ARCADIAN CORP, 10-K/A, 1997-01-10

ARCADIAN CORP
10-K/A, 1997-01-10
AGRICULTURAL CHEMICALS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A

AMENDMENT NO. 1

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995

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.)

6750 POPLAR AVENUE, SUITE 600
MEMPHIS, TENNESSEE 38138-7419
(Address of principal executive offices) (Zip Code)
</TABLE>

Registrant's telephone number, including area code: (901) 758-5200

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ---------------------------------------------------------- --------------------------------
<S> <C>
COMMON STOCK NEW YORK STOCK EXCHANGE
MANDATORILY CONVERTIBLE PREFERRED STOCK, SERIES A NEW YORK STOCK EXCHANGE
</TABLE>

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

At March 26, 1996, there were 32,365,233 outstanding shares of Common
Stock. At such date, the aggregate market value of the shares of Common Stock
held by non-affiliates, based on the closing price of the Common Stock on the
New York Stock Exchange, was approximately $482 million.

DOCUMENTS INCORPORATED BY REFERENCE

1. Proxy Statement dated March 29, 1996 (Part III).

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PART I

ITEM 1. BUSINESS

GENERAL

Arcadian Corporation ("Arcadian") is the largest producer and marketer of
nitrogen fertilizers and nitrogen chemicals in the Western Hemisphere. These
products are used for both agricultural and industrial purposes. Arcadian
produces ammonia at six of its seven domestic plants and in Trinidad. Ammonia is
used by Arcadian to produce a full line of upgraded nitrogen products, including
urea, ammonium nitrate, nitric acid and nitrogen solutions. Ammonia, urea,
ammonium nitrate and nitrogen solutions are sold as fertilizers to agricultural
customers and to industrial customers for various applications, while nitric
acid is sold to industrial customers as an intermediate chemical feedstock. In
addition to nitrogen products, Arcadian manufactures a variety of phosphate
products at one domestic plant for agricultural and industrial purposes. In
1995, Arcadian's sales were divided approximately 60% to agricultural customers
and 40% to industrial customers. Arcadian's plants ship products to
agricultural, industrial and export customers via barge, rail, truck and ship.
The locations of Arcadian's plants are Point Lisas, Trinidad; Geismar,
Louisiana; Augusta, Georgia; Lima, Ohio; Memphis, Tennessee; La Platte,
Nebraska; Clinton, Iowa; and Wilmington, North Carolina. In March 1995, Arcadian
indefinitely shut down production activities at its plant in Savannah, Georgia,
and converted it to a product distribution facility. All of the plants, except
for the Lima and Trinidad plants, were acquired in 1989 in connection with the
formation of Arcadian. The Lima and Trinidad plants were acquired in 1993.

Arcadian was created in 1989 with the acquisition of five previously
separate nitrogen fertilizer businesses. From April 1992 to August 1995,
Arcadian conducted substantially all of its operations through a master limited
partnership, Arcadian Partners, L.P. ("Partners") and its subsidiaries
(collectively "Partnership"). Arcadian created the Partnership and held a 2%
general partner interest and a 43% limited partner interest; a 55% limited
partner interest was represented by publicly traded preference units. Arcadian
effectively acquired all of the preference units of Partners in August 1995 as
part of a series of transactions referred to as the "Merger."

PRODUCT SALES

The historical combined net sales of Arcadian's principal products for the
periods indicated are set forth in the table below.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1995 1994 1993
----------------- ----------------- ---------------
% OF % OF % OF
TOTAL TOTAL TOTAL
NET NET NET NET NET NET
SALES SALES SALES SALES SALES SALES
-------- ----- -------- ----- ------ -----
(IN MILLIONS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Ammonia.................................... $ 341.7 27.0% $ 306.2 27.8% $135.3 16.9%
Urea....................................... 371.5 29.3 276.6 25.1 198.7 24.7
Nitric Acid................................ 30.3 2.4 25.5 2.3 12.5 1.6
Ammonium Nitrate........................... 77.6 6.1 87.7 8.0 69.1 8.6
Nitrogen Solutions......................... 317.6 25.1 273.9 24.9 269.1 33.5
Phosphate Products......................... 84.0 6.7 91.0 8.3 84.7 10.5
Other Products............................. 44.2 3.4 39.4 3.6 33.8 4.2
-------
-
------ ----- ------ ----- -----
Total Net Sales....................... $1,266.9 100.0% $1,100.3 100.0% $803.2 100.0%
====== ===== ====== ===== ======== =====
</TABLE>

MARKETING AND DISTRIBUTION

Domestic

Arcadian supplies customers in the major crop producing and fertilizer
consuming areas of the United States from its domestic plants which are
strategically located throughout the eastern half of the U.S., giving
<PAGE> 3

Arcadian access to a strong, diversified crop base and lengthy fertilizer
consuming seasons. Arcadian's domestic plants have ready access to major
railroads, truck, barge or vessel transportation. At the Geismar plant, Arcadian
also has one of the few U.S. deep-water direct vessel loading facilities in the
industry, which provides it with ready access to the export market.

The primary customers for fertilizer products are retail chain operators,
dealers, distributors and other fertilizer producers. National farm retail
chains and cooperatives have both distribution and application capabilities.
Arcadian does not sell products directly to farmers.

Arcadian distributes its products by barge, railcar and truck to its
customers and through its strategically located storage terminals in high
consumption areas. Arcadian leases or owns approximately 50 terminal facilities
with an aggregate storage capacity of approximately 600,000 tons of product. The
terminals provide off-season storage and also serve local dealers during the
peak seasonal demand period. Arcadian operates approximately 1,300 railcars,
including various types of specialty railcars necessary for transporting some of
Arcadian's products.

Trinidad

Arcadian distributes products from the Trinidad plant to markets in Latin
America, Europe and Africa in addition to the United States. Arcadian's
distribution operations in Trinidad employ one long-term chartered ocean-going
vessel and utilize spot charters as necessary for the transportation of ammonia.
All bulk urea production is shipped through third-party carriers.

SEASONALITY AND VOLATILITY

The markets for nitrogen and phosphate fertilizers are global commodity
markets. These products generally have no proprietary distinction, and the
markets for Arcadian's fertilizer products are both seasonal and volatile. The
seasonality of Arcadian's business is primarily the result of the agricultural
growing season, which imposes the need to build inventories for the annual peak
periods of fertilizer application. The volatility of Arcadian's business is the
result of a number of factors, including U.S. and foreign public sector policies
(including international trade policies), the number of acres planted, weather
patterns and conditions, the mix and yield of crops planted, disposable farm
income, the level of imports and, as with other global markets, the relative
value of the U.S. dollar. The most important factors for domestic markets are
weather patterns and conditions (particularly during periods of high fertilizer
application) and the agricultural and trade policies of the U.S. government.
Among the governmental policies that influence the markets for fertilizer are
those regulating or designed to influence the number of acres planted, the level
of grain stocks, the mix of the crops planted and crop prices. Under current
policy, which is intended to mitigate price and grain inventory volatility, the
U.S. government influences the number of acres planted by removing acres from
cultivation via subsidies to farmers based upon current grain stock inventories
and expected yields.

The effects of the seasonality of Arcadian's fertilizer sales are offset in
part by the sale of approximately 40% of its production for industrial, rather
than agricultural, purposes. The industrial market business cycles for
Arcadian's products are generally independent of the agricultural cycles.

COMPETITION

Although there has been extensive consolidation and privatization
worldwide, substantial competition exists in the nitrogen fertilizer and
chemical industries. Arcadian competes domestically with a broad range of
companies in the production and sale of nitrogen fertilizer and chemical
products, including subsidiaries of larger chemical companies, farm
cooperatives, integrated energy companies and independent fertilizer companies.
Because fertilizer is a commodity, competition takes place largely on the basis
of price and deliverability. The relative cost of, and availability of
transportation for, raw materials and finished products to manufacturing
facilities and markets are important competitive factors. Some of Arcadian's
principal competitors are more diversified and have greater financial resources
than Arcadian.

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Arcadian also competes with foreign companies whose nitrogen products are
imported into the United States. Although the number is diminishing, various
foreign competitors receive subsidies from their governments. Some countries
also have natural gas supplies that are surplus to domestic demand. This surplus
natural gas may have a low alternative value and, when used as feedstock for the
manufacture of ammonia and urea, can result in low-cost production. These
low-cost products are being imported into the U.S. and compete with domestically
manufactured nitrogen fertilizers, including those of Arcadian. In addition,
other importers subsidized by their governments may import products into the
U.S. for reasons not related to U.S. fertilizer market conditions, such as the
need to obtain U.S. dollars for other purposes.

Arcadian believes that its production capacities for each of its principal
nitrogen products are among the one or two largest in the Western Hemisphere,
and that its major domestic competitors are Farmland Industries, Inc., CF
Industries, Inc., and Terra Industries Inc.

Arcadian's domestic plants serve agricultural markets with a diversified
crop base that spans a lengthy growing season. Arcadian's domestic manufacturing
plants are strategically located in agricultural and industrial end-use markets
in the Southeast, Midwest and Gulf Coast regions. Management believes that it is
more economical to transport natural gas, the primary raw material in the
production of nitrogen fertilizers and chemicals, to plants situated in the
product markets than to transport such products over long distances. Several of
Arcadian's domestic plants are located closer to their primary customers than
are their competitors. Arcadian concentrates its marketing efforts on these
nearby markets where lower transportation costs result in better margins.
Arcadian believes that the number and geographic diversity of its plants provide
competitive advantages in manufacturing, distribution, marketing, customer
service and other areas when compared to competitors controlling only a few
facilities.

RAW MATERIALS

Natural gas is the primary raw material used for the production of ammonia
and, as a result, virtually all of Arcadian's other nitrogen products. The
purchase and transportation of natural gas accounts for approximately 40% of
Arcadian's total domestic production cost. Arcadian's natural gas strategy is to
purchase approximately one-third of its natural gas in the spot market or on
short-term contracts, one-third of its natural gas pursuant to fixed-price or
index-priced physical contracts, reserves in the ground or forward contracts
which fix the price of future deliveries, and the remaining one-third of its
natural gas in Trinidad using a pricing formula related to the market price of
ammonia. Arcadian purchases nearly all its natural gas from producers or
marketers at the point of delivery of the natural gas into the pipeline system,
then pays the pipeline company and, where applicable, the local distribution
company to transport the natural gas to Arcadian's facilities. Approximately 60%
of Arcadian's domestic consumption of natural gas is delivered pursuant to firm
transportation contracts which do not permit the pipeline or local distribution
company to interrupt service to, or divert natural gas from, the plant. For a
further description of Arcadian's natural gas hedging policy, refer to Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

In addition to nitrogen products, Arcadian produces phosphate products at
the Geismar plant for which supplies of phosphate rock and sulfur are necessary.
Arcadian purchases phosphate rock from Morocco pursuant to an agreement with a
Moroccan government-owned company, the current term of which expires on December
31, 1997, wherein prices are reset annually through negotiation. If no agreement
on price is reached, either party may terminate the agreement. Changes in the
agreement could affect the stability of the supply of the raw material and the
profitability of Arcadian's phosphate products. Sulfur is purchased pursuant to
a contract that may be cancelled by either party upon 180 days' notice prior to
the end of any month. Both phosphate rock and sulfur are delivered to the
Geismar plant via ship and barge.

FINANCIAL INFORMATION BY GEOGRAPHIC AREA

Refer to Note 8 of Notes to Consolidated Financial Statements included
herein beginning on page F-15.

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ENVIRONMENTAL AND SAFETY MATTERS

General

The production, distribution and storage of nitrogen and phosphate
fertilizers and chemicals may result in environmental damage. In addition, the
production of fertilizers and chemicals involves the use, handling and
processing of materials that may be considered hazardous within the meaning of
applicable environmental, health and safety laws. Arcadian believes that the
procedures currently in effect at all of its facilities for the production,
handling and transportation of all materials are consistent with industry
standards and are in general compliance with applicable environmental, health
and safety laws, the violation of which could have a material adverse effect on
Arcadian.

Arcadian's operations are subject to extensive and evolving federal, state
and local and certain foreign laws and regulatory requirements relating to
environmental affairs, health and safety, waste management and chemical
products. Permits are required for the operation of Arcadian's plants and
related facilities, and these permits are subject to revocation, modification
and renewal. Governmental authorities have the power to enforce compliance with
these regulations and permits, and violators are subject to civil and criminal
penalties, including civil fines, injunctions or both. Third parties also may
have the right to pursue legal actions to enforce compliance. Future
developments, such as stricter laws, regulations or enforcement policies
thereunder, could significantly increase the cost to Arcadian with respect to
the handling, manufacture, use, emission or disposal of substances or wastes by
Arcadian. Moreover, some risk of environmental costs and liabilities is inherent
in Arcadian's operations and products, as it is with other companies in the
industry, and there can be no assurance that material costs and liabilities will
not be incurred by Arcadian. Arcadian's capital expenditures on projects
principally related to environmental control, remediation and compliance in 1995
were approximately $10 million, and Arcadian anticipates expenditures of
approximately $8 million for similar projects during each of 1996 and 1997.
Arcadian expects that its capital requirements for environmental projects may
increase in the future due to increasingly stringent environmental regulations
arising from current and future requirements of law.

Arcadian has identified certain matters of environmental, health and safety
concern, including the specific matters described below, which may require
capital or other remedial expenditures. After considering the nature of these
matters, the responses of various regulatory authorities to similar matters, the
range of operating, engineering, environmental and other alternatives that might
be available to address these matters, the likely ranges of related capital and
operating expenditures, and the time periods over which such expenditures might
be required, Arcadian does not believe that the expenditures related to such
matters will have a material adverse effect on its results of operations or
financial condition. However, there can be no assurance that material
liabilities or expenditures will not arise from these or additional
environmental, health or safety matters that may be discovered or from future
requirements of law.

The federal Clean Air Act Amendments of 1990 ("CAA Amendments") provide for
increased regulation of air emissions, including pollutants that may be
considered toxic within the meaning of the statute, and set forth requirements
for federal air emissions operating permits. In addition, several states,
including Louisiana and North Carolina, have adopted or are in the process of
adopting stricter controls on air emissions designated as toxic by those states,
which in certain cases include ammonia. Arcadian has retained an environmental
consulting firm to evaluate the applicability of the CAA Amendments'
requirements to Arcadian's domestic plants. Based on the preliminary results of
the study, Arcadian will be required to take certain actions to ensure
compliance with the CAA Amendments and related applicable state laws. Due to the
preliminary nature of the study and the uncertain and emerging nature of
applicable regulations, however, Arcadian currently is not able to estimate the
potential cost of such actions.

In 1992, the United States Occupational Safety and Health Administration
("OSHA") issued a process safety management standard for the prevention of
accidental releases of certain chemicals. The standard requires employers to
develop and maintain written process safety information, perform an assessment
of potential hazards, train and consult with employees, and investigate
incidents with the potential to result in major workplace accidents. The
standard provides for implementation of the program in various phases, with
compliance deadlines extending through several years. Arcadian is taking actions
to comply with the process

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safety management standard in accordance with the prescribed deadlines. Arcadian
currently expects that the cost of compliance with the standard will not have a
material adverse effect on Arcadian.

