|
United States
Securities and
Exchange Commission
|
||||||
|
(Mark One)
|
||||||
|
ý |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|||||
|
|
||||||
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|||||
|
Delaware
|
74-2081929
|
|||||
|
722 Burleson Street
, Corpus Christi, Texas 78402
|
||||||
|
(361) 883-5591
|
||||||
|
|
||||||
|
Yes
ý
|
No o |
|||||
|
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). |
||||||
|
Yes
ý
|
No o |
|||||
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. |
||||||
|
Large accelerated filer
o
|
Accelerated filer o |
Non-accelerated filer o |
Smaller reporting company ý |
|||
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). |
||||||
|
Yes
o
|
No ý |
|||||
|
Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. |
||||||
|
Class
|
Shares Outstanding as of August 1, 2013
|
|||||
1
|
Table of Contents |
|||
|
|
|||
|
Part I - Financial Information |
|||
|
Page No. |
|||
|
Item 1. |
Condensed Consolidated Financial Statements |
||
|
Condensed Consolidated
Income Statements --
|
3 |
||
|
Condensed Consolidated
Statements of Comprehensive Income (Loss) --
|
4 |
||
|
Condensed Consolidated
Balance Sheets --
|
5 |
||
|
Condensed Consolidated
Statements of Cash Flows --
|
6 |
||
|
Notes to the Condensed Consolidated Financial Statements |
7 |
||
|
Item 2. |
Management's Discussion and
Analysis of Financial Condition
|
15 |
|
|
Item 4. |
Controls and Procedures |
26 |
|
|
Part II - Other Information |
|||
|
Item 6. |
Exhibits |
27 |
|
|
Signatures |
27 |
||
Forward Looking Information
Certain portions of this report contain forward-looking statements about the business, financial condition and prospects of TOR Minerals International, Inc. (the “Company”). The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, without limitation, changes in demand for the Company’s products, changes in competition, economic conditions, fluctuations in market price for Titanium dioxide pigments, changes in foreign currency exchange rates, increases in the price of energy and raw materials, such as ilmenite, interest rate fluctuations, changes in the capital markets, changes in tax and other laws and governmental rules and regulations applicable to the Company’s business, and other risks indicated in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, and, in many cases, the Company cannot predict all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws. When used in this report, the words “believes,” “estimates,” “plans,” “expects,” “anticipates” and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.
2
3
|
TOR Minerals International, Inc. and Subsidiaries |
||||||||
|
Condensed Consolidated Statements of Comprehensive Income (Loss) |
||||||||
|
(Unaudited) |
||||||||
|
(In thousands) |
||||||||
|
|
|
|||||||
|
|
Three Months
|
|
Six Months
|
|||||
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
NET INCOME |
$ |
150 |
$ |
1,559 |
$ |
75 |
$ |
2,955 |
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax |
||||||||
|
Currency translation adjustment, net of tax: |
||||||||
|
Net foreign currency translation adjustment loss |
(277) |
(926) |
(686) |
(218) |
||||
|
Other comprehensive loss, net of tax |
(277) |
(926) |
(686) |
(218) |
||||
|
COMPREHENSIVE INCOME (LOSS) |
$ |
(127) |
$ |
633 |
$ |
(611) |
$ |
2,737 |
See accompanying notes.
4
5
6
TOR Minerals International, Inc. and Subsidiaries
(Unaudited)
|
Note 1. |
Accounting Policies |
Basis of Presentation and Use of Estimates
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim condensed consolidated financial statements include the consolidated accounts of TOR Minerals International, Inc. (“TOR”, “we”, “us”, “our” or the “Company”) and its wholly-owned subsidiaries, TOR Processing and Trade, B.V. (“TPT”) and TOR Minerals Malaysia, Sdn. Bhd. (“TMM”), with all significant intercompany transactions eliminated. In our opinion, all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the consolidated financial position, results of operations and cash flows for the interim periods presented have been made. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2012, in our Annual Report on Form 10-K filed with the SEC on March 7, 2013. Operating results for the three and six month periods ended June 30, 2013, are not necessarily indicative of the results for the year ending December 31, 2013.
Income Taxes
The Company records income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
For the three and six month periods ended June 30, 2013, income tax expense consisted of federal income tax benefit of approximately $24,000 and expense of approximately $16,000, respectively; state income tax expense of approximately $2,000 and $4,000, respectively; and foreign tax expense of approximately $87,000 and $14,000, respectively. For the three and six month periods ended June 30, 2012, income tax expense consisted of federal income tax expense of approximately $287,000 and $583,000, respectively; state income tax expense of approximately $3,000 and $5,000, respectively; and foreign tax expense of approximately $227,000 and $298,000, respectively. Taxes are based on an estimated annualized consolidated effective tax rate of 31.2% for the year ended December 31, 2013.
When accounting for uncertainties in income taxes, we evaluate all tax years still subject to potential audit under the applicable state, federal and foreign income tax laws. We are subject to taxation in the United States, Malaysia and The Netherlands. Our federal income tax returns in the United States are subject to examination for the tax years ended December 31, 2009 through December 31, 2012. Our state returns, which are filed in Texas and Ohio, are subject to examination for the tax years ended December 31, 2008 through December 31, 2012. Our tax returns in various non-U.S. jurisdictions are subject to examination for various tax years ended December 31, 2007 through December 31, 2012.
As of January 1, 2012, we did not have any unrecognized tax benefits and there was no change during the six month period ended June 30, 2013. In addition, we did not recognize any interest and penalties in our consolidated financial statements during the six month period ended June 30, 2013. If any interest or penalties related to any income tax liabilities are imposed in future reporting periods, we expect to record both of these items as components of income tax expense.
Recently Adopted and Recently Issued Accounting Standards
On February 5, 2013, the Financial Accounting Standards Board issued an amendment to the disclosure requirements for reporting reclassifications out of accumulated other comprehensive income (“AOCI”). The new requirements were effective for the first interim or annual period beginning after December 15, 2012. The amendment requires companies to present information about reclassification adjustments from accumulated other comprehensive income to the income statement, including the income statement line items affected by the reclassification. The information must be presented in the financial statements in a single note or on the face of the financial statements. The new accounting guidance also requires the disclosure to be cross referenced to other financial statement disclosures for reclassification items that are not reclassified directly to net income in their entirety in the same reporting period. TOR adopted the new requirements in the first quarter of 2013; however, the adoption of this guidance did not have an effect on its consolidated financial position, results of operations or cash flows.
7
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 2. |
Debt |
Long-term Debt – Financial Institutions
Following is a summary of our long-term debt to financial institutions:
|
(Unaudited) |
||||
|
(In thousands) |
June 30, |
December 31, |
||
|
2013 |
2012 |
|||
|
Fixed Rate term note payable to a U.S. bank, with an interest rate of 5.5% at June 30, 2013, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our U.S. operation. |
$ |
1,114 |
$ |
1,309 |
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 7.8% at June 30, 2013, due July 1, 2029, secured by TPT's land and office building purchased July 2004. (€265) |
345 |
363 |
||
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.3% at June 30, 2013, due January 31, 2030, secured by TPT's land and building purchased January 2005. (€290) |
377 |
395 |
||
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at June 30, 2013, due July 31, 2015, secured by TPT's assets. (€83) |
108 |
143 |
||
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.25% at June 30, 2013, due July 5, 2014, secured by TPT's assets. (€218) |
283 |
442 |
||
|
Malaysian Ringgit term note payable to a Malaysian bank, with an interest rate of 5.2% at June 30, 2013, due March 1, 2015, secured by TMM's property, plant and equipment. (RM 3,208) |
1,016 |
866 |
||
|
Total |
3,243 |
3,518 |
||
|
Less current maturities |
1,180 |
1,202 |
||
|
Total long-term debt - financial institutions |
$ |
2,063 |
$ |
2,316 |
Short-term Debt
U.S. Operation
On December 31, 2010, the Company entered into a credit agreement (the “Agreement”) with American Bank, N.A. (the “Lender”) which established a $1,000,000 line of credit (the “Line”), and on March 1, 2012, the Line was increased from $1,000,000 to $2,000,000. On May 15, 2013, the Company and the Lender entered into the second amendment which extended the maturity date from October 15, 2013 to October 15, 2014 and reduced the minimum interest rate floor from 5.5% to 4.5%. Under the terms of the Agreement, the amount the Company is entitled to borrow under the Line is subject to a borrowing base, which is based on the loan value of the collateral pledged to the Lender to secure the indebtedness owing to the Lender by the Company. Amounts advanced under the Line bear interest at a variable rate equal to one percent per annum point above the Wall Street Journal Prime Rate as such prime rate changes from time to time, with a minimum floor rate of 4.50%. At June 30, 2013, the Company had an outstanding balance on the Line of $700,000.
