Item 1. Business hereby is amended to read in its entirety as follows:
Item 1. Business.1
COMPANY PROFILE
IMC, a publicly traded Delaware corporation incorporated in 1987, is one of the
world's leading producers and distributors of crop nutrients to the domestic and
international agricultural communities as well as one of the foremost
manufacturers and distributors of animal feed ingredients to the industry. The
Company mines, processes and distributes potash in the United States (U.S.) and
Canada and is the majority joint venture partner in IMC Phosphates Company (IMC
Phosphates), a leading producer, marketer and distributor of phosphate crop
nutrients and animal feed ingredients. The Company's current operational
structure consists of two continuing
1 All statements, other than statements of historical fact contained within
this Form 10-K constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. In particular,
forward-looking statements may include words such as "expect,"
"anticipate," "believe," "may," "should," "could" or "estimate." These
statements involve certain risks and uncertainties that may cause actual
results to differ materially from expectations as of the date of this Form
10-K.
Factors that could cause actual results to differ materially from those
expressed or implied by the forward-looking statements include, but are not
limited to, the following: general business and economic conditions and
governmental policies affecting the agricultural industry in localities where
the Company or its customers operate; weather conditions; the impact of
competitive products; pressure on prices realized by the Company for its
products; constraints on supplies of raw materials used in manufacturing certain
of the Company's products; capacity constraints limiting the production of
certain products; difficulties or delays in the development, production, testing
and marketing of products; difficulties or delays in receiving, or increased
costs of obtaining or satisfying conditions of, required governmental and
regulatory approvals; market acceptance issues, including the failure of
products to generate anticipated sales levels; the effects of and change in
trade, monetary, environmental and fiscal policies, laws and regulations;
foreign exchange rates and fluctuations in those rates; the costs and effects of
legal proceedings, including environmental and administrative proceedings
involving the Company; success in implementing the Company's various
initiatives; the uncertain effects upon the global and domestic economies and
financial markets of the terrorist attacks in New York City and Washington, D.C.
on September 11, 2001 and their aftermaths; and other risk factors reported from
time to time in the Company's Securities and Exchange Commission reports. These
factors are based upon the Company's strategic plans and direction under its
current Board of Directors and management. As described in Part I, Item 1,
"Business," of this Annual Report on Form 10-K, the Company has entered into a
business combination agreement with Cargill, Incorporated. If the transactions
contemplated thereby are consummated, the Company's business would be operated
by a newly-formed public company going forward. The Board of Directors and
management of the new public company may not be the same as exists on the date
hereof for the Company, and they may operate the business of the Company in a
manner that differs from the Company's current operations. The factors listed
above do not account for any such possible change in the Company's operations.
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business units corresponding to its major product lines as follows: IMC PhosFeed
(PhosFeed), which represents the phosphates and feed ingredients businesses, and
IMC Potash (Potash). IMC's continuing operations are located in North America.
As a result of the planned divestiture of the remaining portions of IMC
Chemicals, the financial information for this business is reflected as
discontinued operations. See Note 5 of Notes to Consolidated Financial
Statements in Part II, Item 8, "Financial Statements and Supplementary Data," of
this 2003 10-K for information with respect to the status of this divestiture.
Mergers
In December 2003, the Company and PLP jointly announced that the Company was
considering making a proposal to merge an affiliate of the Company with PLP,
with each publicly held partnership unit in PLP being converted into the right
to receive 0.2 shares of IMC common stock (PLP unit exchange). In addition, the
Company and PLP announced that Alpine Capital, L.P., Keystone, Inc. and The Anne
T. and Robert M. Bass Foundation (collectively, the largest public holders of
PLP units) had agreed to support such a transaction. PLP is a publicly traded
limited partnership in which the Company indirectly holds partnership units
representing an approximate 51.6 percent interest and of which PRP-GP LLC (PRP),
a wholly owned subsidiary of the Company, is administrative managing general
partner and holder of 51.58 percent of the equity. PLP is the minority (43.5
percent) owner of IMC Phosphates. In January 2004, the Company presented the PLP
unit exchange to the Board of Directors of PRP. On March 1, 2004, IMC and PLP
announced that the Board of Directors of PRP had unanimously approved the PLP
unit exchange, and recommended that unitholders vote to approve the PLP unit
exchange. The merger agreement relating to the PLP unit exchange is expected to
be signed shortly, following the final approval by the Board of Directors of the
Company. Such approval is expected in the near future. The PLP unit exchange
will be subject to certain conditions, including among other things, necessary
regulatory approvals, action by the unitholders of PLP, and other conditions
which are customary for transactions of this nature involving publicly traded
companies. The PLP unit exchange is not conditioned on the consummation of the
Company's combination with Cargill Crop Nutrition referred to below. If the
combination with Cargill Crop Nutrition is consummated, and the Company's common
stock is converted into the right to receive common stock of the newly formed
company, then each former publicly held PLP unit will be converted into the
right to receive 0.2 shares of common stock of the newly created company.
In January 2004, the Company signed a definitive agreement with Cargill,
Incorporated (Cargill) to combine the Company's and Cargill's Crop Nutrition
businesses to create a new, publicly traded company (Newco). The combination
will be effected by the contribution by Cargill to Newco of equity interests in
entities owning all or substantially all of the assets, liabilities and
obligations of the Cargill Crop Nutrition businesses, in exchange for the
issuance by Newco of shares of common stock and Class B common stock to Cargill.
In addition, as part of the combination, a wholly owned subsidiary of Newco will
be merged with and into the Company, with the Company surviving as a wholly
owned subsidiary of Newco. In the merger, each outstanding share of the
Company's common stock and preferred stock will be converted into one share of
Newco common stock or preferred stock, as applicable. Cargill will own
approximately 66.5 percent of Newco's common stock and IMC's common stockholders
will own approximately 33.5 percent of Newco's common stock. The combination is
subject to regulatory approval in the U.S., Brazil, Canada, China and several
other countries; the approval of the Company's stockholders; the completion of
the PLP unit exchange; and satisfaction of other customary closing conditions.
Subject to completion of the closing conditions contained in the definitive
agreement, the Company anticipates the transaction will close in the summer of
2004.
Strategy
The Company considers itself one of the most efficient North American producers
of concentrated phosphates, potash and animal feed ingredients. IMC's business
strategy focuses on maintaining and enhancing its leading positions through
continuous process improvements, an ongoing focus on customer service, a
leveraging of its efficient distribution and transportation networks, as well as
growth of its core businesses globally.
