HIGHLIGHTS - Earnings for the third quarter ended February 28, 2007, were $42.2 million, or $0.10 per diluted share ('per share'). This compares to a reported net loss of $71.6 million, or $0.19 per share, for last year's third quarter.
- Third quarter results included a pre-tax gain of $33.9 million ($21.0 million after-tax, or $0.05 per share) on extinguishment of debt. This relates to the Mosaic's $2 billion refinancing which closed on December 1, 2006.
- Net sales increased 19% in the third quarter of fiscal 2007 and operating earnings increased to $34.2 million compared to a loss of $44.4 million a year ago.
- The Phosphates business had an operating loss of $11.1 million in the third quarter, compared to a loss of $19.7 million a year ago. Phosphates had unrealized mark-to-market derivative losses of $1.8 million for the third quarter, compared to losses of $34.6 million a year ago.
- The Potash business had operating earnings of $67.0 million in the third quarter compared to $16.1 million a year ago as a result of higher sales volumes and selling prices. Potash had unrealized mark-to-market derivative losses of $4.6 million in the third quarter compared to a loss of $22.9 million a year ago.
- Third quarter results included a foreign currency transaction gain of $17.8 million compared to a transaction loss of $13.8 million in the same quarter a year ago.
- The effective tax rate for the third quarter of fiscal 2007 was 15.1% compared to a benefit of 27.1% in the same quarter a year ago.
- Mosaic generated strong cash flow during the third quarter, ending with $460 million in cash and cash equivalents.
PLYMOUTH, Minn., April 9, 2007 PRNewswire-FirstCall via COMTEX News Network -- The Mosaic Company
(NYSE: MOS) announced today net earnings of $42.2 million, or $0.10 per share,
for the quarter ended February 28, 2007. These results compare with a
reported net loss of $71.6 million, or $0.19 per share, for the same period a
year ago. Year-to-date net earnings were $217.1 million, or $0.49 per share,
compared with $59.5 million, or $0.14 per share, during last year's nine-month
period.
Net sales in the third quarter of fiscal 2007 were $1.28 billion, an
increase of 19% compared with the same period a year ago.
Mosaic's gross margin for the fiscal 2007 third quarter was
$113.1 million, or 8.8% of net sales, compared with $14.0 million, or 1.3% of
net sales, a year ago. Third quarter operating earnings were $34.2 million,
compared with a loss of $44.4 million for the same period last year. The
increase in gross margin and operating earnings were primarily the result of
higher selling prices and volumes in Potash, and a decline in unrealized
mark-to-market derivative losses to $6.4 million in the third quarter,
compared with mark-to-market derivative losses of $57.5 million a year ago.
"We experienced strong Potash sales in the third quarter compared to weak
results a year ago and Phosphates sales gained momentum as the quarter
closed," said Jim Prokopanko, President and Chief Executive Officer of Mosaic.
"However, our costs were unacceptably high, especially for Phosphates, and it
is an area of great focus for us. Selling prices have increased during the
past two months which should result in substantially improved performance
during our fourth quarter. We also expect strong cash flow trends to continue
during the fourth quarter, further strengthening our balance sheet as we
approach fiscal 2008," Prokopanko added.
Selling, general, and administrative (SG&A) expenses were $77.8 million in
the third quarter, compared to $61.8 million for the same period a year ago.
This increase was mainly associated with higher incentive and stock-based
compensation expenses as well as ERP system and related costs.
Non-cash foreign currency transaction gains totaled $17.8 million for the
third quarter compared with a loss of $13.8 million for the same period a year
ago. This was mainly the result of the effect of a weaker Canadian dollar on
significant U.S. dollar-denominated intercompany receivables held by Mosaic's
Canadian affiliates compared to a stronger Canadian dollar in the same quarter
a year ago.
During the third quarter, Mosaic completed a $2 billion refinancing, which
resulted in a pre-tax gain from extinguishment of debt of $33.9 million.
Mosaic's third-quarter effective tax rate was 15.1% compared to 27.1% a
year ago. This decline was primarily due to a change in the pre-tax profit
mix, the impact from lower losses without a tax benefit, as well as an
additional benefit from the effect of the reduction in the Canadian federal
corporate tax rate, which was originally recorded in the first quarter.