Under the terms of the Agreement, the Company must maintain a ratio of cash flow to debt service of at least 1.25 to 1.0 measured on a rolling four quarter basis. At June 30, 2013, the ratio of cash flow to debt service was 2.92 to 1.0.
8
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
European Operation
On March 20, 2007, our subsidiary, TPT, entered into a short-term credit facility (the “Credit Facility”) with Rabobank which increased TPT’s line of credit from €650,000 to €1,100,000. The Credit Facility was renewed on January 1, 2010 and has no stated maturity date. The Credit Facility, which has a variable interest rate of bank prime plus 2.8% (currently at 3.42%), is secured by TPT’s accounts receivable and inventory. At June 30, 2013, TPT had utilized €794,000 ($1,033,000) of its short-term credit facility.
TPT’s loan agreements covering both the Credit Facility and the term loans include subjective acceleration clauses that allow Rabobank to accelerate payment if, in the judgment of the bank, there are adverse changes in our business. We believe that such subjective acceleration clauses are customary in the Netherlands for such borrowings. However, if demand is made by Rabobank, we may be unable to refinance the demanded indebtedness, in which case the bank could foreclose on the assets of TPT.
Asian Operation
On May 21, 2013, our subsidiary, TMM, amended its banking facility with HSBC Bank Malaysia Berhad (“HSBC”) to extend the maturity date from April 30, 2013 to April 30, 2014. The HSBC facility includes the following in Malaysian Ringgits (“RM”): (1) overdraft of RM 500,000; (2) an import/export line (“ECR”) of RM 6,460,000; and (3) a foreign exchange contract limit of RM 5,000,000 ($158,000, $2,044,000 and $1,582,000, respectively).
On April 17, 2013, TMM amended its banking facility with RHB Bank Berhad (“RHB”) to extend the maturity date from March 5, 2013 to March 24, 2014 and grant a multi-trade line of RM 5,000,000 ($1,582,000). In addition, the RHB facility includes the following: (1) an overdraft line of credit up to RM 1,000,000; (2) an ECR of RM 9,300,000; (3) a bank guarantee of RM 1,200,000; and (4) a foreign exchange contract limit of RM 25,000,000 ($316,000, $2,943,000, $379,000 and $7,913,000, respectively). At June 30, 2013, the outstanding balance on the line of credit was RM 700,000 ($221,000) at a current interest rate of 4.83% and RM 9,181,000 ($1,442,000) was outstanding on the foreign exchange contract at a current interest rate of 2.80%.
The banking facilities with both HSBC and RHB bear an interest rate on the overdraft facilities at 1.25% over bank prime and the ECR facilities bear interest at 1.0% above the funding rate stipulated by the Export-Import Bank of Malaysia Berhad. The ECR, a government supported financing arrangement specifically for exporters, is used by TMM for short-term financing of up to 180 days against customers’ and inter-company shipments. At June 30, 2013, the outstanding balance on the ECR facilities was RM 5,918,000 ($1,873,000) at a current interest rate of 5.0%.
The borrowings under both the HSBC and the RHB short term credit facilities are subject to certain subjective acceleration covenants based on the judgment of the banks and a demand provision that provide that the banks may demand repayment at any time. We believe such a demand provision is customary in Malaysia for such facilities. The loan agreements are secured by TMM’s property, plant and equipment. However, if demand is made by HSBC or RHB, we may be unable to refinance the demanded indebtedness, in which case, the lenders could foreclose on the assets of TMM. The credit facilities prohibit TMM from paying dividends, and the HSBC facility further prohibits loans to related parties without the prior consent of HSBC.
9
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 3. |
Fair Value Measurements |
The following table summarizes the valuation of our financial instruments recorded on a fair value basis as of December 31, 2012 and June 30, 2013.
|
|
|
Fair Value Measurements |
||||||
|
(In thousands) |
Total |
|
Quoted
|
|
Significant
|
|
Significant
|
|
|
Asset (liability) |
|
|
|
|
|
|
|
|
|
December 31, 2012 |
|
|
|
|
|
|
|
|
|
Currency forward contracts |
$ |
(1) |
$ |
- |
$ |
(1) |
$ |
- |
|
June 30, 2013 |
|
|
|
|
|
|
|
|
|
Currency forward contracts |
$ |
3 |
$ |
- |
$ |
3 |
$ |
- |
Our foreign currency derivative financial instruments mitigate foreign currency
exchange risks and include forward contracts. The forward contracts are
marked-to-market at each balance sheet date with any resulting gain or loss
recognized in income as part of the gain or loss on foreign currency exchange
rate included under “Other Expense” on the Company’s
consolidated income statement. The fair value of the currency forward
contracts is determined using Level 2 inputs based on the currency rate in
effect at the end of the reporting period.
The fair value of the Company’s debt is based on estimates using standard pricing models and Level 2 inputs, including the Company’s estimated borrowing rate, that take into account the present value of future cash flows as of the consolidated and condensed balance sheet date. The computation of the fair value of these instruments is performed by the Company. The carrying amounts and estimated fair values of the Company’s long-term debt, including current maturities, are summarized below:
|
|
June 30, 2013 |
|
December 31, 2012 |
|||||
|
(In thousands) |
|
Carrying
|
|
Fair
|
|
Carrying
|
|
Fair
|
|
Long-term
debt, including
|
$ |
3,243 |
$ |
3,160 |
$ |
3,518 |
$ |
3,455 |
The carrying amounts reported in the consolidated and condensed balance sheet for cash and cash equivalents, trade receivables, payables and accrued liabilities and short-term borrowings approximate fair value due to the short term nature of these instruments. Accordingly, these items have been excluded from the above table.
10
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 4. |
Capital Leases |
On August 1, 2010, the Company entered into a financial lease agreement with Dell Financial Services for new computer servers. The cost of the equipment under the capital lease, in the amount of $19,093, is included in the consolidated balance sheets as property, plant and equipment. Accumulated amortization of the leased equipment at June 30, 2013 was approximately $22,000. The capital lease is in the amount of $20,698 including interest of $1,605 (implicit interest rate 5.3%). The lease term is 36 months with equal monthly installments of $575. The net present value of the lease at June 30, 2013 was $1,000.
On September 4, 2011, TPT entered into a financial lease agreement with Diependael Leasing, BV for equipment related to the production of ALUPREM. The cost of the equipment under the capital lease, in the amount of €38,360 ($49,906), is included in the consolidated balance sheets as property, plant and equipment. Accumulated amortization of the leased equipment at June 30, 2013 was approximately €22,000 ($28,622). The capital lease is in the amount of €41,256 ($53,674) including interest of €2,896 ($3,768) (implicit interest rate 4.786%). The lease term is 36 months with equal monthly installments of €1,146 ($1,491). The net present value of the lease at June 30, 2013 was €15,574 ($20,000).
|
Note 5. |
Calculation of Basic and Diluted Earnings per Share |
The following table sets forth the computation of basic and diluted earnings per share:
|
(in thousands, except per share amounts) |
Three Months
|
Six Months
|
||||||
|
2013 |
|
2012 |
2013 |
|
2012 |
|||
|
Numerator: |
||||||||
|
Net Income |
$ |
150 |
$ |
1,559 |
$ |
75 |
$ |
2,955 |
|
Numerator
for basic earnings per share -
|
150 |
1,559 |
75 |
2,955 |
||||
|
Effect of dilutive securities: |
||||||||
|
6% Convertible Debenture Interest Expense |
- |
14 |
- |
36 |
||||
|
Numerator for diluted
income per share -
|
$ |
150 |
$ |
1,573 |
$ |
75 |
$ |
2,991 |
|
Denominator: |
||||||||
|
Denominator
for basic income per share -
|
2,998 |
2,769 |
2,992 |
2,585 |
||||
|
Effect of dilutive securities: |
||||||||
|
Employee stock options |
(1) |
40 |
(1) |
39 |
||||
|
Detachable warrants |
407 |
461 |
204 |
457 |
||||
|
6% Convertible Debenture |
- |
192 |
- |
370 |
||||
|
Dilutive potential common shares |
406 |
693 |
204 |
866 |
||||
|
Denominator
for diluted income per share -
|
3,404 |
3,462 |
3,196 |
3,451 |
||||
|
Basic income per common share |
$ |
0.05 |
$ |
0.56 |
$ |
0.03 |
$ |
1.14 |
|
Diluted income per common share |
$ |
0.04 |
$ |
0.45 |
$ |
0.02 |
$ |
0.87 |
For the three and six month periods ended June 30, 2013 and 2012, approximately 65,000 and 42,000, respectively, of shares issuable upon exercise of employee stock options were excluded from the calculation of diluted earnings per share as the exercise price was greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive.
