R. Grace &
Co. from 1989 to 1995. Mr. Smith resigned from the Company effective
September 30, 1997.
Marschall I. Smith
- ------------------
Age 52. Senior Vice President and General Counsel of the Company since
joining the Company in 1993. Mr. Smith was Senior Vice President and
General Counsel of American Medical International Inc. from 1992 until
1993 and Associate General Counsel of Baxter International Inc.from
1980 to 1992.
Robert M. Van Patten
- --------------------
Age 52. Senior Vice President of the Company and President of the IMC
AgriBusiness business unit. Mr. Van Patten has served as President of
the IMC AgriBusiness business unit since joining the Company in March
1996. Prior to joining the Company, Mr. Van Patten served as Executive
Vice President of The Vigoro Corporation and as President of Vigoro
Industries, Inc. (now known as IMC AgriBusiness Inc.) from June 1993 to
March 1996. Prior thereto he served as President of the Agribusiness
Division of Vigoro Industries, Inc.
All of the Company's executive officers are elected annually, with
the terms of the officers listed above to expire in April 1998. No
"family relationships," as that term is defined in Item 401(d) of
Regulation S-K, exist among any of the listed officers.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Each director and executive officer of the Company who is subject
to Section 16 of the Securities Exchange Act of 1934, as amended (the
Exchange Act), is required by Section 16(a) of the Exchange Act to
report to the SEC, by a specified date, his or her beneficial ownership
of or transactions in the Company's securities. Reports received by
the Company indicate that all such directors and officers filed all
requisite reports with the SEC on a timely basis during fiscal 1997
except that a Form 4 for Dr. Davidson relating to the exercise by Dr.
Davidson of IMC Global options was not timely filed with the SEC.
Item 11. Executive Compensation.
Compensation of Executive Officers
- ----------------------------------
The following table sets forth information as to the compensation
of the Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company serving as such on
June 30, 1997. The executive officers listed below are collectively
referred to as the "Named Executive Officers" in this Annual Report.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compansation
---------------------------- -----------------------
- ---------
Awards
Payouts
----------------------
- -------
Restricted Securities
Other Annual Stock Underyling
LTIP All Other
Name and Fiscal Salary Bonus Compensation Awards Options
Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#)
($) ($) (12)
- ------------------------------------------------------ -----------------------
- ------------------------
W.F. Bueche(1) 1997 600,000 386,256 0 0 89,000(8)
597,364(10) 102,407
Chairman 1996 544,600 425,000 0 0 50,000
1,472,078(11) 48,117
1995 530,040 460,000 0 0 20,000(9)
298,141 52,441
R.E. Fowler,Jr.(2) 1997 450,000 267,408 0 0 158,000(8)
371,024(10) 41,211
President & CEO 1996 148,600 85,000 0 0 0
0 0
B.J. Smith(3) 1997 335,500 160,445 6,947(6) 0 74,000(8)
209,030(10) 29,750
Executive VP & CFO 1996 115,077 60,000 3,996(6) 0 25,000
0 36,442
J.U. Huber(4) 1997 299,075 227,443 12,900(7) 0 64,000(8)
243,036(10) 16,901
Senior VP
R.M. VanPatten(5) 1997 278,353 154,894 0 0 54,000(8)
220,957(10) 14,243
Senior VP
- -------------------------------------------------------------------------------
- ------------------------
(1) Mr. Bueche retired as CEO of the Company on June 30, 1997.
(2) Mr. Fowler's employment with the Company commenced on March 4, 1996.
(3) Mr. Smith's employment with the Company commenced on February 26, 1996.
Mr. Smith resigned from the Company effective September 30, 1997.
(4) Mr. Huber was elected Senior Vice President of the Company on February 25,
1997.
(5) Mr. Van Patten was elected Senior Vice President of the Company on
February 25, 1997.
(6) Represents payments to offset expenses incurred for relocation.
(7) Represents payments to compensate Mr. Huber for lower pension benefits to
be paid by the Company than were payable under the plan of Mr. Huber's
former employer.
(8) Represents options granted in June 1997 and August 1996. The Company
normally grants options to its executive officers once each fiscal year.
Due to the Vigoro merger and the decision of the Board of Directors to
change the fiscal year of the Company from June 30 to December 31, the
Company made two grants of options during fiscal 1997. The Company did
not grant any options to the Named Executive Officers during August 1997.
(9) Reflects a 2-for-1 stock split effected in November 1995.
(10) Payments were made pursuant to the Company's 1996 Long-Term Performance
Incentive Plan.
(11) Reflects restricted shares and contingent stock units payouts under the
1994 Long-Term Performance Incentive Plan that vested on
June 30, 1996, pursuant to action taken by the Board of Directors. The
awards were scheduled to vest on June 30, 1997.
(12) Consists of: (i) the value of the benefit for life insurance premiums paid
by the Company as follows: Mr. Bueche, $64,881 in fiscal 1997; $39,117 in
fiscal 1996; and $34,638 in fiscal 1995; Mr. Fowler, $32,211 in fiscal
1997; Mr. Smith, $19,325 in fiscal 1997 and $6,442 in fiscal 1996; Mr.
Huber, $10,151 and Mr. Van Patten, $6,248; (ii) contributions made by the
Company to the Company's Defined Contribution Savings Plan as follows: Mr.
Bueche, $9,000 in fiscal 1997; $9,000 in fiscal 1996; and $17,803 in
fiscal 1995; Mr. Fowler, $9,000 in fiscal 1997; Mr. Smith, $9,000 in
fiscal 1997; Mr. Huber, $6,750 and Mr. Van Patten, $3,167; (iii)
reimbursement by the Company for estate planning expenditures of $7,400
and $1,425 incurred by Mr. Bueche and Mr. Smith, respectively; (iv) income
attributable to Mr. Van Patten's use of a vehicle owned by the Company;
(v) $21,146 of premiums paid by the Company for additional insurance for
Mr. Bueche and (vi) $30,000 paid to Mr. Smith upon commencement of his
employment.
Company for additional insurance for Mr. Bueche and (vi) $30,000 paid to
Mr. Smith upon commencement of his employment.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth information with respect to all
options to purchase common stock granted in fiscal 1997 to each of the
Named Executive Officers. There were no grants of stock appreciation
rights in fiscal 1997. The Company normally grants options to its
executive officers once each fiscal year. Due to the Vigoro merger and
the decision of the Board of Directors to change the fiscal year of the
Company from June 30 to December 31, the Company made two grants of
options during fiscal 1997. The Company did not grant any options to
the Named Executive Officers during August 1997.
