UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

          (Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d)

Of the Securities Exchange Act of 1934

For Quarter Ended March 31, 2001

 

OR

 

[ ] Transition Report Pursuant to Section 13 or 15(d)

Of the Securities Exchange Act of 1934

For Quarter Ended March 31, 2001

Commission File Number 001-12217

 

MISSISSIPPI CHEMICAL CORPORATION

 

Organized in the State of Mississippi

Tax Identification No. 64-0292638

P. O. Box 388, Yazoo City, Mississippi 39194

Telephone No. 662+746-4131

 

               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 ExchangeAct 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 [ ]

               The number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 2001.

Class
Number of Shares
Common Stock, $0.01 par value
26,131,917
MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

INDEX

 
   
Page 

Number
PART I. 
FINANCIAL INFORMATION:
  
Item 1.
Financial Statements       
Consolidated Statements of Income
3  
     Three months ended March 31, 2001 and 2000, and   
     Nine months ended March 31, 2001 and 2000       
Consolidated Balance Sheets
4 - 5  
     March 31, 2001 and June 30, 2000       
Consolidated Statements of Shareholders' Equity
6  
     Fiscal Year Ended June 30, 2000 and   
     Nine months ended March 31, 2001       
Consolidated Statements of Cash Flows
7  
     Nine months ended March 31, 2001 and 2000       
Notes to Consolidated Financial Statements
8 - 17     
Item 2.
Management's Discussion and Analysis of Results    
of Operations and Financial Condition
18 - 29     
Item 3.
Quantitative and Qualitative Disclosure About    
Market Risk
30        
PART II. 
OTHER INFORMATION:      
Item 6.
Exhibits and Reports on Form 8-K
31     
Signatures 
31
 

PART I.
FINANCIAL INFORMATION

Item 1.
Financial Statements.
 

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 
 
Three months ended

March 31, 
Nine months ended

March 31, 
2001
2000 
2001
2000 
(In thousands, except per share data)
Revenues:     
     Net sales
$147,512    
$129,660  
$403,880 
$333,970       
Operating expenses:     
     Cost of products sold
132,225 
125,335  
389,905 
328,359 
     Selling, general and administrative
7,463 
8,411  
23,499 
25,269 
     Other
     6,647 
        101  
   13,029 
     2,727  
 146,335 
 133,847  
 426,433 
 356,355       
Operating income (loss)
1,177 
(4,187) 
(22,553)
(22,385)      
Other (expense) income:     
     Interest, net
(7,009)
(7,098) 
(21,278)
(19,754)
     Other
     5,457 
     1,671  
     7,837 
     2,952       
Loss before income taxes
(375)
(9,614) 
(35,994)
(39,187)      
Income tax expense (benefit)
        120 
   (4,403) 
  (14,042)
 (18,415)      
Net loss
$     (495)
$ (5,211) 
$(21,952)
$(20,772)
Loss per share - basic and diluted      
     (see Note 2)
$    (0.02)
$   (0.20) 
$    (0.84)
$    (0.79)
 

The accompanying notes are an integral part of these consolidated financial statements.

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

ASSETS
  
March 31, 
June 30,  
2001 
2000  
(In thousands, except per share data)
Current assets:    
   Cash and cash equivalents 
$         929  
$       2,190 
   Accounts receivable, net 
55,235  
62,080      
   Inventories:    
      Finished products 
72,961  
28,015 
      Raw materials and supplies 
8,316  
7,180 
      Replacement parts 
     36,475  
     37,322 
                Total inventories 
117,752  
72,517      
   Income tax receivable 
2,640  
10,080 
   Insurance receivable 
12  
3,094 
   Prepaid expenses and other current assets 
6,503  
9,526 
   Deferred income taxes 
       2,435  
         922      
         Total current assets 
185,506  
160,409      
Investments in affiliates 
93,635  
89,508      
Other assets 
7,288  
11,888      
Property, plant and equipment, at cost 
844,978  
846,868 
  less accumulated depreciation, depletion and

  amortization 
  (426,003) 
  (401,014)
             Net property, plant and equipment 
418,975  
445,854      
Goodwill, net of accumulated amortization 
   163,742  
   167,179        
$ 869,146  
$ 874,838 
 

The accompanying notes are an integral part of these consolidated financial statements.

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Continued)

LIABILITIES AND SHAREHOLDERS' EQUITY

 
  
March 31, 
June 30,  
2001 
2000  
(In thousands, except per share data)     
Current liabilities:    
   Accounts payable 
$  54,117  
$  54,661 
   Accrued liabilities 
    14,330  
    10,893 
          Total current liabilities 
68,447  
65,554      
Long-term debt 
359,974  
330,307      
Other long-term liabilities and deferred credits 
10,803  
9,995      
Deferred income taxes 
59,188  
73,235      
Shareholders' equity:    
   Common stock ($.01 par, authorized 100,000

      shares; issued 27,976) 
280  
280 
   Additional paid-in capital 
305,901  
305,901 
   Retained earnings 
92,260  
114,996 
   Accumulated other comprehensive income 
1,872  
4,149 
   Treasury stock, at cost (1,844 shares) 
    (29,579) 
   (29,579)
                    Total shareholders' equity 
   370,734  
  395,747        
$ 869,146  
$ 874,838 
 

The accompanying notes are an integral part of these consolidated financial statements.

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

MARCH 31, 2001

(Unaudited)
 
 

 

Common

Stock
Additional 

Paid-In

Capital
 

Retained

Earnings
Accumulated

Other

Comprehensive

Income
 

Treasury

Stock
 

 

Total
(In thousands, except per share data)            
Balances, July 1, 1999
$     280
$  305,901
$143,626 
$       1,857  
$(29,579)
$422,085 
  Comprehensive loss:      
     Net loss
-    
-      
(23,664)
-       
-       
(23,664)
     Net unrealized gain on      
       hedges, net of tax
       -    
        -      
      -       
         2,292  
      -       
     2,292        
          Comprehensive loss
-    
-      
(23,664)
2,292  
-       
(21,372)       
     Cash dividends paid      
       ($0.19 per share)
       -    
        -      
    (4,966)
           -       
      -       
    (4,966)       
Balances, June 30, 2000
280
305,901
114,996 
4,149  
(29,579)
395,747 
  Comprehensive loss:      
     Net loss
-    
-      
(21,952)
-       
-       
(21,952)
     Net unrealized loss on      
       hedges, net of tax
       -    
        -      
       -      
        (2,277) 
      -       
    (2,277)       
          Comprehensive loss
-    
-      
(21,952)
(2,277) 
-       
(24,229)       
     Cash dividends paid      
       ($0.03 per share)
       -    
        -      
      (784)
           -       
     -        
       (784)       
Balances, March 31, 2001
$      280
$  305,901
$  92,260
$        1,872  
$(29,579)
$370,734        
 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
  
Nine months ended March 31,  
2001 
2000  
(In thousands)
Cash flows from operating activities:    
  Net loss 
$   (21,952) 
$   (20,772)
  Reconciliation of net loss to net cash used in 

          operating activities:    
       Net change in operating assets and liabilities 
(26,778) 
(16,566)
       Depreciation, depletion and amortization 
35,157  
35,038 
       Deferred gain on hedging activities, net of tax 
1,872  
-      
       Deferred income taxes 
(13,079) 
(9,443)
       Equity earnings in unconsolidated affiliates 
(5,149) 
(10,339)
       Other 
      (2,512) 
         (797)     
Net cash used in operating activities 
    (32,441) 
    (22,879)     
Cash flows from investing activities:    
  Purchases of property, plant and equipment 
(13,997) 
(15,704)
  Proceeds from sale of assets 
15,583  
1,592 
  Other 
          750  
       6,808      
Net cash provided by (used in) investing activities 
       2,336  
      (7,304)     
Cash flows from financing activities:    
  Debt proceeds 
334,331  
294,399 
  Debt payments 
(304,703) 
(259,954)
  Cash dividends paid 
        (784) 
      (4,182)     
Net cash provided by financing activities 
     28,844  
      30,263      
Net (decrease) increase in cash and cash  equivalents 
(1,261) 
80      
Cash and cash equivalents - beginning of period 
       2,190  
        1,648      
Cash and cash equivalents - end of period 
$        929  
$      1,728 
 

 

The accompanying notes are an integral part of these consolidated financial statements.

