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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1995 OR
/ / TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-16032
MELAMINE CHEMICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 64-0475913
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
HIGHWAY 18 WEST, DONALDSONVILLE, LOUISIANA 70346
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(504) 473-3121
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
Securities registered pursuant to Section 12(g) of the Act: Common
stock, $.01 par value.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
(affiliates being directors, executive officers and holders of more than 5% of
the Company's common stock) of the Registrant at September 8, 1995 was
approximately $20,395,000.
The number of shares of the Registrant's common stock, par value one
cent ($.01) per share, outstanding at September 8, 1995 was 5,450,300.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement prepared for
use in connection with the registrant's 1995 Annual Meeting of Shareholders to
be held November 7, 1995 dated September 29, 1995 have been incorporated by
reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
GENERAL
Melamine Chemicals, Inc. (the "Company") is engaged in the
production and marketing of melamine crystal, a specialty chemical having
numerous industrial and commercial applications. Principal products in which
melamine is used include coatings such as paints for automobiles and major
household appliances; laminates such as kitchen countertops, wood paneling and
furniture; virtually unbreakable dinnerware; adhesives for composite wood
products such as particleboard; and as a flame retardant additive in certain
polyurethane foams, paints and polymeric compounds. The Company, one of only
two producers of melamine in North America, is one of the three largest
producers in the world and estimates that it has 60% of the domestic merchant
market. The Company is engaged in the development of new melamine process and
applications technology and the development and commercialization of melamine-
related compounds.
The Company was formed in 1968 as a Delaware corporation by Ashland
Inc. ("Ashland") and First Mississippi Corporation ("First Mississippi"), each
of which owned 50% of the Company's outstanding capital stock prior to the
Company's initial public offering in August 1987. Ashland and First
Mississippi each owns 23.4% of the Company. The Company's plant in
Donaldsonville, Louisiana (the "M-I plant"), which has a design and operating
capacity of 75 million pounds per year, was completed in 1971 and has been
producing melamine with approximately 99.9% purity levels since that date.
In June 1987, the Company started construction of a new production
facility at the Donaldsonville plant that utilizes a high-pressure,
high-temperature non-catalytic process developed and patented by the Company
(the "M-II process") with a design and operating capacity of 30 million pounds
per year (the "M-II plant"). Management believed that the M-II process would
result in significant improvements over the low-pressure, catalytic process
(the "M-I process") used by the M-I plant, including savings in capital costs
and energy costs over comparable production facilities utilizing the M-I
technology. During fiscal 1993, the M-II plant produced 22.8 million pounds,
during fiscal 1994, the plant produced 16.3 million pounds and during fiscal
1995, the plant produced 23.8 million pounds. The M-II plant's production in
fiscal 1994 was negatively impacted by a decision to take an extended
maintenance turnaround to reduce inventory levels.
The purity of the product produced by the M-II plant is averaging in
excess of 97%, and 100% of the product's ingredients are chemically active.
The Company has been successful in introducing this product into a variety of
markets including adhesive resins, molding compounds and concrete additives.
While not all market segments are expected to be able to use the M-II product,
the Company believes that approximately 80% of the current worldwide melamine
market could utilize this product. During fiscal 1995, sales of the M-II
product totaled 21.8 million pounds compared to 24.7 million pounds in fiscal
1994 and 20.2 million pounds in fiscal 1993.
In June 1995, the Company filed patent applications in the United
States covering what it believes to be significant improvements to the M-II
process. Laboratory test of these improvements indicates that they can
increase the melamine content of our M-II product up to 99.5% plus. With this
improvement in melamine content, the M-II product should be suitable for 100%
of the current worldwide consumption.
END-USES OF MELAMINE
Three principal characteristics make melamine crystal chemically
unique: (i) stability that makes it resistant to chemical, thermal and physical
degradation; (ii) a structure that allows it to be combined with other chemical
compounds, particularly formaldehyde and other monomers, in a wide variety of
chemical reactions and polymerizations; and (iii) a 66% nitrogen content.
Melamine has excellent fire retardant
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properties because: (i) when exposed to intense heat, it gives off
nitrogen-containing compounds that dilute oxygen, thereby inhibiting
combustion; and (ii) it is endothermic and, therefore, acts as a heat-sink
which also inhibits combustion.
Over 80% of the melamine sold by the Company is used in the
manufacture of melamine-formaldehyde resins. These resins have numerous
end-uses including: (i) surface coatings, which account for more than
one-third of domestic melamine consumption; (ii) laminates, which account for
more than one-quarter; and (iii) plastic molding compounds, which account for
approximately one-sixth of domestic consumption. Melamine-based resins are
also used in paper treatments and coatings, textile treatments and coatings,
wood adhesives and other uses. These markets, together with other end-uses of
melamine, are described below:
Surface coating resins. Melamine resins are used as clear finishes for paper,
fabrics, wood and metals and can be pigmented with white and colored pigments
to produce opaque enamel finishes. The finishes are color retentive and water
and chemical resistant, and can be used for both interior and exterior
applications. Finishes are formulated for refrigerators, washing machines,
automobiles, hospital equipment, kitchen utensils and cans. In combination
with other materials, melamine resins can be used as flexible finishes for
paper textiles and fabrics. Surface and automotive coatings represent the
largest single domestic use of melamine. The Company believes that over 95% of
all automobiles produced in the United States are now being painted with high
solids melamine-based paints that emit less fumes during application and
produce higher quality finishes than traditional coatings.
Laminating resins. Melamine resins are used in laminated products. Decorative
melamine laminates are often used when durability, especially heat and stain
resistance, is desired. Typical applications include countertops, cabinet
surfaces, simulated wood paneling, furniture surfaces and shelving. Kitchen
and bathroom countertops are a principal household use of melamine.
Plastic molding compounds. Melamine resins with strong thermosetting
attributes are molded into a variety of translucent, heat-resistant products
that are odorless and tasteless, with pale color. Fillers, pigments and dyes
can be incorporated into the plastic to produce various combinations of opacity
and color. These plastics are used in tableware, wash-resistant buttons,
arc-resistant ignition housings, insulation and many other products. The
primary advantages of these plastics are their strong resistance to water,
heat, chemicals and discoloration and their relative non-conductivity and
virtual unbreakability.
Paper-treating resins. Melamine resins are widely used to impart wet-strength,
dimensional stability and other favorable properties to paper.
Adhesive-binding resins. Melamine resins produce excellent weather-resistant
adhesive bonds and are used in particleboard and as binders for glass fibers in
air filters, brake linings and foundry sand cores.
Flame retardant products. Melamine is used as a fire retardant in specialized
paints, certain thermoplastics, textile products and in flexible polyurethane
foam used in the furniture and bedding industry. Because of heightened public
awareness of fire hazards created by the use of combustible materials in
fabrics and furniture, the Company believes the opportunity for sales growth in
this area is promising. The Company markets melamine crystal to the North
American flame retardant flexible polyurethane foam market through a
distributorship agreement with BASF Corporation, an important participant in
the development of melamine-based flame retardant foam systems.
Other uses. Melamine is also used in varied applications such as flocculating
agents in water treatment, in fluorescent pigments, as concrete additives and
as polymeric stabilizers.
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MARKETING AND SALES
The Company's domestic and international sales are managed by a Vice
President of Sales and Marketing. The Company uses a number of distributors
and agents outside the United States.
During the last three years, approximately 50% of the Company's output
was purchased by less than ten industrial customers, including Monsanto
Chemical Company, Sun Coast Industries, Inc., BASF Corporation and BTL
Specialty Resins Corporation. More than 10% of the Company's output was
purchased by Sun Coast Industries, Inc. during this period, and in fiscal 1994
and 1995, Monsanto Chemical Company also purchased more than 10% of the
Company's output.
During fiscal year 1993, approximately 46% of the net sales of the
Company were derived from customers in foreign countries. Approximately 11%
were to customers in Italy, 4% were to customers in the United Kingdom, 3% were
to customers in Indonesia, 3% were to customers in Japan, 3% were to customers
in Germany and 22% were to customers in other foreign countries. During fiscal
1994, approximately 49% of the net sales of the Company were derived from
customers in foreign countries. Approximately 8% were to customers in Italy,
7% to customers in Japan, 5% to customers in Turkey, 4% to customers in
Indonesia, 3% to customers in the Netherlands, 3% to customers in Belgium, 3%
to customers in Australia, 3% to customers in Thailand and 13% to customers in
other countries. During fiscal year 1995, approximately 38% of the net sales
of the Company were derived from customers in foreign countries. Approximately
8% were to customers in Italy, 4% to customers in Belgium, 4% to customers in
Brazil, 4% to customers in the Netherlands, 2% to customers in Chile, 2% to
customers in France, 2% to customers in Germany, 2% to customers in Turkey and
10% to customers in other countries.
For additional information on sales to significant customers and
export sales, see footnote 6 to the financial statements on Page 24.
