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Proc-Type: 2001,MIC-CLEAR
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United States
(Mark One)
[X]
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[__]
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Delaware
74-2081929
722 Burleson Street, Corpus Christi, Texas 78402
(361) 883-5591
Yes [X]
No [__]
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of “accelerated filer and large accelerated
filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [__]
Accelerated filer [__]
Non-accelerated filer [__]
Smaller reporting company [X]
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [__]
No [X]
Indicate the number of shares outstanding of each of
the issuer's classes of common equity, as of the latest practicable date.
Class
Shares Outstanding as of April 30, 2010
Table of Contents
Part I - Financial Information
Page No. Item 1. Condensed Consolidated
Financial Statements Condensed Consolidated
Statements of Operations --
3 Condensed Consolidated
Statements of Comprehensive Income (Loss) --
4 Condensed Consolidated
Balance Sheets --
5 Condensed Consolidated
Statements of Cash Flows --
6 Notes to the Condensed
Consolidated Financial Statements
7 Item 2. Management's Discussion and
Analysis of Financial Condition
20 Item 4. Controls and Procedures
30
Part II - Other Information Item 1. Legal Proceedings
32 Item 6. Exhibits
32 Signatures
32
Forward Looking Information
Certain
portions of this report contain forward-looking statements about the business,
financial condition and prospects of the Company. The actual results of
the Company could differ materially from those indicated by the forward-looking
statements because of various risks and uncertainties including, without
limitation, changes in demand for the Company’s products, changes in
competition, economic conditions, fluctuations in market price for TiO2
pigments, changes in foreign currency exchange rates, increases in the price of
energy and raw materials, such as ilmenite, interest rate fluctuations, changes
in the capital markets, changes in tax and other laws and governmental rules
and regulations applicable to the Company’s business, and other risks
indicated in the Company’s filings with the Securities and Exchange
Commission. These risks and uncertainties are beyond the ability of the
Company to control, and, in many cases, the Company cannot predict all of the
risks and uncertainties that could cause its actual results to differ
materially from those indicated by the forward-looking statements. The
Company assumes no obligation to provide revisions to any forward-looking
statements should circumstances change, except as otherwise required by
securities and other applicable laws. When used in this report, the words
“believes,” “estimates,” “plans,”
“expects,” “anticipates” and similar expressions as
they relate to the Company or its management are intended to identify
forward-looking statements.
TOR Minerals International, Inc. and Subsidiaries
Three Months
2010
2009 NET SALES
$
6,856
$
5,703
Cost of sales
5,206
4,889 GROSS MARGIN
1,650
814
Technical services and research and development
57
52
Selling, general and administrative expenses
849
1,011 OPERATING
INCOME (LOSS)
744
(249) OTHER INCOME
(EXPENSE):
Interest income
-
2
Interest expense
(121)
(112)
Gain (loss) on foreign currency exchange rate
(28)
54
Other, net
-
2 INCOME
(LOSS) BEFORE INCOME TAX
595
(303)
Income tax expense (benefit)
11
(34) NET INCOME
(LOSS)
$
584
$
(269) Less:
Preferred Stock Dividends
15
15 Income (Loss) Available
to Common Shareholders
$
569
$
(284)
Income
(loss) per common share:
Basic
$
0.30
$
(0.15)
Diluted
$
0.26
$
(0.15) Weighted
average common shares outstanding:
Basic
1,891
1,891
Diluted
2,193
1,891
See accompanying notes.
TOR Minerals International, Inc. and Subsidiaries
Three Months
2010
2009 NET INCOME
(LOSS)
$
584 $
(269) OTHER
COMPREHENSIVE INCOME (LOSS), net of tax
Currency translation adjustment, net of tax:
Net foreign currency translation adjustment gain (loss)
415
(881)
Other comprehensive income (loss), net of tax
415
(881) COMPREHENSIVE
INCOME (LOSS)
$
999 $
(1,150)
See accompanying notes.
TOR Minerals
International, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
March 31,
December 31,
(Unaudited)
ASSETS CURRENT ASSETS:
Cash
and cash equivalents
$
1,067
$
1,002
Trade
accounts receivable, net
3,840
3,380
Inventories
9,519
9,101
Other
current assets
750
540
Total
current assets
15,176
14,023 PROPERTY, PLANT AND
EQUIPMENT, net
18,471
18,800 OTHER ASSETS
52
53 Total Assets
$
33,699
$
32,876
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES:
Accounts
payable
$
1,680
$
1,452
Accrued
expenses
1,661
1,036
Notes
payable under lines of credit
2,512
3,313
Current
deferred tax liability
50
60
Current
maturities - capital leases
119
140
Current
maturities of long-term debt – financial institutions
349
435
Total
current liabilities
6,371
6,436 LONG-TERM DEBT, EXCLUDING
CURRENT MATURITIES
Capital
leases
25
49
Long-term
debt – financial institutions
1,334
1,477
Long-term
debt – convertible debentures, net
1,139
1,122 DEFERRED TAX LIABILITY
629
577
Total
liabilities
9,498
9,661 COMMITMENTS AND
CONTINGENCIES SHAREHOLDERS' EQUITY:
Series
A 6% convertible preferred stock $.01 par value:
2
2
Common
stock $.25 par value: authorized, 6,000 shares;
2,364
2,363
Additional
paid-in capital
25,215
25,214
Accumulated
deficit
(7,238)
(7,807)
Accumulated
other comprehensive income:
Cumulative
translation adjustment
3,858
3,443
Total
shareholders' equity
24,201
23,215 Total Liabilities and
Shareholders' Equity
$
33,699
$
32,876
See accompanying notes.
TOR Minerals International, Inc. and Subsidiaries
Three Months Ended March 31,
2010
2009 CASH
FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)
$
584
$
(269)
Adjustments to reconcile net income (loss) to net cash
Depreciation
469
428
Share-based compensation
-
26
Warrant interest expense
17
-
Deferred income taxes
10
(35)
Changes in working capital:
Trade accounts receivables
(489)
(487)
Inventories
(225)
912
Other current assets
(200)
(462)
Accounts payable and accrued expenses
870
6
Net
cash provided by operating activities
1,036
119 CASH
FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment
(102)
(415)
Net cash used in investing activities
(102)
(415) CASH
FLOWS FROM FINANCING ACTIVITIES:
Net (payments on) proceeds from lines of credit
(732)
856
Net proceeds from export credit refinancing facility
-
260
Payments on capital lease
(39)
(20)
Payments on long-term bank debt
(161)
(209)
Loan origination costs
3
-
Proceeds from the issuance of common stock,
2
-
Preferred stock dividends paid
(15)
(15)
Net
cash (used in) provided by financing activities
(942)
872 Effect of
exchange rate fluctuations on cash and cash equivalents
73
(416) Net increase in
cash and cash equivalents
65
160 Cash and cash
equivalents at beginning of year
1,002
191 Cash and cash
equivalents at end of year
$
1,067
$
351 Supplemental
cash flow disclosures:
Interest paid
$
104
$
112
See accompanying notes.
TOR Minerals International, Inc. and Subsidiaries
Note 1.
Going Concern
The
condensed consolidated financial statements included in this report have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As
discussed below, the Company has significant borrowings which require, among
other things, compliance with certain financial covenants, specifically a
Consolidated Fixed Charge Ratio and a Consolidated Funded Debt to EBITDA Ratio,
on a quarterly basis. As a result of the operating losses incurred
throughout 2008 and the first quarter of 2009, the Company was not in
compliance with these ratio covenants under our US Credit Agreement (the
“Credit Agreement”) with Bank of America, N.A. (the
“Bank”) as of December 31, 2008 and March 31, 2009, and the Company
received notice from the Bank on March 5, 2009 of the Bank’s decision to
terminate the Credit Agreement and require us to pay off all outstanding debt
due to the Bank on April 1, 2009.
As
reported in the Company’s Form 8-K filed with the Securities and Exchange
Commission (the “SEC”) on May 6, 2009 the Company and the Bank
amended the Credit Agreement. Under the terms of the amendment, the Bank
revised the stated maturity date to October 1, 2009 and, subject to the
Company’s compliance with the terms and conditions contained in the
amendment, including revised financial covenants, the Bank agreed not to
exercise any of its rights or remedies relating to the existing events of
default under the Credit Agreement.
As
reported in the Company’s Form 8-K filed with the SEC on September 28,
2009, the Bank extended the maturity date on our Line of Credit (the
“Line”) and our term loan (the “Term Loan”) from
October 1, 2009 to February 15, 2010. In addition, the September
amendment reduced the amount available for borrowing under the Line from
$2,500,000 to $2,225,000 and increased the interest rate on the Line and Term
Loan from prime plus two and one-half percent to prime plus three percent.
