FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
Of The Securities Exchange Act of 1934
For Quarter Ended December 31, 1993
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended December 31, 1993
Commission File Number 2-7803
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.
Nitrogen 3,984,602
Mixed 97,310
Potash 13,155
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
December 31, 1993 and
June 30, 1993
Consolidated Statements of Operations 4
Three months ended December 31,
1993 and 1992, and
Six months ended December 31,
1993 and 1992
Consolidated Statements of Cash Flows 5
Six months ended December 31,
1993 and 1992
Consolidated Statements of
Shareholder-Members' Equity 6
Fiscal Year Ended June 30, 1993
and Six months ended December 31, 1993
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8 - 10
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6(b). Reports on Form 8-K 12
Signatures 12
-2-
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
December 31, June 30,
1993 1993
------------ --------
ASSETS Note 1
<S>
CURRENT ASSETS: <C> <C>
Cash and cash equivalents $ 4,981 $ 22,706
Accounts and notes receivable 23,224 39,115
Inventories:
Finished products 30,371 9,009
Raw materials and supplies 5,853 5,426
Replacement parts 26,752 27,268
-------- --------
Total inventories 62,976 41,703
Deferred income tax benefit 1,450 -
Prepaid expenses and other current assets 7,175 3,730
-------- ---------
TOTAL CURRENT ASSETS 99,806 107,254
INVESTMENTS AND OTHER ASSETS
National Bank for Cooperatives 8,864 9,006
Other 10,355 8,039
-------- --------
TOTAL INVESTMENTS AND OTHER ASSETS 19,219 17,045
DEFERRED INCOME TAX BENEFIT 12,460 -
PROPERTY HELD FOR SALE 66,928 66,928
PROPERTY, PLANT AND EQUIPMENT, at cost 375,045 370,701
Less accumulated depreciation,
depletion and amortization (248,649) (241,316)
--------- ---------
Net property, plant and equipment 126,396 129,385
--------- ---------
$ 324,809 $ 320,612
========= =========
LIABILITIES AND SHAREHOLDER-MEMBERS' EQUITY
CURRENT LIABILITIES:
Long-term debt due within one year $ 11,337 $ 11,237
Notes payable 18,495 13,315
Accounts payable 30,680 29,330
Accrued interest 1,022 1,122
Accrued liabilities 12,800 10,213
Income taxes payable -0- 47
Patronage refunds payable 733 13,820
--------- ---------
TOTAL CURRENT LIABILITIES 75,067 79,084
LONG-TERM DEBT 73,955 73,526
OTHER LONG-TERM LIABILITIES 45,383 41,238
DEFERRED GAIN ON SALE OF NEWSPRINT MILL 6,973 7,190
SHAREHOLDER-MEMBERS' EQUITY 123,431 119,574
--------- ---------
$ 324,809 $ 320,612
========= =========
See notes to consolidated financial statements.
</TABLE>
-3-
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Six months ended
December 31, December 31,
------------------ ------------------
(Dollars in thousands) 1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 84,672 $ 79,160 $154,596 $158,125
Other 38 488 86 449
-------- -------- -------- --------
84,710 79,648 154,682 158,574
COSTS AND EXPENSES:
Cost of products sold 78,378 68,619 139,731 138,949
Selling, general and
administrative 10,302 12,686 21,528 23,149
Interest (net) 1,584 1,565 3,157 3,048
Interest capitalized -0- (512) -0- (928)
------- ------- --------- --------
90,264 82,358 164,416 164,218
------- ------- --------- --------
LOSS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING
PRINCIPLE (5,554) (2,710) (9,734) (5,644)
INCOME TAXES (CREDIT) (1,915) -0- (3,655) -0-
-------- ------- --------- --------
LOSS BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (3,639) (2,710) (6,079) (5,644)
CUMULATIVE BENEFIT TO
JULY 1, 1993, OF CHANGE
IN ACCOUNTING FOR
DEFERRED INCOME TAXES -0- -0- 10,255 -0-
------- ------- --------- ---------
NET MARGIN (LOSS) $ (3,639) $ (2,710) $ 4,176 $ (5,644)
======== ======== ======== ========
NET MARGINS (LOSS)
APPLIED TO:
Member equities $ 181 $ 4,130 $ 734 $ 7,350
Retained earnings
(deficit) (3,820) (6,840) 3,442 (12,994)
-------- -------- -------- --------
TOTAL $ (3,639) $ (2,710) $ 4,176 $ (5,644)
======== ======== ======== ========
EARNINGS PER SHARE (Earnings on shareholder business, less reserves
withheld, are returned to shareholder patrons as
patronage refunds. Other earnings are retained by the
Company.)
