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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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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 has
submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes [__]
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 October 31, 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
19 Item 4. Controls and Procedures
30 Part II - Other Information Item 6. Exhibits
31 Signatures
31 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 Nine Months 2010 2009 2010 2009 NET SALES $
7,543 $
6,441 $
22,327 $
17,798 Cost of sales
6,234
5,492
17,765
15,170 GROSS MARGIN
1,309
949
4,562
2,628 Technical services and research and development
66
54
184
146 Selling, general and administrative expenses
846
687
2,666
2,423 OPERATING
INCOME
397
208
1,712
59 OTHER INCOME
(EXPENSE): Interest income
-
-
-
2 Interest expense (110) (159) (343) (407) Gain (loss) on foreign currency exchange rate (53) (5) (47)
37 Other, net
-
-
-
4 INCOME
(LOSS) BEFORE INCOME TAX
234
44
1,322 (305) Income tax expense (benefit) (2)
61
32 (11) NET INCOME
(LOSS) $
236 $
(17) $
1,290 $
(294) Less:
Preferred Stock Dividends
15
15
45
45 Income (Loss) Available
to Common Shareholders $
221 $
(32) $
1,245 $
(339) Income
(loss) per common share: Basic $
0.12 $
(0.02) $
0.66 $
(0.18) Diluted $
0.09 $
(0.02) $
0.51 $
(0.18) Weighted
average common shares outstanding: Basic
1,908
1,891
1,899
1,891 Diluted
2,586
1,891
2,455
1,891 See accompanying notes.
TOR Minerals International, Inc. and Subsidiaries
Three Months Nine Months 2010 2009 2010 2009 NET INCOME
(LOSS) $
236 $
(17) $
1,290 $
(294) OTHER
COMPREHENSIVE INCOME, net of tax Currency translation adjustment, net of tax: Net foreign currency translation adjustment gain (loss)
1,162
362
1,252
162 Other comprehensive income, net of tax
1,162
362
1,252
162 COMPREHENSIVE
INCOME (LOSS) $
1,398 $
345 $
2,542 $
(132) See accompanying notes.
TOR Minerals International, Inc. and Subsidiaries
September 30, December 31, (Unaudited) ASSETS CURRENT ASSETS: Cash
and cash equivalents $
564 $
1,002 Trade
accounts receivable, net
4,016
3,380 Inventories
10,403
9,101 Other
current assets
888
540 Total
current assets
15,871
14,023 PROPERTY, PLANT AND
EQUIPMENT, net
18,901
18,800 OTHER ASSETS
45
53 Total Assets $
34,817 $
32,876 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts
payable $
2,075 $
1,452 Accrued
expenses
1,443
1,036 Notes
payable under lines of credit
1,529
3,313 Export
credit refinancing facility
477
- Current
deferred tax liability
50
60 Current
maturities - capital leases
68
140 Current
maturities of long-term debt – financial institutions
211
435 Total
current liabilities
5,853
6,436 LONG-TERM DEBT, EXCLUDING
CURRENT MATURITIES Capital
leases
20
49 Long-term
debt – financial institutions
1,254
1,477 Long-term
debt – convertible debentures, net
1,197
1,122 DEFERRED TAX LIABILITY
664
577 Total
liabilities
8,988
9,661 COMMITMENTS AND
CONTINGENCIES SHAREHOLDERS' EQUITY: Series
A 6% convertible preferred stock $.01 par value:
2
2 Common
stock $1.25 par value: authorized, 6,000 shares;
2,386
2,363 Additional
paid-in capital
25,308
25,214 Accumulated
deficit (6,562) (7,807) Accumulated
other comprehensive income: Cumulative
translation adjustment
4,695
3,443 Total
shareholders' equity
25,829
23,215 Total Liabilities and
Shareholders' Equity $
34,817 $
32,876 See accompanying notes.
