<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains year-to-date summary financial information extracted from
Mississippi Chemical Corporation fiscal 1999 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-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,365
<SECURITIES> 0
<RECEIVABLES> 82,294
<ALLOWANCES> 2,018
<INVENTORY> 79,594
<CURRENT-ASSETS> 179,251
<PP&E> 820,681
<DEPRECIATION> 353,738
<TOTAL-ASSETS> 908,676
<CURRENT-LIABILITIES> 70,209
<BONDS> 214,500
0
0
<COMMON> 280
<OTHER-SE> 423,774
<TOTAL-LIABILITY-AND-EQUITY> 908,676
<SALES> 340,158
<TOTAL-REVENUES> 340,158
<CGS> 302,704
<TOTAL-COSTS> 332,065
<OTHER-EXPENSES> (344)
<LOSS-PROVISION> 29
<INTEREST-EXPENSE> 13,331
<INCOME-PRETAX> (4,894)
<INCOME-TAX> (2,498)
<INCOME-CONTINUING> (2,396)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,396)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
Of The Securities Exchange Act of 1934
For Quarter Ended March 31, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1999
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 [ ]
The number of shares outstanding of each of the issuer's classes of
common stock, as of March 31, 1999.
Class Number of Shares
----- ----------------
Common Stock, $0.01 par value 26,131,917
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements of Income 3
Three months ended March 31, 1999 and 1998, and
Nine months ended March 31, 1999 and 1998
Consolidated Balance Sheets
March 31, 1999 and June 30, 1998 4 - 5
Consolidated Statements of Shareholders' Equity 6
Fiscal Year Ended June 30, 1998 and
Nine months ended March 31, 1999
Consolidated Statements of Cash Flows 7
Nine months ended March 31, 1999 and 1998
Notes to Consolidated Financial Statements 8 - 10
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 11 - 24
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 25
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 26
Signatures 26
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
March 31, March 31,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Net sales $140,604 $118,035 $340,158 $338,481
Trading loss on
brokered product - (348) - (701)
-------- -------- -------- --------
140,604 117,687 340,158 337,780
Operating expenses:
Cost of products sold 136,033 104,947 302,704 294,746
Selling, general and
administrative 10,557 9,063 29,361 26,724
-------- -------- -------- --------
146,590 114,010 332,065 321,470
-------- -------- -------- --------
Operating (loss) income (5,986) 3,677 8,093 16,310
Other (expense) income:
Interest, net (5,300) (3,537) (13,331) (8,181)
Other 363 630 344 1,406
-------- -------- -------- --------
(Loss) income before
income taxes (10,923) 770 (4,894) 9,535
Income tax (credit) expense (4,792) 327 (2,498) 4,360
-------- -------- -------- --------
Net (loss) income $ (6,131) $ 443 $ (2,396) $ 5,175
======== ======== ======== ========
Earnings (loss) per share -
basic and diluted
(see Note 2) $ (0.23) $ 0.02 $ (0.09) $ 0.19
======== ======== ======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, June 30,
1999 1998
--------- --------
(In thousands, except per share data)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,365 $ 3,857
Accounts receivable, net 80,276 51,532
Note receivable due within one year - 9,500
Inventories:
Finished products 36,768 24,959
Raw materials and supplies 6,603 5,894
Replacement parts 36,223 34,576
-------- --------
Total inventories 79,594 65,429
Prepaid expenses and other current assets 13,289 6,636
Deferred income taxes 3,727 3,767
-------- --------
Total current assets 179,251 140,721
Investments in affiliates 76,939 73,073
Note receivable - 45,125
Other assets 12,635 16,227
Property, plant and equipment, at cost 820,681 795,332
less accumulated depreciation,
depletion and amortization (353,738) (334,491)
-------- --------
Net property, plant and equipment 466,943 460,841
Goodwill, net of accumulated amortization 172,908 176,345
-------- --------
$908,676 $912,332
======== ========
</TABLE>
[FN]
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>
March 31, June 30,
1999 1998
--------- --------
(In thousands, except per share data)
<S> <C> <C>
Current liabilities:
Long-term debt due within one year $ 12 $ 114
Accounts payable 54,665 58,089
Accrued liabilities 15,532 15,156
Income taxes payable - 3,276
-------- --------
Total current liabilities 70,209 76,635
Long-term debt 325,444 304,705
Other long-term liabilities and
deferred credits 16,735 17,481
Deferred income taxes 72,234 64,986
Shareholders' equity:
Common stock ($.01 par; authorized
100,000 shares; issued 27,976) 280 280
Additional paid-in capital 305,901 305,901
