SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
For the fiscal year ended June 30, 1997 or
Transaction report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934 Commission File Number 0-16032
MELAMINE CHEMICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 64-0475913
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
Highway 18 West, Donaldsonville, Louisiana 70346
(Address of principal executive offices) (zip code)
(504) 473-3121
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(g) of the Act: Common
stock, $.01 par value.
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]
The aggregate market value of the voting stock held by non-
affiliates (affiliates being directors, executive officers and holders
of more than 5% of the Company's common stock) of the Registrant at
September 5, 1997 was approximately $21,427,000.
The number of shares of the Registrant's common stock, par value
one cent ($.01) per share, outstanding at September 5, 1997 was
5,626,934.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement prepared
for use in connection with the registrant's 1997 Annual Meeting of
Shareholders have been incorporated by reference into Part III of this
Form 10-K.
PART I
Item 1. Business
General
Melamine Chemicals, Inc. (the "Company") is engaged in the
production and marketing of melamine crystal, a specialty chemical
having numerous industrial and commercial applications. Principal
products in which melamine is used include coatings such as paints for
automobiles and major household appliances; laminates such as kitchen
countertops, wood paneling and furniture; virtually unbreakable
dinnerware; adhesives for composite wood products such as
particleboard; and as a flame retardant additive in certain
polyurethane foams, paints and polymeric compounds. The Company, one
of only two producers of melamine in North America, is one of the
three largest producers in the world and estimates that it has 60% of
the domestic merchant market. The Company is engaged in the
development of new melamine process and applications technology and
the development and commercialization of melamine-related compounds.
The Company was formed in 1968 as a Delaware corporation by Ashland
Inc. ("Ashland") and First Mississippi Corporation, the predecessor of
ChemFirst, Inc. ("ChemFirst"), each of which owned 50% of the
Company's outstanding capital stock prior to the Company's initial
public offering in August 1987. Ashland and ChemFirst each owns 23.1%
of the Company. The Company's plant in Donaldsonville, Louisiana (the
"M-I plant"), which has a design and operating capacity of 75 million
pounds per year, was completed in 1971 and has been producing melamine
with approximately 99.9% purity levels since that date.
In June 1987, the Company started construction of a new production
facility at the Donaldsonville plant that utilizes a high-pressure,
high-temperature non-catalytic process developed and patented by the
Company (the "M-II process") with a design and operating capacity of
30 million pounds per year (the "M-II plant"). Management believed
that the M-II process would result in significant improvements over
the low-pressure, catalytic process (the "M-I process") used by the M-
I plant, including savings in capital costs and energy costs over
comparable production facilities utilizing the M-I technology. During
fiscal 1995, the M-II plant produced 23.8 million pounds, during
fiscal 1996, the plant produced 24.6 million pounds and during fiscal
1997, the plant produced 25.8 million pounds.
The purity of the product produced by the M-II plant is averaging
in excess of 97%, and 100% of the product's ingredients are chemically
active. The Company has been successful in introducing this product
into a variety of markets including adhesive resins, molding compounds
and concrete additives. While not all market segments are expected to
be able to use the M-II product, the Company believes that
approximately 70% of the current worldwide melamine market could
utilize this product. During fiscal 1997, sales of the M-II product
totaled 27.4 million pounds compared to 21.8 million pounds in fiscal
1996 and 21.8 million pounds in fiscal 1995.
In June 1995, the Company filed patent applications in the United
States covering what it believes to be significant improvements to the
M-II process. Laboratory tests of these improvements indicate that
they can increase the purity of the M-II product up to 99.5% plus.
With this improvement, the M-II product is expected to be suitable for
approximately 90% of the current worldwide consumption. The patents
were issued in May 1996. In April 1997, the Company sold the M-II and
associated patents to DSM Melamine B.V. (DSM) for $25 million ($15
million in cash and $10 million in interest bearing notes). In
addition, DSM will assist the Company in modifying its M-I plant to
implement certain improvements developed by DSM. The Company retained
the right to use the M-II process to build up to two additional plants
in the Americas.
End-Uses of Melamine
Three principal characteristics make melamine crystal chemically
unique: (i) stability that makes it resistant to chemical, thermal and
physical degradation; (ii) a structure that allows it to be combined
with other chemical compounds, particularly formaldehyde and other
monomers, in a wide variety of chemical reactions and polymerizations;
and (iii) a 66% nitrogen content. Melamine has excellent fire
retardant properties because: (i) when exposed to intense heat, it
gives off nitrogen-containing compounds that dilute oxygen, thereby
inhibiting combustion; and (ii) it is endothermic and, therefore, acts
as a heat-sink which also inhibits combustion.
Over 80% of the melamine sold by the Company is used in the
manufacture of melamine-formaldehyde resins. These resins have
numerous end-uses including: (i) surface coatings, which account for
more than one-third of domestic melamine consumption; (ii) laminates,
which account for more than one-quarter; and (iii) plastic molding
compounds, which account for approximately one-sixth of domestic
consumption. Melamine-based resins are also used in paper treatments
and coatings, textile treatments and coatings, wood adhesives and
other uses. These markets, together with other end-uses of melamine,
are described below:
Surface coating resins. Melamine resins are used as clear finishes
for paper, fabrics, wood and metals and can be pigmented with white
and colored pigments to produce opaque enamel finishes. The finishes
are color retentive and water and chemical resistant, and can be used
for both interior and exterior applications. Finishes are formulated
for refrigerators, washing machines, automobiles, hospital equipment,
kitchen utensils and cans. In combination with other materials,
melamine resins can be used as flexible finishes for paper textiles
and fabrics. Surface and automotive coatings represent the largest
single domestic use of melamine. The Company believes that over 95%
of all automobiles produced in the United States are now being painted
with high solids melamine-based paints that emit less fumes during
application and produce higher quality finishes than traditional
coatings.
Laminating resins. Melamine resins are used in laminated products.
Decorative melamine laminates are often used when durability,
especially heat and stain resistance, is desired. Typical
applications include countertops, cabinet surfaces, simulated wood
paneling, furniture surfaces and shelving. Kitchen and bathroom
countertops are a principal household use of melamine.
Plastic molding compounds. Melamine resins with strong thermosetting
attributes are molded into a variety of translucent, heat-resistant
products that are odorless and tasteless, with pale color. Fillers,
pigments and dyes can be incorporated into the plastic to produce
various combinations of opacity and color. These plastics are used in
tableware, wash-resistant buttons, arc-resistant ignition housings,
insulation and many other products. The primary advantages of these
plastics are their strong resistance to water, heat, chemicals and
discoloration and their relative non-conductivity and virtual
unbreakability.
Paper-treating resins. Melamine resins are widely used to impart wet-
strength, dimensional stability and other favorable properties to
paper.
Adhesive-binding resins. Melamine resins produce excellent weather-
resistant adhesive bonds and are used in particleboard and as binders
for glass fibers in air filters, brake linings and foundry sand cores.
Flame retardant products. Melamine is used as a fire retardant in
specialized paints, certain thermoplastics, textile products and in
flexible polyurethane foam used in furniture and bedding. Because of
heightened public awareness of fire hazards created by the use of
combustible materials in fabrics and furniture, the Company believes
the opportunity for sales growth in this area is promising.
Other uses. Melamine is also used in varied applications such as
flocculating agents in water treatment, in fluorescent pigments, as
concrete additives and as polymeric stabilizers.
Marketing and Sales
The Company's domestic and international sales are managed by a
Vice President of Sales and Marketing. The Company uses a number of
agents outside the United States.
During the last three years, approximately 50% of the Company's
output was purchased by less than ten industrial customers, including
Monsanto Chemical Company and Sun Coast Industries, Inc. More than
10% of the Company's output was purchased by Monsanto Chemical Company
during this period, and in fiscal 1995, Sun Coast Industries, Inc.
also purchased more than 10% of the Company's output.
During fiscal year 1995, approximately 38% of the net sales of the
Company were derived from customers in foreign countries.
Approximately 8% were to customers in Italy, 4% in Belgium, 4% in
Brazil, 4% in the Netherlands, 2% in Chile, 2% in France, 2% in
Germany, 2% in Turkey and 10% in other countries. During fiscal 1996,
approximately 43% of the net sales of the Company were derived from
customers in foreign countries. Approximately 6% were to customers in
Italy, 5% in the Netherlands, 5% in Belgium, 5% in Australia, 4% in
Indonesia, 2% in India, 2% in Israel, 2% in Korea, 2% in Taiwan and
10% in other countries. During fiscal 1997, approximately 36% of the
net sales of the Company were derived from customers in foreign
countries. Approximately 5% were to customers in Italy, 5% in the
Netherlands, 3% in Brazil, 3% in Belgium, 3% in Korea, 2% in
Australia, 2% in Argentina, and 2% in Chile and 11% in other
countries.
For additional information on sales to significant customers and
export sales, see footnote 6 to the financial statements on Page 23.
Competition
The Company and American Melamine Industries (AMEL) are the only
two domestic producers of melamine crystal. AMEL's facility, located
in Fortier, Louisiana, has production capacity of approximately 140
million pounds per year. AMEL is a manufacturing joint venture
between Cytec Industries Inc. ("Cytec") and DSM, the world's largest
melamine producer.
