AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CHEMFIRST INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSISSIPPI 2865
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification
Code Number)
64-0354930 700 NORTH STREET
(I.R.S. Employer Identification No.) P.O. BOX 1249
JACKSON, MS 39215-1249
(601) 948-7550
(Address, including zip code, and
telephone number, including area
code of Registrant's principal
executive offices)
J. STEVE CHUSTZ, ESQ., GENERAL COUNSEL
CHEMFIRST INC.
700 NORTH STREET
P.O. BOX 1249
JACKSON, MS 39215-1249
(601) 948-7550
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
CHARLES W. MULANEY, JR., ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, IL 60606
(312) 407-0700
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective and all other
conditions to the distribution under the Distribution Agreement described in
the Prospectus have been satisfied or waived.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT PRICE(2) FEE
- ---------------------------------------------------------------------------------------------
Common Stock, par value $1.00 per
share (including Preferred Stock
Purchase Rights)(1).............. 21,331,850 -0- -0- $0.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Each share of Common Stock includes a Right to purchase one one-hundredth
of a share of Series X Junior Participating Preferred Stock, par value
$1.00 per share, of the Company or under certain circumstances, Common
Stock, cash, property or other securities of the Company.
(2) No separate consideration will be received for shares of Common Stock to
be distributed to holders of Common Stock of First Mississippi
Corporation, and therefore the maximum offering price is zero. Pursuant to
the Securities Act of 1933, no fee is required to be paid with this
Registration Statement.
----------------
THE REGISTRATION STATEMENT ALSO RELATES TO AN INDETERMINATE NUMBER OF SHARES
OF COMMON STOCK THAT MAY BE ISSUED UPON STOCK SPLITS, DIVIDENDS OR SIMILAR
TRANSACTIONS IN ACCORDANCE WITH RULE 416 OF THE SECURITIES ACT OF 1933.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CHEMFIRST INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
FORM S-1 ITEM NUMBER AND HEADING CAPTION OR LOCATION IN PROSPECTUS
-------------------------------- ---------------------------------
1. Forepart of the Registration Statement
and Outside Front Cover Page of Facing Page; Cross Reference Page; Outside
Prospectus............................... Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Page;
Additional Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges....... Summary; Risk Factors
4. Use of Proceeds.......................... Not Applicable
5. Determination of Offering Price.......... The Transfers and the Distribution
6. Dilution................................. Not Applicable
7. Selling Security Holders................. Not Applicable
8. Plan of Distribution..................... Outside Front Cover Page; The Transfers and
the Distribution
9. Description of Securities to be Outside Front Cover Page; Summary;
Registered............................... Description of New First Mississippi
Capital Stock
10. Interests of Named Experts and Counsel... Not Applicable
11. Information with Respect to the Outside Front Cover Page; Summary; Risk
Registrant............................... Factors; Business; Listing and Trading of
New First Mississippi Common Stock;
Capitalization; Pro Forma Financial
Information; Selected Historical Financial
Information; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Management;
Beneficial Ownership of New First
Mississippi Common Stock; Certain
Relationships and Related Transactions;
Description of New First Mississippi
Capital Stock; Index to Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
APPENDIX E
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1996
PROSPECTUS
CHEMFIRST INC.
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
-----------
This Prospectus is being furnished to shareholders of First Mississippi
Corporation, a Mississippi corporation ("First Mississippi"), in connection
with the contemplated pro rata distribution (the "Distribution") to First
Mississippi shareholders of shares of common stock, par value $1.00 per share
(the "New First Mississippi Common Stock"), of ChemFirst Inc. ("New First
Mississippi"), a Mississippi corporation and wholly owned subsidiary of First
Mississippi. Holders of shares of common stock, par value $1.00 per share (the
"First Mississippi Common Stock"), of First Mississippi will receive one share
of New First Mississippi Common Stock for every share of First Mississippi
Common Stock held at the close of business on the record date to be set by the
Board of Directors of First Mississippi in connection with the Distribution
(the "Distribution Record Date"), which is expected to be the business day
immediately prior to the date of the Merger described below. The Distribution
will result in 100% of the outstanding shares of New First Mississippi Common
Stock being distributed to holders of First Mississippi Common Stock on a pro
rata basis. The aggregate number of shares of New First Mississippi Common
Stock to be issued to First Mississippi shareholders in the Distribution will
depend on the aggregate number of shares of First Mississippi Common Stock
outstanding on the Distribution Record Date and, accordingly, is not
determinable as of the date of this Prospectus. However, based upon the number
of shares of First Mississippi Common Stock outstanding on the date of this
Prospectus, 20,621,736 shares of New First Mississippi Common Stock will be
issued to First Mississippi shareholders in the Distribution. This Prospectus
constitutes the prospectus of New First Mississippi relating to such shares of
New First Mississippi Common Stock.
As more fully described herein under "The Transfers and the Distribution," at
the time of the Distribution, New First Mississippi will own all of First
Mississippi's assets and will have assumed all of First Mississippi's
liabilities except those relating primarily to First Mississippi's fertilizer
business, including all of First Mississippi's interests in FirstMiss
Fertilizer, Inc., AMPRO Fertilizer, Inc., FMF Barge, Inc., FMF, Inc., FirstMiss
Fertilizer Limited Partnership, the Arcadian/FirstMiss Fertilizer LLC and Triad
Chemical (the "Fertilizer Business") and except for certain indebtedness of
First Mississippi. As used in this Prospectus, "New First Mississippi" means
New First Mississippi and its consolidated subsidiaries at the time of the
Distribution, including the assets and liabilities which will be transferred to
New First Mississippi by First Mississippi and assumed by New First Mississippi
as contemplated in the Agreement and Plan of Distribution to be entered into
between First Mississippi and New First Mississippi prior to the Distribution
(the "Distribution Agreement"), a copy of which is attached as Appendix B to
the Joint Proxy Statement/Prospectus to which this Prospectus is Appendix E
(the "Joint Proxy Statement/Prospectus"). Also, unless the context otherwise
indicates, all references to New First Mississippi in this Prospectus shall
include the business of New First Mississippi as conducted by First Mississippi
prior to the Distribution, and the information contained in this Prospectus
assumes that the Transfers described under "The Transfers and the Distribution"
have been completed. See "Business," "The Transfers and the Distribution" and
"Pro Forma Financial Information."
(continued on the following page)
-----------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN NEW FIRST MISSISSIPPI COMMON STOCK.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1996
(Continued from the previous page)
No consideration will be paid by First Mississippi shareholders for the
shares of New First Mississippi Common Stock to be received by them in the
Distribution. There is currently no public trading market for the shares of
New First Mississippi Common Stock. New First Mississippi intends to apply for
the listing of New First Mississippi Common Stock on the New York Stock
Exchange (the "NYSE").
The consummation of the Distribution is a condition to the parties'
obligations to consummate the merger (the "Merger") provided for in the
Agreement and Plan of Merger and Reorganization, dated as of August 27, 1996
(the "Merger Agreement"), among Mississippi Chemical Corporation, a
Mississippi corporation ("Mississippi Chemical"), MISS SUB, INC., a
Mississippi corporation and wholly owned subsidiary of Mississippi Chemical
("Miss Sub"), and First Mississippi, a copy of which is attached as Appendix A
to the Joint Proxy Statement/Prospectus. See "The Merger" in the Joint Proxy
Statement/Prospectus.
2
TABLE OF CONTENTS
PAGE
----
SUMMARY................................................................... 5
New First Mississippi.................................................. 5
The Distribution and the Merger........................................ 5
The Distribution....................................................... 6
Summary Historical Financial Information............................... 8
RISK FACTORS.............................................................. 9
Absence of Trading Market.............................................. 9
Relationship with First Mississippi; Reorganization to Effect Distribu-
tion.................................................................. 9
Anti-takeover Measures................................................. 9
Possible Costs and Liabilities Relating to Environmental Matters....... 9
Disruptions in Availability and Price of Raw Materials................. 10
Reliance on Major Customers............................................ 10
BUSINESS.................................................................. 11
General................................................................ 11
Operating Strategy..................................................... 11
Chemicals.............................................................. 11
Combustion and Thermal Plasma.......................................... 15
Steel Production....................................................... 17
Other Operations....................................................... 17
Employees.............................................................. 17
Patents and Licenses................................................... 17
Legal Proceedings...................................................... 18
Insurance.............................................................. 18
Environmental Considerations........................................... 18
Properties............................................................. 18
THE TRANSFERS AND THE DISTRIBUTION........................................ 20
Background of and Reasons for the Distribution......................... 20
Terms of the Distribution Agreement.................................... 20
Terms of the Tax Disaffiliation Agreement.............................. 21
Terms of the Employee Benefits Agreement............................... 22
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 23
Consequences of the Transfers and the Distribution..................... 23
Consequences of the Merger............................................. 24
LISTING AND TRADING OF NEW FIRST MISSISSIPPI COMMON STOCK................. 25
CAPITALIZATION............................................................ 26
PRO FORMA FINANCIAL INFORMATION........................................... 27
SELECTED HISTORICAL FINANCIAL INFORMATION................................. 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 31
MANAGEMENT................................................................ 36
Directors.............................................................. 36
Committees of the Board of Directors................................... 38
Compensation of Directors.............................................. 39
Executive Officers..................................................... 40
Executive Compensation Prior to the Distribution....................... 41
3
PAGE
----
Termination Agreements with First Mississippi.......................... 43
Option Grants for First Mississippi Common Stock in Last Fiscal Year... 44
Aggregated Options Exercised in Last Fiscal Year and Year End Option
Values................................................................ 44
Long-Term Incentive Plans--Awards in Last Fiscal Year.................. 45
Other Compensation..................................................... 45
BENEFICIAL OWNERSHIP OF NEW FIRST MISSISSIPPI COMMON STOCK................ 47
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 50
DESCRIPTION OF NEW FIRST MISSISSIPPI CAPITAL STOCK........................ 52
Authorized Capital Stock............................................... 52
Common Stock........................................................... 52
Preferred Stock........................................................ 52
Shareholder Rights Plan................................................ 54
No Preemptive Rights................................................... 57
Description of Certain Statutory, Charter and Bylaw Provisions......... 57
INDEMNIFICATION OF DIRECTORS AND OFFICERS................................. 58
ADDITIONAL INFORMATION.................................................... 59
LEGAL MATTERS............................................................. 60
EXPERTS................................................................... 60
INDEX TO FINANCIAL STATEMENTS............................................. F-1
4
SUMMARY
The following is a summary of the information contained elsewhere in this
Prospectus. This summary does not purport to be complete and is qualified in
its entirety by, and is subject to, the more detailed information and financial
statements, including the notes thereto, set forth in this Prospectus. This
Prospectus is Appendix E to the Joint Proxy Statement/Prospectus. Unless
otherwise defined herein, capitalized terms used in this summary shall have the
respective meanings ascribed to them elsewhere in this Prospectus. SHAREHOLDERS
ARE URGED TO READ CAREFULLY THIS PROSPECTUS IN ITS ENTIRETY.
NEW FIRST MISSISSIPPI
New First Mississippi is currently a wholly owned subsidiary of First
Mississippi. New First Mississippi was incorporated in 1983 but has had no
activities during the last five years. At the time of the Distribution, New
First Mississippi will own all of the assets and will have assumed all of the
liabilities of First Mississippi except those primarily related to the
Fertilizer Business and except for certain indebtedness of First Mississippi.
The mailing address of New First Mississippi's principal executive offices is
700 North Street, P.O. Box 1249, Jackson, MS 39215-1249, and the telephone
number at such address is (601) 948-7550.
THE DISTRIBUTION AND THE MERGER
First Mississippi has entered into the Merger Agreement whereby, upon the
terms and subject to the conditions set forth therein, first, First Mississippi
will spin-off its chemicals and other non-fertilizer businesses to shareholders
in the Distribution and second, First Mississippi will be merged with Miss Sub,
with First Mississippi as the surviving corporation. As a condition to and in
order to facilitate the Merger, First Mississippi has agreed to effect the
Distribution prior to consummation of the Merger. In the Distribution all of
the outstanding shares of New First Mississippi Common Stock will be
distributed pro rata to First Mississippi's shareholders on the Distribution
Record Date.
Pursuant to the Merger Agreement, at the effective time of the Merger (the
"Effective Time"), each issued and outstanding share of First Mississippi
Common Stock will be converted into the right to receive a fraction of a share
of common stock, par value $.01 per share, of Mississippi Chemical (the
"Mississippi Chemical Common Stock") as described under "The Merger--Terms of
the Merger--Conversion of First Mississippi Common Stock in the Merger" in the
Joint Proxy Statement/Prospectus.
Pursuant to the Distribution Agreement, prior to the Distribution, First
Mississippi will transfer or cause to be transferred to New First Mississippi
all of its assets other than those which are part of the Fertilizer Business
and New First Mississippi will assume all of First Mississippi's liabilities
except to the extent that they relate to the Fertilizer Business and except for
certain indebtedness (collectively, the "Transfers"). Prior to the
Distribution, First Mississippi will consummate the Financing described in the
Joint Proxy Statement/Prospectus. A portion of the proceeds of the Financing
will be used to refinance First Mississippi's existing indebtedness and pay
certain costs related to the Merger, with the remaining proceeds, estimated to
be approximately $50.0 million, to be contributed to New First Mississippi
prior to the Distribution. As a result of the Financing, which will remain the
obligation of the Fertilizer Business to be acquired by Mississippi Chemical in
the Merger, and the application of its proceeds, at the time of the
Distribution New First Mississippi will have no significant long-term
indebtedness and available cash reserves currently estimated between
$ million and $ million. See "Pro Forma Financial Information." In
accordance with the terms of the Distribution Agreement, each of First
Mississippi and New First Mississippi have agreed to indemnify the other after
the Distribution with respect to certain losses, damages, claims and
liabilities assumed or retained by that party. See "The Transfers and the
Distribution--Terms of the Distribution Agreement."
The foregoing is a brief summary of certain terms of the Merger and related
transactions affecting New First Mississippi. A more complete description of
the Merger and the Merger Agreement may be found in the
5
Joint Proxy Statement/Prospectus. The Distribution Agreement between New First
Mississippi and First Mississippi is more fully described herein under "The
Transfers and the Distribution--Terms of the Distribution Agreement" and a copy
of the Distribution Agreement is attached as Appendix B to the Joint Proxy
Statement/Prospectus.
THE DISTRIBUTION
Distributing Corporation........ First Mississippi. References to First Mis-
sissippi include its subsidiaries, except
where the context otherwise requires.
Distributed Corporation......... New First Mississippi, which, by the Distri-
bution Record Date, will hold the assets and
be responsible for the liabilities of First
Mississippi other than those of the Fertil-
izer Business and certain indebtedness.
Shares to be Distributed........ Assumed to be 20,621,736 shares of New First
Mississippi Common Stock. However, after giv-
ing effect to the conversion of all outstand-
ing convertible debentures of First Missis-
sippi (the "Convertible Debentures") and the
subsequent conversion of the First Missis-
sippi convertible preferred stock into which
such Debentures are convertible (the "Con-
vertible Preferred Stock"), the exercise of
outstanding and exercisable options to ac-
quire Convertible Debentures (the "Debenture
Options") and the conversion of the Convert-
ible Debentures exercisable therefor and sub-
sequent conversion of the Convertible Pre-
ferred Stock issuable upon such conversion,
and the exercise of outstanding and exercis-
able options to purchase First Mississippi
Common Stock ("Stock Options"), up to
21,335,050 shares of New First Mississippi
Common Stock will be issued in the Distribu-
tion.
Distribution Ratio.............. One share of New First Mississippi Common
Stock for every share of First Mississippi
Common Stock owned as of the close of busi-
ness on the Distribution Record Date. See
"The Transfers and the Distribution--Terms of
the Distribution Agreement--The Distribu-
tion."
Federal Income Tax It is a condition to the Distribution and the
Consequences................... Merger that Skadden, Arps, Slate, Meagher &
Flom, counsel to First Mississippi, issue an
opinion to the effect that the Distribution
qualifies as a tax-free distribution under
Section 355 of the Internal Revenue Code of
1986, as amended (the "Code"), the Merger
qualifies as a tax-free transaction under
Section 368(a) of the Code, and the Transfers
qualify as one or more tax-free transactions
under one or more of Sections 332, 351 and
368(a)(1)(D) of the Code. See "Certain Fed-
eral Income Tax Consequences." In addition,
it is a condition to the Merger that Hughes &
Luce, LLP, counsel to Mississippi Chemical,
issue an opinion to Mississippi Chemical to
the effect that the Merger qualifies as a
tax-free transaction under Section 368(a) of
the Code.
6
Trading Market.................. There is currently no public market for New
First Mississippi Common Stock. New First
Mississippi intends to apply for the listing
of New First Mississippi Common Stock on the
NYSE. See "Listing and Trading of New First
Mississippi Common Stock."
Effect of the Distribution...... In connection with the Distribution, First
Mississippi will transfer to New First Mis-
sissippi all of First Mississippi's assets
and liabilities other than those of the Fer-
tilizer Business and certain indebtedness.
First Mississippi will deliver to the Distri-
bution Agent shares of New First Mississippi
Common Stock representing 100% of the out-
standing shares of New First Mississippi Com-
mon Stock for distribution to the holders of
First Mississippi Common Stock as of the
close of business on the Distribution Record
Date.
Relationship with First
Mississippi after the
Distribution...................
First Mississippi and New First Mississippi
have agreed to indemnify each other after the
Distribution with respect to certain losses,
damages, claims and liabilities assumed or
retained by that party, including certain tax
liabilities. See "Risk Factors--Relationship
with First Mississippi; Reorganization to Ef-
fect Distribution," and "The Transfers and
the Distribution--Terms of the Distribution
Agreement--Mutual Indemnities," "The Trans-
fers and the Distribution--Terms of the Tax
Disaffiliation Agreement" and "The Transfers
and the Distribution--Terms of the Employee
Benefits Agreement."
Distribution Record Date........ It is expected that the Distribution Record
Date will be established as the close of
business on the business day immediately
prior to the day on which the Effective Time
occurs.
Date of Distribution............ The Distribution will be effective the close
of business on the Distribution Record Date.
The distribution of certificates of shares of
New First Mississippi Common Stock will occur
as promptly as practicable thereafter.
Distribution Agent, Transfer
Agent and Registrar............
KeyCorp Shareholder Services, Inc.
Risk Factors.................... First Mississippi shareholders should care-
fully consider the matters discussed under
the section entitled "Risk Factors" in this
Prospectus.
7
SUMMARY HISTORICAL FINANCIAL INFORMATION
As a result of the proposed Distribution, the historical consolidated
financial statements of New First Mississippi will reflect the historical
results of operations and financial position of First Mississippi, reflecting
the classification of the Fertilizer Business as a discontinued operation.
The summary historical consolidated financial information set forth below has
been derived from the audited financial statements of ChemFirst Inc. for the
periods ended June 30, 1996, 1995 and 1994, except for income statement data
for the three months ended September 30, 1996 and 1995, balance sheet data at
September 30, 1996 and balance sheet data at June 30, 1994. ChemFirst Inc.'s
Consolidated Balance Sheets at June 30, 1996 and 1995 and the related
Statements of Operations, Stockholders' Equity and Cash Flows for the three
years ended June 30, 1996 and notes thereto appear elsewhere herein. The
financial information for the three-month interim periods ended September 30,
1996 and 1995 has been derived from ChemFirst Inc.'s unaudited interim
financial statements, presented elsewhere herein, that reflect all adjustments
that, in the opinion of management, are necessary for a fair presentation of
the results of the interim periods presented; all such adjustments are of a
normal recurring nature. The balance sheet data at June 30, 1994 has been
derived from ChemFirst Inc.'s unaudited consolidated financial statements. The
summary historical financial information set forth below should be read in
conjunction with and is qualified in its entirety by reference to ChemFirst
Inc.'s historical consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
CHEMFIRST INC.
THREE MONTHS ENDED FISCAL YEAR ENDED JUNE
SEPTEMBER 30, 30,
--------------------- ------------------------
1996 1995 1996 1995 1994
------- ------------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Sales......................... $95,432 88,746 370,547 331,721 249,091
Earnings (loss) from
continuing operations before
income taxes (benefit),
investee earnings (loss) and
cumulative effect of change
in accounting principle...... 6,718 3,387 (4,929) 18,484 1,226
Earnings (loss) from
continuing operations before
cumulative effect of change
in accounting principle...... 4,090 1,886 (3,458) 10,638 (1,271)
Net earnings.................. 12,789 12,480 35,220 57,794 21,863
Earnings (loss) per share from
continuing operations before
cumulative effect of change
in accounting principle...... 0.20 0.09 (0.16) 0.52 (0.06)
Weighted average common shares
outstanding.................. 20,894 21,048 20,980 20,632 20,126
AT AT JUNE 30,
SEPTEMBER 30, ------------------------
1996 1996 1995 1994
------------- ------- ------- -------
BALANCE SHEET DATA:
Working Capital....................... $ 86,442 86,918 110,107 78,874
Total assets.......................... 432,483 413,635 433,327 357,845
Long-term debt, excluding long-term
debt due within one year............. 76,732 79,909 84,394 104,275
Shareholder's equity.................. 242,208 230,267 232,996 177,687
Cash dividend declared per common
share................................ 0.10 0.40 0.35 0.30
8
RISK FACTORS
ABSENCE OF TRADING MARKET
There is currently no existing trading market for New First Mississippi
Common Stock and there can be no assurance as to the establishment or
continuity of any such market. New First Mississippi expects to apply for
listing of New First Mississippi Common Stock on the NYSE. Even if a trading
market does develop in the New First Mississippi Common Stock, there can be no
assurance that trading will be sustained or that the volume would be
sufficient for trading to occur with any frequency. As a result, it could be
difficult to make purchases or sales of New First Mississippi Common Stock in
the market at any particular time. There can be no assurance as to the price
at which New First Mississippi Common Stock will trade.
RELATIONSHIP WITH FIRST MISSISSIPPI; REORGANIZATION TO EFFECT DISTRIBUTION
Following the Distribution, New First Mississippi will have certain
obligations to indemnify the Fertilizer Business. Under the Distribution
Agreement, New First Mississippi has agreed to indemnify and hold harmless the
Fertilizer Business from and against certain claims and actions related to the
businesses that New First Mississippi will assume in the Distribution. New
First Mississippi will also release the Fertilizer Business from claims
against it (with some exceptions) relating to events or circumstances that
arose before the Distribution. Under the Tax Disaffiliation Agreement
described herein and attached to the Joint Proxy Statement/Prospectus as
Appendix B (the "Tax Disaffiliation Agreement"), subject to certain
exceptions, New First Mississippi will assume responsibility for any tax
liabilities of First Mississippi for the period before the Distribution, tax
liabilities resulting from the Transfers, the Distribution or the Merger; and
any tax liabilities of New First Mississippi. Under the Employee Benefits
Agreement, New First Mississippi has also assumed responsibilities for all
obligations to past employees of First Mississippi who are not employees of
the Fertilizer Business. See "The Transfers and the Distributions."
ANTI-TAKEOVER MEASURES
New First Mississippi, a Mississippi corporation, is subject to the
Mississippi Business Corporation Act (the "MBCA"), including the Mississippi
Shareholder Protection Act (Sections 79-25-1 through 79-25-9 of the MBCA). As
of the time of the Distribution, New First Mississippi will have also enacted
various anti-takeover measures, including a shareholder rights plan (the
"Shareholder Rights Plan"). As a result of the application of the Mississippi
Shareholder Protection Act, certain provisions in New First Mississippi's
Articles of Incorporation and Bylaws and the Shareholder Rights Plan,
potential acquirors of New First Mississippi may find it more difficult or be
discouraged from attempting to effect an acquisition transaction with New
First Mississippi that is not supported by the Board of Directors of New First
Mississippi, thereby possibly depriving holders of New First Mississippi
securities of certain opportunities to sell or otherwise dispose of such
securities at above-market prices pursuant to such transactions. See
"Description of New First Mississippi Capital Stock--Shareholder Rights Plan"
and "Description of New First Mississippi Capital Stock--Description of
Certain Statutory, Charter and Bylaw Provisions."
POSSIBLE COSTS AND LIABILITIES RELATING TO ENVIRONMENTAL MATTERS
Production of many of New First Mississippi's chemicals involves the use,
storage, transportation and disposal of toxic and hazardous materials. New
First Mississippi's operations are subject to extensive international and
federal, state and local laws and regulations relating to the storage,
handling, emission, transportation and discharge of materials into the
environment and the maintenance of safe conditions in the workplace.
Risks of substantial costs and liabilities are inherent in certain plant
operations and certain products produced at New First Mississippi's plants, as
they are with other companies engaged in the chemical, combustion and steel
businesses, and there can be no assurance that significant costs and
liabilities will not be incurred. Moreover, future developments, such as
increasingly strict environmental, safety and health laws and regulations, and
enforcement policies thereunder, could result in substantial costs and
liabilities to New First
9
Mississippi and could subject New First Mississippi's handling, manufacture,
use, reuse, or disposal of substances or pollutants at its plants to more
rigorous scrutiny than at present.
New First Mississippi is involved in several claims, litigations,
administrative proceedings and investigations relating to environmental
matters. The ultimate extent of liabilities with respect to such matters as
well as the timing of related cash disbursements cannot be determined with
certainty. See "Business--Environmental Considerations."
DISRUPTIONS IN AVAILABILITY AND PRICE OF RAW MATERIALS
New First Mississippi uses significant amounts of various chemicals as raw
materials in manufacturing a number of its chemicals products. See "Business--
Chemicals--Raw Materials." Specifically, the primary chemicals used by New
First Mississippi are benzene, toluene, ammonia, natural gas, ethanol,
hydrogen, hydrogen peroxide, o-aminophenol, o-nitrophenol, formaldehyde,
butaldehyde, hydroxylamine, DGA and NMP. The availability and prices of these
chemicals are subject to various factors, including those described below.
Benzene and toluene are readily available commodity by-products of oil
refining. Like most commodities, the prices of benzene and toluene are subject
to fluctuation. Benzene prices are affected by the demand for a variety of
products, principally including styrene and phenolic resins. The price of
toluene, an octane-enhancing additive for unleaded gasoline, is directly
affected by the demand for and price of unleaded gasoline.
New First Mississippi purchases ammonia and ethanol in the spot market for
use in its manufacturing processes. Prices paid by New First Mississippi for
natural gas are affected by the degree of interruptibility of the gas supply.
Hydroxylamine used by New First Mississippi is currently available from only
one supplier located in Japan. The remainder of New First Mississippi's raw
materials are generally available in adequate quantities from several
suppliers, subject to market variation in price. There can be no assurance
that future price changes or disruption in the availability of New First
Mississippi's principal raw materials will not adversely affect New First
Mississippi's operating results. See "Business--Chemicals--Raw Materials."
RELIANCE ON MAJOR CUSTOMERS
Certain of New First Mississippi's largest customers account for a
significant percentage of its revenues. New First Mississippi's sales in 1996
to its two largest customers constituted approximately 23% of its consolidated
sales. No other customer accounted for more than 5% of New First Mississippi's
consolidated sales in 1996.
Although New First Mississippi has had long-standing relationships with
these customers, if New First Mississippi lost any significant portion of its
sales to either of these customers, such loss could have a material adverse
effect on the business and results of operations of New First Mississippi.
10
BUSINESS
GENERAL
The principal businesses of New First Mississippi involve continuous
production of aniline, nitrobenzene, nitrotoluene and toluidines; custom
production of fine chemicals for chemical, agricultural and pharmaceutical
companies, and production of electronic performance chemicals for the
semiconductor and related industries. Other significant businesses include the
design and production of low-emission burners, flares and incinerators and
thermal plasma equipment for steel production, waste treatment and research.
New First Mississippi also produces steel ingots and billets from melted
scrap.
In May 1996, New First Mississippi announced that its wholly owned
subsidiary, Plasma Processing Corporation, was shutting down its only
production facility and exiting the aluminum dross processing (aluminum
recovery) business. Losses from that business were $27.3 million in fiscal
1996, including provisions of $18.3 million related to the shutdown of
facilities. See "--Combustion and Thermal Plasma."
OPERATING STRATEGY
Following the Distribution, the operations of New First Mississippi will be
focused on chemicals and related products and services with planned
dispositions of dross processing and steel operations. New First Mississippi's
strategic objective is to build its chemicals business through internal growth
and expansion and through acquisitions that support and complement existing
businesses, using cash from the Financing which will be distributed to New
First Mississippi prior to the Distribution, from dispositions of steel and
dross processing assets and from operating cash flow and borrowings. New First
Mississippi's goal is to increase sales and earnings, reduce earnings
cyclicality, and provide attractive returns on capital employed and
shareholders' equity to enhance shareholder return. Capital expenditures in
support of this strategy were $33.0 million in fiscal 1996. An additional
$162.0 million is budgeted for capital expenditures over the next two years.
CHEMICALS
General
New First Mississippi's chemicals business had sales of $227.8 million in
fiscal 1996, which accounted for approximately 61% of New First Mississippi's
consolidated sales for fiscal 1996. Chemicals had an operating profit of $44.0
million in fiscal 1996. New First Mississippi's chemicals business is operated
principally through three subsidiaries: First Chemical Corporation ("FCC");
Quality Chemicals, Inc. ("Quality Chemicals"); and EKC Technology, Inc.
("EKC").
New First Mississippi groups its chemical products into three major
categories: industrial chemical intermediates, fine chemicals and electronic
performance chemicals. Industrial chemical intermediaries are manufactured by
FCC and include aniline and nitrobenzene. New First Mississippi's fine
chemicals are produced by both Quality Chemicals and FCC, and include
chemicals for use by companies for agricultural, pharmaceutical, polymer and
photosensitive applications. New First Mississippi's electronic performance
chemicals include organic photoresist removers, which are produced by EKC, and
other chemicals used in the semiconductor and related industries. The primary
distinction between intermediates and fine chemicals is the degree to which
further processing is required to produce the end product used by consumers.
