<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1995
Commission File No. 0-16032
-------
Melamine Chemicals, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 64-0475913
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Highway 18 West Donaldsonville, Louisiana 70346
- --------------------------------------------------------------------------------
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 473-3121
----------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filled 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 of 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
----- -----
5,450,300 shares of Melamine Chemicals, Inc. common stock $.01 par value per
share were outstanding on May 1, 1995. Registrant has no other class of common
stock outstanding.
(This document contains 10 sequentially
numbered pages including exhibits,
indices, and financial statements, notes
to financial statements and schedules.
The exhibit index to this document is
located at page 8.)
<PAGE> 2
Part I. Financial Information
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, June 30,
1995 1994
---------------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,873,884 357,821
Receivables:
Trade (net of allowance for doubtful debts of
$150,000 at March and June) 9,650,806 9,279,871
Income taxes 325,211 529,822
Other 165,872 109,813
- -----------------------------------------------------------------------------------
Total receivables 10,141,889 9,919,506
- -----------------------------------------------------------------------------------
Inventories:
Finished goods 894,000 818,000
Supplies 204,123 224,507
- -----------------------------------------------------------------------------------
Total inventories 1,098,123 1,042,507
- -----------------------------------------------------------------------------------
Prepaid expenses:
Spare parts 2,107,596 2,260,376
Other 434,351 73,776
- -----------------------------------------------------------------------------------
Total prepaid expenses 2,541,947 2,334,152
- -----------------------------------------------------------------------------------
Deferred income taxes 1,115,513 1,115,513
- -----------------------------------------------------------------------------------
Total current assets 17,771,356 14,769,499
- -----------------------------------------------------------------------------------
Plant and equipment, at cost 42,918,228 42,022,996
Less accumulated depreciation 19,274,744 16,601,166
- -----------------------------------------------------------------------------------
Net plant and equipment 23,643,484 25,421,830
- -----------------------------------------------------------------------------------
Other assets 449,162 418,380
- -----------------------------------------------------------------------------------
$ 41,864,002 40,609,709
===================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 2,525,130 3,139,557
Accrued expenses 683,870 677,552
Current maturity of lease obligation 0 72,622
Amounts due to related parties 1,287,375 1,223,164
- -----------------------------------------------------------------------------------
Total current liabilities 4,496,375 5,112,895
- -----------------------------------------------------------------------------------
Note payable 0 2,000,000
Long-term portion of lease obligaton 0 230,654
Deferred income taxes 5,571,759 4,506,063
Stockholders' equity:
Preferred stock of $.01 par value.
Authorized 2,000,000 shares; none issued. 0 0
Common stock of $.01 par value. Authorized
20,000,000 shares; issued and outstanding 5,450,300
at March and 5,450,000 at June 54,503 54,500
Additional paid-in capital 16,798,970 16,797,398
Retained earnings 14,942,395 11,908,199
- -----------------------------------------------------------------------------------
Total stockholders' equity 31,795,868 28,760,097
- -----------------------------------------------------------------------------------
$ 41,864,002 40,609,709
===================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1995 1994 1995 1994
------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales $ 12,155,554 10,024,584 $ 33,130,124 27,707,451
Cost of sales 9,959,210 9,963,334 27,041,847 31,128,632
- -------------------------------------------------------------------------------------------
Gross profit (loss) 2,196,344 61,250 6,088,277 (3,421,181)
Selling, general and
administrative expenses 793,523 722,400 2,261,435 2,098,353
Research and development costs 54,003 28,844 168,641 112,936
- -------------------------------------------------------------------------------------------
Operating profit (loss) 1,348,818 (689,994) 3,658,201 (5,632,470)
Other income (expense):
Interest income 19,466 21,377 31,004 46,161
Interest expense 0 (82,123) (48,799) (264,784)
Sale of technology 0 1,715,240 0 1,715,240
Miscellaneous 191,195 39,434 171,307 177,270
- -------------------------------------------------------------------------------------------
Earnings (loss) before
income taxes 1,559,479 1,003,934 3,811,713 (3,958,583)
Income tax (benefit) (33,287) 361,416 777,517 (1,425,090)
- -------------------------------------------------------------------------------------------
Net earnings (loss) $ 1,592,766 642,518 $ 3,034,196 (2,533,493)
===========================================================================================
Earnings (loss) per common share:
Primary $ .29 .12 $ .55 (.46)
===========================================================================================
Fully diluted $ .29 .12 $ .55 (.46)
===========================================================================================
Weighted average shares 5,450,300 5,450,000 5,450,233 5,450,000
