美盛公司 (MOS) 2003 Q4 法說會逐字稿

Good afternoon and thank you for standing by. We would like to remind all parties that you will be in a listen-only mode until the question-and-answer segment of today's call. We would also like to remind all parties that today's call is being recorded, so if you have any objections, you may disconnect at this time and I would like to introduce today's guest speaker, Mr. Dave Prichard. Sir your line is open you may begin.

Thank you operator and good afternoon every one. We are pleased to have you with us. I am Dave Prichard with IMC Global, your moderator for today's conference call regarding IMC Global's 2003 fourth quarter and full year results issued this morning. I am joined today by Doug Pertz, Chairman and Chief Executive Officer; Reid Porter, Executive Vice President and Chief Financial Officer; and Rob Qualls, Vice President and Controller. As a reminder this conference call will be accessible on a replay format through Friday evening February 13, by calling 402-220-0356 that’s 402-220-0356 and also it will available as an audio webcast accessible through IMC Global's website at www.imcglobal.com. 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 our operating highlights, key corporate developments, and the overall outlook. As a reminder, this conference call does contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements regarding expected trends and results for 2004, expectations regarding the phosphate market recovery, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of IMC Global's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. And finally this communication is not a solicitation of a proxy from any security holder of IMC Global Inc. or Cargill Incorporated. The companies will be filing with the SEC a joint proxy statement prospectus to be mailed to IMC stockholders and other relevant documents concerning the proposed transaction between IMC and Cargill. Stockholders are urged to read the joint proxy statement prospectus when it becomes available, because it will contain important information. Stockholders will be able to obtain a free copy of the joint proxy statement prospectus as well as other filings containing information about Cargill and IMC without charge at the SEC's internet site at www.sec.gov. For a complete version of the non-solicitation language, please refer to today's fourth quarter earnings press release that was distributed this morning. 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 afternoon everyone. I would first like to comment on consolidated results then discuss our PhosFeed and Potash business segment performance, then turn to our balance sheet and end with comments on the transactions we have recently completed or that are underway. Earlier today, IMC Global reported earnings from continuing operations of one-tenth of million or a loss of 2 cents per diluted share including the impact of $2.6m of preferred dividends for the quarter ended December 31, 2003. This compares with a loss from continuing operations of 33m or 29 cents per diluted share a year ago. A loss from discontinued operations of 63.9m or 56 cents per diluted share was recorded in the fourth quarter predominantly from non-cash tax adjustments connected with the company's pending sale of its remaining IMC chemical assets for which we have just signed a definitive agreement. In the year ago quarter, the company reported a loss from [inaudible] of 42m or 37 cents per diluted share. Much like the first three quarters of 2003, our fourth quarter results from continuing operations were significantly impacted by large increases in ammonia, natural gas, and sulphur raw material costs partially offset by much higher phosphate prices and strong phosphate and potash sales volume. Revenues increased 26% versus the prior year quarter, phosphate volumes improved to 20% while potash tons were up 16%. Florida ammonia, Louisiana natural gas, and sulphur costs increased 54%, 47%, and 14% respectively versus the prior year, but as I will discuss later average Diammonium phosphate realization improved $26 per short ton or 20%.

Moving down the income statement, SG&A expenses at $17.9m decreased $5.6m versus prior year, primarily from adjustments to incentive compensation and group insurance reserves. SG&A expenses continued to be tightly controlled and managed company wide. A $4m increase in interest expense year-over-year steamed from higher bond refinancing cost.

As I mentioned at the outside of my comments the diluted net loss of 2 cents per share includes $2.6m of preferred dividend associated with the company's mandatory convertible preferred shares. The quarter's results were favorably impacted by a pre-tax gain of $13.9m or 6 cents per share from the sale of Port Sutton marine terminal and again a $12.4m or 11 cents per diluted share from the sale of approximately 1m common shares of Compass Minerals during its December IPO. We retain approximately 750,000 Compass Mineral common shares but will not recognize any income statement gain on these shares until they are sold. Partially offsetting these gains was a non cash pre-tax loss of $17.7m or 10 cents per share from the unfavorable impact of the strengthening Canadian dollar on IMC Potashes U.S. dollar denominated receivables, similar to effects we have seen in prior quarters in 2003. As explained in previous SEC filings the company fully hedges Canadian dollar cash transaction and hedged gains and losses are recorded in IMC Potashes gross margins but IMC Global does not hedge against non cash U.S. dollar denominated receivable translation risk.

Turning to IMC PhosFeed, its fourth quarter net sales of $429m increased 30% compared with last year due to a higher sales volumes and selling prices. Total concentrated PhosFeed shipments of about 1.9m short tons increased to 20% versus the prior level of about 1.5m tons and were well above the 1.3m tons achieved in the third quarter of 2003. Higher Chinese and Australian shipments were the key contributors to export volume growth of 13%. Domestic shipments grew 32% as rising phosphate prices and improving farm fundamentals both contributed to accelerated customer orders. Perhaps the biggest positive in the quarter was attainment of an average debt price realization of 159 or $159 per short ton, an increase of $26 or 20% versus the prior year and $3 per ton from the third quarter of 2003.