Mosaic ended the quarter with $459.7 million in cash and cash equivalents.
Free cash flow, or cash flow from operations less capital expenditures, was
$81.9 million in the third quarter of fiscal 2007, up $234.9 million from the
same period last year. Mosaic's total debt at the end of February 2007 was
$2.6 billion, resulting in a debt-to-capital ratio of 41.9%.
The Potash business segment's total sales volume of 1.8 million tonnes
during the third quarter was 36% higher than last year's third quarter
volumes. Sales volumes to North America increased 44% and volumes to
international markets increased by 28%. The average potash selling price, FOB
plant, increased to $141 per tonne, or $7 per tonne higher compared to a year
ago.
Net sales in the Potash business totaled $342.7 million for the third
quarter, an increase of 50% compared with a year ago. The Potash business
segment's gross margin increased to $81.3 million in the third quarter, or
23.7% of net sales, compared with $24.1 million a year ago, or 10.5% of net
sales. Operating earnings were $67.0 million during the third quarter
compared to $16.1 million for the same period last year. The increase in
gross margin and operating earnings was due to mark-to-market effects on
derivatives contracts, higher volumes and selling prices and the effect of
operating potash mines at reduced production levels last year. The increase
was partially offset by costs this quarter to contain the new saturated brine
inflow at Mosaic's Esterhazy potash mines which developed in late 2006.
Mosaic's Potash business had unrealized mark-to-market derivative losses of
$4.6 million in the third quarter, compared with losses of $22.9 million in
the same period last year.
The Phosphates' business segment's fertilizer and feed shipments were
2.1 million tonnes for the third quarter, down 2% compared with year ago
levels. North American sales volumes increased by 65%, but were offset by a
24% decline to international markets. The average third quarter diammonium
phosphate (DAP) price, FOB plant, was $246 tonne, which was unchanged from a
year ago.
Phosphates' net sales were $690.7 million for the third quarter, a decline
of 1% compared to a year ago. The sales decline resulted from the lower sales
volumes at the beginning of the quarter, partially offset by higher PhosChem
sales for non-Mosaic members. Phosphates' third quarter gross margin was
$19.7 million, or 2.9% of net sales, compared with a loss of $0.7 million, or
a negative 0.1% of net sales, for the same period a year ago. Phosphates'
operating loss was $11.1 million in the third quarter compared with a loss of
$19.7 million for the same period a year ago. The improvement in gross margin
resulted from unrealized mark-to-market effects in derivatives and lower costs
for ammonia and sulfur, which were partially offset by higher mining and
concentrates production costs. Phosphates had unrealized mark-to-market
losses of $1.8 million for the third quarter of fiscal 2007, compared with
losses of $34.6 million for the third quarter of fiscal 2006.
Offshore's net sales were $242.9 million, an increase of 31% in the third
quarter compared with a year ago, mainly as a result of an increase in sales
volumes and selling prices in Brazil and Thailand. For the third quarter,
gross margin increased to $11.3 million, or 4.7% of net sales, compared to
$2.3 million, or 1.2% of net sales, for the same period in fiscal 2006. The
increase in gross margin is primarily due to improvements in Brazil, Thailand
and Argentina.
Mosaic's Nitrogen business segment's third quarter operating earnings were
$4.2 million compared to $1.2 million during the same period a year ago. This
was mainly due to higher nitrogen selling prices.
Total equity earnings in non-consolidated subsidiaries were $5.5 million
for the quarter, an increase of $3.5 million compared to equity earnings for
the same period a year ago. These results included Mosaic's equity earnings
in Fosfertil, which were $4.0 million for the third quarter compared to
$3.2 million last year. Mosaic's equity earnings in Saskferco were
$0.7 million for the third quarter compared with a loss of $2.2 million a year
ago.
For the nine months ended February 28, 2007, net sales were $4.1 billion,
an increase of 3% compared with last year. Year-to-date operating earnings
were $256.5 million compared with $286.9 million for the same period a year
ago. In the fiscal 2007 period, unrealized non-cash mark-to-market derivative
losses of $5.0 million were recognized, compared with losses of $3.6 million
in the first nine months of last year. Year-to-date SG&A expenses were
$213.9 million compared with $186.7 million for the same period in fiscal
2006. Foreign currency transaction gains totaled $44.9 million for the first
nine months of fiscal 2007, compared to a loss of $66.5 million for the same
period a year ago.