COMPETITION
The Company and American Melamine Industries (AMEL) are the only two
domestic producers of melamine crystal. AMEL's facility, located in Fortier,
Louisiana, has production capacity of approximately 140 million pounds per
year. AMEL is a manufacturing joint venture between Cytec Industries Inc.'s
("Cytec") and N.V. Nederlandse Staatsmijnen (DSM), the world's largest melamine
producer.
The Company estimates its share of the domestic merchant market to be
approximately 60%. The addition in 1990 of approximately 65 million pounds of
production capacity at the AMEL plant and increased competition from foreign
producers have made competition in the domestic market intense. In the last
three fiscal years, the Company has placed greater emphasis on selling in the
domestic market. This change was brought about because of the domestic
economic recovery, and this change in strategy has been successful in
increasing the Company's portion of the domestic market.
Melamine is also produced through several different process
technologies at approximately 20 plants in 15 other countries. Industry reports
indicate that worldwide nameplate capacity is approximately 1.4 billion pounds
per year, although the Company believes that effective capacity is
approximately 1.2 billion pounds. The Company cannot reliably analyze
worldwide competitive conditions because production and consumption data are
not available in all countries outside of the United States.
Melamine imports during the twelve months ended June 30, 1995 have
constituted less than 10% of the total merchant market.
The Company attempts to differentiate itself from competitors to the
greatest extent possible on the basis of custom packaging, a variety of
particle sizes, offering M-II type melamine crystal (under the
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trademark G. P. Crystal(TM)), superior and flexible customer service and new
technology. Also emphasized is the fact that all production is sold to
customers, there being no internal consumption. Those factors, combined with
pricing consistent with levels established in the various geographic markets,
have led to the Company's share of the domestic merchant market (the total
domestic market less the portion attributable to Cytec's internal consumption)
and to its role in supplying export customers.
The Company generally has been protected from competition from
substitute materials because of melamine's unique physical characteristics,
including its clarity, heat and chemical resistance, colorability and surface
hardness.
MARKET DEVELOPMENT AND RESEARCH
In its research and market development programs, the Company uses its
own employees and outside consultants to improve melamine process technology,
provide marketing support and applications development and develop new
proprietary products and applications for melamine.
PATENTS
The Company possesses technical know-how and trade secrets, as well as
18 United States patents, that cover both the M-II process and various
industrial and agricultural applications. None of the Company's patents will
expire before the year 2001. The Company also holds or has applied for the
equivalent of many of its United States patents in various foreign countries.
MELAMINE PRODUCTION
General. Because of their complexity, the corrosive nature of their
chemical reaction processes, and their integration with urea production,
melamine plants throughout the world historically have proven difficult to
operate on a continuous basis. The Company's M-I plant experienced operating
difficulties from the time of its construction in 1971 through 1985.
Refinement of critical plant processes and careful maintenance have enabled the
Company to produce nearer to full capacity since January 1986. The Company
believes the difficulties associated with operating a melamine plant represent
a significant competitive barrier to entry into the industry.
The Melamine-I Process. Currently, the Company produces approximately
75% of its melamine through a continuous chemical process that heats urea,
which is made from ammonia and carbon dioxide, under low pressure in the
presence of a catalyst. In the Company's M-I process, hot urea melt (liquid
urea) is pumped from Triad Chemical's ("Triad") adjacent urea plant into a
reactor where it is atomized with heated ammonia and converted into gaseous
melamine with gaseous ammonia and carbon dioxide formed as by-products. The
gaseous melamine flows from the reactor to a saturator cooler where it is
converted to a slurry through a cooling process. The ammonia and carbon
dioxide by-products are diverted into an ammonia recovery system where pure
ammonia is recovered for reuse in the reactor. The remaining ammonia and all
of the carbon dioxide are then combined with water into a concentrated liquid
solution known as carbamate, returned by pipeline to the urea plant and
recycled to produce additional urea. The melamine slurry is pumped into a
filtration and recrystallization system designed to produce melamine crystal
that is approximately 99.9% pure.
The Melamine-II Process. The M-II process is a continuous,
high-pressure, non-catalytic anhydrous process in which hot urea melt is fed
into a reactor under high-pressure and converted directly into melamine in
liquid form with ammonia and carbon dioxide formed as gaseous by-products.
After separation from the ammonia and carbon dioxide, the liquid melamine is
injected into a cooling unit where it is depressurized and rapidly cooled.
This process allows the formation of melamine crystal that has purity averaging
in excess of 97%. The Company has found that the melamine produced with the
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M-II process is sufficiently pure for use in adhesive resins, as a flame
retardant in flexible polyurethane foam, as a concrete additive and in certain
molding compounds. While not all markets are expected to be able to use the
product currently produced with the M-II process, the Company believes that
approximately 80% of the current worldwide consumption could utilize this
product.
SOURCES OF RAW MATERIALS
Under a feedstock supply agreement between the Company, First
Mississippi and Mississippi Chemical Corporation ("Mississippi Chemical"), the
Company obtains all of its urea and anhydrous ammonia from Triad, a joint
venture between First Mississippi and Mississippi Chemical. Urea is fed
directly from Triad's adjacent facility into the Company's reactor. The
maximum amount of feedstock available under the agreement is sufficient for the
production of approximately 95 million pounds per year. The feedstock
agreement is scheduled to expire in June 2000. The Company pays First
Mississippi and Mississippi Chemical for feedstock an amount related to, but
less than, the weighted average sales price that First Mississippi charges bulk
purchasers of solid urea. The Company receives, as a credit against the price,
an amount based on carbamate returned to Triad. First Mississippi has agreed
to supply urea and anhydrous ammonia to the Company to the extent that
Mississippi Chemical wrongfully ceases to make deliveries. See Item 13.
"Certain Relationships and Related Transactions."
The Company currently purchases less than 25% of Triad's urea output.
Because of the advantages of receiving feedstock from and returning carbamate
to an adjacent urea plant, the continued operation of Triad's plant is
important to the Company. First Mississippi and Mississippi Chemical have not
agreed to guarantee the continuation of Triad's operations and have reserved
the right to suspend or terminate delivery of feedstock upon any suspension or
termination of those operations. Except for temporary shutdowns for
maintenance and repairs, Triad's facility has been in continuous operation for
24 years and is believed by the Company to be one of the most cost efficient
urea plants in the United States. During such temporary shutdowns, the Company
has been required to suspend melamine production. To the extent practicable,
the Company stockpiles melamine in anticipation of Triad's regularly scheduled
maintenance shut downs. The Company does not believe that its ability to fill
customer orders in a timely manner has been significantly affected by any
suspension of operations at the Triad facility.
ENERGY REQUIREMENTS
The Company uses natural gas as an energy source to operate its
production facilities. The Company's production facilities are connected to
three pipeline systems, enabling it to purchase natural gas from different
suppliers. Under a three-year contract executed in August 1986 and extended
every six months thereafter under the terms of the contract, the Company is
purchasing all of its natural gas requirements from one supplier.
ENVIRONMENTAL AND OTHER REGULATORY CONSIDERATIONS
The Company is subject to regulation under federal, state and local
environmental laws and regulations. During the last three years, the Company's
operations did not result in the production of any significant effluents or
emissions. Catalyst residues occur in such small quantities that no further
processing is necessary for either environmental or safety reasons.
Substantially all of the ammonia and carbon dioxide off-gases from the M-I
plant are returned to Triad as carbamate and are used for the production of
additional urea. Ammonia from the M-II plant is recycled to the M-I plant
while carbon dioxide is vented to the atmosphere. The Company disposes
off-site of a small quantity of material used in its filtration system. Except
for ammonia, none of the Company's products or by-products are considered to be
toxic within the meaning of current environmental laws. It is the Company's
policy to operate its facility in compliance with all applicable environmental
laws, and the Company does not believe that it is subject to any material
liability under any such laws.
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On August 24, 1990, the Louisiana Department of Environmental Quality
("DEQ") issued an order requiring the Company to submit within 60 days a
comprehensive plan for reducing nitrogen oxides and reactive hydrocarbon
emissions. Similar orders were sent to other facilities in the Baton Rouge
area. Subsequently, the Company voluntarily agreed to participate in a Baton
Rouge area industrial task force formed for the purpose of developing plans for
the control and reduction of ozone pollution. The task force, in cooperation
with the DEQ, has performed ozone modeling studies to determine whether
nitrogen oxides controls are necessary to reduce ozone levels in the Baton
Rouge area. The task force has submitted its recommended plan to the DEQ but
has not yet received approval. The Company's participation in the task force
has temporarily stayed the DEQ order. The Company does not believe that the
plan's implementation will significantly impact the operations of the Company
nor require significant capital expenditures.
See Item 3. "Legal Proceedings" for a description of the potential
liability associated with the cleaning up of Superfund sites near the towns of
Sorrento, Louisiana and Iota, Louisiana.
Employee safety in the United States is regulated under the
Occupational Safety and Health Act, and management believes that the Company is
in compliance in all material respects with its requirements.
EMPLOYEES
The Company employs 92 persons at the Donaldsonville facility. In
addition, the Company regularly has approximately 60 independent contractors
working at its facility. None of the Company's regular full-time employees or
its independent contractors are represented by unions.
