Agrium Announces Best Quarterly Earnings in Six Years.CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. -- ALL AMOUNTS ARE STATED IN U.S.$ Agrium Agrium Inc. NYSE: AGU TSX: AGU engages in the production, marketing, and distribution of agricultural products and services, and nutrients for agricultural and industrial markets in the United States and Argentina. Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension : AGU AGU Aoyama Gakuin University, Tokyo, Japan AGU American Geophysical Union AGU Arabian Gulf University (Bahrain) AGU All Grown Up (TV show) AGU Aguascalientes, Aguascalientes, Mexico ) (NYSE NYSE See: New York Stock Exchange : AGU) announced today that net earnings for the second quarter of 2004 were $75-million ($0.52 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of ), a significant improvement over net earnings of $69-million ($0.47 diluted earnings per share) for the same period in 2003. Net earnings for the first six months of the year were $87-million ($0.60 diluted earnings per share) exceeding 2003 net earnings of $63-million ($0.43 diluted earnings per share) for the same period. Net earnings for the first six months of 2004 improved over the prior period, despite higher costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. with Union Oil Company of California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). ("Unocal"). These Kenai Kenai may refer to:
Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement. expenses (under dispute), litigation charges and other expenses, including higher gas costs relating to excess gas royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. . In total, these costs amounted to over $27-million for the first half of 2004, compared to a total of only $2-million in the first half of 2003. Second quarter results do not reflect the positive impact of the Arbitration Panel arbitration panel A group of individuals charged with resolving a dispute between individuals and/or organizations. Arbitration panels to resolve investment disputes are sponsored by self-regulatory organizations such as NASD. ruling, including $39-million in damages awarded to Agrium, which will be recorded in the third quarter of 2004. "The second quarter results were the best in six years and represent a continuation continuation - continuation passing style of what we believe to be an improving nitrogen nitrogen (nī`trəjən), gaseous chemical element; symbol N; at. no. 7; at. wt. 14.0067; m.p. −209.86°C;; b.p. −195.8°C;; density 1.25 grams per liter at STP; valence principally −3, +3, or +5. cycle," said Mike Wilson Mike Wilson could refer to the following people:
potash Name used for various inorganic compounds of potassium, chiefly the carbonate (K2CO3), a white crystalline material formerly obtained from wood ashes. prices continued to increase while phosphate phosphate, salt or ester of phosphoric acid, H3PO4. Because phosphoric acid is tribasic (having three replaceable hydrogen atoms), it forms monophosphate, diphosphate, and triphosphate salts in which one, two, or three of the hydrogens of the prices remained relatively stable. Retail sales rebounded to post an 18 percent improvement in EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). over the second quarter of 2003. "The outlook for fertilizer fertilizer, organic or inorganic material containing one or more of the nutrients—mainly nitrogen, phosphorus, and potassium, and other essential elements required for plant growth. fundamentals continues to be positive and as a result we expect year-over-year earnings improvement to continue," said Mr. Wilson Wilson, city (1990 pop. 36,930), seat of Wilson co., E N.C., in a rich agricultural region; inc. 1849. It is a commercial and industrial center with a large tobacco market. Manufactures include textile goods (especially clothing), metal products, and processed foods. . It is difficult to give guidance given the volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the of nutrient nutrient /nu·tri·ent/ (noo´tre-int) 1. nourishing; providing nutrition. 2. a food or other substance that provides energy or building material for the survival and growth of a living organism. prices, North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. gas prices, global freight rates Noun 1. freight rate - the charge for transporting something by common carrier; "we pay the freight"; "the freight rate is usually cheaper" freightage, freight , the uncertainty of Chinese Chinese, subfamily of the Sino-Tibetan family of languages (see Sino-Tibetan languages), which is also sometimes grouped with the Tai, or Thai, languages in a Sinitic subfamily of the Sino-Tibetan language stock. fertilizer trade levels and potential for high nutrient prices to impact demand levels. Agrium's earnings guidance for the second half of 2004 is $0.45 to $0.50 diluted earnings per share. This earnings guidance does not take into account the positive results from the recent Arbitration Panel ruling, specifically the $39-million in damages inclusive of inclusive of prep. Taking into consideration or account; including. interest ($23-million after tax or $0.16 diluted earnings per share) or any positive operational results from Unocal's increased gas supply obligation to our Kenai, Alaska This article is about a city in Alaska. For the character from Disney's Brother Bear, see Kenai (Brother Bear). Kenai is a city in Kenai Peninsula Borough in the U.S. state of Alaska. nitrogen facility. Furthermore, it does not incorporate the increase in nitrogen prices experienced over the past few weeks. Should these higher prices hold, or increase from current levels, we would expect further upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside to our earnings. KEY DEVELOPMENTS Tight supply and demand fertilizer fundamentals continued throughout the second quarter. Nitrogen pricing rose as demand growth and recent U.S. plant closures more than offset additions in world nitrogen capacity. NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). natural