-----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, TSgJ+e5M2fE7v76TjJ96xiK4QDOGQ9pplCtK7fKQk4vX1K+EbKIAm27GmkMyDChI VE5F7ZqiEsDy45GG2Bu+Ag== 0000066895-98-000001.txt : 19980123 0000066895-98-000001.hdr.sgml : 19980123 ACCESSION NUMBER: 0000066895-98-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980122 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSISSIPPI CHEMICAL CORP /MS/ CENTRAL INDEX KEY: 0000066895 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 640292638 STATE OF INCORPORATION: MS FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12217 FILM NUMBER: 98510783 BUSINESS ADDRESS: STREET 1: P O BOX 388 CITY: YAZOO CITY STATE: MS ZIP: 39194 BUSINESS PHONE: 6017464131 MAIL ADDRESS: STREET 1: P O BOX 388 CITY: YAZOO CITY STATE: MS ZIP: 39194 FORMER COMPANY: FORMER CONFORMED NAME: MISSISSIPPI CHEMICAL CORP DATE OF NAME CHANGE: 19920703 EX-27 1
5 This schedul contains second quarter summary financial information extracted from Mississippi Chemical Corporation fiscal 1998 second quarter Form 10-Q and is qualified in its entirety by reference to such Form 10-Q filing. 0000066895 MISSISSIPPI CHEMICAL CORPORATION 1,000 3-MOS JUN-30-1998 DEC-31-1997 4,176 0 52,009 1,878 91,845 159,703 748,349 319,399 917,162 66,293 213,978 0 0 280 437,016 917,162 228,947 229,368 187,454 215,959 0 111 4,644 8,765 4,033 4,732 0 0 0 4,732 0.17 0.17
10-Q 2 FORM 10-Q 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 Quarter Ended December 31, 1997 OR [ ] Transition Report Pursuant to Section 13 or 15(d) Of the Securities Exchange Act of 1934 For Quarter Ended December 31, 1997 Commission File Number 001-12217 MISSISSIPPI CHEMICAL CORPORATION Organized in the State of Mississippi Tax Identification No. 64-0292638 P. O. Box 388, Yazoo City, Mississippi 39194 Telephone No. 601+746-4131 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Number of Shares -------- ---------------- Common Stock, $0.01 par value 27,334,555 MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES INDEX Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Consolidated Financial Statements Consolidated Statements of Income 3 Three months ended December 31, 1997 and 1996, and Six months ended December 31, 1997 and 1996 Consolidated Balance Sheets December 31, 1997 and June 30, 1997 4 - 5 Consolidated Statements of Shareholders' Equity 6 Fiscal Year Ended June 30, 1997 and Six months ended December 31, 1997 Consolidated Statements of Cash Flows 7 Six months ended December 31, 1997 and 1996 Notes to Consolidated Financial Statements 8 - 10 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 11 - 20 PART II. OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K 21 Signatures 21 MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Three months ended Six months ended December 31, December 31, -------------------- -------------------- 1997 1996 1997 1996 -------- -------- -------- -------- (In thousands, except per share data) Revenues: Net sales $118,035 $113,196 $228,947 $204,486 Trading loss on brokered product (56) - (353) - -------- -------- -------- -------- 117,979 113,196 228,594 204,486 Operating expenses: Cost of products sold 99,709 80,488 187,454 143,867 Selling 6,092 6,443 11,796 12,764 General and administrative 8,453 7,665 16,709 14,515 -------- -------- -------- -------- 114,254 94,596 215,959 171,146 -------- -------- -------- -------- Operating income 3,725 18,600 12,635 33,340 Other (expense) income: Interest, net (2,561) (280) (4,644) 142 Other 249 1,539 774 1,637 -------- -------- -------- -------- Income before income taxes 1,413 19,859 8,765 35,119 Income tax expense 978 7,766 4,033 13,731 -------- -------- -------- -------- Net income $ 435 $ 12,093 $ 4,732 $ 21,388 ======== ======== ======== ======== Earnings per share - basic and diluted (see Note 2) $ 0.02 $ 0.56 $ 0.17 $ 1.00 ======== ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS December 31, June 30, 1997 1997 ------------ --------- (In thousands, except per share data) Current assets: Cash and cash equivalents $ 4,176 $ 8,159 Accounts receivable, net 50,131 63,095 Inventories: Finished products 48,825 28,308 Raw materials and supplies 6,154 4,636 Replacement parts 36,866 36,366 -------- -------- Total inventories 91,845 69,310 Prepaid expenses and other current assets 9,834 4,873 Deferred income taxes 3,717 3,596 -------- -------- Total current assets 159,703 149,033 Investments and other assets: Investments in affiliates 71,563 69,230 Other 25,390 14,039 -------- -------- Total investments and other assets 96,953 83,269 Properties