<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-20411
MISSISSIPPI CHEMICAL CORPORATION
================================================================================
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0292638
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
Highway 49 East, P.O. Box 388, Yazoo City, MS 39194
- --------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (601) 746-4131
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $.01 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
================================================================================
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
At August 31, 1997, Mississippi Chemical Corporation had 27,410,656 shares of
common stock, par value $0.01, outstanding. The Company estimates that the
aggregate market value of the common stock on August 31, 1997 (based upon the
closing price of these shares on the New York Stock Exchange), held by
nonaffiliates was approximately $582,884,306.
================================================================================
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for fiscal year ended June 30, 1997 (Items 5, 6, 7
and 8 in Part II, and Item 14 in Part IV).
Proxy Statement for Annual Meeting of Shareholders to be held on November 11,
1997 (Items 10, 11, 12 and 13 in Part III).
1
<PAGE>
PART I
ITEM 1. BUSINESS
Mississippi Chemical Corporation (the "Company") was incorporated in
Mississippi on May 23, 1994, and 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 address of the Company's
principal executive office is Owen Cooper Administration Building, Highway 49
East, Yazoo City, Mississippi 39194, and its telephone number is (601) 746-4131.
The Company maintains a site on the World Wide Web. The address of the
Company's web site is www.misschem.com. The term "Company" includes Mississippi
Chemical Corporation and its wholly owned subsidiaries, Mississippi Phosphates
Corporation, Triad Nitrogen, Inc., and Mississippi Potash, Inc. References to
the Company's operations prior to July 1, 1994, refer to the Cooperative's
operations.
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
that 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. Pursuant to the
Reorganization, the capital stock of the Cooperative was converted into common
stock and/or cash. As a result of the Reorganization, the Company no longer
operates as a cooperative, but as a regular business corporation.
In August 1996, the Company entered into an agreement to acquire the
fertilizer businesses of First Mississippi Corporation ("First Mississippi") in
an all-stock merger transaction. The transaction was completed on December 24,
1996. According to the terms of the merger, the Company issued approximately
6,902,000 shares of its common stock to former First Mississippi shareholders.
Additionally, at closing, First Mississippi's fertilizer businesses had
approximately $150 million in outstanding debt which was assumed by the Company.
The fertilizer operations primarily included AMPRO Fertilizer, Inc. ("AMPRO"),
and a 50 percent interest in Triad Chemical, both located on contiguous property
at Donaldsonville, Louisiana. The Company already held the remaining 50 percent
interest in Triad Chemical. Prior to this acquisition, the Company had the right
to withdraw, at cost, approximately one-half of the production of Triad Chemical
and was obligated to withdraw certain minimum quantities. Since closing of the
transaction, the Company has merged AMPRO into, and has contributed its 50
percent interest in Triad Chemical to, First Mississippi and has changed the
name of First Mississippi to Triad Nitrogen, Inc. ("Triad Nitrogen").
In August 1996, the Company, through two subsidiaries of its wholly owned
subsidiary Mississippi Potash, Inc., acquired substantially all of the assets
(including the right to use the corporate names) of New Mexico Potash
Corporation and Eddy Potash, Inc., from Trans-Resources, Inc. Since the
acquisition, New Mexico Potash Corporation has been merged into Mississippi
Potash, Inc. Eddy Potash, Inc. ("Eddy Potash"), operates as a wholly owned
subsidiary of Mississippi Potash, Inc. The original mine and refinery owned by
Mississippi Potash, Inc., is now known as the "West Facility," and the former
New Mexico Potash Corporation mine is known as the "East Facility."
2
<PAGE>
NITROGEN FERTILIZER
PRODUCTS
The Company produces nitrogen fertilizers at its production facilities in
Yazoo City, Mississippi, and Donaldsonville, Louisiana. In fiscal 1997, the
Company sold approximately 2.0 million tons of nitrogen fertilizers to farmers,
fertilizer dealers, and distributors located primarily in the southern United
States. Sales of nitrogen fertilizer products by the Company in fiscal 1997
were $308.4 million, which represented approximately 59 percent of net sales.
The Company's principal nitrogen products include ammonia; fertilizer-grade
ammonium nitrate, which is sold under the Company's trade name Amtrate(R);
UAN solutions, which are sold under the Company's trade name N-Sol; and urea.
Although, to some extent, the various nitrogen fertilizers are
interchangeable, each has its own distinct characteristics that produce
agronomic preferences among end-users. Farmers determine 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 percent
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 1997, the Company produced approximately 1,151,000 tons of
anhydrous ammonia at its Yazoo City and Donaldsonville facilities and purchased
approximately 59,000 tons. The Company sold approximately 379,000 tons of
anhydrous ammonia for direct-application fertilizer and industrial sales and
used the balance as a raw material to manufacture its other nitrogen fertilizer
products. The Company's subsidiary Mississippi Phosphates Corporation also
purchased 116,000 tons of ammonia for use in its phosphate operations. See
"Phosphate Fertilizer."
In the Company's markets, ammonia is used primarily as a pre-emergent
fertilizer for most row crops and for industrial uses. Although anhydrous
ammonia is the least expensive form of nitrogen, its use as a primary fertilizer
has remained constant in recent years.
AMMONIUM NITRATE. The Company is the largest manufacturer and marketer of
high-density ammonium nitrate fertilizer in the United States. Ammonium
nitrate, which is 34 percent 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
United States has been stable in recent years, the use of conservation tillage,
which reduces soil erosion, is increasing in the United States and should have a
positive impact on ammonium nitrate demand.
In fiscal 1997, the Company sold approximately 725,000 tons of solid
ammonium nitrate fertilizer, substantially all of which was produced at the
Company's Yazoo City facility. The ammonium nitrate produced at the Company's
Yazoo City facility is sold under the registered trade name Amtrate(R). Due to
3
<PAGE>
its superior shipping and storage characteristics, Amtrate(R) has established
excellent brand name recognition and a reputation as a high-quality product.
UAN SOLUTIONS. In fiscal 1997, the Company sold approximately 457,000 tons
of UAN solutions, which it produced at its Yazoo City facility and sold under
the trade name N-Sol. N-Sol is a 32 percent nitrogen product that is made by
mixing urea liquor and ammonium nitrate liquor. N-Sol is used in 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
increase in the use of UAN solutions as a part of the overall growth in the
consumption of nitrogen fertilizers.
UREA. In fiscal 1997, the Company sold approximately 297,000 tons of
prilled urea and approximately 127,000 tons of urea melt, which it produces at
its Donaldsonville facility. Under a long-term contract with Melamine Chemicals,
Inc. ("Melamine"), the Company is obligated to sell up to 150,000 tons per year
of urea melt at prevailing market prices to Melamine's facility located adjacent
to the Triad Nitrogen facility. Urea is synthesized by the reaction of ammonia
and carbon dioxide and then solidified in prill form. At 46 percent 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 that can be used 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. Most
of the Company's prilled urea is broadcast on rice and winter wheat crops in
Arkansas, Louisiana, Mississippi, Oklahoma, and Texas. Approximately 35 percent
of the Company's urea sales are to industrial users and manufacturers of animal
feeds.
PRODUCTION AND PROPERTIES
YAZOO CITY, MISSISSIPPI. The Yazoo City facility is a closely integrated,
multiplant 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, two urea plants, and a UAN solutions plant.
In 1996, the Company announced an expansion project at its Yazoo City facility.
This project will include a 500-ton-per-day anhydrous ammonia plant and a
650-ton-per-day nitric acid plant, as well as modifications to its ammonium
nitrate plant to increase production from approximately 750,000 tons per year to
approximately 950,000 tons per year. The project is estimated to cost
approximately $130 million and is scheduled for a phased completion, with the
nitric acid, anhydrous ammonia, and a portion of the ammonium nitrate capacity
being added in the first half of 1998. Total project completion is anticipated
in early 1999.
The Yazoo City facility includes a 20.5 megawatt cogeneration facility that
produces significant savings by the sequential generation of electricity and
process steam. 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 Nitrogen facility is a closely
integrated, multiplant nitrogen fertilizer complex located on approximately 740
acres fronting the Mississippi River at Donaldsonville, Louisiana, which
produces anhydrous ammonia and urea. The facility consists of two anhydrous
ammonia plants with a combined annual production of 1,080,000 tons, which
includes a capacity expansion of approximately 125,000 tons per year that was
completed during fiscal 1997. In addition, the facility consists of a urea
plant with an annual production of approximately 560,000 tons. In the
transaction with First Mississippi, the Company also acquired a 50 percent
interest in an ammonia
4
<PAGE>
storage terminal in Pasadena, Texas, and a 50 percent interest in a company that
owns and operates 11 ammonia barges. In March 1997, the Company purchased the
other 50 percent interest in the barge company for approximately $3.8 million.
Triad Nitrogen has ready access to rail, truck, and pipeline transportation.
The plant also is equipped with a deep-water port facility on the Mississippi
River, allowing access to economical ship and barge transportation for its urea
and ammonia products. The Triad Nitrogen facility is well-positioned for the
purchase of competitively priced natural gas. See "Raw Materials--Natural Gas."
TRINIDAD. The Company has entered into a 50-50 joint venture with Farmland
Industries, Inc., known as Farmland MissChem Limited to construct and operate a
2,040-short-ton-per-day ammonia plant to be located near Point Lisas,
The Republic of Trinidad and Tobago. The project is expected to cost
approximately $330 million. Construction of the facility is underway with
completion and start-up scheduled for late spring 1998. The Company has entered
into a contract to purchase one-half of the ammonia (approximately 350,000 short
tons per year) produced by the plant at a purchase price that approximates
market price, but is subject to an agreed-upon floor price. The Company intends
to use its portion of the production from the new facility as a raw material for
upgrading into finished fertilizer products at its existing facilities and for
sales into world markets.
MARKETING AND DISTRIBUTION
The Company sells its nitrogen fertilizer products to farmers, dealers, and
distributors, as well as industrial users, located primarily in the southern
farming regions of the United States where its facilities are located. In the
fertilizer distribution chain, distributors operate as wholesalers supplying
dealers who, in turn, sell directly to farmers. Larger customers (distributors
and large multilocation 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 that make up the Company's
primary trade area are Mississippi, Texas, Alabama, Louisiana, Tennessee,
Georgia, Kentucky, Arkansas, Oklahoma, and Florida. However, dealers and
distributors located in this region re-market a substantial quantity of these
nitrogen products to end-users outside of the southern United States.
The Company maintains an experienced field sales force strategically located
throughout the southern United States. This sales force maintains close
communications with the customer base and plays an important 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 sales force is also able to identify
specific customer service needs that the Company can meet. Customer service
helps differentiate the Company's products and enhance its position as a
preferred supplier.
The Company transports its nitrogen products by barge, rail, pipeline, and
truck. The Company's distribution network is complemented by owned or leased
warehouses and terminals strategically placed in high-consumption areas.
5
<PAGE>
PHOSPHATE FERTILIZER
PRODUCTS
The Company produces diammonium phosphate fertilizer ("DAP") at its facility
in Pascagoula, Mississippi. In fiscal 1997, the Company sold approximately
723,000 tons of DAP, primarily into international markets. Sales of DAP by the
Company in fiscal 1997 were $128 million, which represented approximately
25 percent of net sales.
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 percent nitrogen and 46 percent
phosphate (P205) 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's phosphate production complex in Pascagoula, Mississippi, is
located on approximately 1,500 acres. The Pascagoula facility is a closely
integrated, multiplant 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
(40,000 tons), as well as for the primary raw materials, phosphate rock (100,000
tons), sulfur (10,000 tons), and ammonia (25,000 tons). All of the phosphate
rock used by the Company is purchased pursuant to a single supply contract with
Office Cherifien des Phosphates ("OCP"), the national phosphate company of
Morocco. See "Raw Materials--Phosphate Rock."
The plant site fronts a deep-water channel that provides direct access to
the Gulf of Mexico. The complex contains docks and off-loading facilities for
receiving shipload quantities of phosphate rock, sulfur, and ammonia and for
out-loading 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.
The Company has begun construction of a new phosphogypsum disposal facility
at Pascagoula that is expected to be operational by spring 1998, at an estimated
cost of $17 million. In July 1997, the Company also initiated construction of
an expansion of its diammonium phosphate manufacturing facilities at Pascagoula.
This project will increase production from approximately 720,000 to 900,000 tons
per year and will increase product storage capacity from approximately 40,000 to
80,000 tons at an estimated cost of $10.5 million. It is expected that this
expansion will be fully operational by the end of fiscal 1998.
MARKETING AND DISTRIBUTION
In fiscal 1997, the Company sold substantially all of its DAP to Atlantic
Fertilizer & Chemical Corporation ("Atlantic"). 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 that
reflects the price that Atlantic charges its customers, adjusted to reflect
Atlantic's discount. Sales to Atlantic for the export market are backed by
standby letters of credit.
In July 1997, the Company announced that it is ending its exclusive DAP
marketing agreement with Atlantic. The Company has agreed to become a member of
the Phosphate Chemicals Export
6
<PAGE>
Association, Inc., a Webb-Pomerene corporation known as PhosChem, effective
October 1, 1997. All of the Company's export sales of DAP will be made through
PhosChem. Also effective October 1, 1997, all domestic sales of DAP will be made
through the Company's sales staff.
In fiscal 1997, over 80 percent of the Company's DAP was sold into
international markets. The largest export markets in fiscal 1997 were China,
India and countries in Central and South America. 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 DAP is
transported by ship and barge, although truck and rail access is also available.
POTASH FERTILIZER
PRODUCTS
The Company produces potash at three mines and related facilities near
Carlsbad, New Mexico. In fiscal 1997, the Company sold approximately 1,020,000
tons of potash, primarily in granular form. These sales were primarily to
customers located west of the Mississippi River. Sales of potash fertilizer by
the Company in fiscal 1997 were $82 million, which represented approximately
16 percent of net sales.
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 by which the potassium chloride is separated from
the sodium chloride.
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. In addition, the Company produces
several grades of potash that are purchased by industrial users.
PRODUCTION AND PROPERTIES
Prior to the August 1996 acquisition, the Company operated only the West
Facility, consisting of a potash mine and refinery located approximately
25 miles east of Carlsbad, New Mexico. This mine supplies ore to an above-ground
refinery that 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. 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 West Facility is currently producing approximately 420,000 short tons
per year of red potash, primarily in granular form. 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 in situ ore with an average
grade of 15.25 percent K20 or 297.9 million tons of recoverable ore with an
average grade of 14.88 percent K20. Since these estimates were made, ore
extracted would indicate remaining reserves of 330 million tons of in situ ore
with an average grade of 15.26 percent K2O or 281 million tons of
7
<PAGE>
recoverable ore with an average grade of 14.88 percent K2O. This reserve base is
estimated to be equivalent to 55 million tons of muriate of potash.
The East Facility and Eddy Potash, located near Carlsbad, New Mexico, have a
combined annual production capacity of approximately 850,000 tons. The East
Facility produces white potash for use by both agriculture and industry in
standard, coarse, and granular forms. The Eddy Potash mine produces red potash
for agriculture in standard form and white soluble grade for industrial users.
On September 24, 1997, the Company announced that Eddy Potash intends to
suspend operations on December 3, 1997. The higher-grade ore zone that Eddy
Potash has been mining is nearly depleted and other ore zones are not presently
economical. The Eddy Potash facilities will be maintained while the Company
proceeds with ongoing evaluations of alternate mining methods for the Eddy
Potash reserves.
At current production rates, the Company's combined reserves at the East and
West Facilities have a remaining life of several decades.
MARKETING AND DISTRIBUTION
The majority of the Company's agricultural potash sales are in domestic
markets in the 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"
(sales less distribution and delivery expense) and increase profit margins,
domestic sales are targeted for locations along the freight route of the
Burlington Northern Santa Fe Railroad. Domestic potash marketing is performed
by a separate sales group solely responsible for marketing potash products. The
Company's export sales are made through Potash Corporation of Saskatchewan Sales
Limited. While the typical primary export market for the Company's potash is
Latin America, the majority of fiscal 1997 export sales were to Mexico, Brazil,
and Japan. Potash for export is transported by rail to terminal facilities in
Houston, Texas, where it is loaded onto ocean-going vessels for shipment to
export markets.
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 that is then
upgraded into other nitrogen fertilizer products. During fiscal 1997, the cost
of natural gas represented approximately 79 percent of the Company's cost of
producing ammonia. Because there are no commercially feasible alternatives for
natural gas in the production of ammonia, the economic success 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 sources and transportation services. In addition to the impact on
transmission costs, access alternatives enable the Company to benefit from
natural gas price
8
<PAGE>
differences that 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 majority of the 54,000 Mcf per day natural gas requirements of the
Yazoo City facility is currently being furnished by Sonat Marketing Company
("Sonat"), an affiliate of Southern Natural Gas Company ("Southern"). Sonat
deliveries are secured via a long-term natural gas purchase agreement that
commenced on January 1, 1996. The Sonat agreement provides for market-sensitive
pricing and a firm-delivery supply commitment. Another major supplier for the
Yazoo City facility is Pursue Energy Corporation ("Pursue") from its natural gas
reserves located in Rankin County, Mississippi. It is anticipated that the
Pursue purchase arrangement will continue for the foreseeable future. The Yazoo
City facility is directly connected to the interstate pipeline system operated
by Southern. In addition, the Company's 60-mile, 12-inch-diameter natural gas
pipeline provides the plant with direct access to the Pursue reserves, an
additional interstate pipeline, and a large intrastate gathering and
transmission system in southern Mississippi. Currently, plans are being
implemented to establish an additional pipeline interconnect with another major
interstate pipeline to provide further gas supply flexibility to the Yazoo City
facility. As a result of this multiple-source access, the Company benefits from
competition for the transportation and supply of natural gas.
Natural gas requirements for the Triad Nitrogen facility are approximately
105,000 Mcf per day. The Triad Nitrogen facility is located in one of the
primary gas-producing regions of the United States. The facility is currently
connected to five intrastate pipeline systems and benefits from intense
competition among the many suppliers that have transport capabilities on the
intrastate lines. Current natural gas requirements are being supplied by all
five intrastate lines under various pricing arrangements. The remaining
requirements continue to be supplied via spot market 30-day or 90-day fixed-
price contracts. As a result of Triad Nitrogen'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 Nitrogen facility .
Relative to fiscal 1996 levels, the Company's delivered cost of natural gas
increased approximately 11 percent. The inability of gas suppliers to replenish
depleted natural gas storage inventories after the harsh winter of 1995-1996 is
responsible for much of this increase. Although long-term natural gas supplies
appear adequate to meet projected demand, gas prices can be influenced
significantly by short-term fundamentals such as weather, storage levels, gas
transportation interruptions, and competing fuel prices. 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 one of the primary raw materials used in the manufacture
of DAP. The Pascagoula facility's requirements for phosphate rock are
approximately 1.2 million tons per year. On September 15, 1991, the Company
entered into a ten-year contract with OCP to supply all of the phosphate rock
requirements of the Pascagoula facility, including the additional phosphate rock
attributable to the announced capacity expansion. This contract has been amended
and its term extended to June 30, 2016. OCP, the national phosphate company of
Morocco, is the world's largest producer and exporter of phosphate rock and
upgraded phosphates as a company. The contract price for phosphate rock is based
on phosphate rock costs incurred by certain domestic competitors of the Company
and on
9
<PAGE>
the operating 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 not profitable. As a result, the Company has been able to
sustain its operations since resuming production at the Pascagoula facility in
December 1991, despite a sustained period of low prices for phosphate products
during fiscal 1993 and 1992. Conversely, in favorable markets, when the
Company's DAP operations are profitable, the contract price of phosphate rock
will escalate based on the profitability of its DAP operations. 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 good.
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 290,000 tons per
year. The location of the Company's plant at Pascagoula, Mississippi, near
major oil and gas fields that supply substantial amounts of sulfur, provides the
Company with a strategic advantage in the purchase of sulfur over its Florida
competitors.
AMMONIA
Demand for ammonia during fiscal 1997 was very heavy, and U.S. inventories
declined from the prior year. However, prices are expected to come under some
pressure later in the year as new production starts up at the various locations
around the world. Prices are still at relatively high levels and demand is
expected to remain strong.
COMPETITION
Since fertilizers are global commodities that are available from multiple
sources, the primary competitive factor is delivered price. Other competitive
factors 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 nonmarket factors such as the need for
hard currency.
The Company produces and sells nitrogen fertilizer products primarily in the
southern United States. However, dealers and distributors located in this
region re-market a substantial quantity of these nitrogen products to end-users
outside of the southern United States. Because competition is based largely on
the delivered price, maintaining low production costs is critical to
competitiveness. The Company believes it is a low-cost producer of nitrogen
fertilizers in the United States. Natural gas comprises the vast majority of
the raw materials cost of nitrogen fertilizers. Competitive natural gas
purchasing is essential to maintaining the Company's low-cost position. Equally
important is efficient use of this gas because of the energy-intensive nature of
the nitrogen fertilizer 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 also can be
sources of product differentiation.
10
<PAGE>
The Company sells over two-thirds of its DAP in international markets. The
U.S. 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 percent of U.S. 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 may be offset by logistical
and freight advantages in certain markets in the southwestern United States and
the lower United States corn belt.
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 expenditures on research activities sponsored by the
Company during fiscal 1997, 1996, and 1995 were approximately $1.3 million,
$1.2 million, and $1.3 million, respectively.
EMPLOYEES
As of June 30, 1997, the Company employed approximately 1,700 persons
throughout all of its 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 various state statutes. The Company's facilities
require operating permits that 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.
Since 1967, the Company has spent in excess of $50 million on its fertilizer
production facilities in order to meet applicable federal and state pollution
standards. 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. Capital expenditures related to environmental obligations for the
past three fiscal years were approximately as follows: 1997--$8,400,000;
1996--$920,000; and 1995--$7,750,000.
Environmental capital expenditures are expected to be approximately
$13.2 million for fiscal 1998. These funds relate in large part to the
development of a new gypsum disposal facility at Pascagoula. The estimated cost
of this facility is $17.0 million, which amount will be expended until
completion in early 1998. The Company has recently secured the necessary permits
for its development.
The Company is currently accruing costs for the future closure of the
current gypsum disposal facility located at Pascagoula, Mississippi. These costs
are reflected in "Cost of Products Sold" during the appropriate periods. The
balance of the accrual at June 30, 1997, of $8.1 million relates to the
11
<PAGE>
portion of the disposal facility utilized to date. In future years, the Company
expects to record additional charges of approximately $1.9 million related to
the future closure of the facility. These charges will be recorded over the
estimated two-year remaining life of the 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.
OUTLOOK AND UNCERTAINTIES
Certain information in this report may contain "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. In some cases, forward-looking statements can be identified by the use
of terminology such as "may," "will," "expects," "plans," "anticipates,"
"estimates," "potential," or "continue," the negatives thereof or other
comparable terminology. Such statements are subject to inherent risks and
uncertainties, including the following risk factors:
Factors Affecting Fertilizer Demand and Prices. With virtually all of its
nitrogen fertilizer net sales and approximately 94 percent of its total net
sales in fiscal 1997 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, but are not limited to,
U.S. planted acreage, government agricultural policies, projected grain stocks,
crop failure, weather and changes in agricultural production methods. Since
fertilizers, particularly anhydrous ammonia, are also used for industrial
applications, industrial markets and the general economy can also affect
fertilizer demand and prices.
