<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedul contains second quarter summary financial information extracted
from Mississippi Chemical Corporation fiscal 1998 second 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-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 4,176
<SECURITIES> 0
<RECEIVABLES> 52,009
<ALLOWANCES> 1,878
<INVENTORY> 91,845
<CURRENT-ASSETS> 159,703
<PP&E> 748,349
<DEPRECIATION> 319,399
<TOTAL-ASSETS> 917,162
<CURRENT-LIABILITIES> 66,293
<BONDS> 213,978
0
0
<COMMON> 280
<OTHER-SE> 437,016
<TOTAL-LIABILITY-AND-EQUITY> 917,162
<SALES> 228,947
<TOTAL-REVENUES> 229,368
<CGS> 187,454
<TOTAL-COSTS> 215,959
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 111
<INTEREST-EXPENSE> 4,644
<INCOME-PRETAX> 8,765
<INCOME-TAX> 4,033
<INCOME-CONTINUING> 4,732
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,732
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</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 December 31, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended December 31, 1997
Commission File Number 001-12217
MISSISSIPPI CHEMICAL CORPORATION
Organized in the State of Mississippi
Tax 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 27,334,555
<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 December 31, 1997 and 1996, and
Six months ended December 31, 1997 and 1996
Consolidated Balance Sheets
December 31, 1997 and June 30, 1997 4 - 5
Consolidated Statements of Shareholders' Equity 6
Fiscal Year Ended June 30, 1997
and Six months ended December 31, 1997
Consolidated Statements of Cash Flows 7
Six months ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements 8 - 10
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 11 - 20
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 21
<PAGE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three months ended Six months ended
December 31, December 31,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Net sales $118,035 $113,196 $228,947 $204,486
Trading loss on
brokered product (56) - (353) -
-------- -------- -------- --------
117,979 113,196 228,594 204,486
Operating expenses:
Cost of products sold 99,709 80,488 187,454 143,867
Selling 6,092 6,443 11,796 12,764
General and
administrative 8,453 7,665 16,709 14,515
-------- -------- -------- --------
114,254 94,596 215,959 171,146
-------- -------- -------- --------
Operating income 3,725 18,600 12,635 33,340
Other (expense) income:
Interest, net (2,561) (280) (4,644) 142
Other 249 1,539 774 1,637
-------- -------- -------- --------
Income before income taxes 1,413 19,859 8,765 35,119
Income tax expense 978 7,766 4,033 13,731
-------- -------- -------- --------
Net income $ 435 $ 12,093 $ 4,732 $ 21,388
======== ======== ======== ========
Earnings per share -
basic and diluted
(see Note 2) $ 0.02 $ 0.56 $ 0.17 $ 1.00
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, June 30,
1997 1997
------------ ---------
(In thousands, except per share data)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,176 $ 8,159
Accounts receivable, net 50,131 63,095
Inventories:
Finished products 48,825 28,308
Raw materials and supplies 6,154 4,636
Replacement parts 36,866 36,366
-------- --------
Total inventories 91,845 69,310
Prepaid expenses and other current assets 9,834 4,873
Deferred income taxes 3,717 3,596
-------- --------
Total current assets 159,703 149,033
Investments and other assets:
Investments in affiliates 71,563 69,230
Other 25,390 14,039
-------- --------
Total investments and other assets 96,953 83,269
Properties held for sale 52,919 52,919
Property, plant and equipment, at cost 748,349 697,101
Less accumulated depreciation,
depletion and amortization (319,399) (304,706)
-------- --------
Net property, plant and equipment 428,950 392,395
Goodwill, net of accumulated amortization 178,637 180,929
-------- --------
$917,162 $858,545
======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, June 30,
1997 1997
------------ ----------
(In thousands, except per share data)
<S> <C> <C>
Current liabilities:
Long-term debt due within one year $ 135 $ 140
Accounts payable 54,260 74,534
Accrued liabilities 11,363 14,476
Income taxes payable 535 5,973
-------- --------
Total current liabilities 66,293 95,123
Long-term debt 331,931 244,516
Other long-term liabilities and
deferred credits 21,806 20,620
Deferred income taxes 59,836 58,857
Shareholders' equity:
Common stock ($.01 par; authorized 100,000
shares; issued 27,976 in fiscal 1998 and
1997) 280 280
Additional paid-in capital 305,882 305,901
Retained earnings 145,079 145,827
Treasury stock, at cost (641 shares in
fiscal 1998 and 566 shares in fiscal
1997) (13,945) (12,579)
-------- --------
437,296 439,429
-------- --------
$917,162 $858,545
======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
DECEMBER 31, 1997
Additional
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
-------- ---------- --------- --------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balances, July 1, 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
Net income - - 4,732 - 4,732
Cash dividends paid - - (5,480) - (5,480)
Treasury stock, net - (19) - (1,366) (1,385)