Global demand for phosphate fertilizer is expected to increase by 4% to 5%
in calendar year 2007. This is due to demand growth from countries that have
been the traditional drivers for food production, such as India and Brazil.
Strong growth in the biofuels industry, such as the U.S. ethanol market, is
increasing demand for grain and fertilizer. Demand is also stronger due to a
rebuilding of low stocks in the distribution pipeline, particularly in North
America. The U.S. Department of Agriculture recently reported that corn
plantings are expected to increase 15% to 90.5 million acres in 2007, which
should result in higher fertilizer demand. In addition, high grain prices and
good farm economics are expected to result in an increase in fertilizer
application rates on a per acre basis during 2007.
Strong agricultural fundamentals and industry demand have resulted in
escalating phosphate prices. Recent price increases will be reflected in
Mosaic's revenues beginning in the fourth quarter.
"We currently have about a two to three month lag in realizing increases
in reported market prices for phosphates, and we expect significantly higher
prices and margins in our fourth quarter and into fiscal 2008. Shipments are
strong for both Phosphates and Potash as the North American spring season is
off to a good start and export demand remains strong," said Jim Prokopanko.
"We are also pleased with the progress made to sharply reduce the saturated
brine inflow at Esterhazy to within historical levels over the last three
months, although we will incur significant additional costs associated with
the inflow in the fourth quarter. In addition, our expansion at Esterhazy has
been very successful and is expected to exceed our initial projections,"
Prokopanko added.
For Phosphates, fiscal 2007 sales volumes are anticipated to be between
9.0 to 9.3 million tonnes and Potash sales volumes are anticipated to be
between 7.7 and 8.1 million tonnes.
Mosaic anticipates capital spending ranging between $270 and $290 million
during fiscal 2007 compared with $390 million in fiscal 2006.
The Mosaic Company is one of the world's leading producers and marketers
of concentrated phosphate and potash crop nutrients. For the global
agriculture industry, Mosaic is a single source of phosphates, potash,
nitrogen fertilizers and feed ingredients. More information on the company is
available at http://www.mosaicco.com.
Mosaic will conduct a conference call on Tuesday, April 10, 2007 at 11:00
am EDT to discuss third quarter earnings results. A webcast of the conference
call, both live and as a replay, can be accessed by visiting Mosaic's website
at http://www.mosaicco.com/investors. This webcast will be available up to one
year from the time of the earnings call.
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, statements about future financial and
operating results. Such statements are based upon the current beliefs and
expectations of The Mosaic Company's management and are subject to significant
risks and uncertainties. These risks and uncertainties include but are not
limited to the predictability of fertilizer, raw material and energy markets
subject to competitive market pressures; changes in foreign currency and
exchange rates; international trade risks including, but not limited to,
changes in policy by foreign governments; changes in environmental and other
governmental regulation; the ability to successfully integrate the former
operations of Cargill Crop Nutrition and IMC Global Inc. and the ability to
fully realize the expected cost savings from their business combination within
expected time frames; adverse weather conditions affecting operations in
central Florida or the Gulf Coast of the United States, including potential
hurricanes or excess rainfall; actual costs of closure of the South Pierce,
Green Bay and Fort Green facilities differing from management's current
estimates; realization of management's expectations regarding reduced raw
material or operating costs, reduced capital expenditures and improved cash
flow and anticipated time frames for the closures and the ability to obtain
any requisite waivers or amendments from regulatory agencies with oversight of
The Mosaic Company or its phosphate business; management's estimates of the
current volumes of brine inflows at the Company's Esterhazy mines, the
available capacity of brine storage reservoirs at the Esterhazy mines, the
possibility that the rate of the brine inflows could materially increase,
management's expectations regarding the potential efficacy of remedial
measures to control the brine inflows, and the level of capital and operating
expenditures necessary to control the inflows, as well as other risks and
uncertainties reported from time to time in The Mosaic Company's reports filed
with the Securities and Exchange Commission. Actual results may differ from
those set forth in the forward-looking statements.
