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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission file number 1-9164
Phosphate Resource Partners Limited Partnership
(Exact name of Registrant as specified in its charter)
Delaware 72-1067072
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 South Saunders Road
Lake Forest, Illinois 60045
(847) 739-1200
(Address and telephone number, including area code, of registrant's
principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X . No .
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying interim condensed financial statements of
Phosphate Resource Partners Limited Partnership (PLP) do not
include all disclosures normally provided in annual financial
statements. These financial statements, which should be read in
conjunction with the financial statements contained in PLP's
Annual Report on Form 10-K for the year ended December 31, 1999,
are unaudited but include all adjustments which the management
of IMC Global Inc. (IMC), the managing general partner of PLP,
considers necessary for a fair presentation. These adjustments
consist of normal recurring accruals. Interim results are not
necessarily indicative of the results expected for the full
year.
<TABLE>
CONDENSED STATEMENT OF OPERATIONS
(In millions, except per unit amounts)
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 117.0 $ 134.8 $ 354.4 $ 471.2
Cost of goods sold 108.7 111.1 309.9 365.1
------- ------- ------- -------
Gross margins 8.3 23.7 44.5 106.1
Selling, general and
administrative expenses 6.7 6.8 21.8 21.0
Restructuring activity 0.5 - (0.5) -
------- ------- ------- -------
Operating earnings 1.1 16.9 23.2 85.1
Interest expense 10.5 10.0 30.7 29.7
Other (income) expense, net 0.1 (0.7) (0.3) (3.4)
------- ------- ------- -------
Earnings (loss) before cumulative
effect of a change in
accounting principal (9.5) 7.6 (7.2) 58.8
Loss from discontinued
operations - (3.1) - (2.7)
------- ------- ------- -------
Earnings (loss) from cumulative
effect of a change in
accounting principle (9.5) 4.5 (7.2) 56.1
Cumulative effect of a change
in accounting principle - - - (2.6)
------- ------- -------- -------
Earnings (loss) $ (9.5) $ 4.5 $ (7.2) $ 53.5
======= ======= ======= =======
Earnings (loss) per unit:
Earnings (loss) from continuing
operations before cumulative
effect of a change in
accounting principle $ (0.09) $ 0.07 $ (0.07) $ 0.57
Loss from discontinued
operations - (0.03) - (0.03)
Cumulative effect of a change
in accounting principle - - - (0.02)
------- ------- ------- -------
Earnings (loss) per unit $ (0.09) $ 0.04 $ (0.07) $ 0.52
======= ======= ======= =======
Average units outstanding 103.5 103.5 103.5 103.5
Distributions paid per publicly
held unit $ - $ 0.30 $ 0.09 $ 0.43
(See Notes to Condensed Financial Statements)
</TABLE>
<TABLE>
CONDENSED BALANCE SHEET
(In millions)
<CAPTION>
(Unaudited)
Assets September 30, 2000 December 31, 2000
-----------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ - $ 41.2
Receivables, net 3.1 23.8
Inventories, net 85.3 92.4
Other current assets - 0.3
------- -------
Total current assets 88.4 157.7
Property, plant and equipment, net 438.8 434.0
Other assets 21.6 20.1
------- -------
Total assets $ 548.8 $ 611.8
======= =======
Liabilities and Partners' Deficit
-----------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued
liabilities $ 88.6 $ 89.1
Short-term debt and current maturities
of long-term debt 4.3 4.3
------- -------
Total current liabilities 92.9 93.4
Long-term debt, less current maturities 501.6 543.0
Other noncurrent liabilities 198.1 202.8
Partners' deficit (243.8) (227.4)
------- -------
Total liabilities and partners' deficit $ 548.8 $ 611.8
======= =======
(See Notes to Condensed Financial Statements)
</TABLE>
<TABLE>
CONDENSED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
<CAPTION>
Nine months ended
September 30
2000 1999
-------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Earnings (loss) $ (7.2) $ 53.5
Adjustments to reconcile earnings (loss) to net
cash provided by operating activities:
Depreciation, depletion and amortization 17.1 19.8
Other charges and credits, net (5.8) (20.6)
Changes in:
Receivables 20.7 10.2
Inventories 7.1 20.5
Other current assets 0.3 0.6
Accounts payable and accrued liabilities (0.5) (6.3)
------ ------
Net cash provided by operating activities 31.7 77.7
------ ------
Cash Flows from Investing Activities
Capital expenditures (22.6) (41.8)
Proceeds from sale of investment - 12.8
Proceeds from sale of property, plant and
equipment 0.5 4.8
------ ------
Net cash used in investing activities (22.1) (24.2)
------ ------
Net cash provided before financing activities 9.6 53.5
------ ------
Cash Flows from Financing Activities
Cash distributions to unitholders (9.3) (44.5)
Payments of long-term debt, net (59.7) (17.2)
Proceeds from issuance of long-term debt 18.2 0.4
------ ------
Net cash used in financing activities (50.8) (61.3)
------ ------
Net change in cash and cash equivalents (41.2) (7.8)
Cash and cash equivalents - beginning of period 41.2 10.8
------ ------
Cash and cash equivalents - end of period $ - $ 3.0
====== ======
(See Notes to Condensed Financial Statements)
</TABLE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Dollars in millions, except per unit amounts)
1.Restructuring Activities
-------------------------
1999 Restructuring Charge
During the fourth quarter of 1999, PLP announced and began
implementing a rightsizing program (Rightsizing Program) which was
designed to simplify and focus PLP's core businesses. The key
components of the Rightsizing Program were: (i) the shutdown and
permanent closure of the Nichols and Payne Creek facilities of IMC
Phosphates Company (IMC Phosphates), formerly known as IMC-Agrico
Company, resulting from an optimization program that will reduce
rock and concentrate production costs through higher utilization
rates at the lowest-cost facilities; and (ii) headcount reductions.
