PLP incurred a loss of $8.3 million, or $0.08 per unit, in the second quarter of 2002. This compares to a loss of $16.1 million, or $0.16 per unit, in the second quarter of 2001. The reduced loss in 2002 primarily resulted from: (i) an increase in equity in earnings of IMC Phosphates as a result of higher phosphates prices, reduced idle plant costs and favorable raw material costs, partially offset by increased phosphate production costs; and (ii) reduced interest expense from lower variable interest rates.

PLP incurred a loss of $14.1 million, or $0.14 per unit in the first six months of 2002. This compares to a loss of $26.6 million, or $0.26 per unit, in the first six months of 2001, excluding PLP's share of IMC Phosphates' special charges of $2.2 million, or $0.02 per unit, related to the write-off of certain deferred costs and expenses associated with an organizational realignment. Including special charges, PLP's loss in the first six months of 2001 was $28.8 million, or $0.28 per unit. The reduced loss in 2002 resulted from: (i) an increase in the equity in earnings of IMC Phosphates due to higher phosphate volumes, reduced idle plant costs and favorable raw material costs, partially offset by increased phosphate production costs; and (ii) reduced interest expense from lower variable interest rates.

For information related to IMC Phosphates, see Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of IMC Phosphates' Form 10-Q included in Part II, Item 5, "Other Information," of this Form 10-Q.

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Historically, PLP has satisfied its borrowing needs through IMC. IMC's ability to make payments on and to refinance its indebtedness and to fund planned capital expenditures, expansion efforts and strategic acquisitions in the future, if any, will depend on IMC's ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond IMC's control. IMC believes that its cash, other liquid assets and operating cash flow, together with available borrowings and potential access to credit and capital markets, will be sufficient to meet IMC's operating expenses and capital expenditures and to service its debt requirements and other contractual obligations as they become due.

IMC's credit facilities require it to maintain certain financial ratios, including a leverage ratio test and an interest coverage test. In addition, the credit facilities contain certain covenants and customary events of default. IMC's access to funds is dependent upon its product prices and market conditions. If product prices and other market conditions were to return to the low levels of 2001, there is no assurance that IMC will be able to comply with applicable financial covenants. IMC cannot assure that its business will generate sufficient cash flow from operations in the future; that its currently anticipated growth in net sales and cash flow will be realized on schedule; or that future borrowings will be available when needed or in an amount sufficient to enable IMC to repay indebtedness or to fund other liquidity needs. IMC may need to refinance all or a portion of its indebtedness on or before maturity. IMC cannot assure that it will be able to refinance any of its indebtedness o n commercially reasonable terms or at all.

There can be no assurance that IMC will be able to obtain any necessary waivers or amendments from the requisite lenders. Any failure to comply with the restrictions of the credit facilities or any agreement governing its indebtedness may result in an event of default under those agreements. Such default may allow the creditors to accelerate the related debt, which may trigger cross-acceleration or cross-default provisions in other debt. In addition, lenders may be able to terminate any commitments they had made to supply IMC with further funds (including periodic rollovers of existing borrowings).

IMC Phosphates incurs certain non-current liabilities, primarily in its Florida phosphate operations, where to obtain necessary permits, it must either pass a test of financial strength or provide credit support, typically surety bonds. As of June 30, 2002, IMC Phosphates had $88.6 million in surety bonds outstanding which mature over the course of 2002, and met the financial strength test for all additional such liabilities. There can be no assurance that IMC Phosphates can continue to pass such tests of financial strength or to purchase surety bonds at the same terms and conditions. IMC Phosphates anticipates that the renewal or obtaining of new surety bonds may require IMC Phosphates to post collateral for a portion of the insured amount. Such collateral may include letters of credit or cash. IMC Phosphates anticipates that it will be able to satisfy applicable credit support requirements without disrupting normal business operations.

Net cash used in operating activities totaled $16.3 million for the first six months of 2002 versus $19.6 million for the same period in 2001.

Net cash provided by financing activities for the six month period ending June 30, 2002 was $16.3 million compared to $19.6 million for the same period in 2001. Cash provided by financial activities in both periods was the result of additional borrowings from IMC used to fund operating activities.

