-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WBTV7Nw2oCWDw7jYWJMPBgGiMUY6w2iVXQZWYCrPqhQiq1C6R4YjCOWIrkvKraZg m/AiBsM4o7zzOpUxPFDtuA== 0000950134-99-004189.txt : 20020501 0000950134-99-004189.hdr.sgml : 20020501 ACCESSION NUMBER: 0000950134-99-004189 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 DATE AS OF CHANGE: 20020501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEMFIRST INC CENTRAL INDEX KEY: 0001026601 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 640679456 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12547 FILM NUMBER: 99622747 BUSINESS ADDRESS: STREET 1: P O BOX 1249 CITY: JACKSON STATE: MS ZIP: 39202 BUSINESS PHONE: 6019487550 MAIL ADDRESS: STREET 1: P O BOX 1249 CITY: JACKSON STATE: MS ZIP: 39202 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1999 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (MARK ONE) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended March 31, 1999 -------------- or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to ______________ Commission File Number: 333-15789 --------- ChemFirst Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Mississippi 64-0679456 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 700 North Street, Jackson, MS 39202-3095 (Address of principal (Zip Code) executive offices) Registrant's Telephone Number, including Area Code: 601/948-7550 ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Class Outstanding at April 30, 1999 - -------------------------- ----------------------------- Common Stock, $1 Par Value 18,327,099 2 Part I. Financial lnformation Item 1. Financial Statements ChemFirst Inc. Consolidated Balance Sheets (Unaudited) (In Thousands of Dollars)
March 31 December 31 1999 1998 ---------- ----------- Assets: Current assets Cash and cash equivalents $ 7,556 11,226 Accounts receivable 42,312 43,798 Inventories: Finished products 39,233 32,872 Work in process 5,071 7,045 Raw materials and supplies 11,209 11,378 ---------- ---------- Total inventories 55,513 51,295 ---------- ---------- Prepaid expenses and other current assets 7,438 8,274 Net current assets of discontinued operations 43,990 46,309 ---------- ---------- Total current assets 156,809 160,902 ---------- ---------- Investments and other assets 47,765 49,131 Property, plant and equipment 369,499 366,814 Less: accumulated depreciation and amortization 145,454 139,413 ---------- ---------- Property, plant and equipment, net 224,045 227,401 Noncurrent assets of discontinued operations 6,000 6,000 ---------- ---------- $ 434,619 443,434 ========== ========== Liabilities and Stockholders' Equity: Current liabilities Notes payable $ 6,708 5,354 Current instalments of long-term debt 243 251 Deferred revenue 563 104 Accounts payable 13,488 22,020 Accrued expenses and other current liabilities 16,713 16,237 ---------- ---------- Total current liabilities 37,715 43,966 ---------- ---------- Long-term debt 62,025 64,956 Deferred revenue and other liabilities 23,905 24,783 Deferred income taxes 14,735 13,501 Noncurrent liabilities of discontinued operations 10,097 10,097 Minority interest 649 649 Stockholders' equity: Common stock 18,310 18,445 Additional paid-in capital 22,454 22,212 Accumulated other comprehensive income (295) (293) Retained earnings 245,024 245,118 ---------- ---------- Total stockholders' equity 285,493 285,482 ---------- ---------- $ 434,619 443,434 ========== ==========
The accompanying notes are an integral part of these financial statements. 2 3 ChemFirst Inc. Consolidated Statements of Operations (Unaudited) (In Thousands of Dollars and Shares, Except Per Share Amounts)
3 Months Ended March 31 ---------------------------- 1999 1998 ---------- ---------- Revenues: Sales $ 69,844 71,924 Interest and other income 2,132 9,572 ---------- ---------- 71,976 81,496 ---------- ---------- Costs and expenses: Cost of sales 50,350 53,671 General, selling and administrative expenses 10,401 9,843 Other operating expenses 2,791 2,554 Interest expense 948 70 ---------- ---------- 64,490 66,138 ---------- ---------- Earnings before income taxes 7,486 15,358 Income tax expense 2,845 5,912 ---------- ---------- Earnings from continuing operations 4,641 9,446 Earnings from discontinued operations, net of taxes -- 307 ---------- ---------- Net earnings $ 4,641 9,753 ========== ========== Earnings per common share: Continuing operations $ 0.25 0.47 Discontinued operations -- 0.02 ---------- ---------- Net earnings $ 0.25 0.49 ========== ========== Average shares outstanding 18,392 19,886 Earnings per common share, assuming dilution: Continuing operations $ 0.25 0.46 Discontinued operations -- 0.02 ---------- ---------- Net earnings $ 0.25 0.48 ========== ========== Average shares outstanding 18,535 20,206 Cash dividend declared per share $ 0.10 0.10
The accompanying notes are an integral part of these financial statements. 3 4 ChemFirst Inc. Consolidated Statements of Cash Flows (Unaudited) (In Thousands of Dollars)
