SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
Commission file number 1-228
ZEMEX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1031 13-5496920
(State or other (Primary standard (I.R.S. employer
jurisdiction of industrial identification
incorporation or classification code number)
organization) number)
Canada Trust Tower, BCE Place, 161 Bay Street, Suite 3750
Toronto, Ontario, Canada M5J 2S1
(416) 365-8080
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act
New York Stock Exchange Capital
Stock, $1.00 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve
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.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of registrant's voting stock (Capital
Stock, $1.00 par value) held by non-affiliates as of March 8,
1996 (based on the closing sale price of $9.00 on the New York
Stock Exchange) was $36,266,796.
As of March 8, 1996 there were 8,712,728 of the registrant's
Capital Stock, $1.00 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for the Year Ended December 31,
1995 Part II
Definitive Proxy Statement filed with the Commission pursuant
to Regulation 14A with respect to Annual Meeting of Shareholders
Part III
FORM 10-K
ANNUAL REPORT
TABLE OF CONTENTS
AND
CROSS-REFERENCE SHEET
PART I
Page
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders7
Item 10. Executive and Other Officers of the Registrant (A) 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters (B) 8
Item 6. Selected Financial Data (C) 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation (D) 9
Item 8. Financial Statements and Supplementary Data (E) 9
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 9
PART III
Item 10.
Directors of the Registrant(F) *
Item 11.
Executive Compensation(F) *
Item 12.
Security Ownership of Certain Beneficial Owners and Management
(F) *
Item 13. Certain
Relationships and Related Transactions (F) *
PART IV
Item 14.
Exhibits, Financial Statement Schedules, and Reports on Form 8-K
9
__________________________
(A)
Included in Part I pursuant to Instruction 3 of Item 401(b)
of Regulation S-K.
(B) Information responsive to this Item is set forth on page
21 of registrant's Annual Report to Shareholders for the
year ended December 31, 1995 (the "Annual Report to
Shareholders") and is incorporated herein by reference.
The Annual Report to Shareholders is included as Exhibit 13
to this Form 10-K Annual Report. The Annual Report to
Shareholders, except for those portions thereof which are
expressly incorporated by reference herein, is furnished
for the information of the Commission and is not to be
deemed "filed" as part of this Form 10-K report.
(C) Information responsive to this Item is set forth on
page 44 of the Annual Report to Shareholders and is
incorporated herein by reference.
(D) Information responsive to this Item is set forth on
pages 12 through 21 of the Annual Report to Shareholders
and is incorporated herein by reference.
(E) Financial statements responsive to this Item are set
forth on pages 22 through 43 of the Annual Report to
Shareholders and are incorporated herein by reference. The
Supplementary Schedule required by this Item is set forth
on page S-1 of this Form 10-K Annual Report.
(F) Information responsive to this Item is set forth in
registrant's definitive proxy statement to be filed with
the Commission pursuant to Regulation 14A and in the Annual
Report to Shareholders on Page 42 (Note 15) and is
incorporated herein by reference.
PART I
ITEM 1. BUSINESS
General
Zemex Corporation (the "Corporation" or "Zemex"), a Delaware
corporation, was incorporated in 1985 as the successor to Pacific
Tin Corporation. Zemex is a niche producer of industrial
minerals and metal products. Its principal businesses are
industrial minerals, metal powders, and aluminum waste recycling.
Major products include feldspar, feldspathic minerals, kaolin,
sand, mica, talc, ferrous and non ferrous powders and aluminum
dross derivatives.
Industrial Minerals
The Corporation's industrial minerals segment consists of three
wholly-owned subsidiaries: The Feldspar Corporation ("TFC"),
Suzorite Mica Products Inc. ("Suzorite") and Suzorite Mineral
Products, Inc. ("SMP").
The products produced by TFC include feldspar, silica, muscovite
mica and kaolin clay. Industries supplied include glass and
ceramics. Feldspathic minerals and certain grades of industrial
sand are used to manufacture bottles, jars, and other glass
containers, fiberglass, paints and plastics, and television
picture tubes. Feldspar and kaolin are major raw materials for
the ceramic industry, and are incorporated in a variety of
products that include ceramic floor and wall tiles, dinnerware,
plumbing fixtures, glazes and electrical insulators. Industrial
sand is also used for filter, trap, filler, beach, blasting and
concrete applications. TFC is also producing a new low iron sand
product for use in specialized lighting. TFC's operating plants
are located in Florida, Georgia and North Carolina.
Suzorite mines phlogopite mica in an open pit mining operation in
Suzor Township, Quebec, Canada, approximately 200 miles north of
Montreal, Quebec. The ore is mined by standard, open pit methods
and delivered to a siding for ultimate transportation by rail to
the processing plant, which is located in Boucherville, Quebec, a
suburb of Montreal. Processing of phlogopite mica involves
milling, screening and proprietary processing steps to produce
products of various size fractions which find ultimate use in a
variety of applications, such as partial or complete substitution
for asbestos in fire retardation, friction materials, oil well
drilling needs, caulking and molding compounds, coatings,
plasters and plastics. One of the most significant areas of use
is in technological plastic and high temperature plastic
applications, as phlogopite mica has a distinct thermal stability
advantage over competitive materials. These products are
marketed under the trade names of Suzorite Mica and Suzorex. The
principal markets served by Suzorite are the automobile,
construction and oil drilling industries.
The most recent addition to the industrial minerals segment is
the talc business. In late 1994, the company acquired talc
operations in New York, North Carolina and Texas and in May 1995
it bought an additional processing facility in West Virginia. SMP
produces talc which is used in the ceramics, paint and paper
industries. Its plants are located in New York, North Carolina,
Texas and West Virginia. Talc is used in the cosmetic and
pharmaceutical industries and in the coatings, plastics and
ceramics industries. SMP plans to develop a niche for itself in
the talc marketplace by offering such specialty products as fine
grind and surface treated talc products. Customers are currently
testing these products and, if successful, these products will
begin to be sold some time in 1996.
Demand for these industrial minerals is related to the pace of
the general economy and is particularly related to the automotive
industry and the residential and commercial construction and
remodeling industries. Industrial minerals sales in 1995 totaled
$37.1 million, compared with $30.4 million in 1994.
This business segment recorded the fifth straight year of
improved operating income before restructuring charges, with $4.6
million in 1995, $3.9 million in 1994, $2.4 million in 1993, $2.2
million in 1992, and $0.8 million in 1991, due to increased sales
and margins. Major efforts were made in the area of cost
reduction, continuous quality improvement and the introduction of
new value added products.
During 1995, considerable efforts were put into product
development, market research, cost saving capital projects and
product quality improvement systems. The Corporation expects
these efforts will bear fruit in the future.
Capital expenditures were $9.7 million in 1995, compared to $2.1
million in 1994. The 1995 expenditures were used to replace
mining equipment, make mill modifications to produce a new
product and to increase production capacity at TFC's sodium
feldspar facility in Spruce Pine, North Carolina. It is
anticipated that 1996 capital expenditures will be higher due to
the completion of the expansion project and construction of a
high purity silica plant adjacent to the North Carolina sodium
feldspar facility and increased fine grind capacity at the
facility in West Virginia.
Metal Products
The metal products segment consists of Pyron Corporation and
Pyron Metal Powders, Inc. (together, "Pyron") and Alumitech,
Inc., Aluminum Waste Technology, Inc. and Engineered Thermal
Systems, Inc. (collectively, "Alumitech"), all of which are
wholly-owned subsidiaries of Zemex.
Pyron operates plants located in Niagara Falls, New York, St.
Marys, Pennsylvania, Greenback, Tennessee and Maryville,
Tennessee. In 1992, Pyron acquired Pyron Metal Powders, Inc. of
Maryville, Tennessee (renamed from Ligonier Powders, Inc.) out of
bankruptcy. In 1994, Pyron purchased the assets of Greenback
Industries, Inc. Combined, the acquisitions give Pyron the
ability to produce a range of high quality copper and copper
alloy powders at its plants in Maryville and Greenback,
Tennessee. These products complement Pyron's iron and steel
powder products and are sold through Pyron's existing marketing
and sales organization.
Pyron's major products include iron, steel, copper and copper
alloy powders. The largest use of metal powders is in the
fabrication of precision metal parts by the powder metallurgy
process. Powder metallurgy is an efficient, economical process
for the production of numerous components for the automotive,
farm, garden and lawn equipment, and business machine industries.
Key features of powder metallurgy technology are low scrap ratios
and lower production costs than other metal working processes
such as casting and forging. In addition, in recent years, metal
powder use in automotive and rail braking systems has grown
rapidly as a replacement for asbestos, achieving better
performance and improving environmental and health conditions.
Metal powders are also used in making welding rods, for cutting
and scarfing of steel ingots and billets, for the inspection of
oil field pipe and tubing, and in food supplements.
At Pyron, sales of atomized iron and steel products increased in
1993, however, due to technological problems, the rate of
increase was less than anticipated. Late in 1993, the technical
problems were resolved and in 1994 the product rapidly gained
customer acceptance. In March 1995, there was an interruption in
production due to an explosion in the atomization facility. This
resulted in lost sales at a time when the market was slowing due
to an inventory adjustment by suppliers to the automotive
industry. The impact continued through to the end of 1995 but
management sees signs of improvement for 1996.
In 1995 the only domestic producer of manganese sulfide was sold
to a European company and the facility was relocated to Sweden.
Pyron has developed a product line and new process and is
initiating construction of a facility for the production of
manganese sulfide. This new product is currently in the hands of
customers for qualification. With its extended product line,
Pyron has become a valuable and flexible supplier with a long
term future in what management believes to be a very promising
industry.
Also in 1995, Pyron completed construction of a blending facility
in St. Marys, Pennsylvania. This new blending plant enhances
product delivery and allows customers to take advantage of just-
in-time ordering. In the short time it has been in operation,
the St. Marys plant has gained wide acceptance in the
marketplace.
Late in 1993, the Corporation entered into an agreement whereby
it became the exclusive sales agent to the powdered metal markets
for powdered nickel produced in Russia, making Pyron the second
largest supplier of this material to this market in North
America.
Zemex is 100% owner of Alumitech, an aluminum dross reprocessor.
Alumitech has developed, patented and is commercializing its
leading edge aluminum dross recycling technology. The process
transforms chloride-based drosses received from secondary
aluminum producers into a number of commercial components,
including ceramic type materials. Currently, competitive
processes landfill anywhere from 40%-75% of the volume of dross
received whereas Alumitech's recycling process will virtually
eliminate the need for landfill.
The Corporation acquired its initial interest in Alumitech in
1994 and increased its ownership to 100% in 1995. Alumitech has
two processing plants: an aluminum dross plant in Cleveland, Ohio
and a ceramic fiber plant in Streetsboro, Ohio. Aluminum dross
is a waste product produced by primary and secondary aluminum
smelters.
Secondary dross, which is high in chloride content, forms the
primary feedstock for Alumitech's dross plant. Conventional
dross processors extract the contained metallic aluminum and
landfill the balance. The process that Alumitech is currently
commercializing extracts the metallic aluminum, re-crystallizes
the sodium, potassium, and magnesium chlorides, extracts residual
fines as exothermics and converts the balance into its
proprietary non-metallic product ("NMP"). The NMP is a feedstock
for the production of ceramic products. The end result of the
process is the ability for the total elimination of landfill
arising from aluminum dross. Alumitech's patents on its
technology to process NMP have a remaining life of about fourteen
years.
Alumitech also operates a ceramic fiber plant which melts the NMP
in an electric arc furnace and converts it into ceramic fiber.
The fiber is blown into a blanket which is cut to dimension. The
final product is an insulation material with a temperature of
degradation of as high as 2200oF.
Management expects that Alumitech's process will be fully
commercialized in 1996 and that construction of a second dross
plant will begin in 1996.
Sales for the metal product group increased to $48.0 million in
1995 from $24.9 million in 1994 and from $16.9 million in 1993.
Of the 1995 increase, $13.6 million was due to the acquisition of
Alumitech in February 1995. The balance of the increase was due
to higher sales volumes of ferrous and non-ferrous metal powders.
During the same interval, operating income increased from $1.0
million in 1993 to $3.7 million in 1995. Management anticipates
improved margins in this segment in 1996 as a result of higher
metal powder production and an intensive cost reduction program,
coupled with improved volumes of Alumitech.
Capital expenditures were $5.8 million in 1995 as compared to
$0.9 million in 1994 and $0.4 million in 1993. The expenditures
were primarily incurred to construct a powdered metal blending
facility in St. Marys, Pennsylvania and to improve the dross
processing and ceramic production facilities at the Cleveland
plant. In 1996, capital expenditures are anticipated to be
higher due to the commencement of construction of a new dross
processing facility.
Raw Materials and Other Requirements
In recent years, the Corporation has not experienced any
substantial difficulty in obtaining its raw materials
requirements for the metal products segment, which is the segment
that consumes, rather than supplies, raw materials. No assurance
can be given that any shortages of these or other necessary
materials or equipment will not develop or that increased prices
will not adversely affect the Corporation's business in the
future.
Seasonality
The efficiency and productivity of the Corporation's operations
can be affected by unusually severe winter weather conditions.
During the winter of 1995, there were several days of production
lost in operating facilities in North Carolina and New York
states, but they were not significant enough to materially affect
1995 operating results.
Competition
All of the Corporation's products are sold in highly competitive
markets which are influenced by price, product performance,
customer location, service, foreign competition, material
substitution and general economic conditions. The Corporation
competes with other companies active in industrial minerals and
metal products. No material part of the Corporation's business
is dependent upon a single customer or upon very few customers,
the loss of any one of which would have a material adverse impact
on the Corporation.
Industrial mineral prices generally are not subject to the price
fluctuations typical of commodity metals. Demand for industrial
minerals is primarily related to general economic conditions,
particularly in the automotive, housing and construction
industries. In the United States there are three major
feldspathic mineral producers including the Corporation and the
Corporation is the only North American producer of phlogopite
mica. Markets for industrial mineral products are sensitive not
only to service, product performance and price, but to
competitive pressures and transportation costs.
The Corporation is one of five North American producers of metal
powders. The market for metal powders is affected primarily by
product performance, consistency of product quality and price.
To some extent, competition in the metal powders industry is
affected by imports of finished metal powder parts. Product
prices over the last several years have been strongly influenced
by costs of powder production. Demand for metal powders is a
function of general economic conditions, particularly in the
automotive market.
There a numerous aluminum dross processors in the United States,
however, only Alumitech has the patented technology to enable it
to process aluminum dross without landfill. While the Corporation
competes for the supply of aluminum dross with a number of other
operations, the major factor affecting the supply of dross is the
level of activity of the secondary aluminum smelting industry.
Research and Development
The Corporation carries on an active program of product
development and improvement. Research and development expense
was $0.3 million in 1995, $0.3 million in 1994 and $0.4 million
in 1993.
Financial information about industry segments is set forth on
pages 42 and 43 of the Annual Report to Shareholders and is
incorporated herein by reference.
Environmental Considerations
Laws and regulations currently in force which do or may affect
the Corporation's domestic operations include the Federal Clean
Air Act of 1970, the National Environmental Policy Act of 1969,
the Solid Waste Disposal Act (including the Resource Conservation
and Recovery Act of 1976), the Toxic Substances Control Act,
CERCLA (superfund) and regulations under these Acts, the
environmental protection regulations of various governmental
agencies (e.g. the Bureau of Land Management Surface Management
Regulations, Forest Service Regulations, and Department of
Transportation Regulations), laws and regulations with respect to
permitting of land use, various state and local laws and
regulations concerned with zoning, mining techniques, reclamation
of mined lands, air and water pollution and solid waste disposal.
The Corporation is not aware of any adverse environmental
problems or issues.
