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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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Commission File Number 2-7803
MISSISSIPPI CHEMICAL CORPORATION
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(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0292638
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
Highway 49 East, P.O. Box 388, Yazoo City, MS 39194
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (601) 746-4131
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Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, par value $.01 The Nasdaq Stock Market's National Market
Preferred Stock Purchase Rights The Nasdaq Stock Market's National Market
Securities registered pursuant to Section 12(g) of the Act: None
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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 August 31 1996, Mississippi Chemical Corporation had 21,053,450 shares of
common stock, par value $.01, outstanding. The Company estimates that the
aggregate market value of the common stock on August 31, 1996 (based upon the
closing price of these shares on Nasdaq), held by non-affiliates was
approximately $473,702,625.
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DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for annual meeting of shareholders to be held on or about
November 25, 1996 (Items 10, 11, 12 and 13 in Part III).
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PART I
ITEM 1. BUSINESS
Mississippi Chemical Corporation (the "Company") was incorporated in
Mississippi on May 23, 1994, and is the successor by merger, effective July 1,
1994, to a business which was formed in 1948 as the first fertilizer
cooperative in the United States (the "Cooperative"). The address of the
Company's principal executive office is Owen Cooper Administration Building,
Highway 49 East, Yazoo City, Mississippi 39194, and its telephone number is
(601) 746-4131. The term "Company" includes Mississippi Chemical Corporation
and its wholly owned subsidiaries, Mississippi Phosphates Corporation and
Mississippi Potash, Inc. References to the Company's operations prior to July
1, 1994, refer to the Cooperative's operations.
The Cooperative was incorporated in Mississippi in September 1948 and
operated as a cooperative in accordance with the applicable provisions of the
Internal Revenue Code. The principal business of the Cooperative was to
provide fertilizer products to its shareholders pursuant to preferred patronage
rights which gave the shareholders the right to purchase fertilizer products
and receive a patronage refund on fertilizer purchases. On June 28, 1994, the
shareholders of the Cooperative approved a plan of reorganization (the
"Reorganization"), pursuant to which the Cooperative was merged into the
Company. Pursuant to the Reorganization, the capital stock of the Cooperative
was converted into common stock and/or cash. As a result of the
Reorganization, the Company no longer operates as a cooperative, but as a
regular business corporation.
NITROGEN FERTILIZER
Products
The Company produces nitrogen fertilizers at its Yazoo City, Mississippi,
production facility in Yazoo City, Mississippi, and through a 50%-owned
production facility at Donaldsonville, Louisiana. The Louisiana facility
("Triad") is operated as a joint venture by the Company and First Mississippi
Corporation ("First Mississippi"). In fiscal 1996, the Company sold
approximately 1.8 million tons of nitrogen fertilizers to farmers, fertilizer
dealers and distributors located primarily in the southern United States.
Sales of nitrogen fertilizer products by the Company in fiscal 1996 were $255
million, which represented approximately 60% of net sales.
The Company's principal nitrogen products include ammonia;
fertilizer-grade ammonium nitrate, which is sold under the Company's trade name
Amtrate(R); UAN solutions, which are sold under the Company's trade name N-Sol;
and urea.
Although, to some extent, the various nitrogen fertilizers are
interchangeable, each has its own distinct characteristics which produce
agronomic preferences among end-users. Farmers decide which type of nitrogen
fertilizer to apply based on the crop planted, soil and weather conditions,
regional farming practices and relative nitrogen fertilizer prices.
Ammonia. The basic nitrogen product is anhydrous ammonia, which is the
simplest form of nitrogen fertilizer. Anhydrous ammonia, which is 82%
nitrogen, is the most concentrated form of nitrogen fertilizer available. It
is synthesized as a gas under high temperature and pressure. The raw materials
used to produce anhydrous ammonia are natural gas, atmospheric nitrogen and
steam.
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In fiscal 1996, the Company produced approximately 717,000 tons of
anhydrous ammonia at its Yazoo City and Triad facilities and purchased
approximately 62,000 tons. The Company sold approximately 39,000 tons of
anhydrous ammonia for direct-application fertilizer and industrial sales and
used the balance as a raw material to manufacture its other nitrogen fertilizer
products. The Company's subsidiary Mississippi Phosphates Corporation also
purchased 158,000 tons of ammonia for use in its phosphate operations. See
"Phosphate Fertilizer."
In the Company's markets, ammonia is used primarily as a pre-emergent
fertilizer for most row crops. Although anhydrous ammonia is the least
expensive form of nitrogen, its use as a primary fertilizer has gradually
declined because of the difficulties of application and the high cost of
application equipment.
Ammonium Nitrate. The Company is the largest manufacturer and marketer of
ammonium nitrate fertilizer in the United States. Ammonium nitrate, which is
34% nitrogen, is produced by reacting anhydrous ammonia and nitric acid.
Ammonium nitrate is less subject to volatilization (evaporation) losses than
other nitrogen fertilizer forms. Due to its stable nature, ammonium nitrate is
the product of choice for such uses as pastures and no-till row crops where
fertilizer is spread upon the surface and is subject to volatilization losses.
Although the consumption of ammonium nitrate in the U.S. has been stable in
recent years, the use of conservation tillage, which reduces soil erosion, is
increasing in the U.S. and should have a positive impact on ammonium nitrate
demand.
In fiscal 1996, the Company sold approximately 759,000 tons of solid
ammonium nitrate fertilizer, substantially all of which was produced at the
Company's Yazoo City facility. The ammonium nitrate produced at the Company's
Yazoo City facility is sold under the registered trade name Amtrate(R). Due to
its superior shipping and storage characteristics, Amtrate(R) has established
excellent brand name recognition and a reputation as a high-quality product.
In September 1994, the Company and Air Products and Chemicals, Inc. ("Air
Products"), concluded arrangements whereby the Company agreed to purchase all
of the ammonium nitrate fertilizer produced at Air Products' Pace, Florida,
facility (up to 240,000 tons per year). Approximately 2,400 tons of ammonium
nitrate were purchased in fiscal 1996 and approximately 144,000 tons were
purchased in 1995. At the end of fiscal year 1995, Air Products announced its
intention to suspend ammonium nitrate production at its Pace facility due to
sustained high ammonia costs. In February 1996, Air Products and the Company
announced the termination of the agreement.
N-Sol. In fiscal 1996, the Company sold approximately 624,000 tons of
N-Sol, which it produces at its Yazoo City facility. N-Sol is a 32% nitrogen
product that is made by mixing urea liquor and ammonium nitrate liquor. N-Sol
is used in direct application to cotton, corn, grains and pastures as well as
for use in liquid fertilizer blends. Over the past 20 years, there has been a
substantial shift in product preference from directly applied ammonia to UAN
solutions because of the difficulties of applying and the high cost of
application equipment for ammonia.
Urea. In fiscal 1996, the Company sold approximately 231,000 tons of
prilled urea and approximately 83,000 tons of urea melt which it produces at
the Triad facility. Under a long-term contract with Melamine Chemicals, Inc.
("Melamine"), the Company is obligated to sell up to 75,000 tons per year of
urea melt at prevailing market prices to Melamine's facility located adjacent
to the Triad facility. Urea is synthesized by the reaction of ammonia and
carbon dioxide and then solidified in prill form. At 46% nitrogen by weight,
urea is the most concentrated form of dry nitrogen. Because urea undergoes a
complex series of changes within the soil before the nitrogen it contains is
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converted into a form which can be used by plants, it is considered a
long-lasting form of nitrogen. As a fertilizer product, urea is acceptable as
both a direct-application material and as an ingredient in fertilizer blends.
Urea consumption has increased modestly in recent years. Most of the Company's
prilled urea is broadcast on rice and winter wheat crops in Arkansas,
Louisiana, Mississippi, Oklahoma and Texas.
Production and Properties
Yazoo City, Mississippi. The Yazoo City facility is a closely integrated,
multi-plant nitrogen fertilizer production complex located on approximately
1,180 acres. The complex includes an anhydrous ammonia plant, four nitric acid
plants, an ammonium nitrate plant and a UAN solutions plant. In 1996, the
Company announced an expansion project at its Yazoo City facility. This
project will include a 500-ton-per-day anhydrous ammonia plant and a
650-ton-per-day nitric acid plant, as well as expansion of the ammonium nitrate
production and product-shipping areas. The project is estimated to cost
approximately $130 million and is scheduled for completion in 1998.
The Yazoo City facility includes a 20.5 megawatt cogeneration facility
which produces significant savings by the sequential generation of electricity
and process steam. The Yazoo City plant has direct access to water, rail and
truck transportation and is strategically located for the purchase of
competitively priced natural gas. See "--Raw Materials--Natural Gas."
Donaldsonville, Louisiana. The Triad facility is a closely integrated,
multi-plant nitrogen fertilizer complex located on approximately 46 acres
fronting the Mississippi River at Donaldsonville, Louisiana. At the Triad
plant, the Company produces anhydrous ammonia and urea. The Company is
entitled to one-half of the production from the Donaldsonville facility as the
co-owner of Triad with First Mississippi Corporation ("First Mississippi").
The Triad ammonia plant has been retrofitted on several occasions to increase
production capacity and to enhance operating efficiency.
Triad has ready access to rail and truck transportation. The plant is
also equipped with a deep-water port facility on the Mississippi River,
allowing access to economical ship and barge transport for its urea and ammonia
products. The Triad facility is well positioned for the purchase of
competitively priced natural gas. See "--Raw Materials--Natural Gas."
In August 1996, the Company announced that it had entered into a
definitive agreement to acquire the fertilizer operations of First Mississippi,
giving the Company full ownership of the Triad facility. Under the terms of
the agreement and subject to certain adjustments, the Company will issue
approximately 6.9 million shares of the Company's common stock to First
Mississippi shareholders. At closing, the fertilizer business of First
Mississippi will have approximately $150 million of debt. This transaction is
subject to both regulatory and shareholder approval. It is anticipated that the
transaction will be completed during December 1996. Also to be acquired in the
transaction is First Mississippi's wholly owned subsidiary AMPRO Fertilizer,
Inc. ("AMPRO"). AMPRO owns and operates an anhydrous ammonia plant with annual
production of approximately 490,000 tons and is in the process of expanding its
capacity by approximately 125,000 tons a year, or 26%. The expansion should be
completed by the end of 1996. AMPRO and Triad are located on adjacent sites in
Donaldsonvillle and share dock facilities capable of receiving oceangoing
vessels. In addition, the Company will acquire in the transaction a 50%
interest in an ammonia storage terminal in Pasadena, Texas, and a 50% interest
in a partnership which owns and operates 11 ammonia barges.
Trinidad. In December 1994, the Company signed a letter of intent with
Farmland Industries, Inc., to enter into a 50-50 joint venture, known as
Farmland MissChem Limited, to construct and operate a
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2,040-short-ton-per-day ammonia plant to be located on the island of Trinidad.
The project is expected to cost approximately $330 million. Construction of the
facility is underway with completion and start-up scheduled for mid-1998.
Marketing and Distribution
The Company sells its nitrogen fertilizer products to farmers, dealers and
distributors located primarily in the southern farming regions of the United
States where its facilities are located. In the three-tiered fertilizer
distribution chain, distributors operate as wholesalers supplying dealers who,
in turn, sell directly to farmers. Larger customers (distributors and large
multi-location dealers) arrange for distribution, storage and financing of
nitrogen fertilizer. The majority of the Company's sales are made to
distributors and large dealers. The ten states which make up the Company's
primary trade area are Mississippi, Texas, Alabama, Louisiana, Tennessee,
Georgia, Kentucky, Arkansas, Oklahoma, and Florida.
The Company maintains a large and experienced field sales force
strategically located throughout the southern United States. This sales force
maintains close communications with the customer base and plays an important
role in the marketing and distribution of the Company's products. Through
regular, personal contact with its customers, the Company is able to ascertain
local demand for fertilizer products and arrange to have those products
available from the most cost-effective source. The Company's field sales force
is also able to identify specific customer service needs which the Company can
meet. Customer service helps differentiate the Company's products and enhance
its position as a preferred supplier.
The Company transports its nitrogen products by barge, rail and truck.
The Company's distribution network is complemented by owned or leased
warehouses and terminals strategically placed in high-consumption areas.
PHOSPHATE FERTILIZER
Products
The Company produces diammonium phosphate fertilizer ("DAP") at its
facility in Pascagoula, Mississippi. In fiscal 1996, the Company sold
approximately 754,000 tons of DAP, primarily into international markets. Sales
of DAP by the Company in fiscal 1996 were $142 million, which represented
approximately 33% of net sales.
DAP is the most common form of phosphate fertilizer. DAP is produced by
reacting phosphate rock with sulfuric acid to produce phosphoric acid, which is
then combined with ammonia. DAP contains 18% nitrogen and 46% phosphate (P205)
by weight. DAP is an important fertilizer product for both direct application
and for use in blended fertilizers applied to all major types of row crops.
Production and Properties
The Company's phosphate production complex in Pascagoula, Mississippi, is
located on approximately 1,500 acres. The Pascagoula facility is a closely
integrated, multi-plant phosphatic fertilizer complex where the primary
facilities are a phosphoric acid plant, two sulfuric acid plants and a DAP
granulation plant. The plant has storage facilities for finished product
(45,000 tons), as well as for the primary raw materials, phosphate rock
(100,000 tons), sulfur (10,000 tons) and ammonia
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(25,000 tons). All of the phosphate rock used by the Company is purchased
pursuant to a single supply contract with Office Cherifien des Phosphates
("OCP"), the national phosphate company of Morocco. See "--Raw
Materials--Phosphate Rock."
