_______________________________________________________________
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 September 30, 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: October 21, 1996 -
6,314,996.
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 September 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . 1
Consolidated Statement of Operations for the 3 months ended
September 30, 1996 and September 30, 1995. . . . . . . . . 2
Consolidated Statement of Operations for the 9 months ended
September 30, 1996 and September 29, 1995 . . . . . . . . . 3
Consolidated Statement of Cash Flows for the 9 months ended
September 30, 1996 and September 30, 1995 . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . 5
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION
None
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Balance Sheet
September 30,1996 31-Dec-95
ASSETS (unaudited) (audited)
------ ----------------- ----------
Current assets:
Cash and cash equivalents $ 125,000 $ 809,000
Accounts receivable, net 2,813,000 2,711,000
Inventories 984,000 857,000
Prepaid expenses 68,000 118,000
----------------- ----------
Total current assets 3,990,000 4,495,000
Property, plant and equipment, net 2,209,000 2,312,000
Investments in joint ventures 11,662,000 7,391,000
Other assets 369,000 362,000
----------------- ----------
$ 18,230,000 $14,560,000
================= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,858,000 $ 1,717,000
Current portion of capital lease and
long term debt 293,000 176,000
----------------- ----------
Total current liabilities 2,151,000 1,893,000
Long-term debt 630,000 337,000
Deferred income taxes 1,068,000 975,000
Deferred gain on sale and leaseback 0 84,000
----------------- ----------
Total liabilities 3,849,000 3,289,000
----------------- ----------
Shareholders' equity:
Common stock, $.001 par value;
500,000,000 shares authorized;
6,314,966 shares issued 6,000 6,000
Capital in excess of par value 6,203,000 5,888,000
Notes receivable from stock sales (780,000) (509,000)
Retained earnings 8,952,000 5,886,000
----------------- ----------
Total Shareholders' equity 14,381,000 11,271,000
----------------- ----------
$ 18,230,000 $14,560,000
================= ==========
See accompanying notes to financial statements
Page 1
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Statement of Operations
(Unaudited)
3 months ended 3 months ended
9/30/96 9/30/95
----------------- ----------
Revenues:
Net sales $ 5,064,000 $4,441,000
Royalties 568,000 470,000
Equity in earnings from
joint ventures 1,489,000 1,025,000
----------------- ----------
7,121,000 5,936,000
----------------- ----------
Cost and expenses:
Cost of sales 4,536,000 4,074,000
Selling, general and administrative 370,000 146,000
Research and development 48,000 267,000
Depreciation and amortization 145,000 208,000
----------------- ----------
5,099,000 4,695,000
----------------- ----------
Income from operations 2,022,000 1,241,000
Other income (expense) (193,000) 0
----------------- ----------
Income before provision 1,829,000 1,241,000
----------------- ----------
Provision for income taxes
Current 384,000 313,000
Deferred 93,000 63,000
----------------- ----------
477,000 376,000
----------------- ----------
Net income $ 1,352,000 $ 865,000
================= ==========
Earnings per common and common equivalent
share $ .21 $ .21
Weighted average number of common and common
equivalent shares 6,385,000 5,819,260
See accompanying notes to financial statements
Page 2
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Statement of Operations
(Unaudited)
9 months ended 9 months ended
9/30/96 9/30/95
----------------- ----------
Revenues:
Net sales $ 13,888,000 $14,301,000
Royalties 1,277,000 1,067,000
Equity in earnings from
joint venture 3,752,000 2,269,000
----------------- ----------
18,917,000 17,637,000
----------------- ----------
Cost and expenses:
Cost of sales 12,932,000 12,875,000
Selling, general and administrative 917,000 762,000
Research and development 417,000 581,000
Depreciation and amortization 424,000 564,000
----------------- ----------
14,690,000 14,782,000
----------------- ----------
Income from operations 4,227,000 2,855,000
Other income (expense) (127,000) (64,000)
----------------- ----------
Income before provision for income taxes 4,100,000 2,791,000
----------------- ----------
Provision for income taxes
Current 931,000 557,000
Deferred 93,000 275,000
----------------- ----------
1,034,000 832,000
----------------- ----------
Net income $ 3,066,000 $1,959,000
================= ==========
Earnings per common and common equivalent
share $ .48 $ .34
Weighted average number of common and common
equivalent shares 6,385,000 5,819,260
See accompanying notes to financial statements
Page 3
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
9 months ended 9 months ended
9/30/96 9/30/95
----------------- ----------
Cash flows from operating activities:
Net income $ 3,066,000 $1,959,000
Depreciation and amortization 424,000 564,000
Undistributed earnings in joint venture (2,752,000) (819,000)
Change in assets and liabilities:
(Increase) decrease in accounts
receivable (102,000) 14,000
(Increase) decrease in inventories (127,000) (409,000)
(Increase) decrease in prepaid expenses 50,000 (152,000)
(Increase) decrease in other assets (7,000) 51,000
Increase (decrease) in accounts payable
and accrued expenses 141,000 642,000
Increase (decrease) in deferred
income taxes 93,000 275,000
Increase (decrease) in deferred gain
on sale/leaseback (84,000) (31,000)
----------------- ----------
Net cash provided by opererating
activities 702,000 2,094,000
----------------- ----------
Cash flows from investing activities:
Proceeds from sale of plant and equipment 270,000 20,000
Investment in joint ventures (1,519,000) 0
Purchase of plant and equipment (591,000) (667,000)
----------------- ----------
Net cash used in investing activities (1,840,000) (647,000)
----------------- ----------
Cash flows from financing activities:
Proceeds from notes payable to bank-net 802,000 0
Proceeds from exercise of stock options-
net of notes 44,000 173,000
Payments on long-term debt and capital
lease obligations- net (392,000) (229,000)
----------------- ----------
Net cash provided (used) in financing
activities 454,000 (56,000)
----------------- ----------
Net increase (decrease) in cash (684,000) 1,391,000
Cash and cash equivalents, beginning of year 809,000 109,000
----------------- ----------
Cash and cash equivalents, end of third quarter $ 125,000 $1,500,000
================= ==========
See accompanying notes to financial statements
Page 4
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
(1) Description of Consolidated Financial Statements
Mining Services International Corporation (Company), its wholly
owned subsidiaries, Mining Services West Virginia, Inc., Mining Services
(Namibia) (PTY) Ltd., Nevada Chemicals, Inc. (NCI), West Coast
Explosives Ltd., Turon-MSI Limited, Dawn Holding Company, MSI Chemicals
Limited, the Company's 51% owned joint venture, Turon-MSI Ltd., and its
50% owned joint venture, Cayman Mining Services Limited (CMS) are
primarily engaged in the development, manufacture and sale of mining
chemicals and related technology. In addition, NCI has a 50% interest
in Cyanco Company (Cyanco) a non-corporate joint venture, which is
engaged in the manufacture and sale of liquid sodium cyanide. These
interim consolidated financial statements are presented in accordance
with the requirements for Form 10-QSB and incorporate disclosures made
in the annual Form 10-KSB filing. The Company's unaudited, consolidated
and condensed financial statements for the quarter and nine months ended
September 30, 1996 include all appropriate adjustments, in view of
current market, economic and technological conditions, which in the
opinion of Management are necessary in order to make the interim
financial statements not misleading.
(2) Significant Equity Investment
As of September 30, 1996, the Company's investments in joint
ventures represented 64% of total consolidated Assets and 89% of income
from operations for the nine months ended September 30, 1996 and 74% of
income from operations for the three months ended September 30, 1996.
The financial statements reflect the investment in 50% or less owned
joint ventures under the equity method of accounting and include the
Company's share of such joint venture net income in consolidated
revenues as a separate line item. The full contribution to income from
operations of such joint ventures include net income from sales,
royalties, license fees, management fees and service agreements which
may vary in reporting treatment pursuant to the various arrangements
associated with such operations. Joint ventures in which the company
has a greater than 50% interest are pro-rata consolidated in the
Company's financial statements.
(3) Stock Split
On September 30, 1996, the Company's board of directors authorized
a ten (10) percent stock distribution to be issued on October 18, 1996
to shareholders of record on September 20, 1996 for the purpose of
continuing to increase the distribution of its shares traded on the
stock exchange (Nasdaq). The distribution was accounted for as a stock
split. The number of shares distributed on October 18, 1996 was
573,910.
Page 5
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net income for the nine month period ending September 30, 1996 was
$3,066,000 or $.48 per share compared to $1,959,000 or $.34 per share
for the same period in 1995, an increase of approximately 57%. Net
income for the three month period ending September 30, 1996 was
$1,352,000 or $.21 per share compared to $865,000 or $.15 per share a
year earlier, representing an increase of 56%. Net income should
continue improving into 1997 based on current market and economic
conditions. However, net income during 1997 should decrease as a
percentage of revenue compared to 1996 due to an increase in the
effective income tax rate. Advantageous tax benefits from prior year
carryforwards are being realized during 1996 resulting in changes in
valuation estimates which should not be available to decrease the
effective tax rate in future periods.