11
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 6. |
Segment Information |
The Company and its subsidiaries operate in the business of pigment manufacturing and related products in three geographic segments. All United States manufacturing is done at the facility located in Corpus Christi, Texas. Foreign manufacturing is done by the Company’s wholly-owned subsidiaries, TMM, located in Malaysia, and TPT, located in the Netherlands. A summary of the Company’s manufacturing operations by geographic area is presented below:
12
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Product sales of inventory between U.S., European and Asian operations are based on inter-company pricing, which includes an inter-company profit margin. In the geographic information, the location loss from all locations is reflective of these inter-company prices, as is inventory at the U.S. operation prior to elimination adjustments. Such presentation is consistent with the internal reporting reviewed by the Company’s chief operating decision maker. The elimination entries include an adjustment to the cost of sales resulting from the adjustment to ending inventory to eliminate inter-company profit, and the reversal of a similar adjustment from a prior period. To the extent there are net increases or declines period over period in U.S. inventories that include an inter-company component, the net effect of these adjustments can decrease or increase location profit.
Sales from the subsidiary to the Company and between subsidiaries are based upon profit margins which represent competitive pricing of similar products. Inter-company sales consisted of SR, HITOX, ALUPREM and TIOPREM.
|
Note 7. |
Stock Options and Equity Compensation Plan |
The Company granted 21,000 options during each of the six month periods ended June 30, 2013 and 2012.
As of June 30, 2013, there was approximately $413,000 of stock-based employee compensation expense related to non-vested awards which is expected to be recognized over a weighted average period of 3.67 years.
As most options issued under the 2000 Incentive Plan are incentive stock options, the Company does not normally receive significant excess tax benefits relating to the compensation expense recognized on vested options.
|
Note 8. |
Inventories |
A summary of inventory follows:
|
(In thousands) |
|
|
|
June 30, |
|
December 31, |
||
|
|
|
|
2013 |
|
2012 |
|||
|
Raw materials |
$ |
16,120 |
$ |
14,002 |
||||
|
Work in progress |
2,746 |
2,848 |
||||||
|
Finished goods |
6,253 |
5,238 |
||||||
|
Supplies |
916 |
868 |
||||||
|
Total Inventories |
26,035 |
22,956 |
||||||
|
Inventory reserve |
(74) |
(61) |
||||||
|
Net Inventories |
$ |
25,961 |
$ |
22,895 |
13
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 9. |
Derivatives and Other Financial Instruments |
The Company has exposure to certain risks relating to its ongoing business operations, including financial, market, political and economic risks. The following discussion provides information regarding our exposure to the risks of changing foreign currency exchange rates. The Company has not entered into foreign currency contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts for trading or speculative purposes in the future.
Foreign Currency Forward Contracts
We manage the risk
of changes in foreign currency exchange rates, primarily at our Asian Operation,
through the use of foreign currency contracts. Foreign exchange contracts
are used to protect the Company from the risk that the eventual cash flows
resulting from transactions in foreign currencies, including sales and
purchases transacted in a currency other than the functional currency, will be
adversely affected by changes in exchange rates. We report the fair value
of the derivatives on our consolidated and condensed balance sheets and changes
in the fair value are recognized in earnings in the period of the change.
At June 30, 2013, we marked these contracts to market, recording $3,000 as a current asset on the consolidated and condensed balance sheet. For the three and six month periods ended June 30, 2013, we recorded a net gain on these contracts of $3,000 and $24,000, respectively, as a component of our net income. For the three and six month periods ended June 30, 2012, we recorded a net loss of $6,000 and $13,000, respectively, as a component of our net income.
The following table summarizes the gross fair market value of all derivative instruments, which are not designated as hedging instruments and their location in our Condensed Consolidated Balance Sheet:
|
(In thousands) |
||||||
|
Asset Derivatives |
||||||
|
|
|
June 30, |
|
December 31, |
||
|
Derivative Instrument |
|
Location |
|
2013 |
|
2012 |
|
Foreign Currency Exchange Contracts |
Other Current Assets |
$ |
3 |
$ |
- |
|
|
|
|
|
|
|
|
|
|
Liability Derivatives |
||||||
|
|
|
June 30, |
|
December 31, |
||
|
Derivative Instrument |
|
Location |
|
2013 |
|
2012 |
|
Foreign Currency Exchange Contracts |
Accrued Expenses |
$ |
- |
$ |
1 |
|
The following table summarizes the impact of the Company’s derivatives on
the condensed consolidated financial statements of operations for the three and
six month periods ended June 30, 2013 and 2012:
|
|
|
|
Amount of Gain (Loss) Recognized in Income
|
|||||||
|
|
Location of Gain |
|
Three Months Ended |
|
Six Months Ended |
|||||
|
Derivative |
|
(Loss) on Derivative |
|
June 30, |
|
June 30, |
||||
|
Instrument |
|
Instrument |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
Foreign Currency
|
Other Expense:
|
$ |
3 |
$ |
(6) |
$ |
24 |
$ |
(13) |
|
14
TOR Minerals International, Inc. and Subsidiaries
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
Company Overview
We are a global specialty chemical company engaged in the business of manufacturing and marketing mineral products for use as pigments, pigment extenders, engineered fillers and flame retardants used in the manufacture of paints, industrial coatings, plastics, and catalysts applications. We have operations in the U.S., Asia and Europe.
Our U.S. Operation, located in Corpus Christi, Texas, manufactures HITOX, BARTEX, HALTEX/OPTILOAD and TIOPREM. The facility is also the global headquarters for the Company. The Asian Operation, located in Ipoh, Malaysia, manufactures Synthetic Rutile (“SR”), HITOX and TIOPREM and our European Operation, located in Hattem, Netherlands, manufactures ALUPREM.
Operating expenses in the foreign locations are primarily in local currencies. Accordingly, we have exposure to fluctuation in foreign currency exchange rates. These fluctuations impact the translation of sales, earnings, assets and liabilities from local currency to the U.S. Dollar.
Our business is closely correlated with the construction industry and its demand for materials that use pigments, such as paints and plastics. This has generally led to higher sales in our second and third quarters due to increases in construction and maintenance during warmer weather. Also, pigment consumption is closely correlated with general economic conditions. When the economy is in an expansionary state, there is typically an increase in pigment consumption while a slow down typically results in decreased pigment consumption. When the construction industry or the economy is in a period of decline, TOR's sales and profit are likely to be adversely affected.
Following are our results for the three and six month periods ended June 30, 2013 and 2012.
|
(Unaudited) |
||||||||
|
(In thousands, except per share amounts) |
|
Three Months
|
|
Six Months
|
||||
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
NET SALES |
$ |
10,732 |
$ |
14,108 |
$ |
22,159 |
$ |
26,916 |
|
Cost of sales |
9,020 |
10,441 |
18,953 |
20,059 |
||||
|
GROSS MARGIN |
|
1,712 |
|
3,667 |
|
3,206 |
|
6,857 |
|
Technical services and research and development |
171 |
101 |
324 |
183 |
||||
|
Selling, general and administrative expenses |
1,247 |
1,359 |
2,525 |
2,583 |
||||
|
Loss on disposal of assets |
- |
- |
10 |
- |
||||
|
OPERATING INCOME |
|
294 |
|
2,207 |
|
347 |
|
4,091 |
|
OTHER EXPENSE: |
||||||||
|
Interest expense, net |
(99) |
(112) |
(183) |
(254) |
||||
|
Gain (loss) on foreign currency exchange rate |
20 |
(20) |
(67) |
3 |
||||
|
Other, net |
- |
1 |
12 |
1 |
||||
|
INCOME BEFORE INCOME TAX |
|
215 |
|
2,076 |
|
109 |
|
3,841 |
|
Income tax expense |
65 |
517 |
34 |
886 |
||||
|
NET INCOME |
$ |
150 |
$ |
1,559 |
$ |
75 |
$ |
2,955 |
|
|
|
|
|
|
|
|
|
|
|
Income per common share: |
||||||||
|
Basic |
$ |
0.05 |
$ |
0.56 |
$ |
0.03 |
$ |
1.14 |
|
Diluted |
$ |
0.04 |
$ |
0.45 |
$ |
0.02 |
$ |
0.87 |
15
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net Sales : Consolidated net sales for the three and six month periods ended June 30, 2013 decreased approximately $3,376,000, or 24%, and $4,757,000, or 18%, respectively, as compared to the same three and six month periods of 2012 when we experienced increases in our consolidated net sales of 3,619,000, or 35%, and $6,842,000, or 34%, respectively. The decline in sales for both the three and six month periods is primarily related to a decrease in the sale of our HITOX and SR products, both of which continue to be affected by weakness in the broader market for TiO2.
Following is a summary of our consolidated products sales for the three and six month periods ended June 30, 2013 and 2012 (in thousands). All inter-company sales have been eliminated.
|
(Unaudited) |
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|||||||||||||||||
|
Product |
2013 |
2012 |
Variance |
|
2013 |
2012 |
Variance |
||||||||||||
|
HITOX |
$ |
3,797 |
36% |
$ |
5,950 |
42% |
$ |
(2,153) |
-36% |
$ |
7,836 |
35% |
$ |
11,318 |
42% |
$ |
(3,482) |
-31% |
|
|
ALUPREM |
3,137 |
29% |
3,554 |
25% |
(417) |
-12% |
7,024 |
32% |
7,418 |
28% |
(394) |
-5% |
|||||||
|
BARTEX /
|
2,160 |
20% |
1,825 |
13% |
335 |
18% |
4,045 |
18% |
3,568 |
13% |
477 |
13% |
|||||||
|
HALTEX /
|
903 |
8% |
1,024 |
7% |
(121) |
-12% |
1,750 |
8% |
1,902 |
7% |
(152) |
-8% |
|||||||
|
TIOPREM |
567 |
5% |
418 |
3% |
149 |
36% |
1,147 |
5% |
754 |
3% |
393 |
52% |
|||||||
|
SYNTHETIC
|
- |
0% |
1,117 |
8% |
(1,117) |
-100% |
- |
0% |
1,548 |
6% |
(1,548) |
N/A |
|||||||
|
OTHER |
168 |
2% |
220 |
2% |
(52) |
-24% |
357 |
2% |
408 |
1% |
(51) |
-13% |
|||||||
|
Total |
$ |
10,732 |
100% |
$ |
14,108 |
100% |
$ |
(3,376) |
-24% |
$ |
22,159 |
100% |
$ |
26,916 |
100% |
$ |
(4,757) |
-18% |
|
HITOX sales decreased 36% and 31% for the three and six month periods ended June 30, 2013, respectively, primarily due to a global weakness in the TiO2 market, resulting in a decrease in volume of 28% for both periods and a decrease in selling price of approximately 8% and 3%, respectively. This compares to an increase of 27% and 30% for the three and six month periods ended June 30, 2012, respectively, primarily related to a global increase in the average selling price of approximately 41% and 42%, respectively.
ALUPREM sales decreased 12% for the three month period ended June 30, 2013 and 5% for the six month period ended June 30, 2013, as compared to the same periods of 2012, primarily related to a decrease in volume associated with the order patterns of a large U.S. customer and a large European customer. This compares to an increase of 9% and 16% during the same three and six month periods of 2012, respectively, primarily due to an increase in volume of a significant U.S. customer, which was partially offset by a decrease in volume in European sales as this business was affected by the slowdown in the European economy.
BARTEX/BARYPREM sales increased 18% and 13% during the three and six month periods ended June 30, 2013. For the three and six month period, an increase in volume represented approximately 7% for both periods and selling price represented approximately 11% and 6%, respectively, of the overall sales increase. During the three and six month periods ended June 30, 2012, sales increased approximately 62% and 61%, respectively, primarily due to an increase in volume of approximately 51%.
16
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
HALTEX/OPTILOAD sales decreased 12% and 8% for the three and six month periods ended June 30, 2013, respectively. For the quarter ended June 30, 2013, volume and selling price decreased approximately 7% and 5%, respectively. The year to date decline consisted of a decrease in volume and selling price of approximately 7% and 1%, respectively. This compares to an increase in volume of 19% and 17% for the same three and six month periods of 2012, respectively.
TIOPREM sales increased 36% for the three month period ended June 30, 2013, of which approximately 64% related to an increase in volume which was partially offset by a decrease in selling price of 28%. Year to date, sales increased approximately 52% of which volume represented approximately 61% which was partially offset by a decrease in selling price of approximately 9%. The increase in volume for TIOPREM is primarily related to an expanding customer base as this product continues to gain acceptance in the marketplace. For the same three period of 2012, sales increased 12% primarily related to an increase in selling price of 24% which was partially offset by a decrease in volume of 12%; and for the six month period ended June 30, 2012, sales declined approximately 3%.
Synthetic Rutile (“SR”) sales represented 8% and 6% of the overall sales for the three and six month periods ended June 30, 2012, respectively, as favorable market trends during 2012 allowed us to sell a significant quantity of SR to new customers; whereas, during the three and six month periods ended June 30, 2013, we did not sell any SR to third parties as a result of weak market conditions.
17
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
U.S. Operation
Our U.S. Operation manufactures and sells HITOX, BARTEX, HALTEX/OPTILOAD and TIOPREM to third party customers. In addition, we purchase ALUPREM and HITOX from our subsidiaries, TPT and TMM, for distribution in the Americas. Following is a summary of net sales for our U.S. Operation for the three and six month periods ended June 30, 2013 and 2012 (in thousands), as well as a summary of the material changes. All inter-company sales have been eliminated.
|
(Unaudited) |
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|||||||||||||||||
|
Product |
2013 |
2012 |
Variance |
|
2013 |
2012 |
Variance |
||||||||||||
|
HITOX |
$ |
2,420 |
31% |
$ |
3,606 |
40% |
$ |
(1,186) |
-33% |
$ |
5,020 |
33% |
$ |
7,002 |
40% |
$ |
(1,982) |
-28% |
|
|
ALUPREM |
2,055 |
26% |
2,326 |
26% |
(271) |
-12% |
4,244 |
27% |
4,757 |
27% |
(513) |
-11% |
|||||||
|
BARTEX |
1,803 |
23% |
1,485 |
17% |
318 |
21% |
3,282 |
21% |
2,924 |
17% |
358 |
12% |
|||||||
|
HALTEX /
|
903 |
11% |
1,024 |
12% |
(121) |
-12% |
1,750 |
11% |
1,902 |
11% |
(152) |
-8% |
|||||||
|
TIOPREM |
533 |
7% |
272 |
3% |
261 |
96% |
972 |
6% |
483 |
3% |
489 |
101% |
|||||||
|
OTHER |
158 |
2% |
186 |
2% |
(28) |
-15% |
316 |
2% |
370 |
2% |
(54) |
-15% |
|||||||
|
Total |
$ |
7,872 |
100% |
$ |
8,899 |
100% |
$ |
(1,027) |
-12% |
$ |
15,584 |
100% |
$ |
17,438 |
100% |
$ |
(1,854) |
-11% |
|
HITOX sales decreased 33% for the three month period ended June 30, 2013, primarily due to a decrease in volume of approximately 26% and selling price of 7%, respectively, due primarily to a weakening in the global TiO2 market. This compares to an increase 38% for the three month period ended June 30, 2012, primarily due to an increase in selling price of 39% which was partially offset by a small decrease in volume. For the six month period ended June 30, 2013, the decrease in HITOX sales of 28% is primarily related to a decrease in volume of 26% and selling price of 2%. During the same six month period of 2012, sales increased 44%, primarily due to a tight supply of commodity titanium dioxide, resulting in an increase in selling price which represented 43% of increase for that period.