In conjunction with the Rightsizing Program, PLP recorded a special
charge of $52.3 million, or $0.51 per unit, in the fourth quarter of
1999.
Activity related to accruals for the Rightsizing Program during the
period January 1, 2000 to September 30, 2000 was as follows:
<TABLE>
Accrual as of Accrual as of
January 1, 2000 Cash Paid September 30, 2000
--------------- --------- ------------------
<S> <C> <C> <C>
Non-employee exit costs:
Demolition and closure costs $ 18.5 $ 3.9 $ 14.6
Other 0.5 0.3 0.2
Employee headcount reductions:
Severance benefits 6.2 4.9 1.3
------ ------ ------
Total $ 25.2 $ 9.1 $ 16.1
====== ====== ======
</TABLE>
The timing and costs of the Rightsizing Program are generally on
schedule with the time and dollar estimates disclosed in the fourth
quarter of 1999.
1998 Restructuring Charge
During the fourth quarter of 1998, PLP developed and began execution
of a plan to improve profitability (Project Profit). Project Profit
was comprised of four major initiatives: (i) the combination of
certain activities within IMC's potash and phosphates business units
in an effort to realize certain operating and staff function
synergies; (ii) restructuring of the phosphate rock mining and
concentrated phosphate production/distribution operations and
processes in an effort to reduce costs; (iii) simplification of
current business activities by eliminating businesses not deemed
part of PLP's core competencies; and (iv) reduction of operational
and administrative headcount. In conjunction with Project Profit,
PLP recorded a special charge of $61.8 million, or $0.60 per unit,
in the fourth quarter of 1998.
Activity related to accruals for Project Profit during the period
January 1, 2000 to September 30, 2000 was as follows:
<TABLE>
Accrual as of Accrual as of
January 1, 2000 Cash Paid September 30, 2000
--------------- --------- ------------------
<S> <C> <C> <C>
Non-employee exit costs:
Demolition and closure costs $ 10.2 $ 4.5 $ 5.7
Idled leased transportation
equipment 3.7 1.5 2.2
Other 0.6 0.1 0.5
Employee headcount reductions:
Severance benefits 0.1 0.1 -
------ ------ ------
Total $ 14.6 $ 6.2 $ 8.4
====== ====== ======
</TABLE>
The timing and costs of Project Profit are generally on schedule
with the time and dollar estimates disclosed in the fourth quarter
of 1999.
As part of Project Profit, PLP had written off certain assets in
1998. However, in April and July 2000, certain of these assets were
sold to third parties. This activity was recorded in the Statement
of Operations as an adjustment to the restructuring charge
previously recognized for Project Profit.
2.Discontinued Operations
-----------------------
In the fourth quarter of 1999, PLP decided to discontinue its oil
and gas business which primarily consisted of its interest in a
multi-year oil and natural gas exploration program (Exploration
Program) with McMoRan Exploration Company (MMR). PLP sold its
interest in the Exploration Program for proceeds of $32.0 million.
The Statement of Operations has been restated for the applicable
1999 periods presented to report the operating results of the oil
and gas business as discontinued operations in accordance with
Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations."
