Mosaic(MOS) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements and related notes for the reported interim periods ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements, including statements of earnings, comprehensive income, balance sheets, cash flows, and equity, along with detailed notes explaining accounting policies, financial data, and specific accounts. It provides a foundational overview of the company's financial performance and position for the reported periods Condensed Consolidated Statements of Earnings (Loss) This statement details the company's revenues, expenses, and net income or loss over specific interim periods Net Sales: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | 3,548.3 | 5,348.5 | (1,800.2) | (34)% | | Nine months ended Sep 30 | 10,546.6 | 14,643.9 | (4,097.3) | (28)% | Gross Margin: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | 409.6 | 1,502.0 | (1,092.4) | (73)% | | Nine months ended Sep 30 | 1,651.1 | 4,787.4 | (3,136.3) | (66)% | Net (Loss) Earnings attributable to Mosaic: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | | :------------------- | :------------------ | :------------------ | :-------------------- | | Three months ended Sep 30 | (4.2) | 841.7 | (845.9) | | Nine months ended Sep 30 | 799.6 | 3,059.6 | (2,260.0) | Diluted Net (Loss) Earnings per share attributable to Mosaic: | Period | 2023 (USD) | 2022 (USD) | Change (USD) | | :------------------- | :--------- | :--------- | :----------- | | Three months ended Sep 30 | (0.01) | 2.42 | (2.43) | | Nine months ended Sep 30 | 2.39 | 8.50 | (6.11) | Condensed Consolidated Statements of Comprehensive Income (Loss) This statement presents the net income or loss and other comprehensive income items, reflecting changes in equity from non-owner sources Comprehensive (Loss) Income attributable to Mosaic: | Period | 2023 (Millions USD) | 2022 (Millions USD) | | :------------------- | :------------------ | :------------------ | | Three months ended Sep 30 | (142.5) | 448.0 | | Nine months ended Sep 30 | 842.3 | 2,670.6 | Foreign currency translation (loss) gain: | Period | 2023 (Millions USD) | 2022 (Millions USD) | | :------------------- | :------------------ | :------------------ | | Three months ended Sep 30 | (153.3) | (375.4) | | Nine months ended Sep 30 | 22.1 | (345.4) | Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Total Assets: | Date | Amount (Millions USD) | | :---------------- | :-------------------- | | September 30, 2023 | 22,654.4 | | December 31, 2022 | 23,386.0 | Total Current Assets: | Date | Amount (Millions USD) | | :---------------- | :-------------------- | | September 30, 2023 | 5,156.8 | | December 31, 2022 | 6,556.6 | Total Current Liabilities: | Date | Amount (Millions USD) | | :---------------- | :-------------------- | | September 30, 2023 | 4,696.3 | | December 31, 2022 | 5,533.8 | Total Equity: | Date | Amount (Millions USD) | | :---------------- | :-------------------- | | September 30, 2023 | 12,207.1 | | December 31, 2022 | 12,194.2 | Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities for the reported interim periods Net Cash Provided by Operating Activities: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Nine months ended Sep 30 | 1,869.1 | 2,980.1 | (1,111.0) | (37)% | Net Cash Used in Investing Activities: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Nine months ended Sep 30 | (955.0) | (916.5) | (38.5) | 4% | Net Cash Used in Financing Activities: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Nine months ended Sep 30 | (1,069.8) | (2,105.7) | 1,035.9 | (49)% | Net Change in Cash, Cash Equivalents and Restricted Cash: | Period | 2023 (Millions USD) | 2022 (Millions USD) | | :------------------- | :------------------ | :------------------ | | Nine months ended Sep 30 | (152.3) | (63.8) | Condensed Consolidated Statements of Equity This statement outlines changes in the company's equity accounts, including retained earnings and accumulated other comprehensive income Total Mosaic Stockholders' Equity: | Date | Amount (Millions USD) | | :---------------- | :-------------------- | | September 30, 2023 | 12,050.3 | | December 31, 2022 | 12,054.6 | Share Repurchases (Nine months ended Sep 30): | Year | Amount (Millions USD) | | :--- | :-------------------- | | 2023 | (603.0) | | 2022 | (1,609.2) | Cash Dividends Paid (Nine months ended Sep 30): | Year | Amount (Millions USD) | | :--- | :-------------------- | | 2023 | (216.7) | | 2022 | (106.3) | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Organization and Nature of Business This note describes the company's primary business activities and its operational segment structure - The Mosaic Company produces and markets concentrated phosphate and potash crop nutrients through wholly and majority-owned subsidiaries and joint ventures[24] - The company is organized into three business segments: Phosphate, Potash, and Mosaic