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 December 31, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended December 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 December 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 December 31, 1999 and 1998,
and Six months ended December 31, 1999 and 1998
Consolidated Balance Sheets
December 31, 1999 and June 30, 1999 4 - 5
Consolidated Statements of Shareholders' Equity 6
Fiscal Year Ended June 30, 1999 and
Six months ended December 31, 1999
Consolidated Statements of Cash Flows 7
Six months ended December 31, 1999 and 1998
Notes to Consolidated Financial Statements 8 - 16
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 17 - 24
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 25
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders 26
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 Six months ended
December 31, December 31,
--------------------- --------------------
1999 1998 1999 1998
--------- -------- -------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Net sales $107,312 $ 94,839 $204,310 $199,554
Operating expenses:
Cost of products sold 109,579 82,642 203,024 166,670
Selling, general and
administrative 8,246 8,927 16,858 18,467
Other 86 180 2,626 337
-------- -------- -------- --------
117,911 91,749 222,508 185,474
-------- -------- -------- --------
Operating (loss) income (10,599) 3,090 (18,198) 14,080
Other (expense) income:
Interest, net (6,629) (4,519) (12,656) (8,029)
Other 646 732 1,281 (22)
-------- -------- -------- --------
(Loss) income before
income taxes (16,582) (697) (29,573) 6,029
Income tax (benefit)
expense (6,573) (212) (14,012) 2,293
-------- -------- -------- --------
Net (loss) income $(10,009) $ (485) $(15,561) $ 3,736
======== ======== ======== ========
(Loss) earnings per share -
basic (see Note 2) $ (0.38) $ (0.02) $ (0.60) $ 0.14
======== ======== ======== ========
(Loss) earnings per share -
diluted (see Note 2) $ (0.38) $ (0.02) $ (0.60) $ 0.14
======== ======== ======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
December 31, June 30,
1999 1999
------------ ---------
(In thousands, except per share data)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,734 $ 1,648
Accounts receivable, net 55,067 43,780
Inventories:
Finished products 45,837 33,061
Raw materials and supplies 6,041 7,993
Replacement parts 37,024 35,870
-------- --------
Total inventories 88,902 76,924
Income tax receivable 5,797 18,189
Insurance receivable 3,974 11,310
Prepaid expenses and other current assets 10,593 3,622
Deferred income taxes 4,249 3,286
-------- --------
Total current assets 170,316 158,759
Investments in affiliates 85,024 77,020
Other assets 11,014 19,263
Property, plant and equipment, at cost 840,506 835,306
less accumulated depreciation, depletion
and amortization (381,889) (363,222)
-------- --------
Net property, plant and equipment 458,617 472,084
Goodwill, net of accumulated amortization 169,471 171,762
-------- --------
$894,442 $898,888
======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, June 30,
1999 1999
----------- ---------
(In thousands, except per share data)
<S> <C> <C>
Current liabilities:
Accounts payable $ 44,060 $ 60,935
Accrued liabilities 10,690 13,460
--------- ---------
Total current liabilities 54,750 74,395
Long-term debt 349,084 305,857
Other long-term liabilities and
deferred credits 15,249 17,617
Deferred income taxes 74,090 80,791
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 124,667 143,626
Treasury stock, at cost (1,844 shares) (29,579) (29,579)
-------- --------
401,269 420,228
-------- --------
$894,442 $898,888
======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
DECEMBER 31, 1999
(Unaudited)
Additional
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Balances, July 1, 1998 $ 280 $305,901 $157,800 $(15,456) $448,525
Net loss - - (3,608) - (3,608)
Cash dividends paid - - (10,566) - (10,566)
Treasury stock, net - - - (14,123) (14,123)
------- -------- -------- -------- --------
Balances, June 30, 1999 280 305,901 143,626 (29,579) 420,228
Net loss - - (15,561) - (15,561)
Cash dividends paid - - (3,398) - (3,398)
-------- -------- -------- -------- --------
Balances,
December 31, 1999 $ 280 $305,901 $124,667 $(29,579) $401,269
======== ======== ======== ======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended December 31,
1999 1998
--------- ---------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $(15,561) $ 3,736
Reconciliation of net (loss) income
to net cash used in operating activities:
Net change in operating assets
and liabilities (31,051) (69,523)
Depreciation, depletion and amortization 23,358 20,694
Deferred income taxes (5,544) 2,456
Equity earnings in unconsolidated
affiliates (8,184) (796)
Other (442) 354
-------- --------
Net cash used in operating activities (37,424) (43,079)
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (9,188) (21,685)
Investment in Farmland MissChem Limited - (3,358)
Collections on note receivable - 54,625
Other 6,896 787
-------- --------
Net cash (used in) provided by
investing activities (2,292) 30,369
-------- --------
Cash flows from financing activities:
Debt proceeds 212,400 285,650
Debt payments (169,200) (254,519)
Cash dividends paid (3,398) (5,338)
Purchase of treasury stock - (14,123)
-------- --------
Net cash provided by financing activities 39,802 11,670
-------- --------
Net increase (decrease) in cash and
cash equivalents 86 (1,040)
Cash and cash equivalents -
beginning of period 1,648 3,857
-------- --------
Cash and cash equivalents - end of period $ 1,734 $ 2,817
======== ========
</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 have been prepared by
us without audit, and include Mississippi Chemical Corporation, its
subsidiaries and affiliates. In our opinion, the financial statements reflect
all adjustments necessary to present fairly our results of operations for the
three-month and the six-month periods ended December 31, 1999 and 1998, our
financial position at December 31, 1999 and June 30, 1999, our cash flows for
the six months ended December 31, 1999 and 1998, and our consolidated
statements of shareholders' equity as of December 31, 1999. In our opinion,
these adjustments are of a normal recurring nature which are necessary for a
fair presentation of our financial position and results of operations for the
interim periods. We have reclassified certain prior-year information to
conform with the current year's presentation.
Certain notes and other information have been condensed or omitted in our
interim financial statements presented in our quarterly report on Form 10-Q.
Therefore, these financial statements should be read in conjunction with our
1999 Form 10-K and our consolidated financial statements and notes thereto
included in our June 30, 1999, audited financial statements.
The nature of our business is seasonal; therefore, the results of
operations for the periods ended December 31, 1999, are not necessarily
indicative of the operating results for the full fiscal year.
NOTE 2 - EARNINGS PER SHARE
The number of shares used in our basic and diluted earnings per share
computation are as follows:
<TABLE>
Three months ended Six months ended
December 31, December 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 26,178 26,132 26,614
Common stock equivalents for
employee stock options - - - -
------- ------- ------- -------
Weighted average common
shares outstanding for
diluted earnings per share 26,132 26,178 26,132 26,614
======= ======= ======= =======
</TABLE>
Options outstanding at December 31, 1999 and 1998, were not included in
our computations of diluted earnings per share for the three-month or six-month
periods ended December 31, 1999 and 1998, because the options' exercise prices
were greater than the average market price for common shares and, therefore,
not dilutive.
In September 1999, our board of directors announced that quarterly cash
dividends paid in the foreseeable future would be reduced to $0.03 per common
share. The dividend of $0.03 per common share declared in October 1999, for
the three-month period ending September 30, 1999, was paid on November 24,
1999, to holders of record on November 10, 1999. In January 2000, a regular
quarterly cash dividend of $0.03 per common share was declared for the
three-month period ending December 31, 1999. This dividend will be paid on
February 25, 2000, to holders of record on February 11, 2000.
NOTE 3 - SEGMENT INFORMATION
Our reportable operating segments, nitrogen, phosphate and potash, are
strategic business units that offer different products and services. They are
managed separately because each business unit requires different technology and
marketing strategies. Our nitrogen segment produces ammonia, ammonium nitrate,
urea, nitrogen solutions and nitric acid and distributes these products to
fertilizer dealers and distributors, and industrial users. Our phosphate
segment produces diammonium phosphate fertilizer (commonly referred to as
"DAP") that is marketed to agricultural users primarily in international
markets through a separate export association. Our potash segment mines and
produces granular, coarse and standard potash products and distributes them to
agricultural and industrial users. Below is our segment information for the
three-month and six-month periods ended December 31, 1999 and 1998. The Other
caption includes corporate and consolidating eliminations.
<TABLE>
Three months ended December 31, 1999
- ------------------------------------------------------------------------------
(In thousands) Nitrogen Phosphate Potash Other Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales -
external customers $ 65,557 $ 19,578 $ 22,177 $ - $107,312
Net sales - intersegment 3,079 29 - (3,108) -
Operating (loss) income (8,847) (2,161) 822 (413) (10,599)
Depreciation, depletion
and amortization 7,666 1,526 1,549 968 11,709
Capital expenditures 3,456 642 427 59 4,584
Three months ended December 31, 1998
- ------------------------------------------------------------------------------
(In thousands) Nitrogen Phosphate Potash Other Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales -
external customers $ 50,160 $ 27,834 $ 16,845 $ - $ 94,839
Net sales - intersegment 4,268 21 - (4,289) -
Operating (loss) income (5,298) 5,535 2,643 210 3,090
Depreciation, depletion
and amortization 6,840 1,190 1,379 1,005 10,414
Capital expenditures 7,476 371 3,710 398 11,955
Six months ended December 31, 1999
- ------------------------------------------------------------------------------
(In thousands) Nitrogen Phosphate Potash Other Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales -
external customers $107,833 $ 55,361 $ 41,116 $ - $204,310
Net sales - intersegment 8,787 45 - (8,832) -
Operating (loss) income (18,058) 146 867 (1,153) (18,198)
Depreciation, depletion
and amortization 15,359 3,026 3,068 1,905 23,358
Capital expenditures 4,877 1,506 2,355 450 9,188
Six months ended December 31, 1998
- ------------------------------------------------------------------------------
(In thousands) Nitrogen Phosphate Potash Other Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales -
external customers $100,201 $ 58,829 $ 40,524 $ - $199,554
Net sales - intersegment 10,938 39 - (10,977) -
Operating (loss) income (970) 8,010 6,744 296 14,080
Depreciation, depletion
and amortization 13,734 2,442 2,706 1,812 20,694
Capital expenditures 12,319 1,380 6,987 999 21,685
</TABLE>
NOTE 4 - GUARANTOR SUBSIDIARIES
Payment obligations under our 7.25% Senior Notes, due November 15, 2017,
issued pursuant to that certain indenture, dated as of November 25, 1997, are
fully and unconditionally guaranteed on a joint and several basis by
Mississippi Nitrogen, Inc., and MissChem Nitrogen, L.L.C. (the "Guarantor
Subsidiaries"), our wholly owned direct subsidiary and our wholly owned
indirect subsidiary, respectively. Condensed consolidating financial
information regarding the parent company, Guarantor Subsidiaries and
non-guarantor subsidiaries for December 31, 1999 and 1998 is presented below
for purposes of complying with the reporting requirements of the Guarantor
Subsidiaries. Separate financial statements of the Guarantor Subsidiaries are
not presented because we do not believe that separate financial statements are
material to investors.
