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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, 1996 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 6, 1996 was
approximately $14,454,000.
The number of shares of the Registrant's common stock, par value one cent
($.01) per share, outstanding at September 6, 1996 was 5,455,300.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement prepared for use in
connection with the registrant's 1996 Annual Meeting of Shareholders to be held
November 12, 1996 dated October 4, 1996 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 1994, the M-II plant produced 16.3 million pounds, during fiscal
1995, the plant produced 23.8 million pounds and during fiscal 1996, the plant
produced 24.6 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 1996, sales of the M-II
product totaled 21.8 million pounds compared to 21.8 million pounds in fiscal
1995 and 24.7 million pounds in fiscal 1994.
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 90% of the current
worldwide consumption. The patents were issued in May 1996.
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
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reactions and polymerizations; and (iii) a 66% nitrogen content. Melamine has
excellent fire retardant properties because: (i) when exposed to intense heat,
it gives off nitrogen-containing compounds that dilute oxygen, thereby
inhibiting combustion; and (ii) it is endothermic and, therefore, acts as a
heat-sink which also inhibits combustion.
Over 80% of the melamine sold by the Company is used in the manufacture of
melamine-formaldehyde resins. These resins have numerous end-uses including:
(i) surface coatings, which account for more than one-third of domestic
melamine consumption; (ii) laminates, which account for more than one-quarter;
and (iii) plastic molding compounds, which account for approximately one-sixth
of domestic consumption. Melamine-based resins are also used in paper
treatments and coatings, textile treatments and coatings, wood adhesives and
other uses. These markets, together with other end-uses of melamine, are
described below:
Surface coating resins. Melamine resins are used as clear finishes for paper,
fabrics, wood and metals and can be pigmented with white and colored pigments
to produce opaque enamel finishes. The finishes are color retentive and water
and chemical resistant, and can be used for both interior and exterior
applications. Finishes are formulated for refrigerators, washing machines,
automobiles, hospital equipment, kitchen utensils and cans. In combination
with other materials, melamine resins can be used as flexible finishes for
paper textiles and fabrics. Surface and automotive coatings represent the
largest single domestic use of melamine. The Company believes that over 95% of
all automobiles produced in the United States are now being painted with high
solids melamine-based paints that emit less fumes during application and
produce higher quality finishes than traditional coatings.
Laminating resins. Melamine resins are used in laminated products. Decorative
melamine laminates are often used when durability, especially heat and stain
resistance, is desired. Typical applications include countertops, cabinet
surfaces, simulated wood paneling, furniture surfaces and shelving. Kitchen
and bathroom countertops are a principal household use of melamine.
Plastic molding compounds. Melamine resins with strong thermosetting
attributes are molded into a variety of translucent, heat-resistant products
that are odorless and tasteless, with pale color. Fillers, pigments and dyes
can be incorporated into the plastic to produce various combinations of opacity
and color. These plastics are used in tableware, wash-resistant buttons,
arc-resistant ignition housings, insulation and many other products. The
primary advantages of these plastics are their strong resistance to water,
heat, chemicals and discoloration and their relative non-conductivity and
virtual unbreakability.
Paper-treating resins. Melamine resins are widely used to impart wet-strength,
dimensional stability and other favorable properties to paper.
Adhesive-binding resins. Melamine resins produce excellent weather-resistant
adhesive bonds and are used in particleboard and as binders for glass fibers in
air filters, brake linings and foundry sand cores.
Flame retardant products. Melamine is used as a fire retardant in specialized
paints, certain thermoplastics, textile products and in flexible polyurethane
foam used in 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.
Other uses. Melamine is also used in varied applications such as flocculating
agents in water treatment, in fluorescent pigments, as concrete additives and
as polymeric stabilizers.
MARKETING AND SALES
The Company's domestic and international sales are managed by a Vice
President of Sales and Marketing. The Company uses a number of agents outside
the United States.
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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 Monsanto
Chemical Company during this period, and in fiscal 1994 and 1995, Sun Coast
Industries, Inc. also purchased more than 10% of the Company's output.
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. During fiscal 1996,
approximately 43% of the net sales of the Company were derived from customers
in foreign countries. Approximately 6% were to customers in Italy, 5% to
customers in the Netherlands, 5% to customers in Belgium, 5% to customers in
Australia, 4% to customers in Indonesia, 2% to customers in India, 2% to
customers in Israel, 2% to customers in Korea, 2% to customers in Taiwan 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 23.
COMPETITION
The Company and American Melamine Industries (AMEL) are the only two
domestic producers of melamine crystal. AMEL's facility, located in Fortier,
Louisiana, has production capacity of approximately 140 million pounds per
year. AMEL is a manufacturing joint venture between Cytec Industries Inc.'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
four fiscal years, the Company has placed greater emphasis on selling in the
domestic market.
Melamine is also produced through several different process technologies at
approximately 20 plants in 15 other countries. Industry reports indicate that
worldwide nameplate capacity is approximately 1.4 billion pounds per year,
although the Company believes that effective capacity is 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, 1996 have
constituted less than 10% of the total merchant market.
