<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, 2000
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
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(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number, including Area Code: 601/948-7550
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Class Outstanding at April 30, 2000
-------------------------- -----------------------------
Common Stock, $1 Par Value 15,914,472
<PAGE> 2
Part I. Financial Information
Item 1. Financial Statements
ChemFirst Inc.
Consolidated Balance Sheets (Unaudited)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
-------- -----------
<S> <C> <C>
Assets:
Current assets
Cash and cash equivalents $ 13,848 14,551
Accounts receivable 66,007 67,913
Inventories:
Finished products 42,895 36,860
Work in process 3,452 3,565
Raw materials and supplies 17,632 22,238
-------- --------
Total inventories 63,979 62,663
-------- --------
Prepaid expenses and other current assets 8,373 9,794
Net current assets of discontinued operations -- 2,532
-------- --------
Total current assets 152,207 157,453
-------- --------
Investments and other assets 18,849 19,189
Property, plant and equipment 393,904 390,329
Less: accumulated depreciation and amortization 171,344 164,584
-------- --------
Property, plant and equipment, net 222,560 225,745
-------- --------
$393,616 402,387
======== ========
Liabilities and Stockholders' Equity:
Current liabilities
Notes payable $ 8,052 7,668
Accounts payable 22,955 18,919
Deferred revenue -- 373
Accrued expenses and other current liabilities 14,790 17,523
Current liabilities of discontinued operations 643 --
-------- --------
Total current liabilities 46,440 44,483
-------- --------
Long-term debt 39,290 24,224
Other long-term liabilities 25,866 26,130
Deferred income taxes 19,592 18,178
Minority interest 649 649
Stockholders' equity:
Common stock 15,905 17,901
Additional paid-in capital 25,638 25,543
Accumulated other comprehensive income 162 287
Retained earnings 220,074 244,992
-------- --------
Total stockholders' equity 261,779 288,723
-------- --------
$393,616 402,387
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<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
-----------------
2000 1999
------- -------
<S> <C> <C>
Sales $95,891 69,844
Cost of sales 71,015 50,350
------- -------
Gross margin 24,876 19,494
General, selling and administrative expenses 13,931 11,507
Research and development expenses 1,926 1,874
Other operating income, net 805 1,806
------- -------
Operating earnings 9,824 7,919
Interest income 123 483
Interest expense 661 948
Other income, net 16 32
------- -------
Earnings from continuing operations before income taxes 9,302 7,486
Income tax expense 3,489 2,845
------- -------
Earnings from continuing operations 5,813 4,641
Gain on disposal of business, net of taxes 9,656 --
------- -------
Net earnings $15,469 4,641
======= =======
Earnings per common share:
Continuing operations $ 0.34 0.25
Gain on disposal of business, net of taxes 0.57 0.00
------- -------
Net earnings $ 0.91 0.25
======= =======
Average shares outstanding 16,977 18,392
Earnings per common share, assuming dilution:
Continuing operations $ 0.34 0.25
Gain on disposal of business, net of taxes 0.56 0.00
------- -------
Net earnings $ 0.90 0.25
======= =======
Average shares outstanding, assuming dilution 17,094 18,535
Cash dividend declared
per share $ 0.10 0.10
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
ChemFirst Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
3 Months Ended
March 31
--------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operations:
Net earnings $ 15,469 4,641
Adjustments to reconcile net earnings to
net cash provided by operations:
Depreciation and amortization 7,276 6,506
Provision for losses on receivables 16 91
Gain on disposal of business, net of taxes (9,656) --
Gain on disposal of equity investee -- (750)
Deferred taxes and other items 2,197 1,449
Loss on sale of property, plant and equipment -- 342
Change in current assets and liabilities, net
of effects of dispositions 1,878 (8,653)
Other operating activities (640) 255
-------- --------
Net cash provided by continuing operations 16,540 3,881
Net cash provided by discontinued operations -- 1,991
-------- --------
Net cash provided by operating activities 16,540 5,872
-------- --------
Cash flows from investing activities:
Proceeds from sale of business 12,002 --
Capital expenditures (3,575) (3,027)
Other investing activities 1,293 --
-------- --------
Net cash provided by (used in) investing activities 9,720 (3,027)
-------- --------
Cash flows from financing activities:
Net borrowings on notes payable 15,451 (1,646)
Dividends (1,640) (1,834)
Purchase of common stock (40,740) (3,055)
Proceeds from issuance of common stock 91 18
-------- --------
Net cash used in financing activities (26,838) (6,517)
-------- --------
Effect of exchange rate changes on cash (125) 2
-------- --------
Net decrease in cash and cash equivalents (703) (3,670)
Cash and cash equivalents at beginning of period 14,551 11,226
-------- --------
Cash and cash equivalents at end of period $ 13,848 7,556
======== ========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest, net of amounts capitalized $ 14 646
======== ========
Income tax payments (refunds), net $ (1,549) 570
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<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
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. Certain prior year
amounts have been reclassified to conform to the 2000 presentation. In the
opinion of management, the financial statements reflect all adjustments (all
are 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, 1999.
