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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended MARCH 31, 1995
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
_____ to _____
Commission file number 0-17399
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NU-WEST INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
a Delaware corporation 82-0415557
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8400 East Prentice Avenue, Suite 1320
Englewood, Colorado 80111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 721-1396
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
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of April 30, 1995, there were approximately 8,086,280 shares of the
registrant's common stock outstanding.
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(in thousands)
March 31, 1995 June 30,
ASSETS (Unaudited) 1994
--------------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 222 $ 1,137
Receivables, net of allowance for doubtful
accounts of $259,000 and $311,000 12,080 9,543
Inventories 22,070 18,888
Deferred turnaround costs 1,249 1,397
Prepaid expenses and other current assets 1,015 990
-------- --------
Total current assets 36,636 31,955
PROPERTY, PLANT AND EQUIPMENT, less
accumulated depreciation and amortization 37,573 38,793
DEFERRED FINANCING FEES 9,119 9,717
DEFERRED COSTS AND OTHER ASSETS 5,142 3,720
-------- --------
Total assets $ 88,470 $ 84,185
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 5,035 $ 5,262
Accounts payable 1,961 1,456
Accrued liabilities 6,417 8,506
-------- --------
Total current liabilities 13,413 15,224
LONG-TERM DEBT 60,273 60,589
OTHER LIABILITIES 229 141
DEFERRED INCOME TAXES 731 924
-------- --------
Total liabilities 74,646 76,878
STOCKHOLDERS' EQUITY
Preferred stock, Class A, $100 par value,
290,000 shares authorized and outstanding 29,000 29,000
Preferred stock, Class B, $100 par value,
20,000 shares authorized, 344 and 362 shares
outstanding, respectively 34 36
Common stock, $.01 par value, 16,666,667 shares
authorized, 8,086,280 shares outstanding 81 485
Additional paid-in capital 46,972 46,566
Accumulated deficit (62,263) (68,780)
-------- --------
Total stockholders' equity 13,824 7,307
-------- --------
Total liabilities and
stockholders' equity $ 88,470 $ 84,185
======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
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NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATION
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
1995 1994 1995 1994
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net sales $26,317 $26,017 $ 76,075 $ 67,619
Cost of sales 19,238 20,790 58,841 57,870
------- ------- -------- --------
Gross margin 7,079 5,227 17,234 9,749
Selling, general and
administrative expense 1,266 1,364 3,442 3,449
------- ------- -------- --------
Income from operation 5,813 3,863 13,792 6,300
Interest expense 2,407 2,152 7,141 6,459
Other (income) expense, net 21 89 134 56
------- ------- -------- --------
Income (loss) before extra-
ordinary item, minority
interest and income taxes 3,385 1,622 6,517 ( 215)
Minority interest - - - 56
Income taxes - - - -
------- ------- -------- --------
Net income (loss) before extra-
ordinary item 3,385 1,622 6,517 ( 159)
Extraordinary loss from early
extinguishment of debt - - - ( 1,660)
------- ------- -------- --------
Net income (loss) 3,385 1,622 6,517 ( 1,819)
Preferred dividend
requirements ( 799) ( 798) (2,395) ( 2,393)
------- ------- -------- --------
Net income (loss) applicable to
common shareholders $ 2,586 $ 824 $ 4,122 (4,212)
======= ======= ======== ========
Net income (loss) before extra-
ordinary loss per common share $.28 $.12 $.46 $ ( .51)
Extraordinary item - - - ( .33)
------- ------- -------- --------
Net income (loss) per common
share $.28 $.12 $.46 $ ( .84)
======= ======= ======== ========
Weighted average common stock
and equivalents outstanding 9,091 7,174 8,993 4,988
======= ======= ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
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NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended March 31, 1995
(in thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED STOCK PREFERRED STOCK PAID-IN ACCUMULATED
CLASS A CLASS B COMMON STOCK CAPITAL DEFICIT
---------------- ----------------- ---------------------- ---------- ------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- ------- -------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, 290,000 $29,000 362 $36 48,517,677 $ 485 $46,566 $(68,780)
June 30, 1994
Preferred stock
surrendered (18) (2) 2