The Company attempts to differentiate itself from competitors to the
greatest extent possible on the basis of custom packaging, a variety of
particle sizes, offering M-II type melamine crystal (under the trademark G. P.
Crystal(TM)), superior and flexible customer service and new technology. Also
emphasized is the fact that all production is sold to customers, there being no
internal consumption. Those factors, combined with 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.
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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 20
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 M-II process is
sufficiently pure for use in adhesive resins, as a flame retardant in flexible
polyurethane foam, as a concrete additive and in certain molding compounds.
While not all markets are expected to be able to use the product currently
produced with the M-II process, the Company believes that approximately 70% of
the current worldwide consumption could utilize this product.
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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
25 years and is believed by the Company to be one of the most cost efficient
urea plants in the United States. During such temporary shutdowns, the Company
has been required to suspend melamine production. To the extent practicable,
the Company stockpiles melamine in anticipation of Triad's regularly scheduled
maintenance shut downs. The Company does not believe that its ability to fill
customer orders in a timely manner has been significantly affected by any
suspension of operations at the Triad facility.
ENERGY REQUIREMENTS
The Company uses natural gas as an energy source to operate its production
facilities. The Company's production facilities are connected to three
pipeline systems, enabling it to purchase natural gas from different suppliers.
Under a three-year contract executed in August 1986 and extended every six
months thereafter under the terms of the contract, the Company is purchasing
all of its natural gas requirements from one supplier.
ENVIRONMENTAL AND OTHER REGULATORY CONSIDERATIONS
The Company is subject to regulation under federal, state and local
environmental laws and regulations. During the last three years, the Company's
operations did not result in the production of any significant effluents or
emissions. Catalyst residues occur in such small quantities that no further
processing is necessary for either environmental or safety reasons.
Substantially all of the ammonia and carbon dioxide off-gases from the M-I
plant are returned to Triad as carbamate and are used for the production of
additional urea. Ammonia from the M-II plant is recycled to the M-I plant
while carbon dioxide is vented to the atmosphere. The Company disposes
off-site of a small quantity of material used in its filtration system. Except
for ammonia, none of the Company's products or by-products are considered to be
toxic within the meaning of current environmental laws. It is the Company's
policy to operate its facility in compliance with all applicable environmental
laws, and the Company does not believe that it is subject to any material
liability under any such laws.
On August 24, 1990, the Louisiana Department of Environmental Quality ("DEQ")
issued an order requiring the Company to submit within 60 days a comprehensive
plan for reducing nitrogen oxides and reactive hydrocarbon emissions. Similar
orders were sent to other facilities in the Baton Rouge area. Subsequently,
the Company voluntarily agreed to participate in a Baton Rouge area industrial
task force formed for the purpose of developing plans for the control and
reduction of ozone pollution. The task force, in cooperation with the DEQ, has
performed ozone modeling studies to determine whether nitrogen
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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 site near the town of
Sorrento, Louisiana.
Employee safety in the United States is regulated under the Occupational
Safety and Health Act, and management believes that the Company is in
compliance in all material respects with its requirements.
EMPLOYEES
The Company employs 93 persons at the Donaldsonville facility. In addition,
the Company regularly has approximately 60 independent contractors working at
its facility. None of the Company's regular full-time employees or its
independent contractors are represented by unions.
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 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.
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ITEM 3. LEGAL PROCEEDINGS
The Company is one of seventeen defendants in a Superfund site clean up
cost contribution action brought by four plaintiff companies. Fifteen of the
defendants have settled or been dismissed from this litigation. The plaintiff
companies have been identified by the United States Environmental Protection
Agency (the "EPA") as the major generators of wastes disposed at the Cleve
Reber Superfund site near the town of Sorrento, Louisiana. In September 1988,
the plaintiff companies were ordered by the EPA to clean up the site, and they
have agreed to do so. The plaintiff companies subsequently brought this suit
seeking to recover approximately $51 million plus $6 million for reimbursement
to the EPA for remedial costs. While the lawsuit is still in the discovery
stage, it appears that the Company has substantial defenses to the action by
plaintiffs. Material generated by the Company is alleged to have been disposed
of at this site for only one brief period when the regular disposal site used
by its waste disposal contractor was unavailable. The Company contends that any
of its materials transported to the site were not hazardous waste and represent
only a de minimis contribution to the site as compared to material disposed of
there by the plaintiffs and other defendants. The Company has moved for
summary judgment seeking dismissal from this lawsuit. The motion is presently
pending before the court, but placed in abeyance pending settlement
discussions.
In 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 was attempting to recover approximately $4.7 million from
approximately 350 PRP's, including the Company. During fiscal 1996, the
Company was able to settle this matter for less than $1,000.
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, 1996.
ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information regarding the executive officers of
the Company as of September 6, 1996.
James W. Crook, 66, 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, 61, 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, 49, has served as Vice President and Chief Financial
Officer since 1987.
Martin F. Lapari, 48, 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.
William A. Sorensen, 60, 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.
