<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 December 31, 1995
Commission File No. 0-16032
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Melamine Chemicals, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 64-0475913
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Highway 18 West Donaldsonville, Louisiana 70346
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(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 473-3121
--------------
NOT APPLICABLE
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Former name, former address and former fiscal year, if changed since last
report.
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 preceeding 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
--- ---
5,455,300 shares of Melamine Chemicals, Inc. common stock $.01 par value per
share were outstanding on February 2, 1996. Registrant has no other class of
common stock outstanding.
(This document contains 9 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
MELAMINE CHEMICALS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1995
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 5,371,327 5,458,494
Receivables:
Trade (net of allowance for
doubtful debts of $150,000
at December and June) 8,093,180 9,571,751
Income tax refund 24,877 401,770
Other 203,062 177,847
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Total receivables 8,321,119 10,151,368
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Inventories:
Finished goods 3,424,000 590,000
Supplies 217,175 208,683
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Total Inventories 3,641,175 798,683
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Prepaid expenses:
Spare parts 2,478,135 2,239,262
Other 934,061 68,449
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Total prepaid expenses 3,412,196 2,307,711
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Deferred income taxes 1,610,161 1,610,161
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Total current assets 22,355,978 20,326,417
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Plant and equipment, at cost 45,989,762 43,730,930
Less accumulated depreciation 22,032,272 20,192,617
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Net plant and equipment 23,957,490 23,538,313
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Other assets 427,167 424,355
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$ 46,740,635 44,289,085
=================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,128,865 3,775,475
Accrued expenses 755,501 750,924
Amounts due to related parties 1,431,699 1,780,110
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Total current liabilities 6,316,065 6,306,509
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Deferred income taxes 6,401,333 5,888,013
Stockholders' equity:
Preferred stock of $1 par value.
Authorized 2,000,000 shares;
none issued 0 0
Common stock of $.01 par value.
Authorized 20,000,000 shares;
issued and outstanding 5,455,300
at December and 5,450,300 shares;
at June 54,553 54,503
Additional paid-in capital 16,823,920 16,798,970
Retained earnings 17,144,764 15,241,090
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Total stockholders' equity 34,023,237 32,094,563
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$ 46,740,635 44,289,085
=================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994
------------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 12,237,107 11,583,781 $ 23,294,442 $ 20,974,570
Cost of sales 10,186,610 9,250,623 19,128,404 17,082,637
- -------------------------------------------------------------------------------------------------------------------
Gross profit 2,050,497 2,333,158 4,166,038 3,891,933
Selling, general and administrative expenses 794,043 717,420 1,542,550 1,467,912
Research and development costs 54,967 55,265 112,230 114,638
- -------------------------------------------------------------------------------------------------------------------
Operating profit 1,201,487 1,560,473 2,511,258 2,309,383
Other income (expense):
Interest income 279,744 6,062 348,185 11,538
Interest expense 0 (7,351) 0 (48,799)
Miscellaneous (34,977) (50,806) (59,923) (19,888)
- -------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 1,444,254 1,508,378 2,799,520 2,252,234
Income tax 462,801 543,016 895,846 810,804
- -------------------------------------------------------------------------------------------------------------------
Net earnings $ 983,453 965,362 1,903,674 1,441,430
===================================================================================================================
Earnings per common share:
Primary $ .18 .17 .35 $ .26
===================================================================================================================
Fully diluted $ .18 .17 .35 $ .26
===================================================================================================================
Weighted average shares 5,453,633 5,450,300 5,451,967 5,450,200
===================================================================================================================
Dividends per common share $ 0.00 0.00 0.00 $ 0.00
===================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994
------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 983,453 965,362 1,903,674 1,441,430
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 918,530 903,218 1,839,655 1,790,442
Increase (decrease) in deferred income taxes 202,801 543,016 513,320 773,773
Change in assets liabilities:
Decrease (increase) in:
Receivables (28,306) (1,339,876) 1,830,249 1,075,303
Inventories 5,621 414,929 (2,842,492) (369,798)
Prepaid expenses (625,587) 343,191 (1,104,485) (660,912)
Increase (decrease) in:
Accounts payable (533,523) (555,964) 353,390 (332,426)
Accrued expenses 41,110 (126,194) 4,577 (81,754)
Amounts due to related parties (695,347) (396,216) (348,411) (649,576)
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Cash provided by operating activities 268,752 751,466 2,149,477 2,986,482
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Cash flows from financing activities:
Capital expenditures (1,355,451) (102,578) (2,258,832) (488,289)
(Increase) in other assets (4,886) (5,954) (2,812) (10,148)
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Cash (used) by investing activities (1,360,337) (108,532) (2,261,644) (498,437)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
(Repayment) from note payable 0 0 0 (2,000,000)
Proceeds from exercise of stock options 25,000 0 25,000 1,575
(Payments under) lease obligation 0 (285,778) 0 (303,276)
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Cash provided (used) by financing
activities 25,000 (285,778) 25,000 (2,301,701)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (1,066,585) 357,156 (87,167) 186,344
Cash and cash equivalents at beginning
of period 6,437,912 187,009 5,458,494 357,821
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,371,327 544,165 5,371,327 544,165
====================================================================================================================
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Income taxes $ 260,000 0 260,000 0
====================================================================================================================
Interest $ 0 21,029 0 66,091
====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements for the three and six-month
periods ended December 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. CONTINGENCIES
Various legal actions are pending against the Company which seek
relief or damages including actions seeking contribution to cleaning costs of
two Superfund sites by plaintiff parties identified by the United States
Environmental Protection Agency. During the second fiscal quarter of 1996, the
Company received from the United States Environmental Protection Agency a
settlement offer for the Superfund site located near Iota, Louisiana. The
Company has accepted the offer to settle for less than $1,000. While the final
outcome of the other action cannot be predicted with certainty at this time,
management believes, after consulting with cousel, 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 second quarter of fiscal 1996, the Company continued to
generate cash from operating activities. However, the cash position of the
Company was reduced, primarily because of capital expenditures. During the
second quarter of fiscal 1996, the Company incurred capital expenditures of
approximately $1.4 million. Capital expenditures are now expected to total
approximately $3.2 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.