Retained earnings 147,452 157,800
Treasury stock, at cost
(1,844 and 736 shares) (29,579) (15,456)
-------- --------
424,054 448,525
-------- --------
$908,676 $912,332
======== ========
</TABLE>
[FN]
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, 1999
(Unaudited)
<TABLE>
Additional
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
------- ---------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balances, July 1, 1997 $ 280 $305,901 $145,827 $(12,579) $439,429
Net income - - 22,974 - 22,974
Cash dividends paid - - (10,948) - (10,948)
Treasury stock, net - - (53) (2,877) (2,930)
------ -------- -------- -------- --------
Balances, June 30, 1998 280 305,901 157,800 (15,456) 448,525
Net loss - - (2,396) - (2,396)
Cash dividends paid - - (7,952) - (7,952)
Treasury stock, net - - - (14,123) (14,123)
------ -------- -------- -------- --------
Balances, March 31, 1999 $ 280 $305,901 $147,452 $(29,579) $424,054
====== ======== ======== ======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Nine months ended March 31,
1999 1998
--------- ---------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (2,396) $ 5,175
Reconciliation of net (loss) income
to net cash used in operating
activities:
Net change in operating assets
and liabilities (55,853) (33,111)
Depreciation, depletion and
amortization 31,222 27,388
Deferred income taxes 7,287 2,934
Other 3,261 (3,127)
-------- --------
Net cash used in operating activities (16,479) (741)
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (33,984) (73,842)
Investment in Farmland MissChem Limited (3,358) (3,110)
Net change in restricted funds 1,170 (5,019)
Collection on note receivable 54,625 -
Other (1,989) 1,115
-------- --------
Net cash provided by (used in)
investing activities 16,464 (80,856)
-------- --------
Cash flows from financing activities:
Debt proceeds 402,250 532,692
Debt payments (381,652) (442,606)
Cash dividends paid (7,952) (8,214)
Purchase of treasury stock (14,123) (1,483)
-------- --------
Net cash (used in) provided by
financing activities (1,477) 80,389
-------- --------
Net decrease in cash and cash equivalents (1,492) (1,208)
Cash and cash equivalents - beginning of period 3,857 8,159
-------- --------
Cash and cash equivalents - end of period $ 2,365 $ 6,951
======== ========
</TABLE>
[FN]
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, 1999 and 1998, the Company's financial position at March 31, 1999
and June 30, 1998, the cash flows for the nine months ended March 31, 1999
and 1998, and the consolidated statements of shareholders' equity as of
March 31, 1999. 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. Effective July 1, 1998, the Company changed its
presentation of delivery costs from a component of selling expenses to a
component of net sales on its statements of income. This change was made
to conform to industry practice so that the Company can be more readily
compared to its peer group. The Company has restated its prior year
statements of income for this change.
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 1998 Form 10-K and the consolidated financial statements and notes
thereto included in the Company's June 30, 1998, audited financial statements.
Due to the seasonal nature of the Company's business, the results of
operations for the period ended March 31, 1999, 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." As a result, the Company's basic and diluted earnings per share
amounts for the three-month and the nine-month periods ended March 31, 1999,
have been calculated in accordance with SFAS No. 128. Similarly, earnings
per share amounts reported for the three-month and the nine-month periods
ended March 31, 1998, have been restated to comply with this Statement.
The number of shares used in the Company's basic and diluted earnings per
share computations are as follows:
<TABLE>
Three months ended Nine months ended
March 31, March 31,
------------------ -----------------
1999 1998 1999 1998
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding, net of treasury
shares, for basic earnings
per share 26,132 27,335 26,470 27,372
Common stock equivalents for
employee stock options - 31 - 39
------ ------ ------ ------
Weighted average common shares
outstanding for diluted earnings
per share 26,132 27,366 26,470 27,411
====== ====== ====== ======
</TABLE>
Options outstanding for the three-month and the nine-month periods ended
March 31, 1999, were not included in the computation of diluted earnings per
share as a result of the options' exercise prices being greater than the
average market price for common shares and, therefore, would not have been
dilutive.
