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, 1997.
[ ] 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.)
8805 South Sandy Parkway
Sandy, Utah 84070-6408
(Address of principal executive offices)
Issuers telephone number: (801) 233-6000
_________________________
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: March
31, 1997; 7,267,298.
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, 1997 1
Consolidated Statement of Operations for the 3
months ended March 31, 1997 and March 31, 1996 2
Consolidated Statement of Cash Flows for the 3
months ended March 31, 1997 and March 31, 1996 3
Notes to Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II. OTHER INFORMATION
Item 13 Exhibits and Reports on Form 8-K 7
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Balance Sheet
March 31,
1997
(Unaudited)
ASSETS ---------------
Current assets:
Cash $ 1,253,000
Receivables, net 2,570,000
Inventories 1,246,000
Prepaid expenses 88,000
--------------
Total current assets 5,157,000
Property, plant and equipment, net 3,923,000
Investment in joint ventures 12,548,000
Other assets 161,000
--------------
$ 21,789,000
==============
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,754,000
Current portion of long-term debt 147,000
--------------
Total current liabilities 2,901,000
Long-term debt 544,000
Deferred income taxes 1,447,000
--------------
Total liabilities 4,892,000
--------------
Commitments and contingencies -
Shareholders equity:
Common stock, $.001 par value; 500,000,000 shares
authorized; 7,267,298 shares issued and outstanding 7,000
Capital in excess of par value 6,230,000
Notes receivable from stock sales (789,000)
Retained earnings 11,449,000
--------------
Total Shareholders equity 16,897,000
--------------
$ 21,789,000
==============
See accompanying notes to financial statements
Page 1
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Statement of Operations
(Unaudited)
3 months ended 3 months ended
3/31/97 3/31/96
--------------- ---------------
Revenues:
Net sales $ 4,884,000 $ 4,593,000
Royalties 386,000 418,000
Equity in earnings of
joint venture 1,475,000 840,000
--------------- ---------------
6,745,000 5,851,000
--------------- ---------------
Cost and expenses:
Cost of sales 4,634,000 4,480,000
General and administrative 328,000 214,000
Research and development 139,000 201,000
--------------- ---------------
5,101,000 4,895,000
--------------- ---------------
Income from operations 1,644,000 956,000
Other income (expense) 34,000 28,000
--------------- ---------------
Income before provision for
income taxes 1,678,000 984,000
Provision for income taxes
Current 549,000 296,000
Deferred - -
--------------- ---------------
Net income $ 1,129,000 $ 688,000
=============== ===============
Earnings per common and common
equivalent share $ .15 $ .12
=============== ===============
Weighted average number of common and
common equivalent shares 7,666,271 5,654,045
=============== ===============
See accompanying notes to financial statements
Page 2
<PAGE>
MINING SERVICES INTERNATIONAL CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
3 months ended 3 months ended
3/31/97 3/31/96
------------------------------
Cash flows from operating activities:
Net income $ 1,129,000 $ 688,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 142,000 131,000
Gain on disposal of equipment (35,000) -
Undistributed earnings of joint ventures (475,000) (840,000)
Change in assets and liabilities:
Decrease (increase) in accounts receivable 19,000 (208,000)
Decrease (increase) in inventories (122,000) 26,000
Decrease (increase) in prepaid expenses 48,000 39,000
Increase in accounts payable and accrued
expenses 838,000 286,000
Decrease in deferred gain on sale/leaseback - (84,000)
Decrease in other assets 9,000 42,000
------------- -----------
Net cash provided by operating activities 1,553,000 80,000
------------- -----------
Cash flows from investing activities:
Proceeds from the sale of plant and equipment 41,000 37,000
Purchase of plant and equipment (870,000) (565,000)
Investment in Joint Ventures (179,000) -
------------- -----------
Net cash used in investing activities (1,008,000) (528,000)
------------- -----------
Cash flows from financing activities:
Issuance of common stock - 19,000
Proceeds from long-term debt - 634,000
Payments on long-term debt (24,000) (64,000)
------------- -----------
Net cash provided by, used in financing
activities (24,000) 589,000
------------- -----------
Net increase (decrease) in cash 521,000 141,000
Cash, beginning of year 732,000 809,000
------------- -----------
Cash, end of first quarter $ 1,253,000 $ 950,000
============= ===========
See accompanying notes to financial statements
Page 3
<PAGE>
MINING SERVICES INTERNATIONAL
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein is unaudited; however,
such information reflects all adjustments, which are, in the opinion
of management, necessary for a fair statement of results for the
interim periods.
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 the generally
accepted accounting principles or those normally made in the annual
10-KSB filing. Financial information relating to debts, interest
expense, and depreciation contained in the Management's Discussion
and Analysis of Financial Condition and Results of Operations are
incorporated by reference into these notes. Certain accounts in the
1996 financial statements have been reclassified to conform with the
current year presentation.
The results of operations for the three-month period ended March
31, 1997 are not necessarily indicative of the results to be expected
for the full year.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The financial statements reflect the investment in joint
ventures of which the Company owns 50% or less under the equity
method of accounting.
A cash distribution of $1,000,000 was made in March 1997 leaving
undistributed earnings from equity method joint ventures at $475,000
for the three month period ending March 31, 1997.
Summarized financial information for joint ventures reported
under the equity method of accounting follows:
For the Period Ending
March 31,
Results for the Quarter 1997 1996
Gross Revenue $ 9,306,000 $ 5,746,000
Gross Profit $ 2,934,000 $ 1,664,000
Net Income $ 2,950,000 $ 1,680,000
The joint ventures report "gross profit" as net income from
operations. "Net Income" exceeds "gross profit" due primarily to
interest income on cash invested in short-term investments.