The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as the "Superfund" law, imposes liability, without regard
to fault or the legality of the original conduct, on certain classes of persons
who are considered to be responsible for the release of a "hazardous substance"
into the environment. These persons include the owner or operator of the
disposal site or sites where the release occurred and companies that disposed or
arranged for the disposal of the hazardous substances. Under CERCLA, such
persons may be subject to joint and several liability for the costs of cleaning
up the hazardous substances that have been released into the environment, for
damages to natural resources, and for the costs of certain health studies. It is
not uncommon for neighboring landowners and other third parties to file claims
for personal injury and property damage allegedly caused by hazardous substances
or other pollutants released into the environment.

The plant sites on which Arcadian's production operations are located have
been used for many years. Although Arcadian has utilized, and believes that its
predecessors generally utilized, operating and disposal practices that Arcadian
believes complied with industry standards at the time, federal and state laws
relating to the remediation of historical disposal sites have become more
stringent. As a result, to the extent that wastes may have been released or
disposed of at its plant sites, Arcadian has in the past been, and may in the
future be, required to remediate contaminated property or groundwater or remove
previously disposed wastes and address related liabilities.

Matters Related to Specific Facilities

Arcadian's phosphate operations at the Geismar plant generate
phospho-gypsum as a byproduct. The phospho-gypsum, which is placed in large
stacks on site, is currently exempt from regulation as a hazardous waste under
the Resource Conservation and Recovery Act ("RCRA"). The Environmental
Protection Agency ("EPA") was considering a program under the Toxic Substances
Control Act to address the generation and management of phospho-gypsum and is
considering additional regulatory action under RCRA. Additional regulations may
require Arcadian and others similarly situated to take compliance actions
relating to the generation and management of phospho-gypsum. Due to the
uncertain and emerging nature of such regulations, however, Arcadian currently
is not able to estimate the potential cost of any such compliance actions.

The Geismar plant is subject to federal and state wastewater discharge
regulations and permits. Pursuant to the requirements of an EPA administrative
order, Arcadian requested modifications to its federal and state wastewater
discharge permits for a fluoride bleed stream. In 1993, the EPA issued a
modified permit that allows Arcadian to continue operations at current levels.
The Louisiana Department of Environmental Quality ("LDEQ") has administratively
extended the state wastewater discharge permit on substantially the same terms
as are contained in the federal permit. Arcadian does not expect to incur
significant additional expenditures to comply with the modified permits.

In 1994, the LDEQ issued an administrative order to Arcadian requiring the
correction of certain alleged violations of state air pollution control
regulations associated with the operations of the super-phosphoric acid facility
at the Geismar plant. The order specifically requires corrective action as to
certain state opacity requirements and the compliance with such requirements in
the future through the installation of control and monitoring equipment and the
adoption of certain operating procedures at the Geismar plant. Arcadian
currently expects that corrective actions required by the LDEQ order will result
in the expenditure of a total of approximately $3 million during 1996 and 1997.

The EPA had recommended that certain environmental conditions at the site
of Arcadian's terminal in Navassa, North Carolina, be reevaluated under amended
EPA procedures with a view to the potential listing of the site on the National
Priorities List under CERCLA and possible remediation. Based upon information
obtained by Arcadian from the EPA, it appears that the EPA does not currently
plan to list the site on the National Priorities List or require further site
investigation at this time. There can be no assurance, however, that the EPA
will not so list the site or require further investigation and possibly
remediation of the site in the

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future. Further, in February 1996, the North Carolina Department of Environment,
Health and Natural Resources notified the Company that the Navassa terminal site
had been included on the state's Inactive Hazardous Waste Sites Priority List.
Listed sites normally are subject to detailed assessment of the environmental
condition of concern and the feasible remediation options. Arcadian nonetheless
currently expects that the cost and liability, if any, associated with the
Navassa terminal site will not have a material adverse effect on Arcadian.

In 1991, after extensive environmental assessments, Arcadian installed a
remediation system at the Memphis plant to address certain contaminants found in
the groundwater. Although the system was installed voluntarily and had been in
operation for over a year, the Tennessee Department of Environment and
Conservation ("TDEC") in 1993 proposed to include the Memphis plant on the
state's list of Inactive Hazardous Substance Sites. The Tennessee Solid Waste
Disposal Control Board rejected a similar proposal made by the TDEC in 1989.
Listed sites normally are subject to detailed assessment of the environmental
condition of concern and the feasible remediation options, but that process may
not be fully appropriate as to the Memphis plant in view of Arcadian's existing
remediation system. Nevertheless, in 1994, Arcadian entered into a voluntary
consent agreement and order with the TDEC providing for oversight and possible
modification by the TDEC of Arcadian's current remedial action, including
authority for requiring assessments of soils associated with Arcadian's
wastewater treatment system. There can be no assurance that the Memphis plant
will not be listed in the future, but in the event that it is listed, Arcadian
expects that the compliance costs will not have a material adverse effect on
Arcadian.

In 1990, Arcadian implemented a voluntary program to assess groundwater
quality at the Clinton plant due to the presence of nitrates in the groundwater.
Arcadian provided the results of its investigation to the Iowa Department of
Natural Resources ("IDNR"). Pursuant to negotiations with the IDNR, the Company
will conduct further investigations and, if necessary, remediation. Further, the
Clinton plant site is immediately adjacent to the Chemplex Superfund site at
which groundwater remediation is currently being conducted. Certain volatile
organic compounds associated with the Chemplex site have been detected in small
amounts in the groundwater at the Clinton plant. Based on preliminary
information, it is also possible that remediation activities at the Chemplex
site could result in increased levels of nitrates in groundwater at the Clinton
plant. Nonetheless, based on currently available information, Arcadian expects
that the cost of the further assessment and any remediation of nitrates will not
have a material adverse effect on Arcadian.

The Lima plant discharges wastewater to the Ottawa River under a National
Pollutant Discharge Elimination System permit issued by the Ohio Environmental
Protection Agency ("OEPA"). When the permit was last renewed in 1989, the OEPA
initially proposed to impose substantial limitations on certain substances
present in the wastewater, based on concerns over the already impaired quality
of the river water as a result of industrial or municipal discharges. The OEPA
later agreed in an administrative settlement to a five-year permit for the Lima
plant with discharge conditions that were more acceptable to the Lima plant's
prior owner, BP Chemicals Inc. ("BPC"). The permit expired in 1994, but it has
been administratively extended by the OEPA on substantially the same terms
pending processing and approval of Arcadian's application for renewal. While
Arcadian does not expect that substantial additional discharge restrictions will
be imposed, the OEPA may again seek to impose a reduction in the permitted
discharge levels. Such restrictions may require the installation of improved
treatment technology, the cost of which will depend on the limitations
ultimately imposed.

Arcadian has applied to regulatory agencies for the transfer or issuance of
various permits or authorizations that are material to the operation of the Lima
plant. As a result of regulatory procedural delays, some of these permits and
authorizations were not transferred or issued prior to the closing of Arcadian's
acquisition of the Lima plant. Arcadian expects, however, that all such permits
and authorizations for the Lima plant will be transferred or issued in due
course.

Under the Georgia Rules for Hazardous Site Response, owners of property
where hazardous substances have or may have been released in excess of
established threshold levels are required to give notice thereof to the
Environmental Protection Division of the Georgia Department of Natural Resources
("GEPD"). The GEPD will evaluate the reported sites to determine whether they
should be listed on the state's Hazardous

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Site Inventory. In 1994, Arcadian, as to the now idle Savannah plant, and DSM
Chemicals North America, Inc. ("DSM"), as the owner and lessor of the site of
the Augusta plant, notified the GEPD of certain substances that may be present
in reportable quantities at the respective sites. Based on such information, the
GEPD has decided not to include either site on the state's Hazardous Site
Inventory at this time. There can be no assurance that the GEPD will not include
either or both sites on the Hazardous Site Inventory in the future. However,
Arcadian does not expect the cost of any required remedial actions associated
with such listing to have a material adverse effect on Arcadian.

DSM, which conducts manufacturing operations immediately adjacent to the
Augusta plant, is subject to certain corrective action requirements under its
RCRA hazardous waste management permit. Pursuant to these requirements, the GEPD
has identified a number of solid waste management units on DSM's property,
including several on property leased from DSM by Arcadian, for assessment and
potential remediation. Arcadian is contractually obligated to reimburse DSM for
the costs of the assessment and remediation of conditions at solid waste
management units at the Augusta plant which are attributable to past or present
nitrogen production operations at the Augusta plant. In 1995, DSM submitted a
draft remediation investigation work plan to the GEPD providing for the
assessment of the solid waste management units identified by the GEPD at the
Augusta complex. Due to the preliminary nature of the draft work plan and the
fact that it must be approved by the GEPD prior to implementation, Arcadian is
currently not able to accurately estimate the amount of costs that it will be
required to reimburse to DSM. Based on currently available information, however,
Arcadian does not expect that such costs will have a material adverse effect on
Arcadian. Further, if Arcadian successfully completes its negotiations with DSM
for the purchase of the leased land, the GEPD has informed Arcadian that it will
require Arcadian either to enter into a consent order or accept a permit for the
performance of the assessment and remediation actions for which Arcadian is
currently required to reimburse DSM.

The Parliament of Trinidad and Tobago is considering legislation providing
for the increased regulation of environmental matters. Due to the uncertain and
emerging nature of this legislation and the regulations to be issued thereunder,
Arcadian is not currently able to accurately predict the impact that such
legislation and associated regulations may have on its operations in Trinidad.
However, Arcadian does not currently expect that such legislation or regulations
will have a material adverse effect on Arcadian.

EMPLOYEES

Number of employees at December 31, 1995: 1,293

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ITEM 2. PROPERTIES

Facilities

Arcadian manufactures nitrogen products at eight plants, of which seven are
located in the United States and one is located in Trinidad. The following table
sets forth the plant locations and production capabilities:

<TABLE>
<CAPTION>
PLANT LOCATIONS PRODUCTS PRODUCED
------------------------------------------ ----------------------------------------
<S> <C>
Domestic:
Augusta, Georgia........................ Ammonia, urea, nitric acid, ammonium
nitrate, and nitrogen solutions

Clinton, Iowa........................... Ammonia, urea, nitric acid, ammonium
nitrate, and nitrogen solutions

Geismar, Louisiana...................... Ammonia, urea, nitric acid, ammonium
nitrate, nitrogen solutions, phosphoric
acid, super-phosphoric acid, phosphate
solutions, and sulfuric acid

LaPlatte, Nebraska...................... Ammonia, urea, nitric acid, ammonium
nitrate, and nitrogen solutions

Lima, Ohio.............................. Ammonia, urea, nitric acid, and nitrogen
solutions

Memphis, Tennessee...................... Ammonia and urea

Wilmington, North Carolina.............. Nitric acid and nitrogen solutions
Foreign:
Point Lisas, Trinidad................... Ammonia and urea
</TABLE>

Arcadian leases or owns terminal facilities at approximately 50 locations
throughout the southern, southwestern, midwestern and eastern United States
principally for the storage of nitrogen solutions. Arcadian also leases office
space for its corporate headquarters.

Service Agreements

The Geismar plant is integrated with a larger chemical manufacturing
complex owned by Allied-Signal, Inc. ("Allied"). Under the Geismar Services
Agreement, Arcadian and Allied provide certain support services to each other,
including the provision of utilities, the discharge of wastewater, security and
emergency services, and other essential services. Management believes that most
of the services that Arcadian requires are available from other sources, if
necessary. However, the termination of, or the need to replace, certain of the
services provided (such as steam, well water supply and dock services) could, in
the aggregate, involve potentially significant capital expenditures, increased
operating costs and disruptions to the operations of the Geismar plant.

BPC operates the Lima plant on Arcadian's behalf under an operating
agreement expiring in May 1996 but automatically renewable thereafter on an
annual basis. Arcadian's payments to BPC under the operating agreement generally
are intended to approximate BPC's previous cost of operating the Lima plant and
are made through the reimbursement of expenses incurred by BPC in providing such
operating services. In addition, due to the mutual interdependence of the Lima
plant and BPC's operations, Arcadian and BPC have agreed to provide each other
with certain manufacturing support services at cost pursuant to a contract
extending for as long as the plants continue to operate and either party is
required to provide support services thereunder.

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Arcadian uses contract labor personnel provided by Augusta Service Company,
Inc., which is owned 50% by Arcadian and 50% by DSM, to provide purchasing,
stores and spare parts management, maintenance, repair and shipping services for
the Augusta plant.

ITEM 3. LEGAL PROCEEDINGS

Port Authority of New York and New Jersey

On March 15, 1996, Arcadian 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 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), Arcadian 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. While Arcadian 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.

Lake Charles

In connection with a 1992 incident at its Lake Charles plant, Arcadian is
contesting penalties proposed by OSHA totaling $4 million. The OSHA legal
proceeding to date has generally been favorable to Arcadian. While management
and legal counsel believe that any civil penalty ultimately paid by Arcadian
will be substantially less than the remaining $4 million penalty proposed by
OSHA, they cannot predict with certainty the outcome of this proceeding.
Arcadian 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 Arcadian upon the resolution of these matters.

Southern and AGL

Arcadian is involved in various proceedings that stem from its request that
the Federal Energy Regulatory Commission ("FERC") require Southern Natural Gas
Company ("Southern") to transport natural gas directly to the Augusta plant. As
required by a FERC order issued in 1992, Southern constructed the necessary
interconnection facilities and commenced the requested transportation service. A
subsequent FERC order issued in 1994 approved a settlement between Arcadian and
Southern in which Southern agreed, among other things, to construct the
facilities and provide the service. Atlanta Gas Light Company ("AGL"), the local
distribution company that previously served the Augusta plant, has filed
requests for rehearing of the FERC's orders with the FERC and has filed
petitions for review of the FERC's orders with federal appellate courts, which
remain pending. AGL also sought and obtained rulings from the Georgia Public
Service Commission with respect to Southern's gas service to the Augusta plant,
but the federal district court in Atlanta invalidated those rulings and no
appeals have been taken.

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 pricing practices in
the ammonium-nitrate industry, including pricing practices of Arcadian. Arcadian
currently has limited information concerning the DOJ's investigations and, thus,
is unable to predict their outcomes as to

9
<PAGE> 11

Arcadian. However, Arcadian believes that neither it nor its employees have
violated the antitrust laws and the DOJ's investigations are unlikely to result
in a material adverse effect on Arcadian.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the fiscal
quarter ended December 31, 1995.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Common Stock of Arcadian Corporation commenced trading on August 4,
1995.

MARKET PRICE OF COMMON STOCK

<TABLE>
<CAPTION>
1995 HIGH LOW
----------------------------------------------------------------------- ---- ---
<S> <C> <C>
3rd Quarter............................................................ 21 1/2 16 3/4
4th Quarter............................................................ 24 1/8 18 3/8
</TABLE>

CASH DIVIDEND PER COMMON SHARE

<TABLE>
<CAPTION>
1995
-----------------------------------------------------------------------------
<S> <C>
3rd Quarter.................................................................. --
4th Quarter.................................................................. $0.05
</TABLE>

The Common Stock, par value $.01 per share, of Arcadian ("Common Stock") is
traded on the New York Stock Exchange under the symbol "ACA." At March 26, 1996,
there were approximately 337 holders of record of Common Stock.

On February 27, 1996, Arcadian announced that its Board of Directors had
authorized Arcadian to implement a stock repurchase program for its Mandatorily
Convertible Preferred Stock, Series A, par value $.01 per share ("Preferred
Stock"). The Board of Directors has authorized Arcadian to spend up to $50
million in making open market purchases of the Preferred Stock from time to time
as management deems appropriate.

