Exhibit 99.1
3033 Campus Drive Tel 800-918-8270
Suite E490 Fax 763-577-2986
Plymouth, MN 55441
www.mosaicco.com
Press Release
MEDIA CONTACT: Linda Thrasher, 763-577-2864
INVESTOR CONTACT: Douglas Hoadley, 763-577-2867
MOSAIC REPORTS FISCAL 2006 FOURTH QUARTER RESULTS
HIGHLIGHTS
o The fourth quarter net loss for the period ended May 31, 2006, was
$180.9 million, or $0.48 per diluted share ("per share"). This
compares to reported net earnings of $94.1 million or $0.22 per share
for last year's fourth quarter. Included in the results are:
o A charge of $287.6 million pre-tax and $285.6 million after tax,
or $0.75 per share, from the previously announced restructuring
of the Phosphates business.
o A tax benefit of $81.0 million, or $0.21 per share, related to
the reduction in Canadian deferred tax liabilities as a result of
statutory changes in future tax rates in the Province of
Saskatchewan during the fourth quarter.
o Pre-tax foreign currency transaction losses of $34.1 million, or
$0.05 per share, during the fourth quarter compared with a gain
of $8.0 million in the prior year period.
o Net sales declined 8%, mainly due to lower volumes for phosphates and
potash. Mosaic's gross margin declined to 12.5% of net sales compared
to 16.9% a year ago. Margins declined as a result of lower production
levels and lower high-margin potash sales during the quarter.
o The Phosphates business had an operating loss of $268.8 million in the
fourth quarter, including the restructuring charge, compared with
operating earnings of $68.8 million for the same period a year ago.
o The Potash business had operating earnings of $83.8 million in the
fourth quarter compared with $118.9 million a year ago as net sales
declined 23% due to lower volumes.
o The Phosphates business is expected to show improved results in fiscal
2007 due to the completion of the previously announced restructuring
activities. The Potash business is also expected to improve during the
second half of calendar 2006 with Canpotex shipments resuming to
China.
PLYMOUTH, MN, August 1, 2006 - The Mosaic Company (NYSE: MOS) announced
today a net loss of $180.9 million, or $0.48 per diluted share, for the quarter
ended May 31, 2006. Mosaic's fiscal 2006 net loss was $121.4 million, or $0.35
per share, compared to fiscal 2005 net earnings of $165.6 million or $0.46 per
share.
Net sales in the fourth quarter were $1.33 billion, a decline of 8%
compared with the same period a year ago. The decline in net sales was mainly
the result of lower sales volumes for the Potash and Phosphates business
segments.
"Fiscal 2006 was a transition year for Mosaic and we look forward with
confidence to 2007 and beyond. We took aggressive strategic action to
restructure our Phosphates business at the end of the fiscal year to make us
more cost competitive in the global marketplace," said Fritz Corrigan, President
and Chief Executive Officer of Mosaic. "In the Potash business, while markets
have been weak, we expect volumes to improve during the second half of calendar
2006 now that a supply contract has been entered into between Canpotex and
Sinofert in China."
Mosaic's gross margin for the fourth quarter was $166.2 million
compared with $245.6 million for the same period a year ago. This included
unrealized mark-to-market gains on derivative contracts of $11.2 million
compared with a loss of $4.3 million a year ago. The gross margin as a percent
of sales was 12.5% for the fourth quarter compared with 16.9% a year ago.
Although selling prices were higher for most products, they were more than
offset by an unfavorable sales mix due to lower Potash sales volumes and the
effect of reduced potash and phosphates production levels. In addition,
operating costs were higher resulting from increases in energy-based raw
materials and other input prices.
Selling, general, and administrative (SG&A) expenses of $54.6 million
were incurred in the fourth quarter, compared to $65.8 million for the same
period a year ago. This decline was mainly because of a one-time $14 million
Brazilian value-added tax (VAT) credit. SG&A costs were adversely affected by
first year Sarbanes-Oxley Section 404 compliance activities.
Non-cash foreign currency transaction losses totaled $34.1 million for
the fourth quarter compared with a gain of $8.0 million for the same period a
year ago. This was mainly the result of the effect of a strong Canadian dollar
on large U.S. dollar-denominated intercompany receivables held by Mosaic's
Canadian affiliates.
