<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains third quarter summary financial information extracted
from Mississippi Chemical Corporation fiscal 1997 third quarter Form 10-Q and is
qualified in its entirety by reference to such Form 10-Q filing.
</LEGEND>
<CIK> 0000066895
<NAME> MISSISSIPPI CHEMICAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,960
<SECURITIES> 0
<RECEIVABLES> 61,953
<ALLOWANCES> 1,641
<INVENTORY> 84,712
<CURRENT-ASSETS> 168,512
<PP&E> 659,427
<DEPRECIATION> 297,191
<TOTAL-ASSETS> 849,344
<CURRENT-LIABILITIES> 94,979
<BONDS> 0
0
0
<COMMON> 280
<OTHER-SE> 426,302
<TOTAL-LIABILITY-AND-EQUITY> 849,344
<SALES> 142,583
<TOTAL-REVENUES> 142,786
<CGS> 106,391
<TOTAL-COSTS> 122,510
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 168
<INTEREST-EXPENSE> 2,088
<INCOME-PRETAX> 18,188
<INCOME-TAX> 7,589
<INCOME-CONTINUING> 10,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,599
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0
</TABLE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
Of The Securities Exchange Act of 1934
For Quarter Ended March 31, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1997
Commission File Number 001-12217
MISSISSIPPI CHEMICAL CORPORATION
Organized in the State of Mississippi
Identification No. 64-0292638
P. O. Box 388, Yazoo City, Mississippi 39194
Telephone No. 601+746-4131
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ x ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Number of Shares
Common Stock, $0.01 par value 27,792,364
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
INDEX
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Consolidated Financial Statements
Consolidated Statements of Income 3
Three months ended March 31,
1997 and 1996, and Nine months ended
March 31, 1997 and 1996
Consolidated Balance Sheets
March 31, 1997 and June 30, 1996 4 - 5
Consolidated Statements of Shareholders' Equity 6
Fiscal Year Ended June 30, 1996
and Nine months ended March 31,
1997
Consolidated Statements of Cash Flows 7
Nine months ended March 31,
1997 and 1996
Notes to Consolidated Financial Statements 8 - 13
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 14 - 22
PART II. OTHER INFORMATION:
Item 6(a).Exhibits 23
Item 6(b).Reports on Form 8-K 23
Signatures 23
<PAGE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three months ended Nine months ended
March 31, March 31,
-------------------- ------------------
1997 1996 1997 1996
-------- -------- --------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Net sales $142,583 $107,740 $347,069 $304,167
Trading margin on
brokered product 20 - 20 -
-------- -------- -------- --------
142,603 107,740 347,089 304,167
Operating expenses:
Cost of products
sold 106,391 71,324 250,258 207,733
Selling 7,701 6,899 20,465 19,900
General and
administrative 8,418 5,989 22,933 17,721
-------- -------- -------- --------
122,510 84,212 293,656 245,354
-------- -------- -------- --------
Operating income 20,093 23,528 53,433 58,813
Other (expense) income:
Interest, net (2,088) 752 (1,946) 1,508
Other 183 183 1,820 736
-------- -------- -------- --------
Income before income
taxes 18,188 24,463 53,307 61,057
Income tax expense 7,589 8,815 21,320 23,831
-------- -------- -------- --------
Net income $ 10,599 $ 15,648 $ 31,987 $ 37,226
======== ======== ======== ========
Earnings per share
(see Note 2) $ 0.38 $ 0.72 $ 1.37 $ 1.68
======== ======== ======== ========
Weighted average common
shares outstanding 28,000 21,880 23,427 22,134
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, June 30,
1997 1996
--------- --------
(Dollars in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,960 $ 60,214
Accounts receivable, net 60,312 34,630
Inventories:
Finished products 41,444 10,278
Raw materials and supplies 7,800 5,096
Replacement parts 35,468 25,259
-------- --------
Total inventories 84,712 40,633
Prepaid expenses and other
current assets 11,590 3,956
Deferred income taxes 1,938 2,216
-------- --------
Total current assets 168,512 141,649
-------- --------
Investments and other assets:
Investments in affiliates 68,004 13,120
Other 16,939 14,547
-------- --------
Total investments and
other assets 84,943 27,667
-------- --------
Properties held for sale 52,919 52,919
Property, plant and equipment, at cost 659,427 399,882
Less accumulated depreciation,
