Minerals Technologies Reports Third Quarter Diluted Earnings Per Share of $0.72, a 20-Percent Increase over Prior Year
NEW YORK, Oct 26, 2006 (BUSINESS WIRE) -- Minerals Technologies Inc. (NYSE: MTX) today reported third quarter net income of $14.1 million, a 15-percent increase from the $12.2 million reported in the third quarter of 2005. Diluted earnings per common share increased 20 percent to $0.72 from $0.60 in the same period last year.
"We saw improved financial performance in the third quarter as a result of increased steel production in North America and Europe, which provided a significant benefit to our Refractories segment, and from our two new large satellite PCC plants in China, which had a significant improvement in financial performance as compared with the prior year. We also experienced strong demand for our PCC used in uncoated free-sheet paper in North America and volume growth from our satellite PCC expansions in Europe, which together more than offset volume losses from paper mill and paper machine shutdowns during the quarter," said Paul R. Saueracker, chairman, president and chief executive officer. "We continue, however, to be challenged by unrecovered higher raw material and energy costs in the Specialty Minerals segment, and ramp-up and market development expenses related to our new Synsil(R) Products plant in South Carolina and our Refractories facility in China."
Worldwide sales in the quarter were up 7 percent to $265.3 million from $246.8 million in the previous year. Foreign exchange had a favorable impact on sales of 1 percentage point of growth. Income from operations increased 28 percent to $24.4 million from $19.1 million in the third quarter of 2005.
Net income for the first nine months decreased 3 percent to $39.4 million this year from $40.6 million in the prior year. Diluted earnings per share for the nine months increased 1 percent to $1.98 from $1.96 for the same period in 2005.
Worldwide sales for the first nine months of 2006 increased 7 percent to $797.9 million from $742.4 million in the same period last year. Foreign exchange had an unfavorable impact on sales of less than 1 percentage point of growth. Operating income for the nine months was $64.3 million, which was slightly higher than the operating income for the first nine months of 2005.
Worldwide sales in the third quarter for the Specialty Minerals segment, which includes the PCC and Processed Minerals product lines, increased 6 percent to $177.8 million from $167.3 million in the prior year. Income from operations in the third quarter of 2006 was $15.7 million, a 5-percent increase over the $14.9 million in the third quarter of 2005.
For the first nine months of 2006, Specialty Minerals segment sales were up 8 percent to $539.9 million from $497.8 million for the same period in 2005. Specialty Minerals recorded income from operations of $41.2 million, a 5-percent decrease from the $43.4 million for the same period in 2005.
Worldwide sales of PCC, which is used primarily in the manufacturing processes of the paper industry, were $138.9 million, a 6-percent increase over the $130.6 million reported in the third quarter of 2005. PCC sales for the nine months of 2006 increased 8 percent to $420.0 million from $387.5 million during the same period in 2005.
Paper PCC sales grew 7 percent in the third quarter to $124.7 million from $116.8 million in the prior year. Paper PCC achieved sales growth in all regions as total worldwide unit volumes grew 4 percent. Two percentage points of this growth were due primarily to the ramp-up of the two new satellite PCC plants in China. For the first nine months, Paper PCC sales grew 9 percent to $376.6 million.
In the Processed Minerals product line, third quarter sales increased 6 percent to $38.9 million from $36.7 million in the same quarter of last year. Talc sales increased 7 percent to $14.4 million from $13.4 million in the same period in the prior year due to strong global demand in the plastics and consumer-related markets. Other Processed Minerals product sales grew 5 percent to $24.5 million as a result of the volume ramp-up of Synsil(R) Products.
For the first nine months of 2006, Processed Minerals sales increased 9 percent to $119.9 million from $110.3 million in the same period last year. Processed Minerals products, which include ground calcium carbonate, lime and talc, are used in the building materials, polymers, ceramics, paints and coatings, glass and other manufacturing industries.
In the company's Refractories segment, sales for the third quarter were $87.5 million, a 10-percent increase over the $79.5 million recorded in the third quarter of 2005. Sales growth was driven by refractory products and systems in North America and Europe.
Sales of refractory products and systems in the third quarter increased 16 percent to $66.3 million from $57.1 million in the same period last year. Sales in the metallurgical product line decreased 5 percent to $21.2 million in the third quarter. The decline in sales in this product line was due primarily to lower prices as a result of a reduction in raw material costs passed through to customers.
Operating income for the third quarter in the Refractories segment was $8.7 million compared with $4.2 million in the third quarter of 2005, a 107-percent increase. This growth in operating income was attributable to strong demand for refractory products and systems because of the substantial improvement in steel industry operating levels over the prior year. In addition, this product line benefited from cost-reduction initiatives, including product reformulations.
Sales for the nine months of 2006 in the Refractories segment were $258.0 million, a 5-percent increase over the $244.6 million in the previous year. For the nine months, Refractories operating income was $23.1 million, a 12-percent increase over the $20.6 million reported for the comparable period in 2005.
"As previously announced," said Mr. Saueracker, "on October 2, we completed the acquisition of ASMAS, an Istanbul-based Turkish producer of refractories, which will provide an excellent platform for future growth in the Refractories segment."
Mr. Saueracker concluded: "Execution of our key strategies for growth, higher steel production and increased demand for our PCC for uncoated free sheet in the paper industry contributed to our improved financial results for the quarter. Heading into the fourth quarter, however, we are seeing in North America a weakening in both steel production and in the residential construction industry, and we will continue to have development costs associated with the commercialization efforts for Synsil(R) Products, and the ramp-up our new refractory manufacturing facility in China, all of which would likely have a dampening effect on our operational performance."