For the fourth quarter, Mosaic's tax benefit was $61.2 million on a
pre-tax loss of $261.5 million. Mosaic continues to have a high effective
underlying tax rate as a result of losses in the United States and Brazil, and
because its Canadian-based businesses are taxed at relatively higher rates than
the other businesses of the company. Included in the fourth quarter was an $81.0
million tax benefit from the reduction in Canadian deferred tax liabilities as a
result of the statutory reduction in future tax rates in the Province of
Saskatchewan.
Mosaic ended the quarter with $173.3 million in cash and cash
equivalents. Mosaic's total debt at the end of May 2006 was $2.6 billion,
resulting in a debt-to-capital ratio of 42.6%.
POTASH
The Potash business segment's total sales volume was 1.7 million tonnes
during the fourth quarter which was 31% lower than last year's fourth quarter
volumes. This was due to a slow North American market as well as a weak export
market, especially in China and India. The average potash selling price
increased to $141 per tonne, up $6 per tonne from the same period a year ago.
Potash net sales were $328.3 million for the fourth quarter, down 23%
compared with a year ago. The Potash business segment's gross margins declined
to $100.1 million in the fourth quarter or 30.5% of sales, compared with $125.7
million a year ago or 29.7% of sales. This included an unrealized non-cash gain
of $15.2 million resulting from mark-to-market adjustments on derivative
contracts for the fourth quarter compared with a loss of $0.8 million a year
ago. Operating earnings were $83.8 million during the fourth quarter compared to
$118.9 million for the same period last year.
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PHOSPHATES
The Phosphates business segment's fertilizer and feed shipments were
2.8 million tonnes for the fourth quarter, down 0.6 million tonnes compared with
year ago levels. The average fourth quarter diammonium phosphate (DAP) price
increased by 14% compared with last year to $248 per tonne.
Phosphates net sales were $805.8 million for the fourth quarter, 1%
lower than the fourth quarter last year. Phosphates' fourth quarter gross margin
was $39.9 million or 5.0% of net sales, compared with $96.5 million or 11.9% of
net sales for the same period a year ago. Operating losses were $268.8 million,
including the Phosphates restructuring charge of $287.6 million, compared with
operating earnings of $68.8 million for the same period a year ago.
The cost of producing DAP increased 10% in the fourth quarter compared
with the prior year period mainly because of higher energy-based ammonia and
sulfur prices. Operating costs were also higher on a per tonne basis as Mosaic
operated its mining and production facilities at lower rates during this period.
OFFSHORE
Mosaic's Offshore business segment's net sales were $236.8 million for
the fourth quarter, an increase of 8% compared with last year. Offshore's fourth
quarter operating earnings were $10.5 million compared to a loss of $5.8 million
for the comparable period last year. The increase in fourth quarter operating
earnings was the result of a Brazilian VAT credit. Offshore results continued to
be negatively affected by poor farm economics in Brazil.
NITROGEN
Mosaic's Nitrogen business segment's fourth quarter operating earnings
were $4.7 million compared to $3.5 million for the fourth quarter a year ago.
EQUITY EARNINGS
Total equity earnings in non-consolidated subsidiaries were $19.4
million for the quarter, an increase of $8.1 million compared with last year's
results for the same period. Mosaic's equity earnings from its investment in
Saskferco were $10.7 million for the fourth quarter compared with $6.8 million a
year ago. Mosaic's equity earnings from Fosfertil were $3.3 million for the
fourth quarter compared to $4.7 million last year.
FISCAL 2006
Net sales increased 21% to $5.3 billion for fiscal 2006 mainly as a
result of the business combination that formed Mosaic in October 2004 along with
higher prices for phosphates and potash products. Gross margin also increased
$111.9 million to $637.4 million, which was 12% of net sales. Higher prices were
offset by increased costs of production. Operating earnings were $105.8 million
in fiscal 2006, including the $287.6 million Phosphates restructuring charge,
compared with $318.5 million in fiscal 2005. There was a foreign currency
transaction loss of $100.6 million in fiscal 2006, or $0.15 per share, compared
with a gain of $13.9 million a year ago, primarily as a result of a strong
Canadian dollar and large U.S. dollar-denominated inter-company receivables held
by Mosaic's Canadian affiliates. The equity in net earnings of non-consolidated
companies was $48.4 million, a decline of $7.5 million compared with the prior
year due to weaker results from Fosfertil. Dividends from non-consolidated
companies totaled $26.7 million in fiscal 2006.