===========================================================================================
Dividends per common share $ 0.00 0.00 $ 0.00 0.00
===========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1995 1994 1995 1994
------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,592,766 642,518 $ 3,034,196 (2,533,493)
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 914,794 837,190 2,705,236 2,491,753
Increase (decrease) in deferred 291,923 340,205 1,065,696 (1,072,215)
income taxes
Gain on asset sale (5,906) (1,715,240) (5,906) (1,716,740)
Change in assets and liabilities:
Decrease (increase) in:
Receivables (1,297,686) (603,925) (222,383) (1,522,817)
Inventories 314,182 1,535,939 (55,616) 6,535,020
Prepaid expenses 453,117 15,249 (207,795) (507,456)
Increase (decrease) in:
Accounts payable (282,001) 93,006 (614,427) (755,147)
Accrued expenses 88,072 49,864 6,318 119,783
Amounts due to related parties 713,787 583,799 64,211 226,468
- --------------------------------------------------------------------------------------------------
Cash provided by operating
activities 2,783,048 1,778,605 5,769,530 1,265,156
- --------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (440,720) (253,003) (929,009) (1,129,463)
Decrease (increase) in other assets (20,634) 13,607 (30,782) (319,534)
Proceeds from asset sale 8,025 500,000 8,025 501,500
- --------------------------------------------------------------------------------------------------
Cash provided (used) by
investing activities (453,329) 260,604 (951,766) (947,497)
- --------------------------------------------------------------------------------------------------
Cash flows from financing activities:
(Repayment) of note payable 0 (1,750,000) (2,000,000) (250,000)
Proceed from exercise of stock options 0 0 1,575 0
Borrowings from (payments under) lease
obligation 0 (22,444) (303,276) 316,905
- --------------------------------------------------------------------------------------------------
Cash provided (used) by
financing activities 0 (1,772,444) (2,301,701) 66,905
- --------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 2,329,719 266,765 2,516,063 384,564
Cash and cash equivalents at beginning
of period 544,165 415,458 357,821 297,659
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of
period $ 2,873,884 682,223 $ 2,873,884 682,223
==================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 0 0 $ 0 478
==================================================================================================
Interest $ 7,227 55,417 $ 73,318 251,639
==================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements for the three and nine-month periods
ended March 31, 1995 and 1994 have not been audited by independent accountants,
but in the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the consolidated
balance sheet, consolidated statement of operations and consolidated statement
of cash flows at the dates and for the periods indicated have been made.
Results of operations for interim periods are not necessarily indicative of
results of operations for the respective full years.
2. INCOME TAXES
The Company has reached an agreement with the Internal Revenue Service
(IRS) in connection with their audit of fiscal years 1987 through 1994. The
IRS has allowed additional tax basis for certain assets purchased in fiscal
1987. The impact of the agreement is a net tax benefit of $594,700. The
Company expects to receive $325,000 in refunds in fiscal 1996 and the remainder
of the benefit will be realized in subsequent years. The tax benefit of the
agreement reached was recognized in the fiscal quarter ended March 31, 1995.
3. CONTINGENCIES
Various legal actions are pending against the Company which seek relief or
damages including an action seeking contribution to cleaning costs of a
Superfund site by plaintiff parties identified by the United States
Environmental Protection Agency (EPA). In addition, in March 1995, the Company
received notice that it had been named a potentially responsible party (PRP) at
another Superfund site located near Iota, Louisiana. The EPA is attempting to
recover approximately $4.7 million from approximately 350 PRP's, including the
Company. While the final outcome of these matters cannot be predicted with
certainty at this time, management believes, after consulting with counsel,
that the ultimate liability, if any, will not have a material effect on the
consolidated financial position and results of operations of the Company.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
During the third quarter of fiscal 1995, the Company's cash position and
working capital continued to improve. This improvement was caused primarily by:
- improved earnings; and
- a low level of capital expenditures in the third quarter.
During the third quarter of fiscal 1995, the Company incurred capital
expenditures of approximately $441,000. Capital expenditures are now expected
to total approximately $1.5 million for the year. While funds from operations
are expected to be adequate to pay for capital expenditures, any unexpected
shortfall can be funded from the Company's $7.5 million lines of credit which
expire on April 1, 1996. The Company has requested the banks to extend these
lines for one year. No response has been received as of the date of this
filing.
5
<PAGE> 6
Results of Operations
The results for the three- and nine-month periods ended March 31, 1995 and
1994 follow:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
March 31, March 31,
-------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales:
Millions of pounds 25.5 27.0 75.8 74.7
Average price/pound 47.7c. 37.1c. 43.7c. 37.1c.
Production:
Millions of pounds 24.4 23.0 75.5 57.8
Cost of sales/pound 39.1c. 36.8c. 35.7c. 42.7c.