Prices ended the year much higher than the quarter average realization as export and domestic stock prices reached levels not seen in more than five and eight years respectively. This pattern has continued so far in the first quarter of 2004. Fourth quarter PhosFeed gross margins of $5.8m decreased from $15m in 2002. Higher sales volumes were more than offset by increased raw material cost as well as unfavorable rock cost due to reduced production rates and higher expenses. Indicative of the fact that price improvements were accelerating faster than input cost in the latter part of the quarter, gross margins improved $7m from the third quarter.

About 30% of our Louisiana concentrated phosphate output continues to be idled in the quarter to balance supply with current market demand and operating rate expected to be maintained indefinitely until market conditions show sufficient and sustained improvement, including raw material cost abatement.

Turning to our other business segment, IMC Potash reported a strong fourth quarter performance. Net sales increased 14% to a $198m, versus last year due to strong 42% improvement in export shipments primarily from increased Asian and South American demand. Canpotex achieved record annual shipments in 2003 of more than 6m metric tons including its second strongest fourth quarter on record. Our total sales volumes of 1.9m short tons increased 16%, versus 1.7m tons in 2002. Domestic volumes, while improved 5% versus prior year, reflected heavy customer orders in the third quarter ahead of two announced price increases in July and late September. The average selling price including all of our potash products were $75 per short ton, slightly ahead of last years $74 realization. Given our higher proportion of domestic volumes a 10% improvement in domestic realizations, more than offset a 15% decline in export prices primarily from a continuation of higher freight rates. The company's average domestic realization for MOP improved $5 per short ton, or 8% from the third quarter of 2003, reflecting the favorable impact of mid July and September price increases. We remain optimistic about the sustainability of higher domestic netbacks in 2004.

Fourth quarter IMC gross -- Potash gross margins of $53.3m improved 30% versus prior year, due to the higher sales volumes. Effective hedging of foreign currency partially offsets the impact of foreign currency translation and higher natural gas costs. IMC potash continued to balance supply with demand by taking seven weeks of mine shutdowns during the fourth quarter leading to 21% reduction in production volumes versus the prior year and the lowest year end MOP inventory level since 1997. That will provide additional color and perspective on both the fourth quarter performance and the outlook for our phosphate and potash businesses in 2004.

Regarding the balance sheet, cash and cash equivalents were 76.8m at year end versus 17.7m a year ago and 56m at the end of September 30, 2003. At year end our main bank revolver of 210m remained fully available except for letters of credit, which totaled about 80m and we had drawn only modestly on 55m Canadian potash working capital facility, leaving the company with liquidity of $237m. The Company has no significant debt maturities in '04 although we will most likely address in 2004 our remaining '05 maturities of 36m. Net receivables and net inventories continued to be held in tight check. Receivables were only slightly higher year-over-year in spite of higher selling prices and volumes. Inventories decreased about $45m as both phosphate and potash inventories registered double-digit reduction. Those capital expenditures of 38m declined slightly from 40m in the prior year and remained below fourth quarter DD&A of 44m. Full year capital spending of 120m was up to forecasted levels and was about 50m below DD&A of 171.9m. We expect capital expenditures in 2004 to approximate a 110m.

Finally, let me comment on several transactions, we completed the sale of our Port Sutton marine terminal with Kinder Morgan as I mentioned earlier, with per gross cash proceeds of 23.3m. We project lower ongoing Port operating cost and capital spending as a result of the sale. In the quarter, we also received additional proceeds of 7m from working capital adjustments in connection with our sale of the SOP business line to Compass Minerals in June. We also assigned a definitive agreement with affiliates of Sun Capital Partners Inc. of Boca Raton, Florida to divest our remaining discontinued IMC chemicals entities in Silicon Valley, California and in Italy. Under terms of the agreement, IMC Global retained a 19.9% equity interest in these entities. We expect to close the transaction by the end of March. IMC has also announced, it has proposed to acquire all the publicly held units of Phosphate Resource Partners Limited Partnership at an exchange ratio of 0.2 shares of IMC common stock for each PLP unit. We have also announced that the largest unit holders of PLP, which collectively represents 61% of the public float, have agreed to support the transaction. PLP has formed the committee of independent Directors, which has engaged independent, legal, and financial advisors to assist them in evaluating the proposal.

Lastly IMC Global and Cargill announced a small deal and the signing of a definitive agreement. Doug will comment on the agreement. I will now turn the discussion over to Doug.

Thank you Reid and good afternoon. We believe there is much to be encouraged about in our fourth quarter results in spite of the continued and expected negative impact of high raw material costs, ammonia, natural gas, and sulphur. We saw another very strong performance from our potash business driven by improved export sales, higher pricing, and continued cost reduction. Once again, in 2003, IMC was the largest producer and seller in the potash business, wins the highest margins. In phosphates, DAP pricing jumped much higher as the quarter closed then we thought it would when we last talked in October reaching a 5 year spot high. DAP prices also improved at a faster rate than ammonia cost, which gave us some expansion in phosphate margins as we closed out the quarter and clearly stronger margins as we began 2004. Three months ago, export DAP pricing was below a $170 per metric ton and Tampa ammonia was about $275 per metric ton. Today DAP pricing is $220 per metric ton, up $50 and climbing, and ammonia is up less than $50, that same $50 or the equivalent of about $10 per DAP ton cost and ammonia is flowing.

