美盛公司 (MOS) 2002 Q4 法說會逐字稿

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Good morning. And welcome to the IMC earnings call. All participants will be in a listen-only mode until the question-and-answer session. At the request of IMC Global, today's conference call is being recorded. If there are any objections, you may disconnect at this time. I would now like to introduce today's speaker, Mr. David Pritchard, sir, you may begin when ready.

Dave Prichard Thank you, operator. And good morning to everyone. We're pleased to have you with us this morning. I'm Dave Pritchard, Vice President of Investor Relations for IMC Global. I'm your moderator for this morning's conference call regarding our fourth quarter and full year results issued this morning.

I'm joined today by Doug Pertz, Chairman and Chief Executive Officer; Reid Porter, Executive Vice President and Chief Financial Officer; and Bob Bowless, Vice President and Controller.

If you haven't received or seen our results, press release and tables to date this morning, you can call my assistant, Vicki Bunker at 847-739-1817, and the materials will be sent to you right away by e-mail or fax.

The information is also available on first call and the IMC Global Website at www.IMCMCglobal.com.

Finally, the conference call, as usual, will be accessible on a replay format through Friday evening, February 7, and that phone number is 402-220-9797. Or as an audio Web cast accessible again through IMC Global's Website.

As is our custom, we plan some opening comments before turning to your questions.

First, Reid Porter who will discuss our financial results for the quarter, he will be followed by Doug Pertz, who will discuss operating highlights, key corporate developments, and the overall outlook.

As a reminder, this conference call will contain forward-looking statements that involve risks and uncertainties. Those statements are based on current expectations and actual results may differ materially. At this time, I am pleased to turn the call over to our Executive Vice President and Chief Financial Officer, Reid Porter. Reid?

Thanks, Dave. And good morning, everyone. Earlier today IMC Global reported a loss from continuing operations of 8.4 million, or 7 cents per share for the fourth quarter of 2002. Which was in line with company expectations. This compared to a loss of 13.9 million, or 12 cents per share for the same period last year. The earnings improvement versus the prior year was primarily in our phosphate business as higher GAAP prices and lower phosphate rock production costs more than offset the negative impact of increased raw material input costs.

Fourth quarter revenue of 481 million, fell 9% compared to 2001 due to reduced phosphate sales volume and lower potash prices, partially offset by higher phosphate prices. IMC also reported a loss from discontinued operations of 42 million, or 37 cents per share, predominantly for a charge related to a reduced proceeds estimate on the disposal of the remaining IMC chemical assets. Including this loss, the company reported a net loss of 51 million, or 44 cents per share for the fourth quarter of 2002. Turning to the full year 2002 earnings from continuing operations were 11.5 million, or 10 cents per share. This compares to a loss from continuing operations of 27.9 million, or 24 cents per share in 2001.

2002 gross margins of 263 million and operating earnings of 182 million increased 37% and 90% respectively versus the prior year. Interest expense rose 14% to 174 million as a result of the debt financing in 2001. Our effective tax rate was 32% in 2002.

On a full year basis including a loss from discontinued operations of 96 million, or 84 cents a share, which, again, reflects reduced proceeds estimates for IMC chemicals, results were a net loss of 85 million, or 75 cents per diluted share.

In reviewing our results, I'd like to first cover our business segments, then discuss our consolidated income statement, and conclude with comments on our balance sheet and cash flow. IMC's PhosFeed's fourth quarter net sales of 329 million decreased 11% compared with last year, as reduced sales volumes more than offset higher prices. Total concentrated phosphate shipments of 1.5 million short tons were 20% below the prior year level of 1.9 million short tons. Domestic shipments fell 19% as unfavorable weather conditions and delayed orders from stagnant price expectations contributed to sluggish demands. A 21% reduction in export volumes was due primarily to lower Chinese imports versus 2001 when orders accelerated rapidly upon China's admittance to the World Trade Organization. IMC'c PhosFeed 's rganization. The average price realization for GAAP of $133 per short ton improved 10%, or $10 versus the near bottom of the cycle pricing of a year ago. Fourth quarter gross margins of 15 million increased 5 fold from 3 million a year ago. Significantly improved pricing, favorable product mix and lower idle rock mine costs more than offset increased raw material costs. Purchased ammonia prices averaged 149 per short ton versus $120 per ton last year. An increase of 24%. In addition, sulfur prices averaged $66 per long ton, about double the $34 per long ton price in the fourth quarter of 2001. For the full year 2002, PhosFeed net sales improved 7% to 1.338 billion, primarily from higher phosphate prices-a more than 8 fold increase in gross margins to 78.5 million was principally due to higher phosphate prices and reduced idle plant and rock mine costs, partially offset by increased phosphate operating costs. Phosphate's shipments in 2002 improved 3% to 6.2 million short tons as export and domestic volumes both increased slightly.