Employees
The approximate number of Corporation employees as of December
31, 1995 is set forth below:
Industrial Minerals 271
Metal Products 220
Corporate 6
Total 497
Approximately 62 employees of the metal powder operations are
covered by a collective bargaining agreement. The current three-
year agreement expires April 15, 1998. Approximately 23
employees of the Suzorite mica operation are covered by a
collective bargaining agreement. The current agreement is for a
three-year term and expires January 12, 1997. Approximately 39
employees at Alumitech are covered by two collective bargaining
agreements, one agreement expiring April 30, 1996 and one
agreement expiring December 31, 1998. The Corporation considers
its labor relations to be good.
Foreign Operations
The Corporation's international operations are located in Canada
whose institutions and governmental policies are similar to those
of the United States. Although there can be no assurance as to
future conditions, the Corporation has experienced no political
activities, social upheavals, currency restrictions or similar
factors which have had any material adverse effect to date on the
results of its operations or financial condition.
Export Sales
The Corporation's industrial minerals and metal products
operations sell their products internationally to a wide variety
of customers including the ceramics, glass and powder metallurgy
industries. Export sales in these two segments were less than 7%
of total sales.
ITEM 2. PROPERTIES
The industrial minerals segment has operations and mines in
Edgar, Florida; Monticello, Georgia; Boucherville, Quebec;
Suzor Township, Quebec; Natural Bridge, New York; Murphy, North
Carolina; Spruce Pine, North Carolina; Van Horn, Texas; and
Benwood, West Virginia. This segment owns approximately 364,000
square feet of office and plant floor space. In addition, the
processing facility in Benwood, West Virginia has approximately
twelve acres of land. The mineral deposits at the mines
currently operated by the industrial minerals segment are
estimated by the Corporation to be at least 25 years, except in
the case of the mica mine in Suzor Township where reserves are
estimated to be in excess of 100 years. All of the Corporation's
mining properties are either owned or leased, with the leases
expiring from 1996 to 2018.
The metal products group has operations in Niagara Falls, New
York; St. Marys, Pennsylvania; Greenback, Tennessee; Maryville,
Tennessee; Cleveland, Ohio; and Streetsboro, Ohio. At its
facility in Niagara Falls, Pyron Corporation utilizes
approximately 96,000 square feet of office and plant floor space
which it leases from the Niagara County Industrial Development
Agency. The lease was established as part of the Industrial
Revenue Bond issued in November 1989 to finance the construction
of the Atomized Steel Powder plant. Lease payments are to be
sufficient to pay the debt service on the Industrial Revenue
Bond. The facility incorporates approximately 16,000 square feet
of floor space and is adjacent to the existing facility. The
blending plant in St. Marys, Pennsylvania was built in 1995 and
has 32,000 square feet of plant, office and storage space and is
situated on 3.4 acres of land. The Maryville, Tennessee plant
utilizes approximately 23,000 square feet of office and plant
floor space. The Greenback facility is situated on 27.5 acres of
land of which six acres is actively used in the operations.
General office space comprises approximately 6,300 square feet.
There is approximately 66,500 square feet of production/storage
space and approximately 86,800 square feet. The Cleveland, Ohio
operation owns 6.1 acres and has buildings totaling 51,000 square
feet. The Streetsboro, Ohio operation own 6.0 acres on which
there is 36,000 square foot building of plant and office space.
All facilities are maintained in good operating condition.
ITEM 3. LEGAL PROCEEDINGS
On February 11, 1993, The Feldspar Corporation and other non-
affiliated companies were named as defendants in a civil action
brought by Dryvit Systems, Inc. ("Dryvit") in the State of Rhode
Island captioned Dryvit Systems, Inc. v. The Feldspar
Corporation, Taggart Sand Products Corp., Surface Systems, Inc.,
The Morie Company, Inc., Eriez Magnetics, Inc., and Law
Engineering, Inc., C.A. No. KC 93-108, State of Rhode Island,
Kent. Dryvit alleges that between approximately 1985 and 1990,
sand purchased from TFC and other suppliers utilized by Dryvit to
manufacture exterior insulation finishes for the exterior of
buildings developed rust stains because the sand contained pyrite
and magnetic materials. Dryvit seeks unspecified monetary
damages and costs, including the costs associated with the repair
of the damaged structures.
TFC denies such allegations and claims and the Corporation
believes that it is remote that this litigation will result in
any material adverse effect to the Corporation's financial
condition or results of operations. The Corporation strongly
believes that this action is without merit, however, no assurance
can be made as to the outcome of this litigation. Although the
Corporation's primary insurer has attempted to limit its
coverage, the Corporation believes that its primary and excess
liability insurance is sufficient to cover any potentially
unfavorable outcome.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 10. EXECUTIVE AND OTHER OFFICERS OF THE REGISTRANT
Served in
Officer Position Age Position Since
Peter Lawson-Johnston Chairman of the Board of Directors 69
1975
Richard L. Lister President and Chief Executive Officer 57
1993
Allen J. Palmiere Vice President, Chief Financial Officer 43
1993 and Assistant Secretary
Peter J. Goodwin Vice President and President of 45
1994 Suzorite Mineral Products, Inc.
Terrance J. Hogan President, Alumitech, Inc. 40
1995
G. Russell Lewis President, Metal Powders 66
1986
Patricia K. Moran Assistant Secretary-Treasurer 30
1995
There are no family relationships between the officers listed
above. The term of office of each executive officer is until his
respective successor is elected and has qualified, or until his
death, resignation or removal. Officers are elected or appointed
by the Board of Directors annually at its first meeting following
the annual meeting of shareholders. All officers have held their
present positions for at least five years except Messrs. Lister,
Palmiere, Goodwin and Hogan and Ms. Moran.
Mr. Lister, who was elected to the Board of Directors on May 30,
1991, assumed his duties as Vice Chairman of the Board on July
23, 1991 and as President and Chief Executive Officer on June 1,
1993. Mr. Lister was Vice Chairman of Dundee Bancorp Inc. from
October 1991 to May 1993 and prior to that was Chief Executive
Officer of Campbell Resources Inc. from 1981 to 1988 and Chairman
from 1988 to 1992.
Mr. Palmiere assumed the duties of Chief Financial Officer in
October, 1993. From April 1992 to October 1993 he was a self-
employed consultant. From October 1990 to April 1991 he was the
Chief Financial Officer and Vice President of Breakwater
Resources Ltd. and from May 1991 to April 1992 was the Chief
Executive Officer of Breakwater Resources Ltd.
Mr. Goodwin became a Vice President of the Company in August
1994. From May 1993 to August 1994, Mr. Goodwin was a self-
employed consultant. Mr. Goodwin was President and Chief
Executive Officer of Miller and Co. from August 1990 to May 1993.
Mr. Hogan became President of Alumitech, Inc. in May 1995. Prior
to becoming President, Mr. Hogan was Chief Operating Officer of
Alumitech's subsidiary, Aluminum Waste Technology, Inc. from
December 1992 to May 1995. Prior to December 1992, Mr. Hogan was
the Vice President and Chief Financial Officer of American
Recovery Technology Systems, Inc.
Ms. Moran assumed the duties of Assistant Secretary-Treasurer in
February 1995 and has served in various capacities with the
Corporation since 1993.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Information responsive to this Item is set forth on page 21 of
registrant's Annual Report to Shareholders for the year ended
December 31, 1995 (the "Annual Report to Shareholders") and is
incorporated herein by reference. The Annual Report to
Shareholders is included as Exhibit 13 to this Form 10-K Annual
Report. The Annual Report to Shareholders, except for those
portions thereof which are expressly incorporated by reference
herein, is furnished for the information of the Commission and is
not to be deemed "filed" as part of this Form 10-K report.
ITEM 6. SELECTED FINANCIAL DATA
Information responsive to this item is set forth on page 44 of
the Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Information responsive to this Item is set forth on pages 12
through 21 of the Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements responsive to this Item are set forth on
pages 22 through 43 of the Annual Report to Shareholders and are
incorporated herein by reference. The Supplementary Schedule
required by this Item is set forth on page S-1 of this Form 10-K
Annual Report. See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
1. Financial Statements and Independent Auditor's Report Filed
as Part of this Report:
(a) Consolidated Balance Sheets at December 31, 1995
and 1994, which information is incorporated by
reference under Item 8 of this report.
(b) Consolidated Statements of Shareholders' Equity
for the three years ended December 31, 1995, which
information is incorporated by reference under Item 8
of this report.
(c) Consolidated Statements of Income for the three
years ended December 31, 1995, which information is
incorporated by reference under Item 8 of this report.
(d) Consolidated Statements of Cash Flows for the
three years ended December 31, 1995, which information
is incorporated by reference under item 8 of this
report.
(e) Notes to the Consolidated Financial Statements,
which information is incorporated by reference under
Item 8 of this report.
(f) Independent Auditors' Report, which information is
incorporated by reference under Item 8 of this report.
2. Financial Statement Schedules and Independent Auditors'
Report Files as part of this Report:
Schedule
Number Description
- Report of Independent Accountants
Schedule IX Valuation and Qualifying
Accounts
and Reserves (page S-1)
All other financial statements and schedules not listed have been
omitted since the required information is included in the
consolidated financial statements or the notes thereto, or is not
applicable or required.
3. EXHIBITS
(3)(a) Certificate of Incorporation (Incorporated by reference
from Exhibit 4(a) of the Corporation's Registration
Statement on Form S-2, Registration No. 33-7774, filed on
August 5, 1986)
(3)(b) By-Laws (Incorporated by reference from Exhibit 3 of the
Corporation's Quarterly Report on Form 10-Q filed on May
13, 1988)
(3)(c) Amended and Restated Certificate of Incorporation
(Incorporated by reference from Exhibit A of the
Corporation's Definitive Proxy Statement, filed on March
29, 1995)
(4)(a) Indenture of Trust dated as of November 1, 1989 between
Niagara County Industrial Development Agency and The Bank
of New York as trustee for Pyron Corporation
(Incorporated by reference from Exhibit (4)(a) of the
Corporation's Annual Report on Form 10-K filed March 31,
1990)
(4)(b) Agency Mortgage and Security Agreement dated as of
November 1, 1989 from Pyron Corporation and Niagara
County Industrial Development Agency to The Bank of New
York (Incorporated by reference from Exhibit (4)(b) of
the Corporation's Annual Report on Form 10-K filed March
31, 1990)
(4)(c) Letter of Credit Reimbursement Agreement dated as of
November 1, 1989 between Pyron Corporation and Chemical
Bank (Incorporated by reference from Exhibit (4)(c) of
the Corporation's Annual Report on Form 10-K filed March
31, 1990)
(4)(d) First Amendment to Letter of Credit Reimbursement
Agreement dated as of November 1, 1989 between Pyron
Corporation and Chemical Bank (Incorporated by reference
from Exhibit (4)(d) of the Corporation's Annual Report on
Form 10-K filed March 31, 1990)
(4)(e) Second Amendment to Letter of Credit Reimbursement
Agreement dated as of March 15, 1995 between Pyron
Corporation and Chemical Bank (Incorporated by reference
from Exhibit (4)(e) of the Corporation's Annual Report on
Form 10-K filed March 30, 1995)
(4)(f) Bank Mortgage and Security Agreement dated as of November
1, 1989 from Pyron Corporation and Niagara County
Industrial Development Agency to Chemical Bank
(Incorporated by reference from Exhibit (4)(e) of the
Corporation's Annual Report on Form 10-K filed March 31,
1990)
(4)(g) Building Loan Agreement dated as of November 1, 1989
between Chemical Bank and Pyron Corporation
(Incorporated by reference from Exhibit (4)(f) of the
Corporation's Annual Report on Form 10-K filed March 31,
1990)
(4)(h) Security Agreement dated as of November 1, 1989 between
Pyron Corporation and Chemical Bank (Incorporated by
reference from Exhibit (4)(g) of the Corporation's Annual
Report on Form 10-K filed March 31, 1990)
(4)(i) Corporate Guaranty dated as of November 1, 1989 from
Zemex Corporation to Chemical Bank (Incorporated by
reference from Exhibit (4)(h) of the Corporation's Annual
Report on Form 10-K filed March 31, 1990)
(4)(j) First Amendment to Corporate Guaranty dated as of
November 1, 1989 of Zemex Corporation to Chemical Bank
(Incorporated by reference from Exhibit (4)(i) of the
Corporation's Annual Report on Form 10-K filed March 31,
1990)
(4)(k) Second Amendment to Corporate Guaranty dated as of March
14, 1991 of Zemex Corporation to Chemical Bank
(Incorporated by reference from Exhibit (4)(j) of the
Corporation's Annual Report on Form 10-K filed March 31,
1991)
(4)(l) Third Amendment to Corporate Guaranty dated as of
February 25, 1992 of Zemex Corporation to Chemical Bank
(Incorporated by reference from Exhibit (4)(m) of the
Corporation's Annual Report on Form 10-K filed March 31,
1993)
(4)(m) Fourth Amendment to Corporate Guaranty dated as of March
8, 1993 of Zemex Corporation to Chemical Bank
(Incorporated by reference from Exhibit (4)(o) of the
Corporation's Annual Report on Form 10-K filed March 31,
1993)
(4)(n) Fifth Amendment to Corporate Guaranty dated as of March
15, 1995 of Zemex Corporation to Chemical Bank
(Incorporated by reference from Exhibit (4)(n) of the
Corporation's Annual Report on Form 10-K filed March 30,
1995)
(4)(o) Irrevocable Standby Letter of Credit between Florida Gas
Utility and The Feldspar Corporation dated December 16,
1992 (Incorporated by reference from Exhibit (4)(q) of
the Corporation's Annual Report on Form 10-K filed March
31, 1993)
(4)(p) Loan and Security Agreement dated as of March 15, 1995
among Zemex Corporation and The Feldspar Corporation and
NationsBank of Tennessee, N.A. and Chemical Bank and
NationsBank of Tennessee, N.A., as Agent (Incorporated by
reference from Exhibit (4)(p) of the Corporation's Annual
Report on Form 10-K filed March 30, 1995)
*(10)(a) Key Executive Common Stock Purchase Plan
(Incorporated by reference from Exhibit (10)(b) of the
Corporation's Annual Report on Form 10-K filed March 31,
1991)
(10)(b)Consent to Assignment of Lease and to Agreement Sublease,
and permission to Make Payments dated November 7, 1978
each from Joberta Enterprises, Inc. to NL Industries,
Inc. and The Feldspar Corporation (Incorporated by
reference from Exhibit 10(pp) to the Corporation's
Registration Statement on Form S-2, Registration No. 33-
7774, filed on August 5, 1986)
(10)(c)Additional Lease Agreement dated as of November 1, 1989
between Niagara County Industrial Development Agency and
Pyron Corporation (Incorporated by reference from
Exhibit (10)(ll) of the Corporation's Annual Report on
Form 10-K filed March 31, 1990)
*(10)(d) Employment Agreement dated February 5, 1991 between
Zemex Corporation and Robert W. Morris (Incorporated by
reference from Exhibit (10)(ll) of the Corporation's
Annual Report on Form 10-K filed March 31, 1992)
*(10)(e) Option Agreement with Paul Carroll dated September
17, 1991 (Incorporated by reference from Exhibit
(10)(ll) of the Corporation's Annual Report on Form 10-K
filed March 31, 1992)
*(10)(f) Option Agreement with Peter Lawson-Johnston dated
September 17, 1991 (Incorporated by reference from
Exhibit (10)(ll) of the Corporation's Annual Report on
Form 10-K filed March 31, 1992)
*(10)(g) Option Agreement with John Donovan dated September
17, 1991 (Incorporated by reference from Exhibit
(10)(ll) of the Corporation's Annual Report on Form 10-K
filed March 31, 1992)
*(10)(h) Subscription Agreement with Richard L. Lister dated
November 26, 1991 (Incorporated by reference from
Exhibit (5)(a) of the Corporation's Annual Report on Form
10-K filed March 31, 1992)
(10)(i)Asset Purchase Agreement dated March 18, 1991 among
Unimin Corporation, Purchaser; Zemex Corporation, Seller
and The Feldspar Corporation, Operating Subsidiary
(Incorporated by reference from Exhibit (5)(a) of the
Corporation's Annual Report on Form 10-K filed March 31,
1991)
(10)(j)Lease Agreement dated September 5, 1990 between the State
of Connecticut, Department of Transportation and The
Feldspar Corporation (Incorporated by reference from
Exhibit (5)(b) of the Corporation's Annual Report on Form
10-K filed March 31, 1991)
(10)(k)Ligonier Purchase Agreement and Second Plan of
Reorganization dated March 2, 1992 among Pyron Metal
Powders, Inc., a wholly-owned subsidiary of Zemex
Corporation, Purchaser and Ligonier Powders, Inc., Seller
(Incorporated by reference from Exhibit (5)(a) of the
Corporation's Annual Report on Form 10-K filed March 31,
1993)
(10)(l)1995 Stock Option Plan (Incorporated by reference from
Exhibit B of the Corporation's 1995 Definitive Proxy
Statement, filed on March 29, 1995)
(10)(m)Stock Purchase Agreement dated August 10, 1993 between
Zemex Corporation, Zemex Canada Inc., an Ontario
corporation and a direct wholly-owned subsidiary of Zemex
Corporation, Dundee Bancorp Inc., an Ontario corporation;
and Dundee Bancorp International Inc., a Delaware
corporation, and a direct wholly-owned subsidiary of
Dundee Bancorp Inc., with respect to the acquisition of
Suzorite Mica Products Inc. (Incorporated by reference
from Exhibit 2 of the Corporation's Current Report on
Form 8-K filed September 7, 1993)
(10)(n)Capital Stock Purchase Warrant dated September 14, 1993
issued to Dundee Bancorp International Inc. pursuant to
the Stock Purchase Agreement referred to in 10(m).