gas price increased by $0.49/MMBtu in the second quarter of 2004, compared to the second quarter of 2003. Agrium's average gas price rose from $3.48/MMBtu in the second quarter of 2003 to $3.66/MMBtu in the second quarter of 2004, an increase of only $0.18/MMBtu. This smaller change in Agrium's natural gas price is largely due to our gas price advantage resulting from the AECO AECO Aeromedical Evacuation Control Officer AECO Advance Engineering Change Order AECO Architecture, Engineering, Construction and Owner-operated differential. - The Arbitration Panel recently awarded Agrium $39-million in damages including interest, and determined Unocal's gas delivery obligation to the Kenai facility for the contract years through to 2007 at volumes higher than previously indicated. Unocal has indicated it expects that production from dedicated fields will be less than its gas supply obligations as determined by the Arbitration Panel. Kenai operated at an average rate of 88 percent of capacity during the second quarter of 2004, increasing to more than 95 percent of capacity in May and June, taking advantage of additional seasonal gas. These deliveries were supplied 76 percent by Unocal and the balance from higher cost, third party sources. - Gross profit for North and South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. Wholesale increased by $15-million ($7-million and $8-million respectively), as Agrium held first half 2004 nitrogen margins above previous year levels despite volatility in world nitrogen prices. - Carseland Nitrogen Operations and both Redwater redwater red urine; see hemoglobinuria, hematuria, myoglobinuria, phenothiazine, phenolphthalein, xanthorrhoea. redwater fever see babesiosis. and Kapuskasing Kapuskasing (kăpəskā`sĭng), town (1991 pop. 10,344), central Ont., Canada, on the Kapuskasing River, N of Timmins. It has lumbering and pulp and paper mills, a cold-weather automotive testing center, and a large tourism industry. Phosphate Operations achieved new monthly production records during the quarter. North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. Wholesale inventories were 181-thousand metric tonnes lower as at June 30, 2004 than they were at June 30, 2003. - Overall, Retail EBIT improved in the second quarter of 2004 by $8-million over the second quarter of 2003, and North America Retail recorded its best ever second quarter EBIT. MANAGEMENT'S DISCUSSION AND ANALYSIS Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial July July: see month. 27, 2004 The following interim management's discussion and analysis (MD&A) updates our annual MD&A included in our 2003 Annual Report to Shareholders, to which readers are referred. No update is provided where an item is not material or there has been no material change from the discussion in our annual MD&A. OVERVIEW OF CONSOLIDATED con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: FINANCIAL HIGHLIGHTS Net Earnings Agrium's consolidated net earnings for the second quarter of 2004 were $75-million or $0.52 diluted earnings per share. Net earnings increased $6-million over the same quarter last year and diluted earnings per share were up $0.05 compared to $0.47 in the second quarter of 2003. For the six months ended June 30, 2004, consolidated net earnings were $87-million, up $24-million compared to net earnings of $63-million for the same period in 2003. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. diluted earnings per share were $0.60 compared to $0.43 for the comparative six months ended June 30, 2003. Increased earnings were driven by higher international and domestic pricing for most of our products, particularly potash and nitrogen, resulting from a tightened global supply/demand balance. Higher fertilizer prices and volumes contributed to increased margins in our retail businesses. Cash Provided by Operating Activities Cash flow from operating activities for the second quarter of 2004 was $23-million compared to $36-million for the same quarter of 2003. This decline is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a $146-million increase in non-cash working capital, largely due to a $149-million increase in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying . Accounts receivable are up over last year primarily as a result of not using our accounts receivable securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. program this year compared to a $125-million asset securitization at June 30, 2003. Cash flow from operating activities for the six months ended June 30, 2004 was up $54-million to $125-million. The increase is mainly due to improved earnings of $24-million combined with a decrease in net change in non-cash working capital of $23-million compared to the same period in 2003. Financial Position In May 2004, we entered into a $450-million three-year syndicated revolving unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. credit facility which replaced existing credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. in 2004 totaling $281-million. In addition to improved pricing and terms, the extended expiration date Expiration Date The day on which an options or futures contract is no longer valid and, therefore, ceases to exist. Notes: The expiration date for all listed stock options in the U.S. and higher borrowing limits of the new facility complements our growth strategy and provides us with increased liquidity and flexibility for short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. borrowings. The primary financial covenants include restrictions on the amount of additional debt, maximum debt to capital ratios and minimum EBITDA-interest coverage ratios. We were in compliance with all applicable covenants as at June 30, 2004. Business Segment Performance North America Wholesale - Wholesale EBIT for the second quarter of 2004 was $74-million, down $12-million from EBIT of $86-million for the same period last year. - Second quarter gross profit was $137-million in 