DIVIDENDS PER SHARE (Under the Charter, no dividends are payable on any
class of stock.)
See notes to consolidated financial statements.
</TABLE>
-4-
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(Dollars in thousands) Six months ended
December 31,
-----------------
1993 1992
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net margins (loss) $ 4,176 $ (5,644)
Reconciliation of net margins (loss) to
net cash used by operating activities:
Depreciation, depletion and amortization 8,815 6,355
Deferred income tax benefit (13,910) -0-
Deferred lease expense 1,681 1,681
(Gain) loss on sale of property, plant
and equipment 35 (25)
Net change in operating assets and
liabilities (4,241) (15,303)
Other (56) 393
-------- --------
NET CASH USED BY OPERATING ACTIVITIES (3,500) (12,543)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (6,801) (18,928)
National Bank for Cooperatives stock revolved
and patronage refunds 186 296
Proceeds from sale of property, plant and
equipment 131 148
Other (45) 153
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (6,529) (18,331)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt proceeds 93,265 60,075
Debt payments (87,556) (51,822)
Payment of cash patronage (13,405) (22,480)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (7,696) (14,227)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (17,725) (45,101)
CASH AND CASH EQUIVALENTS -
BEGINNING OF SIX MONTHS 22,706 46,855
-------- --------
CASH AND CASH EQUIVALENTS - END OF SIX MONTHS $ 4,981 $ 1,754
======== ========
See notes to consolidated financial statements.
</TABLE>
-5-
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER-MEMBERS' EQUITY
DECEMBER 31, 1993
(Dollars in thousands)
<CAPTION>
Common Stock
------------------------------ Additional Capital
Nitrogen Mixed Potash Paid-in Equity Retained
Series Series Series Capital Credits Deficit Total
-------- ------ ------ --------- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
July 1, 1992 $26,176 $1,460 $ 199 $65,381 $62,352 $(27,373) $128,195
Net margins - - - - - 4,790 4,790
Cash patronage refunds - - - - - (13,820) (13,820)
Stock issued 100 - - 315 - - 415
Stock retired - - (2) (4) - - (6)
------- ------ ----- ------- ------- -------- --------
Balances,
June 30, 1993 26,276 1,460 197 65,692 62,352 (36,403) 119,574
Net margins - - - - - 4,176 4,176
Patronage refunds - - - - - (734) (734)
Stock issued 99 - - 316 - - 415
------- ------ ----- ------- ------- -------- --------
Balances,
December 31, 1993 $26,375 $1,460 $ 197 $66,008 $62,352 $(32,961) $123,431
======= ====== ===== ======= ======= ======== ========
See notes to consolidated financial statements.
</TABLE>
-6-
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
The consolidated balance sheet as of December 31, 1993, the
consolidated statements of operations for the three-month and the
six-month periods ended December 31, 1993 and 1992, the
consolidated statements of cash flows for the six-month periods
then ended, and the consolidated statements of shareholder-
members' equity as of December 31, 1993, have been prepared by
the Company, without audit. In the opinion of management, all
adjustments necessary to present fairly the financial position,
results of operations and changes in cash flows at December 31,
1993, and for all periods presented have been made. All
adjustments made were of a normal recurring nature with the
exception of certain adjustments made related to the adoption of
SFAS No. 109, "Accounting for Income Taxes," effective July 1,
1993. The cumulative effect of this accounting change increased
current period margins by $10.3 million. As a result of the
adoption of SFAS No. 109, tax expense for the quarter ended
December 31, 1993, decreased by approximately $1.9 million, and
tax expense for the six month period ended December 31, 1993,
decreased by approximately $3.7 million.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted. It
is suggested that these consolidated financial statements be read
in conjunction with the consolidated financial statements and
notes thereto included in the Company's June 30, 1993, audited
financial statements. The results of operations for the period
ended December 31, 1993, are not necessarily indicative of the
operating results for the full year.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
During July 1990, the Company entered into an agreement granting
to a third party an exclusive four-year option to purchase the
Company's undeveloped phosphate mineral properties. This option
will expire in June, 1994, and if it is not exercised, the
Company will realize a gain to the extent of the option payments
received. If the option is exercised, the Company will not
realize a material gain or loss on the sale of the property.