Turning to our other business segment, IMC Potash reported net sales of 173 million and gross margins of 41 million in the fourth quarter. Sales volumes of 1.7 million short tons were essentially unchanged versus last year. Potash prices at $74 per short ton fell $2 per ton from last year's level. While potash pricing was lower versus last year's fourth quarter, both domestic and export price realizations improved sequentially from the third quarter. Potash gross margins for the quarter declined 9% from the prior year primarily due to the lower prices. IMC took 12 mine week shutdowns in the quarter to continue efforts to balance supply with demand. For the full year, IMC Potash net sales of 805.9 million were virtually unchanged from 811 million in 2001. Sales volume rose 3% to 7.9 million short tons while the average price per short ton was $74 was 4% below last year. Gross margins fell 3% to 200 million as improved production costs per ton were more than offset by the price decline. IMC Potash implemented more than 40 mine week shutdowns in 2002, about equal to the prior year level.

Now we'll go into greater detail on both the fourth quarter performance and the outlook for both our PhosFeed and potash businesses.

I would now like to comment on our consolidated results in various corporate items. Net sales for the fourth quarter were 481 million, and gross margins were 52 million. We generated operating earnings of 29 million, an improvement of 30% from last year's level. SG&A expense increased versus last year primarily as the result of a favorable adjustment in 2001 for disability and workmen's comp expense. Interest expense for the quarter was 43 million, a decrease of about 2 million when compared to last year. Other income and expense which netted to expense of 3.2 million primarily reflected the non-cash impact of unfavorable foreign exchange translation and debt fee amortization.

Other income and expense benefited from the inclusion of IMC's share of earnings in Dave Prichard Sulfur Services, the sulfur transportation and storage joint venture that was established in June of 2002.

Turning to discontinued operations, we continue to pursue the sale of the remaining parts of our IMC chemical business. Earlier this month, we announced the signing of a definitive agreement to sell our White River sodium mine and bicarb plant for approximately 21 million. We anticipate closing this transaction in early February. We are actively marketing our soda, ash and borun business, which is the only remaining business in discontinued operations. A revised estimate of gross proceeds from the sale resulted in the fourth quarter charge of 37 cents per share to earnings.

Turning to the balance sheet, working capital continued to be a key focus area. Net receivables were 39 million lower than prior year and continue to be well controlled. Inventories were up 57 million versus the fourth quarter of last year. The increase in inventory was in PhosFeed, primarily the result of higher phosphate rock inventory. We relied on one of our four Florida mines in February for a period of about three months to reduce rock inventory and generate cash. As disclosed in December, the company generated net proceeds of 125 million from the add-on offering of senior unsecured notes, the proceeds of which were used primarily to redeem our outstanding August 2003 senior notes this January. With the refinancing of these notes, the company has no scheduled debt maturity until 2005. With the fourth quarter back sliding in GAAP price and resulting reduced EBITDA, we have forecast that we may not comply with certain bank covenant ratios as they tighten in 2003. As a result, we are currently working on an amendment to our credit agreement with our agent bank which we expect to finalize in February.

Turning to cash flow, EBITDA from continuing operations was 69 million in the fourth quarter an improvement of 16% versus the same period last year. For the year, EBITDA was 348 million, up 32% versus the prior year. Net capital expenditures at 140 million for the year were up slightly from last year, but below 2002 depreciation of 173 million.

I'd now like to turn the discussion over to Doug. Doug?

Thanks, Reid. And good morning.

Our fourth quarter results, while slightly improved over last year, were clearly a disappointing way to end 2002. A sharp reversal from our outlook last summer and from our first three quarters that were tracking well against expectations as the phosphate cycle recovery accelerated. As our early December earnings warning outlined, phosphate profit margins, which had improved dramatically in the third quarter, were significantly compressed in the fourth quarter from a combination of GAAP price erosion and then stagnation and then major spikes in sulfur and ammonia raw material costs. Despite this, IMC Global posted year over year double-digit improvements in gross margins, operating earnings and EBITDA cash flow in the fourth quarter. But, again, not nearly as dramatic as earlier expected. In our PhosFeed segment, gross margins of 15 million were much improved over 3 million in 2001, but down significantly from 31 million in the third quarter.