</TABLE>
Sales volume for the third quarter of fiscal 1995 decreased as compared to
the third quarter of fiscal 1994 and as compared to the immediately preceding
quarter. Demand in both the U.S. and Europe is increasing as the economic
recovery continues. However, the Company is continuing to hold back on sales
volume because of the low level of inventory on hand. The Company hopes to
increase its inventory from its current level of about a two week supply.
Sales prices in the third quarter of fiscal 1995 were 29% higher than the
year before and 13% higher than the immediately preceding quarter. These
increases reflect the impact on demand of improving economies. Sales prices in
the next few quarters are expected to increase further as supply and demand
come more into balance and under the pressure of increasing raw material costs.
The Company expects to announce another overall price increase effective July
1, 1995.
The cost of sales per pound in the three-months ended March 31, 1995 was 6%
above the same period last year and 15% above the prior quarter. The increases
were mainly due to higher raw material prices.
Raw material prices for the fourth quarter of fiscal 1995 are expected to
increase cost of sales by 4.5c./pound as compared to the third fiscal quarter.
The Company will attempt to offset any raw material price increases by further
increasing sales prices, but the ultimate success of this effort is impossible
to predict.
During the nine months ended March 31, 1995, research and development costs
increased over the level of the same period in the previous year. While the
absolute dollar increase was not significant, the percentage increase reflects
the Company's increased research efforts in commercializing melamine modifiers
and finding new uses for melamine.
Interest expense for the three-months and nine-months ended March 31, 1995
decreased as compared to the same periods in the prior year. The decrease is
due to the decreased level of borrowing in fiscal 1995 as compared to fiscal
1994.
Miscellaneous income increased significantly for the quarter as compared to
the prior year and as compared to the prior quarter. All of the increase was
due to currency exchange gains recognized during the quarter because of the
weakening U.S. dollar.
The Company has reached an agreement with the Internal Revenue Service
(IRS) in connection with their audit of fiscal years 1987 through 1994. The
IRS has allowed additional tax basis for certain assets purchased in fiscal
1987. The impact of the agreement is a net tax benefit of $594,700. The
Company expects to receive $325,000 in refunds in fiscal 1996 and the remainder
of the benefit will be realized in subsequent years. The tax benefit of the
agreement reached was recognized in the fiscal quarter ended March 31, 1995.
6
<PAGE> 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments during the quarter ended
March 31, 1995.
Item 6. Exhibits and reports on Form 8-K.
A. At page 8 of this report is the index for those exhibits required to
be filed as part of this report.
B. A Form 8-K was filed on April 14, 1995 with the press release
announcing results of operation for the third quarter of fiscal 1995.
7
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
Melamine Chemicals, Inc.
----------------------------------------
(Registrant)
Date: May 1, 1995 /s/ Fred Huber
----------------------------------------
Fred Huber
President & Chief Executive Officer
Date: May 1, 1995 /s/ Wayne D. DeLeo
----------------------------------------
Wayne D. DeLeo
Vice President & Chief Financial Officer
</TABLE>
8
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
COMPUTATION OF NET EARNINGS AND SHARES
USED IN ARRIVING AT NET EARNINGS PER SHARE
THREE- AND NINE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
Primary and Fully Diluted
-------------------------
Three Months Ended Nine Months Ended
March 31, 1995 March 31, 1995
-------------- --------------
<S> <C> <C>
Earnings:
- --------
Net earnings $1,592,766 3,034,196
Less: Dividends on preferred stock --- ---
---------- ---------
Net earnings applicable to common stock $1,592,766 3,034,196
========== =========
Computation of weighted number of
shares outstanding:
- --------------------
Issued and outstanding 5,450,300;
weighted average 5,450,300 5,450,233
========== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000816955
<NAME> MELAMINE CHEMICALS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,873,884
<SECURITIES> 0
<RECEIVABLES> 10,141,889
<ALLOWANCES> 150,000
<INVENTORY> 1,098,123
<CURRENT-ASSETS> 17,771,356
<PP&E> 42,918,228
<DEPRECIATION> 19,274,744
<TOTAL-ASSETS> 41,964,002
<CURRENT-LIABILITIES> 4,496,375
<BONDS> 0
<COMMON> 54,503
0
0
<OTHER-SE> 31,741,365
<TOTAL-LIABILITY-AND-EQUITY> 41,864,000
<SALES> 12,155,554
<TOTAL-REVENUES> 12,155,554
<CGS> 9,959,210
<TOTAL-COSTS> 9,959,210
<OTHER-EXPENSES> (210,661)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,559,479
<INCOME-TAX> (33,287)
<INCOME-CONTINUING> 1,592,766
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,592,766
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