In 2000, IMC launched a Continuous Improvement Program based on Six Sigma and
other similar methodologies for process improvement, cost reduction and customer
satisfaction. Six Sigma is an overall methodology for driving business
improvement. The Six Sigma process uses data and rigorous statistical analysis
to identify and
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eliminate defects or sources of variation in a process or product, resulting in
the potential for improved efficiency, improved quality, and lower costs.
Currently IMC has approximately 250 employees trained in the identification and
implementation of Six Sigma projects. In 2003, pre-tax and pre-minority interest
savings and other benefits from these initiatives were approximately $12.9
million through the completion of 36 formal projects and nearly 60 smaller
projects known as work-outs. Project examples include improved process control
to reduce input usage, improved yields and efficiencies, optimized logistics,
improved product quality and reduced waste. While primarily
manufacturing-focused, the Company has recently expanded the scope of Six Sigma
to improving transactional business processes such as order management and
invoicing.
In early 2003, IMC announced a new multi-year program called Business Process
Improvement, including Operational Excellence. This broad-based re-engineering
initiative was designed to increase efficiency, reduce costs and enhance
revenues through redesign and optimization of core business processes. The focus
of Business Process Improvement has included productivity improvement and cost
reduction in manufacturing; optimization of profitability in sales and
marketing; efficiency improvements and cost reduction in freight and
warehousing; and cost reduction and cost avoidance in procurement.
Implementation of this major Company-wide initiative is being completed through
teams and other full-time resources that are dedicated to process redesign.
Examples of specific projects, associated with this initiative, are: (i) the
design and implementation of a new preventive and predictive maintenance program
to reduce unnecessary costs associated with emergency repairs in the operations;
and (ii) an inventory optimization program designed to reduce the working
capital necessary to support customer service.
Through these and other strategies, IMC remains focused on enhancing its
leadership position as one of the most efficient North American producers of
concentrated phosphates, potash and animal feed ingredients. By leveraging its
large and expansive logistics network, IMC can provide efficient and reliable
service to its customers around the world. Coupled with a strong focus on
world-class customer service and product quality, IMC builds relationships with
its customers that provide a basis for continuous growth.
Market
The three major nutrients required for plant growth are nitrogen, phosphorus,
mined as phosphate rock, and potassium, mined as potash. Nitrogen is an
essential element for most organic compounds in plants. Phosphorus plays a key
role in the photosynthesis process. Potassium is an important regulator of
plants' physiological functions. These elements occur naturally in the soil but
need to be replaced as crops remove them from the soil. Currently, no viable
substitutes exist to replace the role of phosphate, potash and nitrogen in the
development and maintenance of high-yield crops.
The crop nutrients industry is a global market, in which supply and demand are
dictated by worldwide factors. Demand is driven largely by economic and
political conditions, demographics as well as limits on arable land. Population
growth increases demand for grain, as do increases in disposable income and
associated improvements in diet. Improved diets include greater consumption of
livestock and poultry, which together account for approximately 70 percent of
the annual consumption of grain. Combined with limits on arable land, an
increasing demand for grain drives demand for higher crop yields through greater
application of crop nutrients. Supply of crop nutrients is generally driven by
higher global commodity prices, weather conditions and local government
policies.
Given the commodity nature of the crop nutrients business, industry players
compete largely on the basis of low cost and, to a lesser extent, differentiated
customer service. Low cost is principally a function of the quality of the ore;
the state of a company's mining and processing technology; the ability to
strategically source raw material inputs and the breadth and cost of
transportation infrastructure.
PhosFeed
PhosFeed is a leading U.S. miner of phosphate rock, one of the primary raw
materials used in the production of concentrated phosphates, as well as a
leading U.S. producer of concentrated phosphates. PhosFeed is also one of the
world's three largest producers and marketers of phosphate and potash based
animal feed ingredients.
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PhosFeed's mines and related operations are located in central Florida, while
the facilities that produce concentrated phosphates and animal feed ingredients
are located in central Florida and Louisiana. Such mines, concentrates plants
and related facilities are owned or leased principally by IMC Phosphates, a
general partnership of which the Company is the majority owner. IMC Phosphates
MP Inc. (MP Co.) manages the operations of IMC Phosphates. MP Co. is a wholly
owned subsidiary of the Company and PLP. The Company's total interest (through
wholly owned subsidiaries and through the Company's interest in PLP) in IMC
Phosphates is approximately 78.9 percent. Sales, marketing, customer service,
distribution, administrative and other functions are in some cases furnished to
IMC Phosphates and MP Co. by the Company and its subsidiaries that include IMC
USA Holdings Inc., IMC USA Inc. LLC and IMC Global Operations Inc.
Although PhosFeed sells phosphate rock to other crop nutrient and animal feed
ingredient manufacturers, it primarily uses phosphate rock internally.
Domestically, PhosFeed sells its concentrated phosphates to crop nutrient
manufacturers, distributors and retailers. Virtually all of PhosFeed's export
sales are marketed through the Phosphates Chemicals Export Association
(PhosChem), a Webb-Pomerene Act organization. PhosFeed also uses concentrated
phosphates and potash internally for the production of animal feed ingredients,
which are supplied to poultry and livestock markets in North America, Latin
America and Asia. PhosFeed operates in a highly competitive global market.
Potash
Potash mines, processes and distributes potash in the U.S. and Canada. Potash
has four mines in Canada within the province of Saskatchewan and two in the U.S.
located in New Mexico and Michigan. Each mine location has related facilities
which refine the mined potash. Such mines and related facilities are owned or
leased and operated principally through Company subsidiaries corresponding to
the location of each mine: IMC Canada ULC for the mine (Belle Plaine) at Belle
Plaine, Saskatchewan; IMC Esterhazy Canada Limited Partnership for the two
interconnected mines (Esterhazy) at Esterhazy, Saskatchewan; IMC Potash Colonsay
ULC for the mine (Colonsay) at Colonsay, Saskatchewan; IMC Potash Carlsbad Inc.
for the mine (Carlsbad) at Carlsbad, New Mexico; and IMC USA Inc. LLC for the
mine (Hersey) at Hersey, Michigan Sales, marketing, customer service,
distribution, administrative and other services are in some cases performed for
Potash by the Company and its subsidiaries that include IMC USA Holdings Inc.,
IMC USA Inc. LLC and IMC Global Operations Inc.
Potash's products are marketed worldwide to crop nutrient manufacturers,
distributors and retailers and also are used in the manufacture of crop
nutrients and animal feed ingredients as well as sold to customers for
industrial use. Its North American sales are made through the Company's sales
force. The agricultural sales are primarily to independent accounts,
cooperatives and leading regional fertilizer buyers while non-agricultural sales
are primarily to large industrial accounts and the animal feed industry.