As
reported in the Company’s Form 8-K filed with the SEC on February 16,
2010, the Bank extended the maturity date on our Line from February 15, 2010 to
August 15, 2010. As a result, all of the Company’s debt owed to the
Bank matures on August 15, 2010. The Company repaid the outstanding
balance on its Term Loan with the Bank in December 2009, and at March 31, 2010,
the Company had $1,400,000 drawn on the Line. In addition, the Company
was in compliance with the revised financial covenants for the quarters ended
June 30, September 30, December 31, 2009 and March 31, 2010.
As
reported in the Company’s Form 8-K filed with the SEC on May 6, 2009, the
Company’s Board of Directors authorized the issuance of up to $4 million
of its six-percent (6%) convertible subordinated debentures with detachable
warrants (the “Debentures”) for the purpose of refinancing, in
whole or in part, its debt to the Bank and for general corporate
purposes. Under the current authorization, the Company received, on May
4, 2009, $1 million from the sale of Debentures due May 4, 2016, from three of
the Company’s directors.
As
reported in the Company’s Form 10-Q filed with the SEC on August 10,
2009, the Company received proceeds of $500,000 from the sale of additional
Debentures to six additional accredited investors, one of which is a director
and another of which is a greater than 5% shareholder. Under the terms of
the Credit Agreement, the Company agreed to use all proceeds in excess of $1
million from the issuance of any of its capital stock, from capital
contributions in respect to its capital stock, from the issuance of debentures
or the incurrence of permitted subordinated indebtedness (as defined in the
Credit Agreement) to prepay the loans and other obligations under the Credit
Agreement. As a result, the Company applied the $500,000 received from
the sale of Debentures to its outstanding real estate loan with the Bank in
August 2009.
TOR Minerals International, Inc. and Subsidiaries
The
Company is working diligently to establish a corporate lending relationship
with a new financial institution for the Company’s US operations prior to
August 15, 2010, the revised maturity date under the Credit Agreement, to
refinance outstanding debt with the Bank prior to its revised maturity.
However, there can be no assurance that the Company will be able to
successfully refinance the debt due to the Bank. If the Company is unable
to refinance the debt due to the Bank prior to its revised maturity or if the
Company defaults under the terms of the Credit Agreement prior to its revised
maturity and the Bank were to accelerate the maturity of such indebtedness, the
Company does not have sufficient liquidity to pay off the indebtedness owed to
the Bank, and the Bank would be entitled to exercise all of its rights and
remedies as a secured lender under the Credit Agreement.
The
Company’s two subsidiaries, TOR Minerals Malaysia, Sdn. Bhd.
(“TMM”) and TOR Processing and Trade, BV (“TPT”) have
short-term credit facilities and term loans at banks in Malaysia and the
Netherlands, respectively. At March 31, 2010, TMM’s borrowings
under the credit facilities and term loans with HSBC Bank Malaysia, Bhd.
(“HSBC”) and RHB Bank, Bhd. (“RHB”) totaled $224,000
and TPT’s borrowings under the credit facility and term loans with
Rabobank totaled $2,493,000. TMM’s credit facilities with HSBC
mature on April 30, 2010 and TPT’s credit facility with Rabobank which
was renewed on January 1, 2010, has no stated maturity date.
Additionally,
the credit facilities with HSBC, RHB and Rabobank are subject to demand
provisions and are subject to certain subjective acceleration covenants based
on the judgment of the banks. While the banks have made no indication
that they will demand payment of the debt in Malaysia or in the Netherlands, in
light of the Company’s liquidity difficulties, there can be no assurances
that this debt will not be called for payment prior to the stated maturity date
or that the stated maturity date will be extended when this debt becomes due.
Since
early 2007, the Company has actively pursued new production methods and new
product development. As a result, the Company introduced new products to
the market in 2008 and completed a new powder treatment facility in Malaysia in
May 2008. In addition, the Company has invested in a new powder treatment
facility at the US operation which was commissioned in April 2009. With
the new process equipment, the Company replaced natural gas with electricity as
the primary energy source at the US operation. The Company believes that
the changes in the manufacturing process in the US and Malaysia, as well as the
potential acceptance of its new products in the market, will improve cash
flows. However, the introduction of new products and the sales volume of
existing product lines have been negatively impacted by the decline in the
global economy. To offset declines in sales revenue associated with the
economy, in 2009 the Company implemented numerous cost cutting measures at each
of the three operations, including, but not limited to, reductions in staff,
salaries, travel and other discretionary expenses.
The
events described above raise substantial doubt about the Company’s
ability to continue as a going concern. Our ability to continue to
operate as a going concern is dependent on our ability to successfully
establish a corporate lending relationship with a new financial institution for
the US operation, and/or raise sufficient new capital and improve our operating
cash flows to a sufficient level.
TOR Minerals International, Inc. and Subsidiaries
Note 2.
Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying unaudited interim condensed
consolidated financial statements have been prepared in accordance with the
rules and regulations of the SEC. The interim condensed consolidated
financial statements include the consolidated accounts of TOR Minerals
International, Inc. and its wholly-owned subsidiaries with all significant
intercompany transactions eliminated. In our opinion, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
statement of the consolidated financial position, results of operations and
cash flows for the interim periods presented have been made. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations. These condensed
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements for the year ended December 31, 2009,
in our Annual Report on Form 10-K filed with the SEC on March 24, 2010.
Operating results for the three-month period ended March 31, 2010, are not
necessarily indicative of the results for the year ending December 31, 2010.
Income Taxes: The
Company records income taxes using the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Income
taxes consisted of state income tax expense of $1,000 and foreign deferred tax expense
of approximately $10,000 for the three month period ended March 31, 2010,
compared to a foreign deferred tax benefit of approximately $35,000 and state
income tax expense of $1,000 for the same three month period in 2009.
Taxes are based on an estimated annualized consolidated effective rate of 1.8%
for the year ended December 31, 2010.
When accounting for uncertainties in income taxes, we
evaluate all tax years still subject to potential audit under the applicable
state, federal and foreign income tax laws. We are subject to taxation in
the United States, Malaysia and The Netherlands. Our federal income tax
returns in the United States are subject to examination for the tax years ended
December 31, 2006 through December 31, 2009. Our state returns, which are
filed in Texas, Ohio and Michigan, are subject to examination for the tax years
ended December 31, 2006 through December 31, 2009. Our tax returns in
various non-US jurisdictions are subject to examination for various tax years
ended December 31, 2004 through December 31, 2009.
As of January 1, 2010, we did not have any
unrecognized tax benefits and there was no change during the three month period
ended March 31, 2010. In addition, we did not recognize any interest and
penalties in our consolidated financial statements during the three month
period ended March 31, 2010. If any interest or penalties related to any
income tax liabilities are imposed in future reporting periods, we expect to
record both of these items as components of income tax expense.
Subsequent Events: The
Company evaluates events and transactions occurring after the balance sheet date,
but before the consolidated financial statements are available to be
issued. The Company evaluated such events and transactions through the
issue date of the condensed consolidated financial statements.
TOR Minerals International, Inc. and Subsidiaries
Recently Adopted and Recently Issued Accounting Standards
Transfers and Servicing, Accounting for
Transfers of Financial Assets
In December 2009, the Financial Accounting
Standards Board (the “FASB”) issued guidance addressing the
accounting for transfers of financial assets. This guidance became effective
for the Company on January 1, 2010. The guidance changes how companies account
for transfers of financial assets and eliminates the concept of qualifying
special-purpose entities. Adoption of the guidance did not have an impact on the
Company’s results of operations, financial position or liquidity.
Improvements to Financial Reporting by Enterprises Involved With
Variable Interest Entities
In December 2009, the FASB issued guidance
relating to improvements to financial reporting by enterprises involved with
variable interest entities. This guidance became effective for the Company on
January 1, 2010 and requires the enterprise to qualitatively assess if it is the primary beneficiary of a
variable-interest entity (VIE), and, if so, the VIE must be consolidated.
Adoption of the standard did not have a material impact on the Company’s
results of operations, financial position or liquidity. The Company reviewed all
other significant newly issued accounting pronouncements and concluded that
they are either not applicable to the Company’s business or that no
material effect is expected on the consolidated financial statements as a
result of future adoption.
TOR Minerals International, Inc. and Subsidiaries
Note 3. Long-Term Debt
A summary of long-term debt follows:
(Unaudited) (In thousands)
March 31,
December 31,
2010
2009
Term
note payable to a U.S. equipment financing company, with an interest rate of
5.24% at March 31, 2010, due April 1, 2013, secured by a Caterpillar
front-end loader.
$
78
$
84
Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
7.8% at March 31, 2010, due July 1, 2029, secured by TPT's land and office
building purchased July 2004. (377 Euro)
509
547
Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
4.7% at March 31, 2010, due January 31, 2030, secured by TPT's land and
building purchased January 2005. (374 Euro)
506
543
Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
6.1% at March 31, 2010, due July 31, 2015, secured by TPT's assets.