Reverse stock
split (40,431,397) (404) 404
Net income 6,517
------- ------- -------- ------- ------------- ------- ---------- ------------
Balance,
March 31, 1995 290,000 $29,000 344 $ 34 8,086,280 $81 $46,972 $(62,263)
======= ======= ======== ======= ============= ======= ========== =============
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
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NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands)
For the Nine For the Nine
Months Ended Months Ended
March 31, 1995 March 31, 1994
(Unaudited) (Unaudited)
--------------- ---------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING
ACTIVITIES
Net income (loss) $ 6,517 $ (1,819)
Depreciation, depletion and amortization 4,214 4,111
Interest paid in kind 2,096 1,006
Amortization of loan fees and discounts 1,122 1,287
Write off of loan fees and discounts - 1,560
Other (52) 62
Changes in operating assets and
liabilities ( 7,259) (16,107)
-------- --------
Net cash provided by (used for)
operating activities 6,638 ( 9,900)
CASH FLOWS PROVIDED BY (USED FOR) INVESTING
ACTIVITIES
Capital expenditures ( 4,584) ( 1,744)
Proceeds from sale of fixed assets 8 -
Proceeds from collection of long-term
note 81 -
-------- --------
Net cash provided by (used for)
investing activities ( 4,495) ( 1,744)
CASH FLOWS PROVIDED BY (USED FOR) FINANCING
ACTIVITIES
Proceeds from revolving lines of
credit 8,300 48,399
Principal payments on revolving
lines of credit ( 8,300) (42,339)
Proceeds from long-term debt 960 43,250
Principal payments on long-term debt ( 4,018) (35,122)
Proceeds from issuance of common stock - 61
-------- --------
Net cash provided by (used for)
financing activities ( 3,058) 14,249
-------- --------
NET INCREASE (DECREASE) IN CASH ( 915) 2,605
CASH AT BEGINNING OF PERIOD 1,137 92
-------- --------
CASH AT END OF PERIOD $ 222 $ 2,697
======== ========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
Cash paid for interest $ 4,016 $ 5,277
Cash paid for income taxes 193 432
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
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NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission, and reflect all adjustments which are, in the opinion of
management, necessary to present fairly the results for the interim periods, on
a basis consistent with the annual audited statements. The adjustments made
were of a normal recurring nature except as otherwise disclosed herein. Certain
information, accounting policies, and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. These
financial statements should be read in connection with the financial statements
and the summary of significant accounting policies and notes thereto included in
the Form 10-K filed by the Company for the year ended June 30, 1994.
(2) REVERSE STOCK SPLIT
On November 15, 1994 the stockholders of the Company authorized a reverse stock
split of one share of newly issued Common Stock for five, six, or eight shares
of existing Common Stock. On that same date, the Board of Directors approved a
one-for-six reverse stock split to be effective at the close of business on
December 9, 1994. Accordingly, the Restated Certificate of Incorporation was
amended to reduce the number of authorized shares of common stock to 16,666,667.
Every six shares of common stock outstanding on the effective date were
reclassified into one share of common stock. All per share amounts in this
report reflect the effect of this reverse stock split.
(3) INVENTORIES
Inventories are stated at the lower of first-in, first-out cost or market (net
realizable value) and include the cost of materials, labor and manufacturing
overhead. Inventories consisted of the following: (in thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
--------- --------
<S> <C> <C>
Finished goods $ 5,988 $ 3,705
Work in progress 2,559 2,885
Raw materials 9,987 8,894
Supplies 3,536 3,404
------- -------
$22,070 $18,888
======= =======
</TABLE>
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<PAGE>
(4) NET INCOME (LOSS) PER COMMON SHARE
Net income or loss per common share is computed by dividing earnings applicable
to common shareholders by the weighted average of common and common equivalent
shares outstanding during the period. The weighted average number of common
and common equivalent shares include shares issued and shares issuable under
dilutive stock options and warrants giving retro-active effect to the reverse
stock split which was effective on December 9, 1994 (See Note 2). The effect of
the Company's common stock equivalents was anti-dilutive at March 31, 1994.