Electronic performance chemicals are not consumed into the end product but are
instead used during a manufacturing process for a specific purpose.
Of these three categories, industrial chemical intermediates are chemicals
in the least advanced state of production and the most affected by changes in
the business cycle or in the cost of raw materials. These chemicals are
typically sold in large volumes to industrial customers that purchase on the
basis of the chemical's molecular content. The key to successful production of
these chemicals is efficient chemical conversion of large
11
quantities of raw materials and productive use of plant capacity. Providing
technical services to customers is generally less important.
Fine chemicals are sold in relatively small volumes to a narrow base of
customers, which are either end-users or producers of performance chemicals.
Because of their specialized, complex molecular content, there are typically
few uses for fine chemicals and significantly more technical service is
expected from the customer. The key to successful production of fine chemicals
is identifying the markets for the product and developing a highly exacting
chemical synthesis for use in the production process. Profit margins typically
are higher than those associated with the production of industrial chemical
intermediates.
Purchasers of performance chemicals, who are end-users, acquire the product
to achieve a specific performance objective. As with fine chemicals,
performance chemicals are typically sold in relatively small volumes and have
relatively few uses, although the customer base is often larger than that for
fine chemicals. The production and sale of these chemicals are labor intensive
and are usually dependent on a highly technical proprietary formulae and a
sophisticated, well-trained customer service staff. Profit margins are
relatively high and are usually not significantly affected by increases in the
price of raw materials.
Industrial Chemical Intermediates
FCC, located in Pascagoula, Mississippi, owns and operates facilities for
the continuous production of aniline, nitrobenzene, nitrotoluenes and
toluidines. FCC's operating facilities are supported by storage, rail, truck
and barge distribution facilities and quality control laboratories and also
include research laboratories, a pilot plant and multipurpose batch facilities
for the development and production of specialty chemicals. FCC utilizes state-
of-the-art technology for nitration and a proprietary process for continuous
hydrogenation. The Pascagoula facilities' total nitrated aromatic production
capacity is approximately 516 million pounds per year. Actual fiscal 1996
production was 429 million pounds, approximately 83% of average annual
capacity.
FCC is among the largest merchant marketers of aniline in the United States,
and its Pascagoula complex is one of the largest aniline production facilities
in the United States. Aniline's primary end use is in rigid polyurethane foam,
an insulation material that is widely used in residential and commercial
construction. Aniline is also used in the manufacture of impact-resistant
plastic that is used as a replacement for metal in automobile parts such as
bumpers where flexibility and impact resistance are important. Aniline's other
primary applications are in the production of an antioxidizing (anti-cracking)
agent used in the manufacture of synthetic rubber and in a widely used
herbicide for corn and soybeans. The aniline sold by FCC accounted for
approximately 19% of New First Mississippi's consolidated sales for the fiscal
year ended June 30, 1996. Most of FCC's aniline production is sold under
contracts containing price-adjustment mechanisms that substantially protect
FCC from fluctuations in the prices of raw materials.
FCC recently entered into a long-term agreement with Bayer Corporation
("Bayer") to build, own and operate a world scale nitrobenzene and aniline
facility at Bayer's Baytown, Texas chemical complex. The facility will be an
integral part of Bayer's MDI (methylene diphenyl diisocyantate) manufacturing
operations. Completion of Phase I of the facility is scheduled for early 1998.
A large majority of FCC's current aniline production is sold to Bayer under a
long-term contract. It is intended that this contract will terminate if a
potential Phase II of the new facility is completed. The estimated cost to FCC
of Phase I is in excess of $50.0 million. The cost of Phase II is estimated to
be considerably less.
Custom Manufacturing of Fine Chemicals
Through its Quality Chemicals subsidiary, New First Mississippi is a batch
producer of fine chemicals manufactured to the specifications of its
customers. Although historically its customers have purchased small quantities
of Quality Chemicals' products primarily for new product development and
market testing, recently the amount of chemicals sold by Quality Chemicals for
use in commercially marketed products has increased
12
significantly. Companies involved in the mass production of chemically based
consumer products often find it expensive and inefficient to manufacture small
quantities of the complex chemicals required for new product development or
products with limited markets. By providing a versatile array of custom
services to a number of such companies, Quality Chemicals achieves economies
of scale and is able to manufacture certain fine chemicals more economically
than they can be manufactured by its customers.
Quality Chemicals' facilities, located in Tyrone, Pennsylvania, and Dayton,
Ohio, include equipment for multi-step batch processing to custom produce
complex fine chemicals used by chemical, agricultural and pharmaceutical
companies. Both of these facilities are owned by Quality Chemicals. Following
capacity additions and plant modifications to the Tyrone facility in fiscal
1996, annual production capacity is now between 4.5 million and 6.0 million
pounds, depending on the products being produced and the type of custom
processing required. Fiscal 1996 production was approximately 4.5 million
pounds. Annual production capacity for the Dayton facility is between
approximately 1.5 million and 2.0 million pounds depending on the products
being produced and the type of custom processing required. Fiscal 1996
production was approximately 1.1 million pounds.
Quality Chemicals' current production is based on multi-step organic
syntheses. Quality Chemicals has versatile facilities that use numerous
reactors capable of producing custom fine chemicals in quantities ranging from
the very small amounts needed for initial product testing, through pilot plant
production of developmental quantities and continuing through the commercial
production of chemicals with specific markets.
Approximately 46% of Quality Chemicals' revenue in fiscal 1996 was derived
from sales of a herbicide ingredient to one manufacturer under an agreement
that will expire in 2002. A substantial portion of the remainder of Quality
Chemicals' sales is derived from a group of agricultural intermediaries and
actives. Quality Chemicals' other significant products include Diphenyl
isopthalate, an intermediate used in the production of fibers for fire-
retardant fabrics and in transparent, heat-resistant plastics; rubber
additives used in the manufacture of chemical-resistant rubber; and a co-
catalyst for a high-volume polyolefin plastic.
Electronic Performance Chemicals
EKC produces a line of electronic performance chemicals and products used in
the semiconductor and related industries. These products include organic
photoresist removers and cleaning solutions which remove photoresist and dry-
etch residue during the manufacture of semiconductors. These chemicals
comprise approximately 95% of EKC's sales. Approximately 47% of EKC's net
sales for fiscal 1996 were outside of the United States, and approximately 19%
of EKC's net sales for fiscal 1996 were made by its Scotland-based subsidiary,
EKC Limited, which sells EKC's products in the European market. Most of these
products are produced on-site utilizing the same proprietary formulations used
by EKC in the United States with a small percentage manufactured in the United
States and distributed by the subsidiary into Europe. The remaining portion of
non-United States sales were made in the Pacific Rim through distributors.
EKC's production facilities are located in Hayward, California and East
Kilbride, Scotland, with marketing, technical and administrative support
located at both locations. Additional marketing and technical support was
added in Tokyo, Japan during fiscal 1996. Facilities include mixing vessels,
cleanroom packaging facilities, advanced quality control analytical
laboratories and product applications laboratories. EKC owns its California
facility, which is a 65,000-square-foot state-of-the art facility. A research
and development laboratory is being added in California to provide additional
facilities for EKC's expanded research staff. The California operation
includes bulk storage facilities with bulk storage facilities and a factory
addition planned at Scotland within a year. EKC's Scotland facility is a
15,000-square-foot warehousing, manufacturing and office facility. The
facility is owned but the land is leased pursuant to a long-term contract. In
fiscal 1996, EKC leased office space in Tokyo, Japan to provide additional
marketing and technical support for accelerating development of its Japanese
markets. The California facility is currently utilizing 65% of production
capability on a two-shift, five-day basis. The Scotland facility is currently
utilizing 40% of production capability on a one-shift, five-day basis.
13
Marketing and Sales
Chemicals are marketed globally. Approximately % of New First Mississippi's
sales are exports. New First Mississippi has long-term contracts with a number
of its largest customers. A majority of chemicals sales are made through New
First Mississippi's internal sales force.
FCC's products are sold in drums and in bulk as intermediates into the
construction, transportation, semiconductor, agricultural chemical,
pharmaceutical, pigment, photographic, specialty polymer and U.V. curing
markets. Exported product is shipped in ocean-going tankers, iso-containers or
drums to European, Japanese and South American markets. Domestic shipments are
by barge, rail or tank trucks. As discussed above, a significant amount of
FCC's sales are to a single customer under a long-term contract. See "--
Industrial Chemical Intermediates, Fine Chemicals and Performance Chemicals."
Quality Chemicals' specialty chemical products are sold in drums into
pharmaceutical, electronic chemical, agricultural chemical and specialty
polymer markets. A significant amount of Quality Chemicals' sales are to three
customers under long-term contracts.
EKC's performance products are marketed domestically and internationally
within Europe and the Pacific Rim. Approximately 47% of sales are
international. EKC's California facility services North America and the
Pacific Rim and Scotland facility services the European community.
Approximately 40% of all international sales are into Europe and 60% into the
Pacific Rim. Chemicals are distributed in gallon, liter, returnable drum and
tote bin containers.
Raw Materials
Benzene and toluene, two of FCC's principal raw materials, are readily
available commodity by-products of oil refining. Like most commodities, the
prices of benzene and toluene are subject to fluctuation. Benzene prices are
affected by the demand for a variety of products, principally including
styrene and phenolic resins. The price of toluene, an octane-enhancing
additive for unleaded gasoline, is directly affected by the demand for and
price of unleaded gasoline. However, FCC is protected from fluctuations in raw
material prices in the contracts under which most of its aniline production is
sold. The remainder of its production is sold under short-term contracts or
purchase orders at prices that generally reflect its actual raw material cost.
Other significant raw materials include ammonia, natural gas and ethanol.
FCC purchases ammonia and ethanol at market prices. FCC purchases natural gas
in the spot market for use in making the hydrogen necessary for its
manufacturing processes. This gas is transported into the Pascagoula plant
through an interstate pipeline. Prices paid by New First Mississippi for
natural gas are affected by the degree of interruptibility of the gas supply.
Quality Chemicals' primary raw materials include hydrogen, hydrogen
peroxide, o-aminophenol, o-nitrophenol, formaldehyde, butaldehyde and natural
gas. Quality Chemicals obtains its raw materials from a number of different
sources. New First Mississippi does not believe that any one source of raw
materials is material to Quality Chemicals' business.
EKC's primary raw materials include hydroxylamine, DGA and NMP. With the
exception of hydroxlyamine, raw materials are generally available in adequate
quantities from several suppliers, subject to market variation in price.
Hydroxylamine is currently available from one supplier, located in Japan. Two
major manufacturers have announced plans to construct facilities capable of
manufacturing aqueous hydroxylamine with production anticipated to begin
within the next three years.
Research and Development
New First Mississippi conducts research and development to improve existing
products and to produce new specialty chemicals. Approximately $4.5 million,
$5.3 million and $4.3 million was spent on research and
14
development in fiscal 1996, 1995 and 1994, respectively. Research facilities
include laboratories, pilot plant and semi-works for process research and
development with gram to multi-pound sample production capabilities. FCC also
sponsors applied research at leading universities in the United States and
maintains a radiation curing applications laboratory in Pascagoula to evaluate
new products and provide customer technical support. These closely directed
programs have led to the development and introduction of proprietary
technology in fine chemicals and in the FirstCure(R) line of performance
polymer products. EKC conducts research and development internally to improve
existing products and to identify and develop new chemistries. EKC also
sponsors applied research at two leading universities in the U.K. In addition,
EKC has entered into joint development agreements with a major semiconductor
manufacturer and an industry consortium to develop advanced products to meet
future semiconductor manufacturing technology.
Competition
FCC is one of five major United States producers of aniline, with
approximately 18% of domestic capacity and an estimated 5% of world capacity.
FCC is the only United States producer of nitrotoluenes, with an estimated 10%
of world capacity. Major competitors are large chemical companies. Competition
is based on price, service, quality, marketing and research and development
support capabilities.
Based on market share, Quality Chemical is among the top 10 custom chemical
manufacturing companies in the United States. Major competitors are both
smaller and larger companies. Competition is based on service, quality,
manufacturing expertise in chemistries and processes, and research and
development capabilities.
EKC is one of the world's largest producers of post-metal cleaning solutions
with 28% of the world market representing 34% in North America, 40% in Europe
and 20% in the Pacific Rim. Although there are approximately 12 companies
participating in this market worldwide, only EKC and three others specialize
in developing proprietary post-metal cleaning solutions for the semiconductor
and related industries. Competition is based on price, service, product
performance, quality and product development capabilities. EKC has reached an
agreement whereby it would license its HDA(TM) (hyrodxylamine) technology to a
major competitor. See "--Patents and Licenses."
Seasonality of Business
Generally, chemical sales are not seasonal and working capital requirements
do not vary significantly from period to period.
COMBUSTION AND THERMAL PLASMA
Combustion and thermal plasma principally includes the development and
marketing of proprietary equipment and systems for industrial applications.
These include design and production of low-emission burners, flares and
incinerators and thermal plasma equipment for steel production, waste
treatment and research. Raw materials and components for these operations are
available from numerous vendors. The businesses are not considered materially
seasonal. Working capital requirements rose during fiscal 1996 as New First
Mississippi expanded into new markets with less favorable payment terms.
Combustion and thermal plasma sales in fiscal 1996 were $65.6 million,
representing approximately 18% of New First Mississippi's consolidated sales
for such period, and it had an operating loss of $30.9 million for fiscal 1996
including provisions of $18.3 million related to the shutdown of facilities.
See "--General."
Combustion Equipment and Services
Callidus Technologies Inc., a wholly owned subsidiary of New First
Mississippi ("CTI"), was organized in fiscal 1990. CTI's principal products
and services are custom designed and fabricated gas/liquid incinerators,
flares, solid waste systems, vapor recovery units, burners and predictive
emissions monitoring and process optimization software services. CTI also
provides engineering and consulting services for environmental and combustion
applications.
15
CTI markets worldwide to refining, petrochemical, chemical, wood products
and other industries requiring disposal of gas, liquid and solid wastes.
Marketing is primarily through a combination of manufacturers' representatives
and company personnel. The market is well established but growing through
advancements of existing technology, driven primarily by increasingly strict
environmental regulations both in the United States and abroad. Competition is
based on a wide variety of factors, with the most prominent being price,
technological innovation and delivery schedule. CTI competes with the John
Zink Company, which has a significant share of the burner, flare and vapor
recovery markets. Numerous competitors exist in the gas and liquids
incineration market. Primary competition in the solids waste systems market
comes from alternative technologies. CTI offers predictive emissions
monitoring and process optimization software services utilizing products
licensed by CTI's customers. CTI is affected by a variety of factors beyond
its control, including governmental control of environmental standards and
compliance deadlines, competitor pricing strategies and changing technology,
any of which could impact CTI's operating results. CTI leases office space in
Tulsa, Oklahoma, owns a manufacturing and test facility in Beggs, Oklahoma,
and has offices in Belgium, England, Italy, France, Germany and Japan.
Thermal Plasma
Plasma Energy Corporation, a wholly owned subsidiary of New First
Mississippi ("PEC"), is the leading international supplier of plasma heating
systems and related processes to the metals and waste industries. PEC, a
technology-based engineering company, develops, manufactures, sells and
services these systems for use in steel manufacturing, specialty metals
refinement and various environmental waste recycling processes, including
municipal solid waste ("MSW") ash vitrification.
Thermal plasma heating systems convert electrical energy into high
temperature thermal energy using an ionized gas or "plasma." These high
temperatures are produced instantly with no combustion or combustion by-
products. A thermal plasma heating system typically consists of a torch, power
supply, cooling system and control panel. The torch usually operates within a
furnace or heating vessel, in which it can be inserted or retracted according
to operational requirements. PEC holds more than 20 patents in 10 countries,
including several in steel, vacuum melting and waste applications. See "--
Patents and Licenses."
PEC markets industrial-scale commercial systems for controlling temperature
in steel making and waste treatment and reduction. PEC owns a testing facility
used for system integration, system and process development and customer
training. A separate administrative office is leased. Both facilities are
located in Raleigh, North Carolina. Marketing is performed directly by PEC.
International sales are supported by qualified overseas representatives.
Plasma heating systems are sold in both the domestic and international
markets. PEC has two principal domestic competitors and four foreign
competitors. Price competition is intense and competitors' pricing strategies
may impact PEC's operating results.
Plasma Processing Corporation ("PPC") was formed during fiscal 1990 to
commercialize patented technology developed by PEC and Alcan International
Limited ("Alcan") of Canada for the recovery of aluminum from dross using
thermal plasma technology. PPC completed construction of a dross processing
plant located in Millwood, West Virginia in June 1991 utilizing the
technology. The plant also produced a co-product that can be utilized in
refractory industries. In June 1995, dross processing operations were
curtailed to concentrate on the development of the co-product markets. In May
1996, due in part to historical and projected near-term losses, PPC announced
the shutdown of the Millwood facility and permanent exit from the dross
processing business. Operations will continue, however, at its joint venture,
Newminco, formed in August 1995 which manufactures lightweight aggregate
materials based on technology licensed by PPC.
In September 1996, New First Mississippi entered into a letter of intent
providing for the sale of substantially all of PPC's aluminum processing
assets and technology. Assets that are not part of this transaction will be
liquidated by New First Mississippi. New First Mississippi does not anticipate
any material gain or loss related to these dispositions.
16
STEEL PRODUCTION
New First Mississippi operates a steel melting and production facility
through its wholly owned subsidiary FirstMiss Steel, Inc. ("FMS") in
Hollsopple, Pennsylvania. New First Mississippi is actively seeking a buyer
for FMS. FMS had net sales of $77.1 million in fiscal 1996, which constituted
21% of New First Mississippi's consolidated sales. FMS had an operating profit
of $1.3 million for such period. FMS's approximately 400,000 square-foot
leased facility is located about 100 miles east of Pittsburgh. Following
upgrades to one of FMS's two electric arc furnaces in January 1995, annual
capacity of the operation now includes 150,000 tons of carbon, alloy and
specialty grade, bottom-poured ingots and 50,000 tons of high-grade steel
billets through the caster. In January 1996, the second electric arc furnace
was removed and a NOD converter was added, which combined with the newly
upgraded electric arc furnace and the existing VOD units form the "Triplex"
process for producing stainless steel. This new process will increase
stainless steel capacity. Horizontally cast billets are produced for sale to
the specialty remelt and reroll markets. Production during fiscal 1996 totaled
110,000 tons consisting primarily of cast ingots and value-added products. The
value-added product line was introduced in fiscal 1992 and includes specialty
stainless and tool steel ingots or billets, which are converted into forged
billets, bars and plate by outside processors. FirstMiss Alloys was formed
during fiscal 1993 to produce small quantities of cobalt, nickel, copper and
iron-based alloys in bars and wire produced from two small horizontal
continuous casters, small bottom-poured forging ingots and remelt sand ingots.
Raw materials consist of steel scrap and various alloys, of which there is an
adequate supply in the North American market.
Carbon and alloy steel ingots are sold directly to the forging industry,
ring rollers, extruders and integrated steel producers. FMS competes primarily
with three other steel companies in this market and, within the group, ranks
second in total steel production capacity. Specialty steel products are
primarily sold to steel service centers and forgers. Two customers account for
24% of FMS's total revenue. FirstMiss Alloy products are sold as feedstock
directly to forgers, extruders and investment casters. There are numerous
competitors, both domestic and foreign, that compete with FMS in the specialty
steel and ferrous and non-ferrous metals markets. Competitive factors include
price, quality and service. Carbon steel ingots and billets are commodities
and are extremely price competitive.
OTHER OPERATIONS
New First Mississippi owns 50% of Power Sources, Inc. ("PSI") of Charlotte,
North Carolina, which burns wood residue and other biomass in industrial
boilers to create steam energy. The steam is sold under long-term contracts to
industrial users. PSI operates seven plants located in North Carolina, South
Carolina, Tennessee and Mississippi.
EMPLOYEES
New First Mississippi employs approximately 1,100 persons. Approximately 535
persons are employed in the chemicals business, 295 are employed in combustion
and thermal plasma and 210 in steel. In addition, New First Mississippi has
approximately 60 persons employed in its corporate headquarters. Certain
senior management and administrative employees are based in Jackson,
Mississippi. Management believes that its relations with its employees are
good. None of New First Mississippi's employees are covered by a collective
bargaining agreement except certain of FMS's employees.
PATENTS AND LICENSES
New First Mississippi owns or licenses a significant number of patents
relating to various products and processes. These patents expire at various
times over the next 17 years. New First Mississippi does not consider its
business to be materially dependent on any one particular patent or patent
license.
EKC has entered a licensing agreement with a major competitor whereby EKC
licenses its HDA(TM) (hydroxylamine) technology. The agreement results from a
patent violation complaint brought by EKC against the competitor in federal
court. The agreement allows the competitor to continue to market its products
which utilize EKC's hydroxylamine technology, but provides for EKC to receive
a royalty and license fee.
17
its products, which utilize EKC's hyrodxylamine technology, but would provide
for EKC to receive a royalty and license fee.
LEGAL PROCEEDINGS
While New First Mississippi is involved in several suits and claims in the
ordinary course of business, including claims relating to environmental
matters, see "--Environmental Considerations," New First Mississippi is not
now a party to any legal proceeding that New First Mississippi believes would
have a material adverse effect on New First Mississippi's business.
INSURANCE
New First Mississippi maintains business interruption, general liability and
property damage insurance coverage as well as other insurance as appropriate
for the conduct of its business.
ENVIRONMENTAL CONSIDERATIONS
New First Mississippi operations are subject to a wide variety of
environmental laws and regulations governing emissions to the air, discharges
to water sources, and the handling, storage, treatment and disposal of waste
materials, as well as other laws and regulations concerning health and safety
conditions. New First Mississippi holds a number of environmental permits and
licenses regulating air emissions, water discharges and hazardous waste
disposal and, to the best of its knowledge, is in material compliance with
such requirements at all locations. New First Mississippi makes capital and
other expenditures in a continuing effort to comply with environmental laws
and regulations, or changing interpretations of existing laws and regulations.
New First Mississippi's environmental capital expenditures for fiscal 1996
were $1.7 million. Projected environmental capital expenditures for fiscal
1997 and 1998 are $3.5 million and $2.2 million, respectively. While these
expenditures are necessary to comply with environmental laws and regulations,
they may also reduce operating expenses and improve efficiencies.
New First Mississippi monitors and participates in the environmental
regulatory development process which assists it in evaluating new laws and
regulations. New First Mississippi does not anticipate a material increase in
expenses related to current environmental regulations, but because federal and
state environmental laws and regulations are constantly changing, New First
Mississippi is unable to predict their future impact.
New First Mississippi has received notices from the United States
Environmental Protection Agency or a similar state agency that it has been
deemed a potentially responsible party ("PRP") under Superfund or a comparable
state statute at several sites and, thus, may be liable for a share of the
associated remediation cost. New First Mississippi contributed $183,000 toward
clean up of one of these sites during fiscal 1996. It is difficult to estimate
New First Mississippi's ultimate liability in these matters due to several
uncertainties such as, but not limited to, the method and extent of
remediation, the percentage of material attributable to New First Mississippi
at the site relative to that attributable to other parties, and the financial
capabilities of the other PRPs. Based on currently available information,
however, New First Mississippi does not believe that its future liability at
these sites will be material to its financial condition or cash flow.
The current owner of a fertilizer manufacturing facility, previously
operated under lease by a subsidiary of New First Mississippi, has performed a
feasibility study and a remediation action plan for that site, subject to
regulatory approval. A previous owner takes the position that New First
Mississippi has some financial responsibility for the closure activities;
however, New First Mississippi denies liability in this matter, but feels that
it has set up adequate reserves for any potential liability as part of its
accounting for discontinued operations.
PROPERTIES
In addition to those described above, New First Mississippi owns or leases
the following properties:
New First Mississippi owns an approximately 26,000 square-foot office
building in Jackson, Mississippi, which is its corporate headquarters.
18
FCC leases 7 acres of waterfront property from the Jackson County Port
Authority at an annual cost of $9,156. This property is used by FCC for
loading and unloading ocean going vessels and barges. The lease expires in
2003.
New First Mississippi, through FCC, owns 180 acres of land near FCC's
Pascagoula plant. Jackson County, Mississippi, has the right to reclaim this
land and retain one-fifth of the $2.2 million installment purchase price if
New First Mississippi has not commenced construction of facilities on the
property by September 1997. New First Mississippi and a subsidiary of
Mississippi Chemical have entered into an agreement pursuant to which New
First Mississippi would convey approximately 110 acres of such land to the
subsidiary in exchange for approximately 23 acres of land near FCC's
Pascagoula plant and $1.2 million in cash. The consummation of this exchange
is subject to a number of conditions, including the release by Jackson County,
Mississippi, of New First Mississippi's obligation to begin construction on
any part of the 180-acre parcel.
New First Mississippi owns approximately 585 acres of undeveloped land
located in Hillsborough County, Florida.
19
THE TRANSFERS AND THE DISTRIBUTION
This section of the Prospectus describes certain aspects of the proposed
Transfers and the Distribution. To the extent that they relate to the
Distribution Agreement, the Tax Disaffiliation Agreement or the Employee
Benefits Agreement, the following descriptions do not purport to be complete
and are qualified in their entirety by reference to the Distribution
Agreement, the Tax Disaffiliation Agreement or the Employee Benefits
Agreement, as the case may be, which are attached as Appendix B to the Joint
Proxy Statement/Prospectus and are incorporated herein by reference. ALL FIRST
MISSISSIPPI SHAREHOLDERS ARE URGED TO READ THE DISTRIBUTION AGREEMENT, THE TAX
DISAFFILIATION AGREEMENT AND THE EMPLOYEE BENEFITS AGREEMENT IN THEIR
ENTIRETY.
BACKGROUND OF AND REASONS FOR THE DISTRIBUTION
Because the Fertilizer Business is the only business of First Mississippi
that Mississippi Chemical proposes to acquire, First Mississippi has
determined to effect the Distribution, which, based upon the opinion of
counsel to First Mississippi, will be tax free to First Mississippi
shareholders for Federal income tax purposes (except to the extent of cash
received for fractional shares). See "Certain Federal Income Tax
Consequences." First Mississippi's agreement to effect the Distribution
fulfilled a condition to Mississippi Chemical's willingness to enter into the
Merger Agreement.
Although the Distribution will not be effected unless the Merger is approved
and is about to occur, the Distribution is separate from the Merger and the
shares of New First Mississippi Common Stock to be received by holders of
First Mississippi Common Stock in the Distribution do not constitute a part of
the Merger consideration.
TERMS OF THE DISTRIBUTION AGREEMENT
The Distribution will, by means of a spin-off of First Mississippi's
chemicals and other non-fertilizer businesses, separate First Mississippi's
Fertilizer Business from its other businesses and enable Mississippi Chemical
to acquire the Fertilizer Business only in the Merger.
The Distribution
The Distribution Agreement provides that the Distribution will be effected
by the distribution to each holder of record of First Mississippi Common Stock
as of the close of business on the Distribution Record Date of certificates
representing one share of New First Mississippi Common Stock for every share
of First Mississippi Common Stock held by such holder. As a result of the
Distribution, the shareholders of record of First Mississippi at the close of
business on the Distribution Record Date will own all of the outstanding New
First Mississippi Common Stock.
The Transfers
The Distribution Agreement provides for a series of stock transfers, assets
transfers and mergers between and among First Mississippi and certain of First
Mississippi's subsidiaries prior to the Distribution (collectively, the
"Transfers"). The Transfers include the following components, each of which
will be effected prior to the time of the Distribution:
(a) First Mississippi will transfer, assign and convey to New First
Mississippi, all of the issued and outstanding capital stock of its non-
fertilizer subsidiaries, including those of its chemicals, combustion and
thermal plasma and steel operations.
20
(b) In addition to the transfers referred to above, First Mississippi
will, or will cause its subsidiaries to, transfer, assign and convey to New
First Mississippi all other assets of First Mississippi which are not
primarily related to the Fertilizer Business, including, but not limited to
(i) all assets of First Mississippi and its subsidiaries located in the
Jackson, Mississippi metropolitan area (other than books and records of
First Mississippi to the extent that they do not relate to the business of
New First Mississippi); (ii) the note receivable from Getchell Gold, Inc;
and (iii) other receivables.
(c) Prior to the Distribution, FirstMiss Fertilizer, Inc. will be merged
with and into First Mississippi with First Mississippi as the surviving
corporation in the merger.
(d) Prior to First Mississippi's transfer of the capital stock of FEC
Marketing, Inc. to New First Mississippi, FEC Marketing, Inc. will transfer
its interests in FirstMiss Fertilizer Limited Partnership and FirstMiss
Fertilizer of Texas LP to a Fertilizer Business entity.
As a result of the Transfers, New First Mississippi will own all of the assets
of First Mississippi other than those of the Fertilizer Business.
Prior to the Distribution, First Mississippi will consummate the Financing
described in the Joint Proxy Statement/Prospectus. A portion of the proceeds
of the Financing will be used to refinance First Mississippi's existing
indebtedness and pay certain costs related to the Merger, with the remaining
proceeds, estimated to be approximately $50.0 million, to be contributed to
New First Mississippi prior to the Distribution. As a result of the Financing,
which will remain the obligation of the Fertilizer Business to be merged with
Mississippi Chemical, and the application of its proceeds, at the time of the
Distribution New First Mississippi will have no significant long-term
indebtedness and significant available cash reserves. See "Pro Forma Financial
Information."
TERMS OF THE TAX DISAFFILIATION AGREEMENT
In connection with the Distribution and Merger, First Mississippi and New
First Mississippi entered into the Tax Disaffiliation Agreement, which sets
forth each party's rights and obligations with respect to the allocation and
payment of liabilities, and entitlements to refunds, if any, of Federal,
state, local or foreign taxes for periods before and after the Distribution.