Margins have clearly turned positive and are improving, which is truly encouraging. Reid has earlier reviewed our overall and individual segment results as well as our key financial results. I would like to elaborate on some items and then also additional context on other items. Our adjusted fourth quarter results were actually better than we suggested in our later October conference call and somewhat better than most analyst estimates on an apples-to-apples basis. And these improved results, were despite significantly higher ammonia prices that are projected in October and phosphate prices that improved primarily only at the end of the quarter. Our potash segment, once again, had a very strong quarter with sales up 14% and gross margins up more than double that at 30%. These results and the overall Potash market board well for what is to come in Potash with expectations for continued strong export volumes and geometric prices increases in 2004 supported by our ability to utilize our excess capacity as world markets continue to expand. While PhosFeed gross margins were down year-over-year, they were nonetheless positive and improved by $7m versus the third quarter of 2003 continuing the quarterly improvement from the second quarter of 2003. More importantly for the future, prices did not move up significantly in the fourth quarter until December when they were up to over 200 -- up over $20 per metric ton supporting marginally higher margins into 2004. Remember, the stronger first quarter 2002 -- 2004 margins are also supported by Chinese contract pricing that lags current market pricing by 3 weeks and exports schedule continued to be heavy through February.

More than a 100% of our operating earnings short-fall in year-over-year results came from our PhosFeed segment which similar to the third -- the first three quarters of 2003 reflected the continued and significant negative impact of very large increases in ammonia, sulphur and natural gas compared to the year ago period. These three raw materials cost us $28m more in the fourth quarter and close to $126m more for the full year of 2003 versus the comparable 2002 period. As I mentioned our PhosFeed business gross margins in the fourth quarter showed a continuing trend of market sequential improvement moving to a profit of 5.8m from just below breakeven level in the third quarter. This positive trend was driven by only minimal DAP improvement pricing of $3 per ton and increased volume offset by raw material cost increases. Our sulfur costs were up 14% versus last year. It is the continued high cost of ammonia and natural gas that most impacted phosphate cost. [Napa] purchased ammonia was up 54% in the quarter versus the prior year impacting DAP cost by over $17 per ton. While ammonia cost continued to increase in the quarter and in 2004 DAP pricing increased at least as much on a dollar per ton basis improving margins. Tight worldwide ammonia supply and demand including in the FSU region and continuing idling of U.S. capacity due to high gas cost has kept Gulf region tight in ammonia supply and lifted prices more than we thought they would have earlier in the summer.

We are very pleased with the strong PhosFeed volume performance in the fourth quarter both year-over-year and sequentially. Shipment jumped 20% versus 2002, and 46% compared to the fourth quarter. Contract shipments to CNAMPGC in China picked up considerably as did our contract business in Australia. Especially strong in the fourth quarter were domestic shipments up 32% from 2002 and a huge 80% up from the disappointing third quarter levels. [inaudible] with farm income and grain prices improving and the realization that DAP prices are increasingly rapidly domestic buyers came into the market in the fourth quarter in a strong way. Our DAP production in the fourth quarter was down only 2% versus 2002, but for the full year it fell 13% primarily due to the 2 month shut down of Louisiana granulation in June and July. As Reid mentioned DAP/MAP ending inventories for 2003 fell a hefty 36% versus 2002, and were the lowest over 10 years. IMC Global continued to practice significant supply side management in 2003 and it has done since the downturn in the market -- in the mid to late 1999 time frame. With the strong contract shipments in our fourth quarter especially to China and Australia, PhosChem has been operating from essentially sold out position and its order book remains strong into 2004. As we have stated in the press release, IMC continues to have idled DAP/MAP production capacity in Louisiana and has no plans to adjust its production level until market shows a sustained and significant improvement from current levels.

I open by stating that we are encouraged by the recent strong price recoveries, supported by improving supply demand-market conditions. Our fourth quarter price realization of $159 per short ton was close to the highest in four years and a full $26 per short ton higher or 20% higher than a year ago but only $3 per ton higher than the third quarter sequential quarter.

Now to export pricing was only $170 in October. It ended the year at $200 and is now at $220 per metric ton. That is clearly encouraging. The same general scenario occurred with the domestic stock pricing. Only a $160 per short ton in October we ended the year at about $190 per short ton and are now at almost $200 per short ton for Central Florida [real cars] and about $210 for short ton for New Orleans barges.

Even with record high ammonia prices, these pricing levels have returned long profit margins and even more encouraging is that ammonia prices have started to fall. In Potash our strong 30% increase gross margin reflected higher volumes especially in the export side and lower operating costs, despite a rising gas cost. And these higher margins were achieved with selling prices essentially flat year-over-year. The export volume strength was impressive, especially in Asia and South American demand. The fourth quarter volume surge was a fitting in to what was an all time record for shipments for Canpotex of over 6m metric tons, including million, million tons to Brazil alone. 2003 was IMC’s second highest overall shipment since the 1996 merger with Vigoro, and continued to position IMC as a largest potash producer in the industry.