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Three months ended December 31, 1999
- ------------------------------------------------------------------------------
Parent Guarantor Non-Guarantor
(In thousands) Company Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $ - $ 34,223 $108,328 $(35,239) $107,312
Operating expenses:
Cost of products
sold - 40,183 98,178 (28,782) 109,579
Selling, general
and admin-
istrative 530 903 6,813 - 8,246
Other - - 86 - 86
------- ------- -------- --------- --------
530 41,086 105,077 (28,782) 117,911
------- ------- -------- --------- --------
Operating (loss)
income (530) (6,863) 3,251 (6,457) (10,599)
Other (expense) income:
Interest, net (6,039) (2,823) 2,233 - (6,629)
Other (1,812) 2,568 518 (628) 646
-------- ------- -------- --------- --------
(Loss) income
before income
taxes (8,381) (7,118) 6,002 (7,085) (16,582)
Income tax expense
(benefit) 1,628 458 (6,583) (2,076) (6,573)
-------- ------- ------- ------- --------
Net (loss)
income $(10,009) $(7,576) $12,585 $(5,009) $(10,009)
======== ======= ======= ======= ========
</TABLE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Three months ended December 31, 1998
- -------------------------------------------------------------------------------
Parent Guarantor Non-Guarantor
(In thousands) Company Subsidiaries Subsidiaries Eliminations Consolidated
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $ - $ 25,181 $ 94,724 $(25,066) $ 94,839
Operating expenses:
Cost of products
sold - 20,217 85,608 (23,183) 82,642
Selling, general
and admin-
istrative 772 1,371 6,713 71 8,927
Other - - 180 - 180
------- -------- ------- -------- --------
772 21,588 92,501 (23,112) 91,749
------- -------- ------- -------- --------
Operating (loss)
income (772) 3,593 2,223 (1,954) 3,090
Other (expense)
income:
Interest, net (2,874) (1,292) (353) - (4,519)
Other 2,568 (7,360) 673 4,851 732
------- ------- ------- -------- -------
(Loss) income
before income
taxes (1,078) (5,059) 2,543 2,897 (697)
Income tax (benefit)
expense (593) (1,551) 1,820 112 (212)
------- ------- ------- -------- ------
Net (loss) income $ (485) $(3,508) $ 723 $ 2,785 $ (485)
======= ======= ======= ======== ======
</TABLE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Six months ended December 31, 1999
- --------------------------------------------------------------------------------
Parent Guarantor Non-Guarantor
(In thousands) Company Subsidiaries Subsidiaries Eliminations Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ - $ 63,958 $206,544 $(66,192) $204,310
Operating expenses:
Cost of products
sold - 75,923 194,545 (67,444) 203,024
Selling, general
and admin-
istrative 1,132 1,962 13,764 - 16,858
Other - - 2,626 - 2,626
------- ------- -------- -------- --------
1,132 77,885 210,935 (67,444) 222,508
------- ------- -------- -------- --------
Operating loss (1,132) (13,927) (4,391) 1,252 (18,198)
Other (expense)
income:
Interest, net (11,936) (5,457) 4,737 - (12,656)
Other (1,557) (652) 817 2,673 1,281
------- ------- ------- -------- --------
(Loss) income before
income taxes (14,625) (20,036) 1,163 3,925 (29,573)
Income tax expense
(benefit) 936 (4,451) (8,421) (2,076) (14,012)
-------- -------- ------- -------- --------
Net (loss) income $(15,561) $(15,585) $ 9,584 $ 6,001 $(15,561)
======== ======== ======= ======== ========
</TABLE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Six months ended December 31, 1998
- -------------------------------------------------------------------------------
Parent Guarantor Non-Guarantor
(In thousands) Company Subsidiaries Subsidiaries Eliminations Consolidated
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $ - $ 52,504 $200,892 $ (53,842) $199,554
Operating expenses:
Cost of
products sold - 43,362 176,266 (52,958) 166,670
Selling, general
and admin-
istrative 1,597 2,839 13,960 71 18,467
Other - - 337 - 337
------- -------- -------- -------- --------
1,597 46,201 190,563 (52,887) 185,474
------- -------- -------- -------- --------
Operating (loss)
income (1,597) 6,303 10,329 (955) 14,080
Other (expense)
income:
Interest, net (5,156) (2,317) (556) - (8,029)
Other 8,982 (7,360) 264 (1,908) (22)
------- -------- -------- -------- --------
Income (loss)
before income
taxes 2,229 (3,374) 10,037 (2,863) 6,029
Income tax (benefit)
expense (1,507) (924) 4,612 112 2,293
------- -------- -------- -------- --------
Net income (loss) $ 3,736 $ (2,450) $ 5,425 $ (2,975) $ 3,736
======= ======== ======== ======== ========
</TABLE>
<TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 1999
- ------------------------------------------------------------------------------
Parent Guarantor Non-Guarantor
(In thousands) Company Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents $ 134 $ 22 $ 1,578 $ - $ 1,734
Receivables,
net 2,988 16,219 88,674 (43,043) 64,838
Inventories - 22,523 65,166 1,213 88,902
Prepaid expenses
and other
current
assets 7,946 1,176 10,328 (4,608) 14,842
-------- -------- -------- ---------- --------
Total current
assets 11,068 39,940 165,746 (46,438) 170,316
Investments in
affiliates 705,490 342,232 67,991 (1,030,689) 85,024
Other assets 134,772 - 215,031 (338,789) 11,014
PP&E, net 13,364 152,468 292,785 - 458,617
Goodwill, net - - 169,471 - 169,471
-------- -------- -------- ----------- --------
Total
assets $864,694 $534,640 $911,024 $(1,415,916) $894,442
======== ======== ======== =========== ========
Current liabilities:
Accounts
payable $ 30,946 $ 13,966 $ 51,069 $ (51,921) $ 44,060
Accrued
liabilities 6,671 5,035 5,974 (6,990) 10,690
-------- -------- -------- ----------- --------
Total current
liabilities 37,617 19,001 57,043 (58,911) 54,750
Long-term debt 419,759 129,363 132,535 (332,573) 349,084
Other long-term
liabilities
and deferred
credits 6,049 25,938 63,079 (5,727) 89,339
Shareholders'
equity:
Common stock 280 1 58,941 (58,942) 280
Additional
paid-in
capital 305,901 382,147 545,197 (927,344) 305,901
Retained
earnings 124,667 (21,810) 54,229 (32,419) 124,667
Treasury stock,
at cost (29,579) - - - (29,579)
-------- -------- --------- ---------- --------
Total
shareholders'
equity 401,269 360,338 658,367 (1,018,705) 401,269
-------- -------- -------- ---------- --------
Total
liabilities
and share-
holders'
equity $864,694 $534,640 $911,024 $(1,415,916) $894,442
======== ======== ======== =========== ========
</TABLE>
<TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 1999
- -------------------------------------------------------------------------------
Parent Guarantor Non-Guarantor
(In thousands) Company Subsidiaries Subsidiaries Eliminations Consolidated
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents $ 244 $ 21 $ 1,383 $ - $ 1,648
Receivables, net 19,210 7,792 91,632 (45,355) 73,279
Inventories - 19,629 57,076 219 76,924
Prepaid expenses
and other
current assets 3,994 5 6,704 (3,795) 6,908
-------- -------- -------- ----------- --------
Total current
assets 23,448 27,447 156,795 (48,931) 158,759
Investments in
affiliates 698,210 343,951 59,123 (1,024,264) 77,020
Other assets 110,538 12,307 225,372 (328,954) 19,263
PP&E, net 14,270 158,755 299,059 - 472,084
Goodwill, net - - 171,762 - 171,762
-------- -------- -------- ----------- --------
Total assets $846,466 $542,460 $912,111 $(1,402,149) $898,888
======== ======== ======== =========== ========
Current liabilities:
Accounts
payable $ 29,547 $ 11,577 $ 78,472 $ (58,661) $ 60,935
Accrued
liabilities 7,355 - 8,319 (2,214) 13,460
-------- -------- -------- ---------- --------
Total current
liabilities 36,902 11,577 86,791 (60,875) 74,395
Long-term debt 382,402 126,750 112,602 (315,897) 305,857
Other long-term
liabilities and
deferred credits 6,934 28,210 64,158 (894) 98,408
Shareholders' equity:
Common stock 280 1 58,941 (58,942) 280
Additional paid-in
capital 305,901 382,147 544,974 (927,121) 305,901
Retained
earnings 143,626 (6,225) 44,645 (38,420) 143,626
Treasury stock,
at cost (29,579) - - - (29,579)
-------- -------- -------- ---------- --------
Total share-
holders'
equity 420,228 375,923 648,560 (1,024,483) 420,228
-------- -------- -------- ---------- --------
Total
liabilities
and share-
holders'
equity $846,466 $542,460 $912,111 $(1,402,149) $898,888
======== ======== ======== =========== ========
</TABLE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six months ended December 31, 1999
- --------------------------------------------------------------------------------
Parent Guarantor Non-Guarantor
(In thousands) Company Subsidiaries Subsidiaries Eliminations Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net (loss) income $ (15,561) $(15,585) $ 9,584 $ 6,001 $ (15,561)
Reconciliation of
net (loss)
income to net
cash used in
operating
activities:
Net change in
operating
assets and
liabilities 10,511 (1,805) (40,191) 434 (31,051)
Depreciation,
depletion and
amortization 1,515 6,027 15,421 395 23,358
Equity earnings
in unconsoli-
dated
affiliates (7,237) 1,719 (8,869) 6,203 (8,184)
Deferred income
taxes and
other (2,678) 8,854 871 (13,033) (5,986)
------- ------- ------- ------- -------
Net cash used in
operating
activities (13,450) (790) (23,184) - (37,424)
------- ------- ------- ------- -------
Cash flows from
investing
activities:
Purchase of
property, plant
and equipment (450) (1,827) (6,911) - (9,188)
Other 13 5 6,878 - 6,896
------- ------- -------- ------- -------
Net cash used in
investing
activities (437) (1,822) (33) - (2,292)
-------- ------- ------- ------- -------
Cash flows from
financing
activities:
Debt proceeds 212,400 - - - 212,400
Debt payments (169,200) - - - (169,200)
Cash dividend
paid (3,398) - - - (3,398)
Net change in
affiliate notes(26,025) 2,613 23,412 - -
-------- ------- ------- ------- --------
Net cash provided by
financing
activities 13,777 2,613 23,412 - 39,802
-------- ------- ------- ------- --------
Net (decrease)
increase in cash
and cash
equivalents (110) 1 195 - 86
Cash and cash
equivalents -
beginning of
period 244 21 1,383 - 1,648
------- ------- -------- ------- -------
Cash and cash
equivalents -
end of period $ 134 $ 22 $ 1,578 $ - $ 1,734
======= ======= ======== ======= =======
</TABLE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six months ended December 31, 1998
- ------------------------------------------------------------------------------
Parent Guarantor Non-Guarantor
(In thousands) Company Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating
activities:
Net income
(loss) $ 3,736 $(2,450) $ 5,425 $(2,975) $ 3,736
Reconciliation
of net income
(loss) to net
cash (used in)
provided by
operating
activities:
Net change
in operating
assets and
liabil-
ities (45,992) (4,352) (19,765) 586 (69,523)
Depreciation,
depletion
and amortiz-
ation 1,458 4,187 14,562 487 20,694
Equity earnings
in unconsol-
idated affil-
iates (10,937) 7,360 1,953 828 (796)
Deferred
income taxes