(Incorporated by reference from Exhibit 4(a) of the
Corporation's Current Report on Form 8-K filed September
7, 1993)
(10)(o)Registration Rights Agreement dated September 14, 1993
between Zemex Corporation and Dundee Bancorp
International Inc. (Incorporated by reference from
Exhibit 4(b) of the Corporation's Current Report on Form
8-K filed September 7, 1993)
(10)(p)Asset Purchase Agreement dated September 3, 1993 between
U.S. Silica Company, The Feldspar Corporation and Zemex
Corporation with respect to the sale of the Virginia
aplite facility (Incorporated by reference from Exhibit
10(at) of the Corporation's Annual Report on Form 10-K
filed March 31, 1994)
(10)(q)Stock Purchase Agreement dated November 15, 1993 between
Americo Malay Mineral Company and Zemex Corporation with
respect to the sale of 2,500,002 common shares of
Perangsang Pasifik Senderian Berhad, a corporation
organized and existing under the laws of the Federal
Republic of Malaysia (Incorporated by reference from
Exhibit 10(au) of the Corporation's Annual Report on Form
10-K filed March 31, 1994)
(10)(r)Suzorite Mica Product Inc.'s Mining Lease dated August
25, 1975 between the Province of Quebec and Marietta
Resources International Ltd. (Incorporated by reference
from Exhibit 10(av) of the Corporation's Annual Report on
Form 10-K filed March 31, 1994)
(10)(s)Employee Stock Purchase Plan (Incorporated by reference
as Exhibit A to the Corporation's Proxy Statement filed
May 6, 1994)
(10)(t)Stockholders Agreement dated June 10, 1994 among
Alumitech, Inc., Clarion Capital Corporation, DCC
Equities Limited and Moshe Dan Yerushalmi, John Hocevar
and Terrance Hogan and Zemex Corporation (Incorporated by
reference as Exhibit 10(ax) to the Corporation's
Registration Statement on Form S-1, Registration No. 33-
82638, filed on August 22, 1994)
(10)(u)Asset Purchase Agreement dated December 7, 1994 between
Whittaker, Clark & Daniels, Inc., Clark Minerals, Inc.,
Cherokee Minerals, Inc. and Pioneer Talc Company and
Suzorite Mineral Products, Inc. and Zemex Corporation
(Incorporated by reference from Exhibit 10(u) of the
Corporation's Annual Report on Form 10-K filed March 30,
1995)
(13) 1995 Annual Report to Shareholders
(22) Subsidiaries of the Registrant
(24)(a)Consent of Deloitte & Touche
The Corporation will furnish copies of these documents to
requesting shareholders upon payment of $10.80 per document.
* Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ZEMEX CORPORATION
By:/s/ RICHARD L. LISTER
Dated: March 31, 1996 Richard L. Lister
President and ChiefExecutive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report is signed below by the following persons on
behalf of the registrant and in the capacities and on the dated
indicated:
Title
/s/ PETER LAWSON-JOHNSTON Chairman of the Board and Director
Peter Lawson-Johnston
/s/ RICHARD L. LISTER President and Chief Executive Officer
Richard L. Lister and Director (Principal Executive
Officer)
/s/ PAUL A. CARROLL Director
Paul A. Carroll
/S/ MORTON A. COHEN Director
Morton A. Cohen
/s/ JOHN M. DONOVAN Director
John M. Donovan
/s/ THOMAS B. EVANS, JR. Director
Thomas B. Evans, Jr.
Title
/s/ NED GOODMAN Director
Ned Goodman
/s/ PATRICK H. O'NEILL Director
Patrick H. O'Neill
/s/ WILLIAM J. VANDEN HEUVEL Director
William J. vanden Heuvel
/s/ ALLEN J. PALMIERE Vice President, Chief Financial
Officer and
Allen J. Palmiere and Assistant Secretary (Principal
Financial
and Accounting Officer)
ZEMEX CORPORATION
And Subsidiaries
SCHEDULE IX - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
For the Year Ended December 31,
Column A Column B Column C Column D Column E Column
F
Addition
Balance s Balance
at Charged Other At End
Description Beginnin to Costs Additions Deduction of
g and s Period
of Expenses
Period
1995
Reserves
Other $549,000 $154,000 _ $ 98,000 $605,000
Allowance for
Uncollectable 414,000 77,000 $2,000 107,000
Accounts 386,000
1994
Reserves
Repairs _ _ _ _ _
Employee $ _ _ $ _
Severance 80,000 $255,000 _ 80,000 $549,00
Other 482,000 188,000 0
Allowance for 85,000 _
Uncollectable 371,000 42,000 414,000
Accounts
1993
Reserves
Repairs $381,000 _ $381,000 (a
Employee 308,000 _ _ 686,000 ) _
Severance 420,000 $458,000 _ 32,000 $80,000
Other 94,000 (b 482,000
)
Allowance for 241,000 _ 98,000
Uncollectable 228,000 371,000
Accounts
(a) PPSB sold in 1993.
(b) Severance expense during 1993.
Exhibit 22
SUBSIDIARIES OF THE REGISTRANT
The subsidiaries listed below are wholly-owned and all are
consolidated in the financial statements.
State or Country
in Which
Subsidiary Name Incorporated or Organized
Alumitech, Inc. Delaware
The Feldspar Corporation North Carolina
Pyron Corporation New York
Pyron Metal Powders, Inc. Delaware
Suzorite Mica Products Inc.Ontario, Canada
Suzorite Mineral Products, Inc. Delaware
- 17 -
Exhibit 24(a)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of Zemex Corporation
We have audited the consolidated financial statements of Zemex
Corporation and Subsidiaries as of December 31, 1995 and for the
year then ended, and have issued our report thereon dated January
24, 1996, such consolidated financial statements and report are
included in your 1995 Annual Report to Shareholders and are
incorporated herein by reference. Our audit also included the
consolidated financial statement schedules of Zemex Corporation,
listed in Item 14. This consolidated financial statement
schedule is the responsibility of the Corporation's management.
Our responsibility is to express an opinion based on our audit.
In our opinion, such consolidated financial statements schedule,
when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE
Toronto, Ontario
March 31, 1996
Exhibit 13
Financial Highlights
1995 1994
1993
Summary of Operations
Net Sales $85,056,000
$55,306,000 $47,958,000 Income from Continuing Operations
8,418,000 6,250,000 3,188,000
Net Income 8,418,000
6,250,000 1,852,000
Capital Expenditures 15,451,000
3,077,000 2,670,000
Financial Position at Year End
Working Capital $19,709,000
$26,046,000 $ 9,288,000 Shareholders' Equity 70,900,000
54,052,000 26,530,000
Per Common Share
Net Income $ 1.03 $
1.12 $ .40
Shareholders' Equity 8.49
7.54 5.85
Average Common Shares and
Common Share Equivalents Outstanding 8,208,874
5,588,682 4,605,440
Common Shares Issued and Outstanding
at Year End 8,355,722
7,168,153 4,535,283
Table of Contents
To Our Shareholders 2
Corporate Overview 5
Industrial Minerals 6
Metal Products 8
Management's Discussion and Analysis
12 Independent Auditors' Report
22
Management's Report
23
Audit Committee Report
23
Financial Statements
24
Notes to Financial Statements
28
Selected Financial Data
44
To Our Shareholders
We are please to report improved financial results for the
fourth consecutive year, reflecting the continued implementation
of our operating strategy to achieve strength and significance
in each of the markets we serve. For the year ended December
31, 1995, the Corporation reported operating income of $8.3
million compared to $5.8 million in 1994, an increase of 43
percent. The Corporation also reported net income of $8.4
million or $1.03 per share on sales of $85.1 million,
representing growth of 35 percent in net income and 54 percent
in sales over the 1994 fiscal year. Both 1995 and 1994 have
been affected by the recognition of the benefit of prior years'
tax loss carryforwards. Although the 1995 results are
satisfactory, they were negatively impacted by soft performance
in the second half of the year and do not reflect the earnings
potential of the core businesses.
In 1995, the Corporation took an important step in strengthening
its foundation for future growth and profitability by completing
its acquisition of 100 percent of Alumitech, Inc. Alumitech, an
aluminum dross reprocessor, has developed and patented
technology
that will enable it to virtually eliminate the need for the
landfill of dross and dross materials. This acquisition lends
itself to the Corporation's goal of developing leading and/or
niche positions for all of its businesses.
Over the past three years, Zemex has concentrated its efforts on
building solid core businesses with strong cash generation and
continuing its growth through a strategy of expansion and
acquisition. The core businesses, industrial minerals and metal
products, saw capital expenditures in excess of $15 million in
1995, more than 80 percent of which was funded out of cash flow
and cash on hand. Major capital expenditures are also planned
for 1996 and 1997 and these will be funded from cash flow and,
as required, senior long term debt. In the case of building new
Alumitech plants, it is anticipated that the Corporation will
use low interest Industrial Development Revenue Bonds available
for the construction of such facilities.
HIGHLIGHTS OF 1995
Industrial Minerals
Our feldspar business had a good year as strong demand for tiles
and sanitaryware continued despite the uncertainty in the
construction market. We anticipate one of our primary markets
for feldspar, ceramic floor and wall tiles, will continue to
expand rapidly as offshore tile manufacturers, who previously
imported tile products, establish production facilities in North
America. The 135,000 tons of additional capacity provided by
the expansion and modernization at our feldspar operation in
Spruce Pine, North Carolina is ready to meet the continuing
growth of the sodium feldspar market.
Our feldspar group has also developed a new low iron sand
material and has entered into an exclusive contract to supply
this product. Construction of a dedicated facility is set to
commence in early 1996.
To further enhance the talc operations which were acquired at
the end of 1994, the Corporation purchased the assets of a
mineral processing facility in Benwood, West Virginia in May
1995. This facility, with its grinding capacity and strategic
location on the Ohio River, gives the Corporation the
opportunity to expand its present processing capability and
serve a wider and more diverse market base. Programs are well
underway to expand and upgrade the Benwood facility to increase
its fine grind capability and provide further opportunity to
penetrate additional markets.
Our mica business suffered lower sales than anticipated in 1995
due to slowness in the automotive industry and, in particular,
to the effect of major inventory readjustments by the suppliers
to this industry. An intensive marketing program initiated in
1995 is expected to produce stronger results in 1996.
Metal Products
Our metal powders group had a very difficult year: there was a
five-week shutdown due to an explosion of the atomization
furnace at the plant in Niagara Falls, New York; a two-week
shutdown as a result of a curtailment of hydrogen availability
by our supplier; and, most critically, a very sluggish
automotive market. Despite these setbacks, the metal powders
group was able to strengthen its customer service and expand its
customer base by completing a new blending plant in St. Marys,
Pennsylvania. This new facility effectively positions the
Corporation to meet the "just-in-time"
inventory requirements of its customers from a location
considered to be in the heart of the powdered metallurgical
industry.
In addition, the occasion to pursue a new product line arose
when the only domestic producer of manganese sulfide was sold
and relocated to Europe in late 1995. Our metal powders group
accomplished the task of developing what appears to be a more
advanced material and has announced plans to produce this new
product at its facility in Greenback, Tennessee commencing in
mid1996.
Alumitech, Inc. is an aluminum dross reprocessor that adds
proprietary technology to conventional dross processing. The
result is an environmentally friendly process that has the
ultimate ability to eliminate all need for landfilling aluminum
dross and dross components. The value of this patented
technology is apparent given that up to two billion pounds of
aluminum dross materials are currently landfilled in the United
States annually. Furthermore, many European countries have
declared aluminum dross a hazardous waste.
Alumitech is a good contributor to the Corporation's overall
profitability but, more importantly, offers the Cooperation a
significant opportunity. By taking aluminum waste, transforming
it into commercially acceptable materials, and avoiding
landfill, the Corporation is set to revolutionize conventional
aluminum dross reprocessing.
Currently we are active in site selection for the first full
scale Alumitech plant, and anticipate beginning construction as
soon as possible after the site is purchased and permitted.
STOCK REPURCHASE PROGRAM
We believe that the Corporation's stock is undervalued and in
November 1995 announced a continuation of a stock repurchase
program originally initiated in November 1994. To date, the
Corporation has repurchased approximately 563,000 shares on the
open market.
OUR COMMITMENT
Zemex is eager to move forward and build on its solid foundation
to achieve long term growth and profitability. Sharper
execution of our core strategies remains a critical priority.
We will continue to focus on increasing sales but with greater
emphasis on operating efficiencies and improved returns. We
remain committed to profitably growing our businesses and
achieving maximum value for our shareholders.
Nothing can be achieved without the efforts of our most valuable
asset - our employees. For their dedication and consistent
performance, we are continually grateful.
/s/ RICHARD L. LISTER /s/ PETER LAWSON -JOHNSTON
Richard L. Lister Peter Lawson-Johnston
President and Chief Executive Officer Chairman of the Board
CORPORATE OVERVIEW
INDUSTRIAL MINERALS METAL POWDERS ALUMITECH, INC.
Industrial Minerals Metal Powders has Alumitech, Inc.
has
has operating mines operating operating
and facilities at: facilities at: facilities at:
Edgar, Florida Niagara Falls, New Cleveland, Ohio
Monticello, Georgia York Streetsboro, Ohio
Natural Bridge, New St. Marys,
York Pennsylvania Major Products
Murphy, North Greenback,
Carolina Tennessee secondary
aluminum
Spruce Pine, North Maryville, mixed salts
Carolina Tennessee high temperature
Boucherville, insulation
material
Quebec Major Products abrasives
Suzor Township,
Quebec atomized steel Applications
Van Horn, Texas powders
Benwood, West atomized iron refractory
Virginia powders insulation
sponge iron aluminum
Major Products copper, tin and fabrication
alloy powders
sodium and manganese sulfide Markets
Served
potassium feldspar distributors of
kaolin nickel powder secondary
aluminum
silica sand industry
low iron sand Applications
mica
talc bushings, bearings,
baryte complex
P/M parts, brakes
Applications and gears
ceramics Markets Served
plumbing fixtures
wall and floor automotive industry
tiles small appliance
electric porcelain industry
wiring devices friction brake
dinnerware industry
specialty glass
reinforced plastics
sound damping
asbestos
replacement
fillers
Markets Served
housing sector (new
and renovation)
commercial and
industrial
construction
electrical/power
transmission
automotive industry
paint, plastics and
fillers
INDUSTRIAL MINERALS
Zemex's industrial minerals division mines, processes and
supplies feldspar, kaolin, sand, mica and talc for use in a
multitude of consumer and industrial products and
applications. With operating facilities in five states and
one Canadian
province, this group provides Zemex with strong cash generation
and a significant contribution to the Corporation's consolidated
net income.