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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,
1996 and 1995:
1996 1995
---------------- ----------------
High Low High Low
First Quarter 10 1/4 8 1/2 11 5 7/8
Second Quarter 10 1/4 8 1/4 12 1/4 9
Third Quarter 9 1/2 7 5/8 10 3/4 7 1/4
Fourth Quarter 9 3/4 7 49/64 9 1/4 7
As of September 6, 1996, there were 212 record holders of the Company's
common stock and approximately 1,843 beneficial shareholders.
In May 1992, the Board of Directors eliminated the payment of dividends for
the foreseeable future because of the lack of earnings and the need to conserve
cash. The declaration and payment of dividends are at the discretion of the
Board of Directors of the Company. The payment of future dividends will be
considered by the Board of Directors from time to time based on the Company's
results of operations, financial position, capital requirements and other
factors.
ITEM 6. SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
-------------------------------------------------------
FISCAL YEAR ENDED JUNE 30,
-------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
OPERATIONS STATEMENT DATA:
Net sales $ 55,619 45,501 39,085 35,423 35,910
Cost of sales 46,976 38,204 41,670 37,353 34,639
-------- -------- -------- -------- --------
Gross profit (loss) 8,643 7,297 (2,585) (1,930) 1,271
Selling, general and administrative
expenses 3,293 2,994 2,820 3,285 3,552
Research and development costs 229 230 182 129 27
-------- -------- -------- -------- --------
Operating income (loss) 5,121 4,073 (5,587) (5,344) (2,308)
Other income (expense), net (1,106) 205 1,668 (266) (92)
-------- -------- -------- -------- --------
Earnings (loss) before income tax
expense (benefit) 4,015 4,278 (3,919) (5,610) (2,400)
Income tax expense (benefit) 1,285 945 (1,411) (2,019) (864)
-------- -------- -------- -------- --------
Net earnings (loss) $ 2,730 3,333 (2,508) (3,591) (1,536)
======== ======== ======== ======== ========
Earnings (loss) per common share $ 0.50 0.60 (0.46) (0.66) (0.28)
======== ======== ======== ======== ========
Dividends per common share $ 0.00 0.00 0.00 0.18 0.18
======== ======== ======== ======== ========
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(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
----------------------------------------------------
AS OF JUNE 30
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
BALANCE SHEET DATA:
Working capital $ 18,364 14,020 9,656 12,678 14,016
Total assets $ 47,143 44,289 40,610 46,954 49,913
Stockholders' equity $ 34,850 32,095 28,760 31,268 34,859
FISCAL YEAR ENDED JUNE 30,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
OPERATING DATA (IN MILLIONS OF POUNDS):
Melamine produced 106.0 99.3 84.5 94.5 77.4
Domestic sales 58.0 62.6 53.9 47.0 36.7
Export sales 44.5 37.8 51.2 40.4 38.7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Sales in fiscal 1996 increased to $55.6 million from $45.5 million in
fiscal 1995. The sales volume increased by 2% while the sales prices increased
by 20%. The sales volume for fiscal 1996 was curtailed by the Company to build
inventory to a more acceptable level. The sales price increases during fiscal
1996 reflect the impact of strong worldwide demand.
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 announced another price increase effective July
1, 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,
---------------------------------------
1996 1995 1994
------- ------- -------
As a percentage of sales
Cost of sales 84.5% 84.0% 106.6%
Gross profit (loss) 15.5 16.0 (6.6)
Selling, general and administrative expenses 5 .9 6 .6 7.2
Research and development costs 0 .4 0 .5 0.5
Operating income (loss) 9 .2 9 .0 (14.3)
Net earnings (loss) 4 .9 7 .3 (6.4)
The gross profit margins in fiscal 1996 decreased slightly as compared to
fiscal 1995. Net sales price for the fiscal year increased by 8.9_ per pound
while the Company experienced an increase in the cost of production of 7.8_ per
pound. The increase in the cost of production was due to:
o a 52% increase in the price of raw material increased the cost of
production by 7.5_ per pound; and
o an increase in the price of natural gas increased the cost of
production by .9_ per pound.
10
11
Offsetting these increases was the benefit that increased production volume
had on spreading fixed cost.
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:
o increased production volume over which fixed costs, including
depreciation, could be spread; and
o a decrease in the price 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
and were replaced in fiscal 1996.
Selling, general and administrative expenses increased by 10% in fiscal
1996 as compared to fiscal 1995. The increase was caused by a number of
factors including:
o increase in salaries and an increase in the number of people in the
sales and customer service area;
o increase in bad debts expenses; and
o increase in consulting fees paid.
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.
Research and development costs increased in both fiscal 1995 and 1996 as
compared to fiscal 1994 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 1997 to more than $300,000.
During fiscal 1996, the amount of interest income increased significantly
as compared to prior years. The change was due to an increase in the level of
cash balances during the year and $208,000 of interest earned on tax refunds
received during the year.
In fiscal 1996, there was a $195 thousand miscellaneous expense compared to
miscellaneous income of $159 thousand in fiscal 1995. The expense was
attributable to foreign exchange losses in fiscal 1996 as compared to foreign
exchange gains in fiscal 1995.