Fertilizantes, with intersegment eliminations and other results included in Corporate, Eliminations and Other[25][26] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles, estimates, and assumptions used in preparing the financial statements - The unaudited Condensed Consolidated Financial Statements are prepared on the accrual basis of accounting in accordance with SEC requirements for interim financial reporting and GAAP[26] - Management makes significant estimates and assumptions, particularly regarding fair value of acquired assets, recoverability of non-current assets (including goodwill), useful lives, environmental and reclamation liabilities, and income tax accounts[28] - Interim results are not necessarily indicative of full fiscal year results due to seasonality and other factors[26] 3. Recently Issued Accounting Guidance This note details the impact of newly adopted accounting standards on the company's financial reporting - The company adopted new FASB guidance on supplier financing programs as of January 1, 2023, which did not impact its balance sheet presentation or footnote disclosures[29] 4. Other Financial Statement Data This note provides supplementary details for various current assets and accrued liabilities Other Current Assets: | Item | Sep 30, 2023 (Millions USD) | Dec 31, 2022 (Millions USD) | | :-------------------------- | :-------------------------- | :-------------------------- | | Income and other taxes receivable | 385.4 | 189.4 | | Prepaid expenses | 295.4 | 237.4 | | Assets held for sale | — | 101.9 | | Other | 32.6 | 49.5 | | Total | 713.4 | 578.2 | Accrued Liabilities: | Item | Sep 30, 2023 (Millions USD) | Dec 31, 2022 (Millions USD) | | :-------------------------- | :-------------------------- | :-------------------------- | | Accrued dividends | 3.2 | 72.9 | | Payroll and employee benefits | 172.3 | 237.0 | | Asset retirement obligations | 392.1 | 212.3 | | Customer prepayments | 415.7 | 743.9 | | Accrued income and other taxes | 143.6 | 208.3 | | Operating lease obligation | 57.9 | 50.7 | | Other | 550.8 | 754.8 | | Total | 1,735.6 | 2,279.9 | 5. Earnings Per Share This note presents the basic and diluted earnings per share calculations for the reported periods Basic Net (Loss) Earnings per share attributable to Mosaic: | Period | 2023 (USD) | 2022 (USD) | | :------------------- | :--------- | :--------- | | Three months ended Sep 30 | (0.01) | 2.45 | | Nine months ended Sep 30 | 2.40 | 8.58 | Diluted Net (Loss) Earnings per share attributable to Mosaic: | Period | 2023 (USD) | 2022 (USD) | | :------------------- | :--------- | :--------- | | Three months ended Sep 30 | (0.01) | 2.42 | | Nine months ended Sep 30 | 2.39 | 8.50 | - 0.6 million and 0.4 million shares for the three and nine months ended September 30, 2023, respectively, were excluded from the diluted EPS calculation because their effect would have been anti-dilutive[34] 6. Inventories This note provides a breakdown of the company's inventory components at specific balance sheet dates Inventories: | Item | Sep 30, 2023 (Millions USD) | Dec 31, 2022 (Millions USD) | | :-------------------------- | :-------------------------- | :-------------------------- | | Raw materials | 113.8 | 177.2 | | Work in process | 865.8 | 844.8 | | Finished goods | 1,229.5 | 2,158.3 | | Final price deferred | 49.4 | 184.2 | | Operating materials and supplies | 194.7 | 178.6 | | Total | 2,453.2 | 3,543.1 | 7. Goodwill This note discusses the company's goodwill balance and its annual impairment assessment process - Goodwill remained stable at $1.1 billion as of September 30, 2023, and December 31, 2022[36] - The company performs its annual goodwill impairment analysis in October and is currently assessing projections for its Mosaic Fertilizantes reporting unit, which could potentially lead to a future impairment charge[37] 8. Marketable Securities Held in Trusts This note describes the investments held in RCRA Trusts for environmental assurance and their fair value classification - Mosaic deposited $630 million into two RCRA Trusts in August 2016 to provide financial assurance for estimated Gypstack Closure Costs in Florida and Louisiana[38] - The RCRA Trusts hold investments in marketable debt securities classified as available-for-sale, carried at fair value, with unrealized gains and losses included in other comprehensive income[39] Fair Value of Investments in RCRA Trusts (September 30, 2023): | Category | Fair Value (Millions USD) | | :-------------------- | :------------------------ | | Cash and cash equivalents | (0.2) | | Corporate debt securities | 189.7 | | Municipal bonds | 196.4 | | U.S. government bonds | 263.1 | | Total | 649.0 | 9. Financing Arrangements This note details the company's various financing activities, including inventory financing, receivable purchasing, and debt facilities - The company has an inventory financing arrangement with no