Phosphate Holdings, Inc. (OTC: PHOS), today reported a third
quarter 2011 profit of $1.5 million, or $0.18 per diluted
share of common stock, compared to earnings of $2.5 million,
or $0.30 per diluted share of common stock for the same period in
2010.
Total net sales for the third quarter of 2011 were $94.7
million, a 35 percent increase from total net sales of
$70.4 million for the third quarter of 2010. The average sales
price per short ton of DAP during the third quarter of 2011 was
$578, a 27 percent increase from the prior-year period average
sales price of $455. During the third quarter, the Company sold
162,761 tons of DAP, with 112,120 tons moving into domestic markets
and 50,641 tons moving into export markets. This represents a 7
percent increase over the 152,500 tons sold in the third quarter of
2010. The Company recorded operating income of $2.7 million
for the third quarter of 2011, compared to operating income of
$3.9 million for the prior-year period. Earnings before
interest, taxes, depreciation and amortization (EBITDA) for the
third quarter of 2011 were $6.6 million, compared to EBITDA of
$7.3 million for the third quarter of 2010. In the third
quarter of 2010, EBITDA was favorably impacted by litigation
settlements, net of related costs, of $0.8 million.
DAP prices began the quarter at $595 per short ton, NOLA, and
$645 per metric ton, FOB, U.S. Gulf. At quarter’s end, DAP prices
were $586 per short ton, NOLA, and $635 per metric ton, FOB, U.S.
Gulf. Sulfur prices in the quarter were posted at $220 per long
ton, CFR, Tampa. Ammonia prices began the quarter at $555 per
metric ton, CFR, Tampa, and closed the quarter at $650 per metric
ton, CFR, Tampa.
Commenting on third quarter results, Robert E. Jones, Chief
Executive Officer, said, “We are pleased to report positive third
quarter results. Our third quarter EBITDA of $6.6 million
represents a 234 percent improvement over our second quarter 2011
EBITDA level of $2.0 million. During the third quarter of 2011, we
produced 167,000 tons of DAP, which is the highest DAP production
level since our second quarter of 2009. However, sulfuric acid
production in one of our two sulfuric acid plants operated
throughout the quarter at substantially reduced rates due to a
damaged heat exchanger. As a result, approximately 27 percent of
our third quarter DAP production was produced with purchased
sulfuric acid. DAP produced with purchased sulfuric acid had much
lower margins than DAP produced with internally generated sulfuric
acid.
‘On October 21, 2011, we commenced a major maintenance
turnaround during which we addressed all known issues constraining
sulfuric acid production. During the course of the turnaround, work
was performed on both sulfuric acid plants as well as on the
phosphoric acid and DAP plants. The turnaround was completed on
November 7, 2011 and, while no assurance can be given, we expect
materially improved operating rates. Downtime associated with these
maintenance activities will adversely impact fourth quarter
operations. We are projecting DAP production of approximately
150,000 to 160,000 tons in the fourth quarter.”
Shifting to the near-to-intermediate-term industry outlook,
Jones added, “A very late harvest in much of the U.S. has delayed
and will shorten the domestic fall application season. As a result,
demand has been soft and DAP prices have declined from $615, on
August 1, 2011 to a current level of $565 per short ton, FOB, NOLA.
Looking beyond the 2011 fall season, market underpinnings appear
strong with high grain prices, historically low grain stocks and a
promising demand outlook for the 2012 spring season.”
As of September 30, 2011, the Company had a cash balance of
approximately $4.3 million and borrowings under our revolving
credit agreement of $7.5 million. The Company continues to
aggressively manage its liquidity and believes that its operating
results and available credit facilities should be adequate to meet
the Company’s financing needs for the foreseeable future.
At the end of 2010, our Board of Directors appointed a special
committee of independent directors to initiate a comprehensive
review of strategic options. While this review is ongoing, we will
not hold an earnings call to discuss our third quarter 2011
financial results and will not otherwise discuss this strategic
process. When the strategic process is completed, we intend to
resume regular quarterly earnings calls.
The Company is a Delaware corporation and the sole stockholder
of Mississippi Phosphates Corporation. Mississippi Phosphates
Corporation is a Delaware corporation with its executive
headquarters in Madison, Miss. Mississippi Phosphates Corporation
owns and operates manufacturing facilities in Pascagoula, Miss.,
which produce diammonium phosphate, the most common form of
phosphate fertilizer used as a source of phosphate on all major row
crops.
