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1 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 March 31, 1996 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 April 26, 1996 Common Stock, $.10 par value 22,631,427 2 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 periods ended March 31, 1996 and April 2, 1995 3 Condensed Consolidated Balance Sheet as of March 31, 1996 and December 31, 1995 4 Condensed Consolidated Statement of Cash Flows for the three-month periods ended March 31, 1996 and April 2, 1995 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 9 Item 6. Exhibits and Reports on Form 8-K 9 Signature 10 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) Three Months Ended --------------------- March 31, April 2, (thousands of dollars, 1996 1995 except per share data) ---- ---- Net sales $128,109 $120,205 Operating costs and expenses: Cost of goods sold 93,077 85,686 Marketing, distribution and administrative expenses 17,100 16,353 Research and development expenses 4,831 4,755 ------ ------ Income from operations 13,101 13,411 Non-operating items: Other income 77 1,889 Other deductions (865) (1,548) ------ ------ Non-operating (deductions) income, net (788) 341 ------ ------ Income before provision for taxes on income and minority interests 12,313 13,752 Provision for taxes on income 4,000 4,642 Minority interests (234) 96 ------ ------ Net income $ 8,547 $ 9,014 ======= ======= Earnings per common share $ 0.38 $ 0.40 ======= ======= Cash dividends declared per common share $ 0.025 $ 0.025 ======= ======= Weighted average number of common shares outstanding 22,637 22,615 ====== ====== See accompanying Notes to Condensed Consolidated Financial Statements. 3 4 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEET ASSETS (thousands of dollars) March 31, December 31, 1996* 1995** ----- ------ Current assets: Cash and cash equivalents $ 12,860 $ 11,318 Accounts receivable, net 98,734 100,473 Inventories 65,163 64,637 Other current assets 11,683 5,997 ------ ------- Total current assets 188,440 182,425 Property, plant and equipment, less accumulated depreciation and depletion - March 31, 1996 - $284,348; Dec. 31, 1995 - $275,665 476,357 455,809 Other assets and deferred charges 12,509 10,910 ------- ------- Total assets $677,306 $649,144 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt $ 44,675 $ 14,890 Current maturities of long-term debt 13,000 13,000 Accounts payable 30,381 30,405 Other current liabilities 31,011 37,384 ------- ------- Total current liabilities 119,067 95,679 Long-term debt 67,900 67,927 Accrued postretirement benefits 20,230 20,230 Deferred taxes on income 38,290 37,064 Other noncurrent liabilities 11,724 12,091 ------- ------- Total liabilities 257,211 232,991 Shareholders' equity: Preferred stock -- -- Common stock 2,517 2,515 Additional paid-in capital 133,566 133,221 Retained earnings 331,356 323,375 Currency translation adjustment 13,811 16,931 Unrealized holding gains 138 111 ------- ------- 481,388 476,153 Less common stock held in treasury, at cost 61,293 60,000 Total shareholders' equity 420,095 416,153 ------- ------- Total liabilities and shareholders' equity $677,306 $649,144 ======== ======== * Unaudited ** Condensed from audited financial statements. See accompanying Notes to Condensed Consolidated Financial Statements. 4 5 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Three Months Ended ------------------- (thousands of dollars) March 31, April 2, 1996 1995 ---- ---- Operating Activities Net income $ 8,547 $ 9,014 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and depletion 10,702 9,184 Deferred income taxes 1,200 1,644 Other non-cash items 77 (298) Net changes in operating assets and liabilities (12,758) (6,317) ------- ------ Net cash provided by operating activities 7,768 13,227 ------- ------ Investing Activities Purchases of property, plant and equipment (33,851) (22,162) Other investing activities, net 31 -- ------- ------- Net cash used in investing activities (33,820) (22,162) ------- ------- Financing Activities Increase in short-term debt 29,785 -- Purchase of common shares for treasury (1,293) -- Dividends paid (566) (566) Other financing activities, net 347 795 ------ ----- Net cash provided by financing activities 28,273 229 ------ ----- Effect of exchange rate changes on cash and cash equivalents (679) 474 ------ ----- Net increase (decrease) in cash and cash equivalents 1,542 (8,232) Cash and cash equivalents at beginning of period 11,318 56,240 ------ ------ Cash and cash equivalents at end of period $ 12,860 $ 48,008 ======== ======== Interest paid $ 818 $ 582 ======== ======== Income taxes paid $ 1,526 $ 1,367 ======== ======== See accompanying Notes to Condensed Consolidated Financial Statements. 5 6 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, 1995. 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 period ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. Note 2 -- Inventories The following is a summary of inventories by major category: March 31, December 31, (thousands of dollars) 1996 1995 ---- ---- Raw material $ 20,255 $ 17,919 Work in process 9,510 9,757 Finished goods 19,223 20,575 Packaging and supplies 16,175 16,386 -------- -------- Total inventories $ 65,163 $ 64,637 ======== ======== Note 3 -- Stock-Based Compensation The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," which requires expanded disclosures of stock-based compensation arrangements with employees. SFAS No. 123 establishes an alternative method of accounting for stock-based compensation awarded to employees which provides for the recognition of compensation cost to be measured based on the fair value of the equity instrument awarded. The Company, however, has elected to continue to recognize compensation cost based on the intrinsic value of the equity instrument awarded as promulgated in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The Company will disclose the required proforma effect of the fair value method on net income and earnings per share in the 1996 annual financial statements. 6 7 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 March 31, 1996 and the related condensed consolidated statements of income and cash flows for the three-month periods ended March 31, 1996 and April 2, 1995. 