The level of trade receivables at December 31, 1996, was lower than at
June 30, 1995 because of a smaller percentage of sales to foreign customers
where the payment terms tend to be longer than the terms extended to domestic
customers.
The level of inventory increased significantly as compared to June 30,
1995. The increase was the result of the Company's attempt to build inventory
from a one week supply to approximately a 30 day supply.
Results of Operations
The results for the three- and six-month periods ended December 31,
1995 and 1994 follow:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
December 31, December 31,
------------ ------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales:
Millions of pounds 22.2 27.3 42.9 50.3
Average price/pound 55.1 cents 42.4 cents 54.3 cents 41.7 cents
Production:
Millions of pounds 21.8 25.7 49.6 51.1
Cost of sales/pound 45.9 cents 33.9 cents 44.6 cents 33.9 cents
</TABLE>
5
<PAGE> 6
Sales volume for the quarter and the six months ended December 31,
1995 were lower than for the comparable period in fiscal 1995 primarily because
of the Company's attempt to increase its inventory level to more acceptable
levels. In addition, during the second quarter of fiscal 1996 the Company had
no sales to one of its customers which historically had accounted for
approximately 10% of total sales. This customer was obtaining melamine from a
competitor at lower prices than were offered by the Company. The Company has
received no purchase orders from that customer for the third fiscal quarter of
1996.
Sales prices for the quarter and the six months ended December 31,
1995 were much higher than the prior year because of stronger demand in both
the U.S. and Europe. However, during the second quarter of fiscal 1996, the
Company did sense weakening demand in the domestic market. it is not
anticipated that prices in the third quarter of fiscal 1996 will change
significantly from the second quarter level.
Production volume in the second quarter of fiscal 1996 was lower than
in the prior year and in the prior quarter. The decrease was due to the annual
maintenance shutdown taken in the quarter ended December 31, 1995.
The cost of sales per pound in the three-months and six-months ended
December 31, 1995 was more than 30% higher than in the same periods last year.
The increase as compared to last year was due almost entirely to an increase in
the price of raw materials.
Raw material prices for the third quarter of fiscal 1996 are expected
to increase cost of sales by 3.5 cents per pound as compared to the second
fiscal quarter. Additionally, increases in the price of natural gas are
expected to increase cost of sales by 1.5 cents per pound. The Company does
not expect to be able to increase prices to offset these cost increases.
Interest income for the three-months and six-months ended December 31,
1995 increased as compared to the same periods in the prior year. The increase
was due to the increased level of cash balances invested and also from $208,000
interest earned on tax refunds received from the Internal Revenue Services.
The effective tax rate in fiscal 1996 is expected to be 32% rather
than the 36% rate in fiscal 1995. The reduction in the rate is due to the
expected benefit of the Company's foreign sales corporation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
During the second fiscal quarter of 1996, the Company received from
the United States Environmental Protection Agency a settlement offer
for the Superfund site located near Iota, Louisiana. The Company has
accepted the offer to settle for less than $1,000.
There have been no other material developments during the quarter
ended December 31, 1995.
Item 6. Exhibits and reports on Form 8-K
A. 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 January 16, 1996 with the press release
announcing results of operation for the second quarter of fiscal 1996.
6
<PAGE> 7
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.
Melamine Chemicals, Inc.
-----------------------------------
(Registrant)
Date: February 2, 1996 /s/ Fred Huber
-----------------------------------
Fred Huber
President & Chief Executive Officer
Date: February 2, 1996 /s/ Wayne D. DeLeo
-----------------------------------
Wayne D. DeLeo
Vice President & Chief Financial
Officer
7
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER Description
- ------- -----------
<S> <C>
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
8
<PAGE> 1
EXHIBIT 11
COMPUTATION OF NET EARNINGS AND SHARES
USED IN ARRIVING AT NET EARNINGS PER SHARE
THREE AND SIX MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Primary and Fully Diluted
-------------------------
Three Months Ended Six Months Ended
December 31, 1995 December 31, 1995
----------------- -----------------
<S> <C> <C>
Earnings:
- --------
Net earnings $ 983,453 1,903,674
Less: Dividends on preferred stock -- --
----------- ---------
Net earnings applicable to common stock $ 983,453 1,903,674
----------- ---------
Computation of weighted number of
shares outstanding:
- ---------------------------------------
Shares outstanding on a diluted basis 5,453,633 5,453,633
=========== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,371,327
<SECURITIES> 0
<RECEIVABLES> 8,321,119
<ALLOWANCES> 150,000
<INVENTORY> 3,641,175
<CURRENT-ASSETS> 22,355,978
<PP&E> 45,989,762
<DEPRECIATION> 22,032,272
<TOTAL-ASSETS> 46,740,635
<CURRENT-LIABILITIES> 6,316,065
<BONDS> 0
<COMMON> 54,553
0
0
<OTHER-SE> 33,968,684
<TOTAL-LIABILITY-AND-EQUITY> 46,740,635
<SALES> 23,294,442
<TOTAL-REVENUES> 23,294,442
<CGS> 19,128,404
<TOTAL-COSTS> 19,128,404
<OTHER-EXPENSES> 59,923
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,799,520
<INCOME-TAX> 895,846
<INCOME-CONTINUING> 1,903,674
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,903,674
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
