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 29, 1997
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 21, 1997
Common Stock, $.10 par value 22,560,427
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 29, 1997 and June 30,1996 3
Condensed Consolidated Balance Sheet as of
June 29, 1997 and December 31, 1996 4
Condensed Consolidated Statement of Cash
Flows for the six-month periods ended
June 29, 1997 and June 30, 1996 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 2.
Changes in Securities 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
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Six Months
Ended Ended
---------------- ----------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------- ------- ------- -------
(thousands of dollars,
except per share data)
Net sales $151,765 $140,466 $289,391 $268,575
Operating costs
and expenses:
Cost of goods sold 107,400 99,357 204,501 192,434
Marketing,
distribution and
administrative
expenses 19,007 19,125 37,336 36,225
Research and
development
expenses 5,179 4,948 10,224 9,779
------- ------- ------- -------
Income from operations 20,179 17,036 37,330 30,137
Non-operating deductions,
net 1,619 1,188 3,088 1,976
------- ------- ------- -------
Income before provision
for taxes on income
and minority interests 18,560 15,848 34,242 28,161
Provision for taxes
on income 5,940 4,927 10,957 8,927
Minority interests 259 114 356 (120)
------- ------- ------- -------
Net income $ 12,361 $ 10,807 $ 22,929 $ 19,354
======= ======= ======= =======
Earnings per
common share $ .55 $ 0.48 $ 1.02 $ 0.86
======= ======= ======= =======
Cash dividends declared
per common share $ 0.025 $ 0.025 $ 0.050 $ 0.050
======= ======= ======= =======
Weighted average number
of common shares
outstanding 22,563 22,627 22,575 22,632
======= ======= ======= =======
See accompanying Notes to Condensed Consolidated Financial
Statements.
-3-
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(thousands of dollars) June 29, December 31,
1997* 1996**
-------- -----------
Current assets:
Cash and cash equivalents $ 19,385 $ 15,446
Accounts receivable, net 115,140 102,494
Inventories 64,239 70,438
Other current assets 12,532 13,902
------- -------
Total current assets 211,296 202,280
Property, plant and equipment,
less accumulated depreciation
and depletion - June 29, 1997
-$333,258; Dec. 31, 1996 -
$311,815 497,763 501,067
Other assets and deferred charges 11,768 10,514
------- -------
Total assets $720,827 $713,861
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 14,304 $ 25,339
Accounts payable 31,164 29,223
Other current liabilities 34,748 32,178
------- -------
Total current liabilities 80,216 86,740
Long-term debt 102,391 104,900
Other noncurrent liabilities 77,457 73,971
------- -------
Total liabilities 260,064 265,611
------- -------
Shareholders' equity:
Common stock 2,531 2,526
Additional paid-in capital 136,960 135,676
Retained earnings 386,009 364,210
Currency translation adjustment 4,543 11,560
Unrealized holding gains 181 163
------- --------
530,224 514,135
Less common stock held in treasury,
at cost 69,461 65,885
------- -------
Total shareholders' equity 460,763 448,250
------- -------
Total liabilities and
shareholders' equity $720,827 $713,861
======= =======
* Unaudited
** Condensed from audited financial statements
See accompanying Notes to Condensed Consolidated Financial
Statements.
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MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
-------------------
(thousands of dollars) June 29, June 30,
1997 1996
-------- --------
Operating Activities
Net income $ 22,929 $ 19,354
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion
and amortization 25,860 22,248
Other non-cash items 824 2,302
Net changes in operating
assets and liabilities (3,090) (32,011)
------- -------
Net cash provided by operating activities 46,523 11,893
------- -------
Investing Activities
Purchases of property, plant and equipment(30,126) (57,925)
Other investing activities, net 3,762 475
------- -------
Net cash used in investing activities (26,364) (57,450)
------- -------
Financing Activities
Proceeds from issuance of short-term
and long-term debt 11,528 61,659
Repayment of debt (25,000) (13,027)
Purchase of common shares for treasury (3,576) (2,813)
Dividends paid (1,130) (1,132)
Other financing activities, net 2,301 1,170
------- -------
Net cash (used in) provided by
financing activities (15,877) 45,857
------- -------
Effect of exchange rate changes on
cash and cash equivalents (343) (631)
------- -------
Net increase (decrease) in cash and
cash equivalents 3,939 (331)
Cash and cash equivalents at
beginning of period 15,446 11,318
------- -------
Cash and cash equivalents at
end of period $ 19,385 $ 10,987
======= =======
Interest paid $ 4,240 $ 3,556
======= =======
Income taxes paid $ 6,576 $ 6,838
======= =======
See accompanying Notes to Condensed Consolidated Financial
Statements.