The Company estimates its share of the domestic merchant market to
be approximately 60%. The addition in 1990 of approximately 65
million pounds of production capacity at the AMEL plant and increased
competition from foreign producers have made competition in the
domestic market intense. In the last four fiscal years, the Company
has placed greater emphasis on selling in the domestic market.
Melamine is also produced through several different process
technologies at approximately 20 plants in 15 other countries.
Industry reports indicate that worldwide nameplate capacity is
approximately 1.4 billion pounds per year, although the Company
believes that effective capacity is lower. The Company cannot
reliably analyze worldwide competitive conditions because production
and consumption data are not available in all countries outside of the
United States.
Melamine imports during the twelve months ended June 30, 1997 have
constituted less than 10% of the total merchant market.
The Company attempts to differentiate itself from competitors to
the greatest extent possible on the basis of custom packaging, a
variety of particle sizes, offering M-II type melamine crystal (under
the trademark G. P. Crystal(TM)), superior and flexible customer
service and new technology. Also emphasized is the fact that all
production is sold to customers, there being no internal consumption.
Those factors, combined with competitive price levels in the various
geographic markets, have led to the Company's share of the domestic
merchant market (the total domestic market less the portion
attributable to Cytec's internal consumption) and to its role in
supplying export customers.
The Company generally has been protected from competition from
substitute materials because of melamine's unique physical
characteristics, including its clarity, heat and chemical resistance,
colorability and surface hardness.
Market Development and Research
In its research and market development programs, the Company uses
its own employees and outside consultants to improve melamine process
technology, provide marketing support and applications development and
develop new proprietary products and applications for melamine.
Patents
The Company possesses technical know-how and trade secrets, as well
as two United States patents, that cover various industrial
applications. None of the Company's patents will expire before the
year 2011. The Company also holds or has applied for the equivalent
of many of its United States patents in various foreign countries.
Melamine Production
General. Because of their complexity, the corrosive nature of
their chemical reaction processes, and their integration with urea
production, melamine plants throughout the world historically have
proven difficult to operate on a continuous basis. The Company's M-I
plant experienced operating difficulties from the time of its
construction in 1971 through 1985. Refinement of critical plant
processes and careful maintenance have enabled the Company to produce
nearer to full capacity since January 1986. The Company believes the
difficulties associated with operating a melamine plant represent a
significant competitive barrier to entry into the industry.
The Melamine-I Process. Currently, the Company produces
approximately 75% of its melamine through a continuous chemical
process that heats urea, which is made from ammonia and carbon
dioxide, under low pressure in the presence of a catalyst. In the
Company's M-I process, hot urea melt (liquid urea) is pumped from
Triad Nitrogen, Inc.'s ("Triad") adjacent urea plant into a reactor
where it is atomized with heated ammonia and converted into gaseous
melamine with gaseous ammonia and carbon dioxide formed as by-
products. The gaseous melamine flows from the reactor to a saturator
cooler where it is converted to a slurry through a cooling process.
The ammonia and carbon dioxide by-products are diverted into an
ammonia recovery system where pure ammonia is recovered for reuse in
the reactor. The remaining ammonia and all of the carbon dioxide are
then combined with water into a concentrated liquid solution known as
carbamate, returned by pipeline to the urea plant and recycled to
produce additional urea. The melamine slurry is pumped into a
filtration and recrystallization system designed to produce melamine
crystal that is approximately 99.9% pure.
The Melamine-II Process. The M-II process is a continuous, high-
pressure, non-catalytic anhydrous process in which hot urea melt is
fed into a reactor under high-pressure and converted directly into
melamine in liquid form with ammonia and carbon dioxide formed as
gaseous by-products. After separation from the ammonia and carbon
dioxide, the liquid melamine is injected into a cooling unit where it
is depressurized and rapidly cooled. This process allows the
formation of melamine crystal that has purity averaging in excess of
97%. The Company has found that the melamine produced with the M-
II process is sufficiently pure for use in adhesive resins, as a flame
retardant in flexible polyurethane foam, as a concrete additive and in
certain molding compounds. While not all markets are expected to be
able to use the product currently produced with the M-II process, the
Company believes that approximately 70% of the current worldwide
consumption could utilize this product.
Sources of Raw Materials
Under a feedstock supply agreement between the Company and Triad,
the Company obtains all of its urea and anhydrous ammonia from Triad,
a subsidiary of Mississippi Chemical Corporation ("Mississippi
Chemical"). Urea is fed directly from Triad's adjacent facility into
the Company's reactor. The maximum amount of feedstock available
under the agreement is sufficient for the production of approximately
95 million pounds per year. The feedstock agreement is scheduled to
expire in June 2000. The Company pays Triad for feedstock an amount
related to, but less than, the weighted average sales price that First
Mississippi charges bulk purchasers of solid urea. The Company
receives, as a credit against the price, an amount based on carbamate
returned to Triad. Until December 1996, Triad was a joint venture
between First Mississippi and Mississippi Chemical. When Mississippi
Chemical acquired 100% of Triad, the feedstock supply agreement was
assigned to Triad, and Mississippi Chemical guarantees its
performance. See Item 13. "Certain Relationships and Related
Transactions".
The Company currently purchases approximately 25% of Triad's urea
output. Because of the advantages of receiving feedstock from and
returning carbamate to an adjacent urea plant, the continued operation
of Triad's plant is important to the Company. Mississippi Chemical has
not agreed to guarantee the continuation of Triad's operations and has
reserved the right to suspend or terminate delivery of feedstock upon
any suspension or termination of those operations. Except for
temporary shutdowns for maintenance and repairs, Triad's facility has
been in continuous operation for 26 years and is believed by the
Company to be one of the most cost efficient urea plants in the United
States. During such temporary shutdowns, the Company has been
required to suspend melamine production. To the extent practicable,
the Company stockpiles melamine in anticipation of Triad's regularly
scheduled maintenance shut downs. The Company does not believe that
its ability to fill customer orders in a timely manner has been
significantly affected by any suspension of operations at the Triad
facility.
Energy Requirements
The Company uses natural gas as an energy source to operate its
production facilities. The Company's production facilities are
connected to three pipeline systems, enabling it to purchase natural
gas from different suppliers. Under a three-year contract executed in
August 1986 and extended every six months thereafter under the terms
of the contract, the Company is purchasing all of its natural gas
requirements from one supplier.
Environmental and Other Regulatory Considerations
The Company is subject to regulation under federal, state and local
environmental laws and regulations. During the last three years, the
Company's operations did not result in the production of any
significant effluents or emissions. Catalyst residues occur in such
small quantities that no further processing is necessary for either
environmental or safety reasons. Substantially all of the ammonia and
carbon dioxide off-gases from the M-I plant are returned to Triad as
carbamate and are used for the production of additional urea. Ammonia
from the M-II plant is recycled to the M-I plant while carbon dioxide
is vented to the atmosphere. The Company disposes off-site of a small
quantity of material used in its filtration system. Except for
ammonia, none of the Company's products or by-products are considered
to be toxic within the meaning of current environmental laws. It is
the Company's policy to operate its facility in compliance with all
applicable environmental laws, and the Company does not believe that
it is subject to any material liability under any such laws.
On August 24, 1990, the Louisiana Department of
Environmental Quality ("DEQ") issued an order requiring the Company to
submit within 60 days a comprehensive plan for reducing nitrogen
oxides and reactive hydrocarbon emissions. Similar orders were sent
to other facilities in the Baton Rouge area. Subsequently, the
Company voluntarily agreed to participate in a Baton Rouge area
industrial task force formed for the purpose of developing plans for
the control and reduction of ozone pollution. The task force, in
cooperation with the DEQ, has performed ozone modeling studies to
determine whether nitrogen oxides controls are necessary to reduce
ozone levels in the Baton Rouge area. The task force has submitted
its recommended plan, and the DEQ has lifted its order.
See Item 3. "Legal Proceedings" for a description of the potential
liability associated with the cleaning up of Superfund site near the
town of Sorrento, Louisiana.
Employee safety in the United States is regulated under the
Occupational Safety and Health Act, and management believes that the
Company is in compliance in all material respects with its
requirements.
Employees
The Company employs 93 persons at the Donaldsonville facility. In
addition, the Company regularly has approximately 60 independent
contractors working at its facility. None of the Company's regular
full-time employees or its independent contractors are represented by
unions.
Insurance
In addition to other customary insurance coverage, the Company
maintains insurance against property damage and business interruption
loss caused by fire, explosion or similar catastrophic events that
result in physical damage or destruction to (i) the Company's premises
or plants, (ii) the utility transmission lines or equipment that
service its property and (iii) the facilities of Triad.
Item 2. Properties
The Company's plant is located on an eight-acre site that is leased
from Triad near Donaldsonville, Louisiana. The plant site lease will
expire June 1, 2000, and the lessee has the right to extend the lease
for four additional five-year terms or until 2020. The annual rent
under the lease is $2,500 during the primary term and any additional
terms. Because the plant site is surrounded by land owned by Triad
and would otherwise have no access to public thoroughfares, railroad
lines or feedstock or utility sources, Triad has granted in the site
lease certain non-exclusive rights-of-way over its property for all
purposes necessary to permit operation of the plant.