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 1 - INTERIM FINANCIAL STATEMENTS**
The accompanying consolidated financial statements have been prepared by us without audit, and include Mississippi Chemical Corporation, its subsidiaries and affiliates.  In our opinion, the financial statements reflect all adjustments necessaryto present fairly our results of operations for the three-month and the nine-month periods ended March 31, 2001 and 2000, our financial position at March 31, 2001 and June 30, 2000, our consolidated statements of shareholders' equity for the nine monthsended March 31, 2001 and the year ended June 30, 2000, and our cash flows for the nine months ended March 31, 2001 and 2000.  In our opinion, these adjustments are of a normal recurring nature which are necessary for a fair presentation of our financialposition and results of operations for the interim periods.  We have reclassified certain prior-year information to conform with the current year's presentation.

Certain notes and other information have been condensed or omitted in our interim financial statements presented in this quarterly report on Form 10-Q.  Therefore, these financial statements should be read in conjunction with our 2000 annual report onForm 10-K and our consolidated financial statements and notes thereto included in our June 30, 2000, audited financial statements.

Our business is seasonal; therefore, the results of operations for the periods ended March 31, 2001, are not necessarily indicative of the operating results for the full fiscal year.

 
**NOTE 2 - EARNINGS PER SHARE**
The number of shares used in our basic and diluted earnings per share computation are as follows:
  
Three months ended 
Nine months ended 
  
March 31, 
March 31,  
2001 
2000 
2001 
2000  
(In thousands)
Weighted average common shares

     outstanding, net of treasury shares, for

       basic earnings per share 
 

26,132 
 

26,132 
 

26,132 
 

26,132
Common stock equivalents for employee        
      stock options 
    -      
    -      
    -      
    -              
Weighted average common shares        
   outstanding for diluted earnings per share 
26,132 
26,132 
26,132 
26,132****
Options outstanding were not included in our computations of diluted earnings per share for the three-month or nine-month periods ended March 31, 2001 and 2000, because they were antidilutive.

 
**NOTE 3 - SEGMENT INFORMATION**
Our reportable operating segments, nitrogen, phosphate and potash, are strategic business units that offer different products.  They are managed separately because each business unit requires different technology and marketing strategies.  Ournitrogen segment produces ammonia, ammonium nitrate, urea, nitrogen solutions and nitric acid.  We distribute these products to fertilizer dealers and distributors, and industrial users.  Our phosphate segment produces diammonium phosphate fertilizer(commonly referred to as "DAP") that is marketed to agricultural users primarily in international markets through a separate export association.  Our potash segment mines and produces granular and standard potash products and distributes them toagricultural and industrial users.  Below is our segment information for the three-month and nine-month periods ended March 31, 2001 and 2000.  The Other caption includes corporate and consolidating eliminations.
  
Three months ended March 31, 2001
(In thousands) 
Nitrogen
Phosphate
Potash
Other
Total       
Net sales - external customers 
$ 101,400
$  25,439 
$ 20,673 
$    -      
$147,512
Net sales - intersegment 
11,762
16 
-      
(11,778)
-     
Operating income (loss) 
3,523
(2,695)
(630)
979 
1,177
Depreciation, depletion and   amortization 
7,486
1,366 
1,683 
920 
11,455
Capital expenditures 
1,898
302 
652 
148 
3,000
 

 
  
Three months ended March 31, 2000
(In thousands) 
Nitrogen
Phosphate
Potash
Other
Total       
Net sales - external customers 
$ 77,871 
$  22,650 
$29,139
$   -      
$129,660 
Net sales - intersegment 
4,116 
20 
-     
(4,136)
-      
Operating (loss) income 
(4,143)
(3,080)
3,153
(117)
(4,187)
Depreciation, depletion and   amortization 
7,595 
1,554 
1,567
964 
11,680 
Capital expenditures 
4,630 
776 
1,115
(5)
6,516 
 
****  
Nine months ended March 31, 2001
(In thousands) 
Nitrogen
Phosphate
Potash
Other
Total       
Net sales - external customers 
$ 270,948 
$  78,124 
$54,808   
$     -     
$403,880
Net sales - intersegment 
 26,443 
48 
-      
(26,491)
-      
Operating (loss) income 
(12,576)
(8,495)
(2,875)
1,393 
(22,553)
Depreciation, depletion and   amortization 
 23,152 
 4,221 
4,972 
2,812 
35,157 
Capital expenditures 
 7,572 
 2,151 
4,093 
181 
13,997 
 
  
Nine months ended March 31, 2000
(In thousands) 
Nitrogen
Phosphate
Potash
Other
Total       
Net sales - external customers 
$185,704
$  78,011 
$70,255
$    -      
$333,970 
Net sales - intersegment 
12,903 
65 
-     
(12,968)
-      
Operating (loss) income 
(22,201)
(2,934)
4,020
(1,270)
(22,385)
Depreciation, depletion and amortization 
22,954 
4,580 
4,635
2,869 
35,038 
Capital expenditures 
9,507 
2,282 
3,470
445 
15,704 
 
**NOTE 4 - ACCUMULATED OTHER COMPREHENSIVE INCOME**
On July 1, 1998, we adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which establishes standards for reporting comprehensive income and its components (revenues, expenses, gains and losses) ina full set of general-purpose financial statements.  Comprehensive income is the total of net income and all other non-owner changes in equity.  The components of comprehensive income that relate to us are net income or loss and unrealized gains or losseson our natural gas derivative transactions, and, as permitted under the provisions of SFAS No. 130, are presented in the Consolidated Statements of Shareholders' Equity.  These derivative transactions may consist of futures contracts, commodity swaps, orsimilar derivative financial instruments related to the price of natural gas.  The changes in the components of accumulated other comprehensive income during the nine months ended March 31, 2001, are included below.

 
****  
 

Before-Tax

Amount 
Tax

(Expense)

Benefit 
Net-of-Tax

Amount
Net unrealized gain on natural gas hedging activities: 
(In thousands)       
Balances, June 30, 2000 
$   6,631  
$  (2,482) 
$   4,149        
         Net unrealized gain arising during period 
7,636  
(2,868) 
4,768 
         Less: reclassification adjustment for net 

                  gains realized in net income 
    (5,174) 
    1,940  
   (3,234)       
     Balances, September 30, 2000 
9,093  
(3,410) 
5,683        
           Net unrealized gain arising during period 
16,532  
(6,199) 
10,333 
           Less: reclassification adjustment for net      
                                gains realized in net income 
    (7,651) 
    2,869  
   (4,782)       
      Balances, December 31, 2000 
17,974  
(6,740) 
11,234        
         Net unrealized loss arising during period 
(3,709) 
1,390  
(2,319)
            Less: reclassification adjustment for net      
                               gains realized in net income 
 (11,269) 
    4,226  
   (7,043)       
      Balances, March 31, 2001 
$    2,996 
$ (1,124) 
$   1,872        
 
**NOTE 5 - GUARANTOR SUBSIDIARIES**
Payment obligations under our 7.25% Senior Notes, due November 15, 2017, issued pursuant to that certain indenture, dated as of November 25, 1997, are fully and unconditionally guaranteed on a joint and several basis by Mississippi Nitrogen, Inc., andMissChem Nitrogen, L.L.C. (the "Guarantor Subsidiaries"), our wholly owned direct subsidiary and our wholly owned indirect subsidiary, respectively.  Condensed consolidating financial information regarding the parent company, Guarantor Subsidiaries andnon-guarantor subsidiaries for March 31, 2001 and 2000 is presented below for purposes of complying with the reporting requirements of the Guarantor Subsidiaries.