Forward-looking Statements
This release contains “forward-looking statements” within the
meaning of the federal securities law, which are intended to
qualify for the safe harbor from liability provided thereunder. All
statements which are not historical statements of fact are
“forward-looking statements” for purposes of these provisions and
are subject to numerous risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
in the forward-looking statements. Future events, risks and
uncertainties that could cause a material difference in such
results include, but are not limited to,(i) changes in matters
which affect the global supply and demand of phosphate fertilizer
products, phosphate rock, ammonia, sulfur and sulfuric acid,
(ii) a variety of conditions in the agricultural industry such
as grain prices, planted acreage, projected grain stocks, U.S.
government policies, weather, and changes in agricultural
production methods, (iii) changes in the availability and cost
of phosphate rock and our other primary raw materials,
(iv) changes in capital markets, (v) possible unscheduled
plant outages and other operating difficulties, (vi) price
competition and capacity expansions and reductions from both
domestic and international competitors, (vii) the
concentration of our sales with one large customer,
(viii) foreign government agricultural policies (in
particular, the policies of the governments of India and China),
(ix) the relative unpredictability of international and local
economic conditions, (x) international trade risks,
(xi) political unrest in Northern Africa and possible
implications on phosphate rock availability (xii) the relative
value of the U.S. dollar, (xiii) regulations regarding
the environment and the sale and transportation of fertilizer
products, (xiv) our potential inability to obtain or maintain
required permits and governmental approvals or to meet financial
assurance requirements, (xv) loss of key members of management, and
(xvi) impact of future storms. The Company undertakes no
obligation to update any forward-looking statement, whether as a
result of new information, future events or otherwise.
(TABLES FOLLOW)
PHOSPHATE HOLDINGS, INC. AND
SUBSIDIARY
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
September 30, December 31,
Assets
2011 2010 Current assets: Cash and cash equivalents $
4,278 2,261 Trade accounts receivable 8,396 11,414 Other
receivables 543 11 Inventories 28,081 26,141 Prepaid expenses and
other 6,344 8,329 Deferred income taxes 5,655 336 Total current
assets 53,297 48,492 Freight deposits 5,305 5,636 Restricted
investments held in trust, at fair value 5,753 5,657 Property,
plant and equipment, net 62,501 61,402 Other 491 553 Total assets $
127,347 121,740
Liabilities and Stockholders’ Equity Current
liabilities: Accounts payable $ 3,471 1,804 Accrued expenses 32,732
29,783 Financing obligations 642 3,492 Revolving credit agreement
7,500 9,000 Total current liabilities 44,345 44,079 Asset
retirement obligations 16,969 16,307 Deferred income taxes 6,747
1,836 Total liabilities 68,061 62,222 Stockholders’ equity:
Common stock ($0.01 par; 30,000,000 shares
authorized;8,411,308 shares issued and outstanding)
84 84 Additional paid-in capital 35,660 35,660 Retained earnings
23,542 23,774 Total stockholders’ equity 59,286 59,518 Total
liabilities and stockholders’ equity $ 127,347 121,740
PHOSPHATE HOLDINGS, INC. AND
SUBSIDIARY
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30, 2011
2010 2011 2010 Net sales: DAP $ 94,014
69,353 249,342 189,680 Other 646 1,020 3,365 2,877 Total net sales
94,660 70,373 252,707 192,557 Cost of sales 90,448 65,306 246,548
183,868 Gross profit 4,212 5,067 6,159 8,689 Selling, general and
administrative expenses 1,514 1,642 5,856 4,654 Environmental
remediation — 260 159 3,731 Litigation recoveries, net — (750) —
(750) Operating income 2,698 3,915 144 1,054 Other income
(expense): Interest expense (272) (280) (769) (850) Other, net
(677) 413 (447) 178 Total other income (expense) (949) 133 (1,216)
(672) Income (loss) before income taxes 1,749 4,048 (1,072) 382
Income tax expense (benefit) 232 1,539 (840) 171 Net income (loss)
$ 1,517 2,509 (232) 211 Income (loss) per share – basic and diluted
$ 0.18 0.30 (0.03) 0.03
Weighted average common shares
outstanding– basic and diluted
8,411 8,411 8,411 8,411
PHOSPHATE HOLDINGS, INC. AND
SUBSIDIARY
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended September 30, 2011
2010 Cash flows from operating activities: Net income
(loss) $ (232) 211 Adjustments to reconcile net income (loss) to
net cashprovided by operating activities: Depreciation of property,
plant and equipment 8,169 5,508 Amortization of prepaid maintenance
turnaround costs 3,891 2,782 Accretion of asset retirement
obligation 662 377 Deferred loan cost amortization 60 202
Unrealized restricted investment (gain) loss 504 (150) Share-based
compensation 284 398 Deferred income taxes (408) 146 Other 2 3