outstanding balance as of September 30, 2023[47] - Under a Receivable Purchasing Agreement, Mosaic sold approximately $1.2 billion of accounts receivable during the nine months ended September 30, 2023[49] - Structured accounts payable arrangements totaled $600.6 million as of September 30, 2023, and the company had $299.6 million outstanding under its commercial paper program[50][51] - A $700 million 10-year senior unsecured term loan facility was entered into in May 2023, with no amounts drawn as of September 30, 2023[52] 10. Asset Retirement Obligations This note explains the recognition and reconciliation of asset retirement obligations, primarily for environmental liabilities - Asset Retirement Obligations (AROs) are recognized at fair value when a legal obligation exists, with a corresponding increase in the related long-lived asset's carrying amount[53] Reconciliation of AROs: | (in millions) | September 30, 2023 | December 31, 2022 | | :-------------------------- | :------------------- | :------------------ | | AROs, beginning of period | 1,905.6 | 1,749.3 | | Liabilities incurred | 15.2 | 14.9 | | Liabilities settled | (147.5) | (205.6) | | Accretion expense | 70.0 | 81.6 | | Revisions in estimated cash flows | 293.7 | 264.5 | | Foreign currency translation | 9.2 | 0.9 | | AROs, end of period | 2,146.2 | 1,905.6 | | Less current portion | 392.1 | 212.3 | | Non-current portion of AROs | 1,754.1 | 1,693.3 | - A majority of AROs relate to Gypstack Closure Costs in Florida and Louisiana, with the undiscounted amount for facilities covered by the 2015 Consent Decrees approximately $2.1 billion as of December 31, 2022[57][60] 11. Income Taxes This note provides information on the company's effective tax rates and unrecognized tax benefits Effective Tax Rate: | Period | 2023 | 2022 | | :------------------- | :--- | :--- | | Three months ended Sep 30 | 31.7% | 26.1% | | Nine months ended Sep 30 | 22.0% | 25.7% | - Gross unrecognized tax benefits increased by $0.1 million to $25.5 million during the nine months ended September 30, 2023[64] - Discrete tax items provided a benefit of approximately $41.1 million for the nine months ended September 30, 2023, primarily from the true-up of U.S. and Canada tax return provisions and share-based excess benefits[68] 12. Derivative Instruments and Hedging Activities This note describes the company's use of derivative instruments to manage foreign currency, interest rate, and commodity price risks - The company uses derivatives to mitigate exposure to foreign currency, interest rate, and commodity price risks, but does not apply hedge accounting to foreign currency, commodity, or freight contracts[69][70] Derivative Instruments Position (Millions USD): | Item | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Gross asset position | 9.5 | 38.8 | | Gross liability position | 31.1 | 50.1 | Total Absolute Notional Volume of Outstanding Derivative Instruments (Sep 30, 2023): | Derivative Category | Unit of Measure | Notional Volume (Millions) | | :------------------ | :-------------- | :------------------------- | | Foreign currency | US Dollars | 2,577.6 | | Natural gas | MMbtu | 16.4 | 13. Fair Value Measurements This note outlines the fair value hierarchy and measurement techniques applied to the company's financial instruments - Foreign currency and commodity derivatives are primarily classified as Level 2 in the fair value hierarchy, while interest rate derivatives were not held as of September 30, 2023[75][76][77] - The carrying amounts of cash and cash equivalents, accounts receivables, accounts payable, structured accounts payable arrangements, and short-term debt approximate fair value due to their short-term maturity[79] - The fair value of long-term debt is estimated using quoted market prices, classified as Level 1 and Level 2[79] 14. Share Repurchases This note details the company's share repurchase programs and the shares bought back during the period - The Board of Directors approved two share repurchase programs totaling $3.0 billion in 2022, with no set expiration date[80] - In February 2023, the company entered into a $300 million accelerated share repurchase agreement, resulting in the repurchase of 5,624,574 shares at an average price of $53.34 per share[81] Shares Repurchased (Nine months ended Sep 30, 2023): | Item | Quantity | Amount (Millions USD) | | :-------------------------- | :--------- | :-------------------- | | Common Stock repurchased | 12,639,719 | 598.0 | 15. Accumulated Other Comprehensive Income (Loss) ("AOCI") This note provides a breakdown of the components of accumulated other comprehensive income attributable to Mosaic AOCI Attributable to Mosaic: | Date | Amount (Millions USD) | | :---------------- | :-------------------- | | September 30, 2023 | (2,109.5) | | December 31, 2022 | (2,152.2) | - Foreign currency translation gain (loss) was $(153.3) million for the three