美盛公司 (MOS) 2003 Q1 法說會逐字稿

Good morning. Thank you for standing by. All participants will be able to listen only until the question and answer session of the conference. The conference is being recorded. If you have any objections, you may disconnect at this time.

I would like to introduce your conference leader for today, Mr. David Prichard, vice president of investor relations. Sir, you may begin.

Thank you, operator. Good morning to everyone. We're pleased to have you with us this morning. I am Dave Prichard, I will be your moderator for this morning's conference call regarding IMC global 2003 first quarter results that were issued earlier this morning.

I am joined today by Doug Pertz, chairman and chief executive officer, Reid Porter, executive vice president and chief financial officer, and Bob Qualls, vice president and controller.

If you have not received or seen our earnings press-release and financial tables yet, you can call my assistant, Vicki Bunker at 847-739-1817 and the materials will be sent to you right away. The information is also available via First Call, and also of course the IMC global web site at www,IMC global.com. Finally, this conference call will be accessible on a replay format through Friday evening, May 2nd, that phone number is 402-998-0477, or the call is also available as an audio web cast on replay, that's act accessible again through the IMC global web site at IMCglobal.com.

As is our custom, we planted 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'm pleased to turn the call over to our executive vice president, and chief financial officer, Reid Porter. Reid?

Thank, Dave. Good morning, everyone.

Earlier today IMC global reported a loss before cumulative effect of accounting change of 31.7 million or 28 cents per diluted share, for the first quarter of 2003. Excluding the non-cash loss from the unfavorable impact of foreign currency translation, which is associated with the strengthening of the Canadian dollar, of 13 cents per diluted share, the company reported a loss of 16.8 million, or 15 cents per diluted share, which was in line with our mid-March guidance. This compared to 4.8 million or 14 cents per diluted share for the same period last year.

I would first like to point out several items that impacted the quarter's results. Restructuring charge of 3.4 million, 2 cents per share, was recorded for severance cost associated with the company's previously announced organizational restructuring program, implemented in March. We'll talk more about that program later. Also the shut down of the Fort Green phosphate rock mine in February and March had an unfavorable impact of 3 cents per diluted share.

These losses were partially offset by a net curtailment gain of 2 cents per share recorded from result of pension and retiree medical plan design changes that we implemented . The company adopted XFAF-143 on January 1, 2003, this requires legal obligations associated with the retirement of long lived assets to be recognized at their fair value. At the time the obligations are incurred. This resulted in a non-cash charge of 4.9 million, or 4 cents per share.

Our lower results versus previous years stemmed from our Phosfeed business, greatly increased ammonia and sulfur raw material input costs, higher concentrate plant operating costs primarily due to turnarounds and two-month rock mine shut down were more than offset by $9 per short ton improvement in average GAPP pricing.

While published (inaudible) prices in creased about $40 during the quarter, the company did not realize much of the increase, sales were more heavily weighted earlier in the quarter and contract pricing resulted in some lag in realizing price increases. First quarter revenues of 552 million increased 11% compared to 2002 due to higher phosphate and pot-ash shipments and increased phosphate pricing.

In reviewing results in more detail I will first cover our business segments, then discuss consolidated income statement and conclude with comments on our balance sheet and cash flow.

First with IMC PhosFeed, first quarter net sales of 359 million increased 15% compared with last weir due to higher prices and sales volumes. Total concentrated phosphate shipments of 1.6 million short tons were 9% higher than the prior year level due to a 16% increase in export shipments primarily to Asia and Australia. Versus 2002, the company realized a $9 increase in average GAAP price to 143 dollars per short ton which also represented a $10 per ton sequential increase from the fourth quarter of 2002.

Reflecting the price increases that were achieved during the quarter, March price realizations were 25 dollars higher than our price realizations in January, and we are seeing continued improvements in pricing in April. First quarter PhosFeed gross margin losses of 14.8 million declined from gross margins of 18 million a year ago, due to greatly increased ammonia and sulfur raw material costs, higher concentrate plant operating costs primarily due to turnaround and a plan idling of a Florida rock mine in February and March to reduce inventory levels and improve cash flow. This was partially offset by the higher phosphate pricing mentioned earlier. earlier. Approximately 20% of IMC's Louisiana concentrated phosphate output continued to be idled to balance supply with current market demand, operating rate projected to be maintained throughout 2003.