(271 Euro)
366
406
U.S.
Dollar term note payable to a Malaysian bank, with an interest rate of 2.0%
at March 31, 2010, due June 30, 2010, secured by TMM's property, plant and
equipment.
108
191
U.S.
Dollar term note payable to a Malaysian bank, with an interest rate of 1.425%
at March 31, 2010, due May 30, 2011, secured by TMM's property, plant and
equipment.
116
141 Total
1,683
1,912 Less current
maturities
349
435 Total long-term
debt and notes payable
$
1,334
$
1,477
US Bank Credit Facility and Term Loans
Bank
of America Credit Facility and Term Loans
On
April 30, 2009, we and the Bank amended the Credit Agreement. Under the
terms of the amended credit agreement, subject to our compliance with the terms
and conditions contained in the amendment, including revised financial
covenants, the Bank agreed not to exercise any of its rights or remedies
relating to the existing events of default under the Credit Agreement.
Under
the terms of the amendment, the financial covenants were replaced with the
following:
TOR Minerals International, Inc. and Subsidiaries
We
also agreed that we will use all proceeds in excess of $1 million that we
received after May 1, 2009 from the issuance of any of our capital stock, from
capital contributions in respect to our capital stock, from the issuance of
debentures or the incurrence of permitted subordinated indebtedness (as defined
in the Credit Agreement) to prepay the loans and other obligations under the
Credit Agreement. As a result, the Company applied $500,000 received from
the sale of Debentures to its outstanding real estate loan with the Bank in
August 2009.
On
September 28, 2009 we amended the Credit Agreement with the Bank to extend the
maturity date on the Line and Term Loan from October 1, 2009 to February 15,
2010. Under the terms of the amendment, the interest rate on the Line and
the Term Loan was increased from prime plus two and one-half percent to prime
plus three percent. In addition, the Line was reduced from $2,500,000 to
$2,250,000.
On
February 12, 2010, we amended the Credit Agreement with the Bank to extend the
maturity date on the Line from February 15, 2010 to August 15, 2010. As a
result of this amendment, all of our debt owed to the Bank will mature on
August 15, 2010, provided, if we default on obligations contained in the
amendment, the Bank will have the rights and remedies available to it under the
Credit Agreement and applicable law. The Line is secured by the accounts
receivable and inventory of the US Operation.
At
March 31, 2010, the outstanding balance on the Credit Agreement consisted of $1,400,000
on the Line and we had $850,000 available on that date based on eligible
accounts receivable and inventory borrowing limitations. The interest
rate on the Line was 6.25% at March 31, 2010.
Six-percent
Convertible Subordinated Debentures
As
reported in the Company’s Form 8-K filed with the SEC on May 6, 2009, the
Company’s Board of Directors authorized the issuance of its six-percent
(6%) convertible subordinated debentures with detachable warrants (the
“Debentures”) for the purpose of refinancing, in whole or in part,
its debt to the Bank and for general corporate purposes. Under the
current authorization, the Company received, on May 4, 2009, $1 million from
the sale of Debentures due May 4, 2016, from three of the Company’s
directors.
As
reported in the Company’s Form 10-Q filed with the SEC on August 10,
2009, the Company received proceeds of $500,000 from the sale of additional
Debentures to six additional accredited investors, one of which is a director
and another of which is a greater than 5% shareholder. As noted above,
under the terms of the Credit Agreement, the Company applied the $500,000
received from the sale of Debentures to its outstanding real estate loan with
the Bank in August 2009.
Other
Term Loans
On
March 31, 2008, we entered into a term loan with Holt Financing in the amount
of $120,000. The proceeds of the loan were used to purchase a new
Caterpillar front-end loader. The loan provides for amortization over
five years with interest fixed at a rate of 5.24%. Monthly principal and
interest payments commenced on May 1, 2008, and will continue through April 1,
2013. The monthly principal and interest payment is $2,275. The
loan balance at March 31, 2010 was $78,000.
TOR Minerals International, Inc. and Subsidiaries
Netherlands Bank Credit Facility, Mortgage and Term Loan
On
March 20, 2007, our subsidiary, TPT, entered into a short-term credit facility
(the “Credit Facility”) with Rabobank which increased TPT’s
line of credit from Euro 650,000 to Euro 1,100,000. The Credit Facility
was renewed on January 1, 2010 and has no stated maturity date. The
Credit Facility, which has a variable interest rate of Bank prime plus 2.8%
(currently at 7.45%), is secured by TPT’s accounts receivable and
inventory. At March 31, 2010,
TPT had utilized Euro 823,000 ($1,112,000) of its short-term credit facility.
TPT’s
loan agreements covering both the credit facility and the term loans include
subjective acceleration clauses that allow Rabobank to accelerate payment if,
in the judgment of the bank, there are adverse changes in our business.
We believe that such subjective acceleration clauses are customary in the
Netherlands for such borrowings. However, if demand is made by Rabobank,
we may be unable to refinance the demanded indebtedness, in which case the
lenders could foreclose on the assets of TPT.
Malaysian Bank Credit Facility and Term Loan
On
December 15, 2009, the Company’s subsidiary, TMM, amended its banking
facility with HSBC Bank Malaysia Berhad (“HSBC”) to extend the
maturity date from October 1, 2009 to April 30, 2010. In addition, the
HSBC facility includes the following in Malaysian Ringgits
(“RM”): (1) a banker’s acceptance (“BA”) of
RM 500,000; (2) an export line (“ECR”) of RM 2,500,000; and (3) a
foreign exchange contract limit of RM 5,000,000 ($153,000, $767,000 and $1,534,000,
respectively).
TMM
is currently in the process of renewing its banking facility with RHB Bank
Berhad (“RHB”) which matured on October 31, 2009. The RHB
facility includes the following: (1) an overdraft line of credit up to RM
1,000,000; (2) an ECR of RM 9,300,000; and (3) a foreign exchange contract
limit of RM 25,000,000 ($307,000, $2,853,000 and $7,671,000, respectively).
The
banking facilities with both HSBC and RHB bear an interest rate on the overdraft
facilities at 1.25% over bank prime and the ECR facilities bear interest at
1.0% above the funding rate stipulated by the Export-Import Bank of Malaysia
Berhad. The ECR, a government supported financing arrangement
specifically for exporters, is used by TMM for short-term financing of up to
180 days against customers’ and inter-company shipments. At March
31, 2010, TMM did not have an outstanding balance on the ECR facilities.
TMM
is currently negotiating with HSBC and RHB to extend the maturity dates of the
bank facilities from April 30, 2010 and October 31, 2009, respectively, to
October 31, 2010. The Company is confident that the bank facilities will
be extended; however, there can be no assurance that the facilities will be
extended or as to the terms and conditions of the extension of the
facility. If either HSBC or RHB is unwilling to extend the maturity dates
of the facility, TMM may not have sufficient liquidity to pay off this
indebtedness.
The
borrowings under both the HSBC and the RHB short term credit facilities are
subject to certain subjective acceleration covenants based on the judgment of
the banks and a demand provision that provide that the banks may demand
repayment at any time. We believe such a demand provision is customary in
Malaysia for such facilities. The loan agreements are secured by
TMM’s property, plant and equipment. However, if demand is made by
HSBC or RHB, we may be unable to refinance the demanded indebtedness, in which
case, the lenders could foreclose on the assets of TMM. The credit
facilities prohibit TMM from paying dividends and the HSBC facility further
prohibits loans to related parties without the prior consent of HSBC.
TOR Minerals International, Inc. and Subsidiaries
Note 4. Series A Convertible Preferred Stock Dividend
On
March 5, 2010, the Company declared a dividend, in the amount of $15,000, or
$0.075 per share, for the quarterly period ended March 31, 2010, payable on
April 1, 2010, to the holders of record of the Series A Convertible Preferred
Stock as of the close of business on March 5, 2010. Note 5. Fair Value Measurements
The
following table presents the Company’s financial assets and financial
liabilities that are measured and recognized at fair value on a recurring
basis, classified under the appropriate level of fair value hierarchy, as of March
31, 2010. The Company did not hold any non-financial assets and/or
non-financial liabilities subject to fair value measurements at March 31, 2010.
March 31, 2010
(In thousands)
Balance at
Quoted Prices in Active
Significant Other Observable Inputs
Significant Asset for foreign currency $
56 $
- $
56 $
-
Our
foreign currency derivative financial instruments mitigate foreign exchange
risks and include forward contracts.
