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 September 28, 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 October 20, 1997
Common Stock,
$.10 par value 22,556,198
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MINERALS TECHNOLOGIES INC.
INDEX TO FORM 10-Q
Page
No.
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PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements:
Condensed Consolidated Statement of Income for
the three-month and nine-month periods ended
September 28, 1997 and September 29, 1996 3
Condensed Consolidated Balance Sheet as of
September 28, 1997 and December 31, 1996 4
Condensed Consolidated Statement of Cash Flows for
the nine-month periods ended September 28, 1997
and September 29, 1996 5
Notes to Condensed Consolidated Financial
Statements 6
Independent Auditors' Report 8
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings 11
Item 6.
Exhibits and Reports on Form 8-K 11
Signature 12
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
__________________ __________________
Sept.28, Sept.29, Sept.28, Sept.29,
1997 1996 1997 1996
________ ________ ________ ________
(thousands of
dollars, except
per share data)
Net sales $155,012 $144,121 $444,403 $412,696
Operating costs
and expenses:
Cost of goods
sold 108,588 102,540 313,089 294,974
Marketing,
distribution and
administrative
expenses 19,488 18,152 56,823 54,377
Research and
development
expenses 4,974 4,892 15,199 14,671
________ ________ ________ ________
Income from
operations 21,962 18,537 59,292 48,674
Non-operating
deductions, net (2,560) (1,240) (5,648) (3,216)
________ ________ ________ ________
Income before
provision for
taxes on income
and minority
interests 19,402 17,297 53,644 45,458
Provision for
taxes on income 6,207 5,366 17,164 14,293
Minority interests (518) 41 (162) (79)
________ ________ ________ ________
Net income $13,713 $11,890 $36,642 $31,244
======== ======== ======== ========
Earnings per
common share $ 0.61 $ 0.53 $ 1.62 $ 1.38
======== ======== ======== ========
Cash dividends
declared per
common share $ 0.025 $ 0.025 $ 0.075 $ 0.075
======== ======== ======== ========
Weighted average
number of common
shares
outstanding 22,545 22,616 22,565 22,627
======== ======== ======== ========
See accompanying Notes to Condensed Consolidated
Financial Statements.
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MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(thousands of dollars) Sept. 28, Dec. 31,
1997* 1996**
________ ________
Current assets:
Cash and cash equivalents $ 31,530 $ 15,446
Accounts receivable, net 115,961 102,494
Inventories 63,710 70,438
Other current assets 15,429 13,902
________ ________
Total current assets 226,630 202,280
Property, plant and equipment,
less accumulated depreciation
and depletion - Sept. 28, 1997
- $343,720; Dec. 31, 1996 -
$311,815 496,138 501,067
Other assets and deferred
charges 11,067 10,514
________ ________
Total assets $733,835 $713,861
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 13,582 $ 25,339
Accounts payable 31,043 29,223
Other current liabilities 42,231 32,178
________ ________
Total current liabilities 86,856 86,740
Long-term debt 101,610 104,900
Other non-current liabilities 78,288 73,971
________ ________
Total liabilities 266,754 265,611
________ ________
Shareholders' equity:
Common stock 2,534 2,526
Additional paid-in capital 137,751 135,676
Retained earnings 399,157 364,210
Currency translation adjustment (1,640) 11,560
Unrealized holding gains 179 163
________ ________
537,981 514,135
Less common stock held in
treasury, at cost 70,900 65,885
________ ________
Total shareholders' equity 467,081 448,250
________ ________
Total liabilities and
shareholders' equity $733,835 $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)
Nine Months Ended
______________________
(thousands of dollars) Sept. 28, Sept. 29,
1997 1996
_________ ________
Operating Activities
Net income $36,642 $31,244
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation, depletion
and amortization 39,522 34,445
Other non-cash items 3,261 5,022
Net changes in operating
assets and liabilities (2,969) (28,784)
________ ________
Net cash provided by operating
activities 76,456 41,927
________ ________
Investing Activities
Purchases of property, plant
and equipment (46,984) (78,283)
Other investing activities, net 3,762 1,725
________ ________
Net cash used in investing
activities (43,222) (76,558)
======== ========
Financing Activities
Proceeds from issuance of
short-term and long-term debt 19,597 111,659
Repayment of debt (34,537) (71,117)
Purchase of common shares for
treasury (5,015) (4,311)
Equity and debt proceeds from
minority interests 3,214 ---
Other financing activities, net 541 110
________ ________
Net cash (used in) provided by
financing activities (16,200) 36,341
________ ________
Effect of exchange rate changes
on cash and cash equivalents (950) (884)
________ ________
Net increase in cash
and cash equivalents 16,084 826
Cash and cash equivalents at
beginning of period 15,446 11,318
________ ________
Cash and cash equivalents at
end of period $ 31,530 $ 12,144
======== ========
Interest paid $ 6,662 $ 4,408
======== ========
Income taxes paid $ 9,907 $ 10,446
======== ========
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
nine-month periods ended September 28, 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:
September 28, December 31,
(thousands of dollars) 1997 1996
____________ ___________
Raw materials $22,347 $23,585
Work in process 6,056 8,513
Finished goods 18,829 20,670
Packaging and supplies 16,478 17,670
_______ _______
Total inventories $63,710 $70,438
======= =======
Note 3 -- Long-Term Debt and Commitments
The following is a summary of long-term debt:
September 28, December 31,
(thousands of dollars) 1997 1996
____________ ___________
7.70% Industrial Development
Revenue Bond Series 1990
Due 2009 (secured) $ --- $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
April 1, 2012 7,545 ---
Variable/Fixed Rate
Industrial Development
Revenue Bonds Due August 1,
2012 8,000 ---
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 1,953 ---
________ ________
115,098 117,900
Less: Current maturities 13,488 13,000
________ ________
Long-term debt $101,610 $104,900
======== ========
The Variable/Fixed Rate Industrial Development
Revenue Bonds due August 1, 2012 are tax-exempt 15-year
instruments that were issued on August 1, 1997 to
finance the construction of a PCC plant in North
America. 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
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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%.