In January 1999, 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, 1998. This dividend was paid on February 25, 1999, to
holders of record on February 11, 1999. In April 1999, the Company's board of
directors declared a regular quarterly cash dividend of $0.10 per common share
for the three-month period ending March 31, 1999. This dividend will be paid
on May 25, 1999, to holders of record on May 10, 1999.
NOTE 3 - CAPITAL PROJECTS
In late fiscal 1996, the Company began an expansion project, originally
estimated to cost $130.0 million, at its nitrogen fertilizer manufacturing
facilities at Yazoo City. The project included the addition of a 650-ton-per-
day nitric acid plant, a 500-ton-per-day ammonia plant and modifications to
increase its ammonium nitrate capacity. The nitric acid plant was completed
and placed in service in March 1998. The Company completed certain
modifications to its ammonium nitrate plant in July 1998, which increased its
capacity to 900,000 tons per year. The Company has not yet decided to
implement additional modifications to the plant, which were originally
estimated to cost $13.0 million, and would increase the ammonium nitrate
capacity by an additional 50,000 tons per year. The ammonia plant, which was
scheduled to be completed in the summer of 1998, was completed and placed in
service in March 1999. As of March 31, 1999, the Company had spent
approximately $113.0 million on this expansion project.
In late fiscal 1998, the Company began an expansion project, estimated to
cost approximately $8.0 million, at its potash facilities in Carlsbad, New
Mexico. This expansion, which was placed in service during the current year
quarter, increased the Company's red granular production capacity from
445,000 to 545,000 tons-per-year, and increased its storage capacities by
30,000 tons. The Company now has approximately 1,100,000 tons per year of
combined potash production capacity from its two operating mines. As of
March 31, 1999, the Company had spent approximately $6.1 million on this
expansion project.
<PAGE>
Item 2. 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, 1998.
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 sold during 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
mechanical failures in production facilities, scheduled maintenance
turnarounds, world market conditions of supply and demand, and weather-related
shifts in planting schedules and purchase patterns. The Company incurs
substantial expenditures for fixed costs and inventory throughout the year.
The Company's results for the quarter ended March 31, 1999, reflect
continued weak pricing for the Company's nitrogen products. Recent global
capacity additions, growing producer stocks and pricing uncertainties in the
marketplace caused nitrogen prices to decline in the current year. Early in
the quarter, ammonia and urea prices reached their lowest levels in several
years. By late February and early March, several plant outages around the
globe, combined with the onset of seasonal demand, resulted in a nominal
increase in nitrogen prices. The Company's average nitrogen sales price
decreased 18% during the current quarter as compared to the prior year
quarter. Phosphate sales prices increased 4% during the current quarter as
compared to the prior year quarter as a result of increased domestic sales.
Potash sales prices increased 2% during the current year quarter. The
results for the current year quarter also include an after-tax charge of
$600,000, or $.02 per share, related to the write-off of start-up costs at
the Company's 50-50 joint venture ammonia plant in Trinidad in accordance
with the early adoption of a change in accounting principle. These costs are
included as a component of cost of products sold in the consolidated
statement of income.
During the current year quarter, sales volumes for the Company's nitrogen
products increased 32% over prior year levels. Ammonia sales volumes increased
30% in the current year, primarily the result of additional tons available for
sale from the Company's 50-50 joint venture ammonia plant in Trinidad. The
Company purchases one-half of the product produced at this plant. This
increase was partially offset by lost production associated with downtime at
one of the Company's ammonia plants located in Donaldsonville, Louisiana.
This plant was down forty-two days due to a scheduled maintenance turnaround,
which was extended to implement improvements in production capacity. In
addition, the Trinidad ammonia plant was down from February 26 through April 6
to correct operational problems. Sales volumes for ammonium nitrate, urea
and nitrogen solutions increased 37%, 28% and 39%, respectively, during the
current year quarter primarily as a result of selling inventories as the spring
planting season approached. Inventories increased significantly during the
first half of the fiscal year as buyers delayed purchasing decisions due to
pricing uncertainties. Phosphate sales volumes increased 44% during the
current year quarter due to additional tons available for sale through
increased production in the current year associated with an expansion
completed in the prior year. During the prior year, the Company experienced
production losses associated with the implementation of the expansion
project as well as a maintenance turnaround. Potash sales volumes increased
15% during the current year quarter as a result of favorable weather
conditions in the Company's trade area as well as customers purchasing
product ahead of announced price increases. The Company also shipped more
potash tons into export markets during the current year quarter as compared
to the prior year quarter.
