PHOS Phosphate Holdings Inc (CE)

Phosphate Holdings, Inc. (OTC: PHOS), today reported a fourth quarter 2011 loss of $0.6 million, or $(0.07) per share of common stock, compared to income of $0.9 million, or $0.10 per share of common stock for the same period in 2010. Net loss for the year ended December 31, 2011 was $0.8 million, or $(0.10) per share of common stock, as compared to income of $1.1 million, or $0.13 per share of common stock for the same period last year.

Net sales for the fourth quarter of 2011 were $99.6 million, a 45 percent increase from net sales of $68.5 million for the fourth quarter of 2010. The average sales price per short ton of DAP during the fourth quarter of 2011 was $539, a 1 percent increase from the prior-year period average sales price of $534. During the fourth quarter, the Company sold 183,436 tons of DAP, with 57,011 tons moving into domestic markets. The Company had operating losses of $1.0 million for the fourth quarter of 2011, compared to operating income of $1.3 million for the prior-year period. Earnings before interest, taxes, depreciation, amortization and accretion (EBITDA) for the fourth quarter of 2011 were $3.5 million, compared to EBITDA of $5.2 million for the fourth quarter of 2010.

Net sales for the year ended December 31, 2011 were $352.3 million, a 35 percent increase from net sales of $261.1 million for the year ended December 31, 2010. The Company had operating losses of $0.8 million for the year ended December 31, 2011, compared to operating income of $2.3 million for the prior-year period. EBITDA for the year ended December 31, 2011 was $15.9 million, compared to EBITDA of $15.1 million for the same period in 2010.

Robert E. Jones, Chief Executive Officer, said, “Our fourth quarter operating results were impacted by a planned maintenance turnaround early in the quarter and by falling DAP prices late in the quarter. DAP prices declined sharply late in the fourth quarter. During December, posted DAP prices per short ton, FOB NOLA, dropped from approximately $560 to approximately $450. With sulfur prices fixed for the quarter and ammonia prices at elevated levels, our margins contracted. This margin squeeze was partially offset by very encouraging results from our October/November turnaround. In December 2011, we had the highest DAP and sulfuric acid production since mid-2008. We continue to experience production improvements in 2012 as compared to recent historical results.

“From a market perspective during the fourth quarter of 2011, the average posted DAP price was $552 per short ton, NOLA, sulfur prices were posted at $220 per long ton, CFR, Tampa, and ammonia prices hit a peak of $705 per metric ton before closing at $555 per metric ton, CFR, Tampa.”

In addressing the industry outlook, Jones added, “Agricultural fundamentals for the U.S. farmer remain very attractive. The USDA estimates 95.9 million acres of corn will be planted in the U.S. this spring. This represents the largest planted corn acreage since 1937. Nonetheless, distributors and retailers were very reluctant to stock inventories in advance of the planting season. This reluctance has led to further price deterioration with the average first quarter 2012 posted DAP price of $444 per short ton, NOLA, and $516 per metric ton, U.S. Gulf. These depressed DAP prices will negatively impact our first quarter results. However, in the first two weeks of April, product movement has been brisk and DAP prices are improving.”

As of December 31, 2011, the Company had a cash balance of approximately $3.0 million and $15.0 million in borrowings under its revolving credit agreement. Approximately $3.2 million was spent on capital expenditures in the fourth quarter of 2011, and $12.5 million for the year ended December 31, 2011. Based on current phosphate market conditions, DAP production rates and available credit facilities, the Company believes that it has adequate liquidity to meet its operating and other cash flow needs throughout 2012.

In late 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 fourth quarter and year end 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 SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

      December 31, Assets 2011   2010 Current assets:   Cash and cash equivalents $ 3,024 2,261 Trade accounts receivable 14,871 11,414 Other receivables 57 11 Inventories 25,075 26,141 Prepaid expenses and other 13,338 8,329 Deferred income taxes 841 336         Total current assets 57,206 48,492 Freight deposits 3,947 5,636 Restricted investments held in trust, at fair value 6,318 5,657 Property, plant and equipment, net 63,650 61,402 Other 477 553 Total assets $ 131,598 121,740 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 3,376 1,804 Accrued expenses 32,313 29,783 Short-term financing obligations 2,965 3,492 Revolving credit agreement 15,000 9,000 Total current liabilities 53,654 44,079 Asset retirement obligations 17,627 16,307 Deferred income taxes 1,607 1,836 Total liabilities 72,888 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 22,966 23,774 Total stockholders’ equity 58,710 59,518 Total liabilities and stockholders’ equity $ 131,598 121,740            