Individual Grants Grant Date
Value
----------------------------------------------------------
- ----------------
Number of % of Total
Securities Options Grant Date
Underlying Granted to Exercise Present
Options Employees in Price Expiration Value
Name Granted(#)(1) Fiscal Year ($/Share)(2) Date
($)(3)
- ----------- ------------- ----------- -------
- ----- -----------
W. F. Bueche 89,000 10.67 40.875 8/14/06 14.84
R. E. Fowler, Jr.53,000 6.35 40.875 8/14/06 14.84
105,000 9.93 37.625 6/23/07 12.56
B. J. Smith 29,000 3.48 40.875 8/14/06 14.84
45,000 4.25 37.625 6/23/07 12.56
J. U. Huber 21,000 2.52 40.875 8/14/06 14.84
43,000 4.07 37.625 6/23/07 12.56
R. M. Van Patten19,000 2.28 40.875 8/14/06 14.84
35,000 3.31 37.625 6/23/07 12.56
- -----------------------------------------------------------------------
- ------
(1) Except for options granted to Mr. Bueche, all options granted and
reported in this table have the following terms: each option vests
over a three-year period, with one-third of the options becoming
exercisable at the end of each of the first three years following
the date of grant and with the entire option becoming exercisable
at the end of the third year, unless the vesting schedule is
accelerated in the event of a change of control of the Company in
accordance with the Company's 1988 Stock Option and Award
Plan, as amended and restated. Each option granted to Mr. Bueche
during fiscal 1997 vests over a two-year period, with one-half of
the options becoming exercisable at the end of each fiscal year.
(2) Exercise price is the fair market value of the common stock on the
date of grant, determined by calculating the average of the high
and low prices at which the common stock is traded on such date,
as reflected on the consolidated tape of the New York Stock
Exchange.
(3) The Black-Scholes Option Pricing Model was used to determine the
grant date present value of the options to purchase common stock
granted in fiscal 1997 by the Company. The material assumptions
and adjustments incorporated in the model in estimating the value
of the options which have an expiration date of (i) August 2006
and (ii) June 2007, respectively, include the following:
(a) option exercise prices of $40.875 and $37.625, respectively,
equal to the fair market value of the underlying stock on the date
of grant; (b) an option term of ten years; (c) interest rates of
6.64 percent and 6.49 percent, respectively, representing the
interest rate on a U. S. Treasury security on the date of grant
with a maturity date corresponding to that of the option term;
(d) volatilities of 35.09 percent and 30.31 percent, respectively,
calculated using daily stock prices for the one-year period prior
to the date of grant; (e) dividends at the rate of $0.32 per
share, representing the annualized dividends paid with respect to
a share of common stock at the date of grant and (f) reductions of
approximately 33 percent and 34 percent, respectively, to reflect
the probability of forfeiture due to termination prior to vesting
and the probability of a shortened option term due to termination
of employment prior to the option exercise date.
The ultimate value of the options will depend on the future market
price of the common stock, which cannot be forecast with
reasonable accuracy. The actual value, if any, an optionee will
realize upon exercise of an option will depend on the excess of
the market value of the common stock over the exercise price on
the date the option is exercised.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to all
exercises of options to purchase common stock in fiscal 1997 by each of
the Named Executive Officers and all outstanding options to purchase
common stock held by such individuals at June 30, 1997.
Number of Securities
Underlying Unexercised Value of
Unexercised
Options at Fiscal In-the-Money Options
Year-End (#) at Fiscal Year-End
($)(1)
Shares Acquired Value ------------------------- ------
- ---------------------
Name on Exercise(#) Realized($) Exercisable
Unexercisable Exercisable Unexercisable
- ------------- -------------- ----------- ----------- ---------
- ---- ----------- -------------
W. F. Bueche _ _ 228,000 114,000 3,620,603 0
R. E. Fowler, Jr. _ _ 395,763 312,427 4,974,851 1,714,598
B. J. Smith _ _ 12,500 86,500 0 0
J. U. Huber 5,000 122,969 57,137 89,891 894,594 176,180
R. M. Van Patten17,338 458,373 24,751 76,168 162,053 165,154
- -----------------------------------------------------------------------
(1) The value is based on a stock price of $35.625, which is the
average of the high and low prices at which the common stock was
traded on June 30, 1997 as reflected on the consolidated tape of
the New York Stock Exchange, less the relevant exercise price(s).
Pension Plans
Qualified Pension Plan
The Company maintains a non-contributory qualified pension plan
which covers all United States salaried employees, including the Named
Executive Officers (except for Messrs. Huber and Van Patten). The
annual pension to which a participant is entitled at normal retirement
age (65) is an amount based on the highest final average annual
remuneration for the five consecutive highest paid years out of the ten
years immediately preceding retirement and years of credited service up
to 35 years. The plan is integrated with benefits payable under Old
Age Survivors and Disability Insurance. Remuneration for these
purposes includes salary and 50 percent of bonus as shown in the
Summary Compensation Table.
The Internal Revenue Code of 1986, as amended (the Code), requires
certain limitations on benefits provided under a qualified retirement
plan. To the extent pension benefits otherwise payable under the
qualified pension plan's formula exceed the Code's limitations, the
Board of Directors has approved a non-qualified plan, the Supplemental
Executive Retirement Plan, which provides for payment of amounts in
excess of the Code's limitations from the Company's operating funds to
its participants.
The following table shows the estimated annual pension benefits
which would be payable to the Named Executive Officers for life at
normal retirement under the qualified pension plan. (If elected, an
optional form of pension would, on an actuarial basis, reduce benefits
to the participant but provide benefits to a surviving beneficiary or
permit a one-time lump sum present value payment.)
Annual Average of
Highest Five Years Annual Benefits for Years
Covered Remuneration of Service Indicated
for Pension Purposes -------------------------------------
- ------------------------
in Ten Years Preceding 35
Years
Normal Retirement Date 10 Years 15 Years 20 Years 25 Years 30
Years or More
- ----------------- ------ ------ ------- ------- ------- -------
$100,000 $ 16,700 $ 25,000$ 33,300 $ 41,600 $ 48,100 $54,700
200,000 34,500 51,700 68,900 86,100 99,800 113,500
300,000 52,300 78,400 104,500 130,600 151,400 172,300
400,000 70,100 105,100 140,100 175,100 203,100 231,100
500,000 87,900 131,800 175,700 219,600 254,700 289,900
600,000 105,700 158,500 211,300 264,100 306,400 348,700
700,000 123,500 185,200 246,900 308,600 358,000 407,500
800,000 141,300 211,900 282,500 353,100 409,700 466,300
900,000 159,100 238,600 318,100 397,600 461,300 525,100
- ----------------------------------------------------------------------
Credited service under the pension plan for the Named Executive
Officers as of June 30, 1996 is as follows: Mr. Bueche, 4 years, 5
months; Mr. Fowler, 1 year, 4 months; Mr. Smith, 1 year, 5 months;
Mr. Huber, 1 year, 4 months; and Mr. Van Patten, 1 year, 4 months.
Supplemental Executive Retirement Plan
The Supplemental Executive Retirement Plan, which is a
non-contributory, non-qualified plan, provides an additional pension
benefit for Company executive officers (including the Named Executive
Officers) and certain other key executives based on the participant's
final average annual remuneration for pension purposes. The plan takes
into account 100 percent of bonus and years of credited service up to a
maximum of 20 years, payable to the extent that such benefits exceed
those payable under the above-described pension plan. There are no
other offsets under this plan.
The following table shows the additional annual retirement benefits
payable under the Supplemental Executive Retirement Plan to the Named
Executive Officers and covered key employees for life beginning at age
65 based upon ten, 15 and 20 years of service.
