Minerals Technologies
Annual Report 2012
Annual Report 2012
Geographic Expansion + New Product Innovation
MINERALS TECHNOLOGIES INC.
MINERALS TECHNOLOGIES INC.
Annual Report 2012
ABLE OF CONTENTS
TTABLE OF CONTENTS
Chairman’s Letter 2
Operational Excellence 8
Geographic Expansion 12
New Product Innovation 16
MTI Celebrates 20th Anniversary 20
10-K 21
Corporate Information Inside Back Cover
Minerals Technologies Inc. is a resource- and technology-based company that develops, produces and markets
worldwide a broad range of specialty mineral, mineral-based and synthetic mineral products and related systems
and services. The Company has two reportable segments: Specialty Minerals and Refractories. The Specialty
Minerals segment produces and sells the synthetic mineral product precipitated calcium carbonate (PCC) and
the processed mineral product quicklime (lime), and mines, processes and sells other natural mineral products,
primarily limestone and talc. This segment’s products are used principally in the paper, building materials, paint
and coatings, glass, ceramic, polymer, food and pharmaceutical industries. The Refractories segment produces
and markets monolithic and shaped refractory materials and specialty products, services and application
equipment used primarily by the steel, non-ferrous metal and glass industries.
The Company emphasizes research and development. By developing and introducing technologically advanced
new products, the Company has been able to anticipate and satisfy changing customer requirements, and to
create market opportunities through new product development and product application innovations.
Millions of Dollars, Except Per Share Data
Millions of Dollars, Except Per Share Data
December 31, 2012
December 31, 2012
December 31, 2011
December 31, 2011
Net sales
Specialty Minerals Segment
PCC Products
Processed Minerals Products
Refractories Segment
Operating Income
Net income attributable to MTI
Earnings per share:
Basic
Diluted
Research & Development Expenses
Depreciation, Depletion & Amortization
Capital Expenditures/Acquisitions
Net cash provided by operating activities
Number of shareholders of record
Number of employees
$1,005.6
$1,044.9
662.2
546.2
116.0
343.4
110.0
74.1
2.10
2.09
20.2
51.2
52.1
139.9
170
1,992
676.1
560.6
115.5
368.8
100.3
67.5
1.87
1.86
19.3
58.2
52.1
133.7
181
2,077
2012 NET SALES BY GEOGRAPHIC AREA
2012 NET SALES BY GEOGRAPHIC AREA
(percentage/millions of dollars)
Canada/
Latin America
7.2%
$72.5
25.6%
$257.0
Europe/Africa
55.9%
$562.5
United States
11.3%
$113.6
Asia
2012 NET SALES BY PRODUCT LINE
2012 NET SALES BY PRODUCT LINE
(percentage/millions of dollars)
47.8%
$480.3
26.3%
$264.1
Paper PCC
7.9%
$79.3
Metallurgical
Products
6.7%
$67.9
Ground
Calcium
Carbonate
Refractory
Products
6.5%
$65.9
Specialty
PCC
4.8%
$48.1
Talc
2 MINERALS TECHNOLOGIES INC.
MINERALS TECHNOLOGIES INC.
CHAIRMAN’S LETTER
DEAR
SHAREHOLDERS
EPS Historical Trend*
(dollars per share)
$2.5
$2.0
$1.5
$1.0
$0.5
$0
1
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.
0
$
3
6
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97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
* Excludes special items
Adjusted for 2012 Stock Split
CHAIRMAN’S LETTER
MINERALS TECHNOLOGIES INC.
3
Two thousand twelve was an excellent year for Minerals Technologies as we continued to build
shareholder value through the pursuit of our primary strategies of geographic expansion and new
product innovation. For the third consecutive year, the company achieved record-breaking fi nancial
performance while continuing to strengthen and build upon the core foundation established over the
past six years to create a high-performing company.
I will outline some of the company’s
2012 accomplishments as well as the
opportunities and challenges we see for
2013. Let’s first, however, review our
financial performance. Operating income for
the full year increased 9 percent to a record
$110.0 million compared to $100.8 million
achieved in 2011, and represented 10.9
percent of sales compared with 9.6 percent
in 2011—a 13.5 percent improvement.
We recorded earnings per share of $2.09
compared with earnings of $1.89 in 2011,
an 11-percent increase. Net income for
2012 was $74.1 million compared to $67.5
million in 2011. This improved performance
was the result of good execution of our
operations initiatives highlighted by a
6-percent company-wide increase in
productivity and a 3-percent reduction in
expenses. Operating income rose despite
a 4-percent decrease in worldwide sales
caused by unfavorable foreign exchange
and weakening market conditions in Europe.
Our Return on Capital for the year was 8.9
percent, compared to 8.5 percent in 2011.
Cash Flow from Ops
Earnings Per Share*
139.9
133.7
5%
150
135
120
105
90
$
S
P
E
d
e
t
u
l
i
D
$2.50
$2.25
$2.00
$1.75
$0
2.09
1.89
1.79
We generated approximately $140 million
in cash from operations compared with
$134 million in 2011, and we repurchased
$28 million of stock as part of our share
repurchase program. Worldwide sales
were $1.01 billion compared with $1.04
billion recorded in 2011. Foreign Exchange
accounted for $26.5 million, or 3 percent
of this decline. In addition to the impact of
foreign exchange, several paper and steel
mill closures in Europe and North America
contributed to the sales decrease, which
was partially offset by increased sales in
our precipitated calcium carbonate (PCC)
business, primarily in Asia. Our underlying
sustainable sales actually grew when these
effects are isolated out and are a good
indicator of our future growth trajectory.
Geographic Expansion
The company accomplished a great deal
through the solid execution of our strategies
to expand geographically and introduce
innovative new products. Our China growth
strategy is now gaining momentum as we
announced an agreement with Shandong
Sun Paper Industry Joint Stock Co. Ltd. for
the construction of a 100,000-ton satellite
PCC plant at Sun Paper’s paper mill in
Yanzhou City, Shandong Province, China.
The satellite facility, which will become
operational in the first quarter of 2014, will
produce OPACARB® A40, a coating-grade
PCC, for Sun Paper’s lightweight coated,
coated fine paper and coated paperboard
grades. And, in December, we announced
an agreement with Henan Jianghe Paper
Co., Ltd. for a 22,000-ton satellite plant at
Jiaozuo City, Henan Province, China, that
will begin production in the first quarter of
Market Capitalization
(in millions)
$1,395
$1,500
$1,300
40%
$1,100
$998
$900
$700
2011
2012
2011
2012
2010 2011 2012
* Excludes special items
4 MINERALS TECHNOLOGIES INC.
CHAIRMAN’S LETTER
2014. The two new facilities will bring our
total number of satellite PCC plants in China
to five with more to come as we are currently
engaged in talks with 12 papermakers for
new satellite projects.
In addition to these two new satellite facilities
in China, MTI started operations at two
other new satellite plants—one in Thailand
and another in India—that will result in
approximately 100,000 tons of additional
annual PCC volume. In the fourth quarter,
we began operations at
the new satellite PCC
plant that was announced
in October of 2011 at
a paper mill owned
by Double A Public
Company Ltd. in Tha
Toom, Thailand. This joint
venture is our second
satellite PCC plant with
Double A at this paper mill, and this PCC
facility will eventually produce approximately
80,000 metric tons of PCC a year after it
ramps up production.
Earlier in 2012, we began production at a
new satellite plant at a paper mill owned by
Kuantum Paper Limited in Saila Khurd in
the northern India state of Punjab. This PCC
facility will produce 25,000 metric tons of
PCC a year. Later this year, we will also begin
PCC production at our fifth satellite plant
in India at a paper mill owned by JK Paper
Limited located near Rayagada in the state of
Odisha, India, which is targeted to produce
46,000 tons of PCC.
The company also expanded four satellite
plants at paper mills owned by two major
North American papermakers, which will
increase PCC production volumes by about
75,000 tons a year.
The effect of this geographic expansion is
that we expect to add 525,000 to 625,000
tons of additional PCC
capacity over the next two
years. Asia is the primary
focus of our geographic
expansion strategy
because it offers the
greatest opportunity
for profi table growth.
Printing and writing paper
production in Asia is
expected to grow between five and seven
percent a year for the foreseeable future.
New Product Innovation
Our efforts to innovate and develop new
products also gained momentum in 2012.
Our most important new product initiative is
the roll out of our FulFill™ brand of higher
filler technologies that reduces papermakers’
costs by replacing expensive natural fi ber
while increasing PCC filler usage by 20
percent. Introduced in the fourth quarter of
“Earlier in 2012, we began production
at a new satellite plant at a paper
mill owned by Kuantum Paper Limited
in Saila Khurd in the northern India
state of Punjab.”
2010, the FulFill™ platform of technologies
offers papermakers a variety of effi cient,
flexible solutions designed to significantly
increase PCC filler usage beyond current
levels. These products and technologies are
tailored for specific operational parameters
at different papermakers depending on
their individual needs. This decreases the
papermaker’s reliance on higher cost pulp,
which, in turn reduces their manufacturing
costs while maintaining their required paper
quality standards.
In 2012, we signed six new commercial
agreements for the use of our FulFill™ E-325
technology with papermakers in Asia, North
America, Europe and South Africa. In early
2013, we announced two more agreements
with paper companies at paper mills in North
America. Today, we have 12 commercial
agreements to provide our FulFill E-325
technology, and we are in active engagement
with an additional 23 paper mills to use the
technology. We expect to continue on a very
positive growth track with this product line.
MTI Productivity
Sales Per Employee (thousands of dollars)
MTI Tons per Hour Worked Index
Return on Capital*
(percentage)
496
494
125
$500
466
$450
427
109.1
106.8
104.8
113.3
392
386
$400
$350
$300
$250
100.0
100
75
8.9
8.3
8.5
8.0
6.0
5.9
3.9
10
%
C
O
R
8
6
4
2
07
08
09
10
11
12
08
09
10
11
12
06
07
08
09
10
11
12
* Bloomberg Method (Annualized)
Excludes special items
CHAIRMAN’S LETTER
MINERALS TECHNOLOGIES INC.
5
Innovation is also an integral part of our
Performance Minerals business unit, which
consists of the Processed Minerals and
Specialty PCC product lines. In 2012 we
launched new talc and ground calcium
carbonate products—Optibloc® talc
blends for plastic applications as well as
TiO2 extenders for paints and coatings. In
Refractories, we sold the fi rst Scantrol®
laser measuring and application system for
a basic oxygen furnace at a Russian steel
mill. The Scantrol® units had previously
been used only in electric arc furnaces.
Minteq International, the operating unit for
the Refractories segment, also sold and
commissioned its first LaCam® Torpedo car
measuring device. This innovation improves
safety and saves steel makers time and
expense in measuring the refractory lining
of torpedo transport ladles that carry molten
iron. Minteq also introduced a new fourth
generation laser measuring device that is the
fastest in the world—17 times faster than the
company’s previous version.
Although not a new product innovation,
Minteq, in 2012, deployed a new business
model by becoming the general refractory
contractor at a new greenfield steel mill
owned by United Steel Company B.S.C.
(SULB) in Bahrain. Under this agreement,
Minteq, working with other refractory
companies, is responsible for coordinating all
refractory maintenance of the steel furnaces
and the other steel production vessels. The
agreement is expected to generate between
$25 million to $30 million in revenues
over the three-year agreement, and we are
exploring similar opportunities to deploy this
business model elsewhere.
Culture Change and Transformation
In last year’s annual report, I discussed
at length the four basic pillars that we
adopted to transform Minerals Technologies
into a higher performing
company. Those four pillars
are: Safety Improvement,
Operational Excellence/
Lean, Expense Reduction,
and the revitalization of our
Technology Development
and Innovation efforts. Two
thousand twelve provides
strong evidence that the company has
changed into a strong operating company
that is capable of higher performance on
many levels.
Our safety performance in 2012 was the
best in the company’s history and we
are now approaching world class safety
levels in our workplace environment. Our
Operational Excellence/Lean initiative is
embedded in MTI’s culture and is providing
significant improvements through higher
productivity and efficiency. As an example,
in 2012, MTI employees conducted more
than 1,190 kaizen events, 460 more than
in 2011. Kaizens are focused employee
events designed to eliminate waste or
improve quality. In addition, our employees
made more than 9,800 suggestions for
improvement—approximately 3,700
more suggestions than were made in
2011. These ranged from suggestions to
increase efficiency to new product ideas to
“In 2012 we launched new talc
and ground calcium carbonate
products—Optibloc® talc
blends for plastic applications
as well as TiO2 extenders for
paints and coatings.”
expense savings, and
approximately 65 percent
of these suggestions were
implemented. Today,
MTI employees, whether
in a manufacturing or a
staff function, are heavily
engaged in applying
Operational Excellence
tools, processes and
principles to eliminate waste. And, the
results have been significant; our sales per
employee have improved by more than 25
percent since 2007.
The company’s focus on expense reduction
and making good “value” decisions everyday
remains on track. We have removed more
than $40 million in overheard expenses in the
last five years while continuing to support the
resource additions needed to grow in Asia.
MTI SG&A and R&D Expenses
(percentage)
Safety: Historical Injury Rates
(Injuries/100 Employees)
15%
12.2
12.2
12.9
10.7
10%
11.2
11.0
10.9
-
l
s
e
a
S
f
o
%
5%
06 07 08 09 10 11 12
-
l
s
e
e
y
o
p
m
E
0
0
1
/
s
e
i
r
u
n
I
-
j
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
3.730
2.560
3.079
2.630
1.155
0.939
World Class Recordable Injury Rate
World Class Workday Injury Rate
2.056
1.414
1.666
0.613
0.748
0.648
1.340
0.383
06
07
08
09
10
11
12
Annual Recordable
Injury Rate
Lost Workday
Injury Rate
6 MINERALS TECHNOLOGIES INC.
CHAIRMAN’S LETTER
Cash & Short Term Investments
(millions of dollars)
Long Term & Short Term Debt
(millions of dollars)
414
385
320
191
139
$500
$400
$300
$200
$100
76
$0
468
$250
21%
$200
$150
$100
$50
$0
15%
14%
12%
11% 11%
10%
3
0
2
8
2
1
6
1
1
5
0
1
7
9
0
0
1
3
9
25
20
15
10
5
0
06
07
08
09
10
11
12
06 07 08 09 10 11 12
Long Term &
Short Term Debt
Debt to
Capital Ratio
Global Suggestion System
2011/2012
Total Kaizen Events Held per Year
10,000
8,000
6,000
4,000
2,000
0
6,127 Ideas
Submitted
3 per Employee
4,006 Ideas
(65%)
Implemented
9,832 Ideas
Submitted
5 per Employee
6,365 Ideas
(65%)
Implemented
1,200
1,000
800
600
400
200
0
103
1,191
679
730
2011
2012
09
10
11
12
New Product Development Pipeline
s
a
e
d
I
f
o
r
e
b
m
u
N
100
80
60
40
20
0
73
2
4
2
3
16
16
5
2007
81
8
6
12
16
31
8
73
10
6
11
24
16
6
63
92
24
5
15
19
24
5
68
95
34
15
12
28
61
2009
2010
2011
2012
New Product Ideas in Development
3
3
Launch
Stage 5
Stage 4
Stage 3
Stage 2
Stage 1
CHAIRMAN’S LETTER
MINERALS TECHNOLOGIES INC.
