Large Cap / Stocks That Pay Dividends

Expanded Purchase Recommendation: September 2015

 

The Turnaround Letter recommended this large cap agricultural company in September 2015:

 

The Mosaic Company (MOS: $40.55)

Atria Corporate Center, Suite E490

Plymouth, MN 55441

Phone: 763-577-2700

Website: www.mosaicco.com

Investor Relations

Securities Exchange Commission Filings

History

Mosaic is one of the world’s largest producers of phosphate (phosphorous) and potash (potassium), considered to be two of the three primary plant nutrients.  Phosphorus’ role in plant growth is in converting the sun’s energy into food, fuel and fiber.  Potash is a naturally occurring mineral created during the evaporation of ancient sea beds.  Serving as the regulator of many essential processes within the plant, it is the most widely used potassium fertilizer,  Corn production is by a wide margin the largest user of fertilizer in the United States at just short of 50% of total consumption.  Wheat, soybeans and cotton collectively account for about 20%.  In the latest quarter, phosphates accounted for about 56% of net sales and potash roughly 31%.  International distribution accounted for the balance.

Mosaic was formed in 2004 to combine the IMC Global fertilizer company with the fertilizer business of agribusiness giant Cargill.  It wasn’t until 2011, however, that Cargill began an orderly distribution of its 64% equity interest.  Strong agricultural demand around the globe drove Mosaic’s stock price up sharply in 2007-2008 only to have it decimated in the recession that followed the 2008 financial crisis and the ensuing weak worldwide recovery.  The recession led to excess capacity in the industry, which held phosphate and potash prices down for several years.  Then in 2013, a break-up of a phosphate marketing cartel in the former Soviet republics put further pressure on the price of that commodity.

Earlier this year it looked as though Mosaic’s stock was finally beginning to recover, but then it was hit by concerns about slowing growth in China.  As a result, the stock now trades for only about a quarter of its 2008 high.

 

Turnaround Challenge/Opportunity

Mosaic’s vertically integrated structure and large market share allow it to be a low-cost producer of both phosphate and potash and position the company well to benefit from the worldwide agricultural growth that is expected in the coming decades.  Moreover, during the last few years the company has been actively making acquisitions and divestitures to improve its strategic position, as well as restructuring ongoing operations to reduce costs. Mosaic management has sought to better position the company for the fact that, despite long-term secular growth opportunities, the agricultural cycle has short-term cyclical moves.

In phosphates they are diversifying the firm’s resources in order to maintain the firm’s position as a worldwide, low-cost producer.  In March 2014, Mosaic closed a deal whereby it acquired the phosphate business of CF Industries for $1.4 billion.  In the transaction, Mosaic acquired a 25,000-acre phosphate mine, a beneficiation plant, a phosphate manufacturing facility and ammonia terminal and finished product warehouse facilities in the Tampa area.  The acquired assets were expected to add approximately 1.8 million tonnes of phosphate fertilizer per year, thus bringing Mosaic’s annual phosphates capacity to over 11 million tones, more than the next two largest producers combined.  With Mosaic having a strong presence in Florida, the acquired assets should be easily assimilated into Mosaic’s operations, and, to date, management has reported solid operating achievements.  For the latest quarter, management commented that the phosphate business is “driving earnings growth” as indicated by it accounting for half of Mosaic’s operating earnings.

The CF asset acquisition also led to a deal whereby Mosaic was able to secure a source of ammonia, a critical input to the production of refined phosphate products.  Two agreements will cover half or more of Mosaic’s ammonia consumption, thus assuring that the vast majority of Mosaic’s ammonia needs will be satisfied for the foreseeable future.  The deal also saved the company some $1 billion that it would have had to otherwise invest in a new ammonia manufacturing plant.

In potash, Mosaic is growing by expanding existing properties, referred to as brownfield expansions.  Generally speaking brownfield operations are easier and cheaper to facilitate.  There are few geographical regions in the world with potash deposits, and the cost of creating a new site can take five to seven years and upwards of $3.5 billion.  Brownfield expansions on the other hand can bring incremental tonnage to market in a short period of time with but a fraction the cost of a new development.

