Agrium Reports Record 2005 Annual Results.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.$ Unless Otherwise Stated 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. (NYSE NYSE See: New York Stock Exchange :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 ) (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :AGU) announced today that net earnings for the fourth quarter of 2005 were $54-million ($0.40 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 ), compared to net earnings (excluding the Kenai-related award and settlement) of $71-million ($0.49 diluted earnings per share) for the fourth quarter of 2004. Net earnings for the year were an all time record $283-million ($2.12 diluted earnings per share) a significant improvement over 2004 net earnings (excluding the Kenai-related settlement) of $214-million ($1.48 diluted earnings per share). Our Retail business again recorded very strong results, with 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 for the full year increasing 14 percent over 2004. EBITDA as a percentage of revenue was nine percent. Revenues and gross profit for all product lines, seed, application, chemicals, and fertilizers, increased. North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. seed sales for the year rose 19 percent. Our current all cash offer for Royster-Clark now has the support of their Board of Directors and major unitholders and we look forward to a successful conclusion to our offer. "We are pleased that the Royster-Clark's Board has recommended our offer to their unitholders. Our Retail operations delivered impressive quarterly results and our ninth straight year of record earnings. This yet again demonstrates the strength of both our Retail business model and our team." said Mike Wilson Mike Wilson could refer to the following people:
Wholesale EBITDA for the year was nine percent higher than in 2004. Excluding the impact of the Kenai Kenai may refer to:
potash Name used for various inorganic compounds of potassium, chiefly the carbonate (K2CO3), a white crystalline material formerly obtained from wood ashes. and 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. . "In January January: see month. 2006, we achieved two significant milestones in our specialties business. We acquired the Nu-Gro controlled release 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. and professional products businesses, and began the start-up Start-up The earliest stage of a new business venture. process at our expanded ESN (Electronic Serial Number) A unique identification number built into a cellphone for security purposes. controlled release nitrogen facility." Our financial position continues to be very robust as we progress our financial and growth strategies. During the course of 2005, we retired $126-million of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. , repaid $175-million in preferred securities, repurchased $98-million in common shares, invested in two plant expansions, and closed two acquisitions. We maintain a healthy cash balance even after the recent Nu-Gro acquisition. The Royster-Clark all cash offer totaling U.S.$534-million, including assumed liabilities, will be funded from cash and existing credit sources. "Our Wholesale results were off for the fourth quarter due to a spike A burst of extra voltage in a power line that lasts only a few nanoseconds. See power surge, power swell, sag and surge suppression. (jargon) spike - To defeat a selection mechanism by introducing a (sometimes temporary) device that forces a specific result. in production costs and customers deferring purchases of all nutrients as a result of the higher prices. Historically, lower fall demand tends to result in a strong spring season. We anticipate our production costs to be significantly lower in the first half of 2006 than in the fourth quarter of 2005." KEY DEVELOPMENTS Increases in nitrogen prices did not keep pace with the dramatic rise in natural gas prices in the fourth quarter. Additionally, we experienced an unscheduled unscheduled Adjective not planned or intended Adj. 1. unscheduled - not scheduled or not on a regular schedule; "an unscheduled meeting"; "the plane made an unscheduled stop at Gander for refueling" mechanical outage out·age n. 1. A quantity or portion of something lacking after delivery or storage. 2. A temporary suspension of operation, especially of electric power. at our Profertil facility. Our overall natural gas cost for the fourth quarter was $7.56/MMBtu, an increase of $2.65/MMBtu over the third quarter. During the same time period the benchmark A performance test of hardware and/or software. There are various programs that very accurately test the raw power of a single machine, the interaction in a single client/server system (one server/multiple clients) and the transactions per second in a transaction processing system. natural gas price (NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). ) increased by $4.60/MMBtu to average $12.85/MMBtu in the fourth quarter. Part of our advantaged gas position was a result of the AECO AECO Aeromedical Evacuation Control Officer AECO Advance Engineering Change Order AECO Architecture, Engineering, Construction and Owner-operated basis widening from $1.50/MMBtu in the third quarter to average $2.87/MMBtu for the fourth quarter. A number of nitrogen producers in both 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. and Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). have
curtailed production due to high natural gas costs. As a result, we
expect that the nitrogen supply/demand balance in North America will be
tight this spring.Our average potash price was flat versus the third quarter as high North American potash inventories limited further price increases. Year over year, potash prices have increased by 22 percent. Producer inventories increased as both international and domestic buyers deferred purchases. Potash producers have announced production curtailments and we expect that supply will be more balanced heading into spring. Our average 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 price increased by $23 per tonne tonne measure of weight or mass; 1 tonne=1000 kg. See also ton. over the third quarter and by $43 per tonne over the prior year. However, our fourth quarter margins were negatively impacted by higher costs, particularly 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 . In addition to a stronger 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 , we have been experiencing technical issues in our 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. phosphate operations. As with potash and nitrogen, North American phosphate production 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. have been reduced which should help support prices going into the spring. Fourth quarter 2005 Retail EBITDA increased by 38 percent over the prior year. Revenues and gross margins for fertilizers, chemicals and other (seed and services) increased in the fourth quarter of 2005 versus the comparable period of 2004. During the fourth quarter, we acquired or agreed to acquire ten additional U.S. retail locations that we will operate on an ongoing basis. We also successfully completed the integration of our new South American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of locations, including the marketing of the acquired branded chemicals across our South American retail operations. Our Royster-Clark offer will close on February February: see month. 8, 2006 and we expect the support of their Board for our offer will facilitate a successful integration. This acquisition is expected to significantly increase our stable and growing retail earnings and establish us as the leader in the North American retail market. 