-----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, LnReWF9Zy8e0ctY5CTXon2mlahuZ8r5c4zV36Crlu2zSl9pbdGuxIYo9uDd4TBjN L31ILvheSu9PrD4+QQOyjw== 0000066895-97-000002.txt : 19970424 0000066895-97-000002.hdr.sgml : 19970424 ACCESSION NUMBER: 0000066895-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970423 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: 1934 Act SEC FILE NUMBER: 001-12217 FILM NUMBER: 97585362 BUSINESS ADDRESS: STREET 1: HIGHWAY 49 EAST 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 schedule contains third quarter summary financial information extracted from Mississippi Chemical Corporation fiscal 1997 third 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-30-1997 MAR-31-1997 9,960 0 61,953 1,641 84,712 168,512 659,427 297,191 849,344 94,979 0 0 0 280 426,302 849,344 142,583 142,786 106,391 122,510 0 168 2,088 18,188 7,589 10,599 0 0 0 10,599 0.38 0
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 March 31, 1997 OR [ ] Transition Report Pursuant to Section 13 or 15(d) Of the Securities Exchange Act of 1934 For Quarter Ended March 31, 1997 Commission File Number 001-12217 MISSISSIPPI CHEMICAL CORPORATION Organized in the State of Mississippi 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 27,792,364 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 March 31, 1997 and 1996, and Nine months ended March 31, 1997 and 1996 Consolidated Balance Sheets March 31, 1997 and June 30, 1996 4 - 5 Consolidated Statements of Shareholders' Equity 6 Fiscal Year Ended June 30, 1996 and Nine months ended March 31, 1997 Consolidated Statements of Cash Flows 7 Nine months ended March 31, 1997 and 1996 Notes to Consolidated Financial Statements 8 - 13 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 14 - 22 PART II. OTHER INFORMATION: Item 6(a).Exhibits 23 Item 6(b).Reports on Form 8-K 23 Signatures 23 MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Three months ended Nine months ended March 31, March 31, -------------------- ------------------ 1997 1996 1997 1996 -------- -------- --------- -------- (In thousands, except per share data) Revenues: Net sales $142,583 $107,740 $347,069 $304,167 Trading margin on brokered product 20 - 20 - -------- -------- -------- -------- 142,603 107,740 347,089 304,167 Operating expenses: Cost of products sold 106,391 71,324 250,258 207,733 Selling 7,701 6,899 20,465 19,900 General and administrative 8,418 5,989 22,933 17,721 -------- -------- -------- -------- 122,510 84,212 293,656 245,354 -------- -------- -------- -------- Operating income 20,093 23,528 53,433 58,813 Other (expense) income: Interest, net (2,088) 752 (1,946) 1,508 Other 183 183 1,820 736 -------- -------- -------- -------- Income before income taxes 18,188 24,463 53,307 61,057 Income tax expense 7,589 8,815 21,320 23,831 -------- -------- -------- -------- Net income $ 10,599 $ 15,648 $ 31,987 $ 37,226 ======== ======== ======== ======== Earnings per share (see Note 2) $ 0.38 $ 0.72 $ 1.37 $ 1.68 ======== ======== ======== ======== Weighted average common shares outstanding 28,000 21,880 23,427 22,134 ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements.
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS March 31, June 30, 1997 1996 --------- -------- (Dollars in thousands) Current assets: Cash and cash equivalents $ 9,960 $ 60,214 Accounts receivable, net 60,312 34,630 Inventories: Finished products 41,444 10,278 Raw materials and supplies 7,800 5,096 Replacement parts 35,468 25,259 -------- -------- Total inventories 84,712 40,633 Prepaid expenses and other current assets 11,590 3,956 Deferred income taxes 1,938 2,216 -------- -------- Total current assets 168,512 141,649 -------- -------- Investments and other assets: Investments in affiliates 68,004 13,120 Other 16,939 14,547 -------- -------- Total investments and other assets 84,943 27,667 -------- -------- Properties held for sale 52,919 52,919 Property, plant and equipment, at cost 659,427 399,882 Less accumulated depreciation, depletion and amortization (297,191) (281,111) -------- -------- Net property, plant and equipment 362,236 118,771 Goodwill, net of accumulated amortization 180,734 - -------- -------- $849,344 $341,006 ======== ======== The accompanying notes are an integral part of these financial statements.