On February 27, 1996, Arcadian also announced that its Board of Directors
intends to submit a proposed charter amendment for approval at Arcadian'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 will be described in detail in Arcadian's proxy solicitation materials
for the Meeting.

10
<PAGE> 12

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS EXCEPT SHARES AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................. $ 1,266,887 $ 1,100,301 $ 803,167 $ 593,440 $ 573,342
Operating income........... 292,341 117,272 62,041 70,543 66,382
Non-controlling interest in
earnings of
partnership.............. (82,270) (43,971) (18,963) (9,927) --
Net income................. 88,250 9,993(b) 2,481 4,481(c) 22,183(d)
Net income (loss)
applicable to common
shares................... 80,227 8,843 (3,082) (1,067) 17,479
Net income (loss) per
common share............. 3.08 0.55 (0.24) (0.07) 1.15
Weighted average common and
common equivalent shares
outstanding.............. 28,676,102 16,148,586 12,915,906 15,693,048 15,255,777
BALANCE SHEET DATA:
Property, plant, and
equipment, net........... $ 606,410 $ 614,197 $ 630,451 $ 336,654 $ 356,018
Total assets............... 1,270,654 1,118,549 1,104,370 603,966 545,446
Total debt (including
current portion)......... 540,000 636,886 615,028 237,012 461,272
Net debt(a)................ 286,812 535,855 483,930 177,721 456,421
Non-controlling interest... -- 279,518 271,297 288,084 --
Stockholders' equity
(deficit)................ 436,419 (52,699) (57,626) (45,837) (15,492)
OTHER DATA:
Depreciation and
amortization............. $ 66,647 $ 61,630 $ 52,547 $ 38,660 $ 37,840
Cash dividends per common
share.................... 1.72 0.33 0.42 0.32 --
</TABLE>

- ---------------

(a) Net debt consists of total debt less cash and cash equivalents, short-term
investments, and restricted cash in reserve accounts which are for the
benefit of debtholders.

(b) Includes a $16 million charge taken on the indefinite shutdown of the
Savannah plant and a $15 million loss on the disposition of
available-for-sale securities.

(c) Includes a $15 million charge taken on closure of the Lake Charles plant and
an extraordinary gain of $11 million on utilization of prior years' net
operating losses.

(d) Includes an extraordinary gain of $22 million on early extinguishment of
debt and utilization of prior years' net operating losses.

11
<PAGE> 13

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

From April 1992 to August 1995, Arcadian Corporation ("Corporation")
conducted substantially all of its operations through a master limited
partnership, Arcadian Partners, L.P. ("Partners") and its subsidiaries
(collectively "Partnership"). The Corporation created the Partnership and held a
2% general partner interest as well as a 43% limited partner interest; a 55%
limited partner interest ("Non-Controlling Interest") was represented by
publicly traded preference units. As more fully described in Note 2 to the
Consolidated Financial Statements, the Corporation, in August 1995, effectively
acquired all of the preference units of Partners as part of a series of
transactions referred to as the "Merger". For all periods presented, Partners
and its subsidiaries along with other less significant subsidiaries of the
Corporation, have been consolidated with the Corporation and are collectively
referred to herein as "Arcadian". Subsequent to the Merger, therefore, results
of operations of Arcadian were not reduced by the portion of Partnership income
allocable to the Non-Controlling Interest. The non-cash portion of the Merger
consideration consisted of the Corporation's newly issued Mandatorily
Convertible Preferred Stock, Series A ("Preferred Stock"). The Preferred Stock
is considered to be a common stock equivalent (if dilutive) due to its
conversion feature.

RESULTS OF OPERATIONS

1995 Compared to 1994

In 1995, Arcadian generated net income of $88 million, net income
applicable to common shares of $80 million and net income per common share of
$3.08, compared to 1994 net income of $10 million, net income applicable to
common shares of $9 million, and net income per common share of $0.55. Operating
income increased in 1995 to $292 million from $117 million in 1994.

Net sales increased from 1994 to 1995 by $167 million or 15%, of which 17%
was related to increased product selling prices, offset by 2% lower sales
volumes. The higher product selling prices were the result of a strong worldwide
demand for ammonia and urea and strengthening domestic demand for nitrogen
solutions. Arcadian experienced increased selling prices in 1995 for all of its
major products and, although sales volume of ammonia declined from the prior
year, Arcadian experienced increased sales volume in 1995 for urea and
relatively stable sales volumes for its other major products.

Gross profit increased from 1994 to 1995 by $173 million. Gross profit as a
percentage of net sales increased from 17% in 1994 to 28% in 1995. The
improvement in gross profit was primarily a result of increases in selling
prices combined with lower natural gas costs. The per unit natural gas cost
included in cost of sales decreased approximately 10% from 1994 to 1995.

Selling, general and administrative expenses increased by $13 million from
1994 to 1995. The increase in expense reflects primarily a $10 million increase
in profit sharing and stock appreciation rights. However, as a percentage of net
sales, selling, general and administrative expenses remained constant with 1994
at 5%.

Interest expense increased from 1994 to 1995 by $1 million comprised of
approximately $3 million in increased expense from costs associated with the
September 1995 redemption of Exchange Debentures, offset by approximately $2
million in reduced expense from significantly lower levels of revolving credit
facility borrowings. Interest income of $13 million in 1995 reflects an increase
of $3 million over 1994, primarily from increased levels of invested funds
earning interest. Significantly improved results on investment transactions in
1995 reflect Arcadian's current more-conservative investment policy.

Partnership income in 1995, prior to the August 1995 Merger, was $150
million and was $80 million for the full year of 1994. Non-Controlling Interest
reflects the preference unitholders' 55% interest in Partnership income prior to
the Merger.

The increase in income tax provision from the prior year reflects higher
1995 taxable earnings and the increase in the Partnership's income allocable to
the Corporation as a result of the Merger.

12
<PAGE> 14

1994 Compared to 1993

In 1994, Arcadian generated net income of $10 million, net income
applicable to common shares of $9 million, and net income per common share of
$0.55, compared to 1993 net income of $2 million, net loss applicable to common
shares of ($3) million, and net loss per common share of ($0.24). Operating
income increased in 1994 to $117 million from $62 million in 1993.

Net sales increased from 1993 to 1994 by $297 million or 37%, of which 15%
was related to increased sales volumes and 22% was related to increased selling
prices. The increase in sales volumes primarily reflects (1) strong agricultural
demand combined with improved industrial demand in 1994 and (2) the benefit for
a full year in 1994 of the March 1993 Trinidad and the May 1993 Lima
acquisitions. Arcadian experienced increased selling prices in 1994 for all of
its major products, although sales volume of nitrogen solutions declined from
the prior year. Excluding Trinidad and Lima sales from both years, the increase
attributable to sales volumes would have been approximately 5%, while the
increase from sales prices would have been 17%.

Gross profit increased from 1993 to 1994 by $85 million. Gross profit as a
percentage of net sales increased from 12% in 1993 to 17% in 1994. The
improvement in gross profit was primarily a result of increases in selling
prices which were partially offset by higher gas costs. The per unit natural gas
cost included in cost of sales increased approximately 10% from 1993 to 1994
which included the results of financial forward positions. In addition to the
natural gas costs above, results for 1994 include approximately $12 million in
unrealized losses on gas contracts which do not qualify for deferral under
generally accepted accounting principles, compared to unrealized losses on
similar gas contracts in 1993 of $3 million.

Selling, general and administrative expenses increased by $15 million from
1993 to 1994. The increase in expense reflects primarily $4 million in higher
distribution costs from increased sales, $6 million of profit sharing expense
(compared to none in 1993), and increased costs related to the Trinidad and Lima
acquisitions. However, as a percentage of net sales, selling, general and
administrative expenses remained constant with 1993 at 5%.

Operating income in 1994 was adversely impacted by the approximately $16
million charge for the indefinite shutdown of the Savannah plant. Approximately
$13 million of the charge relates to the impairment of asset value as a result
of the decision to shut down the plant. See Note 4 to the Consolidated Financial
Statements.

Interest expense increased from 1993 to 1994 by $15 million primarily due
to interest expense for a full year for financing of the Trinidad and Lima
acquisitions and the March 1994 exchange by Arcadian of $34 million aggregate
principal amount of its Exchange Debentures for all outstanding shares of its
$160 Cumulative Exchangeable Preferred Stock, Series B ("Series B Preferred
Stock"). Interest income of $10 million in 1994 reflects an increase of $4
million over 1993, primarily from increases in invested funds and realized
yield. During 1994, Arcadian recognized a $15 million loss on the sale of
marketable securities.

Other income (expense) includes the net effect from the sale of Arcadian's
Triazone Division (income of $4 million), offset by the write-off of its
investment in an exploratory coal-bed methane gas project (expense of $4
million). In 1993, other income (expense) included income of $4 million for
insurance recoveries related to the 1992 failure of the Lake Charles plant.

Partnership income was $80 million and $27 million in 1994 and 1993,
respectively. Non-Controlling Interest reflects the preference unitholders' 55%
interest in Partnership income plus in 1993 approximately $9 million of special
income allocation required by the partnership agreement.

The income tax benefit in 1994 reflects primarily the impact on deferred
taxes of a change in the Trinidad statutory income tax rate from 45% to 38% and
the utilization of net operating losses ("NOLs") and tax credit carryforwards.

13
<PAGE> 15

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Net cash provided by operating activities totaled $326 million, $117
million and $45 million for the years ended December 31, 1995, 1994 and 1993,
respectively. Working capital, net of restricted reserve accounts, was $270
million, and $200 million as of December 31, 1995, and 1994, respectively, and
restricted reserves for the First Mortgage Notes and Senior Notes at those dates
totaled $50 million and $36 million, respectively.

Investing Activities

Net cash used for investing activities was $237 million, $45 million and
$379 million for the years ended December 31, 1995, 1994 and 1993, respectively.
During 1995, such activities included capital expenditures of $53 million,
rotational plant maintenance costs of $8 million and the cash portion of the
Merger Consideration of $214 million. During 1994, such activities included
capital expenditures of $59 million and rotational plant maintenance costs of
$18 million. During 1993, such activities included the Trinidad and Lima
acquisitions (net of acquired cash) of $215 million, other capital expenditures
of $41 million, and rotational plant maintenance costs of $18 million. The
restricted reserve for distributions on preference units of $36 million at
December 31, 1994 was released in 1995 as a result of the Merger.

The current projected total amount of capital expenditures for 1996 is
approximately $61 million. Of the projected 1996 amount, environmental
expenditures are expected to account for approximately $8 million. The current
projected amount of rotational plant maintenance costs for 1996 is approximately
$17 million.

Financing Activities

Net cash provided by (used for) financing activities was $62 million, ($52)
million and $316 million for the years ended December 31, 1995, 1994 and 1993,
respectively. The 1995 amount includes proceeds from the issuance of common
stock of $233 million. The 1993 amount included the proceeds of the Senior Notes
financing used primarily to fund the Trinidad and Lima acquisitions.

In 1995, Arcadian secured a new $100 million revolving credit facility from
a commercial bank. Arcadian will use the revolving credit facility to provide
working capital and to provide $33 million in letters of credit committed to
secure its obligations to the lessor under an operating lease of an ammonia
plant currently under construction on the Trinidad plant site. At December 31,
1995, there was no outstanding balance on the 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 $35 million, was $65
million. The revolving credit facility matures in 1998 but can be extended
annually for one-year periods at the option of the bank. For information
regarding the significant covenant restrictions imposed by Arcadian's debt
agreements, see Note 5 to Consolidated Financial Statements.

In 1994, the Corporation issued approximately $34 million aggregate
principal amount of Exchange Debentures in exchange for all outstanding shares
of Series B Preferred Stock. In 1995, Arcadian redeemed the Exchange Debentures
at a price equal to 108% of the approximately $34 million principal amount. The
redemption resulted in the write-off of unamortized financing fees and discount
totaling approximately $1 million.

The Corporation paid cash dividends on the Common Stock of approximately
$26 million, $5 million and $5 million ($1.72, $0.33 and $0.42 per share) in
1995, 1994 and 1993, respectively.

The Corporation paid cash distributions on the AAC Warrants of
approximately $2 million in 1995 and $1 million in 1994, respectively.

The Corporation paid cash dividends in 1995 on the Preferred Stock of
approximately $3 million ($.2127 per share). The annual dividend on the
Preferred Stock is $1.4725 per share. The initial dividend on the Preferred
Stock of $.2127 per share was prorated based on the 52-day period from August 9,
1995, the date of issuance of Preferred Stock, through September 30, 1995.

14
<PAGE> 16

In 1995 (prior to the Merger), 1994 and 1993, the Partnership made cash
distributions totaling $31 million, $36 million and $36 million to the
preference unitholders.

Management believes that its present working capital position, combined
with projected cash flow from operations and available borrowing capacity, will
be sufficient to meet Arcadian's 1996 anticipated cash requirements for
operating needs, projected capital expenditures, and dividend requirements on
the Preferred Stock.

From 1996 through 2000, Arcadian'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.

Operating Lease Commitment

In June 1995, Arcadian entered into a lease agreement with an unaffiliated
entity ("Lessor") with respect to an ammonia plant currently under construction
at the Trinidad plant site. Upon completion of construction, the Lessor will
lease the plant to a subsidiary of Arcadian. The annual lease payments 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 lease is not renewed or is otherwise terminated, a subsidiary of Arcadian
may be required to make a residual termination payment equal to 85% of the
estimated $75 million total cost of the project. A subsidiary of Arcadian has
provided $33 million in letters of credit to secure its obligations to the
Lessor. The Corporation has an option to purchase the plant during the term of
the lease for a price approximating its fair market value at the date of
exercise. The plant is expected to be operational in the second quarter of 1996.

Risk Management

As noted above, Arcadian employs derivative instruments related to a
portion of its natural gas requirements (primarily futures, swaps and options)
for the purpose of establishing its cost of natural gas. These activities relate
to both committed and anticipated transactions extending into 1997. In
accordance with generally accepted accounting principles, hedging gains and
losses on derivative instruments may be deferred if a high correlation exists
that the derivative instruments substantially offset the price exposure of the
identifiable asset to be hedged (natural gas). Decreases in natural gas spot
prices generally result in unrealized deferred losses on derivative instruments
which offset the benefit of lower spot prices; and increases in natural gas spot
prices generally result in unrealized deferred gains on derivative instruments
which offset the detriment of higher spot prices. Margin deposits related to
derivatives, which are classified as inventory in the balance sheet, decreased
by $19 million from the prior year to $5 million at December 31, 1995.

A substantial portion of Arcadian's Trinidad transactions, including
long-term natural gas purchase contracts and contracts for the sale of products,
are denominated in U.S. dollars and, therefore, the risk to Arcadian as a result
of fluctuations in the Trinidad currency is limited. Foreign currency
translation gains and losses recognized by Arcadian during 1995, 1994 and 1993
were immaterial. The terms of the gas contracts

15
<PAGE> 17

with the Trinidad government include: prices which vary with market prices for
ammonia, escalating floor prices, and minimum purchase quantities. The ammonia
market price attributes under the Trinidad gas contracts offer Arcadian a degree
of profit protection.

Arcadian's cash investment policy objectives focus on the preservation of
the original investment by purchasing investment-grade securities, earning a
return in excess of that provided by U.S. Treasury instruments, and ensuring
that investment periods are commensurate with the time frames in which funds are
available. The anticipated impact of the policy involves lower expected interest
income on the securities held, combined with less risk of volatility in the
underlying value of the original investment.