months and $22.1 million for the nine months ended September 30, 2023[86] 16. Related Party Transactions This note discloses transactions and balances with related parties, including sales and cost of goods sold - The net amount due to non-consolidated companies increased to $89.6 million as of September 30, 2023, from $56.8 million at December 31, 2022[87] Transactions with Related Parties: | Item | Period | 2023 (Millions USD) | 2022 (Millions USD) | | :------------------------------------------ | :------------------- | :------------------ | :------------------ | | Included in net sales | Three months ended Sep 30 | 218.5 | 965.0 | | Included in net sales | Nine months ended Sep 30 | 979.0 | 2,378.0 | | Included in cost of goods sold | Three months ended Sep 30 | 257.7 | 1,198.8 | | Included in cost of goods sold | Nine months ended Sep 30 | 1,122.9 | 2,668.2 | - Marketing fees from the MWSPC joint venture were $3.6 million and $7.5 million for the three and nine months ended September 30, 2023, respectively[88] 17. Contingencies This note outlines the company's environmental accruals and potential legal and tax liabilities in various jurisdictions - Environmental accruals were $144.2 million as of September 30, 2023, down from $185.5 million at December 31, 2022[90] - A reserve of $36.3 million has been established for estimated repairs at the New Wales Phase II East Stack[92] - For Brazil legal contingencies, the estimated probable aggregate loss is approximately $76.8 million (maximum potential liability of $695.4 million), and for Brazil tax contingencies, the maximum potential liability is approximately $606.9 million, with $215.1 million subject to an indemnification agreement[98][100] 18. Business Segments This note presents financial data disaggregated by the company's Phosphate, Potash, and Mosaic Fertilizantes business segments Segment Net Sales (Three months ended Sep 30, 2023): | Segment | Net Sales (Millions USD) | | :-------------------------- | :----------------------- | | Phosphate | 986.4 | | Potash | 719.9 | | Mosaic Fertilizantes | 1,730.6 | | Corporate, Eliminations and Other | 111.4 | | Total | 3,548.3 | Segment Operating Earnings (Loss) (Three months ended Sep 30, 2023): | Segment | Operating Earnings (Loss) (Millions USD) | | :-------------------------- | :--------------------------------------- | | Phosphate | (57.5) | | Potash | 200.0 | | Mosaic Fertilizantes | 77.3 | | Corporate, Eliminations and Other | (74.0) | | Total | 145.8 | Total Assets by Segment (As of Sep 30, 2023): | Segment | Total Assets (Millions USD) | | :-------------------------- | :-------------------------- | | Phosphate | 9,460.0 | | Potash | 9,622.7 | | Mosaic Fertilizantes | 4,976.4 | | Corporate, Eliminations and Other | (1,404.7) | | Total | 22,654.4 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial performance, condition, and results of operations for the three and nine months ended September 30, 2023. It details key drivers behind changes in revenue, gross margin, and operating earnings across business segments, as well as liquidity, capital resources, and significant accounting estimates Results of Operations This section analyzes the key factors influencing the company's net sales, operating earnings, and overall financial performance Net (Loss) Earnings attributable to Mosaic: | Period | 2023 (Millions USD) | 2022 (Millions USD) | | :------------------- | :------------------ | :------------------ | | Three months ended Sep 30 | (4.2) | 841.7 | - Net sales decreased 34% for the three months and 28% for the nine months ended September 30, 2023, primarily driven by lower average selling prices across all segments[112][113] - Operating earnings decreased 87% for the three months and 74% for the nine months ended September 30, 2023[112] - Global markets softened due to a rebound in supply and buyers delaying purchases, though seasonal price strength was observed later in the period[115] - The company repurchased 3,948,783 shares of Common Stock for approximately $150.0 million during the three months ended September 30, 2023[121] - Countervailing Duty (CVD) orders on phosphate fertilizers from Morocco and Russia remain in place, with new subsidy rates announced in November 2023 (OCP 2.12%, PhosAgro 28.50%)[118][121] Phosphate Net Sales and Gross Margin This section details the sales performance and profitability of the Phosphate segment, including pricing, volumes, and cost impacts Net Sales: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | 986.4 | 1,577.6 | (591.2) | (37)% | | Nine months ended Sep 30 | 3,654.2 | 4,874.5 | (1,220.3) | (25)% | Gross Margin: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | 87.5 | 357.9 | (270.4) | (76)% | | Nine months ended Sep 30 | 563.0 | 1,527.2 | (964.2) | (63)% | Average Finished Product Selling Price (destination): | Period | 2023 (USD/tonne) | 2022 (USD/tonne) | Change (USD/tonne) | Percent