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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended December 31, 1996
Commission File No. 0-16032
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Melamine Chemicals, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 64-0475913
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Highway 18 West Donaldsonville, Louisiana 70346
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(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 473-3121
NOT APPLICABLE
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Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filled 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 of 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
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5,455,300 shares of Melamine Chemicals, Inc. common stock $.01 par value per
share were outstanding on February 17, 1997. Registrant has no other class of
common stock outstanding.
(This document contains 9 sequentially
numbered pages including exhibits,
indices, and financial statements,
notes to financial statements and
schedules. The exhibit index to this
document is located at page 8.)
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Part I. Financial Information
MELAMINE CHEMICALS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
DECEMBER 31, June 30,
1996 1996
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ASSETS
Current assets:
Cash $ 9,673,382 5,529,644
Receivables:
Trade (net of allowance for doubtful debts of
$150,000 at December and June) 10,430,641 12,170,229
Income tax refund 0 24,877
Other 11,041 167,373
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Total receivables 10,441,682 12,362,479
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Inventories:
Finished goods 3,014,000 2,225,000
Supplies 211,585 288,300
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Total inventories 3,225,585 2,513,300
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Prepaid expenses:
Spare parts 2,317,873 2,357,090
Other 298,445 1,410
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Total prepaid expenses 2,616,318 2,358,500
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Deferred income taxes 1,522,315 1,522,315
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Total current assets 27,479,282 24,286,238
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Plant and equipment, at cost 47,308,393 46,860,949
Less accumulated depreciation 26,219,366 24,082,467
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Net plant and equipment 21,089,027 22,778,482
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Other assets 76,797 78,073
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$ 48,645,106 47,142,793
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,431,860 3,175,843
Accrued expenses 934,435 1,518,082
Amounts due to related parties 703,417 1,227,711
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Total current liabilities 5,069,712 5,921,636
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Deferred income taxes 6,715,947 6,371,250
Stockholders' equity:
Preferred stock of $1 par value
Authorized 2,000,000 shares; none issued 0 0
Common stock of $.01 par value. Authorized
20,000,000 shares; issued and outstanding 5,455,300 at
December and 5,450,300 shares; at June 54,553 53,553
Additional paid-in capital 16,823,920 16,823,920
Retained earnings 19,980,974 17,971,434
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Total stockholders' equity 36,859,447 34,849,907
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$ 48,645,106 47,142,793
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See accompanying notes to consolidated financial statements.
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MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
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Net sales $ 14,553,469 12,237,107 $ 29,910,187 23,294,442
Cost of sales 12,338,196 10,186,610 25,312,750 19,128,404
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Gross profit 2,215,273 2,050,497 4,597,437 4,166,038
Selling, general and administrative expenses 913,273 794,043 1,781,530 1,542,550
Research and development costs 61,262 54,967 125,087 112,230
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Operating profit 1,240,738 1,201,487 2,690,820 2,511,258
Other income (expense):
Interest income 120,396 279,744 212,791 348,185
Miscellaneous 45,744 (34,977) 51,594 (59,923)
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Earnings before income taxes 1,406,878 1,446,254 2,955,205 2,799,520
Income tax 450,201 462,801 945,666 895,846
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Net earnings $ 956,677 983,453 2,009,539 1,903,674
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Earnings per common share:
Primary $ .17 .18 .36 .35
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Fully diluted $ .17 .18 .36 .35
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Weighted average shares 5,455,300 5,453,633 5,455,300 5,451,967
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Dividends per common share $ 0.00 0.00 0.00 0.00
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See accompanying notes to consolidated financial statements.
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MELAMINE CHEMICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
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Cash flows from operating activities:
Net earnings $ 956,677 983,453 2,009,540 1,903,674
Adjustments to reconcile net earnings
to net cash provided (used) by operating
activities:
Depreciation 1,077,017 918,530 2,136,899 1,839,655
Increase (decrease) in deferred income taxes (40,799) 202,801 344,697 513,320
Change in assets and liabilities:
Decrease (increase) in:
Receivables 1,373,439 (28,306) 1,920,797 1,830,249
Inventories (295,496) 5,621 (712,285) (2,842,492)
Prepaid expenses 455,382 (625,587) (257,818) (1,104,485)
Increase (decrease) in:
Accounts payable (324,366) (533,523) 256,017 353,390
Accrued expenses (293,791) 41,110 (583,647) 4,577
Amounts due to related parties (413,712) (695,347) (524,294) (348,411)
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Cash provided by operating activities 2,494,351 268,752 4,589,906 2,149,477
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Cash flows from investing activities:
Capital expenditures (342,374) (1,355,451) (447,444) (2,258,832)
(Increase) decrease in other assets (2,182) (4,886) 1,276 (2,812)
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Cash provided by investing activities (344,556) (1,360,337) (446,168) (2,261,644)
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Cash flows from financing activities:
Proceeds from exercise of stock options 0 25,000 0 25,000
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Cash provided by financing activities 0 25,000 0 25,000
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Increase (decrease) in cash and cash equivalents 2,149,795 (1,066,585) 4,143,738 (87,167)
Cash and cash equivalents at beginning of period 7,523,587 6,437,912 5,529,644 5,458,494
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Cash and cash equivalents at end of period $ 9,673,382 5,371,327 9,673,382 5,371,327
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 471,000 260,000 535,711 260,000
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See accompanying notes to consolidated financial statements.