FELDSPAR, KAOLIN AND SAND
Through its wholly-owned subsidiary, The Feldspar Corporation
("TFC"), Zemex believes it is the largest producer of
feldspathic materials in the world, with the capacity to produce
390,000 tons of sodium and potassium feldspar. The superior
quality and consistency of TFC's sodium feldspar coupled with
its technical service and new product design gives it a
competitive edge, leading to its majority market share.
Sodium feldspar is used primarily in plumbing fixtures such as
ceramic sinks and toilets, and ceramic floor and wall tiles.
Since 1993, TFC has experienced constant growth in sales due to
the increased consumption of its products. In particular, the
United States has seen a significant increase in feldspar
requirements as offshore tile producers, attempting to protect
their market share, have relocated manufacturing operations to
the United States.
To keep pace with the strong demand for sodium feldspar and to
improve operating efficiency, TFC embarked on a $15 million
expansion and modernization of its sodium feldspar facility in
Spruce Pine, North Carolina. In addition to creating operating
efficiencies, this expansion will also serve to lower production
costs.
Construction is soon to begin on a low iron sand facility at
Spruce Pine, North Carolina to fulfill a long term contract for
the supply of this new high value-added material. Low iron sand
is used in applications where low iron levels are particularly
critical, such as in specialized lighting and refining
equipment.
TFC's potassium feldspar is used in television picture tubes,
electrical porcelain for transformers, substations and power
transmission lines, wiring devices and electrical appliances.
Market demand has been relatively flat for these products,
however, cost efficiencies and more effective mining procedures
have resulted in improved profitability.
TFC also produces a fully water-washed kaolin clay at its plant
in Edgar, Florida. This material's unique forming properties
and white-fired color make it desirable for use in fine china,
dinnerware and mosaic tiles; its low level of impurities make it
suitable for high performance refractories and glazes. TFC
believes that it is the only producer of this specialty kaolin.
Recently, TFC signed marketing agreements with a ball clay
producer and a kaolin producer to market their respective
products in the western United States and abroad. The
arrangements with these two clay producers will give TFC a full
line of ceramic materials for the export market.
MICA
Another major product offered by the industrial minerals group
is a high grade phlogopite mica, an important raw material for a
number of industrial applications owing to its high electrical
and heat resistance characteristics. Phlogopite mica has a
number of attractive physical and chemical characteristics. It
is chemically inert, corrosion resistant, non-combustible and
nonconductive. It also possesses sound absorbent
characteristics and has high strength properties. In comparison
with other known
micas, it has an outstanding thermal stability over a broad
temperature range.
Phlogopite mica is used as a partial or complete substitute for
asbestos in fire-resistant papers, friction materials and
cementatious coatings. The automotive industry currently uses it
to impart rigidity in plastic applications such as fan shrouds,
grills and other car parts. Additional applications are in
paint, coatings, rubber compounds, and in oil well drilling
fluids.
The Corporation's phlogopite mica reserves are located in Suzor
Township, 200 miles north of Montreal, Quebec. The reserves are
estimated at approximately 28 million tons of ore containing 80
percent to 85 percent mica.
TALC
In 1995, the Corporation's newly acquired talc business, Suzorite
Mineral Products, Inc. ("SMP"), established a strategy to improve
market penetration by focusing on niche markets with newly
designed products.
The major uses of talc are in paper, paint, plastics, adhesives
and sealants, cosmetics, pharmaceuticals and ceramics.
The goal for the talc group is to be a value-added provider by
working closely with customers to develop product formulations to
exacting standards, meeting or exceeding performance expectations
at reasonable costs.
During 1995, SMP purchased the assets of a processing facility in
Benwood, West Virginia. Benwood's strategic location on the Ohio
River makes it a cost effective processor of imported raw talc
ores and other materials, enabling SMP to expand its product
lines and add to its ability to competitively serve its
customers.
METAL PRODUCTS
METAL POWDERS
Founded in 1940, the Corporation's wholly-owned subsidiary, Pyron
Corporation, is the oldest established producer of ferrous metal
powders in North America. Although for many years, Pyron
produced only hydrogen-reduced sponge iron, it has emerged as a
world class supplier of sponge and atomized materials, as well as
non-ferrous powders. Pyron currently offers the broadest range
of products to the powdered metallurgical industry.
Powdered metals are produced by processing metals into finely
divided powders by combinations of milling, oxidization and
reduction or by melting and atomizing through the impingement of
high pressure jets.
The use of powdered metals enables automobile part manufacturers
to reduce costs by minimizing machining and waste in the
manufacturing process. In addition, as the process of powder
metallurgy continues to become more refined, the ability to
produce larger and more sophisticated metal parts increases. It
is projected that demand for parts produced by powder metallurgy
will grow rapidly at the expense of forged, machined and cast
components. Recent figures indicate that approximately 28 pounds
of powdered metal parts are used per vehicle, however, industry
sources predict that this number should steadily increase as new
applications for powdered metal parts are developed by
automakers.
Major uses of Pyron's metal powders are in the production of
brake linings, clutch plates and other friction related products,
appliances, and lawn and garden products. In recent years, metal
powder use in automotive and rail braking systems has grown
rapidly as a replacement for asbestos, achieving excellent
performance and improving environmental and health conditions.
Other applications include chemical synthesis, precious metal
reclamation, metal-bonded abrasive products and food additives.
In addition to its iron and steel powder plant in Niagara Falls,
New York, Pyron acquired two copper and alloy powder producers:
one in Maryville, Tennessee in 1992 and one in Greenback,
Tennessee in 1994. Pyron now has the largest capacity of any non
ferrous metal powder producer in North America. These
acquisitions served to uniquely round out Pyron's strategy to
position itself as the only domestic producer of a full range of
ferrous and non-ferrous powders.
The metal powder industry is very competitive. Pyron's primary
emphasis is on expanding sales and improving operating
efficiencies while at the same time providing quality service. To
this end, in April 1995, Pyron opened a blending facility in St.
Marys, Pennsylvania, the heart of the powdered metal parts
industry. This new plant enhances product delivery and allows
customers to take advantage of just-in-time ordering. In the
short time it has been in operation, the St. Marys blending
facility has gained wide acceptance in the marketplace.
As part of its focus on developing profitable niche markets,
Pyron recently announced its intention to become the only U.S.
producer of manganese sulfide. Manganese sulfide is an additive
used by the powdered metallurgical industry to enhance tool life
and aid in machinability. For Pyron, it is a natural complement
to its core ferrous and non-ferrous businesses. For Pyron's
customers, it will mean that they will not have to rely on
imported manganese sulfide: they will have access to a reliable
low cost source of this material. Initial machinability tests
have shown that Pyron's new manganese sulfide product is superior
to any comparable material currently being sold.
Construction of a facility to produce this newly designed product
is underway at the Greenback location and it is anticipated that
the new material will be available commercially by mid 1996.
The atomized steel powder side of the business continues to grow
at a rate that outstrips the sponge business. Shipments of
Pyron's atomized products were up 10 percent in 1995 and it is
anticipated that the rate of shipments will continue to increase
in 1996. In addition, demand for Pyron's high grade, water
atomized, copper powders are expected to remain strong through
1996. As the Maryville plant was operating at near capacity in
1995, plans for 1996 include the start up of a similar atomizing
process at the Greenback plant.
Pyron is in a position to provide true value-added products to
the marketplace. By concentrating its efforts on customers whose
needs are best met by a low cost, high service-oriented supplier.
Pyron is confident that is position as a strong niche supplier to
the metal powder industry will continue to bear fruit in the
future.
Metal Products
ALUMITECH, INC.
The Corporation's now wholly-owned subsidiary, Alumitech, has
developed and patented, unique "closed loop" technology. This
proprietary technology gives Alumitech the ability to recycle
aluminum dross and saltcake and convert material that would
otherwise be landfilled into commercially valuable products.
More importantly, Alumitech's process also eliminates potential
environmental liability that may be caused by the leaching or
reactivity of the landfilled material.
Various industry sources, including the U.S. Department of
Energy, estimate that up to two billion pounds of aluminum
dross and saltcake materials are landfilled annually in the
United States. Another two billion pounds are produced
annually in
Europe where the material is a classified waster material. In
an age where environmental awareness is high, the Alumitech
process is both a welcome and profitable alternative.
Alumitech presently operates through two subsidiaries, Aluminum
Waste Technology, Inc. ("AWT") and Engineered Thermal Systems,
Inc. ("ETS").
AWT is a recycling facility in Cleveland, Ohio that now
processes more than 150 million pounds of aluminum dross and
saltcake annually. At this facility, AWT, using the
proprietary technology developed in-house over many years,
separates the dross and saltcake materials into various
components: aluminum metal, salts, aluminum and other metal
oxides and salt fluxes, using Alumitech's patented process.
The aluminum is sold back to secondary smelters and other
commercial manufacturing operations. A portion of the aluminum
oxide containing aluminum is sold to the steel industry for use
in exothermic compounds, deoxidations materials and slag
conditioner. The salts are crystallized and sent back to the
secondary aluminum producers. The oxides not containing
aluminum metal, also known as non-metallic product ("NMP"), can
be further processed and sent to ETS. ETS, Alumitech's second
plant just outside of Cleveland, produces ceramic fiber. This
ceramic fiber is used as insulation in industrial applications
where temperatures can reach upward of 2000 degrees Fahrenheit.
The Alumitech process has been under development for several
years and is currently in the final stages of
commercialization. During 1995, management focused on refining
the process to maximize the quality and marketability of the
NMP. Alumitech is very close to being able to produce a
material that is inert in an electric arc furnace and as a
result can be substituted for commercial sources of alumina.
The process is currently undergoing final large-scale tests to
provide conclusive data for process design.
Continuing work is also underway to identify and expand the
uses of the NMP generated from recycling of aluminum dross and
saltcake. This material, which is an aluminum silicate
containing magnesium spinels, has additional application and
uses in the abrasive and refractory markets as well as in the
production of steel and cement based compounds. Testing and
evaluation work is currently underway which could greatly
expand the commercial use and demand for NMP.
Alumitech is presently evaluating plant sites for the
construction of its next full-scale facility which is expected
to
be operational by mid 1997. The new plant will be
approximately twice the capacity of the existing operation in
Cleveland and will cost approximately $16 million to construct.
With the increased use of aluminum projected to continue, and
with the potential environmental liability associated with
conventional dross processing and subsequent landfilling, the
future outlook for Alumitech and its technology is very
positive. In addition, as the price of landfill increases and
as more and more companies take a socially responsive proactive
approach to environmental issues, Alumitech offers a very
desirable alternative.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is a discussion and analysis of the financial
condition and results of operations of the Corporation for the
years ended December 31, 1995, 1994 and 1993, and certain
factors that may affect the Corporation's prospective financial
condition and results of operations. The following should be
read in conjunction with the Consolidated Financial Statements
and related notes on pages 24 through 43.
Overview
The Corporation is a diversified producer of specialty
materials, industrial minerals and metal products for use in a
variety of industrial applications. The Corporation operates
in two principal business segments: (i) industrial minerals,
which includes The Feldspar Corporation, Suzorite Mica Products
Inc. and Suzorite Mineral Products, Inc.; and (ii) metal
products, which includes Pyron Corporation, Pyron Metal
Powders, Inc. and Alumitech, Inc.
In 1993, the Corporation hired a new management team which
refocused the strategic direction of the Corporation. Since
then, the Corporation has sold certain non-core assets as well
as undertaken several strategic acquisitions and investments.
In 1993, the Corporation sold its 70 percent interest in
Perangsang Pasifik Senderian Berhad, a tin dredging operation
in Malaysia, and its Virginia aplite facility, and acquired
Suzorite Mica Products Inc. During 1994, Zemex acquired the
assets of Greenback Industries, Inc., the talc operations of
Whittaker, Clark & Daniels, Inc. and a 42 percent interest in
Alumitech, Inc. In 1995, the Corporation completed its
acquisition of 100 percent of Alumitech, Inc. and acquired an
industrial mineral processing facility in Benwood, West
Virginia.
As a result of this strategic redirection, the Corporation's
net sales have increased from $48.0 million in 1993 to $85.1
million in 1995, an increase of 77.3 percent. In addition, the
Corporation's pre-tax earnings from continuing operations have
increased from $3.7 million in 1993 to $7.9 million in 1995.
The Corporation's strategy going forward is to enhance its
position as a leading supplier of specialty materials through
investments in its core businesses, the introduction of new
products, strategic acquisitions, and investments in new
technologies.
Basis of Presentation
The Corporation's acquisition of Suzorite Mica Products Inc. in
1993 was accounted for as a pooling of interests. The
Corporation's 70 percent interest in Perangsang Pasifik
Senderian Berhad, which was sold in 1993, has been presented
separately in
the Corporation's financial statements as discontinued
operations.
Results of Operations
Year Ended December 31, 1995 Compared to Year Ended December
31, 1994
Net Sales
1995 1994 Change Change
(percen
t) Industrial
$37,089 $30,378 $ 6,711 22.1
Minerals
Metal Products 47, 967 24,928 23,039 92.4
$85,056 $55,306 $29,750 53.8
The Corporation's net sales for 1995 were $85.1 million, an
increase of $29.7 million or 53.8 percent from 1994. The major
components of the increase were: the consolidation of
Alumitech, Inc., $13.6 million; increased industrial mineral
sales, $6.7 million; and increased metal powder sales, $9.4
million.
The industrial minerals segment recorded a 22.1 percent
increase in sales from $30.4 million in 1994 to $37.1 million
in 1995. The change was due to an incremental $6.0 million in
sales from the talc operations which were acquired December 1,
1994 and a $2.0 million increase from the feldspar group,
offset in part by lower sales of phlogopite mica. Talc sales
are expected to increase in 1996 as new products are approved
by customers. Feldspar sales continue to grow primarily due to
increased demand from ceramic manufacturers and the mica market
is beginning to strengthen due to a concerted marketing effort.
Net sales for the metal products group increased $23.0 million,
or 92.4 percent, from $24.9 million in 1994 to $48.0 million in
1995. Of this increase, $13.6 million was due to the
consolidation of Alumitech, Inc., which was previously
accounted for as an equity investment. Sales from the metal
powder group increased 38 percent in 1995, primarily due to
increased nonferrous sales following the September 1994
acquisition of Greenback Industries, Inc. Sponge iron sales
increased by 5 percent while atomized steel sales increased 20
percent, notwithstanding the significant negative impact of the
explosion of the atomization furnace at the plant in Niagara
Falls, New York in March 1995.
In 1996, continued growth in metal powder sales is anticipated
with modest improvement in sales from the aluminum dross
operation.
Cost of Goods Sold
Cost of goods sold were $64.4 million in 1995 compared to $40.6
million in 1994. The corresponding gross margins were 24.3
percent for 1995 and 26.7 percent for 1994. The decline in
gross margin was due to several factors: a decline in high-end
mica product sales; an increase in sales of several lower
margin industrial mineral products; and lower margins due to
competitive pressures within certain metal powder product
lines.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses increased
31.4 percent from $6.6 million in 1994 to $8.7 million in 1995.
The increase was the result of acquisitions in late 1994 and
early 1995. As a percent of sales, SG&A expense was 10.2
percent in 1995 as compared to 11.9 percent in 1994, reflecting
the benefit derived from higher volumes.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization increased by $1.4
million or 59.4 percent from $2.3 million in 1994 to $3.7
million in 1995. This increase was driven by the 73.2 percent
increase in property, plant and equipment during 1995 as a
result of acquisitions and capital expenditures.
Prospectively, depreciation will continue to increase as
current capital programs are placed into service.
Operating Income
Operating income rose to $8.3 million for fiscal 1995 from $5.8
million in fiscal 1994. While this represents a 42.8 percent
increase, the operating margin declined from 10.6 percent in
1994 to 9.8 percent in 1995. This decline was due to reasons
discussed previously.
