<PAGE>
As filed with the Securities and Exchange Commission on July 14, 1994
Registration No. 33-_____
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MISSISSIPPI CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
MISSISSIPPI 2898 64-0292638
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
P.O. BOX 388
YAZOO CITY, MISSISSIPPI 39194
(601) 746-4131
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
ROBERT E. JONES
VICE PRESIDENT AND GENERAL COUNSEL
MISSISSIPPI CHEMICAL CORPORATION
P.O. BOX 388
YAZOO CITY, MISSISSIPPI 39194
(601) 746-4131
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
Frederick W. Axley, P.C. Leonard M. Leiman, Esq.
McDermott, Will & Emery Fulbright & Jaworski L.L.P.
227 West Monroe Street 666 Fifth Avenue
Chicago, Illinois 60606-5096 New York, New York 10103
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Calculation of Registration Fee
=============================================================================================================
Proposed maximum Proposed maximum
Title of each class of Amount to be offering price aggregate offering Amount of
securities to be registered registered(1) per share(2) price(2) registration fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock (par value 5,520,000 shares $15.00 $82,800,000 $28,552
$.01 per share)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 720,000 shares subject to an over-allotment option granted to the
Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION ACTING PURSUANT
TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
Cross Reference Sheet
Pursuant to Regulation S-K Item 501(b)
<TABLE>
<CAPTION>
Form S-1 Item Location in Prospectus
- -------------------------------------------------------- --------------------------------------------------
<S> <C>
1. Forepart of the Registration Statement and Outside Outside Front Cover Page
Front Cover Page of Prospectus....................
2. Inside Front and Outside Back
Cover Pages of Prospectus......................... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges................ Prospectus Summary; The Company;
Investment Considerations
4. Use of Proceeds..................................... Use of Proceeds
5. Determination of Offering
Price............................................. Outside Front Cover Page; Underwriting
6. Dilution............................................ Dilution
7. Selling Security Holders............................ Principal and Selling Shareholders
8. Plan of Distribution................................ Outside Front Cover Page; Underwriting
9. Description of Securities to
Be Registered..................................... Prospectus Summary; Capitalization; Description
of Capital Stock
10. Interests of Named Experts and Counsel.............. Legal Matters; Experts
11. Information with Respect to the Registrant.......... Outside Front Cover Page; Prospectus
Summary; Investment Considerations; The
Company; Capitalization; Dividend Policy;
Selected Financial Data; Management's
Discussion and Analysis of Financial Condition
and Results of Operations; Business;
Management; Principal and Selling Shareholders;
Certain Relationships and Related Transactions;
Description of Capital Stock; Shares Eligible for
Future Sale; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.... *
</TABLE>
- ------------------------
* Not applicable
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 14, 1994
4,800,000 SHARES
MISSISSIPPI CHEMICAL CORPORATION
[LOGO]
COMMON STOCK
($.01 PAR VALUE)
Of the 4,800,000 shares of Common Stock offered hereby, 3,200,000 are
being issued and sold by the Company and 1,600,000 are being sold by the
Selling Shareholders. The Company will not receive any of the proceeds
from the sale of shares of Common Stock by the Selling Shareholders. See
"Principal and Selling Shareholders." It is currently estimated that the
public offering price will be between $ and $ per share. See
"Underwriting" for information relating to the method of determining the
public offering price.
Prior to this offering there has been no established trading market for
the Common Stock. Application has been made to approve the Common Stock for
quotation in the Nasdaq Stock Market's National Market (the "Nasdaq National
Market") under the symbol "MISS."
FOR INFORMATION CONCERNING CERTAIN FACTORS RELATING TO THIS OFFERING,
SEE "INVESTMENT CONSIDERATIONS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
Underwriting Proceeds to
Price Discounts and Proceeds to Selling
to Public Commissions(1) Company(2) Shareholders
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share............ $ $ $ $
Total(3)............. $ $ $ $
================================================================================
</TABLE>
(1) See "Underwriting" for indemnification arrangements.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company and certain Selling Shareholders have granted to the
Underwriters a 30-day option to purchase up to 720,000 additional shares
of Common Stock solely to cover over-allotments, if any. If this option
is exercised in full, the total Price to Public, Underwriting Discounts
and Commissions, Proceeds to Company and Proceeds to Selling
Shareholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
The shares of Common Stock offered hereby are being offered by the
several Underwriters named herein, subject to prior sale and acceptance by
the Underwriters and subject to their right to reject any order in whole or
in part. It is expected that the Common Stock will be available for
delivery on or about , 1994 at the offices of Wertheim Schroder &
Co. Incorporated, New York, New York.
WERTHEIM SCHRODER & CO. THE ROBINSON-HUMPHREY
INCORPORATED COMPANY, INC.
, 1994
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDER OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE SECURITIES
COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES
AS OF WHICH INFORMATION IS FURNISHED OR THE DATE HEREOF.
UNTIL , 1994 (TWENTY-FIVE DAYS AFTER THE COMMENCEMENT
OF THE OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by its independent
certified public accountants and quarterly reports containing unaudited
financial information for the first three quarters of each fiscal year.
TABLE OF CONTENTS
PAGE PAGE
---- ----
Prospectus Summary................ Fertilizer Industry Overview......
Investment Considerations......... Business..........................
The Company....................... Management........................
The Reorganization................ Certain Relationships and
Disposition of NSI................ Related Transactions............
Use of Proceeds................... Principal and Selling
Dividend Policy................... Shareholders....................
Dilution.......................... Description of Capital Stock......
Capitalization.................... Shares Eligible for Future Sale...
Selected Financial Data........... Underwriting......................
Pro Forma Balance Sheet........... Legal Matters.....................
Management's Discussion and Experts...........................
Analysis of Financial Condition Available Information.............
and Results of Operations....... Index to Financial Statements..... F-1
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
-2-
<PAGE>
[Product Flow Chart]
<PAGE>
[Map showing location of Company facilities]
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto, appearing elsewhere
in this Prospectus. Except as otherwise noted, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option.
Fiscal year references refer to years ending June 30.
THE COMPANY
Mississippi Chemical Corporation (the "Company") is a major producer and
supplier of nitrogen fertilizers in the southern United States, and believes it
is one of the nation's lowest-cost nitrogen fertilizer producers. The Company
also manufactures phosphate and potash fertilizers, making it a full product
line fertilizer supplier. The Company sells its nitrogen and potash fertilizer
products to farmers, dealers and distributors for ultimate use primarily in the
southern farming regions of the United States and areas served by the
Mississippi River system. The Company's phosphate fertilizers are sold
primarily in international markets.
Nitrogen, phosphorous (contained in phosphate fertilizer) and potassium
(contained in potash fertilizer) constitute the three major nutrients required
for plant growth. Nitrogen is an essential nutrient for most plants.
Phosphorous aids in the photosynthesis process, and potassium is an important
regulator of the physiological functions of plants. These elements are all
naturally present in soil but need to be replaced through the use of
fertilizers as crops exhaust them. There are no viable substitutes for
nitrogen, phosphate or potash fertilizers in the development and maintenance of
high-yield crops.
Nitrogen Fertilizer. The Company produces nitrogen fertilizers at plants
located in Yazoo City, Mississippi, and Donaldsonville, Louisiana. In fiscal
1993, the Company sold over 1.6 million tons of nitrogen fertilizers to
farmers, fertilizer dealers and distributors located primarily in the southern
United States. Sales of nitrogen products by the Company in fiscal 1993 were
$189.1 million, which represented approximately 65% of net sales. Nitrogen
products manufactured by the Company include anhydrous ammonia, fertilizer-
grade ammonium nitrate, urea/ammonium nitrate ("UAN") solutions and prilled
urea. The Company is the largest U.S. manufacturer of ammonium nitrate
fertilizer, which is marketed under the trade name Amtrate(R). Amtrate(R) has
established significant brand name recognition and a reputation as a high-
quality product.
Phosphate Fertilizer. The Company produces diammonium phosphate fertilizer
("DAP") at its Pascagoula, Mississippi facility. In fiscal 1993, the Company
sold over 692,000 tons of DAP, which is the most widely used phosphate
fertilizer. Sales of DAP by the Company in fiscal 1993 were $78.9 million,
which represented approximately 27% of net sales. All of the Company's
phosphate fertilizer sales are made through Atlantic Fertilizer & Chemical
Corporation ("Atlantic"), which was appointed the Company's exclusive
distributor of DAP when the Company restarted production of DAP in December
1991. In fiscal 1993, approximately two-thirds of the Company's DAP production
was sold into international markets, primarily to customers in India, China and
Mexico. Phosphate rock, the primary raw material for the production of
phosphate fertilizer, is provided under a long-term contract with Office
Cherifien des Phosphates ("OCP"), the national phosphate company of Morocco,
which is the world's largest producer of phosphate rock. The continued
viability and competitiveness of the Company's phosphate operations are
dependent on this strategic alliance with OCP. See "Business - Raw Materials."
Potash Fertilizer. The Company produces potash fertilizer at its facility
located near Carlsbad, New Mexico. In fiscal 1993, the Company sold over
283,000 tons of granular 60% K\\2\\O muriate of potash. Potash sales in fiscal
1993 were $20.1 million, which represented approximately 7% of net sales. In
May 1994, the Company completed an expansion of its Carlsbad facility at a cost
of approximately $1.6 million, which has increased granular potash production
capacity from approximately 300,000 tons to approximately 420,000 tons per
year. The Company controls the single largest reserve of potash in the U.S.,
with an estimated remaining life, at current production rates, of approximately
140 years.
-3-
<PAGE>
Business Strategy. The Company's products are global commodities which are
available from multiple sources; therefore, the Company competes primarily on
the basis of price. As a result, the Company stresses low cost and high
efficiency in every aspect of its operations. Unlike many of its competitors,
the Company maintains a large and experienced field sales force strategically
located throughout its trade area. Through its sales force, the Company
provides extensive, cost-effective services to its customers to differentiate
its products, enhance competitiveness and establish the Company as a preferred
supplier. The Company's marketing efforts are focused on geographically
proximate markets where lower transportation and distribution costs increase
"net backs" (sales less distribution and delivery expense) and result in
improved margins. The change in corporate status from a cooperative should
present additional opportunities to improve net backs and enhance profit
margins. Finally, the Company continuously monitors opportunities to expand
its operations through capacity additions, acquisitions, joint ventures and
strategic alliances in the fertilizer business.
THE REORGANIZATION
The Company is the successor by merger, effective July 1, 1994, to a
business which was formed in 1948 as the first fertilizer cooperative in the
United States (the "Cooperative"). The principal business of the Cooperative
was to provide fertilizer products to its shareholders pursuant to preferred
patronage rights which gave the shareholders the right to purchase fertilizer
products and receive a patronage refund on fertilizer purchases. On June 28,
1994, the shareholders of the Cooperative approved a plan of reorganization
(the "Reorganization"), pursuant to which the Cooperative was merged into the
Company, with the Company being the surviving entity. Pursuant to the
Reorganization, the common stock of the Cooperative was converted into Common
Stock and/or cash. In addition, holders of Capital Equity Credits and
Allocated Surplus Accounts of the Cooperative (the "Special Accounts") were
offered the right to exchange the Special Accounts for Common Stock. Since
July 1, 1994, the Company has operated as a regular business corporation.
References in this Prospectus to the Company's operations prior to July 1,
1994, refer to the Cooperative's operations.
The Board of Directors of the Cooperative decided to implement the
Reorganization because it believed that the Company needed greater flexibility
in the marketing of its products than was possible under its cooperative
status. Following the Reorganization, the Company believes that it will be
able to be more responsive to its customers' needs and be better able to
promote its position as a preferred supplier of fertilizer products in its core
markets in the southern U.S. The Company also believes that its new corporate
status will increase opportunities for market expansion and growth of
operations. The Company expects to retain the majority of the Cooperative's
customer base and expects that its sales and profitability will not be
adversely affected by the Reorganization. In addition, following the
Reorganization, the Company expects to have enhanced access to capital markets
and increased options in connection with potential business combinations. See
"The Reorganization."
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by the Company................ 3,200,000 shares
Common Stock offered by the Selling Shareholders... 1,600,000 shares
Common Stock to be outstanding after the offering.. 22,480,043 shares (1)
Use of proceeds.................................... To retire indebtedness. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol............. MISS
Dividend policy.................................... The Company expects to pay a quarterly
cash dividend of $ per share,
commencing with a payment in _____ 1995
with respect to the quarter ending
December 31, 1994. See "Dividend Policy."
</TABLE>
(1) Assumes conversion of all Special Accounts into shares of Common Stock.
-4-
<PAGE>
SUMMARY FINANCIAL DATA
For the periods presented, the Company operated as a cooperative. The
following table, which sets forth certain financial information, in summary
form, with respect to the Cooperative, including certain assumptions to show the
effect as though the Company had operated as a regular business corporation, is
qualified in its entirety by, and should be read in conjunction with, the
consolidated financial statements and related notes appearing elsewhere herein.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
March 31 Fiscal Year Ended June 30
------------------- ----------------------------------------------------
INCOME STATEMENT DATA: 1994 1993 1993 1992 1991 1990 1989
- ---------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $210,483 $189,071 $289,125 $239,657 $214,990 $180,316 $208,584
Operating Expenses:
Cost of products sold 153,154 141,471 213,540 152,324 112,622 110,832 116,814
Provision for closure of
gypsum disposal area (1) 5,922 - - - - - -
Selling, general and
administrative 33,585 29,705 46,230 46,529 47,395 38,536 39,213
-------- -------- -------- -------- -------- -------- --------
192,661 171,176 259,770 198,853 160,017 149,368 156,027
-------- -------- -------- -------- -------- -------- --------
Operating Income 17,822 17,895 29,355 40,804 54,973 30,948 52,557
Interest Expense, Net (3,083) (2,708) (3,569) (3,930) (4,307) (4,246) (4,971)
Other Income (Expense) 258 548 592 (531) 777 2,062 1,295
-------- -------- -------- -------- -------- -------- --------
Margins from Continuing
Operations Before Income Taxes 14,997 15,735 26,378 36,343 51,443 28,764 48,881
Income Tax (Expense) Credit (3,071) (243) (3,697) (4,994) (3,406) 294 (4,613)
-------- -------- -------- -------- -------- -------- --------
Margins from Continuing
Operations $ 11,926 $ 15,492 $ 22,681 $ 31,349 $ 48,037 $ 29,058 $ 44,268
======== ======== ======== ======== ======== ======== ========
Income from Continuing
Operations Assuming Conversion
from a Cooperative to a
Regular Business Corporation
As of July 1, 1988 (2) $ 9,557 $ 9,591 $ 17,808 $ 23,565 $ 35,224 $ 21,544 $ 34,914
======== ======== ======== ======== ======== ======== ========
Earnings Per Share (3) $ 0.49 $ 0.50 $ 0.94 $ 1.27 $ 1.97 $ 1.22 $ 2.02
======== ======== ======== ======== ======== ======== ========
</TABLE>
-5-
<PAGE>
SUMMARY FINANCIAL DATA
(Continued)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
March 31 Fiscal Year
------------------- Ended June 30
PRO FORMA INCOME DATA: 1994 1993 1993
- ---------------------- -------- -------- -------------
<S> <C> <C> <C>
Operating Income $ 17,822 $ 17,895 $ 29,355
Interest Expense, Net (4) (603) (363) (470)
Other Income 258 548 592
-------- -------- --------
Income from Continuing Operations
Before Income Taxes 17,477 18,080 29,477
Income Tax Expense (5) (6,283) (6,941) (9,624)
-------- -------- --------
Income from Continuing Operations $ 11,194 $ 11,139 $ 19,853
======== ======== ========
Earnings Per Share (6) $ 0.50 $ 0.50 $ 0.89
======== ======== ========
<CAPTION>
Nine Months Ended
March 31 Fiscal Year Ended June 30
------------------- ------------------------------
OPERATING DATA: 1994 1993 1993 1992 1991
- --------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales:
Nitrogen $137,387 $118,668 $189,127 $176,835 $188,267
DAP 57,257 57,855 78,906 36,034 -
Potash 14,319 11,566 20,149 25,482 25,251
Other 1,520 982 943 1,306 1,472
-------- -------- -------- -------- --------
Net Sales $210,483 $189,071 $289,125 $239,657 $214,990
======== ======== ======== ======== ========
<CAPTION>
Nine Months Ended
March 31 Fiscal Year Ended June 30
------------------- ------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Tons Sold:
Nitrogen 1,204 1,051 1,602 1,544 1,575
DAP 462 484 692 262 -
Potash 203 163 283 339 332
</TABLE>
-6-
<PAGE>
SUMMARY FINANCIAL DATA
(Continued)
(In Thousands, except per share data)
<TABLE>
<CAPTION>
At March 31, 1994
------------------- June 30,
BALANCE SHEET DATA: Actual Pro Forma (7) 1993
- ------------------- -------- --------- --------
<S> <C> <C> <C>
Working Capital $ 31,640 $ 8,574 $ 22,802
Total Assets $294,103 $286,023 $296,053
Long-Term Debt, Excluding
Current Portion Due $ 48,950 $ 5,602 $ 52,357
Total Shareholders' Equity $121,548 $168,312 $119,574
</TABLE>
(1) During the nine months ended March 31, 1994, the Company recorded a non-
cash charge of approximately $5.9 million relating to the estimated cost
of the closure of the gypsum disposal facility located at its Pascagoula
facility. This charge relates to the portion of the disposal facility
utilized to date and it is estimated that future charges of approximately
$3.0 million will be accrued over the six year estimated remaining life
of the disposal facility.
(2) For the periods presented, the Company operated as a cooperative and
realized deductions for income taxes for amounts paid in cash as patronage
refunds to its shareholder members. If the conversion from a cooperative
to a regular business corporation had occurred as of July 1, 1988, income
taxes would have been increased by the following amounts: $2.4 million and
$5.9 million for the nine months ended March 31, 1994 and March 31, 1993,
respectively; $4.9 million, $7.8 million, $12.8 million, $7.5 million and
$9.4 million for fiscal 1993, 1992, 1991, 1990 and 1989, respectively.
(3) Earnings per share reflect the Reorganization as if it had occurred July 1,
1988. Weighted average shares would have been 19,320,012 and 19,035,276
for the nine months ended March 31, 1994 and March 31, 1993, respectively;
19,035,276, 18,521,287, 17,885,416, 17,723,107 and 17,325,189 for fiscal
1993, 1992, 1991, 1990 and 1989, respectively.
(4) Interest expense, net, reflects a reduction in interest expense of $2.5
million and $2.3 million for the nine months ended March 31, 1994 and
March 31, 1993, respectively, and $3.1 million for fiscal 1993 related to
the reduction in long-term debt from the application of the net proceeds
of the offering.
(5) Reflects taxation as a C corporation as a result of the Reorganization, as
well as the reduction in interest expense from the application of the
proceeds from the offering.
(6) Earnings per share is calculated based on the weighted average shares
outstanding assuming the Reorganization, (See (3)) had occurred prior
to the periods presented, plus the estimated number of shares (3,200,000
shares, assuming a public offering price of $15.00 per share) required to
be sold in order to fund the repayment of long-term debt of the Company.
(7) Reflects (i) the Reorganization, (ii) the disposition of the majority of
the Company's interest in Newsprint South, Inc. and (iii) the sale by the
Company of 3,200,000 shares of Common Stock in this offering, assuming a
public offering price of $15.00 per share and the application of the net
proceeds thereof. See "The Reorganization," "Disposition of NSI," "Use
of Proceeds" and "Pro Forma Balance Sheet," including the notes thereto.
-7-
<PAGE>
INVESTMENT CONSIDERATIONS
In addition to the other information set forth in this Prospectus, the
following investment considerations should be considered carefully in
evaluating the Company and its business before purchasing any shares of Common
Stock offered hereby.
EFFECT OF REORGANIZATION ON OPERATIONS
Until July 1, 1994, the Company operated as a cooperative. As a
cooperative, the substantial majority of the Cooperative's sales of nitrogen
fertilizers were made to its shareholders who purchased products pursuant to
preferred patronage rights and received patronage refunds with respect to their
purchases. The Cooperative paid to its shareholder-customers a patronage
refund consisting of the excess of the purchase price of products over the cost
of manufacturing, distributing and selling the products. It is expected that
the Company will maintain its nitrogen fertilizer customer base even though the
Company will not grant preferred patronage rights and will not pay patronage
refunds, although there can be no assurance that the Reorganization will not
have a material adverse effect on the Company's results of operations. DAP and
virtually all of its potash fertilizer have historically been sold by the
Company outside the cooperative structure.
FACTORS AFFECTING FERTILIZER DEMAND AND PRICES
With virtually all of its nitrogen fertilizer net sales and approximately
80% of its total net sales in fiscal 1993 derived from domestic markets, the
Company's operating results are highly dependent upon conditions in the U.S.
agricultural industry. A variety of factors beyond the Company's control can
materially affect domestic fertilizer demand and pricing. These factors
include U.S. planted acreage, government agricultural policies (including
subsidy and acreage set-aside programs), projected grain stocks, crop failure,
weather and changes in agricultural production methods.
International market conditions also significantly influence the Company's
business. The market for fertilizers is influenced by such factors as the
relative value of the U.S. dollar and its impact upon the cost of importing
fertilizers, foreign agricultural policies, the existence of, or changes in,
import or foreign currency exchange barriers in certain foreign markets,
changes in the hard currency demands of certain countries, such as the former
Soviet Union ("FSU"), and other regulatory policies of foreign governments, as
well as the laws and policies of the U.S. affecting foreign trade and
investment. The Company is also subject to the risks of doing business abroad,
including risks associated with economic or political instability, risks
associated with the value of the U.S. dollar and potential import restrictions
or quotas.
In the recent past, fertilizer prices have been extremely volatile, with
significant price changes from one growing season to the next. The Company
believes that world supply and demand for nitrogen fertilizers are currently in
a more favorable balance than in certain prior years. However, nitrogen
fertilizer is a global commodity and can be subject to intense price
competition from domestic and foreign sources. Between 1987 and 1993,
phosphate fertilizer prices declined to their lowest levels since 1977 as a
result of an acute supply surplus. During late 1993, the price of phosphate
fertilizer increased significantly, primarily in response to increased
purchases by China and India, the primary export markets for the U.S. phosphate
fertilizer industry. Potash fertilizer prices have remained relatively stable
since 1988. No assurance can be given, however, that average realized prices
paid for the Company's fertilizer products will continue at current levels.
SEASONALITY
The usage of fertilizer is highly seasonal, and the Company's quarterly
results reflect the fact that in the Company's markets, significantly more
fertilizer is purchased in the spring. Significant portions of the Company's
net sales and operating income are generated in the last four months of the
Company's fiscal year (March through June). Since interim period operating
results reflect the seasonal nature of the Company's business, they are not
indicative of results expected for the full fiscal year. In addition,
quarterly results can vary significantly from one year to the next due
-8-
<PAGE>
primarily to weather-related shifts in planting schedules and purchase
patterns. The Company incurs substantial expenditures for fixed costs
throughout the year and substantial expenditures for inventory in advance of
the spring planting season.
DEPENDENCE ON NATURAL GAS
Natural gas is the primary raw material used in the manufacture of
nitrogen fertilizer products. Natural gas is used as both a chemical feedstock
and a fuel to produce anhydrous ammonia, which is then utilized in the
production of all other nitrogen fertilizers. Anhydrous ammonia is also a raw
material in the production of DAP. Accordingly, the Company's profitability
may be affected by the price and availability of natural gas. A significant
increase in the price of natural gas which is not recovered through an increase
in the price of the Company's fertilizer products, or an extended interruption
in the supply of natural gas to the Company's production plants, could have a
material adverse effect on the Company's results of operations and financial
condition. Natural gas is currently available in ample quantities; however,
the excess deliverability ("gas bubble") which existed several years ago has
dissipated. In recent years, natural gas prices have become increasingly
subject to seasonal volatility.
ENVIRONMENTAL REGULATIONS
The Company is subject to various environmental laws and regulations of
U.S. federal, state and local governments. Significant capital expenditures
and operating costs have been incurred and will continue to be incurred on
account of these laws and regulations. The Company cannot predict or quantify
the impact of new or changed laws or regulations. In the normal course of its
business, the Company is exposed to risks such as possible release of hazardous
substances into the environment. Such releases could cause substantial damage
or injuries. See "Business -Compliance With Environmental Regulations."
DEPENDENCE ON PHOSPHATE ROCK SUPPLIER
Phosphate rock is the principal raw material used in the manufacture of
DAP. The Company has a long-term requirements contract with OCP, the world's
leading phosphate rock supplier. The continued viability and competitiveness
of the Company's phosphate fertilizer operations are dependent upon the
continuance of this supply contract. See "Business - Raw Materials - Phosphate
Rock."
COMPETITION
Fertilizer products are global commodities and customers base their
purchasing decisions principally on the delivered price of the product. As a
result, markets for the Company's products are highly competitive. A number of
U.S. producers compete with the Company in domestic and export markets, and
producers in other countries, including state-owned and government-subsidized
entities, compete with the Company in the U.S. and in foreign markets to which
the Company exports. Many of the Company's competitors are significantly
larger and have greater financial resources than the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market
following the offering could adversely affect the market price of the Common
Stock. Prior to the Reorganization, the Cooperative's common stock lacked
liquidity due to certain transfer and sales restrictions. The shares of Common
Stock issued in the Reorganization are freely transferable and available for
sale in the public market. Of the _________ shares of Common Stock that will
be outstanding following the offering, all shares will be freely tradable. The
Company, as well as holders of ________ shares of Common Stock, including the
Selling Shareholders and all officers and directors of the Company, have agreed
that they will not offer to sell, contract to sell or dispose of shares of
Common Stock for a period of 180 days after the date of this Prospectus,
without the prior written consent of Wertheim Schroder & Co. Incorporated.
-9-
<PAGE>
NO PRIOR PUBLIC MARKET; VOLATILITY
Prior to the offering, there has been no established trading market for
the Common Stock. Although the Company has applied to have the Common Stock
approved for quotation on the Nasdaq National Market, there can be no assurance
that an active trading market will develop or be sustained following the
offering. The public offering price of the Common Stock offered hereby has
been determined in negotiations among the Company, the Selling Shareholders and
the Representatives of the Underwriters. The trading price of the Common Stock
could be subject to significant fluctuations in response to variations in
quarterly operating results and other factors. In addition, in recent years
the stock market in general, and the market for shares of newly registered
stocks in particular, has experienced price fluctuations which have often been
unrelated to the operating performance of the affected companies. General
market price declines or market volatility in the future could affect the
market price of the Common Stock and the public offering price may not be
indicative of future market prices.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Articles of Incorporation and
Mississippi corporate law could have the effect of discouraging, delaying or
making more difficult a change in control of the Company not approved by the
Board of Directors of the Company. Among other things, the Articles of
Incorporation provide for a classified Board of Directors, require a
supermajority vote of the directors or the shareholders on major transactions,
and allow the Board of Directors to issue up to 500,000 shares of Preferred
Stock and fix the rights, privileges and preferences of those shares without
any further vote or action by the shareholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any Preferred Stock that may be issued in the future. While
the Company has no present intention to issue shares of Preferred Stock, any
issuance of Preferred Stock could have the effect of making it more difficult
for a third party to acquire a majority of the outstanding voting stock of the
Company. In addition, the Company, in its Articles of Incorporation, has
chosen to be subject to the Mississippi Control Share Act which allows
shareholders to decide whether a potential acquiror's shares may exercise
voting rights when such a potential acquiror reaches certain thresholds of
stock ownership, and has chosen to be subject to the Mississippi Shareholder
Protection Act which prevents business combinations with 20% or greater
shareholders unless certain conditions are met. See "Description of Capital
Stock - Certain Statutory Provisions," and "- Certain Charter Provisions."
-10-
<PAGE>
THE COMPANY
The Company is a major producer and supplier of nitrogen fertilizers in
the southern United States, and believes it is one of the nation's lowest-cost
nitrogen fertilizer producers. The Company also manufactures phosphate and
potash fertilizers, making it a full product line fertilizer supplier. The
Company sells its nitrogen and potash fertilizer products to farmers, dealers
and distributors for ultimate use primarily in the southern farming regions of
the United States and areas served by the Mississippi River system. The
Company's phosphate fertilizers are sold primarily in international markets.
Nitrogen, phosphorous (contained in phosphate fertilizer) and potassium
(contained in potash fertilizer) constitute the three major nutrients required
for plant growth. Nitrogen is an essential nutrient for most plants.
Phosphorous aids in the photosynthesis process, and potassium is an important
regulator of the physiological functions of plants. These elements are all
naturally present in soil but need to be replaced through the use of
fertilizers as crops exhaust them. There are no viable substitutes for
nitrogen, phosphate or potash fertilizers in the development and maintenance of
high-yield crops.
Nitrogen Fertilizer. The Company produces nitrogen fertilizers at plants
located in Yazoo City, Mississippi, and Donaldsonville, Louisiana. In fiscal
1993, the Company sold over 1.6 million tons of nitrogen fertilizers to
farmers, fertilizer dealers and distributors located primarily in the southern
United States. Sales of nitrogen products by the Company in fiscal 1993 were
$189.1 million, which represented approximately 65% of net sales. Nitrogen
products manufactured by the Company include anhydrous ammonia, fertilizer-
grade ammonium nitrate, UAN solutions and prilled urea. The Company is the
largest U.S. manufacturer of ammonium nitrate fertilizer which is marketed
under the trade name Amtrate(R). Amtrate(R) has established significant brand
name recognition and a reputation as a high-quality product.
Phosphate Fertilizer. The Company produces DAP at its Pascagoula,
Mississippi facility. In fiscal 1993, the Company sold over 692,000 tons of
DAP, which is the most widely used phosphate fertilizer. Sales of DAP by the
Company in fiscal 1993 were $78.9 million, which represented approximately 27%
of net sales. All of the Company's phosphate fertilizer sales are made through
Atlantic, which was appointed the Company's exclusive distributor of DAP when
the Company restarted production of DAP in December 1991. In fiscal 1993,
approximately two-thirds of the Company's DAP production was sold into
international markets, primarily to customers in India, China and Mexico.
Phosphate rock, the primary raw material for the production of phosphate
fertilizer, is provided under a long-term contract with OCP, the national
phosphate company of Morocco, which is the world's largest producer of
phosphate rock. The continued viability and competitiveness of the Company's
phosphate operations are dependent on this strategic alliance with OCP. See
"Business - Raw Materials."
Potash Fertilizer. The Company produces potash fertilizer at its facility
located near Carlsbad, New Mexico. In fiscal 1993, the Company sold over
283,000 tons of granular 60% K\\2\\O muriate of potash. Potash sales in fiscal
1993 were $20.1 million, which represented approximately 7% of net sales. In
May 1994, the Company completed an expansion of its Carlsbad facility at a cost
of approximately $1.6 million, which has increased granular potash production
capacity from approximately 300,000 tons to approximately 420,000 tons per
year. The Company controls the single largest reserve of potash in the U.S.,
with an estimated remaining life, at current production rates, of approximately
140 years.
Business Strategy. The Company's products are global commodities which
are available from multiple sources; therefore, the Company competes primarily
on the basis of price. As a result, the Company stresses low cost and high
efficiency in every aspect of its operations. Unlike many of its competitors,
the Company maintains a large and experienced field sales force strategically
located throughout its trade area. Through its sales force, the Company
provides extensive, cost-effective services to its customers to differentiate
its products, enhance competitiveness and establish the Company as a preferred
supplier. The Company's marketing efforts are focused on geographically
proximate markets where lower transportation and distribution costs increase
net backs and result in improved margins. The change in corporate status from
a cooperative should present additional opportunities to improve net backs and
enhance profit margins. Finally, the Company continuously monitors
opportunities to expand its operations through capacity additions,
acquisitions, joint ventures and strategic alliances in the fertilizer
business.
-11-
<PAGE>
The Company was incorporated in Mississippi on May 23, 1994 and is the
successor to the Cooperative which was incorporated in 1948 as the first
fertilizer cooperative in the U.S. The address of its principal executive
office is Owen Cooper Administration Building, Highway 49 East, Yazoo City,
Mississippi 39194 and its telephone number is (601) 746-4131. As used in this
Prospectus, the term "Company" includes Mississippi Chemical Corporation and
its wholly-owned subsidiaries, Mississippi Phosphates Corporation and
Mississippi Potash, Inc. References in this Prospectus to the Company's
operations prior to July 1, 1994 refer to the Cooperative's operations.
THE REORGANIZATION
The Cooperative was incorporated in Mississippi in September 1948 and
operated as a cooperative in accordance with the applicable provisions of the
Internal Revenue Code. The principal business of the Cooperative was to
provide fertilizer products to its shareholders pursuant to preferred patronage
rights which gave the shareholders the right to purchase fertilizer products
and receive a patronage refund on fertilizer purchases.
On June 28, 1994, the shareholders of the Cooperative approved the
Reorganization, pursuant to which the Cooperative was merged, effective July 1,
1994, into the Company, a wholly owned subsidiary of the Cooperative, with the
Company being the surviving entity. Pursuant to the Reorganization, the issued
and outstanding shares of common stock of the Cooperative were converted into
shares of Common Stock and/or cash and holders of Special Accounts were offered
the right to exchange those Special Accounts for Common Stock. As of July 1,
1994, an aggregate of 18,776,193 shares of Common Stock had been issued
pursuant to the Reorganization and it is estimated that approximately $6.5
million of cash will be paid pursuant to the Reorganization. Up to an
additional 503,850 shares of Common Stock may be issued upon the conversion of
Special Accounts, including Special Accounts arising from 1994 patronage. As a
result of the Reorganization, the Company no longer operates as a cooperative
but as a regular business corporation.
REASONS FOR THE REORGANIZATION
The Cooperative was formed during a period of severe fertilizer shortages
following World War II in order to provide farmers with a reliable source of
quality nitrogen fertilizer products at reasonable prices. Farmers and
fertilizer dealers purchased stock from the Cooperative in order to secure
preferred rights to obtain fertilizer. Shareholders received a patronage
refund on fertilizer purchases to the extent of any excess of the sales price
over the cost to manufacture and sell the fertilizer. The cooperative
structure initially served the Cooperative and its shareholders well with the
Cooperative providing high-quality fertilizer products at competitive prices.
The value of the Cooperative's stock in the hands of fertilizer users was
primarily a function of the prevailing supply/demand relationship for
fertilizer and the Cooperative's net cost of producing and selling its
products.
Worldwide production expansions in the late 1970's and early 1980's
resulted in an oversupply of fertilizer products. With competitively priced
fertilizer products readily available, fertilizer users no longer had the
incentive to purchase the Cooperative's stock in order to obtain fertilizer
supplies. During the 1980's and 1990's, the business environment for
fertilizer manufacturers changed as a result of intensified foreign competition
from government-controlled entities, supply/demand imbalances, increased
environmental regulations, industry consolidation resulting in fewer, but
better capitalized, competitors and increases in the cost of capital equipment.
Over the years, the needs of the Cooperative's shareholders were also changing,
with a resulting divergence in the stock ownership and customer bases of the
Cooperative. The restrictions on ownership of the Cooperative's stock made
transfers of shares difficult for a shareholder no longer requiring fertilizer
and depressed the value of those shares.
The Cooperative believed it needed to grow in order to adjust to changing
markets, but the cooperative structure provided little flexibility for growth
or expansion. The Cooperative's ability to raise capital was limited because
it could only sell stock to those who used its products. The Cooperative
needed access to capital markets in order to modernize and expand production
facilities, take advantage of technological developments and respond to growth
opportunities.
-12-
<PAGE>
The Cooperative's Board of Directors believed that conversion from a
cooperative would address these business needs, while also providing its
shareholders with a broader and more liquid market for their shares. Although
the Cooperative believed it was one of the most successful fertilizer
cooperatives, a year-long study convinced the Board that the rigid, highly
regulated cooperative structure limited its ability to operate in the most
effective manner. As part of its study, the Board investigated the Company's
ability to operate as a regular corporation and to sell its products without
patronage refunds. The Cooperative had developed an excellent reputation with
its customers, suppliers and competitors as a high quality, dependable supplier
of nitrogen, phosphate and potash fertilizers at competitive prices. Field
surveys by Company personnel indicated that sales volumes would not be
adversely affected by the change from the cooperative structure. The Company
anticipates that the strong relationships that the Cooperative developed with
its customer-shareholders will help the Company to retain a substantial portion
of its existing customer base, while the Company is now also able to sell its
products to new customers and in new markets. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - General."