March 31 ----------------------------- 1999 1998 ---------- ---------- Cash flows from operations: Net earnings $ 4,641 9,753 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 6,506 5,188 Provision for losses on receivables 91 12 Gain on sale of equity investee (750) (8,269) Deferred taxes and other items 1,507 1,634 Change in current assets and liabilities, net of effects of dispositions (8,114) 7,959 Net earnings from discontinued operations -- (307) ---------- ---------- Net cash provided by continuing operations 3,881 15,970 Net cash provided by (used in) discontinued operations 1,991 (7,359) ---------- ---------- Net cash provided by operating activities 5,872 8,611 ---------- ---------- Cash flows from investing activities: Capital expenditures (3,027) (11,678) Proceeds from sale of equity investee -- 18,986 Other investing activities -- (63) ---------- ---------- Net cash provided by (used in) investing activities, continuing operations (3,027) 7,245 Net cash used in investing activities, discontinued operations -- (727) ---------- ---------- Net cash provided by (used in) investing activities (3,027) 6,518 ---------- ---------- Cash flows from financing activities: Net borrowings - notes payable to banks (1,646) 2,000 Principal repayments of long-term debt -- (5) Dividends (1,834) (1,985) Purchase of common stock (3,055) (6,199) Proceeds from issuance of common stock 18 536 Other financing activities -- 15 ---------- ---------- Net cash used in financing activities, continuing operations (6,517) (5,638) Net cash used in financing activities, discontinued operations -- (147) ---------- ---------- Net cash used in financing activities (6,517) (5,785) ---------- ---------- Effect of exchange rate changes on cash 2 -- ---------- ---------- Net increase (decrease) in cash and cash equivalents (3,670) 9,344 Cash and cash equivalents at beginning of period 11,226 7,766 ---------- ---------- Cash and cash equivalents at end of period $ 7,556 17,110 ========== ========== Supplemental disclosures of cash flow information Cash paid during the period for: Interest, net of amounts capitalized $ 646 75 ========== ========== Income taxes, net $ 570 (747) ========== ==========
The accompanying notes are an integral part of these financial statements. 4 5 ChemFirst Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited. In Thousands of Dollars) Note 1 - General The financial statements included herein are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial reporting and Securities and Exchange Commission regulations. Certain prior year amounts have been reclassified to conform to the 1998 presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (of a normal and recurring nature) which are necessary to present fairly the financial position, results of operations and cash flows for the interim periods. These financial statements should be read in conjunction with the Annual Report of the Company and Form 10-K for the year ended December 31, 1998. Note 2 - Discontinued Operations The net assets and liabilities of discontinued operations included in the consolidated financial statements are classified as current assets, noncurrent assets and noncurrent liabilities at March 31, 1999 and December 31,1998, respectively, as follows:
Engineered Products and Services Steel and Other Totals ---------- ---------- ---------- At March 31, 1999: Net current assets of disc. operations $ 24,778 19,212 43,990 ========== ========== ========== Noncurrent assets of disc. operations $ -- 6,000 6,000 ========== ========== ========== Noncurrent liabilities of disc. operations $ -- 10,097 10,097 ========== ========== ========== At December 31, 1998: Net current assets of disc. operations $ 26,565 19,744 46,309 ========== ========== ========== Noncurrent assets of disc. operations $ -- 6,000 6,000 ========== ========== ========== Noncurrent liabilities of disc. operations $ -- 10,097 10,097 ========== ========== ==========
5 6 The statements of operations have been reclassified to separate discontinued and continuing operations. Earnings from discontinued operations include interest expense allocations, based on the ratio of net assets of discontinued operations to consolidated net assets plus debt, of $10 for the three-month period ending March 31, 1998. Capitalized interest allocated was $21 for the same period. Revenues and net earnings of discontinued operations for the three month period ended March 31, 1998 were as follows:
Engineered Products and Services Steel and Other Totals -------- --------- ------- Sales and revenues $ 22,084 15,130 37,214 ======== ======= ======= Earnings from operations before taxes $ 519 111 630 Income tax expense 266 57 323 -------- ------- ------- Earnings from discontinued operations, net $ 253 54 307 ======== ======= =======