International market conditions also significantly influence the Company's
operating results. 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; and other regulatory policies
of foreign governments, as well as the laws and policies of the United States
affecting foreign trade and investment. The Company is also subject to general
risks of doing business abroad, including risks associated with economic or
political instability and potential import restrictions or quotas.
In the past, fertilizer prices have been extremely volatile, with
significant price changes from one growing season to the next. Fertilizers are
global commodities and can be subject to intense price competition from domestic
and foreign sources. No assurance can be given 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 its 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 its
fiscal years (March through June). 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.
12
<PAGE>
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 used
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 is dependent upon the price and availability of natural gas. A
significant increase in the price of natural gas that 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 its production facilities, could
have a material adverse effect on its results of operations and financial
condition.
Environmental Regulations. The Company is subject to various environmental
laws and regulations of federal, state and local governments. Significant
capital expenditures and operating costs have been incurred and will continue to
be incurred as a result 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 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 and result in material costs to the Company.
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 Untied States and in
foreign markets to which the Company exports. Many of the Company's competitors
are significantly larger and have greater financial resources that the Company.
ITEM 2. PROPERTIES
The Company owns an administration building in Yazoo City that contains
approximately 65,000 square feet of office space.
The Company's plants are complete with necessary support facilities, such as
roads, railroad tracks, storage, offices, laboratories, warehouses, machine
shops, and loading facilities. Adequate supplies of water and electric power
are available at all locations. In addition to the fertilizer storage
facilities at Yazoo City and Pascagoula, Mississippi; Carlsbad, New Mexico; and
Donaldsonville, Louisiana, the Company also owns or leases 25 major fertilizer
storage and distribution facilities at other locations in Alabama, Arkansas,
California, Florida, Georgia, Louisiana, Mississippi, Missouri, Tennessee, and
Texas, with a total system-wide storage capacity of approximately 264,000 tons.
During 1990, the Company entered into an agreement granting a third party
the exclusive option, for a period of four years, to purchase the Company's
undeveloped phosphate rock property, consisting of approximately 12,000 acres,
in Hardee County, Florida. As of July 12, 1994, the Company and the option
holder entered into new agreements with respect to this property whereby the
Company conveyed a portion of the property to the third party and granted to the
third party the exclusive option to purchase the remaining portion of the
property. In addition, the Company was granted a put option whereby the Company
has the right and option to sell the remaining portion of the property to the
third party if the third party does not exercise its option to purchase the
remaining property; and was granted an exclusive option to repurchase the
previously conveyed portion in the event the third party does not exercise its
option and the Company does not exercise its put option. The third party's
option will expire on January 16, 1998. The Company's put option will expire six
months after the third party's option expires, and its repurchase option will
expire one year after the Company's put option expires.
13
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Cleve Reber CERCLA Site. Triad Chemical has received and responded to
letters issued by the U.S. 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 disposal site identified as the Cleve Reber site in Ascension Parish,
Louisiana. It is Triad's position that, based upon available information and
records, Triad did not utilize the Cleve Reber site for the disposition of
hazardous material, and it does not appear that Triad has any responsibility for
investigation and cleanup on this site. The EPA is contemplating an action under
the Resource Conservation and Recovery Act, Section 7003, as well as the CERCLA
action mentioned above. The EPA has issued Section 106 orders against the major
contributors at the site for cleanup. They are now engaged in negotiations for
cleanup. In 1994, Triad received a supplemental 104(e) request for information
from the EPA, indicating the EPA's renewed interest in pursuing Potential
Responsible Persons at the site. Triad filed a Freedom of Information Act
request to investigate allegations that some plant trash from Triad may have
been disposed of at the Cleve Reber site. In the opinion of management, the
likelihood of the CERCLA investigation resulting in a loss in a material amount
is remote.
Bayou Sorrel. In early 1996, a class action suit was brought in the U.S.
District Court for the Middle District of Louisiana against Triad Chemical and
other companies alleged to have resulted from the presence of contaminants at
the Bayou Sorrel CERCLA site in Iberville Parish, Louisiana. Triad has not been
served with process in this case. Triad is monitoring the case while awaiting
service of process. In the opinion of management, based upon available
information, the likelihood that these proceedings will result in a loss in a
material amount is remote.
Terra International, Inc. On August 31, 1995, the Company filed suit in
federal court in Mississippi against Terra International, Inc. ("Terra"),
seeking a declaratory judgment and other relief, establishing that certain
technology relating to the design of an ammonium nitrate neutralizer which the
Company licensed to Terra is not defective and was not the cause of an explosion
which occurred in 1994 at Terra's Port Neal, Iowa, fertilizer facility. The
Company is also seeking damages for defamation based on Terra's public statement
related to the Company's alleged role in the explosion. Also, on August 31,
1995, Terra filed suit in federal court in Iowa against the Company seeking
damages caused by the explosion. Terra alleges that the ammonium nitrate
neutralizer technology licensed to Terra was defectively designed by the Company
and that the design defect caused the Port Neal explosion. Both the Mississippi
and Iowa federal district courts and the U.S. Eighth Circuit Court of Appeals
have determined that the Mississippi federal district court is the proper venue
to resolve all issues between the parties relating to the Port Neal explosion.
It is expected that extensive discovery will be conducted by both parties to
these proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is set forth in the Company's 1997
Annual Report to Shareholders under the caption "Quarterly Results," contained
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations," which information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is set forth in the Company's 1997
Annual Report to Shareholders under the caption "Financial Highlights," which
information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth in the Company's 1997
Annual Report to Shareholders under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon of
Arthur Andersen LLP dated July 25, 1997, appearing in the Company's 1997 Annual
Report to Shareholders, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information required by this item regarding directors is set forth
in the Company's Proxy Statement for the 1997 Annual Meeting of Shareholders
under the captions "Nominees for Election to Serve Until 2000," "Directors
Continuing to Serve Until 1999," and "Directors Continuing to Serve Until 1998,"
which information is incorporated herein by reference.
(b) Executive officers are elected for a one-year term by the Board of
Directors. The Company's executive officers are as follows:
OFFICE AND EMPLOYMENT DURING THE
NAME OF OFFICER Age LAST FIVE FISCAL YEARS
- --------------- --- -----------------------------------------------------
Charles O. Dunn 49 President and Chief Executive Officer since
April 1, 1993; Executive Vice President (1988-1993)
David W. Arnold 60 Senior Vice President-Technical Group since
July 1, 1991
C. E. McCraw 49 Senior Vice President-Operations since July 12, 1994;
Senior Vice President-Fertilizer Group (1991-1994)
Robert E. Jones 49 Senior Vice President-Corporate Development
effective October 1, 1997; Senior Vice President and
General Counsel (1996-1997); Vice President and
General Counsel (1989-1996)
John J. Duffy 63 Vice President-Marketing and Distribution since
November 1, 1996; Vice President-Marketing
(1995-1996); Vice President-Sales and Marketing
(1994-1995); Director of Sales and Marketing
(1991-1994)
Timothy A. Dawson 43 Vice President-Finance and Chief Financial Officer
since January 18, 1996; Director of Finance
(1987-1996); Assistant to Senior Vice
President-Finance (1984-1987)
Ethel Truly 47 Vice President-Administration since
January 18, 1996; Director of Administrative
Services (1995-1996); Assistant General Counsel
(1985-1995)
Larry Holley 49 Vice President-Nitrogen Production since
July 17, 1997; Director of Nitrogen Production
(1997); Director of Energy (1991-1997); Manager
of Energy (1987-1991)
William L. Smith 47 General Counsel effective October 1, 1997; partner
in the law firm of Brunini, Grantham, Grower &
Hewes, PLLC (1982-1997)
Rosalyn B. Glascoe 53 Corporate Secretary since June 24, 1986
(c) The information called for with respect to the identification of
certain significant employees is not applicable to the Registrant.
16
<PAGE>
(d) There are no family relationships between the directors and executive
officers listed above. There are no arrangements or understandings between any
named officer and any other person pursuant to which such person was selected as
an officer.
The information required by this item regarding compliance with Section
16(a) of the Exchange Act is set forth in the Company's Proxy Statement for the
1997 Annual Meeting of Shareholders under the caption "Compliance with Section
16(a) of the Exchange Act," which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth in the Company's Proxy
Statement for the 1997 Annual Meeting of Shareholders under the captions
"Compensation of Named Executive Officers," "Annual Bonuses," "Stock Incentive
Plan," and "Retirement Program," which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in the Company's Proxy
Statement for the 1997 Annual Meeting of Shareholders under the captions
"Security Ownership of Certain Beneficial Owners" and "Management Ownership of
the Company's Stock," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in the Company's Proxy
Statement for the 1997 Annual Meeting of Shareholders under the caption
"Compensation Committee Interlocks and Insider Participation," which information
is incorporated herein by reference.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
The consolidated financial statements, together with the report thereon of
Arthur Andersen LLP dated July 25, 1997, appearing in the 1997 Annual Report to
Shareholders, are incorporated by reference in this Form 10-K. With the
exception of the aforementioned information and information incorporated by
reference in Items 5, 6, 7, and 8, the 1997 Annual Report to Shareholders is not
to be deemed filed as part of this Form 10-K. The following financial statement
schedule also should be read in conjunction with the financial statements in
such 1997 Annual Report to Shareholders. Financial statement schedules not
included in this Form 10-K have been omitted because they are not applicable or
the required information is shown in the financial statements or notes thereto.
Separate financial statements of 50 percent or less owned persons accounted for
by the equity method that are not shown herein have been omitted because, if
considered in the aggregate, they would not constitute a significant subsidiary.
(i) Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheets, June 30, 1997 and 1996
Consolidated Statements of Income, Years Ended June 30, 1997,
1996 and 1995
Consolidated Statements of Shareholders' Equity, Years Ended
June 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows, Years Ended June 30, 1997,
1996 and 1995
Notes to Consolidated Financial Statements
(B) EXHIBITS:
Exhibits filed as part of this report are listed below. Certain
exhibits have been filed previously with the Commission and are
incorporated herein by reference.
18
<PAGE>
SEC EXHIBIT
REFERENCE NO. DESCRIPTION
- ------------- -----------
2.1 Asset Purchase Agreement, dated as of May 21, 1996, by and among
the Company, Mississippi Acquisition I, Inc., Mississippi
Acquisition II, Inc., Eddy Potash, Inc., and New Mexico Potash
Corporation; filed as Exhibit 2.1 to the Company's Current Report
on Form 8-K filed September 3, 1996, SEC File No. 0-20411, and
incorporated herein by reference.
2.2 Agreement and Plan of Merger and Reorganization, dated as of
August 27, 1996, by and among the Company, MISS SUB, INC., and
First Mississippi Corporation; filed as Exhibit 2.2 to the
Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996, SEC File No. 0-20411, and incorporated herein by
reference.
3.1 Articles of Incorporation of the Company; filed as Exhibit 3.1 to
the Company's Amendment No. 1 to Form S-1 Registration Statement
filed August 2, 1994, SEC File No. 33-53119, and incorporated
herein by reference.
3.2 Bylaws of the Company, as amended to date.
4.1 Mississippi Phosphates Corporation 401(k) Retirement Plan; filed
as Exhibit 4.3(a) to the Company's Post-Effective Amendment No. 1
to Form S-8 Registration Statement filed June 6, 1995, SEC File
No. 33-59577, and incorporated herein by reference.
4.2 Mississippi Chemical Corporation Thrift Plan Plus; filed as
Exhibit 4.3(b) to the Company's Post-Effective Amendment No. 1 to
Form S-8 Registration Statement filed June 6, 1995, SEC File
No. 33-59577, and incorporated herein by reference.
4.3 Mississippi Chemical Corporation 1994 Stock Incentive Plan; filed
as Exhibit 4.2 to the Company's Form S-8 Registration Statement
filed December 21, 1995, SEC File No. 33-65209, and incorporated
herein by reference.
4.4 Mississippi Chemical Corporation 1995 Stock Option Plan for
Nonemployee Directors; filed as Exhibit 4.3 to the Company's Form
S-8 Registration Statement filed December 21, 1995, SEC File
No. 33-65209, and incorporated herein by reference.
4.5 Mississippi Chemical Corporation 1995 Restricted Stock Purchase
Plan for Nonemployee Directors; filed as Exhibit 4.4 to the
Company's Form S-8 Registration Statement filed December 21,
1995, SEC File No. 33-65209, and incorporated herein by
reference.
4.6 Shareholder Rights Plan; filed as Exhibit 1 to the Company's
Form 8-A Registration Statement dated August 15, 1994, SEC File
No. 2-7803, and incorporated herein by reference.
10.1 Agreement effective as of October 1, 1991, entered into 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, SEC File No. 2-7803, and incorporated herein by
reference.
19
<PAGE>
10.2 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; filed as Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
1993, SEC File No. 2-7803, and incorporated herein by reference.
10.3 Amendment of Agreement, effective as of August 1, 1994, 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; filed as Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
1995, SEC File No. 2-7803, and incorporated herein by reference.
10.4 Agreement made and entered into as of September 15, 1991, between
Office Cherifien des Phosphates and the Company's subsidiary
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.
10.5 Amendment No. 1, effective as of July 1, 1992, to the Agreement
effective as of September 15, 1991, between Office Cherifien des
Phosphates and the Company's subsidiary Mississippi Phosphates
Corporation for the sale and purchase of phosphate rock; filed as
Exhibit 10.12 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, SEC File No. 2-7803, and
incorporated herein by reference.(1)
10.6 Amendment No. 2, effective as of July 1, 1993, to the Agreement
effective as of September 15, 1991, between Office Cherifien des
Phosphates and the Company's subsidiary Mississippi Phosphates
Corporation for the sale and purchase of phosphate rock; filed as
Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, SEC File No. 2-7803, and
incorporated herein by reference.(2)
10.7 Amendment No. 3, effective as of January 1, 1995, to the
Agreement effective as of September 15, 1991, between Office
Cherifien des Phosphates and the Company's subsidiary Mississippi
Phosphates Corporation for the sale and purchase of phosphate
rock; filed as Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995, SEC File
No. 2-7803, and incorporated herein by reference.(3)
- -----------------------
(1) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential business information has been deleted from the first and second
paragraphs of paragraph numbered 1 of Amendment No. 1 and an application for
confidential treatment has been filed separately with the Commission.
(2) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential business information has been deleted from paragraphs numbered 5
and 8 of Amendment No. 2; from the first paragraph, paragraph numbered 1,
paragraph numbered 2, and paragraph numbered 3 of Schedule 1, Exhibit A; from
Schedule 2, Exhibit B; from Schedule 3, Exhibit C, and from Schedule 4,
Exhibit D; and an application for confidential treatment has been filed
separately with the Commission.
(3) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential business information has been deleted from Schedule 1 to Amendment
No. 3, Exhibit B, and an application for confidential treatment has been filed
separately with the Commission.
20
<PAGE>
10.8 Amendment No. 4, effective as of January 1, 1997, to the
Agreement effective as of September 15, 1991, between Office
Cherifien des Phosphates and the Company's subsidiary Mississippi
Phosphates Corporation for the sale and purchase of phosphate
rock.
10.9 Gas Sales Agreement entered into by the Company and Sonat
Marketing Company as of July 13, 1995, for the sale and purchase
of natural gas; filed as Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1995, SEC
File No. 2-7803, and incorporated herein by reference.(4)
10.10 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, SEC File No. 2-7803, and
incorporated herein by reference.
10.11 Form of Severance Agreement dated July 29, 1996, by and between
the Company and each of its Executive Officers; filed as Exhibit
10.14 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996, SEC File No. 2-7803, and incorporated
herein by reference.
10.12 Credit Agreement dated as of December 23, 1996, by and among
First Mississippi Corporation; AMPRO Fertilizer, Inc.; Harris
Trust and Savings Bank, as Administrative Agent; Bank of
Montreal, Chicago Branch, as Syndication Agent; Caisse Nationale
de Credit Agricole and CIBC Inc. as Co-Agents; and the other
lenders party thereto; filed as Exhibit 10.1 to the Company's
Current Report on Form 8-K filed January 6, 1997, SEC File
No. 0-20411, and incorporated herein by reference.
10.13 Credit Agreement dated as of December 23, 1996, by and among
Mississippi Chemical Corporation; Mississippi Phosphates
Corporation; Mississippi Potash, Inc.; Harris Trust and Savings
Bank, as Administrative Agent; Bank of Montreal, Chicago Branch,
as Syndication Agent; Caisse Nationale de Credit Agricole and
CIBC Inc. as Co-Agents; and the other lenders party thereto;
filed as Exhibit 10.2 to the Company's Current Report on Form 8-K
filed January 6, 1997, SEC File No. 0-20411, and incorporated
herein by reference.
13.1 Annual Report to Shareholders for fiscal year ended
June 30, 1997.
21 List of subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
(C) REPORTS ON FORM 8-K:
No reports were filed on Form 8-K during the three months ended
June 30, 1997.
- -------------------------
(4) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential business information has been deleted from Article IV, Price, and
an application for confidential treatment has been filed separately with the
Commission.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MISSISSIPPI CHEMICAL CORPORATION
By: /s/ Charles O. Dunn
-------------------
Charles O. Dunn
President
Principal Executive Officer
By: /s/ Timothy A. Dawson
---------------------
Timothy A. Dawson
Vice President-Finance
Principal Financial Officer and Chief Accounting
Officer
Date: September 29, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE Title DATE
/s/ Charles O. Dunn Director, September 29, 1997
- -------------------------- President and Chief Executive Officer
Charles O. Dunn (principal executive officer)
/s/ Coley L. Bailey Director, Chairman of the Board September 29, 1997
- --------------------------
Coley L. Bailey
/s/ John Sharp Howie Director, Vice Chairman of the Board September 29, 1997
- --------------------------
John Sharp Howie
/s/ John W. Anderson Director September 29, 1997
- --------------------------
John W. Anderson
/s/ Haley Barbour Director September 29, 1997
- --------------------------
Haley Barbour
/s/ Frank R. Burnside, Jr. Director September 29, 1997
- --------------------------
Frank R. Burnside, Jr.
/s/ Robert P. Dixon Director September 29, 1997
- --------------------------
Robert P. Dixon
/s/ W. R. Dyess Director September 29, 1997
- --------------------------
W. R. Dyess
/s/ Woods E. Eastland Director September 29, 1997
- --------------------------
Woods E. Eastland
/s/ George D. Penick, Jr. Director September 29, 1997
- --------------------------
George D. Penick, Jr.
/s/ David M. Ratcliffe Director September 29, 1997
- --------------------------
David M. Ratcliffe
/s/ Wayne Thames Director September 29, 1997
- --------------------------
Wayne Thames
</TABLE>
22
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
EXHIBIT INDEX
TO
FORM 10-K
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Asset Purchase Agreement, dated as of May 21, 1996, by and among
the Company, Mississippi Acquisition I, Inc., Mississippi
Acquisition II, Inc., Eddy Potash, Inc., and New Mexico Potash
Corporation; filed as Exhibit 2.1 to the Company's Current Report
on Form 8-K filed September 3, 1996, SEC File No. 0-20411, and
incorporated herein by reference.
2.2 Agreement and Plan of Merger and Reorganization, dated as of
August 27, 1996, by and among the Company, MISS SUB, INC., and
First Mississippi Corporation; filed as Exhibit 2.2 to the
Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996, SEC File No. 0-20411, and incorporated herein by
reference.
3.1 Articles of Incorporation of the Company; filed as Exhibit 3.1 to
the Company's Amendment No. 1 to Form S-1 Registration Statement
filed August 2, 1994, SEC File No. 33-53119, and incorporated
herein by reference.
3.2 Bylaws of the Company, as amended to date.
4.1 Mississippi Phosphates Corporation 401(k) Retirement Plan; filed
as Exhibit 4.3(a) to the Company's Post-Effective Amendment No. 1
to Form S-8 Registration Statement filed June 6, 1995, SEC File
No. 33-59577, and incorporated herein by reference.
4.2 Mississippi Chemical Corporation Thrift Plan Plus; filed as
Exhibit 4.3(b) to the Company's Post-Effective Amendment No. 1
to Form S-8 Registration Statement filed June 6, 1995, SEC
File No. 33-59577, and incorporated herein by reference.
4.3 Mississippi Chemical Corporation 1994 Stock Incentive Plan;
filed as Exhibit 4.2 to the Company's Form S-8 Registration
Statement filed December 21, 1995, SEC File No. 33-65209, and
incorporated herein by reference.
23
<PAGE>
4.4 Mississippi Chemical Corporation 1995 Stock Option Plan for
Nonemployee Directors; filed as Exhibit 4.3 to the Company's
Form S-8 Registration Statement filed December 21, 1995, SEC
File No. 33-65209, and incorporated herein by reference.
4.5 Mississippi Chemical Corporation 1995 Restricted Stock Purchase
Plan for Nonemployee Directors; filed as Exhibit 4.4 to the
Company's Form S-8 Registration Statement filed December 21, 1995,
SEC File No. 33-65209, and incorporated herein by reference.
4.6 Shareholder Rights Plan; filed as Exhibit 1 to the Company's
Form 8-A Registration Statement dated August 15, 1994, SEC
File No. 2-7803, and incorporated herein by reference.
10.1 Agreement effective as of October 1, 1991, entered into 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, SEC File No. 2-7803, and incorporated herein
by reference.
10.2 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; filed as Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, SEC File No. 2-7803, and incorporated herein by
reference.
10.3 Amendment of Agreement, effective as of August 1, 1994, 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; filed as Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1995, SEC File No. 2-7803, and incorporated herein by
reference.
10.4 Agreement made and entered into as of September 15, 1991,
between Office Cherifien des Phosphates and the Company's
subsidiary 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.
24
<PAGE>
10.5 Amendment No. 1, effective as of July 1, 1992, to the Agreement
effective as of September 15, 1991, between Office Cherifien
des Phosphates and the Company's subsidiary Mississippi
Phosphates Corporation for the sale and purchase of phosphate
rock; filed as Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995, SEC File
No. 2-7803, and incorporated herein by reference(5)
10.6 Amendment No. 2, effective as of July 1, 1993, to the Agreement
effective as of September 15, 1991, between Office Cherifien
des Phosphates and the Company's subsidiary Mississippi
Phosphates Corporation for the sale and purchase of phosphate
rock; filed as Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995, SEC File
No. 2-7803, and incorporated herein by reference.(6)
10.7 Amendment No. 3, effective as of January 1, 1995, to the
Agreement effective as of September 15, 1991, between Office
Cherifien des Phosphates and the Company's subsidiary
Mississippi Phosphates Corporation for the sale and purchase
of phosphate rock; filed as Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1995, SEC File No. 2-7803, and incorporated herein by
reference.(7)
10.8 Amendment No. 4, effective as of January 1, 1997, to the
Agreement effective as of September 15, 1991, between Office
Cherifien des Phosphates and the Company's subsidiary
Mississippi Phosphates Corporation for the sale and purchase
of phosphate rock.
