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
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