The Tax Disaffiliation Agreement also provides for related matters, such as
the allocation of responsibility for and the provision of cooperation in the
filing of any tax returns and the conduct of audits.
Under the Tax Disaffiliation Agreement, New First Mississippi is, except as
described below, responsible for (i) any tax liability of First Mississippi
and its subsidiaries for periods ending on or before the Distribution
(including any tax liability imposed as a result of First Mississippi or its
subsidiaries having joint and several liability as members of an affiliated
group of corporations), (ii) any tax liability resulting from the
Distribution, the Merger or the Transfers, and (iii) any tax liability of New
First Mississippi or its subsidiaries for all periods. New First Mississippi
will be entitled to any refunds that relate to those liabilities. First
Mississippi (that is, the Fertilizer Business to be merged with Miss Sub in
the Merger) is responsible for (i) taxes of First Mississippi and its
subsidiaries for taxable periods (or portions thereof) beginning after the
Distribution; and (ii) all taxes of First Mississippi or New First Mississippi
and their respective subsidiaries for any period resulting from the breach of
any representation, warranty or covenant of Mississippi Chemical or, with
respect to breaches occurring after the Distribution, First Mississippi set
forth in the Merger Agreement, the Distribution Agreement or the Tax
Disaffiliation Agreement. Accordingly, in the event the Distribution is
determined not to qualify as a tax-free distribution under Section 355 of the
Code, the Merger is determined not to qualify as a tax-free reorganization
under Section 368(a) of the Code, or the Transfers are determined not to
consist of tax-free transactions, in each case due to the actions taken by
Mississippi Chemical or its subsidiaries, or by First Mississippi or its
subsidiaries with respect to periods (or portions thereof) beginning after the
Distribution, then First Mississippi shall be responsible for all corporate
taxes resulting therefrom. First Mississippi and New First Mississippi will be
entitled to any refunds that relate to those liabilities for which they are
liable.
21
TERMS OF THE EMPLOYEE BENEFITS AGREEMENT
In connection with the Distribution, First Mississippi and New First
Mississippi will enter into the Employee Benefits Agreement which will govern
the rights and obligations of First Mississippi and New First Mississippi
after the Distribution with respect to the employees of First Mississippi.
Prior to the time of the Distribution, First Mississippi and New First
Mississippi will cooperate to transfer each employee of First Mississippi
other than those who will remain employees of the Fertilizer Business
immediately after the Distribution (the "Fertilizer Employees") to the employ
of New First Mississippi effective as of the time of the Distribution. With
respect to such transferred employees and all other past, present, active or
inactive employees of First Mississippi (or their dependents or
beneficiaries), other than the Fertilizer Employees, New First Mississippi
will assume the liabilities and obligations with respect to, and continue to
be responsible for, all liabilities and obligations whatsoever in connection
with claims made by or on behalf of such persons in respect of salary, wages,
benefits, severance pay, salary continuation and similar obligations accrued
and earned prior to the time of the Distribution and the termination or
alleged termination of such persons' employment with First Mississippi. With
respect to Fertilizer Employees, First Mississippi will retain the liabilities
and obligations with respect to, and continue to be responsible for, all
liabilities and obligations whatsoever in connection with claims made by or on
behalf of such persons in respect of salary, wages, benefits, severance pay,
salary continuation and similar obligations accrued and earned prior to the
time of the Distribution and the termination or alleged termination of such
persons' employment with First Mississippi.
Pursuant to the Employee Benefits Agreement, New First Mississippi will
assume all employee benefit plans of First Mississippi and all other
employment, severance and benefit plans, contracts or arrangements covering
all employees or former employees of First Mississippi who are not Fertilizer
Employees. Under the Employee Benefits Agreement, First Mississippi and New
First Mississippi will agree to cooperate to amend all employee benefit plans
to be transferred as necessary to establish New First Mississippi as successor
to First Mississippi as to all duties, liabilities and obligations under each
of such plans and to take such other steps as may be necessary to prevent the
consummation of the transactions contemplated by the Merger from causing a
termination of employment with respect to such plans.
The Employee Benefits Agreement further provides that each Stock Option and
Debenture Option held by any employee or former employee of First Mississippi
other than a Fertilizer Employee, whether vested or unvested, exercisable or
unexercisable, will be exchanged for an option (a "New First Mississippi
Option") to purchase a number of shares of New First Mississippi Common Stock
equal to the number of shares of First Mississippi Common Stock into which
such Stock Option or Debenture Option was exercisable times a conversion ratio
(the "New First Mississippi Option Conversion Ratio") equal to the fair market
value of the First Mississippi Common Stock divided by the fair market value
of the New First Mississippi Common Stock. The exercise price of the New First
Mississippi Option will equal the exercise price of the Stock Option or
Debenture Option divided by the New First Mississippi Option Conversion Ratio.
For purposes of the Employee Benefits Agreement, the fair market value of the
First Mississippi Common Stock will be the greater of (x) the average of the
trading prices of First Mississippi Common Stock for the ten trading days
immediately preceding the date that the First Mississippi Common Stock
commences trading on an ex-dividend basis (with respect to the Distribution)
or (y) the sum of (A) the average of the trading prices of the First
Mississippi Common Stock for the period from the ex-dividend date (with
respect to the Distribution) to the time of the Distribution and (B) the
average of the trading prices of the New First Mississippi Common Stock for
the ten trading days following the tenth trading day after the time of the
Distribution (the "New First Mississippi Average Price"). The fair market
value of the New First Mississippi Common Stock will equal the New First
Mississippi Average Price. Pursuant to the Employee Benefits Agreement,
effective as of the time of the Distribution, each outstanding Convertible
Debenture will, subject to any required consent of the holder of such
Convertible Debenture, be exchanged for a New First Mississippi debenture
which shall be substantially identical to such Convertible Debenture provided
that such debenture shall be convertible into securities of New First
Mississippi based on a conversion rate which is appropriately adjusted
consistent with the adjustments with respect to the exchange of Stock Options
and Debenture Options for New First Mississippi Options.
22
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material Federal income tax
consequences of the Transfers, the Distribution and the Merger to the holders
of First Mississippi Common Stock. The Federal income tax discussion set forth
below is for general information only and may not apply to particular
categories of holders of First Mississippi Common Stock subject to special
treatment under the Code, including, without limitation, foreign holders and
holders whose First Mississippi Common Stock was acquired pursuant to the
exercise of any employee stock option or otherwise as compensation. EACH
HOLDER OF FIRST MISSISSIPPI COMMON STOCK IS URGED TO CONSULT HIS OR HER TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE TRANSFERS,
THE DISTRIBUTION AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
First Mississippi has not requested an advance ruling from the Internal
Revenue Service as to the tax consequences of the Transfers, the Distribution
or the Merger.
CONSEQUENCES OF THE TRANSFERS AND THE DISTRIBUTION
As a condition of consummating the Merger and the Distribution, Mississippi
Chemical, First Mississippi and New First Mississippi will receive an opinion
from First Mississippi's counsel, Skadden, Arps, Slate, Meagher & Flom
(Illinois) ("Counsel"), to the effect that, on the basis of the facts,
representations and assumptions set forth in the tax opinion, for Federal
income tax purposes, the Distribution qualifies as a tax-free distribution
under Section 355 of the Code, and the Transfers will not be taxable
transactions under one or more of Sections 332, 351 or 368(a)(1)(D) of the
Code. Based upon such opinion, the following is a summary of certain material
Federal income tax consequences of the Transfers and the Distribution:
1. A First Mississippi shareholder will not recognize any income, gain or
loss as a result of the Distribution, except, as described below, in
connection with cash received in lieu of fractional shares.
2. A First Mississippi shareholder who receives cash in lieu of
fractional shares of New First Mississippi Common Stock will be treated as
if such fractional shares had been received by the shareholder as part of
the Distribution and then sold by such shareholder. Accordingly, such
shareholder will recognize gain or loss equal to the difference between the
cash so received and the portion of the tax basis in the New First
Mississippi Common Stock that is allocable to such fractional shares. Such
gain or loss will be capital gain or loss, provided that such fractional
shares would have been held by such shareholder as a capital asset at the
time of the Distribution.
3. Following the Distribution, a First Mississippi shareholder will
apportion his or her tax basis for his or her shares of First Mississippi
Common Stock prior to the Distribution between such First Mississippi
Common Stock and the New First Mississippi Common Stock received (or in the
case of fractional shares, deemed received) in the Distribution in
proportion to the relative fair market values of such First Mississippi
Common Stock and New First Mississippi Common Stock on the Distribution
Date.
4. A First Mississippi shareholder's holding period for the New First
Mississippi Common Stock received in the Distribution will include the
period during which such shareholder held his or her First Mississippi
Common Stock with respect to which the New First Mississippi Common Stock
was received, provided that First Mississippi Common Stock is held as a
capital asset by such shareholder at the time of the Distribution.
5. No gain or loss will be recognized by First Mississippi as a result of
the Transfers or the Distribution (other than income, if any, recognized by
First Mississippi or its subsidiaries in connection with excess loss
accounts under regulation (S)1.1502-19).
Counsel's opinion is based upon certain representations and assumptions and
represents Counsel's best legal judgment. Such opinion is not binding on the
Internal Revenue Service or the courts. If the Internal Revenue Service were
to successfully challenge the Federal income tax treatment of the Transfers
and Distribution set forth in Counsel's opinion and it were ultimately
determined that the Distribution did not qualify under Section
23
355 of the Code, then for Federal income tax purposes (i) each First
Mississippi shareholder would be required to recognize dividend income to the
extent of such shareholder's allocable share of First Mississippi's current
and accumulated earnings and profits on the receipt of New First Mississippi
Common Stock in the Distribution in an amount equal to the fair market value
of the shares of New First Mississippi Common Stock received in the
Distribution (the "Distribution Amount"), and, to the extent the Distribution
Amount exceeded such shareholder's allocable share of First Mississippi's
current and accumulated earnings and profits, such shareholder would be
required to reduce his or her tax basis in First Mississippi Common Stock to
zero and thereafter recognize gain, and (ii) First Mississippi would be
required to recognize gain on the Distribution to the extent that the fair
market value of the shares of New First Mississippi Common Stock issued in the
Distribution exceeded First Mississippi's tax basis in such shares. In this
event, (a) the tax basis of the shares of New First Mississippi Common Stock
received by a First Mississippi shareholder would be the fair market value of
such shares on the date of the Distribution, and (b) the holding period for
such shares of New First Mississippi Common Stock would begin the day after
the date of the Distribution.
Current treasury regulations require each First Mississippi shareholder who
receives New First Mississippi Common Stock pursuant to the Distribution to
attach to his or her Federal income tax return for the year in which the
Distribution occurs a detailed statement setting forth such data as may be
appropriate in order to show the applicability of Section 355 to the
Distribution. New First Mississippi will convey the appropriate information to
each First Mississippi shareholder of record as of the Distribution Record
Date.
CONSEQUENCES OF THE MERGER
As a condition to consummating the Merger, First Mississippi will receive an
opinion of Counsel and Mississippi Chemical will receive an opinion from its
counsel, Hughes & Luce, L.L.P., stating that based upon the facts,
representations and assumptions set forth in the opinions, for Federal income
tax purposes, the Merger will qualify as a reorganization within the meaning
of Section 368(a) of the Code. Based upon such opinions, the following is a
summary of certain of the material Federal income tax consequences of the
Merger:
1. No gain or loss will be recognized by First Mississippi shareholders
whose shares of First Mississippi Common Stock are exchanged solely for
Mississippi Chemical Common Stock pursuant to the Merger (except with
respect to cash received by such First Mississippi shareholders in lieu of
fractional share interests in Mississippi Chemical Common Stock). A First
Mississippi shareholder who receives cash in lieu of fractional shares of
Mississippi Chemical Common Stock will be treated as if such fractional
shares had been received by the shareholder as part of the Merger and then
sold by such shareholder. Accordingly, such shareholder will recognize gain
or loss equal to the difference between the cash so received and the
portion of the tax basis in First Mississippi Common Stock (as determined
immediately following the Distribution) that is allocable to such
fractional shares. Such gain or loss will be capital gain or loss, provided
that such fractional shares would have been held by such shareholder as a
capital asset at the Effective Time.
2. The aggregate tax basis of the Mississippi Chemical Common Stock
received (or, in the case of fractional shares, deemed received) by First
Mississippi shareholders who exchange their First Mississippi Common Stock
solely for Mississippi Chemical Common Stock in the Merger will be the same
as the aggregate tax basis of the First Mississippi Common Stock (as
determined immediately following the Distribution) surrendered in exchange
therefor.
3. The holding period for the shares of Mississippi Chemical Common Stock
received in the Merger will include the period during which the shares of
the First Mississippi Common Stock surrendered in exchange therefor were
held, provided that such shares of First Mississippi Common stock were held
as capital assets at the Effective Time.
4. No gain or loss will be recognized by First Mississippi, Miss Sub or
Mississippi Chemical as a result of the Merger (other than income, if any,
recognized by First Mississippi or its subsidiaries in connection with
excess loss accounts under regulation (S)1.1502-19).
24
LISTING AND TRADING OF NEW FIRST MISSISSIPPI COMMON STOCK
New First Mississippi expects to apply for listing of the New First
Mississippi Common Stock on the NYSE.
New First Mississippi Common Stock received pursuant to the Distribution
will be freely transferable under the Securities Act of 1933, as amended (the
"Securities Act"), except for shares of New First Mississippi Common Stock
received by any person who may be deemed an "affiliate" of New First
Mississippi within the meaning of Rule 145 under the Securities Act. Persons
who may be deemed to be affiliates of New First Mississippi after the
Distribution generally include individuals or entities that control, are
controlled by, or are under common control with New First Mississippi, and may
include the directors and principal executive officers of New First
Mississippi as well as any principal shareholder of New First Mississippi.
Persons who are affiliates of New First Mississippi may sell their shares of
New First Mississippi Common Stock received pursuant to the Distribution only
pursuant to an effective registration statement under the Securities Act
covering such securities, or in compliance with the resale provisions of Rule
144 or Rule 145 or Regulation S under the Securities Act.
25
CAPITALIZATION
The following table sets forth, as of September 30, 1996, the historical
capitalization of ChemFirst Inc. and the pro forma capitalization of New First
Mississippi to reflect the Transfers, the Financing and the Distribution and
the refinancing of First Mississippi's indebtedness. This information should
be read in conjunction with ChemFirst Inc.'s consolidated financial statements
and the related notes thereto included elsewhere in this Prospectus.
SEPTEMBER 30, 1996
--------------------------
NEW FIRST
CHEMFIRST INC. MISSISSIPPI
HISTORICAL PRO FORMA
-------------- -----------
(IN THOUSANDS OF DOLLARS)
SHORT-TERM DEBT:
Current installments of long-term debt............. $ 14,426 1,140
-------- -------
Total Short-Term Debt.......................... 14,426 1,140
LONG-TERM DEBT:
Senior notes....................................... 66,428 --
Bank revolving loan................................ 8,000 --
Other long-term debt............................... 2,304 2,304
-------- -------
Total Long-Term Debt........................... 76,732 2,304
SHAREHOLDERS' EQUITY:
Serial preferred stock, $1.00 par value, 20,000,000
shares authorized (actual), 20,000,000 shares au-
thorized (pro forma); none issued and outstanding
(actual), none issued and outstanding (pro forma). -- --
Common stock, $1.00 par value (actual), $1.00 par
value (pro forma); 100,000,000 shares authorized
(actual), 100,000,000 shares authorized (pro
forma); 20,614,491 issued and outstanding (actu-
al), 20,614,491 issued and outstanding (pro
forma)............................................ 20,614 20,614
Additional paid-in capital......................... 15,446 97,951
Retained earnings.................................. 206,148 196,648
-------- -------
Total Shareholders' Equity..................... 242,208 315,213
-------- -------
TOTAL CAPITALIZATION............................... $333,366 318,659
======== =======
26
PRO FORMA FINANCIAL INFORMATION
The pro forma condensed consolidated balance sheet of ChemFirst Inc. as of
September 30, 1996 and pro forma condensed consolidated statement of
operations of ChemFirst Inc. for the year ended June 30, 1996 and the three
months ended September 30, 1996 have been presented as if the Distribution had
occurred on June 30, 1996 for the balance sheet and July 1, 1995 and July 1,
1996, respectively, for the statements of operations.
The pro forma condensed consolidated financial statements should be read in
conjunction with the other financial information elsewhere in this Prospectus.
The pro forma condensed consolidated information is presented for illustrative
purposes only and is not necessarily indicative either of (i) the operating
results or financial position that would have occurred had the Distribution
occurred on July 1, 1995 or July 1, 1996, in the case of the condensed
consolidated statements of operations, or on September 30, 1996, in the case
of pro forma condensed consolidated balance sheet, or (ii) ChemFirst Inc.'s
future operating results or financial position.
27
CHEMFIRST INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1996
NEW FIRST
CHEMFIRST INC. MISSISSIPPI
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
ASSETS
Current assets
Cash and short-term investments..... $ 11,268 150,000 (1) 67,554
(87,714)(2)
(6,000)(3)
Accounts receivable................... 69,253 69,253
Inventories:
Finished products................... 24,916 24,916
Work in process..................... 24,904 24,904
Raw materials and supplies.......... 22,476 22,476
-------- ------- -------
Total inventories................. 72,296 72,296
-------- ------- -------
Prepaid expenses and other current as-
sets................................. 8,810 8,810
Net current assets of discontinued op-
erations............................. 2,914 (2,914)(4) 0
-------- ------- -------
Total current assets.............. 164,541 53,372 217,913
-------- ------- -------
Investments and other assets.......... 52,976 52,976
Property, plant and equipment, net.... 147,745 147,745
Noncurrent assets of discontinued op-
erations............................. 67,221 (67,221)(4)
-------- ------- -------
$432,483 (13,849) 418,634
======== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long-term
debt............................... $ 14,426 (13,286)(2) 1,140
Deferred revenue.................... 3,484 3,484
Accounts payable.................... 30,999 3,500 (5) 34,499
Accrued expenses and other current
liabilities........................ 29,190 29,190
Net current liabilities of discon-
tinued operations.................. -- 724 (4) 724
-------- ------- -------
Total current liabilities......... 78,099 (9,062) 69,037
-------- ------- -------
Long-term debt........................ 76,732 (74,428)(2) 2,304
Deferred revenue and other liabili-
ties................................. 14,254 14,254
Noncurrent liabilities of discontinued
operations........................... 3,364 (3,364)(4)
Deferred income taxes................. 17,826 17,826
Shareholders' equity:
Common stock........................ 20,614 20,614
Additional paid-in capital.......... 15,446 82,505 (6) 97,951
Retained earnings................... 206,148 (6,000)(3) 196,648
(3,500)(5)
-------- ------- -------
Total shareholders' equity........ 242,208 73,005 (6) 315,213
-------- ------- -------
$432,483 (13,849) 418,634
======== ======= =======
- --------
Notes:
(1) To record cash proceeds from the Financing related to Merger.
(2) To reflect use of proceeds to retire senior debt and outstanding
indebtedness under bank credit facility.
(3) Payment of fees related to prepayment of senior debt and outstanding
indebtedness under bank credit facility.
(4) To remove historical discontinued operations of the Fertilizer Business.
(5) To reflect an additional accrued liability of $3,500 for financial
advisory, legal, accounting, printing and similar expenses which are
expected to be incurred.
(6) The merger of the Fertilizer Business will result in an increase in
additional paid-in capital of $73,005, consisting of the excess of debt
assumed by Mississippi Chemical over the equity of the Fertilizer Business
and the estimated transaction and refinancing costs.
28
CHEMFIRST INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1996
----------------------------------------
NEW FIRST
CHEMFIRST INC. MISSISSIPPI
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
Revenues:
Sales................................ $ 370,547 370,547
Interest and other income, net....... 6,157 6,157
--------- -------
376,704 376,704
Costs and expenses:
Cost of sales........................ 288,677 288,677
General, selling and administrative
expenses............................ 58,557 58,557
Other operating expenses............. 25,157 25,157
Interest expense..................... 9,242 (8,912)(1) 330
--------- ------ -------
381,633 (8,912) 372,721
Earnings from continuing operations
before taxes, investee earnings and
cumulative effect of change in
accounting principle.................. (4,929) 8,912 3,983
Income tax expense (benefit)........... (688) 3,476 (2) 2,788
Equity in net earnings of affiliated
companies............................. 783 783
--------- ------ -------
Earnings (loss) from continuing opera-
tions................................. $ (3,458) 5,436 1,978
========= ====== =======
Earnings (loss) per common share from
continuing operations................. $ (0.16) 0.09
Weighted average shares................ 20,980 20,980
- --------
(1) To remove interest expense related to retired indebtedness.
(2) To record tax effect at 39% of adjustments reflected in (1) above.
Note: The above presentation does not reflect pro forma investment earnings of
$2,798 on excess available cash following the Financing related to the
Merger.
THREE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------
NEW FIRST
CHEMFIRST INC. MISSISSIPPI
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
Revenues:
Sales.............................. $ 95,432 95,432
Interest and other income, net..... 2,775 2,775
-------- ------
98,207 98,207
Costs and expenses:
Cost of sales...................... 72,540 72,540
General, selling and administrative
expenses.......................... 15,831 15,831
Other operating expenses........... 1,353 1,353
Interest expense................... 1,765 (1,701)(1) 64
-------- ------ ------
91,489 (1,701) 89,788
Earnings from continuing operations
before taxes, investee earnings and
cumulative effect of change in ac-
counting principle.................. 6,718 1,701 8,419
Income tax expense................... 2,886 663 (2) 3,549
--------
Equity in net earnings of affiliated
companies........................... 258 258
-------- ------ ------
Earnings from continuing operations.. $ 4,090 1,038 5,128
======== ====== ======
Earnings per common share from con-
tinuing operations.................. $ 0.20 0.25
Weighted average shares.............. 20,894 20,894
- --------
(1) To remove interest expense related to retired indebtedness.
(2) To record tax effect at 39% of adjustments reflected in (1) above.
Note: The above presentation does not reflect pro forma investment earnings of
$700 on excess available cash following the Financing related to the
Merger.
29
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical consolidated financial information set forth below
has been derived from the audited financial statements of ChemFirst Inc. for
the periods ended June 30, 1996, 1995 and 1994, except for income statement
and other financial data for the three months ended September 30, 1996 and
1995, balance sheet data at September 30, 1996 and balance sheet data at June
30, 1994. ChemFirst Inc.'s Consolidated Balance Sheets at June 30, 1996 and
1995 and the related Statements of Operations, Stockholders' Equity and Cash
Flows for the three years ended June 30, 1996 and notes thereto appear
elsewhere herein. The financial information for the three-month interim
periods ended September 30, 1996 and 1995 has been derived from ChemFirst
Inc.'s unaudited interim financial statements, presented elsewhere herein,
that reflect all adjustments that, in the opinion of management, are necessary
for a fair presentation of the results of the interim periods presented; all
such adjustments are of a normal recurring nature. The financial information
for the years ended June 30, 1994, 1993 and 1992 and the balance sheet data at
June 30, 1994 has been derived from ChemFirst Inc.'s unaudited consolidated
financial statements. The selected historical financial information set forth
below should be read in conjunction with and is qualified in its entirety by
reference to ChemFirst Inc.'s historical consolidated financial statements and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus.
CHEMFIRST INC.
THREE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED JUNE 30,
------------------- ------------------------------------------
1996 1995 1996 1995 1994 1993 1992
--------- --------- ------- ------- ------- ------- -------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Sales................... $ 95,432 88,746 370,547 331,721 249,091 209,525 186,086
Earnings (loss) from
continuing operations
before taxes, investee
earnings (loss) and cu-
mulative effect of
change in accounting
principle.............. 6,718 3,387 (4,929) 18,484 1,226 (5,122) (3,306)
Earnings (loss) from
continuing operations
before cumulative
effect of change in
accounting principle... 4,090 1,886 (3,458) 10,638 (1,271) (3,731) (2,115)
Net earnings (loss)..... 12,789 12,480 35,220 57,794 21,863 (23,369) 4,227
Earnings (loss) per
share from continuing
operations before
cumulative effect of
change in accounting
principle.............. 0.20 0.09 (0.16) 0.52 (0.06) (0.19) (0.11)
Weighted average common
shares outstanding..... 20,894 21,048 20,980 20,632 20,126 20,003 19,853
OTHER FINANCIAL DATA:
Earnings before inter-
est, income taxes and
depreciation and amor-
tization expense....... $ 22,293 21,461 61,984 93,379 49,919 1,196 23,668
Capital expenditures.... 13,071 4,366 35,909 26,160 19,775 23,518 14,895
Depreciation and amorti-
zation................. 4,853 4,919 18,210 17,324 15,762 14,215 12,495
AT JUNE 30,
AT SEPTEMBER 30, ---------------------------------------
1996 1996 1995 1994 1993 1992
---------------- ------- ------- ------- ------- -------
BALANCE SHEET
DATA:
Working Capi-
tal........... $86,442 86,918 110,107 78,874 50,121 59,865
Total assets... 432,483 413,635 433,327 357,845 348,596 429,123
Long-term debt,
excluding
long-term debt
due within
one year...... 76,732 79,909 84,394 104,275 113,519 144,280
Shareholder's
equity........ 242,208 230,267 232,996 177,687 160,774 188,378
Cash dividend
declared per
common share.. 0.10 0.40 0.35 0.30 0.30 0.30
30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is based upon and should be read in conjunction
with the selected historical financial information and ChemFirst Inc.'s
financial statements, including the notes thereto, included elsewhere in this
Prospectus.
GENERAL
As a result of the proposed Distribution, and for purposes of this
Prospectus, ChemFirst Inc.'s operating results have been restated to reflect
the classification of the Fertilizer Business as a discontinued operation.
THREE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS THREE MONTHS ENDED SEPTEMBER 30,
1995
Consolidated Results
Earnings from continuing operations for the three months ended September 30,
1996, were up $2.1 million over the same period last year, with increased
Chemicals earnings and sales. Prior year results of discontinued Gold
operations were a net loss of $1.1 million.
Segment Operations
CHEMFIRST INC.
INDUSTRY SEGMENT INFORMATION
(IN THOUSANDS OF DOLLARS)
3 MONTHS ENDED
SEPTEMBER 30,
---------------
1996 1995
------- ------
Sales
Chemicals..................................................... $64,351 54,344
Combustion and Thermal Plasma................................. 14,875 15,997
Steel......................................................... 16,206 18,405
------- ------
Total........................................................ $95,432 88,746
======= ======
Operating profit (loss) before income taxes
Chemicals..................................................... $12,881 10,457
Combustion and Thermal Plasma................................. (356) (1,152)
Steel......................................................... (581) 350
------- ------
11,944 9,655
Unallocated corporate expenses................................ (4,136) (5,685)
Interest income (expense), net................................ (1,255) (712)
Other income (expense), net................................... 165 129
------- ------
Total........................................................ $ 6,718 3,387
======= ======
Chemicals pretax operating results were up 23% over the same period in the
prior year due to license proceeds from a electonics chemicals competitor and
an 18% increase in sales. Sales grew on increased aniline, custom
manufacturing and HDA based electronic chemicals volume.
Combustion and Thermal Plasma pretax operating results for the current
quarter improved $0.8 million over the prior year, primarily due to
elimination of aluminum recovery losses following the shut down of operations
in the fourth quarter of the prior year. Sales declined 7% on lower Thermal
Plasma orders.
Steel pretax operating results were down $0.9 million from the prior year
due to lower gross margin. Gross margin declined as sales fell 12% on a 17%
decrease in volume.
Unallocated corporate expenses were down 27%, primarily due to last year's
higher long-term incentives tied to stock price appreciation. Net interest
expense increased over the prior year due to lower interest income.
31
Discontinued Operations
After tax net income for fertilizer operations for the current quarter was
$8.7 million, down 26% versus the same period in the prior year on higher
production cost and lower average fertilizer prices. Production cost increased
on a 52% increase in natural gas cost. Sales rose 10%, despite the lower
prices, on a 19% increase in volume due to higher brokerage sales and
increased AMPRO ammonia production, which was up 20% over last year due to a
15-day outage in the prior year. Prior year results also include $1.1 million
in operating losses related to discontinued Gold operations.
Capital Resources and Liquidity
Cash flow from operations for the three months ended September 30, 1996, was
up 18% over the same period in the prior year which included cash used in
discontinued Gold operations. Investing activities increased over the prior
year due to an $8.4 million increase in Chemicals capital expenditures,
primarily related to expansion of custom manufacturing operations. Financing
activities in the current year included a $3.0 million reduction in borrowings
under the Company's long-term revolving credit facility.
1996 VERSUS 1995
Consolidated Results
Results of continuing operations for 1996 were a loss of $3.5 million versus
earnings of $10.6 million for 1995 due to an $18.3 million ($11.7 million
after-tax) provision for the shutdown of aluminum dross operations and
increased general, selling and administrative expenses. General, selling and
administrative expenses were up $10.5 million due to higher corporate expenses
and growth in combustion operations.
Segment Operations
Chemicals operating profits were up 10% to a record $44.1 million on a 9%
increase in sales primarily due to higher aniline and electronic chemicals
volumes. Aniline sales volume increased 13% due to increased production
following capacity additions in the prior year. Demand for aniline remains
strong due to its use in the production of methylene diphenyl diisodyanate
(MDI), which is a key component in the production of polyurethane foams and
elastomers. In July 1996, ChemFirst Inc. entered into an agreement with Bayer
to build, own and operate a world scale nitrobenzene and aniline facility,
which will be an integral part of Bayer's United States MDI manufacturing
operations. See "Business--Chemicals--FCC-Industrial Chemical Intermediates,
Fine Chemicals and Performance Chemicals." Start-up for the facility is
scheduled to be completed in 1998 with initial aniline production capacity of
approximately 250 million pounds per year. In electronic chemicals, sales
volume increased 26% driven by an 82% increase in the hydroxylamine based
(HDA(TM)) products volume.