Consolidated Statements of Operations
(in millions, except per share amounts)
The Mosaic Company (unaudited)
Three months ended Nine months ended
February 28 February 28
2007 2006 2007 2006
Net sales $1,278.7 $1,073.2 $4,089.3 $3,974.3
Cost of goods sold 1,165.6 1,059.2 3,619.4 3,503.1
Gross margin 113.1 14.0 469.9 471.2
Selling, general and
administrative expenses 77.8 61.8 213.9 186.7
Restructuring and other charges
(income) - - (0.4) -
Other operating (income) expense 1.1 (3.4) (0.1) (2.4)
Operating earnings (loss) 34.2 (44.4) 256.5 286.9
Interest expense 49.6 44.2 134.6 125.4
Foreign currency transaction
(gain) loss (17.8) 13.8 (44.9) 66.5
Gain on extinguishment of debt (33.9) - (33.9)
Other income (7.4) (1.7) (32.6) (6.4)
Earnings (loss) from
consolidated companies before
income taxes 43.7 (100.7) 233.3 101.4
Provision (benefit) for income
taxes 6.6 (27.2) 38.1 66.5
Earnings (loss) from
consolidated companies 37.1 (73.5) 195.2 34.9
Equity in net earnings of non-
consolidated companies 5.5 2.0 24.8 29.0
Minority interests in net
earnings of consolidated companies (0.4) (0.1) (2.9) (4.4)
Net earnings (loss) $42.2 $(71.6) $217.1 $59.5
Diluted net earnings (loss) per
share $0.10 $(0.19) $0.49 $0.14
Diluted weighted average number
of shares outstanding 440.9 383.6 439.2 436.1
Consolidated Financial Highlights
(dollars in millions)
The Mosaic Company (unaudited)
Three months ended Favorable/ Nine months ended Favorable/
February 28 (Unfavorable) February 28 (Unfavorable)
2007 2006 Amount % 2007 2006 Amount %
Net sales:
Phosphates $690.7 $699.3 $(8.6) (1%) $2,244.2 $2,291.7 $(47.5) (2%)
Potash 342.7 228.6 114.1 50% 984.9 827.6 157.3 19%
Nitrogen 48.9 31.7 17.2 54% 95.8 91.2 4.6 5%
Offshore 242.9 186.1 56.8 31% 1,046.7 1,002.1 44.6 4%
Corporate/
Other (a) (46.5) (72.5) 26.0 (36%) (282.3) (238.3) (44.0)(18%)
$1,278.7 1,073.2 $205.5 19% $4,089.3 $3,974.3 $115.0 3%
Gross margin:
Phosphates $19.7 $(0.7) $20.4 nm $164.8 $207.8 $(43.0)(21%)
Potash 81.3 24.1 57.2 237% 239.1 251.5 (12.4) (5%)
Nitrogen 5.8 2.7 3.1 115% 12.9 10.1 2.8 28%
Offshore 11.3 2.3 9.0 391% 48.4 29.2 19.2 66%
Corporate/
Other (a) (5.0) (14.4) 9.4 (65%) 4.7 (27.4) 32.1 117%
$113.1 $14.0 $99.1 708% $469.9 $471.2 $(1.3) (0%)
Operating earnings (loss):
Phosphates $(11.1) $(19.7) $8.6 (44%) $76.9 $128.3 $(51.4)(40%)
Potash 67.0 16.1 50.9 316% 206.0 226.0 (20.0) (9%)
Nitrogen 4.2 1.2 3.0 250% 7.0 6.5 0.5 8%
Offshore (9.2) (17.2) 8.0 (47%) (8.3) (31.1) 22.8 73%
Corporate/
Other (a) (16.7) (24.8) 8.1 (33%) (25.1) (42.8) 17.7 41%
$34.2 $(44.4) $78.6 (177%) $256.5 $286.9 $(30.4)(11%)
(a) Includes elimination of intercompany sales.