PLP is exposed to the impact of interest rate changes on borrowings and, through its investment in IMC Phosphates, the impact of fluctuations in the purchase price of natural gas, ammonia and sulphur consumed in operations, as well as changes in the fair value of its financial instruments. IMC Phosphates periodically enters into natural gas forward purchase contracts in order to reduce the effects of changing natural gas prices, but not for trading purposes. As of June 30, 2002, none of PLP's exposure to these market risk factors had materially changed from December 31, 2001.

On June 13, 2002, Conoco Inc. filed a contractual claim against Agrico Chemical Company (a subsidiary of PLP), PLP, IMC, and IMC Global Operations Inc. and other unrelated defendants (Conoco vs. Agrico Chemical Company et al., District Court of Oklahoma County, State of Oklahoma). Alleging breach of contract for indemnification, the claim seeks a declaratory judgment of liability as well as unspecified reimbursement for costs expended by Conoco Inc. to investigate and remediate alleged contamination at a former fertilizer manufacturing facility in Charleston, South Carolina (Ashepoo Site). Conoco Inc. (or a corporate predecessor or affiliate) owned and operated the Ashepoo Site for approximately 60 years to produce fertilizer and fertilizer-related materials before selling the Ashepoo Site to Agrico Chemical Company, then a subsidiary of The Williams Companies, in 1972. Agrico Chemical Company operated the production facility until 1975 and sold th e facility in 1978. At this time management cannot determine the magnitude of exposure to PLP; however, PLP believes that it has substantial defenses to this claim and intends vigorously to contest this action and to seek any indemnification or other counterremedies to which it may be entitled.

IMC Phosphates net sales for the second quarter of 2002 increased 23 percent to $336.6 million compared to $273.2 million for the same period last year largely as a result of higher concentrated phosphate sales volumes and prices. Higher shipments of concentrated phosphates, primarily diammonium phosphate (DAP), favorably impacted net sales by $35.4 million. In addition, $5.9 million of the net sales increase was primarily due to average DAP prices increasing two percent to $135 per short ton in the second quarter of 2002 from $132 per short ton in the second quarter of 2001.

Gross margins increased to $14.7 million for the second quarter of 2002 compared to $0.6 million for the second quarter of last year. This increase was mainly the result of lower idle plant costs, lower raw material prices and higher concentrated phosphate sales prices, partially offset by higher phosphate operating costs and increased environmental reserves.

Other expense, net decreased $2.5 million or 78 percent predominantly as a result of the absence of a prior year loss from natural gas forward purchase contracts.

IMC Phosphates' net sales for the first six months of 2002 increased ten percent to $632.0 million compared to $572.5 million for the same period last year primarily as a result of higher concentrated phosphate sales volumes. Higher shipments of concentrated phosphates, primarily DAP, favorably impacted net sales by $47.4 million. Average DAP prices were the same in the current period compared to the prior year period.

Gross margins increased to $33.9 million for the first six months of 2002 compared to $13.4 million, excluding special charges of $2.4 million related to a write-off of certain deferred costs, for the first six months of last year. This increase was mainly the result of lower idle plant costs and lower raw material prices, partially offset by higher phosphate operating costs and increased environmental reserves.

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For a discussion of restructuring charges, see Note 1 of Notes to Condensed Consolidated Financial Statements.

Other expense, net decreased $3.8 million or 68 percent as a result of the absence of fees related to an accounts receivable securitization entered into by IMC in the third quarter of 2000 and the absence of a prior year loss from natural gas forward purchase contracts.

Historically, IMC Phosphates has satisfied its borrowing needs through IMC. In June 2002, IMC Phosphates updated its two variable rate Promissory Notes (previously in the principal amounts of up to $200.0 million and $65.0 million) payable to IMC to: (i) increase the maximum revolving borrowings available to IMC Phosphates from IMC under the $200.0 million note to $300.0 million; and (ii) reflect changes, in the definition of the applicable margin over LIBOR that serves as the basis for the interest rate under these notes, that resulted from changes in IMC's credit facilities entered into in May 2001.