Note 2 - Discontinued Operations
The net assets and liabilities of discontinued operations included in
the consolidated financial statements are classified as current liabilities and
current assets at March 31, 2000 and December 31, 1999, respectively, as
follows:
<TABLE>
<CAPTION>
Engineered Products
and Services
Steel and Other Totals
--------- ------------------- ----------
<S> <C> <C> <C>
At March 31, 2000:
- ------------------
Net current liabilities of discontinued
operations $ 165 478 643
========= ========= =========
At December 31, 1999:
- ---------------------
Net current assets of discontinued
operations $ 12,459 (9,927) 2,532
========= ========= =========
</TABLE>
The statements of operations have been reclassified to separate
discontinued and continuing operations. The gain on disposal of business, net,
in the amount of $9,656, is primarily due to an adjustment in the provision for
income taxes related to the discontinued operations of Getchell Gold
Corporation. The Company reevaluated its tax exposure during the quarter ended
March 31, 2000, when various statutes governing the handling of the disposition
for tax purposes expired.
5
<PAGE> 6
Note 3 - Effect Of Adopting Accounting Changes
Statement of Financial Accounting Standards ("SFAS") No. 133 -
"Accounting for Derivative Instruments and Hedging Activities," was issued in
June 1998 and, as amended, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. 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 follows SFAS No. 52, "Foreign Currency Translation," and
applies hedge accounting treatment to certain foreign currency transactions by
entering into foreign currency option contracts and forward exchange contracts.
Gains and losses associated with currency rate changes on 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. Gains and losses on contracts hedging firm sales commitments
are deferred until the related transactions are consummated. The effect of
adopting the Statement is currently being evaluated, however, based on current
activity, the Company does not believe the effects of adoption will be material
to its financial position or results of operation.
Note 4 - Earnings Per Share
Basic EPS is based on the average number of common shares outstanding
during each period. Diluted EPS includes the effect of outstanding common stock
equivalents ("CSEs"). The following is a reconciliation of the numerators
(income) and denominators (weighted-average shares) of the basic and diluted per
share computations for net earnings:
<TABLE>
<CAPTION>
Three Months Ended March 31
2000 1999
--------------------- ---------------------
Income Shares EPS Income Shares EPS
------- ------- ------- ------- ------- -------
(Thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Earnings per Common Share:
Basic $15,469 16,977 $ 0.91 $ 4,641 18,392 $ 0.25
Dilutive effect of CSEs -- 117 (0.01) -- 143 --
------- ------- ------- ------- ------- -------
Diluted $15,469 17,094 $ 0.90 $ 4,641 18,535 $ 0.25
======= ======= ======= ======= ======= =======
</TABLE>
6
<PAGE> 7
Note 5 - Comprehensive Income
Total comprehensive income for the three months ended March 31, 2000
and 1999, was $15.4 million and $4.6 million, respectively. Total comprehensive
income for the Company includes net income and foreign currency translation
adjustments.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - Three months ended March 31, 2000 Compared to the three
months ended March 31, 1999
Consolidated Results
Earnings from continuing operations for the three months ended March
31, 2000, were $5.8 million, up 25% from the same period of the prior year,
while sales rose 37% to $95.9 million. The increase in sales and earnings was
due to higher sales of electronic chemicals and aniline.