Annual Average of Net Additional
Highest Five Years Annual Benefits
Covered Remuneration for Years of
for Pension Purposes Service Indicated
in Ten Years Preceding ---------------------------------
Normal Retirement Date 10 Years 15 Years 20 Years
- ---------------------- -------- -------- --------
$100,000 $ 13,300 $ 20,000 $ 26,700
200,000 25,500 38,300 51,100
300,000 37,700 56,600 75,500
400,000 49,900 74,900 120,000
500,000 62,100 105,000 180,000
600,000 74,300 150,000 240,000
700,000 90,000 195,000 300,000
800,000 120,000 240,000 360,000
900,000 150,000 285,000 420,000
- ------------------------------------------------------------------
Compensation of Directors
Non-Employee Directors
Each non-employee director receives an annual retainer of $24,000,
attendance fees of $1,000 for each Board meeting attended and an
additional $1,000 for attendance at each meeting of a Board committee
to which he is assigned. Each non-employee director receives an
additional annual retainer of $3,000 for service as chairperson of a
Board committee.
Pursuant to the 1994 Stock Option Plan for Non-Employee Directors,
each non-employee director annually receives options to purchase 2,000
shares of common stock. Options are granted at 100 percent of the fair
market value of the stock at the time of grant. Options granted are
immediately exercisable and may be exercised at any time while the
director remains in office and for 24 months thereafter. However,
common stock issuable upon exercise of options may not be sold within
the six-month period following the date of grant without the consent of
the Compensation Committee nor may options be exercised more than ten
years after the date of the grant.
Pursuant to the Directors' Retirement Service Plan, a non-employee
director who has served at least six years as a director, has agreed to
remain available to provide consultation services to the Company
management and does not work for a competitor will, upon attainment of
age 70 and after retirement from the Board, receive an annual pension
for a period of ten years (subject to earlier termination upon death).
Such pension will be equal to 60 percent to 100 percent of the annual
retainer in effect at retirement, depending upon the length of the
director's service (60 percent if six years, 70 percent if seven, 80
percent if eight, 90 percent if nine, and 100 percent if ten years or
more).
Mr. MacKay received approximately $4,700 during fiscal 1997 for
serving on the Canadian Advisory Board of the Company.
Employee Directors
Employee directors (currently Messrs. Bueche and Fowler) receive no
fees or other remuneration for service on the Board or any committee of
the Board.
Termination of Employment Agreements
Agreements with Messrs. Bueche, Fowler and Smith, to become
effective in the event of a change in control of the Company, are
intended to assure the Company of the continued services of these
executives. In general, each of the agreements provides that, in the
event there is a change in control of the Company (as defined in the
agreement), the executive shall remain employed by the Company in his
then current position at the then current base and incentive
compensation and benefit levels for a period of three years, subject to
earlier expiration because of voluntary resignation, mandatory
retirement, disability, or termination for cause, as defined in the
agreements. If the Company breaches the agreement, the Company is
obligated to provide the executive certain severance benefits,
including three years' base salary plus three times the average of the
prior three years' bonuses. In addition, the Company would become
obligated to continue the executive's participation in various
compensation and benefit plans in which the executive was participating
when the agreement became effective. These agreements are in addition
to the other agreements and arrangements described in this Annual
Report on Form 10-K.
These agreements were amended in August 1995 to update the
definition of change in control and to increase the severance and bonus
payment from two years to three years.
Certain provisions of the federal tax law impose a 20 percent
surcharge upon an executive of a corporation and deny federal income
tax deductibility to the corporation as to a significant portion of the
severance payments made to an executive because of a change in control,
if such payments as a whole exceed three times his or her average
annual base and incentive compensation for the most recent five years.
The amounts estimated to be payable under the aforesaid agreements, if
those agreements become effective, could be large enough to subject the
executives to the surcharge and to deprive the Company of a deduction.
The Company has agreed with each of the executives that, if a surcharge
were assessed upon payment of the aforementioned severance benefits, it
will provide "grossed up" reimbursement to the executive, including any
tax payable on such additional amounts paid to him.
If a change in control were to occur and the contingent employment
agreements were to be breached by the Company within three years
thereafter, the amount of cash that would be payable in respect of
these amended agreements is estimated (as of July 1, 1997 based on
fiscal 1997 salary and bonus and excluding any gross-up reimbursements
for taxes) to be approximately: Mr. Bueche, $3.1 million; Mr. Fowler,
$2.3 million and Mr. Smith, $1.6 million. The merger of FTX into the
Company does not constitute a change of control under these agreements.
Mr. Smith's resignation from the Company will not result in any payment
pursuant to the agreement between Mr. Smith and the Company.
Employment and Other Agreements
On March 4, 1996, the Company and Mr. Bueche entered into an
agreement which amended his employment agreement and which amended his
agreement to provide consulting services to the Company following his
retirement as Chairman of the Company. Pursuant to the employment
agreement, as amended, Mr. Bueche is to serve as Chairman of the
Company from July 1, 1997 through June 30, 1998 at a salary of $250,020
per annum. In addition, Mr. Bueche will be retained as a consultant
for one year from the date of his retirement as Chairman for a total
fee of $250,020.
Mr. Smith and the Company entered into a letter agreement effective
as of March 1, 1996 which provides that if Mr. Smith is terminated
prior to February 28, 1999, he will be entitled to receive the sum of:
two times his annualized salary as of the termination date and two
times the highest annual bonus (annualized if he is employed for less
than a complete bonus year) earned by him for one of the two
consecutive complete bonus years ending immediately preceding the
termination. "Termination" is defined generally in the letter
agreement as the termination prior to February 28, 1999 of employment
with the Company for any reason other than death, disability, cause or
voluntary resignation.
Certain of the Company's directors and executive officers entered
into severance and other similar agreements in connection with the
Vigoro merger. (See "Severance Plans" and "Non-Competition
Agreements," in Part III, Item 11, "Executive Compensation," of this
Annual Report on Form 10-K for further detail.)
Management Compensation and Benefit Assurance Program
The Board adopted a Management Compensation and Benefit Assurance
Program (the Program) in October 1988 and amended this Program in
August 1995. The purpose of the Program is to ensure that officers and
key management personnel receive the compensation and benefits that
have been committed to, and are reasonably expected by, them under the
terms of certain benefit plans, including severance and benefits in the
event of termination of employment after a change in control.
Under the Program, trusts have been established with the Wachovia
Bank of North Carolina, N.A. of Winston-Salem, North Carolina to ensure
appropriate payment when due of commitments, awards and benefits under
the Management Incentive Compensation Plan (including any deferred
bonuses), the Supplemental Executive Retirement Plan, the 1988 Stock
Option and Award Plan, the contingent employment agreements and
gross-up arrangements referred to under the caption "Termination of
Employment Arrangements." These trusts are minimally funded with
operating funds of the Company, subject to full funding in the event
that the Trustee is notified that a change in control has occurred or
is about to occur.
Assuming a change in control were to occur, distributions by the
Trustee would be made only if an officer were involuntarily terminated
without cause within three years after a change in control and/or only
to the extent the Company were to fail to honor its commitments and
subject to the claims of the Company's creditors and to the terms of
the benefit plan involved. The annual cost to the Company to maintain
the trusts is estimated to be $21,000. Full funding under the
arrangements that could be required would depend on the Company's
outstanding commitments subject to the Program from time to time.
