United States |
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(Mark One) |
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ý |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Delaware |
74-2081929 |
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722 Burleson Street,
Corpus Christi, Texas 78402 |
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Yes ý |
No o |
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Yes ý |
No o |
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Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer o |
Smaller reporting company ý |
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Yes o |
No ý |
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Class |
Shares
Outstanding as of July 29, 2014 |
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Table of Contents |
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Part I - Financial Information |
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Page No. |
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Item 1. |
Condensed Consolidated Financial Statements |
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Condensed Consolidated
Statements of Income -- |
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 |
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Item 2. |
Management's Discussion
and Analysis of Financial Condition |
15 |
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Item 4. |
Controls and Procedures |
27 |
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Part II - Other Information |
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Item 6. |
Exhibits |
28 |
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Signatures |
28 |
Forward Looking Information
Certain portions of this report contain forward-looking statements about the business, financial condition and prospects of TOR Minerals International, Inc. (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 Titanium dioxide 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 |
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Condensed Consolidated Statements of Income |
||||||||
(Unaudited) |
||||||||
(In thousands, except per share amounts) |
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|
|
|||||||
|
Three
Months |
|
Six Months |
|||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
NET SALES |
$ |
12,392 |
$ |
10,732 |
$ |
25,524 |
$ |
22,159 |
Cost of sales |
10,885 |
9,020 |
21,865 |
18,953 |
||||
GROSS MARGIN |
|
1,507 |
|
1,712 |
|
3,659 |
|
3,206 |
Technical services and research and development |
54 |
171 |
100 |
324 |
||||
Selling, general and administrative expenses |
1,114 |
1,247 |
2,227 |
2,525 |
||||
Loss on disposal of assets |
- |
- |
- |
10 |
||||
OPERATING INCOME |
|
339 |
|
294 |
|
1,332 |
|
347 |
OTHER INCOME (EXPENSE): |
||||||||
Interest expense, net |
(95) |
(99) |
(190) |
(183) |
||||
Gain (Loss) on foreign currency exchange rate |
(57) |
20 |
(61) |
(67) |
||||
Other, net |
- |
- |
5 |
12 |
||||
Total Other Expense |
(152) |
(79) |
(246) |
(238) |
||||
INCOME BEFORE INCOME TAX |
|
187 |
|
215 |
|
1,086 |
|
109 |
Income tax expense |
34 |
65 |
226 |
34 |
||||
NET INCOME |
$ |
153 |
$ |
150 |
$ |
860 |
$ |
75 |
|
|
|
|
|
|
|
|
|
Earnings per common share: |
||||||||
Basic |
$ |
0.05 |
$ |
0.05 |
$ |
0.29 |
$ |
0.03 |
Diluted |
$ |
0.04 |
$ |
0.04 |
$ |
0.25 |
$ |
0.02 |
Weighted average common shares outstanding: |
||||||||
Basic |
3,014 |
2,998 |
3,014 |
2,992 |
||||
Diluted |
3,402 |
3,404 |
3,407 |
3,196 |
||||
See accompanying notes. |
TOR Minerals International, Inc. and Subsidiaries |
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Condensed Consolidated Statements of Comprehensive Income (Loss) |
||||||||
(Unaudited) |
||||||||
(In thousands) |
||||||||
|
|
|||||||
|
Three
Months |
|
Six Months |
|||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
NET INCOME |
$ |
153 |
$ |
150 |
$ |
860 |
$ |
75 |
OTHER COMPREHENSIVE INCOME (LOSS), net of tax |
||||||||
Currency translation adjustment, net of tax: |
||||||||
Net foreign currency translation adjustment gains (losses) |
207 |
(277) |
292 |
(686) |
||||
Other comprehensive gain (loss), net of tax |
207 |
(277) |
292 |
(686) |
||||
COMPREHENSIVE INCOME (LOSS) |
$ |
360 |
$ |
(127) |
$ |
1,152 |
$ |
(611) |
See accompanying notes. |
TOR Minerals International, Inc. and Subsidiaries |
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Condensed Consolidated Balance Sheets |
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(In thousands, except per share amounts) |
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|
June 30, |
|
December 31, |
|
|
|
(Unaudited) |
|
|
ASSETS |
||||
CURRENT ASSETS: |
||||
Cash and cash equivalents |
$ |
3,825 |
$ |
2,920 |
Trade accounts receivable, net |
6,330 |
4,526 |
||
Inventories, net |
18,071 |
20,753 |
||
Other current assets |
1,310 |
596 |
||
Total current assets |
29,536 |
28,795 |
||
PROPERTY, PLANT AND EQUIPMENT, net |
23,141 |
23,799 |
||
OTHER ASSETS |
23 |
23 |
||
Total Assets |
$ |
52,700 |
$ |
52,617 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||
CURRENT LIABILITIES: |
||||
Accounts payable |
$ |
3,117 |
$ |
3,279 |
Accrued expenses |
1,634 |
1,397 |
||
Notes payable under lines of credit |
715 |
1,477 |
||
Export credit refinancing facility |
3,478 |
3,866 |
||
Current deferred tax liability |
17 |
66 |
||
Current maturities - capital leases |
3 |
12 |
||
Current maturities of long-term debt – financial institutions |
1,197 |
1,040 |
||
Total current liabilities |
10,161 |
11,137 |
||
LONG-TERM DEBT - FINANCIAL INSTITUTIONS |
2,373 |
2,918 |
||
DEFERRED TAX LIABILITY |
406 |
18 |
||
Total liabilities |
12,940 |
14,073 |
||
COMMITMENTS AND CONTINGENCIES |
||||
SHAREHOLDERS' EQUITY: |
||||
Common
stock $1.25 par value: authorized, 6,000 shares; |
3,767 |
3,765 |
||
Additional paid-in capital |
29,444 |
29,365 |
||
Retained earnings |
2,513 |
1,653 |
||
Accumulated other comprehensive income: |
||||
Cumulative translation adjustment |
4,053 |
3,761 |
||
Total shareholders' equity |
39,777 |
38,544 |
||
Total Liabilities and Shareholders' Equity |
$ |
52,717 |
$ |
52,617 |
See accompanying notes. |
TOR Minerals International, Inc. and Subsidiaries |
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Condensed Consolidated Statements of Cash Flows |
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(Unaudited) |
||||
(In thousands) |
||||
|
||||
Six Months Ended June 30, |
||||
2014 |
|
2013 |
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|||
Net Income |
$ |
860 |
$ |
75 |
Adjustments to reconcile net income to net cash |
||||
Depreciation |
1,701 |
1,533 |
||
Loss on disposal of assets |
- |
10 |
||
Share-based compensation |
70 |
62 |
||
Deferred income tax expense (benefit) |
319 |
(71) |
||
Change in inventory reserve |
(170) |
(15) |
||
Provision for bad debts |
(7) |
- |
||
Changes in working capital: |
||||
Trade accounts receivables |
(1,777) |
(1,419) |
||
Inventories |
3,107 |
(3,478) |
||
Other current assets |
(713) |
356 |
||
Accounts payable and accrued expenses |
45 |
881 |
||
Net cash provided by (used in) operating activities |
3,435 |
(2,066) |
||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||
Additions to property, plant and equipment |
(901) |
(2,580) |
||
Proceeds from sales of property, plant and equipment |
- |
2 |
||
Net cash used in investing activities |
(901) |
(2,578) |
||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||
Net (payments on) proceeds from lines of credit |
(766) |
1,337 |
||
Net (payments on) proceeds from export credit refinancing facility |
(468) |
1,492 |
||
Payments on capital leases |
(9) |
(24) |
||
Proceeds from long-term bank debt |
236 |
276 |
||
Payments on long-term bank debt |
(663) |
(503) |
||
Proceeds from the issuance of common stock and exercise of common stock options |
11 |
267 |
||
Net cash (used in) provided by financing activities |
(1,659) |
2,845 |
||
Effect of foreign currency exchange rate fluctuations on cash and cash equivalents |
30 |
(109) |
||
Net increase (decrease) in cash and cash equivalents |
905 |
(1,908) |
||
Cash and cash equivalents at beginning of period |
2,920 |
2,799 |
||
Cash and cash equivalents at end of period |
$ |
3,825 |
$ |
891 |
Supplemental cash flow disclosures: |
||||
Interest paid |
$ |
191 |
$ |
157 |
Income taxes paid |
$ |
70 |
$ |
240 |
See accompanying notes. |
TOR Minerals
International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 1. |
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 (the “SEC”). The interim condensed consolidated financial statements include the consolidated accounts of TOR Minerals International, Inc. (“TOR”, “we”, “us”, “our” or the “Company”) and its wholly-owned subsidiaries, TOR Processing and Trade, BV (“TPT”) and TOR Minerals Malaysia, Sdn. Bhd. (“TMM”) 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 consolidated 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, 2013, in our Annual Report on Form 10-K filed with the SEC on March 10, 2014. Operating results for the three and six month periods ended June 30, 2014, are not necessarily indicative of the results for the year ending December 31, 2014.