2004, up from $130-million last year. Increased prices for nitrogen and potash, a result of a tightened supply/demand balance both domestically and internationally, were the primary drivers underlying the $7-million increase in gross profit in the second quarter of 2004 compared to the second quarter of 2003. However, nitrogen gross profit was negatively impacted by higher cost of product for urea and ammonia ammonia, chemical compound, NH3, colorless gas that is about one half as dense as air at ordinary temperatures and pressures. It has a characteristic pungent, penetrating odor. and lower ammonia sales volumes. - Overall, expenses are up $34-million in the second quarter of 2004 compared to the same period of 2003. Factors most significantly impacting this increase are Kenai Earn-out related expenses, litigation charges and other expenses, including higher gas costs relating to gas royalties, which totaled $18-million. Agrium continues to dispute our liability with respect to the payment of the Earn-out. Higher depreciation and potash profit tax recorded as royalties, were additional factors contributing to the increase. - On July 22, 2004, an Arbitration Panel decision was received with respect to the Corporation's dispute with Union Oil Company of California ("Unocal") over gas supply obligations to our Kenai, Alaska plant. The Panel awarded Agrium damages of $37-million plus interest of $2-million for failure of Unocal to supply the required daily quantities to April 2004 and directed determination of further damages to June 30, 2004. We will reflect the damage award in the Corporation's third quarter financial results. South America Wholesale - Wholesale EBIT was $21-million for the second quarter of 2004, up $8-million from $13-million EBIT for the same quarter last year. Improved EBIT is directly related to increased ammonia and urea prices and increased urea volumes, consistent with a tightened global supply/demand balance. North America Retail - Retail EBIT for the second quarter of 2004 was $48-million, up $6-million from the same period last year. Higher fertilizer prices and sales volumes were the primary drivers behind a $12-million improvement in gross profit for the second quarter year-over-year. Selling expenses increased $5-million in the second quarter of 2004, compared to the second quarter of 2003, which correlates directly with increased sales volume. South America Retail - Second quarter EBIT for Retail was $4-million for 2004, up $2-million from the second quarter of 2003. The increase is primarily a result of higher fertilizer prices and sales volumes, while higher chemical prices also contributed to the increase. Other - EBIT for our Other non-operating business segment for the second quarter of 2004 was a loss of $20-million from a loss of $13-million for the same period last year. This change is a result of a foreign exchange loss in 2004 compared to a foreign exchange gain in 2003.
SELECTED QUARTERLY INFORMATION
(Unaudited, in millions of U.S. dollars, except per share information)
2004 2003 2002
----------- ----------------------- -------------
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
----------- ----------------------- -------------
Net sales 1,011 435 637 561 929 372 507 466
Gross Profit 283 142 204 172 252 111 142 133
Net earnings (loss) 75 12 (109) 25 69 (6) 12 1
Earnings (loss)
per share
-basic 0.56 0.07 (0.89) 0.18 0.53 (0.07) 0.07 (0.01)
-diluted 0.52 0.07 (0.89) 0.17 0.47 (0.07) 0.07 (0.01)
The fertilizer business is seasonal in nature. As a result, quarter-to-quarter comparisons are not directly comparable. NON-GAAP MEASURES In the discussion of our performance for the quarter, in addition to the primary measures of earnings and earnings per share, we make reference to EBIT (earnings before interest expense and income taxes) and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (earnings before interest expense, income taxes, depreciation and amortization). We consider EBIT and EBITDA to be useful measures of performance because income tax jurisdictions and business segments are not synonymous, and we believe that allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of income tax charges distorts the comparability of historical performance for the different business segments. Similarly, financing and related interest charges cannot be allocated to all business segments on a basis that is meaningful for comparison with other companies. EBIT and EBITDA measures are also used extensively in the covenants relating to our financing arrangements. EBIT and EBITDA are not recognized measures under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , and our method of calculation may not be comparable to other companies. EBIT should therefore not be used as an alternative to net earnings (loss) determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP as an indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of our performance. Similarly, EBITDA should not be used as an alternative to cash provided by (used in) operating activities as determined in accordance with GAAP. KEY RISKS AND UNCERTAINTIES Looking Forward to the Second Half 2004 As Agrium looks toward the second half of 2004, there are a number of factors that may positively impact the second half results: - International ammonia and urea prices have increased significantly in June and July supported by strong import demand from regions such as South America and India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. combined with production turnarounds and curtailments in the former Soviet Union, North America, and Indonesia Indonesia (ĭn'dənē`zhə), officially Republic of Indonesia, republic (2005 est. pop. 241,974,000), c.735,000 sq mi (1,903,650 sq km), SE Asia, in the Malay Archipelago. . Prices continue to strengthen in what is traditionally a weak pricing season. - Potash prices continue to improve due to strong U.S. and international demand. North American potash inventories continue to decline and are currently 