------- -------- -------- -------- --------
Balances,
December 31, 1997 $ 280 $305,882 $145,079 $(13,945) $437,296
======= ======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended December 31,
1997 1996
--------- ----------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,732 $ 21,388
Reconciliation of net income to net
cash used in operating activities:
Net change in operating assets and
liabilities (44,156) (28,973)
Depreciation, depletion and
amortization 18,108 10,316
Deferred income taxes 1,193 668
Other (3,696) (4,065)
-------- --------
Net cash used in operating activities (23,819) (666)
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (51,331) (74,391)
Investment in Farmland MissChem Limited (2,040) (43,167)
Proceeds received from option 1,000 1,000
Net change in restricted funds (8,338) -
Other 103 6
-------- --------
Net cash used in investing activities (60,606) (116,552)
-------- --------
Cash flows from financing activities:
Debt proceeds 454,974 222,122
Debt payments (367,569) (150,769)
Cash dividends paid (5,480) (4,240)
Purchase of treasury stock (1,483) (6,306)
-------- --------
Net cash provided by financing activities 80,442 60,807
-------- --------
Net decrease in cash and cash equivalents (3,983) (56,411)
Cash and cash equivalents - beginning of period 8,159 60,214
-------- --------
Cash and cash equivalents - end of period $ 4,176 $ 3,803
======== ========
<FN>
The accompanying notes are an integral part of these consolidated 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 six month periods ended
December 31, 1997 and 1996, the Company's financial position at December 31,
1997 and June 30, 1997, the cash flows for the six months ended December 31,
1997 and 1996, and the consolidated statements of shareholders' equity as of
December 31, 1997. In the opinion of management, these adjustments are of a
normal recurring nature which are 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 1997 Form 10-K and the consolidated financial statements and notes
thereto included in the Company's June 30, 1997, audited financial statements.
Due to the seasonal nature of the Company's business, the results of
operations for the period ended December 31, 1997, are not necessarily
indicative of the operating results for the full fiscal year.
NOTE 2 - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." SFAS 128 specifies new standards for computing and disclosing
earnings per share and is effective for periods ending after December 15,
1997. The Company has adopted this standard and has restated its earnings
per share for prior periods presented.
The number of shares used in the Company's basic and diluted earnings per
share computations are as follows:
<TABLE>
Three months ended Six months ended
December 31, December 31,
-------------------- -------------------
1997 1996 1997 1996
--------- -------- --------- --------
(In thousands)
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding, net of treasury
shares, for basic earnings
per share 27,373 21,506 27,388 21,419
Common stock equivalents for
employee stock options 36 92 42 72
------ ------ ------ ------
Weighted average common shares
outstanding for diluted
earnings per share 27,409 21,598 27,430 21,491
====== ====== ====== ======
</TABLE>
In October 1997, the Company's board of directors declared a regular
quarterly cash dividend of $0.10 per common share for the three-month period
ending September 30, 1997. This dividend was paid on November 24, 1997, to
holders of record on November 4, 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. On 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 January
1998, the third party exercised its option. These properties, which have a
carrying value of $52.9 million, are classified on the balance sheet as
"Properties Held for Sale." The purchase price of the property is $57.0
million. If elected by the purchaser, the purchase price is payable in the
form of a promissory note payable over twenty-four equal quarterly payments.
As a result of the transaction, the Company will recognize a pre-tax gain of
approximately $11.1 million consisting of the excess of the purchase price of
the property over its carrying value, plus $7.0 million in option payments
received since 1994. This transaction is expected to close in April, 1998.
The Company has entered into a 50-50 joint venture known as 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. The portion of the project cost in excess of
required equity contributions of 35% is to be financed by the joint venture on
a nonrecourse project basis. Start-up of the facility is scheduled for 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. This
expansion, which has an estimated total cost of $130 million, is scheduled for a
phased completion with the nitric acid, anhydrous ammonia, and the majority of
the ammonium nitrate capacity being added in the first half of calendar 1998.
Total project completion is anticipated in early calendar 1999.
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, which is expected to cost
approximately $10.5 million, will increase diammonium phosphate ("DAP")
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.