During the current year quarter, nitrogen costs per ton declined 2%,
primarily the result of lower natural gas costs. DAP costs per ton decreased
5% during the current year quarter, primarily as a result of lower maintenance
and labor costs, as well as reduced water treatment costs in the current year.
In addition, the Company incurred lower costs per ton in the current year as a
result of increased production in the current year associated with an expansion
completed in April 1998. Potash costs per ton increased 8% during the current
year quarter. This increase was primarily the result of lower production rates
at the Company's West mine. These lower production rates were the result of
losses related to a fifteen-day downtime associated with the expansion
completed during the current year quarter as well as declines in ore grade.
These higher costs per ton were partially offset by improved operations at
the Company's East mine during the current year.
On September 27, 1998, the Company's Pascagoula, Mississippi, DAP
production facility was shut down as a result of damage caused by Hurricane
Georges. The facility was shut down for 22 days, and approximately 54,000 tons
of DAP inventory on hand was damaged. The damaged property and inventory were
insured, subject to a $250,000 deductible, as were all business interruption
losses in excess of ten days. As of March 31, 1999, the Company had recorded,
as a component of its cost of products sold, net insurance proceeds for the
damaged inventory of approximately $1.4 million. The Company had also
recorded, as a component of other income, a net insurance recovery on the
business interruption claim of approximately $600,000. Management is
continuing to quantify its insurance claim related to the involuntary
conversion of property damaged by the hurricane. After completing this
evaluation, the value of the damaged property and subsequent reimbursement
through insurance proceeds will be treated as a sale of assets. As such, a
gain will be recorded and included as other income in the Company's
consolidated statement of income at June 30, 1999. The gain will be based
on the difference in the carrying value of those assets and the insurance
proceeds received.
Farmland MissChem Limited ("Farmland MissChem"), the Company's 50-50 joint
venture anhydrous ammonia plant located in Point Lisas, The Republic of
Trinidad and Tobago, achieved operational status in late July 1998. The
Company had recorded $280,000 in equity income from Farmland MissChem as of
March 31, 1999. This income was recorded by the Company as a reduction in
its cost of products sold in the Company's consolidated statement of income.
The Company purchases one-half of the product produced at Farmland MissChem
at a discount to market subject to a minimum price. During the three-month
and the nine-month periods ended March 31, 1999, these purchases were at the
minimum price.
Looking forward, the key issue for the Company is still the direction of
nitrogen prices. The most significant factors affecting pricing of nitrogen
products are Chinese purchasing practices, Russian production and pricing
policies, and the impact of recent global capacity expansions. As we move into
the fourth fiscal quarter, weak nitrogen market fundamentals have caused a
softening of nitrogen prices from those experienced in late March. Based on
the current market outlook, low nitrogen prices will continue to have a
negative impact on the Company.
In authorizations granted in May 1995, March 1996, and September 1998, the
Board of Directors authorized the purchase of up to 8,000,000 shares of the
Company's common stock in the open market, in privately negotiated transactions
or otherwise at prices and at times determined by the Company to be appropriate.
As of March 31, 1999, the Company had repurchased a total of 3,700,009 shares
pursuant to those authorizations. The unused authorization to repurchase
4,299,991 shares remains available to 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,
------------------ -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales (in thousands):
Nitrogen $ 74,470 $ 68,475 $174,253 $183,277
DAP 38,329 25,641 96,859 87,520
Potash 27,305 23,256 67,829 66,119
Other 500 663 1,217 1,565
-------- -------- -------- --------
Net Sales $140,604 $118,035 $340,158 $338,481
======== ======== ======== ========
Three months ended Nine months ended
March 31, March 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Tons Sold (in thousands):
Nitrogen:
Ammonia 202 155 606 466
Ammonium nitrate 289 212 510 468
Urea 198 155 421 372
Nitrogen solutions 212 152 296 266
Nitric acid 14 17 46 39
---- ---- ----- -----
Total Nitrogen 915 691 1,879 1,611
DAP 222 155 554 517
Potash 290 253 735 770
Three months ended Nine months ended
March 31, March 31,
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Average Sales Price Per Ton:
Nitrogen $ 81 $ 99 $ 93 $ 114
DAP $ 172 $ 166 $ 175 $ 169
Potash $ 94 $ 92 $ 92 $ 86
</TABLE>
<PAGE>
NET SALES. Net sales increased 19% to $140.6 million for the quarter
ended March 31, 1999, from $118.0 million for the quarter ended March 31, 1998.