TOR Minerals International, Inc. and Subsidiaries Nine Months Ended September 30, 2010 2009 CASH
FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $
1,290 $ (294) Adjustments to reconcile net income (loss) to net cash Depreciation
1,421
1,340 Share-based compensation
91
78 Warrant interest expense
50
27 Deferred income taxes
32 (17) Provision for bad debts
- (61) Changes in working capital: Trade accounts receivables (640) (384) Inventories (827)
2,056 Other current assets (339) (324) Accounts payable and accrued expenses
972 (1,436) Net
cash provided by operating activities
2,050
985 CASH
FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (1,026) (807) Proceeds from sales of property, plant and equipment
17
- Net cash used in investing activities (1,009) (807) CASH
FLOWS FROM FINANCING ACTIVITIES: Net (payments on) proceeds from lines of credit (1,725)
926 Net proceeds from (payments on) export credit refinancing
facility
477 (432) Payments on capital lease (96) (4) Payments on long-term bank debt (399) (1,208) Proceeds from convertible debentures
-
1,500 Proceeds from the issuance of common stock,
51
- Preferred stock dividends paid (45) (45) Net
cash (used in) provided by financing activities (1,737)
737 Effect of
exchange rate fluctuations on cash and cash equivalents
258 (213) Net (decrease)
increase in cash and cash equivalents (438)
702 Cash and cash
equivalents at beginning of year
1,002
191 Cash and cash
equivalents at end of period $
564 $
893 Supplemental
cash flow disclosures: Interest paid $
343 $
377 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 in our Form 10-K filed with the Securities and Exchange Commission
(the “SEC”) on March 24, 2010, the Company was not in compliance
with the Consolidated Fixed Charge Ratio and the Consolidated Funded Debt to
EBITDA 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. As a result, the Bank notified the
Company of its decision to terminate the Credit Agreement. As
reported in the Company’s Form 8-K filed with the SEC on October 4, 2010,
the Bank extended the maturity date on our Line of Credit (the “Line”)
from August 15, 2010 to February 15, 2011. As a result, all of the
Company’s debt owed to the Bank matures on February 15, 2011. The
Company repaid the outstanding balance on its two Term Loans with the Bank in
2009, and at September 30, 2010, the Company had $500,000 drawn on the Line.
In addition, the Company was in compliance with the revised financial covenants
for each quarter ended from June 30, 2009 through September 30, 2010. The
Company is working diligently to establish a corporate lending relationship
with a new financial institution for the Company’s US operations prior to
February 15, 2011, 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 September 30, 2010, TMM’s borrowings
under the credit facilities and term loans with HSBC Bank Malaysia, Bhd.
(“HSBC”) and RHB Bank, Bhd. (“RHB”) totaled $543,000
and TPT’s borrowings under the credit facility and term loans with
Rabobank totaled $2,362,000. TMM’s credit facilities with HSBC
matured on October 31, 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 or that any stated maturity date
in a renewal or amendment to these credit facilities will be extended for a
sufficient amount of time to allow the Company to meet its commitments under
the facilities or find alternate financing arrangements. The
events described above raise 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 Securities and Exchange Commission
(“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 and nine month periods ended September 30, 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 federal tax benefit of $12,000 and state income tax expense
of $3,000, respectively, and foreign deferred tax expense of approximately $7,000
for the three month period ended September 30, 2010, compared to a foreign
deferred tax expense of approximately $61,000 for the same three month period
in 2009. For the nine month period ended September 30, 2010, we recorded
state tax expense of $8,000 and foreign deferred tax expense of $24,000,
compared to a foreign deferred tax benefit of $13,000 and state income tax
expense of $2,000 during the same period of 2009. Taxes are based on an
estimated annualized consolidated effective rate of 2.4% for the year ending 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, 2005 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 nine month period
ended September 30, 2010. In addition, we did not recognize any interest
and penalties in our consolidated financial statements during the three and nine
month periods ended September 30, 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. 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. Note 3. Long-Term Debt A summary of long-term debt to financial
institutions follows: (Unaudited) (In thousands) September 30, December 31, 2010 2009 Term
note payable to a U.S. equipment financing company, with an interest rate of
5.24% at September 30, 2010, due April 1, 2013, secured by a Caterpillar
front-end loader. $
66 $
84 Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
7.8% at September 30, 2010, due July 1, 2029, secured by TPT's land and
office building purchased July 2004. (367 Euro)
500
547 Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
4.6% at September 30, 2010, due January 31, 2030, secured by TPT's land and
building purchased January 2005. (365 Euro)
498
543 Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
4.05% at September 30, 2010, due July 31, 2015, secured by TPT's
assets. (246 Euro)
335
406 U.S.
Dollar term note payable to a Malaysian bank, secured by TMM's property,
plant and equipment, matured June 30, 2010.
-
191 U.S.
Dollar term note payable to a Malaysian bank, with an interest rate of 1.625%
at September 30, 2010, due May 30, 2011, secured by TMM's property, plant and
equipment.