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 and state income tax expense of approximately $11,000 and $2,000, respectively, and foreign tax expense of approximately $21,000 for the three month period ended June 30, 2014, as compared to a federal tax benefit of approximately $24,000 and state income tax expense of approximately $2,000, respectively, and foreign tax expense of approximately $87,000 for the same three month period in 2013.
For the six month period ended June 30, 2014, income taxes consisted of federal and state income tax expense of approximately $58,000 and $4,000, respectively, and foreign tax expense of approximately $164,000, as compared to federal and state income tax expense of approximately $16,000 and $4,000, respectively, and foreign tax expense of approximately $14,000 for the same six month period in 2013. Taxes are based on an estimated annualized consolidated effective rate of 20.8% for the year ended December 31, 2014.
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, 2010 through December 31, 2013. Our state return, which is filed in Texas, is subject to examination for the tax years ended December 31, 2009 through December 31, 2013. Our tax returns in various non-U.S. jurisdictions are subject to examination for various tax years dating back to December 31, 2008.
As of January 1, 2014, we did not have any unrecognized tax benefits and there was no change during the six month period ended June 30, 2014. In addition, we did not recognize any interest and penalties in our condensed consolidated financial statements during the three and six month periods ended June 30, 2014. 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
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 2. |
Debt and Notes Payable |
Long-term Debt – Financial Institutions
Following is a summary of our long-term debt to financial institutions as of June 30, 2014 and December 31, 2013, in thousands:
June 30, |
||||
2014 |
December 31, |
|||
(Unaudited) |
2013 |
|||
Fixed Rate term note payable to a U.S. bank, with an interest rate of 5.5% at June 30, 2014, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our U.S. operation. |
$ |
701 |
$ |
911 |
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.85% at June 30, 2014, due July 1, 2029, secured by TPT's land and office building purchased July 2004. (€246) |
337 |
351 |
||
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.3% at June 30, 2014, due January 31, 2030, secured by TPT's land and building purchased January 2005. (€271) |
371 |
386 |
||
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at June 30, 2014, due July 31, 2015, secured by TPT's assets. (€33) |
46 |
80 |
||
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.25% at June 30, 2014. Paid off June 30, 2014. |
- |
139 |
||
Malaysian Ringgit term note payable to a Malaysian bank, with a fixed interest rate of 5.2% at June 30, 2014, due March 1, 2015, secured by TMM's property, plant and equipment. (RM 2,042) |
636 |
801 |
||
Malaysian Ringgit term note payable to a Malaysian bank, with a fixed interest rate of 5.2% at June 30, 2014, due October 25, 2018, secured by TMM's property, plant and equipment. (RM 4,750) |
1,479 |
1,290 |
||
Total |
3,570 |
3,958 |
||
Less current maturities |
1,197 |
1,040 |
||
Total long-term debt - financial institutions |
$ |
2,373 |
$ |
2,918 |
Short-term Debt
U.S. Operations
On December 31, 2010, the Company entered into a credit agreement, as amended, (the “Agreement”) with American Bank, N.A. (the “Lender”) which established a $1,000,000 line of credit (the “Line”), and on March 1, 2012, the Line was increased from $1,000,000 to $2,000,000. On May 15, 2013, the Company and the Lender entered into the second amendment which extended the maturity date from October 15, 2013 to October 15, 2014 and reduced the minimum interest rate floor from 5.5% to 4.5%. Under the terms of the Agreement, the amount the Company is entitled to borrow under the Line is subject to a defined borrowing base, which is based on the Company’s eligible accounts receivable and inventory. Amounts advanced under the Line bear interest at a variable rate equal to one percent per annum point above the Wall Street Journal Prime Rate as such prime rate changes from time to time, with a minimum floor rate of 4.5%. At June 30, 2014, no funds were outstanding on the Line.
TOR Minerals
International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
On January 14, 2014, the Company entered into the third amendment (the “Amendment”) with the Lender. Under the terms of the Amendment, the Company is required to maintain a ratio of cash flow to debt service of 1.0 to 1.0 for the four month period ended April 30, 2014, six month period ending June 30, 2014, nine month period ending September 30, 2014, and twelve month period ending December 31, 2014. Thereafter, the required ratio of cash flow to debt service shall be 1.25 to 1.0 measured on a rolling four quarter basis as originally detailed in the Agreement. For the six month period ended June 30, 2014, the ratio of cash flow to debt service was 2.76 to 1.0.
European Operations
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 €650,000 to €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 3.452%), is secured by TPT’s accounts receivable and inventory. At June 30, 2014, TPT had utilized €363,000 ($497,000) 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 Rabobank, 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 Rabobank could foreclose on the assets of TPT.