Interest Expense, Net
Net interest expense for the year ended December 31, 1995 was
$0.5 million, an increase of $0.1 million over 1994. This is
attributable to an increase in total indebtedness from $6.7
million at December 31, 1994 to $13.1 million at December 31,
1995, offset in part by a decline in interest rates.
Provision for Income Taxes
In 1995, the Corporation realized an income tax recovery of
$0.5 million as compared to a recovery of $0.7 million in 1994.
The 1995 recovery reflects the recognition of the benefit of
the balance of the net operating tax loss carryforwards
available to the Corporation. While losses remain for tax
purposes, they have been fully recognized for accounting
purposes in accordance with Statement of Financial Accounting
Standards No. 109. In 1996 and beyond, the Corporation will
report an effective tax rate of approximately 35 percent,
reflecting the permanent difference arising from an earned
depletion allowance.
Net Income and Earnings Per Share
As a result of the factors discussed above, net income for the
year ended December 31, 1995 was $8.4 million, an increase of
$2.2 million from 1994. As the impact of the recognition of
the benefits of the loss carryforwards is significant, the
Corporation's earnings per share have been restated below on a
fully-taxed basis using an effective rate of 38 percent.
1995 1994
Pre-Tax Income $7,899,000 $5,579,000
Primary EPS (as $1.03 $1.12
reported)
EPS (fully-taxed $0.60 $0.62
at 38 percent)
Year Ended December 31, 1994 Compared to Year Ended December
31, 1993
Net Sales
1994 1993 Change Change
(percent
)
Industrial $30,378 $31,104 $ (726) (2.3)
Minerals
Metal 24,928 16,854 8,074 47.9
Products
$55,306 $47,958 $7,348 15.3
The Corporation's net sales for the year ended December 31,
1994 were $55.3 million, an increase of $7.3 million, or 15.3
percent, from 1993. The increase was primarily the result of
increased sales of the Corporation's feldspar, phlogopite mica,
and metal powder products, offset in part by decreased sales
resulting from the sale in the fourth quarter of 1993 of the
Virginia aplite facility.
Net sales in the industrial minerals segment for the year ended
December 31, 1994 were $30.4 million, a decrease of $0.7
million, or 2.3 percent, compared to 1993. Net sales for 1993
included $4.1 million attributable to the Virginia aplite
facility. When this amount is excluded from the 1993 results,
net sales in the industrial minerals segment during 1994
increased by $3.4 million or 12.5 percent above 1993. This
increase was primarily due to sales price increases, increased
demand for the Corporation's sodium feldspar and phlogopite
mica products, fueled by growth in the construction and
automobile sectors of the U.S. economy, and the introduction of
new products.
Net sales in the metal powders segment for the year ended
December 31, 1994 were $24.9 million, an increase of $8.1
million, or 47.9 percent, from 1993. The increase was
attributable primarily to increased market acceptance of the
Corporation's new atomized powder products and strong demand
for sponge iron powder. The asset purchase of Greenback
Industries, Inc. contributed $3 million in incremental revenue
in 1994.
Cost of Goods Sold
Cost of goods sold for the year ended December 31, 1994 were
$40.6 million, an increase of $3.8 million, or 10.4 percent,
from 1993. As a percent of net sales, cost of goods sold
decreased to 73.3 percent for the year ended December 31, 1994
from 76.6 percent for the year ended December 31, 1993. The
decrease was primarily due to fixed cost absorption associated
with higher sales volumes and to improvements in product mix
with the introduction of new higher value-added products. In
addition, 1993 included certain non-recurring engineering and
product development costs associated with the Corporation's
introduction of its atomized metal powder product line.
Selling, General and Administrative Expenses
SG&A expenses for the year ended December 31, 1994 increased by
4.2 percent from 1993 to $6.6 million. As a percentage of net
sales, SG&A expenses decreased from 13.2 percent in 1993 to
11.9 percent in 1994, reflecting the benefit derived from
higher volumes resulting in lower unit cost absorption.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization for the year ended
December 31, 1994 was $2.3 million, a decrease of $0.1 million,
virtually unchanged from 1993.
Operating Income
Operating income for the year ended December 31, 1994 was $5.8
million, an increase of $4.6 million, or 372 percent, from
1993. The increase was due in part to the reasons discussed
above. In addition, operating income for 1993 included
restructuring charges of $1.2 million. Excluding such
restructuring charges, the increase was $3.4 million or 135
percent and operating income as a percent of net sales
increased from 5.2 percent in 1993 to 10.6 percent in 1994.
Interest Expense, Net
Net interest expense for the year ended December 31, 1994 was
$0.4 million, a decrease of 52.6 percent from $0.9 million in
1993, reflecting lower levels of indebtedness. More than 50
percent of the Corporation's long term debt was repaid from the
net proceeds of its September 1994 public offering.
Other Income
The Corporation had other income of $3.3 million in 1993,
resulting primarily from a gain on the sale of its Virginia
aplite facility of $3.7 million, which was partially offset by
costs related to the acquisition of Suzorite Mica Products Inc.
and other miscellaneous income and expense items.
Provision for Income Taxes
In 1994, the Corporation recognized an income tax recovery of
$0.7 million after giving effect to a $1.5 million adjustment
for the recognition of a tax benefit arising from loss
carryforwards for financial statement purposes in accordance
with Statement of Financial Accounting Standards No. 109. The
recognition of the $1.5 million benefit was necessitated
primarily by revisions to the estimated future taxable income
during the Corporation's tax loss carryforward period.
Loss from Discontinued Operations
The Corporation recorded a loss of $1.3 million from
discontinued operations in 1993, which consisted of the
Corporation's disposition of its interest in a Malaysian tin
dredging company, Perangsang Pasifik Senderian Berhad. The
loss consisted of two components: (i) $0.1 million from
operations during the year; and (ii) $1.2 million from the
disposal of these operations.
Net Income and Earnings Per Share
As a result of the factors discussed above, net income for the
year ended December 31, 1994 was $6.2 million, an increase of
$4.4 million from 1993. As discussed above, net income for
1994 contains a $1.5 million tax loss carryforward recognition.
For purposes of clarity and consistency, the Corporation's
earnings per share have been restated below on a fully-taxed
basis using an effective rate of 38 percent.
1994 1993
Pre-Tax Income $5,579,000 $2,322,000
Primary EPS (as $1.12
$0.40 reported)
EPS (fully-taxed $0.62
$0.20 at 38 percent)
Liquidity and Capital Resources
The Corporation has historically funded its extraction and
processing activities through cash flow from operations, bank
debt and sales of capital stock and warrants. During the most
recent three-year period ended December 31, 1995, the
Corporation partially funded all capital expenditures,
acquisitions and debt reduction from a combination of
additional debt, cash flow from operations and proceeds from
the sale of operations not considered consistent with its
strategic focus. In addition, in September 1994 the
Corporation completed a public offering, raising net proceeds
of approximately $18.5 million. During 1995, outstanding
warrants were exercised which resulted in net proceeds of $4.8
million. These funds were utilized in part to repay long term
debt, fund acquisitions and purchase treasury stock.
Cash Flow from Operations
The Corporation had $19.7 million of working capital at
December 31, 1995, compared to working capital of $26.0
million at December 31, 1994. Net cash provided by operating
activities for the year ended December 31, 1995 was $7.2
million, up $4.6 million, or 173 percent, relative to 1994.
Earnings before interest, taxes, and depreciation, depletion
and amortization for the year ended December 31, 1995 were
$12.1 million, an increase of 45.8 percent over the $8.3
million generated in 1994.
Financing Agreements
In March 1995, the Corporation entered into a $30.2 million
credit facility with a syndicate of two banks. The credit
facility is further subdivided into four facilities: (i) a
$10.0 million revolving credit and term loan facility; (ii) a
$10.0 million multiple advance term loan facility; (iii) a
$5.2 million standby letter of credit; and (iv) a $5.0 million
operating line. These facilities are secured by specific
assets and a floating charge over a significant portion of the
Corporation's assets. The facilities bear interest at rates
varying from bank prime to bank prime plus 0.25 percent and
from LIBOR plus 1.25 percent to LIBOR plus 2.25 percent,
depending upon the financial position of the Corporation. As
at December 31, 1995, there was $2.0 million outstanding under
the operating line, $2.7 million outstanding under the
multiple advance term loan facility, and the standby letter of
credit was issued to secure the Corporation's Industrial
Development Revenue Bond. The operating line matures June 30,
1996 and will be reviewed annually for purposes of renewal.
The multiple advance term loan facility requires quarterly
payments of $0.3 million commencing April 1, 1996 with the
balance outstanding, if any, due January 1, 2000.
Capital Expenditures
The Corporation's primary capital activities in the past
involved the acquisition and development of industrial mineral
properties and facilities and necessary capital investments to
maintain operating viability and meet environmental, health
and safety standards at its existing operations. During 1995,
capital expenditures were $15.5 million compared to $3.1
million and $2.7 million for the years ended December 31, 1994
and 1993, respectively. In addition to its capital
expenditures, the Corporation purchased the assets of Benwood
Limestone Company, Inc., for a cash payment of $3.6 million.
The capital expenditures were funded by cash on hand, cash
flow from operations and a net increase in long term debt of
$0.9 million.
The Corporation is currently implementing and/or planning
several major capital programs. These include the completion
of the expansion of the sodium feldspar facility, the
construction of a high purity sand plant, and the construction
of a new aluminum dross processing facility. In aggregate,
1996 capital expenditures are anticipated to be approximately
$27 million. The Corporation plans on funding these from a
combination of cash flow from operations and existing and new
credit facilities. As at December 31, 1995, the Corporation
had aggregate unutilized credit of $20.3 million available to
it.
Although the Corporation's capital budgets provide for certain
reclamation and environmental compliance activities,
management does not believe that the cost of the Corporation's
environmental compliance will have a material adverse effect
on the Corporation's results of operations or financial
condition in 1996. The Corporation has no definitive
acquisition agreements with respect to additional property or
other acquisitions. The Corporation will, however, continue
to monitor potential strategic acquisitions that would enhance
its current activities. The Corporation believes the financing
arrangements in place, including those described above, its
cash flow from operations and additional borrowing capacity,
will provide the Corporation with adequate liquidity and
capital resources.
Seasonality and Inflation
Although the Corporation's results from extraction and
processing operations are cyclical due to fluctuations in
industrial minerals and metal products demands, sales of the
Corporation's products are generally not seasonal. Inflation
in recent years has not adversely affected the Corporation's
results of operations or costs, and is not expected to
adversely affect the Corporation in the future unless it grows
substantially and the markets for industrial minerals and
metal products suffer from a negative impact on the economy in
general.
Capital Stock
The capital stock of Zemex Corporation is traded on the New
York Stock Exchange. The price range in which the stock has
traded is shown for the past two years in the following
tables.
Capital Stock Prices
1995 Q1 Q2 Q3 Q4 Year
High 10 7/8 10 7/8 10 7/8 10 10 7/8
Low 8 3/8 9 9 1/8 8 1/4 8 1/4
Close 10 5/8 9 3/8 9 5/8 10 10
1994 Q1 Q2 Q3 Q4 Year
High 7 11 7/8 12 1/4 11 12 1/4
Low 6 1/4 6 1/8 9 5/8 7 3/4 6 1/8
Close 6 3/8 11 1/2 10 3/4 8 5/8 8 5/8
In the fourth quarter of each of 1995, 1994 and 1993, the
Corporation declared a 2 percent stock dividend.
As of December 31, 1995, there were approximately 1,512
holders of record of the Corporation's capital stock. This
number
includes shares held in nominee name and, thus, does not
reflect the number of holders of a beneficial interest in the
stock. Independent Auditors' Report
To the Shareholders and the Board of Directors of Zemex
Corporation
We have audited the accompanying consolidated balance sheets of
Zemex Corporation and Subsidiaries as of December 31, 1995 and
1994 and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1995. These financial
statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards in the United States. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Zemex Corporation and Subsidiaries as of December 31, 1995 and
1994 and the results of their operations and their cash flows
for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting
principles in the United States.
Deloitte & Touche
Chartered Accountants
Toronto, Ontario
January 24, 1996
Management Report
The management of Zemex Corporation and its subsidiaries has
the responsibility for preparing the consolidated
financial statements presented in this Annual Report and for
their accuracy and integrity. The statements have been
prepared in conformity with generally accepted accounting
principles in the United States, and include informed
judgments and estimates as required. Other financial
information in this Annual Report is consistent with the
financial statements.
The Zemex Corporation system of internal controls is designed
to provide reasonable assurance, at a justifiable cost, as to
the reliability of financial records and reporting and the
protection of assets. This system includes organizational
arrangements with clearly defined lines of responsibility.
Deloitte & Touche, independent auditors, have audited
the consolidated financial statements of Zemex Corporation and
their opinion is included on the preceding page.
Zemex Corporation has formal standards of corporate conduct
and policies regarding high standards of ethics and
financial integrity. These policies have been disseminated to
appropriate employees and internal control procedures
provide reasonable assurance that violations of these
policies, if any, are detected.
Allen J. Palmiere Richard L. Lister Vice President and
President and
Chief Financial Officer Chief Executive Officer
Audit Committee Report
The Audit Committee of the Board of Directors is composed of three
independent directors, Patrick H. O'Neill, Chairman, Thomas B. Evans,
Jr. and John M. Donovan. The Committee held four meetings during 1995.
The Audit Committee overseas the financial reporting process of the
Corporation on behalf of the Board of Directors. In fulfilling its
responsibility, the Committee recommended to the Board of Directors,
subject to shareholder approval, the selection of the Corporation's
independent auditors. The Audit Committee met with management and
representatives of the auditors, Deloitte & Touche, to review
accounting, auditing and financial reporting matters. The Committee met
with Deloitte & Touche representatives without management present.
Patrick H. O'Neill
Chairman, Audit Committee
Consolidated Balance Sheets
December 31
1995
1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,653,000 $
8,343,000
Accounts receivable (less allowance for
doubtful accounts of $386,000 at
December 31, 1995 and $414,000 at
December 31, 1994) (Note 15) 13,165,000 10,678,000
Inventories (Note 3) 20,176,000 16,490,000
Prepaid expenses 841,000 660,000
35,835,000 36,171,000
INVESTMENT (Note 2) - 2,286,000
PROPERTY, PLANT AND EQUIPMENT (Notes 4 and 8) 50,271,000 29,020,000
OTHER ASSETS (Note 5) 10,575,000 3,387,000
$ 96,681,000 $ 70,864,000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank indebtedness (Note 8) $ 3,220,000 $ 180,000
Accounts payable 8,037,000 6,316,000
Accrued liabilities 2,222,000 2,158,000
Accrued income taxes 269,000 397,000
Current portion of long term debt (Note 8) 2,378,000 1,074,000
16,126,000 10,125,000
LONG TERM DEBT (Note 8) 7,485,000 5,461,000
OTHER NON-CURRENT LIABILITIES 605,000 549,000
DEFERRED INCOME TAXES (Note 6) 1,565,000 677,000
25,781,000 16,812,000
SHAREHOLDERS' EQUITY
Common stock (Note 9) 8,785,000 7,221,000
Paid-in capital 50,436,000 38,703,000
Retained earnings 18,683,000 11,668,000
Note receivable from shareholder (Note 9) (1,749,000) (1,749,000)
Cumulative translation adjustment (1,218,000) (1,326,000)
Treasury stock at cost (Note 9) (4,037,000) (465,000)
70,900,000 54,052,000
$ 96,681,000 $ 70,864,000
Consolidated Statements of Shareholders' Equity
Years ended December 31
No
te
Receivable Cumulative
Common Paid-In Treasury Retained from Translation
Stock Capital Stock Earnings Shareholder Adjustment Total
Balance at December 31, 1992 $4,404,000 $18,443,000 $ -
$8,111,000 $(1,749,000) $(828,000) $
28,381,000 Stock issued to former officer 50,000 300,000 - -
- -
350,000
Stock dividend (a) 81,000 520,000 -
(604,000) - -
(3,000)
Cash dividend paid by Suzorite
Mica Products Inc.(a) - - - (2,621,000)
- -
(2,621,000)
Reduction of capital by Suzorite
Mica Products Inc. (a) - (1,353,000) - -
- -
(1,353,000)
Net income for the year - - - 1,852,000
- -
1,852,000
Translation adjustment - - - -
- (76,000)
(76,000)
Balance at December 31, 1993 4,535,000 17,910,000 - 6,738,000
(1,749,000) (904,000)
26,530,000 Stock issued for cash (a) 2,348,000 18,174,000 -
- - -
20,522,000
Stock dividend (a) 146,000 1,171,000 - (1,320,000)
- - (3,000)
Stock options and warrants
exercised (a) 56,000 357,000 - -
- - 413,000
Stock issued in connection with
acquisition (b) 136,000 1,091,000 - -
- - 1,227,000
Stock purchased for
treasury (a) - - (465,000) -
- - (465,000)
Net income for the year - - - 6,250,000
- - 6,250,000
Translation adjustment - - - -
- (422,000) (422,000)
Balance at December 31, 1994 7,221,000 38,703,000
(465,000)11,668,000 (1,749,000)(1,326,000) 54,052,000
Stock issued under employee
stock purchase plan (a) 49,000 422,000 - -
- - 471,000
Stock dividend (a) 167,000 1,233,000 - (1,403,000)
- - (3,000)
Stock options and warrants
exercised (a) 626,000 4,423,000 - -
- - 5,049,000
Stock issued in connection with
Alumitech purchase (b) 722,000 5,877,000 - -
- - 6,599,000
Warrants repurchased (a) - (222,000) - -
- - (222,000)
Stock purchased for
treasury (a) - - (3,572,000) -
- - (3,572,000)
Net income for the year - - - 8,418,000
- - 8,418,000
Translation adjustment - - - -
- 108,000 108,000
Balance at December 31, 1995 $8,785,000$ 50,436,000
$(4,037,000)$18,683,000$(1,749,000)$(1,218,000)$70,900,000
See Notes to the Consolidated Financial Statements
(a) See Note 9.