held for sale 52,919 52,919 Property, plant and equipment, at cost 748,349 697,101 Less accumulated depreciation, depletion and amortization (319,399) (304,706) -------- -------- Net property, plant and equipment 428,950 392,395 Goodwill, net of accumulated amortization 178,637 180,929 -------- -------- $917,162 $858,545 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) LIABILITIES AND SHAREHOLDERS' EQUITY December 31, June 30, 1997 1997 ------------ ---------- (In thousands, except per share data) Current liabilities: Long-term debt due within one year $ 135 $ 140 Accounts payable 54,260 74,534 Accrued liabilities 11,363 14,476 Income taxes payable 535 5,973 -------- -------- Total current liabilities 66,293 95,123 Long-term debt 331,931 244,516 Other long-term liabilities and deferred credits 21,806 20,620 Deferred income taxes 59,836 58,857 Shareholders' equity: Common stock ($.01 par; authorized 100,000 shares; issued 27,976 in fiscal 1998 and 1997) 280 280 Additional paid-in capital 305,882 305,901 Retained earnings 145,079 145,827 Treasury stock, at cost (641 shares in fiscal 1998 and 566 shares in fiscal 1997) (13,945) (12,579) -------- -------- 437,296 439,429 -------- -------- $917,162 $858,545 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY DECEMBER 31, 1997 Additional Common Paid-In Retained Treasury Stock Capital Earnings Stock Total -------- ---------- --------- --------- -------- (In thousands) Balances, July 1, 1996 $ 229 $178,364 $ 99,814 $(30,582) $247,825 Net income - - 55,815 - 55,815 Cash dividends paid - - (9,802) - (9,802) Treasury stock, net - 56 - (18,753) (18,697) Stock options exercised - 203 - - 203 Stock issued for business acquired 51 127,278 - 36,756 164,085 ------- -------- -------- -------- -------- Balances, June 30, 1997 280 305,901 145,827 (12,579) 439,429 Net income - - 4,732 - 4,732 Cash dividends paid - - (5,480) - (5,480) Treasury stock, net - (19) - (1,366) (1,385) ------- -------- -------- -------- -------- Balances, December 31, 1997 $ 280 $305,882 $145,079 $(13,945) $437,296 ======= ======== ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended December 31, 1997 1996 --------- ---------- (In thousands) Cash flows from operating activities: Net income $ 4,732 $ 21,388 Reconciliation of net income to net cash used in operating activities: Net change in operating assets and liabilities (44,156) (28,973) Depreciation, depletion and amortization 18,108 10,316 Deferred income taxes 1,193 668 Other (3,696) (4,065) -------- -------- Net cash used in operating activities (23,819) (666) -------- -------- Cash flows from investing activities: Purchase of property, plant and equipment (51,331) (74,391) Investment in Farmland MissChem Limited (2,040) (43,167) Proceeds received from option 1,000 1,000 Net change in restricted funds (8,338) - Other 103 6 -------- -------- Net cash used in investing activities (60,606) (116,552) -------- -------- Cash flows from financing activities: Debt proceeds 454,974 222,122 Debt payments (367,569) (150,769) Cash dividends paid (5,480) (4,240) Purchase of treasury stock (1,483) (6,306) -------- -------- Net cash provided by financing activities 80,442 60,807 -------- -------- Net decrease in cash and cash equivalents (3,983) (56,411) Cash and cash equivalents - beginning of period 8,159 60,214 -------- -------- Cash and cash equivalents - end of period $ 4,176 $ 3,803 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - INTERIM FINANCIAL STATEMENTS The accompanying consolidated financial statements of Mississippi Chemical Corporation and its subsidiaries ("the Company") have been prepared by the Company, without audit. In the opinion of the Company's management, the financial statements reflect all adjustments necessary to present fairly the results of operations for the three month and the six month periods ended December 31, 1997 and 1996, the Company's financial position at December 31, 1997 and June 30, 1997, the cash flows for the six months ended December 31, 1997 and 1996, and the consolidated statements of shareholders' equity as of December 31, 1997. In the opinion of management, these adjustments are of a normal recurring nature which are necessary for a fair presentation of the financial position and results of operations for the interim periods. Certain notes and other information have been condensed or omitted from the interim financial statements presented in the Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company's 1997 Form 10-K and the consolidated financial statements and notes