-----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, PlcxIvkOVVJhPxbJvu5qcjpgW9SsYE9FmdOtwPgDy6tqLiNLCCXI28UvhkNySQCI wG2ZhpY2pABzqobtgdjddQ== 0000950150-98-000648.txt : 19980427 0000950150-98-000648.hdr.sgml : 19980427 ACCESSION NUMBER: 0000950150-98-000648 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980424 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: 98600782 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 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 March 31, 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 Identification Number) of incorporation or organization) CANADA TRUST TOWER, BCE PLACE 161 BAY STREET, SUITE 3750 TORONTO, ONTARIO, CANADA, M5J 2S1 (Address of principal executive offices) (416) 365-8080 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act NEW YORK STOCK EXCHANGE CAPITAL STOCK, $1.00 PAR VALUE Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- - -- As of April 22, 1998, there were 8,461,620 shares of capital stock outstanding. -1- 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ZEMEX CORPORATION CONSOLIDATED BALANCE SHEETS (US$)
MARCH 31, 1998 DECEMBER 31, 1997 (unaudited) _____________________________________________________________________________________ ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,208,000 $ 2,189,000 Accounts receivable 17,587,000 16,287,000 Inventories 17,693,000 17,595,000 Prepaid expenses 971,000 786,000 Deferred income taxes 1,328,000 1,328,000 _____________________________________________________________________________________ 38,787,000 38,185,000 PROPERTY, PLANT AND EQUIPMENT 72,833,000 70,812,000 INVESTMENTS 353,000 -- OTHER ASSETS 11,400,000 9,777,000 _____________________________________________________________________________________ TOTAL ASSETS $123,373,000 $118,774,000 _____________________________________________________________________________________ LIABILITIES CURRENT LIABILITIES Bank indebtedness $ 3,250,000 $ 3,000,000 Accounts payable 7,614,000 9,805,000 Accrued liabilities 5,611,000 3,151,000 Accrued income taxes 549,000 1,235,000 Current portion of long term debt 1,995,000 2,019,000 _____________________________________________________________________________________ 19,019,000 19,210,000 LONG TERM DEBT 21,115,000 20,527,000 OTHER NON-CURRENT LIABILITIES 945,000 1,014,000 DEFERRED INCOME TAXES 1,470,000 1,488,000 MINORITY INTEREST 3,007,000 -- _____________________________________________________________________________________ 45,556,000 42,239,000 _____________________________________________________________________________________ SHAREHOLDERS' EQUITY Common stock 9,243,000 9,204,000 Paid-in capital 53,530,000 53,298,000 Retained earnings 25,462,000 24,235,000 Note receivable from shareholder (1,749,000) (1,749,000) Cumulative translation adjustment (1,524,000) (1,588,000) Treasury stock at cost (7,145,000) (6,865,000) _____________________________________________________________________________________ 77,817,000 76,535,000 _____________________________________________________________________________________ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $123,373,000 $118,774,000 _____________________________________________________________________________________
-2- 3 ZEMEX CORPORATION CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31 (US$)
1998 1997 (unaudited) ________________________________________________________________________ NET SALES $26,446,000 $23,700,000 ________________________________________________________________________ COSTS AND EXPENSES Cost of goods sold 19,148,000 17,486,000 Selling, general and administrative 3,333,000 3,001,000 Depreciation, depletion and amortization 1,592,000 1,447,000 ________________________________________________________________________ 24,073,000 21,934,000 ________________________________________________________________________ OPERATING INCOME 2,373,000 1,766,000 ________________________________________________________________________ Interest expense, net 516,000 447,000 Other, expense (income) 82,000 (15,000) ________________________________________________________________________ 598,000 432,000 ________________________________________________________________________ INCOME BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST 1,775,000 1,334,000 Provision for income taxes 533,000 472,000 Minority interest 14,000 -- ________________________________________________________________________ NET INCOME $ 1,228,000 $ 862,000 ________________________________________________________________________ NET INCOME PER SHARE Basic $ 0.15 $ 0.11 Diluted $ 0.15 $ 0.11 ________________________________________________________________________ AVERAGE COMMON SHARES OUTSTANDING 8,091,638 8,077,984 ________________________________________________________________________
-3- 4 ZEMEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE MONTHS ENDED MARCH 31 (US$)