10.9 Gas Sales Agreement entered into by the Company and Sonat
Marketing Company as of July 13, 1995, for the sale and
purchase of natural gas; filed as Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1995, SEC File No. 2-7803, and incorporated herein by
reference.(8)
- --------------
(5) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential business information has been deleted from the first and second
paragraphs of paragraph numbered 1 of Amendment No. 1 and an application for
confidential treatment has been filed separately with the Commission.
(6) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential business information has been deleted from paragraphs numbered 5
and 8 of Amendment No. 2; from the first paragraph, paragraph numbered 1,
paragraph numbered 2, and paragraph numbered 3 of Schedule 1, Exhibit A; from
Schedule 2, Exhibit B; from Schedule 3, Exhibit C, and from Schedule 4,
Exhibit D; and an application for confidential treatment has been filed
separately with the Commission.
(7) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential business information has been deleted from Schedule 1 to Amendment
No. 3, Exhibit B, and an application for confidential treatment has been filed
separately with the Commission.
(8) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential business information has been deleted from Article IV, Price, and
an application for confidential treatment has been filed separately with the
Commission.
25
<PAGE>
10.10 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, SEC File No. 2-7803, and
incorporated herein by reference.
10.11 Form of Severance Agreement dated July 29, 1996, by and between
the Company and each of its Executive Officers; filed as
Exhibit 10.14 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1996, SEC File No. 2-7803,
and incorporated herein by reference.
10.12 Credit Agreement dated as of December 23, 1996, by and among First
Mississippi Corporation; AMPRO Fertilizer, Inc.; Harris Trust and
Savings Bank, as Administrative Agent; Bank of Montreal, Chicago
Branch, as Syndication Agent; Caisse Nationale de Credit Agricole
and CIBC Inc. as Co-Agents; and the other lenders party thereto;
filed as Exhibit 10.1 to the Company's Current Report on Form 8-K
filed January 6, 1997, SEC File No. 0-20411, and incorporated
herein by reference.
10.13 Credit Agreement dated as of December 23, 1996, by and among
Mississippi Chemical Corporation; Mississippi Phosphates
Corporation; Mississippi Potash, Inc.; Harris Trust and Savings
Bank, as Administrative Agent; Bank of Montreal, Chicago Branch,
as Syndication Agent; Caisse Nationale de Credit Agricole and
CIBC Inc. as Co-Agents; and the other lenders party thereto;
filed as Exhibit 10.2 to the Company's Current Report on
Form 8-K filed January 6, 1997, SEC File No. 0-20411, and
incorporated herein by reference.
13.1 Annual Report to Shareholders for fiscal year ended
June 30, 1997.
21 List of subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
26
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
MISSISSIPPI CHEMICAL CORPORATION
(a Mississippi corporation)
- --------------------------------------------------------------------------------
ARTICLE I.
IDENTIFICATION
--------------
Section 1.01. NAME. The name of this corporation is Mississippi Chemical
Corporation. The corporation may conduct operations under such other names as
the Board of Directors may designate.
SECTION 1.02. SEAL. The corporation shall be authorized, but not required,
to use a corporate seal, which if used shall be circular in form and contain the
name of the corporation and the words "Corporate Seal, Mississippi." The
corporate seal shall be affixed by the Secretary upon such instruments or
documents as may be deemed necessary. The presence or absence of such seal on
any instrument shall not, however, affect its character or validity or legal
effect in any respect.
Section 1.03. OFFICES. The address of the principal office of the
corporation shall be Highway 49 East, P. O. Box 388, Yazoo City, Mississippi
39194-0388. The corporation may also have offices at such other places as the
Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II.
CAPITAL STOCK
-------------
Section 2.01. CONSIDERATION FOR SHARES. Except as otherwise permitted by
law, capital stock of the corporation may be issued for such consideration as
shall be fixed from time to time by the Board of Directors.
SECTION 2.02. PAYMENT FOR SHARES. The consideration for the issuance of
shares may be paid, in whole or in part, in money, in other property, tangible
or intangible, or in other benefit to the corporation, including promissory
notes, labor or services already performed, contracts for services to be
performed or other securities of the corporation. Before the corporation issues
shares, the Board of Directors shall determine that the consideration is
adequate, which determination is conclusive insofar as the adequacy of
consideration for the issuance of shares relates to whether the shares are
validly issued, fully paid and nonassessable. When the corporation receives the
consideration for which the Board authorized the issuance of shares, the shares
issued therefor are fully paid and nonassessable. The corporation may place in
escrow shares issued for a contract for future services or benefits or a
promissory note, or make other arrangements to restrict
1
<PAGE>
transfer of the shares, and may credit distributions in respect of the shares
against their purchase price until the services are performed, the note is paid
or the benefits received. Such escrow arrangements may provide that if the
services are not performed, the note is not paid or the benefits are not
received, then the shares escrowed or restricted and the distributions credited
may be cancelled in whole or in part.
SECTION 2.03. CERTIFICATES REPRESENTING SHARES. The certificates of stock
of the corporation shall be numbered consecutively and entered in the books of
the corporation as they are issued. The Board of Directors may authorize the
issuance of some or all of the shares without certificates. Such authorization
shall not affect shares already represented by certificates. Each certificate
issued shall be signed, either manually or by facsimile, by two officers of the
corporation and may bear the corporate seal or its facsimile. If the corporation
is authorized to issue different classes of shares or different series within a
class, then each certificate shall have noted thereon a summary of the
designations, relative rights, preferences, rights and limitations applicable to
each class and the variations in rights, preferences and limitations determined
for each series. Certificates evidencing shares of the corporation shall set
forth thereon the statements prescribed by Section 79-4-6.25 of the Mississippi
Business Corporation Act and by any other applicable provision of law. If a
person who signed, either manually or in facsimile, a share certificate no
longer holds office when the certificate is issued, the certificate is
nevertheless valid.
SECTION 2.04. SHARE TRANSFERS. Upon compliance with any provisions
restricting the transferability of shares that may be set forth in the Articles
of Incorporation, these Bylaws, or any written agreement in respect thereof,
transfers of shares of the corporation shall be made only on the books of the
corporation by the registered holder thereof, or by his or her attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary of the corporation, or with a transfer agent or a registrar and on
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon, if any. Except as may be otherwise
provided by law or these Bylaws, the person in whose name shares stand on the
books of the corporation shall be deemed the owner thereof for all purposes as
regards the corporation; provided that whenever any transfer of shares shall be
made for collateral security, and not absolutely, such fact, if known to the
Secretary of the corporation, shall be so expressed in the entry of transfer.
ARTICLE III.
MEETINGS OF SHAREHOLDERS
------------------------
Section 3.01. PLACE OF MEETINGS. Meetings of the shareholders of the
corporation shall be held at the principal office of the corporation or at such
other place in or out of the state of Mississippi as shall be determined by the
Board of Directors.
SECTION 3.02. ANNUAL MEETINGS. The annual meeting of the shareholders
shall be held at such time and place as the Board of Directors shall designate,
at which annual meeting the shareholders shall elect a number of members of the
Board of
2
<PAGE>
Directors equal to the number of directors whose terms expire at such meeting,
and transact such other business as may properly come before the meeting.
Failure to hold the annual meeting at the designated time shall not affect the
validity of any corporate action.
SECTION 3.03. SPECIAL MEETINGS. Special meetings of the shareholders shall
be held on such call as may be specified in the Articles of Incorporation, on
call of the Board of Directors or on call of the holders of at least twenty-five
percent (25%) of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting if such holders sign, date and
deliver to the Secretary one or more written demand(s) for the meeting. Any
written demand for a meeting shall state the purpose(s) of the proposed meeting
and only business within such purpose(s) described in the notice may be
conducted at such meeting.
SECTION 3.04. NOTICE OF MEETINGS - WAIVER. Written notice stating the
place, date and time of the meeting, and in case of a special meeting, the
purpose(s) for which the meeting is called, shall be delivered not less than ten
(10) days or more than sixty (60) days before the date of the meeting, either
personally or by mail, to each shareholder entitled to vote at such meeting.
Only the shareholders whose names appear on the stock transfer books at the
close of business the day before the first notice is delivered to shareholders
shall be entitled to notice of and to vote at such meeting, notwithstanding the
transfer of shares thereafter.
The corporation shall give notice to shareholders not entitled to vote in
any instance where such notice is required by the provisions of the Mississippi
Business Corporation Act. A shareholder may waive notice before or after the
date and time stated in the notice. The waiver must be in writing, must be
signed by the shareholder entitled to notice and must be delivered to the
corporation for inclusion in the minutes or filing with the corporate records. A
shareholder's attendance at a meeting waives objection to lack of notice or
defective notice of the meeting unless at the beginning of the meeting (or
promptly upon arrival) the shareholder objects to holding the meeting or
transacting business at the meeting. A shareholder's attendance at a meeting
also waives objection to consideration of a particular matter which is not
within the purpose(s) described in the notice unless the shareholder objects
when the matter is presented.
SECTION 3.05. RECORD DATE. The Board of Directors may fix a record date
for one (1) or more voting groups in order to determine the shareholders
entitled to notice of a shareholders' meeting, to demand a special meeting, to
vote, or to take any other action; provided, that a record date fixed under this
sentence may not be more than seventy (70) days before the meeting or action
requiring a determination of shareholders. The stock transfer books of the
corporation need not be closed. The record date may precede the date on which
the record date is established. A determination of shareholders entitled to
notice of or to vote at a shareholders' meeting is effective for any adjournment
of the meeting unless the Board of Directors fixes a new record date, which it
must do if the meeting is adjourned to a date more than one hundred twenty (120)
days after the date fixed for the original meeting.
3
<PAGE>
SECTION 3.06. SHARES HELD BY NOMINEES. The corporation may establish a
procedure by which the beneficial owner of shares that are registered in the
name of a nominee is recognized by the corporation as the shareholder. The
extent of this recognition may be determined in the procedure.
SECTION 3.07. SHAREHOLDERS' LIST. After fixing a record date for a
meeting, the corporation shall prepare an alphabetical list of the names of all
its shareholders who are entitled to notice of shareholders' meeting. The list
shall be arranged by voting group, and within each voting group by class or
series of shares, and show the address of and number of shares held by each
shareholder. The shareholders' list must be available for inspection by any
shareholder, beginning two (2) business days after notice of the meeting is
given for which the list was prepared and continuing through the meeting, at the
corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. A shareholder, his or her agent or
attorney is entitled on written demand to inspect and, subject to the
requirements of Section 79-4-16.02(c) of the Mississippi Business Corporation
Act, to copy the list during regular business hours and at his or her expense,
during the period it is available for inspection. The corporation shall make the
shareholders' list available at the meeting, and any shareholder, his or her
agent or attorney, is entitled to inspect the list at any time during the
meeting or any adjournment.
SECTION 3.08. QUORUM. Unless otherwise required by law or the Articles of
Incorporation, a majority of the votes entitled to be cast on the matter by a
voting group, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders for action on that matter. Holders of shares entitled to
vote as a separate voting group may take action on a matter at a meeting only if
a quorum of those shares exists with respect to that matter. Once a share is
represented for any purpose at a meeting, it is deemed present for quorum
purposes for the remainder of the meeting and any adjournment thereof unless a
new record date is or must be set for the adjourned meeting of shareholders for
action on that matter. The shareholders present at a duly organized meeting may
continue to do business until adjournment, notwithstanding the withdrawal of a
number of shareholders so that less than a quorum remains. A meeting may be
adjourned despite the absence of a quorum.
SECTION 3.09. MEANING OF CERTAIN TERMS. As used herein in respect to the
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "shareholder" or
"shareholders" refers to an outstanding share or shares and to a holder or
holders of record of outstanding shares when the corporation is authorized to
issue only one (1) class of shares, and said reference is also intended to
include any outstanding share or shares and any holder or holders of record of
outstanding shares of any class upon which or upon whom the Articles of
Incorporation confer such rights where there are two (2) or more classes or
series of shares or upon which or upon whom the Mississippi Business Corporation
Act confers such rights
4
<PAGE>
notwithstanding that the Articles of Incorporation may provide for more than one
(1) class or series of shares, one (1) or more of which are limited or denied
such rights thereunder.
SECTION 3.10. PROXIES AND VOTING. Except as otherwise provided by law or
the Articles of Incorporation, each outstanding share, regardless of class, is
entitled to one (1) vote on each matter voted on at a shareholders' meeting. A
shareholder may vote either in person or by proxy. A shareholder may appoint a
proxy by signing an appointment form, either personally or by his attorney-in-
fact, and delivering it to the Secretary or other officer of the corporation who
is authorized to tabulate votes. An appointment of a proxy is revocable unless
the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest. Such an appointment becomes revocable
when the interest is extinguished. No proxy shall be valid after eleven (11)
months from the date of its execution, unless otherwise provided in the proxy.
Unless the Articles of Incorporation provide otherwise, directors shall be
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting in which a quorum is present.
SECTION 3.11 CONDUCT OF MEETING. Meetings of the shareholders shall be
presided over by one of the following in the order of seniority and if present
and acting; the Chairman of the Board, if any; the Vice Chairman of the Board,
if any; the President, a Vice President, if any; or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his or her absence, an
Assistant Secretary, shall act as secretary of every meeting, but, if neither
the Secretary nor an Assistant Secretary is present, the chairman of the meeting
shall appoint a secretary of the meeting.
SECTION 3.12. ACTION WITHOUT A MEETING. Action required or permitted by
the Mississippi Business Corporation Act to be taken at a shareholders' meeting
may be taken without a meeting if the action is taken by all the shareholders
entitled to vote on the action. The action must be evidenced by one (1) or more
written consents describing the action taken, signed by all the shareholders
entitled to vote on the action, and delivered to the corporation for inclusion
in the minutes or filing with the corporate records. The corporation must give
any required notice to nonvoting shareholders, if any.
5
<PAGE>
ARTICLE IV.
BOARD OF DIRECTORS
------------------
Section 4.01. NUMBER AND QUALIFICATIONS. A director need not be a
shareholder, a citizen of the United States, or a resident of the state of
Mississippi. The business and affairs of the corporation shall be managed under
the direction of, and all corporate powers shall be exercised by or under the
authority of, its Board of Directors. The Board of Directors of the corporation
shall, effective as of the date of adoption of these Bylaws, consist of twelve
(12) members and thereafter shall consist of such number of members not less
than nine (9) or more than fifteen (15) as determined from time to time by
resolution of a majority of the Board of Directors.
As long as the size of the Board of Directors shall be fixed at twelve (12)
members, the Board shall be divided in three (3) classes of four (4) directors
each, with the Board of Directors designating nominees for each class and the
shareholders of the Company electing the initial directors serving in such
classes to initial terms expiring in the three (3) successive years following
such initial election (Class I-1995, Class II-1996 and Class III-1997). In the
event a different number of directors is established but is nine (9) or more,
the Board of Directors shall be divided into three (3) classes consisting of
equal numbers of directors to the extent possible. The Board of Directors may
fill any vacancies on the Board of Directors, pursuant to Section 4.06 hereof,
designating new directors to one (1) of the three (3) classes of directors. At
each annual meeting of the shareholders following such initial election, the
number of directors equal to the number of the class whose term expires at the
time of such meeting shall be elected to hold office until the third succeeding
annual meeting after their election or until their earlier retirement from the
Board. Any vacancy arising from the earlier retirement of a director shall be
filled by vote of the Board, and the term of any such director shall be for the
balance of the term of the retiring director.
SECTION 4.02. ELECTION. At each annual meeting at which directors are
elected, directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election. Each director shall hold office for the
term for which he or she is elected and until his or her successor shall be
elected and qualified.
SECTION 4.03. ELECTION OF OFFICERS OF BOARD OF DIRECTORS. At the first
meeting or at any subsequent meeting called for the purpose, the directors shall
elect a Chairman of the Board of Directors and a Vice Chairman of the Board of
Directors. Such officers shall hold office until the next annual election of
officers, and until their successors are elected and qualify.
SECTION 4.04. THE CHAIRMAN AND VICE CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board shall preside at all meetings of the Board of
Directors. The Vice Chairman shall act as Chairman in the absence of the
Chairman.
SECTION 4.05. REMOVAL OF DIRECTORS. The directors or the shareholders may
remove one (1) or more director(s) only for cause, as defined in the Articles of
6
<PAGE>
Incorporation. A director may be removed only if the number of votes cast to
remove the director exceeds the number of votes cast not to remove the director.
A director may be removed by the shareholders or directors only at a meeting
called for the purpose of removing the director, and the meeting notice must
state that the purpose or one of the purposes of the meeting is the removal of
directors.
SECTION 4.06. VACANCIES. Unless the Articles of Incorporation provide
otherwise, if a vacancy occurs in the Board of Directors, including a vacancy
resulting from an increase in the number of directors:
(a) the Board of Directors may fill the vacancy; or
(b) if the directors remaining in office constitute fewer than a
quorum of the Board, they may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
A decrease in the number of directors does not shorten an incumbent director's
term. A vacancy that will occur at a specified later date may be filled before
the vacancy occurs, but the new director may not take office until the vacancy
occurs.
SECTION 4.07. PLACE OF MEETING. Meetings of the Board of Directors,
regular or special, may be held either in or out of the state of Mississippi.
SECTION 4.08. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice of the date, time, place or purpose of the meeting.
SECTION 4.09. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be held upon notice. Unless the Articles of Incorporation provide for a
longer or shorter period, special meetings of the Board of Directors must be
preceded by at least two (2) days' notice of the date, time and place of the
meeting. The notice need not describe the purpose of the special meeting unless
required by the Articles of Incorporation. Attendance in person at or
participation in a special meeting waives any required notice of the meeting
unless at the beginning of the meeting (or promptly upon arrival) the director
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting. Notice of any
meeting of the Board of Directors may be waived before or after the date and
time stated in the notice if in writing, signed by the director entitled to the
notice, and filed with the minutes or corporate records.
SECTION 4.10. QUORUM AND VOTING. A quorum of the Board shall consist of a
majority of the directors in office immediately before the meeting begins. If a
quorum is present when a vote is taken, the affirmative vote of a majority of
directors present is the act of the Board. A director who is present at a
meeting of the Board when corporate action is taken is deemed to have assented
to the action taken unless:
7
<PAGE>
(a) he or she objects at the beginning of the meeting (or promptly upon
arrival) to holding the meeting or transacting business at the meeting;
(b) his or her dissent or abstention from the action taken is entered in
the minutes of the meeting; or
(c) he or she delivers written notice of dissent or abstention to the
presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
SECTION 4.11. CONDUCT OF MEETINGS. The Board of Directors may permit any
or all directors to participate in a regular or special meeting by, or conduct
the meeting through use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
who so participates in a meeting is deemed to be present in person at the
meeting.
SECTION 4.12. COMMITTEES OF THE BOARD. Unless the Articles of
Incorporation provide otherwise, the Board of Directors may create one or more
committees and appoint members of the Board of Directors to serve on them. Each
committee must have two (2) or more members, who shall serve at the pleasure of
the Board of Directors. The creation of a committee and appointment of members
to it must be approved by a majority of all the directors in office when the
action is taken. The requirements applicable to the Board of Directors with
regard to meetings, action without meetings, notice and waiver of notice, and
quorum and voting requirements apply to committees and their members as well.
The Board of Directors may delegate to such committee(s) all such authority of
the Board that it deems desirable except the authority to:
(a) authorize distributions;
(b) approve or propose to the shareholders action required to be approved
by shareholders;
(c) fill vacancies on the Board of Directors or on any of its committees;
(d) amend the Articles of Incorporation;
(e) adopt, amend or repeal Bylaws;
(f) approve a plan of merger not requiring shareholder approval;
8
<PAGE>
(g) authorize or approve reacquisition of shares, except according to a
formula or method prescribed by the Board of Directors; or
(h) authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences
and limitations of a class or series of shares, except that the Board
of Directors may authorize a committee to do so within limits
specifically prescribed by the Board of Directors.
SECTION 4.13. ACTION WITHOUT MEETING. Action required or permitted by the
Mississippi Business Corporation Act to be taken at a Board of Directors'
meeting may be taken without a meeting if the action is taken by all members of
the Board. The action must be evidenced by one (1) or more written consents
describing the action taken, signed by each director, and included in the
minutes or filed with the corporate records reflecting the action taken. Action
taken under this paragraph is effective when the last director signs the
consent, unless the consent specifies a different prior or subsequent effective
date.
ARTICLE V.
OFFICERS
--------
Section 5.01. OFFICERS. The officers of the corporation shall consist of a
President and Secretary and, as deemed appropriate by the Board of Directors, a
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
General Counsel, Treasurer, one (1) or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers and such other officers and assistant officers
and agents as may be deemed necessary by the Board of Directors. Any two (2) or
more offices may be held by the same person. The Board of Directors shall
delegate to one (1) of the officers the responsibility of preparing minutes of
directors' and shareholders' meetings and of authenticating records of the
corporation. Officers need not be directors or shareholders of the corporation.
SECTION 5.02. VACANCIES. Vacancies occurring in any office shall be filled
by the Board of Directors at any regular or special meeting.
SECTION 5.03. THE PRESIDENT. The President shall be responsible for the
active, executive management and supervision of the operations of the
corporation and shall perform such duties as the Board of Directors may
prescribe or his or her capacity as President by custom may provide.
SECTION 5.04. THE VICE PRESIDENT. Vice Presidents shall perform such
duties as the Board of Directors may prescribe. Each Vice President shall report
to the President or his or her delegate who shall be responsible for the Vice
President's actions.
SECTION 5.05. THE SECRETARY. The Secretary shall attend all meetings of
the shareholders and of the Board of Directors, and shall keep a true and
complete record of the proceedings of these meetings. The Secretary shall be
custodian of the
9
<PAGE>
records of the corporation and shall attend to the giving of all notices,
attest, when requested, to the authority of the President or other officers, as
revealed by the minutes or these Bylaws, to execute legal documents binding the
corporation, and shall perform such other duties as these Bylaws may provide or
the Board of Directors may prescribe.
SECTION 5.06. THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep correct and complete records of account, showing accurately at all
times the financial condition and results of operations of the corporation. The
Chief Financial Officer shall be the legal custodian of all moneys, notes,
securities and other valuables that may from time to time come into the
possession of the corporation. The Chief Financial Officer shall immediately
deposit all funds of the corporation coming into his or her hands in some
reliable bank or other depository to be designated by the Board of Directors,
and shall keep this bank account in the name of the corporation. The Chief
Financial Officer shall furnish at meetings of the Board of Directors, or
whenever requested, a statement of the financial condition and results of
operations of the corporation, and shall perform such other duties as these
Bylaws may provide or the Board of Directors may prescribe. The Chief Financial
Officer may be required to furnish bond in such amount as shall be determined by
the Board of Directors.
SECTION 5.07. OTHER OFFICERS. The duties of other officers elected by the
Board of Directors shall be such as are customary to their respective offices
and as shall be assigned to them by the President.
SECTION 5.08. RESIGNATION AND REMOVAL. An officer may resign at any time
by delivering notice to the corporation. A resignation is effective when the
notice is delivered unless the notice specifies a later effective date. If a
resignation is made effective at a later date and the corporation accepts the
future effective date, the Board of Directors may fill the pending vacancy
before the effective date provided the successor does not take office until the
effective date. The Board of Directors may remove any officer at any time with
or without cause and any officer or assistant officer, if appointed by another
officer, may likewise be removed by such officer.
