-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O8OD5J5+ds+jAEvDMS9S8JjK0zTRDXGE/kHfzGyEAkLmhWQlGvoSK4aHCuC8BhLa YMLwwUaqEDZPpFATfFiTbQ== 0000075644-96-000003.txt : 19960405 0000075644-96-000003.hdr.sgml : 19960405 ACCESSION NUMBER: 0000075644-96-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 DATE AS OF CHANGE: 19960403 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZEMEX CORP CENTRAL INDEX KEY: 0000075644 STANDARD INDUSTRIAL CLASSIFICATION: 1400 IRS NUMBER: 135496920 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00228 FILM NUMBER: 96543534 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-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 Commission file number 1-228 ZEMEX CORPORATION (Exact name of registrant as specified in its charter) Delaware 1031 13-5496920 (State or other (Primary standard (I.R.S. employer jurisdiction of industrial identification incorporation or classification code number) organization) number) Canada Trust Tower, BCE Place, 161 Bay Street, Suite 3750 Toronto, Ontario, Canada M5J 2S1 (416) 365-8080 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Securities registered pursuant to Section 12(b) of the Act New York Stock Exchange Capital Stock, $1.00 par value 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. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. The aggregate market value of registrant's voting stock (Capital Stock, $1.00 par value) held by non-affiliates as of March 8, 1996 (based on the closing sale price of $9.00 on the New York Stock Exchange) was $36,266,796. As of March 8, 1996 there were 8,712,728 of the registrant's Capital Stock, $1.00 par value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Shareholders for the Year Ended December 31, 1995 Part II Definitive Proxy Statement filed with the Commission pursuant to Regulation 14A with respect to Annual Meeting of Shareholders Part III FORM 10-K ANNUAL REPORT TABLE OF CONTENTS AND CROSS-REFERENCE SHEET PART I Page Item 1. Business 1 Item 2. Properties 6 Item 3. Legal Proceedings 7 Item 4. Submission of Matters to a Vote of Security Holders7 Item 10. Executive and Other Officers of the Registrant (A) 7 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters (B) 8 Item 6. Selected Financial Data (C) 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation (D) 9 Item 8. Financial Statements and Supplementary Data (E) 9 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 9 PART III Item 10. Directors of the Registrant(F) * Item 11. Executive Compensation(F) * Item 12. Security Ownership of Certain Beneficial Owners and Management (F) * Item 13. Certain Relationships and Related Transactions (F) * PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 9 __________________________ (A) Included in Part I pursuant to Instruction 3 of Item 401(b) of Regulation S-K. (B) Information responsive to this Item is set forth on page 21 of registrant's Annual Report to Shareholders for the year ended December 31, 1995 (the "Annual Report to Shareholders") and is incorporated herein by reference. The Annual Report to Shareholders is included as Exhibit 13 to this Form 10-K Annual Report. The Annual Report to Shareholders, except for those portions thereof which are expressly incorporated by reference herein, is furnished for the information of the Commission and is not to be deemed "filed" as part of this Form 10-K report. (C) Information responsive to this Item is set forth on page 44 of the Annual Report to Shareholders and is incorporated herein by reference. (D) Information responsive to this Item is set forth on pages 12 through 21 of the Annual Report to Shareholders and is incorporated herein by reference. (E) Financial statements responsive to this Item are set forth on pages 22 through 43 of the Annual Report to Shareholders and are incorporated herein by reference. The Supplementary Schedule required by this Item is set forth on page S-1 of this Form 10-K Annual Report. (F) Information responsive to this Item is set forth in registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A and in the Annual Report to Shareholders on Page 42 (Note 15) and is incorporated herein by reference. PART I ITEM 1. BUSINESS General Zemex Corporation (the "Corporation" or "Zemex"), a Delaware corporation, was incorporated in 1985 as the successor to Pacific Tin Corporation. Zemex is a niche producer of industrial minerals and metal products. Its principal businesses are industrial minerals, metal powders, and aluminum waste recycling. Major products include feldspar, feldspathic minerals, kaolin, sand, mica, talc, ferrous and non ferrous powders and aluminum dross derivatives. Industrial Minerals The Corporation's industrial minerals segment consists of three wholly-owned subsidiaries: The Feldspar Corporation ("TFC"), Suzorite Mica Products Inc. ("Suzorite") and Suzorite Mineral Products, Inc. ("SMP"). The products produced by TFC include feldspar, silica, muscovite mica and kaolin clay. Industries supplied include glass and ceramics. Feldspathic minerals and certain grades of industrial sand are used to manufacture bottles, jars, and other glass containers, fiberglass, paints and plastics, and television picture tubes. Feldspar and kaolin are major raw materials for the ceramic industry, and are incorporated in a variety of products that include ceramic floor and wall tiles, dinnerware, plumbing fixtures, glazes and electrical insulators. Industrial sand is also used for filter, trap, filler, beach, blasting and concrete applications. TFC is also producing a new low iron sand product for use in specialized lighting. TFC's operating plants are located in Florida, Georgia and North Carolina. Suzorite mines phlogopite mica in an open pit mining operation in Suzor Township, Quebec, Canada, approximately 200 miles north of Montreal, Quebec. The ore is mined by standard, open pit methods and delivered to a siding for ultimate transportation by rail to the processing plant, which is located in Boucherville, Quebec, a suburb of Montreal. Processing of phlogopite mica involves milling, screening and proprietary processing steps to produce products of various size fractions which find ultimate use in a variety of applications, such as partial or complete substitution for asbestos in fire retardation, friction materials, oil well drilling needs, caulking and molding compounds, coatings, plasters and plastics. One of the most significant areas of use is in technological plastic and high temperature plastic applications, as phlogopite mica has a distinct thermal stability advantage over competitive materials. These products are marketed under the trade names of Suzorite Mica and Suzorex. The principal markets served by Suzorite are the automobile, construction and oil drilling industries. The most recent addition to the industrial minerals segment is the talc business. In late 1994, the company acquired talc operations in New York, North Carolina and Texas and in May 1995 it bought an additional processing facility in West Virginia. SMP produces talc which is used in the ceramics, paint and paper industries. Its plants are located in New York, North Carolina, Texas and West Virginia. Talc is used in the cosmetic and pharmaceutical industries and in the coatings, plastics and ceramics industries. SMP plans to develop a niche for itself in the talc marketplace by offering such specialty products as fine grind and surface treated talc products. Customers are currently testing these products and, if successful, these products will begin to be sold some time in 1996. Demand for these industrial minerals is related to the pace of the general economy and is particularly related to the automotive industry and the residential and commercial construction and remodeling industries. Industrial minerals sales in 1995 totaled $37.1 million, compared with $30.4 million in 1994. This business segment recorded the fifth straight year of improved operating income before restructuring charges, with $4.6 million in 1995, $3.9 million in 1994, $2.4 million in 1993, $2.2 million in 1992, and $0.8 million in 1991, due to increased sales and margins. Major efforts were made in the area of cost reduction, continuous quality improvement and the introduction of new value added products. During 1995, considerable efforts were put into product development, market research, cost saving capital projects and product quality improvement systems. The Corporation expects these efforts will bear fruit in the future. Capital expenditures were $9.7 million in 1995, compared to $2.1 million in 1994. The 1995 expenditures were used to replace mining equipment, make mill modifications to produce a new product and to increase production capacity at TFC's sodium feldspar facility in Spruce Pine, North Carolina. It is anticipated that 1996 capital expenditures will be higher due to the completion of the expansion project and construction of a high purity silica plant adjacent to the North Carolina sodium feldspar facility and increased fine grind capacity at the facility in West Virginia. Metal Products The metal products segment consists of Pyron Corporation and Pyron Metal Powders, Inc. (together, "Pyron") and Alumitech, Inc., Aluminum Waste Technology, Inc. and Engineered Thermal Systems, Inc. (collectively, "Alumitech"), all of which are wholly-owned subsidiaries of Zemex. Pyron operates plants located in Niagara Falls, New York, St. Marys, Pennsylvania, Greenback, Tennessee and Maryville, Tennessee. In 1992, Pyron acquired Pyron Metal Powders, Inc. of Maryville, Tennessee (renamed from Ligonier Powders, Inc.) out of bankruptcy. In 1994, Pyron purchased the assets of Greenback Industries, Inc. Combined, the acquisitions give Pyron the ability to produce a range of high quality copper and copper alloy powders at its plants in Maryville and Greenback, Tennessee. These products complement Pyron's iron and steel powder products and are sold through Pyron's existing marketing and sales organization. Pyron's major products include iron, steel, copper and copper alloy powders. The largest use of metal powders is in the fabrication of precision metal parts by the powder metallurgy process. Powder metallurgy is an efficient, economical process for the production of numerous components for the automotive, farm, garden and lawn equipment, and business machine industries. Key features of powder metallurgy technology are low scrap ratios and lower production costs than other metal working processes such as casting and forging. In addition, in recent years, metal powder use in automotive and rail braking systems has grown rapidly as a replacement for asbestos, achieving better performance and improving environmental and health conditions. Metal powders are also used in making welding rods, for cutting and scarfing of steel ingots and billets, for the inspection of oil field pipe and tubing, and in food supplements. At Pyron, sales of atomized iron and steel products increased in 1993, however, due to technological problems, the rate of increase was less than anticipated. Late in 1993, the technical problems were resolved and in 1994 the product rapidly gained customer acceptance. In March 1995, there was an interruption in production due to an explosion in the atomization facility. This resulted in lost sales at a time when the market was slowing due to an inventory adjustment by suppliers to the automotive industry. The impact continued through to the end of 1995 but management sees signs of improvement for 1996. In 1995 the only domestic producer of manganese sulfide was sold to a European company and the facility was relocated to Sweden. Pyron has developed a product line and new process and is initiating construction of a facility for the production of manganese sulfide. This new product is currently in the hands of customers for qualification. With its extended product line, Pyron has become a valuable and flexible supplier with a long term future in what management believes to be a very promising industry. Also in 1995, Pyron completed construction of a blending facility in St. Marys, Pennsylvania. This new blending plant enhances product delivery and allows customers to take advantage of just- in-time ordering. In the short time it has been in operation, the St. Marys plant has gained wide acceptance in the marketplace. Late in 1993, the Corporation entered into an agreement whereby it became the exclusive sales agent to the powdered metal markets for powdered nickel produced in Russia, making Pyron the second largest supplier of this material to this market in North America. Zemex is 100% owner of Alumitech, an aluminum dross reprocessor. Alumitech has developed, patented and is commercializing its leading edge aluminum dross recycling technology. The process transforms chloride-based drosses received from secondary aluminum producers into a number of commercial components, including ceramic type materials. Currently, competitive processes landfill anywhere from 40%-75% of the volume of dross received whereas Alumitech's recycling process will virtually eliminate the need for landfill. The Corporation acquired its initial interest in Alumitech in 1994 and increased its ownership to 100% in 1995. Alumitech has two processing plants: an aluminum dross plant in Cleveland, Ohio and a ceramic fiber plant in Streetsboro, Ohio. Aluminum dross is a waste product produced by primary and secondary aluminum smelters. Secondary dross, which is high in chloride content, forms the primary feedstock for Alumitech's dross plant. Conventional dross processors extract the contained metallic aluminum and landfill the balance. The process that Alumitech is currently commercializing extracts the metallic aluminum, re-crystallizes the sodium, potassium, and magnesium chlorides, extracts residual fines as exothermics and converts the balance into its proprietary non-metallic product ("NMP"). The NMP is a feedstock for the production of ceramic products. The end result of the process is the ability for the total elimination of landfill arising from aluminum dross. Alumitech's patents on its technology to process NMP have a remaining life of about fourteen years. Alumitech also operates a ceramic fiber plant which melts the NMP in an electric arc furnace and converts it into ceramic fiber. The fiber is blown into a blanket which is cut to dimension. The final product is an insulation material with a temperature of degradation of as high as 2200oF. Management expects that Alumitech's process will be fully commercialized in 1996 and that construction of a second dross plant will begin in 1996. Sales for the metal product group increased to $48.0 million in 1995 from $24.9 million in 1994 and from $16.9 million in 1993. Of the 1995 increase, $13.6 million was due to the acquisition of Alumitech in February 1995. The balance of the increase was due to higher sales volumes of ferrous and non-ferrous metal powders. During the same interval, operating income increased from $1.0 million in 1993 to $3.7 million in 1995. Management anticipates improved margins in this segment in 1996 as a result of higher metal powder production and an intensive cost reduction program, coupled with improved volumes of Alumitech. Capital expenditures were $5.8 million in 1995 as compared to $0.9 million in 1994 and $0.4 million in 1993. The expenditures were primarily incurred to construct a powdered metal blending facility in St. Marys, Pennsylvania and to improve the dross processing and ceramic production facilities at the Cleveland plant. In 1996, capital expenditures are anticipated to be higher due to the commencement of construction of a new dross processing facility. Raw Materials and Other Requirements In recent years, the Corporation has not experienced any substantial difficulty in obtaining its raw materials requirements for the metal products segment, which is the segment that consumes, rather than supplies, raw materials. No assurance can be given that any shortages of these or other necessary materials or equipment will not develop or that increased prices will not adversely affect the Corporation's business in the future. Seasonality The efficiency and productivity of the Corporation's operations can be affected by unusually severe winter weather conditions. During the winter of 1995, there were several days of production lost in operating facilities in North Carolina and New York states, but they were not significant enough to materially affect 1995 operating results. Competition All of the Corporation's products are sold in highly competitive markets which are influenced by price, product performance, customer location, service, foreign competition, material substitution and general economic conditions. The Corporation competes with other companies active in industrial minerals and metal products. No material part of the Corporation's business is dependent upon a single customer or upon very few customers, the loss of any one of which would have a material adverse impact on the Corporation. Industrial mineral prices generally are not subject to the price fluctuations typical of commodity metals. Demand for industrial minerals is primarily related to general economic conditions, particularly in the automotive, housing and construction industries. In the United States there are three