0000075644-95-000011.txt : 19950816 0000075644-95-000011.hdr.sgml : 19950816 ACCESSION NUMBER: 0000075644-95-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950815 SROS: NASD SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZEMEX CORP CENTRAL INDEX KEY: 0000075644 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 135496920 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00228 FILM NUMBER: 95564019 BUSINESS ADDRESS: STREET 1: BCE PLACE STREET 2: 161 BAY STREET STE 3750 CITY: TORONTO ONTARIO M5J STATE: A6 BUSINESS PHONE: 4163658080 MAIL ADDRESS: STREET 1: CANADA TRUST TOWER STREET 2: BCE PLACE 161 BAY ST,# 3750 PO BOX 703 CITY: TORONTO ONTARIO FORMER COMPANY: FORMER CONFORMED NAME: PACIFIC TIN CONSOLIDATED CORP DATE OF NAME CHANGE: 19860720 10-Q 1 QUARTER ENDING JUNE 30, 1995 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 Commission file number 1-228 ZEMEX CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 13-5496920 (State or other jurisdiction (I.R.S. Employer Identification Number) of incorporation or organization) Canada Trust Tower, BCE Place 161 Bay Street, Suite 3750 Toronto, Ontario, Canada, M5J 2S1 (address of principal executive offices) (416) 365-8080 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act New York Stock Exchange Capital Stock, $1.00 par value Securities registered pursuant to Section 12(g) of the Act NASDAQ Warrants to purchase capital stock 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 twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO As of August 11, 1995, there were 8,520,146 shares of capital stock outstanding. Part I - FINANCIAL INFORMATION Item 1 - Financial Statements ZEMEX CORPORATION CONSOLIDATED BALANCE SHEETS June 30, 1995December 31, 1994 ASSETS (unaudited) Current Assets Cash and cash equivalen ts $ 4,419,000 $ 8,343,000 Accounts receivable 13,029,000 10,678,000 Inventories 17,055,000 16,490,000 Prepaid Expenses 448,000 660,000 Total Current Assets 34,951,000 36,171,000 Investments _ 2,286,000 Property, Plant and Equipment 45,154,000 29,020,000 Other Assets 9,757,000 3,387,000 Total Assets $89,862,000 $70,864,000 LIABILITIES Current Liabilities Bank Indebtedness $ _ $ 180,000 Accounts Payable and Accrued Liabilities 9,360,000 8,474,000 Accrued Income Taxes 721,000 397,000 Current Portion of Long Term Debt 2,374,000 1,074,000 Deferred Revenue 359,000 _ Total Current Liabilities 13,084,000 10,125,000 Long Term Debt 10,188,000 5,461,000 Other Non-Current Liabilities 546,000 549,000 Deferred Income Taxes 634,000 677,000 Total Liabilities 24,452,000 16,812,000 SHAREHOLDERS' EQUITY Common Stock 8,017,000 7,168,000 Paid-In Capital 44,923,000 38,291,000 Retained Earnings 15,370,000 11,668,000 Note Receivable from Shareholder (1,749,000) (1,749,000) Cumulative Translation Adjustment (1,151,000) (1,326,000) Total Shareholders' Equity 65,410,000 54,052,000 Total Liabilities and Shareholders' Equity $89,862,000 $70,864,000 ZEMEX CORPORATION CONSOLIDATED STATEMENT OF INCOME 3 Months Ended June 30 6 Months Ended June 30 1995 1994 1995 1994 (unaudited) NET SALES $21,439,000$13,388,000 $42,544,000 $25,787,000 COSTS AND EXPENSES Cost of goods sold 15,982,000 9,739,000 32,135,000 19,023,000 Selling, general and administrative 2,085,000 1,562,000 4,143,000 3,039,000 Depreciation, depletion and amortization 907,000 661,000 1,678,000 1,234,000 18,974,000 11,962,000 37,956,000 23,296,000 OPERATING INCOME 2,465,000 1,426,000 4,588,000 2,491,000 Interest expense, net 125,000 178,000 154,000 328,000 Other, net 94,000 (79,000) (45,000) (155,000) 219,000 99,000 109,000 173,000 INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES2,246,000 1,327,000 4,479,000 2,318,000 Provision for Income Taxes 63,000 199,000 777,000 426,000 NET INCOME $2,183,000 $1,128,000 $3,702,000 $1,892,000 NET INCOME PER SHARE $0.28 $0.24 $0.48 $0.41 AVERAGE COMMON SHARES OUTSTANDING 7,965,434 4,804,818 7,747,786 4,601,094 ZEMEX CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES Income from continuing operations $3,702,000 $1,892,000 Adjustments to reconcile income from continuing operations to net cash flows Depreciation, depletion and amortization 1,678,000 1,234,000 Increase (decrease) in deferred income taxes (42,000) 258,000 Share of net income (loss) of investees (87,000) (30,000) Gain (loss) on sale of property, plant & equipment - (74,000) Increase)decrease in other assets excluding assets held for sale - (308,000) Increase (decrease) in non-current liabilities (3,000) 168,000 Changes in non-cash working capital items (1,529,000) (1,695,000) Net cash provided by operating activities 3,719,000 1,445,000 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (12,249,000) (854,000) Proceeds from sale of asset 134,000 78,000 Cash acquired in acquisition 688,000 - Insurance recovery 450,000 - Additions to other assets (800,000) - Investments - (2,000,000) Net cash used in investing activities (11,777,000) (2,776,000) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in long term debt 3,576,000 - Net decrease in bank indebtedness (180,000) (237,000) Repayment of long term debt - (1,224,000) Issuance of common stock 727,000 2,165,000 Net cash provided by financing activities 4,123,000 704,000 EFFECT OF EXCHANGE RATE CHANGES ON CASH 11,000 (49,000) NET DECREASE IN CASH (3,924,000) (676,000) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,343,000 3,796,000 CASH AND CASH EQUIVALENTS AT END OF PERIOD $4,419,000 $3,120,000 Notes to the Consolidated Financial Statements The consolidated financial statements include the accounts of Zemex Corporation and its wholly-owned subsidiaries (the "Corporation"). The financial data for the three months ended June 30, 1995 and 1994 and the six months ended June 30, 1995 and 1994 are unaudited but, in the opinion of the management of the Corporation, reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of financial position and results of operations. All material intercompany transactions have been eliminated. 1. On May 5, 1995, the Corporation increased its investment in Alumitech, Inc. ("Alumitech") from 73% to 100% by issuing 343,126 common shares. The Corporation had previously increased its investment in Alumitech from 42% to 73% on February 15, 1995 by issuing 412,500 common shares of Zemex Corporation. Prior to February 15, 1995 the investment in Alumitech was accounted for under the equity method and the equity income recognized during this period was $87,000. 2. On May 1, 1995, at its Annual Meeting of Shareholders, the Corporation received approval to increase its authorized share capital to 25,000,000 shares, consisting of 20,000,000 common shares and 5,000,000 preferred shares. 3. On May 15, 1995, the Corporation , through its wholly owned subsidiary, Suzorite Mineral Products, Inc., purchased the fixed assets and inventory of Benwood Limestone Company, Inc. for approximately $3.5 million. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion and analysis of the financial condition and results of operations of the Corporation for the three months ended June 30, 1995 and the three months ended June 30, 1994, and the six months ended June 30, 1995 and the six months ended June 30, 1994, and certain factors that may affect the Corporation's prospective financial condition and results of operations. The following should be read in conjunction with the Consolidated Financial Statements and related notes thereto included elsewhere herein. Results of Operations Three Months Ended June 30, 1995 Compared to Three Months Ended June 30, 1994 Net Sales The Corporation's net sales for the three months ended June 30, 1995 were $21.4 million, an increase of $8.1 million, or 60.7%, from the comparable period in 1994. Sales increased by $8.0 million as a result of the acquisitions of a metal powders producer in September 1994, a talc operation in December 1994 and an aluminum dross reprocessor by way of a step purchase completed May 5, 1995. The increase in sales was also attributable to higher sales volumes of the Corporation feldspar and metal powders. Net sales in the industrial minerals segment for the three month period ended June 30, 1995 increased by $1.5 million, or 18.9 %, compared to the 1994 period. This increase was primarily due to increased demand for the Corporation's sodium feldspar products fueled by growth in both the housing and construction sectors of the economy and to the acquisition of a talc operation in December 1994. Net sales in the metal powders and recycling segment for the three months ended June 30, 1995 were $12.0 million, an increase of $6.6 million, or 119.4%, from the comparable period in 1994. The increase was attributable primarily to increased sales of sponge products the September 1994 acquisition of a copper powder producer in Greenback, Tennessee and the consolidation of Alumitech. The rate of growth, however, was adversely affected by an explosion in the first quarter and a disruption in hydrogen supply that extended a regularly scheduled plant maintenance shutdown well beyond expectations in the second quarter. Cost of Goods Sold Cost of goods sold for the three months ended June 30, 1995 was $16.0 million, an increase of $6.2 million, or 64.1%, from the comparable period in 1994. As a percent of net sales, cost of goods sold increased to 74.5% for the three months ended June 30, 1995 from 73.0% for the same period in 1994 period. The increase in cost of goods sold was primarily due to lower margins on incremental revenue from recently acquired companies. Selling, General and Administrative Expense Selling, general, and administrative expense ("SG&A expense") for the three months ended June 30, 1995 increased by 33.5% from the comparable 1994 period to $2.1 million. Of the increase $0.6 million or 30.7% was due to operations acquired subsequent to the 1994 period. As a percentage of net sales, SG&A expense decreased from 11.7% in the 1994 period to 9.7% in the 1995 period, reflecting the benefit derived from higher volumes resulting in lower unit cost absorption. Depreciation, Depletion and Amortization Depreciation, depletion and amortization for the three months ended June 30, 1995 was $0.9 million, an increase of 37.2% over the comparable period in 1994. The increase was due to assets acquired during 1994 and the first half 1995. Operating Income Operating income for the three month period ended June 30, 1995 was $2.5 million, an increase of $1.0 million, or 72.9%, from the comparable period in 1994. The increase was due in part to the reasons discussed above. Interest Expense, Net Interest expense for the three months ended June 30, 1995 was $0.13 million, down from $0.18 million for the comparable period in 1994. This is attributable to the reduction of long term debt achieved by the partial use of proceeds of the September 1994 secondary public offering. Provision for Income Taxes The Corporation's provision for income taxes for the three months ended June 30, 1995 decreased to $63,000 from $.0.2 million in the comparable period in 1994. The decrease is due to the fact that the foreign tax provision has declined significantly. Net Income As a result of the factors discussed above, net income for the three months ended June 30, 1995 was $2.2 million, an increase of 93.5% from the comparable period in 1994. Six Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1994 Net Sales The Corporation's net sales for the six months ended June 30, 1995 were $42.5 million, an increase of $16.8 million, or 65%, from the comparable period in 1994. Sales increased by $14.5 million as a result of the acquisitions of a metal powders producer in September 1994, a talc operation in December 1994 and an aluminum dross reprocessor by way of a step purchase completed on May 5, 1995. The increase in sales was also attributable to higher sales volumes of the Corporation's feldspar and metal powders. Net sales in the industrial minerals segment for the six month period ended June 30, 1995 increased by $3.2 million, or 20.8%, compared to the 1994 period. This increase was primarily due to increased demand for the Corporation's sodium feldspar products fueled by growth both in the housing and construction sectors of the economy and to the acquisition of a talc operation in December 1994. Net sales in the metal powders and recycling segment for the six months ended June 30, 1995 were $24.1 million, an increase of $13.6 million, or 128.8%, from the comparable period in 1994. The increase was attributable primarily to significantly higher sales volumes, increased sales for atomized powder products and the September 1994 acquisition of a copper powder producer in Greenback, Tennessee. As mentioned above, this segment also contains figures for Alumitech. The steep rate of growth, however, was curbed somewhat in the latter part of the quarter after an explosion occurred on March 8, 1995 in the powdered steel atomizing furnace at the Niagara Falls, New York facility. The plant resumed full operation on April 14, 1995. In addition, the Niagara Falls facility also experienced a two week shutdown in June as the annual maintenance shutdown was increased from one to two weeks because of a disruption in the facility's supply of hydrogen. Cost of Goods Sold Cost of goods sold for the six months ended June 30, 1995 was $32.1 million, an increase of $13.1 million, or 68.9%, from the comparable period in 1994. As a percent of net sales, cost of goods sold increased to 75.5% for the six months ended June 30, 1995 from 73.8% for the same period in 1994 period. The increase in cost of goods sold was primarily due to lower margins on incremental revenue from recently acquired companies. Selling, General and Administrative Expense SG&A expense for the six months ended June 30, 1995 increased by 36.3% from the comparable 1994 period to $4.1 million. Of the $1.0 million or 24.3% was due to operations acquired subsquent to the 1994 period. As a percentage of net sales, SG&A expense decreased from 11.8% in the 1994 period to 9.7% in the 1995 period, reflecting the benefit derived from higher volumes resulting in lower unit cost absorption. Depreciation, Depletion and Amortization Depreciation, depletion and amortization for the six months ended June 30, 1995 was $1.7 million, an increase of 36% over the comparable period in 1994. The increase was due to assets acquired during 1994 and the first half of 1995. Operating Income Operating income for the six month period ended June 30, 1995 was $4.6 million, an increase of $2.1 million, or 84.2%, from the comparable period in 1994. The