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 March 31, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from _______________ to ________________.
Commission file number 0-10634
_____________________________
Mining Services International Corporation
(Exact Name of Small Business issuer as specified in its charter)
Utah 87-0351702
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5284 South Commerce Drive, Suite C-244
Salt Lake City, Utah 84107-7930
(Address of principal executive offices)
Issuers telephone number: (801) 261-5666
_________________________
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: May 10, 1996 - 5,554,045
Transitional Small Business Disclosure Format (check one): Yes[ ] No [X]
_________________________________________________________________
_________________
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Page Number
Item 1 Financial Statements
Consolidated Balance Sheet as of March 31, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statement of Operations for the 3 months ended
March 31, 1996 and March 31, 1995 . . . . . . . . . . . . . . . 2
Consolidated Statement of Cash Flows for the 3 months ended
March 31, 1996 and March 31, 1995 . . . . . . . . . . . . . . . 3
Notes to Financial Statements . . . . . . . . . . . . . . . . . 4
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . 5
PART II. OTHER INFORMATION
No information reported
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Balance Sheet
March 31, December
1996 31, 1995
ASSETS (unaudited) (audited)
Current assets:
Cash $ 950,000 $ 809 000
Accounts receivable, net 2,919,000 2,711,000
Inventories 831,000 857,000
Prepaid expenses 79,000 118,000
Total current assets 4,779,000 4,495,000
Property, plant and equipment, net 2,929,000 2,532,000
Investment in joint venture (see Note 2) 8,011,000 7,171,000
Other assets 320,000 362,000
$16,039,000 14,560,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable and
accrued expenses 2,003,000 1,717,000
Current portion of capital lease and
long term debt 427,000 176,000
Total current liabilities 2,430,000 1,893,000
Long-term debt 656,000 337,000
Deferred income taxes 975,000 975,000
Deferred gain on sale and leaseback 0 84,000
Total liabilities 4,061,000 3,289,000
Shareholders' equity:
Common stock, $.001 par value;
500,000,000 shares authorized;
5,554,045 shares issued 6,000 6,000
Capital in excess of par value 5,924,000 5,888,000
Notes receivable from stock sales (509,000) (509,000)
Retained earnings 6,557,000 5,886,000
Total Shareholders' equity 11,978,000 11,271,000
$16,039,000 14,560,000
See accompanying notes to financial statements
Page 1
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Statement of Operations
(Unaudited)
3 months 3 months
ended ended
3/31/96 3/31/95
Revenues:
Net sales 4,628,000 4,983,000
Royalties 418,000 277,000
Equity in earnings of joint venture 840,000 405,000
5,886,000 5,665,000
Cost and expenses:
Cost of sales 4,379,000 4,442,000
Selling, general and administrative 346,000 305,000
Research and development 74,000 85,000
Depreciation and amortization 131,000 177,000
4,930,000 5,009,000
Income from operations 956,000 656,000
Other income (expense):
Interest expense (19,000) (24,000)
Other income (expense) 47,000 (10,000)
Income before provision for income taxes 984,000 622,000
Provision for income taxes
Current 296,000 60,000
Deferred 0 120,000
$ 296,000 $ 180,000
Net income $ 688,000 $ 442,000
Earnings per common and common equivalent $ .12 $ .08
share
Weighted average number of common and common
equivalent shares 5,654,045 5,312,970
See accompanying notes to financial statements
Page 2
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
3 months 3 months
ended ended
3/31/96 3/31/95
Cash flows from operating activities:
Net income $ 688,000 $ 442,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 131,000 177,000
Undistributed earnings in joint
venture (840,000) (405,000)
Change in assets and liabilities:
Decrease (increase) in accounts receivable (208,000) (394,000)
Decrease (increase) in inventories 26,000 (28,000)
Decrease (increase) in prepaid expenses 39,000 79,000
Increase (decrease) in accounts payable
and accrued expenses 286,000 386,000
Increase in deferred income taxes -0- 120,000
Decrease in deferred gain on sale/leaseback (84,000) (13,000)
Decrease in other assets 42,000 61,000
Net cash provided by operating activities 80,000 425,000
Cash flows from investing activities:
Proceeds from the sale of plant and equipment 37,000 13,000
