<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains third quarter summary financial information extracted
from Mississippi Chemical Corporation fiscal 1998 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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,951
<SECURITIES> 0
<RECEIVABLES> 60,153
<ALLOWANCES> 1,934
<INVENTORY> 79,222
<CURRENT-ASSETS> 208,305
<PP&E> 769,713
<DEPRECIATION> (327,306)
<TOTAL-ASSETS> 922,123
<CURRENT-LIABILITIES> 68,877
<BONDS> 214,500
0
0
<COMMON> 280
<OTHER-SE> 434,725
<TOTAL-LIABILITY-AND-EQUITY> 922,123
<SALES> 354,720
<TOTAL-REVENUES> 355,424
<CGS> 291,436
<TOTAL-COSTS> 337,709
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 167
<INTEREST-EXPENSE> 8,180
<INCOME-PRETAX> 9,535
<INCOME-TAX> 4,360
<INCOME-CONTINUING> 5,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,175
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</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, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1998
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 March 31, 1998 and 1997,
and Nine months ended March 31, 1998 and
1997
Consolidated Balance Sheets
March 31, 1998 and June 30, 1997 4 - 5
Consolidated Statements of Shareholders' Equity 6
Fiscal Year Ended June 30, 1997 and
Nine months ended March 31, 1998
Consolidated Statements of Cash Flows 7
Nine months ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements 8 - 10
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition 11 - 22
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 23
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Net sales $125,773 $142,583 $354,720 $347,069
Trading (loss)
margin on
brokered product (348) 20 (701) 20
-------- -------- -------- --------
125,425 142,603 354,019 347,089
Operating expenses:
Cost of products
sold 103,982 106,391 291,436 250,258
Selling 9,131 7,701 20,927 20,465
General and
administrative 8,637 8,418 25,346 22,933
-------- -------- -------- --------
121,750 122,510 337,709 293,656
-------- -------- -------- --------
Operating income 3,675 20,093 16,310 53,433
Other (expense) income:
Interest, net (3,536) (2,088) (8,180) (1,946)
Other 631 183 1,405 1,820
-------- -------- -------- --------
Income before income
taxes 770 18,188 9,535 53,307
Income tax expense 327 7,589 4,360 21,320
-------- -------- -------- --------
Net income $ 443 $ 10,599 $ 5,175 $ 31,987
======== ======== ======== ========
Earnings per share -
basic (see Note 2) $ 0.02 $ 0.38 $ 0.19 $ 1.37
======== ======== ======== ========
Earnings per share -
diluted (see Note 2) $ 0.02 $ 0.38 $ 0.19 $ 1.36
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION> March 31, June 30,
1998 1997
-------- --------
(In thousands, except per share data)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,951 $ 8,159
Accounts receivable, net 58,219 63,095
Inventories:
Finished products 37,255 28,308
Raw materials and supplies 4,784 4,636
Replacement parts 37,183 36,366
-------- --------
Total inventories 79,222 69,310
Properties held for sale 52,919 52,919
Prepaid expenses and other
current assets 7,203 4,873
Deferred income taxes 3,791 3,596
-------- --------
Total current assets 208,305 201,952
Investments and other assets:
Investments in affiliates 72,744 69,230
Other 21,176 14,039
-------- --------
Total investments and
other assets 93,920 83,269
Property, plant and equipment, at cost 769,713 697,101
Less accumulated depreciation,
depletion and amortization (327,306) (304,706)
-------- --------
Net property, plant
and equipment 442,407 392,395
Goodwill, net of accumulated
amortization 177,491 180,929
-------- --------
$922,123 $858,545
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
-------- --------
(In thousands, except per share data)
<S> <C> <C>
Current liabilities:
Long-term debt due within
one year $ 128 $ 140
Accounts payable 52,559 74,534
Accrued liabilities 15,227 14,476
Income taxes payable 963 5,973
-------- --------
Total current liabilities 68,877 95,123
Long-term debt 334,613 244,516
Other long-term liabilities and
deferred credits 21,977 20,620
Deferred income taxes 61,651 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 142,788 145,827
Treasury stock, at cost
(641 shares in fiscal 1998 and
566 shares in fiscal 1997) (13,945) (12,579)
-------- --------
435,005 439,429
-------- --------
$922,123 $858,545
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
MARCH 31, 1998
<TABLE>
<CAPTION>
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 - - 5,175 - 5,175
Cash dividends paid - - (8,214) - (8,214)
Treasury stock, net - (19) - (1,366) (1,385)
------- -------- -------- -------- --------
Balances, March 31, 1998 $ 280 $305,882 $142,788 $(13,945) $435,005
======= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended March 31,
1998 1997
-------- ---------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,175 $ 31,987
