Minerals Technologies Inc. Reports Second Quarter Diluted Earnings Per Share of $0.63
NEW YORK--(BUSINESS WIRE)--July 27, 2006--Minerals Technologies Inc. (NYSE: MTX) today reported second quarter net income of $12.6 million, a 4-percent decrease from the $13.1 million reported in the second quarter of 2005. Diluted earnings per common share were $0.63, the same as reported in the second quarter of last year.
"As we announced in June, the company did not achieve the increase in operating income expected during the quarter," said Paul R. Saueracker, chairman, president and chief executive officer.
Worldwide sales in the quarter increased 9 percent to $266.5 million from $244.7 million in the previous year. Foreign exchange had a minimal unfavorable impact on sales. Income from operations was $20.9 million in the second quarter, slightly above the prior year.
Worldwide sales for the first six months of 2006 increased 7 percent to $532.5 million from $495.5 million reported last year. Foreign exchange had an unfavorable impact on sales of approximately $6.1 million or 1 percentage point of growth. Operating income for the first six months of 2006 was $39.8 million, an 11-percent decrease from the $44.9 million reported in the first half of 2005.
For the first six months of 2006, net income decreased 11 percent to $25.4 million from $28.4 million last year. Diluted earnings per common share decreased 7 percent to $1.27 from $1.36 for the same period in 2005.
"In a comparison of the second quarter of 2006 with the same period last year, our operating income improved only slightly as a result of a number of factors," said Mr. Saueracker. "These included unrecovered raw material and energy cost increases; reduced contributions from the metallurgical product line; paper mill and paper machine shutdowns affecting several satellite PCC facilities; and, increased market development and ramp-up costs for our SYNSIL(R) Products.
"Partially mitigating these factors were improved paper industry operations in Finland, which had faced labor disputes in the second quarter of last year; improved operations of our two large satellite precipitated calcium carbonate (PCC) plants in China; and the ramp up of our European coating program," said Mr. Saueracker.
Sales in the Specialty Minerals segment, which includes the PCC and Processed Minerals product lines, increased 12 percent to $179.6 million from $160.7 million in the comparable quarter of 2005. Income from operations for the second quarter of 2006 was $13.3 million, a 9-percent increase over the $12.2 million reported the previous year. For the first six months of 2006, Specialty Minerals sales increased 10 percent to $362.1 million from $330.5 million in the same period in 2005. Income from operations for the six months decreased 11 percent to $25.5 million from $28.6 million in the first half of last year.
Worldwide net sales of PCC, which is used primarily in paper manufacturing, increased 12 percent in the second quarter to $137.8 million from $122.9 million in the same period in 2005. Total PCC sales for the first six months of 2006 were $281.1 million, a 9-percent increase from $256.9 million in the prior year.
For the second quarter, Paper PCC sales grew 14 percent to $123.7 million from $108.8 million in the prior year. For the first half of 2006, Paper PCC sales grew 10 percent to $251.9 million.
"Paper PCC achieved sales growth in all regions during the second quarter as total worldwide unit volumes grew 11 percent," said Mr. Saueracker. "Four percentage points of this growth were attributable to the ramp-up of volumes from new facilities in China and Germany and 3 percentage points of growth were due to the resumption of operations in Finland that had been affected by the labor actions in 2005. Strong demand and satellite PCC expansions more than offset the volume losses associated with the paper mill shutdowns."
Sales of Specialty PCC in the quarter were essentially flat compared to prior year at $14.1 million. For the first six months of 2006, Specialty PCC sales increased 3 percent to $29.2 million from $28.4 million.
Sales of Processed Minerals products for the second quarter were $41.8 million, an 11-percent increase over the $37.8 million reported for the same period in 2005. Talc sales increased 18 percent to $16.1 million from $13.7 million in the prior year due to strong global demand for plastics and consumer-related markets. For the six months, sales of Processed Minerals products increased 10 percent to $81.0 million from $73.6 million in the first half of 2005. Processed Minerals 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, which primarily serves the steel industry, increased 3 percent to $86.9 million from $84.0 million in the same period of 2005. Sales in the metallurgical product line decreased 15 percent to $20.8 million from $24.5 million in the second quarter of 2005. Sales of refractory products and systems to steel and other industrial applications increased 11 percent to $66.1 million from $59.5 million in the prior year. Income from operations for the Refractories segment in the second quarter of 2006 decreased 12 percent to $7.6 million from $8.6 million in the same period last year.