Turning to our other business segment, IMC Potash's first quarter net sales improved 4% to 214 million versus last year's 205 million, higher export shipments more than offset slightly reduced selling prices. Total shipments of nearly 2.2 million short tons increased 7%. Export volumes improved 23% due primarily to timing of Chinese shipments. The company's increased Campa-tech (ph) sales allocation of 1.7 percentage points to 36.67% retroactive to July 1, 2002, and strong Brazilian demand.

Domestic shipments were essentially unchanged. The average selling price including all potash products was 74 dollars per short ton compared to last year's $75 per short ton. Approximately $4 per short ton of the February and March domestic MOP price increases is expected to be achieved in the second quarter based upon a trend of improving realizations as the first quarter ended.

First quarter gross margins of 55.4 million were slightly improved versus the prior year. Improved sales volumes offset by slightly lower prices and higher production costs, the largest factor over which was increased natural gas prices. Doug will provide greater analysis and perspective on both our first quarter performance and the outlook for both our PhosFeed and potash businesses.

I would now like to comment further on our consolidated results in various corporate items. SG&A expense decreased 6% to 18.3 million, primarily as a result of favorable impacts from pension plan and retiree medical benefit changes. Interest expense for the quarter increased 4% from higher costs associated with completion of our bank amendment in February and refinancing of outstanding 2003 debt through a December add-on offering. As discussed earlier, foreign currency translation resulted in a non-cash loss of 21.9 million, a 22.9 million swing from the prior year. This was due to the Canadian dollar strengthening approximately 7% versus the U.S. dollar in the quarter.

I would first like to note it is IMC's policy to hedge its currency exposure from Canadian dollar operating expenses in order to limit our cash exposure. Pursuant to FAS 133 realized gain or loss on these hedged positions are recorded predominantly in cost of goods sold and in turn operating earnings since the currency exposure from cash operating expenses in Canada are in cost of goods sold . However, IMC does not hedge monetary assets where translation gains or losses have no cash impact. In this case, IMC Potash carries U.S. dollar receivables due to U.S. dollar denominated sales as well as inner company balances. A change in exchange rate creates a loss or gain reflected in other income expense line on the consolidated income statement, when these IMC potash U.S. dollar receivables are translated in to Canadian dollars. These same receivables are then translated back to U.S. dollars in IMC's consolidated balance sheet, but this offsetting translation gain is booked directly to stockholders' equity instead of the income statement.

Turning to discontinued operations, we made progress on divesting remaining parts of our IMC chemical business with the sale of our sodium bicarb (ph) assets in February, for 20.6 million. We continue to actively market soda ash and Boron business, the only remaining business in discontinued operations. These operations are carried on our books at minimal value. value.

There are two other current and important cash generation activities to mention. We expect to complete the sale of our Port Sutton marine terminal in Tampa for 23 million in the second quarter, a move which will also lower our future operating costs and eliminate needed capital expenditures at the facility . Also we just received in April a $30 million cash refund from election in March to carry back a federal tax net operating loss, consistent with the new tax law provision enacted in 2002.

IMC still has nearly 300 million in net operating loss in AMT credit carry forward benefits available. Our NOL (ph) carry back decision is consistent with efforts to maximize cash flow through the monitorization of assets.

Turning to the balance sheet working capital remains a key focus, both net receivables and inventories continue to be well controlled, with both down slightly versus the prior year. The shut down of our Fort Green rock mine in February, March, which will continue through April, contributed 23 million to inventory reduction in the first quarter. Net proceeds of 125 million from our add-on offering of senior unsecured notes in December were applied primarily to redeem 98 million of outstanding August 2003 senior notes in January. But this refinancing of these 2003 notes the company has no scheduled debt maturity until 2005. With respect to our bank revolver, IMC had borrowings of about 35 million at the end of the first quarter, versus 28 million at year end 2002. As I referenced earlier in February we amended our five-year 470 million credit facility which gives us significant financial covenant ease him through late 2004 .

Turning to cash flow effective with this quarter we're introduced refined calculation for EBITDA, now defined as operating earnings plugs depreciation, depletion, amortization. We believe this is a more straightforward cash flow result. Also in the spirit of providing earlier and fuller quarterly information you will note our financial tables accompanying the press release have been expanded to with operating results, DD and A and EBITDA for PhosFeed Potash and corporate segments.

