-----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, Gtglh8sDNiKLX+Aq2I3G5Wbm2wl78PygM2LDJIkkrOTpVX8LkW/w73RNT3j/iKIT r1yveaIZBtafLUktUIOCGA== 0000932384-98-000173.txt : 19980807 0000932384-98-000173.hdr.sgml : 19980807 ACCESSION NUMBER: 0000932384-98-000173 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980806 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: 98678378 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 FORM 10-Q 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 June 30, 1998 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, $1.00 PAR VALUE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ------ ---- ----- ---- YES X NO ------ ---- ----- ---- As of July 31, 1998, there were 8,472,614 shares of capital stock outstanding.
ZEMEX CORPORATION CONSOLIDATED BALANCE SHEETS (US$) - ---------------------------------------------------------------------------------------- June 30, 1998 December 31, 1997 - ---------------------------------------------------------------------------------------- ASSETS (unaudited) CURRENT ASSETS Cash and cash equivalents $ 2,014,000 $ 2,189,000 Accounts receivable 18,073,000 16,287,000 Inventories 16,554,000 17,595,000 Prepaid expenses 628,000 786,000 Deferred income taxes 1,328,000 1,328,000 - ---------------------------------------------------------------------------------------- 38,597,000 38,185,000 PROPERTY, PLANT AND EQUIPMENT 78,650,000 70,812,000 OTHER ASSETS 28,385,000 9,777,000 - ---------------------------------------------------------------------------------------- TOTAL ASSETS $145,632,000 $118,774,000 - ---------------------------------------------------------------------------------------- LIABILITIES CURRENT LIABILITIES Bank indebtedness $ 5,000,000 $ 3,000,000 Accounts payable 8,465,000 9,805,000 Accrued liabilities 4,941,000 3,151,000 Accrued income taxes 642,000 1,235,000 Current portion of long term debt 2,050,000 2,019,000 - ---------------------------------------------------------------------------------------- 21,098,000 19,210,000 LONG TERM DEBT 40,234,000 20,527,000 OTHER NON-CURRENT LIABILITIES 902,000 1,014,000 DEFERRED INCOME TAXES 1,369,000 1,488,000 MINORITY INTEREST 3,155,000 -- - ---------------------------------------------------------------------------------------- 66,758,000 42,239,000 - ---------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Common stock 9,262,000 9,204,000 Paid-in capital 53,696,000 53,298,000 Retained earnings 26,737,000 24,235,000 Note receivable from shareholder (1,749,000) (1,749,000) Cumulative translation adjustment (1,808,000) (1,588,000) Treasury stock at cost (7,264,000) (6,865,000) - ---------------------------------------------------------------------------------------- 78,874,000 76,535,000 - ---------------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $145,632,000 $118,774,000 - ----------------------------------------------------------------------------------------
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ZEMEX CORPORATION CONSOLIDATED STATEMENTS OF INCOME (US$) - ------------------------------------------------------------------------------------------------------ 3 MONTHS ENDED JUNE 30 6 MONTHS ENDED JUNE 30 1998 1997 1998 1997 - ------------------------------------------------------------------------------------------------------ (unaudited) NET SALES $25,933,000 $25,199,000 $52,380,000 $48,899,000 - ------------------------------------------------------------------------------------------------------ COSTS AND EXPENSES Cost of goods sold 18,317,000 18,161,000 37,465,000 35,648,000 Selling, general and administrative 3,528,000 3,380,000 6,861,000 6,381,000 Depreciation, depletion and amortization 1,670,000 1,403,000 3,262,000 2,850,000 - ------------------------------------------------------------------------------------------------------ 23,515,000 22,944,000 47,588,000 44,879,000 - ------------------------------------------------------------------------------------------------------ OPERATING INCOME 2,418,000 2,255,000 4,792,000 4,020,000 - ------------------------------------------------------------------------------------------------------ Interest expense, net 519,000 562,000 1,036,000 1,009,000 Other, net 45,000 39,000 127,000 24,000 - ------------------------------------------------------------------------------------------------------ 564,000 601,000 1,163,000 1,033,000 - ------------------------------------------------------------------------------------------------------ INCOME BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST 1,854,000 1,654,000 3,629,000 