On July 31, 1997, the Company retired the $7.3
million Industrial Development Revenue Bonds Due 2009.
On August 4, 1997, the Company redeemed $1,455,000
of the Variable/Fixed Rate Industrial Development
Revenue Bonds due April 1, 2012. This represented the
unused portion of the original bond issuance proceeds
received on April 1, 1997 to finance the construction
of a PCC plant in Jackson, Alabama.
The Company has available $120 million in
uncommitted short-term bank credit lines, none of which
is in use at September 28, 1997.
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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 September 28, 1997 and the
related condensed consolidated statements of income for
each of the three-month and nine-month periods ended
September 28, 1997 and September 29, 1996 and cash
flows for the nine-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
November 3, 1997
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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 Nine Months Ended
__________________ _________________
Sept.28, Sept.29, Sept.28, Sept.29,
1997 1996 1997 1996
_______ _______ _______ _______
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods
sold 70.0 71.1 70.5 71.5
Marketing,
Distribution and
administrative
expenses 12.6 12.6 12.8 13.2
Research and
development
expenses 3.2 3.4 3.4 3.5
____ ____ ____ ____
Income from
Operations 14.2 12.9 13.3 11.8
Net income 8.8% 8.3% 8.2% 7.6%
==== ==== ==== ====
Results of Operations
Three Months Ended September 28, 1997 as Compared with
Three Months Ended September 29, 1996
Net sales in the third quarter of 1997 increased
7.6% to $155.0 million from $144.1 million in the third
quarter of 1996. This increase in revenue was primarily
attributable to higher volumes in all three product
lines: precipitated calcium carbonate ("PCC")
products, processed minerals products and refractory
products. The stronger U.S. dollar had an unfavorable
impact of approximately $3.1 million on net sales.
PCC sales grew 10.0% to $75.8 million from $68.9
million in the third quarter of 1996. This increase
was primarily attributable to the start of operations
at five new satellite PCC plants since the third
quarter of 1996 and to the significant ramp-up of
several satellite plants that began operations during
the first nine months of 1996. During the third
quarter of 1997, developments in our PCC product line
included start-up of operations of two new satellite
PCC plants and an agreement to construct another
satellite plant in the U.S.
Late in the third quarter of 1997, the Company
began operation of its first on-site acid-tolerant
satellite PCC plant at the Myllykoski Paper Oy mill in
Anjalankoski, Finland. This paper company is a leading
producer of groundwood supercalendered paper which is
used for magazines and catalogues. The satellite plant
at Myllykoski is equivalent to approximately two
satellite units. A satellite "unit" produces between
25,000 and 35,000 tons of PCC annually.
Also in the third quarter of 1997, PT Sinar Mas
Specialty Minerals, a joint venture company, began
operation of a satellite PCC plant for paper filling
and coating applications at a paper mill in Indonesia.
This PCC plant is equivalent to approximately two
satellite units. In addition, the Company announced an
agreement with Champion International Corporation for
the construction of a satellite PCC plant at the
Champion paper mill near Pensacola, Florida. This
plant is expected to be in operation in the second
quarter of 1998 and will be approximately equal to two
satellite units.
Net sales of processed mineral products increased
3.8% in the third quarter of 1997 to $29.8 million from
$28.7 million in the comparable quarter of 1996. The
sales growth was due to volume increases in the lime
and limestone product line.
Net sales of refractory products increased 6.2% to
$49.4 million from $46.5 million in the third quarter
of 1996. Profitability of the refractory product line
was significantly higher than the prior year due to the
continued emphasis on higher margin specialty products.
