<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 September 30, 1996, there were 38,703,778 outstanding shares of Common
Stock, par value $.01 per share, of Arcadian Corporation.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ARCADIAN CORPORATION
TABLE OF CONTENTS
FOR
QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Independent Auditors' Report........................................................ 3
Condensed Consolidated Balance Sheet as of September 30, 1996, and December 31,
1995............................................................................. 4
Condensed Consolidated Statements of Operations for --
Nine Months Ended September 30, 1996 and 1995.................................... 5
Three Months Ended September 30, 1996 and 1995................................... 6
Condensed Consolidated Statements of Cash Flows for --
Nine Months Ended September 30, 1996 and 1995.................................... 7
Three Months Ended September 30, 1996 and 1995................................... 8
Notes to Condensed Consolidated Financial Statements................................ 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................................................... 15
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................................. 20
SIGNATURE............................................................................. 21
</TABLE>
1
<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 September 30, 1996, and the related condensed
consolidated statements of operations and cash flows for the three and
nine-month periods ended September 30, 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
November 14, 1996
3
<PAGE> 5
ARCADIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
($000) ($000)
------------- ------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents.......................................... $ 214,752 $ 202,738
Restricted Reserve Accounts........................................ 57,801 50,450
Accounts Receivable, Net........................................... 123,172 109,496
Inventories........................................................ 118,486 136,767
Other.............................................................. 12,115 6,569
---------- ----------
Total Current Assets..................................... 526,326 506,020
Property, Plant and Equipment, Net................................. 598,882 606,410
Goodwill, Net...................................................... 94,567 96,393
Other, Net......................................................... 81,592 61,831
---------- ----------
$ 1,301,367 $1,270,654
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities........................... $ 149,374 $ 170,808
Current Portion of Long-Term Debt.................................. 15,000 15,000
---------- ----------
Total Current Liabilities................................ 164,374 185,808
---------- ----------
Long-Term Debt, Less Current Portion............................... 510,000 525,000
Accrued Benefits Cost.............................................. 8,467 8,329
Other Long-Term Liabilities........................................ 15,498 14,477
Deferred Income Taxes.............................................. 108,427 100,621
---------- ----------
642,392 648,427
---------- ----------
Mandatorily Convertible Preferred Stock............................ 85,999 214,195
Common Stock....................................................... 402 305
Additional Paid-In Capital......................................... 352,466 223,190
Retained Earnings (Deficit)........................................ 92,249 (1,271)
Treasury Stock..................................................... (36,515) --
---------- ----------
Total Stockholders' Equity............................... 494,601 436,419
---------- ----------
$ 1,301,367 $1,270,654
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 6
ARCADIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
($000) ($000)
-------- --------
<S> <C> <C>
Net Sales.............................................................. $935,244 $960,601
Cost of Sales.......................................................... 685,601 691,451
-------- --------
Gross Profit......................................................... 249,643 269,150
Selling, General and Administrative Expenses........................... 40,081 45,925
-------- --------
Operating Income..................................................... 209,562 223,225
Interest Expense, Net.................................................. 29,842 44,319
Other, Net............................................................. 2,005 (414)
-------- --------
Income Before Non-Controlling Interest and Income Taxes................ 177,715 179,320
Non-Controlling Interest in Earnings of Partnership.................... -- (82,270)
-------- --------
Income Before Income Taxes............................................. 177,715 97,050
Income Tax Provision................................................... 61,815 42,000
-------- --------
Net Income............................................................. $115,900 $ 55,050
======== ========
Net Income Per Common Share............................................ $ 2.49 $ 2.44
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 7
ARCADIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
($000) ($000)
-------- --------
<S> <C> <C>
Net Sales.............................................................. $293,526 $269,523
Cost of Sales.......................................................... 233,129 198,529
-------- --------
Gross Profit......................................................... 60,397 70,994
Selling, General and Administrative Expenses........................... 15,472 16,789
-------- --------
Operating Income..................................................... 44,925 54,205
Interest Expense, Net.................................................. 10,141 16,293
Other, Net............................................................. 1,059 (668)
-------- --------
Income Before Non-Controlling Interest and Income Taxes................ 33,725 38,580
Non-Controlling Interest in Earnings of Partnership.................... -- (7,869)
-------- --------
Income Before Income Taxes............................................. 33,725 30,711
Income Tax Provision................................................... 10,489 10,937
-------- --------
Net Income............................................................. $ 23,236 $ 19,774
======== ========
Net Income Per Common Share............................................ $ 0.51 $ 0.58
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 8
ARCADIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
----------------------
1996 1995
($000) ($000)
-------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income.......................................................... $115,900 $ 55,050
Adjustments to Reconcile Net Income to Cash from Operating
Activities:
Depreciation and Amortization.................................... 51,092 50,102
Amortization of Deferred Financing Costs......................... 1,663 2,691
(Gains) Losses on Disposals of Property, Plant and Equipment..... 2,622 1,014
Non-Controlling Interest......................................... -- 82,270
Deferred Income Taxes............................................ 7,806 16,502
Net Change in Operating Assets and Liabilities:
Short-Term Investments......................................... -- 13,307