This increase was primarily the result of higher sales volumes in the current
year for the Company's nitrogen, DAP and potash products partially offset by
lower sales prices for the Company's nitrogen products. During the current
year quarter, sales volumes for ammonia, ammonium nitrate, urea and nitrogen
solutions increased 30%, 37%, 28% and 39%, respectively, resulting in a 32%
increase in total nitrogen sales volume. The increase in ammonia sales
volumes is primarily due to the additional tons available for sale from
Farmland MissChem, which began operating in the first quarter of the current
fiscal year. This increase was partially offset by lost production associated
with downtime at one of the Company's ammonia plants located in Donaldsonville,
Louisiana. This plant was down forty-two days due to a scheduled maintenance
turnaround which was extended to implement improvements in production
capacity. In addition, the Trinidad ammonia plant was down from February 26th
through April 6 to correct operational problems. The increased sales volumes
for ammonium nitrate, urea and nitrogen solutions were due to the sale of tons
from inventories as the spring planting season approached. Inventories
increased significantly during the first half of the fiscal year as buyers
delayed purchasing decisions due to pricing uncertainties. The Company's
sales prices for its anhydrous ammonia, ammonium nitrate, urea and nitrogen
solutions decreased 28%, 12%, 17% and 12%, respectively, during the current
year quarter resulting in an 18% reduction in the weighted average price per
ton of nitrogen when compared to the prior year quarter. During the current
year quarter, DAP sales increased 49% compared to the prior year quarter due
to a 44% increase in sales volumes and a 4% increase in sales prices. DAP
sales volumes increased primarily as a result of additional tons available
for sale through increased production in the current year associated with an
expansion completed at the Company's DAP facility in the prior year.
Additionally, during the prior year, the Company experienced production
losses associated with a scheduled maintenance turnaround and the
implementation of the expansion project. The increase in DAP sales prices
occurred as a result of increased domestic sales in the current year.
Potash sales increased 17% during the current year quarter as compared to
the prior year quarter as a result of a 15% increase in sales volumes and a
2% increase in sales prices in the current year. Potash sales volumes
increased as a result of favorable weather conditions in the Company's
trade area as well as customers purchasing product ahead of announced
price increases. The Company also shipped more potash tons into export
markets in the current year quarter as compared to the prior year quarter.
Net sales increased .5% to $340.2 million for the nine months ended
March 31, 1999, from $338.5 million for the nine months ended March 31, 1998.
This increase was primarily the result of higher sales volumes for the
Company's nitrogen and DAP products, offset by lower sales prices in the
current year for the Company's nitrogen products. During the current year,
nitrogen fertilizer sales volumes increased 17%, primarily the result of
increased sales volumes for ammonia. Ammonia sales volumes increased 30%
during the current year due to the additional tons available for sale from
Farmland MissChem. The Company's sales prices for its anhydrous ammonia,
ammonium nitrate, urea and nitrogen solutions decreased 29%, 11%, 14% and
16%, respectively, during the current year resulting in an 18% reduction in
the weighted average price per ton of nitrogen when compared to the prior
year. During the current year, DAP sales increased 11% compared to the
prior year due to a 7% increase in sales volumes and a 3% increase in sales
prices. DAP sales volumes increased as a result of additional tons
available for sale through increased production in the current year
associated with an expansion completed in the prior year. This increase was
partially offset by lost production in the current year as a result of damage
to the Company's production facility caused by Hurricane Georges in late
September. The plant did not produce for approximately 22 days during the
current year, and approximately 54,000 tons of DAP inventory was damaged by
the hurricane. Potash sales increased 3% during the current year as compared
to the prior year as a result of a 7% increase in sales prices partially
offset by a 5% decrease in the sales volumes. Sales volumes decreased in
the current year as a result of reduced product availability due to the
suspension of operations at the Company's Eddy potash mine and refinery in
December 1997, as well as lost production associated with the expansion
completed in the third quarter of the current fiscal year.