The M-I plant was constructed by First Mississippi and Ashland in
1971 and leased to the Company. In June 1987, the Company purchased
the M-I plant from subsidiaries of Ashland and First Mississippi.
During fiscal 1989, construction of the M-II plant was completed
and start-up of the plant began. The start-up of the M-II plant was
completed in April 1991.
The Company leases approximately 5,500 square feet of office space
at the plant site from Triad. Lease of the office space is included
in the plant site lease.
The Company owns a 17,600 square foot warehouse building and four
silos on the plant site with combined capacity to store up to 5.5
million pounds of melamine. The Company uses common carriers to
transport all of the melamine it produces. The Company has truck
loading facilities at its warehouse and an adjacent rail spur that
permits direct loading onto railroad cars.
Item 3. Legal Proceedings
The Company is one of seventeen defendants in a Superfund site
clean-up cost contribution action brought by four plaintiff companies.
Fifteen of the defendants have settled or been dismissed from this
litigation. The plaintiff companies have been identified by the
United States Environmental Protection Agency (the "EPA") as the major
generators of wastes disposed at the Cleve Reber Superfund site near
the town of Sorrento, Louisiana. In September 1988, the plaintiff
companies were ordered by the EPA to clean up the site, and they have
agreed to do so. The plaintiff companies subsequently brought this
suit seeking to recover approximately $51 million plus $6 million for
reimbursement to the EPA for remedial costs. While the lawsuit is
still in the discovery stage, it appears that the Company has
substantial defenses to the action by plaintiffs. Material generated
by the Company is alleged to have been disposed of at this site for
only one brief period when the regular disposal site used by its waste
disposal contractor was unavailable. The Company contends that any of
its materials transported to the site were not hazardous waste and
represent only a de minimis contribution to the site as compared to
material disposed of there by the plaintiffs and other defendants.
The Company has moved for summary judgment seeking dismissal from this
lawsuit. The motion is presently pending before the court, but placed
in abeyance pending settlement discussions.
In a purported class action suit for recovery of property damages
and personal injuries, the Company and 87 other defendants are accused
of disposing of materials at two sites in Iberville Parish, Louisiana.
One of these two sites was identified as a Superfund site and is
subject to a Consent Decree. The Company was previously named as a
potential responsible party to this site and settled with the
Environmental Protection Agency in fiscal 1988. This lawsuit has been
stayed pending a decision to grant the defendants' motion to deny
class certification. While the lawsuit is in the very early stage of
discovery, it is management's opinion after discussion with counsel
that the case is not likely to have a material adverse effect on the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
The Company did not submit any matters to a vote of security
holders during the fourth quarter of fiscal year ended June 30, 1997.
Item 4(a). Executive Officers of the Registrant
Set forth below is certain information regarding the executive
officers of the Company as of September 5, 1997.
James W. Crook, 67, has served as Chairman of the Board since June
1987. Mr. Crook, a private investor, has served on the Board of
Directors since 1972.
Frederic R. Huber, 62, has served as President and Chief Executive
Officer since November 1991.
Wayne D. DeLeo, 50, has served as Vice President and Chief
Financial Officer since 1987.
Martin F. Lapari, 49, has served as Vice President of Manufacturing
and Engineering since August 1992.
William A. Sorensen, 61, has served as Vice President of Sales and
Marketing since January 1994. From January 1993 to December 1993, Mr.
Sorensen served as Director of National Account Sales of LaRoche
Chemicals, Inc. From 1989 to 1992, Mr. Sorensen served as Director of
Corporate Relations of LaRoche Chemicals Inc., a manufacturer of
specialty and industrial aluminas, chlor alkali and conditioned
comfort products.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
The Company's common stock trades on the Nasdaq National Market
under the symbol MTWO.
The following table sets forth the high and low sales price of the
Company's common stock as quoted on Nasdaq for the fiscal years ending
June 30, 1997 and 1996:
1997 1996
------------ ------------
High Low High Low
First Quarter 9 6 1/4 10 1/4 8 1/2
Second Quarter 8 3/4 6 1/4 10 1/4 8 1/4
Third Quarter 11 3/4 7 5/8 9 1/2 7 5/8
Fourth Quarter 14 1/2 10 1/2 9 3/4 7 49/64
As of September 5, 1997, there were 175 record holders of the
Company's common stock and approximately 1,398 beneficial
shareholders.
In May 1992, the Board of Directors eliminated the payment of
dividends for the foreseeable future because of the lack of earnings
and the need to conserve cash. The declaration and payment of
dividends are at the discretion of the Board of Directors of the
Company. The payment of future dividends will be considered by the
Board of Directors from time to time based on the Company's results of
operations, financial position, capital requirements and other
factors.
Item 6. Selected Financial Data
(In thousands, except per shar and operating data)
Fiscal year Ended June 30,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Operations Statement Data:
Net Sales $ 59,978 55,619 45,501 39,085 35,423
Cost of Sales 51,142 46,976 38,204 41,670 37,353
------ ------ ------ ------ ------
Gross Profit (loss) 8,836 8,643 7,297 (2,585) (1,930)
Selling, general and
administrative expenses 3,512 3,293 2,994 2,820 3,285
Research and development costs 250 229 230 182 129
----- ----- ----- ----- -----
Operating income (loss) 5,074 5,121 4,073 (5,587) (5,344)
Other income (expense), net 17,844(1)(1,106) 205 1,668 (266)
Earnings (loss) before income tax ------ ----- ----- ----- -----
expense (benefit) 22,918 4,015 4,278 (3,919) (5,610)
Income tax expense (benefit) 8,176 1,285 945 (1,411) (2,019)
------ ----- ----- ----- -----
Net earnings (loss) $ 14,742 2,730 3,333 (2,508) (3,591)
====== ===== ===== ===== =====
Earnings (loss) per common share $ 2.63 0.50 0.60 (0.46) (0.66)
====== ===== ===== ===== =====
Dividends per common share $ 0.00 0.00 0.00 0.00 0.18
====== ===== ===== ===== =====
- ---------------
(1) Includes $17.4 million from sale of technology in April 1997.
(In thousands, except per share and operating data)
---------------------------------------------------
As of June 30,
----------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Balance Sheet Data:
Working Capital $ 34,193 18,364 14,020 9,656 12,678
Total Assets $ 75,749 47,143 44,289 40,610 46,954
Stockholders'equity $ 50,044 34,850 32,095 28,760 31,268
Fiscal year Ended June 30,
----------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Operating Data (in millions
of pounds):
Melamine produced 107.1 106.0 99.3 84.5 94.5
Domestic sales 72.2 58.0 62.6 53.9 47.0
Export sales 41.5 44.5 37.8 51.2 40.4
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Sales in fiscal 1997 increased by $4.3 million to $60.0 million.
The increase was due to an 11% increase in sales volume offset by a 3%
decrease in sales prices. Sales volume for fiscal 1997 exceeded
production by 6.6 million pounds. Of this amount, 3.6 million pounds
were sold out of inventory and 3.0 million pounds were purchased from
another producer to satisfy strong customer demand.
Sales in fiscal 1996 increased to $55.6 million from $45.5 million
in fiscal 1995. Sales volume increased by 2% while the sales prices
increased by 20%. The sales volume for fiscal 1996 was curtailed by
the Company to build inventory to a more acceptable level. The sales
price increases during fiscal 1996 reflect the impact of strong
worldwide demand.
The following table, which is derived from Item 6. "Selected
Financial Data," sets forth for the periods indicated certain items
from the Company's statements of operations as a percentage of the
Company's sales:
Fiscal Year Ended June 30,
---------------------------
1997 1996 1995
---- ---- ----
As a percentage of sales
Cost of sales 85.3% 84.5% 84.0%
Gross profit 14.7 15.5 16.0
Selling, general and
administrative expenses 5.9 5.9 6.6
Research and development costs 0.4 0.4 0.5
Operating income 8.5 9.2 9.0
Net earnings 24.6 4.9 7.3
The gross profit margins in fiscal 1997 decreased slightly as
compared to fiscal 1996. Net sales prices decreased by 1.4 cents per pound
because of the impact of the strengthening U.S. dollar in Europe.
Most of the Company's European sales are denominated in foreign
currencies and a strengthening of the U.S. dollar reduces the net
sales price in U.S. dollars. While sales prices decreased, the cost
of production also dropped by 1.2 cents per pound. The decrease in
production cost was due entirely to a decrease in the price of raw
materials.
Gross profit margins in fiscal 1996 decreased slightly as compared
to fiscal 1995. Net sales price for the fiscal year increased by 8.9 cents
per pound while the Company experienced an increase in the cost of
production of 7.8 cents per pound. The increase in the cost of production
was due to:
- a 52% increase in the price of raw material increased the cost of
production by 7.5 cents per pound; and
- an increase in the price of natural gas increased the cost of
production by .9 cents per pound.