increase was due in part to the reasons discussed above. Interest Expense, Net Interest expense for the six months ended June 30, 1995 was $0.2, down from $0.3 for the comparable period in 1994. This is attributable to the reduction of long term debt achieved by the partial use of proceeds of the September 1994 secondary public offering. Provision for Income Taxes The Corporation's provision for income taxes for the six months ended June 30, 1995 increased to $0.7 million from $0.4 million in the comparable period in 1994. The increase is partially due to a change in the accounting treatment of net operating losses pursuant to the implementation of FAS 109 and as a result of increased profitability. However, the Corporation has enough loss carryforwards to effectively shelter income in 1995. Accordingly, the provision for income taxes will be for foreign taxes only. Net Income As a result of the factors discussed above, net income for the six months ended June 30, 1995 was $3.7 million, an increase of 95.7% from the comparable period in 1994. Liquidity and Capital Resources Acquisitions Benwood On May 15, 1995, the Corporation acquired the assets of Benwood Limestone Company, Inc. ("Benwood"), a division of James River Limestone Company, Inc. ("James River") for approximately $3.5 million. Benwood was purchased through a 100% wholly owned subsidiary of the Corporation, Suzorite Mineral Products, Inc. ("Suzorite"). The acquisition of Benwood offers Suzorite the opportunity to expand its present talc and mineral processing capability, and serves as a strategic shipping point for all the Corporation's business units. Benwood will continue to process consumer products for its former owner, James River, under a long term contract. Alumitech, Inc. On May 5, 1995 the Corporation completed its step purchase of 100% (fully diluted) of Alumitech, Inc. ("Alumitech") by issuing 343,126 common shares. The Corporation had previously increased its investment in Alumitech from 42% to 73% on February 15, 1995 by issuing 412,500 common shares of Zemex Corporation. The Corporation had first acquired a minority interest in Alumitech in May 1994. Alumitech has developed proprietary and patented technology to process chloride-based drosses and saltcake materials from waste generated in recycling aluminum scrap and beverage cans into usable and commercial products. This technology, in its newly developed form, is capable of completely recycling dross and saltcake thereby eliminating all landfill requirements. Alumitech currently processes approximately 60,000 tons per year and reclaims nearly 80% of the incoming feed but aniticipates having the ability to reclaim 100% of this material by late 1995. With this technology, Alumitech is considered an industry leader in recycling of chloride base aluminum dross and saltcake material. The materials produced from this proprietary process include aluminum metal, salts, exothermic compounds, ceramic fiber and abrasive materials. Cash Flow from Operations Net cash provided by operating activities for the six months ended June 30, 1995 was $3.7 million, up $2.3 million, or 157.4% relative to the year ended December 31, 1995. During the first six months of 1995, the Corporation generated positive cash flow from operations of $3.7 million as compared to $1.4 million for the first six months of 1994. In 1995, non-cash working capital items used $1.5 million of the cash otherwise generated from operations as compared to $1.7 million for the corresponding period of 1994, as a result of increases in accounts receivable, accounts payable, accrued liabilities, accrued income taxes and inventories and a decrease in prepaid expenses. The Corporation had $21.9 million of working capital at June 30, 1995, compared to $26.0 million at December 31, 1994. The decrease of $4.1 million is attributable to an increase in capital expenditures of $12.2 million funded by cash on hand and funds from operations, partially offset by an increase in non- cash working capital items due to the acquisition of Alumitech. Financing Agreements In May 1995, the Corporation drew down $3.5 million of its $25 million loan facility with NationsBank of Tennessee to finance the acquisition of an industrial mineral processor. (See Notes to Consolidated Financial Statements). It is the opinion of management that there are sufficient sources of funds available to meet its anticipated cash requirements. 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 hereunto duly authorized. Dated this 14th day of August, 1995. ZEMEX CORPORATION (Registrant) By : Allen J. Palmiere Vice President and Chief Financial Officer EX-27 2
5 1,000 6-MOS DEC-31-1995 JUN-30-1995 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 42,544,000 42,544,000 32,135,000 32,135,000 0 0 154,000 4,479,000 777,000 3,702,000 0 0 0 3,702,000 0.48 0