<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, 1996
Commission File No. 0-16032
Melamine Chemicals, Inc.
- --------------------------------------------------------------------------------
(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 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 May 7, 1996. 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 9.)
<PAGE> 2
Part 1. Financial Information
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,819,609 $ 5,458,494
Receivables:
Trade (net of allowance for doubtful debts of
$150,000 at March and June) 12,279,097 9,571,751
Income taxes 24,877 401,770
Other 200,795 177,847
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Total receivables 12,504,769 10,151,368
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Inventories:
Finished goods 3,820,000 590,000
Supplies 212,276 208,683
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Total inventories 4,032,276 798,683
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Prepaid expenses:
Spare parts 2,447,149 2,239,262
Other 465,693 68,449
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Total prepaid expenses 2,912,842 2,307,711
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Deferred income taxes 1,610,161 1,610,161
Total current assets 24,879,657 20,326,417
Plant and equipment, at cost 47,111,137 43,730,930
Less accumulated depreciation 23,036,942 20,192,617
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Net plant and equipment 24,074,195 23,538,313
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Other assets 436,714 424,355
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49,390,566 $ 44,289,085
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 4,988,898 3,775,475
Accrued expenses 1,074,254 750,924
Amounts due to related parties 2,034,701 1,780,110
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Total current liabilities 8,097,853 6,306,509
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Deferred income taxes 6,488,739 5,888,013
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
5,455,300 at March and 5,450,300 at June 54,553 54,503
Additional paid-in capital 16,823,920 16,798,970
Retained earnings 17,925,501 15,241,090
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Total stockholders' equity 34,803,974 32,094,563
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49,390,566 $ 44,289,085
==============================================================================
</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,
1996 1995 1996 1995
------------ ---------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 14,787,330 12,155,554 $ 38,081,772 33,130,124
Cost of sales 12,659,886 9,959,210 31,788,290 27,041,847
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Gross profit 2,127,444 2,196,344 6,293,482 6,088,277
Selling, general and adm 901,932 793,523 2,444,482 2,261,435
Research and development costs 59,290 54,003 171,520 168,641
- --------------------------------------------------------------------------------
Operating profit 1,166,222 1,348,818 3,677,480 3,658,201
Other income (expense):
Interest income 67,230 19,466 415,415 31,004
Interest expense 0 0 0 (48,799)
Miscellaneous (85,309) 191,466 (145,232) 171,307
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Earnings before income taxes
1,148,143 1,559,479 3,947,663 3,811,713
Income tax (benefit) 367,406 (33,287) 1,263,252 777,517
- --------------------------------------------------------------------------------
Net earnings $ 780,737 1,592,766 $ 2,684,411 3,034,196
================================================================================
Earnings per common share:
Primary $ .14 .29 .49 .5
================================================================================
Fully diluted $ .14 .29 .49 .5
================================================================================
Weighted average shares 5,455,300 5,450,300 5,453,078 5,450,233
================================================================================
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,
1996 1995 1996 1995
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 780,737 1,592,766 $ 2,684,411 3,034,196
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 1,019,358 914,794 2,859,013 2,705,236
Increase in deferred income taxes 87,406 291,923 600,726 1,065,696
Gain on asset sale 0 (5,906) 0 (5,906)
Change in assets and liabilities:
Decrease (increase) in:
Receivables (4,183,650) (1,297,686) (2,353,401) (222,383)
Inventories (391,101) 314,182 (3,233,593) (55,616)
Prepaid expenses 499,354 453,117 (605,131) (207,795)
Increase (decrease) in:
Accounts payable 860,033 (282,001) 1,213,423 (614,427)
Accrued expenses 318,753 88,072 323,330 6,318
Amounts due to related parties 603,002 713,787 254,591 64,211
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Cash provided by operating activities (406,108) 2,783,048 1,743,369 5,769,530
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Cash flows from investing activities:
Capital expenditures (1,136,063) (440,720) (3,394,895) (929,009)
(Increase) in other assets (9,547) (20,634) (12,359) (30,782)
Proceeds from asset sale 0 8,025 0 8,025
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Cash (used) by investing activities (1,145,610) (453,329) (3,407,254) (951,766)
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Cash flows from financing activities:
(Repayment) of note payable 0 0 0 (2,000,000)
Proceed from exercise of stock options 0 0 25,000 1,575
Other financing activities 0 0 0 (303,276)
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Cash provided (used) by
financing activities 0 0 25,000 (2,301,701)
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Increase (decrease) in cash and cash equivalents (1,551,718) 2,329,719 (1,638,885) 2,516,063
Cash and cash equivalents at beginning
of period 5,371,327 544,165 5,458,494 357,821
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Cash and cash equivalents at end
of period $ 3,819,609 2,873,884 $ 3,819,609 2,873,884
=========================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 280,000 0 $ 540,000 0
=========================================================================================================================
Interest $ 0 7,227 $ 0 73,318
=========================================================================================================================
</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 six-month periods
ended March 31, 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 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 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 1996, the cash position of the Company
was reduced, primarily because of capital expenditures and an increase in trade
receivables. During the third quarter of fiscal 1996, the Company incurred
capital expenditures of approximately $1.1 million. Capital expenditures are
now expected to total approximately $3.7 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, all of which are currently available.
The level of trade receivables at March 31, 1996, was higher than at June
30, 1995 because of a larger percentage of sales to foreign customers where the
payment terms tend to be longer than the terms extended to domestic customers.