7
Our Board of Directors worked diligently
to find a successor who would continue
to lead the company in a way that MTI
would maintain its direction, strategy and
high-performance culture that has been
established. Bob and I along with our top
management team are committed to working
together effectively to ensure a smooth and
seamless transition.
It has been an honor and a privilege to serve
as chairman and chief executive of Minerals
Technologies these last six years, and I look
forward to serving as executive chairman to
assure that the company grows profi tably
and continues to create shareholder value.
Sincerely,
Joseph C. Muscari
Executive Chairman
1-Year Indexed Total Shareholder Return*
$150
$140
$130
$120
$110
$100
$90
12/11
12/12
141.93 Mineral Technologies Inc.
123.65 S & P MidCap 400 Materials Sector
117.88 S & P MidCap 400
117.87 Dow Jones US Industries
116.00 S & P 500
110.49 Dow Jones US Basic Materials
* $100 invested on 12/31/11 in stock or index,
including reinvestment of dividends.
Fiscal year ending December 31.
“Our higher performing culture
will also be a key enabler
to successfully execute the
company’s M&A strategy as
we will be able to integrate
new companies faster and
more effectively.”
It is important to also note that MTI’s new
product pipeline is also very healthy and has
been revitalized. In 2007, the company had
only 16 new product development ideas in
that pipeline; today we
have more than 60 new
product ideas, and we
have commercialized
more than 30 new
products since 2009.
Mergers and
Acquisitions
Our higher performing
culture will also be a
key enabler to successfully execute the
company’s M&A strategy as we will be able
to integrate new companies faster and
more effectively. We remain committed and
are active in seeking out minerals-based
companies that will allow us to leverage our
core competencies of fine particle technology
and crystal engineering in areas that are
less cyclical than our major end markets of
paper, steel, construction and automotive,
such as the energy, environmental and the
consumer sectors.
2013
Looking at 2013, we see both opportunities
and challenges that will enable the company
to continue on a high performance track
that will further improve shareholder
value. We expect stability and slow growth
in our traditional end markets with the
exception of Europe where there is still
some uncertainty. Improvement in the U.S.
building and construction market, continued
strong growth in Asia, new product
commercialization and new PCC satellite
start-ups will allow us
to stay on a growth
path and continued
fi nancial performance
improvement.
In 2013, we will continue
to take a balanced
approach in our use of
cash. This approach
includes funding organic
growth opportunities, especially in our Paper
PCC business through new satellites or
penetration of new products, repurchasing
shares on an opportunistic basis, and the
fulfillment of our acquisition strategy.
Transitioning
The Board and I believe that Minerals
Technologies is at an excellent place to
begin a leadership transitioning process.
In early March, we announced that
Robert S. Wetherbee would become chief
executive officer and that I would remain
in the company as executive chairman.
Bob Wetherbee is a globally accomplished
business leader with more than 30 years
of experience in general management,
finance, operations and marketing, and, I
am confident that Minerals Technologies
will continue on its high-performance track
under his leadership.
8 MINERALS TECHNOLOGIES INC.
MINERALS TECHNOLOGIES INC.
OPERATIONAL EXCELLENCE
THE PROCESS
TO PROGRESS
OPERATIONAL EXCELLENCE
MINERALS TECHNOLOGIES INC.
MINERALS TECHNOLOGIES INC.
9
commitment to R&D. The various initiatives designed around OE demonstrate a
commitment to R&D. The various initiatives designed around OE demonstrate a
tireless commitment to applying “Lean” thinking, not just in the traditional arena
tireless commitment to applying “Lean” thinking, not just in the traditional arena
(See sidebar, “Operational Excellence: A Glossary,” for more on individual OE components
(See sidebar, “Operational Excellence: A Glossary,” for more on individual OE components
including 5S, Total Productive Maintenance, Daily Management, Standard Work and
including 5S, Total Productive Maintenance, Daily Management, Standard Work and
Kaizen Events.)
Kaizen Events.)
10 MINERALS TECHNOLOGIES INC.
OPERATIONAL EXCELLENCE
Many improvements throughout the year were direct outgrowths of MTI’s regular
Kaizen events. The company held 1,191 such events in 2012, a robust increase
over 2011’s 730. The events yield many ideas to improve processes and can
sometimes be implemented during the event itself.
Today, while MTI’s industry-advancing
products and revamped marketing strategies
may be regarded as the building blocks
to the company’s marketplace success,
OE “provides the glue,” says Robert
Cenek, director of Corporate Initiatives
and facilitator of the
OE Lead Team, which
meets monthly to provide
the guidance policies,
practices, procedures
and standards to be
deployed at all levels of
the company.
The collective impact
of Lean is evident in
a variety of company-
wide metrics. In 2012,
company overhead expenses dropped three
percent year-over-year, while productivity
grew by six percent. All of which helped lift
earnings per share to its all-time high.
Safety, which is often overlooked in
analyzing a manufacturing company’s
performance, has very direct implications
for achieving high performance. In 2006,
MTI’s safety record was about average for
a manufacturing company, but at just 0.4
recordable accidents per 100 employees
in 2012, our performance was the best
in company history, and within sight of
world class levels. Performance Minerals
employees logged 715,000 hours with
just one recordable injury, while Minteq
manufacturing went injury-free in North
America. MTI is dedicated to the belief that
the company can become injury free.
OE is a people-centered set of principles,
tools, processes and system that are
tightly linked and integrated with safe work
practices. Consider the quartet of Asian
facilities (one in Thailand, three in India)
where our Paper PCC business began
operations in earnest and
invested signifi cant prep
work during 2012. Amid
that flurry of concentrated
ramp-up activity,
Paper PCC posted a
10-percent improvement
in productivity and
impressive cost
containment—while
experiencing not a
single lost-workday
accident. Such is the
interconnectedness of safety and OE.
At the same time, major company-wide
strides in Standard Work provided a
proven base for further refinement and for
problem-solving creativity on the part of
all employees. Standardizing procedures
fosters a sense of ownership and work-site
confidence that may be best exemplified in
the ingenuity of Minteq’s steel mill service
(SMS) teams. Notes Brett Argirakis, global
vice president for Refractories, “Some of
the teams, working on solo shifts, have
developed customer solutions in situations
that otherwise would’ve cost us or our
customers thousands of dollars. This was
enabled by the fact that Standard Work was
in place, the process was in control and
change could be easily made to address
specific customer process issues.”
Operational Excellence: A Glossary
The uninitiated may mistakenly interpret
terms like Operational Excellence (OE)
and Lean as little more than code words to
reduce costs. In reality, at MTI, OE comprises
a specific set of processes and competencies
that are a living, breathing part of daily life at
all levels of the company. To underestimate
the value OE generates at MTI is akin to
discussing the quality of a home without
considering its foundation, wiring and other
key aspects of infrastructure. Operational
Excellence is the common language in which
all employees in all of MTI’s global venues are
expected to be fl uent.
Its core components are:
5S is a foundational method for organizing
the workplace, perhaps best captured in
the phrase, “A place for everything and
everything in its place.” Its twin purpose
is to highlight waste and serve as a basis
for continuous improvement. The 5 S’s are
Seiri (Sort); Seiton (Set in Order); Seiso
(Shine); Seiketsu (Standardize); Shitsuke
(Sustain). As with many of the elements
here, the Japanese terms date back to their
origins in Toyota’s landmark total quality-
management programs.
Kaizen events are highly focused multi-day
improvement workshops that address a
particular process, work area, equipment set
or value chain. (Kaizen translates to “change
for the better.”) The events typically involve
a cross-functional group and may include
suppliers and customers. At MTI, Kaizen
brainstorming strives to identify the “least
waste way” to produce a given product or
service. In addition to improving the target
activity, Kaizen training improves problem-
solving skills.
Total Productive Maintenance (TPM) seeks to
optimize equipment effectiveness, eliminate
breakdowns and promote autonomous
operator maintenance through day-to-day
activities involving the total workforce. A
key piece of the OE paradigm, TPM aims to
reduce overproduction and the rest of the so-
called six “big losses” that drain productivity.
OPERATIONAL EXCELLENCE
MINERALS TECHNOLOGIES INC.
11
Says D.J. Monagle, senior vice president
and managing director, Paper PCC, and
chairman of the OE Lead Team: “By
design we’ve brought OE into the depth
and breadth of our culture in order to keep
it sustainable.”
“By design we’ve brought OE
into the depth and breadth
of our culture in order to keep
it sustainable.”
Employee involvement
and engagement as a
living, breathing part
of daily company life
shows most notably in
suggestions: Of the 9,832
employee suggestions in 2012—an increase
of 3,700 over 2011—6,365 (about 65
percent) were implemented.
Although careful program tracking reveals a
67 percent system-wide deployment in key
elements of OE, this deployment is really
more of a stage in the ongoing pathway to
achieve further progress. In Performance
Minerals, reports Doug
Mayger, senior vice
president and managing
director for Performance
Minerals and MTI
Supply Chain, “Plant
managers came in with
a line of sight to realize
an additional 10-percent improvement
in efficiencies in 2013,” as well as the 2
percent reduction in variable costs that MTI
expects of all business units.
Han Schut, senior vice president and
managing director of Minteq International,
captures this spirit when he says of OE, “It’s
never just one tool; it’s the journey. Every
year you take another step forward. It’s the
spirit of continuous improvement.”
Employee engagement is equally responsible
for our culture of continuous improvement,
in which all current performance levels,
though worthy of acknowledgment in their
own right, are best viewed as temporary
milestones along a continuum in which
incremental improvement is always
attainable. “We have teams of people all over
the world looking for ways to eliminate waste
and improve productivity and effi ciency,”
says Monagle.
Voice of the Customer. A critical part of
MTI’s OE is the mandate to “specify value
from the point of view of the customer”—to
understand your customers’ respective
businesses so that you can meet their
current needs and, ideally, anticipate their
evolving needs. Voice of the Customer-based
thinking informs the entirety of the MTI
service and product-value chain.
Standard work, the foundational cornerstone
of “Lean,” is integral to the process of
continuous improvement. It ensures that
operations are safely carried out with all tasks
organized in the “least waste way” to ensure
a stable, repeatable and unambiguous
process to achieve the reliable output of
processes and superior quality. Standard
work is not a “straitjacket” or a rigid set
of rules; rather, standards are continually
reexamined and refined based on feedback
and suggestions, especially from those
closest to the work itself.
Hoshin Kanri (management compass) is a
structured method for capturing, reinforcing
and implementing strategic goals. Also
known as policy deployment or Hoshin
planning, it’s a strategic management
methodology that emphasizes the creation of
goals, the tracking of goals via measurable
benchmarks, and the link between daily
control activities and company strategy.
Hoshin Kanri ensures that the crush of daily
events and bottom-line pressures is never
permitted to undermine long-term strategic
goals. MTI uses a software application,
WebHoshin, to help integrate and track
strategy deployment efforts.
Daily Management is the system that
supports the ability to manage departments,
functions and processes. Key operational
data is collected, measured and charted for
visual tracking. This tracking facilitates rapid
response to sudden operational issues or
the adoption of countermeasures to slowly
developing adversity.
Infusing all of these sometimes overlapping
processes is an unwavering commitment to
efficiently deliver added value to customers—
as befitting MTI’s position as a category
leader in the global marketplace.
12
MINERALS TECHNOLOGIES INC.
MINERALS TECHNOLOGIES INC.
GEOGRAPHIC EXPANSION
GEOGRAPHIC EXPANSION
EXPANDING AROUND
THE GLOBE
Technology-fueled growth and redeployment of key resources
in emerging regions were the twin headlines of the MTI’s
expansion initiatives in 2012.
13
14 MINERALS TECHNOLOGIES INC.
GEOGRAPHIC EXPANSION
In the high growth environment of Asia, two
new satellites came on-stream in 2012—at
Double A Paper in Thailand and Kuantum
paper in India—delivering 105,000 new
tons of business. The company also signed
agreements for a pair of satellites in China
that will be constructed in 2013 and will
produce more than 120,000 tons of PCC
when they come on line in 2014. These
new satellites are a significant part of our
global expansion strategy as they add to our
ever-growing footprint in China, where the
paper market continues to grow five to seven
percent a year. This will give us fi ve satellites
there with more to come. Our fifth satellite in
India, for JK Paper, becomes operational in
2013 and will yield over 45,000 tons. Asia
new business development is critical, and
as European volumes have declined, we’ve
redeployed some key capabilities to China
and India, further enabling
us to produce unique
products targeted to these
high growth markets.
Looking ahead, we
see FulFill™ E-325 as
a major differentiator
throughout Asia, and
especially in China. The
Chinese market historically has not been as
responsive to MTI’s traditional value-added
marketing strategy, so FulFill™ improves
the company’s value equation by giving us
a step-change in cost-saving technology
to offer customers versus competitors. We
therefore are targeting China to continue to
be a very positive environment for growth in
the coming years.
Our announced FulFill™ E-325 deployments
in India and Thailand in 2012 bring to six the
number of commercial E-325 agreements
in Asia. Over the next two years we envision
around 600,000 tons of PCC volume growth
from our Asian initiatives—a global volume
increase of 15-18 percent by 2015 over
where we stand today. At this point, we are
on track to hit the target we set in 2010 for
Asia sales in 2015.
All told, the half-dozen FulFill™ agreements
secured in 2012 alone provide our game-
changing technology a presence on four
continents. FulFill’s ubiquity in our regional
expansion during the two years since
its introduction symbolizes this exciting
technology’s significance as a catalyst for
growth. As we look across our network of
more than 55 satellites now operating or
under construction, we
are confident that the
FulFill™ series, which also
includes products of higher
fill potential than E-325,
is applicable to our target
market globally.
The two Chinese satellites
also manifest our strategy
of aligning ourselves with formidable
papermakers who can “take us with them”
as part of their own expansion plans. Sun
Paper Company of Shandong Province,
for example, is the largest privately owned
paper business in China; its paper and
board products are sold throughout China
and exported to more than 20 countries in
Southeast Asia, Africa, and the United States
All told, the half-dozen
FulFill™ agreements
secured in 2012 alone
provide our game-changing
technology a presence on
four continents.
Minteq admittedly enters 2013 facing
overcapacity in the Chinese market, but the
refractories unit has made enviable strides
in India and the Mideast, and expects
leading-edge products like its growing line of
metallurgical wires to fuel additional growth
in the region. The past year saw the fi rst sale
of a Minteq lance injection system in India,
and we anticipate further inroads for wire in
Korea, Brazil, Turkey, and Russia.
GEOGRAPHIC EXPANSION
MINERALS TECHNOLOGIES INC.
15
Moreover, although our full maintenance contract with SULB is important as a revenue generator
and a landmark piece of business in the Mideast, those factors ultimately may be eclipsed by the
contract’s value as a prototype for a new paradigm for full-service maintenance. We look to extend
that model throughout the Mideast and in other regions.
