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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
/ /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 1-13774
ARCADIAN CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 76-0275035
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
6750 POPLAR AVENUE, SUITE 600
MEMPHIS, TENNESSEE 38138-7419
(Address of principal executive offices)
(Zip Code)
(901) 758-5200
(Registrant's telephone number, including area code)
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 / /
At March 31, 1996, there were 32,385,233 outstanding shares of Common
Stock, par value $.01 per share, of Arcadian Corporation.
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<PAGE> 2
ARCADIAN CORPORATION
TABLE OF CONTENTS
FOR
QUARTERLY REPORT ON FORM 10-Q
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Page
----
<S> <C>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Independent Auditors' Report........................................................ 3
Condensed Consolidated Balance Sheet as of March 31, 1996, and December 31, 1995.... 4
Condensed Consolidated Statement of Operations for --
Three Months Ended March 31, 1996 and 1995....................................... 5
Condensed Consolidated Statement of Cash Flows for --
Three Months Ended March 31, 1996 and 1995....................................... 6
Notes to Condensed Consolidated Financial Statements................................ 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................................................... 11
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................................. 14
SIGNATURE............................................................................. 15
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
See next page.
2
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Arcadian Corporation:
We have reviewed the condensed consolidated balance sheet of Arcadian
Corporation and subsidiaries as of March 31, 1996, and the related condensed
consolidated statements of operations and cash flows for the three-month periods
ended March 31, 1996 and 1995, in accordance with standards established by the
American Institute of Certified Public Accountants.
A review of interim financial information consists principally of obtaining
an understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Arcadian Corporation and
subsidiaries as of December 31, 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated February 9, 1996, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1995, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG PEAT MARWICK LLP
Memphis, Tennessee
May 14, 1996
3
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ARCADIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1996 DECEMBER 31,
(UNAUDITED) 1995
($000) ($000)
----------- ------------
<S> <C> <C>
Cash and Cash Equivalents.......................................... $ 278,474 $ 202,738
Restricted Reserve Accounts........................................ 53,333 50,450
Accounts Receivable, Net........................................... 102,377 109,496
Inventories........................................................ 129,995 136,767
Other.............................................................. 5,080 6,569
---------- ----------
Total Current Assets..................................... 569,259 506,020
Property, Plant and Equipment, Net................................. 598,743 606,410
Goodwill, Net...................................................... 95,784 96,393
Other, Net......................................................... 58,025 61,831
---------- ----------
$1,321,811 $1,270,654
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities........................... $ 176,655 $ 170,808
Current Portion of Long-Term Debt.................................. 15,000 15,000
---------- ----------
Total Current Liabilities................................ 191,655 185,808
---------- ----------
Long-Term Debt, Less Current Portion............................... 525,000 525,000
Accrued Benefits Cost.............................................. 9,638 8,329
Other Long-Term Liabilities........................................ 14,230 14,477
Deferred Income Taxes.............................................. 104,211 100,621
---------- ----------
653,079 648,427
---------- ----------
Mandatorily Convertible Preferred Stock............................ 211,616 214,195
Common Stock....................................................... 324 305
Additional Paid-In Capital......................................... 232,779 223,190
Retained Earnings (Deficit)........................................ 32,358 (1,271)
---------- ----------
Total Stockholders' Equity............................... 477,077 436,419
---------- ----------
$1,321,811 $1,270,654
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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ARCADIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1996 1995
($000) ($000)
-------- --------
<S> <C> <C>
Net Sales.............................................................. $297,396 $340,838
Cost of Sales.......................................................... 209,966 253,084
-------- --------
Gross Profit......................................................... 87,430 87,754
Selling, General and Administrative Expenses........................... 11,240 16,116
-------- --------
Operating Income..................................................... 76,190 71,638
Interest Expense, Net.................................................. 10,805 14,558
Other, Net............................................................. 1,107 158
-------- --------
Income Before Non-Controlling Interest and Income Taxes................ 64,278 56,922
Non-Controlling Interest in Earnings of Partnership.................... -- (27,539)
