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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 March 30, 1997
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 21, 1997
Common Stock, $.10 par value 22,586,918
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 30, 1997
and March 31, 1996 3
Condensed Consolidated Balance Sheet as of
March 30, 1997 and December 31, 1996 4
Condensed Consolidated Statement of Cash Flows
for the three-month periods ended March 30, 1997
and March 31, 1996 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
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in thousands, Three Months Ended
except per share data) ----------------------
March 30, March 31,
1997 1996
--------- ---------
Net sales $137,626 $128,109
Operating costs and expenses:
Cost of goods sold 97,101 93,077
Marketing, distribution and
administrative expenses 18,329 17,100
Research and development expenses 5,045 4,831
------- -------
Income from operations 17,151 13,101
Non-operating deductions, net 1,469 788
------- -------
Income before provision for taxes
on income and minority interests 15,682 12,313
Provision for taxes on income 5,017 4,000
Minority interests 97 (234)
------- -------
Net income $ 10,568 $ 8,547
======= =======
Earnings per common share $ 0.47 $ 0.38
======= =======
Cash dividends declared per
common share $ 0.025 $ 0.025
======= =======
Weighted average number of common
shares outstanding 22,588 22,637
======= =======
See accompanying Notes to Condensed Consolidated Financial
Statements.
3
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(thousands of dollars) March 30, December 31,
1997* 1996**
--------- -----------
Current assets:
Cash and cash equivalents $ 15,726 $ 15,446
Accounts receivable, net 104,988 102,494
Inventories 66,262 70,438
Other current assets 15,316 13,902
------- -------
Total current assets 202,292 202,280
Property, plant and equipment,
less accumulated depreciation
and depletion - March 30, 1997
-$320,462; Dec. 31, 1996-$311,815 497,459 501,067
Other assets and deferred charges 11,826 10,514
------- -------
Total assets $711,577 $713,861
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 4,230 $ 12,339
Current maturities of long-term
debt 13,515 13,000
Accounts payable 29,131 29,223
Other current liabilities 34,030 32,178
------- -------
Total current liabilities 80,906 86,740
Long-term debt 106,445 104,900
Other noncurrent liabilities 74,371 73,971
------- -------
Total liabilities 261,722 265,611
------- -------
Shareholders' equity:
Common stock 2,529 2,526
Additional paid-in capital 136,662 135,676
Retained earnings 374,214 364,210
Currency translation adjustment 4,345 11,560
Unrealized holding gains 151 163
------- -------
517,901 514,135
Less common stock held in treasury,
at cost 68,046 65,885
------- -------
Total shareholders' equity 449,855 448,250
------- -------
Total liabilities and
shareholders' equity $711,577 $713,861
======= =======
* 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)
Three Months Ended
---------------------
(thousands of dollars) March 30, March 31,
1997 1996
--------- ---------
Operating Activities
Net income $ 10,568 $ 8,547
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and depletion 12,141 10,702
Other non-cash items 782 1,277
Net changes in operating
assets and liabilities (778) (12,758)
------- -------
Net cash provided by operating
activities 22,713 7,768
------- -------
Investing Activities
Purchases of property, plant
and equipment (13,642) (33,851)
Other investing activities, net 157 31
------- -------
Net cash used in investing activities (13,485) (33,820)
Financing Activities
Proceeds from issuance of short-term
and long-term debt 2,060 29,785
Repayment of short-term debt (8,109) --
Purchase of common shares for treasury (2,161) (1,293)
Dividends paid (564) (566)
Other financing activities, net 578 347
------- -------
Net cash (used in) provided by
financing activities (8,196) 28,273
------- -------
Effect of exchange rate changes on
cash and cash equivalents (752) (679)
------- -------
Net increase in cash and cash
equivalents 280 1,542
Cash and cash equivalents at
beginning of period 15,446 11,318
------- -------
Cash and cash equivalents at
end of period $ 15,726 $ 12,860
======= =======
Interest paid $ 2,531 $ 818
======= =======
Income taxes paid $ 1,318 $ 1,526
======= =======
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, 1996. 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 30, 1997 are not necessarily indicative of the
results that may be expected for the year ending December
31, 1997.