"Change in control" of the Company is defined to occur as of the
first day that any one or more of the following conditions shall have
been satisfied:
(1) the acquisition by any individual entity or group (a
Person), including any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange
Act, of 15 percent or more of either (i) the then outstanding
shares of common stock of the Company (the Outstanding Company
Common Stock) or (ii) the combined voting power of the then
outstanding securities of the Company entitled to vote generally in
the election of directors (the Outstanding Company Voting
Securities); excluding, however, the following: (A) any acquisition
directly from the Company (excluding any acquisition resulting from
the exercise of an exercise, conversion or exchange privilege
unless the security being so exercised, converted or exchanged was
acquired directly from the Company); (B) any acquisition by the
Company; (C) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; and (D) any acquisition by
any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (3) of this definition;
(2) individuals who, as of the date hereof, constitute the Board
of Directors (the Incumbent Board) cease for any reason to
constitute at least a majority of such Board; provided that any
individual who becomes a director of the Company subsequent to the
date hereof whose election, or nomination for election by the
Company's stockholders, was approved by the vote of at least a
majority of the directors then comprising the Incumbent Board shall
be deemed a member of the Incumbent Board; and provided further,
that any individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person
other than the Board shall not be deemed a member of the Incumbent
Board;
(3) approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company (a Corporate Transaction); excluding, however, a Corporate
Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or
indirectly, more than 60 percent of, respectively, the outstanding
shares of common stock, and the combined voting power of the
outstanding securities of such corporation entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or indirectly) in substantially
the same proportions relative to each other as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities,
as the case may be, (ii) no Person (other than: the Company; the
corporation resulting from such Corporate Transaction; and any
Person which beneficially owned, immediately prior to such
Corporate Transaction, directly or indirectly, 25 percent or more
of the Outstanding Company Common Stock or the Outstanding Voting
Securities, as the case may be) will beneficially own, directly or
indirectly, 25 percent or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the
outstanding securities of such corporation entitled to vote
generally in the election of directors and (iii) individuals who
were members of the Incumbent Board will constitute at least a
majority of the members of the Board of Directors of the
corporation resulting from such Corporate Transaction; or
(4) approval by the stockholders of the Company of a plan of
complete liquidation or dissolution of the Company.
The merger of FTX into the Company does not constitute a change in
control under the Program.
Severance Plans
In connection with the March 1996 merger of Vigoro into a
wholly-owned subsidiary of the Company (the Vigoro Merger), the Vigoro
Board adopted and the Company assumed a Severance Plan (the Vigoro
Severance Plan) applicable to 28 employees of Vigoro, including
Mr. Fowler, the current President and Chief Executive Officer of the
Company, and Messrs. Huber and Van Patten, each of whom is currently a
Senior Vice President of the Company. The Vigoro Severance Plan
provides that a covered employee will receive "Severance Benefits" if
the employee is terminated in circumstances that constitute a
"Severance Event" and such employee executes a release of claims.
Severance Benefits consist of an amount equal to the employee's then
annualized base salary or, if greater, annualized base salary as of
November 13, 1995 (Base Salary), plus an amount generally equal to the
employee's highest annual bonus and other incentive payments received
for any of the prior three years (Bonus Base), paid in 12 equal monthly
installments plus unpaid salary and pro-rated bonus and earned but
unused vacation. Eligible employees will also be entitled to
continuation of benefits for the lesser of one year or until the
employee finds new employment providing comparable benefits. A
Severance Event occurs if within three years of November 13, 1995, an
eligible employee's employment is terminated: (i) by the employer other
than because such employee engaged in willful and intentional conduct
which has caused demonstrable and serious injury to the Company, was
convicted of or entered a plea of nolo contendere to any felony, was
convicted of a criminal offense or entered a plea of nolo contendere to
any offense involving dishonesty, breach of trust or moral turpitude,
committed a breach of fiduciary duty involving personal profit or
willfully refused to perform or was grossly negligent in the
performance of his or her duties or responsibilities (unless
significantly changed without the consent of the employee)
(collectively, Cause); (ii) by such employee within 90 days after such
employee has or should have knowledge that his or her Base Salary was
not maintained in accordance with prior levels, he or she is not
included on a comparable basis with similar employees in bonus plans or
stock option or similar plans or he or she is not included on a
comparable basis with similar employees in benefit plans or vacation or
other perquisite plans (collectively, Good Reason); or (iii) by such
employee on or after the date such employee has reached the age of 60.
A covered employee is not entitled to Severance Benefits if the
employee terminates his or her employment other than in circumstances
constituting a Severance Event or the employee's employment is
terminated as a result of the death or disability of the employee.
Other than as described above, no Named Executive Officer is eligible
to receive Severance Benefits under the Vigoro Severance Plan.
Non-Competition Agreements
Upon consummation of the Vigoro merger, the Company entered into
Non-Competition Agreements (the Non-Competition Agreements) with a
total of 14 officers and key employees of Vigoro, including
Messrs. Fowler, Huber and Van Patten, and with nine key employees of
the Company which provide that such employees will not compete with the
Company or any of its affiliates for specified periods following the
termination of their employment with Vigoro or its subsidiaries because
of a Severance Event (as defined under the caption "Severance Plans")
and will receive scheduled payments in equal monthly installments
during the period of non-competition. Employees entering into
Non-Competition Agreements will agree not to compete (i) for a period
of three years if a Severance Event occurs on or before the first
anniversary of the Effective Time; (ii) for two years if a Severance
Event occurs after the first anniversary and on or before the second
anniversary of the Effective Time; and (iii) for one year if a
Severance Event occurs after the second anniversary and on or before
the third anniversary of the Effective Time (the Non-Competition
Periods). During the Non-Competition Periods, certain employees of the
Company will be prohibited from rendering employment or consulting
services to any business enterprise in North America in a capacity in
which such employee will directly supervise a business which is
directly competitive with the business which the employee supervised
during the one-year period preceding the Severance Event. The maximum
aggregate payments under the Non-Competition Agreements payable to
Messrs. Fowler, Huber and Van Patten are $1,580,000, $920,000 and
$772,000, respectively. Other than as described above, no Named
Executive Officer is a party to a Non-Competition Agreement.
Compensation Committee Interlocks and Insider Participation
Robert E. Fowler, Jr., the President and Chief Executive Officer of
the Company, is the Chairman of the Compensation Committee of the Board
of Directors of Anixter International, Inc. Rod F. Dammeyer is the
Chief Executive Officer of Anixter International, Inc. and is on the
Compensation Committee of the Board of Directors of the Company.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Ownership of Common Stock by Directors and Executive Officers
The following table shows the number of shares of the common stock
that are owned beneficially, as of August 29, 1997, by (i) each
director, (ii) each executive officer named in the Summary Compensation
Table and (iii) the directors, all such executive officers and all
other executive officers as a group (18 persons), with sole voting and
investment power unless otherwise indicated.
Number of Shares
Owned Beneficially
Name as of 8/29/97(1)(2)
- ----------------------------------------------------------------------
Wendell F. Bueche 331,980(3)(4)
Raymond F. Bentele 9,000(5)
Rod F. Dammeyer 17,000(5)(6)
James M. Davidson 8,000(5)
Robert E. Fowler, Jr. 587,328(3)(6)
Harold H. MacKay 21,600(5)(6)
David B. Mathis 8,000(5)
Thomas H. Roberts, Jr. 25,000(5)
Joseph P. Sullivan 698,675(5)(6)
Richard L. Thomas 6,000(5)
Billie B. Turner 61,906(5)
Brian J. Smith 48,239(3)
John U. Huber 236,691(3)(6)(7)
Robert M. Van Patten 296,850(3)(6)(8)
Directors and all executive officers as a group 2,568,262(3)(5)(6)
- ---------------------------------------------------------------------
(1) Beneficial ownership of the common stock is based on information
furnished or confirmed by each director or executive officer
described above.
