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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 29, 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 October 25, 1996
Common Stock, $.10 par value 22,610,030
1
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 and nine-month periods ended September 29, 1996
and October 1, 1995 3
Condensed Consolidated Balance Sheet as of September 29,
1996 and December 31, 1995 4
Condensed Consolidated Statement of Cash Flows for the
nine-month periods ended September 29, 1996 and October 1,
1995 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
2
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. 29, Oct. 1, Sept. 29, Oct. 1,
(thousands of dollars, 1996 1995 1996 1995
except per share data) ========= ======= ======== ========
Net sales $144,121 $135,795 $412,696 $394,617
Operating costs and expenses:
Cost of goods sold 102,540 97,883 294,974 283,594
Marketing, distribution and
administrative expenses 18,152 17,332 54,377 52,233
Research and development expenses 4,892 4,999 14,671 14,850
------- ------- ------- -------
Income from operations 18,537 15,581 48,674 43,940
Non-operating items:
Other income 698 573 1,126 3,173
Other deductions (1,938) (833) (4,342) (3,458)
------- ------- ------- -------
Non-operating deductions, net (1,240) (260) (3,216) (285)
Income before provision for taxes
on income and minority interests 17,297 15,321 45,458 43,655
Provision for taxes on income 5,366 4,899 14,293 14,359
Minority interests 41 (145) (79) (171)
------- ------- ------- -------
Net income $ 11,890 $ 10,567 $ 31,244 $ 29,467
======= ======= ======= =======
Earnings per common share $ 0.53 $ 0.47 $ 1.38 $ 1.30
======= ======= ======= =======
Cash dividends declared per
common share $ 0.025 $ 0.025 $ 0.075 $ 0.075
======= ======= ======= =======
Weighted average number of common
shares outstanding 22,616 22,642 22,627 22,627
======= ======= ======= =======
See accompanying Notes to Condensed Consolidated Financial
Statements.
3
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(thousands of dollars) Sept. 29, Dec. 31,
1996* 1995**
========= ========
Current assets:
Cash and cash equivalents $ 12,144 $ 11,318
Accounts receivable, net 108,228 100,473
Inventories 70,671 64,637
Other current assets 10,553 5,997
------- -------
Total current assets 201,596 182,425
Property, plant and equipment,
less accumulated depreciation and depletion
- Sept. 29, 1996 - $303,407;
Dec. 31, 1995 - $275,665 495,571 455,809
Other assets and deferred charges 11,603 10,910
------- -------
Total assets $708,770 $649,144
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 18,459 $ 14,890
Current maturities of long-term debt 13,000 13,000
Accounts payable 26,365 30,405
Other current liabilities 33,095 37,384
------- -------
Total current liabilities 90,919 95,679
Long-term debt 104,900 67,927
Other non-current liabilities 73,890 69,385
------- -------
Total liabilities 269,709 232,991
Shareholders' equity:
Common stock 2,523 2,515
Additional paid-in capital 135,020 133,221
Retained earnings 352,922 323,375
Currency translation adjustment 12,755 16,931
Unrealized holding gains 152 111
------- -------
503,372 476,153
Less common stock held in treasury, at cost 64,311 60,000
------- -------
Total shareholders' equity 439,061 416,153
------- -------
Total liabilities and shareholders' equity $708,770 $649,144
======= =======
* Unaudited
** Condensed from audited financial statements.
See accompanying Notes to Condensed Consolidated Financial
Statements.
4
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
(thousands of dollars) Sept. 29, Oct. 1,
1996 1995
========= =======
Operating Activities
Net income $31,244 $ 29,467
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 34,445 30,072
Deferred income taxes 4,288 5,391
Other non-cash items 734 602
Net changes in operating assets
and liabilities (28,784) ( 31,538)
------- -------
Net cash provided by operating activities 41,927 33,994
------- -------
Investing Activities
Purchases of property, plant and equipment (78,283) ( 74,338)
Other investing activities, net 1,725 812
------- -------
Net cash used in investing activities (76,558) ( 73,526)
------- -------
Financing Activities
Increase in short-term debt 3,569 ---
Issuance of long-term debt 50,000 ---
Repayment of debt (13,027) ( 2,100)
Purchase of common shares for treasury ( 4,311) ---
Dividends paid ( 1,697) ( 1,698)
Other financing activities, net 1,807 1,031
------- -------
Net cash provided by (used in)
financing activities 36,341 ( 2,767)
------- -------
Effect of exchange rate changes on cash and
cash equivalents ( 884) 129
------- -------
Net increase (decrease) in cash and
cash equivalents 826 ( 42,170)
Cash and cash equivalents at beginning
of period 11,318 56,240
------- -------
Cash and cash equivalents at end of period $12,144 $ 14,070
======= =======
Interest paid $ 4,408 $ 3,180
======= =======
Income taxes paid $10,446 $ 6,298
======= =======
See accompanying Notes to Condensed Consolidated Financial
Statements.