-------- --------
Income Before Income Taxes............................................. 64,278 29,383
Income Tax Provision................................................... 23,248 15,638
-------- --------
Net Income............................................................. $ 41,030 $ 13,745
======== ========
Net Income Per Common Share............................................ $ 0.87 $ 0.83
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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ARCADIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------------
1996 1995
($000) ($000)
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income........................................................... $ 41,030 $ 13,745
Adjustments to Reconcile Net Income to Cash from Operating
Activities:
Depreciation and Amortization..................................... 17,221 16,747
Amortization of Deferred Financing Costs.......................... 555 577
Non-Controlling Interest.......................................... -- 27,539
Deferred Income Taxes............................................. 3,590 6,197
Net Change in Operating Assets and Liabilities:
Short-Term Investments.......................................... -- 13,307
Accounts Receivable............................................. 7,119 (9,552)
Inventories..................................................... 6,772 21,016
Other Current Assets............................................ 1,489 (228)
Accounts Payable, Accrued Expenses and Other Liabilities........ 6,909 (3,103)
Other, Net...................................................... (1,024) 67
-------- --------
Cash Provided by (Used for) Operating Activities............. 83,661 86,312
-------- --------
Cash Flows from Investing Activities:
Purchase of Property, Plant and Equipment, Net....................... (4,644) (1,288)
Rotational Plant Maintenance Costs................................... (200) (402)
-------- --------
Cash Provided by (Used for) Investing Activities............. (4,844) (1,690)
-------- --------
Cash Flows from Financing Activities:
Decrease (Increase) in Restricted Reserve Accounts................... (2,883) (2,784)
Cash Distributions to Non-Controlling Interest....................... -- (8,938)
Proceeds from (Repayment of) Debt, Net............................... -- (61,515)
Repurchase of Preferred Stock........................................ (3,377) --
Cash Dividends on Common and Preferred Stock......................... (6,664) (10,426)
Transaction and Financing Fees....................................... (465) --
Proceeds from Issuance of Common Stock............................... 10,308 2,593
-------- --------
Cash Provided by (Used for) Financing Activities............. (3,081) (81,070)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents....................... 75,736 3,552
Cash and Cash Equivalents at Beginning of Period....................... 202,738 51,093
-------- --------
Cash and Cash Equivalents at End of Period............................. $278,474 $ 54,645
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
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ARCADIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Arcadian
Corporation and its subsidiaries (collectively "Company") are unaudited and have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to the Quarterly Report
on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.
In the opinion of the Company, the accompanying condensed consolidated
financial statements contain all adjustments (consisting of only normal,
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows of the Company as of the dates and for the
periods presented.
Because of the seasonal nature of the Company's business, the results of
operations for the periods presented are not necessarily indicative of the
results of operations for a full fiscal year.
The accompanying condensed consolidated financial statements of the Company
include the results of operations of Arcadian Corporation ("Corporation") and
its subsidiaries, including Arcadian Partners, L.P. ("Partners"), Arcadian
Fertilizer, L.P. ("Fertilizer"), and their respective subsidiaries (collectively
"Partnership"), on a consolidated basis. All intercompany balances and
transactions have been eliminated in consolidation. Prior to the August 1995
Merger, the approximately 55% limited partner interest in the Partnership
represented by the preference units was accounted for as a "Non-Controlling
Interest."
2. PRO FORMA
The following unaudited pro forma financial information of the Company for
the three months ended March 31, 1995, give effect to the August 1995 Merger and
the August 1995 Public Offering as if they had occurred on January 1, 1995. The
pro forma data presented below do not purport to represent what the Company's
results of operations would have been had such transactions in fact occurred as
of January 1, 1995, or to project the Company's results of operations in any
future periods (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
PRO FORMA*
($000)
----------
<S> <C>
Net Sales................................................................ $340,838
Net Income............................................................... 31,326
Net Income per Common Share.............................................. 0.68
</TABLE>
- - ---------------
* The pro forma adjustments include amortization of goodwill resulting from the
August 1995 Merger, the decrease in interest expense as a result of the
Company's redemption of its 16% Junior Subordinated Exchange Debentures due
December 15, 2004 ("Exchange Debentures"), the elimination of the non-
controlling interest in the Partnership represented by the preference units,
and the income tax effect of the pro forma adjustments.