PHOSPHATE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

                Three months

ended

December 31,

  Twelve months

ended

December 31,

2011   2010 2011   2010 Net sales: DAP $ 98,941 67,553 348,283 257,233 Other 685   986   4,050   3,863   Total net sales 99,626 68,539 352,333 261,096 Cost of sales 98,751   66,063   345,299   249,931   Gross profit 875 2,476 7,034 11,165 Selling, general and administrative expenses 1,866 2,204 7,722 6,858 Environmental remediation — 297 159 4,028 Litigation recoveries, net —   (1,303 ) —   (2,053 ) Operating income (loss) (991 ) 1,278 (847 ) 2,332 Other income (expense): Interest, net (276 ) (257 ) (1,045 ) (1,107 ) Other, net 365   356   (82 ) 534   Total other income (expense) 89   99   (1,127 ) (573 ) Income (loss) before income taxes (902 ) 1,377 (1,974 ) 1,759 Income tax expense (benefit) (326 ) 524   (1,166 ) 695   Net income (loss) $ (576 ) 853   (808 ) 1,064   Earnings (loss) per share – basic $ (0.07 ) 0.10 (0.10 ) 0.13 Earnings (loss) per share – diluted $ (0.07 ) 0.10 (0.10 ) 0.13 Weighted average common shares outstanding – basic 8,411 8,411 8,411 8,411 Weighted average common shares outstanding – diluted 8,411 8,411 8,411 8,411            

PHOSPHATE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

                  Years Ended

December 31,

2011   2010 Cash flows from operating activities: Net income (loss) $ (808 ) 1,064

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation of property, plant and equipment 10,656 7,571 Amortization of prepaid maintenance turnaround costs 5,265 3,967 Accretion of asset retirement obligation 906 659 Deferred loan cost amortization 74 229 Unrealized restricted investment (gain) loss 139 (507 ) Share-based compensation 12 697 Deferred income taxes (734 ) 670 Other 2 8 Changes in operating assets and liabilities: Trade and other accounts receivable (3,503 ) (8,361 ) Income taxes receivable — 574 Inventories 1,066 (8,554 ) Prepaid expenses and other (10,274 ) (7,442 ) Freight deposits 1,689 (5,636 ) Accounts payable and accrued expenses 4,090   18,276   Net cash provided by operating activities 8,580   3,215   Cash flows from investing activities: Purchases of restricted investments held in trust (800 ) (800 ) Purchases of property, plant and equipment (12,490 ) (9,702 ) Net cash used in investing activities (13,290 ) (10,502 ) Cash flows from financing activities: Net borrowings (payments) on revolving credit agreement 6,000 9,000 Proceeds from financing obligations 2,965 4,836 Payments on financing obligations (3,492 ) (3,333 ) Payment of deferred loan costs — (622 ) Payments on term loan —   (2,400 ) Net cash provided by financing activities 5,473   7,481   Net increase in cash and cash equivalents 763 194 Cash and cash equivalents at beginning of year 2,261   2,067   Cash and cash equivalents at end of year $ 3,024   2,261              

PHOSPHATE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

                  Three Months

ended

December 31,

2011   2010 Cash flows from operating activities: Net income (loss) $ (576 ) 853

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation of property, plant and equipment 2,487 2,063 Amortization of prepaid maintenance turnaround costs 1,374 1,185 Accretion of asset retirement obligation 244 282 Deferred loan cost amortization 14 27 Unrealized restricted investment gain (365 ) (357 ) Share-based compensation (272 ) 304 Deferred income taxes (326 ) 524 Changes in operating assets and liabilities: Trade and other accounts receivable (5,989 ) (2,103 ) Inventories 3,006 1,057 Prepaid expenses and other (8,368 ) (3,851 ) Freight deposits 1,358 (1,054 ) Long-term prepaid insurance — 607 Accounts payable and accrued expenses (242 ) 3,131   Net cash provided by (used in) operating activities (7,655 ) 2,668   Cash flows from investing activities: Purchases of restricted investments held in trust (200 ) (200 ) Purchases of property, plant and equipment (3,222 ) (3,764 ) Net cash used in investing activities (3,422 ) (3,964 ) Cash flows from financing activities: Net borrowings (payments) on revolving credit agreement 7,500 (295 ) Proceeds from financing obligations 2,965 1,052 Payments on financing obligations (642 ) (839 ) Net cash provided by (used in) financing activities 9,823   (82 ) Net decrease in cash and cash equivalents (1,254 ) (1,378 ) Cash and cash equivalents at beginning of year 4,278   3,639   Cash and cash equivalents at end of year $ 3,024   2,261          

PHOSPHATE HOLDINGS, INC. AND SUBSIDIARIESReconciliation 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

December 31,

  Twelve Months

ended

December 31,

2011   2010 2011   2010 Net income (loss) $ (576 ) 853 (808 ) 1,064 Interest, net 276 257 1,045 1,107 Income tax expense (benefit) (326 ) 524 (1,166 ) 695 Depreciation, amortization and accretion 4,105   3,530 16,827   12,197 EBITDA

$

3,479   5,164

 

15,898  

 

15,063