major feldspathic mineral producers including the Corporation and the Corporation is the only North American producer of phlogopite mica. Markets for industrial mineral products are sensitive not only to service, product performance and price, but to competitive pressures and transportation costs. The Corporation is one of five North American producers of metal powders. The market for metal powders is affected primarily by product performance, consistency of product quality and price. To some extent, competition in the metal powders industry is affected by imports of finished metal powder parts. Product prices over the last several years have been strongly influenced by costs of powder production. Demand for metal powders is a function of general economic conditions, particularly in the automotive market. There a numerous aluminum dross processors in the United States, however, only Alumitech has the patented technology to enable it to process aluminum dross without landfill. While the Corporation competes for the supply of aluminum dross with a number of other operations, the major factor affecting the supply of dross is the level of activity of the secondary aluminum smelting industry. Research and Development The Corporation carries on an active program of product development and improvement. Research and development expense was $0.3 million in 1995, $0.3 million in 1994 and $0.4 million in 1993. Financial information about industry segments is set forth on pages 42 and 43 of the Annual Report to Shareholders and is incorporated herein by reference. Environmental Considerations Laws and regulations currently in force which do or may affect the Corporation's domestic operations include the Federal Clean Air Act of 1970, the National Environmental Policy Act of 1969, the Solid Waste Disposal Act (including the Resource Conservation and Recovery Act of 1976), the Toxic Substances Control Act, CERCLA (superfund) and regulations under these Acts, the environmental protection regulations of various governmental agencies (e.g. the Bureau of Land Management Surface Management Regulations, Forest Service Regulations, and Department of Transportation Regulations), laws and regulations with respect to permitting of land use, various state and local laws and regulations concerned with zoning, mining techniques, reclamation of mined lands, air and water pollution and solid waste disposal. The Corporation is not aware of any adverse environmental problems or issues. Employees The approximate number of Corporation employees as of December 31, 1995 is set forth below: Industrial Minerals 271 Metal Products 220 Corporate 6 Total 497 Approximately 62 employees of the metal powder operations are covered by a collective bargaining agreement. The current three- year agreement expires April 15, 1998. Approximately 23 employees of the Suzorite mica operation are covered by a collective bargaining agreement. The current agreement is for a three-year term and expires January 12, 1997. Approximately 39 employees at Alumitech are covered by two collective bargaining agreements, one agreement expiring April 30, 1996 and one agreement expiring December 31, 1998. The Corporation considers its labor relations to be good. Foreign Operations The Corporation's international operations are located in Canada whose institutions and governmental policies are similar to those of the United States. Although there can be no assurance as to future conditions, the Corporation has experienced no political activities, social upheavals, currency restrictions or similar factors which have had any material adverse effect to date on the results of its operations or financial condition. Export Sales The Corporation's industrial minerals and metal products operations sell their products internationally to a wide variety of customers including the ceramics, glass and powder metallurgy industries. Export sales in these two segments were less than 7% of total sales. ITEM 2. PROPERTIES The industrial minerals segment has operations and mines in Edgar, Florida; Monticello, Georgia; Boucherville, Quebec; Suzor Township, Quebec; Natural Bridge, New York; Murphy, North Carolina; Spruce Pine, North Carolina; Van Horn, Texas; and Benwood, West Virginia. This segment owns approximately 364,000 square feet of office and plant floor space. In addition, the processing facility in Benwood, West Virginia has approximately twelve acres of land. The mineral deposits at the mines currently operated by the industrial minerals segment are estimated by the Corporation to be at least 25 years, except in the case of the mica mine in Suzor Township where reserves are estimated to be in excess of 100 years. All of the Corporation's mining properties are either owned or leased, with the leases expiring from 1996 to 2018. The metal products group has operations in Niagara Falls, New York; St. Marys, Pennsylvania; Greenback, Tennessee; Maryville, Tennessee; Cleveland, Ohio; and Streetsboro, Ohio. At its facility in Niagara Falls, Pyron Corporation utilizes approximately 96,000 square feet of office and plant floor space which it leases from the Niagara County Industrial Development Agency. The lease was established as part of the Industrial Revenue Bond issued in November 1989 to finance the construction of the Atomized Steel Powder plant. Lease payments are to be sufficient to pay the debt service on the Industrial Revenue Bond. The facility incorporates approximately 16,000 square feet of floor space and is adjacent to the existing facility. The blending plant in St. Marys, Pennsylvania was built in 1995 and has 32,000 square feet of plant, office and storage space and is situated on 3.4 acres of land. The Maryville, Tennessee plant utilizes approximately 23,000 square feet of office and plant floor space. The Greenback facility is situated on 27.5 acres of land of which six acres is actively used in the operations. General office space comprises approximately 6,300 square feet. There is approximately 66,500 square feet of production/storage space and approximately 86,800 square feet. The Cleveland, Ohio operation owns 6.1 acres and has buildings totaling 51,000 square feet. The Streetsboro, Ohio operation own 6.0 acres on which there is 36,000 square foot building of plant and office space. All facilities are maintained in good operating condition. ITEM 3. LEGAL PROCEEDINGS On February 11, 1993, The Feldspar Corporation and other non- affiliated companies were named as defendants in a civil action brought by Dryvit Systems, Inc. ("Dryvit") in the State of Rhode Island captioned Dryvit Systems, Inc. v. The Feldspar Corporation, Taggart Sand Products Corp., Surface Systems, Inc., The Morie Company, Inc., Eriez Magnetics, Inc., and Law Engineering, Inc., C.A. No. KC 93-108, State of Rhode Island, Kent. Dryvit alleges that between approximately 1985 and 1990, sand purchased from TFC and other suppliers utilized by Dryvit to manufacture exterior insulation finishes for the exterior of buildings developed rust stains because the sand contained pyrite and magnetic materials. Dryvit seeks unspecified monetary damages and costs, including the costs associated with the repair of the damaged structures. TFC denies such allegations and claims and the Corporation believes that it is remote that this litigation will result in any material adverse effect to the Corporation's financial condition or results of operations. The Corporation strongly believes that this action is without merit, however, no assurance can be made as to the outcome of this litigation. Although the Corporation's primary insurer has attempted to limit its coverage, the Corporation believes that its primary and excess liability insurance is sufficient to cover any potentially unfavorable outcome. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 10. EXECUTIVE AND OTHER OFFICERS OF THE REGISTRANT Served in Officer Position Age Position Since Peter Lawson-Johnston Chairman of the Board of Directors 69 1975 Richard L. Lister President and Chief Executive Officer 57 1993 Allen J. Palmiere Vice President, Chief Financial Officer 43 1993 and Assistant Secretary Peter J. Goodwin Vice President and President of 45 1994 Suzorite Mineral Products, Inc. Terrance J. Hogan President, Alumitech, Inc. 40 1995 G. Russell Lewis President, Metal Powders 66 1986 Patricia K. Moran Assistant Secretary-Treasurer 30 1995 There are no family relationships between the officers listed above. The term of office of each executive officer is until his respective successor is elected and has qualified, or until his death, resignation or removal. Officers are elected or appointed by the Board of Directors annually at its first meeting following the annual meeting of shareholders. All officers have held their present positions for at least five years except Messrs. Lister, Palmiere, Goodwin and Hogan and Ms. Moran. Mr. Lister, who was elected to the Board of Directors on May 30, 1991, assumed his duties as Vice Chairman of the Board on July 23, 1991 and as President and Chief Executive Officer on June 1, 1993. Mr. Lister was Vice Chairman of Dundee Bancorp Inc. from October 1991 to May 1993 and prior to that was Chief Executive Officer of Campbell Resources Inc. from 1981 to 1988 and Chairman from 1988 to 1992. Mr. Palmiere assumed the duties of Chief Financial Officer in October, 1993. From April 1992 to October 1993 he was a self- employed consultant. From October 1990 to April 1991 he was the Chief Financial Officer and Vice President of Breakwater Resources Ltd. and from May 1991 to April 1992 was the Chief Executive Officer of Breakwater Resources Ltd. Mr. Goodwin became a Vice President of the Company in August 1994. From May 1993 to August 1994, Mr. Goodwin was a self- employed consultant. Mr. Goodwin was President and Chief Executive Officer of Miller and Co. from August 1990 to May 1993. Mr. Hogan became President of Alumitech, Inc. in May 1995. Prior to becoming President, Mr. Hogan was Chief Operating Officer of Alumitech's subsidiary, Aluminum Waste Technology, Inc. from December 1992 to May 1995. Prior to December 1992, Mr. Hogan was the Vice President and Chief Financial Officer of American Recovery Technology Systems, Inc. Ms. Moran assumed the duties of Assistant Secretary-Treasurer in February 1995 and has served in various capacities with the Corporation since 1993. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information responsive to this Item is set forth on page 21 of registrant's Annual Report to Shareholders for the year ended December 31, 1995 (the "Annual Report to Shareholders") and is incorporated herein by reference. The Annual Report to Shareholders is included as Exhibit 13 to this Form 10-K Annual Report. The Annual Report to Shareholders, except for those portions thereof which are expressly incorporated by reference herein, is furnished for the information of the Commission and is not to be deemed "filed" as part of this Form 10-K report. ITEM 6. SELECTED FINANCIAL DATA Information responsive to this item is set forth on page 44 of the Annual Report to Shareholders and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Information responsive to this Item is set forth on pages 12 through 21 of the Annual Report to Shareholders and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements responsive to this Item are set forth on pages 22 through 43 of the Annual Report to Shareholders and are incorporated herein by reference. The Supplementary Schedule required by this Item is set forth on page S-1 of this Form 10-K Annual Report. See Item 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 1. Financial Statements and Independent Auditor's Report Filed as Part of this Report: (a) Consolidated Balance Sheets at December 31, 1995 and 1994, which information is incorporated by reference under Item 8 of this report. (b) Consolidated Statements of Shareholders' Equity for the three years ended December 31, 1995, which information is incorporated by reference under Item 8 of this report. (c) Consolidated Statements of Income for the three years ended December 31, 1995, which information is incorporated by reference under Item 8 of this report. (d) Consolidated Statements of Cash Flows for the three years ended December 31, 1995, which information is incorporated by reference under item 8 of this report. (e) Notes to the Consolidated Financial Statements, which information is incorporated by reference under Item 8 of this report. (f) Independent Auditors' Report, which information is incorporated by reference under Item 8 of this report. 2. Financial Statement Schedules and Independent Auditors' Report Files as part of this Report: Schedule Number Description - Report of Independent Accountants Schedule IX Valuation and Qualifying Accounts and Reserves (page S-1) All other financial statements and schedules not listed have been omitted since the required information is included in the consolidated financial statements or the notes thereto, or is not applicable or required. 3. EXHIBITS (3)(a) Certificate of Incorporation (Incorporated by reference from Exhibit 4(a) of the Corporation's Registration Statement on Form S-2, Registration No. 33-7774, filed on August 5, 1986) (3)(b) By-Laws (Incorporated by reference from Exhibit 3 of the Corporation's Quarterly Report on Form 10-Q filed on May 13, 1988) (3)(c) Amended and Restated Certificate of Incorporation (Incorporated by reference from Exhibit A of the Corporation's Definitive Proxy Statement, filed on March 29, 1995) (4)(a) Indenture of Trust dated as of November 1, 1989 between Niagara County Industrial Development Agency and The Bank of New York as trustee for Pyron Corporation (Incorporated by reference from Exhibit (4)(a) of the Corporation's Annual Report on Form 10-K filed March 31, 1990) (4)(b) Agency Mortgage and Security Agreement dated as of November 1, 1989 from Pyron Corporation and Niagara County Industrial Development Agency to The Bank of New York (Incorporated by reference from Exhibit (4)(b) of the Corporation's Annual Report on Form 10-K filed March 31, 1990) (4)(c) Letter of Credit Reimbursement Agreement dated as of November 1, 1989 between Pyron Corporation and Chemical Bank (Incorporated by reference from Exhibit (4)(c) of the Corporation's Annual Report on Form 10-K filed March 31, 1990) (4)(d) First Amendment to Letter of Credit Reimbursement Agreement dated as of November 1, 1989 between Pyron Corporation and Chemical Bank (Incorporated by reference from Exhibit (4)(d) of the Corporation's Annual Report on Form 10-K filed March 31, 1990) (4)(e) Second Amendment to Letter of Credit Reimbursement Agreement dated as of March 15, 1995 between Pyron Corporation and Chemical Bank (Incorporated by reference from Exhibit (4)(e) of the Corporation's Annual Report on Form 10-K filed March 30, 1995) (4)(f) Bank Mortgage and Security Agreement dated as of November 1, 1989 from Pyron Corporation and Niagara County Industrial Development Agency to Chemical Bank (Incorporated by reference from Exhibit (4)(e) of the Corporation's Annual Report on Form 10-K filed March 31, 1990) (4)(g) Building Loan Agreement dated as of November 1, 1989 between Chemical Bank and Pyron Corporation (Incorporated by reference from Exhibit (4)(f) of the Corporation's Annual Report on Form 10-K filed March 31, 1990) (4)(h) Security Agreement dated as of November 1, 1989 between Pyron Corporation and Chemical Bank (Incorporated by reference from Exhibit (4)(g) of the Corporation's Annual Report on Form 10-K filed March 31, 1990) (4)(i) Corporate Guaranty dated as of November 1, 1989 from Zemex Corporation to Chemical Bank (Incorporated by reference from Exhibit (4)(h) of the Corporation's Annual Report on Form 10-K filed March 31, 1990) (4)(j) First Amendment to Corporate Guaranty dated as of November 1, 1989 of Zemex Corporation to Chemical Bank (Incorporated by reference from Exhibit (4)(i) of the Corporation's Annual Report on Form 10-K filed March 31, 1990) (4)(k) Second Amendment to Corporate Guaranty dated as of March 14, 1991 of Zemex Corporation to Chemical Bank (Incorporated by reference from Exhibit (4)(j) of the Corporation's Annual Report on Form 10-K filed March 31, 1991) (4)(l) Third Amendment to Corporate Guaranty dated as of February 25, 1992 of Zemex Corporation to Chemical Bank (Incorporated by reference from Exhibit (4)(m) of the Corporation's Annual Report on Form 10-K filed March 31, 1993) (4)(m) Fourth Amendment to Corporate Guaranty dated as of March 8, 1993 of Zemex Corporation to Chemical Bank (Incorporated by reference from Exhibit (4)(o) of the Corporation's Annual Report on Form 10-K filed March 31, 1993) (4)(n) Fifth Amendment to Corporate Guaranty dated as of March 15, 1995 of Zemex Corporation to Chemical Bank (Incorporated by reference from Exhibit (4)(n) of the Corporation's Annual Report on Form 10-K filed March 30, 1995) (4)(o) Irrevocable Standby Letter of Credit between Florida Gas Utility and The Feldspar Corporation dated December 16, 1992 (Incorporated by reference from Exhibit (4)(q) of the Corporation's Annual Report on Form 10-K filed March 31, 1993) (4)(p) Loan and Security Agreement dated as of March 15, 1995 among Zemex Corporation and The Feldspar Corporation and NationsBank of Tennessee, N.A. and Chemical Bank and NationsBank of