Overall, full year PhosFeed margins improved nearly seven fold -- excuse me, nearly eight fold. Despite the volume drop in the fourth quarter, Reid indicated our domestic phosphate market share in the year, as Reid indicated in the -- in his prior conversations about volumes, our market share in the phosphate business for the full year improved by 1% to over 32%. For the year, our 2002 average GAAP realization of $133 per short ton improved $10 from a near cycled bottom of $123 per short ton in 2001. But versus the average 2002 third quarter level, our average DAP price fell $12 per short ton in the quarter. At the end of the third quarter, the announcement of the restarting of idle DAP capacity, farmhand read row's rapid laboratory plant sale and the expected seasonal export softness combined to cause a $20 permission ton drop in Tampa export pricing, furthering softness also in domestic pricing at the same time. 30% of our Louisiana concentrated phosphate capacity continued to be idle in the quarter to balance supply and demand in the current market conditions. An operating rate which we expect to maintain throughout 2003. This amounts to an idle plant cost of about $10 million per year. In potash, slightly lower pricing was the primary factor for the 3% reduction in IMC's potash fourth quarter net sales and 9% decline in gross margins. While our fourth quarter potash selling prices were down slightly versus 2001, the good news is that our mid-September domestic price increase did hold with a little more than $2 per short ton improvement in MOP realizations. This is particularly encouraging as too early a price increase attempts in 2002 were unsuccessful. Reduced pricing in 2002 negatively impacted price potash margins significantly by approximately $30 million. We have additional price increases announced into this spring season and are encouraged especially given expectations for a good spring planting season that we're now on a path to recover some or all the price declines we experience in 2002.

Potash costs per ton improved by over 5% in the year helped by natural gas costs and productivity improvements. In 2003, we expect improved pricing, driven by already announced increases, coupled with increased domestic and export volumes to significantly increase our potash business performance.

Before I discuss our first quarter outlook and provide some general comments about 2003, I want to, again, reiterate some highlights and some gains and positive trends in 2002, despite the disappointment of our fourth quarter.

EBITDA from continuing -- EBITDA cash flow from continuing operations of $69 million in the quarter increased 16% from the prior year. And we registered an even larger improvement of 32% in the full year EBITDA of nearly 348 million. With respect to expenses and spending we believe that our high program and closer cost disciplining and containment isest. 2002 capital expenditures of $140 million were in line with our budget, and we plan on flat or only slightly increased capital expenditures in 2003. In line with our strong focus on cost reduction and managing what we can control, we're also announcing today significant new short-term and long-term cost reduction process improvement programs. I'll talk more about these initiatives in a few moments. But our direction on low costs should be clear.

Now let's turn to the outlook on the first quarter and some overall comments about 2003.

Lower GAAP pricing and higher raw material costs mean that 2003 is starting out to be a very challenging year for IMC. From a lower earnings base as indicated by our dissapointing fourth quarter and first quarter earnings indications. DAP export pricing was $148 per metric ton the first week of January. and thankfully, has recovered over $10 per metric ton in the last three weeks from this unrealistically low level. In addition, sulfur and ammonia costs have trended higher in January, and are up significantly year over year. We just settled first quarter sulfur contracts at a $4 long ton increase from fourth quarter contract pricing. However, we're actually pleased that we've held price increases at this level after earlier indications were that increases could be more than double that. Ammonia prices have increased to $170 per ton range, driven by higher seasonal natural gas prices and a loss of Venezuelan ammonia imports due to their continued strike.

First quarter earnings will also be negative impacted by two months of idle lot (ph) mine costs as we reduced rock production by about 30% over this period to reduce lot (ph) inventory and improve cash flow.

The drop-poff in fourth quarter DAP pricing by some $20 per ton from the third quarter to the beginning of this year meant starting 2003 at a lower level than industry consultants and we originally forecast.

But the encouraging news is that DAP export prices have jumped more than $10 per metric ton in the three weeks of January alone to about $160 after stagnation below 150 during much of November and December. As a result, the DAP export price today is lightly above year-ago levels, with U.S. producers apparently appearing to be comfortable well into March and strongly result to secure higher prices to offset the margin erosion from higher raw material costs.

Some industry observers predict DAP prices to move toward this year's high of -- last year's high of $170 per metric ton by early March. And at least into the mid-160 range in February. This is supported by expectations for a strong build into the U.S. spring season. PhosCam (ph)It is sold out for virtually the entire quarter and we have issued a new domestic price list with $10 per ton post in increases for both central Florida and river barge shipments. However, the strong DAP price rebound and the announced potash price increases will only have limited impact on first quarter net backs and earnings.

For example, phosphate exports are heavily scheduled for the first two months of this quarter and export price realizations lag published pricing. As a result, the impact of lower than expected pricing, coupled with seasonally high ammonia and natural gas costs and idle rock mine costs, our first quarter earnings could be in the range of a loss of 10 to 20 cents per share.