7
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ARCADIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SUPPLEMENTAL CASH FLOW INFORMATION
The Company considers highly liquid investments with an original maturity
of three months or less to be cash equivalents, except for those which are part
of the restricted reserve accounts. The following is supplemental cash flow
information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
($000) ($000)
------- -------
<S> <C> <C>
Interest Paid...................................................... $ 28 $ 7,000
Income Taxes Paid.................................................. 6,616 347
</TABLE>
4. NET INCOME PER COMMON SHARE
For purposes of computing net income per common share, the conversion of
13,646,100 shares of Preferred Stock, which are common stock equivalents because
of their mandatory conversion feature, is assumed when such conversion is
dilutive. Common and common equivalent shares outstanding were 47,059,571 and
16,630,244 for the three months ended March 31, 1996 and 1995, respectively. See
note 8 for information related to the repurchase of Preferred Stock during 1996.
5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
1996 DECEMBER 31,
(UNAUDITED) 1995
($000) ($000)
----------- ------------
<S> <C> <C>
Finished Products........................................... $ 70,269 $ 70,459
Raw Materials and Supplies.................................. 59,726 66,308
-------- --------
$129,995 $136,767
======== ========
</TABLE>
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
1996 DECEMBER 31,
(UNAUDITED) 1995
($000) ($000)
----------- ------------
<S> <C> <C>
First Mortgage Notes........................................ $200,000 $200,000
Senior Notes................................................ 340,000 340,000
Revolving Credit Facility................................... -- --
-------- --------
540,000 540,000
Less Current Portion of Long Term Debt...................... 15,000 15,000
-------- --------
$525,000 $525,000
======== ========
</TABLE>
At March 31, 1996, there was no outstanding balance on the Company's $100
million revolving credit facility, and the amount available for borrowing in the
form of loans and letters of credit, after considering outstanding and committed
letters of credit of $39 million, was $61 million.
8
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ARCADIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. RESTRICTED RESERVE ACCOUNTS
At March 31, 1996, restricted reserve accounts of $53 million were
comprised primarily of a $31 million Cash Collateral Account maintained by
Fertilizer for the benefit of the holders of the First Mortgage Notes and a $19
million Debt Service Reserve Account maintained by Partners for the benefit of
the holders of the 10 3/4% Series B Senior Notes due 2005 ("Senior Notes").
8. STOCKHOLDERS' EQUITY
SECONDARY OFFERING OF COMMON STOCK
In February 1996, the Company completed an underwritten public offering of
2.4 million shares of Common Stock on behalf of certain holders of Common Stock
and warrants to purchase Common Stock. The Company received net proceeds of $4
million from the exercise of the warrants and $5 million from the issuance of an
additional 0.2 million shares upon the exercise of the underwriters'
over-allotment option.
PREFERRED STOCK REPURCHASE
In February 1996, the Company's Board of Directors authorized the Company
to implement a stock repurchase program for its Mandatorily Convertible
Preferred Stock, Series A ("Preferred Stock"). The Board of Directors authorized
the Company to spend up to $50 million in making open market purchases of the
Preferred Stock from time to time as management deems appropriate. As of March
31, 1996, the Company had repurchased approximately 166,000 shares of Preferred
Stock at an aggregate premium of approximately $1 million above their original
issue price. The premium associated with the repurchase of shares of Preferred
Stock (which are common stock equivalents because of their mandatory conversion
feature) has not been treated as a reduction of earnings applicable to common
shares for purposes of computing net income per common share. Had the premium
been treated as a reduction to earnings for such purposes, net income per common
share for the first quarter of 1996 would have decreased $0.02.
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENTS
In June 1995, the Company entered into a lease agreement with an
unaffiliated entity ("First Lessor") with respect to an ammonia plant
constructed at the Trinidad plant site ("First Trinidad Plant Lease"). Upon
completion of construction, the First Lessor will lease the plant to a
subsidiary of the Company. The annual lease payments under the First Trinidad
Plant Lease are expected to be approximately $6 million. The initial five-year
lease term is renewable for an additional five-year term, subject to certain
conditions. If the First Trinidad Plant Lease is not renewed or is otherwise
terminated, a subsidiary of the Company may be required to make a residual
termination payment equal to 85% of the estimated $75 million total cost of the
project. In addition, the Company has an option to purchase the plant during the
term of the First Trinidad Plant Lease for a price approximating its fair market
value at the date of exercise. The plant is expected to be commercially
operational in the second quarter of 1996.