Additionally, potash is sold as an ingredient in icemelter as well as a water
softener regenerant. Potash's exports from Canada, except to the U.S., are made
through Canpotex Limited (Canpotex), an export association of Saskatchewan
potash producers. Potash is a commodity available from many sources and,
consequently, the market is highly competitive.
Other
For information on the Company's operating segments and its operations by
geographic area, see Note 18 of Notes to Consolidated Financial Statements in
Part II, Item 8, "Financial Statements and Supplementary Data," of this 2003
10-K.
For additional information on the Company's business structure, see Notes 1 and
5 of Notes to Consolidated Financial Statements in Part II, Item 8, "Financial
Statements and Supplementary Data," of this 2003 10-K.
IMC's annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments thereto, filed with the SEC pursuant to
Section 13(a) of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder are made available free of charge, on IMC's website,
(www.imcglobal.com), as soon as reasonably practicable after IMC electronically
files such material with, or furnishes it to, the SEC. The information contained
on IMC's website is not being incorporated herein.
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BUSINESS UNIT INFORMATION
The following discussion of business unit operations should be read in
conjunction with the information contained in Part II, Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," of
this 2003 10-K.
PhosFeed
Net sales for PhosFeed were $1,417.5 million, $1,338.1 million and $1,245.9
million for the years ended December 31, 2003, 2002 and 2001, respectively.
PhosFeed is a leading U.S. miner of phosphate rock, one of the primary raw
materials used in the production of concentrated phosphates, with approximately
18 million tons of annual capacity. PhosFeed is also a leading U.S. producer of
concentrated phosphates with an annual capacity of approximately four million
tons of phosphoric acid (P2O5)2. PhosFeed's concentrated phosphate products are
marketed worldwide to crop nutrient manufacturers, distributors and retailers.
Additionally, PhosFeed is one of the world's three largest producers and
marketers of phosphate and potash-based animal feed ingredients with a total
annual capacity approaching one million tons.
PhosFeed's facilities, which produce concentrated phosphates and animal feed
phosphates, are located in central Florida and Louisiana. Its annual capacity
represents approximately 30 percent of total U.S. concentrated phosphate
production capacity and approximately nine percent of world capacity. The
Florida concentrated phosphate facilities consist of two plants: New Wales and
South Pierce. The New Wales complex is the second largest concentrated phosphate
plant in the world with an estimated annual capacity of nearly two million tons
of phosphoric acid (P2O5 equivalent). New Wales primarily produces two forms of
concentrated phosphates and four forms of animal feed phosphates. Diammonium
phosphate (DAP) and monoammonium phosphate (MAP, both granular and powdered) are
the fertilizer derivatives, while Biofos, Dynafos, Monofos and Multifos are the
animal feed derivatives. The South Pierce plant produces phosphoric acid,
merchant grade phosphoric acid and granular triple superphosphate. Additionally,
PhosFeed sources potassium raw materials from the Company's respective
production facilities and markets Dyna-K, Dyna-K White and Dynamate as
potassium-based feed ingredients.
The Louisiana concentrated phosphate facilities consist of three plants: Uncle
Sam, Faustina and Taft. The Uncle Sam plant produces phosphoric acid. The
phosphoric acid is then shipped to the Faustina and Taft plants where it is used
to produce DAP and granular monoammonium phosphate (GMAP). The Faustina plant
manufactures phosphoric acid, DAP, GMAP and ammonia. The Taft facility
manufactures DAP and GMAP. Concentrated phosphate operations are managed to
balance PhosFeed's output with customer needs. In response to then-current
reduced market demand, PhosFeed suspended production at its Taft facility in
July 1999 and suspended phosphoric acid production at its Faustina facility in
November 1999. From January 2001 until early August 2001, PhosFeed temporarily
suspended its Uncle Sam phosphoric acid production as well as its Faustina DAP
and GMAP production. In addition, from January 2001 until June 2001, PhosFeed
temporarily suspended its Faustina ammonia production. From June 2003 until
early August 2003, PhosFeed temporarily suspended its Uncle Sam phosphoric acid
production as well as its Faustina DAP, GMAP and ammonia production. The Taft
facility and Faustina's phosphoric acid production facilities remain temporarily
idled.
Summarized below are descriptions of the principal raw materials used in the
production of concentrated phosphates: phosphate rock, sulphur and ammonia.
Phosphate Rock
All of PhosFeed's phosphate mines and related mining operations are located in
central Florida. PhosFeed has four active mines, Kingsford, Four Corners,
Hopewell and Fort Green and two planned future mines, Ona and Pine Level.
2 P2O5 is an industry term indicating a product's phosphate content
measured chemically in units of phosphorous pentoxide.
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The phosphate deposits of Florida are of sedimentary origin and are part of a
phosphate-bearing province that extends from southern Florida north along the
Atlantic coast into southern Virginia. PhosFeed's active mines are primarily in
what is known as the Bone Valley Member of the Peace River Formation in the
Central Florida Phosphate District, having their origin from reworking of the
host Hawthorn Group of middle Miocene age. The southern portions of the Four
Corners and Fort Green mines are in what is referred to as the Undifferentiated
Peace River Formation, in which the Ona and Pine Level mines would be located.
Phosphate mining has been conducted in the Central Florida Phosphate District
since the late 1800s. The potentially mineable portion of the Central Florida
Phosphate District encompasses an area approximately 80 miles in length in a
north-south direction and approximately 40 miles in width.
The map below shows the location of each of PhosFeed's mines.
[[Image Removed: LOGO]]
PhosFeed extracts phosphate ore using large surface mining machines that it owns
called "draglines." Prior to extracting the ore, the draglines must first remove
a ten to fifty foot layer of sandy overburden. PhosFeed then processes the ore
at beneficiation plants that it owns at each active mine where the ore goes
through washing, screening, sizing and flotation processes designed to separate
the phosphate rock from sands, clays and other
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foreign materials. Prior to commencing operations at either of the planned
future mines, PhosFeed would need to acquire new draglines or move existing
draglines to the mines and, unless the beneficiation plant at an existing mine
were used, construct a beneficiation plant.
The following table shows the past three years of rock production volume and
grade3 for each of PhosFeed's active mines:
2003 2002 2001
Production Average Production Average Production Average
Tons BPL Tons BPL Tons BPL
(millions of tons) (millions of tons) (millions of tons)
Kingsford 3.0 65.8 3.6 66.2 2.5 66.2
Four Corners 7.5 61.7 7.8 64.2 6.5 65.3
Hopewell 0.7 67.7 0.9 66.8 0.7 70.2
Fort Green 4.0 61.9 5.4 63.9 4.3 63.5
Total 15.2 62.9 17.7 64.6 14.0 65.2
In order to manage its inventories, PhosFeed temporarily idled its mining
operations in 2001 during the months of July and December. From late January
2003 through April 2003, PhosFeed temporarily idled its Fort Green mining
operation in order to manage its inventories. Although PhosFeed 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 internally totaled approximately 12 million, 12 million
and 11 million for the years ended December 31, 2003, 2002 and 2001,
respectively, representing 73 percent, 70 percent and 69 percent, respectively,
of total rock tons shipped. Rock shipments to customers totaled approximately
four million, five million and five million tons for each of the years ended
December 31, 2003, 2002 and 2001, respectively.