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) LIABILITIES AND SHAREHOLDERS' EQUITY March 31, June 30, 1997 1996 --------- --------- (Dollars in thousands) Current liabilities: Long-term debt due within one year $ 138 $ 78 Accounts payable 79,497 46,013 Accrued liabilities 11,753 8,707 Income taxes payable 3,591 5,238 --------- --------- Total current liabilities 94,979 60,036 --------- --------- Long-term debt 252,667 - Other long-term liabilities and deferred credits 18,685 18,218 Deferred income taxes 56,431 14,927 Shareholders' equity: Common stock ($.01 par; authorized 100,000,000 shares; issued 27,963,845 in fiscal 1997 and 22,903,450 in fiscal 1996) 280 229 Additional paid-in capital 305,698 178,364 Retained earnings 124,764 99,814 Treasury stock, at cost (171,481 shares in fiscal 1997 and 1,550,000 shares in fiscal 1996) (4,160) (30,582) -------- -------- 426,582 247,825 -------- -------- $849,344 $341,006 ======== ======== The accompanying notes are an integral part of these financial statements.
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY MARCH 31, 1997 Additional Common Paid-in Retained Treasury Stock Capital Earnings Stock Total ------- ---------- -------- -------- ------- (Dollars in thousands) Balances, July 1, 1995 $ 229 $178,332 $ 53,520 $ (4,774) $227,307 Net income - - 54,178 - 54,178 Cash dividends paid - - (7,884) - (7,884) Treasury stock, net - 32 - (25,808) (25,776) ------- -------- -------- -------- -------- Balances, June 30, 1996 229 178,364 99,814 (30,582) 247,825 Net income - - 31,987 - 31,987 Cash dividends paid - - (7,037) - (7,037) Treasury stock, net - 56 - (10,334) (10,278) Stock issued for business acquired 51 127,278 - 36,756 164,085 -------- -------- -------- -------- -------- Balances, March 31, 1997 $ 280 $305,698 $124,764 $ (4,160) $426,582 ======== ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements.
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended March 31, ---------------------- 1997 1996 -------- --------- (Dollars in thousands) Cash flows from operating activities: Net income $ 31,987 $ 37,226 Reconciliation of net income to net cash (used) provided by operating activities: Net change in operating assets and liabilities (49,037) 18,080 Depreciation, depletion and amortization 18,666 13,224 Deferred income taxes 63 1,708 Transaction costs for business acquired (2,848) - Other (492) 171 -------- --------- Net cash (used) provided by operating activities (1,661) 70,409 -------- --------- Cash flows from investing activities: Purchase of property, plant and equipment (94,086) (11,995) Proceeds received from option 1,000 2,000 Investment in Farmland MissChem Limited (44,136) (4,262) Other (11) (851) -------- --------- Net cash used by investing activities (137,233) (15,108) -------- --------- Cash flows from financing activities: Debt payments (253,596) (3,129) Debt proceeds 359,739 - Cash dividends paid (7,037) (5,736) Purchase of treasury stock (10,466) (23,375) -------- --------- Net cash provided (used) by financing activities 88,640 (32,240) -------- --------- Net (decrease) increase in cash and cash equivalents (50,254) 23,061 Cash and cash equivalents - beginning of period 60,214 29,617 -------- --------- Cash and cash equivalents - end of period $ 9,960 $ 52,678 ======== ========= The accompanying notes are an integral part of these 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 nine-month periods ended March 31, 1997 and 1996, the Company's financial position at March 31, 1997 and June 30, 1996, the cash flows for the nine-month periods ended March 31, 1997 and 1996, and the consolidated statements of shareholders' equity as of March 31, 1997. These adjustments are of a normal recurring nature, and are, in the opinion of management, 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 1996 Form 10-K and the consolidated financial statements and notes thereto included in the Company's June 30, 1996, audited financial statements. Due to the seasonal nature of the Company's business, the results of operations for the period ended March 31, 1997, are not necessarily indicative of the operating results for the full fiscal year. NOTE 2 - EARNINGS PER SHARE The number of shares used in the earnings per share computation are the weighted average number of common shares outstanding plus dilutive common share equivalents as follows: Three months ended Nine months ended March 31, March 31, 1997 1996 1997 1996 ------- ------- ------- ------- Weighted average common shares outstanding, net of treasury shares 27,904 21,813 23,350 22,066 Common stock equivalents for employee stock options 96 67 77 68 ------- ------- ------- ------- 28,000 21,880 23,427 22,134 ======= ======= ======= =======