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As of the end of fiscal 2006, Mosaic had surpassed its synergy benefits
goal from the business combination between IMC Global and Cargill's Crop
Nutrition businesses of $145 million calculated on an annual run-rate basis.
Synergy benefits include cost reduction and cost avoidance initiatives,
production volume enhancement efforts, opportunity savings, capital spending
avoidance and other classifications. In fiscal 2006, the benefits of the
synergies have been significantly offset by higher costs for energy and other
production inputs, wages and benefits, water treatment, raw material inputs,
general inflation and one-time costs to achieve them.
OBSERVATIONS AND OUTLOOK
"We are encouraged by more attractive industry fundamentals in our
Phosphates and Potash businesses as well as the expected benefits of our
Phosphates restructuring, which should result in lower costs of production and
higher margins in fiscal 2007," Corrigan said. "We expect Potash volumes to
recover during the second half of calendar 2006 now that contracts have been
signed between Canpotex and Sinofert, a key Chinese customer. We believe that
inventory levels throughout the potash distribution pipeline, including China
and India, have been sharply reduced."
For Phosphates, fiscal 2007 sales volumes are expected to range from
9.5 to 9.9 million tonnes, including 0.9 millions tonnes of feed phosphates.
Phosphates margins are expected to benefit from cost declines due to
expectations of lower raw material prices. Potash sales volumes for fiscal 2007
are anticipated to be between 7.7 and 8.1 million tonnes taking into account
resumed shipments by Canpotex to China in August 2006.
In July, Mosaic's single super phosphate (SSP) plant in Quebracho,
Argentina began production and is expected to produce up to 240,000 tonnes of
granular SSP annually.
Mosaic anticipates capital spending ranging between $250 million and
$290 million during fiscal 2007 compared with $389.5 million in fiscal 2006.
This reduced level of capital spending is primarily a result of the Phosphates
restructuring.
Mosaic expects to record a tax benefit of $45 to $50 million in the
first quarter of fiscal 2007 as a result of a reduction in future Canadian
Federal tax rates, which leads to a reduction in deferred tax liabilities. This
is similar in nature to the benefit recorded in the fourth quarter from a
reduction in the Saskatchewan Provincial tax rate. As they are implemented,
these tax rate changes will result in a lower effective tax rate for Mosaic.
ABOUT THE MOSAIC COMPANY
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 www.mosaicco.com.
Mosaic will conduct a conference call on Tuesday, August 1, 2006 to
discuss fiscal 2006 fourth quarter earnings results. The call will begin at
11:00 a.m. Eastern Daylight Time (10:00 a.m. Central Daylight Time) and will
last no longer than 60 minutes.
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Conference Call Phone Number: 800-591-6944
International Phone Call-In Number: 617-614-4910
Participant Passcode: 70958587
Additionally, a Webcast of the conference call, both live and as a
replay, can be accessed by visiting Mosaic's web site at
http://www.mosaicco.com/investors. This Webcast will be available up to one year
from the time of the earnings call.
A replay of the audio call will be available through 6:00 p.m. Eastern
Daylight Time on Tuesday, August 15, 2006. Please call 888-286-8010 to access
the replay and use passcode 33138336.
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, 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.