Expansion of the firm’s potash properties began in the 2006-2008 time frame with several multi-year projects at the firm’s three Canadian properties.  Several projects have been completed, including expansion at its Colonsay and Belle Plaine properties.  Added operational capacity increased Mosaic’s share of Canpotex, an export association of Canadian potash producers.  Expansion projects have also been completed at the firm’s Exterhazy property, considered the world’s largest potash mine.  Mosaic’s K3 mine at Esterhazy is the remaining project in Mosaic’s expansion plans.  The K3 project is on track to be producing ore in 2017.  In late 2014, the Board approved $1.5 billion in capital expenditures to bring the K3 site to its full design capability by 2024.  When completed, Mosaic’s capacity will have increased by nearly 50% from levels at the end of the last decade.

Mosaic is also growing globally via joint ventures.  It has a 35% interest in a phosphate rock mine in Peru that not only provides a localized source of phosphate but also serves as a backup supply should its Florida operations suffer shutdowns; Florida’s high water table and hurricanes are two operational risks.  The company also has a 25% interest in a Saudi Arabian venture that is developing a mine and two chemical complexes expected to produce phosphate fertilizers, animal fee and food-grade purified phosphoric acid.  Mosaic will market about 25% of the venture’s production, thus improving the firm’s logistical access to key agricultural countries, including India.  In late 2014, Mosaic enhanced its worldwide operations by purchasing Archer Daniels Midland’s Fertilizer Distribution business in Brazil and Paraguay for $350 million.  Mosaic’s distribution operations, serving the top four nutrient-consuming countries in the world, provide an attractive competitive advantage.

Mosaic’s branded fertilizers include MicroEssentials, K-Mag, Pegasus and Aspire.  They are advanced crop nutrient products that match the sophisticated level of today’s most advanced plant genetics, crop protection and equipment technologies.  MicroEssentials is a newer, next-generation brand that was developed using a patented fusion technology that addresses soil sulfur requirements over the course of the entire growing season.  Sales of MicroEssentials products in North America rose about 14% in 2014.  Management has plans to add an additional 1.2 million tones of capacity, bringing total capacity to 3.5 million tones by 2017.

Mosaic’s business model is to be a single source provider of phosphate and potash fertilizers and feed ingredients for the global agriculture industry.  It has sold marginal assets in recent years, but nothing that would cut into the company’s vertically integration operations.  Capitalizing on its dominant position in phosphate (world’s number one producer) and strong potash properties with cost-effective brownfield build-out opportunities, marketing leading branded fertilizers and world-wide distribution channels, Mosaic has been able to capture attractive market share.

While building out its already dominant phosphate assets and expanding on its potash properties and enhancing its distribution network, management has worked at restructuring operations and aligning assets to assure the company’s cost competitiveness.  In 2014, management sold salt operations in Michigan and closed related potash operations, exited distribution businesses in Chile and Argentina and stopped some potash production activities at its Carlsbad, New Mexico mine.  Management has also been executing on a major cost-reduction strategy that is expected to achieve $500 million in cost savings.  It is interesting to note that Mosaic, through cogeneration activities, has reduced its power consumption by about $45 million, 39%) over the last few years.

Management has leveraged the firm’s leading industry position to maintain a solid balance sheet, and despite the vagaries of weather and agricultural production, it generally manages to produce good cash flow.  In addition to investing in the business, management is committed to returning a substantial portion of this cash flow to shareholders in the form of dividends and stock repurchases.  The stock has a nearly three percent dividend yield, and the company has occasionally paid sizeable special dividends in the past.  There is also an ongoing $1 billion stock repurchase program.

Agricultural technology has experienced many advances in rent years, perhaps not as epoch as the cotton gin, but, nevertheless, quite significant.  What is irrefutable, however, is that the world is going to have to produce more food, and it cannot meet the need without crop nutrition.  It is estimated that there will be nine billion people on Earth by 2050, an increase greater than the world’s population in 1950.  This growing global population, together with a move toward increasing urbanization in developing countries, will require increased agricultural efficiencies and spur demand for phosphate and potash fertilizers.

Although the stock fell during the recent China-related selloff, we do not expect Chinese demand for agricultural products to fall off the way it has in other sectors.  While China’s industrial strategy may be forced to change, the government’s most fundamental policy driver is promoting and maintaining social stability, and at the most basic level that means keeping the people well fed.  And true to management’s expectations, actually exceeding them, Indian demand has shown solid growth thus far in 2015.