thereto included in the Company's June 30, 1997, audited financial statements. Due to the seasonal nature of the Company's business, the results of operations for the period ended December 31, 1997, are not necessarily indicative of the operating results for the full fiscal year. NOTE 2 - EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS 128 specifies new standards for computing and disclosing earnings per share and is effective for periods ending after December 15, 1997. The Company has adopted this standard and has restated its earnings per share for prior periods presented. The number of shares used in the Company's basic and diluted earnings per share computations are as follows: Three months ended Six months ended December 31, December 31, -------------------- ------------------- 1997 1996 1997 1996 --------- -------- --------- -------- (In thousands) Weighted average common shares outstanding, net of treasury shares, for basic earnings per share 27,373 21,506 27,388 21,419 Common stock equivalents for employee stock options 36 92 42 72 ------ ------ ------ ------ Weighted average common shares outstanding for diluted earnings per share 27,409 21,598 27,430 21,491 ====== ====== ====== ======
In October 1997, the Company's board of directors declared a regular quarterly cash dividend of $0.10 per common share for the three-month period ending September 30, 1997. This dividend was paid on November 24, 1997, to holders of record on November 4, 1997. NOTE 3 - COMMITMENTS AND CONTINGENCIES During 1990, the Company entered into an agreement granting a third party the exclusive option, for a period of four years, to purchase the Company's undeveloped phosphate rock property of approximately 12,000 acres in Hardee County, Florida. On July 12, 1994, the Company and the option holder entered into new agreements with respect to this property whereby the Company conveyed a portion of the property to the third party and granted to the third party the exclusive option to purchase the remaining portion of the property. In January 1998, the third party exercised its option. These properties, which have a carrying value of $52.9 million, are classified on the balance sheet as "Properties Held for Sale." The purchase price of the property is $57.0 million. If elected by the purchaser, the purchase price is payable in the form of a promissory note payable over twenty-four equal quarterly payments. As a result of the transaction, the Company will recognize a pre-tax gain of approximately $11.1 million consisting of the excess of the purchase price of the property over its carrying value, plus $7.0 million in option payments received since 1994. This transaction is expected to close in April, 1998. The Company has entered into a 50-50 joint venture known as Farmland MissChem Limited with Farmland Industries, Inc., to construct and operate a 2,040-short-ton-per-day anhydrous ammonia plant to be located near Point Lisas, The Republic of Trinidad and Tobago. The project is expected to cost approximately $330 million. The portion of the project cost in excess of required equity contributions of 35% is to be financed by the joint venture on a nonrecourse project basis. Start-up of the facility is scheduled for spring 1998. The Company has entered into a contract to purchase one-half of the ammonia, approximately 350,000 short-tons-per-year, produced by the plant at a purchase price which approximates market price but is subject to an agreed-upon floor price. The Company intends to use its portion of the production from the new facility as a raw material for upgrading into finished fertilizer products at its existing facilities and for sales into world markets. The Company is accounting for this investment using the equity method. In late fiscal 1996, the Company began an expansion at its nitrogen fertilizer manufacturing facilities at Yazoo City. The project includes the addition of a 650-ton-per-day nitric acid plant, a new 500-ton-per-day ammonia plant and modifications to its ammonium nitrate plant to increase production from approximately 750,000 to approximately 950,000 tons per year. This expansion, which has an estimated total cost of $130 million, is scheduled for a phased completion with the nitric acid, anhydrous ammonia, and the majority of the ammonium nitrate capacity being added in the first half of calendar 1998. Total project completion is anticipated in early calendar 1999. The Company has begun construction of a new phosphogypsum disposal facility at Pascagoula that is expected to be operational by spring 1998 at an estimated cost of $17 million. In July 1997, the Company also initiated construction of an expansion of its diammonium phosphate manufacturing facilities at Pascagoula. This project, which is expected to cost approximately $10.5 million, will increase diammonium phosphate ("DAP") production from approximately 720,000 to 900,000 tons per year and will increase product storage capacity from approximately 40,000 to 80,000 tons. It is expected that this expansion will be fully operational by the end of fiscal 1998. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion and analysis should be read in conjunction with the attached consolidated financial statements and notes thereto, and with the Company's audited financial statements and notes thereto for the fiscal year ended June 30, 1997. Consistent with the historical nature of the Company's business, the usage of fertilizer in the Company's trade territory is highly seasonal, and the Company's quarterly results reflect the fact that significantly more fertilizer is purchased in the spring. Significant portions of the Company's net sales and operating income are generated in the last four months of the Company's fiscal year (March through June). Since interim period operating results reflect the seasonal nature of the Company's business, they may not necessarily be indicative of results expected for the full fiscal year. In addition, quarterly results can vary significantly from year to year due to a number of factors, including weather-related shifts in planting schedules and purchase patterns. The Company incurs substantial expenditures for fixed costs throughout the year and substantial expenditures for inventory in advance of the spring planting season. The Company's results for the quarter ended December 31, 1997, reflect weak pricing for all of the Company's nitrogen products. The lower prices are primarily the result of China's continued ban on urea imports, which contributed to a 30% decrease in the price of urea during the current year quarter as compared to the prior year quarter. The price of urea began decreasing during the prior quarter and continued to decrease for the quarter ended December 31, 1997. As urea prices declined, the prices for the Company's other nitrogen products declined as well. During the current year quarter, sales volumes for the Company's nitrogen products were below expectations. Nitrogen solutions sales volumes decreased 16% during the current year quarter as compared to the prior year quarter, as customers continued to resist off-season purchases due to fertilizer pricing uncertainties. This resulted in the Company placing significantly increased tonnage in consignment inventory during the current year. This consignment inventory will be purchased by customers later in the year at then prevailing market prices. Sales volumes for the Company's ammonium nitrate decreased 14% during the current year quarter primarily due to unfavorable weather conditions in the Company's trade area. These unfavorable conditions adversely impacted the application of ammonium nitrate to hay and forage crops during the current year quarter. Ammonia and urea sales volumes for the Company increased during the current year quarter primarily due to the additional tons available for sale through the acquisition of the First Mississippi Corporation ("First Mississippi") fertilizer assets in December 1996. During the current year quarter, the Company experienced production losses and increased costs at its Donaldsonville, Louisiana, nitrogen facility and its Pascagoula DAP facility due to scheduled maintenance turnarounds. The quarter was also affected by high natural gas cost during October and November; however, by quarters end, natural gas prices had declined substantially due to the mild winter weather experienced in major gas consuming regions of the country. Phosphate prices were unchanged during the current year quarter as compared to the prior year quarter, while potash sales prices increased 13% during the current year quarter as a result of continued strengthening in the domestic and international markets. Potash sales volumes decreased 8% during the current year quarter due primarily to product movement which was shifted to the first quarter as a result of customers filling their storage prior to announced price increases, as well as the closure in early December 1997, of the Company's Eddy Potash, Inc. ("Eddy Potash") facility located in Carlsbad, New Mexico. This closure had no material impact on the