In the fourth quarter of fiscal 1996, the Company's net results were
impacted by a $1,863,000 charge for costs associated with two expansion
projects which were terminated. In fiscal 1992, the Company announced that it
was going to evaluate the feasibility of constructing a melamine plant in a
joint venture with a subsidiary of Norsk Hydro A.S. (Hydro). The Company was
informed by Hydro during the last week of June 1996 that it had decided not to
proceed with the project. In addition, the Company entered into negotiations
with Arcadian Corporation (Arcadian) in August 1995 to build a melamine plant
in Memphis, Tennessee. The Company and Arcadian were unable to agree on
several substantive commercial terms and agreed jointly to terminate their
negotiations. The costs associated with engineering and design of the two
plant sites were expensed when the decision was reached not to proceed.
11
12
In addition, the fourth quarter of fiscal 1996 included a $480 thousand
gain from a contract dispute resolution. During 1986, the Company and its
natural gas supplies were unable to resolve a contract dispute regarding the
price of natural gas. In the fourth quarter of fiscal 1996, the statute of
limitation expired on the issue.
In the fourth quarter of fiscal 1995, the Company's operating results were
negatively affected by:
o A 34% increase in the cost of raw material, which reduced operating
income by $1.3 million; and
o 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.
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.
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.
The Company is subject to extensive regulation under federal, state and
local environmental laws and regulations (see Item 1. "Business-Environmental
and Other Regulatory Considerations"). In addition, the Company obtains its
urea and anhydrous ammonia from Triad, which also is subject to extensive
environmental regulation. The inability of Triad to comply with those laws and
regulations could severely restrict the Company's ability to produce melamine.
The Company is not aware of any existing circumstances that materially affect
its or Triad's ability to comply with the applicable regulations.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996, the Company generated cash flow from operations of $2.8
million and spent $3.1 million in capital expenditures. The cash flow from
operations would have been greater, but the Company used $2.2 million in
increasing trade receivables for the increased level of sales and $1.7 million
in increasing inventory to more acceptable levels.
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. During
fiscal 1995, an attempt to build inventories to acceptable levels was not
successful because of very strong demand. In fiscal 1996, the Company was able
to increase inventory levels but is still below the four week level the Company
tries to maintain.
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. It is anticipated that the level of capital
expenditures in fiscal 1997 will approximate $2 million.
The Company has two $3.75 million lines of credit that expire in April
1997. The Company expects the level of borrowing in fiscal 1997 to be nominal
and that the lines of credit will be sufficient to finance planned capital
expenditures and any cash shortfalls from operations.
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
12
13
Board of Directors, any future payments will include consideration of the
Company's profitability, financial position and all liquidity requirements.
The Financial Acounting Standards Board (the FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
statement is effective for fiscal years beginning after December 15, 1995. The
Company adopted the Standard, and it had no impact on the Company's results of
operations or financial position.
The FASB also issued SFAS No. 123, "Acounting for Stock Based
Compensation," effective also for fiscal years beginning after December 15,
1995. The new statement encourages, but does not require, companies to measure
stock-based compensation cost using a fair value method, rather than the
intrinsic value method prescribed by Accounting Principles Board (APB) Opinion
No. 25. Companies choosing to continue to measure stock-based compensation
using the intrinsic value method must disclose on a proforma basis net earnings
and net earnings per share as if the fair value method were used. Management
is currently evaluating the requirements of SFAS No. 123.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS, SUPPLEMENTARY DATA AND FINANCIAL
STATEMENT SCHEDULES
Page
----
Independent Auditors' Report 14
Consolidated Balance Sheets as of June 30, 1996 and 1995 15
Consolidated Statements of Operations for the years ended
June 30, 1996, 1995 and 1994 16
Consolidated Statements of Stockholders' Equity for the years
ended June 30, 1996, 1995 and 1994 16
Consolidated Statements of Cash Flows for the years ended June
30, 1996, 1995 and 1994 17
Notes to Consolidated Financial Statements 18
Supplemental Information 25
Schedule II - Valuation and Qualifying Accounts 30
13
14
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Melamine Chemicals, Inc.:
We have audited the consolidated financial statements of Melamine
Chemicals, Inc. as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
consolidated financial statement schedule as listed in the accompanying index.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by 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, 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. Also in
our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Baton Rouge, Louisiana
July 30, 1996
14
15
MELAMINE CHEMICALS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
1996 1995
------------ ------------
ASSETS
Current assets:
Cash and temporary investments $ 5,529,644 5,458,494
Receivables:
Trade (net of allowance for doubtful debts of $150,000
at June 1996 and at June 1995) 12,170,229 9,571,751
Income tax refund 24,877 401,770
Other 167,373 177,847
------------ ------------
Total receivables 12,362,479 10,151,368
------------ ------------
Inventories:
Finished goods 2,225,000 590,000
Supplies 288,300 208,683
------------ ------------
Total inventories 2,513,300 798,683
------------ ------------
Prepaid expenses:
Spare parts 2,357,090 2,239,262
Other 1,410 68,449
------------ ------------
Total prepaid expenses 2,358,500 2,307,711
------------ ------------
Deferred income taxes 1,522,315 1,610,161
------------ ------------
Total current assets 24,286,238 20,326,417
------------ ------------
Plant and equipment, at cost 46,860,949 43,730,930
Less accumulated depreciation 24,082,467 20,192,617
------------ ------------
Net plant and equipment 22,778,482 23,538,313
------------ ------------
Other assets 78,073 424,355
------------ ------------
$ 47,142,793 44,289,085
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,175,843 3,775,475
Accrued expenses 1,518,082 750,924
Amounts due to related parties 1,227,711 1,780,110
------------ ------------
Total current liabilities 5,921,636 6,306,509
------------ ------------
Deferred income taxes 6,371,250 5,888,013
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 5,455,300
at June 1996 and 5,450,300 at June 1995 54,553 54,503
Additional paid-in capital 16,823,920 16,798,970
Retained earnings 17,971,434 15,241,090
------------ ------------
Total stockholders' equity 34,849,907 32,094,563
------------ ------------
$ 47,142,793 44,289,085
============ ============
See accompanying notes to consolidated financial statements.