###
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CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
THE MOSAIC COMPANY (unaudited)
- ----------------------------------------------------------------------------------------------------
Three months ended Twelve months ended
May 31 May 31
----------------------- -----------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net sales $ 1,331.5 $ 1,449.7 $ 5,305.8 $ 4,396.7
Cost of goods sold 1,165.3 1,204.1 4,668.4 3,871.2
---------- ---------- ---------- ----------
Gross margin 166.2 245.6 637.4 525.5
Selling, general and
administrative expenses 54.6 65.8 241.3 207.0
Restructuring and other charges 287.6 - 287.6 -
Other operating (income) expense 6.5 3.3 2.7 -
---------- ---------- ---------- ----------
Operating earnings (loss) (182.5) 176.5 105.8 318.5
Interest expense 41.1 43.7 166.5 120.6
Foreign currency transaction (gain) loss 34.1 (8.0) 100.6 (13.9)
Other (income) expense 3.8 0.5 (1.2) (3.1)
---------- ---------- ---------- ----------
Earnings (loss) from consolidated
companies before income taxes
and the cumulative effect of a change
in accounting principle (261.5) 140.3 (160.1) 214.9
Provision (benefit) for income taxes (61.2) 54.1 5.3 98.3
---------- ---------- ---------- ----------
Earnings (loss) from consolidated
companies before the cumulative effect
of a change in accounting principle (200.3) 86.2 (165.4) 116.6
Equity in net earnings of nonconsolidated
companies 19.4 11.3 48.4 55.9
Minority interests in net (earnings) loss
of consolidated companies - (3.4) (4.4) (4.9)
---------- ---------- ---------- ----------
Earnings (loss) before the cumulative
effect of a change in accounting principle (180.9) 94.1 (121.4) 167.6
Cumulative effect of a change in accounting
principle, net of tax - - - (2.0)
---------- ---------- ---------- ----------
Net earnings (loss) $ (180.9) $ 94.1 $ (121.4) $ 165.6
========== ========== ========== ==========
Diluted net earnings (loss) per share $ (0.48) $ 0.22 $ (0.35) $ 0.46
========== ========== ========== ==========
Diluted weighted average number of
shares outstanding 384.2 432.8 382.2 360.4
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CONSOLIDATED FINANCIAL HIGHLIGHTS
(dollars in millions)
THE MOSAIC COMPANY (unaudited)
- ----------------------------------------------------------------------------------------------------------------------
Three months ended Favorable/ Twelve months ended Favorable/
May 31 (Unfavorable) May 31 (Unfavorable)
------------------- -------------------- ------------------- --------------------
2006 2005 Amount % 2006 2005 Amount %
-------- -------- -------- -------- -------- -------- -------- --------
NET SALES:
Phosphates $ 805.8 $ 813.8 $ (8.0) (1)% $3,097.5 $2,312.5 $ 785.0 34%
Potash 328.3 423.7 (95.4) (23)% 1,155.9 869.4 286.5 33%
Nitrogen 52.2 (22.3) 74.5 (334)% 143.5 119.8 23.7 20%
Offshore 236.8 219.4 17.4 8% 1,238.9 1,228.9 10.0 1%
Corporate/Other (a) (91.6) 15.1 (106.7) (707)% (330.0) (133.9) (196.1) 146%
-------- -------- -------- -------- -------- -------- -------- --------
$1,331.5 $1,449.7 $ (118.2) (8)% $5,305.8 $4,396.7 $ 909.1 21%
======== ======== ======== ======== ======== ======== ======== ========
GROSS MARGIN:
Phosphates $ 39.9 $ 96.5 $ (56.6) (59)% $ 247.7 $ 162.5 $ 85.2 52%
Potash 100.1 125.7 (25.6) (20)% 351.6 246.1 105.5 43%
Nitrogen 6.4 4.5 1.9 42% 16.5 15.4 1.1 7%
Offshore 15.7 12.9 2.8 22% 44.9 99.4 (54.5) (55)%
Corporate/Other (a) 4.1 6.0 (1.9) (32)% (23.3) 2.1 (25.4) (1210)%
-------- -------- -------- -------- -------- -------- -------- --------
$ 166.2 $ 245.6 $ (79.4) (32)% $ 637.4 $ 525.5 $ 111.9 21%
======== ======== ======== ======== ======== ======== ======== ========
OPERATING EARNINGS (LOSS):
Phosphates $ (268.8) $ 68.8 $ (337.6) (491)% $ (139.3) $ 88.5 $ (227.8) (257)%
Potash 83.8 118.9 (35.1) (30)% 309.8 227.9 81.9 36%
Nitrogen 4.7 3.5 1.2 34% 11.2 10.9 0.3 3%
Offshore 10.5 (5.8) 16.3 (281)% (20.4) 23.0 (43.4) (189)%
Corporate/Other (a) (12.7) (8.9) (3.8) 43% (55.5) (31.8) (23.7) 75%
-------- -------- -------- -------- -------- -------- -------- --------
$ (182.5) $ 176.5 $ (359.0) (203)% $ 105.8 $ 318.5 $ (212.7) (67)%
======== ======== ======== ======== ======== ======== ======== ========
(a) Includes elimination of intercompany sales.