We are also making available today through our investor relation department five years of quarterly and full-year EBITDA back to '98 by total company in line with this revised cash flow calculation. These segment results carried for many years in our 10qs and annual reports, but we are now reporting them several weeks earlier in our earning releases. Now we hope this accelerated disclosure is helpful. Our 2003 first quarter EBITDA of 55.5 million compared to 90.4 million a year ago, tight spending controls continue to be evident as gross capital expenditures of 23.7 million were down from 31.7 in the prior year, and well below first quarter EDNA of 41.4 million.

With these comments I turn the discussion over to Doug.

Thanks, Reid. Good morning.

Our first quarter results, while disappointing, were in line with our mid-March guidance and earlier comments about a challenging start to 2003. In fact, our actual results included a 2-cent one-time restructuring charge that was not in our original guidance. The quart results were driven by significant spikes in raw material costs that mask a dramatic increase in DAP prices, over 40 per metric ton, that unfortunately came too late in the quarter and was more than offset by raw material cost spikes.

But as I will discuss later, we have begun to see significant phosphate margin expansions starting in March and continuing to date as the increased pricing is beginning to be realized and ammonia and natural gas cost spikes have eased. It's important to note that the 15 cent loss in the quarter from continuing operations before the non-cash foreign currency impact includes a 3 cent per share idle plant cost with a planted shut down of fort green rock mine in February and March to reduce inventory and cash flow.

Also in the results is a 2 cent per share one-time restructuring charge for severance cost that Reid alluded to from organization restructuring program has been implemented in March. As suggested restructuring charge resulted in a positive 3 cents per share for the full-year, after the severance charges, and on an ongoing annual savings in the future of 5 cents per share starting in 2004.

So excluding these two impacts, our adjusted first quarter results before the non-cash foreign currency impact was a loss of 8 cents per diluted share.

Still, a tough start, but more positive under the unique marketing conditions when looking at ongoing operations. As Reid pointed out and I would like to reemphasize, the reported foreign currency exchange loss of 21.9 million is non-cash and only reflects the accounting treatment of our Canadian operating subsidiary loan balances which are stated in U.S. dollars. More importantly, all of our projected Canadian dollars cash operating costs are fully hedged, minimizing any real cash earnings risk.

It's also important to note that the rapid improvement in global DAP pricing in the quarter to levels not seen in over four years should not be masked by our operating loss. As I will discuss later, this price acceleration suggests that even better, than an even better year in 2003 for global phosphate markets than we had, and some industry consultants initially projected at the end of 2002. At least from the standpoint of pricing cycle recovery.

Reid thoroughly reviewed overall and individual segment financial results as well as other key financial indicators. But I would like the elaborate on some key items and offer some additional color. In our PhosFeed segment, gross margin losses of 15 million dollars in the quarter included a $6 million negative impact from the rock mine idle plant cost for the two months of February and March. It also included accelerated maintenance turnarounds in every concentrated plant that were original planned for later in the year . Obviously it included the large year over year increases in ammonia and sulfur cost of over 30-plus million dollars.

Despite bottom line result there are encouraging trends to note in our PhosFeed segment in the first quarter. Net sales were up a strong 15%, sales volumes rose 9% on strength of impressive 16% export shipment improvement primarily in Asia, Australia, New Zealand. PhosCam shipments to China flat year over year supporting China sales in 2003 at levels similar to 2002. Most important, our average DAP realization of 1 on -- 143 dollars per short ton in the first quarter was the best since the third quarter of 1999. a Full $9 higher than the first quarter of 2002, and $10 higher versus the fourth quarter of 2002, when prices fell in an overreaction in our view to several unusual events in that quarter that we previously discussed.

However, DAP realization, DAP price realization in the first quarter dramatically lagged the market price increases due to contract pricing and seasonal fill programs. DAP spot pricing advances in the first quarter were very strong. Bench spot export price FOB Tampa (ph) rose more than 40 dollars per metric ton from the year end 2002 through the end of March, and today has only eased about $5 per ton from the peak. Central Florida domestic spot price jumped by similar amount of over $40 per short ton to about $180, price level not achieved again since 1998.

As we enter the second quarter of 2003, we saw DAP market prices continue to move a little higher and then hold hold. Our DAP price realizations will also significantly improve with the market price improvements in the second quarter. Reporting higher DAP prices and sustained cycle recovery is a very tight supply situation . Evidenced by extremely low industry inventory levels and curtailed productions by almost, production by almost all North American producers in the first quarter. In fact the recent issue of Green Markets the domestic industry weekly publication stated it well and I quote, DAP supplies are down, a lot. DAP inventories in March were down 8% from February and a whopping 33% lower than March 2002. One producer was quoted, this confirms what we have been saying, we are very, very, very tight on product, end quote.