2,987,000 Provision for income taxes 556,000 590,000 1,089,000 1,061,000 Minority interest 24,000 -- 38,000 -- - ------------------------------------------------------------------------------------------------------ NET INCOME $ 1,274,000 $ 1,064,000 $ 2,502,000 $ 1,926,000 - ------------------------------------------------------------------------------------------------------ NET INCOME PER SHARE - basic $0.16 $0.13 $0.31 $0.24 - diluted 0.15 0.13 0.29 0.24 - ------------------------------------------------------------------------------------------------------ AVERAGE COMMON SHARES OUTSTANDING 8,105,448 8,089,296 8,100,073 8,083,671 - ------------------------------------------------------------------------------------------------------
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ZEMEX CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30 (US$) - ------------------------------------------------------------------------------------------------- 1998 1997 - ------------------------------------------------------------------------------------------------- (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,502,000 $ 1,926,000 Adjustments to reconcile net income to net cash flows Depreciation, depletion and amortization 3,262,000 2,850,000 Amortization of deferred financing costs 83,000 65,000 Decrease in deferred income taxes (119,000) (80,000) Minority interest in subsidiary earnings 38,000 -- Increase in other assets (16,839,000) (59,000) (Decrease) increase in other non-current liabilities (112,000) 186,000 Loss (gain) on sale of property, plant and equipment 4,000 (70,000) Changes in non-cash working capital items (1,245,000) 1,843,000 - ------------------------------------------------------------------------------------------------- Net cash (used in) provided by operating activities (12,426,000) 6,661,000 - ------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (6,513,000) (6,081,000) Assets acquired in acquisitions (7,801,000) -- Proceeds from sale of assets 3,117,000 151,000 - ------------------------------------------------------------------------------------------------- Net cash used in investing activities (11,197,000) (5,930,000) - ------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in long term debt 17,502,000 2,945,000 Net increase (decrease) in bank indebtedness 2,000,000 (3,589,000) Liabilities assumed in acquisitions 3,914,000 -- Issuance of common stock 475,000 323,000 Purchase of common stock (418,000) (274,000) - ------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 23,473,000 (595,000) - ------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (25,000) 24,000 - ------------------------------------------------------------------------------------------------- NET (DECREASE) INCREASE IN CASH (175,000) 160,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,189,000 2,279,000 - ------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,014,000 $ 2,439,000 - -------------------------------------------------------------------------------------------------
-4- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements include the accounts of Zemex Corporation and its wholly-owned subsidiaries (the "Corporation"). The financial data for the three months ended June 30, 1998 and 1997 and for the six months ended June 30, 1998 and 1997 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. In January 1998, the Corporation, through its wholly-owned subsidiary, Zemex Industrial Minerals, Inc., acquired a muscovite mica producer for approximately $2.2 million, which includes the assumption of debt. The two facilities acquired in the purchase are located in the Spruce Pine, North Carolina area and are operating under the name Zemex Mica Corporation. The acquisition was financed through borrowings on the Corporation's credit facility. On February 24, 1998, Industria Mineraria Fabi S.r.l. ("Fabi") became a partner in the Corporation's talc facility located in Benwood, West Virginia by acquiring a 40% interest in a new limited liability company, Zemex Fabi-Benwood, LLC. As part of the transaction, Fabi paid $3.4 million and is providing access to its technology. Suzorite Mineral Products, Inc., a wholly-owned subsidiary of the Corporation, will manage the new entity pursuant to an operating agreement. Effective June 1, 1998, Alumitech, Inc., a 100% wholly-owned subsidiary of the Corporation, acquired all of the issued and outstanding shares of S&R Enterprises, Inc. ("S&R") for approximately $7.5 million which included the assumption of debt. S&R is an aluminum dross processor located in Wabash, Indiana. The Corporation used its credit facility to finance the acquisition. 