Tennessee, N.A., as Agent (Incorporated by reference from Exhibit (4)(p) of the Corporation's Annual Report on Form 10-K filed March 30, 1995) *(10)(a) Key Executive Common Stock Purchase Plan (Incorporated by reference from Exhibit (10)(b) of the Corporation's Annual Report on Form 10-K filed March 31, 1991) (10)(b)Consent to Assignment of Lease and to Agreement Sublease, and permission to Make Payments dated November 7, 1978 each from Joberta Enterprises, Inc. to NL Industries, Inc. and The Feldspar Corporation (Incorporated by reference from Exhibit 10(pp) to the Corporation's Registration Statement on Form S-2, Registration No. 33- 7774, filed on August 5, 1986) (10)(c)Additional Lease Agreement dated as of November 1, 1989 between Niagara County Industrial Development Agency and Pyron Corporation (Incorporated by reference from Exhibit (10)(ll) of the Corporation's Annual Report on Form 10-K filed March 31, 1990) *(10)(d) Employment Agreement dated February 5, 1991 between Zemex Corporation and Robert W. Morris (Incorporated by reference from Exhibit (10)(ll) of the Corporation's Annual Report on Form 10-K filed March 31, 1992) *(10)(e) Option Agreement with Paul Carroll dated September 17, 1991 (Incorporated by reference from Exhibit (10)(ll) of the Corporation's Annual Report on Form 10-K filed March 31, 1992) *(10)(f) Option Agreement with Peter Lawson-Johnston dated September 17, 1991 (Incorporated by reference from Exhibit (10)(ll) of the Corporation's Annual Report on Form 10-K filed March 31, 1992) *(10)(g) Option Agreement with John Donovan dated September 17, 1991 (Incorporated by reference from Exhibit (10)(ll) of the Corporation's Annual Report on Form 10-K filed March 31, 1992) *(10)(h) Subscription Agreement with Richard L. Lister dated November 26, 1991 (Incorporated by reference from Exhibit (5)(a) of the Corporation's Annual Report on Form 10-K filed March 31, 1992) (10)(i)Asset Purchase Agreement dated March 18, 1991 among Unimin Corporation, Purchaser; Zemex Corporation, Seller and The Feldspar Corporation, Operating Subsidiary (Incorporated by reference from Exhibit (5)(a) of the Corporation's Annual Report on Form 10-K filed March 31, 1991) (10)(j)Lease Agreement dated September 5, 1990 between the State of Connecticut, Department of Transportation and The Feldspar Corporation (Incorporated by reference from Exhibit (5)(b) of the Corporation's Annual Report on Form 10-K filed March 31, 1991) (10)(k)Ligonier Purchase Agreement and Second Plan of Reorganization dated March 2, 1992 among Pyron Metal Powders, Inc., a wholly-owned subsidiary of Zemex Corporation, Purchaser and Ligonier Powders, Inc., Seller (Incorporated by reference from Exhibit (5)(a) of the Corporation's Annual Report on Form 10-K filed March 31, 1993) (10)(l)1995 Stock Option Plan (Incorporated by reference from Exhibit B of the Corporation's 1995 Definitive Proxy Statement, filed on March 29, 1995) (10)(m)Stock Purchase Agreement dated August 10, 1993 between Zemex Corporation, Zemex Canada Inc., an Ontario corporation and a direct wholly-owned subsidiary of Zemex Corporation, Dundee Bancorp Inc., an Ontario corporation; and Dundee Bancorp International Inc., a Delaware corporation, and a direct wholly-owned subsidiary of Dundee Bancorp Inc., with respect to the acquisition of Suzorite Mica Products Inc. (Incorporated by reference from Exhibit 2 of the Corporation's Current Report on Form 8-K filed September 7, 1993) (10)(n)Capital Stock Purchase Warrant dated September 14, 1993 issued to Dundee Bancorp International Inc. pursuant to the Stock Purchase Agreement referred to in 10(m). (Incorporated by reference from Exhibit 4(a) of the Corporation's Current Report on Form 8-K filed September 7, 1993) (10)(o)Registration Rights Agreement dated September 14, 1993 between Zemex Corporation and Dundee Bancorp International Inc. (Incorporated by reference from Exhibit 4(b) of the Corporation's Current Report on Form 8-K filed September 7, 1993) (10)(p)Asset Purchase Agreement dated September 3, 1993 between U.S. Silica Company, The Feldspar Corporation and Zemex Corporation with respect to the sale of the Virginia aplite facility (Incorporated by reference from Exhibit 10(at) of the Corporation's Annual Report on Form 10-K filed March 31, 1994) (10)(q)Stock Purchase Agreement dated November 15, 1993 between Americo Malay Mineral Company and Zemex Corporation with respect to the sale of 2,500,002 common shares of Perangsang Pasifik Senderian Berhad, a corporation organized and existing under the laws of the Federal Republic of Malaysia (Incorporated by reference from Exhibit 10(au) of the Corporation's Annual Report on Form 10-K filed March 31, 1994) (10)(r)Suzorite Mica Product Inc.'s Mining Lease dated August 25, 1975 between the Province of Quebec and Marietta Resources International Ltd. (Incorporated by reference from Exhibit 10(av) of the Corporation's Annual Report on Form 10-K filed March 31, 1994) (10)(s)Employee Stock Purchase Plan (Incorporated by reference as Exhibit A to the Corporation's Proxy Statement filed May 6, 1994) (10)(t)Stockholders Agreement dated June 10, 1994 among Alumitech, Inc., Clarion Capital Corporation, DCC Equities Limited and Moshe Dan Yerushalmi, John Hocevar and Terrance Hogan and Zemex Corporation (Incorporated by reference as Exhibit 10(ax) to the Corporation's Registration Statement on Form S-1, Registration No. 33- 82638, filed on August 22, 1994) (10)(u)Asset Purchase Agreement dated December 7, 1994 between Whittaker, Clark & Daniels, Inc., Clark Minerals, Inc., Cherokee Minerals, Inc. and Pioneer Talc Company and Suzorite Mineral Products, Inc. and Zemex Corporation (Incorporated by reference from Exhibit 10(u) of the Corporation's Annual Report on Form 10-K filed March 30, 1995) (13) 1995 Annual Report to Shareholders (22) Subsidiaries of the Registrant (24)(a)Consent of Deloitte & Touche The Corporation will furnish copies of these documents to requesting shareholders upon payment of $10.80 per document. * Management contract or compensatory plan or arrangement. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. ZEMEX CORPORATION By:/s/ RICHARD L. LISTER Dated: March 31, 1996 Richard L. Lister President and ChiefExecutive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons on behalf of the registrant and in the capacities and on the dated indicated: Title /s/ PETER LAWSON-JOHNSTON Chairman of the Board and Director Peter Lawson-Johnston /s/ RICHARD L. LISTER President and Chief Executive Officer Richard L. Lister and Director (Principal Executive Officer) /s/ PAUL A. CARROLL Director Paul A. Carroll /S/ MORTON A. COHEN Director Morton A. Cohen /s/ JOHN M. DONOVAN Director John M. Donovan /s/ THOMAS B. EVANS, JR. Director Thomas B. Evans, Jr. Title /s/ NED GOODMAN Director Ned Goodman /s/ PATRICK H. O'NEILL Director Patrick H. O'Neill /s/ WILLIAM J. VANDEN HEUVEL Director William J. vanden Heuvel /s/ ALLEN J. PALMIERE Vice President, Chief Financial Officer and Allen J. Palmiere and Assistant Secretary (Principal Financial and Accounting Officer) ZEMEX CORPORATION And Subsidiaries SCHEDULE IX - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Year Ended December 31, Column A Column B Column C Column D Column E Column F Addition Balance s Balance at Charged Other At End Description Beginnin to Costs Additions Deduction of g and s Period of Expenses Period 1995 Reserves Other $549,000 $154,000 _ $ 98,000 $605,000 Allowance for Uncollectable 414,000 77,000 $2,000 107,000 Accounts 386,000 1994 Reserves Repairs _ _ _ _ _ Employee $ _ _ $ _ Severance 80,000 $255,000 _ 80,000 $549,00 Other 482,000 188,000 0 Allowance for 85,000 _ Uncollectable 371,000 42,000 414,000 Accounts 1993 Reserves Repairs $381,000 _ $381,000 (a Employee 308,000 _ _ 686,000 ) _ Severance 420,000 $458,000 _ 32,000 $80,000 Other 94,000 (b 482,000 ) Allowance for 241,000 _ 98,000 Uncollectable 228,000 371,000 Accounts (a) PPSB sold in 1993. (b) Severance expense during 1993. EX-1 2 Exhibit 22 SUBSIDIARIES OF THE REGISTRANT The subsidiaries listed below are wholly-owned and all are consolidated in the financial statements. State or Country in Which Subsidiary Name Incorporated or Organized Alumitech, Inc. Delaware The Feldspar Corporation North Carolina Pyron Corporation New York Pyron Metal Powders, Inc. Delaware Suzorite Mica Products Inc.Ontario, Canada Suzorite Mineral Products, Inc. Delaware EX-2 3 - 17 - Exhibit 24(a) REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Zemex Corporation We have audited the consolidated financial statements of Zemex Corporation and Subsidiaries as of December 31, 1995 and for the year then ended, and have issued our report thereon dated January 24, 1996, such consolidated financial statements and report are included in your 1995 Annual Report to Shareholders and are incorporated herein by reference. Our audit also included the consolidated financial statement schedules of Zemex Corporation, listed in Item 14. This consolidated financial statement schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audit. In our opinion, such consolidated financial statements schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE Toronto, Ontario March 31, 1996 EX-3 4 Exhibit 13 Financial Highlights 1995 1994 1993 Summary of Operations Net Sales $85,056,000 $55,306,000 $47,958,000 Income from Continuing Operations 8,418,000 6,250,000 3,188,000 Net Income 8,418,000 6,250,000 1,852,000 Capital Expenditures 15,451,000 3,077,000 2,670,000 Financial Position at Year End Working Capital $19,709,000 $26,046,000 $ 9,288,000 Shareholders' Equity 70,900,000 54,052,000 26,530,000 Per Common Share Net Income $ 1.03 $ 1.12 $ .40 Shareholders' Equity 8.49 7.54 5.85 Average Common Shares and Common Share Equivalents Outstanding 8,208,874 5,588,682 4,605,440 Common Shares Issued and Outstanding at Year End 8,355,722 7,168,153 4,535,283 Table of Contents To Our Shareholders 2 Corporate Overview 5 Industrial Minerals 6 Metal Products 8 Management's Discussion and Analysis 12 Independent Auditors' Report 22 Management's Report 23 Audit Committee Report 23 Financial Statements 24 Notes to Financial Statements 28 Selected Financial Data 44 To Our Shareholders We are please to report improved financial results for the fourth consecutive year, reflecting the continued implementation of our operating strategy to achieve strength and significance in each of the markets we serve. For the year ended December 31, 1995, the Corporation reported operating income of $8.3 million compared to $5.8 million in 1994, an increase of 43 percent. The Corporation also reported net income of $8.4 million or $1.03 per share on sales of $85.1 million, representing growth of 35 percent in net income and 54 percent in sales over the 1994 fiscal year. Both 1995 and 1994 have been affected by the recognition of the benefit of prior years' tax loss carryforwards. Although the 1995 results are satisfactory, they were negatively impacted by soft performance in the second half of the year and do not reflect the earnings potential of the core businesses. In 1995, the Corporation took an important step in strengthening its foundation for future growth and profitability by completing its acquisition of 100 percent of Alumitech, Inc. Alumitech, an aluminum dross reprocessor, has developed and patented technology that will enable it to virtually eliminate the need for the landfill of dross and dross materials. This acquisition lends itself to the Corporation's goal of developing leading and/or niche positions for all of its businesses. Over the past three years, Zemex has concentrated its efforts on building solid core businesses with strong cash generation and continuing its growth through a strategy of expansion and acquisition. The core businesses, industrial minerals and metal products, saw capital expenditures in excess of $15 million in 1995, more than 80 percent of which was funded out of cash flow and cash on hand. Major capital expenditures are also planned for 1996 and 1997 and these will be funded from cash flow and, as required, senior long term debt. In the case of building new Alumitech plants, it is anticipated that the Corporation will use low interest Industrial Development Revenue Bonds available for the construction of such facilities. HIGHLIGHTS OF 1995 Industrial Minerals Our feldspar business had a good year as strong demand for tiles and sanitaryware continued despite the uncertainty in the construction market. We anticipate one of our primary markets for feldspar, ceramic floor and wall tiles, will continue to expand rapidly as offshore tile manufacturers, who previously imported tile products, establish production facilities in North America. The 135,000 tons of additional capacity provided by the expansion and modernization at our feldspar operation in Spruce Pine, North Carolina is ready to meet the continuing growth of the sodium feldspar market. Our feldspar group has also developed a new low iron sand material and has entered into an exclusive contract to supply this product. Construction of a dedicated facility is set to commence in early 1996. To further enhance the talc operations which were acquired at the end of 1994, the Corporation purchased the assets of a mineral processing facility in Benwood, West Virginia in May 1995. This facility, with its grinding capacity and strategic location on the Ohio River, gives the Corporation the opportunity to expand its present processing capability and serve a wider and more diverse market base. Programs are well underway to expand and upgrade the Benwood facility to increase its fine grind capability and provide further opportunity to penetrate additional markets. Our mica business suffered lower sales than anticipated in 1995 due to slowness in the automotive industry and, in particular, to the effect of major inventory readjustments by the suppliers to this industry. An intensive marketing program initiated in 1995 is expected to produce stronger results in 1996. Metal Products Our metal powders group had a very difficult year: there was a five-week shutdown due to an explosion of the atomization furnace at the plant in Niagara Falls, New York; a two-week shutdown as a result of a curtailment of hydrogen availability by our supplier; and, most critically, a very sluggish automotive market. Despite these setbacks, the metal powders group was able to strengthen its customer service and expand its customer base by completing a new blending plant in St. Marys, Pennsylvania. This new facility effectively positions the Corporation to meet the "just-in-time" inventory requirements of its customers from a location considered to be in the heart of the powdered metallurgical industry. In addition, the occasion to pursue a new product line arose when the only domestic producer of manganese sulfide was sold and relocated to Europe in late 1995. Our metal powders group accomplished the task of developing what appears to be a more advanced material and has announced plans to produce this new product at its facility in Greenback, Tennessee commencing in mid1996. Alumitech, Inc. is an aluminum dross reprocessor that adds proprietary technology to conventional dross processing. The result is an environmentally friendly process that has the ultimate ability to eliminate all need for landfilling aluminum dross and dross components. The value of this patented technology is apparent given that up to two billion pounds of aluminum dross materials are currently landfilled in the United States annually. Furthermore, many European countries have declared aluminum dross a hazardous waste. Alumitech is a good contributor to the Corporation's overall profitability but, more importantly, offers the Cooperation a significant opportunity. By taking aluminum waste, transforming it into commercially acceptable materials, and avoiding landfill, the Corporation is set to revolutionize conventional aluminum dross reprocessing. Currently we are active in site selection for the first full scale Alumitech plant, and anticipate beginning construction as soon as possible after the site is purchased and permitted. STOCK REPURCHASE PROGRAM We believe that the Corporation's stock is undervalued and in November 1995 announced a continuation of a stock repurchase program originally initiated in November 1994. To date, the Corporation has repurchased approximately 563,000 shares on the open market. OUR COMMITMENT Zemex is eager to move forward and build on its solid foundation to achieve long term growth and profitability. Sharper execution of our core strategies remains a critical priority. We will continue to focus on increasing sales but with greater emphasis on operating efficiencies and improved returns. We remain committed to profitably growing our businesses and achieving maximum value for our shareholders. Nothing can be achieved without the efforts of our most valuable asset - our employees. For their dedication and consistent performance, we are continually grateful. /s/ RICHARD L. LISTER /s/ PETER LAWSON -JOHNSTON Richard L. Lister Peter Lawson-Johnston President and Chief Executive Officer Chairman of the Board CORPORATE OVERVIEW INDUSTRIAL MINERALS METAL POWDERS ALUMITECH, INC. Industrial Minerals Metal Powders has Alumitech, Inc. has has operating mines operating operating and facilities at: facilities