In support of maintaining tight supply, we accelerated planned plant turnarounds and continue to have Faustina asset capacity idle at a cost annually of about $10 million per year and represents significant potential upside cash flow in earnings to IMC in the future. It's also the only significant and idle DAP capacity left in the North American market.

In potash, our first quarter results were continuation of the steady and solid performance of this business over time, net sales and shipments showed good improvement year over year, while profits and selling prices were essentially unchanged. With domestic sales volumes about unchanged, it was our strong 23% improvement in export shipments that resulted in the 4% sales increase in the quarter.

Brazilian demand, as we indicated, would be the case early in the quarter, is very strong and should remain so through the summer months. Brazil is Canpotex's second largest customer behind China. We also benefited from 1.7% Canpotex export sales allocation increase, our increase in shipments to 7% also enabled us to offset slightly higher production cost primarily result of higher natural gas cost.

In the first quarter and throughout the winter fill, we were able to hold a more than $2 per short ton improvement in MOP realizations we achieved in the fourth quarter of 2002. With price increases announced in both February and March, first quarter of this year, we are optimistic that approximately $4 of these increases will hold during the second quarter and beyond, given expectations for a good spring planting season. While first quarter domestic market share is down slightly as we push for increased pricing, we are confident that the stronger volumes we have recently experienced coming in to the spring season together with higher prices and strong export volumes will result in an even stronger potash year.

As Reid summarized, we continue to focus on cost control, capital spending management and cash flow maximization. First quarter capex , example, spending of $20 million was down from $26 million last year and continued to underspend EDNA expenses. SG&A expenses fell 6% to 18 million dollars. During the quarter, we closed 29 dollar sale of sodium bicarb, signed agreement to sell assets (inaudible) for 23 million. Direction and performance to date in increasing cash flow and lowering costs should be clear. And it will continue.

Now let's turn to the outlook in the second quarter and overall comments about 2003. Nearly one month in to the second quarter, we continue to see a reversal of what hurt is in the first quarter. Since early March and now continuing through April, we are seeing expansion of margins as DAP prices increased and held most of their gains, while ammonia costs have come down more than $40 per ton from their peak in early March to current levels of $235 per metric ton.

We and many industry consultants believe ammonia costs will continue to fall throughout the second quarter as natural gas prices also ease. However we were expecting more easing of ammonia prices than we have seen in the second quarter to date. We settled second quarter recovered sulfur contracts at a $8 per long ton increase from our first quarter levels. But below the $10 increase initially sought and expected from suppliers. We have forecasted most of this increase already and believe along with others that the sulfur prices have about peaked and should flatten out and perhaps ease some in the second half of the year, as Venezuela sulfur and crude comes back to the market and refinery production increases.

Phosphate for cost, excuse me, phosphate full cost margins are positive across the board as we move in to the second quarter. Further improvement will be dependent primarily on ammonia and gas costs in the future. When I spoke to you on January 30th during our year end earnings call, I said some industry observers predicted DAP prices to move towards last year's high of $170 per metric ton by the end of March and it at least to the mid-160 range in February. Obviously DAP prices went there and well beyond. They remain at close to $140 per metric ton levels, nearly 1/3 of the way in to the second quarter r. While we still expect some seasonal fall back in DAP prices, we believe a large portion of the gains that we have seen since the start of the year can be maintained as we head in to the late spring, and summer months, when export demand picks back up again .

PhosCam remains sold out for all products through may, with contracts from China, customers in Australia, Japan, Brazil and other countries through the rest of the year. We continue to negotiate with Chinacam on supply for the balance of 2003 and hope to conclude agreement with them in the next few weeks, once greater visibility on China's spring offtake and ending inventories are known. known. The size and timing of the Chinacam additional contract coupled with level of Chinese spot purchases which are starting to increase and optional contract tonnage this summer, will have an impact on the degree to which DAP prices hold gains through the summer period.

India remains an upside wildcard for DAP imports or exports, as you may look at it, this year from a very low base and low expectation level. The Oswald plant continues to be shut down and pressure is mounting on the Indian government to modify possibly subsidies, all positive signs.

