FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
Of The Securities Exchange Act of 1934
For Quarter Ended March 31, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1994
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 3,985,190
Mixed 97,310
Potash 37,156
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MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
March 31, 1994 and
June 30, 1993
Consolidated Statements of Operations 4
Three months ended March 31,
1994 and 1993, and
Nine months ended March 31,
1994 and 1993
Consolidated Statements of Cash Flows 5
Nine months ended March 31,
1994 and 1993
Consolidated Statements of
Shareholder-Members' Equity 6
Fiscal Year Ended June 30, 1993
and Nine months ended March 31, 1994
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 5. Other Information 11
Item 6(b). Reports on Form 8-K 11
Signatures 11
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MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, June 30,
1994 1993
---------- --------
ASSETS Note 1
CURRENT ASSETS:
Cash and cash equivalents $ 4,851 $ 22,706
Accounts and notes receivable 44,950 39,115
Inventories:
Finished products 14,161 9,009
Raw materials and supplies 5,003 5,426
Replacement parts 27,811 27,268
--------- ---------
Total inventories 46,975 41,703
Deferred income tax benefit 6,353 -
Prepaid expenses and other current assets 4,046 3,730
--------- ---------
TOTAL CURRENT ASSETS 107,175 107,254
INVESTMENTS AND OTHER ASSETS
National Bank for Cooperatives 8,887 9,006
Other 10,463 8,039
--------- ---------
TOTAL INVESTMENTS AND OTHER ASSETS 19,350 17,045
DEFERRED INCOME TAX BENEFIT 11,365 -
PROPERTY HELD FOR SALE 66,928 66,928
PROPERTY, PLANT AND EQUIPMENT, at cost 378,164 370,701
Less accumulated depreciation,
depletion and amortization (253,032) (241,316)
--------- ---------
Net property, plant and equipment 125,132 129,385
--------- ---------
$ 329,950 $ 320,612
========= =========
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LIABILITIES AND SHAREHOLDER-MEMBERS' EQUITY
CURRENT LIABILITIES:
Long-term debt due within one year $ 4,738 $ 11,237
Notes payable 14,655 13,315
Accounts payable 24,881 29,330
Accrued interest 1,515 1,122
Accrued liabilities 23,402 10,213
Income taxes payable 2,448 -0-
Patronage refunds payable 7,001 13,820
--------- ---------
TOTAL CURRENT LIABILITIES 78,640 79,084
LONG-TERM DEBT 70,679 73,526
OTHER LONG-TERM LIABILITIES 52,219 41,238
DEFERRED GAIN ON SALE OF NEWSPRINT MILL 6,864 7,190
SHAREHOLDER-MEMBERS' EQUITY 121,548 119,574
--------- ---------
$ 329,950 $ 320,612
========= =========
See notes to consolidated financial statements.
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MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine months ended
March 31, March 31,
------------------ -----------------
(Dollars in thousands) 1994 1993 1994 1993
---- ---- ---- ----
REVENUES:
Net sales $126,360 $101,986 $280,956 $260,111
Other 180 426 266 875
-------- -------- -------- --------
126,540 102,412 281,222 260,986
COSTS AND EXPENSES:
Cost of products sold 98,283 85,517 238,014 224,466
Provision for closure of
gypsum disposal area 5,922 -0- 5,922 -0-
Selling, general and
administrative 18,140 12,739 39,668 35,888
Interest (net) 1,171 1,398 4,328 4,446
Interest capitalized -0- (99) -0- (1,027)
------- ------- --------- --------
123,516 99,555 287,932 263,773
------- ------- --------- --------
MARGINS (LOSS) BEFORE
INCOME TAXES AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 3,024 2,857 (6,710) (2,787)
INCOME TAXES (CREDIT) (1,360) (1,739) (5,015) (1,739)
-------- ------- --------- --------
MARGINS (LOSS) BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 4,384 4,596 (1,695) (1,048)
CUMULATIVE BENEFIT TO
JULY 1, 1993, OF CHANGE
IN ACCOUNTING FOR
DEFERRED INCOME TAXES -0- -0- 10,255 -0-
------- --------- -------- --------
NET MARGIN (LOSS) $ 4,384 $ 4,596 $
======== ======== ======== ========
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NET MARGINS (LOSS)
APPLIED TO:
Member equities $ 6,267 $ 10,017 $ 7,001 $ 17,367
Retained earnings
(deficit) (1,883) (5,421) 1,559 (18,415)
-------- -------- -------- --------
TOTAL $ 4,384 $ 4,596 $ 8,560 $ (1,048)
======== ======== ======== ========
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.