In January 1997, the Company's board of directors declared a regular quarterly cash dividend of $0.10 per common share outstanding. This dividend was paid on February 7, 1997, to holders of record on January 27, 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. As of 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 addition, the Company was granted a put option whereby the Company has the right and option to sell the remaining portion of the property to the third party if the third party does not exercise its option to purchase the remaining property and was granted an exclusive option to repurchase the previously conveyed portion in the event the third party does not exercise its option and the Company does not exercise its put option. The third party's option will expire on January 16, 1998. The Company's put option will expire six months after the third party's option expires, and its repurchase option will expire one year after the Company's put option expires. These properties are classified as property held for sale at March 31, 1997 and June 30, 1996. The Company has entered into a 50-50 joint venture ("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. Startup of the facility is scheduled for mid-1998. 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. The Company estimates total cost of the expansion to be $130 million. The expansion is scheduled to be fully operational during the first half of 1998. NOTE 4 - CHANGE IN TRADING MARKETS Effective October 10, 1996, the Company's common stock began trading on the New York Stock Exchange under the symbol "GRO." The Company's shares had previously traded on the NASDAQ Stock Market's National Market under the symbol "MISS". NOTE 5 - ACQUISITIONS ACCOUNTED FOR BY THE PURCHASE METHOD OF ACCOUNTING NITROGEN ACQUISITION: In August 1996, the Company entered into an agreement to acquire the fertilizer businesses of First Mississippi Corporation ("First Mississippi") in an all-stock merger transaction. On December 24, 1996, this transaction was completed for an approximate value of $315 million. Since closing, the transaction has been adjusted to approximately $311 million and remains subject to further adjustment. The transaction was accounted for by the purchase method of accounting and is reflected in the Company's consolidated balance sheet at March 31, 1997. According to the terms of the merger, the Company issued approximately 6.9 million shares of its common stock to former First Mississippi shareholders. Additionally, at closing First Mississippi's fertilizer businesses had approximately $150.5 million of outstanding debt which was assumed by the Company. The fertilizer operations of First Mississippi include AMPRO Fertilizer, Inc. and a 50% interest in Triad Chemical. The Company already held the remaining 50% interest in Triad Chemical, which owns and operates an anhydrous ammonia plant with an annual production of approximately 465,000 tons, and a urea plant with an annual production of approximately 560,000 tons. AMPRO owns and operates an anhydrous ammonia plant with annual production of approximately 615,000 tons. AMPRO and Triad are located on adjacent sites in Donaldsonville, Louisiana, and share dock facilities capable of receiving ocean-going vessels. In the transaction, the Company also acquired a 50% interest in an ammonia storage terminal in Pasadena, Texas, and a 50% interest in a company which owns and operates eleven ammonia barges. Since closing, the Company has contributed to the capital of First Mississippi its 50% interest in Triad Chemical and the name of First Mississippi has been changed to Triad Nitrogen, Inc. ("Triad Nitrogen"). The following recap reflects the allocation of the purchase price (subject to adjustment) on the Company's consolidated balance sheet as of March 31, 1997: (a) Property, plant and equipment $151,407 (b) Goodwill 181,954 (c) Other assets/liabilities acquired, net 19,417 (d) Deferred taxes (42,107) -------- $310,671
Goodwill will be amortized over a period of forty years using the straight-line method. In March 1997, the Company purchased for $3.8 million the other 50% interest in the ammonia barge company acquired in the First Mississippi merger. Triad Nitrogen's results of operations for the period December 24, 1996, through March 31, 1997, are included in the Company's current year consolidated statement of income. To facilitate analysis, the accompanying summarized unaudited pro forma financial information includes Triad Nitrogen's results of operations, assuming the acquisition had occurred on July 1, 1996, and July 1, 1995, respectively. These pro forma results of operations are not necessarily indicative of what would have occurred had the acquisition actually been consummated at the beginning of the periods presented, or of future results of the combined companies. Nine months ended March 31, -------------------- (In thousands, except per share data) 1997 1996 -------- -------- Net sales $463,003 $466,127 ======== ======== Net income $ 44,394 $ 59,725 ======== ======== Earnings per share $ 1.46 $ 2.06 ======== ========