TRADING LOSS ON BROKERED PRODUCT. During the prior year quarter,
brokered ammonia sales of $4.3 million and purchases of $4.6 million resulted
in a $348,000 net trading loss. 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 $701,000 net trading loss. The Company brokered approximately
39,000 short tons in the prior year quarter and approximately 100,000 short
tons during the prior year nine-month period. The Company is not engaging
in brokering activities in the current year.
COST OF PRODUCTS SOLD. Cost of products sold increased to $136.0 million
for the quarter ended March 31, 1999, from $104.9 million for the quarter ended
March 31, 1998. As a percentage of net sales, cost of products sold increased
to 97% during the current year quarter from 89% during the prior year quarter.
This increase was primarily the result of lower sales prices for the Company's
nitrogen products and higher costs per ton for the Company's potash products
partially offset by lower costs per ton for the Company's nitrogen and DAP
products. The Company's lower nitrogen costs per ton were achieved primarily
through lower natural gas costs. During the current year quarter, DAP costs
per ton decreased 5%, primarily the result of lower maintenance and labor
costs, as well as reduced water treatment costs in the current year. During
the prior year, the Company experienced higher maintenance and labor costs
due to a scheduled maintenance turnaround at one of its sulfuric acid plants
at its Pascagoula, Mississippi, DAP facility. During the prior year, the
Company also experienced higher water treatment costs due to abnormally high
rainfall levels. In addition, the Company incurred lower costs per ton in the
current year as a result of increased production in the current year
associated with an expansion completed in April 1998. During the current year
quarter, lower raw material costs for ammonia and sulfur were offset by higher
raw material costs for phosphate rock and sulfuric acid. Potash costs per ton
increased 8% during the current year quarter as compared to the prior year
quarter. This increase was primarily the result of lower production rates at
the Company's West mine. These lower rates were the result of losses related
to a fifteen-day downtime associated with the expansion completed during the
current year quarter as well as declines in ore grade. These higher costs per
ton were partially offset by improved operations at the Company's East mine
during the current year.
Cost of products sold increased to $302.7 million for the nine months
ended March 31, 1999, from $294.7 million for the nine months ended March 31,
1998. As a percentage of net sales, cost of products sold increased to 89%
from 87%, primarily the result of lower sales prices for the Company's nitrogen
products partially offset by lower nitrogen and DAP costs per ton during the
current year. The Company's lower nitrogen costs per ton were achieved through
lower natural gas costs as well as lower maintenance and labor costs during the
current year. During the prior year, the Company incurred higher maintenance
and labor costs at the Company's Yazoo City, Mississippi, nitrogen facility as
a result of a scheduled maintenance turnaround. During the current year, DAP
costs per ton decreased 7%, primarily the result of insurance proceeds from
damaged inventory and lower raw material costs for ammonia and sulfur. The
Company also incurred lower maintenance and labor costs in the current year
as a result of maintenance turnarounds at its sulfuric acid plants in the
prior year. These lower costs were partially offset by higher raw material
costs for phosphate rock and sulfuric acid in the current year. In addition,
the Company incurred lower costs per ton in the current year as a result of
increased production in the current year associated with an expansion
completed in April 1998. Potash costs per ton decreased 1% during the current
year as compared to the prior year. This decrease was primarily the result
of improved operations at the Company's East mine as well as the suspension
of operations at the higher cost Eddy mining and production facilities in
early December 1997. These decreases were partially offset by lower production
rates at the Company's West mine. These lower rates were the result of losses
related to downtime associated with the expansion completed in the Company's
third fiscal quarter as well as declines in ore grade.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $10.6 million for the quarter ended March
31, 1999, from $9.1 million for the quarter ended March 31, 1998. This
increase was primarily the result of increased professional fees in the
current year quarter. As a percentage of net sales, selling, general and
administrative expenses was 8% for the quarters ended March 31, 1999 and 1998.
For the nine months ended March 31, 1999, selling, general and administrative
expenses increased to $29.4 million, from $26.7 million for the nine months
ended March 31, 1998. This increase was primarily the result of increased
professional fees and advertising costs in the current year. As a percentage
of net sales, selling, general and administrative expenses increased to 9% for
the nine months ended March 31, 1999, from 8% for the nine months ended
March 31, 1998.