CONDENSED CONSOLIDATING STATEMENT OF INCOME
  
Three months ended March 31, 2001
(In thousands) 
Parent

Company
Guarantor

Subsidiaries
Non-Guarantor

Subsidiaries
Eliminations
Consolidated
Revenues:      
  Net sales 
$     -      
$    53,395 
$148,666 
$ (54,549)
 $ 147,512        
Operating expenses:      
  Cost of products sold 
-      
53,600 
129,875 
(51,250)
132,225 
  Selling, general and

    administrative 
(988)
1,518 
6,933 
-      
7,463 
  Other 
       -      
          749 
      5,898 
        -      
      6,647   
       (988)
      55,867 
  142,706 
   (51,250)
  146,335 
Operating income (loss) 
988 
(2,472)
5,960 
(3,299)
1,177        
Other (expense) income:      
  Interest, net 
(7,301)
(3,795)
4,087 
-      
(7,009)
  Other 
      3,145 
      13,794 
      4,307 
   (15,789)
      5,457        
(Loss) income before    income taxes 
(3,168)
7,527 
14,354 
(19,088)
(375)       
Income tax (benefit)    expense 
    (2,673)
        4,299 
       (222)
     (1,284)
         120        
Net (loss) income 
$     (495)
$      3,228 
$  14,576 
$  (17,804)
$      (495)
 

CONDENSED CONSOLIDATING STATEMENT OF INCOME
  
Three months ended March 31, 2000
(In thousands) 
Parent

Company
Guarantor

Subsidiaries
Non-Guarantor

Subsidiaries
Eliminations
Consolidated
Revenues:      
  Net sales 
$      -    
$     38,733 
$130,969 
$ (40,042)
$ 129,660        
Operating expenses:      
  Cost of products sold 
-      
42,475 
120,123 
(37,263)
125,335 
  Selling, general and

    administrative 
104 
944 
7,363 
-       
8,411 
  Other 
      -       
        -       
        101 
     -       
        101   
        104 
      43,419 
  127,587 
 (37,263)
  133,847 
Operating (loss) income 
(104)
(4,686)
3,382 
(2,779)
(4,187)       
Other (expense) income:      
  Interest, net 
(6,652)
(2,974)
2,528 
-       
(7,098)
  Other 
     1,284 
       9,569 
           14 
   (9,196)
      1,671        
(Loss) income before income taxes 
(5,472)
1,909
5,924 
(11,975)
(9,614)       
Income tax (benefit)    expense 
      (261)
       3,472 
     (5,907)
    (1,707)
     (4,403)       
Net (loss) income 
$  (5,211)
$    (1,563)
$    11,831
$ (10,268)
$   (5,211)
 

 

CONDENSED CONSOLIDATING STATEMENT OF INCOME
  
Nine months ended March 31, 2001
(In thousands) 
Parent

Company
Guarantor

Subsidiaries
Non-Guarantor

Subsidiaries
Eliminations
Consolidated
Revenues:      
  Net sales 
$     -      
$ 131,654 
$  406,703 
$ (134,477)
$ 403,880        
Operating expenses:      
  Cost of products sold 
-      
142,484 
381,029 
(133,608)
389,905 
  Selling, general and

    administrative 
(1,424)
4,481 
20,442 
-       
23,499 
  Other 
       -      
      3,432 
       9,597 
        -       
     13,029   
    (1,424)
  150,397 
    411,068 
  (133,608)
   426,433 
Operating income (loss) 
1,424 
(18,743)
(4,365)
(869)
(22,553)       
Other (expense) income:      
  Interest, net 
(22,482)
(11,006)
12,210 
-       
(21,278)
  Other 
    (4,971)
    18,826 
        4,613 
    (10,631)
      7,837        
(Loss) income before income taxes 
(26,029)
(10,923)
12,458 
(11,500)
(35,994)       
Income tax (benefit) expense 
    (4,077)
      2,054 
    (10,071)
      (1,948)
   (14,042)       
Net (loss) income 
$ (21,952)
$ (12,977)
$    22,529 
$    (9,552)
$  (21,952)
 

CONDENSED CONSOLIDATING STATEMENT OF INCOME
  
Nine months ended March 31, 2000
(In thousands) 
Parent

Company
Guarantor

Subsidiaries
Non-Guarantor

Subsidiaries
Eliminations
Consolidated
Revenues:      
  Net sales 
$     -    
$    102,691 
$ 337,513  
$ (106,234)
$ 333,970        
Operating expenses:      
  Cost of products sold 
-      
118,398 
314,668  
(104,707)
328,359 
  Selling, general and

    administrative 
1,236 
2,906 
21,127  
-       
25,269 
  Other 
       -      
         -      
      2,727  
       -       
      2,727   
      1,236 
    121,304 
  338,522  
 (104,707)
  356,355 
Operating loss 
(1,236)
(18,613)
(1,009) 
(1,527)
(22,385)       
Other (expense) income:      
   Interest, net 
(18,588)
(8,431)
7,265 
-       
(19,754)
   Other 
      (273)
        8,917 
         831 
     (6,523)
      2,952        
(Loss) income before income taxes 
(20,097)
(18,127)
7,087 
(8,050)
(39,187)       
Income tax expense (benefit) 
       675 
         (979)
    (14,328)
     (3,783)
   (18,415)       
Net (loss) income 
$(20,772)
$  (17,148)
$     21,415
$   (4,267)
$ (20,772)
 

 

CONDENSED CONSOLIDATING BALANCE SHEET
 
March 31, 2001
(In thousands)
Parent

Company
Guarantor

Subsidiaries
Non-Guarantor

Subsidiaries
Eliminations
Consolidated      
Current assets:     
   Cash and cash equivalents
$       855 
$         17 
$          57 
$          -      
$        929 
   Receivables, net
3,219 
25,928 
113,924 
(85,184)
57,887 
   Inventories
-      
19,401 
99,654 
(1,303)
117,752 
   Prepaid expenses and other  

      current assets

      3,500 
      1,784 
     11,059 
        (7,405)
       8,938       
                Total current assets
7,574 
47,130 
224,694 
(93,892)
185,506       
Investments in affiliates
691,878 
364,734 
77,128 
(1,040,105)
93,635 
Other assets
156,795 
-      
250,897 
(400,404)
7,288 
PP&E, net
9,683 
141,268 
268,024 
-       
418,975 
Goodwill, net
        -      
        -      
   163,742 
          -       
   163,742       
           Total assets
$ 865,930 
$ 553,132 
$  984,485 
$(1,534,401)
$ 869,146             
Liabilities and Shareholders'
    Equity     
Current liabilities:     
   Accounts payable
$   31,633 
$  29,845 
$   89,833 
$    (97,194)
$   54,117 
   Accrued liabilities
     12,844 
      3,125 
       5,764 
        (7,403)
     14,330       
           Total current liabilities
44,477 
32,970 
95,597 
(104,597)
68,447       
Long-term debt
448,978 
147,075 
138,286 
(374,365)
359,974 
Other long-term liabilities and     
   deferred credits
1,741 
34,896 
59,588 
(26,234)
69,991       
Shareholders' equity:     
   Common stock
280 
1 
58,941 
(58,942)
280 
   Additional paid-in capital
305,901 
324,715 
535,866 
(860,581)
305,901 
   Retained earnings
92,260 
13,475 
96,207 
(109,682)
92,260 
   Accumulated other      
      comprehensive income
1,872 
-      
-      
-       
1,872 
   Treasury stock, at cost
   (29,579)
        -      
         -      
          -       
   (29,579)      
   Total shareholders' equity
   370,734 
   338,191 
    691,014 
 (1,029,205)
   370,734       
          Total liabilities and     
              shareholders' equity
$ 865,930 
$ 553,132 
$  984,485 
$(1,534,401)
$ 869,146       
 

 

CONDENSED CONSOLIDATING BALANCE SHEET

 
 
June 30, 2000
(In thousands)
Parent

Company
Guarantor

Subsidiaries
Non-Guarantor

Subsidiaries
Eliminations
Consolidated      
Current assets:     
   Cash and cash equivalents
$  2,085 
$        17
$         88
$         -      
$     2,190 
   Receivables, net
1,556 
11,139
93,407
(30,848)
75,254 
   Inventories
-      
22,858
50,056
(397)
72,517 
   Prepaid expenses and other

      current assets

    6,622 
     1,321
      6,360
      (3,855)
    10,448       
                 Total current assets
10,263 
35,335
149,911
(35,100)
160,409       
Investments in affiliates
700,062 
350,635
72,776
(1,033,965)
89,508 
Other assets
134,530 
5
252,267
(374,914)
11,888 
PP&E, net
12,296 
148,828
284,730
-       
445,854 
Goodwill, net
       -      
       -     
  167,179
           -       
  167,179       
            Total assets
$857,151 
$534,803
$926,863
$(1,443,979)
$874,838             
Liabilities and Shareholders'
    Equity     
Current liabilities:     
   Accounts payable
$ 23,195 
$ 11,404
$ 58,375
$     (38,313)
$ 54,661
   Accrued liabilities
     7,254 
     3,028
     5,879
         (5,268)
   10,893      
         Total current liabilities
30,449 
14,432
64,254
(43,581)
65,554       
Long-term debt
429,846 
137,937
127,553
(365,029)
330,307 
Other long-term liabilities and     
   deferred credits
1,109 
31,266
62,079
(11,224)
83,230       
Shareholders' equity:     
   Common stock
280 
1
58,941
(58,942)
280 
   Additional paid-in capital
305,901 
324,715
545,069
(869,784)
305,901 
   Retained earnings
114,996 
26,452
68,967
(95,419)
114,996 
   Accumulated other     
      comprehensive income
4,149 
-     
-     
-      
4,149 
   Treasury stock, at cost
  (29,579)
        -     
        -     
           -      
  (29,579)      
              Total shareholders' equity
  395,747 
  351,168
  672,977
 (1,024,145)
  395,747       
          Total liabilities and     
              shareholders' equity
$857,151 
$534,803
$926,863
$(1,443,979)
$874,838       
 

