0000842295-95-000018.txt : 19950811 0000842295-95-000018.hdr.sgml : 19950811 ACCESSION NUMBER: 0000842295-95-000018 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HITOX CORPORATION OF AMERICA CENTRAL INDEX KEY: 0000842295 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 742081929 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-17321 FILM NUMBER: 95560356 BUSINESS ADDRESS: STREET 1: P.O. BOX 2544 STREET 2: 418 PEOPLES STREET CITY: CORPUS CHRISTI STATE: TX ZIP: 78401 BUSINESS PHONE: 5128825175 MAIL ADDRESS: STREET 1: P.O. BOX 2544 CITY: CORPUS CHRISTI STATE: TX ZIP: 78403 10QSB 1 U.S. Securities and Exchange Commission Washington, D. C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to ------- ------- Commission file number 0-17321 HITOX CORPORATION OF AMERICA (Exact name of small business issuer as specified in its charter) Delaware 74-2081929 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Furman Plaza Building 418 Peoples Street, Corpus Christi, Texas 78401 (Address of principal executive offices) Issuer's telephone number: (512) 882-5175 None (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes [ X ] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Common Stock, $0.25 par value 3,656,787 (Class) (Outstanding as of July 31, 1995) Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ] 1 HITOX CORPORATION OF AMERICA AND SUBSIDIARIES INDEX Page No. -------- PART I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets-- June 30, 1995 and December 31, 1994 3-4 Condensed Consolidated Statements of Operations-- three months ended June 30, 1995 and 1994 and six months ended June 30, 1995 and 1994 5 Condensed Consolidated Statements of Cash Flows-- six months ended June 30, 1995 and 1994 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 11 Signature 11 2 HITOX CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 1995 AND DECEMBER 31, 1994 (in thousands)
June 30, 1995 December 31, (Unaudited) 1994 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 837 $ 2,483 Accounts receivable; no allowance for doubtful accounts considered necessary 1,641 959 Other receivables 1 132 Inventories: Raw materials 2,349 2,034 Finished goods 715 984 Supplies 79 97 ------------- ------------- Total inventories 3,143 3,115 Other current assets 130 30 ------------- ------------- Total current assets 5,752 6,719 Property, plant and equipment 8,976 8,855 Accumulated depreciation (4,399) (4,078) ------------- ------------- 4,577 4,777 Other assets 200 231 ------------- ------------- $ 10,529 $ 11,727 ============= =============
3 HITOX CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 1995 AND DECEMBER 31, 1994 (in thousands, except par value)
June 30, 1995 December 31, (Unaudited) 1994 ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 627 $ 217 Notes payable to bank ----- 2,267 Accrued expenses 1,171 866 Current maturities of long-term debt 527 558 ------------- ------------- Total current liabilities 2,325 3,908 Long-term subordinated debt, related party 5,000 5,000 ------------- ------------- Total liabilities 7,325 8,908 Commitments and contingencies Shareholders' equity: Common stock $.25 par value; authorized 10,000 shares; 3,657 shares outstanding after deducting 88 shares held in treasury 936 936 Additional paid-in capital 10,600 10,594 Accumulated deficit (8,289) (8,668) ------------- ------------- 3,247 2,862 Less: cost of treasury stock (43) (43) ------------- ------------- Total shareholders' equity 3,204 2,819 ------------- ------------- $ 10,529 $ 11,727 ============= =============
4 HITOX CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 1995 1994 1995 1994 -------- -------- -------- -------- Net Sales $ 3,204 $ 3,402 $ 5,872 $ 6,411 Costs and expenses: Cost of products sold 2,122 2,495 4,033 4,680 Selling, administrative and general 645 759 1,144 1,394 -------- -------- -------- -------- Operating income 437 148 695 337 Other income (expenses): Interest income 8 ----- 32 ----- Interest expense (159) (388) (330) (763) Other, net (9) 12 (17) 27 -------- -------- -------- -------- Income (loss) before minority interest and income tax 277 (228) 380 (399) Minority interest ----- (8) ----- (22) -------- -------- -------- -------- Income (loss) before income tax 277 (236) 380 (421) Provision for income tax 1 8 1 33 -------- -------- -------- -------- NET INCOME (LOSS) $ 276 $ (244) $ 379 $ (454) ======== ======== ======== ======== Income (loss) per common share: Primary $ 0.07 $ (0.07) $ 0.10 $ (0.12) Fully diluted 0.07 (0.07) 0.10 (0.12) Weighted average number of common and common equivalent shares outstanding: Primary 3,772 3,657 3,713 3,657 Fully diluted 3,772 4,213 3,733 4,213 -------------------------------------- Antidilutive
