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 June 30, 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 July 26, 1996 Common Stock, $.10 par value 22,616,424
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 six-month periods ended June 30, 1996 and July 2, 1995. 3 Condensed Consolidated Balance Sheet as of June 30, 1996 and December 31, 1995. 4 Condensed Consolidated Statement of Cash Flows for the six-month periods ended June 30, 1996 and July 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 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K 10 Signature 11
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) Three Months Ended Six Months Ended ------------------ ----------------- June 30, July 2, June 30, July 2, 1996 1995 1996 1995 ------- ------ ------- ------ (thousands of dollars, except per share data) Net sales $140,466 $138,617 $268,575 $258,822 Operating costs and expenses: Cost of goods sold 99,357 100,025 192,434 185,711 Marketing, distribution and administrative expenses 19,125 18,548 36,225 34,901 Research and development expenses 4,948 5,096 9,779 9,851 ------- ------- ------- ------- Income from operations 17,036 14,948 30,137 28,359 Non-operating items: Other income 351 711 428 2,600 Other deductions (1,539) (1,077) (2,404) (2,625) ------- ------- ------- ------- Non-operating deductions, net (1,188) (366) (1,976) (25) ------- ------- ------- ------- Income before provision for taxes on income and minority interests 15,848 14,582 28,161 28,334 Provision for taxes on income 4,927 4,818 8,927 9,460 Minority interests 114 (122) (120) (26) ------- ------- ------- ------- Net income $ 10,807 $ 9,886 $ 19,354 $ 18,900 ======= ======= ======= ======= Earnings per common share $ 0.48 $ 0.44 $ 0.86 $ 0.84 ======= ======= ======= ======= Cash dividends declared per common share $ 0.025 $ 0.025 $ 0.050 $ 0.050 ====== ====== ====== ====== Weighted average number of common shares outstanding 22,627 22,624 22,632 22,620 ====== ====== ====== ====== See accompanying Notes to Condensed Consolidated Financial Statements.
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEET ASSETS (thousands of dollars) June 30, December 31, 1996* 1995** ------ -------- Current assets: Cash and cash equivalents $ 10,987 $ 11,318 Accounts receivable, net 105,328 100,473 Inventories 69,571 64,637 Other current assets 10,360 5,997 ------- ------- Total current assets 196,246 182,425 Property, plant and equipment, less accumulated depreciation and depletion - June 30, 1996 - $292,258; Dec. 31, 1995 - $275,665 488,500 455,809 Other assets and deferred charges 12,136 10,910 ------- ------- Total assets $696,882 $649,144 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt $ 76,549 $ 14,890 Current maturities of long-term debt 13,000 13,000 Accounts payable 25,613 30,405 Other current liabilities 27,695 37,384 ------- ------- Total current liabilities 142,857 95,679 Long-term debt 54,900 67,927 Other noncurrent liabilities 70,527 69,385 ------- ------- Total liabilities 268,284 232,991 Shareholders' equity: Common stock 2,520 2,515 Additional paid-in capital 134,386 133,221 Retained earnings 341,597 323,375 Currency translation adjustment 12,727 16,931 Unrealized holdings gains 181 111 ------- ------- 491,411 476,153 Less common stock held in treasury, at cost 62,813 60,000 ------- ------- Total shareholders' equity 428,598 416,153 ------- ------- Total liabilities and shareholders' equity $696,882 $649,144 ======= ======= * Unaudited ** Condensed from audited financial statements. See accompanying Notes to Condensed Consolidated Financial Statements.