Offsetting these increases was the benefit that increased
production volume had on spreading fixed cost.
Selling, general and administrative expenses increased by 7% in
fiscal 1997 as compared to 1996. The increase was due mostly to an
increase in salary levels, increased travel costs and a $25,000
provision for bad debts. During the first quarter of fiscal 1997, the
Company ended its association with its sales agent in Europe and
appointed a new agent to act on its behalf in Europe. In this
connection, Company personnel traveled extensively in Europe visiting
its customers to assist in the transition from one agent to another.
Selling, general and administrative expenses increased by 10% in
fiscal 1996 as compared to fiscal 1995. The increase was caused by a
number of factors including:
- increase in salaries and an increase in the number of people in the
sales and customer service area;
- increase in bad debts expenses; and
- increase in consulting fees paid.
During fiscal 1997 and 1996, the amount of interest income
increased significantly as compared to prior years. The change was
due to an increase in the level of cash balances during the year and
$208,000 of interest earned on tax refunds received during fiscal
1996.
In fiscal 1996, there was a $195,000 miscellaneous expense compared
to miscellaneous income of $159,000 in fiscal 1995. The expense was
attributable to foreign exchange losses in fiscal 1996 as compared to
foreign exchange gains in fiscal 1995.
In the fourth quarter of fiscal 1997, the Company sold certain
process patents to DSM in exchange for $25 million. Of this amount,
$15 million was paid in cash, and the remainder was paid to the
Company in the form of two $5 million interest bearing notes due in
2000 and 2005. Income of $17.4 million, net of certain transaction
costs, was recognized. Approximately $6.9 million of the proceeds has
been deferred and will be recognized as costs are incurred or
obligations fulfilled relating to joint technical developments and
testing over the next 10 fiscal years. In addition to the $25
million, the Company will also receive DSM's assistance in modifying
its M-I plant to implement improvements developed by DSM. The
benefits that may be derived from these improvements are unknown. The
Company retains certain rights to the process patents including the
right to use the processes to build two additional plants in the
Americas.
In the fourth quarter of fiscal 1996, the Company's net results
were impacted by a $1,863,000 charge for costs associated with two
expansion projects that were terminated. In fiscal 1992, the Company
announced that it was going to evaluate the feasibility of
constructing a melamine plant in a joint venture with a subsidiary of
Norsk Hydro A.S. (Hydro). The Company was informed by Hydro during
the last week of June 1996 that it had decided not to proceed with the
project. In addition, the Company entered into negotiations with
Arcadian Corporation (Arcadian) in August 1995 to build a melamine
plant in Memphis, Tennessee. The Company and Arcadian were unable to
agree on several substantive commercial terms and agreed jointly to
terminate their negotiations. The costs associated with engineering
and design of the two plant sites were expensed when the decision was
reached not to proceed.
In addition, the fourth quarter of fiscal 1996 included a $480,000
gain from a contract dispute resolution. During 1986, the Company and
its natural gas supplies were unable to resolve a contract dispute
regarding the price of natural gas. In the fourth quarter of fiscal
1996, the statute of limitation expired on the issue.
In the fourth quarter of fiscal 1995, the Company's operating
results were negatively affected by:
- A 34% increase in the cost of raw material, which reduced operating
income by $1.3 million; and
- A maintenance shut down during the last nine days of the month,
which reduced production by about three million pounds.
Partially offsetting these negative factors was a 2.5 cents per pound
increase in the average selling price.
During the first quarter of fiscal 1998, the Company's raw material
supplier temporarily reduced the amount of raw materials it is able to
supply the Company because of equipment repairs being performed. The
repairs are expected to be completed by the end of October 1997, and
the Company anticipates returning to full production levels shortly
thereafter. The Company expects that first quarter production will be
approximately seven million pounds below normal levels resulting in a
substantial reduction in earnings in the first fiscal quarter of 1998.
The Company is subject to extensive regulation under federal, state
and local environmental laws and regulations (see Item 1. "Business-
Environmental and Other Regulatory Considerations"). In addition, the
Company obtains its urea and anhydrous ammonia from Triad, which also
is subject to extensive environmental regulation. The inability of
Triad to comply with those laws and regulations could severely
restrict the Company's ability to produce melamine. The Company is
not aware of any existing circumstances that materially affect its or
Triad's ability to comply with the applicable regulations.
Liquidity and Capital Resources
During fiscal 1997, the Company generated cash flow from operation
of $14.2 million and spent $1.2 million on capital expenditures. In
addition, the Company received $15.0 million from the sale of
technology to DSM. While capital expenditures for fiscal 1998 are
expected to be around $1.7 million, the Company expects to increase
inventories to more acceptable levels and may increase inventories by
as much as $2.0 million. The Company attempts to keep inventory to a
four-week supply, but because of strong demand has been unable to do
so.
During fiscal 1996, the Company generated cash flow from operations
of $2.8 million and spent $3.1 million in capital expenditures. Cash
flow from operations would have been greater, but the Company used
$2.2 million in increasing trade receivables for the increased level
of sales and $1.7 million in increasing inventory to more acceptable
levels.
In fiscal 1995, the Company generated cash flow from operations of
$9.1 million, a $7.4 million increase from the prior year. The
increase was due mainly to increased profitability and an increase in
deferred income taxes. Capital expenditures increased to $1.7 million
in fiscal 1995 and included about $500,000 for the construction of new
salt coils.
The Company has a $7.5 million line of credit that expires in
September 1998. The Company expects that the lines of credit will be
sufficient to finance planned capital expenditures and any cash
shortfalls from operations.
The Company does not consider the impact of inflation to be
significant in the business in which it operates.
In May 1992, the Board of Directors eliminated the payment of
dividends because of the lack of earnings and the need to conserve
cash. While the future payment of dividends is at the discretion of
the Board of Directors, any future payments will depend on the
Company's profitability, financial position and all liquidity
requirements.
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share".
SFAS No. 128 is effective for annual and interim periods ending after
December 15, 1997. Management does not believe that this
pronouncement will have a material impact on the Company's earnings
per share.
Additionally, the FASB issued SFAS No. 129, "Disclosure of
Information About Capital Structure", SFAS No. 130 "Reporting
Comprehensive Income" and SFAS No 131 "Reporting Disaggregated
Information about a Business Enterprise." SFAS No. 129 is effective
for fiscal years ending after December 15, 1997. Statements Nos. 130
and 131 are effective for fiscal years beginning after December 1997.
These statements principally relate to disclosure requirements.
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS,
SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULES
Page
-------
Independent Auditors' Report 14
Consolidated Balance Sheets as of June 30, 1997 and 1996 15
Consolidated Statements of Operations for the years ended
June 30, 1997, 1996 and 1995 16
Consolidated Statements of Stockholders' Equity for the years
ended June 30, 1997, 1996 and 1995 16
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1996 and 1995 17
Notes to Consolidated Financial Statements 18
Supplemental Information 26
Schedule II - Valuation and Qualifying Accounts 31
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Melamine Chemicals, Inc.:
We have audited the consolidated financial statements of Melamine
Chemicals, Inc. as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have
audited the consolidated financial statement schedule as listed in the
accompanying index. These financial statements and financial
statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Melamine Chemicals, Inc. as of June 30, 1997 and 1996, and the
results of its operations and its cash flows for each of the years in
the three-year period ended June 30, 1997, in conformity with
generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG PEAT MARWICK, L.L.P.
Baton Rouge, Louisiana
July 18, 1997
MELAMINE CHEMICALS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND 1996
1997 1996
ASSETS ---- ----
Current assets:
Cash and temporary investments $ 33,381,898 5,529,644
Receivables:
Trade (net of allowance for doubtful
debts of $175,000 at June 1997 and
$150,000 at June 1996) 8,902,384 12,170,229
Income tax refund 0 24,877
Other 183,889 167,373
---------- ----------
Total receivables 9,086,273 12,362,479
---------- ----------
Inventories:
Finished goods 588,000 2,225,000
Supplies 214,958 288,300
---------- ----------
Total inventories 802,958 2,513,300
---------- ----------
Prepaid expenses:
Spare parts 2,179,773 2,357,090
Other 517,855 1,410
---------- ----------
Total prepaid expenses 2,697,628 2,358,500
---------- ----------
Deferred income taxes 37,957 1,522,315
---------- ----------
Total current assets 46,006,714 24,286,238
---------- ----------
Plant and equipment, at cost 48,052,680 46,860,949
Less accumulated depreciation 28,380,158 24,082,467
---------- ----------
Net plant and equipment 19,672,522 22,778,482
---------- ----------
Notes receivable 10,000,000 0
Other assets 70,083 78,073
---------- ----------
$75,749,319 47,142,793
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,248,930 3,175,843
Accounts expenses 1,834,217 1,518,082
Income taxes 4,730,304 0
Amounts due to related parties 0 1,227,711
---------- ----------
Total current liabilities 11,813,451 5,921,636
---------- ----------
Deferred income taxes 6,926,892 6,371,250
Deferred income 6,965,000 0
Stockholders' equity:
Preferred stock of $1 par value.
