UAP 3Q fertilizer sales up over 80 percent; higher SGA expenses increase quarterly net loss

UAP Holding Corp. reported an 80.3 percent increase in fertilizer sales during the third quarter ending Nov. 25, 2007, to $209.5 million versus the year-ago $116.2 million. The company attributed $12 million in additional revenues to acquired businesses, with increased volumes and selling prices making up the remainder. Nine-month fertilizer sales were $888.2 million versus the year-ago $607 million.

Higher selling, general, and administrative expenses (SGA) caused UAP’s net income to dive 45 percent to a loss of $19.0 ($.36 per share) on sales of $497.8 million, versus the year-ago loss of $13.1 million ($.26 per share). SGA expenses for the quarter mimicked the downturn, up 45 percent, to $79.3 million from the year-ago $54.7 million. UAP said the higher expenses were due to additional expenses from acquired businesses, as well as higher incentive-based compensation commensurate with the company’s performance. The company acquired some eleven businesses for a total initial purchase price of $82.1 million in the prior fiscal year 2007, net of cash received, and assumed liabilities of approximately $47 million. UAP also acquired some four businesses during fiscal 2008 and paid $8.9 million in purchase price.

For the first nine months UAP was well within the plus column, with net income of $103.7 million ($1.95 per share) on sales of $2.96 billion, up from the year-ago $40.9 million ($.78 per share) on sales of $2.51 billion. Nine-month SGA was up 22 percent.

In December 2007, UAP and Agrium Inc. announced Agrium’s plans to conduct a tender offer for UAP’s shares (GM Dec. 10, p. 1). Due to questions from U.S. regulatory authorities, Agrium has had to withdraw and refile documents in order to allow more time for review (GM Jan. 21, p. 1). While the deal does not appear to be in jeopardy, UAP says should it not be completed due to a failure to achieve regulatory approval and certain other conditions, Agrium would be liable to UAP for a reverse break fee of $54 million. Likewise, should the deal not proceed for other, unspecified reasons, Agrium would be liable to UAP for up to $54 million.

Canadian regulatory authorities have recently given the Agrium/UAP deal a green light (GM Jan. 28, p 12), with the companies noting that neither has significant retail presence in the country. For the nine months ending Nov. 25, 2007, UAP reports Canadian sales of $64.2 million, compared to U.S. sales of $2.9 billion.

* Sales in millions