Net sales in the United States were 8.0% higher
than in the prior year's third quarter, primarily due
to volume growth in all product lines. Foreign sales
were 6.6% higher than in the prior year, due primarily
to the international expansion of the satellite PCC
product line. This growth was partially offset by
unfavorable foreign exchange rates.
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Income from operations increased 18.5% in the
third quarter of 1997 to $22.0 million. This increase
was due primarily to good growth in the PCC satellite
operations and improved profitability in refractory
products, largely due to the successful implementation
of the Company's strategy of introducing high-value,
innovative products. This growth was partially offset
by weakness in the processed minerals product line,
specifically in the talc operations.
Non-operating deductions increased primarily as a
result of foreign exchange losses in Asia.
Net income grew 15.3% to $13.7 million from $11.9
million in the prior year. Earnings per share rose
15.1% to $0.61 in the third quarter of 1997 compared to
$0.53 in the prior year.
Nine Months Ended September 28, 1997 as Compared with
Nine Months Ended September 29, 1996
Net sales for the first nine months of 1997
increased 7.7% to $444.4 million from $412.7 million in
1996. Excluding the impact of overall unfavorable
foreign exchange rates, sales would have increased
9.7%. PCC sales increased 14.3% to $219.8 million from
$192.3 million in the prior year. This increase was
primarily attributable to the commencement of
operations at five new satellite PCC plants since the
third quarter of 1996, significant volume increases
from several satellite plants that commenced operations
in early 1996 and an improvement in the paper industry
from the first half of 1996. Net sales of processed
minerals products rose 5.0% to $79.7 million for the
first nine months of 1997. Refractory product sales
for the first nine months of 1997 were $144.9 million,
a slight increase over the prior year's $144.5 million.
Profitability of our refractory products was
significantly higher than a year ago, primarily due to
our continued emphasis on higher-margin specialty
products.
The Company now operates 48 satellite PCC plants
around the world and has four under construction, the
most recent one in Pensacola, Florida; one in France;
one in South Africa and another in Germany. The
satellite plant in Florida is scheduled to be
operational in the second quarter of 1998, and will be
equivalent to two satellite units. 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 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. The
satellite plant in Germany will be equivalent to two
satellite units and is scheduled to begin operations in
the first quarter of 1998.
Net sales in the United States increased 7.6% to
$306.8 million in the first nine months of 1997, due
primarily to growth in the PCC product line. Net
foreign sales increased approximately 7.8% to $137.6
million in the first nine months of 1997, primarily as
a result of the continued international expansion of
the PCC product line.
Income from operations rose 21.8% to $59.3 million
in the first nine months of 1997 from $48.7 million in
the previous year.
Non-operating deductions increased due to foreign
exchange losses and 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
nine months of 1997.
Net income increased 17.3% to $36.6 million from
$31.2 million in 1996. Earnings per share increased
17.4% to $1.62 compared to $1.38 in the prior year.
Liquidity and Capital Resources
The Company's financial position remained strong
in the first nine months of 1997. Cash flows of $76.5
million were provided from operations and were applied
principally to fund $47.0 million of capital
expenditures and to remit the required principal
repayment of $13 million under the Company's Guarantied
Senior Notes due June 11, 2000. The increase in cash
from operating activities was due to an improvement in
working capital.
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The Variable/Fixed Rate Industrial Revenue Bonds
due April 1, 2012 and August 1, 2012, respectively, are
tax-exempt 15-year instruments issued to finance the
construction of North American satellite PCC plants.
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%. The total amount outstanding on
these bonds at September 28, 1997 was $15.5 million.
On July 31, 1997, the Company retired the $7.3
million Industrial Development Revenue Bonds Due 2009.
The Company has available approximately $120
million in uncommitted, short-term bank credit lines,
none of which were outstanding at September 28, 1997.
The Company anticipates that capital expenditures for
all of 1997 will be about $65 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 decline in the capital
expenditure forecast from the previous estimate was due
to delays in finalizing satellite PCC contracts and
expansions. 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.
The Company is currently investigating the
possibility of divesting its Limestone Midwest business,
and intends to reach a decision by year-end wether to
sell this business or continue to operate it. Based at
the Port Inland mine in Gulliver, MI, Limestone Midwest
is the Company's only business unit competing for sales
of limestone aggregate, a commodity business. Sales for
Limestone Midwest in 1996 were approximately $17.1 million.
The Company has also entered into a long-term lease of
its Pima County, Arizona limestone facility to The
Georgia Marble Company. Sales for this facility in 1996
were approximately $1.5 million.
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 6.EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
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).
99 - Cautionary factors that may affect future
results.
b) No reports on Form 8-K were filed during the third
quarter of 1997.
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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
November 10, 1997
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