Change | | :------------------- | :--------------- | :--------------- | :----------------- | :------------- | | Three months ended Sep 30 | 569 | 924 | (355) | (38)% | | Nine months ended Sep 30 | 642 | 950 | (308) | (32)% | Sales Volumes (Finished Products in thousands of metric tonnes): | Period | 2023 | 2022 | Change | Percent Change | | :------------------- | :--- | :--- | :----- | :------------- | | Three months ended Sep 30 | 1,651 | 1,651 | 0 | 0% | | Nine months ended Sep 30 | 5,409 | 4,987 | 422 | 8% | - Lower raw material costs, primarily sulfur (down 64% for Q3) and ammonia (down 47% for Q3), favorably impacted gross margin[129][130] - North America phosphate rock production decreased due to geology of rock and operational challenges, and the operating rate for processed phosphate production decreased to 64% for Q3 2023 due to an equipment failure at Faustina, Louisiana[131][132][137] Potash Net Sales and Gross Margin This section analyzes the sales and gross margin trends for the Potash segment, considering pricing, volumes, and operational costs Net Sales: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | 719.9 | 1,432.1 | (712.2) | (50)% | | Nine months ended Sep 30 | 2,475.2 | 4,072.1 | (1,596.9) | (39)% | Gross Margin: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | 210.4 | 798.7 | (588.3) | (74)% | | Nine months ended Sep 30 | 959.7 | 2,305.2 | (1,345.5) | (58)% | Average Finished Product Selling Price (destination): | Period | 2023 (USD/tonne) | 2022 (USD/tonne) | Change (USD/tonne) | Percent Change | | :------------------- | :--------------- | :--------------- | :----------------- | :------------- | | Three months ended Sep 30 | 324 | 669 | (345) | (52)% | | Nine months ended Sep 30 | 393 | 653 | (260) | (40)% | Total Potash Segment Tonnes (in thousands of metric tonnes): | Period | 2023 | 2022 | Change | Percent Change | | :------------------- | :--- | :--- | :----- | :------------- | | Three months ended Sep 30 | 2,220 | 2,142 | 78 | 4% | | Nine months ended Sep 30 | 6,293 | 6,238 | 55 | 1% | - Gross margin was unfavorably impacted by higher idle and turnaround costs, particularly due to the timing of the turnaround at Esterhazy, Saskatchewan mine and the temporary idling of the Colonsay mine in the first half of the year[142][147][149] - Canadian resource taxes and royalties decreased significantly, favorably impacting gross margin by $195 million for Q3 2023 and $437 million for YTD Q3 2023[142][143][147][148] Mosaic Fertilizantes Net Sales and Gross Margin This section reviews the sales and gross margin performance of the Mosaic Fertilizantes segment, including pricing, volumes, and cost drivers Net Sales: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | 1,730.6 | 2,628.7 | (898.1) | (34)% | | Nine months ended Sep 30 | 4,492.7 | 6,377.0 | (1,884.3) | (30)% | Gross Margin: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | 106.1 | 348.3 | (242.2) | (70)% | | Nine months ended Sep 30 | 117.8 | 1,017.8 | (900.0) | (88)% | Average Finished Product Selling Price (destination): | Period | 2023 (USD/tonne) | 2022 (USD/tonne) | Change (USD/tonne) | Percent Change | | :------------------- | :--------------- | :--------------- | :----------------- | :------------- | | Three months ended Sep 30 | 566 | 931 | (365) | (39)% | | Nine months ended Sep 30 | 597 | 915 | (318) | (35)% | Total Mosaic Fertilizantes Segment Tonnes (in thousands of metric tonnes): | Period | 2023 | 2022 | Change | Percent Change | | :------------------- | :--- | :--- | :----- | :------------- | | Three months ended Sep 30 | 3,060 | 2,824 | 236 | 8% | | Nine months ended Sep 30 | 7,525 | 6,966 | 559 | 8% | - Lower product costs for the distribution business and reduced sulfur and ammonia costs in the production business favorably impacted gross margin by $750 million for the three months ended September 30, 2023[154] - The phosphate operating rate increased to 81% for the three months ended September 30, 2023, compared to 76% in the prior year period[156] Corporate, Eliminations and Other This section explains the financial results for corporate activities, intersegment eliminations, and other non-segment specific operations - Gross margin for Corporate, Eliminations and Other was $5.7 million for the three months ended September 30, 2023, compared to $(2.9) million in the prior year period[162] - The improvement was driven by the elimination of profit on intersegment sales (approximately $45 million favorable impact for Q3 2023) and favorable product costs in China and India distribution operations[162] - Net unrealized loss on derivatives was approximately $45 million for the three months ended September 30, 2023, compared to approximately $76 million in the prior year period[162] Other Income Statement Items This section provides details on selling, general and administrative expenses, other operating expenses, and foreign currency