POTASH ACQUISITIONS: In August 1996, the Company, through its wholly owned subsidiary, Mississippi Potash, Inc., completed the acquisition of substantially all of the assets of New Mexico Potash Corporation and Eddy Potash, Inc. from Trans- Resources, Inc. for $45 million, plus an adjustment for current working capital of approximately $11 million. The two mines, located near Carlsbad, New Mexico, have a combined annual production capacity of approximately 870,000 tons of potash. Eddy Potash, Inc. is now a wholly owned subsidiary of Mississippi Potash, Inc. New Mexico Potash Corporation has been merged into Mississippi Potash, Inc. Prior to this acquisition, Mississippi Potash, Inc. produced approximately 420,000 tons of potash per year. NOTE 6 - TRADING MARGIN ON BROKERED PRODUCT As a result of the First Mississippi acquisition, the Company routinely trades or brokers ammonia in the open market. During the current year quarter, the Company brokered approximately 108,000 short tons of ammonia. On these brokered transactions, the Company realized margins of approximately $20,000, net of an acquisition purchase price adjustment of $557,000 which represented losses on contracts assumed in the First Mississippi acquisition. All of these contracts are cancelable by the Company prior to the end of the first quarter of fiscal 1998. The trading margin on brokered product has been reflected in the accompanying Consolidated Statements of Income. The following recaps the components of the trading margin on brokered products related to these activities: (Dollars in thousands) Gross sales $ 20,054 Purchases (20,591) Assumed losses through acquisition 557 -------- $ 20 ========
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, 1996. The usage of fertilizer in the Company's trade territory is highly seasonal, and the Company's quarterly results reflect the fact that in the Company's markets 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 are not indicative of results expected for the full fiscal year. In addition, quarterly results can vary significantly from year to year primarily as a result of 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 financial results for the Company's third quarter primarily reflect a delay in seasonal fertilizer applications due to wet weather throughout the Company's primary trade area. The resulting weak demand for nitrogen products during the quarter caused prices for most products to decline relative to the year earlier period. Phosphate prices were also well below year-ago levels due to soft international demand. Further, the financial results for the quarter reflect lower than expected production at the Company's newly acquired ammonia facility due to start-up problems early in the quarter associated with a major modification of the plant. The Company also experienced significantly higher production costs at its Carlsbad, New Mexico, potash facilities due to operating difficulties at the two newly acquired potash mines, as well as higher energy costs and the mining of a low-grade ore zone. The Company's results of operations for the nine-month period ended March 31, 1997, reflect higher sales volumes for potash and higher sales prices for nitrogen and potash, partially offset by lower sales prices for DAP. DAP sales prices decreased as a result of soft international demand. Higher potash volumes reflect the sale of tonnages available from the Company's potash facilities acquired in August 1996. During the current year, the Company's lower sales volumes for its upgraded nitrogen products, excluding urea, more than offset its higher sales volume of ammonia. The Company's ammonia and urea sales increased during the current year as a result of its acquisition of the fertilizer businesses of First Mississippi in December 1996. During the current year, the Company has experienced higher natural gas prices which have adversely impacted the Company's results. During the current quarter, natural gas prices have declined; however, they remain subject to pronounced near-term fluctuations. In May 1995 and March 1996, the Board of Directors authorized the purchase of up to 1,500,000 and 1,500,000 shares, respectively, of the Company's common stock in the open market or in privately negotiated transactions. As of March 31, 1997, the Company had repurchased a total of 2,021,481 shares pursuant to those authorizations; however, in December, the Company reissued 1,850,000 shares as part of its acquisition of First Mississippi. The unused authorization to repurchase 978,519 shares remains available to be utilized by the Company. RESULTS OF OPERATIONS Following are summaries of the Company's sales results by product categories: Three months ended Nine months ended March 31, March 31, -------------------- -------------------- 1997 1996 1997 1996 --------- --------- --------- -------- (in thousands) Net Sales: Nitrogen $ 90,050 $ 65,178 $194,606 $180,021 DAP 30,306 33,855 96,813 102,851 Potash 21,777 8,218 53,996 19,872 Other 450 489 1,654 1,423 -------- --------- --------- -------- Net Sales $142,583 $107,740 $347,069 $304,167 ======== ======== ======== ======== Three months ended Nine months ended March 31, March 31, ------------------- ---------------------- 1997 1996 1997 1996 -------- --------- -------- -------- (in thousands) Tons Sold: Nitrogen 533 449 1,261 1,292 DAP 170 158 542 540 Potash 268 113 683 280 Three months ended Nine months ended March 31, March 31, -------------------- --------------------- 1997 1996 1997 1996 -------- ------- -------- --------- Average Sales Price Per Ton: Nitrogen $ 169 $ 145 $ 154 $ 139 DAP $ 179 $ 214 $ 179 $ 191 Potash $ 81 $ 73 $ 79 $ 71