Phosphate and potash movement in the second quarter in the U.S. should begin to accelerate in line with significant pickup in the rate of corn and other crop plantings in the corn belt and great plain regions in late April and throughout may. We continue to expect as much as a 2 to 3% year over year increase in P&K demand from improved planting fundamentals in the form of higher crop prices and inadequate nutrient levels in the soil.

Chance still exists for slightly higher planted corn acreage than the USDA forecast in late March of 79 million acres. Even if planting corn acreage comes in at the 79 million acre level, yields would likely have to approach an all-time record of close to 140 bushels per acre to prevent ending corn stocks from falling any further from already multiyear low levels.

We remain encouraged by the positive market developments for phosphate and potash in terms of volume and pricing both domestically and internationally. Low inventory levels and expected strong seasonal demand should continue to support a positive cycle recovery environment. Raw material import costs in creases have now been outstripped by price realizations, supporting our projected strong earnings turnaround in the second quarter.

However, ammonia and natural gas prices have not eased as much as we anticipated quarter to date. Resulting in our guidance of 10 to 15 cents of earnings in the quarter from continuing operations, the second quarter that is . This outlook includes an expected gain of 6 cents from the previously announced sale of Fort Sutton and the negative impact of about 1 cent for the final month of idle plant costs related to our shut down rock mine. The encouraging upward movement in DAP prices so far in 2003 is an indicator that global phosphate fundamentals are indeed recovering, despite setback in the fourth quarter 2002. Based upon trends to date, the full-year average Tampa DAP export price could be markedly better than consultants projections of about 168 dollars per metric ton, which is up about $10 from 2002 average levels.

World operating rates and demand should edge higher again this year, and there remains no significant idle or new capacity on the horizon except for IMC million tons of idle capacity at Faustina.

I want to close my comments with a review of our unwaivering focus on continuing to drive for lower cost, both in recent years and going forward. On January 30th we announced several significant new initiatives targeted at assuring IMC Global continues to meet its goal of being the industry's low cost producer and that we counter tough market conditions by maximizing the areas that we control and can directly impact. The first initiative was an organizational restructuring program which is implemented and completed in March, it included the elimination of 100 positions and related overhead expenses. First quarter charge for the severance cost, annual savings are expected to reach 7-plus million dollars or 3 cents per share this year and more than 10-plus million dollars or about 5 cents per share in 2004 and beyond.

The second, Operational Excellence, a multiyear reengineering initiative led by our president and COO John Ferguson, that should result in increased efficiency, cost and revenue enhancements, achieved through core business process redesign and optimization. We completed a comprehensive six-month analysis and evaluation phase in a the second half of 2002 and early 2003 and are now in the early stages of a multiyear implementation phase targeted on specific operating process changes throughout the company, such as maintenance, repair costs, transportation and logistics, asset utilization, and customer segmentation and net-back improvements.

Operation Excellence is targeted to generate annualized pre tax savings of at least $70 million by mid-2005 with more than 15 million dollars to be achieved in the second half of this year. Underpinning initiatives we continue to expand our six sigma workout and other lean process programs, the foundation for our continuous improvement to the system and our culture. Led by more than 250 black and green belts we're looking for six sigma and workout to again deliver annual savings in excess of $8 million in 2003, similar to what we achieved in 2002 . These savings and the culture help us offset and keep ahead of the inevitably inflationary and competitive cost pressures.

As Reid mentioned we also recently implemented change in our defined benefit pension and retirement health care plans that together should deliver net pre tax savings of about $13 million annually beginning this year. While these decisions were difficult to make we believe they are necessary as part of our efforts to control and reduce costs and expenses in today's and future challenging business environment.

Reid provided thorough balance sheet update but let me, in closing, stress a few points. First we're pleased to have completed our bank credit facility amendment on schedule in February and have easements through late 2004. Between the sale of our sodium bicarb assets in February, cash refund from our election to carry back a federal tax NOL and pending sale of Fort Sutton we expect to generate added $70 million in cash proceeds during the first half of 2003. These actions reinforce our focus on reducing debt and strengthening our balance sheet in the months ahead. We look for the market recovery to add to this and as we see the beginning of the second quarter and beyond of additional stronger operating cash flows as well.

With these comments let me turn it back to Dave for open question and answers.

Thanks very much, Doug and Reid. And with that, we will begin the Q&A session in the 25, 30 minutes we have available. We hope that each of you will try to limit yourself to one question so everyone has a chance to ask a question in the time remaining. Operator, you may now begin the Q&A session.