Minerals Technologies will sponsor a conference call tomorrow, October 27, at 11 a.m. The conference call will be broadcast live on the company web site, which can be found at www.mineralstech.com.
This press release contains some forward-looking statements. 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 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, except per share data)
(unaudited)
Third Quarter % Nine months %
------------------- -------------------
2006 2005 Change 2006 2005 Change
--------- --------- ------ --------- --------- ------
Net sales $265,324 $246,830 7 $797,850 $742,380 7
Operating costs
and expenses:
Cost of goods
sold 207,442 195,767 6 630,153 582,091 8
Marketing and
administrative
expenses 25,780 24,544 5 80,694 74,425 8
Research and
development
expenses 7,656 7,380 4 22,736 21,856 4
--------- --------- --------- ---------
Income from
operations 24,446 19,139 28 64,267 64,008 0
Non-operating
deductions -
net 2,282 1,229 86 3,143 3,706 (15)
--------- --------- --------- ---------
Income before
provision for
taxes on income
and minority
interests 22,164 17,910 24 61,124 60,302 1
Provision for
taxes on income 7,083 5,165 37 18,887 18,392 3
Minority
interests 1,016 501 103 2,790 1,294 116
--------- --------- --------- ---------
Net income $ 14,065 $ 12,244 15 $ 39,447 $ 40,616 (3)
--------- --------- --------- ---------
Weighted average
number of
common shares
outstanding:
Basic 19,517 20,211 19,767 20,439
Diluted 19,598 20,420 19,892 20,683
Earnings per
share:
Basic earnings
per share $ 0.72 $ 0.61 18 $ 2.00 $ 1.99 1
--------- --------- --------- ---------
Diluted
earnings per
share $ 0.72 $ 0.60 20 $ 1.98 $ 1.96 1
--------- --------- --------- ---------
Cash dividends
declared per
common share $ 0.05 $ 0.05 $ 0.15 $ 0.15
--------- --------- --------- ---------
1) For the periods ended October 1, 2006 and October 2, 2005.
2) Sales increased 6% in the United States in the third quarter and 8%
for the first nine months of 2006. International sales increased
approximately 9% in the third quarter and 7% for the first nine
months of 2006.
3) Provisions for bad debt, included in marketing and administrative
expenses, decreased $0.2 million in the third quarter and increased
$1.4 million for the first nine months of 2006.
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 nine months, 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 nine months
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 third quarter
and first nine months was $0.7 million and $1.8 million,
respectively. The related tax benefit on the non-qualified stock
options was $0.1 million and $0.3 million in the third quarter and
first nine 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 third quarter or the first nine 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 nine month period ended October 1, 2006.
7) The results of operations for the interim period ended October 1,
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
third quarter is scheduled for Friday, October 27, 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)
Third Quarter % Nine Months %
-------------- --------------
2006 2005 Change 2006 2005 Change
------ ------ ------ ------ ------ ------
United States $158.5 $149.2 6 $480.5 $446.9 8
International $106.8 $ 97.6 9 $317.4 $295.5 7
Paper PCC $124.7 $116.8 7 $376.6 $345.3 9
Specialty PCC 14.2 13.8 3 43.4 42.2 3
------ ------ ------ ------
PCC Products $138.9 $130.6 6 $420.0 $387.5 8
------ ------ ------ ------
Talc $ 14.4 $ 13.4 7 $ 45.3 $ 41.2 10
Other Processed Minerals
Products 24.5 23.3 5 74.6 69.1 8
------ ------ ------ ------
Processed Minerals
Products $ 38.9 $ 36.7 6 $119.9 $110.3 9
------ ------ ------ ------
Specialty Minerals
Segment $177.8 $167.3 6 $539.9 $497.8 8
------ ------ ------ ------
Refractory products $ 66.3 $ 57.1 16 $193.4 $181.1 7
Metallurgical Products 21.2 22.4 (5) 64.6 63.5 2
------ ------ ------ ------
Refractories Segment $ 87.5 $ 79.5 10 $258.0 $244.6 5
------ ------ ------ ------
Net Sales $265.3 $246.8 7 $797.9 $742.4 7
------ ------ ------ ------
MINERALS TECHNOLOGIES INC AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands of Dollars)
October 1, December 31,
2006* 2005**
------------ ------------
Current assets:
Cash & cash equivalents 94,684 51,100
Short-term investments 7,569 2,350
Accounts receivable, net 201,832 184,272
Inventories 118,339 118,895
Prepaid expenses and other current
assets 18,111 20,583
------------ ------------
Total current assets 440,535 377,200
Property, plant and equipment 1,452,397 1,380,298
Less accumulated depreciation 815,975 751,553
------------ ------------
Net property, plant & equipment 636,422 628,745
Goodwill 54,649 53,612
Prepaid benefit costs 70,354 67,795
Other assets and deferred charges 29,151 28,951
------------ ------------
Total assets 1,231,111 1,156,303
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt 160,222 62,847
Current maturities of long-term debt 2,534 53,698
Accounts payable 57,872 61,323
Other current liabilities 67,299 53,384
------------ ------------
Total current liabilities 287,927 231,252
Long-term debt 38,651 40,306
Other non-current liabilities 117,771 113,583
------------ ------------
Total liabilities 444,349 385,141
Total shareholders' equity 786,762 771,162
------------ ------------
Total liabilities and
shareholders' equity 1,231,111 1,156,303
------------ ------------
* Unaudited.
** Condensed from audited financial statements.
SOURCE: Minerals Technologies Inc.
Minerals Technologies Inc. Rick Honey,212-878-1831