15
16
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
1996 1995 1994
------------ ------------ ------------
Net sales $ 55,618,937 45,500,736 39,085,475
Cost of sales, including amounts to related parties 46,976,007 38,203,570 41,670,029
------------ ------------ ------------
Gross profit (loss) 8,642,930 7,297,166 (2,584,554)
------------ ------------ ------------
Selling, general and administrative expenses 3,292,634 2,993,748 2,820,539
Research and development costs 229,460 229,955 181,943
------------ ------------ ------------
3,522,094 3,223,703 3,002,482
------------ ------------ ------------
Operating income (loss) 5,120,836 4,073,463 (5,587,036)
------------ ------------ ------------
Other income (expenses):
Interest income 472,240 95,227 50,582
Interest expense 0 (48,799) (330,187)
Projects costs (1,863,000) 0 0
Contract dispute resolution 479,827 0 0
Sale of technology 0 0 1,715,240
Miscellaneous (194,691) 158,533 232,574
------------ ------------ ------------
(1,105,624) 204,961 1,668,209
------------ ------------ ------------
Income (loss) before income tax 4,015,212 4,278,424 (3,918,827)
Income tax expense (benefit) 1,284,868 945,533 (1,410,778)
------------ ------------ ------------
Net earnings (loss) $ 2,730,344 3,332,891 (2,508,049)
============ ============ ============
Net earnings (loss) per common share $ 0.50 0.60 (.46)
============ ============ ============
See accompanying notes to consolidated financial statements.
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
----------- ----------- ----------- -----------
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
Exercise of stock options 50 24,950 0 25,000
Net earnings for fiscal 1996 0 0 2,730,344 2,730,344
----------- ----------- ----------- -----------
Balance June 30, 1996 $ 54,553 16,823,920 17,971,434 34,849,907
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
16
17
MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
1996 1995 1994
------------ ------------ ------------
Cash flows from operating activities:
Net earnings (loss) $ 2,730,344 3,332,891 (2,508,049)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation 3,904,538 3,623,109 3,344,222
Increase (decrease) in deferred income taxes 483,237 1,381,950 (454,850)
Loss (gain) on sale of assets 0 (5,906) (1,716,740)
Change in assets and liabilities
(Increase) decrease in:
Receivables (2,211,111) (231,862) (2,753,793)
Inventories (1,714,617) 243,824 7,858,603
Prepaid expenses (50,789) 26,441 (387,451)
Deferred income taxes 87,846 (494,648) (24,132)
Increase (decrease) in:
Accounts payable (599,632) 635,918 (1,464,379)
Accrued expenses 767,158 73,372 (74,488)
Amounts due to related parties (552,399) 556,946 (145,747)
------------ ------------ ------------
Cash from operating activities 2,844,575 9,142,035 1,673,196
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from disposition of assets 0 8,025 1,801,500
Capital expenditures (3,144,707) (1,741,711) (1,315,817)
Decrease (increase) in other assets 346,282 (5,975) (401,993)
------------ ------------ ------------
Cash from investing activities (2,798,425) (1,739,661) 83,690
------------ ------------ ------------
Cash flows from financing activities:
(Repayment) of note payable 0 (2,000,000) (2,000,000)
Proceeds from exercise of stock options 25,000 1,575 0
Other financing activities 0 (303,276) 303,276
------------ ------------ ------------
Cash from financing activities 25,000 (2,301,701) (1,696,724)
------------ ------------ ------------
Increase in cash and temporary investments 71,150 5,100,673 60,162
Cash and temporary investments at beginning
of year 5,458,494 357,821 297,659
------------ ------------ ------------
Cash and temporary investments at end of year $ 5,529,644 5,458,494 357,821
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 625,000 460,000 478
============ ============ ============
Interest $ 0 73,318 331,080
============ ============ ============
See accompanying notes to consolidated financial statements.
17
18
MELAMINE CHEMICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
(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, 1996, 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
$653,000 and $436,000 at June 30, 1996 and 1995, respectively.