BUSINESS INSURANCE
In addition to other customary insurance coverage, the Company
maintains insurance against property damage and business interruption loss
caused by fire, explosion or similar catastrophic events that result in
physical damage or destruction to (i) the Company's premises or plants, (ii)
the utility transmission lines or equipment that service its property and (iii)
the facilities of Triad.
ITEM 2. PROPERTIES
The Company's plant is located on an eight-acre site that is leased
from Triad near Donaldsonville, Louisiana. The plant site lease will expire
June 1, 2000, and the lessee has the right to extend the lease for four
additional five-year terms or until 2020. The annual rent under the lease is
$2,500 during the primary term and any additional terms. Because the plant
site is surrounded by land owned by Triad and would otherwise have no access to
public thoroughfares, railroad lines or feedstock or utility sources, Triad has
granted in the site lease certain non-exclusive rights-of-way over its property
for all purposes necessary to permit operation of the plant.
The M-I plant was constructed by First Mississippi and Ashland in 1971
and leased to the Company. In June 1987, the Company purchased the M-I plant
from subsidiaries of Ashland and First Mississippi.
During fiscal 1989, construction of the M-II plant was completed and
start-up of the plant began. The start-up of the M-II plant was completed in
April 1991.
The Company leases approximately 5,500 square feet of office space at
the plant site from Triad. Lease of the office space is included in the plant
site lease.
The Company owns a 17,600 square foot warehouse building and four
silos on the plant site with combined capacity to store up to 5.5 million
pounds of melamine. The Company uses common carriers to
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transport all of the melamine it produces. The Company has truck loading
facilities at its warehouse and an adjacent rail spur that permits direct
loading onto railroad cars.
ITEM 3. LEGAL PROCEEDINGS
The Company is one of seventeen defendants in a Superfund site clean
up cost contribution action brought by four plaintiff companies. Fourteen of
the defendants have settled or been dismissed from this litigation. The
plaintiff companies have been identified by the United States Environmental
Protection Agency (the "EPA") as the major generators of wastes disposed at the
Cleve Reber Superfund site near the town of Sorrento, Louisiana. In September
1988, the plaintiff companies were ordered by the EPA to clean up the site, and
they have agreed to do so. The plaintiff companies subsequently brought this
suit seeking to recover portions of approximately $600,000 they allege to have
already expended on remedial work as well as portions of future clean-up costs
(which have been preliminarily estimated at approximately $35 million plus $6
million for reimbursement to the EPA for remedial costs). The clean-up cost
estimate is an approximation based upon on-site incineration of wastes and
future semi-annual monitoring of the site for thirty years. While the lawsuit
is still in the discovery stage, it appears that the Company has substantial
defenses to the action by plaintiffs. Material generated by the Company is
alleged to have been disposed of at this site for only one brief period when
the regular disposal site used by its waste disposal contractor was
unavailable. The Company contends that any of its materials transported to the
site were not hazardous waste and represent only a de minimis contribution to
the site as compared to material disposed of there by the plaintiffs and other
defendants. The Company has moved for summary judgment seeking dismissal from
this lawsuit. The motion is presently pending before the court, but plaintiffs
have requested additional time to conduct further discovery.
In March 1995, the Company received notice that it had been named a
potentially responsible party (PRP) at a Superfund site located near Iota,
Louisiana. The EPA is attempting to recover approximately $4.7 million from
approximately 350 PRP's, including the Company. While this matter is still in
the early discovery stage, it appears that the Company has substantial defenses
and is expected to be a de minimis party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders
during the fourth quarter of fiscal year ended June 30, 1995.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information regarding the executive
officers of the Company as of September 8, 1995.
James W. Crook, 65, has served as Chairman of the Board since June
1987. Mr. Crook, a private investor, has served on the Board of Directors
since 1972. Mr. Crook is a director of First Mississippi Corporation and is
also a member of the Triad Management Committee.
Frederic R. Huber, 60, has served as President and Chief Executive
Officer since November 1991. From 1985 to November 1991, Mr. Huber served as
Executive Vice President of the Organic Chemicals Division of W. R. Grace & Co.
Wayne D. DeLeo, 48, has served as Vice President and Chief Financial
Officer since 1987.
Martin F. Lapari, 47, has served as Vice President of Manufacturing
and Engineering since August 1992. From May 1987 until August 1992, Mr. Lapari
served as the Company's plant manager.
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William A. Sorensen, 59, has served as Vice President of Sales and
Marketing since January 1994. From January 1993 to December 1993, Mr. Sorensen
served as Director of National Account Sales of LaRoche Chemicals, Inc. From
1989 to 1992, Mr. Sorensen served as Director of Corporate Relations of LaRoche
Chemicals Inc., a manufacturer of specialty and industrial aluminas, chlor
alkali and conditioned comfort products.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock trades on The Nasdaq Stock Market under the
symbol MTWO.
The following table sets forth the high and low sales price of the
Company's common stock as quoted on Nasdaq for the fiscal years ending June 30,
1995 and 1994:
1995 1994
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HIGH LOW HIGH LOW
First Quarter 11 5 7/8 6 1/2 4 1/2
Second Quarter 12 1/4 9 6 3/4 5
Third Quarter 10 3/4 7 1/4 6 3/4 4 7/8
Fourth Quarter 9 1/4 7 6 1/4 5
As of September 8, 1995, there were 248 record holders of the
Company's common stock and approximately 2,280 beneficial shareholders.
In May 1992, the Board of Directors eliminated the payment of
dividends for the foreseeable future because of the lack of earnings and the
need to conserve cash. The declaration and payment of dividends are at the
discretion of the Board of Directors of the Company. The payment of future
dividends will be considered by the Board of Directors from time to time based
on the Company's results of operations, financial position, capital
requirements and other factors.
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ITEM 6. SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
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FISCAL YEAR ENDED JUNE 30,
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1991 1992 1993 1994 1995
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OPERATIONS STATEMENT DATA:
Net sales $37,793 35,910 35,423 39,085 45,501
Cost of sales 30,978 34,639 37,353 41,670 38,204
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Gross profit (loss) 6,815 1,271 (1,930) (2,585) 7,297
Selling, general and administrative expenses 3,488 3,552 3,285 2,820 2,994
Research and development costs 77 27 129 182 230
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Operating income (loss) 3,250 (2,308) (5,344) (5,587) 4,073
Other income (expense), net 67 (92) (266) 1,668 205
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Earnings (loss) before income tax expense (benefit) 3,317 (2,400) (5,610) (3,919) 4,278
Income tax expense (benefit) 1,134 (864) (2,019) (1,411) 945
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Net earnings (loss) $ 2,183 (1,536) (3,591) (2,508) 3,333
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Earnings (loss) per common share $ 0.40 (0.28) (0.66) (0.46) 0.60
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Dividends per common share $ 0.24 0.18 0.18 0.00 0.00
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AS OF JUNE 30,
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1991 1992 1993 1994 1995
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BALANCE SHEET DATA:
Working capital $10,542 14,016 12,678 9,656 14,020
Total assets $48,834 49,913 46,954 40,610 44,289
Stockholders' equity $37,376 34,859 31,268 28,760 32,095
FISCAL YEAR ENDED JUNE 30,
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1991 1992 1993 1994 1995
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OPERATING DATA (IN MILLIONS OF POUNDS):
Melamine produced 71.3 77.4 94.5 84.5 99.3
Domestic sales 37.3 36.7 47.0 53.9 62.6
Export sales 28.8 38.7 40.4 51.2 37.8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Sales in fiscal 1995 increased to $45.5 million from $39.1 million in
fiscal 1994. The sales volume decreased to 100 million pounds from 105 million
pounds because of low inventory levels. While sales volume decreased, the
average sales price increased 22% in fiscal 1995 as compared to fiscal 1994. The
sales price increase was due to the strengthening worldwide economies and the
resulting increase in demand. During fiscal 1995, the Company implemented two
overall price increases and has announced another price increase effective July
1, 1995.
Sales in fiscal 1994 increased to $39.1 million from $35.4 million in
fiscal 1993. The sales volume increased by 20% to 105 million pounds, a record
level. This volume increase was caused by temporary
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maintenance shut downs by a number of other production facilities and the
improving economies in the United States and in Europe. Sales prices decreased
by 8% reflecting the impact of worldwide over capacity, especially during the
first half of fiscal 1994. During the second half of fiscal 1994, demand and
supply appeared to become more in balance, and pricing pressure subsided.
During the last three fiscal years, the Company has placed greater
emphasis on selling in the domestic market. This emphasis was brought about
because of the relatively strong domestic market and has increased the portion
of the Company's sales into the domestic market from 54% in fiscal 1993 to 62%
in fiscal 1995.