Asian Operations
On May 21, 2013, our subsidiary, TMM, amended its banking facility with HSBC Bank of Malaysia Berhad (“HSBC”) to extend the maturity date from April 30, 2013 to April 30, 2014. TMM is currently negotiating an extension to the banking facility with HSBC. The HSBC facility includes the following in RM: (1) overdraft of RM 500,000; (2) an import/export line (“ECR”) of RM 6,460,000; and (3) a foreign exchange contract limit of RM 5,000,000 ($156,000, $2,012,000 and $1,557,000, respectively).
On April 17, 2013, TMM amended its banking facility with RHB Bank Berhad (“RHB”) to extend the maturity date from March 5, 2013 to March 24, 2014. TMM is currently negotiating an extension to the banking facility with RHB. 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; (3) a bank guarantee of RM 1,200,000; and (4) a foreign exchange contract limit of RM 25,000,000 ($311,000, $2,896,000, $374,000 and $7,785,000, respectively). At June 30, 2014, the outstanding balance on the foreign exchange contract was RM 700,000 ($218,000) at a current interest rate of 2.20%.
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 June 30, 2014, the outstanding balance on the ECR facilities was RM 11,169,000 ($3,478,000) at a current interest rate of 4.9%.
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
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 3. |
Fair Value Measurements |
The following table summarizes the valuation of our financial instruments recorded on a fair value basis as of June 30, 2014 and December 31, 2013, in thousands. The Company did not hold any non-financial assets and/or non-financial liabilities subject to fair value measurements at June 30, 2014 or at December 31, 2013.
|
|
Fair Value Measurements |
||||||
Total |
|
Quoted Prices |
|
Significant |
|
Significant |
||
Asset |
|
|
|
|
|
|
|
|
June 30, 2014 |
|
|
|
|
|
|
|
|
Currency forward contracts |
$ |
14 |
$ |
- |
$ |
14 |
$ |
- |
Liability |
|
|
|
|
|
|
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
Currency forward contracts |
$ |
(14) |
$ |
- |
$ |
(14) |
$ |
- |
Our foreign currency derivative financial instruments mitigate foreign currency
exchange risks and include forward contracts. The forward contracts are
marked-to-market at each balance sheet date with any resulting gain or loss
recognized in income as part of the gain or loss on foreign currency exchange
rate included under “Other Expense” on the Company’s
condensed consolidated statements of income. The fair value of the
currency forward contracts is determined using Level 2 inputs based on the
currency rate in effect at the end of the reporting period.
The fair value of the Company’s debt is based on estimates using standard pricing models and Level 2 inputs, including the Company’s estimated borrowing rate, that take into account the present value of future cash flows as of the condensed consolidated balance sheet date. The computation of the fair value of these instruments is performed by the Company. The carrying amounts and estimated fair values of the Company’s long-term debt, including current maturities, are summarized below, in thousands:
|
June 30, 2014 |
|
December 31, 2013 |
|||||
|
Carrying |
|
Fair |
|
Carrying |
|
Fair |
|
Long-term debt, including
|
$ |
3,570 |
$ |
3,356 |
$ |
3,958 |
$ |
3,697 |
The carrying amounts reported in the condensed consolidated balance sheets for
cash and cash equivalents, trade receivables, payables and accrued liabilities,
accrued income taxes and short-term borrowings approximate fair values 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
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 4. |
Capital Leases |
On September 4, 2011, TPT entered into a financial lease agreement with Diependael Leasing, BV for equipment related to the production of ALUPREM. The cost of the equipment under the capital lease, in the amount of approximately €38,360 ($52,500), is included in the condensed consolidated balance sheets as property, plant and equipment. Accumulated amortization of the leased equipment at June 30, 2014 was approximately €35,166 ($48,000). The capital lease is in the amount of €41,256 ($56,500) including interest of €2,896 ($4,000) (implicit interest rate 4.786%). The lease term is 36 months with equal monthly installments of €1,146 ($1,570). The net present value of the lease at June 30, 2014 was €2,280 ($3,100).
Note 5. |
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 |
Six Months |
||||||
2014 |
|
2013 |
2014 |
|
2013 |
|||
Numerator: |
||||||||
Net Income |
$ |
153 |
$ |
150 |
$ |
860 |
$ |
75 |
Numerator
for basic earnings per share - |
153 |
150 |
860 |
75 |
||||
Effect of dilutive securities: |
||||||||
Numerator for diluted
earnings per share - |
$ |
153 |
$ |
150 |
$ |
860 |
$ |
75 |
Denominator: |
||||||||
Denominator
for basic earnings per share - |
3,014 |
2,998 |
3,014 |
2,992 |
||||
Effect of dilutive securities: |
||||||||
Employee stock options |
(5) |
(1) |
- |
- |
||||
Warrants |
393 |
407 |
393 |
204 |
||||
Dilutive potential common shares |
388 |
406 |
393 |
204 |
||||
Denominator for diluted
earnings per share - |
3,402 |
3,404 |
3,407 |
3,196 |
||||
Basic earnings per common share |
$ |
0.05 |
$ |
0.05 |
$ |
0.29 |
$ |
0.03 |
Diluted earnings per common share |
$ |
0.04 |
$ |
0.04 |
$ |
0.25 |
$ |
0.02 |
For the three and six month periods ended June 30, 2014 and 2013, approximately 106,000 and 65,000, respectively, of shares issuable upon exercise of employee stock options were excluded from the calculation of diluted earnings per share as the exercise price was greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive.
TOR Minerals
International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 6. |
Segment Information |
The Company and its subsidiaries operate in the business of pigment manufacturing and related products in three geographic segments. All U.S. manufacturing is done at the facility located in Corpus Christi, Texas. Foreign manufacturing is done by the Company’s wholly-owned foreign operations, TMM, located in Malaysia and TPT, located in The Netherlands. A summary of the Company’s manufacturing operations by geographic segment is presented below in thousands:
United States |
Europe |
Asia |
Inter-Company |
Consolidated |
||||||
As of and for the three months ended: |
||||||||||
June 30, 2014 |
||||||||||
Net Sales: |
||||||||||
Customer sales |
$ |
8,451 |
$ |
3,092 |
$ |
849 |
$ |
- |
$ |
12,392 |
Intercompany sales |
- |
2,133 |
3,241 |
(5,374) |
- |
|||||
Total Net Sales |
$ |
8,451 |
$ |
5,225 |
$ |
4,090 |
$ |
(5,374) |
$ |
12,392 |
Location income (loss) |
$ |
(8) |
$ |
603 |
$ |
(473) |
$ |
31 |
$ |
153 |
June 30, 2013 |
||||||||||
Net Sales: |
||||||||||
Customer sales |
$ |
7,872 |
$ |
1,698 |
$ |
1,162 |
$ |
- |
$ |
10,732 |
Intercompany sales |
- |
1,647 |
3,306 |
(4,953) |
- |
|||||
Total Net Sales |
$ |
7,872 |
$ |
3,345 |
$ |
4,468 |
$ |
(4,953) |
$ |
10,732 |
Location income (loss) |
$ |
(19) |
$ |
46 |
$ |
205 |
$ |
(82) |
$ |
150 |
As of and for the six months ended: |
||||||||||
June 30, 2014 |
||||||||||
Net Sales: |
||||||||||
Customer sales |
$ |
16,397 |
$ |
5,807 |
$ |
3,320 |
$ |
- |
$ |
25,524 |
Intercompany sales |
57 |
3,968 |
3,884 |
(7,909) |
- |
|||||
Total Net Sales |
$ |
16,454 |
$ |
9,775 |
$ |
7,204 |
$ |
(7,909) |
$ |
25,524 |
Location income (loss) |
$ |
46 |
$ |
1,147 |
$ |
(429) |
$ |
96 |
$ |
860 |
Location assets |
$ |
21,020 |
$ |
11,500 |
$ |
20,180 |
$ |
- |
$ |
52,700 |
June 30, 2013 |
||||||||||
Net Sales: |
||||||||||
Customer sales |
$ |
15,584 |
$ |
4,176 |
$ |
2,399 |
$ |
- |
$ |
22,159 |
Intercompany sales |
56 |
3,322 |
5,639 |
(9,017) |
- |
|||||
Total Net Sales |
$ |
15,640 |
$ |
7,498 |
$ |
8,038 |
$ |
(9,017) |
$ |
22,159 |
Location income (loss) |
$ |
29 |
$ |
265 |
$ |
(193) |
$ |
(26) |
$ |
75 |
Location assets |
$ |
22,655 |
$ |
10,747 |
$ |
23,901 |
$ |
- |
$ |
57,303 |
TOR Minerals
International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Product sales of inventory between the U.S., Asian and European operations are based on inter-company pricing, which includes an inter-company profit margin. In the geographic information, the location profit (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 parent company are based upon profit margins which represent competitive pricing of similar products. Intercompany sales consisted of SR, HITOX, ALUPREM and TIOPREM.
