Minerals Technologies Inc. Reports Second Quarter Diluted Earnings Per Share of $0.63; Company Cites Finnish Paper Industry Labor Dispute and Additional Costs of New Facilities for Lower than Expected Earnings
NEW YORK, Jul 28, 2005 (BUSINESS WIRE) -- Minerals Technologies Inc. (NYSE: MTX) today reported second quarter net income of $13.1 million, a 13-percent decrease from the $15.1 million reported in the second quarter of 2004. Diluted earnings per common share were $0.63 compared with $0.73 in the same period last year, a 14-percent decrease.
"Minerals Technologies had a difficult second quarter in which earnings were significantly below our expectations," said Paul R. Saueracker, chairman, president and chief executive officer. "The primary reason for the shortfall was the 56-day labor dispute that occurred in the Finnish paper industry, where we have manufacturing facilities that supply precipitated calcium carbonate to a number of paper mills. During the quarter, we also experienced higher than anticipated start-up costs at two new facilities in China and continued ramp-up costs at a merchant facility in Germany."
Worldwide sales in the quarter increased 7 percent to $244.7 million from $229.3 million in the previous year. Foreign exchange had a favorable impact on sales of approximately $4.9 million, or 2 percentage points of sales growth. Income from operations was $20.8 million, or 9 percent lower than the $22.9 million reported for the second quarter of 2004.
Worldwide sales for the first six months of 2005 increased 13 percent to $495.5 from $438.8 million reported last year. The favorable impact of foreign exchange on sales for the first six months of 2005 was approximately $10.7 million, or 2 percentage points of growth. The company also benefited by approximately 3 percentage points of sales growth from five additional business days in the first half as compared to the prior year. Operating income for the first six months of 2005 was $44.9 million compared with $43.0 million reported in the first half of 2004, a growth of 4 percent.
For the first six months of 2005, net income increased 2 percent to $28.4 million from $27.7 million last year. Diluted earnings per common share increased 2 percent to $1.36 from $1.33 for the same period in 2004.
Sales in the Specialty Minerals segment, which includes the precipitated calcium carbonate (PCC) and Processed Minerals product lines, increased 4 percent to $160.7 million from $155.1 million in the comparable quarter of 2004. Income from operations for the second quarter of 2005 was $12.2 million, a 24-percent decline from $16.1 million reported the previous year. For the first six months of 2005, Specialty Minerals sales increased 11 percent to $330.5 million from $298.9 million in the same period in 2004. Income from operations for the six months decreased 3 percent to $28.6 million from $29.6 million in the first half of last year.
Worldwide net sales of PCC, which is primarily used in the manufacturing process of the paper industry, increased 4 percent in the second quarter to $122.9 million from $118.5 million in the same period in 2004. Foreign exchange had a favorable impact on sales of approximately 2 percentage points of growth. Total PCC sales for the six months were $256.9 million, an 11-percent increase from $230.9 million in the prior year.
For the second quarter, Paper PCC sales grew 3 percent to $108.8 million from $105.3 million in the prior year. Paper PCC sales in North America, the company's largest market, grew 8 percent with approximately 3 percentage points of growth generated from the Millinocket, Maine, facility, which restarted in May 2004. Excluding foreign currency, European region sales declined 14 percent. The European region was affected primarily by the paper industry labor dispute in Finland, which had an impact on sales of approximately $5 million or 15 percentage points of growth. The labor dispute was settled on June 29.
Worldwide tonnage volume of PCC used for filling and coating paper was flat for the second quarter. "This was primarily the result of the labor dispute in Finland," said Mr. Saueracker, adding that during the lockout the Finnish paper industry lost almost 1.7 million tons of paper production.
Sales of Specialty PCC in the quarter grew 7 percent to $14.1 million from $13.2 million in 2004 due to increased sales from the Brookhaven, Mississippi, facility, and from the facility in Lifford, England.