(b) See Note 2.
Consolidated Statements of Income
Years ended December 31
1995 1994
1993
NET SALES $ 85,056,000 $55,306,000
$47,958,000
COSTS AND EXPENSES
Cost of goods sold 64,356,000 40,552,000
36,742,000
Selling, general and administrative 8,669,000 6,598,000
6,331,000
Depreciation, depletion and
amortization 3,689,000 2,315,000
2,398,000
76,714,000 49,465,000
45,471,000
OPERATING INCOME BEFORE
RESTRUCTURING CHARGES 8,342,000 5,841,000
2,487,000
RESTRUCTURING CHARGES (Note 10) - -
1,250,000
OPERATING INCOME 8,342,000 5,841,000
1,237,000
OTHER INCOME (EXPENSES)
Interest expense, net (Note 8) (523,000) (425,000)
(896,000)
Other, net (Notes 2 and 10) 80,000 163,000 3,317,000
(443,000) (262,000) 2,421,000
INCOME BEFORE PROVISION FOR
INCOME TAXES 7,899,000 5,579,000 3,658,000
(RECOVERY OF) PROVISION FOR
INCOME TAXES (Note 6) (519,000) (671,000) 470,000
INCOME FROM CONTINUING OPERATIONS 8,418,000 6,250,000 3,188,000
DISCONTINUED OPERATIONS
Loss from operations - -
(89,000)
Loss on disposal - - (1,247,000)
Loss from discontinued operations - -
(1,336,000)
NET INCOME $ 8,418,000 $ 6,250,000 $1,852,000
INCOME (LOSS) PER SHARE
Continuing operations $ 1.03 $ 1.12 $ .69
Discontinued operations - - (.29)
NET INCOME PER SHARE $ 1.03 $ 1.12 $ .40
AVERAGE COMMON SHARES AND COMMON
SHARE EQUIVALENTS OUTSTANDING 8,208,874 5,588,682 4,605,440
Consolidated Statements of Cash Flows
Years ended December 31
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations $ 8,418,000 $ 6,250,000
$3,188,000
Adjustments to reconcile income from
continuing operations to net cash
flows from continuing
operating activities
Depreciation, depletion and amortization 3,754,000 2,315,000
2,398,000 Loss on assets held for resale 61,000 -
300,000
(Decrease) increase in deferred income taxes(122,000) (1,366,000)
393,000 Share of net income of investee (87,000) (267,000)
-
Loss (gain) on sale of property,plant
and equipment 22,000 15,000
(3,689,000)
Increase in other assets (227,000) (63,000)
(48,000)
Increase in non-current liabilities 56,000 67,000
62,000
Changes in non-cash working capital items
(Note 14) (4,660,000) (4,311,000)
(844,000)
Net cash provided by operating activities 7,215,000 2,640,000
1,760,000
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment(15,451,000)(3,077,000)(2,670,000)
Assets acquired in connection with
acquisitions (Note 2) (3,658,000)(4,888,000) -
Proceeds from sale of assets (Note 2) - 78,000 5,479,000
Additions to assets held for resale - - (134,000)
Investment (Note 2) - (2,019,000) -
Promissory notes - (371,000) -
Net cash provided by (used in) investing
activities (19,109,000)(10,277,000) 2,675,000
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred financing costs (467,000) - -
Proceeds from long term debt 6,219,000 266,000 4,827,000
Proceeds (payments) net, on bank
indebtedness 3,040,000 (415,000) 520,000
Repayment of long term debt (5,343,000)(8,094,000)(3,322,000)
Cash paid in lieu of fractional shares (3,000) (3,000) (3,000)
Dividend paid (Note 9) - - (2,621,000)
Issuance of common stock (Note 9) 5,520,000 20,935,000 350,000
Purchase of common stock and warrants
(Note 9) (3,794,000) (465,000) -
Reduction of common stock (Note 9) - - (1,353,000)
Net cash provided by (used in) financing
activities 5,172,000 12,224,000 (1,602,000)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 32,000 (40,000) (26,000)
NET (DECREASE) INCREASE IN CASH
FROM CONTINUING OPERATIONS (6,690,000)4,547,000 2,807,000
NET CASH USED IN DISCONTINUED OPERATIONS - - (207,000)
NET (DECREASE) INCREASE IN CASH (6,690,000)4,547,000 2,600,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,343,000 3,796,000 1,196,000
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,653,000 $8,343,000 $3,796,000
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Income taxes paid $ 303,000 $ 233,000 $ -
Interest paid 656,000 573,000
891,000
SUPPLEMENTAL DISCLOSURE OF
NON CASH ACTIVITIES
Notes issued in connection with purchase
of assets (Note 2) $ - $1,102,000 $ -
Stock issued in connection with
acquisition (Note 2) 6,599,000 1,227,000 -
Assumption of liabilities in connection
with asset purchases - 793,000 -
Notes received in connection with sale of assets held for
resale (Note 10) 423,000
- - - -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Corporation's significant accounting policies are as
follows:
a. Principles of Consolidation
The consolidated financial statements include the
accounts of Zemex Corporation and its wholly-owned
subsidiaries (the "Corporation"). All material
intercompany transactions have been eliminated. As
discussed in Note 2, the 1993 acquisition of Suzorite
Mica Products Inc. ("Suzorite") has been accounted for as
a pooling of interests and the sale of the Corporation's
70 percent interest in Perangsang Pasifik Senderian
Berhad ("PPSB"), a tin dredging operation in Malaysia,
has been reported as a discontinued operation. Also as
discussed in Note 2, Alumitech, Inc. ("Alumitech") was
acquired in two separate
transactions and, accordingly, was accounted for on an
equity basis until it became a wholly-owned subsidiary in
February 1995.
b. Inventories
Inventories are stated at the lower of cost or market and
are computed using the average cost method. It is not
practical to segregate finished products from ore and
concentrates. Supplies are stated at cost using the first
in, first-out or average cost method.
c. Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Repairs
and maintenance are charged to expense as incurred.
Expenditures for major renewals and improvements are
capitalized. When assets are sold or otherwise retired, the
cost and accumulated depreciation or depletion are removed
from the accounts and any gain or loss is included in
results of operations. Provisions for depreciation are
based upon estimated useful lives, using principally the
straight-line method. Depletion of mining properties and
depreciation of other mining assets are computed using the
unit-of-production method, except in the case of the
Corporation's Suzorite operation where the estimated
reserves exceed the expected production during the term of
the mining lease. The Suzorite mining lease rights and
deferred costs, including all preproduction and set-up
costs, are amortized using the straight-line method over the
term of the mining lease.
d. Postretirement Benefits
Pension Plans
The funding policy of the Corporation, generally, is to
contribute annually at a rate that is intended to provide
for the cost of benefits earned during the year and which
will amortize prior service costs over periods of 10 to 30
years, subject to Internal Revenue Service limits for
deductible contributions.
Healthcare and Other Postretirement Benefits Other Than
Pensions
Effective January 1, 1993, the Corporation adopted Statement
of Financial Accounting Standards ("SFAS") No. 106 -
"Employees' Accounting for Postretirement Benefits Other
Than Pensions". This Statement requires the accrual of all
postretirement benefits other than pensions during the years
in which employees render the necessary services to be
entitled to receive such benefits. The 1995, 1994 and 1993
amounts include the current year expense and the transition
liability which is being amortized over twenty years as
allowed by SFAS No. 106 (Note 7).
e. Foreign Currency Translation
The functional currency for the Corporation's foreign
operations is the local currency. Foreign currency assets
and liabilities are translated using the exchange rates in
effect at the balance sheet date. The effect of exchange
rate fluctuations on translating foreign currency assets and
liabilities into U.S. dollars is accumulated as part of the
cumulative translation adjustment component of
shareholders' equity. Results of operations and cash flows
are translated using the average exchange rates during the
year. Gains and losses from foreign currency transactions
are included in net income for the year.
f. Research and Development Expense
Research and development expense was $320,000 in 1995,
$315,000 in 1994 and $371,000 in 1993.
g. Provision for Future Reclamation Costs
Costs for future reclamation have been provided for based
upon estimated future reclamation costs allocated over the
expected productive life of the quarries.
h. Income Taxes
Effective January 1, 1993, the Corporation adopted SFAS No.
109 - "Accounting for Income Taxes". This Statement
requires the liability method of accounting for income
taxes rather than the deferral method previously used.
Because of the valuation reserves established on the
deferred tax asset related to the net operating loss
carryforwards, the cumulative effect of this accounting
change and the impact on the 1993 income tax provision was
not material.
i. Earnings Per Share
Earnings per share is based upon the weighted average
number of common and common share equivalents outstanding.
Common share equivalents include stock options issued under
the employee stock option plans and stock issued under the
Key Executive Common Stock Purchase Plan (Note 9). For the
purpose of the treasury method, stock dividends are
considered to be issued at the beginning of the period.
j. Deferred Financing Costs
Costs associated with the issuance of long term debt are
deferred, and are being amortized over the term of the debt
on a straight-line basis. The unamortized balance is
included in other assets.
k. Other Assets
Other assets include assets held for sale which are stated
at the lower of cost or estimated net realizable value. In
determining the estimated net realizable value, the
Corporation deducts from the estimated selling price the
projected costs to bring the assets into a saleable
condition, to dispose of the assets and to hold the
property to an expected date of sale. Other assets also
include patents which are stated at cost, and are being
amortized over their remaining life of 15 years on a
straight-line basis.
Intangible assets are evaluated periodically and, if
conditions warrant, an impairment valuation is provided.
l. Cash Equivalents
For purposes of the consolidated statement of cash flows,
highly liquid investments with original maturities of
three months or less, when purchased, are considered as
cash equivalents.
2. Acquisitions and Dispositions
Acquisitions
Acquisition of Alumitech, Inc.
In June 1994, the Corporation acquired its initial 39.53
percent investment in Alumitech by investing $2,000,000 to
acquire treasury stock. In 1995, the Corporation increased
its interest to 100 percent by issuing 722,352 shares of
common stock with an ascribed value of $6,599,000. The
shares were issued as to 266,106 to Dundee Bancorp
International Inc. ("Dundee"), the Corporation's largest
shareholder, and as to 266,106 to Clarion Capital
Corporation, a company controlled by a director of the
Corporation. Alumitech, an aluminum dross processor, has
developed proprietary technology that enables it to have the
ability to convert 100 percent of its dross feed into
marketable products.
The acquisition has been accounted for using the purchase
method of accounting and, accordingly, the purchase price has
been allocated to the assets purchased and liabilities
assumed based upon the fair values at the date of
acquisition. The net purchase price was allocated as
follows:
Working capital $ 73,000
Property, plant and equipment 5,527,000
Patents 7,363,000
Other assets 225,000
Other liabilities (2,192,000)
Deferred income taxes (2,025,000)
____________
$8,971,000
Consideration
Carrying value of investment at date
of acquisition of remaining interest $2,372,000
Capital stock 6,599,000
____________
$8,971,000
The operating results of Alumitech have been included in the
consolidated statement of income from the date of
acquisition. On the basis of a pro forma consolidation of
the results of operations, as if the acquisition had taken
place at the beginning of fiscal 1994 rather than at February
15, 1995, consolidated net sales would have been $64.5
million for fiscal 1994, and $86.9 million for fiscal 1995.
Consolidated pro forma income and earnings per share would
not have been materially different from the reported amounts
for fiscal 1994 and 1995. Such pro forma amounts are not
necessarily indicative of what the actual consolidated
results of operations might have been if the acquisition had
been effective at the beginning of fiscal 1994.
Acquisition of the assets of Benwood Limestone Company, Inc.
On May 15, 1995, the Corporation acquired the assets of
Benwood Limestone Company, Inc. ("Benwood"), through its
wholly-owned subsidiary, Suzorite Mineral Products, Inc.,
for $3,658,000. The acquisition of Benwood offers the
Corporation the opportunity to expand its present talc and
mineral processing capability. Benwood will continue to
process consumer products for its former owner under a long
term contract.
Acquisition of the talc operations of Whittaker, Clark &
Daniels, Inc.
In December 1994, the Corporation acquired from Whittaker,
Clark & Daniels, Inc. ("WCD") certain assets including its
talc operations. Consideration for the purchase included
$4,388,000 in cash, 136,360 common shares of the Corporation
with an ascribed value of $1,277,000 and the assumption of
certain current liabilities directly relating to the
operations acquired aggregating $267,000. Concurrent with
the purchase, the Corporation entered into an agreement with
WCD whereby WCD agreed to act as the exclusive marketing,
distribution and sales agent for the Corporation's premium
talc products.
Acquisition of the assets of Greenback Industries, Inc.
In September 1994, the Corporation, through its wholly-owned
subsidiary, Pyron Metal Powders, Inc., acquired the assets
and assumed certain liabilities of Greenback Industries, Inc.
("Greenback"). Consideration for the purchase was $500,000
in cash, the issuance of two promissory notes having
principal amounts of $650,000 and $451,563, respectively, and
the assumption of certain current liabilities aggregating
$526,000. The Greenback facilities provide the Corporation
with increased capacity to produce powdered copper as well as
powdered tin, and powdered copper and tin alloys.
Acquisition of Suzorite Mica Products Inc.
In September 1993, the Corporation, through a wholly-owned
subsidiary, acquired 100 percent of the outstanding capital
stock of Suzorite from Dundee. Suzorite mines and processes
mica which is used in various applications in the automotive,
construction and oil drilling industries. In connection
therewith, the Corporation issued 1,400,000 shares of common
stock and a transferable warrant entitling the holder to
purchase up to an additional 100,000 shares of common stock
at $7.00 per share. The warrant was exercised by Dundee on
July 14, 1995.