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Six Months Ended ---------------- (thousands of dollars) June 30, July 2, 1996 1995 -------- -------- Operating Activities Net income $ 19,354 $ 18,900 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 22,248 19,769 Deferred income taxes 2,678 3,514 Other non-cash items (376) 852 Net changes in operating assets and liabilities (32,011) (18,269) ------ ------ Net cash provided by operating activities 11,893 24,766 Investing Activities Purchases of property, plant and equipment (57,925) (46,521) Other investing activities, net 475 -- Net cash used in investing activities (57,450) (46,521) ------ ------ Financing Activities Increase in short-term debt 61,659 -- Repayment of debt (13,027) -- Purchase of common shares for treasury (2,813) -- Dividends paid (1,132) (1,132) Other financing activities, net 1,170 983 ----- ----- Net cash provided by (used in) financing activities 45,857 (149) ------ ------ Effect of exchange rate changes on cash and cash equivalents (631) 962 ------ ------ Net decrease in cash and cash equivalents (331) (20,942) Cash and cash equivalents at beginning of period 11,318 56,240 ------ ------ Cash and cash equivalents at end of period $10,987 $35,298 ====== ====== Interest paid $ 3,556 $ 2,602 ====== ====== Income taxes paid $ 6,838 $ 3,464 ====== ======= See accompanying Notes to Condensed Consolidated Financial Statements.
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 three-month and six-month periods ended June 30, 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: June 30, December 31, (thousands of dollars) 1996 1995 ------- ------------ Raw materials $23,400 $17,919 Work in process 9,170 9,757 Finished goods 21,278 20,575 Packaging and supplies 15,723 16,386 ------ ------ Total inventories $69,571 $64,637 ====== ====== Note 3 -- Subsequent Event 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.
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 June 30, 1996 and the related condensed consolidated statements of income for each of the three-month and six-month periods ended June 30, 1996 and July 2, 1995 and cash flows for the six-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 August 8, 1996
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 Six Months Ended ------------------- ---------------- June 30, July 2, June 30, July 2, 1996 1995 1996 1995 ------- ------- ------- ------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 70.8 72.1 71.7 71.7 Marketing, distribution and administrative expenses 13.6 13.4 13.5 13.5 Research and development expenses 3.5 3.7 3.6 3.8 ---- ---- ---- ---- Income from operations 12.1 10.8 11.2 11.0 Net income 7.7% 7.1% 7.2% 7.3% ==== ==== ==== ==== Results of Operations Three Months Ended June 30, 1996 as Compared with Three Months Ended July 2, 1995 Net sales in the second quarter of 1996 increased 1.4% to $140.5 million from $138.6 million in the second quarter of 1995. The stronger U.S. dollar had an unfavorable impact of approximately $4 million on sales growth. In addition, in the second quarter of 1995, the company brought forward the financial close of certain international subsidiaries to a current calendar month, which had the effect of increasing reported net sales by approximately $4 million. Excluding the effect of foreign exchange and the acceleration of reporting periods, sales growth was approximately 7 percent. Higher volumes in the precipitated calcium carbonate (PCC) product line were chiefly responsible for the sales increase. PCC sales grew 13.5% to $64.9 million from $57.2 million in the second quarter of 1995. This increase was attributable primarily to volumes generated as a result of five new satellite PCC plants coming into operation since the second quarter of 1995 and to production capacity expansions at several satellite plants during 1995. The company began operation of a satellite plant in Poland during the third quarter of 1995, as well as one in Israel, two in Brazil, and a joint venture in Thailand during the first half of 1996. The company has signed contracts for three new PCC satellite plants since the end of the first quarter. These satellite plants are located in the United States, Slovakia and Indonesia. The satellite PCC plant in the United States will be equivalent to approximately three satellite units and is scheduled to begin operation in the third quarter of 1996. A satellite "unit" produces between 25,000 and 35,000 tons of PCC annually. The satellite PCC plant in Slovakia will be equivalent to one satellite unit and is expected to commence operations in the first quarter of 1997. The satellite plant in Indonesia, which will be operated through a joint venture, will be equivalent to two satellite units and is also expected to begin operations in the first quarter of 1997. The company now operates 42 satellite PCC plants in 10 countries and has four satellite plants under construction. Net sales of other mineral products grew 1.9% in the second quarter of 1996 to $27.0, million from $26.5 million in the comparable quarter of 1995. Net sales of refractory products decreased 11.5% to $48.6 million, from $54.9 million in the second quarter of 1995. This decrease was primarily due to the aforementioned prior year acceleration of reporting periods of certain international subsidiaries and to unfavorable exchange rates from the stronger U.S. dollar. Income from operations rose 14.0% in the second quarter of 1996 to $17.0 million. This increase was due primarily to good growth in the PCC satellite operations, despite the weakness in the paper industry and significant start-up costs at several international locations, and improved profitability in refractory products, due primarily to the substantial growth in the calcium and metallurgical wire product line.