 

 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

 
 
Nine months ended March 31, 2001
(In thousands)
Parent

Company
Guarantor

Subsidiaries
Non-Guarantor

Subsidiaries
Eliminations
Consolidated      
Cash flows from operating activities:     
   Net (loss) income
$ (21,952)
$ (12,977)
$  22,529 
$   (9,552)
$   (21,952)
   Reconciliation of net (loss)      
      income to net cash used in     
      operating activities:     
          Net change in operating      
             assetsand liabilities
13,367 
7,108 
(42,812)
(4,441)
(26,778)
          Depreciation, depletion      
             andamortization
2,807 
9,596 
22,754 
-      
35,157 
          Deferred gain on hedging     
             activities, net of tax
1,872 
-      
-      
-      
1,872 
          Equity earnings in      
             unconsolidated affiliates
6,534 
(17,954)
(4,360)
10,631 
(5,149)
          Deferred income taxes and      
             other
  (16,743)
    (3,195)
        985 
     3,362 
    (15,591)
Net cash used in      
   operating activities
  (14,115)
  (17,422)
       (904)
       -      
    (32,441)      
Cash flows from investing
   activities:     
   Purchases of property, plant      
      and equipment
(181)
(1,954)
(11,862)
-      
(13,997)
   Proceeds from sale of assets
4,759 
6 
10,818 
-      
15,583 
   Other
        -     
        742 
            8 
       -      
          750 
Net cash provided by (used in)      
   investing activities
     4,578 
    (1,206)
    (1,036)
       -      
        2,336       
Cash flows from financing
   activities:     
      Debt proceeds
334,331 
-      
-      
-      
334,331 
      Debt payments
(304,703)
-      
-      
-      
(304,703)
      Cash dividends paid
(784)
-      
-      
-      
(784)
      Net change in affiliate notes
  (20,537)
  18,628 
      1,909 
       -      
        -       
Net cash provided by     
   financing activities
      8,307 
  18,628 
      1,909 
       -      
      28,844       
Net decrease in cash and     
   cash equivalents
(1,230)
-      
(31)
-      
(1,261)      
Cash and cash equivalents -     
   beginning of period
      2,085 
         17 
           88 
        -      
        2,190       
Cash and cash equivalents -     
   end of period
$       855 
$       17 
$         57
$       -      
$         929 
 

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

 
 
Nine months ended March 31, 2000
(In thousands)
Parent

Company
Guarantor

Subsidiaries
Non-Guarantor

Subsidiaries
Eliminations
Consolidated      
Cash flows from operating
    activities:     
      Net (loss) income
$ (20,772)
$  (17,148)
$     21,415 
$    (4,267)
$   (20,772)
      Reconciliation of net (loss)       
         income to net cash (used 
        in) provided by operating     
         activities:     
           Net change in operating      
             assetsand liabilities
22,484 
7,205 
(29,009)
(17,246)
(16,566)
          Depreciation, depletion      
             andamortization
2,866 
8,991 
23,181 
-       
35,038 
          Equity earnings in      
             unconsolidated affiliates
(9,159)
(7,656)
(10,885)
17,361 
(10,339)
          Deferred income taxes and      
             other
   (14,514)
          506 
          (211)
      3,979 
    (10,240)
Net cash (used in) provided by      
   operating activities
   (19,095)
      (8,102)
         4,491 
       (173)
    (22,879)      
Cash flows from investing
    activities:     
      Purchases of property, plant        
         and equipment
(445)
(3,961)
(11,298)
-       
(15,704)
     Other
          18 
             4 
         8,378 
       -       
       8,400       
Net cash used in investing
    activities
 
       (427)
 
      (3,957)
 
       (2,920)
 
        -       
 
      (7,304)      
Cash flows from financing
    activities:     
      Debt proceeds
294,399 
-       
-       
-       
294,399 
      Debt payments
(259,954)
-       
-       
-       
(259,954)
      Cash dividends paid
(4,182)
-       
(173)
173 
(4,182)
      Net change in affiliate notes
     (9,611)
      12,055 
       (2,444)
        -       
        -             
Net cash provided by (used in)     
   financing activities
     20,652 
      12,055 
       (2,617)
          173 
      30,263       
Net increase (decrease) in cash      
   and cash equivalents
1,130 
(4)
(1,046)
-       
80      
Cash and cash equivalents -     
   beginning of period
         244 
             21 
         1,383 
        -       
        1,648       
Cash and cash equivalents -     
   end of period
$     1,374 
$           17 
$          337 
$       -       
$      1,728 
 

 
**Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION**
GENERAL.  Our operations are organized into three strategic business units: nitrogen, phosphate and potash.  Our nitrogen business unit produces nitrogen products for distribution to fertilizer dealers and distributors, and industrial userslocated primarily in the southern region of the United States.  Our phosphate business unit produces diammonium phosphate fertilizer (commonly referred to as "DAP") and exports the majority of this production through Phosphate Chemicals ExportAssociation, Inc., a Webb-Pomerene corporation known as "PhosChem."  Our potash business unit mines and produces agricultural and industrial potash products for sale to farmers, fertilizer dealers and distributors, and industrial users for use primarilyin the southern and western regions of the United States.  The following is management's discussion and analysis of the financial condition and results of operations, which should be read in conjunction with our audited financial statements and relatednotes for the fiscal year ended June 30, 2000.

SEASONALITY.  Consistent with the historical nature of our business, the usage of fertilizer in our trade territory is highly seasonal, and our quarterly results reflect the fact that significantly more fertilizer is sold during the last four monthsof our fiscal year (March through June).  Since interim period operating results reflect the seasonal nature of our business, they may not necessarily be indicative of results expected for the full fiscal year.  In addition, quarterly results can varysignificantly from year to year due to a number of factors as detailed under "Forward Looking Statements" in this report.  We incur substantial expenditures for fixed costs and inventory throughout the year.

 
**RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2000**
OVERVIEW.  For the quarter ended March 31, 2001, we incurred a net loss of $495,000 (or $0.02 per diluted share) compared to a net loss of $5.2 million (or $0.20 per diluted share) for the same quarter during the prior year.  Net sales increased to$147.5 million for the quarter ended March 31, 2001, from $129.7 million for the quarter ended March 31, 2000.  We incurred operating income of $1.2 million for the quarter ended March 31, 2001, compared to an operating loss of $4.2 million for thequarter ended March 31, 2000.  Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the quarter ended March 31, 2001, were $18.1 million compared to $9.2 million for the quarter ended March 31, 2000.

NET SALES

The following tables summarize our sales results by product categories for the three months ended March 31:

  
 

2001
2000
%

Inc. (Dec.)
Net Sales (in thousands):    
   Nitrogen 
$101,246
$ 77,720
30% 
   DAP 
25,430
22,443
13% 
   Potash 
20,672
29,139
(29%)
   Other 
        164
        358
    (54%)     
       Net Sales 
$147,512
$129,660
     14% 
 

 

  
 

2001
2000
%

Inc. (Dec.)
Tons Sold (in thousands):    
   Nitrogen:    
       Ammonia 
238
299
(20%)
       Ammonium nitrate 
124
160
(23%)
       Urea 
86
125
(31%)
       Nitrogen solutions 
116
190
(39%)
       Nitric acid 
       19
        7
    171% 
            Total Nitrogen 
583
781
(25%)     
   DAP 
185
175
6% 
   Potash 
223
328
(32%)
 

 

  
 

2001
2000
%

Inc. (Dec.)
Average Sales Price Per Ton:    
   Nitrogen 
$     174
$       99
75% 
   DAP 
$     137
$     128
7% 
   Potash 
$       93
$       89
4%      
 

OVERVIEW.  Our net sales increased 14% to $147.5 million for the quarter ended March 31, 2001, from $129.7 million for the quarter ended March 31, 2000.  This increase was primarily the result of higher sales prices for our nitrogen products partiallyoffset by lower sales volumes for our nitrogen and potash products.