As this transaction was between companies which were then
under common control, it has been accounted for as a pooling
of interests and, accordingly, the Corporation's financial
statements for periods prior to the acquisition have been
restated to include the accounts of Suzorite for all periods
presented. There were no adjustments necessary to conform
the accounting policies of the two companies. Net sales and
net income (loss) from continuing operations of the separate
companies for the period preceding the acquisition are as
follows:
Period from January
1, 1993 to September 30, 1993
(unaudited)
Net sales
Suzorite $5,586,000
Zemex 30,628,000
____________
Combined $36,214,000
____________
Income (loss) from continuing operations
Suzorite $ 649,000
Zemex (240,000)
____________
Combined $ 409,000
____________
Dispositions
Discontinued Operations
During the fourth quarter of 1993, the Corporation sold its
70 percent owned subsidiary, PPSB, which was involved in the
dredging of tin oxide in Malaysia. Accordingly, the
consolidated financial statements of the Corporation have
been reclassified to report separately from continuing
operations the net assets and operating results of this
discontinued operation.
Sales applicable to the discontinued Malaysian operation
prior to its sale were $2,313,000 in 1993.
Other Dispositions
In 1993, the Corporation sold its aplite plant and operations
in Montpelier, Virginia for aggregate net proceeds of
$5,470,000, resulting in a pre-tax gain of $3,683,000 which
was included in other income (expenses).
3. Inventories
1995 1994
Ore, concentrates and finished products
Industrial minerals $10,852,000 $7,158,000
Metal products 4,042,000 3,655,000
________________________
14,894,000 10,813,000
Materials and supplies
Industrial minerals 3,867,000 4,252,000
Metal products 1,415,000 1,425,000
________________________
5,282,000 5,677,000
________________________
$20,176,000 $16,490,000
________________________
4. Property, Plant and Equipment
1995 1994
Land $4,952,000 $2,937,000
Mining properties and deferred costs 5,535,000
4,890,000
Buildings 15,304,000 10,925,000
Machinery and equipment 45,797,000 34,928,000
Construction in progress 7,609,000 2,317,000
____________ ___________
Total property, plant and equipment, at cost 79,197,000
55,997,000
Less: Accumulated depreciation, depletion
and amortization 28,926,000 26,977,000
____________ ___________
Net property, plant and equipment $ 50,271,000 $
29,020,000
____________ ___________
As of December 31, 1995, the Corporation estimates that
approximately $12,580,000 will be expended to complete its
construction in progress.
5. Other Assets
1995 1994
Prepaid pension cost (Note 7) $1,632,000 $1,518,000
Assets held for resale (Note 10) 250,000
734,000
Deferred financing costs 802,000 442,000
Other deferred charges 443,000 471,000
Promissory notes receivable,
non-current portion 369,000 222,000
Patents, net 7,079,000 -
____________ ___________
$10,575,000 $3,387,000
____________ ___________
6. Income Taxes
The provision for income taxes consists of the following
components:
1995 1994 1993
Income from continuing operations
before provision for income taxes
Domestic $ 7,708,000$ 3,631,000$ 2,331,000
Foreign 191,0001,948,000 1,327,000
___________________ _________ Total
pre-tax income $ 7,899,000$ 5,579,000$ 3,658,000
___________________ _________
Current tax provision
Federal $ 1,849,000$ 880,000$ 985,000 State
and local 293,000 258,000 116,000
Foreign 37,000 425,000 -
___________________ _________ Total
2,179,0001,563,000 1,101,000
Deferred tax provision
Federal 283,000 - -
State and local 55,000 - -
Foreign 40,000 256,000 470,000
___________________ _________ Total
378,000 256,000 470,000
Benefit of operating loss and tax
credit carryforwards(3,076,000)(2,490,000)(1,101,000)
___________________ _________
(Recovery of) provision for
income taxes $ (519,000)$ (671,000)$ 470,000
___________________ _________
The following tabulation reconciles the U.S. federal
statutory income tax rate to the federal, state and foreign
overall effective income tax rate.
1995 1994 1993
(percent) (percent)
(percent)
Statutory federal rate 34.0 34.0 34.0
Benefit of operating loss carryforwards
(net of foreign income taxes) (38.1) (46.0)
(22.0)
Other 2.5 - 0.8
_____ _____ _____
Effective income tax rate (6.6) (12.0) 12.8
_____ _____ _____
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes. At December 31, 1995,
the Corporation had unused tax benefits of $4,102,000 related
to U.S. net operating loss and tax credit carryforwards.
Significant components of the Corporation's deferred tax
assets and liabilities as of December 31 are as follows
(dollars in thousands):
1995 1994
U.S.ForeignTotal U.S.ForeignTotal
Deferred tax assets
Net operating loss
and tax credit
carryforwards$ 4,102$ -$ 4,102$4,132$ -
$ 4,132
Accrued expenses 444 - 444 414 - 414
Bad debt allowances112 - 112 124 - 124
Inventories 505 - 505 132 - 132
Other 137 - 137 397 - 397
_____ _____ _____ _____ _____ _____
Gross deferred tax assets5,300 - 5,300 5,199 - 5,199
Valuation allowance for
deferred tax assets- - -(1,645) -(1,645)
_____ _____ _____ _____ _____ _____ Total
5,300 - 5,300 3,554 - 3,554
_____ _____ _____ _____ _____ _____
Deferred tax liabilities
Property, plant and
equipment 2,159 2,075 4,234 1,223 2,177 3,400
Patent 1,929 - 1,929 - - -
Pension contributions 600 - 600 553 - 553
Assets held for resale 102 - 102 278 - 278
_____ _____ _____ _____ _____ _____
Total 4,790 2,075 6,865 2,054 2,177 4,231
_____ _____ _____ _____ _____ _____ Net
deferred tax
(assets) liabilities$ (510)$2,075$1,565$(1,500)$2,177
$677
_____ _____ _____ _____ _____ _____
The net change in the valuation allowance for deferred tax
assets was a decrease of $1,645,000 and $2,744,000 in the
years ended December 31, 1995 and 1994, respectively,
related primarily to benefits arising from recognition of
the benefit of net operating loss carryforwards. In 1995,
the benefit of the balance of the net operating losses was
recognized and, accordingly, the valuation allowance was
reduced to nil.
At December 31, 1995, the Corporation had $9,136,000 of
federal operating loss carryforwards available to reduce
future taxable income which will expire between 1999 and
2006. Additionally, the Corporation had $646,000 of unused
general business tax credits, which will expire between 1996
and 2009, and $270,000 of alternative minimum tax credits.
7. Pension Plans and Other Postretirement Benefits
Pension Plans
The Corporation has several pension plans covering
substantially all domestic employees. The plans covering
salaried employees provide pension benefits that are based on
the compensation of the employee. In all plans, the plan
assets exceed the benefit obligations and hence the plans are
overfunded.
Net periodic pension cost (income) included the following
components:
1995 1994 1993
Current service costs $369,000 $422,000 $ 338,000
Interest cost on projected
benefit obligations 940,000 882,000 846,000 Actual
return on assets (2,587,000) 368,000 (1,249,000)
Net amortization and deferral 1,164,000
(1,704,000) 29,000
_____________________________
Net pension income $(114,000) $ (32,000)$
(36,000)
__________ _________
__________
Net amortization and deferral consists of amortization of net
assets at transition and deferral of subsequent net gains and
losses. The assumptions used to determine projected benefit
obligations were (i) a discount rate of 7 percent in 1995,
and 7.5 percent in 1994 and 1993; (ii) an expected long term
rate of return on assets of 8.75 percent in 1995, 1994 and
1993; and (iii) an increase in the level of compensation of 6
percent for 1995, 1994 and 1993.
The status of the plans and the amounts recognized in the
consolidated balance sheets of the Corporation for its
pension plans as of December 31, 1995 and 1994 are tabulated
below:
1995 1994
Actuarial present value of benefit obligations
Vested benefit obligation $11,059,000 $9,404,000
____________ ___________
Accumulated benefit obligation $ 11,261,000 $
9,555,000
____________ ___________
Projected benefit obligation $(15,042,000) $
(12,760,000)
Plan assets at fair value 16,646,000 14,675,000
____________ __________
Plan assets in excess of projected
benefit obligation 1,604,000 1,915,000
Unrecognized net gain 226,000 (40,000)
Prior service costs not yet recognized in net
periodic pension cost 282,000 276,000
Unrecognized net asset at year end (480,000)
(633,000)
____________ ___________
Prepaid pension cost included
in consolidated balance sheets $ 1,632,000 $
1,518,000
____________ ___________
Other Postretirement Benefits
The Corporation provides healthcare and life insurance
benefits for certain retired employees which, effective
January 1, 1993, are accrued as earned (Note 1). The cost
of such benefits was $95,000 in 1995, $73,000 in 1994, and
$51,000 in 1993. The unrecognized obligation for
postretirement benefits is not material.
8. Debt and Lines of Credit
1995 1994
Term loan facility (a) $2,700,000 $ -
Other term loans (b) 1,038,000 91,000
Industrial Development Revenue Bonds (c) 4,612,000
5,100,000
Promissory notes (d) 811,000 1,064,000
Capital leases (e) 330,000 280,000
Other 372,000 -
__________ __________ Total
debt 9,863,000 6,535,000
Less: Current portion 2,378,000 1,074,000
__________ __________
Long term debt $7,485,000 $5,461,000
__________ __________
(a) During 1995, the Corporation entered into a $30,224,000
credit facility with a syndicate of two banks. The credit
facility is further subdivided into four facilities: (i) a
$10,000,000 revolving credit and term loan facility; (ii)
a $10,000,000 multiple advance term loan facility; (iii) a
$5,224,000 standby letter of credit; and (iv) a $5,000,000
operating line. These facilities are secured by specific
assets and a floating charge over a significant portion of
the Corporation's assets. The facilities bear interest at
rates varying from bank prime to bank prime plus 0.25
percent and from LIBOR plus 1.25 percent to LIBOR plus
2.25 percent, depending upon the financial position of the
Corporation. As at December 31, 1995, there was $2,000,000
outstanding under the operating line, $2,700,000
outstanding under the multiple advance term loan facility,
and the standby letter of credit was issued to secure the
Industrial Development Revenue Bonds. The operating line
matures June 30, 1996 and will be reviewed annually for
renewal. The multiple advance term loan facility requires
quarterly payments of $277,000 commencing April 1, 1996
with the balance outstanding, if any, due January 1, 2000.
(b) The other term loans bear interest at the prime rate of
the lending institution plus 1.25 percent to 1.50 percent
depending on certain tests. They are secured by
substantially all of the fixed assets of Alumitech and its
wholly-owned subsidiaries and are repayable in
monthly principal instalments of approximately $19,000
until they are repaid in 1998 and 1999.
(c) The Corporation's wholly-owned subsidiary, Pyron
Corporation ("Pyron"), entered into a lease agreement on
November 29, 1989 with the Niagara County Industrial
Development Agency (the "Agency") to partially finance the
construction of a manufacturing facility, acquire and
install equipment and machinery, and renovate the existing
Pyron facility for the purpose of manufacturing atomized
steel powders. The agreement authorized the Agency to
issue and sell Industrial Development Revenue Bonds in the
aggregate principal amount of $7,650,000 to provide the
funds for the project.
While the bonds are not the obligation of Pyron, the
agreement requires Pyron to make quarterly rental payments
equal to the debt service under the sinking fund
requirements and interest on the outstanding principal to
the Agency. The amount outstanding at December 31, 1995
and 1994 was $4,612,000 and $5,100,000, respectively.
Pyron's obligation under the agreement is $510,000
annually until paid.
The bonds bear interest at a variable rate not to exceed
15 percent per annum. The rate at December 31, 1995 was
5.25 percent and at December 31, 1994 was 5.65 percent.
Pyron has the option to convert the bonds to a fixed
interest rate at any time during the term. Under the
lease agreement, Pyron may purchase the facility at any
time during the term, which expires November 1, 2004, by
paying the outstanding principal amount of the bonds plus
$1.
The bonds are collateralized by a mortgage on the land,
the new facility and the existing facility which have an
aggregate net book value of approximately $8,992,000 at
December 31, 1995.
A bank has provided Pyron with a letter of credit which
is available to support Pyron's obligations under the
lease agreement. If the bondholders tender their bonds
for repayment, the letter of credit will be utilized to
pay the bondholders. The letter of credit is
collateralized under the credit facility in (a) above. The
letter of credit expires on October 1, 1999.
(d) In 1994, the Corporation's wholly-owned subsidiary,
Pyron Metal Powders, Inc., issued two promissory notes to
former owners in connection with the acquisition of its
operations. One promissory note with an aggregate
principal amount outstanding as of December 31, 1995 of
$325,000 and at December 31, 1994 of $650,000 bears
interest at 7 percent in both 1995 and 1994 with principal
due in two equal instalments of $325,000 on September 15,
1995 and 1996, respectively. A second note with an
aggregate principal amount outstanding as at December 31,
1995 of $263,000 and at December 31, 1994 of $414,000 is
non-interest bearing with principal payments of $12,550
due monthly until the final payment of $12,313 due
September 15, 1997.
(e) The Corporation has a long term capital lease agreement
at a variable rate for equipment used in its operations.
This is a six-year lease with a maturity in the year 2000.
The carrying value of the leased equipment as of
December 31, 1995 was $217,000.
Principal repayments on long term debt are as follows:
1996 $2,378,000
1997 2,112,000
1998 1,584,000
1999 1,035,000
2000 572,000
Thereafter 2,182,000
$9,863,000
Interest
Interest earned and expensed in each of the past three years
is summarized below:
1995 1994 1993
Interest income $268,000 $246,000 $ 22,000 Interest
expense (791,000) (671,000)
(918,000)
Net interest expense $(523,000) $ (425,000) $
(896,000)
9. COMMON STOCK, STOCK OPTIONS AND WARRANTS
Shares Outstanding
During 1995, the Corporation received shareholder approval to
increase its authorized stock from 10,000,000 to 25,000,000,
par value one dollar ($1.00) per share, of which 20,000,000
shares will be denominated common stock and 5,000,000 shares
will be denominated preferred stock. There were 8,355,722
shares of common stock issued and outstanding as of December
31, 1995 and 7,168,153 shares as of December 31, 1994.
In March 1993, Suzorite reduced its stated capital by way of
a cash distribution to its then sole shareholder, Dundee, by
$1,353,000. This reduction in stated capital did not reduce
the number of shares outstanding. As the acquisition of
Suzorite has been accounted for as a pooling of interest,
this distribution is reflected in the consolidated statement
of shareholders' equity.
On May 5, 1994, the Corporation issued 347,826 shares of
common stock in a private placement transaction for
aggregate proceeds of $2,000,000.
In September 1994, the Corporation issued 2,000,000 shares of
its common stock pursuant to a public offering of shares for
net proceeds, after underwriting fees and expenses of issue,
of $18,522,000.
In 1995, the Corporation completed its purchase of 100
percent of Alumitech by issuing 722,352 shares of common
stock with an ascribed valued of $6,599,000.
During 1995, 49,000 shares of common stock were issued
pursuant to the Corporation's employee stock purchase plan
for an aggregate consideration of $471,000. The plan was
approved by the shareholders and provides that 250,000 shares
may be purchased under the plan. The shares have been
registered for listing on the New York Stock Exchange.
As part of a stock repurchase program, the Corporation has
purchased 429,000 shares of common stock on the open market:
376,000 common shares in 1995 for an aggregate cost of
$3,572,000 and 53,000 common shares in 1994 for an aggregate
cost of $465,000.
Dividends
On November 10, 1995, the Corporation declared a 2 percent
stock dividend to shareholders of record on November 24,
1995, which was paid December 8, 1995. Retained earnings
were charged $1,403,248 as the result of the issuance of
167,149 shares of the Corporation's common stock, and cash
payments of $3,375 in lieu of fractional shares.
On November 14, 1994, the Corporation declared a 2 percent
stock dividend to shareholders of record on November 28,
1994, which was paid December 19, 1994. Retained earnings
were charged $1,320,307 as the result of the issuance of
145,708 shares of the Corporation's common stock, and cash
payments of $3,218 in lieu of fractional shares.
On November 7, 1993, the Corporation declared a 2 percent
stock dividend to shareholders of record on November 24,
1993, which was paid December 6, 1993. Retained earnings
were charged $604,276 as a result of the issuance of 81,573
shares of the Corporation's common stock, and cash payments
of $2,672 in lieu of fractional shares.