In 1997, IMC had potash shipments of 8.9m, short tons, versus the 8.6m tons in 2003. We have expanded our capacity since that time, offering the ability to participate in the growing market demand in the future. Despite the very heavy domestic free buying of potash in the third quarter, ahead of the July and late September announced price increases, fourth quarter domestic volumes were up only 7%, but nonetheless up 5% for the full year. We again demonstrated our supply demand commitment in the potash business with fourth quarter shutdowns of 7-miner weeks, although was down from 11.5 in 2002. The shutdowns together with strong market demand especially international, pushed our inventories down 21% leaving us with the lowest year-end MOP inventory levels since 1997, and helping to pave the way to support domestic price increases achieved in the fourth quarter and more pricing strength into 2004.

Natural gas and other inflationary costs were more than offset by productivity improvements and spending controls across IMC’s potash operations, which reduced cost by -- per ton by 9% year-over-year, as well as sequentially from the third quarter, helping to boost gross margins in the quarter and throughout the year.

Importantly and as expected, we saw steady improvements in domestic price realizations in the fourth quarter with prices improving more than $6 per ton versus both the third quarter of 2003 and the year ago quarter. We have announced an additional $10 per ton, domestic MOP price increase effective February 15. 2003 was a year in which we more than recover domestic price level that had eroded somewhat in 2002 and are on track to pass receivable utilizations that will be the best in the number of years for the industry. And such increases are needed, however, to offset the impact of the strengthened Canadian Dollar versus U.S. Dollar.

Domestic price improvements more than offset lower export pricing, which like in third quarter suffered due to higher freight rate. Export realizations fell 15% versus 2002, but only 3% versus the third quarter. Canpotex is working hard to garner additional price increases in region such as Southeast Asia, Brazil, and India. The prices for delivered product are being increased by over 20%-40% -- excuse me, $20-$40 per ton. And in attempt to further offset higher shipping cost and the stronger dollar, which both continue to be issues going into 2004.

On the topic of overseas potash markets, let me reiterate the Canpotex signed a major three-year MOP supply agreement with Sinochem, providing a minimal 1.75m metric tons per year similar to this past 2003 contract and with a $3 per metric ton increase versus the 2003 level. The agreement want to ensure Canpotex maintain its market share in China, as potash import demand continue to grow in years ahead. This agreement along with PhosChem’s two year agreement with CNAMPGC for DAP are important for IMC in ensuring strong and solid [TNK] base load in to the world’s largest fertilizer markets.

Now, let’s turn to the outlook for 2004. The agriculture and crop global environment continue to improve as we start the year. Overall, grain inventories are historically low level and the world’s stock and use ratio is in a near 30-year low of around 16%. Importantly, China is also drawing down corn stocks, but is difficult to tell by how much. It is an important development to watch as many speculate the China could soon become an importer of corn versus an exporter today.

Commodity prices are on the rise with corn at over $2.60 per bushel and beans at over $8 per bushel, both up dramatically over the last several months, sending strong signals to farmers to plant more acres and intensify fertilizer application in cropping practices. U. S. farm income is much better than in the recent years, supported by higher commodity pricing and increased government support.

In the case of soya nutrient level need to be replenished and farmers know that they must start spending more input dollars in this area. All these are good at macro-industry drivers for the fertilizer business. As usually, high Ag. commodity prices also drive fertilizers stock prices.

In short, it appears there is a broad-base Ag. sector recovery under way and in world’s nutrient demand, which was projected by IFA, they have increased more than 3% in 2003. IMC remains well positioned to benefit from an overall improved market and in the near-term and longer-term the outlook is positive. DAP spot pricing at Tampa is at now at an 8-year high, primarily due to tighter supply demand, but also partially pushed up by cost pressures. Improving phosphate fundamentals have boosted DAP margins significantly, however these margins could be cyclically higher levels, if we are not per the higher ammonia pricing. Raw material cost especially ammonia remain in major pressure points and through margin expansion. Tampa purchase ammonia has been more than $300 per metric ton for some weeks now and gas cost remained high for reasons we all are aware of. If there is now some reasons for optimism, the ammonia cost have peaked at Tampa as IMC Global settled first half February contract ammonia at $320 per metric ton, down $5 per metric ton, which arrest an upward movement we've seen since April of 2003. There were some signs of easy ammonia supply demand that using in the FSU, key benchmark for Tampa price indications. [Following] unexpected cold weather in the U.S. in February, I repeat -- in the repeat of last year, it would appear that ammonia -- that the ammonia market peak has been reached and prices could be starting to edge back. Nonetheless, 2004 ammonia cost versus 2003 will likely still be higher for IMC even if the peak has been arranged and some fall back occurs in the months ahead. Further out, industry consultants believe ammonia prices will ease further as significant new capacity starts up in areas such as Trinidad, Venezuela and the FSU by late 2004 and in the 2005.

2004 first quarter sulphur contract prices were rollover, unchanged from fourth quarter 2003. We continue to believe there is ample and growing sulphur supply in the Gulf region, including some abatement in sulphur prices in future quarters. Spot shortages, competitive auctions, and producer shutdowns seen last year, are no longer issues. And Burlington industry is back holding on line as is Venezuela. All factors supporting an improved market supply situation.

