<PAGE> 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, 1998
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
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Commission File Number: 333-15789
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ChemFirst Inc.
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(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
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(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number, including Area Code: 601/948-7550
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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, 1998
-------------------------- -----------------------------
Common Stock, $1 Par Value 19,878,589
<PAGE> 2
Part I. Financial Information
Item 1. Financial Statements
ChemFirst Inc.
Consolidated Balance Sheets (Unaudited)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Mar. 31 Dec. 31
1998 1997
------------ --------
<S> <C> <C>
Assets:
Current assets
Cash and cash equivalents $ 17,110 7,766
Accounts receivable 70,172 77,526
Inventories:
Finished products 36,537 30,022
Work in process 24,320 21,768
Raw materials and supplies 23,323 23,592
------------ --------
Total inventories 84,180 75,382
------------ --------
Prepaid expenses and other current assets 12,101 12,741
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Total current assets 183,563 173,415
------------ --------
Investments and other assets 50,427 57,455
Property, plant and equipment 379,293 366,876
Less: accumulated depreciation and amortization 143,857 138,400
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Property, plant and equipment, net 235,436 228,476
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$ 469,426 459,346
============ ========
Liabilities and Stockholders' Equity:
Current liabilities
Notes payable $ 22,714 20,700
Current instalments of long-term debt 846 878
Deferred revenue 4,978 2,964
Accounts payable 39,332 46,229
Accrued expenses and other current liabilities 30,909 24,585
------------ --------
Total current liabilities 98,779 95,356
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Long-term debt 4,774 4,865
Deferred revenue and other liabilities 22,980 19,076
Deferred income taxes 18,287 18,352
Stockholders' equity:
Common stock 19,853 20,031
Additional paid-in capital 19,500 18,869
Retained earnings 285,253 282,797
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Total stockholders' equity 324,606 321,697
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$ 469,426 459,346
============ ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
ChemFirst Inc.
Consolidated Statements of Operations (Unaudited)
(In Thousands of Dollars and Shares, Except Per Share Amounts)
<TABLE>
<CAPTION>
3 Months Ended
March 31
-----------------------------
1998 1997
---------- -------
<S> <C> <C>
Revenues:
Sales $ 111,368 110,720
Interest and other income 9,591 2,406
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120,959 113,126
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Costs and expenses:
Cost of sales 86,430 85,118
General, selling and
administrative expenses 15,643 13,663
Other operating expenses 2,803 1,515
Interest expense 95 83
---------- -------
104,971 100,379
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Earnings before income taxes 15,988 12,747
Income tax expense 6,235 5,036
Equity in net earnings of equity investees - 408
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Net earnings $ 9,753 8,119
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Earnings per common share $ 0.49 0.39
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Average shares outstanding 19,886 20,614
Earnings per common share, assuming dilution $ 0.48 0.39
=========== =======
Average shares outstanding 20,206 21,081
Cash dividend declared
per share $ 0.10 0.10
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
ChemFirst Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
March 31
------------------------------
1998 1997
------------ --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 9,753 8,119
Adjustments to reconcile earnings to
net cash provided by (used in) operating activities:
Depreciation and amortization 6,102 5,190
Gain on sale of equity investee (8,269) -
Deferred taxes and other items 1,299 (1,738)
Change in current assets and liabilities, net
of effects of dispositions (274) (12,556)
------------ --------
Net cash provided by (used in) operations 8,611 (985)
------------ --------
Cash flows from investing activities:
Capital expenditures (12,444) (17,620)
Proceeds from sale of equity investee 18,986 -
Proceeds from sale of subsidiary - 2,100
Other investing activities (24) 289
------------ --------
Net cash provided by (used in) investing activities 6,518 (15,231)
------------ --------
Cash flows from financing activities:
Net borrowings - notes payable to banks 2,000 -
Principal repayments of long-term debt (151) (325)
Dividends (1,985) -
Purchase of common stock (6,199) (4,976)
Proceeds from issuance of common stock 536 72
Proceeds from issuance of long-term debt 14 -
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Net cash used in financing activities (5,785) (5,229)
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Net increase (decrease) in cash and cash equivalents 9,344 (21,445)
Cash and cash equivalents at beginning of period 7,766 68,385
------------ --------
Cash and cash equivalents at end of period $ 17,110 46,940
============ ========
Supplemental disclosures of cash flow information Cash paid during the period
for:
Interest , net of amounts capitalized 89 125
============ ========
Income taxes, net $ (747) 981
============ ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 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, 1997.