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NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements for the three and six-month periods
ended December 31, 1996 and 1995 have not been audited by independent
accountants, but in the opinion of management, all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
consolidated balance sheet, consolidated statement of operations and
consolidated statement of cash flows at the dates and for the periods indicated
have been made. Results of operations for interim periods are not necessarily
indicative of results of operations for the respective full years.
2. CONTINGENCIES
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. 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 and results of
operations of the Company.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
During the second quarter of fiscal 1997, the Company's cash position
continued to improve, as its cash balance increased by approximately $2.1
million over the balance at the end of the first fiscal quarter. This
improvement was caused primarily by $957 thousand in net earnings and a $1.1
million non-cash charge for depreciation.
During the second quarter of fiscal 1997, the Company incurred capital
expenditures of approximately $342,000. Capital expenditures are expected to
total between $1.5 and $2.0 million for the year. These capital expenditures
are expected to be funded out of operations, and any shortfall can be funded
from the Company's $7.5 million lines of credit.
Results of Operations
The results for the three-and six-month periods ended December 31, 1996
and 1995 follow:
Quarter Ended Six Months Ended
December 31, December 31,
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1996 1995 1996 1995
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Sales:
Millions of pounds 27.7 22.2 56.4 42.9
Average price/pound 52.6c. 55.1c. 53.0c. 54.3c.
Production:
Millions of pounds 27.8 21.8 55.2 49.6
Cost of sales/pound 44.6c. 45.9c. 44.9c. 44.6c.
Sales volume for the second quarter of fiscal 1997 increased by 25% as
compared to the same period in fiscal 1996 but was fairly consistent with the
first quarter of fiscal 1997. The increase was due mainly to two factors:
1. Fiscal 1997 reflects a continuing strong market for melamine
worldwide; and
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2. Fiscal 1996 volume was low because the Company held back sales volume
to increase inventory because of a maintenance shut down taken in the
second quarter of fiscal 1996.
The cost of sales per pound in the three-months ended December 31, 1996
was almost 1c. per pound lower than in the same period last year. The decrease
was due to a much higher production volume in the second quarter of fiscal 1997
as compared to the prior year. The increase in production volume was due to the
maintenance shut down taken in the second quarter of the prior year. Offsetting
the cost benefits of increased production volume were the negative impact of
higher raw material cost (approximately 1c./lb) and higher natural gas cost
(approximately 1c./lb):
Because of relatively low inventory levels, the Company purchased
approximately 3,000,000 pounds (700,000 pounds in the second quarter) of
melamine from a competitor at essentially the same price as it was selling
product to its customers. The Company is not committed to purchase any
additional quantities.
Selling, general and administrative expenses increased by 15% in the
second quarter of fiscal 1997 as compared to the second quarter of fiscal 1996
and by 5% over the previous quarter. The increase was due mostly to increased
salary levels and increased travel cost. During the first quarter of fiscal
1997, the Company ended its association with its sales agent in Europe and
appointed a new agent to act on its behalf in Europe. In this connection,
Company personnel traveled extensively in Europe, visiting its customers to
assist in the transition from one agent to another.
Interest income for the second fiscal quarter of 1997 was 57% below the
same period last year. The second quarter of last year included $208,000 of
interest received on tax refunds received from the Internal Revenue Service.
Miscellaneous income for the second quarter of fiscal 1997 includes
$98,000 for the reversal of an overaccrual of the estimated loss related to
project cancellation costs which were recorded in June 1996. Offsetting this
accrual reversal was an exchange loss of $53,000 realized in the second
quarter.
Historically, the Company has taken one planned maintenance shut down in
the first or second quarter of each fiscal year. These shut downs generally
last between 2 and 3 weeks. During fiscal 1997, the Company has decided to take
two planned shut downs of shorter duration. In July 1996, the Company took a
maintenance shutdown of eight days and plans to take another short shut down in
the third or fourth fiscal quarter of fiscal 1997.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments during the quarter ended December
31, 1996.
Item 6. Exhibits and reports on Form 8-K.
A. Page 8 of this report is the index for those exhibits required to be filed
as part of this report.
B. A Form 8-K was filed on January 15, 1997 containing the press release
announcing results of operations for the second quarter of fiscal 1997.
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SIGNATURES
Pursuant to the requirements 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.
Melamine Chemicals, Inc.
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(Registrant)
Date: February 17, 1997 /s/ Fred Huber
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Fred Huber
President & Chief Executive Officer
Date: February 17, 1997 /s/ Wayne D. DeLeo
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Wayne D. DeLeo
Vice President & Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule