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Minerals Technologies Inc. recently reported net income of $4.2 million, or $0.22 per share, for the first quarter of 2009, compared with $5.7 million, or $0.31 per share, in the fourth quarter of 2008. Excluding special items, earnings per share were $0.25, compared with $0.41 per share in the fourth quarter of 2008.
“Demand in our end markets-primarily the paper, steel, construction and automotive industries-declined further from fourth quarter levels, causing a significant drop in demand for our products,” said Joseph C. Muscari, chairman and chief executive officer. “As a result, our earnings per share decreased 29% from the fourth quarter of 2008 and 75% from the first quarter of 2008. From the onset of the recession, we have taken, and continue to take, the necessary measures to manage through this worldwide recession by conserving cash and reducing costs. We have reduced our workforce by approximately 15% since October, shortened work weeks, reduced overtime, suspended our stock repurchase program, reduced capital investment and continued our aggressive expense reduction measures. The result was that even in this weak economic environment, the company still generated $24 million in cash flow from operations and free cash flow of $19 million in the first quarter.”
During the first quarter, the company recorded a pre-tax restructuring charge of approximately $0.5 million, which represents additional charges associated with reductions in the workforce announced in the fourth quarter of 2008.
The company's worldwide sales in the first quarter were $208.3 million, a 13% sequential decline from the $240.0 million reported in the fourth quarter of 2008, of which foreign exchange had an unfavorable impact on sales of approximately $2.3 million or 1 percentage point. Operating income, excluding special items, was $7.8 million, a 17% decrease from the $9.4 million reported in the fourth quarter of 2008.
For the first quarter, worldwide sales in the company's Specialty Minerals segment, which consists of precipitated calcium carbonate (PCC) and Processed Minerals, were $143.6 million, compared with $159.8 million in the fourth quarter of 2008, a 10% decrease. Both product lines in the segment experienced volume declines. Foreign exchange had an unfavorable impact on sequential sales growth for the quarter of approximately 1 percentage point. However, income from operations, excluding special items, was $10.0 million, a 19% increase from the $8.4 million recorded in the fourth quarter of 2008. This increase in profitability was due to the contractual recovery of raw material cost increases in the PCC product line and lower expenses throughout the segment, which more than offset volume declines. The Processed Minerals product line operated at a loss for the quarter of approximately $2 million.
Worldwide sales of PCC, which is used mainly in the manufacturing processes of the paper industry, were $123.1 million, a 10% decrease from the $137.4 million recorded in the fourth quarter of 2008. This decrease was associated primarily with lower PCC volumes caused by a worldwide decline in paper demand that resulted in both temporary and permanent paper machine shutdowns and production curtailments that continued throughout the first quarter. Worldwide sales of Processed Minerals products were $20.5 million, an 8% decline from the $22.4 million in the fourth quarter of 2008. Processed Minerals products, which include ground calcium carbonate and talc, are used in the building materials, polymers, ceramics, paints and coatings, glass and other manufacturing industries. The decline in Processed Minerals sales, which represented a 4% decline in volumes, was due to the continued production curtailment by customers serving the already weak residential and commercial construction and automotive industries.
In the company's Refractories segment, sales in the first quarter of 2009 were $64.7 million, a 19% decrease from the $80.2 million recorded in the fourth quarter of 2008. Foreign exchange had an unfavorable impact on sales of less than 1 percentage point vs. the fourth quarter of 2008. The Refractory segment, which provides products and services primarily to the worldwide steel industry, recorded an operating loss of $1.9 million, excluding special items, for the first quarter compared with operating income of $1.6 million in the fourth quarter of 2008. Continued lower levels of global steel production in the quarter was the primary cause of this decline, which resulted in a 17% decrease in refractories volumes from the fourth quarter 2008.
“The first quarter was a continuation of the last two months of the fourth quarter-demand for steel in North America, our most important market for refractories, was down more than 50% from third quarter levels; housing starts were at the lowest levels in decades; and North American paper production was down over 25% from prior year,” said Muscari. “We will continue to effectively manage through these extraordinarily difficult and uncertain times. I am confident that because of the restructuring program the company initiated in 2007 and continued in 2008, we are on a stronger foundation than in years past. We continue to have a strong balance sheet, good cash flow, leaner operations, and we will make the necessary adjustments to maintain our competitiveness in this global recession.”
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