NOTE 2 - SALE OF EQUITY INVESTMENT
On January 22, 1998, the Company sold its fifty percent interest in
Power Sources, Inc. generating pretax cash proceeds of approximately $19,000. An
after tax gain of $5,000 was recognized during the first quarter and an
additional after tax gain of approximately $2,000 was deferred, pending
resolution of contingencies related to the contract.
NOTE 3 - EFFECT OF ADOPTING ACCOUNTING CHANGES
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130 - "Reporting Comprehensive
Income", in June 1997, effective for fiscal years beginning after December 15,
1997. The statement requires reporting comprehensive income (components include
net income plus all changes to equity except those resulting from investments
and distributions) directly in the financial statements and deals only with
reporting and display issues versus recognition and measurement issues.
Accordingly, there is no effect on the results of operations. The Company has
immaterial transactions that meet the definition of other comprehensive income
and as such has elected against the provisions of disclosure as allowed by the
statement under these circumstances.
SFAS No. 131 - "Disclosures about Segments of an Enterprise and
Related Information", was also issued in June 1997, effective for fiscal
years beginning after December 15, 1997. The
<PAGE> 6
statement requires a "management approach," based on the way management
organizes segments internally for making operating decisions and assessing
performance, to provide selected reporting information. The Company has not yet
completed its analysis of SFAS No. 131 and accordingly has not yet determined
what effect, if any, it may have on future financial statement disclosure.
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 is
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 is effective for fiscal years beginning after December 15, 1998.
Adoption of these statements is not expected to have a material impact on the
Company's financial statements.
NOTE 4 - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128 - "Earnings Per Share." The statement requires companies to adopt its
provisions in financial statements issued for periods ending after December 15,
1997, and requires restatement of all prior earnings per share ("EPS") data
presented. 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").
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
--------------------- ----------------
Shares EPS Shares EPS
------ --- ------ ---
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
Earnings per Common Share:
Basic 19.89 $ 0.49 20.61 $ 0.39
Dilutive effect of CSEs 0.32 - 0.47 -
----- --------- ----- ---------
Diluted 20.21 $ 0.48 21.08 $ 0.39
===== ========= ===== =========
</TABLE>
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations - Three months ended March 31, 1998 compared to the three
months ended March 31, 1997
Consolidated Results
Net earnings for the three months ended March 31, 1998, were $9.8
million versus $8.1 million for the same period of the prior year. Current year
results include a $5.0 million gain on the January 1998 sale of Power Sources,
Inc. Excluding the Power Sources gain, earnings were $4.8 million, down 42% from
the prior year. The earnings decline was primarily due to lower chemicals
earnings. The current year also reflects no equity earnings, following the sale
of Melamine Chemicals in November 1997, and the sale of Power Sources, and lower
net interest income.
Segment Operations
Industry Segment Information
(In Thousands of Dollars)
<TABLE>
<CAPTION>
3 Months Ended
March 31
--------------
<S> <C> <C>
Sales
Chemicals $ 74,173 74,473
Engineered Products and Services 15,112 17,984
Steel 22,083 18,263
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Total $ 111,368 110,720
=========== =======
Operating profit (loss) before income taxes
Chemicals $ 8,785 13,580
Engineered Products and Services 122 449
Steel 534 (153)
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9,441 13,876
Unallocated corporate expenses (2,174) (2,268)
Interest income (expense), net 485 1,039
Other income, net 8,236 100
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Total $ 15,988 12,747
=========== =======
</TABLE>
<PAGE> 8
Chemicals pretax operating profits were $8.8 million versus $13.6 million
for the same quarter of the prior year. The decline was primarily due to lower
custom manufacturing profits as a result of lower revenue. Additional factors
included lower aniline production due to unscheduled maintenance at the
Pascagoula facility and higher research and development, and general, selling
and administrative expenses, up primarily due to acquisitions made in December
1997 and business growth. Sales for the chemical segment were essentially
unchanged from last year with improvements in electronic chemicals and
additional sales from the recently acquired acylation derivatives business
offsetting lower custom manufacturing revenue and a 13% decrease in aniline
sales volume due to the lost production.