Other income decreased as a result of lower interest income in the current year due to lower levels of cash-on-hand. Other deductions increased primarily due to higher interest costs associated with additional short-term borrowings. Net income grew 9.1% to $10.8 million from $9.9 million in the prior year. Earnings per share were $0.48 in the second quarter of 1996 compared to $0.44 in the prior year. Six Months Ended June 30, 1996 as Compared with Six Months Ended July 2, 1995 Net sales in the first half of 1996 increased 3.8% to $268.6 million from $258.8 million in 1995. This increase was due primarily to the continued expansion of the PCC product line. PCC sales increased 10.8% to $123.4 million from $111.4 million in the first half of 1995. Sales increases were primarily attributable to the commencement of operations at five new satellite PCC plants since the first half of 1995 and to production capacity expansions at several satellite plants during 1995. Net sales of other mineral products rose 2.2% to $47.2 million in the first half of 1996. Refractory product sales decreased 3.3% to $98.0 million in the first half of 1996. This decrease was primarily due to the aforementioned acceleration of reporting periods of certain international subsidiaries in the second quarter of 1995, as discussed in the preceding section, and to unfavorable exchange rates. Net sales in the United States increased 5.3% to $185.0 million in the first half 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 1% in the first half of 1996. Excluding the effect of the aforementioned acceleration of reporting periods of certain international subsidiaries, net foreign sales growth was 5.7%. This growth was primarily due to the foreign expansion of the PCC satellite product line. Income from operations rose 6.0% to $30.1 million in the first half of 1996 from $28.4 million in the previous year. Other income decreased by $2.2 million in 1996. In the first half 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. Net income increased 2.6% to $19.4 million from $18.9 million in 1995. Earnings per share were $0.86 compared to $0.84 in the prior year. Liquidity and Capital Resources The Company's financial position remained strong in the first half of 1996. Cash flows in the first quarter were provided from operations and short-term financing and were applied principally to fund $57.9 million of capital expenditures and approximately $32.0 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. Cash provided from operating activities amounted to $11.9 million in the first half of 1996 as compared to $24.8 million in the prior year. The Company has available approximately $120 million in uncommitted, short-term bank credit lines, of which $74.5 million was in use at June 30, 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. 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.
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 time and 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 busi- nesses. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its annual meeting on May 23, 1996. At the meeting, (1) Steven J. Golub was elected a director of the Company, by a plurality of 19,802,057 votes, with 387,902 votes being withheld; (2) William L. Lurie was elected a director of the Company, by a plurality of 19,805,862 votes, with 384,097 votes being withheld; (3) Jean-Paul Valles was elected a director of the Company, by a plurality of 19,796,357 votes, with 393,602 votes being withheld, and (4) the appointment of KPMG Peat Marwick LLP as independent auditors of the Company for the year 1996 was approved by a vote of 19,970,896 for and 7,835 against, with 211,228 abstentions. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: 10.1 - Note Purchase Agreement, dated as of July 24, 1996, between the Company and Metropolitan Life Insurance Company with respect to the Company's issuance of $50,000,000 in aggregate principal amount of its 7.49% Guaranteed Senior Notes due July 24, 2006. 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 second quarter of 1996.
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 August 8, 1996