Note 3 - Change from Reporting Gross Sales to Net Sales Basis Beginning with calendar year 1999 the Company elected to present sales on a net of freight basis by reclassing freight-out expense from cost of sales to sales. Prior periods have been reclassified to consistently reflect this presentation. Freight-out expense reclassed for the three months ended March 31,1998 from cost of sales to net sales was $2,249. Note 4 - Effect Of Adopting Accounting Changes In March 1998, the Accounting Standards Executive Committee ("AcSEC") released Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The SOP identifies the characteristics of internal-use software and provides guidance for accounting treatment of costs for computer software developed or obtained for internal use as related to capitalization or expense decisions. The statement was effective for fiscal years beginning after December 15, 1998. In April 1998, AcSEC released SOP 98-5, "Reporting on the Costs of Start-Up Activities." The SOP broadly defines start-up activities and provides guidance on the financial reporting of start-up costs and organization costs. It requires costs of start-up activities and organization costs to be expensed as incurred. The statement was effective for fiscal years beginning after December 15, 1998. Information has been presented on the basis required by these two statements and is immaterial to operations. Statement of Financial Accounting Standards ("SFAS") No. 133 - "Accounting for Derivative Instruments and Hedging Activities," was issued in June 1998, effective for fiscal 6 7 years beginning after June 15, 1999. The statement establishes accounting and reporting standards for derivative instruments and for hedging activities. All derivatives are required to be recognized as either assets or liabilities in the statement of financial position and measured at fair value. Changes in fair value will be reported either in earnings or outside earnings depending on the intended use of the derivative and the resulting designation. Entities applying hedge accounting are required to establish at the inception of the hedge the method used to assess the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge. The Company currently hedges certain foreign currency transactions by entering into forward exchange contracts. Gains and losses associated with currency rate changes on forward contracts hedging foreign currency transactions are recorded in income and generally offset the transaction losses or gains on the foreign currency cash flows that they are intended to hedge. The Company has not completed its analysis of SFAS No. 133 and, accordingly, has not determined what additional effect, if any, it may have on future operations and financial statement disclosure. Note 5 - Earnings Per Share Basic EPS is based on the average number of common shares outstanding during each period. Diluted EPS includes the effect of outstanding common stock equivalents ("CSEs"). The following is a reconciliation of the numerators (income) and denominators (weighted-average shares) of the basic and diluted per share computations for income from continuing operations:
Three Months Ended March 31 1999 1998 ----------------------- ------------------------ Income Shares EPS Income Shares EPS -------- -------- -------- -------- -------- -------- (Millions, except per share amounts) Earnings per Common Share: Basic $ 4,641 18.39 $ 0.25 $ 9,753 19.89 $ 0.47 Dilutive effect of CSEs -- 0.15 -- -- 0.32 (0.01) -------- -------- -------- -------- -------- -------- Diluted $ 4,641 18.54 $ 0.25 $ 9,753 20.21 $ 0.46 ======== ======== ======== ======== ======== ========
Note 6 - Comprehensive Income Total comprehensive income for the three months ended March 31, 1999 and 1998, was $4.6 million and $9.8 million, respectively. Total comprehensive income for the Company includes net income and foreign currency translation adjustments. 7 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - Three months ended March 31, 1999 compared to the three months ended March 31, 1998 Consolidated Results Earnings from continuing operations for the three months ended March 31, 1999, were $4.6 million versus $9.4 million for the same period of the prior year. Prior year results include a $5.0 million gain on the January 1998 sale of Power Sources, Inc. Excluding the Power Sources gain, earnings from continuing operations for the same period of the prior year were $4.4 million. Earnings improved as increased profits from the Polyurethane Chemicals segment, which added the Baytown aniline facility in the second quarter of 1998, more than offset a decline in sales and earnings from Electronic and Other Specialty Chemicals, hurt by lower prices and volumes, and higher fixed costs. Segment Operations Segment Information (In Thousands of Dollars)
3 Months Ended March 31 -------- 1999 1998 ---------- ---------- Sales Electronic and Other Specialty Chemicals $ 39,917 48,337 Polyurethane Chemicals 29,927 23,587 ---------- ---------- Total $ 69,844 71,924 ========== ========== Operating profit before income taxes Electronic and Other Specialty Chemicals $ 3,538 5,630 Polyurethane Chemicals 7,205 3,155 ---------- ---------- 10,743 8,785 Unallocated corporate expenses (2,824) (2,174) Interest income (expense), net (465) 509 Other income, net 32 8,238 ---------- ---------- Total $ 7,486 15,358 ========== ==========