In March 1996, the Company entered into a lease agreement with an
unaffiliated entity ("Second Lessor") with respect to an ammonia plant to be
constructed at the Trinidad plant site ("Second Trinidad Plant Lease"). Upon
completion of construction, the Second Lessor will lease the plant to a
subsidiary of the Company. The annual lease payments under the Second Trinidad
Plant Lease are expected to be approximately $21 million. The initial seven-year
lease term is renewable for an additional five-year term, subject to certain
conditions. If the Second Trinidad Plant Lease is not renewed or is otherwise
terminated, a subsidiary of the Company may be required to make a residual
termination payment equal to 85% of the estimated $285 million total cost of the
project. In addition, the Company has an option to purchase the plant during the
9
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ARCADIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
term of the Second Trinidad Plant Lease for a price approximating its fair
market value at the date of exercise. The plant is expected to be operational in
1998.
LAKE CHARLES PLANT
In connection with a 1992 incident at its Lake Charles plant, the Company
is contesting penalties proposed by the United States Occupational Safety and
Health Administration ("OSHA") totaling $4 million. The OSHA legal proceeding to
date has generally been favorable to the Company. While management and legal
counsel believe that any civil penalty ultimately paid by the Company will be
substantially less than the remaining $4 million penalty proposed by OSHA, they
cannot predict with certainty the outcome of this proceeding. The Company also
is defending civil litigation relating to the Lake Charles incident which
include personal injury, property damage, employee relations, and other claims.
Management believes that these matters either are without merit or are
satisfactorily covered by insurance, and that there will be no material adverse
effect to the Company upon the resolution of these matters.
PORT AUTHORITY OF NEW YORK AND NEW JERSEY
On March 15, 1996, the Company was notified that it, two other nitrogen
producers, and up to 30 unidentified parties have been named as defendants in a
lawsuit filed by the subrogating insurers of the Port Authority of New York and
New Jersey ("Port Authority") in a New Jersey state court. The Port Authority is
seeking to recover damages allegedly incurred as a result of the explosion at
the World Trade Center in New York City on February 26, 1993. The Port Authority
alleges in its complaint that the two other named defendants and one or more
unidentified parties (as manufacturers of ammonium nitrate), the Company and one
or more unidentified parties (as producers of urea), and one or more
unidentified makers of nitric acid are liable under various tort theories for
unspecified property damages, business interruption losses, lost rent and other
damages allegedly incurred by the Port Authority as a result of the World Trade
Center explosion. The defendants have removed the case to federal court in New
Jersey. The Port Authority has moved to disqualify its insurers' counsel, and
the court has stayed any further proceedings until this motion is resolved.
While the Company is unaware of any basis for liability, it is evaluating the
lawsuit and intends to respond to the complaint in a timely manner and to
vigorously defend against the Port Authority's allegations.
10. SUBSEQUENT EVENTS
COMMON STOCK DIVIDEND
In April 1996, the Company declared a cash dividend on the Common Stock in
the amount of $0.10 per share or approximately $3 million in the aggregate. The
dividend is payable on May 14, 1996, to holders of record at the close of
business on May 3, 1996.
PREFERRED STOCK DIVIDEND
In April 1996, the Company declared a cash dividend on the Preferred Stock
in the amount of $0.3681 per share or approximately $5 million in the aggregate.
The dividend on the Preferred Stock is payable on May 14, 1996, to holders of
record at the close of business on May 3, 1996.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Because of the seasonal nature of the Company's business, the results of
operations for the periods presented are not necessarily indicative of the
results for a full fiscal year.
THREE MONTHS ENDED MARCH 31, 1996, COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
For the three months ended March 31, 1996, the Company generated net income
of $41 million, or $0.87 per common share, compared to net income of $14
million, or $0.83 per common share, for the same period last year. Operating
income increased $5 million for the three months ended March 31, 1996, from the
prior year period.
For the three months ended March 31, 1996, compared to the same period last
year, net sales decreased $43 million or 13%, of which 14% was related to lower
sales volume, offset by a 1% increase in product selling prices. The decrease in
sales volume reflects the combined effects of reduced sales of low margin
purchased product for resale and a weather-related delayed planting season.