We believe that Mosaic stock is an attractive way to participate in the need for growth in global food production that is likely to continue for many decades.  We recommend buying Mosaic up to 50.

 

Finance/Valuation

Market Capitalization = $14.4 billion

Price/Sales = 1.56

Price/Book = 1.43

Total Debt/equity = 0.37

Forward Annual Dividend Rate = 2.9%

As we’ve mentioned, Mosaic’s position as a low cost producer and resulting strong cash flow provide strong underpinnings to the firm’s capital structure.  At the end of the June quarter, long-term debt stood at 37% of total equity; cash and equivalents of $2.2 billion equaled 59% of long-term debt.  Moreover, some three fourths of long-term debt doesn’t mature until after 2019.

We also like the fact that management has more than doubled the annual dividend in recent years to return more cash to shareholders.  In 2014, management distributed $3.2 billion to shareholders through share repurchases and dividends.  Further, the company is not afraid to return cash to shareholders in the form of a special dividend when times are good, as seen in fiscal 2010 when the company distributed more than $550 million to stockholders.

It is also noteworthy that Mosaic is one of the largest landowners in Florida; now its mining operations may not seem like attractive properties, but the company has a strong reclamation program.  Generally, more of the firm’s reclaimed property becomes available for uses other than for phosphate operations each year.  Successfully optimizing the value of these properties is not an insignificant value-enhancing opportunity.  Witness the company’s 16,000 acre Streamsong resort, a world-class resort and conference center in Central Florida that became fully operational in January 2014.  It has received critical acclaim, with golf operations that even Donald Trump would envy.

 

Products/Services

OVERVIEW

The Mosaic Company is the world’s leading producer and marketer of concentrated phosphate and potash crop nutrients.  They are the largest integrated phosphate producer in the world and one of the largest producers and marketers of phosphate-based animal feed ingredients in the United States.  They are also one of the four largest potash producers in the world.  Through a broad product offering, Mosaic is a single source supplier of phosphate- and potash-based crop nutrients and animal feed ingredients serving customers in approximately 40 countries.  They mine phosphate rock in Florida and process rock into finished phosphate products at facilities in Florida and Louisiana.  Potash is mined in Saskatchewan and New Mexico.  They have other production, blending or distribution operations in Brazil, China, India and Paraguay, as well as strategic equity investments in a phosphate rock mine in the Bayovar region in Peru and a joint venture formed to develop a phosphate rock mine and chemical complexes in the Kingdom of Saudi Arabia.  Distribution operations serve the top four nutrient-consuming countries in the world.

Business is conducted through wholly and majority-owned subsidiaries as well as businesses in which they own less than a majority or a non-controlling interest.  Mosaic is organized into two reportable business segments: Phosphates and Potash.  The following charts show the respective contributions to 2014 sales volumes, net sales and operating earnings for each of these business segments:

value stock

Phosphates Segment — Mosaic sells phosphate-based crop nutrients and animal feed ingredients throughout North America and internationally.  The Phosphate segment also includes international distribution activities such as sales offices, port terminals and warehouses in the United States, Canada, and several other key international countries.  In addition, the international distribution activities include blending, bagging or production facilities in Brazil, China, India and Paraguay.  Mosaic accounts for approximately 14% of estimated global annual production and 71% of estimated North American annual production of concentrated phosphate crop nutrients.

Potash Segment — Mosaic sells potash throughout North America and internationally, principally as fertilizer, but also for use in industrial applications and, to a lesser degree, as animal feed ingredients.  They account for approximately 14% of estimated global annual potash production and 44% of estimated North American annual potash production.

Phosphates Segment

The Phosphates business segment owns and operates mines and production facilities in Florida which produce concentrated phosphate crop nutrients and phosphate-based animal feed ingredients, and processing plants in Louisiana which produce concentrated phosphate crop nutrients.  Phosphate segment results also include international distribution activities.