3.Adoption of SOP 98-5
--------------------
In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position (SOP) 98-5, "Reporting on
the Costs of Start-Up Activities," which mandated that costs related
to start-up activities be expensed as incurred, effective January 1,
1999. Prior to the adoption of SOP 98-5, PLP capitalized its start-
up costs (i.e., pre-operating costs). PLP adopted the provisions of
SOP 98-5 in its financial statements beginning January 1, 1999 and,
accordingly, recorded a charge for the cumulative effect of an
accounting change of $2.6 million, or $0.02 per unit, in order to
expense start-up costs that had been previously capitalized.
4.Sale of Accounts Receivable
---------------------------
In September 2000, IMC entered into an accounts receivable
securitization facility (Securitization Facility) which expires on
September 28, 2001 unless extended, and in any event no later than
September 26, 2003. The Securitization Facility allows IMC and
certain of its subsidiaries, including IMC Phosphates, to sell
without recorse, on an on-going basis, certain of their trade accounts
receivable to a special purpose vehicle (SPV). The SPV in turn may
sell an interest in such receivables purchased from IMC and its
subsidiaries to a financial conduit for up to a $100.0 million net
investment. The proceeds received by the SPV from the financial
conduit are used to pay IMC and its subsidiaries for a portion of the
purchase price of the receivables. The SPV pays for the remainder of
the purchase price of the receivables through the issuance of notes
payable to IMC, which bear interest at the Federal Runds Rate (6.5%
at September 30, 2000) and are due no later than one year after the
termination of the Securitization Facility.
At September 30, 2000 PLP's proportionate share of the outstanding
balance of IMC Phosphates trade accounts receivable sold to the
SPV was $28.5 million. Net proceeds of the sale of receivable by IMC
Phosphates reduced working capital loans payable to IMC.
5.Inventories
-----------
<TABLE>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Products (principally finished) $ 68.8 $ 74.1
Operating materials and supplies 17.1 19.7
------ ------
85.9 93.8
Less: Inventories allowances 0.6 1.4
------ ------
Inventories, net $ 85.3 $ 92.4
====== ======
</TABLE>
6.Recently Issued Accounting Guidance
-----------------------------------
In December 1999, the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition
in Financial Statements," which provides guidance regarding revenue
recognition. PLP is in the process of determining the impact, if
any, this new guidance will have on PLP's financial statements. The
effect of any change will be reflected by the cumulative effect of
an accounting change as of January 1, 2000. In May 2000, the SEC
deferred the required effective date for implementation of SAB No.
101 until the fourth quarter of 2000.
During the second quarter of 2000, the Financial Accounting
Standards Board issued Emerging Issues Task Force (EITF) 00-01,
"Investor Balance Sheet and Income Statement Display under the
Equity Method for Investments in Certain Partnerships and Other
Ventures," which will require PLP to account for its investment in
IMC Phosphates using the equity method rather than the current
proportional consolidation method. Under the equity method, PLP's
investment in IMC Phosphates will be displayed as a single amount in
PLP's Balance Sheet while PLP's share of IMC Phosphates earnings or
losses will be displayed as a single amount in PLP's Statement of
Operations. Under the current proportional consolidation method,
IMC Phosphates' assets and liabilities are displayed, on a
proportionate gross basis, in the PLP Balance Sheet and the related
results of operations are similarly displayed in PLP's Statement of
Operations. PLP will adopt this change in accounting methodology in
the fourth quarter of 2000, as required by EITF 00-01, and will
restate prior periods' financial statements to reflect this new
accounting method.
Effective in the fourth quarter 2000, PLP will adopt the provisions
of EITF Issue No. 00-10, "Accounting for Shipping and Handling Fees
and Costs," which provides guidance regarding classification of
shipping and handling costs in the Consolidated Statement of
Operations. PLP is in the process of determining the impact this
reclassification of costs will have on PLP's financial statements.
PLP believes that Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities,"
which PLP is required to adopt on January 1, 2001, will not have a
material impact on PLP's financial statements.
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations.(1)
Results of Operations
---------------------
Three months ended September 30, 2000 vs. three months ended
September 30, 1999
------------------------------------------------------------
Overview
PLP, through its joint venture interest in IMC Phosphates, is
one of the world's largest and lowest cost producers, marketers
and distributors of phosphate crop nutrients and animal feed
ingredients, with operations in central Florida and on the
Mississippi River in Louisiana. IMC Phosphates is 41.5 percent
owned by PLP and 58.5 percent owned by IMC. The dollar amounts
included throughout this discussion are shown at PLP's 41.5
percent ownership percentage, unless otherwise noted.