The plant site fronts a deep-water channel that provides direct access to
the Gulf of Mexico. The complex contains docks and off-loading facilities for
receiving shipload quantities of phosphate rock, sulfur and ammonia, and for
out- loading DAP. The plant's location on deep water provides the Company
with an outbound freight cost advantage over central Florida DAP producers with
respect to international shipments and domestic shipments along the Mississippi
River system.
The Company has entered into option agreements for the purchase of lands
near the Pascagoula facility for construction of a new phosphogypsum disposal
facility. Engineering design is currently in progress and permit applications
have been filed with the appropriate local, state and federal authorities.
This project, which is expected to cost approximately $16.5 million, is
scheduled for completion in late 1997.
Marketing and Distribution
The Company sells substantially all of its DAP to Atlantic Fertilizer &
Chemical Corporation ("Atlantic"), the primary distributor of its DAP products.
Atlantic maintains a network of sales agents in the major phosphate
fertilizer-consuming nations around the world. Sales to Atlantic are made on
an FOB Pascagoula basis at a price which reflects the price Atlantic charges
its customers, adjusted to reflect Atlantic's commission. Sales to Atlantic
for the export market are backed by standby letters of credit.
In fiscal 1996, over two-thirds of the Company's DAP was sold into
international markets. The largest export markets in fiscal 1996 were China,
India and countries in Central and South America. Most domestic sales are made
in barge-lot quantities to major fertilizer distributors and dealers located on
the Mississippi River system. The vast majority of the Company's DAP is
transported by ship and barge, although truck and rail access is also
available.
POTASH FERTILIZER
Products
The Company produces potash at three mines and related facilities near
Carlsbad, New Mexico. In fiscal 1996, the Company sold approximately 418,000
tons of potash primarily in granular form. These sales were primarily to
customers located west of the Mississippi River. In May 1994, the Company
completed an expansion of its Carlsbad facility for $1.6 million, bringing its
capacity for granular product to approximately 420,000 tons per year. Sales of
potash fertilizer by the Company in fiscal 1996 were $30 million, which
represented approximately 7% of net sales.
The Company's potash is mined from subterranean salt deposits containing a
mixture of potassium chloride and sodium chloride. The Carlsbad, New Mexico,
potash deposits are located from 800 to 1,200 feet below the surface. Potash
is produced in a refining process whereby the potassium chloride is separated
from the sodium chloride.
Prior to the acquisition described below, the Company primarily produced
red granular potash. The three principal grades of potash fertilizer are
granular, coarse and standard, with granular being the
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largest particle size. Granular potash is used as a direct-application
fertilizer and, among the various grades, is particularly well suited for use
in fertilizer blends. Potash is an important fertilizer product for both
direct application and for use in blended fertilizer applied to all major types
of row crops.
Production and Properties
The Company's potash mine and refinery are located approximately 25 miles
east of Carlsbad, New Mexico. In fiscal 1994, the Company completed a $5
million project to modernize its mining equipment, enabling it to extract a
higher grade of ore which improved overall facility efficiencies. The mine
supplies ore to an above-ground refinery which separates the potassium chloride
from the ore. The run-of-mine refined product is then transported to the
Company's nearby compaction plant for conversion to granular form. Located
contiguous to the compaction facility are storage and shipping facilities from
which the finished product is transported by rail and truck into domestic and
export markets.
The Company's existing facility is currently producing approximately
420,000 short tons per year of red potash, primarily in granular form. The
Company's potash reserves are controlled under long-term federal and state
potassium leases on approximately 60,000 acres. In addition, the Company holds
mineral title to approximately 4,400 acres and fee title to approximately
10,000 acres. Revised estimates of potash ore reserves underlying the Carlsbad
properties were compiled in 1981 and 1983. According to these estimates, the
Company's reserves were estimated to contain 346.2 million tons of in situ ore
with an average grade of 15.25% K20 or 297.9 million tons of recoverable ore
with an average grade of 14.88% K20. Since these estimates were made, ore
extracted would indicate remaining reserves of 330 million tons of in situ ore
with an average grade of 15.26% K2O or 281 million tons of recoverable ore with
an average grade of 14.88% K2O. This reserve base is estimated to be
equivalent to 55 million tons of muriate of potash. At current production
rates, the Company's reserves have a remaining life in excess of 100 years.
In August 1996, the Company acquired substantially all the assets of two
New Mexico potash producers--New Mexico Potash Corporation and Eddy Potash,
Inc., from Trans-Resources, Inc., for $45 million, plus an adjustment for
working capital on hand at closing (approximately $10 million). Currently,
these new acquisitions are being operated as subsidiaries of Mississippi
Potash, Inc. These two mines, located near Carlsbad, New Mexico, have a
combined annual production capacity of approximately 870,000 tons. The New
Mexico Potash Corporation mine produces white potash for use by both
agriculture and industry in standard, coarse and granular forms. The Eddy
Potash, Inc., mine produces red potash for agriculture in standard, coarse and
granular forms, and white chemical and soluble grades for industrial users.
Marketing and Distribution
The substantial majority of the Company's agricultural potash sales are in
domestic markets in the southern states west of the Mississippi River where it
and other Carlsbad potash producers enjoy freight cost advantages over Canadian
and overseas potash producers. Consistent with the Company's strategy to
maximize "net backs" (sales less distribution and delivery expense) and
increase profit margins, domestic sales are targeted for locations along the
freight route of the Santa Fe Railroad. Domestic potash marketing is performed
by the Company's sales staff. The Company's export sales are made through
Potash Corporation of Saskatchewan Sales Limited. While the typical primary
export market for the Company's potash is Latin America, the majority of fiscal
1996 export sales were to Mexico and
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Brazil. Potash for export is transported by rail to terminal facilities in
Houston, Texas, where it is loaded onto ocean-going vessels for shipment to
export markets.
RAW MATERIALS
Natural Gas
Natural gas is the primary raw material used by the Company in the
manufacture of nitrogen fertilizer products. Natural gas is used both as a
chemical feedstock and as a fuel to produce anhydrous ammonia which is then
upgraded into other nitrogen fertilizer products. During fiscal 1996, the cost
of natural gas represented approximately 73% of the Company's cost of producing
ammonia. Because there are no commercially feasible alternatives for natural
gas in the production of ammonia, the economic viability of the Company's
nitrogen business depends upon the availability of competitively priced natural
gas.
In today's natural gas market, the Company's total natural gas cost
generally consists of two components--the market price of the natural gas in
the producing area at the point of delivery into a pipeline and the fee charged
by the pipeline for transporting the natural gas to the Company's plants. The
cost of the transportation component can vary substantially depending on
whether or not the pipeline has to compete for the business. Therefore, it is
extremely important to the Company's competitiveness that it have access to
multiple natural gas transportation services. In addition to the impact on
transmission costs, access alternatives enable the Company to benefit from
natural gas price differences that may exist from time to time in the various
natural gas-producing areas. In recent years, the Company has improved the
natural gas purchasing logistics of its nitrogen facilities.
The majority of the 54,000 Mcf per day natural gas requirements of the
Yazoo City facility is currently being furnished by Sonat Marketing Company
("Sonat"), an affiliate of Southern Natural Gas Company ("Southern"). In 1995,
the Company entered into a long-term natural gas purchase agreement with Sonat.
Deliveries under the Sonat agreement began on January 1, 1996. The Sonat
agreement provides for market-sensitive pricing and a firm-delivery supply
commitment. The balance of the natural gas requirements of the Yazoo City
facility is supplied by Pursue Energy Corporation ("Pursue") from its natural
gas reserves located in Rankin County, Mississippi. It is anticipated that
this purchase arrangement will continue for the foreseeable future. The Yazoo
City facility is directly connected to the interstate pipeline system operated
by Southern. In addition, the Company recently purchased a 60-mile, 12-inch
diameter natural gas pipeline which provides the plant with direct access to
the Pursue reserves, an additional interstate pipeline and a large intrastate
gathering and transmission system in southern Mississippi. As a result of this
multiple source access, the Company benefits from competition for the
transportation and supply of natural gas.
The natural gas requirements of the Triad facility are approximately
50,000 Mcf per day. The Triad facility is located in one of the primary
gas-producing regions of the United States. The facility is currently
connected to five intrastate pipeline systems and benefits from intense
competition among those suppliers. Currently, the plant's requirements are
being supplied by three of the intrastate lines under various pricing
arrangements. Generally, these contracts impose firm delivery obligations at
market-sensitive prices. In addition, the Company purchases gas for Triad on
the spot market pursuant to 30-day fixed-price contracts. As a result of
Triad's favorable access to natural gas supplies, the Company believes that the
loss of any particular supplier would not have a material impact on plant
operations. There have been no significant supply interruptions at the Triad
facility.
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Natural gas prices have risen significantly since December 1995. The
harsh winter of 1995-1996 is primarily responsible for much of this increase.
Although long-term natural gas supplies appear adequate to meet projected
demand, gas prices can be significantly influenced by short-term fundamentals
such as weather, storage levels, gas transportation interruptions and competing
fuel prices. The Company uses natural gas futures contracts to hedge against
the risk of short-term market fluctuations in the cost of natural gas.
Phosphate Rock
Phosphate rock is one of the primary raw materials for the manufacture of
DAP. The Pascagoula facility's requirements for phosphate rock are
approximately 1.2 million tons per year. As of September 15, 1991, the Company
entered into a ten-year contract with Office Cherifien des Phosphates ("OCP")
to supply all of the phosphate rock requirements of the Pascagoula facility.
This contract has been amended and its term extended to June 30, 2003. OCP,
the national phosphate company of Morocco, is the world's largest producer and
exporter of phosphate rock and upgraded phosphates as a company. The contract
price for phosphate rock is based on phosphate rock costs incurred by certain
domestic competitors of the Company and on the operating performance of the
Company's phosphate operations. Under this formula, the Company realizes
favorable phosphate rock prices and is afforded significant protection during
periods when market conditions are depressed and its DAP operations are not
profitable. As a result, the Company has been able to sustain its operations
since reopening the Pascagoula facility in December 1991, despite a sustained
period of low prices for phosphate products during fiscal 1993 and 1992.
Conversely, in favorable markets, when the Company's DAP operations are
profitable, the contract price of phosphate rock will escalate based on the
profitability of its DAP operations. Pursuant to this contract, the Company
and OCP are required to negotiate further adjustments as needed to maintain the
viability and economic competitiveness of the Pascagoula plant. The strategic
alliance with OCP has functioned effectively since inception, and the Company
considers its relations with OCP to be good.
Sulfur
Sulfur is used in the manufacture of sulfuric acid at the Pascagoula
plant. Sulfur is in adequate supply and is available on the open market in
quantities sufficient to satisfy the Company's current requirements of 290,000
tons per year. The location of the Company's plant at Pascagoula, Mississippi,
near major oil and gas fields which supply substantial amounts of sulfur,
provides the Company with a strategic advantage in the purchase of sulfur over
its Florida competitors.
Ammonia
Heavy demand for ammonia, which began in 1994, continued into 1995. This
demand is from both the industrial and agricultural markets. However, prices
have declined somewhat from the level reached during spring 1995, but remain at
relatively high levels. The Company expects to become a net seller of ammonia
with the construction of additional ammonia capacity in Yazoo City and Trinidad
and the pending purchase of First Mississippi Corporation's fertilizer
business.
COMPETITION
Since fertilizers are global commodities which are available from multiple
sources, the primary competitive factor is price. Other competitive factors
include product quality, customer service and availability of product. In each
product category, the Company competes with a broad range of domestic
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producers, including farmer cooperatives, subsidiaries of larger companies,
integrated energy companies and independent fertilizer companies. Many of the
Company's domestic competitors have larger financial resources and sales than
the Company. The Company also competes with foreign producers. Foreign
competitors are often owned or subsidized by their governments and, as a
result, may have cost advantages over domestic companies. Additionally,
foreign competitors are frequently motivated by non-market factors such as the
need for hard currency.
The Company produces and sells nitrogen fertilizer products primarily in
the southern United States. Because competition is based largely on price,
maintaining low production costs is critical to competitiveness. The Company
believes it is one of the lowest-cost producers of nitrogen fertilizers in the
United States. Natural gas comprises the majority of the raw materials cost of
nitrogen fertilizers. Competitive natural gas purchasing is essential to
maintaining the Company's low-cost position. Equally important is efficient
use of this gas because of the energy-intensive nature of the nitrogen
fertilizer business. Therefore, cost-competitive production facilities that
allow flexible upgrading of ammonia to other finished products are critical to
a low-cost competitive position. In the highly fragmented nitrogen fertilizer
market, product quality and customer service can also be sources of product
differentiation.
Through Atlantic, the Company sells over two-thirds of its DAP in
international markets. The United States phosphate industry has become more
concentrated as a result of recent consolidations and joint ventures, and the
Company is significantly smaller than most of its competitors in terms of
resources and sales. Most of the Company's principal competitors have captive
sources of some or all of the raw materials, and this may provide them with
cost advantages. The Company's long-term phosphate rock contract with its
flexible pricing mechanism is a key element to the Company's ability to
compete.