U.S.Phosphate Crop Nutrients and Animal Feed Ingredients

U.S. phosphate operations have capacity to produce approximately 5.2 million tonnes of phosphoric acid per year, or about 9% of world annual capacity and about 56% of North American annual capacity.  Phosphoric acid is produced by reacting finely ground phosphate rock with sulfuric acid.  Phosphoric acid is the key building block for the production of high analysis or concentrated phosphate crop nutrients and animal feed products, and is the most comprehensive measure of phosphate capacity and production and a commonly used benchmark in the industry.  Mosaic’s U.S. phosphoric acid production totaled approximately 4.4 million tonnes during 2014, accounting for approximately 11% of estimated global annual production and 54% of estimated North American annual output.

Phosphate crop nutrient products are marketed worldwide to crop nutrient manufacturers, distributors, retailers and farmers.  Mosaic produced approximately 8.7 million tonnes of concentrated phosphate crop nutrients during 2014 and accounted for approximately 14% of estimated world annual output and 71% of estimated North American annual production.  Principal phosphate crop nutrient products are as follows:

  • Diammonium Phosphate (18-46-0) Diammonium Phosphate (“DAP”) is the most widely used high-analysis phosphate crop nutrient worldwide.  DAP is produced by first combining phosphoric acid with anhydrous ammonia in a reaction vessel.  This initial reaction creates a slurry that is then pumped into a granulation plant where it is reacted with additional ammonia to produce DAP.  DAP is a solid granular product that is applied directly or blended with other solid plant nutrient products such as urea and potash.
  • Monoammonium Phosphate (11-52-0) Monoammonium Phosphate (“MAP”) is the second most widely used high-analysis phosphate crop nutrient and the fastest growing phosphate product worldwide.  MAP is also produced by first combining phosphoric acid with anhydrous ammonia in a reaction vessel.  The resulting slurry is then pumped into the granulation plant where it is reacted with additional phosphoric acid to produce MAP.  MAP is a solid granular product that is applied directly or blended with other solid plant nutrient products.
  • MicroEssentials is a value-added ammoniated phosphate product that is enhanced through a patented process that creates very thin platelets of sulfur and other micronutrients, such as zinc, on the granulated product.  The patented process incorporates both the sulfate and elemental forms of sulfur, providing season long availability to crops.

The following map shows the locations of each of Mosaic’s phosphate concentrates plants in the United States and the locations of each of its active and planned phosphate mines in Florida.

value stock

 

Phosphate Rock

Phosphate rock is the key mineral used to produce phosphate crop nutrients and feed phosphate.  Mosaic’s phosphate rock production totaled approximately 14.0 million tonnes in 2014 and accounted for approximately 7% of estimated world annual production and 53% of estimated North American annual production.  They are the world’s second largest miner of phosphate rock and currently operate four mines with a combined annual capacity of approximately 17.2 million tonnes.  Production of one tonne of DAP requires between 1.6 and 1.7 tonnes of phosphate rock.

All of its wholly owned phosphate mines and related mining operations are located in central Florida.  During 2014, they operated five active mines: Four Corners, South Fort Meade, Hookers Prairie, Wingate and South Pasture, which was acquired in March of 2014.  The Hookers Prairie mine’s reserves were exhausted in June of 2014.  Management plans to develop reserves at Ona and at DeSoto to replace reserves that will be depleted at various times during the next decade.

The phosphate deposits of Florida are of sedimentary origin and are part of a phosphate-bearing province that extends from southern Florida north along the Atlantic coast into southern Virginia.  Active phosphate mines are primarily located in what is known as the Bone Valley Member of the Peace River Formation in the Central Florida Phosphate District.  The southern portions of the Four Corners and Wingate mines are in what is referred to as the Undifferentiated Peace River Formation, in which future Ona and DeSoto reserves are also located.  Phosphate mining has been conducted in the Central Florida Phosphate District since the late 1800’s.  The potentially mineable portion of the district encompasses an area approximately 80 miles in length in a north-south direction and approximately 40 miles in width.

Mosaic extracts phosphate ore using large surface mining machines called “draglines.” Prior to extracting the ore, the draglines must first remove a 10 to 50 foot layer of sandy overburden.  At its Wingate mine, they also utilize dredges to remove the overburden and mine the ore.  They then process the ore at beneficiation plants at each active mine where the ore goes through washing, screening, sizing and flotation processes designed to separate the phosphate rock from sands, clays and other foreign materialsPrior to commencing operations at any planned future mines, management would need to acquire new draglines or move existing draglines to the mines and, unless the beneficiation plant at an existing mine were used, construct a beneficiation plant.