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 June 30, 1998 and the three months ended June 30, 1997, and for the six months ended June 30, 1998 and the six months ended June 30, 1997, 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 JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997 Net Sales The Corporation's net sales for the three months ended June 30, 1998 were $25.9 million compared to $25.2 million for the three months ended June 30, 1997, reflecting a 2.8% increase in sales of industrial minerals and a 3.0% increase in the sales of metal products. Net sales in the industrial minerals segment for the three month period ended June 30, 1998 increased by $0.3 million to $11.7 million from $11.4 million in the corresponding period of 1997. The increase is due to higher sales of feldspar, talc and industrial sand products. -5- Net sales of the Corporation's metal products were $14.2 million for the three months ended June 30, 1998, an increase of $0.4 million from the comparable period in 1997, as a result of higher sales of aluminum, atomized and ceramic fiber products offset in part by lower aluminum prices. Cost of Goods Sold Cost of goods sold for the three months ended June 30, 1998 was $18.3 million, compared to $18.2 million for the second quarter of 1997. As a percentage of net sales, gross margin increased from 27.9% in 1997 to 29.4% for the three months ended June 30, 1998, reflecting higher sales and improved cost efficiencies. Selling, General and Administrative Expense Selling, general, and administrative ("SG&A") expense for the three months ended June 30, 1998 increased by 4.4% to $3.5 million from $3.4 million in the like period of 1997. As a percentage of net sales, SG&A expense increased to 13.6% in the second quarter of 1998 from 13.4% in the same period in 1997. The increase is attributable primarily to increased staffing. Depreciation, Depletion and Amortization Depreciation, depletion and amortization ("DD&A") for the three months ended June 30, 1998 was $1.7 million, an increase of $0.3 million, or 19.1%, over the corresponding period in 1997 as a result of capital expenditures coming on line. Operating Income Operating income for the three month period ended June 30, 1998 was $2.4 million, an increase of $0.2 million, or 7.2%, from the comparable period in 1997. The increase was due to the reasons discussed above. Interest Expense, Net Interest expense for the three months ended June 30, 1998 was $0.5 million, virtually unchanged from the same period in 1997. Provision for Income Taxes The Corporation's provision for income taxes for the three months ended June 30, 1998 was $0.6 million slightly below the corresponding period in 1997 due to a lower tax rate being applied. Net Income As a result of the factors discussed above, net income for the three months ended June 30, 1998 was $1.3 million, an increase of $0.2 million, or 19.7%, from the comparable period in 1997. -6- SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997 Net Sales The Corporation's net sales for the six months ended June 30, 1998 were $52.4 million, an increase of $3.5 million, or 7.1%, from 1997. The increase is due to a 4.1% increase in sales of industrial minerals and a 9.7% increase in sales of metal products. Net sales in the industrial minerals segment for the six month period ended June 30, 1998 increased by $0.9 million to $23.0 million from $22.1 million in the corresponding period of 1997. The increase is due to higher sales volume of feldspar, talc and industrial sand. Net sales in the metal products segment for the six months ended June 30, 1998 were $29.3 million, an increase of $2.6 million, or 9.7%, from the comparable period in 1997. The increase is due to stronger sales of aluminum, sponge, atomized and ceramic fiber products, partially offset by a decline in aluminum prices. Cost of Goods Sold Cost of goods sold for the six months ended June 30, 1998 was $37.5 million, an increase of $1.8 million, or 5.1%, from the comparable period in 1997. As a percent of net sales, gross margin increased to 28.5% for the six months ended June 30, 1998 from 27.1% for the same period in 1997. The increase is due to higher sales and improved operating efficiencies. Selling, General and Administrative Expense SG&A expense for the six months ended June 30, 1998 increased to $6.9 million from $6.4 million in 1997, an increase of $0.5 million, or 7.5%. As a percentage of net sales, SG&A expense remained virtually the same at 13.1%. Depreciation, Depletion