at: facilities at: Edgar, Florida Niagara Falls, New Cleveland, Ohio Monticello, Georgia York Streetsboro, Ohio Natural Bridge, New St. Marys, York Pennsylvania Major Products Murphy, North Greenback, Carolina Tennessee secondary aluminum Spruce Pine, North Maryville, mixed salts Carolina Tennessee high temperature Boucherville, insulation material Quebec Major Products abrasives Suzor Township, Quebec atomized steel Applications Van Horn, Texas powders Benwood, West atomized iron refractory Virginia powders insulation sponge iron aluminum Major Products copper, tin and fabrication alloy powders sodium and manganese sulfide Markets Served potassium feldspar distributors of kaolin nickel powder secondary aluminum silica sand industry low iron sand Applications mica talc bushings, bearings, baryte complex P/M parts, brakes Applications and gears ceramics Markets Served plumbing fixtures wall and floor automotive industry tiles small appliance electric porcelain industry wiring devices friction brake dinnerware industry specialty glass reinforced plastics sound damping asbestos replacement fillers Markets Served housing sector (new and renovation) commercial and industrial construction electrical/power transmission automotive industry paint, plastics and fillers INDUSTRIAL MINERALS Zemex's industrial minerals division mines, processes and supplies feldspar, kaolin, sand, mica and talc for use in a multitude of consumer and industrial products and applications. With operating facilities in five states and one Canadian province, this group provides Zemex with strong cash generation and a significant contribution to the Corporation's consolidated net income. FELDSPAR, KAOLIN AND SAND Through its wholly-owned subsidiary, The Feldspar Corporation ("TFC"), Zemex believes it is the largest producer of feldspathic materials in the world, with the capacity to produce 390,000 tons of sodium and potassium feldspar. The superior quality and consistency of TFC's sodium feldspar coupled with its technical service and new product design gives it a competitive edge, leading to its majority market share. Sodium feldspar is used primarily in plumbing fixtures such as ceramic sinks and toilets, and ceramic floor and wall tiles. Since 1993, TFC has experienced constant growth in sales due to the increased consumption of its products. In particular, the United States has seen a significant increase in feldspar requirements as offshore tile producers, attempting to protect their market share, have relocated manufacturing operations to the United States. To keep pace with the strong demand for sodium feldspar and to improve operating efficiency, TFC embarked on a $15 million expansion and modernization of its sodium feldspar facility in Spruce Pine, North Carolina. In addition to creating operating efficiencies, this expansion will also serve to lower production costs. Construction is soon to begin on a low iron sand facility at Spruce Pine, North Carolina to fulfill a long term contract for the supply of this new high value-added material. Low iron sand is used in applications where low iron levels are particularly critical, such as in specialized lighting and refining equipment. TFC's potassium feldspar is used in television picture tubes, electrical porcelain for transformers, substations and power transmission lines, wiring devices and electrical appliances. Market demand has been relatively flat for these products, however, cost efficiencies and more effective mining procedures have resulted in improved profitability. TFC also produces a fully water-washed kaolin clay at its plant in Edgar, Florida. This material's unique forming properties and white-fired color make it desirable for use in fine china, dinnerware and mosaic tiles; its low level of impurities make it suitable for high performance refractories and glazes. TFC believes that it is the only producer of this specialty kaolin. Recently, TFC signed marketing agreements with a ball clay producer and a kaolin producer to market their respective products in the western United States and abroad. The arrangements with these two clay producers will give TFC a full line of ceramic materials for the export market. MICA Another major product offered by the industrial minerals group is a high grade phlogopite mica, an important raw material for a number of industrial applications owing to its high electrical and heat resistance characteristics. Phlogopite mica has a number of attractive physical and chemical characteristics. It is chemically inert, corrosion resistant, non-combustible and nonconductive. It also possesses sound absorbent characteristics and has high strength properties. In comparison with other known micas, it has an outstanding thermal stability over a broad temperature range. Phlogopite mica is used as a partial or complete substitute for asbestos in fire-resistant papers, friction materials and cementatious coatings. The automotive industry currently uses it to impart rigidity in plastic applications such as fan shrouds, grills and other car parts. Additional applications are in paint, coatings, rubber compounds, and in oil well drilling fluids. The Corporation's phlogopite mica reserves are located in Suzor Township, 200 miles north of Montreal, Quebec. The reserves are estimated at approximately 28 million tons of ore containing 80 percent to 85 percent mica. TALC In 1995, the Corporation's newly acquired talc business, Suzorite Mineral Products, Inc. ("SMP"), established a strategy to improve market penetration by focusing on niche markets with newly designed products. The major uses of talc are in paper, paint, plastics, adhesives and sealants, cosmetics, pharmaceuticals and ceramics. The goal for the talc group is to be a value-added provider by working closely with customers to develop product formulations to exacting standards, meeting or exceeding performance expectations at reasonable costs. During 1995, SMP purchased the assets of a processing facility in Benwood, West Virginia. Benwood's strategic location on the Ohio River makes it a cost effective processor of imported raw talc ores and other materials, enabling SMP to expand its product lines and add to its ability to competitively serve its customers. METAL PRODUCTS METAL POWDERS Founded in 1940, the Corporation's wholly-owned subsidiary, Pyron Corporation, is the oldest established producer of ferrous metal powders in North America. Although for many years, Pyron produced only hydrogen-reduced sponge iron, it has emerged as a world class supplier of sponge and atomized materials, as well as non-ferrous powders. Pyron currently offers the broadest range of products to the powdered metallurgical industry. Powdered metals are produced by processing metals into finely divided powders by combinations of milling, oxidization and reduction or by melting and atomizing through the impingement of high pressure jets. The use of powdered metals enables automobile part manufacturers to reduce costs by minimizing machining and waste in the manufacturing process. In addition, as the process of powder metallurgy continues to become more refined, the ability to produce larger and more sophisticated metal parts increases. It is projected that demand for parts produced by powder metallurgy will grow rapidly at the expense of forged, machined and cast components. Recent figures indicate that approximately 28 pounds of powdered metal parts are used per vehicle, however, industry sources predict that this number should steadily increase as new applications for powdered metal parts are developed by automakers. Major uses of Pyron's metal powders are in the production of brake linings, clutch plates and other friction related products, appliances, and lawn and garden products. In recent years, metal powder use in automotive and rail braking systems has grown rapidly as a replacement for asbestos, achieving excellent performance and improving environmental and health conditions. Other applications include chemical synthesis, precious metal reclamation, metal-bonded abrasive products and food additives. In addition to its iron and steel powder plant in Niagara Falls, New York, Pyron acquired two copper and alloy powder producers: one in Maryville, Tennessee in 1992 and one in Greenback, Tennessee in 1994. Pyron now has the largest capacity of any non ferrous metal powder producer in North America. These acquisitions served to uniquely round out Pyron's strategy to position itself as the only domestic producer of a full range of ferrous and non-ferrous powders. The metal powder industry is very competitive. Pyron's primary emphasis is on expanding sales and improving operating efficiencies while at the same time providing quality service. To this end, in April 1995, Pyron opened a blending facility in St. Marys, Pennsylvania, the heart of the powdered metal parts industry. This new plant enhances product delivery and allows customers to take advantage of just-in-time ordering. In the short time it has been in operation, the St. Marys blending facility has gained wide acceptance in the marketplace. As part of its focus on developing profitable niche markets, Pyron recently announced its intention to become the only U.S. producer of manganese sulfide. Manganese sulfide is an additive used by the powdered metallurgical industry to enhance tool life and aid in machinability. For Pyron, it is a natural complement to its core ferrous and non-ferrous businesses. For Pyron's customers, it will mean that they will not have to rely on imported manganese sulfide: they will have access to a reliable low cost source of this material. Initial machinability tests have shown that Pyron's new manganese sulfide product is superior to any comparable material currently being sold. Construction of a facility to produce this newly designed product is underway at the Greenback location and it is anticipated that the new material will be available commercially by mid 1996. The atomized steel powder side of the business continues to grow at a rate that outstrips the sponge business. Shipments of Pyron's atomized products were up 10 percent in 1995 and it is anticipated that the rate of shipments will continue to increase in 1996. In addition, demand for Pyron's high grade, water atomized, copper powders are expected to remain strong through 1996. As the Maryville plant was operating at near capacity in 1995, plans for 1996 include the start up of a similar atomizing process at the Greenback plant. Pyron is in a position to provide true value-added products to the marketplace. By concentrating its efforts on customers whose needs are best met by a low cost, high service-oriented supplier. Pyron is confident that is position as a strong niche supplier to the metal powder industry will continue to bear fruit in the future. Metal Products ALUMITECH, INC. The Corporation's now wholly-owned subsidiary, Alumitech, has developed and patented, unique "closed loop" technology. This proprietary technology gives Alumitech the ability to recycle aluminum dross and saltcake and convert material that would otherwise be landfilled into commercially valuable products. More importantly, Alumitech's process also eliminates potential environmental liability that may be caused by the leaching or reactivity of the landfilled material. Various industry sources, including the U.S. Department of Energy, estimate that up to two billion pounds of aluminum dross and saltcake materials are landfilled annually in the United States. Another two billion pounds are produced annually in Europe where the material is a classified waster material. In an age where environmental awareness is high, the Alumitech process is both a welcome and profitable alternative. Alumitech presently operates through two subsidiaries, Aluminum Waste Technology, Inc. ("AWT") and Engineered Thermal Systems, Inc. ("ETS"). AWT is a recycling facility in Cleveland, Ohio that now processes more than 150 million pounds of aluminum dross and saltcake annually. At this facility, AWT, using the proprietary technology developed in-house over many years, separates the dross and saltcake materials into various components: aluminum metal, salts, aluminum and other metal oxides and salt fluxes, using Alumitech's patented process. The aluminum is sold back to secondary smelters and other commercial manufacturing operations. A portion of the aluminum oxide containing aluminum is sold to the steel industry for use in exothermic compounds, deoxidations materials and slag conditioner. The salts are crystallized and sent back to the secondary aluminum producers. The oxides not containing aluminum metal, also known as non-metallic product ("NMP"), can be further processed and sent to ETS. ETS, Alumitech's second plant just outside of Cleveland, produces ceramic fiber. This ceramic fiber is used as insulation in industrial applications where temperatures can reach upward of 2000 degrees Fahrenheit. The Alumitech process has been under development for several years and is currently in the final stages of commercialization. During 1995, management focused on refining the process to maximize the quality and marketability of the NMP. Alumitech is very close to being able to produce a material that is inert in an electric arc furnace and as a result can be substituted for commercial sources of alumina. The process is currently undergoing final large-scale tests to provide conclusive data for process design. Continuing work is also underway to identify and expand the uses of the NMP generated from recycling of aluminum dross and saltcake. This material, which is an aluminum silicate containing magnesium spinels, has additional application and uses in the abrasive and refractory markets as well as in the production of steel and cement based compounds. Testing and evaluation work is currently underway which could greatly expand the commercial use and demand for NMP. Alumitech is presently evaluating plant sites for the construction of its next full-scale facility which is expected to be operational by mid 1997. The new plant will be approximately twice the capacity of the existing operation in Cleveland and will cost approximately $16 million to construct. With the increased use of aluminum projected to continue, and with the potential environmental liability associated with conventional dross processing and subsequent landfilling, the future outlook for Alumitech and its technology is very positive. In addition, as the price of landfill increases and as more and more companies take a socially responsive proactive approach to environmental issues, Alumitech offers a very desirable alternative. MANAGEMENT'S DISCUSSION AND ANALYSIS The following is a discussion and analysis of the financial condition and results of operations of the Corporation for the years ended December 31, 1995, 1994 and 1993, 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 on pages 24 through 43. Overview The Corporation is a diversified producer of specialty materials, industrial minerals and metal products for use in a variety of industrial applications. The Corporation operates in two principal business segments: (i) industrial minerals, which includes The Feldspar Corporation, Suzorite Mica Products Inc. and Suzorite Mineral Products, Inc.; and (ii) metal products, which includes Pyron Corporation, Pyron Metal Powders, Inc. and Alumitech, Inc. In 1993, the Corporation hired a new management team which refocused the strategic direction of the Corporation. Since then, the Corporation has sold certain non-core assets as well as undertaken several strategic acquisitions and investments. In 1993, the Corporation sold its 70 percent interest in Perangsang Pasifik Senderian Berhad, a tin dredging operation in Malaysia, and its Virginia aplite facility, and acquired Suzorite Mica Products Inc. During 1994, Zemex acquired the assets of Greenback Industries, Inc., the talc operations of Whittaker, Clark & Daniels, Inc. and a 42 percent interest in Alumitech, Inc. In 1995, the Corporation completed its acquisition of 100 percent of Alumitech, Inc. and acquired an industrial mineral processing facility in Benwood, West Virginia. As a result of this strategic redirection, the Corporation's net sales have increased from $48.0 million in 1993 to $85.1 million in 1995, an increase of 77.3 percent. In addition, the Corporation's pre-tax earnings from continuing operations have increased from $3.7 million in 1993 to $7.9 million in 1995. The Corporation's strategy going forward is to enhance its position as a leading supplier of specialty materials through investments in its core businesses, the introduction of new products, strategic acquisitions, and investments in new technologies. Basis of Presentation The Corporation's acquisition of Suzorite Mica Products Inc. in 1993 was accounted for as a pooling of interests. The Corporation's 70 percent interest in Perangsang Pasifik Senderian Berhad, which was sold in 1993, has been presented separately in the Corporation's financial statements as discontinued operations. Results of Operations Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Net Sales 1995 1994 Change Change (percen t) Industrial $37,089 $30,378 $ 6,711 22.1 Minerals Metal Products 47, 967 24,928 23,039 92.4 $85,056 $55,306 $29,750 53.8 The Corporation's net