Most potash consumed in the United States is provided by large Canadian
producers who have economies of scale and lower variable costs than their U.S.
counterparts. Over 80% of United States potash production capacity is located
in the Carlsbad, New Mexico, area. While the Carlsbad producers have higher
mining costs than the Canadian producers, this disadvantage is offset by
logistical and freight advantages in certain markets in the southwestern United
States and the lower United States corn belt. The Company competes in these
markets primarily with two other Carlsbad potash producers.
RESEARCH AND DEVELOPMENT
The Company has a research and development staff of 12 full-time
professional employees whose activities relate primarily to the improvement of
existing products. The expenditures on research activities sponsored by the
Company during fiscal 1996, 1995 and 1994 were approximately $1.2 million, $1.3
million and $1.4 million, respectively.
EMPLOYEES
As of June 30, 1996, the Company employed approximately 1,008 persons at
all locations. The Company considers its employee relations to be
satisfactory.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company's operations are subject to federal, state and local laws and
regulations pertaining to the environment, among which are the Clean Air Act,
the Clean Water Act, the Resource Conservation and Recovery Act, the
Comprehensive Emergency Response Compensation and Liability Act, the Toxic
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Substances Control Act and various state statutes. The Company's facilities
require operating permits that are subject to review by governmental agencies.
The Company believes that its policies and procedures now in effect are
generally in compliance with applicable laws and with the permits relating to
the facilities.
In the past, significant capital and operating costs related to
environmental laws have been incurred. The majority of the Company's
environmental capital expenditures have been in response to the requirements of
the Clean Air Act and the Clean Water Act. Since 1967, the Company has spent
in excess of $50 million on its fertilizer production facilities in order to
meet applicable federal and state pollution standards.
Capital expenditures related to environmental obligations for the past
three fiscal years were approximately as follows: 1996--$920,000;
1995--$7,750,000; and 1994--$619,000.
Environmental capital expenditures are expected to be approximately $9.0
million for fiscal 1997. These funds relate in large part to the development
of a new gypsum disposal facility at Pascagoula. The estimated cost of this
facility is expected to be $17.0 million, which amount will be expended over an
estimated 32 months. The Company is currently seeking the necessary permits
for its development.
During fiscal 1994, the Company charged to its earnings approximately $6.1
million relating to the estimated cost of the future closure of the existing
gypsum disposal facility located at Pascagoula. The Company charged an
additional $564,000 in 1996 and $562,000 in 1995 toward this estimated cost of
closure. The total accrual of approximately $7.2 million relates to the
portion of the disposal facility utilized to date. In future years, the
Company expects to record additional charges of approximately $1.9 million
related to the anticipated closure costs of the gypsum disposal facility.
These charges will be recorded over the estimated four-year remaining life of
the facility.
In the normal course of its business, the Company is exposed to risks
relating to possible releases of hazardous substances into the environment.
Such releases could cause substantial damage or injuries. Environmental
expenditures have been and will continue to be significant. It is impossible
to predict or quantify the impact of future environmental laws and regulations.
ITEM 2. OTHER PROPERTIES
The Company owns an administration building in Yazoo City which contains
approximately 65,000 square feet of office space.
The Company's plants are complete with necessary support facilities, such
as roads, railroad tracks, storage, offices, laboratories, warehouses, machine
shops and loading facilities. Adequate supplies of water and electric power
are available at all locations. In addition to the fertilizer storage
facilities at Yazoo City and Pascagoula, Mississippi; Carlsbad, New Mexico; and
Donaldsonville, Louisiana, the Company also owns or leases 15 major fertilizer
storage and distribution facilities at other locations in Alabama, Arkansas,
Georgia, Mississippi, Tennessee and Texas, with a total system-wide storage
capacity of approximately 220,000 tons.
In 1980, the Company completed the purchase of phosphate rock property in
Hardee County, Florida. This property, containing approximately 12,000 acres,
is estimated by the Company to contain approximately 62,000,000 recoverable
tons of phosphate rock of commercial quality. During 1990, the Company entered
into an agreement granting a third party the exclusive option, for a period of
four
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years, to purchase this undeveloped phosphate rock property. The Company
received an aggregate of $14 million in option payments during this four-year
period. As of July 12, 1994, the Company and the option holder entered into
new agreements with respect to this property whereby (i) the Company conveyed
approximately 2,500 acres of this property to the third party; (ii) for
aggregate additional option payments of $7 million to be paid during the option
period, the Company granted to the third party the exclusive option, for a
period of three and one-half years, to purchase the remaining 9,500 acres;
(iii) the Company was granted a put option pursuant to which the Company has
the right to sell the 9,500 acres to the third party if the third party does
not exercise its prior option to purchase the property; and (iv) the Company
was granted an exclusive option to repurchase the previously conveyed 2,500
acres in the event the third party does not exercise its option to purchase the
9,500 acres and the Company does not exercise its put option on the 9,500
acres.
ITEM 3. LEGAL PROCEEDINGS
Cleve Reber CERCLA Site. Triad has received and responded to letters
issued by the United States Environmental Protection Agency ("EPA") under
Section 104 of the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") relative to the possible disposition of Triad waste at
the disposal site identified as the Cleve Reber site in Ascension Parish,
Louisiana. It is Triad's position that, based upon available information and
records, Triad did not utilize the Cleve Reber site for the disposition of
hazardous material, and it does not appear that Triad has any responsibility
for investigation and cleanup on this site. It should be noted that the EPA is
contemplating an action under the Resource Conservation and Recovery Act,
Section 7003, as well as the CERCLA action mentioned above. The EPA has issued
Section 106 orders against the major contributors at the site for cleanup.
They are now engaged in negotiations for cleanup. Two years ago, , Triad
received a supplemental 104(e) request for information from the EPA, indicating
the EPA's renewed interest in pursuing Potential Responsible Persons at the
site. Triad filed a Freedom of Information Act request to investigate
allegations that some plant trash from Triad may have been disposed of at the
Cleve Reber site. In the opinion of management, the likelihood of the CERCLA
investigation resulting in a loss in a material amount is remote.
In early 1996, a class action suit was brought against Triad and other
companies allegedly involved in the site based upon toxic torts alleged to have
resulted from the presence of contaminants at the Cleve Reber site. Triad has
not been served with process in the case. In the opinion of management, based
upon available information, the likelihood that these proceedings will result
in a loss in a material amount is remote. Triad is monitoring the case while
awaiting service of process.
Terra International, Inc. On August 31, 1995, the Company filed suit
in federal court in Mississippi against Terra International, Inc. ("Terra")
seeking a declaratory judgment and other relief establishing that certain
technology relating to the design of an ammonium nitrate neutralizer which the
Company licensed to Terra is not defective and was not the cause of an
explosion which occurred in 1994 at Terra's Port Neal, Iowa, fertilizer
facility. The Company is also seeking damages for defamation based on Terra's
public statement related to the Company's alleged role in the explosion. Also,
on August 31, 1995, Terra filed suit in federal court in Iowa against the
Company seeking damages caused by the explosion. Terra alleges that the
Company negligently designed the ammonium nitrate neutralizer technology
licensed to Terra and that that design defect led to the Port Neal explosion.
Discovery in this case is underway and is scheduled to run through December 31,
1997. Trial is tentatively scheduled to begin in the summer of 1998. The
Company intends to vigorously defend itself against Terra's allegations and
plans to fully prosecute its defamation claim.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The following table presents dividends paid per share and the high and low
price range for the Company's common stock for fiscal 1996 and fiscal 1995.
Year Ending June 30, 1996
-----------------------------------------------------------------
1st Q 2nd Q 3rd Q 4th Q
------- -------- -------- ---------
Dividends paid per share $ 0.08 $ 0.08 $ 0.10 $ 0.10
Common stock price range
- high $23.88 $25.13 $24.75 $22.50
- low $19.88 $21.00 $19.75 $19.25
Year Ending June 30, 1995
-----------------------------------------------------------------
1st Q 2nd Q 3rd Q 4th Q
------- -------- -------- ---------
Dividends paid per share $ - $ - $ 0.08 $ 0.08
Common stock price range
- high $19.25 $19.00 $19.88 $20.13
- low $15.00 $14.75 $16.50 $15.38
The Company's common stock is listed on the Nasdaq Stock Market's National
Market under the symbol "MISS." As of September 18, 1996, shareholders of
record numbered approximately 10,700.
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ITEM 6. SELECTED FINANCIAL DATA
Fiscal Year Ended June 30
----------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(In thousands, except per-share data)
Income Statement Data:
---------------------
Net sales $ 428,789 $ 388,154 $ 309,360 $ 289,125 $ 239,657
Operating income $ 84,818 $ 80,969 $ 37,905 $ 29,180 $ 40,804
Income from continuing operations
before cumulative effect of
change in accounting principle $ 54,178 $ 52,230 $ 26,912 $ 22,681 $ 31,349
Net income $ 54,178 $ 52,230 $ 36,523 $ 4,790 $ 13,003
Income from continuing operations
assuming conversion from a
cooperative to a regular
business N/A n/a $ 21,415 $ 17,533 $ 22,821
corporation as of July 1, 1991
(1)
Earnings per share (2) $ 2.46 $ 2.34 $ 1.10 $ 0.92 $ 1.23
Weighted average common shares
outstanding (3) 21,980 22,365 19,454 19,035 18,521
June 30
----------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(In thousands, except per-share data)
Balance Sheet Data:
------------------
Working capital $ 81,613 $ 70,790 $ 34,931 $ 22,802 $ 35,225
Total assets $ 341,006 $ 302,215 $ 298,430 $ 296,053 $ 303,158
Long-term debt, excluding
long-term debt due within one
year $ - $ 2,478 $ 57,217 $ 52,357 $ 59,333
Shareholders' equity $ 247,825 $ 227,307 $ 142,956 $ 119,574 $ 128,195
Cash dividends declared per
common share (4) $ 0.36 $ 0.16 $ - $ - $ -
(1) For 1994, 1993 and 1992, the Company operated as a cooperative and
realized deductions for income taxes for amounts paid in cash as
patronage refunds to its shareholder-members. If the conversion from a
cooperative to a regular business corporation had occurred as of July
1, 1991, income taxes would have been increased by the following
approximate amounts: $5.5 million, $5.1 million and $8.5 million for
fiscal 1994, 1993 and 1992, respectively.
(2) For 1994, 1993 and 1992, earnings per share reflect the reorganization
of the Company from a cooperative to a regular business corporation as
if it had occurred July 1, 1991, and is based on income from continuing
operations.
(3) For 1994, 1993 and 1992, weighted average common shares outstanding
reflect the reorganization of the Company from a cooperative to a
regular business corporation as if it had occurred July 1, 1991.
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(4) For 1994, 1993 and 1992, the Company operated as a cooperative and
paid cash patronage refunds in lieu of cash dividends.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's results of operations have historically been influenced
by a number of factors beyond the Company's control which have, at times, had a
significant effect on the Company's operating results. Fertilizer demand and
prices are highly dependent upon conditions in the agricultural industry and
can be affected by a variety of factors, including planted acreage, United
States government agricultural policies, projected grain stocks, weather and
changes in agricultural production methods. The Company's results can be
affected by such factors as the relative value of the U.S. dollar, foreign
agricultural policies (in particular the policies of the governments of India
and China regarding subsidies of fertilizer imports), and the hard currency
demands of countries such as the former Soviet Union.
The Company's fiscal 1996 results reflect record sales, operating
income and net income. Net sales increased 10.5% to $428.8 million from $388.2
million in 1995. Operating income increased 4.8% to $84.8 million from $81.0
million in 1995, and net income increased 3.7% to $54.2 million from $52.2
million in 1995. These results reflect higher sales prices for nitrogen and
DAP and higher sales volumes for all product groups. Sales volumes were
favorably impacted by a carryover effect caused by slow product movement
resulting from adverse weather conditions in May and June of 1995. These
increases were partially offset by lower ammonium nitrate sales volumes during
the current year due to the absence of tonnage obtained through a contract with
Air Products and Chemicals, Inc. ("Air Products"), in the prior fiscal year,
which is no longer in effect. The Company purchased approximately 144,000 tons
of ammonium nitrate from Air Products in fiscal 1995 compared to 2,400 tons
during fiscal 1996. The average sales price per ton of nitrogen fertilizer
increased to $144 in fiscal 1996 from $138 in fiscal 1995. For fiscal 1996,
the average sales price of DAP was $188 per ton compared to $165 per ton for
fiscal 1995. The average sales price of potash decreased to $71 in fiscal 1996
from $77 in fiscal 1995.
During the current year, a favorable worldwide supply/demand balance
for nitrogen and DAP fertilizers caused sales prices to increase. However,
during the fourth quarter, adverse weather patterns affected spring demand and
resulted in lower than expected sales volumes for the Company's products. In
response, nitrogen prices, particularly ammonia and urea, weakened. Looking
forward, fertilizer market fundamentals remain strong. U.S. and world grain
stocks continue at their lowest level in more than two decades. Total acreage
planted during fiscal 1996 increased more than 15 million acres over last
year's levels, and industry analysts expect a further increase in planted acres
for 1997. This, coupled with rising global food demand, should translate into
high levels of fertilizer consumption for the upcoming fiscal year.
Prices for natural gas, a significant raw material in the production of
nitrogen fertilizers, have risen significantly since December 1995. Much of
the recent increase is attributed to difficulties in replenishing natural gas
inventories following the harsh winter of 1995-1996. Although long-term
natural gas supplies appear adequate to meet projected demand, gas prices can
be significantly influenced by short-term fundamentals such as weather, storage
levels, gas transportation interruptions and competing fuel prices. This price
volatility is expected to continue.