"The Refractories segment experienced strong demand for its refractory products and systems during the quarter," said Mr. Saueracker. "The decline in sales in the metallurgical product line, however, was attributable primarily to lower prices as a result of a reduction in raw material costs passed through to customers."
For the six months, sales in the Refractories segment increased 3 percent to $170.4 million from $165.0 million in the same period in 2005. However, income from operations for the six months decreased 12 percent--from $16.3 million for the first six months of 2005 to $14.3 million. The decline in operating income for the six months was due to lower margins in the metallurgical product line, and additional costs related to new business development activities.
Mr. Saueracker concluded: "We are disappointed with the company's operating income performance for the second quarter, but looking forward, we believe that our results will improve through the remainder of the year,"
The company has scheduled an analyst conference call for Friday, July 28, 2006 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 2005 Annual Report Form 10-K and in our other reports filed with the Securities and Exchange Commission.
CONSOLIDATED STATEMENTS OF INCOME
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
(thousands of dollars, except per share data)
(unaudited)
Second Quarter Six months
------------------ % ------------------ %
2006 2005 Change 2006 2005 Change
-------- -------- ------ -------- -------- ------
Net sales $266,486 $244,734 9 $532,526 $495,550 7
Operating costs
and expenses:
Cost of goods
sold 210,527 193,339 9 422,711 386,324 9
Marketing and
administrative
expenses 27,241 23,263 17 54,914 49,881 10
Research and
development
expenses 7,861 7,322 7 15,080 14,476 4
-------- -------- -------- --------
Income from
operations 20,857 20,810 0 39,821 44,869 (11)
Non-operating
deductions -
net 1,572 1,259 25 861 2,477 (65)
-------- -------- -------- --------
Income before
provision for
taxes on income
and minority
interests 19,285 19,551 (1) 38,960 42,392 (8)
Provision for
taxes on income 5,842 6,101 (4) 11,804 13,227 (11)
Minority
interests 873 316 176 1,774 793 124
-------- -------- -------- --------
Net income $ 12,570 $ 13,134 (4) $ 25,382 $ 28,372 (11)
-------- -------- -------- --------
Weighted average
number of
common shares
outstanding:
Basic 19,836 20,573 19,892 20,551
Diluted 19,994 20,836 20,039 20,814
Earnings per
share:
Basic earnings
per share $ 0.63 $ 0.64 (2) $ 1.28 $ 1.38 (7)
-------- -------- -------- --------
Diluted
earnings per
share $ 0.63 $ 0.63 0 $ 1.27 $ 1.36 (7)
-------- -------- -------- --------
Cash dividends
declared per
common share $ 0.05 $ 0.05 $ 0.10 $ 0.10
-------- -------- -------- --------
1) For the periods ended July 2, 2006 and July 3, 2005.
2) Sales increased 8% in the United States in both the second quarter
and for the first six months of 2006. International sales
increased approximately 11% in the second quarter and 6% for the
first six months of 2006.
3) Provisions for bad debt, included in marketing and administrative
expenses, increased $1.1 million in the second quarter and $1.6
million for the first six months of 2006. The provisions for bad
debt were $0.3 million and $1.3 million for the second quarter and
first six months of 2006, respectively. In the second quarter of
2005, recoveries of bad debt were in excess of provisions.
4) On January 1, 2006, the Company adopted the fair value recognition
provisions of SFAS No. 123R, "Share-Based Payment," using the
modified-prospective transition method. Under this transition
method, stock-based compensation was recognized in the financial
statements for granted, modified or settled stock options.
Compensation expense recognized included the estimated expense for
stock options granted in the first half, based on the grant date
fair value estimated in accordance with the provisions of SFAS
123R, and the estimated expense for the portion vesting in the
first half for options granted prior to, but not vested as of
January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions of SFAS 123. Stock-based
compensation expense relating to these options recognized in
marketing and administrative expenses in the consolidated
statement of income in the second quarter and first six months was
$0.6 million and $1.1 million, respectively. The related tax
benefit on the non- qualified stock options was $0.1 million and
$0.2 million in the second quarter and first six months,
respectively.