These properties are classified as properties held for sale at
June 30, and December 31, 1993. In December, 1993, the fourth
-7-
and final option payment was received by the Company and is
included in other long-term liabilities.
-8-
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's operations for the first six months of this
fiscal year reflect the fact that the usage of fertilizer in the
Company's market area is highly seasonal. Results for the first
six months of fiscal 1994 are not indicative of results expected
for the full fiscal year. Fall fertilizer usage and sales are
significantly less than spring usage and sales in the Company's
market area. Nevertheless, the Company operates its
manufacturing plants on a year-round basis accumulating inventory
to meet its seasonal sales demand.
Newsprint South, Inc. ("NSI"), a wholly owned subsidiary of
the Company, experienced a loss for the first six months of this
fiscal year. U.S. newsprint prices remain extremely depressed.
A significant capacity buildup during the late 1980s coincided
with a decline in newsprint consumption, causing an acute
supply/demand imbalance and a precipitous decline in the price of
newsprint. Record losses continue in the newsprint industry,
resulting in an industry restructuring which includes the closure
of higher cost mills and machines. The pace of this
restructuring and domestic and worldwide economic conditions are
the principal factors which will affect future newsprint prices.
While an improved business climate for newsprint is projected for
the remainder of the fiscal year, NSI is expected to continue to
experience losses.
In December 1991, Mississippi Phosphates Corporation
("MPC"), a wholly owned subsidiary of the Company, began the
production of diammonium phosphate ("DAP"). Virtually all of
MPC's production is sold to a third party which has been
appointed the exclusive distributor of MPC's production. The
exclusive distributor markets MPC's DAP primarily in
international markets. Although for the first six months of this
fiscal year MPC shows a net loss, recent increases in demand have
caused DAP prices to rise, resulting in a profit for the current
quarter and an improved outlook for the remainder of this fiscal
year.
On July 1, 1993, the Company transferred assets in Carlsbad,
New Mexico, consisting of a potash mine and related facilities,
to a newly formed, wholly owned Mississippi subsidiary,
Mississippi Potash, Inc.
-9-
COMPARATIVE ANALYSIS OF THE SIX MONTHS ENDED DECEMBER 31, 1993
AND DECEMBER 31, 1992
Net sales decreased 2% for the six months ended December 31,
1993, compared with the same period of the prior year. This
decrease was largely due to lower volumes of DAP available for
sale as a result of a maintenance turnaround and consequential
lost production at the Pascagoula, Mississippi, facility. This
decrease was partially offset by higher sales volumes and prices
for nitrogen fertilizers. Other income decreased $363,000 for
the six months ended December 31, 1993, primarily due to receipt
of funds from the settlement of certain pending litigation during
the six months ended December 31, 1992.
Cost of products sold did not change significantly in the
current period. The effects of lower sales volumes and lower
production costs for DAP were offset by higher production costs
for nitrogen fertilizers and newsprint.
Selling, general and administrative expenses decreased 7%
for the six months ended December 31, 1993, primarily due to
lower transportation expense due to lower per-ton delivery costs
partially offset by higher volumes of nitrogen fertilizer sold.
The inclusion of employee incentives during the prior year also
contributed to the decrease.
Net interest incurred increased 4% for the six months ended
December 31, 1993, and net interest after capitalization
increased 49%. The increase in net interest is primarily the
result of lower earnings due to lower levels of investments.