Purchase of plant and equipment (565,000) (310,000)
Net cash used in investing activities (528,000) (297,000)
Cash flows from financing activities:
Proceeds from notes payable to bank 634,000 200,000
Proceeds from exercise of stock options 19,000 19,000
Payments on long-term debt and capital (64,000) (43,000)
Net cash provided by financing
activities 589,000 176,000
Net increase in cash 141,000 304,000
Cash, beginning of year 809,000 109,000
Cash, end of first quarter $ 950,000 $ 413,000
See accompanying notes to financial statements
Page 3
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
(1) Description of Consolidated Financial Statements
Mining Services International Corporation (Company) and its
wholly owned subsidiaries, MSI-Fabrication Inc., Mine Chemical
Services, Inc. (MCS), Mining Services West Virginia, Inc., Mining
Services (Namibia) (PTY) Ltd., Nevada Chemicals, Inc. (NCI), West
Coast Explosives Ltd., and Dawn Holding Company and its 51%
owned incorporated Joint Venture, Turon-MSI Ltd., are primarily
engaged in the development, manufacture and sale of mining
chemicals and related technology. In addition, NCI has a fifty
percent interest in Cyanco Company (Cyanco) a non-corporate joint
venture, which is engaged in the manufacture and sale of liquid
sodium cyanide. These consolidated financial statements are
presented in accordance with the requirements for Form 10-QSB and
consequently may not include all the disclosures normally
required by generally accepted accounting principles or those
normally made in the annual Form 10-KSB filing. The Company's
unaudited, consolidated interim financial statements for the
quarter ending March 31, 1995 include all appropriate adjustments
which in the opinion of Management are necessary in order to make
the financial statements not misleading.
(2) Significant Equity Investment
As of March 31, 1996, MSI's investment in Cyanco
represented 50% of total consolidated Assets and approximately
87% of Income from operations. The financial statements reflect
the investment in Cyanco under the equity method of accounting
and include MSI's share of Cyanco's net income in revenues.
Summarized financial information for Cyanco is as follows:
For the periods ending
March 31, 1996 March 31, 1995
Sales $ 5,746,000 $4,196,000
Gross profit 1,664,000 796,000
Net Income 1,680,000 811,000
Cyanco reports "gross profit" as net income from operations.
"Net income" exceeds "gross profit" due primarily to interest
income received on cash invested in short-term investments.
Page 4
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net income for the first quarter of 1996 increased by 55%
over that of the same period in 1995. Earnings for the first
quarter were $668,000 or $.12 per share for 1996 compared to
$442,000 or $.08 per share for the same period in 1995. Net
income before taxes attributable to the explosives business
decreased from approximately $217,800 during the first quarter of
1995 to $117,000 for the same quarter in 1996. The Company's net
income before taxes attributable to Cyanco increased by 107% from
$405,000 during the first quarter of 1995 to $840,000 for the
same quarter in 1996. The effective tax rate for the current
first quarter tax provision is approximately 30% including state
and federal income taxes. Advantageous tax benefits from prior
year carryforwards utilized during 1995 will not be available to
decrease the effective tax rate for 1996, therefore the effective
tax rate for the current tax provision has increased.
Revenues increased slightly for the first quarter of 1996
compared to revenues for the first quarter of 1995. The decrease
of $410,000 in explosives sales in the United States and Canada
resulted from the lack of HEF sales in the Eastern U.S. and
lower than expected HEF sales at a main customer in the West.
Royalties from foreign licensees increased from $277,000 in the
first quarter of 1995 to $418,000 for the same quarter in 1996.
To accurately demonstrate the effect of Cyanco's income on
revenues the following table is prepared:
<TABLE>
MSI's Cyanco Income MSI Explosive
Period Cyanco Sales Cyanco Income Co's % Included in MSI Revenue Revenue Total Revenue
1996
<S> <C> <C> <C> <C> <C> <C>
1sr Qtr $5,746,000 $1,680,000 50% $840,000 $5,046,000 $5,886,000
1995
1st Qtr $4,196,000 $811,000 50% $405,000 $5,260,000 $5,615,000
</TABLE>
Operating Income as a percentage of sales for the first
quarter of 1996 was approximately 16% compared to 11% for the
same quarter in 1995, an increase of 5%.