For the second quarter and balance of 2003, earnings should be helped by improved pricing, both the full impact of the $10 per ton increase already seen in January and the forecasted ad increases in the spring season and beyond.

We anticipate that raw material costs, especially ammonia and natural gas, should moderate throughout 2003 as the cold weather season subsides, Venezuela exports return to Normal, and war uncertainty is hopefully resolved.

Idle rock mine costs should be reduced in the second quarter and eliminated thereafter. In addition, costs will be increasingly reduced by our significant organizational restructuring and operational excellence programs we announced today.

The encouraging upward move in DAP pricing so far in 2003 is an indicator that global phosphate [inaudible] of the juries are, indeed, recovering, despite the set back of the fourth quarter. For example, IMC's 2002 average DAP price rose $9 per short ton versus the 2001 low of $128 per ton. And was even above the $134 short ton average in 2000. DAP export price averaged a $13 improvement last year versus 2001 and a $6 improvement compared with 2000.

World DAP demand and capacity rates edged higher last year after falling for two consecutive years. Industry consultants call for at least a $10 per ton improvement in average DAP prices in 2003- up from 2002 average DAP prices of $158 per metric ton, driven by higher demand and further increases in operating rates. After January's $10 per ton increase, current export prices are already at last year's average level.

Chinese DAP imports in 2003 are expected to match or slightly exceed the improved 2002 level, which was up about 1 million tons over 2001 low level of just 3.1 million tons.

While not necessarily expected, any improvement in DAP imports from India in 2003 would add an important positive driver to the market,since a poor monsoon season last year caused India's DAP imports to fall to low levels and year-end inventories appear to be inadequate. Supporting the continued phosphate recovery as well as expectations for better potash performance are much tighter global grain markets and generally higher commodity prices which historically have correlated with increased consumption of phosphate and potash as farmers plant more cres and seek better yields to increased application rates. These conditions also historically have closely correlated with stronger fertilizer industry stock prices.

The world grain stock to use ration of 22% is at a 25-year low, while U.S. corn and wheat ending stocks are at their lowest levels since the mid-1990s. Forecast calls for increased plantings of corn and wheat which are the most fertilized intensive crops. Given better commodity prices and the need to end below normal potash and phosphate levels in the soil, we think domestic demand for p & k (ph) should increase by at least 3%, especially since fourth quarter orders were somewhat sluggish as unfavorable weather hampered fall field activity and customers held off on orders as they perceived relatively flat pricing.

In support of our continued drive to lower costs, we announce today several significant new initiatives targeted at iinsuring that IMC is the industry's low-cost producer and that we maximize actions to counter current market conditions.

An organizational Re-structuresing program scheduled for implementation in the first quarter will reduce overhead head count levels and related costs. Annualized savings are expected to exceed $10 million with no lump sum re-structuring charge.

Our operational excellence program is a multi-year initiative that will result in increased efficiency, reduced costs and revenue enhancements achieved through core business process redesign and optimization. We completed the analysis and evaluation phases and are launching the multi-year implementation phase targeted on specific operating processes throughout the company.

Cost savings through 2005 for these combined programs is in excess of $80 million, and is on top of our already implemented cost savings initiatives. IMC reduced costs by over $8 million last year through continued improvement projects, clearly cementing continuous improvements as part of the IMC culture.. Sigma, workout (ph) and other lean process teams will continue to push future cost savings above this level and support additional overall productivity improvements.

Before closing, a word or two about our balance sheet. We are optimistic that we will finalize an agreement to amend our credit facilities and recalibrate certain financial covenants with our bank group during February. Our December add-on offering of senior notes generated $125 million in net proceeds and refinanced our August 2003 senior notes. As a result, we do not have any scheduled debt maturity until 2005.

In the meantime, management is highly focused on maximizing cash flow and reducing debt. We expect to close on the sodium bicarb assests sales shortlyfor nearly $21 million in cash and have at least one other non-core asset sale near at hand that will generate every a like amount amount of cash.

We continue to aggressively pursue the sale of remaining discontinued IMC chemical assests and our managing working capital and capital expenditure needs in a similarly aggressive manner.

With these comments, I'll turn it back to Dave for our question and answer session.

Dave Prichard Thank you very much, Doug, and Reid, and with that, we will now begin the Q-and-A session, and I will again ask that you try to limit yourself to one question in one part so everyone who wants to ask a question in the time remaining will have a fair chance to do so.

Operator, you may now begin the question-and-answer session, please.

Thank you, sir. If anyone would like to ask a question, please press star-1 on your touch-tone phone, and to withdraw your question, please press star-2.

Our first question comes from Fred seemer of the seemer company.