(5) SYNTHETIC SILICA BUSINESS
Summarized financial information for the segment of the Company's business which
NuTec Mineral and Chemical Company represents is as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
1995 1994 1995 1994
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net sales to unaffiliated
customers $ - $ 8 $ - $ 145
Net loss 172 127 466 1,040
Depreciation and amortization - - - 60
Capital expenditures - 2 - 29
Identifiable assets as of
March 31, - - 5,198 5,282
</TABLE>
(6) STOCK OPTION PLANS
On November 15, 1994, the stockholders of the Company approved the Nu-West
Industries, Inc. 1994 Employee Stock Incentive Plan and the Nu-West Industries,
Inc. Nonemployee Director Stock Option Plan. On November 22, 1994, the Board of
Directors granted incentive stock options for an aggregate of 260,833 shares of
Common Stock to 50 employees. The exercise price of the options is $6.375 per
share, which was the closing price of the common stock on the NASDAQ/National
Market on November 22, 1994 as adjusted for the reverse stock split which was
effective on December 9, 1994. Consequently, the options are noncompensatory.
Forty per cent of the options become exercisable on January 1, 1997 and twenty
per cent become exercisable on each of January 1, 1998, 1999 and 2000.
-7-
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(7) COMMITMENTS AND CONTINGENT LIABILITIES
Environmental: The Company is subject to federal, state and local environmental
laws and regulations. Significant costs could be incurred on account of these
environmental laws and regulations in the future. Most of the Company's
environmental expenditures and potential costs are or would be in response to
provisions of various federal environmental laws, particularly the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the
Comprehensive Environmental Response, Compensation and Liability Act (aka
"Superfund") and the land use, air, surface and ground water, and hazardous
waste regulations of the State of Idaho.
The phosphoric acid process water and calcium sulfate or "phosphogypsum" handled
at the Company's Conda Plant are currently exempt from regulation as a
"hazardous waste" under Subtitle C of the Resource Conservation and Recovery Act
("RCRA"). The EPA, with input from an advisory committee, is currently
evaluating potential improved processing, handling and storage measures for
phosphogypsum under provisions of the Toxic Substances Control Act and the RCRA.
The exact requirements of those potential future rules cannot be predicted with
certainty at this time but will likely affect the Company's handling of these
materials.
These materials are also regulated under Section 112 of the federal Clean Air
Act, which contains closure requirements for gypsum stacks that are no longer
used for water management and otherwise become deactivated. The Company does
not currently plan to deactivate any of its gypsum stacks under these
provisions.
The Company has been subject to normal periodic review under Superfund, and an
Expanded Site Inspection was recently completed by an EPA contractor. This
inspection included an initial site visit in August 1993, followed by well water
sampling and testing in March 1994. Based on the contractor's report, the EPA
notified the Company in October 1994 that no further action under the Federal
Superfund Program is currently recommended at the Conda Plant.
In March 1994, the EPA issued a Notice of Violation pertaining to a number of
excess SO\\2\\ emissions during the period from October 1989 to May 1993. The
Company has negotiated a settlement with the EPA, which is now pending final
federal court approval, that provides for the payment of a $150,000 fine and
reduced SO\\2\\ emissions limitations until November 1995, at which time the
Company will shut down the older of its two sulfuric acid plants. The Company
has entered into a five-year contract with Kennecott Utah Copper Corporation to
replace the production of this plant. (See Note 13 to the Company's June 30,
1994 Consolidated Financial Statements for further information.)
The Company has recently received a Notice of Violation from the EPA for alleged
violations under the Safe Drinking Water Act ("SDWA") relating to testing and
reporting on the quality of water used for human consumption from a public water
supply system at the Conda Plant. The Company has initiated testing of water
that potentially could be used for human consumption and believes, based on
discussions with agency officials, that no or only minimal civil penalties will
be assessed in connection with this matter. However, the Company has committed
to make improvements to its water supply system to comply with SDWA requirements
at a cost of approximately $100,000.
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<PAGE>
Mining Contract: On August 9, 1994, the Company entered into a Work Reduction
and Buy-Out Settlement Agreement with the third party general contractor who had
since 1972 performed the mining operations on the ore reserves owned by the
Conda Partnership. This amendment to the mining contract eliminates the
remaining minimum annual mining requirement and the required use of the general
contractor for ore handling functions at the Conda Plant, as well as certain
other modifications. The Company paid the general contractor $100,000 for the
modification of the contract and expects to save $1.0-1.5 million annually as a
result of these changes. The Company entered into a $1.2 million, five year
operating lease with Caterpillar Financial Services Corporation for equipment to
conduct the ore handling operations previously performed by the general
contractor. The annual minimum lease payments for this equipment are $213,000
for fiscal 1995, $273,000 for fiscal 1996, $249,000 for fiscal 1997 through 1999
and $83,000 for fiscal 2000.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
This discussion should be read in conjunction with Management's Discussion and
Analysis included in the Annual Report on Form 10-K filed by Nu-West Industries,
Inc. ("the Company") for the fiscal year ended June 30, 1994.