The
fair value of the Company’s debt is based on estimates using standard
pricing models that take into account the present value of future cash flows as
of the balance sheet date. The computation of the fair value of these
instruments is generally performed by the Company. The carrying amounts
and estimated fair values of the Company’s long-term debt, including
current maturities, are summarized below:
March 31, 2010
December 31, 2009
(In thousands)
Carrying
Fair
Carrying
Fair
Long-term
debt, including current portion
$
1,683
$
1,400
$
1,912
$
1,603
Long-term
debt – convertible debentures
1,500
610
1,500
569
$
3,183
$
2,010
$
3,412
$
2,172
The
carrying amounts reported in the balance sheet for cash and cash equivalents,
trade receivables, payables and accrued liabilities, accrued income taxes and
short-term borrowings approximate fair value due to the short term nature of
these instruments. Accordingly, these items have been excluded from the
above table.
TOR Minerals International, Inc. and Subsidiaries
Note 6. Capital Lease
On
June 27, 2005, TPT entered into a financial lease agreement with De Lage
Landen Financial Services, BV for equipment related to the production of
ALUPREM. The cost of the equipment under the capital lease is included in
the balance sheets as property, plant and equipment and was $381,181.
Accumulated amortization of the leased equipment at March 31, 2010 was
approximately Euro 135,000 ($185,000). Amortization of assets under
capital leases is included in depreciation expense. The capital lease is
in the amount of Euro 377,351 including interest of Euro 62,113 (implicit
interest rate 6.3%) and Euro 238 in executory costs. The lease term is 72
months with equal monthly installments of Euro 5,241 ($7,081). The net
present value of the lease at March 31, 2010 was Euro 70,000 ($95,000).
On
October 30, 2007, the Company entered into a financial lease agreement with
Dell Financial Services for two computer servers. The cost of the
equipment under the capital lease, in the amount of $12,420, is included in the
balance sheets as property, plant and equipment. Accumulated amortization
of the leased equipment at March 31, 2010 was approximately $11,000. The
capital lease is in the amount of $13,217 including interest of $800 (implicit
interest rate 4.1%). The lease term is 36 months with equal monthly
installments of $367. The net present value of the lease at March 31,
2010 was $2,000.
On
March 13, 2008, the Company entered into a financial lease agreement with
Toyota Financial Services for a forklift. The cost of the equipment under
the capital lease, in the amount of $26,527, is included in the balance sheets
as property, plant and equipment. Accumulated amortization of the leased
equipment at March 31, 2010 was approximately $9,000. The capital lease
is in the amount of $31,164 including interest of $4,637 (implicit interest
rate 6.53%). The lease term is 60 months with equal monthly installments
of $519. The net present value of the lease at March 31, 2010 was $16,000.
On
September 24, 2009, the Company entered into a financial lease agreement with
Sympatec for a particle analyzer. The cost of the equipment under the
capital lease, in the amount of $68,722, is included in the balance sheets as
property, plant and equipment. Accumulated amortization of the leased
equipment at March 31, 2010 was approximately $5,000. The capital lease
is in the amount of $74,220 including interest of $5,498 (implicit interest
rate 14.45%). The lease term is 12 months with equal monthly installments
of $6,185. The net present value of the lease at March 31, 2010 was $30,000.
TOR Minerals International, Inc. and Subsidiaries
Note
7.
Calculation
of Basic and Diluted Earnings per Share
The
following table sets forth the computation of basic and diluted earnings per
share: (in thousands,
except per share amounts)
Three Months
2010
2009 Numerator:
Net Income (Loss)
$
584
$
(269)
Preferred Stock Dividends
(15)
(15)
Numerator for basic earnings per share -
569
(284) Effect of
dilutive securities:
-
-
Numerator for diluted income (loss) per share -
$
569
$
(284) Denominator:
Denominator for basic income (loss) per share -
1,891
1,891
Effect of dilutive securities:
Employee stock options
7
-
Detachable warrants
295
- Dilutive
potential common shares
302
-
Denominator for diluted income (loss) per share -
2,193
1,891 Basic
income (loss) per common share
$
0.30
$
(0.15) Diluted
income (loss) per common share
$
0.26
$
(0.15)
Excluded
from the computation of diluted earnings per share were a total of 111,000
common shares related to the 200,000 convertible preferred shares at March 31, 2010
and 2009. The convertible preferred
shares were not included in the computation of diluted earnings per share as
the effect would be antidilutive.
For
the three month periods ended March 31, 2010 and 2009, approximately 144,000
and 149,000, respectively, of employee stock options were excluded from the
computation of diluted earnings per share because the effect would be
antidilutive.
For
the three month periods ended March 31, 2010 and 2009, approximately 315,000
shares of common stock exercisable under the warrants were excluded from the
computation of diluted earnings per share as the effect would be antidilutive.
TOR Minerals International, Inc. and Subsidiaries
Note
8.
Segment
Information
The Company and its subsidiaries operate in the
business of pigment manufacturing and related products in three geographic
segments. All United States manufacturing is done at the facility located
in Corpus Christi, Texas. Foreign manufacturing is done by the
Company’s wholly-owned subsidiaries, TMM, located in Malaysia, and TPT,
located in the Netherlands. A summary of the Company’s
manufacturing operations by geographic area is presented below:
(In thousands)
United States
Europe
Asia
Inter-Company
Consolidated As of and for the three
months ended:
March 31, 2010 Net Sales:
Customer
sales
$
4,264
$
1,917
$
675
$
-
$
6,856
Intercompany
sales
24
482
1,123
(1,629)
- Total Net Sales
$
4,288
$
2,399
$
1,798
$
(1,629)
$
6,856 Location profit
$
265
$
178
$
90
$
51
$
584 Location assets
$
10,751
$
7,846
$
15,102
$
-
$
33,699
March 31, 2009 Net Sales:
Customer
sales
$
3,945
$
1,392
$
366
$
-
$
5,703
Intercompany
sales
-
788
349
(1,137)
- Total Net Sales
$
3,945
$
2,180
$
715
$
(1,137)
$
5,703 Location profit (loss)
$
(194)
$
(24)
$
(115)
$
64
$
(269) Location assets
$
12,141
$
7,792
$
13,685
$
-
$
33,618
Product sales of inventory between Corpus Christi, TPT
and TMM are based on inter-company pricing, which includes an inter-company
profit margin. In the geographic information, the location loss from all
locations is reflective of these inter-company prices, as is inventory at the
Corpus Christi location prior to elimination adjustments. Such
presentation is consistent with the internal reporting reviewed by the
Company’s chief operating decision maker. The elimination entries
include an adjustment to the cost of sales resulting from the adjustment to
ending inventory to eliminate inter-company profit, and the reversal of a
similar adjustment from a prior period. To the extent there are net
increases/declines period over period in Corpus Christi inventories that
include an inter-company component, the net effect of these adjustments can
decrease/increase location profit.
Sales
from the subsidiary to the US parent company and between subsidiaries are based
upon profit margins which represent competitive pricing of similar
products. Intercompany sales consisted of Synthetic Rutile (“SR”),
HITOX and ALUPREM.
TOR Minerals International, Inc. and Subsidiaries
Note 9. Stock Options and Equity Compensation Plan No options were granted
during the three month periods ended March 31, 2010 and 2009. As of March 31, 2010, all
outstanding options were fully vested, therefore, there is no unrecognized option
compensation expense related to non-vested awards. As all options issued under
the Plan are Incentive Stock Options, the Company does not normally receive
significant excess tax benefits relating to the compensation expense recognized
on vested options. Note 10. Inventories
A
summary of inventory follows: (In thousands)
March 31,
December 31,
2010
2009 Raw materials
$
4,583
$
4,178 Work in progress
1,206
1,173 Finished goods
3,200
3,311 Supplies
746
710
Total
Inventories
9,735
9,372
Inventory
reserve
(216)
(271)
Net
Inventories
$
9,519
$
9,101 Note 11. Derivatives and Other Financial Instruments The Company has
exposure to certain risks relating to its ongoing business operations, including
financial, market, political and economic risks. The following discussion
provides information regarding our exposure to the risks of changing energy
prices and foreign currency exchange rates. The Company has not entered
into these contracts for trading or speculative purposes in the past, nor do we
currently anticipate entering into such contracts for trading or speculative
purposes in the future. The natural gas and foreign exchange contracts
are used to mitigate uncertainty and volatility, and to cover underlying
exposures.
Natural Gas Contracts -
We manage the risk of changes in
natural gas supply prices at our Corpus Christi operation using derivative
financial instruments. Natural gas market prices are volatile and we
effectively fix prices for a portion of our natural gas production requirements
through the use of swaps. A swap is a contract between us and a third
party to exchange cash based on a designated natural gas price. Swap
contracts require payment to or from us for the amount, if any, that the
monthly published gas prices from the source specified in the contract differ
from the prices of the New York Mercantile Exchange (NYMEX) natural gas futures
during a specified period. There are no initial cash requirements related
to the swap. The contracts are traded in months forward and settlement
dates are scheduled to coincide with gas purchases during that future
period. We report the fair value of the derivatives on our balance sheet
and changes in fair value are recognized in cost of sales in the period of the
change.