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 February 2, 2006 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. Certain statements in this press release constitute forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties and various business sensitivities, including those referred to in the management discussion and analysis section of the Corporation's most recent Annual Report to shareholders as well as those risk factors described in the Corporation's most recent Annual Information Form, 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 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 natural gas, future prices of nitrogen, phosphate and potash, the differential pricing of natural gas in various markets, the future gas prices and availability at Kenai, the exchange rates for U.S., Canadian, Argentine Argentine having some relationship with the country Argentina. Argentine tick margaropuswinthemi. Argentine tortoise geochelonechilensis. , and Chilean currencies, South American government policy, South American domestic fertilizer consumption, China's urea trade policies and volumes, reliance on Royster-Clark Ltd.'s publicly available information, 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. 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. The following interim management's discussion and analysis (MD&A) updates our annual MD&A included in our 2004 Annual Report to Shareholders, to which our 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 Three months ended December December: see month. 31, 2005 Agrium's fourth quarter consolidated net earnings were $54-million compared with $98-million for the same quarter of 2004. Diluted earnings per share were $0.40 compared with $0.71 for the same quarter last year. Earnings before interest and taxes In financial and business accounting, earnings before interest and taxes (EBIT) is a measure of a firm's profitability that excludes interest and income tax expenses.[1] EBIT = Operating Revenue – Operating Expenses + Non-operating Income (EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). ) were $95-million for the fourth quarter of 2005 compared to EBIT of $168-million for the same period in 2004. Comparative information has been restated for a change in accounting policy to reclassify Verb 1. reclassify - classify anew, change the previous classification; "The zoologists had to reclassify the mollusks after they found new species" class, classify, sort out, assort, sort, separate - arrange or order by classes or categories; "How would you preferred securities as debt (refer to note two of the financial statements). The decrease in year-over-year fourth quarter EBIT of $73-million comprised a decline in gross profit of $41-million and an increase in expenses of $32-million. The gross profit drop reflects lower fall demand for all three nutrients and the negative impact on margins primarily from higher natural gas prices and the stronger Canadian dollar. Further analysis of gross profit is contained below in our discussion of business segment performance. The increase in 2005 fourth quarter expenses of $32-million over the same quarter last year reflects the following items: - Kenai award and settlement of $45-million recorded as income in the comparable quarter of 2004; - Settlement of a commercial dispute in the amount of $16-million recorded as income in the fourth quarter of 2005; and, - Other net expenses in the amount of $3-million recorded in the fourth quarter of 2005. Twelve months ended December 31, 2005 For the year, consolidated net earnings set a new record at $283-million, or $2.12 diluted earnings per share. This is a $17-million improvement over prior year net earnings of $266-million, or $1.91 diluted earnings per share. We also achieved a record EBIT in 2005 of $500-million, an increase of $33-million over EBIT of $467-million reported in the prior year. The growth in full year net earnings was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to both Retail operations, which earned record 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 , and North America Wholesale operations, which achieved higher per tonne margins for nitrogen and potash product lines due to a tight supply/demand balance. Cash Provided by Operating Activities Operating activities provided cash of $8-million in the fourth quarter of 2005 compared to $189-million for the same quarter of 2004. The unfavorable variance The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality from the same quarter last year was primarily the result of the impact of an increase in inventory and lower net earnings. Our results for 2005 generated a record $450-million in operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. compared to $440-million in 2004. Financial Position During 2005 we took advantage of our strong cash position to undertake significant investing and financing activities. This was in line with our growth and financing strategies. Our cash balances ended 2005 at $300-million, down $125-million from the prior year reflecting the redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. of our preferred securities, repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of long-term debt, repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of common shares and expenditures relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our capital projects over the year. Our non-cash working capital balance increased during the year. Our inventory was up by $86-million over the prior year reflecting primarily an increase in North America Wholesale inventory of $48-million and an increase in Retail inventory of $38-million. The rise in Wholesale inventory was mainly due to higher natural gas costs and weaker market demand in the last quarter. The change in Retail inventory reflects higher fertilizer prices and advance purchase opportunities with our suppliers. 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 increased by $55-million compared to the prior year due to higher fertilizer prices and increased sales resulting from our 2005 acquisitions of fertilizer distribution assets 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. retail centres. Valuation of our natural gas derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. contracts also contributed to the increase. Our prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. assets increased by $35-million compared to last year
as a result of our scheduled turnaround TurnaroundA situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. activities and product pre-payment opportunities with suppliers to the Retail segment in 2005. Accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. rose by $104-million compared to the prior year due to increased fertilizer prices, accelerated purchase of product for resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. and accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. related to our capital projects. Other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. and other liabilities other liabilities Small and relatively insignificant liabilities. For financial reporting purposes, firms often combine small liabilities into this single category rather than listing each liability separately. are up $21-million and $23-million respectively over the same quarter last year chiefly due to valuation of our natural gas derivative contracts. BUSINESS SEGMENT PERFORMANCE Retail Retail fourth quarter of 2005 EBIT reached $25-million, an improvement of $8-million or 47 percent over the same period last year. This was driven by a 23 percent increase in both fertilizer and chemical net sales while gross margin percentages for these retail products remained relatively stable compared to the same period last year. The improvement in Retail's net sales reflects favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. fall weather throughout most of the U.S. relative to the early winter conditions that hit in 2004. Also contributing to the increase was a fourth quarter revenue improvement of 36 percent in our South America based retail operations due to their recent acquisition of additional retail centres. Retail's expenses increased by $9-million in the fourth quarter of 2005 over the same period last year primarily due to higher incentive accruals and fuel costs. North America Wholesale North America Wholesale EBIT was $67-million in the fourth quarter of 2005, down $73-million from EBIT of $140-million for the same period last year. The EBIT decline comprised a $53-million decline in gross profit and a $20-million increase in expenses. Gross profit decline in the fourth quarter to $98-million from gross profit of $151-million in the same period last year is attributed to the following: - Nitrogen gross profit declined by $39-million in the fourth quarter of 2005 reflecting primarily a decline in both international and domestic urea gross profit. -- Higher urea prices were more than offset by lower sales volumes. The volume decline reflected lower opening inventory balances, turnaround at our plants and weaker demand. Urea demand softened soft·en v. soft·ened, soft·en·ing, soft·ens v.tr. 1. To make soft or softer. 