IMC's ability to make payments on and to refinance its indebtedness and to fund planned capital expenditures, expansion efforts and strategic acquisitions in the future, if any, will depend on IMC's ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond IMC's control. IMC believes that its cash, other liquid assets and operating cash flow, together with available borrowings and potential access to credit and capital markets, will be sufficient to meet IMC's operating expenses and capital expenditures and service its debt requirements and other contractual obligations as they become due.

IMC's credit facilities require it to maintain certain financial ratios, including a leverage ratio test and an interest coverage test. In addition, the credit facilities contain certain covenants and customary events of default. IMC's access to funds is dependent upon its product prices and market conditions. If product prices and other market conditions were to return to the low levels of 2001, there is no assurance that IMC will be able to comply with applicable financial covenants. IMC cannot assure that its business will generate sufficient cash flow from operations in the future; that its currently anticipated growth in net sales and cash flow will be realized on schedule; or that future borrowings will be available when needed or in an amount sufficient to enable IMC to repay indebtedness or to fund other liquidity needs. IMC may need to refinance all or a portion of its indebtedness on or before maturity. IMC cannot assure that it will be able to refinance any of its indebtedness o n commercially reasonable terms or at all.

There can be no assurance that IMC will be able to obtain any necessary waivers or amendments from the requisite lenders. Any failure to comply with the restrictions of the credit facilities or any agreement governing its indebtedness may result in an event of default under those agreements. Such default may allow the creditors to accelerate the related debt, which may trigger cross-acceleration or cross-default provisions in other debt. In addition, lenders may be able to terminate any commitments they had made to supply IMC with further funds (including periodic rollovers of existing borrowings).

IMC Phosphates incurs certain non-current liabilities, primarily in its Florida phosphate operations, where to obtain necessary permits, it must either pass a test of financial strength or provide credit support, typically surety bonds. As of June 30, 2002, IMC Phosphates had $88.6 million in surety bonds outstanding which mature over the course of 2002, and met the financial strength test for additional such liabilities. There can be no assurance that IMC Phosphates can continue to pass such tests of financial strength or to purchase surety bonds at the same terms and conditions. IMC Phosphates anticipates that the renewal or obtaining of new surety bonds may require IMC Phosphates to post collateral for a portion of the insured amount. Such collateral may include letters of credit or cash. IMC Phosphates anticipates that it will be able to satisfy applicable credit support requirements without disrupting normal business operations.

Most of IMC Phosphates' export sales of phosphate crop nutrients are marketed through a North American export associations, Phosphate Chemicals Export Association, Inc. (PhosChem), which funds its operations in part through third-party financing facilities. During the second quarter of 2002, PhosChem entered into a new $65.0 million receivable purchase facility with a bank that replaced prior funding facilities. This facility supports PhosChem's funding of its purchases of crop nutrients from IMC Phosphates and other PhosChem members.

Net cash provided by operating activities totaled $47.7 million for the first six months of 2002 versus net cash used in operating activities of $186.3 million for the same period in 2001. The fluctuation of $234.0 million primarily resulted from improved working capital, stronger operating results and the absence of the termination of the accounts receivable securitization in 2001.

Net cash used in investing activities for the first six months of 2002 of $60.9 million increased $19.9 million from $41.0 million for the first six months of 2001. This increase was primarily the result of the $10.0 million investment in Gulf Sulphur Services Ltd., LLP (see Note 5 of Notes to Condensed Consolidated Financial Statements) and higher capital spending. Capital expenditures for the first six months of 2002 increased $9.0 million to $51.0 million from $42.0 million in the prior year period. IMC Phosphates estimates that its capital expenditures for 2002 will approximate $100.0 million and will be financed primarily from operations and borrowings.

Net cash provided by financing activities for the six-month period ending June 30, 2002 was $13.1 million compared to $220.6 million for the same period in 2001. The decrease resulted from improved operations which reduced the amount of funding that was necessary from IMC.

IMC Phosphates is exposed to the impact of interest rate changes on borrowings and the impact of fluctuations in the purchase price of natural gas, ammonia and sulphur consumed in operations, as well as changes in the market value of its financial instruments. IMC Phosphates periodically enters into natural gas forward purchase contracts to reduce the risk related to significant price changes in natural gas, but not for trading purposes. As of June 30, 2002, none of IMC Phosphates' exposure to the risk factors discussed above had materially changed from December 31, 2001.