and other 3,457 (957) (763) 1,073 2,810
------- ------- ------- ------ -------
Net cash (used in)
provided by
operating
activities (48,278) 3,788 1,412 (1) (43,079)
-------- ------- ------- ------ -------
Cash flows from
investing
activities:
Purchase of
property, plant
and equipment (999) (8,954) (11,732) - (21,685)
Investment in
Farmland
MissChem Limited(3,358) - - - (3,358)
Collections on note
receivable 54,625 - - - 54,625
Other - - 787 - 787
------- ------- ------ ------- --------
Net cash provided
by (used in)
investing
activities 50,268 (8,954) (10,945) - 30,369
------- ------- ------- ------- --------
Cash flows from
financing activities:
Debt proceeds 285,650 - - - 285,650
Debt payments (254,450) - (69) - (254,519)
Cash dividend
paid (5,338) - - - (5,338)
Purchase of
treasury
stock (14,123) - - - (14,123)
Net change in
affiliate notes(14,864) 5,167 9,697 - -
------- ------- ------- ------- --------
Net cash (used in)
provided by
financing
activities (3,125) 5,167 9,628 - 11,670
------- ------- ------- ------- --------
Net (decrease)
increase in cash
and cash
equivalents (1,135) 1 95 (1) (1,040)
Cash and cash
equivalents -
beginning of
period 2,616 21 1,220 - 3,857
-------- ------- ------- ------- -------
Cash and cash
equivalents -
end of period $ 1,481 $ 22 $ 1,315 $ (1) $ 2,817
======== ======= ======= ======= =======
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Our operations are organized into three strategic business units:
nitrogen, phosphate and potash. Our nitrogen business unit produces nitrogen
products for distribution to fertilizer dealers and distributors, and
industrial users located primarily in the southern region of the United States.
Our phosphate business unit produces DAP and exports the majority of this
production through the Phosphate Chemicals Export Association, Inc., a
Webb-Pomerene corporation known as "PhosChem." Our potash business unit mines
and produces agricultural and industrial potash products for sale to farmers,
fertilizer dealers and distributors, and industries for use primarily in the
southern and western regions of the United States. The following is
management's discussion and analysis of the financial condition and results of
operations, which should be read in conjunction with our audited financial
statements and related notes for the fiscal year ended June 30, 1999.
Consistent with the historical nature of our business, the usage of
fertilizer in our trade territory is highly seasonal, and our quarterly results
reflect the fact that significantly more fertilizer is sold during the last
four months of our fiscal year (March through June). Since interim period
operating results reflect the seasonal nature of our 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 for our products, price of raw materials required to produce our
products, farm commodity prices, and weather-related shifts in planting
schedules and purchase patterns. We incur substantial expenditures for fixed
costs throughout the year and for inventory prior to the spring planting
season.
For the current year, we incurred a net loss during the quarter of $10.0
million (or $0.38 per basic and diluted share) compared to a net loss of
$485,000 (or $0.02 per basic and diluted share) for the same quarter during the
prior year. Net sales increased to $107.3 million for the quarter ended
December 31, 1999, from $94.8 million for the quarter ended December 31, 1998.
We incurred an operating loss of $10.6 million for the quarter ended December
31, 1999, compared to operating income of $3.1 million for the quarter ended
December 31, 1998.
NITROGEN
Weak product pricing through much of the quarter and an increase in the
cost of producing ammonia combined to continue the difficult operating
environment for our nitrogen business unit. Ammonia is our base nitrogen
product and is necessary for the production of our other nitrogen products
(urea, ammonium nitrate, nitrogen solutions and nitric acid). The weighted
average sales price for our nitrogen products was 8% below the prior year
quarter while our cost per ton for ammonia increased 16% from the prior year
quarter primarily due to a 15% increase in the cost of natural gas, the primary
raw material in the production of ammonia. Prices for most of our nitrogen
products increased from the trough levels experienced in the summer of 1999 due
to production curtailments and plant shutdowns in the nitrogen industry which
reduced the nitrogen inventories of domestic producers and tightened the
supply/demand relationship for our nitrogen products. We anticipate that
pricing for our nitrogen products will continue to improve through the upcoming
spring planting season.
Recent positive developments for our nitrogen business unit include: (1) a
42% increase in sales volumes over the prior year quarter, which we believe
indicates that a number of our customers expect prices for our nitrogen
products to move upward in the near-term; (2) improvement in grain commodity
prices, which could result in an increase in fertilizer application rates this
spring; and (3) the preliminary determination by the U.S. Department of
Commerce ("Department"), issued on December 31, 1999, subjecting Russian
ammonium nitrate imports to an effective dumping margin of 264.59% pending
final determination of the case on or before June 30, 2000. This has
positively impacted ammonium nitrate prices by virtually eliminating unfairly
priced Russian ammonium nitrate imports.
PHOSPHATE
Weak product pricing also negatively impacted our phosphate business unit
which experienced a 27% reduction in DAP sales prices during the current year
quarter as compared to the prior year quarter as the market continued to react
to anticipated new supply in India and Australia. Recent plant shutdowns and
curtailments have positively impacted the supply/demand balance. In order to
reduce inventories, on October 18, 1999, we extended a scheduled maintenance
shutdown of our DAP facility by approximately five days followed by curtailed
production rates through the date of this filing. We will continue to monitor
market conditions to determine whether additional production curtailments are
advisable. We believe DAP pricing has reached its low point for this fiscal
year and is beginning to firm. DAP costs per ton increased 1% during the
current year quarter as compared to the prior year quarter, primarily as a
result of higher conversion costs partially offset by lower raw material costs
for ammonia and phosphate rock.
POTASH
Our potash business unit experienced a 43% increase in sales volumes and an
8% decrease in sales prices during the current year quarter as compared to the
prior year quarter. The increase in sales volumes was due primarily to
increased domestic movement through our sales incentive program offered in the
fall, increased export sales and carryover tons from the quarter ended September
30, 1999. Potash costs per ton increased 10% during the current year quarter
as compared to the prior year quarter as a result of selling higher cost
inventory produced in earlier periods as well as incurring higher production
costs at our East mine.
OUTLOOK
Improvement in our nitrogen margins is anticipated through the remainder
of this fiscal year; however, the extent of any such improvement is impossible
to predict due to the difficulty of accurately projecting natural gas costs,
nitrogen product availability, weather conditions and demand. Additional
nitrogen capacity, which is scheduled to come on line in the summer and fall of
this year, could have a negative impact on the nitrogen supply/demand balance.
We anticipate that DAP sales prices will continue in the near term to adversely
affect our phosphate segment's financial results. Finally, we believe that the
financial results of our potash segment will show near-term improvement as a
result of anticipated increases in potash prices and reduced production costs
caused primarily by mining higher grade ore and lower maintenance costs.
RESULTS OF OPERATIONS
Our results of operations have historically been influenced by a number of
factors beyond our control, which can significantly alter our operating
results. Fertilizer demand and prices are highly dependent upon a variety of
conditions in the agricultural industry such as grain prices, planted acreage,
projected grain stocks, U.S. Government policies, weather, and changes in
agricultural production methods. Our results of operations can also be
affected by (i) the volatility of natural gas prices, (ii) mechanical
operating difficulties, (iii) the relative value of the U.S. dollar,
(iv) foreign government agricultural policies (in particular, policies of the
Governments of India and China regarding fertilizer imports), (v) capacity
expansions by competitors, (vi) pricing policies of domestic and foreign
competitors (especially Russia), and (vii) the unpredictable nature of
international and local economies.
Following are summaries of our sales results by product categories:
<TABLE>
Three months ended Six months ended
December 31, December 31,
------------------ --------------------
1999 1998 1999 1998
Net Sales (in thousands): -------- -------- -------- --------
<S> <C> <C> <C> <C>
Nitrogen $ 65,371 $ 49,926 $107,392 $ 99,782
DAP 19,559 27,747 55,314 58,530
Potash 22,177 16,845 41,116 40,524
Other 205 321 488 718
-------- -------- -------- --------
Net Sales $107,312 $ 94,839 $204,310 $199,554
======== ======== ======== ========
Three months ended Six months ended
December 31, December 31,
------------------ --------------------
1999 1998 1999 1998
Tons Sold (in thousands): -------- -------- ------- -------
<S> <C> <C> <C> <C>
Nitrogen:
Ammonia 209 220 381 405
Ammonium nitrate 234 107 318 220
Urea 129 115 263 223
Nitrogen solutions 173 78 260 84
Nitric acid 11 11 25 32
----- ---- ----- -----
Total Nitrogen 756 531 1,247 964
DAP 154 160 383 331
Potash 256 179 472 444
Three months ended Six months ended
December 31, December 31,
------------------ -------------------
1999 1998 1999 1998
Average Sales Price Per Ton: ------- ------- ------ ------
<S> <C> <C> <C> <C>
Nitrogen $ 87 $ 94 $ 86 $ 104
DAP $ 127 $ 174 $ 145 $ 177
Potash $ 87 $ 94 $ 87 $ 91
</TABLE>
<PAGE>
NET SALES. Our net sales increased 13% to $107.3 million for the quarter
ended December 31, 1999, from $94.8 million for the quarter ended December 31,
1998. This increase is explained by higher sales volumes in the current year
for our nitrogen and potash products partially offset by lower average sales
prices for our nitrogen, DAP and potash products. For the six months ended
December 31, 1999, net sales increased 2% to $204.3 million from $199.6 million
for the six months ended December 31, 1998. This increase is the result of
higher sales volumes partially offset by lower sales prices for our nitrogen,
DAP and potash products.