Note 7. |
Stock Options and Equity Compensation Plan |
The Company granted 20,500 options during each of the six month periods ended June 30, 2014 and 2013.
As of June 30, 2014, there was approximately $432,000 of stock-based employee compensation expense related to non-vested awards which is expected to be recognized over a weighted average period of 3.18 years.
As most options issued under the Company’s 2000 Incentive 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 8. |
Inventories |
Following is a summary of inventory at June 30, 2014 and December 31, 2013, in thousands:
|
|
|
June 30, |
|
December 31, |
|||
|
|
|
2014 |
|
2013 |
|||
Raw materials |
$ |
12,075 |
$ |
12,852 |
||||
Work in progress |
1,665 |
1,866 |
||||||
Finished goods |
3,385 |
5,306 |
||||||
Supplies |
1,082 |
1,034 |
||||||
Total Inventories |
18,207 |
21,058 |
||||||
Inventory reserve |
(136) |
(305) |
||||||
Net Inventories |
$ |
18,071 |
$ |
20,753 |
TOR Minerals
International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 9. |
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 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 foreign exchange contracts are used to mitigate uncertainty and volatility, and to cover underlying exposures.
Foreign Currency Forward Contracts
We manage the risk of changes in foreign currency exchange rates, primarily at our Asian 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 condensed consolidated balance sheets and changes in the fair value are recognized in earnings in the period of the change.
At June 30, 2014, we marked these contracts to market, recording $14,000 as a current asset on the condensed consolidated balance sheet. For the three and six month periods ended June 30, 2014, we recorded a net gain on these contracts of $14,000 and $23,000, respectively, as a component of our net income. For the three and six month periods ended June 30, 2013, we recorded a net gain on these contracts of $3,000 and $24,000, respectively, as a component of our net income.
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 sheets at June 30, 2014 and December 31, 2013, in thousands:
Asset Derivatives |
||||||
Derivative Instrument |
|
Location |
|
June 30, 2014 |
|
December 31, 2013 |
Foreign Currency |
Other Current Assets |
$ |
14 |
$ |
- |
|
Liability Derivatives |
||||||
Derivative Instrument |
|
Location |
|
June 30, 2014 |
|
December 31, 2013 |
Foreign Currency |
Accrued Expenses |
$ |
- |
$ |
14 |
The following table summarizes, in thousands, the impact of the Company’s derivatives on the condensed consolidated financial statements of income for the quarters ended June 30, 2014 and 2013:
Location of Gain |
Amount of Gain Recognized in Operations |
|||||||||
Derivative |
on Derivative |
Three Months Ended June 30, |
|
Six Month Ended June 30, |
||||||
Instrument |
Instrument |
2014 |
|
2013 |
2014 |
|
2013 |
|||
Foreign Currency |
Gain on foreign currency |
$ |
14 |
$ |
3 |
$ |
23 |
$ |
24 |
|
|
|
|
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
Company Overview
We are a global producer of high performance, specialty mineral products focused on product innovation and technical support. Our specialty mineral products, which include flame retardant and smoke suppressant fillers, engineered fillers, and TiO2-color hybrid pigments, are designed for use in plastics, coatings, paints and catalysts applications, as well as a wide range of other industrial applications. With operations in the United States, Europe and Asia, our mission is to bring high value products and superior levels of service to our customers to help ensure their success.
Our U.S. operation, located in Corpus Christi, Texas, is also the global headquarters for the Company. TPT, our European operation, located in Hattem, Netherlands, and TMM, our Asian operation, located in Ipoh, Malaysia. Following is a list of our current specialty mineral products and a brief description of the unique characteristics which lend to the high performance of these specialty products.
ALUPREM®
Premium Alumina Trihydrate (ATH) and Boehmite (AMH) products are produced at our European operation and are designed for the most demanding worldwide applications. In-house engineered surface treatment is available for enhance performance benefits.
ALUPREM TB and SR Boehmite alumina products are suitable for a broad range of applications including wire and cable, printed circuit boards, catalysts, high-tech polishing, coatings and pigments. Performance benefits include high temperature flame retardant, improved mechanical properties and scratch resistance, good resin compatibility and high brightness.
ALUPREM XHL is specially designed ATH for “Extra High Loading” to meet more stringent flame retardant and smoke suppressant requirements for sheet molding compound (“SMC”), bulk molding compound (“BMC”), pultrusion and other thermoset composite applications.
ALUPREM TA Bayer and TG ultra-white / translucent grade ATH products are designed for color critical applications like Solid Surface and performance driven uses such as wire and cable.
HITOX®
HITOX (high grade titanium dioxide) is a high quality, cost-effective, beige colored titanium dioxide pigment produced at both our U.S. and Asian operations. In products which require opacity and color, HITOX can reduce the amount of expensive organic and inorganic pigments as well as white TiO2. HITOX is used in a broad range of paint and coatings and plastics applications including architectural, coil backers, powder, container, wood, traffic, paper, primers, adhesive and sealants, roof coatings and PVC.
BARTEX® and BARYPREM®
High whiteness and brightness, chemical inertness and controlled particle sizing are features of BARTEX. Barium Sulfate’s high density is one of the primary reasons it is used as a pigment. Suitable for use in both acid and basic conditions, BARTEX gives weight and body to products ranging from powder coatings to rubber products and plastics. BARTEX is also used as an extender pigment in top coats and primers.