Accounts Receivable............................................ (13,676) 19,938
Inventories.................................................... 18,281 29,688
Other Current Assets........................................... (5,546) (3,607)
Accounts Payable, Accrued Expenses and Other Liabilities....... (20,275) (9,227)
Other, Net..................................................... (2,548) (1,957)
-------- ---------
Cash Provided by (Used for) Operating Activities............ 155,319 255,771
-------- ---------
Cash Flows from Investing Activities:
Cash Portion of Merger Consideration................................ -- (214,205)
Purchase of Property, Plant and Equipment........................... (35,352) (23,730)
Proceeds from Disposals of Property, Plant and Equipment............ 239 3,697
Rotational Plant Maintenance Costs.................................. (14,294) (1,603)
Investment in Joint Venture......................................... (11,000) --
Increase in Restricted Reserve Accounts............................. (7,351) (9,819)
Release of MQD Reserve.............................................. -- 35,750
-------- ---------
Cash Provided by (Used for) Investing Activities............ (67,758) (209,910)
-------- ---------
Cash Flows from Financing Activities:
Cash Distributions to Non-Controlling Interest...................... -- (30,786)
Repayment of Debt................................................... (15,000) (96,882)
Repurchase of Preferred Stock....................................... (11,837) --
Repurchase of Common Stock.......................................... (36,515) --
Cash Dividends on Common and Preferred Stock........................ (22,755) (26,407)
Transaction and Financing Fees...................................... (485) (11,487)
Proceeds from Issuance of Common Stock.............................. 11,045 232,364
Other, Net.......................................................... -- (11)
-------- ---------
Cash Provided by (Used for) Financing Activities............ (75,547) 66,791
-------- ---------
Increase (Decrease) in Cash and Cash Equivalents...................... 12,014 112,652
Cash and Cash Equivalents at Beginning of Period...................... 202,738 51,093
-------- ---------
Cash and Cash Equivalents at End of Period............................ $214,752 $ 163,745
======== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 9
ARCADIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER 30,
----------------------
1996 1995
($000) ($000)
-------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income.......................................................... $ 23,236 $ 19,774
Adjustments to Reconcile Net Income to Cash from Operating
Activities:
Depreciation and Amortization.................................... 17,027 16,746
Amortization of Deferred Financing Costs......................... 584 1,290
(Gains) Losses on Disposals of Property, Plant and Equipment..... 728 (1,075)
Non-Controlling Interest......................................... -- 7,869
Deferred Income Taxes............................................ (1,595) 4,379
Net Change in Operating Assets and Liabilities:
Accounts Receivable............................................ (21,032) (6,992)
Inventories.................................................... (14,600) (3,396)
Other Current Assets........................................... (6,680) 2,123
Accounts Payable, Accrued Expenses and Other Liabilities....... 1,629 18,027
Other, Net..................................................... (6) (2,083)
-------- ---------
Cash Provided by (Used for) Operating Activities............ (709) 56,662
-------- ---------
Cash Flows from Investing Activities:
Cash Portion of Merger Consideration................................ -- (214,205)
Purchase of Property, Plant and Equipment........................... (14,900) (12,787)
Proceeds from Disposals of Property, Plant and Equipment............ 1 3,668
Rotational Plant Maintenance Costs.................................. (13,633) (1,126)
Increase in Restricted Reserve Accounts............................. (10,718) (3,863)
Release MQD Reserve................................................. -- 35,750
-------- ---------
Cash Provided by (Used for) Investing Activities............ (39,250) (192,563)
-------- ---------
Cash Flows from Financing Activities:
Cash Distributions to Non-Controlling Interest...................... -- (12,911)
Repayment of Debt................................................... -- (33,191)
Repurchase of Common Stock.......................................... (36,515) --
Cash Dividends on Common and Preferred Stock........................ (7,914) (3,196)
Transaction and Financing Fees...................................... (20) (10,432)
Proceeds from Issuance of Common Stock.............................. 300 226,834
-------- ---------
Cash Provided by (Used for) Financing Activities............ (44,149) 167,104
-------- ---------
Increase (Decrease) in Cash and Cash Equivalents...................... (84,108) 31,203
Cash and Cash Equivalents at Beginning of Period...................... 298,860 132,542
-------- ---------
Cash and Cash Equivalents at End of Period............................ $214,752 $ 163,745
======== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
<PAGE> 10
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 nine months and three months ended September 30, 1995, gives effect to the
August 1995 Merger and 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:
<TABLE>
<CAPTION>
PRO FORMA*
------------------------------
THREE MONTHS
NINE MONTHS ENDED
ENDED SEPTEMBER
SEPTEMBER 30, 30,
1995 1995
($000) ($000)
------------- ------------
<S> <C> <C>
Net Sales................................................. $ 960,601 $269,523
Net Income................................................ 110,078 27,665
Net Income per Common Share............................... 2.37 0.59
</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, 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.
9
<PAGE> 11
ARCADIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
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>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1996 1995 1996 1995
($000) ($000) ($000) ($000)
------- -------- ------- --------
<S> <C> <C> <C> <C>
Interest Paid................................ $32,290 $ 40,523 $ 8,947 $ 8,889
Income Taxes Paid............................ 42,134 18,148 16,955 9,768
Non-Cash Items:
Capital Contribution to Joint Venture in
the Form of Property, Plant and
Equipment............................... -- 3,662 -- 3,662
Non-Cash Portion of August 1995 Merger
Consideration -- Issuance of Preferred
Stock................................... -- 214,205 -- 214,205
Conversion of Shares of Preferred Stock
into Common Stock....................... 119,028 -- 116,546 --
</TABLE>
4. NET INCOME PER COMMON SHARE
For purposes of computing net income per common share, the conversion of
Mandatorily Convertible Preferred Stock, Series A ("Preferred Stock"), which is
a common stock equivalent because of its mandatory conversion feature, is
assumed when such conversion is dilutive. Common and common equivalent shares
outstanding were 46,501,379 and 22,522,466 for the nine months ended September
30, 1996 and 1995, and 45,679,722 and 33,837,816 for the three months ended
September 30, 1996 and 1995, respectively. Net income per common share disclosed
herein is computed on a primary basis only, as net income per common share
computed on a fully diluted basis differs from the amounts disclosed by less
than 3%.