(d) Plant and Equipment
Plant and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the assets using the straight-line method.
The estimated useful lives used to depreciate assets are:
Years
-----
Plant and leasehold equipment 3 - 15
Buildings 5 - 15
Machinery and equipment 3 - 10
Furniture and fixtures 3 - 12
Expenditures on an asset are capitalized until the asset is placed in
service or until the recoverability of the expenditures becomes uncertain.
Modifications to existing assets are capitalized when the modification
increases the production capacity or extends the useful life of the assets.
18
19
(e) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
(f) Postemployment, Pension and Other Postretirement Benefits.
The Company has a defined benefit pension plan covering all employees
who have completed six months of employment. The benefits are based on
years of service and the employee's highest average monthly compensation
for any successive five year period.
The expected cost of post-retirement benefits is accrued during the
years that an employee renders service to the employer.
The Company's pension funding policy is consistent with Federal laws
and regulations. Prior service costs are being amortized over a 17-year
period.
(g) Patent Costs
Patent costs are charged to research and development costs as incurred.
(h) Earnings Per Share
Primary and fully diluted earnings (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 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.
19
20
(2) RELATED PARTY TRANSACTIONS
A summary of significant transactions with related parties follows:
1996 1995 1994
---------- ---------- ----------
Purchases of raw materials from First Mississippi
at prices approximating market $11,592,109 7,153,290 6,199,179
=========== ========== =========
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 $ 265,851 428,502 425,875
=========== ========== ==========
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 which expires in June 2000. 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,
1996 1995
----------- ----------
Plant and leasehold improvements $ 43,070,652 39,765,414
Buildings 669,510 660,616
Machinery and equipment 1,872,139 1,561,719
Furniture and fixtures 714,124 682,563
Construction in progress 534,524 1,060,618
------------ -----------
Total plant and equipment $ 46,860,949 43,730,930
============ ==========
Maintenance and repairs charged to costs and expenses were $5,957,000,
$6,599,000 and $4,810,000 for fiscal 1996, 1995 and 1994, respectively. Rent
expense for all operating leases amounted to $12,025, $22,000 and $42,000 for
fiscal 1996, 1995, and 1994, respectively.
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21
(4) INCOME TAXES
Income tax expense (benefit) amounted to $1,284,868 for 1996 (an effective
rate of 32%), $945,533 for 1995 (an effective rate of 22%) and $(1,410,778) for
1994 (an effective rate of 36%). The actual tax expense for these years
differs from the expected tax expense as follows:
YEARS ENDED JUNE 30
-----------------------------------
1996 1995 1994
------- --------- ---------
Computed expected tax expense (benefit) 34% $ 1,365,172 1,454,664 (1,332,401)
State income taxes (net of Federal Income
tax benefit) 96,695 65,068 (64,603)
Settlement of fiscal 1987 through 1994 audit 0 (594,700) 0
Tax benefit from foreign sales corporation (189,041) 0 0
Other 12,042 20,501 (13,774)
----------- ------------ ----------
Actual tax expense (benefit) $ 1,284,868 945,533 (1,410,778)
=========== ============ ==========
Components of income tax expense (benefit) are as follows:
CURRENT DEFERRED TOTAL
------- --------- ---------
Year ended June 30, 1996:
Federal 630,732 507,629 1,138,361
State 83,053 63,454 146,507
----------- --------- ----------
$ 713,785 571,083 1,284,868
=========== ========= ==========
Year ended June 30, 1995:
Federal 58,231 788,713 846,944
State 0 98,589 98,589
----------- ---------- ----------
$ 58,231 887,302 945,533
=========== ========== ==========
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)
=========== ========== ==========
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
----------------------------------
1996 1995 1994
-------- --------- ---------
Depreciation and amortization of plant and
equipment $ (805,815) (565,550) 314,617
Uniform capitalization of LIFO inventory 20,485 19,494 668,801
Alternative minimum tax 73,219 (404,808) 668,836
Expense accrual 183,860 29,934 59,478
Net operating loss carryforward 1,045,425 1,789,485 (2,111,278)
Other 53,909 18,747 (79,436)
----------- ----------- ---------
$ 571,083 887,302 (478,982)
=========== =========== =========
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22
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and tax liabilities at June 30, 1996 and
1995 are presented below:
1996 1995
----------- ----------
Deferred tax assets:
Net operating loss carryforwards $ 0 1,045,425
Alternative minimum tax credit carryforwards 1,323,430 1,396,649
Uniform capitalization of LIFO inventory 56,252 76,737
Expense accrual 35,440 219,300
Deferral of profit during plant start-up 64,080 64,080
Other 43,113 86,914
----------- ----------
Total gross deferred tax assets 1,522,315 2,889,105
----------- ----------
Deferred tax liabilities:
Depreciation and amortization of plant and equipment 6,292,794 7,098,609
Other 78,457 68,348
----------- ---------
Net deferred tax liability $ 4,848,935 4,277,852
=========== =========
The Company's alternative minimum tax credit carryforwards are available to
reduce future federal taxable income, if any, over an infinite period.