During the current quarter, nitrogen sales increased 31% as compared to
the prior year quarter. For the current six-month period, nitrogen sales
increased 8% as compared to the prior year six-month period. The increases
were primarily the result of higher sales volume for our ammonium nitrate,
urea and nitrogen solution products due to buyers building inventories as
the markets showed indications of improvement for the spring season, as well
as customers purchasing inventory previously held on consignment in
anticipation of higher prices. During the current quarter, our ammonia sales
volume decreased 5% as compared to the prior year. During the current
six-month period, our ammonia sales volume decreased 6% as compared to the
prior year. These decreases were the result of reduced tons available for sale
due to curtailed production in August and September of the current fiscal year
at our No. 2 ammonia facility in Donaldsonville, Louisiana. This facility
resumed production on October 4,1999. During the current quarter, our average
sales prices for ammonium nitrate decreased 11%, urea decreased 15%, and
nitrogen solutions decreased 16%. Our average sales price for ammonia
increased 14% during the current quarter due to improvement in the global
supply/demand balance during the past several months. The changes in average
sales prices resulted in an 8% reduction in the weighted average sales price
per ton of nitrogen compared to the prior year. Ammonium nitrate sales
prices were lower at the beginning of the current quarter due to a continued
overhang in the market caused by large volumes of unfairly priced Russian
imports brought in during the first ten months of the calendar year. By
the end of the quarter, market conditions tightened as a result of the
reduction of Russian imports and production curtailments at several plants.
Urea sales prices were lower in the current year due to supply contracts
that use a historical rolling average to determine the selling price.
Thus, while these contract prices will reflect the price changes in the
market, the timing of the changes will lag the market. During the current
six-month period, our average sales prices for ammonia decreased 2%,
ammonium nitrate decreased 17%, urea decreased 21% and nitrogen solutions
decreased 17%, resulting in a 17% reduction in the weighted average sales
price per ton of nitrogen compared to the prior year.
During the current quarter, DAP sales decreased 30% as compared to the
prior year quarter due to a 27% reduction in sales price and a 3% reduction in
sales volumes. For the current six-month period, DAP sales decreased 6% as
compared to the prior year six-month period. This decrease was the result of
an 18% reduction in sales price partially offset by a 16% increase in sales
volumes. The decline in sales price during the current year period was
apparently the result of anticipated supply from new plants in India and
Australia. During the current quarter, the sales volume was lower due to weaker
export and domestic demand. As a result of the weak market conditions and in
order to reduce inventory levels, we curtailed production rates at our
Pascagoula DAP facility after a scheduled maintenance shutdown in October. We
will continue to monitor market conditions to determine whether additional
shutdowns or curtailments are advisable. In addition, in the prior year, we
had 18 days of production downtime as well as approximately 54,000 tons of DAP
inventory that was damaged as a result of Hurricane Georges.
Potash sales increased 32% during the current quarter as compared to the
prior year quarter as a result of a 43% increase in sales volume partially
offset by an 8% reduction in sales prices. For the current six-month period,
potash sales increased 2% as compared to the prior year six-month period as a
result of a 6% increase in sales volume partially offset by a 5% reduction in
sales price. The increases in sales volume for the current year periods are
due primarily to increased domestic movement through our sales incentive
program offered in the fall as well as increased export sales.
COST OF PRODUCTS SOLD. Our cost of products sold increased to $109.6
million for the quarter ended December 31, 1999, from $82.6 million for the
quarter ended December 31, 1998. As a percentage of net sales, cost of
products sold increased to 102% for the current year quarter, from 87% for
the prior year quarter. Cost of products sold increased as a percentage of
net sales due to lower sales prices for our nitrogen, DAP and potash products
and higher costs per ton for our potash products and for ammonia. Ammonia
costs per ton increased 16% during the current year quarter primarily as a
result of higher natural gas costs at our domestic production facilities.
Natural gas prices increased 15% during the current year quarter as compared
to the prior year quarter. These higher natural gas costs were partially
offset by higher equity earnings at Farmland MissChem Limited ("Farmland
MissChem"), our 50-50 joint venture ammonia plant in Trinidad that began
operations in late July 1998. Pursuant to the Farmland MissChem offtake
agreement, we purchase one-half of the ammonia production from Farmland
MissChem at a discount to market subject to a minimum price. During the
current quarter, all purchases from Farmland MissChem were at the minimum
price. We record earnings from the joint venture as a reduction in our
cost of products sold. Our portion of the earnings was $2.6 million for the
current quarter. DAP costs per ton increased 1% during the current quarter as
compared to the prior year quarter as a result of higher conversion costs in
the current year that were partially offset by lower raw material costs for
ammonia and phosphate rock. Phosphate rock costs decreased due to the pricing
formula in our phosphate rock supply contract that is based on the phosphate
rock costs incurred by certain other domestic phosphate producers and the
financial performance of our operations. Potash costs per ton increased 10%
in the current year quarter as compared to the prior year quarter. This
increase was the result of selling, in the current year, higher cost inventory
produced in earlier periods, as well as incurring higher production costs at
our East mine.
For the six-month period ending December 31, 1999, our cost of products
sold increased to $203.0 million, from $166.7 million for the six-month period
ending December 31, 1998. As a percentage of net sales, cost of products sold
increased to 99% for the current six-month period, from 84% for the prior year
six-month period. Cost of products sold increased as a percentage of net sales
due to lower sales prices for our nitrogen, DAP and potash products and higher
costs per ton for our nitrogen and potash products during the current year.
These increases were partially offset by lower costs per ton of DAP. Our
nitrogen costs per ton increased primarily as a result of higher natural gas
costs at our domestic production facilities in the current year. Natural gas
prices increased 14% during the current year six-month period as compared to
the prior year six-month period. These higher gas costs were partially offset
by increased earnings at our joint venture ammonia plant in Trinidad. Our
portion of the earnings from Farmland MissChem was $8.9 million for the current
year and included $3.4 million related to a business interruption claim for
downtime that occurred in March and April of 1999. DAP costs per ton decreased
5% during the current six-month period as compared to the prior year six-month
period. This decrease was primarily the result of lower raw material costs for
ammonia and phosphate rock. This decrease was partially offset by higher
conversion costs in the current year. Potash costs per ton increased 15%
during the current year six-month period as compared to the prior year
six-month period. This increase was the result of incurring higher production
costs at both our East and West mines.
SELLING, GENERAL AND ADMINISTRATIVE. Our selling, general and
administrative expenses decreased to $8.2 million for the quarter ended
December 31, 1999, from $8.9 million for the quarter ended December 31, 1998.
This decrease was primarily the result of decreased advertising costs in the
current year. As a percentage of net sales, selling, general and
administrative expenses decreased to 8% for the quarter ended December 31,
1999, from 9% for the quarter ended December 31, 1998. For the six months
ended December 31, 1999, our selling, general and administrative expenses
decreased to $16.9 million, from $18.5 million for the six months ended
December 31, 1998. This decrease was primarily the result of decreased
advertising cost, use tax, and employee incentives during the current year,
partially offset by costs incurred related to the reorganization of our sales,
marketing and distribution division. As a percentage of net sales, selling,
general and administrative expenses decreased to 8% for the six months
ended December 31, 1999, from 9% for the six months ended December 31, 1998.
OTHER. Our other operating expenses decreased to $86,000 for the quarter
ended December 31, 1999, from $180,000 for the quarter ended December 31, 1998.
This decrease was the result of reduced idle plant costs in the current year
associated with our Eddy Potash mine that suspended operations in
December 1997. For the six months ended December 31, 1999, our other operating
expenses increased to $2.6 million, from $337,000 for the six months ended
December 31, 1998. This increase was the result of idle plant costs associated
with the curtailment of production in August and September at our No. 2 ammonia
plant in Donaldsonville, Louisiana. Operations were resumed at this plant on
October 4, 1999.
OPERATING (LOSS) INCOME. As a result of the above factors, we incurred an
operating loss of $10.6 million for the quarter ended December 31, 1999, as
compared to operating income of $3.1 million for the quarter ended December 31,
1998. For the six months ended December 31, 1999, we incurred an operating
loss of $18.2 million, as compared to operating income of $14.1 million for
the six months ended December 31, 1998.
INTEREST. For the quarter ended December 31, 1999, our net interest
expense increased to $6.6 million from $4.5 million for the quarter ended
December 31, 1998. For the six months ended December 31, 1999, our net
interest expense increased to $12.7 million from $8.0 million for the six
months ended December 31, 1998. These increases were primarily the result of
interest not being capitalized in the current year because we completed major
construction projects during the prior fiscal year. We capitalized
$1.3 million of interest costs during the prior year quarter and capitalized
$3.0 million of interest costs during the prior year six-month period.
Higher average debt levels and higher average interest rates during the current
year periods also contributed to increased interest costs.
OTHER INCOME (EXPENSE). For the quarter ended December 31, 1999, other
income decreased to $646,000 from $732,000 for the quarter ended December 31,
1998. This decrease was primarily the result of recording in the prior year
quarter, a net insurance recovery on the business interruption claim associated
with Hurricane Georges at the Pascagoula, Mississippi, DAP facility, partially
offset by higher earnings at our unconsolidated affiliates during the current
year quarter. For the six months ended December 31, 1999, we had other income
of $1.3 million as compared to other expense of $22,000 for the six months
ended December 31, 1998. This increase in other income during the current
year is due primarily to higher earnings at our unconsolidated affiliates
partially offset by net expenses in the prior year associated with damage
caused by Hurricane Georges.
INCOME TAX (BENEFIT) EXPENSE. For the quarter ended December 31, 1999,
our income tax benefit was $6.6 million, as compared to an income tax benefit
of $212,000 for the quarter ended December 31, 1998. For the six months ended
December 31, 1999, our income tax benefit was $14.0 million, as compared to
income tax expense of $2.3 million for the six months ended December 31, 1998.