ALUPREM sales during the second quarter decreased 12% as compared to an increase of 97% during the second quarter of 2012. For the six month period ended June 30, 2013, U.S. ALUPREM sales decreased 11% as compared to an increase of 101% during the same six month period of 2012. The decrease in sales for the three and six month periods ended June 30, 2013 is due to a change in the ordering pattern of a significant U.S. customer.
BARTEX sales in the U.S. increased 21% and 12% the three and six month periods ended June 30, 2013, respectively. For the second quarter, volume and selling price increased 6% and 15%, respectively; and for the six month period ended June 30, 2013, volume and selling price increased 5% and 7%, respectively. During the same three and six month periods of 2012, sales increased 62% and 61%, respectively. For the three and six month periods of 2012, an increase in volume represented approximately 51% of the overall sales increase.
TIOPREM sales in the U.S. increased 96% and 101% the three and six month periods ended June 30, 2013, respectively. For the second quarter, volume increased 117% and selling price decreased sales 21%; and for the six month period ended June 30, 2012, volume increased 117% and selling price decreased sales 16%. During the same three and six month periods of 2012, sales increased 15% and 14%, respectively. For the second quarter of 2012, volume decreased 8% and selling price increased sales 23%; and year to date, volume decreased 14% and selling price increased sales 28%.
18
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
European Operation
Our subsidiary in the Netherlands, TPT, manufactures and sells ALUPREM to third party customers, as well as to our U.S. Operation for distribution to U.S. customers. In addition, TPT purchases HITOX from TMM for distribution in Europe. The following table represents TPT’s ALUPREM and HITOX sales (in thousands) for the three and six month periods ended June 30, 2013 and 2012 to third party customers. All inter-company sales have been eliminated.
|
(Unaudited) |
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|||||||||||||||||
|
Product |
2013 |
2012 |
Variance |
|
2013 |
2012 |
Variance |
||||||||||||
|
ALUPREM |
$ |
1,082 |
64% |
$ |
1,228 |
62% |
$ |
(146) |
-12% |
$ |
2,780 |
67% |
$ |
2,661 |
64% |
$ |
119 |
4% |
|
|
HITOX |
232 |
14% |
388 |
20% |
(156) |
-40% |
582 |
14% |
825 |
20% |
(243) |
-29% |
|||||||
|
BARYPREM |
357 |
21% |
340 |
17% |
17 |
5% |
763 |
18% |
644 |
15% |
119 |
18% |
|||||||
|
TIOPREM |
27 |
1% |
30 |
1% |
(3) |
-10% |
51 |
1% |
43 |
1% |
8 |
19% |
|||||||
|
Total |
$ |
1,698 |
100% |
$ |
1,986 |
100% |
$ |
(288) |
-15% |
$ |
4,176 |
100% |
$ |
4,173 |
100% |
$ |
3 |
0% |
|
ALUPREM sales in Europe decreased 12% for the three month period ended June 30, 2013, primarily relating to a change in selling price which resulted in a reduction of approximately 30% and was partially offset by an increase in volume of 18%. The decrease in volume is primarily the result of the current European economy. This compares to a decrease in sales of 35% and 28% for the same three and six month periods of 2012, respectively, which was primarily due to a decrease in volume for the two periods of 30% and 26%, respectively.
HITOX sales in Europe decreased 40% and 29% for the three and six month periods ended June 30, 2013, respectively, primarily due to the global weakness in the TiO2 market, as well as a weak European economy. For the three and six month periods ended June 30, 2013, volume decreased 28% and 27%, respectively, and selling price decreased 12% and 2%, respectively. This compares to a decrease in sales of 24% and 5% for the same three and six month periods of 2012, respectively, primarily due to a weak European economy. For the three and six month periods ended June 30, 2012, volume decreased 29% and 22%, respectively.
BARYPREM sales in Europe increased 5% for the three month period ended June 30, 2013, primarily due to an increase in volume of approximately 15%, which was partially offset by a decrease in selling price of 10%. For the six month period ended June 30, 2013, sales increased 18% due to an increase in volume and selling price of 14% and 4%, respectively. This follows significant increases in volume during the same three and six month periods of 2012 as the product gained greater acceptance in the European market.
TIOPREM sales in Europe decreased 10% during the three month period ended June 30, 2013, primarily due to a decrease in selling price of 21%, which was partially offset by an increase in volume of 11%. For the six month period ended June 30, 2013, sales increased approximately 19%, primarily due to an increase in volume and selling price of 11% and 7%, respectively. For the three and six month periods ended June 30, 2012, sales decreased 67% and 72%, respectively, primarily due to a decline in volume resulting from a weak European economy.
19
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Asian Operation
Our subsidiary in Malaysia, TMM, manufactures and sells HITOX and SR to third party customers, as well as to our U.S. Operation and TPT. The following table represents TMM’s sales (in thousands) for the three and six month periods ended June 30, 2013 and 2012 to third party customers. All inter-company sales have been eliminated.
|
(Unaudited) |
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|||||||||||||||||
|
Product |
2013 |
2012 |
Variance |
|
2013 |
2012 |
Variance |
||||||||||||
|
HITOX |
$ |
1,145 |
98% |
$ |
1,956 |
61% |
$ |
(811) |
-41% |
$ |
2,234 |
93% |
$ |
3,491 |
66% |
$ |
(1,257) |
-36% |
|
|
TIOPREM |
7 |
1% |
116 |
3% |
(109) |
-94% |
124 |
5% |
228 |
4% |
(104) |
-46% |
|||||||
|
SYNTHETIC
|
- |
0% |
1,117 |
35% |
(1,117) |
-100% |
- |
0% |
1,548 |
29% |
(1,548) |
-100% |
|||||||
|
OTHER |
10 |
1% |
34 |
1% |
(24) |
-71% |
41 |
2% |
38 |
1% |
3 |
8% |
|||||||
|
Total |
$ |
1,162 |
100% |
$ |
3,223 |
100% |
$ |
(2,061) |
-64% |
$ |
2,399 |
100% |
$ |
5,305 |
100% |
$ |
(2,906) |
-55% |
|
HITOX sales in Asia decreased 41% and 36% for the three and six month periods ended June 30, 2013, respectively. For the second quarter, volume and selling price decreased 32% and 9%, respectively, and for the six month period ended June 30, 2013, volume and selling price decreased 32% and 4%, respectively, due to the weakness in the TiO2 market. This compares to an increase of 27% and 17% for the same three and six month periods of 2012, respectively, primarily related to an increase in selling price of 49% and 43%, respectively, which was partially offset by a decrease in volume of 22% and 26%.
TIOPREM sales in Asia decreased 94% and 46% during the three and six month periods ended June 30, 2013. For the second quarter, volume and selling price decreased 47% and 47%, respectively; and for the six month period ended June 30, 2013, volume decreased approximately 46% and selling price was flat. This compares to an increase of 152% and 1031% during the three and six month periods ended June 30, 2012, respectively.
SR sales represented 35% and 29% of the overall sales for the three and six month periods ended June 30, 2012, respectively, as favorable market trends during 2012 allowed us to sell a significant quantity of SR to new customers; whereas, during the three and six month periods ended June 30, 2013, we did not sell any SR to third parties as a result of weak market conditions.
20
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Other Consolidated Results
Gross Margin : The following table represents our net sales, cost of sales and gross margin for the three and six month periods ended June 30, 2013 and 2012.
|
(Unaudited) |
||||||||
|
(In thousands) |
|
Three Months
|
|
Six Months
|
||||
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
NET SALES |
$ |
10,732 |
$ |
14,108 |
$ |
22,159 |
$ |
26,916 |
|
Cost of sales |
9,020 |
10,441 |
18,953 |
20,059 |
||||
|
GROSS MARGIN |
$ |
1,712 |
$ |
3,667 |
$ |
3,206 |
$ |
6,857 |
|
GROSS MARGIN % |
16.0 % |
26.0 % |
14.5 % |
25.5 % |
||||
For the three and six month periods ended June 30, 2013, gross margin decreased approximately 10% and 11%, respectively. For the second quarter, the primarily factors influencing the decrease in gross margin include a decrease in selling price of approximately 8% and an increase in the cost of raw materials and energy costs of 7%, which were partially offset by improved operating efficiencies, resulting in an increase in the gross margin of approximately 5%.
For the six month period ended June 30, 2013, the primarily factors influencing the decrease in gross margin include a decrease in selling price of approximately 5% and an increase in the cost of raw materials of 6%.
Selling, General, Administrative and Expenses (“SG&A”) : SG&A expense decreased approximately 8% during the three month period ended June 30, 2013, primarily due to a decrease in selling expense, consulting fees and legal fees of approximately 6%, 4% and 2%, respectively, which was partially offset by registration fees (“REACH”) required by the European government to continue selling our products in Europe of 4%.
For the six month period ended June 30, 2013, SG&A expenses decreased approximately 2%, primarily due to a decrease in selling expense, consulting fees, legal fees and travel expense of approximately 4%, 2%, 2% and 1%, respectively, which was partially offset by an increase in salaries and REACH fees of 5% and 2%, respectively.
Interest Expense : Net interest expense for the three and six month periods ended June 30, 2013 decreased approximately $13,000 and $71,000, respectively, as compared to the same periods of 2012, primarily due to a decrease in our long and short-term financing.
Income Taxes : For the three and six month periods ended June 30, 2013, income tax expense consisted of federal income tax benefit of approximately $24,000 and expense of approximately $16,000, respectively; state income tax expense of approximately $2,000 and $4,000, respectively; and foreign tax expense of approximately $87,000 and $14,000, respectively. For the three and six month periods ended June 30, 2012, income tax expense consisted of federal income tax expense of approximately $287,000 and $583,000, respectively; state income tax expense of approximately $3,000 and $5,000, respectively; and foreign tax expense of approximately $227,000 and $298,000, respectively. Taxes are based on an estimated annualized consolidated effective tax rate of 31.2% for the year ended December 31, 2013.
21
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity, Capital Resources and Other Financial Information
Long-term Debt – Financial Institutions
Following is a summary of our long-term debt to financial institutions:
|
(Unaudited) |
||||
|
(In thousands) |
June 30, |
December 31, |
||
|
2013 |
2012 |
|||
|
Fixed Rate term note payable to a U.S. bank, with an interest rate of 5.5% at June 30, 2013, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our U.S. operation. |
$ |
1,114 |
$ |
1,309 |
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 7.8% at June 30, 2013, due July 1, 2029, secured by TPT's land and office building purchased July 2004. (€265) |
345 |
363 |
||
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 3.3% at June 30, 2013, due January 31, 2030, secured by TPT's land and building purchased January 2005. (€290) |
377 |
395 |
||
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at June 30, 2013, due July 31, 2015, secured by TPT's assets. (€83) |
108 |
143 |
||
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.25% at June 30, 2013, due July 5, 2014, secured by TPT's assets. (€218) |
283 |
442 |
||
|
Malaysian Ringgit term note payable to a Malaysian bank, with an interest rate of 5.2% at June 30, 2013, due March 1, 2015, secured by TMM's property, plant and equipment. (RM 3,208) |
1,016 |
866 |
||
|
Total |
3,243 |
3,518 |
||
|
Less current maturities |
1,180 |
1,202 |
||
|
Total long-term debt - financial institutions |
$ |
2,063 |
$ |
2,316 |
Short-term Debt
U.S. Operation
On December 31, 2010, the Company entered into a credit agreement (the “Agreement”) with American Bank, N.A. (the “Lender”) which established a $1,000,000 line of credit (the “Line”), and on March 1, 2012, the Line was increased from $1,000,000 to $2,000,000. On May 15, 2013, the Company and the Lender entered into the second amendment which extended the maturity date from October 15, 2013 to October 15, 2014 and reduced the minimum interest rate floor from 5.5% to 4.5%. Under the terms of the Agreement, the amount the Company is entitled to borrow under the Line is subject to a borrowing base, which is based on the loan value of the collateral pledged to the Lender to secure the indebtedness owing to the Lender by the Company. Amounts advanced under the Line bear interest at a variable rate equal to one percent per annum point above the Wall Street Journal Prime Rate as such prime rate changes from time to time, with a minimum floor rate of 4.50%. At June 30, 2013, the Company had an outstanding balance on the Line of $700,000.
Under the terms of the Agreement, the Company must maintain a ratio of cash flow to debt service of at least 1.25 to 1.0 measured on a rolling four quarter basis. At June 30, 2013, the ratio of cash flow to debt service was 2.92 to 1.0.
22
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
European Operation
On March 20, 2007, our subsidiary, TPT, entered into a short-term credit facility (the “Credit Facility”) with Rabobank which increased TPT’s line of credit from €650,000 to €1,100,000. The Credit Facility was renewed on January 1, 2010 and has no stated maturity date. The Credit Facility, which has a variable interest rate of bank prime plus 2.8% (currently at 3.42%), is secured by TPT’s accounts receivable and inventory. At June 30, 2013, TPT had utilized €794,000 ($1,033,000) of its short-term credit facility.
TPT’s loan agreements covering both the Credit Facility and the term loans include subjective acceleration clauses that allow Rabobank to accelerate payment if, in the judgment of the bank, there are adverse changes in our business. We believe that such subjective acceleration clauses are customary in the Netherlands for such borrowings. However, if demand is made by Rabobank, we may be unable to refinance the demanded indebtedness, in which case the bank could foreclose on the assets of TPT.
Asian Operation
On May 21, 2013, our subsidiary, TMM, amended its banking facility with HSBC Bank Malaysia Berhad (“HSBC”) to extend the maturity date from April 30, 2013 to April 30, 2014. The HSBC facility includes the following in Malaysian Ringgits (“RM”): (1) overdraft of RM 500,000; (2) an import/export line (“ECR”) of RM 6,460,000; and (3) a foreign exchange contract limit of RM 5,000,000 ($158,000, $2,044,000 and $1,582,000, respectively).
On April 17, 2013, TMM amended its banking facility with RHB Bank Berhad (“RHB”) to extend the maturity date from March 5, 2013 to March 24, 2014 and grant a multi-trade line of RM 5,000,000 ($1,582,000). In addition, the RHB facility includes the following: (1) an overdraft line of credit up to RM 1,000,000; (2) an ECR of RM 9,300,000; (3) a bank guarantee of RM 1,200,000; and (4) a foreign exchange contract limit of RM 25,000,000 ($316,000, $2,943,000, $379,000 and $7,913,000, respectively). At June 30, 2013, the outstanding balance on the line of credit was RM 700,000 ($221,000) at a current interest rate of 4.83% and RM 9,181,000 ($1,442,000) was outstanding on the foreign exchange contract at a current interest rate of 2.80%.
The banking facilities with both HSBC and RHB bear an interest rate on the overdraft facilities at 1.25% over bank prime and the ECR facilities bear interest at 1.0% above the funding rate stipulated by the Export-Import Bank of Malaysia Berhad. The ECR, a government supported financing arrangement specifically for exporters, is used by TMM for short-term financing of up to 180 days against customers’ and inter-company shipments. At June 30, 2013, the outstanding balance on the ECR facilities was RM 5,918,000 ($1,873,000) at a current interest rate of 5.0%.
The borrowings under both the HSBC and the RHB short term credit facilities are subject to certain subjective acceleration covenants based on the judgment of the banks and a demand provision that provide that the banks may demand repayment at any time. We believe such a demand provision is customary in Malaysia for such facilities. The loan agreements are secured by TMM’s property, plant and equipment. However, if demand is made by HSBC or RHB, we may be unable to refinance the demanded indebtedness, in which case, the lenders could foreclose on the assets of TMM. The credit facilities prohibit TMM from paying dividends, and the HSBC facility further prohibits loans to related parties without the prior consent of HSBC.