Income from operations of $4,227,000 increased by 48% for the nine
months ended September 30, 1996 compared to the nine months ended one
year earlier. For the three months ended September 30, 1996 income
from operations of $2,022,000 increased 63% compared to the same period
in 1995 or an increase of $781,000. This increase was primarily caused
by increased income from operations in the Cyanco joint venture coupled
with a strong performance from explosives. Primarily due to the
reporting of net income from equity joint ventures in revenues without a
corresponding offset in cost of sales, operating income as a percentage
of revenues for the nine months ended September 30, 1996 was 22%
compared to 16% for the same nine months in 1995, and 28% for the third
quarter of 1996 compared to 21% for the same quarter in 1995.
Revenue for the third quarter of 1996 increased by 20% over that
of the same period in 1995 and the revenue for the nine months ended
September 30, 1996 was 7.3% over the same period of 1995. The increasing
trend in revenues should continue in both the cyanide and explosives
markets as the backup facility at Cyanco goes into production in 1997
and the EMGEL plant and other international projects reach production
levels during 1997.
The Company continues to concentrate on niche marketing in North
American and international markets and on increasing profitability of
its sales in the U.S. and Canada. The Company's efforts to increase
operating margins by decreasing costs and increasing efficiencies at its
manufacturing plants should continue to improve overall gross margins.
During 1996 the Company has been investing in backup capacity at its
Cyanco plant to avoid the future use of dry sodium cyanide and continues
its development of explosive projects in other parts of the world. It
is expected that the backup facility for Cyanco will be completed and
will begin operations in the first quarter of 1997 providing total
capacity to Cyanco of approximately 86 million pounds per year. The
explosives plant in Uzbekistan has successfully produced test quantities
of explosives and the joint venture now anticipates regular production
in the first half of 1997. The Colombia emulsion plant and equipment
have been shipped and the infrastructure at the mine site is now being
completed. The Colombia plant should produce development quantities
this year with full production being reached in the first quarter of
1997. Other developments are continuing in key niche markets which
management anticipates will continue to position the company as an
equity participant with long-term marketing potential.
Page 6
<PAGE>
Liquidity and Capital Resources
It is anticipated that the Company's capital requirements 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 operating line of
credit with a large national bank increasing the Company's revolving
short-term credit to $1,500,000 at the bank's prime rate. The Company
also arranged a revolving equipment line of credit for $1,000,000 with
minimum payments based on an amortization period of 60 months at the
bank's prime rate plus one-half percent.
The Company has used its revolving line of credit at various times
during the year. The maximum amount used at any time was approximately
$960,000. As of October 21, 1996 the line of credit had a balance of
$493,000. The operating line of credit matures on April 30, 1997. The
equipment line of credit has been utilized for refinancing equipment
leases for about $700,000. In addition to cash provided from the
explosives operations during the last quarter of 1996, the Company
expects to receive a cash distribution from its Cyanco joint venture in
the last quarter of 1996 which together should provide sufficient cash
resources for operations including capital expenditures, income taxes
and the construction costs of the Company's new office building planned
for completion in the second quarter of 1997. In order to adequately
cover any contingency in the construction of backup facilities at Cyanco
and to provide for increased production, the joint venture has also
increased its revolving line of credit to seven million dollars.
Total Assets increased from December 31, 1995 to September 30,
1996 by $3,670,000 while total
liabilities increased $560,000, thus improving the overall stability of
the Company's balance sheet by approximately $3,110,000 or $.49 per
share. In management's opinion the Company has sufficient capital
resources for current operations and planned capital expenditures.
Page 7
<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)
October 29, 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 THE COMPANY AS FILED IN ITS 10-QSB (ITEM 1) FOR THE
QUARTER ENDED SEPTEMER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 125,000
<SECURITIES> 0
<RECEIVABLES> 2,823,000
<ALLOWANCES> 10,000
<INVENTORY> 984,000
<CURRENT-ASSETS> 3,990,000
<PP&E> 8,136,000
<DEPRECIATION> 5,927,000
<TOTAL-ASSETS> 18,230,000
<CURRENT-LIABILITIES> 2,151,000
<BONDS> 630,000
0
0
<COMMON> 6,000
<OTHER-SE> 14,381,000
<TOTAL-LIABILITY-AND-EQUITY> 18,230,000
<SALES> 13,888,000
<TOTAL-REVENUES> 18,917,000
<CGS> 12,932,000
<TOTAL-COSTS> 14,690,000
<OTHER-EXPENSES> 73,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,000
<INCOME-PRETAX> 4,100,000
<INCOME-TAX> 1,034,000
<INCOME-CONTINUING> 3,066,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,066,000
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.48
</TABLE>