These increases in income tax benefits are primarily the result of incurring
losses in the current year periods. For the six months ended
December 31, 1999, we also recorded a one-time benefit in the amount of $2.0
million related to settlement agreements made with the Internal Revenue
Service for fiscal years 1994, 1995 and 1996.
NET (LOSS) INCOME. As a result of the foregoing, we incurred a net loss
of $10.0 million for the quarter ended December 31, 1999, as compared to a net
loss of $485,000 for the quarter ended December 31, 1998. For the six months
ended December 31, 1999, we incurred a net loss of $15.6 million, as compared
to net income of $3.7 million for the six months ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, we had cash and cash equivalents of $1.7 million,
compared to $1.6 million at June 30, 1999, an increase of approximately
$100,000.
OPERATING ACTIVITIES. For the six months ended December 31, 1999, our
net cash used in operating activities was $37.4 million compared to $43.1
million for the six months ended December 31, 1998.
INVESTING ACTIVITIES. Our net cash used in investing activities was $2.3
million for the six months ended December 31, 1999, compared to net cash
provided by investing activities of $30.4 million for the six months ended
December 31, 1998. During the prior year, we collected $54.6 million on a note
receivable obtained as a result of a sale of our undeveloped phosphate rock
property. Investing activities for the prior year also included $3.4 million
related to our investment in Farmland MissChem Limited. During the current
year, our capital expenditures were $9.2 million compared to $21.7 million
during the prior year. Our current year expenditures included $2.1 million
related to the completion of our nitrogen expansion project at our Yazoo City
facility, and $7.1 million for normal improvements and modifications to our
facilities.
FINANCING ACTIVITIES. Our net cash provided by financing activities was
$39.8 million for the six months ended December 31, 1999, compared to $11.7
million for the six months ended December 31, 1998. During the current year,
the amounts provided by financing activities included $212.4 million in debt
proceeds. These proceeds were partially offset by $169.2 million in debt
payments and $3.4 million in cash dividends. During the prior year, the
amounts provided by financing activities included $285.7 million in debt
proceeds, partially offset by $254.5 million in debt payments, $5.3 million
in cash dividends and $14.1 million for the purchase of treasury stock.
In August 1997, we issued $14.5 million in industrial revenue bonds, a
portion of which were tax-exempt, to finance the development of our new
phosphogypsum disposal facility at our Pascagoula, Mississippi, DAP
manufacturing plant. On April 1, 1998, we issued $14.5 million in fully tax-
exempt industrial revenue bonds, the proceeds of which were used to redeem the
initial industrial revenue bonds issued in August 1997. The bonds issued on
April 1, 1998, mature on March 1, 2022, and carry a 5.8% fixed rate. The bonds
may be redeemed at our option at a premium from March 1, 2008, to February 28,
2010, and may be redeemed at face value at any time after February 28, 2010,
through the maturity date.
On November 25, 1997, we issued $200.0 million of 7.25% Senior Notes (the
"Notes") due November 15, 2017. The holders 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.
We have an unsecured revolving credit facility (the "Facility") with
Harris Trust and Savings Bank and a syndicate of other commercial banks
totaling $200.0 million. This Facility is a five-year facility which matures
on November 25, 2002, and bears interest at rates related to the Prime Rate,
the London Interbank Offered Rate or Federal Funds Rate. At December 31, 1999,
we had $135.0 million outstanding under the Facility.
We have reached an agreement with the Facility lenders to modify the
Facility in a manner that we believe, when combined with our operating cash
flow, will satisfy our anticipated operating and capital requirements through
fiscal 2001 and significantly reduce the likelihood of future noncompliance
with the Facility's financial covenants. The modification includes a change
to the financial covenants that shifts the focus from our cash flow generation
(which has been impaired by the current industry down-cycle) to our balance
sheet by replacing the leverage covenant (which required us to maintain a
threshold ratio of cash flow to total debt) with a debt to capital covenant
(which prohibits us from exceeding a threshold ratio of debt to total capital).
In addition, the interest coverage covenant will be significantly less
restrictive. The modification permits quarterly cash dividends at our current
level of $0.03 per common share if we maintain a certain ratio of earnings
before interest, taxes, depreciation, and amortization to interest and
prohibits us from repurchasing our shares outstanding. As part of the
modification, the Facility lenders will be granted limited security interests
in substantially all of our assets, as allowed by the Senior Notes Indenture.
The modification, which is expected to increase our near-term borrowing costs
under the Facility by approximately 100 basis points, should be in place before
March 31, 2000.
We estimate our capital expenditure requirements for the remainder of
fiscal 2000 to be approximately $15.0 million. The great majority of the
anticipated capital expenditures are for essential improvements and
modifications to our facilities.
In authorizations granted in May 1995, March 1996, and September 1998,
our board of directors authorized the purchase of up to 8,000,000 shares of
our common stock in the open market, in privately negotiated transactions or
otherwise at prices and at times determined by us to be appropriate. As of
October 31, 1998, we had repurchased a total of 3,700,009 shares pursuant to
those authorizations. No shares have been repurchased since that date.
YEAR 2000
We did not experience, nor do we anticipate experiencing, any significant
problems related to Year 2000 issues. Our total cost to date related to Year
2000 issues is approximately $300,000.
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 our
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, (i) the relative unpredictability of international and
local economic conditions, (ii) changes in matters which affect the supply and
demand of fertilizer products, (iii) weather, (iv) the volatility of the
natural gas market, (v) environmental regulation, (vi) price competition from
both domestic and international competitors, (vii) possible unscheduled plant
outages and other operating difficulties, and (viii) other important factors
affecting the fertilizer industry and us as detailed under "Outlook and
Uncertainties" and elsewhere in our most recent annual report on Form 10-K
which is on file with the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
We are exposed to market risk, including changes in interest rates and
natural gas prices. To manage the risks related to these exposures, we enter
into derivative transactions. We do not hold or issue derivative financial
instruments for trading purposes. We maintain formal policies with respect to
entering into and monitoring derivative transactions. The derivative
transactions are intended to hedge our future natural gas and interest costs.
For more information about how we manage specific risk exposures, see Note 14 -
Hedging Activities, and Note 7 - Credit Agreements and Long-Term Debt, in our
Notes to Consolidated Financial Statements contained in our Annual Report for
the fiscal year ended June 30, 1999.
At June 30, 1999, we estimated the fair value of our fixed rate Senior
Notes using an interest rate equal to 2% above the effective yield on U.S.
Treasury Notes with similar maturities. Based on current market quotes for
securities similar to the Senior Notes, we now believe the fair value of our
fixed rate Senior Notes would be lower than the fair value estimated at
June 30, 1999. We also believe that at December 31, 1999, the fair value of
our obligation related to our interest rate swap agreements had decreased
from the fair value we estimated at June 30, 1999, due to the swap agreements
approaching maturity in May 2000.
We use natural gas futures contracts to reduce the impact of changes in
natural gas prices. We prepared a sensitivity analysis to estimate our market
risk exposure arising from these instruments. The fair value of open contracts
was 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 market prices. We estimate that this adverse change in prices would have
reduced the fair value of open contracts by $2.2 million at December 31, 1999.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Two matters were voted on by our shareholders at the annual meeting of
shareholders held on November 9, 1999. Shareholders reelected Haley Barbour,
W. R. Dyess, David M. Ratcliffe and Wayne Thames to our Board of Directors.
Voting tabulations for elections of the above directors were:
<TABLE>
Name For Against Withheld
---- --- ------- --------
<S> <C> <C> <C>
Haley Barbour 20,102,183 0 1,530,872
W. R. Dyess 20,136,516 0 1,496,539
David M. Ratcliffe 20,137,709 0 1,495,346
Wayne Thames 20,133,774 0 1,499,280
</TABLE>
Shareholders also approved the adoption of the Amended and Restated 1994
Stock Incentive Plan by a vote of 12,699,034 for, 5,895,369 against, and 92,495
abstained.
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
10.1 Amended and Restated 1994 Stock Incentive Plan
10.2 Amended and Restated Executive Deferrred
Compensation Plan
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: February 11, 2000 /s/ Timothy A. Dawson
----------------- -------------------------
Timothy A. Dawson
Senior Vice President and
Chief Financial Officer
Date: February 11, 2000 /s/ Rosalyn B. Glascoe
----------------- -------------------------
Rosalyn B. Glascoe
Corporate Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains year-to-date summary financial information extracted from
Mississippi Chemical Corporation fiscal 2000 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 1,734
<SECURITIES> 0
<RECEIVABLES> 57,040
<ALLOWANCES> 1,973
<INVENTORY> 88,902
<CURRENT-ASSETS> 170,316
<PP&E> 840,506
<DEPRECIATION> 381,889
<TOTAL-ASSETS> 894,442
<CURRENT-LIABILITIES> 54,750
<BONDS> 214,500
0
0
<COMMON> 280
<OTHER-SE> 400,989
<TOTAL-LIABILITY-AND-EQUITY> 894,442
<SALES> 204,310
<TOTAL-REVENUES> 204,310
<CGS> 203,024
<TOTAL-COSTS> 222,508
<OTHER-EXPENSES> (1,281)
<LOSS-PROVISION> (70)
<INTEREST-EXPENSE> 12,656
<INCOME-PRETAX> (29,573)
<INCOME-TAX> (14,012)
<INCOME-CONTINUING> (15,561)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,561)
<EPS-BASIC> (0.60)
<EPS-DILUTED> (0.06)
</TABLE>
MISSISSIPPI CHEMICAL CORPORATION
AMENDED AND RESTATED
1994 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this Stock Incentive Plan (the "Plan") is to
enable Mississippi Chemical Corporation (the "Company") to offer certain
officers and other key employees of the Company and its subsidiaries
performance-based incentives and other equity interests in the Company, thereby
attracting, retaining and rewarding such employees and strengthening the
mutuality of interest between such employees and the Company's shareholders.
2. Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company (the "Board of Directors")
or by such other committee of the Board of Directors designated by the Board
of Directors for such purpose. The Compensation or other Committee
administering this Plan (the "Committee") shall be comprised solely of two or
more individuals who are each a "nonemployee director" as defined in Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
also an "outside director" within the meaning of Treasury Regulation
Section 1.162-27(e)(3) (the "Committee"). The Committee will approve the
forms of agreements relating to the benefits granted hereunder, containing
such terms and conditions consistent with the provisions of this Plan as are
determined by the Committee, which agreements may be executed on behalf of the
Company by the Chief Executive Officer or any Vice President of the Company.