In sum, we anticipate sulphur pricing will continue to decline to 2004 and beyond. We begin 2004 with DAP prices significantly higher than a year ago and prospects for improving U.S. exports and a good spring season with phosphate and potash demand likely to be up in the 2% range. China would expect the DAP imports of just over 2.8m metric tons in 2003, down from 4.1 in 2004 is expected to move back in to the low 3m plus ton range in 2004 with three quarters of that number already contracted for. Supporting this, are very low end of the season, end of the year domestic DAP inventory levels of less than 500,000 tons, and increased grain prices in China. We are confident that our two year contract and long term relationship with CNAMPGC supporting strong distribution and product branding will also support increased PhosChem DAP sales into China.

In India, significant short falls primarily from high raw material cost and continued problems at Oswal and increased demand due to a good monsoon season, have also resulted in very low year end inventory level. While India will import close to 800,000 tons in 2003, up from 350,000 tons, probable shortage at the farmer level and very low inventories together would reduced domestic production, should support increased imports in 2004 to as much as 1.2m tons, but the only barrier to higher imports being discliminary, excuse me, discriminatory Indian government subsidies. Brazil and South America should continue to increase demand next year surpassing record high 2003 level driven by higher soybean prices and plantings. This is evidenced by the fact that Brazil has been buying DAP and MAP over the winter months, usually for them historically in an otherwise off season time of the year. These indicators support analyst projections of improving phosphate world supply demand in 2004 and another year of price improvement. More importantly we start 2004 with improved positive -- and with improved and positive phosphate margins even as we see record high ammonia cost, and foresee the ability to achieve added margin improvement throughout the year. We expect even stronger performance from our potash business in 2004 after a great 2003. Improving and increasing domestic prices and stronger worldwide volume with improving cost position with improving cost business should be a recipe for better profitability and cash flow and possibly a record 2004. As mentioned earlier, we’ve announced another $10 per ton MOP domestic price increase from mid February, as we move into the spring season and in a much improved agriculture environment with farmers driving yield and higher fertilizer application rates. High ocean freight rates continue to impact international realization and Canpotex is working hard to raise prices in key markets to offset this impact. Ultimately, the magnitude of our improved performance in 2004 will largely depend on the relative direction and magnitude of change in DAP pricing and raw material costs primarily ammonia and gas. If DAP pricing holds a significant portion of this gains, as industry analysts now anticipated well, and raw material cost showed some meaningful abatement as we move through the year, then we will certainly benefit from improved phosphate results on top of our expectations for an improved potash performance.

The improving market for crop nutrients and especially cycle recovery for phosphates is a tremendous backdrop for our merger announcements of last week. While, we are encouraged by the macro ag Crop Nutrition and phosphate cycle recovery direction, we think that the announced merger of IMC with Cargill Fertilizer business will add to future shareholder value. The combination creates a leading, publicly traded global Crop Nutrition company better positioned to deliver customer value and increased shareholder value. IMC shareholders will retain stock in a stronger publicly traded company to potentially reap the increased value as global ag fundamentals improve and the phosphate cycle recovers from the bottom of the cycle.

Like IMC, Cargill is highly leveraged to the phosphate cycle, in fact more than IMC as a percent of its total business offering significant potential upside to shareholders in the cycle recovery. Shareholders will also continue to reap the benefits of IMCs leading low cost potash business with improving fundamentals and increased capacity potential. The transaction is expected to be accretive to IMC shareholders immediately and into the future on top of the expected benefit, IMC would enjoy from the cycle recovery if it were to be on a standalone basis. The combination should result in operational synergies of over 145m on an annual run rate basis with the prospects for additional ongoing cost and other synergies. [That] cost synergies include G&A duplication elimination, assets operational improvements in mining, manufacturing, it will be significant with both company’s operating in Central Florida as well as other purchasing logistic in other synergies.

You know what's not included in this projection include balance sheet for interest cost reductions and revenue enhancement. With Cargill contributing less than $50m of debt along with its assets and cash book the combined balance sheet and financial profile would be significantly stronger, the results will be an improved -- credit -- will be improved credit ratings, improved financial relations, and greater financial and strategic flexibility. IMCs strong domestic phosphate and potash businesses will be combined with Cargill's largely international franchise to form a stronger and broader global platform. It not only -- it not only expands production in the U.S. but also in Brazil, and China, and more importantly Cargill offers significant distribution platforms throughout the world for higher growth rate in these key markets. The combined global phosphoric acid capacity share is 14.4%, and concentrated phosphate production capacity will be about 13m short tons. The merger will create a global leader with LTM or last twelve months sales at the bottom of the cycle of about $4.1b, the largest in North America. LTM, EBIT-to-cash flow was about $440m without synergies, again at the bottom of the cycle, and approaching $600m including run rate synergies and total debt will be very similar to IMCs level of just under $2.2b. The combination to this in both companies and the industry is better for coming out of the bottom of the cycle and for future cycles.

Our earnings release today, improving market fundamentals, and last weeks merger announcement, we think positions IMC shareholders for significant current and future value creation. The combination of just starting to -- the combination and just starting to recover the phosphate cycle, are significant upside leverage and the benefits of the accretion and soon [inaudible] merger, offer IMC shareholders an unique value opportunity unlike any other in the industry. Those comments, I'll pass it back to you David for questions-and-answers.

Thanks very much Doug and Reid and operator you may now begin the question-and-answer session please. Operator.

At this time, If you would like to ask a question, please press "*" "1" on your touchtone phone. Again at this time if you would like to ask a question, please press "*" "1" on your touchtone phone. You name will be announced prior asking your question. Our first question comes from Mr. Andy Prile (ph.). Your line is open.