(2) No individual director or executive officer is a beneficial owner
of more than one percent of the outstanding shares of common
stock. Directors and the executive officers described above as a
group beneficially own an aggregate of approximately 2.8 percent
of the outstanding shares of common stock.
(3) Includes shares of common stock currently purchasable or
purchasable within 60 days of August 29, 1997 through the exercise
of options granted under the 1988 Stock Option and Award Plan, as
amended and restated, as follows: Mr. Bueche, 272,500 shares;
Mr. Fowler, 17,666 shares; Mr. Smith, 22,166 shares; Mr. Huber,
7,000 shares; Mr. Van Patten, 6,333 shares; and directors and all
executive officers as a group, 496,971 shares.
(4) Includes 1,600 shares of common stock held by the Nancy Bird
Jacobson Trust dated March 27, 1974 (the Trust). Mr. Bueche
disclaims beneficial ownership of the 1,600 shares of common stock
held by the Trust.
(5) Includes shares of common stock purchasable within 60 days of
August 29, 1997 through the exercise of options granted to
non-employee directors under the 1994 Stock Option Plan for
Non-Employee Directors, as follows: Mr. Bentele, 8,000 shares;
Mr. Dammeyer, 4,000 shares; Dr. Davidson, 6,000 shares;
Mr. MacKay, 4,000 shares; Mr. Mathis, 6,000 shares; Mr. Roberts,
8,000 shares; Mr. Sullivan, 4,000 shares; Mr. Thomas, 4,000
shares; and Mr. Turner, 8,000 shares.
(6) Includes shares of common stock currently purchasable or
purchasable within 60 days of August 29, 1997 through the exercise
of options granted under The Vigoro Corporation 1991 Stock Option
Plan, as amended, as follows: Mr. Dammeyer, 8,000 shares;
Mr. Fowler, 550,190 shares; Mr. Huber, 64,104 shares; Mr. MacKay,
16,000 shares; Mr. Sullivan, 261,000 shares; Mr. Van Patten,
40,517 shares; and directors and the executive officers described
above as a group, 939,811 shares.
(7) Includes 155,000 shares held by the John and Janice Huber Family
Limited Partnership, an Illinois limited partnership (the Huber
Partnership). Mr. Huber and his wife are the sole general
partners of the Huber Partnership. Mr. Huber disclaims beneficial
ownership of any of the 155,000 shares of common stock owned by
the Huber Partnership except to the extent of his ownership
interest in the Huber Partnership.
(8) Includes 250,000 shares held by the Robert and Susan Van Patten
Family Limited Partnership, an Illinois limited partnership (the
Van Patten Partnership). Mr. Van Patten and his wife are the sole
general partners of the Van Patten Partnership. Mr. Van Patten
disclaims beneficial ownership of any of the 250,000 shares of
common stock owned by the Van Patten Partnership except to the
extent of his ownership interest in the Van Patten Partnership.
Ownership of Common Stock by Others
The Company believes that, as of August 29, 1997, based on filings
with the Securities and Exchange Commission (the SEC), only the
following named institutions are the beneficial owners of more than
five percent of the outstanding common stock.
Percent
Shares of
Name and Address of Beneficial Owner Beneficially Outstanding
Owned Common
Stock
Wellington Management Company, L.L.P. (1) 10,102,025 10.97%
75 State Street
Boston, Massachusetts 02109
Neuberger & Berman, L.L.C. (2) 6,678,834 7.25%
605 Third Avenue
New York, New York 10158-3698
Eagle-GVI One L.L.C. (3) 6,510,286 7.07%
Two North Riverside Plaza, Suite 1100
Chicago, Illinois 60606
MacKay Shields Financial Corporation (4) 5,041,640 5.47%
9 West 57th Street
New York, New York 10019
(1) Wellington Management Company, L.L.P. is a parent holding company
which files one Schedule 13G to report beneficial ownership of
common stock by all of its affiliates. Includes shares as to which
Wellington Management Company, L.L.P. has or shares investment and
voting power as follows: shared voting power, 2,640,100 shares and
shared investment power, 10,102,025 shares.
(2) Neuberger & Berman, L.L.C. is an investment adviser registered
under the Investment Advisers Act of 1940 (the Advisers Act) and
has or shares investment and voting power as follows: sole voting
power, 1,706,136 shares; shared voting power, 3,870,400 shares and
shared investment power, 6,678,834 shares.
(3) Eagle-One GVI L.L.C. has sole investment and voting power with
respect to the common stock reported.
(4) MacKay-Shields Financial Corporation is an investment adviser
registered under Section 203 of the Advisers Act and has or shares
investment and voting power as follows: shared voting power,
5,041,640 shares and shared investment power, 5,041,640 shares.
The Company knows of no contractual arrangements which may, at a
subsequent date, result in a change in control of the Company.
Item 13. Certain Relationships and Related Transactions.
TRANSACTIONS WITH PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE
OFFICERS
The Company, Great American Management and Investment, Inc. (GAMI)
and certain former stockholders of Vigoro (including Rod F. Dammeyer, a
Director) entered into a Registration Rights Agreement (the
Registration Rights Agreement) in connection with the Vigoro merger.
On May 8, 1996, pursuant to such Registration Rights Agreement, GAMI
requested that the Company register the shares of common stock held by
GVI Holdings, Inc., a wholly owned subsidiary of GAMI. On July 2,
1996, the Company effected such registration.
The Registration Rights Agreement provides that GAMI will cause any
affiliate or associate of GAMI to resign as a director of the Company
if GAMI's direct or indirect ownership of common stock is reduced below
3.5 percent of the outstanding shares of common stock.
Certain of the Company's directors and executive officers entered
into severance and other similar agreements in connection with the
Vigoro merger. (See "Severance Plans" and "Non-Competition Agreements,"
in Part III, Item 11, "Executive Compensation," of this Annual Report
on Form 10-K for further detail.)
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-
K.
(a) (1) Consolidated financial statements filed as part of this
report are listed under Part II, Item 8 of this Annual Report on Form
10-K.
(a) (2) All schedules for which provision is made in the applicable
accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore
have been omitted.
(a) (3) The exhibits listed in the following index have previously
been filed with the Securities and Exchange
Commission or are being filed as part of this report.
Filed with
Exhibit Incorporated Herein Electronic
No. Description By Reference to Submission
3.1 Restated Certificate of Company's Report on
Incorporation, as amended Form 8-K dated
November 1, 1994
3.2 Certificate of Amendment to X
Restated Certificate of
Incorporation, dated October
20, 1994
3.3 Certificate of Amendment to Exhibit 3.2 to the
Restated Certificate of Company's
Incorporation, dated October Registration
23, 1995 Statement on Form 8-
A/A-1 dated January
12, 1996
3.4 Certificate of Amendment to X
Restated Certificate of
Incorporation, dated March
1, 1996
3.5 By-Laws, amended as of March Exhibit 4.4 to the
4, 1996, and as currently in Company's Post-
effect Effective Amendment
No. 1 on Form S-8
to Form S-4,
(No. 333-0439)
3.6 Rights Agreement dated June Company's Report on
21, 1989, amended as of Form 8-A/A dated
August 17, 1995, with The September 7, 1995.