23
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Cash and Cash Equivalents
As noted on the following table, cash and cash equivalents decreased $1,908,000 for the six months ended June 30, 2013 as compared to a decrease of $1,317,000 for the six months ended June 30, 2012.
|
(Unaudited) |
||||
|
Six Months Ended June 30, |
||||
|
(In thousands) |
|
2013 |
|
2012 |
|
Net cash provided by (used in) |
||||
|
Operating activities |
$ |
(2,066) |
$ |
(2,617) |
|
Investing activities |
(2,578) |
(2,031) |
||
|
Financing activities |
2,845 |
3,409 |
||
|
Effect of exchange rate fluctuations |
(109) |
(78) |
||
|
Net decrease in cash and cash equivalents |
$ |
(1,908) |
$ |
(1,317) |
Operating Activities
Operating activities used $2,066,000 in cash during the first six months of 2013 as compared to using cash of $2,617,000 during the same period of 2012. Following are the major changes in working capital affecting cash used by operating activities for the six month period ended June 30, 2013:
Investing Activities
We used $2,578,000 of cash in investing activities during the first six months of 2013, primarily for the purchase of fixed assets as compared to $2,031,000 during the same period 2012. Net investments for each of our three locations are as follows:
24
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Financing Activities
Financing activities provided cash of $2,845,000 during the six month period ended June 30, 2013 as compared to $3,409,000 for the same period 2012. Significant factors relating to financing activities include the following:
U.S. Operation: Borrowings on our U.S. line of credit increased $700,000 during the first six months of 2013 as compared to $1,000,000 during the same period of 2012.
European Operation: Borrowings on TPT’s line of credit increased $50,000 during the six month period ended June 30, 2013 as compared to an increase of $334,000 during the same period of 2012.
Asian Operation: Borrowings on TMM’s line of credit increased $587,000 during the six month period ended June 30, 2013 as compared to a decrease of $511,000 during the same period of 2012.
U.S. Operation: Our U.S. long-term debt decreased $195,000 for each of the six month periods ended June 30, 2013 and 2012.
European Operation: TPT’s long-term debt decreased $210,000 and $204,000 for the six month periods ended June 30, 2013 and 2012, respectively.
Asian Operation: TMM’s long-term debt increased $178,000 and $536,000 for the six month periods ended June 30, 2013 and 2012, respectively.
Off-Balance Sheet Arrangements and Contractual Obligations
No material changes have been made to the “ Off-Balance Sheet Arrangements and Contractual Obligations” noted in the Company’s 2012 Annual Report on Form 10-K.
25
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
Item 4. |
Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective (i) to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Controls
During the last fiscal quarter, there were no changes in the Company's internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
26
Part II - Other Information
|
Item 6. |
Exhibits
|
|
(a) |
Exhibits |
|
|
Exhibit 10.1 |
Amendment No. One to Revolving Credit Promissory Note with American Bank, N.A. dated May 15, 2013 |
|
|
Exhibit 10.2 |
Amendment No. One Promissory Note with American Bank, dated May 15, 2013 |
|
|
Exhibit 10.3 |
Second Amendment to Loan Agreement with American Bank, dated May 15, 2013 |
|
|
Exhibit 10.4 |
Extension of Maturity Date with HSBC, dated May 21, 2013 |
|
|
Exhibit 31.1 |
Certification of Chief
Executive Officer
|
|
|
Exhibit 31.2 |
Certification of Chief
Financial Officer
|
|
|
Exhibit 32.1 |
Certification of Chief
Executive Officer
|
|
|
Exhibit 32.2 |
Certification of Chief
Financial Officer
|
|
|
|
Pursuant to the
requirements 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.
|
|
|
TOR Minerals International, Inc. |
|
||
|
____________ |
||||
|
(Registrant) |
||||
|
Date: |
August 6, 2013 |
OLAF KARASCH
|
||
|
Date: |
August 6, 2013 |
BARBARA RUSSELL
|
||
27
EXHIBIT 10.1
ALLONGE AND AMENDMENT NO. ONE
TO REVOLVING CREDIT PROMISSORY NOTE
MAKER: TOR Minerals International, Inc.
ORIGINAL PRINCIPAL SUM: $2,000,000.00
DATE OF NOTE: February 15, 2012
PAYEE: AMERICAN BANK, N.A.
This is an amendment and allonge to the Promissory Note described above. The said Promissory Note is hereby amended as follows:
(1) Maturity is extended to October 15, 2014.
(2) The interest rate prior to maturity is amended to be a variable rate which is one percent (1%) per annum ABOVE THE REFERENCE RATE, with such variable rate to change and be adjusted to reflect any change in such Reference Rate at the time of any such change; provided, such variable rate shall never be less than 4.5% per annum nor ever exceed the lesser of: (i) the maximum legal rate which may be lawfully contracted for, charged or received hereon from time to time under applicable law; or (ii) 17.5% per annum.
(3) Principal shall be due and payable on or before October 15, 2014 (the "maturity date"). Accrued interest shall be due and payable on a monthly basis commencing June 15, 2013, and on the same day of each succeeding month thereafter, and at maturity.
(4) The loan and Note, as extended, continues to be subject to and governed by a Loan Agreement dated December 30, 2010, as amended.
PAYMENT DEFAULTS/OTHER DEFAULT PROVISIONS :
(a) Late Charge for Payment Defaults : If a regularly scheduled payment due prior to maturity is 10 days or more late, Maker will be charged 5.000% of the regularly scheduled payment. The late charge shall not apply to payments due at maturity.
(b) Annual Interest Rate with Other Default : Maker hereby agrees that, prior to maturity, at the sole option of Payee and upon ten (10) days written notice to Maker, the entire unpaid principal balance of this Note may bear interest at the highest rate permissible under applicable law or 17.50% per annum, whichever is less, during any period(s) in which Maker fails to comply with or to perform any term, obligation, promise or condition, other than a payment default, contained in this Note or any agreement related to and/or securing this Note. This Paragraph (b) does not apply to payment defaults, such being specifically addressed herein in Paragraph (a) Late Charge for Payment Defaults .
POST MATURITY RATE:
The Post Maturity Rate on this Note is the maximum rate allowed by applicable law. Maker will pay interest on all sums due after final maturity, whether by acceleration or otherwise, at that rate, with the exception of any amounts added to the principal balance of this Note based on Payee's payment of insurance premiums, which will continue to accrue interest at the pre-maturity rate.
Except as so amended, and as such may have been previously amended, said Promissory Note shall remain in full force and effect.
EXECUTED effective the 15th day of May, 2013.
NOTICE TO MAKER: THIS LOAN IS PAYABLE IN FULL ON THE MATURITY DATE. YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF THE LOAN AND UNPAID ACCRUED INTEREST THEN DUE. THE PAYEE IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT TIME. YOU WILL THEREFORE BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS YOU MAY OWN, OR YOU WILL HAVE TO FIND A PAYEE WILLING TO LEND YOU THE MONEY AT PREVAILING MARKET RATES, WHICH MAY BE CONSIDERABLY HIGHER OR LOWER THAN THE INTEREST RATE ON THIS LOAN. IF YOU REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING FROM THE SAME PAYEE.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
|
MAKER:
|
HOLDER:
|
|||
|
By: |
BARBARA RUSSELL |
By: |
PHILLIP J. RITLEY |
|
|
Barbara Russell
|
Phillip J. Ritley
|
|||
2
EXHIBIT 10.2
ALLONGE AND AMENDMENT NO. ONE
TO PROMISSORY NOTE
MAKER: TOR Minerals International, Inc.
ORIGINAL PRINCIPAL SUM: $2,000,000.00
DATE OF NOTE: December 30, 2010
PAYEE: AMERICAN BANK, N.A.
This is an amendment and allonge to the Promissory Note described above. The said Promissory Note is hereby amended as follows:
(1) The unpaid principal balance is $1,147,034.59.
(2) The interest rate prior to maturity is amended to 5.5% per annum.