The following table, which is derived from Item 6. "Selected Financial
Data," sets forth for the periods indicated certain items from the Company's
statements of operations as a percentage of the Company's sales:
FISCAL YEAR ENDED JUNE 30,
---------------------------------------
1993 1994 1995
------ ------- -------
As a percentage of sales
Cost of sales 105.4% 106.6% 84.0%
Gross profit (loss) (5.4) (6.6) 16.0
Selling, general and administrative expenses 9.3 7.2 6.6
Research and development costs 0.4 0.5 0.5
Operating income (loss) (15.1) (14.3) 9.0
Net earnings (loss) (10.1) (6.4) 7.3
The gross profit margins improved in fiscal 1995 as compared to fiscal
1994 because of an increase in average sales price of 8.1 per pound and a
reduction in cost of production of 2.0 per pound. The reduction in the cost
of production was due to:
-- increased production volume over which fixed costs, including
depreciation, could be spread; and
-- a decrease in the cost of natural gas, which amounted to
$875,000.
The reduction in the cost of production was achieved in spite of a
$1.8 million increase in maintenance cost due to the deterioration of the salt
coils in the M-I plant. The salt coils have a limited life and failures
increase with age. The Company plans to replace the coils during the annual
maintenance shutdown scheduled in October 1995 at an estimated cost of $1.5
million.
Gross profit margins in fiscal 1994 worsened as compared to fiscal
1993 because of a drop in sales prices of 3.3 per pound, which was partially
offset by a reduction in the cost of production of 2.2 per pound resulting
from:
-- a price reduction of $1.1 million in the cost of raw material;
and
-- a $1.5 million reduction in maintenance cost.
During the five years ended in fiscal 1991, there was a steady
increase in maintenance costs due to the addition of a second plant, repetitive
production problems and cost increases. In fiscal 1992, the Company took a
number of corrective steps to stop the increase in maintenance costs and
reverse the trend. The Company added two key employees, a planner and a
superintendent, to see that future maintenance activities are done on a more
preventive basis and provide long-term solutions to repetitive problems. In
fiscal 1994, maintenance cost dropped by $1.5 million.
At the end of fiscal 1993, inventory had increased to approximately a
three month supply. Because of the high level of inventory, the Company took
an extended normal yearly maintenance shut down in early
11
12
October 1993. The shut down lasted approximately six weeks for the M-I plant
and three months for the M-II plant. The impact of the extended shutdown was
to :
-- Reduce inventory by $5.2 million and improve the Company's
cash position;
-- Increase operating losses by approximately $1.3 million
because fixed and semi-fixed costs were spread over fewer
pounds of production; and
-- Reduce production volume by approximately 10 million pounds.
While the extended shut down accomplished the originally objectives,
inventory levels declined by the end of fiscal 1994 to a two week supply, which
the Company believes to be about half the acceptable level. In addition, two
consecutive record breaking sales quarters in the second half of fiscal 1994
contributed to the inventory shortage, as did maintenance problems experienced
by a number of competing production plants which increased the volume of sales
orders received by the Company during this six month period far beyond normal
levels.
During fiscal 1995, an attempt to build inventories to acceptable
levels was not successful because of very strong demand. The annual
maintenance shut down is scheduled for October 1995 and is expected to last
from two to three weeks. The Company will attempt to build inventories to a
higher level in order to have sufficient inventory for the shut down period.
The building of inventory levels in the first quarter of fiscal 1996 is
expected to negatively affect the first quarter sales volume.
Selling, general and administrative expenses increased by 6% in fiscal
1995 as compared to fiscal 1994. The increase was due to the incentive plan
awards incurred in fiscal 1995. No incentive plan awards were granted in
fiscal 1994 because the Company experienced a loss in that year.
Selling, general and administrative expenses decreased in fiscal 1994
as compared to fiscal 1993. The largest element of the decrease was a
reduction in bad debt expense and a reduction in the expenses associated with
examining the feasibility of constructing a plant in Europe.
Research and development costs increased in both fiscal 1994 and 1995
and as the emphasis has moved from trying to get the M-II plant operating
properly back to basic research and development. In addition, because the
Company has become profitable, the funds available for research have increased.
Research and development costs are expected to increase in fiscal 1996 to more
than $300,000.
In the fourth quarter of fiscal 1995, the Company's operating results
were negatively affected by:
-- A 34% increase in the cost of raw material, which reduced
operating income by $1.3 million; and
-- A maintenance shut down during the last nine days of the
month, which reduced production by about three million pounds.
Partially offsetting these negative factors was a 2.5 per pound
increase in the average selling price. While the cost of raw material is
impossible to predict with any certainty, the Company does expect the
production cost in fiscal 1996 to exceed fiscal 1995's cost by about 5 per
pound because of the expected increases in raw material cost.
In the fourth quarter of fiscal 1994, the Company's operating results
improved as compared to the previous three fiscal quarters. The improvement
was due to a record sales volume of approximately 30 million pounds, a slightly
better net sales price, larger production volume over which to spread fixed and
semi-fixed costs, and lower raw material cost.
12
13
In the third quarter of fiscal 1994, the Company sold its
controlled-release fertilizer technology for $1.8 million resulting in a gain
of $1.7 million. This technology had previously been licensed and had
generated yearly royalties of between $200 and $300 thousand.
Operating results for the fourth quarter of fiscal 1993 were
negatively affected by a maintenance shut down during the quarter. In addition
to the high maintenance costs during the quarter, there was less production
volume over which to spread fixed and semi-fixed costs. This shut down was
discretionary and was taken in an attempt to improve future operating
efficiencies and reliability of the production facilities.
The Company is subject to extensive regulation under federal, state
and local environmental laws and regulations (see Item 1.
"Business-Environmental and Other Regulatory Considerations"). In addition,
the Company obtains its urea and anhydrous ammonia from Triad, which also is
subject to extensive environmental regulation. The inability of Triad to
comply with those laws and regulations could severely restrict the Company's
ability to produce melamine. The Company is not aware of any existing
circumstances that materially affect its or Triad's ability to comply with the
applicable regulations.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1995, the Company generated cash flow from operations of
$9.1 million, a $7.4 million increase from the prior year. The increase was
due mainly to increased profitability and an increase in deferred income taxes.
Capital expenditures increased to $1.7 million in fiscal 1995 and included
about $500,000 for the construction of new salt coils that will be installed in
the M-I plant in October 1995.
The Company generated cash flow from operation of $1.7 million and
$570,000 in fiscal 1994 and 1993, respectively. The Company's capital
expenditures in fiscal 1993 and 1994 were curtailed because of the lack of cash
from operating activities. The Company believes that yearly capital
expenditures of approximately $1 million are essential to maintain the
production facilities' capacity at current levels.
It is anticipated that the level of capital expenditures in fiscal
1996 will approximate $3 million. Of this amount, an additional $1.0 million
will be spent on salt coils for the M-I plant and $1.0 million will be spent
for new packaging equipment. In addition, approximately $300,000 will be spent
to change the draft tube inside of the M-II reactor. While it is anticipated
that the M-II plant will be shut down for about four weeks in connection with
this project, the exact length of the shut down is not possible to predict with
certainty.
The Company has two $3.75 million lines of credit that expire in April
1997. The Company expects the level of borrowing in fiscal 1996 to be nominal
and that the lines of credit will be sufficient to finance planned capital
expenditures and any cash shortfalls from operations.
In July 1995, the Company announced the signing of two letters of
intent relating to the proposed construction of a 66 million pound-per-year
melamine plant near Memphis, Tennessee, using the Company's M-II technology.
One letter of intent was signed with a major U.S. corporation seeking a
long-term supply of melamine. The letter of intent contemplates a contract
covering a large portion of the proposed plant's output. The second letter of
intent, signed with Arcadian Fertilizer, L.P., contemplates a long-term raw
material supply contract for the proposed plant under which the Company would
receive all of the new plant's raw material requirements on a cost-plus basis.
It is anticipated that the new plant will cost about $40 million. The Company
is discussing financing of the new plant with a number of financial
institutions but has not yet received any commitment. It is expected that the
definitive agreements, additional engineering and financing arrangements will
be completed within six months of signing of the letter of intent. The Board
of Director of each of the three parties to the two letters of intent must
approve the definitive agreements prior to beginning of construction.
The Company is continuing to evaluate the feasibility of constructing
a melamine plant using the Company's M-II technology in a joint venture with a
subsidiary of Norsk Hydro A.S. The Company
13
14
invested approximately $360,000 in fiscal 1994 in developing engineering
designs and in forming a joint venture company that represents the Company as
its sales agent throughout Europe. A final decision on this plant is expected
to be reached in fiscal 1996. If it is decided to build the plant, the
Company's ability to finance its equity contribution to the joint venture will
have to be explored with its lenders. No commitment has been obtained in this
regard from any lender. If it is decided that it is not desirable to build the
plant, the Company intends to use the engineering design at other plant
locations.
In May 1992, the Board of Directors eliminated the payment of
dividends because of the lack of earnings and the need to conserve cash. While
the future payment of dividends is at the discretion of the Board of Directors,
any future payments will include consideration of the Company's profitability,
financial position and all liquidity requirements.