The Company is engaged in the production and sale of concentrated phosphate
fertilizer products. Its production facilities are located near Soda Springs,
Idaho (the "Conda Plant"), and its primary marketing area is western North
America. The fertilizer industry is a commodity-oriented business, and has
historically experienced wide-ranging volatility in prices due to supply and
demand imbalances both domestically and overseas. Government farm policies,
weather and disposable farm income, in addition to international politics and
economics with their effect on export demand, are among the factors contributing
to price volatility.
Prices for phosphate fertilizer products dropped to record low levels industry-
wide during the Company's fiscal year 1993. Beginning in the Fall of 1993, a
steady recovery of product prices began as a result of reduced production by
certain U.S. Gulf Coast manufacturers and improved export demand. The average
prices received for the Company's dry granular products were 13 - 19% higher
during the quarter ended March 31, 1995 compared to the previous year's quarter,
and prices for its liquid products increased approximately 9%. The combination
of product price gains and ore cost reductions, which offset other raw material
cost increases in conjunction with increased production, has enabled the Company
to post substantially improved operating earnings and net income for the quarter
and nine month period ended March 31, 1995.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1995 VS. QUARTER ENDED MARCH 31, 1994
Consolidated net income for the quarter ended March 31, 1995 was $3.4 million,
or $.28 per share after provision for preferred stock dividends. This compares
to $1.6 million, or $.12 per share after provision for preferred stock dividends
for the three months ended March 31, 1994. Included in the consolidated results
are losses from NuTec Mineral and Chemical Company ("NuTec") (net of minority
interest and including amortization of goodwill) of $236,000 and $127,000 for
the quarters ended March 31, 1995 and 1994, respectively.
Net sales increased 1% to $26.3 million for the current quarter compared to
$26.0 million for the corresponding quarter in the previous fiscal year.
Improved product prices caused an 11% increase in sales revenue which was offset
by a 10% decrease due to reduced sales volume. The decrease in sales volume
resulted from a 31% decrease in sales tons on a phosphoric acid ("P\\2\\O\\5\\")
basis of dry granular fertilizer products which was partially offset by a 2%
increase in
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<PAGE>
sales tons of liquid products. Weather conditions in the Spring of 1995 have
delayed crop planting and fertilizer application, resulting in reduced shipments
for the quarter ended March 31, 1995 as compared to shipments during the third
quarter of fiscal 1994. The planting season was early in the Spring of 1994 due
to dry weather conditions, particularly in the Western U.S. Sales of liquid
products accounted for 60% of net product sales for the quarter ended March 31,
1995 and 54% for the quarter ended March 31, 1994 and contributed a substantial
portion of gross margins in both periods.
The gross operating margin of $7.1 million for the quarter ended March 31, 1995
compares to a gross margin of $5.2 million for the comparable prior year
quarter. This increase in margin is due to improved product sales prices
discussed above and stable production costs. Production costs were the same for
both quarters despite a 121%, 33%, and 9% increase in sulfur, sulfuric acid and
ammonia, respectively, which are significant raw materials of the company's
products. These increases were offset by a 17% decrease in the cost of
phosphate rock, the principal raw material in the Company's products. This
decrease in the cost of phosphate rock resulted from savings due to the
purchase of rock from Rhone Poulenc Basic Chemical Company ("RP") under a seven
year purchase contract. (See Note 13 to the Company's Consolidated Financial
Statements for the year ended June 30, 1994 for further information). Also,
contributing to the decreased per ton costs was a 6% increase in production
volumes during the quarter ended March 31, 1995 as compared to those of the
quarter ended March 31, 1994 on a P\\2\\O\\5\\ basis.
Selling, general and administrative ("SGA") expense decreased $98,000 from the
prior fiscal year's quarter and decreased as a percentage of sales from 5.2% to
4.8%. Interest expense increased by $255,000 largely as a result of the
increase in the prime lending rate during fiscal 1995.