OPERATING (LOSS) INCOME. As a result of the above factors, the Company
incurred an operating loss of $6.0 million for the quarter ended March 31,
1999, compared to operating income of $3.7 million for the quarter ended March
31, 1998. For the nine-month period ending March 31, 1999, operating income
decreased to $8.1 million from $16.3 million for then nine-month period ending
March 31,1998, a 50% decrease.
INTEREST, NET. For the quarter ended March 31, 1999, net interest
expense increased to $5.3 million from $3.5 million for the quarter ended March
31, 1998. For the nine-month period ended March 31, 1999, net interest expense
increased to $13.3 million from $8.2 million for the nine-month period ended
March 31, 1998. 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 $839,000 and $2.3
million of its interest costs for the quarters ended March 31, 1999 and 1998,
respectively, and $3.9 million and $6.6 million for the nine-month periods
ended March 31,1999 and 1998, respectively.
OTHER. For the quarter ended March 31, 1999, other income decreased to
$363,000, compared to $630,000 for the quarter ended March 31, 1998. For the
nine-month period ended March 31, 1999, other income decreased to $344,000,
compared to $1.4 million for the nine-month period ended March 31, 1998. These
decreases were primarily the result of lower earnings at the Company's
unconsolidated affiliates during the current year periods. For the nine-month
period ended March 31, 1999, this decrease was partially offset by a net
insurance recovery recorded on the business interruption claim associated with
Hurricane Georges at the Pascagoula, Mississippi, DAP facility.
INCOME TAX (CREDIT) EXPENSE. For the quarter ended March 31, 1999,
income tax credits were $4.8 million compared to income tax expense of $327,000
for the quarter ended March 31, 1998. For the nine-month period ended
March 31, 1999, income tax credits were $2.5 million compared to income tax
expense of $4.4 million for the nine-month period ended March 31, 1998.
These decreases in tax expense were primarily the result of lower earnings.
NET (LOSS) INCOME. As a result of the foregoing, the Company incurred a
net loss of $6.1 million for the quarter ended March 31, 1999, as compared to
net income of $443,000 for the quarter ended March 31, 1998. For the
nine-month period ended March, 31, 1999, the Company incurred a net loss of
$2.4 million, as compared to net income of $5.2 million for the nine-month
period ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company had cash and cash equivalents of $2.4
million, compared to $3.9 million at June 30, 1998, a decrease of $1.5 million.
OPERATING ACTIVITIES. For the nine months ended March 31, 1999, net cash
used in operating activities was $16.5 million compared to $741,000 for the
nine months ended March 31, 1998.
INVESTING ACTIVITIES. Net cash provided by investing activities was
$16.5 million for the nine months ended March 31, 1999, and net cash used by
investing activities was $80.9 million for the nine months ended March 31,
1998. During the current year, the Company collected $54.6 million on a note
receivable obtained during the prior year as a result of a sale of the
Company's undeveloped phosphate rock property. During the current year
period, capital expenditures were $34.0 million compared to $73.8 million
during the prior year. The current year expenditures include approximately
$12.9 million related to the Company's nitrogen expansion project at its
Yazoo City facility and approximately $6.1 million related to the Company's
potash production expansion project at its Carlsbad facilities. The
remaining $15.0 million was for normal improvements and modifications to the
Company's facilities. Investing activities for the current year period also
included $3.4 million related to the Company's investment in Farmland
MissChem Limited compared to $3.1 million during the prior year. For the
nine months ended March 31, 1998, the Company placed $5.0 million in
restricted funds related to the issuance of industrial revenue bonds and
reduced those funds by $1.2 million for the nine months ended March 31, 1999.
FINANCING ACTIVITIES. Net cash used by financing activities was $1.5
million for the nine months ended March 31, 1999, and net cash provided by
financing activities was $80.4 million for the nine months ended March 31,
1998. During the current year,the amounts used by financing activities
included $381.7 million in debt payments, $8.0 million in cash dividends,
and $14.1 million for the purchase of treasury stock. These amounts were
partially offset by $402.3 million in debt proceeds. During the prior year,
the amounts provided by financing activities included $532.7 million in debt
proceeds 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.