66
141 Total
1,465
1,912 Less current
maturities
211
435 Total long-term
debt and notes payable - financial institutions $
1,254 $
1,477 TOR Minerals International, Inc. and Subsidiaries 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. 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. On
September 30, 2010, we amended the Credit Agreement with the Bank to extend the
maturity date on the Line from August 15, 2010 to February 15, 2011. Under
the terms of the amendment, the Line was reduced from $2,250,000 to $1,500,000
(subject to a defined borrowing base) and the interest rate remained at Prime
plus three percent. The loan covenant regarding the current ratio
remained unchanged at 1.0 to 1.0 and the fixed charge coverage increased from
0.85 to 1.0 to 1.10 to 1.0. As a result of this amendment, all of our
debt owed to the Bank will mature on February 15, 2011, 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
September 30, 2010, the financial covenants were as follows: Covenants to be based solely on
the results of the US operation Current Ratio – Maintain a
ratio of current assets to current liabilities of at least 1.0 to 1.0 (1.65 to
1.0 as of the quarter ended September 30, 2010) Fixed Charge Coverage Ratio
– Maintain a fixed charge coverage ratio of at least 1.1 to 1.0 (6.65 to
1.0 for the quarter ended September 30, 2010) At
September 30, 2010, the outstanding balance on the Credit Agreement consisted
of $500,000 on the Line and we had $1,000,000 available on that date based on
eligible accounts receivable and inventory borrowing limitations. The
interest rate on the Line was 6.25% at September 30, 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. TOR Minerals International, Inc. and Subsidiaries
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 September 30, 2010 was $66,000. 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 7.3%), is secured by TPT’s accounts receivable and
inventory. At September 30, 2010,
TPT had utilized Euro 755,000 ($1,029,000) 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 The
Company’s subsidiary, TMM, is negotiating with HSBC Bank Malaysia Berhad
(“HSBC”) to extend the maturity date of its banking facility which
matured on October 31, 2010. The facility with HSBC 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 ($162,000, $809,000 and $1,619,000, 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 ($324,000, $3,011,000 and $8,094,000, 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 September
30, 2010, TMM had utilized RM 1,472,000 ($477,000) of the ECR facilities. TMM
is currently negotiating with both HSBC and RHB to renew or amend the credit
facilities to provide for, among other things, an extended stated maturity date
of both bank facilities. The Company is confident that the bank
facilities will be renewed; however, there can be no assurance that the
facilities will be renewed, amended or extended or as to the terms and
conditions of the extension of the facility. If these lenders are
unwilling to extend the maturity dates of these facilities, 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
September 5, 2010, the Company declared a dividend, in the amount of $15,000,
or $0.075 per share, for the quarterly period ended September 30, 2010, payable
on October 1, 2010, to the holders of record of the Series A Convertible
Preferred Stock as of the close of business on September 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 September
30, 2010. The Company did not hold any non-financial assets and/or
non-financial liabilities subject to fair value measurements at September 30,
2010. September 30, 2010 (In thousands) Balance at Quoted Prices in Active Significant Other Observable Inputs Significant Asset for foreign currency $
30 $
- $
30 $
- 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: September 30, 2010 December 31, 2009 (In thousands) Carrying Fair Carrying Fair Long-term
debt, including current portion $
1,465 $
1,198 $
1,912 $
1,603 Long-term
debt – convertible debentures
1,500
720
1,500
569 $
2,965 $
1,918 $
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 September 30, 2010 was
approximately Euro 148,000 ($202,000). 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 ($7,144). The net
present value of the lease at September 30, 2010 was Euro 41,000 ($56,000). 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 September 30, 2010 was approximately $13,000.