The Company believes that access to broader based capital markets will
assist it in expanding its operations, financing required capital expenditures
and remaining competitive in its markets. The ability to issue securities not
subject to the restrictions of a cooperative should also provide the Company
with greater flexibility in connection with potential acquisitions,
partnerships and alliances in the fertilizer industry.
DISPOSITION OF NSI
GENERAL
On June 24, 1994, the Cooperative divested a majority of its interest in
Newsprint South, Inc. ("NSI"), its newsprint manufacturing subsidiary. As a
result of NSI's significant losses, which were expected to continue, and
continuing negative industry trends, the Cooperative's Board of Directors
authorized the disposition of NSI. NSI, which was organized in 1986, completed
the construction of a 225,000 ton-per-year newsprint mill near Grenada,
Mississippi, in 1989. NSI markets its products to newspapers and commercial
printers located primarily in the southern United States.
BACKGROUND
The Cooperative's involvement with newsprint production began in the late
1970's when the Cooperative's founder and former president identified the need
for a timber-based industry in north Mississippi, an area abundant in timber
resources. Due to a lack of local pulp and paper mills, timber prices realized
by north Mississippi growers lagged those prevailing in other regions. Since
many farmers were also timber growers, the Cooperative and its shareholders
became interested in a proposed project to build a newsprint mill in north
Mississippi. After thorough analysis, the Cooperative concluded that the
project could materially benefit its shareholders and that the project could be
financed with a modest equity investment and with non-recourse debt.
OPERATIONS
For the last three fiscal years, NSI's sales were $97.3 million for 1993;
$95.5 million for 1992; and $106.1 million for 1991. During the last three
fiscal years, NSI incurred losses of $17.9 million for 1993; $18.3 million for
1992; and $8.7 million for 1991. A further significant loss is projected for
fiscal 1994.
NSI's losses are directly attributable to depressed conditions in the
newsprint industry, since unit volume production costs have been continually
reduced due to increased production volume and improved mill performance. The
construction and start-up of NSI's facility coincided with a massive capacity
build-up in newsprint during the late 1980's and early 1990's. Concurrently,
the 1991-1992 recession produced an unprecedented decline in newsprint
consumption. The resulting supply/demand imbalance caused a collapse in the
price of newsprint. Newsprint prices fell by over 30% during the period from
1988 to mid-1992, causing record losses for the newsprint industry.
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<PAGE>
Following a brief modest improvement in prices during late 1992 and early 1993,
prices returned to mid-1992 levels and remain at depressed levels.
THE DISPOSITION OF NSI
On June 24, 1994, the Cooperative and the principal parties (the mill
owner and the primary lender) to the leveraged lease transaction pursuant to
which the NSI facilities are financed concluded a restructuring of NSI which
involved a transfer by the Cooperative of 70% of the outstanding stock of NSI.
The Cooperative will retain a 30% nonvoting interest in NSI. Under the terms
of the restructuring, the Cooperative paid $19.0 million to NSI in various
forms, including a capital contribution, payments in liquidation of the
Cooperative's obligations under a newsprint purchase contract and certain tax-
compensating payments pursuant to a tax-sharing agreement. Loans of
approximately $13.7 million made by the Cooperative to NSI were converted to
capital. The Cooperative purchased from NSI its National Bank for Cooperatives
("CoBank") common stock for $4.0 million. This stock is scheduled for
redemption at the face amount by CoBank during the next five years. The
Company has also agreed to continue to provide management services to NSI for a
fee during a transition period of up to nine months. The Cooperative was
released from its obligations under all contracts to which it was a party
related to the NSI project and the leveraged lease financing of the NSI
project.
EFFECT OF DISPOSITION
Although NSI's debts were non-recourse to the Cooperative and the
Cooperative was not responsible for NSI's continuing losses, as a wholly owned
subsidiary, NSI's financial results were consolidated with those of the
Cooperative. As a result of the divestiture, NSI's financial results will no
longer be consolidated with those of the Company. With respect to periods
prior to the disposition, NSI's results will be reflected as discontinued
operations. Subsequent to this transaction, the Company is accounting for its
continuing interest in NSI using the cost method of accounting for investments.
In connection therewith, the Company will write up to zero its investment in
NSI as it will have no continuing obligation to fund any of NSI's future
losses.
USE OF PROCEEDS
The net proceeds from the sale of 3,200,000 shares of Common Stock offered
by the Company (after deducting estimated underwriting discounts and estimated
offering expenses) are expected to be approximately $44.1 million ($ if
the Underwriters' over-allotment option is exercised in full), assuming a
public offering price of $15.00 per share. The Company will not receive any
proceeds from the sale of the shares by the Selling Shareholders.
The estimated net proceeds of $44.1 million will be used to repay all
amounts outstanding under the Company's revolving line of credit with
NationsBank Corporation due June 30, 1997, its term loan agreement with CoBank
due June 30, 1997, and its 9.5% Subordinated Notes due July 1, 1999 (the
"Subordinated Notes"). The revolving line of credit bears interest at an
adjustable rate, currently equal to 7.25% per annum, the term loan bears
interest at an adjustable rate, currently equal to 9.75% per annum, and the
Subordinated Notes bear interest at a fixed rate of 9.5% per annum. Following
the offering, the Company expects to use its credit availability under this
revolving line of credit for working capital and general corporate purposes,
including expansion and efficiency enhancements of the Company's operations.
DIVIDEND POLICY
The Company currently anticipates that it will pay regular quarterly
dividends following the offering, commencing with a payment which is expected
to be made in , 1995 with respect to the quarter ending December 31,
1994. It is currently expected that the initial quarterly dividend will be $
per share. However, the amount and timing of the payment of any dividends will
be based on a number of factors, including the future
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<PAGE>
earnings and capital requirements of the Company, the financial condition of
the Company, the dividend policies of similar publicly-traded companies and
other factors the Board of Directors considers relevant. There can be no
assurance that dividends will be paid in any minimum amounts or at any
particular times. In the future, it is possible that agreements with lenders
may restrict or prohibit the Company's ability to pay dividends and/or limit
the amount of dividends that may be paid.
DILUTION
The pro forma net tangible book value of the Company at March 31, 1994, was
$6.28 per share of Common Stock, assuming the Reorganization and the
disposition of NSI had occurred as of such date. After giving effect to the
sale of 3,200,000 shares of Common Stock offered by the Company hereby at an
assumed public offering price of $15.00 per share, and the application by the
Company of the estimated net proceeds therefrom, the pro forma net tangible
book value of the Company as of March 31, 1994, would have been $7.42 per
share. This represents an immediate increase in pro forma net tangible book
value of $1.14 per share to existing shareholders and an immediate dilution of
$7.58 per share to new investors purchasing shares of Common Stock in the
offering.
The following table illustrates this per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed public offering price per share......................... $15.00
Pro forma net tangible book value
per share before the offering................................... $6.28
Increase per share attributable to new investors.............. 1.14
Pro forma net tangible book value per share after the offering.. 7.42
------
Dilution per share to new investors............................. $ 7.58
======
</TABLE>
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<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as of
March 31, 1994, and as adjusted to reflect (i) the Reorganization, (ii) the
disposition of NSI and (iii) the sale by the Company of 3,200,000 shares of
Common Stock in this offering assuming a public offering price of $15.00 per
share and the application of the net proceeds therefrom. See "The
Reorganization," "Disposition of NSI," "Use of Proceeds" and "Pro Forma Balance
Sheet," including the notes thereto. This table should be read in conjunction
with the consolidated financial statements of the Company, including the notes
thereto, appearing elsewhere in this Prospectus.
(Dollars in thousands)
<TABLE>
<CAPTION>
As
Actual Adjusted
-------- --------
<S> <C> <C>
Long-term debt due within one year $ 4,298 $ 3,506
======== ========
Long-term debt (excluding amounts due
within one year) $ 48,950 $ 5,602
Shareholders' equity:
Preferred stock, $.01 par value, 500,000
shares authorized; none outstanding - -
Cooperative capital stock 28,032 -
Common stock, $.01 par value, 100,000,000
shares authorized; 22,400,000 (estimated)
shares issued and outstanding, As Adjusted - 224
Additional paid-in capital 66,008 174,133
Capital equity credits 62,352 -
Retained earnings (deficit) (34,844) (6,045)
-------- --------
Total shareholders' equity 121,548 168,312
-------- --------
Total capitalization $170,498 $173,914
======== ========
</TABLE>
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<PAGE>
SELECTED FINANCIAL DATA
The following tables present certain selected consolidated financial data
with respect to the Company for each of the fiscal years in the five-year period
ended June 30, 1993, and for the nine-month periods ended March 31, 1994 and
March 31, 1993. The selected consolidated financial data in the table are
derived from the consolidated financial statements of the Company, which, in the
case of the nine months ended March 31, 1994 and fiscal 1993, 1992 and 1991,
have been audited by Arthur Andersen & Co., independent public accountants, as
indicated in their report included elsewhere herein. Information at March 31,
1993, and for the nine-month period then ended, is unaudited, but in the opinion
of management, includes all adjustments, consisting of normal recurring
accruals, necessary to present fairly the data set forth therein. The results
of operations for the nine-month periods are not necessarily indicative of the
results to be expected for the fiscal year. These tables should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the "Pro Forma Balance Sheet," including the notes
thereto, the "Use of Proceeds," and the consolidated financial statements of the
Company, including the notes thereto, all appearing elsewhere in this
Prospectus.
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
March 31 Fiscal Year Ended June 30
-------------------- ----------------------------------------------------
INCOME STATEMENT DATA: 1994 1993 1993 1992 1991 1990 1989
- ---------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $210,483 $189,071 $289,125 $239,657 $214,990 $180,316 $208,584
Operating Expenses:
Cost of products sold 153,154 141,471 213,540 152,324 112,622 110,832 116,814
Provision for closure of
gypsum disposal area (1) 5,922 - - - - - -
Selling 20,600 18,194 28,940 27,731 28,036 25,038 27,286
General and administrative 12,985 11,511 17,290 18,798 19,359 13,498 11,927
-------- -------- -------- -------- -------- -------- --------
192,661 171,176 259,770 198,853 160,017 149,368 156,027
-------- -------- -------- -------- -------- -------- --------
Operating Income 17,822 17,895 29,355 40,804 54,973 30,948 52,557
Interest Expense, Net (3,083) (2,708) (3,569) (3,930) (4,307) (4,246) (4,971)
Other Income (Expense) 258 548 592 (531) 777 2,062 1,295
-------- -------- -------- -------- -------- -------- --------
Margins from Continuing
Operations Before Income Taxes
and Cumulative Effect of Change
in Accounting Principle 14,997 15,735 26,378 36,343 51,443 28,764 48,881
Income Tax (Expense) Credit (3,071) (243) (3,697) (4,994) (3,406) 294 (4,613)
-------- -------- -------- -------- -------- -------- --------
Margins from Continuing Operations
Before Cumulative Effect of
Change in Accounting Principle 11,926 15,492 22,681 31,349 48,037 29,058 44,268
Discontinued Operations (13,621) (16,540) (17,891) (18,346) (8,653) (21,833) (1,964)
</TABLE>
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<PAGE>
SELECTED FINANCIAL DATA
(Continued)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
March 31 Fiscal Year Ended June 30
------------------- ----------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Cumulative Effect to July 1,
1993, of Change in Accounting
for Deferred Income Taxes:
Continuing Operations (6,149) - - - - - -
Discontinued Operations 16,404 - - - - - -
-------- -------- -------- -------- -------- -------- --------
Net Margins (Loss) $ 8,560 $ (1,048) $ 4,790 $ 13,003 $ 39,384 $ 7,225 $ 42,304
======== ======== ======== ======== ======== ======== ========
Income from Continuing Operations
Assuming Conversion from a
Cooperative to a Regular
Business Corporation as of
July 1, 1988 (2) $ 9,557 $ 9,591 $ 17,808 $ 23,565 $ 35,224 $ 21,544 $ 34,914
======== ======== ======== ======== ======== ======== ========
Earnings Per Share (3) $ 0.49 $ 0.50 $ 0.94 $ 1.27 $ 1.97 $ 1.22 $ 2.02
======== ======== ======== ======== ======== ======== ========
Nine Months Ended
March 31 Fiscal Year
------------------- Ended June 30
PRO FORMA INCOME DATA: 1994 1993 1993
- ---------------------- -------- -------- -------------
Operating Income $ 17,822 $ 17,895 $29,355
Interest Expense, Net (4) (603) (363) (470)
Other Income 258 548 592
-------- ------- -------
Income from Continuing Operations
Before Income Taxes 17,477 18,080 29,477
Income Tax Expense (5) (6,283) (6,941) (9,624)
-------- ------- -------
Income from Continuing Operations $ 11,194 $ 11,139 $19,853
======== ======== =======
Earnings Per Share (6) $ 0.50 $ 0.50 $ 0.89
======== ======== =======
</TABLE>
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<PAGE>
SELECTED FINANCIAL DATA
(Continued)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
At March 31, 1994 Fiscal Year Ended June 30
---------------------- -----------------------------------------------
BALANCE SHEET DATA: Actual Pro Forma(7) 1993 1992 1991 1990 1989
- ------------------- -------- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Working Capital $ 31,640 $ 8,574 $ 22,802 $ 35,225 $ 54,926 $ 57,845 $ 63,055
Total Assets $294,103 $286,023 $296,053 $303,158 $287,835 $248,235 $279,795
Long-Term Debt, Excluding
Current Portion Due $ 48,950 $ 5,602 $ 52,357 $ 59,333 $ 67,489 $ 64,332 $ 66,946
Total Shareholders' Equity $121,548 $168,312 $119,574 $128,195 $138,762 $138,255 $150,912
</TABLE>
(1) During the nine months ended March 31, 1994, the Company recorded a non-cash
charge of approximately $5.9 million relating to the estimated cost of the
closure of the gypsum disposal facility located at its Pascagoula facility.
This charge relates to the portion of the disposal facility utilized to date
and it is estimated that future charges of approximately $3.0 million will
be accrued over the six year estimated remaining life of the disposal
facility.
(2) For the periods presented, the Company operated as a cooperative and
realized deductions for income taxes for amounts paid in cash as patronage
refunds to its shareholder members. If the conversion from a cooperative to
a regular business corporation had occurred as of July 1, 1988, income taxes
would have been increased by the following amounts: $2.4 million and $5.9
million for the nine months ended March 31, 1994 and March 31, 1993,
respectively; $4.9 million, $7.8 million, $12.8 million, $7.5 million and
$9.4 million for fiscal 1993, 1992, 1991, 1990 and 1989, respectively.
(3) Earnings per share reflects the Reorganization as if it had occurred July 1,
1988. Weighted average shares would have been 19,320,012 and 19,035,276 for
the nine months ended March 31, 1994 and March 31, 1993, respectively;
19,035,276, 18,521,287, 17,885,416, 17,723,107 and 17,325,189 for fiscal
1993, 1992, 1991, 1990 and 1989, respectively.
(4) Interest expense, net, reflects a reduction in interest expense of $2.5
million and $2.3 million for the nine months ended March 31, 1994 and March
31, 1993, respectively; and $3.1 million for the 1993 fiscal year related to
the reduction in long-term debt from the net proceeds of the offering.
(5) Reflects taxation as a C corporation as a result of the Reorganization, as
well as the reduction in interest expense from the application of the
proceeds from the offering.
(6) Earnings per share is calculated based on the weighted average shares
outstanding assuming the Reorganization, (See (3)), had occurred prior to
the periods presented, plus the estimated number of shares (3,200,000,
assuming a public offering price of $15.00 per share) required to be sold in
order to fund the repayment of long-term debt of the Company.
(7) Reflects (i) the Reorganization, (ii) the disposition of NSI and (iii) the
sale by the Company of 3,200,000 million shares in this offering at an
assumed price of $15.00 per share and the application of the net proceeds
thereof. See "the Reorganization," "Use of Proceeds," "Disposition of NSI"
and "Pro Forma Balance Sheet," including the notes thereto.
-19-
<PAGE>
PRO FORMA BALANCE SHEET
MARCH 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
NSI Conversion Offering
Pro Forma Pro Forma Pro Forma
ASSETS Historical Adjustments Adjustments Subtotal Adjustments Pro Forma
------ ---------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents $ 3,971 $ - $ - $ 3,971 $ 44,140 (4) $ 5,608
- - (42,503)(5)
Accounts
receivable 32,789 112 (1) - 32,901 - 32,901
Inventories 39,668 - - 39,668 - 39,668
Deferred income
tax benefit 2,809 - - 2,809 - 2,809
Prepaid expenses
and other
current assets 3,958 - - 3,958 - 3,958
-------- -------- ----------- -------- -------- --------
Total current
assets 83,195 112 - 83,307 1,637 84,944
Investments and
other assets:
National Bank
for Cooperatives 4,641 4,000 (2) - 8,641 - 8,641
Other 23,443 (13,829)(3) - 9,614 - 9,614
-------- -------- ----------- -------- -------- --------
Total
investments
and other
assets 28,084 (9,829) - 18,255 - 18,255
Properties held
for sale 66,928 - - 66,928 - 66,928
Property, plant and
equipment, at cost,
less accumulated
depreciation,
depletion and
amortization 115,896 - - 115,896 - 115,896
-------- -------- ----------- -------- -------- --------
Total Assets $294,103 $ (9,717) $ - $284,386 $ 1,637 $286,023
======== ======== =========== ======== ======== ========
</TABLE>
-20-
<PAGE>
PRO FORMA BALANCE SHEET
MARCH 31, 1994
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
NSI Conversion Offering
Pro Forma Pro Forma Pro Forma
Historical Adjustments Adjustments Subtotal Adjustments Pro Forma
---------- ----------- ----------- -------- ----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Long-term debt due
within one year $ 4,298 $ - $ - $ 4,298 $ (792)(5) $ 3,506
Notes payable 10,000 - - 10,000 - 10,000
Accounts payable 19,682 - - 19,682 - 19,682
Accrued interest 1,515 - - 1,515 - 1,515
Dividends payable 7,001 - - 7,001 - 7,001
Accrued liabilities 9,059 4,000 (2) 1,460 (9) 34,666 - 34,666
8,751 (6) 4,356 (10) -
6,382 (7) 658 (11) -
-------- -------- -------- -------- -------- --------
Total current
liabilities 51,555 19,133 6,474 77,162 (792) 76,370
Long-term debt 48,950 - - 48,950 (43,348)(5) 5,602
Other long-term
liabilities 26,764 - - 26,764 - 26,764
Deferred income
tax payable 6,606 - 2,369 (12) 8,975 - 8,975
Net liabilities of
discontinued
operations 38,680 112 (1) - - - -
(13,829)(3) - -
(8,751)(6) - -
(6,382)(7) - -
(9,830)(8) - -
Shareholders' equity:
Preferred stock, $.01
par value, 500,000
shares authorized;
none outstanding - - - - - -
Cooperative capital
stock 28,032 - (26,375)(13) - - -
- (1,460)(9) -
- (197)(11) -
</TABLE>
-21-
<PAGE>
PRO FORMA BALANCE SHEET
MARCH 31, 1994
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
NSI Conversion Offering
Pro Forma Pro Forma Pro Forma
Historical Adjustments Adjustments Subtotal Adjustments Pro Forma
---------- ----------- ----------- -------- ----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
(Continued)
<S> <C> <C> <C> <C> <C> <C>
Common stock, $.01
par value,
100,000,000 shares
authorized;
22,400,000 (estimated)
shares issued and
outstanding - 155 (13) 192 32 (4) 224
- 28 (14) -
- 12 (15) -
- (3)(10) -
-------- -------- -------- -------- -------- --------
Total stock 28,032 - (27,840) 192 32 224
Additional paid-in
capital 66,008 - 26,220 (13) 130,025 44,108 (4) 174,133
- (461)(11) -
- 42,623 (14) -
- (4,353)(10) -
- (12)(15) -
Capital equity credits 62,352 - (62,352)(14) - - -
Retained deficit since
June 30, 1988 (34,844) 9,830 (8) (2,369)(12) (7,682) (843)(5) (6,045)
- 19,701 (14) 2,480 (5)
-------- -------- -------- -------- -------- --------
Total shareholders'
equity 121,548 9,830 (8,843) 122,535 45,777 168,312
-------- -------- -------- -------- -------- --------
Total liabilities
and shareholders'
equity $294,103 $ (9,717) $ - $284,386 $ 1,637 $286,023
======== ======== ======== ======== ======== ========
</TABLE>
-22-
<PAGE>
PRO FORMA BALANCE SHEET SUMMARY OF GENERAL ASSUMPTIONS AND ACCOUNTING POLICIES
The Pro Forma Balance Sheet has been prepared on the assumption that as of
March 31, 1994, (i) the Reorganization had been approved by the shareholders of
the Cooperative, (ii) the disposition of NSI had occurred, and (iii) the
offering contemplated hereby had been completed. Adjustments have been made to
reflect the merger of the Cooperative into the Company and the exchange of
Capital Equity Credits and Allocated Surplus Accounts and to reflect the other
assumptions described in the ensuing notes.
The significant accounting policies followed by the Cooperative have been
used in the preparation of the Company's pro forma balance sheet. These
policies together with additional information are included in the Notes to
Consolidated Financial Statements in the Cooperative's 1993 Annual Report (see
the Index to Financial Statements on page F-1) and should be read in conjunction
with the accompanying pro forma balance sheet.
NOTES
(1) Reflects an accrual for the Company's continuing obligation (April 1,
1994 through June 30, 1994) to NSI resulting from the Company's
contract to purchase newsprint for resale.
(2) Reflects the purchase of NSI's investment in CoBank at a price of $4.0
million.
(3) Reflects a capital contribution of the March 31, 1994 intercompany
receivable from NSI to the Company related to newsprint contract
obligations.
(4) Reflects the issuance of 3,200,000 shares of Common Stock in this
offering at an assumed public offering price of $15.00 per share.
(5) Reflects the reduction in long-term debt and long-term debt due within
one year from the application of the net proceeds from the offering.
(6) Reflects an accrual to satisfy its obligation (fiscal 1995 and 1996)
to NSI resulting from the Company's contract to purchase newsprint for
resale.
(7) Reflects the $6.4 million additional capital contribution to NSI made
in connection with the disposition.
(8) Reflects the elimination of the net liabilities of NSI in connection
with the conveyance of the majority of the Company's interest therein.
(9) Reflects the conversion of the Cooperative's outstanding shares of
Mixed Series IV and Mixed Series V Capital Stock into the right to
receive $15.00 per share pursuant to the Reorganization.
(10) Reflects the redemption of Common Stock at $15.00 per share from
shareholders who own fewer than 100 shares after the Reorganization.
(11) Reflects the conversion of the Cooperative's outstanding shares of
Potash Series VI Capital Stock into the right to receive $50.00 per
share, pursuant to the Reorganization.
(12) Reflects the tax effect of converting from a cooperative to a regular
business corporation.
(13) Reflects the conversion of the Cooperative's outstanding shares of
Nitrogen Series I, Nitrogen Series II and Nitrogen Series III Capital
Stock into Common Stock, pursuant to the Reorganization.
(14) Reflects the assumption that all holders of Capital Equity Credits
elect to convert those Capital Equity Credits into Common Stock at a
rate of one share for each $15.00 in present value of the Capital
Equity Credits.
(15) Reflects the assumption that all holders of Allocated Surplus Accounts
elect to convert 1992, 1993 and 1994 (estimated) Allocated Surplus
Accounts into Common Stock at a rate of one share for each $15.00 in
present value of the Allocated Surplus Accounts.
-23-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's results of operations have historically been influenced
by a number of factors beyond the Company's control which have, at times,
had a significant effect on the Company's operating results. Fertilizer
demand and prices are highly dependent upon conditions in the agricultural
industry and can be affected by a variety of factors, including planted
acreage, United States government agricultural policies (including subsidy
and acreage set-aside programs), projected grain stocks, weather and changes
in agricultural production methods. The Company's results can be affected
by such factors as the relative value of the U.S. dollar, foreign
agricultural policies (in particular the policies of the governments of
India and China regarding subsidies of fertilizer imports), and the hard
currency demands of countries such as the FSU, whose fertilizer export
activities have proved disruptive to world fertilizer pricing in recent
years. See "Fertilizer Industry Overview."
From fiscal 1991 through fiscal 1993, the Company experienced a 34.5%
increase in net sales from $215.0 million to $289.1 million. However, over
the same period, operating income fell from $55.0 million to $29.4 million.
This decline in operating income between 1991 and 1993 was primarily caused
by fluctuations in nitrogen fertilizer prices and lower DAP prices.
Nitrogen fertilizer prices "spiked" during the fall of 1990 and the spring
of 1991 due to the invasion of Kuwait and subsequent war in the Persian
Gulf, which caused concerns about fertilizer shortages. This spike in
nitrogen fertilizer prices caused fiscal 1991 to be a particularly strong
year for the Company. In fiscal 1991, the Company's average selling price
for nitrogen fertilizer was $120 per ton compared to average selling prices
of $110 per ton and $115 per ton in fiscal 1990 and 1992, respectively. In
December 1991 the Company restarted production at its Pascagoula DAP plant.
Fiscal 1993 was the first full year of DAP production after the restart of
the plant. Although DAP production significantly increased the Company's
net sales between fiscal 1991 and fiscal 1993, the Company's re-entry to the
DAP market coincided with a significant fall in DAP prices, due primarily to
an increase in DAP exports by the FSU and a sharp fall in demand from the
world's two largest fertilizer importers, India and China. The Company's
average selling price for DAP was $137 per ton and $114 per ton in fiscal
1992 and 1993, respectively.
The Company has begun to experience an improvement in results from
operations in fiscal 1994, as pricing and demand factors have improved in
world fertilizer markets over the last six to nine months. In particular,
the Company has experienced strong demand for its nitrogen fertilizer
products in fiscal 1994. Also, DAP prices have recovered significantly from
their low point in 1993.
Effects of the Reorganization. Effective July 1, 1994, the Company
converted from a cooperative into a regular business corporation pursuant to
the Reorganization. The substantial majority of the Cooperative's sales of
nitrogen fertilizers were made to its shareholders who purchased such
products pursuant to preferred patronage rights based on their stock
ownership and who received patronage refunds with respect to such purchases
based on the difference between the sales price and the cost of
manufacturing and selling the product. Although the Company will no longer
grant preferred patronage rights or pay patronage refunds, it is expected
that the Company will retain the majority of its current customer base and
that nitrogen fertilizer sales volumes and profitability will not be
adversely affected by the Reorganization.
The Company generally absorbs much of the cost of distributing its
products to its customers. The Company's cost of distributing its products
is affected by the location of its customers. Therefore, profitability is
optimized by achieving the highest net back for its products. As a
cooperative, the Company sold most of its products to its shareholders
pursuant to preferred patronage rights. After the Reorganization, the
Company will be able to increase its focus on more geographically proximate
markets where higher net backs should be realized.
-24-
<PAGE>
After the Reorganization, the Company will not be eligible for new
financing from CoBank which was a traditional source of financing for the
Cooperative. To replace this historic financing, the Company has
significantly increased its credit facility with NationsBank, which prior to
the Reorganization had been a lender to the Cooperative. See "Liquidity and
Capital Resources." In addition, as a cooperative, the Company had few
options for raising capital. The Reorganization should provide the Company
with greater access to capital markets than was previously available.
The Company will no longer distribute its earnings on business done
with shareholders as patronage refunds. As a cooperative, these
distributions were deductible for income tax purposes. The Company will now
be taxed as a regular business corporation and income tax expense should
increase.
Change in Accounting Policy. Effective July 1, 1993, the Company
adopted SFAS No. 109, "Accounting for Income Taxes." The cumulative effect
of this accounting change increased current period margins by $10.3 million,
consisting of an increase of $16.4 million from discontinued operations,
partially offset by a decrease of $6.1 million from continuing operations.
-25-
<PAGE>
RESULTS OF OPERATIONS
Following are summaries of the Company's sales results by product
categories:
<TABLE>
<CAPTION>
Nine Months Ended
March 31 Fiscal Year Ended June 30
------------------ ----------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales (In thousands):
Nitrogen $137,387 $118,668 $189,127 $176,835 $188,267
DAP 57,257 57,855 78,906 36,034 -
Potash 14,319 11,566 20,149 25,482 25,251
Other 1,520 982 943 1,306 1,472
-------- -------- -------- -------- --------
Net Sales $210,483 $189,071 $289,125 $239,657 $214,990
======== ======== ======== ======== ========
Nine Months Ended
March 31 Fiscal Year Ended June 30
------------------ ----------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
Tons Sold (In thousands):
Nitrogen 1,204 1,051 1,602 1,544 1,575
DAP 462 484 692 262 -
Potash 203 163 283 339 332
Nine Months Ended
March 31 Fiscal Year Ended June 30
------------------ ----------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
Average Price
Per Ton:
Nitrogen $ 114 $ 113 $ 118 $ 115 $ 120
DAP $ 124 $ 119 $ 114 $ 137 $ -
Potash $ 71 $ 71 $ 71 $ 75 $ 76
</TABLE>
Nine Months Ended March 31, 1994 Compared To Nine Months Ended March
31, 1993
Net Sales. Net sales increased 11.3% from $189.1 million for the nine
months ended March 31, 1993, to $210.5 million for the nine months ended
March 31, 1994, primarily as a result of increased sales of nitrogen
fertilizers resulting from increased production capacity. Nitrogen
fertilizer sales increased 15.8% as a result of a 14.5% increase in tons
sold and a 1.1% increase in prices. Sales of DAP decreased 1.0% as a result
of a 4.6% decrease in tons sold offset by a 3.7% increase in prices. Potash
sales increased 23.8% as a result of a 24.8% increase in tons sold offset by
a 0.8% decrease in prices.
Cost of Products Sold. Cost of products sold increased from $141.5
million for the nine months ended March 31, 1993, to $153.2 million for the
nine months ended March 31, 1994. As a percentage of net sales, cost of
products sold decreased from 74.8% to 72.8%. This decrease reflects an
increase in the cost per ton of nitrogen fertilizers, offset by decreases in
the cost per ton of both DAP and potash. Nitrogen fertilizer costs
increased partially as a result of increased maintenance and labor costs
related to a scheduled biennial maintenance turnaround at the Company's
Yazoo City nitrogen production facility during September 1993. Also
contributing to the increase in costs were higher natural gas costs and
increased depreciation expense related to a new nitric acid plant at Yazoo
City which began operating in January 1993. DAP costs per ton declined as a
result of lower raw material costs. Potash production costs per ton
decreased as a result of increased production volume for the nine months
ended March 31, 1994.
-26-
<PAGE>
During the nine months ended March 31, 1994, the Company recorded a
non-cash charge of $5.9 million relating to the estimated cost of the
closure of the gypsum disposal facility located at its Pascagoula facility.
This charge relates to the portion of the disposal facility utilized to date
and it is estimated that future charges of approximately $3.0 million will
be accrued over the estimated six year remaining life of the facility. See
"Business - Compliance with Environmental Regulations."
Selling Expenses. Selling expenses increased from $18.2 million for
the nine months ended March 31, 1993, to $20.6 million for the nine months
ended March 31, 1994 reflecting higher sales volumes. As a percentage of
net sales, selling expenses increased from 9.6% to 9.8% primarily as a
result of increased delivery expenses per ton of product sold.
General and Administrative Expenses. General and administrative
expenses increased from $11.5 million for the nine months ended March 31,
1993, to $13.0 million for the nine months ended March 31, 1994, as a result
of increases in property insurance and property taxes. General and
administrative expenses increased from 6.1% of net sales to 6.2% of net
sales.
Operating Income. As a result of the above factors, operating income
decreased from $17.9 million for the nine months ended March 31, 1993, to
$17.8 million for the nine months ended March 31, 1994. Before the effect
of the non-cash charge for gypsum disposal costs, operating income for the
period was $23.7 million, a 32.7% increase over the $17.9 million operating
income for the prior period.
Interest Expense, Net. Net interest increased from $2.7 million for
the nine months ended March 31, 1993, to $3.1 million for the nine months
ended March 31, 1994, reflecting a $1.0 million decrease in capitalized
interest related to the construction of a new nitric acid plant in the prior
year. Also increasing net interest expense in the current period was lower
interest income due to lower levels of cash and lower interest rates earned.
Partially offsetting this increase were lower levels of borrowings and lower
interest rates paid.
Income Taxes. Income taxes increased from $243,000 for the nine months
ended March 31, 1993, to $3.1 million for the nine months ended March 31,
1994. The increase in income tax expense in the current year was due to
increased non-member income.
Margins from Continuing Operations Before Cumulative Effect of Change
in Accounting Principle. As a result of the foregoing, margins from
continuing operations before the cumulative effect of a change in accounting
principle decreased from $15.5 million for the nine months ended March 31,
1993, to $11.9 million for the nine months ended March 31, 1994. Before the
effect of the non-cash charge for gypsum disposal costs, margins from
continuing operations before cumulative effect of a change in accounting
principle for the period were $17.8 million.
Effect of Reorganization. If the Company had not operated as a
cooperative, income taxes would have been $5.4 million for the nine months
ended March 31, 1994, and $6.1 million for the nine months ended March 31,
1993. Income from continuing operations before cumulative effect of a
change in accounting principle assuming conversion from a cooperative to a
regular business corporation would have been $9.6 million for the nine
months ended March 31, 1994, and $9.6 million for the nine months ended
March 31, 1993. Before the effect of the non-cash charge for gypsum
disposal costs, and assuming the Reorganization had taken place, income from
continuing operations before the cumulative effect of the change in
accounting principle would have been $13.6 million for the period.
Fiscal 1993 Compared To Fiscal 1992
Net Sales. Net sales increased 20.6% from $239.7 million for fiscal
1992 to $289.1 million for fiscal 1993, as a result of increased sales of
nitrogen fertilizers and the operation of the Pascagoula DAP facility for
all of fiscal 1993. The Pascagoula facility resumed production of DAP in
December 1991. Nitrogen fertilizer sales increased 7.0% as a result of a
3.8% increase in tons sold and a 3.1% increase in prices. Sales of DAP
increased
-27-
<PAGE>
119.0% as a result of a 163.7% increase in tons sold partially offset by a
17.0% decrease in prices. Potash sales decreased 20.9% as a result of a
16.5% decrease in tons sold and a 5.3% decrease in prices.
Cost of Products Sold. Cost of products sold increased from $152.3
million for fiscal 1992 to $213.5 million for fiscal 1993. Cost of products
sold increased from 63.6% to 73.9% of net sales. This increase reflects an
increase in the cost per ton of nitrogen fertilizers, a decrease in the cost
per ton of DAP and an increase in the cost per ton of potash. Nitrogen
fertilizer costs increased due to increased depreciation resulting from a
newly constructed nitric acid plant, and higher natural gas costs. DAP
production costs per ton declined due to higher production volumes and lower
raw material costs. Potash costs per ton increased due to higher labor
costs and lower production in fiscal 1993.
Selling Expenses. Selling expenses increased from $27.7 million for
fiscal 1992 to $28.9 million for fiscal 1993 due to increased delivery
expenses resulting from higher volumes of nitrogen fertilizer sold. As a
percentage of net sales, however, selling expenses decreased from 11.6% to
10.0% as a result of a higher percentage of DAP sales in fiscal 1993 for
which the Company did not absorb delivery expense.
General and Administrative Expenses. General and administrative
expenses decreased from $18.8 million for fiscal 1992 to $17.3 million for
fiscal 1993. The decrease was due to the inclusion of overhead costs for
the Company's DAP plant for a portion of fiscal 1992 before the facility had
reached full operation. For fiscal 1993, these costs were included in cost
of products sold. As a percentage of net sales, general and administrative
expenses decreased from 7.8% to 6.0%.
Operating Income. As a result of the above factors, operating income
decreased from $40.8 million for fiscal 1992 to $29.4 million for fiscal
1993.
Interest Expense, Net. Net interest decreased from $3.9 million for
fiscal 1992 to $3.6 million for fiscal 1993, reflecting a $363,000 increase
in capitalized interest related to the construction of a new nitric acid
plant. Net interest expense also decreased as a result of lower interest
rates partially offset by higher levels of borrowings and lower interest
income.
Income Taxes. Income taxes decreased from $5.0 million for fiscal 1992
to $3.7 million for fiscal 1993.
Margins from Continuing Operations Before Cumulative Effect of Change
in Accounting Principle. As a result of the foregoing, margins from
continuing operations before cumulative effect of a change in accounting
principle decreased from $31.3 million for fiscal 1992 to $22.7 million for
fiscal 1993.