Gross profit remained on pace with the same period in 1995 at approximately
$87 million. Gross profit as a percentage of net sales increased from 26% in the
first quarter of 1995 to 29% in the first quarter of 1996 partially as a result
of reduced sales of low margin purchased product for resale noted above. The per
unit natural gas cost included in cost of sales increased approximately 3% from
1995.
Selling, general and administrative expenses as a percentage of net sales
decreased from 5% for the three months ended March 31, 1995, to 4% for the three
months ended March 31, 1996.
Net interest expense decreased 26% to $11 million in the first quarter of
1996 compared to $15 million for the same period in 1995, reflecting the
improvements in the Company's net debt.
The non-controlling interest in earnings of the Partnership in 1995
reflected the approximately 55% interest of the Preference Unitholders in the
net earnings of Partners prior to the August 1995 Merger. The effective income
tax rate for the first quarter of 1996 was approximately 36%.
The income tax provision increased $8 million for the three months ended
March 31, 1996, compared to the same period in 1995. The increase reflects
income tax expense on higher 1996 taxable earnings and the increase in the
Partnership's income allocable to the Corporation as a result of the August 1995
Merger.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Net cash provided by operating activities was $84 million and $86 million
for the three months ended March 31, 1996 and 1995, respectively. At March 31,
1996 and 1995, working capital, net of restricted reserve accounts, was $324
million and $270 million, respectively.
Investing Activities
Net cash used for investing activities of $5 million and $2 million for the
three months ended March 31, 1996 and 1995, respectively, reflects primarily
capital expenditures.
Financing Activities
Net cash used for financing activities was $3 million and $81 million for
the three months ended March 31, 1996 and 1995, respectively. The 1995 amount
reflected a $61 million reduction in the outstanding balance under the revolving
credit facility.
At March 31, 1996, there was no outstanding balance on the Company's $100
million revolving credit facility, and the amount available for borrowing in the
form of loans and letters of credit, after considering outstanding and committed
letters of credit of $39 million, was $61 million.
11
<PAGE> 13
Management believes that its present working capital position, combined
with projected cash flows from operations and available borrowing capacity, will
be sufficient to meet the Company's 1996 and 1997 anticipated cash requirements
for operating needs, projected capital expenditures, and dividend payments on
the Preferred Stock.
From 1996 through 2000, the Company's principal long-term liquidity
requirements will focus on maturities of long-term debt. Excluding the revolving
credit facility, maturities of long-term debt will total $15 million, $15
million, $15 million, $18 million and $18 million in 1996, 1997, 1998, 1999 and
2000, respectively. Cash from operations is expected to be sufficient for the
payment of all such maturities of long-term debt.
The Senior Notes, First Mortgage Notes, and revolving credit facility
contain provisions restricting distributions on Partners' and certain
subsidiaries' equity interests in the event that certain financial covenants are
not met. Management believes that Partners and such subsidiaries will continue
to meet all such financial covenants for the foreseeable future.
In February 1996, the Company completed an underwritten public offering of
2.4 million shares of Common Stock on behalf of certain holders of Common Stock
and warrants to purchase Common Stock. The Company received net proceeds of $4
million from the exercise of the warrants and $5 million from the issuance of an
additional 0.2 million shares upon the exercise of the underwriters'
over-allotment option.
In February 1996, the Company's Board of Directors authorized the Company
to implement a stock repurchase program for the Preferred Stock. The Board of
Directors authorized the Company to spend up to $50 million in making open
market purchases of the Preferred Stock from time to time as management deems
appropriate. As of March 31, 1996, the Company had repurchased approximately
166,000 shares of Preferred Stock at an aggregate premium of approximately $1
million above their original issue price.
In February 1996, the Company announced that its Board of Directors intends
to submit a proposed charter amendment for approval at the Company's 1996 Annual
Meeting of Stockholders ("Meeting") to be held on May 16, 1996. The proposal
would permit the holders of Preferred Stock to voluntarily convert their shares
into Common Stock during a period beginning after the Meeting and ending on
August 16, 1996. Subject to stockholder approval, the holders of Preferred Stock
would be entitled to convert their shares into Common Stock on a share-for-share
basis, subject to a value limitation of $22.475 per share. The proposal is
described in detail in the Company's proxy solicitation materials for the
Meeting.
