PHOS Phosphate Holdings Inc (CE)

Phosphate Holdings, Inc. (OTC: PHOS), today reported second quarter of 2012 net income of $0.9 million, or $0.10 per diluted share of common stock, compared to a loss of $1.8 million, or $0.21 per diluted share of common stock for the same period in 2011. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter of 2012 were $5.1 million, compared to EBITDA of $2.0 million for the second quarter of 2011.

Total net sales for the second quarter of 2012 were $78.5 million, a 2.4 percent decrease from total net sales of $80.5 million for the second quarter of 2011. The average sales price per short ton of DAP during the second quarter of 2012 was $482.42, an 11 percent decrease from the prior-year period average sales price of $542.54. During the second quarter, the Company sold 161,045 tons of DAP, with 106,364 tons moving into export markets and 54,681 tons moving into domestic markets. This compares with 146,213 tons of DAP sold in the second quarter of 2011. The Company had operating income of $2.0 million for the second quarter of 2012, compared to an operating loss of $2.6 million for the prior-year period.

As of June 30, 2012, the Company had a cash balance of approximately $1.2 million and borrowings under our credit agreement of $14.8 million. During the second quarter, the Company expended $1.9 million on capital expenditures. The Company continues to aggressively manage its liquidity internally in the absence of an external committed source of additional liquidity. Assuming no further substantial interruptions to normal operations, the Company believes that its operating results should be adequate to meet the Company’s operating and capital needs during 2012 without the need for additional liquidity facilities or arrangements.

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 and the continuation of our sales and other arrangements with such customer through the scheduled expiration of such arrangements, (viii) our ability to negotiate on attractive terms a longer-term phosphate rock supply agreement with our sole provider of phosphate rock, expiring on December 31, 2012, (ix) foreign government agricultural policies (in particular, the policies of the governments of India and China), (x) the relative unpredictability of international and local economic conditions, (xi) international trade risks, (xii) political unrest in Northern Africa and possible implications on phosphate rock availability (xiii) the relative value of the U.S. dollar, (xiv) regulations regarding the environment and the sale and transportation of fertilizer products, (xv) our potential inability to obtain or maintain required permits and governmental approvals or to meet financial assurance requirements, (xvi) loss of key members of management, and (xvii) 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 SUBSIDIARIESConsolidated Balance Sheets(In thousands, except share data)(Unaudited)

  June 30, December 31, Assets 2012 2011 Current assets: Cash and cash equivalents $ 1,219 3,024 Trade accounts receivable 6,467 14,871 Other receivables 599 57 Inventories 25,736 25,075 Prepaid expenses and other 10,926 13,338 Deferred income taxes 719 841 Total current assets 45,666 57,206 Freight deposits — 3,947 Restricted investments held in trust, at fair value 6,975 6,318 Property, plant and equipment, net 62,628 63,650 Other 448 477 Total assets $ 115,717 131,598 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 2,587 3,376 Accrued expenses 18,568 32,313 Short-term financing obligations 1,545 2,965 Current maturities of long-term debt 1,875 — Revolving credit agreement — 15,000 Total current liabilities 24,575 53,654 Long-term debt 12,969 — Asset retirement obligations 18,292 17,627 Deferred income taxes 1,372 1,607 Total liabilities 57,208 72,888 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 22,765 22,966 Total stockholders’ equity 58,509 58,710 Total liabilities and stockholders’ equity $ 115,717 131,598

         

PHOSPHATE HOLDINGS, INC. AND SUBSIDIARIESConsolidated Statements of Operations(In thousands, except per share data)(Unaudited)

  Three months ended Six months ended June 30, June 30, 2012   2011 2012   2011 Net sales: DAP $ 77,692 79,327 169,585 155,328 Other 821   1,129   1,502   2,719   Total net sales 78,513 80,456 171,087 158,047 Cost of sales 74,628   80,990   167,355   156,100   Gross profit (loss) 3,885 (534 ) 3,732 1,947 Selling, general and administrative 1,835 1,914 3,488 4,342 Environmental remediation 22   159   128   159   Operating income (loss) 2,028 (2,607 ) 116 (2,554 ) Other income (expense): Interest expense (395 ) (254 ) (691 ) (497 ) Other, net (233 ) 15   261   230   Total other income (expense) (628 ) (239 ) (430 ) (267 ) Income (loss) before income taxes 1,400 (2,846 ) (314 ) (2,821 ) Income tax expense (benefit) 543   (1,081 ) (113 ) (1,072 ) Net income (loss) $ 857   (1,765 ) (201 ) (1,749 ) Earnings (loss) per share – basic and diluted $ 0.10 (0.21 ) (0.02 ) (0.21 )