46% below the 5-year average. - Phosphate prices continue to be supported by strong export demand and declining inventories for both DAP and MAP. - Strong Chinese domestic demand combined with internal transportation problems could limit the availability of Chinese urea on the international market. - Ocean freight rates have increased in July following the steady decline in rates throughout the second quarter. Further strengthening of ocean freight rates could positively impact Agrium's South and domestic North American nitrogen netbacks but could negatively impact Agrium's offshore potash. - The USDA USDA, n.pr See United States Department of Agriculture. is forecasting a record U.S. corn crop in 2004 and prices well above five-year averages for all the major row crops, supporting strong farm income levels and the ability of farmers to finance farm inputs. - Moisture moisture wetness due to any liquid; usually refers to water as a component, e.g. in feed. moisture free a substance heated at 220°F (105°C) to constant weight. Called also oven-dry or 100% dry matter. conditions in Western Canada
Western Canada, commonly referred to as the West have improved significantly compared to the conditions in early spring 2004, which should result in increased yields and support nutrient demand. Offsetting these positive indicators are some negative factors that may adversely impact the second half results: - Continued high and volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. North American natural gas prices could negatively impact North America Wholesale's margins. - Additional nitrogen capacity is expected to come on-stream on-stream adv. & adj. In or into operation or production. in the second half of 2004, which may have some impact on current high prices if demand is significantly less than expectations. - The ban on Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. beef imports by key trading partners as a result of Bovine Spongiform Encephalopathy bovine spongiform encephalopathy: see prion. (BSE See Bombay Stock Exchange. BSE See Boston Stock Exchange (BSE). ) will continue to negatively impact Canadian farm income. - Strengthening in the Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents would negatively impact Agrium's costs in its Canadian operations. OTHER Agrium Inc. is a leading global producer and marketer of agricultural nutrients and industrial products and a major retail supplier of agricultural products and services in both North America and Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. . Agrium produces and markets three primary groups of nutrients: nitrogen, phosphate and potash as well as micronutrients This is a list of micronutrients. Vitamins
Incremental cost is additional or increased cost of an item or service apart from its actual cost. expansion of its existing operations and acquisitions as well as the development, commercialization and marketing of new products and international opportunities. Certain statements in this press release constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Such forward-looking statements involve known and unknown risks and uncertainties, including those referred to in the management discussion and analysis section of the Corporation's most recent annual report to shareholders, which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements. A number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, weather conditions, the future supply, demand, price level and volatility of natural gas, future prices of nitrogen, phosphate and potash, the differential pricing of natural gas in various markets, pending litigation between the Corporation and Unocal, the application and enforceability of a $50-million cap on the amount of liquidated damages Monetary compensation for a loss, detriment, or injury to a person or a person's rights or property, awarded by a court judgment or by a contract stipulation regarding breach of contract. under the Kenai gas supply contract, the impact of any future reserves recertification recertification Recredentialing Graduate education A process in which a professional is periodically re-evaluated–eg, every 10 yrs by an accrediting body to assure continued provision of safe, high-quality health care on the volumes of gas reserves dedicated to the Kenai facility, the future gas prices and availability at Kenai, the exchange rates for U.S., Canadian and Argentine Argentine having some relationship with the country Argentina. Argentine tick margaropuswinthemi. Argentine tortoise geochelonechilensis. currencies, Argentine domestic fertilizer consumption, future fertilizer inventory levels, future nitrogen, potassium potassium (pətăs`ēəm), a metallic chemical element; symbol K [Lat. kalium=alkali]; at. no. 19; at. wt. 39.0983; m.p. 63.25°C;; b.p. 760°C;; sp. gr. .862 at 20°C;; valence +1. and phosphate consumption in North America, future crop prices, future levels of nitrogen imports into North America and future additional fertilizer capacity and operating rates Operating rate The percentage of total production capacity of a company, industry, or country that is being used. operating rate The portion of capacity at which a business operates. . Agrium disclaims any intention or obligation to update or revise any forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information as a result of new information or future events. A WEBSITE SIMULCAST Simulcast is a portmanteau of "simultaneous broadcast", and refers to programs or events broadcast across more than one medium, or more than one service on the same medium, at the same time. of the 2004 2nd Quarter Conference Call will be available in a listen-only mode beginning Wednesday Wednesday: see week. , July 28th at 8:00 a.m. MDT MDT abbr. Mountain Daylight Time MDT (in the US and Canada) Mountain Daylight Time MDT n abbr (US) (= mountain daylight time) → (10:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ). Please visit the following website: www.agrium.com
AGRIUM INC.