2. To undermine or reduce the strength, morale, or resistance of. 3. as customers delayed purchase decisions until closer to the spring season and in anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, that lower natural gas prices may result in lower nitrogen prices. -- Our North America nitrogen margins were also negatively impacted by a significant increase in North American natural gas costs compared to the fourth quarter of 2004. Previously deferred qualifying hedge gains realized on natural gas derivative contracts in the fourth quarter of 2005 contributed $5-million to nitrogen gross profit. - Potash gross profit was relatively consistent compared to the fourth quarter of 2004. While potash prices were higher in the fourth quarter of 2005, our sales volumes fell consistent with softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. demand. This slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. resulted in part from purchase delays by North America based customers due to high product prices relative to crop prices. Other factors contributing to the weakness included purchase delays from our international marketing agency, Canpotex, due to poor conditions in the Brazilian farming economy and purchase delays by China pending negotiation of annual supply contracts. - Phosphate gross profit dropped by $14-million in the fourth quarter of 2005 compared to the same period last year. Phosphate prices were strong reflecting rising prices for the key inputs of 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 sulphur Sulphur, city, United States Sulphur, city (1990 pop. 20,125), Calcasieu parish, SW La.; inc. 1914. It is a trade center for an area producing natural gas, oil, and timber as well as sorghum, soybeans, cattle, and crawfish. , but sales volumes were down due to lower opening inventory balances resulting from an extended plant turnaround and soft North America demand. Other factors negatively impacting margin in the quarter were higher phosphate rock phosphate rock n. Any of various rocks composed largely of phosphate minerals, especially apatite, used as fertilizer and as a source of phosphorous compounds. mining costs and raw material costs, and higher unit fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). , reflecting lower production volumes. The increase in expense in our North America Wholesale segment mainly reflects the absence of the favorable impact from the Kenai award and settlement recorded in 2004 as discussed above under "Overview of Consolidated Financial Highlights". South America Wholesale South America Wholesale fourth quarter 2005 EBIT and gross profit remained relatively unchanged compared to the same quarter last year. The benefit from increased urea sales volumes was offset in part by the impact of the extended shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down at the Profertil urea facility in the fourth quarter of 2005. The facility was down twenty-two days in the quarter and, as a result, fixed costs per tonne were higher, as costs were spread over fewer units of production. Other EBIT for our 'Other' non-operating business segment for the fourth quarter of 2005 was down $8-million from the same period last year. Factors that contributed to the decline included the variance resulting from foreign exchange on the translation of our U.S. working capital balances maintained in our Canadian dollar subsidiaries and higher expenses relating to investigating business development opportunities. These factors were offset in part by lower long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. incentive plan expenses in the fourth quarter of 2005 compared to the same quarter last year. PROPOSED TRANSACTIONS Offer to Purchase Royster-Clark The Corporation is offering to purchase all of the outstanding Income Deposit Securities (IDSs) of Royster-Clark Ltd. and Royster-Clark ULC ULC Up (Stage) Left Center ULC Universal Life Church ULC Underwriters' Laboratories of Canada ULC Ultra Light Client ULC Ultra Low Cost (cellular phone) ULC Urban Libraries Council (collectively "Royster-Clark") for C$11.90. The Board of Directors of Royster-Clark has recommended that the holders of the IDSs accept out offer. Estimated total purchase consideration is U.S.$534-million (C$609-million), including assumed liabilities. We intend to fund this proposed transaction from our current cash balances and existing credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities . Royster-Clark is one of the largest agricultural retail companies in 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. , with over 250 retail centres located in the Midwestern Mid·west or Middle West A region of the north-central United States around the Great Lakes and the upper Mississippi Valley. It is generally considered to include Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Iowa, Missouri, Kansas, and and Southeastern south·east n. 1. Abbr. SE The direction or point on the mariner's compass halfway between due south and due east, or 135° east of due north. 2. An area or region lying in the southeast. 3. United States. We expect to integrate Royster-Clark into the operations of the existing Retail business segment. In Royster-Clark's press release issued on January 5, 2006, Royster-Clark's management estimated that for the year ending December 31, 2005, net sales were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. U.S.$1.15 billion, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was more than U.S.$39-million and EBITDA was more than U.S.$64-million. Our bid expires on February 8, 2006 and is subject to a number of conditions. There can be no assurance that the proposed transaction will be completed as proposed or at all. Other Transactions Consistent with our growth objectives, we are currently in preliminary discussions with regard to potential acquisition opportunities in the fertilizer supply chain. These discussions are in the normal course of operations and from time to time may require us to enter into confidentiality Restrictions on the accessibility and dissemination of information. Confidentiality is one of the six fundamental components of information security (see Parkerian Hexad). agreements. SELECTED QUARTERLY INFORMATION (Unaudited, in millions of U.S. dollars, except per share information)
2005 2004 (a)
------------------------ -----------------------
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
------------------------ -----------------------
Net sales 770 807 1,180 537 720 672 1,011 435
Gross Profit 213 288 375 171 254 231 283 142
Net earnings 54 72 133 24 98 83 74 11
Earnings per share
-basic 0.41 0.54 1.01 0.18 0.75 0.63 0.56 0.08
-diluted 0.40 0.54 0.99 0.18 0.71 0.60 0.52 0.08
(a) Amounts have been restated to reflect the January 1, 2005
adoption of the revised Canadian accounting standards
reclassifying preferred securities to debt (see note two to the
financial statements).