The Company reached an agreement in fiscal 1995 with the Internal Revenue
Service (IRS) in connection with its audit of fiscal years 1987 through 1994.
The IRS allowed additional tax basis for certain assets purchased in fiscal
1987. The impact of the agreement was a net tax benefit of $594,700.
(5) EMPLOYEE PENSION AND THRIFT PLANS
The Company has a noncontributory group annuity pension plan that covers
all full-time employees who have completed six months of service, were hired
prior to their 60th birthday and work 1,000 or more hours during the year. The
right to discontinue the plan has been reserved by the Company, and, in such
event, the accumulated plan benefits would be distributed to the participants.
Approximately one-third of the plan assets are invested in U.S. government
bonds with the remainder invested in U.S. equity securities.
Employee pension costs amounted to $257,994 for 1996, $205,862 for 1995 and
$296,588 for 1994. 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:
1996 1995 1994
-------- --------- ---------
Service cost benefit earned during the period $294,394 245,658 296,919
Interest cost on projected benefit obligation 348,323 281,122 315,594
Expected return on assets (388,212) (324,408) (319,414)
Net amortization 3,489 3,490 3,489
-------- -------- -------
Net pension cost $257,994 205,862 296,588
======== ======= =======
Assumptions used in the accounting were:
Discount rates 7.5% 7.5% 8.0%
==== ==== ====
Rate of increase in compensation 3.5% 3.5% 3.5%
==== ==== ====
Expected long-term rate of return on assets 9.0% 9.0% 9.0%
==== ==== ====
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23
The following table sets forth the plan's funded status and amounts
recognized in the Balance Sheets at June 30, 1996 and 1995.
1996 1995
--------- ---------
Actuarial present value of vested benefit obligations $ 3,007,143 2,474,102
=========== =========
Accumulated benefit obligation $ 3,524,978 2,974,753
=========== =========
Plan assets at fair value $ 5,084,380 4,261,451
Projected benefit obligation 5,260,621 4,423,236
----------- ----------
Plan assets less than projected benefit obligation (176,241) (161,785)
Unrecognized transition amount (227,194) (254,078)
Unrecognized prior service loss 303,733 334,106
Unrecognized actuarial loss (gain) 80,152 121,845
----------- ----------
Pension asset (liability) recognized in the
Balance Sheets $ (19,550) 40,088
=========== =========
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 $166,000 for 1996, $153,000 for 1995 and
$143,000 for 1994.
(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 43%, 38%
and 49% of net sales in fiscal 1996, 1995, and 1994, respectively. The same
customer accounted for 13%, 13% and 12% of net sales in fiscal 1996, 1995 and
1994, respectively, and another customer also accounted for 13% and 12% of the
net sales in fiscal 1995 and 1994, respectively.
(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
1994, 1995 and 1996 were as follows:
Price Range
Per Share Shares
------------- -------
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
Options granted 8.75 70,900
Options exercised 5.00 (5,000)
-------
Outstanding-June 30, 1996 5.00 - 13.75 394,100
=======
At June 30, 1996 options to purchase 261,934 shares were exercisable under the
plan.
23
24
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, 1996,
estimated minimum rental expense under noncancelable operating leases was as
follows:
Fiscal Year
-----------
1997 $12,025
1998 4,881
1999 2,500
2000 2,292
2001 0
After 2001 0
-------
$21,698
=======
Various legal actions are pending against the Company which seek relief or
damages including an action seeking contribution to cleaning costs of a
Superfund site by plaintiff parties identified by the United States
Environmental Protection Agency (EPA). The plaintiff companies seek to recover
an unspecified amount of the cost of cleaning a Superfund site near the town of
Sorrento, Louisiana. The plaintiff contends that they have spent $51 million
and that the EPA is seeking reimbursement of $6 million. While the final
outcome of these matters cannot be predicted with certainty at this time,
management believes, after consulting with counsel, that the ultimate
liability, if any, will not have a material effect on the 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, 1996, 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 1996, 1995 and 1994 by $(192,000), $93,000 and
$53,000, respectively.
24
25
(9) OTHER INCOME AND EXPENSE
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.
In fiscal 1996, the Company wrote off $1,863,000 of costs associated with
two expansion projects which were terminated. The write off included costs
associated with the engineering and design of a plant to be located in Europe
and a plant to be located in Memphis, Tennessee. In addition, the Company
recognized a $479,827 gain from a contract dispute resolution. The contract
dispute related to the price the Company's previous natural gas supplier was
charging.
(10) NEW ACCOUNTING PRONOUNCEMENTS
The Financial Acounting Standards Board (the FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
statement is effective for fiscal years beginning after December 15, 1995. The
Company adopted the Standard, and it had no impact on the Company's results of
operations or financial position.
The FASB also issued SFAS No. 123, "Acounting for Stock Based
Compensation," effective also for fiscal years beginning after December 15,
1995. The new statement encourages but does not require, companies to measure
stock-based compensation cost using a fair value method, rather than the
intrinsic value method prescribed by Accounting Principles Board (APB) Opinion
No. 25. Companies choosing to continue to measure stock-based compensation
using the intrinsic value method must disclose on a proforma basis net earnings
and net earnings per share as if the fair value method were used. Management
is currently evaluating the requirements of SFAS No. 123.