Reserves
PhosFeed estimates its reserves based upon exploration core drilling as well as
technical and economic analyses to determine that reserves so classified can be
economically mined. Proven (measured) reserves are those resources of sufficient
concentration to meet minimum physical, chemical and economic criteria related
to PhosFeed's current product standards and mining and production practices.
PhosFeed's estimates of probable (indicated) reserves are based on information
similar to that used for proven reserves, but sites for drilling are farther
apart or are otherwise less adequately spaced than for proven reserves, although
the degree of assurance is high enough to assume continuity between such sites.
Proven reserves are determined using a minimum drill hole spacing of two sites
per forty acre block. Probable reserves have less than two drill holes per forty
acre block, but geological data provides a high degree of assurance that
continuity exists between sites.
3 The standard industry term used to grade the quality of phosphate rock
is BPL, which literally means bone phosphate of lime.
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The following table sets forth PhosFeed's proven and probable reserves as of
December 31, 2003:
Mine Available Acres(a) Mineable Acres(a) Reserve Tons Average BPL(g)
(in millions)(b)(c)
Active Mines
Kingsford 1,578 1,425 9.2 (d) 65.2
Four Corners 20,500 16,001 96.1 63.8
Hopewell 932 723 4.5 (d) 67.9
Fort Green 9,842 8,328 79.9 (e) 61.9
Total Active Mines 32,852 26,477 189.7 63.2
Future Mines
Ona 14,616 9,483 84.9 (e) 64.3
Pine Level 36,296 24,586 163.1 (f) 64.8
Total Future Mines 50,912 34,069 248.0 64.6
Total Mines 83,764 60,546 437.7 64.0
(a) Available Acres reflect that part of the total deeded or
controlled acreage that is fully accessible for mining.
Available acres are free of surface or subsurface encumbrance,
legal setbacks, wetland preserves and other legal restrictions
that preclude permittable access for mining, and are believed by
PhosFeed's management to be permittable. Available Acres also
exclude mined out acreage. Mineable Acres reflect that part of
Available Acres that meets specified minimum physical, economic
and chemical criteria related to current mining and production
practices. All reported reserves are within the Mineable Acres.
(b) Reserve estimates are generally established by PhosFeed
personnel, without a third party review. However, PhosFeed
does retain an independent third party to prepare annual
valuation analyses, primarily for tax purposes, that include
valuations of the reserves consistent with the information
shown in the above table. The reserve estimates have been
prepared in accordance with the standards set forth in
Industry Guide 7 promulgated by the SEC.
(c) Of the reserves shown, approximately 408.3 million tons are
proven reserves, while 0.6 million tons at Ona and 28.8 million
tons at Pine level are probable reserves.
(d) Approximately 5.0 million of the tons shown for Kingsford and 2.2
million of the tons shown for Hopewell were purchased by PhosFeed
in December 2002 pursuant to agreements that provide for future
payment of royalties of $78,000 per month through December 1,
2009 (which payments may be accelerated if production from such
reserves exceeds 261,000 tons per calendar quarter). In addition,
as part of such purchase, PhosFeed purchased two clay settling
ponds for payments of $63,000 per month through December 1, 2008
and leases certain plant and equipment for payments of $46,000
per month through December 1, 2009 pursuant to a lease that may
thereafter be continued at the election of PhosFeed.
(e) Approximately 44.3 million of the tons shown for Fort Green and
3.0 million of the tons shown for Ona are subject to a purchase
money mortgage with an outstanding principal balance of $6.0
million as of December 31, 2003.
(f) In connection with the sale of certain of the surface rights
related to approximately 53.8 million tons of the reported Pine
Level reserves, PhosFeed agreed not to mine such reserves until
at least 2014. PhosFeed's current mining plans do not contemplate
mining such reserves until at least that time.
(g) BPL ranges from 50 percent to 78 percent.
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PhosFeed generally owns the reserves shown in the table above, with the only
significant exceptions being the Pine Level reserves, approximately 12.3 million
of the tons shown for the Fort Green mine and the reserves referred to in note
(d) to the above table. PhosFeed's rights to approximately 109.2 million tons of
the estimated reserves shown for Pine Level are held pursuant to an option
agreement that is described under "Pine Level Property Reserves" in Note 17 of
Notes to Consolidated Financial Statements in Part II, Item 8, "Financial
Statements and Supplementary Data" of this 2003 10-K. The 12.3 million tons
referred to above for the Fort Green mine are leased under a lease that PhosFeed
has the right to extend through 2014 and for which PhosFeed has prepaid
substantially all royalties. PhosFeed's rights to the reserves referred to in
note (d) to the above table are held pursuant to mineral rights that expire in
2012, except for a portion that expire in 2017. In light of the long-term nature
of its rights to its reserves, PhosFeed expects to be able to mine all reported
reserves that are not currently owned prior to termination or expiration of
PhosFeed's rights.
PhosFeed also owns or controls non-reserve phosphate materials at its mines.
These non-reserve phosphate materials have been delineated by appropriately
spaced drilling and/or underground sampling to support a sufficient tonnage and
average grade of product. Such non-reserve phosphate materials are mineralized
deposits that may become economically recoverable. However, additional
geostatistical analyses, including further exploration, permitting and mining
feasibility studies, changes in current market conditions, and/or changes in the
mining technology currently used by PhosFeed, are required before such deposits
may be classified as reserves. The following table sets forth information
concerning such non-reserve phosphate materials:
Non-Reserve Phosphate
Mine Material Tons Average BPL
(in millions)
Active Mines
Kingsford 4.5 63.9
Four Corners 29.8 49.7
Hopewell 0.7 58.7
Fort Green 64.5 51.6
Total Active Mines 99.5 51.7
Future Mines
Ona 158.1 52.4
Pine Level 148.4 45.1
Total Future Mines 306.5 48.9
Total Mines 406.0 49.5
PhosFeed's preliminary analyses of these non-reserve phosphate materials
indicate that they differ in physical and chemical characteristics from those
historically mined by PhosFeed and are uneconomic under current market
conditions using the mining technology currently used by PhosFeed.