First 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 Indenture, dated as of June Exhibit 4.7 to the
15, 1993, between IMC Global Company's
Inc. and NationsBank of Registration
Georgia, National Statement on Form S-
Association, as Trustee 4, (No. 33-49795)
relating to the issuance of
10 1/8% Senior Notes due
2001 and 10 1/8% Series B
Senior Notes due 2001 and
10 3/4% Senior Notes Due
2003 and 10 3/4% Series B
Senior Notes Due 2003
4.3 First Supplemental Exhibit 4.9 to the
Indenture, dated as of 1996 Annual Report
September 5, 1996, between on Form 10-K
IMC Global Inc. and The Bank
Of New York, as successor
trustee to NationsBank of
Georgia, which amends and
supplements the Indenture
dated as of June 15, 1993,
between IMC Global Inc. and
the trustee relating to the
issuance of 10 1/8% Senior
Notes due 2001 and 10 1/8 %
Series B Senior Notes due
2001
4.4 Second Supplemental X
Indenture, dated as of May
8, 1997, between IMC Global
Inc. and The Bank of New
York, as successor trustee
to NationsBank of Georgia,
which amends and supplements
the Indenture dated as of
June 15, 1993, between IMC
Global Inc. and the trustee
relating to the issuance of
10 3/4% Senior Notes due
2003 and 10 3/4% Series B
Senior Notes due 2003
4.5 Indenture dated as of Exhibit 4.1 to the
October 1, 1993, between IMC Company's Report on
Global Inc. and The Bank of Form 8-K dated
New York, as successor October 12, 1993
trustee to NationsBank of
Georgia, relating to the
issuance of a series of
Senior Debt Securities known
as the 9 1/4% Senior Notes
due 2000
4.6 First Supplemental Exhibit 4.1 to the
Indenture, dated as of Company's Report on
October 1, 1993, between IMC Form 8-K dated
Global Inc. and NationsBank October 12, 1993
of Georgia, National
Association, as Trustee
relating to the issuance of
a series of Senior Debt
Securities known as the 9
1/4% Senior Notes due 2000
4.7 Second Supplemental Exhibit 4.10 to the
Indenture, dated as of 1996 Annual Report
September 3, 1996, between on Form 10-K
IMC Global Inc. and The Bank
Of New York, as successor
trustee to NationsBank of
Georgia, which amends and
supplements the Indenture
dated as of October 1, 1993,
between IMC Global Inc. and
the trustee and the
Supplemental Indenture dated
as of October 1, 1993
between IMC Global Inc. and
the trustee, relating to the
issuance of a series of
Senior Debt Securities known
as the 9 1/4% Senior Notes
due 2000.
4.8 Indenture, dated as of July Exhibit 4.1 to the
17, 1997, between IMC Global Company's Report on
Inc. and The Bank of New Form 8-K dated July
York, relating to the 23, 1997
issuance of 6 7/8% Senior
Notes due 2007
10.1 Intercorporate Agreement Exhibit 10.1 to the
dated as of July 1, 1987, by Company's
and between Mallinckrodt and Registration
IMC Global Operations Inc. Statement on Form S-
with Exhibits 1, (Amendment No.
2),
(No. 33-17091)
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)
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 S-
Agreement dated October 15, 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 S-
Inc. and International 1, (No. 33-17091)
Minerals & Chemical (Canada)
Global Limited
10.5* Management Incentive Exhibit 10.17 to
Compensation Program, as the Company's
amended through July 1, 1996 Registration
Statement on Form S-
1, (No. 33-17091)
10.6 * Amendment to Management X
Incentive Compensation
Program
10.7* 1996 Long-Term Performance Exhibit 10.77 to
Incentive Plan the Company's
September 30, 1996
Form 10-Q
10.8* 1988 Stock Option & Award X
Plan, as amended and
restated
10.9* 1994 Stock Option Plan for Exhibit 4(a) to the
Non-Employee Directors Company's
Registration
Statement on Form S-
8, (No. 33-56911)
10.10* Retirement Plan for Salaried Exhibit 10.9 to the
Employees, as amended 1995 Annual Report
through November 1, 1994, on Form 10-K
and as currently in effect
10.11* Supplemental Benefit Plan Exhibit 10.12 to
the Company's
Registration
Statement on Form S-
1, (No. 33-17091)
10.12* 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)
10.13* Investment Plan for Salaried Exhibit 10.12 to
Employees, as amended the 1995 Annual
through July 1, 1994, and as Report on Form 10-K
currently in effect
10.14* Management Compensation and X
Benefit Assurance Program,
as amended through
August 17, 1995
10.15* Form of Trust Agreement with Exhibit 10.33 to
Wachovia Bank & Trust Co., the 1992 Annual
N.A., as amended through Report on Form 10-K
August 15, 1991
10.16* Form of Contingent Exhibit 10.18 to
Employment Agreement dated the 1995 Annual
September 1, 1995, with Report on Form 10-K
Officers of Corporation
10.17* Form of "Gross Up" Exhibit 10.20 to
Agreement dated September 1, the 1995 Annual
1995, with Officers of Report on Form 10-K
Corporation, as amended
10.18* Directors' Retirement Exhibit 10.54 to
Service Plan Effective July the 1992 Annual
1, 1989 Report on Form 10-K
10.19* Amendment Number 2 to Exhibit 10.44 to
Investment Plan for Salaried the Company's
Employees effective March 1, Registration
1988 and restated effective Statement on Form S-
January 1, 1992 4, (No. 33-49795)
10.20* 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 S-
Corporation 4, (No. 33-49795)
10.21* 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)
10.22* Consulting Agreement, dated Exhibit 10.48 to
July 19, 1993, between the Company's
Wendell F. Bueche and IMC Registration
Global Inc. Statement on Form S-
4, (No. 33-49795)
10.23* Amendment and Extension Exhibit 10.49 to
Agreement, dated as of June the 1995 Annual
15, 1995, to Employment Report on Form 10-K
Agreement dated as of April
15, 1993 and Consulting
Agreement dated as of July
19, 1993, between Wendell F.
Bueche and IMC Global Inc.
10.24* Non-competition Agreement Exhibit 10.71 to
dated as of March 1, 1996 the 1996 Annual
between IMC Global Inc., IMC Report on Form 10-K
Global Operations Inc. and
C. Steven Hoffman
10.25* Non-competition Agreement Exhibit 10.72 to
dated as of February 29, the 1996 Annual
1996 between IMC Global Inc. Report on Form 10-K
and Robert E. Fowler, Jr.