Hi. Good afternoon, I had a quick question for you. If I am looking at earnings for the given segment and I adjust for the one time items it looks like the corporate earnings jump $7-8m or so quarter-over-quarter -- sequentially. Can you give me some color on that?

Okay Andy. Do you want to compare third quarter to fourth quarter?

Yeah.

I'll have to dig out my third quarter comparisons; I don’t have that readily available. Obviously sales were much stronger in both PhosFeed and potash in the fourth quarter. We mentioned we had about $6 domestic potash price increase quarter-over-quarter, third quarter to fourth quarter.

I guess I am looking at the corporate line in particular.

What corporate line are you looking at Andy?

Just the corporate eliminations line and the segment break out. If I adjust it for one time gains which I think is important [inaudible] in the PhosFeed segment. We go from about negative $9m to positive $4m or so here quarter -- third quarter to fourth quarter, was curious within that number.

Why don't we get back to you, I think -- in fact dealing with the one-time gains and charges for the quarter I presume and where they are placed.

In the third quarter we did have a number of adjustments flowing through as well.

There were some grew up on our pension and retiree health and medical, as a result of the changes we made in those plan earlier in the year that tied in to are actually our assumptions as well as the full benefits that we now achieve due to restructuring that we incorporated in the first half of the year to reduce salary headcount.

Okay. Yeah, if you could follow up on, would be great.

Yeah, I think the SG&A comments we made as well where we adjusted down on incentive comps and help -- to help that year-end largely, flowed through corporate.

Okay. Great, thanks guys.

Peter Hendresy (ph.), you may ask your question.

Hi. I was just wondering is this transaction require you to refinance your working capital facility, from a direct cargo?

I think practically -- we won't be looking it practically taking a look at all of our bank facilities and that would be included in that.

Okay

Yeah, obviously, we would expect to that most of indentures would stay in place, but the bank facilities would be renegotiated.

Okay.

Our next question comes from David Silver.

Dave.

Yeah, hi good morning -- good afternoon.

Good afternoon.

Hello, Dave

Hi. I had a question or two, I guess on potash, I know there has been a whole series, I guess of price hikes announced in the domestic market, you know, maybe since going back to last spring, but as we sit here kind of right now, you know before the said 15 -- $10 price hike is, you know, effective. What kind of price improvement or price change do you think you've achieved, you know, I guess through the 12 months of 2003 in the domestic market?

I think we've laid that out. We were up $6 year-over-year and quarter-over-quarter. So the best way to look at it in the fourth quarter we are up $6 in domestic price realization for MOP, that's the best look, Dave, we were able to accomplish on year-over-year earnings.

Okay, you think that, maybe single point, you know, January 1, 2004 versus January 1, 2003, you still think it’s -- that $6 of price?

It’s close to that number. I mean you are right, Dave, it’s going to make a different since it is the average for the quarter, is end of the quarter --

Right.

It is end of the year, but it is going to be closer. I think the trend is what's important, you know, we saw a decline in pricing in the first half of 2002 -- excuse me, 2003, before we started to see these implementation of the July and then the September increases.

Okay. If I could just ask you a quick question about freight rates and how it might impact your phosphate business? I know most of the business there is certainly down on an SOP Tampa basis, but can you talk about, you know, how much if any, what portion of your export DAP, MAP business might be on a delivered cost basis subject to the freight rate fluctuations we have been experiencing?

Very, very little and very immaterial amount almost none.

Okay.

So we may see some pushback just because of the freight rates are causing the landed cost to be higher. But we certainly have not seen that yet in market such as China where the domestic Chinese pricing has started to get very close to the world price, you know, the export pricing plus freight rates.

Okay. One last question, I guess animal feed supplements has been kind of a tough business segment for the last year or so. There has been, I guess a recent closure, and I was wondering if you -- how you might talk about that in terms of outlook, does that improve your expectations for what that business line of yours might accomplish in '04? Thanks.

You know I think it's premature until we see a lot more of trouble, what really happens there if unless to make any comments on that?

Okay, great thank you.

Thanks David.

Our next question comes from Andrew Gunla (ph.).

Yeah, good afternoon. Two quick questions. Could you talk about what you expect from Hart-Scott-Rodino in the merger with Cargill, would you expect second review, second request, you know, how long do you think it will take?

Okay. I think as we have stated in our conservation last week, we would probably anticipate a second request from HSR, but we don't necessarily want to pre-determine that. We think that if this is evaluated on the basis of a world market, which we clearly think it should be and has -- similar transactions have been reviewed in the past, the role in fact is that the combined business is about 14.4% of the total phosphoric acid capacity.

What about U.S. market share, are you prepared to share that?

If you look at the combined, I mean, this is not a public information, if you look at a combined market share of our positions in North America, we are just on the 30% phosphate market share that being IMC, and Cargill is something probably just south of 10%.

Okay, thank you. Well, second question is, you spoke about, on the merger call, about balance sheet type assets that Cargill was contributing that may influence the percentages that both parties get in the new company, can you be a little more specific about, you know, how much you see Cargill putting in terms of the inventory and receivables, and our working capital stuff. It's obviously they don't have a public balance sheet [kept], no idea what there is?