Company's results of operations or its financial position at December 31, 1997. With world grain inventories remaining at low levels, most industry analysts expect increases in U.S. planted acres and fertilizer consumption during 1998. Despite the prospect of higher U.S. demand, the near-term nitrogen price outlook remains uncertain due to the present worldwide urea supply/demand imbalance and the expected availability of new nitrogen capacity in early 1998. In May 1995, the Board of Directors authorized the purchase of up to 1,500,000 shares of the Company's common stock in the open market or in privately negotiated transactions. In March 1996, the Board of Directors authorized the Company to repurchase up to 1,500,000 additional shares. As of December 31, 1997, the Company had repurchased a total of 2,496,009 shares pursuant to those authorizations. The unused authorization to repurchase 503,991 shares remains available to the Company. Effective October 1, 1997, the Company became a member of the Phosphate Chemicals Export Association, Inc., a Webb-Pomerene corporation known as "PhosChem". All of the Company's export sales of DAP are made through PhosChem, while domestic DAP sales are made through the Company's internal sales staff. The Company has ended its exclusive DAP marketing agreement with Atlantic Fertilizer & Chemical Corporation. RESULTS OF OPERATIONS Following are summaries of the Company's sales results by product categories: Three months ended Six months ended December 31, December 31, ------------------- ------------------- 1997 1996 1997 1996 -------- --------- --------- -------- Net Sales (in thousands): Nitrogen $ 63,087 $ 55,812 $121,069 $104,557 DAP 32,531 35,485 63,487 66,507 Potash 21,899 21,361 43,476 32,219 Other 518 538 915 1,203 -------- -------- -------- -------- Net Sales $118,035 $113,196 $228,947 $204,486 ======== ======== ======== ========
Three months ended Six months ended December 31, December 31, -------------------- ------------------- 1997 1996 1997 1996 -------- --------- -------- -------- Tons Sold (in thousands): Nitrogen: Ammonia 161 16 311 22 Ammonium nitrate 140 163 256 303 Urea 100 74 218 132 Nitrogen solutions 103 122 113 253 Nitric acid 11 9 22 17 ----- ----- ----- ----- Total Nitrogen 515 384 920 727 DAP 185 201 363 372 Potash 250 273 517 416
Three months ended Six months ended December 31, December 31, ------------------- -------------------- 1997 1996 1997 1996 -------- -------- ------- ------- Average Sales Price Per Ton: Nitrogen $ 122 $ 145 $ 132 $ 144 DAP $ 176 $ 176 $ 175 $ 179 Potash $ 88 $ 78 $ 84 $ 78
NET SALES. Net sales increased 4% to $118.0 million for the quarter ended December 31, 1997, from $113.2 million for the quarter ended December 31, 1996. For the six months ended December 31, 1997, net sales increased 12% to $228.9 million, from $204.5 million for the six months ended December 31, 1996. These increases were primarily the result of increased sales volumes for nitrogen fertilizers partially offset by lower sales prices for nitrogen fertilizers. The volume increases are attributable to increased anhydrous ammonia and urea sales due to the acquisition of First Mississippi in December 1996, partially offset by lower sales volumes of ammonium nitrate and nitrogen solutions. In the current year quarter, nitrogen solutions sales volumes decreased 16% as compared to the prior year quarter, and decreased 55% in the current year six-month period as compared to the prior year six-month period. These decreases were primarily the result of customers continued resistance to commit to off-season purchases due to pricing uncertainties in the marketplace. Ammonium nitrate sales volumes decreased 14% in the current year quarter as compared to the prior year quarter, and decreased 16% in the current six-month period as compared to the prior year six-month period. These decreases were primarily the result of unfavorable weather conditions which delayed movement onto hay and forage crops during the current year periods. During the current year quarter, the Company's sales prices for its anhydrous ammonia, ammonium nitrate, urea and nitrogen solutions decreased 33%, 20%, 30% and 15%, respectively, which resulted in a 16% reduction in the Company's weighted average price per ton of nitrogen. For the six months ended December 31, 1997, the Company's sales prices for its anhydrous ammonia, ammonium nitrate, urea and nitrogen solutions decreased 29%, 17%, 25% and 15%, respectively, which resulted in an 8% reduction in the average price per ton of