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 expense, income taxes, depreciation, amortization and asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. ). 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. In this management's discussion ad analysis, we make reference to certain non-CAAP measures of Royster-Clark. There is no assurance that Royster-Clark's method of calculation of non-GAAP measures is comparable to our or to other companies' non-GAAP measurements. KEY RISKS AND UNCERTAINTIES Our outlook for global 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. markets remains positive as announced production curtailments help provide support. We anticipate some decrease in overall demand as growers Growers are the people, animals, plants, and various living creatures that assist in the growing of plants and other living creatures. More specifically, the term "growers" refers to individual people who put forth effort to grow plants for food and medicinal use, including the switch a small percentage of their crops from corn to soybeans. However, this decrease should be partially offset by increased nutrient requirements caused by significant crop nutrient uptake uptake /up·take/ (up´tak) absorption and incorporation of a substance by living tissue. up·take n. in 2005 and as growers make up for reduced purchases in the fall of 2005. Nitrogen prices should be supported by high energy prices in North America and Europe. 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. urea exports will be discouraged dis·cour·age tr.v. dis·cour·aged, dis·cour·ag·ing, dis·cour·ag·es 1. To deprive of confidence, hope, or spirit. 2. To hamper by discouraging; deter. 3. following the reinstatement Reinstatement The restoration of an insurance policy after it has lapsed for nonpayment of premiums. of the 30 percent urea export tax for the January to September September: see month. 2006 time period. The uncertainty around domestic operating rates, delayed customer purchases, and the increased lead time required for offshore imports into North America may lead to supply shortages during the first half of 2006. Phosphate prices are expected to remain firm as high ammonia and sulphur prices impact phosphate producer costs and margins. Phosphate inventories are near historical average levels as production curtailments and permanent closures have offset a reduction in import demand from China and Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. . North American potash inventories are high relative to last year, but remain near the five-year average. Announced production curtailments should prevent further increases in producer inventories. 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 and South America. Agrium produces and markets three primary groups of nutrients: nitrogen, phosphate and potash as well as controlled release fertilizers and 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. 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 2005 4th Quarter Conference Call will be available in a listen-only mode beginning Thursday Thursday: see week. , February 2nd at 1:30 p.m. MT (3:30 p.m. ET). 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 Year ended
December 31, December 31,
-------------------------------------
2005 2004 2005 2004
-------------------------------------
Restated Restated
(note 2) (note 2)
Sales $ 817 $ 766 $ 3,491 $ 3,001
Direct freight 47 46 197 163
-------------------------------------
Net sales 770 720 3,294 2,838
Cost of product 557 466 2,247 1,928
-------------------------------------
Gross profit 213 254 1,047 910
-------------------------------------
Expenses
Selling 70 62 254 237
General and administrative 22 20 79 63
Depreciation and amortization 35 39 146 156
Kenai award and settlement
(note 3) - (45) - (86)
Royalties and other taxes 11 6 45 29
Other expenses (income) (note 8) (20) 4 23 44
-------------------------------------
118 86 547 443
-------------------------------------
Earnings before interest
expense and income taxes 95 168 500 467
Interest on long-term debt 10 17 47 65
Other interest 1 3 2 4
-------------------------------------
Earnings before income taxes 84 148 451 398
-------------------------------------
Current income taxes 15 24 113 99
Future income taxes 15 26 55 33
-------------------------------------
Income taxes 30 50 168 132
-------------------------------------
Net earnings 54 98 283 266
Retained earnings - beginning
of period (as reported) 548 305 398 145
Cumulative change in
accounting policy (note 2) - (4) (6) (5)
-------------------------------------
Retained earnings - beginning
of period (as restated) 548 301 392 140
Common share dividends declared (7) (7) (14) (14)
Common share repurchase (note 5) (11) - (77) -
-------------------------------------
Retained earnings -
end of period $ 584 $ 392 $ 584 $ 392
-------------------------------------
-------------------------------------
Earnings per share (note 9)
Basic $ 0.41 $ 0.75 $ 2.14 $ 2.03
Diluted $ 0.40 $ 0.71 $ 2.12 $ 1.91
See accompanying notes
AGRIUM INC.
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
(Unaudited)
Three months
ended Year ended
December 31, December 31,
------------------------------------
2005 2004 2005 2004
------------------------------------
Restated Restated
Operating (note 2) (note 2)
Net earnings $ 54 $ 98 $ 283 $ 266
Items not affecting cash
Depreciation and amortization 35 39 146 156
Kenai award and settlement
(note 3) - (36) - (36)
Proceeds on settlement (note 3) - 25 - 25
Loss on disposal of assets
and investments (5) (4) (4) (6)
Future income taxes 15 26 55 33
Foreign exchange (1) (1) (6) (5)
Other 6 7 27 15
Net change in non-cash
working capital (96) 35 (51) (8)
------------------------------------
Cash provided by operating
activities 8 189 450 440
------------------------------------
Investing
Capital expenditures (78) (33) (175) (82)
Increase in other assets (8) (7) (22) (14)
Proceeds from disposal of
assets and investments 10 7 13 10
Net change in non-cash
working capital (1) - (10) -
Other (5) 3 (18) 7
------------------------------------
Cash used in investing
activities (82) (30) (212) (79)
------------------------------------
Financing
Common shares 3 4 50 12
Common share repurchase (note 5a) (15) - (98) -
Long-term debt (30) (36) (126) (134)
Bank indebtedness 1 (1) - -
Preferred security repayment - - (175) -
Common share dividends paid - - (14) (14)
------------------------------------
Cash used in financing activities (41) (33) (363) (136)
------------------------------------
(Decrease) Increase in cash
and cash equivalents (115) 126 (125) 225
Cash and cash equivalents
- beginning of period 415 299 425 200
------------------------------------
Cash and cash equivalents
- end of period $ 300 $ 425 $ 300 $ 425
------------------------------------
------------------------------------
See accompanying notes
AGRIUM INC.