Consolidated Statements of Operations and Retained Earnings
(Millions of U.S. dollars except per share information)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
------------------ ----------------
Sales $ 1,055 $ 966 $ 1,519 $ 1,361
Direct freight 44 37 73 60
------------------ ----------------
Net sales 1,011 929 1,446 1,301
Cost of product 728 677 1,021 938
------------------ ----------------
Gross profit 283 252 425 363
------------------ ----------------
Expenses
Selling, general and
administrative 77 74 143 133
Depreciation and amortization 39 35 77 66
Royalties and other taxes 8 4 14 9
Other expenses 32 9 33 20
------------------ ----------------
156 122 267 228
------------------ ----------------
Earnings before interest
expense and income taxes 127 130 158 135
Interest on long-term debt 13 15 26 29
Other interest 2 3 2 4
------------------ ----------------
Earnings before income taxes 112 112 130 102
------------------ ----------------
Current income taxes 32 29 37 29
Future income taxes 5 14 6 10
------------------ ----------------
Income taxes 37 43 43 39
------------------ ----------------
Net earnings 75 69 87 63
Retained earnings
- beginning of period 155 182 145 191
Common share dividends
declared (7) (7) (7) (7)
Preferred securities charges (2) (2) (4) (5)
------------------ ----------------
Retained earnings
- end of period $ 221 $ 242 $ 221 $ 242
------------------ ----------------
------------------ ----------------
Earnings per share (note 6)
Basic $ 0.56 $ 0.53 $ 0.63 $ 0.46
Diluted $ 0.52 $ 0.47 $ 0.60 $ 0.43
AGRIUM INC.
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
------------------ ----------------
Operating
Net earnings $ 75 $ 69 $ 87 $ 63
Items not affecting cash
Depreciation and amortization 39 35 77 66
Future income taxes 5 14 6 10
Net change in non-cash
working capital (96) (82) (45) (68)
------------------ ----------------
Cash provided by
operating activities 23 36 125 71
------------------ ----------------
Investing
Capital expenditures (22) (22) (35) (31)
Increase in other assets (3) (3) (5) -
Proceeds from disposal of
assets and investments 1 6 2 11
Other 5 3 7 7
------------------ ----------------
Cash used in investing
activities (19) (16) (31) (13)
------------------ ----------------
Financing
Common shares 1 - 3 -
Bank indebtedness proceeds
(repayment) - (2) 1 (1)
Long-term debt repayment (9) - (91) (2)
Common share dividends paid - - (7) (7)
Preferred securities
charges paid (2) (2) (4) (5)
------------------ ----------------
Cash used in financing
activities (10) (4) (98) (15)
------------------ ----------------
Increase (decrease) in cash
and cash equivalents (6) 16 (4) 43
Cash and cash equivalents
- beginning of period 202 136 200 109
------------------ ----------------
Cash and cash equivalents
- end of period $ 196 $ 152 $ 196 $ 152
------------------ ----------------
------------------ ----------------
AGRIUM INC.
Consolidated Balance Sheets
(Millions of U.S. dollars)
(Unaudited)
As at As at
June 30, December 31,
---------------- -----------
2004 2003 2003
---------------- -----------
ASSETS
Current assets
Cash and cash equivalents $ 196 $ 152 $ 200
Accounts receivable 436 287 314
Inventories 394 405 368
Prepaid expenses 48 26 60
---------------- ----------
1,074 870 942
Capital assets 1,197 1,472 1,260
Other assets 69 90 71
---------------- ----------
$ 2,340 $ 2,432 $ 2,273
---------------- ----------
---------------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 483 $ 411 $ 404
Current portion of long-term debt 46 104 121
---------------- ----------
529 515 525
Long-term debt
Recourse debt 498 533 503
Non-recourse debt 99 124 111
---------------- ----------
597 657 614
Other liabilities 198 177 181
Future income taxes 130 187 132
---------------- ----------
1,454 1,536 1,452
---------------- ----------
Shareholders' equity
Share capital
Authorized: unlimited common shares
and preferred securities
Issued:
Common shares: 2004 - 131 million
(2003 - 126 million) 544 485 490
Preferred securities:
8% Redeemable 2004 - seven million
(2003 - seven million) 172 172 172
6% Convertible, redeemable 2004 - nil
(2003 - two million) (note 4) - 50 50
Contributed surplus 1 - 1
Retained earnings 221 242 145
Cumulative translation adjustment (52) (53) (37)
---------------- ----------
886 896 821
---------------- ----------
$ 2,340 $ 2,432 $ 2,273
---------------- ----------
---------------- ----------
AGRIUM INC.