Worldwide sales of Processed Minerals products for the second quarter were $37.8 million compared with $36.6 million for the same period in 2004, an increase of 3 percent. For the six months, sales of Processed Minerals products increased 8 percent to $73.6 million from $68.0 million in the first half of 2004. These products are used in the building materials, polymers, ceramics, paints and coatings, glass and other manufacturing industries.
Second quarter net sales in the Refractories segment, the products of which are used primarily in the steel industry, increased 13 percent to $84.0 million from $74.2 million in the same period of 2004. The favorable impact of foreign exchange was approximately 3 percentage points of growth. Sales in the metallurgical product line grew 80 percent to $24.5 million. This increase was attributable to a combination of price increases due to the substantial escalation in the cost of raw materials for this product line, and strong volume growth at both of the company's manufacturing facilities in Connecticut and Holland. Sales of refractory products and systems to steel and other industrial applications decreased 2 percent to $59.5 million from $60.6 million in the prior year. Income from operations in the second quarter 2005 increased 27 percent to $8.6 million from $6.8 million in the same period last year.
For the six months, sales in the Refractories segment increased 18 percent to $165.0 million from $139.9 million in the same period in 2004. Income from operations for the six months increased 22 percent to $16.3 million from $13.4 million for the first six months of 2004.
"Much of the growth in the Refractories segment was the result of continued good performance by our metallurgical product line," said Mr. Saueracker. "Refractories, however, continued to be affected by high raw material costs, and we have seen a softening in the North American steel industry in recent weeks."
Consolidated cost of goods sold was 79.0 percent of sales compared with 76.3 percent of sales in the second quarter of 2004. Cost of goods sold for the quarter increased 8 percent in the Specialty Minerals segment, which had an unfavorable leveraging impact on the sales growth resulting in a 12 percent decline in production margin. This unfavorable leveraging occurred in Europe and Asia. European margins were affected by the labor dispute in Finland and ongoing coating program development costs at the new merchant PCC facility in Germany. Margins in Asia were affected by the continuing start-up and ramp-up costs at two new PCC facilities in China. Collectively, these three factors had an adverse impact on production margin and operating income of approximately $5 million.
Cost of goods sold in the Refractories segment increased 16 percent in the quarter. This also had an unfavorable leveraging impact on the sales growth resulting in a 7 percent increase in production margin. Higher raw material costs continue to impact the Refractories segment margins.
"Minerals Technologies recorded disappointing financial results for the second quarter as a result of the loss of paper production because of the labor dispute in Finland, as well as the higher than expected start-up costs at our two new PCC satellite plants in China and the ramp-up of our coating program in Europe," said Mr. Saueracker. "The Finnish papermakers are now producing and our PCC plants there should be operating at normal levels through the balance of the third quarter. The two plants in China are now ramping up, and the coating facility in Germany is accelerating production. Although our business fundamentals remain strong, we see some weakness in the North American steel market and are experiencing rapidly increasing energy costs in some of our operations."
The company has scheduled an analyst conference call for July 29, 2005 at 11:00 a.m. to discuss operating results for the second quarter. The conference call will be broadcast over the company's website, www.mineralstech.com.
This press release contains some forward-looking statements; in particular statements of anticipated changes in the business environment in which the company operates and in the company's future operating rate. Actual results may differ materially from these expectations. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this document should be evaluated together with the many uncertainties that affect our businesses, particularly those mentioned in the cautionary statements in our 2004 Annual Report Form 10-K and in our other reports filed with the Securities and Exchange Commission.