depletion and amortization (297,191) (281,111)
-------- --------
Net property, plant and
equipment 362,236 118,771
Goodwill, net of accumulated
amortization 180,734 -
-------- --------
$849,344 $341,006
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, June 30,
1997 1996
--------- ---------
(Dollars in thousands)
<S> <C> <C>
Current liabilities:
Long-term debt due within one year $ 138 $ 78
Accounts payable 79,497 46,013
Accrued liabilities 11,753 8,707
Income taxes payable 3,591 5,238
--------- ---------
Total current liabilities 94,979 60,036
--------- ---------
Long-term debt 252,667 -
Other long-term liabilities and
deferred credits 18,685 18,218
Deferred income taxes 56,431 14,927
Shareholders' equity:
Common stock ($.01 par; authorized
100,000,000 shares; issued
27,963,845 in fiscal 1997 and
22,903,450 in fiscal 1996) 280 229
Additional paid-in capital 305,698 178,364
Retained earnings 124,764 99,814
Treasury stock, at cost (171,481
shares in fiscal 1997 and
1,550,000 shares in fiscal
1996) (4,160) (30,582)
-------- --------
426,582 247,825
-------- --------
$849,344 $341,006
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
MARCH 31, 1997
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Balances, July 1, 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 - - 31,987 - 31,987
Cash dividends paid - - (7,037) - (7,037)
Treasury stock, net - 56 - (10,334) (10,278)
Stock issued for
business acquired 51 127,278 - 36,756 164,085
-------- -------- -------- -------- --------
Balances, March 31, 1997 $ 280 $305,698 $124,764 $ (4,160) $426,582
======== ======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
March 31,
----------------------
1997 1996
-------- ---------
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 31,987 $ 37,226
Reconciliation of net income to net
cash (used) provided by operating
activities:
Net change in operating assets
and liabilities (49,037) 18,080
Depreciation, depletion and amortization 18,666 13,224
Deferred income taxes 63 1,708
Transaction costs for business acquired (2,848) -
Other (492) 171
-------- ---------
Net cash (used) provided by operating activities (1,661) 70,409
-------- ---------
Cash flows from investing activities:
Purchase of property, plant and equipment (94,086) (11,995)
Proceeds received from option 1,000 2,000
Investment in Farmland MissChem Limited (44,136) (4,262)
Other (11) (851)
-------- ---------
Net cash used by investing activities (137,233) (15,108)
-------- ---------
Cash flows from financing activities:
Debt payments (253,596) (3,129)
Debt proceeds 359,739 -
Cash dividends paid (7,037) (5,736)
Purchase of treasury stock (10,466) (23,375)
-------- ---------
Net cash provided (used) by financing activities 88,640 (32,240)
-------- ---------
Net (decrease) increase in cash and cash
equivalents (50,254) 23,061
Cash and cash equivalents - beginning of period 60,214 29,617
-------- ---------
Cash and cash equivalents - end of period $ 9,960 $ 52,678
======== =========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Mississippi Chemical
Corporation and its subsidiaries ("the Company") have been prepared by the
Company, without audit. In the opinion of the Company's management, the
financial statements reflect all adjustments necessary to present fairly the
results of operations for the three-month and the nine-month periods ended
March 31, 1997 and 1996, the Company's financial position at March 31, 1997
and June 30, 1996, the cash flows for the nine-month periods ended March 31,
1997 and 1996, and the consolidated statements of shareholders' equity as
of March 31, 1997. These adjustments are of a normal recurring nature, and
are, in the opinion of management, necessary for a fair presentation of the
financial position and results of operations for the interim periods.
Certain notes and other information have been condensed or omitted from
the interim financial statements presented in the Quarterly Report on Form
10-Q. Therefore, these financial statements should be read in conjunction
with the Company's 1996 Form 10-K and the consolidated financial statements
and notes thereto included in the Company's June 30, 1996, audited financial
statements.
Due to the seasonal nature of the Company's business, the results of
operations for the period ended March 31, 1997, are not necessarily indicative
of the operating results for the full fiscal year.