5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
($000) ($000)
------------- ------------
<S> <C> <C>
Finished Products.......................................... $ 46,872 $ 70,459
Raw Materials and Supplies................................. 71,614 66,308
-------- --------
$ 118,486 $136,767
======== ========
</TABLE>
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
($000) ($000)
------------- ------------
<S> <C> <C>
First Mortgage Notes....................................... $ 185,000 $200,000
Senior Notes............................................... 340,000 340,000
Revolving Credit Facility.................................. -- --
-------- --------
525,000 540,000
Less Current Portion of Long Term Debt..................... 15,000 15,000
-------- --------
$ 510,000 $525,000
======== ========
</TABLE>
10
<PAGE> 12
ARCADIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
At September 30, 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 $40 million, was $60 million.
7. RESTRICTED RESERVE ACCOUNTS
At September 30, 1996, restricted reserve accounts of $58 million were
comprised of a $28 million Cash Collateral Account maintained by Fertilizer for
the benefit of the holders of the First Mortgage Notes, a $20 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"), and a $10 million
Cash Reserve Account maintained by Fertilizer for the benefit of the Second
Lessor (as defined in Note 9).
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 $50 million stock repurchase program for the Preferred Stock. In
the first and second quarters of 1996, the Company repurchased approximately
592,000 shares of Preferred Stock at an aggregate cost of approximately $12
million and an aggregate premium of approximately $3 million above their
original issue price.
COMMON STOCK REPURCHASE
In July 1996, the Company's Board of Directors authorized the Company to
implement a $100 million stock repurchase program for the Common Stock. In the
third quarter of 1996, the Company repurchased approximately 1,653,000 shares of
Common Stock at an aggregate cost of approximately $37 million.
PREFERRED STOCK EXCHANGED FOR COMMON STOCK
In May 1996, the Company's stockholders approved a charter amendment that
gave the holders of Preferred Stock the opportunity to convert their shares into
Common Stock if they desired to do so. Holders of Preferred Stock were allowed,
but were not required, to convert their shares of Preferred Stock into Common
Stock on a share-for-share basis, subject to a value limitation of $22.475 per
share. Holders of Preferred Stock were allowed to exercise the optional
conversion right at any time until the close of business on August 16, 1996. At
August 16, 1996, approximately 7,679,000 shares of Preferred Stock had been
converted into a like number of shares of Common Stock. Shares of Preferred
Stock not converted continue to have exactly the same rights as they had prior
to the optional conversion period.
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENT
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
11
<PAGE> 13
ARCADIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
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 an incident at its Lake Charles plant in 1992, 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.
In September 1996, the Company's liability insurers negotiated preliminary
settlements of substantially all of the civil litigation arising from the Lake
Charles incident. The settlements, which in the aggregate are within the policy
limits of the Company's liability insurance, are subject to the negotiation and
execution of definitive settlement agreements and, with respect to the class
action civil litigation, approval as to fairness by the court. There remain
three lawsuits against the Company arising from the incident, which were brought
by former employees at the Lake Charles plant who allege that they were
wrongfully terminated by the Company following the incident. Management and
legal counsel believe that these lawsuits are without merit, and that there will
be no material adverse effect on the Company upon their resolution.
PORT AUTHORITY OF NEW YORK AND NEW JERSEY
On March 13, 1996, the Company, two other nitrogen producers, and up to 30
unidentified parties were named as defendants in a lawsuit filed in the name of
the Port Authority of New York and New Jersey (the "Port Authority") in New
Jersey state court. The lawsuit was actually filed by attorneys hired by the
Port Authority's subrogated insurance carriers. The Port Authority's insurers
are 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's insurers allege in their 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 Company and the other
defendants have removed the case to federal court in New Jersey. Pending the
resolution of the Port Authority's motion to disqualify its insurers' counsel,
the court stayed substantive proceedings in the lawsuit. That motion was
resolved by an order dated September 23, 1996, and substantive proceedings are
scheduled to resume on November 26, 1996. Although neither the Port Authority
nor its subrogated insurers have alleged or otherwise revealed the amount of
damages sought from the Company in the lawsuit, the Port Authority stated in an
affidavit submitted to the court in support of its motion to disqualify its
insurers' counsel that as of April 9, 1996, the Port Authority had submitted to
its insurers claims relating to the explosion totaling approximately $340
million, of which the insurers had paid approximately $160 million. The Company
is unaware of any basis for liability and intends to vigorously defend the
lawsuit.
