<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 September 30, 1998
-----------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from ______________ to ______________
Commission File Number: 333-15789
ChemFirst Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 64-0679456
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 North Street, Jackson, MS 39202-3095
- --------------------------------------------------------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number, including Area Code: 601/948-7550
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Class Outstanding at October 31, 1998
-------------------------- -------------------------------
Common Stock, $1 Par Value 18,804,302
<PAGE> 2
Part I. Financial lnfo
Item 1. Financial Statements
ChemFirst Inc.
Consolidated Balance Sheets (Unaudited)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
------------ -----------
<S> <C> <C>
Assets:
Current assets
Cash and cash equivalents $ 11,712 7,766
Accounts receivable 55,045 63,252
Inventories:
Finished products 35,773 22,281
Work in process 19,970 15,760
Raw materials and supplies 11,201 11,481
----------- -------
Total inventories 66,944 49,522
----------- -------
Prepaid expenses and other current assets 11,534 11,188
Net current assets of discontinued operations 26,837 27,997
----------- -------
Total current assets 172,072 159,725
----------- -------
Investments and other assets 50,090 56,955
Property, plant and equipment 367,178 335,190
Less: accumulated depreciation and amortization 140,651 123,629
----------- -------
Property, plant and equipment, net 226,527 211,561
Noncurrent assets of discontinued operations - 17,416
----------- -------
$ 448,689 445,657
----------- -------
Liabilities and Stockholders' Equity:
Current liabilities
Notes payable $ - 20,700
Current installments of long-term debt 250 277
Deferred revenue 3,080 2,964
Accounts payable 17,506 34,097
Accrued expenses and other current liabilities 24,234 23,629
----------- -------
Total current liabilities 45,070 81,667
----------- -------
Long-term debt 68,895 3,941
Deferred revenue and other liabilities 26,575 19,076
Deferred income taxes 17,019 18,352
Noncurrent liabilities of discontinued operations - 924
Minority interest 700 -
Stockholders' equity:
Common stock 18,813 20,031
Additional paid-in capital 21,852 18,869
Retained earnings 249,765 282,797
----------- -------
Total stockholders' equity 290,430 321,697
----------- -------
$ 448,689 445,657
=========== =======
</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 9 Months Ended
September 30 September 30
---------------------- ---------------------
1998 1997 1998 1997
-------- ------ ------- -------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 91,589 87,842 278,105 271,923
Interest and other income 3,096 1,573 13,756 5,278
-------- ------ ------- -------
94,685 89,415 291,861 277,201
-------- ------ ------- -------
Costs and expenses:
Cost of sales 66,485 61,235 204,226 195,558
General, selling and
administrative expenses 14,507 15,165 45,306 42,350
Other operating expenses 3,923 1,420 9,847 4,463
Interest expense 800 63 1,271 223
-------- ------ ------- -------
85,715 77,883 260,650 242,594
-------- ------ ------- -------
Earnings before income taxes 8,970 11,532 31,211 34,607
Income tax expense 3,495 4,556 12,170 13,669
Equity in net earnings of equity investees - 203 - 2,368
Earnings from continuing operations 5,475 7,179 19,041 23,306
Loss from discontinued operations, net of tax benefit (1,212) (382) (1,071) (512)
Loss on disposal, net of tax benefit (11,950) - (11,950) -
-------- ------ ------- -------
Net earnings (loss) $ (7,687) 6,797 6,020 22,794
-------- ------ ------- -------
Earnings (loss) per common share:
Continuing operations 0.29 0.35 0.98 1.14
Discontinued operations (0.07) (0.02) (0.06) (0.03)
Net loss on disposal of business (0.63) - (0.61) -
-------- ------ ------- -------
Net earnings (loss) $ (0.41) 0.33 0.31 1.11
-------- ------ ------- -------
Average shares outstanding 18,926 20,354 19,435 20,459
Earnings (loss) per common share, assuming dilution:
Continuing operations 0.29 0.35 0.97 1.11
Discontinued operations (0.06) (0.02) (0.05) (0.02)
Net loss on disposal of business (0.63) - (0.61) -
-------- ------ ------- -------
Net earnings (loss) $ (0.40) 0.33 0.31 1.09
======== ====== ======= =======
Average shares outstanding 19,088 20,839 19,695 20,943
Cash dividend declared
per share $ 0.10 0.10 0.30 0.30
</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>
September 30
----------------------
1998 1997
-------- -------
<S> <C> <C>
Cash flows from operations:
Net earnings $ 6,020 22,794
Adjustments to reconcile net earnings to
net cash provided by operations:
Depreciation and amortization 18,708 13,711
Loss on disposal of subsidiary 11,950 -
Gain on sale of equity investee (8,269) -
Undistributed earnings of affiliates - (3,907)
Deferred taxes and other items 2,969 1,907
Change in current assets and liabilities, net
of effects of dispositions (18,394) (17,043)
Net losses from discontinued operations 1,071 512
-------- -------
Net cash provided by continuing operations 14,055 17,974
Net cash provided by (used in) discontinued operations (1,094) 1,476
-------- -------
Net cash provided by operating activities 12,961 19,450
-------- -------
Cash flows from investing activities:
Capital expenditures (32,421) (63,948)
Proceeds from sale of equity investee 18,986 -
Proceeds from sale of subsidiary - 2,100
Other investing activities 905 1,535
-------- -------
Net cash used in investing activities, continuing operations (12,530) (60,313)
Net cash used in investing activities, discontinued operations (745) (1,840)
-------- -------
Net cash used in investing activities (13,275) (62,153)
-------- -------
Cash flows from financing activities:
Net borrowings - notes payable to banks 45,000 5,000
Principal repayments of long-term debt (17) (16)
Dividends (5,791) (6,132)
Purchase of common stock (35,370) (12,179)
Proceeds from issuance of common stock 1,579 1,342
Other financing activities (700) -
-------- -------
Net cash provided by (used in) financing activities, continuing
operations 4,701 (11,985)
Net cash used in financing activities, discontinued operations (441) (603)
-------- -------
Net cash provided by (used in) financing activities 4,260 (12,588)
-------- -------
Net increase (decrease) in cash and cash equivalents 3,946 (55,291)
Cash and cash equivalents at beginning of period 7,766 68,385
-------- -------
Cash and cash equivalents at end of period $ 11,712 13,094
-------- -------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest, net of amounts capitalized $ 1,211 357
-------- -------
Income taxes, net $ 6,065 7,467
======== =======
</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 - Discontinued Operations
The assets and liabilities of the discontinued steel operations have
been segregated in the consolidated financial statements along with other (net
current discontinued assets of $400 and $176 at September 30, 1998 and December
31, 1997, respectively) discontinued operations. Based on the steel disposal
plan, the net assets of the steel business are classified as current at
September 30, 1998. The following is the composition of those steel assets and
liabilities at September 30, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
-------- --------
<S> <C> <C>
Receivables $ 10,607 14,274
Inventories 13,319 26,191
Prepaid expenses and other current assets 15,000 1,045
Current instalments of long-term debt (1,084) (601)
Accounts payable (5,853) (12,132)
Accrued expenses and other current liabilities (5,552) (956)
-------- --------
Net current assets of discontinued operations $ 26,437 27,821
======== ========
Noncurrent assets of discontinued operations $ 0 17,416
======== ========
Long-term liabilities of discontinued operations $ 0 924
======== ========
</TABLE>
2
<PAGE> 6
The statements of operations have been reclassified to separate discontinued and
continuing operations. Operating losses from discontinued operations include
interest expense allocations, based on the ratio of net assets of discontinued
operations to consolidated net assets plus debt, of $59 and $10 for the
three-month, and $127 and $36 for the nine-month periods ending September 30,
1998 and 1997, respectively (capitalized interest allocated was $25 and $87 for
the three-month and nine-month periods ending September 30, 1998, with no
capitalized interest allocated for 1997). Revenues and net losses of
discontinued operations for the three and nine month periods ended September 30,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Three months Nine months
September 30 September 30
1998 1997 1998 1997
-------- ------ ------ ------
<S> <C> <C> <C> <C>
Sales and revenues $ 13,790 18,252 54,620 56,079
======== ====== ====== ======
Losses from operations before taxes $ (1,902) (631) (1,671) (846)
Income tax benefit 690 249 600 334
-------- ------ ------ ------
Losses from discontinued operations, net $ (1,212) (382) (1,071) (512)
======== ====== ====== ======
</TABLE>
Note 3 - 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 a potential
after tax gain of approximately $2,000 was deferred, pending resolution of
contingencies related to the contract.
Note 4 - 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 to omit disclosure as allowed by the statement under
these circumstances.
3
<PAGE> 7
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 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.
SFAS No. 133 - "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998, effective for fiscal years beginning after
June 15, 1999. The statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. All derivatives are required
to be recognized as either assets or liabilities in the statement of financial
position and measured at fair value. Changes in fair value will be reported
either in earnings or outside earnings depending on the intended use of the
derivative and the resulting designation. Entities applying hedge accounting are
required to establish at the inception of the hedge the method used to assess
the effectiveness of the hedging derivative and the measurement approach for
determining the ineffective aspect of the hedge. The Company currently hedges
certain foreign currency transactions by entering into forward exchange
contracts. Gains and losses associated with currency rate changes on forward
contracts hedging foreign currency transactions are recorded in income and
generally offset the transaction losses or gains on the foreign currency cash
flows that they are intended to hedge. The Company has not completed its
analysis of SFAS No. 133 and accordingly has not determined what additional
effect, if any, it may have on future operations and financial statement
disclosure.
4
<PAGE> 8
Note 5 - 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 September 30
1998 1997
-------------------- -------------------
Shares EPS Shares EPS
------ ------- ------ ------
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
Earnings per Common Share:
Basic 18.93 $ (0.41) 20.35 $ 0.33
Dilutive effect of CSEs 0.16 0.01 0.49 -
----- ------- ----- ------
Diluted 19.09 $ (0.40) 20.84 $ 0.33
===== ======= ===== ======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30
1998 1997
-------------------- -------------------
Shares EPS Shares EPS
------ ------- ------ ------
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
Earnings per Common Share:
Basic 19.44 $ 0.31 20.46 $ 1.11
Dilutive effect of CSEs 0.26 - 0.48 (0.02)
----- ------- ----- ------
Diluted 19.70 $ 0.31 20.94 $ 1.09
===== ======= ===== ======
</TABLE>
5
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations - Nine months ended September 30, 1998 compared to the
nine months ended September 30, 1997
Consolidated Results
Earnings from continuing operations for the nine months ending
September 30, 1998 were $19.0 million versus $23.3 million for the same period
of the prior year. Current year earnings reflect a $5.0 million gain from the
January 1998 sale of Power Sources, Inc. (PSI). With the PSI sale, and the
Melamine Chemicals, Inc. sale in November 1997, the company has no current
equity affiliate earnings. Excluding all income related to the operation and
sale of equity affiliates, earnings from continuing operations for the current
year were down 33%, primarily due to lower gross margins in chemicals
operations, expenses for chemical mechanical planarization (CMP) product
development and lower net interest income. Chemicals' gross margin percentage
declined primarily due to lower aniline production and higher maintenance
expenses at the Pascagoula, Mississippi plant and weaker custom manufacturing
demand.
Segment Operations
Industry Segment Information
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
------------------------
1998 1997
--------- ---------
<S> <C> <C>
Sales
Chemicals $ 227,025 216,234
Engineered Products and Services 51,080 55,689
--------- ---------
Total Sales $ 278,105 271,923
========= =========
Operating profit:
Chemicals $ 28,313 38,005
Engineered Products and Services 1,411 2,220
--------- ---------
29,724 40,225
Unallocated corporate expenses (7,059) (8,351)
Interest income, net 381 2,437
Other income, net 8,165 296
--------- ---------
$ 31,211 34,607
========= =========
</TABLE>
6
<PAGE> 10
Chemicals pretax operating profits were down 26% from the prior year as
lower results from Pascagoula aniline operations, adverse markets for some
custom manufacturing customers and lower prices for nitrobenzene and some
specialty chemicals more than offset earnings from the Company's Baytown, Texas
aniline facility which started up in March 1998. Pascagoula operations were hurt
by a decline in aniline production and increased expenses, primarily the result
of plant maintenance during the first and second quarter and Hurricane Georges
late in the third quarter. Also affecting current year chemicals operating
profits were development expenses for chemical mechanical planarization (CMP)
products. Sales for the current year were up 5% as the addition of acylation
derivatives and Baytown aniline sales and higher revenue from electronic
chemicals more than offset lower custom manufacturing revenue and Pascagoula
aniline sales volume.
Engineered Products and Services pretax operating profits for the
current year were $1.4 million versus $2.2 million in the prior year. Results
include a $1.1 million gain for the sale of a small product line. Excluding the
gain, results were down from the prior year primarily due to lower sales and to
losses in some international markets.