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RESULTS OF OPERATIONS
Following are summaries of the Company's sales results by product categories:
Fiscal Year Ended June 30
--------------------------------------------------
1996 1995 1994
------------ ------------- -------------
(In thousands)
Net Sales:
Nitrogen $ 255,195 $ 240,692 $ 199,918
DAP 142,084 117,495 83,367
Potash 29,553 27,433 24,084
Other 1,957 2,534 1,991
------------ ------------- -------------
Net Sales $ 428,789 $ 388,154 $ 309,360
============ ============= =============
Fiscal Year Ended June 30
--------------------------------------------------
1996 1995 1994
------------ ------------- -------------
(In thousands)
Tons Sold:
Nitrogen 1,770 1,748 1,643
DAP 754 713 638
Potash 418 357 330
Fiscal Year Ended June 30
--------------------------------------------------
1996 1995 1994
------------ ------------- -------------
Average Sales Price
Per ton:
Nitrogen $ 144 $ 138 $ 122
DAP $ 188 $ 165 $ 131
Potash $ 71 $ 77 $ 73
FISCAL 1996 COMPARED TO FISCAL 1995
Net Sales. Net sales increased 10.5% to $428.8 million in fiscal 1996 from
$388.2 million in fiscal 1995, primarily as a result of higher sales prices for
nitrogen and DAP fertilizers and increased sales volumes for all product
groups. Nitrogen fertilizer sales increased 6.0% as a result of a 4.7%
increase in prices and a 1.3% increase in tons sold. During fiscal 1996, the
Company's ammonium nitrate sales decreased 6.1% primarily due to the absence of
tonnage obtained through a contract with Air Products in the prior year which
is no longer in effect. Sales of DAP increased 20.9% as a result of a 14.4%
increase in prices and a 5.7% increase in tons sold. Potash sales increased
7.7% as a result of a 17.1% increase in tons sold partially offset by an 8.0%
decrease in prices.
Cost Of Products Sold. Cost of products sold increased to $291.4 million
in fiscal 1996 from $254.6 million in fiscal 1995. As a percentage of net
sales, cost of products sold increased to 68.0% in fiscal 1996 from 65.6% in
fiscal 1995. This increase, as a percentage of net sales, reflects increases
in the production cost per ton for nitrogen fertilizers and DAP partially
offset by higher sales prices for nitrogen
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and DAP. During the current fiscal year, the Company incurred higher costs
related to its nitrogen products due to higher natural gas costs, increased
purchases of ammonia used as a raw material and upgraded to other nitrogen
fertilizer products and higher maintenance and labor costs. Maintenance and
labor costs were higher due to a scheduled biennial maintenance turnaround at
the Company's Yazoo City facility in fiscal 1996. Purchases of ammonia also
increased as a result of the scheduled turnaround which reduced supplies of
internally produced ammonia.
DAP costs per ton increased during fiscal 1996 as a result of higher costs
for raw materials, primarily phosphate rock. Phosphate rock costs increased
due to the Company's phosphate rock supply contract which bases the price of
this raw material on the phosphate rock costs incurred by certain domestic
phosphate producers and on the financial performance of the Company's phosphate
operations.
Potash production costs per ton increased 5.5% primarily due to lower
volumes produced at the Carlsbad facility during the current year. Production
levels were lower primarily due to a low ore grade resulting from a salt
deposit that was encountered during January and February of the current year.
Selling Expenses. Selling expenses decreased to $27.9 million in fiscal
1996 from $29.2 million in fiscal 1995. As a percentage of net sales, selling
expenses decreased to 6.5% in fiscal 1996 from 7.5% in fiscal 1995. This
decrease was the result of increased sales prices for DAP and nitrogen
fertilizers and lower delivery costs during the current year due to a product
mix that included a lower percentage of tons sold on a delivered basis. These
decreases were partially offset by higher storage costs during the current
year.
General And Administrative Expenses. General and administrative expenses
increased to $24.7 million in fiscal 1996 from $23.3 million in fiscal 1995.
This increase was primarily due to increased franchise taxes, higher
depreciation expense and decreased service fees received from a former
subsidiary which reduced the Company's general and administrative expenses in
the prior year. As a percentage of net sales, general and administrative
expenses decreased to 5.8% in fiscal 1996 from 6.0% in fiscal 1995. This
decrease was primarily the result of increased sales prices for DAP and
nitrogen fertilizers.
Operating Income. As a result of the above factors, operating income
increased to $84.8 million in fiscal 1996 from $81.0 million in fiscal 1995, a
4.8% increase.
Interest, Net. For fiscal 1996, net interest income was $2.2 million
compared to net interest expense of $52,000 in fiscal 1995. This change is
primarily a reflection of lower interest expense incurred during the current
year resulting from lower levels of borrowings. The Company had no long-term
debt at June 30, 1996. The Company also experienced higher interest income
during the current year due to higher levels of investments.
Income Tax Expense. Income tax expense increased to $34.3 million in
fiscal 1996 from $29.2 million in fiscal 1995. This increase is the result of
the change in earnings during the current year and the utilization of
alternative minimum tax credits during the prior year.
Net Income. As a result of the foregoing, net income increased to $54.2
million in fiscal 1996 from $52.2 million in fiscal 1995.
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FISCAL 1995 COMPARED TO FISCAL 1994
Net Sales. Net sales increased 25.5% to $388.2 million in fiscal 1995 from
$309.4 million in fiscal 1994, primarily as a result of higher sales prices and
increased sales volumes for nitrogen and DAP fertilizers. Nitrogen fertilizer
sales increased 20.4% as a result of a 6.4% increase in tons sold and a 12.8%
increase in prices. In fiscal 1995, the Company agreed to purchase all of the
ammonium nitrate fertilizer produced by Air Products at its Pace, Florida,
manufacturing facility. The Company purchased approximately 144,000 tons of
ammonium nitrate from Air Products during fiscal 1995. Sales of DAP increased
40.9% as a result of a 26.1% increase in prices and an 11.8% increase in tons
sold. Potash sales increased 13.9% as a result of an 8.2% increase in tons
sold and a 5.2% increase in prices.
Cost Of Products Sold. Cost of products sold increased to $254.6 million
in fiscal 1995 from $216.2 million in fiscal 1994. As a percentage of net
sales, cost of products sold decreased to 65.6% in fiscal 1995 from 69.9% in
fiscal 1994. This decrease reflects increases in sales prices for all products
and a reduction in the production cost per ton for nitrogen fertilizers and
potash offset by increases in the production cost per ton of DAP. During the
current fiscal year, the Company incurred higher costs related to its nitrogen
products due to increased purchases of finished products. Nitrogen fertilizer
production cost per ton decreased due to lower prices paid for natural gas
during the current year and lower maintenance and labor costs due to a
scheduled biennial maintenance turnaround at the Company's Yazoo City facility
during the prior year.
DAP costs per ton increased during fiscal 1995 as a result of higher raw
material costs, primarily for ammonia and sulfur. Phosphate rock costs also
increased during the year due to the operation of the Company's phosphate rock
supply contract which bases the price of phosphate rock on the phosphate rock
costs incurred by certain domestic phosphate producers and on the financial
performance of the Company's phosphate operations.
Potash production costs per ton decreased as a result of increased
production volume during the current fiscal year resulting from an expansion
which was completed in May 1994. This expansion increased potash production
capacity from approximately 300,000 tons to approximately 420,000 tons per
year.
Selling Expenses. Selling expenses decreased to $29.2 million in fiscal
1995 from $29.3 million in fiscal 1994. As a percentage of net sales, selling
expenses decreased to 7.5% in fiscal 1995 from 9.5% in fiscal 1994. Factors
contributing to this decrease were increased sales prices for all products and
an increase in DAP sales which bore no delivery expense. Also, the Company
sold more of its nitrogen products directly from production facilities, thereby
eliminating delivery and storage expense on those sales.
General And Administrative Expenses. General and administrative expenses
increased to $23.3 million in fiscal 1995 from $19.9 million in fiscal 1994.
This increase was primarily due to increased expenses related to the purchase
of a new computer system and an increase in the Company's reserve for
uncollectible accounts. As a percentage of net sales, general and
administrative expenses decreased to 6.0% in fiscal 1995 from 6.4% in fiscal
1994. This decrease was primarily the result of increased sales prices for all
products.
Operating Income. As a result of the above factors, operating income
increased to $81.0 million in fiscal 1995 from $37.9 million in fiscal 1994, a
113.6% increase.
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Interest, Net. Net interest decreased to $52,000 in fiscal 1995 from $4.0
million in fiscal 1994. This decrease is primarily a reflection of lower
levels of borrowings due to the repayment of debt from the proceeds of a stock
offering in August 1994. The Company also had higher earnings due to higher
levels of investments and higher rates earned on these investments during
fiscal 1995.
Income Tax Expense. Income tax expense increased to $29.2 million in
fiscal 1995 from $6.0 million in fiscal 1994. The Company's effective tax rate
increased significantly in the current fiscal year as a result of the
conversion from a cooperative to a regular business corporation on July 1,
1994. As a cooperative, earnings on business done with shareholders were
distributed to shareholders as patronage refunds which were deductible for
income tax purposes.
Income From Continuing Operations Before Cumulative Effect Of Change In
Accounting Principle. As a result of the foregoing, income from continuing
operations before the cumulative effect of a change in accounting principle
increased to $52.2 million in fiscal 1995 from $26.9 million in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had cash and cash equivalents of $60.2
million, compared to $29.6 million at June 30, 1995, an increase of $30.6
million. At June 30, 1995, cash and cash equivalents had increased to $29.6
million from $23.2 million at June 30, 1994, an increase of $6.4 million.
Operating Activities. For fiscal 1996, 1995 and 1994, net cash provided by
operating activities was $94.6 million, $78.7 million and $39.8 million,
respectively.
Investing Activities. Net cash used by investing activities was $27.1
million, $26.9 million and $25.4 million, respectively, for fiscal 1996, 1995
and 1994, primarily reflecting capital expenditures in those periods. In
fiscal 1996 and 1995, these expenditures were partially offset by the receipt
of option payments related to the Company's Florida phosphate rock properties.
Fiscal 1996 and 1995 also included $12.0 million and $1.1 million,
respectively, related to the Company's investment in Farmland MissChem Limited,
the Company's 50-50 joint venture formed to construct and operate an ammonia
plant in The Republic of Trinidad and Tobago. Cash flows from investing
activities for fiscal 1995 and 1994 combined reflect an aggregate of $13.1
million in payments required under a newsprint purchase contract with its
former subsidiary, Newsprint South, Inc. ("NSI"). In fiscal 1994, the Company
also incurred $10.8 million in payments made to settle certain obligations in
connection with the disposition of NSI.
Capital expenditures were $16.1 million during fiscal 1996. These
expenditures were for normal improvements and modifications to the Company's
facilities.
Financing Activities. Net cash used by financing activities was $36.9
million, $45.4 million, and $13.2 million, respectively, for fiscal 1996, 1995
and 1994. During fiscal 1996, the amounts used by financing activities
included $25.9 million for the purchase of treasury stock and $7.9 million in
cash dividends. The Company also had debt payments of $3.2 million which
included $2.4 million in prepayments. During fiscal 1995, financing activities
included $47.4 million in proceeds received from a stock offering in August
1994. These proceeds were subsequently used to prepay approximately $29.0
million of the Company's long-term debt and a portion of the Company's
revolving credit facility. The Company also paid $5.7 million to its
shareholders related to the reorganization of the Company, $3.7 million in cash
dividends and $4.8 million to purchase treasury stock. In addition, the
Company paid $14.8 million in cash patronage refunds related to fiscal 1994,
when the Company operated as a cooperative. For fiscal 1994, the amounts used
by financing activities included cash patronage payments of
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$13.4 million and $11.2 million in payments on long-term debt that matured
during the year. Also during fiscal 1994, the Company prepaid $12.2 million of
long-term debt with the National Bank for Cooperatives ("CoBank") which had
maturities through fiscal 1998.
During April 1996, the Company entered into a $125 million credit facility
with NationsBank of Tennessee, N.A. ("NationsBank"), as agent for a syndicate
of commercial banks, replacing all previous lines the Company had with
NationsBank. Under this new facility, the Company has a $40 million short-term
line of credit and an $85 million revolving line of credit with a term of three
years. These lines of credit will bear interest at the Prime Rate or at rates
related to the London Interbank Offered Rate. The Company also has a $5
million short-term line of credit with a financial institution. During fiscal
1996, the Company had no outstanding borrowings under any of its lines of
credit.
The Company has entered into a 50-50 joint venture ("Farmland MissChem
Limited") with Farmland Industries, Inc., to construct and operate a
2,040-short-ton-per-day anhydrous ammonia plant to be located near Point Lisas,
The Republic of Trinidad and Tobago. The project is expected to cost
approximately $330 million. The portion of the project cost in excess of
required equity contributions is to be financed by the joint venture on a
non-recourse project basis. Startup of the facility is scheduled for mid-1998.
In late fiscal 1996, the Company began an expansion at its nitrogen
fertilizer manufacturing facilities at Yazoo City. The project includes the
addition of a 650-ton-per-day nitric acid plant, a new 500-ton-per-day ammonia
plant and modifications to its ammonium nitrate plant to increase production
from approximately 750,000 to 950,000 tons per year. The Company estimates
that the total cost of the expansion will be $130 million. This expansion is
scheduled to be fully operational during the first half of 1998.