Sulphur
Sulphur is used at the New Wales, South Pierce, Uncle Sam and (when producing
phosphoric acid) Faustina plants to produce sulphuric acid primarily for use in
PhosFeed's production of phosphoric acid. Until June 2002, a significant portion
of PhosFeed's sulphur requirements was provided by Freeport-McMoRan Sulphur LLC
(FMS) under a supply agreement with the Company, while PhosFeed's remaining
sulphur requirements were provided by market contracts. In June 2002, PhosFeed
completed the acquisition of the sulphur transportation and terminaling assets
of FMS through Gulf Sulphur Services Ltd., LLLP (Gulf Services), a 50-50 joint
venture with Savage Industries Inc. Concurrently with this acquisition, and
instead of purchasing a majority of its annual sulphur tonnage through FMS,
PhosFeed negotiated new supply agreements to purchase sulphur directly from
recovered sulphur producers. Additionally, the Company, CF Industries, Inc. and
Cargill Fertilizer, Inc. have
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formed a separate joint venture to construct a facility for remelting sulphur
for use at their respective Florida phosphate fertilizer operations. The remelt
facility was expected to be operational in 2005, however the three companies
have slowed the development process until further discussions are held during
2004. The remelt facility would provide PhosFeed additional flexibility by
allowing it to diversify and procure a portion of its sulphur from the much
larger and previously inaccessible offshore solid sulphur market.
Ammonia
PhosFeed's ammonia needs are supplied by its Faustina ammonia production
facility and by world suppliers, primarily under annual and multi-year
contracts. Production from the Faustina plant, which has an estimated annual
capacity of 560,000 tons of anhydrous ammonia, is principally used internally to
produce certain concentrated phosphates. Ammonia for the New Wales plant and
third party ammonia customers of PhosFeed is terminaled through an ammonia
facility at Port Sutton, Florida that is leased by PhosFeed for a term expiring
in 2013 which PhosFeed may extend for up to five additional years. In connection
with the sale of PhosFeed's Port Sutton fertilizer and feed warehouse and marine
export facility (Port Sutton) in December 2003 that is adjacent to the Port
Sutton ammonia facility, PhosFeed entered into an agreement with the buyer for
the buyer to also operate the Port Sutton ammonia facility. The agreement
expires in 2013 but may be extended by PhosFeed for an unlimited number of
additional five year terms, as long as the parties are entitled to operate the
ammonia facility.
Sales and Marketing
Domestically, PhosFeed sells its concentrated phosphates to crop nutrient
manufacturers, distributors and retailers. PhosFeed also uses concentrated
phosphates internally for the production of animal feed ingredients. Virtually
all of PhosFeed's export sales of phosphate crop nutrients are marketed through
PhosChem which the Company administers on behalf of itself and two other member
companies. PhosChem believes that its sales represent approximately 41 percent
of total U.S. exports of concentrated phosphates. The countries that account for
the largest amount of PhosChem's sales of concentrated phosphates include China,
Brazil, Australia and Japan. During 2003, PhosFeed's concentrated phosphates
exports to Asia were 34 percent of total shipments by volume, with China
representing 35 percent of export shipments. PhosFeed, with a strong brand
position in a $1.0 billion feed ingredients global market, also supplies
phosphate and potassium-based feed ingredients for poultry and livestock to
markets in North America, Latin America and Asia.
The table below shows PhosFeed's shipments of concentrated phosphates in
thousands of dry product tons, primarily DAP:
2003 2002 2001
Tons % Tons % Tons %
Domestic 2,657 44 2,857 46 2,689 45
Export 3,373 56 3,331 54 3,313 55
Total shipments 6,030 100 6,188 100 6,002 100
As of December 31, 2003, PhosFeed had contractual commitments for 2004 from
non-affiliated customers for the shipment of approximately three million tons of
concentrated phosphates and approximately five million tons of phosphate rock.
PhosFeed also had contractual commitments from non-affiliated customers for the
shipment of phosphate feed and feed grade potassium products amounting to
approximately 500,000 tons in 2004.
In connection with the Port Sutton sale, PhosFeed entered into an agreement with
the buyer pursuant to which at least 70 percent (75 percent if the buyer meets
certain customer requirements) of the bulk marine export requirements for DAP
and MAP and 100 percent of the bulk marine export requirements for animal feed
ingredients from New Wales will be shipped through the Port Sutton facility and
the buyer's Port Manatee, Florida, warehouse and marine export facility. The
agreement expires in 2013 but may be extended by PhosFeed for an unlimited
number of additional five year terms.
Competition
PhosFeed 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.
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Phosphate crop nutrient producers compete primarily based on price and, to a
lesser extent, product quality and innovation. Major integrated producers of
feed phosphates and feed grade potassium are located in the U.S., Europe and
China. Many smaller producers are located in emerging markets around the world.
Many of these smaller producers are not manufacturers of phosphoric acid and are
required to purchase this raw material on the open market. Competition in this
global market is also driven by price, quality and service.
As one of the largest miners of phosphate rock in the U.S., and one of the
world's largest producers of concentrated phosphates, PhosFeed enjoys an
advantage over some competitors as the scale of operations effectively reduces
production costs per unit. PhosFeed is also vertically integrated to captively
supply one of its key raw materials, phosphate rock, to its concentrated
phosphate production facilities. In addition, it produces another raw material,
ammonia, to captively supply its Faustina concentrates facility. As a 50 percent
owner of Gulf Services, PhosFeed is well-positioned to ensure an adequate,
flexible and cost-effective supply of its third key raw material, sulphur.
With production facilities in both Central Florida near the Port of Tampa and in
Louisiana on the Mississippi River, PhosFeed is logistically positioned to
supply both domestic and international customers. In addition, those multiple
production points afford PhosFeed the flexibility to optimally balance supply
and demand.
With no captive ammonia production in Florida, PhosFeed is subject to
significant volatility in its purchase price of ammonia from world markets. In
addition, PhosFeed is subject to many environmental laws and regulations in the
state of Florida that are often more stringent than those with which producers
in other states or foreign countries must comply.
Potash
Net sales for the Company's potash business unit were $855.5 million, $805.9
million, and $811.2 million for the years ended December 31, 2003, 2002 and
2001, respectively.
Potash mines, processes and distributes potash in the U.S. and Canada. The term
"potash" applies generally to the common salts of potassium. Potash's products
are marketed worldwide to crop nutrient manufacturers, distributors and
retailers and are also used in the manufacture of mixed crop nutrients and, to a
lesser extent, animal feed ingredients (see PhosFeed). Potash also sells potash
to customers for industrial use. Potash operates four potash mines in Canada as
well as two potash mines in the U.S. In addition, Potash's products are used for
icemelter and water softener regenerant. Potash has total capacity in excess of
11 million tons of product per year. In 2003, Potash's operations accounted for
approximately 15 percent of world capacity on a K2O4 basis.