Net interest income was down $2.1 million due to a lower net cash
position and increased interest expense, while net other income increased on the
$8.3 million pretax gain from the Power Sources sale. Unallocated corporate
expenses were down $1.3 million due to a reduction in benefit plan accruals tied
to the price of the Company's stock.
Results of Operations - Three months ended September 30, 1998 compared to the
three months ended September 30, 1997
Consolidated Results
Earnings from continuing operations for the three months ended
September 30, 1998, were $5.5 million versus $7.2 million for the same period of
the prior year. As a result of the Power Sources sale in January 1998 and the
Melamine Chemicals sale in November 1997, there is no equity affiliate income in
the current year. Excluding from the same quarter of the prior year $0.2 million
in income related to equity affiliates, earnings from continuing operations for
the current quarter were down 22%, primarily due to a lower gross margins in
chemicals operations, expenses for chemical mechanical planarization (CMP)
product development and lower net interest income. The gross margin percentage
declined primarily due to lost aniline production and expenses associated with
Hurricane Georges at the Pascagoula, Mississippi plant and weaker custom
manufacturing demand.
7
<PAGE> 11
Results of Operations - Three months ended September 30, 1998 compared to the
three months ended September 30, 1997
Segment Operations
Industry Segment Information
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
September 30
----------------------
1998 1997
-------- --------
<S> <C> <C>
Sales
Chemicals $ 74,753 69,743
Engineered Products and Services 16,836 18,099
-------- --------
Total $ 91,589 87,842
======== ========
Operating profit:
Chemicals $ 10,437 12,908
Engineered Products and Services 793 919
-------- --------
11,230 13,827
Unallocated corporate expenses (1,957) (3,080)
Interest income (expense), net (271) 577
Other income (expense), net (32) 208
-------- --------
$ 8,970 11,532
======== ========
</TABLE>
Chemicals pretax operating profits were down 19% from the prior year as
lower results from Pascagoula aniline operations, lower earnings from custom
manufacturing and lower prices for nitrobenzene and some specialty chemicals
more than offset the addition of earnings from the Company's new Baytown, Texas
aniline facility. In addition, Pascagoula operations were hurt by Hurricane
Georges, which hit on September 28, 1998. The hurricane losses are covered by
insurance subject to a $1.0 million deductible, which was recorded in the third
quarter. Also affecting current year chemicals operating profits were
development expenses for chemical mechanical planarization (CMP) products. Sales
for the current quarter were up 7%, primarily due to the addition of Baytown
aniline production.
Engineered Products and Services pretax operating profits for the
quarter were $0.8 million, down from $0.9 million in the prior year. Results
include a $1.1 million gain for the sale of a small product line. Excluding the
gain, results were down from the prior year primarily due to lower sales and to
losses in some international markets.
8
<PAGE> 12
Net interest income was down $0.8 million due to a lower net cash
position and increased interest expense. Unallocated corporate expenses were
down $1.1 million due to a reduction in compensation plan accruals tied to the
price of the Company's stock.
Capital Resources and Liquidity
Cash flow provided by continuing operations activities for the first nine
months of the current year was $14.1 million, down from $18.0 million for the
same period in the prior year, primarily due to lower operating earnings. 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 includes $35.4 million for the purchase of
1,458,900 shares of ChemFirst common stock. In 1997, $12.2 million was used in
the purchase of 508,000 shares.
Discontinued Operations
During the year, the U. S. steel industry has been hurt by imports from
Japan, Korea and other countries with weak currencies and little domestic market
for their products. This has led to a sharp decline in steel orders and margins
for the Company. Steel's pretax operating loss of $1.9 million ($1.2 million
after tax) for the third quarter of 1998 came on a 32% reduction in volume and a
22% decline in unit contribution versus the same period of the prior year.
During the third quarter of the current year, the Company finalized plans
to dispose of its steel operations by the end of 1999 and reclassified this
business as discontinued. In October 1998, the Company announced it had reached
an understanding of principal terms for the sale of the steel business to a
strategic buyer. Since that time, negotiations with this potential buyer have
ceased. The Company is continuing, however, with its plan to dispose of its
steel operations by the end of 1999. An anticipated loss on disposal of $12.0
million, net of applicable income taxes of $6.0 million, was recorded at
September 30, 1998 and was primarily related to the write down of assets to
their estimated fair market value. Proceeds from the disposition are currently
estimated at $32 million.