SUPPLEMENTAL INFORMATION
The quarterly financial data (unaudited) for the three years ended June 30,
1996 follows:
EARNINGS
(LOSS) INCOME
GROSS BEFORE TAX NET PRIMARY AND FULLY
PROFIT INCOME (BENEFIT) EARNINGS DILUTED EARNINGS TAX
REVENUE (LOSS) TAXES EXPENSE (LOSS) (LOSS) PER SHARE RATE
------- ------ ----- ------- ------ ---------------- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1996:
1st Quarter $ 11,057 2,115 1,353 433 920 .17 32.0%
2nd Quarter 12,237 2,050 1,446 463 983 .18 32.0
3rd Quarter 14,787 2,127 1,148 367 781 .14 32.0
4th Quarter 17,538 2,349 68 22 46 .01 32.0
1995:
1st Quarter $ 9,391 1,559 744 268 476 .09 36.0%
2nd Quarter 11,584 2,333 1,508 543 965 .17 36.0
3rd Quarter 12,156 2,197 1,559 (33) 1,593 .29 2.1
4th Quarter 12,370 1,209 467 168 298 .05 36.0
1994:
1st Quarter $ 8,413 (1,254) (1,938) (698) (1,240) (.23) 36.0%
2nd Quarter 9,269 (2,228) (3,024) (1,088) (1,936) (.35) 36.0
3rd Quarter 10,025 62 1,004 361 643 .12 36.0
4th Quarter 11,378 837 40 15 25 .00 36.0
25
26
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
1996 Annual Meeting of Shareholders to be held November 12, 1996 and is
incorporated herein by reference. Certain information concerning the Company's
officers is included in Item 4(a) of Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is included on pages 6 to 9 of
the Company's definitive proxy statement prepared in connection with the 1996
Annual Meeting of Shareholders to be held November 12, 1996 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 1996 Annual Meeting of Shareholders
to be held November 12, 1996 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
included on pages 11 to 12 of the Company's definitive proxy statement prepared
in connection with the 1996 Annual Meeting of Shareholders to be held November
12, 1996 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.
26
27
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)
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)
27
28
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)
24.1 Consent of KPMG Peat Marwick LLP.
------------------------
(1) Incorporated by reference from the Company's Registration
Statement on form S-1 (Registration No. 33- 15181).
(2) Incorporated by reference from the Company's 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).
28
29
(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 July 25, 1995 was filed by the Company relating to
the financial results for the year ended June 30, 1995.
A Form 8-K dated August 10, 1995 was filed by the Company relating to
the signing of two letters of intent in connection with the proposed
construction of a melamine plant near Memphis, Tennessee using the
Company's patented M-II technology.
A Form 8-K dated September 1, 1995 was filed by the Company relating
to a price increase for melamine crystal.
A Form 8-K dated October 16, 1995 was filed by the Company relating to
the financial results for the three month period ended September 30,
1995.
A Form 8-K dated January 15, 1996 was filed by the Company relating to
the financial results for the three and six month periods ended
December 31, 1995.
A Form 8-K dated April 15, 1996 was filed by the Company relating to
the financial results for the three and nine month periods ended March
31, 1996.
A Form 8-K dated July 1, 1995 was filed by the Company relating to
ending plans for expansions in Europe and Tennessee.
A Form 8-K dated July 30, 1996 was filed by the Company relating to
the financial results for the year ended June 30, 1996.
29
30
=========================================================================================================================
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, 1996 $150,000 25,486 25,486 $ 150,000
Year ended June 30, 1995 $150,000 Nil Nil $150,000
Year ended June 30, 1994 $120,000 $ 30,000 Nil $150,000
=========================================================================================================================
30
31
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 11, 1996.
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 11, 1996
- -------------------------------
(James W. Crook)
/s/ CHARLES M. MCAULEY Director September 11, 1996
- -------------------------------
(Charles M. McAuley)
/s/ SCOTTY B. PATRICK Director September 11, 1996
- -------------------------------
(Scotty B. Patrick)
/s/ R. MICHAEL SUMMERFORD Director September 11, 1996
- -------------------------------
(R. Michael Summerford)
/s/ DANIEL D. RENEAU, JR. Director September 11, 1996
- -------------------------------
(Daniel D. Reneau, Jr.)
/s/ NILON H. PRATER Director September 11, 1996
- -------------------------------
(Nilon H. Prater)
/s/ DAVID J. D'ANTONI Director September 11, 1996
- -------------------------------
(David J. D'Antoni)
/s/ WAYNE D. DELEO Vice President and September 11, 1996
- ------------------------------- Chief Financial Officer
(Wayne D. DeLeo)
(Principal Financial and
Accounting Officer)
31
32
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)
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)
33
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)
24.1 Consent of KPMG Peat Marwick LLP.
------------------------
(1) Incorporated by reference from the Company's Registration
Statement on form S-1 (Registration No. 33- 15181).
(2) Incorporated by reference from the Company's 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).
34
(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.