Effect of Reorganization. If the Company had not operated as a
cooperative, income taxes would have been $8.6 million for fiscal 1993 and
$12.8 million for fiscal 1992. Income from continuing operations before
cumulative effect of the change in accounting principle assuming conversion
from a cooperative to a regular business corporation would have been $17.8
million for fiscal 1993 and $23.6 million for fiscal 1992.
Fiscal 1992 Compared To Fiscal 1991
Net Sales. Net sales increased 11.5% from $215.0 million for fiscal
1991 to $239.7 million for fiscal 1992, as a result of the sales of DAP that
commenced in December 1991, partially offset by decreases in nitrogen
fertilizer sales. Nitrogen fertilizer sales decreased 6.1% as a result of a
2.0% decrease in tons sold and a 4.2% decrease in prices. The restart of
DAP production in December 1991 added $36.0 million in sales to the second
half of fiscal 1992. Potash sales increased 0.9% as a result of a 2.1%
increase in tons sold offset by a 1.2% decrease in prices.
Cost of Products Sold. Cost of products sold increased from $112.6
million for fiscal 1991 to $152.3 million for fiscal 1992. As a percentage
of net sales, cost of products sold increased from 52.4% to 63.6%. This
increase reflects an increase in the cost per ton of nitrogen fertilizers,
an increase in the cost per ton of potash
-28-
<PAGE>
and the addition of DAP sales in the 1992 fiscal year. Nitrogen fertilizer
costs increased as a result of higher maintenance costs due to a scheduled
biennial maintenance turnaround at the Company's Yazoo City nitrogen
production facility in September 1991, and increased purchases of finished
nitrogen products. This increase was partially offset by lower natural gas
costs for fiscal 1992. Increased maintenance costs at the Company's potash
mine resulted in higher potash costs for fiscal 1992.
Selling Expenses. Selling expenses decreased from $28.0 million for
fiscal 1991 to $27.7 million for fiscal 1992 due to lower delivery expenses
resulting from lower volumes of nitrogen fertilizer sold and lower storage
expense for nitrogen products. As a percentage of net sales, selling
expenses decreased from 13.0% to 11.6% as a result of the addition of DAP
sales in fiscal 1992 for which the Company did not absorb delivery expense.
General and Administrative Expenses. General and administrative
expenses decreased from $19.4 million for fiscal 1991 to $18.8 million for
fiscal 1992. The decrease was due to the recovery of a prior year bad debt
expense in the 1992 fiscal year. As a percentage of net sales, general and
administrative expenses decreased from 9.0% to 7.8%.
Operating Income. As a result of the above factors, operating income
decreased from $55.0 million for fiscal 1991 to $40.8 million for fiscal
1992.
Interest Expense, Net. Net interest decreased from $4.3 million for
fiscal 1991 to $3.9 million for fiscal 1992, reflecting a $616,000 increase
in capitalized interest. Net interest expense also decreased in the current
period as a result of lower levels of borrowings and lower interest rates
partially offset by lower interest income.
Income Taxes. Income taxes increased from $3.4 million for fiscal 1991
to $5.0 million for fiscal 1992, due to tax deductions for capital equity
credits redeemed and a net operating loss carryback in the fiscal 1991 tax
calculation.
Margins from Continuing Operations Before Cumulative Effect of Change
in Accounting Principle. As a result of the foregoing, margins from
continuing operations before cumulative effect of change in accounting
principle decreased from $48.0 million for fiscal 1991 to $31.3 million for
fiscal 1992.
Effect of Reorganization. If the Company had not operated as a
cooperative, income taxes would have been $12.8 million for fiscal 1992 and
$16.2 million for fiscal 1991. Income from continuing operations assuming
conversion from a cooperative to a regular business corporation would have
been $23.6 million for fiscal 1992 and $35.2 million for fiscal 1991.
LIQUIDITY AND CAPITAL RESOURCES
The Company has traditionally financed its operations with retained
patronage earnings through the issuance of Capital Equity Credits and
Allocated Surplus Accounts and borrowings from CoBank and commercial banks.
At March 31, 1994, the Company had cash and cash equivalents of $4.0
million. At June 30, 1993, cash and cash equivalents were $22.0 million
reflecting the fact that cash collections are higher in the fourth quarter
of the fiscal year, which was a decrease of $24.6 million from June 30,
1992, primarily as a result of the repayment of borrowings.
Operating Activities. For the nine months ended March 31, 1994, and
the nine months ended March 31, 1993, net cash provided by operating
activities was $11.1 million and $1.5 million, respectively. This increase
was primarily due to higher non-cash charges for depreciation, deferred
taxes, and the accrual for closure of the gypsum disposal area, partially
offset by lower margins from continuing operations. For fiscal 1993, 1992,
and 1991, net cash provided by operating activities was $41.1 million, $47.2
million, and $61.9 million, respectively.
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<PAGE>
Net cash provided by operating activities has declined in the two most
recent fiscal years because of lower margins from continuing operations
partially offset by increased depreciation.
Investing Activities. Net cash used by investing activities was $10.7
million, $29.6 million, $27.3 million, and $4.6 million, respectively, for
the nine months ended March 31, 1994, and fiscal 1993, 1992, and 1991,
primarily reflecting capital expenditures in those periods. In addition to
capital expenditures, cash flow from investing activities in the above
periods also included an aggregate of $12.9 million for payments required
under a newsprint purchase contract with NSI. As a result of the
disposition of NSI, the Company is no longer obligated to make these
payments. See "Disposition of NSI."
Capital expenditures were $7.7 million during the nine months ended
March 31, 1994. These expenditures were for improvements and modifications
to the Company's facilities. The Company estimates that capital
expenditures were approximately $4.2 million in the fourth quarter of fiscal
1994, which includes expenditures for an emission control system for its
ammonium nitrate prill towers at its Yazoo City nitrogen production facility
and the purchase of a new computer system.
During fiscal 1993, capital expenditures were $27.4 million. Of these
expenditures, $11.2 million was for improvements and modifications to the
Company's facilities, $4.5 million was spent to purchase new mining
equipment for the Company's potash mine near Carlsbad, New Mexico, and $11.7
million was spent on the construction of a new nitric acid plant and related
facilities which began production in January 1993. The total cost of the
nitric acid project was approximately $32.0 million.
Financing Activities. Net cash used by financing activities was $18.4
million, $36.2 million, $28.1 million and $27.8 million, respectively, for
the nine months ended March 31, 1994, and fiscal 1993, 1992, and 1991. The
amounts used by financing activities included cash patronage payments of
$13.4 million, $22.5 million, $27.1 million and $12.3 million, respectively,
for the nine months ended March 31, 1994, and fiscal 1993, 1992, and 1991.
In December 1992, the Company prepaid $8.9 million of 9.5% secured notes
which had maturities scheduled through fiscal year 1997. In addition, the
Company paid $8.3 million and $10.9 million on long-term debt that matured
during fiscal 1994 and 1993.
The Company and its subsidiaries have commitments from various banks
for short-term borrowings up to $55.0 million, which includes $40.0 million
from CoBank. Short-term borrowings outstanding at March 31, 1994, and June
30, 1993 and 1992, were $10.0 million, $4.6 million and $13.5 million,
respectively.
The lines of credit available through CoBank expire in October 1994,
and will not be renewed. The Company also has a loan commitment from
NationsBank which was increased from $20 million to $50 million on June 17,
1994. This commitment is a revolving credit facility that bears interest at
the prime rate (7.25% at July 1, 1994) per year. At March 31, 1994, the
balance outstanding on this loan was $3.0 million. The amounts borrowed
under the Company's credit lines vary based on the Company's seasonal
requirements. The maximum combined amount outstanding under the short-term
lines and the revolving credit facility at any month-end for the twelve
months ended March 31, 1994, was $21.5 million.
The Company believes that existing cash, cash generated from
operations, the proceeds of this offering, and available lines of credit
will be sufficient to satisfy its financing needs for the foreseeable
future.
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<PAGE>
QUARTERLY RESULTS (Dollars in thousands)
The usage of fertilizer is highly seasonal, and the Company's quarterly
results reflect the fact that in the Company's markets significantly more
fertilizer is purchased in the spring. Significant portions of the
Company's net sales and operating income are generated in the last four
months of the Company's fiscal year (March through June). Since interim
period operating results reflect the seasonal nature of the Company's
business, they are not indicative of results expected for the full fiscal
year. In addition, quarterly results can vary significantly from one year
to the next due primarily to weather-related shifts in planting schedules
and purchase patterns. The Company incurs substantial expenditures for
fixed costs throughout the year and substantial expenditures for inventory
in advance of the spring planting season.
The following table presents selected quarterly results of operations
for fiscal 1994 and fiscal 1993.
<TABLE>
<CAPTION>
(Unaudited)
Fiscal 1994 Quarter Ended
-----------------------------------
September 30 December 31 March 31
------------ ----------- --------
<S> <C> <C> <C>
Net sales $45,220 $61,105 $104,158
======= ======= ========
Operating income $ 2,071 $ 4,044 $ 11,707
======= ======= ========
Margins from continuing
operations before cumulative
effect of change in
accounting principle $ 799 $ 1,660 $ 9,467
======= ======= ========
Income from continuing
operations assuming
conversion to a regular
business corporation for
the periods presented $ 626 $ 1,840 $ 7,091
======= ======= ========
Earnings per share $ 0.03 $ 0.10 $ 0.37
======= ======= ========
(Unaudited)
Fiscal 1993 Quarter Ended
---------------------------------------------
September 30 December 31 March 31 June 30
------------ ----------- -------- --------
Net sales $55,157 $54,653 $ 79,261 $100,054
======= ======= ======== ========
Operating income $ 3,828 $ 3,359 $ 10,708 $ 11,460
======= ======= ======== ========
Margins from continuing
operations $ 2,757 $ 2,694 $ 10,041 $ 7,189
======= ======= ======== ========
Income from continuing
operations assuming
conversion to a regular
business corporation for
the periods presented $ 1,652 $ 1,580 $ 6,359 $ 8,217
======= ======= ======== ========
Earnings per share $ 0.09 $ 0.08 $ 0.33 $ 0.44
======= ======= ======== ========
</TABLE>
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<PAGE>
DISCONTINUED OPERATIONS/NSI
On June 24, 1994, the Company entered into an agreement pursuant to
which it disposed of a majority of its interest in NSI effective June 30,
1994. This action was taken due to substantial losses incurred to date by
NSI and the expectation of continuing losses. See "Disposition of NSI."
The following is a discussion of the NSI results of operations for the
nine months ended March 31, 1994, compared to the nine months ended March
31, 1993, and for the fiscal years ended June 30, 1993, 1992 and 1991:
Nine Months Ended March 31, 1994 Compared To Nine Months Ended March
31, 1993
Newsprint sales did not change significantly for the nine months ended
March 31, 1994, compared to the same period of fiscal 1993, while cost of
products sold increased 2%. A 3% increase in sales volumes was offset by a
3% decrease in sales prices. Operating losses were $21.7 million for the
nine months ended March 31, 1994, compared to $18.5 million in the same
period of fiscal 1993. The cumulative effect of adopting SFAS 109,
"Accounting for Income Taxes," decreased NSI's loss by $16.4 million in the
current period resulting in a net margin of $2.8 million compared to a $16.5
million loss in the comparable period of fiscal 1993.
Fiscal 1993 Compared To Fiscal 1992
Newsprint sales increased 2% in fiscal 1993 compared to fiscal 1992,
the result of a 3% increase in tons sold which was partially offset by a 1%
decrease in prices. Cost of products sold did not change significantly from
fiscal 1992. The effect of higher sales volumes was offset by a reduction
in production costs per ton. NSI's net loss was $17.9 million in fiscal
1993, compared to $18.3 million in fiscal 1992.
Fiscal 1992 Compared To Fiscal 1991
Newsprint sales decreased 10% in fiscal 1992 compared to fiscal 1991,
the result of a 15% decrease in prices which was partially offset by a 5%
increase in tons sold. Cost of products sold decreased 1% for fiscal 1992.
Lower production costs reduced cost of sales 5%, while higher volumes sold
in fiscal 1992 caused cost of sales to increase 4%. The net loss was $18.3
million in fiscal 1992 compared to $8.7 million in fiscal 1991.
Liquidity and Capital Resources
NSI has a commitment from CoBank which allows short-term borrowings of
up to $11.3 million. The balance on this loan was $4.7 million at March 31,
1994, $8.7 million at June 30, 1993, and $6.5 million at June 30, 1992.
Additional amounts are available to NSI from a commercial finance company
under specified conditions for payments of rent under the newsprint mill
lease.
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<PAGE>
FERTILIZER INDUSTRY OVERVIEW
GENERAL
Fertilizer products are primarily used by the agricultural industry to
enhance the natural fertility of soil. Nitrogen, phosphorous (contained in
phosphate fertilizer) and potassium (contained in potash fertilizer)
constitute the three major nutrients required for plant growth. These
elements are all naturally present in soil but need to be replaced through
the use of fertilizers as crops exhaust them. There are no viable
substitutes for nitrogen, phosphate or potash in the development and
maintenance of high-yield crops.
The primary determinants of fertilizer demand in the U.S. are total
planted acres, fertilizer application rates and crop mix, which in turn are
influenced by government agricultural policies (including subsidy and
acreage set-aside programs), projected grain stocks, crop failure, weather
and changes in agricultural production methods. Worldwide supply/demand
relationships are impacted by currency exchange rates, prevailing import and
currency exchange barriers, changes in hard currency demand and economic,
political and regulatory policies of foreign governments, decisions relating
to production of fertilizer by foreign state-owned and/or state-subsidized
entities, and the laws and policies of the U.S. affecting foreign trade and
investment. The supply/demand balance for fertilizer can have a dramatic
effect on the market price of fertilizers.
NITROGEN FERTILIZER
Nitrogen is one of three primary nutrients essential for plant growth.
Nitrogen fertilizer needs to be reapplied each year in areas of extensive
agricultural usage because of absorption by crops and its tendency to
evaporate from the soil. There are no substitutes for nitrogen fertilizer
in the cultivation of high-yield crops. Ammonia is the simplest form of
nitrogen fertilizer and is the primary raw material for the production of
upgraded nitrogen fertilizers. Ammonia is a gas under normal conditions and
requires special handling and application equipment and procedures. Ammonia
is reacted with other compounds to produce solid and liquid fertilizers,
primarily urea, ammonium nitrate and nitrogen solutions, which are easier to
transport, store and apply than ammonia. The type of nitrogen fertilizer
applied is dependent on the crop, soil type, weather conditions, available
application equipment, regional farming practices and fertilizer prices.
From 1980 through 1992 total nitrogen consumption in the U.S. varied
from 10.5 million tons to 11.9 million tons. The Company has forecasted
total nitrogen consumption in the U.S. to range between 11.4 million tons
and 11.6 million tons per year for the years 1994 to 1998. Over the same
period, the acreage dedicated to the principal crops which are dependent on
nitrogen fertilizer (corn, sorghum, wheat, rice and cotton) is expected to
range between 234 million and 240 million acres. In contrast to the
relative stability of nitrogen fertilizer usage, total U.S. nitrogen
production capacity has declined by approximately 17% since 1980 due to
plant shutdowns and conversions to other products. Construction of new
facilities is deterred by the requirements of substantial construction lead
time, capital demands and environmental regulations. The Company does not
believe that any new nitrogen fertilizer facilities are presently planned
for North America.
Imports supplied approximately 19% of U.S. demand for nitrogen
fertilizers in 1993. The Company believes a favorable world nitrogen
fertilizer supply/demand balance has developed in recent years. With world
consumption expected to grow in line with world population growth at a rate
of approximately 1.6% per year for the next several years, an oversupply is
not expected to occur in the near term. In western Europe, ammonia capacity
and production have been on the decline since 1970, and imports of nitrogen
fertilizers have risen. Exports from the FSU have declined recently due to
political instability, reduced production capacity, higher natural gas and
transportation costs and increased local consumption. Despite a continuing
need for hard currency, FSU exporting activities are expected to remain at
depressed levels for several years because of internal demand for
fertilizers and because of production and delivery costs which are not
competitive with U.S. and certain other producers.
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<PAGE>
Except in limited periods, nitrogen fertilizer prices have been
relatively stable in the past ten years. During the fall of 1990, nitrogen
fertilizer prices temporarily surged due to the Gulf War. During early
1994, shortages of ammonia developed and ammonia experienced an approximate
60% increase in price. Once spring seasonal demand pressures subsided, the
market price of ammonia declined but remains substantially above 1993
levels.
PHOSPHATE FERTILIZER
Phosphate plays a direct role in many of the physiological processes of
plants, such as the utilization of sugar and starch, photosynthesis, and the
transfer of energy. It increases the strength of cereal straw, stimulates
root development, promotes flower formation, and hastens the maturity of
crops grown in soils low in phosphorus. Adequate phosphate fertilization
may also increase resistance to diseases. Phosphate fertilizers are
manufactured from phosphate rock obtained from surface mining operations.
DAP is the most widely utilized form of phosphate fertilizer.
From 1975 through 1989, worldwide phosphate fertilizer consumption
increased from approximately 28 million tons to approximately 42 million
tons per year. This increase was due in large part to significant increases
in demand from the developing world, particularly China and India. Between
1989 and 1993, worldwide phosphate demand fell sharply. In addition,
starting in 1990, the FSU, which historically had been a significant
importer of phosphate fertilizer, became a major exporter and this has had a
material disruptive impact on world phosphate trade. More recently,
purchases by India and China, the world's largest phosphate fertilizer
importing nations, have dropped dramatically in response to the termination
of state fertilizer subsidies in both countries. As a result of these
factors, phosphate fertilizer consumption in 1993 declined to less than 31
million tons, the lowest level since 1977. While consumption was falling,
DAP production remained relatively consistent. As a result, an acute supply
imbalance developed and DAP prices fell to their lowest levels since 1977.
During the spring of 1994, industry conditions improved markedly. The
supply/demand relationship has responded to (i) production cutbacks by major
U.S. producers, (ii) reduced phosphate fertilizer exports from the FSU, and
(iii) the reinstitution of subsidies and increased demand in China and
India. Current DAP prices in the world market have risen significantly
since the first half of 1993.
For the longer term, worldwide phosphate fertilizer consumption has
been projected by industry sources to approach 40 million tons per year by
the year 2000. These projections are based on an assumed partial recovery
of internal demand in the FSU, as well as growth in demand of approximately
5% per year in Africa, Asia and Latin America. Demand in the U.S. and
western Europe is expected to be flat or to decline slightly.
POTASH FERTILIZER
Potash, as a source of potassium, is a vital plant nutrient. Plants
cannot achieve maximum growth and yield without potash, nor can the
functions that potash performs be carried out by other nutrients. Potash is
essential for protein synthesis, overcoming effects of diseases, tolerance
of water stress and winter hardiness. Nearly every aspect of plant growth
and development, yield and quality is dependent upon an adequate potash
supply. Potash ore, the source of potash fertilizer, is extracted from both
below surface and surface mines. Potash is also precipitated from potassium
rich brines.
In recent years, potash fertilizer markets worldwide have generally
been characterized by excess capacity and falling usage. From a base of 57
million tons in 1988, worldwide consumption fell to approximately 39 million
tons in 1993. In 1992 and 1993, demand was dampened by reduced usage in the
developing world, particularly in India, China and Brazil. Concurrently,
exports from the FSU increased, driven by hard currency demands and falling
internal consumption.
Potash fertilizer usage, both domestically and abroad, increased in the
1994 crop season and, as a result, prices have increased. Industry reports
have forecasted significant growth in potash fertilizer consumption in
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<PAGE>
developing countries over the next ten years as economic reforms in China,
India and Latin America boost crop production.
BUSINESS
GENERAL
The Company is a major producer and supplier of nitrogen fertilizers in
the southern United States and believes it is one of the nation's lowest-
cost nitrogen fertilizer producers. The Company also manufactures phosphate
and potash fertilizers, making it a full product line fertilizer supplier.
The Company sells its nitrogen and potash fertilizer products to farmers,
dealers and distributors for ultimate use primarily in the southern farming
regions of the United States and areas served by the Mississippi River
system. Phosphate fertilizers are sold primarily in international markets.
The Company's operations are managed from its corporate headquarters in
Yazoo City, Mississippi. The Company produces nitrogen fertilizers at its
production facility in Yazoo City, Mississippi, and through a 50%-owned
production facility at Donaldsonville, Louisiana. The Louisiana facility
("Triad") is operated as a joint venture by the Company and First
Mississippi Corporation. The Company produces DAP fertilizer at its
Pascagoula, Mississippi, facility. Potash fertilizer is mined and processed
at the Company's facility near Carlsbad, New Mexico.
EFFECTS OF THE REORGANIZATION
The Company is the successor by merger to the Cooperative, which was
formed in 1948 as the first fertilizer cooperative in the United States.
Effective July 1, 1994, the Cooperative was merged into the Company and
cooperative operations ceased. The primary business of the Cooperative was
to provide nitrogen fertilizer to its over 16,000 shareholders. The
Cooperative built an excellent reputation with its customers, suppliers and
competitors as a high-quality, dependable source of fertilizers. Field
surveys conducted by Company personnel have indicated that sales volumes
should not be adversely affected by the change from the cooperative
structure. Further, the Company anticipates that the strong relationships
that the Cooperative developed with its customer-shareholders will have a
positive carryover effect on marketing. The Company believes that after the
Reorganization, it will retain a substantial portion of its existing
customer base, while also being able to sell its products to new customers
and in new markets.
While the Cooperative had few options for raising capital, the Company
believes the Reorganization will provide it with access to broader-based
capital markets. This access will assist it in expanding operations,
financing required capital expenditures and becoming even more competitive
in its markets. The ability to issue securities not subject to the
restrictions of the cooperative structure should also provide the Company
with greater flexibility in connection with the financing of potential
acquisitions, partnerships and alliances in the fertilizer industry.
BUSINESS STRATEGY
The Company's business and operating strategy is to supply quality
fertilizer products at competitive prices while increasing the Company's
long-term profitability. This strategy focuses on the following elements:
Low Cost/High Efficiency Operations. The Company stresses low cost and
high efficiency in every aspect of its operations. The Company's products
are global commodities which are available from multiple sources; therefore,
the Company competes primarily on the basis of price. Accordingly, the
Company is committed to maintaining its position as one of the lowest cost
U.S. nitrogen fertilizer producers. The Company maintains an experienced
technical staff which aggressively seeks cost-reduction opportunities in its
production processes.
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<PAGE>
Customer Service and Product Quality. Unlike many of its competitors,
the Company maintains a large and experienced field sales force
strategically located throughout its market area. This sales force provides
extensive, cost-effective, value added services and programs to the
Company's customers. These efforts help to differentiate the Company's
products, enhance competitiveness and establish the Company as a preferred
supplier of fertilizer products. Improvements to product quality are also
continually addressed to assure that products offered by the Company remain
well-accepted in the marketplace.
Distribution System. The Company has strategically located production
and distribution facilities throughout the United States' mid south. All of
the Company's warehouses and terminals are accessible by either rail or
water. The flexibility to ship its products by these low cost modes of
transportation enhances the Company's competitive position.
Increase in Net Backs. The Company seeks to achieve the greatest
return for each sale based on the net back to the Company. The Company's
marketing efforts are focused on geographically proximate markets where
lower transportation and distribution costs increase net backs and improve
margins.
Implemention of Advantages of the Reorganization. The Company believes
that its new corporate status will increase opportunities for the growth of
its operations. In addition to enhancing its ability to improve net backs,
the greater flexibility of operations and access to capital markets
resulting from the Reorganization will assist the Company in expanding its
operations, financing capital expenditures and seeking opportunities for
acquisitions, joint ventures and other strategic alliances in the fertilizer
business.
NITROGEN
Products
The Company produces nitrogen fertilizers at its Yazoo City,
Mississippi, production facility and at the Triad facility. In fiscal 1993,
the Company sold approximately 1.6 million tons of nitrogen fertilizers to
farmers, fertilizer dealers and distributors located primarily in the
southern United States. In fiscal 1993, sales of nitrogen fertilizer were
$189.1 million, which represented approximately 65% of net sales.
The Company's principal nitrogen products include ammonia, fertilizer-
grade ammonium nitrate, which is sold under the Company's brand name
"Amtrate(R)," UAN solutions which are sold under the Company's brand name
"N-Sol" and urea.
Although, to some extent, the various nitrogen fertilizers are
interchangeable, each has its own distinct characteristics which produce
agronomic preferences among end-users. Farmers decide which type of
nitrogen fertilizer to apply based on the crop planted, soil and weather
conditions, regional farming practices and relative nitrogen fertilizer
prices.
Ammonia. The basic nitrogen product is anhydrous ammonia, which is the
simplest form of nitrogen fertilizer. Anhydrous ammonia, which is 82%
nitrogen, is the most concentrated form of nitrogen fertilizer available.
It is synthesized as a gas under high temperature and pressure. The raw
materials used to produce anhydrous ammonia are natural gas, atmospheric
nitrogen and steam.
In fiscal 1993, the Company produced approximately 711,000 tons of
anhydrous ammonia at its Yazoo City and Triad facilities and purchased
approximately 27,000 tons. The Company sold approximately 34,000 tons of
anhydrous ammonia as direct-application fertilizer and used the balance as a
raw material to manufacture its other nitrogen fertilizer products.
In the Company's markets, ammonia is used primarily as a pre-emergent
fertilizer for most row crops. Although anhydrous ammonia is the least
expensive form of nitrogen, its use as a primary fertilizer has gradually
declined because of the difficulties of applying and the high cost of
application equipment.
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<PAGE>
Ammonium Nitrate. The Company is the largest manufacturer and marketer
of ammonium nitrate fertilizer in the United States and believes it is one
of the lowest cost U.S. producers. Ammonium nitrate, which is 34% nitrogen,
is produced by reacting anhydrous ammonia and nitric acid. Ammonium nitrate
is less subject to volatilization (evaporation) losses than other nitrogen
fertilizer forms. Due to its stable nature, ammonium nitrate is the product
of choice for such uses as pastures and no-till row crops where fertilizer
is spread upon the surface and is subject to volatilization losses.
Although the consumption of ammonium nitrate in the U.S. has been stable in
recent years, the use of conservation tillage, which reduces soil erosion,
is increasing rapidly in the U.S. and should have a positive impact on
ammonium nitrate demand.
In fiscal 1993, the Company sold approximately 731,000 tons of solid
ammonium nitrate fertilizer, which it produces at its Yazoo City facility.
The Company's ammonium nitrate is sold under the registered trade name
Amtrate(R). Due to its superior shipping and storage characteristics,
Amtrate(R) has established excellent brand name recognition and a reputation
as a high-quality product.
N-Sol. In fiscal 1993, the Company sold approximately 568,000 tons of
N-Sol which is produced at its Yazoo City facility. N-Sol is a 32% nitrogen
product which is made by mixing urea liquor and ammonium nitrate liquor.
N-Sol is utilized for direct application to cotton, corn, grains and
pastures as well as for use in liquid fertilizer blends. Over the past 20
years, there has been a substantial shift in product preference from
directly applied ammonia to UAN solutions because of the difficulties of
applying and the high cost of application equipment for ammonia.
Urea. In fiscal 1993, the Company sold approximately 194,000 tons of
prilled urea and approximately 74,000 tons of urea melt which are produced
primarily at its Triad facility. Under a long-term contract with Melamine
Chemicals, Inc., a maximum of 75,000 tons per year of urea melt can be sold
at prevailing market prices to its facility located adjacent to the Triad
facility. Urea is synthesized by the reaction of ammonia and carbon dioxide
and then solidified in prill form. At 46% nitrogen by weight, urea is the
most concentrated form of dry nitrogen. Because urea undergoes a complex
series of changes within the soil before the nitrogen it contains is
ultimately converted into a form which can be utilized by plants, it is
considered a long-lasting form of nitrogen. As a fertilizer product, urea
is acceptable as both a direct-application material and as an ingredient in
fertilizer blends. Urea consumption has increased modestly in recent years.
In the Company's trade area, urea is the nitrogen product of choice for
topdressing rice. Most of the Company's prilled urea is aerially broadcast
on rice crops in Arkansas, Louisiana, Mississippi and Texas.
Production and Properties
Yazoo City, Mississippi. The Yazoo City manufacturing facility is a
closely integrated, multi-plant nitrogen fertilizer production complex
located on approximately 1,180 acres. The complex includes an anhydrous
ammonia plant, four nitric acid plants, an ammonium nitrate plant, and a UAN
solutions plant. In 1993, the Company spent $32 million to expand its
nitrogen production capacity at its Yazoo City facilities which increased
nitric acid production capacity by approximately 300 tons per day and
ammonium nitrate capacity by approximately 375 tons per day.
The Yazoo City ammonia plant has been continuously retrofitted to
incorporate energy-saving technology and improved efficiencies. The Yazoo
City facility includes a 20.5 megawatt cogeneration facility which produces
significant savings by sequentially using steam for electricity generation
and process heat. The Yazoo City plant has direct access to water, rail and
truck transportation and is strategically located for the purchase of
competitively priced natural gas. See "- Raw Materials - Natural Gas."
Donaldsonville, Louisiana. The Triad facility is a closely integrated,
multi-plant nitrogen fertilizer complex located on approximately 46 acres
fronting the Mississippi River. At the Triad plant, the Company produces
anhydrous ammonia and urea fertilizer. The Company is entitled to one-half
of the production from
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<PAGE>
the Donaldsonville facility as the co-owner of Triad with First Mississippi
Corporation. The Triad ammonia plant has been retrofitted on several
occasions to increase production and enhance energy efficiency.
Triad has ready access to rail and truck transportation. The plant is
also equipped with a deep-water port facility on the Mississippi River,
allowing access to economical barge and ship transport for its urea and
ammonia products. The Triad facility is well positioned for the purchase of
natural gas. See "- Raw Materials - Natural Gas."
Marketing and Distribution
Prior to the Reorganization, over 90% of the Cooperative's sales of
nitrogen fertilizers were made to its shareholders who purchased such
products pursuant to a quantity entitlement based on their stock ownership
and who received patronage refunds on such purchases to the extent of the
excess of the sales price over the cost of manufacturing, distributing and
selling the product. Competitive factors in the sale of nitrogen
fertilizers include price, proximity to markets and customer service. The
Company believes that it can successfully compete based on these criteria
and anticipates that its nitrogen customer base will be substantially
similar to that of the Cooperative. See "The Reorganization - Reasons for
the Reorganization."
The Company sells its nitrogen fertilizer products to farmers, dealers
and distributors located primarily in the southern farming regions of the
United States where its facilities are located. In the three-tiered
fertilizer distribution chain, distributors operate as wholesalers supplying
dealers who, in turn, sell directly to farmers. Larger customers
(distributors and large multi-location dealers) arrange for distribution,
storage and financing of nitrogen fertilizer. The majority of the Company's
sales are made to distributors and large dealers.
The ten states which make up the Company's primary trade area are
Mississippi, Alabama, Arkansas, Texas, Louisiana, Missouri, Georgia,
Florida, Tennessee and Kentucky. Based on published fertilizer consumption
figures, the Company believes that its sales of nitrogen fertilizers in
Mississippi, Alabama, Arkansas and Louisiana substantially exceed those of
any other producer.
The Company maintains a large and experienced field sales force
strategically located throughout the southern United States. This sales
force maintains close communications with the customer base and plays a
vital role in the marketing and distribution of the Company's products.
Through regular, personal contact with its customers, the Company is able to
ascertain local demand for fertilizer products and arrange to have those
products available from the most cost-effective source. The Company's field
sales force is also able to identify specific customer service needs which
the Company can provide. Customer service helps differentiate the Company's
products and enhance its position as a preferred supplier.
The Company transports its nitrogen products by water, rail and truck.
The Company's distribution network is complemented by 23 owned or leased
warehouses and terminals strategically placed in high-consumption areas.
PHOSPHATES
Products
The Company produces DAP at its Pascagoula, Mississippi, facility. In
fiscal 1993, the Company sold approximately 692,000 tons of DAP, primarily
into international markets. In fiscal 1993, sales of DAP were $78.9
million, which represented approximately 27% of net sales.
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<PAGE>
DAP is the most common form of phosphate fertilizer. DAP is produced
by reacting phosphate rock with sulfuric acid to produce phosphoric acid
which is then combined with ammonia. DAP contains 18% nitrogen and 46%
phosphate (P\\2\\0\\5\\) by weight. DAP is an important fertilizer product
for both direct application and for use in blended fertilizers applied to
all major types of row crops.
Production and Properties
The Company returned the Pascagoula facility to full operation and
began producing DAP in December 1991 after entering into its phosphate rock
supply contract with OCP. In April 1988, the Company had sold its
Pascagoula, Mississippi, fertilizer manufacturing facility where it produced
mixed fertilizer products. The purchaser had operated the facility for
approximately two years, after which it filed a voluntary Chapter 7
bankruptcy petition and the U.S. bankruptcy trustee took control of the
facility for liquidation. On December 7, 1990, the trustee conveyed the
Pascagoula facility to the Company in lieu of foreclosure of the Company's
security interest in the facility.
The Company's phosphate production complex is located on approximately
1,500 acres. The Pascagoula facility is a closely integrated, multi-plant
phosphatic fertilizer complex where the primary facilities are a phosphoric
acid plant, two sulfuric acid plants and a DAP granulation plant. The plant
has storage facilities for finished product (45,000 tons), as well as for
the primary raw materials, phosphate rock (80,000 tons), sulfur (10,000
tons) and ammonia (25,000 tons). All of the phosphate rock utilized by the
Company is purchased pursuant to a single supply contract. See "- Raw
Materials - Phosphate Rock."
The plant site fronts a deep-water channel which provides direct access
to the Gulf of Mexico. The complex contains docks and off-loading
facilities for receiving ship-load quantities of phosphate rock, sulfur and
ammonia, and for outloading DAP. The plant's location on deep water
provides the Company with an outbound freight cost advantage over central
Florida DAP producers with respect to international shipments and domestic
shipments along the Mississippi River system.
Marketing and Distribution
The Company sells substantially all of its DAP to Atlantic, the
exclusive distributor of its DAP products. Atlantic maintains a network of
sales agents in the major phosphate fertilizer consuming nations around the
world. Sales to Atlantic are made on an FOB Pascagoula basis at a price
which reflects the price Atlantic charges its customers, adjusted to reflect
Atlantic's commission. Sales to Atlantic for the export market are backed
by standby letters of credit.
In fiscal 1993, approximately two thirds of the Company's DAP was sold
into international markets. The three largest export markets in fiscal 1993
were India, China and Mexico. Most domestic sales are made in barge-lot
quantities to major fertilizer distributors and dealers located on the
Mississippi River system. The vast majority of the Company's product is
transported by ship and barge, although truck and rail access is also
available.
POTASH
Products
The Company produces potash at its mine and related facilities near
Carlsbad, New Mexico. In fiscal 1993, the Company sold approximately
283,000 tons of granular potash primarily to customers located west of the
Mississippi River. In May 1994, the Company completed an expansion of its
Carlsbad facility for $1.6 million, bringing its capacity for granular
product to approximately 420,000 tons per year. In fiscal 1993, potash
sales were $20.1 million, which represented approximately 7% of net sales.
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The Company's potash is mined from subterranean salt deposits
containing a mixture of potassium chloride and sodium chloride. The
Carlsbad, New Mexico, potash deposits are located from 800 to 1,200 feet
below the surface. Potash is produced in a refining process whereby the
potassium chloride is separated from the sodium chloride.
The Company produces red granular potash. The three principal grades
of potash fertilizer are granular, coarse and standard, with granular being
the largest particle size. Granular potash is used as a direct-application
fertilizer and, among the various grades, is particularly well-suited for
use in fertilizer blends. Potash is an important fertilizer product for
both direct application and for use in blended fertilizer applied to all
major types of row crops.
Production and Properties
The Company's potash mine and refinery are located approximately 25
miles east of Carlsbad, New Mexico. The Company recently completed a $5
million project to modernize its mining equipment and enable it to extract a
higher grade of ore which will improve overall facility efficiencies. The
mine supplies ore to an aboveground refinery which separates the potassium
chloride from the ore. The run-of-mine refined product is then transported
to the Company's nearby compaction plant for conversion to granular form.
The Company recently increased compaction capacity from approximately
300,000 tons to approximately 420,000 tons per year. Located contiguous to
the compaction facility are storage and shipping facilities from which the
finished product is transported by rail and truck into domestic and export
markets.
The Company's potash reserves are controlled under long-term federal
and state potassium leases on approximately 60,000 acres. In addition, the
Company holds mineral title to approximately 4,400 acres and fee title to
approximately 10,000 acres. Revised estimates of potash ore reserves
underlying the Carlsbad properties were compiled in 1981 and 1983.
According to these estimates, the Company's reserves were estimated to
contain 346.2 million tons of insitu ore with an average grade of 15.25%
K\\2\\0 or 297.9 million tons of recoverable ore with an average grade of
14.88% K\\2\\0. Since these estimates were made, ore extracted would
indicate remaining reserves of 334.4 million tons of insitu ore with an
average grade of 15.25% K\\2\\O or 297.9 million tons of recoverable ore
with an average grade of 14.88% K\\2\\O. With expected ore processing
efficiencies, this estimated reserve base is equivalent to 57.2 million tons
of product muriate of potash. At current production rates, the Company's
reserves have a remaining life of approximately 140 years.
Marketing and Distribution
The substantial majority of the Company's potash sales are in domestic
markets in the southern states west of the Mississippi River where it and
other Carlsbad potash producers enjoy freight cost advantages over Canadian
and overseas potash producers. Consistent with the Company's strategy to
maximize net backs and increase profit margins, domestic sales are targeted
for locations along the freight route of the Santa Fe Railroad. Domestic
potash marketing is performed by the Company's sales staff. The Company's
export sales are made through Potash Corporation of Saskatchewan. The
primary export markets for the Company's potash are Mexico and Brazil.
Potash for export is transported by rail to terminal facilities in Houston.
RAW MATERIALS
Natural Gas
Natural gas is the primary raw material used by the Company in the
manufacture of nitrogen fertilizer products. Natural gas is used both as a
chemical feedstock and as a fuel to produce anhydrous ammonia which is then
upgraded into other nitrogen fertilizer products. During fiscal 1993, the
cost of natural gas represented approximately 80% of the Company's cost of
producing ammonia. Because there are no commercially feasible
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alternatives for natural gas in the production of ammonia, the economic
viability of the Company's nitrogen business depends upon the availability
of competitively priced natural gas.
In today's natural gas market, the Company's total natural gas cost
generally consists of two components--the market price of the natural gas in
the producing area at the point of delivery into a pipeline and the fee
charged by the pipeline for transporting the natural gas to the Company's
plants. The cost of the transportation component can vary substantially
depending on whether or not the pipeline has to compete for the business.
Therefore, it is extremely important to the Company's competitiveness that
it have access to multiple natural gas transportation services. In addition
to the impact on transmission costs, access alternatives enable the Company
to benefit from natural gas price differences which may exist from time to
time in the various natural gas-producing areas. In recent years, the
Company has improved the natural gas purchasing logistics of its nitrogen
facilities.
The natural gas requirements of the Yazoo City plant (approximately
54,000 Mcf per day) are supplied in part by Shell Western E&P Inc.
("SWEPI"), a subsidiary of Shell Oil Company ("Shell"). In 1972, the
Company and Shell entered into a gas purchase and sale agreement whereby
Shell agreed to supply natural gas to the Yazoo City plant from its natural
gas reserves located in Rankin County, Mississippi. To facilitate this
agreement, Shell constructed a 60-mile pipeline (the "Thomasville Line")
from its reserves directly to the Yazoo City facility. The original Shell
contract was superseded by a new contract with SWEPI on January 1, 1986.
The 1986 contract provided for the delivery of 30,000 Mcf per day under
arrangements providing for fixed prices on certain quantities and market-
related prices on other specified quantities. The arrangements with SWEPI
provided the Company with natural gas supplies priced below the prevailing
market. The primary term of the SWEPI contract expired on March 31, 1994.
SWEPI continues to furnish gas for a 120-day "renegotiation period" to allow
for the opportunity for structuring a new contract. The Company anticipates
that it will reach an agreement with SWEPI to continue purchasing the output
of the Rankin County reserves, which is presently approximately 20,000 Mcf
per day. The Company expects that the gas will be subject to market-
sensitive pricing. Although the expiration of the SWEPI contract has
resulted in higher natural gas costs, the Company believes that it remains
one of the lowest-cost nitrogen producers in the U.S.
The balance of the requirements of the Yazoo City plant are presently
being furnished by an intrastate pipeline which is connected to the plant by
the Thomasville Line and by various producers and marketers who sell gas to
the Company at various points along the pipeline systems which are directly
connected to the Yazoo City plant. The Yazoo City plant is also directly
connected to the interstate pipeline system of Southern Natural Gas Company
("Southern"). The Company and Southern have entered into a long-term,
interruptible transportation agreement. Although the Southern contract
provides for interruptible service, the Company believes that curtailment of
supply is unlikely due to the plant's location on the system. In addition
to being connected to Southern, the plant is located within a mile of the
Texas Eastern Transmission Corporation pipeline system. The Company has
also secured long-term transportation capacity in the Thomasville Line,
which provides the plant with access to an additional interstate pipeline
and a large intrastate gathering and transmission system in southern
Mississippi. As a result of this multiple source access, the Company
benefits from competition for the transportation and its supply of natural
gas.
The natural gas requirements of the Triad plant are approximately
54,000 Mcf per day. The Triad facility is located in one of the primary
gas-producing regions of the United States. The facility is presently
connected to five intrastate pipeline systems and benefits from intense
competition among those suppliers. Currently, the plant's requirements are
being supplied by three of the intrastate lines under various pricing
arrangements. Generally, these contracts impose firm delivery obligations
at market-sensitive prices. In addition, the Company purchases gas for
Triad on the spot market pursuant to 30- to 90-day fixed-price contracts.
Due to Triad's favorable access to natural gas supplies, the Company
believes that the loss of any particular supplier would not have a material
impact on plant operations. There have been no significant supply
interruptions at the Triad facility.
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Natural gas is currently in ample supply but the excess deliverability
("gas bubble") which existed in the late 1980's and early 1990's has
dissipated. Producer deliveries are now approaching full capacity. Due to
the narrowing gap between supply and demand, natural gas prices have become
increasingly volatile and subject to seasonal volatility. The Company uses
natural gas futures contracts to hedge against the risk of short-term market
fluctuations in the cost of natural gas.
Phosphate Rock
Phosphate rock is the primary raw material for the manufacture of DAP.
The Pascagoula facility's requirements for phosphate rock are approximately
1.1 million tons per year. As of September 15, 1991, the Company entered
into a contract with Office Cherifien des Phosphates ("OCP") to supply all
of the phosphate rock requirements of the Pascagoula facility. This
contract was recently amended and its term extended to June 30, 2003. OCP,
the national phosphate company of Morocco, is the world's largest producer
of phosphate rock and upgraded phosphates. The contract price for phosphate
rock is based on phosphate rock costs incurred by certain domestic
competitors of the Company and on the long-term financial performance of the
Company's phosphate operations. Under this formula, the Company realizes
favorable phosphate rock prices and is afforded significant protection
during periods when market conditions are depressed and its DAP operations
are stressed. As a result, the Company was able to sustain its operations
during the past several years despite historically low prices for phosphate
products. Conversely, in favorable markets, when the Company's DAP
operations are profitable, the contract price of phosphate rock will
escalate to the extent that the Company will not fully participate in DAP
price appreciation. Pursuant to this contract, the Company and OCP are
required to negotiate further adjustments as needed to maintain the
viability and economic competitiveness of the Pascagoula plant. The
strategic alliance with OCP has functioned effectively since inception, and
the Company considers its relations with OCP to be excellent.
Sulfur
Sulfur is used in the manufacture of sulfuric acid at the Pascagoula
plant. Sulfur is in adequate supply and is available on the open market in
quantities sufficient to satisfy the Company's current requirements of
300,000 tons per year.
Ammonia
Until recently, ammonia has been in adequate supply at depressed
prices. In early 1994, intermittent shortages of ammonia, which caused a
surge in ammonia prices, developed due to increased consumption in
agricultural and industrial markets, several unplanned plant outages and
reduced imports from the FSU. However, in the past few months, ammonia
prices have returned to more moderate levels.
COMPETITION
Since fertilizers are global, largely fungible commodities, the primary
competitive factor is price. Secondary methods of competition include
product quality, customer service and availability of product. In each
product category, the Company competes with a broad range of domestic
producers, including farmer cooperatives, subsidiaries of larger companies,
integrated energy companies and independent fertilizer companies. Many of
the Company's domestic competitors have larger financial resources and sales
than the Company. The Company also competes with foreign producers.
Foreign competitors are often owned or subsidized by their governments and,
as a result, may have cost advantages over domestic companies.
Additionally, foreign competitors are frequently motivated by non-market
factors such as the need for hard currency.
The Company produces and sells nitrogen fertilizer products primarily
in the southern United States. Because competition is based largely on
price, maintaining low production costs is critical to competitiveness. The
Company believes it is one of the lowest-cost producers of nitrogen
fertilizers in the United States. Natural
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gas comprises the majority of the raw materials cost of nitrogen
fertilizers. Competitive natural gas purchasing is essential to maintenance
of the Company's low-cost position. Equally important is efficient use of
this gas due to the energy-intensive nature of the nitrogen business.
Therefore, cost-competitive production facilities that allow flexible
upgrading of ammonia to other finished products are critical to a low-cost
competitive position. In the highly fragmented nitrogen fertilizer market,
product quality and customer service can also be sources of product
differentiation.
Through Atlantic, the Company sells approximately two-thirds of its DAP
in international markets. The United States phosphate industry has become
more concentrated as a result of recent consolidations and joint ventures,
and the Company is significantly smaller than most of its competitors in
terms of resources and sales. Most of the Company's principal competitors
have captive sources of some or all of the raw materials and this may
provide them with cost advantages. The Company's long-term phosphate rock
contract with its flexible pricing mechanism is a key element to the
Company's ability to compete.
Most potash consumed in the United States is provided by large Canadian
producers, who have economies of scale and lower variable costs than their
U.S. counterparts. Over 80% of United States potash production capacity is
located in the Carlsbad, New Mexico, area. While the Carlsbad producers
have higher mining costs than the Canadian producers, this disadvantage is
offset by logistical and freight advantages in certain markets in the United
States southwest and the lower United States corn belt. The Company
competes in these markets primarily with three other Carlsbad potash
producers. The Company believes that its reserve position gives it a
competitive edge and that it will be a long-term participant in the United
States potash industry.
OTHER PROPERTIES
The Company owns an administration building in Yazoo City which
contains approximately 65,000 square feet of office space.
The Company has a total system-wide storage capacity of approximately
393,000 tons. In addition to the fertilizer storage facilities in Yazoo
City and Pascagoula, Mississippi, Carlsbad, New Mexico, and Donaldsonville,
Louisiana, the Company also owns or leases 23 fertilizer storage and
distribution facilities at other locations in Alabama, Arkansas, Florida,
Georgia, Louisiana, Mississippi, Missouri, Tennessee and Texas.
In 1980, the Company completed the purchase of phosphate rock property
in Hardee County, Florida. This property, containing approximately 12,000
acres, is estimated by the Company to contain approximately 62 million
recoverable tons of phosphate rock of commercial quality. During 1990, the
Company entered into an agreement granting a third party the exclusive
option, for a period of four years, to purchase this undeveloped phosphate
rock property. As of July 12, 1994, the Company and the option holder
entered into a new agreement with respect to this property whereby (i) the
Company conveyed approximately 2,500 acres to the third party; (ii) the
Company has granted to the third party the exclusive option, for a period of
three and one-half years, to purchase the remaining 9,500 acres; (iii) the
Company was granted a put option whereby the Company has the right and
option to sell the 9,500 acres to the third party if the third party does
not exercise its prior option to purchase the property; and (iv) the Company
was granted an exclusive option to repurchase the previously conveyed 2,500
acres in the event the third party does not exercise its option to purchase
the 9,500 acres and the Company does not exercise its put option on the
9,500 acres.
RESEARCH AND DEVELOPMENT
The Company has a research and development staff of 12 full-time
professional employees whose activities relate primarily to the improvement
of existing products. The Company estimates that approximately $1.5 million
will be spent on research and development activities during fiscal 1994.
The expenditures on research activities sponsored by the Company during
fiscal 1993, 1992 and 1991 were approximately $1.4 million, $1.7 million and
$1.2 million, respectively.
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EMPLOYEES
As of March 30, 1994, the Company employed approximately 945 persons at
all locations. The Company considers its employee relations to be
satisfactory.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company's operations are subject to federal, state and local laws
and regulations pertaining to the environment among which are: the Clean
Air Act, the Clean Water Act, the Resource Conservation and Recovery Act,
the Comprehensive Emergency Response Compensation and Liability Act, the
Toxic Substances Control Act, and the Mississippi State Pollution Prevention
Act. The Company's facilities require operating permits which are subject
to review by governmental agencies. The Company believes that its policies
and procedures now in effect are generally in compliance with applicable
laws and with the permits relating to the facilities.
In the past, significant capital and operating costs related to
environmental laws have been incurred. The majority of the Company's
environmental capital expenditures have been in response to the requirements
of the Clean Air Act and the Clean Water Act. Since 1967, the Company has
spent approximately $50.0 million on its fertilizer production facilities in
order to meet applicable federal and state pollution standards. The Company
is involved in certain litigation involving a Louisiana waste disposal site.
See "Legal Proceedings - Combustion, Inc. Litigation."
Capital expenditures related to environmental obligations for the past
three fiscal years were approximately as follows: 1993 - $7.0 million;
1992 - $10.0 million; 1991 - $4.0 million. In addition to the foregoing
expenditures, the Company constructed a new nitric acid plant and related
facilities in Yazoo City which was completed in early 1993. This facility
increased capacity and also replaced existing production from other plants
which were closed. Enhanced environmental protection under the Clean Air Act
was a primary factor in the Company's decision to construct the plant.
Environmental capital expenditures are expected to be approximately
$1.5 million for the fiscal year ending June 30, 1994 and approximately $6.0
million for fiscal 1995. Future environmental expenditures will include a
recently approved expenditure of approximately $7.0 million to replace an
existing scrubber system at Yazoo City with a new system which will reduce
particulate emissions from fertilizer prill towers. The Company has also
approved a $1.3 million expenditure to relocate the discharge point of the
Yazoo City facility's combined storm and process water to the Yazoo River.
On March 31, 1994, the Company charged to its earnings approximately
$5.9 million relating to the estimated cost of the future closure of the
gypsum disposal facility located at Pascagoula. This charge relates to the
portion of the disposal facility utilized to date, and it is estimated that
future charges of approximately $3.0 million will be accrued over the
estimated six-year remaining life of the disposal facility.
In the normal course of its business, the Company is exposed to risks
relating to possible releases of hazardous substances into the environment.
Such releases could cause substantial damage or injuries. Environmental
expenditures have been and will continue to be significant. It is
impossible to predict or quantify the impact of future environmental laws
and regulations.
LEGAL PROCEEDINGS
Combustion, Inc. Litigation. On July 15, 1986, the first of 17
lawsuits was filed by numerous plaintiffs in the Twenty-first Judicial
District Court, Parish of Livingston, State of Louisiana, against Triad, the
Company and approximately 90 other named defendants. Additionally,
approximately 200 parties have been added as third-party defendants. The
plaintiffs' claims are based on alleged personal injuries and property
damages as a result of exposure to hazardous waste from the Combustion, Inc.
waste disposal site in Livingston Parish, Louisiana.
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These cases were removed to the U.S. District Court for the Middle
District of Louisiana, then remanded to State Court, and have now been
removed once again to Federal Court. Plaintiffs have filed a motion to have
the cases remanded to State Court.
The plaintiffs moved for certification of a class for the purpose of
consolidating the pending litigation as one class action suit, and in
January 1991, a state class was certified by the District Court judge. The
Louisiana First Circuit Court of Appeal affirmed the certification of the
class, but reversed the definition of the class and remanded the issue to
the trial court for further determination.
Triad and the Company are vigorously defending their position in these
proceedings and consider their defense meritorious.
CERCLA Sites. Triad has received and responded to letters issued by
the United States Environmental Protection Agency ("EPA") under Section 104
of the Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") relative to the possible disposition of Triad waste at the
Combustion, Inc. site and the Cleve Reber disposal site in Ascension Parish,
Louisiana. Under CERCLA, generators of waste may be held responsible for
investigation and site cleanup costs.
Potash Litigation. In actions filed in April 1993, the Company was
named as a defendant, along with other United States and Canadian potash
producers, in several complaints which alleged a conspiracy among the
defendants to fix the price of potash in violation of the United States
antitrust laws. Following the disqualification of certain of the
plaintiff's counsel, amended complaints were filed, none of which name the
Company as a defendant. With respect to two of the plaintiffs, the Company
has entered into an agreement whereby any applicable statute of limitation
is tolled from the date of the agreement through September 30, 1994.
Potash Investigation. On November 24, 1993, the Antitrust Division of
the Department of Justice served the Company with a grand jury subpoena in
connection with its investigation of allegations of price fixing by United
States and Canadian potash producers. The subpoena requests that the
Company produce certain documents relating to its potash business in the
United States and Canada. The Company is in the process of assembling these
documents for production.
Other Legal Proceedings. In addition to the foregoing, the Company, in
the ordinary course of business, is the subject of, or a party to, other
various pending or threatened legal proceedings. The Company believes that
any ultimate liability arising from these actions would not have a material
effect on its financial position or results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Charles O. Dunn(1) 46 President, Chief Executive Officer and Director
William F. Hawkins 63 Senior Vice President - Finance and Administration
David W. Arnold 57 Senior Vice President - Technical Group
C. E. McCraw 46 Senior Vice President - Operations
Robert E. Jones 46 Vice President and General Counsel
Rosalyn B. Glascoe 49 Corporate Secretary
Coley L. Bailey(1) 43 Chairman of the Board
John Sharp Howie(1)(2) 54 Vice-Chairman of the Board
John W. Anderson(1)(3) 59 Director
Frank R. Burnside, Jr.(2) 45 Director
Woods E. Eastland (2) 49 Director
Robert P. Dixon(1)(2) 50 Director
W. R. Dyess(3)(4) 55 Director
G. David Jobe(3) 51 Director
George Penick(4) 46 Director
David M. Ratcliffe(3) 46 Director
Wayne Thames(4) 58 Director
Tom C. Parry 66 Director Emeritus
</TABLE>
__________________________
(1) Member of Executive Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
(4) Member of Directors Affairs Committee
CHARLES O. DUNN - Mr. Dunn has been employed by the Company since 1978,
was elected President and Chief Executive Officer of the Company in April
1993 and has served as a director of the Company since 1993. Prior to
becoming President, Mr. Dunn served in various positions within the Company,
including Attorney and Executive Vice President.
WILLIAM F. HAWKINS - Mr. Hawkins has been employed by the Company since
1966. He was appointed Senior Vice President - Finance and Administration
in 1987. Prior to 1987, Mr. Hawkins served in various positions with the
Company, including Senior Vice President - Finance and Vice President -
Finance.
DAVID W. ARNOLD - Mr. Arnold has been employed by the Company since
1966. He was appointed as Senior Vice President - Technical Group in July
1991. Mr. Arnold served as Senior Vice President - Engineering from 1981 to
1987 and as Senior Vice President - Research & Engineering from 1987 to
1991.
C. E. MCCRAW - Mr. McCraw has been employed by the Company since 1974.
He was appointed Senior Vice President - Fertilizers Group in 1991. Prior
to 1991, Mr. McCraw served as Vice President - Operations, Vice President -
Nitrogen Development and various other positions with the Company.
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ROBERT E. JONES - Mr. Jones has been employed by the Company since
1974. He was appointed Vice President and General Counsel in 1989. Prior
to 1989, Mr. Jones served in various positions with the Company, including
Associate General Counsel and General Counsel.
ROSALYN B. GLASCOE - Ms. Glascoe has been employed by the Company since
1981. She was appointed Corporate Secretary in 1986. Prior to 1986, Ms.
Glascoe served as Stock Department Manager and Assistant Secretary.
COLEY L. BAILEY - Mr. Bailey has been a director of the Company since
1978 and has served as Chairman of the Board since 1988. For more than the
past five years, he has been engaged in farming activities in Yalobousha
County, Mississippi.
JOHN SHARP HOWIE - Mr. Howie has been a director of the Company since
1966 and has served as Vice Chairman of the Board since 1988. For more than
the past five years, he has been engaged in farming activities in Yazoo
County, Mississippi.
JOHN W. ANDERSON - Mr. Anderson has been a director of the Company
since 1989. In May 1989, he was named Chief Executive Officer of Alabama
Farmers Cooperative, Inc. Prior to 1989, Mr. Anderson was Manager of the
Anderson's Peanuts Division of Alabama Farmers Cooperative. He had been
affiliated with Anderson's Peanut Division since 1984.
FRANK R. BURNSIDE, JR. - Mr. Burnside has been a director of the
Company since 1985. For more than the past five years, he has been a farm
supply dealer and Vice President and Manager of Newellton Elevator Company,
Inc., Newellton, Louisiana.
ROBERT P. DIXON - Mr. Dixon has been a director of the Company since
1986. For more than the past five years, he has been the President and
Chief Executive Officer of SF Services, Inc., a North Little Rock, Arkansas
agricultural cooperative.
W. R. DYESS - Mr. Dyess has been a director of the Company since 1991.
Since 1972, he has served as President of Dyess Farm Center, Inc., in
Bardwell, Texas, and ABC Ag Center, Inc., in Corsicana, Texas.
WOODS E. EASTLAND - Mr. Eastland has been a director of the Company
since July 1994. Since 1986, he has been President and Chief Executive
Officer of Staplcotn & Stapldiscount, a cotton marketing and financing
cooperative located in Greenwood, Mississippi.
G. DAVID JOBE - Mr. Jobe has been a director of the Company since 1989.
Since 1981 he has been affiliated with, and currently serves as Senior Vice
President of Corporate Operations of, MFA Incorporated, a regional
agricultural cooperative.
GEORGE PENICK - Mr. Penick has been a director of the Company since
July 1994. He is President of the Foundation for the Mid South, a private
philanthropic foundation, and has served in that position since 1990. From
1986 until 1990, he was the first executive director of the Jessie Ball
duPont Fund.
DAVID M. RATCLIFFE - Mr. Ratcliffe has been a director of the Company
since July 1994. Since 1991, he has served as President and Chief Executive
Officer of Mississippi Power Company, an electric utility. From 1989 until
1991, he was Executive Vice President of Southern Company Services.
WAYNE THAMES - Mr. Thames has been a director of the Company since
1973. For more than the past five years, he has been a cattleman in
Evergreen, Alabama.
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TOM C. PARRY - Mr. Parry was President of the Company and a member of
the Board of Directors from 1972 until 1993. Mr. Parry was appointed in
1994 by the Board of Directors as Director Emeritus.
TERM OF OFFICE
The Board of Directors is classified into three classes, the first
class serving until the annual meeting of shareholders to be held in 1995
("Class I Directors"), the second class serving until the annual meeting of
shareholders to be held in 1996 ("Class II Directors") and the third class
serving until the annual meeting of shareholders to be held in 1997 ("Class
III Directors"). Messrs. Burnside, Anderson, Dixon and Penick serve as
Class I Directors, Messrs. Thames, Dyess, Jobe and Ratcliffe serve as Class
II Directors and Messrs. Dunn, Bailey, Howie and Eastland serve as Class III
Directors. All officers serve at the pleasure of the Board of Directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Articles of Incorporation contain provisions eliminating
the personal liability of its directors for monetary damages resulting from
breaches of their fiduciary duty to the extent permitted by the Mississippi
Business Corporation Act. Each director will continue to be subject to
liability for the amount of financial benefit received by a director to
which he or she is not entitled, for any intentional infliction of harm on
the Company or its shareholders, for improper distributions to shareholders
and for intentional violations of criminal law. This provision does not
affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws.
BOARD COMMITTEES
The Board of Directors has established four standing committees: the
Audit Committee, the Compensation Committee, the Directors Affairs Committee
and the Executive Committee. The Audit Committee recommends the appointment
of independent auditors and oversees the accounting and audit functions of
the Company. The Compensation Committee determines executive officers'
salaries and bonuses. No member of the Compensation Committee or the Audit
Committee is or has been an employee of the Company. The Directors Affairs
Committee operates as a nominating committee for the slate of directors and
officers, recommends directors' compensation to the full Board and
periodically reviews the performance of the Board. The Executive Committee
has the authority to take all actions which the Board of Directors as a
whole would be able to take.
DIRECTOR COMPENSATION
All directors, other than Coley L. Bailey, John Sharp Howie and Charles
O. Dunn, are paid an annual retainer of $12,000 and $1,000 per meeting, plus
expenses. Coley L. Bailey, as Chairman of the Board, receives a salary of
$40,000 a year, plus expenses. John Sharp Howie, as Vice Chairman of the
Board, receives an annual retainer of $18,000 and $1,000 per meeting, plus
expenses. Charles O. Dunn, as President and Chief Executive Officer,
receives no additional remuneration for serving as a director.
-48-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all
compensation paid or earned for services rendered to the Company in fiscal
1993, 1992 and 1991 by the Company's Chief Executive Officer and the
Company's four highest paid executive officers other than the Chief
Executive Officer (together, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
<S> <C> <C> <C> <C>
(A) (B) (C) (D) (E)
OTHER ANNUAL
SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1)
---- -------- ------- ------------
Charles O. Dunn 1993 $243,319 $64,612 $4,427
President and Chief 1992 216,600 65,846 4,303
Executive Officer 1991 202,416 68,822 4,116
William F. Hawkins 1993 212,628 45,077 4,427
Senior Vice President - 1992 198,720 55,344 4,303
Finance and Administration 1991 185,700 57,567 4,116
C. E. McCraw 1993 195,132 41,758 4,427
Senior Vice President - 1992 175,008 46,377 4,303
Fertilizer Group 1991 151,836 42,515 4,116
Robert E. Jones 1993 162,648 32,123 4,427
Vice President and 1992 152,016 34,584 4,303
General Counsel 1991 142,008 35,502 4,116
David W. Arnold 1993 159,540 30,711 4,427
Senior Vice President - 1992 149,100 33,920 4,303
Technical Group 1991 139,344 34,836 4,116
</TABLE>
________________________________
(1) The amounts disclosed in column (e) of the Summary Compensation Table
represent employee salary deferrals under the Company's 401(k) plan
which would otherwise be payable during the relevant fiscal year.
-49-
<PAGE>
BASE SALARIES
Base salaries of the President and other executive officers are based
on internal equity and external competitiveness. The Company has retained
W.M.S. Management Consultants, a compensation consulting firm, to assist in
the establishment of salary ranges for each executive officer. Individual
salaries are set within the established range based on subjective individual
performance evaluations. It is the objective of the Compensation Committee
of the Company to develop salary programs which attract and maintain
qualified key employees.
ANNUAL BONUSES
Annual bonuses for executive officers are intended to reward key
employees who have a material impact on the Company's operating results.
Bonuses are not paid unless the Company's financial performance, as measured
by specified ratios, ranks in the top 50% of an industry survey. The Chief
Executive Officer's bonus is based on corporate performance. Other
executive officers' bonuses are based in part on corporate performance, as
measured by specific financial measurements, and in part on management's
evaluation of each executive officer's performance. These criteria are
reviewed and approved by the Compensation Committee. Under this plan, the
Chief Executive Officer's bonus can range as high as 33% of base salary.
Other executive officers can achieve bonuses up to a maximum percentage
established by the Compensation Committee. For 1993, maximum bonus
potential for the Company's four most highly compensated executive officers,
other than the Chief Executive Officer, ranged between 15% and 21%.
PENSION PLAN
The Company provides a "Defined Benefit" retirement plan for all
regular employees meeting established age and employment service
requirements. Benefits are determined based on average pay and years of
credited service. Annual Company contributions on behalf of individual
specified participants cannot be calculated by plan actuaries. Only an
employee's "base pay" is covered by the plan. Plan compensation does not
include bonuses, overtime or shift differentials. The following table shows
estimated annual benefits payable at age 65 to newly hired persons in
specified compensation and years of service categories. Listed benefits are
not subject to deductions for social security or other offset amounts.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
REMUNERATION
<S> <C> <C> <C> <C> <C>
15 20 25 30 35
$ 25,000 $ 4,688 $ 6,250 $ 7,813 $ 9,375 $ 10,938
50,000 10,005 12,500 15,625 18,750 21,875
100,000 25,005 32,440 39,763 47,175 54,880
150,000 40,005 52,440 64,763 77,175 89,880
200,000 55,005 72,440 89,763 104,077 104,077
250,000 65,757 86,776 104,077 104,077 104,077
and above
=======================================================================
</TABLE>
Years of service for the officers listed in the Summary Compensation Table
are: Charles O. Dunn - 15; William F. Hawkins - 27; C. E. McCraw - 20;
Robert E. Jones - 20; and David W. Arnold - 27.
-50-
<PAGE>
SUPPLEMENTAL BENEFIT PLAN
In fiscal 1984, the Company established a nonqualified "Defined
Benefit" Supplemental Benefit Plan for any employee who is a participant in
the Pension Plan and whose benefits from that Plan will, at his retirement,
be limited by the operation of Section 415 of the Internal Revenue Code
and/or, effective for fiscal 1991, Section 407(a)(17) of the Code. The
purpose of the supplemental plan is to make up the difference between the
defined pension benefit permitted under Section 415 of the Code and what
would otherwise be payable but for the Section 415 limit.
Benefits from this Plan will be payable to any participant designated
by the Plan Administrator on a monthly basis beginning at the time and under
the terms that would have applied if such benefits had been payable from the
Pension Plan.
The following table shows estimated annual benefits payable under the
Plan to persons in specified compensation and years of service categories.
(The actual benefit paid under the supplemental plan is the supplemental
benefit minus the allowable pension plan benefit.)
SUPPLEMENTAL BENEFIT PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
REMUNERATION
<S> <C> <C> <C> <C> <C>
15 20 25 30 35
$150,000 $ 0 $ 0 $ 0 $ 0 $ 0
or less
200,000 0 0 0 3,098 20,803
250,000 4,248 5,864 10,686 33,098 55,803
300,000 19,248 25,864 35,686 63,098 90,803
350,000 34,248 45,864 60,686 93,098 125,803
400,000 49,248 55,864 85,686 123,098 160,803
450,000 64,248 65,864 110,686 163,098 195,803
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS WITH CUSTOMERS
The primary business of the Cooperative was to provide fertilizer
products to its shareholders pursuant to preferred patronage rights to
purchase fertilizer products in proportion to the type and amount of Common
Stock they owned. Certain directors of the Company were either direct
customers of the Cooperative or were affiliated in some capacity with direct
customers of the Cooperative. All sales of product to directors and their
affiliates have been and are made in the ordinary course of business at
prices and terms which are determined based on prevailing competitive
conditions and which are no less favorable to the Company than the prices
and terms of transactions with other customers and shareholders.
During the fiscal year ended June 30, 1993, sales to SF Services, Inc.
("SFS") were approximately $33 million representing approximately 11.4% of
the Company's net sales and approximately 8.6% of SFS's consolidated gross
revenues. Robert P. Dixon, a director of the Company, is an executive
officer of SFS. During
-51-
<PAGE>
fiscal 1993, sales to Alabama Farmers Cooperative, Inc. ("AFC") were
approximately $14.0 million. These sales represent 6.6% of the gross
revenues of AFC. John W. Anderson, a director of the Company, is an
executive officer of AFC. Sales to SFS and AFC were on terms and conditions
comparable to transactions with other shareholders.
The Cooperative paid its shareholders patronage refunds. In fiscal
1993, the Cooperative paid its largest shareholder, SFS, patronage refunds
in the aggregate amount of $1.9 million and paid AFC $1.7 million. As a
result of the Reorganization, the Company will not pay patronage refunds
after fiscal 1994. It is currently expected that patronage refunds with
respect to fiscal 1994 will be calculated and paid in October 1994.
OTHER TRANSACTIONS
SFS has agreed to buy the Company's storage facility located in North
Little Rock, Arkansas, for approximately $600,000. Robert P. Dixon, a
director of the Company, is an executive officer of SFS.
On August 30, 1993, the Company sold a storage facility located in
Decatur, Alabama, to AFC for $115,000. John W. Anderson, a director of the
Company, is the President and Chief Executive Officer of AFC.
In the opinion of the Company, the transactions described are on terms
as favorable to the Company as if transacted with unaffiliated third
parties.
-52-
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information as of June 1, 1994
regarding the beneficial ownership of the Common Stock by (i) the Selling
Shareholders, (ii) each shareholder known by the Company to be the
beneficial owner of more than five percent of the outstanding shares of the
Company's Common Stock, (iii) each director of the Company, (iv) each Named
Executive Officer of the Company and (v) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed
below, based on information provided by the named persons, have sole
investment and sole voting power with respect to such shares, subject to
community property laws where applicable. The address of SF Services, Inc.
is 824 North Palm Street, P.O. Box 5489, North Little Rock, Arkansas 72119.
Except as set forth in the preceding sentence, the address of each of the
shareholders named below is the Company's principal executive office.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
SHARES BENEFICIALLY OWNED BEING SHARES BENEFICIALLY
PRIOR TO OFFERING OFFERED OWNED AFTER OFFERING
-------------------------- --------- --------------------
NAME NUMBER PERCENT NUMBER NUMBER PERCENT
---- ------------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SF Services, Inc...................... 2,956,175 [ ]% [ ] [ ] [ ]
Charles O. Dunn....................... -- -- -- -- --
William F. Hawkins.................... -- -- -- -- --
David W. Arnold....................... -- -- -- -- --
C. E. McCraw.......................... -- -- -- -- --
Robert E. Jones....................... -- -- -- -- --
Coley L. Bailey....................... 4,663 * [ ] [ ] *
John Sharp Howie(1)................... 3,857 * [ ] [ ] *
John W. Anderson...................... 448 * [ ] [ ] *
Frank R. Burnside, Jr.(2)............. 21,015 * [ ] [ ] *
Robert P. Dixon(3).................... 380 * [ ] [ ] *
W. R. Dyess(4)........................ 43,932 -- -- -- --
Woods E. Eastland(5).................. 3,440 * [ ] [ ] *
Rosalyn B. Glascoe(6)................. 190 * [ ] [ ] *
G. David Jobe......................... -- -- -- -- --
George Penick......................... -- -- -- -- --
David M. Ratcliffe.................... -- -- -- -- --
Wayne Thames.......................... 4,825 * [ ] [ ] *
Selling Shareholders(7)............... [ ] [ ] [ ] [ ] [ ]
All directors and executive officers
as a group (17 persons).............. [ ] * [ ] [ ] *
</TABLE>
- -------------------------------
* less than 1%
(1) Mr. Howie owns 1,971 shares individually and is the beneficial owner of
1,886 shares owned by Pauline W. Howie and John Sharp Howie d/b/a Cedar
Grove Plantation.
-53-
<PAGE>
(2) Mr. Burnside owns 3,187 shares individually and is the beneficial owner
of 17,828 shares owned by Newellton Elevator Company, Inc.
(3) Mr. Dixon owns 26 shares individually and is the beneficial owner of 354
shares owned by Robert P. Dixon d/b/a Benchmark Farms.
(4) Mr. Dyess owns 474 shares individually and is the beneficial owner of
29,238 shares owned by Dyess Farm Center, Inc. and 14,220 shares owned
by ABC Ag Center, Inc.
(5) Mr. Eastland is the beneficial owner of 3,440 shares owned by the
Elizabeth C. Eastland Trust.
(6) Ms. Glascoe is the beneficial owner of 190 shares owned by James Clayton
Hatch and Rosalyn B. Glascoe.
(7) The Company has offered certain shareholders the right to sell a portion
of their shares of Common Stock in this offering.
-54-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100,500,000
shares, of which 100,000,000 shares are Common Stock, par value $.01 per
share, and 500,000 shares are Preferred Stock, par value $.01 per share. At
July 1, 1994, there were 18,776,193 shares of Common Stock outstanding and
held of record by shareholders and no shares of Preferred Stock
outstanding. Up to an additional 503,850 shares of Common Stock may be
issued upon the conversion of Special Accounts, including Special Accounts
arising from 1994 patronage.
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the shares
being offered hereby will, upon payment therefor, be validly issued, fully
paid and nonassessable. Subject to the rights of holders of Preferred
Stock, the holders of outstanding shares of Common Stock are entitled to
receive dividends out of assets legally available therefor at such times and
in such amounts as the Board of Directors may from time to time determine.
See "Dividend Policy." The shares of Common Stock are neither redeemable
nor convertible, and the holders thereof have no preemptive or subscription
rights to purchase any securities of the Company. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive, pro rata, the assets of the Company which are legally
available for distribution, after payment of all debts and other
liabilities, including Special Accounts which, pursuant to the Articles of
Incorporation of the Company, may be established by the Company's Board of
Directors only to represent capital allocations to shareholders of the
Company of a portion of earnings on business done with such shareholders
made by the Cooperative, and subject to the prior rights of any holders of
Preferred Stock then outstanding. Each outstanding share of Common Stock is
entitled to one vote on all matters submitted to a vote of shareholders.