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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,
1996. 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 the
three-month and six-month periods ended June 29, 1997 are
not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
Note 2 -- Inventories
The following is a summary of inventories by major
category:
June 29, December 31,
(thousands of dollars) 1997 1996
-------- -----------
Raw materials $ 22,500 $ 23,585
Work in process 5,830 8,513
Finished goods 19,266 20,670
Packaging and supplies 16,643 17,670
------- -------
Total inventories $ 64,239 $ 70,438
======= =======
Note 3 -- Long-Term Debt
The following is a summary of long-term debt:
June 29, December 31,
(thousands of dollars) 1997 1996
-------- ------------
7.70% Industrial Development
Revenue Bond Series 1990
Due 2009 (secured) $ 7,300 $ 7,300
7.75% Economic Development
Revenue Bonds Series 1990
Due 2010 (secured) 4,600 4,600
Variable/Fixed Rate Industrial
Development Revenue Bonds
Due 2009 4,000 4,000
Variable/Fixed Rate Industrial
Development Revenue Bonds
Due 2012 9,000 --
6.04% Guarantied Senior Notes
Due June 11, 2000 39,000 52,000
7.49% Guaranteed Senior Notes
Due July 24, 2006 50,000 50,000
Other borrowings 1,988 --
------- -------
115,888 117,900
Less: Current maturities 13,497 13,000
------- -------
Long-term debt $102,391 $104,900
======= =======
The Variable/Fixed Rate Industrial Development Revenue Bonds
due 2012 are tax-exempt 15-year instruments and were issued
on April 1, 1997 to finance the construction of a PCC plant
in Jackson, Alabama. The bonds bear interest at either a
variable rate or fixed rate, at the option of the Company.
Interest is payable semi-annually under the fixed rate
option and monthly under the variable rate option. The
Company has selected the variable rate option on these
borrowings and the average interest rate was approximately
4%.
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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 29, 1997 and the related condensed consolidated
statements of income for each of the three-month and six-month
periods ended June 29, 1997 and June 30, 1996 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, 1996, 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 February 4, 1997, 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, 1996 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, 1997
-7-
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 Six Months
Ended Ended
---------------- ----------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 70.8 70.8 70.7 71.7
Marketing, distribution
and administrative
expenses 12.5 13.6 12.9 13.5
Research and development
expenses 3.4 3.5 3.5 3.6
----- ----- ----- -----
Income from operations 13.3 12.1 12.9 11.2
Net income 8.1% 7.7% 7.9% 7.2%
===== ===== ===== =====
Results of Operations
THREE MONTHS ENDED JUNE 29, 1997 AS COMPARED WITH THREE
MONTHS ENDED JUNE 30, 1996
Net sales in the second quarter of 1997 increased 8.0%
to $151.8 million from $140.5 million in the second quarter
of 1996. Higher volumes in the precipitated calcium
carbonate (PCC) and processed mineral product lines were
primarily responsible for the sales increase. The stronger
U.S. dollar had an unfavorable impact of approximately $2.2
million on sales growth. Excluding the effect of foreign
exchange, sales growth was approximately 10%.
PCC sales grew 13.2% to $73.4 million from $64.9
million in the second quarter of 1996. This increase was
primarily attributable to the startup of four new satellite
PCC plants since June 1996, to the significant ramp up of
four satellite PCC plants that commenced operations in early
1996 and to a general improvement in the paper industry.
The Company has signed contracts for three new PCC
satellite plants since the end of the first quarter. These
satellite PCC plants will be located in South Africa, France
and Germany. The satellite plant in South Africa, which will
be operated through a joint venture, will be equivalent to
two satellite units and is scheduled to begin operations in
the fourth quarter of 1997. A satellite "unit" produces
between 25,000 and 35,000 tons of PCC annually. The
satellite plant in France will be equivalent to one
satellite unit and is expected to commence operations in the
first quarter of 1998. The satellite plant in Germany will
be equivalent to two satellite units and is also scheduled
to begin operations in the first quarter of 1998. In
addition, our satellite plant in Indonesia began operations
early in the third quarter of 1997. The Company now
operates 47 satellite PCC plants in 12 countries and has
four satellite plants under construction.
Net sales of processed mineral products grew 7.9% in
the second quarter of 1997 to $29.2 million, from $27.0
million in the comparable quarter of 1996.
Net sales of refractory products increased 1.3% to
$49.2 million from $48.6 million in the second quarter of
1996.
In 1997, the Company recorded a $1.6 million provision
for loss as guarantor of indebtedness of a company which was
the subject of an involuntary bankruptcy petition under
Chapter 7 of the U.S. Bankruptcy Code. In addition, the
Company recognized a gain of approximately $1.4 million
related to the sale of property in Japan. Such non-recurring
items are included in marketing, distribution and
administrative expenses.
Income from operations rose 18.4% in the second quarter
of 1997 to $20.2 million. This increase was due primarily
to solid growth in the PCC product line; improved
profitability in refractory products, due primarily to the
successful execution of the Company's strategy of
introducing high value innovative products; and to increased
growth in the processed minerals product line.
-8-
Non-operating deductions increased due to higher net
interest expense as a result of a reduction in capitalized
interest costs associated with the construction of major
capital projects. This reduction in capitalized interest was
due to lower levels of capital spending in the second
quarter of 1997.