Reconciliation of net income to
net cash used in operating
activities:
Net change in operating
assets and liabilities (33,111) (49,037)
Depreciation, depletion and
amortization 27,388 18,666
Deferred income taxes 2,934 63
Other (3,127) (3,340)
-------- ---------
Net cash used in operating activities (741) (1,661)
-------- ---------
Cash flows from investing activities:
Purchase of property, plant and
equipment (73,842) (94,086)
Investment in Farmland MissChem
Limited (3,110) (44,136)
Proceeds received from option 1,000 1,000
Net change in restricted funds (5,019) -
Other 115 (11)
-------- ---------
Net cash used in investing activities (80,856) (137,233)
-------- ---------
Cash flows from financing activities:
Debt proceeds 532,692 359,739
Debt payments (442,606) (253,596)
Cash dividends paid (8,214) (7,037)
Purchase of treasury stock (1,483) (10,466)
-------- ---------
Net cash provided by financing
activities 80,389 88,640
-------- ---------
Net decrease in cash and cash
equivalents (1,208) (50,254)
Cash and cash equivalents -
beginning of period 8,159 60,214
-------- ---------
Cash and cash equivalents -
end of period $ 6,951 $ 9,960
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<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, 1998 and 1997, the Company's financial position at March 31, 1998 and June
30, 1997, the cash flows for the nine months ended March 31, 1998 and 1997, and
the statements of shareholders' equity as of March 31, 1998. 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. The Company has reclassified certain prior
year information to conform with the current year's presentation.
Certain notes and other information have been condensed or omitted in 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 March 31, 1998, 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
adopted this standard during the quarter ended December 31, 1997, 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>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------ -----------------
1998 1997 1998 1997
-------- -------- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding, net of treasury
shares, for basic earnings
per share 27,335 27,926 27,372 23,367
Common stock equivalents for
employee stock options 31 96 39 80
------ ------ ------ ------
Weighted average common shares
outstanding for diluted
earnings per share 27,366 28,022 27,411 23,447
====== ====== ====== ======
</TABLE>
In January 1998, the Company's board of directors declared a regular
quarterly cash dividend of $0.10 per common share for the three-month
period ending December 31, 1997. This dividend was paid on February 13, 1998,
to holders of record on February 2, 1998.
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, and on April 16, 1998, the sale to
the third party was completed. These properties had a carrying value of $52.9
million, and were classified on the balance sheet at March 31, 1998, and June
30, 1997, as "Properties Held for Sale." The $57.0 million purchase price of
the property was paid in the form of a note. In addition to the purchase
price, the Company has received $7.0 million in option payments since 1994.
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 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. The facility was beginning the start-up phase as the quarter
ended, and production from the facility is expected to commence during the
fourth quarter. 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 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. The nitric acid plant was completed and placed in service during
the current quarter. The Company anticipates the anhydrous ammonia and
substantially all of the ammonium nitrate capacity being added by summer 1998.
Total project completion is anticipated in calendar 1999.
The Company has begun construction of a new phosphogypsum disposal facility
at Pascagoula, Mississippi, that is expected to be operational by the end of
fiscal 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
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
world market conditions of supply and demand, 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 March 31, 1998, reflect
continued weak pricing for all of the Company's nitrogen products. Due to a
persistent world supply/demand imbalance, the Company's average nitrogen sales
price decreased 36% during the current quarter as compared to the prior year
quarter. By the end of the third quarter, nitrogen demand in the Company's
market area was strong and prices were exhibiting modest seasonal strength.
During the current quarter, phosphate sales prices decreased 3% as compared to
the prior year, while potash sales prices increased 15% during the current year
as a result of strong demand in both domestic and international markets.