10.26* Non-competition Agreement X
dated as of March 1, 1996
between IMC Global Inc. and
John U. Huber
10.27* Non-competition Agreement X
dated as of March 1, 1996
between IMC Global Inc. and
Robert M. Van Patten
10.28* Transition Bonus Agreement Exhibit 10.73 to
dated as of March 1, 1996 the 1996 Annual
between IMC Global Inc., IMC Report on Form 10-K
Global Operations Inc. and
Marschall I. Smith
10.29* The Vigoro Corporation Exhibit 10.74 to
Severance Plan, as amended the 1996 Annual
Report on Form 10-K
10.30* The IMC Global Inc. Exhibit 10.75 to
Severance Plan the 1996 Annual
Report on Form 10-K
10.31* Letter Agreement dated March Exhibit 10.76 to
5, 1996, between the Company the 1996 Annual
and Brian J. Smith Report on Form 10-K
10.32 Suspension Agreement Exhibit 10.17 to
concerning Potassium the Company's
Chloride from Canada among Registration
the U.S. Department of Statement on Form S-
Commerce and the signatory 1, (No. 33-17091)
purchasers/exporters of
potassium chloride from
Canada dated January 7, 1988
10.33 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 S-
Improvement Trust Fund of 1, (No. 33-17091)
the State of Florida, the
Department of Natural
Resources of the State of
Florida and Mallinckrodt
10.34 Sulphur Joint Operating Exhibit 10.40 to
Agreement dated as of May 1, the 1990 Annual
1988, among Freeport-McMoRan Report on Form 10-K
Resource Partners, IMC
Global Operations Inc. and
Felmont Oil Corporation
10.35 Oil/Gas Operating Agreement Exhibit 10.41 to
dated as of June 5, 1990, the 1990 Annual
among Freeport-McMoRan Report on Form 10-K
Resource Partners, IMC
Global Operations Inc. and
Felmont Oil Corporation
10.36 Agreement in Principle dated Exhibit 10.43 to
September 7, 1990, with the 1990 Annual
Mallinckrodt Report on Form 10-K
10.37 Agreement dated as of Exhibit 10.44 to
September 12, 1990, with the 1990 Annual
Mallinckrodt Report on Form 10-K
10.38 Memorandum of Agreement as Exhibit 10.51 to
of December 21, 1990, the 1991 Annual
amending Mining and Report on Form 10-K
Processing Agreement of
January 31, 1978, between
Potash Corporation of
Saskatchewan Inc. and
International Minerals &
Chemical (Canada) Global
Limited
10.39 Division of Proceeds Exhibit 10.52 to
Agreement dated December 21, the 1991 Annual
1990, between Potash Report on Form 10-K
Corporation of Saskatchewan
Inc. and International
Minerals & Chemical (Canada)
Global Limited
10.40 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 Global 1) filed on May 19,
Operations Inc. 1993
10.41 Form of Partnership Exhibit 10.29 to
Agreement, dated as of July the 1995 Annual
1, 1993, as further amended Report on Form 10-K
and restated as of May 26,
1995, between IMC-Agrico GP
Company, Agrico Limited
Partnership and IMC-Agrico
MP Inc., including
definitions
10.42 Form of Parent Agreement, Exhibit 10.30 to
dated as of July 1, 1993, as the 1995 Annual
further amended and restated Report on Form 10-K
as of May 26, 1995, between
IMC Global Operations Inc.,
Freeport-McMoRan Resource
Partners, Limited
Partnership, Freeport-
McMoRan Inc. and IMC-Agrico
Company
10.43 Amendment, Waiver and Exhibit 10.31 to
Consent, dated May 26, 1995, the 1995 Annual
among IMC Global Inc.; IMC Report on Form 10-K
Global Operations Inc.; IMC-
Agrico GP Company; IMC-
Agrico MP, Inc.; IMC-Agrico
Company; Freeport-McMoRan
Inc.; Freeport-McMoRan
Resource Partners, Limited
Partnership; and Agrico,
Limited Partnership
10.44 Agreement and Plan of Exhibit 10.32 to
Complete Liquidation and the 1995 Annual
Dissolution, dated May 26, Report on Form 10-K
1995, among IMC Global
Operations Inc., IMC-Agrico
GP Company, and IMC-Agrico
MP, Inc.
10.45 Sterlington Settlement Exhibit 10.58 to
Agreement between IMC Global the Company's March
Inc., ANGUS Chemical Company 31, 1993 Form 10-
and Industrial Risk Insurers Q/A (Amendment No.
dated April 1, 1993 1) filed on May 19,
1993
10.46 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 Global
Operations Inc.
10.47 Loan Agreement, dated as of Exhibit 10.64 to
December 1, 1991, between the Company's
IMC Global Operations Inc. Registration
and the Polk County Statement on Form S-
Industrial Development 4, (No. 33-49795)
Authority (Florida)
10.48 Amended and Restated Exhibit 10.65 to
Unconditional Guaranty, the Company's
dated as of December 1, 1991 Registration
of IMC Global Inc. with Statement on Form S-
respect to Polk County 4, (No. 33-49795)
Industrial Development
Authority (Florida)
Industrial Development
Revenue Bonds (IMC Global
Operations Inc. Project)
1991 Tax-Exempt Series A and
1992 Tax-Exempt Series A
10.49 Supplemental Loan Agreement, Exhibit 10.66 to
dated as of January 1, 1992, the Company's
between IMC Global Registration
Operations Inc. and the Polk Statement on Form S-
County Industrial 4, (No. 33-49795)
Development Authority
(Florida)
10.50 Second Supplemental Loan Exhibit 10.67 to
Agreement, dated as of June the Company's
30, 1993, between IMC Global Registration
Operations Inc. and the Polk Statement on Form S-
County Industrial 4, (No. 33-49795)
Development Authority
(Florida)
10.51 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 S-
(Florida) Industrial 4, (No. 33-49795)
Development Revenue Bonds
(IMC Global Operations Inc.
Project) 1991 Tax-Exempt
Series A and 1992 Tax-Exempt
Series A
10.52 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 S-
"Authority") and The Bank of 4, (No. 33-49795)
New York, as Trustee (the
"IRB Trustee") relating to
the Industrial Development
Revenue Bonds (IMC Global
Operations Inc. Project)
1991 Tax-Exempt Series A
(the "Series 1991 Bonds")
10.53 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 S-
Trustee, relating to the 4, (No. 33-49795)
Industrial Development
Revenue Bonds (IMC Global
Operations Inc. Project)
1992 Tax-Exempt Series A
(the "Series 1992 Bonds")
10.54 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 S-
Trustee, relating to the 4, (No. 33-49795)
Series 1991 Bonds and the
Series 1992 Bonds
10.55 Amendment No. 1, dated as of Exhibit 10.53 to
June 24, 1994 to Credit the 1995 Annual
Agreement, dated as of Report on Form 10-K
February 9, 1994 between
IMC-Agrico Company,
NationsBank of Georgia and
the Banks Listed Therein
10.56 Amendment No. 2, dated as of Exhibit 10.54 to
February 25, 1995 to Credit the 1995 Annual
Agreement, dated as of Report on Form 10-K
February 9, 1994 between
IMC-Agrico Company,
NationsBank of Georgia and
the Banks Listed Therein
10.57 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)
10.58 Letter Agreement, dated as X
of October 30, 1996,
relating to Credit
Agreement, dated as of
February 9, 1994, between
IMC-Agrico Company,
NationsBank of Georgia, and
the Banks Listed Therein
10.59 Agreement Under the Parent Exhibit 10.63 to
Agreement, dated as of the Company's
January 23, 1996, among IMC December 31, 1995
Global Inc.; IMC Global Form 10-Q
Operations Inc.; Freeport-
McMoRan Resource Partners,
Limited Partnership;
Freeport-McMoRan Inc.; and
IMC-Agrico Company, a
Delaware general partnership
10.60 Amendment and Agreement Exhibit 10.64 to
Under the Partnership the Company's
Agreement, dated as of December 31, 1995
January 23, 1996, by and Form 10-Q
among IMC-Agrico GP Company;
Agrico, Limited Partnership;
IMC-Agrico MP, Inc.; IMC
Global Operations Inc. and
IMC-Agrico Company
10.61 Credit Agreement, dated as Exhibit 10.65 to
of February 28, 1996, among the Company's
IMC Global Inc., IMC Global Report on Form 8-K
Operations Inc., dated March 15,
International Minerals & 1996
Chemical (Canada) Global
Limited, Kalium Canada Ltd.,
Central Canada Potash, Inc.