NOTE 2 - EARNINGS PER SHARE
The number of shares used in the earnings per share computation are the
weighted average number of common shares outstanding plus dilutive common share
equivalents as follows:
<TABLE>
Three months ended Nine months ended
March 31, March 31,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding, net of treasury
shares 27,904 21,813 23,350 22,066
Common stock equivalents for
employee stock options 96 67 77 68
------- ------- ------- -------
28,000 21,880 23,427 22,134
======= ======= ======= =======
</TABLE>
In January 1997, the Company's board of directors declared a regular
quarterly cash dividend of $0.10 per common share outstanding. This dividend
was paid on February 7, 1997, to holders of record on January 27, 1997.
NOTE 3 - 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, 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
property held for sale at March 31, 1997 and June 30, 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 million. Startup of the facility is scheduled for mid-1998. 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 million. The expansion is
scheduled to be fully operational during the first half of 1998.
NOTE 4 - CHANGE IN TRADING MARKETS
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 under the symbol
"MISS".
NOTE 5 - ACQUISITIONS ACCOUNTED FOR BY THE PURCHASE METHOD OF ACCOUNTING
NITROGEN ACQUISITION:
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. On December 24, 1996, this transaction was
completed for an approximate value of $315 million. Since closing, the
transaction has been adjusted to approximately $311 million and remains subject
to further adjustment. The transaction was accounted for by the purchase
method of accounting and is reflected in the Company's consolidated balance
sheet at March 31, 1997. According to the terms of the merger, the Company
issued approximately 6.9 million shares of its common stock to former First
Mississippi shareholders. Additionally, at closing First Mississippi's
fertilizer businesses had approximately $150.5 million of outstanding debt
which was assumed by the Company.
The fertilizer operations of First Mississippi include AMPRO Fertilizer,
Inc. and a 50% interest in Triad Chemical. The Company already held the
remaining 50% interest in Triad Chemical, which owns and operates 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 owns
and operates an anhydrous ammonia plant with annual production of approximately
615,000 tons. AMPRO and Triad are located on adjacent sites in Donaldsonville,
Louisiana, and share dock facilities capable of receiving ocean-going vessels.
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 eleven ammonia barges. Since closing, the Company has contributed
to the capital of First Mississippi its 50% interest in Triad Chemical and the
name of First Mississippi has been changed to Triad Nitrogen, Inc. ("Triad
Nitrogen").
The following recap reflects the allocation of the purchase price (subject
to adjustment) on the Company's consolidated balance sheet as of March 31, 1997:
<TABLE>
<S> <C>
(a) Property, plant and equipment $151,407
(b) Goodwill 181,954
(c) Other assets/liabilities acquired, net 19,417
(d) Deferred taxes (42,107)
--------
$310,671
</TABLE>
Goodwill will be amortized over a period of forty years using the
straight-line method.
In March 1997, the Company purchased for $3.8 million the other 50%
interest in the ammonia barge company acquired in the First Mississippi merger.
Triad Nitrogen's results of operations for the period December 24, 1996,
through March 31, 1997, are included in the Company's current year consolidated
statement of income. To facilitate analysis, the accompanying summarized
unaudited pro forma financial information includes Triad Nitrogen's results of
operations, assuming the acquisition had occurred on July 1, 1996, and July 1,
1995, respectively. These pro forma results of operations are not necessarily
indicative of what would have occurred had the acquisition actually been
consummated at the beginning of the periods presented, or of future results of
the combined companies.
<TABLE>
Nine months ended
March 31,
--------------------
(In thousands, except per share data)
1997 1996
-------- --------
<S> <C> <C>
Net sales $463,003 $466,127
======== ========
Net income $ 44,394 $ 59,725
======== ========
Earnings per share $ 1.46 $ 2.06
======== ========
</TABLE>
POTASH ACQUISITIONS:
In August 1996, the Company, through its wholly owned subsidiary,
Mississippi Potash, Inc., completed the acquisition of substantially all of the
assets of New Mexico Potash Corporation and Eddy Potash, Inc. from Trans-
Resources, Inc. for $45 million, plus an adjustment for current working capital
of approximately $11 million. The two mines, located near Carlsbad, New Mexico,
have a combined annual production capacity of approximately 870,000 tons of
potash. Eddy Potash, Inc. is now a wholly owned subsidiary of Mississippi
Potash, Inc. New Mexico Potash Corporation has been merged into Mississippi
Potash, Inc. Prior to this acquisition, Mississippi Potash, Inc. produced
approximately 420,000 tons of potash per year.