5
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 and nine-month periods ended September 29, 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:
September 29, December 31,
(thousands of dollars) 1996 1995
============= ============
Raw materials $ 23,058 $ 17,919
Work in process 10,357 9,757
Finished goods 20,547 20,575
Packaging and supplies 16,709 16,386
------- -------
Total inventories $ 70,671 $ 64,637
======= =======
Note 3 -- Long-Term Debt and Commitments
The following is a summary of long-term debt:
September 29, December 31,
(thousands of dollars) 1996 1995
============= ============
7.70% Industrial Development
Revenue Bonds Series 1990
Due 2009 (secured) $ 7,300 $ 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
6.04% Guarantied Senior Notes
Due June 11, 2000 52,000 65,000
7.49% Guaranteed Senior Notes
Due July 24, 2006 50,000 ---
Other borrowings --- 27
------- -------
117,900 80,927
Less: Current maturities 13,000 13,000
------- -------
Long-term debt $104,900 $ 67,927
======= =======
6
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 -- Long-Term Debt and Commitments (cont'd)
On July 24, 1996, through a private placement, the Company
issued $50 million of 7.49% Guaranteed Senior Notes due July 24, 2006. The
proceeds from the sale of the notes were used to refinance a portion of the
short-term commercial bank debt outstanding. These notes rank pari passu
with the Company's other unsecured senior obligations. No required
principal payments are due until July 24, 2006. Interest on the notes
is payable semi-annually.
The Company has available approximately $110 million in uncommitted
short-term bank credit lines, of which $16.7 million were in use at September
29, 1996. The interest rate on these borrowings was approximately 5.75%.
Note 4 -- Litigation
The Company is a defendant in a lawsuit pending in the U.S.
District Court for the Western District of Michigan. The suit alleges that
certain materials sold to the plaintiff corporation for use in truck
transmissions were defective, necessitating repairs for which the plaintiff
now seeks reimbursement. The suit was filed on July 31, 1996. The Company
has evaluated the claims of this lawsuit to the extent possible considering
the limited amount of information available, believes the claims to be
without merit, and intends to contest them vigorously.
The Company and its subsidiaries are not party to any other
material pending legal proceedings, other than ordinary routine litigation
incidental to their businesses.
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 September 29,
1996 and the related condensed consolidated statements of income for each of
the three-month and nine-month periods ended September 29, 1996 and
October 1, 1995 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, 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.
KPMG Peat Marwick LLP
New York, New York
November 11, 1996
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 Nine Months Ended
------------------ -----------------
Sept. 29, Oct. 1, Sept. 29, Oct. 1,
1996 1995 1996 1995
--------- ------- --------- -------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 71.1 72.1 71.5 71.9
Marketing, distribution and
administrative expenses 12.6 12.7 13.2 13.2
Research and development expenses 3.4 3.7 3.5 3.8
----- ----- ----- -----
Income from operations 12.9 11.5 11.8 11.1
Net income 8.3% 7.8% 7.6% 7.5%
===== ===== ===== =====
Results of Operations
Three Months Ended September 29, 1996 as Compared with Three
Months Ended October 1, 1995
Net sales in the third quarter of 1996 increased 6.1% to $144.1 million
from $135.8 million in the third quarter of 1995. This increase was
primarily attributable to higher volumes in the precipitated calcium
carbonate ("PCC") line and in other mineral products. PCC sales grew
15.4% to $68.9 million from $59.7 million in the third quarter of 1995.
This increase was primarily attributable to increased sales from five new
satellite plants which began operations after the third quarter of 1995.
In addition, expansion of production capacity at several satellite PCC
plants during 1995 contributed to the sales growth. The Company began
operation of a satellite plant in the United States during this quarter,
as well as one in Israel, two in Brazil and a joint venture in Thailand
during the first half of 1996.
The Company has completed construction of its third satellite PCC plant
in Brazil which will commence operations in the fourth quarter. In
addition, the Company has three satellite PCC plants under construction - one
in the United States, one in Slovakia and another in Indonesia. These
satellite plants, combined, will be equivalent to approximately five satellite
units and should be operational in the first half of 1997. A satellite
"unit" produces between 25,000 and 35,000 tons of PCC annually.
Net sales of other mineral products grew 8.3% in the third quarter of
1996 to $28.7 million from $26.5 million in the comparable quarter of
1995. This growth was due to increased volumes across the product line.
Net sales of refractory products decreased 6.3% to $46.5 million from
$49.6 million in the third quarter of 1995. The decrease in the
refractory product line was attributable to overall volume declines in lower
margin products and unfavorable foreign exchange rates.
Net sales in the United States were 5.0% higher than in the prior year's
third quarter, primarily due to volume growth in the PCC and other minerals
product lines. Foreign sales were 8.9% higher than in the prior year, due
primarily to the international expansion of the PCC satellite product line.
This growth was partially offset by unfavorable foreign exchange rates.