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MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) Nine months ended
March 31,
-----------------
1994 1993
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net margins (loss) $ 8,560 $ (1,048)
Reconciliation of net margins (loss) to
net cash provided (used) by operating
activities:
Depreciation, depletion and amortization 13,352 10,338
Deferred income tax benefit (17,718) -0-
Accrued gypsum disposal costs 5,922 -0-
Deferred lease expense 2,522 2,521
Loss on sale of property, plant
and equipment 60 53
Net change in operating assets and
liabilities 907 (15,618)
Other (1,502) 241
-------- --------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 12,103 (3,513)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (9,288) (23,420)
National Bank for Cooperatives stock revolved
and patronage refunds 579 444
Proceeds from sale of property, plant and
equipment 227 195
Other (65) 153
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (8,547) (22,628)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt proceeds 161,550 107,368
Debt payments (169,556) (102,665)
Payment of cash patronage (13,405) (22,480)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (21,411) (17,777)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (17,855) (43,918)
CASH AND CASH EQUIVALENTS - BEGINNING OF NINE MONTHS 22,706 46,855
-------- --------
CASH AND CASH EQUIVALENTS - END OF NINE MONTHS $ 4,851 $ 2,937
======== ========
See notes to consolidated financial statements.
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<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER-MEMBERS' EQUITY
MARCH 31, 1994
(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 - - - - - 8,560 8,560
Patronage refunds - - - - - (7,001) (7,001)
Stock issued 99 - - 316 - - 415
------- ------ ----- ------- ------- -------- --------
Balances,
March 31, 1994 $26,375 $1,460 $ 197 $66,008 $62,352 $(34,844) $121,548
======= ====== ===== ======= ======= ======== ========
</TABLE>
See notes to consolidated financial statements.
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MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
The consolidated balance sheet as of March 31, 1994, the
consolidated statements of operations for the three-month and the
nine-month periods ended March 31, 1994 and 1993, the
consolidated statements of cash flows for the nine-month periods
then ended, and the consolidated statements of shareholder-
members' equity as of March 31, 1994, 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 March 31,
1994, 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 March
31, 1994, decreased by approximately $1.5 million, and tax
expense for the nine month period ended March 31, 1994, increased
by approximately $200,000.
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 March 31, 1994, 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 March 31, 1994. In December, 1993, the fourth and
final option payment was received by the Company and is included
in other long-term liabilities. Currently, the Company and the
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option holder are in the process of negotiating new arrangements
with respect to the properties.
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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 nine 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
nine months of fiscal 1994 are not indicative of results expected
for the full fiscal year. Spring fertilizer usage and sales are
significantly greater than fall 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 nine months of this
fiscal year. U.S. newsprint prices remain extremely depressed
and are currently at historical lows. 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. Although
newsprint prices increased modestly during April 1994, NSI is
still incurring significant losses. As a result of these losses
and continuing negative industry trends, the Company's board of
directors has authorized the president of the Company to dispose
of a majority of the company's interest in NSI. Although no
final decisions have been reached regarding the timing and
structure of this disposition, it is expected that it will occur
on or about July 1, 1994.
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. During the
current quarter, MPC reserved from earnings $5.9 million
relating to the estimated cost of the closure of the phospho-
gypsum disposal facility located at its Pascagoula facility.
This provision resulted in MPC showing a loss for the current
quarter and for the nine months ended March 31, 1994; however,
increased demand has caused DAP prices to rise during the year
and, therefore, it is anticipated that MPC will be profitable in
fiscal 1994.
On July 1, 1993, the Company transferred assets in Carlsbad, New
Mexico, consisting of a potash mine and related facilities, to a
-11-
newly formed, wholly owned Mississippi subsidiary, Mississippi
Potash, Inc.
COMPARATIVE ANALYSIS OF THE NINE MONTHS ENDED MARCH 31, 1994 AND
MARCH 31, 1993
Net sales increased 8% for the nine months ended March 31, 1994,
compared with the same period of the prior year. This increase
was largely due to higher sales volumes and prices for nitrogen
fertilizers. Other income decreased $609,000 for the nine months
ended March 31, 1994, primarily due to receipt of funds from the
settlement of certain pending litigation during the nine months
ended March 31, 1993.
Cost of products sold increased 6% for the nine months ended
March 31, 1994, compared with the same period of the prior year.
This increase was primarily due to higher sales volumes and
higher production costs for nitrogen fertilizers
partially offset by lower sales volumes and lower production
costs for DAP.
Selling, general and administrative expenses increased 11% for
the nine months ended March 31, 1994, primarily due to increased
delivery expense due to higher volumes of nitrogen fertilizer
sold.
Net interest incurred decreased 3% for the nine months ended
March 31, 1994, and net interest after capitalization increased
27%. The decrease in net interest is primarily the result of
lower levels of borrowings and lower interest rates paid by the
Company. This decrease was partially offset by lower earnings
due to lower levels of investments. 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 increased 11% for the nine months ended March 31, 1994.
This increase was due primarily to a 12% increase in nitrogen
sales volumes and a 2% increase in nitrogen sales prices. The
Company also experienced a 25% increase in potash tons sold.
Cost of products sold increased 8% from the nine months ended
March 31, 1993. The increase in cost of sales resulted primarily
from higher sales volumes and higher per-ton costs for nitrogen
fertilizers partially offset by lower sales volumes and lower
per-ton costs for DAP. Also contributing to the increase were
higher sales volumes for potash. During the current period, DAP
production costs per ton declined 15% due to lower raw material
costs. Nitrogen fertilizer costs increased 15% partially due to
increased maintenance and labor costs resulting from a scheduled
turnaround at the Company's Yazoo City nitrogen production
-12-
facility during the current period. Also contributing to the
increase in costs were higher natural gas costs and increased
depreciation expense related to a new nitric acid plant which
began operating in January, 1993.