Authorized 2,000,000 shares; none
issued 0 0
Common stock of $.01 par value.
Authorized 20,000,000 shares; issued
and outstanding 5,529,000 at June
1997 and 5,455,300 at June 1996 55,299 54,553
Additional paid-in capital 17,275,399 16,823,920
Retained earnings 32,713,278 17,971,434
---------- ----------
Total stockholders' equity 50,043,976 34,849,907
---------- ----------
$75,749,319 47,142,793
========== ==========
See accompanying notes to consolidated financial statements.
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 30, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
Net sales $ 59,978,341 55,618,937 45,500,736
Cost of sales, including amounts
to related parties 51,142,490 46,976,007 38,203,570
---------- ---------- ----------
Gross profit 8,835,851 8,642,930 7,297,166
---------- ---------- ----------
Selling, general and
administrative expenses 3,512,041 3,292,634 2,993,748
Research and development costs 249,853 229,460 229,955
---------- ---------- ----------
3,761,894 3,522,094 3,223,703
---------- ---------- ----------
Operating income 5,073,957 5,120,836 4,073,463
---------- ---------- ----------
Other income (expenses):
Interest income 833,020 472,240 95,227
Interest expense (160,000) 0 (48,799)
Projects cost 0 (1,863,000) 0
Contract dispute resolution 0 479,827 0
Gain on sale of technology 17,400,00 0 0
Miscellaneous (229,118) (194,691) 158,533
---------- ---------- ----------
17,843,902 (1,105,624) 204,961
---------- ---------- ----------
Income before income tax 22,917,859 4,015,212 4,278,424
Income tax expense 8,176,015 1,284,868 945,533
---------- ---------- ----------
Net earnings $ 14,741,844 2,730,344 3,332, 891
========== ========= ==========
Net earnings per common share $ 2.63 0.50 0.60
========== ========= ==========
See accompanying notes to consolidated financial statements.
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended June 30, 1997, 1996 and 1995
Additional
Common Paid-in Retained
Stock Capital Earnings Total
------- ---------- ---------- ----------
Balance June 30, 1994 $ 54,500 16,797,398 11,908,199 28,760,097
Exercise of stock 3 1,572 0 1,575
options
Net earnings for fiscal 1995 0 0 3,332,891 3,332,891
------ ---------- ---------- ----------
Balance June 30, 1995 54,503 16,798,970 15,241,090 32,094,563
Exercise of stock 50 24,950 0 25,000
options
Net earnings for fiscal 1996 0 0 2,730,344 2,730,344
------ ---------- ---------- ----------
Balance June 30, 1996 54,553 16,823,920 17,971,434 34,849,907
Exercise of stock 746 451,479 0 452,225
options
Net earnings for fiscal 1997 0 0 14,741,844 14,741,844
------ ---------- ---------- ----------
Balance June 30, 1997 $ 55,299 17,275,399 32,713,278 50,043,976
====== ========== ========== ==========
See accompanying notes to consolidated financial statements.
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net earnings 14,741,844 2,730,344 3,332,891
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation 4,302,702 3,904,538 3,623,109
Increase in deferred income taxes 555,642 483,237 1,381,950
Gain on sale of technology and other assets (17,400,000) 0 (5,906)
Change in assets and liabilities
(Increase) decrease in:
Receivables 3,276,206 (2,211,111) (231,862)
Inventories 1,710,342 (1,714,617) 243,824
Prepaid expenses (339,128) (50,789) 26,441
Deferred income taxes 1,484,358 87,846 (494,648)
Increase (decrease) in:
Accounts payable 2,073,087 (599,632) 635,918
Accrued expenses 316,135 767,158 73,372
Income taxes 4,730,304 0 0
Amounts due to related parties (1,227,711) (552,399) 556,946
---------- --------- ---------
Cash from operating activities 14,223,781 2,844,575 9,142,035
---------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of technology and other assets
net of transaction cost 14,365,000 0 8,025
Capital expenditures (1,196,742) (3,144,707) (1,741,711)
Decrease (increase) in other assets 7,990 346,282 (5,975)
---------- ---------- ----------
Cash from investing activities 13,176,248 (2,798,425) (1,739,661)
---------- ---------- ----------
Cash flows from financing activities:
Repayment of note payable 0 0 (2,000,000)
Proceeds from exercise of stock options 452,225 25,000 1,575
Other financing activities 0 0 (303,276)
---------- ---------- ----------
Cash from financing activities 452,225 25,000 (2,301,701)
---------- ---------- ----------
Increase in cash and temporary investments 27,852,254 71,150 5,100,673
Cash and temporary investments at beginning
of year 5,529,644 5,458,494 357,821
---------- --------- ---------
Cash and temporary investments at end of year $ 33,381,898 5,529,644 5,458,494
========== ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 1,405,711 625,000 460,000
========== ========= =========
Interest $ 0 0 73,318
========== ========= =========
Non cash transactions:
Note receivable for sale of technology $ 10,000,000 0 0
========== ========= =========
See accompanying notes to consolidated financial statements.
MELAMINE CHEMICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies
(a) Organization and Operations
Melamine Chemicals, Inc. (the Company) is engaged in the production and
marketing of melamine crystal, a specialty chemical having numerous
industrial and commercial applications. The Company is actively involved
in the development of new uses for melamine and also in melamine related
compounds that modify the characteristics of melamine resins.
At June 30, 1997, ChemFirst, Inc. (ChemFirst) and a division of Ashland
Inc. (Ashland) each owned 23.1% of the Company, which operates a melamine
production facility. ChemFirst acquired its interest in the Company
through the spin-off of certain of First Mississippi Corporation's
("First Mississippi") assets.
The Company has a foreign sales corporation incorporated in the Virgin
Islands and a holding company incorporated in Louisiana. The financial
statements include the accounts of the Company and these subsidiaries.
All significant intercompany balances and transactions are eliminated in
consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that could affect the reported amounts of assets at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results and the results of
future periods could differ from those estimates.
(c) Inventories
Inventories of finished goods are stated at the lower of cost or market
as determined by the last-in, first-out (LIFO) method. Supplies are
stated at the lower of average cost or net realizable value. If the
average cost method was used, finished goods inventories would be
higher by $615,000 and $653,000 at June 30, 1997 and 1996, respectively.
(d) Plant and Equipment
Plant and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the assets using the straight-line
method. The estimated useful lives used to depreciate assets are:
Years
------
Plant and leasehold equipment 3 - 15
Buildings 5 - 15
Machinery and equipment 3 - 10
Furniture and fixtures 3 - 12
Expenditures on an asset are capitalized until the asset is placed in
service or until the recoverability of the expenditures becomes uncertain.
Modifications to existing assets are capitalized when the modification
increases the production capacity or extends the useful life of the
assets.
(e) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
(f) Postemployment, Pension and Other Postretirement Benefits.
The Company has a defined benefit pension plan covering all employees who
have completed six months of employment. The benefits are based on years
of service and the employee's highest average monthly compensation for
any successive five year period.
The expected cost of post-retirement benefits is accrued during the years
that an employee renders service to the employer.
The Company's pension funding policy is consistent with Federal laws and
regulations. Prior service costs are being amortized over a 17-year
period.
(g) Patent Costs
Patent costs are charged to research and development costs as incurred.
(h) Earnings Per Share
Primary and fully diluted earnings per share are computed based on the
weighted average number of shares and dilutive equivalent shares of common
stock (stock options) outstanding during each year using the treasury
stock method.
(i) Cash and Temporary Investments
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid investment instruments purchased with a maturity of three
months or less to be cash equivalents.
(j) Concentrations of Credit Risk and Other Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts
receivable. The credit risk in trade accounts receivable is mitigated
by the Company's credit evaluation process and the geographical
dispersion of sales transactions.
The Company currently purchases all of its urea and anhydrous ammonia,
two significant raw materials, from one plant under a feedstock supply
agreement. Periodic temporary shutdowns by the supplier are anticipated
and the Company is generally able to build its finished goods inventory
in sufficient quantity to prevent suspension of shipments to customers.
(k) Stock Compensation
On July 1, 1996, the Company elected to continue to use the intrinsic
value method of accounting for stock-based compensation prescribed by
Accounting Principles Board (APB) Opinion No. 25 and, accordingly,
adopted the disclosure provisions of SFAS No. 123, "Accounting for
Stock based Compensation."
(2) Related Party Transactions
A summary of significant transactions with related parties follows:
1997 1996 1995
Purchases of raw materials from First --------- ---------- ----------
Mississippi at prices approximating market $ 5,357,884 11,592,109 7,153,290
========= ========== ==========
Amounts paid to Triad Chemical, an affiliate
of First Mississippi, for certain utilities
and services as well as shared costs such as
security, maintenance and related services $ 207,518 265,851 428,502
========= ========== ==========
Prior to December 24, 1996, direct expenses incurred by First Mississippi
were allocated to the Company based on the actual costs incurred. Amounts
paid to Triad for utilities and certain other services were based on actual
costs, and shared costs and services were based on pro-rata allocations that
reasonably approximate actual costs. Management believes that these methods
of allocation were reasonable and that the costs would not be materially
different on a stand-alone basis. On December 23, 1996, First Mississippi
spun-off certain of its assets, including its investment in the Company, to
ChemFirst, Inc. Accordingly, First Mississippi is no longer a related party.