12
<PAGE> 14
ARCADIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
STOCKHOLDERS LITIGATION
On August 5, 1996, the Company and Freeport-McMoRan Inc. ("Freeport")
signed a non-binding letter of intent for the combination of their businesses
into a newly formed company. Following the public announcement on August 7,
1996, of the Company's execution of the letter of intent, five lawsuits were
filed in Delaware state court on behalf of a purported class of all stockholders
of the Company other than the defendants and their affiliates. The Company and
some or all of its directors (including one former director, who was
subsequently dismissed from the lawsuits) were named as defendants in the
lawsuits. On September 2, 1996, the Company entered into an Agreement and Plan
of Merger (the "Merger Agreement") with Potash Corporation of Saskatchewan Inc.
("PCS") and PCS Nitrogen, Inc., a wholly owned subsidiary of PCS ("Merger Sub"),
providing for the acquisition of the Company by PCS through the merger of the
Company with and into Merger Sub (the "Merger"). On September 5, 1996, following
the public announcement of the proposed Merger on September 3, 1996, an amended
complaint (the "Amended Complaint") was filed in two of the five lawsuits. PCS
is named as an additional defendant in the Amended Complaint, but PCS has
informed the Company that PCS has not yet received service of process. The
Amended Complaint alleges generally that the defendants acted improperly in
causing the Company to enter into the Merger Agreement, and seeks an injunction
preventing the Merger, unspecified monetary damages, and other relief. On
September 16, 1996, the court signed an order consolidating all five lawsuits
and ordering that the Amended Complaint serve as the complaint in the
consolidated action. The Company and its directors have agreed to formally
respond to the Amended Complaint on or before November 27, 1996. The Company is
unaware of any basis for liability, and the defendants intend to vigorously
defend the lawsuit.
10. SUBSEQUENT EVENTS
COMMON STOCK DIVIDEND
On November 14, 1996, the Company paid a cash dividend on the Common Stock
in the amount of $0.10 per share or approximately $4 million in the aggregate to
holders of record at the close of business on November 4, 1996.
PREFERRED STOCK DIVIDEND
On November 14, 1996, the Company paid a cash dividend on the Preferred
Stock in the amount of $0.3681 per share or approximately $2 million in the
aggregate to holders of record at the close of business on November 4, 1996.
DOJ INVESTIGATIONS (AS OF JANUARY 9, 1996)
In 1993, Arcadian learned that the Antitrust Division of the Department of
Justice (the "DOJ") had initiated a grand-jury investigation of pricing
practices in the explosives industry. In response to a subpoena issued in that
investigation, Arcadian produced to the DOJ in 1994 and 1995 documents
concerning ammonium nitrate sold to explosives manufacturers. In late 1996 and
early 1997, Arcadian learned that the DOJ had begun contacting current and
former Arcadian employees seeking information concerning Arcadian's pricing of
ammonium nitrate in 1992. Arcadian currently has limited information concerning
the DOJ's investigations and, thus, is unable to predict their outcomes as to
Arcadian. However, Arcadian believes that neither it nor its employees have
violated the antitrust laws and that the DOJ's investigations are unlikely to
result in a material adverse effect on Arcadian.
13
<PAGE> 15
ARCADIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
11. MERGER
TERMINATION OF POTENTIAL BUSINESS COMBINATION WITH FREEPORT
On September 2, 1996, the Company terminated its previously disclosed
non-binding letter of intent dated August 5, 1996, with Freeport regarding their
potential business combination.
PROPOSED ACQUISITION BY PCS
On September 2, 1996, the Company, PCS and Merger Sub entered into the
Merger Agreement pursuant to which, subject to the satisfaction or waiver of
certain conditions, PCS will acquire the Company through the Merger. In the
Merger, subject to adjustment and to certain exceptions, each outstanding share
of Common Stock, including each share resulting from the mandatory conversion of
the outstanding shares of Preferred Stock immediately prior to the Merger, will
be converted into the right to receive $12.25 in cash and a fraction of a common
share of PCS expected to have a market value of between $12.75 and $14.75. The
obligations of the Company and PCS to consummate the Merger are subject to
various conditions, including the condition that the holders of a majority of
the outstanding shares of Common Stock and Preferred Stock, voting together as a
single class, vote in favor of the approval of the Merger Agreement. The Company
expects to hold a special meeting of stockholders in January 1997, at which the
stockholders will consider and vote upon the Merger Agreement. If the necessary
stockholder vote is obtained and all other conditions are satisfied or waived,
the Company expects that the Merger will be consummated shortly thereafter.
14
<PAGE> 16
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.
NINE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
For the nine months ended September 30, 1996, the Company generated net
income of $116 million, or $2.49 per common share, compared to net income of $55
million, or $2.44 per common share, for the same period last year. Operating
income decreased $14 million for the nine months ended September 30, 1996, from
the prior year period.
For the nine months ended September 30, 1996, compared to the same period
last year, net sales decreased $25 million or 3%, of which 4% was related to
decreased selling prices, partially offset by a 1% increase in sales volumes.
Lower ammonia selling prices were partially offset by an increase in the selling
prices of nitrogen solutions. Higher sales volumes reflect increased sales
tonnage of low margin purchased ammonia for resale.
Gross profit decreased $20 million for the reasons noted above. Gross
profit as a percentage of net sales decreased from 28% for the nine months ended
September 30, 1995, to 27% for the nine months ended September 30, 1996,
partially as a result of the lower ammonia selling prices. The per unit natural
gas cost included in cost of sales remained relatively flat.
Selling, general and administrative expenses as a percentage of net sales
decreased from 5% for the nine months ended September 30, 1995, to 4% for the
nine months ended September 30, 1996.