nitrogen. During the current year quarter, sales of DAP decreased 8% as compared to the prior year quarter as a result of an 8% decrease in tons sold. For the six-month period ended December 31, 1997, sales of DAP decreased 5% as compared to the prior year six-month period, the result of a 2% decrease in tons sold and a 2% decrease in the average sales price. Potash sales increased 3% during the current year quarter as compared to the prior year quarter, and increased 35% during the current six-month period as compared to the prior year six-month period. While potash volumes were down 8% in the current quarter, volumes were up 24% for the six month period as compared to the prior year. Potash prices were up 13% and 8%, respectively, for the current year quarter and six month period. These increases were the result of increased domestic and international demand during the current year. The Company's lower sales volumes during the current quarter were primarily due to product movement which was shifted to the first quarter as a result of customers filling their storage prior to announced price increases. Also, the Company ceased production at its Eddy Potash facility in early December 1997. TRADING LOSS ON BROKERED PRODUCT. Following the First Mississippi acquisition in December 1996, the Company routinely trades or brokers ammonia in the open market. During the current quarter, brokered ammonia sales of $2.6 million and purchases of approximately $2.7 million resulted in a $.1 million net loss. During the six month period ended December 31, 1997, brokered ammonia sales of $8.9 million and purchases of $9.3 million resulted in a $.4 million loss. The Company brokered approximately 20,000 short tons during the current quarter and 60,000 short tons during the six month period ended December 31, 1997. COST OF PRODUCTS SOLD. Cost of products sold increased to $99.7 million for the quarter ended December 31, 1997, from $80.5 million for the quarter ended December 31, 1996. As a percentage of net sales, cost of products sold increased to 84% from 71%. This increase in cost of products sold, as a percentage of net sales in the current year quarter, is primarily the result of decreases in the average sales price of each of the Company's nitrogen products. The Company also incurred higher costs per ton for its nitrogen products in the current year quarter primarily as a result of higher maintenance and labor costs due to a scheduled maintenance turnaround at the Company's Donaldsonville, Louisiana, nitrogen facility and higher depreciation associated with the First Mississippi acquisition. These factors were partially offset by improved ammonia production rates and efficiencies in the current year. During the current year quarter, DAP costs per ton increased 4%, primarily the result of the Company incurring higher conversion costs due to a scheduled maintenance turnaround of a sulfuric acid plant. These costs were partially offset by lower raw material costs, primarily ammonia. Potash cost per ton did not change significantly during the current quarter as compared to the prior year quarter. For the six months ended December 31, 1997, cost of products sold increased to $187.5 million from $143.9 million for the six months ended December 31, 1996. As a percentage of net sales, cost of products sold increased to 82% from 70%. This increase in cost of products sold, as a percentage of net sales, is primarily the result of decreases in the average sales price of each of the Company's nitrogen products. The Company incurred higher costs per ton for its nitrogen products in the current year primarily as a result of higher maintenance and labor costs due to scheduled maintenance turnarounds at the Company's nitrogen facilities in Yazoo City, Mississippi, and Donaldsonville, Louisiana. The Company also incurred higher depreciation associated with its First Mississippi acquisition. DAP costs per ton increased 2% during the current year, primarily the result of the Company incurring higher conversion costs due to a scheduled turnaround of its sulfuric acid plant at the Company's Pascagoula, Mississippi, facility. These higher costs were partially offset by lower raw material costs, primarily ammonia and phosphate rock. Phosphate rock costs decreased due to the Company's phosphate rock supply contract, which is based on the phosphate rock costs incurred by certain other domestic phosphate producers and the financial performance of the Company's phosphate operations. Potash cost per ton did not change significantly during