NOTE 6 - TRADING MARGIN ON BROKERED PRODUCT
As a result of the First Mississippi acquisition, the Company routinely
trades or brokers ammonia in the open market. During the current year quarter,
the Company brokered approximately 108,000 short tons of ammonia. On these
brokered transactions, the Company realized margins of approximately $20,000,
net of an acquisition purchase price adjustment of $557,000 which represented
losses on contracts assumed in the First Mississippi acquisition. All of these
contracts are cancelable by the Company prior to the end of the first quarter
of fiscal 1998. The trading margin on brokered product has been reflected
in the accompanying Consolidated Statements of Income. The following recaps
the components of the trading margin on brokered products related to these
activities:
<TABLE>
(Dollars in thousands)
<S> <C>
Gross sales $ 20,054
Purchases (20,591)
Assumed losses through acquisition 557
--------
$ 20
========
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction with
the attached consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the fiscal year
ended June 30, 1996.
The usage of fertilizer in the Company's trade territory is highly
seasonal, and the Company's quarterly results reflect the fact that in the
Company's markets significantly more fertilizer is purchased in the spring.
Significant portions of the Company's net sales and operating income are
generated in the last four months of the Company's fiscal year (March through
June). Since interim period operating results reflect the seasonal nature of
the Company's business, they are not indicative of results expected for the
full fiscal year. In addition, quarterly results can vary significantly from
year to year 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 financial results for the Company's third quarter primarily reflect a
delay in seasonal fertilizer applications due to wet weather throughout the
Company's primary trade area. The resulting weak demand for nitrogen products
during the quarter caused prices for most products to decline relative to the
year earlier period. Phosphate prices were also well below year-ago levels due
to soft international demand. Further, the financial results for the quarter
reflect lower than expected production at the Company's newly acquired ammonia
facility due to start-up problems early in the quarter associated with a major
modification of the plant. The Company also experienced significantly higher
production costs at its Carlsbad, New Mexico, potash facilities due to
operating difficulties at the two newly acquired potash mines, as well as
higher energy costs and the mining of a low-grade ore zone.
The Company's results of operations for the nine-month period ended March
31, 1997, reflect higher sales volumes for potash and higher sales prices for
nitrogen and potash, partially offset by lower sales prices for DAP. DAP sales
prices decreased as a result of soft international demand. Higher potash
volumes reflect the sale of tonnages available from the Company's potash
facilities acquired in August 1996. During the current year, the Company's lower
sales volumes for its upgraded nitrogen products, excluding urea, more than
offset its higher sales volume of ammonia. The Company's ammonia and urea
sales increased during the current year as a result of its acquisition of the
fertilizer businesses of First Mississippi in December 1996. During the current
year, the Company has experienced higher natural gas prices which have adversely
impacted the Company's results. During the current quarter, natural gas prices
have declined; however, they remain subject to pronounced near-term
fluctuations.
In May 1995 and March 1996, the Board of Directors authorized the purchase
of up to 1,500,000 and 1,500,000 shares, respectively, of the Company's common
stock in the open market or in privately negotiated transactions. As of March
31, 1997, the Company had repurchased a total of 2,021,481 shares pursuant to
those authorizations; however, in December, the Company reissued 1,850,000
shares as part of its acquisition of First Mississippi. The unused
authorization to repurchase 978,519 shares remains available to be utilized by
the Company.