Summarized Notes to the Consolidated Financial Statements
For the six months ended June 30, 2004
(Millions of U.S. dollars, except per share amounts)
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES The Corporation's accounting policies are in accordance with accounting principles generally accepted in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and are consistent with those outlined in the annual audited financial statements except where stated below. These interim consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge do not include all disclosures normally provided in annual financial statements and should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the Corporation's audited consolidated financial statements for the year ended December December: see month. 31, 2003. In management's opinion, the interim consolidated financial statements include all adjustments necessary to present fairly such information. Certain comparative figures have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the current year's presentation. 2. BANK INDEBTEDNESS INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. In May 2004, Agrium Inc. and its wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , Agrium U.S. Inc., entered into a $450-million three-year syndicated revolving unsecured credit facility. The new credit agreement replaced Agrium Inc.'s $225-million credit facility due in May 2004 and Agrium U.S. Inc.'s $56-million credit facility due in December 2004. Under the terms of the agreement, Agrium Inc. and Agrium U.S. Inc. may borrow Borrow To obtain or receive money on loan with the promise or understanding that it will be repaid. a maximum principal amount of $325-million and $125-million respectively. Interest rates are at either Canadian prime rate plus a variable margin, U.S. base rate established by a bank plus a variable margin, LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). plus a variable margin or bankers' acceptance A bankers' acceptance, or BA, is a time draft drawn on and accepted by a bank. Before acceptance, the draft is not an obligation of the bank; it is merely an order by the drawer to the bank to pay a specified sum of money on a specified date to a named person or to the rate plus a variable margin, at the election of the borrower BORROWER, contracts. He to whom a thing is lent at his request. 2. The contract of loan confers rights, and imposes duties on the borrower' 1. In general, he has the right to use the thing borrowed, during the time and for the purpose intended between the . The credit facility requires that Agrium Inc. maintain certain financial ratios and other covenants. 3. EMPLOYEE FUTURE BENEFITS The total net employee future benefits expense for the Corporation's pension and post-retirement benefit plans are computed as follows:
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
------------------ ----------------
Defined benefit pension plans $ 2 $ 2 $ 4 $ 4
Post-retirement benefit plans 1 1 3 2
Defined contribution pension
plans 2 2 7 6
------------------ ----------------
Total expense $ 5 $ 5 $ 14 $ 12
------------------ ----------------
------------------ ----------------
This expense is reflected in our cost of product and general and administrative expenses. 4. SHARE CAPITAL In January 2004, all holders of the six percent convertible, redeemable Redeemable Eligible for redemption under the terms of an indenture. preferred securities elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. to convert the securities into common shares at the stated conversion price Stated conversion price At the time of issuance of a convertible security, the price the issuer effectively grants the securityholder to purchase the common stock, equal to the par value of the convertible security divided by the conversion ratio. of $11.9677 per share, resulting in the issuance of an additional 4.18 million common shares. 5. STOCK BASED COMPENSATION The Corporation began prospectively expensing the fair value of stock options granted in 2003 over their vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period. In accordance with the prospective method of adoption, the Corporation has recorded no compensation expense for stock options granted prior to January 1, 2003 and will continue to provide pro-forma disclosure of the effect on net earnings (loss) and earnings (loss) per share had the fair value been expensed. The following table summarizes the pro-forma disclosure for stock options granted prior to 2003 that have not been expensed.
Three months ended
June 30,
-----------------------------------------------
2004 2003
----------------------- ---------------------
As Pro As Pro
Reported forma Reported forma
----------------------- ---------------------
Net earnings $ 75 $ 74 $ 69 $ 68
Earnings per share
Basic $ 0.56 $ 0.55 $ 0.53 $ 0.52
Diluted $ 0.52 $ 0.51 $ 0.47 $ 0.46
Six months ended
June 30,
-----------------------------------------------
2004 2003
----------------------- ---------------------
As Pro As Pro
Reported forma Reported forma
----------------------- ---------------------
Net earnings $ 87 $ 85 $ 63 $ 60
Earnings per share
Basic $ 0.63 $ 0.62 $ 0.46 $ 0.43
Diluted $ 0.60 $ 0.59 $ 0.43 $ 0.41
6. EARNINGS PER SHARE
The following table summarizes the computation of net earnings
per share:
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
--------- ------- ------- -------
Numerator:
Net earnings $ 75 $ 69 $ 87 $ 63
Preferred securities
charges (net of tax) (2) (2) (4) (5)
--------- ------- ------- -------
Numerator for basic
earnings per share 73 67 83 58
