-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D1Labm9WuGgsUrzuTHDk6tLo8lCa8CL9aANRRg/F1N0onOm0PJHEFANy39dKijzr xkv7UFDeJ93jfIxO3L5SLg== 0000950134-96-005057.txt : 19960926 0000950134-96-005057.hdr.sgml : 19960926 ACCESSION NUMBER: 0000950134-96-005057 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960925 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960925 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSISSIPPI CHEMICAL CORP /MS/ CENTRAL INDEX KEY: 0000066895 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 640292638 STATE OF INCORPORATION: MS FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12217 FILM NUMBER: 96634508 BUSINESS ADDRESS: STREET 1: HIGHWAY 49 EAST CITY: YAZOO CITY STATE: MS ZIP: 39194 BUSINESS PHONE: 6017464131 MAIL ADDRESS: STREET 1: P O BOX 388 CITY: YAZOO CITY STATE: MS ZIP: 39194 FORMER COMPANY: FORMER CONFORMED NAME: MISSISSIPPI CHEMICAL CORP DATE OF NAME CHANGE: 19920703 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): September 25, 1996 (August 16, 1996) Mississippi Chemical Corporation ------------------------------------------------------ (Exact name of registrant as specified in its charter) Mississippi 2-7803 64-0292638 ----------------- ------------ ---------------- (State or other (Commission (IRS employer jurisdiction of file number) identification no.) incorporation) P.O. Box 388, Yazoo City, Mississippi 39194 --------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 601-746-4131 Page 1 of 36 sequentially numbered pages. Index to exhibits is located on sequentially numbered page 5. 2 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS. (a) Financial Statements of Business Acquired. This item is amended to provide financial statements of each of Eddy Potash, Inc. and New Mexico Potash Corporation, which are filed as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K. (i) Eddy Potash, Inc. a. Audited Annual Financial Statements Independent Auditors' Report Balance Sheets as of December 31, 1995 and 1994 Statements of Operations and Retained Earnings for the years ended December 31, 1995 and 1994 Statements of Cash Flows for the years ended December 31, 1995 and 1994 Notes to Financial Statements b. Unaudited Interim Financial Statements Balance Sheet as of June 30, 1996 Statements of Income for the six months ended June 30, 1996 and 1995 Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (ii) New Mexico Potash Corporation a. Audited Annual Financial Statements Report of Independent Accountants Balance Sheet as of December 31, 1995 Statement of Income and Retained Earnings for the year ended December 31, 1995 2 3 Statement of Cash Flows for the year ended December 31, 1995 Notes to Financial Statements b. Unaudited Interim Financial Statements Balance Sheet as of June 30, 1996 Statements of Income for the six months ended June 30, 1996 and 1995 Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (b) Pro Forma Financial Information. This item is amended to provide the following unaudited pro forma condensed consolidated financial statements, which are filed as Exhibit 99.3 to this Current Report on Form 8-K. Pro Forma Condensed Balance Sheet as of June 30, 1996 Pro Forma Condensed Consolidated Statement of Income for the fiscal year ended June 30, 1996 Notes to Pro Forma Financial Statements (c) Exhibits. See "Index to Exhibits." 3 4 SIGNATURE 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 hereunto duly authorized. Mississippi Chemical Corporation Date: September 25, 1996 By: /s/ Robert E. Jones ------------------- Robert E. Jones Senior Vice President & General Counsel 4 5 INDEX TO EXHIBITS
Page Exhibit 2.1 Asset Purchase Agreement, dated as of May 21, 1996, by and among Mississippi Chemical Corporation, Mississippi Acquisition I, Inc., Mississippi Acquisition II, Inc., Eddy Potash, Inc. and New Mexico Potash Corporation. Filed as an Exhibit to the Current Report of the Company on Form 8-K dated September 3, 1996 and incorporated herein by reference. -- Exhibit 4.1 Loan Agreement, dated as of April 26, 1996, by and among Mississippi Chemical Corporation, Mississippi Phosphates Corporation, Mississippi Potash, Inc., and MCC Pipeline, Inc., the various banks and lending institutions on the signature pages hereto together with all assignees of such banks and lending institutions, NationsBank of Tennessee, N.A., as the Swingline Bank, and NationsBank of Tennessee, N.A. Filed as an Exhibit to the Current Report of the Company on Form 8-K dated September 3, 1996 and incorporated herein by reference. -- Exhibit 99.1 Financial Statements of Eddy Potash, Inc. Filed herewith. 6 Exhibit 99.2 Financial Statements of New Mexico Potash Corporation. Filed herewith. 17 Exhibit 99.3 Pro Forma Financial Information. Filed herewith. 31
5 EX-99.1 2 FINANCIAL STATEMENT OF EDDY POTASH 1 EXHIBIT 99.1 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Trans-Resources, Inc. New York, New York We have audited the accompanying balance sheets of Eddy Potash, Inc. (a wholly owned subsidiary of Trans-Resources, Inc.) (the "Company") as of December 31, 1995 and 1994, and the related statements of operations and retained earnings and of cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Eddy Potash, Inc. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Deloitte & Touche LLP March 15, 1996 1 2 EDDY POTASH, INC. (A WHOLLY OWNED SUBSIDIARY OF TRANS-RESOURCES, INC.) BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (IN THOUSANDS) - --------------------------------------------------------------------------------