Consolidated Balance Sheet
(Millions of U.S. dollars)
(Unaudited)
As at As at
December 31, December 31,
-----------------------------------
2005 2004
-----------------------------------
Restated
ASSETS (note 2)
Current assets
Cash and cash equivalents $ 300 $ 425
Accounts receivable 443 388
Inventories 533 447
Prepaid expenses 91 56
-----------------------------------
1,367 1,316
Property, plant and equipment 1,293 1,239
Other assets 103 82
Future income tax assets 22 24
-----------------------------------
$ 2,785 $ 2,661
-----------------------------------
-----------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 5 $ -
Accounts payable and
accrued liabilities 576 472
Current portion of long-term debt 30 60
-----------------------------------
611 532
Long-term debt
Recourse debt 442 471
Non-recourse debt - 69
Preferred securities (note 2, 4) - 175
-----------------------------------
442 715
Other liabilities 280 257
Future income tax liabilities 272 209
-----------------------------------
1,605 1,713
-----------------------------------
Shareholders' equity
Share capital
Authorized: unlimited common
shares
Issued: common shares:
2005 - 131 million
(December 2004 - 132 million)
(note 5) 583 553
Contributed surplus 3 2
Retained earnings 584 392
Cumulative translation adjustment 10 1
-----------------------------------
1,180 948
-----------------------------------
$ 2,785 $ 2,661
-----------------------------------
-----------------------------------
See accompanying notes
AGRIUM INC.
Summarized Notes to the Consolidated Financial Statements
For the three and twelve months ended December 31, 2005
(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 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 31, 2004. 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. CHANGE IN ACCOUNTING POLICY Effective January 1, 2005, the Corporation adopted the revised Canadian accounting standards for disclosure and presentation of financial instruments. The amendment requires obligations that must or could be settled with a variable number of the entity's own equity instruments to be classified as liabilities. Consequently, the Corporation reclassified from equity to liabilities its eight percent preferred securities, redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. February 14, 2005 and its six percent preferred securities, converted to common shares in January 2004. This change was applied retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin with restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of prior periods. The effect of the adoption on prior periods and the cumulative impact of retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a restatement as at the date of adoption are presented below as increases (decreases):
As at
December 31,
---------------
2004
---------------
Balance Sheet
Other assets $ 5
Long term debt 175
Future income tax liabilities 8
Preferred securities (172)
Retained earnings (6)
Three months Twelve months
ended ended
December 31, December 31,
-------------- ---------------
2004 2004
-------------- ---------------
Income Statement
Interest on long term debt $ 4 $ 14
Future income tax expense - (4)
Earnings per share
Net earnings available for basic
earnings per share (4) (10)
Basic earnings per share (0.01) (0.01)
Diluted earnings per share - -
3. KENAI AWARD AND SETTLEMENT The following amounts were recorded during 2004 relating to the arbitration award An arbitration award (or arbitral award) is a determination on the merits by an arbitration tribunal in an arbitration, and is analogous to a judgment in a court of law. and settlement of legal claims in our dispute 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):
2004
------------------------------
Three months Twelve months
ended ended
December 31, December 31,
-------------- ---------------
Arbitration award (a) $ 9 $ 50
Settlement of legal claims (b) 36 36
-------------- ---------------
$ 45 $ 86
-------------- ---------------
-------------- ---------------
(a) Arbitration award During 2004, the Corporation was awarded 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. with respect to a dispute with Unocal over gas supply obligations 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. 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. awarded the Corporation $37-million plus interest for damages up to April 2004. An additional $4-million was received for the period May to September 2004 and $9-million for the period October October: see month. to December 2004. The total liquidated damages recorded during 2004 totalled $50-million. (b) Settlement of legal claims In December of 2004, the Corporation settled its dispute with Unocal over obligations under the Purchase and Sale Agreement, pursuant to which the Corporation acquired its Kenai, Alaska nitrogen facility. The settlement agreement established a definitive gas supply obligation from Unocal to the Kenai facility up until October 31, 2005. The net gain of $36-million recorded in the fourth quarter of 2004 was comprised of the following:
-------------------
Three and Twelve
months ended
December 31, 2004
-------------------
Net cash received $ 25
Earn-out adjustment (2001 - 2004) 81
Adjustments related to termination of gas supply (70)
-------------------
Net gain $ 36
-------------------
-------------------
4. PREFERRED SECURITIES On February 14, 2005, the Corporation redeemed the $175-million, eight percent redeemable Redeemable Eligible for redemption under the terms of an indenture. preferred securities for cash. The redemption price Redemption price See: Call price redemption price 1. The price at which an open-end investment company will buy back its shares from the owners. In most cases, the redemption price is the net asset value per share. 2. was equal to the principal amount of the securities plus accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. and unpaid interest to the date of redemption. In January 2004, pursuant to the Corporation's plan to redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. the six percent preferred securities, all holders of the convertible, redeemable 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. SHARE CAPITAL
Three months ended
December 31,
-------------------------------------------
2005 2004
--------------------- ---------------------
Number of Number of
Shares Shares
(millions) Amount (millions) Amount
--------------------- ---------------------
--------------------- ---------------------
Common shares
Issued and outstanding,
beginning of period 131 $ 583 131 $ 548
Exercise of stock options 1 4 1 5
Shares repurchased (a) (1) (4) - -
--------------------- ---------------------
Issued and outstanding,
end of period 131 $ 583 132 $ 553
--------------------- ---------------------
--------------------- ---------------------
Twelve months ended