CONSOLIDATED STATEMENT OF INCOME
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
(thousands of dollars, except per share data)
(unaudited)
Second Quarter % Six months %
-------------- ----------------
2005 2004 Change 2005 2004 Change
-------- -------- ------ ------- ------ ------
Net sales $244,734 $229,292 7 $495,550 $438,765 13
Operating costs
and expenses:
Cost of goods sold 193,339 174,998 10 386,324 334,805 15
Marketing and
administrative
expenses 23,263 23,579 (1) 49,881 45,790 9
Research and
development
expenses 7,322 7,378 (1) 14,476 14,195 2
Restructuring
charges 0 428 N/A 0 1,000 N/A
--------- -------- --------- --------
Income from
operations 20,810 22,909 (9) 44,869 42,975 4
Non-operating
deductions - net 1,259 725 74 2,477 2,290 8
-------- -------- -------- --------
Income before
provision for taxes
on income and minority
interests 19,551 22,184 (12) 42,392 40,685 4
Provision for
taxes on income 6,101 6,593 (7) 13,227 12,093 9
Minority interests 316 473 (33) 793 884 (10)
-------- -------- -------- --------
Net income $ 13,134 $ 15,118 (13) $ 28,372 $ 27,708 2
-------- -------- -------- --------
Weighted average
number of common
shares outstanding:
Basic 20,573 20,559 20,551 20,520
Diluted 20,836 20,802 20,814 20,760
Earnings per share:
Basic earnings per
share $ 0.64 $ 0.74 (14) $ 1.38 $ 1.35 2
-------- -------- -------- --------
Diluted earnings per
share $ 0.63 $ 0.73 (14) $ 1.36 $ 1.33 2
-------- -------- -------- --------
Cash dividends
declared per
common share $ 0.05 $ 0.05 $ 0.10 $ 0.10
-------- -------- -------- --------
1) For the periods ended July 3, 2005 and June 27, 2004.
2) Sales increased 6% in the United States in the second quarter
and 12% for the first six months of 2005. International sales
increased approximately 7% in the second quarter and 14% for the
first six months of 2005.
3) Provisions for bad debt, included in marketing and
administrative expenses, decreased $1.9 million in the second
quarter and $2.3 million for the first six months of 2005. The
overall allowance for doubtful accounts was reduced from $7.1
million at December 31, 2004 to $6.6 million at July 3, 2005.
4) The Company recorded restructuring charges of $0.4 million in
the second quarter of 2004 and $1.0 million in the first half of
2004 related to the program announced in December 2003. These
charges relate to workforce reductions from business units
and organization levels throughout the Company's worldwide
operations.
5) The results of operations for the interim period ended July 3,
2005 are not necessarily indicative of the results that ultimately
might be achieved for the current year.
6) The analyst conference call to discuss operating results for
the second quarter is scheduled for July 29, 2005 at 11:00 a.m. and
will be broadcast over the Company's website
(www.mineralstech.com). The broadcast will remain on the Company's
website for no less than one year.
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(In Thousands of Dollars)
July 3, December 31,
2005* 2004**
------------ ------------
Current assets:
Cash & cash equivalents 91,191 105,767
Short-term investments -- 7,200
Accounts receivable, net 173,026 156,276
Inventories 117,907 106,125
Prepaid expenses and other current
assets 26,906 20,303
------------ ------------
Total current assets 409,030 395,671
Property, plant and equipment 1,340,724 1,330,176
Less accumulated depreciation 728,561 715,891
------------ ------------
Net property, plant & equipment 612,163 614,285
Goodwill 52,491 53,729
Prepaid benefit costs 59,834 61,617
Other assets and deferred charges 28,066 29,600
------------ ------------
Total assets 1,161,584 1,154,902
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt 63,521 33,917
Accounts payable 60,146 56,381
Other current liabilities 61,914 62,555
------------ ------------
Total current liabilities 185,581 152,853
Long-term debt 91,842 94,811
Other non-current liabilities 110,819 107,925
------------ ------------
Total liabilities 388,242 355,589
Total shareholders' equity 773,342 799,313
------------ ------------
Total liabilities and shareholders'
equity 1,161,584 1,154,902
------------ ------------
* Unaudited.
** Condensed from audited financial
statements.
SOURCE: Minerals Technologies Inc.
Minerals Technologies Inc. Rick B. Honey, 212-878-1831