Net interest expense decreased 33% to $30 million in the nine months ended
September 30, 1996, compared to $44 million for the same period in 1995,
reflecting the improvement 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 the Partnership prior to the August 1995 Merger.
The income tax provision increased $20 million for the nine months ended
September 30, 1996, compared to the same period in 1995. The increase primarily
reflects the increase in the Partnership's income allocable to the Corporation
as a result of the August 1995 Merger, partially offset by a reduction in the
Trinidad statutory income tax rate. The effective income tax rate for the nine
months ended September 30, 1996, was approximately 35%.
THREE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
For the three months ended September 30, 1996, the Company generated net
income of $23 million, or $0.51 per common share, compared to net income of $20
million, or $0.58 per common share, for the same period last year. Operating
income decreased $9 million for the three months ended September 30, 1996, from
the prior year period.
For the three months ended September 30, 1996, compared to the same period
last year, net sales increased $24 million or 9%, of which 14% was related to
increased sales volumes, partially offset by a 5% decrease in selling prices.
Higher sales volumes reflect increased sales tonnage of low margin purchased
ammonia for resale and increased sales tonnage of nitrogen solutions. Lower
ammonia and nitrogen solutions selling prices were partially offset by an
increase in the selling prices of urea.
Gross profit decreased $11 million for the reasons noted above. Gross
profit as a percentage of net sales decreased from 26% in the third quarter of
1995 to 21% in the third quarter of 1996 partially as a result of the lower
ammonia and nitrogen solutions selling prices. The per unit natural gas cost
included in cost of sales increased approximately 5% from 1995.
Selling, general and administrative expenses as a percentage of net sales
decreased from 6% for the three months ended September 30, 1995, to 5% for the
three months ended September 30, 1996.
15
<PAGE> 17
Net interest expense decreased 38% to $10 million in the third quarter of
1996 compared to $16 million for the same period in 1995, reflecting the
improvement 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 the Partnership prior to the August 1995 Merger.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Net cash provided by (used for) operating activities was $155 million and
$256 million for the nine months ended September 30, 1996 and 1995, and $(1)
million and $57 million for the three months ended September 30, 1996 and 1995,
respectively. At September 30, 1996 and 1995, working capital, net of restricted
reserve accounts, was $304 million and $252 million, respectively.
Investing Activities
Net cash used for investing activities of $68 million and $210 million for
the nine months ended September 30, 1996 and 1995, and $39 million and $193
million for the three months ended September 30, 1996 and 1995, respectively,
reflects capital expenditures, rotational plant maintenance cost, and an
investment of $11 million in an ammonia terminal joint venture in the second
quarter of 1996 and the cash portion of the August 1995 Merger Consideration of
$214 million. The restricted reserve for distributions on preference units of
$36 million was released as a result of the 1995 Merger.
Financing Activities
Net cash provided by (used for) financing activities was $(76) million and
$67 million for the nine months ended September 30, 1996 and 1995, and $(44)
million and $167 million for the three months ended September 30, 1996 and 1995,
respectively. The nine months ended September 30, 1995, amount reflected a $61
million reduction in the outstanding balance under the revolving credit
facility.
At September 30, 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 $40 million, was $60 million.
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 remaining 1996 and anticipated 1997 cash
requirements for operating needs, projected capital expenditures, and dividend
payments on the Company's Mandatorily Convertible Preferred Stock, Series A
("Preferred Stock").
From 1997 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 range from $15 million to $18
million in 1997 through 2000. Cash from operations is expected to be sufficient
for the payment of all such maturities of long-term debt.
The Company's 10 3/4% Series B Senior Notes due 2005, its First Mortgage
Notes, and the revolving credit facility contain provisions restricting
distributions on the equity interests of Arcadian Partners, L.P., Arcadian
Fertilizer, L.P., and certain other subsidiaries in the event that certain
financial covenants are not met. Management believes that 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 repurchasing
shares of Preferred Stock from time to time as management deems appropriate. In
the first and second quarters of 1996, the Company repurchased approximately
592,000 shares of Preferred Stock at an aggregate cost of approximately $12
million and an aggregate premium of approximately
16
<PAGE> 18
$3 million above their original issue price. The timing of Preferred Stock
repurchases is dependent upon many factors, including the price, the Company's
financial condition, and general economic and market factors.
In July 1996, the Company's Board of Directors authorized the Company to
implement a stock repurchase program for the Common Stock. The Board of
Directors authorized the Company to spend up to $100 million in repurchasing
shares of Common Stock from time to time as management deems appropriate. In the
third quarter of 1996, the Company repurchased approximately 1,653,000 shares of
Common Stock at an aggregate cost of approximately $37 million. The timing of
Common Stock repurchases is dependent upon many factors, including the price,
the Company's financial condition, and general economic and market factors.
In May 1996, the Company's stockholders approved a charter amendment that
gave the holders of Preferred Stock the opportunity to convert their shares into
Common Stock if they desired to do so. Holders of Preferred Stock were allowed,
but were not required, to convert their shares of Preferred Stock into Common
Stock on a share-for-share basis, subject to a value limitation of $22.475 per
share. Holders of Preferred Stock were allowed to exercise the optional
conversion right at any time until the close of business on August 16, 1996. At
August 16, 1996, approximately 7,679,000 shares of Preferred Stock had been
converted into a like number of shares of Common Stock. Shares of Preferred
Stock not converted continue to have exactly the same rights as they had prior
to the optional conversion period. Based on the Company's existing dividend
policies, the conversion of such shares from Preferred Stock to Common Stock
will result in a net decrease of approximately $8 million in the Company's
annual dividend requirements.