The new fourth-generation LaCam® laser
also gives us an opportunity to accelerate
the replacement of old lasers throughout the
Minteq system.
Performance Minerals, too, has made
headway in globalization. Historically, the
Specialty PCC unit had negligible sales into
Russia, whereas in 2012 we secured almost
1,300 tons of new business. Performance
Minerals also expanded its sales into Turkey
(upward of 2,000 tons) and into Eastern
Europe, while marketing Specialty PCCs and
talc in China.
In the mature markets of Europe and North
America, Paper PCC has enjoyed success at
offsetting volume declines by reducing costs
through Operational Excellence and also
solidifying its relationships through contract
extensions with some of the healthiest and
largest papermakers.
In 2012, we saw the company’s fi rst FulFill™
penetrations in Europe, at three different
plants, and in North America, at Wisconsin’s
Flambeau River Papers. In early 2013, the
company announced that a major North
American papermaker had also signed on
to use E-325. These contracts are important
for what they demonstrate about the ability
of FulFill™ technology to extract maximum
PCC sales out of established markets
in challenging times. In 2013, we will
undertake an aggregate 75,000-tons’ worth
of expansions at four U.S. satellites. Here too
Fulfill™ is a potential future part of the sales
to these accounts.
In addition, our satellite on the site of
the former Alizay paper mill in France
remains operable, and we expect to resume
supplying PCC to the mill when it comes
back online under the Double A Paper
banner, likely in the second half of 2013.
Double A recently bought the idled mill from
Metsä Board Corporation.
With the 2012 improvement of the
automotive and construction industries,
Performance Minerals expects North
America sales to be strong as sectors
continue to recover. Elsewhere in the
Americas, both Minteq and Paper PCC have
solidified important relationships in Brazil:
Minteq with critical materials suppliers and
Paper PCC via customer contracts that give
us long-term stability.
Finally, with regard to MTI’s strategic M&A
aspirations, our Operational Excellence
culture will pay dividends in our ability to
assimilate new companies. Our processes,
tools and systems will allow us to effectively
and quickly integrate any new acquisition into
MTI by applying and leveraging our business
system framework, which includes a very
efficient Global Shared Services platform.
Similarly, Minteq’s contract with Russia’s
NTMK, the first use of the Scantrol®
system in a BOF setting, illustrates a
wider point as well. The NTMK contract
relied on German engineering channeled
through Turkish (ASMAS) marketing
expertise, complemented by steel mill
service from North America and the U.K.
This demonstrates the breadth and critical
mass of Minteq’s worldwide franchise as
it allows the company to draw upon global
best practices in achieving further expansion
objectives quickly.
16 MINERALS TECHNOLOGIES INC.
MINERALS TECHNOLOGIES INC.
NEW PRODUCT INNOVATION
BREAKING THROUGH
TO NEW BUSINESS
In addition to being an outstanding operational performance
In addition to being an outstanding operational performance
year, 2012 validated the value of MTI’s commitment to R&D.
year, 2012 validated the value of MTI’s commitment to R&D.
Clearly MTI’s investment in innovative products and service
Clearly MTI’s investment in innovative products and service
applications—rooted in the “Voice of the Customer”—
applications—rooted in the “Voice of the Customer”—
energized its penetration of new markets.
energized its penetration of new markets.
17
18 MINERALS TECHNOLOGIES INC.
NEW PRODUCT INNOVATION
“Developing innovative new products is not only one of the company’s core strategies, it is the lifeblood
to our future success,” said Jon Hastings, vice president, Corporate Development and chairman of the
company’s Technology Lead Team, which is comprised of senior scientists and business leaders. The
Lead Team was established in 2007 to provide oversight, guidance and the tools to improve integration
of innovation and technology with the strategies of each of MTI’s three business units.
That initiative has proven fruitful. Today,
there are more than 60 new product
concepts in the revitalized MTI pipeline,
which has impressively delivered more
than 30 commercialized products since
2009. And, in MTI’s realm, breakthroughs
equal broader penetration, often deciding
competitive situations in our favor.
Paper PCC continued to demonstrate
the attractiveness of its FulFill™ brand of
high-filler technology by signing six new
commercial agreements dispersed across
three continents. By year-end the company
had a total of 10 such agreements in place
for the promising technology, introduced in
late 2010. (Read more on the growth of the
Fulfill™ market under “Expanding Around
the Globe.”)
The FulFill™ E-325 series allows
papermakers to increase loading levels of
PCC by 3 to 5 points. While we view E-325
as the current workhorse of the brand, the
entire series offers papermakers an array of
efficient, flexible alternatives to costly natural
fiber. The Fulfill™ products already in roll-
out, Fulfill™ E and Fulfill™ V, typically allow
the papermaker to save between $5 and $25
per paper ton.
“Worldwide interest in this money-saving
papermaking technology is strong, and
we are pursuing an additional two-dozen
opportunities,” says D.J. Monagle, senior
vice president and managing director, Paper
PCC. “All told, we realized operating income
of about $1.4 million from Fulfill™ in 2012,
including a technology fee that is inherent
in Fulfill™ pricing. In 2013, we expect
operating income from FulFill™ to double.”
While Fulfill™ E-325 is an important step
change for papermakers, other components
in the series, notably Fulfill™ F, are authentic
game changers that augur a doubling in
the amount of PCC in paper: from a current
average of 15-18 percent to more than 30
percent. Paper PCC is planning further
products specifically geared to the lucrative
Chinese market,
projected to offer 5 to
7 percent of growth in
annual paper volume.
Performance Minerals
got out of the gate
fast in early January
of 2012, releasing two
new antiblock talc
blends, Optibloc® 8
and Optibloc® 325,
for high-clarity film and bag applications.
(Antiblocks are used to prevent the
adhesion of adjacent layers of fi lm, mostly
in polyethylenes and polypropylenes.) Our
patented Optibloc® product line is gaining
traction globally in applications that require
film to be tough, reasonably transparent and
not unduly sticky.
“We have a customer who has built a plant
around our product in Thailand,” says Doug
Mayger, senior vice president and managing
director for Performance Minerals and MTI
Supply Chain, adding that “antiblocking talcs
were one of our largest new-growth areas
in 2012.”
The company also announced the launch
of ALBAFIL® T10 and ALBACAR® T10, a
suite of Specialty PCCs for the extension of
titanium dioxide (TiO2) in paints, coatings,
grouts and ceramic tiles. These extenders
allow manufacturers to substitute PCC for
5 percent to 12 percent of costlier TiO2,
depending on formulations and the specifi c
purpose of the paint, coating or other end
use. We are currently trialing the TiO2
extenders with four paint manufacturers and
anticipate additional
sales in 2013.
We also experienced
great success in 2012
with Performance
Minerals talc
products for catalytic
converters; as the
automotive industry
rebounded, so has
the demand for
quality talcs. One major automotive customer
has established profi t-improving incentives
with us to supply additional tonnage on
an on-demand basis. Thanks to such
marketplace factors and our Operations
Excellence initiatives, our Performance
Minerals plant in Barretts, MT is operating at
historically high profit levels with even further
opportunity to improve.
“In the Performance Minerals business
units, we won 15,000 tons of new business
in 2012 and we expect to add an additional
100,000 tons in 2013,” says Mayger.
Performance Minerals continues work on a
line of compacted talcs for automotive uses,
such as dashboards and bumpers, which
will allow better economies of freight and
easier customer handling.
NEW PRODUCT INNOVATION
MINERALS TECHNOLOGIES INC.
19
The more Performance Mineral’s business
strategically moves further into food and
pharmaceutical applications, the more our
calcium carbonate, talc purity and quality
control advantages allow us to differentiate
from competitors. Forthcoming are new
applications for plastic pallets (which don’t
convey infectious agents as wood can) and
household goods. On the near horizon are
applications in pet products as well as new
consumer-packaging opportunities for the
Optibloc® line. In 2009, such new-product
and process development constituted just
one percent of the growth in Performance
Minerals, but by end-year 2013 we’re
targeting 5 percent growth.
Minteq, the operating unit of the Refractories
segment, shared the innovation spotlight
with its two corporate siblings, and 2012 was
a year of firsts. The most significant success
story is the new business model of full-
service refractory maintenance embodied
in the company’s three-year cost-per-ton
agreement with Bahrain’s United Steel
Company (SULB), projected to generate
$25 million to $30 million over its lifetime.
Minteq crews work around the clock to
install refractory materials of all kinds, and
also furnish the heavy equipment needed
to maintain SULB’s furnaces and steel-
making vessels. Our Turkish ASMAS plant
provides the manpower and materials and
integrates other refractory companies’
products as necessary.
Minteq also broke new technological ground
by installing its first LaCam Scantrol® laser
measuring system in a basic oxygen furnace
(BOF) at the Nizhniy Tagil Metallurgical Plant
(NTMK) in Russia. One of
the largest fully integrated
steel-production facilities
in Russia, NTMK is a unit
of the EVRAZ Group, the
world’s fi fteenth largest
steel producer. Although
the utility of Scantrol®
systems in Electric Arc
Furnaces (EAFs) is well
established, the NTMK installation signals
expanded marketing horizons for LaCam®.
The LaCam® system, developed by our
Ferrotron subsidiary, provides non-contact
measurement of hot-refractory linings in
metallurgical reaction vessels. The laser
beam documents vital information about
the residual thickness and wear of the
refractory lining. In addition, Minteq sold its
first LaCam® scanning device, developed
specifically for torpedo ladle cars that
transport molten metal to steel-making
furnaces, to Germany’s ThyssenKrupp AG.
“In mid-year we debuted a fourth generation
LaCam® system that is 17 times faster
than the previous version due to a higher
pulse repetition rate of 300,000 points per
second,” said Han Schut, vice president
and managing director, Minteq International.
“The speed, plus an extended scanning
field, offers a 38-percent improvement over
current laser-technology, enabling steel
makers to scan an entire converter vessel in
under three minutes.”
Minteq, the operating unit
of the Refractories segment,
shared the innovation
spotlight with its two
corporate siblings, and 2012
was a year of fi rsts.
The new LaCam® system
better detects tiny cracks
in the refractory surface of
converter vessels or steel-
casting ladles and is also
less sensitive to smoke and
dust, yielding improved
results even in the worst
steel-making conditions.
In sum, LaCam® solidifies MTI’s position in
the vanguard of preventive maintenance,
allowing the customer to address problems
before they require signifi cant, costly
equipment downtime.
Minteq also envisions new hot shotcrete
products for torpedo ladle maintenance
and is trialing alumina cold maintenance
refractory products. The refractories unit
also is refining its wire injection systems,
and we are targeting further developments
in Ferrotron—which will widen the scope of
furnace applications.
MTI’s focused R&D has resulted in a
revitalized new product pipeline that will
provide the company’s customers with value-
added, cost-savings technologies, and, in
turn will continue to fuel future growth and
shareholder value.
20 MINERALS TECHNOLOGIES INC.
MINERALS TECHNOLOGIES CELEBRATES 20 YEARS
MINERALS TECHNOLOGIES
CELEBRATES
In 2012, Minerals Technologies Inc. celebrated its 20th anniversary as a publicly
traded company. MTI was fi rst listed on the New York Stock Exchange on October
23, 1992, after an initial public offering from Pfi zer Inc.
On November 14, 2012, members of the
company’s Board of Directors and senior
management commemorated the milestone
when Joe Muscari, Chairman and Chief
Executive Officer, rang the bell that closed
trading for the day.
In 1992, MTI had annual sales of $394.0
million and net income of $25.6 million
with a market capitalization of $400 million.
Today sales are $1.01 billion, net income
is $74.1 million, and market capitalization
is $1.4 billion. In 1992, the company
had 29 satellite PCC plants, all in North
America, while today, there are more than
55 operating or under construction in 17
countries. Over the 20-year period, sales
of Paper PCC nearly quadrupled and
Refractories more than doubled.
“During the last 20 years, MTI has gone
through a number of changes, and, as most
corporations do, some ups and downs—
however, our trajectory is on an upward
track,” said Mr. Muscari. “Through the efforts
of the dedicated and talented employees
who have worked for, and continue to work
for MTI, the company today is healthy and
continues to perform at a high level. Our
prospects for future growth are excellent.”
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 1-11430
MINERALS TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
622 Third Avenue
38th Floor
New York, New York
(Address of principal executive office)
25-1190717
(I.R.S. Employer
Identification Number)
10017-6707
(Zip Code)
(212) 878-1800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.10 par value
Name of each exchange
on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [X] No [ ]
Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes [ ] No [X]
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 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).
Yes [X] No [ ]
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 the
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. [X].
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions
of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [X]
Accelerated Filer [ ]
Non- accelerated Filer [ ]
Smaller Reporting Company [ ]
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
(Do not check if smaller reporting company)
The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing price at which the stock was sold as of June 29, 2012, was
approximately $983 million. Solely for the purposes of this calculation, shares of common stock held by officers, directors and beneficial owners of 10% or more of the
outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
As of February 8, 2013, the Registrant had outstanding 35,071,669 shares of common stock, all of one class.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2013 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form
10-K.
MINERALS TECHNOLOGIES INC.
2012 FORM 10-K ANNUAL REPORT
Table of Contents
PART I
Page
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
PART II
Item 5.
Market for the Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
PART III
Item 12.
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
Signatures
PART IV
2
3
8
11
11
14
15
15
21
22
33
33
33
33
34
34
35
35
35
35
36
39
Item 1. Business
PART I
Minerals Technologies Inc. (the "Company") is a resource- and technology-based company that develops, produces and markets
worldwide a broad range of specialty mineral, mineral-based and synthetic mineral products and supporting systems and services. The
Company has two reportable segments: Specialty Minerals and Refractories. The Specialty Minerals segment produces and sells the
synthetic mineral product precipitated calcium carbonate ("PCC") and processed mineral product quicklime ("lime"), and mines
mineral ores then processes and sells natural mineral products, primarily limestone and talc. This segment's products are used
principally in the paper, building materials, paint and coatings, glass, ceramic, polymer, food, automotive and pharmaceutical
industries. The Refractories segment produces and markets monolithic and shaped refractory materials and specialty products,
services and application and measurement equipment, and calcium metal and metallurgical wire products. Refractories segment
products are primarily used in high-temperature applications in the steel, non-ferrous metal and glass industries.
The Company maintains a research and development focus. The Company's research and development capability for developing
and introducing technologically advanced new products has enabled the Company to anticipate and satisfy changing customer
requirements, creating market opportunities through new product development and product application innovations.
Specialty Minerals Segment
PCC Products and Markets
The Company's PCC product line net sales were $546.2 million, $560.6 million and $554.6 million for the years ended December
31, 2012, 2011 and 2010, respectively. The Company's sales of PCC have been, and are expected to continue to be, made primarily to
the printing and writing papers segment of the paper industry. The Company also produces PCC for sale to companies in the polymer,
food and pharmaceutical industries.
PCC Products - Paper
In the paper industry, the Company's PCC is used:
· As a filler in the production of coated and uncoated wood-free printing and writing papers, such as office
papers;
· As a filler for coated and uncoated groundwood (wood-containing) paper such as magazine and catalog
papers; and
· As a coating pigment for both wood-free and groundwood papers.