In February 1996, the Company paid cash dividends on the Common Stock in
the aggregate amount of approximately $2 million ($0.05 per share). In April
1996, the Company declared a cash dividend on the Common Stock in the aggregate
amount of approximately $3 million ($0.10 per share), payable on May 14, 1996,
to holders of record at the close of business on May 3, 1996.
In February 1996, the Company paid cash dividends on the Preferred Stock in
the aggregate amount of approximately $5 million ($0.3681 per share). In April
1996, the Company declared a cash dividend on the Preferred Stock in the
aggregate amount of approximately $5 million ($0.3681 per share), payable on May
14, 1996, to holders of record at the close of business on May 3, 1996.
Operating Lease Commitments
In June 1995, the Company entered into a lease agreement with an
unaffiliated entity ("First Lessor") with respect to an ammonia plant
constructed at the Trinidad plant site ("First Trinidad Plant Lease"). Upon
completion of construction, the First Lessor will lease the plant to a
subsidiary of the Company. The annual lease payments under the First Trinidad
Plant Lease are expected to be approximately $6 million. The initial five-year
lease term is renewable for an additional five-year term, subject to certain
conditions. If the First Trinidad Plant Lease is not renewed or is otherwise
terminated, a subsidiary of the Company may be required to make a residual
termination payment equal to 85% of the estimated $75 million total cost of the
project. In addition, the Company has an option to purchase the plant during the
term of the First Trinidad Plant Lease for a price approximating its fair market
value at the date of the exercise. The plant is expected to be commercially
operational in the second quarter of 1996.
12
<PAGE> 14
In March 1996, the Company entered into a lease agreement with an
unaffiliated entity ("Second Lessor") with respect to an ammonia plant to be
contructed at the Trinidad plant site ("Second Trinidad Plant Lease"). Upon
completion of construction, the Second Lessor will lease the plant to a
subsidiary of the Company. The annual lease payments under the Second Trinidad
Plant Lease are expected to be approximately $21 million. The initial seven-year
lease term is renewable for an additional five-year term, subject to certain
conditions. If the Second Trinidad Plant Lease is not renewed or is otherwise
terminated, a subsidiary of the Company may be required to make a residual
termination payment equal to 85% of the estimated $285 million total cost of the
project. In addition, the Company has an option to purchase the plant during the
term of the Second Trinidad Plant Lease for a price approximating its fair
market value at the date of exercise. The plant is expected to be operational in
1998.
Lake Charles Plant
In connection with a 1992 incident at its Lake Charles plant, the Company
is contesting penalties proposed by the United States Occupational Safety and
Health Administration ("OSHA") totaling $4 million. The OSHA legal proceeding to
date has generally been favorable to the Company. While management and legal
counsel believe that any civil penalty ultimately paid by the Company will be
substantially less than the remaining $4 million penalty proposed by OSHA, they
cannot predict with certainty the outcome of this proceeding. The Company also
is defending civil litigation relating to the Lake Charles incident which
include personal injury, property damage, employee relations, and other claims.
Management believes that these matters either are without merit or are
satisfactorily covered by insurance, and that there will be no material adverse
effect to the Company upon the resolution of these matters.
Port Authority of New York and New Jersey
On March 15, 1996, the Company was notified that it, two other nitrogen
producers, and up to 30 unidentified parties have been named as defendants in a
lawsuit filed by the subrogating insurers of the Port Authority of New York and
New Jersey ("Port Authority") in a New Jersey state court. The Port Authority is
seeking to recover damages allegedly incurred as a result of the explosion at
the World Trade Center in New York City on February 26, 1993. The Port Authority
alleges in its complaint that the two other named defendants and one or more
unidentified parties (as manufacturers of ammonium nitrate), the Company and one
or more unidentified parties (as producers of urea), and one or more
unidentified makers of nitric acid are liable under various tort theories for
unspecified property damages, business interruption losses, lost rent and other
damages allegedly incurred by the Port Authority as a result of the World Trade
Center explosion. The defendants have removed the case to federal court in New
Jersey. The Port Authority has moved to disqualify its insurers' counsel, and
the court has stayed any further proceedings until this motion is resolved.