Note 2 -- Inventories
The following is a summary of inventories by major
category:
March 30, December 31,
(thousands of dollars) 1997 1996
-------- ------------
Raw material $ 27,420 $ 23,585
Work in process 4,996 8,513
Finished goods 16,876 20,670
Packaging and supplies 16,970 17,670
------- -------
Total inventories $ 66,262 $ 70,438
======= =======
Note 3 -- Long-Term Debt and Commitments
The following is a summary of long-term debt:
March 30, December 31,
(thousands of dollars) 1997 1996
-------- ------------
7.70% Industrial Development
Revenue Bond Series 1990
Due 2009 (secured) $ 7,300 $ 7,300
7.75% Economical 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 52,000
7.49% Guaranteed Senior Notes
Due July 24, 2006 50,000 50,000
Other borrowings 2,060 --
------- -------
119,960 117,900
Less: Current maturities 13,515 13,000
------- -------
Long-term debt $106,445 $104,900
======= =======
6
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 30, 1997 and the related condensed
consolidated statements of income and cash flows for the
three-month periods ended March 30, 1997 and March 31,
1996. 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, 1996, 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 February 4, 1997, 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, 1996 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
April 30, 1997
7
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 30, March 31,
1997 1996
-------- --------
Net sales 100.0% 100.0%
Cost of goods sold 70.5 72.7
Marketing, distribution
and administrative expenses 13.3 13.3
Research and development expenses 3.7 3.8
----- -----
Income from operations 12.5 10.2
Net income 7.7% 6.7%
===== =====
Results of Operations
Three Months Ended March 30, 1997 as Compared with Three
Months Ended March 31, 1996
Net sales in the first quarter of 1997 increased 7.4%
to $137.6 million from $128.1 million in the first quarter
of 1996. Precipitated Calcium Carbonate (PCC) sales grew
20.7% to $70.6 million from $58.5 million in the first
quarter of 1996. This increase was primarily attributable
to the commencement of operations at four satellite PCC
plants since the first quarter of 1996, significant sales
growth from three satellite PCC plants that began
operations in the first quarter of 1996 and increased
volume at other satellite PCC plants. Net sales of
processed mineral products grew 2.5% in the first quarter
of 1997 to $20.7 million from $20.2 million in the
comparable quarter of 1996. Net sales of refractory
products decreased 6.3% to $46.3 million in the first
quarter of 1997 from $49.4 million in the first quarter of
the prior year. This decrease was primarily due to overall
volume declines in lower margin products and unfavorable
foreign exchange rates.
Net sales in the United States were 6.7% higher than
in the prior year's first quarter. Foreign sales were 8.9%
higher than in the prior year, due primarily to the growth
in the satellite PCC product line.
Income from operations rose 30.9% in the first quarter
of 1997 to $17.2 million. This increase was due primarily
to higher sales volumes in the PCC product line, improved
profitability in the refractory product lines and an
overall containment of costs and expenses. The
profitability of the processed minerals product line was
negatively impacted by significant unfavorable production
variances in the talc operations.
Non-operating deductions increased as a result of
higher interest costs associated with additional
borrowings.
Net income increased 23.6% to $10.6 million from $8.5
million in the prior year. Earnings per share were $0.47
in the first quarter of 1997 as compared to $0.38 in the
prior year.
8
Liquidity and Capital Resources
The Company's financial position remained strong in
the first quarter of 1997. Cash flows in the first quarter
were provided from operations and were applied principally
to fund capital expenditures and reduce short-term
financing. Cash provided from operating activities
amounted to $22.7 million in the first quarter of 1997 as
compared to $7.8 million in the prior year.
The Company has available approximately $120 million
in uncommitted, short-term bank credit lines, of which $4.0
million were in use at March 30, 1997. The interest rate
on these borrowings was approximately 6%. The Company
anticipates that capital expenditures for all of 1997 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 and, where
appropriate, project financing of certain satellite plants.
Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share," which established
standards for computing and presenting earnings per share
(EPS). The Statement simplifies the standards for computing
EPS, replaces the presentation of primary EPS with a
presentation of basic EPS and requires dual presentation of
basic and diluted EPS on the face of the income statement.
This Statement is effective for financial statements issued
for periods after December 15, 1997 and requires
restatement of all prior-period EPS data presented.
Adoption of SFAS No. 128 is not expected to have a material
impact on previously reported EPS data.
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, believes the
claim 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. EXHIBITS 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 electroni-
cally to the Securities and Exchange Commission,
and not filed, pursuant to Rule 402 of Regulation
S-T).
b) No reports on Form 8-K were filed during the first
quarter of 1997.
9
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
April 30, 1997
10
EXHIBIT 11
SCHEDULE RE: COMPUTATION OF EARNINGS PER COMMON SHARE*
(In thousands, except per share amounts)
Three Months Ended
---------------------
March 30, March 31,
1997 1996
-------- --------
PRIMARY
Net income $ 10,568 $ 8,547
------- -------
Weighted average shares outstanding 22,588 22,637
------- -------
Primary earnings per share * $ 0.47 $ 0.38
======= =======
FULLY DILUTED
Net income $ 10,568 $ 8,547
------- -------
Weighted average shares outstanding 22,588 22,637
Add incremental shares representing:
Shares issuable upon exercise of stock
options based on average market price 532 447
------- -------
Weighted average number of shares,
as adjusted 23,120 23,084
------- -------
Fully diluted earnings per share $ 0.46 $ 0.37
======= =======
Dilutive effect of incremental shares 2.3% 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
requires 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 April 30, 1997, 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
May 9, 1997