In August 1996, two of the Company's indirect subsidiaries acquired
substantially all of the assets of New Mexico Potash Corporation and Eddy
Potash, Inc., subsidiaries of Trans-Resources, Inc., for $45 million, plus an
adjustment for working capital on hand at closing (approximately $10 million).
The assets purchased included the two Trans-Resources mines located near
Carlsbad, New Mexico, with an annual production capacity of approximately
870,000 tons of potash.
The Company anticipates financing all projects, including its equity
contribution to the Farmland MissChem Limited project, with existing cash, cash
generated from operations, and available lines of credit. The Company also
believes that these sources will be sufficient to satisfy any other financing
needs in the foreseeable future.
DISCONTINUED OPERATIONS
On June 30, 1994, the Company disposed of a majority of its interest in
NSI. This action was taken due to substantial losses incurred to date by NSI
and the expectation of continuing losses. The transaction involved a transfer
by the Company of 70% of its economic interest in NSI to various individuals
designated by the lessor of the newsprint facility leveraged lease. The
Company did not retain any voting interest in NSI. The disposition of NSI
allows the Company to focus its attention on its core fertilizer business.
Under the terms of the transaction, the Company paid $19.0 million to NSI
in various forms, including capital contributions, payments in liquidation of
the Company's obligations under a newsprint purchase contract and certain tax-
compensating payments pursuant to a tax-sharing agreement. Prior loans
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in the amount of approximately $13.7 million made by the Company to NSI
pursuant to a newsprint purchase contract between the Company and NSI were
converted to capital. Pursuant to the transaction, the Company also purchased
from NSI its CoBank common stock for $4.0 million. This stock is being
redeemed at the face amount by CoBank over a four-year period.
Subsequent to this transaction, the Company is accounting for its
continuing interest in NSI using the cost method of accounting for investments.
In connection therewith, the Company wrote up to zero its negative investment
in NSI of $39.7 million as it will have no continuing obligation to fund any of
NSI's future losses.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Public Accountants
To the Board of Directors and
the Shareholders of
Mississippi Chemical Corporation:
We have audited the accompanying consolidated balance sheets of Mississippi
Chemical Corporation (a Mississippi corporation) and subsidiaries as of June
30, 1996 and 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for the three years ended June 30, 1996.
These financial statements are the responsibility of the Company's 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. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Mississippi Chemical
Corporation and subsidiaries as of June 30, 1996 and 1995, and the results of
their operations and their cash flows for the three years ended June 30, 1996,
in conformity with generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements as of July
1, 1993, the Company has given cumulative effect to the change in accounting
for income taxes under Statement of Financial Accounting Standards No. 109.
Arthur Andersen LLP
Memphis, Tennessee,
July 29, 1996
22
23
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
June 30
----------------------------
1996 1995
----------- ------------
ASSETS (Dollars in thousands)
Current Assets:
Cash and cash equivalents $ 60,214 $ 29,617
Accounts receivable (less allowances of $1,200 and $1,000) 34,630 30,424
Inventories 40,633 50,315
Prepaid expenses and other current assets 3,956 3,012
Deferred income taxes 2,216 1,929
----------- ------------
Total current assets 141,649 115,297
Investments and other assets:
Investments 15,478 4,087
Other 12,189 10,275
----------- ------------
Total investments and other assets 27,667 14,362
Properties held for sale 52,919 52,919
Property, plant and equipment, at cost, less
accumulated depreciation, depletion and amortization 118,771 119,637
----------- ------------
$ 341,006 $ 302,215
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due within one year $ 78 $ 775
Accounts payable 46,013 31,520
Accrued liabilities 8,707 8,799
Income taxes payable 5,238 3,413
----------- ------------
Total current liabilities 60,036 44,507
Long-term debt - 2,478
Other long-term liabilities and deferred credits 18,218 15,167
Deferred income taxes 14,927 12,756
Commitments and contingencies (see Notes 8 and 13)
Shareholders' equity:
Common stock ($.01 par; authorized 100,000,000 shares;
issued 22,903,450 in 1996 and 22,898,253 in 1995) 229 229
Additional paid-in capital 178,364 178,332
Retained earnings 99,814 53,520
Treasury stock, at cost (1,550,000 shares in 1996 and 300,000 shares in
1995) (30,582) (4,774)
----------- ------------
Total shareholders' equity 247,825 227,307
----------- ------------
$ 341,006 $ 302,215
=========== ============
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
23
24
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
Year Ended June 30
-------------------------------------------------------
1996 1995 1994
-------------- --------------- ----------------
(Dollars in thousands, except per-share data)
Net Sales $ 428,789 $ 388,154 $ 309,360
Operating expenses:
Cost of products sold 291,403 254,629 216,204
Selling 27,856 29,212 29,339
General and administrative 24,712 23,344 19,857
Provision for closure of gypsum disposal area
- - 6,055
-------------- ---------------- ----------------
343,971 307,185 271,455
-------------- ---------------- ----------------
Operating income 84,818 80,969 37,905
Other income (expense):
Interest, net 2,229 (52) (3,991)
Restructuring - - (1,402)
Other 1,446 491 421
-------------- ---------------- ----------------
Income from continuing operations before
income taxes and cumulative effect of
change in accounting principle 88,493 81,408 32,933
Income tax expense 34,315 29,178 6,021
-------------- ---------------- ----------------
Income from continuing operations before
cumulative effect of change in accounting
principle 54,178 52,230 26,912
Discontinued operations:
Loss from discontinued operations (less
applicable income tax credits of $5,314) - - (23,987)
Gain on disposal of discontinued operations
(including applicable income tax credits
of $4,030) - - 39,747
Cumulative effect to July 1, 1993, of change
in accounting for income taxes - - (6,149)
-------------- ---------------- ----------------
Net income $ 54,178 $ 52,230 $ 36,523
============== ================ ================
Earnings per share (see Note 1) $ 2.46 $ 2.34
============== ================
The accompanying notes to consolidated financial statements are an
integral part of these financial statements.
24
25
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Cooperative Additional Capital Retained
Common Common Paid-in Equity Earnings Treasury
Stock Stock Capital Credits (Deficit) Stock Total
-------- -------- --------- -------- -------- -------- --------
(Dollars in thousands)
Balances,
June 30, 1993 $ 27,933 $ - $ 65,692 $ 62,352 $(36,403) $ - $119,574
Net income - - - - 36,523 - 36,523
Cash patronage - - - - (14,756) - (14,756)
Stock issued 459 - 1,156 - - - 1,615
-------- -------- --------- -------- -------- -------- --------
Balances,
June 30, 1994 28,392 - 66,848 62,352 (14,636) - 142,956
Conversion of
cooperative stock (26,375) 155 26,220 - - - -
Conversion of capital
equity credits
and allocated
surplus accounts - 41 42,723 (62,352) 19,588 - -
Redemptions (2,017) (1) (4,095) - - - (6,113)
-------- -------- --------- -------- -------- -------- --------
Subtotal - 195 131,696 - 4,952 - 136,843
Net income - - - - 52,230 - 52,230
Stock issued - 34 46,636 - - - 46,670
Cash dividends paid - - - - (3,662) - (3,662)
Treasury stock purchased - - - - - (4,774) (4,774)
-------- -------- --------- -------- -------- -------- --------
Balances,
June 30, 1995 - 229 178,332 - 53,520 (4,774) 227,307
Net income - - - - 54,178 - 54,178
Cash dividends paid - - - - (7,884) - (7,884)
Treasury stock, net - - 32 - - (25,808) (25,776)
-------- -------- --------- -------- -------- -------- --------
Balances,
June 30, 1996 $ - $ 229 $ 178,364 $ - $ 99,814 $(30,582) $247,825
======== ======== ========= ======== ======== ======== ========
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
25
26
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Year Ended June 30
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
(Dollars in thousands)
Cash flows form operating activities:
Net income $ 54,178 $ 52,230 $ 36,523
Loss from discontinued operations - - 23,987
Gain on disposal of discontinued operations - - (39,747)
------------ ------------ ------------
Net income from continuing operations 54,178 52,230 20,763
Reconciliation of net income from continuing operations
to net cash provided by operating activities:
Net change in operating assets and liabilities 21,401 (3,241) (5,820)
Depreciation, depletion and amortization 17,798 17,058 16,967
Deferred income taxes 1,884 11,556 3,302
Accrual for closure of gypsum disposal area 564 562 6,055
Other (1,206) 555 (1,455)
------------ ------------ ------------
Net cash provided by operating activities 94,619 78,720 39,812
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property, plant and equipment (16,143) (22,305) (11,232)
Investment in Farmland MissChem Limited (11,993) (1,128) -
Proceeds received from option holder 2,000 3,000 -
Payments for newsprint contract obligations - (8,751) (4,338)
Disposition of Newsprint South, Inc. - - (10,848)
Other (937) 2,260 1,039
------------ ------------ ------------
Net cash used by investing activities (27,073) (26,924) (25,379)
------------ ------------ ------------
Cash flows from financing activities:
Debt payments (3,175) (118,567) (162,183)
Debt proceeds - 54,625 161,160
Purchase of treasury stock (25,890) (4,774) -
Cash dividends paid (7,884) (3,662) -
Cash patronage paid - (14,756) (13,405)
Proceeds from issuance of common stock - 47,401 1,200
Conversion of common stock - (5,665) -
------------ ------------ ------------
Net cash used by financing activities (36,949) (45,398) (13,228)
------------ ------------ ------------
Net increase in cash and cash equivalents 30,597 6,398 1,205
Cash and cash equivalents - beginning of period 29,617 23,219 22,014
------------ ------------ ------------
Cash and cash equivalents - end of period $ 60,214 $ 29,617 $ 23,219
============ ============ ============
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
26
27
Mississippi Chemical Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Financial Statements
The accompanying consolidated financial statements include the accounts of
Mississippi Chemical Corporation, its subsidiaries and its proportionate share
of the assets and liabilities of Triad Chemical, a 50%-owned, unincorporated
joint venture (collectively, the "Company"). All material intercompany
transactions and balances have been eliminated.
Prior to July 1, 1994, Mississippi Chemical Corporation was organized and
operated as a cooperative to manufacture and distribute chemical fertilizer
primarily to its shareholder-members. On July 1, 1994, Mississippi Chemical
Corporation converted from a cooperative to a regular business corporation (see
Note 2). The Company is a major producer and supplier of nitrogen fertilizers
in the southern United States. The Company also manufactures phosphate and
potash fertilizers, making it a full product line fertilizer supplier. The
Company sells its nitrogen and potash fertilizer products to farmers,
fertilizer dealers and distributors primarily for use in the southern farming
regions of the United States and areas served by the Mississippi River system.
The Company's phosphate fertilizers are sold primarily in international
markets.
The Company has the right to withdraw, at cost, approximately one-half of
the production of Triad Chemical and is obligated to withdraw certain minimum
quantities as specified by the Products Withdrawal Agreement. Triad Chemical's
assets constitute approximately 2.3% and 2.6% of total assets at June 30, 1996
and 1995, respectively.
On June 30, 1994, the Company disposed of a majority of its interest in its
newsprint manufacturing subsidiary, Newsprint South, Inc. ("NSI") (see Note
18).
Inventories
Inventories are stated at the lower of cost or market. Cost has been
determined under a moving average cost method.
Investments
The Company's investments consist of an investment in the National Bank for
Cooperatives ("CoBank") and a 50-50 joint venture ("Farmland MissChem Limited")
with Farmland Industries, Inc. (see Note 13). The investment in CoBank is
stated at its net present value determined by applying a discount factor to an
assumed redemption schedule. The value of this investment will be realized
over a period of approximately four years as CoBank redeems its equity in the
normal course of its operations.
27
28
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Properties Held for Sale
Assets are classified as properties held for sale if the Company is
actively engaged in trying to dispose of the assets. These assets are valued
at the lower of cost or net realizable value.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated
depreciation, depletion and amortization. Expenditures for major improvements
are capitalized; expenditures for normal maintenance and repairs are charged to
expense as incurred. Upon sale or retirement of properties, the cost and
accumulated depreciation are removed from the accounts, and any gain or loss is
credited or charged to income. Depreciation of property, plant and equipment
is provided over the estimated useful lives of the related assets which range
from 3 to 25 years. The Company uses primarily the declining-balance method
for assets purchased through June 30, 1995. Effective July 1, 1995, the
Company changed its method of depreciating newly acquired, long-lived assets
from the declining-balance method to the straight- line method. This change in
accounting principle did not have a material effect on the Company's financial
statements for the year ended June 30, 1996. Depletion of mineral properties
is provided using the units-of-production method over the estimated life of the
reserves.
Interest costs attributable to major construction and other projects under
development are capitalized in the appropriate property account and amortized
over the life of the related asset.
Income Taxes
During fiscal 1996 and 1995, the Company operated as a regular business
corporation; therefore, the provision for income taxes was based on earnings
reported in the financial statements. For fiscal 1994, the provision for
income taxes was based on all income not distributed to patrons as patronage
refunds since the Company operated as a cooperative in that year.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
the Company adopted effective July 1, 1993. The cumulative effect of this
change in accounting principle decreased net income by $6,149,000 for fiscal
1994.
Hedging Activities
The Company enters into futures contracts to protect against price
fluctuations of natural gas. At the time the futures contracts are closed and
the related natural gas is purchased, the Company records a gain or loss from
the change in market value of such contracts.
