-----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, ICsDBfxd6ZM6wtb4sB0YgFt6bpVXKn+hs5XacGwvOpfHN+skxsRXtXNLOdk1w8kq 7v21hD80N2EDHidjoP/KRg== 0000891020-97-001455.txt : 19971117 0000891020-97-001455.hdr.sgml : 19971117 ACCESSION NUMBER: 0000891020-97-001455 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZEMEX CORP CENTRAL INDEX KEY: 0000075644 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 135496920 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00228 FILM NUMBER: 97717898 BUSINESS ADDRESS: STREET 1: CT TOWER, BCE PLACE STREET 2: 161 BAY ST, STE 3750 P O BOX 703 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 M5J STATE: A6 FORMER COMPANY: FORMER CONFORMED NAME: PACIFIC TIN CONSOLIDATED CORP DATE OF NAME CHANGE: 19860720 10-Q 1 EDGAR 10-Q FOR ZEMEX CORPORATION 1 CONFORMED UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 Commission file number 1-228 ZEMEX CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 13-5496920 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) CANADA TRUST TOWER, BCE PLACE 161 BAY STREET, SUITE 3750 TORONTO, ONTARIO, CANADA, M5J 2S1 (Address of principal executive offices) (416) 365-8080 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act NEW YORK STOCK EXCHANGE CAPITAL STOCK, $1.00 PAR VALUE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO As of October 31, 1997, there were 8,311,389 shares of capital stock outstanding. 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ZEMEX CORPORATION CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------ SEPTEMBER 30, 1997 DECEMBER 31, 1996 - ------------------------------------------------------------------------------------------ ASSETS (unaudited) CURRENT ASSETS Cash and cash equivalents $ 1,820,000 $ 2,279,000 Accounts receivable 17,928,000 15,003,000 Inventories 17,343,000 18,171,000 Prepaid expenses 1,165,000 1,388,000 Deferred income taxes 1,223,000 1,013,000 - ------------------------------------------------------------------------------------------ 39,479,000 37,854,000 PROPERTY, PLANT AND EQUIPMENT 66,183,000 62,084,000 OTHER ASSETS 9,739,000 9,438,000 - ------------------------------------------------------------------------------------------ TOTAL ASSETS $115,401,000 $109,376,000 - ------------------------------------------------------------------------------------------ LIABILITIES CURRENT LIABILITIES Bank indebtedness $ 1,700,000 $ 6,590,000 Accounts payable 6,655,000 7,091,000 Accrued liabilities 5,732,000 2,983,000 Accrued income taxes 1,932,000 301,000 Current portion of long term debt 1,767,000 2,201,000 - ------------------------------------------------------------------------------------------ 17,786,000 19,166,000 LONG TERM DEBT 20,895,000 17,797,000 OTHER NON-CURRENT LIABILITIES 873,000 599,000 DEFERRED INCOME TAXES 717,000 817,000 - ------------------------------------------------------------------------------------------ 40,271,000 38,379,000 - ------------------------------------------------------------------------------------------ SHAREHOLDERS' EQUITY Common stock 9,016,000 8,950,000 Paid-in capital 51,553,000 51,304,000 Retained earnings 24,061,000 20,040,000 Note receivable from shareholder (1,749,000) (1,749,000) Cumulative translation adjustment (1,148,000) (1,175,000) Treasury stock at cost (6,603,000) (6,373,000) - ------------------------------------------------------------------------------------------ 75,130,000 70,997,000 - ------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $115,401,000 $109,376,000 - ------------------------------------------------------------------------------------------
-2- 3 ZEMEX CORPORATION CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------------------------------------------------------------------------------- 3 MONTHS ENDED SEPTEMBER 30 9 MONTHS ENDED SEPTEMBER 30 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------------------- (unaudited) NET SALES $24,773,000 $21,601,000 $73,672,000 $65,362,000 - ---------------------------------------------------------------------------------------------------------- COSTS AND EXPENSES Cost of goods sold 17,874,000 16,250,000 53,522,000 49,228,000 Selling, general and administrative 3,076,000 2,746,000 9,457,000 7,886,000 Depreciation, depletion and amortization 1,451,000 1,161,000 4,301,000 3,370,000 - ---------------------------------------------------------------------------------------------------------- 22,401,000 20,157,000 67,280,000 60,484,000 - ---------------------------------------------------------------------------------------------------------- OPERATING INCOME BEFORE REORGANIZATION COSTS 2,372,000 1,444,000 6,392,000 4,878,000 Reorganization costs -- -- -- 1,752,000 - ---------------------------------------------------------------------------------------------------------- OPERATING INCOME 2,372,000 1,444,000 6,392,000 3,126,000 - ---------------------------------------------------------------------------------------------------------- Interest expense, net (497,000) (239,000) (1,506,000) (639,000) Other, net 1,366,000 6,000 1,342,000 14,000 - ---------------------------------------------------------------------------------------------------------- 869,000 (233,000) (164,000) (625,000) - ---------------------------------------------------------------------------------------------------------- INCOME BEFORE PROVISION FOR INCOME TAXES 3,241,000 1,211,000 6,228,000 2,501,000 Provision for income taxes 1,146,000 432,000 2,207,000 897,000 - ---------------------------------------------------------------------------------------------------------- NET INCOME $ 2,095,000 $ 779,000 $ 4,021,000 $ 1,604,000 - ---------------------------------------------------------------------------------------------------------- NET INCOME PER SHARE $0.26 $0.10 $0.50 $0.20 - ---------------------------------------------------------------------------------------------------------- AVERAGE COMMON SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING 8,126,244 7,860,429 8,064,777 7,966,422 - ----------------------------------------------------------------------------------------------------------
-3- 4 ZEMEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30
- ---------------------------------------------------------------------------------------------- 1997 1996 - ---------------------------------------------------------------------------------------------- (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,021,000 $ 1,604,000 Adjustments to reconcile net income to net cash flows Depreciation, depletion and amortization 4,301,000 3,370,000 Amortization of deferred financing costs 106,000 -- Decrease in deferred income taxes (310,000) (63,000) Decrease (increase) in other assets (747,000) 105,000 Increase in other non-current liabilities 274,000 42,000 Changes in non-cash working capital items 2,070,000 (2,111,000) Gain on sale of property, plant and equipment (1,489,000) -- - ---------------------------------------------------------------------------------------------- Net cash provided by operating activities 8,226,000 2,947,000 - ---------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (10,119,000) (11,953,000) Proceeds from sale of assets 3,548,000 -- - ---------------------------------------------------------------------------------------------- Net cash used in investing activities (6,571,000) (11,953,000) - ---------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in long term debt 2,664,000 8,456,000 Net (decrease) increase in bank indebtedness (4,890,000) 3,054,000 Issuance of common stock 482,000 563,000 Purchase of common stock (397,000) (3,174,000) - ---------------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities (2,141,000) 8,899,000 - ---------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 27,000 (56,000) - ---------------------------------------------------------------------------------------------- NET DECREASE IN CASH (459,000) (163,000) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,279,000 1,653,000 - ---------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,820,000 $ 1,490,000 - ----------------------------------------------------------------------------------------------
-4- 5 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements include the accounts of Zemex Corporation and its wholly owned subsidiaries (the "Corporation"). The financial data for the three months ended September 30, 1997 and 1996 and for the nine months ended September 30, 1997 and 1996 are unaudited but, in the opinion of the management of the Corporation, reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of financial position and results of operations. All material intercompany transactions have been eliminated. During the first quarter of 1996, the Corporation recognized reorganization costs of $1.8 million in connection with the reorganization of its industrial minerals division, a write-down to market of inventory held in Brazil and the recognition of a provision for anticipated costs associated with storing and selling the material. The Brazilian enterprise was unsuccessful primarily due to rapidly deteriorating market prices which made market penetration extremely difficult. In August 1997, the Corporation entered into an agreement with respect to Alumitech, Inc.'s fiber manufacturing operation located in Streetsboro, Ohio. Under the agreement, the fiber line was sold to a new corporation in which Alumitech retained an interest, resulting in a one-time gain of $0.9 million, or $0.11 per share in the third quarter of 1997. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE CORPORATION The following is a discussion and analysis of the financial condition and results of operations of the Corporation for the three months ended September 30, 1997 and the three months ended September 30, 1996, and for the nine months ended September 30, 1997 and the nine months ended September 30, 1996, and certain factors that may affect the Corporation's prospective financial condition and results of operations. The following should be read in conjunction with the Consolidated Financial Statements and related notes thereto. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996 Net Sales The Corporation's net sales for the three months ended September 30, 1997 were $24.8 million compared to $21.6 million for the nine months ended September 30, 1996, reflecting a 4.5% increase in sales of industrial minerals and a 24.2% increase in sales of metal products. Net sales in the industrial minerals segment for the three month period ended September 30, 1997 increased by $0.5 million to $10.9 million from $10.5 million in the corresponding period of 1996. The growth is a result of increased sales of talc, mica and industrial sand netted against a decrease in sales of low iron sand products. Net sales of the Corporation's metal products were $13.8 million for the three months ended September 30, 1997, an increase of $2.7 million from the comparable period in 1996. The increase was due primarily to an increase in the price of aluminum and to an increase in sales of aluminum, fiber products -5- 6 and ferrous atomized products, partially offset by a decrease in tipping fees, sales of air atomized and sponge iron products. Cost of Goods Sold Cost of goods sold for the three months ended September 30, 1997 was $17.9 million, compared to $16.3 million for the third quarter of 1996. As a percentage of net sales, gross margin increased from 24.8% in 1996 to 27.9% for the three months ended September 30, 1997, reflecting improved cost efficiencies and an increase in the price of aluminum. Selling, General and Administrative Expense Selling, general, and administrative ("SG&A") expense for the three months ended September 30, 1997 increased by 12.0% to $3.1 million from $2.7 million in the like period of 1996. The increase is attributable primarily to increased staffing and sales and marketing promotion. As a percentage of net sales, SG&A expense decreased to 12.4% in the third quarter of 1997 from 12.7% in the same period in 1996. Depreciation, Depletion and Amortization Depreciation, depletion and amortization ("DD&A") for the three months ended September 30, 1997 was $1.5 million, an increase of $0.3 million, or 25.0%, over the corresponding period in 1996. This increase is primarily due to the depreciation of capital expenditures completed by the Corporation during the last twelve months. Operating Income Operating income for the three month period ended September 30, 1997 was $2.4 million, an increase of $0.9 million, or 64.3%, from the comparable period in 1996. The increase was due to the reasons discussed above. Interest Expense, Net Interest expense for the three months ended September 30, 1997 was $0.5 million, up from $0.2 million for the three months ended September 30, 1996 as the result of increased interest rates partially offset by a $0.2 million decrease in total bank indebtedness. The increase is also attributable to the completion of the Spruce Pine expansion and the interest expense related thereto. Prior to 1997, during the period of construction, interest expense was being capitalized. Other Income As discussed in the notes above, the Corporation recognized a one-time pre-tax gain of $1.4 million (or $0.9 million after tax) resulting from the disposition of Alumitech's fiber line. Provision for Income Taxes The Corporation's provision for income taxes for the three months ended September 30, 1997 increased to $1.1 million from $0.4 million in the third quarter of 1996 due to a 167.5% increase in pre-tax income. -6- 7 Net Income As a result of the factors discussed above, net income for the three months ended September 30, 1997 was $2.1 million, an increase of $1.3 million, or 169.0%, from the comparable period in 1996. NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1996 Net Sales The Corporation's net sales for the nine months ended September 30, 1997 were $73.7 million, an increase of $8.3 million, or 12.7%, from 1996. The increase is due to an 8.0% increase in sales of industrial minerals, a 16.9% increase in the sales of metal products, and an increase in the price of aluminum. Net sales in the industrial minerals segment for the nine month period ended September 30, 1997 increased by $2.4 million to $33.1 million from $30.6 million in 1996. The increase is due to higher sales volume of talc, mica and industrial sand, offset in part by decreased sales of low iron sand products. Net sales in the metal products segment for the nine months ended September 30, 1997 were $40.6 million, an increase