and the Banks Listed Therein
10.62 Amendment No. 1 to Credit X
Agreement, dated as of
February 28, 1996, among IMC
Global Inc., IMC Global
Operations Inc.,
International Minerals &
Chemical (Canada) Global
Limited, Kalium Canada Ltd.,
Central Canada Potash, Inc.
and the Banks Listed Therein
10.63 Second Amended and Restated Exhibit 10.66 to
Note Purchase Agreement, the Company's
dated as of February 28, Report on Form 8-K
1996, to the Amended and dated March 15,
Restated Note Purchase and 1996
Private Shelf Agreement
dated as of December 22,
1994, among IMC Global Inc.,
The Vigoro Corporation and
The Prudential Insurance
Company of America
10.64 Amendment No. 1, dated X
September 30, 1996, to
Second Amended and Restated
Note Purchase Agreement,
dated as of February 28,
1996, to the Amended and
Restated Note Purchase and
Private Shelf Agreement
dated as of December 22,
1994, among IMC Global Inc.,
The Vigoro Corporation and
The Prudential Insurance
Company of America
10.65 Second Amended and Restated Exhibit 10.67 to
Note Purchase Agreement, the Company's
dated as of February 28, Report on Form 8-K
1996, to the Amended and dated March 15,
Restated Note Purchase and 1996
Private Shelf Agreement
dated as of December 22,
1994, between Kalium Canada,
Ltd. and The Prudential
Insurance Company of America
10.66 Amended and Restated Credit X
Agreement, dated as of
October 23, 1996 between
IMC-Agrico Company as
Borrower and NationsBank,
N.A. as Lender U.S.
$50,000,000
10.67 Second Amended and Restated X
Party Guaranty, dated as of
February 28, 1996 by IMC
Global Inc. and The Vigoro
Corporation, a Delaware
corporation, in favor of The
Prudential Insurance Company
of America
10.68 Third Amendment dated as of X
August 1, 1995 to the Credit
Agreement, by and among
IMC-Agrico Company, a
Delaware general
partnership, the Banks
identified therein, and
NationsBank, N.A. (successor
in interest to NationsBank
of North Carolina, N.A., as
Agent)
10.69 Fourth Amendment and Waiver X
Agreement dated as of May
14, 1996 to the Credit
Agreement, by and among
IMC-Agrico Company, a
Delaware general
partnership, the Banks
identified therein, and
NationsBank, N.A. (successor
in interest to NationsBank,
N.A. and NationsBank of
North Carolina, N.A., as
Agent)
10.70 Fifth Amendment dated as of X
February 4, 1997 to the
Credit Agreement, by and
among IMC-Agrico Company, a
Delaware general
partnership, the Banks
identified therein, and
NationsBank, N.A. (successor
in interest to NationsBank,
N.A. and NationsBank of
North Carolina, N.A., as
Agent)
10.71 Sixth Amendment, Consent and X
Waiver dated as of May, 1997
to the Credit Agreement, by
and among IMC-Agrico
Company, a Delaware general
partnership, the Banks
identified therein, and
NationsBank, N.A. (successor
in interest to NationsBank,
N.A. and NationsBank of
North Carolina, N.A., as
Agent)
10.72 Transfer and Administration X
Agreement, dated as of June
27, 1997, among IMC-Agrico
Receivables Company L.L.C.,
IMC-Agrico Company and
Enterprise Funding
Corporation, a Delaware
corporation
10.73 Receivables Purchase X
Agreement between IMC-Agrico
Company as Seller and
IMC-Agrico Receivables
Company L.L.C. as Purchaser,
dated as of June 27, 1997
10.74 Registration Rights Exhibit 99.6 to the
Agreement dated as of March Company's March
1, 1996 among IMC Global 31,1996 Form 10-Q
Inc. and certain former
stockholders of The Vigoro
Corporation
11.1 Fully diluted earnings per
share for the years ended X
June 30, 1997, 1996 and 1995
12 Ratio of Earnings to Fixed X
Charges
13.1 Report of Arthur Andersen X
LLP
21.1 Subsidiaries of the X
Registrant
23.1 Consent of Ernst & Young LLP X
23.2 Consent of Arthur Andersen X
LLP
24 Power of Attorney X
27.1 Financial Data Schedule X
* Denotes management contract or compensatory plan.
(b) REPORTS ON FORM 8-K
During the fourth quarter and through the date of this filing, the
following reports were filed:
A report under Item 8 Dated June 24, 1997
A report under Item 5 Dated July 17, 1997
A report under Item 5 Dated July 28, 1997
A report under Item 5 Dated August 28, 1997
(c) EXHIBITS
See exhibit index listed at Item 14(a)(3) hereof.
(d) 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.
INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA
AND FINANCIAL STATEMENT SCHEDULES
Page References
Consolidated Balance Sheet at June 30, 1997 and 1996 33
For the years ended June 30, 1997, 1996, and 1995:
Consolidated Statement of Earnings 32
Consolidated Statement of Cash Flows 34
Consolidated Statement of Changes in Stockholders' Equity 35
Notes to Consolidated Financial Statements 36-54
Supplementary Financial Information - Quarterly Results (Unaudited) 55
- --------------------
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 GLOBAL INC.
(Registrant)
------------------------------------
Robert E. Fowler, Jr.
Chief Executive Officer and President
Date: September 24,1997
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
- ----------------------------------------------------------------------
- -------------------- Chief Executive Officer September 24, 1997
Robert E. Fowler, Jr. (principal executive
officer), President
(principal operating
officer) and Director
- -------------------- Chief Financial Officer September 24, 1997
Brian J. Smith (principal financial officer),
- -------------------- Controller (principal September 24, 1997
Anne M. Scavone accounting officer)
* Chairman and Director September 24, 1997
- --------------------
Wendell F. Bueche
* Director September 24, 1997
- --------------------
Raymond F. Bentele
* Director September 24, 1997
- --------------------
Rod F. Dammeyer
* Director September 24, 1997
- --------------------
Dr. James M. Davidson
* Director September 24, 1997
- --------------------
Harold H. MacKay
* Director September 24, 1997
- --------------------
David B. Mathis
* Director September 24, 1997
- --------------------
Thomas H. Roberts, Jr.
* Director September 24, 1997
- --------------------
Joseph P. Sullivan
* Director September 24, 1997
- --------------------
Richard L. Thomas
* Director September 24, 1997
- --------------------
Billie B. Turner
* By:
----------------------------------
Marschall I. Smith
Attorney in fact