impacts Selling, General and Administrative Expenses: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | 119.9 | 124.5 | (4.6) | (4)% | | Nine months ended Sep 30 | 377.5 | 365.1 | 12.4 | 3% | Other Operating Expense: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | 143.9 | 222.8 | (78.9) | (35)% | | Nine months ended Sep 30 | 214.0 | 337.6 | (123.6) | (37)% | Foreign Currency Transaction (Loss) Gain: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Three months ended Sep 30 | (96.9) | (61.1) | (35.8) | 59% | | Nine months ended Sep 30 | 103.0 | 22.4 | 80.6 | NM | - Other operating expense for the nine months ended September 30, 2023, was positively impacted by a $57 million gain on the sale of the Streamsong Resort[168] - Other expense for the three months ended September 30, 2023, primarily related to a $42 million pension plan settlement loss and $6 million of realized losses on marketable securities held in RCRA Trusts[172] Critical Accounting Estimates This section highlights the significant judgments and assumptions made by management in preparing the financial statements - The Condensed Consolidated Financial Statements are prepared in conformity with GAAP, requiring significant judgments, estimates, and assumptions that can materially impact reported results[178] - Key estimates include fair value of acquired assets, recoverability of non-current assets (including goodwill), useful lives and net realizable values of long-lived assets, environmental and reclamation liabilities, and income tax-related accounts[28][178] Liquidity and Capital Resources This section discusses the company's cash position, debt, and strategies for managing liquidity and capital allocation - As of September 30, 2023, the company had cash and cash equivalents of $591.0 million and approximately $3.4 billion in long-term debt (including current maturities)[180] - The company maintains a target liquidity buffer of up to $3.0 billion, including cash and available committed and uncommitted credit lines[180] - Capital allocation priorities include maintaining investment grade metrics, sustaining assets, investing in business growth, and returning excess cash to shareholders[180] - As of September 30, 2023, $2.49 billion was available under the $2.50 billion revolving credit facility, and approximately $1.3 billion was available under uncommitted facilities[182] Operating Activities This section analyzes the cash flows generated from the company's primary business operations Net Cash Provided by Operating Activities: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Nine months ended Sep 30 | 1,869.1 | 2,980.1 | (1,111.0) | (37)% | - The decrease in operating cash flow was primarily due to lower net earnings after non-cash adjustments, partially offset by a favorable change in assets and liabilities of $252.4 million[185] - Favorable impacts from decreases in accounts receivable ($332.6 million) and inventories ($1.1 billion) were partially offset by an increase in other current and noncurrent assets ($347.3 million) and a decrease in accounts payable and accrued expenses ($926.5 million)[186] Investing Activities This section details the cash flows related to the acquisition and disposal of long-term assets and investments Net Cash Used in Investing Activities: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Nine months ended Sep 30 | (955.0) | (916.5) | (38.5) | 4% | - Capital expenditures were $1.0 billion for the nine months ended September 30, 2023, compared to $906.8 million in the prior year period[16][187] - The company completed the sale of the Streamsong Resort for net proceeds of $158.4 million and acquired the remaining 50% equity interest of Gulf Sulphur Services for $41.0 million[188] Financing Activities This section outlines the cash flows from debt, equity, and dividend transactions Net Cash Used in Financing Activities: | Period | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | Percent Change | | :------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Nine months ended Sep 30 | (1,069.8) | (2,105.7) | 1,035.9 | (49)% | - During the nine months ended September 30, 2023, the company made stock repurchases of $606.0 million and paid cash dividends of $286.5 million[189] - Net payments on structured accounts payable arrangements were $176.6 million, and payments on long-term debt were $44.8 million[189] Debt Instruments, Guarantees and Related Covenants This section provides information on the company's debt obligations, guarantees, and compliance with financial covenants - The company was in compliance with its credit facility financial ratios as of September 30, 2023[182] - Further information is incorporated by reference from Notes 11 and 17 to the Consolidated Financial Statements in the 10-K Report[190] Financial Assurance Requirements This section describes the regulatory requirements for financial assurance related to