The Company's Paper PCC product line net sales were $480.3 million, $497.0 million and $496.6 million for the years ended
December 31, 2012, 2011 and 2010, respectively.
Approximately 50% of the Company's sales consist of PCC sold to papermakers from "satellite" PCC plants. A satellite PCC plant
is a PCC manufacturing facility located near a paper mill, thereby eliminating costs of transporting PCC from remote production sites
to the paper mill. The Company believes the competitive advantages offered by improved economics and superior optical
characteristics of paper produced with PCC manufactured by the Company's satellite PCC plants resulted in substantial growth in the
number of the Company's satellite PCC plants since the first such plant was built in 1986. For information with respect to the
locations of the Company's PCC plants as of December 31, 2012, see Item 2, "Properties," below.
The Company currently manufactures several customized PCC product forms using proprietary processes. Each product form is
designed to provide optimum balance of paper properties including brightness, opacity, bulk, strength and improved printability. The
Company's research and development and technical service staffs focus on expanding sales from its existing and potential new satellite
PCC plants as well as developing new technologies for new applications. These technologies include, among others, acid-tolerant
("AT®") PCC, which allows PCC to be introduced to the large wood-containing segment of the printing and writing paper market,
OPACARB® PCC, a family of products for paper coating, and our FulFillTM family of products, a system of high-filler technologies
that offers papermakers a variety of efficient, flexible solutions which decrease dependency on natural fibers.
The Company owns, staffs, operates and maintains all of its satellite PCC facilities, and owns or licenses the related technology.
Generally, the Company and its paper mill customers enter into long-term evergreen agreements, initially ten years in length, pursuant
to which the Company supplies substantially all of the customer's precipitated calcium carbonate filler requirements. The Company is
generally permitted to sell to third-parties PCC produced at a satellite plant in excess of the host paper mill's requirement.
The Company also sells a range of PCC products to paper manufacturers from production sites not associated with paper mills.
These merchant facilities are located at Adams, Massachusetts; Birmingham, England; and Walsum, Germany.
3
PCC Markets - Paper
Uncoated Wood-Free Printing and Writing Papers – North America. Beginning in the mid-1980's, as a result of a concentrated
research and development effort, the Company's satellite PCC plants facilitated the conversion of a substantial percentage of North
American uncoated wood-free printing and writing paper producers to lower-cost alkaline papermaking technology. The Company
estimates that during 2012, more than 90% of North American uncoated wood-free paper was produced employing alkaline
technology. Presently, the Company owns and operates 17 commercial satellite PCC plants located at paper mills that produce
uncoated wood-free printing and writing papers in North America.
Uncoated Wood-Free Printing and Writing Papers – Outside North America. The Company estimates the amount of uncoated
wood-free printing and writing papers produced outside of North America at facilities that can be served by satellite and merchant
PCC plants is more than twice as large (measured in tons of paper produced) as the North American uncoated wood-free paper market
currently served by the Company. The Company believes that the superior brightness, opacity and bulking characteristics offered by
its PCC products allow it to compete with suppliers of ground limestone and other filler products outside of North America.
Presently, the Company owns and operates 23 commercial satellite PCC plants located at paper mills that produce uncoated wood-free
printing and writing papers outside of North America.
Uncoated Groundwood Paper. The uncoated groundwood paper market, including newsprint, represents approximately 30% of
worldwide paper production. Paper mills producing wood-containing paper still generally employ acid papermaking technology. The
conversion to alkaline technology by these mills has been hampered by the tendency of wood-containing papers to darken in an
alkaline environment. The Company has developed proprietary application technology for the manufacture of high-quality
groundwood paper in an acidic environment using PCC (AT® PCC). Furthermore, as groundwood or wood-containing paper mills use
larger quantities of recycled fiber, there is a trend toward the use of neutral papermaking technology in this segment for which the
Company presently supplies traditional PCC chemistries. The Company now supplies PCC at about 11 groundwood paper mills
around the world and licenses its technology to a ground calcium carbonate producer to help accelerate the conversion from acid to
alkaline papermaking.
Coated Paper. The Company continues to pursue satellite PCC opportunities in coated paper markets where our products provide
unique performance and/or cost reduction benefits to papermakers and printers. Our Opacarb product line is designed to create value
to the papermaker and can be used alone or in combination with other coating pigments. PCC coating products are produced at 8 of
the Company's PCC plants worldwide.
Specialty PCC Products and Markets
The Company also produces and sells a full range of dry PCC products on a merchant basis for non-paper applications. The
Company's Specialty PCC product line net sales were $65.9 million, $63.6 million and $58.0 million for the years ended December
31, 2012, 2011 and 2010, respectively. The Company sells surface-treated and untreated grades of PCC to the polymer industry for
use in automotive and construction applications, and to the adhesives and printing inks industries. The Company's PCC is also used
by the food and pharmaceutical industries as a source of bio-available calcium in tablets and food applications, as a buffering agent in
tablets, and as a mild abrasive in toothpaste. The Company produces PCC for specialty applications from production sites at Adams,
Massachusetts and Lifford, England.
Processed Minerals - Products and Markets
The Company mines and processes natural mineral products, primarily limestone and talc. The Company also manufactures lime,
a limestone-based product. The Company's net sales of processed mineral products were $116.0 million, $115.5 million and $110.4
million for the years ended December 31, 2012, 2011 and 2010, respectively. Net sales of talc products were $48.1 million, $46.9
million and $44.0 million for the years ended December 31, 2012, 2011 and 2010, respectively. Net sales of ground calcium carbonate
("GCC") products, which are principally lime and limestone, were $67.9 million, $68.6 million and $66.4 million for the years ended
December 31, 2012, 2011 and 2010, respectively.
The Company mines and processes GCC products at its reserves in the eastern and western parts of the United States. GCC is used
and sold in the construction, automotive and consumer markets.
Lime produced at the Company's Adams, Massachusetts, and Lifford, United Kingdom, facilities is used primarily as a raw
material for the manufacture of PCC at these sites and is sold commercially to various chemical and other industries.
The Company mines, beneficiates and processes talc at its Barretts site, located near Dillon, Montana. Talc is sold worldwide in
finely ground form for ceramic applications and in North America for paint and coatings and polymer applications. Because of the
exceptional chemical purity of the Barretts ore, a significant portion of worldwide automotive catalytic converter ceramic substrates
contain the Company's Barretts talc.
4
The Company's natural mineral products are supported by the Company's limestone reserves located in the western and eastern
parts of the United States, and talc reserves located in Montana. The Company estimates these reserves, at current usage levels, to be
in excess of 30 years at its limestone production facilities and approximately 20 years at its talc production facility. See Item 2,
“Properties,” for more information with respect to those facilities.
Our high quality limestone, dolomitic limestone, and talc products are defined primarily by the chemistry and color characteristics
of the ore bodies. Ore samples are analyzed by x-ray fluorescence (XRF) and other techniques to determine purity and more generally
by Hunter brightness measurement to determine dry brightness and the Hunter yellowness (b) value. We serve multiple markets from
each of our operations, each of which has different requirements relating to a combination of chemical and physical properties.
Refractories Segment
Refractory Products and Markets
Refractories Products
The Company offers a broad range of monolithic and pre-cast refractory products and related systems and services. The
Company's Refractory segment net sales were $343.4 million, $368.8 million and $337.4 million for the years ended December 31,
2012, 2011 and 2010, respectively.
Refractory product sales are often supported by Company-supplied proprietary application equipment and on-site technical service
support. The Company's proprietary application equipment is used to apply refractory materials to the walls of steel-making furnaces
and other high temperature vessels to maintain and extend their useful life. Net sales of refractory products, including those for non-
ferrous applications, were $264.1 million, $287.4 million and $264.5 million for the years ended December 31, 2012, 2011 and 2010.
The Company's proprietary application system, such as its MINSCAN®, allow for remote-controlled application of the Company's
refractory products in steel-making furnaces, as well as in steel ladles and blast furnaces. Since the steel-making industry is
characterized by intense price competition, which results in a continuing emphasis on increased productivity, these application
systems and the technologically advanced refractory materials developed in the Company's research laboratories have been well
accepted by the Company's customers. These products allow steel makers to improve their performance through, among other things,
the application of monolithic refractories to furnace linings while the furnace is at operating temperature, thereby eliminating the need
for furnace cool-down periods and steel-production interruption. The result is a lower overall cost for steel produced by steel makers.
The Company's technical service staff and application equipment assist customers to achieve desired productivity objectives. The
Company's technicians are also able to conduct laser measurement of refractory wear, sometimes in conjunction with robotic
application tools, to improve refractory performance at many customer locations. The Company believes that these services, together
with its refractory product offerings, provide it with a strategic marketing advantage.
Over the past several years the Refractories segment has continued to reformulate its products and application technology to
maintain its competitive advantage in the market place. Some of the new products the Company has introduced in the past several
years include:
such as steel ladle safety linings;
benefit of rapid dry-out capabilities;
as steel ladles, electric arc furnaces (EAF) and basic oxygen furnaces (BOF) furnaces;
· HOTCRETE®: High durability shotcrete products for applications at high temperatures in ferrous applications such
· FASTFIRE®: High durability castable and shotcrete products in the non-ferrous and ferrous industries with the added
· OPTIFORM®: A system of products and equipment for the rapid continuous casting of refractories for applications
· ENDURATEQ®: A high durability refractory shape for glass contact applications such as plungers and orifice rings;
· DECTEQ™: A system for the automatic control of electrical power feeding electrodes used in electric arc steel
· LACAM® Torpedo: A laser scanning system that measures the refractory lining thickness inside a Hot Iron
· LACAM®: A new, fourth generation Lacam® laser measurement device for use in the worldwide steel industry that is
17 times faster than the previous version. This new technology provides the fastest and most accurate laser scanning
for hot surfaces available today.
(Torpedo) Ladle. The torpedo ladles transport liquid iron from a blast furnace to the steel plant.
making furnaces.
and
Refractories Markets
The principal market for the Company's refractory products is the steel industry. Management believes that certain trends in the
steel industry will provide growth opportunities for the Company. These trends include growth and quality improvements in select
geographic regions (e.g., China, Middle East, Eastern Europe and India) the development of improved manufacturing processes such
as thin-slab casting, the trend in North America to shift production from integrated mills to electric arc furnaces (mini-mills) and the
ever-increasing need for improved productivity and longer lasting refractories.
5
The Company sells its refractory products in the following markets:
Steel Furnace. The Company sells gunnable monolithic refractory products and application systems to users of basic oxygen
furnaces and electric arc furnaces for application on furnace walls to prolong the life of furnace linings.
Other Iron and Steel. The Company sells monolithic refractory materials and pre-cast refractory shapes for iron and steel ladles,
vacuum degassers, continuous casting tundishes, blast furnaces and reheating furnaces. The Company offers a full line of materials to
satisfy most continuous casting refractory applications. This full line consists of gunnable materials, refractory shapes and permanent
linings.
Industrial Refractory Systems. The Company sells refractory shapes and linings to non-steel refractories consuming industries
including glass, cement, aluminum and petrochemicals, power generation and other non-steel industries. The Company also produces
a specialized line of carbon composites and pyrolitic graphite primarily sold under the PYROID® trademark, primarily to the
aerospace and electronics industries.
Metallurgical Products and Markets
The Company produces a number of other technologically advanced products for the steel industry, including calcium metal,
metallurgical wire products and a number of metal treatment specialty products. Net sales of metallurgical products were $79.3
million, $81.4 million and $72.9 million for the years ended December 31, 2012, 2011 and 2010. The Company manufactures calcium
metal at its Canaan, Connecticut, facility and purchases calcium in international markets. Calcium metal is used in the manufacture of
the Company's PFERROCAL® solid-core calcium wire, and is also sold for use in the manufacture of batteries and magnets. We also
manufacture cored wires at our Canaan, Connecticut and Hengelo, Netherlands, manufacturing sites. The Company sells metallurgical
wire products and associated wire-injection equipment for use in the production of high-quality steel. These metallurgical wire
products are injected into molten steel to improve castability and reduce imperfections. The steel produced is used for high-pressure
pipeline and other premium-grade steel applications.
Marketing and Sales
The Company relies principally on its worldwide direct sales force to market its products. The direct sales force is augmented by
technical service teams that are familiar with the industries to which the Company markets its products, and by several regional
distributors. The Company's sales force works closely with the Company's technical service staff to solve technical and other issues
faced by the Company's customers. The Company's technical service staff assists paper producers in ongoing evaluations of the use of
PCC for paper coating and filling applications. In the Refractory segment, the Company's technical service personnel advise on the use
of refractory materials, and, in many cases pursuant to service agreements, apply the refractory materials to the customers' furnaces
and other vessels. Continued use of skilled technical service teams is an important component of the Company's business strategy.
The Company works closely with its customers to ensure that their requirements are satisfied, and it often trains and supports
customer personnel in the use of the Company's products. The Company oversees domestic marketing and sales activities from
Bethlehem, Pennsylvania, and from regional sales offices in the eastern and western United States. The Company's international
marketing and sales efforts are directed from regional centers located in Brussels, Belgium; Sao Jose Dos Campos, Brazil; and
Shanghai, China. The Company believes its processed minerals are at regional locations that satisfy the stringent delivery
requirements of the industries they serve. The Company also believes that its worldwide network of sales personnel and
manufacturing sites facilitates the continued international expansion.
Raw Materials
The Company depends in part on having an adequate supply of raw materials for its manufacturing operations, particularly lime
and carbon dioxide for the PCC product line, magnesia and alumina for its Refractory operations, and on having adequate access to
ore reserves at its mining operations.
The Company uses lime in the production of PCC and is a significant purchaser of lime worldwide. Generally, lime is purchased
under long-term supply contracts from unaffiliated suppliers located in close geographic proximity to the Company's PCC plants.
Generally, the lime utilized in our business is readily available from numerous sources, including, to a small extent, from our Adams,
Massachusetts facility. Carbon dioxide is readily available in exhaust gas from the host paper mills, or other operations at our
merchant facilities.
The principal raw materials used in the Company's monolithic refractory products are refractory-grade magnesia and various forms
of alumina silicates. The Company purchases a portion of its magnesia requirements from sources in China. The price and
availability of bulk raw materials from China are subject to fluctuations that could affect the Company's sales to its customers. In
addition, the volatility of transportation costs has also affected the delivered cost of raw materials imported from China to North
America and Europe. The Company has developed alternate sources of magnesia over the past few years that have reduced our
reliance on China sourced magnesia. The alumina we utilize in our business is readily available from numerous sources. The
6
Company also purchases calcium metal, calcium silicide, graphite, calcium carbide and various alloys for use in the production of
metallurgical wire products and uses lime and aluminum in the production of calcium metal.
Competition
The Company is continually engaged in efforts to develop new products and technologies and refine existing products and
technologies in order to remain competitive and to position itself as a market leader.
With respect to its PCC products, the Company competes for sales to the paper industry with other minerals, such as GCC and
kaolin, based in large part upon technological know-how, patents and processes that allow the Company to deliver PCC that it believes
imparts gloss, brightness, opacity and other properties to paper on an economical basis. The Company is the leading manufacturer and
supplier of PCC to the paper industry.