December 31,
-------------------------------------------
2005 2004
--------------------- ---------------------
Number of Number of
Shares Shares
(millions) Amount (millions) Amount
--------------------- ---------------------
--------------------- ---------------------
Common shares
Issued and outstanding,
beginning of period 132 $ 553 127 $ 490
Preferred securities
redemption - - 4 50
Issued on exercise of
stock options 4 51 1 13
Shares repurchased (a) (5) (21) - -
--------------------- ---------------------
Issued and outstanding,
end of period 131 $ 583 132 $ 553
--------------------- ---------------------
--------------------- ---------------------
(a) On April 28, 2005, the Board of Directors of the Corporation authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: a share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program of up to 13 million common shares (approximately 10 percent of the Corporation's issued and outstanding common shares) through a normal course issuer bid. Shares may be repurchased from time to time on the open market through to May 2, 2006 at prevailing market prices. Effective October 12, 2005 the share repurchase program was suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. pending completion of proposed acquisition activities. During the three months ended December 31, 2005, the Corporation repurchased for cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. 691,600 common shares under the program, at a net cost of $15-million and an average price of $21.02. The repurchase resulted in a reduction of share capital of $4-million and the excess net cost over the average book value of the shares of $11-million has been recorded as a reduction of retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. . During the twelve months ended December 31, 2005, a total of 4,696,100 shares have been repurchased at a net cost of $98-million and an average price per share of $20.82, resulting in a reduction of share capital of $21-million and a reduction of retained earnings of $77-million. 6. 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 Twelve months
ended ended
December 31, December 31,
--------------- ---------------
2005 2004 2005 2004
--------------- ---------------
Defined benefit pension plans $ 1 $ 4 $ 7 $ 10
Post-retirement benefit plans 1 3 5 7
Defined contribution pension
plans 2 3 11 11
------ ------ ------ ------
Total expense $ 4 $ 10 $ 23 $ 28
------ ------ ------ ------
------ ------ ------ ------
7. 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 As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma disclosure of the effect on net earnings and earnings 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
December 31,
------------------------------------------------
2005 2004
----------------------- -----------------------
As Reported Pro forma As Reported Pro forma
----------------------- -----------------------
----------------------- -----------------------
Restated Restated
(note 2) (note 2)
Net earnings $ 54 $ 53 $ 98 $ 97
Earnings per share
Basic $ 0.41 $ 0.40 $ 0.75 $ 0.74
Diluted $ 0.40 $ 0.40 $ 0.71 $ 0.70
Twelve months ended
December 31,
------------------------------------------------
2005 2004
----------------------- -----------------------
As Reported Pro forma As Reported Pro forma
Restated Restated
----------------------- -----------------------
----------------------- -----------------------
(note 2) (note 2)
Net earnings $ 283 $ 281 $ 266 $ 262
Earnings per share
Basic $ 2.14 $ 2.13 $ 2.03 $ 2.00
Diluted $ 2.12 $ 2.10 $ 1.91 $ 1.89
8. OTHER EXPENSES (INCOME)
Three months ended Twelve months ended
December 31, December 31,
-------------------- --------------------
2005 2004 2005 2004
-------------------- --------------------
Interest income $ (7) $ (7) $ (22) $ (16)
Idle plant costs 6 - 9 5
Stock based compensation 3 1 13 4
Environmental remediation
and accretion of asset
retirement obligation 3 6 9 14
Deferred financing costs
on settlement of debt - - 14 -
Realized and unrealized loss
(gain) on non- qualifying
derivatives 4 (3) 21 (3)
Foreign exchange gain 1 (3) (5) (6)
Kenai, Alaska nitrogen
facility earn-out - 10 - 28
Litigation and contract
settlements (16) - (25) (7)
Other (19) (1) (1) 24
-------------------- --------------------
$ (20) $ 4 $ 23 $ 44
-------------------- --------------------
-------------------- --------------------
9. EARNINGS PER SHARE
The following table summarizes the computation of net earnings per
share:
Three months ended Twelve months ended
December 31, December 31,
-------------------- --------------------
2005 2004 2005 2004
-------------------- --------------------
Restated Restated
Numerator: (note 2) (note 2)
Net earnings and
numerator for basic
earnings per share $ 54 $ 98 $ 283 $ 266
-------------------- --------------------
-------------------- --------------------
Preferred securities
charges (net of tax) - 4 - 10
-------------------- --------------------
Numerator for diluted
earnings per share $ 54 $ 102 $ 283 $ 276
-------------------- --------------------
-------------------- --------------------
Denominator - weighted
average common shares
outstanding:
For basic earnings per
share 131 132 132 131
-------------------- --------------------
-------------------- --------------------
Dilutive instruments:
Stock options (a) 1 2 1 1
Preferred securities:
$175-million, eight
percent (a) (note 4) - 10 - 12
-------------------- --------------------
-------------------- --------------------
For diluted earnings
per share 132 144 133 144
-------------------- --------------------
-------------------- --------------------
Basic earnings per share $ 0.41 $ 0.75 $ 2.14 $ 2.03
Diluted earnings per share $ 0.40 $ 0.71 $ 2.12 $ 1.91
(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 December 31, 2005 (2004 - 132 million). As at December 31, 2005, the Corporation has outstanding approximately six million (2004 - eight 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. 10. FINANCIAL INSTRUMENTS NATURAL GAS SUPPLY De-designated Financial Instruments Effective July July: see month. 