4 Because the amount of potassium in the common salts of potassium varies,
the industry has established a common standard of measurement of defining
a product's potassium content, or grade, in terms of equivalent
percentages of potassium oxide (K2O). A K2O equivalent of 60 percent, 50
percent and 22 percent is the customary minimum standard for muriate of
potash, sulphate of potash and double sulphate of potash magnesia
products, respectively.
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The map below shows the location of each of Potash's mines.
[[Image Removed: LOGO]]
Potash owns related facilities at each of the mines, which we refer to as
refineries, which refine the mined potash.
The following table shows the past three years production of ore, grade and
finished product for each of Potash's mines:
2003 Production 2002 Production 2001 Production
Ore Mined Product Ore Mined Product Ore Mined Product
Annual (millions Grade (millions Annual (millions Grade (millions Annual (millions Grade (millions
Capacity(2) of tons) % K2O of tons) Capacity(2) of tons) % K2O of tons) Capacity(2) of tons) % K2O of tons)
Canadian Mines
Belle Plaine -
MOP 3.0 9.7 18.0 2.6 3.0 9.4 18.0 2.6 2.5 9.8 18.0 2.5
Colonsay - MOP 2.0 3.7 26.5 1.4 2.0 3.8 26.7 1.5 1.6 3.5 27.0 1.4
Esterhazy - MOP 4.2 11.2 24.1 3.9 4.1 10.1 24.4 3.6 4.1 10.3 23.9 3.5
sub-totals 9.2 24.6 22.1 7.9 9.1 23.3 22.2 7.7 8.2 23.6 21.9 7.4
United States
Mines
Carlsbad - MOP 0.4 3.6 12.4 0.3 0.4 4.0 12.7 0.3 0.4 3.4 13.1 0.3
Carlsbad -
K-Mag 1.1 3.8 7.8 0.9 1.1 3.6 7.8 0.9 1.1 3.5 7.9 0.8
Carlsbad - SOP
(1) 0.2 n/a n/a 0.1 0.2 n/a n/a 0.2 0.2 n/a n/a 0.1
Carlsbad -
Total 1.7 7.4 10.0 1.3 1.7 7.6 10.4 1.4 1.7 6.9 10.4 1.2
Hersey - MOP 0.2 0.5 26.6 0.1 0.2 0.5 26.6 0.1 0.2 0.5 26.6 0.1
sub-totals 1.9 7.9 11.1 1.4 1.9 8.1 11.4 1.5 1.9 7.4 11.5 1.3
Totals 11.1 32.5 19.4 9.3 11.0 31.4 19.4 9.2 10.1 31.0 19.4 8.7
(1) MOP & K-Mag are used to make SOP
(2) millions of tons of finished product (KCl)
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Reserves
Potash's estimates of its reserves and non-reserve potash mineralization are
based on exploration drill hole data, seismic data and actual mining results
during the past 35 to 40 years (15 years in the case of Hersey). Proven reserves
are estimated by identifying material in place that is delineated on at least
two sides and material in place within a half-mile radius or distance from an
existing sampled mine entry or exploration core hole. Probable reserves are
estimated by identifying material in place within a one mile radius or distance
from an existing sampled mine entry or exploration core hole. Historical
extraction ratios from the many years of mining results are then applied to both
types of material to estimate the proven and probable reserves. Potash believes
that all reserves and non-reserve potash mineralization reported below are
potentially recoverable using existing production shaft and refinery locations.
Potash's estimated recoverable reserves and non-reserve potash mineralization as
of December 31, 2003 for each of its mines is as follows:
Non-Reserve
Reserves (1)(2) Potash Mineralization (1)(3)
Millions of Average Grade Millions of potentially
recoverable tons (% K2O) recoverable tons
Canadian Mines
Belle Plaine 723 18.0 2,058
Colonsay 278 28.3 167
Esterhazy 554 24.5 252
sub-totals 1,555 22.2 2,477
United States Mines
Carlsbad 130 9.8 -
Hersey 47 26.6 -
sub-totals 177 14.3 -
Totals 1,732 21.4 2,477
(1) There has been no third party review of reserve estimates
within the last three years. The reserve estimates have been
prepared in accordance with the standards set forth in
Industry Guide 7 promulgated by the U.S. Securities and
Exchange Commission.
(2) Includes both proven and probable reserves.
(3) The non-reserve potash mineralization reported in the above table
in some cases extends to the boundaries of the mineral rights
owned or leased by Potash. Such boundaries are up to 14 miles
from the closest existing sampled mine entry or exploration core
hole.
As discussed more fully below, Potash either owns the reserves and
mineralization shown above or leases them pursuant to mineral leases that
generally remain in effect or are renewable at the option of Potash, or are
long-term leases. Accordingly, Potash expects to be able to mine all reported
reserves that are leased prior to termination or expiration of the existing
leases.
Canadian Mines
Potash has three Canadian potash facilities, all in the southern half of the
Province of Saskatchewan: the mine at Belle Plaine, the two interconnected shaft
mines at Esterhazy and the mine at Colonsay.
Extensive potash deposits are found in the southern half of the Province of
Saskatchewan. The potash ore is contained in a predominantly rock salt formation
known as the Prairie Evaporites. The evaporite deposits are
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bounded by limestone formations and contain the potash beds. Three potash
deposits of economic importance occur in the Province, the Esterhazy, Belle
Plaine and Patience Lake members. The Patience Lake member is mined at Colonsay,
and the Esterhazy member at Esterhazy. At Belle Plaine all three members are
mined. The major potash members each contain several potash beds of different
thicknesses and grades. The particular beds mined at Colonsay and Esterhazy have
a mining height of eleven and eight feet, respectively. At Belle Plaine several
beds of different thicknesses are mined.
Potash's four mines in Canada produce muriate of potash exclusively. Esterhazy
and Colonsay utilize shaft mining while Belle Plaine utilizes solution mining
technology. Traditional potash shaft mining takes place underground at depths of
over three thousand feet where continuous mining machines cut out the ore face
and load it on to conveyor belts. The ore is then crushed, moved to storage bins
and then hoisted to refineries above ground. In contrast, Potash's solution
mining process involves heated water, which is pumped through a "cluster" to
dissolve the potash in the ore beds at a depth of approximately 5,000 feet. 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 22 different potash products, including
industrial grades, many through proprietary processes.
Under a long-term contract with Potash Corporation of Saskatchewan (PCS), Potash
mines and refines PCS 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 million tons and
a minimum of approximately five hundred thousand tons per year. The current
contract extends through June 30, 2006 and is renewable at the option of PCS for
four additional five-year periods.