8 9 Electronic and Other Specialty Chemicals pretax operating profits for the current year were down 37% versus the same quarter of the prior year to $3.5 million, while sales declined 17%. The decline in operating profits and sales was primarily due to lower volume and prices for electronic chemicals as a result of weaker semiconductor demand and the continuing negative impact of biotechnology on our conventional agricultural chemical customers. Higher costs from recent investments in new facilities in the U.S. and Japan also negatively impacted current year operating results. Polyurethane Chemicals pretax operating profits for the current year were up 128% versus the same quarter of the prior year to $7.2 million due to additional aniline volume from the new Baytown, TX plant which came on stream second quarter last year. In addition, earnings for the first quarter of the prior year were adversely affected by unscheduled maintenance at the Pascagoula, MS aniline plant. Sales for the quarter were up 27%, primarily due to the addition of Baytown production. Unallocated corporate expenses for the current year were $2.8 million versus $2.2 million in the prior year, up on increased compensation expense indexed to the Company's stock price. Net interest expense for the current year was $0.5 million versus net interest income of $0.5 million in the prior year due to higher interest expense caused by increased borrowings. Other income and expense for the prior year included $8.2 million in pretax gain from the sale of Power Sources, Inc. Discontinued Operations Earnings from discontinued operations include the results of Steel and Engineered Products and Services. The Company adopted plans for disposal of these operations in the third and fourth quarters of 1998. Negotiations for the sale of Engineered Products and Services to the managers of that business have stalled, and the Company is seeking other buyers. FirstMiss Steel will cease melt operations effective June 30, 1999, and mothball the plant while continuing to seek a buyer. Capital Resources and Liquidity Cash flow from continuing operations for the current year was $3.9 million versus $16.0 million in the prior year. Operating cash flow for the prior year included a $10.8 million reduction in accounts receivable. Capital expenditures during the current year were down from the prior year which included final expenditures on the Baytown, TX facility. Net cash provided by investing activities in the prior year includes $19.0 million in pretax proceeds from the Company's sale of its interest in Power Sources, Inc. Cash flow used in financing activities for the current year includes $3.1 million for the purchase of shares of ChemFirst common stock versus $6.2 million in the prior year. 9 10 On October 20,1995, Getchell Gold Corporation ("Getchell") was spun off to Company shareholders. The Company received a promissory note, which is included in other investments, in settlement of all prior cash advances. The aggregate unpaid principal and accrued interest was originally due in September of 2000. In November 1998, Getchell and Placer Dome Inc. announced plans to merge, with completion of the transaction currently anticipated to occur by the end of May 1999. If the merger is completed, Getchell must immediately prepay all principal and interest due, approximately $29.6 million, to the Company. Year 2000 In 1996, the Company began a study which led to the purchase in 1997 of a company-wide Enterprise Resource Planning ("ERP") system to integrate the Company's information systems, replacing small, stand-alone purchased systems. The ERP system will be Year 2000 compliant, with the material portion of the system planned for completion by the middle of 1999. Installation is being completed in stages, with the first sites converted at December 31, 1998. As of March 31, 1999, the Company has spent $8.7 million on this project and is projecting to spend approximately $3.3 million for the remainder of 1999. A corporate-wide survey of other information technology ("IT") and non-IT equipment and systems utilizing date or time functions has been completed and is now undergoing a final review. The current estimated cost to remediate is less than $0.4 million of which approximately $0.1 million has been spent to date. Process control systems at the Dayton and Tyrone facilities have been remediated; testing of these systems will be completed this summer. The implementation and testing of process control remediations at the Pascagoula facility will occur in the fourth quarter of 1999 to coincide with the next scheduled plant maintenance turnaround, the exact date for which has not been determined. Remediation, including verification testing, of other non-compliant systems, equipment and software is materially complete. Contingency plans are currently being developed in the event the remediations are not successful or the remaining remediations do not occur or are delayed. Severe delay or widespread failure affecting both the remediation effort and the contingency plans, although not expected, could have a material effect on the Company's financial condition and results of operations. The Company is surveying its key customers, as well as service and