OPTILOAD®
OPTILOAD ATH is specially developed for “Optimum Loading”, offering a halogen-free solution for passing the most stringent flame retardant and smoke suppressant requirements. With increasing legislative concerns over smoke and toxicity associated with older halogenated systems, interest in re-formulation with OPTILOAD is growing. Produced at our U.S. operation, the low viscosity OPTILOAD series offers high performance in a wide range of thermoset composite applications including SMC, BMC, pultrusion, resin infusion and spray-up / hand lay-up.
HALTEX®
HALTEX ATH is an economical, non-toxic, flame retardant and smoke suppressant filler produced at our U.S. operation for supply to the North American market. HALTEX features tightly controlled particle sizing to meet specific application performance requirements. Quality is suitable for a broad range of uses including electrical components, SMC, BMC, adhesives and sealants, roof coatings, foam insulation and rubber mining belts.
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
TIOPREM®
TIOPREM is a high performance TiO2 colored hybrid pigment produced at both the U.S. and Asian operations. TIOPREM offers excellent heat stability making it suitable for use in high temperature resins and coatings. Typical applications are plastic master batch, color concentrates and liquid color. TIOPREM exhibits good opacity and is cost-effective in formulation, partially replacing more expensive heat stable pigments as well as white Titanium Dioxide.
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.
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 U.S. Dollar.
Following are our results for the three and six month periods ended June 30, 2014 and 2013.
(Unaudited) |
||||||||
(In thousands, except per share amounts) |
|
Three Months |
|
Six Months |
||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
NET SALES |
$ |
12,392 |
$ |
10,732 |
$ |
25,524 |
$ |
22,159 |
Cost of sales |
10,885 |
9,020 |
21,865 |
18,953 |
||||
GROSS MARGIN |
|
1,507 |
|
1,712 |
|
3,659 |
|
3,206 |
Technical services and research and development |
54 |
171 |
100 |
324 |
||||
Selling, general and administrative expenses |
1,114 |
1,247 |
2,227 |
2,525 |
||||
Loss on disposal of assets |
- |
- |
- |
10 |
||||
OPERATING INCOME |
|
339 |
|
294 |
|
1,332 |
|
347 |
OTHER INCOME (EXPENSE): |
||||||||
Interest expense, net |
(95) |
(99) |
(190) |
(183) |
||||
Gain (Loss) on foreign currency exchange rate |
(57) |
20 |
(61) |
(67) |
||||
Other, net |
- |
- |
5 |
12 |
||||
INCOME BEFORE INCOME TAX |
|
187 |
|
215 |
|
1,086 |
|
109 |
Income tax expense |
34 |
65 |
226 |
34 |
||||
NET INCOME |
$ |
153 |
$ |
150 |
$ |
860 |
$ |
75 |
|
|
|
|
|
|
|
|
|
Earnings per common share: |
||||||||
Basic |
$ |
0.05 |
$ |
0.05 |
$ |
0.29 |
$ |
0.03 |
Diluted |
$ |
0.04 |
$ |
0.04 |
$ |
0.25 |
$ |
0.02 |
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net Sales: Consolidated net sales increased approximately 15% or $1,660,000 and 15% or $3,365,000 for the three and six month periods ended June 30, 2014, respectively. The growth in sales for both the three and six month periods of 2014 is primarily related to an increase in volume of our specialty mineral products, ALUPREM and BARTEX.
Following is a summary of our consolidated products sales for the three and six month periods ended June 30, 2014 and 2013 (in thousands). All inter-company sales have been eliminated.
(Unaudited) |
|||||||||||||||||||
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|||||||||||||||
Product |
2014 |
2013 |
Variance |
|
2014 |
2013 |
Variance |
||||||||||||
ALUPREM |
$ |
5,369 |
43% |
$ |
3,137 |
29% |
$ |
2,232 |
71% |
$ |
9,745 |
38% |
$ |
7,024 |
32% |
$ |
2,721 |
39% |
|
HITOX |
3,448 |
28% |
3,797 |
36% |
(349) |
-9% |
7,144 |
28% |
7,836 |
35% |
(692) |
-9% |
|||||||
BARTEX / |
2,383 |
19% |
2,160 |
20% |
223 |
10% |
4,646 |
18% |
4,045 |
18% |
601 |
15% |
|||||||
HALTEX / |
858 |
7% |
903 |
8% |
(45) |
-5% |
1,741 |
7% |
1,750 |
8% |
(9) |
-1% |
|||||||
TIOPREM |
150 |
1% |
567 |
5% |
(417) |
-74% |
501 |
2% |
1,147 |
5% |
(646) |
-56% |
|||||||
SYNTHETIC |
- |
0% |
- |
0% |
- |
100% |
1,365 |
5% |
- |
0% |
1,365 |
||||||||
OTHER |
184 |
2% |
168 |
2% |
16 |
10% |
382 |
2% |
357 |
2% |
25 |
7% |
|||||||
Total |
$ |
12,392 |
100% |
$ |
10,732 |
100% |
$ |
1,660 |
15% |
$ |
25,524 |
100% |
$ |
22,159 |
100% |
$ |
3,365 |
15% |
ALUPREM sales increased 71% for the three month period ended June 30, 2014 and 39% for the six month period ended June 30, 2014, primarily related to an increase in volume from a large U.S. and European customer.
HITOX sales decreased 9% for both the three and six month periods ended June 30, 2014, primarily due to the weakness in the global TiO2 market, as well as the entry into the TiO2 market by producers of white TiO2 in China. For the second quarter of 2014, volume and selling price decreased approximately 3% and 6%, respectively, and for the six month period ended June 30, 2014, volume decreased only slightly; however, the selling price decreased approximately 7% and the impact of the change in foreign currency reduced HITOX year to date sales approximately 3%.
BARTEX/BARYPREM sales increased 10% and 15% during the three and six month periods ended June 30, 2014, respectively. For the three and six month periods, volume increased approximately 9% and 14%, respectively, and a change in selling price and the impact of the change in foreign currency accounted for an increase during both periods of approximately 1%.
HALTEX/OPTILOAD sales decreased 5% and 1% for the three and six month periods ended June 30, 2014, respectively. For the quarter ended June 30, 2014, volume decreased approximately 5%. The year to date decline consisted of an increase in volume of 1% which was partially offset by a change in product mix resulting in a reduction of 2%.
TIOPREM sales decreased 74% and 56% for the three and six month periods ended June 30, 2013, respectively. Volume decreased 71% during the second quarter of 2014 and the selling price decreased 3%. For the year to date period, sales volume decreased 53% and the selling price decreased 3%.
Synthetic Rutile (“SR”) represented 5% of our overall sales during the six month period ended June 30, 2014. Producers of white TiO2 in China have contributed to the weakness in the global TiO2 market. However, historically, we have not sold SR on a regular basis to third party customers. Our SR is typically produced for our own internal consumption. We did not sell SR during the second quarter of 2014 nor was any SR sold during the six month period ended June 30, 2013.