RESULTS OF OPERATIONS
Following are summaries of the Company's sales results by product
categories:
<TABLE>
Three months ended Nine months ended
March 31, March 31,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- --------
(in thousands)
<S> <C> <C> <C> <C>
Net Sales:
Nitrogen $ 90,050 $ 65,178 $194,606 $180,021
DAP 30,306 33,855 96,813 102,851
Potash 21,777 8,218 53,996 19,872
Other 450 489 1,654 1,423
-------- --------- --------- --------
Net Sales $142,583 $107,740 $347,069 $304,167
======== ======== ======== ========
Three months ended Nine months ended
March 31, March 31,
------------------- ----------------------
1997 1996 1997 1996
-------- --------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Tons Sold:
Nitrogen 533 449 1,261 1,292
DAP 170 158 542 540
Potash 268 113 683 280
Three months ended Nine months ended
March 31, March 31,
-------------------- ---------------------
1997 1996 1997 1996
-------- ------- -------- ---------
<S> <C> <C> <C> <C>
Average Sales Price Per Ton:
Nitrogen $ 169 $ 145 $ 154 $ 139
DAP $ 179 $ 214 $ 179 $ 191
Potash $ 81 $ 73 $ 79 $ 71
</TABLE>
NET SALES. Net sales increased 32.3% to $142.6 million for the quarter
ended March 31, 1997, from $107.7 million for the quarter ended March 31, 1996,
primarily as a result of increased sales volumes for nitrogen and potash,
partially offset by lower sales prices for DAP. Nitrogen fertilizer sales
increased 38.2% due to an 18.9% increase in tons sold and a 16.2% increase in
sales prices. The volume increase is attributable to an increase in anhydrous
ammonia and urea sales due to the acquisition of First Mississippi which was
partially offset by lower sales volumes of nitrogen solutions. During the
current year quarter, the weighted average nitrogen sales price increased by
16.2% over the prior year quarter. A 119,000-ton increase in ammonia sales
at a 14.1% higher sales price was partially offset by lower average sales
prices for upgraded nitrogen products. Potash sales increased 165.0% as a
result of a 137.8% increase in tons sold and an 11.4% increase in the
average price per ton. This increase in volume is the result of increased
tonnage available due to the Company's recent potash acquisitions. Sales of
DAP decreased 10.5% as a result of a 16.5% decrease in the average price per
ton partially offset by a 7.3% increase in tons sold.
For the nine months ended March 31, 1997, net sales increased 14.1% to
$347.1 million, from $304.2 million for the nine months ended March 31, 1996.
This increase was primarily the result of increased sales volumes for potash and
higher sales prices for potash and nitrogen, partially offset by lower sales
prices for DAP. Potash sales increased 171.7% as a result of a 144.1% increase
in tons sold and an 11.3% increase in the average sales price. This increase in
volume is the result of increased tonnage available due to the Company's potash
acquisitions completed during August 1996. Nitrogen fertilizer sales increased
8.1% due to a 10.8% increase in sales prices partially offset by a 2.5% decrease
in tons sold. Sales of DAP decreased 5.9% as a result of a 6.3% decrease in the
average price per ton partially offset by a .4% increase in tons sold.
TRADING MARGIN ON BROKERED PRODUCT. For the quarter ended March 31, 1997,
and the nine-month period ended March 31, 1997, the Company's trading margin on
brokered product was $20,000. As a result of the First Mississippi acquisition,
the Company routinely trades or brokers ammonia in the open market. During the
current year quarter, the Company brokered approximately 108,000 short tons of
ammonia. On these brokered transactions, the Company realized margins of
approximately $20,000, net of an acquisition purchase price adjustment of
$557,000 which represented losses on contracts assumed in the First Mississippi
acquisition. All of these contracts are cancelable by the Company prior to the
end of the first quarter of fiscal 1998.
COST OF PRODUCTS SOLD. Cost of products sold increased to $106.4 million
for the quarter ended March 31, 1997, from $71.3 million for quarter ended
March 31, 1996. As a percentage of net sales, cost of products sold
increased to 74.6% from 66.2%. 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 its nitrogen and potash products which were partially offset by
lower costs per ton for DAP. The Company's current year sales also include a
higher proportion of potash tons sold which have a higher percentage of cost
to sales. For the quarter ended March 31, 1997, nitrogen fertilizer cost per
ton increased primarily as a result of higher depreciation associated with
the First Mississippi acquisition and higher fixed costs associated with
production downtime at the newly acquired ammonia plant. This downtime was
due to startup difficulties associated with a major modification of the plant.