Segment Operations
Segment Information
(In Thousands of Dollars)
<TABLE>
<CAPTION>
3 Months Ended
March 31
--------------------
2000 1999
-------- --------
<S> <C> <C>
Sales:
Electronic and Other Specialty Chemicals $ 51,158 39,917
Polyurethane Chemicals 44,733 29,927
-------- ------
Total $ 95,891 69,844
======== ======
Operating profit before income taxes:
Electronic and Other Specialty Chemicals $ 2,947 3,538
Polyurethane Chemicals 9,465 7,205
-------- ------
12,412 10,743
Unallocated corporate expenses (2,588) (2,824)
Interest expense, net (538) (465)
Other income, net 16 32
-------- ------
Total $ 9,302 7,486
======== ======
</TABLE>
7
<PAGE> 8
Electronic and Other Specialty Chemicals pretax operating profits for
the current year were down 17% versus the same quarter of the prior year to $2.9
million. Sales were up 28% over last year on higher electronic chemical volumes.
Sales volumes of remover products were up 52% from the same quarter last year on
increased demand from the semiconductor industry. However, production problems
in resins for deep ultra violet photoresists and lower unit margins in other
specialty chemicals more than offset better remover performance. The Company
believes these production problems will be corrected in the second quarter of
this year.
Polyurethane Chemicals pretax operating profits for the quarter were up
31% to $9.5 million on a $14.8 million increase in sales versus the same quarter
last year. Sales were up on a 23% increase in volume and a 21% increase in
average unit price. Stronger aniline demand due to customer build-up of
methylene diphenyl diisocyanate inventories helped drive volume for this
segment. The higher unit sales price primarily reflects the pass-through to
customers of the increase in cost of benzene, which is used as a raw material.
Unallocated corporate expenses for the current year were $2.6 million,
down from $2.8 million in the prior year, primarily related to a reduction in
compensation expense. Net interest expense for the year was up $0.1 million from
the prior year to $0.5 million on lower interest income.
Discontinued Operations
A gain of $9.7 million on disposal of discontinued operations was
recorded during the quarter ended March 31, 2000. The gain included $10.1
million due to an adjustment in the provision for income taxes related to the
discontinued operations of Getchell Gold Corporation. The Company
reevaluated its tax exposure during the quarter ended March 31, 2000, when
various statutes governing the handling of the disposition for tax purposes
expired. Also, during the first quarter of the current year, the Company
recorded an additional $0.4 million loss on disposal of discontinued operations
related to final settlement of post-closure issues associated with the
dispositions of Callidus Technology, Inc. and FirstMiss Steel, Inc.
Capital Resources and Liquidity
Cash flow from continuing operations for the current year was $16.5
million, up from $3.9 million in the prior year primarily due to increased
accounts payable. Net cash provided by investing activities in the current year
included $12.0 million in proceeds from the sale of the Company's steel business
and $1.5 million collected on a note related to a previous property sale. These
proceeds were used to assist in repurchasing shares of the Company's stock.
During the current quarter, $40.7 million was expended under the Company's
authorized repurchasing program to reacquire approximately 2.0 million shares of
stock. As of March 31, 2000, the Company has approximately $50.0 million
remaining for additional share repurchases under the current authorization.
8
<PAGE> 9
Forward-Looking Statements
Certain statements included in this Form 10-Q which are not historical
in nature, may constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements, as well as other forward-looking statements made from time to time
by the Company, or in the Company's press releases and filings with the U.S.