Yeah the definitive agreement calls for them to contribute 352m of net working capital, which would be inventories, receivables, less payables and current liabilities.

And that inventory is at market prices or at their cost?

Cost. You know, it's always lower cost to market.

Yeah, exactly. Okay thank you very much.

And then I think just to add to that we feel that the, what they’re contributing in those assets and the assets that they’re contributing other than working capital are rate assets, very current assets and offer the ability for a significant future cash flows that will make the combination very strong.

To the extent that you have NOLs and they have NOLs, do they actually stay whole in the new company?

There will be benefits for the new company, for the NOLs that they are in place, but they maybe modified some going forward, so they may not be able to be used to the fullest [extent] report timeframe.

Any idea what the total amount might be at this stage, of the NOL?

No we haven’t finalized the legal tax structure yet to have a definitive answer on that.

Got you, okay thanks for your comments.

Thank you.

Our next question comes from Don Carson.

Thank you. A couple of questions, one on the DAP market, Doug, we are seeing some nice price increases lately, but on relatively small volumes in the South America. Well, I was looking at freight rates, I noticed that you Chinese freight rates were up in low 60s now, you know, from 50 at the beginning in the year, 40 in the beginning of the fourth quarter. Are you seeing much enquiry from them, because my understanding is that they only took minimal contract volumes in January and February, you know, March, April is normally quiet. Are you seeing any indications that they are going to take more than their minimum contractual volumes given the hike in freight rates?

Well, I don’t think that we should necessarily link it to what their freight rates are. I think the positive thing is that they are taking the 1.6 base contract ton and 1.6m annual tons. They’ve been taking that since the beginning of the contract period and there has not been any push out or change on that tonnage and in fact we’ve seen a significant improvement in domestic Chinese pricing even in the off market. I think what will be the determining factor here as they go into their next season, how will domestic Chinese pricing act versus the international market pricing and remember they are going in with relatively lower inventories than they have in the past. So, we are relatively positive about not only taking the basic contract tons, but then seeing what happens as the season really starts, and we are going to anticipate seeing much more prior to the season other than the contract tons.

And when you season starts, you are basically talking about when they come back in for additional volumes in May, June.

Yes, that’s right.

And, as you know, that you could do that other than the contract tons and until that contract.

Okay. And just a question on your pending transaction, how much capital are you expecting to combine and you [are going] to spend getting specifically at, you know, both companies have had rising rock costs, and obviously part of this trend -- the motivation this transaction is to optimize your common rock reserves and lower costs, just what's your overall CAPEX number on a pro forma basis?

I think it's too early to really address that in full. I think, though that Don, we feel there are significant benefits of combining, in particular, the mining operations and the sourcing from the various mines that we have. Utilizing the full capacity of those mines which may not be the case today, and therefore that probably over the longer period of time, what we will see is, capital requirements for mining are actually going down. So, I think, it's going to be probably just the opposite of what you are suggesting, we will see the benefits of the combination especially on the mining side and being able to longer term, anyway, minimize capital, reduce cost, and gain the benefits of efficiency in that combination. I think it's premature at this stage though to lay out a combined capital number since we really haven't started to looking at the combined strategy on mining.

Okay. Thank you.

One other thing, that I might, you know, follow up on, in terms of the China scenario, if you look at the contracts and the business is in place, I mentioned there is probably about 75% already in place, our base contract that being [inaudible] base contract is 1.6m tons and with the ability for another 300,000-400,000 tons on top of that, depending on where does the market goes. And then there is a base ton that comes from -- tonnage that comes from OCP on top of that, it is probably anywhere from 300,000,400,000 to 500,000 tons on a country to country basis. And there are direct sales, you know, from Cargill into China, that have historically been fairly strong in the 0.5m ton range, and then on top of that, there are contracts that [inaudible] will be putting in place. But if you put all that together there is already a very strong base tonnage for the China market as there has been in prior years. Thank you.

Our next question comes from Bruce Berger (ph.).

Yes. Do you any expectations of this PhosFeed cycle where the cash gross margin will be peak out per ton, per short ton? Do you think we can approach the $80-90 levels?

Yeah. I don’t know that we necessarily want to be projecting where that -- where that might peak out at. I think a good way to look at though would be in the range that you are talking about on what prior margins have been and if you look to the timeframe in which we saw pricing in a stable supply demand condition in the '96-'98 -- '95-'98 timeframe it suggests that margins during that timeframe when pricing was in the $195-200 metric ton export basis the DAP pricing margins were in that $72-80 range almost consistently for that period of time, picking up substantially above that but consistent for that 3-4 year period of time, maybe even a little bit longer consistently in that range.

What percentage of your capacity the Louisiana DAP plants operating at right now?

They would operating at above two-thirds. The DAP/MAP capacity in Louisiana is 3m short tons a year and we are running at about 2m. So about two-thirds. Just in Louisiana our system line were bit higher than that when you add Florida in.

And sir final question, are there any regulatory approvals that -- could you may be make a list of what regulatory approvals are needed for this deal to go through with Cargill.

You know I am not sure that I am the expert on that and we probably get some body else to give you a bit more details on that but clearly the various countries [similar] to the HSR review in the U.S. and we think the U.S. is clearly the biggest hurdle from that standpoint, but the U.S., Canada, Brazil probably China, Korea are a list of some, but again really its really the U.S. we think is the primary one.

