_______________________________________________________________
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, 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: July 15,
1996 - 5,682,347
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 June 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . 1
Consolidated Statement of Operations for the 3 months ended
June 30, 1996 and June 30, 1995 . . . . . . . . . . . . . . . 2
Consolidated Statement of Operations for the 6 months ended
June 30, 1996 and June 30, 1995 . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows for the 6 months ended
June 30, 1996 and June 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
Item 4 Submission of Matters to a Vote of Security Holders . . . . . 8
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Balance Sheet
June 30,1996 31-Dec-95
ASSETS (unaudited) (audited)
Current assets:
Cash and cash equivalents $ 800,000 $ 809,000
Accounts receivable, net 3,103,000 2,711,000
Inventories 959,000 857,000
Prepaid expenses 46,000 118,000
Total current assets 4,908,000 4,495,000
Property, plant and equipment, net 2,476,000 2,312,000
Investment in joint venture 9,540,000 7,391,000
Other assets 336,000 362,000
---------- ----------
$17,260,000 $14,560,000
=========== ===========
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,446,000 $ 1,717,000
Current portion of capital lease and
long term debt 151,000 176,000
Total current liabilities 2,597,000 1,893,000
Long-term debt 625,000 337,000
Deferred income taxes 975,000 975,000
Deferred gain on sale and leaseback - 84,000
Total liabilities 4,197,000 3,289,000
Shareholders equity:
Common stock, $.001 par value; 500,000,000
shares authorized; 5,682,347 shares issued 6,000 6,000
Capital in excess of par value 6,025,000 5,888,000
Notes receivable from stock sales (567,000) (509,000)
Retained earnings 7,599,000 5,886,000
Total Shareholders equity 13,063,000 11,271,000
----------- -----------
$17,260,000 $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
6/30/96 6/30/95
Revenues:
Net sales $ 4,194,000 $ 4,877,000
Royalties 291,000 320,000
Equity in earnings of joint venture 1,424,000 839,000
5,909,000 6,036,000
Cost and expenses:
Cost of sales 4,017,000 4,360,000
Selling, general and administrative 201,000 310,000
Research and development 295,000 229,000
Depreciation and amortization 148,000 179,000
4,661,000 5,078,000
Income from operations 1,248,000 958,000
Other income (expense) 38,000 (30,000)
Income before provision for income taxes 1,286,000 928,000
Provision for income taxes
Current 261,000 184,000
Deferred - 92,000
261,000 276,000
----------- -----------
Net income $ 1,025,000 $ 652,000
=========== ===========
Earnings per common and common equivalent share $ .18 $ .18
Weighted average number of common and common
equivalent shares 5,812,863 5,819,260
=========== ===========
See accompanying notes to financial statements
Page 2
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Statement of Operations
(Unaudited)
6 months ended 6 months ended
6/30/96 6/30/95
Revenues:
Net sales $ 8,822,000 $ 9,860,000
Royalties 709,000 597,000
Equity in earnings of joint venture 2,264,000 1,244,000
11,795,000 11,701,000
Cost and expenses:
Cost of sales 8,396,000 8,802,000
Selling, general and administrative 547,000 615,000
Research and development 369,000 314,000
Depreciation and amortization 279,000 356,000
9,591,000 10,087,000
Income from operations 2,204,000 1,614,000
Other income (expense) 66,000 (64,000)
Income before provision for income taxes 2,270,000 1,550,000
Provision for income taxes
Current 557,000 244,000
Deferred - 212,000
557,000 456,000
----------- ------------
Net income $ 1,713,000 $ 1,094,000
=========== ============
Earnings per common and common equivalent share $ .29 $ .19
Weighted average number of common and common
equivalent shares 5,812,863 5,819,260
=========== ============
See accompanying notes to financial statements
Page 3
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
6 months ended 6 months ended
6/30/96 6/30/95
Cash flows from operating activities:
Net income 1,713,000 1,094,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 279,000 356,000
Distributions of joint venture in excess
of earnings 1,000,000 -
Undistributed earnings in joint venture (2,263,000) (1,244,000)
Change in assets and liabilities:
(Increase) decrease in accounts
receviable (392,000) (302,000)
(Increase) decrease in inventories (102,000) (74,000)
(Increase) decrease in prepaid expenses 72,000 (57,000)
(Increase) decrease in other assets 26,000 49,000
Increase (decrease) in accounts payable
and accrued expenses 730,000 1,133,000
Increase (decrease) in deferred income
taxes - 227,000
Increase (decrease) in deferred gain
on sale/leaseback (84,000) (13,000)
Net cash provided by operating
activities (734,000) 75,000
Cash flows from investing activities:
Proceeds from the sale of plant and
equipment 50,000 20,000
Investment in joint ventures (885,000) -
Purchase of plant and equipment (495,000) (583,000)
Net cash used in investing
activities (1,330,000) (563,000)
Cash flows from financing activities:
Proceeds from notes payable to bank - net 634,000 25,000
Proceeds from exercise of stock options 79,000 154,000
Payments on long-term debt and capital
lease obligations - net (371,000) (186,000)
Net cash provided by financing
activities 342,000 (7,000)
Net increase (decrease) in cash (9,000) 599,000
Cash, beginning of year 809,000 109,000
----------- ------------
Cash, end of second quarter $ 800,000 $ 708,000
=========== ============
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, 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, its 51% owned incorporated Joint Venture, Turon-MSI Ltd. and its 50%
owned incorporated 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 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
June 30, 1996 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 June 30, 1996, MSI's investment in Cyanco represented 49% of
total consolidated Assets. 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.