Combustion and Thermal Plasma results were a loss of $30.9 million for 1996,
versus a loss of $6.2 million in 1995. The losses in both years were primarily
due to aluminum dross processing operations. Losses in 1996 were due to an
$18.3 million pretax charge related to the shutdown of the aluminum dross
processing plant, located in Millwood, West Virginia, following adoption of a
plan by the Board of Directors on May 21, 1996, to close the facility. The
decision to close the facility, which operated at a loss since inception, was
based in part on projections that indicated operations were unlikely to be
profitable in the near future. The charge included write-downs of $12.3
million for property, plant and equipment, $0.6 million for spare parts, $0.4
million for inventory and $5.0 million in accruals for other estimated costs
to be incurred related to the closure. In addition, results were down for
combustion operations despite a 34% increase in sales, as gross margins
declined $1.1 million due to cost overruns in several large projects and
general, selling and administrative expenses increased $4.5 million due to
operations growth. The Company does not anticipate combustion operations
overhead growth to be as rapid in fiscal 1997 with improvement in margin
projected based on current order backlog.
Steel operating results improved for 1996, as gross margin improved on
higher sales. Steel sales increased from $65.9 million to $77.1 million on a
10% increase in average sales price and 7% increase in volume.
Unallocated corporate expenses were up $4.4 million over the prior year,
primarily due to the spinoff of Getchell Gold Corporation ("Getchell"),
formerly FirstMiss Gold Inc., and expenses for potential acquisitions
32
and environmental compliance not directly allocable to subsidiary operations.
Included in 1996 and 1995 are $2.5 million and $3.1 million, respectively, of
compensation expenses tied to appreciation of Stock Options and Debenture
Options. Net interest expense for the year was down 14% from the prior year
due to increased interest income.
1995 VERSUS 1994
Consolidated Results
Results from continuing operations for 1995 were a profit of $10.6 million
versus a loss of $1.3 million in 1994, on higher chemicals earnings and
improved performance in combustion operations. Sales were up 33% and gross
margin increased to 23% of sales from 22% for the prior year. Equity income
was up $1.1 million as results at Melamine Chemicals, Inc. improved due to
higher revenues and increased margins.
Segment Operations
Chemicals sales and pretax operating results for 1995 were up 30% and 32%,
respectively, over 1994 on strong demand for electronic chemicals, custom
manufacturing services and intermediates. Intermediate sales, which accounted
for 46% of sales, increased on 20% higher volume, primarily nitrobenzene, and
a 6% improvement in average unit price. Nitrobenzene volume was up due to a
multi-year contract entered into in late 1994 that will fully utilize
nitrobenzene capacity through 1999. Custom manufacturing services and
electronic chemicals sales for semiconductor production increased, primarily
due to higher volume.
Combustion and Thermal Plasma results for 1995 improved $3.2 million over
1994, primarily due to increased combustion sales, which grew 83%. In
addition, 1994 results included $0.9 million in costs for a successful patent
defense. The losses in both years were primarily due to aluminum dross
processing operations.
Steel results for 1995 improved by $3.4 million over 1994. Steel gross
profit improved $2.3 million as sales increased 21% to $65.9 million,
primarily due to an increase in average unit price. Also included in 1995
steel results was $1.0 million in income related to asset sales and insurance
recoveries.
Unallocated corporate expenses for 1995 were up over 1994 due to $3.1
million of compensation expenses tied to appreciation of Stock Options and
Debenture Options. Expenses for 1994 included $1.3 million in additional
interest related to deferred compensation. Net interest expense for 1995 was
down versus 1994 on lower average debt and $1.2 million in additional interest
income from increased short-term investments.
DISCONTINUED OPERATIONS
Fertilizer
On August 27, 1996, First Mississippi entered into the Merger Agreement with
Mississippi Chemical, under which Mississippi Chemical will acquire the
Fertilizer Business. Immediately prior to the Distribution, First
Mississippi's debt will be refinanced and increased to approximately $150.0
million. This debt will be retained by the Fertilizer Business in the Merger.
Cash on hand after this refinancing (and the payment of certain Merger related
expenses), estimated at approximately $50.0 million, will be transferred to
New First Mississippi, which will be essentially debt free. The Merger is
subject to approval by the shareholders of both First Mississippi and
Mississippi Chemical, legal opinions that the Distribution and the Merger are
tax-free and customary regulatory approvals. It is expected that the
transaction will be consummated by December 31, 1996.
1996 versus 1995. Fertilizer after tax net income was down 23% to $41.4
million on lower average sales prices and higher natural gas cost. Average
fertilizer sales prices declined 11% on 18% lower ammonia prices, more than
offsetting a 16% increase in urea prices. Total sales volume remained about
the same at 1.2 million tons with captive production accounting for about 74%
of total volume, up from 70% in the prior year. The higher production was
primarily due to scheduled maintenance in the prior year. The average price of
natural gas purchased at spot prices and consumed in production increased 36%;
however, hedging gains of $1.1 million
33
in the current year, versus hedging losses of $5.9 million in the prior year,
reduced the overall average gas cost increase to 17%. At June 30, 1996, First
Mississippi had no open forward purchase contracts for natural gas.
1995 versus 1994. Fertilizer after tax net income for 1995 was up $38.0
million over 1994 due to higher prices, primarily ammonia, and lower
production cost. Sales rose on a 57% increase in average price, which offset
lower volume. Ammonia prices averaged $210 per ton for 1995 versus $130 per
ton in 1994, and urea prices averaged $163 per ton in 1995 versus $126 per ton
in 1994. Volume declined on lower brokerage sales. The ammonia supply/demand
balance remained tight through fiscal 1995. Agricultural demand was strong in
1995, driven by high grain prices and low world inventories. Industrial demand
for production of fibers, plastics, and resins was also strong. Urea prices
increased on higher ammonia prices and strong offshore demand. Production cost
for ammonia and urea declined, primarily due to lower prices for natural gas,
which decreased 12% below 1994 levels. Included in natural gas cost for 1995
is $5.9 million in net futures contracts losses versus net gains of $0.7
million in 1994.
Gold
On October 20, 1995, ChemFirst Inc. completed the spinoff of its 81% owned
subsidiary, Getchell, to shareholders (the "Gold Distribution"). Included in
discontinued operations for fiscal 1996 is $1.1 million in after tax losses,
net of minority interest, related to operations of Getchell for the period
prior to the distribution.
1995 versus 1994. After tax results for 1995, net of minority interest, were
a loss of $6.9 million versus a profit of $5.0 million in 1994. Results
declined due to impairment and abandonment charges of $11.5 million, including
a $2.4 million write-off for an inactive silver exploration property and $9.1
million of assets associated with termination of mining in its main pit.
Mining was discontinued in the pit when results of a geotechnical monitoring
program indicated continued pit mining would destabilize areas along the pit
walls. Production for 1995 declined 24% due to lower mill feed grade and lower
heap leach production. Mill feed grades from the open pit were down from 1994
when high-grade North Pit ore was used for mill feed. In addition, delays in
mining the Main Pit and Getchell Main Underground required increased use of
lower grade stockpiled ore. Sales declined 25%, primarily due to the lower
production.
Loss on disposal of businesses for 1996 reflects estimated additional costs
of $1.7 million after tax related to operations discontinued in prior years.
ENVIRONMENTAL MATTERS
ChemFirst Inc.'s operations are subject to a wide variety of constantly
changing environmental laws and regulations governing emissions to the air,
discharges to water sources, and the handling, storage, treatment and disposal
of waste materials, as well as other laws and regulations concerning health
and safety conditions, for which it must incur certain costs. ChemFirst Inc.'s
capital expenditures for environmental protection were $1.7 million for 1996
and are projected to be $3.5 million and $2.3 million for 1997 and 1998,
respectively. ChemFirst Inc.'s expenses related to the operation and
maintenance of environmental facilities and the disposal of hazardous and
nonhazardous waste were approximately $3.3 million, $2.8 million and $2.5
million in 1996, 1995 and 1994, respectively. In addition, ChemFirst Inc.
accrues for anticipated costs associated with investigatory and remediation
efforts relating to the environment. At June 30, 1996, ChemFirst Inc.'s
accrued liability for these matters totaled $1.5 million.
At June 30, 1996, ChemFirst Inc. was guarantor of $17.1 million in
reclamation bonds related to the disposed coal operations. Replacement bonds
have been submitted to the appropriate state authorities. The bonds guaranteed
by ChemFirst Inc. are anticipated to be released by the end of December 1996.
CAPITAL RESOURCES AND LIQUIDITY
Cash and short-term investments declined $34.8 million from 1995, primarily
due to increased investing activities and lower cash flow from operations.
Investing activities of continuing operations included higher
34
capital expenditures, primarily to increase chemicals production capacities
and a note collection representing proceeds received from Getchell following
its spinoff in October 1995. Additional uses of cash included $5.5 million for
the purchase of 235,900 shares of First Mississippi Common Stock, which
represented approximately 28% of the $20.0 million repurchase authorization
announced in May 1995. Cash provided by continuing operations declined $33.0
million from the prior year primarily due to lower earnings and increases in
working capital in chemicals and combustion operations. At June 30, 1996,
total debt had declined $5.0 million from the prior year; however, total debt
as a percentage of total debt and equity only declined from 30% to 29% due to
the $31.3 million reduction in equity related to the distribution of Getchell
common stock.
Capital expenditures for continuing operations are projected at
approximately $162.0 million over the next two years, up significantly over
prior years due to growth plans for its chemicals businesses, which include
the construction of the new aniline facility. See "--1996 Versus 1995--Segment
Operations." The disposition of the Fertilizer Business, based on its past two
year performance, will have a significant effect on operating cash flow of New
First Mississippi. Fertilizer generated total net cash of approximately $55.0
million in 1996 and 1995 combined. The excess proceeds of the Financing to be
distributed to New First Mississippi, however, will reduce debt to near zero
and provide an anticipated surplus of approximately $50.0 million. This
surplus cash plus cash flow from operations, combined with New First
Mississippi's access to new bank credit facilities is believed to adequately
provide for New First Mississippi's growth strategy over the next two years.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," for fiscal years beginning after
December 15, 1995. The provisions of Statement No. 121 require New First
Mississippi to review its long-lived assets for impairment on an exception
basis whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through future cash flows. Any
loss will be recognized in the income statement and certain disclosures
regarding the impairment are to be made in the financial statements. New First
Mississippi is evaluating the provisions of Statement No. 121 and does not
anticipate a material effect on its financial position or results of
operations.
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-
Based Compensation," for fiscal years beginning after December 15, 1995.
Statement No. 123 allows companies to recognize compensation expense for
grants of stock, stock options and other equity instruments to employees based
upon fair value or permits them to continue to apply the existing accounting
rules contained in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25"). Companies choosing to continue on
APB No. 25 are required to disclose pro forma net income and earnings per
share data based on fair value. New First Mississippi anticipates continuing
to account for stock-based compensation in accordance with APB No. 25 and
therefore the adoption of Statement No. 123 would not have an impact on New
First Mississippi's financial position or results of operations.
35
MANAGEMENT
DIRECTORS
The board of directors of New First Mississippi (the "Board") consists of
thirteen persons, each of whom has been elected for a term expiring at the
annual meeting of New First Mississippi shareholders indicated below and until
his or her successor shall have been elected and qualified. The following
table sets forth information concerning the individuals who serve as directors
of New First Mississippi. Under New First Mississippi's corporate governance
guidelines adopted by the Board, Mr. Moreton will be required to resign from
the Board upon reaching age 70, which will occur prior to the expiration of
his term.
TERM EXPIRES AT
NAME AGE ANNUAL MEETING IN
---- --- -----------------
James E. Fligg....................................... 60 1999
Robert P. Guyton..................................... 59 1999
Paul W. Murrill...................................... 62 1999
J. Kelley Williams................................... 62 1999
Richard P. Anderson.................................. 67 1997
Paul A. Becker....................................... 57 1998
James W. Crook....................................... 66 1998
Charles P. Moreton................................... 69 1998
William A. Percy..................................... 56 1997
Leland R. Speed...................................... 64 1998
R. Gerald Turner..................................... 50 1997
Michael J. Ferris.................................... 51 1997
Dan F. Smith......................................... 50 1998
Mr. Fligg is Senior Executive Vice President, Strategic Planning and
International Business Development, Amoco Corporation, based in Chicago,
Illinois, and has been since October 1995. From July 1993 until October 1995,
he was Executive Vice President, Chemicals Sector, Amoco Corporation. He was
President of Amoco Chemical Company, an international chemical manufacturing
and marketing subsidiary of Amoco Corporation based in Chicago, Illinois, from
July 1991 until October 1995. He was a director of Amoco Chemical from 1984
until October 1995. He was Executive Vice President, International Operations
and Polymer Products, from 1989 to July 1991. During fiscal 1996, two of the
New First Mississippi's subsidiaries purchased a total of approximately $12.1
million in products from Amoco Chemical Company or one of its affiliates. He
is a member of the Compensation & Human Resources Committee.
Mr. Guyton is Chairman and Chief Executive Officer of Smart Choice Holdings,
Inc., an owner and operator of automobile dealerships and finance companies, a
position he has held since July 1996. He was Vice President and Financial
Consultant for Raymond James & Associates, Inc., an asset management and
investment banking company in Atlanta, Georgia, a position he held from August
1993 to July 1996. He was self-employed as a management consultant from June
1991 to July 1993. He was Chairman and Chief Executive Officer of Bank South
Corporation, Atlanta, Georgia, from 1990 to 1991. He served as President and
Chief Executive Officer of Bank South Corporation from 1981 to 1990. He is a
member of the Board of Directors of Piccadilly Cafeterias, Inc., a restaurant
chain, Baton Rouge, Louisiana. Mr. Guyton is a Director of Power Sources,
Inc., a 50% owned subsidiary of New First Mississippi. He is Chairman of the
Audit Committee.
Dr. Murrill is a professional engineer. He is Chairman of the Board of
Directors of Piccadilly Cafeterias, Inc., a restaurant chain, Baton Rouge,
Louisiana. He has been a director of Entergy Corporation since 1994, when it
purchased Gulf States Utilities Company, an electric and gas utility company
in Beaumont, Texas, of which Dr. Murrill was a director. Until March 1990, Dr.
Murrill was also a Special Advisor to the Chairman of the Board of Gulf
States. Dr. Murrill had also previously served as Chairman of the Board and
Chief Executive Officer of that company. He is a Director of ZYGO, a high
precision instrument company, Middlefield, Connecticut; Howell Corporation, a
diversified energy company, Houston, Texas; and Tidewater, Inc., an oil
service company, New Orleans, Louisiana. He is a member of the Audit
Committee.
36
Mr. Williams is the Chairman of the Board and Chief Executive Officer of New
First Mississippi and has been since 1988. From 1988 until August 1995, he was
President, Chief Executive Officer and Chairman of the Board. He was President
and Chief Executive Officer from 1971 until 1988. He is a Director of Deposit
Guaranty Corporation and Deposit Guaranty National Bank, Jackson, Mississippi,
and Chairman of the Board of Getchell Gold Corporation, Englewood, Colorado.
He is Chairman of the Board of Callidus Technologies Inc., FirstMiss Steel,
Inc., First Chemical Corporation, Plasma Energy Corporation, Plasma Processing
Corporation and Power Sources, Inc. (50% owned), all subsidiaries of New First
Mississippi.
Mr. Anderson is the President and Chief Executive Officer of The Andersons,
Inc., an agribusiness company in Maumee, Ohio, and has been since 1981. He is
a Director of Centerior Energy Corporation, an electric utility company in
Cleveland, Ohio, and N-Viro International Corporation, a waste recycling
company in Toledo, Ohio. He is also a Director of Plasma Processing
Corporation, a subsidiary of New First Mississippi. He is a member of the
Committee on Director Affairs and Chairman of the Compensation & Human
Resources Committee.
Mr. Becker is a Managing Director of Mitchell Hutchins Asset Management,
Inc., an investment management company in New York City, and wholly owned by
Paine Webber Group, Inc. Mr. Becker has been employed by Paine Webber Group,
Inc. since 1978. Mitchell Hutchins served as an investment manager for First
Mississippi's pension plan until August 1996. He is a member of the Audit
Committee.
Mr. Crook is Chairman of the Board of Melamine Chemicals, Inc. ("MCI"),
which manufactures melamine in Donaldsonville, Louisiana, and has been since
1987. New First Mississippi owns approximately 23% of the common stock of MCI.
MCI obtains all of its raw materials (urea) from Triad Chemical, a joint-
venture between First Mississippi and Mississippi Chemical. During fiscal year
1996, First Mississippi was paid approximately $11.6 million by MCI for urea.
Mr. Crook is a retired Vice President of First Mississippi, a position he held
from 1965 to June 1985. Mr. Crook is also a Director of FirstMiss Steel, Inc.,
a subsidiary of New First Mississippi. He is a member of the Committee on
Director Affairs and the First Mississippi Corporation Foundation Advisory
Committee.
Mr. Moreton has been a private investor, primarily in the oil and gas
business, since 1991. He was Chairman of the Board of Commet Resources, Inc.,
a natural gas transmission and marketing company in Houston, Texas, from 1986
until its dissolution in July 1991. He was a Director of Tanglewood
Bancshares, Inc., Houston, Texas, until August 1, 1995. He is a Director of
Plasma Processing Corporation, a subsidiary of New First Mississippi. He is a
member of the Audit Committee.
Mr. Percy is a partner of Trail Lake Enterprises, a cotton and soybean
farming operation in Arcola, Mississippi, and has been since 1986. Since
September 1992, he has been the Chairman of the Board of Staple Cotton
Cooperative Association in Greenwood, Mississippi. Until July 1, 1994, he was
a Director of Mississippi Chemical Corporation ("Mississippi Chemical"), which
manufactures and sells fertilizer. First Mississippi and Mississippi Chemical
are engaged in a joint-venture, Triad Chemical, in Donaldsonville, Louisiana.
Mr. Percy is also President and Chief Executive Officer of Greenville Compress
Co., Greenville, Mississippi. He was a Director of the Sunburst Bank of
Mississippi, Grenada, Mississippi, until it was purchased by Union Planters
Bank in July 1995. He is also a Director of Callidus Technologies Inc., and
Plasma Energy Corporation, subsidiaries of New First Mississippi. He is a
member of the Compensation & Human Resources Committee and the First
Mississippi Corporation Foundation Advisory Committee.
Mr. Speed is Chief Executive Officer and Chairman of the Board of Parkway
Properties, Inc. (formerly The Parkway Company), and Chairman, Chief Executive
Officer and Trustee of EastGroup Properties, real estate investment companies,
both of Jackson, Mississippi. He is Chairman and Director of Delta Industries,
Inc., a construction materials manufacturer and a Director of Farm Fish, Inc.
and Mississippi Valley Gas Company, all of Jackson, Mississippi. He was
Trustee and President of Eastover Corporation from 1977 through December 1994;
President and Director of Congress Street Properties from 1984 through
November 1994; and President and Director of LNH REIT, INC. from 1991 through
May 1996. He was also President, Chief Executive Officer and Director of
Rockwood National Corporation, a real estate developer, from 1983 through June
1994. He was a Trustee of First Continental Investors REIT, Houston, Texas
from 1983 through May 1994. He is also a
37
Director of First Chemical Corporation, a subsidiary of New First Mississippi.
He is a member of the Committee on Director Affairs and the First Mississippi
Corporation Foundation Advisory Committee.
Dr. Turner is the President of Southern Methodist University in Dallas,
Texas, a position he assumed in June 1995. He was the Chancellor of the
University of Mississippi in Oxford, Mississippi, from 1984 through June 1995.
He has been a director of River Oaks Furniture, Inc., a furniture manufacturer
based in Fulton, Mississippi, since 1994, and a Director of JC Penney Co.,
Inc., a retailer, since 1995 and a director of Mobile Telecommunications
Technologies Corp., a provider of nationwide paging and voice messaging
services, since July 1996. He is also a Director of Callidus Technologies
Inc., a subsidiary of New First Mississippi. He is Chairman of the Committee
on Director Affairs and a member of the First Mississippi Corporation
Foundation Advisory Committee.
Mr. Ferris is Executive Vice President, Chemicals Group, of Vulcan Materials
Company, a chemical manufacturer located in Birmingham, Alabama. Vulcan serves
principally the chemical, paper and water treatment industries. Prior to
becoming Executive Vice President of Vulcan in 1996, Mr. Ferris served in
various positions at Vulcan Chemicals, a division of Vulcan Materials Company,
since 1974, including President and Executive Vice President.
Mr. Smith is President and Chief Operating Officer of Lyondell Petrochemical
Company of Houston, Texas, a position he has held since August 1994. Lyondell
manufactures and sells petrochemicals and refinery products. From May 1993
until August 1994, he was Executive Vice President and Chief Operating Officer
of Lyondell. He was Vice President, Corporate Planning, of Atlantic Richfield
Company, Los Angeles, California, from October 1991 to May 1993. From July
1991 to October 1991, he was Executive Vice President and Chief Financial
Officer of Lyondell. During fiscal 1996, CTI sold a total of approximately
$308,000 in products to Lyondell Petrochemical Company and its affiliates.
New First Mississippi's Bylaws divide the Board into three groups, with
regular three-year staggered terms and initial terms of three, two and one
years for each group.
Under New First Mississippi's Bylaws, New First Mississippi directors are
required to offer resignations upon completion of nine (9) consecutive years
of service prior to reaching age 65 and again upon reaching age 65. In each
case, the Committee on Director Affairs (or successor committee) will make a
recommendation for action with respect to continued service to the Board of
Directors. Directors must retire at age 70. In accordance with the Bylaws, Mr.
Moreton will be required to resign upon reaching age 70 on September 24, 1997.
Also in accordance with these Bylaw provisions, Mr. Speed, Dr. Murrill and Mr.
Williams will be required to offer their resignations as directors of New
First Mississippi prior to the expiration of their terms. Pursuant to New
First Mississippi's Bylaws, the Committee on Director Affairs will make a
recommendation with respect to the continued Board service of each of these
three directors at the time their respective resignations are submitted in
accordance with the Bylaws.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has established three committees: the Committee on Director
Affairs, the Audit Committee, and the Compensation & Human Resources
Committee. Each is described below.
The Committee on Director Affairs is composed of four (4) non-employee
Directors and is responsible for nominating new Board members, appointing
members to Board Committees, assessing Board performance and recommending
Board compensation for action by the Board. The Chairman of this committee
also chairs executive sessions of the outside members of the Board. The
Committee on Director Affairs considers suggestions for Director nominations
from all sources.
The Audit Committee is composed of four (4) non-employee Directors with
broad latitude for inquiry into all operations of the Company. Its primary
responsibilities include making a recommendation to the Board on the selection
of independent auditors, reviewing audit reports prepared by independent
auditors, internal auditors, insurance auditors and other consultants engaged
by New First Mississippi to examine specific areas of corporate operations,
and examining the adequacy of compliance with various governmental regulations
and corporate policies and procedures.
38
The Compensation & Human Resources Committee is composed of three (3) non-
employee Directors and is charged with the responsibility of recommending to
the Board a program of overall compensation for the Company and its
subsidiaries, including Executive Officers and other Key Employees. These
responsibilities include administration of the Company's Long-Term Incentive
Plans.
The Chief Executive Officer serves as a member ex-officio of the
Compensation & Human Resources Committee, but may not serve as Chairman or
vote or participate in or be present for Committee decisions regarding his own
compensation. He does not make recommendations about nor participate in
decisions regarding any aspect of his compensation.
COMPENSATION OF DIRECTORS
Directors who are not employees will be compensated for their services with
a retainer of $16,000 per year. In addition, non-employee Directors will
receive fees for attendance at duly called Board and committee meetings. The
fees paid will be $1,000 per day for attendance at duly called Board and
committee meetings or a fee of $500 for half-day committee meetings except for
committee chairmen, who will receive a fee of $1,250 per day for meetings and
$625 for half-day meetings. Travel expenses to and from meetings will be
reimbursed to all Directors. No fees will be paid for informal meetings.
Attendance at meetings held by telephone conference call will be paid at the
half-day rate. Directors performing special services at the request of the
Chief Executive Officer will be paid a per diem of $1,000 per day, except for
committee chairmen, who will be paid a per diem of $1,250 per day.
Under First Mississippi's 1988 Long-Term Incentive Plan, which will be
assumed by New First Mississippi in connection with the Transfers and the
Distribution, non-employee Directors were automatically awarded for five (5)
years, Debenture Options to purchase Convertible Debentures. Debenture Options
may be exercised any time within ten (10) years after the date of grant to
purchase Convertible Debentures. Each debenture may be converted six (6)
months after the date of grant of the applicable option into Convertible
Preferred Stock. Each share of Convertible Preferred Stock is, in turn,
immediately convertible into First Mississippi Common Stock. There will be no
further awards under this plan. Debenture Options issued prior to the
Distribution will be exchanged for New First Mississippi Debenture Options
pursuant to the terms of the Employee Benefits Agreement. See "The Transfers
and the Distribution--Terms of the Employee Benefits Agreement."
Under First Mississippi's 1995 Long-Term Incentive Plan, which will be
assumed by New First Mississippi in connection with the Transfers and the
Distribution (the "1995 Plan"), each non-employee Director is eligible
annually for a nonqualified stock option grant. The number of shares subject
to each such option shall be determined by New First Mississippi performance
as measured by First Mississippi's return on equity calculated as the average
two (2) year total net income divided by the average two (2) year shareholder
equity and measured as a rolling average of the two immediately preceding
fiscal years. However, no awards shall be awarded in the event of an average
return of less than 10% and in the event of an average return of 20% or more,
no more than 1,500 options may be granted to any non-employee Director in any
given year.
The exercise price for each such option is the fair market value of First
Mississippi Common Stock as of the date of the grant of the option. Each
option vests six months after the date of grant and terminates on the tenth
anniversary of the date of grant. Accordingly, each non-employee Director
received options to purchase 1,500 shares of First Mississippi Common Stock in
November 1995 and will receive options to purchase an additional 1,500 shares
following First Mississippi's next Annual Meeting. Such options will be
exchanged for New First Mississippi Options. See "The Transfers and the
Distribution--Terms of the Employee Benefits Agreement."
Also under the 1995 Plan, non-employee Directors may make an irrevocable
election to receive share units in exchange for deferring all or some portion
of their annual retainer at a per share unit exchange price that is eighty-
five percent (85%) of the fair market value of First Mississippi Common Stock
determined as of the first day of the year during which all or a portion of
the deferred retainer was to be paid. Dividend equivalents earned pursuant to
the share units are reinvested in the form of additional share units.
39
In fiscal 1986, First Mississippi established a Deferred Income Plan for
Directors, Officers and Key Employees (Plan A) which superseded the previous
deferred income arrangement and pursuant to which deferral opportunities in
any given year, up to a maximum of three (3) years, were offered at the
discretion of the Board. Amounts deferred under Plan A earn interest at a
prescribed rate which, as originally established, was twenty percent (20%),
compounded annually, subject to reduction as described below. First
Mississippi is owner and beneficiary of life insurance policies covering most
of the participants in Plan A. The benefits associated with these policies are
expected to cover First Mississippi's financial obligations incurred in
connection with Plan A, including the interest accrued on the amounts deferred
thereunder in excess of market rates, resulting in no net cost to First
Mississippi over the life of the plan. The Plan provides that the interest
rate may be reduced prospectively and, if necessary, may be adjusted
retroactively, due to severe economic changes including, but not limited to,
changes in tax law. However, no retroactive changes in the rate of a return
may occur unless such economic changes are material, adverse and retroactive
in nature. Further, in no event shall the interest rate on amounts deferred
under Plan A be reduced to a level lower than the ten (10)-year Treasury Note
Rate. Effective January 1, 1994, the Director participants in Plan A still
serving on the Board voluntarily reduced the applicable interest rate to one
hundred twenty percent (120%) of the applicable annual federal long-term rate
as specified in the Internal Revenue Code. At the same time, the Board closed
Plan A for any new participants or deferral opportunities, subject to the
existing rights and obligations thereunder. The interest rate for the first
six months of fiscal year 1994 for all Directors remained at twenty percent
(20%). In fiscal year 1989, First Mississippi established a successor Deferred
Compensation Plan for Outside Directors (Plan B) to insure continuation of
deferral opportunities for Directors. Plan B was amended effective January 1,
1994, to change the interest rate prospectively to one hundred twenty percent
(120%) of the applicable annual federal long-term rate as specified in the
Internal Revenue Code. Amounts deferred under Plan B prior to January 1, 1994
earned interest based on the Chase Manhattan Bank, N.A. Prime Rate, less one
percent (1%). At the time of the Distribution, New First Mississippi will
assume both Plan A and Plan B. The deferrals under both Plan A and Plan B will
be held by New First Mississippi until retirement, resignation or other
termination of services. Director J. Kelley Williams will participate only in
Plan A.
New First Mississippi will furnish Directors with $100,000 accidental death
and dismemberment and $250,000 of business travel accident insurance. At the
time of the Distribution, New First Mississippi will assume First
Mississippi's Retirement Plan for its non-employee Directors under which all
such Directors who have served at least one (1) three-year term with First
Mississippi or New First Mississippi will, under certain conditions, receive
an annual retirement benefit equal to their annual retainer at retirement for
each year of service with First Mississippi and New First Mississippi, not to
exceed fifteen (15) years. The amount of the retainer to be received after
retirement shall be fixed at the time of retirement. The plan also provides
for a lump sum payment to a Director under certain conditions in the event of
a change of control and to his beneficiary upon his death.
EXECUTIVE OFFICERS
The following sets forth certain information with respect to the executive
officers of New First Mississippi. All executive officers are elected by the
Board and hold office until the next annual meeting of shareholders and
thereafter until their successors are elected and qualified.The following
executive officers were elected at the October 30, 1996 meeting of the Board,
and all held the same positions at First Mississippi Corporation prior
thereto.