sales for 1995 were $85.1 million, an increase of $29.7 million or 53.8 percent from 1994. The major components of the increase were: the consolidation of Alumitech, Inc., $13.6 million; increased industrial mineral sales, $6.7 million; and increased metal powder sales, $9.4 million. The industrial minerals segment recorded a 22.1 percent increase in sales from $30.4 million in 1994 to $37.1 million in 1995. The change was due to an incremental $6.0 million in sales from the talc operations which were acquired December 1, 1994 and a $2.0 million increase from the feldspar group, offset in part by lower sales of phlogopite mica. Talc sales are expected to increase in 1996 as new products are approved by customers. Feldspar sales continue to grow primarily due to increased demand from ceramic manufacturers and the mica market is beginning to strengthen due to a concerted marketing effort. Net sales for the metal products group increased $23.0 million, or 92.4 percent, from $24.9 million in 1994 to $48.0 million in 1995. Of this increase, $13.6 million was due to the consolidation of Alumitech, Inc., which was previously accounted for as an equity investment. Sales from the metal powder group increased 38 percent in 1995, primarily due to increased nonferrous sales following the September 1994 acquisition of Greenback Industries, Inc. Sponge iron sales increased by 5 percent while atomized steel sales increased 20 percent, notwithstanding the significant negative impact of the explosion of the atomization furnace at the plant in Niagara Falls, New York in March 1995. In 1996, continued growth in metal powder sales is anticipated with modest improvement in sales from the aluminum dross operation. Cost of Goods Sold Cost of goods sold were $64.4 million in 1995 compared to $40.6 million in 1994. The corresponding gross margins were 24.3 percent for 1995 and 26.7 percent for 1994. The decline in gross margin was due to several factors: a decline in high-end mica product sales; an increase in sales of several lower margin industrial mineral products; and lower margins due to competitive pressures within certain metal powder product lines. Selling, General and Administrative Expenses Selling, general and administrative ("SG&A") expenses increased 31.4 percent from $6.6 million in 1994 to $8.7 million in 1995. The increase was the result of acquisitions in late 1994 and early 1995. As a percent of sales, SG&A expense was 10.2 percent in 1995 as compared to 11.9 percent in 1994, reflecting the benefit derived from higher volumes. Depreciation, Depletion and Amortization Depreciation, depletion and amortization increased by $1.4 million or 59.4 percent from $2.3 million in 1994 to $3.7 million in 1995. This increase was driven by the 73.2 percent increase in property, plant and equipment during 1995 as a result of acquisitions and capital expenditures. Prospectively, depreciation will continue to increase as current capital programs are placed into service. Operating Income Operating income rose to $8.3 million for fiscal 1995 from $5.8 million in fiscal 1994. While this represents a 42.8 percent increase, the operating margin declined from 10.6 percent in 1994 to 9.8 percent in 1995. This decline was due to reasons discussed previously. Interest Expense, Net Net interest expense for the year ended December 31, 1995 was $0.5 million, an increase of $0.1 million over 1994. This is attributable to an increase in total indebtedness from $6.7 million at December 31, 1994 to $13.1 million at December 31, 1995, offset in part by a decline in interest rates. Provision for Income Taxes In 1995, the Corporation realized an income tax recovery of $0.5 million as compared to a recovery of $0.7 million in 1994. The 1995 recovery reflects the recognition of the benefit of the balance of the net operating tax loss carryforwards available to the Corporation. While losses remain for tax purposes, they have been fully recognized for accounting purposes in accordance with Statement of Financial Accounting Standards No. 109. In 1996 and beyond, the Corporation will report an effective tax rate of approximately 35 percent, reflecting the permanent difference arising from an earned depletion allowance. Net Income and Earnings Per Share As a result of the factors discussed above, net income for the year ended December 31, 1995 was $8.4 million, an increase of $2.2 million from 1994. As the impact of the recognition of the benefits of the loss carryforwards is significant, the Corporation's earnings per share have been restated below on a fully-taxed basis using an effective rate of 38 percent. 1995 1994 Pre-Tax Income $7,899,000 $5,579,000 Primary EPS (as $1.03 $1.12 reported) EPS (fully-taxed $0.60 $0.62 at 38 percent) Year Ended December 31, 1994 Compared to Year Ended December 31, 1993 Net Sales 1994 1993 Change Change (percent ) Industrial $30,378 $31,104 $ (726) (2.3) Minerals Metal 24,928 16,854 8,074 47.9 Products $55,306 $47,958 $7,348 15.3 The Corporation's net sales for the year ended December 31, 1994 were $55.3 million, an increase of $7.3 million, or 15.3 percent, from 1993. The increase was primarily the result of increased sales of the Corporation's feldspar, phlogopite mica, and metal powder products, offset in part by decreased sales resulting from the sale in the fourth quarter of 1993 of the Virginia aplite facility. Net sales in the industrial minerals segment for the year ended December 31, 1994 were $30.4 million, a decrease of $0.7 million, or 2.3 percent, compared to 1993. Net sales for 1993 included $4.1 million attributable to the Virginia aplite facility. When this amount is excluded from the 1993 results, net sales in the industrial minerals segment during 1994 increased by $3.4 million or 12.5 percent above 1993. This increase was primarily due to sales price increases, increased demand for the Corporation's sodium feldspar and phlogopite mica products, fueled by growth in the construction and automobile sectors of the U.S. economy, and the introduction of new products. Net sales in the metal powders segment for the year ended December 31, 1994 were $24.9 million, an increase of $8.1 million, or 47.9 percent, from 1993. The increase was attributable primarily to increased market acceptance of the Corporation's new atomized powder products and strong demand for sponge iron powder. The asset purchase of Greenback Industries, Inc. contributed $3 million in incremental revenue in 1994. Cost of Goods Sold Cost of goods sold for the year ended December 31, 1994 were $40.6 million, an increase of $3.8 million, or 10.4 percent, from 1993. As a percent of net sales, cost of goods sold decreased to 73.3 percent for the year ended December 31, 1994 from 76.6 percent for the year ended December 31, 1993. The decrease was primarily due to fixed cost absorption associated with higher sales volumes and to improvements in product mix with the introduction of new higher value-added products. In addition, 1993 included certain non-recurring engineering and product development costs associated with the Corporation's introduction of its atomized metal powder product line. Selling, General and Administrative Expenses SG&A expenses for the year ended December 31, 1994 increased by 4.2 percent from 1993 to $6.6 million. As a percentage of net sales, SG&A expenses decreased from 13.2 percent in 1993 to 11.9 percent in 1994, reflecting the benefit derived from higher volumes resulting in lower unit cost absorption. Depreciation, Depletion and Amortization Depreciation, depletion and amortization for the year ended December 31, 1994 was $2.3 million, a decrease of $0.1 million, virtually unchanged from 1993. Operating Income Operating income for the year ended December 31, 1994 was $5.8 million, an increase of $4.6 million, or 372 percent, from 1993. The increase was due in part to the reasons discussed above. In addition, operating income for 1993 included restructuring charges of $1.2 million. Excluding such restructuring charges, the increase was $3.4 million or 135 percent and operating income as a percent of net sales increased from 5.2 percent in 1993 to 10.6 percent in 1994. Interest Expense, Net Net interest expense for the year ended December 31, 1994 was $0.4 million, a decrease of 52.6 percent from $0.9 million in 1993, reflecting lower levels of indebtedness. More than 50 percent of the Corporation's long term debt was repaid from the net proceeds of its September 1994 public offering. Other Income The Corporation had other income of $3.3 million in 1993, resulting primarily from a gain on the sale of its Virginia aplite facility of $3.7 million, which was partially offset by costs related to the acquisition of Suzorite Mica Products Inc. and other miscellaneous income and expense items. Provision for Income Taxes In 1994, the Corporation recognized an income tax recovery of $0.7 million after giving effect to a $1.5 million adjustment for the recognition of a tax benefit arising from loss carryforwards for financial statement purposes in accordance with Statement of Financial Accounting Standards No. 109. The recognition of the $1.5 million benefit was necessitated primarily by revisions to the estimated future taxable income during the Corporation's tax loss carryforward period. Loss from Discontinued Operations The Corporation recorded a loss of $1.3 million from discontinued operations in 1993, which consisted of the Corporation's disposition of its interest in a Malaysian tin dredging company, Perangsang Pasifik Senderian Berhad. The loss consisted of two components: (i) $0.1 million from operations during the year; and (ii) $1.2 million from the disposal of these operations. Net Income and Earnings Per Share As a result of the factors discussed above, net income for the year ended December 31, 1994 was $6.2 million, an increase of $4.4 million from 1993. As discussed above, net income for 1994 contains a $1.5 million tax loss carryforward recognition. For purposes of clarity and consistency, the Corporation's earnings per share have been restated below on a fully-taxed basis using an effective rate of 38 percent. 1994 1993 Pre-Tax Income $5,579,000 $2,322,000 Primary EPS (as $1.12 $0.40 reported) EPS (fully-taxed $0.62 $0.20 at 38 percent) Liquidity and Capital Resources The Corporation has historically funded its extraction and processing activities through cash flow from operations, bank debt and sales of capital stock and warrants. During the most recent three-year period ended December 31, 1995, the Corporation partially funded all capital expenditures, acquisitions and debt reduction from a combination of additional debt, cash flow from operations and proceeds from the sale of operations not considered consistent with its strategic focus. In addition, in September 1994 the Corporation completed a public offering, raising net proceeds of approximately $18.5 million. During 1995, outstanding warrants were exercised which resulted in net proceeds of $4.8 million. These funds were utilized in part to repay long term debt, fund acquisitions and purchase treasury stock. Cash Flow from Operations The Corporation had $19.7 million of working capital at December 31, 1995, compared to working capital of $26.0 million at December 31, 1994. Net cash provided by operating activities for the year ended December 31, 1995 was $7.2 million, up $4.6 million, or 173 percent, relative to 1994. Earnings before interest, taxes, and depreciation, depletion and amortization for the year ended December 31, 1995 were $12.1 million, an increase of 45.8 percent over the $8.3 million generated in 1994. Financing Agreements In March 1995, the Corporation entered into a $30.2 million credit facility with a syndicate of two banks. The credit facility is further subdivided into four facilities: (i) a $10.0 million revolving credit and term loan facility; (ii) a $10.0 million multiple advance term loan facility; (iii) a $5.2 million standby letter of credit; and (iv) a $5.0 million operating line. These facilities are secured by specific assets and a floating charge over a significant portion of the Corporation's assets. The facilities bear interest at rates varying from bank prime to bank prime plus 0.25 percent and from LIBOR plus 1.25 percent to LIBOR plus 2.25 percent, depending upon the financial position of the Corporation. As at December 31, 1995, there was $2.0 million outstanding under the operating line, $2.7 million outstanding under the multiple advance term loan facility, and the standby letter of credit was issued to secure the Corporation's Industrial Development Revenue Bond. The operating line matures June 30, 1996 and will be reviewed annually for purposes of renewal. The multiple advance term loan facility requires quarterly payments of $0.3 million commencing April 1, 1996 with the balance outstanding, if any, due January 1, 2000. Capital Expenditures The Corporation's primary capital activities in the past involved the acquisition and development of industrial mineral properties and facilities and necessary capital investments to maintain operating viability and meet environmental, health and safety standards at its existing operations. During 1995, capital expenditures were $15.5 million compared to $3.1 million and $2.7 million for the years ended December 31, 1994 and 1993, respectively. In addition to its capital expenditures, the Corporation purchased the assets of Benwood Limestone Company, Inc., for a cash payment of $3.6 million. The capital expenditures were funded by cash on hand, cash flow from operations and a net increase in long term debt of $0.9 million. The Corporation is currently implementing and/or planning several major capital programs. These include the completion of the expansion of the sodium feldspar facility, the construction of a high purity sand plant, and the construction of a new aluminum dross processing facility. In aggregate, 1996 capital expenditures are anticipated to be approximately $27 million. The Corporation plans on funding these from a combination of cash flow from operations and existing and new credit facilities. As at December 31, 1995, the Corporation had aggregate unutilized credit of $20.3 million available to it. Although the Corporation's capital budgets provide for certain reclamation and environmental compliance activities, management does not believe that the cost of the Corporation's environmental compliance will have a material adverse effect on the Corporation's results of operations or financial condition in 1996. The Corporation has no definitive acquisition agreements with respect to additional property or other acquisitions. The Corporation will, however, continue to monitor potential strategic acquisitions that would enhance its current activities. The Corporation believes the financing arrangements in place, including those described above, its cash flow from operations and additional borrowing capacity, will provide the Corporation with adequate liquidity and capital resources. Seasonality and Inflation Although the Corporation's results from extraction and processing operations are cyclical due to fluctuations in industrial minerals and metal products demands, sales of the Corporation's products are generally not seasonal. Inflation in recent years has not adversely affected the Corporation's results of operations or costs, and is not expected to adversely affect the Corporation in the future unless it grows substantially and the markets for industrial minerals and metal products suffer from a negative impact on the economy in general. Capital Stock The capital stock of Zemex Corporation is traded on the New York Stock Exchange. The price range in which the stock has traded is shown for the past two years in the following tables. Capital Stock Prices 1995 Q1 Q2 Q3 Q4 Year High 10 7/8 10 7/8 10 7/8 10 10 7/8 Low 8 3/8 9 9 1/8 8 1/4 8 1/4 Close 10 5/8 9 3/8 9 5/8 10 10 1994 Q1 Q2 Q3 Q4 Year High 7 11 7/8 12 1/4 11 12 1/4 Low 6 1/4 6 1/8 9 5/8 7 3/4 6 1/8 Close 6 3/8 11 1/2 10 3/4 8 5/8 8 5/8 In the fourth quarter of each of 1995, 1994 and 1993, the Corporation declared a 2 percent stock dividend. As of December 31, 1995, there were approximately 1,512 holders of record of the Corporation's capital stock. This number includes shares held in nominee name and, thus, does not reflect the number of holders of a beneficial interest in the stock. Independent Auditors' Report To the Shareholders and the Board of Directors of Zemex Corporation We have audited the accompanying consolidated balance sheets of Zemex Corporation and Subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Zemex Corporation and Subsidiaries as of December 31, 1995 and 1994 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles in the United States. Deloitte & Touche Chartered Accountants Toronto, Ontario January 24, 1996 Management Report The management of Zemex Corporation and its subsidiaries has the responsibility for preparing the consolidated financial statements presented in this Annual Report and for their accuracy and integrity. The statements have been prepared in conformity with generally accepted accounting principles in the United States, and include informed judgments and estimates as required. Other financial information in this Annual Report is consistent with the financial statements. The