Yes. I wonder, could you go into China and their take of phosphates? I know -- I haven't kept up with it. I know their regulations under the World Trade Organization were quite confused. You know, what do they think this year, and what do you expect next?

Yeah. Fred, let me go through that fairly quickly and just a quick overview. As you're probably aware, at the end of 2001, with the ascession (ph) of WTO, TRQ's four fertilizer imports were put into place, and they started at the end of of 2001 and were fully implemented last year. . Last year's level of imports under the TRQ were about 5.6 million tons of imports. They go up this year by I think it's 5% to 5.9 million tons. Those have already been released by the government, and the QRQs (ph) are in place, and it's a combination of both state trading organizations as well as other non-government organizations that have the right for obtaining import license and gaining the quotas.

Last year, as we said, imports were just around a million tons -- excuse me, 4 million tons, up 1 million tons versus the prior year, right about at expectation levels for the increase in imports.

And we anticipate that this year 2003, we'll see imports that will be at that level or slightly above, which, again, is an expectations of the industry consultants and analysts. And what we project over the next period of time through 2005 or so is that these increases will be in the -- or imports will be in the range of 4.5 million tons or so.

Okay.

Thank you.

Thank you.

Our next question comes from Duffy Fischer of Goldman Sachs.

Yeah. A question on the deferred taxes if you look at, you know, where you were at the third quarter, you know, basically now flow of 76 million and where you were at the end of the year, outflow of 125 or 126, about a 50 million jump in the fourth quarter.

Now, can you walk through why that is so negative, what the outlook for that is would, you know, for this year? And you know, kind of correlate that back. I think a lot has to do with the potash in Canada. But their sales were down -- profits were certainly down because costs were up and prices were down. So I'm a little confused why that number was so big in the fourth quarter.

Duffy, the overwhelming reason was we tax effect our writeoff on disk ops. And so you know, we create a deferred tax asset associated with that write off. So the big hit we took in disk ops creates that asset. Also, to the -- we did have losses in the U.S. of the fourth quarter that generated from an operating basis some additional net operating losses, which, in part, was 69s reason for the rest of the increase.

So it's fair to say it was basically paying today for NOLs(ph) that you'll use in the future?

Yes. You know, to the extent it's, you know, it's basically a balance -- you know, a balance sheet write-off of our investment in chemicals. We're not really paying today. But we are creating tax benefits that we hope to -- you know, that we expect to use over the next four years.

Fair enough. And then best guestimate for what that line looks like at the end of 2003?

We would, you know, given the disk ops are behind us, we're not making any specific projections for 2003, but simply put, we don't expect to use a significant portion of our tax assets in 2003.

Fair enough. Okay. Thank you.

Our next question comes from Andy Parr of Loomis Sales.:

Good morning. I was hoping you could rundown the balance sheet. What do you have around the revolver at the moment?

At year end we had 28 million drawn down on the revolver. As you recall, our revolver is 210 million. In addition, we, you know, on top of that obviously would be letters of credit. But from a cash basis we had 28 million drawn down.

All right-y. I'll get back in queue. Thank you.

Our next question comes from David Driscoll.

Hi. Good morning, everyone.

Morning, David.

I'd just like to talk to you a little bit about 2003 EPS guidance. You didn't issue any. And I was hoping that you could just kind of talk us through what are some of the per mute tags here. Why is this difficult to give a forecast on? Essentially what are the biggest variables in there? And if you could give some kind of timing on when you see them changing, as this would affect our quarterly pattern, that would be quite helpful. Thank you.

Thanks, David. Let me kind of refer back to some of my comments. I think that's the best way to go through it. Generally, we look for spring season to be one of the best determinants as to where the year and the outlook will go. In fact, last year, I think, we did not give any earnings for the year, estimates, until we saw where the spring season was and what the outlook would be. So I think that's, again, what we're looking at doing this year.

So that, clearly, is one of the big determinants. As I laid out, though, in my comments, clearly, we started out the year and our first quarter is going to be heavily impacted by the low pricing that we started out with.

However, with 10, $11 of that already back in January, we'll see the impact of that, plus we think -- and what analysts suggest--will be continued increase in pricing throughout the year, will be substantially impacting the second quarter and rest of the year. So that's a clear and very big impact that we will see very little of in the first quarter.

Beyond that, I think it's a question of where raw material costs go. And certainly you and you have experts who will be projecting where that will go. We think certainly the winter weather and the issues of Venezuela and other things are impacting gas prices, and therefore some of -- ammonia as well, certainly Venezuela is ammonia as well. And negatively impacting us. So we think those things will tend to moderate as we go out of the season and into the spring planting season. And those are big impacts.