environmental and operational obligations - The company is subject to financial assurance requirements in various jurisdictions, particularly Florida and Louisiana, for operational and environmental regulations[191] - These requirements typically involve passing a financial strength test or providing credit support through mechanisms such as surety bonds, letters of credit, certificates of deposit, or trust funds[191] Environmental, Health, Safety and Security Matters This section updates on significant environmental regulations and their potential impact on the company's operations - The U.S. Supreme Court's Sackett v EPA decision significantly limits the definition of 'Waters of the United States' (WOTUS), reducing federal jurisdiction under the Clean Water Act[193] - In response, the EPA issued a final rule on August 29, 2023, effective September 8, 2023, to conform its WOTUS definition to the Sackett decision[194] - The conforming rule is being implemented in 23 states, while other states interpret WOTUS consistent with the pre-2015 regulatory regime and the Sackett decision[195] Off-Balance Sheet Arrangements and Obligations This section refers to disclosures regarding the company's off-balance sheet commitments and liabilities - Information regarding off-balance sheet arrangements and obligations is incorporated by reference from Management's Discussion and Analysis of Results of Operations and Financial Condition in the 10-K Report and Note 17 to the Condensed Consolidated Financial Statements in this report[196] Contingencies This section refers to disclosures regarding potential legal, environmental, and tax contingencies - Information regarding contingencies is incorporated by reference to Note 17 to the Condensed Consolidated Financial Statements in this report[197] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section outlines the company's exposure to various market risks, including fluctuations in currency exchange rates, interest rates, commodity prices (natural gas, ammonia, sulfur), and freight costs. It details the use of derivative instruments to mitigate these risks, primarily focusing on foreign currency exchange contracts and natural gas swaps - The company is exposed to market risks from fluctuations in currency values, interest rates, commodity prices (natural gas, ammonia, sulfur), and freight costs[207] - Derivatives, such as forward contracts, zero-cost collars, futures, and natural gas swaps, are used to mitigate these risks, but not for speculative purposes[207][208] Foreign Currency Exchange Contracts This section details the company's strategies and positions for hedging foreign currency exchange rate risks - The company's primary foreign currency exposures are the Canadian dollar and Brazilian real[208] - Financial instruments, including forward contracts, are used to hedge expected cash flows, typically for up to 18 months for the Canadian dollar and 12 months for the Brazilian real[208] - As of September 30, 2023, the fair value of major foreign currency exchange contracts was $(22.8) million, compared to $(27.3) million as of December 31, 2022[209] Commodities This section describes the company's approach to managing commodity price risks, particularly for natural gas - The company uses natural gas derivatives, primarily swaps, to manage the risk related to significant price changes in natural gas[211][76] - As of September 30, 2023, the fair value of natural gas commodities contracts was $1.6 million, down from $18.7 million as of December 31, 2022[211] ITEM 4. CONTROLS AND PROCEDURES This section confirms that management, including the principal executive and financial officers, evaluated the effectiveness of the company's disclosure controls and procedures as of September 30, 2023, and concluded they were effective. It also states that no material changes in internal control over financial reporting were identified during the quarter - Management, with the participation of the principal executive officer and principal financial officer, concluded that disclosure controls and procedures were effective as of September 30, 2023[214] - No changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting were identified during the three months ended September 30, 2023[215] PART II. OTHER INFORMATION This section provides additional disclosures not covered in the financial statements, including legal proceedings, risk factors, and equity security information ITEM 1. LEGAL PROCEEDINGS This section provides updates on various legal and environmental proceedings, including ongoing litigation related to Countervailing Duty (CVD) orders on phosphate fertilizers, the South Pasture Extension Mine Litigation, the Cruz Litigation concerning radiation levels, and the Faustina Plant Risk Management Plan. The company continues to actively defend these matters and manage compliance - Countervailing Duty (CVD) orders on phosphate