It is expected that this expansion will be fully operational by the end of
fiscal 1998.
<PAGE>
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, 1997.
Consistent with the historical nature of the Company's business, the usage
of fertilizer in the Company's trade territory is highly seasonal, and the
Company's quarterly results reflect the fact that 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 may not necessarily
be indicative of results expected for the full fiscal year. In addition,
quarterly results can vary significantly from year to year due to a number of
factors, including 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 Company's results for the quarter ended December 31, 1997, reflect
weak pricing for all of the Company's nitrogen products. The lower prices are
primarily the result of China's continued ban on urea imports, which
contributed to a 30% decrease in the price of urea during the current year
quarter as compared to the prior year quarter. The price of urea began
decreasing during the prior quarter and continued to decrease for the quarter
ended December 31, 1997. As urea prices declined, the prices for the Company's
other nitrogen products declined as well.
During the current year quarter, sales volumes for the Company's nitrogen
products were below expectations. Nitrogen solutions sales volumes decreased
16% during the current year quarter as compared to the prior year quarter, as
customers continued to resist off-season purchases due to fertilizer pricing
uncertainties. This resulted in the Company placing significantly increased
tonnage in consignment inventory during the current year. This consignment
inventory will be purchased by customers later in the year at then prevailing
market prices. Sales volumes for the Company's ammonium nitrate decreased 14%
during the current year quarter primarily due to unfavorable weather conditions
in the Company's trade area. These unfavorable conditions adversely impacted
the application of ammonium nitrate to hay and forage crops during the current
year quarter. Ammonia and urea sales volumes for the Company increased during
the current year quarter primarily due to the additional tons available for sale
through the acquisition of the First Mississippi Corporation ("First
Mississippi") fertilizer assets in December 1996.
During the current year quarter, the Company experienced production losses
and increased costs at its Donaldsonville, Louisiana, nitrogen facility and
its Pascagoula DAP facility due to scheduled maintenance turnarounds. The
quarter was also affected by high natural gas cost during October and November;
however, by quarters end, natural gas prices had declined substantially due to
the mild winter weather experienced in major gas consuming regions of the
country.
Phosphate prices were unchanged during the current year quarter as compared
to the prior year quarter, while potash sales prices increased 13% during the
current year quarter as a result of continued strengthening in the domestic and
international markets. Potash sales volumes decreased 8% during the current
year quarter due primarily to product movement which was shifted to the first
quarter as a result of customers filling their storage prior to announced
price increases, as well as the closure in early December 1997, of the
Company's Eddy Potash, Inc. ("Eddy Potash") facility located in Carlsbad, New
Mexico. This closure had no material impact on the Company's results of
operations or its financial position at December 31, 1997.
With world grain inventories remaining at low levels, most industry
analysts expect increases in U.S. planted acres and fertilizer consumption
during 1998. Despite the prospect of higher U.S. demand, the near-term
nitrogen price outlook remains uncertain due to the present worldwide urea
supply/demand imbalance and the expected availability of new nitrogen capacity
in early 1998.
In May 1995, the Board of Directors authorized the purchase 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 repurchase up to 1,500,000 additional shares. As of
December 31, 1997, the Company had repurchased a total of 2,496,009 shares
pursuant to those authorizations. The unused authorization to repurchase
503,991 shares remains available to the Company.
Effective October 1, 1997, the Company became a member of the Phosphate
Chemicals Export Association, Inc., a Webb-Pomerene corporation known as
"PhosChem". All of the Company's export sales of DAP are made through
PhosChem, while domestic DAP sales are made through the Company's internal
sales staff. The Company has ended its exclusive DAP marketing agreement
with Atlantic Fertilizer & Chemical Corporation.