1998 1997 (unaudited) _____________________________________________________________________________ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,228,000 $ 862,000 Adjustments to reconcile income from operations to net cash flows from operating activities Depreciation, depletion and amortization 1,634,000 1,472,000 Decrease in deferred income taxes (19,000) (34,000) Minority interest in subsidiary earnings 14,000 -- Gain on sale of property, plant and equipment (2,000) (39,000) Decrease (increase) in other assets 365,000 (321,000) (Decrease) increase in non-current liabilities (69,000) 214,000 Changes in non-cash working capital items (2,975,000) 563,000 _____________________________________________________________________________ NET CASH PROVIDED BY OPERATING ACTIVITIES 176,000 2,717,000 _____________________________________________________________________________ CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (2,639,000) (3,079,000) Assets acquired in acquisitions (1,969,000) -- Proceeds from sale of assets 2,995,000 88,000 Additions to investments (353,000) -- _____________________________________________________________________________ NET CASH USED IN INVESTING ACTIVITIES (1,966,000) (2,991,000) _____________________________________________________________________________ CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in bank indebtedness 250,000 (2,590,000) Net increase in long term debt 564,000 2,671,000 Issuance of common stock 289,000 158,000 Purchase of common stock (299,000) -- _____________________________________________________________________________ NET CASH PROVIDED BY FINANCING ACTIVITIES 804,000 239,000 _____________________________________________________________________________ EFFECT OF EXCHANGE RATE CHANGES ON CASH 5,000 6,000 _____________________________________________________________________________ NET DECREASE IN CASH (981,000) (29,000) _____________________________________________________________________________ CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,189,000 2,279,000 _____________________________________________________________________________ CASH & CASH EQUIVALENTS AT END OF PERIOD $ 1,208,000 $ 2,250,000 _____________________________________________________________________________
-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 March 31, 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 will operate 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. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of the financial condition and results of operations of the Corporation for the three months ended March 31, 1998 and the three months ended March 31, 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 MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997 Net Sales The Corporation's net sales for the three months ended March 31, 1998 were $26.4 million, an increase of $2.7 million, or 11.6%, from the comparable period in 1997. Net sales of $11.3 million in the industrial minerals segment for the three month period ended March 31, 1998 represented an increase of $0.6 million, or 5.4%, compared to the 1997 period as a result of a favorable product mix and an increase in sales of talc, industrial sand and low iron sand. Net sales in the metal products segment for the three months ended March 31, 1998 were $15.1 million, an increase of $2.2 million, or 16.7%, from the comparable period in 1997. The increase is due primarily to an increase in sales of sponge iron, ferrous and non ferrous metal powder products and higher aluminum prices. -5- 6 Cost of Goods Sold Cost of goods sold for the three months ended March 31, 1998 was $19.1 million, an increase of $1.7 million, or 9.5%, from the comparable period in 1997. Gross margin increased to 27.6% for the three months ended March 31, 1998 from 26.2% in the first quarter of 1997, reflecting improved cost and operating efficiencies. Selling, General and Administrative Expense Selling, general, and administrative expense ("SG&A") for the three months ended March 31, 1998 increased to $3.3 million, an increase of $0.3 million over the comparable 1997 period. Of the increase, $0.2 million was attributable to a one-time charge for the settlement of a legal dispute. As a percentage of sales, SG&A decreased slightly from 12.7% in the 1997 period to 12.6% in the 1998 period. Depreciation, Depletion and Amortization Depreciation, depletion and amortization for the three months ended March 31, 1998 was $1.6 million, an increase of 10.0% over the comparable period in 1997, as a result of assets acquired and placed in service over the last twelve months. Operating Income Operating income for the three month period ended March 31, 1998 was $2.4 million, an increase of $0.6 million from the comparable period in 1997. Interest Expense, Net Interest expense for the three months ended March 31, 1998 was $0.5 million, up from $0.4 million for the comparable period in 1997. Provision for Income Taxes The Corporation's provision for income taxes for the three months ended March 31, 1998 was $0.5 million, virtually unchanged from the first quarter of 1997. Net Income As a result of the factors discussed above, net income for the three months ended March 31, 1998 was $1.2 million compared to $0.9 million for the three months ended March 31, 1997. LIQUIDITY AND CAPITAL RESOURCES Cash Flow from Operations During the first quarter of 1998, the Corporation generated cash flow from operations of $0.2 million as compared to a positive cash flow of $2.7 million for the first quarter of 1997. In 1998, non-cash working capital items used $3.0 million of the cash otherwise generated from operations whereas in the corresponding period in 1997 non-cash working capital items generated $0.6 million of cash. -6- 7 The Corporation had $19.8 million of working capital at March 31, 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. 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 24th day of April, 1998. ZEMEX CORPORATION (Registrant) By: /s/ ALLEN J. PALMIERE --------------------- Allen J. Palmiere Vice President and Chief Financial Officer -7- EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 MAR-31-1998 1,208,000 0 17,927,000 (340,000) 17,693,000 38,787,000 108,929,000 (36,096,000) 123,373,000 19,019,000 0 9,243,000 0 0 68,574,000 123,373,000 26,446,000 26,446,000 19,148,000 24,073,000 (82,000) 0 516,000 1,775,000 533,000 1,228,000 0 0 0 1,228,000 0.15 0.15
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