There is no cumulative voting in the election of Directors.
Each of the items described in "- Preferred Stock", "- Certain
Statutory Provisions" and "- Certain Charter Provisions" hereafter, could
result in the Company being less attractive to a potential acquiror and
could result in shareholders receiving less for their shares of Common Stock
than otherwise might be available in the event of a takeover attempt.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the Board of
Directors to issue the Preferred Stock in classes or series and to establish
the designations, preferences, qualifications, limitations or restrictions
of any class or series with respect to the rate and nature of dividends, the
price and terms and conditions on which shares may be redeemed, the terms
and conditions for conversion or exchange into any other class or series of
the stock, voting rights and other terms. The Company may issue, without
the approval of the holders of Common Stock, Preferred Stock which has
voting, dividend or liquidation rights superior to the Common Stock and
which may adversely affect the rights of holders of Common Stock. The
issuance of Preferred Stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other
things, adversely affect the voting power of the holders of Common Stock and
could have the effect of delaying, deferring or preventing a change in
control of the Company.
CERTAIN STATUTORY PROVISIONS
Mississippi Control Share Act
The Company has chosen to be subject to the Mississippi Control Share
Act which provides, in the case of a public company which has more than 500
of its shareholders resident in Mississippi or more than 10 percent of its
shares owned by Mississippi residents, that once a potential acquiror
notifies a company of the intention to purchase 20%, 33 1/3% or more than
50% of the company's shares and requests a special meeting, a shareholders'
meeting must be held within 50 days, at the acquiror's expense, to vote on
whether the control shares (those held by the acquiring entity) may exercise
voting rights. If a request is not made, shareholders will
-55-
<PAGE>
vote on whether to restore voting rights at the next shareholder's meeting.
Without the approval of a majority of the outstanding shares, excluding
shares owned by the acquiror and company officers and employee-directors,
the control shares do not receive voting rights until three years have
passed.
Mississippi Shareholder Protection Act
The Company has chosen to be subject to the Mississippi Shareholder
Protection Act. By the terms of the act, a corporation may not enter into
any business combination with a 20% shareholder unless: (a) 80% of the
outstanding shares and two-thirds of the shares not owned by the 20%
shareholder approve the combination; (b) 80% of the continuing directors
approve the combination; or (c) the aggregate amount of the offer meets
certain fair price criteria.
CERTAIN CHARTER PROVISIONS
The Articles of Incorporation provide for the Board of Directors to be
divided into three classes, with staggered three-year terms. As a result,
only one class of directors will be elected at each annual meeting of
shareholders of the Company, with the other classes continuing for the
remainder of their respective terms.
The Articles of Incorporation also provide that directors may be
removed from office only for cause and only at a shareholders' meeting
called for the purpose of removing such directors with notice stating such
purpose. Vacancies on the Board of Directors, including those resulting
from an increase in the number of directors, may be filled by the remaining
directors or by the shareholders and the term of any director filling a
vacancy shall be for the balance of the term of the retiring director's
class.
Certain provisions contained in the Articles of Incorporation,
including those relating to the size and classification of the Board of
Directors, the indemnification of directors, the removal of directors, the
election to be subject to the Mississippi Shareholders Protection Act and
the Mississippi Control Share Act, the power of the Board of Directors to
increase the percentage of voting shares necessary to call a special meeting
of shareholders and the required vote necessary to approve the transactions
may only be amended by the affirmative vote of the holders of at least two-
thirds of the total outstanding voting power of the Company.
The Articles of Incorporation of the Company also authorize a class of
Preferred Stock the terms of which may be designated by the Board of
Directors. This stock may be used in acquisitions, as a financing vehicle
or could be issued in connection with a shareholder rights plan or to a
friendly party who would agree to support management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Harris Trust
and Savings Bank.
-56-
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The 21,976,193 outstanding shares of Common Stock, including the
3,200,000 shares to be sold by the Company in this offering, will be freely
tradeable without restriction or further registration under the Securities
Act, unless acquired by "affiliates" (as defined in Rule 144 of the
Securities Act) in which case such shares will be subject to the resale
limitations of Rule 144.
In general, under Rule 144 as currently in effect, a person deemed
affiliated with the Company, whose shares meet a two-year holding period
requirement would be entitled to sell, within any three-month period, a
number of those shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock or the average weekly trading volume in
the Common Stock during the four calendar weeks preceding the date on which
notice of the sale is given, provided certain manner of sale and notice
requirements and requirements as to the availability of current public
information about the Company are satisfied. In addition, affiliates of the
Company must comply with the restrictions and requirements of Rule 144,
other than the two-year holding period requirement, in order to sell shares
of Common Stock which are not restricted securities.
The Company, its officers, directors, the Selling Shareholders and
certain other shareholders, holding in the aggregate _________ shares of
Common Stock ( ___% of the shares of Common Stock outstanding after the
offering) have agreed not to offer, sell or otherwise dispose of any shares
of Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock for a period of 180 days after the date of this
Prospectus without the prior consent of Wertheim Schroder & Co.
Incorporated.
Prior to the offering, there has been no established trading market for
the Common Stock. The Company can make no prediction as to the effect, if
any, that sales of shares of its Common Stock, or the availability of shares
for future sale, will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock
in the public market, or the perception that such sales could occur, could
depress the prevailing market price for the Common Stock.
-57-
<PAGE>
UNDERWRITING
The Underwriters named below have severally agreed, subject to certain
conditions, to purchase from the Company and the Selling Shareholders the
aggregate number of shares of Common Stock set forth below opposite their
respective names:
Number of
Underwriter Shares
----------- ---------
Wertheim Schroder & Co. Incorporated.............
The Robinson-Humphrey Company, Inc...............
---------
Total.......................................
=========
The Underwriting Agreement provides that the several Underwriters are
obligated to purchase all the shares of Common Stock offered hereby
(other than shares that may be purchased under the over-allotment option),
if any are purchased. Wertheim Schroder & Co. Incorporated and The
Robinson-Humphrey Company, Inc., as representatives (the "Representatives")
of the several Underwriters, have advised the Company and the Selling
Shareholders that the Underwriters propose to offer the shares to the public
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters propose initially to allow a concession
not in excess of $ per share to certain dealers,including the
Underwriters; that the Underwriters and such dealers may initially allow a
discount not in excess of $ per share to other dealers; and that the
public offering price and the concession and discount to dealers may be
changed by the Representatives after the initial public offering.
The Company and certain Selling Shareholders have granted to the
Underwriters an option, expiring at the close of business on the 30th day
after the date of the Underwriting Agreement, to purchase up to an
additional shares of Common Stock, at the public offering price less
underwriting discounts and commissions, all as set forth on the cover page
of this Prospectus. The Underwriters may exercise the option only to cover
over-allotments, if any, in the sale of shares of Common Stock in the
offering. To the extent that the Underwriters exercise this option, each
Underwriter will be committed, subject to certain conditions, to purchase a
number of the additional shares proportionate to such Underwriter's initial
commitment.
The Company, the Selling Shareholders and the Underwriters have agreed
to indemnify each other against certain liabilities, including liabilities
under the Securities Act.
The Company, its officers and directors and the Selling Shareholders
have agreed not to sell or otherwise dispose of any shares of Common Stock
for a period of 180 days after the date of this Prospectus without the prior
written consent of the Representatives. Following the offering, the Selling
Shareholders will own an aggregate of shares of Common Stock, % of
the total shares outstanding ( shares and % if the Underwriters'
over-allotment option is exercised in full).
-58-
<PAGE>
Prior to the offering, there has been no active public market for the
Common Stock of the Company. Consequently, the initial public offering
price of the Common Stock has been determined by negotiations between the
Company, the Selling Shareholders and the Representatives. Among the
factors considered in such negotiations were the Company's results of
operations and financial condition, the prospects for the Company and for
the industry in which the Company operates, the Company's capital structure
and prevailing conditions in the securities market. The estimated offering
price set forth on the cover of this Prospectus is subject to changes as a
result of market conditions and other factors.
The Representatives have informed the Company that the Underwriters do
not intend to confirm sales to accounts over which they exercise
discretionary authority in excess of 5% of the total number of shares
offered hereby.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by McDermott, Will & Emery, Chicago, Illinois.
Certain legal matters will be passed upon for the Underwriters by Fulbright
& Jaworski L.L.P., New York, New York.
EXPERTS
The consolidated financial statements, including the related notes and
schedules thereto as of June 30, 1992 and 1993 and for each of the three
years in the period ended June 30, 1993, included in this Prospectus and
elsewhere in the registration statement of which this Prospectus is a part
have been audited by Arthur Andersen & Co., independent public accountants,
as indicated in their report with respect thereto, and are included herein
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
-59-
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a registration statement on Form S-1 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement")
under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. The Company is subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended, and in accordance therewith files reports, proxy statements and
other information with the Commission. For further information with respect
to the Company and the Common Stock offered hereby, reference is made to the
Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete; with respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto may be inspected,
without charge, at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661, and 7 World Trade Center, Suite 1300, New York, NY 10048. Copies of
such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
-60-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants......... F-2
Consolidated Balance Sheets as at
March 31, 1994, June 30, 1993 and
1992............................................. F-3
Consolidated Statements of Operations
for the Nine Months Ended March
31, 1994 and 1993 and for the Years
Ended June 30, 1993, 1992 and 1991.............. F-4
Consolidated Statements of Shareholder-Members'
Equity as at June 30, 1991, 1992,
and 1993 and March 31, 1994..................... F-5
Consolidated Statements of Cash
Flows for the Nine Months Ended
March 31, 1994 and 1993 and for the
Years Ended June 30, 1993, 1992
and 1991........................................ F-6
Notes to Consolidated Financial
Statements...................................... F-7
</TABLE>
F-1
<PAGE>
Report of Independent Public Accountants
----------------------------------------
To the Board of Directors and
the Shareholders of
Mississippi Chemical Corporation:
We have audited the accompanying consolidated balance sheets of Mississippi
Chemical Corporation (a Mississippi corporation) and subsidiaries as of
March 31, 1994, June 30, 1993 and 1992, and the related consolidated
statements of operations, shareholder-members' equity and cash flows for the
nine months ended March 31, 1994, and for each of the three years ended June
30, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mississippi Chemical
Corporation and subsidiaries as of March 31, 1994, June 30, 1993 and 1992,
and the results of their operations and their cash flows for the nine months
ended March 31, 1994, and for each of the three years ended June 30, 1993,
in conformity with generally accepted accounting principles.
As further explained in Note 1 to the consolidated financial statements, the
Company has given cumulative effect to the change in accounting for income
taxes under Statement of Financial Accounting Standard No. 109.
Arthur Andersen & Co.
Memphis, Tennessee,
June 27, 1994.
F-2
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
--------------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<TABLE>
<CAPTION>
(Dollars in thousands) June 30
March 31 ------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,971 $ 22,014 $ 46,627
Accounts receivable 32,789 26,394 23,987
Inventories 39,668 34,744 35,484
Deferred income tax benefit 2,809 - -
Prepaid expenses and other current assets 3,958 3,686 5,635
-------- -------- --------
Total Current Assets 83,195 86,838 111,733
INVESTMENTS AND OTHER ASSETS:
National Bank for Cooperatives 4,641 4,813 5,062
Other 23,443 16,960 11,785
-------- -------- --------
Total Investments and Other Assets 28,084 21,773 16,847
PROPERTIES HELD FOR SALE 66,928 66,928 66,928
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation,
depletion and amortization 115,896 120,514 107,650
-------- -------- --------
TOTAL ASSETS $294,103 $296,053 $303,158
======== ======== ========
</TABLE>
LIABILITIES AND SHAREHOLDER-MEMBERS' EQUITY
-------------------------------------------
<TABLE>
CURRENT LIABILITIES:
<S> <C> <C> <C>
Long-term debt due within one year $ 4,298 $ 11,237 $ 9,058
Notes payable 10,000 4,625 13,500
Accounts payable 19,682 24,225 20,462
Accrued interest 1,515 1,122 1,605
Accrued liabilities 9,059 9,007 8,988
Patronage payable 7,001 13,820 22,895
-------- -------- --------
Total Current Liabilities 51,555 64,036 76,508
LONG-TERM DEBT 48,950 52,357 59,333
OTHER LONG-TERM LIABILITIES 26,764 18,623 15,550
DEFERRED INCOME TAX PAYABLE 6,606 - -
NET LIABILITIES OF DISCONTINUED OPERATIONS 38,680 41,463 23,572
SHAREHOLDER-MEMBERS' EQUITY 121,548 119,574 128,195
-------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDER-MEMBERS' EQUITY $294,103 $296,053 $303,158
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated financial statements.
F-3
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
--------------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands)
Nine Months Ended
March 31 Year Ended June 30
---------------------- -------------------------------
1994 1993 1993 1992 1991
--------- ----------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES $210,483 $189,071 $289,125 $239,657 $214,990
OPERATING EXPENSES:
Cost of products sold 153,154 141,471 213,540 152,324 112,622
Provision for closure
of gypsum disposal area 5,922 - - - -
Selling 20,600 18,194 28,940 27,731 28,036
General and administrative 12,985 11,511 17,290 18,798 19,359
-------- -------- -------- -------- --------
192,661 171,176 259,770 198,853 160,017
-------- -------- -------- -------- --------
OPERATING INCOME 17,822 17,895 29,355 40,804 54,973
Interest expense, net (3,083) (2,708) (3,569) (3,930) (4,307)
Other income (expense) 258 548 592 (531) 777
-------- -------- -------- -------- --------
MARGINS FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 14,997 15,735 26,378 36,343 51,443
INCOME TAXES 3,071 243 3,697 4,994 3,406
-------- -------- -------- -------- --------
MARGINS FROM CONTINUING
OPERATIONS BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 11,926 15,492 22,681 31,349 48,037
DISCONTINUED OPERATIONS:
Loss from discontinued
operations (less
applicable income tax
credits of $8,086 and
$1,982 for the nine
months ended March 31,
1994 and 1993, and $4,555,
$5,898 and $4,179 for the
fiscal years ended June 30,
1993, 1992 and 1991 (13,621) (16,540) (17,891) (18,346) (8,653)
CUMULATIVE EFFECT TO JULY 1,
1993, OF CHANGE IN
ACCOUNTING FOR DEFERRED
INCOME TAXES:
Continuing operations (6,149) - - - -
Discontinued operations 16,404 - - - -
-------- -------- -------- -------- --------
NET MARGINS (LOSS) $ 8,560 $ (1,048) $ 4,790 $ 13,003 $ 39,384
======== ======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated financial statements.
F-4
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
--------------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF SHAREHOLDER-MEMBERS' EQUITY
------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands)
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,
June 30, 1991 $26,015 $1,460 $ 568 $65,731 $62,469 $(17,481) $138,762
Net margins - - - - - 13,003 13,003
Cash patronage
refunds - - - - - (22,895) (22,895)
Stock issued 161 - - 511 - - 672
Stock retired - - (369) (861) - - (1,230)
Other - - - - (117) - (117)
------- ------ ------ ------- ------- -------- --------
Balances,
June 30, 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
Cash 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>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated financial statements.
F-5
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
--------------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands)
Nine Months
Ended March 31 Year Ended June 30
----------------------- --------------------
1994 1993 1993 1992 1991
--------- ----------- --------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net margins (loss) $ 8,560 $ (1,048) $ 4,790 $ 13,003 $ 39,384
(Margins) loss from discontinued
operations after cumulative
effect of change in accounting
principle (2,783) 16,540 17,891 18,346 8,653
--------- -------- --------- -------- --------
Net margins from continuing operations 5,777 15,492 22,681 31,349 48,037
Reconciliation of net margins from
continuing operations to net cash
provided by operating activities:
Deferred income tax payable 3,797 - - - -
Depreciation, depletion
and amortization 12,199 9,444 14,444 12,094 10,586
Accrual for closure of gypsum
disposal area 5,922 - - - -
Deferred raw material cost - - 1,977 - -
(Gain) loss on sale of property
plant and equipment (51) 53 (277) (440) (762)
Net change in operating assets
and liabilities (14,971) (23,170) 2,702 6,205 2,657
Other (1,610) (270) (378) (2,035) 1,430
--------- -------- --------- -------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 11,063 1,549 41,149 47,173 61,948
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for newsprint contract
obligations (3,909) (3,611) (4,350) (3,138) (1,474)
Purchase of property, plant
and equipment (7,548) (22,653) (26,448) (24,045) (4,415)
Proceeds from sale of property,
plant and equipment 213 195 543 838 930
Other 514 304 646 (943) 332
--------- -------- --------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (10,730) (25,765) (29,609) (27,288) (4,627)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt payments (123,501) (65,475) (111,606) (20,541) (8,523)
Debt proceeds 118,530 68,173 97,933 28,580 -
Payment of cash patronage (13,405) (22,480) (22,480) (27,120) (12,322)
Payment of capital equity credits - - - (7,785) (7,270)
Proceeds from issuance of common
stock - - - - 348
Purchase of common stock - - - (1,230) -
--------- -------- --------- -------- --------
NET CASH USED BY FINANCING ACTIVITIES (18,376) (19,782) (36,153) (28,096) (27,767)
--------- -------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (18,043) (43,998) (24,613) (8,211) 29,554
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 22,014 46,627 46,627 54,838 25,284
--------- -------- --------- -------- --------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 3,971 $ 2,629 $ 22,014 $ 46,627 $ 54,838
========= ======== ========= ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated financial statements.
F-6
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
--------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NINE MONTHS ENDED MARCH 31, 1994 AND 1993
-----------------------------------------
AND FISCAL YEARS JUNE 30, 1993, 1992 AND 1991
---------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Financial Statements
-----------------------------
The accompanying consolidated financial statements include the accounts
of Mississippi Chemical Corporation, its subsidiaries and its proportionate
share of the assets and liabilities of Triad Chemical, a 50% owned,
unincorporated joint venture (collectively, the "Company"). All material
intercompany transactions and balances have been eliminated.
Mississippi Chemical Corporation is organized and operated on a
cooperative basis as a manufacturer and distributor of chemical fertilizer
primarily to its shareholder-members (see Note 18). The chemical fertilizer
products are primarily used as agricultural fertilizers. Newsprint is
manufactured and distributed by the Company's wholly owned subsidiary,
Newsprint South, Inc. ("NSI") (see Note 17).
The Company has the right to withdraw, at cost, approximately one-half
of the production of the Triad facilities and is obligated to withdraw
certain minimum quantities as specified by the Production Withdrawal
Agreement. The venture's assets constitute approximately 3% of total assets
at March 31, 1994, 2.8% at June 30, 1993, and 2.6% at June 30, 1992.
Inventories
-----------
Inventories are stated at the lower of cost or market. Cost has been
determined under an average cost method for finished products and raw
materials and under a moving average method for replacement parts.
Investment
----------
Investment in the National Bank for Cooperatives is stated at cost,
increased for the amount of patronage refunds received in the form of stock
and allocated surplus. The investment is reduced by the amounts redeemed.
This approximates the equity method of accounting and is in accordance with
industry practice.
Property Held for Sale
----------------------
Assets are classified as property held for sale if the Company is
actively engaged in trying to dispose of the assets. These assets are
valued at cost or net realizable value, whichever is less.
Property, Plant and Equipment
-----------------------------
Depreciation of property, plant and equipment is provided over the
estimated useful lives of the related assets using primarily the declining-
balance method.
Interest costs attributable to major construction and other projects
under development are capitalized in the appropriate property account and
amortized over the life of the related asset.
The Company is obligated under certain leases which for accounting
purposes are considered to be equivalent to installment purchases. The
costs of such properties are included in property, plant and equipment. The
related lease obligations, less amounts due within one year, are set forth
separately in long-term debt.
F-7
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Income Taxes
------------
The provision for income taxes relates to margins from non-member
business and such other earnings as may not be currently taxable to members.
A provision for income taxes is made on margins from member business as they
relate to nonqualified capital equity credits and reserves. No provision
for income taxes has been made on margins from member business distributed
as cash patronage refunds which are deductible in determining taxable
income.
In February 1992, the Financial Accounting Standards Board issued a new
standard on accounting for income taxes which significantly changes the
accounting for deferred income taxes. The Company adopted this standard
effective July 1, 1993.
Reclassifications
-----------------
The Company has reclassified the presentation of certain prior year
information to conform with the current year's presentation.
NOTE 2 - INVENTORIES:
Inventories consisted of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30
March 31 ---------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Finished products $ 13,435 $ 8,596 $ 9,114
Raw materials and supplies 2,900 3,281 4,167
Replacement parts 23,333 22,867 22,203
--------- --------- ---------
$ 39,668 $ 34,744 $ 35,484
========= ========= =========
</TABLE>
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30
March 31 ---------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Mineral properties $ 18,574 $ 18,574 $ 18,574
Land 8,092 8,094 7,803
Buildings 23,503 23,835 22,577
Machinery and equipment 307,682 301,633 259,633
Construction in progress 6,338 5,887 22,669
--------- --------- ---------
364,189 358,023 331,256
Less accumulated depreciation,
depletion and amortization (248,293) (237,509) (223,606)
--------- --------- ---------
$ 115,896 $ 120,514 $ 107,650
========= ========= =========
</TABLE>
F-8
<PAGE>
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT (Continued):
The Company leases certain machinery and equipment with a cost of
approximately $9,967,000 and accumulated depreciation of $9,626,000 for
periods ranging from 5 to 25 years. These leases have been capitalized and
the amortization of these assets is included in depreciation expense. These
assets were financed primarily by industrial revenue bond issues. At the
expiration of the leases, the Company has the option to buy the property or
renew the leases at a nominal amount.
NOTE 4 - CREDIT AGREEMENTS AND LONG-TERM DEBT:
The Company has commitments from various banks, primarily the National
Bank for Cooperatives, which allow the Company to borrow up to $55,000,000
on a short-term basis. Outstanding borrowings under these commitments were
$10,000,000 at March 31, 1994, $4,625,000 at June 30, 1993, and $13,500,000
at June 30, 1992. Subsequent to March 31, 1994, the Company obtained an
additional $5,000,000 commitment from a commercial bank.
In fiscal 1993, the Company obtained a $20,000,000 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. Outstanding
borrowings under this commitment were $3,000,000 at March 31, 1994.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30
March 31 -------------------
1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Mortgage notes payable:
National Bank for Cooperatives (7.6%) $26,400 $ 32,800 $28,000
Financial institutions (8.3%) 6,600 9,200 15,969
Purchase money mortgages - 839 1,890
Capitalized lease obligations (7.0%) 17,100 17,607 19,384
Subordinated debentures (9.5%) 3,148 3,148 3,148
------- -------- -------
53,248 63,594 68,391
Long-term debt due within one year (4,298) (11,237) (9,058)
------- -------- -------
$48,950 $ 52,357 $59,333
======= ======== =======
</TABLE>
Substantially all of the assets of the Company are pledged as
collateral under various loan and lease agreements.
Mortgage notes payable to the National Bank for Cooperatives are stated
at the current effective interest rate which is subject to adjustment by the
bank, related to its cost of funds.
F-9
<PAGE>
NOTE 4 - CREDIT AGREEMENTS AND LONG-TERM DEBT (Continued):
The various loan agreements have covenants that require, among other
things, that the Company maintain specified levels of tangible assets to
long-term debt, long-term debt to equity, current assets to current
liabilities and place restrictions on the payment of cash patronage
refunds. Loan agreements with the National Bank for Cooperatives require
the Company and its subsidiaries to maintain an investment in varying
amounts in the National Bank for Cooperatives.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Long-Term Capitalized Leases
(Dollars in thousands) Obligations (Including Interest)
----------- --------------------
<S> <C> <C>
Twelve months ending March 31
-----------------------------
1995 $ 2,750 $ 2,589
1996 9,301 2,508
1997 8,900 2,239
1998 8,600 2,020
1999 2,700 1,937
Thereafter 3,897 11,837
-------- --------
36,148 23,130
Less interest - 6,030
-------- --------
$ 36,148 $ 17,100
======== ========
</TABLE>
NOTE 5 - SHAREHOLDER-MEMBERS' EQUITY:
Common stock authorized consisted of the following at March 31, 1994:
<TABLE>
<CAPTION>
Authorized
Common Stock Par Value Shares
------------ --------- ----------
<S> <C> <C>
Nitrogen Series I $30 50,000
Nitrogen Series II 15 2,500,000
Nitrogen Series III 2 2,750,000
Mixed Series IV 15 1,500,000
Mixed Series V 15 1,000,000
Potash Series VI 15 150,000
Potash Series VII (None Issued) 15 450,000
</TABLE>
F-10
<PAGE>
NOTE 5 - SHAREHOLDER - MEMBERS' EQUITY (Continued):
Common stock issued and outstanding consisted of the following:
<TABLE>
<CAPTION>
Potash
Nitrogen Series Mixed Series Series
----------------------------- ------------- --------
I II III IV V VI
------- --------- --------- ------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding,
June 30, 1991 12,159 1,369,812 2,551,301 94,537 2,773 37,878
Retirements - - - - - (24,601)
Issues - 10,768 - - - -
Transfers (649) - 9,735 - - -
------ --------- --------- ------ ----- -------
Shares outstanding,
June 30, 1992 11,510 1,380,580 2,561,036 94,537 2,773 13,277
Retirements - - - - - (122)
Issues - 6,634 - - - -
Transfers (609) - 9,135 - - -
------ --------- --------- ------ ----- -------
Shares outstanding,
June 30, 1993 10,901 1,387,214 2,570,171 94,537 2,773 13,155
Issues - 6,642 - - - -
Transfers (733) - 10,995 - - -
------ --------- --------- ------ ----- -------
Shares outstanding,
March 31, 1994 10,168 1,393,856 2,581,166 94,537 2,773 13,155
====== ========= ========= ====== ===== =======
</TABLE>
The Board of Directors intends to reserve 40% of the earnings from
business with shareholders for the fiscal year ending June 30, 1994, which
is reflected in the March 31, 1994 financial statements. During June 1993,
the Board of Directors voted to reserve 50% of the earnings from business
with shareholders during fiscal 1993. These reserves are reflected in an
"Allocated Surplus Account" maintained by the Company, and amounts set aside
in the account are allocated to individual shareholders in the same
proportion that the earnings from business with such shareholders bears to
total earnings from business with all shareholders. The allocated surplus,
which totalled $34,262,000 and $29,595,000 at March 31, 1994 and June 30,
1993, would receive a preference in distribution over unallocated surplus in
the event of the liquidation of the Company. The allocated surplus is a
component of retained deficit which is included in the consolidated
statements of shareholder-members' equity.
Nonqualified capital equity credits issued in 1981 were redeemed in
fiscal 1992. The redemption of capital equity credits is at the discretion
of the Board of Directors and is based on the financial condition and
capital requirements of the Company, the availability of funds under
restrictive covenants in the Company's financing arrangements, tax
considerations and other factors. The Board of Directors did not elect to
redeem capital equity credits in fiscal year 1993 or fiscal year 1994.
The Company's bylaws currently prohibit the payment of dividends on any
class or series of common stock and provide for one vote for each share
outstanding (see Note 18).
F-11
<PAGE>
NOTE 6 - RETIREMENT PLANS:
The Company maintains non-contributory defined benefit pension plans
which provide benefits to substantially all full-time employees. Under the
plans, retirement benefits are primarily a function of both the average
annual compensation and number of years of credited service. The plans are
funded annually by the Company, subject to the full funding limitation.
Net periodic pension expense includes the following components:
<TABLE>
<CAPTION>
March 31 June 30
------------------ ---------------------------
(Dollars in thousands) 1994 1993 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(Unaudited)
Service cost - benefits earned
during the period $ 1,149 $ 1,117 $ 1,489 $ 1,354 $ 1,111
Interest cost on projected
benefit obligations 3,026 2,825 3,767 3,515 3,268
Actual gain on plan assets (2,294) (4,368) (5,824) (5,119) (5,013)
Net amortization and deferral
of transition assets (562) (293) (390) (335) (460)
Unrecognized gain (loss) on
plan assets (1,487) 882 1,176 807 1,027
------- ------- ------- ------- -------
Net periodic pension expense $ (168) $ 163 $ 218 $ 222 $ (67)
======= ======= ======= ======= =======
</TABLE>
The following table sets forth the plans' funded status and the amounts
included in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
March 31 June 30
-------- -----------------
(Dollars in thousands) 1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $48,260 $45,988 $42,475
Non-vested benefit obligation 60 72 317
------- ------- -------
Accumulated benefit obligation 48,320 46,060 42,792
Increase in benefits due to future
compensation increases 10,939 8,991 8,590
------- ------- -------
Projected benefit obligation 59,259 55,051 51,382
Estimated fair value of plan assets 61,264 60,304 55,667
------- ------- -------
Plan assets in excess of projected
benefit obligation 2,005 5,253 4,285
Remaining unrecognized transition assets (4,364) (4,761) (5,112)
Unrecognized net loss 8,486 4,394 4,257
------- ------- -------
Prepaid pension cost at end of period $ 6,127 $ 4,886 $ 3,430
======= ======= =======
</TABLE>
The following assumptions were used to measure net periodic pension
cost for the plans for the nine months ended March 31, 1994 and 1993, and
the fiscal years ended June 30, 1993, 1992 and 1991:
<TABLE>
<S> <C>
Discount rate 7.5%
Expected long-term rate of return on assets 8.5%
Average increase in compensation levels 6.5%
</TABLE>
F-12
<PAGE>
NOTE 6 - RETIREMENT PLANS (Continued):
The plans' assets consist primarily of guaranteed investment contracts
and marketable equity securities.
The Company also has contributory thrift plans covering substantially
all employees who have completed minimum service requirements. Company
contributions totalled approximately $611,000 for the nine months ended
March 31, 1994, $514,000 for the nine months ended March 31, 1993
(unaudited), $670,000 for the fiscal year ended June 30, 1993, $590,000 for
the fiscal year ended June 30, 1992, and $580,000 for the fiscal year ended
June 30, 1991.
The Company has no material post-retirement benefit obligations.
NOTE 7 - LEASE COMMITMENTS:
The Company has commitments under operating leases for plant rolling
stock items and 23 storage warehouses.
The following is a schedule of the future minimum rental payments
required under operating leases that have noncancellable lease terms in
excess of one year as of March 31, 1994:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Twelve Months Ending March 31:
1995 $ 712
1996 319
1997 135
1998 16
1999 6
Thereafter 95
------
$1,283
======
</TABLE>
Rental expense for all operating leases was $841,000 for the nine
months ended March 31, 1994, $809,000 for the nine months ended March 31,
1993 (unaudited), $848,000 for the fiscal year ended June 30, 1993, $823,000
for the fiscal year ended June 30, 1992, and $2,357,000 for the fiscal year
ended June 30, 1991.
F-13
<PAGE>
NOTE 8 - INCOME TAXES:
The following is a summary of the components of the provision for
income taxes:
<TABLE>
<CAPTION>
(Dollars in thousands)
Nine Months Ended
March 31 Fiscal Year Ended
-------------------- ------------------------
1994 1993 1993 1992 1991
------- ----------- ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Current:
Federal $ 5,230 $ - $3,408 $4,697 $3,199
State and local 194 243 289 297 207
------- ----- ------ ------ ------
5,424 243 3,697 4,994 3,406
Deferred:
Federal (2,429) - - - -
State and local 76 - - - -
(2,353) - - - -
------- ----- ------ ------ ------
$ 3,071 $ 243 $3,697 $4,994 $3,406
======= ===== ====== ====== ======
</TABLE>
The tax effects of the significant temporary differences and tax credit
carryforwards at March 31, 1994 follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
Current Non-current
------- -----------
<S> <C> <C>
Federal and state net operating loss
carryforwards $1,691 $ -
Alternative minimum tax credit - 3,383
Employee benefit obligations 990 -
Accrual for closure of gypsum disposal area - 2,206
Other 128 551
------ -------
Deferred tax assets 2,809 6,140
Depreciation and amortization - (11,080)
Pension - (1,666)
------ --------
Deferred tax liabilities - (12,746)
------ --------
Net deferred taxes $2,809 $ (6,606)
====== ========
</TABLE>
F-14
<PAGE>
NOTE 8 - INCOME TAXES (Continued):
A reconciliation, as of March 31, 1994 and 1993, and June 30, 1993,
1992 and 1991, of the effective tax rate follows:
<TABLE>
<CAPTION>
Nine months ended March 31 Fiscal Year Ended
-------------------------- --------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
(Unaudited)
% of % of % of % of % of
Earnings Earnings Earnings Earnings Earnings
Before Before Before Before Before
Taxes Taxes Taxes Taxes Taxes
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statutory tax rate 34.3% 34.0% 34.0% 34.0% 34.0%
Increase (decrease)
resulting from:
Deduction for cash
patronage paid (15.8) (37.5) (18.5) (21.4) (18.3)
State taxes, net 1.8 (0.3) 0.7 0.6 0.3
Other, net 0.1 5.4 (1.6) - (2.8)
----- ----- ----- -------- -----
20.4 1.6 14.6 13.2 13.2
Non-deductible losses
of subsidiaries - - (0.6) 0.6 -
Credit from non-
qualified capital
equity credit
revolved - - - - (6.6)
----- ----- ----- -------- -----
20.4% 1.6% 14.0% 13.8% 6.6%
===== ===== ===== ==== =====
</TABLE>
In connection with an Internal Revenue Service audit of fiscal years
1985 through 1987, the Company, on June 11, 1990, received an Examination
Report which proposed adjustments totalling approximately $3,300,000 to the
Company's tax liability for tax years 1983, 1984 and 1985. Interest on the
proposed deficiencies would be approximately $3,353,000 through March 31,
1994. It is the Service's position that Section 277 of the Internal Revenue
Code prohibits non-exempt cooperatives from carrying back losses incurred on
patronage business. It is the Company's position that, as a matter of law,
Section 277 does not apply to the Company. On July 9, 1990, the Company
filed with the District Director of the Internal Revenue Service its protest
of the proposed deficiency. The Company believes it has meritorious
defenses against the claimed assessments and intends to vigorously defend
its position in this matter. If the Company is unsuccessful, the relevant
losses, excluding interest, may be carried forward to succeeding tax years.
F-15
<PAGE>
NOTE 9 - RAW MATERIAL CONTRACTS:
During 1987, the Company entered into a contract to purchase natural
gas for the Yazoo City plant. Payments for gas deliveries under the
contract are based on certain fixed and market-related components. On March
31, 1994, this contract expired; however, the supplier continues to furnish
natural gas under the terms of the contract for a 120-day "renegotiations
period" to allow the opportunity for restructuring a new contract. The
Company and the supplier are currently discussing a new arrangement for the
supply of gas to the Yazoo City plant.
Mississippi Phosphates Corporation ("MPC"), a wholly owned subsidiary
of the Company, has entered into a contract to purchase from a third party
its full requirement of phosphate rock. The contract will expire on June
30, 2001. The purchase price for phosphate rock is based on the phosphate
rock costs incurred by certain domestic phosphate producers and the
operating performance of MPC. For fiscal 1993, a portion of the purchase
price of phosphate rock is subject to deferred payment. The deferred
portion, which is included in other long-term liabilities, will be due and
payable at a later date to be agreed upon.
MPC paid approximately $1,204,000 to a third party in consideration of
the third party's facilitating the phosphate rock contract. These payments
were recorded as a deferred cost of acquiring the contract and are being
amortized over the contract's ten-year term. The unamortized portions of
these payments, which are included in other assets at March 31, 1994 and
June 30, 1993, are $916,000 and $1,009,000, respectively.
NOTE 10 - MAJOR CUSTOMERS AND EXPORT SALES:
Sales to the Company's three largest customers were approximately
$57,257,000, $21,257,000 and $10,763,000 for the nine months ended March 31,
1994; $79,150,000, $32,957,000 and $13,860,000 for the fiscal year ended
June 30, 1993 (unaudited); $36,034,000, $32,080,000 and $13,879,000 for the
fiscal year ended June 30, 1992; and $38,261,000, $13,320,000 and
$13,178,000 for the fiscal year ended June 30, 1991. Export sales were less
than 10% of sales for the nine months ended March 31, 1994, and for the
fiscal years ended June 30, 1993, 1992 and 1991.
Substantially all of MPC's sales are made to a third party which has
been appointed the exclusive distributor of diammonium phosphate fertilizer
produced by MPC. Sales to the distributor are recorded net of the
distributor's commission. The distributor sells primarily in international
markets.