POSITION HELD, YEAR FIRST
NAME AGE ELECTED AND TERM OF OFFICE
- ---- --- --------------------------
Daniel P. Anderson...... 44 Vice President, Health, Safety and Environmental
Affairs, July 1, 1995; Vice President, Environmental
Affairs, First Chemical Corporation, 1990.
Robert B. Barker........ 51 Vice President, Corporate Development and
Acquisitions, October 1996;
President, Quality Chemicals, Inc., 1990.
40
POSITION HELD, YEAR FIRST
NAME AGE ELECTED AND TERM OF OFFICE
- ---- --- --------------------------
W. P. Bartlett.......... 58 President, Callidus Technologies Inc., 1989;
President, Penteco Corporation, 1983-1989.
J. Steve Chustz......... 48 General Counsel, 1993; Interim General Counsel,
May 1993 through November 1993; Associate
General Counsel, 1987.
Paul Jerry Coder........ 54 President, EKC Technology, Inc., December 1992;
Vice President, Market Research, EKC Technology,
Inc., June 1992; Vice President, KCI Chemicals, Inc.,
June 1987--February 1992.
Samir A. Hakooz......... 49 President, Plasma Energy Corporation ("PEC"), 1991;
Executive Vice President and General Manager, PEC,
July, 1990; Vice President of Marketing, PEC,
April, 1990; Vice President, Marketing and
Vice President of Utility Products for
General Atomics Company, through April 1990.
Scott A. Martin......... President, Quality Chemicals, Inc. October, 1996;
Vice President, Quality Chemicals.
James L. McArthur....... 53 Secretary and Manager, Investor Relations, 1993;
Manager, Investor Relations, 1988.
Terry L. Moore.......... 47 President, Plasma Processing Corporation, 1990;
Vice President, Marketing, PEC, 1985-1990.
George M. Simmons....... 53 President, First Chemical Corporation, July 1, 1995;
Vice President, Marketing, First Chemical
Corporation, 1985.
R. Michael Summerford... 48 Vice President and Chief Financial Officer, 1988;
Vice President, 1983-1988.
Thomas G. Tepas......... 49 President and Chief Operating Officer, August 1995;
Various senior management positions with Hercules,
Inc., including Senior Vice President, 1994 to
August 1995; Group Vice President and President
of the Food and Functional Products Division, 1992;
President of the Flavor and Food Ingredients
Division, 1991.
J. Kelley Williams...... 62 Chairman of the Board and Chief Executive Officer,
August 1995; Chairman of the Board, President
and Chief Executive Officer, 1988;
President and Chief Executive Officer, 1971-1988.
Frank D. Winter......... 55 President and Chief Executive Officer,
FirstMiss Steel, Inc., 1992;
Self-employed consultant, 1991-1992; President,
Atlas Specialty Steels, 1987-1991.
EXECUTIVE COMPENSATION PRIOR TO THE DISTRIBUTION
The following table sets forth certain information concerning compensation
paid by First Mississippi during fiscal years 1996, 1995 and 1994 to First
Mississippi's Chief Executive Officer and the other four most highly
compensated persons, based on the salary and bonus earned in 1996, who were
executive officers of First Mississippi on June 30, 1996, and who will be
executive officers of New First Mississippi at the time of the Distribution.
41
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION (1) OPTIONS (2) COMPENSATION (3)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ---- ------- ------- ---------------- --------------------- -----------------
J. Kelley Williams (4).. 1996 475,000 324,400 1,886,548(5) 60,000 29,545(8)(9)(10)
Chairman & Chief 1995 450,000 360,000 127,697(5) 22,050
Executive Officer 1994 330,000 200,000 (6) 35,000 52,975
Thomas G. Tepas......... 1996 187,500 135,000 (6) 48,272* 48,921(9)(10)(11)
President & Chief
Operating Officer
R. Michael Summerford... 1996 196,271 95,500 858,782(5) 16,422* 12,100(8)(9)(10)
Vice President & 1995 191,725 86,900 212,965(5) 21,300 11,701
Chief Financial Officer 1994 182,458 73,400 (6) 25,000 11,357
George M. Simmons....... 1996 163,227 81,600 71,239(5)(7) 2,300 13,313(8)(9)(10)
President, First Chemi-
cal 1995 127,342 35,400 (6) 10,829
Corporation 1994 120,731 32,000 151,598(5)(7) 6,192
Robert B. Barker........ 1996 163,227 57,000 (6) 2,300 12,845(8)(9)(10)
President, Quality 1995 136,204 37,000 (6) 10,776
Chemicals, Inc. 1994 126,650 33,400 261,849(7) 6,839
- --------
* During fiscal 1996, the effective exercise price and number of underlying
securities for all Stock Options outstanding at the time of the Gold
Distribution were adjusted to reflect the distribution value of the
Getchell shares. Mr. Tepas' and Mr. Summerford's unexercised option awards
issued in 1996 before the Gold Distribution reflect this adjustment. See
"Beneficial Ownership of New First Mississippi Common Stock."
(1) Other Annual Compensation includes payouts under Performance Option
arrangements, direct cash payments related to tax reimbursements related
to long-term incentives, tax planning and tax return preparation services,
and imputed income and tax reimbursements resulting from the personal use
of company automobiles and country clubs. Tax reimbursement payments
represent payments to eligible employees of thirty-seven percent (37%) of
First Mississippi's federal income tax deduction resulting from the
exercise of Debenture Options, Non-Qualified Stock Options ("NQSOs"),
Incentive Stock Options ("ISOs") and Performance Options. These payments
are not applicable for options granted since August 22, 1995.
(2) NQSOs were granted to officers and certain key employees of First
Mississippi in 1996, 1995 and 1994. The options for 1996 were awarded
under the 1995 Long-Term Incentive Plan. Options for 1995 and 1994 were
granted under the 1988 Long-Term Incentive Plan, under which no further
grants will be made. No shares of First Mississippi Common Stock are
available for the grant of awards under the 1980 Long-Term Incentive Plan.
The share amounts for a particular fiscal year under this column reflect
only the shares underlying options which were granted during the
respective fiscal year (that is, shares underlying options granted
subsequent to fiscal year end but based on performance in the prior fiscal
year are included in the share amounts for the subsequent year during
which the related options were actually granted).
(3) All Other Compensation is comprised of company contributions related to
First Mississippi's 401(k) Plan, including amounts provided by First
Mississippi's Benefits Restoration Plan ("BRP"), executive life insurance,
relocation expenses and the above market portion of interest earned under
the Deferred Income Plan (Plan A).
The BRP permits participants in the 401(k) Plan to make contributions, and
First Mississippi to match the same, in amounts permitted by the 401(k)
Plan but which would otherwise be in excess of those permitted by certain
Code limitations.
42
(4) Mr. Williams' base salary was reduced twenty-five percent (25%) at his
request from June 1, 1993 to July 1, 1994, in consideration of losses due
to restructuring in fiscal 1993.
(5) Tax reimbursement payments in fiscal year 1996 to Mr. Williams, Mr.
Summerford and Mr. Simmons were $1,856,591; $844,060 and $16,304,
respectively. Tax reimbursement payments in fiscal 1995 to Mr. Williams
and Mr. Summerford were $78,625 and $196,493, respectively. Tax
reimbursement payments in fiscal 1994 to Mr. Simmons and Mr. Barker were
$38,150 and $69,396, respectively.
(6) Aggregate perquisites and other personal benefits were less than $50,000
or ten percent (10%) of the total annual salary and bonus reported for the
named executive officer and thus are excluded from the table.
(7) Includes payments received by Mr. Simmons on exercise of Performance
Options of $44,064 in 1996 and payments received by Mr. Simmons and Mr.
Barker of $103,107 and $187,558, respectively, in 1994.
(8) Above market interest earned under the Deferred Income Plan in fiscal 1996
was $2,850; $5,172 and $4,705 for Mr. Summerford, Mr. Simmons and Mr.
Barker, respectively. Mr. Williams voluntarily reduced the interest rate
on his deferrals effective January 1, 1994 to one hundred twenty percent
(120%) of the applicable annual federal long-term rate as specified in the
Internal Revenue Code. See "Compensation of Directors."
(9) Company contributions to the 401(k) Plan in fiscal 1996 were $6,000;
$1,200; $6,000; $6,000 and $6,000 for Mr. Williams, Mr. Tepas, Mr.
Summerford, Mr. Simmons and Mr. Barker. Accruals to the 401(k) related BRP
were $13,000; $3,100; $1,800; $529 and $529 for Mr. Williams, Mr. Tepas,
Mr. Summerford, Mr. Simmons and Mr. Barker, respectively.
(10) The Executive life insurance program was changed effective November 1,
1995, to provide cash subsidies to participants based on age-based
premium cost replacing a program under which the Company provided the
insurance and paid the premiums directly. Direct insurance payments in
fiscal 1996 were $1,425; $283; $590; $490 and $490 for Mr. Williams, Mr.
Tepas, Mr. Summerford, Mr. Simmons and Mr. Barker, respectively. Cash
subsidies in fiscal 1996 were $9,120; $1,080; $860; $1,121 and $1,121 for
Mr. Williams, Mr. Tepas, Mr. Summerford, Mr. Simmons and Mr. Barker,
respectively.
(11) Relocation expenses paid by First Mississippi during 1996 on behalf of
Mr. Tepas were $43,258.
TERMINATION AGREEMENTS WITH FIRST MISSISSIPPI
During fiscal 1996, the Board of Directors of First Mississippi approved and
First Mississippi entered into Termination Agreements for the Executive
Officers of First Mississippi, including Mr. Williams, Mr. Tepas, Mr.
Summerford, Mr. Simmons and Mr. Barker. The Termination Agreements are
contingent upon a Change of Control, as defined in the Agreements, and provide
for three-year terms which are automatically extended unless First Mississippi
determines not to renew or there is a Change of Control of First Mississippi
during any three-year term. The consummation of the Transfers, the
Distribution and the Merger will not result in a Change of Control under the
Termination Agreements. Each officer, other than the Chief Executive Officer,
would be paid upon termination of employment for reasons other than cause,
death or disability or upon resignation for good reason, subsequent to a
Change of Control during the term of the Termination Agreement, three (3)
times the sum of the five-year average of his annual base salary and bonus.
First Mississippi's Chief Executive Officer is entitled to the same
termination benefit as described above for all other Executive Officers,
except for the fact that the Chief Executive Officer may resign for any
reason, as opposed to "good reason," within thirty-six (36) months of a Change
of Control and still be entitled to the termination benefit. Upon termination,
the individual would have the option, unless he notifies First Mississippi
otherwise, to receive a cash payment equal to the cash value of all his NQSOs,
Debenture Options and Convertible Debentures, whether then exercisable or not.
Following termination, First Mississippi will pay amounts previously due to
individuals for early stock disposition of grants issued in 1994 and earlier
under First Mississippi's tax sharing plan. No individual would receive
payments in the event of death, disability or termination for cause. In
addition, the Termination Agreements provide for an additional payment to be
made by First Mississippi to the Chief Executive Officer if any of the
severance payments provided for by the Termination Agreements or any other
payments made pursuant to a Change of Control of First Mississippi (the "Total
Payments") become subject to an additional tax ("Excise Tax") imposed by
Section 4999 of the Code, such that the net of all of the payments received by
the Officer after the imposition of the Excise Tax on the Total Payments and
any federal income tax on the
43
additional payment shall be equal to the Total Payments. Pursuant to the
Distribution Agreement, at the time of the Distribution, New First Mississippi
will assume the obligations of First Mississippi under the Termination
Agreements. See "The Transfers and the Distribution--Terms of the Distribution
Agreement."
OPTION GRANTS FOR FIRST MISSISSIPPI COMMON STOCK IN LAST FISCAL YEAR
The following table provides information on Stock Options to purchase First
Mississippi Common Stock granted in fiscal year 1996 to the executive officers
named in the Summary Compensation Table above. Pursuant to the Employee
Benefits Agreement, at the time of the Distribution these Stock Options will
be converted to New First Mississippi Options. See "The Transfers and the
Distribution--Terms of the Employee Benefits Agreement."
INDIVIDUAL GRANTS
---------------------------------------------------------------------------- ---
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED STOCK PRICE APPRECIATION FOR
UNDERLYING TO ALL EXERCISE TEN-YEAR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ($)(2)
NAME GRANTED(1) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- -------------- --------- ---------- -----------------------------
J. Kelley Williams...... 60,000 23.4% 23.13 11/10/05 872,591 2,211,318
Thomas G. Tepas......... 23,800 9.3% 23.13 11/10/05 346,128 877,156
24,472 9.5% 20.38 08/22/05 313,661 794,879
R. Michael Summerford... 16,422 6.4% 20.38 08/22/05 210,483 533,406
George M. Simmons....... 2,300 0.9% 23.13 11/10/05 33,449 84,767
Robert B. Barker........ 2,300 0.9% 23.13 11/10/05 33,449 84,767
- --------
(1) The share amounts under this column do not include 60,000; 21,300; 16,900,
5,100 and 4,100 shares underlying options which were granted on August 27,
1996 to Mr. Williams, Mr. Tepas, Mr. Summerford, Mr. Simmons and Mr.
Barker, respectively.
(2) The dollar amounts under these columns represent the potential realizable
value of each grant assuming that the market value of First Mississippi
Common Stock appreciates from the date of grant to the expiration of the
option at annualized rates of 5% and 10%. These assumed rates of
appreciation have been specified by the Securities and Exchange Commission
for illustrative purposes only and are not intended to forecast future
financial performance or possible future appreciation in the price of
First Mississippi stock.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following table sets forth certain information with regard to the
aggregated options to purchase First Mississippi Common Stock exercised in the
year ended June 30, 1996 and the option values as of the end of that year for
the chief executive officer and other executive officers of First Mississippi
listed in the Summary Compensation Table.
NUMBER OF NUMBER OF SECURITIES AGGREGATE VALUE OF
SHARES ACQUIRED VALUE UNDERLYING UNEXERCISED UNEXERCISED, IN-THE-MONEY
NAME ON EXERCISE REALIZED ($) OPTIONS AT 6/30/96(1) OPTIONS AT 6/30/96 ($)(2)
- ---- --------------- ------------ ---------------------- -------------------------
J. Kelley Williams...... 175,000 5,017,813 317,600 3,370,975
Thomas G. Tepas......... -- -- 48,272 45,752
R. Michael Summerford... 93,300 2,281,244 16,422 30,702
George M. Simmons....... -- -- 18,400 204,788
Robert B. Barker........ -- -- 16,790 184,903
- --------
(1) All option information disclosed relates to exercisable options. There
were no unexercisable options at fiscal year end.
44
(2) Value was computed as the difference between the individual option price
and the per share closing price of First Mississippi Common Stock on June
30, 1996, as reported on the consolidated transaction system for NYSE
issues. Only options with fair market values in excess of the exercise
price are reflected in this column.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR(1)
The following table sets forth certain information with regard to awards
under First Mississippi's Long-Term Incentive Plan in the last fiscal year
ended June 30, 1996.
PERFORMANCE OR
NUMBER OF OTHER PERIOD UNTIL ESTIMATED
NAME UNITS MATURATION OR PAYOUT FUTURE PAYOUTS
- ---- --------- -------------------- --------------
George M. Simmons................. 9,600 (2) (3)
Robert B. Barker.................. 9,600 (2) (3)
- --------
(1) In fiscal 1996, First Mississippi adopted Performance Option Plans for
First Chemical Corporation and Quality Chemicals, Inc., providing for
awards payable only in cash based on appreciation in value of units, such
appreciated value being based on the subsidiary's pre-tax operating profit
and the price earnings multiples of a peer group of publicly held
companies. Options shown in this table represent performance units granted
under these plans on August 22, 1995. This table does not include
performance units granted on August 27, 1996 of 6,700 and 17,500 to Mr.
Simmons and Mr. Barker, respectively.
(2) Performance units granted August 22, 1995 are exercisable no earlier than
six (6) months from date of grant and until ten (10) years from grant. The
units are valued on a quarterly basis and may be exercised by the
participant within fifteen (15) business days from the date of valuation.
(3) The performance options granted on August 22, 1995, have a base price of
$20.30 and may be exercised as noted above. Estimated future value will be
based on the appreciated value of the options on the exercise date and
cannot be reasonably estimated at this time. However, if unit values
appreciated at annual rates of 5% and 10%, the potential realizable value
at the end of their ten (10)-year term would be $122,529 and $310,589,
respectively, for Mr. Simmons and Mr. Barker.
OTHER COMPENSATION
In 1970, First Mississippi shareholders authorized the noncontributory
Retirement Plan for the Employees of First Mississippi. Employees become one
hundred percent (100%) vested after five (5) years of employment. The plan
provides for normal retirement at age sixty-five (65) with actuarially
adjusted provisions for early and postponed retirement dates. Retirement
benefits are based on years of service and average compensation (wages and
salary) of the five (5) highest consecutive years during employment. The
benefits listed in the table below are not subject to any reduction for social
security or other offset amounts.
The following table shows the estimated annual retirement benefit payable to
participating employees including executive officers based on earnings and
years of service classifications as indicated.
AVERAGE ANNUAL ESTIMATED ANNUAL BENEFITS FOR YEARS OF CREDIT SERVICE
COMENSATION (5 HIGHESTP ------------------------------------------------------
CNSECUTIVE YEARS)O 10 YEARS 20 YEARS 30 YEARS 40 YEARS
- ----------------------- ------------- ------------- ------------- -------------
$100,000................ $ 17,712 $ 35,424 $ 53,136 $ 70,848
150,000................. 26,712 53,424 80,136 106,848
200,000................. 35,712 71,424 107,136 142,848
300,000................. 53,712 107,424 161,136 214,848
400,000................. 71,712 143,424 215,136 286,848
450,000................. 80,712 161,424 242,136 322,848
500,000................. 89,712 179,424 269,136 358,848
45
The table includes amounts that exceed limitations allowed under Section 415
of the Code. First Mississippi's BRP provides that if a retired employee's
benefits calculated under the Retirement Plan exceed the maximum allowed under
the Code, First Mississippi will supplement such employee's benefits to the
extent such benefit is in excess of the limitation.
Years of service for the executive officers listed in the Summary
Compensation Table are: J. Kelley Williams, thirty (30) years; Thomas G.
Tepas, one (1) year; R. Michael Summerford, eighteen (18) years; George M.
Simmons, eleven (11) years and Robert B. Barker, twenty-one (21) years.
46
BENEFICIAL OWNERSHIP OF NEW FIRST MISSISSIPPI COMMON STOCK
The following table sets forth certain projected information as of the
Distribution Record Date regarding the beneficial ownership of shares of New
First Mississippi Common Stock by (i) each person known by New First
Mississippi to own beneficially more than five percent of the outstanding
shares of First Mississippi Common Stock, (ii) each director of New First
Mississippi, (iii) certain executive officers of New First Mississippi and
(iv) the directors and executive officers of New First Mississippi as a group.
The ownership information presented below with respect to all persons and
organizations is based on record ownership of First Mississippi Common Stock
as of September 9, 1996 (other than Goldman Sachs Group, L.P.) and assumes no
change in record ownership of First Mississippi Common Stock or beneficial
ownership of Stock Options or Debenture Options between such date and the
Distribution Record Date.
TOTAL COMMON
COMMON STOCK STOCK PERCENT
BENEFICIALLY PERCENT OF COMMON BENEFICIALLY OF
NAME OWNED(1)(2) CLASS STOCK OWNED(3) CLASS
- ---- ------------ ---------- ------- ------------ -------
Directors and Named
Executive Officers:
Richard P. Anderson..... 9,450(4)
NQSO................... 2,101 11,551 *
Paul A. Becker.......... 10,000
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
------
13,376 23,376 *
James W. Crook.......... 116,087(5)
NQSO................... 2,101 118,188 *
James E. Fligg.......... 500
1994-1 Series.......... 2,255 100%
NQSO................... 2,101
------
4,356 4,856 *
Robert P. Guyton........ 23,000
NQSO................... 2,101 25,101 *
Charles P. Moreton...... 13,250
NQSO................... 2,101 15,351 *
Paul W. Murrill......... 7,900(6)
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
------
13,376 21,276 *
William A. Percy, II.... 36,275(7)
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
------
13,376 49,651 *
47
TOTAL COMMON
COMMON STOCK STOCK PERCENT
BENEFICIALLY PERCENT OF COMMON BENEFICIALLY OF
NAME OWNED(1)(2) CLASS STOCK OWNED(3) CLASS
- ---- ------------ ---------- ------- ------------ -------
Leland R. Speed......... 12,720
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
-------
13,376 26,096 *
R. Gerald Turner........ 7,900(8)
NQSO................... 2,101 10,001 *
J. Kelley Williams...... 870,465(9)
1987-A Series.......... 56,375 78%
1988-A Series.......... 101,475 63%
1989-1 Series.......... 101,475 100%
1990-1 Series.......... 101,475 98%
NQSO................... 84,037
-------
444,887 1,315,302 [5.61]%
Robert B. Barker........ 10,772(10)
1987-A Series.......... 11,275 16%
1988-A Series.......... 6,765 4%
1989-A Series.......... 2,255 6%
NQSO................... 3,221
-------
23,516 34,288 *
George M. Simmons....... 243
1988-A Series**........ 9,000 6%
1989-A Series.......... 2,255 6%
NQSO................... 14,496
-------
25,771 26,014 *
R. Michael Summerford... 70,546
NQSO................... 23,001 93,547 *
Thomas G. Tepas 1,759(11)
NQSO................... 67,611 69,370 *
All Directors and Execu-
tive Officers as a
Group (24 Persons)(12). 1,218,366
1987-A Series.......... 67,650 94%
1988-A Series**........ 121,770 75%
1988-1 Series.......... 9,020 80%
1989-A Series.......... 5,637 15%
1989-1 Series.......... 101,475 100%
1989-2 Series.......... 9,020 80%
1990-1 Series.......... 101,475 85%
48
TOTAL COMMON
COMMON STOCK STOCK PERCENT
BENEFICIALLY PERCENT OF COMMON BENEFICIALLY OF
NAME OWNED(1)(2) CLASS STOCK OWNED(3) CLASS
- ---- ------------ ---------- ------ ------------ -------
1990-2 Series.......... 9,020 80%
1991-1 Series.......... 6,765 75%
1991-2 Series.......... 9,020 80%
1992-1 Series.......... 9,020 80%
1994-1 Series.......... 2,225 100%
NQSO................... 294,343
-------
746,470 1,964,836 9.2
5% Beneficial Holder:
Goldman Sachs Group,
L.P.(13)................ 1,771,091 8.3
Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
- --------
* Represents less than one percent (1%) of class.
** Represents 9,020 shares of First Mississippi Common Stock underlying
Convertible Debentures that have already been purchased through the
exercise of Debenture Options.
(1) On October 20, 1995, First Mississippi distributed to its shareholders
the shares of Getchell held by First Mississippi pursuant to the Gold
Distribution. Following the Gold Distribution, in accordance with the
provisions of the Long-Term Incentive Plans of First Mississippi, the
number of shares of First Mississippi Common Stock underlying outstanding
Convertible Debentures, Debenture Options and NQSOs, as well as the
effective exercise prices relating thereto, were adjusted to reflect the
distribution value of the Getchell shares. This adjustment increased the
number of shares underlying the awards outstanding at the time of the
Gold Distribution and reduced the respective exercise prices by a factor
of 1.61.
(2) Numbers represent shares of First Mississippi Common Stock underlying the
Convertible Debentures and NQSOs beneficially owned by the directors and
officers. The Convertible Debentures are immediately convertible into the
specified number of shares of Convertible Preferred Stock of the same
series and then immediately convertible into the specified number of
shares of First Mississippi Common Stock. NQSOs are exercisable no
earlier than six (6) months from date of grant into shares of First
Mississippi Common Stock and presently all are exercisable.
(3) It is anticipated that prior to the Distribution, New First Mississippi
will adopt a Shareholder Rights Plan pursuant to which, preferred stock
purchase rights will be attached to the outstanding shares of New First
Mississippi Common Stock, including the outstanding shares of New First
Mississippi Common Stock projected above as being owned by directors and
officers immediately following the Distribution. Under certain
conditions, each right will be exercisable to purchase one one-hundredth
(1/100) of a share of a new series of preferred stock, at an exercise
price of $100 (subject to adjustment). The rights, which will not have
voting rights, will expire in 2006 and will be redeemable by New First
Mississippi at a price of $.01 per right prior to a specified period of
time after the occurrence of certain events. In certain events, each
right (except certain rights beneficially owned by 10% or more owners,
which rights are voided) will entitle its holder to purchase shares of
New First Mississippi Common Stock with a value of twice the then current
exercise price. See "Description of New First Mississippi Capital Stock--
Shareholder Rights Plan."
(4) Shares voting and investment power of 3,700 shares with Mrs. Anderson.
(5) Included are 700 shares owned by Mrs. Crook of which Mr. Crook has no
voting and investment power and disclaims beneficial ownership.
(6) Included are 775 shares owned by Mrs. Murrill of which Dr. Murrill has no
voting and investment power and disclaims beneficial ownership.
(7) Included are 31,500 shares of which Mr. Percy has sole voting and
investment power as President of Greenville Compress Company and of which
he disclaims beneficial ownership.
49
(8) Shares voting and investment power of 7,800 shares with Mrs. Turner.
(9) Included are 171,518 shares of which Mr. Williams shares voting and
investment power, and 4,327 shares for which he has no voting and
investment power and disclaims beneficial ownership. Excluded are 61,750
shares held in the Jean P. Williams Revocable Trust, of which Mr. Williams
has no voting and investment power and disclaims beneficial ownership.
(10) Shares voting and investment power of 200 shares with Mrs. Barker.
(11) Shares voting and investment power with Mrs. Tepas.
(12) Except for 2,000 shares, 2,000 shares, and 100 shares for which Mr.
Daniel Anderson, Mr. Moore and Mr. Chustz, respectively, have shared
voting and investment power, and except for 12 shares owned by Mr.
McArthur's wife, of which he has no voting and investment power and
disclaims beneficial ownership, and except as otherwise indicated in
these notes, the shares beneficially owned by the persons indicated in
the table above represent sole voting and investment power.
(13) Based on Form 13G filed by the Investor with the Securities and Exchange
Commission. Included 1,762,991 shares as to shared voting power and 8,100
shares with no voting power.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gold Distribution. Until October 20, 1995, First Mississippi owned
14,750,000 shares of common stock of Getchell (approximately 81% of the
outstanding common stock). On that date, First Mississippi distributed all of
the stock it owned in Getchell to its shareholders. During fiscal 1996,
Messrs. Moreton, Summerford and Williams, who currently serve as a director,
Vice President, Chief Financial Officer, and Chairman and Chief Executive
Officer, respectively, of First Mississippi, served as members of the board of
Getchell, with Mr. Williams serving as Chairman. At August 31, 1996, Mr.
Williams beneficially owned 613,165 shares of common stock of Getchell, or
2.4% of the total number of shares outstanding.
Debt Owed by Getchell. Prior to the Gold Distribution, First Mississippi
provided to Getchell capital and operating advances from time to time.
Effective the date of the Gold Distribution, the debt was $52.5 million and
First Mississippi and Getchell entered into a new long-term loan agreement
(the "Loan Agreement") which provided that the total outstanding amount would
be due in September 2000, that Getchell would repay $15.0 million to First
Mississippi from the proceeds of a public common stock offering prior to April
1996, that interest would accrue at a rate not exceeding the London Inter-Bank
Offered Rate plus one percent, and that the interest would not be paid in
cash, but rather would be capitalized to the note. In November 1995, Getchell
reduced the debt by $15.0 million, from proceeds of a common stock offering.
The debt was further reduced by the settlement of the Tax Sharing Agreement
(described below). At June 30, 1996, the total aggregate debt owed to First
Mississippi pursuant to the Loan Agreement was $24.7 million. The Loan
Agreement will be transferred to New First Mississippi pursuant to the
Transfers.
Tax Sharing Agreement. In October 1987, First Mississippi and Getchell
entered into a Tax Sharing Agreement for the period during which Getchell was
a member of the affiliated group of corporations of which First Mississippi is
the common parent (the "Affiliated Group"). Under the agreement, Getchell
accrued income taxes (payable to First Mississippi) as if Getchell and its
subsidiaries were, since the inception of the agreement on October 28, 1987, a
separate affiliated group of corporations filing consolidated income tax
returns. In determining the amount of such payments, Getchell was potentially
bound by tax elections, conventions, treatments or methods utilized by First
Mississippi in filing its consolidated income tax returns. The Tax Sharing
Agreement also provided for payments in respect of net operating losses and
certain other tax benefits by First Mississippi to Getchell or, under some
circumstances, by Getchell to First Mississippi, in taxable years in which
Getchell was no longer a member of the Affiliated Group. Effective with the
Gold Distribution on October 20, 1995, the Tax Sharing Agreement was
terminated. In settlement of the Agreement, approximately $13.9 million was
used to reduce the debt owed by Getchell to First Mississippi.
Tax Ruling Agreement. First Mississippi obtained a letter ruling from the
Internal Revenue Service in April 1995 providing for tax-free distribution to
its shareholders of its shares of Getchell's common stock. In
50
September 1995, First Mississippi and Getchell entered into the Tax Ruling
Agreement which sets forth certain covenants and agreements of Getchell
relevant to maintaining the tax-free nature of the distribution of the common
stock.
The Tax Ruling Agreement provides that Getchell will complete an
underwritten public equity of common stock generating aggregate proceeds of at
least $50.0 million prior to April 1996. In late 1995, Getchell satisfied this
requirement by issuing common stock to the public which generated net proceeds
of approximately $137.5 million. The Tax Ruling Agreement also required
Getchell to repay at least $15.0 million of debt owed to First Mississippi
from the net proceeds of the common equity issue, which repayment occurred in
November 1995.