This was partially offset by lower interest rates paid by the
Company. Capitalized interest decreased due to the
capitalization of interest related to the construction of a new
nitric acid plant in the prior year.
FERTILIZER
Net sales decreased 3% for the six months ended December 31,
1993. This decrease was due primarily to an 11% decrease in DAP
sales volumes and an 8% decrease in DAP sales prices. These
decreases were partially offset by a 3% increase in nitrogen tons
sold and a 2% increase in nitrogen sales prices. The Company
also experienced a 10% increase in potash tons sold partially
offset by a 3% decrease in potash sales prices during the current
period.
Cost of products sold decreased 1% from the six months ended
December 31, 1992. The decrease in cost of sales resulted from
lower sales volumes of DAP. This decrease was partially offset
by higher per-ton costs for nitrogen fertilizers and higher sales
volumes of nitrogen fertilizers and potash. During the current
-10-
period, DAP production costs per ton declined 15% due to lower
raw material costs. Nitrogen fertilizer costs increased 20%
partially due to increased maintenance and labor costs resulting
from a scheduled turnaround at the Company's Yazoo City nitrogen
production facility during the current period. Also contributing
to the increase in costs were higher natural gas costs and higher
depreciation expense from a new nitric acid plant which began
operating in January, 1993.
NEWSPRINT
Net sales did not change significantly for the six months
ended December 31, 1993. Cost of products sold increased 4% for
the six months ended December 31, 1993; the result of higher
production costs per ton. Higher wood and electrical costs were
partially offset by lower maintenance costs during the current
period.
COMPARATIVE ANALYSIS OF THE QUARTERS ENDED DECEMBER 31, 1993 AND
DECEMBER 31, 1992
Net sales increased 7% for the quarter ended December 31,
1993, compared with the same quarter of the prior year. This
increase was largely due to higher sales volumes for DAP and
potash partially offset by lower sales volumes for nitrogen
fertilizers and lower sales prices for newsprint. Other income
decreased $450,000 for the quarter ended December 31, 1993,
primarily due to receipt of funds from the settlement of certain
pending litigation during the quarter ended December 31, 1992.
Cost of products sold increased 14% for the current period
due primarily to higher sales volumes of DAP and higher
production costs for nitrogen fertilizers and newsprint partially
offset by lower production costs for DAP.
Selling, general and administrative expenses decreased 19%
for the quarter ended December 31, 1993, primarily due to lower
transportation expense due to lower per-ton delivery costs
partially offset by higher volumes of nitrogen fertilizer sold.
The inclusion of employee incentives during the prior year also
contributed to the decrease.
Net interest incurred increased 1% for the quarter ended
December 31, 1993, and net interest after capitalization
increased 50%. The increase in net interest is primarily the
result of lower earnings due to lower levels of investments.
This increase was partially offset by lower interest rates paid
by the Company. Capitalized interest decreased due to the
capitalization of interest related to the construction of a new
nitric acid plant in the prior year.
-11-
</PAGE>
FERTILIZER
Net sales increased 12% for the quarter ended December 31,
1993. This increase was due primarily to higher sales volumes
and higher sales prices for DAP. The Company also experienced a
42% increase in potash tons sold and a 4% increase in potash
sales prices during the current quarter. These increases were
partially offset by lower nitrogen tons sold.
Cost of products sold increased 19% from the quarter ended
December 31, 1992. The increase in cost of sales resulted
primarily from higher sales volumes of DAP and potash partially
offset by lower DAP production costs per ton due to lower raw
material costs. Nitrogen fertilizer costs increased 22% due to
higher natural gas prices and higher depreciation expense from a
new nitric acid plant which began operating in January, 1993.
NEWSPRINT
Net sales decreased 4% for the quarter ended December 31,
1993; the result of lower sales prices.
Cost of products sold increased 7% for the quarter ended
December 31, 1993. This increase was primarily due to increased
production costs per ton resulting from higher wood, electrical,
and operating supply costs during the current quarter.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended December 31, 1993, cash used by
operating activities was $3.5 million, and cash used by investing
activities was $6.5 million. Financing activities consumed $7.7
million, including $471,000 the Company paid on long-term debt
that matured during the six-month period and cash patronage
refunds of $13.4 million. At December 31, 1993, the Company had
cash and cash equivalents of $5 million, which was a decrease of
$17.7 million from June 30, 1993.