Contingencies

In connection with a 1992 incident at its Lake Charles plant, Arcadian 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 Arcadian. While management and legal
counsel believe that any civil penalty ultimately paid by Arcadian will be
substantially less than the remaining $4 million penalty proposed by OSHA, they
cannot predict with certainty the outcome of this proceeding. Arcadian 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 Arcadian upon the resolution of these matters.

Arcadian's operations are subject to extensive and evolving federal, state
and local and certain foreign laws and regulatory requirements relating to
environmental affairs, health and safety, waste management and chemical
products. Arcadian believes that the procedures currently in effect at all of
its facilities for the production, handling and transportation of all materials
are consistent with industry standards and are in general compliance with
applicable environmental, health and safety laws, the violation of which could
have a material adverse effect on Arcadian. Inspection and monitoring of
Arcadian's facilities has at times resulted, and may result in the future, in
the determination of the need for additional compliance activities,
environmental remediation or other modifications. Arcadian's capital
expenditures on projects principally related to environmental control,
remediation and compliance in 1995 were approximately $10 million. Capital
expenditures for similar projects in 1996, 1997 and 1998 are expected to range
from approximately $4 million to approximately $8 million each year. Future
developments, such as stricter laws, regulations or enforcement policies
thereunder, could significantly increase the cost to Arcadian with respect to
the handling, manufacture, use, emission or disposal of substances or wastes by
Arcadian. Further, there can be no assurance that material liabilities or
expenditures will not arise from environmental, health and safety matters that
may be discovered or from future requirements of law.

Accounting Pronouncements

In 1995, the Financial Accounting Standards Board issued Statements No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and No. 123, "Accounting for Stock-Based
Compensation". Both Statements are effective in 1996, and neither is currently
expected to have a significant effect on the financial statements of Arcadian.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The required financial statements and supplementary data are included
herein beginning on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

16
<PAGE> 18

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Refer to pages 3-6 of Arcadian's definitive Proxy Statement dated March 29,
1996, relating to the Meeting ("Proxy Statement"), which are incorporated herein
by reference.

ITEM 11. EXECUTIVE COMPENSATION

Refer to pages 7-11 of the Proxy Statement, which are incorporated herein
by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Refer to pages 13-14 of the Proxy Statement, which are incorporated herein
by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Refer to page 5 of the Proxy Statement, which is incorporated herein by
reference.

17
<PAGE> 19

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

The required financial statements are included herein beginning on
page F-1.

2. Financial Statement Schedules

All schedules for which provision is made in Regulation S-X of the
Commission are not required under the related instructions or are
inapplicable and, therefore, have been omitted from this report.

3. Exhibits

The exhibits listed in the Exhibit Index below are filed as part of
this report:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------
<C> <S>
3.1 -- Restated Certificate of Incorporation of Arcadian Corporation, as amended
(incorporated herein by reference to Exhibit 3.1 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") and
Exhibit 3.2 to Arcadian Corporation's Current Report on Form 8-K for the
reported event dated August 9, 1995 ("Arcadian Corporation 08/09/95 Current
Report")).

3.2 -- Certificate of Designation relating to the Mandatorily Convertible Preferred
Stock, Series A (incorporated herein by reference to Exhibit 3.2 to the Arcadian
Corporation 08/09/95 Current Report).

3.3* -- Amended and Restated Bylaws of Arcadian Corporation dated February 12, 1996.

4.1 -- Indenture dated May 11, 1993, among Arcadian Partners, L.P., Arcadian Partners
Finance Corporation, and IBJ Schroder Bank & Trust Company, as Trustee, with
respect to Arcadian Partners, L.P.'s and Arcadian Partners Finance
Corporation's Series A and B Senior Notes due 2005 (incorporated herein by
reference to Exhibit 4.2 to Arcadian Partners, L.P.'s Current Report on Form
8-K for the reported event dated May 11, 1993 ("Arcadian Partners 05/11/93
Current Report")).

4.2* -- Note Agreement dated as of April 23, 1992, between Arcadian Fertilizer, L.P.,
and the purchasers of the First Mortgage Notes named therein (form), as amended by
(1) the letter agreement dated as of September 7, 1993, between Arcadian
Fertilizer, L.P., and the holders of the First Mortgage Notes (form), (2) the
letter agreement dated as of April 8, 1994, between Arcadian Fertilizer, L.P.,
and the holders of the First Mortgage Notes (form), (3) the letter agreement
dated as of June 26, 1995, between Arcadian Fertilizer, L.P., and the holders
of the First Mortgage Notes (form) ("Third Amendment"), and (4) the letter
agreement dated as of July 24, 1995, between Arcadian Fertilizer, L.P., and the
holders of the First Mortgage Notes (form) ("Fourth Amendment") (incorporated
herein by reference to Exhibit 10.34 to the Registration Statement on Form S-1
(Registration No. 33-45828) relating to Arcadian Partners, L.P.'s offering of
Preference Units ("Preference Units Registration Statement"), Exhibit 10.27 to
Arcadian Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, and Exhibit 4.3 to the Preferred Stock Registration
Statement, except for the Third Amendment and the Fourth Amendment which are
filed herewith).

4.3 -- Revolving Credit Agreement dated as of June 29, 1995, among Arcadian
Fertilizer, L.P., the banks parties thereto, and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch, as Agent
(incorporated herein by reference to Exhibit 4.4 to the Preferred Stock
Registration Statement).
</TABLE>

18
<PAGE> 20

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<C> <S>
4.4 -- Registration Rights Agreement dated as of December 22, 1989, among Arcadian
Corporation and certain holders of Common Stock (form) (incorporated herein by
reference to Exhibit 4.4 to the Registration Statement on Form S-1
(Registration No. 33-34357) relating to Arcadian Corporation's offering of
Common Stock ("Common Stock Registration Statement")).

4.5 -- Warrant Issuance Agreement dated as of May 31, 1989, between Arcadian
Corporation and AAC Holdings, Inc., on behalf of the holders of AAC Warrants
(incorporated herein by reference to Exhibit 10.29 to the Common Stock
Registration Statement).

4.6* -- Warrant Agreement dated as of December 22, 1989, between Arcadian Corporation
and Chemical Bank, as Warrant Agent, relating to the B Warrants, as supplemented
by (1) the First Supplemental Agreement dated as of April 10, 1992, among
Arcadian Fertilizer, L.P., Arcadian Corporation and Chemical Bank, as Warrant
Agent, and (2) the letter agreement dated as of January 31, 1996, among
Arcadian Corporation, Society National Bank, as successor Warrant Agent, and
Chemical Bank, as removed Warrant Agent ("Second Supplement") (incorporated
herein by reference to Exhibit 10.31 to the Common Stock Registration Statement
and Exhibit 10.31 to the Preference Units Registration Statement, except for
the Second Supplement which is filed herewith).

10.1* -- Amended and Restated Agreement of Limited Partnership of Arcadian Partners,
L.P., dated as of March 5, 1996 ("Partners Partnership Agreement"), and the
related Certificate of Limited Partnership of Arcadian Partners, L.P., filed
with the Secretary of State of the State of Delaware on February 10, 1992
(incorporated herein by reference to Exhibit 3.2 to the Preference Units
Registration Statement, except for the Partners Partnership Agreement which is
filed herewith).

10.2 -- Agreement of Limited Partnership of Arcadian Fertilizer, L.P., dated as of
March 3, 1992 (form), and the related Certificate of Limited Partnership of
Arcadian Fertilizer, L.P., filed with the Secretary of State of the State of
Delaware on March 3, 1992 (incorporated herein by reference to Exhibits 10.32
and 10.33 to the Preference Units Registration Statement).

10.3 -- Geismar Complex Services Agreement dated June 4, 1984, between Allied
Corporation and Arcadian Corporation (incorporated herein by reference to Exhibit
10.4 to the Common Stock Registration Statement).

10.4 -- Agreement of Lease and Option to Purchase dated as of November 1, 1986, between
Nipro, Inc. and CNC Corp. (subsequently named Columbia Nitrogen Corporation), as
amended by the letter agreement dated as of November 1, 1986, between the
parties (incorporated herein by reference to Exhibit 10.18 to the Preference
Units Registration Statement).

10.5* -- Operating Agreement dated May 11, 1993, between BP Chemicals Inc. and Arcadian
Ohio, L.P., as amended by the First Amendment to the Operating Agreement dated as
of November 20, 1995, between BP Chemicals Inc. and Arcadian Ohio, L.P. ("First
Amendment") (incorporated herein by reference to Exhibit 10.2 to the Arcadian
Partners 05/11/93 Current Report, except for the First Amendment which is filed
herewith).

10.6 -- Manufacturing Support Agreement dated May 11, 1993, between BP Chemicals Inc.
and Arcadian Ohio, L.P. (incorporated herein by reference to Exhibit 10.3 to the
Arcadian Partners 05/11/93 Current Report).

10.7 -- Agreement for Lease dated as of June 29, 1995, between Trinidad Ammonia
Company, Limited Partnership, and Arcadian Fertilizer, L.P. (incorporated herein
by reference to Exhibit 10.21 to the Preferred Stock Registration Statement).

10.8 -- Lease Agreement dated as of June 29, 1995, between Trinidad Ammonia Company,
Limited Partnership, and Arcadian Fertilizer, L.P. (incorporated herein by
reference to Exhibit 10.22 to the Preferred Stock Registration Statement).
</TABLE>

19
<PAGE> 21

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<C> <S>

10.9 -- Purchase Option Agreement dated as of June 29, 1995, between Trinidad Ammonia
Company, Limited Partnership, and Arcadian Corporation (incorporated herein by
reference to Exhibit 10.23 to the Preferred Stock Registration Statement).

10.10* -- Indemnity Agreement between Arcadian Corporation and its directors and officers
(form).

10.11 -- Arcadian Corporation Stock Option Plan dated April 23, 1990, as amended by (1)
the First Amendment to the Arcadian Corporation Stock Option Plan dated November
2, 1990, (2) the Second Amendment to the Arcadian Corporation Stock Option Plan
dated April 30, 1991, (3) the Third Amendment to the Arcadian Corporation Stock
Option Plan dated April 27, 1993, and (4) the Fourth Amendment to the Arcadian
Corporation Stock Option Plan dated April 26, 1994 (incorporated herein by
reference to Exhibits 28.1, 28.2 and 28.3 to the Registration Statement on Form
S-8 (Registration No. 33-40323) relating to Arcadian Corporation's offering of
Common Stock upon the exercise of options granted pursuant to the Stock Option
Plan, Exhibit 10.19 to Post-Effective Amendment No. 1 to the Registration
Statement on Form S-1 (Registration No. 33-51252) relating to Arcadian
Corporation's offering of Common Stock upon the exercise of A Warrants and B
Warrants, and Exhibit 10.14 to the Preferred Stock Registration Statement).

10.12 -- Arcadian Corporation Stock Appreciation Rights Plan dated January 26, 1993, as
amended by the First Amendment to the Arcadian Corporation Stock Appreciation
Rights Plan dated October 25, 1994 (incorporated herein by reference to Exhibit
10.27 to Arcadian Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1993, and Exhibit 10.15 to the Preferred Stock
Registration Statement).

10.13 -- Arcadian Corporation Supplemental Executive Retirement Plan (incorporated
herein by reference to Exhibit 10.16 to the Preferred Stock Registration
Statement.)

10.14* -- Arcadian Corporation Restricted Stock Plan dated March 26, 1996.

11* -- Computation of Net Income (Loss) per Common Share.

13* -- Arcadian Corporation's 1995 Annual Report to Stockholders.

21* -- Subsidiaries of Arcadian Corporation.

23* -- Accountants' Consent of KPMG Peat Marwick LLP.
</TABLE>

- ---------------

* This exhibit or a portion thereof, as indicated above, is filed with this
report.

(b) Reports on Form 8-K

On December 28, 1995, Arcadian filed a Current Report on Form 8-K
relating to the completion of its public offering of 15,558,824 shares of
Common Stock on August 9, 1995, and filing a copy of the Prospectus dated
August 3, 1995, relating thereto as an exhibit to such report.

20
<PAGE> 22

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on January 10, 1997.

ARCADIAN CORPORATION

By: J. D. CAMPBELL
--------------------------------
J. D. Campbell
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on January 10, 1997.

<TABLE>
<S> <C>
WILLIAM A. McMINN WILLIAM P. COPENHAVER
----------------------------------- ---------------------------------
William A. McMinn William P. Copenhaver
Chairman of the Board Director

J. D. CAMPBELL ALLAN R. DRAGONE
----------------------------------- ---------------------------------
J. D. Campbell Allan R. Dragone
Director, President and Chief Executive Director
Officer (principal executive officer)

A. L. WILLIAMS WILLIAM R. HUFF
----------------------------------- ---------------------------------
A. L. Williams William R. Huff
Vice President -- Finance and Director
Chief Financial Officer (principal
financial and accounting officer)

JOHN R. BLOCK HERBERT W. KIRBY
----------------------------------- ---------------------------------
John R. Block Herbert W. Kirby
Director Director

GORDON A. CAIN JAMES A. SHIRLEY
----------------------------------- ---------------------------------
Gordon A. Cain James A. Shirley
Director Director

CHESTER B. VANATTA
---------------------------------
Chester B. Vanatta
Director
</TABLE>

21
<PAGE> 23

ARCADIAN CORPORATION & SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Reports..................................................... F-2, 3, 4
Consolidated Balance Sheet as of December 31, 1995 and 1994....................... F-5
Consolidated Statement of Operations for the Years Ended December 31, 1995, 1994
and 1993........................................................................ F-6
Consolidated Statement of Cash Flows for the Years Ended December 31, 1995, 1994
and 1993........................................................................ F-7
Consolidated Statement of Stockholders' Equity for the Years Ended December 31,
1995, 1994 and 1993............................................................. F-8
Notes to Consolidated Financial Statements........................................ F-9
</TABLE>

F-1
<PAGE> 24

ARCADIAN CORPORATION & SUBSIDIARIES

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Arcadian Corporation:

We have audited the consolidated balance sheet of Arcadian Corporation and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits. We did not audit the financial statements of Arcadian Trinidad Limited
and Arcadian Trinidad Ammonia Limited, wholly-owned subsidiaries, as of and for
the years ended December 31, 1995 and 1994. Those statements reflect total
assets constituting approximately 30% and total revenues constituting less than
1%, after elimination of intercompany balances and sales, of the respective
consolidated totals for both of the years ended December 31, 1995 and 1994.
These statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts included
for Arcadian Trinidad Limited and Arcadian Trinidad Ammonia Limited, is based
solely on the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Arcadian Corporation and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick
LLP

Memphis, Tennessee
February 9, 1996

F-2
<PAGE> 25

ARCADIAN CORPORATION AND SUBSIDIARIES

INDEPENDENT AUDITORS' REPORT

To the Members of Arcadian Trinidad Limited
(Formerly Arcadian Trinidad Urea Limited)

We have audited the accompanying balance sheet of Arcadian Trinidad Limited
as of 31st December, 1995 and 1994, and the related profit and loss account,
shareholders' equity and cash flow statements for the years then ended. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards prevailing in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statements presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Arcadian Trinidad Limited as
of 31st December, 1995 and 1994 and the results of its operations and cash flows
for the years then ended in conformity with generally accepted accounting
principles prevailing in the United States of America.