Until December 23, 1996, the Company purchased one-half of its raw materials
at approximate market prices from First Mississippi under a long-term
contract which expires in June 2000. The Company now purchases all of its
raw material under the same contract that has been assigned to Triad.
(3) Plant and Equipment
A summary of plant and equipment follows:
June 30, June 30,
1997 1996
---------- ----------
Plant and leasehold improvements $ 44,065,494 43,070,652
Buildings 669,510 669,510
Machinery and equipment 1,952,142 1,872,139
Furniture and fixtures 1,082,208 714,124
Construction in progress 283,326 534,524
---------- ----------
Total plant and equipment $ 48,052,680 46,860,949
========== ==========
Maintenance and repairs charged to costs and expenses were $6,367,000,
$5,957,000 and $6,599,000 for fiscal 1997, 1996 and 1995, respectively.
Rent expense for all operating leases amounted to $12,025, $12,025 and
$22,000 for fiscal 1997, 1996, and 1995, respectively.
(4) Income Taxes
Income tax expense amounted to $8,176,015 for 1997 (an effective rate of
36%), $1,284,868 for 1996 (an effective rate of 32%) and $945,533 for 1995
(an effective rate of 22%).The actual tax expense for these years differs
from the expected tax expense as follows:
Years ended June 30
-------------------
1997 1996 1995
---- ---- ----
Computed expected tax expense
(35% for 1997; 34% for 1996 and 1995) $ 8,021,251 1,365,172 1,454,664
State income taxes (net of Federal Income
tax benefit) 581,495 96,695 65,068
Settlement of fiscal 1987 through 1994 audit 0 0 (594,700)
Tax benefit from foreign sales corporation (166,951) (189,041) 0
Other (259,780) 12,042 20,501
--------- --------- ---------
Actual tax expense $ 8,176,015 1,284,868 945,533
========= ========= =========
Components of income tax expense are as follows:
Current Deferred Total
--------- --------- ---------
Year ended June 30, 1997:
Federal $ 5,360,725 1,920,682 7,281,407
State 775,290 119,318 894,608
--------- --------- ---------
$ 6,136,015 2,040,000 8,176,015
========= ========= =========
Year ended June 30, 1996:
Federal 630,732 507,629 1,138,361
State 83,053 63,454 146,507
--------- --------- ---------
$ 713,785 571,083 1,284,868
========= ========= =========
Year ended June 30, 1995:
Federal 58,231 788,713 846,944
State 0 98,589 98,589
--------- --------- ---------
$ 58,231 887,302 945,533
========= ========= =========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and tax liabilities at June 30, 1997
and 1996 are presented below:
1997 1996
---- ----
Deferred tax assets:
Deferred income related to sale of technology $ 2,539,757 0
Alternative minimum tax credit carryforwards 0 1,323,430
Uniform capitalization of LIFO inventory 78,119 56,252
Expense accrual 24,946 35,440
Deferral of profit during plant start-up 0 64,080
Other 48,882 43,113
--------- ---------
Total gross deferred tax assets 2,691,704 1,522,315
--------- ---------
Deferred tax liabilities:
Depreciation and amortization of plant and
equipment 5,838,733 6,292,794
Installment sale of technology 3,613,317 0
Prepaid pension costs 128,589 0
Other 0 78,457
--------- ---------
Net deferred tax liability $ 6,888,935 4,848,935
========= =========
The Company reached an agreement in fiscal 1995 with the Internal Revenue
Service (IRS) in connection with its audit of fiscal years 1987 through
1994. The IRS allowed additional tax basis for certain assets purchased
in fiscal 1987. The impact of the agreement was a net tax benefit of
$594,700.
(5) Employee Pension and Thrift Plans
The Company has a noncontributory group annuity pension plan that covers all
full-time employees who have completed six months of service, were hired
prior to their 60th birthday and work 1,000 or more hours during the year.
The right to discontinue the plan has been reserved by the Company, and, in
such event, the accumulated plan benefits would be distributed to the
participants. Approximately one-third of the plan assets are invested in
U.S. government bonds with the remainder invested in U.S. equity securities.
Employee pension costs amounted to $276,895 for 1997, $257,994 for 1996,
$205,862 for 1995. Pension expense for fiscal 1995 decreased because of the
change in the assumed rate of compensation increase.
The net pension cost included the following components:
1997 1996 1995
------- ------- -------
Service cost benefit earned during the period $ 341,689 294,394 245,658
Interest cost on projected benefit obligation 406,606 348,323 281,122
Expected return on assets (474,889) (388,212) (324,408)
Net amortization 3,489 3,489 3,490
------- ------- -------
Net pension cost $ 276,895 257,994 205,862
======= ======= =======
Assumptions used in the accounting were:
Discount rates 7.75% 7.5% 7.5%
======= ======= =======
Rate of increase in compensation 3.5% 3.5% 3.5%
======= ======= =======
Expected long-term rate of return on assets 9.0% 9.0% 9.0%
======= ======= =======
The following table sets forth the plan's funded status and amounts
recognized in the Balance Sheets at June 30, 1997 and 1996.
1997 1996
--------- ---------
Actuarial present value of vested benefit obligations $ 3,412,894 3,007,143
========= =========
Accumulated benefit obligation $ 4,002,377 3,524,978
========= =========
Plan assets at fair value $ 6,465,837 5,084,380
Projected benefit obligation 5,879,128 5,260,621
Plan assets in excess of (less than) projected --------- ---------
benefit obligation 586,709 (176,241)
Unrecognized transition amount (200,310) (227,194)
Unrecognized prior service loss 273,360 303,733
Unrecognized actuarial loss (gain) (306,452) 80,152
Pension asset (liability) recognized in the --------- ---------
Balance Sheets $ 353,307 (19,550)
========= =========
The Company has a contributory 401(k) thrift plan covering substantially all
employees who have completed one year of service. Total expenses under the
plan amounted to approximately $187,000 for 1997, $166,000 for 1996 and
$153,000 for 1995.
(6) Industry Segment and Export Sales
The Company's operations consist of one industry segment, and all of the
operations are located in the United States. Export sales comprised 36%,
43% and 38% of net sales in fiscal 1997, 1996 and 1995, respectively. The
same customer accounted for 13% of net sales in fiscal 1997, 1996 and 1995,
and another customer also accounted for 13% of the net sales in fiscal 1995.
(7) Stockholders' Equity
A long-term incentive plan for officers and certain key employees of the
company was adopted in 1987 and amended in 1991 by the Company's stock-
holders. The Company reserved 500,000 shares of common stock for issuance
upon exercise of incentives awarded under the plan. In 1997, the Company's
stockholders adopted a new plan, and the Company reserved 350,000 shares
of common stock for issuance upon exercise of incentives awarded under the
plan. Awards under the plan may be in the form of options to purchase
common stock, convertible debentures, convertible preferred stock, stock
appreciation rights, performance units, restricted stock, supplemental cash
or other forms as the Board of Directors may direct. Stock options are
granted with an exercise price equal to the stock's fair market value at
the date of grant. Options generally vest over a three year period
commencing on the date of grant and expire ten years from the date of grant.
The Company applies APB Opinion No. 25 in accounting for its plan and,
accordingly, no compensation cost has been recognized for the stock option
grants in the consolidated financial statements. Had compensation cost for
the Company's stock option plan been determined based on the fair value at
the grant date for its stock options under SFAS No. 123, the Company's net
earnings and net earnings per common share would have been reduced to the
proforma amounts as follows:
1997 1996
Net earnings ---------- ---------
As reported $14,741,844 2,730,344
Pro forma $14,626,293 2,669,358
Net earnings per common share
As reported $ 2.63 0.50
Pro forma $ 2.61 0.48
Pro forma net earnings and earnings per common share reflect only options
granted during fiscal years 1997 and 1996. Therefore, the full impact of
calculating compensation cost for stock options under SFAS No. 123 is not
reflected in the proforma amounts presented above because compensation cost
is reflected over the options' vesting period of three years and
compensation cost for options granted prior to July 1, 1995 is not
considered.
The per share weighted average fair value of stock options granted during
fiscal years 1997 and 1996 were $3.63 and $4.36, respectively, on the dates
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions.