TOR Minerals International, Inc. and Subsidiaries
On November 18, 2008, the Company entered into a
natural gas contract with Bank of America, N.A. for 40,000 MM/Btu’s of
natural gas which settled on March 1, 2009. For the three month period
ended March 31, 2009, we recorded a net expense of approximately $27,000 as a
component of our cost of sales. At March 31, 2010, there were no natural
gas contracts outstanding.
Foreign Currency Forward Contracts - We manage the risk of changes in foreign currency
exchange rates, primarily at our Malaysian operation, through the use of
foreign currency contracts. Foreign exchange contracts are used to
protect the Company from the risk that the eventual cash flows resulting from
transactions in foreign currencies, including sales and purchases transacted in
a currency other than the functional currency, will be adversely affected by
changes in exchange rates. We report the fair value of the derivatives on
our balance sheet and changes in the fair value are recognized in earnings in
the period of the change. At March 31, 2010,
we marked these contracts to market, recording income of approximately $56,000
as a component of our year to date net income and as a current asset on the
balance sheet. At March 31, 2009, we marked these contracts to market,
recording a net expense of approximately $14,000, respectively, as a component
of our year to date net loss and as a current liability on the balance sheet. The following
table summarizes the gross fair market value of all derivative instruments,
which are not designated as hedging instruments and their location in our
Condensed Consolidated Balance Sheet:
(In thousands)
Asset Derivatives
March 31,
December 31,
Derivative Instrument
Location
2010
2009
Foreign
Currency Exchange Contracts
Other
Current Assets
$
56
$
3
$
56
$
3
The following
table summarizes the impact of the Company’s derivatives on the condensed
consolidated financial statements of operations for the quarters ended March
31, 2010 and 2009:
(In thousands)
Amount of Gain (Loss) Recognized in Operations
Location of Gain
Three Months Ended
(Loss) on Derivative
March 31,
Derivative Instrument
Instrument
2010
2009
Natural
Gas Cost of Sales
$
-
$
(27)
Foreign
Currency Other Income (Expense)
56
(14)
$
56
$
(41)
TOR Minerals International, Inc. and Subsidiaries
Item
2. Management's Discussion
and Analysis of Financial Condition and Results of Operations
Company Overview
We
are a global specialty chemical company engaged in the business of
manufacturing and marketing mineral products for use as pigments, pigment
extenders and flame retardants used in the manufacture of paints, industrial
coatings, plastics, and catalysts applications. We have operations in the
US, Asia and Europe.
Our
US Operation, located in Corpus Christi, Texas, manufactures HITOX, BARTEX,
HALTEX/OPTILOAD and TIOPREM. The facility is also the Global Headquarters
for the Company. The Asian Operation, located in Ipoh, Malaysia,
manufactures SR, HITOX and TIOPREM and our European Operation, located in
Hattem, Netherlands, manufactures Alumina based products.
Operating
expenses in the foreign locations are primarily in local currencies.
Accordingly, we have exposure to fluctuation in foreign currency exchange
rates. These fluctuations impact the translation of sales, earnings,
assets and liabilities from local currency to the US Dollar.
Our
business is closely correlated with the construction industry and its demand for
materials that use pigments, such as paints and plastics. This has
generally led to higher sales in our second and third quarters due to increases
in construction and maintenance during warmer weather. Also, pigment
consumption is closely correlated with general economic conditions. When
the economy is in an expansionary state, there is typically an increase in
pigment consumption while a slow down typically results in decreased pigment
consumption. When the construction industry or the economy is in a period
of decline, TOR's sales and profit are likely to be adversely affected.
Following
are our results for the three month periods ended March 31, 2010 and
2009. The income (loss) per common share and the weighted average common
shares outstanding have been adjusted to reflect the one-for-five reverse stock
split which was effective February 19, 2010.
(Unaudited) (In thousands, except
per share amounts)
Three Months
2010
2009 NET SALES
$
6,856
$
5,703
Cost of sales
5,206
4,889 GROSS MARGIN
1,650
814
Technical services and research and development
57
52
Selling, general and administrative expenses
849
1,011 OPERATING
INCOME (LOSS)
744
(249) OTHER INCOME
(EXPENSE):
Interest income
-
2
Interest expense
(121)
(112)
Gain (loss) on foreign currency exchange rate
(28)
54
Other, net
-
2 INCOME
(LOSS) BEFORE INCOME TAX
595
(303)
Income tax expense (benefit)
11
(34) NET INCOME
(LOSS)
$
584
$
(269)
Income
(loss) per common share:
Basic
$
0.30
$
(0.15)
Diluted
$
0.26
$
(0.15)
TOR Minerals International, Inc. and Subsidiaries
2010 Outlook
In
2010, we anticipate market conditions for our products in certain end markets
to improve. Based on our conversations with customers, economic data and
information from other market participants, it appears that the worldwide
demand in the paint and plastics markets has started to stabilize. We saw
significant improvement in our more mature HITOX sales during the last quarter
of 2009, which has continued during the first quarter of 2010. In Asia,
HITOX sales for in-country use have increased and we are now starting to see
production rates for HITOX used in export products increase. In addition
to improving market conditions in the US and Asia, HITOX sales are beginning to
benefit from new niche markets, which we are hopeful will generate additional
incremental revenue for HITOX this year.
We
introduced TIOPREM, a titanium dioxide colored pigment, into the market in
2008. While the rate of adoption has been slower than we had originally
anticipated, customer activity has picked up over the past several months and
we are now shipping this product to customers in both the US and Europe.
The
second product we recently introduced, OPTILOAD, is a specialty alumina used in
high performance flame retardant applications. Our new alumina product
offers a high performance, cost effective and environmentally friendly solution
for the new flame retardant and smoke suppression standards that are being
implemented in the US. This is an emerging market with large growth
opportunity in the US during 2010 and beyond.
From
the cost side, increases in energy prices and continued currency movements are
expected to be a challenge; and while we do not plan to fill the positions
eliminated in 2008 and 2009, we have reinstated our employees’ salaries
back to the 2008 level. We are committed to securing and improving on the
savings realized in 2009 from procurement, overhead and working capital
programs and continuing to strengthen the balance sheet using operating cash
flows to further reduce debt levels.
Looking to the future
Our
strategy focuses on pursuing niche markets for paints, plastics, papers and
catalysts applications with high value-added products that produce attractive
profit margins and have high barriers to entry by competitors. Our focus
is on products that will provide a solid value proposition with our customers
and therefore sell at a higher average price and produce more attractive gross
margins for TOR. In addition, the high value-added nature of these
products will allow us to create close partnerships with our customers and
develop long-term relationships with recurring and predictable revenue streams.
As
we look at our HITOX business going forward, we expect our traditional HITOX
business to remain tied to the strength of the US and global economy. Our
key growth strategy is to introduce newly developed colored pigments that will
expand our addressable market and increase our sales potential. We are
applying technologies developed in our Netherlands operation to create new high
performance fillers and pigments. Unlike our traditional HITOX products,
our new products have high performance characteristics, much broader end market
applications and provide for value-added premium pricing.
Actual
results could differ materially from those indicated by these forward looking
statements because of various risks and uncertainties. See the
information under the caption “Forward Looking Information”
appearing below the Table of Contents of this report.
TOR Minerals International, Inc. and Subsidiaries
Results of Operations
Net Sales:
Consolidated net sales for the quarter ended March 31, 2010 increased
approximately $1,153,000 or 20% compared to the first quarter 2009 primarily due
to an increase in our sales of HITOX, BARTEX and HALTEX which were partially
offset by a decrease in ALUPREM sales.
Following
is a summary of our consolidated products sales for the three month periods
ended March 31, 2010 and 2009 (in thousands). All inter-company sales
have been eliminated. (Unaudited)
Three Months Ended March 31, Product
2010
2009
Variance HITOX
$
2,903
42%
$
1,943
34%
$
960
49% ALUPREM
2,383
35%
2,744
48%
(361)
-13% BARTEX
842
12%
585
10%
257
44% HALTEX
518
8%
316
6%
202
64% TIOPREM
77
1%
-
0%
77 OTHER
133
2%
115
2%
18
16% Total
$
6,856
100%
$
5,703
100%
$
1,153
20%
HITOX
sales increased 49% for the three month period ended March 31, 2010 as compared
to the same period in 2009 primarily due to an increase in world-wide
demand. This compares to a decline of 49% during the same period a year
ago primarily as a result of the weak North American market and the impact of
the global economy.