Thank you, sir. At this time we would like to begin the formal question and answer session of the conference. If you would like to ask a question, please press star 1. You will be announced prior to asking your question. To withdraw your question, you may press star 2. Once again, if you would like to ask a question, please press star 1.

The first question comes from Mr. David Silver with JP Morgan. You may ask your question.

Yeah, hi. Doug, I have a question for you about your second quarter earnings guidance. I think back in mid-March you kind of indicated a range that maybe in the 15 to 20-cent range and now you're guiding us towards 10 to 15 cents. Could you maybe walk us through what might have changed over the last, you know, 4 to 6 weeks that caused you to reduce that guidance?

Sure, I would be glad to. And you're absolutely correct in terms of the changes that we tried to lay out. The real differences between the two are where we're seeing raw material costs at this point in time and that's primarily in the areas of ammonia and natural gas. As I said in my comments, the pricing is in line and is maintaining the levels that we would have anticipated back in our earlier guidance, so it really is on the cost side, that the increase in sulfur cost, were fairly minimal in the overall impact and pretty much in line within a couple dollars of increase on the sulfur side, which translates in to less than $1 of increase in DAP cost per ton. So really the major increase is that we would have anticipated that natural gas costs and therefore also ammonia cost would probably have eased a little bit more than they have by now and therefore, the projections through the rest of the quarter we have taken the cost up some in our projections. That's primary change in our projections and I think what it really leaves is a lot of variability as to where things could go depending on where the costs go to the future.

Okay. So, you know, you had indicated that your book of business is pretty full through may. So it doesn't seem like there's a volume issue. I guess what you're saying, you're not certain about your ability to recoup, you know, those higher than expected costs.

Not only recoup, but where they're going. I mean I think it's more an indication of where it's going as well as just recoup. But yeah, you're right. Right now we're comfortable with the book of business, depending on where the North American spring season goes but right now everything would suggest that we're starting off to a reasonable spring season, it's about where we were expecting before, planting to date are in line with the five-year average. And we are anticipating over the next six weeks that we should see a reasonable spring season.

Okay. Great. I will get back in the queue. Thank you.

The next question comes from Mr. Duffy Fischer with Goldman Sachs. You may ask your question.

Good morning, folks. Could you quantify the 1.7% you got from Campotex (ph), how many backdated tons is that equivalent to so what you missed out in Q3, Q4, how many actual tons is that going to translate to for you guys? And when do those tons get to ship? Were help shipped in the first quarter this year or will they ship at some point later on this year? And if you could, talk about also in the feed business, what you're seeing as far as percentage change in price and volume there, please.

Okay, Duffy. Those are two questions, but we'll -- Duffy, the 1.7% increase in the Campotex share, probably translated in to about 40,000 tons of backdated, if you will, retro capacity or sales that we got, most of that has already been reflected in the first quarter. We will then see the additional 1.7 going forward for the rest of the year and we anticipate that probably volumes will be a little bit stronger this year through Campotex than they were last year.

Second question was feed. Feed pricing and realizations are down this year, unfortunately, primarily as a result of additional capacity coming on in the marketplace from two other competitors. Reid?

Obviously that cost has a lot of lines. Trying to look for a breakdown.

Well, I'll tell you what, don't waste time on the call. I will give Dave a call, I was looking for the percentage change in price and volume. I will give Dave a call.

We can get you percentage changes, I'm not sure we have notes where it break it out. We have probably some reductions in price, but we have to look at the tonnage was not off that much because of imports, excuse me, exports were up but we did see some pricing down that would probably be in the high single digit range.

Fair enough. Thank you.

Probably a good estimate of a number to use.

Thanks, fellows.

The next question comes from Mr. Robbie Camas (ph), you may ask your question.

Yes, given your bullish outlook for DAP and the fact that pop stock price now appears to be reflecting closer to its true value, you know, reflecting the fact that plp of significant debt due to IMC Global, it appears to make sense for IMC to roll up the minority interest in plp. Is there anything I'm missing legal, tax, other reason that’s preventing IMC from rolling up plp? Thank you.