The Company competes in sales of its limestone and talc based primarily upon quality, price, and geographic location.
With respect to the Company's refractory products, competitive conditions vary by geographic region. Competition is based upon
the performance characteristics of the product (including strength, consistency and ease of application), price, and the availability of
technical support.
Research and Development
Many of the Company's product lines are technologically advanced. Our expertise in inorganic chemistry, crystallography and
structural analysis, fine particle technology and other aspects of materials science apply to and support all of our product lines. The
Company's business strategy for growth in sales and profitability depends, to a large extent, on the continued success of its research
and development activities. Among the significant achievements of the Company's research and development efforts have been: the
satellite PCC plant concept; PCC crystal morphologies for paper coating; AT® PCC for wood-containing papers; FulFillTM high filler
technology systems; the development of FASTFIRE® and OPTIFORM® shotcrete refractory products; LACAM® laser-based
refractory measurement systems; the MINSCAN® and HOTCRETE® application systems; and EMforce®, Optibloc® and Titanium
Dioxide (TiO2) extenders for the Processed Minerals and Specialty PCC product lines.
Under the FulFillTM platform of products, the Company continues to develop its filler-fiber composite material. The FulFill™
brand High Filler Technology is a portfolio of high-filler technologies that offers papermakers a variety of efficient, flexible solutions
that decreases dependency on natural fiber and reduces costs. The FulFill™ E-325 series allows papermakers to increase filler loading
levels of precipitated calcium carbonate (PCC), which replaces higher cost pulp, and increases PCC usage. Depending on paper
grades, this PCC volume increase may range from 15 to 30 percent. The Company continues to progress in the commercialization of
FulFill™ E-325. We have signed agreements with eleven paper mills and are actively engaged with additional paper mill sites for
further FulFill™ deployment. We continue product development with other products within this platform.
The Company will also continue to reformulate its refractory materials to be more competitive, and will also continue development
of unique calcium carbonates for use in novel biopolymers.
For the years ended December 31, 2012, 2011 and 2010, the Company spent approximately $20.2 million, $19.3 million and $19.6
million, respectively, on research and development. The Company's research and development spending for 2012, 2011 and 2010 was
approximately 2.0%, 1.9% and 2.0% of net sales, respectively.
The Company maintains its primary research facilities in Bethlehem and Easton, Pennsylvania. It also has research and
development facilities in China, Germany, Ireland, Japan and Turkey. Approximately 79 employees worldwide are engaged in
research and development. In addition, the Company has access to some of the world's most advanced papermaking and paper coating
pilot facilities.
Patents and Trademarks
The Company owns or has the right to use approximately 248 patents and approximately 875 trademarks related to its business.
Our patents expire between 2013 and 2031. Our trademarks continue indefinitely. The Company believes that its rights under its
existing patents, patent applications and trademarks are of value to its operations, but no one patent, application or trademark is
material to the conduct of the Company's business as a whole.
Insurance
The Company maintains liability and property insurance and insurance for business interruption in the event of damage to its
production facilities and certain other insurance covering risks associated with its business. The Company believes such insurance is
adequate for the operation of its business. There is no assurance that in the future the Company will be able to maintain the coverage
currently in place or that the premiums will not increase substantially.
7
Employees
At December 31, 2012, the Company employed 1,992 persons, of whom 999 were employed outside of the United States.
Environmental, Health and Safety Matters
The Company’s operations are subject to federal, state, local and foreign laws and regulations relating to the environment and
health and safety. Certain of the Company’s operations involve and have involved the use and release of substances that have been
and are classified as toxic or hazardous within the meaning of these laws and regulations. Environmental operating permits are, or
may be, required for certain of the Company’s operations and such permits are subject to modification, renewal and revocation. The
Company regularly monitors and reviews its operations, procedures and policies for compliance with these laws and regulations. The
Company believes its operations are in substantial compliance with these laws and regulations and that there are no violations that
would have a material effect on the Company. Despite these compliance efforts, some risk of environmental and other damage is
inherent in the Company’s operations, as it is with other companies engaged in similar businesses, and there can be no assurance that
material violations will not occur in the future. The cost of compliance with these laws and regulations is not expected to have a
material adverse effect on the Company.
Laws and regulations are subject to change. See Item 1A, Risk Factors, for information regarding the possible effects that
compliance with new environmental laws and regulations, including those relating to climate change, may have on our businesses and
operating results.
Under the terms of certain agreements entered into in connection with the Company's initial public offering in 1992, Pfizer Inc
("Pfizer") and its wholly-owned subsidiary Quigley Company, Inc. ("Quigley") agreed to indemnify the Company against certain
liabilities being retained by Pfizer and its subsidiaries including, but not limited to, pending lawsuits and claims, and any lawsuits or
claims brought at any time in the future alleging damages or injury from the use, handling of or exposure to any product sold by
Pfizer's specialty minerals business prior to the closing of the initial public offering.
Available Information
The Company maintains an internet website located at http://www.mineralstech.com. Its reports on Forms 10-K, 10-Q and 8-K,
and amendments to those reports, as well as its Proxy Statement and filings under Section 16 of the Securities Exchange Act of 1934
are available free of charge through the Investor Relations page of its website, as soon as reasonably practicable after they are filed
with the Securities and Exchange Commission ("SEC"). Investors may access these reports through the Company's website by
navigating to "Investor Relations" and then to "SEC Filings."
Financial information concerning our business segments and the geographical areas in which we operate appears in the Notes to the
Consolidated Financial Statements. Information related to our executive officers is included in Item 10, “Directors, Executive
Officers and Corporate Governance.”
Item 1A. Risk Factors
Our business faces significant risks. These risks include those described below and may include additional risks and uncertainties
not presently known to us. Our business, financial condition and results of operations could be materially adversely affected by any of
these risks. These risks should be read in conjunction with the other information in this Annual Report on Form 10-K.
(cid:120)
Worldwide general economic, business, and industry conditions have had, and may continue to have, an adverse effect on the
Company’s results.
The global economic instability of the past few years has caused, among other things, declining consumer and business
confidence, volatile raw material prices, instability in credit markets, high unemployment, fluctuating interest and exchange rates,
and other challenges. The Company’s business and operating results have been and may continue to be adversely affected by
these global economic conditions. In particular, our operations in Europe continue to be impacted by the uncertain European
economy. A currency or financial crisis in Europe could precipitate a significant decline in the European economy, which would
likely result in a decrease in demand for our products in Europe. The Company’s customers and potential customers may
experience deterioration of their businesses, cash flow shortages, and difficulty obtaining financing. As discussed below, the
industries we serve, primarily paper, steel, construction and automotive, have been particularly adversely affected by the uncertain
global economic climate due to the cyclical nature of their businesses. As a result, existing or potential customers may reduce or
delay their growth and investments and their plans to purchase products, and may not be able to fulfill their obligations in a timely
fashion. Further, suppliers could experience similar conditions, which could affect their ability to fulfill their obligations to the
Company. Adversity within capital markets may also impact the Company’s results of operations by negatively affecting the
amount of expense the Company records for its pension and other postretirement benefit plans. Actuarial valuations used to
calculate income or expense for the plans reflect assumptions about financial market and other economic conditions – the most
significant of which are the discount rate and the expected long-term rate of return on plan assets. Such actuarial valuations may
8
change based on changes in key economic indicators. Global economic markets remain uncertain, and there can be no assurance
that market conditions will improve in the near future. Future weakness in the global economy could materially and adversely
affect our business and operating results.
(cid:120) The Company’s operations are subject to the cyclical nature of its customers' businesses and we may not be able to mitigate
that risk.
The majority of the Company's sales are to customers in industries that have historically been cyclical: paper, steel, construction,
and automotive. These industries have been particularly adversely affected by the uncertain global economic climate. Our
Refractories segment primarily serves the steel industry. In 2012, North American and European steel production was
approximately 15% below 2008 levels due to reduced demand and several steel mill closures. In the paper industry, which is
served by our Paper PCC product line, production levels for uncoated freesheet within North America and Europe, our two largest
markets remain approximately 16% below 2008 levels. The reduced demand for paper industry products has also caused the paper
industry to experience a number of recent bankruptcies and paper mill closures, including among our customers. In addition, our
Processed Minerals and Specialty PCC product lines are affected by the domestic building and construction markets and the
automotive market. Housing starts in 2012 averaged approximately 781 thousand units. Housing starts were at a peak rate of 2.1
million units in 2005. Demand for our products is subject to these trends. In addition, these trends could cause our customers to
face liquidity issues or bankruptcy, which could deteriorate the aging of our accounts receivable, increase our bad debt exposure
and possibly trigger impairment of assets or realignment of our businesses. The Company has taken steps to reduce its exposure to
variations in its customers' businesses, including by diversifying its portfolio of products and services; through geographic
expansion, and by structuring most of its long-term satellite PCC contracts to provide a degree of protection against declines in the
quantity of product purchased, since the price per ton of PCC generally rises as the number of tons purchased declines. In
addition, many of the Company's product lines lower its customers' costs of production or increase their productivity, which
should encourage them to use its products. However, there can be no assurance that these efforts will mitigate the risks of our
dependence on these industries. Continued weakness in the industries we serve has had, and may in the future have, an adverse
effect on sales of our products and our results of operations. A continued or renewed economic downturn in one or more of the
industries or geographic regions that the Company serves, or in the worldwide economy, could cause actual results of operations to
differ materially from historical and expected results.
(cid:120) The Company’s results could be adversely affected if it is unable to effectively achieve and implement its growth initiatives.
Sales and income growth of the Company depends upon a number of uncertain events, including the outcome of the Company's
strategies of increasing its penetration into geographic markets such as the BRIC (Brazil, Russia, India, China) countries and other
Asian and Eastern European countries; increasing its penetration into product markets such as the market for papercoating
pigments and the market for groundwood paper pigments; increasing sales to existing PCC customers by increasing the amount of
PCC used per ton of paper produced; developing, introducing and selling new products such as the FulFillTM family of products
for the paper industry. Difficulties, delays or failure of any of these strategies could affect the future growth rate of the Company.
Our strategy also anticipates growth through future acquisitions. However, our ability to identify and consummate any future
acquisitions on terms that are favorable to us may be limited by the number of attractive acquisition targets, internal demands on
our resources and our ability to obtain financing. Our success in integrating newly acquired businesses will depend upon our
ability to retain key personnel, avoid diversion of management’s attention from operational matters, and integrate general and
administrative services. In addition, future acquisitions could result in the incurrence of additional debt, costs and contingent
liabilities. Integration of acquired operations may take longer, or be more costly or disruptive to our business, than originally
anticipated, and it is also possible that expected synergies from future acquisitions may not materialize. We also may incur costs
and divert management attention with regard to potential acquisitions that are never consummated.
(cid:120) The Company’s sales of PCC could be adversely affected by our failure to renew or extend long term sales contracts for our
satellite operations.
The Company's sales of PCC to paper customers are typically pursuant to long-term evergreen agreements, initially ten years in
length, with paper mills where the Company operates satellite PCC plants. Sales pursuant to these contracts represent a significant
portion of our worldwide Paper PCC sales, which were $480.3 million in 2012, or approximately 48% of the Company’s net sales.
The terms of many of these agreements have been extended or renewed in the past, often in connection with an expansion of the
satellite plant. However, failure of a number of the Company's customers to renew or extend existing agreements on terms as
favorable to the Company as those currently in effect, or at all, could have a substantial adverse effect on the Company's results of
operations, and could also result in impairment of the assets associated with the PCC plant.
(cid:120) The Company’s sales could be adversely affected by consolidation in customer industries, principally paper and steel.
Several consolidations in the paper industry have taken place in recent years and such consolidation could continue in the future.
These consolidations could result in partial or total closure of some paper mills where the Company operates PCC satellites. In
2011, the Company idled its satellite plant in Anjalankoski, Finland, due to the permanent closure of the paper mill, and the
Company’s satellite plant at Alizay, France, is temporarily closed. Such closures would reduce the Company's sales of PCC,
except to the extent that they resulted in shifting paper production and associated purchases of PCC to another location served by
9
the Company. Similarly, consolidations have occurred in the steel industry. Such consolidations in the two major industries we
serve concentrate purchasing power in the hands of a smaller number of papermakers and steel manufacturers, enabling them to
increase pressure on suppliers, such as the Company. This increased pressure could have an adverse effect on the Company's
results of operations in the future.
(cid:120) The Company is subject to stringent regulation in the areas of environmental, health and safety, and tax, and may incur
unanticipated costs or liabilities arising out of claims for various legal, environmental and tax matters or product stewardship
issues.
The Company’s operations are subject to international, federal, state and local governmental environmental, health and safety, tax
and other laws and regulations. We have expended, and may be required to expend in the future, substantial funds for compliance
with such laws and regulations. In addition, future events, such as changes to or modifications of interpretations of existing laws
and regulations, or enforcement polices, or further investigation or evaluation of the potential environmental impacts of operations
or health hazards of certain products, may give rise to additional compliance and other costs that could have a material adverse
effect on the Company. State, national, and international governments and agencies have been evaluating climate-related
legislation and regulation that would restrict emissions of greenhouse gases in areas in which we conduct business, and some such
legislation and regulation have already been enacted or adopted. Enactment of climate-related legislation or adoption of regulation
that restrict emissions of greenhouse gases in areas in which we conduct business could have an adverse effect on our operations
or demand for our products. Our manufacturing processes, particularly the manufacturing process for PCC, use a significant
amount of energy and, should energy prices increase as a result of such legislation or regulation, we may not be able to pass these
increased costs on to purchasers of our products. We cannot predict if or when currently proposed or additional laws and
regulations regarding climate change or other environmental or health and safety concerns will be enacted or adopted. Moreover,
changes in tax regulation and international tax treaties could reduce the financial performance of our foreign operations.
The Company is currently a party in various litigation matters and tax and environmental proceedings and faces risks arising from
various unasserted litigation matters, including, but not limited to, product liability, patent infringement, antitrust claims, and
claims for third party property damage or personal injury stemming from alleged environmental torts. Failure to appropriately
manage safety, human health, product liability and environmental risks associated with the Company’s products and production
processes could adversely impact the Company’s employees and other stakeholders, the Company’s reputation and its results of
operations. Public perception of the risks associated with the Company’s products and production processes could impact product
acceptance and influence the regulatory environment in which the Company operates. While the Company has procedures and
controls to manage these risks, carries liability insurance, which it believes to be appropriate to its businesses, and has provided
reserves for current matters, which it believes to be adequate, an unanticipated liability, arising out of a current matter or
proceeding or from the other risks described above, could have a material adverse effect on the Company’s financial condition or
results of operations.
(cid:120) Delays or failures in new product development could adversely affect the Company’s operations.
The Company’s future business success will depend in part upon its ability to maintain and enhance its technological capabilities,
to respond to changing customer needs, and to successfully anticipate or respond to technological changes on a cost-effective and
timely basis. The Company is engaged in a continuous effort to develop new products and processes in all of its product lines.
Difficulties, delays or failures in the development, testing, production, marketing or sale of such new products could cause actual
results of operations to differ materially from our expected results.