The capital lease is in the amount of $13,217 including interest of $800
(implicit interest rate 4.1%). The lease matured September 30, 2010. 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 September 30, 2010 was approximately $11,000. 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 September 30,
2010 was $14,000. 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 September 30, 2010 was approximately $8,000. The capital
lease is in the amount of $74,220 including interest of $5,498 (implicit
interest rate 14.45%). The lease matured August 24, 2010. On
August 1, 2010, the Company entered into a financial lease agreement with Dell
Financial Services for new computer servers. The cost of the equipment
under the capital lease, in the amount of $19,093, is included in the balance
sheets as property, plant and equipment. Accumulated amortization of the
leased equipment at September 30, 2010 was not significant. The capital
lease is in the amount of $20,698 including interest of $1,605 (implicit
interest rate 5.3%). The lease term is 36 months with equal monthly
installments of $575. The net present value of the lease at September 30,
2010 was $18,000. 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 Nine Months 2010 2009 2010 2009 Numerator: Net Income (Loss) $
236 $ (17) $
1,290 $ (294) Preferred Stock Dividends (15) (15) (45) (45) Numerator for basic earnings per share -
221 (32)
1,245 (339) Effect of
dilutive securities:
-
-
-
- Numerator for diluted income (loss) per share - $
221 $ (32) $
1,245 $ (339) Denominator: Denominator for basic income (loss) per share -
1,908
1,891
1,899
1,891 Effect of dilutive securities: Employee stock options
12
-
11
- Detachable warrants
666
-
545
- Dilutive
potential common shares
678
-
556
- Denominator for diluted income (loss) per share -
2,586
1,891
2,455
1,891 Basic
income (loss) per common share $
0.12 $ (0.02) $
0.66 $ (0.18) Diluted
income (loss) per common share $
0.09 $ (0.02) $
0.51 $ (0.18) 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 September
30, 2010 and 2009. The convertible
preferred shares were not included in the computation of diluted earnings per
share as the effect would be antidilutive. Approximately
153,000 and 155,000 employee stock options were excluded from the computation
of diluted earnings per share for the three and nine month periods ended September
30, 2010, respectively; and approximately 175,000 were excluded for the same
three and nine month periods of 2009. The employee stock options were
excluded as the effect would be antidilutive. For
the three and nine month periods ended September 30, 2010 and 2009,
approximately 315,000 and 881,000 of shares of common stock, respectively,
exercisable under the warrants were excluded from the computation of diluted
earnings per share as the effect would be antidilutive. For
the three and nine month periods ended September 30, 2009, approximately
566,000 shares of common stock convertible under debentures 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:
September 30, 2010 Net Sales: Customer
sales $
4,753 $
1,953 $
837 $
- $
7,543 Intercompany
sales
-
575
1,254 (1,829)
- Total Net Sales $
4,753 $
2,528 $
2,091 $ (1,829) $
7,543 Location profit (loss) $
94 $
308 $ (125) $ (41) $
236
September 30, 2009 Net Sales: Customer
sales $
4,243 $
1,577 $
621 $
- $
6,441 Intercompany
sales
6
290
909 (1,205)
- Total Net Sales $
4,249 $
1,867 $
1,530 $ (1,205) $
6,441 Location profit (loss) $ (17) $
51 $
21 $ (72) $ (17) As of and for the nine
months ended:
September 30, 2010 Net Sales: Customer
sales $
13,951 $
6,122 $
2,254 $
- $
22,327 Intercompany
sales
24
1,532
3,896 (5,452)
- Total Net Sales $
13,975 $
7,654 $
6,150 $ (5,452) $
22,327 Location profit (loss) $
587 $
665 $ (27) $
65 $
1,290 Location assets $
11,811 $
7,733 $
15,273 $
- $
34,817
September 30, 2009 Net Sales: Customer
sales $
12,049 $
4,194 $
1,555 $
- $
17,798 Intercompany
sales
6
1,633
2,333 (3,972)
- Total Net Sales $
12,055 $
5,827 $
3,888 $ (3,972) $
17,798 Location profit (loss) $ (159) $ (128) $ (66) $
59 $ (294) Location assets $
11,935 $
8,338 $
13,545 $
- $
33,818 TOR Minerals International, Inc. and Subsidiaries 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. Note 9. Stock Options and Equity Compensation Plan For the three month period
ended September 30, 2009, the Company recorded stock-based employee
compensation expense of $28,000. For the nine month period ended September
30, 2010 and 2009, the Company recorded stock-based employee compensation
expense of $91,000 and $78,000, respectively. This compensation expense
is included in the selling, general and administrative expenses in the
accompanying consolidated statements of operations. The Company granted 23,404
and 137,500 options during the nine month periods ended September 30, 2010 and
2009. As of September 30, 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) September 30, December 31, 2010 2009 Raw materials $
5,440 $
4,178 Work in progress
1,376
1,173 Finished goods
2,952
3,311 Supplies
779
710 Total
Inventories
10,547
9,372 Inventory
reserve (144) (271) Net
Inventories $
10,403 $
9,101 TOR Minerals International, Inc. and Subsidiaries 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.