1997 1996
---- ----
Risk-free interest rate 6.23% 5.37%
Expected dividend yield rate 0% 0%
Expected stock price volatility 48.76% 48.76%
Expected stock option life 5 years 5 years
Information regarding the option plan for 1997, 1996 and 1995 follows:
1997 1996 1995
------------------------- -------------------------- -------------------------
Weighted Average Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ ---------------- ------ ---------------- ------ ----------------
Options outstanding,
Beginning of year 394,100 $8.83 328,200 8.79 269,100 9.03
Options granted 64,953 7.13 70,900 8.75 60,000 7.50
Options exercised (74,600) 6.06 (5,000) 5.00 (300) 5.25
Options expired 3,833 7.68 0 0.00 600 5.25
Options outstanding, ------- ---- ------- ---- ------- ----
end of year 380,620 9.10 394,100 8.83 328,200 8.79
Options exercisable ======= ==== ======= ==== ======= ====
at end of year 254,186 261,934 214,399
======= ======= =======
Weighted average
exercise price
of options
exercisable $ 9.76 8.78 10.00
======= ======= =======
Options Outstanding Options Exercisable
---------------------------------------------------- --------------------------------
Weighted-
Average Weighted
Remaining Average Number
Range of Outstanding Contractual Exercise Exercisable Weighted-Average
Exercise Price at 6/30/97 Life Price at 6/30/97 Exercise Price
-------------- ----------- ----------- --------- ----------- -----------------
$5.00 - $7.50 183,220 7.4 $ 6.63 101,742 $ 6.17
$8.00 - $8.75 72,400 7.8 $ 8.70 27,444 $ 8.61
$12.75 - $13.75 125,000 0.6 $ 12.94 125,000 $ 12.94
------- --- -------- ------- --------
380,620 5.3 $ 9.10 254,186 $ 9.76
======= === ======== ======= ========
The Company adopted a Share Purchase Rights Plan ("Plan") on November 6,
1990 and amended the Plan August 7,1991 and August 3, 1994. Under the Plan,
one Preferred Share Purchase Right ("Right") was distributed for each out-
standing common share. The Right becomes exercisable if a person or group
acquires 10% or more of the Company's common stock or announces a tender
offer, the consummation of which would result in the ownership by such a
person or group of 10% or more of the common stock. The terms of the Plan
provide that current holdings of ChemFirst and Ashland do not trigger the
provisions of the Plan. The Right entitles its holder to purchase, at the
Right's then current exercise price, a number of the Company's common shares
having a market value of twice such price. The plan expires on November 15,
1997 unless extended.
(8) Commitments
The Company's plant is located on an eight-acre site near Donaldsonville,
Louisiana. In June 1969, the plant site was leased by Triad to Ashland,
which subsequently assigned a one-half interest in the lease to First
Mississippi. Ashland and First Mississippi have assigned the lease to the
Company. The plant site lease will expire on June 1, 2000, and the lessee
has the right to extend the lease for four additional five-year terms or
until 2020. The annual rent under the lease is $2,500 during the primary
term and any additional terms.
The Company is obligated under other operating leases. At June 30, 1997,
estimated minimum rental expense under noncancelable operating leases was as
follows:
Fiscal Year
-----------
1998 4,881
1999 2,500
2000 2,292
2001 0
2002 0
After 2002 0
-----
$ 9,673
=====
Various legal actions are pending against the Company which seek relief or
damages including an action seeking contribution to cleaning costs of a
Superfund site by plaintiff parties identified by the United States
Environmental Protection Agency (EPA). The plaintiff companies seek to
recover an unspecified amount of the cost of cleaning a Superfund site near
the town of Sorrento, Louisiana. The plaintiff contends that they have
spent $51 million and that the EPA is seeking reimbursement of $6 million.
While the final outcome of these matters cannot be predicted with certainty
at this time, management believes, after consulting with counsel, that the
ultimate liability, if any, will not have a material effect on the consol-
idated financial position, results of operations and cash flow of the
Company.
The Company has a $7.5 million revolving loan agreement with a bank which
provides for a line of credit. Under the provisions of this agreement,
the Company must pay interest at prime and maintain certain quarterly
financial covenants as follows: current ratio 1.25 : 1; debt to equity
ratio .50 : 1; minimum working capital of $8 million; and minimum net worth
of $31 million. This line of credit expires on September 1998 and is
unsecured. At June 30, 1997, there was no amount outstanding under this
line of credit.
Foreign currency transaction gains and losses are included in the
determination of net income (loss). Transaction gains (losses) increased
(decreased) net earnings in 1997, 1996, and 1995 by $(337,000), $(192,000)
and $93,000, respectively.
(9) Other Income and Expense
In the fourth quarter of fiscal 1997, the Company transferred its M-II and
M-IV technology in exchange for a fee of $25,000,000. The Company retained
the right to use this technology to operate its current plant as well as to
operate certain expansion opportunities as specified in the transfer
agreement. In addition, the Company is obligated to allow the transferee
limited use of its existing facility for testing purposes.
The fee consisted of a cash payment of $15,000,000 and two $5,000,000
promissory notes which mature in 2000 and 2005 and bear interest at 5.94 and
6.32%, respectively. Income of $17.4 million, net of certain transaction
costs, was recognized in 1997. Approximately $6.9 million of the fee has
been deferred and will be recognized as costs are incurred or obligations
are fulfilled.
The estimated fair value of the notes receivable approximates their carrying
value at June 30, 1997.
In fiscal 1996, the Company wrote off $1,863,000 of costs associated with
two expansion projects which were terminated. The write off included costs
associated with the engineering and design of a plant to be located in
Europe and a plant to be located in Memphis, Tennessee. In addition, the
Company recognized a $479,827 gain from a contract dispute resolution.
The contract dispute related to the price the Company's previous natural
gas supplier was charging.
(10) New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". SFAS
No. 128 is effective for annual and interim periods ending after December
15, 1997. This pronouncement will not have a material impact on its
earnings per share.
Additionally, the FASB issued SFAS No. 129, "Disclosure of Information About
Capital Structure", SFAS No. 130 "Reporting Comprehensive Income" and SFAS
No 131 "Reporting Disaggregated Information about a Business Enterprise."
SFAS No. 129 is effective for fiscal years ending after December 15, 1997.
Statements Nos. 130 and 131 are effective for fiscal years beginning after
December 1997. These statements principally relate to disclosure
requirements.
SUPPLEMENTAL INFORMATION
The quarterly financial data (unaudited) for the three years ended June 30,
1997 follows:
Earnings
Before Income Primary and Fully
Gross Income Tax Net Diluted Earnings Tax
Revenue Profit Taxes Expense Earnings Per Share Rate
------- ------ -------- ------- -------- ----------------- ----
(In thousands, except per share data)
1997:
1st Quarter $ 15,357 2,382 1,548 495 1,053 .19 32.0%
2nd Quarter 14,553 2,215 1,407 450 957 .17 32.0
3rd Quarter 14,998 2,997 1,885 603 1,282 .23 32.0
4th Quarter 15,070 1,242 18,078 6,628 11,450 2.04 36.7
1996:
1st Quarter $ 11,057 2,115 1,353 433 920 .17 32.0%
2nd Quarter 12,237 2,050 1,446 463 983 .18 32.0
3rd Quarter 14,787 2,127 1,148 367 781 .14 32.0
4th Quarter 17,538 2,349 68 22 46 .01 32.0
1995:
1st Quarter $ 9,391 1,559 744 268 476 .09 36.0%
2nd Quarter 11,584 2,333 1,508 543 965 .17 36.0
3rd Quarter 12,156 2,197 1,559 (33) 1,593 .29 2.1
4th Quarter 12,370 1,209 467 168 298 .05 36.0
The tax rate for each quarter is based upon an estimate of the effective tax
rate of the entire year. The tax rate in the third quarter of fiscal 1995
was impacted by a $594,700 settlement reached with the Internal Revenue
Service. The tax rate in the fourth quarter of fiscal 1997 was impacted by
$17.4 million gain on the sale of technology.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosures
There have been no changes in accountants and no disagreements on accounting
principles or practices, financial statement disclosure or auditing scope or
procedure between the Company and its independent certified public
accountants during the period beginning July 1, 1994 and ending on the date
hereof.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding directors of the Company is included on pages 3 to 6
of the Company's definitive proxy statement prepared in connection with the
1997 Annual Meeting of Shareholders and is incorporated herein by reference.
Certain information concerning the Company's officers is included in Item
4(a) of Part I of this report.
Item 11. Executive Compensation
Information regarding executive compensation is included on pages 6 to 9 of
the Company's definitive proxy statement prepared in connection with the
1997 Annual Meeting of and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding security ownership of certain beneficial owners and
management is included on pages 2 to 3 of the Company's definitive proxy
statement prepared in connection with the 1997 Annual Meeting of
Shareholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is
included on pages 11 to 12 of the Company's definitive proxy statement
prepared in connection with the 1997 Annual Meeting of Shareholders and is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
See Item 8 of PART II of this report.
2. Financial Statement Schedules
See Item 8 of Part II of this report.
3. Exhibits
3.1 Restated Certificate of Incorporation of the Company.1
3.2 Amended By-laws of the Company.1
3.3 Amendment No. 1 to the Amended By-laws.2
3.4 Amendment No. 2 to the Amended By-laws.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's
Restated Certificate of Incorporation and Amended By-laws defining
the rights of holders of Common Stock.
4.2 Specimen of Common Stock Certificate.1
4.3 Registration Rights Agreement by and among the Company, Ashland
and First Mississippi.1
4.4 Rights Agreement dated November 15, 1990 between the Company
and Wachovia Bank and Trust Company, N.A. as Rights Agent.3
4.5 Amendment to Rights Agreement dated as of August 7, 1991.3
4.6 Second Amendment to Rights Agreement dated as of August 3,
1994.3
10.1 Feedstock Agreement dated April 30, 1987, by and between the
Company and First Mississippi, certain portions of which are filed
under a request for confidential treatment under Rule 406 of the
Securities Act of 1933, as amended, and the Freedom of Information
Act.1
10.2 Amendment to Feedstock Agreement dated February 20, 1997 by and
between the Company and First Mississippi.