10
<PAGE>
ARTICLE VI.
REGISTERED OFFICE AND AGENT
---------------------------
The address of the initial registered office of the corporation and the name
of the initial registered agent of the corporation are set forth in the original
Articles of Incorporation.
ARTICLE VII.
FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
ARTICLE VIII.
AMENDMENTS
----------
These Bylaws may be altered, amended or repealed and new Bylaws adopted by
the affirmative vote of the holders of a majority of the outstanding stock at
any regular meeting of the shareholders or special meeting called for the
purpose, or by the affirmative vote of a majority of the entire Board of
Directors at any regular or special meeting of the Board, unless the
shareholders in amending or repealing a particular Bylaw provide expressly that
the Board of Directors may not amend or repeal that Bylaw; provided, however,
that the Board of Directors may not amend these Bylaws to take any action which
is reserved exclusively by the shareholders pursuant to the Mississippi Business
Corporation Act. If any shareholder or director, as the case may be, should
object to the consideration of any proposed amendment, the proposal may not be
voted upon unless notice of the proposed amendment was given at least ten (10)
days prior to the meeting at which such objecting shareholder or director is
entitled to vote. Any amendment, modification, repeal or addition to these
Bylaws adopted by the Board of Directors may be amended or repealed by the
shareholders.
A Bylaw that fixes a greater quorum or voting requirement for the Board of
Directors may be amended or repealed:
(a) if originally adopted by the shareholders, only by the shareholders; or
(b) if originally adopted by the Board of Directors, either by the
shareholders or the Board of Directors.
Action by the Board of Directors to adopt or amend a Bylaw originally
adopted by the Board of Directors fixing a greater quorum or voting requirement
must meet the same quorum requirement and be adopted by the same vote required
to take action under the quorum and voting requirement then in effect or
proposed to be adopted, whichever is greater. The Board is without authority to
amend this Article VIII.
11
<PAGE>
EXHIBIT 10.8
AMENDMENT NO. 4 OF AGREEMENT
This Amendment No. 4 of Agreement ("Amendment No. 4") is effective as
of January 1, 1997, between Office Cherifien des Phosphates ("OCP") and
Mississippi Phosphates Corporation ("MPC").
WHEREAS, MPC and OCP are parties to that certain Agreement with an effective
date of September 15, 1991, for the sale and purchase of all MPC's requirements
of phosphate rock at its Pascagoula, plant ("Agreement"); and
WHEREAS, the Agreement has been amended by Amendment No. 1 effective as of
July 1, 1992, Amendment No. 2 effective as of July 1, 1993, and Amendment No. 3
effective as of January 1, 1995; and
WHEREAS, MPC and OCP desire to further amend the Agreement as hereinafter
set forth; and
WHEREAS, MISSISSIPPI CHEMICAL CORPORATION, the parent company of MPC, agrees
to be substituted to MPC in taking responsibility of the latest with respect to
the environmental problems linked to the gypsum stacks; and
NOW, THEREFORE, MPC and OCP hereby agree as follows:
1. Article I of the Agreement is hereby amended by changing the second
sentence of the first paragraph thereof to read in its entirety as follows:
The term of this Agreement shall commence on the Effective Date and
shall continue until June 30, 2016.
2. The Agreement is hereby amended by adding thereto a new Article XIII,
which shall read in its entirety as follows:
ARTICLE XIII
Subject to its timely receipt of all required governmental permits,
authorizations and approvals in acceptable form, MPC intends to
construct a new phosphogypsum disposal facility (the "New Gypsum
Facility"), at an estimated cost of $16.2 million, which will
ultimately replace the phosphogypsum disposal facility currently being
utilized by MPC (the "Old Gypsum Facility"). With respect to the New
Gypsum Facility and the Old Gypsum Facility, MPC and OCP agree as
follows:
(a) Cost of Products Sold, as defined in Article IV hereof, shall
include depreciation expense related to the actual cost of the New
Gypsum Facility. As each ton of phosphogypsum is placed in the New
Gypsum Facility, Cost of Products Sold shall be increased by a "units-
of-production" depreciation charge equal to the quotient of (i) the
undepreciated cost of the New Gypsum Facility divided by (ii) the
estimated number of tons of unused capacity
<PAGE>
remaining in the New Gypsum Facility. It is expected that this capacity
will be utilized at reasonably uniform rates over its estimated useful
life of 18 years.
(b) Cost of Products Sold, as defined in Article IV hereof, shall
include charges related to the estimated cost of closing the New Gypsum
Facility. As each ton of phosphogypsum is placed in the New Gypsum
Facility, Cost of Products Sold shall be increased by a closure charge
equal to the quotient of (i) the unamortized estimated cost of closing
the New Gypsum Facility divided by (ii) the estimated number of tons of
unused capacity remaining in the New Gypsum Facility. The estimated
cost of closing the New Gypsum Facility is $13.5 million. Closure
charges related to the Old Gypsum Facility will continue to be
recognized as its remaining capacity is utilized. The estimated closure
cost of the Old Gypsum Facility is $9.4 million, out of which an amount
of $2.24 million has to be amortized as from July 1, 1996, till
saturation of the Old Gypsum storage.
(c) If, prior to the actual closure of either the New Gypsum
Facility or the Old Gypsum Facility, a third party assumes
responsibility for the cost of closing either the New Gypsum Facility
or the Old Gypsum Facility, then MPC agrees to pay to OCP an amount
equal to fifty percent (50%) of the unspent portion of all closure
charges which have been recognized and reflected in all previous
calculations of Additional Price pursuant to Article IV of this
Agreement and which relate to the facility for which the third party
has assumed responsibility to close. MPC further agrees that OCP shall
have no responsibility for effecting the actual closure of either the
New Gypsum Facility or the Old Gypsum Facility.
3. The Agreement is hereby amended by adding thereto a new Article XIV,
which shall read in its entirety as follows:
ARTICLE XIV
Subject to its timely receipt of all required governmental permits,
authorizations and approvals in acceptable form, MPC intends to
construct an expansion of the Pascagoula Plant (the "Pascagoula Plant
Expansion"), which is expected to increase the Pascagoula Plant's
annual production rate to approximately 900,000 short tons, at an
estimated cost of $10.45 million. Cost of Products Sold, as defined in
Article IV hereof, shall include depreciation expense related to the
actual cost of the assets comprising the Pascagoula Plant Expansion.
The assets comprising the Pascagoula Plant Expansion will be
depreciated on a "straight-line" basis over their estimated useful
lives, which range from five (5) to eighteen (18) years and set forth
in the table hereto as Schedule 1 to this Amendment No. 4.
2
<PAGE>
4. The Agreement is hereby amended by adding thereto a new Article XV,
which shall read in its entirety as follows:
ARTICLE XV
MPC agrees to indemnify, hold harmless and defend OCP from and against
any and all losses, costs, damages, injuries, liabilities, claims,
demands, penalties, or causes of action arising out of or in connection
with the environmental conditions at the Old Gypsum Facility and the
New Gypsum Facility.
In any case including MPC failure, MISSISSIPPI CHEMICAL CORPORATION,
the parent company of MPC, will be sole responsible and will pay for
all losses, costs, damages, injuries, liabilities, claims, demands,
penalties, or causes of action arising out of or in connection with the
environmental conditions at the Old Gypsum Facility and the New Gypsum
Facility.
5. The Agreement is amended by attaching thereto Exhibit F which is
attached as Schedule 1 to this Amendment No. 4.
6. Except as specifically set forth in this Amendment No. 4, all of the
terms and conditions of the Agreement, as heretofore amended, shall continue in
full force and effect.
7. All capitalized terms used in this Amendment No. 4 and not otherwise
defined herein shall have the meanings set forth in the Agreement.
IN WITNESS WHEREOF, MPC and OCP have caused this Amendment No. 4 to be duly
executed as of the 1st day of January, 1997.
MADE OUT IN DUPLICATE ON FEBRUARY 20, 1997.
MISSISSIPPI PHOSPHATES CORPORATION OFFICE CHERIFIEN DES PHOSPHATES
AND MISSISSIPPI CHEMICAL CORPORATION
By: /s/ Charles O. Dunn By: /s/ Mourad Cherif
------------------- -----------------
Charles O. Dunn Mourad Cherif
President General Manager
3
<PAGE>
SCHEDULE 1 TO AMENDMENT NO. 4 OF AGREEMENT
EXHIBIT F
THE PASCAGOULA PLANT EXPANSION
The Pascagoula Plant Expansion shall consist of all the new equipments and
facilities and all improvements and modifications to the existing production
units and storage facilities at the Pascagoula Plant which are assembled,
constructed and installed in order to increase the Pascagoula Plant's annual
production rate to approximately 900,000 short tons. The major components of
the Pascagoula Plant Expansion are set forth hereinafter together with their
estimated useful lives and straight-line depreciation in US$/year.
<PAGE>
SCHEDULE 1 TO AMENDMENT NO. 4 OF AGREEMENT
EXHIBIT F
THE PASCAGOULA PLANT EXPANSION
<TABLE>
<CAPTION>
CAPITAL COST AND PRELIMINARY DEPRECIATION SCHEDULE
INCREASE DAP PRODUCTION CAPACITY
ST. LINE
USEFUL LIFE DEPRECIATION
COST (YRS) ESTIMATED $/Year
----------- --------------- ------------
<S> <C> <C> <C>
I. PHOSPHORIC ACID
PLANT EXPANSION
A. Additional Digestor & Cooling $ 1,251,000 10 Years $125,100
B. Filte and Evaporator Upgrades $ 1,765,000 10 Years $176,500
C. Recycle & Sulfuric Acid
System Modification in Phos Acid $ 214,000 10 Years $ 21,400
D. Sulfuric Acid Transfer Piping $ 513,000 10 Years $ 51,300
-----------
$ 3,743,000
II. DAP STORAGE $ 3,499,000 18 Years $194,389
III. DAP PLANT EXPANSION
A. Neutralizer Addition $ 586,000 15 Years $ 39,067
B. Weak Acid Scrubber $ 231,000 15 Years $ 15,400
Modification
C. Product Cooler Upgrade $ 475,000 15 Years $ 31,667
D. Sulfuric Acid Catalyst $ 430,000 5 Years $ 86,000
Replacement
E. Granulator Upgrade $ 373,000 15 Years $ 24,867
F. Upgrade Recycle Circuit $ 477,000 15 Years $ 31,800
G. Reslope Dryer $ 141,000 15 Years $ 9,400
-----------
$ 2,713,000
IV. ENGINEERING AND SUPERVISION $ 498,000 13.75 Years $ 36,218
-----------
TOTAL I, II, III & IV $10,453,000
-----------
</TABLE>
<PAGE>
EXHIBIT 13.1
MISSISSIPPI CHEMICAL CORPORATION
[MAP APPEARS HERE]
1997
ANNUAL REPORT
<PAGE>
TABLE OF CONTENTS
President's Message 3
The Year In Review 8
Production And Distribution Facilities 19
Products And Markets 20 & 21
Financial Highlights 23
Management's Discussion And Analysis Of
Financial Condition And Results Of Operations 25
Consolidated Balance Sheets 34
Consolidated Statements Of Income 35
Consolidated Statements Of Shareholders' Equity 36
Consolidated Statements Of Cash Flows 37
Notes To Consolidated Financial Statements 38
Report Of Independent Public Accountants 56
Directors And Officers 57
Shareholder Information 58
<PAGE>
To compete in the fertilizer market today, a successful company must adopt both
a local and global perspective. On the local level, manufacturing operations and
distribution facilities must be managed as efficiently and productively as
possible. At the same time, a company must anticipate and respond to supply,
demand and pricing factors around the globe. Over the past three years, the
primary strategic emphasis of Mississippi Chemical has been to position itself
to conduct business effectively on both a local and global level. Its products
are sold to customers in markets as near as the southern United States and as
far away as China and India; a significant portion of its raw materials are now
sourced from Morocco and, beginning in 1998, The Republic of Trinidad and
Tobago. This year's Annual Report, Rooted Locally, Working Globally, will
provide insight into Mississippi Chemical's operations in both the local and
global marketplace.
<PAGE>
To Our Shareholders
For producers and marketers of fertilizer products, the term global economy
rings particularly true. Ours is an industry in which the forces of both supply
and demand truly are international and are becoming more so every day. Thus, at
Mississippi Chemical,/1/ we make products that are used in markets as nearby as
the Mississippi River delta or as far away as China and India. Not only are our
markets global in scope, but so are our operations to an increasing degree. For
example, we annually import more than 1 million tons of phosphate rock from
Morocco as the primary raw material for our Pascagoula plant. Within the next
year, we will start producing ammonia in The Republic of Trinidad and Tobago at
a plant now under construction.
Many of Mississippi Chemical's accomplishments during fiscal 1997 reflect
our efforts to position the Company to compete in a worldwide business
environment characterized by favorable long-term trends for fertilizer demand.
Among the major strategic developments of the past year were the following:
. Our acquisition of the fertilizer operations of First Mississippi
Corporation was completed by mid-fiscal year. Through this transaction, we have
added substantial anhydrous ammonia and urea capacity and augmented our
distribution network with a fleet of ammonia barges and an interest in an
ammonia storage terminal at Pasadena, Texas. We believe that our expanded
production and distribution capacity will provide important competitive
advantages in the increasingly international marketplace. The acquisition also
makes Mississippi Chemical an important marketer of nitrogen to industrial
users.
. In Trinidad, we made continued progress at our joint venture anhydrous
ammonia plant project. Construction was approximately 50 percent complete at the
end of fiscal 1997, and we remain on track to start production during the spring
of 1998.
. To strengthen our ability to market products to customers worldwide, we
agreed to join the Phosphate Chemicals Export Association, Inc., known as
PhosChem. Effective Oct. 1, 1997, PhosChem will handle all export sales of our
diammonium phosphate. This marketing consortium is a major force in promoting
the export of U.S. concentrated phosphate products and will help support the
expansion of our diammonium phosphate sales to world markets.
. Our long-standing supply contract with Office Cherifien des Phosphates
(OCP), the national phosphate company of Morocco, was recently extended for an
additional 13 years. This arrangement should ensure a competitive supply of
phosphate rock through fiscal year 2016.
. We continued to invest in capacity growth at existing facilities, most
notably an expansion of our nitrogen complex in Yazoo City, budgeted at $130
million, and an $11 million project to expand production at our Pascagoula
diammonium phosphate plant by more than 20 percent.
. In August 1996, Mississippi Chemical completed the acquisition of two
potash mines in Carlsbad, N.M. The acquisition of these mines has expanded the
Company's product line, providing
CHARLES O. DUNN
President & Chief Executive Officer
THE COMPANY'S NITROGEN FERTILIZER COMPLEX IN YAZOO CITY IS UNDERGOING A MAJOR
EXPANSION AT A COST OF $130 MILLION. THE EXPANSION WILL ADD A NITRIC ACID PLANT,
AN AMMONIA PLANT AND ENHANCED AMMONIUM NITRATE CAPACITY.
Mississippi Chemical Corporation and Subsidiaries
3
<PAGE>
additional grades of agricultural and industrial products to our existing potash
mix. This acquisition makes Mississippi Potash, Inc. the largest producer of
potash in the U.S.
. Mississippi Chemical's common stock began trading on the New York Stock
Exchange early in the second quarter under the symbol GRO. We believe that
listing on the world's premier stock market will enhance the Company's
visibility with investors and benefit shareholders through improved trading
liquidity.
Before I discuss these developments and their implications in greater
detail, let me review our results for the fiscal year.
OPERATING AND FINANCIAL HIGHLIGHTS
Net sales for fiscal 1997 were $520.6 million, an increase of 21.4 percent
from the $428.8 million reported in fiscal 1996. Earnings before interest,
taxes, depreciation and amortization (EBITDA) amounted to $122.9 million in
fiscal 1997, up 18.1 percent from the fiscal 1996 figure of $104.1 million.
Operating income rose 7.5 percent, to $91.2 million from $84.8 million. Net
income for fiscal 1997 was $55.8 million, or $2.29 per share, compared with
$54.2 million, or $2.46 per share, for the prior fiscal year. There were
24,375,000 weighted average common shares outstanding in fiscal 1997, versus
21,980,000 in fiscal 1996.
Our financial results partly reflected the contributions from recent
acquisitions. The addition of First Mississippi's fertilizer operations during
the second half of this year was largely responsible for the 14.3 percent rise
in the volume of nitrogen products sold, which totaled 2 million tons for fiscal
1997. Potash volume increased 144.2 percent to 1 million tons, due to the
acquisition of the Trans-Resources, Inc. potash mines in Carlsbad, N.M.
A number of factors affected our performance during fiscal 1997. We
experienced prolonged adverse weather conditions in our primary trade area
during late winter and early spring. These conditions caused a delay in the
planting season and reduced sales of nitrogen fertilizers during our third
quarter. Nitrogen demand was also impacted by significant changes in crop
patterns as a greater-than-expected number of farmers made the economic
decision to shift from corn and cotton to soybeans which require essentially no
nitrogen fertilizer. The above factors, coupled with soft international
nitrogen demand due primarily to reduced urea imports in China, traditionally
the world's largest importer, caused nitrogen prices to decline during the
fourth quarter of fiscal 1997.
In phosphates, prices declined from prior-year levels due to erratic
purchase patterns by China and India, the world's largest importers of
phosphates. By the end of the year, export demand had improved and diammonium
phosphate prices had stabilized.
Potash experienced strong demand and pricing throughout fiscal 1997.
However, during early 1997, production costs increased due to low ore grade and
other operational difficulties. By year's end,
Mississippi Chemical Corporation and Subsidiaries
4
<PAGE>
ore grade had improved and the other operational issues were largely
resolved. A plan has been implemented to further improve ore grade by year end.
Looking ahead, we see continued product price uncertainty; however, most
industry analysts expect relatively high planted acres and strong fertilizer
demand for 1998.
STRATEGIC POSITIONING
As a result of the acquisitions and expansion initiatives of the past year,
Mississippi Chemical enters fiscal 1998 with significantly higher production
capacity, more extensive distribution resources and a growing industrial market
base to augment our traditional agricultural customers. I would like to review
these developments in some detail, to provide insight as to how they have
strategically positioned the Company for the opportunities we will face in the
global marketplace in the years ahead.
First Mississippi Acquisition. The purchase of the First Mississippi
fertilizer operations was a strategic move with significant positive
implications for the future of our Company. In this single transaction, we
obtained full ownership of Triad Chemical, which we previously had owned jointly
with First Mississippi, while also acquiring a large, modern ammonia plant
adjacent to Triad. The combination of these assets, all based in Donaldsonville,
La., has given us one of the premier nitrogen fertilizer complexes in the U.S.,
which now operates as Triad Nitrogen, Inc. It consists of two anhydrous ammonia
plants with combined capacity of 1,080,000 tons per year, a urea plant with a
560,000 ton capacity, dock facilities on the Mississippi River capable of
receiving ocean-going vessels and a connection to the ammonia pipeline into the
Midwest. The acquisition also included interests in an ammonia storage terminal
in Pasadena, Texas, and a fleet of 11 ammonia barges.
Nitrogen Expansion. We have also continued with plans to expand our existing
Yazoo City, Miss., nitrogen fertilizer facilities, which are on track for
completion during the first half of calendar year 1998. We are adding a nitric
acid plant with a 650 ton-per-day capacity and a 500 ton-per-day ammonia plant,
while also expanding our ammonium nitrate capacity by 200,000 tons per year.
After completion of the project, we will have additional nitric acid for sale to
industrial markets.
Trinidad Ammonia Plant. Another critical link in our strategy to enhance
self-sufficiency and cost-effectiveness in nitrogen fertilizer operations is the
ongoing construction of our anhydrous ammonia plant in The Republic of Trinidad
and Tobago, developed as a joint venture with Farmland Industries, Inc. The
advantages of this operation include Trinidad's abundant supply of natural gas,
along with a long-term contract that ties the pricing of this key raw material
to the market price of the finished product.
In combination, the First Mississippi acquisition, the Yazoo City expansion
and the Trinidad ammonia plant represent a sizable commitment to nitrogen
fertilizer products. While on the surface
Mississippi Chemical Corporation and Subsidiaries
5
<PAGE>
this may appear to be an overconcentration of resources in one segment, we
believe it will ultimately enhance our flexibility and growth prospects. For
example, there are considerable opportunities to more efficiently utilize the
assets of the Triad Nitrogen complex. The new Yazoo City ammonia plant and
Trinidad project will increase our ammonia self-sufficiency and overall cost-
effectiveness. The ammonia storage terminal and barge fleet acquired with the
First Mississippi transaction have strategically improved our distribution
capabilities in the U.S. industrial market. And, we have improved our ability to
reach more international ammonia customers, especially those in Latin America,
via Trinidad.
We believe that Mississippi Chemical's investment in the nitrogen segment
will prove to be well-timed, as global demand for our products in the
agricultural and industrial markets should justify the growth in capacity over
the long term. The forces driving fertilizer usage include the demand for more
food to serve a growing population. Improving diet in many emerging nations will
also increase the demand for agricultural products and require additional
fertilizer application.
Potash and Phosphate Products. At the same time we were investing to make
our nitrogen operations more productive and more flexible, we continued to
expand our other product areas. The two potash mines we acquired in Carlsbad,
N.M., are adjacent to our existing potash operation and have increased our
capacity to approximately 1.2 million tons per year. The larger of the acquired
facilities has significant associated potash reserves which should last for
several decades. At the second facility, the Company is mining in an ore zone
which may be fully depleted as early as fiscal 1998. The Company is continuously
monitoring its options with respect to this property. Alternatives include
mining in a different ore zone, the implementation of solution mining and mine
closure. The acquired mines also have provided us with additional types of
potash, including those suitable for industrial users. While production from the
new mines was impeded earlier in the year by a low-grade ore zone and other
operational difficulties, we have largely resolved these issues.
At our diammonium phosphate operation in Pascagoula, Miss., we are well
along in our program to expand production and product and gypsum storage
facilities. Upon completion, scheduled for June 1998, we will add approximately
180,000 tons of diammonium phosphate production per year while enhancing our
cost-effectiveness. Our phosphate business will also benefit from the extension
of our raw material supply agreement with Morocco's OCP and our new
international marketing partnership with PhosChem, as described earlier.
ENVIRONMENTAL STEWARDSHIP
No Mississippi Chemical annual report to shareholders would be complete
without a comment on our important environmental preservation activities. Two
years ago, we committed to devote a
Mississippi Chemical Corporation and Subsidiaries
6
<PAGE>
percentage of the Company's profits to land conservation. In keeping with that
commitment, we are acquiring a 3,900-acre tract of land north of Vicksburg,
Miss., on the Mississippi River. We currently have a 50 percent ownership
interest in the property and expect to purchase the remainder over the next few
years. The project calls for the replanting of native hardwoods, the
preservation of wetlands and the restoration of some barren areas. The property
will be maintained as a wildlife preserve and will be made available for
research and the promotion of wildlife management. It is an exciting venture.
LOOKING AHEAD
As we look toward fiscal 1998 and beyond, we are very optimistic about the
prospects for our Company and our industry. Domestic planting appears to be
poised for a strong year, and the international markets should continue to
provide attractive growth opportunities. Our emphasis during the next year will
be on completing the integration of operations acquired from First Mississippi
and Trans-Resources; continuing the expansion projects in Yazoo City, Pascagoula
and Trinidad; developing more industrial markets; and, in general, maximizing
the potential of the domestic and international markets for our products.
We enter the new fiscal year as a larger company and one with a stronger
strategic position in the global fertilizer industry. What has not changed,
however, is the value system and culture of Mississippi Chemical. We are a
business that prizes the stability and dedication of our workforce, the loyalty
of our customers, the confidence of our shareholders and the support of our
communities. And, we are determined to work constructively with all of these
constituencies so that we can grow and prosper together. The theme of this
annual report is rooted locally, working globally. As you read through it, you
will see how we draw upon the strengths of our local operations to create a
Company with a strong presence in the worldwide marketplace.
We thank you for your continued support and assure you of our commitment to
making your association with Mississippi Chemical a beneficial one.
/s/Charles O. Dunn
Charles O. Dunn
President & Chief Executive Officer
- ---------------------
/1/ In this annual report, the terms "Mississippi Chemical" and "Company"
include all subsidiaries and affiliates of Mississippi Chemical Corporation.
In many cases, the activities or assets described are those of a subsidiary
or an affiliate rather than of Mississippi Chemical directly.
Mississippi Chemical Corporation and Subsidiaries
7
<PAGE>
MISSISSIPPI CHEMICAL: ROOTED LOCALLY, WORKING GLOBALLY
The changing dynamics of the fertilizer industry are creating new challenges
and new opportunities worldwide. The forces of supply and demand have become
truly global, and events that take place in a market in one part of the world
will have almost immediate implications for every other major market.
Mississippi Chemical is well positioned to meet the challenges and benefit from
the opportunities in this increasingly international marketplace. The Company
does business on a broad international scale, both sourcing and selling its
products in a variety of regions. Despite operating in diverse locations,
Mississippi Chemical adapts its activities to the needs and opportunities in
each locality, as well as in the worldwide market. Thus, the theme of this
year's annual report is: Rooted Locally, Working Globally.
GLOBAL DYNAMIC: SUPPLY AND DEMAND
Mississippi Chemical's activities in the world fertilizer market should be
viewed in the context of the global developments in supply and demand. By the
year 2005, it is estimated that the population of the world will be over 6.5
billion. This is approximately 1.25 billion more people than in 1990 -- an
increase of nearly 24 percent in just 15 years./2/ Population growth on such a
wide scale has been, and should continue to be, an important driver of
fertilizer use worldwide. Experts believe that much of the world has under-
invested in agriculture for the past decade, leading grain stocks to grow at a
slower pace than population. As a result, world grain inventories are near the
lowest levels of the past 35 years, while population is significantly higher.
Besides population growth, several other forces are expected to add to the
pressure for greater efficiency in the use of agricultural resources --
efficiency gains that rely heavily on the application of fertilizer products.
The gradual shift to free-market economies in China, other Asian nations and
Eastern European countries, along with enhanced wealth in emerging economies
elsewhere, are creating higher standards of living and, thus, dietary
improvements. At the same time, the supply of arable land is declining as
industrialization becomes more commonplace. Therefore, the required increases in
agricultural yields must be achieved through more advanced farming techniques,
including fertilizer usage.
For Mississippi Chemical and the world's other leading fertilizer producers,
the long-term implications of these trends are very positive. The worldwide
consumption of fertilizer is expected to grow at rates ranging from 2.5-3.5
percent for nitrogen products, 3-4 percent for phosphates and 4-5 percent for
potash./3/
EACH YEAR, MORE THAN 1 MILLION TONS OF PHOSPHATE ROCK LEAVE MOROCCO, DESTINED
FOR THE COMPANY'S DAP PLANT IN PASCAGOULA, MISSISSIPPI. THE COMPANY HAS A LONG-
TERM SUPPLY CONTRACT WITH THE MOROCCAN PHOSPHATE COMPANY THROUGH 2016.
Mississippi Chemical Corporation and Subsidiaries
8
<PAGE>
[BLANK PAGE APPEARS HERE]
Mississippi Chemical Corporation and Subsidiaries
9
<PAGE>
[BLANK PAGE APPEARS HERE]
Mississippi Chemical Corporation and Subsidiaries
10
<PAGE>
At the same time, significant additions are being made to capacity. For
instance, China and India have built new nitrogen fertilizer plants or are now
constructing them; North Africa and several Middle Eastern nations are in the
midst of projects to add phosphate capacity; and some Latin American countries,
such as Brazil, may bring more potash capacity on-stream. While world nitrogen
supply may exceed demand in the next few years due to this capacity growth,
overall fertilizer supply and demand will be in balance over the long term.
Mississippi Chemical is prepared to compete in this global business
environment. It has moved selectively into international markets: striking a new
agreement to market phosphate products overseas, constructing an ammonia plant
in Trinidad and obtaining raw material from Morocco. At the same time, the
Company has strengthened its presence in the U.S. market through the acquisition
of First Mississippi's fertilizer operations and Trans-Resources' potash
operations, as well as several capacity expansion programs elsewhere. To provide
a perspective on how Mississippi Chemical is rooted locally, but working
globally, we have chosen to focus on several of its operations around the world.
TRINIDAD: TRAINING TOMORROW'S WORKERS
In The Republic of Trinidad and Tobago, Mississippi Chemical is constructing
the world's largest single-train ammonia facility through a venture jointly
owned with Farmland Industries, Inc. The Trinidad project is important to the
Company's future, as it will not only increase its ammonia capacity by 350,000
short tons, but will also ensure a plentiful and cost-effective supply of
natural gas. Since natural gas is a basic and critical raw material for
fertilizer products, its cost can, by itself, determine profitability. The
plant is expected to be in operation by the late spring of 1998.
To meet the staffing needs of its new facilities, Mississippi Chemical draws
on expertise honed during nearly 50 years of constructing and operating plants.
The Company has developed an approach to teaching basic skills and best
practices to inexperienced employees in a new plant. The use of the Company's
approach by the Trinidad facility in meeting its staffing needs illustrates the
interplay of global and local aspects of the Company's operations.
In the case of the Trinidad facility, all but two of the plant's new
employees are native Trinidadians. While the majority of new employees have had
experience in the fertilizer industry, a substantial number
THE COMPANY AND ITS JOINT VENTURE PARTNER ARE BUILDING THE WORLD'S LARGEST
SINGLE-TRAIN AMMONIA PLANT IN TRINIDAD, PROVIDING ACCESS TO AN ABUNDANT SUPPLY
OF COMPETITIVELY PRICED NATURAL GAS AND A BETTER OPPORTUNITY TO REACH LATIN
AMERICAN MARKETS.
Mississippi Chemical Corporation and Subsidiaries
11
<PAGE>
must be trained. Therefore, the Trinidad plant management formed a relationship
with a local technical training institute to meet the educational needs of its
workforce of 84 workers, virtually all of whom have already been hired to
prepare for the start up of operating systems, development of manuals, training
and other activities related to starting up the plant. The training institute
provided classroom facilities and faculty and developed the basic plant
operating course. Experienced operating supervisors and senior technical
managers then refined the course. Working together with assistance from the
plant construction firm and numerous equipment manufacturers, the institute and
senior plant personnel developed 34 operating manuals. After an intensive three-
month classroom-training regimen now in progress, the employees participating in
the program will have another three-months of hands-on training on site. By
start-up, even inexperienced workers will be ready to work alongside veteran
operators in the new plant.
FOSTERING INTERNATIONAL COOPERATION
As a leading U.S.-based fertilizer producer, Mississippi Chemical frequently
plays host to visiting delegations of industry executives, trade organization
personnel and government officials from other countries. In recent years, the
Company has participated in such information exchange programs with
representatives from England, France, India and Morocco.
Recently, a group organized by the Chinese Ministry for the Chemical
Industry visited Yazoo City and met with personnel from the Company's
operations, technical, marketing, communications and other departments. They
also visited local farms and fertilizer dealers. Among a number of presentations
by their U.S. counterparts, the Chinese delegation heard about the strong
market-driven orientation of Mississippi Chemical and other American fertilizer
producers, as well as our emphasis on safety and the environment. In return,
Mississippi Chemical gained insights into the Chinese market and distribution
infrastructure and formed relationships that may be valuable in future business
ventures.
China is the world's largest fertilizer consumer with about one-fourth of
total world consumption. In international trade, the Chinese are second only to
the U.S., representing about 15 percent of total fertilizer imports. With these
impressive numbers, Mississippi Chemical Corporation was eager to exchange views
with such a large buyer and consumer of fertilizer products.
WHEN REPRESENTATIVES OF CHINA, ONE OF THE WORLD'S LEADING FERTILIZER CONSUMERS,
WANTED TO EXCHANGE INDUSTRY INSIGHTS, ONE OF THE COMPANIES THEY VISITED WAS
MISSISSIPPI CHEMICAL.
Mississippi Chemical Corporation and Subsidiaries
12
<PAGE>
[BLANK PAGE APPEARS HERE]
Mississippi Chemical Corporation and Subsidiaries
13
<PAGE>
[BLANK PAGE APPEARS HERE]
Mississippi Chemical Corporation and Subsidiaries
14
<PAGE>
U.S.: EXPANDING MARKETING, SALES AND DISTRIBUTION
A world tour of Mississippi Chemical's activities would not be complete
without a visit to its operations in the United States. One of the Company's
strengths is its domestic marketing and distribution network, which has grown
and evolved during Mississippi Chemical's nearly 50 years in the U.S.
fertilizer industry. The Company serves a diverse customer base of independent
fertilizer dealers, farm cooperatives and regional and national distributors,
as well as feed and industrial product manufacturers, located across the
Southern and Midwestern regions of the U.S.
Domestic distribution of fertilizer products is accomplished by rail,
trucks, pipeline, barges and ocean-going vessels and is supported by 31
distribution terminals. In fiscal 1997, this distribution infrastructure was
expanded through the acquisition of First Mississippi's fertilizer operations,
which included interests in 11 ammonia barges plying the U.S. inland and
intracoastal canal systems, plus an interest in an ammonia storage terminal near
Houston, Texas. The Company also has two modern ocean-going vessels on long-term
charter, beginning in 1998, to facilitate the movement of anhydrous ammonia from
the Trinidad plant. With this extensive network, the Company has the ability to
supply not only agricultural customers in its core region, but, increasingly,
industrial users as well.
MOROCCO: ENSURING STABLE SUPPLY
Since 1991, Mississippi Chemical has enjoyed the benefits of a long-term
supply contract with Office Cherifien des Phosphates (OCP), the national
phosphate company of Morocco. Under this arrangement, the price for phosphate
rock is based on costs incurred by certain domestic competitors of the Company,
as well as the financial performance of Mississippi Chemical's phosphate
operations.
The Company's contract with OCP was recently extended through fiscal year
2016. This strategic relationship with OCP should sustain the Pascagoula plant
as an economically competitive phosphate operation for years to come. Both the
Company and OCP have made renewed commitments which will enhance the plant
facilities at Pascagoula. An expansion of this facility is now under
construction.
DEEP BENEATH THE EARTH'S SURFACE, THE COMPANY EXTRACTS POTASH FROM ITS CARLSBAD,
NEW MEXICO MINES. THE PURCHASE OF TWO ADDITIONAL MINES EARLY IN FISCAL 1997
DOUBLED THE COMPANY'S POTASH CAPACITY, BROUGHT NEW GRADES OF POTASH PRODUCTS ON
STREAM AND EXPANDED THE COMPANY'S INDUSTRIAL CUSTOMER BASE.
Mississippi Chemical Corporation and Subsidiaries
15
<PAGE>
PHOSCHEM: INCREASING INTERNATIONAL ACCESS
To broaden its access to the world markets for phosphate products, the
Company joined the Phosphate Chemicals Export Association, Inc., effective
October 1997. The organization, known as PhosChem, handles overseas marketing
and distribution for the leading phosphate fertilizer producers in North
America. In calendar 1996, PhosChem members exported approximately 4.4 million
short tons of diammonium phosphate (DAP). India and China have been the largest
international consumers of DAP in recent years, with Argentina, Australia,
Japan, Pakistan and Thailand also becoming increasingly important customers.
Mississippi Chemical's DAP export business should benefit from PhosChem's
network of sales representatives and its strong international contacts. At the
same time, because of its deep-water port in Pascagoula, the Company will
contribute significantly to PhosChem's global distribution capabilities. Plans
are in progress to expand these facilities and add additional storage.
EXPORTING A CORPORATE CULTURE
Although it operates in diverse markets, the Company believes in treating
its employees, customers, suppliers and other business associates in every
region with the same measure of integrity, fairness and respect. For nearly 50
years, since its start as a cooperative, Mississippi Chemical has fostered a
culture that might be best summed up by the phrase doing the right thing. A deep
concern for workplace safety and environmental stewardship are also part of the
company-wide ethic. This well-established corporate culture may be Mississippi
Chemical's most important export. As a result, its 1,700 employees share core
values that transcend national borders -- core values which are equally crucial
to doing business locally or globally.
- ---------------------
SOURCES: /2/ The World Bank. /3/ Brokerage firm reports.
FOLLOWING THE COMPANY'S ACQUISITION OF FIRST MISSISSIPPI'S HALF INTEREST IN
TRIAD CHEMICAL AND ITS ADJACENT AMPRO AMMONIA PLANT, THE COMPANY OPERATES ONE OF
THE PREMIER NITROGEN FERTILIZER COMPLEXES IN THE U.S. AT DONALDSONVILLE,
LOUISIANA.
Mississippi Chemical Corporation and Subsidiaries
16
<PAGE>
[BLANK PAGE APPEARS HERE]
Mississippi Chemical Corporation and Subsidiaries
17
<PAGE>
OUR CORPORATE HISTORY
In September of 1948, under the general laws of Mississippi, an agricultural
cooperative called Mississippi Chemical Corporation was organized.
As a cooperative, Mississippi Chemical's primary business was to provide
fertilizer products to over 16,000 shareholders pursuant to preferred patronage
rights. The shareholder-patron received a patronage refund on purchases to the
extent of the purchase price of the product over the cost of manufacturing and
distributing such product minus any allocated reserve.
In 1950, Mississippi Chemical constructed the first cooperative nitrogen
manufacturing plant in the world at Yazoo City, Miss.
On June 28, 1994, Mississippi Chemical shareholders approved a Plan of
Reorganization whereby the Company began its operations as a regular business
corporation as of July 1, 1994.
Today, approximately 200,000 farmers receive their fertilizer supplies from
Mississippi Chemical Corporation.
The Company manufactures nitrogen fertilizers at its facilities in Yazoo
City, Miss., and at an ammonia and urea fertilizer complex in Donaldsonville,
La., owned by the Company's wholly owned subsidiary, Triad Nitrogen, Inc.
Another subsidiary of the Company, Mississippi Potash, Inc., owns and operates
potash mines and refineries near Carlsbad, N.M.
Diammonium phosphate (DAP) is produced at the Pascagoula, Miss., facility,
which is owned by the Mississippi Phosphates Corporation, a wholly owned
subsidiary of the Company. The majority of Mississippi Phosphates' DAP
production is placed in international markets.
Following the reorganization in 1994, Mississippi Chemical has maintained
its traditional customer base and continues marketing its products to fertilizer
users in the United States as well as international markets.
Mississippi Chemical Corporation and Subsidiaries
18
<PAGE>
PRODUCTION AND DISTRIBUTION FACILITIES
[UNITED STATES MAP APPEARS HERE]
*PRODUCTION FACILITIES
*DISTRIBUTION FACILITIES
*POTASH SALES OFFICE
FACILITIES AND PRODUCTION CAPACITIES
MISSISSIPPI CHEMICAL CORPORATION
Yazoo City, Mississippi
Anhydrous Ammonia -- 500,000 ton capacity
Ammonium Nitrate (Amtrate(R) -- 750,000 ton capacity
Nitrogen Solutions (N-Sol 32(R) -- 600,000 ton capacity
MISSISSIPPI PHOSPHATES CORPORATION
PASCAGOULA, MISSISSIPPI
Diammonium Phosphate (DAP) -- 720,000 ton capacity
MISSISSIPPI POTASH, INC./1/
CARLSBAD, NEW MEXICO
Agricultural Grade Potash -- 984,000 ton capacity
Industrial Grade Potash -- 306,000 ton capacity
TRIAD NITROGEN, INC.
DONALDSONVILLE, LOUISIANA
Urea Synthesis -- 560,000 ton capacity
Prilled Urea -- 420,000 ton capacity
Ammonia -- 1,080,000 ton capacity
/1/ Capacities shown represent Mississippi Potash and its wholly owned
subsidiary, Eddy Potash, Inc.
Mississippi Chemical Corporation and Subsidiaries
19
<PAGE>
[GRAPH APPEARS HERE]
Mississippi Chemical Corporation and Subsidiaries
20
<PAGE>
[GRAPH APPEARS HERE]
Mississippi Chemical Corporation and Subsidiaries
21
<PAGE>
Products and Markets Yazoo City, Miss.
Donaldsonville, La.
MCC's nitrogen products include anhydrous ammonia, fertilizer-grade ammonium
nitrate which is sold under the Company's trade name Amtrate(R),
urea/ammonium nitrate (UAN) solutions which are sold under the Company's
trade name N-Sol 32(R), nitric acid and urea.
Ammonia N The basic nitrogen product is anhydrous ammonia, which contains 82
percent nitrogen and is the most concentrated form of nitrogen fertilizer
available. Ammonia is synthesized from natural gas, atmospheric nitrogen and
steam. Anhydrous ammonia is used directly as a preemergent fertilizer for most
row crops. Most of the ammonia produced by MCC is used as a raw material for the
manufacture of other nitrogen fertilizer products.
Ammonium Nitrate N Ammonium nitrate contains 34 percent nitrogen and is
manufactured by reacting anhydrous ammonia and nitric acid. Due to its stable
nature, ammonium nitrate is the fertilizer 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. MCC is the largest manufacturer and
marketer of ammonium nitrate in the U.S.
Nitric Acid N Nitric acid is made by oxidizing ammonia with air. It is a primary
ingredient in the production of ammonium nitrate fertilizer. Nitric acid is also
used in the industrial market to produce end products such as nylon fibers,
polyurethane foams, rubber chemicals and specialty fibers like Kevlar(R). MCC is
the largest producer of nitric acid in one location in the U.S.
UAN Solutions (N-Sol 32(R)) N N-Sol 32(R) is a 32 percent nitrogen liquid
product made by mixing urea liquor and ammonium nitrate liquor. N-Sol 32(R) is
used in direct application to cotton, corn, grains and pastures as well as being
used in liquid fertilizer blends. Over the past 20 years, there has been a 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 -- MCC sold approximately 297,000 tons of prilled urea and approximately
127,000 tons of urea melt which it produces primarily at its Triad facility.
Urea is synthesized by the reaction of ammonia and carbon dioxide and then
solidified in prill form. With a 46 percent nitrogen content, urea is the most
concentrated form of dry nitrogen and is considered a long-lasting form of
nitrogen. In the MCC trade area, prilled urea is the nitrogen product of choice
for topdressing rice, and most of the Company's prilled urea is aerially
broadcast on rice crops in Arkansas, Louisiana, Mississippi and Texas.
DAP -- DAP is the most common form of phosphate fertilizer, containing 18
percent nitrogen and 46 percent phosphate by weight. DAP is produced by reacting
phosphate rock with sulfuric acid to produce phosphoric acid, which is then
combined with ammonia. DAP is an important fertilizer for both direct
application and for use in blended fertilizers applied to all major types of row
crops.
Sulfuric Acid -- Sulfuric acid is made by burning elemental sulfur in air. It is
a primary ingredient in the production of phosphoric acid. Sulfuric acid is also
used for a wide range of industrial applications, involving organic and
petrochemical processes, oil refining, inorganic chemicals, metal processing,
wood pulping and textiles.
Potash -- MCC produces both red and white potash from three mines and associated
refining facilities in Carlsbad, N.M. Two types of ore refining processes are
used: flotation to produce red and hot leech crystallization to produce the
higher purity white potash. A portion of both the red and white standard potash
is converted to a granular product which is used as a direct application
fertilizer and in bulk blending of agricultural products N both of which are
applied to all major types of row crops. The balance of the white product is
consumed in the specialty and industrial markets.
Pascagoula, Miss. MCC produces diammonium phosphate (DAP) at its Pascagoula,
Miss. facility. Sales of DAP are primarily into international markets.
Carlsbad, N.M. MCC produces potash at its mines and facilities near
Carlsbad, N.M. The Company's potash products include red granular, red standard,
white granular, white standard, white coarse, industrial standard, soluble and
industrial soluble.
1 The company purchases its ammonia for DAP production from third
parties.
Mississippi Chemical Corporation and Subsidiaries
22
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Income Statement Data: Fiscal Years Ended June 30
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 520,569 $ 428,789 $ 388,154 $ 309,360 $ 289,125
Operating income $ 91,209 $ 84,818 $ 80,969 $ 37,905 $ 29,180
Income from continuing operations
before cumulative effect of change in
accounting principle $ 55,815 $ 54,178 $ 52,230 $ 26,912 $ 22,681
Net income $ 55,815 $ 54,178 $ 52,230 $ 36,523 $ 4,790
Income from continuing operations assuming
conversion from a cooperative to a regular
business corporation as of July 1, 1992 (1) n/a n/a n/a $ 21,415 $ 17,533
Earnings per share (2) $ 2.29 $ 2.46 $ 2.34 $ 1.10 $ 0.92
Weighted average common shares outstanding (3) 24,375 21,980 22,365 19,454 19,035
BALANCE SHEET DATA: June 30
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Working capital $ 53,910 $ 81,613 $ 70,790 $ 34,931 $ 22,802
Total assets $ 858,545 $ 341,006 $ 302,215 $ 298,430 $ 296,053
Long-term debt, excluding long-term debt
due within one year $ 244,516 $ - $ 2,478 $ 57,217 $ 52,357
Shareholders' equity $ 439,429 $ 247,825 $ 227,307 $ 142,956 $ 119,574
Cash dividends declared per common share (4) $ 0.40 $ 0.36 $ 0.16 $ - $ -
</TABLE>
(1) For 1994 and 1993, 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, 1992, income taxes would have
been increased by the following approximate amounts: $5.5 million and $5.1
million for fiscal 1994 and 1993, respectively.
(2) For 1994 and 1993, earnings per share reflect the reorganization of the
Company from a cooperative to a regular business corporation as if it had
occurred July 1, 1992, and is based on income from continuing operations.
(3) For 1994 and 1993, weighted average common shares outstanding reflect the
reorganization of the Company from a cooperative to a regular business
corporation as if it had occurred July 1, 1992.
(4) For 1994 and 1993, the Company operated as a cooperative and paid cash
patronage refunds in lieu of cash dividends.
Mississippi Chemical Corporation and Subsidiaries
23
<PAGE>
[BLANK PAGE APPEARS HERE]
Mississippi Chemical Corporation and Subsidiaries
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's fiscal 1997 results reflect record sales, operating income
and net income. Net sales increased 21.4% to $520.6 million from $428.8 million
in 1996. Operating income increased 7.5% to $91.2 million from $84.8 million in
1996, and net income increased 3.0% to $55.8 million from $54.2 million in 1996.