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. The contract settled on March 1, 2009 at which time we
recorded a net expense of approximately $27,000 as a component of our cost of
sales. At September 30, 2010, there were no natural gas contracts
outstanding. TOR Minerals International, Inc. and Subsidiaries 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 September 30,
2010, we marked these contracts to market, recording $30,000 as a current asset
on the balance sheet. For the three and nine month periods ended September
30, 2010, we recorded $30,000 and $143,000, respectively, as a component of our
net income. For the three and nine month periods ended September 30,
2009, we recorded $22,000 and $31,000, respectively, as a component of our net
loss. 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 September 30, December 31, Derivative Instrument Location 2010 2009 Foreign
Currency Exchange Contracts Other
Current Assets $
30 $
3 $
30 $
3 The following
table summarizes the impact of the Company’s derivatives on the condensed
consolidated financial statements of operations for the three and nine month
periods ended September 30, 2010 and 2009: Amount of Gain (Loss) Recognized in Operations Location of Gain Three Months Ended Nine Months Ended Derivative (Loss) on Derivative September 30, September 30, Instrument Instrument 2010 2009 2010 2009 Natural Gas Cost of Sales $
- $
- $
- $
(27) Foreign Currency Other Income
30
22
143
31 $
30 $
22 $
143 $
4 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 and other uses 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 and nine month periods ended September 30, 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 Nine Months 2010 2009 2010 2009 NET SALES $
7,543 $
6,441 $
22,327 $
17,798 Cost of sales
6,234
5,492
17,765
15,170 GROSS MARGIN
1,309
949
4,562
2,628 Technical services and research and development
66
54
184
146 Selling, general and administrative expenses
846
687
2,666
2,423 OPERATING
INCOME
397
208
1,712
59 OTHER INCOME
(EXPENSE): Interest income
-
-
-
2 Interest expense (110) (159) (343) (407) Gain (loss) on foreign currency exchange rate (53) (5) (47)
37 Other, net
-
-
-
4 INCOME
(LOSS) BEFORE INCOME TAX
234
44
1,322 (305) Income tax expense (benefit) (2)
61
32 (11) NET INCOME
(LOSS) $
236 $
(17) $
1,290 $
(294) Income
(loss) per common share: Basic $
0.12 $
(0.02) $
0.66 $
(0.18) Diluted $
0.09 $
(0.02) $
0.51 $
(0.18) TOR Minerals International, Inc. and Subsidiaries 2010 Outlook For
the duration of 2010, we anticipate market conditions for our products in
certain end markets to continue 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 nine months 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 further market
penetration in niche markets, which we are hopeful will generate additional
incremental revenue for HITOX gong forward. 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 meeting the most stringent 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 and raw material prices, as well as the
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 us. 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 higher 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 three and nine month periods ended September 30,
2010 increased approximately $1,102,000 or 17% and $4,529,000 or 25%,
respectively, as compared to the same three and nine month periods of 2009 when
we experienced declines in our consolidated net sales of $1,062,000 or 14% and
$3,367,000 or 16%, respectively. Following
is a summary of our consolidated products sales for the three and nine month
periods ended September 30, 2010 and 2009 (in thousands). All
inter-company sales have been eliminated. (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, Product 2010 2009 Variance 2010 2009 Variance HITOX $
2,941 39% $
2,890 45% $
51 2% $
8,939 40% $
7,673 43% $
1,266 16% ALUPREM
2,719 36%
2,266 35%
453 20%
8,038 36%
6,791 38%
1,247 18% BARTEX
985 13%
705 11%
280 40%
2,804 13%
1,908 11%
896 47% HALTEX
618 8%
475 7%
143 30%
1,977 9%
1,124 6%
853 76% TIOPREM
180 3%
2 <1%
178 8900%
266 1%
5 <1%
261 5220% OTHER
100 1%
103 2% (3) -3%
303 1%
297 2%
6 2% Total $
7,543 100% $
6,441 100% $
1,102 17% $
22,327 100% $
17,798 100% $
4,529 25% HITOX sales increased 2% and 16% for the three and nine
month periods ended September 30, 2010, respectively, as compared to the same
periods in 2009 primarily due to an increase in world-wide demand. This
compares to a decline of 28% and 32% during the same three and nine month
periods ended September 30, 2009, respectively, as a result of the weak North
American market and the impact of the global economy. ALUPREM sales increased 20% during the third quarter of 2010 and
18% for the nine month period ended September 30, 2010, as compared to the same
periods of 2009 primarily due to an increase in sales in Europe. This
compares to a decrease of 1% and an increase of 9% during the same three and
nine month periods of 2009, respectively. BARTEX sales increased 40% during the third quarter of 2010 and