Earnings Per Share
Earnings per share is computed on the basis of the weighted average number
of common shares outstanding during the period plus dilutive common share
equivalents arising from stock options using the treasury stock method. Shares
used in the calculation were 21,980,267 and 22,365,246 for the years ended June
30, 1996 and 1995, respectively. Fully diluted earnings per share are not
significantly different from primary earnings per share.
28
29
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Earnings per share for fiscal 1994 are not meaningful and are not presented
since the Company operated as a cooperative in that year.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
New Accounting Pronouncements
In 1995, Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," was issued, which is effective for fiscal years
beginning after December 15, 1995. This statement requires footnote disclosure
of the pro forma impact on net earnings and earnings per share of the
compensation cost that would have been recognized if the fair value of all
stock-based awards was recorded in the income statement. The disclosure
provisions of this statement will be adopted in fiscal 1997.
In fiscal 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This pronouncement requires that long-
lived assets be reviewed for impairment upon the occurrence of events or
changes in circumstances that indicate that the carrying value of these assets
may not be recoverable. Recoverability is measured by comparing the assets'
net book value to the estimated future cash flows generated by their use.
Impaired assets are recorded at the lesser of their carrying value or fair
value. The adoption of this statement had no impact on the Company's financial
position or operating results.
Reclassifications
The Company has reclassified certain prior year information to conform with
the current year's presentation.
NOTE 2 - EFFECTS OF REORGANIZATION:
The Company operated as a cooperative during fiscal year 1994. On June 28,
1994, the shareholder-members of the Company voted to adopt a plan of
reorganization (the "Reorganization") which became effective July 1, 1994.
Pursuant to the Reorganization, the Company was merged into a newly created,
wholly owned subsidiary ("New Company") which is a non- cooperative Mississippi
business corporation. In the merger, the common stock of the Company was
converted into New Company common stock and/or cash. In addition, holders of
Capital Equity Credits and Allocated Surplus Accounts of the Company were
offered the right to exchange those interests for New Company common stock.
Pursuant to the Reorganization, New Company changed its name to Mississippi
Chemical Corporation.
29
30
NOTE 3 - INVENTORIES:
Inventories consisted of the following:
June 30
---------------------------
1996 1995
---------- -----------
(Dollars in thousands)
Finished products $ 10,278 $ 19,817
Raw materials and supplies 5,096 6,740
Replacement parts 25,259 23,758
---------- -----------
$ 40,633 $ 50,315
========== ===========
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following:
June 30
---------------------------
1996 1995
---------- -----------
(Dollars in thousands)
Mineral properties $ 18,574 $ 18,574
Land 8,152 8,079
Buildings 22,520 22,345
Machinery and equipment 345,595 321,511
Construction in progress 5,041 13,822
---------- -----------
399,882 384,331
Less accumulated depreciation,
depletion and amortization (281,111) (264,694)
---------- -----------
$ 118,771 $ 119,637
========== ===========
30
31
NOTE 5 - CREDIT AGREEMENTS AND LONG-TERM DEBT:
During April 1996, the Company entered into a $125,000,000 credit facility
with NationsBank of Tennessee, N.A. ("NationsBank"), and a syndicate of other
commercial banks, replacing all previous lines the Company had with
NationsBank. Under this new facility, the Company has a $40,000,000 short-term
line of credit and an $85,000,000 revolving line of credit with a term of three
years. These lines of credit will bear interest at the prime rate or at rates
related to the London Interbank Offered Rate. At June 30, 1996, there were no
outstanding borrowings under these commitments.
Prior to this new agreement, the Company had $15,000,000 in short-term
lines with NationsBank and a $50,000,000 long-term revolving credit facility
which bore interest at the prime rate or for fixed periods at interest rates
related to the London Interbank Offered Rates or U.S. Treasury notes.
The Company also has a $5,000,000 short-term line of credit with a
financial institution which is not part of the syndicate mentioned above.
There were no outstanding borrowings under this commitment at June 30, 1996 or
1995.
Long-term debt consisted of the following:
June 30
-------------------------------
1996 1995
------------ -------------
(Dollars in thousands)
Note payable to financial institution (9.97%) $ - $ 3,000
Other 78 253
------------ -------------
78 3,253
Long-term debt due within one year (78) (775)
------------ -------------
$ - $ 2,478
============ =============
The Company's credit facilities have covenants that require, among other
things, that the Company maintain specified levels of tangible net worth and
debt to capitalization. The Company is in compliance with all covenants under
its facilities.
31
32
NOTE 6 - SHAREHOLDERS' EQUITY:
At June 30, 1996, the Company had 100,000,000 authorized shares of common
stock at a par value of $0.01.
Common stock issued and outstanding consisted of the following:
COOPERATIVE
COMMON COMMON
STOCK STOCK
----------- ----------
Shares outstanding,
June 30, 1993 4,078,751 -
Issues 30,643 -
Transfers 10,514 -
----------- ----------
Shares outstanding,
June 30, 1994 4,119,908 -
Redemptions (134,466) -
Conversion of cooperative stock (3,985,442) 15,524,746
Conversion of capital equity credits and
allocated surplus accounts - 4,133,628
Redemptions - (158,049)
Stock issued - 3,397,928
Purchase of treasury stock - (300,000)
----------- ----------
Shares outstanding,
June 30, 1995 - 22,598,253
Stock reissued - 5,197
Purchase of treasury stock - (1,250,000)
----------- ----------
Shares outstanding,
June 30, 1996 - 21,353,450
=========== ==========
As a cooperative, the Company periodically reserved a certain percentage of
earnings from business with its shareholders. These reserves were reflected in
"Allocated Surplus Accounts" as a component of retained earnings. As a
cooperative, the Company also, from time to time, paid a portion of patronage
refunds in the form of Capital Equity Credits. As part of the Reorganization
of the Company (see Note 2), these holders of Allocated Surplus Accounts and
Capital Equity Credits, which totaled $38,920,000 and $62,352,000,
respectively, at June 30, 1994, were offered the right to exchange those
interests for common shares.
32
33
NOTE 6 - SHAREHOLDERS' EQUITY (CONTINUED):
In May 1995, the Board of Directors authorized the repurchase of up to
1,500,000 shares of the Company's common stock in the open market or in
privately negotiated transactions. As of June 30, 1995, the Company had
repurchased 300,000 shares pursuant to this authorization. In March 1996, the
Board of Directors authorized the Company to repurchase up to 1,500,000
additional shares of the Company's common stock. During fiscal 1996, the
Company repurchased 1,250,000 shares pursuant to these authorizations at prices
that ranged from $19.88 to $23.50 per common share, or approximately
$25,890,000 in the aggregate. These treasury stock repurchases were funded
from cash provided by operations.
On August 2, 1994, the Board of Directors adopted a stock incentive plan
for certain officers and key employees of the Company. This plan was approved
by the Company's shareholders at its annual meeting held on November 14, 1995.
On July 20, 1995, the Board of Directors also adopted a similar plan for
nonemployee directors of the Company. This plan was also approved by the
Company's shareholders at its annual meeting held on November 14, 1995.
Options may be granted, under the provisions of the Company's plans, to
purchase common stock of the Company at a price approximating fair market value
on the date of grant.
During fiscal 1996 and 1995, total options granted were 201,941 and
279,441, respectively, at option exercise prices of $15.00 and $23.96,
respectively. There were no options exercised or canceled during fiscal 1996
or 1995. At June 30, 1996, there were 1,800,000 shares available for future
grants under the above-mentioned stock incentive plans.
The Company's Articles of Incorporation authorize the Board of Directors,
at its discretion, to issue up to 500,000 shares of Preferred Stock, par value
$0.01 per share. The stock is issuable in classes or series which may vary as
to certain rights and preferences. As of June 30, 1996, none of these shares
were outstanding.
NOTE 7 - RETIREMENT PLANS:
The Company maintains non-contributory defined benefit pension plans which
provide benefits to a majority of its full-time employees. Under the plans,
retirement benefits are primarily a function of both the average annual
compensation and number of years of credited service. The plans are funded
annually by the Company, subject to the Internal Revenue Code funding
limitation.
Net periodic pension expense includes the following components:
Year Ended June 30
---------------------------------------
1996 1995 1994
---------- --------- ----------
(Dollars in thousands)
Service cost - benefits earned during the period $ 1,955 $ 1,860 $ 1,532
Interest cost on projected benefit obligations 4,875 4,515 4,035
Actual gain on plan assets (13,260) (5,528) (3,059)
Net amortization and deferral of transition assets (153) (459) (750)
Unrecognized gain (loss) on plan assets 7,778 392 (1,982)
---------- --------- ----------
Net periodic pension expense (credit) $ 1,195 $ 780 $ (224)
========== ========= ===========
33
34
NOTE 7 - RETIREMENT PLANS (CONTINUED):
The following table sets forth the plans' funded status and the amounts
included in the Company's consolidated balance sheets:
June 30
-----------------------
1996 1995
---------- --------
(Dollars in thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation $ 62,238 $ 54,423
Non-vested benefit obligation 428 74
---------- --------
Accumulated benefit obligation 62,666 54,497
Increase in benefits due to future compensation increases 14,712 11,803
---------- --------
Projected benefit obligation 77,378 66,300
Estimated fair value of plan assets 75,954 65,238
---------- --------
Plan assets less than projected benefit obligation (1,424) (1,062)
Contributions after measurement date 175 289
Remaining unrecognized transition assets (3,174) (3,703)
Unrecognized prior service cost 829 904
Unrecognized net loss 10,766 10,732
---------- --------
Prepaid pension cost at end of period $ 7,172 $ 7,160
========== ========
The following assumptions were used to measure net periodic pension cost
for the plans for fiscal 1996, 1995 and 1994:
1996 1995 1994
---- ---- ----
Discount rate 7.0% 7.5% 7.5%
Expected long-term rate of return on assets 8.5% 8.5% 8.5%
Average increase in compensation levels 5.0% 5.0% 6.5%
The plans' assets consist primarily of guaranteed investment contracts and
marketable equity securities.
The Company also has contributory thrift plans covering substantially all
employees who have completed minimum service requirements. Company
contributions totaled approximately $866,000 in 1996; $812,000 in 1995; and
$811,000 in 1994.
The Company has no material post-retirement benefit obligations.
NOTE 8 - LEASE COMMITMENTS:
The Company has commitments under operating leases for plant rolling stock
items and storage warehouses. The total for these commitments was $3,440,000
at June 30, 1996. Rental expense for all operating leases was $1,476,000 for
1996; $1,332,000 for 1995; and $1,218,000 for 1994.
34
35
NOTE 9 - INCOME TAXES:
The following is a summary of the components of the provision for income
taxes:
Year Ended June 30
-----------------------------------------------
1996 1995 1994
------------- ------------- -------------
(Dollars in thousands)
Current:
Federal $ 29,838 $ 16,245 $ 8,862
State 2,592 1,377 223
------------- ------------- -------------
32,430 17,622 9,085
------------- ------------- -------------
Deferred:
Federal 1,734 9,504 (3,423)
State 151 2,052 359
------------- ------------- -------------
1,885 11,556 (3,064)
------------- ------------- -------------
$ 34,315 $ 29,178 $ 6,021
============= ============= =============
The tax effects of the significant temporary differences and tax credit
carryforwards at June 30, 1996, follow:
Current Non-current
------------ ------------
(Dollars in thousands)
Employee benefit obligations $ 1,441 $ 107
Reserve for bad debts 472 -
Employee retirement 79 1,011
Accrual for closure of gypsum disposal area - 2,379
Investment in CoBank - 199
Capital less carryforwards - 212
Other 224 -
------------ ------------
Deferred tax assets 2,216 3,908
------------ ------------
Depreciation and amortization - (15,560)
Pension - (3,275)
------------ ------------
Deferred tax liabilities - (18,835)
------------ ------------
Net deferred tax asset (liability) $ 2,216 $ (14,927)
============ ============
35
36
NOTE 9 - INCOME TAXES (CONTINUED):
A reconciliation, as of June 30, of the provision for income taxes and the
effective tax rate with the amount computed by applying the statutory federal
income tax rate follows:
1996 1995 1994
----------------------- ------------------------ ------------------------
% OF % of % of
EARNINGS Earnings Earnings
BEFORE Before Before
AMOUNT TAXES Amount Taxes Amount Taxes
---------- ----------- ----------- --------- ----------- -----------
(Dollars in thousands)
Income taxes computed
at statutory rate $ 30,972 35.0% $ 28,493 35.0% $ 11,427 34.7%
Increase (decrease) in
taxes resulting from:
State taxes, net 2,743 3.1 3,429 4.2 (582) (1.8)
Deduction for cash
patronage refunds - - - - (5,017) (15.2)
Alternative minimum
tax - - (2,822) (3.5) - -
Other, net 600 0.7 78 0.1 193 0.6
---------- ---- ---------- ---- ---------- ----
$ 34,315 38.8% $ 29,178 35.8% $ 6,021 18.3%
========== ==== ========== ==== ========== ====
NOTE 10 - RAW MATERIAL CONTRACTS:
Mississippi Phosphates Corporation ("MPC"), a wholly owned subsidiary of
the Company, has entered into a contract to purchase from a third party its
full requirement of phosphate rock. The contract will expire on June 30, 2003.
The purchase price for phosphate rock is based on the phosphate rock costs
incurred by certain domestic phosphate producers and the operating performance
of MPC.