fertilizers from Morocco and Russia are subject to ongoing litigation and administrative reviews, with new subsidy rates announced in November 2023 (OCP 2.12%, PhosAgro 28.50%)[216][217] - In the South Pasture Extension Mine Litigation, a waiver and reclamation schedule extension was approved by the Hardee County BOCC, along with a $249,000 civil penalty payment[223][224] - The Cruz Litigation, a class action alleging elevated radiation levels, saw defendants' motions to dismiss denied in March 2023, and the company intends to vigorously defend the matter[225][226] - The EPA Region 6 issued a Notice of Potential Violation regarding the Faustina Plant's Risk Management Plan Rule compliance, with settlement discussions ongoing[227] ITEM 1A. RISK FACTORS This section updates the company's key risk factors, emphasizing the significant impact of business and economic conditions, governmental policies affecting the agricultural industry, and international market dynamics on operating results. It specifically highlights the ongoing litigation and administrative reviews related to Countervailing Duty (CVD) orders on phosphate fertilizers from Morocco and Russia as a critical influence - Operating results are highly dependent on business and economic conditions and governmental policies affecting the agricultural industry[229] - International market conditions and the success of Countervailing Duty (CVD) petitions significantly influence operating results[230] - Ongoing litigation and administrative reviews related to CVD orders on phosphate fertilizers from Morocco and Russia could change applicable final CVD assessment rates and cash deposit rates, potentially having an adverse effect on the business[230][231] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section reports on the company's equity security repurchases during the quarter ended September 30, 2023. The company repurchased 3,948,783 shares of Common Stock for approximately $150.0 million at an average price of $37.99 per share under its publicly announced repurchase programs - No options to purchase shares of Common Stock were exercised using shares already owned by the optionee during the reported periods[233] Issuer Repurchases of Equity Securities (Quarter ended Sep 30, 2023): | Period | Total Shares Purchased | Average Price Paid per Share (USD) | Total Shares Purchased as part of Program | Max Approx. Dollar Value Remaining (USD) | | :-------------------------- | :--------------------- | :------------------------------- | :---------------------------------------- | :-------------------------------------- | | July 1, 2023 - July 31, 2023 | — | — | — | 1,467,818,178 | | August 1, 2023 - August 31, 2023 | 218,000 | 38.93 | 218,000 | 1,459,330,893 | | September 1, 2023 - Sep 30, 2023 | 3,730,783 | 37.93 | 3,730,783 | 1,317,818,221 | | Total | 3,948,783 | 37.99 | 3,948,783 | 1,317,818,221 | - A $2.0 billion share repurchase program was authorized in July 2022, effective upon completion of a prior $1.0 billion program, with no set expiration date[235] ITEM 4. MINE SAFETY DISCLOSURES This section indicates that information concerning mine safety violations or other regulatory matters, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K, is provided in Exhibit 95 to this report - Mine safety disclosures, as required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, are included in Exhibit 95 of this report[236] ITEM 5. OTHER INFORMATION This section states that no directors or officers informed the company of the adoption or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the fiscal quarter ended June 30, 2023 - No directors or officers informed the company of the adoption or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the fiscal quarter ended June 30, 2023[237] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q report, including various certifications (Rule 13a-14(a) and 13a-14(b)), mine safety disclosures, and Inline XBRL documents, which provide detailed supporting information for the financial statements and other disclosures - The exhibits include certifications required by Rule 13a-14(a) (Exhibits 31.1, 31.2) and Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (Exhibits 32.1, 32.2)[241] - Mine Safety Disclosures are filed as Exhibit 95[241] - Inline XBRL documents (Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Label Linkbase, Presentation Linkbase, Definition Linkbase, and Cover Page Interactive Data File) are also included[241] Signatures This section contains the official signature block for the Form 10-Q report, indicating that the registrant, The Mosaic Company, has duly caused the report to be signed on its behalf by Russell A. Flugel, Vice President and Controller, on November 8, 2023 - The report was signed on behalf of The Mosaic Company by Russell A. Flugel, Vice President and Controller[244] - The signature date is November 8, 2023[244]