COOPERS & LYBRAND
previously traded as
Deloitte & Touche
Chartered Accountants
Port of Spain
Trinidad, W.I.
10th January, 1996

F-3
<PAGE> 26

ARCADIAN CORPORATION AND SUBSIDIARIES

INDEPENDENT AUDITORS' REPORT

To the Members of Arcadian Trinidad Ammonia Limited

We have audited the accompanying balance sheet of Arcadian Trinidad Ammonia
Limited as of 31st December, 1995 and 1994, and the related profit and loss
account, shareholders' equity and cash flow statements for the years then ended.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Arcadian Trinidad Ammonia
Limited as of 31st December, 1995 and 1994 and the results of its operations and
cash flows for the years then ended in conformity with generally accepted
accounting principles prevailing in the United States of America.

COOPERS & LYBRAND
previously traded as
Deloitte & Touche
Chartered Accountants
Port of Spain
Trinidad, W.I.
10th January, 1996

F-4
<PAGE> 27

ARCADIAN CORPORATION & SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
---------- ----------
(IN THOUSANDS EXCEPT PAR
VALUE AND SHARE AMOUNTS)
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 202,738 $ 51,093
Short-term investments............................................ -- 13,307
Restricted reserve accounts....................................... 50,450 72,381
Accounts receivable:
Trade, net..................................................... 103,685 98,375
Other.......................................................... 5,811 27,080
Inventories:
Finished products.............................................. 70,459 81,202
Raw materials and supplies..................................... 66,308 85,577
---------- ----------
Total inventories......................................... 136,767 166,779
Other............................................................. 6,569 6,739
---------- ----------
Total current assets...................................... 506,020 435,754
---------- ----------
Property, plant and equipment, net.................................. 606,410 614,197
Goodwill, net....................................................... 96,393 --
Other, net.......................................................... 61,831 68,598
---------- ----------
$1,270,654 $1,118,549
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Trade accounts payable............................................ $ 89,373 $ 83,604
Accrued expenses and other liabilities............................ 81,435 76,644
Current portion of long-term debt................................. 15,000 2,762
---------- ----------
Total current liabilities................................. 185,808 163,010
---------- ----------
Long-term debt, less current portion................................ 525,000 634,124
Deferred income taxes............................................... 100,621 73,381
Other long-term liabilities......................................... 22,806 21,215
---------- ----------
648,427 728,720
---------- ----------
Non-controlling interest (note 2)................................... -- 279,518
---------- ----------
Commitments and contingencies (note 11)
Stockholders' equity:
Preferred stock, $.01 par value; 50,000,000 shares authorized;
13,812,500 shares issued and outstanding in 1995............... 214,195 --
Common stock, $.01 par value; 150,000,000 shares authorized;
30,489,967 shares issued and outstanding in 1995; 15,857,403
shares issued in 1994.......................................... 305 159
Additional paid-in capital.......................................... 223,190 38,603
Retained earnings (accumulated deficit)............................. (1,271) (53,513)
Treasury stock, at cost; 1,643,838 common shares in 1994............ -- (37,948)
---------- ----------
Total stockholders' equity (deficit)...................... 436,419 (52,699)
---------- ----------
$1,270,654 $1,118,549
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 28

ARCADIAN CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
---------- ---------- --------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net sales............................................... $1,266,887 $1,100,301 $803,167
Cost of sales........................................... 909,338 915,363 703,726
---------- ---------- --------
Gross profit.......................................... 357,549 184,938 99,441
Selling, general and administrative expenses............ 65,208 52,166 37,400
Provision for plant shut-down (note 4).................. -- 15,500 --
---------- ---------- --------
Operating income...................................... 292,341 117,272 62,041
Interest expense........................................ 67,217 66,389 51,698
Interest (income)....................................... (13,090) (9,951) (6,423)
(Gains) losses on investments........................... 138 15,109 (108)
Other, net.............................................. 732 1,300 (4,524)
---------- ---------- --------
Income before non-controlling interest and income tax
provision.......................................... 237,344 44,425 21,398
Non-controlling interest................................ (82,270) (43,971) (18,963)
---------- ---------- --------
Income before income tax provision.................... 155,074 454 2,435
Income tax provision (benefit).......................... 66,824 (9,539) (46)
---------- ---------- --------
Net income............................................ $ 88,250 $ 9,993 $ 2,481
========= ========= ========
Net income (loss) applicable to common shares......... $ 80,227 $ 8,843 $ (3,082)
========= ========= ========
Net income (loss) per common share.................... $ 3.08 $ 0.55 $ (0.24)
========= ========= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 29

ARCADIAN CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 88,250 $ 9,993 $ 2,481
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization........................ 66,647 61,630 52,547
Amortization of deferred financing costs............. 3,290 2,571 4,545
(Gains) losses on disposals of property, plant and
equipment.......................................... 3,108 397 1,732
Non-controlling interest............................. 82,270 43,971 18,963
Deferred income taxes................................ 27,240 (23,143) (4,275)
Provision for plant shut-down (note 4)............... -- 15,500 --
(Gains) losses on investments........................ 138 15,109 (108)
Net changes in operating assets and liabilities:
Accounts receivable................................ 15,959 (37,907) 2,131
Inventories........................................ 30,012 (4,582) (18,499)
Other current assets............................... 170 (438) 1,447
Accounts payable, accrued expenses and other
liabilities..................................... 7,066 33,189 (9,339)
Other, net......................................... 1,598 707 (6,868)
--------- -------- ---------
Net cash provided by (used for) operating
activities.................................... 325,748 116,997 44,757
--------- -------- ---------
Cash flows from investing activities:
Cash portion of merger consideration.................... (214,205) -- --
Purchase of acquired businesses, net of acquired cash... -- -- (215,170)
Purchase of property, plant and equipment............... (53,255) (59,234) (41,284)
Proceeds from disposals of property, plant and
equipment............................................ 4,157 315 455
Rotational plant maintenance costs...................... (8,305) (18,107) (18,167)
Purchases of investments................................ (36,237) (33,160) (83,111)
Proceeds on sales of investments........................ 49,406 72,853 16,300
Increase in restricted reserve accounts................. (13,819) (7,369) (37,763)
Release of MQD reserve.................................. 35,750 -- --
--------- -------- ---------
Net cash provided by (used for) investing
activities.................................... (236,508) (44,702) (378,740)
--------- -------- ---------
Cash flows from financing activities:
Revolving credit facility, net.......................... (61,000) (7,000) 40,700
Proceeds from Senior Notes.............................. -- -- 340,000
Repayment of debt....................................... (35,886) (4,158) (6,702)
Transaction and financing fees.......................... (11,872) (5) (10,651)
Proceeds from issuance of common stock.................. 232,882 2,008 5,940
Cash paid to repurchase common stock.................... (11) -- (6,777)
Cash distributions to non-controlling interest.......... (30,786) (35,750) (35,750)
Cash dividends on common stock and preferred stock...... (30,922) (7,274) (10,850)
--------- -------- ---------
Net cash provided by (used for) financing
activities.................................... 62,405 (52,179) 315,910
--------- -------- ---------
Total increase (decrease) in cash and cash
equivalents................................... 151,645 20,116 (18,073)
Cash and cash equivalents at beginning of period.......... 51,093 30,977 49,050
--------- -------- ---------
Cash and cash equivalents at end of period................ $ 202,738 $ 51,093 $ 30,977
========= ======== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 30

ARCADIAN CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF ADDITIONAL
SHARES OF SHARES OF PREFERRED COMMON PAID-IN
PREFERRED STOCK COMMON STOCK STOCK STOCK CAPITAL
--------------- ------------ --------- ------ ----------
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992..................... -- 13,674,405 $ -- $138 $ 35,789
Accretion of discount on preferred stock....... -- -- -- -- (166)
Preferred stock dividends...................... -- -- -- -- (5,397)
Repurchase of 1,295,343 shares of common
stock........................................ -- -- -- -- --
Cash dividends on common stock ($0.42/share)... -- -- -- -- --
Exercise of warrants and stock options......... -- 1,894,248 -- 19 7,521
Net income for 1993............................ -- -- -- -- --
---------- ---------- -------- ---- --------
Balance at December 31, 1993..................... -- 15,568,653 -- 157 37,747
Accretion of discount on preferred stock....... -- -- -- -- (29)
Preferred stock dividends...................... -- -- -- -- (1,121)
Issuance of common stock....................... -- 165,000 -- 1 1,599
Cash dividends on common stock ($0.33/share)... -- -- -- -- --
Exercise of warrants and stock options......... -- 123,750 -- 1 407
Net income for 1994............................ -- -- -- -- --
---------- ---------- -------- ---- --------
Balance at December 31, 1994..................... -- 15,857,403 -- 159 38,603
Issuance of common stock....................... -- 15,791,451 -- 157 219,671
Issuance of preferred stock.................... 13,812,500 -- 214,195 -- --
Preferred stock dividends...................... -- -- -- -- --
Cash dividends on common stock ($1.72/share)... -- -- -- --
Exercise of stock options...................... -- 486,451 -- 5 2,859
Repurchase of 1,500 shares of common stock..... -- -- -- -- --
Retirement of 1,645,338 shares of common stock
held in treasury............................. -- (1,645,338) -- (16) (37,943)
Net income for 1995............................ -- -- -- -- --
---------- ---------- -------- ---- --------
Balance at December 31, 1995..................... 13,812,500 30,489,967 $ 214,195 $305 $223,190
========== ========== ======== ==== ========

<CAPTION>
RETAINED
EARNINGS TREASURY
(ACCUMULATED STOCK,
DEFICIT) AT COST TOTAL
------------ -------- --------

<S> <<C> <C> <C>
Balance at December 31, 1992..................... $(54,611) $(27,153) $(45,837)
Accretion of discount on preferred stock....... -- -- (166)
Preferred stock dividends...................... -- -- (5,397)
Repurchase of 1,295,343 shares of common
stock........................................ -- (10,795) (10,795)
Cash dividends on common stock ($0.42/share)... (5,452) -- (5,452)
Exercise of warrants and stock options......... -- -- 7,540
Net income for 1993............................ 2,481 -- 2,481
-------- -------- --------
Balance at December 31, 1993..................... (57,582) (37,948) (57,626)
Accretion of discount on preferred stock....... -- -- (29)
Preferred stock dividends...................... -- -- (1,121)
Issuance of common stock....................... -- -- 1,600
Cash dividends on common stock ($0.33/share)... (5,924) -- (5,924)
Exercise of warrants and stock options......... -- -- 408
Net income for 1994............................ 9,993 -- 9,993
-------- -------- --------
Balance at December 31, 1994..................... (53,513) (37,948) (52,699)
Issuance of common stock....................... -- -- 219,828
Issuance of preferred stock.................... -- -- 214,195
Preferred stock dividends...................... (8,023) -- (8,023)
Cash dividends on common stock ($1.72/share)... (27,985) -- (27,985)
Exercise of stock options...................... -- -- 2,864
Repurchase of 1,500 shares of common stock..... -- (11) (11)
Retirement of 1,645,338 shares of common stock
held in treasury............................. -- 37,959 --
Net income for 1995............................ 88,250 -- 88,250
-------- -------- --------
Balance at December 31, 1995..................... $ (1,271) $ -- $436,419
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-8
<PAGE> 31

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Arcadian Corporation ("Corporation") was created in 1989 with the
acquisition of five previously separate nitrogen fertilizer businesses. From
April 1992 to August 1995, the Corporation conducted substantially all of its
operations through a master limited partnership, Arcadian Partners, L.P.
("Partners") and its subsidiaries (collectively "Partnership"). The Corporation
created the Partnership and held a 2% general partner interest as well as a 43%
limited partner interest; a 55% limited partner interest ("Non-Controlling
Interest") was represented by publicly traded preference units. As more fully
described in Note 2, the Corporation effectively acquired all of the preference
units of Partners in August 1995 as part of a series of transactions referred to
as the "Merger". For all periods presented, Partners and its subsidiaries, along
with other less significant subsidiaries of the Corporation, have been
consolidated with the Corporation and are collectively referred to herein as
"Arcadian". All intercompany balances and transactions have been eliminated in
consolidation.

Arcadian produces a variety of nitrogen and phosphate fertilizers and
nitrogen chemicals and sells product throughout the United States and
internationally. Arcadian's customers vary in size and typically participate in
agricultural and intermediate industrial chemical businesses. Credit is extended
based on an evaluation of the customer's financial condition, and generally,
collateral or other forms of security are not required. Expected credit losses
have been provided for in the financial statements.

Arcadian's management has made a number of estimates and assumptions
(relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities) to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

Cash Equivalents

Arcadian 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.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using principally the first-in, first-out (FIFO) method. The cost of finished
goods includes raw materials, direct labor, plant operating overhead, certain
plant to terminal freight and terminal distribution costs. Finished goods also
include the net effect of product exchange agreements with other fertilizer
producers. Raw material inventories also include spare parts, maintenance
supplies, catalyst, and margin requirements related to derivative financial
instruments ("derivatives") discussed below.

Arcadian uses derivatives for a portion of its natural gas requirements to
manage its exposure to commodity price risk in the purchases of natural gas,
Arcadian's primary raw material. These activities have been designated as
hedging activities by Arcadian and are accounted for as such. Arcadian hedges
for both committed and anticipated purchases of natural gas. Increases
(decreases) in the fair value of derivatives generally offset (decreases)
increases in the spot market prices of natural gas, and therefore allow Arcadian
to establish a determinable fixed cost for this raw material.

Gains or losses resulting from changes in the fair value of hedging
transactions which have not yet been settled are not recognized as they
generally relate to changes in the spot price of anticipated natural gas
purchases. Gains or losses arising from settled hedging transactions are
deferred as a component of inventory until the product containing the hedged
item is sold, at which time both the natural gas purchase cost and the related
hedging deferral are recorded as cost of sales. Arcadian regularly evaluates its
unrecognized or deferred

F-9
<PAGE> 32

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

gains and losses on derivatives from a net realizable value of inventory
perspective and establishes appropriate reserves, if necessary.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. Normal maintenance and
repairs are charged to expense as incurred. Major improvements and betterments
are capitalized.

Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which range from five to 20 years. Leasehold
improvements are amortized over their estimated useful lives or the related
primary lease terms, whichever are shorter.

Interest is normally expensed as incurred, except when it is incurred in
conjunction with major capital additions, and then it is capitalized as part of
the asset cost. No such interest was capitalized by Arcadian during the periods
presented.

Goodwill

Goodwill is amortized on a straight-line basis over 40 years. The
Corporation assesses the recoverability of this intangible asset based on
estimated undiscounted future operating cash flows from the Partnership.

Other Assets

Rotational plant maintenance costs, which consist primarily of planned
major maintenance projects performed on a periodic basis (also known as
"turnarounds"), are capitalized when incurred and are amortized over the
anticipated periods until the next scheduled rotational plant maintenance which
ranges from two to four years.

Financing costs are capitalized and amortized over the terms of the related
debt.

Income Taxes

Income taxes have been provided for in accordance with the asset and
liability methodology of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Under Statement No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities (and their respective tax bases) and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under
Statement No. 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that deferred tax assets will be
realized through the generation of future taxable income.

The income tax provision includes income taxes applicable to the
Corporation's allocation of Partnership income and all income taxes applicable
to the Partnership's domestic and foreign subsidiaries.

Foreign withholding taxes, which relate to Trinidad taxes on interest
payments by Trinidad subsidiaries on intercompany debt for which foreign tax
credits are not allowed, are included in income tax provision in the
accompanying consolidated statement of operations.

