PHOS Phosphate Holdings Inc (CE)

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