Investments in Joint Ventures

Mosaic has a 35% economic interest in a joint venture which owns the Miski Mayo phosphate rock mine in the Bayovar region of Peru.  The investment in the Miski Mayo Mine and related commercial offtake supply agreement to purchase a share of the phosphate rock from the Miski Mayo Mine reduces Mosaic’s need to purchase phosphate rock from other suppliers.  The Miski Mayo Mine’s annual production capacity is 3.8 million tonnes.

They also own a 25% interest in the Wa’ad Al Shamal Joint Venture and in connection with an equity share, Mosaic will market approximately 25% of the production of the joint venture.  The Wa’ad Al Shamal Joint Venture is developing a mine and two chemical complexes that are presently expected to produce phosphate fertilizers, animal feed, food grade purified phosphoric acid and other downstream phosphates products in the Kingdom of Saudi Arabia.  Mosaic estimates that the cost to develop and construct the integrated phosphate production facilities will approximate $7.5 billion, which management expects to be funded primarily through investments by Mosaic, Ma’aden and SABIC, and through borrowing arrangements and other external project financing facilities.  Management estimates that Mosaic’s cash investment in the Project, including the amount invested to date will approximate $850 million.  Their cash investment in the Project through December 31, 2014 was $328.5 million.  The greenfield project is being built in the northern region of Saudi Arabia at Wa’ad Al Shamal Minerals Industrial City, and include further expansion of processing plants in Ras Al Khair Minerals Industrial City which is located on the east coast of Saudi Arabia.  The facilities are expected to have a production capacity of approximately 3.5 million tonnes of finished product per year.  The project is expected to benefit from the availability of key raw nutrients from sources within Saudi Arabia.  Operations are expected to commence in late 2016.

On June 30, 2014, the Wa’ad Al Shamal Joint Venture entered into Funding Facilities with a consortium of 20 financial institutions for a total amount of approximately $5.0 billion.

Potash Segment

Mosaic is one of the leading potash producers in the world.  They mine and process potash in Canada and the United States and sell potash in North America and internationally.  The term “potash” applies generally to the common salts of potassium.  Muriate of potash (MOP) is the primary source of potassium for the crop nutrient industry.  Red MOP has traces of iron oxide.  The granular and standard grade Red MOP products are well suited for direct fertilizer application and bulk blending.  White MOP has a higher percent potassium oxide.  White MOP, besides being well suited for the agricultural market, is used in many industrial applications.

Potash products are marketed worldwide to crop nutrient manufacturers, distributors and retailers and are also used in the manufacture of mixed crop nutrients and, to a lesser extent, in animal feed ingredients.  They also sell potash to customers for industrial use.  In addition, the firm’s potash products are used for de-icing and as a water softener regenerant.

In 2014, Mosaic operated three potash mines in Canada, including two shaft mines with a total of three production shafts and one solution mine, as well as two potash mines in the United States, including one shaft mine and one solution mine.  They sold the salt operations at a former Hersey, Michigan mine and closed the related potash operations.  The sale of the salt operations was completed on July 29, 2014.  Mosaic also owns related refineries at each of the mines.

The expansion in its Colonsay mine was completed and added an additional 0.6 million tonnes of operational capacity.  Management continues to expand the capacity in the Potash segment, with the K3 shafts at the firm’s Esterhazy mine on track to start producing ore in 2017, adding an estimated 0.9 million tonnes to the firm’s potash operational capacity.  In December 2014, the Board approved approximately $1.5 billion in capital expenditures over the next ten years to increase the mining capacity of the K3 shafts and provide for an infrastructure to move rock from K3 to the K1 and K2 mills.  This would provide the flexibility to optimize production at K1, K2 and K3 in order to mitigate risk from current and future brine inflows.

Mosaic’s current potash annualized operational capacity totals 10.5 million tonnes of product per year and accounts for approximately 13% of world annual capacity and 47% of North American annual capacity.  Production during 2014 totaled 8.2 million tonnes.  Mosaic accounts for approximately 14% of estimated world annual production and 44% of estimated North American annual production.