During the current year quarter, sales volumes for the Company's nitrogen
products increased 30% over prior year levels. Nitrogen solutions sales volumes
increased 66% during the current year quarter as compared to the prior year
quarter, due to the sale of tons from consignment inventories as the spring
planting season began in March. In the prior year, nitrogen solutions were
sold through a "fall-fill" program (a program designed to encourage customers
to take product during the off season which resulted in more evenly distributed
sales throughout the fiscal year). Phosphate sales volumes decreased 9% during
the current year quarter primarily due to reduced product availability
resulting from a scheduled maintenance turnaround during March. Potash sales
volumes decreased 6% during the current year quarter due to wet weather
conditions in California and the southwestern United States and the closure in
early December of the mining and production facilities at Eddy Potash, Inc.
During the current year quarter, nitrogen costs per ton declined due to
lower natural gas costs and reduced prices paid for purchased ammonia. These
factors were partially offset by production losses and increased costs incurred
at the Donaldsonville, Louisiana, nitrogen facility due to a scheduled
maintenance turnaround. During the current quarter, DAP costs per ton
experienced little change. Lower raw material costs were offset by excess water
treatment costs due to high rainfall levels and by lost production and increased
costs due to downtime associated with a scheduled maintenance turnaround.
Potash costs were reduced during the current quarter as compared to the prior
year quarter as a result of the closure in early December of the mining and
production facilities at Eddy Potash, Inc.
With world grain inventories remaining at low levels, most industry
analysts expect increases in world-wide fertilizer consumption during 1998.
Despite the prospect of higher fertilizer demand, the near-term nitrogen price
outlook remains uncertain.
In authorizations granted in May 1995, and March 1996, the Board of
Directors authorized the purchase of up to 3,000,000 shares of the Company's
common stock in the open market or in privately negotiated transactions. As of
March 31, 1998, 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.
The Company has begun an assessment of all of its computer systems,
including the systems involved in the operation of its manufacturing facilities,
to identify the systems that could be affected by the "Year 2000" issue. The
Company expects to complete the assessment during the summer of 1998 and to have
any such Year 2000 conversion projects completed on a timely basis. The cost of
any such project is as yet undetermined but, based upon facts known to date, is
not expected to be material to the Company. The Company has also begun
assessing Year 2000 issues in relation to its customers, suppliers and creditors
to determine whether Year 2000 problems of any such third parties may materially
affect the Company. The ability of third parties with which the Company
transacts business to adequately address their Year 2000 issues is outside the
Company's control. There can be no assurance that the failure of the Company or
such third parties to adequately address their respective Year 2000 issues will
not have a material adverse effect on the Company's business operations and
financial condition.
RESULTS OF OPERATIONS
Following are summaries of the Company's sales results by product
categories:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales (in thousands):
Nitrogen $ 74,731 $ 90,050 $195,800 $194,606
DAP 26,770 30,306 90,257 96,813
Potash 23,603 21,777 67,079 53,996
Other 669 450 1,584 1,654
-------- -------- -------- --------
Net Sales $125,773 $142,583 $354,720 $347,069
======== ======== ======== ========
Three months ended Nine months ended
March 31, March 31,
------------------- -------------------
1998 1997 1998 1997
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Tons Sold (in thousands):
Nitrogen:
Ammonia 155 134 466 157
Ammonium nitrate 212 188 468 491
Urea 155 112 372 244
Nitrogen solutions 152 92 266 345
Nitric acid 17 7 39 24
----- ----- ------- -----
Total Nitrogen 691 533 1,611 1,261
DAP 155 170 517 542
Potash 253 268 770 683
Three months ended Nine months ended
March 31, March 31,
------------------ ------------------
1998 1997 1998 1997
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Average Sales Price Per Ton:
Nitrogen $ 108 $ 169 $ 122 $ 154
DAP $ 173 $ 179 $ 174 $ 179
Potash $ 93 $ 81 $ 87 $ 79
</TABLE>
NET SALES. Net sales decreased 12% to $125.8 million for the quarter ended
March 31, 1998, from $142.6 million for the quarter ended March 31, 1997. This
decrease was primarily the result of lower nitrogen fertilizer sales prices
partially offset by higher nitrogen fertilizer sales volumes. During the
current year quarter, the Company's sales prices for its anhydrous ammonia,
ammonium nitrate, urea and nitrogen solutions decreased 47%, 24%, 38% and 23%,
respectively, which resulted in a 36% reduction in the weighted average price
per ton of nitrogen. Nitrogen fertilizer sales volumes increased 30% during the
current quarter due to increased sales volumes in all products. The largest
volume increase occurred in nitrogen solutions which were up 66% due to the sale
of tons from consignment inventories as the spring planting season began in late
March. In the prior year, nitrogen solutions were sold through a "fall-fill"
program which resulted in more evenly distributed sales throughout the fiscal
year.