Weighted average common shares outstanding – basic and diluted

8,411 8,411 8,411 8,411

           

PHOSPHATE HOLDINGS, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows(In thousands)(Unaudited)

  Six months ended June 30, 2012   2011 Cash flows from operating activities: Net loss $ (201 ) (1,749 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation of property, plant and equipment 4,466 5,262 Amortization of prepaid maintenance turnaround costs 2,173 2,440 Accretion of asset retirement obligation 665 418 Deferred loan cost amortization 29 45 Unrealized restricted investment gain (257 ) (225 ) Share-based compensation (149 ) 577 Deferred income taxes (113 ) (1,072 ) Changes in operating assets and liabilities: Trade and other accounts receivable 7,862 5,537 Inventories (661 ) 217 Prepaid expenses and other 239 (2,254 ) Freight deposits 3,947 (362 ) Accounts payable and accrued expenses (14,385 ) (1,365 ) Net cash provided by operating activities 3,615   7,469   Cash flows from investing activities: Purchases of restricted investments held in trust (400 ) (400 ) Purchases of property, plant and equipment (3,444 ) (4,926 ) Net cash used in investing activities (3,844 ) (5,326 ) Cash flows from financing activities: Net proceeds on revolving credit agreement — 4,500 Proceeds from financing obligations 379 — Payments on financing obligations (1,799 ) (1,894 ) Payments on long-term debt (156 ) —   Net cash provided by (used in) financing activities (1,576 ) 2,606   Net increase (decrease) in cash and cash equivalents (1,805 ) 4,749 Cash and cash equivalents at beginning of period 3,024   2,261   Cash and cash equivalents at end of period $ 1,219   7,010   Supplemental disclosure of non-cash transaction: Revolving credit agreement converted to long-term debt $ 15,000 —

             

PHOSPHATE HOLDINGS, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows(In thousands)(Unaudited)

  Three months ended June 30, 2012   2011 Cash flows from operating activities: Net income (loss) $ 857 (1,765 )

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

Depreciation of property, plant and equipment 2,223 3,135 Amortization of prepaid maintenance turnaround costs 778 1,195 Accretion of asset retirement obligation 331 243 Deferred loan cost amortization 15 18 Unrealized restricted investment (gain) loss 233 (15 ) Share-based compensation (164 ) (71 ) Deferred income taxes 543 (1,081 ) Changes in operating assets and liabilities: Trade and other accounts receivable 3,934 373 Inventories 1,505 2,469 Prepaid expenses and other 740 (2,516 ) Freight deposits 1,580 347 Accounts payable and accrued expenses (12,113 ) (4,523 ) Net cash provided by (used in) operating activities 462   (2,191 ) Cash flows from investing activities: Purchases of restricted investments held in trust (200 ) (200 ) Purchases of property, plant and equipment (1,864 ) (3,431 ) Net cash used in investing activities (2,064 ) (3,631 ) Cash flows from financing activities: Net proceeds on revolving credit agreement 2,000 8,500 Payments on financing obligations (921 ) (950 ) Payments on long-term debt (156 ) —   Net cash provided by financing activities 923   7,550   Net increase (decrease) in cash and cash equivalents (679 ) 1,728 Cash and cash equivalents at beginning of period 1,898   5,282   Cash and cash equivalents at end of period $ 1,219   7,010   Supplemental disclosure of non-cash transaction: Revolving credit agreement converted to long-term debt $ 15,000 —  

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

June 30,

Six Months Ended

June 30,

2012   2011 2012   2011 Net Income (loss) $ 857 (1,765 ) (201 ) (1,749 ) Interest expense 395 254 691 497 Income tax expense (benefit) 543 (1,081 ) (113 ) (1,072 ) Depreciation, amortization and accretion 3,332 4,573   7,304   8,120   EBITDA

$

5,127 1,981  

 

7,681  

 

5,796