5) On January 1, 2006, the Company adopted the consensus of Emerging
Issues Task Force ("EITF") Issue No. 04-06, "Accounting for
Stripping Costs Incurred During Production in the Mining
Industry." This consensus states that stripping costs incurred
during the production phase of a mine are variable production
costs that should be included in the costs of inventory produced
during the period that the stripping costs are incurred. The
Company had previously deferred stripping costs in excess of the
average life of mine stripping ratio and amortized such costs on a
unit of production method. As a result of this consensus, the
Company recorded an after-tax charge to opening retained earnings
of $7.1 million and increased its opening inventory by $0.8
million. The change in accounting did not have a significant
impact on the second quarter or the first six months earnings.
6) During the first quarter of 2006, the Company recognized an
insurance settlement gain of approximately $1.8 million for
property damage sustained at the Easton, Pennsylvania facility in
2004 related to Hurricane Ivan. Such amount is included in
non-operating deductions (income) for the six month period ended
July 2, 2006.
7) The results of operations for the interim period ended July 2, 2006
are not necessarily indicative of the results that ultimately
might be achieved for the current year.
8) The analyst conference call to discuss operating results for the
second quarter is scheduled for Friday, July 28, 2006 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.
SUPPLEMENTARY SALES DATA
MINERALS TECHNOLOGIES INC. AND
SUBSIDIARY COMPANIES
(millions of dollars)
(unaudited)
Second Quarter Six Months
-------------- % -------------- %
2006 2005 Change 2006 2005 Change
------ ------ ------ ------- ------ ------
United States $160.1 $148.9 8 $321.9 $297.6 8
International $106.4 $ 95.8 11 $210.6 $197.9 6
Paper PCC $123.7 $108.8 14 $251.9 $228.5 10
Specialty PCC 14.1 14.1 0 29.2 28.4 3
------ ------ ------ ------
PCC Products $137.8 $122.9 12 $281.1 $256.9 9
------ ------ ------ ------
Talc $ 16.1 $ 13.7 18 $ 30.9 $ 27.7 12
Other Processed Minerals
Products 25.7 24.1 7 50.1 45.9 9
------ ------ ------ ------
Processed Minerals
Products $ 41.8 $ 37.8 11 $ 81.0 $ 73.6 10
------ ------ ------ ------
Specialty Minerals
Segment $179.6 $160.7 12 $362.1 $330.5 10
------ ------ ------ ------
Refractory products $ 66.1 $ 59.5 11 $127.1 $123.9 3
Metallurgical Products 20.8 24.5 (15) 43.3 41.1 5
------ ------ ------ ------
Refractories Segment $ 86.9 $ 84.0 3 $170.4 $165.0 3
------ ------ ------ ------
Net Sales $266.5 $244.7 9 $532.5 $495.5 7
------ ------ ------ ------
MINERALS TECHNOLOGIES INC AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands of Dollars)
July 2, December 31,
2006* 2005**
------------ ------------
Current assets:
Cash & cash equivalents 50,770 51,100
Short-term investments 8,135 2,350
Accounts receivable, net 196,150 184,272
Inventories 121,531 118,895
Prepaid expenses and other current assets 17,882 20,583
------------ ------------
Total current assets 394,468 377,200
Property, plant and equipment 1,431,931 1,380,298
Less accumulated depreciation 794,923 751,553
------------ ------------
Net property, plant & equipment 637,008 628,745
Goodwill 54,280 53,612
Prepaid benefit costs 67,344 67,795
Other assets and deferred charges 28,760 28,951
------------ ------------
Total assets 1,181,860 1,156,303
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt 62,342 62,847
Current maturities of long-term debt 53,160 53,698
Accounts payable 62,905 61,323
Other current liabilities 59,044 53,384
------------ ------------
Total current liabilities 237,451 231,252
Long-term debt 38,639 40,306
Other non-current liabilities 116,143 113,583
------------ ------------
Total liabilities 392,233 385,141
Total shareholders' equity 789,627 771,162
------------ ------------
Total liabilities and shareholders' equity 1,181,860 1,156,303
------------ ------------
* Unaudited.
** Condensed from audited financial statements.
CONTACT: Minerals Technologies Inc.
Rick B. Honey, 212-878-1831
SOURCE: Minerals Technologies Inc.