PLP's net sales of $117.0 million in the third quarter of 2000
decreased 13 percent from $134.8 million in the year-earlier
period. PLP's gross margins of $8.3 million in the third
quarter of 2000 represented a 65 percent decrease from gross
margins of $23.7 million in the third quarter of 1999. The loss
from continuing operations for the third quarter of 2000 was
$9.5 million, or $0.09 per unit. Earnings from continuing
operations for the third quarter of 1999 were $7.6 million, or
$0.07 per unit. Earnings for the third quarter of 1999 of $4.5
million, or $0.04 per unit, included a loss from discontinued
operations of $3.1 million, or $0.03 per unit.
IMC Phosphates Company
IMC Phosphates' net sales for the third quarter of 2000
declined 13 percent to $117.0 million compared to $134.8
million for the same period last year largely as a result of
lower average sales realizations and lower volumes. Lower
average concentrate sales prices, driven by decreased average
diammonium phosphate (DAP) realizations, reduced sales by $13.4
million. Average DAP prices fell 14 percent to $134 per short
ton in the third quarter of 2000 from $156 per short ton in the
third quarter of 1999. Concentrated phosphates domestic sales
volumes, primarily DAP, rose 36 percent in the third quarter of
2000 while export shipments fell 20 percent. Overall,
decreased shipments of concentrated phosphates, primarily DAP,
unfavorably impacted net sales by $4.0 million.
Gross margins decreased 74 percent to $5.4 million for the
third quarter of 2000 compared to $20.8 million for the third
quarter of last year. This decrease was mainly the result of
the lower prices discussed above, higher idle plant costs from
temporary production cutbacks and increased ammonia and natural
gas costs, partially offset by savings from cost reduction
programs of approximately $6.5 million and lower sulphur costs.
Demand for phosphate products remained depressed during the
third quarter of 2000 and IMC Phosphates responded with the
curtailment of full operating capacity to stabilize phosphate
inventories. IMC Phosphates balanced phosphate rock inventory
with demand by suspending production throughout all phosphate
mining operations for an approximate two-week period during the
third quarter of 2000. Additionally, IMC Phosphates curtailed
phosphate fertilizer production at its Louisiana facilities for
approximately two months in the third quarter of 2000; however,
partial production resumed in September 2000 to fulfill
customer requirements.
Nine months ended September 30, 2000 vs. nine months ended
September 30, 1999
----------------------------------------------------------------
Overview
Net sales for the first nine months of 2000 of $354.4 million
decreased 25 percent from $471.2 million in the year-earlier
period. PLP's gross margins of $44.5 million for the first
nine months of 2000 represented a 58 percent decrease from
gross margins of $106.1 million in the first nine months of
1999. The loss from continuing operations for the first nine
months of 2000 was $7.2 million, or $0.07 per unit. Earnings
from continuing operations, before the cumulative effect of a
change in accounting principle, for the first nine months of
1999 were $58.8 million, or $0.57 per unit. Earnings for the
first nine months of 1999 of $53.5 million, or $0.52 per unit,
included a loss from discontinued operations of $2.7 million,
or $0.03 per unit, and a cumulative effect of a change in
accounting principle of $2.6 million, or $0.02 per unit.
IMC Phosphates Company
IMC Phosphates' net sales for the first nine months of 2000
declined 25 percent to $354.4 million compared to $471.2
million for the same period last year largely as a result of
lower phosphate average sales realizations and volumes. Lower
average concentrate sales prices, driven by decreased average
DAP realizations, reduced sales by $67.0 million. Average DAP
prices fell 21 percent to $132 per short ton in the first nine
months of 2000 from $167 per short ton in the first nine months
of 1999. Concentrated phosphates export sales volumes,
primarily DAP, fell 27 percent for the first nine months of
2000 while domestic shipments rose 13 percent. Overall,
decreased shipments of concentrated phosphates unfavorably
impacted net sales by an additional $45.7 million. Also, sales
of uranium and urea decreased $8.4 million as a result of
exiting these two businesses as part of Project Profit.
Gross margins decreased 63 percent to $35.9 million for the
first nine months of 2000 compared to $97.5 million for the
first nine months of the prior year. This decrease was mainly
the result of the lower prices and volumes discussed above,
partially offset by savings from cost reduction programs of
approximately $22.4 million.
Other (Income) Expense, Net
Other (income) expense, net for the first nine months of 2000
decreased $3.1 million from the prior year primarily as a result
of the absence of a gain on the sale of an IMC Phosphates
investment, which occurred in the first quarter of 1999.
Restructuring Activities
------------------------
The timing and costs of the Rightsizing Program and Project
Profit are generally on schedule with the time and dollar
estimates disclosed in the fourth quarter of 1999. See Note 1
of Notes to Condensed Financial Statements.