Potash's mineral rights in Saskatchewan consist of :
Belle Plaine Colonsay Esterhazy Total
Acres
Owned in fee 12,733 6,748 109,205 128,686
Leased from Province 47,840 60,106 70,613 178,559
Leased from others - 320 22,837 23,157
Total 60,573 67,174 202,655 330,402
Potash's management believes that its mineral rights in Saskatchewan are
potentially sufficient to support current operations for more than a century.
Leases are generally renewable at the option of Potash for successive terms,
generally of 21 years each, except that certain of the acres shown above as
"Leased from others" are leased under long-term leases with terms (including
renewals at the option of Potash) that expire from 2094 to 2142. Royalties,
established by regulation of the province of Saskatchewan, amounted to $8.1
million in 2003 and approximately $8.0 million in 2002 and 2001.
The Belle Plaine and Colonsay facilities, including owned and leased mineral
rights, respectively, are subject to the mortgage granted under the Company's
senior secured credit facility. For further information, see Capital Resources
and Liquidity in Part II, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," of this 2003 10-K.
Since December 1985, Potash has experienced an inflow of water into one of its
two interconnected potash mines at Esterhazy, Saskatchewan. As a result, Potash
has incurred expenditures, certain of which, due to their nature, have been
capitalized while others have been charged to expense, to control the inflow.
Since the initial discovery of the inflow, Potash has been able to meet all
sales obligations from production at the mines. Potash has considered
alternatives to the operational methods employed at Esterhazy. However, the
procedures utilized to control the water inflow have proven successful to date,
and Potash currently intends to continue conventional shaft mining. Despite the
relative success of these measures, there can be no assurance that the amounts
required
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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 Potash to
change its mining process or abandon the mines. While shaft mining, in general,
poses safety risks to employees, it is the opinion of Potash and its independent
advisors that the water inflow at Esterhazy does not create an unacceptable nor
unmanageable risk to employees. The current operating approach and related risks
are reviewed on a regular basis by management and the Board of Directors.
Potash's underground mine operations are presently insured against business
interruption and risk from catastrophic perils, including collapse, floods and
other property damage with the exception of flood coverage at Esterhazy. Due to
the ongoing water inflow problem at Esterhazy, underground operations at this
facility are currently not insurable for water incursion problems. Like other
potash producers' shaft mines, the Colonsay mine is also subject to the risks of
inflow of water as a result of its shaft mining operations.
United States Mines
Potash has two U.S. potash facilities: the Carlsbad shaft mine located in
Carlsbad, New Mexico and the Hersey solution mine located in Hersey, Michigan.
The Carlsbad ore reserves are of two types: (1) sylvinite, a mixture of
potassium chloride and sodium chloride, the same as the ore mined in
Saskatchewan, and (2) langbeinite, a double sulfate of potassium and magnesium.
These two types of potash reserves occur in a predominantly rock salt formation
known as the Salado Formation. The McNutt Member of this formation consists of
eleven units of economic importance, of which IMC mines three. The McNutt
Member's evaporite deposits are interlayered with anhydrite, polyhalite,
potassium salts, clay, and minor amounts of sandstone and siltstone.
Continuous underground mining methods are utilized for the ore to be extracted.
In the mining sections, drum type mining machines are used to cut the sylvinite
and langbeinite ores from the face. Mining heights are as low as four and
one-half feet. Ore from the continuous sections is loaded onto conveyors,
transported to storage areas, and then hoisted to the surface for further
processing at the refinery.
Two types of potash are produced at the Carlsbad refinery: muriate of potash,
which is the primary source of potassium for the crop nutrient industry; and
double sulfate of potash magnesia, marketed under the brand name K-Mag ,
containing significant amounts of sulphur, potassium and magnesium, with low
levels of chloride. Production by the Company of a third type of potash, sulfate
of potash (SOP), was discontinued in November 2003 in connection with the sale
of the SOP business line. See Note 2 of Notes to Consolidated Financial
Statements in Part II, Item 8, "Financial Statements and Supplementary Data," of
this 2003 10-K.
Potash's mineral rights in the United States consist of:
Carlsbad Hersey Total
Acres under control
owned in fee - 581 581
long term leases 56,197 1,799 57,996
Total under control 56,197 2,380 58,577
At the Carlsbad facility, Potash mines and refines potash from 56,197 acres of
mineral rights. Potash controls these reserves pursuant to either (i) various
leases from the U.S. Government that, in general, continue in effect at the
option of Potash (subject to readjustment by the U.S. Government every twenty
years) or (ii) leases from the State of New Mexico that continue as long as
Potash continues to produce from them. These reserves contain an estimated total
of 129.5 million tons of potash mineralization (calculated after estimated
extraction losses) in three mining beds evaluated at thickness ranging from four
and one-half feet to in excess of eleven feet. At average refinery rates, these
ore reserves are estimated to be sufficient to yield 7.1 million tons of
concentrate from sylvinite with an average grade of approximately 60 percent K2O
and 24.5 million tons of langbeinite concentrate with an average grade of
approximately 22 percent K2O. At projected rates of production, management
estimates that Carlsbad's reserves of sylvinite and langbeinite are sufficient
to support operations for more than 12 years and 24 years, respectively.
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At Hersey, Michigan, Potash operates a solution mining facility which produces
salt and potash. Mining occurs in the Michigan Basin in a predominantly rock
salt formation called the Salina Group Evaporite. This formation is a clean salt
deposit with interlayered beds of sylvinite and carbonate. At the Hersey
facility, Potash's mineral rights consist of 581 acres owned in fee and 1,799
acres controlled under leases that, in general, continue in effect at the option
of Potash as long as Potash continues its operations at Hersey. These lands
contain an estimated 47 million tons of potash mineralization contained in two
beds ranging in thickness from fourteen to thirty feet. Management estimates
that these reserves are sufficient to yield 20.0 million tons of concentrate
from sylvinite with an average grade of 60 percent K2O. At current rates of
production, management estimates that these reserves are sufficient to support
operations for more than 120 years.
The Hersey facility, including owned and leased mineral rights, is subject to
the mortgage granted under the Company's senior secured credit facility. For
further information, see Capital Resources and Liquidity in Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operation," of this 2003 10-K.
Royalties for the U.S. operations, which are established by the U.S. Department
of the Interior, Bureau of Land Management, in the case of the Carlsbad leases
from the U.S. Government, and pursuant to provisions set forth in the leases, in
the case of the Carlsbad state leases and the Hersey leases, amounted to
approximately $4.6 million in 2003 and $4.0 million in 2002 and 2001.