In February, May, August and November 1996, the Company paid cash dividends
on the Common Stock in the aggregate amounts of approximately $2 million ($0.05
per share), $3 million ($0.10 per share), $3 million ($0.10 per share), and $4
million ($0.10 per share), respectively.
In February, May, August and November 1996, the Company paid cash dividends
on the Preferred Stock in the aggregate amounts of approximately $5 million
($0.3682 per share), $5 million ($0.3681 per share), $5 million ($0.3681 per
share) and $2 million ($0.3681 per share), respectively.
Operating Lease Commitment
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
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 an incident at its Lake Charles plant in 1992, 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.
In September 1996, the Company's liability insurers negotiated preliminary
settlements of substantially all of the civil litigation arising from the Lake
Charles incident. The settlements, which in the aggregate are within the policy
limits of the Company's liability insurance, are subject to the negotiation and
execution of definitive settlement agreements and, with respect to the class
action civil litigation, approval as to fairness by
17
<PAGE> 19
the court. There remain three lawsuits against the Company arising from the
incident, which were brought by former employees at the Lake Charles plant who
allege that they were wrongfully terminated by the Company following the
incident. Management and legal counsel believe that these lawsuits are without
merit, and that there will be no material adverse effect on the Company upon
their resolution.
Port Authority of New York and New Jersey
On March 13, 1996, the Company, two other nitrogen producers, and up to 30
unidentified parties were named as defendants in a lawsuit filed in the name of
the Port Authority of New York and New Jersey (the "Port Authority") in New
Jersey state court. The lawsuit was actually filed by attorneys hired by the
Port Authority's subrogated insurance carriers. The Port Authority's insurers
are 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's insurers allege in their 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 Company and the other
defendants have removed the case to federal court in New Jersey. Pending the
resolution of the Port Authority's motion to disqualify its insurers' counsel,
the court stayed substantive proceedings in the lawsuit. That motion was
resolved by an order dated September 23, 1996, and substantive proceedings are
scheduled to resume on November 26, 1996. Although neither the Port Authority
nor its subrogated insurers have alleged or otherwise revealed the amount of
damages sought from the Company in the lawsuit, the Port Authority stated in an
affidavit submitted to the court in support of its motion to disqualify its
insurers' counsel that as of April 9, 1996, the Port Authority had submitted to
its insurers claims relating to the explosion totaling approximately $340
million, of which the insurers had paid approximately $160 million. The Company
is unaware of any basis for liability and intends to vigorously defend the
lawsuit.
Stockholders Litigation
On August 5, 1996, the Company and Freeport-McMoRan Inc. ("Freeport")
signed a non-binding letter of intent for the combination of their businesses
into a newly formed company. Following the public announcement on August 7,
1996, of the Company's execution of the letter of intent, five lawsuits were
filed in Delaware state court on behalf of a purported class of all stockholders
of the Company other than the defendants and their affiliates. The Company and
some or all of its directors (including one former director, who was
subsequently dismissed from the lawsuits) were named as defendants in the
lawsuits. On September 2, 1996, the Company entered into an Agreement and Plan
of Merger (the "Merger Agreement") with Potash Corporation of Saskatchewan Inc.
("PCS") and PCS Nitrogen, Inc., a wholly owned subsidiary of PCS ("Merger Sub"),
providing for the acquisition of the Company by PCS through the merger of the
Company with and into Merger Sub (the "Merger"). On September 5, 1996, following
the public announcement of the proposed Merger on September 3, 1996, an amended
complaint (the "Amended Complaint") was filed in two of the five lawsuits. PCS
is named as an additional defendant in the Amended Complaint, but PCS has
informed the Company that PCS has not yet received service of process. The
Amended Complaint alleges generally that the defendants acted improperly in
causing the Company to enter into the Merger Agreement, and seeks an injunction
preventing the Merger, unspecified monetary damages, and other relief. On
September 16, 1996, the court signed an order consolidating all five lawsuits
and ordering that the Amended Complaint serve as the complaint in the
consolidated action. The Company and its directors have agreed to formally
respond to the Amended Complaint on or before November 27, 1996. The Company is
unaware of any basis for liability, and the defendants intend to vigorously
defend the lawsuit.
Termination of Potential Business Combination with Freeport
On September 2, 1996, the Company terminated its previously disclosed
non-binding letter of intent dated August 5, 1996, with Freeport regarding their
potential business combination.
18
<PAGE> 20
Proposed Acquisition by PCS
On September 2, 1996, the Company, PCS and Merger Sub entered into the
Merger Agreement pursuant to which, subject to the satisfaction or waiver of
certain conditions, PCS will acquire the Company through the Merger. In the
Merger, subject to adjustment and to certain exceptions, each outstanding share
of Common Stock, including each share resulting from the mandatory conversion of
the outstanding shares of Preferred Stock immediately prior to the Merger, will
be converted into the right to receive $12.25 in cash and a fraction of a common
share of PCS expected to have a market value of between $12.75 and $14.75. The
obligations of the Company and PCS to consummate the Merger are subject to
various conditions, including the condition that the holders of a majority of
the outstanding shares of Common Stock and Preferred Stock, voting together as a
single class, vote in favor of the approval of the Merger Agreement. The Company
expects to hold a special meeting of stockholders in January 1997, at which the
stockholders will consider and vote upon the Merger Agreement. If the necessary
stockholder vote is obtained and all other conditions are satisfied or waived,
the Company expects that the Merger will be consummated shortly thereafter.