(cid:120) The Company’s ability to compete is dependent upon its ability to defend its intellectual property against inappropriate
disclosure and infringement.
The Company's ability to compete is based in part upon proprietary knowledge, both patented and unpatented. The Company's
ability to achieve anticipated results depends in part on its ability to defend its intellectual property against inappropriate
disclosure as well as against infringement. In addition, development by the Company's competitors of new products or
technologies that are more effective or less expensive than those the Company offers could have a material adverse effect on the
Company's financial condition or results of operations.
(cid:120) The Company’s operations could be impacted by the increased risks of doing business abroad.
The Company does business in many areas internationally. Approximately 44% of our sales in 2012 were derived from outside
the United States and we have significant production facilities which are located outside of the United States. We continue to be
concerned about the possibility of recessionary conditions in Europe, from which we derived approximately 25% of our sales in
2012. Our sales in Europe decreased from $298.4 million in 2011 to $257.0 million in 2012, and continued weakness in the
European market may negatively affect our sales in the future. We have in recent years expanded our operations in emerging
markets, and we plan to continue to do so in the future, particularly in China, India, Brazil, and Eastern Europe. Some of our
operations are located in areas that have experienced political or economic instability, including Indonesia, Brazil, Thailand, China
and South Africa. As the Company expands its operations overseas, it faces increased risks of doing business abroad, including
inflation, fluctuation in interest rates, changes in applicable laws and regulatory requirements, export and import restrictions,
10
tariffs, nationalization, expropriation, limits on repatriation of funds, civil unrest, terrorism, unstable governments and legal
systems, and other factors. Adverse developments in any of the areas in which we do business could cause actual results to differ
materially from historical and expected results. In addition, a significant portion of our raw material purchases and sales outside
the United States are denominated in foreign currencies, and liabilities for non-U.S. operating expenses and income taxes are
denominated in local currencies. Accordingly, reported sales, net earnings, cash flows and fair values have been and in the future
will be affected by changes in foreign currency exchange rates. Our overall success as a global business depends, in part, upon our
ability to succeed in differing legal, regulatory, economic, social and political conditions. We cannot assure you that we will
implement policies and strategies that will be effective in each location where we do business.
(cid:120) The Company’s operations are dependent on the availability of raw materials and increases in costs of raw materials or energy
could adversely affect our financial results.
The Company depends in part on having an adequate supply of raw materials for its manufacturing operations, particularly lime
and carbon dioxide for the PCC product line, and magnesia and alumina for its Refractory operations. Purchase prices and
availability of these critical raw materials are subject to volatility. At any given time, we may be unable to obtain an adequate
supply of these critical raw materials on a timely basis, on price and other terms, or at all. While most such raw materials are
readily available, the Company purchases a portion of its magnesia requirements from sources in China. The price and availability
of magnesia have fluctuated in the past and they may fluctuate in the future. Price increases for certain other of our raw materials,
as well as increases in energy prices, have also affected our business. Our ability to recover increased costs is uncertain. The
Company and its customers will typically negotiate reasonable price adjustments in order to recover a portion of these rapidly
escalating costs. While the contracts pursuant to which we construct and operate our satellite PCC plants generally adjust pricing
to reflect increases in costs resulting from inflation, there is a time lag before such price adjustments can be implemented. In
2012, increased raw materials affected our Specialty Minerals segment by $12 million. These increased raw material costs were
partially offset by price increases.
The Company also depends on having adequate access to ore reserves of appropriate quality at its mining operations. There are
numerous uncertainties inherent in estimating ore reserves including subjective judgments and determinations that are based on
available geological, technical, contract and economic information.
We cannot predict whether, and how much, prices for our key raw materials will increase in the future. Changes in the costs or
availability of such raw materials, to the extent we cannot recover them in price increases to our customers, could adversely affect
the Company’s results of operations.
(cid:120) The Company operates in very competitive industries, which could adversely affect our profitability.
The Company has many competitors. Some of our principal competitors have greater financial and other resources than we have.
Accordingly, these competitors may be better able to withstand changes in conditions within the industries in which we operate
and may have significantly greater operating and financial flexibility than we do. As a result of the competitive environment in
the markets in which we operate, we currently face and will continue to face pressure on the sales prices of our products from
competitors, which could reduce profit margins.
(cid:120) Production facilities are subject to operating risks and capacity limitations that may adversely affect the Company’s financial
condition or results of operations.
The Company is dependent on the continued operation of its production facilities. Production facilities are subject to hazards
associated with the manufacturing, handling, storage, and transportation of chemical materials and products, including pipeline
leaks and ruptures, explosions, fires, inclement weather and natural disasters, mechanical failure, unscheduled downtime, labor
difficulties, transportation interruptions, and environmental risks. We maintain property, business interruption and casualty
insurance but such insurance may not cover all risks associated with the hazards of our business and is subject to limitations,
including deductibles and maximum liabilities covered. We may incur losses beyond the limits, or outside the coverage, of our
insurance policies. Further, from time to time, we may experience capacity limitations in our manufacturing operations. In
addition, if we are unable to effectively forecast our customers’ demand, it could affect our ability to successfully manage
operating capacity limitations. These hazards, limitations, disruptions in supply and capacity constraints could adversely affect
financial results.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Set forth below is the location of, and the main customer served by, each of the Company's satellite PCC plants in operation as of
December 31, 2012. Generally, the land on which each satellite PCC plant is located is leased at a nominal amount by the Company
11
from the host paper mill pursuant to a lease, the term of which generally runs concurrently with the term of the PCC production and
sale agreement between the Company and the host paper mill.
Location
Principal Customer
United States
Alabama, Courtland ..................................................... International Paper Company
Alabama, Jackson ........................................................ Boise Inc.
Alabama, Selma ........................................................... International Paper Company
Arkansas, Ashdown ..................................................... Domtar Inc.
Florida, Pensacola ........................................................ Georgia-Pacific Corporation (Koch Industries)
Kentucky, Wickliffe ..................................................... NewPage Corporation
Louisiana, Port Hudson ................................................ Georgia-Pacific Corporation (Koch Industries)
Maine, Jay .................................................................... Verso Paper Holdings LLC
Maine, Madison ........................................................... Madison Paper Industries
Michigan, Quinnesec ................................................... Verso Paper Holdings LLC
Minnesota, Cloquet ...................................................... Sappi Ltd.
Minnesota, International Falls...................................... Boise Inc.
New York, Ticonderoga ............................................... International Paper Company
Ohio, Chillicothe .......................................................... P.H. Glatfelter Co.
Ohio, West Carrollton .................................................. Appleton Papers Inc.
South Carolina, Eastover ............................................. International Paper Company
Washington, Camas ..................................................... Georgia-Pacific Corporation (Koch Industries)
Washington, Longview ................................................ North Pacific Paper Corporation
Washington, Wallula.................................................... Boise Inc.
Wisconsin, Kimberly ................................................... Appleton Coated
Wisconsin, Park Falls................................................... Flambeau River Papers LLC
Wisconsin, Superior .....................................................
Wisconsin, Wisconsin Rapids ......................................
New Page Corporation
New Page Corporation
Location
Principal Customer
International
Brazil, Guaiba .............................................................. Aracruz Celulose S.A.
Brazil, Jacarei............................................................... Ahlstrom-VCP Industria de Papeis Especialis Ltda.
Brazil, Luiz Antonio .................................................... International Paper do Brasil Ltda.
Brazil, Mucuri .............................................................. Suzano Papel e Celulose S. A.
Brazil, Suzano .............................................................. Suzano Papel e Celulose S. A.
Canada, St. Jerome, Quebec ........................................ Cascades Fine Papers Group Inc.
Canada, Windsor, Quebec ............................................ Domtar Inc.
China, Dagang 1 ........................................................... Gold East Paper (Jiangsu) Company Ltd.
China, Zhenjiang 1 ....................................................... Gold East Paper (Jiangsu) Company Ltd.
China, Suzhou1 ............................................................ Gold HuaSheng Paper Company Ltd.
Finland, Äänekoski ...................................................... M-real Corporation
Finland, Tervakoski ..................................................... Trierenberg Holding
France, Alizay2 ............................................................. Double A Paper Company Ltd.
France, Docelles ........................................................... UPM Corporation
France, Saillat Sur Vienne ........................................... International Paper Company
Germany, Schongau ..................................................... UPM Corporation
India, Ballarshah1 ......................................................... Ballarpur Industries Ltd.
India, Dandeli............................................................... West Coast Paper Mill Ltd.
India, Gaganapur1 ........................................................ Ballarpur Industries Ltd.
India, Saila Khurd ........................................................ ABC Paper Ltd.
India, Rayagada1,3 ........................................................ JK Paper
Indonesia, Perawang1 ................................................... PT Indah Kiat Pulp and Paper Corporation
Japan, Shiraoi1 ............................................................. Nippon Paper Group Inc.
Malaysia, Sipitang ....................................................... Ballarpur Industries Ltd.
Mexico, Anahuac ......................................................... Copamex, S.A. de C.V.
Poland, Kwidzyn .......................................................... International Paper – Kwidzyn, S.A
Portugal, Figueira da Foz1 ............................................ Soporcel – Sociedade Portuguesa de Papel, S.A.
Slovakia, Ruzomberok ................................................. Mondi Business Paper SCP
South Africa, Merebank1 ............................................. Mondi Paper Company Ltd.
Thailand, Namphong.................................................... Phoenix Pulp & Paper Public Co. Ltd.
Thailand, Tha Toom1 ................................................... Double A Paper Company Ltd.
Thailand, Tha Toom 21,3 .............................................. Double A Paper Company Ltd.
12
1 These plants are owned through joint ventures.
2 This plant is temporarily idled. The mill was sold to Double A Paper Company Ltd. in 2013. The Company is currently negotiating a contract with
this customer.
3 These plants are under construction.
The Company also owned and operated at December 31, 2012, 8 plants engaged in the mining, processing and/or production of
lime, limestone, precipitated calcium carbonate and talc, as well as owned or leased and operated 18 manufacturing facilities
worldwide within the Refractories segment. The Company's corporate headquarters, sales offices, research laboratories, plants and
other facilities are owned by the Company except as otherwise noted. Set forth below is certain information relating to the Company's
plants and office and research facilities:
Location
Facility
Product Line
United States
Arizona, Pima County ................ Plant; Quarry1
California, Lucerne Valley ......... Plant; Quarry
Connecticut, Canaan .................. Plant; Quarry
Indiana, Portage ......................... Plant
Louisiana, Baton Rouge ............. Plant
Massachusetts, Adams ............... Plant; Quarry
Montana, Dillon ......................... Plant; Quarry
New York, New York ................ Headquarters2
Ohio, Bryan ................................ Plant
Ohio, Dover ............................... Plant
Pennsylvania, Bethlehem ........... Administrative Office; Research laboratories;
Sales Offices
Pennsylvania, Easton ................. Administrative Office; Research laboratories;
Plant; Sales Offices
Pennsylvania, Slippery Rock ..... Plant; Sales Offices
Texas, Bay City .......................... Plant
Limestone
Limestone
Limestone, Metallurgical Wire/Calcium
Refractories/Shapes
Monolithic Refractories
Limestone, Lime, PCC
Talc
All Company Products
Monolithic Refractories
Monolithic Refractories/Shapes
All Company Products
All Company Products
Monolithic Refractories/Shapes
Talc
Location
Facility
Product Line
International
Australia, Carlingford ................ Sales Office2
Belgium, Brussels ...................... Sales Office2/Administrative Office
Brazil, Sao Jose dos Campos ..... Sales Office2/Administrative Office
Canada, Pt. Claire ...................... Administrative Office
China, Shanghai ......................... Administrative Office/Sales Office
China, Suzhou ............................ Plant/Sales Office/Research laboratories
Finland, Kaarina ......................... Administrative Office2
Germany, Duisburg .................... Plant/Sales Office/Research laboratories
Germany, Walsum ..................... Plant
Holland, Hengelo ....................... Plant/Sales Office
India, Mumbai ............................ Sales Office2/Administrative Office
Ireland, Cork .............................. Plant; Administrative Office2/
Research laboratories
Italy, Brescia .............................. Sales Office
Italy, Nave .................................. Plant
Japan, Gamagori ........................ Plant/Research laboratories
Japan, Tokyo .............................. Sales Office
Singapore ................................... Sales Office2/Administrative Office
Spain, Santander ........................ Sales Office2/Administrative Office
South Africa, Pietermaritzburg .. Plant
South Africa, Johannesburg ....... Sales Office/Administrative Office2
Turkey, Gebze ............................ Plant/Research Laboratories
Turkey, Istanbul ......................... Sales Office/Administrative Office
Turkey, Kutahya ........................ Plant
United Kingdom, Lifford ........... Plant
United Kingdom, Rotherham ..... Plant/Sales Office
Monolithic Refractories
Monolithic Refractories/PCC
PCC
PCC/Monolithic Refractories
PCC/Monolithic Refractories
PCC/Monolithic Refractories
PCC
Laser Scanning Instrumentation/
Probes/Monolithic Refractories
PCC
Metallurgical Wire
PCC/Monolithic Refractories/
Metallurgical Wire
Monolithic Refractories
Monolithic Refractories/Shapes
Monolithic Refractories/Shapes
Monolithic Refractories/Shapes, Calcium
Monolithic Refractories
PCC
Monolithic Refractories
Monolithic Refractories
Monolithic Refractories
Monolithic Refractories/Shapes/ Application
Equipment
Monolithic Refractories
Monolithic Refractories/Shapes
PCC, Lime
Monolithic Refractories/Shapes
1 This plant and quarry is leased to another company.
2 Leased by the Company. The facilities in Cork, Ireland, are operated pursuant to a 99-year lease, the term of which commenced in 1963. The
Company's headquarters in New York, New York, are held under a lease which expires in 2021.
13
The following sets forth, for each of the quarries or mines we own or operate, as set forth above, our current estimate as to the
amount of reserves such quarry or mine holds, based on the most recent mine plan, and its usage rate in 2012.
Millions of tons
Location
Arizona, Pima County ................
California, Lucerne Valley .........
Connecticut, Canaan ..................
Massachusetts, Adams ...............
Montana, Dillon .........................
Reserves
8.90
47.94
20.87
26.16
3.56
2012 Usage
0.11
0.79
0.50
0.60
0.18
The Company believes that its facilities, which are of varying ages and are of different construction types, have been satisfactorily
maintained, are in good condition, are suitable for the Company's operations and generally provide sufficient capacity to meet the
Company's production requirements. Based on past loss experience, the Company believes it is adequately insured with respect to
these assets and for liabilities likely to arise from its operations.
Item 3. Legal Proceedings
Certain of the Company's subsidiaries are among numerous defendants in a number of cases seeking damages for exposure to
silica or to asbestos containing materials. The Company currently has 72 pending silica cases and 7 pending asbestos cases. To date,
1,394 silica cases and 32 asbestos cases have been dismissed. No new asbestos cases were filed in the fourth quarter of 2012, and
twenty-two were dismissed. Most of these claims do not provide adequate information to assess their merits, the likelihood that the
Company will be found liable, or the magnitude of such liability, if any. Additional claims of this nature may be made against the
Company or its subsidiaries. At this time management anticipates that the amount of the Company's liability, if any, and the cost of
defending such claims, will not have a material effect on its financial position or results of operations.