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
U.S. Operations
Our U.S. 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 U.S. operation for the three and six month periods ended June 30, 2014 and 2013 (in thousands), as well as a summary of the material changes. All inter-company sales have been eliminated.
(Unaudited) |
|||||||||||||||||||
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|||||||||||||||
Product |
2014 |
2013 |
Variance |
|
2014 |
2013 |
Variance |
||||||||||||
ALUPREM |
$ |
3,012 |
36% |
$ |
2,055 |
26% |
$ |
957 |
47% |
$ |
5,479 |
33% |
$ |
4,244 |
27% |
$ |
1,235 |
29% |
|
HITOX |
2,352 |
28% |
2,420 |
31% |
(68) |
-3% |
4,656 |
28% |
5,020 |
33% |
(364) |
-7% |
|||||||
BARTEX |
1,931 |
23% |
1,803 |
23% |
128 |
7% |
3,707 |
23% |
3,282 |
21% |
425 |
13% |
|||||||
HALTEX / |
858 |
10% |
903 |
11% |
(45) |
-5% |
1,741 |
11% |
1,750 |
11% |
(9) |
-1% |
|||||||
TIOPREM |
120 |
1% |
533 |
7% |
(413) |
-77% |
446 |
3% |
972 |
6% |
(526) |
-54% |
|||||||
OTHER |
178 |
2% |
158 |
2% |
20 |
13% |
368 |
2% |
316 |
2% |
52 |
16% |
|||||||
Total |
$ |
8,451 |
100% |
$ |
7,872 |
100% |
$ |
579 |
7% |
$ |
16,397 |
100% |
$ |
15,584 |
100% |
$ |
813 |
5% |
HITOX sales decreased 3% for the three month period ended June 30, 2014, due to a decrease in selling price of 3% as compared to the same period of 2013, primarily related to the continued weakening of the TiO2 market which is driving down the global selling price of TiO2 products. For the six month period ended June 30, 2014, the 7% decrease in HITOX sales was primarily related to a decrease in selling price of 5% and a decrease in volume of 2%.
BARTEX sales increased 7% and 13% the three and six month periods ended June 30, 2014, respectively. For the second quarter of 2014, an increase in volume of 8% was partially offset by a decrease in selling price of 1%; and for the six month period ended June 30, 2014, the increase in volume of 14% was partially offset by a decrease in selling price of 1%.
TIOPREM sales in the U.S. decreased 77% and 54% during the three and six month periods ended June 30, 2014, respectively. For the second quarter of 2014, volume decreased 74% and selling price decreased 3%; and for the six month period ended June 30, 2012, volume decreased 50% and selling price decreased sales 4%.
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
European Operations
Our subsidiary in The Netherlands, TPT, manufactures and sells ALUPREM to third party customers, as well as to our U.S. operation for distribution to U.S. customers. In addition, TPT purchases HITOX from TMM for distribution in Europe. The following table represents TPT’s sales (in thousands) for the three and six month periods ended June 30, 2014 and 2013 to third party customers. All inter-company sales have been eliminated.
(Unaudited) |
|||||||||||||||||||
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|||||||||||||||
Product |
2014 |
2013 |
Variance |
|
2014 |
2013 |
Variance |
||||||||||||
ALUPREM |
$ |
2,357 |
76% |
$ |
1,082 |
64% |
$ |
1,275 |
118% |
$ |
4,266 |
74% |
$ |
2,780 |
67% |
$ |
1,486 |
53% |
|
BARYPREM |
452 |
15% |
357 |
21% |
95 |
27% |
939 |
16% |
763 |
18% |
176 |
23% |
|||||||
HITOX |
253 |
8% |
232 |
14% |
21 |
9% |
552 |
9% |
582 |
14% |
(30) |
-5% |
|||||||
TIOPREM |
30 |
1% |
27 |
1% |
3 |
11% |
50 |
1% |
51 |
1% |
(1) |
-2% |
|||||||
Total |
$ |
3,092 |
100% |
$ |
1,698 |
100% |
$ |
1,394 |
82% |
$ |
5,807 |
100% |
$ |
4,176 |
100% |
$ |
1,631 |
39% |
ALUPREM sales in Europe increased 118% for the three month period ended June 30, 2014, primarily due to an increase in volume of 49%, product mix of 58% and the impact of the change in the foreign currency rate of approximately 11%. For the six month period ended June 30, 2014, ALUPREM sales increased 53% primarily due to an increase in volume of 32%, product mix of 14% and the impact of the change in the foreign currency rate of approximately 7%. The increase in volume and product mix is primarily related to our continued development of new high performance, specialty mineral products, as well as our focus on product innovation and technical support which has enabled TPT to grow its customer base.
HITOX sales in Europe increased 9% for the second quarter of 2014 primarily due to an increase in volume. For the six month period ended June 30, 2014, HITOX sales decreased approximately 5%, primarily due to a decrease in selling price of approximately 10% which was partially offset by the impact of the change in the foreign currency rate of approximately 5%. The European HITOX sales continue to be impacted by the overall weakness in the global TiO2 market.
BARYPREM sales in Europe increased 27% for the three month period ended June 30, 2014, primarily due to an increase in volume, selling price and the impact of the change in the foreign currency rate of approximately 13%, 9% and 5%, respectively. For the six month period ended June 30, 2014, sales increased 23%, primarily due to an increase in volume, selling price and the impact of the change in the foreign currency rate of approximately 15%, 4% and 4%, respectively.
TIOPREM sales in Europe increased 11% during the second quarter of 2014, primarily due to an increase in volume, selling price and the impact of the change in the foreign currency rate of approximately 4%, 4% and 3%, respectively. For the six month period ended June 30, 2014, TIOPREM sales decreased approximately 2%, primarily due to a decrease in volume.
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Asian Operations
Our subsidiary in Malaysia, TMM, manufactures and sells HITOX and SR to third party customers, as well as to our U.S. operation and TPT. The following table represents TMM’s sales (in thousands) for the three and six month periods ended June 30, 2014 and 2013 to third party customers. All inter-company sales have been eliminated.
(Unaudited) |
|||||||||||||||||||
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|||||||||||||||
Product |
2014 |
2013 |
Variance |
|
2014 |
2013 |
Variance |
||||||||||||
HITOX |
$ |
843 |
99% |
$ |
1,145 |
98% |
$ |
(302) |
-26% |
$ |
1,936 |
58% |
$ |
2,234 |
93% |
$ |
(298) |
-13% |
|
TIOPREM |
- |
0% |
7 |
1% |
(7) |
-100% |
5 |
> 1% |
124 |
5% |
(119) |
-96% |
|||||||
SYNTHETIC |
- |
0% |
- |
0% |
- |
0% |
1,365 |
41% |
- |
0% |
1,365 |
100% |
|||||||
OTHER |
6 |
1% |
10 |
1% |
(4) |
-40% |
14 |
1% |
41 |
2% |
(27) |
-66% |
|||||||
Total |
$ |
849 |
100% |
$ |
1,162 |
100% |
$ |
(313) |
-27% |
$ |
3,320 |
100% |
$ |
2,399 |
100% |
$ |
921 |
38% |
HITOX sales in Asia decreased 26% and 13% for the three and six month periods ended June 30, 2014, respectively. For the second quarter of 2014, volume and selling price decreased 12% and 14%, respectively. For the six month period ended June 30, 2013, the 4% increase in volume was offset by a decrease in selling price and the impact of the change in the foreign currency rate of 11% and 6%, respectively. The HITOX market in Asia continues to decline due to the weakness in the TiO2 market, as well as the entry into the TiO2 market by producers of white TiO2 in China.