ASSETS 1995 1994 CURRENT ASSETS: Cash and cash equivalents $ 51 Accounts receivable, less allowance for doubtful accounts of $171 in both 1995 and 1994 $ 2,261 1,861 Inventories - finished goods 3,636 5,064 Prepaid expenses 1,682 1,966 ------- ------- Total current assets 7,579 8,942 PROPERTY, PLANT AND EQUIPMENT - Net of accumulated depreciation and depletion of $22,018 and $21,344 in 1995 and 1994, respectively 4,342 3,859 DEFERRED TAXES 2,682 2,682 OTHER ASSETS 1,299 1,240 ------- ------- TOTAL $15,902 $16,723 ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable $ 1,450 $ 1,201 Accrued expenses and other current liabilities 2,646 2,765 Intercompany debt - net 173 892 ------- ------- Total current liabilities 4,269 4,858 LONG-TERM DEBT 1,257 STOCKHOLDER'S EQUITY: Additional paid-in capital 6,000 6,000 Retained earnings 4,376 5,865 ------- ------- Total stockholder's equity 10,376 11,865 ------- ------- TOTAL $15,902 $16,723 ======= =======
See notes to financial statements. 2 3 EDDY POTASH, INC. (A WHOLLY OWNED SUBSIDIARY OF TRANS-RESOURCES, INC.) STATEMENTS OF OPERATIONS AND RETAINED EARNINGS YEARS ENDED DECEMBER 31, 1995 AND 1994 (IN THOUSANDS) - --------------------------------------------------------------------------------
1995 1994 NET SALES $ 24,509 $ 31,324 OPERATING COSTS AND EXPENSES: Cost of products sold 23,666 32,565 Selling, general and administrative 1,445 1,923 -------- -------- Total operating costs and expenses 25,111 34,488 -------- -------- OPERATING LOSS (602) (3,164) INTEREST EXPENSE (30) (43) INTEREST INCOME 143 57 -------- -------- NET LOSS (489) (3,150) DIVIDENDS PAID TO PARENT (1,000) RETAINED EARNINGS AT JANUARY 1 5,865 9,015 -------- -------- RETAINED EARNINGS AT DECEMBER 31 $ 4,376 $ 5,865 ======== ========
See notes to financial statements. 3 4 EDDY POTASH, INC. (A WHOLLY OWNED SUBSIDIARY OF TRANS-RESOURCES, INC.) STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995 AND 1994 (IN THOUSANDS) - --------------------------------------------------------------------------------
1995 1994 OPERATING ACTIVITIES: Net loss $ (489) $(3,150) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and depletion 674 3,397 (Increase) decrease in accounts receivable (400) 1,400 Decrease in inventories 1,428 3,460 Decrease in prepaid expenses 284 53 (Increase) in other assets (59) (443) Increase (decrease) in accounts payable 249 (152) (Decrease) increase in accrued expenses and other current liabilities (119) 73 ------- ------- Net cash provided by operating activities 1,568 4,638 INVESTING ACTIVITIES - Additions to property, plant and equipment (1,157) (476) FINANCING ACTIVITIES: Proceeds from long-term debt 1,257 Decrease in intercompany debt (719) (4,304) Dividends paid to parent (1,000) ------- ------- Net cash used in financing activities (462) (4,304) ------- ------- NET DECREASE IN CASH AND CASH (51) (142) EQUIVALENTS CASH AND CASH EQUIVALENTS AT JANUARY 1 51 193 ------- ------- CASH AND CASH EQUIVALENTS AT DECEMBER 31 $NIL $ 51 ------- ------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid during the year for interest $ 30 $ 43
See notes to financial statements. 4 5 EDDY POTASH, INC. (A WHOLLY OWNED SUBSIDIARY OF TRANS-RESOURCES, INC.) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995 AND 1994 - -------------------------------------------------------------------------------- 1. DESCRIPTION OF THE COMPANY Eddy Potash, Inc. (the "Company") is a wholly owned subsidiary of Trans-Resources, Inc. ("TRI") and was organized on March 17, 1988 under the laws of the State of Delaware for the mining, refining and marketing of potash and its related products. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION - Revenue is recognized upon shipment of the Company's finished product. CASH AND CASH EQUIVALENTS - For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. INVENTORIES - Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated at cost. Depreciation is determined principally using the straight-line method over the estimated useful lives of the respective assets. Effective January 1, 1995, in order to give effect to the Company's estimate of the life of the mine and to more closely approximate the economic lives of such assets, the Company adjusted the remaining depreciable lives of all fixed assets from three years to ten years. The effect of this change in estimate was to decrease depreciation expense in 1995 by $2,834,000. Depletion of mineral reserves is determined using the unit-of-production method based on estimated proved developed mineral reserves. Maintenance, repairs and minor renewals are charged to operations as incurred. Major renewals and betterments are capitalized. 5 6 INCOME TAXES - The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109. Under SFAS No. 109, the amounts provided for income taxes are based on the amounts of current and deferred taxes payable or refundable at the date of the financial statements as a result of all events recognized in the financial statements as measured by the provisions of enacted tax laws. Deferred tax charges on the balance sheets primarily result from excess cumulative book depreciation over tax depreciation and accrued expenses not deductible for tax purposes. RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform to the manner of presentation in the current year. 3. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following:
1995 1994 (IN THOUSANDS) Land $ 46 $ 46 Building and improvements 5,750 5,537 Machinery and equipment 18,335 17,401 Furniture and fixtures 299 289 Mineral reserves 1,778 1,778 Water rights 152 152 ------- ------- Total 26,360 25,203 Less accumulated depreciation and depletion 22,018 21,344 ------- ------- Property, plant and equipment - net $ 4,342 $ 3,859 ======= =======