The Tax Ruling Agreement provides also that Getchell will not, prior to one
year from the date of the spinoff, enter into any agreement to merge or
consolidate with or into any other corporation, to liquidate, to sell or
transfer all or substantially all of its assets, to redeem or repurchase any
of its capital stock (except for the redemption of the stock of one or more
Getchell employees upon his or her termination) or to issue additional shares
of its capital stock (except in connection with the public offering of common
stock described above, or issuances pursuant to Getchell's employee benefit or
compensation plans), unless it first obtains an opinion of counsel or a
supplemental ruling from the Internal Revenue Service that such action does
not interfere with the Tax Ruling.
In the event Getchell were to be taken such actions or solicits or assists
any person or group to commence a tender offer, if such person or group would
acquire ownership of 20% or more of Getchell's outstanding Common Stock
without an opinion or a supplemental Internal Revenue Service ruling, Getchell
agreed under the Tax Ruling Agreement to indemnify and hold First Mississippi
and certain affiliated corporations harmless against any and all federal,
state and local taxes, interest penalties and additions thereto imposed upon
or incurred by such corporations as a result of such action's effect on the
tax free nature of the Gold Distribution. The Tax Ruling Agreement will be
transferred to New First Mississippi pursuant to the Transfers.
For a description of certain other relationships and related transactions
with respect to entities related to directors and executive officers of New
First Mississippi, see "Management--Directors" and "Management--Executive
Officers."
51
DESCRIPTION OF NEW FIRST MISSISSIPPI CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of New First Mississippi consists of
100,000,000 shares of New First Mississippi Common Stock, par value $1.00 per
share, and 20,000,000 shares of Preferred Stock. At the Distribution Record
Date there are expected to be 20,614,491 shares of New First Mississippi
Common Stock outstanding held of record by approximately 5,476 persons. No
shares of Preferred Stock have been issued by New First Mississippi.
Based on the 20,614,491 shares of First Mississippi Common Stock outstanding
at September 9, 1996, 20,614,491 shares of New First Mississippi Common Stock
will be distributed to First Mississippi shareholders in the Distribution. All
the shares of New First Mississippi Common Stock to be distributed to First
Mississippi shareholders in the Distribution will be fully paid and non-
assessable.
COMMON STOCK
Dividends will be payable on New First Mississippi Common Stock at the
discretion of the Board from sources legally available therefor. Upon
dissolution of New First Mississippi, holders of the New First Mississippi
Common Stock will be entitled to share pro rata in the assets remaining after
payment of corporate debts and any other priority claims. New First
Mississippi Common Stock will not be subject to any redemption or sinking fund
provisions and will have no subscription rights. Each holder of New First
Mississippi Common Stock will be entitled to one vote per share.
PREFERRED STOCK
New First Mississippi's Board of Directors may authorize the issuance of up
to 20,000,000 shares of Preferred Stock in one or more series, which series
may have such voting powers (if any), and such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
or restrictions thereof, as the Board shall establish in its resolution
providing for the issuance of such series. Any series of Preferred Stock
issued by New First Mississippi may have dividend, dissolution and other
preferences over New First Mississippi Common Stock and may be convertible
into shares of New First Mississippi Common Stock. New First Mississippi will
at or prior to the time of the Distribution, designate a series of New First
Mississippi Preferred Stock as Series X Junior Participating Preferred Stock
(the "Series X Preferred Stock"), in connection with the Shareholder Rights
Plan. See "--Shareholder Rights Plan" below.
Pursuant to its authority to designate series of Preferred Stock, the Board
has established the 1987-A, 1988-A, 1988-1, 1989-A, 1989-1, 1989-2, 1990-1,
1990-2, 1991-1, 1991-2, 1992-1 and 1994-1 Series Convertible Preferred Stock
for issuance in connection with certain benefit plans of New First Mississippi
and has authorized the issuance of such Preferred Stock as follows: up to
97,000 shares of the 1987-A Series, 156,000 shares of the 1988-A Series,
11,000 shares of the 1988-1 Series, 103,000 shares of the 1989-A Series,
45,000 shares of the 1989-1 Series, 11,000 shares of the 1989-2 Series,
138,000 shares of the 1990-1 Series, 11,000 shares of the 1990-2 Series,
155,000 shares of the 1991-1 Series, 11,000 shares of the 1991-2 Series,
11,000 shares of the 1992-1 Series and 1,000 shares of the 1994-1 Series upon
conversion of, respectively, the 1987-A, 1988-A, 1988-1, 1989-A, 1989-1, 1989-
2, 1990-1, 1990-2, 1991-1, 1991-2, 1992-1 and 1994-1 Series Convertible
Debentures.
The 1987-A, 1988-A, 1988-1, 1989-A, 1989-1, 1989-2, 1990-1, 1990-2, 1991-1,
1991-2, 1992-1 Series and 1994-1 Series Convertible Preferred Stock (sometimes
referred to collectively as the "Series Stock") each has a par value of $1.00
per share and is entitled to a quarterly non-cumulative preferential dividend
of $.05 per share, payable quarterly. Each share of Series Stock will be
convertible immediately into 1.61 shares of New First Mississippi's Common
Stock, subject to adjustment in certain events (including with respect to the
Distribution). The Board of Directors is authorized to determine the
appropriate adjustments, if any, to the number of shares of the New First
Mississippi's Common Stock issuable upon conversion of the Series Stock in the
event of a reclassification, recapitalization, merger, consolidation,
reorganization, issuance of warrants, rights or debentures,
52
stock dividend, stock split or reverse stock split, cash dividend, property
dividend, including, without limitation, a distribution of the stock of a
subsidiary (including the Distribution), combination or exchange of shares,
repurchase of shares, or any other change of New First Mississippi's corporate
structure, which, in the judgment of the Board materially affects the value of
New First Mississippi's shares subsequent to the grant of a regular Debenture
Option or subsequent to the conversion of a Stock Option into a Special
Debenture Option.
New First Mississippi will not issue fractional shares of New First
Mississippi Common Stock upon conversion of Series Stock. In lieu of such
fractions, New First Mississippi will pay to the holder of Series Stock
requesting conversion an amount in cash equal to the market value of such
fraction at the time of such conversion, as determined by the Board.
Any or all of the Series Stock outstanding at any time may be redeemed at
the option of New First Mississippi in whole or in part at any time upon not
less than 20 nor more than 60 days' notice to the record holders at their last
addresses as shown in the stock transfer records of New First Mississippi. The
conversion right with respect to any shares called for redemption will be lost
unless exercised no later than the day fixed for redemption. The redemption
price per share (the "Redemption Price") for Series Stock will be as follows
(plus in each case accrued and unpaid dividends per share on the respective
series of stock to the date of redemption):
REDEMPTION
SERIES STOCK PRICE PER SHARE
------------ ---------------
1987-A................................................... $14.4375
1988-A................................................... 15.9375
1988-1................................................... 16.125
1989-A................................................... 17.50
1989-1................................................... 17.50
1989-2................................................... 13.8125
1990-1................................................... 11.00
1990-2................................................... 9.3750
1991-1................................................... 9.8125
1991-2................................................... 9.3125
1992-1................................................... 7.8125
1994-1................................................... 21.3125
Under the MBCA, no redemption could be made if New First Mississippi were
insolvent or would be rendered insolvent by such redemption or if such
redemption would reduce New First Mississippi's net assets below the aggregate
amount payable to holders of shares having prior or equal rights to New First
Mississippi's assets upon involuntary dissolution.
Upon any voluntary or involuntary liquidation or dissolution of New First
Mississippi, the holders of the Series Stock will be entitled to a liquidation
preference equal to the Redemption Price for the appropriate series as set
forth above, plus any declared but unpaid dividends on the respective series
of stock, before any distribution of assets may be made to the holders of New
First Mississippi Common Stock or other shares junior to the Series Stock.
After the holders of the Series Stock have received such amount, they may not
participate in any remaining assets and surplus funds of New First
Mississippi. If the amounts which holders of the Series Stock and any other
series of Preferred Stock ranking equally as to distribution of assets are
entitled to receive in any voluntary or involuntary liquidation or dissolution
are not paid in full, the shares of Series Stock and such other series of
Preferred Stock will share ratably in any distribution of assets in accordance
with the amounts which would be payable on such distribution if all amounts to
which the holders of each such series are entitled are paid in full.
Additional series of Preferred Stock may be created and shares thereof may
be issued by New First Mississippi without any approval or action by the
holders of the Series Stock being necessary, and such additional series of
stock may rank equally with the Series Stock as to distribution of New First
Mississippi's assets in the event of liquidation or dissolution.
53
The holders of shares of Series Stock will not be entitled to vote except in
certain circumstances as provided by the MBCA. Holders of Series Stock do not
have preemptive rights.
SHAREHOLDER RIGHTS PLAN
New First Mississippi expects that the Board of Directors of New First
Mississippi will, at or prior to the Time of Distribution, declare a dividend
distribution of one right (a "New First Mississippi Right") for each
outstanding share of New First Mississippi Common Stock distributed to First
Mississippi shareholders pursuant to the Distribution. Each Right will entitle
the registered holder to purchase from First Mississippi a unit consisting of
one one-hundredth of a share (a "Unit") of Series X Preferred Stock, at a
purchase price per Unit (the "Purchase Price"), to be determined prior to
issuing the Rights. The description and terms of the Rights will be set forth
in a Rights Agreement (the "Rights Agreement") between New First Mississippi
and a Rights Agent.
Initially, the Rights will be attached to all New First Mississippi Common
Stock certificates representing shares then outstanding, and no separate
Rights Certificates will be distributed. The Rights will separate from New
First Mississippi Common Stock and a Rights Distribution Date will occur upon
the earliest of any of the following events:
(i) 10 days following a public announcement that a person or group (an
"Acquiring Person"), together with persons affiliated or associated with
it, has acquired, or obtained the right to acquire, beneficial ownership of
15 percent or more of the outstanding shares of New First Mississippi
Common Stock (the "Stock Acquisition Date");
(ii) 10 business days (or such later date as the Board of Directors of
the Registrant shall determine) following the commencement of a tender
offer or exchange offer that would result in a person or group beneficially
owning 15 percent or more of such outstanding shares of New First
Mississippi Common Stock; or
(iii) 10 business days following a determination by the Board of
Directors of the Registrant that a person (an "Adverse Person"), alone or
together with its affiliates and associates, has become the beneficial
owner of more than 10% of the Common Stock and that (a) such beneficial
ownership is intended to cause New First Mississippi to repurchase the
Common Stock beneficially owned by such person or to cause pressure on to
New First Mississippi take action or enter into transactions intended to
provide such person with short-term financial gain under circumstances
where the Board of Directors determines that the best long-term interests
of New First Mississippi would not be served by taking such action or
entering into such transactions at the time or (b) such beneficial
ownership is causing or reasonably likely to cause a material adverse
impact on the business or prospects of New First Mississippi; provided,
however, that the Board of Directors of New First Mississippi shall not
declare any person to be an Adverse Person if such person has reported or
is required to report its ownership of Common Stock on Schedule 13G under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or on
Schedule 13D under the Exchange Act which Schedule 13D does not state any
intention to, or reserve the right to, control or influence New First
Mississippi or engage in certain other actions, so long as such person
neither reports nor is required to report such ownership other than as
described in this proviso (the earliest of such dates being called the
"Distribution Date").
Until the Distribution Date (or earlier redemption or expiration of the
Rights), (i) the Rights will be transferred with and only with the New First
Mississippi Common Stock (except in connection with redemption of the Rights),
(ii) new New First Mississippi Common Stock certificates issued after the
Record Date upon transfer, replacement or new issuance of New First
Mississippi Common Stock will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any
certificates for New First Mississippi Common Stock outstanding will also
constitute the transfer of the Rights associated with the New First
Mississippi Common Stock represented by such certificate.
54
The Rights will first become exercisable on the Distribution Date and will
expire at the close of business on November , 2006 (the "Expiration Date"),
unless earlier redeemed by New First Mississippi as described below.
Notwithstanding the foregoing, the Rights will not be exercisable after the
occurrence of a Triggering Event (defined below) until New First Mississippi's
right of redemption has expired.
As soon as practicable after the Distribution Date, separate certificates
evidencing the Rights (the "Rights Certificates") will be mailed to holders of
record of New First Mississippi Common Stock as of the close of business on
the Distribution Date and, thereafter, such separate Rights Certificates alone
will evidence the Rights. Except for shares of New First Mississippi Common
Stock issued or sold after the Distribution Date pursuant to the exercise of
stock options or under any employee benefit plan or arrangement granted or
awarded prior to the Distribution Date, or the exercise, conversion or
exchange of securities issued by New First Mississippi, and except as
otherwise determined by the Board of Directors, only shares of New First
Mississippi Common Stock issued prior to the Distribution Date will be issued
with Rights.
In the event that any person shall become (a) an Acquiring Person (except
(i) pursuant to an offer for all outstanding shares of New First Mississippi
Common Stock which the independent directors determine to be fair to and
otherwise in the best interest of New First Mississippi and its shareholders
after receiving advice from one or more investment banking firms (a
"Qualifying Offer") and (ii) for certain persons who report their ownership on
Schedule 13G under the Exchange Act, or on Schedule 13D under the Exchange
Act, provided that they do not state any intention to, or reserve the right
to, control or influence New First Mississippi and such persons certify that
they became an Acquiring Person inadvertently and they agree that they will
not acquire any additional shares of New First Mississippi Common Stock) or
(b) an Adverse Person (either such event is referred to herein as a
"Triggering Event"), then the Rights will "flip-in" and entitle each holder of
a Right, except as provided below, to purchase, upon exercise at the then-
current Purchase Price, that number of shares of Common Stock having a market
value of two times such Purchase Price.
Any Rights beneficially owned at any time on or after the earlier of the
Distribution Date and the Stock Acquisition Date by an Acquiring Person, an
Adverse Person or an affiliate or associate of an Acquiring Person or an
Adverse Person (whether or not such ownership is subsequently transferred)
will become null and void upon the occurrence of a Triggering Event, and any
holder of such Rights will have no right to exercise such Rights.
In the event that, following a Triggering Event, New First Mississippi is
acquired in a merger or other business combination in which the New First
Mississippi Common Stock does not remain outstanding or is changed (other than
a merger following a Qualifying Offer) or 50 percent of the assets or earning
power of New First Mississippi and its Subsidiaries (as defined in the Rights
Agreement) (taken as a whole) is sold or otherwise transferred to any person
(other than New First Mississippi or any Subsidiary of the Registrant) in one
transaction or a series of related transactions, the Rights will "flip-over"
and entitle each holder of a Right, except as provided in the preceding
paragraph, to purchase, upon exercise of the Right at the then-current
Purchase Price, that number of shares of common stock of the acquiring company
(or, in certain circumstances, one of its affiliates) which at the time of
such transaction would have a market value of two times such Purchase Price.
The Purchase Price is subject to adjustment from time to time to prevent
dilution upon the (i) declaration of a dividend on the Preferred Stock payable
in shares of Preferred Stock, (ii) subdivision of the outstanding Preferred
Stock, (iii) combination of the outstanding Preferred Stock into a smaller
number of shares, (iv) issuance of any shares of New First Mississippi's
capital stock in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which New
First Mississippi is the continuing or surviving corporation), (v) grant to
holders of the Preferred Stock of certain rights, options, or warrants to
subscribe for Preferred Stock or securities convertible into Preferred Stock
at less than the current market price of the Preferred Stock, or (vi)
distribution to holders of the Preferred Stock of other evidences of
indebtedness, cash (other than a regular quarterly cash dividend payable out
of the earnings or retained earnings of New First Mississippi), subscription
rights, warrants, or assets (other than a dividend payable in Preferred Stock,
but including any dividend payable in stock other than Preferred Stock).
55
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent of the Purchase Price.
At any time until the earlier of (i) 10 days following the Stock Acquisition
Date and (ii) the Expiration Date, New First Mississippi (under certain
circumstances only with the concurrence of a majority of the Continuing
Directors (as defined in the Rights Agreement)) may redeem the Rights in
whole, but not in part, at a price of $.01 per Right, subject to adjustments.
New First Mississippi may not redeem the Rights following a determination that
any person is an Adverse Person. New First Mississippi may, at its option, pay
the redemption price in cash, shares of New First Mississippi Common Stock
(based on the current market price of the New First Mississippi Common Stock
at the time of redemption) or any other form of consideration deemed
appropriate by the Board of Directors of New First Mississippi. Immediately
upon the action of the New First Mississippi's Board of Directors ordering
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the applicable
redemption price. In addition, after a Triggering Event, at the election of
the Board of Directors of New First Mississippi, the outstanding Rights (other
than those beneficially owned by an Acquiring Person, Adverse Person or an
affiliate or associate of an Acquiring Person or Adverse Person) may be
exchanged, in whole or in part, for shares of New First Mississippi Common
Stock, or shares of preferred stock of New First Mississippi having
essentially the same value or economic rights as such shares. Immediately upon
the action of the Board of Directors of New First Mississippi authorizing any
such exchange, and without any further action or any notice, the Rights (other
than Rights which are not subject to such exchange) will terminate and such
Rights will only entitle holders to receive the shares issuable upon such
exchange.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of New First Mississippi, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to shareholders or to New First Mississippi, shareholders
may, depending upon the circumstances, recognize taxable income in the event
that the Rights become exercisable for New First Mississippi Common Stock (or
other consideration) of the Registrant or for common stock of the acquiring
company as set forth above.
At any time prior to the Distribution Date, New First Mississippi may,
without the approval of any holder of the Rights, supplement or amend any
provision of the Rights Agreement. Thereafter, the Rights Agreement may be
amended only (i) to cure ambiguities, (ii) to correct inconsistent provisions,
(iii) to shorten or lengthen any time period thereunder (under certain
circumstances only with the concurrence of a majority of the Continuing
Directors) or (iv) in ways that do not adversely affect the Rights holders
(other than an Acquiring Person or Adverse Person). From and after the
Distribution Date, the Rights Agreement may not be amended to lengthen (A) a
time period relating to when the Rights may be redeemed at such time as the
Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights (other than an
Acquiring Person or Adverse Person).
Until the Distribution Date, New First Mississippi will issue one Right with
each share of New First Mississippi Common Stock that shall become outstanding
so that all such shares will have attached Rights. 250,000 shares of Preferred
Stock have been reserved for issuance upon exercise of the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire New First
Mississippi on terms not approved by New First Mississippi's Board of
Directors. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors of New First Mississippi since
the Board of Directors may, at its option, at any time until 10 days following
the Stock Acquisition Date, redeem all, but not less than all, of the then
outstanding Rights at the applicable redemption price.
56
NO PREEMPTIVE RIGHTS
No holder of any stock of any class of New First Mississippi capital stock
authorized at the time of the Distribution will then have any preemptive right
to subscribe to any securities of any kind or class.
DESCRIPTION OF CERTAIN STATUTORY, CHARTER AND BYLAW PROVISIONS
Mississippi Shareholder Protection Act
Sections 79-25-1 through 79-25-9 of the MBCA (the "Shareholder Protection
Act"), a statutory provision restricting business combinations with
shareholders who acquire 20 percent or more of a corporation's voting stock,
is applicable to First Mississippi and will be applicable to New First
Mississippi after the Distribution. The Shareholder Protection Act prohibits
certain "business combination" transactions between a publicly held
Mississippi corporation and any "interested shareholder" for a period of two
years after the date on which the interested shareholder became an interested
shareholder unless (a) 80 percent of the outstanding shares and two-thirds of
the shares not owned by the 20 percent holder approve the combination; (b) 80
percent of the continuing directors approve the combination; or (c) the
aggregate amount of the offer meets certain fair price criteria.
The Shareholder Protection Act would not prevent the holder of a controlling
interest from exercising control over New First Mississippi and would not
prevent a hostile takeover or hostile acquisition of control of New First
Mississippi. The Shareholder Protection Act may, however, discourage or make
more difficult a hostile takeover or acquisition of control.
Mississippi Control Share Act
New First Mississippi has elected in its Articles of Incorporation to not be
subject to Sections 79-27-1 through 79-27-11 of the MBCA (known as the Control
Share Act).
Classified Board of Directors
The Articles of Incorporation and Bylaws provide for New First Mississippi's
Board of Directors to be divided into three classes of Directors serving
staggered three-year terms, as is the case under First Mississippi's Restated
Charter of Incorporation as currently in effect. As a result, approximately
one-third of the members of New First Mississippi's Board will be elected each
year. See "Management--Directors." This provision could prevent a party who
acquires outstanding voting stock of New First Mississippi having a majority
voting power from obtaining control of New First Mississippi's Board until the
second annual shareholders' meeting following the date the acquiror obtains
the controlling interest, and thus could have the effect of discouraging a
potential acquiror from making a tender offer or otherwise attempting to
obtain control of New First Mississippi. Accordingly, this provision could
increase the likelihood that incumbent directors will retain their positions.
Number of Directors; Removal; Vacancies
The Bylaws provide that the number of directors initially will be 13. The
number of directors will automatically be reduced to 12 when any director
whose term expires in 1998 ceases to be a member of the Board. Directors may
be removed only for cause. The Bylaws of New First Mississippi provide that
only the Board will be entitled to fill vacancies on the Board, including
vacancies created by expansion of the Board.
No Cumulative Voting
The Articles of Incorporation of New First Mississippi provide that
shareholders shall not be entitled to cumulate their votes for election of
directors. First Mississippi shareholders currently have the right to cumulate
their votes for election of directors.
57
Special Meetings
New First Mississippi's Articles of Incorporation provide that special
meetings of New First Mississippi's shareholders may be held only upon call of
the Board or the chief executive officer or upon written demand of the holders
of at least twenty percent of the shares entitled to vote upon an issue
proposed to be considered at the special meeting. Shareholder demands must
state the purpose or purposes for which the meeting is to be held. New First
Mississippi's Bylaws require that the purpose or purposes for which a special
meeting is called must be stated in the notice of the meeting and prohibit
consideration of matters not within the stated purpose or purposes at the
meeting.
Amendment of Certain Provisions of the Articles of Incorporation
The provisions of New First Mississippi's Articles of Incorporation relating
to the classified Board, approval of certain major corporate transactions,
removal of directors, the call of special shareholder meetings and amendment
of the Bylaws may be amended only by the affirmative vote of the holders of
not less than four-fifths of the outstanding shares entitled to vote in
elections of directors, unless such an amendment has been recommended by two-
thirds of all of the directors.
Shareholder Nominations
The Bylaws establish procedures that must be followed for a shareholder to
nominate individuals for election to the New First Mississippi Board.
Shareholder Proposals
The Bylaws establish procedures that must be followed for a shareholder to
submit a proposal for consideration at an annual meeting of the shareholders
of New First Mississippi.
Amendment of Bylaw Provisions
The Articles of Incorporation provide that Bylaw provisions may be adopted,
amended or repealed by the Board.
Any amendment, modification or repeal of the provisions of the Bylaws which
is made by shareholders will require approval by the affirmative vote of the
holders of two-thirds of the total number of shares of First Mississippi
Common Stock entitled to vote.
Preferred Stock
Under the Articles of Incorporation, New First Mississippi's Board has the
authority to provide by resolution for the issuance of shares of one or more
series of New First Mississippi Preferred Stock and to fix the terms and
conditions of each such series. See "--Preferred Stock." The authorized shares
of New First Mississippi Preferred Stock, as well as authorized but unissued
shares of New First Mississippi Common Stock, will be available for issuance
without further action by New First Mississippi's shareholders, unless
shareholder action is required by applicable law or by the rules of a stock
exchange on which any series of New First Mississippi's stock may then be
listed.
These provisions will give New First Mississippi's Board the power to
approve the issuance of a series of New First Mississippi Preferred Stock that
could, depending on its terms, either impede or facilitate the completion of a
merger, tender offer or other takeover attempt. For example, the issuance of
new shares might impede a business combination if the terms of those shares
include voting rights which would enable a holder to block business
combinations. Conversely, the issuance of new shares might facilitate a
business combination if those shares have general voting rights sufficient to
cause an applicable percentage vote requirement to be satisfied.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subarticle E of Article 8 of the MBCA empowers a Mississippi corporation to
indemnify against liability an individual who is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, formal or informal (a
"Proceeding"), because such person is or was a director. To be eligible for
indemnification, the director must have conducted himself in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation and,
58
with respect to any criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful. Liability indemnified against
includes the obligation to pay a judgment, settlement, penalty, fine or
reasonable expenses incurred with respect to a Proceeding. The MBCA precludes
a corporation from indemnifying a director in connection with a Proceeding by
or in the right of the corporation in which the director was adjudged liable
to the corporation or in connection with any other Proceeding charging
improper personal benefit to a director, whether or not involving action in
the director's official capacity, in which the director was adjudged liable on
the basis that personal benefit was improperly received by the director.
Subarticle E further provides that if a director is wholly successful, on
the merits or otherwise, in the defense of any Proceeding to which he was a
party because he is or was a director, the corporation must indemnify him
against reasonable expenses incurred in connection with the Proceeding. Also,
a court may order a company to indemnify a director if it determines the
director is fairly and reasonably entitled to indemnification in view of all
of the relevant circumstances. Subarticle E also allows corporations to
indemnify officers, employees or agents to the same extent as directors, and
provides for mandatory or court-ordered indemnification for these persons as
described above. Finally, the MBCA allows corporations to purchase and
maintain insurance on behalf of directors, officers, employees or agents
against liability asserted against or incurred by him in that capacity or
arising from his status as such, whether or not the corporation would have the
power to indemnify such person against liability under Subarticle E.
New First Mississippi's Bylaws provide for indemnification of New First
Mississippi's officers and directors to the fullest extent allowed by
Mississippi law and further permit such indemnification with respect to other
employees and agents. First Mississippi entered into indemnification
agreements with certain of its officers and its directors. The effect of these
agreements is to add to the indemnification rights otherwise granted a
contractual right to such indemnification. It is anticipated that New First
Mississippi will assume these agreements at the time of the Distribution.
New First Mississippi will have directors' and officers' liability insurance
which protects each director or officer from certain claims and suits,
including shareholder derivative suits, even where the director may be
determined to not be entitled to indemnification under the MBCA and claims and
suits arising under the Securities Act. The policy may also afford coverage
under circumstances where the facts do not justify a finding that the director
or officer acted in good faith and in a manner that was in or not opposed to
the best interests of New First Mississippi.
The foregoing represents a summary of the general effect of the MBCA, New
First Mississippi's Articles of Incorporation and Bylaws and directors' and
officers' liability insurance coverage for purposes of general description
only.
ADDITIONAL INFORMATION
New First Mississippi has filed the Form S-1 with the Commission under the
Securities Act, with respect to the shares of New First Mississippi Common
Stock being received by First Mississippi shareholders in the Distribution.
This Prospectus does not contain all of the information set forth in the Form
S-1 and the exhibits and schedules thereto. Statements made in this Prospectus
as to the contents of any contract, agreement or other document referred to
herein are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Form S-1, reference is
made to such exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.
The Form S-1 and the exhibits and schedules thereto filed by New First
Mississippi may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 5th Street, N.W., Washington,
D.C. 20549, as well as at the Regional Offices of the Commission at Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
of such information can also be obtained by mail from the Public Reference
Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates.
59
Following the Distribution, New First Mississippi will be required to comply
with the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and will file annual, quarterly and other
reports with the Commission. New First Mississippi will also be subject to the
proxy solicitation requirements of the Exchange Act and, accordingly, will
furnish audited financial statements to its shareholders in connection with
its annual meetings of shareholders.
No person is authorized by First Mississippi or New First Mississippi to
give any information or to make any representations other than those contained
in this Prospectus, and if given or made, such information or representations
must not be relied upon as having been authorized.
LEGAL MATTERS
The validity of the shares of New First Mississippi Common Stock offered
hereby and certain U.S. federal income tax consequences of the Transfers and
the Distribution will be passed upon for New First Mississippi by Skadden,
Arps, Slate, Meagher & Flom (Illinois), Chicago, Illinois who will rely as to
matters of Mississippi law on Baker, Donelson, Bearman & Caldwell, Jackson,
Mississippi.
EXPERTS
The consolidated financial statements of ChemFirst Inc. as of June 30, 1996
and 1995 and for each of the years in the three year period ended June 30,
1996 have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm
as experts in accounting and auditing.
60
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report.............................................. F-2
Consolidated Balance Sheets as of June 30, 1996 and 1995.................. F-3
Consolidated Statements of Operations for the years ended June 30, 1996,
1995 and 1994............................................................ F-4
Consolidated Statements of Stockholders' Equity for the years ended June
30, 1996, 1995 and 1994.................................................. F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1996,
1995 and 1994............................................................ F-6
Notes to Consolidated Financial Statements................................ F-7
Interim Consolidated Financial Statements (unaudited)
Consolidated Balance Sheet as of September 30, 1996........................ F-3
Consolidated Statements of Operations for the three months ended September
30, 1996 and 1995......................................................... F-4
Consolidated Statements of Stockholders' Equity for the three months ended
September 30, 1996 and 1995............................................... F-5
Consolidated Statements of Cash Flows for the three months ended September
30, 1996 and 1995......................................................... F-6
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders First Mississippi Corporation:
We have audited the accompanying consolidated balance sheets of ChemFirst
Inc. as of June 30, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended June 30, 1996. These consolidated financial statements
are the responsibility of First Mississippi Corporation's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ChemFirst
Inc. as of June 30, 1996 and 1995, and the results of its operations and its
cash flows for each of the years in the three-year period ended June 30, 1996,
in conformity with generally accepted accounting principles.