NITROGEN.  Our nitrogen sales increased 30% as a result of a 75% increase in average nitrogen sales prices, partially offset by a 25% decrease in nitrogen sales volumes.  Our ammonia sales prices increased 91% while sales volumes decreased 20%.  Thesignificant increase in sales prices reflects continued improvement in the global supply/demand balance.  From November 2000 through January 2001, unprecedented increases in the price of natural gas forced the U.S.  nitrogen industry to curtail domesticproduction.  We operated our domestic ammonia plants at approximately 56% of capacity during the quarter ended March 31, 2001.  Production curtailments in the industry have reduced the availability of world supply and have led to increased sales prices.The curtailment at our facilities, as well as a maintenance shutdown of our ammonia plant in Trinidad during the quarter ended March 31, 2001, reduced product available for sale.  These factors resulted in our purchase of approximately 150,000 tons ofammonia from third parties to meet customer commitments and to offset lost production.  In contrast, our ammonium nitrate sales prices increased only 30%, while our ammonium nitrate sales volumes decreased 23%.  Sales volumes for ammonium nitratedecreased as a result of wet weather conditions in our trade area during the quarter and carryforward of dealer inventory from heavy 2000 imports which negatively impacted prices.  Because of these market conditions, our ammonium nitrate operations ran atonly 83% of capacity during the quarter ended March 31, 2001.  Urea sales prices increased 61% and sales volumes decreased 31%.  Significantly improved market fundamentals increased the sales price for our urea products.  Sales volumes decreased primarilyas a result of less product available for sale due to market related production curtailments of urea at our Donaldsonville, Louisiana, facility.  During the quarter ended March 31, 2001, our prilled urea facilities operated at 51% of capacity, and ourFaustina, Louisiana, granular urea facility did not operate because IMC Phosphates Company curtailed production at its Faustina ammonia plant, which is our sole source of carbon dioxide required to make granular urea.  Nitrogen solutions sales pricesincreased 88%, while sales volumes decreased 39%.  Prices for nitrogen solutions were positively affected by improved market conditions, but sales volumes were lower as a result of wet weather conditions in our trade area during the quarter.  We rannitrogen solutions production at 91% of capacity during the quarter ended March 31, 2001.

PHOSPHATES.  In our phosphate business unit, DAP sales increased 13%.  A 7% increase in sales prices and a 6% increase in sales volumes contributed to the increase.  Although sales volumes increased, volumes were lower than anticipated due to a weakexport market and delayed domestic application of phosphate due to wet planting conditions in our trade area during the quarter.  As a result of these lower-than-anticipated sales volumes and increased production, we ended the quarter with higherinventory levels as compared to the quarter ended March 31, 2000.

POTASH.  In our potash business unit, sales decreased 29%.  A 32% decrease in sales volumes, partially offset by a 4% increase in sales prices, was the primary factor for this change.  Sales volumes were lower due to wet weather conditions in ourtrade area during the quarter.

 

COST OF PRODUCTS SOLD
****
OVERVIEW.  Our cost of products sold increased to $132.2 million for the quarter ended March 31, 2001, from $125.3 million for the quarter ended March 31, 2000.  As a percentage of net sales, cost of products sold decreased to 90% for the quarterended March 31, 2001, from 97% for the quarter ended March 31, 2000.  This decrease is primarily the result of higher nitrogen sales prices partially offset by higher nitrogen costs per ton.  Our corporate average natural gas price increased 94% ascompared to the prior year quarter.

NITROGEN.  Our nitrogen costs per ton increased 49% primarily as a result of higher natural gas costs at our domestic production facilities.  The average price of natural gas, net of futures gains and losses, at our domestic nitrogen productionfacilities increased approximately 89% to $5.08 per MMBTU.  We also had additional costs related to the purchase of approximately 150,000 tons of ammonia from third parties, higher per-ton fixed costs at our domestic facilities as a result of reducedoperating rates, and lower equity earnings from our joint venture ammonia plant in Trinidad, Farmland MissChem Limited ("Farmland MissChem").  During the quarter ended March 31, 2001, Farmland MissChem incurred higher gas cost because its gas contractties the price of natural gas to the market price of ammonia, which increased on average during the quarter.  Additionally, Farmland MissChem's sales prices during the quarter were below market as a result of its product offtake agreements with us and ourjoint venturer, Farmland Industries, Inc.  The agreements require Farmland MissChem to make sales at prices lower than market to recover amounts paid in excess of market price in previous periods.  

PHOSPHATES.  Our DAP costs per ton increased 5%, primarily the result of higher raw material costs for ammonia.

POTASH.  Our potash costs per ton increased 20%, primarily the result of higher than normal  natural gas and electricity costs.

 

SELLING, GENERAL AND ADMINISTRATIVE

Our selling, general and administrative expenses decreased to $7.5 million for the quarter ended March 31, 2001, from $8.4 million for the quarter ended March 31, 2000.  This decrease was primarily the result of lower labor costs due to an earlyretirement program and reduction in workforce.  As a percentage of net sales, selling, general and administrative expenses decreased to 5%, from 6%.

 

OTHER OPERATING EXPENSES

Our other operating expenses increased to $6.6 million for the quarter ended March 31, 2001, from $101,000 for the quarter ended March 31, 2000.  This increase is the result of higher idle plant costs at our nitrogen facilities.  Portions of ourammonia, urea and nitric acid production capacities were idled for various periods primarily due to the unfavorable relationship between product prices and natural gas prices and, to a lesser extent, miscellaneous mechanical problems.  Our granular ureaproduction at our Faustina, Louisiana, facility was idled during the entire quarter because IMC Phosphates Company curtailed production at its Faustina ammonia plant, which is our sole source for the carbon dioxide required to make granular urea. 

 

INTEREST, NET

Our net interest expense for the quarter ended March 31, 2001, did not change significantly from the quarter ended March 31, 2000.

 

OTHER INCOME

Other income increased to $5.5 million from $1.7 million, primarily as a result of gains on the sale of non-core assets, consisting primarily of real estate.

 

INCOME TAX EXPENSE (BENEFIT)

For the quarter ended March 31, 2001, we recorded income tax expense of $120,000.  This expense was primarily the result of our nondeductible goodwill amortization more than offsetting our net loss for the quarter.

 
**RESULTS OF OPERATIONS - NINE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE NINE MONTHS ENDED MARCH 31, 2000

OVERVIEW.  For the nine-month period ended March 31, 2001, we incurred a net loss of $22.0 million (or $0.84 per diluted share) compared to a net loss of $20.8 million (or $0.79 per diluted share) for the nine-month period ended March 31,2000.  Net sales increased to $403.9 million for the nine-month period ended March 31, 2001, from $334.0 million for the nine-month period ended March 31, 2000.  We incurred an operating loss of $22.6 million for the nine-month period ended March 31,2001, compared to an operating loss of $22.4 million for the nine-month period ended March 31, 2000.  Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the nine-month period ended March 31, 2001, was $20.4 million, compared to$15.6 million for the nine-month period ended March 31, 2000.

 

NET SALES

The following tables summarize our sales results by product categories for the nine-month period ended March 31:

  
 

2001
2000
%

Inc. (Dec.)
Net Sales (in thousands):    
   Nitrogen 
$270,513
$185,113
46% 
   DAP 
77,366
77,757
(1%)
   Potash 
54,807
70,255
(22%)
   Other 
     1,194
        845
    41%      
       Net Sales 
$403,880
$333,970
    21% 
  
 

 

 

2001
 

 

2000
 

%

Inc. (Dec.)
Tons Sold (in thousands):    
   Nitrogen:    
       Ammonia 
672
679
(1%)
       Ammonium nitrate 
432
479
(10%)
       Urea 
382
387
(1%)
       Nitrogen solutions 
270
451
(40%)
       Nitric acid 
       46
       33
     39% 
            Total Nitrogen 
1,802
2,029
(11%)     
   DAP 
571
558
2% 
   Potash 
603
800
(25%)
 

 

  
 

2001
2000
%

Inc. (Dec.)
Average Sales Price Per Ton:    
   Nitrogen 
$       150
$       91
65% 
   DAP 
$       136
$     139
(3%)
   Potash 
$         91
$       88
4% 
 

OVERVIEW.  For the nine-month period ended March 31, 2001, our net sales increased 21% to $403.9 million, from $334.0 million for the nine-month period ended March 31, 2000.  This increase was primarily the result of higher sales prices for ournitrogen products partially offset by lower sales volumes for our nitrogen and potash products.