These results primarily reflect higher sales volumes for the Company's nitrogen
and potash products. The volume increases were largely due to the additional
tonnage available for sale resulting from the Company's acquisitions during the
fiscal year. In August 1996, the Company acquired substantially all of the
assets of New Mexico Potash Corporation and Eddy Potash, Inc. (the "Potash
Acquisitions"), from Trans-Resources, Inc. In December 1996, the Company
acquired the fertilizer operations of First Mississippi Corporation ("First
Mississippi") which included anhydrous ammonia and urea facilities. The
Company's sales prices for each of its nitrogen products (ammonia, ammonium
nitrate, urea and N-Sol) declined during the year; however, due to the sales
product mix, the Company's weighted average nitrogen sales price increased 5.8%
to $152 in fiscal 1997 from $144 in fiscal 1996. The Company's sales product mix
in fiscal 1997 included a higher percentage of anhydrous ammonia and urea tons
sold at higher prices when compared to the Company's other nitrogen products.
China, traditionally the world's largest buyer of DAP, reduced imports in 1997;
however, DAP sales to both the domestic and international markets were up.
Competition to capture sales outside of the Chinese market resulted in a decline
in DAP prices from the near record levels of the previous year. During fiscal
1997, the Company's DAP prices were down 6.0% to $177 per ton compared to $188
per ton for fiscal 1996. For fiscal 1997, the average sales price of potash was
$80 per ton compared to $71 per ton for fiscal 1996. This 13.6% increase in
potash prices is attributable to continued strengthening in both the domestic
and international markets and the inclusion of value added industrial grades of
potash in the Company's product mix.
The Company's results for fiscal 1997 were adversely impacted by an 11%
increase in the price for natural gas, a signicant raw material for the
production of nitrogen fertilizers. The natural gas industry had difculty
replenishing inventories during the summer of 1996, resulting in sharply higher
prices during the first half of fiscal 1997. Natural gas prices declined
somewhat during the second half of fiscal 1997. At June 30, 1997, storage
inventory levels had increased slightly and long-term natural gas supplies
appeared adequate to meet projected demand. The Company's gas prices can be
signicantly influenced by factors such as weather, gas transportation
interruptions and competing fuel prices.
During the current year, demand for the Company's nitrogen products was
negatively impacted by adverse weather conditions at the beginning of the
planting season and by an increase in acres planted in soybeans, which require
less nitrogen fertilizers than other traditional crops. The increase in soybean
acres came at the expense of cotton and corn in the Company's primary trade
area. Both cotton and corn require nitrogen fertilizers to produce optimal
yields. This year's shift to planting more soybeans in the Company's trade area
was driven by historically high soybean prices.
Looking forward, U.S. and world grain stocks remain at low levels. Global
food demand also remains strong and most industry analysts expect farmers to
plant fence-row-to-fence-row in fiscal 1998. The Company expects that, due to
the anticipated
Mississippi Chemical Corporation and Subsidiaries
25
<PAGE>
record soybean crop this year, many farmers will return to planting corn and
cotton in the Company's primary trade area in fiscal 1998, thereby increasing
the demand for nitrogen fertilizers. With the passage of the Freedom to Farm
Act, farmers now have greater flexibility in the crops they choose to plant. It
is likely that, in the future, planted acreage will shift between crops as
farmers try to maximize their economic return.
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
signicant 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, projected grain stocks, weather and changes in
agricultural production methods. The Company's results can also 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 those of the former Soviet Union.
RESULTS OF OPERATIONS
Following are summaries of the Company's sales results by product
categories:
Fiscal Years Ended June 30
- --------------------------------------------------------------------------------
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
NET SALES:
Nitrogen $ 308,441 $ 255,195 $ 240,692
DAP 128,076 142,084 117,495
Potash 81,945 29,553 27,433
Other 2,107 1,957 2,534
- --------------------------------------------------------------------------------
Net Sales $ 520,569 $ 428,789 $ 388,154
================================================================================
Fiscal Years Ended June 30
- --------------------------------------------------------------------------------
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
TONS SOLD:
Nitrogen 2,023 1,770 1,748
DAP 723 754 713
Potash 1,020 418 357
Mississippi Chemical Corporation and Subsidiaries
26
<PAGE>
Fiscal Years Ended June 30
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Average Sales Price Per Ton:
Nitrogen $ 152 $ 144 $ 138
DAP $ 177 $ 188 $ 165
Potash $ 80 $ 71 $ 77
FISCAL 1997 COMPARED TO FISCAL 1996
NET SALES. Net sales increased 21.4% to $520.6 million in fiscal 1997, from
$428.8 million in fiscal 1996, primarily as a result of increased sales volumes
for nitrogen and potash fertilizers. Nitrogen fertilizer sales increased 20.9%
through an increase in tons sold of 14.3% and a 5.8% increase in sales prices.
The volume increase is attributable to an increase in anhydrous ammonia and urea
sales due to the acquisition of the fertilizer operations of First Mississippi
which was partially offset by lower sales volumes for nitrogen solutions and
ammonium nitrate. During the current year, the weighted average nitrogen sales
price increased by 5.8% over the prior year primarily due to a 340,000-ton
increase in anhydrous ammonia sales and an 111,000-ton increase in urea sales
over the prior year. Prices for individual nitrogen products during the current
year were similar to those in the prior year with the exception of urea, which
was down approximately 4.6%. Sales of DAP decreased 9.9% as a result of a 6.0%
decrease in the average price per ton and a 4.1% decrease in tons sold. The
decrease in average sales prices was the result of aggressive competition for
non-Chinese DAP sales during the current year. Potash sales increased 177.3% as
a result of a 144.2% increase in tons sold and a 13.6% increase in the average
price per ton. This increase in volume is the result of increased tonnage made
available through the Potash Acquisitions completed during August 1996. Potash
prices increased due to strengthening in both the domestic and international
markets and the inclusion of value added industrial grades of potash in the
Company's product mix.
TRADING LOSS ON BROKERED PRODUCT. Following the acquisition of the
fertilizer operations of First Mississippi, the Company routinely trades or
brokers ammonia in the open market. During fiscal 1997, the Company brokered
approximately 177,000 short tons of ammonia. Brokered ammonia sales of
approximately $32.3 million and purchases of approximately $33.2 million
resulted in a $57,000 net loss after considering certain purchase price
adjustments associated with the acquisition.
COST OF PRODUCTS SOLD. For fiscal 1997, the Company's cost of products sold
increased to $367.0 million from $291.4 million in fiscal 1996. As a percentage
of net sales, cost of products sold increased to 70.5% from 68.0%. This increase
in cost of products sold, as a percentage of net sales, is the result of the
Company incurring higher costs per ton for nitrogen and potash partially offset
by lower costs per ton for DAP. Through the Potash Acquisitions, the Company's
current year sales also included a higher proportion of potash sales which have
a higher percentage of cost to sales. This increase, as a percentage of net
sales, was partially offset by higher weighted average sales prices for nitrogen
and potash. For fiscal 1997, nitrogen fertilizer
Mississippi Chemical Corporation and Subsidiaries
27
<PAGE>
cost per ton increased primarily as a result of higher natural gas costs and
higher depreciation associated with the First Mississippi acquisition. These
higher costs were partially offset by reduced purchases of ammonia and lower
maintenance and labor costs during the current year. During the prior fiscal
year, the Company incurred higher maintenance and labor costs and increased
purchases of ammonia due to a scheduled biennial maintenance turnaround at the
Company's Yazoo City facility. For fiscal 1997, DAP costs per ton decreased as a
result of lower costs for phosphate rock and sulfur, partially offset by higher
ammonia costs. Phosphate rock costs decreased due to the pricing formula in the
Company's phosphate rock supply contract that is based on the phosphate rock
costs incurred by certain other domestic phosphate producers, and the financial
performance of the Company's phosphate operations.
SELLING EXPENSES. For fiscal 1997, selling expenses increased to $30.7
million from $27.9 million in fiscal 1996. As a percentage of net sales, selling
expenses decreased to 5.9% for fiscal 1997, from 6.5% in fiscal 1996. This
decrease, as a percentage of net sales, was primarily the result of the
Company's sales including less tonnage sold on a delivered basis and higher
weighted average sales prices for nitrogen and potash. This decrease was
partially offset by higher transportation expenses for the Company's nitrogen
products. The Company also experienced increased costs for sales administration
and storage during the current fiscal year due to its Potash Acquisitions and
the acquisition of First Mississippi.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $31.7 million in fiscal 1997, from $24.7 million in fiscal 1996. As
a percentage of net sales, general and administrative expenses increased to 6.1%
from 5.8%. This increase is primarily the result of the amortization of goodwill
associated with the acquisition of First Mississippi in December 1996. In
addition, the Company experienced increased royalties and other administrative
costs associated with the Potash Acquisitions.
OPERATING INCOME. As a result of the above factors, operating income
increased to $91.2 million for fiscal 1997, from $84.8 million in fiscal 1996, a
7.5% increase.
INTEREST, NET. For fiscal 1997, net interest expense was $4.3 million
compared to net interest income of $2.2 million in fiscal 1996. This increase in
net interest expense was primarily the reflection of higher interest expense
resulting from higher levels of borrowings and lower interest income earned due
to lower levels of investments during fiscal 1997. This increase was partially
offset by interest income received on income tax refunds related to a prior
period. Also, during the current year, the Company capitalized $3.9 million of
its interest costs.
INCOME TAX EXPENSE. For fiscal 1997, income tax expense increased to $34.8
million from $34.3 million in fiscal 1996. This increase is primarily the result
of changes in earnings during the current fiscal year. The Company also incurred
an increase in the effective tax rate during the current year due to the
nondeductible amortization of goodwill associated with the acquisition of First
Mississippi in December 1996. This increase was offset by a decrease in the
Company's effective state income tax rate during the current year.
NET INCOME. As a result of the foregoing, net income increased to $55.8
million in fiscal 1997, from $54.2 million in fiscal 1996.
Mississippi Chemical Corporation and Subsidiaries
28
<PAGE>
FISCAL 1996 COMPARED TO FISCAL 1995
NET SALES. Net sales increased 10.5% to $428.8 million in fiscal 1996 from
$388.2 million in fiscal 1995, primarily as a result of higher sales prices for
nitrogen and DAP fertilizers and increased sales volumes for all product groups.
Nitrogen fertilizer sales increased 6.0% as a result of a 4.7% increase in
prices and a 1.3% increase in tons sold. During fiscal 1996, the Company's
ammonium nitrate sales decreased 6.1% primarily due to the absence of tonnage
obtained through a contract with Air Products and Chemicals, Inc. in the prior
year which is no longer in effect. Sales of DAP increased 20.9% as a result of a
14.4% increase in prices and a 5.7% increase in tons sold. Potash sales
increased 7.7% as a result of a 17.1% increase in tons sold partially offset by
an 8.0% decrease in prices.
COST OF PRODUCTS SOLD. Cost of products sold increased to $291.4 million in
fiscal 1996 from $254.6 million in fiscal 1995. As a percentage of net sales,
cost of products sold increased to 68.0% in fiscal 1996 from 65.6% in fiscal
1995. This increase, as a percentage of net sales, reflects increases in the
production cost per ton for nitrogen fertilizers and DAP partially offset by
higher sales prices for nitrogen and DAP. During fiscal 1996, the Company
incurred higher costs related to its nitrogen products due to higher natural gas
costs, increased purchases of ammonia used as a raw material and upgraded to
other nitrogen fertilizer products, and higher maintenance and labor costs.
Maintenance and labor costs were higher due to a scheduled biennial maintenance
turnaround at the Company's Yazoo City facility in fiscal 1996. Purchases of
ammonia also increased as a result of the scheduled turnaround, which reduced
supplies of internally produced ammonia.
DAP costs per ton increased during fiscal 1996 as a result of higher costs
for raw materials, primarily phosphate rock. Phosphate rock costs increased due
to the pricing formula in the Company's phosphate rock supply contract which
bases the price of this raw material on the phosphate rock costs incurred by
certain other domestic phosphate producers, and the financial performance of the
Company's phosphate operations.
Potash production costs per ton increased 5.5% primarily due to lower
volumes produced at the Carlsbad facility during fiscal 1996. Production levels
were lower primarily because of a lower ore grade resulting from mining in a
salt deposit that was unexpectedly encountered during January and February of
fiscal 1996.
SELLING EXPENSES. Selling expenses decreased to $27.9 million in
fiscal 1996, from $29.2 million in fiscal 1995. As a percentage of net sales,
selling expenses decreased to 6.5% in fiscal 1996, from 7.5% in fiscal 1995.
This decrease was the result of increased sales prices for DAP and nitrogen
fertilizers and lower delivery costs during fiscal 1996 due to a product mix
that included a lower percentage of tons sold on a delivered basis. These
decreases were partially offset by higher storage costs during fiscal 1996.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased to $24.7 million in fiscal 1996, from $23.3 million in fiscal
1995. This increase was primarily due to increased franchise taxes, higher
depreciation expenses and decreased service fees received from a former
subsidiary which reduced the Company's general and administrative expenses in
fiscal 1995. As a percentage of net sales, general and administrative expenses
decreased to 5.8% in fiscal 1996 from 6.0% in fiscal 1995. This decrease was
primarily the result of increased sales prices for DAP and nitrogen fertilizers.
Mississippi Chemical Corporation and Subsidiaries
29
<PAGE>
OPERATING INCOME. As a result of the above factors, operating income
increased to $84.8 million in fiscal 1996, from $81.0 million in fiscal 1995, a
4.8% increase.
INTEREST, NET. For fiscal 1996, net interest income was $2.2 million
compared to net interest expense of $52,000 in fiscal 1995. This change is
primarily a reflection of lower interest expense incurred during fiscal 1996
resulting from lower borrowing levels. The Company had no long-term debt at June
30, 1996. The Company also experienced higher interest income during fiscal 1996
due to higher levels of investments.
INCOME TAX EXPENSE. Income tax expense increased to $34.3 million in fiscal
1996, from $29.2 million in fiscal 1995. This increase is the result of the
change in earnings during the current year and the utilization of alternative
minimum tax credits during fiscal 1995.
NET INCOME. As a result of the foregoing, net income increased to $54.2
million in fiscal 1996, from $52.2 million in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had cash and cash equivalents of $8.2
million, compared to $60.2 million at June 30, 1996, a decrease of $52.0
million. At June 30, 1996, cash and cash equivalents had increased to $60.2
million from $29.6 million at June 30, 1995, an increase of $30.6 million.
OPERATING ACTIVITIES. For fiscal 1997, 1996 and 1995, net cash provided by
operating activities was $72.6 million, $94.6 million and $78.7 million,
respectively.
INVESTING ACTIVITIES. Net cash used in investing activities was $195.5
million, $27.1 million and $26.9 million for fiscal 1997, 1996 and 1995,
respectively, primarily reflecting capital expenditures in those periods. Fiscal
1997 capital expenditures were $93.8 million, which included $52.9 million
related to the Company's nitrogen expansion project at its Yazoo City,
Mississippi facility, $3.8 million for the remaining 50% interest in an ammonia
barge company it acquired in the First Mississippi acquisition, and $5.3 million
for land to be used in the development of a new phosphogypsum disposal facility
at the Pascagoula, Mississippi facility. The remaining $31.8 million was
utilized in normal improvements and modications to the Company's facilities and
other items. Capital expenditures for fiscal 1996 and 1995 were $16.1 million
and $22.3 million, respectively. Fiscal 1997, 1996 and 1995, respectively,
included $45.2 million, $12.0 million and $1.1 million related to the Company's
investment in Farmland MissChem Limited. In August 1996, the Company spent $56.1
million for the Potash Acquisitions. These expenditures were partially offset by
the receipt of option payments relating to the Company's Florida phosphate rock
properties. Net cash used in investing activities for 1995 also included $8.8
million in payments required to terminate a newsprint purchase contract with its
former subsidiary, Newsprint South, Inc.
FINANCING ACTIVITIES. Net cash provided by financing activities was $70.9
million for fiscal 1997, and net cash used in financing activities was $36.9
million and $45.4 million for fiscal 1996 and 1995, respectively. During the
current year, the
Mississippi Chemical Corporation and Subsidiaries
30
<PAGE>
amounts provided by financing activities included $490.3 million in debt
proceeds partially offset by $390.9 million in debt payments, $18.9 million paid
for the purchase of treasury stock and $9.8 million paid in cash dividends.
During the prior year, the amounts used in financing activities included $25.9
million for the purchase of treasury stock and $7.9 million paid in cash
dividends. During fiscal 1996, the Company also made $3.2 million in debt
payments, which included $2.4 million in prepayments.
For fiscal 1995, net cash used in financing activities included $47.4
million in proceeds received from a stock offering in August 1994. These
proceeds were subsequently used to prepay approximately $29.0 million of the
Company's long-term debt and a portion of the Company's revolving credit
facility. The Company also paid $5.7 million to its shareholders related to the
reorganization of the Company, $3.7 million in cash dividends and $4.8 million
to purchase treasury stock. In addition, the Company paid $14.8 million in cash
patronage refunds related to fiscal 1994, when the Company operated as a
cooperative.
At June 30, 1997, the Company and its subsidiaries had unsecured credit
facilities with Harris Trust and Savings Bank ("Harris") and a syndicate of
commercial banks totaling $300 million. These facilities are five-year
facilities and replaced a $125 million credit facility with NationsBank of
Tennessee, N.A. ("NationsBank"), as agent. The new facilities bear interest at
the Prime Rate or at rates related to the London Interbank Offered Rate. At June
30, 1997, the Company had $244.4 million outstanding under these facilities. The
maximum amount outstanding at any month end during the current year was $252.5
million. The Company also has a separate $5 million short-term line of credit
with a financial institution which is not part of the facilities mentioned
above. There were no outstanding borrowings under this commitment at June 30,
1997.
The Company's 50-50 joint venture, Farmland MissChem Limited, has commenced
construction of a 2,040-short-ton-per-day anhydrous ammonia plant to be located
near Point Lisas, The Republic of Trinidad and Tobago. The project is expected
to cost approximately $330 million. The portion of the project cost in excess of
required equity contributions of 35% is to be financed by the joint venture on a
non-recourse project basis. Startup of the facility is scheduled for late spring
1998. The Company has entered into a contract to purchase one-half of the
ammonia, approximately 350,000 short tons per year, produced by the plant at a
purchase price that approximates market price but is subject to an agreed-upon
floor price. The Company intends to use its portion of the production from the
new facility as a raw material for upgrading into finished fertilizer products
at its existing facilities and for sales into world markets.
In late fiscal 1996, the Company began an expansion at its nitrogen
fertilizer manufacturing facilities at Yazoo City. The project includes the
addition of a 650 ton-per-day nitric acid plant, a new 500 ton-per-day ammonia
plant and modications to its ammonium nitrate plant to increase production from
approximately 750,000 to approximately 950,000 tons per year. The Company
estimates total cost of the expansion to be $130 million. The expansion is
scheduled to be fully operational during the first half of 1998.
The Company has commenced construction of a new phosphogypsum disposal
facility at its Pascagoula, Mississippi, facility. This facility is expected to
be operational by spring 1998 at an estimated cost of $17 million. In July 1997,
the Company also
Mississippi Chemical Corporation and Subsidiaries
31
<PAGE>
initiated construction of an expansion of its diammonium phosphate manufacturing
facilities at Pascagoula. This project will increase production from
approximately 720,000 to 900,000 tons per year at an estimated cost of $10.5
million. It is expected that this expansion will be fully operational by the end
of fiscal 1998.
The Company anticipates financing the above-mentioned projects with cash
generated from operations and available lines of credit. The Company also
believes that these sources and other credit facilities that may be negotiated
by the Company will be sufficient to satisfy any financing needs of the Company
through fiscal 1998.
QUARTERLY RESULTS
The usage of fertilizer is highly seasonal, and the Company's quarterly
results reect the fact that in the Company's markets signicantly more fertilizer
is purchased in the spring. Signicant 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
signicantly from one year to the next primarily as a result of 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 unaudited quarterly results of
operations for fiscal 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Year Ending June 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1st Q 2nd Q 3rd Q 4th Q
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 91,290 $ 113,196 $ 142,583 $ 173,500
Operating income $ 14,740 $ 18,600 $ 20,093 $ 37,776
Net income $ 9,295 $ 12,093 $ 10,599 $ 23,828
Earnings per share (1) $ 0.44 $ 0.56 $ 0.38 $ 0.86
Weighted average common
shares outstanding 21,250 21,620 28,000 27,613
Dividends paid per share $ 0.10 $ 0.10 $ 0.10 $ 0.10
Common stock price range
- high $ 23.38 $ 26.00 $ 27.25 $ 24.38
- low $ 17.75 $ 23.00 $ 23.13 $ 19.50
</TABLE>
Mississippi Chemical Corporation and Subsidiaries
32
<PAGE>
<TABLE>
<CAPTION>
Year Ending June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1st Q 2nd Q 3rd Q 4th Q
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 96,570 $ 99,857 $ 107,740 $ 124,622
Operating income $ 16,885 $ 18,400 $ 23,528 $ 26,005
Net income $ 9,704 $ 11,874 $ 15,648 $ 16,952
Earnings per share (1) $ 0.43 $ 0.53 $ 0.72 $ 0.79
Weighted average common
shares outstanding 22,349 22,210 21,880 21,484
Dividends paid per share $ 0.08 $ 0.08 $ 0.10 $ 0.10
Common stock price range
- high $ 23.88 $ 25.13 $ 24.75 $ 22.50
- low $ 19.88 $ 21.00 $ 19.75 $ 19.25
Year Ending June 30, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1st Q 2nd Q 3rd Q 4th Q
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 72,751 $ 83,713 $ 114,677 $ 117,013
Operating income $ 10,876 $ 16,129 $ 27,457 $ 26,507
Net income $ 5,776 $ 10,439 $ 17,198 $ 18,817
Earnings per share (1) $ 0.27 $ 0.46 $ 0.75 $ 0.82
Weighted average common
shares outstanding 21,125 22,920 22,934 22,855
Dividends paid per share $ - $ - $ 0.08 $ 0.08
Common stock price range
- high $ 19.25 $ 19.00 $ 19.88 $ 20.13
- low $ 15.00 $ 14.75 $ 16.50 $ 15.38
</TABLE>
(1) Quarterly amounts do not add to the annual earnings per share because of
changes in the number of outstanding shares during the year.
Effective October 10, 1996, the Company's common stock began trading on the
New York Stock Exchange under the symbol "GRO." The Company's shares had
previously traded on the NASDAQ Stock Market's National Market (the "NASDAQ
Market") under the symbol "MISS." As of August 20, 1997, shareholders of record
numbered approximately 13,100.