Net Income Per Common Share

For purposes of computing net income per common share, the conversion of
13,812,500 shares of Preferred Stock which are common stock equivalents because
of their mandatory conversion feature, is

F-10
<PAGE> 33

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assumed when such conversion is dilutive. If such conversion is antidilutive,
the conversion of such shares is not assumed, and net income applicable to
common shares is therefore reduced by dividends on the Preferred Stock. The
assumed conversion in 1995 of the Preferred Stock had a dilutive effect.
Warrants and options are common stock equivalents. Prior to the exchange by the
Corporation of the 16% Junior Subordinated Exchange Debentures due December 15,
2004 ("Exchange Debentures") for its $160 Cumulative Exchangeable Preferred
Stock, Series B ("Series B Preferred Stock"), on March 15, 1994, net income
applicable to common shares was reduced by dividends and discount accretion
associated with the Series B Preferred Stock. Common and common equivalent
shares outstanding were 28,676,102; 16,148,586; and 12,915,906 for years ended
December 31, 1995, 1994 and 1993, respectively.

Foreign Currency Translation

The functional currency of Arcadian's Trinidad operations is the U.S.
dollar. Monetary assets and liabilities denominated in local currency are
translated at year-end exchange rates and monetary income and expense accounts
denominated in local currency are translated at average exchange rates for the
period. Nonmonetary accounts denominated in local currency are translated at
historical exchange rates. Adjustments resulting from translating local currency
denominated accounts are included in results of operations. Aggregate foreign
currency gains and losses recognized during the periods presented were
immaterial.

Reclassifications

Certain amounts have been reclassified to conform to current year
presentation.

(2) MERGER

On August 9, 1995, the Corporation completed its acquisition of all of the
outstanding preference units of Partners by means of the merger of Arcadian
Merger Subsidiary, L.P. ("AMS"), a directly and indirectly wholly-owned
subsidiary of the Corporation, with and into Partners ("Merger"), pursuant to
the Amended and Restated Agreement and Plan of Reorganization dated as of May
30, 1995, among the Corporation, Arcadian Holding Corporation, AMS and Partners.
In exchange for each outstanding preference unit, the holders received, upon the
surrender of their preference unit certificates, consideration consisting of (1)
cash in the amount of $14.50, (2) 0.935 share of the Corporation's Preferred
Stock, and (3) the accrued but unpaid minimum quarterly distribution ("MQD") on
the preference units from July 1 through August 9, 1995, in the amount of $.269
per preference unit. The Merger was accounted for using the purchase method of
accounting. The excess of the aggregate consideration ($428 million) over the
Corporation's carrying value for Non-Controlling Interest at the date of the
Merger ($331 million) was recorded as goodwill. The cash portion of the
consideration paid by the Corporation was provided primarily by a concurrent
public offering of 15,558,824 shares of its Common Stock at a price of $15.50
per share. Net sales and net income on a pro forma basis assuming the Merger and
public offering had occurred as of January 1, 1994 would have been $1.1 billion
and $45 million for 1994 and $1.3 billion and $143 million for 1995,
respectively.

(3) RESERVE ACCOUNTS

At December 31, 1995, restricted reserve accounts of $50 million were
comprised of a $31 million Cash Collateral Account for the benefit of the
holders of the First Mortgage Notes and a $19 million Debt Service Reserve
Account for the benefit of the holders of the 10 3/4% Series B Senior Notes due
2005 ("Senior Notes"). At December 31, 1995, restricted reserve accounts
consisted of $50 million in mutual funds which invest primarily in commercial
paper and money market instruments. As a result of the Merger, the $36 million
reserve maintained by Partners to support MQD payments on the preference units
was released for general corporate purposes.

F-11
<PAGE> 34

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land and improvements.......................................... $ 18,531 $ 18,531
Buildings and improvements..................................... 44,812 45,158
Machinery and equipment........................................ 699,945 665,480
Furniture and fixtures......................................... 5,938 4,720
Construction in progress....................................... 54,090 50,391
-------- --------
823,316 784,280
Less accumulated depreciation.................................. 216,906 170,083
-------- --------
$606,410 $614,197
======== ========
</TABLE>

1993 Acquisitions

In March 1993, Partners acquired its Trinidad operations ("Arcadian
Trinidad") for consideration of approximately $175 million and in May 1993,
Partners acquired its Ohio operations from BP Chemicals Inc. ("BPC") for
approximately $90 million. The acquisitions were accounted for using the
purchase method of accounting. Total purchase costs were allocated to the assets
and liabilities acquired based upon their respective fair values at the dates of
acquisition. Net sales and net income for 1993 on a pro forma basis assuming the
Trinidad and Lima acquisitions had occurred as of January 1, 1993 would have
been approximately $881 million and $3 million, respectively.

Savannah Plant

In December 1994, the Board of Directors authorized the Corporation to
indefinitely shut down its Savannah, Georgia plant. Production activities at the
Savannah plant were indefinitely discontinued, and the site is now being used as
a fertilizer solutions terminal. The decision to discontinue production
operations at the Savannah plant was due to its lack of profitability. Market
conditions beginning in 1994, which are not expected to significantly improve
unless industry fundamentals change, have resulted in a sharp increase in the
cost of purchased ammonia, the primary raw material at this non-ammonia
producing site, while sales prices for nitrogen products produced at the site
have not experienced similar increases. The plant was operational until March
1995, after which all employees, except a minimal number involved in the
continuing terminal operations, were relocated or terminated with severance
benefits.

As a result of the plan of indefinite shutdown, Arcadian recorded a
provision against fourth quarter 1994 earnings of approximately $16 million for
the impairment of long-lived assets and the accrual of certain other related
costs. The provision reduces the net book value of the assets for the plant to
their estimated fair value. While management currently has no definitive plans
for the sale or relocation of the idle assets, they may consider such
alternatives in the future.

F-12
<PAGE> 35

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
First Mortgage Notes......................................... $200,000 $200,000
Revolving credit facility.................................... -- 61,000
Senior Notes................................................. 340,000 340,000
Exchange Debentures.......................................... -- 33,124
Other........................................................ -- 2,762
-------- --------
540,000 636,886
Less current portion......................................... 15,000 2,762
-------- --------
$525,000 $634,124
======== ========
</TABLE>

The First Mortgage Notes are payable in varying annual principal
installments beginning in 1996, have a final maturity in 2012, and bear
interest, which is payable quarterly, at rates ranging from 9.09% to 10.10% per
annum (with a weighted average interest rate in 1995 of 9.63%). The First
Mortgage Notes are secured by substantially all of the property, plant and
equipment of Partners' operating subsidiary, Arcadian Fertilizer, L.P.
("Fertilizer"), as well as by the Cash Collateral Account.

In 1995, the Partnership secured a new $100 million revolving credit
facility from a commercial bank. The Partnership will use the revolving credit
facility to provide working capital and to provide $33 million in letters of
credit committed to secure its obligations to the lessor under an operating
lease of an ammonia plant currently under construction at the Trinidad plant
site. At December 31, 1995, there was no outstanding balance on the 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 $35 million, was $65 million. The revolving credit facility is secured
primarily by inventories and accounts receivable, and bears interest, which is
payable quarterly, based on reserve-adjusted LIBOR plus a margin of 1.25%. An
alternative interest rate is available based on the agent's base lending rate.
The revolving credit facility matures in 1998 but can be extended annually for
one-year periods at the option of the bank.

In conjunction with its 1993 acquisitions, Partners issued $340 million
aggregate principal amount of Senior Notes. The Senior Notes rank pari passu in
right of payment with all other existing and future senior debt of the
Partnership and senior in right of payment to any future subordinated debt of
the Partnership. Because the Partnership conducts operations through its
subsidiaries, the Senior Notes are structurally subordinated to all debt and
other obligations of the subsidiaries. The Senior Notes are redeemable, in whole
or in part, beginning on May 1, 1998. A sinking fund will provide for the
mandatory redemption of the Senior Notes, at the annual rate of 20% of the
aggregate principal amount of the Senior Notes, beginning on May 1, 2001, and
continuing until the entire issue is retired on May 1, 2005. In addition, the
Senior Noteholders effectively have a put option, triggered by a change in
control (as defined), which would require the repurchase of the Senior Notes at
101% of par. Pursuant to the Senior Note indenture, a Debt Service Reserve
Account was established equal to six months of interest on the Senior Notes. The
indenture contains certain covenants that, among other things, restrict the
ability of Partners and certain of its subsidiaries, under certain
circumstances, to create liens, incur or guarantee debt, make distributions,
sell certain equity interests or assets, and engage in certain other
transactions.

In 1994, the Corporation issued approximately $34 million aggregate
principal amount of Exchange Debentures in exchange for all 33,734 previously
outstanding shares of Series B Preferred Stock. The holders received $1,000
principal amount of Exchange Debentures for each share of Series B Preferred
Stock. On

F-13
<PAGE> 36

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

September 15, 1995, the Corporation redeemed the Exchange Debentures at a price
equal to 108% of the approximately $34 million principal amount. The redemption
resulted in the write-off of unamortized financing fees and discount totaling
approximately $1 million.

Maturities of long-term debt as of December 31, 1995, are as follows:

<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31, (IN THOUSANDS)
----------------------------------------------------------------------- --------------
<S> <C>
1996................................................................... $ 15,000
1997................................................................... 15,000
1998................................................................... 15,000
1999................................................................... 17,500
2000................................................................... 17,500
Thereafter............................................................. 460,000
--------
$540,000
========
</TABLE>

(6) PREFERRED STOCK

The Corporation has 50 million shares of $.01 par value preferred stock
authorized, 16,500,000 of which have been designated as Mandatorily Convertible
Preferred Stock, Series A ("Preferred Stock"). On August 9, 1995, in conjunction
with the Merger, the Corporation issued 13,812,500 shares of Preferred Stock.

The Preferred Stock ranks senior to the Corporation's common stock in the
payment of dividends and liquidation, has voting rights, pays a cumulative
quarterly dividend at an annual rate of $1.4725 per share until August 9, 1998
("Mandatory Conversion Date") and has a liquidation preference of approximately
$214 million ($15.50 per share) plus any accrued but unpaid dividends thereon.
The Preferred Stock converts automatically into Common Stock, on a
share-for-share basis, on the Mandatory Conversion Date. The Corporation may
also cause the conversion of the outstanding Preferred Stock into Common Stock
upon certain mergers or consolidations of the Corporation. The Corporation has
the option to redeem the Preferred Stock, in whole or in part, in exchange for a
combination of cash and/or shares of Common Stock having a value equal to the
sum of $22.475 per share and an amount equal to $1.3175 per share per annum from
the date of the redemption to the Mandatory Conversion Date.

(7) COMMON STOCK

The Arcadian Corporation Stock Option Plan, which provides for both
incentive stock options and nonqualified options, authorizes the granting of
options to purchase up to 2,025,000 shares of Common Stock. The options have
effective dates ranging from May 1990 to January 1995, vest ratably over the
three years following the effective date, and will expire ten years from their
respective dates. The following table summarizes option activity:

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Options outstanding January 1..................... 1,647,198 1,491,201 1,537,152
Options granted................................... 69,000 336,000 231,000
Options exercised................................. (486,451) (105,000) (46,350)
Options cancelled................................. (18,501) (75,003) (230,601)
--------- --------- ---------
Options outstanding December 31................... 1,211,246 1,647,198 1,491,201
========= ========= =========
Options exercisable December 31................... 973,749 1,324,500 1,175,100
========= ========= =========
</TABLE>

F-14
<PAGE> 37

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Options exercised during 1995 ranged from $3.33 to $8.33 per share. Options
exercised during 1994 and 1993 were all at $3.33 per share. Options outstanding
at December 31, 1995 were at prices per share ranging from $3.33 to $10.33.

The Corporation has warrants outstanding which may be exercised to acquire
shares of Common Stock under certain conditions. Subsequent to the February 1996
secondary offering discussed in Note 14, there were warrants outstanding for
approximately .5 million shares of Common Stock with an average exercise price
of approximately $3.30.

The Corporation has reserved approximately 23.5 million shares of Common
Stock for issuance upon the conversion of the Preferred Stock, approximately 1.2
million shares for issuance upon the exercise of options granted under the Stock
Option Plan, and approximately .5 million shares for issuance upon the exercise
of warrants.

Effective December 31, 1995, the Board of Directors authorized the
retirement of the then outstanding 1.6 million shares of Common Stock held in
treasury.

(8) FOREIGN OPERATIONS

Geographic segment information for the years 1995, 1994 and 1993 is as
follows:

<TABLE>
<CAPTION>
US TRINIDAD CONSOLIDATED
------ -------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
1995
Sales to unaffiliated customers...................... $1,263 $ 4 $1,267
Sales between geographic areas....................... -- 227 --
Operating income..................................... 198 94 292
Identifiable assets.................................. 906 365 1,271
1994
Sales to unaffiliated customers...................... $1,096 $ 4 $1,100
Sales between geographic areas....................... -- 151 --
Operating income..................................... 72 45 117
Identifiable assets.................................. 815 304 1,119
1993
Sales to unaffiliated customers...................... $ 801 $ 2 $ 803
Sales between geographic areas....................... -- 81 --
Operating income..................................... 50 12 62
Identifiable assets.................................. 832 272 1,104
</TABLE>

Transfer prices for sales between geographic affiliates approximate prices
charged to unaffiliated customers less Fertilizer's estimated costs for
marketing and distribution efforts.

F-15
<PAGE> 38

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) INCOME TAXES

The income tax provision (benefit) consisted of the following:

<TABLE>
<CAPTION>
1995 1994 1993
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
U.S. Federal......................................... $18,768 $ 10,002 $(1,631)
U.S. State........................................... 2,757 1,363 400
Foreign.............................................. 18,059 2,238 1,866
------- -------- -------
39,584 13,603 635
------- -------- -------
Deferred:
U.S. Federal......................................... 22,217 (15,778) 1,011
Foreign.............................................. 5,023 (7,364) (1,692)
------- -------- -------
27,240 (23,142) (681)
------- -------- -------
$66,824 $ (9,539) $ (46)
======= ======== =======
</TABLE>

Income taxes in 1995, 1994 and 1993, differed from the amount calculated
using the U.S. statutory rate (35%, 34% and 34%, respectively) for the following
reasons:

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax at U.S. statutory rate...................... $54,276 $ 154 $ 851
Domestic state income taxes, net of federal benefit.... 1,792 18 95
Foreign subsidiaries -- withholding taxes and rate
differentials........................................ 4,446 5,020 1,151
Non-controlling interest share of foreign income
taxes................................................ 7,238 10,219 (815)
Adjustment to deferred taxes for change in foreign tax
rate from 45% to 38%................................. -- (8,635) --
Change in valuation allowance.......................... (6,326) (9,990) (5,758)
Other, net............................................. 5,398 (6,325) 4,430
------- ------- -------
$66,824 $(9,539) $ (46)
======= ======= =======
</TABLE>

F-16
<PAGE> 39

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effect of temporary differences that give rise to significant
portions of the net deferred tax liability as of December 31, 1995 and 1994 are
as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax asset:
Loss and credit carryforwards.................................. $ 3,864 $ 24,023
Other.......................................................... 9,819 16,489
-------- --------
Gross deferred tax asset....................................... 13,683 40,512
Less valuation allowance....................................... (3,004) (9,330)
-------- --------
Net deferred tax asset......................................... 10,679 31,182
-------- --------
Deferred tax liability:
Basis difference in fixed assets............................... 83,564 92,649
Other.......................................................... 27,736 11,914
-------- --------
Gross deferred tax liability................................... 111,300 104,563
-------- --------
Net deferred tax liability..................................... $100,621 $ 73,381
======== ========
</TABLE>

Of the December 31, 1995 and 1994 net deferred tax liability amounts above,
$50 million and $45 million, respectively, relate to Trinidad.