Page 5
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net income for the second quarter of 1996 increased by 64% on a per
share basis over that of the same period in 1995. Earnings for the second
quarter were $1,025,000 or $.18 per share for 1996 compared to $652,000 or
$.11 per share for the same period in 1995. Net loss before taxes
attributable to the explosives business for the second quarter in 1996 was
due primarily to decreased sales and the increased support costs of
international joint ventures while they are being developed, start up costs
of the Domenigoni Dam project in California and continued development and
start-up costs associated with the Emgel product line which is now beginning
to receive market acceptance. Advantageous tax benefits from prior year
carryforwards will be utilized during 1996 and will not be available to
decrease the effective tax rate in future periods. In managements' opinion
this decrease in explosive sales represents a change from discontinued low-
margin contracts being replaced by other major explosive contracts both
domestically and internationally which should in the long run provide better
overall profitability and growth.
Operating Income as a percentage of sales for the second quarter of 1996
was approximately 21% compared to 16% for the same quarter in 1995.
The Company continues to concentrate on niche marketing and increasing
profitability of its 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 at 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 $500,000 in order to fund increased
working capital. 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. The working capital line of credit matures on April 30, 1997.
Cash usage from operations was $9,000 for the six months ended
June 30, 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 $599,000. 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.
Page 6
<PAGE>
Total Assets increased during the second quarter of 1996 by
approximately $1,221,000 while total liabilities increased $136,000, thus
improving the overall stability of the Company's balance sheet by
approximately $1,088,000 or $.19 per share. The current ratio, defined as
the relationship of current assets divided by current liabilities decreased
from 1.96 at March 31, 1996 to approximately 1.89 at June 30, 1996. The
decrease in the current ratio was primarily due to resources utilized in
expansion in Colombia and Uzbekistan.
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 Colombia and Uzbekistan as well as other niche markets. The
Company is actively marketing its EMGEL products in several markets where
the products' potential is receiving high interest. Plant expansion at
Cyanco will require most of the income generated in the joint venture during
the remainder of 1996.
In management's opinion the Company has sufficient capital resources for
current operations and planned capital expenditures.
Page 7
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders of the Company held on May 23,
1996, the following directors were re-elected as directors:
Edward N. Bagley - Chairman
John T. Day - Director, Chief Executive Officer
Lex L. Udy - Director, Vice Chairman, Secretary
Edward Dallin Bagley - Director
Nathan L. Wade - Director
All votes were properly taken with 59.6% of the shares present or
represented by proxy. As to each director, all of shares present to vote or
which voted by proxy (total count at the shareholders meeting was 2,796,305
shares) voted unanimously for each director. There were no abstentions or
negative votes cast.
Page 8
<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)
July 31, 1996 /s/ Lex L. Udy
----------------------------
(Date) Lex L. Udy
Vice Chairman and Secretary
/s/ Duane W. Moss
----------------------------
Duane W. Moss
Chief Financial Officer
Page 9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MINING
SERVICES INTERNATIONAL CORPORATION JUNE 30, 1996 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 800,000
<SECURITIES> 0
<RECEIVABLES> 3,103,000
<ALLOWANCES> 0
<INVENTORY> 959,000
<CURRENT-ASSETS> 4,908,000
<PP&E> 8,681,000
<DEPRECIATION> 6,205,000
<TOTAL-ASSETS> 17,260,000
<CURRENT-LIABILITIES> 2,597,000
<BONDS> 625,000
0
0
<COMMON> 6,000
<OTHER-SE> 13,057,000
<TOTAL-LIABILITY-AND-EQUITY> 17,260,000
<SALES> 8,822,000
<TOTAL-REVENUES> 11,795,000
<CGS> 8,396,000
<TOTAL-COSTS> 9,591,000
<OTHER-EXPENSES> (100,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,000
<INCOME-PRETAX> 2,270,000
<INCOME-TAX> 557,000
<INCOME-CONTINUING> 1,713,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,713,000
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