Zemex Corporation system of internal controls is designed to provide reasonable assurance, at a justifiable cost, as to the reliability of financial records and reporting and the protection of assets. This system includes organizational arrangements with clearly defined lines of responsibility. Deloitte & Touche, independent auditors, have audited the consolidated financial statements of Zemex Corporation and their opinion is included on the preceding page. Zemex Corporation has formal standards of corporate conduct and policies regarding high standards of ethics and financial integrity. These policies have been disseminated to appropriate employees and internal control procedures provide reasonable assurance that violations of these policies, if any, are detected. Allen J. Palmiere Richard L. Lister Vice President and President and Chief Financial Officer Chief Executive Officer Audit Committee Report The Audit Committee of the Board of Directors is composed of three independent directors, Patrick H. O'Neill, Chairman, Thomas B. Evans, Jr. and John M. Donovan. The Committee held four meetings during 1995. The Audit Committee overseas the financial reporting process of the Corporation on behalf of the Board of Directors. In fulfilling its responsibility, the Committee recommended to the Board of Directors, subject to shareholder approval, the selection of the Corporation's independent auditors. The Audit Committee met with management and representatives of the auditors, Deloitte & Touche, to review accounting, auditing and financial reporting matters. The Committee met with Deloitte & Touche representatives without management present. Patrick H. O'Neill Chairman, Audit Committee Consolidated Balance Sheets December 31 1995 1994 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,653,000 $ 8,343,000 Accounts receivable (less allowance for doubtful accounts of $386,000 at December 31, 1995 and $414,000 at December 31, 1994) (Note 15) 13,165,000 10,678,000 Inventories (Note 3) 20,176,000 16,490,000 Prepaid expenses 841,000 660,000 35,835,000 36,171,000 INVESTMENT (Note 2) - 2,286,000 PROPERTY, PLANT AND EQUIPMENT (Notes 4 and 8) 50,271,000 29,020,000 OTHER ASSETS (Note 5) 10,575,000 3,387,000 $ 96,681,000 $ 70,864,000 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank indebtedness (Note 8) $ 3,220,000 $ 180,000 Accounts payable 8,037,000 6,316,000 Accrued liabilities 2,222,000 2,158,000 Accrued income taxes 269,000 397,000 Current portion of long term debt (Note 8) 2,378,000 1,074,000 16,126,000 10,125,000 LONG TERM DEBT (Note 8) 7,485,000 5,461,000 OTHER NON-CURRENT LIABILITIES 605,000 549,000 DEFERRED INCOME TAXES (Note 6) 1,565,000 677,000 25,781,000 16,812,000 SHAREHOLDERS' EQUITY Common stock (Note 9) 8,785,000 7,221,000 Paid-in capital 50,436,000 38,703,000 Retained earnings 18,683,000 11,668,000 Note receivable from shareholder (Note 9) (1,749,000) (1,749,000) Cumulative translation adjustment (1,218,000) (1,326,000) Treasury stock at cost (Note 9) (4,037,000) (465,000) 70,900,000 54,052,000 $ 96,681,000 $ 70,864,000 Consolidated Statements of Shareholders' Equity Years ended December 31 No te Receivable Cumulative Common Paid-In Treasury Retained from Translation Stock Capital Stock Earnings Shareholder Adjustment Total Balance at December 31, 1992 $4,404,000 $18,443,000 $ - $8,111,000 $(1,749,000) $(828,000) $ 28,381,000 Stock issued to former officer 50,000 300,000 - - - - 350,000 Stock dividend (a) 81,000 520,000 - (604,000) - - (3,000) Cash dividend paid by Suzorite Mica Products Inc.(a) - - - (2,621,000) - - (2,621,000) Reduction of capital by Suzorite Mica Products Inc. (a) - (1,353,000) - - - - (1,353,000) Net income for the year - - - 1,852,000 - - 1,852,000 Translation adjustment - - - - - (76,000) (76,000) Balance at December 31, 1993 4,535,000 17,910,000 - 6,738,000 (1,749,000) (904,000) 26,530,000 Stock issued for cash (a) 2,348,000 18,174,000 - - - - 20,522,000 Stock dividend (a) 146,000 1,171,000 - (1,320,000) - - (3,000) Stock options and warrants exercised (a) 56,000 357,000 - - - - 413,000 Stock issued in connection with acquisition (b) 136,000 1,091,000 - - - - 1,227,000 Stock purchased for treasury (a) - - (465,000) - - - (465,000) Net income for the year - - - 6,250,000 - - 6,250,000 Translation adjustment - - - - - (422,000) (422,000) Balance at December 31, 1994 7,221,000 38,703,000 (465,000)11,668,000 (1,749,000)(1,326,000) 54,052,000 Stock issued under employee stock purchase plan (a) 49,000 422,000 - - - - 471,000 Stock dividend (a) 167,000 1,233,000 - (1,403,000) - - (3,000) Stock options and warrants exercised (a) 626,000 4,423,000 - - - - 5,049,000 Stock issued in connection with Alumitech purchase (b) 722,000 5,877,000 - - - - 6,599,000 Warrants repurchased (a) - (222,000) - - - - (222,000) Stock purchased for treasury (a) - - (3,572,000) - - - (3,572,000) Net income for the year - - - 8,418,000 - - 8,418,000 Translation adjustment - - - - - 108,000 108,000 Balance at December 31, 1995 $8,785,000$ 50,436,000 $(4,037,000)$18,683,000$(1,749,000)$(1,218,000)$70,900,000 See Notes to the Consolidated Financial Statements (a) See Note 9. (b) See Note 2. Consolidated Statements of Income Years ended December 31 1995 1994 1993 NET SALES $ 85,056,000 $55,306,000 $47,958,000 COSTS AND EXPENSES Cost of goods sold 64,356,000 40,552,000 36,742,000 Selling, general and administrative 8,669,000 6,598,000 6,331,000 Depreciation, depletion and amortization 3,689,000 2,315,000 2,398,000 76,714,000 49,465,000 45,471,000 OPERATING INCOME BEFORE RESTRUCTURING CHARGES 8,342,000 5,841,000 2,487,000 RESTRUCTURING CHARGES (Note 10) - - 1,250,000 OPERATING INCOME 8,342,000 5,841,000 1,237,000 OTHER INCOME (EXPENSES) Interest expense, net (Note 8) (523,000) (425,000) (896,000) Other, net (Notes 2 and 10) 80,000 163,000 3,317,000 (443,000) (262,000) 2,421,000 INCOME BEFORE PROVISION FOR INCOME TAXES 7,899,000 5,579,000 3,658,000 (RECOVERY OF) PROVISION FOR INCOME TAXES (Note 6) (519,000) (671,000) 470,000 INCOME FROM CONTINUING OPERATIONS 8,418,000 6,250,000 3,188,000 DISCONTINUED OPERATIONS Loss from operations - - (89,000) Loss on disposal - - (1,247,000) Loss from discontinued operations - - (1,336,000) NET INCOME $ 8,418,000 $ 6,250,000 $1,852,000 INCOME (LOSS) PER SHARE Continuing operations $ 1.03 $ 1.12 $ .69 Discontinued operations - - (.29) NET INCOME PER SHARE $ 1.03 $ 1.12 $ .40 AVERAGE COMMON SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING 8,208,874 5,588,682 4,605,440 Consolidated Statements of Cash Flows Years ended December 31 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Income from continuing operations $ 8,418,000 $ 6,250,000 $3,188,000 Adjustments to reconcile income from continuing operations to net cash flows from continuing operating activities Depreciation, depletion and amortization 3,754,000 2,315,000 2,398,000 Loss on assets held for resale 61,000 - 300,000 (Decrease) increase in deferred income taxes(122,000) (1,366,000) 393,000 Share of net income of investee (87,000) (267,000) - Loss (gain) on sale of property,plant and equipment 22,000 15,000 (3,689,000) Increase in other assets (227,000) (63,000) (48,000) Increase in non-current liabilities 56,000 67,000 62,000 Changes in non-cash working capital items (Note 14) (4,660,000) (4,311,000) (844,000) Net cash provided by operating activities 7,215,000 2,640,000 1,760,000 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment(15,451,000)(3,077,000)(2,670,000) Assets acquired in connection with acquisitions (Note 2) (3,658,000)(4,888,000) - Proceeds from sale of assets (Note 2) - 78,000 5,479,000 Additions to assets held for resale - - (134,000) Investment (Note 2) - (2,019,000) - Promissory notes - (371,000) - Net cash provided by (used in) investing activities (19,109,000)(10,277,000) 2,675,000 CASH FLOWS FROM FINANCING ACTIVITIES Deferred financing costs (467,000) - - Proceeds from long term debt 6,219,000 266,000 4,827,000 Proceeds (payments) net, on bank indebtedness 3,040,000 (415,000) 520,000 Repayment of long term debt (5,343,000)(8,094,000)(3,322,000) Cash paid in lieu of fractional shares (3,000) (3,000) (3,000) Dividend paid (Note 9) - - (2,621,000) Issuance of common stock (Note 9) 5,520,000 20,935,000 350,000 Purchase of common stock and warrants (Note 9) (3,794,000) (465,000) - Reduction of common stock (Note 9) - - (1,353,000) Net cash provided by (used in) financing activities 5,172,000 12,224,000 (1,602,000) EFFECT OF EXCHANGE RATE CHANGES ON CASH 32,000 (40,000) (26,000) NET (DECREASE) INCREASE IN CASH FROM CONTINUING OPERATIONS (6,690,000)4,547,000 2,807,000 NET CASH USED IN DISCONTINUED OPERATIONS - - (207,000) NET (DECREASE) INCREASE IN CASH (6,690,000)4,547,000 2,600,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,343,000 3,796,000 1,196,000 CASH AND CASH EQUIVALENTS AT END OF YEAR $1,653,000 $8,343,000 $3,796,000 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Income taxes paid $ 303,000 $ 233,000 $ - Interest paid 656,000 573,000 891,000 SUPPLEMENTAL DISCLOSURE OF NON CASH ACTIVITIES Notes issued in connection with purchase of assets (Note 2) $ - $1,102,000 $ - Stock issued in connection with acquisition (Note 2) 6,599,000 1,227,000 - Assumption of liabilities in connection with asset purchases - 793,000 - Notes received in connection with sale of assets held for resale (Note 10) 423,000 - - - - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of significant accounting policies The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Corporation's significant accounting policies are as follows: a. Principles of Consolidation The consolidated financial statements include the accounts of Zemex Corporation and its wholly-owned subsidiaries (the "Corporation"). All material intercompany transactions have been eliminated. As discussed in Note 2, the 1993 acquisition of Suzorite Mica Products Inc. ("Suzorite") has been accounted for as a pooling of interests and the sale of the Corporation's 70 percent interest in Perangsang Pasifik Senderian Berhad ("PPSB"), a tin dredging operation in Malaysia, has been reported as a discontinued operation. Also as discussed in Note 2, Alumitech, Inc. ("Alumitech") was acquired in two separate transactions and, accordingly, was accounted for on an equity basis until it became a wholly-owned subsidiary in February 1995. b. Inventories Inventories are stated at the lower of cost or market and are computed using the average cost method. It is not practical to segregate finished products from ore and concentrates. Supplies are stated at cost using the first in, first-out or average cost method. c. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and improvements are capitalized. When assets are sold or otherwise retired, the cost and accumulated depreciation or depletion are removed from the accounts and any gain or loss is included in results of operations. Provisions for depreciation are based upon estimated useful lives, using principally the straight-line method. Depletion of mining properties and depreciation of other mining assets are computed using the unit-of-production method, except in the case of the Corporation's Suzorite operation where the estimated reserves exceed the expected production during the term of the mining lease. The Suzorite mining lease rights and deferred costs, including all preproduction and set-up costs, are amortized using the straight-line method over the term of the mining lease. d. Postretirement Benefits Pension Plans The funding policy of the Corporation, generally, is to contribute annually at a rate that is intended to provide for the cost of benefits earned during the year and which will amortize prior service costs over periods of 10 to 30 years, subject to Internal Revenue Service limits for deductible contributions. Healthcare and Other Postretirement Benefits Other Than Pensions Effective January 1, 1993, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") No. 106 - "Employees' Accounting for Postretirement Benefits Other Than Pensions". This Statement requires the accrual of all postretirement benefits other than pensions during the years in which employees render the necessary services to be entitled to receive such benefits. The 1995, 1994 and 1993 amounts include the current year expense and the transition liability which is being amortized over twenty years as allowed by SFAS No. 106 (Note 7). e. Foreign Currency Translation The functional currency for the Corporation's foreign operations is the local currency. Foreign currency assets and liabilities are translated using the exchange rates in effect at the balance sheet date. The effect of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars is accumulated as part of the cumulative translation adjustment component of shareholders' equity. Results of operations and cash flows are translated using the average exchange rates during the year. Gains and losses from foreign currency transactions are included in net income for the year. f. Research and Development Expense Research and development expense was $320,000 in 1995, $315,000 in 1994 and $371,000 in 1993. g. Provision for Future Reclamation Costs Costs for future reclamation have been provided for based upon estimated future reclamation costs allocated over the expected productive life of the quarries. h. Income Taxes Effective January 1, 1993, the Corporation adopted SFAS No. 109 - "Accounting for Income Taxes". This Statement requires the liability method of accounting for income taxes rather than the deferral method previously used. Because of the valuation reserves established on the deferred tax asset related to the net operating loss carryforwards, the cumulative effect of this accounting change and the impact on the 1993 income tax provision was not material. i. Earnings Per Share Earnings per share is based upon the weighted average number of common and common share equivalents outstanding. Common share equivalents include stock options issued under the employee stock option plans and stock issued under the Key Executive Common Stock Purchase Plan (Note 9). For the purpose of the treasury method, stock dividends are considered to be issued at the beginning of the period. j. Deferred Financing Costs Costs associated with the issuance of long term debt are deferred, and are being amortized over the term of the debt on a straight-line basis. The unamortized balance is included in other assets. k. Other Assets Other assets include assets held for sale which are stated at the lower of cost or estimated net realizable value. In determining the estimated net realizable value, the Corporation deducts from the estimated selling price the projected costs to bring the assets into a saleable condition, to dispose of the assets and to hold the property to an expected date of sale. Other assets also include patents which are stated at cost, and are being amortized over their remaining life of 15 years on a straight-line basis. Intangible assets are evaluated periodically and, if conditions warrant, an impairment valuation is provided. l. Cash Equivalents For purposes of the consolidated statement of cash flows, highly liquid investments with original maturities of three months or less, when purchased, are considered as cash equivalents. 2. Acquisitions and Dispositions Acquisitions Acquisition of Alumitech, Inc. In June 1994, the Corporation acquired its initial 39.53 percent investment in Alumitech by investing $2,000,000 to acquire treasury stock. In 1995, the Corporation increased its interest to 100 percent by issuing 722,352 shares of common stock with an ascribed value of $6,599,000. The shares were issued as to 266,106 to Dundee Bancorp International Inc. ("Dundee"), the Corporation's largest shareholder, and as to 266,106 to Clarion Capital Corporation, a company controlled by a director of the Corporation. Alumitech, an aluminum dross processor, has developed proprietary technology that enables it to have the ability to convert 100 percent of its dross feed into marketable products. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets purchased and liabilities assumed based upon the fair values at the date of acquisition. The net purchase price was allocated as follows: Working capital $ 73,000 Property, plant and equipment 5,527,000 Patents 7,363,000 Other assets 225,000 Other liabilities (2,192,000) Deferred income taxes (2,025,000) ____________ $8,971,000 Consideration Carrying value of investment at date of acquisition of remaining interest $2,372,000 Capital stock 6,599,000 ____________ $8,971,000 The operating results of Alumitech have been included in the consolidated statement of income from the date of acquisition. On the basis of a pro forma consolidation of the results of operations, as if the acquisition had taken place at the beginning of fiscal 1994 rather than at February 15, 1995, consolidated net sales would have been $64.5 million for fiscal 1994, and $86.9 million for fiscal 1995. Consolidated pro forma income and earnings per share would not have been materially different from the reported amounts for fiscal 1994 and 1995. Such pro forma amounts are not necessarily indicative of what the actual consolidated results of operations might have been if the acquisition had been effective at the beginning of fiscal 1994. Acquisition of the assets of Benwood Limestone Company, Inc. On May 15, 1995, the Corporation acquired the assets of Benwood Limestone Company, Inc. ("Benwood"), through its wholly-owned subsidiary, Suzorite Mineral Products, Inc., for $3,658,000. The acquisition of Benwood offers the Corporation the opportunity to expand its present talc and mineral processing capability. Benwood will continue to process consumer products for its former owner under a long term contract. Acquisition of the talc operations of Whittaker, Clark & Daniels, Inc. In December 1994, the Corporation acquired from Whittaker, Clark & Daniels, Inc. ("WCD") certain assets including its talc operations. Consideration for the purchase included $4,388,000 in cash, 136,360 common shares of the Corporation with an ascribed value of $1,277,000 and the assumption of certain current liabilities directly relating to the operations acquired aggregating $267,000. Concurrent with the purchase, the Corporation entered into an agreement with WCD whereby WCD agreed to act as the exclusive marketing, distribution and sales agent for the Corporation's premium talc products. Acquisition of the assets of Greenback Industries, Inc. In September 1994, the Corporation, through its wholly-owned subsidiary, Pyron Metal Powders, Inc., acquired the assets and assumed certain liabilities of Greenback Industries, Inc. ("Greenback"). Consideration for the purchase was $500,000 in cash, the issuance of two promissory notes having principal amounts of $650,000 and $451,563, respectively, and the assumption of certain current liabilities aggregating $526,000. The Greenback facilities provide the Corporation with increased capacity to produce powdered copper as well as powdered tin, and powdered copper and tin alloys. Acquisition of Suzorite Mica Products Inc. In September 1993, the Corporation, through a wholly-owned subsidiary, acquired 100 percent of the outstanding capital stock of Suzorite from Dundee. Suzorite mines and processes mica which is used in various applications in the automotive, construction and oil drilling industries. In connection therewith, the Corporation issued 1,400,000 shares of common stock and a transferable warrant entitling the holder to purchase up to an additional 100,000 shares of common stock at $7.00 per share. The warrant was exercised by Dundee on July 14, 1995. As this transaction was between companies which were then under common control, it has been accounted for as a pooling of interests and, accordingly, the Corporation's financial statements for periods prior to the acquisition have been restated to include the accounts of Suzorite for all periods presented. There were no adjustments necessary to conform the accounting policies of the two companies. Net sales and net income (loss) from continuing operations of the separate companies for the period preceding the acquisition are as follows: Period from January 1, 1993 to September 30, 1993 (unaudited) Net sales Suzorite $5,586,000 Zemex 30,628,000 ____________ Combined $36,214,000 ____________ Income (loss) from continuing operations Suzorite $ 649,000 Zemex (240,000) ____________ Combined $ 409,000 ____________ Dispositions Discontinued Operations During the fourth quarter of 1993, the Corporation sold its 70 percent owned subsidiary, PPSB, which was involved in the dredging of tin oxide in Malaysia. Accordingly, the consolidated financial statements of the Corporation have been reclassified to report separately from continuing operations the net assets and operating results of this discontinued operation. Sales applicable to the discontinued Malaysian operation prior to its sale were $2,313,000 in 1993. Other Dispositions In 1993, the Corporation sold its aplite plant and operations in Montpelier, Virginia for aggregate net proceeds of $5,470,000, resulting in a pre-tax gain of $3,683,000 which was included in other income (expenses). 3. Inventories 1995 1994 Ore, concentrates and finished products Industrial minerals $10,852,000 $7,158,000 Metal products 4,042,000 3,655,000 ________________________ 14,894,000 10,813,000 Materials and supplies Industrial minerals 3,867,000 4,252,000 Metal products 1,415,000 1,425,000 ________________________ 5,282,000 5,677,000 ________________________ $20,176,000 $16,490,000 ________________________ 4. Property, Plant and Equipment 1995 1994 Land $4,952,000 $2,937,000 Mining properties and deferred costs 5,535,000 4,890,000 Buildings 15,304,000 10,925,000 Machinery and equipment 45,797,000 34,928,000 Construction in progress 7,609,000 2,317,000 ____________ ___________ Total property, plant and equipment, at cost 79,197,000 55,997,000 Less: Accumulated depreciation, depletion and amortization 28,926,000 26,977,000 ____________ ___________ Net property, plant and equipment $ 50,271,000 $ 29,020,000 ____________ ___________ As of December 31, 1995, the Corporation estimates that approximately $12,580,000 will be expended to complete its construction in progress. 5. Other Assets 1995 1994 Prepaid pension cost (Note 7) $1,632,000 $1,518,000 Assets held for resale (Note 10) 250,000 734,000 Deferred financing costs 802,000 442,000 Other deferred charges 443,000 471,000 Promissory notes receivable, non-current portion 369,000 222,000 Patents, net 7,079,000 - ____________ ___________ $10,575,000 $3,387,000 ____________ ___________ 6. Income Taxes The provision for income taxes consists of the following components: 1995 1994 1993 Income from continuing operations before provision for income taxes Domestic $ 7,708,000$ 3,631,000$ 2,331,000 Foreign 191,0001,948,000 1,327,000 ___________________ _________ Total pre-tax income $ 7,899,000$ 5,579,000$ 3,658,000 ___________________ _________ Current tax provision Federal $ 1,849,000$ 880,000$ 985,000 State and local 293,000 258,000 116,000 Foreign 37,000 425,000 - ___________________ _________ Total 2,179,0001,563,000 1,101,000 Deferred tax provision Federal 283,000 - - State and local 55,000 - - Foreign 40,000 256,000 470,000 ___________________ _________ Total 378,000 256,000 470,000 Benefit of operating loss and tax credit carryforwards(3,076,000)(2,490,000)(1,101,000) ___________________ _________ (Recovery of) provision for income taxes $ (519,000)$ (671,000)$ 470,000 ___________________ _________ The following tabulation reconciles the U.S. federal statutory income tax rate to the federal, state and foreign overall effective income tax rate. 1995 1994 1993 (percent) (percent) (percent) Statutory federal rate 34.0 34.0 34.0 Benefit of operating loss carryforwards (net of foreign income taxes) (38.1) (46.0) (22.0) Other 2.5 - 0.8 _____ _____ _____ Effective income tax rate (6.6) (12.0) 12.8 _____ _____ _____ Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 1995, the Corporation had unused tax benefits of $4,102,000 related to U.S. net operating loss and tax credit carryforwards. Significant components of the Corporation's deferred tax assets and liabilities as of December 31 are as follows (dollars in thousands): 1995 1994 U.S.ForeignTotal U.S.ForeignTotal Deferred tax assets Net operating loss and tax credit carryforwards$ 4,102$ -$ 4,102$4,132$ - $ 4,132 Accrued expenses 444 - 444 414 - 414 Bad debt allowances112 - 112 124 - 124 Inventories 505 - 505 132 - 132 Other 137 - 137 397 - 397 _____ _____ _____ _____ _____ _____ Gross deferred tax assets5,300 - 5,300 5,199 - 5,199 Valuation allowance for deferred tax assets- - -(1,645) -(1,645) _____ _____ _____ _____ _____ _____ Total 5,300 - 5,300 3,554 - 3,554 _____ _____ _____ _____ _____ _____ Deferred tax liabilities Property, plant and equipment 2,159 2,075 4,234 1,223 2,177 3,400 Patent 1,929 - 1,929 - - - Pension contributions 600 - 600 553 - 553 Assets held for resale 102 - 102 278 - 278 _____ _____ _____ _____ _____ _____ Total 4,790 2,075 6,865 2,054 2,177 4,231 _____ _____ _____ _____ _____ _____ Net deferred tax (assets) liabilities$ (510)$2,075$1,565$(1,500)$2,177 $677 _____ _____ _____ _____ _____ _____ The net change in the valuation allowance for deferred tax assets was a decrease of $1,645,000 and $2,744,000 in the years ended December 31, 1995 and 1994, respectively, related primarily to benefits arising from recognition of the benefit of net operating loss carryforwards. In 1995, the benefit of the balance of the net operating losses was recognized and, accordingly, the valuation allowance was reduced to nil. At December 31, 1995, the Corporation had $9,136,000 of federal operating loss carryforwards available to reduce future taxable income which will expire between 1999 and 2006. Additionally, the Corporation had $646,000 of unused general business tax credits, which will expire between 1996 and 2009, and $270,000 of alternative minimum tax credits. 7. Pension Plans and Other Postretirement Benefits Pension Plans The Corporation has several pension plans covering substantially all domestic employees. The plans covering salaried employees provide pension benefits that are based on the compensation of the employee. In all plans, the plan assets exceed the benefit obligations and hence the plans are overfunded. Net periodic pension cost (income) included the following components: 1995 1994 1993 Current service costs $369,000 $422,000 $ 338,000 Interest cost on projected benefit obligations 940,000 882,000 846,000 Actual return on assets (2,587,000) 368,000 (1,249,000) Net amortization and deferral 1,164,000 (1,704,000) 29,000 _____________________________ Net pension income $(114,000) $ (32,000)$ (36,000) __________ _________ __________ Net amortization and deferral consists of amortization of net assets at transition and deferral of subsequent net gains and losses. The assumptions used to determine projected benefit obligations were (i) a discount rate of 7 percent in 1995, and 7.5 percent in 1994 and 1993; (ii) an expected long term rate of return on assets of 8.75 percent in 1995, 1994 and 1993; and (iii) an increase in the level of compensation of 6 percent for 1995, 1994 and 1993. The status of the plans and the amounts recognized in the consolidated balance sheets of the Corporation for its pension plans as of December 31, 1995 and 1994 are tabulated below: 1995 1994 Actuarial present value of benefit obligations Vested benefit obligation $11,059,000 $9,404,000 ____________ ___________ Accumulated benefit obligation $ 11,261,000 $ 9,555,000 ____________ ___________ Projected benefit obligation $(15,042,000) $ (12,760,000) Plan assets at fair value 16,646,000 14,675,000 ____________ __________ Plan assets in excess of projected benefit obligation 1,604,000 1,915,000 Unrecognized net gain 226,000 (40,000) Prior service costs not yet recognized in net periodic pension cost 282,000 276,000 Unrecognized net asset at year end (480,000) (633,000) ____________ ___________ Prepaid pension cost included in consolidated balance sheets $ 1,632,000 $ 1,518,000 ____________ ___________ Other Postretirement Benefits The Corporation provides healthcare and life insurance benefits for certain retired employees which, effective January 1, 1993, are accrued as earned (Note 1). The cost of such benefits was $95,000 in 1995, $73,000 in 1994, and $51,000 in 1993. The unrecognized obligation for postretirement benefits is not material. 8. Debt and Lines of Credit 1995 1994 Term loan facility (a) $2,700,000 $ - Other term loans (b) 1,038,000 91,000 Industrial Development Revenue Bonds (c) 4,612,000 5,100,000 Promissory notes (d) 811,000 1,064,000 Capital leases (e) 330,000 280,000 Other 372,000 - __________ __________ Total debt 9,863,000 6,535,000 Less: Current portion 2,378,000 1,074,000 __________ __________ Long term debt $7,485,000 $5,461,000 __________ __________ (a) During 1995, the Corporation entered into a $30,224,000 credit facility with a syndicate of two banks. The credit facility is further subdivided into four facilities: (i) a $10,000,000 revolving credit and term loan facility; (ii) a $10,000,000 multiple advance term loan facility; (iii) a $5,224,000 standby letter of credit; and (iv) a $5,000,000 operating line. These facilities are secured by specific assets and a floating charge over a significant portion of the Corporation's assets. The facilities bear interest at rates varying from bank prime to bank prime plus 0.25 percent and from LIBOR plus 1.25 percent to LIBOR plus 2.25 percent, depending upon the financial position of the Corporation. As at December 31, 1995, there was $2,000,000 outstanding under the operating line, $2,700,000 outstanding under the multiple advance term loan facility, and the standby letter of credit was issued to secure the Industrial Development Revenue Bonds. The operating line matures June 30, 1996 and will be reviewed annually for renewal. The multiple advance term loan facility requires quarterly payments of $277,000 commencing April 1, 1996 with the balance outstanding, if any, due January 1, 2000. (b) The other term loans bear interest at the prime rate of the lending institution plus 1.25 percent to 1.50 percent depending on certain tests. They are secured by substantially all of the fixed assets of Alumitech and its wholly-owned subsidiaries and are repayable in monthly principal instalments of approximately $19,000 until they are repaid in 1998 and 1999. (c) The Corporation's wholly-owned subsidiary, Pyron Corporation ("Pyron"), entered into a lease agreement on November 29, 1989 with the Niagara County Industrial Development Agency (the "Agency") to partially finance the construction of a manufacturing facility, acquire and install equipment and machinery, and renovate the existing Pyron facility for the purpose of manufacturing atomized steel powders. The agreement authorized the Agency to issue and sell Industrial Development Revenue Bonds in the aggregate principal amount of $7,650,000 to provide the funds for the project. While the bonds are not the obligation of Pyron, the agreement requires Pyron to make quarterly rental payments equal to the debt service under the sinking fund requirements and interest on the outstanding principal to the Agency. The amount outstanding at December 31, 1995 and 1994 was $4,612,000 and $5,100,000, respectively. Pyron's obligation under the agreement is $510,000 annually until paid. The bonds bear interest at a variable rate not to exceed 15 percent per annum. The rate at December 31, 1995 was 5.25 percent and at December 31, 1994 was 5.65 percent. Pyron has the option to convert the bonds to a fixed interest rate at any time during the term. Under the lease agreement, Pyron may purchase the facility at any time during the term, which expires November 1, 2004, by paying the outstanding principal amount of the bonds plus $1. The bonds are collateralized by a mortgage on the land, the new facility and the existing facility which have an aggregate net book value of approximately $8,992,000 at December 31, 1995. A bank has provided Pyron with a letter of credit which is available to support Pyron's obligations under the lease agreement. If the bondholders tender their bonds for repayment, the letter of credit will be utilized to pay the bondholders. The letter of credit is collateralized under the credit facility in (a) above. The letter of credit expires on October 1, 1999. (d) In 1994, the Corporation's wholly-owned subsidiary, Pyron Metal Powders, Inc., issued two promissory notes to former owners in connection with the acquisition of its operations. One promissory note with an aggregate principal amount outstanding as of December 31, 1995 of $325,000 and at December 31, 1994 of $650,000 bears interest at 7 percent in both 1995 and 1994 with principal due in two equal instalments of $325,000 on September 15, 1995 and 1996, respectively. A second note with an aggregate principal amount outstanding as at December 31, 1995 of $263,000 and at December 31, 1994 of $414,000 is non-interest bearing with principal payments of $12,550 due monthly until the final payment of $12,313 due September 15, 1997. (e) The Corporation has a long term capital lease agreement at a variable rate for equipment used in its operations. This is a six-year lease with a maturity in the year 2000. The carrying value of the leased equipment as of December 31, 1995 was $217,000. Principal repayments on long term debt are as follows: 1996 $2,378,000 1997 2,112,000 1998 1,584,000 1999 1,035,000 2000 572,000 Thereafter 2,182,000 $9,863,000 Interest Interest earned and expensed in each of the past three years is summarized below: 1995 1994 1993 Interest income $268,000 $246,000 $ 22,000 Interest expense (791,000) (671,000) (918,000) Net interest expense $(523,000) $ (425,000) $ (896,000) 9. COMMON STOCK, STOCK OPTIONS AND WARRANTS Shares Outstanding During 1995, the Corporation received shareholder approval to increase its authorized stock from 10,000,000 to 25,000,000, par value one dollar ($1.00) per share, of which 20,000,000 shares will be denominated common stock and 5,000,000 shares will be denominated preferred stock. There were 8,355,722 shares of common stock issued and outstanding as of December 31, 1995 and 7,168,153 shares as of December 31, 1994. In March 1993, Suzorite reduced its stated capital by way of a cash distribution to its then sole shareholder, Dundee, by $1,353,000. This reduction in stated capital did not reduce the number of shares outstanding. As the acquisition of Suzorite has been accounted for as a pooling of