NINE MONTHS ENDED MARCH 31, 1995 VS. NINE MONTHS ENDED MARCH 31, 1994
Consolidated net income for the nine months ended March 31, 1995 was $6.5
million, or $.46 per share, as compared to a net loss of $159,000 or $.51 per
share, before the extraordinary loss from the write off of loan fees and
discounts for the nine months ended March 31, 1994. The total consolidated net
loss for the nine month period ended March 31, 1994 was $1.8 million, or $.84
per share, including the extraordinary loss of $1.7 million. Included in the
consolidated results are losses from NuTec Mineral and Chemical Company (net of
minority interest and including amortization of goodwill) of $650,000 and $1.0
million for the nine months ended March 31, 1995 and 1994, respectively.
Net sales were $76.1 million for the current period compared to $67.6 million
for the comparable prior year period, or a 13% increase. Improved product
prices caused the increase in sales revenue. Per ton sales prices of liquid
fertilizer products increased approximately 9% while the average prices for dry
granular products improved 18% for the period ended March 31, 1995 as compared
to the corresponding previous year's period. Sales of dry granular products on
a P\\2\\O\\5\\ ton basis decreased 10% during the nine months ended March 31,
1995 as compared to the same period ended March 31, 1994 which was partially
offset by a 6% increase in the sales of liquid fertilizer products. Sales of
liquid products accounted for 57% of net
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<PAGE>
product sales in the current period and 56% in the prior year period, and
contributed a substantial portion of gross margins in both periods.
The gross operating margin of $17.2 million for the nine months ended March 31,
1995 compares to a gross margin of $9.7 million for the comparable prior year
period. This improvement is a result of the higher product prices discussed
above. The per ton production costs of liquid fertilizer products was unchanged
for the nine months ended March 31, 1995 as compared to the same period ended
March 31, 1994 while increases in the per ton cost of the Company's dry granular
products ranged from 1 - 3%. Although the cost of phosphate ore for the nine
months ended March 31, 1995 decreased by 13% as compared to the nine months
ended March 31, 1994, the cost of sulfur, sulfuric acid and ammonia increased
56%, 71% and 11%, respectively. Production volume increased 3% for the period
ended March 31, 1995 as compared to the corresponding period ended March 31,
1994.
SGA expense was the same for the nine months ended March 31, 1995 as it was for
the period ended March 31, 1994 but decreased as a percentage of sales from 5.1%
to 4.5% as a result of the increase in sales revenue. Interest expense
increased $682,000 largely as a result of the change to variable rate debt
instruments as part of the Recapitalization Plan in November 1993 and the
increase in the prime lending rate during the nine months ended March 31, 1995.
(See Note 4 to the Company's Consolidated Financial Statements for the year
ended June 30, 1994 for further information.)
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities: Cash provided by operations for the nine months ended
March 31, 1995 was $6.6 million as compared to a use of cash of $9.9 million for
the period ended March 31, 1994. The Company's liquidity and profitability have
improved significantly during the past eighteen months as a result of higher
phosphate fertilizer prices and the realization of phosphate ore cost reduction.
Sales volumes and prices reflect good demand in the Company's market area.
Prices averaged 18% and 9% higher for dry and liquid products, respectively, for
the nine months ended March 31, 1995 than for the nine months ended March 31,
1994. Sulfur prices compared over the same periods are approximately 56%
higher, a result primarily of increased demand by the phosphate fertilizer
industry. Ammonia prices have risen during fiscal 1995 due to high demand for
and reduced supply of nitrogen fertilizers, and are expected to remain at
relatively high levels in future months. The Company expects further moderate
increases in its cost of sulfur and ammonia in the near term. Offsetting these
raw material cost increases, the Company expects continued savings from the
purchase of ore under the RP Agreement. The combined effect of higher product
prices and cost reduction efforts has been improved product margins and
significantly higher earnings.