The map below shows the location of each of the firm’s potash mines.

value stock

 

SALES AND DISTRIBUTION ACTIVITIES

United Statesand Canada

Mosaic has United States and Canadian sales and marketing teamsthat sell to wholesale distributors, retail chains, cooperatives, independent retailers and national accounts.

Customer service and the ability to effectively minimize the overall supply chain costs are key competitive factors in the crop nutrient and animal feed ingredients businesses.  In addition to production facilities, to service the needs of customers, Mosaic owns, leases or has contractual throughput or other arrangements at strategically located distribution warehouses along or near the Mississippi and Ohio Rivers as well as in other key agricultural regions of the United States and Canada.  From these facilities, they market Mosaic produced phosphate and potash products for customers who in turn resell the product into the distribution channel or directly to farmers in the United States and Canada.

Mosaic owns port facilities in Tampa, Florida and Houston, Texas, which have deep water berth capabilities providing access to the Gulf of Mexico.  They also own warehouse distribution facilities in Savage, Minnesota; Pekin, Illinois; and Henderson, Kentucky.

In addition to the geographically situated facilities that they own, U.S. distribution operations also include leased distribution space or contractual throughput agreements in other key geographical areas such as California, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Minnesota, Nebraska, North Dakota, Ohio, Oklahoma, Texas and Wisconsin.

Canadian customers include independent dealers and national accounts.  Mosaic also leases and owns warehouse facilities in Saskatchewan, Ontario, Quebec and Manitoba in Canada.

International

Outside of the United States and Canada, Mosaic markets its Phosphates segments products through its own international distribution activities as well as a sales force focused on geographies outside of North America.

Sales outside of the United States and Canada of Saskatchewan potash products are made through Canpotex.  Canpotex sales are allocated among its members based on peaking capacity.  Mosaic has been notified by Canpotex that effective January 1, 2015, its entitlement increased from approximately 38.8% to 40.6% as a result of a proving run successfully completed at its Colonsay mine.  Potash exports from Carlsbad are sold through its own sales force.  Mosaic also markets its Potash segment’s products through its Phosphates segment international distribution activities, which acquire potash primarily through Canpotex.  The countries that account for the largest amount of international potash sales, by volume, are Brazil, China, Indonesia, India and Malaysia.

International distribution operations also purchase phosphates, potash and nitrogen products from unrelated third parties, which they either use to produce blended crop nutrients (Blends) or for resale.

To service the needs of its customers, Mosaic’s international distribution activities include a network of strategically located sales offices, crop nutrient blending and bagging facilities, port terminals and warehouse distribution facilities that they own and operate in key geographic areas throughout several countries.  The blending and bagging facilities primarily produce Blends from phosphate, potash and nitrogen.  The average product mix in our Blends (by volume) contains approximately 50% phosphate, 25% potash and 25% nitrogen, although this mix differs based on seasonal and other factors.  International operations serve primarily as a sales outlet for its North American Phosphates production, both for resale and as an input for Blends.  The potash segment also has historically furnished the majority of the raw materials needs for the production of Blends, primarily via Canpotex, and is expected to continue to do so in the future.

On December 17, 2014, Mosaic completed the acquisition of ADM’s fertilizer distribution business in Brazil and Paraguay.  The acquisition is expected to increase its distribution capacity in the region from approximately four million tonnes per year to six million tonnes.  They also negotiated the terms of five-year fertilizer supply agreements, whereby Mosaic will supply ADM’s fertilizer needs in Brazil and Paraguay.

Management completed the sale of the firm’s Argentina assets, and plans to close the Chile business and sell the fixed assets related to Chile’s distribution business, which they do not expect to significantly affect sales in Latin America as they plan to continue to sell crop nutrients through other distributors in these regions.

The following maps highlight Mosaic’s distribution operations in South America and Asia:

value stock

 

Management

Board of Directors

Management Team

James C. O’Rourke, President and CEO

James “Joc” C. O’Rourke is President and Chief Executive Officer.  Elected to the Mosaic Board of Directors in May 2015, O’Rourke succeeded Jim Prokopanko as the Company’s President and CEO effective August 5, 2015.  He is the third executive to lead the Company since Mosaic was founded in 2004.  O’Rourke joined Mosaic as Executive Vice President – Operations in January 2009.  He was promoted to Executive Vice President – Operations and Chief Operating Officer in August 2012.  For more than six years, O’Rourke was responsible for Mosaic’s global mining and processing operations, supply chain, procurement, and environment, health and safety organizations.  O’Rourke’s focus on employees, innovation and execution has propelled significant Company growth and expansions in potash and phosphate production.  He has also led programs to improve operational efficiency, lower production costs and advance sustainability performance through water, energy and greenhouse gas emissions reductions.