the current year as compared to the prior year. SELLING EXPENSES. Selling expenses decreased to $6.1 million for the quarter ended December 31, 1997, from $6.4 million for the quarter ended December 31, 1996. For the six months ended December 31, 1997, selling expenses decreased to $11.8 million from $12.8 million for the six months ended December 31, 1996. These decreases were primarily the result of lower delivery expense incurred during the current year periods due to lower sales volumes for nitrogen solutions and ammonium nitrate. These decreases were partially offset by higher storage costs resulting from increased tonnage placed into storage at the Company's outlying storage facilities. As a percentage of net sales, selling expenses decreased to 5% for the quarter ended December 31, 1997, from 6% for the quarter ended December 31, 1996, and decreased to 5% for the six months ended December 31, 1997, from 6% for the six months ended December 31, 1996. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased to $8.5 million for the quarter ended December 31, 1997, from $7.7 million for the quarter ended December 31, 1996. For the six months ended December 31, 1997, general and administrative expenses increased to $16.7 million, from $14.5 million for the six months ended December 31, 1996. These increases were primarily the result of goodwill amortization associated with the acquisition of First Mississippi in December 1996. As a percentage of net sales, general and administrative expenses remained at 7% for the quarters ended December 31, 1997 and 1996, and for the six month periods ended December 31, 1997 and 1996. OPERATING INCOME. As a result of the above factors, operating income decreased to $3.7 million for the quarter ended December 31, 1997, from $18.6 million for the quarter ended December 31, 1996, an 80% decrease. For the six months ended December 31, operating income decreased to $12.6 million in 1997 from $33.3 million in 1996, a 62% decrease. INTEREST, NET. For the quarter ended December 31, 1997, net interest expense increased to $2.6 million from $.3 million for the quarter ended December 31, 1996. For the six-month period ended December 31, 1997, net interest expense was $4.6 million, compared to net interest income of $.1 million for the six months ended December 31, 1996. These increases in net interest expense were primarily due to increased interest costs resulting from higher borrowing levels during the current year period. Additionally, the Company capitalized $2.3 million and $.9 million of its interest costs for the quarters ended December 31, 1997 and 1996, respectively, and $4.3 million and $1.3 million for the six month periods ended December 31, 1997 and 1996, respectively. INCOME TAX EXPENSE. For the quarter ended December 31, 1997, income tax expense decreased to $1.0 million from $7.8 million for the quarter ended December 31, 1996. For the six month period ended December 31, 1997, income tax expense decreased to $4.0 million from $13.7 million for the six months ended December 31, 1996. These decreases were primarily the result of changes in earnings during the current year. Also, during the current year periods, the Company incurred a higher effective tax rate due to the nondeductible amortization of goodwill. These increases were partially offset by a decrease in the Company's effective state income tax rate during the current year periods. NET INCOME. As a result of the foregoing, net income decreased to $.4 million for the quarter ended December 31, 1997, from $12.1 million for the quarter ended December 31, 1996. For the six months ended December 31, 1997, net income decreased to $4.7 million from $21.4 million in 1996. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1997, the Company had cash and cash equivalents of $4.2 million, compared to $8.2 million at June 30, 1997, a decrease of $4.0 million. OPERATING ACTIVITIES. For the six months ended December 31, 1997, net cash used in operating activities was $23.8 million compared to $.7 million for the six months ended December 31, 1996. INVESTING ACTIVITIES. Net cash used in investing activities was $60.6 million for the six months ended December 31, 1997, and $116.6 million for the six months ended December 31, 1996, primarily reflecting capital expenditures in those periods. During the current year period, capital expenditures were $51.3 million compared to $74.4 million during the prior year. The current year expenditures consisted of approximately $31.0 million related to the Company's nitrogen