5 HITOX CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six Months Ended June 30, ---------------------------- 1995 1994 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 379 $ (454) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 349 406 Other 6 24 Changes in assets and liabilities: Accounts receivable (681) (55) Inventories (27) 186 Other current assets 31 (351) Accounts payable and accrued expenses 715 212 ------------ ------------ Net cash provided by (used in) operating activities 772 (32) CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (120) (26) ------------ ------------ Net cash used in investing activities (120) (26) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on debt (2,298) (7,067) Proceeds from debt ----- 7,850 ------------ ------------ Net cash (used in) provided by financing activities (2,298) 783 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,646) 725 CASH AND CASH EQUIVALENTS: AT BEGINNING OF PERIOD 2,483 537 ------------ ------------ AT END OF PERIOD $ 837 $ 1,262 ============ ============ Supplemental disclosure of cash flow information: Interest paid $ 510 $ 368 Income taxes paid 1 36 Income tax refunds received 39 -----
6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Accounting Policies The interim financial statements of Hitox Corporation of America and subsidiaries (the "Company") are unaudited, but include all adjustments which the Company deems necessary for a fair presentation of its financial position and results of operations. All adjustments are of a normal and recurring nature. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. All significant accounting policies conform to those previously set forth in the Company's fiscal 1994 Annual Report on Form 10-KSB. Reclassification Certain reclassifications have been made to prior years' condensed consolidated financial statements to conform to present reporting classifications. 2. Debt The Company maintains a credit facility with NationsBank of Texas (the "Bank"). The credit facility includes a $1,400,000 line of credit with an interest rate of prime plus 3%. There are no amounts outstanding under the line of credit at June 30, 1995. The credit facility also includes a term loan with $491,000 outstanding at June 30, 1995. Both the line of credit and the term loan expired during the second quarter. The Company negotiated an extension of the line of credit through August 30, 1995 and an extension of the term loan through August 31, 1995. The Company is attempting to negotiate a new credit facility with more favorable terms, including a longer duration and sufficient credit to satisfy the Company's working capital needs, prior to expiration of the current extensions. During the quarter ended June 30, 1995, the Company paid accrued and overdue interest of $450,000 to the holders of the $5,000,000 subordinated debentures (the "Debentures") under a plan approved by the Bank. The balance of accrued and overdue interest on the Debentures was $407,000 at June 30, 1995. The Company intends, subject to Bank approval, to continue to make $150,000 monthly payments to the Debenture holders until the accrued and overdue interest is paid off in September. In addition, subject to Bank approval, the Company has agreed to change the current interest payments on the Debentures from semi-annual payments of $262,500, to monthly payments of $43,750, beginning August 1, 1995. 3. Commitments The Company purchases raw materials under a supply agreement (the "Supply Agreement"). The Supply Agreement contains a take or pay arrangement for specified quantities on a yearly basis, with a fixed price for the first two years of its five year term. The Company anticipates that it will need and take delivery of the quantities stipulated in the Supply Agreement. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Sales: Net sales for the second quarter of 1995 were $3,204,000 as compared to $3,402,000 for the same quarter in 1994. Total net sales for the six months ended June 30, 1995 were $5,872,000 compared with $6,411,000 for the same period in 1994. The three month and six month decreases of approximately $200,000 and $500,000, respectively, are due to the inclusion of sales in 1994 from two former foreign subsidiaries that the Company divested effective September 30, 1994. Quantities sold and prices were relatively constant after adjustment for the 1994 foreign sales. Management continues to focus on marketing HITOX pigments to existing and new markets in the United States, Canada and Mexico. Gross Profit: Gross profit for the second quarter of 1995 was $1,082,000, as compared to $907,000 for the second quarter of 1994, an increase of $175,000. Gross profit as a percentage of sales increased to 33.8% in the second quarter this year as compared to 26.7% in the same quarter last year. The year to date gross profit for the six months ended June 30, 1995 was $1,839,000, or 31.3% of net sales compared with $1,731,000, or 27.0% of net sales for the same period of 1994. The improvement is primarily a result of the divestiture of the Company's foreign subsidiaries, and is partly a result of a reduction in costs of domestic operations begun in the latter half of 1994. Expenses: Total selling, administrative and general expenses declined from $759,000 during the second quarter of 1994, to $645,000 for the second quarter of 1995, representing a decrease of approximately 15%. Total selling, administrative and general expenses decreased from $1,394,000 during the six months ended June 30, 1994, to $1,144,000 for the same period of 1995, representing approximately an 18% decrease. The decreases result principally because 1995 does not include the two former subsidiaries' expenses, and partly due to the Company's cost reduction efforts. Interest Income: During the second quarter of 1995, excess funds were deposited in short- term interest bearing investments resulting in interest income of $8,000. Total interest income for the six months ended June 30, 1995 was $32,000. Included in the six month total is $20,000 resulting from a one time foreign currency transaction gain. 8 Interest Expense: Interest expense decreased $229,000 in the second quarter of 1995 as compared with the same quarter last year. For the six month period ended June 30, 1995, interest expense decreased $433,000 principally because 1994 included $281,000 of interest expense incurred by the Company's two foreign subsidiaries. The remainder of the decrease is due to a reduction in the average line of credit balance outstanding from $3,100,000 in the first six months of 1994 to $144,000 during the first six months of 1995. Minority Interest: During the six months ended June 30, 1995, there was no charge for minority interest due to the 1994 sale of the Company's foreign subsidiaries. Provision for Income Tax: The Company has net operating loss and other carry forwards available to offset the Company's regular taxable income. However, the Company is subject to alternative minimum tax. LIQUIDITY AND CAPITAL RESOURCES The Company continued to experience improvement in its financial position in the second quarter of 1995 after the divestiture of its foreign subsidiaries in the third quarter of 1994. Working capital increased from $2,811,000 at December 31, 1994, to $3,427,000 at June 30, 1995. The Company applied a substantial amount of its cash position at December 31, 1994 to pay off the entire $2,267,000 outstanding balance in its bank line of credit in mid- January, 1995. The Company had no outstanding balance in its line of credit at June 30, 1995, and had $1,400,000 available to borrow under its amended line of credit. The Company continues to renegotiate the terms of its borrowings and expects to finance its operations principally through cash flows generated by U.S. operations, through bank financing and cash on hand. The Company has a continuing need for working capital to finance raw material purchases, primarily synthetic rutile, which is now purchased under a Supply Agreement with its former subsidiary, Malaysian Titanium Corporation. The Supply Agreement contains a take or pay arrangement for specified quantities on a yearly basis, with a fixed price for the first