The Company continues to concentrate on niche marketing and
increasing profitable sales in the U.S. and Canada. The Company
has continued its efforts to increase operating margins by
decreasing costs and increasing efficiencies at its manufacturing
plants. During 1996 the Company will continue investing in
increased capacity at its Cyanco plant and continue its
development of explosive projects in other parts of the world.
It is expected that operations should begin during the later half
of 1996 in several markets for bulk and packaged explosives and
increased capacity in liquid sodium cyanide should be on-line
the first quarter of 1997.
Liquidity and Capital Resources
It is anticipated that the Company's capital requirements
for capital expansion as well as increased working capital will
be funded from operations. However, it is likely that timing of
the capital expenditures may require utilizing the Company's
revolving line of credit with the Company's bank on a temporary
basis. During the first Quarter of 1996, the Company negotiated
a new working capital revolving line of credit with a large
national bank increasing the Company's revolving short-term
credit to $1,500,000 a the bank's prime rate. The Company also
arranged a revolving equipment line of credit for $1,000,000 with
a term of 60 months at the bank's prime rate plus 1/2 of 1
percent. Year to date, the Company used its revolving line of
credit to approximately $300,000 in order to provide added
working capital for the first quarter. Equipment leases and the
term note were liquidated and approximately $700,000 of the
equipment line has been utilized in the refinancing which was
accomplished to lower the overall borrowing costs of the Company.
Page 5
<PAGE>
Currently, the workine capital revolving line of credit is
virtually unutilized having been substantially paid down in April
1996. The working capital line of credit matures on April 30,
1997.
Cash flows from operations was $80,000 in the first quarter
of 1996. A cash distribution from Cyanco of $1,000,000 was made
in early May, 1996. Cash provided during the same period for
1995 was $425,000. It is likely that cash distributions from
Cyanco will not be made except to fund estimated tax payments on
income for the remainder of 1996 due to the commitment of those
funds to construct the backup production facilities for expansion
of the Cyanco operations.
Total Assets increased during the first quarter of 1996 by
approximately $1,479,000 while total liabilities increased
$772,000, thus improving the overall stability of the Company's
balance sheet by approximately $707,000 or $.12 per share. The
current ratio, defined as the relationship of current assets
divided by current liabilities decreased from 2.37 at the end of
the year 1995 to approximately 1.96 at the quarter ending March
31, 1996 which continues to demonstrate a short-term liquidity
for the Company. The decrease in the current ratio was primarily
due to capitalizing certain operating leases in the amount of
approximately $300,000 to take advantage of the revolving nature
of the equipment line of credit and the lower interest rate.
Total stockholders' equity increased during the quarter from
$11,271,000 to $11,978,000.
For the remainder of 1996, the Company will continue its
commitments to the explosives business in the U.S. and Canada
while continuing its expansion efforts in expanding in Ghana and
Uzbekistan as well as other niche markets. The Company is
actively marketing its EMGEL products in several international
markets where the products' potential is receiving high interest.
In management's opinion the Company has sufficient capital
resources for current operations and planned capital
expenditures.
Page 6
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
MINING SERVICES INTERNATIONAL CORPORATION
(Registrant)
May 14, 1996 /s/ Lex L. Udy
------------ -----------------------------
(Date) Lex L. Udy
Vice Chairman and Secretary
/s/ Duane W. Moss
-----------------------------
Duane W. Moss
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MINING SERVICES INTERNATIONAL MARCH 31, 1996 FORM 10QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> $950,000
<SECURITIES> 0
<RECEIVABLES> 2,919,000
<ALLOWANCES> 0
<INVENTORY> 831,000
<CURRENT-ASSETS> 4,779,000
<PP&E> 9,019,000
<DEPRECIATION> 6,090,000
<TOTAL-ASSETS> 16,039,000
<CURRENT-LIABILITIES> 2,430,000
<BONDS> 656,000
<COMMON> 6,000
0
0
<OTHER-SE> 11,972,000
<TOTAL-LIABILITY-AND-EQUITY> 16,039,000
<SALES> 4,628,000
<TOTAL-REVENUES> 5,886,000
<CGS> 4,379,000
<TOTAL-COSTS> 4,930,000
<OTHER-EXPENSES> (28,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 984,000
<INCOME-TAX> 296,000
<INCOME-CONTINUING> 688,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 688,000
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
