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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 September 30, 1996
Commission File No. 0-16032
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
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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 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
--- ---
5,455,300 shares of Melamine Chemicals, Inc. common stock $.01 par value per
share were outstanding on October 21, 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.)
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Part I. Financial Information
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MELAMINE CHEMICALS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 7,523,587 5,529,644
Receivables:
Trade (net of allowance for doubtful debts of
$150,000 at September and June) 11,654,603 12,170,229
Income tax refund 0 24,877
Other 160,518 167,373
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Total receivables 11,815,121 12,362,479
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Inventories:
Finished goods 2,668,000 2,225,000
Supplies 262,089 288,300
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Total inventories 2,930,089 2,513,300
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Prepaid expenses:
Spare parts 2,372,654 2,357,090
Other 699,046 1,410
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Total prepaid expenses 3,071,700 2,358,500
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Deferred income taxes 1,522,315 1,522,315
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Total current assets 26,862,812 24,286,238
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Plant and equipment, at cost 46,966,019 46,860,949
Less accumulated depreciation 25,142,349 24,082,467
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Net plant and equipment 21,823,670 22,778,482
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Other assets 74,615 78,073
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$ 48,761,097 47,142,793
====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,756,226 3,175,843
Accrued expenses 1,228,226 1,518,082
Amounts due to related parties 1,117,129 1,227,711
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Total current liabilities 6,101,581 5,921,636
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Deferred income taxes 6,756,746 6,371,250
Stockholders' equity:
Preferred stock of $1 par value.
Authorized 2,000,000 shares; none issued 0 0
Common stock of $.01 par value. Authorized
20,000,000 shares; issued and outstanding 5,455,300 at
September and June 54,553 54,553
Additional paid-in capital 16,823,920 16,823,920
Retained earnings 19,024,297 17,971,434
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Total stockholders' equity 35,902,770 34,849,907
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$ 48,761,097 47,142,793
====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
September 30,
1996 1995
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<S> <C> <C>
Net sales $ 15,356,718 11,057,335
Cost of sales 12,974,553 8,941,794
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Gross profit 2,382,165 2,115,541
Selling, general and administrative expenses 868,257 748,507
Research and development costs 63,825 57,263
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Operating profit 1,450,083 1,309,771
Other income (expense):
Interest income 92,395 68,441
Miscellaneous 5,850 (24,946)
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Earnings before income taxes 1,548,328 1,353,266
Income tax expense 495,465 433,045
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Net earnings $ 1,052,863 920,221
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Earnings per common share:
Primary $ .19 .17
===================================================================================================
Fully diluted $ .19 .17
===================================================================================================
Weighted average shares outstanding 5,455,300 5,450,300
===================================================================================================
Dividends per common share $ 0.00 0.00
===================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
September 30,
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,052,863 920,221
Adjustments to reconcile net earnings
to net cash provided (used) by operating
activities:
Depreciation 1,059,882 921,125
Increase in deferred income taxes 385,496 310,519
Change in assets and liabilities:
Decrease (increase) in:
Receivables 547,358 1,858,555
Inventories (416,789) (2,848,113)
Prepaid expenses (713,200) (478,898)
Increase (decrease) in:
Accounts payable 580,383 886,913
Accrued expenses (289,856) (36,533)
Amounts due to related parties (110,582) 346,936
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Cash provided by operating activities 2,095,555 1,880,725
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Cash flows from investing activities:
Capital expenditures (105,070) (903,381)
`ecrease in other investing activities 3,458 2,074
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Cash used by investing activities (101,612) (901,307)
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Increase (decrease) in cash and cash equivalents 1,993,943 979,418
Cash and cash equivalents at beginning of period 5,529,644 5,458,494
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Cash and cash equivalents at end of period $ 7,523,587 6,437,912
=======================================================================================
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Income taxes $ 64,711 0
=======================================================================================
Interest $ 0 0
=======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements for the three-month periods ended
September 30, 1996 and 1995 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 an action seeking contribution to cleaning costs of a
Superfund site by plaintiff parties identified by the United States
Environmental Protection Agency. 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 first quarter of fiscal 1997, the Company's cash position
continued to improve. The cash balance has increased by almost $2 million
since the end of fiscal 1996. This improvement was caused primarily by
earnings and depreciation being a non-cash expense.
During the first quarter of fiscal 1997, the Company incurred capital
expenditures of only approximately $105,000. Capital expenditures are expected
to total approximately $2.0 million for the year. These capital expenditures
are expected to be funded out of operations, and any shortfall can be funded
from the Company's $7.5 million lines of credit.