19
<PAGE> 21
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Recent Development -- DOJ Investigations
In 1993, Arcadian learned that the Antitrust Division of the Department of
Justice (the "DOJ") had initiated a grand-jury investigation of pricing
practices in the explosives industry. In response to a subpoena issued in that
investigation, Arcadian produced to the DOJ in 1994 and 1995 documents
concerning ammonium nitrate sold to explosives manufacturers. In late 1996 and
early 1997, Arcadian learned that the DOJ had begun contacting current and
former Arcadian employees seeking information concerning Arcadian's pricing of
ammonium nitrate in 1992. Arcadian currently has limited information concerning
the DOJ's investigations and thus is unable to predict their outcomes as to
Arcadian. However, Arcadian believes that neither it nor its employees have
violated the antitrust laws and that the DOJ's investigations are unlikely to
result in a material adverse effect on Arcadian.
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>
2 -- Agreement and Plan of Merger dated as of September 2, 1996, among
Potash Corporation of Saskatchewan Inc., Arcadian Corporation, and PCS
Nitrogen, Inc.
10.1 -- Agreement for Lease dated as of June 29, 1995, between Trinidad Ammonia
Company, Limited Partnership, and Arcadian Fertilizer, L.P., as amended
by Amendment No. 1 to Agreement for Lease dated as of August 20, 1996,
between Trinidad Ammonia Company, Limited Partnership, and Arcadian
Fertilizer, L.P. (incorporated by reference to Exhibit 10.21 to the
Registration Statement on Form S-4 (Registration No. 33-90290) relating
to Arcadian Corporation's offering of Preferred Stock ("Preferred Stock
Registration Statement"), except for Amendment No. 1 which is filed
herewith).
10.2 -- Lease Agreement dated as of June 29, 1995, between Trinidad Ammonia
Company, Limited Partnership, and Arcadian Fertilizer, L.P., as amended
by Amendment No. 1 to Lease Agreement dated as of August 20, 1996,
between Trinidad Ammonia Company, Limited Partnership, and Arcadian
Fertilizer, L.P., and Amendment No. 2 to Lease Agreement dated as of
August 26, 1996, between Trinidad Ammonia Company, Limited Partnership,
and Arcadian Fertilizer, L.P. (incorporated by reference to Exhibit
10.22 to the Preferred Stock Registration Statement, except for
Amendment No. 1 and Amendment No. 2 which are filed herewith).
10.3 -- Agreement for Lease dated as of March 27, 1996, between Nitrogen
Leasing Company, Limited Partnership, and Arcadian Fertilizer, L.P., as
amended by Amendment No. 1 to Agreement for Lease dated as of May 24,
1996, between Nitrogen Leasing Company, Limited Partnership, and
Arcadian Fertilizer, L.P.
10.4 -- Lease Agreement dated as of March 27, 1996, between Nitrogen Leasing
Company, Limited Partnership, and Arcadian Fertilizer, L.P., as amended
by Amendment No. 1 to Lease Agreement dated as of August 26, 1996,
between Nitrogen Leasing Company, Limited Partnership, and Arcadian
Fertilizer, L.P.
10.5 -- Purchase Option Agreement dated as of March 27, 1996, between Nitrogen
Leasing Company, Limited Partnership, and Arcadian Corporation.
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- --------------------------------------------------------------------------
<C> <S>
10.6 -- Employment Agreement between Arcadian Corporation and certain of its
officers (form).
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 August 7, 1996, the Company filed a Current Report on Form 8-K regarding
a potential business combination with Freeport.
On September 5, 1996, the Company filed a Current Report on Form 8-K
regarding (a) the termination of its potential business combination with
Freeport and (b) the proposed acquisition of the Company by PCS in the Merger.
21
<PAGE> 23
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 January 10, 1997.
ARCADIAN CORPORATION
By: A. L. WILLIAMS
----------------------------------
A. L. Williams
Vice President -- Finance and
Chief Financial Officer
22
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
2 -- Agreement and Plan of Merger dated as of September 2, 1996, among
Potash Corporation of Saskatchewan Inc., Arcadian Corporation, and
PCS Nitrogen, Inc.
10.1 -- Agreement for Lease dated as of June 29, 1995, between Trinidad
Ammonia Company, Limited Partnership, and Arcadian Fertilizer, L.P.,
as amended by Amendment No. 1 to Agreement for Lease dated as of
August 20, 1996, between Trinidad Ammonia Company, Limited
Partnership, and Arcadian Fertilizer, L.P. (incorporated by reference
to Exhibit 10.21 to the Registration Statement on Form S-4
(Registration No. 33-90290) relating to Arcadian Corporation's
offering of Preferred Stock ("Preferred Stock Registration
Statement"), except for Amendment No. 1 which is filed herewith).