Beyond that, we talked about the first quarter mine shutdown which will negatively impact earnings but will positively impact cash flow as we adjust inventories. And that's a fairly significant piece for the first quarter. And then on -- as well, as we start implementing the cost savings, both the restructuring in the first quarter, which will tend to see the benefits from -- in the second half of the year as we see the cost of the restructuring in each of the quarters of the first half of the year as well as then the on-going multi-year cost saving programs which will start to have a much more of an impact in the secretary half of this year and beyond.

Could you just talk about idle plant costs year over year? Am I to understand that we have an incremental idle plant cost because of the phosphate mine shutdown?

Yes. Last year we had idle plant costs that were primarily as the result of our continued shutdown of Faustina which we said in the paf's was a little over $10 million a year. We anticipate that we will have that for all of this year. What we are adding to that in the first quarter of this year and maybe for a month or so depending on how long we keep it down in the second quarter, is the shutdown of one of our mines which is about 30% of our overall mine capacity. And so that will add a significant amount of additional EPS cost reduction. EPS reduction in the first quarter. And that is additional idle plant costs. Beyond that, it will be sporadic potash mine management as we go through the year. An example, there will be probably more management of that even in the first quarter as we balance inventories. Our actual inventory on the potash side was slightly down at the end of last year versus the prior year.

And then just following on your cost savings initiatives, is there head count reductions in there that are, you know, that you can essentially bank on that you know you're going to get that?

All of it is head count reductions, once they are [inaudible] and implemented that you can bank on and related expenses associated with it. Again, what we're looking at is, this is not facilities reduction. This is not asset write-offs. This is costs associated with head count and other overhead cost reductions that you can bank on.

Thanks a lot.

That's why it's very significant and it's a major step, we think, to address as much as we can in the -- in what's controllable in this environment to take aggressive actions aat a time that we need to.

Very good. I'll get back in queue.

Our next question comes from David Silver of JPMorgan.

Yeah, hi. Good morning. I was hoping you could speak maybe a little bit about just the current picture in the DAP market as we head into spring. You know, you talked about the expectations for demand growth. You talked about, I guess, the recent move up in price. You know, I'd also say, I guess, the most recent industry data points to very low operating rates in the U.S., and there's some indications there's been some cutbacks overseas as well.

I guess I'm just wondering if I'm missing anything. My question would be why wouldn't you be a little more aggressive on, I guess, the progression of DAP prices as we head into spring and the ability to recover, you know, as you pointed out, the rising raw material costs? What might be holding back the pace of price hikes? Thanks.

Again, I tried to cover some of that in the balance manner in the conversations and my remarks. David, I think that, in fact, that operating rates are relatively high in the U.S. The only things that are probably causing some issues that would bring it down right now would be some turn-arounds and maybe some pull-aheads of some turn-arounds as well as people try to grapple with running plants at these high cost levels.

And second, would probably be, in some cases, the inability to get sulfur, which may cause some reduction in plant operation levels as well.

But in general, with the announcement of additional plants coming on in Florida, most operators in the U.S. are pretty much going full boar that we would expect to come back on except for the turn-arounds and reductions of sulfur supplies. But we actually think that's probably, in a twisted way, good news in that there's not a new supply coming on board. And then, in fact, the market is relatively tight, the need for increased demand in the domestic marketplace, with increased acreage, with increased application rates, should provide for a relatively strong spring season domestically, and that export demand has already, in a very thin market, in January, picked up fairly dramatically.

And as I mentioned in my comments, there are some analysts that are suggesting, by the end of the first quarter, that we'd see numbers in the $170 per metric ton range, which was the high of the nice improvement that we saw last year. And, again, we're already at 159 today in a relatively thin demand marketplace.

I think, as I also mentioned, if we see anything happening that suggests not only a good spring domestic market, but something else in an international market such as India coming in to any degree in the May-June time frame, that we could see something dramatically beyond these levels.

Okay. I guess -- no, thanks a lot. You did cover an awful lot of those points. I guess I'm just trying to get comfortable with the time being and pace. Thanks.

We are, too, and obviously that's what happened in the first and fourth quarters. Part of the pace and timing is specific to us, as I mentioned in the first quarter is that most of our first quarter export shipments heavily obviously due to chin that come in January and February of this year. Once we go into the March time frame, it doesn't provide shipment time generally to get it to China for their spring season. So we're front-end loaded in the quarter for export shipments, and generally the pricing levels that pegged pricing realization levels for the export market are lagging by 3 to 4 weeks, and therefore, we're not going to see the benefits in the first quarter, but we will be in the second quarter and beyond.