expansion project at its Yazoo City facility, approximately $4.0 million for the development of a new phosphogypsum disposal facility at the Pascagoula facility, and approximately $3.0 million related to the expansion of its manufacturing facilities at the Pascagoula facility. The remaining $13.3 million was for normal improvements and modifications to the Company's facilities. The current year period also included $2.0 million related to the Company's investment in Farmland MissChem Limited compared to $43.2 million during the prior year. These expenditures were partially offset by the receipt of $1.0 million in option payments relating to the Company's Florida phosphate rock properties. At December 31, 1997, the Company also had $8.3 million in restricted funds resulting from the Company's August 1997 issuance of $14.5 million in industrial revenue bonds. The proceeds from these bonds are being used for the Company's development of the new phosphogypsum disposal facility at its Pascagoula, Mississippi, DAP facility. FINANCING ACTIVITIES. Net cash provided by financing activities was $80.4 million for the six months ended December 31, 1997, and $60.8 million for the six months ended December 31, 1996. During the current year, the amounts provided by financing activities included $455.0 million in debt proceeds, which included $200.0 million in senior notes due 2017 and $14.5 million in industrial revenue bonds. These amounts were partially offset by $367.6 million in debt payments, $5.5 million in cash dividends, and $1.5 million for the purchase of treasury stock. During the prior year, the amounts provided by financing activities included $222.1 million in debt proceeds partially offset by $150.8 million in debt payments, $6.3 million for the purchase of treasury stock and $4.2 million in cash dividends. On November 25, 1997, the Company issued $200.0 million of 7.25% Senior Notes, due November 15, 2017. The holders of the Senior Notes may elect to have the Notes repaid on November 15, 2007. The Notes were issued under a $300.0 million shelf registration statement filed with the Securities and Exchange Commission in November, 1997. The net proceeds from the issuance totaled $194.8 million and were used to repay a portion of the outstanding indebtedness under the Company's unsecured revolving credit facilities with Harris Trust and Savings Bank and a syndicate of other commercial banks. Also on November 25, 1997, the Company modified these unsecured revolving credit facilities to reduce the facilities from $300.0 million to $200.0 million. These modified facilities are five-year facilities which mature on November 25, 2002, and bear interest at the Prime Rate or at rates related to the London Interbank Offered Rate. At December 31, 1997, the Company had $117.9 million outstanding under these facilities. The Company also has a separate $5 million short-term line of credit with another financial institution. The Company believes that existing cash, cash generated from operations, and current lines of credit will be sufficient to satisfy its financing requirements for its operations and its capital projects through fiscal 1998. The Company estimates its capital expenditure requirements for the remainder of fiscal 1998 to be approximately $60.0 million. The Company's major capital projects include production expansions at its nitrogen facility in Yazoo City and its DAP facility in Pascagoula. The Company's Pascagoula facility is also constructing a new phosphogypsum disposal facility. This report contains forward-looking statements. Readers are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties, including, but not limited to, the relative unpredictability of changes in general economic conditions and other important factors affecting the fertilizer industry and the Company as detailed under "Outlook and Uncertainties" and elsewhere in the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997, which is on file with the Securities and Exchange Commission. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits filed as part of this report are listed below. SEC Exhibit Reference No. Description Exhibit Index to Form 10-Q 27 Financial Data Schedule. (b) No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MISSISSIPPI CHEMICAL CORPORATION Date: January 22, 1998 /s/ Timothy A. Dawson ----------------- --------------------- Vice President - Finance Date: January 22, 1998 /s/ Rosalyn B. Glascoe ---------------- ---------------------- Corporate Secretary -----END PRIVACY-ENHANCED MESSAGE-----