The Company has not settled any silica or asbestos lawsuits to date. We are unable to state an amount or range of amounts claimed
in any of the lawsuits because state court pleading practices do not require identifying the amount of the claimed damage. The
aggregate cost to the Company for the legal defense of these cases since inception was approximately $0.2 million, the majority of
which has been reimbursed by Pfizer Inc pursuant to the terms of certain agreements entered into in connection with the Company's
initial public offering in 1992. Of the 7 pending asbestos cases, all allege liability based on products sold mostly or entirely prior to the
initial public offering, and for which the Company is therefore entitled to indemnification pursuant to such agreements. Our
experience has been that the Company is not liable to plaintiffs in any of these lawsuits and the Company does not expect to pay any
settlements or jury verdicts in these lawsuits.
Environmental Matters
On April 9, 2003, the Connecticut Department of Environmental Protection issued an administrative consent order relating to our
Canaan, Connecticut, plant where both our Refractories segment and Specialty Minerals segment have operations. We agreed to the
order, which includes provisions requiring investigation and remediation of contamination associated with historic use of
polychlorinated biphenyls ("PCBs") and mercury at a portion of the site. We have completed the required investigations and submitted
several reports characterizing the contamination. We are now conducting a site-specific risk assessment required by the regulators.
We believe that the most likely form of overall site remediation will be to leave the existing contamination in place (with
some limited soil removal), encapsulate it, and monitor the effectiveness of the encapsulation. We anticipate that a substantial portion
of the remediation cost will be borne by the United States based on its involvement at the site from 1942 – 1964, as historic
documentation indicates that PCBs and mercury were first used at the facility at a time of U.S. government ownership for production
of materials needed by the military. Though the cost of the likely remediation remains uncertain pending completion of the phased
remediation decision process, we have estimated that the Company’s share of the cost of the encapsulation and limited soil removal
described above would approximate $0.4 million, which has been accrued as of December 31, 2012.
The Company is evaluating options for upgrading the wastewater treatment facilities at its Adams, Massachusetts plant. This work
has been undertaken pursuant to an administrative Consent Order originally issued by the Massachusetts Department of
Environmental Protection (“DEP”) on June 18, 2002. This order was amended on June 1, 2009 and on June 2, 2010. The amended
Order includes the investigation by January 1, 2022 of options for ensuring that the facility's wastewater treatment ponds will not
result in unpermitted discharge to groundwater. Additional requirements of the amendment include the submittal by July 1, 2022 of a
plan for closure of a historic lime solids disposal area. Preliminary engineering reviews completed in 2005 indicate that the estimated
cost of wastewater treatment upgrades to operate this facility beyond 2024 may be between $6 million and $8 million. The Company
estimates that the remaining remediation costs would approximate $0.4 million, which has been accrued as of December 31, 2012.
The Company and its subsidiaries are not party to any other material pending legal proceedings, other than routine litigation
incidental to their businesses.
14
Item 4. Mine Safety Disclosures
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Annual Report on Form
10-K.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Securities
The Company's common stock is traded on the New York Stock Exchange under the symbol "MTX."
Information on market prices and dividends is set forth below. On December 11, 2012, the Company effected a two-for-one stock
split in the form of a stock dividend. Accordingly, all share and per share data presented reflects the effect of the stock split. See Note
1 to the consolidated financial statements “Summary of Significant Accounting Policies,” for additional information.
2012 Quarters
Market Price Range Per Share of Common Stock
High .............................................................................$
Low ..............................................................................
Close ............................................................................
First
Second
Third
Fourth
33.96 $
28.78
32.70
33.60 $
30.81
31.89
36.99 $
30.50
35.46
39.92
34.25
39.92
Dividends paid per common share ...............................$
0.025 $
0.025 $
0.025 $
0.05
2011 Quarters
Market Price Range Per Share of Common Stock
High .............................................................................$
Low ..............................................................................
Close ............................................................................
First
Second
Third
Fourth
34.36 $
31.23
34.36
35.04 $
31.50
33.83
34.31 $
24.63
24.63
29.00
23.37
28.26
Dividends paid per common share ...............................$
0.025 $
0.025 $
0.025 $
0.025
Equity Compensation Plan Information
Plan Category
Number of securities
to be issued upon
exercise of
outstanding options
Weighted average
exercise price of
outstanding options
Number of securities
remaining available
for future issuance
Equity compensation plans approved by
security holders1 .......................................
1,395,520
$
28.31
Total .............................................
1 The Company’s only equity compensation plan has been approved by the Company’s stockholders.
1,395,520
28.31
$
Issuer Purchases of Equity Securities
Period
October 1 – October 28 ............................
October 29 – November 19 ......................
November 20 – November 25 ..................
November 26 - December 31 ...................
Total
Number of
Shares
Purchased
Average Price
Paid Per Share
Total Number
of Shares
Purchased as
Part of the
Publicly
Announced
Program
7,400
69,360
69,600
289,900
$
$
$
$
*
*
35.00
35.00
35.81
38.22
204,715
274,075
343,675
633,575
1,491,974
1,491,974
Dollar Value
of Shares That
May Yet be
Purchased
Under the
Program
62,776,742
57,921,378
55,429,131
44,349,140
Total ...............................................
* Share prices have been retrospectively adjusted for all periods presented for the two-for-one stock split on December 11, 2012. See
Note 1 to the consolidated financial statements, "Summary of Significant Accounting Policies", for additional information.
436,260
36.93
$
*
15
In 2011, the Company’s Board of Directors authorized the Company’s management to repurchase, at its discretion, up to $75
million of additional shares over a two-year period. As of December 31, 2012, 633,575 shares have been repurchased under this
program for $30.7 million, or an average price of approximately $48.38 per share.
On January 23, 2013, the Company's Board of Directors declared a regular quarterly dividend on its common stock of $0.05 per
share. No dividend will be payable unless declared by the Board and unless funds are legally available for payment thereof.
On February 8, 2013, the last reported sales price on the NYSE was $42.12 per share. As of February 8, 2013, there were
approximately 171 holders of record of the common stock.
16
The graph below compares Minerals Technologies Inc.'s cumulative 1-year total shareholder return on common stock with the
cumulative total returns of the S&P 500 index, the Dow Jones US Industrials index, the S&P Midcap 400 index, the Dow Jones US
Basic Materials index, and the S&P MidCap 400 Materials Sector. The graph tracks the performance of a $100 investment in our
common stock and in each index (with the reinvestment of all dividends) from 12/31/2011 to 12/31/2012.
COMPARISON OF 1 YEAR CUMULATIVE TOTAL RETURN*
Among Minerals Technologies Inc., the S&P 500 Index, the S&P Midcap 400 Index,
the Dow Jones US Industrials Index, the Dow Jones US Basic Materials Index,
and S&P MidCap 400 Materials Sector
$150
$140
$130
$120
$110
$100
$90
12/11
MTX
S&P Materials
S&P 400
DJIA-US
S&P 500
DJ-Basic
12/12
Minerals Technologies Inc.
S&P 500
S&P Midcap 400
Dow Jones US Industrials
Dow Jones US Basic Materials
S&P MidCap 400 Materials Sector
*$100 invested on 12/31/11 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2013 S&P, a division of The McGraw -Hill Companies Inc. All rights reserved.
Copyright© 2013 Dow Jones & Co. All rights reserved.
Minerals Technologies Inc.
S&P 500
S&P Midcap 400
Dow Jones US Industrials
Dow Jones US Basic Materials
S&P MidCap 400 Materials Sector
12/11
12/12
100.00
100.00
100.00
100.00
100.00
100.00
141.93
116.00
117.88
117.87
110.49
123.65
17
The graph below compares Minerals Technologies Inc.'s cumulative 2-year total shareholder return on common stock with the
cumulative total returns of the S&P 500 index, the Dow Jones US Industrials index, the S&P Midcap 400 index, the Dow Jones US
Basic Materials index, and the S&P MidCap 400 Materials Sector. The graph tracks the performance of a $100 investment in our
common stock and in each index (with the reinvestment of all dividends) from 12/31/2010 to 12/31/2012.
COMPARISON OF 2 YEAR CUMULATIVE TOTAL RETURN*
Among Minerals Technologies Inc., the S&P 500 Index, the S&P Midcap 400 Index,
the Dow Jones US Industrials Index, the Dow Jones US Basic Materials Index,
and S&P MidCap 400 Materials Sector
$130
$125
$120
$115
$110
$105
$100
$95
$90
$85
$80
MTX
S&P Materials
S&P 500
DJIA-US
S&P 400
DJ-Basic
12/10
12/11
12/12
Minerals Technologies Inc.
S&P 500
S&P Midcap 400
Dow Jones US Industrials
Dow Jones US Basic Materials
S&P MidCap 400 Materials Sector
*$100 invested on 12/31/10 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2013 S&P, a division of The McGraw -Hill Companies Inc. All rights reserved.
Copyright© 2013 Dow Jones & Co. All rights reserved.
Minerals Technologies Inc.
S&P 500
S&P Midcap 400
Dow Jones US Industrials
Dow Jones US Basic Materials
S&P MidCap 400 Materials Sector
12/10
12/11
12/12
100.00
100.00
100.00
100.00
100.00
100.00
86.71
102.11
98.27
99.21
85.28
98.77
123.06
118.45
115.84
116.94
94.23
122.13
18
The graph below compares Minerals Technologies Inc.'s cumulative 3-year total shareholder return on common stock with the
cumulative total returns of the S&P 500 index, the Dow Jones US Industrials index, the S&P Midcap 400 index, the Dow Jones US
Basic Materials index, and the S&P MidCap 400 Materials Sector. The graph tracks the performance of a $100 investment in our
common stock and in each index (with the reinvestment of all dividends) from 12/31/2009 to 12/31/2012.
COMPARISON OF 3 YEAR CUMULATIVE TOTAL RETURN*
Among Minerals Technologies Inc., the S&P 500 Index, the S&P Midcap 400 Index,
the Dow Jones US Industrials Index, the Dow Jones US Basic Materials Index,
and S&P MidCap 400 Materials Sector
$160
$150
$140
$130
$120
$110
$100
$90
12/09
S&P Materials
MTX
DJIA-US
S&P 400
S&P 500
DJ-Basic
12/10
Minerals Technologies Inc.
12/11
S&P 500
12/12
S&P Midcap 400
Dow Jones US Industrials
Dow Jones US Basic Materials
S&P MidCap 400 Materials Sector
*$100 invested on 12/31/09 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2013 S&P, a division of The McGraw -Hill Companies Inc. All rights reserved.
Copyright© 2013 Dow Jones & Co. All rights reserved.
Minerals Technologies Inc.
S&P 500
S&P Midcap 400
Dow Jones US Industrials
Dow Jones US Basic Materials
S&P MidCap 400 Materials Sector
12/09
12/10
12/11
12/12
100.00
100.00
100.00
100.00
100.00
100.00
120.53
115.06
126.64
126.02
131.73
125.46
104.51
117.49
124.45
125.03
112.34
123.92
148.33
136.30
146.69
147.37
124.12
153.23
19
The graph below compares Minerals Technologies Inc.'s cumulative 5-year total shareholder return on common stock with the
cumulative total returns of the S&P 500 index, the Dow Jones US Industrials index, the S&P Midcap 400 index, the Dow Jones US
Basic Materials index, and the S&P MidCap 400 Materials Sector. The graph tracks the performance of a $100 investment in our
common stock and in each index (with the reinvestment of all dividends) from 12/31/2007 to 12/31/2012.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Minerals Technologies Inc., the S&P 500 Index, the S&P Midcap 400 Index,
the Dow Jones US Industrials Index, the Dow Jones US Basic Materials Index,
and S&P MidCap 400 Materials Sector
$140
$130
$120
$110
$100
$90
$80
$70
$60
$50
$40
S&P Materials
S&P 400
MTX
DJIA-US
S&P 500
DJ-Basic
12/07
12/08
12/09
12/10
12/11
12/12
Minerals Technologies Inc.
S&P 500
S&P Midcap 400
Dow Jones US Industrials
Dow Jones US Basic Materials
S&P MidCap 400 Materials Sector
*$100 invested on 12/31/07 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2013 S&P, a division of The McGraw -Hill Companies Inc. All rights reserved.
Copyright© 2013 Dow Jones & Co. All rights reserved.
Minerals Technologies Inc.
S&P 500
S&P Midcap 400
Dow Jones US Industrials
Dow Jones US Basic Materials
S&P MidCap 400 Materials Sector
12/07
12/08
12/09
12/10
12/11
12/12
100.00
100.00
100.00
100.00
100.00
100.00
61.28
63.00
63.77
60.45
49.18
58.16
82.02
79.67
87.61
76.21
81.40
86.12
98.86
91.67
110.94
96.05
107.23
108.05
85.72
93.61
109.02
95.29
91.45
106.72
121.66
108.59
128.51
112.32
101.04
131.96
20
Item 6. Selected Financial Data
Dollars in Millions, Except Per Share Data
Income Statement Data:
2012
2011
2010
2009
2008
Net sales ............................................................................... $
Cost of goods sold ................................................................
Production margin ...........................................................
1,005.6 $
786.2
219.4
1,044.9 $
832.7
212.2
1,002.4 $
793.2
209.2
907.3 $
751.5
155.8
1,112.2
891.7
220.5
Marketing and administrative expenses ...............................
Research and development expenses ...................................
Impairment of assets ............................................................
Restructuring and other costs ...............................................
Income (loss) from operations .........................................
89.2
20.2
--
--
110.0
92.1
19.3
--
0.5
100.3
Non-operating income (deductions), net ..............................
(3.0 )
(2.6 )
Income (loss) from continuing operations before
Provision (benefit) for taxes on income (loss) ...............
Provision (benefit) for taxes on income (loss) .....................
Income (loss) from continuing operations .......................
Income (loss) from discontinued operations, net of tax ..
Consolidated net income (loss) ......................................
Less: Net income attributable to
non-controlling interests .........................................
Net income (loss) attributable to Minerals
Technologies Inc. (MTI) ....................................... $
107.0
30.8
76.2
--
76.2
97.7
27.5
70.2
--
70.2
90.5
19.6
--
0.8
98.3
0.6
98.9
29.0
69.9
--
69.9
91.1
19.9
39.8
22.0
(17.0 )
(6.1 )
(23.1 )
(5.4 )
(17.7 )
(3.2 )
(20.9 )
(2.9 )
101.8
23.1
0.2
13.4
82.0
0.3
82.3
24.1
58.2
10.3
68.5
(3.2)
(2.1 )
(2.7 )
(3.0 )
74.1 $
67.5 $
66.9 $
(23.8 ) $
65.3
Earnings Per Share
Basic:
Earnings (loss) from continuing operations
attributable to MTI…………………………………..
Earnings (loss) from discontinued operations
attributable to MTI…………………………………..