Prior to joining Mosaic, O’Rourke was President of Australia Pacific for Barrick Gold Corporation, the largest gold producer in Australia, where he was responsible for the Australia Pacific Business Unit consisting of 10 gold and copper mines in Australia and Papua New Guinea.  O’Rourke has more than 25 years of experience in mining and processing operations, and has held various management, engineering and other roles in the mining industry in Canada and Australia.  He holds a Bachelor of Science degree in mining and mineral engineering from the University of British Columbia in Vancouver, Canada, and an Executive Master of Business Administration degree from INSEAD in Fontainebleau, France.

 

Consolidated Financial Statements December 31, 2015

STATEMENTS OF CONSOLIDATED OPERATIONS

(In millions, except per share amounts)

 

Year Ended 
 December 31,

 

Seven Months Ended

December 31,

 

Years Ended May 31,

 

2014

 

2013

 

2013

 

2012

Net sales

$

9,055.8

 

 

$

4,765.9

 

 

$

9,974.1

 

 

$

11,107.8

 

Cost of goods sold

7,129.2

 

 

3,937.6

 

 

7,213.9

 

 

8,022.8

 

Gross margin

1,926.6

 

 

828.3

 

 

2,760.2

 

 

3,085.0

 

Selling, general and administrative expenses

382.4

 

 

211.8

 

 

427.3

 

 

410.1

 

(Gain) loss on assets sold and to be sold

(16.4

)

 

122.8

 

 

 

 

 

Carlsbadrestructuring expense

125.4

 

 

 

 

 

 

 

Other operating expenses

123.4

 

 

76.8

 

 

123.3

 

 

63.8

 

Operating earnings

1,311.8

 

 

416.9

 

 

2,209.6

 

 

2,611.1

 

(Loss) gain in value of share repurchase agreement

(60.2

)

 

73.2

 

 

 

 

 

Interest (expense) income, net

(107.6

)

 

(13.3

)

 

18.8

 

 

18.7

 

Foreign currency transaction gain (loss)

79.1

 

 

16.5

 

 

(15.9

)

 

16.9

 

Other (expense) income

(5.8

)

 

(9.1

)

 

2.0

 

 

(17.8

)

Earnings from consolidated companies before income taxes

1,217.3

 

 

484.2

 

 

2,214.5

 

 

2,628.9

 

Provision for income taxes

184.7

 

 

152.6

 

 

341.0

 

 

711.4

 

Earnings from consolidated companies

1,032.6

 

 

331.6

 

 

1,873.5

 

 

1,917.5

 

Equity in net earnings (loss) of nonconsolidated companies

(2.2

)

 

10.9

 

 

18.3

 

 

13.3

 

Net earnings including noncontrolling interests

1,030.4

 

 

342.5

 

 

1,891.8

 

 

1,930.8

 

Less: Net earnings attributable to noncontrolling interests

1.8

 

 

2.5

 

 

3.1

 

 

0.6

 

Net earnings attributable to Mosaic

$

1,028.6

 

 

$

340.0

 

 

$

1,888.7

 

 

$

1,930.2

 

Basic net earnings per share attributable to Mosaic

$

2.69

 

 

$

0.80

 

 

$

4.44

 

 

$

4.44

 

Basic weighted average number of shares outstanding

374.1

 

 

420.8

 

 

425.7

 

 

435.2

 

Diluted net earnings per share attributable to Mosaic

$

2.68

 

 

$

0.80

 

 

$

4.42

 

 

$

4.42

 

Diluted weighted average number of shares outstanding

375.6

 

 

422.0

 

 

426.9

 

 

436.5

 

 

 

CONSOLIDATED BALANCE SHEETS

(In millions, except shares)

 

December 31

 

2014

 

2013

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

2,374.6

 

 

$

5,293.1

 

Receivables, net

754.4

 

 

543.1

 

Inventories

1,718.3

 

 

1,432.9

 