14
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS,
SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULES
Page
----
Independent Auditors' Report 16
Consolidated Balance Sheets as of June 30, 1995 and 1994 17
Consolidated Statements of Operations for the years ended June 30, 1995, 1994 and 1993 18
Consolidated Statements of Stockholders' Equity for the years ended June 30, 1995,
1994 and 1993 18
Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1994 and 1993 19
Notes to Consolidated Financial Statements 20
Supplemental Information 26
Schedule II - Valuation and Qualifying Accounts 31
15
16
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Melamine Chemicals, Inc.:
We have audited the consolidated financial statements of Melamine
Chemicals, Inc. as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
consolidated financial statement schedules as listed in the accompanying index.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedules 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 a management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Melamine Chemicals, Inc. as of June 30, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year period
ended June 30, 1995, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules,
when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly, in all material respects, the information set
forth therein.
KPMG PEAT MARWICK LLP
Baton Rouge, Louisiana
July 25, 1995
16
17
MELAMINE CHEMICALS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
1995 1994
----------- ----------
ASSETS
Current assets:
Cash $ 5,458,494 357,821
Receivables:
Trade (net of allowance for doubtful debts of $150,000 at June
1995 and at June 1994) 9,571,751 9,279,871
Income tax refund 401,770 529,822
Other 177,847 109,813
----------- ----------
Total receivables 10,151,368 9,919,506
----------- ----------
Inventories:
Finished goods 590,000 818,000
Supplies 208,683 224,507
----------- ----------
Total inventories 798,683 1,042,507
----------- ----------
Prepaid expenses:
Spare parts 2,239,262 2,260,376
Other 68,449 73,776
----------- ----------
Total prepaid expenses 2,307,711 2,334,152
----------- ----------
Deferred income taxes 1,610,161 1,115,513
----------- ----------
Total current assets 20,326,417 14,769,499
----------- ----------
Plant and equipment, at cost 43,730,930 42,022,996
Less accumulated depreciation 20,192,617 16,601,166
----------- ----------
Net plant and equipment 23,538,313 25,421,830
----------- ----------
Other assets 424,355 418,380
----------- ----------
$44,289,085 40,609,709
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,775,475 3,139,557
Accrued expenses 750,924 677,552
Current maturity on lease obligation 0 72,622
Amounts due to related parties 1,780,110 1,223,164
----------- ----------
Total current liabilities 6,306,509 5,112,895
----------- ----------
Note payable 0 2,000,000
Long-term portion of lease obligation 0 230,654
Deferred income taxes 5,888,013 4,506,063
Stockholders' equity:
Preferred stock of $1 par value.
Authorized 2,000,000 shares; none issued 0 0
Common stock of $.01 par value. Authorized 20,000,000 shares;
issued and outstanding 5,450,300 at June 1995 and 5,450,000 at
June 1994 54,503 54,500
Additional paid-in capital 16,798,970 16,797,398
Retained earnings 15,241,090 11,908,199
----------- ----------
Total stockholder's equity 32,094,563 28,760,097
----------- ----------
$44,289,085 40,609,709
=========== ==========
See accompanying notes to consolidated financial statements.
17
18
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
1995 1994 1993
----------- ---------- ----------
Net sales $45,500,736 39,085,475 35,422,740
Cost of sales 38,203,570 41,670,029 37,352,899
----------- ---------- ----------
Gross profit (loss) 7,297,166 (2,584,554) (1,930,159)
----------- ---------- ----------
Selling, general and administrative expenses 2,993,748 2,820,539 3,285,203
Research and development costs 229,955 181,943 129,168
----------- ---------- ----------
3,223,703 3,002,482 3,414,371
----------- ---------- ----------
Operating income (loss) 4,073,463 (5,587,036) (5,344,530)
----------- ---------- ----------
Other income (expenses):
Interest income 95,227 50,582 11,495
Interest expense (48,799) (330,187) (262,056)
Sale of technology 0 1,715,240 0
Miscellaneous 158,533 232,574 (15,596)
----------- ---------- ----------
204,961 1,668,209 (266,157)
----------- ---------- ----------
Income (loss) before income tax 4,278,424 (3,918,827) (5,610,687)
Income tax expense (benefit) 945,533 (1,410,778) (2,019,847)
----------- ---------- ----------
Net earnings (loss) $ 3,332,891 (2,508,049) (3,590,840)
=========== ========== ==========
Net earnings (loss) per common share $ 0.60 (.46) (.66)
=========== ========== ==========
See accompanying notes to consolidated financial statements.
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------- ---------- ---------- ----------
Balance June 30, 1992 $54,500 16,797,398 18,007,088 34,858,986
Net loss for fiscal 1993 0 0 (3,590,840) (3,590,840)
------- ---------- ---------- ----------
Balance June 30, 1993 54,500 16,797,398 14,416,248 31,268,146
Net loss for fiscal 1994 0 0 (2,508,049) (2,508,049)
------- ---------- ---------- ----------
Balance June 30, 1994 54,500 16,797,398 11,908,199 28,760,097
Exercise of stock options 3 1,572 0 1,575
Net earnings for fiscal 1995 0 0 3,332,891 3,332,891
------- ---------- ---------- ----------
Balance June 30, 1995 $54,503 16,798,970 15,241,090 32,094,563
======= ========== ========== ==========
See accompanying notes to consolidated financial statements.
18
19
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
1995 1994 1993
----------- ---------- ----------
Cash flows from operating activities:
Net earnings (loss) $ 3,332,891 (2,508,049) (3,590,840)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation 3,623,109 3,344,222 3,247,616
Increase (decrease) in deferred income taxes 1,381,950 (454,850) (727,794)
Loss (gain) on sale of assets (5,906) (1,716,740) 1,107
Change in assets and liabilities
(Increase) decrease in:
Receivables (231,862) (2,753,793) 3,144,827
Inventories 243,824 7,858,603 (2,596,174)
Prepaid expenses 26,441 (387,451) (42,234)
Deferred income taxes (494,648) (24,132) 20,350
Increase (decrease) in:
Accounts payable 635,918 (1,464,379) 1,035,074
Accrued expenses 73,372 (74,488) (528,825)
Amounts due to related parties 556,946 (145,747) 607,496
----------- ---------- ----------
Cash from operating activities 9,142,035 1,673,196 570,603
----------- ---------- ----------
Cash flows from investing activities:
Proceeds from disposition of assets 8,025 1,801,500 449
Capital expenditures (1,741,711) (1,315,817) (760,803)
Increase in other assets (5,975) (401,993) (7,952)
----------- ---------- ----------
Cash from investing activities (1,739,661) 83,690 (768,306)
----------- ---------- ----------
Cash flows from financing activities:
Proceeds (repayment) of note payable (2,000,000) (2,000,000) 500,000
Proceeds from exercise of stock options 1,575 0 0
Other financing activities (303,276) 303,276 0
----------- ---------- ----------
Cash from financing activities (2,301,701) (1,696,724) 500,000
----------- ---------- ----------
Increase in cash and cash equivalents 5,100,673 60,162 302,297
Cash and temporary investments at beginning of year 357,821 297,659 (4,638)
----------- ---------- ----------
Cash and temporary investments at end of year $ 5,458,494 357,821 297,659
=========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 460,000 478 29,456
=========== ========== ==========
Interest $ 73,318 331,080 253,878
=========== ========== ==========
See accompanying notes to consolidated financial statements.
19
20
MELAMINE CHEMICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Operations
Melamine Chemicals, Inc. (the Company) is engaged in the
production and marketing of melamine crystal, a specialty chemical
having numerous industrial and commercial applications. The Company
is actively involved in the development of new uses for melamine and
also in melamine related compounds that modify the characteristics of
melamine resins.
At June 30, 1995, First Mississippi Corporation (First
Mississippi) and a division of Ashland Inc. (Ashland) each owned
23.4% of the Company, which operates a melamine production facility.
The Company has a foreign sales corporation incorporated in
the Virgin Islands and a holding company incorporated in Louisiana.
The financial statements include the accounts of the Company and these
subsidiaries. All significant intercompany balances and transactions
are eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that could affect the reported amounts of
assets at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results and the results of future periods could differ from those
estimates.
(c) Inventories
Inventories of finished goods are stated at the lower of cost
or market as determined by the last-in, first-out (LIFO) method.
Supplies are stated at the lower of average cost or net realizable
value. If the average cost method was used, finished goods
inventories would be higher by $436,000 and $485,000 at June 30, 1995
and 1994, respectively.
(d) Plant and Equipment
Plant and equipment are stated at cost. Depreciation is
provided over the estimated useful lives of the assets using the
straight-line method.
Expenditures on an asset are capitalized until the asset is
placed in service or until the recoverability of the expenditures
becomes uncertain. Modifications to existing assets are capitalized
when the modification increases the production capacity or extends the
useful life of the assets.
(e) Income Taxes
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
20
21
(f) Postemployment, Pension and Other Postretirement Benefits.
The Company has a defined benefit pension plan covering all
employees who have completed six months of employment. The benefits
are based on years of service and the employee's highest average
monthly compensation for any successive five year period.
The expected cost of post-retirement benefits is accrued
during the years that an employee renders service to the employer.
The Company's pension funding policy is consistent with
Federal laws and regulations. Prior service costs are being amortized
over a 17-year period.