RESULTS OF OPERATIONS
Following are summaries of the Company's sales results by product
categories:
<TABLE>
Three months ended Six months ended
December 31, December 31,
------------------- -------------------
1997 1996 1997 1996
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Net Sales (in thousands):
Nitrogen $ 63,087 $ 55,812 $121,069 $104,557
DAP 32,531 35,485 63,487 66,507
Potash 21,899 21,361 43,476 32,219
Other 518 538 915 1,203
-------- -------- -------- --------
Net Sales $118,035 $113,196 $228,947 $204,486
======== ======== ======== ========
</TABLE>
<TABLE>
Three months ended Six months ended
December 31, December 31,
-------------------- -------------------
1997 1996 1997 1996
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Tons Sold (in thousands):
Nitrogen:
Ammonia 161 16 311 22
Ammonium nitrate 140 163 256 303
Urea 100 74 218 132
Nitrogen solutions 103 122 113 253
Nitric acid 11 9 22 17
----- ----- ----- -----
Total Nitrogen 515 384 920 727
DAP 185 201 363 372
Potash 250 273 517 416
</TABLE>
<TABLE>
Three months ended Six months ended
December 31, December 31,
------------------- --------------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Average Sales Price Per Ton:
Nitrogen $ 122 $ 145 $ 132 $ 144
DAP $ 176 $ 176 $ 175 $ 179
Potash $ 88 $ 78 $ 84 $ 78
</TABLE>
NET SALES. Net sales increased 4% to $118.0 million for the quarter
ended December 31, 1997, from $113.2 million for the quarter ended December
31, 1996. For the six months ended December 31, 1997, net sales increased 12%
to $228.9 million, from $204.5 million for the six months ended December 31,
1996. These increases were primarily the result of increased sales volumes for
nitrogen fertilizers partially offset by lower sales prices for nitrogen
fertilizers. The volume increases are attributable to increased anhydrous
ammonia and urea sales due to the acquisition of First Mississippi in December
1996, partially offset by lower sales volumes of ammonium nitrate and nitrogen
solutions. In the current year quarter, nitrogen solutions sales volumes
decreased 16% as compared to the prior year quarter, and decreased 55% in the
current year six-month period as compared to the prior year six-month period.
These decreases were primarily the result of customers continued resistance
to commit to off-season purchases due to pricing uncertainties in the
marketplace. Ammonium nitrate sales volumes decreased 14% in the current year
quarter as compared to the prior year quarter, and decreased 16% in the current
six-month period as compared to the prior year six-month period. These
decreases were primarily the result of unfavorable weather conditions which
delayed movement onto hay and forage crops during the current year periods.
During the current year quarter, the Company's sales prices for its anhydrous
ammonia, ammonium nitrate, urea and nitrogen solutions decreased 33%, 20%, 30%
and 15%, respectively, which resulted in a 16% reduction in the Company's
weighted average price per ton of nitrogen. For the six months ended December
31, 1997, the Company's sales prices for its anhydrous ammonia, ammonium
nitrate, urea and nitrogen solutions decreased 29%, 17%, 25% and 15%,
respectively, which resulted in an 8% reduction in the average price per ton
of nitrogen. During the current year quarter, sales of DAP decreased 8% as
compared to the prior year quarter as a result of an 8% decrease in tons sold.
For the six-month period ended December 31, 1997, sales of DAP decreased 5% as
compared to the prior year six-month period, the result of a 2% decrease in
tons sold and a 2% decrease in the average sales price. Potash sales increased
3% during the current year quarter as compared to the prior year quarter, and
increased 35% during the current six-month period as compared to the prior year
six-month period. While potash volumes were down 8% in the current quarter,
volumes were up 24% for the six month period as compared to the prior year.
Potash prices were up 13% and 8%, respectively, for the current year quarter
and six month period. These increases were the result of increased domestic
and international demand during the current year. The Company's lower sales
volumes during the current quarter were primarily due to product movement
which was shifted to the first quarter as a result of customers filling their
storage prior to announced price increases. Also, the Company ceased
production at its Eddy Potash facility in early December 1997.
TRADING LOSS ON BROKERED PRODUCT. Following the First Mississippi
acquisition in December 1996, the Company routinely trades or brokers ammonia
in the open market. During the current quarter, brokered ammonia sales of $2.6
million and purchases of approximately $2.7 million resulted in a $.1 million
net loss. During the six month period ended December 31, 1997, brokered
ammonia sales of $8.9 million and purchases of $9.3 million resulted in a $.4
million loss. The Company brokered approximately 20,000 short tons during the
current quarter and 60,000 short tons during the six month period ended
December 31, 1997.
COST OF PRODUCTS SOLD. Cost of products sold increased to $99.7 million
for the quarter ended December 31, 1997, from $80.5 million for the quarter
ended December 31, 1996. As a percentage of net sales, cost of products sold
increased to 84% from 71%. This increase in cost of products sold, as a
percentage of net sales in the current year quarter, is primarily the result of
decreases in the average sales price of each of the Company's nitrogen products.