TIOPREM sales in Asia decreased 100% and 96% during the three and six month periods ended June 30, 2014. For the second quarter of 2014, TMM did not sell any TIOPREM to third parties. For the six month period ended June 30, 2014, volume decreased approximately 91% and the impact of the change in the foreign currency rate reduced sales approximately 5%.
Synthetic Rutile (“SR”) represented 41% of TMM’s overall sales during the six month period ended June 30, 2014. Producers of white TiO2 in China have contributed to the weakness in the global TiO2 market. However, historically, we have not sold SR on a regular basis to third party customers. Our SR is typically produced for our own internal consumption. We did not sell SR during the second quarter of 2014 nor was any SR sold during the six month period ended June 30, 2013.
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Other Consolidated Results
Gross Margin: The following table represents our net sales, cost of sales and gross margin for the three and six month periods ended June 30, 2014 and 2013, in thousands.
(Unaudited) |
||||||||
|
|
Three Months |
|
Six Months |
||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
NET SALES |
$ |
12,392 |
$ |
10,732 |
$ |
25,524 |
$ |
22,159 |
Cost of sales |
10,885 |
9,020 |
21,865 |
18,953 |
||||
GROSS MARGIN |
$ |
1,507 |
$ |
1,712 |
$ |
3,659 |
$ |
3,206 |
GROSS MARGIN % |
12% |
16% |
14% |
14% |
For the three month period ended June 30, 2014, gross margin decreased approximately 4%. The primary factors influencing the decrease in gross margin include a decrease of approximately 6% related to the SR plant at TMM being idle the entire second quarter of 2014, which was partially offset by an increase in selling price and the impact of the change in the foreign currency rate of approximately 2%.
For the six month period ended June 30, 2014, the gross margin remained flat at 14%.
Selling, General, Administrative and Expenses (“SG&A”): SG&A expense decreased approximately 11% during the three month period ended June 30, 2014, primarily related to a decrease in selling expense and salaries of approximately 10% and 7%, respectively, which was partially offset by an increase in various SG&A expenses of 6%.
For the six month period ended June 30, 2014, SG&A expenses decreased approximately 12%, primarily due to a decrease in selling expense and salaries of approximately 6% and 11%, respectively, which was partially offset by an increase in various SG&A expenses of 5%.
Interest Expense: Net interest expense decreased approximately $4,000 for the second quarter of 2014 and increased approximately $7,000 for the six month period ended June 30, 2014, as compared to the same periods of 2013, primarily due to a decrease in our long and short-term financing at both the U.S. and European operations and an increase at our Asian operation.
Income Taxes: Income taxes consisted of federal and state income tax expense of approximately $11,000 and $2,000, respectively, and foreign tax expense of approximately $21,000 for the three month period ended June 30, 2014, as compared to a federal tax benefit of approximately $24,000 and state income tax expense of approximately $2,000, respectively, and foreign tax expense of approximately $87,000 for the same three month period in 2013.
For the six month period ended June 30, 2014, income taxes consisted of federal and state income tax expense of approximately $58,000 and $4,000, respectively, and foreign tax expense of approximately $164,000, as compared to federal and state income tax expense of approximately $16,000 and $4,000, respectively, and foreign tax expense of approximately $14,000 for the same six month period in 2013. Taxes are based on an estimated annualized consolidated effective rate of 20.8% for the year ended December 31, 2014.
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity, Capital Resources and Other Financial Information
Long-term Debt – Financial Institutions
Following is a summary of our long-term debt to financial institutions as of June 30, 2014 and December 31, 2013, in thousands:
June 30, |
||||
2014 |
December 31, |
|||
(Unaudited) |
2013 |
|||
Fixed Rate term note payable to a U.S. bank, with an interest rate of 5.5% at June 30, 2014, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our U.S. operation. |
$ |
701 |
$ |
911 |
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.85% at June 30, 2014, due July 1, 2029, secured by TPT's land and office building purchased July 2004. (€246) |
337 |
351 |
||
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.3% at June 30, 2014, due January 31, 2030, secured by TPT's land and building purchased January 2005. (€271) |
371 |
386 |
||
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at June 30, 2014, due July 31, 2015, secured by TPT's assets. (€33) |
46 |
80 |
||
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.25% at June 30, 2014. Paid off June 30, 2014. |
- |
139 |
||
Malaysian Ringgit term note payable to a Malaysian bank, with a fixed interest rate of 5.2% at June 30, 2014, due March 1, 2015, secured by TMM's property, plant and equipment. (RM 2,042) |
636 |
801 |
||
Malaysian Ringgit term note payable to a Malaysian bank, with a fixed interest rate of 5.2% at June 30, 2014, due October 25, 2018, secured by TMM's property, plant and equipment. (RM 4,750) |
1,479 |
1,290 |
||
Total |
3,570 |
3,958 |
||
Less current maturities |
1,197 |
1,040 |
||
Total long-term debt - financial institutions |
$ |
2,373 |
$ |
2,918 |
Short-term Debt
U.S. Operations
On December 31, 2010, the Company entered into a credit agreement, as amended, (the “Agreement”) with American Bank, N.A. (the “Lender”) which established a $1,000,000 line of credit (the “Line”), and on March 1, 2012, the Line was increased from $1,000,000 to $2,000,000. On May 15, 2013, the Company and the Lender entered into the second amendment which extended the maturity date from October 15, 2013 to October 15, 2014 and reduced the minimum interest rate floor from 5.5% to 4.5%. Under the terms of the Agreement, the amount the Company is entitled to borrow under the Line is subject to a defined borrowing base, which is based on the Company’s eligible accounts receivable and inventory. Amounts advanced under the Line bear interest at a variable rate equal to one percent per annum point above the Wall Street Journal Prime Rate as such prime rate changes from time to time, with a minimum floor rate of 4.5%. At June 30, 2014, no funds were outstanding on the Line.
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
On January 14, 2014, the Company entered into the third amendment (the “Amendment”) with the Lender. Under the terms of the Amendment, the Company is required to maintain a ratio of cash flow to debt service of 1.0 to 1.0 for the four month period ended April 30, 2014, six month period ending June 30, 2014, nine month period ending September 30, 2014, and twelve month period ending December 31, 2014. Thereafter, the required ratio of cash flow to debt service shall be 1.25 to 1.0 measured on a rolling four quarter basis as originally detailed in the Agreement. For the six month period ended June 30, 2014, the ratio of cash flow to debt service was 2.76 to 1.0.