NITROGEN.  During the nine-month period ended March 31, 2001, nitrogen sales increased 46% as compared to the nine-month period ended March 31, 2000.  This increase was the result of a 65% increase in nitrogen sales prices partially offset by an 11%decrease in nitrogen sales volumes.  The average sales price for ammonia, ammonium nitrate, urea and nitrogen solutions increased 69%, 27%, 64% and 84%, respectively.  Industry-wide production curtailments due to unprecedented increases in natural gasprices during our 2001 fiscal year, and improvement in the global supply/demand balance over the entire period, have caused nitrogen prices to increase.  As shown, ammonium nitrate did not benefit as much from the supply/demand balance primarily becauseof heavy Ukrainian imports during calendar 2000.  Nitrogen sales volumes decreased 11%, primarily the result of wet weather conditions during the quarter ended March 31, 2001.

PHOSPHATES.  During the nine-month period ended March 31, 2001, our DAP sales decreased 1%.  This decrease was the result of a 3% decrease in sales prices partially offset by a 2% increase in sales volumes.  Sales prices decreased as a result of morethan sufficient quantities of product in the world marketplace.

POTASH.  Our potash sales decreased 22% during the nine-month period ended March 31, 2001.  This decrease was the result of a 25% decrease in sales volumes partially offset by a 4% increase in sales prices.  Sales volumes were lower due to reducedexport volumes and wet weather conditions in our trade area.

 

COST OF PRODUCTS SOLD

OVERVIEW.  Our cost of products sold increased to $389.9 million, from $328.4 million.  As a percentage of net sales, cost of products sold decreased to 97%, from 98%.  Cost of products sold decreased as a percentage of net sales primarily as a resultof higher sales prices for our nitrogen products partially offset by higher costs per ton for our nitrogen products.  Our corporate average natural gas price increased 74% during the nine-month period ended March 31, 2001.

NITROGEN.  Our nitrogen costs per ton increased 50% primarily as a result of higher natural gas costs at our domestic production facilities.  The average price of natural gas at these facilities increased 71%.  We also had additional costs related tothird party purchases of ammonia, higher per-ton fixed costs at our domestic facilities as a result of reduced operating rates and lower equity earnings from Farmland MissChem. During the nine-month period ended March 31, 2001, Farmland MissChem had lowerearnings primarily because it received $3.4 million in insurance proceeds in the prior fiscal year for a business interruption claim arising from downtime that occurred in March and April of 1999.  Our portion of the earnings from Farmland MissChem was$4.4 million for the nine-month period ended March 31, 2001, as compared to $7.5 million, without the business interruption claim, in the prior fiscal year.  During the nine-month period ended March 31, 2001, Farmland MissChem incurred higher gas costbecause its gas contract ties the price of natural gas to the market price of ammonia, which increased on average during fiscal 2001.  Additionally, Farmland MissChem's sales prices during fiscal 2001 were below market as a result of its product offtakeagreements with us and our joint venturer, Farmland Industries, Inc.  The agreements require Farmland MissChem to make sales at prices lower than market to recover amounts paid in excess of market price in previous periods.

PHOSPHATES.  Our DAP costs per ton increased 4%, primarily the result of higher raw material costs for ammonia.

POTASH.  Potash costs per ton increased 15% for the nine-month period ended March 31, 2001.  This increase was primarily the result of higher than normal natural gas and electricity costs.

 

SELLING, GENERAL AND ADMINISTRATIVE

Our selling, general and administrative expenses decreased to $23.5 million, from $25.3 million.  This decrease was primarily the result of lower labor costs.  These lower costs were partially offset by costs incurred related to an early retirementprogram and severance costs related to a reduction in force.  During the nine-month period ended March 31, 2000, we incurred costs related to the reorganization of our sales, marketing and distribution division.  As a percentage of net sales, selling,general and administrative expenses decreased to 6%, from 8%.

 

OTHER OPERATING EXPENSES

Our other operating expenses increased to $13.0 million, from $2.7 million.  This increase is the result of higher idle plant costs at our nitrogen facilities.  Portions of our ammonia, urea and nitric acid production capacities were idled for variousperiods primarily due to the unfavorable relationship between product prices and natural gas prices and, to a lesser extent, miscellaneous mechanical problems.  In August and September of fiscal 2000, our Donaldsonville, Louisiana, facility had idle plantcosts due to our No. 2 ammonia plant being idled.  During the nine months ended March 31, 2001, we idled granular urea production at our Faustina, Louisiana, facility for various periods because IMC Phosphates Company curtailed production at its Faustinaammonia plant, which is our sole source for the carbon dioxide required to make granular urea.

 

INTEREST, NET

Our net interest expense increased to $21.3 million from $19.8 million.  This increase was primarily the result of higher average interest rates paid under our revolving credit facility.

 

OTHER INCOME

Other income increased to $7.8 million from $3.0 million.  This increase was primarily the result of gains on the sale of non-core assets consisting primarily of real estate.

 

INCOME TAX BENEFIT

Our income tax benefit decreased to $14.0 million from $18.4 million.  These income tax benefits are the result of our net losses.  For the nine-month period ended March 31, 2000, we also recorded a one-time benefit in the amount of $2.0 millionrelated to settlement agreements made with the Internal Revenue Service for fiscal years 1994, 1995 and 1996.

 

 
**LIQUIDITY AND CAPITAL RESOURCES**
At March 31, 2001, we had cash and cash equivalents of $929,000, compared to $2.2 million at June 30, 2000, a decrease of approximately $1.3 million.

 

OPERATING ACTIVITIES

For the nine-month period ended March 31, 2001, our net cash used in operating activities was $32.4 million compared to $22.9 million for the nine-month period ended March 31, 2000.

 

INVESTING ACTIVITIES

Our net cash provided by investing activities was $2.3 million for the nine-month period ended March 31, 2001, and included $15.6 million in proceeds from the sale of non-core assets.  These proceeds were partially offset by $14.0 million in capitalexpenditures that were for normal improvements and modifications to our facilities.  Our net cash used in investing activities was $7.3 million for the nine-month period ended March 31, 2000, and included capital expenditures of $15.7 million.

 

FINANCING ACTIVITIES

Our net cash provided by financing activities was $28.8 million for the nine-month period ended March 31, 2001, and included net debt proceeds of $29.6 million and $784,000 in cash dividends.  Our net cash provided by financing activities was $30.3million for the nine-month period ended March 31, 2000, and included net debt proceeds of $34.4 million partially offset by $4.2 million in cash dividends.

In August 1997, we issued $14.5 million in industrial revenue bonds, a portion of which were tax-exempt, to finance the development of our new phosphogypsum disposal facility at our Pascagoula, Mississippi, DAP manufacturing plant.  On April 1, 1998,we issued $14.5 million in fully tax-exempt industrial revenue bonds (the "1998 IRBs"), the proceeds of which were used to redeem the initial industrial revenue bonds issued in August 1997.  The 1998 IRBs mature on March 1, 2022, and carry a 5.8% fixedrate.  The IRBs may be redeemed at our option at a premium from March 1, 2008, to February 28, 2010, and may be redeemed at face value at any time after February 28, 2010, through the maturity date.

On November 25, 1997, we issued $200.0 million of 7.25% Senior Notes (the "Senior Notes") due November 15, 2017.  The holders may elect to have the Notes repaid on November 15, 2007.  The Senior Notes were issued under a $300.0 million shelfregistration statement filed with the Securities and Exchange Commission in November 1997.