The Company also incurred higher costs per ton for its nitrogen products in the
current year quarter primarily as a result of higher maintenance and labor
costs due to a scheduled maintenance turnaround at the Company's Donaldsonville,
Louisiana, nitrogen facility and higher depreciation associated with the First
Mississippi acquisition. These factors were partially offset by improved
ammonia production rates and efficiencies in the current year. During the
current year quarter, DAP costs per ton increased 4%, primarily the result of
the Company incurring higher conversion costs due to a scheduled maintenance
turnaround of a sulfuric acid plant. These costs were partially offset by lower
raw material costs, primarily ammonia. Potash cost per ton did not change
significantly during the current quarter as compared to the prior year quarter.
For the six months ended December 31, 1997, cost of products sold
increased to $187.5 million from $143.9 million for the six months ended
December 31, 1996. As a percentage of net sales, cost of products sold
increased to 82% from 70%. This increase in cost of products sold, as a
percentage of net sales, is primarily the result of decreases in the average
sales price of each of the Company's nitrogen products. The Company incurred
higher costs per ton for its nitrogen products in the current year primarily as
a result of higher maintenance and labor costs due to scheduled maintenance
turnarounds at the Company's nitrogen facilities in Yazoo City, Mississippi,
and Donaldsonville, Louisiana. The Company also incurred higher depreciation
associated with its First Mississippi acquisition. DAP costs per ton increased
2% during the current year, primarily the result of the Company incurring
higher conversion costs due to a scheduled turnaround of its sulfuric acid
plant at the Company's Pascagoula, Mississippi, facility. These higher costs
were partially offset by lower raw material costs, primarily ammonia and
phosphate rock. 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. Potash cost per ton did not change
significantly during the current year as compared to the prior year.
SELLING EXPENSES. Selling expenses decreased to $6.1 million for the
quarter ended December 31, 1997, from $6.4 million for the quarter ended
December 31, 1996. For the six months ended December 31, 1997, selling
expenses decreased to $11.8 million from $12.8 million for the six months ended
December 31, 1996. These decreases were primarily the result of lower delivery
expense incurred during the current year periods due to lower sales volumes for
nitrogen solutions and ammonium nitrate. These decreases were partially offset
by higher storage costs resulting from increased tonnage placed into storage at
the Company's outlying storage facilities. As a percentage of net sales,
selling expenses decreased to 5% for the quarter ended December 31, 1997, from
6% for the quarter ended December 31, 1996, and decreased to 5% for the six
months ended December 31, 1997, from 6% for the six months ended December 31,
1996.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $8.5 million for the quarter ended December 31, 1997, from $7.7
million for the quarter ended December 31, 1996. For the six months ended
December 31, 1997, general and administrative expenses increased to $16.7
million, from $14.5 million for the six months ended December 31, 1996. These
increases were primarily the result of goodwill amortization associated with
the acquisition of First Mississippi in December 1996. As a percentage of net
sales, general and administrative expenses remained at 7% for the quarters
ended December 31, 1997 and 1996, and for the six month periods ended December
31, 1997 and 1996.
OPERATING INCOME. As a result of the above factors, operating income
decreased to $3.7 million for the quarter ended December 31, 1997, from $18.6
million for the quarter ended December 31, 1996, an 80% decrease. For the six
months ended December 31, operating income decreased to $12.6 million in 1997
from $33.3 million in 1996, a 62% decrease.
INTEREST, NET. For the quarter ended December 31, 1997, net interest
expense increased to $2.6 million from $.3 million for the quarter ended
December 31, 1996. For the six-month period ended December 31, 1997, net
interest expense was $4.6 million, compared to net interest income of $.1
million for the six months ended December 31, 1996. These increases in net
interest expense were primarily due to increased interest costs resulting from
higher borrowing levels during the current year period. Additionally, the
Company capitalized $2.3 million and $.9 million of its interest costs for the
quarters ended December 31, 1997 and 1996, respectively, and $4.3 million and
$1.3 million for the six month periods ended December 31, 1997 and 1996,
respectively.
INCOME TAX EXPENSE. For the quarter ended December 31, 1997, income tax
expense decreased to $1.0 million from $7.8 million for the quarter ended
December 31, 1996. For the six month period ended December 31, 1997, income
tax expense decreased to $4.0 million from $13.7 million for the six months
ended December 31, 1996. These decreases were primarily the result of changes
in earnings during the current year. Also, during the current year periods,
the Company incurred a higher effective tax rate due to the nondeductible
amortization of goodwill. These increases were partially offset by a decrease
in the Company's effective state income tax rate during the current year
periods.
NET INCOME. As a result of the foregoing, net income decreased to $.4
million for the quarter ended December 31, 1997, from $12.1 million for the
quarter ended December 31, 1996. For the six months ended December 31, 1997,
net income decreased to $4.7 million from $21.4 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had cash and cash equivalents of $4.2
million, compared to $8.2 million at June 30, 1997, a decrease of $4.0 million.