Sale of Accounts Receivables
----------------------------
In September 2000, IMC entered into a Securitization Facility which
expires on September 28, 2001, unless extended, and in any event no
later than September 26, 2003. The Securitization Facility allows
IMC and certain of its subsidiaries, including IMC Phosphates, to
sell without recorse, on an on-going basis, certain of their trade
accounts receivable to a SPV. The SPV in turn may sell an interest
in such receivables purchased from IMC and its subsidiaries to a
financial conduit for up to a $100.0 million net investment. The
proceeds received by the SPV from the financial conduit are used to
pay IMC and its subsidiaries for a portion of the purchase price of
the receivables. The SPV pays for the remainder of the purchase
price of the receivables through the issuance of notes payable to
IMC, which bear interest at the Federal Funds Rate (6.5% at
September 30, 2000) and are due no later than one year after the
termination of the Securitization Facility.
At September 30, 2000 PLP's proporationate share of the
outstanding balance of IMC Phosphates trade accounts receivable
sold to the SPV was $28.5 million. Net proceeds of the sale of
receivables by IMC Phosphates reduced working capital loans
payable to IMC.
Capital Resources and Liquidity
-------------------------------
PLP generates cash through its joint venture operations in IMC
Phosphates and has sufficient borrowing capacity to meet its
operating and discretionary spending requirements. Net cash
provided by operating activities totaled $31.7 million for the
first nine months of 2000 versus net cash provided by operating
activities of $77.7 million for the same period in 1999. The
reduction in cash provided by operating activities was
primarily caused by lower earnings, partially offset by cash
proceeds from the accounts receivable securitization.
Net cash used in investing activities for the first nine months
of 2000 decreased to $22.1 million from $24.2 million in the
same period one year ago. This decline was mainly the result
of a reduction in capital expenditures by IMC Phosphates and
the absence of capital expenditures for oil and gas activities
as a result of the sale of the Exploration Program in the
fourth quarter of 1999, partially offset by the absence of
proceeds from the sale of PLP's investment in MMR stock.
Net cash used in financing activities for the nine-month period
ending September 30, 2000 was $50.8 million compared to $61.3
million for the same period in 1999. This decrease was
primarily attributable to a reduction in cash distributions to
unitholders and an increase in net debt payments as a
consequence of a reduction in working capital loans payable to
IMC.
Item 3.Market Risk.
PLP is exposed to the impact of interest rate changes on
borrowings and the impact of fluctuations in the purchase price
of natural gas, ammonia and sulphur consumed in operations, as
well as changes in the fair value of its financial instruments.
PLP periodically enters into natural gas forward purchase
contracts with maturities of typically one year or less in
order to reduce the effects of changing raw material prices,
but not for trading purposes. At September 30, 2000, PLP's
exposure to these market risk factors was not significant and
had not materially changed from December 31, 1999.
Part II.OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description
----------- --------------------------------------------
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter
ended September 30, 2000.
* * * * * * * * * * * * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PHOSPHATE RESOURCE PARTNERS
LIMITED PARTNERSHIP
By: IMC GLOBAL INC.,
Its Administrative Managing
General Partner
By: /s/ Anne M. Scavone
------------------------------
Anne M. Scavone
Vice President and Controller
(on behalf of the Registrant
and as Chief Accounting Officer)
Date: November 9, 2000
PHOSPHATE RESOURCE PARTNERS LIMITED PARTNERSHIP
Exhibit Index
Filed with
Exhibit Incorporated Electronic
No. Description Herein by Reference to Submission
------- ----------------------------- ---------------------- ----------
27 PLP Financial Data Schedule X
---------------------------
(1)All statements, other than statements of historical fact, appearing
under Part I, Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995.
Factors that could cause actual results to differ materially from
those expressed or implied by the forward-looking statements
include, but are not limited to, the following: general business
and economic conditions and governmental policies affecting the
agricultural industry in localities where PLP or its customers
operate; weather conditions; the impact of competitive products;
pressure on prices realized by PLP for its products; constraints on
supplies of raw materials used in manufacturing certain of PLP's
products; capacity constraints limiting the production of certain
products; difficulties or delays in the development, production,
testing and marketing of products; difficulties or delays in
receiving required governmental and regulatory approvals; market
acceptance issues, including the failure of products to generate
anticipated sales levels; difficulties in integrating acquired
businesses and in realizing related cost savings and other
benefits; the effects of and change in trade, monetary,
environmental and fiscal policies, laws and regulations; foreign
exchange rates and fluctuations in those rates; the costs and
effects of legal proceedings, including environmental, and
administrative proceedings involving PLP; and other risk factors
reported from time to time in PLP's Securities and Exchange
Commission reports.