Weather conditions during the quarter ended March 31, 1995 have delayed spring
planting and resulted in somewhat lower sales volumes for the quarter as
compared to the quarter ended March 31, 1994. Demand for phosphate fertilizer
products in the Company's market area has been good and the Company expects
moderately good product shipments during its fiscal fourth quarter in spite of
weather delays, based on current domestic market information. The outlook
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<PAGE>
for product prices industry-wide remains positive based on the need for
phosphates in both the United States and in foreign markets such as China, India
and South America. Increased buying in the international market has been a key
factor in the balancing of supply and demand that has led to reduced inventories
and product price recovery. It is difficult, however, to forecast the future
effect or duration of the near term buying patterns of China and India. The
Company's product prices continue to be directly related to those received by
producers of phosphate fertilizers in the U.S. Gulf Coast region, and the
uncertainties associated with the export market serviced by those producers.
Factors such as weather conditions, the timing and quantity of export demand,
and other unforeseeable market forces on a world-wide basis have frustrated
previous attempts to predict with accuracy a sustained recovery. In spite of
these uncertainties, the Company remains optimistic for continued price
stability in the months ahead based on demand within its market area and
reported expectations of near-term export shipments.
The Company finances its working capital needs through its revolving line of
credit. Working capital increased by $7.3 million due primarily to a $2.2
million increase in accounts receivable, a $3 million increase in inventories,
and a $2.2 million decrease in accrued liabilities. Accounts receivable have
increased due to the increased sales volume during the Spring planting season as
compared to June sales which are typically low immediately following the Spring
planting season. Inventories have increased due to increased finished good
inventory resulting from increased production rates and the delayed Spring
planting season as discussed above. Ore inventories are higher at March 31,
1995 than at June 30, 1994 due to unusually low levels at June 30, 1994
resulting from the transition to ore purchased under the RP contract. Accrued
liabilities decreased due to payments of expenses related to the RP contract.
The Company's revolving credit facility bears interest at prime plus 2% (11% at
March 31, 1995). Cash balances were $222,000 and unused borrowing capacity
totalled approximately $6.3 million. Outstanding borrowings were $8.7 million
at March 31, 1995. The Company had working capital of approximately $23.2
million and a current ratio of 2.73:1 at March 31, 1995. Based on current
projections, the Company expects results of operations to generate sufficient
borrowing capacity under its revolving line of credit to continue to meet its
working capital needs.
Investing Activities: Capital expenditures were $4.6 million for the nine months
ended March 31, 1995. Of this amount $1.2 million relates to the RP Agreement
and $1.0 million relates to construction of certain assets required by the
sulfuric acid purchase contract with Kennecott. (See Note 13 to the Company's
June 30, 1994 Consolidated Financial Statements for further information.)
Future capital expenditure requirements of the Company include an additional
$1.0 million required by the RP Agreement, approximately $3 million required by
the Kennecott Agreement and $2.5 million for the construction of a new double
lined cooling pond to be completed during the summer of 1995. In addition the
Company believes that approximately $2 million per year of estimated capital
expenditures, along with an approximate $4-5 million per year of annual
maintenance turnaround expenditures (included in cost of sales), will be
sufficient to maintain production capacity of the Conda Plant for the
foreseeable future.
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<PAGE>
Financing Activities: The capital expenditure requirements for the RP Agreement,
the new cooling pond and those required to maintain capacity will be funded from
the results of operations. The construction of the assets required by the
Kennecott contract will be financed by a five-year, $4 million loan from
Kennecott. Borrowings under this facility were $907,000 at March 31, 1995.
The Company has made $4 million in regularly scheduled principal payments on its
senior secured term loan during the nine months ended March 31, 1995.
Other: The Company has retained an investment banking firm to assist it in
exploring alternatives for enhancing long-term shareholder value. The
alternatives under consideration have not been limited, and could include
strategic relationships with other significant fertilizer producers and/or
customers, the sale or merger of the Company, the formation of a joint venture
with one or more parties, or the continuation of the Company's current business
plan to concentrate on internal growth. The Company has made no decision to
pursue any particular alternative, and no assurance can be given that any
transaction will result from this review and analysis.
PART II -- OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
See the Company's December 31, 1994 Form 10Q.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
27 Financial Data Schedule.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NU-WEST INDUSTRIES, INC.
Dated: May 5, 1995 /s/ MARK R. SANDERS
-------------------------------- -------------------------
Senior Vice President and
Chief Financial Officer
-15-
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NU-WEST
INDUSTRIES, INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
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<SECURITIES> 0
<RECEIVABLES> 12,339
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