Changes in operating assets and liabilities: Trade and other
accounts receivable 2,486 (6,258) Income taxes receivable — 574
Inventories (1,940) (9,611) Prepaid expenses and other (1,906)
(3,591) Freight deposits - long term 331 (4,582) Prepaid insurance
- long term — (607) Accounts payable and accrued expenses 4,332
15,145 Net cash provided by operating activities 16,235 547 Cash
flows from investing activities: Purchases of restricted
investments held in trust (600) (600) Purchases of property, plant
and equipment (9,268) (5,938) Net cash used in investing activities
(9,868) (6,538) Cash flows from financing activities: Net
borrowings (payments) on revolving credit agreement (1,500) 9,295
Proceeds from financing obligations — 3,784 Payments on financing
obligations (2,850) (2,494) Payments on term debt — (2,400)
Deferred loan costs — (622) Net cash provided by (used in)
financing activities (4,350) 7,563 Net increase in cash and cash
equivalents 2,017 1,572 Cash and cash equivalents at beginning of
period 2,261 2,067 Cash and cash equivalents at end of period $
4,278 3,639
PHOSPHATE HOLDINGS, INC. AND
SUBSIDIARY
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended September 30, 2011
2010 Cash flows from operating activities: Net income
$ 1,517 2,509 Adjustments to reconcile net income to net cash
provided by
operating activities:
Depreciation of property, plant and equipment 2,907 1,875
Amortization of prepaid maintenance turnaround costs 1,451 947
Accretion of asset retirement obligation 244 129 Deferred loan cost
amortization 15 27 Unrealized restricted investment (gain) loss 729
(412) Share-based compensation (293) 71 Deferred income taxes 664
1,539 Other 2 5 Changes in operating assets and liabilities: Trade
and other accounts receivable (3,051) (2,609) Inventories (2,157)
(1,018) Prepaid expenses and other 348 (348) Freight deposits –
long term 693 (1,418) Prepaid insurance – long term - 676 Accounts
payable and accrued expenses 5,697 (89) Net cash provided by
operating activities 8,766 1,884 Cash flows from investing
activities: Purchases of restricted investments held in trust (200)
(200) Purchases of property, plant and equipment (4,342) (1,407)
Net cash used in investing activities (4,542) (1,607) Cash flows
from financing activities: Net borrowings (payments) on revolving
credit agreement (6,000) 1,200 Payments on financing obligations
(956) (929) Deferred loan costs - (1) Net cash provided by (used
in) financing activities (6,956) 270 Net increase (decrease) in
cash and cash equivalents (2,732) 547 Cash and cash equivalents at
beginning of period 7,010 3,092 Cash and cash equivalents at end of
period $ 4,278 3,639
PHOSPHATE HOLDINGS, INC. AND
SUBSIDIARYReconciliation of Net Income (Loss) to EBITDA(In
thousands)(Unaudited)
We define EBITDA as net income (loss) before interest; income
taxes; depreciation, amortization and accretion. EBITDA is used as
a supplemental financial measure by our management and by external
users of our financial statements to assess:
- the financial performance of our assets
without regard to financing methods, capital structure or
historical cost basis;
- our operating performance and return on
capital as compared to other companies in the fertilizer business,
without regard to financing or capital structure; and
- the viability of acquisitions and
capital expenditure projects and the overall rates of return on
alternative investment opportunities.
We use EBITDA as a primary operating performance measure and an
important indicator of our ability to provide cash flows to meet
future debt service, if any, capital expenditures and working
capital requirements and to fund future growth.
The U.S. Generally Accepted Accounting Principles, or GAAP,
measure most directly comparable to EBITDA is net income (loss).
Our non-GAAP financial measure of EBITDA should not be considered
as an alternative to GAAP net income (loss). You should not
consider EBITDA in isolation or as a substitute for analysis of our
results as reported under GAAP. Because EBITDA excludes some, but
not all, items that affect income from continuing operations and is
defined differently by different companies in our industry, our
definition of EBITDA may not be comparable to similarly titled
measures of other companies.
We compensate for the limitations of EBITDA as an analytical
tool by reviewing the comparable GAAP measures, understanding the
differences between the measures and incorporating this information
into our decision-making processes.
The following table shows the reconciliation of net income
(loss) to EBITDA for the periods indicated:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2011 2010 2011 2010 Net
income (loss) $ 1,517 2,509 $ (232) 211 Interest expense 272 280
769 850 Income tax expense (benefit) 232 1,539 (840) 171
Depreciation, amortization and
accretion
4,602 2,951 12,722 8,667 EBITDA $ 6,623 7,279
$
12,419 9,899
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