We have a secured revolving credit facility (the "Facility") with Harris Trust and Savings Bank and a syndicate of other commercial banks totaling $200.0 million.  The Facility matures on November 25, 2002, and bears interest at rates related to thePrime Rate, the London Interbank Offered rate or Federal Funds Rate.  At March 31, 2001, we had letters of credit outstanding in the amount of $10.4 million that lowers our availability under the Facility, and we had borrowings outstanding in the amountof $145.8 million.  We had $43.8 million available under the Facility at March 31, 2001.  The facility contains covenants that prohibit us from exceeding a threshold ratio of debt to total capital and require us to maintain a minimum level of tangible networth.  In addition, we have covenants that require minimum levels of interest coverage and restrict dividends if such interest coverages are not met.  During the quarter ended September 30, 2000, we discontinued our normal quarterly dividends.  Amountsoutstanding under the Facility are subject to a requirement that the total amount outstanding under the Facility not exceed a certain asset value calculation.  The facility also prohibits the repurchase of our outstanding shares, and establishes maximumlevels of capital expenditures by year.  We were in compliance with all covenants at March 31, 2001.  The Facility lenders have security interests in substantially all of our assets, as allowed by the Indenture governing the Senior Notes.  Because of thecurrent volatility of natural gas and product prices, it is possible that certain covenants will not be met in the future.  Although there can be no assurances, we believe that we would be able to negotiate an amendment or waiver with our lenders.

Based on natural gas market prices as of the date of this filing, and our current hedge positions, we believe that our existing cash, cash generated from operations and available credit facilities will be sufficient to satisfy our financingrequirements for operations and capital projects through fiscal 2001.  There has been unprecedented volatility in natural gas prices since late spring 2000 with our corporate natural gas costs increasing 94% in the third quarter of our 2001 fiscal yearover the third quarter of our 2000 fiscal year.  Although natural gas prices have decreased since December, they remain volatile.  If they remain at these levels, or increase without corresponding increases in the market prices for our products, ournatural gas costs will have a material adverse impact on our liquidity.  We estimate our capital expenditure requirements for the remainder of fiscal 2001 to be approximately $6 million, which includes normal improvements and modifications to our facilities .

 
**OUTLOOK**
We believe that our nitrogen segment will continue to benefit in the near-term from the improved supply/demand outlook resulting from U.S. industry production curtailments and permanent shutdowns during fiscal 2001 and anticipated additional industrycurtailments in fiscal 2002.  In addition, we expect world nitrogen demand growth to exceed supply growth in the long-term as a result of projected population growth and fewer new production facilities announced to come online in the next four years.However, to maximize results in the current environment, we continue to determine operating levels for our plants based on our commitments to customers and the relationship between nitrogen product prices and natural gas prices.  Although we experienced alate spring selling season due to weather conditions, as the season continues, we anticipate moving some sales volumes from the third fiscal quarter to the fourth fiscal quarter.  Weather and final planting decisions by farmers will determine how muchvolume is recovered.  These factors will continue to be a major determinant of whether our nitrogen facilities will operate at reduced rates or at all.    Extraordinarily high natural gas prices and the seasonal nature of our business will continue tomake the spring season challenging.  While natural gas prices have come down since the end of December, they remain volatile.  If current natural gas prices remain high or increase, it will have a material adverse impact on our performance if productprices do not experience corresponding increases.  Nitrogen prices have softened since the end of our third fiscal quarter, and we expect this trend to continue through the summer; however, we do not anticipate that nitrogen prices will reach the lowlevels seen during fiscal 2000.

We anticipate that DAP sales prices and weak international markets will continue in the near-term to adversely affect our phosphate segment's financial results.  International markets have recently been impacted by China's anticipated reduction inimport quantities for calendar 2001.  In addition, low agricultural commodity prices may affect domestic phosphate applications this spring.  We continue to evaluate market conditions to determine what production adjustments are necessary to manageinventory levels.  Finally, we believe domestic potash demand will remain firm in the near-term; however, the performance of our potash segment will depend on energy costs, maintaining improved ore grades, and the impact of anticipated low agriculturalcommodity prices on domestic potash applications this spring.  Other variables can affect our results of operations as stated elsewhere in the discussion under the headings titled "Results of Operations" and "Forward Looking Statements."
** 

FORWARD LOOKING STATEMENTS**
Except for the historical statements and discussion contained herein, statements set forth in this report constitute "forward-looking statements."  Since these forward-looking statements rely on a number of assumptions concerning future events, risksand other uncertainties that are beyond our ability to control, readers are cautioned that actual results may differ materially from such forward-looking statements.  Future events, risks and uncertainties that could cause a material difference in suchresults include, but are not limited to, (i) changes in matters which affect the global supply and demand of fertilizer products, (ii) the volatility of the natural gas market, (iii) a variety of conditions in the agricultural industry such as grainprices, planted acreage, projected grain stock, U.S. government policies, weather, and changes in agricultural production methods, (iv) possible unscheduled plant outages and other operating difficulties, (v) price competition and capacity expansions andreductions from both domestic and international competitors, (vi) foreign government agricultural policies (in particular, the policies of the governments of India and China regarding fertilizer imports), (vii) the relative unpredictability ofinternational and local economic conditions, (viii) the relative value of the U.S. dollar, (ix) environmental regulations, and (x) other important factors affecting the fertilizer industry and us as detailed under "Outlook and Uncertainties" and elsewherein our most recent Annual Report on 

Form 10-K which is on file with the Securities and Exchange Commission.
**Item 3.  Quantitative and Qualitative Disclosure About Market Risk.**
We are exposed to market risk, including changes in natural gas prices and interest rates.  For more information about how we manage specific risk exposures, see Note 12 - Hedging Activities, and Note 5 - Credit Agreements and Long-Term Debt, in ourNotes to Consolidated Financial Statements contained in our most recent Annual Report on Form 10-K.  

To manage our natural gas price risks, we enter into derivative transactions, primarily in the near-term market, as the opportunity arises.  These derivative transactions may consist of futures contracts, commodity swaps, or similar derivativefinancial instruments related to the price of natural gas.  We do not hold or issue derivative financial instruments for trading purposes.  We maintain formal policies with respect to entering into and monitoring derivative transactions.  Our derivativetransactions are intended to hedge our future natural gas costs.  The volume of natural gas hedged varies from time to time based on management's judgment of market conditions, particularly natural gas prices and product prices.  

We prepared a sensitivity analysis to estimate our market risk exposure arising from our open natural gas derivative instruments.  At March 31, 2001, the fair value of open positions was calculated by valuing each position using quoted market priceson the New York Mercantile Exchange ("NYMEX").  We define market risk as the potential loss in fair value as a result of a 10% adverse change in market prices of our open natural gas derivative instruments.  We estimate that this adverse change in priceswould have reduced the fair value of our open positions by $3.3 million at March 31, 2001.

Based on estimated trading price information from an independent market-maker for our Senior Notes, we believe the fair value of our Senior Notes at March 31, 2001, had decreased significantly from their fair value at June 30, 2000.  However, since weare unaware of any actual trades at or near the relevant dates, there can be no assurance as to the extent of any decrease in the fair value of our Senior Notes.  The estimated fair value for our 1998 IRBs was computed using the effective yield on stateand local bonds as quoted by the Federal Reserve.  At March 31, 2001, we believe the fair value of our 1998 IRBs had increased slightly from their fair value at June 30, 2000.

 
**PART II.  OTHER INFORMATION**
Item 6.
Exhibits and Reports on Form 8-K.   
(a)   Exhibits.   
        See Index of Exhibits on page 32.     
(b)   Reports on Form 8-K.   
        No reports on Form 8-K have been filed during the quarter for which this 

        report is filed.  
 

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
MISSISSIPPI CHEMICAL CORPORATION    
Date:    May 10, 2001

        ---------------------------
/s/ Timothy A. Dawson

----------------------------- 
Timothy A. Dawson 
Senior Vice President and CFO 
(Principal Financial Officer and 
  Chief Accounting Officer)
 
**INDEX OF EXHIBITS

 ****EXHIBIT NUMBER**DESCRIPTION**PAGE NO.   
3.1
Articles of Incorporation of the Company; filed as Exhibit 3.1 to the Company's Amendment No. 1 to Form S-1 Registration Statement filed August 2, 1994, SEC File No. 33-53119, and incorporated herein by reference.

*
3.2
Bylaws of the Company; filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997, SEC File No. 0-20411, and incorporated herein by reference.

*
4.1
Shareholder Rights Plan; filed as Exhibit 1 to the Company's Form 8-A Registration Statement dated August 15, 1994, SEC File No. 2-7803, and incorporated herein by reference.

*
4.2
Indenture dated as of November 25, 1997, between the Company and Harris Trust and Savings Bank, as Trustee, for the issuance of up to $300 million of debt securities; filed as Exhibit 4(a) to the Company's Current Report on Form 8-K filedNovember 25, 1997, SEC File No. 001-12217, and incorporated herein by reference.