These startup difficulties have been overcome as the plant is currently fully
operational. These higher costs were partially offset by lower natural gas
costs during the current year quarter. During the current year quarter, the
Company also experienced higher production costs at its two potash mines
acquired in August 1996. This increase in cost of production is attributable
to low ore quality, high energy costs and other operational difficulties.
For the quarter ended March 31, 1997, DAP costs per ton decreased as a result
of lower costs for phosphate rock, partially offset by higher ammonia costs.
Phosphate rock costs decreased due to the Company's phosphate rock supply
contract which is based on the phosphate rock costs incurred by certain other
domestic phosphate producers, and the financial performance of the Company's
phosphate operations.
For the nine months ended March 31, 1997, cost of products sold increased
to $250.3 million from $207.7 million for the nine months ended March 31, 1996.
As a percentage of net sales, cost of products sold increased to 72.1% from
68.3%. This increase in cost of products sold, as a percentage of net sales, is
the result of the Company incurring higher cost per ton for nitrogen and potash
partially offset by lower cost per ton for DAP. 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 sales prices for nitrogen and potash. For the nine
months ended March 31, 1997, nitrogen fertilizer cost per ton increased
primarily as a result of higher natural gas costs and higher depreciation
associated with the First Mississippi acquisition and higher fixed costs
associated with production downtime at the newly acquired ammonia plant. These
higher costs were partially offset by reduced purchases of ammonia and lower
maintenance and labor costs during the current year. During the prior 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 the nine months ended March 31, 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 Company's phosphate rock supply contract which 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. Selling expenses increased to $7.7 million for the
quarter ended March 31, 1997, from $6.9 million for the quarter ended March 31,
1996. As a percentage of net sales, selling expenses decreased to 5.4% for the
quarter ended March 31, 1997, from 6.4% for the quarter ended March 31, 1996.
This decrease, as a percentage of net sales, was the result of the Company's
sales including a higher proportion of potash products for which the customer
generally incurs the delivery expense partially offset by higher transportation
expense for its nitrogen products.
For the nine months ended March 31, 1997, selling expenses increased to
$20.5 million from $19.9 million for the nine months ended March 31, 1996. As
a percentage of net sales, selling expenses decreased to 5.9% for the nine
months ended March 31, 1997, from 6.5% for the nine months ended March 31,
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 sales prices for nitrogen and potash. This decrease was partially
offset by higher transportation expense for nitrogen products.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $8.4 million for the quarter ended March 31, 1997, from $6.0
million for the quarter ended March 31, 1996. As a percentage of net sales,
general and administrative expenses increased to 5.9% from 5.6%. For the nine
months ended March 31, 1997, general and administrative expenses increased to
$22.9 million from $17.7 million for the nine months ended March 31, 1996. As a
percentage of net sales, general and administrative expenses increased to 6.6%
from 5.8%. These increases for both the current year quarter and the nine
months ended March 31, 1997, were primarily the result of increased royalties
and other administrative costs associated with the potash companies acquired in
August 1996, as well as the amortization of goodwill associated with the
acquisition of the fertilizer businesses of First Mississippi in December 1996.
For the nine months ended March 31, 1997, the Company also incurred higher
insurance costs.
OPERATING INCOME. As a result of the above factors, operating income
decreased to $20.1 million for the quarter ended March 31, 1997, from $23.5
million for the quarter ended March 31, 1996, a 14.6% decrease. For the nine
months ended March 31, operating income decreased to $53.4 million in 1997 from
$58.8 million in 1996, a 9.2% decrease.
INTEREST, NET. For the quarter ended March 31, 1997, net interest expense
was $2.1 million compared to net interest income of $.8 million for the quarter
ended March 31, 1996. For the nine months ended March 31, 1997, net interest
expense was $1.9 million compared to net interest income of $1.5 million for
the nine months ended March 31, 1996. These increases in net interest expense
were primarily the reflection of higher interest expense resulting from
higher levels of borrowings during the current year periods and lower interest
income earned due to lower levels of investments during the current year
periods. Also, during the current year quarter and nine month periods, the
Company capitalized $1.1 million and $2.4 million, respectively, of its
interest costs.