F-16
<PAGE>
NOTE 11 - COMMITMENTS AND CONTINGENCIES:
A significant portion of the Company's trade receivables are due from
entities which operate in the chemical fertilizer and farm supply industry.
A severe downturn in the agricultural economy could have an adverse impact
on the collectibility of those receivables.
During July 1990, the Company entered into an agreement granting to a
third party the exclusive four-year option to purchase the Company's
undeveloped phosphate mineral properties. In December 1993, the fourth and
final option payment was received by the Company. This option will expire
in June 1994. Under the existing terms, if it is not exercised, the Company
will realize a gain to the extent of the option payments received (see Note
14). 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 property held for sale at March 31, 1994, June 30, 1993 and June 30,
1992. However, the Company and the option holder are currently in the
process of negotiating new arrangements with respect to the properties.
On July 15, 1986, the first of 17 lawsuits was filed in the Twenty-
first Judicial District Court, Parish of Livingston, State of Louisiana,
against Triad Chemical and approximately 90 other named defendants by
numerous plaintiffs. The plaintiffs' claims are based on alleged personal
injuries and property damages as a result of exposure to hazardous waste
allegedly contributed by the defendants to the Combustion, Inc. site in
Livingston Parish, Louisiana. Triad is vigorously defending its position in
these proceedings and considers its defenses meritorious. No provision for
claims being made is included in the accompanying financial statements
because management is of the opinion that the ultimate disposition of this
matter will not involve a material loss to the Company.
Additionally, the Company, in the ordinary course of its business, is
the subject of, or a party to, other various pending or threatened legal
actions. The Company believes that any ultimate liability arising from
these actions will not have a significant impact on the future earnings of
the Company.
NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION:
The Company considers its holdings of highly liquid money market debt
instruments to be cash equivalents if the securities mature within 90 days
from the date of acquisition. These short-term investments were $2,240,000
at March 31, 1994, $18,347,000 at June 30, 1993, and $44,756,000 at June 30,
1992. There were no short-term investments at March 31, 1993.
Net refunds of income taxes were $244,000 for the nine months ended
March 31, 1994, $180,000 for the nine months ended March 31, 1993
(unaudited), $180,000 for the fiscal year ended June 30, 1993, $480,000 for
the fiscal year ended June 30, 1992, and $3,086,000 for the fiscal year
ended June 30, 1991. Payments of interest (net of amounts capitalized) were
$3,439,000 for the nine months ended March 31, 1994, $3,789,000 for the nine
months ended March 31, 1993 (unaudited), $5,266,000, $5,755,000 and
$6,649,000, respectively, for the fiscal years ended June 30, 1993, 1992 and
1991.
F-17
<PAGE>
NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION (Continued):
The increase in cash due to the changes in operating assets and
liabilities consisted of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) March 31 June 30
-------------------- ---------------------------
1994 1993 1993 1992 1991
-------- --------- -------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Accounts and notes receivable $ (6,936) $ (3,463) $(2,052) $ 1,914 $(7,320)
Inventories (4,924) (14,857) 740 (7,736) 3,959
Prepaid expenses and other
current assets (272) (333) 1,949 3,386 3,365
Accounts payable (4,543) (1,947) 3,764 7,983 2,916
Accrued interest 100 (112) (483) (130) (321)
Accrued liabilities 1,604 (2,458) (1,216) 788 58
-------- -------- ------- ------- -------
$(14,971) $(23,170) $ 2,702 $ 6,205 $ 2,657
======== ======== ======= ======= =======
</TABLE>
Supplemental disclosures regarding non-cash financing and investing
activities include the following:
<TABLE>
<CAPTION>
March 31 June 30
-------------------- ---------------------------
(Dollars in thousands) 1994 1993 1993 1992 1991
-------- -------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Capital expenditures made from
restricted funds $ 1,000 $ 1,000 $ 1,000 $ 7,790 $ 4,934
Net option proceeds deposited in
restricted funds - $ 1,000 $ 1,000 $ 2,000 $ 9,967
Capital expenditures financed by
issuance of long-term debt - - - $ 980 -
Stock issued for consideration
other than cash $ 99 $ 411 $ 411 $ 672 -
Note payable converted to
long-term debt - $ 10,000 $10,000 - -
Accrued liability transferred
to long-term liability $ 1,258 - - - -
Stock acquired by reducing
shareholder's trade accounts
receivable - - - - $ 3,720
</TABLE>
NOTE 13 - OTHER NON-CURRENT ASSETS:
Other non-current assets are comprised of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30
March 31 -----------------
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Receivable from NSI for
contract payments $ 13,829 $ 9,379 $ 5,384
Other 9,614 7,581 6,401
-------- ------- -------
$ 23,443 $16,960 $11,785
======== ======= =======
</TABLE>
F-18
<PAGE>
NOTE 14 - OTHER LONG-TERM LIABILITIES:
Other long-term liabilities are comprised of the following:
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30
March 31 ---------------
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Option proceeds $13,967 $12,967 $11,967
Accrual for closure of gypsum disposal area 5,922 - -
Other 6,875 5,656 3,583
------- ------- -------
$26,764 $18,623 $15,550
======= ======= =======
</TABLE>
On March 31, 1994, MPC charged to earnings $5,922,000 relating to the
estimated cost of the future closure of the phosphogypsum disposal facility
located at Pascagoula. In future years, MPC expects to record additional
charges of approximately $3,000,000 related to the future closure of the
facility. The current charge of $5,922,000 relates to the portion of the
disposal facility utilized to date, and the estimated future charges of
approximately $3,000,000 will be accrued over the estimated remaining life
of the facility.
NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Cash Equivalents
-------------------------
The carrying amount approximates fair value because of the short
maturity of those instruments.
Accounts Receivable and Payable
-------------------------------
The carrying amounts approximate fair value because of the short
settlement periods of these instruments.
Long-Term Debt
--------------
The fair value of the Company's long-term debt is estimated based on
the current rates offered to the Company for debt of the same remaining
maturities.
The estimated fair values of the Company's financial instruments at
March 31, 1994 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
Carrying Fair
Amount Value
-------- -------
<S> <C> <C>
Cash and cash equivalents $ 3,971 $ 3,971
Long-term debt $48,950 $48,513
</TABLE>
F-19
<PAGE>
NOTE 16 - INTEREST EXPENSE, NET:
Interest expense, net of interest income, consisted of the following:
<TABLE>
<CAPTION>
(Dollars in thousands)
March 31 June 30
----------------- ---------------------------
1994 1993 1993 1992 1991
------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Interest expense $ 4,893 $ 4,710 $ 5,994 $ 6,523 $ 6,550
Interest capitalized - (1,027) (1,027) (664) (48)
Interest income (1,810) (975) (1,398) (1,929) (2,195)
------- ------- ------- ------- -------
$ 3,083 $ 2,708 $ 3,569 $ 3,930 $ 4,307
======= ======= ======= ======= =======
</TABLE>
NOTE 17 - DISPOSITION OF NSI:
On June 24, 1994, the Company closed a transaction whereby it will
dispose of a majority of its interest in NSI effective June 30, 1994. This
action was taken due to substantial losses incurred to date by NSI and the
expectation of continuing losses. The transaction involves a transfer by
the Company on June 30, 1994, of 70% of its economic interest in NSI to
various individuals designated by the lessor. The Company will not retain
any voting interest in NSI. The disposition of NSI will also allow the
Company to focus its attention on its core fertilizer business.
Under the terms of the transaction, the Company paid $19,000,000 to NSI
in various forms including capital contributions, payments in liquidation of
the Company's obligations under a newsprint purchase contract and certain
tax-compensating payments pursuant to a tax-sharing agreement. Prior loans
in the amount of approximately $14,000,000 made by the Company to NSI
pursuant to a newsprint purchase contract between the Company and NSI were
converted to capital. Pursuant to the transaction, the Company also
purchased from NSI its CoBank common stock for a purchase price of
$4,000,000. This stock is scheduled for redemption at the face amount by
CoBank during the next five years.
Subsequent to this transaction, the Company is accounting for its
continuing interest in NSI using the cost method of accounting for
investments. In connection therewith, the Company will write up to zero its
investment in NSI as it will have no continuing obligation to fund any of
NSI's future losses.
The Company expects the overall impact of the disposition to have a net
favorable impact on the Company's financial statements. However, until all
of the relevant costs can be determined, the ultimate disposition will not
be recorded in the Company's consolidated financial statements.
F-20
<PAGE>
NOTE 17 - DISPOSITION OF NSI (Continued):
To facilitate analysis, the accompanying summarized financial
information of NSI for the nine months ended March 31, 1994 and 1993, and
for the fiscal years ended June 30, 1993, 1992 and 1991 was as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) March 31 March 31 June 30 June 30 June 30
1994 1993 1993 1992 1991
--------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
BALANCE SHEETS:
Current Assets $ 20,561 $ 18,076 $ 20,416 $ 18,698 $ 24,197
======== ======== ======== ======== ========
Total Assets $ 56,282 $ 31,566 $ 33,938 $ 32,753 $ 38,468
======== ======== ======== ======== ========
Current Liabilities $ 27,085 $ 17,818 $ 15,048 $ 13,896 $ 8,367
======== ======== ======== ======== ========
Total Liabilities $ 94,962 $ 71,678 $ 75,401 $ 56,325 $ 43,694
======== ======== ======== ======== ========
Net Deficit $(38,680) $(40,112) $(41,463) $(23,572) $ (5,226)
======== ======== ======== ======== ========
STATEMENTS OF OPERATIONS:
Net Sales $ 70,481 $ 71,367 $ 97,293 $ 95,472 $106,073
======== ======== ======== ======== ========
Loss Before Cumulative Effect
of Change in Accounting
Principle $(13,621) $(16,540) $(17,891) $(18,346) $ (8,653)
======== ======== ======== ======== ========
Cumulative Benefit to
July 1, 1993, of Change
in Accounting for
Deferred Income Taxes $ 16,404 $ - $ - $ - $ -
======== ======== ======== ======== ========
Net Margins (Loss) $ 2,783 $(16,540) $(17,891) $(18,346) $ (8,653)
======== ======== ======== ======== ========
</TABLE>
NOTE 18 - PLAN OF REORGANIZATION
On June 28, 1994, the shareholder-members of the Company will vote upon
a proposal to adopt a plan of reorganization pursuant to which the Company
will merge with and into a newly created wholly owned subsidiary, the New
Company, which is a non-cooperative Mississippi business corporation with
one class of common stock. If the plan is approved, it will become
effective July 1, 1994.
F-21
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
All fees and expenses will be paid by the Company. The following
expenses (other than the SEC and NASD fees) are estimated:
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee .................................. $28,552
NASD filing fee ....................................... 8,780
Nasdaq Stock Market's National Market application fee . 50,000
Printing expenses ..................................... *
Fees and expenses of counsel .......................... *
Fees and expenses of accountants ...................... *
Transfer agent and registrar fees ..................... *
Blue sky fees and expenses ............................ *
Miscellaneous ......................................... *
-------
Total .............................................. $ *
=======
- --------------------------
</TABLE>
* To be filed by amendment.
ITEM 14. Indemnification of Directors and Officers.
Under Mississippi law, a corporation may indemnify any person who was
or is a party to an action (other than an action by or in the right of the
corporation) by reason of his service as a director or officer of the
corporation, or his service, at the corporation's request, as a director,
officer, employee or agent of another corporation or other enterprise, against
expenses (including attorneys' fees) that are actually and reasonably incurred
by him ("Expenses"), and judgments, fines and amounts paid in settlement that
are actually and reasonably incurred by him, in connection with the defense or
settlement of such action, provided that he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interest and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. Mississippi law
permits a corporation to indemnify any person referred to above against
reasonable expenses incurred in connection with the defense or settlement of an
action by or in the right of the corporation, provided that he has not been
judged liable to the corporation. The determination as to whether a person
seeking indemnification has met the required standard of conduct is to be made
(1) by a majority vote of a quorum of disinterested members of the board of
directors and if a quorum of disinterested directors cannot be obtained, by vote
of a majority of the members of a committee (the "Committee") composed of at
least two disinterested directors and designated by the entire Board, or (2) by
independent legal counsel if the disinterested directors or the Committee so
direct, or (3) by the shareholders, provided that shares owned or controlled by
interested directors do not count. Mississippi law also provides for the
mandatory indemnification of any director, officer, employee or agent against
Expenses to the extent such person has been successful in any proceeding.
The Company's Articles of Incorporation provide for indemnification of
the Company's directors to the fullest extent permitted by Mississippi law.
The Company maintains liability insurance for the benefit of its
directors and officers.
II-1
<PAGE>
Under the terms of the Underwriting Agreement, the Underwriters have
agreed to indemnify, under certain conditions, the Company, its directors,
certain of its officers and persons who control the Company within the meaning
of the Securities Act of 1933, as amended (the "Securities Act") against certain
liabilities.
ITEM 15. Recent Sales of Unregistered Securities.
All of the Company's currently outstanding shares of Common Stock were
issued in exchange for interests in the Cooperative pursuant to the
Reorganization, including the exchange offer. See "The Reorganization" for a
description of the terms of these issuances. These issuances were registered
under the Securities Act of 1933, as amended, on Form S-4 (File No. 33-53119).
All of the other shares issued by the Company to the Cooperative to facilitate
the formation of the Company were cancelled in the Reorganization.
ITEM 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
1. Underwriting Agreement
3.1 Articles of Incorporation of the Company.
3.3 By-laws of the Company.
4.7 Specimen of the Company's 9 1/2% Subordinated Note Due July
1, 1999, (incorporated herein by reference to Exhibit 4.7 to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993, File No. 2-7803).
4.8 Term Loan Agreement Number 6420 dated August 25, 1987,
between the Company's subsidiary, Newsprint South, Inc., and
Jackson Bank for Cooperatives (now National Bank for
Cooperatives) in an amount not to exceed $4,700,000, as
amended and restated by Amendment to Loan Agreement Number
6420(A) dated February 2, 1989, (incorporated herein by
reference to Exhibit 4.8 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1993 File No. 2-
7803).
4.9 Line of Credit Agreement Number 6899 dated December 13, 1991,
between the Company's subsidiary, Newsprint South, Inc., and
National Bank for Cooperatives, for a revolving line of
credit in an amount equal to the lesser of the Borrowing Base
(as defined in Section 6 thereof) or $10,680,000, as amended
by Amendment Number 6899(A) dated June 12, 1992, and
Amendment Number 6899(B) dated December 18, 1992, which
increased the line of credit to $10,992,000, (incorporated
herein by reference to Exhibit 4.9 to the Company's Annual
Report on Form 10-K for the fiscal year ended on June 30,
1993, File No. 2-7803).
4.10 Term Loan Agreement number 6939 dated October 19, 1992,
between the Company's subsidiary, Mississippi Phosphates
Corporation, and National Bank for Cooperatives and the
Company as co-maker in an aggregate principal amount not to
exceed $10,000,000, (incorporated herein by reference to
Exhibit 4.10 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, File No. 2-7803).
4.11 Line of Credit Agreement Number 6871 dated September 30,
1991, between the Company and National Bank for Cooperatives
for a revolving line of credit in the amount of
II-2
<PAGE>
$10,000,000, as amended by Amendment Number 6871(A) dated
October 20, 1992, which increases the line of credit to
$15,000,000, (incorporated herein by reference to Exhibit
4.11 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1993, File No. 2-7803).
4.12 Amendment Number 6392(A) dated November 2, 1987, and
Amendment Number 6392(B) dated April 20, 1988, to Loan
Agreement Number 6392 dated as of April 24, 1987, between the
Company and the Jackson Bank for Cooperatives (now the
National Bank for Cooperatives), (incorporated herein by
reference to Exhibit 4.12 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1993, File No.
2-7803).
4.13 Loan Agreement Number 6392 dated as of April 24, 1987,
between the Company and Jackson Bank for Cooperatives (now
the National Bank for Cooperatives) in a principal amount not
to exceed $35,000,000; (incorporated herein by reference to
Exhibit 4.13 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1987, File No. 2-7803).
4.14 Revolving Credit/Term Loan Agreement dated August 6, 1992,
between the Company and NationsBank of Tennessee, purchaser
of the Company's Series I Secured Note, Due June 30, 1999, in
the aggregate principal amount of $20,000,000; filed as
Exhibit 4.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1992, File No. 2-7803, and
incorporated herein by reference thereto.
4.15 Note Purchase Agreement dated as of December 26, 1989,
between the Company and John Hancock Variable Life Insurance
Company, purchaser of the Company's 9.97% Secured Notes,
Series H, Due 1999, in the aggregate principal amount of
$6,000,000; filed as an exhibit to Exhibit 4.3 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1990, File No. 2-7803, and incorporated herein
by reference thereto.
4.16 Twelfth Supplemental Indenture dated as of August 6, 1992,
between the Company and Deposit Guaranty National Bank; filed
as Exhibit 4.3 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1992, File No. 2-7803, and
incorporated herein by reference thereto.
4.17 Eleventh Supplemental Indenture dated as of July 16, 1990,
between the Company and Deposit Guaranty National Bank,
together with Exhibit A thereto, being an Agreement for Real
Estate Purchase Option dated July 16, 1990, for the sale of
the Company's Hardee County, Florida, property and underlying
phosphate reserves; filed as Exhibit 4.2 to Amendment No. 1
of the Company's Report on Form 8 dated November 7, 1990,
File No. 2-7803, and incorporated herein by reference
thereto.
4.18 Tenth Supplemental Indenture dated as of December 26, 1989,
between the Company and Deposit Guaranty National Bank,
together with Exhibit A thereto, being a Note Purchase
Agreement dated as of December 26, 1989, between the Company
and John Hancock Variable Life Insurance Company, purchaser
of the Company's 9.97% Secured Notes, Series H, Due 1999, in
the aggregate principal amount of $6,000,000; filed as
Exhibit 4.3 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1990, File No. 2-7803, and
incorporated herein by reference thereto.
II-3
<PAGE>
4.19 Ninth Supplemental Indenture dated as of February 23, 1988,
between the Company and Deposit Guaranty National Bank; filed
as Exhibit 4.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1988, File No. 2-7803, and
incorporated herein by reference thereto.
4.20 Eighth Supplemental Indenture dated as of May 15, 1983,
between the Company and Deposit Guaranty National Bank; filed
as Exhibit 4.1 to Post-Effective Amendment No. 3 to
Registration Statement No. 2-71827 and incorporated herein by
reference thereto.
4.21 Seventh Supplemental Indenture dated as of October 1, 1979,
between the Company and Deposit Guaranty National Bank; filed
as Exhibit 2 to Post-Effective Amendment No. 3 to
Registration Statement No. 2-57390 and incorporated herein by
reference thereto.
4.22 Sixth Supplemental Indenture dated as of September 1, 1979,
between the Company and Deposit Guaranty National Bank, filed
as Exhibit 3 to Post-Effective Amendment No. 3 to
Registration Statement No. 2-57390 and incorporated herein by
reference thereto.
4.23 Fifth Supplemental Indenture dated as of June 1, 1978,
between the Company and Deposit Guaranty National Bank; filed
as Exhibit 7 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1979, File No. 2-7803, and
incorporated herein by reference thereto.
4.24 Fourth Supplemental Indenture dated as of May 1, 1978,
between the Company and Deposit Guaranty National Bank; filed
as Exhibit 9 to Post-Effective Amendment No. 2 to
Registration Statement No. 2-57390 and incorporated herein by
reference thereto.
4.25 Third Supplemental Indenture dated as of June 28, 1977,
between the Company and Deposit Guaranty National Bank; filed
as Exhibit 6 to Post-Effective Amendment No. 1 to
Registration Statement No. 2-57390 and incorporated herein by
reference thereto.
4.26 Second Supplemental Indenture dated as of September 30, 1976,
among the Company, New Orleans Bank for Cooperatives, John H.
Farrelly and Deposit Guaranty National Bank; filed as Exhibit
6 to Registration Statement No. 2-57390 and incorporated
herein by reference thereto.
4.27 First Supplemental Indenture, dated as of September 7, 1976,
among the Company, New Orleans Bank for Cooperatives, John H.
Farrelly and Deposit Guaranty National Bank; filed as Exhibit
3 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1976, File No. 2-7803, and incorporated
herein by reference thereto.
4.28 Note Purchase Agreement effective as of September 1, 1976,
between the Company and the Purchasers of the Company's
9 1/2% Secured Notes, Series B, Due 1996, in the aggregate
principal amount of $35,000,000, together with Exhibits A and
B thereto; filed as Exhibit 2 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1976, File
No. 2-7803, and incorporated herein by reference thereto.
4.29 Indenture dated as of May 1, 1989, between the Company and
Sunburst Bank, as Trustee, for the issuance by the Company
and 9 1/2% subordinated notes, due July 1, 1999, in the
aggregate principal amount of $11,061,000; filed as Exhibit
4.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1989, File No. 7-2803, and
incorporated herein by reference thereto.
II-4
<PAGE>
5. Opinion re Legality.
10.1 First Supplement to Lease Agreement dated as of June 30,
1992, to the Lease Agreement dated as of September 28, 1989,
among Newsprint South, Inc., The First National Bank of
Boston, and G. Patrick McEnroe, as Trustees, (incorporated
herein by reference to Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1993,
File No. 2-7803).
10.2 Second Supplement to Lease Agreement dated as of July 15,
1992, to the Lease Agreement dated as of September 28, 1989,
among Newsprint South, Inc., The First National Bank of
Boston, and G. Patrick McEnroe, as Trustees, (incorporated
herein by reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1993,
File No. 2-7803).
10.3 Amendment of Agreement, effective as of July 1, 1993, to the
Agreement entered into as of October 1, 1991, by the
Company's subsidiary, Mississippi Phosphates Corporation, for
the exclusive distribution of diammonium phosphate produced
by Mississippi Phosphates Corporation, (incorporated herein
by reference to Exhibit 10.3 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1993, File
No. 2-7803)./1/
10.4 Amendment to Joint Venture Agreement entered into by the
Company and First Mississippi Corporation effective as of May
28, 1993, (incorporated herein by reference to Exhibit 10.4
to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1993, File No. 2-7803).
10.5 Amendment to Products Withdrawal Agreement entered into by
the Company and First Mississippi Corporation effective as of
May 28, 1993, (incorporated herein by reference to Exhibit
10.5 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1993, File No. 2-7803).
10.6 Agreement effective as of October 1, 1991, by the Company's
subsidiary, Mississippi Phosphates Corporation for the
exclusive distribution of diammonium phosphate produced by
Mississippi Phosphates Corporation; filed as Exhibit 10.1 to
Amendment No. 1 to the Company's Report on Form 8 dated
January 7, 1993, File No. 2-7803, and incorporated herein by
reference thereto./2/
10.7 Agreement made and entered into as of September 15, 1991,
between Office Cherifien des Phosphates and Mississippi
Phosphates Corporation for the sale and purchase of phosphate
rock; filed as Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1991, File No.
2-7803, and incorporated herein by reference thereto./3/
- -----------------------
/1/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.3 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/2/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/3/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.7 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
II-5
<PAGE>
10.8 Lease Agreement dated as of September 28, 1989, among
Newsprint South, Inc., The First National Bank of Boston, and
G. Patrick McEnroe, as Trustees; filed as Exhibit 10.1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1990, File No. 2-7803, and incorporated herein
by reference thereto.
10.9 Agreement for Real Estate Purchase Option dated July 16,
1990, for the sale of the Company's Hardee County, Florida,
property and underlying phosphate reserves; filed as an
exhibit to Exhibit 4.2 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, File No.
2-7803, and incorporated herein by reference thereto./4/
10.10 Power Contract dated as of June 27, 1988, between the
Company's subsidiary, Newsprint South, Inc., and Tennessee
Valley Authority, as supplemented by letter agreement dated
June 27, 1988, filed as Exhibit 10.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1989,
File No. 2-7803, and incorporated herein by reference
thereto.
10.11 Gas Purchase and Sale Contract between the Company and Shell
Western E&P Inc., dated as of January 1, 1986; filed as
Exhibit 10.6 to Amendment No. 1 of the Company's Report on
Form 8 dated January 7, 1993, File No. 2-7803, and
incorporated herein by reference thereto./5/
10.12 Triad Chemical Joint Venture Agreement; filed as Exhibit G1
to Post-Effective Amendment No. 6 to Registration Statement
No. 2-25041 and incorporated herein by reference thereto.
10.13 Products Withdrawal Agreement dated June 3, 1968, between
First Mississippi Corporation and MisCoa covering withdrawal
of product from Triad Chemical; filed as Exhibit H to Post-
Effective Amendment No. 7 to Registration Statement No.
2-25041 and incorporated herein by reference thereto.
18.1 Preferability letter dated July 31, 1992, issued by Arthur
Andersen & Co. to the Company to fulfill the requirements of
Regulation S-K in connection with the Company's change in the
method of reporting patronage refunds; filed as Exhibit 18.1
to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1993, File No. 2-7803, and incorporated
herein by reference thereto.
21.1 List of subsidiaries of the Company, filed as Exhibit 21.1 to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993, File No. 2-7803, and incorporated herein
by reference thereto.
23.1 Consent of McDermott, Will & Emery (included in Exhibit 5).
23.2 Consent of Arthur Andersen & Co.
24 Power of Attorney (included on page II-8).
- -----------------------
/4/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.9 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/5/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.11 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
II-6
<PAGE>
(b) Financial Statement Schedules.
Report of Independent Public Accountants
Schedule V Property, Plant and Equipment
Schedule VI Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment
Schedule IX Short-Term Borrowings
Schedule X Supplementary Income Statement Information
ITEM 17. Undertakings.
(a) The undersigned Registrant hereby undertakes to provide to the
Representatives of the Underwriters at the closings specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by such Representatives to permit prompt delivery to
each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, (i) the information
omitted from the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective and (ii) each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Yazoo City, State of
Mississippi on July 14, 1994.
Mississippi Chemical Corporation
By /s/ Charles O. Dunn
---------------------------
Charles O. Dunn,
President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Charles O. Dunn and Robert E. Jones and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Mississippi Chemical Corporation) to sign any or all amendments (including post-
effective amendments) to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
---------- ------ ----
<S> <C> <C>
/s/ Charles O. Dunn President, Chief Executive Officer and Director July 14, 1994
- ---------------------------- (Principal Executive Officer)
Charles O. Dunn
/s/ William F. Hawkins Senior Vice President - Finance and Administration July 14, 1994
- ---------------------------- (Principal Financial Officer and Principal
William F. Hawkins Accounting Officer)
/s/ Coley L. Bailey Chairman of the Board and Director July 14, 1994
- ----------------------------
Coley L. Bailey
/s/ John Sharp Howie Vice Chairman of the Board and Director July 14, 1994
- ----------------------------
John Sharp Howie
/s/ John W. Anderson Director July 14, 1994
- ----------------------------
John W. Anderson
/s/ Frank R. Burnside, Jr. Director July 14, 1994
- ----------------------------
Frank R. Burnside, Jr.
</TABLE>
II-8
<PAGE>
(SIGNATURES CONTINUED)
<TABLE>
<S> <C> <C>
/s/ W. R. Dyess Director July 14, 1994
- -------------------------
W. R. Dyess
/s/ Woods E. Eastland Director July 14, 1994
- -------------------------
Woods E. Eastland
/s/ G. David Jobe Director July 14, 1994
- -------------------------
G. David Jobe
/s/ George Penick Director July 14, 1994
- -------------------------
George Penick
/s/ David M. Ratcliffe Director July 14, 1994
- -------------------------
David M. Ratcliffe
/s/ Wayne Thames Director July 14, 1994
- -------------------------
Wayne Thames
</TABLE>
II-9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To Mississippi Chemical Corporation:
We have audited in accordance with generally accepted auditing
standards, the accompanying financial statements included in this Registration
Statement, and have issued our report thereon dated June 27, 1994. Our audits
were made for the purpose of forming an opinion on those statements taken as a
whole. The schedules on pages II-11 through
II-15 are the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements, and in our opinion, fairly state
in all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen & Co.
Memphis, Tennessee,
June 27, 1994.
II-10
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
------------------------------------------
THREE YEARS ENDED JUNE 30, 1993
-------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands)
Balance at
Beginning Additions at Retirements Other Charges - Balance at End
Classification (1) of Period Cost or Sales Add (Deduct) of Period
- ------------------ ---------- ------------ ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1991:
Mineral properties $ 18,657 $ -0- $ -0- $ 78 (2) $ 18,735
Land 4,693 107 34 2,471 (2) 7,237
Buildings 21,203 298 698 1,486 (2) 22,289
Machinery and equipment 244,051 4,140 17,163 19,065 (3) 250,093
Construction in progress 1,710 5,873 -0- (4,642) (2) 2,941
-------- ------- ------- -------- --------
$290,314 $10,418 $17,895 $18,458 $301,295
======== ======= ======= ======== ========
1992:
Mineral properties $ 18,735 $ -0- $ 161 -0- $ 18,574
Land 7,237 566 -0- -0- 7,803
Buildings 22,289 42 3 249 (2) 22,577
Machinery and equipment 250,093 6,661 2,583 5,462 259,633
Construction in progress 2,941 25,443 4 (5,711) (2) 22,669
-------- ------- ------- ------- --------
$301,295 $32,712 $ 2,751 $ -0- $331,256
======== ======= ======= ======= ========
1993:
Mineral properties $ 18,574 $ -0- $ -0- -0- $ 18,574
Land 7,803 350 59 -0- 8,094
Buildings 22,577 18 -0- 1,240 (2) 23,835
Machinery and equipment 259,633 3,767 622 38,855 (2) 301,633
Construction in progress 22,669 23,313 -0- (40,095) (2) 5,887
-------- ------- ------- -------- --------
$331,256 $27,448 $ 681 $ -0- $358,023
======== ======= ======= ======== ========
</TABLE>
II-11
<PAGE>
DEPRECIATION AND AMORTIZATION
- -----------------------------
The annual provisions to depreciation have been computed based on the following
estimated useful lives:
Buildings 12 - 33 years
Machinery and equipment 3 - 20 years
(1) Amounts have been restated to exclude discontinued operations.
(2) Transfer construction in progress.
(3) Included in this is $18,458 representing the assets of the Pascagoula plant
conveyed to the Company in lieu of foreclosure.
II-12
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
------------------------------------------------------------------
OF PROPERTY, PLANT AND EQUIPMENT
--------------------------------
THREE YEARS ENDED JUNE 30, 1993
-------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands)
Balance at Additions
Beginning Charged to Costs Other Charges - Balance at End
Description (1) of Period and Expenses Retirements Add (Deduct) of Period
- --------------------------- ---------- ---------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
1991:
Mineral properties $ 1,613 $ 116 $ -0- $ -0- $ 1,729
Buildings 15,704 518 675 -0- 15,547
Machinery and equipment 203,568 9,952 16,870 -0- 196,650
--------- --------- --------- ------- ---------
$ 220,885 $ 10,586 $ 17,545 $ -0- $ 213,926
========= ========= ========= ======= =========
1992:
Mineral properties $ 1,729 $ 118 $ 119 $ -0- $ 1,728
Buildings 15,547 775 3 -0- 16,319
Machinery and equipment 196,650 11,139 2,230 -0- 205,559
--------- --------- --------- ------- ---------
$ 213,926 $ 12,032 $ 2,352 $ -0- $ 223,606
========= ========= ========= ======= =========
1993:
Mineral properties $ 1,728 $ 117 $ 8 $ -0- $ 1,837
Buildings 16,319 662 -0- -0- 16,981
Machinery and equipment 205,559 13,547 415 -0- 218,691
--------- --------- --------- ------- ---------
$ 223,606 $ 14,326 $ 423 $ -0- $ 237,509
========= ========= ========= ======= =========
</TABLE>
(1) Amounts have been restated to exclude discontinued operations.
II-13
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
SCHEDULE IX - SHORT-TERM BORROWINGS
-----------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Maximum Amount Average Amount Weighted Average
Category of Aggregate Balance at End of Weighted Average Outstanding at any Outstanding During Interest Rate
Short-Term Borrowings (1) Period Interest Rate Month End the Period (2) During the Period (3)
- ------------------------------ ----------------- ---------------- ------------------ ------------------ ---------------------
JUNE 30, 1991
Notes payable to banks $ -0- $ -0- $ -0- $ -0- $ -0-
JUNE 30, 1992
Notes payable to banks (4) 13,500 6.63% 15,565 7,012 6.61%
JUNE 30, 1993
Notes payable to banks (4) 4,625 4.30% 13,500 8,402 5.20%
</TABLE>
(1) Amounts have been restated to exclude discontinued operations.
(2) Average amount outstanding during the period is computed by dividing the
total of daily outstanding principle balances by 365.
(3) Weighted average interest rate during the period is computed by dividing
the actual short-term interest expense by the average short-term debt
outstanding during the period.
(4) Notes payable in 1991-92 and 1992-93 were primarily related to borrowings
for the Company's wholly-owned subsidiary, Mississippi Phosphates Corporation.
II-14
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
-------------------------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Column A Column B
- -------- --------
Item Charged to Costs and Expenses
- ---- Year Ended June 30 (1)
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs $18,548 $17,150 $13,009
Depreciation, depletion and amortization of property,
plant and equipment and other intangible assets
14,444 12,094 10,586
Property taxes
1,555 1,523 1,324
Other taxes - other than income taxes and payroll taxes
1,218 1,190 1,005
</TABLE>
(1) Amounts have been restated to exclude discontinued operations.
II-15
<PAGE>
Mississippi Chemical Corporation
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<C> <S> <C>
1. Underwriting Agreement
3.1 Articles of Incorporation of the Company.*
3.3 By-laws of the Company.*
4.7 Specimen of the Company's 9 1/2% Subordinated Note Due July 1, 1999,
(incorporated herein by reference to Exhibit 4.7 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1993, File No. 2-
7803)
4.8 Term Loan Agreement Number 6420 dated August 25, 1987, between the
Company's subsidiary, Newsprint South, Inc., and Jackson Bank for
Cooperatives (now National Bank for Cooperatives) in an amount not to
exceed $4,700,000, as amended and restated by Amendment to Loan
Agreement Number 6420(A) dated February 2, 1989, (incorporated herein by
reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993 File No. 2-7803).
4.9 Line of Credit Agreement Number 6899 dated December 13, 1991, between
the Company's subsidiary, Newsprint South, Inc., and National Bank for
Cooperatives, for a revolving line of credit in an amount equal to the lesser
of the Borrowing Base (as defined in Section 6 thereof) or $10,680,000, as
amended by Amendment Number 6899(A) dated June 12, 1992, and
Amendment Number 6899(B) dated December 18, 1992, which increased the
line of credit to $10,992,000, (incorporated herein by reference to Exhibit 4.9
to the Company's Annual Report on Form 10-K for the fiscal year ended on
June 30, 1993, File No. 2-7803).
4.10 Term Loan Agreement number 6939 dated October 19, 1992, between the
Company's subsidiary, Mississippi Phosphates Corporation, and National
Bank for Cooperatives and the Company as co-maker in an aggregate
principal amount not to exceed $10,000,000, (incorporated herein by
reference to Exhibit 4.10 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, File No. 2-7803).
4.11 Line of Credit Agreement Number 6871 dated September 30, 1991, between
the Company and National Bank for Cooperatives for a revolving line of
credit in the amount of $10,000,000, as amended by Amendment Number
6871(A) dated October 20, 1992, which increases the line of credit to
$15,000,000, (incorporated herein by reference to Exhibit 4.11 to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1993, File No. 2-7803).
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<C> <S> <C>
4.12 Amendment Number 6392(A) dated November 2, 1987, and Amendment
Number 6392(B) dated April 20, 1988, to Loan Agreement Number 6392
dated as of April 24, 1987, between the Company and the Jackson Bank for
Cooperatives (now the National Bank for Cooperatives), (incorporated herein
by reference to Exhibit 4.12 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993, File No. 2-7803).
4.13 Loan Agreement Number 6392 dated as of April 24, 1987, between the
Company and Jackson Bank for Cooperatives (now the National Bank for
Cooperatives) in a principal amount not to exceed $35,000,000; (incorporated
herein by reference to Exhibit 4.13 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1987, File No. 2-7803).
4.14 Revolving Credit/Term Loan Agreement dated August 6, 1992, between the
Company and NationsBank of Tennessee, purchaser of the Company's Series
I Secured Note, Due June 30, 1999, in the aggregate principal amount of
$20,000,000; filed as Exhibit 4.1 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1992, File No. 2-7803, and
incorporated herein by reference thereto.