For the nine months ended March 31, 1998, net sales increased 2% to $354.7
million from $347.1 million for the nine months ended March 31, 1997. This
increase was primarily due to higher sales volumes for nitrogen and potash as
well as higher sales prices for potash, which were mostly offset by lower sales
prices for nitrogen. During the current year, the Company's sales prices for
its anhydrous ammonia, ammonium nitrate, urea and nitrogen solutions decreased
36%, 20%, 31% and 19%, respectively. This resulted in a 21% reduction in the
weighted average price per ton of nitrogen. Nitrogen fertilizer sales volumes
increased 28% during the current nine month period due to increased ammonia and
urea volumes that are attributable to the acquisition of the fertilizer
production facilities of First Mississippi Corporation in December 1996.
During the current year quarter, sales of DAP decreased 12% as compared to
the prior year quarter due to a 9% decrease in sales volumes and a 3% decrease
in sales prices. For the nine months ended March 31, 1998, DAP sales decreased
7% as compared to the prior year period due to a 5% decrease in tons sold and a
2% decrease in sales prices. The volume decreases were primarily the result of
production losses associated with scheduled maintenance turnarounds during the
current year. Potash sales increased 8% during the current year quarter as
compared to the prior year quarter as a result of a 15% increase in sales price
partially offset by a 6% decrease in sales volumes. For the nine months ended
March 31, 1998, potash sales increased 24% as compared to the prior year period
due to a 13% increase in sales volume and a 10% increase in sales price. The
higher sales prices during the current year quarter and nine month periods, as
well as the higher sales volumes for the nine month period, are 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
the closure in early December 1997, of the Company's mining and production
facilities at Eddy Potash, Inc. Sales volumes were also impacted during the
current quarter by wet weather conditions in California and the Southwestern
United States.
TRADING (LOSS) MARGIN ON BROKERED PRODUCT. The Company began trading and
brokering ammonia in the open market following the First Mississippi acquisition
in December 1996. During the quarter ended March 31, 1998, brokered ammonia
sales of $4.3 million and purchases of approximately $4.6 million resulted in a
$.3 million net trading loss, compared to brokered ammonia sales and purchases
of approximately $12.3 million which resulted in a $20,000 net trading margin
for the quarter ended March 31, 1997. During the nine month period ended
March 31, 1998, brokered ammonia sales of $13.2 million and purchases of $13.9
million resulted in a $.7 million net trading loss, compared to brokered
ammonia sales and purchases of approximately $12.3 million which resulted in
a $20,000 net trading margin for the nine month period ended March 31, 1997.
The Company brokered approximately 39,000 short tons during the current
quarter, compared to 108,000 short tons during the prior year quarter, and
brokered approximately 100,000 short tons during the nine month period
ended March 31, 1998, compared to 108,000 short tons during the nine month
period ended March 31, 1997.
COST OF PRODUCTS SOLD. Cost of products sold decreased to $104.0 million
for the quarter ended March 31, 1998, from $106.4 million for the quarter ended
March 31, 1997. As a percentage of net sales, cost of products sold increased
to 83% from 75%, primarily due to decreases in the average sales price of each
of the Company's nitrogen products. The Company incurred lower costs per ton
for its nitrogen products in the current year quarter primarily through lower
natural gas costs and lower prices paid for purchased ammonia. These lower
costs were partially offset by higher maintenance and labor costs resulting
from a scheduled turnaround at the Company's nitrogen facility in
Donaldsonville, Louisiana. During the current year quarter, DAP costs per ton
experienced little change. Lower raw material costs for ammonia and phosphate
rock were offset by higher conversion costs because of a scheduled maintenance
turnaround and higher costs for water treatment resulting from the abnormally
high rainfall levels experienced during the current quarter. In addition,
modifications were made in preparation for the Company's DAP production
expansion. Potash cost per ton decreased 12% during the current quarter as
compared to the prior year quarter. This decrease was primarily the result of
the closure of the Company's higher cost mining and production facilities at
Eddy Potash, Inc. in early December 1997.
