SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-3295
--
MINERALS TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-1190717
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
405 Lexington Avenue, New York, New York 10174-1901
(Address of principal executive offices, including zip code)
(212) 878-1800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that registrant was required to file
such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
-------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT July 26, 1996
Common Stock, $.10 par value 22,616,424
MINERALS TECHNOLOGIES INC.
INDEX TO FORM 10-Q
Page No.
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements:
Condensed Consolidated Statement of Income for
the three-month and six-month periods ended
June 30, 1996 and July 2, 1995. 3
Condensed Consolidated Balance Sheet
as of June 30, 1996 and December 31, 1995. 4
Condensed Consolidated Statement of Cash Flows
for the six-month periods ended June 30, 1996
and July 2, 1995. 5
Notes to Condensed Consolidated Financial
Statements. 6
Independent Auditors' Report 7
Item 2.
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings 10
Item 4.
Submission of Matters to a Vote of Security Holders 10
Item 6.
Exhibits and Reports on Form 8-K 10
Signature 11
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
------------------ -----------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
------- ------ ------- ------
(thousands of dollars,
except per share data)
Net sales $140,466 $138,617 $268,575 $258,822
Operating costs and
expenses:
Cost of goods sold 99,357 100,025 192,434 185,711
Marketing, distribution
and administrative
expenses 19,125 18,548 36,225 34,901
Research and
development expenses 4,948 5,096 9,779 9,851
------- ------- ------- -------
Income from operations 17,036 14,948 30,137 28,359
Non-operating items:
Other income 351 711 428 2,600
Other deductions (1,539) (1,077) (2,404) (2,625)
------- ------- ------- -------
Non-operating deductions,
net (1,188) (366) (1,976) (25)
------- ------- ------- -------
Income before provision
for taxes on income and
minority interests 15,848 14,582 28,161 28,334
Provision for taxes on
income 4,927 4,818 8,927 9,460
Minority interests 114 (122) (120) (26)
------- ------- ------- -------
Net income $ 10,807 $ 9,886 $ 19,354 $ 18,900
======= ======= ======= =======
Earnings per
common share $ 0.48 $ 0.44 $ 0.86 $ 0.84
======= ======= ======= =======
Cash dividends declared
per common share $ 0.025 $ 0.025 $ 0.050 $ 0.050
====== ====== ====== ======
Weighted average number of
common shares
outstanding 22,627 22,624 22,632 22,620
====== ====== ====== ======
See accompanying Notes to Condensed Consolidated Financial
Statements.
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(thousands of dollars) June 30, December 31,
1996* 1995**
------ --------
Current assets:
Cash and cash equivalents $ 10,987 $ 11,318
Accounts receivable, net 105,328 100,473
Inventories 69,571 64,637
Other current assets 10,360 5,997
------- -------
Total current assets 196,246 182,425
Property, plant and equipment,
less accumulated depreciation
and depletion - June 30, 1996
- $292,258; Dec. 31, 1995
- $275,665 488,500 455,809
Other assets and deferred charges 12,136 10,910
------- -------
Total assets $696,882 $649,144
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 76,549 $ 14,890
Current maturities of
long-term debt 13,000 13,000
Accounts payable 25,613 30,405
Other current liabilities 27,695 37,384
------- -------
Total current liabilities 142,857 95,679
Long-term debt 54,900 67,927
Other noncurrent liabilities 70,527 69,385
------- -------
Total liabilities 268,284 232,991
Shareholders' equity:
Common stock 2,520 2,515
Additional paid-in capital 134,386 133,221
Retained earnings 341,597 323,375
Currency translation adjustment 12,727 16,931
Unrealized holdings gains 181 111
------- -------
491,411 476,153
Less common stock held in
treasury, at cost 62,813 60,000
------- -------
Total shareholders'
equity 428,598 416,153
------- -------
Total liabilities and
shareholders' equity $696,882 $649,144
======= =======
* Unaudited
** Condensed from audited financial statements.
See accompanying Notes to Condensed Consolidated Financial
Statements.
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
----------------
(thousands of dollars) June 30, July 2,
1996 1995
-------- --------
Operating Activities
Net income $ 19,354 $ 18,900
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion
and amortization 22,248 19,769
Deferred income taxes 2,678 3,514
Other non-cash items (376) 852
Net changes in operating assets
and liabilities (32,011) (18,269)
------ ------
Net cash provided by operating
activities 11,893 24,766
Investing Activities
Purchases of property,
plant and equipment (57,925) (46,521)
Other investing activities, net 475 --
Net cash used in investing activities (57,450) (46,521)
------ ------
Financing Activities
Increase in short-term debt 61,659 --
Repayment of debt (13,027) --
Purchase of common shares for treasury (2,813) --
Dividends paid (1,132) (1,132)
Other financing activities, net 1,170 983
----- -----
Net cash provided by (used in)
financing activities 45,857 (149)
------ ------
Effect of exchange rate changes on
cash and cash equivalents (631) 962
------ ------
Net decrease in cash and cash equivalents (331) (20,942)
Cash and cash equivalents at beginning
of period 11,318 56,240
------ ------
Cash and cash equivalents at end
of period $10,987 $35,298
====== ======
Interest paid $ 3,556 $ 2,602
====== ======
Income taxes paid $ 6,838 $ 3,464
====== =======
See accompanying Notes to Condensed Consolidated Financial
Statements.
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared by management in
accordance with the rules and regulations of the United
States Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
Therefore, these financial statements should be read in
conjunction with the consolidated financial statements and
notes thereto contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1995. In the opinion of
management, all adjustments, consisting solely of normal
recurring adjustments necessary for a fair presentation of the
financial information for the periods indicated, have been
included. The results for three-month and six-month periods
ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending
December 31, 1996.
Note 2 -- Inventories
The following is a summary of inventories by major
category:
June 30, December 31,
(thousands of dollars) 1996 1995
------- ------------
Raw materials $23,400 $17,919
Work in process 9,170 9,757
Finished goods 21,278 20,575
Packaging and supplies 15,723 16,386
------ ------
Total inventories $69,571 $64,637
====== ======
Note 3 -- Subsequent Event
On July 24, 1996, through a private placement, the Company
issued $50 million of 7.49% Guaranteed Senior Notes due July
24, 2006. The proceeds from the sale of the notes were used to
refinance a portion of the short-term commercial bank debt
outstanding. No required principal payments are due until July
24, 2006. Interest on the notes is payable semi-annually.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Minerals Technologies Inc.:
We have reviewed the condensed consolidated balance
sheet of Minerals Technologies Inc. and subsidiary companies as
of June 30, 1996 and the related condensed consolidated
statements of income for each of the three-month and six-month
periods ended June 30, 1996 and July 2, 1995 and cash flows for
the six-month periods then ended. These financial statements
are the responsibility of the company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet of
Minerals Technologies Inc. and subsidiary companies as of
December 31, 1995, and the related consolidated statements of
income, shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated January
31, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1995 is fairly
presented, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
KPMG Peat Marwick LLP
New York, New York
August 8, 1996
ITEM 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Income and Expense Items
As a Percentage of Net Sales
----------------------------------
Three Months Ended Six Months Ended
------------------- ----------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
------- ------- ------- -------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 70.8 72.1 71.7 71.7
Marketing, distribution and
administrative expenses 13.6 13.4 13.5 13.5
Research and development
expenses 3.5 3.7 3.6 3.8
---- ---- ---- ----
Income from operations 12.1 10.8 11.2 11.0
Net income 7.7% 7.1% 7.2% 7.3%
==== ==== ==== ====
Results of Operations
Three Months Ended June 30, 1996 as Compared with Three Months
Ended July 2, 1995
Net sales in the second quarter of 1996 increased 1.4% to
$140.5 million from $138.6 million in the second quarter of 1995.
The stronger U.S. dollar had an unfavorable impact of
approximately $4 million on sales growth. In addition, in the
second quarter of 1995, the company brought forward the financial
close of certain international subsidiaries to a current calendar
month, which had the effect of increasing reported net sales by
approximately $4 million. Excluding the effect of foreign
exchange and the acceleration of reporting periods, sales growth
was approximately 7 percent. Higher volumes in the precipitated
calcium carbonate (PCC) product line were chiefly responsible for
the sales increase.
PCC sales grew 13.5% to $64.9 million from $57.2 million in
the second quarter of 1995. This increase was attributable
primarily to volumes generated as a result of five new satellite
PCC plants coming into operation since the second quarter of 1995
and to production capacity expansions at several satellite plants
during 1995. The company began operation of a satellite plant in
Poland during the third quarter of 1995, as well as one in
Israel, two in Brazil, and a joint venture in Thailand during the
first half of 1996.
The company has signed contracts for three new PCC satellite
plants since the end of the first quarter. These satellite
plants are located in the United States, Slovakia and
Indonesia. The satellite PCC plant in the United States will be
equivalent to approximately three satellite units and is
scheduled to begin operation in the third quarter of 1996. A
satellite "unit" produces between 25,000 and 35,000 tons of PCC
annually. The satellite PCC plant in Slovakia will be
equivalent to one satellite unit and is expected to commence
operations in the first quarter of 1997. The satellite plant in
Indonesia, which will be operated through a joint venture, will
be equivalent to two satellite units and is also expected to
begin operations in the first quarter of 1997. The company now
operates 42 satellite PCC plants in 10 countries and has four
satellite plants under construction.
Net sales of other mineral products grew 1.9% in the second
quarter of 1996 to $27.0, million from $26.5 million in the
comparable quarter of 1995.
Net sales of refractory products decreased 11.5% to $48.6
million, from $54.9 million in the second quarter of 1995. This
decrease was primarily due to the aforementioned prior year
acceleration of reporting periods of certain international
subsidiaries and to unfavorable exchange rates from the stronger
U.S. dollar.
Income from operations rose 14.0% in the second quarter of
1996 to $17.0 million. This increase was due primarily to good
growth in the PCC satellite operations, despite the weakness in
the paper industry and significant start-up costs at several
international locations, and improved profitability in refractory
products, due primarily to the substantial growth in the calcium
and metallurgical wire product line.
Other income decreased as a result of lower interest income
in the current year due to lower levels of cash-on-hand. Other
deductions increased primarily due to higher interest costs
associated with additional short-term borrowings.
Net income grew 9.1% to $10.8 million from $9.9 million in
the prior year. Earnings per share were $0.48 in the second
quarter of 1996 compared to $0.44 in the prior year.
Six Months Ended June 30, 1996 as Compared with Six Months Ended
July 2, 1995
Net sales in the first half of 1996 increased 3.8% to $268.6
million from $258.8 million in 1995. This increase was due
primarily to the continued expansion of the PCC product line.
PCC sales increased 10.8% to $123.4 million from $111.4 million
in the first half of 1995. Sales increases were primarily
attributable to the commencement of operations at five new
satellite PCC plants since the first half of 1995 and to
production capacity expansions at several satellite plants during
1995. Net sales of other mineral products rose 2.2% to $47.2
million in the first half of 1996. Refractory product sales
decreased 3.3% to $98.0 million in the first half of 1996. This
decrease was primarily due to the aforementioned acceleration of
reporting periods of certain international subsidiaries in the
second quarter of 1995, as discussed in the preceding section,
and to unfavorable exchange rates.
Net sales in the United States increased 5.3% to $185.0
million in the first half of 1996, due primarily to growth in the
PCC product line and in the calcium and metallurgical wire
product group. Net foreign sales increased approximately 1% in
the first half of 1996. Excluding the effect of the
aforementioned acceleration of reporting periods of certain
international subsidiaries, net foreign sales growth was 5.7%.
This growth was primarily due to the foreign expansion of the PCC
satellite product line.
Income from operations rose 6.0% to $30.1 million in the
first half of 1996 from $28.4 million in the previous year.
Other income decreased by $2.2 million in 1996. In the
first half of 1995, the Company recorded a significant
non-recurring foreign exchange gain while a small foreign
exchange loss was recorded in the current year. In addition,
interest income was significantly higher in the prior year due to
higher levels of cash-on-hand.
Net income increased 2.6% to $19.4 million from $18.9
million in 1995. Earnings per share were $0.86 compared to $0.84
in the prior year.
Liquidity and Capital Resources
The Company's financial position remained strong in the
first half of 1996. Cash flows in the first quarter were
provided from operations and short-term financing and were
applied principally to fund $57.9 million of capital expenditures
and approximately $32.0 million of working capital increases. In
addition, the Company remitted its initial required principal
payment of $13 million under the Company's Guarantied Senior
Notes due June 11, 2000. Cash provided from operating activities
amounted to $11.9 million in the first half of 1996 as compared
to $24.8 million in the prior year.
The Company has available approximately $120 million in
uncommitted, short-term bank credit lines, of which $74.5 million
was in use at June 30, 1996. The interest rate on these
borrowings was approximately 5.75%. The Company anticipates that
capital expenditures for all of 1996 will be approximately $100
million, principally related to the construction of satellite PCC
plants, expansion projects at existing satellite PCC plants and
at other mineral plants, and other opportunities which meet the
strategic growth objectives of the Company. The Company expects
to meet such requirements from internally generated funds, the
aforementioned uncommitted bank credit lines, long-term financing
and, where appropriate, project financing of certain satellite
plants.
On July 24, 1996, through a private placement, the Company
issued $50 million of 7.49% Guaranteed Senior Notes due July 24,
2006. The proceeds from the sale of the notes were used to
refinance a portion of the short-term commercial bank debt
outstanding. No required principal payments are due until July
24, 2006. Interest on the notes is payable semi-annually.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit captioned Eaton
Corporation v. Pfizer Inc., Minerals Technologies Inc.
and Specialty Minerals Inc. pending in the U.S.
District Court for the Western District of Michigan.
The suit alleges that certain materials sold to Eaton
for use in truck transmissions were defective,
necessitating repairs for which Eaton now seeks
reimbursement. The suit was filed on July 31, 1996.
The Company has evaluated the claims of this lawsuit
to the extent possible considering the limited amount
of time and information available, believes the claims
to be without merit, and intends to contest them
vigorously.
The Company and its subsidiaries are not party to any
other material pending legal proceedings, other than
ordinary routine litigation incidental to their busi-
nesses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting on May 23, 1996. At the
meeting, (1) Steven J. Golub was elected a director of the
Company, by a plurality of 19,802,057 votes, with 387,902
votes being withheld; (2) William L. Lurie was elected a
director of the Company, by a plurality of 19,805,862 votes,
with 384,097 votes being withheld; (3) Jean-Paul Valles was
elected a director of the Company, by a plurality of
19,796,357 votes, with 393,602 votes being withheld, and (4)
the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the year 1996 was approved by a
vote of 19,970,896 for and 7,835 against, with 211,228
abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
10.1 - Note Purchase Agreement, dated as of July 24,
1996, between the Company and Metropolitan
Life Insurance Company with respect to the
Company's issuance of $50,000,000 in
aggregate principal amount of its 7.49%
Guaranteed Senior Notes due July 24, 2006.
11 - Schedule re: Computation of earnings per
common share (Part I Data).
15 - Accountants' Acknowledgment (Part I Data).
27 - Financial Data Schedule (submitted
electronically to, but not filed with, the
Securities and Exchange Commission pursuant
to Rule 402 of Regulation S-T.
b) No reports on Form 8-K were filed during the second
quarter of 1996.
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 thereunto duly authorized.
Minerals Technologies Inc.
By: /s/ John R. Stack
John R. Stack
Vice President-Finance and
Chief Financial Officer
August 8, 1996