--------- ------- ------- -------
--------- ------- ------- -------
Preferred securities
charges (net of tax) 2 2 4 5
--------- ------- ------- -------
Numerator for diluted
earnings per share 75 69 87 63
----------- ----- ---------- ----
----------- ----- ---------- ----
Denominator:
Weighted average
denominator for basic
earnings per share 131 126 130 126
--------- ------- ------- -------
--------- ------- ------- -------
Dilutive instruments:
Stock options (a) 1 1 1 1
Preferred securities
converted to common shares
$175-million, eight
percent (a) 13 16 13 16
$50-million, six
percent (note 4)(a) - 4 - 4
--------- ------- ------- -------
Denominator for diluted
earnings per share 145 147 144 147
--------- ------- ------- -------
--------- ------- ------- -------
Basic earnings per share $ 0.56 $ 0.53 $ 0.63 $ 0.46
Diluted earnings per share $ 0.52 $ 0.47 $ 0.60 $ 0.43
(a) For diluted earnings per share, these dilutive instruments are
added back only when the impact of the instrument is dilutive to
basic earnings per share
There were 131 million common shares outstanding at June 30, 2004 (2003 - 126 million). As at June 30, 2004, the Corporation has outstanding approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. nine million options and options with tandem (Tandem Computers Inc., Cupertino, CA) A former major manufacturer of fault-tolerant computers founded in 1974 by James Treybig and provider of the early 21st century technology for HP's enterprise computing strategy. stock appreciation rights to acquire common shares. 7. SEASONALITY The fertilizer business is seasonal in nature. Sales are concentrated in the spring and fall planting seasons while produced inventories are accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. throughout the year. Cash collections generally occur after the planting seasons in North and South America. 8. SEGMENTED INFORMATION The Corporation's primary activity is the production and wholesale marketing of nitrogen, potash and phosphate and the retail sales of fertilizers, chemicals and other agricultural inputs and services. The Corporation operates principally in Canada, the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Argentina. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight between segments are accounted for at prices which approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. fair market value and are eliminated on consolidation. The reportable segment entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Other" includes Corporate functions and inter-segment eliminations. 9. SUBSEQUENT EVENT Subsequent to June 30, 2004, an Arbitration Panel decision was received with respect to the Corporation's dispute with Union Oil Company of California ("Unocal") over gas supply obligations to our Kenai, Alaska plant. The Panel awarded Agrium damages of $37-million plus interest of $2-million for failure of Unocal to supply the required daily quantities to April 2004 and directed determination of further damages to June 30, 2004. We will reflect the damage award in the Corporation's third quarter financial results.
Schedule 1
AGRIUM INC.
Segmentation
(unaudited - millions of U.S. dollars)
Three Months Ended June 30
--------------------------------------------
North America North America South America
Wholesale Retail Wholesale
--------------------------------------------
2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ----
Net sales
- external $ 488 $ 476 $ 460 $ 407 $ 33 $ 23
- inter-segment 27 21 - - 3 2
--------------------------------------------
Total net sales 515 497 460 407 36 25
Cost of product 378 367 349 308 10 7
--------------------------------------------
Gross profit 137 130 111 99 26 18
Gross profit % 27% 26% 24% 24% 72% 72%
--------------------------------------------
--------------------------------------------
Selling Expenses $ 4 $ 4 $ 57 $ 52 $ - $ -
EBIT (1) $ 74 $ 86 $ 48 $ 42 $ 21 $ 13
EBITDA (2) $ 102 $ 110 $ 53 $ 47 $ 25 $ 17
Schedule 1
(cont.)
Three Months Ended June 30
--------------------------------------------
South America
Retail Other Total
--------------------------------------------
2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ----
Net sales
- external $ 30 $ 23 $ - $ - $1,011 $ 929
- inter-segment - - (30) (23) - -
--------------------------------------------
Total net sales 30 23 (30) (23) 1,011 929
Cost of product 23 20 (32) (25) 728 677
--------------------------------------------
Gross profit 7 3 2 2 283 252
Gross profit % 23% 13% (7)% (9)% 28% 27%
--------------------------------------------
--------------------------------------------
Selling Expenses $ 4 $ 3 $ (1) $ - $ 64 $ 59
EBIT (1) $ 4 $ 2 $ (20) $ (13) $ 127 $ 130
EBITDA (2) $ 4 $ 2 $ (18) $ (11) $ 166 $ 165
Schedule 1
(cont.)
AGRIUM INC.
Segmentation
(unaudited - millions of U.S. dollars)
Six Months Ended June 30
--------------------------------------------
North America North America South America
Wholesale Retail Wholesale
--------------------------------------------
2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ----
Net sales
- external $ 748 $ 695 $ 606 $ 533 $ 53 $ 43
- inter-segment 43 37 - - 4 3
--------------------------------------------
Total net sales 791 732 606 533 57 46
Cost of product 572 546 450 392 17 14
--------------------------------------------
Gross profit 219 186 156 141 40 32
Gross profit % 28% 25% 26% 26% 70% 70%
--------------------------------------------
-------------------------------------------
Selling Expenses $ 8 $ 7 $ 103 $ 96 $ - $ 1
EBIT (1) $ 110 $ 99 $ 44 $ 37 $ 31 $ 24
EBITDA (2) $ 167 $ 145 $ 53 $ 46 $ 38 $ 32
Schedule 1
(cont.)