10.2 -- Lease Agreement dated as of June 29, 1995, between Trinidad Ammonia
Company, Limited Partnership, and Arcadian Fertilizer, L.P., as
amended by Amendment No. 1 to Lease Agreement dated as of August 20,
1996, between Trinidad Ammonia Company, Limited Partnership, and
Arcadian Fertilizer, L.P., and Amendment No. 2 to Lease Agreement
dated as of August 26, 1996, between Trinidad Ammonia Company,
Limited Partnership, and Arcadian Fertilizer, L.P. (incorporated by
reference to Exhibit 10.22 to the Preferred Stock Registration
Statement, except for Amendment No. 1 and Amendment No. 2 which are
filed herewith).
10.3 -- Agreement for Lease dated as of March 27, 1996, between Nitrogen
Leasing Company, Limited Partnership, and Arcadian Fertilizer, L.P.,
as amended by Amendment No. 1 to Agreement for Lease dated as of May
24, 1996, between Nitrogen Leasing Company, Limited Partnership, and
Arcadian Fertilizer, L.P.
10.4 -- Lease Agreement dated as of March 27, 1996, between Nitrogen Leasing
Company, Limited Partnership, and Arcadian Fertilizer, L.P., as
amended by Amendment No. 1 to Lease Agreement dated as of August 26,
1996, between Nitrogen Leasing Company, Limited Partnership, and
Arcadian Fertilizer, L.P.
10.5 -- Purchase Option Agreement dated as of March 27, 1996, between
Nitrogen Leasing Company, Limited Partnership, and Arcadian
Corporation.
10.6 -- Employment Agreement between Arcadian Corporation and certain of its
officers (form).
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>
<PAGE> 1
EXHIBIT 11
<PAGE> 2
ARCADIAN CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(DOLLARS IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1996 1995 1996 1995
($000) ($000) ($000) ($000)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income (Applicable to Common
Shares)............................. $ 115,900 $ 55,050 $ 23,236 $ 19,774
Primary:
Weighted Average Common and Common
Equivalent Shares Outstanding:
Weighted Average Common Shares
Outstanding.................... 33,188,471 17,695,701 35,473,796 23,712,717
Dilution from Assumed Exercise of
Warrants and Options and
Assumed Conversion Of Preferred
Stock(a)....................... 13,312,908 4,826,765 10,205,926 10,125,099
----------- ----------- ----------- -----------
Weighted Average Common and
Common Equivalent Shares
Outstanding.................... 46,501,379 22,522,466 45,679,722 33,837,816
========== ========== ========== ==========
Net Income Per Common
Share -- Primary.......... $ 2.49 $ 2.44 $ 0.51 $ 0.58
========== ========== ========== ==========
Fully Diluted:
Weighted Average Common and Common
Equivalent Shares Outstanding:
Weighted Average Common Shares
Outstanding.................... 33,188,471 17,695,701 35,473,796 23,712,717
Dilution from Assumed Exercise of
Warrants and Options and
Assumed Conversion Of Preferred
Stock.......................... 13,369,449 5,186,650 10,247,270 10,291,053
----------- ----------- ----------- -----------
Weighted Average Common and
Common Equivalent Shares
Outstanding.................... 46,557,920 22,882,351 45,721,066 34,003,770
========== ========== ========== ==========
Net Income Per Common
Share -- Fully Diluted.... $ 2.49 $ 2.41(b) $ 0.51 $ 0.58
========== ========== ========== ==========
</TABLE>
- ---------------
(a) For purposes of computing net income per common share, the conversion of
12,073,108 and 2,630,952 shares of Preferred Stock for the nine months ended
September 30, 1996 and 1995, and 9,181,790 and 7,807,065 shares of Preferred
Stock for the three months ended September 30, 1996 and 1995, respectively,
which are Common Stock equivalents because of the mandatory conversion
feature, is assumed when such conversion is dilutive.
(b) Net income per common share -- fully diluted is set forth herein in
accordance with Item 601 of Regulation S-K. The additional dilution arising
in the fully diluted calculation is not material (less than 3%); therefore,
fully diluted net income per common share is not disclosed in the statements
of operations.
<PAGE> 1
EXHIBIT 15
<PAGE> 2
EXHIBIT 15
Arcadian Corporation
Memphis, Tennessee
Gentlemen:
Re: Registration Statement No. 33-40323 and No. 333-10361
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated November 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 Section 7 and 11 of the Act.
Very truly yours,
KPMG PEAT MARWICK LLP
Memphis, Tennessee
January 9, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS OF ARCADIAN CORPORATION INCLUDED IN FORM 10-Q/A FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 272,553<F1>
<SECURITIES> 0
<RECEIVABLES> 124,706
<ALLOWANCES> 1,534
<INVENTORY> 118,486
<CURRENT-ASSETS> 526,326
<PP&E> 853,634
<DEPRECIATION> 254,752
<TOTAL-ASSETS> 1,301,367
<CURRENT-LIABILITIES> 164,374
<BONDS> 510,000
0
85,999
<COMMON> 402
<OTHER-SE> 408,200
<TOTAL-LIABILITY-AND-EQUITY> 1,301,367
<SALES> 935,244
<TOTAL-REVENUES> 935,244
<CGS> 685,601
<TOTAL-COSTS> 685,601
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 247
<INTEREST-EXPENSE> 29,842
<INCOME-PRETAX> 177,715
<INCOME-TAX> 61,815
<INCOME-CONTINUING> 115,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,900
<EPS-PRIMARY> 2.49
<EPS-DILUTED> 2.49
<FN>
<F1>CASH INCLUDES $58 MILLION OF RESTRICTED RESERVES.
</FN>
</TABLE>