Deferred income taxes

148.7

 

 

129.9

 

Other current assets

368.2

 

 

706.8

 

Total current assets

5,364.2

 

 

8,105.8

 

Property, plant and equipment, net

9,313.9

 

 

8,576.6

 

Investments in nonconsolidated companies

849.8

 

 

576.4

 

Goodwill

1,806.5

 

 

1,794.4

 

Deferred income taxes

394.4

 

 

152.2

 

Other assets

554.2

 

 

348.6

 

Total assets

$

18,283.0

 

 

$

19,554.0

 

Liabilities and Equity

 

 

 

Current liabilities:

 

 

 

Short-term debt

$

13.5

 

 

$

22.6

 

Current maturities of long-term debt

41.0

 

 

0.4

 

Accounts payable

797.3

 

 

570.2

 

Accrued liabilities

726.1

 

 

666.3

 

Contractual share repurchase liability

 

 

1,985.9

 

Deferred income taxes

3.7

 

 

20.5

 

Accrued income taxes

18.8

 

 

 

Total current liabilities

1,600.4

 

 

3,265.9

 

Long-term debt, less current maturities

3,778.0

 

 

3,008.9

 

Deferred income taxes

984.0

 

 

1,031.5

 

Other noncurrent liabilities

1,200.0

 

 

927.1

 

Equity:

 

 

 

Preferred stock, $0.01 par value, 15,000,000 shares authorized, none issued and outstanding as of December 31, 2014 and 2013

 

 

 

Class A common stock, $0.01 par value, 194,203,987 shares authorized as of December 31, 2014, 17,176,046 shares issued and outstanding as of December 31, 2014, 254,300,000 shares authorized, 128,759,772 shares issued and 85,839,827 shares outstanding as of December 31, 2013

0.2

 

 

1.3

 

Class B common stock, $0.01 par value, 87,008,602 shares authorized, none issued and outstanding as of December 31, 2014 and 2013

 

 

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 369,987,783 shares issued and 350,364,236 shares outstanding as of December 31, 2014, 352,204,571 shares issued and 340,166,109 shares outstanding as of December 31, 2013

3.5

 

 

3.0

 

Capital in excess of par value

4.2

 

 

1.6

 

Retained earnings

11,168.9

 

 

11,182.1

 

Accumulated other comprehensive income (loss)

(473.7

)

 

114.3

 

Total Mosaic stockholders’ equity

10,703.1

 

 

11,302.3

 

Non-controlling interests

17.5

 

 

18.3

 

Total equity

10,720.6

 

 

11,320.6

 

Total liabilities and equity

$

18,283.0

 

 

$

19,554.0

 

Identify & Profit from Distressed Investing

Free Report: Turnaround Investing Mistakes

Turnaround Investing Blog

Turnaround Investing Blog

Amazon = US GDP 1970

Amazon joined Apple in reaching a $1 trillion market capitalization. $1 trillion is about the same as the total value of New York City property and the total value of loans at JP Morgan, the nation’s largest bank in terms of assets. Jeff Bezos’ $160 billion stake would place him (personally) as the #33 largest company in the S&P 500 in terms of market cap, next to Coca-Cola, Disney and Netflix. We aren’t bold enough to predict whether the shares will continue upwards or if they are in a bubble reaching maximum inflation. Setting aside for a moment their investment prospects, let’s admire the truly remarkable milestone that these two companies have reached. Read More.

EV/EBITDA: What Is It & Why Are We Using It More?

In reading recent editions of The Turnaround Letter, you have probably noticed that we are increasingly using EV/EBITDA as a valuation measure, rather than the better-known price/earnings multiple.  We thought it might be useful to describe this measure and why we like it.

Read More.

Turnaround Letter Stock Pick Named Top Performer of 2017

 

stock market advicex

 

What Last Year's Top Stock Pickers Are Buying in 2018

 

This Forbes write-up follows up on the recent Top Stock Tips report--naming The Turnaround Letter's Crocs recommendation the top performer of 2017: With 90% gains, CROX beat out 100 other investment ideas included in the report; and the stock continues to have value investing appeal, according to Putnam.

 

George notes, "We see additional upside for the stock in 2018 as management's efforts continue to bear fruit, though the gains will likely be more muted than we saw in 2017."