1, 2005, the Corporation's previously qualifying natural gas derivative contracts were determined to no longer qualify for hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). due to reduced correlation correlation In statistics, the degree of association between two random variables. The correlation between the graphs of two data sets is the degree to which they resemble each other. between AECO based natural gas purchase contracts and NYMEX based derivative contracts. Accordingly, the fair value of these derivative contracts at July 1, 2005, an unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. of $40-million, was deferred and will be recognized as cost of product manufactured in the same periods during which the originally hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. gas purchases occur between 2005 and 2009. Subsequent changes in fair value of these derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. will be recognized through other expenses. During the fourth quarter of 2005, $5-million and $1-million of the deferred gain were recognized as cost of product sold and inventory, respectively. At December 31, 2005, the current and long-term portions of the remaining deferred gain of $15-million and $14-million were included in accounts payable and accrued liabilities and other liabilities, respectively. The change in fair value of these non-qualifying derivative contracts during the fourth quarter of 2005, a gain of $1-million, was recognized as a reduction to other expenses. At December 31, 2005, the Corporation had 27 million MMBtu notional amount The notional amount (or notional principal amount or notional value) on a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument. This amount generally does not change hands and is thus referred to as notional. remaining on unsettled de-designated natural gas contracts maturing in 2006 - 2009. Other Financial Instruments At December 31, 2005, the Corporation had 25 million MMBtu notional amount of natural gas AECO basis swap A basis swap is an interest rate swap which involves the exchange of two floating rate financial instruments denominated in the same or different currencies. A floating-floating interest rate swap under which the floating rate payments is referenced to different bases. contracts maturing in 2006 - 2007, 14 million MMBtu notional amount of natural gas option and swap contracts maturing in 2006 - 2007. These contracts did not qualify for hedge accounting treatment. During the fourth quarter of 2005, other expenses included net realized and unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. in the amount of $5-million primarily related to AECO basis swaps. At December 31, 2005, accounts payable included $18-million, other liabilities included $1-million, accounts receivable included $16-million and other assets included $8-million, representing the fair value of the contracts. FOREIGN EXCHANGE At December 31, 2005, the Corporation had C$105-million underlying amount of forward currency contracts with forward rates ranging from C$1.1723 to C$1.1823 and maturing in 2006 that qualified for hedge accounting. During the fourth quarter of 2005, net realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. on forward currency contracts of $1-million were recorded in sales. 11. SUBSEQUENT EVENT Acquisition of Royster-Clark Ltd. The Corporation has issued a take over bid to purchase all of the outstanding Income Deposit Securities (IDSs) of Royster-Clark Ltd. and Royster Roys´ter n. 1. same as Roister, Roisterer. Clark ULC (collectively "Royster-Clark") at C$11.90 cash per IDS. Total purchase consideration is C$609-million, including assumed liabilities. The bid expires on February 8, 2006. Royster-Clark is a retail company in the United States with over 250 retail centres located primarily in the Midwestern and Southeastern United States. 12. SEASONALITY The fertilizer and agricultural retail businesses are 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. 13. 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 and South America. Net sales 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.
Schedule 1
AGRIUM INC.
Segmentation
(Unaudited - millions of U.S. dollars)
Three Months Ended December 31
-----------------------------------------------------
Wholesale
---------------------------------
Retail North America South America
-----------------------------------------------------
2005 2004 2005 2004 2005 2004
-----------------------------------------------------
Net sales
- external $ 267 $ 219 $ 470 $ 464 $ 33 $ 37
- inter-segment - - 43 36 11 2
-----------------------------------------------------
Total net sales 267 219 513 500 44 39
Cost of product 177 146 415 349 17 11
-----------------------------------------------------
Gross profit 90 73 98 151 27 28
Gross profit % 34% 33% 19% 30% 61% 72%
-----------------------------------------------------
-----------------------------------------------------
Selling Expenses $ 66 $ 58 $ 5 $ 5 $ 1 $ -
EBITDA (1) $ 29 $ 21 $ 93 $ 169 $ 26 $ 27
EBIT (2) $ 25 $ 17 $ 67 $ 140 $ 23 $ 23
Three Months Ended December 31
-----------------------------------------------------
Other Total
-----------------------------------------------------
2005 2004 2005 2004
-----------------------------------------------------
Net sales
- external $ - $ - $ 770 $ 720
- inter-segment (54) (38) - -
-----------------------------------------------------
Total net sales (54) (38) 770 720
Cost of product (52) (40) 557 466
-----------------------------------------------------
Gross profit (2) 2 213 254
Gross profit % 4% (5)% 28% 35%
-----------------------------------------------------
-----------------------------------------------------
Selling Expenses $ (2) $ (1) $ 70 $ 62
EBITDA (1) $ (18) $ (10) $ 130 $ 207
EBIT (2) $ (20) $ (12) $ 95 $ 168
Twelve Months Ended December 31
-----------------------------------------------------
Wholesale
---------------------------------
Retail North America South America
-----------------------------------------------------
2005 2004 2005 2004 2005 2004
-----------------------------------------------------
Net sales
- external $ 1,242 $ 1,114 $ 1,899 $ 1,594 $ 153 $ 130
- inter-segment - - 132 109 16 13
-----------------------------------------------------
Total net sales 1,242 1,114 2,031 1,703 169 143
Cost of product 895 798 1,443 1,211 54 41
-----------------------------------------------------
Gross profit 347 316 588 492 115 102
Gross profit % 28% 28% 29% 29% 68% 71%
-----------------------------------------------------
-----------------------------------------------------
Selling Expenses $ 239 $ 222 $ 19 $ 17 $ 1 $ 1
EBITDA (1) $ 113 $ 99 $ 515 $ 465 $ 99 $ 98
EBIT (2) $ 96 $ 81 $ 408 $ 349 $ 84 $ 83
Twelve Months Ended December 31
-----------------------------------------------------
Other Total
-----------------------------------------------------
2005 2004 2005 2004
-----------------------------------------------------
Net sales
- external $ - $ - $ 3,294 $ 2,838
- inter-segment (148) (122) - -
-----------------------------------------------------
Total net sales (148) (122) 3,294 2,838
Cost of product (145) (122) 2,247 1,928
-----------------------------------------------------
Gross profit (3) - 1,047 910
Gross profit % 2% 0% 32% 32%
-----------------------------------------------------
-----------------------------------------------------
Selling Expenses $ (5) $ (3) $ 254 $ 237
EBITDA (1) $ (81) $ (39) $ 646 $ 623
EBIT (2) $ (88) $ (46) $ 500 $ 467
(1) Earnings (loss) before interest expense, income taxes,
depreciation, amortization and asset impairment.