NET SALES. Net sales increased 32.3% to $142.6 million for the quarter ended March 31, 1997, from $107.7 million for the quarter ended March 31, 1996, primarily as a result of increased sales volumes for nitrogen and potash, partially offset by lower sales prices for DAP. Nitrogen fertilizer sales increased 38.2% due to an 18.9% increase in tons sold and a 16.2% increase in sales prices. The volume increase is attributable to an increase in anhydrous ammonia and urea sales due to the acquisition of First Mississippi which was partially offset by lower sales volumes of nitrogen solutions. During the current year quarter, the weighted average nitrogen sales price increased by 16.2% over the prior year quarter. A 119,000-ton increase in ammonia sales at a 14.1% higher sales price was partially offset by lower average sales prices for upgraded nitrogen products. Potash sales increased 165.0% as a result of a 137.8% increase in tons sold and an 11.4% increase in the average price per ton. This increase in volume is the result of increased tonnage available due to the Company's recent potash acquisitions. Sales of DAP decreased 10.5% as a result of a 16.5% decrease in the average price per ton partially offset by a 7.3% increase in tons sold. For the nine months ended March 31, 1997, net sales increased 14.1% to $347.1 million, from $304.2 million for the nine months ended March 31, 1996. This increase was primarily the result of increased sales volumes for potash and higher sales prices for potash and nitrogen, partially offset by lower sales prices for DAP. Potash sales increased 171.7% as a result of a 144.1% increase in tons sold and an 11.3% increase in the average sales price. This increase in volume is the result of increased tonnage available due to the Company's potash acquisitions completed during August 1996. Nitrogen fertilizer sales increased 8.1% due to a 10.8% increase in sales prices partially offset by a 2.5% decrease in tons sold. Sales of DAP decreased 5.9% as a result of a 6.3% decrease in the average price per ton partially offset by a .4% increase in tons sold. TRADING MARGIN ON BROKERED PRODUCT. For the quarter ended March 31, 1997, and the nine-month period ended March 31, 1997, the Company's trading margin on brokered product was $20,000. As a result of the First Mississippi acquisition, the Company routinely trades or brokers ammonia in the open market. During the current year quarter, the Company brokered approximately 108,000 short tons of ammonia. On these brokered transactions, the Company realized margins of approximately $20,000, net of an acquisition purchase price adjustment of $557,000 which represented losses on contracts assumed in the First Mississippi acquisition. All of these contracts are cancelable by the Company prior to the end of the first quarter of fiscal 1998. COST OF PRODUCTS SOLD. Cost of products sold increased to $106.4 million for the quarter ended March 31, 1997, from $71.3 million for quarter ended March 31, 1996. As a percentage of net sales, cost of products sold increased to 74.6% from 66.2%. This increase in cost of products sold, as a percentage of net sales, is the result of the Company incurring higher costs per ton for its nitrogen and potash products which were partially offset by lower costs per ton for DAP. The Company's current year sales also include a higher proportion of potash tons sold which have a higher percentage of cost to sales. For the quarter ended March 31, 1997, nitrogen fertilizer cost per ton increased primarily as a result of higher depreciation associated with the First Mississippi acquisition and higher fixed costs associated with production downtime at the newly acquired ammonia plant. This downtime was due to startup difficulties associated with a major modification of the plant. These startup difficulties have been overcome as the plant is currently fully operational. These higher costs were partially offset by lower natural gas costs during the current year quarter. During the current year quarter, the Company also experienced higher production costs at its two potash mines acquired in August 1996. This increase in cost of production is attributable to low ore quality, high energy costs and other operational difficulties. For the quarter ended March 31, 1997, DAP costs per ton decreased as a result of lower costs for phosphate rock, partially offset by higher ammonia costs. 