The Company leases mineral rights from the Federal government, the State of New Mexico and various private enterprises for a nominal fixed amount plus contingent rentals based upon potash sales from the various leases. The Company expensed approximately $181,000 and $860,000 related to these mineral leases during the years ended December 31, 1995 and 1994, respectively. As of December 31, 1995 based on current rates of production and depending on future market conditions and production costs, the Company's ore reserves are estimated to be sufficient to support mining operations for at least 14 years. 6 7 4. INTERCOMPANY DEBT Intercompany debt consists of the following:
1995 1994 (IN THOUSANDS) Federal income taxes payable to TRI $ 878 $ 878 Advances due to TRI 14 Accounts payable - Cedar Chemical Corporation ("Cedar"), a wholly-owned subsidiary of TRI 7 Accounts payable - New Mexico Potash Corporation, a wholly-owned subsidiary of Cedar 15 Accounts receivable - Vicksburg Chemical ("Vicksburg"), a subsidiary of Cedar (727) ----- ----- Total $ 173 $ 892 ===== =====
The Company pays Cedar a management fee to reimburse Cedar for costs incurred by Cedar on behalf of the Company related to marketing and financial services. The Company has recorded a management fee of approximately $687,000 and $1,175,000 for the years ended December 31, 1995 and 1994, respectively. The Company had sales to Vicksburg of $1,214,000 in 1995. 5. LONG-TERM DEBT The Company entered into a long-term credit agreement on October 13, 1995, as amended, which provides a revolving credit loan up to $3,000,000, including a $1,500,000 letter of credit facility, through October 13, 1998. The annual interest rate on all borrowings is equal to the published 30 day dealer placed commercial paper rate plus 3% per annum, which was 8.8% at December 31, 1995. Borrowings against the revolving credit loan totaled $1,257,000 at December 31, 1995, and were collateralized by substantially all assets of the Company. The credit agreement requires certain financial covenants relating to minimum earnings, tangible net worth, fixed charge coverage ratios and maximum capital expenditure amounts. 6. EMPLOYEE AND RETIREE BENEFITS The Company sponsors an employee 401(k) plan covering substantially all of its employees. The Company makes contributions equal to 25% of the contributions made by the employees, not to exceed 2% of applicable employees' earnings in any year. An additional contribution of 1% of applicable employees' earnings is also required. The 7 8 Company has recorded approximately $184,000 and $199,000 of expenses for employer contributions for the years ended December 31, 1995 and 1994, respectively. A severance pay plan was established effective July 1, 1991 to provide for severance pay to all employees who are still working for the Company when it ceases operations. The Company recorded an expense of $308,000 in 1994 and none in 1995 for this plan. The Company has transferred all funds related to the severance pay plan into a trust fund held by a bank. The fair market value of the assets in this trust fund is $1,009,000 and $944,000 at December 31, 1995 and 1994, respectively. 7. MAJOR CUSTOMERS During the years ended December 31, 1995 and 1994, one major customer accounted for 21% and 19%, respectively, of the Company's total revenues. Another customer during 1995 and 1994 accounted for 10% and 14%, respectively, of total revenues. No other customer contributed more than 10% of the Company's total revenues in 1995 or 1994. 8. INCOME TAXES The provision for income taxes in 1995 and 1994 represent effective tax rates of 0.0% for both years. These amounts differ from the amounts of $(171,000) and $(1,102,000), respectively, computed by applying the statutory Federal income tax rates to loss before income taxes. The reasons for such variances were as follows:
1995 1994 ------------------- ------------------- AMOUNT PERCENT AMOUNT PERCENT (IN THOUSANDS) (IN THOUSANDS) Statutory Federal rate $ (171) (35.0)% $(1,102) (35.0)% Increase (decrease) in income tax rate resulting from: Increase (decrease) in valuation allowance (192) (39.3)% 720 22.9% State income taxes - net (63) (2.1)% Unrecognized tax loss carryforwards 363 74.3% 445 14.2% ------- ------ ------- ------ Total $ 0 0.0% $ 0 0.0% ======= ====== ======= ======
8 9 The tax effects of significant items comprising the Company's deferred tax asset as of December 31, 1995 and 1994 are as follows:
1995 1994 (IN THOUSANDS) Cumulative book depreciation over tax depreciation $ 3,103 $ 3,524 Non-deductible accruals 785 669 Other temporary differences 133 15 Unrecognized tax loss carryforwards 786 433 Valuation allowance (2,125) (1,959) ------- ------- Net deferred tax asset $ 2,682 $ 2,682 ======= =======