In addition, the net sales for the third quarter set a new sales record and
approximately 43% of the net sales occurred in the last month of the quarter.
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 nine-month periods ended March 31, 1996 and
1995 follow:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
March 31 , March 31,
-------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales:
Millions of pounds 26.9 25.5 69.8 75.8
Average price/pound 54.9c. 47.7c. 54.5c. 43.7c.
Production:
Millions of pounds 27.5 24.4 77.1 75.5
Cost of sales/pound 47.3c. 39.1c. 45.3c. 35.7c.
</TABLE>
5
<PAGE> 6
Sales volume for the quarter ended March 31, 1996 was higher than the same
quarter in fiscal 1995. The volume increase represents higher demand in the
foreign areas brought about by production problems experienced by competitors
in certain foreign areas. In addition, in February 1996, a major customer that
did not purchase from the Company during the entire second quarter of fiscal
1996 started purchasing product.
Sales prices for the quarter and the nine months ended March 31, 1996 were
much higher than the prior year because of stronger demand in both the U.S.
and Europe. However, during the second and third quarter of fiscal 1996, the
Company did sense weakening demand in the domestic market. It is not
anticipated that prices in the fourth quarter of fiscal 1996 will change
significantly from the third quarter level.
Production volume in the third quarter of fiscal 1996 was higher than in
the same period in the prior year. Production was negatively affected in the
third quarter of fiscal 1995 by an unscheduled maintenance shut down caused by
a power outage.
The cost of sales per pound in the three-months and nine-months ended March
31, 1996 was 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 and natural gas.
Raw material prices for the fourth quarter of fiscal 1996 are expected to
increase cost of sales by 1.3c. per pound as compared to the third fiscal
quarter. The Company does not expect to be able to increase prices to offset
this cost increase.
Selling, general and administrative expenses for the three months ended
March 31, 1996 were about 14% higher than for the same period last year. The
primary reasons for the increase were the addition of a salesman, an increase
in the estimated pension expense for the year and a number of individually
insignificant one-time charges.
Interest income for the three-months and nine-months ended March 31, 1996
increased as compared to the same periods in the prior year due to the
increased level of cash balances invested and also from $208,000 in interest
earned in the second fiscal quarter on tax refunds received from the Internal
Revenue Service.
Miscellaneous income decreased for the quarter and nine-months ended March
31, 1996 as compared to the same periods in the prior year due mainly to a
currency exchange loss in fiscal 1996 as compared to a currency exchange gain
in fiscal 1995.
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.
In fiscal 1992, the Company announced that it was beginning to evaluate the
feasibility of constructing a melamine plant in a joint venture with a
subsidiary of Norsk Hydro A.S. The Company has completed its evaluation and
expects that a final decision will be reached by the two joint venture partners
in the fourth quarter of fiscal 1996.
In August 1995, the Company announced that it was evaluating the
possibility of building a 66 million pound per year melamine plant near
Memphis, Tennessee. Since that date, the Company has spent or committed to
spend approximately $1.0 million in engineering and design of this project. If
a plant is constructed, this cost will be included in the cost of the project.
If it is decided not to build this plant, this cost will be expensed in the
period that decision is reached.
6
<PAGE> 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments during the quarter ended
March 31, 1996.
Item 6. Exhibits and reports on Form 8-K.
A. At page 9 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 15, 1996 with the press release
announcing results of operation for the third quarter of fiscal 1996.
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.
Melamine Chemicals, Inc.
----------------------------------------
(Registrant)
Date: May 7, 1995 /s/ FRED HUBER
----------------------------------------
Fred Huber
President & Chief Executive Officer
Date: May 7, 1995 /s/ WAYNE D. DELEO
----------------------------------------
Wayne D. DeLeo
Vice President & Chief Financial Officer
8
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Number
------ -----------
<S> <C> <C>
11 Statement re Computation of Per Share Earnings 10
27 Financial Data Schedule 11
</TABLE>
9
<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, 1996
Primary and Fully Diluted
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, 1996 March 31, 1996
------------------- -----------------
<S> <C> <C>
Earnings:
- --------
Net earnings $ 780,737 2,684,411
Less: Dividends on preferred stock --- ---
--------- ---------
Net earnings applicable to common stock $ 780,737 2,684,411
========= =========
Computation of weighted number of
shares outstanding:
- ---------------------------------------
Issued and outstanding 5,455,300;
weighted average 5,455,300 5,453,078
========= =========
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 3,819,609
<SECURITIES> 0
<RECEIVABLES> 12,504,769
<ALLOWANCES> 150,000
<INVENTORY> 4,032,276
<CURRENT-ASSETS> 24,879,657
<PP&E> 47,111,137
<DEPRECIATION> 23,036,942
<TOTAL-ASSETS> 49,390,455
<CURRENT-LIABILITIES> 8,097,853
<BONDS> 0
<COMMON> 54,553
0
0
<OTHER-SE> 34,803,974
<TOTAL-LIABILITY-AND-EQUITY> 49,390,566
<SALES> 38,081,772
<TOTAL-REVENUES> 38,081,772
<CGS> 31,788,290
<TOTAL-COSTS> 31,788,290
<OTHER-EXPENSES> 59,923
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,947,663
<INCOME-TAX> 1,263,252
<INCOME-CONTINUING> 2,684,411
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,684,411
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