ALUPREM
sales decreased 13% during the first quarter of 2010, primarily due to a change
in the order pattern of a significant US customer; partially offset by a 33%
increase first quarter sales in Europe. This compares to an increase of
59% during the first quarter of 2009 which was primarily due to an increase in
the order pattern of a significant US customer which was partially offset by a
decline in sales in Europe of approximately 25%.
BARTEX
sales increased 44% during the first quarter of 2010 primarily due to an
increase in volume and our customer base. This follows a decline of approximately
36% during the first quarter of 2009 as our US customers decreased their
existing inventory levels primarily as a result of the downturn in the US
economy.
HALTEX
sales increased 64% and 13% for the quarters ended March 31, 2010 and 2009,
respectively. The increase is related to new business for our standard
HALTEX and OPTILOAD specialty products which are gaining acceptance in the
marketplace.
TOR Minerals International, Inc. and Subsidiaries
Corpus Christi Operation
Our
Corpus Christi operation manufactures and sells HITOX, BARTEX, HALTEX/OPTILOAD
and TIOPREM to third party customers. In addition, we purchase ALUPREM
and HITOX from our subsidiaries, TPT and TMM, for distribution in the Americas. Following is a summary of net sales for our Corpus Christi operation for
the three month periods ended March 31, 2010 and 2009 (in thousands), as well
as a summary of the material changes. All inter-company sales have been
eliminated. (Unaudited)
Three Months Ended March 31, Product
2010
2009
Variance HITOX
$
2,018
47%
$
1,498
38%
$
520
35% ALUPREM
687
16%
1,466
37%
(779)
-53% BARTEX
842
20%
585
15%
257
44% HALTEX
518
12%
316
8%
202
64% TIOPREM
72
2%
-
0%
72
0% OTHER
127
3%
80
2%
47
59% Total
$
4,264
100%
$
3,945
100%
$
319
8% HITOX – Increase in the US market, as well as in Canada
and South America. The increase is primarily related to the gradual
improvement in the construction industry.
Netherlands Operation
Our
subsidiary in the Netherlands, TPT, manufactures and sells ALUPREM to third
party customers, as well as to our Corpus Christi operation for distribution to
our US customers. In addition, TPT purchases HITOX from TMM for
distribution in Europe. The following table represents TPT’s ALUPREM
and HITOX sales (in thousands) for the three month periods ended March 31, 2010
and 2009 to third party customers. All inter-company sales have been
eliminated. (Unaudited)
Three Months Ended March 31, Product
2010
2009
Variance ALUPREM
$
1,696
89%
$
1,278
92%
$
418
33% HITOX
216
11%
114
8%
102
89% TIOPREM
5
< 1%
-
0%
5
< 1% Total
$
1,917
100%
$
1,392
100%
$
525
38%
ALUPREM – Increase in European sales of ALUPREM primarily related to an increase
in volume and product mix.
HITOX – Increase in European sales of HITOX primarily related to gradual
improvement in the construction industry.
TOR Minerals International, Inc. and Subsidiaries
Malaysian Operation
Our
subsidiary in Malaysia, TMM, manufactures and sells HITOX and SR to third party
customers, as well as to our Corpus Christi operation and TPT. The
following table represents TMM’s sales (in thousands) for the three month
periods ended March 31, 2010 and 2009 to third party customers. All
inter-company sales have been eliminated. (Unaudited)
Three Months Ended March 31, Product
2010
2009
Variance HITOX
$
669
99%
$
331
90%
$
338
102% OTHER
6
1%
35
10%
(29)
-83% Total
$
675
100%
$
366
100%
$
309
84% HITOX – Increase in Asian sales primarily related to an increase in
volume related to the continuing improvement in the economy and the
construction industry in Asia.
Other Consolidated Results
Gross Margin: For the three month period ended March 31, 2010,
gross margin increased approximately 9.8% percent, from 14.3% in 2009 to 24.1%
in 2010. Primary factors affecting our gross margin include the mix of
products sold during the quarter compared to the same period 2009, as well our
efforts to maintain and/or reduce costs and maximize efficiency. Also
contributing to the increase in the gross margin was a reduction in idle plant
time resulting from the timing of our SR production at TMM, as well as an
increase in production at our US operation of over 50%.
Technical Services and Selling, General, Administrative and Expenses
(“SG&A”): Total SG&A expenses decreased approximately 14.7%
during the three month period ended March 31, 2010 as compared to the same
period in 2009 primarily due to a reduction in salaries, option compensation
expense and accounting fees. The Company implemented a 20% salary
reduction for management and staff in February, 2009. Effective January
1, 2010, the Company reinstated the salaries for management and staff to their
previous level.
Interest Expense: Net interest expense for the quarter increased
approximately $9,000 as compared to the same period in 2009, primarily related
to interest on the debentures and warrants issued in 2009, offset by a decrease
in long-term debt and our lines of credit.
Income Taxes: Income taxes consisted of a foreign deferred
tax expense of approximately $10,000 and state income tax expense of $1,000 for
the three month period ended March 31, 2010, compared to a foreign deferred tax
benefit of approximately $35,000 and state income tax expense of $1,000 for the
same three month period in 2009. Taxes are based on an estimated
annualized consolidated effective rate of 1.8% for the year ended December 31,
2010.
TOR Minerals International, Inc. and Subsidiaries
Liquidity,
Capital Resources and Other Financial Information
Going Concern
The
condensed consolidated financial statements included in this report have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As
discussed below, the Company has significant borrowings which require, among
other things, compliance with certain financial covenants, specifically a
Consolidated Fixed Charge Ratio and a Consolidated Funded Debt to EBITDA Ratio,
on a quarterly basis. As a result of the operating losses incurred throughout
2008 and the first quarter of 2009, the Company was not in compliance with
these ratio covenants under our US Credit Agreement (the “Credit
Agreement”) with Bank of America, N.A. (the “Bank”) as of
December 31, 2008 and March 31, 2009, and the Company received notice from the
Bank on March 5, 2009 of the Bank’s decision to terminate the Credit
Agreement and require us to pay off all outstanding debt due to the Bank on
April 1, 2009.
As
reported in the Company’s Form 8-K filed with the Securities and Exchange
Commission (the “SEC”) on May 6, 2009 the Company and the Bank
amended the Credit Agreement. Under the terms of the amendment, the Bank
revised the stated maturity date to October 1, 2009 and, subject to the
Company’s compliance with the terms and conditions contained in the
amendment, including revised financial covenants, the Bank agreed not to
exercise any of its rights or remedies relating to the existing events of
default under the Credit Agreement.
As
reported in the Company’s Form 8-K filed with the SEC on September 28,
2009, the Bank extended the maturity date on our Line of Credit (the
“Line”) and our term loan (the “Term Loan”) from
October 1, 2009 to February 15, 2010. In addition, the September amendment
reduced the amount available for borrowing under the Line from $2,500,000 to
$2,225,000 and increased the interest rate on the Line and Term Loan from prime
plus two and one-half percent to prime plus three percent.
As
reported in the Company’s Form 8-K filed with the SEC on February 16,
2010, the Bank extended the maturity date on our Line from February 15, 2010 to
August 15, 2010. As a result, all of the Company’s debt owed to the
Bank matures on August 15, 2010. The Company repaid the outstanding
balance on its Term Loan with the Bank in December 2009, and at March 31 2010,
the Company had $1,400,000 drawn on the Line. In addition, the Company
was in compliance with the revised financial covenants for the quarters ended
June 30, September 30, December 31, 2009 and March 31, 2010.
As
reported in the Company’s Form 8-K filed with the SEC on May 6, 2009, the
Company’s Board of Directors authorized the issuance of up to $4 million
of its six-percent (6%) convertible subordinated debentures with detachable
warrants (the “Debentures”) for the purpose of refinancing, in
whole or in part, its debt to the Bank and for general corporate
purposes. Under the current authorization, the Company received, on May
4, 2009, $1 million from the sale of Debentures due May 4, 2016, from three of
the Company’s directors.
As
reported in the Company’s Form 10-Q filed with the SEC on August 10,
2009, the Company received proceeds of $500,000 from the sale of additional
Debentures to six additional accredited investors, one of which is a director
and another of which is a greater than 5% shareholder. Under the terms of
the Credit Agreement, the Company agreed to use all proceeds in excess of $1
million from the issuance of any of its capital stock, from capital
contributions in respect to its capital stock, from the issuance of debentures
or the incurrence of permitted subordinated indebtedness (as defined in the
Credit Agreement) to prepay the loans and other obligations under the Credit
Agreement. As a result, the Company applied the $500,000 received from
the sale of Debentures to its outstanding real estate loan with the Bank in
August 2009.