4.15 Note Purchase Agreement dated as of December 26, 1989, between the
Company and John Hancock Variable Life Insurance Company, purchaser of
the Company's 9.97% Secured Notes, Series H, Due 1999, in the aggregate
principal amount of $6,000,000; filed as an exhibit to Exhibit 4.3 to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1990, File No. 2-7803, and incorporated herein by reference thereto.
4.16 Twelfth Supplemental Indenture dated as of August 6, 1992, between the
Company and Deposit Guaranty National Bank; filed as Exhibit 4.3 to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1992, File No. 2-7803, and incorporated herein by reference thereto.
4.17 Eleventh Supplemental Indenture dated as of July 16, 1990, between the
Company and Deposit Guaranty National Bank, together with Exhibit A
thereto, being an Agreement for Real Estate Purchase Option dated July 16,
1990, for the sale of the Company's Hardee County, Florida, property and
underlying phosphate reserves; filed as Exhibit 4.2 to Amendment No. 1 of
the Company's Report on Form 8 dated November 7, 1990, File No. 2-7803,
and incorporated herein by reference thereto.
4.18 Tenth Supplemental Indenture dated as of December 26, 1989, between the
Company and Deposit Guaranty National Bank, together with Exhibit A
thereto, being a Note Purchase Agreement dated as of December 26, 1989,
between the Company and John Hancock Variable Life Insurance Company,
purchaser of the Company's 9.97% Secured Notes, Series H, Due 1999, in
the aggregate principal amount of $6,000,000; filed as Exhibit 4.3 to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1990, File No. 2-7803, and incorporated herein by reference thereto.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<C> <S> <C>
4.19 Ninth Supplemental Indenture dated as of February 23, 1988, between the
Company and Deposit Guaranty National Bank; filed as Exhibit 4.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1988, File No. 2-7803, and incorporated herein by reference thereto.
4.20 Eighth Supplemental Indenture dated as of May 15, 1983, between the
Company and Deposit Guaranty National Bank; filed as Exhibit 4.1 to Post-
Effective Amendment No. 3 to Registration Statement No. 2-71827 and
incorporated herein by reference thereto.
4.21 Seventh Supplemental Indenture dated as of October 1, 1979, between the
Company and Deposit Guaranty National Bank; filed as Exhibit 2 to Post-
Effective Amendment No. 3 to Registration Statement No. 2-57390 and
incorporated herein by reference thereto.
4.22 Sixth Supplemental Indenture dated as of September 1, 1979, between the
Company and Deposit Guaranty National Bank, filed as Exhibit 3 to Post-
Effective Amendment No. 3 to Registration Statement No. 2-57390 and
incorporated herein by reference thereto.
4.23 Fifth Supplemental Indenture dated as of June 1, 1978, between the
Company and Deposit Guaranty National Bank; filed as Exhibit 7 to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1979, File No. 2-7803, and incorporated herein by reference thereto.
4.24 Fourth Supplemental Indenture dated as of May 1, 1978, between the
Company and Deposit Guaranty National Bank; filed as Exhibit 9 to Post-
Effective Amendment No. 2 to Registration Statement No. 2-57390 and
incorporated herein by reference thereto.
4.25 Third Supplemental Indenture dated as of June 28, 1977, between the
Company and Deposit Guaranty National Bank; filed as Exhibit 6 to Post-
Effective Amendment No. 1 to Registration Statement No. 2-57390 and
incorporated herein by reference thereto.
4.26 Second Supplemental Indenture dated as of September 30, 1976, among the
Company, New Orleans Bank for Cooperatives, John H. Farrelly and Deposit
Guaranty National Bank; filed as Exhibit 6 to Registration Statement No. 2-
57390 and incorporated herein by reference thereto.
4.27 First Supplemental Indenture, dated as of September 7, 1976, among the
Company, New Orleans Bank for Cooperatives, John H. Farrelly and Deposit
Guaranty National Bank; filed as Exhibit 3 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1976, File No. 2-7803, and
incorporated herein by reference thereto.
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<C> <S> <C>
4.28 Note Purchase Agreement effective as of September 1, 1976, between the
Company and the Purchasers of the Company's 9 1/2% Secured Notes,
Series B, Due 1996, in the aggregate principal amount of $35,000,000,
together with Exhibits A and B thereto; filed as Exhibit 2 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1976, File
No. 2-7803, and incorporated herein by reference thereto.
4.29 Indenture dated as of May 1, 1989, between the Company and Sunburst
Bank, as Trustee, for the issuance by the Company and 9 1/2% subordinated
notes, due July 1, 1999, in the aggregate principal amount of $11,061,000;
filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1989, File No. 7-2803, and incorporated herein by
reference thereto.
5 Opinion re Legality.*
10.1 First Supplement to Lease Agreement dated as of June 30, 1992, to the
Lease Agreement dated as of September 28, 1989, among Newsprint South,
Inc., The First National Bank of Boston, and G. Patrick McEnroe, as
Trustees, (incorporated herein by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1993, File
No. 2-7803).
10.2 Second Supplement to Lease Agreement dated as of July 15, 1992, to the
Lease Agreement dated as of September 28, 1989, among Newsprint South,
Inc., The First National Bank of Boston, and G. Patrick McEnroe, as
Trustees, (incorporated herein by reference to Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1993, File
No. 2-7803).
10.3 Amendment of Agreement, effective as of July 1, 1993, to the Agreement
entered into as of October 1, 1991, by the Company's subsidiary, Mississippi
Phosphates Corporation, for the exclusive distribution of diammonium
phosphate produced by Mississippi Phosphates Corporation, (incorporated
herein by reference to Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1993, File No. 2-7803)./1/
10.4 Amendment to Joint Venture Agreement entered into by the Company and
First Mississippi Corporation effective as of May 28, 1993, (incorporated
herein by reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1993, File No. 2-7803).
</TABLE>
- -----------------------
/1/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.3 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
S-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<C> <S> <C>
10.5 Amendment to Products Withdrawal Agreement entered into by the
Company and First Mississippi Corporation effective as of May 28, 1993,
(incorporated herein by reference to Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1993, File No. 2-
7803).
10.6 Agreement effective as of October 1, 1991, by the Company's subsidiary,
Mississippi Phosphates Corporation for the exclusive distribution of
diammonium phosphate produced by Mississippi Phosphates Corporation;
filed as Exhibit 10.1 to Amendment No. 1 to the Company's Report on Form
8 dated January 7, 1993, File No. 2-7803, and incorporated herein by
reference thereto./2/
10.7 Agreement made and entered into as of September 15, 1991, between Office
Cherifien des Phosphates and Mississippi Phosphates Corporation for the
sale and purchase of phosphate rock; filed as Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1991, File
No. 2-7803, and incorporated herein by reference thereto./3/
10.8 Lease Agreement dated as of September 28, 1989, among Newsprint South,
Inc., The First National Bank of Boston, and G. Patrick McEnroe, as
Trustees; filed as Exhibit 10.1 to the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1990, File No. 2-7803, and incorporated
herein by reference thereto.
10.9 Agreement for Real Estate Purchase Option dated July 16, 1990, for the sale
of the Company's Hardee County, Florida, property and underlying
phosphate reserves; filed as an exhibit to Exhibit 4.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1990, File
No. 2-7803, and incorporated herein by reference thereto./4/
10.10 Power Contract dated as of June 27, 1988, between the Company's
subsidiary, Newsprint South, Inc., and Tennessee Valley Authority, as
supplemented by letter agreement dated June 27, 1988, filed as Exhibit 10.3
to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1990, File No. 2-7803, and incorporated herein by reference thereto.
</TABLE>
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/2/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/3/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.7 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/4/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.9 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
S-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<C> <S> <C>
10.11 Gas Purchase and Sale Contract between the Company and Shell Western
E&P Inc., dated as of January 1, 1986; filed as Exhibit 10.6 to Amendment
No. 1 of the Company's Report on Form 8 dated January 7, 1993, File No. 2-
7803, and incorporated herein by reference thereto./5/
10.12 Triad Chemical Joint Venture Agreement; filed as Exhibit G1 to Post-
Effective Amendment No. 6 to Registration Statement No. 2-25041 and
incorporated herein by reference thereto.
10.13 Products Withdrawal Agreement dated June 3, 1968, between First
Mississippi Corporation and MisCoa covering withdrawal of product from
Triad Chemical; filed as Exhibit H to Post-Effective Amendment No. 7 to
Registration Statement No. 2-25041 and incorporated herein by reference
thereto.
18.1 Preferability letter dated July 31, 1992, issued by Arthur Andersen & Co. to
the Company to fulfill the requirements of Regulation S-K in connection with
the Company's change in the method of reporting patronage refunds; filed as
Exhibit 18.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1992, File No. 2-7803, and incorporated herein by
reference thereto.
21.1 List of subsidiaries of the Company, filed as Exhibit 21.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1993, File
No. 2-7803, and incorporated herein by reference thereto.
23.1 Consent of McDermott, Will & Emery (included in Exhibit 5).*
23.2 Consent of Arthur Andersen & Co. [ ]
24 Power of Attorney (included on page II-9). [ ]
</TABLE>
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/5/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.11 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
* To be filed by Amendment.
S-6
<PAGE>
EXHIBIT 1
MISSISSIPPI CHEMICAL CORPORATION
4,800,000 SHARES
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
UNDERWRITING AGREEMENT
----------------------
New York, New York
, 1994
WERTHEIM SCHRODER & CO. INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
As Representatives of the several Underwriters
named in Schedule I hereto
c/o Wertheim Schroder & Co. Incorporated
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Dear Sirs:
Mississippi Chemical Corporation, a Mississippi corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters"), an aggregate of 3,200,000 shares of Common Stock, par value
$.01 per share (the "Common Stock"), and certain securityholders of the Company
named in Schedule II hereto (the "Selling Securityholders"), propose, subject to
the terms and conditions stated herein, to sell to the Underwriters an aggregate
of 1,600,000 shares of Common Stock. The 4,800,000 shares of Common Stock to be
sold by the Company and the Selling Securityholders are herein referred to as
the "Firm Securities." In addition, the Company and certain Selling
Securityholders propose to grant to the Underwriters an option to purchase up to
an additional 720,000 shares of Common Stock (the "Option Securities"), on the
terms and for the purposes set forth in Section 2 hereof. The Firm Securities
and the Option Securities are herein collectively referred to as the
"Securities."
<PAGE>
1A. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 33- ), and as
a part thereof a preliminary prospectus, in respect of the Securities, has been
filed with the Securities and Exchange Commission (the "Commission") in the form
heretofore delivered to you and, with the exception of exhibits to the
registration statement, to you for each of the other Underwriters; if such
registration statement has not become effective, an amendment (the "Final
Amendment") to such registration statement, including a form of final
prospectus, necessary to permit such registration statement to become effective,
will promptly be filed by the Company with the Commission; if such registration
statement has become effective and any post-effective amendment to such
registration statement has been filed with the Commission prior to the execution
and delivery of this Agreement, which amendment or amendments shall be in form
acceptable to you, the most recent such amendment has been declared effective by
the Commission; if such registration statement has become effective, a final
prospectus (the "Rule 430A Prospectus") relating to the Securities containing
information permitted to be omitted at the time of effectiveness by Rule 430A of
the rules and regulations of the Commission under the Securities Act of 1933, as
amended (the "Act"), will promptly be filed by the Company pursuant to Rule
424(b) of the rules and regulations of the Commission under the Act (any
preliminary prospectus filed as part of such registration statement being herein
called a "Preliminary Prospectus," such registration statement as amended at the
time that it becomes or became effective, or, if applicable, as amended at the
time the most recent post-effective amendment to such registration statement
filed with the Commission prior to the execution and delivery of this Agreement
became effective (the "Effective Date"), including all exhibits thereto (whether
filed or incorporated by reference) and all information deemed to be a part
thereof at such time pursuant to Rule 430A of the rules and regulations of the
Commission under the Act, being herein called the "Registration Statement" and
the final prospectus relating to the Securities in the form first filed pursuant
to Rule 424(b)(1) or (4) of the rules and regulations of the Commission under
the Act or, if no such filing is required, the form of final prospectus included
in the Registration Statement, being herein called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through you expressly for use therein;
-2-
<PAGE>
(c) On the Effective Date and the date the Prospectus is filed with the
Commission, the Registration Statement and the Prospectus, respectively, did,
and when any further amendment or supplements thereto become effective or are
filed with the Commission, as the case may be, the Registration Statement and
the Prospectus, as amended by such amendment or supplements, will, conform in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not and will not, as the case
may be, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through you expressly for use therein;
(d) The documents incorporated by reference in the Registration
Statement, when they were filed with the Commission, conformed in all material
respects to the requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(e) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement; the execution,
delivery and performance by the Company of its obligations under this Agreement
have been duly and validly authorized by all requisite corporate action of the
Company; and this Agreement constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms;
(f) Neither the Company nor any of its subsidiaries has sustained since
June 30, 1994, any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, which loss or
interference is material to the Company and its subsidiaries, taken as a whole;
and, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been, and prior to the
Time of Delivery (as defined in Section 4 hereof) there will not be, any change
in the capital stock or short-term debt or long-term debt of the Company or any
of its subsidiaries, or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole, otherwise than
as set forth or contemplated in the Prospectus;
(g) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except
-3-
<PAGE>
such as are described in or contemplated by the Registration Statement or the
Prospectus, or such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and its subsidiaries, and any real property and buildings held under
lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such real property
and buildings by the Company and its subsidiaries;
(h) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Mississippi, with
power and authority (corporate and other) to own its properties and to conduct
its business as described in the Registration Statement and the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in which it
owns or leases property, or conducts any business, so as to require such
qualification (except where the failure to so qualify would not have a material
adverse effect on the Company or the Company and its subsidiaries considered as
a whole); and each of the Company's subsidiaries listed in Exhibit 21.1 to the
Registration Statement has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases property, or conducts any business, so
as to require such qualification (except where the failure to so qualify would
not have a material adverse effect on the Company and its subsidiaries
considered as a whole); and the Company has all necessary corporate power and
all government authorizations, permits and approvals required to conduct its
business as described in the Registration Statement and in the Prospectus;
(i) The Company has an authorized, issued and outstanding
capitalization as set forth in the Registration Statement, and all the issued
shares of Common Stock have been duly and validly authorized and issued, are
fully paid and non-assessable, are free of any statutory preemptive rights,
contractual preemptive rights, rights of first refusal or similar rights, were
issued and sold in compliance with applicable federal and state securities laws
and conform in all material respects to the description in the Prospectus;
except as described in the Prospectus, there are no outstanding options,
warrants or other rights calling for the issuance of, and there are no
commitments, plans or arrangements to issue, any shares of capital stock of the
Company or any security convertible or exchangeable or exercisable for capital
stock of the Company; there are no holders of securities of the Company who, by
reasons of the filing of the Registration Statement, have the right (and have
not waived such right) to request the Company to include in the Registration
Statement securities owned by them; and all of the issued and outstanding shares
of capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned by the
Company free and clear of all liens, encumbrances, equities or claims; and there
are no outstanding options, warrants or other rights calling for the issuance
of, and there are no
-4-
<PAGE>
commitments, plans or arrangements to issue, any shares of capital stock of any
subsidiary or any security convertible or exchangeable or exercisable for
capital stock of any subsidiary;
(j) The Securities to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued, fully paid and non-assessable, will conform in all material
respects to the description of the Common Stock in the Registration Statement
and in the Prospectus and will be included for quotation on the Nasdaq Stock
Market's National Market (the "Nasdaq National Market") as of the Effective
Date, and the Securities to be sold by the Selling Securityholders to the
Underwriters hereunder have been duly and validly issued and are fully paid and
non-assessable and will also be quoted on the Nasdaq National Market as of the
Effective Date;
(k) The performance of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws, in each case as amended to the date hereof, of the
Company or the provisions of the similar corporate constituent documents, in
each case as amended to the date hereof, of any of its subsidiaries, or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body is required
for the issue and sale of the Securities or the consummation of the other
transactions contemplated by this Agreement, except the registration under the
Act and the Exchange Act of the Securities, and such consents, approvals,
authorizations, registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Securities by the Underwriters;
(l) There are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject, other than litigation or
proceedings disclosed in the Prospectus or incident to the business conducted by
the Company and its subsidiaries, none of which will individually or in the
aggregate have a material adverse effect on the financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries considered as a whole; and, to the best of the Company's knowledge,
no such proceedings are threatened or contemplated by governmental authorities
or threatened or contemplated by others; and neither the Company nor any of its
subsidiaries
-5-
<PAGE>
is involved in any labor dispute, nor, to the Company's knowledge, is any labor
dispute threatened;
(m) The Company and its subsidiaries have obtained such licenses,
permits and other approvals or authorizations of and from governmental or
regulatory authorities ("Permits") as are necessary under applicable law to own
their respective properties and to conduct their respective businesses in the
manner now being conducted and as described in the Registration Statement and in
the Prospectus; and the Company and its subsidiaries have fulfilled and
performed in all material respects all of their respective obligations with
respect to such Permits, and no event has occurred which allows, or after notice
or lapse of time or both would allow, revocation or termination thereof or
result in any other material impairment of the rights of the holder of any such
Permits;
(n) Arthur Andersen & Co., who have certified certain consolidated
financial statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(o) The consolidated financial statements of the Company and its
subsidiaries included in the Registration Statement and the Prospectus present
fairly the financial condition, the results of operations and the cash flows of
the Company and its subsidiaries as of the dates and for the periods therein
specified in conformity with generally accepted accounting principles
consistently applied throughout the periods involved, except as otherwise stated
therein; and the other financial and statistical information and data set forth
in the Registration Statement and the Prospectus is accurately presented and, to
the extent such information and data is derived from the financial statements
and books and records of the Company and its subsidiaries, is prepared on a
basis consistent with such financial statements and the books and records of the
Company and its subsidiaries; no other financial statements are required to be
included in the Registration Statement and the Prospectus; the pro forma
financial statements included in the Registration Statement and the Prospectus
have been properly compiled and comply in form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X of the
Commission;
(p) There are no statutes or governmental regulations, or any contracts
or other documents that are required to be described in or filed as exhibits to
the Registration Statement which are not described therein or filed as exhibits
thereto or incorporated by reference therein;
(q) The Company and its subsidiaries own or possess adequate patent
rights or licenses or other rights to use patent rights, inventions, trademarks,
service marks, trade names and copyrights necessary to conduct the general
business now operated by them and neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any patent, patent
-6-
<PAGE>
rights, inventions, trademarks, service marks, trade names or copyrights which,
singly or in the aggregate, could materially adversely affect the business,
operations, financial condition, income or business prospects of the Company and
its subsidiaries considered as a whole;
(r) Neither the Company nor any of its subsidiaries is in violation of
any term or provision of its Certificate of Incorporation or By-Laws (or similar
corporate constituent documents), in each case as amended to the date hereof, or
any law, ordinance, administrative or governmental rule or regulation applicable
to the Company or any of its subsidiaries, or of any decree of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries, the violation of which either individually or together with all
such other violations would have a material adverse effect on the Company and
its subsidiaries considered as a whole;
(s) No default exists, and no event has occurred which with notice or
lapse of time, or both, would constitute a default in the due performance and
observance of any term, covenant or condition of any indenture, mortgage, deed
of trust, bank loan or credit agreement, lease or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which any of
them is bound;
(t) The Company and its subsidiaries have timely filed all necessary
tax returns and notices and have paid all federal, state, county, local and
foreign taxes of any nature whatsoever for all tax years through June 30, 1994,
to the extent such taxes have become due. Except as disclosed in the
Registration Statement and in the Prospectus, the Company has no knowledge of
any tax deficiencies which would have a material adverse effect on the Company
or any of its subsidiaries, considered as a whole, or of any further liability
(whether or not disclosed on such returns) or assessments for any such taxes,
and no interest or penalties accrued or accruing with respect thereto, except as
may be set forth or adequately reserved for in the financial statements included
in the Registration Statement; the amounts currently set up as provisions for
taxes or otherwise by the Company and its subsidiaries on their respective books
and records are sufficient for the payment of all their unpaid federal, foreign,
state, county and local taxes accrued through the dates as of which they speak,
and for which the Company and its subsidiaries may be liable in their own right,
or as a transferee of the assets of, or as successor to, any other corporation,
association, partnership, joint venture or other entity;
(u) The Company will not, during the period of 180 days after the date
hereof, except pursuant to this Agreement, offer, sell or otherwise dispose of
any capital stock of the Company, directly or indirectly, without the prior
written consent of Wertheim Schroder & Co. Incorporated;
(v) The Company and its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in
-7-
<PAGE>
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences;
(w) Neither the Company nor any of its subsidiaries is in violation of
any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants, nor any federal or state law
relating to discrimination in the hiring, promotion or paying of employees nor
any applicable federal or state wages and hours laws, nor any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations promulgated thereunder;
(x) Neither the Company nor any of its subsidiaries, nor, to the
Company's knowledge, any employee or agent of the Company or any of its
subsidiaries has made any payment of funds of the Company or any of its
subsidiaries or received or retained any funds in violation of any law, rule or
regulation, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus;
(y) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or that might
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Securities, in each case as defined under the Exchange Act and the rules and
regulations of the Commission thereunder;
(z) The Company's Registration Statement on Form S-4 (Reg. No. 33-
53119) and the Proxy Statement/Prospectus, dated May 27, 1994, utilized in
connection with the Company's Special Meeting of Shareholders held on June 28,
1994 conformed in all material respects to the requirements of the Act and the
Exchange Act, and the rules and regulations of the Commission thereunder, and
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading;
(aa) The Company is the surviving corporation resulting from the merger
of Mississippi Chemical Corporation, a Mississippi corporation operated as a
cooperative in accordance with the applicable provisions of the Internal Revenue
Code (the "Cooperative"), with and into the Company pursuant to a Plan of
Reorganization (the "Plan of Reorganization"), dated May 23, 1994, which merger
became effective July 1, 1994. Such merger was consummated in accordance with
the provisions of the Plan of Reorganization, which has been duly authorized by
the Company and the Cooperative and their respective shareholders and complied
in all respects with applicable law;
-8-
<PAGE>
(bb) The Company has no liability to any of its or the Cooperative's
securityholders in connection with the Plan of Reorganization and the
transactions contemplated thereby, except for those securityholders (the
"Dissenters") named in Schedule III hereto, who have elected to exercise their
dissenters' rights in accordance with Article 13 of the Mississippi Business
Corporation Act (the "MBCA"). Schedule III is complete and correct in all
respects and the Dissenters are the only securityholders of the Company or the
Cooperative who have validly preserved any rights under Article 13 of the MBCA
with respect to the Plan of Reorganization. The Company has entered into a
Settlement Agreement, dated July [ ], 1994, a true and correct copy of which has
been delivered to counsel for the Underwriters, with Mulberry Phosphates, Inc.
("Mulberry Phosphates"), pursuant to which Mulberry Phosphates has released the
Company from any and all liability to it in connection with the Plan of
Reorganization and the transactions contemplated thereby.
(cc) The Company has made all filings required to be made by it under
the Exchange Act; and
(dd) The Company has executed and delivered an Omnibus Transfer,
Receipt and Release dated June 24, 1994 (the "Release Agreement") among the
Company, General Electric Capital Corporation ("GECC"), National Bank for
Cooperatives ("CoBank"), Newsprint South, Inc. ("Newsprint South"), and other
interested parties, and all other documents and agreements referred to in the
Release Agreement (collectively, the "Settlement Documents"). The Settlement
Documents have released the Company from all of its obligations and liabilities
to Newsprint South, GECC and CoBank, as well as its obligations and liabilities
under all agreements related to the Project (as defined in the Release
Agreement), provided that the Company performs all of the actions required to be
performed by it pursuant to the terms of the Release Agreement. The Company has
no further obligations or liabilities to Newsprint South, GECC or CoBank, or
under any agreement related to the Project, except as set forth in the
Settlement Documents.
1B. Each of the Selling Securityholders, severally and not jointly,
represents and warrants to, and agrees with, each of the Underwriters and the
Company that:
(a) Such Selling Securityholder has duly executed and delivered a power
of attorney (a "Power of Attorney"), an executed copy of which has been
delivered to Fulbright & Jaworski L.L.P., counsel to the several Underwriters,
appointing [ ] and [ ], or either of them (the "Selling Securityholder
Attorneys"), as attorney-in-fact with authority to execute and deliver this
Agreement on behalf of such Selling Securityholder and to take certain other
action with respect thereto; and all authorizations and consents necessary for
the execution and delivery by such Selling Securityholder of the Power of
Attorney, and for the execution and delivery of this Agreement by or on behalf
of such Selling Securityholder, have been given;
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<PAGE>
(b) Certificates for the Securities to be sold by each Selling
Securityholder have been placed in custody for delivery under this Agreement
with the Selling Securityholder Attorneys pursuant to the custody provisions
contained in the Power of Attorney, an executed copy of which has been delivered
to Fulbright & Jaworski L.L.P. Each Selling Securityholder agrees that the
Securities represented by the certificates so held in custody are subject to the
interests of the several Underwriters, the Company and the other Selling
Securityholders hereunder, that the arrangements made for such custody are
irrevocable, and that the obligations of such Selling Securityholder hereunder
shall not be terminated by any act of such Selling Securityholder or by
operation of law, whether by death, incapacity, dissolution or winding up of any
Selling Securityholder or the occurrence of any other event. If any such death,
incapacity, dissolution, winding up or other event should occur before the
delivery of the Securities to be sold by a Selling Securityholder hereunder,
certificates for the Securities of such Selling Securityholder shall be
delivered by the Selling Securityholder Attorneys in accordance with the terms
and conditions of this Agreement as if such death, incapacity, dissolution or
winding up or other event has not occurred, regardless of whether the Selling
Securityholder Attorneys shall have received notice of such death, incapacity,
dissolution, winding up or other event;
(c) Such Selling Securityholder has, and at the Time of Delivery (as
defined in Section 4 hereof) will have, good and marketable title to the
Securities to be sold by such Selling Securityholder hereunder, free and clear
of any liens, encumbrances, equities, security interests, claims and other
restrictions of any nature whatsoever, and such Selling Securityholder has the
full right, power and authority to sell, assign, transfer and deliver such
Securities hereunder subject to the rights of the Selling Securityholder
Attorneys and to make the representations, warranties, covenants and agreements
made by it in this Agreement; and upon the delivery of and payment for such
Securities as herein provided, the several Underwriters will acquire good and
marketable title thereto, free and clear of all liens, encumbrances, equities,
security interests, claims and other restrictions of any nature whatsoever;
(d) Such Selling Securityholder will not, during the period of 180 days
after the date hereof, except pursuant to this Agreement, offer, sell, or
otherwise dispose of any capital stock of the Company, directly or indirectly,
without the prior written consent of Wertheim Schroder & Co. Incorporated;
(e) The consummation of the transactions herein contemplated and the
fulfillment of the terms hereof will not result in a breach by such Selling
Securityholder of any of the terms or provisions of, or constitute a default by
it under, any agreement or instrument to which it is a party or by which it is
bound, or any statute, ruling, decree, judgment, order or regulation of any
governmental authority having jurisdiction over it or its property;
(f) Such Selling Securityholder has not taken and will not take,
directly or indirectly, any action designed to or which has constituted or which
might
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<PAGE>
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Securities, in each case as defined under the Exchange Act and the rules and
regulations of the Commission thereunder; and
(g) To the extent that any statements or omissions are made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by such Selling Securityholder specifically
for use therein, such Preliminary Prospectus did, and the Registration Statement
and the Prospectus and any amendments or supplements thereto, when they become
effective or are filed with the Commission, as the case may be, will, conform in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and did not and will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
and
(h) Such Selling Stockholder has read each Preliminary Prospectus
referred to in Section 1A(a) hereof (as amended or as supplemented, if the
Company shall have filed with the Commission prior to the date this
representation is given an amendment thereof or supplement thereto, including,
without limitation, the Prospectus) and does not believe or have any reasonable
grounds to believe that any untrue statement of a material fact is included
therein or that there is omitted therefrom a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances in which they were made, not misleading.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to the several Underwriters an aggregate of 3,200,000
Firm Securities, each Selling Securityholder agrees to sell to the several
Underwriters the number of Firm Securities set forth on Schedule II opposite the
name of each such Selling Securityholder and each of the Underwriters agrees to
purchase from the Company and the Selling Securityholders, at a purchase price
of $ per share, the respective aggregate number of Firm Securities
determined in the manner set forth below. The obligation of each Underwriter to
the Company and each of the Selling Securityholders, respectively, shall be to
purchase that portion of the number of shares of Common Stock to be sold by the
Company or such Selling Securityholder pursuant to this Agreement as the number
of Firm Securities set forth opposite the name of such Underwriter on Schedule I
bears to the total number of Firm Securities to be purchased by the Underwriters
pursuant to this Agreement, in each case adjusted by you such that no
Underwriter shall be obligated to purchase Firm Securities other than in 100-
share amounts. In making this Agreement, each Underwriter is contracting
severally and not jointly.
In addition, subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the several Underwriters an aggregate of
[ ] Option Securities and each of the Selling Securityholders agrees to sell
to the Underwriters up to
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the number of Option Securities set forth opposite its name on Schedule II, as
required (for the sole purpose of covering over-allotments in the sale of the
Firm Securities), at the purchase price per share of the Firm Securities being
sold by the Company and the Selling Securityholders as stated in the preceding
paragraph. The right to purchase the Option Securities may be exercised by your
giving 48 hours' prior written notice to the Company and to the Selling
Securityholder Attorneys of your determination to purchase all or a portion of
the Option Securities. Such notice may be given at any time within a period of
30 days following the date of this Agreement. Option Securities shall be
purchased severally for the account of each Underwriter in proportion to the
number of Firm Securities set forth opposite the name of such Underwriter in
Schedule I hereto. If the Underwriters elect to purchase less than the full
amount of 720,000 Securities, the Company and each Selling Securityholder shall
sell a proportional amount based on the number of Option Securities to be sold
by the Company as set forth in this paragraph and each Selling Securityholder as
set forth on Schedule II. No Option Securities shall be delivered to or for the
accounts of the Underwriters unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided. The
respective purchase obligations of each Underwriter shall be adjusted by you so
that no Underwriter shall be obligated to purchase Option Securities other than
in 100 share amounts. The Underwriters may cancel any purchase of Option
Securities at any time prior to the Option Securities Delivery Date (as defined
in Section 4 hereof) by giving written notice of such cancellation to the
Company and to the Selling Securityholder Attorneys.
3. Upon the authorization by you of the release of the Securities, the
Underwriters propose to offer the Securities for sale upon the terms and
conditions set forth in the Prospectus.
4. Certificates in definitive form for the Firm Securities to be purchased
by each Underwriter hereunder shall be delivered by or on behalf of the Company
and the Selling Securityholders to you for the account of such Underwriter,
against payment by such Underwriter or on its behalf of the purchase price
therefor by certified or official bank check or checks, payable in New York
Clearing House funds, to the order of the Company, for the purchase price of the
Firm Securities being sold by the Company, and to the order of the Selling
Securityholder Attorneys for the Selling Securityholders, for the purchase price
of the Firm Securities being sold by the Selling Securityholders, in New York,
New York, at 9:30 A.M., New York City time, on ________ __, 1994, or at such
other time, date and place as you and the Company may agree upon in writing,
such time and date being herein called the "Time of Delivery."
Certificates in definitive form for the Option Securities to be purchased
by each Underwriter hereunder shall be delivered by or on behalf of the Company
and the Selling Securityholders named in Schedule II to you for the account of
such Underwriter, against payment by such Underwriter or on its behalf of the
purchase price thereof by certified or official bank check or checks, payable in
New York Clearing House funds, to the order of the Company and the Selling
Securityholder Attorneys, as the case may be, for
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the purchase price of the Option Securities, in New York, New York, at such time
and on such date (not earlier than the Time of Delivery nor later than ten
business days after giving of the notice delivered by you to the Company and the
Selling Securityholders named in Schedule II with reference thereto) and in such
denominations and registered in such names as shall be specified in the notice
delivered by you to the Company and the Selling Securityholders named in
Schedule II with respect to the purchase of such Option Securities. The date and
time of such delivery and payment are herein sometimes referred to as the
"Option Securities Delivery Date." The obligations of the Underwriters shall be
subject, in their discretion, to the condition that there shall be delivered to
the Underwriters on the Option Securities Delivery Date opinions and
certificates, dated such Option Securities Delivery Date, referring to the
Option Securities instead of the Firm Securities, but otherwise to the same
effect as those required to be delivered at the Time of Delivery pursuant to
Sections 7(d), 7(e), 7(f), 7(g) and 7(j).
Certificates for the Firm Securities and the Option Securities so to be
delivered will be in good delivery form, and in such denominations and
registered in such names as you may request not less than 48 hours prior to the
Time of Delivery and the Option Securities Delivery Date, respectively. Such
certificates will be made available for checking and packaging in New York, New
York, at least 24 hours prior to the Time of Delivery and Option Securities
Delivery Date.
5. The Company agrees with each of the Underwriters:
(a) If the Registration Statement has not become effective, to file
promptly the Final Amendment with the Commission and use its best efforts to
cause the Registration Statement to become effective; if the Registration
Statement has become effective, to promptly file the Rule 430A Prospectus with
the Commission; to make no further amendment or any supplement to the
Registration Statement or the Prospectus which shall be disapproved by you after
reasonable notice thereof; to advise you, promptly after it receives notice
thereof of the time when the Registration Statement, or any amendment thereto,
or any amended Registration Statement has become effective or any supplement to
the Prospectus or any amended Prospectus has been filed, of the issuance by the
Commission of any stop order or of any order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information; and in the event of
the issuance of any stop order or of any order preventing or suspending the use
of any Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain withdrawal of such
order;
(b) To promptly from time to time take such action as you may
reasonably request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the
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continuance of sales and dealings therein in such jurisdictions for as long as
may be necessary to complete the distribution, provided that in connection
therewith the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Registration
Statement (two of which will be signed and will include all exhibits), each
Preliminary Prospectus, the Prospectus and all amendments or supplements thereto
in such quantities and in such form or forms as you may from time to time
reasonably request, and if the delivery of a prospectus is required by law in
connection with sales of Securities at any time prior to the expiration of nine
months after the time of issue of the Prospectus and if at such time any event
shall have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make statements therein, in the
light of the circumstances under which they were made when such Prospectus is
delivered, not misleading, or if for any other reason it shall be necessary to
amend or supplement the Prospectus in order to comply with the Act, to notify
you and, if the Company so determines or upon your request, to prepare and
furnish without charge to each Underwriter and to any dealer in securities as
many copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such statement
or omission or effect such compliance (which each Underwriter and dealer shall
thereafter be obligated to use); and in case any Underwriter is required to
deliver a prospectus in connection with sales of any of the Securities at any
time nine months or more after the time of issue of the Prospectus, upon your
request but at the expense of such Underwriter, to prepare and deliver to such
Underwriter as many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its stockholders as soon as
practicable, but in any event not later than 45 days after the close of the
period covered thereby, an earnings statement in form complying with the
provisions of Section 11(a) of the Act and Rule 158 of the rules promulgated
thereunder covering a period of 12 consecutive months beginning not later than
the first day of the Company's fiscal quarter next following the Effective Date;
(e) To file promptly all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act subsequent to
the Effective Date and during any period when the Prospectus is required to be
delivered;
(f) For a period of five years from the Effective Date, to furnish to
its stockholders after the end of each fiscal year an annual report (including a
consolidated balance sheet and statements of income, cash flow and stockholders'
equity of the Company and its subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year
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<PAGE>
(beginning with the fiscal quarter ending after the Effective Date),
consolidated summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail;
(g) For a period of five years from the Effective Date, to furnish to
you copies of all reports or other communications (financial or other) furnished
to its stockholders, and deliver to you (i) as soon as they are available,
copies of any reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of securities
of the Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to time
reasonably request in connection with your obligations hereunder;
(h) To apply the net proceeds from the sale of the Securities hereunder
substantially in accordance with the description set forth in the Prospectus;
(i) That it will not take, directly or indirectly, any action designed
to or that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Securities;
(j) That prior to the Time of Delivery, there will not be any change in
the capital stock or short-term debt or long-term debt of the Company or any of
its subsidiaries, or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company or any of its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus;
(k) That it will not, during the period of 180 days after the date
hereof (other than pursuant to this Agreement), offer, sell or otherwise dispose
of any capital stock of the Company, directly or indirectly, without the prior
written consent of the Representatives; and
(l) That it has caused the Securities to be included for quotation on
the Nasdaq National Market as of the Effective Date.