Notwithstanding the foregoing, the Committee shall have exclusive authority to
make and administer grants to individuals who are or may reasonably be expected
to become "covered employees," as defined in Section 162(m)(3) of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), which are
intended to qualify as performance-based compensation under Code
Section 162(m)(4)(C).
The Committee will have complete authority to construe, interpret and
administer the provisions of this Plan and the provisions of the agreements
relating to the benefits granted hereunder; to prescribe, amend and rescind
rules and regulations pertaining to this Plan; and to make all other
determinations necessary or deemed advisable in the administration of the Plan.
The determinations, interpretations and constructions made by the Committee are
final and conclusive. No member of the Committee may be held liable for any
action taken, or failed to be taken, made in good faith relating to the Plan or
any benefit hereunder, and the members of the Committee will be entitled to
defense, indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including attorneys' fees) arising therefrom to
the fullest extent permitted by law and by the Articles of Incorporation of the
Company. Except to the extent prohibited by applicable law or the applicable
rule of a stock exchange, the Committee may delegate all or any part of its
responsibilities and powers with respect to nonofficer participants to the
Chief Executive Officer of the Company or any other person selected by it,
which delegation may be revoked at any time.
3. Eligibility. Benefits under the Plan may be granted to any officer
or other key employee of the Company or one of its subsidiaries on the basis
of the special importance of their services in the management, development
and/or operations of the Company and its subsidiaries. For these purposes, a
subsidiary includes any corporation, partnership or other entity that is a
"subsidiary corporation" (as that term is defined in Code Section 424(f)) with
respect to the Company.
4. Benefits. The benefits that may be granted under the Plan consist of
(a) stock options, (b) stock appreciation rights, and (c) stock awards.
5. Shares Reserved. There is hereby reserved for issuance under the
Plan an aggregate of 3,400,000 shares of common stock of the Company, subject
to adjustment pursuant to Section 13 below, which may be authorized but
unissued or treasury shares. All of such shares may, but need not, be issued
pursuant to the exercise of incentive stock options. The maximum number of
shares that may be covered by benefits granted to any one participant in any
fiscal year is 200,000 shares, subject to adjustment pursuant to Section 13
below. No more than 160,000 shares, subject to adjustment pursuant to
Section 13 below, may be issued as stock awards hereunder. If there is a
lapse, expiration, termination or cancellation of any option prior to the
issuance of shares thereunder, or if shares are issued and thereafter are
reacquired by the Company pursuant to rights reserved upon issuance thereof,
those shares may again be used for new awards under this Plan. Notwithstanding
the foregoing, subject to adjustment pursuant to Section 13 below, no more than
200,000 shares may be subject to stock options or stock appreciation rights
that are intended to be "performance-based compensation," as that term is
used in Section 162(m) of the Code, granted to any one participant in any
fiscal year; solely for purposes of this limitation, options or stock
appreciation rights that are cancelled continue to count against the limit,
and options or stock appreciation rights that are repriced are treated as if
they had been cancelled and new grants made.
6. Stock Options. Stock options shall consist of options to purchase
shares of common stock of the Company. Certain options granted under this Plan
are intended to qualify as "incentive stock options" pursuant to Code Section
422, while certain other options granted under the Plan will constitute
nonqualified options, in each case as determined by the Committee. The
exercise price for any stock option shall be not less than 100% of the fair
market value of the common stock of the Company on the date the stock option is
granted; provided, however, that, if the participant owns on the date of grant
more than 10% of the total combined voting power of all classes of stock of the
Company or its parent or any of its subsidiaries (a "10% Holder"), as more
fully described in Section 422(b)(6) of the Code or any successor provision,
the exercise price for any incentive stock option granted to the 10% Holder
must not be less than 110% of the fair market value of the common stock of the
Company on the date of grant. The aggregate fair market value (determined as
of the time the stock option is granted) of the shares of common stock with
respect to which incentive stock options are exercisable for the first time by
a participant during any calendar year (under all plans of the employer of
such participant and its parent and subsidiary corporations as defined in
Section 424(e) and (f) of the Code, or a corporation or a parent or subsidiary
corporation of such corporation issuing or assuming a stock option in a
transaction to which Section 424(a) of the Code applies) may not exceed
$100,000 or such other amount as from time to time provided in Section 422(d)
of the Code or any successor provision.
Upon exercise, the exercise price may be paid by check or, in the
discretion of the Committee, by the delivery of shares of common stock of the
Company then owned by the participant. A participant may also use cashless
exercise as permitted under Regulation T, 12 CFR Part 220, or any successor
provision ("Regulation T"), if the shares to be purchased are covered by an
effective registration statement under the Securities Act of 1933, as amended.
Under Regulation T, any stock option granted under the Plan may be exercised by
a broker-dealer acting on behalf of a participant if (a) the broker-dealer has
received from the participant or the Company a fully- and duly-endorsed
agreement evidencing such stock option, together with instructions signed by
the participant requesting the Company to deliver the shares subject to such
stock option to the broker-dealer on behalf of the participant and specifying
the account into which such shares should be deposited, (b) adequate provision
has been made with respect to the payment of any withholding taxes due upon
such exercise, and (c) the broker-dealer and the participant have otherwise
complied with Section 220.3(e)(4) of Regulation T.
Stock options will become exercisable at such time or times and
subject to such terms and conditions as may be determined by the Committee at
the time of grant; provided, however, that no stock option may be exercisable
prior to six months after the option grant date and no incentive stock option
may be exercisable later than ten years after the grant date, or five years for
any incentive stock option granted to a 10% Holder. The terms and conditions
under which a benefit may be exercised after a participant's termination of
employment will be determined by the Committee, except as otherwise provided
herein. The conditions under which such post-termination exercises may be
permitted with respect to incentive stock options must be determined in
accordance with the provisions of Section 422 of the Code and as otherwise
provided in this Section 6 above.
7. Stock Appreciation Rights. Stock appreciation rights may be granted
in conjunction with the grant of any nonqualified stock option granted
hereunder and shall be subject to such terms and conditions consistent with the
Plan as the Committee shall impose from time to time, including the following:
(a) A stock appreciation right may be granted with respect to a
stock option at the time of its grant or at any time thereafter up to six
months prior to its expiration;
(b) Stock appreciation rights will permit the holder to surrender
any related stock option or portion thereof which is then exercisable and elect
to receive in exchange therefor cash in an amount equal to:
(i) The excess of the fair market value on the date of such
election of one share of common stock over the option price, multiplied by
(ii) The number of shares issuable upon exercise of such option
or portion thereof which is so surrendered.
(c) The Committee shall satisfy a participant's right to receive the
amount of cash determined under paragraph (b) hereof in whole or in part by
delivering shares of the common stock of the Company equal in value to such
amount as of the date of the participant's election.
(d) In the event of the exercise of a stock appreciation right, the
number of shares reserved for issuance hereunder shall be reduced by the number
of shares covered by the stock option or portion thereof surrendered.
8. Stock Awards. Stock awards will consist of the grant of shares of
common stock of the Company to participants without other payment therefor as
additional compensation for their services to the Company or one of its
subsidiaries. A stock award shall be subject to such terms and conditions as
the Committee determines appropriate including, without limitation,
restrictions on the sale or other disposition of such shares, the right of the
Company to reacquire such shares upon termination of the participant's
employment within specified periods and conditions requiring that the shares
be earned in whole or in part upon the achievement of performance goals or
other objective criteria established by the Committee over a designated period
of time. The Committee may designate whether the grant of any stock award is
intended to be "performance-based compensation," as that term is used in
Section 162(m) of the Code, which stock award must be conditioned on the
achievement of one or more performance measures established by the Committee.
The performance measures established by the Committee may include earnings per
share, total return on shareholder equity, or such other goals as may be
established by the Committee in its discretion. For stock awards intended to
be "performance-based compensation," the grant of the stock award and the
establishment of the performance measures must be made during the period
required under Section 162(m) of the Code.
9. Transferability. Incentive stock options granted under this Plan may
not be transferred other than by will or the laws of descent and distribution,
and each incentive stock option may be exercised during the participant's
lifetime only by the participant or the participant's guardian or legal
representative. Participants may transfer nonqualified stock options and stock
awards only as provided by the Committee.
10. Change in Control. In the event of a change in control of the
Company, all outstanding stock options and stock appreciation rights shall
become immediately exercisable and all stock awards shall immediately vest with
all performance goals deemed fully achieved. For these purposes, change in
control means the occurrence of any of the following events, as a result of one
transaction or a series of transactions:
(a) any "person" (as that term is used in Sections 13(d) and 14(d)
of the Exchange Act, but excluding the Company, its affiliates and any
qualified or nonqualified plan maintained by the Company or its affiliates)
becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 20% of the combined voting power of the Company's then
outstanding securities;
(b) individuals who constitute a majority of the Board of Directors
immediately prior to a contested election for positions on the Board of
Directors cease to constitute a majority as a result of such contested
election;
(c) the Company is combined (by merger, share exchange,
consolidation, or otherwise) with another entity and, as a result of such
combination, less than 75% of the outstanding securities of the surviving or
resulting entity are owned in the aggregate by the former shareholders of the
Company; or
(d) the Company sells, leases, or otherwise transfers all or
substantially all of its properties or assets to another person or entity.
Notwithstanding the foregoing, benefits payable on a change of control shall
be limited so that no excess parachute payments, as defined in Code Section
280G(b)(1) occur, in accordance with such additional provisions as the
Committee includes in the award pursuant to Section 11 below.
11. Other Provisions. The award of any benefit under the Plan may also
be subject to other provisions (whether or not applicable to the benefit
awarded to any other participant) as the Committee determines appropriate,
including such provisions as may be required to comply with federal or state
securities laws and stock exchange requirements and understandings or
conditions as to the participant's employment.
12. Fair Market Value. The fair market value of the Company's common
stock at any time shall be determined in such manner as the Committee may deem
equitable or as required by applicable law or regulation.
13. Adjustment Provisions.
(a) If the Company at any time changes the number of issued shares
of common stock without new consideration to the Company (such as by stock
dividend or stock split), the total number of shares reserved for issuance
under this Plan and the number of shares covered by each outstanding benefit
hereunder shall be adjusted to the number of shares as is equitably required,
together with an appropriate adjustment to the exercise price of stock options
so that the aggregate consideration payable to the Company, if any, upon
exercise of such option will not be changed.