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. For the nine months ended March 31, 1997, cost of products sold increased to $250.3 million from $207.7 million for the nine months ended March 31, 1996. As a percentage of net sales, cost of products sold increased to 72.1% from 68.3%. This increase in cost of products sold, as a percentage of net sales, is the result of the Company incurring higher cost per ton for nitrogen and potash partially offset by lower cost per ton for DAP. The Company's current year sales also included a higher proportion of potash sales which have a higher percentage of cost to sales. This increase, as a percentage of net sales, was partially offset by higher sales prices for nitrogen and potash. For the nine months ended March 31, 1997, nitrogen fertilizer cost per ton increased primarily as a result of higher natural gas costs and higher depreciation associated with the First Mississippi acquisition and higher fixed costs associated with production downtime at the newly acquired ammonia plant. These higher costs were partially offset by reduced purchases of ammonia and lower maintenance and labor costs during the current year. During the prior year, the Company incurred higher maintenance and labor costs and increased purchases of ammonia due to a scheduled biennial maintenance turnaround at the Company's Yazoo City facility. For the nine months ended March 31, 1997, DAP costs per ton decreased as a result of lower costs for phosphate rock and sulfur, partially offset by higher ammonia costs. 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. SELLING EXPENSES. Selling expenses increased to $7.7 million for the quarter ended March 31, 1997, from $6.9 million for the quarter ended March 31, 1996. As a percentage of net sales, selling expenses decreased to 5.4% for the quarter ended March 31, 1997, from 6.4% for the quarter ended March 31, 1996. This decrease, as a percentage of net sales, was the result of the Company's sales including a higher proportion of potash products for which the customer generally incurs the delivery expense partially offset by higher transportation expense for its nitrogen products. For the nine months ended March 31, 1997, selling expenses increased to $20.5 million from $19.9 million for the nine months ended March 31, 1996. As a percentage of net sales, selling expenses decreased to 5.9% for the nine months ended March 31, 1997, from 6.5% for the nine months ended March 31, 1996. This decrease, as a percentage of net sales, was primarily the result of the Company's sales including less tonnage sold on a delivered basis and higher sales prices for nitrogen and potash. This decrease was partially offset by higher transportation expense for nitrogen products. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased to $8.4 million for the quarter ended March 31, 1997, from $6.0 million for the quarter ended March 31, 1996. As a percentage of net sales, general and administrative expenses increased to 5.9% from 5.6%. For the nine months ended March 31, 1997, general and administrative expenses increased to $22.9 million from $17.7 million for the nine months ended March 31, 1996. As a percentage of net sales, general and administrative expenses increased to 6.6% from 5.8%. These increases for both the current year quarter and the nine months ended March 31, 1997, were primarily the result of increased royalties and other administrative costs associated with the potash companies acquired in August 1996, as well as the amortization of goodwill associated with the acquisition of the fertilizer businesses of First Mississippi in December 1996. For the nine months ended March 31, 1997, the Company also incurred higher insurance costs. OPERATING INCOME. As a result of the above factors, operating income decreased to $20.1 million for the quarter ended March 31, 1997, from $23.5 million for the quarter ended March 31, 1996, a 14.6% decrease. For the nine months ended March 31, operating income decreased to $53.4 million in 1997 from $58.8 million in 1996, a 9.2% decrease. INTEREST, NET. For the quarter ended March 31, 1997, net interest expense was $2.1 million compared to net interest income of $.8 million for the quarter ended March 31, 1996. For the nine months ended March 31, 1997, net interest expense was $1.9 million compared to net interest income of $1.5 million for the nine months ended March 31, 1996. These increases in net interest expense were primarily the reflection of higher interest expense resulting from higher levels of borrowings during the current year periods and lower interest income earned due to lower levels of investments during the current year periods. Also, during the current year quarter and nine month periods, the Company capitalized $1.1 million and $2.4 million, respectively, of its interest costs. INCOME TAX EXPENSE. For the quarter ended March 31, 1997, income tax expense decreased