Arcadian has not recognized a deferred tax liability for foreign
withholding taxes on undistributed earnings of the Trinidad subsidiaries, as it
is currently management's intent not to repatriate Trinidad profits in the
foreseeable future. Cumulative undistributed earnings total approximately $38
million at December 31, 1995; the related withholding tax would approximate $4
million.

(10) EMPLOYEE BENEFIT PLANS

Pension Plans

Arcadian has defined benefit pension plans covering essentially all
employees. Participation and benefit accrual is based on a future service basis,
with past service counting for purposes of vesting and eligibility for benefits.
Pension cost is funded at amounts equal to the minimum funding requirements of
the Employee Retirement Income Security Act of 1974.

Information regarding benefit plans for Arcadian's Trinidad employees is
included following the information on domestic plans.

F-17
<PAGE> 40

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the funded status under the U.S. plans:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of
$24,802 and $18,591 at December 31, 1995 and 1994............ $ 27,324 $ 20,932
-------- --------
Projected benefit obligation for service rendered to date...... 36,738 27,674
Plan assets at fair value...................................... (26,096) (21,536)
-------- --------
Projected benefit obligation in excess of plan assets.......... 10,642 6,138
Unrecognized net gain (loss)................................... (7,507) (2,871)
Unrecognized prior service cost................................ 459 526
Additional minimum liability................................... 47 70
-------- --------
Unfunded accrued pension cost.................................. $ 3,641 $ 3,863
======== ========
</TABLE>

Plan assets are invested in a master investment fund which has various
investments consisting primarily of domestic and foreign equity securities and
corporate bonds.

At December 31, 1995 and 1994, the settlement rate used in determining the
actuarial present value of the projected benefit obligation was 7.5% and 8.25%
respectively. At December 31, 1995 and 1994, the expected long-term rate of
return on assets was 9.0%. At December 31, 1995 and 1994, the weighted average
rate of increase in future compensation levels was approximately 6%.

The following table sets forth amounts recognized in Arcadian's financial
statements under the U.S. plans:

<TABLE>
<CAPTION>
1995 1994 1993
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net pension costs included the following components:
Service cost -- benefits earned during the period...... $ 2,127 $2,475 $ 2,103
Interest cost on projected benefit obligations......... 2,241 2,013 1,782
Actual return on plan assets........................... (3,227) (645) (1,865)
Net amortization and deferral.......................... 1,157 (977) 488
------- ------ -------
Net pension cost....................................... $ 2,298 $2,866 $ 2,508
======= ====== =======
</TABLE>

The following sets forth assumptions used in developing the net pension
cost:

<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Settlement rate............................................ 8.25% 7.25% 7.75%
Expected long-term rate of return.......................... 9.00% 9.00% 9.50%
Weighted average rate of increase in future compensation
levels................................................... 6.00% 6.00% 6.00%
</TABLE>

The Trinidad operations have contributory defined benefit pension plans,
covering essentially all employees. Participation and benefit accrual is
essentially on a future service basis, with past service counting for purposes
of vesting and eligibility for benefits.

At December 31, 1995 and 1994, the accumulated benefit obligation of those
plans was $5 million and $4 million, respectively, with such benefits being
nearly fully vested. Plan assets at fair value as of December 31, 1995 and 1994
were approximately $19 million and $16 million, respectively, and were invested
primarily in local government and other bonds, local mortgages and
mortgage-backed securities, fixed income

F-18
<PAGE> 41

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

deposits and cash. The projected benefit obligation, for service rendered to
date, at December 31, 1995 and 1994 was approximately $9 million and $7 million,
respectively, and unrecognized net gains and losses were negligible. At December
31, 1995 and 1994, the settlement rate used in determining the actuarial present
value of the projected benefit obligation was 8.5% and 9.0%, respectively and
for the periods ended December 31, 1995 and 1994, the expected long-term rate of
return on assets was 9.5%. Prepaid pension assets of $9 million at December 31,
1995 and 1994, are classified as other assets in the accompanying consolidated
balance sheet. Net pension cost (credit) during the periods ended December 31,
1995, 1994 and 1993 was approximately $(0.4) million, $(0.5) million and $(0.6)
million, respectively.

Postretirement Plans

Arcadian provides certain health care and life insurance benefits for
retired employees. Under Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pension," the cost
of postretirement benefits must be recognized on an accrual basis as employees
perform services to earn the benefits.

The following table sets forth the funded status under the plans:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees......................................................... $ 3,606 $ 3,350
Active plan participants eligible to retire...................... 2,986 3,387
Other active plan participants................................... 5,550 5,690
------- -------
12,142 12,427
Unrecognized net gain (loss)..................................... (2,784) (1,158)
Unrecognized transition obligation............................... (4,670) (7,777)
------- -------
Unfunded accrued post retirement cost............................ $ 4,688 $ 3,492
======= =======
</TABLE>

At December 31, 1995 and 1994, the settlement rate used in determining the
actuarial present value of the accumulated postretirement benefit obligation
("APBO") was 7.5% and 8.25%. For measurement purposes, a 6.0% annual rate of
increase in per capita cost of covered health care benefits was assumed for 1995
and 1994; the rate was assumed to decrease gradually to 4.5% for 2000 and remain
at that level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported, and increasing the assumed health
care cost trend rates by 1% in each year would increase the APBO as of December
31, 1995, by $2 million and the aggregate of the service and interest cost
components of net periodic cost for the year then ended by $.2 million.

The following table sets forth amounts recognized in Arcadian's financial
statements under the plan:

<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Net postretirement costs included the following
components:
Service cost -- benefits earned during the period...... $ 396 $ 544 $ 510
Interest cost on accumulated postretirement benefit
obligations......................................... 847 944 912
Amortization of net loss from prior periods............ 21 102 --
Amortization of transition obligation.................. 275 433 520
------ ------
Net postretirement cost................................ $1,539 $2,023 $1,942
====== ======
</TABLE>

F-19
<PAGE> 42

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following sets forth assumptions used in developing the net pension
cost:

<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Settlement rate............................................ 8.25% 7.25% 7.75%
Subsequent rate of increase in per capita cost of covered
health care benefits..................................... 6.00% 6.00% 6.00%
</TABLE>

Employee Stock Ownership Plan

Arcadian has an Employee Stock Ownership Plan ("ESOP") in which essentially
all employees participate. Arcadian is committed to making annual contributions
to the ESOP at least equal to 4% of covered compensation. ESOP expense was
approximately $2 million in 1995 and 1994 and approximately $1 million in 1993.

SAR Plan

The Corporation has a Stock Appreciation Rights Plan ("SAR Plan") for key
employees. The SAR Plan authorizes the granting of 825,000 units, of which
812,787 have been granted as of December 31, 1995. The units vest over a
three-year period and are generally exercisable for ten years. Of the units
granted, 300,000 units (200,000 vested) have a $3.33 grant price; 75,000 units
(50,000 vested) have a $5.03 grant price; and 437,787 units (271,858 vested)
have a $6.67 grant price. As a result of the August 1995 initial public
offering, a triggering event occurred under the SAR Plan allowing the exercise
of units. During 1995 (following the triggering event), Arcadian accrued $12
million for the SAR Plan.

Profit Sharing Plan

Arcadian has a profit sharing plan covering essentially all employees which
is based primarily on annual financial performance of Arcadian, performance
measures of employees, and certain other conditions. Annual profit sharing plan
targets, pay-out thresholds and other components are determined at the
discretion of the Compensation Committee of Arcadian's Board of Directors.
During 1995 and 1994, profit sharing expenses totaled $22 million and $6
million, respectively; the amounts are included in accrued expenses at year-end.
During 1993, Arcadian had no profit sharing expense.

(11) COMMITMENTS AND CONTINGENCIES

Leases

Arcadian leases certain of its office space, storage terminals, ocean-going
transportation vessels, railcars and equipment. Total rental expense for the
years ended December 31, 1995, 1994, and 1993, was approximately $25 million,
$24 million and $23 million, respectively.

F-20
<PAGE> 43

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Minimum commitments under noncancellable operating leases and
noncancellable storage and handling agreements as of December 31, 1995, are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
--------------------------------------------------------------- --------------
<S> <C>
1996........................................................ $ 16,211
1997........................................................ 15,746
1998........................................................ 14,452
1999........................................................ 12,622
2000........................................................ 11,559
Thereafter.................................................. 14,043
-------
$ 84,633
=======
</TABLE>

In June 1995, Arcadian entered into a lease agreement with an unaffiliated
entity ("Lessor") with respect to an ammonia plant currently under construction
at the Trinidad plant site. Upon completion of construction, the Lessor will
lease the plant to a subsidiary of Arcadian. The annual lease payments 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 lease is not renewed or is otherwise terminated, a subsidiary of Arcadian
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 Corporation
has an option to purchase the plant during the term of the lease for a price
approximating its fair market value at the date of exercise. The plant is
expected to be operational in the second quarter of 1996.

Derivatives

In addition to physical spot and term purchases, Arcadian at times employs
futures, swaps and option agreements to establish the cost on a portion of its
natural gas requirements. These instruments are intended to hedge the future
cost and supply of committed and anticipated natural gas purchases for its
domestic plants. Under these arrangements, Arcadian receives or makes payments
based on the differential between a specified price and the actual spot price of
natural gas. Arcadian has certain available lines of credit which are utilized
to reduce cash margin requirements to maintain the derivatives. At December 31,
1995, available off-balance sheet lines of credit totaled approximately $9
million and $4 million of such lines of credit were utilized at that date. Cash
margin requirements in excess of available lines of credit which have been
advanced as of December 31, 1995 and 1994, totaled $5 million and $24 million,
respectively, and are included in inventory.

As of December 31, 1995, Arcadian had derivatives qualifying for deferral
in the form of futures and swaps. The futures represented a notional amount of
17 million MMBtus with maturities in 1996 through 1997. The swaps represented a
notional amount of 15 million MMBtus with maturities in 1996 through 1997.

During the years ended December 31, 1995, 1994, and 1993, the net cost of
natural gas (which is included in cost of sales) has been increased (decreased)
from the use of derivatives by $15 million, $37 million and ($2) million,
respectively.

Lake Charles Plant

In connection with a 1992 incident at its Lake Charles plant, Arcadian 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 Arcadian. While management and legal
counsel believe that any civil penalty ultimately paid by Arcadian will be
substantially less than the remaining $4 million penalty proposed by OSHA, they
cannot predict with certainty the outcome of this proceeding. Arcadian also is
defending civil litigation relating to the Lake Charles incident which include
personal injury,

F-21
<PAGE> 44

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 Arcadian upon
the resolution of these matters.

Trinidad Operations

Arcadian Trinidad has entered into long-term natural gas contracts with a
gas company in Trinidad. The contracts provide for prices which vary with
ammonia market prices, escalating floor prices, and minimum purchase quantities.

Ohio Operations

BPC agreed to operate the Lima plant on behalf of Arcadian pursuant to a
contract providing for the reimbursement of expenses incurred by BPC in
providing such operating services.

Environmental Matters

In the normal course of business, Arcadian monitors its operations and
makes expenditures for environmental protection. In addition, Arcadian's
operations generally are subject to the environmental standards and regulations
of various regulatory agencies. Environmental expenditures that relate to
current operations are expensed or capitalized as appropriate. Expenditures
resulting from remediation of an existing condition caused by past operations
are generally expensed. Liabilities are recognized for remedial activities when
the efforts are probable and the cost is reasonably estimated.

As of December 31, 1995, management has accrued for its known environmental
liabilities, which are not considered to be material to Arcadian's financial
condition or results of operations. While current and future environmental laws
and regulations will potentially subject Arcadian to corrective costs and
expenses, management is not aware of any such matters which it considers to be
of a material nature.

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and estimated fair values
of financial instruments:

<TABLE>
<CAPTION>
1995 1994
--------------------- ---------------------
ESTIMATED ESTIMATED
SEE CARRYING FAIR CARRYING FAIR
NOTE AMOUNT VALUE AMOUNT VALUE
---- -------- --------- -------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Financial liabilities:
Long-term debt........................... 5 $540 $ 575 $637 $ 635
Derivatives.............................. 11 -- -- -- 14
</TABLE>

The carrying amount of all other assets and liabilities not listed above
approximate their estimated fair values. The following methods and assumptions
were used to estimate the fair values for financial instruments:

Long-term debt

The fair values for long-term debt are based on quoted market prices for
similar issues or by discounting expected cash flows at the rates currently
available for debt of similar terms and maturities.

Derivatives

The fair values for natural gas contracts are based on quoted market prices
at the reporting date for those or similar instruments.

F-22
<PAGE> 45

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(13) STOCK SPLIT

On March 10, 1995, the Board of Directors approved a 3-for-1 stock split of
the Common Stock (to be effected as a stock dividend). Retroactive effect for
this stock split has been given to all Common Stock share amounts (except
treasury shares) and per share amounts for all periods presented in these
consolidated financial statements.

(14) SUBSEQUENT EVENTS

Cash Dividends and Distributions

In January 1996, the Corporation declared a cash dividend on the Common
Stock in the amount of $0.05 per share or approximately $2 million in the
aggregate, and a cash distribution on the AAC Warrants of $0.05 per share of
Common Stock purchasable upon exercise of the AAC Warrants or approximately
$53,000 in the aggregate. The dividend on the Common Stock and the distribution
on the AAC Warrants are payable on February 13, 1996 to holders of record at the
close of business on February 2, 1996.

In January 1996, the Corporation declared a cash dividend on the Preferred
Stock in the amount of $.3682 per share or approximately $5 million in the
aggregate. The dividend on the Preferred Stock is payable on February 13, 1996,
to holders of record at the close of business on February 2, 1996.

Secondary Common Stock Offering

In February 1996, the Corporation completed an underwritten public offering
of 2.4 million shares of Common Stock on behalf of certain holders of Common
Stock and of warrants to purchase Common Stock. The Company received net
proceeds of $4 million from the exercise of warrants, and $5 million from the
issuance of an additional 0.2 million shares upon the exercise of the
underwriters' over-allotment option.

DOJ Investigations -- As of January 9, 1997 (Unaudited)

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.