interest, this distribution is reflected in the consolidated statement of shareholders' equity. On May 5, 1994, the Corporation issued 347,826 shares of common stock in a private placement transaction for aggregate proceeds of $2,000,000. In September 1994, the Corporation issued 2,000,000 shares of its common stock pursuant to a public offering of shares for net proceeds, after underwriting fees and expenses of issue, of $18,522,000. In 1995, the Corporation completed its purchase of 100 percent of Alumitech by issuing 722,352 shares of common stock with an ascribed valued of $6,599,000. During 1995, 49,000 shares of common stock were issued pursuant to the Corporation's employee stock purchase plan for an aggregate consideration of $471,000. The plan was approved by the shareholders and provides that 250,000 shares may be purchased under the plan. The shares have been registered for listing on the New York Stock Exchange. As part of a stock repurchase program, the Corporation has purchased 429,000 shares of common stock on the open market: 376,000 common shares in 1995 for an aggregate cost of $3,572,000 and 53,000 common shares in 1994 for an aggregate cost of $465,000. Dividends On November 10, 1995, the Corporation declared a 2 percent stock dividend to shareholders of record on November 24, 1995, which was paid December 8, 1995. Retained earnings were charged $1,403,248 as the result of the issuance of 167,149 shares of the Corporation's common stock, and cash payments of $3,375 in lieu of fractional shares. On November 14, 1994, the Corporation declared a 2 percent stock dividend to shareholders of record on November 28, 1994, which was paid December 19, 1994. Retained earnings were charged $1,320,307 as the result of the issuance of 145,708 shares of the Corporation's common stock, and cash payments of $3,218 in lieu of fractional shares. On November 7, 1993, the Corporation declared a 2 percent stock dividend to shareholders of record on November 24, 1993, which was paid December 6, 1993. Retained earnings were charged $604,276 as a result of the issuance of 81,573 shares of the Corporation's common stock, and cash payments of $2,672 in lieu of fractional shares. In March 1993, Suzorite paid a cash dividend of $2,621,000 to its then sole shareholder, Dundee. This dividend, because of the pooling of interest accounting referred to in Note 2, is also reflected in the consolidated statement of shareholders' equity. Stock Options The Corporation provides stock option incentive plans and has, with shareholder approval, issued options to certain directors outside of the plans. The plans are intended to provide long term incentives and rewards to executive officers, directors and other key employees contingent upon an increase in the market value of the Corporation's common stock. Options for 10 percent of the Corporation's outstanding common stock are issuable under the plans. Stock option transactions are summarized as follows: NumberExercise Price of Optionsper Option ($) Outstanding at December 31, 1992 260,000 5 Granted 372,500 5 1/2 Granted 60,000 7 1/8 Cancelled or expired (120,000) 5 Outstanding at December 31, 1993 572,500 Granted 25,000 11 1/2 Cancelled (9,750) 5 1/2 Cancelled (8,000) 5 Exercised (12,000) 5 Exercised (11,200) 5 1/2 Outstanding at December 31, 1994 556,550 Granted 284,000 9 1/8 Granted 22,000 9 3/4 Granted 21,000 10 Granted 14,000 10 1/8 Cancelled (3,750) 5 1/2 Cancelled (3,000) 9 1/8 Exercised (8,000) 5 Exercised (30,250) 5 1/2 Outstanding at December 31, 1995 852,550 The options expire from 1996 to 2001. During 1995 options for 38,250 shares of common stock were exercised for proceeds of $206,000. At December 31, 1995 there were 511,550 options exercisable. During 1994, options for 23,200 shares of common stock were exercised for proceeds of $122,000. Warrants During 1993, in connection with the acquisition of Suzorite (Note 2), the Corporation issued a transferable warrants to Dundee to purchase at any time prior to July 15, 1995 up to 100,000 shares (104,040 after adjustments for stock dividends) of common stock at $7.00 per share. The warrant was exercised by Dundee on July 14, 1995 for proceeds of $700,000. As a result of a stock rights offering in 1990, 725,769 warrants were issued. Each warrant entitled the holder to purchase, prior to July 15, 1995, 1.08 shares of common stock at an exercise price of $8.56 per share, which was repriced from $9.25 per share as a result of stock dividends. Of the 725,769 warrants originally issued, the Corporation repurchased 218,046 warrants at an aggregate cost of $222,000. During 1995, 448,000 warrants were exercised for 484,027 shares of common stock for net proceeds of $4,143,000. During 1994, 31,514 warrants were exercised resulting in the issuance of 32,771 shares of common stock at an exercise price of $8.88 per share for aggregate proceeds of $291,000. No warrants were exercised in 1993. The warrants expired July 15, 1995. Note Receivable from Shareholder The note receivable from shareholder of $1,749,000 represents amounts due from the Corporation's President and Chief Executive Officer pursuant to the Key Executive Common Stock Purchase Plan. The loan, which was used to acquire 357,000 shares of common stock of the Corporation, is noninterest bearing, is secured by a pledge of the shares acquired, and is due on the earlier of August 12, 1997 or 30 days after the termination of employment. Since the loan arose from the sale of stock, it is classified as a reduction of shareholders' equity. 10. RESTRUCTURING CHARGES AND UNUSUAL ITEMS Restructuring Charges In 1993, the Corporation reorganized certain of its U.S. operations. This has resulted in a charge to operation of $950,000 in 1993 which includes the cost of closing an office and severance costs. In December 1991, the Corporation closed its industrial minerals plant located in Connecticut. The assets of this operation were reclassified to assets held for resale and written down in 1991 by $430,000 to their estimated net realizable value. These assets were written down by a further $300,000 in 1993. In 1995, a portion of the property was sold for approximately net book value. The purchaser has a five-year option to purchase the remaining portion. Unusual Items Other income (expenses) for 1993 includes a gain on sale of the Montpelier, Virginia aplite plant and operations of $3,683,000 (Note 2) as well as $616,000 of legal and other costs primarily associated with the acquisition of Suzorite. 11. OPERATING LEASES AND OTHER COMMITMENTS Operating Leases The Corporation has a number of operating lease agreements primarily involving equipment, office space, warehouse facilities and rail sidings. The operating lease for equipment provides that the Corporation may, after the initial lease term, renew the lease for successive yearly periods or may purchase the equipment at the fair market value. An operating lease for office facilities contains escalation clauses for increases in operating costs and property taxes. The majority of the leases are cancellable and are renewable on a yearly basis. Future minimum rental payments required by operating leases that have initial or remaining non-cancellable lease terms in excess of one year as of December 31, 1995 are as follows: Minimum YearLease Payments 1996 $ 535,000 1997 468,000 1998 343,000 1999 247,000 Thereafter 577,000 Total minimum lease payments $2,170,000 Rent expense was $422,000, $281,000 and $88,000 in 1995, 1994 and 1993, respectively. Other Commitments The Corporation has a mining contract with an independent contractor to extract minerals from its open pit mine in Suzor Township, Quebec that expires on September 30, 1998. This contract specifies the mining and delivery of approximately 50,000 tons of ore per year to the mine site rail siding at a rate of Cdn. $17.50 per ton. 12. QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of certain unaudited quarterly financial data from continuing operations: 1995 1994 Net sales First quarter $21,105,000 $12,399,000 Second quarter 21,439,000 13,388,000 Third quarter 21,748,000 13,333,000 Fourth quarter 20,764,000 16,186,000 $85,056,000 $55,306,000 Operating income First quarter $2,123,000 $1,065,000 Second quarter 2,465,000 1,426,000 Third quarter 1,822,000 1,636,000 Fourth quarter 1,932,000 1,714,000 $8,342,000 $5,841,000 Net income First quarter $1,459,000 $ 764,000 Second quarter 2,183,000 1,128,000 Third quarter 1,562,000 1,314,000 Fourth quarter 3,214,000 3,044,000 $8,418,000 $6,250,000 Net income per share First quarter $ .19 $ .17 Second quarter .28 .24 Third quarter .18 .24 Fourth quarter .38 .43 13. FINANCIAL INSTRUMENTS Financial instruments comprise cash and cash equivalents, accounts receivable, short term bank borrowings, accounts payable, accrued liabilities, and long term debt. The fair value of these financial instruments approximates their carrying value. Financial instruments which potentially subject the Corporation to concentrations of credit risk consist principally of trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Corporation's customer base and their dispersion across a number of different industries, principally the construction, automotive, ceramics and secondary aluminum industries. 14. Changes in Non-Cash Working Capital Items The changes in non-cash working capital items are as follows: 1995 1994 1993 Increase in accounts receivable $ (783,000) $ (2,384,000) $(471,000) (Increase) decrease in inventories (2,742,000) (4,471,000) 728,000 Increase in prepaid expenses (16,000) (31,000) (162,000) Increase (decrease) in accounts payable and accrued liabilities (1,495,000) 2,248,000 (981,000) Increase in accrued income taxes 376,000 327,000 42,000 ______________________________ $(4,660,000) $(4,311,000) $ (844,000) 15. Related Party Transactions Related party transactions not otherwise disclosed in the consolidated financial statements include: (a) Suzorite was charged management fees of $219,000 in 1993 by Dundee. Effective July 1, 1993, Dundee discontinued charging management fees to Suzorite; and (b) as at December 31, 1995 and 1994, accounts receivable included amounts due from directors of $350,000. These amounts are non-interest bearing with no fixed terms of repayment. 16. Segment Information The Corporation has two principal lines of business and is organized into two operating units based on its product lines: (i) industrial minerals, and (ii) metal products. Industrial mineral products include feldspar, kaolin, mica, talc, baryte, feldspathic sand and industrial sand. These products are marketed principally to the automotive, housing and ceramics industries in North America. They are produced from mines and processing plants located near Edgar, Florida; Monticello, Georgia; Murphy, North Carolina; Spruce Pine, North Carolina; Natural Bridge, New York; Van Horn, Texas; Benwood, West Virginia; Boucherville, Quebec; and Suzor Township, Quebec. Metal products are produced in Niagara Falls, New York; St. Marys, Pennsylvania; Maryville, Tennessee; and Greenback, Tennessee. The Corporation's ferrous and non-ferrous metal powders are marketed primarily in North America to manufacturers of powdered metal parts used in the automotive and transportation industries. Aluminum dross is recycled at a plant in Cleveland, Ohio and ceramic products are produced at a plant in Streetsboro, Ohio. Corporate assets principally include cash, term deposits, and furniture and fixtures. Information pertaining to sales and earnings from continuing operations and assets by business segment appears below: 1995 1994 1993 Net sales (a) Industrial minerals$37,089,000 $ 30,378,000 $ 31,104,000 Metal products 47,967,000 24,928,000 16,854,000 Total $85,056,000 $ 55,306,000 $ 47,958,000 Operating income (loss) (a) Industrial minerals$4,622,000 $ 3,865,000) $ 2,424,000 Metal products 3,677,000 2,202,000 1,046,000 Restructuring charges (b) - - (1,250,000) General unallocated corporate 43,000 (226,000) (983,000) Total 8,342,000 5,841,000 1,237,000 Interest (expense) net (523,000) (425,000) (896,000) Other income, net (b) 80,000 163,000 3,317,000 Income before provision for income taxes $7,899,000 $ 5,579,000$ 3,658,000 Capital expenditures (a) (c) Industrial minerals$9,653,000 $ 2,050,000$ 2,209,000 Metal products 5,784,000 878,000 391,000 Corporate 14,000 149,000 70,000 Total $15,451,000 $ 3,077,000$ 2,670,000 Depreciation, depletion and amortization (a) Industrial minerals$1,932,000 $ 1,456,000$ 1,494,000 Metal products 1,451,000 828,000 834,000 Corporate 306,000 31,000 70,000 Total $ 3,689,000 $ 2,315,000 $ 2,398,000 Identifiable assets at year end (a) Industrial minerals$52,348,000 $36,853,000 $ 30,170,000 Metal products 34,133,000 22,665,000 16,687,000 Corporate (d) 10,200,000 11,346,000 1,557,000 Total $96,681,000 $ 70,864,000 $ 48,414,000 (a) The Corporation's businesses are located in the United States and Canada, which the Corporation considers one geographic segment. (b) See Note 10. (c) Capital expenditures for 1995 and 1994 exclude property, plant and equipment of $9,027,000 and $3,264,000, respectively, acquired in connection with the Corporation's 1995 and 1994 acquisitions (Note 2). (d) 1994 includes equity investment in Alumitech and includes cash and cash equivalents for all years presented. Zemex Corporation Selected Financial Data Years Ended December 31 1995 1994 1993 1992 1991 Summary of Operations Net Sales $85,056,000$55,306,000$47,958,000$42,020,000$37,870,000 Restructuring Charges _ _ 1,250,000 _ _ Operating Income (Loss)8,342,0005,841,0001,237,000 1,737,000(1,751,000) Other Income (Expenses)(443,000)(262,000)2,421,000 (475,000)(1,156,000) Net Income (Loss) from Continuing Operations8,418,0006,250,0003,188,000 838,000(3,215,000) Net Income (Loss) 8,418,000 6,250,000 1,852,000 949,000(3,152,000) Financial Position Working Capital $19,709,000$26,046,000$ 9,288,000$ 9,431,000$ 8,763,000 Total Assets 96,681,00070,864,00048,414,00050,773,00056,620,000 Long Term Debt (Non-Current Portion)7,485,0005,461,0008,735,0009,593,000 10,181,000 Common Stock Average Common Shares Outstanding8,208,8745,588,6824,605,440 4,440,551 4,433,634 Actual Common Shares Issued and Outstanding at Year End8,355,7227,168,1534,535,2834,491,8344,120,777 Per Share of Common Stock Net Income (Loss), as reported $1.03 $1.12 $0.40 $0.21 $(0.71) Net Income (Loss), excluding the benefit of tax loss carryforwards0.60 0.62 0.20 0.21 (0.71) Common Stock Prices High 10 7/8 12 1/4 8 6 3/8 6 7/8 Low 8 1/4 6 1/8 4 1/2 2 7/8 3 3/8 Year End 10 8 5/8 6 3/4 5 3/8 3 3/8 BOARD OF DIRECTORS OFFICERS EXECUTIVE OFFICE Paul A. Carroll Peter Lawson- Zemex Corporation Partner, Smith Johnston Canada Trust Lyons(1) Chairman of the Tower Board BCE Place Morton A. Cohen 161 Bay Street Chairman, President Richard L. Lister Suite 3750, P.O. and President and Box 703 Chief Executive Chief Executive Toronto, Ontario Officer, Officer Canada M5J 2S1 Clarion Capital Corporation Allen J. Palmiere Tel: (416) 365- Vice President, 8080 John M. Donovan Chief Financial Fax: (416) 365- Corporate Consultant Officer and 8094 (1) (2) Assistant Secretary INDEPENDENT Thomas B. Evans, Jr. Peter J. Goodwin PUBLIC Vice Chairman Vice President; ACCOUNTANTS The Jefferson Group President, Inc. (2) Industrial Minerals Deloitte & Touche Toronto, Ontario, Ned Goodman Terrance J. Hogan Canada Chairman and Chief President, Executive Officer, Alumitech, Inc. TRANSFER AGENT Dundee Bancorp Inc. AND REGISTRAR G. Russell Lewis CAPITAL STOCK Peter Lawson-Johnston President, Metal Chairman and Trustee, Powders First Union Solomon R. Guggenheim National Bank of Foundation; Chairman, Patricia K. Moran North Carolina The Harry Frank Assistant Secretary- Shareholder Guggenheim Foundation Treasurer Services Group (1) (3) 230 South Tryon Street Richard L. Lister Charlotte, North President and Chief Carolina 28288 Executive Officer of the Tel: (800) 829- Corporation (3) 8432 Fax: (704) 374 Patrick H. O'Neill 6114 Corporate Consultant (2) FORM 10-K William J. vanden Copies of the Heuvel Form 10-K filed Counsel, Strook, with the Strook & Lavan (3) Securities and Exchange Commission for (1) Member of the the year ended Executive December 31, 1995 will be available Compensation/Stock after April 1, Option/Pension 1996 by writing Committee to Shareholder of the Relations at the Corporation Executive Office (2) Member of the Audit Committee of the Corporation (3) Member of the Executive Committee of the Corporation EX-4 5 [ARTICLE] 5 [MULTIPLIER] 1 [PERIOD-TYPE] 3-MOS [FISCAL-YEAR-END] DEC-31-1995 [PERIOD-END] DEC-31-1995 [CASH] 1,653,000 [SECURITIES] 0 [RECEIVABLES] 13,551,000 [ALLOWANCES] 386,000 [INVENTORY] 20,176,000 [CURRENT-ASSETS] 35,835,000 [PP&E] 79,196,000 [DEPRECIATION] 28,925,000 [TOTAL-ASSETS] 96,681,000 [CURRENT-LIABILITIES] 16,126,000 [BONDS] 0 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [COMMON] 8,785,000 [OTHER-SE] 62,115,000 [TOTAL-LIABILITY-AND-EQUITY] 96,681,000 [SALES] 85,056,000 [TOTAL-REVENUES] 85,056,000 [CGS] 64,356,000 [TOTAL-COSTS] 76,714,000 [OTHER-EXPENSES] (80,000) [LOSS-PROVISION] 0 [INTEREST-EXPENSE] 523,000 [INCOME-PRETAX] 7,899,000 [INCOME-TAX] (519,000) [INCOME-CONTINUING] 8,418,000 [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] 8,418,000 [EPS-PRIMARY] 1.03 [EPS-DILUTED] 1.03
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