Thanks.

Yeah Operator next question please.

Once again if any one would like to ask a question please press "*" "1" on your touchtone phone. Our next question comes from Duffy Fischer.

Yes, good afternoon fellow, we’ve seen margin in DAP increase you know fairly nicely since the beginning of the year. Now if you look at that from a timing standpoint I think almost everybody understand how the off shore market works with the 3-week delay, when do you start to realize that increase for domestic sales? You know because I am sure there is a mix of them, some people pre-buy a couple of months out but what's kind of a general rule on as we look at margin expansion? Is that something that hits your book say a month later, two months later, what should we be looking at there?

I think Duffy as you mentioned on an export base the primarily with China it's done on a market price less a three week lag on that. So you know that’s a pretty good indicator on for most of the exports. Domestically, they could be depending on the customer, with the spot [Inaudible] with his contract or not, there could be a four plus week lag on average, however what we have attempted to try and do is not to do significant winter fill programs and going in to this winter season the price more at the time of order then we have in the past and I think for IMCs part because of our very low inventory levels going out of the -- record low inventory levels in fact going out of the year, we have been very cognoscente to assure that we are abided by these [policies] as much as we can outside of the contracts that we have.

Fair enough. Then if you look for the first time in a long time, the U.S. potash market looks better than offshore. What are the odds that people don't take full advantage of the Canpotex allocations to try to push more volume in the U.S. You know, where you guys -- you know, the big [inaudible] and you know basically may be make that market softer than most people are thinking today?

I think it is a short-term issue on the potash side. That -- I think Canpotex is doing a great job in pushing freight rate increases because so much of the potash business is done on a delivered C&F basis. I think that's a short-term issue that we will see starting to correct itself quickly. We are seeing other potash producers pushing for as much price and being lead in many cases such as in India as Canpotex is. So I think we will see that to be the case. In addition to that the members of Canpotex are bound to provide their percentages to fill the requirements and remember we are talking about volumes both domestically and internationally that are up for fair amount versus prior years which is very positive to this than being rather than look at it as on a negative side.

Fair enough. The last question.

Another thing on the phosphate, on the pricing you are talking month a lag, I think it is important to know and I tried to point this out in my comments that it really wasn't until December, the third month obviously, the quarter that we really saw phosphate pricing really started to take off both internationally and domestically, and so that lag that we saw in the quarter remember it was only up on average $3 versus the sequential quarter; that’s going to may play a significant role, it's up now to 220 versus probably an average market price that was $40 plus less than that in the third quarter -- fourth quarter. So, that’s going to play a big role in 2004 in pushing up the margins.

Fair enough. Last question, if you look at your company and the outlook kind of excluding the mergers, so let’s just -- you know, obviously you did some planning before the merger was announced what you guys would look like is just IGL -- you know, were you guys pretty confident that you would be at least breakeven this year?

Yeah, I think we are looking each other because at this point in time, especially with the merger we are not giving full year guidance into the marketplace.

Fair enough, thanks.

Hey, we are approaching our 60-minute time limit, but operator I think we will try to end it, if there is one more question let’s take that and we will end it.

Our next question comes from Harvey Spielberg (ph.).

Yes, good afternoon. Can you tell me how you figure ethanol might effect corn demand, we planted record amounts of corn last year where you see that going over the next couple of years, and how regulatory changes in ethanol or gas plane is going to play into your demand forecast?

You know, Harvey, I don't think we have a good answer to that on a specific quantifiable basis, but clearly it's all positive, and we will push up demand. The combination of that was the fact that we are seeing the opportunity for North American export of corn to be up -- the combination of increased domestic demand push by ethanol as well as export demand, we think will be key drivers to hopefully higher corn prices, but also to the greater number of acres to be planted on the corn side domestically. And that’s going to drive more fertilizer usage.

I mean, how much from is there to increase acreage when you are ready at record acreage or is it said something that the market will adjust on the basis of price?

There isn’t too much [inaudible], and I be speculating how we maybe -- you know, there might be a couple of million acres, you know, they go tenth post to tenth post.

Another 2-3m acres on corn side, you know, which is the highest user of our fertilizers could really help and I think with the increased pricing that we are seeing in the corn and in being commodity it’s going to increase application rates on that as well. Some of the return for farmers in, you know, only a minimum amount of additional fertilizer usage and even with the higher pricing it’s very dramatic, it’s notable time to return based on the increase in commodity prices.

Okay

Economics are very strong and very good.

Last quick question regarding freight cost in potash, are there any strategies you can implement to offset some of that, for example, taking product from a competitor overseas or swapping product from a competitor overseas, any other strategies in the future you could use to offset because the -- obviously the freight impact has been quite significant?

No, I am sure there are -- we’ll continue to look at merger and other issues and maybe Cargill can help -- provide some additional insight to that as well.

Okay. Thank you.

Operator, I think we’ve reached our time limit here, and we’ll close down the call now. And on behalf of everyone here at IMC Global I want to thank all of you for taking part in our fourth quarter and full year 2003 conference call today and we -- hope you have a good day. Thanks very much.

Thank you very much, and this concludes today’s call. Thank you.