The Company is included in the consolidated Federal income tax return of TRI and TRI's parent company and, accordingly, pays its applicable Federal income taxes to TRI and computes its Federal income tax as if it were filing on a separate company basis. No federal income taxes were paid to TRI during 1995 or 1994. The Company paid no state income taxes in 1995 or 1994. 9. CONTINGENCIES In April 1993 and subsequent thereto, several lawsuits were filed against the Company and other potash producers alleging that the defendants conspired to fix, raise, maintain and stabilize the prices of potash in the United States purchased by the plaintiffs in violation of United States antitrust laws. The Company has no knowledge of any conspiracy of the type alleged in the complaints. The lawsuit is in an early stage and the Company intends to vigorously defend itself against these allegations. The United States Department of Justice Antitrust Division ("DOJ") is conducting a separate investigation concerning possible violations of the antitrust laws in connection with the production, sale and marketing of potash. In connection therewith, the Company and other potash producers have been served with subpoenas to produce documents for a grand jury authorized by the DOJ. The Company is cooperating with the DOJ in connection with providing documents sought by the subpoena. In the opinion of management, the ultimate outcome of these lawsuits and investigation will not have a material adverse effect on the financial position of the Company. The Company's last major labor dispute took place in July 1995. As a result of this dispute, union employees of the Company had a work stoppage for approximately three weeks. 9 10 10. LEASE COMMITMENTS The Company leases railcars under various operating lease agreements. Rent expenses under these leases totaled $64,000 and $168,000 in 1995 and 1994, respectively. Remaining commitments under these leases for fiscal years subsequent to December 31, 1995 are as follows: 1996 - $37,000 and 1997 - $28,000. * * * * * * * 10 11 EDDY POTASH, INC. UNAUDITED BALANCE SHEET JUNE 30, 1996 (IN THOUSANDS) ASSETS - ------ CURRENT ASSETS: Accounts receivable, net $ 3,096 Inventories -- Finished goods 3,909 Prepaid expenses 1,423 ------- Total current assets 8,428 PROPERTY, PLANT AND EQUIPMENT, Net of accumulated depreciation and depletion of $22,418 4,453 OTHER ASSETS 4,047 ------- $16,928 ======= LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 2,939 Accrued expense and other current liabilities 3,540 ------- Total current liabilities 6,479 LONG-TERM DEBT 1,058 OTHER LIABILITIES 64 STOCKHOLDER'S EQUITY: Additional paid-in capital 6,000 Retained earnings 3,327 ------- Total stockholders' equity 9,327 ------- $16,928 =======
1 12 EDDY POTASH, INC. UNAUDITED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30 (IN THOUSANDS)
1996 1995 -------- -------- NET SALES $ 11,420 $ 14,439 OPERATING COSTS AND EXPENSES: Cost of products sold 11,739 13,411 Selling, general and administrative 716 678 -------- -------- Total operating costs and expenses 12,455 14,089 -------- -------- OPERATING (LOSS) INCOME (1,035) 350 INTEREST EXPENSE (93) 0 INTEREST INCOME 79 76 -------- -------- NET (LOSS) INCOME $ (1,049) $ 426 ======== ========
2 13 EDDY POTASH, INC. UNAUDITED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30 (IN THOUSANDS)
1996 1995 ---- ---- OPERATING ACTIVITIES: Net (loss) income $(1,049) $ 426 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 400 360 Increase in Accounts receivable (804) (1,434) (Increase) decrease in Inventories (273) 2,295 Decrease in Prepaid expenses 282 168 Increase in Accounts payable 1,489 3 Increase in Accrued expenses and other current liabilities 731 40 ------- ------- Net cash provided by operating activities 776 1,858 ------- ------- INVESTING ACTIVITIES: Additions to property, plant and equipment (511) (463) Other increase in investments in other assets (65) (21) ------- ------- Net Cash used by investment activities (576) (484) ------- ------- FINANCING ACTIVITIES: Dividends to stockholders 0 (1,000) Payments and current maturities of long-term debt (200) 0 ------- ------- Net Cash used by financing activities (200) (1,000) ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 0 374 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 0 51 ------- ------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 0 $ 425 ======= =======
3 EX-99.2 3 FINANCIAL STATEMENT OF NEW MEXICO POTASH CORP. 1 EXHIBIT 99.2 REPORT OF INDEPENDENT ACCOUNTANTS February 9, 1996, except as to Note 12, which is as of May 21, 1996 To the Board of Directors and Shareholder of New Mexico Potash Corporation In our opinion, the accompanying balance sheet and the related statements of income and retained earnings and of cash flows present fairly, in all material respects, the financial position of New Mexico Potash Corporation at December 31, 1995, and the results of its operations and its cash flows for the year in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. Price Waterhouse LLP 1 2 NEW MEXICO POTASH CORPORATION (A WHOLLY OWNED SUBSIDIARY OF CEDAR CHEMICAL CORPORATION) BALANCE SHEET DECEMBER 31, 1995 (DOLLARS IN THOUSANDS) - -------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 1,053 Receivables, less allowance for doubtful accounts of $155 4,024 Receivables from affiliates Trade 887 Other 9,818 Inventories 4,675 Prepaid expenses and other current assets 2,934 Deferred income taxes 332 ------- Total current assets 23,723 Property, plant and equipment, net 10,379 Deposits 1,361 Other assets 39 Deferred income taxes 837 ------- Total assets $36,339 ======= LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Accounts payable and accrued expenses $ 7,371 Income taxes payable 154 ------- Total liabilities 7,525 ------- Commitments and contingencies (Notes 10 and 11) Shareholder's equity: Common stock, no par value Class A, 1,000 shares 10 authorized, 10 shares issued and outstanding Retained earnings 28,804 ------- Total shareholder's equity 28,814 ------- Total liabilities and shareholder's equity $36,339 =======
The accompanying notes are an integral part of these financial statements. 2 3 NEW MEXICO POTASH CORPORATION (A WHOLLY OWNED SUBSIDIARY OF CEDAR CHEMICAL CORPORATION) STATEMENT OF INCOME AND RETAINED EARNINGS DECEMBER 31, 1995 (DOLLARS IN THOUSANDS) - -------------------------------------------------------------------------------- Net sales to nonaffiliates $ 29,120 Net sales to affiliates 6,030 -------- Net sales 35,150 Operating cost and expenses: Cost of products sold 28,650 Selling and administrative 1,854 Depreciation and amortization 2,854 -------- Operating income 1,792 Interest expense (1,110) Interest and other income, net 36 -------- Income before income taxes 718 Income tax provision 92 -------- Net income 626 Retained earnings: Beginning of year 9,417 Rescission of dividends declared (Note 8) 18,761 -------- End of year $ 28,804 ========
The accompanying notes are an integral part of these financial statements. 3 4 NEW MEXICO POTASH CORPORATION (A WHOLLY OWNED SUBSIDIARY OF CEDAR CHEMICAL CORPORATION) STATEMENT OF CASH FLOWS DECEMBER 31, 1995 (DOLLARS IN THOUSANDS) - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 626 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization 2,854 Deferred income taxes (567) (Increase) decrease in assets: Receivables, net (383) Inventories (904) Prepaid expenses and other current assets 401 Other assets (625) Increase (decrease) in liabilities: Accounts payable and accrued expenses 2,924 Income taxes payable (109) ------- Net cash flows provided by operating activities 4,217 ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,272) ------- Net cash flows used in investing activities (1,272) ------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on parent company debt (1,913) ------- Net cash used in financing activities (1,913) ------- CASH AND CASH EQUIVALENTS: Net increase 1,032 At beginning of year 21 ------- At end of year $ 1,053 ======= SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid $ 147 Interest paid $ 1,110
The accompanying notes are an integral part of these financial statements. 4 5 NEW MEXICO POTASH CORPORATION (A WHOLLY OWNED SUBSIDIARY OF CEDAR CHEMICAL CORPORATION) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES The Company is engaged in the mining and processing of potash. The Company is a wholly owned subsidiary of Cedar Chemical Corporation (the "parent company" or "Cedar") which in turn is a wholly owned subsidiary of Trans-Resources, Inc. ("TRI"). SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingencies at the date of the financial statements and the related reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INVENTORIES Inventories are stated at the lower of cost or market, with cost being determined using the first-in, first-out ("FIFO") method. MAINTENANCE AND OPERATING SUPPLIES Maintenance and operating supplies are stated at the lower of cost or market, with cost being determined using the FIFO method. At December 31, 1995, maintenance and operating supplies totaling $2,754,000 were included in prepaid expenses and other current assets. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost including the cost of additions and improvements which materially increase the useful lives or values of the assets. The cost and accumulated depreciation of assets retired or sold are removed from the related accounts; gains or losses are included in income. Repair and maintenance costs are expensed as incurred. Depreciation is provided on a straight-line basis over the estimated useful lives of the respective assets. Annual depreciation rates are as follows: buildings and land improvements - 5%; equipment - 10% to 25%. 5 6 NEW MEXICO POTASH CORPORATION (A WHOLLY OWNED SUBSIDIARY OF CEDAR CHEMICAL CORPORATION) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- INCOME TAXES The Company's operations are included in a consolidated federal income tax return with TRI. The Company's provision for income taxes is computed on a separate return basis. Income taxes payable on the balance sheet are payable to TRI. The amounts provided for income taxes are based on the amounts of current and deferred taxes payable or refundable at the date of the financial statements as a result of all events recognized in the financial statements as measured by the provisions of enacted tax laws. FUTURES CONTRACTS In 1994, the Company purchased natural gas futures contracts to hedge the future cost of gas. No such contracts were purchased in 1995, however, 11 contracts purchased in November 1994 were closed in January 1995 resulting in a realized loss of $51,000. ENVIRONMENTAL COSTS Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation ("environmental clean-up costs"), are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company's commitment to a formal plan of action. Accruals relating to costs to be incurred, if any, at the end of the useful life of equipment, facilities or other assets are made over the useful life of the respective assets. STATEMENT OF CASH FLOWS Investments with original maturities of three months or less are classified as cash equivalents by the Company. Noncash financing and investing activities, consisting of various related party transactions described in Note 2, are not included in the statement of cash flows. 6 7 NEW MEXICO POTASH CORPORATION (A WHOLLY OWNED SUBSIDIARY OF CEDAR CHEMICAL CORPORATION) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 2 - RELATED PARTY TRANSACTIONS During 1995, the Company consummated the following transactions with affiliates through common direct and indirect ownership, its parent company, and TRI: -- Cedar allocated $689,000 of expenses and interest in the form of a management fee to the Company. These cost have been reflected as operating cost and expenses and as interest expense. -- The Company sold $6,030,000 of product to an affiliate through common ownership. The cost of these goods was $5,226,000. NOTE 3 - CONCENTRATION OF CREDIT RISKS During 1995, a subsidiary of Cedar accounted for approximately 17.15% of the Company's sales. Additionally, an unrelated customer accounted for approximately 10.84% of sales. At December 31, 1995, this unrelated customer's receivable accounted for 10.79% of nonrelated receivables. NOTE 4 - INVENTORIES Inventories at December 31, 1995 are summarized as follows (in thousands): Raw materials $ 149 Finished goods 4,526 ------- $ 4,675 =======
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT At December 31, 1995, property, plant and equipment is composed of (in thousands): Buildings $ 577 Equipment 26,400 -------- 26,977 Less accumulated depreciation and amortization (16,598) -------- $ 10,379 ========
7 8 NEW MEXICO POTASH CORPORATION (A WHOLLY OWNED SUBSIDIARY OF CEDAR CHEMICAL CORPORATION) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 6 - INCOME TAXES The income tax provision consists of the following (in thousands): Federal: Current $ 555 Deferred (478) ----- 77 ----- State: Current 104 Deferred (89) ----- 15 ----- $ 92 =====
All income was from U. S. sources. The income tax provision in the statement of income and retained earnings reflects effective tax rates that vary from the statutory U. S. federal income tax rate of 35%. The primary reasons for the differences are as follows (dollars in thousands):
% OF AMOUNT PRETAX INCOME ------ ------------- Income tax provision at statutory rate $ 251 35.0 Excess depletion expense (119) (16.6) Other (40) (5.6) ----- ------ $ 92 12.8 ===== ======
Deferred income taxes are provided in recognition of temporary differences in reporting certain revenues and expenses for financial statement and income tax purposes. The reporting differences relate principally to depreciation methods. 8 9 NEW MEXICO POTASH CORPORATION (A WHOLLY OWNED SUBSIDIARY OF CEDAR CHEMICAL CORPORATION) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- The net deferred tax asset consists of the following (in thousands): Current deferred tax asset/(liability): Allowance for doubtful accounts $ 59 Workers' compensation accrual 257 Vacation pay accrual 61 Inventory valuation (64) Other 19 ----- $ 332 ===== Noncurrent deferred asset: Depreciation $ 837 =====
NOTE 7 - RETIREMENT AND PROFIT SHARING PLANS The Company provides a profit sharing plan designed to conform to Internal Revenue Code Section 401(k) and to the requirements of ERISA. The plans, which cover all full-time employees, allow participants to contribute as much as 15% of their annual compensation, up to the maximum permitted by law, through salary reductions. The Company's contributions to the plans are based on a percentage of participants' contributions, and the Company may make additional contributions to the plan at the discretion of the Board of Directors. The Company's contribution expense relating to the profit sharing thrift plan totaled $243,000 during 1995. NOTE 8 - SHAREHOLDER'S EQUITY Prior to 1995, the Company declared approximately $18.8 million of dividends payable to Cedar which were reflected in prior year financial statements as a reduction in receivables from Cedar. During 1995, the Company reversed this declaration when Cedar notified the Company that no cash payment was required. The rescission of the dividend is considered noncash financing activity and has been excluded from the statement of cash flows. NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS At December 31, 1995, the Company did not have any outstanding financial derivative instruments. The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of those instruments. 9 10 NEW MEXICO POTASH CORPORATION (A WHOLLY OWNED SUBSIDIARY OF CEDAR CHEMICAL CORPORATION) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES AND OTHER MATTERS The mining of raw materials and processing ore involves the use, handling and processing of materials that may be considered hazardous within the meaning of applicable environmental or health and safety laws. Accordingly, the Company's operations are subject to federal, state and local regulatory requirements relating to environmental matters. Operating permits are required for the operation of the Company's facilities, and these permits are subject to revocation, modification and renewal. Government authorities have the power to enforce compliance with these regulations and permits, and violators are subject to civil and criminal penalties, including civil fines, injunctions or both. The Company has several legal actions and regulatory matters pending incident to the ordinary course of business. In the opinion of management, the eventual disposition of the matters described above should have no material adverse effect on the financial position or future operations of the Company. During 1993, the Company, among other defendants, was notified of a legal action regarding alleged violation of certain anti-trust and other laws which the Company is defending vigorously. As a result, the Company has also had inquiries and requests to provide certain information to the U.S. Department of Justice, which the Company has provided. NOTE 11 - OPERATING LEASES The Company is obligated under noncancelable leases covering principally machinery and equipment. At December 31, 1995, the minimum annual rental commitments under these leases are as follows (in thousands): 1996 $1,102 1997 1,048 1998 1,026 1999 1,019 2000 722 Thereafter - ------ Total minimum lease payments $4,917 ======
Rent expense for 1995 was $443,000. 10 11 NEW MEXICO POTASH CORPORATION (A WHOLLY OWNED SUBSIDIARY OF CEDAR CHEMICAL CORPORATION) NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 12 - SUBSEQUENT EVENT On May 21, 1996, the Company and Cedar entered into an asset purchase agreement with Mississippi Chemical Corporation ("MCC") whereby substantially all the assets of the Company will be sold to MCC. The sale is expected to close later in 1996, and the Company's financial statements do not reflect any adjustments as the result of this proposed transaction. 11 12 NEW MEXICO POTASH CORPORATION UNAUDITED BALANCE SHEET JUNE 30, 1996 (DOLLARS IN THOUSANDS) Assets Current Assets: Cash and cash equivalents $ 39 Accounts receivable, less allowance for doubtful accounts 4,091 Receivables from affiliate 26 Inventories 3,862 Prepaid expenses and other current assets 2,891 Deferred income taxes 333 -------- Total current assets 11,242 Property, plant and equipment, net 9,833 Other assets 2,238 -------- $ 23,313 ======== Liabilities and Shareholder's Equity Current Liabilities: Accounts payable and accrued expenses $ 4,360 Income taxes payable (58) -------- Total current liabilities 4,302 Intercompany payable (receivable) (9,642) Commitments and contingencies Shareholder's equity: Common stock, no par value Class A, 1,000 shares authorized, 10 shares issued and outstanding 10 Retained earnings 28,643 -------- Total shareholder's equity 28,653 -------- $ 23,313 ========
1 13 NEW MEXICO POTASH CORPORATION UNAUDITED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30 (DOLLARS IN THOUSANDS)
1996 1995 ---- ---- Net Sales $ 20,669 $ 18,165 Operating Costs and Expenses: Cost of products sold 19,002 16,358 Selling and administrative 1,005 912 -------- -------- Operating Income 662 895 Interest expense (946) (554) Interest income 40 9 -------- -------- (Loss) income before income taxes (244) 350 Income tax (benefit) provision (83) 21 -------- -------- Net (loss) income $ (161) $ 329 ======== ========
2 14 NEW MEXICO POTASH CORPORATION UNAUDITED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30 (DOLLARS IN THOUSANDS)
1996 1995 ---- ---- Cash flows from Operating Activities: Net (loss) income $ (161) $ 329 Adjustments to reconcile net (loss) income to net cash flows provided (used) by operating activities: Depreciation 1,504 1,516 (Increase) decrease in assets: Receivables, net 812 681 Inventories 813 148 Prepaid expenses and other current assets 43 177 Other assets -- 12 Increase (decrease) in liabilities: Accounts payable and accrued expenses (3,011) (161) Other current liabilities (212) 9 ------- ------- Net cash provided (used) by operating activities (212) 2,711 ------- ------- Cash flows from investment activities: Capital expenditures (958) (565) ------- ------- Net cash used in investment activities (958) (565) ------- ------- Cash flows from financing activities: Decrease in notes payable -- (171) Accounts payable/receivable - intercompany 156 (1,188) Net payments and current maturities of long-term debt -- (787) ------- ------- Net cash provided (used) by financing activities 156 (2,146) ------- ------- Cash and cash equivalents: Net decrease (1,014) -- ------- ------- At beginning of period 1,053 21 ------- ------- At end of period $ 39 $ 21 ======= =======
3 EX-99.3 4 PRO FORMA FINANCIAL INFORMATION 1 EXHIBIT 99.3 MISSISSIPPI CHEMICAL CORPORATION UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The unaudited pro forma financial information set forth below is presented to show the pro forma effect of the acquisition of certain assets and assumption of certain liabilities of New Mexico Potash Corporation ("NMPC") and Eddy Potash, Inc. ("Eddy"), collectively referred to as the "Potash Companies," as if the transaction had been consummated on June 30, 1996, for balance sheet presentation purposes and July 1, 1995, for income statement presentation purposes pursuant to the assumption and adjustments in the accompanying Notes to Mississippi Chemical Unaudited Condensed Pro Forma Consolidated Financial Statements. The acquisition will be accounted for as a purchase. The allocation of the purchase price has not been finally determined; accordingly, the amounts reflected below may differ from the amounts that would have been determined if the final purchase price allocation had been determined. The following pro forma information is not necessarily indicative of the results of operation and financial position of Mississippi Chemical as they may be in the future or they might have been had the acquisition occurred as of the respective dates assumed. This pro forma information should be read in conjunction with the historical Consolidated Financial Statements of Mississippi Chemical and its current report on Form 8-K dated September 3, 1996 which has been incorporated herein by reference. This pro forma information should also be read in conjunction with the historical financial statements as of and for the period ended December 31, 1995, for the Potash Companies included in this document. 1 2 MISSISSIPPI CHEMICAL CORPORATION UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 30, 1996 (IN THOUSANDS) The following Unaudited Condensed Pro Forma Consolidated Balance Sheet is based on (i) the audited historical Consolidated Balance Sheet of Mississippi Chemical as of June 30, 1996, and (ii) the unaudited historical combined balance sheet of the Potash Companies as of June 30, 1996, and has been prepared to reflect the acquisition by Mississippi Chemical of the Potash Companies after giving effect to the pro forma adjustments described in the Notes as if the acquisition had occurred on June 30, 1996.
Mississippi Mississippi Chemical Potash Pro Forma Chemical Historical Companies Adjustments Pro Forma ---------- --------- ----------- --------- Current Assets: Cash and cash equivalents $ 60,214 $ -- $ (55,112)(2) $ 5,102 Accounts receivable 34,630 7,104 -- 41,734 Inventories 40,633 7,771 -- 48,404 Prepaid expenses and other current assets 6,172 3,884 -- 10,056 --------- --------- --------- --------- Total current assets 141,649 18,759 (55,112) 105,296 Investments and other assets: Investments 15,478 -- -- 15,478 Other 12,189 -- -- 12,189 --------- --------- --------- --------- Total investments and other assets 27,667 -- -- 27,667 Properties held for sale 52,919 -- -- 52,919 Property, plant and equipment, at cost, less accumulated depreciation, depletion and amortization 118,771 14,286 30,814(1) 163,871 --------- --------- --------- --------- $ 341,006 $ 33,045 $ (24,298) $ 349,753 ========= ========= ========= ========= Current liabilities: Long-term debt due within one year $ 78 $ -- $ -- $ 78 Accounts payable and accrued liabilities 54,720 8,805 63,525 Income taxes payable 5,238 (58) 5,180 --------- --------- --------- --------- Total current liabilities 60,036 8,747 -- 68,783 Other long-term liabilities and deferred credits 18,218 -- -- 18,218 Deferred income taxes 14,927 -- -- 14,927 Commitments and contingencies Shareholders' equity: Common stock 229 -- -- 229 Additional paid-in capital 178,364 -- -- 178,364 Retained earnings 99,814 -- -- 99,814 Parent company investment in subsidiaries sold -- 24,298 (24,298)(1) -- Treasury stock (30,582) -- (30,582) --------- --------- --------- --------- Total shareholders' equity 247,825 24,298 (24,298) 247,825 --------- --------- --------- --------- $ 341,006 $ 33,045 $ (24,298) $ 349,753 ========= ========= ========= =========
The Unaudited Condensed Pro Forma Consolidated Balance Sheet should be read in conjunction with the accompanying notes to the Unaudited Condensed Pro Forma Consolidated Financial Statements. 2 3 MISSISSIPPI CHEMICAL CORPORATION UNAUDITED CONDENSED PRO FORMA CONSOLIDATED INCOME STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 1996 (IN THOUSANDS, EXCEPT PER-SHARE DATA) The following Unaudited Condensed Pro Forma Consolidated Income Statement for the fiscal year ended June 30, 1996, is based on (i) the audited historical Consolidated Statement of Income of Mississippi Chemical for the fiscal year ended June 30, 1996, and (ii) the unaudited combined statement of income of the Potash Companies for the fiscal year ended June 30, 1996, after giving effect to the pro forma adjustments described in the Notes. Such adjustments have been made assuming that the acquisition by Mississippi Chemical of the Potash Companies took place on July 1, 1995.
Mississippi Mississippi Chemical Potash Pro Forma Chemical Historical Companies Adjustments Pro Forma ---------- --------- ----------- --------- Net Sales $ 428,789 $ 53,986 $ - $ 482,775 Operating expenses: Cost of products sold 291,403 51,142 (759)(3) 341,786 Selling, general and administrative 52,568 1,511 - 54,079 --------- --------- --------- --------- 343,971 52,653 (759) 395,865 Operating Income 84,818 1,333 759 86,910 Other Income (expense): Interest, net 2,229 - (2,446)(4) (1,028) (811)(4) Other 1,446 298 - 1,744 --------- --------- --------- --------- Income before income taxes 88,493 1,631 (2,498) 87,626 Income tax expense 34,315 652 (981)(5) 33,986 --------- --------- --------- --------- Net income $ 54,178 $ 979 $ (1,517) $ 53,640 ========= ========= ========= ========= Earnings per share $ 2.46 $ 2.44 ========= =========
The Unaudited Condensed Pro Forma Consolidated Income Statement should be read in conjunction with the accompanying notes to the Unaudited Condensed Pro Forma Consolidated Financial Statements. 3 4 NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) Balance sheet adjustments The Unaudited Condensed Pro Forma Consolidated Balance Sheet gives effect to the adjustments set forth below necessary to reflect the acquisition of the Potash Companies for approximately $55 million of cash. (1) Allocation of the Potash Companies' purchase price adjustments. (2) Cash paid for purchase of the Potash Companies. Income statement adjustments The Unaudited Condensed Pro Forma Consolidated Income Statement gives effect to the following pro forma adjustments necessary to reflect the acquisition of the Potash Companies: (3) Adjustments to the Potash Companies to reflect the application of purchase accounting adjustments and MCC accounting policies relating to depreciation on property, plant and equipment. (4) Estimated foregone interest income on cash used to purchase the Potash Companies of $2,446 and incremental interest expense of $811 for approximately $11,000 of debt assumed to have been incurred to fund the purchase. (5) Reflects tax effects of the purchase price adjustments and interest charges. 4 -----END PRIVACY-ENHANCED MESSAGE-----