to $7.6 million from $8.8 million for the quarter ended March 31, 1996. This decrease is primarily the result of changes in earnings during the current year quarter. Also, for both the current year quarter and the current year nine month period, the Company incurred higher effective tax rates due to the nondeductible amortization of goodwill which resulted from the merger with First Mississippi in December 1996. For the nine months ended March 31, 1997, income tax expense decreased to $21.3 million from $23.8 million for the nine months ended March 31, 1996. This decrease is the result of changes in earnings during the current year, an adjustment to the deferred tax rate made during the prior year as well as the nondeductible amortization of goodwill discussed above. NET INCOME. As a result of the foregoing, net income decreased to $10.6 million for the quarter ended March 31, 1997, from $15.6 million for the quarter ended March 31, 1996. For the nine months ended March 31, 1997, net income decreased to $32.0 million from $37.2 million in 1996. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997, the Company had cash and cash equivalents of $10.0 million, compared to $60.2 million at June 30, 1996, a decrease of $50.2 million. OPERATING ACTIVITIES. For the nine months ended March 31, 1997, net cash used by operating activities was $1.7 million. For the nine months ended March 31, 1996, net cash provided by operating activities was $70.4 million. The decline in cash provided by operating activities is primarily attributable to a $49 million net change in operating assets and liabilities. INVESTING ACTIVITIES. Net cash used by investing activities was $137.2 million for the nine months ended March 31, 1997, and $15.1 million for the nine months ended March 31, 1996, primarily reflecting capital expenditures in those periods. During the current year period, capital expenditures were $94.1 million compared to $12.0 million during the prior year. The current year expenditures consisted of $45.0 million spent for the purchase of the two new potash mines in August 1996, and $21.5 million related to the Company's nitrogen expansion project at its Yazoo City facilities. In March 1997, the Company purchased for $3.8 million the other 50% interest in the ammonia barge company it acquired in the First Mississippi merger. The remaining $23.8 million was for normal improvements and modifications to the Company's facilities and other items. The current year period also includes $44.1 million related to the Company's investment in Farmland MissChem Limited compared to $4.3 million during the prior year period. These expenditures were partially offset by the receipt of option payments relating to the Company's Florida phosphate rock properties. FINANCING ACTIVITIES. Net cash provided by financing activities was $88.6 million for the nine months ended March 31, 1997, and net cash used by financing activities was $32.2 million for the nine months ended March 31, 1996. During the current year, the amounts provided by financing activities included $359.7 million in debt proceeds partially offset by $253.6 million in debt payments, $10.5 million for the purchase of treasury stock and $7.0 million in cash dividends. During the prior year, the amounts used by financing activities included $23.4 million for the purchase of treasury stock and $5.7 million in cash dividends. The Company also paid $3.1 million in debt payments which included $2.4 million in prepayments. At March 31, 1997, the Company and its subsidiaries had credit facilities with Harris Trust and Savings Bank ("Harris") and a syndicate of other commercial banks totaling $300 million. These facilities are five-year facilities and replace all previous credit facilities with NationsBank. The new facilities will bear interest at the Prime Rate or at rates related to the London Interbank Offered Rate. At March 31, 1997, the Company had $252.5 million outstanding under these facilities which represented the maximum amount outstanding at any month end during the current year. The Company also has a separate $5 million short-term line of credit with another financial institution. Prior to the completion of the Harris facilities, the Company had a $125 million credit facility with NationsBank as agent for a syndicate of commercial banks. The Company believes that existing cash, cash generated from operations, and current and anticipated lines of credit will be sufficient to satisfy its financing requirements through fiscal 1998. 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 27 Financial Data Schedule. (b) The Company filed a Form 8-K on January 6, 1997. 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: April 22, 1997 /s/ Timothy A. Dawson ---------------- ----------------------- Timothy A. Dawson Vice President - Finance Date: April 22, 1997 /s/ Rosalyn B. Glascoe ---------------- ----------------------- Rosalyn B. Glascoe -----END PRIVACY-ENHANCED MESSAGE-----