NOTE 11 - MAJOR CUSTOMERS AND EXPORT SALES:
Sales to the Company's three largest customers were approximately
$136,560,000, $36,499,000 and $20,135,000 for 1996; $117,495,000, $32,270,000
and $16,745,000 for 1995; and $83,366,000, $33,513,000 and $13,696,000 for
1994. Export sales were less than 10% of sales in 1996, 1995 and 1994.
A significant portion of the Company's trade receivables are due from
entities which operate in the chemical fertilizer and farm supply industries.
A severe downturn in the agricultural economy could have an adverse impact on
the collectibility of those receivables.
Substantially all of MPC's sales are made to a third party which has been
appointed the exclusive distributor of diammonium phosphate fertilizer produced
by MPC. Sales to the distributor are recorded net of the distributor's
commission. The distributor sells primarily in international markets.
36
37
NOTE 12 - HEDGING ACTIVITIES:
During fiscal 1996, natural gas hedging activities resulted in average cost
decreases of approximately $0.40 per MMBtu on volumes hedged of 5,560,000
MMBtu's. During fiscal 1995 and 1994, natural gas hedging activities resulted
in average cost increases of approximately $0.52 and $0.09 per MMBtu on volumes
hedged of 4,850,000 and 6,150,000 MMBtu's, respectively. As of June 30, 1996,
the Company had no outstanding futures positions.
NOTE 13 - COMMITMENTS AND CONTINGENCIES:
During 1990, the Company entered into an agreement granting a third party
the exclusive option, for a period of four years, to purchase the Company's
undeveloped phosphate rock property of approximately 12,000 acres in Hardee
County, Florida. As of July 12, 1994, the Company and the optionholder entered
into new agreements with respect to this property whereby the Company conveyed
a portion of the property to the third party and granted to the third party the
exclusive option to purchase the remaining portion of the property. In
addition, the Company was granted a put option whereby the Company has the
right and option to sell the remaining portion of the property to the third
party if the third party does not exercise its option to purchase the remaining
property and was granted an exclusive option to repurchase the previously
conveyed portion in the event the third party does not exercise its option and
the Company does not exercise its put option. The third party's option will
expire on January 16, 1998. The Company's put option will expire six months
after the third party's option expires, and its repurchase option will expire
one year after the Company's put option expires. These properties are
classified as properties held for sale at June 30, 1996 and 1995.
The Company has entered into a 50-50 joint venture ("Farmland MissChem
Limited") with Farmland Industries, Inc., to construct and operate a
2,040-short-ton-per-day anhydrous ammonia plant to be located near Point Lisas,
The Republic of Trinidad and Tobago. The project is expected to cost
approximately $330 million. Startup of the facility is scheduled for mid-1998.
The Company intends to use the majority of its portion of the production from
the new facility, expected to be in excess of 350,000 short tons per year,
primarily as a raw material for upgrading into finished fertilizer products at
its existing facilities. The Company is accounting for this investment using
the equity method.
In late fiscal 1996, the Company began an expansion at its nitrogen
fertilizer manufacturing facilities at Yazoo City. The project includes the
addition of a 650-ton-per-day nitric acid plant, a new 500-ton-per-day ammonia
plant and modifications to its ammonium nitrate plant to increase production
from approximately 750,000 to approximately 950,000 tons per year. The Company
estimates total cost of the expansion to be $130 million. The expansion is
scheduled to be fully operational during the first half of 1998.
In August 1996, two of the Company's indirect subsidiaries acquired
substantially all of the assets of New Mexico Potash Corporation and Eddy
Potash, Inc., subsidiaries of Trans-Resources, Inc., for $45 million, plus an
adjustment for working capital on hand at closing (approximately $10 million).
The assets purchased included the two Trans-Resources, Inc., mines located near
Carlsbad, New Mexico, with an annual production capacity of approximately
870,000 tons of potash.
37
38
NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED):
Additionally, the Company, in the ordinary course of its business, is the
subject of, or a party to, various pending or threatened legal actions. The
Company believes that any ultimate liability arising from these actions will
not have a significant impact on the financial position or the future earnings
of the Company.
NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION:
The Company considers its holdings of highly liquid money market debt
securities to be cash equivalents if the securities mature within 90 days from
the date of acquisition. These short-term investments were $53,739,000 and
$27,587,000 at June 30, 1996 and 1995, respectively.
The increase (decrease) in cash due to the changes in operating assets and
liabilities consisted of the following:
Year Ended June 30
-------------------------------------------
1996 1995 1994
----------- ------------ -----------
(Dollars in thousands)
Accounts receivable $ (3,564) $ 9,095 $ (2,265)
Inventories 9,682 (16,325) 754
Prepaid expenses and other current assets (944) 569 (295)
Accounts payable 14,494 2,505 (6,407)
Accrued liabilities 1,733 915 2,393
----------- ------------ -----------
$ 21,401 $ (3,241) $ (5,820)
=========== ============ ===========
During fiscal 1996 and 1995, the Company had net payments of income taxes
of $31,127,000 and $16,675,000. During fiscal 1994, the Company had net
refunds of $149,000. Payments of interest were $330,000 in 1996; $2,646,000 in
1995; and $4,707,000 in 1994.
Supplemental disclosures regarding non-cash financing and investing
activities include the following:
Year Ended June 30
---------------------------------
1995 1994
--------------- --------------
(Dollars in thousands)
Conveyance of phosphate rock property $ 14,000 $ -
Conversion of capital equity credits $ 62,352 $ -
Conversion of cooperative stock $ 26,375 $ -
Capital expenditures made from restricted funds $ - $ 1,000
Net option proceeds deposited in restricted funds $ - $ 1,000
During fiscal 1996, the Company had no material non-cash financing and
investing activities.
38
39
NOTE 15 - OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS:
Other long-term liabilities and deferred credits are comprised of the
following:
June 30
---------------------------------
1996 1995
-------------- --------------
(Dollars in thousands)
Option proceeds (see Note 13) $ 4,967 $ 2,967
Accrual for closure of gypsum disposal area 7,181 6,617
Other 6,070 5,583
-------------- --------------
$ 18,218 $ 15,167
============== ==============
During fiscal 1994, MPC charged to earnings $6,055,000 relating to the
estimated cost of the future closure of the phosphogypsum disposal facility
located at Pascagoula, Mississippi. During fiscal 1996 and 1995, MPC recorded
additional charges of $564,000 and $562,000, respectively, which are reflected
in cost of products sold in the Company's statements of income. The total
amount of the accrual, $7,181,000, relates to the portion of the disposal
facility utilized to date. In future years, MPC expects to record additional
charges of approximately $1,874,000 related to the future closure of the
facility. These charges will be accrued over the estimated four-year remaining
life of the facility.
The Company plans to construct a new phosphogypsum disposal facility. An
option agreement has been secured for land for use in the development of this
facility. Preliminary engineering work has been completed and the
environmental applications have been submitted. The Company anticipates the
permitting will be completed and construction will begin during fiscal 1997 on
the first phase of the facility, which is estimated to cost $15 million. The
facility is expected to be operational by late summer 1997.
NOTE 16 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
At June 30, 1996, the carrying amounts of the Company's financial
instruments approximate fair value because of the short settlement periods of
those instruments.
NOTE 17 - INTEREST, NET:
Interest, net, consisted of the following:
Year Ended June 30
--------------------------------------------
1996 1995 1994
----------- ----------- ------------
(Dollars in thousands)
Interest expense $ 715 $ 2,021 $ 4,655
Interest capitalized (10) (231) (2)
Interest income (2,934) (1,738) (662)
----------- ----------- ------------
$ (2,229) $ 52 $ 3,991
=========== =========== ============
39
40
NOTE 18 - DISCONTINUED OPERATIONS:
On June 30, 1994, the Company disposed of a majority of its interest in
Newsprint South, Inc. ("NSI"). This action was taken due to substantial losses
incurred to date by NSI and the expectation of continuing losses. The
transaction involved a transfer by the Company of 70% of its economic interest
in NSI to various individuals designated by the lessor of the newsprint
facility leveraged lease. The Company did not retain any voting interest in
NSI.
Under the terms of the transaction, the Company paid $19,000,000 to NSI in
various forms, including capital contributions, payments in liquidation of the
Company's obligations under a newsprint purchase contract, and certain
tax-compensating payments pursuant to a tax-sharing agreement. Prior loans in
the amount of approximately $13,700,000 made by the Company to NSI pursuant to
a newsprint purchase contract between the Company and NSI were converted to
capital. Pursuant to the transaction, the Company also purchased from NSI its
CoBank common stock for $4,000,000. This stock is scheduled for redemption at
the face amount by CoBank during the next three years.
The disposition of NSI allows the Company to focus its attention on its
core fertilizer business.
Prior to the disposition, the Company had consolidated the financial
results of NSI which had a capital deficit of $39,747,000 at the time of
disposition. Since the Company had no further obligations with respect to NSI,
the previously recorded deficit was eliminated which resulted in a gain on
disposition of $39,747,000. Subsequent to the disposition, the remaining 30%
economic interest will be accounted for at cost which was zero at June 30, 1996
and 1995. In fiscal 1994, NSI had net sales of $94,617,000 and incurred a net
loss of $23,987,000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
40
41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information required by this item regarding directors is set forth
in the Company's Proxy Statement for the 1996 annual meeting of shareholders
under the captions "Nominees for Election to Serve Until 1999," "Directors
Continuing to Serve Until 1998," and "Directors Continuing to Serve Until
1997," which information is incorporated herein by reference.
(b) Executive officers of the Registrant as of June 30, 1996, are as
follows: Executive officers are elected for a one-year term by the Board of
Directors.
OFFICE AND EMPLOYMENT DURING THE
NAME OF OFFICER AGE LAST FIVE FISCAL YEARS
---------------------- ------- ---------------------------------------------------------------------
Charles O. Dunn 48 President and Chief Executive Officer since April 1 1993; Executive
Vice President (1988-1993)
David W. Arnold 59 Senior Vice President-Technical Group since July 1, 1991; Senior
Vice President-Research and Engineering (1987-1991)
C. E. McCraw 48 Senior Vice President-Operations since July 12, 1994; Senior Vice
President-Fertilizer Group (1991-1994); Vice President-Fertilizer
Group (1991); Vice President-Operations (1987-1991)
Robert E. Jones 49 Senior Vice President and General Counsel since January 18, 1996;
Vice President and General Counsel (1989-1996)
John J. Duffy 62 Vice President-Marketing since July 1, 1995; Vice President-Sales
and Marketing (1994-1995); Director of Sales and Marketing (1991-
1994); Director, Field Sales (1988-1991)
Ethel Truly 46 Vice President-Administration since January 18, 1996; Director of
Administrative Services (1995-1996); Assistant General Counsel
(1985-1995)
Timothy A. Dawson 42 Vice President-Finance since January 18, 1996; Director of Finance
(1987-1996); Assistant to Senior Vice President-Finance (1984-1987)
(c) The information called for with respect to the identification of
certain significant employees is not applicable to the Registrant.
(d) There are no family relationships between the directors and executive
officers listed above. There are no arrangements nor understandings between
any named officer and any other person pursuant to which such person was
selected as an officer.
(e) There are no legal proceedings involving directors, nominees for
directors, or officers.
41
42
The information required by this item regarding compliance with Section
16(a) of the Exchange Act is set forth in the Company's Proxy Statement for the
1996 annual meeting of shareholders under the caption "Compliance with Section
16(a) of the Exchange Act," which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth in the Company's Proxy
Statement for the 1996 annual meeting of shareholders under the captions
"Compensation of Executive Officers" and "Retirement Program," which
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in the Company's Proxy
Statement for the 1996 annual meeting of shareholders under the captions
"Security Ownership of Certain Beneficial Owners" and "Management Ownership of
the Company's Stock," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in the Company's Proxy
Statement for the 1996 annual meeting of shareholders under the caption
"Compensation Committee Interlocks and Insider Participation," which
information is incorporated herein by reference.
42
43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) FINANCIAL STATEMENTS AND SCHEDULES
Financial statement schedules not included in this Form 10-K have been
omitted because they are not applicable or the required information is shown in
the financial statements or notes thereto. Separate financial statements of
50% or less owned persons accounted for by the equity method which are not
shown herein have been omitted because, if considered in the aggregate, they
would not constitute a significant subsidiary
(i) Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheets, June 30, 1996 and 1995
Consolidated Statements of Income Years Ended June 30, 1996, 1995 and
1994
Consolidated Statements of Shareholders' Equity, Years Ended June 30,
1996, 1995 and 1994
Consolidated Statements of Cash Flows, Years Ended June 30, 1996, 1995
and 1994
Notes to Consolidated Financial Statements
(ii) Exhibits:
Exhibits filed as part of this report are listed below. Certain
exhibits have been previously filed with the Commission and are
incorporated herein by reference.
SEC EXHIBIT
REFERENCE NO. DESCRIPTION
- ------------- -----------
1 Shareholder Rights Plan; filed as Exhibit 1 to the Company's Form 8-A Registration Statement dated August 15,
1994, SEC File No. 2-7803, and incorporated herein by reference.
2.1 Asset Purchase Agreement, dated as of May 21, 1996, by and among the Company, Mississippi Acquisition I, Inc.,
Mississippi Acquisition II, Inc., Eddy Potash, Inc., and New Mexico Potash Corporation; filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K filed September 3, 1996, SEC File No. 20411, and incorporated herein
by reference.
2.2 Agreement and Plan of Merger and Reorganization dated as of August 27, 1996, by and among the Company, MISS
SUB, INC., and First Mississippi Corporation.