At December 31, 1998, the Company and its subsidiaries had unsecured
revolving credit facilities with Harris Trust and Savings Bank and a syndicate
of other commercial banks totaling $200.0 million. These facilities are five-
year facilities which mature on November 25, 2002, and bear interest at rates
related to the Prime Rate, the London Interbank Offered Rate or Federal
Funds Rate. At March 31, 1999, the Company had $111.4 million outstanding
under these facilities.
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 1999
and the foreseeable future. The Company estimates its capital expenditure
requirements for the remainder of fiscal 1999 to be approximately $6.0 million,
which includes normal improvements and modifications to the Company's
facilities.
YEAR 2000
The Company has formed a Year 2000 Committee (the "Committee") which has
substantially completed the assessment of its computer systems, including the
systems involved in the operation of its manufacturing facilities, to identify
to what extent the Company could be affected by the "Year 2000" issue. The
Company expects to complete the system replacement and testing at its facilities
by October 31, 1999. As of March 31, 1999, the Company has spent approximately
$100,000 and estimates that it will spend an additional $500,000 to address
both its information technology ("IT") and non-IT systems. The Company is also
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. This assessment was substantially complete at
March 31, 1999. This assessment process will continue as there are parties
that have provided incomplete information that warrants further investigation.
Since 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 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.
Although no one can accurately predict how many Year 2000 related
failures will occur or the severity, duration or financial consequences of such
failures, it is possible that the Company could sustain what is expected to be
nonmaterial operational inconveniences and inefficiencies and be involved in
what is expected to be nonmaterial business disputes related to the Company
or one of its vendor's or customer's inability to carry out certain contractual
obligations. The Committee is working with an outside consultant to oversee
its efforts on Year 2000 issues and assist in developing an initial contingency
plan by July 31, 1999, to be implemented if its efforts to identify and correct
Year 2000 problems are not successful. These contingency plans will continue
to be improved and modified as our testing progresses and our critical vendors
and suppliers provide us with updates regarding their progress towards Year 2000
compliance.
FORWARD-LOOKING STATEMENTS
Except for the historical statements and discussion contained herein,
statements set forth in this report constitute "forward-looking statements."
Since these forward-looking statements rely on a number of assumptions
concerning future events, risks and other uncertainties that are beyond the
Company's ability to control, readers are cautioned that actual results may
differ materially from such forward-looking statements. Future events,
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 from both domestic
and international competitors, possible unscheduled plant outages, and other
important factors affecting the fertilizer industry and the Company as
detailed under "Outlook and Uncertainties" and elsewhere in the Company's
most recent annual report on Form 10-K for the year ended June 30, 1998,
which is on file with the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
The Company is exposed to market risk, including changes in interest rates
and commodity prices. To manage the volatility relating to these exposures,
the Company enters into derivative transactions. The Company does not hold or
issue derivative financial instruments for trading purposes. The Company
maintains formal policies with respect to entering into and monitoring
derivative transactions,and Company policy precludes management from entering
into derivative transactions that would be deemed speculative positions.
The Company's derivative transactions are intended to hedge the future
production and interest costs of the Company.
At June 30, 1998, the Company had a note receivable in the amount of $54.6
million related to the sale of the Company's phosphate rock properties. In
August 1998, this note was paid in full and canceled. At March 31, 1999, the
Company believes that the fair value of its fixed rate long-term debt had
increased during the current fiscal year as a result of volatility in interest
rates during the year.
The Company uses natural gas futures contracts to reduce the impact of
changes in gas prices. A sensitivity analysis has been prepared to estimate
the Company's market risk exposure arising from these instruments. The fair
value of open contracts is calculated by valuing each position using quoted
market prices. Market risk is the potential loss in fair value as a result
of a 10% adverse change in such prices. The Company estimates this change
in prices would reduce the fair value of open contracts by $3.5 million at
March 31, 1999.
For more information about how the Company manages specific risk
exposures, see Note 14 - Hedging Activities, and Note 7 - Credit Agreements
and Long-Term Debt, in the Company's Notes to Consolidated Financial Statements
contained in the Annual Report for the fiscal year ended June 30, 1998.
<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: May 13, 1999 /s/ Timothy A. Dawson
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Timothy A. Dawson
Senior Vice President and
Chief Financial Officer
Date: May 13, 1999 /s/ Rosalyn B. Glascoe
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Rosalyn B. Glascoe
Corporate Secretary