47% for the nine month period ended September 30, 2010 primarily due to an
increase in volume and our customer base. This follows a decline of approximately
5% and 23% during the same three and nine month periods of 2009, respectively, primarily
as a result of the downturn in the US economy. HALTEX sales increased 30% and 76% for the three and nine
month periods ended September 30, 2010, respectively. This compares to an
increase of 45% and 26% for the same three and nine month periods of 2009,
respectively. The year over year increase is related to new business for
our standard HALTEX and newer 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 and nine month periods ended September 30, 2010 and 2009 (in
thousands). All inter-company sales have been eliminated. (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, Product 2010 2009 Variance 2010 2009 Variance HITOX $
1,954 41% $
2,071 49% $ (117) -6% $
6,136 44% $
5,669 47% $
467 8% ALUPREM
974 20%
896 21%
78 9%
2,544 18%
3,094 26% (550) -18% BARTEX
985 21%
705 17%
280 40%
2,804 20%
1,908 16%
896 47% HALTEX
618 13%
475 11%
143 30%
1,977 14%
1,124 9%
853 76% TIOPREM
130 3%
- 0%
130 100%
205 2%
3 <1%
202 < 1% OTHER
92 2%
96 2% (4) -4%
285 2%
251 2%
34 14% Total $
4,753 100% $
4,243 100% $
510 12% $
13,951 100% $
12,049 100% $
1,902 16% HITOX – Sales in the US, Mexico and South
America trailed the third quarter last year 10%, 60% and 13%,
respectively, however, HITOX sales in Canada increased 51% resulting in a
net decrease of 6% for the quarter as compared to the same period in 2009.
This compares to a net decrease in the third quarter of 2009 of 22%.
Year to date, HITOX sales increased 8% primarily related to the gradual
improvement in the construction industry, as compared to a net decrease of
28% during the same nine month period of 2009. Sales in the US,
Canada, Mexico and South America increased 3%, 40%, 18% and 11%, respectively. TOR Minerals International, Inc. and Subsidiaries 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 and nine month periods ended
September 30, 2010 and 2009 to third party customers. All inter-company
sales have been eliminated. (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, Product 2010 2009 Variance 2010 2009 Variance ALUPREM $
1,745 89% $
1,370 87% $
375 27% $
5,494 90% $
3,697 88% $
1,797 49% HITOX
187 10%
205 13% (18) -9%
596 10%
495 12%
101 20% TIOPREM
21 1%
2 <1%
19 < 1%
32 <1%
2 <1%
30 < 1% Total $
1,953 100% $
1,577 100% $
376 24% $
6,122 100% $
4,194 100% $
1,928 46% ALUPREM
–European sales increased 27% and 49% for the three and nine month
periods ended September 30, 2010, respectively, primarily due to an increase
in volume, customer base and product mix, offset by the negative impact of
foreign currency rate fluctuations as the Euro weakened against the
USD. During the same three and nine month periods of 2009, European
ALUPREM sales decreased 11% and 27%, respectively. 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 and
nine month periods ended September 30, 2010 and 2009 to third party
customers. All inter-company sales have been eliminated. (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, Product 2010 2009 Variance 2010 2009 Variance HITOX $
800 96% $
614 99% $
186 30% $
2,207 98% $
1,509 97% $
698 46% TIOPREM
29 3%
- 0%
29 100%
29 1%
- 0%
29 100% OTHER
8 1%
7 1%
1 14%
18 1%
46 3% (28) -61% Total $
837 100% $
621 100% $
216 35% $
2,254 100% $
1,555 100% $
699 45% HITOX – Asian HITOX sales increased 30% and 46% for the three and nine
month periods ended September 30, 2010, respectively, primarily due to an increase
in volume related to the continuing improvement in the economy and the
construction industry in Asia, as well as the positive effect of the
foreign currency fluctuations between the Malaysian Ringgit and the USD as
the Ringgit has gained in strength against the USD. During the same
three and nine month periods of 2009, HITOX sale in Asia decreased 49% and
46%, respectively. TOR Minerals International, Inc. and Subsidiaries Other Consolidated Results Gross Margin: For the three and nine month periods ended
September 30, 2010, gross margin increased approximately 2.7% and 5.6%,
respectively. Primary positive factors affecting our gross margin include
the mix of products sold during the three and nine month periods compared to
the same periods of 2009, as well our efforts to maintain and/or reduce costs
and maximize efficiency. Negative factors impacting our gross margin
include an increase in the cost of energy and raw materials, as well as the
foreign currency fluctuations. However, we are partially offsetting these
negative factors by reducing idle plant time resulting from the timing of our
SR production at TMM, as well as increasing production at our US operation. Technical Services and Selling, General, Administrative and Expenses
(“SG&A”): Total SG&A expenses increased approximately 23.1%
during the three month period ended September 30, 2010 as compared to the same
period in 2009 primarily due to an increase in compensation expense and sales expense.