43
44
3.1 Articles of Incorporation of the Company; filed as Exhibit 3.1 to the Company's Amendment No. 1 to Form S-1
Registration Statement filed August 2, 1994, SEC File No. 33-53119, and incorporated herein by reference.
3.2 Bylaws of the Company; filed as Exhibit 3.2 to the Company's Amendment No. 1 to Form S-1 Registration Statement
filed August 2, 1994, SEC File No. 33-53119, and incorporated herein by reference.
4.1 Mississippi Phosphates Corporation 401(k) Retirement Plan; filed as Exhibit 4.3(a) to the Company's
Post-Effective Amendment No. 1 to Form S-8 Registration Statement filed June 6, 1995, SEC File No. 33-59577,
and incorporated herein by reference.
4.2 Mississippi Chemical Corporation Thrift Plan Plus; filed as Exhibit 4.3(b) to the Company's Post-Effective
Amendment No. 1 to Form S-8 Registration Statement filed June 6, 1995, SEC File No. 33-59577, and incorporated
herein by reference.
4.3 Mississippi Chemical Corporation 1994 Stock Incentive Plan; filed as Exhibit 4.2 to the Company's Form S-8
Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by reference.
4.4 Mississippi Chemical Corporation 1995 Stock Option Plan for Nonemployee Directors; filed as Exhibit 4.3 to the
Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated
herein by reference.
4.5 Mississippi Chemical Corporation 1995 Restricted Stock Purchase Plan for Nonemployee Directors; filed as
Exhibit 4.4 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209,
and incorporated herein by reference.
4.6 Loan Agreement dated as of April 26, 1996, among the Company, Mississippi Phosphates Corporation, Mississippi
Potash, Inc., and MCC Pipeline, Inc., and NationsBank of Tennessee, N.A., as Agent, and the banks named
therein; filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed September 3, 1996, SEC File
No. 20411, and incorporated herein by reference.
10.1 Agreement effective as of October 1, 1991, entered into by the Company's subsidiary Mississippi Phosphates
Corporation for the exclusive distribution of diammonium phosphate produced by Mississippi Phosphates
Corporation; filed as Exhibit 10.1 to Amendment No. 1 to the Company's Report on Form 8 dated January 7, 1993,
SEC File No. 2-7803, and incorporated herein by reference.
10.2 Amendment of Agreement, effective as of July 1, 1993, to the Agreement entered into as of October 1, 1991, by
the Company's subsidiary Mississippi Phosphates Corporation for the exclusive distribution of diammonium
phosphate produced by Mississippi Phosphates Corporation; filed as Exhibit 10.3 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1993, SEC File No. 2-7803, and incorporated herein by
reference.
44
45
10.3 Amendment of Agreement, effective as of August 1, 1994, to the Agreement entered into as of October 1, 1991, by
the Company's subsidiary Mississippi Phosphates Corporation for the exclusive distribution of diammonium
phosphate produced by Mississippi Phosphates Corporation; filed as Exhibit 10.7 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by
reference.
10.4 Agreement made and entered into as of September 15, 1991, between Office Cherifien des Phosphates and the
Company's subsidiary Mississippi Phosphates Corporation for the sale and purchase of phosphate rock; filed as
Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1991, File No.
2-7803, and incorporated herein by reference.
10.5 Amendment No. 1, effective as of July 1, 1992, to the Agreement effective as of September 15, 1991, between
Office Cherifien des Phosphates and the Company's subsidiary Mississippi Phosphates Corporation for the sale
and purchase of phosphate rock; filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference(1)
10.6 Amendment No. 2, effective as of July 1, 1993, to the Agreement effective as of September 15, 1991, between
Office Cherifien des Phosphates and the Company's subsidiary Mississippi Phosphates Corporation for the sale
and purchase of phosphate rock; filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference(2)
10.7 Amendment No. 3, effective as of January 1, 1995, to the Agreement effective as of September 15, 1991, between
Office Cherifien des Phosphates and the Company's subsidiary Mississippi Phosphates Corporation for the sale
and purchase of phosphate rock; filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference(3)
- ----------------------------------
(1) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from the first and second paragraphs of
paragraph numbered 1 of Amendment No. 1 and an application for confidential
treatment has been filed separately with the Commission.
(2) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from paragraphs numbered 5 and 8 of
Amendment No. 2; from the first paragraph, paragraph numbered 1, paragraph
numbered 2, and paragraph numbered 3 of Schedule 1, Exhibit A; from Schedule 2,
Exhibit B; from Schedule 3, Exhibit C, and from Schedule 4, Exhibit D; and an
application for confidential treatment has been filed separately with the
Commission.
(3) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from Schedule 1 to Amendment No. 3,
Exhibit B, and an application for confidential treatment has been filed
separately with the Commission.
45
46
10.8 Gas Sales Agreement entered into by the Company and Sonat Marketing Company as of July 13, 1995, for the sale
and purchase of natural gas; filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference.(4)
10.9 Triad Chemical Joint Venture Agreement; filed as Exhibit G1 to Post-Effective Amendment No. 6 to Registration
Statement No. 2-25041 and incorporated herein by reference.
10.10 Amendment to Joint Venture Agreement entered into by the Company and First Mississippi Corporation effective as
of May 28, 1993; filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, SEC File No. 2-7803, and incorporated herein by reference.
10.11 Products Withdrawal Agreement dated June 3, 1968, between First Mississippi Corporation and MisCoa covering
withdrawal of product from Triad Chemical; filed as Exhibit H to Post-Effective Amendment No. 7 to Registration
Statement No. 2-25041 and incorporated herein by reference.
10.12 Amendment to Products Withdrawal Agreement entered into by the Company and First Mississippi Corporation
effective as of May 28, 1993; filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1993, SEC File No. 2-7803, and incorporated herein by reference.
10.13 Agreement for Real Estate Purchase Option dated July 16, 1990, for the sale of the Company's Hardee County,
Florida, property and underlying phosphate reserves; filed as an exhibit to Exhibit 4.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1990, SEC File No. 2-7803, and incorporated herein by
reference.
10.14 Form of Severance Agreement dated July 29, 1996, by and between the Company and each of its Executive Officers.
21 List of subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
- ----------------------------------
(4) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from Article IV, Price, and an application
for confidential treatment has been filed separately with the Commission.
46
47
(b) REPORTS ON FORM 8-K:
The Company's Current Report on Form 8-K dated September 3, 1996.
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.
MISSISSIPPI CHEMICAL CORPORATION
By: /s/ Charles O. Dunn
President
Principal Executive Officer
By: /s/ Timothy A. Dawson
Vice President-Finance
Principal Financial Officer
and Chief Accounting Officer
Date: September 20, 1996
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 and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Charles O. Dunn Director, September 20, 1996
President and Chief Executive Officer
(principal executive officer)
/s/ Coley L. Bailey Director, Chairman of the Board September 20, 1996
/s/ John Sharp Howie Director, Vice Chairman of the Board September 20, 1996
/s/ John W. Anderson Director September 20, 1996
/s/ Frank R. Burnside, Jr. Director September 20, 1996
/s/ Robert P. Dixon Director September 20, 1996
/s/ W. R. Dyess Director September 20, 1996
/s/ Woods E. Eastland Director September 20, 1996
/s/ G. David Jobe Director September 20, 1996
/s/ George D. Penick, Jr. Director September 20, 1996
/s/ David M. Ratcliffe Director September 20, 1996
/s/ Wayne Thames Director September 20, 1996
47
48
MISSISSIPPI CHEMICAL CORPORATION
EXHIBIT INDEX
TO
FORM 10-K
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- --------------------------------------------------------------------------------- ------
1 Shareholder Rights Plan; filed as Exhibit 1 to the Company's Form 8-A
Registration Statement dated August 15, 1994, SEC File No. 2-7803, and
incorporated herein by reference.
2.1 Asset Purchase Agreement, dated as of May 21, 1996, by and among the Company,
Mississippi Acquisition I, Inc., Mississippi Acquisition II, Inc., Eddy Potash,
Inc., and New Mexico Potash Corporation; filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed September 3, 1996, SEC File No. 20411, and
incorporated herein by reference.
2.2 Agreement and Plan of Merger and Reorganization dated as of August 27, 1996, by
and among the Company, MISS SUB, INC., and First Mississippi Corporation. [ ]
3.1 Articles of Incorporation of the Company; filed as Exhibit 3.1 to the Company's
Amendment No. 1 to Form S-1 Registration Statement filed August 2, 1994, SEC
File No. 33-53119, and incorporated herein by reference.
3.2 Bylaws of the Company; filed as Exhibit 3.2 to the Company's Amendment No. 1 to
Form S-1 Registration Statement filed August 2, 1994, SEC File No. 33-53119, and
incorporated herein by reference.
4.1 Mississippi Phosphates Corporation 401(k) Retirement Plan; filed as
Exhibit 4.3(a) to the Company's Post-Effective Amendment No. 1 to Form S-8
Registration Statement filed June 6, 1995, SEC File No. 33-59577, and
incorporated herein by reference.
4.2 Mississippi Chemical Corporation Thrift Plan Plus; filed as Exhibit 4.3(b) to
the Company's Post-Effective Amendment No. 1 to Form S-8 Registration Statement
filed June 6, 1995, SEC File No. 33-59577, and incorporated herein by reference.
4.3 Mississippi Chemical Corporation 1994 Stock Incentive Plan; filed as Exhibit 4.2
to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC
File No. 33-65209, and incorporated herein by reference.
48
49
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- --------------------------------------------------------------------------------- ------
4.4 Mississippi Chemical Corporation 1995 Stock Option Plan for Nonemployee
Directors; filed as Exhibit 4.3 to the Company's Form S-8 Registration Statement
filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by
reference.
4.5 Mississippi Chemical Corporation 1995 Restricted Stock Purchase Plan for
Nonemployee Directors; filed as Exhibit 4.4 to the Company's Form S-8
Registration Statement filed December 21, 1995, SEC File No. 33-65209, and
incorporated herein by reference.
4.6 Loan Agreement, dated as of April 26, 1996, the Company, Mississippi Phosphates
Corporation, Mississippi Potash, Inc., and MCC Pipeline, Inc., and NationsBank
of Tennessee, N.A., as Agent, and the banks named therein; filed as Exhibit 4.1
to the Company's Current Report on Form 8-K filed September 3, 1996, SEC File
No. 20411, and incorporated herein by reference.
10.1 Agreement effective as of October 1, 1991, entered into by the Company's
subsidiary Mississippi Phosphates Corporation for the exclusive distribution of
diammonium phosphate produced by Mississippi Phosphates Corporation; filed as
Exhibit 10.1 to Amendment No. 1 to the Company's Report on Form 8 dated
January 7, 1993, SEC File No. 2-7803, and incorporated herein by reference.
10.2 Amendment of Agreement, effective as of July 1, 1993, to the Agreement entered
into as of October 1, 1991, by the Company's subsidiary Mississippi Phosphates
Corporation for the exclusive distribution of diammonium phosphate produced by
Mississippi Phosphates Corporation; filed as Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1993, SEC File No.
2-7803, and incorporated herein by reference.
10.3 Amendment of Agreement, effective as of August 1, 1994, to the Agreement entered
into as of October 1, 1991, by the Company's subsidiary Mississippi Phosphates
Corporation for the exclusive distribution of diammonium phosphate produced by
Mississippi Phosphates Corporation; filed as Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File
No. 2-7803, and incorporated herein by reference.
49
50
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- --------------------------------------------------------------------------------- ------
10.4 Agreement made and entered into as of September 15, 1991, between Office
Cherifien des Phosphates and the Company's subsidiary Mississippi Phosphates
Corporation for the sale and purchase of phosphate rock; filed as Exhibit 10.1
to the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1991, File No. 2-7803, and incorporated herein by reference.
10.5 Amendment No. 1, effective as of July 1, 1992, to the Agreement effective as of
September 15, 1991, between Office Cherifien des Phosphates and the Company's
subsidiary Mississippi Phosphates Corporation for the sale and purchase of
phosphate rock; filed as Exhibit 10.12 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and
incorporated herein by reference.(5)
10.6 Amendment No. 2, effective as of July 1, 1993, to the Agreement effective as of
September 15, 1991, between Office Cherifien des Phosphates and the Company's
subsidiary Mississippi Phosphates Corporation for the sale and purchase of
phosphate rock; filed as Exhibit 10.11 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and
incorporated herein by reference.(6)
10.7 Amendment No. 3, effective as of January 1, 1995, to the Agreement effective as
of September 15, 1991, between Office Cherifien des Phosphates and the Company's
subsidiary Mississippi Phosphates Corporation for the sale and purchase of
phosphate rock; filed as Exhibit 10.10 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and
incorporated herein by reference.(7)
- ----------------------------------
(5) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from the first and second paragraphs of
paragraph numbered 1 of Amendment No. 1 and an application for confidential
treatment has been filed separately with the Commission.
(6) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from paragraphs numbered 5 and 8 of
Amendment No. 2; from the first paragraph, paragraph numbered 1, paragraph
numbered 2, and paragraph numbered 3 of Schedule 1, Exhibit A; from Schedule 2,
Exhibit B; from Schedule 3, Exhibit C, and from Schedule 4, Exhibit D; and an
application for confidential treatment has been filed separately with the
Commission.
(7) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from Schedule 1 to Amendment No. 3,
Exhibit B, and an application for confidential treatment has been filed
separately with the Commission.
50