Mississippi Chemical Corporation and Subsidiaries
33
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
ASSETS June 30
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,159 $ 60,214
Accounts receivable (less allowances of $1,767 and $1,200) 63,095 34,630
Inventories 69,310 40,633
Prepaid expenses and other current assets 4,873 3,956
Deferred income taxes 3,596 2,216
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 149,033 141,649
Investments and other assets:
Investments in affiliates 69,230 13,121
Other 14,039 14,546
- ------------------------------------------------------------------------------------------------------------------------------------
Total investments and other assets 83,269 27,667
Properties held for sale 52,919 52,919
Property, plant and equipment, at cost,
less accumulated depreciation, depletion and amortization 392,395 118,771
Goodwill, net of accumulated amortization 180,929 -
- ------------------------------------------------------------------------------------------------------------------------------------
$ 858,545 $ 341,006
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Long-term debt due within one year $ 140 $ 78
Accounts payable 74,534 46,013
Accrued liabilities 14,476 8,707
Income taxes payable 5,973 5,238
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 95,123 60,036
Long-term debt 244,516 -
Other long-term liabilities and deferred credits 20,620 18,218
Deferred income taxes 58,857 14,927
Commitments and contingencies (see Notes 12, 16, 17 and 18)
Shareholders' equity:
Common stock ($.01 par; authorized 100,000,000 shares; issued
27,975,936 in 1997 and 22,903,450 in 1996) 280 229
Additional paid-in capital 305,901 178,364
Retained earnings 145,827 99,814
Treasury stock, at cost (565,809 shares in 1997 and 1,550,000
shares in 1996) (12,579) (30,582)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 439,429 247,825
- ------------------------------------------------------------------------------------------------------------------------------------
$ 858,545 $ 341,006
====================================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
Mississippi Chemical Corporation and Subsidiaries
34
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Years Ended June 30
- --------------------------------------------------------------------------------
(In thousands, except per share data) 1997 1996 1995
- -------------------------------------------------------------------------------
Revenues:
Net sales $ 520,569 $ 428,789 $ 388,154
Trading loss on brokered product (57) - -
- --------------------------------------------------------------------------------
520,512 428,789 388,154
Operating expenses:
Cost of products sold 366,961 291,403 254,629
Selling 30,670 27,856 29,212
General and administrative 31,672 24,712 23,344
- --------------------------------------------------------------------------------
429,303 343,971 307,185
- --------------------------------------------------------------------------------
Operating income 91,209 84,818 80,969
Other income (expense):
Interest, net (4,331) 2,229 (52)
Other 3,709 1,446 491
- --------------------------------------------------------------------------------
Income before income taxes 90,587 88,493 81,408
Income tax expense 34,772 34,315 29,178
- --------------------------------------------------------------------------------
Net income $ 55,815 $ 54,178 $ 52,230
================================================================================
Earnings per share (see Note 1) $ 2.29 $ 2.46 $ 2.34
================================================================================
Weighted average common shares outstanding 24,375 21,980 22,365
================================================================================
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
Mississippi Chemical Corporation and Subsidiaries
35
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cooperative Additional Capital Retained
Common Common Paid-in Equity Earnings Treasury
Stock Stock Capital Credits (Decit) Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, June 30, 1994 $ 28,392 $ - $ 66,848 $ 62,352 $ (14,636) $ - $ 142,956
Conversion of cooperative stock (26,375) 155 26,220 - - - -
Conversion of capital equity credits and
allocated surplus accounts - 41 42,723 (62,352) 19,588 - -
Redemptions (2,017) (1) (4,095) - - - (6,113)
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal - 195 131,696 - 4,952 - 136,843
Net income - - - - 52,230 - 52,230
Stock issued - 34 46,636 - - - 46,670
Cash dividends paid - - - - (3,662) - (3,662)
Treasury stock purchased - - - - - (4,774) (4,774)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, June 30, 1995 - 229 178,332 - 53,520 (4,774) 227,307
Net income - - - - 54,178 - 54,178
Cash dividends paid - - - - (7,884) - (7,884)
Treasury stock, net - - 32 - - (25,808) (25,776)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, June 30, 1996 - 229 178,364 - 99,814 (30,582) 247,825
Net income - - - - 55,815 - 55,815
Cash dividends paid - - - - (9,802) - (9,802)
Treasury stock, net - - 56 - - (18,753) (18,697)
Stock options exercised - - 203 - - - 203
Stock issued for business acquired - 51 127,278 - - 36,756 164,085
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, June 30, 1997 $ - $ 280 $ 305,901 $ - $ 145,827 $ (12,579) $ 439,429
====================================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
Mississippi Chemical Corporation and Subsidiaries
36
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended June 30
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 55,815 $ 54,178 $ 52,230
Reconciliation of net income to net cash provided
by operating activities:
Net change in operating assets and liabilities (9,423) 21,401 (3,241)
Depreciation, depletion and amortization 27,980 17,798 17,058
Deferred income taxes 562 1,885 11,556
Other (2,322) (643) 1,117
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 72,612 94,619 78,720
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property, plant and equipment (93,816) (16,143) (22,305)
Investment in Farmland MissChem Limited (45,165) (11,993) (1,128)
Proceeds received from option holder 1,000 2,000 3,000
Acquisition of potash businesses (56,098) - -
Payments for newsprint contract obligations - - (8,751)
Other (1,449) (937) 2,260
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (195,528) (27,073) (26,924)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Debt payments (390,945) (3,175) (118,567)
Debt proceeds 490,290 - 54,625
Purchase of treasury stock (18,885) (25,890) (4,774)
Cash dividends paid (9,802) (7,884) (3,662)
Proceeds from issuance of common stock 203 - 47,401
Conversion of common stock - - (5,665)
Cash patronage paid - - (14,756)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 70,861 (36,949) (45,398)
- ------------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (52,055) 30,597 6,398
Cash and cash equivalents - beginning of period 60,214 29,617 23,219
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 8,159 $ 60,214 $ 29,617
====================================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
Mississippi Chemical Corporation and Subsidiaries
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the accounts of
Mississippi Chemical Corporation and its subsidiaries (collectively, the
"Company"). All material intercompany transactions and balances have been
eliminated.
Prior to July 1, 1994, the Company was organized and operated as a
cooperative to manufacture and distribute chemical fertilizer primarily to its
shareholder-members. On July 1, 1994, the Company converted from a cooperative
to a regular business corporation (see Note 2). The Company is a major producer
and supplier of nitrogen fertilizers in the southern United States. 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, fertilizer dealers and distributors primarily for use 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. The Company's potash products are also sold into
industrial markets where they are used for a broad range of industrial
applications.
In August 1996, the Company, through two subsidiaries of its wholly owned
subsidiary, Mississippi Potash, Inc., acquired substantially all of the assets
of New Mexico Potash Corporation and Eddy Potash, Inc. from Trans-Resources,
Inc. (see Note 3). Since the acquisition, New Mexico Potash Corporation has been
merged into Mississippi Potash, Inc. Eddy Potash, Inc. operates as a wholly
owned subsidiary of Mississippi Potash, Inc.
In December 1996, the Company acquired the fertilizer operations of First
Mississippi Corporation ("First Mississippi") in an all-stock merger transaction
(see Note 3). The fertilizer operations primarily included AMPRO Fertilizer,
Inc. ("AMPRO") and a 50% interest in Triad Chemical; the Company already held
the remaining 50% interest. Prior to this acquisition, the Company had the right
to withdraw, at cost, approximately one-half of the production of Triad Chemical
and was obligated to withdraw certain minimum quantities. Triad Chemical's
assets constituted approximately 2.3% and 2.6% of total assets at June 30, 1996
and 1995, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost has been
determined under a moving average cost method.
Mississippi Chemical Corporation and Subsidiaries
38
<PAGE>
INVESTMENTS IN AFFILIATES
The Company's investments in affiliates consist of an investment in a 50-50
joint venture ("Farmland MissChem Limited") with Farmland Industries, Inc. (see
Note 17) and a 50% interest in an ammonia storage terminal in Pasadena, Texas
(see Note 3). The Company acquired its interest in this storage terminal as part
of its acquisition of the fertilizer assets of First Mississippi in December
1996.
PROPERTIES HELD FOR SALE
Assets are classified as properties held for sale if the Company is
actively engaged in trying to dispose of the assets. These assets are valued at
the lower of cost or net realizable value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated
depreciation, depletion and amortization. Expenditures for major improvements
are capitalized; expenditures for normal maintenance and repairs are charged to
expense as incurred. Upon the sale or retirement of properties, the cost and
accumulated depreciation are removed from the accounts, and any gain or loss is
credited or charged to income. The Company uses primarily the declining-balance
method for assets purchased through June 30, 1995. Effective July 1, 1995, the
Company changed its method of depreciating newly acquired long-lived assets from
the declining-balance method to the straight-line method. Depletion of mineral
properties is provided using the units-of-production method over the estimated
life of the reserves. Depreciation of property, plant and equipment is provided
over the estimated useful lives of the related assets as follows:
Buildings 5-45 years
Machinery and equipment 2-25 years
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 maintains spare parts at all facilities in order to minimize
downtime in the event of a part failure. All parts that exceed a minimum value
and are repairable are capitalized as property, plant and equipment and are
depreciated over their estimated useful lives. Parts that do not exceed the
minimum value or are not repairable are maintained as replacement parts and are
included as inventory in the Company's current assets. These replacement parts
are charged to cost of products sold as they are installed in the facility.
GOODWILL
Goodwill represents the excess of cost over the fair value of the net
assets acquired by the Company in its December 1996 acquisition of the
fertilizer operations of First Mississippi. Goodwill is amortized on a straight-
line basis over 40 years. Amortization expense approximated $2,389,000 for the
fiscal year ended June 30, 1997.
Mississippi Chemical Corporation and Subsidiaries
39
<PAGE>
REVENUE RECOGNITION
Revenues are recognized as product is sold and title transfers to the
customer.
HEDGING ACTIVITIES
The Company enters into futures contracts to protect against price
fluctuations of natural gas. At the time the futures contracts are closed and
the related natural gas is purchased, the Company records a gain or loss from
the change in market value of such contracts as a component of cost of products
sold.
INCOME TAXES
Deferred tax assets and liabilities are recorded based on the difference
between the financial statement and income tax basis of assets and liabilities
using existing tax rates.
EARNINGS PER SHARE
Earnings per share is computed on the basis of the weighted average number
of common shares outstanding during the period plus dilutive common share
equivalents arising from stock options using the treasury stock method. Fully
diluted earnings per share are not signicantly different from primary earnings
per share.
USE OF ESTIMATES
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1, "Environmental Remediation Liabilities" (the
"SOP"). The SOP provides guidance concerning the recognition, measurement and
disclosure of environmental remediation liabilities and is effective for fiscal
years beginning after December 15, 1996. The Company does not expect the
adoption of SOP 96-1 to have a material effect on its financial statements.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS
No. 128 specifies new standards for computing and disclosing earnings per share
and is effective for periods ending after December 15, 1997. The Company does
not expect the adoption of SFAS No. 128 to have a material effect on the results
of its earnings per share calculations.
Mississippi Chemical Corporation and Subsidiaries
40
<PAGE>
In February 1997, the Financial Accounting Standards Board issued SFAS No.
129, "Disclosure of Information about Capital Structure." SFAS No. 129
establishes standards for disclosing information about an entity's capital
structure and is effective for periods ending after December 15, 1997. The
Company does not expect the adoption of SFAS No. 129 to have a material effect
on its financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 establishes new standards for
reporting comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. This statement is
effective for fiscal years beginning after December 15, 1997. The Company does
not expect the adoption of SFAS No. 130 to have a material effect on its
financial statements.
RECLASSIFICATIONS
The Company has reclassified certain prior year information to conform with
the current year's presentation.
NOTE 2 - EFFECTS OF REORGANIZATION:
Prior to July 1, 1994, the Company operated as a cooperative. On June 28,
1994, the shareholder-members of the Company voted to adopt a plan of
reorganization (the "Reorganization") which became effective July 1, 1994.
Pursuant to the Reorganization, the Company was merged into a newly created,
wholly owned subsidiary ("New Company") which is a non-cooperative Mississippi
business corporation. In the merger, the common stock of the Company was
converted into New Company common stock and/or cash. In addition, holders of
Capital Equity Credits and Allocated Surplus Accounts of the Company were
offered the right to exchange those interests for New Company common stock.
Pursuant to the Reorganization, New Company changed its name to Mississippi
Chemical Corporation.
NOTE 3 - ACQUISITIONS:
NITROGEN:
In August 1996, the Company entered into an agreement to acquire the
fertilizer businesses of First Mississippi in an all-stock merger transaction.
This transaction was completed on December 24, 1996, and was accounted for by
the purchase method of accounting. According to the terms of the merger, the
Company issued approximately 6,902,000 shares of its common stock to former
First Mississippi shareholders. Additionally, at closing, First Mississippi's
fertilizer businesses had $150,500,000 in outstanding debt which was assumed by
the Company.
The fertilizer operations of First Mississippi included AMPRO and a 50%
interest in Triad Chemical. Prior to the transaction, the Company held the
remaining 50% interest in Triad Chemical, which owned and operated an anhydrous
ammonia plant with an annual production of approximately 465,000 tons, and a
urea plant with an annual production of approximately 560,000 tons. AMPRO owned
and operated an anhydrous ammonia plant with annual production of approximately
615,000
Mississippi Chemical Corporation and Subsidiaries
41
<PAGE>
tons. AMPRO and Triad are located on adjacent sites in Donaldsonville,
Louisiana. In the transaction, the Company also acquired a 50% interest in an
ammonia storage terminal in Pasadena, Texas, and a 50% interest in a company
which owns and operates 11 ammonia barges. In March 1997, the Company purchased
the other 50% interest in the barge company for $3,824,000. Since closing, the
Company has merged AMPRO into and has contributed its 50% interest in Triad
Chemical to First Mississippi and has changed the name of First Mississippi to
Triad Nitrogen, Inc. ("Triad Nitrogen").
A preliminary allocation of the purchase price is as follows:
-----------------------------------------------------------
(Dollars in thousands)
-----------------------------------------------------------
Property, plant and equipment $ 151,407
Goodwill 180,655
Other assets/liabilities acquired, net 19,189
Deferred taxes (41,931)
-----------------------------------------------------------
$ 309,320
===========================================================
Additionally, the Company incurred approximately $2,663,000 in transaction
costs and other related fees associated with the acquisition. The Company
recorded these amounts as goodwill.
POTASH:
In August 1996, the Company, through two subsidiaries of its wholly owned
subsidiary, Mississippi Potash, Inc., acquired substantially all of the assets
of New Mexico Potash Corporation and Eddy Potash, Inc. (the "Potash
Acquisitions") from Trans-Resources, Inc. for $45,000,000, plus an adjustment
for working capital of approximately $11,000,000. The two potash mines, located
near Carlsbad, New Mexico, have a combined annual production capacity of
approximately 850,000 tons of potash. Since the acquisition, New Mexico Potash
Corporation has been merged into Mississippi Potash, Inc. Eddy Potash, Inc.
operates as a wholly owned subsidiary of Mississippi Potash, Inc. This
acquisition was accounted for by the purchase method of accounting, and the
purchase price was principally allocated to property, plant and equipment. Prior
to this acquisition, Mississippi Potash, Inc. produced approximately 420,000
tons of potash per year.
The Company's current year consolidated statement of income includes Triad
Nitrogen's results of operations for the period December 24, 1996 through June
30, 1997, and the Potash Acquisitions' results of operations for the period
August 16, 1996 through June 30, 1997. The unaudited pro forma summary financial
information presented below includes Triad Nitrogen's and the Potash
Acquisitions' results of operations, assuming the acquisitions had occurred on
July 1, 1996, and also on July 1, 1995. These pro forma results of operations
are not necessarily indicative of what would have occurred had the acquisitions
actually been consummated at the beginning of the periods presented, or of
future results of the combined companies.
Mississippi Chemical Corporation and Subsidiaries
42
<PAGE>
The following table summarizes the Company's pro forma results of
operations:
-----------------------------------------------------------
(Dollars in thousands,
except per share data) 1997 1996
-----------------------------------------------------------
Net sales $ 643,159 $ 698,404
===========================================================
Net income $ 68,151 $ 80,712
===========================================================
Earnings per share $ 2.44 $ 2.79
===========================================================
NOTE 4 - INVENTORIES:
Inventories consisted of the following:
June 30
-----------------------------------------------------------
(Dollars in thousands) 1997 1996
-----------------------------------------------------------
Finished products $ 28,308 $ 10,278
Raw materials and supplies 4,636 5,096
Replacement parts 36,366 25,259
-----------------------------------------------------------
$ 69,310 $ 40,633
===========================================================
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following:
June 30
-----------------------------------------------------------
(Dollars in thousands) 1997 1996
-----------------------------------------------------------
Mineral properties $ 40,668 $ 18,574
Land 8,609 8,152
Buildings 46,904 32,531
Machinery and equipment 519,940 335,584
Construction in progress 80,980 5,041
-----------------------------------------------------------
697,101 399,882
Less accumulated depreciation,
depletion and amortization (304,706) (281,111)
-----------------------------------------------------------
$ 392,395 $ 118,771
===========================================================
Mississippi Chemical Corporation and Subsidiaries
43
<PAGE>
NOTE 6 - CREDIT AGREEMENTS AND LONG-TERM DEBT:
At June 30, 1997, the Company and its subsidiaries had unsecured credit
facilities with Harris Trust and Savings Bank ("Harris") and a syndicate of
other commercial banks totaling $300,000,000. These facilities are five-year
facilities and replace all previous credit facilities with NationsBank of
Tennessee, N.A. ("NationsBank"). The new facilities bear interest at the prime
rate or at rates related to the London Interbank Offered Rate. At June 30, 1997,
there were outstanding borrowings of $244,400,000 under these facilities.
Prior to the completion of the Harris facilities, the Company had a
$125,000,000 credit facility with NationsBank and a syndicate of other
commercial banks. Under this facility, the Company had a $40,000,000 short-term
line of credit and an $85,000,000 revolving line of credit with a term of three
years. These lines of credit bear interest at the prime rate or at rates related
to the London Interbank Offered Rate. At June 30, 1996, there were no
outstanding borrowings under these commitments.
The Company also has a $5,000,000 short-term line of credit with a
financial institution which is not part of the facilities mentioned above. There
were no outstanding borrowings under this commitment at June 30, 1997 or 1996.
Long-term debt consisted of the following:
June 30
-----------------------------------------------------------
(Dollars in thousands, 1997 1996
-----------------------------------------------------------
Notes payable to financial
institution (6.26%) $ 244,400 $ -
Other 256 78
-----------------------------------------------------------
244,656 78
Long-term debt due within one year (140) (78)
-----------------------------------------------------------
$ 244,516 $ -
===========================================================
The Company's credit facilities with Harris have covenants that require,
among other things, that the Company maintain specified levels of tangible net
worth, debt to cash flow, and cash flow to interest expense. The Company is in
compliance with all covenants under its facilities.
The Company has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on its floating rate long-term debt. At
June 30, 1997, the Company had two outstanding interest rate swap agreements
(the "Agreements") with commercial banks having a total notional principal
amount of $40,000,000. The Agreements effectively change the Company's interest
rate exposure on a portion of its $300,000,000 credit facilities from a variable
rate to a fixed rate. The Agreements mature in fiscal year 2001, and have total
notional amounts ranging from $33,650,000 to $50,000,000.
Mississippi Chemical Corporation and Subsidiaries
44
<PAGE>
Note 7 - Other Long-Term Liabilities and Deferred Credits:
Other long-term liabilities and deferred credits are comprised of
the following:
June 30
-----------------------------------------------------------
(Dollars in thousands) 1997 1996
-----------------------------------------------------------
Option proceeds (see Note 17) $ 5,967 $ 4,967
Accrual for closure of gypsum
disposal area 8,051 7,181
Other 6,602 6,070
-----------------------------------------------------------
$ 20,620 $ 18,218
===========================================================
The Company is currently accruing costs for the future closure of the
phosphogypsum disposal facility located at Pascagoula, Mississippi. These costs
are reflected in cost of products sold during the appropriate periods. The
balance at June 30, 1997, relates to the portion of the disposal facility
utilized to date. In future years, the Company expects to record additional
charges of approximately $1,874,000 related to the future closure of the
facility. These charges will be accrued over the estimated two-year remaining
life of the facility.
The Company has commenced construction of a new phosphogypsum disposal
facility. The land to be utilized for the facility has been purchased,
preliminary engineering work has been completed, and the environmental permits
have been received. The facility is expected to be operational by spring 1998 at
an estimated cost of $17,000,000. To provide for operational flexibility, the
new disposal facility will be completed before the current facility is
completely utilized. Thereby, if one of the facilities became inaccessible, the
other facility would be available and an interruption in plant operations could
be avoided.
Mississippi Chemical Corporation and Subsidiaries
45
<PAGE>
NOTE 8 - SHAREHOLDERS' EQUITY:
At June 30, 1997, the Company had 100,000,000 authorized shares of common
stock at a par value of $.01.
Common stock issued and outstanding consisted of the following:
Cooperative
Common Common
(Shares in thousands) Stock Stock
-----------------------------------------------------------
Shares outstanding, June 30, 1994 4,120 -
Redemptions (135) -
Conversion of cooperative stock (3,985) 15,525
Conversion of capital equity
credits and allocated surplus
accounts - 4,133
Redemptions - (158)
Stock issued - 3,398
Purchase of treasury stock - (300)
-----------------------------------------------------------
Shares outstanding, June 30, 1995 - 22,598
Stock reissued - 5
Purchase of treasury stock - (1,250)
-----------------------------------------------------------
Shares outstanding, June 30, 1996 - 21,353
Treasury stock issued for business acquired - 1,545
Stock issued for business acquired - 5,357
Stock options exercised - 12
Stock reissued - 8
Purchase of treasury stock - (865)
-----------------------------------------------------------
Shares outstanding, June 30, 1997 - 27,410
===========================================================
As a cooperative, the Company periodically reserved a certain percentage of
earnings from business with its shareholders. These reserves were reflected in
"Allocated Surplus Accounts" as a component of retained earnings. As a
cooperative, the Company also, from time to time, paid a portion of patronage
refunds in the form of capital equity credits. As part of the Reorganization of
the Company (see Note 2), these holders of Allocated Surplus Accounts and
capital equity credits, which totaled $38,920,000 and $62,352,000, respectively,
at June 30, 1994, were offered the right to exchange those interests for common
shares.
In May 1995, the Board of Directors authorized the repurchase of up to
1,500,000 shares of the Company's common stock in the open market or in
privately negotiated transactions. In March 1996, the Board of Directors
authorized the Company to
Mississippi Chemical Corporation and Subsidiaries
46
<PAGE>
repurchase up to 1,500,000 additional shares. During fiscal 1997, 1996 and 1995,
the Company repurchased 865,809, 1,250,000 and 300,000 shares, respectively,
pursuant to these authorizations. These treasury stock repurchases were funded
from cash provided by operations and from borrowings under the Company's
revolving credit facilities.
The Company's Articles of Incorporation authorize the Board of Directors,
at its discretion, to issue up to 500,000 shares of Preferred Stock, par value
$.01 per share. The stock is issuable in classes or series which may vary as to
certain rights and preferences. As of June 30, 1997, none of these shares were
outstanding.