For the nine month period ended September 30, 2010, SG&A expenses increased
approximately 10.9% primarily related to an increase in sales expense. In
February 2009, the Company implemented a 20% salary reduction for management
and staff; however, effective January 1, 2010, the Company reinstated these salaries
to their previous level. Interest Expense: Net interest expense for the three and nine
month periods ended September 30, 2010 decreased approximately $49,000 and $64,000,
respectively, as compared to the same periods of 2009, primarily due to a
decrease in long-term debt and our lines of credit, offset by interest on the
debentures and warrants issued in 2009. Income Taxes: Income taxes consisted of federal tax benefit
of $12,000 and state income tax expense of $3,000, respectively, and foreign
deferred tax expense of approximately $7,000 for the three month period ended
September 30, 2010, compared to a foreign deferred tax expense of approximately
$61,000 for the same three month period in 2009. For the nine month
period ended September 30, 2010, we recorded state tax expense of $8,000 and
foreign deferred tax expense of $24,000, compared to a foreign deferred tax
benefit of $13,000 and state income tax expense of $2,000 during the same
period of 2009. Taxes are based on an estimated annualized consolidated
effective rate of 2.4% for the year ending 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 in our Form 10-K filed with the Securities and Exchange Commission
(the “SEC”) on March 24, 2010, the Company was not in compliance
with the Consolidated Fixed Charge Ratio and the Consolidated Funded Debt to
EBITDA 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. As a result, the Bank notified the
Company of its decision to terminate the Credit Agreement. As
reported in the Company’s Form 8-K filed with the SEC on October 4, 2010,
the Bank extended the maturity date on our Line of Credit (the “Line”)
from August 15, 2010 to February 15, 2011. As a result, all of the
Company’s debt owed to the Bank matures on February 15, 2011. The
Company repaid the outstanding balance on its two Term Loans with the Bank in
2009, and at September 30, 2010, the Company had $500,000 drawn on the Line.
In addition, the Company was in compliance with the revised financial covenants
for each quarter ended from June 30, 2009 through September 30, 2010. The
Company is working diligently to establish a corporate lending relationship
with a new financial institution for the Company’s US operations prior to
February 15, 2011, 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 September 30, 2010, TMM’s borrowings
under the credit facilities and term loans with HSBC Bank Malaysia, Bhd.
(“HSBC”) and RHB Bank, Bhd. (“RHB”) totaled $543,000
and TPT’s borrowings under the credit facility and term loans with
Rabobank totaled $2,362,000. TMM’s credit facilities with HSBC
matured on October 31, 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 or that any stated maturity date
in a renewal or amendment to these credit facilities will be extended for a
sufficient amount of time to allow the Company to meet its commitments under
the facilities or find alternate financing arrangements. The
events described above raise 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 to
financial institutions debt. (Unaudited) (In thousands) September 30, December 31, 2010 2009 Term
note payable to a U.S. equipment financing company, with an interest rate of
5.24% at September 30, 2010, due April 1, 2013, secured by a Caterpillar
front-end loader. $
66 $
84 Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
7.8% at September 30, 2010, due July 1, 2029, secured by TPT's land and
office building purchased July 2004. (367 Euro)
500
547 Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
4.6% at September 30, 2010, due January 31, 2030, secured by TPT's land and
building purchased January 2005. (365 Euro)
498
543 Fixed
rate Euro term note payable to a Netherlands bank, with an interest rate of
4.05% at September 30, 2010, due July 31, 2015, secured by TPT's
assets. (246 Euro)
335
406 U.S.
Dollar term note payable to a Malaysian bank, secured by TMM's property,
plant and equipment, matured June 30, 2010.
-
191 U.S.
Dollar term note payable to a Malaysian bank, with an interest rate of 1.625%
at September 30, 2010, due May 30, 2011, secured by TMM's property, plant and
equipment.