(g) Patent Costs
Patent costs are charged to research and development costs as
incurred.
(h) Earnings Per Share
Primary and fully diluted earnings (loss) per share are
computed based on the weighted average number of shares and dilutive
equivalent shares of common stock (stock options) outstanding during
each year using the treasury stock method.
(i) Cash and Temporary Investments
For purposes of the Statements of Cash Flows, the Company
considers all highly liquid investment instruments purchased with a
maturity of three months or less and bank overdrafts to be cash
equivalents.
(j) Concentrations of Credit Risk and Other Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts
receivable. The credit risk in trade accounts receivable is mitigated
by the Company's credit evaluation process and the geographical
dispersion of sales transactions.
The Company currently purchases all of its urea and anhydrous
ammonia, two significant raw materials, from one plant under a
feedstock supply agreement. Periodic temporary shutdowns by the
supplier are anticipated and the Company is generally able to build
its finished goods inventory in sufficient quantity to prevent
suspension of shipments to customers.
(2) RELATED PARTY TRANSACTIONS
A summary of significant transactions with related parties follows:
1995 1994 1993
--------- --------- ---------
Purchases of raw materials from First Mississippi
at prices approximating market $7,153,290 6,199,179 7,475,356
========== ========= =========
Amounts paid to Triad Chemical, an affiliate of
First Mississippi, for certain utilities and
services as well as shared costs such as
security, maintenance and related services $ 428,502 425,875 328,540
========== ========== ==========
21
22
Direct expenses incurred by First Mississippi are allocated to the
Company based on the actual costs incurred. Amounts paid to Triad Chemical for
utilities and certain other services are based on actual costs, and shared
costs and services are based on pro-rata allocations that reasonably
approximate actual costs. Management believes that these methods of allocation
are reasonable and that the costs would not be materially different on a
stand-alone basis.
Since August 1986, the Company has purchased a substantial portion of
its raw materials at approximate market prices under a long-term contract with
First Mississippi. In July 1988, the Company agreed to an assignment in which
one-half of First Mississippi's obligation to supply raw materials was assigned
to another company, and First Mississippi agreed to guarantee the performance
of the other company.
(3) PLANT AND EQUIPMENT
A summary of plant and equipment follows:
JUNE 30, JUNE 30,
1995 1994
----------- ----------
Plant and leasehold improvements $39,765,414 38,768,756
Buildings 660,616 631,560
Machinery and equipment 1,561,719 1,320,062
Furniture and fixtures 682,563 589,727
Construction in progress 1,060,618 712,891
----------- -----------
Total plant and equipment $43,730,930 42,022,996
=========== ===========
Maintenance and repairs charged to costs and expenses were $6,599,000,
$4,810,000 and $6,311,000 for fiscal 1995, 1994 and 1993, respectively. Rent
expense for all operating leases amounted to $22,000, $42,000 and $32,000 for
fiscal 1995, 1994, and 1993, respectively.
(4) INCOME TAXES
Income tax expense (benefit) amounted to $945,533 for 1995 ( an
effective rate of 22%), $(1,410,778) for 1994 (an effective rate of 36%) and
$(2,019,847) for 1993 (an effective rate of 36%). The actual tax expense for
these years differs from the expected tax expense as follows:
YEARS ENDED JUNE 30
-------------------------------------
1995 1994 1993
--------- --------- ---------
Computed expected tax expense (benefit) 34% $ 1,454,664 (1,332,401) (1,907,634)
State income taxes (net of Federal Income
tax benefit) 65,068 (64,603) (126,432)
Settlement of fiscal 1987 through 1994 audit (594,700) 0 0
Other 20,501 (13,774) 14,219
----------- ---------- ----------
Actual tax expense (benefit) $ 945,533 (1,410,778) (2,019,847)
=========== ========== ==========
Components of income tax expense (benefit) are as follows:
CURRENT DEFERRED TOTAL
------- --------- ---------
Year ended June 30, 1995:
Federal 58,231 788,713 846,944
State 0 98,589 98,589
----------- --------- ---------
$ 58,231 887,302 945,533
=========== ========= =========
22
23
CURRENT DEFERRED TOTAL
------- --------- ---------
Year ended June 30, 1994:
Federal $ (931,796) (425,762) (1,357,558)
State 0 (53,220) (53,220)
----------- --------- ----------
$ (931,796) (478,982) (1,410,778)
=========== ========= ===========
Year ended June 30, 1993:
Federal $(1,213,405) (614,878) (1,828,283)
State (98,997) (92,567) (191,564)
----------- --------- -----------
$(1,312,402) (707,445) (2,019,847)
=========== ========= ===========
Deferred income taxes result from timing differences in the
recognition of income and expense for income tax and financial statement
purposes. The sources of these differences and the tax effect of each are as
follows:
YEARS ENDED JUNE 30
--------------------------------------
1995 1994 1993
-------- --------- ---------
Depreciation and amortization of plant and
equipment $ (565,550) 314,617 569,810
Uniform capitalization of LIFO inventory 19,494 668,801 (155,047)
Alternative minimum tax (404,808) 668,836 (497,000)
Pension expense accrued 25,244 54,616 155,991
Health insurance accrual 4,690 4,862 (41,682)
Net operating loss carryforward 1,789,485 (2,111,278) (723,632)
Other 18,747 (79,436) (15,885)
----------- ----------- ---------
$ 887,302 (478,982) (707,445)
----------- ----------- ---------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and tax liabilities at June 30, 1995 and
1994 are presented below:
1995 1994
----------- ----------
Deferred tax assets:
Net operating loss carryforwards $1,045,425 2,834,910
Alternative minimum tax credit carryforwards 1,396,649 991,841
Uniform capitalization of LIFO inventory 76,737 96,231
Pension expense accrual 14,432 39,676
Health insurance accrual 32,130 36,820
Expense accrual 172,738 172,738
Deferral of profit during plant start-up 64,080 64,080
Other 86,914 37,313
---------- ----------
Total gross deferred tax assets 2,889,105 4,273,609
---------- ----------
Deferred tax liabilities:
Depreciation and amortization of plant and equipment 7,098,609 7,664,159
Other 68,348 0
---------- ----------
Net deferred tax liability $4,277,852 3,390,550
========== ==========
The Company's net operating loss carryforward for federal income tax
purposes is available to offset future federal taxable income, if any, through
2008. In addition, the Company's alternative minimum tax credit carryforwards
are available to reduce future federal taxable income, if any, over an infinite
period.
The Company has reached an agreement with the Internal Revenue Service
(IRS) in connection with its audit of fiscal years 1987 through 1994. The IRS
has allowed additional tax basis for certain assets purchased in fiscal 1987.
The impact of the agreement is a net tax benefit of $594,700. The Company
expects to receive $325,000 in refunds in fiscal 1996 and will utilize the
remainder as a net operating loss carryforward.
23
24
(5) EMPLOYEE PENSION AND THRIFT PLANS
The Company has a noncontributory group annuity pension plan with
Mutual Life Insurance Company of New York. The plan covers all full-time
employees who have completed six months of service, were hired prior to their
60th birthday and work 1,000 or more hours during the year. The right to
discontinue the plan has been reserved by the Company, and, in such event, the
accumulated plan benefits would be distributed to the participants.
Employee pension costs amounted to $205,862 for 1995, $296,588 for
1994 and $339,812 for 1993. Pension expense for fiscal 1995 decreased because
of the change in the assumed rate of compensation increase.
The net pension cost included the following components:
1995 1994 1993
-------- --------- ---------
Service cost benefit earned during the period $ 245,658 296,919 263,970
Interest cost on projected benefit obligation 281,122 315,594 276,183
Expected return on assets (550,195) (319,414) (215,054)
Net amortization 229,277 3,489 14,713
--------- --------- --------
Net pension cost $ 205,862 296,588 339,812
========= ========= ========
Assumptions used in the accounting were:
Discount rates 7.5% 8% 8%
==== == ==
Rate of increase in compensation 3.5% 3.5% 5%
==== ==== ==
Expected long-term rate of return on assets 9% 9% 9%
== == ==
The following table sets forth the plan's funded status and amounts
recognized in the Balance Sheets at June 30, 1995 and 1994.
1995 1994
--------- ---------
Actuarial present value of vested benefit obligations $2,474,102 1,779,143
========== =========
Accumulated benefit obligation $2,974,753 2,204,912
========== =========
Plan assets at fair value $4,261,451 3,369,991
Projected benefit obligation 4,423,236 3,412,339
---------- ---------
Plan assets less than projected benefit obligation (161,785) (42,348)
Unrecognized transition amount (254,078) (280,962)
Unrecognized prior service loss 334,106 364,480
Unrecognized actuarial loss (gain) 121,845 (151,383)
---------- ---------
Pension asset (liability) recognized in the
Balance Sheets $ 40,088 (110,213)
========== =========
The Company has a contributory 401(k) thrift plan covering
substantially all employees who have completed one year of service. Total
expenses under the plan amounted to approximately $153,000 for 1995, $143,000
for 1994 and $136,000 for 1993.