TOR Minerals International, Inc. and Subsidiaries
The
Company is working diligently to establish a corporate lending relationship
with a new financial institution for the Company’s US operations prior to
August 15, 2010, the revised maturity date under the Credit Agreement, to
refinance outstanding debt with the Bank prior to its revised maturity.
However, there can be no assurance that the Company will be able to
successfully refinance the debt due to the Bank. If the Company is unable
to refinance the debt due to the Bank prior to its revised maturity or if the
Company defaults under the terms of the Credit Agreement prior to its revised
maturity and the Bank were to accelerate the maturity of such indebtedness, the
Company does not have sufficient liquidity to pay off the indebtedness owed to
the Bank, and the Bank would be entitled to exercise all of its rights and
remedies as a secured lender under the Credit Agreement.
The
Company’s two subsidiaries, TOR Minerals Malaysia, Sdn. Bhd.
(“TMM”) and TOR Processing and Trade, BV (“TPT”) have
short-term credit facilities and term loans at banks in Malaysia and the
Netherlands, respectively. At March 31, 2010, TMM’s borrowings
under the credit facilities and term loans with HSBC Bank Malaysia, Bhd.
(“HSBC”) and RHB Bank, Bhd. (“RHB”) totaled $224,000
and TPT’s borrowings under the credit facility and term loans with
Rabobank totaled $2,493,000. TMM’s credit facilities with HSBC
mature on April 30, 2010 and TPT’s credit facility with Rabobank, which
was renewed on January 1, 2010, has no stated maturity date.
Additionally,
the credit facilities with HSBC, RHB and Rabobank are subject to demand
provisions and are subject to certain subjective acceleration covenants based
on the judgment of the banks. While the banks have made no indication
that they will demand payment of the debt in Malaysia or in the Netherlands, in
light of the Company’s liquidity difficulties, there can be no assurances
that this debt will not be called for payment prior to the stated maturity date
or that the stated maturity date will be extended when this debt becomes due.
Since
early 2007, the Company has actively pursued new production methods and new
product development. As a result, the Company introduced new products to
the market in 2008 and completed a new powder treatment facility in Malaysia in
May 2008. In addition, the Company has invested in a new powder treatment
facility at the US operation which was commissioned in April 2009. With
the new process equipment, the Company replaced natural gas with electricity as
the primary energy source at the US operation. The Company believes that
the changes in the manufacturing process in the US and Malaysia, as well as the
potential acceptance of its new products in the market, will improve cash
flows. However, the introduction of new products and the sales volume of
existing product lines have been negatively impacted by the decline in the
global economy. To offset declines in sales revenue associated with the
economy, in 2009 the Company implemented numerous cost cutting measures at each
of the three operations, including, but not limited to, reductions in staff,
salaries, travel and other discretionary expenses.
The
events described above raise substantial doubt about the Company’s
ability to continue as a going concern. Our ability to continue to
operate as a going concern is dependent on our ability to successfully
establish a corporate lending relationship with a new financial institution for
the US operation, and/or raise sufficient new capital and improve our operating
cash flows to a sufficient level.
TOR Minerals International, Inc. and Subsidiaries
Long-term Debt
Following is a schedule of our long-term
debt.
(Unaudited) (In thousands)
March 31,
December 31,
2010
2009
Term
note payable to a U.S. equipment financing company, with an interest rate of
5.24% at March 31, 2010, due April 1, 2013, secured by a Caterpillar
front-end loader.
$
78
$
84
Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
7.8% at March 31, 2010, due July 1, 2029, secured by TPT's land and office
building purchased July 2004. (377 Euro)
509
547
Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
4.7% at March 31, 2010, due January 31, 2030, secured by TPT's land and
building purchased January 2005. (374 Euro)
506
543
Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
6.1% at March 31, 2010, due July 31, 2015, secured by TPT's assets.
(271 Euro)
366
406
U.S.
Dollar term note payable to a Malaysian bank, with an interest rate of 2.0%
at March 31, 2010, due June 30, 2010, secured by TMM's property, plant and
equipment.
108
191
U.S.
Dollar term note payable to a Malaysian bank, with an interest rate of 1.425%
at March 31, 2010, due May 30, 2011, secured by TMM's property, plant and
equipment.
116
141 Total
1,683
1,912 Less current
maturities
349
435 Total long-term
debt and notes payable
$
1,334
$
1,477
US Operations
Bank
of America Credit Facility and Term Loans
On
April 30, 2009, we and the Bank amended the Credit Agreement. Under the
terms of the amended credit agreement, subject to our compliance with the terms
and conditions contained in the amendment, including revised financial
covenants, the Bank agreed not to exercise any of its rights or remedies
relating to the existing events of default under the Credit Agreement.
Under
the terms of the amendment, the financial covenants were replaced with the
following:
TOR Minerals International, Inc. and Subsidiaries
We
also agreed that we will use all proceeds in excess of $1 million that we
received after May 1, 2009 from the issuance of any of our capital stock, from
capital contributions in respect to our capital stock, from the issuance of
debentures or the incurrence of permitted subordinated indebtedness (as defined
in the Credit Agreement) to prepay the loans and other obligations under the
Credit Agreement. As a result, the Company applied $500,000 received from
the sale of Debentures to its outstanding real estate loan with the Bank in
August 2009.
On
September 28, 2009 we amended the Credit Agreement with the Bank to extend the
maturity date on the Line and Term Loan from October 1, 2009 to February 15,
2010. Under the terms of the amendment, the interest rate on the Line and
the Term Loan was increased from prime plus two and one-half percent to prime
plus three percent. In addition, the Line was reduced from $2,500,000 to
$2,250,000.
On
February 12, 2010, we amended the Credit Agreement with the Bank to extend the
maturity date on the Line from February 15, 2010 to August 15, 2010. As a
result of this amendment, all of our debt owed to the Bank will mature on
August 15, 2010, provided, if we default on obligations contained in the
amendment, the Bank will have the rights and remedies available to it under the
Credit Agreement and applicable law. The Line is secured by the accounts
receivable and inventory of the US Operation.
At
March 31, 2010, the outstanding balance on the Credit Agreement consisted of $1,400,000
on the Line and we had $850,000 available on that date based on eligible
accounts receivable and inventory borrowing limitations. The interest
rate on the Line was 6.25% at March 31, 2010.
Six-percent
Convertible Subordinated Debentures
As
reported in the Company’s Form 8-K filed with the SEC on May 6, 2009, the
Company’s Board of Directors authorized the issuance of its six-percent
(6%) convertible subordinated debentures with detachable warrants (the
“Debentures”) for the purpose of refinancing, in whole or in part,
its debt to the Bank and for general corporate purposes. Under the
current authorization, the Company received, on May 4, 2009, $1 million from
the sale of Debentures due May 4, 2016, from three of the Company’s
directors.
As
reported in the Company’s Form 10-Q filed with the SEC on August 10,
2009, the Company received proceeds of $500,000 from the sale of additional
Debentures to six additional accredited investors, one of which is a director
and another of which is a greater than 5% shareholder. As noted above,
under the terms of the Credit Agreement, the Company applied the $500,000
received from the sale of Debentures to its outstanding real estate loan with
the Bank in August 2009.
Other
Term Loans
On
March 31, 2008, we entered into a term loan with Holt Financing in the amount
of $120,000. The proceeds of the loan were used to purchase a new
Caterpillar front-end loader. The loan provides for amortization over
five years with interest fixed at a rate of 5.24%. Monthly principal and
interest payments commenced on May 1, 2008, and will continue through April 1,
2013. The monthly principal and interest payment is $2,275. The
loan balance at March 31, 2010 was $78,000.
TOR Minerals International, Inc. and Subsidiaries
Netherlands Operation
On
March 20, 2007, our subsidiary, TPT, entered into a short-term credit facility
(the “Credit Facility”) with Rabobank which increased TPT’s
line of credit from Euro 650,000 to Euro 1,100,000. The Credit Facility
was renewed on January 1, 2010 and has no stated maturity dated. The
Credit Facility, which has a variable interest rate of Bank prime plus 2.8%
(currently at 7.45%), is secured by TPT’s accounts receivable and
inventory. At March 31, 2010,
TPT had utilized Euro 823,000 ($1,112,000) of its short-term credit facility.
TPT’s
loan agreements covering both the credit facility and the term loans include
subjective acceleration clauses that allow Rabobank to accelerate payment if,
in the judgment of the bank, there are adverse changes in our business.
We believe that such subjective acceleration clauses are customary in the
Netherlands for such borrowings. However, if demand is made by Rabobank,
we may be unable to refinance the demanded indebtedness, in which case the
lenders could foreclose on the assets of TPT.