As discussed in notes 1 and 7, ChemFirst Inc. changed its method of
accounting for income taxes as of July 1, 1993 to adopt the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
KPMG Peat Marwick LLP
Jackson, Mississippi
September 6, 1996
F-2
CHEMFIRST INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30,
SEPTEMBER 30, ---------------
1996 1996 1995
------------- ------- -------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
ASSETS
Current assets:
Cash and cash equivalents...................... $ 11,268 5,303 40,123
Receivables:
Trade, less allowance for doubtful accounts of
$925, $781 and $732 ......................... 65,738 60,029 52,546
Affiliated companies (note 3)................. 9 201 192
Other (note 7)................................ 3,506 9,025 4,099
-------- ------- -------
Total receivables........................... 69,253 69,255 56,837
-------- ------- -------
Inventories:
Finished products............................. 24,916 22,335 21,278
Work in process............................... 24,904 28,494 19,051
Raw materials and supplies.................... 22,476 19,494 18,210
-------- ------- -------
Total inventories........................... 72,296 70,323 58,539
-------- ------- -------
Prepaid expenses and other current assets (note
7)............................................ 8,810 5,542 6,872
Net current assets of discontinued operations
(note 2)...................................... 2,914 7,008 18,974
-------- ------- -------
Total current assets........................ 164,541 157,431 181,345
-------- ------- -------
Investments and other assets:
Investments in affiliated companies (note 3)... 13,970 13,547 12,257
Other investments (note 3)..................... 27,962 27,496 3,931
Intangible and other assets, at cost less ap-
plicable amortization (note 4)................ 11,044 11,404 13,396
-------- ------- -------
Total investments and other assets.......... 52,976 52,447 29,584
-------- ------- -------
Property, plant and equipment, at cost less ac-
cumulated depreciation and amortization (notes
5 and 6)....................................... 147,745 139,647 130,456
Noncurrent assets of discontinued operations
(note 2)....................................... 67,221 64,110 91,942
-------- ------- -------
$432,483 413,635 433,327
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note
6)............................................ $ 14,426 14,534 15,076
Deferred revenue.............................. 3,484 1,802 1,434
Accounts payable--trade (including book over-
drafts of $4,650, $5,019 and $9,334)......... 30,999 29,773 35,520
Accrued expenses and other current liabilities
(note 15).................................... 29,190 24,404 19,208
-------- ------- -------
Total current liabilities................... 78,099 70,513 71,238
-------- ------- -------
Long-term debt, excluding current installments
(note 6)....................................... 76,732 79,909 84,394
Other long-term liabilities..................... 14,254 13,864 12,289
Long-term liabilities and minority interest of
discontinued operations (note 2)............... 3,364 3,572 13,771
Deferred income taxes (note 7).................. 17,826 15,510 18,639
Stockholders' equity (notes 6, 8 and 9):
Serial preferred stock. Authorized 20,000,000
shares; none issued........................... -- -- --
Common stock of $1 par value. Authorized
100,000,000 shares; outstanding 20,614,491
shares in 1996 and 20,438,208 shares in 1995.. 20,614 20,614 20,438
Additional paid-in capital..................... 15,446 14,234 7,656
Retained earnings.............................. 206,148 195,419 204,902
-------- ------- -------
Total stockholders' equity.................. 242,208 230,267 232,996
-------- ------- -------
Commitments and contingent liabilities (notes 7,
8 and 10) $432,483 413,635 433,327
======== ======= =======
See accompanying notes to consolidated financial statements.
F-3
CHEMFIRST INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
-------------------------------------------
1996 1995 1996 1995 1994
--------- ---------------- ------- -------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
Revenues:
Sales (note 12)................. $ 95,432 88,746 370,547 331,721 249,091
Interest and other income, net
(note 11)...................... 2,775 2,195 6,157 6,120 3,264
--------- -------- ------- ------- -------
98,207 90,941 376,704 337,841 252,355
--------- -------- ------- ------- -------
Costs and expenses:
Cost of sales................... 72,540 68,352 288,677 254,364 193,154
General, selling and
administrative expenses........ 15,831 15,191 58,557 48,091 42,470
Other operating expenses........ 1,353 1,643 6,901 7,347 5,459
Provision for plant shut-down
(note 5)....................... -- -- 18,256 -- --
Interest expense (note 6)....... 1,765 2,368 9,242 9,555 10,046
--------- -------- ------- ------- -------
91,489 87,554 381,633 319,357 251,129
--------- -------- ------- ------- -------
Earnings (loss) from continuing
operations before income taxes,
investee earnings (loss) and
cumulative effect of change in
accounting principle............. 6,718 3,387 (4,929) 18,484 1,226
Income tax expense (benefit) (note
7)............................... 2,886 1,694 (688) 8,706 2,248
Equity in net earnings (loss) of
affiliated companies (note 3).... 258 193 783 860 (249)
--------- -------- ------- ------- -------
Earnings (loss) from continuing
operations before cumulative
effect of change in accounting
principle........................ 4,090 1,886 (3,458) 10,638 (1,271)
Earnings from discontinued
operations, net of taxes (note
2)............................... 8,699 10,594 40,424 47,156 21,038
Loss on disposal of business, net
of taxes (note 2)................ -- -- (1,746) -- --
Cumulative effect of change in
accounting principle (note 7).... -- -- -- -- 2,096
--------- -------- ------- ------- -------
Net earnings.................. $ 12,789 12,480 35,220 57,794 21,863
========= ======== ======= ======= =======
Earnings (loss) per common share
(note 9):
Continuing operations........... $ .20 .09 (.16) .52 (.06)
Discontinued operations......... .41 .50 1.84 2.28 1.05
Cumulative effective of change
in accounting principle........ -- -- -- -- .10
--------- -------- ------- ------- -------
Total earnings per common
share........................ $ .61 .59 1.68 2.80 1.09
========= ======== ======= ======= =======
See accompanying notes to consolidated financial statements.
F-4
CHEMFIRST INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
-----------------------------------------------
COMMON STOCK ADDITIONAL
----------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
------------ --------- ----------------------
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
Balance, June 30, 1993......... 19,980,440 $ 19,980 2,424 138,370
Net earnings................... -- -- -- 21,863
Dividends declared--$.30 per
share......................... -- -- -- (6,010)
Common stock issued:
Employee stock options....... 39,350 39 351 --
Convertible debentures....... 66,300 67 561 --
Income tax benefit on exercise
of stock options and
convertible debentures........ -- -- 42 --
------------ --------- -------- ---------
Balance, June 30, 1994......... 20,086,090 20,086 3,378 154,223
Net earnings................... -- -- -- 57,794
Dividends declared--$.35 per
share......................... -- -- -- (7,115)
Common stock issued:
Employee stock options....... 86,218 86 555 --
Convertible debentures....... 265,900 266 2,917 --
Income tax benefit on exercise
of stock options and
convertible debentures........ -- -- 806 --
------------ --------- -------- ---------
Balance, June 30, 1995......... 20,438,208 20,438 7,656 204,902
Net earnings................... -- -- -- 35,220
Dividends declared--$.40 per
share......................... -- -- -- (8,161)
Distribution of common stock of
Getchell Gold Corp............ -- -- -- (31,277)
Common stock issued:
Employee stock options....... 111,483 111 878 --
Convertible debentures....... 300,700 301 2,880 --
Purchase and retirement of
common shares............... (235,900) (236) -- (5,265)
Income tax benefit on exercise
of stock options and
convertible debentures........ -- -- 2,820 --
------------ --------- -------- ---------
Balance, June 30, 1996......... 20,614,491 $ 20,614 14,234 195,419
============ ========= ======== =========
See accompanying notes to consolidated financial statements.
F-5
CHEMFIRST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
-------------------- ----------------------------
1996 1995 1996 1995 1994
--------- --------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
Cash flows from operating
activities:
Net earnings.............. $ 12,789 12,480 35,220 57,794 21,863
Adjustments to reconcile
net earnings to net cash
provided by operating
activities:
Depreciation and
amortization............ 4,853 4,919 18,210 17,324 15,762
Provision for plant shut-
down.................... -- -- 18,256 -- --
Provision for losses on
receivables............. 136 80 728 196 550
Deferred income taxes,
net of effect of
accounting change in
1994.................... 227 1,806 (2,184) 7,024 11,266
(Gain) loss on property,
plant and equipment..... -- -- (657) 81 4
(Gain) loss on
disposition of
investments and other
assets.................. 12 -- (50) 19 286
Undistributed (earnings)
loss of affiliates, net
of taxes................ (437) (320) (976) (816) 214
Changes in current assets
and liabilities, net of
effects of dispositions:
Receivables............. (8,778) 4,397 (131) (10,011) 827
Inventories............. (2,233) (6,949) (14,134) (12,190) (6,200)
Prepaid expenses........ 6,171 (353) (8,452) (658) (1,178)
Accounts payable........ 1,039 (941) (7,063) 10,221 (4,746)
Accrued expenses and
other current
liabilities............ 7,358 2,965 (685) 8,496 (4,475)
Deferred revenue......... 2,070 392 1,961 2,762 3,187
Other, net............... (396) (378) (1,140) 117 17
Net earnings from
discontinued operations. (8,699) (10,595) (38,678) (47,156) (21,038)
--------- --------- -------- -------- --------
Net cash provided by
continuing operations... 14,112 7,503 225 33,203 16,339
Net cash provided by
discontinued operations. 13,437 15,102 44,945 72,901 9,491
--------- --------- -------- -------- --------
Net cash provided by
operating activities. 27,549 22,605 45,170 106,104 25,830
--------- --------- -------- -------- --------
Cash flows from investing
activities:
Capital expenditures...... (13,071) (4,366) (35,909) (26,160) (19,775)
Investment in equity
investees, net........... -- -- 14 -- 1
Acquisition of investments
and other assets......... (23) (48) (177) (1,405) (1,027)
Collection of note
receivable............... -- -- 15,000 -- --
Proceeds from sale of
property, plant and
equipment................ 2 -- 741 304 175
Proceeds from disposition
of investments and other
assets................... -- 140 630 -- 7,594
Proceeds from sale of
subsidiaries............. -- -- -- -- 8,462
Other investing........... -- -- 15 -- (1)
--------- --------- -------- -------- --------
Net cash used in investing
activities of continuing
operations............... (13,092) $4,274) (19,686) (27,261) (4,571)
Net cash used in investing
activities of
discontinued operations.. (3,145) (7,257) (45,763) (29,144) (16,146)
--------- --------- -------- -------- --------
Net cash used in
investing activities. (16,237) (11,531) (65,449) (56,405) (20,717)
--------- --------- -------- -------- --------
Cash flows from financing
activities:
Principal repayments of
long-term debt........... (3,286) (270) (15,550) (6,512) (11,100)
Dividends (note 9)........ (2,061) (2,057) (8,161) (8,622) (6,010)
Purchase of common stock.. -- -- (5,491) -- --
Proceeds from long-term
borrowings............... -- -- 11,000 151 1,706
Proceeds from issuance of
common stock............. -- 1,302 3,661 2,567 944
--------- --------- -------- -------- --------
Net cash used in
financing activities. (5,347) (1,025) (14,541) (12,416) (14,460)
--------- --------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents. 5,965 10,049 (34,820) 37,283 (9,347)
Cash and cash equivalents
at beginning of year...... 5,303 40,523 40,123 2,840 12,187
--------- --------- -------- -------- --------
Cash and cash equivalents
at end of year............ $ 11,268 50,572 5,303 40,123 2,840
========= ========= ======== ======== ========
Supplemental disclosures of
cash flow information:
Cash paid during the year
for:
Interest, net of amounts
capitalized............. $ 1,776 2,658 9,605 9,566 10,166
========= ========= ======== ======== ========
Income taxes, net........ $ (4,845) 99 23,603 20,680 15,581
========= ========= ======== ======== ========
See accompanying notes to consolidated financial statements.
F-6
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, 1995 AND 1994
AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT AMOUNTS PER SHARE)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As discussed in note 14, on August 27, 1996 First Mississippi Corporation
("First Mississippi") and Mississippi Chemical Corporation ("MCC") entered
into an Agreement and Plan of Merger and Reorganization.
The Agreement contemplates that the following transactions will occur:
. A tax-free spinoff of the chemicals and related businesses of First
Mississippi in the form of a new publicly traded company ("ChemFirst
Inc.") that will retain the First Mississippi Corporation name.
. The refinancing of First Mississippi's debt, increasing the debt to
approximately $150,000, which will be assumed by MCC in the merger.
. The transfer of cash of approximately $50,000 to ChemFirst Inc.
. A tax-free merger of First Mississippi's fertilizer business ("First
Mississippi Fertilizer Business to be Merged") with MCC.
In the accompanying consolidated financial statements, the assets,
liabilities, revenues and expenses of First Mississippi Fertilizer Business to
be Merged are included in discontinued operations. The transactions described
above will be reported in the historical consolidated financial statements
when they occur.
ChemFirst Inc. (the "Company") produces chemicals for industry and
agriculture and related products and services which are marketed globally.
Further descriptions of the Company's products and the relative significance
of its operations are included in the industry segment information data in
note 12 to the financial statements.
The preparation of 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 and
disclosure of contingent 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.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Intercompany balances and transactions have been
eliminated in consolidation. Investments in joint ventures, partnerships and
other equity investments are accounted for by the equity method.
Recognition of Revenue
Revenues generally are recorded when title and risk of ownership pass,
except for long-term construction type contracts, which are accounted for
under the percentage of completion method.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out and weighted average methods for purchased
inventories of finished product, and using the average cost method with
respect to all other inventories.
Depreciation and Amortization
Depreciation of plant and equipment and depreciable investments is based on
cost and the estimated useful lives (or term of lease, if shorter) of the
separate units of property. The straight-line and accelerated methods are
primarily used in determining the amount of depreciation charged to expense.
Goodwill of businesses acquired is amortized generally over 20 years using the
straight-line method. Other intangibles are amortized over their estimated
useful lives (5-17 years) using the straight-line method.
F-7
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Loan costs are amortized over the terms of related loans using the interest
method.
Income Taxes
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax liabilities and assets for differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
Pension Plans
Pension cost is determined using the "projected unit credit" actuarial
method for reporting purposes. The Company's funding policy is to contribute
annually at amounts not less than the minimum requirements of the Employee
Retirement Income Security Act of 1974.
Stock Options
All stock options are nonqualified or incentive options and require no
charges against income upon grant or exercise. The tax benefit the Company
receives from dispositions that result in ordinary income to option recipients
is reflected in stockholders' equity.
Cash and Cash Equivalents
The Company considers all short-term investments with original maturities of
three months or less to be cash equivalents.
Investments
Realized gains and losses on investments are determined on the basis of
specific costs and are included in gain (loss) on investments, net. Equity
investments are carried at fair value in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," ("SFAS No. 115"). Fair value is based on year end
market prices as quoted by the appropriate security exchange. Any significant
unrealized holding gains and losses for available-for-sale securities are
excluded from earnings and reported as a net amount in a separate component of
stockholders' equity until realized. The effect of applying SFAS No. 115 is
not material.
Contingencies
Estimates of loss contingencies, including environmental liability costs for
remediation, are charged to expense when it is probable an asset has been
impaired or a liability incurred and the amount can be reasonably estimated.
If a potentially material loss contingency is reasonably possible, or probable
but cannot be estimated, then the nature of the contingency and an estimated
range of possible loss, if determinable and material, are disclosed.
Reclassifications
Certain consolidated financial statement amounts for 1995 and 1994 have been
reclassified for consistent presentation.
Unaudited Interim Financial Information
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments that are necessary for a fair presentation, have been
included in the unaudited financial information as of and for the three months
ended September 30, 1996 and 1995.
F-8
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. DISCONTINUED OPERATIONS
On October 20, 1995, the Company distributed to its shareholders its entire
ownership of Getchell Gold Corporation ("Getchell"), formerly known as
FirstMiss Gold Inc. The June 30, 1996 consolidated balance sheet includes a
$31,277 reduction of retained earnings in connection with the distribution of
Getchell. Each First Mississippi shareholder received approximately seven-
tenths of a common share of Getchell for each share of First Mississippi
owned.
As discussed in notes 1 and 14, the Company has entered an agreement to
discontinue its fertilizer operations.
The net assets and liabilities of the discontinued operations (primarily
Getchell and the fertilizer operations) have been segregated in the
consolidated financial statements. The following is the composition of those
net assets and liabilities at September 30, 1996 and June 30, 1996 and 1995:
SEPTEMBER 30,
1996 JUNE 30, 1996
------------- -------------------------------------
TOTAL FERTILIZER GETCHELL OTHER TOTAL
------------- ---------- -------- ------- --------
Receivables............... $ 24,289 $ 19,319 -- -- 19,319
Inventories............... 6,114 6,040 -- -- 6,040
Prepaid expenses and other
current assets........... 1,562 5,322 -- 2,651 7,973
Deferred revenue.......... (1,076) (295) -- -- (295)
Accounts payable.......... (26,091) (20,856) -- (38) (20,894)
Accrued expenses and other
current liabilities...... (1,884) (1,840) -- (3,295) (5,135)
-------- -------- --- ------- --------
Net current assets
(liabilities) of
discontinued operations.. $ 2,914 $ 7,690 -- (682) 7,008
======== ======== === ======= ========
Noncurrent assets of
discontinued operations.. $ 67,221 $ 64,110 -- -- 64,110
======== ======== === ======= ========
Long-term liabilities and
minority interest of
discontinued operations.. $ 3,364 $ 3,572 -- -- 3,572
======== ======== === ======= ========
JUNE 30, 1995
----------------------------------
FERTILIZER GETCHELL OTHER TOTAL
---------- -------- ----- -------
Receivables................................ $ 14,808 1,856 -- 16,664
Inventories................................ 5,906 9,554 -- 15,460
Prepaid expenses and other current assets.. 2,756 1,176 1,990 5,922
Deferred revenue........................... (614) -- -- (614)
Accounts payable........................... (10,056) (6,522) -- (16,578)
Accrued expenses and other current
liabilities............................... (720) (578) (582) (1,880)
-------- ------ ----- -------
Net current assets (liabilities) of
discontinued operations................... $ 12,080 5,486 1,408 18,974
======== ====== ===== =======
Noncurrent assets of discontinued
operations................................ $ 24,253 67,689 -- 91,942
======== ====== ===== =======
Long-term liabilities and minority interest
of discontinued operations................ $ 4,738 9,033 -- 13,771
======== ====== ===== =======
F-9
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The statements of operations have been reclassified to separate discontinued
and continued operations. Revenues and net earnings (losses) of the
discontinued operations for the quarters ended September 30, 1996 and 1995 and
years ended June 30, 1996, 1995 and 1994 were as follows:
SEPTEMBER 30,
--------------
1996 1995 1996 1995 1994
------- ------ -------- ------- -------
Fertilizer
Sales and revenues............ $60,267 53,811 217,002 237,152 164,099
======= ====== ======== ======= =======
Income from operations before
taxes........................ 13,813 18,533 65,495 85,714 24,343
Income tax expense............ 5,114 6,856 24,238 31,719 9,002
Equity in net earnings (loss)
of equity investees.......... -- -- 250 74 (57)
Cumulative effect of change in
accounting principle......... -- -- -- -- 754
------- ------ -------- ------- -------
Earnings from discontinued op-
erations, net................ $ 8,699 11,677 $ 41,507 54,069 16,038
======= ====== ======== ======= =======
Getchell
Sales and revenues............ $ -- 17,961 17,961 71,617 95,300
======= ====== ======== ======= =======
Income (loss) from operations
before taxes................. -- (2,118) $ (2,118) (17,929) 5,599
Income tax (expense) benefit.. -- 750 750 (7,550) 900
Minority interests............ -- 285 285 3,466 (1,049)
Cumulative effect of change in
accounting principle......... -- -- -- -- 1,350
------- ------ -------- ------- -------
Earnings (loss) from
discontinued operations, net. -- (1,083) $ (1,083) (6,913) 5,000
======= ====== ======== ======= =======
Total operating results of
discontinued operations...... $ 8,699 10,594 $ 40,424 47,156 21,038
======= ====== ======== ======= =======
A pretax loss of $2,700 was recorded in 1996 related to previously
discontinued businesses and is included in loss on disposal of business, net
of applicable income tax benefit of $954, in the accompanying consolidated
financial statements. Such losses resulted from revised estimates of
environmental remediation costs and settlements of operating costs related to
previously discontinued phosphate fertilizer (1982) and oil and gas (1993)
businesses.
3. INVESTMENTS
Investments in affiliated companies accounted for by the equity method were
$13,547 and $12,257, respectively, at June 30, 1996 and 1995. Equity earnings
(losses), net of taxes, were $783, $860 and $(249), respectively, for years
ended June 30, 1996, 1995 and 1994.
The following is a summary of financial information related to affiliated
companies:
JUNE 30
--------------
1996 1995
------- ------
Current assets................................................ $27,184 21,575
Noncurrent assets............................................. 45,396 40,429
Current liabilities........................................... 9,045 8,559
Noncurrent liabilities........................................ 17,897 11,854
------- ------
Net equity.................................................... $45,638 41,591
======= ======
The Company has a 50% ownership interest in Power Sources, Inc. which burns
wood waste to create steam for industrial users. The Company also has a 23.4%
interest in Melamine Chemicals, Inc. ("MCI"). The MCI investment had a quoted
market value of approximately $11,634 and $11,475, with carrying amounts of
$8,153 and $7,508, at June 30, 1996 and 1995, respectively.
F-10
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash advances to Getchell for the period from July 1, 1995 to October 20,
1995, the spinoff date, were $8,850. At the date of the spinoff, the Company
received a promissory note in the amount of $52,507 from Getchell in
settlement of all prior cash advances. The note bears interest at a rate based
on the London Interbank Offered Rate (6.625% at June 30, 1996). Interest and
principal are due in September, 2000. Subsequent to the spinoff date, the note
principal amount was reduced by a cash repayment of $15,000 and an offset of
$13,939 representing settlement of tax attributes utilized by the Company
during the time Getchell was included in the Company's consolidated income tax
returns. The aggregate unpaid principal amount of the note, including accrued
interest, of $24,733 at June 30, 1996 is included in other investments.
4. INTANGIBLE AND OTHER ASSETS
The major classes of intangible and other assets are summarized below:
JUNE 30
--------------
1996 1995
------- ------
Goodwill...................................................... $16,868 16,868
Other......................................................... 10,134 9,873
------- ------
27,002 26,741
Less accumulated amortization................................. 15,598 13,345
------- ------
$11,404 13,396
======= ======
The net carrying amount of goodwill at June 30, 1996 and 1995 was $9,778 and
$10,872, respectively, and is all related to the chemical segment.
Amortization expense related to the above amounted to $1,959 in 1996, $2,415
in 1995 and $2,640 in 1994.
5. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
JUNE 30
ESTIMATED ----------------
USEFUL LIVES 1996 1995
------------ -------- -------
Assets owned:
Land and land improvements.................. 10-20 $ 6,200 4,794
Buildings................................... 20-45 11,768 6,648
Plant facilities and equipment.............. 5-15 152,935 134,324
Other facilities and equipment.............. 5-12 80,461 72,031
Construction in progress.................... 10,653 6,940
-------- -------
Total assets owned........................ 262,017 224,737
-------- -------
Assets leased:
Land improvements........................... 10-20 509 509
Buildings................................... 10 216 216
Other facilities and equipment.............. 20 8,958 8,958
-------- -------
Total capital leases...................... 9,683 9,683
-------- -------
Total property, plant and equipment....... 271,700 234,420
Less accumulated depreciation and amorti-
zation................................... 132,053 103,964
-------- -------
Net property, plant and equipment......... $139,647 130,456
======== =======
F-11
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and amortization expense related to the above, amounted to
$16,251 in 1996, $14,909 in 1995 and $13,122 in 1994.
Interest capitalized amounted to $186 in 1996, $135 in 1995 and $396 in
1994.
On May 21, 1996, the Board of Directors of the Company authorized a plan to
close its aluminum dross processing facility at Millwood, West Virginia, which
was operated by its wholly owned subsidiary Plasma Processing Corporation,
("PPC"). PPC's operations are included in the Company's Combustion and Thermal
Plasma segment. This facility, completed in June 1991, was built to process
aluminum dross using patented thermal plasma technology. The decision to close
the Millwood facility, which operated at a loss since inception, was based in
part on projections that indicated operations were unlikely to be profitable
in the near future. The plan assumes the plant will operate for a portion of
the first quarter of fiscal 1997 to fulfill contractual obligations then cease
operations and be held for disposition by sale if possible. As a result of
this plan, the Company incurred a pretax charge of $18,256 ($11,706 after tax)
during the fourth quarter of fiscal 1996. The charge included write-downs to
reduce carrying values to estimated net realizable values (estimated fair
values less costs to sell) of $12,271 for property, plant and equipment, $570
for spare parts, $350 for inventory and $5,065 in accruals for other estimated
costs to be incurred related to the closure. The majority of the accrual
represents the estimated cost of $3,100 in excess of market value to process
inventory to meet contractual obligations and $500 for disposal of
unmarketable inventory. In addition, the accrual includes $525 for severance,
$200 for contract cancellations and $740 for other estimated costs. Excluding
the above charge, operating losses for PPC were approximately $9,000, $8,400
and $5,700 in 1996, 1995 and 1994, respectively. In September 1996, the
Company executed a letter of intent for the sale of substantially all of PPC's
assets. Assets that are not part of the transactions will be liquidated by the
Company. The Company does not anticipate any material gain or loss related to
these dispositions. The carrying value of PPC's net assets at June 30, 1996,
was approximately $6,000.
The Company is also seeking a buyer for its steel melting and production
facility operated by FirstMiss Steel, Inc. Based on negotiations to date with
potential buyers, the Company believes it will not incur a material gain or
loss if a sale is closed.
6. LONG-TERM DEBT
A summary of long-term debt follows:
JUNE 30
--------------
1996 1995
------- ------
Unsecured:
9.42% senior notes payable to institutional investors, due
in annual installments of $13,286 through June 2002....... $79,714 93,000
Notes payable under revolving credit facility, due February
1998...................................................... 11,000 --
Other notes................................................ 1,100 3,078
Secured:
Capital lease obligations, with interest rates at 4.0%, due
in monthly installments through May 2000.................. 2,360 2,703
Other notes................................................ 269 689
------- ------
94,443 99,470
Less current installments of long-term debt.................. 14,534 15,076
------- ------
Long-term debt, excluding current installments............. $79,909 84,394
======= ======
Under loan agreements in effect at June 30, 1996, there were no compensating
balance requirements. The above obligations mature in various amounts through
2002, including approximately, $14,534 in 1997, $24,915 in 1998, $14,199 in
1999, $14,144 in 2000 and $13,367 in 2001.
F-12
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has a bank revolving credit facility totaling $65,000 which is
committed until February 1998. Borrowings under the facility are priced at a
rate based on either the London Interbank Offered Rate, or the prime rate,
contingent on the Company's debt-to-equity ratio. A commitment fee ranging
from .225 to .375 of 1% per annum is charged on the daily average unused
commitment under the revolving credit facility and is also based on the debt-
to-equity ratio. Commitment fees for the years ended June 30, 1996, 1995 and
1994 totaled $183, $216 and $189, respectively.
The senior notes and bank credit agreements contain various restrictions
related to working capital, funded debt, net worth, fixed charges coverage,
distributions, repurchases of stock and dispositions of assets. At June 30,
1996 and 1995, the Company was in compliance with these covenants.
At June 30, 1996, the fair value of the 9.42% senior notes payable to
institutional investors approximates carrying value due to penalties and fees
which are due in the event of prepayment. The recorded amounts for all other
long-term debt of the Company approximate fair values as well.
Total interest costs incurred for the years ended June 30, 1996, 1995 and
1994 were $9,428, $9,690 and $10,442, respectively.
7. INCOME TAXES
The cumulative effect of the change in accounting for income taxes of
continuing operations described in note 1 resulted in a benefit of $2,096 and
was reported as a cumulative effect of a change in accounting principle in the
June 30, 1994 consolidated financial statements.