NEWSPRINT
Net sales did not change significantly for the nine months ended
March 31, 1994. Higher sales volumes were offset by lower sales
prices.
Cost of products sold increased 2% for the nine months ended
March 31, 1994; the result of higher sales volumes.
COMPARATIVE ANALYSIS OF THE QUARTERS ENDED MARCH 31, 1994 AND
MARCH 31, 1993
Net sales increased 24% for the quarter ended March 31, 1994,
compared with the same quarter of the prior year. This increase
was largely due to higher sales volumes for nitrogen fertilizers
and higher sales prices for DAP. Other income decreased $246,000
for the quarter ended March 31, 1994, primarily due to receipt of
funds from the settlement of certain pending litigation during
the quarter ended March 31, 1993.
Cost of products sold increased 15% for the current period due
primarily to higher sales volumes and higher production costs for
nitrogen fertilizers.
Selling, general and administrative expenses increased 42% for
the quarter ended March 31, 1994, primarily due to higher
transportation expense due to higher per-ton delivery costs and
higher volumes of nitrogen fertilizer sold.
Net interest incurred decreased 16% for the quarter ended March
31, 1994, and net interest after capitalization decreased 10%.
The decrease in net interest is primarily the result of lower
levels of borrowings and higher earnings due to the receipt of
patronage income from the National Bank for Cooperatives during
the current quarter. This decrease was partially offset by
higher 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 increased 31% for the quarter ended March 31, 1994.
This increase was due primarily to a 24% increase in sales
volumes for nitrogen fertilizers and a 21% increase in sales
prices for DAP. The Company also experienced a 42% increase in
potash tons sold and a 12% increase in DAP tons sold as well as a
-13-
2% increase in nitrogen fertilizer sales prices during the
current quarter.
Cost of products sold increased 22% from the quarter ended March
31, 1993. The increase in cost of sales resulted primarily from
higher sales volumes of nitrogen fertilizers and a 10% increase
in nitrogen fertilizer costs. During the current quarter, higher
sales volumes of DAP were more than offset by an 18% decrease in
DAP production costs, the result of lower raw material costs.
The increase in nitrogen fertilizer costs was due to higher
natural gas prices and higher costs for purchased ammonia.
NEWSPRINT
Net sales decreased 2% for the quarter ended March 31, 1994; the
result of an 11% decrease in sales prices partially offset by a
9% increase in sales volumes.
Cost of products sold did not change significantly for the
quarter ended March 31, 1994. Lower production costs per ton
were offset by higher sales volumes.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended March 31, 1994, cash provided by
operating activities was $12.1 million, and cash used by
investing activities was $8.5 million. Financing activities
consumed $21.4 million, including $8.3 million the Company paid
on long-term debt during the nine-month period and cash patronage
refunds of $13.4 million. At March 31, 1994, the Company had
cash and cash equivalents of $4.9 million, which was a decrease
of $17.8 million from June 30, 1993.
At March 31, 1994, the Company had working capital of $28.5
million compared to $28.2 million at June 30, 1993. The
Company's current ratio was 1.36 to 1 at March 31, 1994, and at
June 30, 1993. Short-term borrowings increased to $14.7 million
at March 31, 1994, compared to $13.3 million at June 30, 1993.
Long-term debt was $70.7 million at March 31, 1994, which was a
decrease of $2.8 million from the June 30, 1993, level of $73.5
million. Shareholder-members' equity increased to $121.5 million
at March 31, 1994, from $119.6 million. Long-term debt to total
capitalization decreased to 36.8% at March 31, 1994, compared to
38.1% at June 30, 1993.
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. At March 31, 1994, and June 30,
1993, the balances outstanding on this loan were $3 million and
$5 million, respectively. The Company also has lines of credit
totalling $41 million with the National Bank for Cooperatives
-14-
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 $9.2 million during the nine months
ended March 31, 1994. These expenditures were for normal
improvements and modifications to the Company's facilities, and
were financed with internally generated funds.
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PART II -- OTHER INFORMATION
Item 5. Other Information
At its meeting on March 22, 1994, the board of directors of the
Company unanimously adopted a plan of reorganization which if
approved by the shareholders would result in the conversion of
the Company from a cooperative to a regular, for-profit business
corporation. Pursuant to the plan of reorganization, the Company
will be merged into a newly formed, wholly owned subsidiary. A
registration statement on Form S-4, which was filed on April 13,
1994, in connection with the transaction is currently being
reviewed by the Securities and Exchange Commission.
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: May 12, 1994 /s/ William F. Hawkins
William F. Hawkins
Senior Vice President - Finance
and Administration
Date: May 12, 1994 /s/ Rosalyn B. Glascoe
Rosalyn B. Glascoe
Corporate Secretary
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