You flow, in a similar fashion, obviously it's the spring season domestically that heats up at the end of the first quarter and into the second quarter and that's why we won't see the increases which have lagged a little bit in light of the international price improvements.

Okay. Thanks very much.

We have a follow-up question from Duffy Fisher.

Yeah. Doug, towards the end of your prepared remarks, you were talking about asset sales, and you had mentioned 21 million, you know, for the asset that just went. And then you said you thought you'd get a similar price for one of the other non-core assesets, I this, is what you called it. A couple questions, one, non-core, is the only non-core assets left the soda, ash and Boron and the 21 million or the similar amount you would get, is that one business or two businesses?

Well, Duffy, I don't mean to confuse the issue, and maybe that statement confuses it a bit. The remaining chemical assets, the boron and soda ash businesses, are really viewed as one asset sale and combined are already in the conversation or in a discussion and [inaudible] type of recovery that we would expect. The additional ones that I alluded to is in addition to the chemical business. And I'd rather not talk a lot more on it. But I think suffice it to say what we are looking to do is make sure we maximize the return on our assets and our cash flow at this point in time without negatively impacting our cash position. We'll aggressively keep on looking at that and hopefully we can say more on that later.

That's fine. That clarifies it. Just one other question. With the write-down of the discontinued ops - soda, ash and boron- what's the carrying value of those two businesses now?

Let me answer the question another way. Our expectation on the sales price of the soda ash and boron business is fairly modest, in the range 20 to 25 million of what we hope to achieve. We have some book purposes and understanding that we will sell the business this year, at a distressed price if necessary, has even put on the books a lower price than that for the business.

Okay.

.

I hope that explains it, Duffy.

Yeah, no, that's good.

Stay tuned.

We have another question from David Driscoll.

Hi. A follow-up on China question that [inaudible] was asking. I just want to understand the quarterly pattern here for shipments as best as you know right now. Do we have a good first half comparison in '03 relative to the shipments that IMC sent to China in '02? Or is it a little bit weaker here? I'm just trying to get a sense as to what your load -- the loadout looks like.

You know, Duffy, I don't have the information in front -- excuse me, David, I don't have the information in front of me to really address that. But in general, yes. The -- in general, yes. We have sold a copy, we being PhosFeed have sold a couple in the first quarter not only to -- well, to spot buyers as well as to an increased contract in 2003 versus 2001 to CNA and BGC, and they have very heavy loadings in the first quarter or for the spring season. So in general, yes, not only for Fos-cam (ph) but for the industry, it's running in a comparable fashion.

And -- Remember in the fourth quarter 2001, levels were a fair amount higher, and that caused some of the year over year comparison issues in last quarter.

Okay. How about inventories in China? Can you just give me a relative benchmark? Are they up or down relative to, you know, January of '02?

You know, in the November-December time frame, the inventories were up some. It appears, though, based on the lower imports and orders in the fourth quarter of last year, that the inventories are pretty much back in line and in some cases are drifting lower. We'd have to get an update on that to be certain. But I would imagine they're pretty much in line at this point in time.

And I think the real key, again, is going to be an indication on how strong a spring season there is in China this year. Pretty much the numbers are in place, and the imports are in place. Now for what's going to be imported this spring. And it's pretty much in line with expectations. The next step will be how strong the spring season is and then what we end up seeing in the June, mid-year time frame.

Okay. Great. Thank you.

Thank you.

We have a follow-up question from Fred Seemer.

Just two things. One on a pension. Is there anything going on there recent-wise or any charge to equity? Then I have another question on raw materials.

As we mentioned in our press release, we took approximately a $50 million charge directly to equity regarding our pension. Regarding a look forward, we have virtually no funding requirement for our pensions in '03. With current valuation as of last September 30, in '04 and '05, funding requirements step up to approximately 40 million a year. In those two years. And obviously, that's subject to change in market valuation between now and that period of time.

Okay. I'm sorry, I didn't get a chance to read your press release.

On raw materials, ammonia, there's some people in the United States that think gas is going to be at $4 in BTU on a secular basis.

One question is, have you thought forward or done any hedging for this year, and would it make any competitive sense for you to try to backward integrate somehow into ammonia, buy any interest in Trinidad or something like that, would that give you a competitive advantage because of the people?

Well, Fred, first of all, in Louisiana, we produce our own ammonia. So we're subject to natural gas costs. And in that regard, we've hedged you know, with hindsight, we're not as hedged as we'd like to be. We have about a 50% hedge in the first quarter at $3.50, and for the rest of the year, we drop down to hedges modestly under 30% at about 328. And that's company-wide. That includes not only gas for Faustina, but also for our solution mine up in Belle Plain.