Page 4
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
position and operating results during the periods included in the
accompanying consolidated financial statements of March 31, 1997.
First Quarter 1997 vs. 1996
Net income for the three months ended March 31, 1997 increased
$441,000 over net income for the same the month period in 1996
primarily due to increased equity earnings from joint ventures
reported under the equity method.
Total revenues for the Company increased $894,000 comparing the
first quarter of 1997 with the first quarter of 1996 while gross
margins increased on a percentage revenue basis from 23.4% to 31.3%.
The gross margin from MSI's direct sales increased from 10.6% at
March 31, 1996 to 12.1% at March 31, 1997 due to continued cost
containment activities and continued emphasis on niche marketing.
Royalties from licenses decreased 8% in the first quarter of 1997
compared to the first quarter of 1996 because a major licensee's
contract which was extended for ten years had a royalty rate
reduction. The reduction in the bulk explosive royalty rate is
anticipated to be partially offset in the future by increased volume
and additional royalties on EMGEL.
The effective tax rate for the current first quarter tax
provision is approximately 33% including state and federal income
taxes. Advantageous tax benefits from prior year carryforwards were
substantially used in 1996 and accordingly will not be available to
decrease the effective tax rate for 1997.
General and administrative expenses increased $114,000 from the
first quarter of 1997 compared to the first quarter of 1996 due to
costs associated with the increase in the number of employees which
at March 31, 1997 was 66 compared with 60 at March 31, 1996.
Research and development costs have decreased $62,000 in comparing
the first quarter of 1997 with the first quarter of 1996 as efforts
have temporarily shifted from research and development to start-up
activities.
The decline in the current ratio from 1.97 at March 31, 1996, to
1.78 at March 31, 1997 resulted primarily from increased accounts
payable and accruals related to the expansion of the West Virginia
plant, investing in the Ghana joint venture, and an increase in
income tax liabilities. Allowance for doubtful accounts was
increased to $39,000 at March 31, 1997 relating to disputed royalties
receivable.
Cyanco should continue expanding sales to fill increased
capacity and to meet growing demand in the west gold markets.
Colombian operations are expected to add significant growth to
revenues and income during 1997. EMGEL produced in the Eastern
United States is expected to increase domestic sales. During 1997
the Company will continue to seek investments in joint ventures and
expanding operations in various market niches throughout the world in
both explosives and cyanide.
Liquidity and Capital Resources
The primary source for the Company's financial resources is from
operations. On May 1, 1997 the Company renegotiated a revolving line
of credit with its bank in Salt Lake City, Utah in the amount of
$2,000,000 bearing interest at the bank's prime rate, an equipment
line of credit of $1,000,000 bearing interest at the bank's prime
rate secured by equipment, and a working capital line of credit for
$500,000 at the bank's prime rate secured by the new corporate office
building. As of May 5, 1997 the Company has utilized $385,104 of
the revolving line of credit and $709,000 of the equipment line of
credit. Interest expense for the first quarter of 1997 was $12,000
compared to $19,000 in the first quarter of 1996. Net cash provided
from operations increased $1,473,000 compared to $80,000 during the
first quarter of 1996 to $1,553,000 during
Page 5
<PAGE>
the first quarter of 1997. Capital expenditures for the first
quarter of 1997 increased by $480,000 over that spent in the first
quarter of 1996 due primarily to the construction on the corporate
offices and continued investment in joint ventures. We anticipate
using up to $1.5 million of the working line of credit during certain
periods of the current year. The new corporate offices were
completed on April 1, 1997 at an approximate cost of $950,000 with
the final payment due in May of 1997. The construction has been
financed out of current cash flow. Total property, plant and
equipment, and accumulated depreciation were $9,684,000 and
$5,761,000 at March 31, 1997 respectively compared with $9,019,000
and $6,090,000 at March 31, 1996 respectively.
In management's opinion, the capital resources of the Company
are adequate to finance its business activity in the short term as
well as the long term assuming the current political, financial, and
economic environment continues. In the long term, the results of
operations and the liquidity of the Company's resources could be
impacted by factors such as political risks, capital availability,
changes in taxation, inflation, and foreign exchange. Consequently,
the Company cannot determine the ultimate effect that current
products and strategies will have on long-term net sales, earnings,
or stock price.
Page 6
<PAGE>
PART II. OTHER INFORMATION
Item 13: Exhibits and Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
March 31, 1997 or during the period covered by this report. The
exhibits filed as part of this report are listed below.
No. Page No. Description
- ---------------------------------------------------------------------------
27 Financial Data Schedule
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)
May 6, 1997 /s/ Lex L. Udy
------------------------ ------------------------------
(Date) Lex L. Udy
Vice Chairman and Secretary
/s/ Duane W. Moss
------------------------------
Duane W. Moss
Chief Financial Officer
<PAGE>
<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 MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,253,000
<SECURITIES> 0
<RECEIVABLES> 2,609,000
<ALLOWANCES> 39,000
<INVENTORY> 1,246,000
<CURRENT-ASSETS> 5,157,000
<PP&E> 9,684,000
<DEPRECIATION> 5,761,000
<TOTAL-ASSETS> 21,789,000
<CURRENT-LIABILITIES> 2,901,000
<BONDS> 691,000
0
0
<COMMON> 7,000
<OTHER-SE> 16,890,000
<TOTAL-LIABILITY-AND-EQUITY> 21,789,000
<SALES> 4,884,000
<TOTAL-REVENUES> 6,745,000
<CGS> 4,634,000
<TOTAL-COSTS> 5,101,000
<OTHER-EXPENSES> (46,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,000
<INCOME-PRETAX> 1,678,000
<INCOME-TAX> 549,000
<INCOME-CONTINUING> 1,129,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,129,000
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.15
</TABLE>