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, 1995, 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 January 31, 1996, 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, 1995 is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP New York, New York May 6, 1996 7 8 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 ------------------ March 31, April 2, 1996 1995 ---- ---- Net sales 100.0% 100.0% Cost of goods sold 72.7 71.3 Marketing, distribution and administrative expenses 13.3 13.6 Research and development expenses 3.8 3.9 ----- ----- Income from operations 10.2 11.2 Net income 6.7% 7.5% ===== ===== Results of Operations Three Months Ended March 31, 1996 as Compared with Three Months Ended April 2, 1995 Net sales in the first quarter of 1996 increased 6.6% to $128.1 million from $120.2 million in the first quarter of 1995. Precipitated Calcium Carbonate (PCC) sales grew 7.9% to $58.5 million from $54.2 million in the first quarter of 1995. This increase was primarily attributable to the commencement of operations at four new satellite PCC plants since the first quarter of 1995 and significant sales growth from one satellite PCC plant which began operations late in the first quarter of 1995. Net sales of other mineral products grew 3.1% in the first quarter of 1996 to $20.2 million from $19.6 million in the comparable quarter of 1995. Net sales of refractory products increased 6.5% to $49.4 million in the first quarter of 1996 from $46.4 million in the first quarter of the prior year. This increase was primarily due to substantial growth in the calcium and metallurgical wire product group. Net sales in the United States were 4.0% higher than in the prior year's first quarter. Foreign sales were 12.6% higher than in the prior year, due primarily to the growth in the satellite PCC product line. Income from operations declined 2.3% in the first quarter of 1996 to $13.1 million. Operating income was negatively affected by a paper industry slowdown created by lower demand and excess inventory, severe weather conditions in the other mineral product line and higher cost of sales in the refractory product line as a result of significant increases in the price of magnesia. In addition, the Company absorbed higher expenses from PCC satellite plant start-ups in the first quarter. Other income decreased by $1.8 million in 1996. In the first quarter of 1995, the Company recorded a significant non-recurring foreign exchange gain while a small foreign exchange loss was recorded in the current year. In addition, interest income was significantly higher in the prior year due to higher levels of cash-on-hand. Other deductions decreased due to higher capitalized interest costs associated with the growth in capital spending in the current year. Net income declined 5.2% to $8.5 million from $9.0 million in the prior year. Earnings per share were $0.38 in the first quarter of 1996 as compared to $0.40 in the prior year. 8 9 Liquidity and Capital Resources The Company's financial position remained strong in the first quarter of 1996. Cash flows in the first quarter were provided from operations and short-term financing and were applied principally to fund capital expenditures. Cash provided from operating activities amounted to $7.8 million in the first quarter of 1996 as compared to $13.2 million in the prior year. The Company has available approximately $120 million in uncommitted, short-term bank credit lines, of which $44.5 million were in use at March 31, 1996. The interest rate on these borrowings was approximately 5.75%. The Company anticipates that capital expenditures for all of 1996 will be approximately $100 million, principally related to the construction of satellite PCC plants, expansion projects at existing satellite PCC plants and at other mineral plants, and other opportunities which meet the strategic growth objectives of the Company. In addition, payments of principal under the Company's Guarantied Senior Notes due June 11, 2000 will commence during 1996 with a required payment of $13 million. 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. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company and its subsidiaries are not party to any 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' Acknowledgement (Part I Data). 27 - Financial Data Schedule (submitted electronically to, but not filed with, the Securities and Exchange Commission pursuant to Rule 402 of Regulation S-T). b) No reports on Form 8-K were filed during the first quarter of 1996. 9 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 May 6, 1996 10
EXHIBIT 11
SCHEDULE RE: COMPUTATION OF EARNINGS PER COMMON SHARE*
(In thousands, except per share amounts)
Three Months Ended
-------------------
March 31, April 2,
1996 1995
---- ----
PRIMARY
Net income $ 8,547 $ 9,014
------- -------
Weighted average shares outstanding 22,637 22,615
------- -------
Primary earnings per share * $ 0.38 $ 0.40
======= =======
FULLY DILUTED
Net income $ 8,547 $ 9,014
------- -------
Weighted average shares outstanding 22,637 22,615
Add incremental shares representing:
Shares issuable upon exercise of
stock options based on period-end
market price 447 330
------- -------
Weighted average number of shares,
as adjusted 23,084 22,945
-------- -------
Fully diluted earnings per share $ 0.37 $ 0.39
======== =======
Dilutive effect of incremental shares 1.9% 1.4%
======== =======
* Incremental shares have not been considered in the
computation of primary earnings per common share in accordance
with generally accepted accounting principles which require
inclusion only when the dilutive effect is greater than 3%.
EXHIBIT 15
ACCOUNTANTS' ACKNOWLEDGMENT
The Board of Directors
Minerals Technologies Inc.:
Re: Registration Statement Nos. 33-59080, 33-65268 and 33-96558
With respect to the subject registration statements, we
acknowledge our awareness of the use therein of our report dated
May 6, 1996, related to our review of interim financial
information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such
report is not considered a part of a registration statement
prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of sections 7 and
11 of the Act.
Very truly yours,
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
May 10, 1996