The Company has started up its 250-million-pound per year aniline
facility located at Bayer Corporation's Baytown, Texas, chemical complex. The
facility will be an integral part of Bayer's U. S. methyl diphenyl disocyanate
(MDI) manufacturing operations and is expected to more than double the Company's
current aniline capacity.
Engineered Products and Services pretax operating profits were $0.1
million, down $0.3 million from the prior year on 16% lower revenue. Steel
operating results improved $0.7 million as sales grew 21% on a 27% increase in
volume. Net interest income was down $0.6 million due to a lower net cash
position, while net other income increased on the $8.3 million pretax gain from
the Power Sources sale.
This Form 10-Q includes foward-looking statements that 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 the forward-looking statements
included in this Form 10-Q. For additional information on those factors which
could affect actual results, please refer to the Company's Form 10-K for the
fiscal year ended December 31, 1997.
Capital Resources and Liquidity
Cash flow from operating activities for the current year was $8.6
million. For the same period in the prior year, $1.0 million was used in
operations due to a reduction in payables as well as accruals related to the
disposition of Fertilizer and aluminum recovery operations. Net cash provided by
investing activities in 1998 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 included $6.2 million for the purchase of 236,200 shares of
ChemFirst common stock. In 1997, $5.0 million was used in the purchase of
221,300 shares.
<PAGE> 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27.1 - Financial Data Schedule
Exhibit 27.2 - 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, 1998.
<PAGE> 10
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 12, 1998 /s/ J. Kelley Williams
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Date J. Kelley Williams
Chairman and Chief Executive Officer
May 12, 1998 /s/ R. Michael Summerford
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Date R. Michael Summerford
Vice President & Chief Financial Officer
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
27.1 - Financial Data Schedules
27.2 - Financial Data Schedules
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,110
<SECURITIES> 0
<RECEIVABLES> 71,067
<ALLOWANCES> 895
<INVENTORY> 84,180
<CURRENT-ASSETS> 183,563
<PP&E> 379,293
<DEPRECIATION> 143,857
<TOTAL-ASSETS> 469,426
<CURRENT-LIABILITIES> 98,779
<BONDS> 4,774
0
0
<COMMON> 19,853
<OTHER-SE> 304,753
<TOTAL-LIABILITY-AND-EQUITY> 469,426
<SALES> 111,368
<TOTAL-REVENUES> 120,959
<CGS> 86,430
<TOTAL-COSTS> 86,430
<OTHER-EXPENSES> 2,803
<LOSS-PROVISION> 74
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> 15,988
<INCOME-TAX> 6,235
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,753
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.48
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 46,940
<SECURITIES> 0
<RECEIVABLES> 66,699
<ALLOWANCES> 518
<INVENTORY> 70,093
<CURRENT-ASSETS> 191,919
<PP&E> 291,323
<DEPRECIATION> 126,233
<TOTAL-ASSETS> 412,220
<CURRENT-LIABILITIES> 71,401
<BONDS> 1,971
0
0
<COMMON> 20,472
<OTHER-SE> 289,339
<TOTAL-LIABILITY-AND-EQUITY> 412,220
<SALES> 110,720
<TOTAL-REVENUES> 113,126
<CGS> 85,118
<TOTAL-COSTS> 85,188
<OTHER-EXPENSES> 1,515
<LOSS-PROVISION> 204
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 12,747
<INCOME-TAX> 5,036
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,119
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