The Mosaic Company Key Statistics
(unaudited)
Three months ended Favorable/ Nine months ended Favorable/
February 28 (Unfavorable) February 28 (Unfavorable)
2007 2006 Amount % 2007 2006 Amount %
Sales volumes
(000 metric
tonnes) (a):
Phosphates (b) 2,074 2,115 (41) (2%) 6,653 7,427 (774) (10%)
Potash (c) 1,786 1,311 475 36% 5,445 4,778 667 14%
Average price per
metric tonne:
DAP (d) $246 $246 $- 0% $246 $244 $2 1%
Potash (d) 141 134 7 5% 138 140 (2) (1%)
Ammonia (e) 345 386 (41) (11%) 317 339 (22) (6%)
Sulfur
(long ton) (e) 62 78 (16) (21%) 67 73 (6) (8%)
Exchange rate
at quarter-end
of the Canadian
Dollar $1.171 $1.149
(a) Sales volumes include tonnes sold captively.
(b) Phosphates volumes represent dry product tonnes, primarily DAP and
MAP. Excludes tonnes sold by PhosChem for non-Mosaic members.
(c) Potash volumes exclude tonnes mined under a long-term third party
tolling arrangement
(d) FOB plant/mine.
(e) Delivered Tampa
The Mosaic Company (unaudited)
Selected Non-GAAP Financial Measures and Reconciliations
The following table summarizes the calculation of EBITDA and provides a
reconciliation to net earnings:
EBITDA Calculation
Three months ended Nine months ended
February 28 February 28
2007 2006 2007 2006
(dollars in millions) (dollars in millions)
Net earnings (loss) $42.2 $(71.6) $217.1 $59.5
Interest expense, exclusive
of amortization* 50.0 52.7 157.7 155.2
Income taxes 6.6 (27.2) 38.1 66.5
Depreciation, depletion &
amortization 81.4 80.7 235.5 239.4
Amortization of debt
refinancing and issuance
costs 1.0 3.5 3.0 5.9
Amortization of fair market
value adjustment of debt (1.4) (12.0) (26.1) (35.7)
Amortization of mark-to-market
contracts (3.9) (4.1) (12.1) (13.1)
EBITDA $175.9 $22.0 $613.2 $477.7
* Interest expense in this table is exclusive of amortization of debt
refinancing and issuance costs and amortization of fair market value
adjustment of debt.
The Company has presented above EBITDA, which is a non-GAAP financial
measure. Generally, a non-GAAP financial measure is a supplemental numerical
measure of a company's performance, financial position or cash flows that
either excludes or includes amounts that are not normally excluded or included
in the most directly comparable measure calculated and presented in accordance
with U.S. generally accepted accounting principles ("GAAP"). EBITDA is not a
measure of financial performance under GAAP. Because not all companies use
identical calculations, our calculation of EBITDA may not be comparable to
other similarly titled measures presented by other companies. Moreover, EBITDA
as presented in this press release is different than similarly titled measures
used for purposes of financial covenants in our senior secured bank credit
facility and other covenants relating to our indebtedness, all of which
require different adjustments, both positive and negative, that were the
result of negotiations with the lenders. In evaluating these measures,
investors should consider that our methodology in calculating such measures
may differ from that used by other companies.
EBITDA is frequently used by securities analysts, investors, lenders and
others to evaluate companies' performance, including, among other things, cash
flows and profitability before the effect of financing and similar decisions.
Because securities analysts, investors, lenders and others use EBITDA,
Mosaic's management believes that our presentation of EBITDA affords them
greater transparency in assessing our financial performance. EBITDA should not
be considered as a substitute for, nor superior to, measures of financial
performance prepared in accordance with GAAP.
The Mosaic Company (unaudited)
The following table summarizes the calculation of Total Debt to
Capitalization:
Debt to Capitalization Calculation
February 28 May 31
2007 2006
(dollars in billions) (dollars in billions)
Numerator
Total debt $2.6 $2.6
Denominator
Book value of equity $3.6 $3.5
Total debt 2.6 2.6
Capitalization $6.2 $6.1
Total debt to total
capitalization 41.9% 42.6%
Media, Linda Thrasher
763-577-2864
Investors:
Douglas Hoadley
763-577-2867
both of The Mosaic Company
SOURCE The Mosaic Company