Six Months Ended June 30
--------------------------------------------
South America
Retail Other Total
--------------------------------------------
2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ----
Net sales
- external $ 39 $ 30 $ - $ - $1,446 $1,301
- inter-segment - - (47) (40) - -
--------------------------------------------
Total net sales 39 30 (47) (40) 1,446 1,301
Cost of product 30 26 (48) (40) 1,021 938
--------------------------------------------
Gross profit 9 4 1 - 425 363
Gross profit % 23% 13% (2)% 0% 29% 28%
--------------------------------------------
--------------------------------------------
Selling Expenses $ 6 $ 4 $ (1) $ (1) $ 116 $ 107
EBIT (1) $ 3 $ 2 $ (30) $ (27) $ 158 $ 135
EBITDA (2) $ 3 $ 2 $ (26) $ (24) $ 235 $ 201
(1) Earnings (loss) before interest expense and income taxes.
(2) Earnings (loss) before interest expense, income taxes,
depreciation and amortization.
Schedule 2(a)
AGRIUM INC.
Product Lines
Three Months Ended June 30
(unaudited - millions of U.S. dollars)
--------------------------------------------
2004
--------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
--------------------------------------------
North America Wholesale
Nitrogen (1)
Ammonia $ 136 $ 37 506 $ 269 $ 73
Urea 140 29 683 205 42
Nitrate, Sulphate
and Other 97 25 521 186 48
--------------------------------------------
Total Nitrogen 373 91 1,710 218 53
Phosphate 85 19 336 253 57
Potash (2) 57 27 510 112 53
--------------------------------------------
515 137 2,556 201 54
South America Wholesale (1) 36 26 190 189 137
North America Retail
Fertilizers 212 53
Chemicals 180 30
Other 68 28
--------------
460 111
South America Retail 30 7
Inter-segment (30) 2
--------------
Total $ 1,011 $ 283
--------------
--------------
Schedule 2(a)
(cont.)
AGRIUM INC.
Product Lines
Three Months Ended June 30
(unaudited - millions of U.S. dollars)
--------------------------------------------
2003
--------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
--------------------------------------------
North America Wholesale
Nitrogen (1)
Ammonia $ 145 $ 39 571 $ 254 $ 68
Urea 133 34 661 201 51
Nitrate, Sulphate
and Other 94 25 533 176 47
--------------------------------------------
Total Nitrogen 372 98 1,765 211 56
Phosphate 78 14 305 256 46
Potash (2) 47 18 480 98 38
--------------------------------------------
497 130 2,550 195 51
South America Wholesale (1) 25 18 145 172 124
North America Retail
Fertilizers 174 50
Chemicals 175 27
Other 58 22
--------------
407 99
South America Retail 23 3
Inter-segment (23) 2
--------------
Total $ 929 $ 252
--------------
--------------
(1) International nitrogen sales were 524,000 tonnes (2003 - 587,000)
and gross profit was $24-million (2003 - $41-million) for the three
months ended June 30.
(2) International potash sales were 199,000 tonnes (2003 - 170,000)
and gross profit was $11-million (2003 - $7-million) for the three
months ended June 30.
Schedule 2(b)
AGRIUM INC.
Product Lines
Six Months Ended June 30
(unaudited - millions of U.S. dollars)
--------------------------------------------
2004
--------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
--------------------------------------------
North America Wholesale
Nitrogen (1)
Ammonia $ 210 $ 60 788 $ 266 $ 76
Urea 206 45 983 210 46
Nitrate, Sulphate
and Other 143 37 762 188 49
--------------------------------------------
Total Nitrogen 559 142 2,533 221 56
Phosphate 128 30 499 257 60
Potash (2) 104 47 949 110 50
--------------------------------------------
791 219 3,981 199 55
South America Wholesale (1) 57 40 294 194 136
North America Retail
Fertilizers 286 72
Chemicals 237 50
Other 83 34
--------------
606 156
South America Retail 39 9
Inter-segment (47) 1
--------------
Total $ 1,446 $ 425
--------------
--------------
Schedule 2(b)
(cont.)
AGRIUM INC.
Product Lines
Six Months Ended June 30
(unaudited - millions of U.S. dollars)
--------------------------------------------
2003
--------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
--------------------------------------------
North America Wholesale
Nitrogen (1)
Ammonia $ 194 $ 49 817 $ 237 $ 60
Urea 203 49 1,070 190 46
Nitrate, Sulphate
and Other 132 35 748 176 47
--------------------------------------------
Total Nitrogen 529 133 2,635 201 50
Phosphate 124 23 501 248 46
Potash (2) 79 30 820 96 37
--------------------------------------------
732 186 3,956 185 47
South America Wholesale (1) 46 32 284 162 113
North America Retail
Fertilizers 233 66
Chemicals 230 48
Other 70 27
---------------
533 141
South America Retail 30 4
Inter-segment (40) -
---------------
Total $ 1,301 $ 363
---------------
---------------
(1) International nitrogen sales were 830,000 tonnes
(2003 - 1,019,000) and gross profit was $55-million
(2003 - $67-million) for the six months ended June 30.
(2) International potash sales were 357,000 tonnes
(2003 - 306,000) and gross profit was $16-million
(2003 - $13-million) for the six months ended June 30.
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