INCOME TAX EXPENSE. For the quarter ended March 31, 1997, income tax
expense decreased to $7.6 million from $8.8 million for the quarter ended March
31, 1996. This decrease is primarily the result of changes in earnings during
the current year quarter. Also, for both the current year quarter and the
current year nine month period, the Company incurred higher effective tax rates
due to the nondeductible amortization of goodwill which resulted from the merger
with First Mississippi in December 1996. For the nine months ended March 31,
1997, income tax expense decreased to $21.3 million from $23.8 million for the
nine months ended March 31, 1996. This decrease is the result of changes in
earnings during the current year, an adjustment to the deferred tax rate made
during the prior year as well as the nondeductible amortization of goodwill
discussed above.
NET INCOME. As a result of the foregoing, net income decreased to $10.6
million for the quarter ended March 31, 1997, from $15.6 million for the quarter
ended March 31, 1996. For the nine months ended March 31, 1997, net income
decreased to $32.0 million from $37.2 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had cash and cash equivalents of $10.0
million, compared to $60.2 million at June 30, 1996, a decrease of $50.2
million.
OPERATING ACTIVITIES. For the nine months ended March 31, 1997, net cash
used by operating activities was $1.7 million. For the nine months ended March
31, 1996, net cash provided by operating activities was $70.4 million. The
decline in cash provided by operating activities is primarily attributable to a
$49 million net change in operating assets and liabilities.
INVESTING ACTIVITIES. Net cash used by investing activities was $137.2
million for the nine months ended March 31, 1997, and $15.1 million for the nine
months ended March 31, 1996, primarily reflecting capital expenditures in those
periods. During the current year period, capital expenditures were $94.1
million compared to $12.0 million during the prior year. The current year
expenditures consisted of $45.0 million spent for the purchase of the two new
potash mines in August 1996, and $21.5 million related to the Company's nitrogen
expansion project at its Yazoo City facilities. In March 1997, the Company
purchased for $3.8 million the other 50% interest in the ammonia barge company
it acquired in the First Mississippi merger. The remaining $23.8 million was
for normal improvements and modifications to the Company's facilities and other
items. The current year period also includes $44.1 million related to the
Company's investment in Farmland MissChem Limited compared to $4.3 million
during the prior year period. These expenditures were partially offset by the
receipt of option payments relating to the Company's Florida phosphate rock
properties.
FINANCING ACTIVITIES. Net cash provided by financing activities was $88.6
million for the nine months ended March 31, 1997, and net cash used by financing
activities was $32.2 million for the nine months ended March 31, 1996. During
the current year, the amounts provided by financing activities included $359.7
million in debt proceeds partially offset by $253.6 million in debt payments,
$10.5 million for the purchase of treasury stock and $7.0 million in cash
dividends. During the prior year, the amounts used by financing activities
included $23.4 million for the purchase of treasury stock and $5.7 million in
cash dividends. The Company also paid $3.1 million in debt payments which
included $2.4 million in prepayments.
At March 31, 1997, the Company and its subsidiaries had credit facilities
with Harris Trust and Savings Bank ("Harris") and a syndicate of other
commercial banks totaling $300 million. These facilities are five-year
facilities and replace all previous credit facilities with NationsBank. The new
facilities will bear interest at the Prime Rate or at rates related to the
London Interbank Offered Rate. At March 31, 1997, the Company had $252.5
million outstanding under these facilities which represented the maximum amount
outstanding at any month end during the current year. The Company also has a
separate $5 million short-term line of credit with another financial
institution.
Prior to the completion of the Harris facilities, the Company had a $125
million credit facility with NationsBank as agent for a syndicate of commercial
banks.
The Company believes that existing cash, cash generated from operations,
and current and anticipated lines of credit will be sufficient to satisfy its
financing requirements through fiscal 1998.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits filed as part of this report are listed below.
SEC Exhibit
Reference No. Description
27 Financial Data Schedule.
(b) The Company filed a Form 8-K on January 6, 1997.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MISSISSIPPI CHEMICAL CORPORATION
Date: April 22, 1997 /s/ Timothy A. Dawson
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Timothy A. Dawson
Vice President - Finance
Date: April 22, 1997 /s/ Rosalyn B. Glascoe
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Rosalyn B. Glascoe