Income from operations rose 19.0% in the third quarter of 1996 to $18.5
million. This increase was due primarily to good growth in the PCC satellite
operations, despite significant start-up costs at several international
locations, improved profitability in refractory products, due primarily to
the growth in the calcium and metallurgical wire product line and
volume increases in the other minerals product line.
Other deductions increased primarily due to higher interest
costs associated with additional borrowings.
Net income grew 12.5% to $11.9 million from $10.6 million.
Earnings per share were $0.53 in the third quarter of 1996 compared to $0.47
in the prior year.
9
Nine Months Ended September 29, 1996 as Compared with Nine Months
Ended October 1, 1995
Net sales for the first nine months of 1996 increased 4.6%
to $412.7 million from $394.6 million in 1995. This increase was due
primarily to the continued expansion of the PCC product line. PCC sales
increased 12.4% to $192.3 million from $171.1 million in the prior year.
Sales increases were primarily attributable to the commencement of operations
at five new satellite PCC plants since the third quarter of 1995 and to
production capacity expansions at several satellite plants during 1995. Net
sales of other mineral products rose 4.5% to $75.9 million for the first nine
months of 1996. Refractory product sales decreased 4.2 % to $144.5 million
for the first nine months of 1996. This decrease was primarily due to an
acceleration of reporting periods of certain international subsidiaries in
the prior year and to unfavorable exchange rates.
Net sales in the United States increased 5.2% to $285.0 million in
the first nine months of 1996, due primarily to growth in the PCC product
line and in the calcium and metallurgical wire product group. Net foreign
sales increased approximately 3.3% to $127.7 million in the first nine months
of 1996. This growth was primarily due to the foreign expansion of the PCC
satellite product line, partially offset by the aforementioned acceleration
of reporting periods in the prior year and to unfavorable exchange rates.
Income from operations rose 10.8% to $48.7 million in the first nine
months of 1996 from $43.9 million in the previous year.
Other income decreased by $2.0 million in 1996. In the first nine
months 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 increased
primarily due to higher interest costs associated with additional borrowings.
Net income increased 6.0% to $31.2 million from $29.5 million in 1995.
Earnings per share were $1.38 compared to $1.30 in the prior year.
Liquidity and Capital Resources
The Company's financial position remained solid in the first nine months
of 1996. Cash flows were provided principally from operations and short-term
and long-term financing and were applied principally to fund $78.3 million
of capital expenditures and approximately $28.8 million of working capital
increases. In addition, the Company remitted its initial required principal
payment of $13 million under the Company's Guarantied Senior Notes due June
11, 2000.
On July 24, 1996, through a private placement, the Company issued $50
million of 7.49% Guaranteed Senior Notes due July 24, 2006. The proceeds
from the sale of the notes were used to refinance a portion of the
short-term commercial bank debt outstanding. No required principal payments
are due until July 24, 2006. Interest on the notes is payable semi-annually.
The Company has available approximately $110 million in uncommitted,
short-term bank credit lines, of which $16.7 million were in use at September
29, 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. The Company expects to meet such
requirements from internally generated funds, the aforementioned uncommitted
bank credit lines, long-term financing and, where appropriate, project
financing of certain satellite plants.
10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit captioned Eaton Corporation
v. Pfizer Inc., Minerals Technologies Inc. and Specialty Minerals Inc.
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 now
seeks reimbursement. The suit was filed on July 31, 1996. The Company
has evaluated the claims of this lawsuit to the extent possible considering
the limited amount of information available, believes the claims to be
without merit, and intends to contest them vigorously.
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. EXIBITS 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, 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 third
quarter of 1996.
11
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 11, 1996
EXHIBIT 11
SCHEDULE RE: COMPUTATION OF EARNINGS PER COMMON SHARE*
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 29, Oct 1, Sept. 29, Oct 1,
1996 1995 1996 1995
--------- ------ --------- ------
PRIMARY
Net income $11,890 $10,567 $31,244 $29,467
------ ------ ------ ------
Weighted average shares outstanding 22,616 22,642 22,627 22,627
------ ------ ------ ------
Primary earnings per share * $ 0.53 $ 0.47 $ 1.38 $ 1.30
====== ====== ====== ======
FULLY DILUTED
Net income $11,890 $10,567 $31,244 $29,467
------ ------ ------ ------
Weighted average shares outstanding 22,616 22,642 22,627 22,627
Add incremental shares representing:
Shares issuable upon exercise of
stock options based on period-end
market price 500 423 500 423
------ ------ ------ ------
Weighted average number of shares,
as adjusted 23,116 23,065 23,127 23,050
------ ------ ------ ------
Fully diluted earnings per share $ 0.51 $ 0.46 $ 1.35 $ 1.28
====== ====== ====== ======
Dilutive effect of incremental shares 2.2% 1.9% 2.2% 1.9%
====== ====== ====== ======
* 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' ACKNOWLEDGEMENT
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 November 11, 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,
KPMG Peat Marwick LLP
New York, New York
November 11, 1996