*
4.3
Indenture of Trust dated as of March 1, 1998, between Mississippi Business Finance Corporation and Deposit Guaranty National Bank, for the issuance of bonds in the aggregate principal amount of $14.5 million to assist the Company in financing andrefinancing the cost of construction and equipping of solid waste disposal facilities at its Pascagoula, Mississippi, facility; filed as Exhibit 4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, SEC FileNo. 0-20411, and incorporated herein by reference.

*
10.1
Agreement made and entered into as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscalyear ended June 30, 1991, File No. 2-7803, and incorporated herein by reference.

*
 
**EXHIBIT NUMBER**DESCRIPTION**PAGE NO.   
10.2
Amendment No. 1, effective as of July 1, 1992, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.12 to theCompany's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference.

*
10.3
Amendment No. 2, effective as of July 1, 1993, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.11 to theCompany's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference.

*
10.4
Amendment No. 3, effective as of January 1, 1995, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.10 tothe Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference.

*
10.5
Amendment No. 4, effective as of January 1, 1997, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.8 to theCompany's Annual Report on Form 10-K for the fiscal year ended June 30, 1997, SEC File No. 0-20411, and incorporated herein by reference.

***EXHIBIT NUMBER**DESCRIPTION**PAGE NO.   
10.6
Amendment No. 5, effective as of July 1, 2000, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock.

32
10.7
Credit Agreement dated as of November 25, 1997, among the Company; the Lenders Party Thereto; Harris Trust and Savings Bank, as Administrative Agent; Bank of Montreal, Chicago Branch, as Syndication Agent; and Credit Agricole Indosuez, as Co-Agent,establishing the Company's $200 million revolving line of credit; filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, SEC File No. 0-20411, and incorporated herein by reference.

*
10.8
First Amendment, effective as of June 10, 1999, to Credit Agreement dated as of November 25, 1997, among the Company; the Lenders Party Thereto; Harris Trust and Savings Bank, as Administrative Agent; Bank of Montreal, Chicago Branch, asSyndication Agent; and Credit Agricole Indosuez, as Co-Agent, establishing the Company's $200 million revolving line of credit; filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999.

*
10.9
Second Amendment, effective as of September 17, 1999, to Credit Agreement dated as of November 25, 1997, among the Company, the Lenders Party Thereto; Harris Trust and Savings Bank, as Administrative Agent; Bank of Montreal, Chicago Branch,as Syndication Agent; and Credit Agricole Indosuez, as Co-Agent, establishing the Company's $200 million revolving line of credit, filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,1999, SEC File No. 001-12217, and incorporated herein by reference.

*
 
**EXHIBIT NUMBER**DESCRIPTION**PAGE NO.   
10.10
Third Amendment, effective as of February 24, 2000, to Credit Agreement dated as of November 25, 1997, among the Company, the Lenders Party Thereto; Harris Trust and Savings Bank, as Administrative Agent; Bank of Montreal, Chicago Branch, asSyndication Agent; and Credit Agricole Indosuez, as Co-Agent, establishing the Company's $200 million revolving line of credit, filed as Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000,SEC File No. 001-12217, and incorporated herein by reference.

*
10.11
Form of Severance Agreement dated July 29, 1996, by and between the Company and each of its Executive Officers; filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996, SEC File No. 2-7803, andincorporated herein by reference.

*
10.12
Mississippi Chemical Corporation Officer and Key Employee Incentive Plan; filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, SEC File No. 0-20411, and incorporated herein byreference.

*
10.13
Mississippi Chemical Corporation Executive Deferred Compensation Plan; filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, SEC File No. 0-20411, and incorporated herein byreference.

*
10.14
Mississippi Chemical Corporation Executive Deferred Compensation Plan, as amended and restated, effective January 1, 2000; filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31,1999, SEC File No. 001-12217, and incorporated herein by reference.

*
10.15
Mississippi Chemical Corporation Nonemployee Directors' Deferred Compensation Plan; filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, SEC File No. 0-20411, and incorporatedherein by reference.

***EXHIBIT NUMBER**DESCRIPTION**PAGE NO.   
10.16
Mississippi Chemical Corporation Supplemental Benefit Plan, as amended and restated as of July 1, 1996; filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, SEC File No. 0-20411, andincorporated herein by reference.

*
10.17
Mississippi Chemical Corporation 1994 Stock Incentive Plan; filed as Exhibit 4.2 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by reference.
****
*
10.18
Mississippi Chemical Corporation 1995 Stock Option Plan for Nonemployee Directors; filed as Exhibit 4.3 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by reference.
****
*
10.19
Mississippi Chemical Corporation Amended and Restated 1995 Stock Option Plan for Nonemployee Directors effective November 7, 2000; filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31,1999, SEC File No. 001-12217, and as Exhibit 4.2 to the Company's Form S-8 Registration Statement filed March 8, 2001, SEC File No. 333-56726, and incorporated herein by reference.

*
10.20
Mississippi Chemical Corporation 1995 Restricted Stock Purchase Plan for Nonemployee Directors; filed as Exhibit 4.4 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporatedherein by reference.

*
* Incorporated by reference.

 

 

EXHIBIT 1.6

AMENDMENT NO. 5 DATED FEBRUARY 6TH, 2001

TO THE AGREEMENT BETWEEN OCP AND MPC

DATED SEPTEMBER 15TH, 1991

          This Amendment No. 5 of Agreement is effective as of July 1st, 2000, between:

 

OFFICE CHERIFIEN DES PHOSPHATES ("OCP")

ANGLE ROUTE D'EL JADIDA ET BD DE

LA GRANDE CEINTURE - CASABLANCA

MOROCCO

                                                                                                           on the one part,

                                                                                                           ------------------

and:

---

 

MISSISSIPPI PHOSPHATES CORPORATION (MPC)

P.O. BOX 848

PASCAGOULA, MISSISSIPPI, USA 39568-0848

                                                                                                          on the other part.

                                                                                                          --------------------

 

W I T N E S S E T H

 

          WHEREAS, OCP and MPC are parties to that certain Agreement with an Effective Date of September 15, 1991, for the sale and purchase of all MPC's requirements of phosphate rock at its Pascagoula Plant ("Agreement"); and

          WHEREAS, the Agreement has been amended by Amendment No. 1 effective as of 

July 1st, 1992, Amendment No. 2 effective as of July 1st, 1993, Amendment No. 3 effective as of January 1st, 1995, and Amendment No. 4 effective as of January 1st, 1997; and

          WHEREAS, OCP and MPC desire to amend the Agreement as hereinafter set forth;

          NOW, THEREFORE, OCP and MPC hereby agree as follows:

          1.       Article IV of the Agreement is hereby further amended by changing

          the second, third, fourth and fifth sentences of the definition of "Sales,

              General and Administrative Expense" to read in their entirety as follows:

                  Subject to the adjustments hereafter described, expenses shall 

                  include an annual payment of two million and 00/100 dollars 

                  ($2,000,00.00) to MCC for certain services to be provided by 

                  MCC to MPC.  The annual payment by MPC to MCC for services 

                  shall be reduced by two million and 00/100 dollars ($2,000,000.00) 

                  with respect to the Contract Year commencing on July 1, 2000.  

                  Thereafter, with respect to subsequent Contract Year(s), the annual 

                   payment(s) may be increased by amounts not exceeding two million 

                   and 00/100 dollars ($2,000,000.00) in the aggregate.  Payment of 

                   any such increases in the annual payment(s) to MCC for services 

                   and payments to OCP of the "Deferred Portion" (as defined in 

                   Addendum No. 1 to Sale Contract Addendum No. 10) shall be 

                   made in the same amounts and at the same time.

          2.       Except as specifically set forth in this Amendment, all of theterms

          and conditions of the Agreement shall continue in full force andeffect. 

          3.       All capitalized terms used in this Amendment and not otherwise

          defined herein shall have the meanings set forth in the Agreement.

          IN WITNESS WHEREOF, OCP and MPC have caused this Amendment to be duly

executed as of the 6 day of February, 2001.

 

MISSISSIPPI PHOSPHATES CORPORATION     OFFICE CHERIFIEN DES  

                                                                                PHOSPHATES

By: /s/ Robert E. Jones                                            By: /s/ Mohamed Berrada

     -------------------------------                                                 ----------------------------

           Robert E. Jones                                                                                Mohamed Berrada

           Sr. Vice President                                                                         Director General

     Corporate Development********************************