Net income grew 14.4% to $12.4 million from $10.8
million in the prior year. Earnings per common share were
$0.55 in the second quarter of 1997 compared to $0.48 in the
prior year.
SIX MONTHS ENDED JUNE 29, 1997 AS COMPARED WITH SIX MONTHS
ENDED JUNE 30, 1996
Net sales in the first half of 1997 increased 7.8% to
$289.4 million from $268.6 million in 1996. PCC sales
increased 16.7% to $144.0 million from $123.4 million in the
first half of 1996. Sales increases were primarily
attributable to the start-up of four new satellite PCC
plants since the second quarter of 1996, significant volume
increases from four satellite PCC plants that commenced
operations in early 1996 and to volume increases from other
satellite PCC plants due to a general improvement in the
paper industry. Net sales of processed mineral products
rose 5.7% to $49.9 million in the first half of 1997.
Refractory product sales decreased 2.5% to $95.5 million in
the first half of 1997. This decrease was primarily due to
overall volume declines in lower margin products and to
unfavorable exchange rates.
Net sales in the United States increased 7% in the
first half of 1997 primarily due to the growth in the PCC
product line. Net foreign sales increased approximately 8%
in the first half of 1997 as a result of the continued
international expansion of the PCC product line.
Income from operations rose 23.9% to $37.3 million in
the first half of 1997 from $30.1 million in the previous
year.
Non-operating deductions increased due to higher net
interest expense as a result of a reduction in capitalized
interest costs associated with the construction of major
capital projects. This reduction in capitalized interest was
due to lower levels of capital spending in the first half of
1997.
Net income increased 18.5% to $22.9 million from $19.4
million in 1996. Earnings per common share were $1.02
compared to $0.86 in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position remained strong in the
first half of 1997. Cash flows in the first half of 1997
were provided from operations and were applied principally
to fund $30.1 million of capital expenditures and to remit
the required principal payment of $13 million under the
Company's Guarantied Senior Notes due June 11, 2000. Cash
provided from operating activities amounted to $46.5 million
in the first half of 1997 as compared to $11.9 million in
the prior year. This increase was primarily due to an
improvement in working capital.
The Variable/Fixed Rate Industrial Development Revenue
Bonds due 2012 are tax-exempt 15-year instruments and were
issued on April 1, 1997 to finance the construction of a PCC
plant in Jackson, Alabama. The bonds bear interest at
either a variable rate or fixed rate, at the option of the
Company. Interest is payable semi-annually under the fixed
rate option and monthly under the variable rate option.
The Company has available approximately $120 million in
uncommitted, short-term bank credit lines, none of which
were outstanding at June 29, 1997. The Company
anticipates that capital expenditures for all of 1997 will
be approximately $80 million, principally related to the
construction of satellite PCC plants, expansion projects at
existing satellite PCC plants and other opportunities that
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 and, where appropriate, project financing of certain
satellite plants.
-9-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed, the Company and its
subsidiary Specialty Minerals Inc. are defendants
in a lawsuit, captioned EATON CORPORATION V. PFIZER
INC, MINERALS TECHNOLOGIES INC. AND SPECIALTY
MINERALS INC., which was filed on July 31, 1996 and
is 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 seeks reimbursement. While
all litigation contains an element of uncertainty,
the Company and Specialty Minerals Inc. believe
that they have valid defenses to the claims
asserted by Eaton in this lawsuit, are continuing
to vigorously defend all such claims, and believe
that the outcome of this matter will not have a
material adverse effect on the Company's
consolidated financial position or results of
operations.
The Company and its subsidiaries are not party to
any other material pending legal proceedings, other
than ordinary routine litigation incidental to
their businesses.
ITEM 2. CHANGES IN SECURITIES
On January 30, 1997, in a transaction not involving
a public offering and therefore exempt from
registration pursuant to Section 4(2) of the
Securities Act of 1933, the Company issued 10,520
shares of Common Stock to Walter Nazarewicz,
retired President of Specialty Minerals Inc., in
exchange for consulting services to Specialty
Minerals Inc. during 1994 and 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting on May 22,
1997. At the meeting, (1) Paul M. Meister was
elected a director of the Company, by a plurality
of 19,592,301 votes, with 183,291 votes being
withheld; (2) Michael F. Pasquale was elected a
director of the Company, by a plurality of
19,609,372 votes, with 166,220 votes being
withheld; and (3) the appointment of KPMG Peat
Marwick LLP as independent auditors of the Company
for the year 1997 was approved by a vote of
19,773,241 for and 9,748 against, with 32,603
abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
10.19 - Company Savings and Investment Plan, as
amended April 24, 1997.
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 the Securities
and Exchange Commission, and not filed,
pursuant to Rule 402 of
Regulation S-T).
b) No reports on Form 8-K were filed during the
second quarter of 1997.
-10-
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, 1997
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