Total income tax expense (benefit) for the years ended June 30, 1996, 1995
and 1994 was allocated as follows:
YEARS ENDED JUNE 30
-----------------------
1996 1995 1994
------- ------ ------
Continuing operations.............................. $ (688) 8,706 2,248
Discontinued operations............................ 22,534 24,169 9,902
Stockholders' equity, for compensation expense for
tax purposes in excess of amounts recognized for
financial reporting purposes...................... (2,820) (806) (42)
------- ------ ------
$19,026 32,069 12,108
======= ====== ======
Income tax expense (benefit) differs from the statutory Federal rate of 35%
applied to earnings (loss) from continuing operations before income taxes,
minority interests and investee earnings (loss) for the years ended June 30,
1996, 1995 and 1994 as follows:
YEARS ENDED JUNE 30
---------------------
1996 1995 1994
------- ----- -----
Computed "expected" tax expense (benefit)............ $(1,725) 6,469 429
State income taxes, net of Federal income tax bene-
fit................................................. 1,224 1,045 536
Loss from operations of foreign subsidiaries......... -- 444 423
Amortization of goodwill............................. 411 392 423
Exempt earnings of Foreign Sales Corporation......... (212) (260) (128)
Increase in net cash surrender value of life insur-
ance................................................ (324) (254) (232)
Tax provision adjustments for pending Internal
Revenue Service matters............................. 150 1,275 --
Adjustment to deferred tax assets and liabilities for
enacted change in tax law and rates................. -- -- 370
Other, net........................................... $ (212) (405) 427
------- ----- -----
Actual tax expense (benefit)--continuing opera-
tions............................................. $ (688) 8,706 2,248
======= ===== =====
F-13
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Components of income tax expense (benefit) are as follows:
YEARS ENDED JUNE 30
-----------------------
1996 1995 1994
------- ----- -------
Current:
Federal........................................... $ 557 (334) (9,023)
State............................................. 1,003 1,686 964
Foreign........................................... (358) 110 (205)
------- ----- -------
1,202 1,462 (8,264)
======= ===== =======
Deferred:
Federal........................................... (2,771) 7,305 12,672
State............................................. 881 (43) (2,160)
Foreign........................................... -- (18) --
------- ----- -------
(1,890) 7,244 10,512
======= ===== =======
Total:
Federal........................................... $(2,214) 6,971 3,649
State............................................. 1,884 1,643 (1,196)
Foreign........................................... (358) 92 (205)
------- ----- -------
$ (688) 8,706 2,248
======= ===== =======
The significant components of deferred income tax expense attributable to
income from continuing operations for the years ended June 30, 1996, 1995 and
1994 are as follows:
YEARS ENDED JUNE 30
---------------------
1996 1995 1994
------- ----- ------
Deferred tax expense (benefit) from changes in
temporary differences and the valuation allowance... $(1,890) 7,244 10,144
Adjustment to deferred tax assets and liabilities for
enacted change in tax law and rates................. -- -- 368
------- ----- ------
$(1,890) 7,244 10,512
======= ===== ======
F-14
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and the deferred tax liabilities at June
30, 1996 and 1995 are as follows:
JUNE 30
-----------------
1996 1995
-------- -------
Deferred tax assets:
Accounts receivable, principally due to allowance for
doubtful accounts..................................... $ 229 24
Deferred compensation.................................. 3,116 2,732
Incentive compensation accrual......................... 667 882
Inventory costs........................................ 1,121 617
State net operating loss carryforward.................. 2,687 1,364
Alternative minimum tax credit carryforward............ -- 5,383
Accrued vacation costs................................. 611 542
Accrued pension costs.................................. 824 697
Other, net............................................. 4,020 3,845
-------- -------
Total gross deferred tax assets...................... 13,275 16,086
Less: valuation allowance.............................. (2,579) (1,262)
-------- -------
Net deferred tax assets.............................. 10,696 14,824
-------- -------
Deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation.......................................... (9,290) (16,477)
Investment in affiliated companies, principally due to
undistributed earnings................................ (12,946) (12,946)
State income taxes..................................... (1,967) (798)
-------- -------
Total gross deferred tax liabilities................. (24,203) (30,221)
-------- -------
Net deferred tax liability........................... $(13,507) (15,397)
======== =======
The net deferred tax liability at June 30, 1996 and June 30, 1995 consists
of a long-term deferred tax liability of $15,510 and $18,639, respectively,
and a current deferred tax asset of $2,003 and $3,242, respectively. The
current deferred tax asset is included in prepaid expenses and other current
assets in the consolidated balance sheets.
The valuation allowance for the gross deferred tax assets as of July 1,
1995, 1994 and 1993 was $2,579, $1,262 and $3,074, respectively. The net
change in the total valuation allowance for the year ended June 30, 1996 was
an increase of $1,317 and for the year ended June 30, 1995, a decrease of
$1,812. The valuation allowance is related to certain state net operating
losses, which the Company believes are less than likely to be recognized. The
decrease in the valuation allowance for the year ended June 30, 1995 is
attributable to a reduction in state net operating loss carryforwards for
states where the Company is no longer required to file income tax returns.
Subsequently recognized tax benefits relating to the allowance for deferred
tax assets will be reported in the consolidated statements of operations.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, recoverable
taxes paid, projected taxable income and tax planning strategies in making
this assessment. Based on the reversal of existing deferred tax liabilities
and projections for future taxable income over the periods which the deferred
tax assets are deductible, management believes it is more likely than not the
Company will realize the benefit of these deductible differences, net of the
existing valuation allowance at June 30, 1996.
F-15
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Refundable income taxes of $6,020 and $3,236 at June 30, 1996 and 1995,
respectively, are included in other current receivables in the accompanying
consolidated financial statements.
The Company's federal income tax returns have been examined through June 30,
1992, and all years prior to June 30, 1989 are closed. Federal income tax
returns for the years ended June 30, 1993 and 1994 are currently under
examination. Issues relating to the years ended June 30, 1989 through June 30,
1992 are being contested through various stages of administrative appeal. In
addition, the Company has various state income tax returns in the process of
examination or administrative appeal. Management believes that adequate
provision has been made for any adjustments which might be assessed for open
years through June 30, 1996.
Prior to the spinoff, the Company filed a consolidated federal income tax
return which included Getchell. In accordance with a Tax Sharing Agreement
dated October 1, 1987 between the Company and Getchell, Getchell recomputed
its income tax provision each year on a separate return basis and paid to the
Company amounts approximating the federal income taxes Getchell would have
paid if Getchell filed an independent consolidated return. The Tax Sharing
Agreement also applied to certain state and franchise tax returns which the
Company filed on a combined or consolidated basis. Based on the June 30, 1995
income tax returns, Getchell had approximately $19,472 of unused tax assets
which the Company was required to reimburse under the terms of the Tax Sharing
Agreement. Prior to the distribution of Getchell to Company shareholders, the
Company and Getchell negotiated a settlement of $13,929 in cancellation of the
Tax Sharing Agreement.
8. EMPLOYEE BENEFIT AND INCENTIVE PLANS
The Company has a noncontributory defined benefit pension plan covering
substantially all full-time permanent employees. The benefits are based on
years of service and participants' compensation during the last five years of
employment.
Net annual pension expense for this plan for the years ended June 30, 1996,
1995 and 1994 included the following components:
YEARS ENDED JUNE 30
-------------------------
1996 1995 1994
------- ------- -------
Service cost...................................... $ 2,055 1,987 1,876
Interest cost..................................... 1,807 1,697 1,503
Actual return on plan assets...................... (3,317) (4,478) (481)
Net amortization and deferral..................... 854 2,358 (1,697)
------- ------- -------
Net annual pension expense........................ $ 1,399 1,564 1,201
======= ======= =======
The assumptions used in calculating the expense for 1996, 1995 and 1994
included a discount rate of 7.75%, a rate of increase in compensation levels
of 4%, 4% and 4.5%, respectively, and a 9% expected long-term rate of return
on assets. Net annual pension expense included above and allocated to
discontinued operations was $189, $412 and $409 for 1996, 1995 and 1994,
respectively. Plan assets are invested primarily in equity securities and U.S.
Government and corporate bonds.
F-16
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the funded status of the plan at June 30,
1996 and 1995:
JUNE 30
---------------
1996 1995
------- ------
Actuarial present value of benefit obligations:
Vested benefit obligations............................... $19,300 15,974
======= ======
Accumulated benefit obligations.......................... $22,401 18,453
======= ======
Projected benefit obligation............................... $30,838 25,048
Plan assets at fair value.................................. 27,947 25,257
------- ------
Plan assets in excess of (less than) projected benefit ob-
ligation.................................................. (2,891) 209
Unrecognized net gain from past experience................. (730) (3,030)
Unrecognized prior service cost............................ 1,077 1,159
Unrecognized transition credit, net........................ (2,634) (2,947)
------- ------
Pension liability.......................................... $(5,178) (4,609)
======= ======
The Company also has a nonqualified supplemental pension plan. This plan
provides for incremental pension payments from the Company's funds to restore
those pension benefits earned, but reduced due to income tax regulations. The
total accrual at June 30, 1996 and 1995, relating to this unfunded plan was
$1,177 and $933, respectively. Net annual pension expense for this plan was
$245 in 1996, $187 in 1995 and $82 in 1994; including expenses allocated to
discontinued operations for those years of $82, $38 and $0, respectively.
The Company has a contributory 401(k) savings plan and an employee stock
ownership plan, both of which cover substantially all eligible employees who
have completed six months of service. Total expense under the plans amounted
to approximately $1,468 in 1996, $1,301 in 1995 and $1,106 in 1994. These
plans and the pension plan invest in the Company's stock. The total number of
shares held by the plans at June 30, 1996 and 1995, was approximately 357,000
and 337,000, respectively.
F-17
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Directors, officers and certain key employees of the Company participate in
the long-term incentive plans (the Plans) under which the Company has reserved
shares of common stock for issuance. Awards under the Plans include stock
options, options to purchase debentures convertible into preferred stock and
then convertible into common stock of the Company, stock appreciation rights,
performance units, restricted stock, supplemental cash and such other forms as
the Board of Directors may direct. Options under all plans are granted at the
market price of the shares on the date of the grants. As of June 30, 1996,
858,150 shares remained available for granting. Additional information
follows:
STOCK OPTIONS DEBENTURE OPTIONS
----------------------- -----------------------
AVERAGE AVERAGE
NUMBER OPTION PRICE NUMBER OPTION PRICE
OF SHARES PER SHARE OF SHARES PER SHARE
--------- ------------ --------- ------------
Balance, June 30, 1993........... 163,750 $10.86 863,000 $12.49
Options granted................ 113,000 9.41 -- --
Options exercised.............. (39,350) 9.90 (177,800) 12.71
Options forfeited.............. (45,800) 12.98 (58,000) 13.73
-------- ------ -------- ------
Balance, June 30, 1994........... 191,600 9.69 627,200 12.31
Options granted................ 63,600 15.06 1,000 21.31
Options exercised.............. (102,400) 9.77 (172,200) 12.04
-------- ------ -------- ------
Balance June 30, 1995............ 152,800 11.87 456,000 12.43
Options granted before spinoff. 93,600 32.81 -- --
Options exercised before spin-
off........................... (123,400) 11.47 (247,200) 10.80
Option conversion adjustment*.. 75,034 -- 127,368 --
Options granted after spinoff.. 123,200 23.21 -- --
Options exercised after spin-
off........................... (483) 9.36 -- --
Options forfeited.............. (550) 23.13 -- --
-------- ------ -------- ------
Balance, June 30, 1996........... 320,201 $19.71 336,168 $ 8.92
======== ====== ======== ======
Exercisable, June 30, 1996....... 320,201 336,168
======== ========
- --------
* The number of shares of common stock underlying outstanding debentures,
debenture options and nonqualifying stock options, as well as stock option
prices, were adjusted to reflect the distribution value (note 2) of the
Getchell shares. This adjustment increased the number of shares underlying
the outstanding awards and reduced the exercise prices by a factor of 1.61.
9. STOCKHOLDERS' EQUITY
Earnings per share calculations are based on the weighted average number of
common shares and common share equivalents outstanding during each year,
20,980,439 in 1996, 20,632,383 in 1995 and 20,126,093 in 1994.
In connection with the Shareholder Rights Plan adopted by the Company on
February 27, 1996, preferred stock purchase rights were distributed to
stockholders and are deemed to be attached to the outstanding shares of common
stock of the Company. Under certain conditions, each right may be exercised to
purchase one one-hundredth ( 1/100) of a share of a new series of preferred
stock, at an exercise price of $100 (subject to adjustment). The rights, which
do not have voting rights, expire in 2006 and may be redeemed by the Company
at a price of $0.01 per right prior to a specified period of time after the
occurrence of certain events. In certain events, each right (except certain
rights beneficially owned by 10% or more owners, which rights are voided) will
entitle its holder to purchase shares of common stock with a value of twice
the then current exercise price.
F-18
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company elected to accelerate dividend payments beginning in fiscal year
1995. As a result, five dividend payments were made versus the usual four
during that particular year.
10. COMMITMENTS AND CONTINGENT LIABILITIES
The Company has entered into various capital and operating leases for
transportation equipment (primarily railroad tank cars), chemical pipelines
and storage facilities, office buildings and land and other miscellaneous
items of equipment.
The following is a schedule by years of future minimum rental payments for
all capital leases and those operating leases with initial or remaining
noncancelable terms in excess of one year, as of June 30, 1996:
YEARS ENDING OPERATING CAPITAL
JUNE 30 LEASES LEASES
------------ --------- -------
1997................................................ $1,591 641
1998................................................ 1,408 641
1999................................................ 883 641
2000................................................ 586 632
2001................................................ 531 --
Later years.......................................... 517 --
------ ------ ---
Total minimum payments required...................... $5,516 2,555
======
Less imputed interest................................ 195
------
$2,360
======
Provisions applicable to certain transportation equipment leases provide for
mileage credits computed on the basis of usage. No recognition has been given
to the effect of such credits in the amounts presented above.
Rental expense, including short-term rentals (net of mileage credits and
short-term subleases of approximately $249 in 1996, $255 in 1995 and $202 in
1994), was approximately $4,092 in 1996, $4,181 in 1995 and $3,575 in 1994. In
most cases, management expects that, in the normal course of business, leases
will be renewed or replaced by other leases.
Company operations are subject to a wide variety of environmental laws and
regulations governing emissions to the air, discharges to water sources, and
the handling, storage, treatment and disposal of waste materials, as well as
other laws and regulations concerning health and safety conditions. The
Company accrues for anticipated costs associated with investigatory and
remediation efforts relating to the environment. At June 30, 1996 the
Company's estimated liability for these matters totaled $1,500.
At June 30, 1996, the Company provided financial guarantees related to
discontinued coal and gold operations of $17,100 and $12,000, respectively.
The $12,000 guarantee related to gold operations was canceled in August 1996.
The Company has pending several claims incurred in the normal course of
business which, in the opinion of management and legal counsel, can be
disposed of without material effect on the accompanying consolidated financial
statements.
F-19
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INTEREST AND OTHER INCOME
Interest and other income (expense) items are as follows:
YEARS ENDED JUNE 30
---------------------
1996 1995 1994
------- ------ ------
Interest income....................................... $ 4,622 4,211 1,870
Royalty, license, rental and fee income (expense)..... 555 223 1,084
Gain (loss) on disposition of noncurrent assets....... 708 242 (292)
Other................................................. 272 1,444 602
------- ------ ------
$ 6,157 6,120 3,264
======= ====== ======
12. INDUSTRY SEGMENT INFORMATION
As of June 30, 1996, the Company operated principally in the following
industry segments: Chemicals, Combustion and Thermal Plasma and Steel.
Operations in the chemicals segment include production and sale of specialty
chemicals and organic chemical intermediates, and research and development for
new products and production processes for specialty chemicals. The combustion
and thermal plasma segment develops, markets and utilizes proprietary
combustion and thermal plasma equipment and services for environmental
applications and manufacturing. At June 30, 1996, the classification
Combustion and Thermal Plasma includes the operations of Plasma Energy, Plasma
Processing and Callidus Technologies. The classification Steel includes the
operations of FirstMiss Steel.
The chemicals segment had unaffiliated major customer sales of $61,773,
$68,066 and $42,512 in 1996, 1995 and 1994, respectively.
F-20
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a breakdown by industry segment of the Company's
consolidated financial statements at June 30, 1996, 1995 and 1994 and for each
of the years then ended:
1996 1995 1994
-------- ------- -------
Sales to unaffiliated customers:
Chemicals....................................... $227,837 209,472 161,045
Combustion and Thermal Plasma................... 65,624 56,347 33,779
Steel........................................... 77,086 65,902 54,267
Transfers between business segments:
Combustion and Thermal Plasma................... 812 -- --
Intercompany eliminations....................... (812) -- --
-------- ------- -------
Total......................................... $370,547 331,721 249,091
======== ======= =======
Operating profit (loss) before income taxes,
investee earnings (loss) and cumulative effect of
change in accounting principle:
Chemicals....................................... $ 44,058 40,019 30,295
Combustion and Thermal Plasma................... (30,944) (6,230) (9,393)
Steel........................................... 1,332 27 (3,370)
-------- ------- -------
14,446 33,816 17,532
Unallocated corporate expenses.................... (15,015) (10,661) (8,435)
Interest expense, net............................. (4,620) (5,346) (8,176)
Other income (expense), net....................... 260 675 305
-------- ------- -------
Total......................................... $ (4,929) 18,484 1,226
======== ======= =======
Depreciation and amortization:
Chemicals....................................... $ 12,888 11,577 10,723
Combustion and Thermal Plasma................... 2,522 2,726 2,193
Steel........................................... 2,239 2,421 2,201
Corporate....................................... 561 600 645
-------- ------- -------
Total......................................... $ 18,210 17,324 15,762
======== ======= =======
Identifiable assets:
Chemicals....................................... $178,381 150,199 132,739
Combustion and Thermal Plasma................... 41,242 40,993 33,591
Steel........................................... 63,481 63,733 52,452
-------- ------- -------
283,104 254,925 218,782
Corporate assets and investments.................. 59,413 67,486 31,251
Discontinued operations........................... 71,118 110,916 107,812
-------- ------- -------
Total......................................... $413,635 433,327 357,845
======== ======= =======
Capital expenditures:
Chemicals....................................... $ 30,032 19,460 11,735
Combustion and Thermal Plasma................... 2,871 3,258 5,263
Steel........................................... 2,546 3,126 2,094
Corporate....................................... 460 316 683
-------- ------- -------
Total......................................... $ 35,909 26,160 19,775
======== ======= =======
Export sales to unaffiliated customers:
North, Central and South America................ $ 7,529 5,182 5,059
Europe and Asia................................. 45,748 36,828 20,027
Africa and Australia............................ 837 189 1,251
-------- ------- -------
Total......................................... $ 54,114 42,199 26,337
======== ======= =======
F-21
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Total segment research and development expenses were $6,278 in 1996, $7,227
in 1995 and $5,401 in 1994. Certain corporate expenses, primarily those
related to the overall management of the Company, were not allocated to the
operating segments.
Identifiable assets by industry segment are those assets used in the
Company's operations in each industry and include investments in joint
ventures and partnerships. Corporate assets and investments are principally
cash and short-term investments, nontrade receivables and certain other
investments.
The Company's trade receivables are primarily concentrated with the
chemicals segment. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral on trade receivables. The
Company believes that consolidated trade receivables are well diversified,
thereby reducing potential credit risk, and that adequate allowances are
maintained for any uncollectible trade receivables.
The Company has revenue-producing operations in foreign countries. These
operations and related foreign currency translation adjustments are not
material.
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data follow:
QUARTERS ENDED
----------------------------------------- YEAR ENDED
SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 JUNE 30
------------ ----------- -------- ------- ----------
1996:
Sales.................. $88,746 86,595 97,138 98,068 370,547
======= ====== ====== ======= =======
Gross profit........... $20,395 20,428 20,426 20,621 81,870
======= ====== ====== ======= =======
Net earnings (loss)
from continuing
operations............ $ 2,441 3,231 2,501 (11,631) (3,458)
======= ====== ====== ======= =======
Net earnings (loss).... $12,480 15,158 11,618 (4,036) 35,220
======= ====== ====== ======= =======
Earnings (loss) per
share:
Continuing
operations.......... $ .12 .15 .12 (.55) (.16)
======= ====== ====== ======= =======
Net earnings (loss).. $ .59 .72 .56 (.19) 1.68
======= ====== ====== ======= =======
1995:
Sales.................. $76,402 77,660 84,884 92,775 331,721
======= ====== ====== ======= =======
Gross profit........... $18,793 18,186 19,089 21,289 77,357
======= ====== ====== ======= =======
Net earnings from
continuing operations. $ 3,117 2,733 3,029 1,759 10,638
======= ====== ====== ======= =======
Net earnings........... $15,023 12,942 19,654 10,175 57,794
======= ====== ====== ======= =======
Earnings per share:
Continuing
operations.......... $ .15 .13 .15 .09 .52
======= ====== ====== ======= =======
Net earnings......... $ .74 .63 .95 .49 2.80
======= ====== ====== ======= =======
The above quarterly earnings per share calculations are based on the
weighted average shares outstanding during each quarter whereas the annual
earnings per share calculations are based on the weighted average shares
outstanding during the year.
Net earnings declined in the third quarter of fiscal 1996 primarily due to
lower margins in discontinued fertilizer operations, and in the fourth quarter
of fiscal 1996 due to losses related to the shutdown of PPC's operations (see
Note 5).
Net earnings declined in the fourth quarter of fiscal 1995 due to losses at
discontinued Gold operations resulting from impairment and abandonment
charges.
F-22
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
14. SUBSEQUENT EVENT
On August 27, 1996, First Mississippi entered into a definitive merger
agreement with MCC, under which MCC will acquire all the fertilizer interests
of First Mississippi. The transaction will occur in two steps: first, the tax-
free spinoff to First Mississippi's shareholders of First Mississippi's
chemicals and related businesses in the form of a new publicly traded company
that will retain the First Mississippi name; and second, the tax-free merger
of First Mississippi's fertilizer operations with a subsidiary of MCC. In the
merger, First Mississippi's stockholders will receive, subject to some
adjustment, approximately 6,900,000 shares of MCC stock, or 0.335 shares of
MCC stock for each share of First Mississippi's stock. At closing First
Mississippi's debt will be refinanced and increased to approximately $150,000
and will be assumed by MCC in the merger. An estimated loss of approximately
$6,000 will be incurred in the refinancing. After this refinancing and the
payment of certain expenses, cash on hand, currently estimated at
approximately $50,000, will be transferred to ChemFirst Inc., which will be
essentially debt free. The transaction is subject to, among other things,
approval by the stockholders of both First Mississippi and MCC and customary
regulatory approvals. It is expected that the transaction will be consummated
by December 31, 1996.
15. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Details of accrued expenses and other current liabilities are as follows:
JUNE 30
--------------
1996 1995
------- ------
Accrued costs for exiting aluminum business (note 5)............ $ 5,065 --
Other accruals, individually less than 5% of current liabili-
ties........................................................... 19,339 19,208
------- ------
$24,404 19,208
======= ======
16. VALUATION AND QUALIFYING ACCOUNTS
Details regarding the allowances for doubtful accounts and restructuring
costs are as follows:
OTHER
BALANCE AT CHARGED TO ADDITIONS BALANCE
BEGINNING COSTS AND (DEDUCTIONS), AT END
OF YEAR EXPENSES NET OF YEAR
---------- ---------- ------------- -------
Year ended June 30, 1996:
Allowance for doubtful accounts.. $ 732 607 (558) 781
Allowance for restructuring
costs........................... $ 582 -- -- --
Year ended June 30, 1995:
Allowance for doubtful accounts.. $ 424 180 128 732
Allowance for restructuring
costs........................... $ 2,460 -- (1,878) 582
Year ended June 30, 1994:
Allowance for doubtful accounts.. $ 4,287 405 (4,268) 424
Allowance for restructuring
costs........................... $21,535 -- (19,075) 2,460
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments not discussed in
note 6 approximate their fair values.
F-23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following sets forth the expenses in connection with the issuance and
distribution of the securities offered hereby, all of which are payable by the
Registrant:
ITEM AMOUNT
---- -------
Securities and Exchange Commission registration fee.............. $ 0
Blue Sky fees and expenses+...................................... *
Printing and engraving expenses+................................. *
Legal fees and expenses+......................................... *
Accountant's fees and expenses+.................................. *
Miscellaneous.................................................... *
-------
Total........................................................ *
=======
- --------
+Estimated.
*To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subarticle E of Article 8 of the Mississippi Business Corporation Act
("MBCA") empowers a Mississippi corporation to indemnify against liability an
individual who is made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
formal or informal (a "Proceeding"), because such person is or was a director.
To be eligible for indemnification, the director must have conducted himself
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. Liability indemnified against includes the
obligation to pay a judgment, settlement, penalty, fine or reasonable expenses
incurred with respect to a Proceeding. The MBCA precludes a corporation from
indemnifying a director in connection with a Proceeding by or in the right of
the corporation in which the director was adjudged liable to the corporation
or in connection with any other Proceeding charging improper personal benefit
to a director, whether or not involving action in the director's official
capacity, in which the director was adjudged liable on the basis that personal
benefit was improperly received by the director.
Subarticle E further provides that if a director is wholly successful, on
the merits or otherwise, in the defense of any Proceeding to which he was a
party because he is or was a director, the corporation must indemnify him
against reasonable expenses incurred in connection with the Proceeding. Also,
a court may order a company to indemnify a director if it determines the
director is fairly and reasonably entitled to indemnification in view of all
of the relevant circumstances. Subarticle E also allows corporations to
indemnify officers, employees or agents to the same extent as directors, and
provides for mandatory or court-ordered indemnification for these persons as
described above. Finally, the MBCA allows corporations to purchase and
maintain insurance on behalf of directors, officers, employees or agents
against liability asserted against or incurred by him in that capacity or
arising from his status as such, whether or not the corporation would have the
power to indemnify such person against liability under Subarticle E.
The Registrant's Amended and Restated Articles of Incorporation and Bylaws
provide for indemnification of the Registrant's officers and directors to the
fullest extent allowed by Mississippi law. First Mississippi entered into its
indemnification agreements with certain of its officers and its directors. The
effect of these agreements is to add to the indemnification rights otherwise
granted a contractual right to such indemnification. It is anticipated that
New First Mississippi will assume these agreements at the time of the
Distribution.
The Registrant will have directors and officers liability insurance which
protects each director or officer from certain claims and suits, including
shareholder derivative suits, even where the director may be determined to not
be entitled to indemnification under the MBCA and claims and suits arising
under the Securities Act. The policy may also afford coverage under
circumstances where the facts do not justify a finding that the director or
officer acted in good faith and in a manner that was in or not opposed to the
best interests of the Registrant.
The foregoing represents a summary of the general effect of the MBCA, the
Registrant's Amended and Restated Articles of Incorporation and Bylaws and
directors and officers liability insurance coverage for purposes of general
description only.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
The following Exhibits are filed as part of this Registration Statement:
2.1 Agreement and Plan of Merger and Reorganization, dated as of August 27, 1996,
among Mississippi Chemical Corporation, MISS SUB, INC. and First Mississippi
Corporation.
2.2 Form of Agreement and Plan of Distribution to be entered into between First
Mississippi Corporation and the Registrant.
2.3 Form of Tax Disaffiliation Agreement to be entered into between First
Mississippi Corporation and the Registrant.
2.4 Form of Employee Benefits and Compensation Agreement to be entered into between
First Mississippi Corporation and the Registrant.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4+ Rights Agreement, dated as of October 30, 1996, between the Registrant and
Society National Bank, as Rights Agent.
5+ Opinion of Baker, Donelson, Bearman & Caldwell re: legality.
8 Form of opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois).
11+ Statement re: computation of per share earnings.
21+ List of the subsidiaries of the Registrant.
23.1+ Consent of Baker, Donelson, Bearman & Caldwell (included in Exhibit 5).
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois) (included in Exhibit
8).
23.3 Auditors' Consent of KPMG Peat Marwick LLP.
24 Powers of attorney (included as part of the signature page).
27+ Financial Data Schedules.
- --------
+To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
To be filed by amendment as applicable.
2
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of an action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it as against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF JACKSON AND THE STATE OF
MISSISSIPPI ON THIS 30TH DAY OF OCTOBER, 1996.
/s/ J. Kelley Williams
By: ________________________________
J. Kelley Williams, Chairman of
the
Board and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS EACH OF J. KELLEY WILLIAMS, R. MICHAEL
SUMMERFORD AND TROY B. BROWNING HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND
AGENTS, EACH ACTING ALONE, WITH FULL POWERS OF SUBSTITUTION AND RESUBSTITUTION,
FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN
ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS
REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND
OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, EACH ACTING ALONE,
FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, EACH ACTING ALONE, OR
THEIR OR HIS SUBSTITUTES OR SUBSTITUTE, MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE HEREOF.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ J. Kelley Williams Chairman of the Board October 30, 1996
____________________________________ of Directors, Chief
J. Kelley Williams Executive Officer
(Principal Executive
Officer) and Director
/s/ Thomas G. Tepas President and Chief October 30, 1996
____________________________________ Operating Officer
Thomas G. Tepas
/s/ R. Michael Summerford Vice President and Chief October 30, 1996
____________________________________ Financial Officer
R. Michael Summerford (Principal Financial
Officer)
/s/ Troy B. Browning Controller (Principal October 30, 1996
____________________________________ Accounting Officer)
Troy B. Browning
/s/ Richard P. Anderson Director October 30, 1996
____________________________________
Richard P. Anderson
/s/ Paul A. Becker Director October 30, 1996
____________________________________
Paul A. Becker
4
SIGNATURE TITLE DATE
--------- ----- ----
/s/ James W. Crook Director October 30, 1996
____________________________________
James W. Crook
/s/ Michael J. Ferris Director October 30, 1996
____________________________________
Michael J. Ferris
/s/ James E. Fligg Director October 30, 1996
____________________________________
James E. Fligg
/s/ Richard P. Guyton Director October 30, 1996
____________________________________
Richard P. Guyton
/s/ Charles P. Moreton Director October 30, 1996
____________________________________
Charles P. Moreton
/s/ Paul W. Murrill Director October 30, 1996
____________________________________
Paul W. Murrill
/s/ William A. Percy, II Director October 30, 1996
____________________________________
William A. Percy, II
/s/ Dan F. Smith Director October 30, 1996
____________________________________
Dan F. Smith
/s/ Leland R. Speed Director October 30, 1996
____________________________________
Leland R. Speed
/s/ R. Gerald Turner Director October 30, 1996
____________________________________
R. Gerald Turner
5
EXHIBIT INDEX
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
2.1 Agreement and Plan of Merger and Reorganization, dated as of August 27, 1996,
among Mississippi Chemical Corporation, MISS SUB, INC. and First Mississippi
Corporation.
2.2 Form of Agreement and Plan of Distribution to be entered into between First
Mississippi Corporation and the Registrant.
2.3 Form of Tax Disaffiliation Agreement to be entered into between First Mississippi
Corporation and the Registrant.
2.4 Form of Employee Benefits and Compensation Agreement to be entered into between
First Mississippi Corporation and the Registrant.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4+ Rights Agreement, dated as of October 30, 1996, between the Registrant and
Society National Bank, as Rights Agent.
5+ Opinion of Baker, Donelson, Bearman & Caldwell re: legality.
8 Form of opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois).
11+ Statement re: computation of per share earnings.
21+ List of the subsidiaries of the Registrant.
23.1+ Consent of Baker, Donelson, Bearman & Caldwell (included in Exhibit 5).
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois) (included in Exhibit
8).
23.3 Auditors' Consent of KPMG Peat Marwick LLP.
24 Powers of attorney (included as part of the signature page).
27+ Financial Data Schedules.
- --------
+To be filed by amendment.