66
141 Total
1,465
1,912 Less current
maturities
211
435 Total long-term
debt and notes payable - financial institutions $
1,254 $
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. 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. TOR Minerals International, Inc. and Subsidiaries On
September 30, 2010, we amended the Credit Agreement with the Bank to extend the
maturity date on the Line from August 15, 2010 to February 15, 2011. Under
the terms of the amendment, the Line was reduced from $2,250,000 to $1,500,000
(subject to a defined borrowing base) and the interest rate remained at Prime
plus three percent. The loan covenant regarding the current ratio
remained unchanged at 1.0 to 1.0 and the fixed charge coverage increased from
0.85 to 1.0 to 1.10 to 1.0. As a result of this amendment, all of our
debt owed to the Bank will mature on February 15, 2011, 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
September 30, 2010, the financial covenants were as follows: Covenants to be based solely on
the results of the US operation Current Ratio – Maintain a
ratio of current assets to current liabilities of at least 1.0 to 1.0 (1.65 to
1.0 as of the quarter ended September 30, 2010) Fixed Charge Coverage Ratio
– Maintain a fixed charge coverage ratio of at least 1.1 to 1.0 (6.65 to
1.0 for the quarter ended September 30, 2010) At
September 30, 2010, the outstanding balance on the Credit Agreement consisted
of $500,000 on the Line and we had $1,000,000 available on that date based on
eligible accounts receivable and inventory borrowing limitations. The
interest rate on the Line was 6.25% at September 30, 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 September 30, 2010 was $66,000. 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 date. The
Credit Facility, which has a variable interest rate of Bank prime plus 2.8%
(currently at 7.3%), is secured by TPT’s accounts receivable and
inventory. At September 30, 2010,
TPT had utilized Euro 755,000 ($1,029,000) 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. TOR Minerals International, Inc. and Subsidiaries Malaysian Operation The
Company’s subsidiary, TMM, is negotiating with HSBC Bank Malaysia Berhad
(“HSBC”) to extend the maturity date of its banking facility which
matured on October 31, 2010. The facility with HSBC 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 ($162,000, $809,000 and $1,619,000, 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 ($324,000, $3,011,000 and $8,094,000, 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 September
30, 2010, TMM had utilized RM 1,472,000 ($477,000) of the ECR facilities. TMM
is currently negotiating with both HSBC and RHB to renew or amend the credit
facilities to provide for, among other things, an extended stated maturity date
of both bank facilities. The Company is confident that the bank
facilities will be renewed; however, there can be no assurance that the
facilities will be renewed, amended or extended or as to the terms and
conditions of the extension of the facility. If these lenders are
unwilling to extend the maturity dates of these facilities, 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. Cash and Cash Equivalents As
noted on the following table, cash and cash equivalents decreased $438,000 for
the nine months ended September 30, 2010 as compared to an increase of $702,000
for the nine months ended September 30, 2009. (Unaudited) Nine Months Ended September 30, (In
thousands) 2010 2009 Net
cash provided by (used in) Operating
activities $
2,050 $
985 Investing
activities (1,009) (807) Financing
activities (1,737)
737 Effect
of exchange rate fluctuations
258 (213) Net
change in cash and cash equivalents $ (438) $
702 TOR Minerals International, Inc. and Subsidiaries Operating Activities Operating
activities provided $2,050,000 during the first nine months of 2010 as compared
to $985,000 during the same period 2009. Following are the major changes
in working capital affecting cash provided by operating activities for the nine
month period ended September 30, 2010: Investing Activities We
used cash of $1,009,000 in investing activities during the first nine months of
2010 primarily for the purchase of fixed assets as compared to $807,000 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 $1,737,000 in financing activities during the nine month period ended
September 30, 2010 as compared to cash provided by financing activities of $737,000
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 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 Signatures: 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: November 15, 2010 OLAF KARASCH Date: November 15, 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:
November 15, 2010 /s/ Olaf Karasch Olaf Karasch
Securities and
Exchange Commission
Washington, D. C. 20549
____________________________
FORM 10-Q
____________________________
For the quarterly period ended September 30, 2010
OR
For the transition period from __________ to __________
(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
1,909,188
Three and nine months ended September 30, 2010 and 2009
Three and nine months ended September 30, 2010 and 2009
September 30, 2010 and December 31, 2009
Nine months ended September 30, 2010 and 2009
and Results of Operations
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Ended September 30,
Ended September 30,
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(In thousands)
Ended September 30,
Ended September 30,
Consolidated Balance Sheets
(In thousands, except per share amounts)
2010
2009
authorized, 5,000 shares; 200 shares issued and
outstanding at 9/30/2010 and 12/31/2009
1,909 and 1,891 shares issued and outstanding
at 9/30/2010 and 12/31/2009, respectively
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)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
September 30, 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 September 30,
Ended September 30,
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)
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(In thousands)
Swap Contract
Exchange Contracts
(Expense)
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Ended September 30,
Ended September 30,
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
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
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: November 15, 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 September 30, 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)
November 15, 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 September 30, 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)
November 15, 2010