Malaysian Operation
On
December 15, 2009, the Company’s subsidiary, TMM, amended its banking
facility with HSBC Bank Malaysia Berhad (“HSBC”) to extend the
maturity date from October 1, 2009 to April 30, 2010. In addition, the
HSBC facility includes the following in Malaysian Ringgits
(“RM”): (1) a banker’s acceptance (“BA”) of
RM 500,000; (2) an export line (“ECR”) of RM 2,500,000; and (3) a
foreign exchange contract limit of RM 5,000,000 ($153,000, $767,000 and
$1,534,000, respectively).
TMM
is currently in the process of renewing its banking facility with RHB Bank
Berhad (“RHB”) which matured on October 31, 2009. The RHB
facility includes the following: (1) an overdraft line of credit up to RM
1,000,000; (2) an ECR of RM 9,300,000; and (3) a foreign exchange contract
limit of RM 25,000,000 ($307,000, $2,853,000 and $7,671,000, respectively).
The
banking facilities with both HSBC and RHB bear an interest rate on the
overdraft facilities at 1.25% over bank prime and the ECR facilities bear
interest at 1.0% above the funding rate stipulated by the Export-Import Bank of
Malaysia Berhad. The ECR, a government supported financing arrangement
specifically for exporters, is used by TMM for short-term financing of up to
180 days against customers’ and inter-company shipments. At March
31, 2010, TMM did not have an outstanding balance on the ECR facilities.
TMM
is currently negotiating with HSBC and RHB to extend the maturity dates of the
bank facilities from April 30, 2010 and October 31, 2009, respectively, to
October 31, 2010. The Company is confident that the bank facilities will
be extended; however, there can be no assurance that the facilities will be
extended or as to the terms and conditions of the extension of the
facility. If either HSBC or RHB is unwilling to extend the maturity dates
of the facility, TMM may not have sufficient liquidity to pay off this indebtedness.
The
borrowings under both the HSBC and the RHB short term credit facilities are
subject to certain subjective acceleration covenants based on the judgment of
the banks and a demand provision that provide that the banks may demand
repayment at any time. We believe such a demand provision is customary in
Malaysia for such facilities. The loan agreements are secured by
TMM’s property, plant and equipment. However, if demand is made by
HSBC or RHB, we may be unable to refinance the demanded indebtedness, in which
case, the lenders could foreclose on the assets of TMM. The credit
facilities prohibit TMM from paying dividends and the HSBC facility further
prohibits loans to related parties without the prior consent of HSBC.
TOR Minerals International, Inc. and Subsidiaries
Cash and Cash Equivalents
As
noted on the following table, cash and cash equivalents increased $65,000 from December
31, 2009 to March 31, 2010 as compared to an increase of $160,000 from December
31, 2008 to March 31, 2009.
(Unaudited)
Three Months Ended March 31,
(In
thousands)
2010
2009
Net
cash provided by (used in)
Operating
activities
$
1,036
$
119
Investing
activities
(102)
(415)
Financing
activities
(942)
872
Effect
of exchange rate fluctuations
73
(416)
Net
change in cash and cash equivalents
$
65
$
160
Operating Activities
Operating
activities provided $1,036,000 during the first three months of 2010. Following
are the major changes in working capital affecting cash provided by operating
activities for the three month period ended March 31, 2010:
Investing Activities
We
used cash of $102,000 in investing activities during the first three months of
2010 primarily for the purchase of fixed assets as compared to $415,000 during
the same period 2009. Net investments for each of our three locations are
as follows:
TOR Minerals International, Inc. and Subsidiaries
Financing Activities
We
used $942,000 in financing activities during the three month period ended March
31, 2010 as compared to cash provided by financing activities of $872,000 for
the same period 2009. Significant factors relating to financing
activities include the following:
Off-Balance Sheet Arrangements and Contractual
Obligations
No material changes have been made to the “Off-Balance
Sheet Arrangements and Contractual Obligations” noted in the
Company’s 2009 Annual Report on Form 10-K except as noted above. Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under
the supervision and with the participation of the Company’s Chief
Executive Officer and Chief Financial Officer, management of the Company has
evaluated the effectiveness of the Company’s disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”))
as of the end of the period covered by this report. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that the
Company’s disclosure controls and procedures are effective (i) to ensure
that information required to be disclosed by the Company in reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission rules and forms; and (ii) to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management,
including the Company’s Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Controls
During
the last fiscal quarter, there were no changes in the Company's internal
controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)
of the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal controls over financial reporting.
Part II - Other Information Item 1. Legal Proceedings
In
late July 2008, we learned that our former chief financial officer, Steven H.
Parker, filed a complaint with the Occupational Safety and Health
Administration, US Department of Labor. Parker’s complaint was filed
on or about July 21, 2008, and alleges that TOR violated the whistleblower
provisions of the Sarbanes-Oxley Act of 2002 by terminating Parker’s
employment in response to Parker’s reporting to our CEO and a board
member of the negative accounting treatment of a potential transaction.
In addition, Parker has claimed that he was terminated for refusing to perform
an illegal act in violation of Texas law. Parker subsequently notified
the Department of Labor that he intended to bring an action against the Company
in the United States District Court for the Southern District of Texas.
Because of Parker’s election to proceed in the United States District
Court, the Department of Labor has dismissed Parker’s complaint.
Relief sought by Parker includes back pay, reinstatement or front pay in lieu
of reinstatement and reasonable attorney’s fees and costs. We
intend to vigorously defend such legal action. The Company believes that
a material loss is remote, and therefore, has not recorded a liability related
to this matter. Item 6. Exhibits (a) Exhibits
Exhibit
31.1 Certification of Chief
Executive Officer
Exhibit
31.2 Certification of Chief
Financial Officer
Exhibit
32.1 Certification of Chief
Executive Officer
Exhibit
32.2 Certification of Chief
Financial Officer
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 thereunto
duly authorized.
____________
(Registrant) Date:
May 5, 2010
OLAF KARASCH Date:
May 5, 2010
BARBARA RUSSELL Exhibit 31.1 CERTIFICATIONS I, Olaf Karasch, certify that: 1. I have reviewed this Form 10-Q of TOR Minerals International, Inc.; 2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have: (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and (d)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and 5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions): (a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting. Date:
May 5, 2010 /s/ Olaf Karasch Olaf Karasch
Securities and
Exchange Commission
Washington, D. C. 20549
____________________________
FORM 10-Q
____________________________
For the quarterly period ended March 31, 2010
OR
For the transition period from __________ to __________
Commission file number 0-17321
TOR MINERALS INTERNATIONAL, INC.
(Exact name of registrant as
specified in its charter)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
(Address of principal executive offices)
(Issuer’s telephone number)
____________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the preceding 12 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.
Common Stock, $0.25 par value
1,891,354
Three months ended March 31, 2010 and 2009
Three months ended March 31, 2010 and 2009
March 31, 2010 and December 31, 2009
Three months ended March 31, 2010 and 2009
and Results of Operations
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Ended March 31,
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(In thousands)
Ended March 31,
2010
2009
authorized, 5,000 shares; 200 shares issued and
outstanding at 3/31/2010 and 12/31/2009
1,891 shares issued and outstanding at 3/31/2010
and 12/31/2009
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
provided by operating activities:
and exercise of common stock options
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(1.66 to 1.0 as of the quarter ending March 31, 2010)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
March 31, 2010
Markets for Identical Items
(Level 1)
(Level 2)
Unobservable Inputs
(Level 3)
derivative financial instruments
(including forward contracts)
Value
Value
Value
Value
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Ended March 31,
income (loss) available to common shareholders
loss available to common shareholders
after assumed conversions
weighted-average shares
weighted-average shares and assumed conversions
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(Corpus Christi)
(TPT)
(TMM)
Eliminations
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Swap Contract
Exchange Contracts
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Ended March 31,
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
(1.66 to 1.0 as of the quarter ending March 31, 2010)
(4.13 to 1.0 for the
quarter ending March 31, 2010)
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Signatures:
Olaf Karasch
President and Chief Executive Officer
Barbara Russell
Chief Financial Officer
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Barbara Russell, certify that:
1. I have reviewed this Form 10-Q of TOR Minerals International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 5, 2010
/s/ Barbara Russell
Barbara Russell
Chief Financial Officer
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of TOR Minerals, Inc. ("Registrant") for the quarter ended March 31, 2010 (the "Report") as filed with the Securities and Exchange Commission, the undersigned Chief Executive Officer of the Registrant hereby certifies, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
/s/ OLAF KARASCH
Olaf Karasch
President and Chief Executive Officer
(Principal Executive Officer)
May 5, 2010
Exhibit 32.2
Certification of Acting Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of TOR Minerals, Inc. ("Registrant") for the quarter ended March 31, 2010 (the "Report") as filed with the Securities and Exchange Commission, the undersigned Chief Financial Officer of the Registrant hereby certifies, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
/s/ BARBARA RUSSELL
Barbara Russell
Chief Financial Officer
(Principal Financial Officer)
May 5, 2010