European Operations
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 €650,000 to €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 3.452%), is secured by TPT’s accounts receivable and inventory. At June 30, 2014, TPT had utilized €363,000 ($497,000) 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 Rabobank, 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 Rabobank could foreclose on the assets of TPT.
Asian Operations
On May 21, 2013, our subsidiary, TMM, amended its banking facility with HSBC Bank of Malaysia Berhad (“HSBC”) to extend the maturity date from April 30, 2013 to April 30, 2014. TMM is currently negotiating an extension to the banking facility with HSBC. The HSBC facility includes the following in RM: (1) overdraft of RM 500,000; (2) an import/export line (“ECR”) of RM 6,460,000; and (3) a foreign exchange contract limit of RM 5,000,000 ($156,000, $2,012,000 and $1,557,000, respectively).
On April 17, 2013, TMM amended its banking facility with RHB Bank Berhad (“RHB”) to extend the maturity date from March 5, 2013 to March 24, 2014. TMM is currently negotiating an extension to the banking facility with RHB. 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; (3) a bank guarantee of RM 1,200,000; and (4) a foreign exchange contract limit of RM 25,000,000 ($311,000, $2,896,000, $374,000 and $7,785,000, respectively). At June 30, 2014, the outstanding balance on the foreign exchange contract was RM 700,000 ($218,000) at a current interest rate of 2.20%.
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 June 30, 2014, the outstanding balance on the ECR facilities was RM 11,169,000 ($3,478,000) at a current interest rate of 4.9%.
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
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Cash and Cash Equivalents
As noted on the following table, cash and cash equivalents increased $905,000 for the six months ended June 30, 2014 as compared to a decrease of $1,908,000 for the six months ended June 30, 2013, in thousands.
(Unaudited) |
||||
Six Months Ended June 30, |
||||
|
2014 |
|
2013 |
|
Net cash provided by (used in) |
||||
Operating activities |
$ |
3,435 |
$ |
(2,066) |
Investing activities |
(901) |
(2,578) |
||
Financing activities |
(1,659) |
2,845 |
||
Effect of exchange rate fluctuations |
30 |
(109) |
||
Net increase (decrease) in cash and cash equivalents |
$ |
905 |
$ |
(1,908) |
Operating Activities
Operating activities provided cash of $3,435,000 in cash during the first six months of 2014 as compared to using cash of $2,066,000 during the same period of 2013. Following are the major changes in working capital affecting cash used by operating activities for the six month period ended June 30, 2014:
· Accounts Receivable: Accounts receivable increased $1,777,000 during the first six months of 2014. The increase in accounts receivable is primarily due to stronger sales in the second quarter 2014 compared to the fourth quarter of 2013. Accounts receivable increased $2,030,000 at the U.S. operation and $392,000 at TPT and decreased at TMM $645,000.
· Inventories: Inventories decreased $3,107,000 during the first six months of 2014. Inventories at the U.S. operation decreased $265,000, primarily related to a decrease in finished goods which was partially offset by an increase in raw materials. TMM’s inventory decreased approximately $2,834,000, primarily related to a decrease in SR feedstock. TPT’s inventory decreased approximately $8,000, primarily due to a decrease in raw materials.
· Other Current Assets: Other current assets increased $713,000 during the first six months of 2014. Prepaid expenses at the U.S. operation increased $105,000, primarily related to the timing of insurance premiums, TPT’s increased $386,000, primarily due to the prepayment of payroll taxes, deposits on equipment parts and timing of insurance premiums and TMM’s increased $222,000, primarily due to the timing of deposits paid on equipment.
· Accounts Payable and Accrued Expenses: Trade accounts payable and accrued expenses increased $45,000 during the first six months of 2014. Accounts payable and accrued expenses at the U.S. operation increased $110,000, primarily related to the timing of raw material purchases; TPT’s increased $478,000, primarily related to capital expenditures and an increase in tax accruals; and TMM’s decreased $543,000, primarily due to a reduction in raw material inventory.
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Investing Activities
We used $901,000 of cash in investing activities during the first six months of 2014, primarily for the purchase of fixed assets as compared to $2,578,000 during the same period 2013. Net investments for each of our three locations are as follows:
· U.S. Operation: We invested approximately $225,000 and $565,000 in 2014 and 2013, respectively, primarily related to capital maintenance and production equipment.
· European Operation: We invested approximately $455,000 and $578,000 in 2014 and 2013, respectively, for new equipment to increase the production capacity of ALUPREM.
· Asian Operation: We invested approximately $221,000 and $1,435,000 in 2014 and 2013, respectively, primarily related to improved efficiency and yield of SR production.
Financing Activities
Financing activities used cash of $1,659,000 during the six month period ended June 30, 2014 as compared to providing cash of $2,845,000 for the same period 2013. Significant factors relating to financing activities include the following:
· Lines of Credit
· U.S. Operation: Borrowings on our U.S. line of credit were not utilized by the Company during the six month period ended June 30, 2014, as compared to an increase of $700,000 during the first six months of 2013.
· European Operation: Borrowings on TPT’s line of credit decreased $576,000 during the six month period ended June 30, 2014, as compared to an increase of $50,000 during the same period of 2013.
· Asian Operation: Borrowings on TMM’s line of credit decreased $190,000 during the six month period ended June 30, 2014, as compared to an increase of $587,000 during the same period of 2013.
· Export Credit Refinancing Facility (ECR): TMM’s borrowing on the ECR decreased $468,000 during the six month period ended June 30, 2014, as compared to an increase of $1,492,000 for the same period in 2013.
· Capital Leases: Capital leases decreased approximately $9,000 during the first six months of 2014 as compared to a decrease of approximately $24,000 for the same period in 2013.
· Long-term Debt:
· U.S. Operation: Our U.S. long-term debt decreased $209,000 and $195,000 for the six month periods ended June 30, 2014 and 2013, respectively.
· European Operation: TPT’s long-term debt decreased $199,000 and $210,000 for the six month periods ended June 30, 2014 and 2013, respectively.
· Asian Operation: TMM’s long-term debt decreased $19,000 for the six month period ended June 30, 2014 and increased $178,000 for the six month period ended June 30, 2013.
Proceeds from Issuance of Common Stock: We received $11,000 from the issuance of common stock during the first six months of 2014 related to the exercise of stock options. For the same six month period of 2013, we received $267,000 from the issuance of common stock related to the exercise of stock options.
TOR Minerals
International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
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 2013 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 have 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 |
|
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: |
July 29, 2014 |
OLAF KARASCH |
||
Date: |
July 29, 2014 |
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: July 29, 2014
/s/ Olaf Karasch
Olaf Karasch
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: July 29, 2014
/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 June 30, 2014 (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)
July 29, 2014
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 June 30, 2014 (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)
July 29 2014
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