and Amortization DD&A for the six months ended June 30, 1998 was $3.3 million, an increase of $0.4 million, or 14.5%, over the comparable period in 1997 as a result of capital expenditures coming on line. Operating Income Operating income for the six month period ended June 30, 1998 was $4.8 million, an increase of $0.8 million, or 19.2%, from the comparable period in 1997. Interest Expense, Net Interest expense for the six months ended June 30, 1998 was $1.0 million, virtually unchanged from the corresponding period in 1997. Provision for Income Taxes The Corporation's provision for income taxes for the six months ended June 30, 1998 was $1.1 million slightly higher than the comparable period in 1997. The increase is due to higher pre-tax income in the first six months of 1998 and also the application of a lower tax rate in 1998. -7- Net Income As a result of the factors discussed above, net income for the six months ended June 30, 1998 was $2.5 million, an increase of $0.6 million, or 29.9%, from the comparable period in 1997. LIQUIDITY AND CAPITAL RESOURCES Cash Flow from Operations During the first half of 1998, operating activities used $12.4 million of cash as compared to $6.7 million cash generated from operations for the first six months of 1997. The change is primarily due to funds used to acquire 4,075,500 common shares of Inmet Mining Corporation (see Part II, Item 5 - Other Business) in the second quarter of 1998. In 1998, non-cash working capital items used $1.2 million of the cash otherwise generated from operations as compared to a generation of $1.8 million for the corresponding period of 1997 as a result of a decrease in inventories and an increase in accounts receivable and accrued liabilities. The Corporation had $17.5 million of working capital at June 30, 1998, compared to $19.0 million at December 31, 1997. It is the opinion of management that there are sufficient sources of funds available to meet its anticipated cash requirements. PART II - OTHER INFORMATION ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Corporation's 1998 Annual Meeting of Shareholders held on June 30, 1998, the following actions were taken and votes tabulated: 1. Eight directors were elected for the ensuing year.
NAME VOTES FOR VOTES WITHHELD - -------------------------------- ------------------------------ --------------------------- Paul A. Carroll 6,554,462 466,013 Morton A. Cohen 6,554,578 465,897 John M. Donovan 6,554,462 466,013 Thomas B. Evans, Jr. 6,554,578 465,897 Peter O. Lawson-Johnston 6,554,462 466,013 Richard L. Lister 6,554,578 465,897 Patrick H. O'Neill 6,554,462 466,013 William J. vanden Heuvel 6,554,462 466,013
-8- 2. The appointment of Deloitte & Touche as independent auditors of the accounts of the Corporation and its subsidiaries for the fiscal year ending December 31, 1998 was ratified.
ABSTENTIONS VOTES FOR VOTES AGAINST (INCLUDING BROKER NON-VOTES) - ---------------------------- ---------------------------- ------------------------------ 7,012,158 6,582 1,735
3. The proposal to amend the Corporation's Amended and Restated Articles of Incorporation to provide for a new class of shares was approved.
ABSTENTIONS VOTES FOR VOTES AGAINST (INCLUDING BROKER NON-VOTES) - ---------------------------- ---------------------------- ------------------------------ 5,314,882 928,011 28,143
ITEM 5 - OTHER INFORMATION On July 8, 1998, Zemex Corporation, together with one other shareholder, requisitioned a special meeting of shareholders of Inmet Mining Corporation ("Inmet"), a Toronto Stock Exchange listed mining company (TSE-IMN). The purpose of the meeting will be to consider a series of resolutions, including a change of the board of directors, that will recapitalize Inmet and facilitate a business combination with Zemex. Upon their appointment, the new board of Inmet/Zemex Canada will consider the immediate merger of Zemex Corporation with the recapitalized Inmet on a one-for-one basis. 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 6th day of August, 1998. ZEMEX CORPORATION (Registrant) By: /s/ Allen J. Palmiere ------------------------------------------ Allen J. Palmiere Vice President and Chief Financial Officer -9- EX-27 2 FDS -- FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1997 JUN-30-1998 2,014,000 0 18,423,000 (350,000) 16,554,000 38,597,000 116,754,000 (38,104,000) 145,632,000 21,098,000 0 0 0 9,262,000 69,612,000 145,632,000 52,380,000 52,380,000 37,465,000 47,588,000 127,000 0 1,036,000 3,629,000 1,089,000 2,502,000 0 0 0 2,502,000 0.31 0.29
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