Regarding ammonia, you know, obviously in Tampa, we are well placed to receive Trinidad ammonia, and right now we do pay you know, market price plus some discounts, and we certainly would look to strategically lock in ammonia, but obviously we're not going to be buying any Trinidad asset as this point in time given our balance sheet.

Okay. Thank you.

But it's a good idea strategically the Lingage (ph) with us on a long-term contract with somebody that's an owner there might make a lot of sense.

Thanks.

We have another follow-up question from David Silver.

Yeah, hi. I have a question on the potash market. And I guess in particular, I was just wondering if you could give us your view of the export picture for potash so you know, China has certainly signed in some agreements. But maybe if you could comment on broader international demand for potash at this point and also, you know, if you had some sense of the timing or the spread of the shipments that Canpotex (ph) might be making and how that might work into your overall [inaudible] and shipping plans. Thanks.

You know, Dave, I'll try and answer it as best I can. Maybe we can talk again offline on more specifics on it. In terms of shipping, I don't think the patterns are much changed from prior years, and we can kind of walk through that a little bit.

The [inaudible] text really is probably a good place to start is China, as you're probably well aware. China agreed to a million and a half ton contract for 2003 at pricing that was flat versus the prior year - which we viewed as being positive based on the price with volumes that were up versus the prior year.

So we think that's positive, and as you probably saw actually imports into China last year for potash last year were up versus the prior year and I think we'll continue to see that trend and certainly supported by the contract. Increase.

I would anticipate that overall volumes, we should see up, although modestly year over year. And that the question will be what happens with pricing in other locations other than China. Now, luckily we saw that there were some price increases recently in Brazil, which is the other major market that were fairly significant and good timing in the marketplace. These were just in the last couple weeks in publication pricing. So that's encouraging to suggest that maybe we'll see some improvement in pricing, at least holding it steady. And again, domestically, we are aggressively looking to see a good portion of our price increases that we are announcing through -- between now and April implemented and get the benefit of that which will be very substantial throughout the year.

Okay. Very good. Thanks a lot.

Thank you.

Operator, if there are any other questions, we have time to take one more question before we close it off and let them hop to their other calls.

Okay. Sir, our final question will come from Steve Byrne from Merrill Lynch.

It's almost afternoon, isn't it? I wanted to ask you about the sulfur market. You had mentioned, Doug, in your remarks about the market being tight in the Gulf, and clearly with the Venezuelan strike things aren't getting any better there. I just wanted to ask you about the savage JV (ph). Does it give you any strategic advantage over access to product, or is it primarily a price benefit that you get from the JV?

It's -- you know, versus our prior relationship of buying sulfur through Freeport, we achieved a significant price advantage going directly to the refiners. As well, we locked into long-term contracts, which do give us some supply advantage with these refiners. Now, to the extent one or two of them took turnarounds and moved to sweeter crudes than they would normally produce, we have had some of our own modest sulfur shortages, but long-time -- long-term and at current levels, we are fairly secure in our sulfur supply.

One of the key pieces assuring sulfur supply is the transportation of sulfur. And we are, through the joint venture, are in a very strong position to assure that we have transportation both through our river as well as to the Tampa operations from the Gulf area. So that's a key piece that helps assure we'll have supply as well as the availability to key customers.

As Reid mentioned earlier, a key piece of what we're seeing now is not only Venezuela and other issues with the supply of sulfur but also part of it is the change in crude to a sweeter crude versus a crude that is historically been used that has more of a sulfur by product. As we get more to that, we'll be in a position that it will get back to a more normal state of less sweet crude, there should be a lot more availability of product from refiners.

Also note that we're continuing the process with other partners in our Tampa-based re-melter project would allow us to bring in solid sulfur to try and manage some of the supply-demand balance in the sulfur marketplace.

And when might that facility get to an on-stream state?

Probably a year and a half or so.

Okay. And then one last quick one, you mentioned FozCam (ph)was sold out through the first quarter, but yet they don't have a contract with SignAChem (ph) yet. Is that impacting your outlook any, the fact that you don't have that contract yet?

Not at all. We're in constant conversations with them. What we've done is placed the couple vessels that we didn't have sold, those have already been placed quite awhile ago in the open market. And they went to China anyway. So our increased contract with CNGNGC (ph) plus a couple of these vessels ended up putting basically the same amount into China. And then I think what we'll see is the finalizing of a similar-size contract going through the rest of the year.

Okay. Thank you.

Thank you, Steve. And to all of you, thanks for taking part in our conference call. We appreciate it very much. We'll talk to you offline. Have a good day. And take care.

Thank you.

Operator: Thank you for participating in today's EMC earnings call. All participants may disconnected at this time.--- 0