That's a pretty detailed, loaded question, I think in many respects. Part of it I think, you have outlined reasonably well in terms of the issue of significant inner company debt or excuse me, significant debt that plp has and debt to IMC as well that is primarily funding a lot of the losses during the down period for the phosphate cycle period that we have seen. I do think that we are starting to see obviously an improvement in potential future earnings and cash flow generated from the business, which obviously in plps case has to take a lot of the debt that is in place and make sure that the structure going forward is the appropriate one going forward. So those are real issues and I think you outlined those reasonably well. I'm not sure I can comment, nor do we want to comment necessarily on what we might do or where we might go with the relationship in the future. Nor necessarily if there were anything else that would preclude us one way or the other or would suggest a direction one way or the other. You know, Reid, do you want to add anything more to that?

I can say a couple of the plp unit holders expressed an interest in us exchanging igl shares for plp shares and we haven't come to a determination of what would be appropriate from both plp unit holders and igl shareholders in terms of appropriate exchange ratio. But you know, we have, we understand and agree with some of the plp unit holders' position that igl shares would be a more liquid vehicle for them in terms of going forward and we sympathize with that and we just haven't focused on that or come to a conclusion, you know, how to make that transaction work. But I don't think there's any blocks from the legal point of view from entering in to such an exchange ratio at some point in time in the future.

And we would hasten to add this is not something that we are directly or imminently focused on at this point as well

Okay, great. Thanks a lot.

The next question comes from Mr. Robert Boyle with Green Markets. Sir, you may ask your question.

Yes. I saw a story in the newspaper, one of the Florida newspapers today, about the unions filing with the national labor relations board in Tampa, a grievance regarding the amount, the workers would be facing lower paying jobs and doing essentially the same thing. If that was upheld by the NLRB what would be the impact on the earnings?

Number one, Robert, I hope you appreciate us quoting your publication.

No problem at all.

I just happen to briefly see this article before we came on the conference call. We think that the charges are baseless. This is a normal practice that we and the rest of the industry do on an ongoing basis. This is a normal course of business and things that we, and how we manage the tenure, seniority issues. We don't think this will be any issue at all.

Okay, thank you.

The last question comes from Mr. David Silver with JP Morgan Securities. You may ask your question.

Okay, thanks. I have a couple of questions. The first one was, I was trying to parse your wording regarding the $4 per ton potash price increase and, you know, you cited in the text a trend of improving realizations and I guess I just wanted to ask, if you have indeed, you know, been seeing $4 per ton higher prices received from, you know, significant customers, either, you know, during the latter part of the first quarter or in to April. I will follow up with another question after that.

Okay. I didn't know we were parsing words, Dave. But we have been seeing an improved trend in several ways: The numbers that we put out obviously were the full, for the full quarter and generally the pricing that we'll put out with heavier volumes in the first of the quarter was at the lower pricing levels and we have seen as we have gone through the quarter levels of pricing that have been increased just below the $4 range. In other words, as you implemented or announced the price increases in February and March, our volumes have come down some after the seasonal fill periods at the end of the quarter, but our pricing realization have started to come back, have started to come up. We have not seen the full $4 impact yet but certainly started getting close to that at the end of the quart. Then what we started to see in terms of the onset of, with the onset of the spring season is that our volume have dramatically increased as we have gone in to the second quarter, which is in line with the seasonal changes and pricing has started to come up, but it's too early to tell if we are seeing full impact of the $4 yet.

Okay. I also had a question regarding, I guess the DAP market with regards to China and you did make some comments regarding your interest in a further large contract with the Chinese importers for later this year. I guess, you know, as I'm sitting here in April and you're talking about sold out conditions fairly robust, you know, field conditions around the world, I guess I'm just wondering about your thinking, maybe could you give me your ideas about how important or how useful it is to aggressively pursue that contract, I guess rather than let them come to you. I don't mean to be too coy, but traders out there would probably view, you know, the lack of a contract between the two of you as a positive and that China would have to go out and procure product from the very few remaining sources of supply. So I know certainly that kind of volume is important to you as well, but I guess I was just wondering if -- what your thinking might be, has it changed over the last few months? How do you kind of view how signing a contract with China for, let's say the second half of this year, fits in to your overall picture of the industry.

Well, I think there's a couple things to comment on that. Number one is we already have contracts or we have at least one other contract with China, PhosCam signed a contract, which is the other major quasi state importer in China. In fact, that contract is about 20% larger this year than last year and they have been taking tons and as I said earlier, the tons going in to China were about flat with last year's and last year's were relatively high levels as they were coming off of a good import year or supporting a good import year. So it's not like there are not contracts in to China. In fact contracts out there are higher than prior levels. We also sold in the first quarter several spot tons that made up any amount of shortfall in tonnage that we have seen in prior years in to China.