KEY STATISTICS
THE MOSAIC COMPANY (unaudited)
- -----------------------------------------------------------------------------------------------------------------------
Three months ended Favorable/ Twelve months ended Favorable/
May 31 (Unfavorable) May 31 (Unfavorable)
------------------- -------------------- ------------------- --------------------
2006 2005 Amount % 2006 2005 Amount %
-------- -------- -------- -------- -------- -------- -------- --------
Sales volumes
(000 metric tonnes) (a):
Phosphates (b) 2,782 3,431 (649) (19)% 10,567 9,191 1,376 15%
Potash 1,720 2,505 (785) (31)% 6,498 5,453 1,045 19%
Nitrogen 569 554 15 3% 1,484 1,644 (160) (10)%
Average price per
metric tonne:
DAP (c) $ 248 $ 218 $ 30 14% $ 245 $ 222 $ 23 10%
Potash (c) 141 135 6 4% 140 124 16 13%
Ammonia (d) 355 301 54 18% 343 303 40 13%
Sulfur (long ton) (d) 77 65 12 18% 74 66 8 12%
(a) Sales volumes include tonnes sold captively. Phosphates volumes represent
dry product tonnes, primarily DAP.
(b) Includes captive sales tonnes to Offshore.
(c) FOB plant/mine.
(d) Delivered Tampa
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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 (loss):
EBITDA and Adjusted EBITDA Calculation
- --------------------------------------------------------------------------------
Three months ended Twelve months ended
May 31 May 31
----------------------- -----------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
(dollars in millions) (dollars in millions)
Net earnings (loss) $ (180.9) $ 94.1 $ (121.4) $ 165.6
Interest expense, exclusive of amortization* 52.4 50.2 211.0 147.4
Income taxes (benefit) (61.2) 54.1 5.3 98.3
Depreciation, depletion & amortization 84.7 81.9 324.1 219.3
Amortization of debt refinancing and issuance costs 0.9 1.2 3.4 1.8
Amortization of fair market value adjustment of debt (12.2) (7.7) (47.9) (28.6)
Amortization of mark-to-market contracts (4.4) (12.4) (17.5) (13.9)
---------- ---------- ---------- ----------
EBITDA (120.7) 261.4 357.0 589.9
Restructuring and other charges 287.6 - 287.6 -
---------- ---------- ---------- ----------
Adjusted EBITDA $ 166.9 $ 261.4 $ 644.6 $ 589.9
========== ========== ========== ==========
* Interest expense is exclusive of amortization of debt financing fees and
amortization of fair market value adjustment of debt.
The Company has presented above EBITDA and Adjusted EBITDA. EBITDA and Adjusted
EBITDA are non-GAAP financial measures. 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 generally accepted accounting principles
("GAAP"). EBITDA and Adjusted EBITDA are not measures of financial performance
under U.S. 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 addition, Adjusted EBITDA, which we present above, excludes
restructuring and other charges related to the restructuring of our Phosphates
business. The Restructuring and other charges are not items that are generally
excluded from EBITDA. In evaluating these measures, investors should consider
that our methodology in calculating such measures may differ from that used by
other companies.
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EBITDA, or various adjusted measures of 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.
We believe that Adjusted EBITDA is useful to investors because, when presented
with EBITDA, it highlights the extent to which EBITDA in fiscal 2006 and our
fourth fiscal quarter was affected by our decision to restructure our Phosphates
business. EBITDA and Adjusted 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
- --------------------------------------------------------------------------------
May 31 May 31
2006 2005
----------- -----------
(dollars in (dollars in
billions) billions)
Numerator
Total debt $ 2.6 $ 2.7
Denominator
Book value of equity $ 3.5 $ 3.2
Total debt 2.6 2.7
----------- -----------
Capitalization $ 6.1 $ 5.9
=========== ===========
Total debt to total capitalization 42.6% 45.8%
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