(2) Earnings (loss) before interest expense and income taxes.
Schedule 2a
AGRIUM INC.
Product Lines
Three Months Ended December 31, 2005
(Unaudited - millions of U.S. dollars)
2005
---------------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------------
North America
Wholesale
Nitrogen (1)
Ammonia $ 190 $ 27 500 $ 380 $ 54
Urea 140 20 445 315 45
Nitrate,
Sulphate
and Other 47 8 204 230 39
---------------------------------------------------
Total Nitrogen 377 55 1,149 328 48
Phosphate 79 9 250 316 36
Potash (2) 57 34 347 164 98
---------------------------------------------------
513 98 1,746 294 56
South America
Wholesale (1) 44 27 173 254 156
Retail (3)
Fertilizers 161 33
Chemicals 76 41
Other 30 16
------------------
267 90
Other inter-segment
eliminations (54) (2)
------------------
Total $ 770 $ 213
------------------
------------------
2004
---------------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------------
North America
Wholesale
Nitrogen (1)
Ammonia $ 100 $ 24 325 $ 308 $ 74
Urea 166 53 649 256 82
Nitrate,
Sulphate
and Other 71 17 352 202 48
---------------------------------------------------
Total Nitrogen 337 94 1,326 254 71
Phosphate 101 23 370 273 62
Potash (2) 62 34 464 134 73
---------------------------------------------------
500 151 2,160 231 70
South America
Wholesale (1) 39 28 149 262 188
Retail (3)
Fertilizers 131 28
Chemicals 62 32
Other 26 13
------------------
219 73
Other inter-segment
eliminations (38) 2
------------------
Total $ 720 $ 254
------------------
------------------
(1) International nitrogen sales were 456,000 tonnes (2004 - 437,000
tonnes); net sales were $125-million (2004 - $110-million) and
gross profit was $54-million (2004 - $62-million).
(2) International potash sales were 144,000 tonnes (2004 - 200,000
tonnes); net sales were $19-million (2004 - $22-million) and
gross profit was $12-million (2004 - $14-million).
(3) International Retail net sales were $50-million (2004 -
$37-million) and gross profit was $10-million (2004 -
$5-million).
Schedule 2b
AGRIUM INC.
Product Lines
Twelve Months Ended December 31, 2005
(Unaudited - millions of U.S. dollars)
2005
---------------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------------
North America
Wholesale
Nitrogen (1)
Ammonia $ 606 $ 142 1,881 $ 322 $ 75
Urea 584 165 2,064 283 80
Nitrate,
Sulphate
and Other 273 67 1,237 221 54
---------------------------------------------------
Total Nitrogen 1,463 374 5,182 282 72
Phosphate 313 57 1,065 294 54
Potash (2) 255 157 1,611 158 97
---------------------------------------------------
2,031 588 7,858 258 75
South America
Wholesale (1) 169 115 634 267 181
Retail (3)
Fertilizers 626 141
Chemicals 458 130
Other 158 76
------------------
1,242 347
Other inter-segment
eliminations (148) (3)
------------------
Total $ 3,294 $ 1,047
------------------
------------------
2004
---------------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------------
North America
Wholesale
Nitrogen (1)
Ammonia $ 397 $ 113 1,438 $ 276 $ 79
Urea 499 134 2,211 226 61
Nitrate,
Sulphate
and Other 284 68 1,510 189 45
---------------------------------------------------
Total Nitrogen 1,180 315 5,159 229 61
Phosphate 309 71 1,181 262 60
Potash (2) 214 106 1,796 119 59
---------------------------------------------------
1,703 492 8,136 209 60
South America
Wholesale (1) 143 102 634 226 161
Retail (3)
Fertilizers 556 131
Chemicals 416 118
Other 142 67
------------------
1,114 316
Other
inter-segment
eliminations (122) -
------------------
Total $ 2,838 $ 910
------------------
------------------
(1) International nitrogen sales were 1,840,000 tonnes (2004 -
1,881,000 tonnes); net sales were $462-million (2004 -
$393-million) and gross profit was $250-million (2004 -
$206-million).
(2) International potash sales were 751,000 tonnes (2004 - 730,000
tonnes); net sales were $97-million (2004 - $71-million) and
gross profit was $63-million (2004 - $42-million).
(3) International Retail net sales were $146-million (2004 -
$118-million) and gross profit was $26-million (2004 -
$22-million).
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