two years of its five year term. The Company anticipates that it will need and take delivery of the quantities stipulated in the Supply Agreement. The Company maintains a credit facility with NationsBank of Texas (the "Bank"). The credit facility includes a $1,400,000 line of credit with an interest rate of prime plus 3%. There are no amounts outstanding under the line of credit at June 30, 1995. The credit facility also includes a term loan 9 with $491,000 outstanding at June 30, 1995. Both the line of credit and the term loan expired during the second quarter. The Company negotiated an extension of the line of credit through August 30, 1995 and an extension of the term loan through August 31, 1995. The Company is attempting to negotiate a new credit facility with more favorable terms, including a longer duration and sufficient credit to satisfy the Company's working capital needs, prior to expiration of the current extensions. During the quarter ended June 30, 1995, the Company paid accrued and overdue interest of $450,000 to the holders of the $5,000,000 subordinated debentures (the "Debentures") under a plan approved by the Bank. The balance of accrued and overdue interest on the Debentures was $407,000 at June 30, 1995. The Company intends, subject to Bank approval, to continue to make $150,000 monthly payments to the Debenture holders until the accrued and overdue interest is paid off in September. In addition, subject to Bank approval, the Company has agreed to change the current interest payments on the Debentures from semi-annual payments of $262,500, to monthly payments of $43,750, beginning August 1, 1995. The Company expects that a new credit agreement will be reached with the Bank or with another financial institution which will continue to allow the Company to make interest payments to the Debenture holders. The trustee under the Note Purchase Agreement has waived any default related to payments of interest or principal on the Debentures through June 30, 1996. 10 PART II Item 6. Exhibits and Reports on Form 8-K Page No. -------- (a) Exhibit 11 - Earnings per share 12 Exhibit 27 - Financial Data Schedule 13 (b) Reports on Form 8-K: None Signature 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. Hitox Corporation of America -------------------------------------- (Registrant) Date: August 10, 1995 THOMAS A. LANDSHOF --------------- --------------------------------- Thomas A. Landshof, President and Chief Executive Officer Date: August 10, 1995 CRAIG A. SCHKADE --------------- --------------------------------- Craig A. Schkade, Chief Financial Officer (Principal Financial and Accounting Officer) 11 Hitox Corporation of America and Subsidiaries Exhibit 11 Computation of Earnings Per Share (EPS) (in thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 1995 1994 1995 1994 -------- -------- -------- -------- WEIGHTED AVERAGE SHARES OUTSTANDING Common Stock 3,657 3,657 3,657 3,657 Common Stock Equivalents, assumed exercise of stock options and warrants (Treasury Stock Method at average market value) 115 ----- 56 ----- -------- -------- -------- -------- Total for Primary EPS 3,772 3,657 3,713 3,657 Other potentially dilutive securities, assumed conversion of 10.5% convertible subordinate redeemable debentures into 556 shares of common stock ----- 556 ----- 556 Assumed exercise of stock options and warrants (Treasury Stock Method at greater of average or end of period market value) ----- ----- 20 ----- -------- -------- -------- -------- Total for Fully Diluted EPS 3,772 4,213 3,733 4,213 INCOME (LOSS) Income (loss) for primary EPS: Net income (loss) $ 276 $ (244) $ 379 $ (454) Income (loss) for fully diluted EPS: Net income (loss) 276 (244) 379 (454) Interest, net of income taxes on 10.5% convertible subordinate debentures ----- 87 ----- 173 Amortization of loan origination fees, net of taxes ----- 10 ----- 19 -------- -------- -------- -------- Net income (loss) for fully diluted EPS $ 276 $ (147) $ 379 $ (262) INCOME (LOSS) PER SHARE Primary $ 0.07 $ (0.07) $ 0.10 $ (0.12) Fully Diluted 0.07 (0.03) 0.10 (0.06) -------------------------------------------- Antidilutive
12 EX-27 2
5 1000 6-MOS DEC-31-1995 JUN-30-1995 $837 0 1641 0 3143 5752 8976 4399 $10529 $2325 5000 936 0 0 2268 $10529 $5872 5904 4033 4033 0 0 330 380 1 379 0 0 0 $379 $0.10 $0.10