(6) INDUSTRY SEGMENT AND EXPORT SALES
The Company's operations consist of one industry segment, and all of
the operations are located in the United States. Export sales comprised 38%,
49% and 46% of net sales in fiscal 1995, 1994, and 1993, respectively. The
same customer accounted for 13%, 12% and 10% of net sales in fiscal 1995, 1994
and 1993, respectively, and another customer also accounted for 13% and 12% of
the net sales in fiscal 1995 and 1994, respectively.
24
25
(7) STOCKHOLDERS' EQUITY
A long-term incentive plan for officers and certain key employees of
the Company was adopted in 1987 and amended in 1991 by the Company's
stockholders. The Company reserved 500,000 shares of common stock for issuance
upon the exercise of incentives awarded under the plan. Awards under the plan
may be in the form of options to purchase common stock, convertible debentures,
convertible preferred stock, stock appreciation rights, performance units,
restricted stock, supplemental cash or other forms as the Board of Directors
may direct.
Transactions under the Company's long-term incentive plan during
fiscal 1993, 1994 and 1995 were as follows:
Price Range
Per Share Shares
------------- --------
Outstanding-June 30, 1992 $6.00 - 13.75 195,000
Options granted 5.00 30,000
-------
Outstanding-June 30, 1993 5.00 - 13.75 225,000
Options granted 5.25 - 6.25 77,500
Options canceled 5.25 - 12.75 (33,400)
Outstanding-June 30, 1994 5.00 - 13.75 269,100
Options granted 7.50 60,000
Options exercised 5.25 (300)
Options canceled 5.25 (600)
-------
Outstanding-June 30, 1995 5.00 - 13.75 328,200
=======
At June 30, 1995 options to purchase 214,399 shares were exercisable under the
plan.
The Company adopted a Share Purchase Rights Plan ("Plan") on November
6, 1990 and amended the Plan August 7,1991 and August 3, 1994. Under the Plan,
one Preferred Share Purchase Right ("Right") was distributed for each
outstanding common share. The Right becomes exercisable if a person or group
acquires 10% or more of the Company's common stock or announces a tender offer,
the consummation of which would result in the ownership by such a person or
group of 10% or more of the common stock. The terms of the Plan provide that
current holdings of First Mississippi and Ashland do not trigger the provisions
of the Plan. The Right entitles its holder to purchase, at the Right's then
current exercise price, a number of the Company's common shares having a market
value of twice such price. The plan expires on November 15, 1997 unless
extended.
(8) COMMITMENTS AND CONTINGENCIES
The Company's plant is located on an eight-acre site near
Donaldsonville, Louisiana. In June 1969, the plant site was leased by Triad to
Ashland, which subsequently assigned a one-half interest in the lease to First
Mississippi. Ashland and First Mississippi have assigned the lease to the
Company. The plant site lease will expire on June 1, 2000, and the lessee has
the right to extend the lease for four additional five-year terms or until
2020. The annual rent under the lease is $2,500 during the primary term and
any additional terms.
The Company is obligated under other operating leases. At June 30,
1995, estimated minimum rental expense under noncancelable operating leases was
as follows:
25
26
Fiscal Year
-----------
1996 $12,025
1997 12,025
1998 4,881
1999 2,500
2000 2,292
After 2000 0
-------
$33,723
=======
Various legal actions are pending against the Company which seek
relief or damages including an action seeking contribution to cleaning costs of
a Superfund site by plaintiff parties identified by the United States
Environmental Protection Agency and another site at which the Company has been
named a potentially responsible party. While the final outcome of these
matters cannot be predicted with certainty at this time, management believes,
after consulting with counsel, that the ultimate liability, if any, will not
have a material effect on the consolidated financial position, results of
operations and cash flow of the Company.
The Company has two $3.75 million revolving loan agreements with two
banks which provide for lines of credit. Under the provisions of each of the
agreements, the Company must pay interest at prime and maintain certain
quarterly financial covenants as follows: current ratio 1.25 : 1; quick ratio
.70 : 1; debt to equity ratio .50 : 1; and minimum net worth of $29 million.
Both of these lines of credit expire on April 1, 1997 and are unsecured. At
June 30, 1995, there were no amounts outstanding under these lines of credit.
Foreign currency transaction gains and losses are included in the
determination of net income (loss). Transaction gains (losses) increased
(decreased) net earnings in 1995, 1994 and 1993 by $93,000, $53,000 and
($118,000), respectively.
(9) SALE OF TECHNOLOGY
During the third quarter of fiscal 1994, the Company sold its
controlled-release fertilizer technology for a net sales price of $1.8 million.
The sale resulted in a pretax gain of $1,715,240.
SUPPLEMENTAL INFORMATION
The quarterly financial data (unaudited) for the three years ended
June 30, 1995 follows:
EARNINGS
(LOSS) INCOME
BEFORE TAX NET PRIMARY AND FULLY
INCOME (BENEFIT) EARNINGS DILUTED EARNINGS TAX
REVENUE TAXES EXPENSE (LOSS) (LOSS) PER SHARE RATE
------- ----- ------- ------ ---------------- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1995:
1st Quarter $ 9,391 744 268 476 .09 36.0%
2nd Quarter 11,584 1,508 543 965 .17 36.0
3rd Quarter 12,156 1,559 (33) 1,593 .29 2.1
4th Quarter 12,370 467 168 298 .05 36.0
26
27
EARNINGS
(LOSS) INCOME
BEFORE TAX NET PRIMARY AND FULLY
INCOME (BENEFIT) EARNINGS DILUTED EARNINGS TAX
REVENUE TAXES EXPENSE (LOSS) (LOSS) PER SHARE RATE
------- ----- ------- ------ ---------------- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1994:
1st Quarter $ 8,413 (1,938) (698) (1,240) (.23) 36.0%
2nd Quarter 9,269 (3,024) (1,088) (1,936) (.35) 36.0
3rd Quarter 10,025 1,004 361 643 .12 36.0
4th Quarter 11,378 40 15 25 .00 36.0
1993:
1st Quarter $ 8,889 (1,389) (500) (889) (.16) 36.0%
2nd Quarter 10,281 (841) (303) (538) (.10) 36.0
3rd Quarter 7,990 (748) (269) (479) (.09) 36.0
4th Quarter 8,263 (2,633) (948) (1,685) (.31) 36.0
The tax rate for each quarter is based upon an estimate of the
effective tax rate of the entire year. The tax rate in the third quarter of
fiscal 1995 was impacted by a $594,700 settlement reached with the Internal
Revenue Service.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
There have been no changes in accountants and no disagreements on
accounting principles or practices, financial statement disclosure or auditing
scope or procedure between the Company and its independent certified public
accountants during the period beginning July 1, 1993 and ending on the date
hereof.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors of the Company is included on pages 3
to 5 of the Company's definitive proxy statement prepared in connection with
the 1995 Annual Meeting of Shareholders to be held November 7, 1995 and is
incorporated herein by reference. Certain information concerning the Company's
officers is included in Item 4(a) of Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is included on pages 5 to
9 of the Company's definitive proxy statement prepared in connection with the
1995 Annual Meeting of Shareholders to be held November 7, 1995 and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners
and management is included on pages 2 to 3 of the Company's definitive proxy
statement prepared in connection with the 1995 Annual Meeting of Shareholders
to be held November 7, 1995 and is incorporated herein by reference.
27
28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions
is included on pages 11 to 12 of the Company's definitive proxy statement
prepared in connection with the 1995 Annual Meeting of Shareholders to be held
November 7, 1995 and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) l. Financial Statements
See Item 8 of PART II of this report.
2. Financial Statement Schedules
See Item 8 of Part II of this report.
3. Exhibits
3.1 Restated Certificate of Incorporation of the Company.(1)
3.2 Amended By-laws of the Company.(1)
3.3 Amendment No. 1 to Amended By-laws.(6)
3.4 Amendment No. 2 to Amended By-laws.(7)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's Restated Certificate of Incorporation
and Amended By-laws defining the rights of holders of Common Stock.