(b) Notwithstanding any other provision of this Plan, and without
affecting the number of shares reserved or available hereunder, the Board of
Directors may authorize the issuance or assumption of benefits in connection
with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate.
(c) In the event of any merger, consolidation or reorganization of
the Company with any other entity, there may be substituted, on an equitable
basis as determined by the Committee, for each share of common stock then
reserved for issuance under the Plan and for each share of common stock then
subject to a benefit granted under the Plan, the number and kind of shares of
stock, other securities, cash or other property to which holders of common
stock of the Company will be entitled pursuant to the transaction.
14. Taxes. The Company shall be entitled to withhold the amount of any
tax attributable to any shares deliverable under the Plan after giving the
person entitled to receive the shares notice as far in advance as practicable
and the Company may defer making delivery as to any benefit if any such tax is
payable until indemnified to its satisfaction. The Committee may, in its
discretion and subject to rules that it may adopt, permit a participant to pay
all or a portion of the taxes arising in connection with any benefit under the
Plan by electing to have the Company withhold shares of common stock from the
shares otherwise deliverable to the participant, having a fair market value
equal to the amount to be withheld.
15. Term of Plan; Amendment, Modification or Cancellation of Benefits.
The Plan will be unlimited in duration and, in the event of termination of the
Plan, will remain in effect as long as any benefits granted hereunder remain
outstanding; provided, however, that no incentive stock option may be granted
more than ten years after the date of the approval of this Plan by the
shareholders of the Company, or the date of approval of this amendment and
restatement for incentive stock options granted based upon the increase in
shares affected by such amendment and restatement. The terms and conditions
applicable to any benefits granted prior to termination of the Plan may at any
time be amended or cancelled by mutual agreement between the Committee and the
participant or any other persons as may then have an interest therein and may
be unilaterally modified by the Committee whenever such modification is deemed
necessary to protect the Company or its shareholders.
16. Amendment or Discontinuation of Plan. The Board of Directors may
amend the Plan at any time, provided that no such amendment shall be effective
unless approved within 12 months after the date of the adoption of such
amendment by the affirmative vote of a majority of the shareholders. The Board
of Directors may suspend the Plan or discontinue the Plan at any time;
provided, however, that no such action may adversely affect any outstanding
benefit.
17. Shareholder Approval. The Plan was adopted by the Board of Directors
on August 2, 1994, and was approved by the shareholders on November 9, 1994.
This amendment and restatement of the Plan was adopted by the Board of
Directors on July 22, 1999, subject to shareholder approval. This amendment
and restatement of the Plan and any benefits granted based upon such amendment
and restatement will be null and void if shareholder approval is not obtained
at the next annual meeting of shareholders.
MISSISSIPPI CHEMICAL CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 2000
TABLE OF CONTENTS
SECTION PAGE
1. Introduction...................................................1
1.1 Plan.....................................................1
1.2 Effective Date...........................................1
1.3 Purpose..................................................1
2. Participation and Supplemental Benefits........................1
2.1 Eligibility..............................................1
2.2 Election to Defer........................................2
2.3 Amount of Deferral.......................................2
2.4 Time of Election.........................................2
2.5 Establishment and Adjustment of Deferred Stock Accounts..2
3. Payment of Deferred Compensation...............................3
3.1 Payment of Deferred Compensation.........................3
3.2 Installment Election; Further Deferrals..................3
3.3 Death....................................................3
3.4 Hardship Distribution....................................4
3.5 Source of Payment........................................4
3.6 Limitations on Issuance of Stock.........................4
4. Plan Administration............................................4
4.1 Committee......................................................4
4.2 Indemnification..........................................5
5. General........................................................5
5.1 Interests not Transferable; Taxes........................5
5.2 Facility of Payment......................................5
5.3 Gender and Number........................................5
5.4 Controlling Law..........................................5
5.5 Successors...............................................5
5.6 Not a Contract...........................................6
6. Amendment, Termination and Cessation of Trading................6
6.1 Amendment and Termination................................6
6.2 Cessation of Trading in Employer Stock...................6
7. Execution of Plan..............................................6
<PAGE>
SECTION 1
INTRODUCTION
1.1 Plan. This plan has been established by Mississippi Chemical
Corporation for the benefit of eligible employees of Mississippi Chemical
Corporation, Mississippi Chemical Management Company and Mississippi Chemical
Company, L.P. (hereinafter collectively referred to as the "Employer"), and
shall be known as the Mississippi Chemical Corporation Executive Deferred
Compensation Plan (the "Plan"). Other subsidiaries and affiliates of
Mississippi Chemical may adopt this Plan for the benefit of any of their
employees, subject to the approval of the Committee (as defined in Section 4.1
below).
1.2 Effective Date. The Plan was originally adopted effective
August 26, 1997, subject to shareholder approval of the material terms of the
Plan in accordance with Section 162(m)(4)(C) of the Internal Revenue Code of
1986, as amended (the "Code"), which occurred on November 11, 1997. The Plan
is hereby amended and restated, effective January 1, 2000.
1.3 Purpose. This Plan has been established to provide incentives to a
select group of the Employer's executive officers and key employees to more
closely align their interests with those of the shareholders of Mississippi
Chemical Corporation and to work towards growth in the Employer's shareholder
value, by risking certain payments otherwise payable to them for deferred
compensation based on the value of Mississippi Chemical Corporation common
stock ("Stock"). This Plan is intended to permit such executive officers and
key employees to elect to defer certain incentive payments that would otherwise
be payable pursuant to the Employer's Officer and Key Employee Incentive Plan,
any payment that would otherwise be made under any "all-employee"
profit-sharing plan of the Employer or of a subsidiary or affiliate of
Mississippi Chemical Corporation which has adopted this Plan with the approval
of the Committee, and under any other bonus, profit-sharing or incentive plan
of the Employer or of a subsidiary or affiliate of Mississippi Chemical
Corporation which has adopted this Plan with the approval of the Committee
(hereinafter collectively referred to as "Incentive Payments") and to elect to
defer a portion of their salary. This Plan is intended to provide additional
incentives to such executive officers and key employees to more closely align
their interests with those of the shareholders of Mississippi Chemical
Corporation and work towards growth in the Employer's shareholder value by
risking compensation otherwise payable to them for deferred compensation
based on future growth in the value of Stock. This Plan is intended to be
unfunded for purposes of the Code and the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). Amounts deferred under this Plan that
would otherwise be payable under the Officer and Key Employee Incentive Plan
are intended to qualify as qualified performance-based compensation under
Code Section 162(m)(4)(C) and related Treasury regulations, and this Plan
shall be interpreted accordingly.
SECTION 2
PARTICIPATION AND SUPPLEMENTAL BENEFITS
2.1 Eligibility. Each executive officer and key employee of the
Employer who is named in writing by the Committee ("Executive") will be
eligible to become a Participant under this Plan. Eligibility shall be
limited to a select group of management or highly compensated employees in
accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
2.2 Election to Defer. An Executive may elect to defer (a) all or a
portion of his Incentive Payments or (b) any percentage or dollar amount, up to
10 percent of the salary that would otherwise be payable to him, by filing a
written election with the Committee on forms to be prescribed by the Committee
at the time prescribed in Section 2.4 below. Such election must include a
designation of beneficiary. Upon making such election, the Executive shall
become a "Participant" in this Plan.
2.3 Amount of Deferral. The amount of Incentive Payments and the amount
of salary to be deferred in any calendar year shall be designated by the
Participant in dollar or percentage terms on forms to be prescribed by the
Committee.
2.4 Time of Election. A separate election to defer must be filed for
each calendar year in which a Participant desires to defer any Incentive
Payments and/or salary, and must be received by the end of the calendar year
preceding the calendar year in which the Incentive Payments and/or salary would
otherwise be paid. Any election by a Participant with respect to a given
calendar year will not preclude a different action with respect to any
subsequent calendar year. Notwithstanding the foregoing, any eligible Executive
may, within 30 days of first becoming eligible to participate in this Plan,
elect to defer any Incentive Payments and/or salary earned subsequent to such
election for the balance of the calendar year in which he first becomes
eligible.
2.5 Establishment and Adjustment of Deferred Stock Accounts. The
Committee shall cause a "Deferred Stock Account" to be created for each
Participant. The Deferred Stock Account shall be a mere bookkeeping account
reflecting the Employer's future obligation to make payments under this Plan,
and shall not confer on any Participant any of the rights of a stockholder of
Mississippi Chemical Corporation. A Participant's Deferred Stock Account shall
be credited with "deferred shares" effective as of the date payment of a cash
Incentive Payment and/or salary would have been made, absent the Participant's
election to defer such amount pursuant to this Plan. The number of "deferred
shares" to be credited shall be determined by dividing (a) 150 percent of the
dollar amount of the Incentive Payment and/or salary that otherwise would have
been payable to the Participant by (b) the fair market value of one share of
Stock as of the July 1 immediately prior to the calendar year in which payment
of the Incentive Payment and/or salary would otherwise have occurred.
Notwithstanding the foregoing, in no event shall the number of deferred shares
credited be less than (i) 150 percent of the dollar amount of the cash
Incentive Payment and/or salary the Participant has elected to defer, divided
by (ii) the fair market value of one share of Stock as of the date such
Incentive Payment and/or salary would otherwise have been paid in cash. The
result of such division shall be rounded up to the nearest whole share.
A Participant's Deferred Stock Account shall be credited, effective as of the
payment date of any dividend on the Stock, with additional shares of deferred
stock, calculated by dividing (x) the dollar amount of the dividend per share
times the number of deferred shares then credited to the Participant's
Deferred Stock Account by (y) the fair market value of one share of Stock.
The Committee shall cause each Participant's Deferred Stock Account to be
adjusted to reflect stock splits, stock dividends, exchange of stock in
connection with a merger, and similar transactions to produce the same
number of deferred shares as the holder of an equal number of shares of
Stock would have following such a transaction. Whenever payment of all or any
portion of a Participant's Deferred Stock Account is to be made in cash
hereunder, the amount of cash to be paid to the Participant is to be
determined by multiplying the number of deferred shares to be distributed by
the fair market value of such shares. For purposes of this Section 2.5,
"fair market value" of a share of Stock shall equal the average of the
closing prices of a share as reported on the New York Stock Exchange for the
last 20 trading days prior to the date in question.