In March 1993, Suzorite paid a cash dividend of $2,621,000 to
its then sole shareholder, Dundee. This dividend, because of
the pooling of interest accounting referred to in Note 2, is
also reflected in the consolidated statement of shareholders'
equity.
Stock Options
The Corporation provides stock option incentive plans and
has, with shareholder approval, issued options to certain
directors outside of the plans. The plans are intended to
provide long term incentives and rewards to executive
officers, directors and other key employees contingent upon
an increase in the market value of the Corporation's common
stock. Options for 10 percent of the Corporation's
outstanding common stock are issuable under the plans.
Stock option transactions are summarized as follows:
NumberExercise Price
of Optionsper Option ($)
Outstanding at December 31, 1992 260,000 5 Granted
372,500 5 1/2
Granted 60,000 7 1/8
Cancelled or expired (120,000) 5
Outstanding at December 31, 1993 572,500
Granted 25,000 11 1/2
Cancelled (9,750) 5 1/2
Cancelled (8,000) 5
Exercised (12,000) 5
Exercised (11,200) 5 1/2
Outstanding at December 31, 1994 556,550
Granted 284,000 9 1/8
Granted 22,000 9 3/4
Granted 21,000 10 Granted
14,000 10 1/8 Cancelled (3,750)
5 1/2 Cancelled (3,000) 9 1/8
Exercised (8,000) 5
Exercised (30,250) 5 1/2
Outstanding at December 31, 1995 852,550
The options expire from 1996 to 2001. During 1995 options
for 38,250 shares of common stock were exercised for proceeds
of $206,000. At December 31, 1995 there were 511,550 options
exercisable. During 1994, options for
23,200 shares of common stock were exercised for proceeds of
$122,000.
Warrants
During 1993, in connection with the acquisition of Suzorite
(Note 2), the Corporation issued a transferable warrants to
Dundee to purchase at any time prior to July 15, 1995 up to
100,000 shares (104,040 after adjustments for stock
dividends) of common stock at $7.00 per share. The warrant
was exercised by Dundee on July 14, 1995 for proceeds of
$700,000.
As a result of a stock rights offering in 1990, 725,769
warrants were issued. Each warrant entitled the holder to
purchase, prior to July 15, 1995, 1.08 shares of common stock
at an exercise price of $8.56 per share, which was repriced
from $9.25 per share as a result of stock dividends. Of the
725,769 warrants originally issued, the Corporation
repurchased 218,046 warrants at an aggregate cost of
$222,000. During 1995, 448,000 warrants were exercised for
484,027 shares of common stock for net proceeds of
$4,143,000. During 1994, 31,514 warrants were exercised
resulting in the issuance of 32,771 shares of common stock at
an exercise price of $8.88 per share for aggregate proceeds
of $291,000. No warrants were exercised in 1993. The
warrants expired July 15, 1995.
Note Receivable from Shareholder
The note receivable from shareholder of $1,749,000 represents
amounts due from the Corporation's President and Chief
Executive Officer pursuant to the Key Executive Common Stock
Purchase Plan. The loan, which was used to acquire 357,000
shares of common stock of the Corporation, is noninterest
bearing, is secured by a pledge of the shares acquired, and
is due on the earlier of August 12, 1997 or 30 days after the
termination of employment. Since the loan arose from the
sale of stock, it is classified as a reduction of
shareholders' equity.
10. RESTRUCTURING CHARGES AND UNUSUAL ITEMS
Restructuring Charges
In 1993, the Corporation reorganized certain of its U.S.
operations. This has resulted in a charge to operation of
$950,000 in 1993 which includes the cost of closing an office
and severance costs.
In December 1991, the Corporation closed its industrial
minerals plant located in Connecticut. The assets of this
operation were reclassified to assets held for resale and
written down in 1991 by $430,000 to their estimated net
realizable value. These assets were written down by a
further $300,000 in 1993. In 1995, a portion of the property
was sold for approximately net book value. The purchaser has
a five-year option to purchase the remaining portion.
Unusual Items
Other income (expenses) for 1993 includes a gain on sale of
the Montpelier, Virginia aplite plant and operations of
$3,683,000 (Note 2) as well as $616,000 of legal and other
costs primarily associated with the acquisition of Suzorite.
11. OPERATING LEASES AND OTHER COMMITMENTS
Operating Leases
The Corporation has a number of operating lease agreements
primarily involving equipment, office space, warehouse
facilities and rail sidings. The operating lease for
equipment provides that the Corporation may, after the
initial lease term, renew the lease for successive yearly
periods or may purchase the equipment at the fair market
value. An operating lease for office facilities contains
escalation clauses for increases in operating costs and
property taxes. The majority of the leases are cancellable
and are renewable on a yearly basis.
Future minimum rental payments required by operating leases
that have initial or remaining non-cancellable lease terms in
excess of one year as of December 31, 1995 are as follows:
Minimum YearLease
Payments
1996 $ 535,000
1997 468,000
1998 343,000
1999 247,000
Thereafter 577,000
Total minimum lease payments $2,170,000
Rent expense was $422,000, $281,000 and $88,000 in 1995,
1994 and 1993, respectively.
Other Commitments
The Corporation has a mining contract with an independent
contractor to extract minerals from its open pit mine in
Suzor Township, Quebec that expires on September 30, 1998.
This contract specifies the mining and delivery of
approximately 50,000 tons of ore per year to the mine site
rail siding at a rate of Cdn. $17.50 per ton.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of certain unaudited quarterly
financial data from continuing operations:
1995 1994
Net sales
First quarter $21,105,000 $12,399,000
Second quarter 21,439,000 13,388,000
Third quarter 21,748,000 13,333,000
Fourth quarter 20,764,000 16,186,000
$85,056,000 $55,306,000
Operating income
First quarter $2,123,000 $1,065,000
Second quarter 2,465,000 1,426,000
Third quarter 1,822,000 1,636,000
Fourth quarter 1,932,000 1,714,000
$8,342,000 $5,841,000
Net income
First quarter $1,459,000 $ 764,000
Second quarter 2,183,000 1,128,000
Third quarter 1,562,000 1,314,000
Fourth quarter 3,214,000 3,044,000
$8,418,000 $6,250,000
Net income per share
First quarter $ .19 $ .17
Second quarter .28 .24
Third quarter .18 .24
Fourth quarter .38 .43
13. FINANCIAL INSTRUMENTS
Financial instruments comprise cash and cash equivalents,
accounts receivable, short term bank borrowings, accounts
payable, accrued liabilities, and long term debt. The fair value
of these financial instruments approximates their carrying value.
Financial instruments which potentially subject the
Corporation to concentrations of credit risk consist
principally of trade receivables. Concentrations of credit
risk with respect to trade receivables are limited due to
the large number of customers comprising the Corporation's
customer base and their dispersion across a number of
different industries, principally the construction,
automotive, ceramics and secondary aluminum industries.
14. Changes in Non-Cash Working Capital Items
The changes in non-cash working capital items are as
follows:
1995 1994 1993
Increase in accounts receivable $ (783,000) $
(2,384,000) $(471,000)
(Increase) decrease in inventories (2,742,000)
(4,471,000) 728,000
Increase in prepaid expenses (16,000) (31,000)
(162,000)
Increase (decrease) in accounts
payable and accrued liabilities (1,495,000)
2,248,000 (981,000)
Increase in accrued income taxes 376,000 327,000
42,000
______________________________
$(4,660,000) $(4,311,000) $
(844,000)
15. Related Party Transactions
Related party transactions not otherwise disclosed in the
consolidated financial statements include:
(a) Suzorite was charged management fees of $219,000 in
1993 by Dundee. Effective July 1, 1993, Dundee
discontinued charging management fees to Suzorite; and
(b) as at December 31, 1995 and 1994, accounts
receivable included amounts due from directors of
$350,000. These amounts are non-interest bearing with no
fixed terms of repayment.
16. Segment Information
The Corporation has two principal lines of business and is
organized into two operating units based on its product
lines: (i) industrial minerals, and (ii) metal products.
Industrial mineral products include feldspar, kaolin,
mica, talc, baryte, feldspathic sand and industrial sand.
These products are marketed principally to the automotive,
housing and ceramics industries in North America. They
are produced from mines and processing plants located near
Edgar, Florida; Monticello, Georgia; Murphy, North
Carolina; Spruce Pine, North Carolina; Natural Bridge, New
York; Van Horn, Texas; Benwood, West Virginia;
Boucherville, Quebec; and Suzor Township, Quebec. Metal
products are produced in Niagara Falls, New York; St.
Marys, Pennsylvania; Maryville, Tennessee; and Greenback,
Tennessee. The Corporation's ferrous and non-ferrous
metal powders are marketed primarily in North America to
manufacturers of powdered metal parts used in the
automotive and transportation industries. Aluminum dross
is recycled at a plant in Cleveland, Ohio and ceramic
products are produced at a plant in Streetsboro, Ohio.
Corporate assets principally include cash, term deposits,
and furniture and fixtures.
Information pertaining to sales and earnings from
continuing operations and assets by business segment
appears below:
1995 1994 1993
Net sales (a)
Industrial minerals$37,089,000 $ 30,378,000 $
31,104,000
Metal products 47,967,000 24,928,000
16,854,000
Total $85,056,000 $ 55,306,000 $
47,958,000
Operating income (loss) (a)
Industrial minerals$4,622,000 $ 3,865,000) $
2,424,000
Metal products 3,677,000 2,202,000
1,046,000
Restructuring charges (b) - -
(1,250,000)
General unallocated corporate 43,000
(226,000) (983,000)
Total 8,342,000 5,841,000
1,237,000
Interest (expense) net (523,000)
(425,000) (896,000)
Other income, net (b) 80,000 163,000
3,317,000
Income before provision for income
taxes $7,899,000 $ 5,579,000$
3,658,000
Capital expenditures (a) (c)
Industrial minerals$9,653,000 $ 2,050,000$
2,209,000
Metal products 5,784,000 878,000 391,000
Corporate 14,000 149,000 70,000
Total $15,451,000 $ 3,077,000$
2,670,000
Depreciation, depletion and
amortization (a)
Industrial minerals$1,932,000 $ 1,456,000$
1,494,000
Metal products 1,451,000 828,000 834,000
Corporate 306,000 31,000 70,000
Total $ 3,689,000 $ 2,315,000
$ 2,398,000
Identifiable assets at
year end (a)
Industrial minerals$52,348,000 $36,853,000 $
30,170,000
Metal products 34,133,000 22,665,000
16,687,000
Corporate (d) 10,200,000 11,346,000
1,557,000
Total $96,681,000 $ 70,864,000 $
48,414,000
(a) The Corporation's businesses are
located in the United States and Canada, which the
Corporation considers one geographic segment.
(b) See Note 10.
(c) Capital expenditures for 1995 and
1994 exclude property, plant and equipment of $9,027,000
and $3,264,000, respectively, acquired in connection with
the Corporation's 1995 and 1994 acquisitions (Note 2).
(d) 1994 includes equity investment in
Alumitech and includes cash and cash equivalents for all
years presented.
Zemex Corporation
Selected Financial Data
Years Ended December 31 1995 1994 1993 1992 1991
Summary of Operations
Net Sales $85,056,000$55,306,000$47,958,000$42,020,000$37,870,000
Restructuring Charges _ _ 1,250,000 _ _
Operating Income (Loss)8,342,0005,841,0001,237,000 1,737,000(1,751,000)
Other Income (Expenses)(443,000)(262,000)2,421,000 (475,000)(1,156,000) Net
Income (Loss) from
Continuing Operations8,418,0006,250,0003,188,000 838,000(3,215,000) Net
Income (Loss) 8,418,000 6,250,000 1,852,000 949,000(3,152,000)
Financial Position
Working Capital $19,709,000$26,046,000$ 9,288,000$ 9,431,000$ 8,763,000
Total Assets 96,681,00070,864,00048,414,00050,773,00056,620,000
Long Term Debt (Non-Current Portion)7,485,0005,461,0008,735,0009,593,000
10,181,000
Common Stock
Average Common Shares Outstanding8,208,8745,588,6824,605,440 4,440,551
4,433,634
Actual Common Shares Issued and
Outstanding at Year End8,355,7227,168,1534,535,2834,491,8344,120,777
Per Share of Common Stock
Net Income (Loss), as reported $1.03 $1.12 $0.40 $0.21
$(0.71)
Net Income (Loss), excluding the benefit
of tax loss carryforwards0.60 0.62 0.20 0.21 (0.71)
Common Stock Prices
High 10 7/8 12 1/4 8 6 3/8 6 7/8
Low 8 1/4 6 1/8 4 1/2 2 7/8 3 3/8
Year End 10 8 5/8 6 3/4 5 3/8 3 3/8
BOARD OF DIRECTORS OFFICERS EXECUTIVE OFFICE
Paul A. Carroll Peter Lawson- Zemex Corporation
Partner, Smith Johnston Canada Trust
Lyons(1) Chairman of the Tower
Board BCE Place
Morton A. Cohen 161 Bay Street
Chairman, President Richard L. Lister Suite 3750, P.O.
and President and Box 703
Chief Executive Chief Executive Toronto, Ontario
Officer, Officer Canada M5J 2S1
Clarion Capital
Corporation Allen J. Palmiere Tel: (416) 365-
Vice President, 8080
John M. Donovan Chief Financial Fax: (416) 365-
Corporate Consultant Officer and 8094
(1) (2) Assistant Secretary
INDEPENDENT Thomas
B. Evans, Jr. Peter J. Goodwin PUBLIC
Vice Chairman Vice President; ACCOUNTANTS
The Jefferson Group President,
Inc. (2) Industrial Minerals Deloitte & Touche
Toronto, Ontario,
Ned Goodman Terrance J. Hogan Canada
Chairman and Chief President,
Executive Officer, Alumitech, Inc. TRANSFER AGENT
Dundee Bancorp Inc. AND REGISTRAR
G. Russell Lewis CAPITAL STOCK
Peter Lawson-Johnston President, Metal
Chairman and Trustee, Powders First Union
Solomon R. Guggenheim National Bank of
Foundation; Chairman, Patricia K. Moran North Carolina
The Harry Frank Assistant Secretary- Shareholder
Guggenheim Foundation Treasurer Services Group
(1) (3) 230 South Tryon
Street
Richard L. Lister Charlotte, North
President and Chief Carolina 28288
Executive
Officer of the Tel: (800) 829-
Corporation (3) 8432
Fax: (704) 374
Patrick H. O'Neill 6114
Corporate Consultant
(2) FORM 10-K
William J. vanden Copies of the
Heuvel Form 10-K filed
Counsel, Strook, with the
Strook & Lavan (3) Securities and
Exchange
Commission for
(1) Member of the the year ended
Executive December 31, 1995
will be available
Compensation/Stock after April 1,
Option/Pension 1996 by writing
Committee to Shareholder
of the Relations at the
Corporation Executive Office
(2) Member of the
Audit
Committee of
the
Corporation
(3) Member of the
Executive
Committee of
the
Corporation
[ARTICLE] 5
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[CASH] 1,653,000
[SECURITIES] 0
[RECEIVABLES] 13,551,000
[ALLOWANCES] 386,000
[INVENTORY] 20,176,000
[CURRENT-ASSETS] 35,835,000
[PP&E] 79,196,000
[DEPRECIATION] 28,925,000
[TOTAL-ASSETS] 96,681,000
[CURRENT-LIABILITIES] 16,126,000
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 8,785,000
[OTHER-SE] 62,115,000
[TOTAL-LIABILITY-AND-EQUITY] 96,681,000
[SALES] 85,056,000
[TOTAL-REVENUES] 85,056,000
[CGS] 64,356,000
[TOTAL-COSTS] 76,714,000
[OTHER-EXPENSES] (80,000)
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 523,000
[INCOME-PRETAX] 7,899,000
[INCOME-TAX] (519,000)
[INCOME-CONTINUING] 8,418,000
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 8,418,000
[EPS-PRIMARY] 1.03
[EPS-DILUTED] 1.03
</TABLE>