OPERATING ACTIVITIES. For the six months ended December 31, 1997, net
cash used in operating activities was $23.8 million compared to $.7 million for
the six months ended December 31, 1996.
INVESTING ACTIVITIES. Net cash used in investing activities was $60.6
million for the six months ended December 31, 1997, and $116.6 million for the
six months ended December 31, 1996, primarily reflecting capital expenditures
in those periods. During the current year period, capital expenditures were
$51.3 million compared to $74.4 million during the prior year. The current
year expenditures consisted of approximately $31.0 million related to the
Company's nitrogen expansion project at its Yazoo City facility, approximately
$4.0 million for the development of a new phosphogypsum disposal facility at
the Pascagoula facility, and approximately $3.0 million related to the
expansion of its manufacturing facilities at the Pascagoula facility. The
remaining $13.3 million was for normal improvements and modifications to the
Company's facilities. The current year period also included $2.0 million
related to the Company's investment in Farmland MissChem Limited compared to
$43.2 million during the prior year. These expenditures were partially offset
by the receipt of $1.0 million in option payments relating to the Company's
Florida phosphate rock properties. At December 31, 1997, the Company also had
$8.3 million in restricted funds resulting from the Company's August 1997
issuance of $14.5 million in industrial revenue bonds. The proceeds from these
bonds are being used for the Company's development of the new phosphogypsum
disposal facility at its Pascagoula, Mississippi, DAP facility.
FINANCING ACTIVITIES. Net cash provided by financing activities was
$80.4 million for the six months ended December 31, 1997, and $60.8 million
for the six months ended December 31, 1996. During the current year, the
amounts provided by financing activities included $455.0 million in debt
proceeds, which included $200.0 million in senior notes due 2017 and $14.5
million in industrial revenue bonds. These amounts were partially offset by
$367.6 million in debt payments, $5.5 million in cash dividends, and $1.5
million for the purchase of treasury stock. During the prior year, the amounts
provided by financing activities included $222.1 million in debt proceeds
partially offset by $150.8 million in debt payments, $6.3 million for the
purchase of treasury stock and $4.2 million in cash dividends.
On November 25, 1997, the Company issued $200.0 million of 7.25% Senior
Notes, due November 15, 2017. The holders of the Senior Notes may elect to
have the Notes repaid on November 15, 2007. The Notes were issued under a
$300.0 million shelf registration statement filed with the Securities and
Exchange Commission in November, 1997. The net proceeds from the issuance
totaled $194.8 million and were used to repay a portion of the outstanding
indebtedness under the Company's unsecured revolving credit facilities with
Harris Trust and Savings Bank and a syndicate of other commercial banks.
Also on November 25, 1997, the Company modified these unsecured revolving
credit facilities to reduce the facilities from $300.0 million to $200.0
million. These modified facilities are five-year facilities which mature
on November 25, 2002, and bear interest at the Prime Rate or at rates related
to the London Interbank Offered Rate. At December 31, 1997, the Company had
$117.9 million outstanding under these facilities. The Company also has a
separate $5 million short-term line of credit with another financial
institution.
The Company believes that existing cash, cash generated from operations,
and current lines of credit will be sufficient to satisfy its financing
requirements for its operations and its capital projects through fiscal 1998.
The Company estimates its capital expenditure requirements for the remainder of
fiscal 1998 to be approximately $60.0 million. The Company's major capital
projects include production expansions at its nitrogen facility in Yazoo City
and its DAP facility in Pascagoula. The Company's Pascagoula facility is also
constructing a new phosphogypsum disposal facility.
This report contains forward-looking statements. Readers are cautioned
that actual results may differ materially from such forward-looking statements.
Forward-looking statements involve risks and uncertainties, including, but not
limited to, the relative unpredictability of changes in general economic
conditions and other important factors affecting the fertilizer industry and the
Company as detailed under "Outlook and Uncertainties" and elsewhere in the
Company's annual report on Form 10-K for the fiscal year ended June 30, 1997,
which is on file with the Securities and Exchange Commission.
<PAGE>
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
Exhibit Index to Form 10-Q
27 Financial Data Schedule.
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MISSISSIPPI CHEMICAL CORPORATION
Date: January 22, 1998 /s/ Timothy A. Dawson
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Vice President - Finance
Date: January 22, 1998 /s/ Rosalyn B. Glascoe
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Corporate Secretary