SECTION 3
PAYMENT OF DEFERRED COMPENSATION
3.1 Payment of Deferred Compensation. Subject to the provisions of
Section 3.2, a Participant shall be entitled to receive shares of Stock equal
to the number of deferred shares then credited to the Participant's Deferred
Stock Account, computed in accordance with Section 2.5 above, on the first to
occur of (a) 30 days following the end of the calendar year in which such
Participant ceases to be an employee of the Employer due to separation of
employment, retirement, Total Disability (as defined below), or death or
(b) the payment date that he elected at the time of his deferral election,
which date shall be equal to or more than 18 months after the date of the
deferral election. The shares issued to the Participant may be authorized and
previously unissued shares or Treasury shares. For purposes of this Plan, the
term "Total Disability" shall mean inability to perform the normal functions
of his current position with the Company due to a physical or mental condition,
disease, or injury that is anticipated to last at least 12 months. The
Committee shall determine whether Total Disability has occurred based on such
evidence as it deems satisfactory.
3.2 Installment Election; Further Deferrals. Subject to the approval of
the Committee, in lieu of receiving the lump-sum issuance of Stock to which the
Participant may be entitled pursuant to the provisions of Section 3.1 above at
the time specified therein, a Participant may elect to receive installment
payments by delivering to the Committee at any time prior to December 31 of the
calendar year preceding the calendar year in which payment would otherwise
occur hereunder, written notice of the Participant's election to receive the
amount credited to his Deferred Stock Account in such number of annual
installments (not to exceed installments extending over 10 years) and
commencing on such date (which date shall be no earlier than the date on which
the balance in the Participant's Deferred Stock Account would otherwise be
paid to the Participant) as is specified in the written notice. Subject to
the approval of the Committee, a Participant may also elect, no later than
December 31 of the calendar year preceding the calendar year in which issuance
of shares of Stock would otherwise occur under Section 3.1 above, to defer
issuance of such shares of Stock until a later date specified in such election.
A Participant may modify or rescind an installment election or further deferral
election in its entirety at any time prior to the December 31 date referred to
in this Section 3.2, but on such December 31 the election shall become
irrevocable.
3.3 Death. If a Participant dies before receiving all amounts credited
to his Deferred Stock Account, the entire unpaid amount shall be paid in one
(1) lump sum in accordance with Section 3.1 above to the beneficiary designated
by such Participant. No beneficiary designation shall be valid unless it is in
writing, signed by the Participant, dated and filed with the Committee prior to
death. Any beneficiary designation may be revoked and a new designation may be
made, as long as the new designation is in writing, signed by the Participant,
dated and filed with the Committee prior to death. If no beneficiary has been
designated, or no designated beneficiary survives the Participant, any unpaid
amounts will be paid to the Participant's surviving spouse, or if the
Participant does not have a surviving spouse, to the Participant's estate as
soon as administratively possible.
3.4 Hardship Distribution. A Participant or beneficiary may request
acceleration of the payment terms hereunder only in the event of severe
financial hardship resulting from an Unforeseeable Emergency (as defined
below). The amount of the hardship distribution is limited to the amount
necessary to meet the emergency. Such request shall specify in detail the
grounds for the requested modification and shall be referred to the Committee.
The decision of the Committee with respect to the requested modification shall
be solely at the discretion of the Committee and in accordance with its
evaluation of the exigencies of the situation. Such decision shall be binding
on the Employer and Participant. For purposes of this Plan, the term
"Unforeseeable Emergency" means an unanticipated emergency that is caused by
an event beyond the control of the Participant or beneficiary that would result
in severe financial hardship to the individual if early withdrawal were not
permitted and that otherwise meets the requirements of such term in any
applicable statute or regulation.
3.5 Source of Payment. All payments under this Plan in cash pursuant to
Section 3.6 below shall be paid from the general funds of the Employer or from
such other funding vehicle as the Committee shall provide, and all
distributions of Stock under this Plan shall be made from authorized but
unissued shares, Treasury shares or shares purchased with general funds of the
Employer, or from such other funding vehicle as the Committee shall provide,
provided that all assets paid into any funding vehicle shall, at all times
prior to payment to a Participant or beneficiary, be subject to the general
creditors of the Employer. The Employer shall be under no obligation to
segregate any assets in connection with the maintenance of any Deferred Stock
Account, nor shall anything contained in this Plan or any action taken
pursuant to this Plan create or be construed to create a trust of any kind or
a fiduciary relationship between the Employer and Participant. Title to the
beneficial ownership of any assets, whether cash or investments, which the
Employer may designate to pay the amounts credited to the Deferred Stock
Accounts shall at all times remain in the Employer, and Participants shall not
have any property interest whatsoever in any specific assets of the Employer.
Each Participant's interest in his Deferred Stock Account shall be limited to
the Employer's promise to make payment of such Account in the future pursuant
to terms of this Plan, and such right to receive future payment shall be no
greater than the right of any other unsecured general creditor of the
Employer.
3.6 Limitations on Issuance of Stock. Notwithstanding anything to the
contrary in this Plan, in lieu of issuing Stock of the Employer to a
Participant, the Employer reserves the right to pay a Participant in cash equal
to the fair market value (determined in accordance with Section 2.5 above) of
the deferred shares credited to his Deferred Stock Account, if the Employer, in
its sole discretion, determines that it is necessary or desirable to do so to
comply with any provision of federal or state law, stock exchange listing
rules, or its articles or bylaws.
SECTION 4
PLAN ADMINISTRATION
4.1 Committee. The terms "Committee" and "Compensation Committee" mean
the Compensation Committee established by Mississippi Chemical Corporation's
Board of Directors. The Committee shall have complete authority to control and
manage the operation and administration of this Plan. The Committee shall
interpret this Plan and shall determine all questions arising in the
administration and interpretation of this Plan; however, all such
interpretations and decisions shall be applied in a uniform manner to all
similarly situated Participants. All decisions and interpretations of the
Committee made in good faith pursuant to this Plan shall be final, conclusive
and binding on all persons, subject only to the claims review procedures
required by ERISA.
4.2 Indemnification. In the event and to the extent not insured under
any contract of insurance with an insurance company, the Employer shall
indemnify and hold harmless each Indemnified Person, as defined below, against
any and all claims, demands, suits, proceedings, losses, damages, interest,
penalties, fines, expenses (specifically including, but not limited to, counsel
fees to the extent approved by the Board of Directors of Mississippi Chemical
Corporation or otherwise provided by law, court costs and other reasonable
expenses of litigation), and liability of every kind, including amounts paid in
settlement with the approval of the Board of Directors, arising from any action
or cause of action related to the Indemnified Person's act or acts or failure
to act. Such indemnity shall apply regardless of whether such claims, demands,
suits, proceedings, losses, damages, interest, penalties, fines, expenses, and
liability arise in whole or in part from (a) the negligence or other fault of
the Indemnified Person or (b) from the imposition on such Indemnified Person of
any civil penalties or excise tax pursuant to ERISA or the Code; except when
the same is judicially determined to be due to gross negligence, fraud,
recklessness, or willful or intentional misconduct of such Indemnified Person.
The indemnification provided in this Section 4.2 shall not be construed to
limit or supersede any other indemnity provided by the Employer. "Indemnified
Person" shall mean the Committee and each employee, officer, or director of
the Employer acting in a decision-making or administrative role with respect
to this Plan.
SECTION 5
GENERAL
5.1 Interests Not Transferable; Taxes. Except as to any withholding of
federal, state or local tax and except with respect to assignment of amounts
currently due and payable hereunder to an alternate payee pursuant to a
"qualified domestic relations order" as defined in ERISA, the interest of any
Participant or his spouse or his beneficiary under this Plan is not subject to
the claims of creditors and may not be voluntarily or involuntarily sold,
transferred, assigned, alienated or encumbered. The Committee shall have the
discretion and sole authority to determine the amount and timing of any
withholding or employment taxes with respect to amounts accrued or paid under
this Plan.
5.2 Facility of Payment. Any amounts payable hereunder to any person
under legal disability or who, in the judgment of the Committee, is unable to
properly manage his financial affairs may be paid to the legal representative
of such person or may be applied for the benefit of such person in any manner
which the Committee may select.
5.3 Gender and Number. Where the context admits, words in the
masculine gender shall include the feminine gender, the plural shall include
the singular and the singular shall include the plural.
5.4 Controlling Law. To the extent not superseded by the laws of the
United States, the laws of Mississippi shall be controlling in all matters
relating to this Plan.
5.5 Successors. This Plan is binding on the Employer and will be
binding on, and inure to the benefit of, any successor of the Employer, whether
by way of purchase, merger, consolidation or otherwise.
5.6 Not a Contract. This Plan does not constitute a contract of
employment and shall not be construed to give any Participant the right to be
retained in the Employer's service.
SECTION 6
AMENDMENT, TERMINATION
AND CESSATION OF TRADING
6.1 Amendment and Termination. While the Employer expects to continue
this Plan indefinitely, the Compensation Committee must necessarily reserve,
and hereby reserves, the right to terminate this Plan at any time and to amend
this Plan at any time, but no more than once in any six-month period, except to
comport with changes in the Code, provided that in no event shall any
Participant's Deferred Stock Account accrued to the date of such amendment or
termination be reduced by such action without the specific written agreement of
the Participant to such modification or reduction. In the event the Committee
elects to terminate this Plan, the Employer reserves the right to settle all
liabilities under this Plan by paying each Participant a lump-sum payment in
cash or in Stock, determined at the Committee's sole election, in full
satisfaction of his benefits hereunder. Such lump sum shall equal the value of
his Deferred Stock Account valued through the date of Plan termination pursuant
to Section 2.5 above.
6.2 Cessation of Trading in Employer Stock. Notwithstanding anything
to the contrary in this Plan, in the event the Stock permanently ceases to be
traded on a national stock exchange or over the counter for any reason other
than a merger with another publicly traded entity, or ceases to exist for any
reason other than a merger (whether due to liquidation or other event), within
sixty (60) days of such event, the Employer (or its successor) shall distribute
to each Participant (or beneficiary) the value of the entire balance of his
Deferred Stock Account in cash, based on the fair market value as calculated
under Section 2.5 above, as of the last date the Stock was traded.
SECTION 7
EXECUTION OF PLAN
To record the amendment and restatement of this Plan, the undersigned,
being duly authorized to act on behalf of the Compensation Committee of the
Board of Directors of Mississippi Chemical Corporation, have executed this
document at Yazoo City, Mississippi.
Dated: November 23, 1999 MISSISSIPPI CHEMICAL CORPORATION
By:________________________________
John Sharp Howie
Chairman, Compensation Committee
By:________________________________
Ethel Truly
Vice President - Administration