of $5.9 million, or 16.9%, from the comparable period in 1996. Sales increased due to a recovery in aluminum prices and increased throughput and higher sales of ferrous atomized and non-ferrous water atomized products. Cost of Goods Sold Cost of goods sold for the nine months ended September 30, 1997 was $53.5 million, an increase of $4.3 million, or 8.7%, from the comparable period in 1996. As a percent of net sales, gross margin increased to 27.4% for the nine months ended September 30, 1997 from 24.7% for the same period in 1996. The increase is primarily due to improved operating efficiencies and higher aluminum prices. Selling, General and Administrative Expense SG&A expense for the nine months ended September 30, 1997 increased to $9.5 million from $7.9 million in 1996, an increase of $1.6 million, or 19.9%. As a percentage of net sales, SG&A expense increased from 12.1% in the 1996 period to 12.8% in the 1997 period, reflecting an increase in staffing and the purchase of certain of the assets and liabilities of a small manufacturer of heat containment systems utilizing ceramic fiber in February 1997. Depreciation, Depletion and Amortization DD&A for the nine months ended September 30, 1997 was $4.3 million, an increase of $0.9 million, or 27.6%, over the comparable period in 1996. The increase is attributable to the depreciation expense associated with the Spruce Pine expansion; prior to 1997, the project was not complete and therefore was not being depreciated. -7- 8 Operating Income Operating income for the nine month period ended September 30, 1997 was $6.4 million, an increase of $3.3 million, or 104.5%, from the comparable period in 1996. In the first quarter of 1996, the Corporation recognized a $1.8 million charge in connection with the reorganization of its industrial minerals segment, a write-down to market of its Brazilian inventory, and the recognition of a provision for storage costs and selling expenses in connection thereto. Interest Expense, Net Interest expense for the nine months ended September 30, 1997 was $1.5 million, up from $0.6 million for the comparable period in 1996 as the result of higher interest rates and the completion of the Spruce Pine expansion. Interest expense related to the expansion project was capitalized during the construction period. Other Income As discussed in the notes above, the Corporation recognized a one time pre-tax gain of $1.4 million (or $0.9 million after tax) resulting from the disposition of Alumitech's fiber line. Provision for Income Taxes The Corporation's provision for income taxes for the nine months ended September 30, 1997 increased to $2.2 million from $0.9 million in the comparable period in 1996. The increase is due to higher pre-tax income in the first nine months of 1997. Net Income As a result of the factors discussed above, net income for the nine months ended September 30, 1997 was $4.0 million, an increase of $2.4 million, or 150.7% , from the comparable period in 1996. LIQUIDITY AND CAPITAL RESOURCES Cash Flow from Operations During the first nine months of 1997, the Corporation generated cash flow from operations of $8.2 million as compared to $2.9 million for the first nine months of 1996. The increase of $5.3 million is primarily due to higher net income in the 1997 period. In 1997, non-cash working capital items generated $2.1 million of the cash otherwise generated from operations as compared to $2.1 million used in for the corresponding period of 1996 as a result of a decrease in inventories and an increase in accounts payable and accrued liabilities. The Corporation had $21.7 million of working capital at September 30, 1997, compared to $18.7 million at December 31, 1996. It is the opinion of management that there are sufficient sources of funds available to meet its anticipated cash requirements. -8- 9 ITEM 5 - OTHER During the third quarter of 1997, Richard L. Lister, President and Chief Executive Officer, obtained a personal loan for the purchase of 86,000 of the Corporation's common shares on the open market, a transaction which was reported on Form 4 in May 1997. Mr. Lister's indebtedness will be guaranteed by Zemex and the Corporation is holding the shares as collateral. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated this 14th day of October, 1997. ZEMEX CORPORATION (Registrant) By: /s/ Allen J. Palmiere ------------------------------------------ Allen J. Palmiere Vice President and Chief Financial Officer -9- EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1996 JUN-30-1997 1,820,000 0 18,394,000 (466,000) 17,343,000 39,479,000 101,801,000 (35,618,000) 115,401,000 17,786,000 0 9,016,000 0 0 66,114,000 115,401,000 73,672,000 73,672,000 53,522,000 67,280,000 (1,342,000) 0 1,506,000 6,228,000 2,207,000 4,021,000 0 0 0 4,021,000 0.50 0.50
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