raw material suppliers, about their Year 2000 readiness, and plans to complete the surveying and assess the responses by July 31, 1999. Contingency plans will then be developed, as appropriate, in a process scheduled for completion by September 30, 1999. Although the Company cannot quantify the precise effect, significant or prolonged disruptions of key customers or suppliers could have a material effect on the Company's financial condition and results of operations. For example, the majority of aniline produced by the Company is sold through long-term contracts to 10 11 a few customers. Their inability to utilize the Company's aniline could have a material adverse effect. The Company has not, however, completed its assessments of these customers. The Company has not determined its worse case scenario in the event of Year 2000 related problems, but will do so during the development of contingency plans. Forward-Looking Statements Certain statements included in this Form 10-Q which relate to the Year 2000, proceeds from the discontinuance of the steel and engineered products and services operations, the prepayment of a note by Getchell as well as other statements in this Form 10-Q that are not historical in nature, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, as well as other forward-looking statements made from time to time by the Company, or in the Company's press releases and filings with the U.S. Securities and Exchange Commission, are based on certain underlying assumptions and expectations of management. These forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those expressed in such forward-looking statements. Such risks and uncertainties include, but are not limited to, general economic conditions, availability and pricing of raw materials, supply/demand balance for key products, new product development, manufacturing efficiencies, conditions of and product demand by key customers, the timely completion and start up of construction projects, pricing pressure as a result of the downturn in Asian or other foreign markets, successful installation of the Company's new ERP system, the inability of the Company to either resolve the Company's Year 2000 issues or to accurately estimate the costs associated with Year 2000 compliance and other factors as may be discussed in the company's Form 10-K for the fiscal year ended December 31, 1998. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to changes in financial market conditions in the normal course of its business, including changes in interest rates and foreign currency exchange rates. At March 31, 1999, the Company's derivative and other financial instruments included long-term debt denominated in U.S. dollars and short-term debt denominated in Japanese yen and a series of short-term forward sales of Japanese yen. Due to the short-term nature and size of these yen obligations, the Company does not consider its exposure to foreign currency or interest rate fluctuations on these instruments to be material. The Company utilizes fixed and variable-rate debt to maintain liquidity and fund its business operations, with the terms and amounts based on business requirements, market conditions and other factors. At March 31,1999, the market value of the Company's fixed rate borrowings was approximately $24.0 million. A 100 basis point change in interest rates (all other 11 12 variables held constant) as of March 31,1999, would result in an approximate $1.0 million change in fair market value, but would not affect interest expense or cash flow. At March 31,1999, the Company had $38.0 million in variable-rate debt. A 100 basis point change in interest rates (all other variables held constant) on this portion of the Company's debt would result in a change in interest expense of approximately $0.4 million. Part II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule Exhibit 27.1 - Restated Financial Data Schedule (b) Reports on Form 8-K No report on Form 8-K was filed by the Registrant during the three months ended March 31, 1999. 12 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHEMFIRST INC. May 13, 1999 /s/ J. Kelley Williams - --------------------- ---------------------------------------- J. Kelley Williams Chairman and Chief Executive Officer May 13, 1999 /s/ Troy B. Browning - --------------------- ---------------------------------------- Date Troy B. Browning Controller (Principal Accounting Officer) 13 14 EXHIBIT INDEX
EXHIBITS DESCRIPTION - -------- ----------- 27 - Financial Data Schedules 27.1 - Restated Financial Data Schedules
14 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 7,556 0 42,375 63 55,513 156,809 369,499 145,454 434,619 37,715 62,025 0 0 18,310 267,183 434,619 69,844 71,976 50,350 50,350 2,791 91 948 7,486 2,845 4,641 0 0 0 4,641 0.25 0.25
EX-27.1 3 RESTATED FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 17,110 0 42,440 317 46,114 155,999 335,219 123,547 441,863 69,032 4,001 0 0 19,853 304,753 441,863 71,924 81,496 53,671 53,671 2,554 12 70 15,358 5,912 9,446 307 0 0 9,753 0.49 0.48
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