Year 2000
The advent of the Year 2000 poses significant risks to many companies
because of calculation limitations imposed by some equipment and systems limited
to storing a year as a two-digit field (e.g. 1998 as "98"), which may lead to
computational errors when the years 2000 or later are used in calculations. In
1996, the Company began a study which led to the purchase in 1997 of a
company-wide Enterprise Resource Planning ("ERP") system to integrate the
9
<PAGE> 13
Company's information systems, replacing small, stand-alone purchased systems
which are fully depreciated. The ERP system will be Year 2000 compliant, with
the material portion of the system planned for completion by the middle of 1999.
Installation is being completed in stages, with the first sites scheduled for
conversion by the end of this year. In 1997, the Company expended $3.0 million,
and is projecting to spend approximately $6.0 million in 1998 and $3.0 million
in 1999 on this project. If difficulties are encountered which delay the ERP
system implementation, contingency plans provide for the purchase of select,
Year 2000 compliant personal computer software products, the cost of which
should not be material.
A corporate wide survey of other information technology ("IT") and
non-IT equipment and systems utilizing date or time functions has been
undertaken. An initial assessment, which is subject to further review, indicates
a cost to remediate of less than $600,000, most of which will be incurred in
1999. Final assessment should be completed by the end of 1998. Remediation,
including verification testing, of most non-compliant systems, equipment and
software is targeted for completion by April 30, 1999, however, some
remediations at the Pascagoula facility will occur in the fourth quarter of
1999 to coincide with the next scheduled plant maintenance turnaround.
Contingency plans are currently being developed in the event the remediations
do not occur or are delayed. Severe delay or widespread failure affecting both
the remediation effort and the contingency plans, although not expected, could
have a material effect on the Company's financial condition and results of
operations.
Key customers, as well as service and raw material suppliers, are being
surveyed about their Year 2000 readiness. Depending on their responses,
contingency plans will be developed as appropriate. It is anticipated that this
process will be completed no later than September 30, 1999. Although the Company
cannot quantify the precise effect, significant or prolonged disruptions of key
customers or suppliers could have a material effect on the Company's financial
condition and results of operations. For example, the majority of aniline
produced by the Company is sold through long-term contracts to a few customers.
Their inability to utilize the Company's aniline could have a material adverse
effect.
Forward-Looking Statements
Certain statements included in this Form 10-Q which relate to the Year
2000, the discontinuance of steel operations, possible additional gains from the
sale of Power Sources, Inc. and insurance recoveries related to recent hurricane
damage, as well as other statements in this Form 10-Q that are not historical in
nature, may constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements, as well as other forward-looking statements made from time to time
by the Company, or in the Company's press releases and filings with the U.S.
Securities and Exchange Commission, are based on certain underlying assumptions
and expectations of management. These forward-looking statements are subject to
risks and uncertainties which could cause actual
10
<PAGE> 14
results to differ materially from those expressed in such forward-looking
statements. Such risks and uncertainties include, but are not limited to,
general economic conditions, availability and pricing of raw materials,
supply/demand balance for key products, new product development, manufacturing
efficiencies, conditions of and product demand by key customers, the timely
completion and start up of construction projects, pricing pressure as a result
of the downturn in Asian or other foreign markets, successful installation of
the Company's new ERP system, the inability of the Company to either resolve the
Company's Year 2000 issues or to accurately estimate the costs associated with
Year 2000 compliance, the resolution of contingencies related to the sale of
Power Sources, Inc., insurance coverage related to hurricane damage to the
Company's Pascagoula facility and other factors as may be discussed in the
company's Form 10-K for the fiscal year ended December 31, 1997.
11
<PAGE> 15
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 September 30, 1998.
12
<PAGE> 16
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.
November 11, 1998 /s/ J. Kelley Williams
- ----------------------------------- ------------------------------------
Date J. Kelley Williams
Chairman and Chief Executive Officer
November 11, 1998 /s/ Troy B. Browning
- ----------------------------------- ------------------------------------
Date Troy B. Browning
Controller (Principal Accounting
Officer)
13
<PAGE> 17
EXHIBIT INDEX
EXHIBITS
27.1 - Financial Data Schedules
27.2 - Financial Data Schedules
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
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