While the Company is unaware of any basis for liability, it is evaluating the
lawsuit and intends to respond to the complaint in a timely manner and to
vigorously defend against the Port Authority's allegations.
13
<PAGE> 15
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following materials are filed as exhibits to this report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- - -------------------------------------------------------------------------------------
<C> <S>
11 -- Computation of Net Income per Common Share.
15 -- Letter from KPMG Peat Marwick LLP to Arcadian Corporation
with respect to interim financial information.
27 -- Financial Data Schedule.
</TABLE>
(b) Current Reports on Form 8-K
On January 17, 1996, Arcadian Corporation filed a Current Report on Form
8-K regarding its unaudited results of operations for the quarter and year ended
December 31, 1995.
On February 28, 1996, Arcadian Corporation filed a Current Report on Form
8-K relating to the Preferred Stock repurchase program and the proposal for the
optional conversion of Preferred Stock into Common Stock.
14
<PAGE> 16
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on May 14, 1996.
ARCADIAN CORPORATION
By: /s/ A. L. WILLIAMS
------------------------------------
A. L. Williams
Vice President -- Finance and
Chief Financial Officer
15
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ---------------------------------------------------------------------------------------------
<C> <S>
11 -- Computation of Net Income per Common Share.
15 -- Letter from KPMG Peat Marwick LLP to Arcadian Corporation with
respect to interim financial information.
27 -- Financial Data Schedule
</TABLE>
16
<PAGE> 1
ARCADIAN CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(DOLLARS IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1996 1995
($000) ($000)
---------- ----------
<S> <C> <C>
Net Income (Applicable to Common Shares)............................ $ 41,030 $ 13,745
========== ==========
Weighted Average Common and Common Equivalent Shares Outstanding:
Weighted Average Common Shares Outstanding........................ 31,600,152 14,506,670
Dilution from Assumed Exercise of Warrants and Options and Assumed
Conversion of Preferred Stock(a)............................... 15,459,419 2,123,574
---------- ----------
Weighted Average Common and Common Equivalent Shares
Outstanding.................................................... 47,059,571 16,630,244
========== ==========
Net Income Per Common Share(b)...................................... $ 0.87 $ 0.83
========== ==========
</TABLE>
- - ---------------
(a) For purposes of computing net income per common share, the conversion of
13,646,100 shares of Preferred Stock, which are common stock equivalents
because of their mandatory conversion feature, is assumed when such
conversion is dilutive.
(b) As of March 1996, the Company had repurchased approximately 166,000 shares
of Preferred Stock at an aggregate premium of approximately $1 million above
their original issue price. The premium associated with the repurchase of
shares of Preferred Stock has not been treated as a reduction of earnings
applicable to common shares for purposes of computing net income per common
share. Had the premium been treated as a reduction to earnings for such
purposes, net income per common share for the first quarter of 1996 would
have decreased $0.02.
<PAGE> 1
EXHIBIT 15
Arcadian Corporation
Memphis, Tennessee
Gentlemen:
Re: Registration Statement No. 33-40323
With respect to the subject registration statement, we acknowledge our
awareness of the use therein of our report dated May 14, 1996 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is
not considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
Very truly yours,
KPMG Peat Marwick LLP
Memphis, Tennessee
May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF ARCADIAN CORPORATION INCLUDED IN FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 331,807<F1>
<SECURITIES> 0
<RECEIVABLES> 104,320
<ALLOWANCES> 1,943
<INVENTORY> 129,995
<CURRENT-ASSETS> 569,259
<PP&E> 827,960
<DEPRECIATION> 229,217
<TOTAL-ASSETS> 1,321,811
<CURRENT-LIABILITIES> 191,655
<BONDS> 525,000
<COMMON> 324
0
211,616
<OTHER-SE> 265,137
<TOTAL-LIABILITY-AND-EQUITY> 1,321,811
<SALES> 297,396
<TOTAL-REVENUES> 297,396
<CGS> 209,966
<TOTAL-COSTS> 209,966
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 65
<INTEREST-EXPENSE> 10,805
<INCOME-PRETAX> 64,278
<INCOME-TAX> 23,248
<INCOME-CONTINUING> 41,030
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,030
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
<FN>
<F1>CASH INCLUDES $53 MILLION OF RESTRICTED RESERVES.
</FN>
</TABLE>