4.2 Specimen of Common Stock certificate.(1)
4.3 Registration Rights Agreement by and among the Company, Ashland and First Mississippi.(2)
10.1 Feedstock Agreement dated April 30, 1987, by and between the Company and First Mississippi,
certain portions of which are filed under a request for confidential treatment under Rule 406
of the Securities Act of 1933, as amended, and the Freedom of Information Act(1)
10.2 United States Patent, Patent Number 4,565,867.(1)
10.3 MCI/Triad Intercompany Agreement dated June 10,1987, by and between the Company and Triad.(1)
10.4 Gas Sales Contract dated August 1, 1986, by and between Ponchartrain Natural Gas System and the
Company.(1)
10.5 Site Lease Agreement dated November 4, 1970 and July 1, 1972, respectively, by and among Triad,
First Mississippi, Mis Coa, Mississippi Chemical Corporation, Coastal Chemical Corporation and
Ashland.(1)
28
29
10.6 Assignment of Site Lease dated July 23, 1987, by and among Triad, First Mississippi,
Mississippi Chemical Corporation, Ashland and the Company.(1)
10.7 Amended and Restated Long-Term Incentive Plan.(1)
10.8 Employee 401(K) Thrift Plan and related Trust.(1)
10.9 Retirement Plan for Employees of the Company including First Supplement and related Trust.(1)
10.10 Indemnity Agreement by and between the Company and James W. Crook.(2)
10.11 Indemnity Agreement by and between the Company and Daniel D. Reneau.(2)
10.12 Indemnity Agreement by and between the Company and R. Michael Summerford.(2)
10.13 Indemnity Agreement by and between the Company and Charles M. McAuley.(2)
10.14 Indemnity Agreement by and between the Company and Scotty B. Patrick.(2)
10.15 Description of Annual Incentive Pay Plan.(3)
10.16 Assignment Agreement dated July 1, 1988, by and among the Company, Mississippi Chemical
Corporation and First Mississippi.(3)
10.17 Standby Feedstock Agreement dated July 1, 1988, by and between the Company and First
Mississippi(3)
10.18 Rights agreement dated November 15, 1990 and an amendment thereto dated August 7, 1991.(5)
10.19 Change of Control Severance Agreement by and between the Company and each of James W. Crook and
Wayne D. DeLeo dated January 11, 1991 and Frederic R. Huber dated November 16, 1991(7)
10.20 Form of Change of Control Severance Agreement by and between the Company and each of its other
exempt employees (in accordance with instruction 2 to item 60l of Regulation S-K other
substantially identical contracts have been omitted and a schedule identifying the documents
omitted and setting forth the material details in which such documents differ from the
foregoing document has been included)(7)
10.21 Form of Amendment to Change of Control Severance Agreement (1991).(7)
10.22 Form of Amendment to Change of Control Severance Agreement (1992).(8)
10.23 Form of Amendment to Change of Control Severance Agreement by and between the Company and
Martin F. Lapari.(8)
10.24 Employment Agreement dated November 16, 1991, by and between the Company and Frederic R.
Huber.(8)
10.25 Indemnity Agreement by and between the Company and Nilon H. Prater.(9)
10.26 Indemnity Agreement by and between the Company and David J. D'Antoni.(9)
29
30
24.1 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule
________________________
(1)Incorporated by reference from the Company's Registration
Statement on form S-1 (Registration No. 33-15181).
(2)Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1987.
(3)Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1988.
(4)Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1989.
(5)Incorporated by reference from the Company's Current Reports
on Form 8-K dated November 5, 1990 and August 7, 1991.
(6)Incorporated by reference to Section 4.4 of the Company's
Form S-8 (Registration No. 33-20502).
(7)Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1991.
(8)Incorporated by reference from the Company's Annual Report
on Form 10-K for fiscal year ended June 30, 1992.
(9)Incorporated by reference from the Company's Annual Report
on Form 10-K for fiscal year ended June 30, 1993.
(b) Reports on Form 8-K
A Form 8-K dated April 13, 1995 was filed by the Company
relating to the financial results for the three and nine month
periods ended March 31, 1995.
A Form 8-K dated June 7, 1995 was filed by the Company
relating to patent applications filed in the United States for
improvements to the Company's process for the production of
melamine.
30
31
SCHEDULE II
MELAMINE CHEMICALS, INC.
VALUATION AND QUALIFYING ACCOUNTS
=====================================================================================================
Additions-
Balance at amounts Deductions- Balance at
beginning charged to receivables end of
Description of Year expense written off Year
-----------------------------------------------------------------------------------------------------
Allowance for doubtful accounts
Year ended June 30, 1995 $150,000 Nil Nil $150,000
Year ended June 30, 1994 $120,000 $ 30,000 Nil $150,000
Year ended June 30, 1993 Nil $ 120,000 Nil $120,000
=====================================================================================================
31
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on September 15, 1995.
MELAMINE CHEMICALS, INC.
/S/ FREDERIC R. HUBER
-------------------------------------
Frederic R. Huber
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ JAMES W. CROOK Chairman of the Board September 15, 1995
------------------
(James W. Crook)
/s/ CHARLES M. MCAULEY Director September 15, 1995
----------------------
(Charles M. McAuley)
/s/ SCOTTY B. PATRICK Director September 15, 1995
---------------------
(Scotty B. Patrick)
/s/ R. MICHAEL SUMMERFORD Director September 15, 1995
-------------------------
(R. Michael Summerford)
/s/ DANIEL D. RENEAU, JR. Director September 15, 1995
-------------------------
(Daniel D. Reneau, Jr.)
/s/ NILON H. PRATER Director September 15, 1995
-------------------
(Nilon H. Prater)
/s/ DAVID J. D'ANTONI Director September 15, 1995
---------------------
(David J. D'Antoni)
/s/ WAYNE D. DELEO Vice President and September 15, 1995
------------------ Chief Financial Officer
(Wayne D. DeLeo)
(Principal Financial and
Accounting Officer)
32
33
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation of the Company.(1)
3.2 Amended By-laws of the Company.(1)
3.3 Amendment No. 1 to Amended By-laws.(6)
3.4 Amendment No. 2 to Amended By-laws.(7)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's Restated Certificate of Incorporation
and Amended By-laws defining the rights of holders of Common Stock.
4.2 Specimen of Common Stock certificate.(1)
4.3 Registration Rights Agreement by and among the Company, Ashland and First Mississippi.(2)
10.1 Feedstock Agreement dated April 30, 1987, by and between the Company and First Mississippi,
certain portions of which are filed under a request for confidential treatment under Rule 406
of the Securities Act of 1933, as amended, and the Freedom of Information Act(1)
10.2 United States Patent, Patent Number 4,565,867.(1)
10.3 MCI/Triad Intercompany Agreement dated June 10,1987, by and between the Company and Triad.(1)
10.4 Gas Sales Contract dated August 1, 1986, by and between Ponchartrain Natural Gas System and the
Company.(1)
10.5 Site Lease Agreement dated November 4, 1970 and July 1, 1972, respectively, by and among Triad,
First Mississippi, Mis Coa, Mississippi Chemical Corporation, Coastal Chemical Corporation and
Ashland.(1)
34
10.6 Assignment of Site Lease dated July 23, 1987, by and among Triad, First Mississippi,
Mississippi Chemical Corporation, Ashland and the Company.(1)
10.7 Amended and Restated Long-Term Incentive Plan.(1)
10.8 Employee 401(K) Thrift Plan and related Trust.(1)
10.9 Retirement Plan for Employees of the Company including First Supplement and related Trust.(1)
10.10 Indemnity Agreement by and between the Company and James W. Crook.(2)
10.11 Indemnity Agreement by and between the Company and Daniel D. Reneau.(2)
10.12 Indemnity Agreement by and between the Company and R. Michael Summerford.(2)
10.13 Indemnity Agreement by and between the Company and Charles M. McAuley.(2)
10.14 Indemnity Agreement by and between the Company and Scotty B. Patrick.(2)
10.15 Description of Annual Incentive Pay Plan.(3)
10.16 Assignment Agreement dated July 1, 1988, by and among the Company, Mississippi Chemical
Corporation and First Mississippi.(3)
10.17 Standby Feedstock Agreement dated July 1, 1988, by and between the Company and First
Mississippi(3)
10.18 Rights agreement dated November 15, 1990 and an amendment thereto dated August 7, 1991.(5)
10.19 Change of Control Severance Agreement by and between the Company and each of James W. Crook and
Wayne D. DeLeo dated January 11, 1991 and Frederic R. Huber dated November 16, 1991(7)
10.20 Form of Change of Control Severance Agreement by and between the Company and each of its other
exempt employees (in accordance with instruction 2 to item 60l of Regulation S-K other
substantially identical contracts have been omitted and a schedule identifying the documents
omitted and setting forth the material details in which such documents differ from the
foregoing document has been included)(7)
10.21 Form of Amendment to Change of Control Severance Agreement (1991).(7)
10.22 Form of Amendment to Change of Control Severance Agreement (1992).(8)
10.23 Form of Amendment to Change of Control Severance Agreement by and between the Company and
Martin F. Lapari.(8)
10.24 Employment Agreement dated November 16, 1991, by and between the Company and Frederic R.
Huber.(8)
10.25 Indemnity Agreement by and between the Company and Nilon H. Prater.(9)
10.26 Indemnity Agreement by and between the Company and David J. D'Antoni.(9)
35
24.1 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule
________________________
(1)Incorporated by reference from the Company's Registration
Statement on form S-1 (Registration No. 33-15181).
(2)Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1987.
(3)Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1988.
(4)Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1989.
(5)Incorporated by reference from the Company's Current Reports
on Form 8-K dated November 5, 1990 and August 7, 1991.
(6)Incorporated by reference to Section 4.4 of the Company's
Form S-8 (Registration No. 33-20502).
(7)Incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1991.
(8)Incorporated by reference from the Company's Annual Report
on Form 10-K for fiscal year ended June 30, 1992.
(9)Incorporated by reference from the Company's Annual Report
on Form 10-K for fiscal year ended June 30, 1993.