10.3 Standby Feedstock Agreement dated July 1, 1988, by and between
the Company and First Mississippi.
10.4 MCI/Triad Intercompany Agreement dated June 10, 1987, by and
between the Companyand Triad.1
10.5 Gas Sales Contract dated August 1, 1986, by and between
Ponchartrain Natural Gas System and the Company.1
10.6 Site Lease Agreement dated November 4, 1970 and July 1, 1972,
by and among Triad, First Mississippi, Mis Coa, Mississippi Chemical
Corporation, Coastal Chemical Corporation, Ashland and the Company.1
10.7 Assignment of Site Lease dated July 23, 1987, by and among
Triad, First Mississippi, Mississippi Chemical Corporation, Ashland
and the Company.1
10.8 Amended and Restated Long-Term Incentive Plan.1
10.9 Second Amended and Restated Long-Term Incentive Plan.4
10.10 1996 Long-Term Incentive Plan.
10.11 Employee 401(K) Thrift Plan and related Trust (Restated 1996).
10.12 Amendment No. 1 to Employee 401(k) Thrift Plan.
10.13 Amendment No. 2 to Employee 401(k) Thrift Plan.
10.14 Amended and Restated Retirement Plan for Employees of the
Company including First Supplement and related Trust. (The related
Trust is incorporated by reference from the Company's Registration
Statement on Form S-1 (Registration No. 33-15181).
10.15 Amendment No. 1 to the Retirement Plan.
10.16 Form of Indemnity Agreement.1
10.17 Schedule describing differences between Indemnity Agreements.
10.18 Description of Annual Incentive Plan.
10.19 Assignment Agreement dated July 1, 1988, by and among the
Company, Mississippi Chemical Corporation and First Mississippi.1
10.20 Form of Single Trigger Change of Control Severance Agreement.
10.21 Schedule describing differences between Single Trigger Change
of Control Agreement.
10.22 Form of Double Trigger Change of Control Severance Agreement.
10.23 Schedule describing differences between Double Trigger Change
of Control Agreement.
10.24 Form of renewal of Change of Control Agreements.
10.25 Technology Transfer and Technical Cooperation Agreement, dated
as of February 25, 1997, by and between Melamine Chemicals, Inc. and
DSM Melamine B.V. (Portions of this agreement are confidential and
have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential
treatment).5
10.26 $5 million 5.94% Promissory Note due 2000 dated April 3, 1997,
DSM Melamine B.V. to the Company.
10.27 $5 million 6.23% Promissory Note due 2005 dated April 3, 1997,
DSM Melamine B.V. to the Company.
24.1 Consent of KPMG Peat Marwick LLP.
1 Incorporated by reference from the Company's Registration Statement
on form S-1 (Registration No. 33-15181).
2 Incorporated by reference from the Company's Registration Statement
on Form S-8 (Registration No. 33-20497).
3 Incorporated by reference from the Company's Registration Statement
on Form 8-A dated November 9, 1990 as amended by the Company's Form 8
dated August 20, 1991 and the Company's Form 8-A/A dated December 8,
1994.
4 Incorporated by reference from the Company's Registration Statement
on Form S-8 (Registration N. 33-43979).
5 Incorporated by reference from the Company's Current Report on Form
8-K filed with the Commission on April 11, 1997.
(b) Reports on Form 8-K
A Form 8-K dated July 1, 1996 was filed by the Company announcing the end
of its consideration of expansion projects in Europe and in Memphis,
Tennessee.
A Form 8-K dated July 30, 1996 was filed by the Company relating to the
financial results for the year ended June 30, 1996.
A Form 8-K dated October 14, 1996 was filed by the Company relating to
the financial results for the three month period ended September 30,
1996.
A Form 8-K dated January 14, 1997 was filed by the Company relating to
the financial results for the three and six month periods ended December
31, 1996.
A Form 8-K dated February 26, 1997 was filed by the Company announcing
the signing of an agreement relating to the sale of Melamine Chemicals
Inc.'s patented high-pressure melamine production technologies to DSM
Melamine B.V.
A Form 8-K dated March 25, 1997 was filed by the Company announcing the
closing date for the sale of technology.
A Form 8-K dated April 3, 1997 was filed by the Company relating to the
definitive agreement executed with DSM.
A Form 8-K dated April 17, 1997 was filed by the Company relating to the
financial results for the three and nine month periods ended March 31,
1997.
A Form 8-K dated June 30, 1997 was filed by the Company relating to an
unsolicited proposal by Ashland, Inc. to acquire all of Melamine's
outstanding stock that Ashland does not currently own.
A Form 8-K dated July 18, 1997 was filed by the Company relating to the
financial results for the year ended June 30, 1997.
A Form 8-K dated August 15, 1997 was filed by the Company relating
Ashland's increased offer to purchase the Company.
A Form 8-K dated August 26, 1997 was filed by the Company relating to its
financial advisor's, Goldman, Sachs & Co.'s, continuing review of
Ashland's offer and other available alternatives.
A Form 8-K dated August 27, 1997 was filed by the Company relating to
Ashland Inc. confirming its offer of August 14 to purchase all of the
issued and outstanding shares of the Company that it does not own.
A Form 8-K dated September 8, 1997 was filed by the Company announcing
that it has temporarily reduced its melamine production due to equipment
repairs being performed by its primary raw materials supplier, Triad
Nitrogen Inc.
SCHEDULE II
MELAMINE CHEMICALS, INC.
VALUATION AND QUALIFYING ACCOUNTS
==================================================================================
Additions-
Balance at amounts Deductions- Balance at
beginning charged toreceivables end of
Description of Year expense written off Year
- ----------------------------------------------------------------------------------
Allowance for doubtful accounts
Year ended June 30, 1997 $150,000 $25,000 Nil $175,000
Year ended June 30, 1996 $150,000 25,486 25,486 $150,000
Year ended June 30, 1995 $150,000 Nil Nil $150,000
- ----------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on September 26, 1997.
MELAMINE CHEMICALS, INC.
/S/ FREDERIC R. HUBER
---------------------
Frederic R. Huber
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and on the dates indicated.
Signature Title Date
/s/ JAMES W. CROOK Chairman of the Board September 26, 1997
- ------------------
(James W. Crook)
/s/ CHARLES M. MCAULEY Director September 26, 1997
- ----------------------
(Charles M. McAuley)
/s/ SCOTTY B. PATRICK Director September 26, 1997
- ---------------------
(Scotty B. Patrick)
/s/ R. MICHAEL SUMMERFORD Director September 26, 1997
- -------------------------
(R. Michael Summerford)
/s/ DANIEL D. RENEAU, JR. Director September 26, 1997
- -------------------------
(Daniel D. Reneau, Jr.)
/s/ NILON H. PRATER Director September 26, 1997
- -------------------
(Nilon H. Prater)
/s/ DAVID J. D'ANTONI Director September 26, 1997
- ---------------------
(David J. D'Antoni)
/s/ WAYNE D. DELEO Vice President and September 26, 1997
- ------------------ Chief Financial Officer
(Wayne D. DeLeo)
(Principal Financial and
Accounting Officer)
Exhibit Index
Exhibit No. Description
3.4 Amendment No. 2 to the Amended By-laws.
10.2 Amendment to Feedstock Agreement dated January 1, 1997 by and
between the Company and First Mississippi.
10.3 Standby Feedstock Agreement dated July 1, 1998, by and between
the Company and First Mississippi.
10.10 1996 Long-Term Incentive Plan.
10.11 Employee 401(K) Thrift Plan and related Trust (Restated 1996).
10.12 Amendment No. 1 to Employee 401(K) Thrift Plan.
10.13 Amendment No. 2 to Employee 401(K) Thrift Plan.
10.14 Amended and Restated Retirement Plan for Employees of the Company
including First Supplement and related Trust. (The related Trust
is incorporated by reference from the Company's Registration
Statement on Form S-1 (Registration No. 33-15181).
10.15 Amendment No. 1 to the Retirement Plan.
10.17 Schedule describing differences between Indemnity Agreements.
10.18 Description of Annual Incentive Plan.
10.20 Form of Single Trigger Change of Control Severance Agreement.
10.21 Schedule describing differences between Single Trigger Change of
Control Agreement.
10.22 Form of Double Trigger Change of Control Severance Agreement.
10.23 Schedule describing differences between Double Trigger Change of
Control Agreement.
10.24 Form of renewal of Change of Control Agreements.
10.26 $5 million 5.94% Promissory Note due 2000 dated April 3, 1997, DSM
Melamine B.V. to the Company.
10.27 $5 million 6.23% Promissory Note due 2005 dated April 3, 1997, DSM
Melamine B.V. to the Company.
24.1 Consent of KPMG Peat Marwick LLP.