For the nine months ended March 31, 1998, cost of products sold increased
to $291.4 million from $250.3 million for the nine months ended March 31, 1997.
As a percentage of net sales, cost of products sold increased to 82% from 72%.
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 lower costs per ton for its
nitrogen products in the current year primarily as a result of lower natural gas
costs as well as lower prices paid for purchased ammonia partially offset by
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 the acquisition of the First Mississippi fertilizer assets.
DAP costs per ton increased 1% during the current year, primarily the result of
the Company incurring higher conversion costs due to scheduled turnarounds of
its sulfuric acid plants and increased water treatment costs as a result of the
abnormally high rainfall levels experienced during the current year. In
addition, modifications were made in preparation for the Company's DAP
production expansion. 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 decreased 4% during the current year as compared to the prior year,
primarily the result of the Company's closure of its mining and production
facilities at Eddy Potash, Inc. in early December 1997.
SELLING EXPENSES. Selling expenses increased to $9.1 million for the
quarter ended March 31, 1998, from $7.7 million for the quarter ended March 31,
1997. This increase was primarily the result of higher delivery expense
incurred during the current year due to higher sales volumes for ammonium
nitrate and nitrogen solutions. For the nine months ended March 31, 1998,
selling expenses increased to $20.9 million from $20.5 million for the nine
months ended March 31, 1997. This increase was primarily the result of higher
storage costs resulting from increased tonnage placed into the Company's
outlying storage facilities as well as higher administration costs incurred as
a result of the Company's acquisitions made during the prior year. These
increases were partially offset by lower delivery expense during the current
year due to lower sales volumes for ammonium nitrate and nitrogen solutions.
As a percentage of net sales, selling expenses increased to 7% for the quarter
ended March 31, 1998, from 5% for the March 31, 1997, quarter. Selling expenses
as a percentage of net sales were 6% for the nine-month periods ended March 31,
1998 and 1997.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $8.6 million for the quarter ended March 31, 1998, from $8.4
million for the quarter ended March 31, 1997. These increases were primarily the
result of idle plant costs associated with the Company's Eddy potash mine shut-
down in December 1997. These increases were partially offset by decreased
employee incentives related to income levels of the Company. For the nine
months ended March 31, 1998, general and administrative expenses increased to
$25.3 million, from $22.9 million for the nine months ended March 31, 1997.
This increase was primarily the result of increased goodwill amortization during
the current year associated with the acquisition of First Mississippi in
December 1996. As a percentage of net sales, general and administrative
expenses increased to 7% for the quarter ended March 31, 1998, from 6% for the
quarter ended March 31, 1997. General and administrative expenses, as a
percentage of net sales, were 7% for the nine month periods ended March 31,
1998 and 1997.
OPERATING INCOME. As a result of the above factors, operating income
decreased to $3.7 million for the quarter ended March 31, 1998, from $20.1
million for the quarter ended March 31, 1997, an 82% decrease. For the nine
months ended March 31, operating income decreased to $16.3 million in 1998
from $53.4 million in 1997, a 69% decrease.
INTEREST, NET. For the quarter ended March 31, 1998, net interest expense
increased to $3.5 million from $2.1 million for the quarter ended March 31,
1997. For the nine-month period ended March 31, 1998, net interest expense
increased to $8.2 million from $1.9 million for the nine months ended March 31,
1997. These increases in net interest expense were primarily due to increased
interest costs resulting from higher borrowing levels during the current year
periods. Additionally, the Company capitalized $2.3 million and $1.1 million
of its interest costs for the quarters ended March 31, 1998 and 1997,
respectively, and capitalized $6.6 million and $2.4 million for the nine month
periods ended March 31, 1998 and 1997, respectively.
INCOME TAX EXPENSE. For the quarter ended March 31, 1998, income tax
expense decreased to $.3 million from $7.6 million for the quarter ended March
31, 1997. For the nine-month period ended March 31, 1998, income tax expense
decreased to $4.4 million from $21.3 million for the nine months ended March 31,
1997. These decreases were primarily the result of changes in earnings during
the current year. For the nine months ended March 31, 1998, the Company's
effective tax rate increased due to the nondeductible amortization of goodwill.