At December 31, 1993, the Company had working capital of
$24.7 million compared to $28.2 million at June 30, 1993. The
Company's current ratio decreased to 1.33 to 1 at December 31,
1993, compared to 1.36 to 1 at June 30, 1993. Short-term
borrowings increased to $18.5 million at December 31, 1993,
compared to $13.3 million at June 30, 1993. Long-term debt was
$74 million at December 31, 1993, which was an increase of
$500,000 from the June 30, 1993, level of $73.5 million.
Shareholder-members' equity increased to $123.4 million at
December 31, 1993, from $120 million. Long-term debt to total
capitalization decreased to 37.5% at December 31, 1993, compared
to 38.1% at June 30, 1993.
-12-
</PAGE>
On August 6, 1992, the Company obtained a $20 million loan
commitment from a commercial bank. This commitment is a
revolving credit facility that converts any outstanding balance
to term debt on June 30, 1994. The balance outstanding on this
loan as of December 31, 1993, and June 30, 1993, was $5 million.
The Company also has a $26 million line of credit with the
National Bank for Cooperatives available to finance short-term
cash requirements. The Company believes that existing cash, cash
generated from operations, and available lines of credit will be
sufficient to satisfy its short- and long-term financing needs.
Capital expenditures were $5.7 million during the six months
ended December 31, 1993. These expenditures were for normal
improvements and modifications to the Company's facilities, and
were financed with internally generated funds.
-13-
</PAGE>
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the annual meeting of shareholders of Mississippi
Chemical Corporation held in Yazoo City, Mississippi, on November
9, 1993, the following resolution was unanimously adopted:
BE IT RESOLVED, that the shareholders of the
Corporation hereby consent to the service on the Board
of Directors of the Corporation by each person elected
to such Board, whether heretofore elected or elected at
this meeting or a subsequent meeting, notwithstanding
the fact that he may be engaged or interested in a
competing business either individually or as an
employee, shareholder, director, officer, or otherwise.
The following persons were unanimously elected as directors
of the registrant for the terms specified:
Name Term
F. Neal Bolton 3 years
Bruce J. Brumfield 3 years
John A. Denton 3 years
Charles O. Dunn 3 years
A. T. Evans 3 years
John A. Gaston 3 years
John Sharp Howie 3 years
Gene C. Pickens 3 years
There follows a list of directors whose terms of office
continued after the meeting:
W. H. Allen, Jr. W. R. Dyess
John W. Anderson Thomas H. Gist, Jr.
Coley L. Bailey Carroll F. Harpole
U. Owen Bibb, Jr. G. David Jobe
Randon D. Bounds Tom C. Parry
Frank R. Burnside, Jr. W. A. Percy, II
Robert A. Carson E. C. A. Runge
Robert P. Dixon Wayne Thames
Item 5. Other Information.
At a meeting of the Board of Directors held in Yazoo City,
Mississippi, on November 9, 1993, the following officers were
elected to serve one-year terms:
Name Office
-14-
</PAGE>
Coley L. Bailey Chairman of the Board
John S. Howie Vice Chairman of the Board
Charles O. Dunn President and Chief Executive
Officer
David W. Arnold Senior Vice President-
Technical Group
W. F. Hawkins Senior Vice President-Finance
and Administration
C. E. McCraw Senior Vice President-
Fertilizer Group
Robert E. Jones Vice President and General
Counsel;
Assistant Secretary
Rosalyn B. Glascoe Corporate Secretary
Item 6(b). Reports on Form 8-K.
No reports on Form 8-K have been filed during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
MISSISSIPPI CHEMICAL CORPORATION
Date: February 14, 1994 William F. Hawkins
-----------------------------------
William F. Hawkins
Senior Vice President - Finance and
Administration
Date: February 14, 1994 Rosalyn B. Glascoe
-----------------------------------
Rosalyn B. Glascoe
Corporate Secretary
-15-
</PAGE>