(3) Commencing as of the date of this instrument, this note shall be due and payable in 32 monthly installments, unless sooner paid, the first 31 installments being in the amount of $38,619.59 each, including accrued interest each, and the 32nd and final installment being in the amount of the balance of principal plus accrued interest then remaining outstanding and unpaid hereon. The first such installment is due and payable June 1, 2013, and the remaining installments are due and payable in consecutive order on the same day of each and every succeeding month thereafter until all sums hereunder have been paid, the final installment due hereon being due on January 1, 2016 (the "maturity date"). In the event of prepayment, no prepayment of principal shall reduce the amount of installments next coming due, and every prepayment of principal shall be applied in inverse order against the principal last coming due hereunder.
(4) The loan and Note, as extended, continues to be subject to and governed by a Loan Agreement dated December 30, 2010, as amended.
PAYMENT DEFAULTS/OTHER DEFAULT PROVISIONS :
(a) Late Charge for Payment Defaults : If a regularly scheduled payment due prior to maturity is 10 days or more late, Maker will be charged 5.000% of the regularly scheduled payment. The late charge shall not apply to payments due at maturity.
(b) Annual Interest Rate with Other Default : Maker hereby agrees that, prior to maturity, at the sole option of Payee and upon ten (10) days written notice to Maker, the entire unpaid principal balance of this Note may bear interest at the highest rate permissible under applicable law or 17.50% per annum, whichever is less, during any period(s) in which Maker fails to comply with or to perform any term, obligation, promise or condition, other than a payment default, contained in this Note or any agreement related to and/or securing this Note. This Paragraph (b) does not apply to payment defaults, such being specifically addressed herein in Paragraph (a) Late Charge for Payment Defaults .
POST MATURITY RATE:
The Post Maturity Rate on this Note is the maximum rate allowed by applicable law. Maker will pay interest on all sums due after final maturity, whether by acceleration or otherwise, at that rate, with the exception of any amounts added to the principal balance of this Note based on Payee's payment of insurance premiums, which will continue to accrue interest at the pre-maturity rate.
Except as so amended, and as such may have been previously amended, said Promissory Note shall remain in full force and effect.
EXECUTED effective the 1st day of May, 2013.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
|
MAKER:
|
HOLDER:
|
|||
|
By: |
BARBARA RUSSELL |
By: |
PHILLIP J. RITLEY |
|
|
Barbara Russell
|
Phillip J. Ritley
|
|||
2
EXHIBIT 10.3
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement is effective the 15th day of May, 2013, between American Bank, N.A. ("Lender"), and TOR Minerals International, Inc., ("Borrower") and amends that prior Loan Agreement between the parties dated December 30, 2010 (the "Agreement"), as previously amended on February 15, 2012.
Paragraph 1.03 of Section One is amended to hereafter read as follows:
1.03 Interest Rate on Line of Credit . All amounts advanced hereunder on the line of credit loan shall bear interest, prior to maturity from the date advanced until repaid, at a variable rate which is to be determined from time to time and which is equal to one percent (1%) per annum above the Wall Street Journal Price Rate as such prime rate changes from time to time, not to ever be less than 4.5% per annum, nor to exceed the legal maximum that may be paid by Borrower, and as otherwise set forth in the said form of Revolving Credit Promissory Note. Matured principal and accrued interest shall bear interest until paid at the rate set forth in said Note, as amended.
The three subparagraphs identified below in paragraph 5.04 of Section Five are amended to hereafter read as follows:
a. Quarterly Financial Statement for Borrower . Borrower shall furnish to Lender within 30 days after the end of each fiscal quarter, a balance sheet and income statement as of the end of such fiscal quarter, all in form and substance and in reasonable detail satisfactory to Lender, such quarterly financial statements being prepared according to GAAP.
d. Accounts Receivable Reports . Within fifteen (15) days following the end of any month in which any funds are advanced on the line of credit, Borrower shall furnish to Lender a listing of all trade accounts receivable from U.S. operations with ageing, such listings to be as of the close of business at the end of such calendar month. Such listings shall include customer name, address, invoice number, date of invoice and amount owing thereon. Borrower additionally shall provide a borrowing base compliance report outlining the information required by paragraph 3.01 above. Such report shall be signed by the Chief Financial Officer of Borrower.
g. Compliance Certificate . Borrower shall furnish a certificate signed by its Chief Financial Officer within 30 days after the end of each fiscal quarter, stating that Borrower is in full compliance with all of its obligations under this Agreement and any and all other loan documents relating to the Loans and Notes, and is not in default of any term or provisions hereof or thereof, and demonstrating compliance with all financial ratios and covenants set forth in this Agreement. The certificate of compliance shall accompany the quarterly financial reports.
Except as amended hereby, all other provisions of the Loan Agreement, as previously amended, shall remain in full force and effect and are hereby ratified and confirmed.
EXECUTED in multiple originals the date first set forth above.
THIS WRITTEN LOAN AGREEMENT AND THE PROMISSORY NOTES, SECURITY AGREEMENTS, GUARANTY AGREEMENTS AND OTHER LOAN DOCUMENTS EXECUTED BY THE PARTIES REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
|
BORROWER:
|
LENDER:
|
|||
|
By: |
BARBARA RUSSELL |
By: |
PHILLIP J. RITLEY |
|
|
Barbara Russell
|
Phillip J. Ritley
|
|||
2
EXHIBIT 10.4
HSBC
21-May-2013
Dear Sirs
We have completed our review of your existing Facilities and are pleased to advise you that we agree to continue providing the Facilities for a further period subject to all the terms and conditions contained in the prior documentation.
The Facilities are subject to review at any time, in any event by April 2014.
The Facilities are subject always to the Bank's customary overriding right of suspension, withdrawal and repayment on demand. The Terms and Conditions may also allow the Bank to cease providing the Facilities to you.
Please send us two signed/certified copies of your next set of audited account or where they are out of date (more than 6 months), updated management accounts are to be submitted before the review date mentioned above. Kindly also note to submit the next set of audited accounts of your holding company, TOR Minerals International before that date.
The continuation of the Facilities are also subject to satisfactory conduct of your current accounts in accordance with guidelines issued by Bank Negara Malaysia and/or policies of the Bank or other financial institutions you have current accounts with from time to time. If there is any breach which may subject any of your current accounts (be it with the Bank or other financial institution) to closure, the Bank shall have the right to recall the Facilities. This is notwithstanding that your current account(s) with the Bank whether held solely or jointly with others are conducted satisfactorily.
The Bank may rely on information furnished by the Credit Bureau established by Bank Negara Malaysia for information whether any of your current accounts have become liable to closure. Reliance by the Bank on such information shall not subject it to any liability to you or other parties should there be inaccuracy in such information unknown to the Bank.
We are pleased to be of assistance to you and look forward to the development of a mutually beneficial and lasting banking relationship. Should you have any query, please do not hesitate to contact our Mr Lim Jit Foo at telephone no. 05-2083846.
Yours faithfully,
LIM JIT FOO
Lim Jit Foo
Relationship Manager
Ipoh
RESTRICTED - Page 1 of 1
HSBC Bank
Malaysia Berhad
(Company number 127776-11
138, .lalan
Sultan Yussuf, 30000 lpoh, Perak.
Tel 05-241
1022 Fax 05-255
4125
Exhibit 31.1
CERTIFICATIONS
I, Olaf Karasch, certify that:
1. I have reviewed this Form 10-Q of TOR Minerals International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 6, 2013
/s/ Olaf Karasch
Olaf Karasch
President and Chief Executive Officer
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of TOR Minerals, Inc. ("Registrant") for the quarter ended June 30, 2013 (the "Report") as filed with the Securities and Exchange Commission, the undersigned Chief Executive Officer of the Registrant hereby certifies, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
/s/ OLAF KARASCH
Olaf Karasch
President and Chief Executive Officer
(Principal Executive Officer)
August 6, 2013
Exhibit 31.2
CERTIFICATIONS
I, Barbara Russell, certify that:
1. I have reviewed this Form 10-Q of TOR Minerals International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 6, 2013
/s/ Barbara Russell
Barbara Russell
Chief Financial Officer
Exhibit 32.2
Certification of Acting Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of TOR Minerals, Inc. ("Registrant") for the quarter ended June 30, 2013 (the "Report") as filed with the Securities and Exchange Commission, the undersigned Chief Financial Officer of the Registrant hereby certifies, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
/s/ BARBARA RUSSELL
Barbara Russell
Chief Financial Officer
(Principal Financial Officer)
August 6, 2013