NOTE 9 - STOCK OPTIONS:
On August 2, 1994, the Board of Directors adopted a stock incentive plan
for certain officers and key employees of the Company. On July 20, 1995, the
Board of Directors adopted a stock option plan for nonemployee directors of the
Company. Both the stock incentive plan and the stock option plan for nonemployee
directors were approved by the Company's shareholders at its annual meeting held
on November 14, 1995. Options may be granted under the provisions of the
Company's plans to purchase common stock of the Company at a price not less than
the fair market value on the date of grant. Stock options for officers and key
employees are exercisable six months from the date of grant. Stock options for
nonemployee directors become exercisable in installments beginning one year
after the date of grant and become fully exercisable six years after the date of
grant. All options expire 10 years from the date of grant. As of June 30, 1997,
1996 and 1995, exercisable options were 490,489, 334,104 and 201,941,
respectively. There were approximately 1,129,000 shares available for option
plan grants at June 30, 1997. The summary of stock option activity is shown
below:
Options Weighted Average
Outstanding Exercise Price
-----------------------------------------------------------
July 1, 1994 - -
Options granted 201,941 $ 15.00
Stock options exercised - -
Stock options canceled - -
-----------------------------------------------------------
June 30, 1995 201,941 $ 15.00
Options granted 220,404 $ 23.96
Stock options exercised - -
Stock options canceled (26,241) $ 15.00
-----------------------------------------------------------
June 30, 1996 396,104 $ 19.99
Options granted 174,576 $ 20.00
Stock options exercised (12,091) $ 16.68
Stock options canceled - -
-----------------------------------------------------------
June 30, 1997 558,589 $ 20.06
============================================================
Mississippi Chemical Corporation and Subsidiaries
47
<PAGE>
The following table summarizes information about stock options outstanding
at June 30, 1997:
Exercise Options Weighted Average Weighted Average
Price Range Outstanding Remaining Contractual Life Exercise Price
- --------------------------------------------------------------------------------
$ 15.00 - $16.44 177,014 7.3 $ 15.07
$ 18.90 - $20.28 161,171 9.2 $ 20.22
$ 23.96 220,404 8.3 $ 23.96
During fiscal 1997, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which requires companies to estimate the fair value
for stock options on date of grant. Under SFAS No. 123, the Company is required
to record the estimated fair value of stock options issued as compensation
expense in its income statements over the related service periods or,
alternatively, continue to apply accounting methodologies as prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and disclose the pro forma effects of the estimated fair value of
stock options issued in the accompanying footnotes to its financial statements.
The determination of fair value is only required for stock options issued
beginning in fiscal 1996. In adopting SFAS No. 123, the Company decided to
continue to follow the accounting methodologies as prescribed by APB Opinion
No. 25.
The pro forma effects of the total compensation expense that would have
been recognized under SFAS No. 123 are as follows:
June 30
-----------------------------------------------------------
(Dollars in thousands,
except per share data) 1997 1996
-----------------------------------------------------------
Net income, as reported $ 55,815 $ 54,178
Pro forma net income $ 55,015 $ 52,925
Earnings per share, as reported $ 2.29 $ 2.46
Pro forma earnings per share $ 2.26 $ 2.41
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
In adopting SFAS No. 123, the Company utilized the Black-Scholes Option
Pricing Model to estimate the fair value of stock options granted using the
following assumptions:
1997 1996
-----------------------------------------------------------
Expected dividend yield 1.94% 1.49%
Expected option lives 6 years 6 years
Expected volatility 33% 33%
Risk-free interest rates 6.06% 6.13%
Mississippi Chemical Corporation and Subsidiaries
48
<PAGE>
Based on the results of the model, the fair value of the stock options
issued on the date of grant are as follows:
Weighted Average
Number Grant Date
Years Issued Fair Value per Option
-----------------------------------------------------------
1997 174,576 $ 7.35
1996 220,404 $ 9.14
NOTE 10 - MAJOR CUSTOMERS:
Sales to the Company's three largest customers were approximately
$119,412,000, $26,590,000 and $23,526,000 for 1997; $136,560,000, $36,499,000
and $20,135,000 for 1996; and $117,495,000, $32,270,000 and $16,745,000 for
1995.
A significant portion of the Company's trade receivables is 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.
Substantially all of phosphate sales are made to a third party which was
appointed the exclusive distributor of diammonium phosphate fertilizer produced
by the Company's Pascagoula, Mississippi, facility. Sales to the distributor
were recorded net of the distributor's discount. The distributor sells primarily
in international markets.
Subsequent to June 30, 1997, the Company announced that it is ending this
exclusive marketing agreement and will market its product for export through a
third party export association. The Company's domestic sales will be assumed by
the Company's internal sales staff.
NOTE 11 - TRADING LOSS ON BROKERED PRODUCT:
Through the acquisition of the fertilizer operations of First Mississippi,
the Company routinely trades or brokers anhydrous ammonia in the open market.
During fiscal 1997, the Company brokered approximately 177,000 short tons of
ammonia. Brokered ammonia sales of approximately $32,287,000 and purchases of
approximately $33,210,000 resulted in a $57,000 net loss after considering
certain purchase price adjustments associated with the First Mississippi
acquisition. The trading loss on brokered product has been reflected in the
accompanying consolidated statements of income.
NOTE 12 - HEDGING ACTIVITIES:
During fiscal 1997 and 1996, natural gas hedging activities resulted in
average cost decreases of approximately $.30 and $.40 per MMBTU on volumes
hedged of 15,880,000 and 5,560,000 MMBTU's, respectively. During fiscal 1995,
natural gas hedging activities resulted in an average cost increase of
approximately $.52 per MMBTU on volumes hedged of 4,850,000 MMBTU's.
Mississippi Chemical Corporation and Subsidiaries
49
<PAGE>
As of June 30, 1997, the Company had open futures contracts covering a
total volume of 13,480,000 MMBTU's with some contracts extending through June
1998. The unrealized gain on these contracts at June 30, 1997, was approximately
$1,605,000. The risk associated with outstanding futures positions is directly
related to increases or decreases in the prices of natural gas in relation to
the contract prices.
NOTE 13 - INTEREST, NET:
Interest, net, consisted of the following:
Years Ended June 30
-----------------------------------------------------------
(Dollars in thousands) 1997 1996 1995
-----------------------------------------------------------
Interest expense $ (8,942) $ (715) $ (2,021)
Interest capitalized 3,858 10 231
Interest income 753 2,934 1,738
-----------------------------------------------------------
$ (4,331) $ 2,229 $ (52)
===========================================================
NOTE 14 - INCOME TAXES:
The following is a summary of the components of the provision for income
taxes:
Years Ended June 30
-----------------------------------------------------------
(Dollars in thousands) 1997 1996 1995
-----------------------------------------------------------
Current:
Federal $ 30,379 $ 29,838 $ 16,245
State 3,831 2,592 1,377
-----------------------------------------------------------
34,210 32,430 17,622
-----------------------------------------------------------
Deferred:
Federal 503 1,734 9,504
State 59 151 2,052
-----------------------------------------------------------
562 1,885 11,556
-----------------------------------------------------------
$ 34,772 $ 34,315 $ 29,178
===========================================================
Mississippi Chemical Corporation and Subsidiaries
50
<PAGE>
The tax effect of the significant temporary differences and tax credit
carryforwards at June 30 follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996
- -------------------------------------------------------------------------------------------------------------
Current Non-current Current Non-current
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee benefit obligations $ 2,137 $ 101 $ 1,441 $ 107
Reserve for bad debts 691 - 472 -
Employee post retirement 78 1,041 79 1,011
Deferred income on affiliate sales 1,658 - - -
Accrual for closure of gypsum disposal area - 2,397 - 2,379
Investment in CoBank - 120 - 199
Capital loss carryforwards - 211 - 212
Other 240 - 224 -
- -------------------------------------------------------------------------------------------------------------
Deferred tax assets 4,804 3,870 2,216 3,908
Depreciation and amortization (1,208) (59,688) - (15,560)
Pension - (3,039) - (3,275)
- -------------------------------------------------------------------------------------------------------------
Deferred tax liabilities (1,208) (62,727) - (18,835)
- -------------------------------------------------------------------------------------------------------------
Net deferred tax asset (liability) $ 3,596 $ (58,857) $ 2,216 $ (14,927)
=============================================================================================================
</TABLE>
A reconciliation, as of June 30, of the statutory rate for income taxes and
the effective tax rate follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
% of % of % of
Earnings Earnings Earnings
Before Before Before
Amount Taxes Amount Taxes Amount Taxes
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income taxes computed at statutory rate $ 31,705 35.0% $ 30,972 35.0% $ 28,493 35.0 %
Increase (decrease) in taxes resulting from:
State taxes, net 2,263 2.5% 2,743 3.1% 3,429 4.2 %
Alternative minimum tax - - - - (2,822) (3.5)%
Other, net 804 0.9% 600 0.7% 78 0.1 %
- -------------------------------------------------------------------------------------------------------------
$ 34,772 38.4% $ 34,315 38.8% $ 29,178 35.8 %
=============================================================================================================
</TABLE>
Mississippi Chemical Corporation and Subsidiaries
51
<PAGE>
NOTE 15 - RETIREMENT PLANS:
The Company maintains non-contributory defined benefit pension plans which
provide benefits to a majority of its 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 Internal Revenue Code funding
limitation.
Net periodic pension expense includes the following components:
<TABLE>
<CAPTION>
Years Ended June 30
- ----------------------------------------------------------------------------------------------------
(Dollars in thousands) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 2,297 $ 1,955 $ 1,860
Interest cost on projected benefit obligations 5,294 4,875 4,515
Actual gain on plan assets (10,094) (13,260) (5,528)
Net amortization and deferral of transition assets (240) (153) (459)
Unrecognized gain on plan assets 3,734 7,778 392
- ----------------------------------------------------------------------------------------------------
Net periodic pension expense $ 991 $ 1,195 $ 780
====================================================================================================
</TABLE>
The following table sets forth the plans' funded status and the amounts
included as a component of other assets in the Company's consolidated balance
sheets:
<TABLE>
<CAPTION>
June 30
- ----------------------------------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 64,016 $ 62,238
Non-vested benefit obligation 464 428
- ----------------------------------------------------------------------------------------------------
Accumulated benefit obligation 64,480 62,666
Increase in benefits due to future compensation increases 17,084 14,712
- ----------------------------------------------------------------------------------------------------
Projected benefit obligation 81,564 77,378
Estimated fair value of plan assets 83,521 75,954
- ----------------------------------------------------------------------------------------------------
Plan assets greater (less) than projected benefit obligation 1,957 (1,424)
Contributions after measurement date - 175
Remaining unrecognized transition assets (2,645) (3,174)
Unrecognized prior service cost 5,291 829
Unrecognized net loss 3,129 10,766
- ----------------------------------------------------------------------------------------------------
Prepaid pension cost at end of period $ 7,732 $ 7,172
====================================================================================================
</TABLE>
Mississippi Chemical Corporation and Subsidiaries
52
<PAGE>
The following assumptions were used to measure net periodic pension cost
for the plans for fiscal 1997, 1996 and 1995:
1997 1996 1995
-----------------------------------------------------------
Discount rate 7.5% 7.0% 7.5%
Expected long-term rate of
return on assets 8.5% 8.5% 8.5%
Average increase in compensation
levels 5.0% 5.0% 5.0%
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. Under the plans, the
Company matches a certain percentage of each employee's contributions to the
plan up to a maximum percentage of the employee's base compensation. Company
contributions totaled approximately $1,073,000 in 1997, $866,000 in 1996 and
$812,000 in 1995.
The Company has no material post-retirement benefit obligations.
NOTE 16 - LEASE COMMITMENTS:
The Company has commitments under operating leases for plant rolling stock
items and 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 June 30, 1997:
Year Ending June 30: (Dollars in thousands)
-----------------------------------------------------------
1998 $ 2,435
1999 2,104
2000 1,856
2001 458
2002 138
-----------------------------------------------------------
$ 6,991
===========================================================
Rental expense for all operating leases was $3,417,000 for 1997, $1,476,000
for 1996 and $1,332,000 for 1995.
NOTE 17 - COMMITMENTS AND CONTINGENCIES:
During 1990, the Company entered into an agreement granting a third party
the exclusive option, for a period of four years, to purchase the Company's
undeveloped phosphate rock property of approximately 12,000 acres in Hardee
County,
Mississippi Chemical Corporation and Subsidiaries
53
<PAGE>
Florida. As of July 12, 1994, the Company and the option holder entered
into new agreements with respect to this property whereby the Company conveyed a
portion of the property to the third party and granted to the third party the
exclusive option to purchase the remaining portion of the property. In addition,
the Company was granted a put option whereby the Company has the right and
option to sell the remaining portion of the property to the third party if the
third party does not exercise its option to purchase the remaining property and
was granted an exclusive option to repurchase the previously conveyed portion in
the event the third party does not exercise its option and the Company does not
exercise its put option. The third party's option will expire on January 16,
1998. The Company's put option will expire six months after the third party's
option expires, and its repurchase option will expire one year after the
Company's put option expires. These properties are classified as properties held
for sale at June 30, 1997 and 1996.
The Company has entered into a 50-50 joint venture ("Farmland MissChem
Limited") with Farmland Industries, Inc. to construct and operate a 2,040 short-
ton-per-day anhydrous ammonia plant to be located near Point Lisas, The Republic
of Trinidad and Tobago. The project is expected to cost approximately
$330,000,000. The portion of the project cost in excess of required equity
contributions of 35% is to be financed by the joint venture on a non-recourse
project basis. Startup of the facility is scheduled for late spring 1998. The
Company has entered into a contract to purchase one-half of the ammonia,
approximately 350,000 short-tons-per-year, produced by the plant at a purchase
price which approximates market price but is subject to an agreed-upon floor
price. The Company intends to use its portion of the production from the new
facility as a raw material for upgrading into finished fertilizer products at
its existing facilities and for sales into world markets. The Company is
accounting for this investment using the equity method.
In late fiscal 1996, the Company began an expansion at its nitrogen
fertilizer manufacturing facilities at Yazoo City. The project includes the
addition of a 650 ton-per-day nitric acid plant, a new 500 ton-per-day ammonia
plant and modifications to its ammonium nitrate plant to increase production
from approximately 750,000 to approximately 950,000 tons-per-year. The Company
estimates total cost of the expansion to be $130,000,000. The expansion is
scheduled to be fully operational during the first half of 1998.
The Company has commenced construction of a new phosphogypsum disposal
facility at Pascagoula, Mississippi which is expected to be operational by
spring 1998, at an estimated cost of $17,000,000. In July 1997, the Company also
initiated construction of an expansion of its diammonium phosphate manufacturing
facilities at Pascagoula. This project will increase production from
approximately 720,000 to 900,000 tons per year at an estimated cost of
$10,500,000. It is expected that this expansion will be fully operational by the
end of fiscal 1998.
Additionally, the Company, in the ordinary course of its business, is the
subject of, or a party to, 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 financial position or the future earnings of
the Company.
Mississippi Chemical Corporation and Subsidiaries
54
<PAGE>
NOTE 18 - RAW MATERIAL CONTRACTS:
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 has been extended through June 30,
2016. 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.
NOTE 19 - SUPPLEMENTAL CASH FLOW INFORMATION:
The Company considers its holdings of highly liquid money market debt
securities to be cash equivalents if the securities mature within 90 days from
the date of purchase. These short-term investments were $53,739,000 and
$27,587,000 at June 30, 1996 and 1995, respectively. The Company had no short-
term investments at June 30, 1997.
The increase (decrease) in cash due to the changes in operating assets and
liabilities consisted of the following:
Years Ended June 30
-----------------------------------------------------------
(Dollars in thousands) 1997 1996 1995
-----------------------------------------------------------
Accounts receivable $ (2,048) $ (3,564) $ 9,095
Inventories (11,378) 9,682 (16,325)
Prepaid expenses and
other current assets 3,443 (944) 569
Accounts payable (4,504) 14,494 2,505
Accrued liabilities 5,064 1,733 915
-----------------------------------------------------------
$ (9,423) $ 21,401 $ (3,241)
===========================================================
During fiscal 1997, 1996 and 1995, the Company paid income taxes of
$30,451,000, $31,127,000 and $16,675,000, respectively. Payments of interest
were $7,677,000 in 1997, $330,000 in 1996 and $2,646,000 in 1995. Supplemental
disclosures regarding non-cash financing and investing activities include the
following:
Years Ended June 30
-----------------------------------------------------------
(Dollars in thousands) 1997 1996 1995
-----------------------------------------------------------
Land option transferred
to land $ 941 $ - $ -
Conveyance of phosphate
rock property $ - $ - $ 14,000
Conversion of capital
equity credits $ - $ - $ 62,352
Conversion of cooperative
stock $ - $ - $ 26,375
Other material non-cash activities include the Company's December
1996, acquisition of the fertilizer businesses of First Mississippi in an
all-stock merger transaction (see Note 3).
Mississippi Chemical Corporation and Subsidiaries
55
<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 (the
"Company") as of June 30, 1997 and 1996, and the related consolidated statements
of income, shareholders' equity and cash flows for the three years ended June
30, 1997. 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 signicant 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 June 30, 1997 and 1996, and the results of
their operations and their cash flows for the three years ended June 30, 1997,
in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Memphis, Tennessee
July 25, 1997
Mississippi Chemical Corporation and Subsidiaries
56
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
DIRECTORS OFFICERS
<S> <C>
John W. Anderson /1/,/4/ Charles O. Dunn
Former President & CEO President & Chief Executive Officer
Alabama Farmers Cooperative, Inc.
David W. Arnold
Coley L. Bailey, Chairman /4/ Senior Vice President -- Technical Group
Self-employed
Farming Interests Robert E. Jones
Senior Vice President -- Corporate Development
Haley Barbour /1/
Partner & Attorney C. E. McCraw
Barbour, Griffith & Rogers Senior Vice President -- Operations
Frank R. Burnside, Jr. /2/ Timothy A. Dawson
Self-employed Vice President -- Finance & Chief Financial Officer
Agribusiness Interests
John J. Duffy
Robert P. Dixon /3/,/4/ Vice President -- Marketing & Distribution
Former President & CEO
SF Services, Inc. Larry W. Holley
Vice President -- Nitrogen Production
Charles O. Dunn /4/
President & CEO William L. Smith
Mississippi Chemical Corporation General Counsel
W. R. Dyess /3/ Ethel Truly
President Vice President -- Administration
ABC Ag Center, Inc. & Dyess Farm Center, Inc.
Rosalyn B. Glascoe
Woods E. Eastland /1/ Corporate Secretary
President & CEO
Staplcotn & Stapldiscount
John S. Howie, Vice Chairman /2/,/4/
Self-employed
Farming Interests
George Penick /3/
President
Foundation for the Mid-South
David M. Ratcliffe /2/
Senior Vice President of External Affairs
The Southern Company
Wayne Thames /1/
Self-employed
Farming Interests
DIRECTOR EMERITUS
/1/ Audit Committee -- John W. Anderson, Chairman
Tom C. Parry /1/ /2/ Compensation Committee --John S. Howie, Chairman
Past President /3/ Corporate Governance Committee -- W. R. Dyess, Chairman
Mississippi Chemical Corporation /4/ Executive Committee
</TABLE>
Mississippi Chemical Corporation and Subsidiaries
57
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER INFORMATION
CORPORATE OFFICES CORPORATE COMMUNICATIONS
<S> <C>
Mississippi Chemical Corporation Mississippi Chemical Corporation
P.O. Box 388 Corporate Communications
Yazoo City, MS 39194-0388 P.O. Box 388
(601) 746-4131 Yazoo City, MS 39194-0388
FAX (601) 746-9158 (601) 746-4131
www.misschem.com FAX (601) 751-2232
SEC FORM 10-K SHARE ACCOUNT INFORMATION
A copy of the Company's annual report to the Securities Stockholders with inquiries concerning their accounts
& Exchange Commission on Form 10-K is available without may call or write:
charge upon written request to: Mississippi Chemical Corporation
Corporate Secretary Corporate Secretary
Mississippi Chemical Corporation P.O. Box 388
P.O. Box 388 Yazoo City, MS 39194-0388
Yazoo City, MS 39194-0388 (601) 746-4131
FAX (601) 751-2232
COMMON STOCK
INDEPENDENT ACCOUNTANTS
Mississippi Chemical Corporation common stock is traded on
the New York Stock Exchange under the symbol GRO. Arthur Andersen LLP
165 Madison Avenue
TRANSFER AGENT Suite 1700
Memphis, TN 38103-2777
Harris Trust and Savings Bank
P.O. Box A-3504
311 West Monroe, 14th Floor
Shareholder Services
Chicago, IL 60690-3504
INVESTOR RELATIONS
Mississippi Chemical Corporation The information in this annual report is intended solely
Investor Relations as a report to shareholders and is not a prospectus,
P.O. Box 388 representation, or circular in respect to any stock or
Yazoo City, MS 39194-0388 security, and is not transmitted in connection with any
(601) 746-4131 sale or offer to sell, or any negotiation for the sale of
FAX (601) 751-2978 any stock or security.
</TABLE>
Mississippi Chemical Corporation and Subsidiaries
58
<PAGE>
[MAP APPEARS HERE]
Mississippi Chemical Corporation
P.O. Box 388
Yazoo City, MS 39194-0388
www.misschem.com
Mississippi Chemical Corporation and Subsidiaries
59
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Subsidiaries of the Company as of September 29, 1997, are as follows:
Percentage
State of of Voting
NAME OF COMPANY Incorporation Securities Owned
- --------------- ------------- ----------------
Mississippi Phosphates Corporation Delaware 100%
NSI Land Corporation Delaware 100%
Mississippi Chemical Management Company Delaware 100%
MCC Investments, Inc. Mississippi 100%
Mississippi Potash, Inc. Mississippi 100%
Eddy Potash, Inc. Mississippi 100%
(a subsidiary of Mississippi Potash, Inc.)
Triad Nitrogen, Inc. Delaware 100%
Triad Fertilizer, Inc. Mississippi 100%
(a subsidiary of Triad Nitrogen, Inc.)
TNI, Inc. Mississippi 100%
(a subsidiary of Triad Nitrogen, Inc.)
Triad Barge, Inc. Mississippi 100%
(a subsidiary of Triad Nitrogen, Inc.)
TNI Barge, Inc. Delaware 100%
(a subsidiary of Triad Barge, Inc.)
Farmland MissChem Limited Republic of Trinidad 50%
and Tobago
<PAGE>
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of our
reports incorporated by reference in this Form 10-K, into the Company's
previously filed SEC File No. 333-13069.
Arthur Andersen LLP
Memphis, Tennessee
September 29, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 1997 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY TO
SUCH ANNUAL REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,159
<SECURITIES> 0
<RECEIVABLES> 64,862
<ALLOWANCES> 1,767
<INVENTORY> 69,310
<CURRENT-ASSETS> 149,033
<PP&E> 697,101
<DEPRECIATION> 304,706
<TOTAL-ASSETS> 858,545
<CURRENT-LIABILITIES> 95,123
<BONDS> 14,500
0
0
<COMMON> 280
<OTHER-SE> 439,149
<TOTAL-LIABILITY-AND-EQUITY> 858,545
<SALES> 520,569
<TOTAL-REVENUES> 524,221
<CGS> 366,961
<TOTAL-COSTS> 429,303
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 567
<INTEREST-EXPENSE> 4,331
<INCOME-PRETAX> 90,587
<INCOME-TAX> 34,772
<INCOME-CONTINUING> 55,815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,815
<EPS-PRIMARY> 2.29
<EPS-DILUTED> 0
</TABLE>