(15) OTHER FINANCIAL INFORMATION

Allowance for Doubtful Accounts

The following is supplemental information for Arcadian's allowance for
doubtful accounts:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1994 1993
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance -- January 1.................................. $1,254 $1,150 $ 880
Additions charged to expenses....................... 948 286 344
Deductions.......................................... (324) (182) (74)
------ ------ ------
Balance -- December 31................................ $1,878 $1,254 $1,150
====== ====== ======
</TABLE>

F-23
<PAGE> 46

ARCADIAN CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Inventory Valuation Reserves

The following is supplemental information for Arcadian's inventory
valuation reserves:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance -- January 1.................................. $ 5,337 $ 3,817 $ 1,194
Additions (deductions).............................. (3,007) 1,520 2,623
------- ------- -------
Balance -- December 31................................ $ 2,330 $ 5,337 $ 3,817
======= ======= =======
</TABLE>

Cash Flow Supplemental Information

The following is supplemental cash flow information:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest paid......................................... $ 63,976 $63,222 $40,811
Income taxes paid..................................... 36,122 9,411 6,652
Non-cash items:
Capital contribution to joint venture in the form of
property, plant and equipment....................... 3,662 -- --
Exchange of preferred stock for junior subordinated
debentures....................................... -- 33,734 --
Notes issued to repurchase common stock............. -- -- 4,018
Non-cash portion of merger consideration (issuance
of preferred stock).............................. 214,195 -- --
Accrued dividends on preferred stock................ 5,085 -- --
</TABLE>

(16) SUMMARIZED CONSOLIDATED QUARTERLY INFORMATION (UNAUDITED)

Summarized quarterly financial information for the years ended December 31,
1995 and 1994, is as follows:

<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1995
Net sales..................................... $340,838 $350,240 $269,523 $306,286
Gross profit.................................. 87,754 110,402 70,994 88,399
Operating income.............................. 71,638 97,382 54,205 69,116
Net income.................................... 13,745 21,531 19,774 33,200
Net income per common share(a).............. $ 0.83 $ 1.28 $ 0.58 $ 0.71
1994
Net sales..................................... $245,509 $305,583 $260,966 $288,243
Gross profit.................................. 31,861 58,891 39,053 55,133
Operating income.............................. 21,190 45,768 25,557 24,757
Net income (loss)............................. 4,602 8,657 3,555 (6,821)
Net income (loss) per common share(a)....... $ 0.21 $ 0.53 $ 0.22 $ (0.48)
</TABLE>

- ---------------

(a) Net income (loss) per common share for each quarter has been computed based
on the weighted average number of common and common equivalent shares during
the respective quarter; therefore, quarterly amounts may not sum to the year
totals.

F-24
<PAGE> 47

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
3.1 -- Restated Certificate of Incorporation of Arcadian Corporation, as
amended (incorporated herein by reference to Exhibit 3.1 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") and Exhibit 3.2 to
Arcadian Corporation's Current Report on Form 8-K for the reported
event dated August 9, 1995 ("Arcadian Corporation 08/09/95 Current
Report")).

3.2 -- Certificate of Designation relating to the Mandatorily Convertible
Preferred Stock, Series A (incorporated herein by reference to
Exhibit 3.2 to the Arcadian Corporation 08/09/95 Current Report).

3.3* -- Amended and Restated Bylaws of Arcadian Corporation dated February
12, 1996.

4.1 -- Indenture dated May 11, 1993, among Arcadian Partners, L.P., Arcadian
Partners Finance Corporation, and IBJ Schroder Bank & Trust Company,
as Trustee, with respect to Arcadian Partners, L.P.'s and Arcadian
Partners Finance Corporation's Series A and B Senior Notes due 2005
(incorporated herein by reference to Exhibit 4.2 to Arcadian
Partners, L.P.'s Current Report on Form 8-K for the reported event
dated May 11, 1993 ("Arcadian Partners 05/11/93 Current Report")).

4.2* -- Note Agreement dated as of April 23, 1992, between Arcadian
Fertilizer, L.P., and the purchasers of the First Mortgage Notes
named therein (form), as amended by (1) the letter agreement dated as
of September 7, 1993, between Arcadian Fertilizer, L.P., and the
holders of the First Mortgage Notes (form), (2) the letter agreement
dated as of April 8, 1994, between Arcadian Fertilizer, L.P., and the
holders of the First Mortgage Notes (form), (3) the letter agreement
dated as of June 26, 1995, between Arcadian Fertilizer, L.P., and the
holders of the First Mortgage Notes (form) ("Third Amendment"), and
(4) the letter agreement dated as of July 24, 1995, between Arcadian
Fertilizer, L.P., and the holders of the First Mortgage Notes (form)
("Fourth Amendment") (incorporated herein by reference to Exhibit
10.34 to the Registration Statement on Form S-1 (Registration No.
33-45828) relating to Arcadian Partners, L.P.'s offering of
Preference Units ("Preference Units Registration Statement"), Exhibit
10.27 to Arcadian Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, and Exhibit 4.3 to the Preferred
Stock Registration Statement, except for the Third Amendment and the
Fourth Amendment which are filed herewith).

4.3 -- Revolving Credit Agreement dated as of June 29, 1995, among Arcadian
Fertilizer, L.P., the banks parties thereto, and Cooperatieve
Centrale Raiffeisen- Boerenleenbank B.A., "Rabobank Nederland", New
York Branch, as Agent (incorporated herein by reference to Exhibit
4.4 to the Preferred Stock Registration Statement).

4.4 -- Registration Rights Agreement dated as of December 22, 1989, among
Arcadian Corporation and certain holders of Common Stock (form)
(incorporated herein by reference to Exhibit 4.4 to the Registration
Statement on Form S-1 (Registration No. 33-34357) relating to
Arcadian Corporation's offering of Common Stock ("Common Stock
Registration Statement")).

4.5 -- Warrant Issuance Agreement dated as of May 31, 1989, between Arcadian
Corporation and AAC Holdings, Inc., on behalf of the holders of AAC
Warrants (incorporated herein by reference to Exhibit 10.29 to the
Common Stock Registration Statement).
</TABLE>
<PAGE> 48

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
4.6* -- Warrant Agreement dated as of December 22, 1989, between Arcadian
Corporation and Chemical Bank, as Warrant Agent, relating to the B
Warrants, as supplemented by (1) the First Supplemental Agreement
dated as of April 10, 1992, among Arcadian Fertilizer, L.P., Arcadian
Corporation and Chemical Bank, as Warrant Agent, and (2) the letter
agreement dated as of January 31, 1996, among Arcadian Corporation,
Society National Bank, as successor Warrant Agent, and Chemical Bank,
as removed Warrant Agent ("Second Supplement") (incorporated herein
by reference to Exhibit 10.31 to the Common Stock Registration
Statement and Exhibit 10.31 to the Preference Units Registration
Statement, except for the Second Supplement which is filed herewith).

10.1* -- Amended and Restated Agreement of Limited Partnership of Arcadian
Partners, L.P., dated as of March 5, 1996 ("Partners Partnership
Agreement"), and the related Certificate of Limited Partnership of
Arcadian Partners, L.P., filed with the Secretary of State of the
State of Delaware on February 10, 1992 (incorporated herein by
reference to Exhibit 3.2 to the Preference Units Registration
Statement, except for the Partners Partnership Agreement which is
filed herewith).

10.2 -- Agreement of Limited Partnership of Arcadian Fertilizer, L.P., dated
as of March 3, 1992 (form), and the related Certificate of Limited
Partnership of Arcadian Fertilizer, L.P., filed with the Secretary of
State of the State of Delaware on March 3, 1992 (incorporated herein
by reference to Exhibits 10.32 and 10.33 to the Preference Units
Registration Statement).

10.3 -- Geismar Complex Services Agreement dated June 4, 1984, between Allied
Corporation and Arcadian Corporation (incorporated herein by
reference to Exhibit 10.4 to the Common Stock Registration
Statement).

10.4 -- Agreement of Lease and Option to Purchase dated as of November 1,
1986, between Nipro, Inc. and CNC Corp. (subsequently named Columbia
Nitrogen Corporation), as amended by the letter agreement dated as of
November 1, 1986, between the parties (incorporated herein by
reference to Exhibit 10.18 to the Preference Units Registration
Statement).

10.5* -- Operating Agreement dated May 11, 1993, between BP Chemicals Inc. and
Arcadian Ohio, L.P., as amended by the First Amendment to the
Operating Agreement dated as of November 20, 1995, between BP
Chemicals Inc. and Arcadian Ohio, L.P. ("First Amendment")
(incorporated herein by reference to Exhibit 10.2 to the Arcadian
Partners 05/11/93 Current Report, except for the First Amendment
which is filed herewith).

10.6 -- Manufacturing Support Agreement dated May 11, 1993, between BP
Chemicals Inc. and Arcadian Ohio, L.P. (incorporated herein by
reference to Exhibit 10.3 to the Arcadian Partners 05/11/93 Current
Report).

10.7 -- Agreement for Lease dated as of June 29, 1995, between Trinidad
Ammonia Company, Limited Partnership, and Arcadian Fertilizer, L.P.
(incorporated herein by reference to Exhibit 10.21 to the Preferred
Stock Registration Statement).

10.8 -- Lease Agreement dated as of June 29, 1995, between Trinidad Ammonia
Company, Limited Partnership, and Arcadian Fertilizer, L.P.
(incorporated herein by reference to Exhibit 10.22 to the Preferred
Stock Registration Statement).

10.9 -- Purchase Option Agreement dated as of June 29, 1995, between Trinidad
Ammonia Company, Limited Partnership, and Arcadian Corporation
(incorporated herein by reference to Exhibit 10.23 to the Preferred
Stock Registration Statement).
</TABLE>
<PAGE> 49

10.11 -- Arcadian Corporation Stock Option Plan dated April 23, 1990, as
amended by (1) the First Amendment to the Arcadian Corporation Stock
Option Plan dated November 2, 1990, (2) the Second Amendment to the
Arcadian Corporation Stock Option Plan dated April 30, 1991, (3) the
Third Amendment to the Arcadian Corporation Stock Option Plan dated
April 27, 1993, and (4) the Fourth Amendment to the Arcadian
Corporation Stock Option Plan dated April 26, 1994 (incorporated
herein by reference to Exhibits 28.1, 28.2 and 28.3 to the
Registration Statement on Form S-8 (Registration No. 33-40323)
relating to Arcadian Corporation's offering of Common Stock upon the
exercise of options granted pursuant to the Stock Option Plan,
Exhibit 10.19 to Post-Effective Amendment No. 1 to the Registration
Statement on Form S-1 (Registration No. 33-51252) relating to
Arcadian Corporation's offering of Common Stock upon the exercise of
A Warrants and B Warrants, and Exhibit 10.14 to the Preferred Stock
Registration Statement).

10.12 -- Arcadian Corporation Stock Appreciation Rights Plan dated January 26,
1993, as amended by the First Amendment to the Arcadian Corporation
Stock Appreciation Rights Plan dated October 25, 1994 (incorporated
herein by reference to Exhibit 10.27 to Arcadian Corporation's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1993, and Exhibit 10.15 to the Preferred Stock Registration
Statement).

10.13 -- Arcadian Corporation Supplemental Executive Retirement Plan
(incorporated herein by reference to Exhibit 10.16 to the Preferred
Stock Registration Statement.)

10.14* -- Arcadian Corporation Restricted Stock Plan dated March 26, 1996.

11* -- Computation of Net Income (Loss) per Common Share.

13* -- Arcadian Corporation's 1995 Annual Report to Stockholders.

21* -- Subsidiaries of Arcadian Corporation.

23* -- Accountants' Consent of KPMG Peat Marwick LLP.
</TABLE>

- ---------------

* This exhibit or a portion thereof, as indicated above, is filed with this
report.

<PAGE> 1

EXHIBIT 11
<PAGE> 2

EXHIBIT 11
ARCADIAN CORPORATION AND SUBSIDIARIES

COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE(A)
(DOLLARS IN THOUSANDS EXCEPT SHARES AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net income................................... $ 88,250 $ 9,993 $ 2,481
Less:
Preferred stock dividends.................. -- (1,121)(d) (5,397)(d)
Accretion of discount on preferred stock... -- (29)(d) (166)(d)
----------- ----------- -----------
Net income (loss) applicable to
common shares.................... $ 88,250 $ 8,843 $ (3,082)
=========== =========== ===========
Primary:
Weighted average common and common equivalent
shares outstanding:
Weighted average common shares
outstanding............................. 20,918,465 13,999,359 12,915,906
Dilution from assumed exercise of warrants
and options and assumed conversion of
Series A Preferred Stock................ 7,757,637(b) 2,149,227 --(e)
----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding........... 28,676,102 16,148,586 12,915,906
=========== =========== ===========
Net income (loss) per common
share............................ $ 3.08 $ 0.55 $ (0.24)
=========== =========== ===========
Fully Diluted(c):
Weighted average common and common equivalent
shares outstanding:
Weighted average common shares
outstanding............................. 20,918,465 13,999,359 12,915,906
Dilution from assumed exercise of warrants
and options and assumed conversion of
Series A Preferred Stock................ 7,951,081(b) 2,149,227 --(e)
----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding........... 28,869,546 16,148,586 12,915,906
=========== =========== ===========
Net income (loss) per common
share............................ $ 3.06 $ 0.55 $ (0.24)
=========== =========== ===========
</TABLE>

- ---------------

(a) On March 10, 1995 the Board of Directors approved a 3-for-1 stock split of
the Corporation's Common Stock (to be effected as a stock dividend).
Retroactive effect for this stock split has been given to all Common Stock
share and per share amounts for all periods presented herein.

(b) For purposes of computing 1995 net income per common share, the conversion
of 13,812,500 shares of Series A Preferred Stock, which are assumed to be
common stock equivalents because of the mandatory conversion feature, is
assumed when such conversion is dilutive. If such conversion is
antidilutive, the conversion of such shares is not assumed, and net income
applicable to common shares is therefore reduced by dividends on the Series
A Preferred Stock. The assumed conversion of the Series A Preferred Stock
had a dilutive effect in 1995.

(c) 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 statement
of operations.

(d) Prior to the exchange by the Corporation of the Exchange Debentures for the
Series B Preferred Stock on March 15, 1994, net income applicable to common
shares is reduced by dividends and discount accretion associated with the
Series B Preferred Stock.

(e) Due to the net loss applicable to common shares, the assumed exercise of
warrants and options to purchase common stock have an antidilutive effect
and have not been included in the weighted average number of common shares.

<PAGE> 1

EXHIBIT 23
<PAGE> 2

EXHIBIT 23

The Board of Directors
Arcadian Corporation

Re: Registration Statement No. 33-40323 and No. 333-10361

We consent to incorporation by reference in the subject registration
statements of Arcadian Corporation of our report dated February 9, 1996,
relating to the consolidated balance sheet of Arcadian Corporation and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1995, which report appears in
the December 31, 1995 annual report on Form 10-K/A of Arcadian Corporation.

KPMG Peat Marwick LLP

Memphis, Tennessee

January 9, 1997

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF ARCADIAN CORPORATION INCLUDED IN FORM 10-K/A FOR THE YEAR ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 253,188<F1>
<SECURITIES> 0
<RECEIVABLES> 111,374
<ALLOWANCES> 1,878
<INVENTORY> 136,767
<CURRENT-ASSETS> 506,020
<PP&E> 823,316
<DEPRECIATION> 216,906
<TOTAL-ASSETS> 1,270,654
<CURRENT-LIABILITIES> 185,808
<BONDS> 0
0
214,195
<COMMON> 305
<OTHER-SE> 221,919
<TOTAL-LIABILITY-AND-EQUITY> 1,270,654
<SALES> 1,266,887
<TOTAL-REVENUES> 1,266,887
<CGS> 909,338
<TOTAL-COSTS> 909,338
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 948
<INTEREST-EXPENSE> 67,217
<INCOME-PRETAX> 155,074
<INCOME-TAX> 66,824
<INCOME-CONTINUING> 88,250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,250
<EPS-PRIMARY> 3.08
<EPS-DILUTED> 3.06
<FN>
<F1>CASH INCLUDES $50 MILLION OF RESTRICTED RESERVES.
</FN>

</TABLE>