Natural Gas
Natural gas is a significant raw material used in the potash solution mining
process. The purchase, transportation and storage of natural gas amounted to
approximately 16 percent of Potash's production costs for 2003. The two solution
mines accounted for approximately 74 percent of Potash's total natural gas
requirements for potash production. Potash purchases a portion of its
requirements through fixed price physical contracts and uses forward contracts
to fix the price of an additional portion of future purchases. The remainder of
its requirements is purchased either on the domestic spot market or under
short-term contracts.
Sales and Marketing
Potash's North American potash sales are made through the Company's sales force.
North American agricultural sales are primarily to independent accounts,
co-operatives and large regional fertilizer buyers while non-agricultural sales
are primarily to large industrial accounts and the animal feed industry.
Additionally, potash is sold as an ingredient in icemelter as well as a water
softener regenerant.
Potash is sold throughout the world, with Potash's largest amount of sales
outside of North America made to China, Japan, India, South East Asia,
Australia, New Zealand and Latin America. Potash's exports from Canada, except
to the U.S., are made through Canpotex. In general, Canpotex sales are allocated
among the producer members based on production capacity. Potash currently
supplies approximately 36.7 percent of Canpotex's requirements. Potash's exports
from Carlsbad are sold through Potash's sales force. In 2003, 85 percent of the
potash produced by Potash was sold as crop nutrients, while 15 percent was sold
for non-agricultural uses.
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The table below shows Potash's shipments of potash in thousands of tons:
2003 2002 2001
Tons % Tons % Tons %
Domestic
Customers 5,330 62 5,227 66 5,050 65
Captive, to other business units 124 2 129 2 217 3
5,454 64 5,356 68 5,267 68
Export 3,132 36 2,588 32 2,466 32
Total shipments 8,586 100 7,944 100 7,733 100
As of December 31, 2003, Potash had contractual commitments for 2004 from
non-affiliated customers for the shipment of potash amounting to approximately
1,380,000 tons.
Competition
Potash is a commodity available from many sources and consequently, the market
is highly competitive. In addition to Potash, there are four large North
American producers: two in the U.S. and two in Canada. Through its participation
in Canpotex, Potash competes outside of North America with various independent
potash producers and consortia as well as other export organizations, including
state-owned organizations. Potash'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.
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 operating results.
Revenues 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, the Company's crop
nutrients business is seasonal to the extent North American farmers and
agricultural enterprises purchase more crop nutrient products during the spring
and fall.
The Company sells products throughout the world. Unfavorable changes in trade
protection laws, policies and measures, and other regulatory requirements
affecting trade; unexpected changes in tax and trade treaties; strengthening or
weakening of foreign economies as well as political relations with the U.S. may
cause sales trends to customers in one or more foreign countries to differ from
sales trends in the U.S.
The Company's foreign operations, predominately in Canada, are subject to risks
from changes in foreign currencies. The costs of the Canadian operations are
principally denominated in the Canadian dollar while its sales are denominated
in the U.S. dollar. As a result, significant changes in the exchange rate of
these two currencies can have a significant effect on the company's business and
results of operations. For additional detail, see Market Risk in Part II, Item
7A, "Quantitative and Qualitative Disclosures about Market Risk," of this 2003
10-K.
OTHER MATTERS
Environmental Matters
For information regarding environmental matters of the Company, see
Environmental, Health and Safety Matters in Part II, Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," of
this 2003 10-K.
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Employees
The Company had 5,017 employees as of December 31, 2003. The work force
consisted of 1,373 salaried, 3,643 hourly employees and one temporary or
part-time employee.
Labor Relations
Within North America, the Company has five collective bargaining agreements with
the affiliated local chapters of three international unions. As of December 31,
2003, approximately 91 percent of the hourly work force was covered under
collective bargaining agreements. Three agreements were re-negotiated during
2003. Two agreements will expire in 2004. The Company has not experienced a
significant work stoppage in recent years and considers its labor relations to
be good.
EXECUTIVE OFFICERS OF THE REGISTRANT
The ages and five-year employment history of the Company's executive officers as
of March 1, 2004 was as follows:
E. Paul Dunn, Jr.
Age 50. Vice President, Finance and Treasurer of the Company since March 2002.
From May 1998 to March 2002, Mr. Dunn served as Vice President and Treasurer of
the Company.
C. Steven Hoffman
Age 54. Senior Vice President of the Company since 1990 and President, IMC Sales
and Marketing since March 2002. From September 1998 to March 2002, Mr. Hoffman
served as President, International of the Company.
Mary Ann Hynes
Age 56. Senior Vice President and General Counsel of the Company since joining
the Company in July 1999. Prior to joining the Company, Ms. Hynes served as Vice
President, General Counsel and Secretary of Sundstrand Corporation, a designer
and manufacturer of aerospace and industrial technology-based components, from
1998 to July 1999.
Stephen P. Malia
Age 49. Senior Vice President, Human Resources of the Company since joining the
Company in January 2000. Prior to joining the Company, Mr. Malia served as Vice
President, Human Resources-Exterior Systems Business for Owens Corning, a
manufacturer of consumer and industrial building materials and composite
systems, from 1997 through 1999.
Douglas A. Pertz
Age 49. Chairman and Chief Executive Officer of the Company since March 2002.
From October 2000 to March 2002, Mr. Pertz served as Chairman, President and
Chief Executive Officer of the Company, and from October 1999 to October 2000,
Mr. Pertz served as President and Chief Executive Officer of the Company. Mr.
Pertz served as President and Chief Operating Officer of the Company from
October 1998 to October 1999.
J. Reid Porter
Age 54. Executive Vice President and Chief Financial Officer of the Company
since joining the Company in October 2001. Prior to joining the Company, Mr.
Porter served as Vice President and partner of Hidden Creek Industries and Chief
Financial Officer of Heavy Duty Holdings, both of Minneapolis, partnerships in
the automotive-related and heavy-duty commercial vehicle industries,
respectively, from 1998 until October 2001.
Robert M. Qualls
Age 53. Vice President and Controller of the Company since March 2002. From
January 2001 to March 2002, Mr. Qualls served as Vice President, Finance of IMC
Crop Nutrients. Mr. Qualls served as Vice President of Finance, Purchasing and
Information Services of IMC Phosphates Company from October 1999 to January
2001, and as Vice President of Finance and Administration from February 1997 to
October 1999.
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All of the Company's executive officers are elected to serve until the next
organizational meeting of the Board of Directors of the Company, or until their
respective successors are elected and qualified or until their earlier death,
resignation or removal. No "family relationships," as that term is defined in
Item 401(d) of Regulation S-K, exist among any of the listed officers.
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