6. The Company and the Selling Securityholders covenant and agree with the
several Underwriters that the Company will pay or cause to be paid: (i) the
fees, disbursements and expenses of counsel and accountants for the Company, and
all other expenses, in connection with the preparation, printing and filing of
the Registration Statement and the Prospectus and (except as otherwise provided
in Section 5(c) hereof) amendments and supplements thereto and the furnishing of
copies thereof, including charges for mailing, air freight and delivery and
counting and packaging thereof and of any Preliminary Prospectus and related
offering documents to the Underwriters and dealers; (ii) the cost of printing
this Agreement, the Agreement Among Underwriters, the Selling Agreement,
communications with the Underwriters and selling group and the Preliminary
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<PAGE>
and Supplemental Blue Sky Memoranda; (iii) all expenses in connection with the
qualification of the Securities for offering and sale under state securities
laws as provided in Section 5(b) hereof, including filing and registration fees
and the fees, disbursements and expenses for counsel for the Underwriters in
connection with such qualification and in connection with Blue Sky surveys; (iv)
the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Securities; and (v) all other costs and expenses incident to the performance of
its obligations hereunder which are not otherwise specifically provided for in
this Section 6, including the fees of the Company's Transfer Agent and
Registrar, the cost of any stock issue or transfer taxes on sale of the
Securities to the Underwriters, the cost of the Company's personnel and other
internal costs, the cost of printing and engraving the certificates representing
the Securities, and all expenses and taxes incident to the sale and delivery of
the Securities to be sold by the Company and by the Selling Securityholders to
the Underwriters hereunder.
It is understood, however, that, except as provided in this Section,
Section 8 and Section 11 hereof, the Underwriters will pay all their own costs
and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in
their discretion, to the condition that all representations and warranties and
other statements of the Company and the Selling Securityholders herein are, at
and as of the Time of Delivery, true and correct, the condition that the Company
and the Selling Securityholders shall have performed all their obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Registration Statement shall have become effective, and you
shall have received notice thereof not later than 10:00 P.M., New York City
time, on the date of execution of this Agreement, or at such other time as you
and the Company may agree; if required, the Prospectus shall have been filed in
accordance with Rule 424(b)(1) or (4) of the rules and regulations of the
Commission under the Act not later than 24 hours following the execution of this
Agreement; no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been complied with to your
reasonable satisfaction;
(b) All corporate proceedings and related legal and other matters in
connection with the organization of the Company and the registration,
authorization, issue, sale and delivery of the Securities shall have been
reasonably satisfactory to Fulbright & Jaworski L.L.P., counsel to the
Underwriters, and Fulbright & Jaworski L.L.P. shall have been furnished with
such papers and information as they may reasonably have requested to enable them
to pass upon the matters referred to in this subsection;
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<PAGE>
(c) You shall not have advised the Company or any Selling
Securityholder that the Registration Statement or Prospectus, or any amendment
or supplement thereto, contains an untrue statement of fact or omits to state a
fact which in your judgment is in either case material and in the case of an
omission is required to be stated therein or is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(d) McDermott, Will & Emery, counsel to the Company, shall have
furnished to you their written opinion, dated the Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Company has been duly and validly organized and is validly
existing as a corporation in good standing under the laws of the State of
Mississippi, and is qualified to do business and is in good standing in
each jurisdiction in which its ownership or leasing of properties requires
such qualification or the conduct of its business requires such
qualification (except where the failure to so qualify would not have a
material adverse effect on the Company); and the Company has all necessary
corporate power and all material governmental authorizations, permits and
approvals required to own, lease and operate its properties and conduct its
business as described in the Prospectus;
(ii) Each of the Company's subsidiaries has been duly and validly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, and is qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of properties requires such qualification or the
conduct of its business requires such qualification (except where the
failure to so qualify would not have a material adverse effect on the
Company and its subsidiaries as a whole); and each such subsidiary has all
necessary corporate power and all material governmental authorizations,
permits and approvals required to own its properties and to conduct its
business as described in the Prospectus, except as otherwise described in
the Prospectus;
(iii) All the outstanding shares of capital stock of each of the
Company's subsidiaries are validly issued and outstanding and are owned by
the Company of record and, to the best knowledge of such counsel, (A)
beneficially and (B) free and clear of all liens, charges or encumbrances
of any nature whatsoever; and neither the Company nor any of its
subsidiaries has granted any outstanding options, warrants or commitments
with respect to any shares of its capital stock, whether issued or
unissued, except as otherwise described in the Prospectus;
(iv) The Company has an authorized capitalization as set forth in
the Registration Statement and all the issued shares of capital stock of
the Company have been duly and validly authorized and issued and are fully
paid and non-assessable, are free of any statutory preemptive rights, and
were issued and sold
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in compliance with all applicable federal and state securities laws; except
as described in the Prospectus, to the knowledge of such counsel, there are
no outstanding options, warrants, or other rights calling for the issuance
of, and there are no commitments, plans or arrangements to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company; the
Securities being sold by the Company have been duly and validly authorized
and, when duly countersigned by the Company's Transfer Agent and Registrar
and issued, delivered and paid for in accordance with the provisions of the
Registration Statement and this Agreement, will be duly and validly issued,
fully paid and nonassessable and free of any statutory preemptive and, to
the best knowledge of such counsel, contractual preemptive rights, rights
of first refusal or similar rights; the Securities conform to the
description of the Common Stock in the Prospectus; and the Securities have
been duly included for quotation on the Nasdaq National Market as of the
Effective Date;
(v) This Agreement has been duly authorized, executed and delivered
by the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except as enforceability of the
same may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and except as
enforceability of those provisions relating to indemnity may be limited by
the federal securities laws and principles of public policy;
(vi) The Company has full corporate power and authority to execute,
deliver and perform this Agreement, and the execution, delivery and
performance of this Agreement, the consummation of the transactions herein
contemplated and the issue and sale of the Securities and the compliance by
the Company with all the provisions of this Agreement will not conflict
with, or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon, any of the property or assets of the
Company or its subsidiaries pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement, lease or other material agreement
or instrument known to such counsel to which the Company or any of its
subsidiaries is a party and by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or the By-Laws (or
similar corporate constituent documents) of the Company or any of its
subsidiaries, in each case as amended to the date hereof, any statute or,
to the best of such counsel's knowledge, any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(vii) No consent, approval, authorization, order, registration or
qualification of or with any court or any regulatory authority or other
governme-
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ntal body is required for the issue and sale of the Securities or the
consummation of the other transactions contemplated by this Agreement,
except such as have been obtained under the Act and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Underwriters;
(viii) To the best of such counsel's knowledge, neither the Company
nor any of its subsidiaries is currently in breach of, or in default under,
any indenture, mortgage, deed of trust, lease, bank loan or credit
agreement or (in any respect that is material in light of the financial
condition of the Company and its subsidiaries, taken as a whole) any other
agreement or instrument of which such counsel has knowledge to which the
Company or any of its subsidiaries is a party or by which any of them or
any of their property may be bound or affected;
(ix) There are no preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the voting or transfer of, any
Securities pursuant to the Company's Certificate of Incorporation or By-
Laws, in each case as amended to the date hereof, or any agreement or other
instrument known to such counsel; and either no holders of securities of
the Company have rights to the registration thereof under the Registration
Statement or, if any such holders have such rights, such holders are
participating in the offering of Securities contemplated by the
Registration Statement in accordance with such rights, or such holders have
waived such rights or such rights have expired by reason of the lapse of
time following notification to such holders of the Company's intention to
file the Registration Statement;
(x) Such counsel has read all contracts and loan agreements
referred to in the Registration Statement and the Prospectus and, to the
extent material, such contracts and loan agreements are fairly summarized
as disclosed therein, conform in all material respects to the descriptions
thereof contained therein, and are filed as exhibits thereto or
incorporated by reference therein; and to such counsel's knowledge, there
is no contract or document concerning the Company or any of its
subsidiaries of a character required to be described in the Prospectus or
to be filed as an exhibit or incorporated by reference to the Registration
Statement, which is not so described, filed or incorporated by reference;
(xi) To such counsel's knowledge, there is no litigation or
governmental or other action, suit, proceeding or investigation before any
court or before or by any public, regulatory or governmental agency or body
pending or threatened against, or involving the properties or business of,
the Company or any of its subsidiaries, which, if resolved against the
Company or any of its subsidiaries, individually or, to the extent
involving related claims or issues, in the aggregate, is of a character
required to be disclosed in the Prospectus which has not been properly
disclosed therein;
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(xii) Such counsel does not know that any of the representations
and warranties of the Company contained in this Agreement are not true or
correct or that any of the covenants and agreements herein contained to be
performed on the part of the Company or any of the conditions herein
contained, or set forth in the Registration Statement and the Prospectus,
to be fulfilled or complied with by the Company have not been or will not
be duly and timely performed, fulfilled or complied with;
(xiii) The Registration Statement has become effective under the
Act, the Prospectus has been filed in accordance with Rule 424(b) of the
rules and regulations of the Commission under the Act, including the
applicable time periods set forth therein, or such filing is not required,
and, to the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened under the Act; and the Registration Statement, the Prospectus
and each amendment or supplement thereto, as of their respective effective
or issue dates, complied as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder; it being
understood that such counsel need express no opinion as to the financial
statements and schedules or other financial and statistical data contained
in the Registration Statement or the Prospectus;
(xiv) The Company has executed and delivered the Settlement
Documents, which have released the Company from all of its obligations and
liabilities to Newsprint South, GECC and CoBank, as well as its obligations
and liabilities under all agreements related to the Project, provided that
the Company performs all of the actions required to be performed by it
pursuant to the terms of the Release Agreement. To such counsel's
knowledge, the Company has no further obligations or liabilities to
Newsprint South, GECC or CoBank, or under any agreement related to the
Project, except as set forth in the Settlement Documents; and
(xv) The Company has no liability to any of its or the
Cooperative's securityholders in connection with the Plan of Reorganization
and the transactions contemplated thereby, except for those securityholders
(the "Dissenters") named in Schedule III hereto, who have elected to
exercise their dissenters' rights in accordance with Article 13 of the
MBCA. Schedule III is complete and correct in all respects and the
Dissenters are the only securityholders of the Company or the Cooperative
who have validly preserved any rights under Article 13 of the MBCA with
respect to the Plan of Reorganization. The Company has entered into a
Settlement Agreement, dated July [ ], 1994, a true and correct copy of
which has been delivered to counsel for the Underwriters, with Mulberry
Phosphates pursuant to which Mulberry Phosphates has released the Company
from any and all liability
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to it in connection with the Plan of Reorganization and the transactions
contemplated thereby.
McDermott, Will & Emery shall also state that nothing has come to their
attention that would lead them to believe that either the Registration Statement
or the Prospectus contains any untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
In rendering their opinions set forth in Section 7(d) above, McDermott,
Will & Emery may rely (a) upon certificates of state officials, and (b) as to
factual matters, on certificates of the officers of the Company;
(e) McDermott, Will & Emery, counsel to the Selling Securityholders,
shall have furnished to you their written opinion with respect to each Selling
Securityholder, dated the Time of Delivery, in form and substance satisfactory
to you, to the effect that:
(i) Such Selling Securityholder has full corporate power to enter
into this Agreement and the Power of Attorney and to sell, transfer and
deliver the Securities being sold by such Selling Securityholder hereunder;
each of this Agreement and the Power of Attorney has been duly authorized,
executed and delivered by or on behalf of each such Selling Securityholder;
and is a legal, valid and binding agreement of each such Selling
Securityholder, enforceable in accordance with its terms, except as
enforcement of the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and except as enforceability of those provisions relating
to indemnity and contribution may be limited by the federal securities laws
and principles of public policy, and the performance of this Agreement and
the Power of Attorney and the consummation of the transactions herein and
therein contemplated will not result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any statute,
indenture, mortgage, deed of trust, loan agreement, lease, license
agreement or other agreement or instrument known to such counsel to which
any such Selling Securityholder is bound; or any statute or any order, rule
or regulation known to such counsel of any court or governmental agency or
body having jurisdiction over any such Selling Securityholder or the
property of any such Selling Securityholder;
(ii) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the consummation of the transactions contemplated by this
Agreement or the Power of Attorney in connection with the Securities being
sold by such Selling Securityholders, except such as have been obtained
under the Act and such as may
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be required under state securities or Blue Sky laws in connection with the
purchase and distribution of such Securities by the Underwriters;
(iii) Such counsel does not know that any of the representations
and warranties of such Selling Securityholders contained in this Agreement
are not true or correct; and
(iv) Upon delivery of and payment for the Securities being sold by
such Selling Securityholders, the several Underwriters will receive valid
and marketable title to such Securities, free and clear of all liens,
encumbrances, equities, security interests, claims or other restrictions.
In rendering such opinions, McDermott, Will & Emery may rely (a) as to
factual matters, on certificates of the Selling Securityholders and of officers
of the Company, (b) upon certificates of state officials, (c) on opinions of
counsel (provided, however, that you shall have received a copy of each of such
opinions which shall be dated the Time of Delivery, addressed to you or
otherwise authorizing you to rely thereon, and that McDermott, Will & Emery, in
their opinion to you delivered pursuant to this subsection, shall state that
such counsel are satisfactory to them and that McDermott, Will & Emery has no
reason to believe that you and they are not entitled to so rely), and (d) upon
representations of such Selling Securityholders as to matters of fact in their
respective Powers of Attorney;
(f) Fulbright & Jaworski L.L.P., counsel to the Underwriters, shall
have furnished to you their written opinion or opinions, dated the Time of
Delivery, in form and substance satisfactory to you, with respect to the
incorporation of the Company, the validity of the Securities, the Registration
Statement, the Prospectus and other related matters as you may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters;
(g) At the time this Agreement is executed and also at the Time of
Delivery, Arthur Andersen & Co. shall have furnished to you a letter or letters,
dated the date of this Agreement and the Time of Delivery, in form and substance
satisfactory to you, to the effect, that:
(i) They are independent accountants with respect to the Company
and its subsidiaries within the meaning of the Act and the applicable
published rules and regulations thereunder;
(ii) In their opinion, the consolidated financial statements of the
Company and its subsidiaries (including the related schedules and notes)
included in the Registration Statement and Prospectus and covered by their
reports included therein comply as to form in all material respects with
the applicable
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accounting requirements of the Act and the published rules and regulations
thereunder;
(iii) On the basis of specified procedures as of a specified date
not more than five days prior to the date of their letter (which procedures
do not constitute an examination made in accordance with generally accepted
auditing standards), consisting of a reading of the latest available
unaudited interim financial statements of the Company and its subsidiaries
(with an indication of the date or dates of each such latest available
financial statements), a reading of the latest available minutes of any
meeting of the Board of Directors and stockholders of the Company and its
subsidiaries since June 30, 1994, inquiries of officials of the Company who
have responsibility for financial and accounting matters subsequent to June
30, 1994, respectively, and such other procedures or inquiries as are
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) the information relating to the Company and its
subsidiaries for the fiscal years ended June 30, 1990, 1991, 1992,
1993, and 1994, and any unaudited information relating to the Company,
included in the Prospectus under the caption "Selected Financial Data"
does not agree with corresponding amounts in the audited and any
unaudited consolidated balance sheets and the audited and any
unaudited consolidated statements of income and the audited and any
unaudited statements of cash flows as of and for the periods then
ended;
(B) Any unaudited consolidated balance sheets, any unaudited
consolidated statements of operations, any unaudited consolidated
statements of shareholder-members' equity, and any unaudited
consolidated statements of cash flow, included in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder, or were not prepared on a basis substantially
consistent with that of the audited financial statements for the year
ended June 30, 1994, included in the Prospectus;
(C) as of a specified date not more than five days prior to
the date of their letter, there was any change in the capital stock,
long-term debt or short-term debt of the Company and its subsidiaries
on a consolidated basis, or any decreases in shareholder-members'
equity, inventory, working capital or total assets of the Company, as
compared with the amounts shown in the consolidated balance sheets as
of June 30, 1994, included in the Prospectus, except in each case for
changes which the Prospectus discloses have occurred or may occur or
which are described in their letter;
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(D) for the period from June 30, 1994, to a specified date
not more than five days prior to the date of such letter, there was
any decrease, as compared with the corresponding period of the
preceding fiscal year, in the following consolidated amounts: net
sales, operating income, margins from continuing operations before
income taxes and cumulative effect of change in accounting principle,
margins from continuing operations before cumulative change in
accounting principle, net margins, pro forma income from continuing
operations and pro forma earnings per share of the Company and its
subsidiaries, except in all instances for decreases which the
Registration Statement discloses have occurred or may occur; or if
there was any decrease, setting forth the amount of such decrease; or
if the Company and its subsidiaries have no financial statements for
any period subsequent to June 30, 1994, and other sufficient
information is not available to management in order to enable
management to comment on net sales, operating income, margins from
continuing operations before income taxes and cumulative effect of
change in accounting principle, margins from continuing operations
before cumulative change in accounting principle, net margins, pro
forma income from continuing operations and pro forma earnings per
share of the Company and its subsidiaries subsequent to June 30, 1994,
stating that management believes that there was no decrease in net
sales, operating income, margins from continuing operations before
income taxes and cumulative effect of change in accounting principle,
margins from continuing operations before cumulative change in
accounting principle, net margins, pro forma income from continuing
operations and pro forma earnings per share of the Company and its
subsidiaries for the period subsequent to June 30, 1994, as compared
with the corresponding period of the preceding fiscal year;
(iv) in addition to the examination referred to in their reports
included in the Registration Statement and the Prospectus and the limited
procedures referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are derived from the
general accounting records of the Company and its subsidiaries which appear
in the Prospectus under the captions "Prospectus Summary," "Investment
Considerations," "The Company," "Use of Proceeds," "Dividend Policy,"
"Historical and Pro Forma Capitalization," "Dilution," "Selected Financial
Data," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business," "Management," "Certain Relationships
and Related Transactions", "Principal and Selling Shareholders,"
"Description of Capital Stock," and "Shares Eligible for Future Sale," and
have compared such amounts and financial information with the accounting
records of the Company and its subsidiaries and have found them to be in
agreement and have proved the mathematical accuracy of certain specified
percentages; and
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(v) On the basis of a reading of the pro forma consolidated
financial statements included in the Registration Statement and the
Prospectus, carrying out certain specified procedures that would not
necessarily reveal matters of significance with respect to the comments set
forth in this clause (v), inquires of certain officials of the Company who
have responsibility for financial and accounting matters and proving the
arithmetic accuracy of the application of the pro forma adjustments to the
historical amounts in the pro forma consolidated financial statements,
nothing came to their attention that caused them to believe that the pro
forma consolidated financial statements do not comply in form in all
material respects with the applicable accounting requirements of Rule 11-02
of Regulation S-X or that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of such statements;
(h) (i) Neither the Company nor any of its subsidiaries shall have
sustained since June 30, 1994, any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree; and
(ii) since the respective dates as of which information is given in the
Prospectus, there shall not have been any change in the capital stock or short-
term debt or long-term debt of the Company or any of its subsidiaries nor any
change or any development involving a prospective change, in or affecting the
general affairs, management, financial position, shareholder-members' equity or
results of operations of the Company or any of its subsidiaries, otherwise than
as set forth or contemplated in the Prospectus, the effect of which, in any such
case described in clause (i) or (ii), is in your judgment so material and
adverse as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus;
(i) Between the date hereof and the Time of Delivery there shall have
been no declaration of war by the Government of the United States; at the Time
of Delivery there shall not have occurred any material adverse change in the
financial or securities markets in the United States or in political, financial
or economic conditions in the United States or any outbreak or material
escalation of hostilities or other calamity or crisis, the effect of which is
such as to make it, in the judgment of the Representatives, impracticable to
market the Securities or to enforce contracts for the resale of Securities and
no event shall have occurred resulting in (i) trading in securities generally on
the New York Stock Exchange or the Nasdaq National Market being suspended or
limited or minimum or maximum prices being generally established on the Nasdaq
National Market or on such exchange, or additional material governmental
restrictions, not in force on the date of this Agreement, being imposed upon
trading in securities generally by the Nasdaq National Market or such exchange
or by order of the Commission or any court or other governmental authority or
(ii) a general banking moratorium being declared by either Federal or New York
authorities;
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(j) The Company and each of the Selling Securityholders shall have
furnished or caused to be furnished to you at the Time of Delivery certificates
signed by the Chief Executive Officer and the Chief Financial Officer, on behalf
of the Company, and such Selling Securityholder or the Selling Securityholder
Attorneys, on behalf of each Selling Securityholder, satisfactory to you as to
such matters as you may reasonably request and as to (i) the accuracy of its
respective representations and warranties herein at and as of the Time of
Delivery and (ii) the performance by the Company and each Selling Securityholder
of all its respective obligations hereunder to be performed at or prior to the
Time of Delivery; the Company shall have furnished or caused to be furnished to
you at the Time of Delivery certificates signed by the Chief Executive Officer
and the Chief Financial Officer, on behalf of the Company, as to (i) the fact
that they have examined the Registration Statement and the Prospectus and, (a)
as of the Effective Date, the statements contained or incorporated by reference
in the Registration Statement and the Prospectus were true and correct and
neither the Registration Statement nor the Prospectus omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (b) since the Effective Date, no event has occurred
that is required by the Act or the rules and regulations of the Commission
thereunder to be set forth in an amendment of, or a supplement to, the
Prospectus that has not been set forth in such an amendment or supplement; and
(ii) the matters set forth in subsection (a) of this Section 7;
(k) Each director, officer, and [five-percent] stockholder of the
Company shall have delivered to you an agreement not to offer, sell or otherwise
dispose of any shares of Common Stock (or securities convertible into shares of
Common Stock), directly or indirectly, for a period of 180 days without the
prior written consent of Wertheim Schroder & Co. Incorporated; and
(l) The Company shall have delivered to you evidence that the
Securities have been included for quotation on the Nasdaq National Market as of
the Effective Date.
8. (a) The Company and each Selling Securityholder, jointly and severally,
will indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement made by the Company in Section
1A of this Agreement, (ii) any untrue statement or alleged untrue statement of a
material fact contained or incorporated by reference in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or in any Blue Sky application or other document executed by
the Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Securities under the securities laws thereof or filed
with the Commission or any securities association or securities exchange (each,
an "Application"), or the omission or
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alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements made or incorporated by reference therein
not misleading, or (iii) the employment by the Company of any device, scheme or
artifice to defraud, or the engaging by the Company in any act, practice or
course of business which operates or would operate as a fraud or deceit, or any
conspiracy with respect thereto, in which the Company shall participate, in
connection with the issuance and sale of any of the Securities, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating, preparing to defend,
defending or appearing as a third-party witness in connection with any such
action or claim; provided, however, that the Company and each of such Selling
Securityholders shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission relating
to an Underwriter made in any Preliminary Prospectus, the Registration
Statement, the Prospectus or such amendment or supplement or any Application in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through you expressly for use therein; provided,
further, that the indemnity agreement contained in this Section 8(a) with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter (or any persons controlling such Underwriter) on account of any
losses, claims, damages, liabilities or litigation arising from the sale of
Securities to any person, if such Underwriter fails to send or give a copy of
the Prospectus, as the same may be then supplemented or amended, to such person,
within the time required by the Act and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus, unless such failure is
the result of noncompliance by the Company with Section 5(c) hereof.
(b) Each Selling Securityholder, severally and not jointly, will
indemnify and hold harmless each Underwriter, the Company and the other Selling
Securityholders against any losses, claims, damages or liabilities to which such
Underwriter, the Company or such Selling Securityholders may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement made by such Selling
Securityholder in Section 1B of this Agreement, or (ii) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Prospectus, the Registration Statement, or the Prospectus, or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Preliminary Prospectus, the Registration Statement, the
Prospectus or such amendment or supplement in reliance upon and in conformity
with written information furnished to such Underwriter or the Company by such
Selling Securityholder expressly for use therein, and will reimburse such
Underwriter, the Company or such Selling Securityholders for any legal or other
expenses reasonably incurred by such Underwriter, the Company or such Selling
Securityholders in connection with investigating, preparing to defend, defending
or appearing as a third-party witness in connection with any
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such action or claim; provided, however, that the indemnity agreement contained
in this Section 8(b) with respect to any Preliminary Prospectus shall not inure
to the benefit of any Underwriter (or any persons controlling such Underwriter)
on account of any losses, claims, damages, liabilities or litigation arising
from the sale of Securities to any person, if such Underwriter fails to send or
give a copy of the Prospectus, as the same may be then supplemented or amended,
to such person, within the time required by the Act and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus, unless
such failure is the result of noncompliance by the Company with Section 5(c)
hereof.
(c) In addition to any obligations of the Company and each of the
Selling Securityholders under Section 8(a) and 8(b), the Company and each of the
Selling Securityholders agree that they shall perform their indemnification
obligations under Section 8(a) and Section 8(b) (as modified by the last
paragraph of this Section 8(c)) with respect to counsel fees and expenses and
other expenses reasonably incurred by making payments within 45 days to the
Underwriter in the amount of the statements of the Underwriter's counsel or
other statements which shall be forwarded by the Underwriter, and that it shall
make such payments notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the obligation to reimburse the Underwriters
for such expenses and the possibility that such payments might later be held to
have been improper by a court until such time as a court orders return of such
payments .
The indemnity agreement in Section 8(a) and Section 8(b) shall be in
addition to any liability which the Company or any of the Selling
Securityholders may otherwise have and shall extend upon the same terms and
conditions to each person, if any, who controls any Underwriter within the
meaning of the Act or the Exchange Act.
In no event shall any Selling Securityholder be required pursuant to
the indemnity agreement under Section 8(a) and 8(b) to pay a total amount in
excess of the net amount received by such Selling Securityholder hereunder for
the sale of Securities to the Underwriters.
(d) Each Underwriter will indemnify and hold harmless the Company
and the Selling Securityholders against any losses, claims, damages or
liabilities to which the Company or such Selling Securityholder may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or any Application, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Prospectus, the Registration Statement, the Prospectus or
such amendment or supplement or any
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Application in reliance upon and in conformity with written information
furnished to the Company or such Selling Securityholder by such Underwriter
relating to such Underwriter through you expressly for use therein, and will
reimburse the Company or such Selling Securityholder for any legal or other
expenses reasonably incurred by the Company or such Selling Securityholder in
connection with investigating or defending any such action or claim.
The indemnity agreement in this Section 8(d) shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company or of any Selling Securityholder and to each person, if any, who
controls the Company or any Selling Securityholder within the meaning of the Act
or the Exchange Act.
(e) Promptly after receipt by an indemnified party under Section
8(a), 8(b) or 8(d) of notice of the commencement of any action (including any
governmental investigation), such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party under Section 8(a), 8(b) or
8(d) except to the extent it was unaware of such action and has been prejudiced
in any material respect by such failure or from any liability which it may have
to any indemnified party otherwise than under such Section 8(a), 8(b) or 8(d).
In case any such action shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. If, however, (i) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party or (ii) an indemnified party shall have reasonably concluded
that representation of such indemnified party and the indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them and the
indemnified party so notifies the indemnifying party, then the indemnified party
shall be entitled to employ counsel different from counsel for the indemnifying
party at the expense of the indemnifying party and the indemnifying party shall
not have the right to assume the defense of such indemnified party. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to local counsel) for all indemnified parties in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same set of allegations or circumstances. The
counsel with respect to which fees and expenses shall be so reimbursed shall be
designated in writing by Wertheim Schroder & Co.
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Incorporated in the case of parties indemnified pursuant to Section 8(a) and
Section 8(b) and by the Company in the case of parties indemnified pursuant to
Section 8(d).
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by Section 8(c), the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(f) In order to provide for just and equitable contribution under
the Act in any case in which (i) any Underwriter (or any person who controls any
Underwriter within the meaning of the Act or the Exchange Act) makes claim for
indemnification pursuant to Section 8(a) or Section 8(b) hereof, but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that Section 8(a) or Section 8(b) provides for
indemnification in such case or (ii) contribution under the Act may be required
on the part of any Underwriter or any such controlling person in circumstances
for which indemnification is provided under Section 8(d), then, and in each such
case, the Company, the Selling Securityholders and such Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject as an indemnifying party hereunder (after contribution from
others) in such proportion so that such Underwriter is responsible for the
portion represented by the percentage that the underwriting discount appearing
on the cover page of the Prospectus bears to the public offering price appearing
thereon, the Selling Securityholders are responsible for the portion represented
by the percentage that the total net proceeds of the offering received by the
Selling Securityholders bears to the total public offering price appearing on
the cover page of the Prospectus and the Company is responsible for the
remaining portion; provided, however, that, in any such case, (x) no Underwriter
shall be required to contribute any amount in excess of the underwriting
discount applicable to the Securities purchased by such Underwriter, (y) no
Selling Securityholder shall in any case be required to contribute an amount in
excess of the proceeds of the offering received by such Selling Securityholder,
and (z) no person guilty of a fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to a contribution from any person
who was not guilty of such fraudulent misrepresentation. The amount paid or
payable by an Underwriter as result of this Section 8(f) shall be deemed to
include any legal or other expenses reasonably incurred by
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such Underwriter in connection with investigating, preparing to defend or
defending any such claim.
(g) Promptly after receipt by any party to this Agreement of notice
of the commencement of any action, suit or proceeding, such party will, if a
claim for contribution in respect thereof is to be made against another party
(the "contributing party"), notify the contributing party of the commencement
thereof; but the omission so to notify the contributing party will not relieve
it from any liability which it may have to any other party for contribution
under the Act except to the extent it was unaware of such action and has been
prejudiced in any material respect by such failure or from any liability which
it may have to any other party other than for contribution under the Act. In
case any such action, suit or proceeding is brought against any party, and such
party notifies a contributing party of the commencement thereof, the
contributing party will be entitled to participate therein with the notifying
party and any other contributing party similarly notified.
9. (a) If any Underwriter shall default in its obligation to
purchase the Firm Securities which it has agreed to purchase hereunder, you may
in your discretion arrange for you or another party or other parties to purchase
such Firm Securities on the terms contained herein. If the aggregate number of
Firm Securities as to which Underwriters default is more than one-eleventh of
the aggregate number of all the Firm Securities and within 36 hours after such
default by any Underwriter you do not arrange for the purchase of such Firm
Securities, then the Company shall be entitled to a further period of 36 hours
within which to procure another party or other parties satisfactory to you to
purchase such Firm Securities on such terms. In the event that, within the
respective prescribed periods, you notify the Company that you have so arranged
for the purchase of such Firm Securities, or the Company notifies you that it
has so arranged for the purchase of such Firm Securities, you or the Company
shall have the right to postpone the Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which it or you
determine may thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Firm Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Firm Securities of such defaulting Underwriter or Underwriters by you or the
Company or both as provided in subsection (a) above, the aggregate number of
such Firm Securities which remain unpurchased does not exceed one-eleventh of
the aggregate number of all the Firm Securities, then the Company shall have the
right to require each non-defaulting Underwriter to purchase the number of the
Firm Securities which such Underwriter agreed to purchase hereunder and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Firm Securities which such
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Underwriter agreed to purchase hereunder) of the Firm Securities of such
defaulting Underwriter or Underwriters for which such arrangements have not been
made; but nothing shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of
the Firm Securities of a defaulting Underwriter or Underwriters by you or the
Company as provided in subsection (a) above, the aggregate number of such Firm
Securities which remain unpurchased exceeds one-eleventh of the aggregate number
of all the Firm Securities, or if the Company shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Firm Securities of a defaulting Underwriter or Underwriters, then this
Agreement shall thereupon terminate without liability on the part of any non-
defaulting Underwriter, the Company or any Selling Securityholders, except for
the expenses to be borne by the Company and the Underwriters as provided in
Section 6 hereof and the indemnity agreement in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company, each of the Selling
Securityholders and the several Underwriters, as set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of any Underwriter or
any controlling person of any Underwriter, or the Company, or an officer or
director or controlling person of the Company or any of the Selling
Securityholders, and shall survive delivery of and payment for the Securities.
11. This Agreement shall become effective (a) if the Registration
Statement has not heretofore become effective, at the earlier of 12:00 Noon, New
York City time, on the first full business day after the Registration Statement
becomes effective, or at such time after the Registration Statement becomes
effective as you may authorize the sale of the Securities to the public by
Underwriters or other securities dealers, or (b) if the Registration Statement
has heretofore become effective, at the earlier of 24 hours after the filing of
the Prospectus with the Commission or at such time as you may authorize the sale
of the Securities to the public by Underwriters or securities dealers, unless,
prior to any such time you shall have received notice from the Company that it
elects that this Agreement shall not become effective, or you, or through you
such of the Underwriters as have agreed to purchase in the aggregate fifty
percent or more of the Firm Securities hereunder, shall have given notice to the
Company that you or such Underwriters elect that this Agreement shall not become
effective; provided, however, that the provisions of this Section 11 and Section
6 and Section 8 hereof shall at all times be effective.
If this Agreement shall be terminated pursuant to Section 9 hereof, or if
this Agreement, by election of you or the Underwriters, shall not become
effective pursuant to the provisions of this Section, the Company and the
Selling Securityholders shall not then be under any liability to any Underwriter
except as provided in Section 6 and Section 8
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hereof, but if this Agreement becomes effective and is not so terminated but the
Securities are not delivered by or on behalf of the Company or any of the
Selling Securityholders as provided herein because the Company or any of the
Selling Securityholders has been unable for any reason beyond its control and
not due to any default by it to comply with the terms and conditions hereof, the
Company will reimburse the Underwriters through you, for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Securities, but the Company and the Selling
Securityholders shall then be under no further liability to any Underwriter
except as provided in Section 6 and Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter, if the
same shall have been made or given by you, and in all dealings with the Selling
Securityholders hereunder, you and the Company shall be entitled to act and rely
upon any statement, request, notice or agreement furnished in writing by or on
behalf of such Selling Securityholder or by the Selling Securityholder
Attorneys.
All statements, requests, notices and agreements hereunder shall be in
writing or by written telecommunication, and shall be sufficient in all respects
if delivered or sent by registered mail, if to the Underwriters, to the
Representatives, in care of Wertheim Schroder & Co. Incorporated at 787 Seventh
Avenue, New York, New York 10019, Attention: Syndicate Department; provided,
however, that any notice to any Underwriter pursuant to Section 8(d) hereof
shall be delivered or sent by registered mail to such Underwriter at its address
set forth in its Underwriters' Questionnaire delivered to the Company; and if to
the Company or the Selling Securityholders, to Mississippi Chemical Corporation,
Post Office Box 388, Yazoo City, MS 39194-0388, Attention: Charles O. Dunn,
President and Chief Executive Officer.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and each of the Selling
Securityholders and, to the extent provided in Section 8 and Section 10 hereof,
the officers and directors of the Company and each person who controls the
Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Securities from any Underwriters shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be construed in accordance with the laws of
the State of New York.
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<PAGE>
16. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument .
If the foregoing is in accordance with your understanding, please sign and
return to us a counterpart hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, the Company and
each of the Selling Securityholders. It
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<PAGE>
is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement Among
Underwriters, manually or facsimile executed counterparts of which, to the
extent practicable and upon request, shall be submitted to the Company for
examination, but without warranty on your part as to the authority of the
signers thereof.
Very truly yours,
MISSISSIPPI CHEMICAL CORPORATION
By:_____________________________________
SELLING SECURITYHOLDERS
By:_____________________________________
As Attorney-in-Fact for each of the
Selling Securityholders listed in
Schedule II
Accepted as of the date hereof:
WERTHEIM SCHRODER & CO. INCORPORATED
THE ROBINSON-HUMPHREY COMPANY INC.
as Representatives of the several Underwriters
By: Wertheim Schroder & Co. Incorporated
By:_______________________________________
Managing Director
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<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
Underwriter Number of Shares
----------- ----------------
<S> <C>
Wertheim Schroder & Co. Incorporated
The Robinson-Humphrey Company, Inc.
_________
Total................................. 4,800,000
=========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
Number of Firm Maximum Number of
Selling Securityholder Securities to be Sold Option Securities to be Sold
- ---------------------- --------------------- ----------------------------
<S> <C> <C>
_________ _________
Total 1,600,000
========= =========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
Dissenting Number and Series Reorganization Value
Securityholder of Dissenting Shares of Dissenting Shares
- -------------- -------------------- --------------------
<S> <C> <C>
________ _________
Total ======== =========
</TABLE>
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<PAGE>
EXHIBIT 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our
reports included herein and to all references to our Firm included in or
made a part of this registration statement.
Arthur Andersen & Co.
Memphis, Tennessee,
July 14, 1994.