During the first quarter of fiscal 1997, the amount of other prepaid
expenses increased by almost $700,000. The increase is attributable to the
timing of payments for certain items such as insurance.
Because of the relatively low inventory level and the scheduled
maintenance shut down, the Company purchased approximately 2.3 millions pounds
of melamine from a competitor at essentially the same price it was selling
product to its customers. In addition, the Company is committed to purchase an
additional 1.0 million pounds during the second quarter of fiscal 1997 at the
approximate price that it is to be sold to its customer.
Results of Operations
The results for the three-month periods ended September 30, 1996 and 1995
follow:
<TABLE>
<CAPTION>
Quarter Ended
September 30,
-----------------
1996 1995
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<S> <C> <C>
Sales:
Millions of pounds 28.7 20.7
Average price/pound 53.4(cent) 53.4(cent)
Production:
Millions of pounds 27.4 27.8
Cost of sales/pound 45.1 43.2(cent)
</TABLE>
5
<PAGE> 6
Sales volume for the first quarter of fiscal 1997 increased by 38% as
compared to the same period in fiscal 1996. The increase was due mainly to two
factors:
1. Fiscal 1997 reflects a continuing strong market for melamine worldwide;
and
2. Fiscal 1996 volume was low because the Company held back sales volume
to increase inventory in anticipation of a maintenance shut down
scheduled for the second quarter.
The cost of sales per pound in the three-months ended September 30, 1996
was almost 2(cent) per pound higher than in the same period last year. The
increase was due to:
1. Natural gas prices were 49% higher than the prior year and increased
cost of sales by 1.1(cent)per pound; and
2. Increased maintenance cost and depreciation expense accounted for most
of the remaining cost increase.
Selling, general and administrative expenses increased by 16% in the
first quarter of fiscal 1997 as compared to the first quarter of fiscal 1996.
The increase was due mostly to increased salary levels and increased travel
cost. During the first quarter of fiscal 1997, the Company ended its
association with its sales agent in Europe and appointed a new agent to act on
its behalf in Europe. In this connection, Company personnel traveled
extensively in Europe, visiting its customers to assist in the transition from
one agent to another.
Historically, the Company has taken one planned maintenance shut down in
the first or second quarter of each fiscal year. These shut downs generally
last between 2 - 3 weeks. During fiscal 1997, the Company has decided to take
two planned shut downs of shorter duration. In July 1996, the Company took a
maintenance shutdown of eight days and plans to take another short shut down
in the third or fourth fiscal quarter of fiscal 1997.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments during the quarter ended
September 30, 1996.
Item 6. Exhibits and reports on Form 8-K.
A. Page 7 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 October 14, 1996 with the press release
announcing results of operation for the first quarter of fiscal 1997.
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: October 21, 1996 /s/ Fred Huber
----------------------------------------
Fred Huber
President & Chief Executive Officer
Date: October 21, 1996 /s/ Wayne D. DeLeo
----------------------------------------
Wayne D. DeLeo
Vice President & Chief Financial Officer
7
<PAGE> 8
EXHIBIT INDEX
Exhibit
Number
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11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
COMPUTATION OF NET EARNINGS AND SHARES
USED IN ARRIVING AT NET EARNINGS PER SHARE
THREE MONTHS ENDED SEPTEMBER 30, 1996
Primary and Fully Diluted
Three Months Ended
September 30, 1996
------------------
Earnings:
Net earnings $ 1,052,863
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Less: Dividends on preferred stock ---
----------------
Net earnings applicable to common stock $ 1,052,863
================
Computation of weighted number of shares outstanding:
Shares outstanding on a diluted basis
5,455,300
================
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,523,587
<SECURITIES> 0
<RECEIVABLES> 11,815,121
<ALLOWANCES> 150,000
<INVENTORY> 2,930,089
<CURRENT-ASSETS> 26,862,812
<PP&E> 46,966,019
<DEPRECIATION> 25,142,349
<TOTAL-ASSETS> 48,761,097
<CURRENT-LIABILITIES> 3,756,226
<BONDS> 0
0
0
<COMMON> 54,553
<OTHER-SE> 35,902,770
<TOTAL-LIABILITY-AND-EQUITY> 48,761,095
<SALES> 15,356,718
<TOTAL-REVENUES> 15,356,718
<CGS> 12,974,553
<TOTAL-COSTS> 12,974,553
<OTHER-EXPENSES> (98,245)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,548,328
<INCOME-TAX> 495,465
<INCOME-CONTINUING> 1,052,863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,052,863
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