NET INCOME. As a result of the foregoing, net income decreased to $.4
million for the quarter ended March 31, 1998, from $10.6 million for the quarter
ended March 31, 1997. For the nine months ended March 31, 1998, net income
decreased to $5.2 million from $32.0 million in 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had cash and cash equivalents of $7.0
million, compared to $8.2 million at June 30, 1997, a decrease of $1.2 million.
OPERATING ACTIVITIES. For the nine months ended March 31, 1998, net cash
used in operating activities was $.7 million compared to $1.7 million for the
nine months ended March 31, 1997.
INVESTING ACTIVITIES. Net cash used in investing activities was $80.9
million for the nine months ended March 31, 1998, and $137.2 million for the
nine months ended March 31, 1997, primarily reflecting capital expenditures
in those periods. During the current year period, capital expenditures were
$73.8 million compared to $94.1 million during the prior year. The current
year expenditures consisted of approximately $37.7 million related to the
Company's nitrogen expansion project at its Yazoo City facility, approximately
$7.0 million for the development of a new phosphogypsum disposal facility at
the Pascagoula facility, and approximately $7.7 million related to the
expansion of its manufacturing facilities at the Pascagoula facility. The
remaining $21.4 million was for normal improvements and modifications to the
Company's facilities. The current year period also included $3.1 million
related to the Company's investment in Farmland MissChem Limited compared to
$44.1 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 March 31, 1998, the Company also had
$5.0 million in restricted funds resulting from the Company's issuance of $14.5
million in industrial revenue bonds. The proceeds from these bonds are being
used for the Company's development of a new phosphogypsum disposal facility at
its Pascagoula, Mississippi, DAP facility.
FINANCING ACTIVITIES. Net cash provided by financing activities was $80.4
million for the nine months ended March 31, 1998, and $88.6 million for the nine
months ended March 31, 1997. During the current year, the amounts provided by
financing activities included $532.7 million in debt proceeds. Debt proceeds
included $200.0 million in senior notes due 2017 and $14.5 million in industrial
revenue bonds. These amounts were partially offset by $442.6 million in debt
payments, $8.2 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 $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.
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
March 31, 1998, the Company had $120.6 million outstanding under these
facilities. The Company also has available a separate $5 million short-term
line of credit with another financial institution.
In August 1997, the Company issued $14.5 million in industrial revenue
bonds, a portion of which were tax-exempt, to finance the development of a new
phosphogypsum disposal facility at its Pascagoula, Mississippi, DAP
manufacturing plant. On April 1, 1998, the Company issued $14.5 million in tax-
exempt industrial revenue bonds, the proceeds of which were used to redeem the
August 1997 industrial revenue bonds. The bonds issued on April 1, 1998, mature
on March 1, 2022, and carry a 5.80% fixed rate.
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 $25.0 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 which include, but are not
limited to, statements regarding calendar 1998 fertilizer demand and
consumption, the construction of various new and expanded facilities, the
Company's ability to satisfy its fiscal 1998 financing requirements, the
Company's fiscal 1998 estimated capital expenditures and Year 2000 computer
problems. Readers are cautioned that actual results may differ materially from
such forward-looking statements. Risks and uncertainties that could cause a
material difference in such results, include, but are not limited to, the
relative unpredictability of international and local economic conditions;
changes in matters which affect the supply and demand of fertilizer products;
weather; the volatility of the natural gas market; environmental regulation;
price competition; possible delays in completing and obtaining production from
new or expanded facilities; 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: April 22, 1998 /s/ Timothy A. Dawson
-------------- ---------------------
Timothy A. Dawson
Vice President - Finance
Date: April 22, 1998 /s/ Rosalyn B. Glascoe
-------------- ----------------------
Rosalyn B. Glascoe
Corporate Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains restated year-to-date summary financial
information extracted from Mississippi Chemical Corporation fiscal
1997 third quarter Form 10-Q and is qualified in its entirety by reference to
sucm Form 10-Q filing.
</LEGEND>
<RESTATED>
<CIK> 0000066895
<NAME> MISSISSIPPI CHEMICAL CORPORATION
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