Securities and Exchange Commission, are based on certain underlying assumptions
and expectations of management. These forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those expressed in such forward-looking statements. Such risks and
uncertainties include, but are not limited to, general economic conditions,
availability and pricing of raw materials, supply/demand balance for key
products, new product development, manufacturing efficiencies, conditions of and
product demand by key customers, the timely completion and start up of
construction projects, pricing pressure as a result of the downturn in Asian or
other foreign markets and other factors as may be discussed in the company's
Form 10-K for the fiscal year ended December 31, 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to changes in financial market conditions in the
normal course of its business, including changes in interest rates and foreign
currency exchange rates. At March 31, 2000, the Company's derivative and other
financial instruments related to foreign operations included a series of yen
option collars with contract expiration dates ranging from April 2000 through
January 2001 and short-term debt denominated in Japanese yen. Due to the
short-term nature and amount of these yen obligations, the Company does not
consider its exposure to fluctuations in foreign currency exchange rates or
interest rates to be material.
The Company utilizes fixed and variable-rate debt to maintain liquidity
and fund its domestic business operations, with the terms and amounts based on
business requirements, market conditions and other factors. At March 31, 2000,
this included long-term debt denominated in U.S. dollars and long-term revolving
credit facility borrowings. The market value of the Company's fixed rate
borrowings was approximately $24.0 million. A 100 basis point change in interest
rates (all other variables held constant) as of March 31, 2000, would result in
an approximate $1.0 million annualized change in fair market value but would not
affect interest expense or cash flow. At March 31, 2000, the Company had $15.0
million in variable-rate debt. A 100 basis point change in interest rates (all
other variables held constant) on this portion of the Company's debt would
result in an annualized change in interest expense of approximately $0.15
million.
9
<PAGE> 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
Exhibit 27.1 - Restated Financial Data Schedule
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Registrant during the
three months ended March 31, 2000.
10
<PAGE> 11
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 11, 2000 /s/ J. Kelley Williams
- ------------- -----------------------------------------
Date J. Kelley Williams
Chairman and Chief Executive Officer
May 11, 2000 /s/ Troy B. Browning
- -------------- -----------------------------------------
Date Troy B. Browning
Controller (Principal Accounting Officer)
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
NUMBERS DESCRIPTION
- -------- -----------
<S> <C> <C>
27 - Financial Data Schedules
27.1 - Restated Financial Data Schedules
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 13,848
<SECURITIES> 0
<RECEIVABLES> 66,367
<ALLOWANCES> 360
<INVENTORY> 63,979
<CURRENT-ASSETS> 152,207
<PP&E> 393,904
<DEPRECIATION> 171,344
<TOTAL-ASSETS> 393,616
<CURRENT-LIABILITIES> 46,440
<BONDS> 39,290
0
0
<COMMON> 15,905
<OTHER-SE> 245,874
<TOTAL-LIABILITY-AND-EQUITY> 393,616
<SALES> 95,891
<TOTAL-REVENUES> 96,835
<CGS> 71,015
<TOTAL-COSTS> 71,015
<OTHER-EXPENSES> 1,926
<LOSS-PROVISION> 16
<INTEREST-EXPENSE> 661
<INCOME-PRETAX> 9,302
<INCOME-TAX> 3,489
<INCOME-CONTINUING> 5,813
<DISCONTINUED> 9,656
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,469
<EPS-BASIC> 0.91
<EPS-DILUTED> 0.90
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 7,556
<SECURITIES> 0
<RECEIVABLES> 42,375
<ALLOWANCES> 63
<INVENTORY> 55,513
<CURRENT-ASSETS> 156,806
<PP&E> 372,665
<DEPRECIATION> 148,621
<TOTAL-ASSETS> 434,615
<CURRENT-LIABILITIES> 37,714
<BONDS> 62,026
18,310
0
<COMMON> 0
<OTHER-SE> 267,179
<TOTAL-LIABILITY-AND-EQUITY> 434,615
<SALES> 69,844
<TOTAL-REVENUES> 72,165
<CGS> 50,350
<TOTAL-COSTS> 50,350
<OTHER-EXPENSES> 1,874
<LOSS-PROVISION> 91
<INTEREST-EXPENSE> 948
<INCOME-PRETAX> 7,486
<INCOME-TAX> 2,845
<INCOME-CONTINUING> 4,641
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,641
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.25
</TABLE>