$
2.10 $
1.87 $
1.80 $
(0.55 ) $
--
--
--
(0.09 )
Basic earnings (loss) per share attributable to MTI ......... $
2.10 $
1.87 $
1.80 $
(.064 ) $
Diluted:
Earnings (loss) from continuing operations
attributable to MTI…………………………………..
Earnings (loss) from discontinued operations
attributable to MTI…………………………………..
$
2.09 $
1.86 $
1.79 $
(0.55 ) $
--
--
--
(0.09 )
Diluted earnings (loss) per share attributable to MTI ...... $
2.09 $
1.86 $
1.79 $
(0.64 ) $
1.46
0.27
1.73
1.45
0.27
1.72
Weighted average number of common shares outstanding:
Basic ..............................................................................
Diluted ...........................................................................
Dividends declared per common share ................................ $
Balance Sheet Data:
Working capital .................................................................... $
Total assets ...........................................................................
Long-term debt .....................................................................
Total debt .............................................................................
Total shareholders' equity ....................................................
35,340
35,529
0.125 $
36,018
36,236
37,228
37,386
37,448
37,448
0.10 $
0.10 $
0.10 $
37,786
37,966
0.10
514.4 $
539.4 $
520.3 $
447.8 $
1,211.2
8.5
92.6
813.7
1,165.0
85.4
99.8
768.0
1,116.1
92.6
97.2
782.7
1,072.1
92.6
104.1
747.7
380.7
1,067.6
97.2
116.2
734.8
Shares and per share amounts have been retrospectively adjusted for all periods presented for the two-for-one stock split on December
11, 2012. See Note 1 to the consolidated financial statements, "Summary of Significant Accounting Policies", for additional
information.
21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement for “Safe Harbor” Purposes under the Private Securities Litigation Reform Act of 1995
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf
of the Company. This report contains statements that the Company believes may be “forward-looking statements” within the meaning
of Section 21E of the Securities Exchange Act of 1934, particularly statements relating to the Company’s objectives, plans or goals,
future actions, future performance or results of current and anticipated products, sales efforts, expenditures, and financial results.
From time to time, the Company also provides forward-looking statements in other publicly-released materials, both written and oral.
Forward-looking statements provide current expectations and forecasts of future events such as new products, revenues and financial
performance, and are not limited to describing historical or current facts. They can be identified by the use of words such as
“believes,” “expects,” “plans,” “intends,” “anticipates,” and other words and phrases of similar meaning.
Forward-looking statements are necessarily based on assumptions, estimates and limited information available at the time they are
made. A broad variety of risks and uncertainties, both known and unknown, as well as the inaccuracy of assumptions and estimates,
can affect the realization of the expectations or forecasts in these statements. Many of these risks and uncertainties are difficult to
predict or are beyond the Company’s control. Consequently, no forward-looking statements can be guaranteed. Actual future results
may vary materially. Significant factors affecting the expectations and forecasts are set forth under “Item 1A — Risk Factors” in this
Annual Report on Form 10-K.
The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances that arise after
the date hereof. Investors should refer to the Company's subsequent filings under the Securities Exchange Act of 1934 for further
disclosures.
Income and Expense Items as a Percentage of Net Sales
Year Ended December 31,
2012
2011
Net sales ..............................................................................
Cost of goods sold ...............................................................
Production margin ..........................................................
100.0 %
78.2
21.8
100.0 %
79.7
20.3
Marketing and administrative expenses ..............................
Research and development expenses ..................................
Restructuring charges..........................................................
Income from operations .................................................
Income from continuing operations before
Provision for taxes ....................................................
Provision (benefit) for taxes on income ..............................
Non-controlling interests ....................................................
8.9
2.0
--
10.9
10.6
3.0
0.2
8.8
1.9
--
9.6
9.4
2.6
0.3
2010
100.0%
79.1
20.9
9.0
2.0
0.1
9.8
9.9
2.9
0.3
Net income .....................................................................
7.4 %
6.5 %
6.7%
Executive Summary
The Company reported record earnings per share for 2012 of $2.09 per share, an increase of 12% from 2011. The results reflected
continued solid financial performance.
Worldwide sales were $1.01 billion compared with $1.04 billion in 2011, a decrease of 4 percent. Foreign exchange had an
unfavorable impact on sales of $26.5 million or 3 percentage points. In addition to the impact of foreign exchange, several temporary
and permanent paper and steel mill closures in Europe and North America contributed to the sales decrease, which was partially offset
by Paper PCC sales from new satellite facilities and the continued ramp up of satellite facilities that began operations in the past year.
Income from operations grew 10 percent to $110.0 million as compared to $100.3 million in the prior year. This increase was due
to a strong operating performance highlighted by 6-percent company-wide productivity improvements, which resulted in savings of $4
million, and a 3 percent decrease, or $4 million savings, in total overhead expenses.
In 2012, the Company continued to advance the execution of its growth strategies of geographic expansion and new product
innovation and development. During the year, we began operations in the fourth quarter of two new satellite plants, one in India and
one in Thailand. In addition, we signed contracts for two new satellite PCC facilities in China. The two new satellite facilities in
China will add approximately 132,000 tons of production capacity and should be operational by the first quarter of 2014. Six more
commercial agreements were signed with paper mills for our FulFillTM portfolio of products bringing the total to ten as of December
31, 2012. We presently have eleven commercial contracts for FulFill™. In 2012 the FulFill™ program generated $1.4 million of
22
operating income. We expect the contribution of our FulFill™ program to generate operating income between $2.5 million and $3.0
million in 2013. The Refractory segment introduced a new, fourth generation Lacam® laser measurement system and expect additional
Lacam® sales in 2013. We also signed an agreement with United Steel Company B.S.C. (SULB) to perform all refractory
maintenance at a greenfield steel mill in Bahrain that started up in the third quarter of 2012. Minteq, working with other refractory
companies, is responsible for coordinating refractory maintenance of the steel furnaces and other steel production vessels. We
generated approximately $3 million in revenue from this contract in 2012 and we expect to generate between $8 million-$10 million
per year of revenue over the 3 year term of the contract.
The Company's balance sheet as of December 31, 2012 continues to be very strong. Cash, cash equivalents and short-term
investments at December 31, 2012 were approximately $468 million. Our cash flows from operations were approximately $139
million in 2012. In addition, we had available lines of credit of $183.5 million, our debt to equity ratio was 0.10, and our current ratio
was 3.1.
We face some significant risks and challenges in the future:
(cid:120) The industries we serve, primarily paper, steel, construction and automotive, have been adversely affected by
the uncertain global economic climate, primarily in Europe. Although these markets have stabilized, our
global business could be adversely affected by further decreases in economic activity. Our Refractories
segment primarily serves the steel industry. Although North American production improved slightly in 2012
as compared with the prior year, we saw declines in European steel production and it remains below 2008
levels. In the paper industry, which is served by our Paper PCC product line, 2012 production levels for
printing and writing papers within North America and Europe, our two largest markets were 5% and 4%
below the prior year. In addition, our Processed Minerals and Specialty PCC product lines are affected by
the domestic building and construction markets and the automotive market. Housing starts in 2012 averaged
approximately 781 thousand units, and were up 28% from 2011 levels. Housing starts were at a peak rate of
2.1 million units in 2005.
(cid:120) Some of our customers may experience mill shutdowns due to further consolidations, or may face liquidity
issues, or bankruptcy, which could deteriorate the aging of our accounts receivable, increase our bad debt
exposure and possibly trigger impairment of assets or realignment of our businesses.
(cid:120) Consolidations and rationalizations in the paper and steel industries concentrate purchasing power in the
hands of fewer customers, increasing pricing pressure on suppliers such as us.
(cid:120) Most of our Paper PCC sales are subject to long-term contracts that may be terminated pursuant to their
terms, or may be renewed on terms less favorable to us.
(cid:120) We are subject to volatility in pricing and supply availability of our key raw materials used in our Paper PCC
product line and Refractory product line.
(cid:120) We continue to rely on China for a portion of our supply of magnesium oxide in the Refractories segment,
which may be subject to uncertainty in availability and cost.
(cid:120) Fluctuations in energy costs have an impact on all of our businesses.
(cid:120) Changes in the fair market value of our pension assets, rates of return on assets, and discount rates could
continue to have a significant impact on our net periodic pension costs as well as our funding status.
(cid:120) As we expand our operations abroad we face the inherent risks of doing business in many foreign countries,
including foreign exchange risk, import and export restrictions, and security concerns.
(cid:120) The Company’s operations, particularly in the mining and environmental areas (discharges, emissions and
greenhouse gases), are subject to regulation by federal, state and foreign authorities and may be subject to,
and presumably will be required to comply with, additional laws, regulations and guidelines which may be
adopted in the future.
During the second quarter of 2011, M-real Corporation announced plans to divest its Alizay paper mill in France. Since that time,
the mill has not been operating. In January 2013, Double A Paper Company announced it had acquired the Alizay mill. While there
can be no assurance, we expect to negotiate a contract and the paper mill to resume operations in the second half of 2013. In 2011,
sales from our Alizay mill were approximately $7 million.
During the third quarter of 2011, NewPage Corporation filed for Chapter 11 bankruptcy protection. In 2012, the Company did
business with five NewPage mills, including operating three satellite PCC facilities at NewPage locations. In December 2012,
NewPage emerged from the bankruptcy process and the Company continues to supply PCC to these mills. Annual sales to NewPage
locations in 2012 were approximately $22 million.
The Company has evaluated these facilities for impairment of assets and, based upon the information currently available and
probability-weighted cash flows of various potential outcomes, has determined that no impairment charge was required in the fourth
quarter.
23
Outlook
Looking forward, we remain cautious about the state of the global economy, particularly in Europe, and the impact it will have on
our product lines. Although we saw market stabilization and improvement in 2012, there remains uncertainty as to the sustainability
of the upturn.
In 2013, the Company will continue to focus on innovation and new product development and other opportunities for sales growth
as follows:
(cid:120) Develop multiple high-filler technologies, such as filler-fiber, under the FulFillTM platform of products, to
increase the fill rate in freesheet paper and continue to progress with commercial discussions and full-scale
paper machine trials.
(cid:120) Increase our sales of PCC for paper by further penetration of the markets for paper filling at both freesheet
and groundwood mills, particularly in emerging markets.
(cid:120) Expand the Company's PCC coating product line using the satellite model.
(cid:120) Promote the Company's expertise in crystal engineering, especially in helping papermakers customize PCC
morphologies for specific paper applications.
(cid:120) Expand PCC produced for paper filling applications by working with industry partners to develop new
methods to increase the ratio of PCC for fiber substitutions.
(cid:120) Develop unique calcium carbonates and talc products used in the manufacture of novel biopolymers, a new
market opportunity.
(cid:120) Deploy new talc and GCC products in paint, coating and packaging applications.
(cid:120) Deploy value-added formulations of refractory materials that not only reduce costs but improve performance.
(cid:120) Expand our solid core wire product line into BRIC, Middle Eastern and other Asian countries.
(cid:120) Deploy our laser measurement technologies into new applications.
(cid:120) Expand our refractory maintenance model to other steel makers globally.
(cid:120) Deploy operational excellence principles into all aspects of the organization, including system infrastructure
and lean principles.
(cid:120) Explore selective acquisitions to fit our core competencies in minerals and fine particle technology.
However, there can be no assurance that we will achieve success in implementing any one or more of these opportunities.
Results of Operations
Sales
(Dollars in millions)
% of
Total
Sales
Net Sales
55.9 %
U.S. ............................................ $
International ...............................
44.1 %
Net sales ................................ $ 1,005.6 100.0 %
562.5
443.1
2012
Growth
1 % $
2011
557.5
(9) %
487.4
(4) % $ 1,044.9
Paper PCC .................................. $
Specialty PCC.............................
PCC Products ........................ $
Talc ............................................. $
GCC ............................................
Processed Minerals Products $
480.3
65.9
546.2
48.1
67.9
116.0
47.8 %
6.5 %
54.3 %
4.8 %
6.7 %
11.5 %
(3) % $
4 %
(3) % $
3 % $
(1) %
0 % $
497.0
63.6
560.6
46.9
68.6
115.5
% of
Total
Sales
53.4 %
46.6 %
100.0 %
47.5 %
6.1 %
53.6 %
4.5 %
6.6 %
11.1 %
% of
Total
Sales
Growth
2010
53.3 %
534.3
4 % $
4 %
46.7 %
468.1
4 % $ 1,002.4 100.0 %
0 % $
10 %
1 % $
7 % $
3 %
5 % $
496.6
58.0
554.6
44.0
66.4
110.4
49.5 %
5.8 %
55.3 %
4.4 %
6.6 %
11.0 %
Specialty Minerals Segment $
662.2
65.8 %
(2) % $
676.1
64.7 %
2 % $
665.0
66.3 %
Refractory Products .................... $
Metallurgical Products................
Refractories Segment............. $
264.1
79.3
343.4
26.3 %
7.9 %
34.2 %
(8) % $
(3) %
(7) % $
287.4
81.4
368.8
27.5 %
7.8 %
35.3 %
9 % $
12 %
9 % $
264.5
72.9
337.4
26.4 %
7.3 %
33.7 %
Net sales ............................... $ 1,005.6 100.0 %
(4) % $ 1,044.9
100.0 %
4 % $ 1,002.4 100.0 %
Worldwide net sales in 2012 decreased 4% from the previous year to $1.01 billion. Foreign exchange had an unfavorable impact
on sales of $26.5 million or 3 percentage points of growth. Sales in the Specialty Minerals segment, which includes the PCC and
Processed Minerals product lines, decreased 2% to $662.2 million from $676.1 million in 2011. Sales in the Refractories segment
decreased 7% to $343.4 million from $368.8 million in the previous year. In 2011, worldwide net sales increased 4% to $1,044.9
billion from $1,002.4 billion in the prior year. Foreign exchange had a favorable impact on sales of $21.0 million, or less than 2
24
percentage points of growth. In 2011, Specialty Minerals segment sales increased 2% and Refractories segment sales increased 9%
from 2010 levels.
In 2012, worldwide net sales of PCC, which is primarily used in the manufacturing process of the paper industry, decreased 3% to
$546.2 million from $560.6 million in the prior year. Foreign exchange had an unfavorable impact on sales of approximately $17.3
million or 3 percentage points of growth. Worldwide net sales of Paper PCC decreased 3% to $480.3 million from the $497.0 million
in the prior year. Volumes for this product line decreased 3 percent, primarily in Europe. Sales were affected by the closure of one
satellite PCC facility in Finland, and the temporary shutdown of a satellite PCC facility in France, both of which occurred in the fourth
quarter of 2011. There were, however, increased volumes from new satellites which largely offset the volume decline. Sales of
Specialty PCC increased 4% to $65.9 million from $63.6 million in 2011. This increase was attributable to higher volumes.
In 2011 worldwide net sale of PCC, which is primarily used in the manufacturing process of the paper industry, increased 1% to
$560.6 million from $554.6 million in the prior year. Foreign exchange had a favorable impact on sales of approximately $10.9
million or less than 2 percentage points of growth. Worldwide net sales of Paper PCC were flat at $497.0 million, increasing slightly
from the $496.6 million in the prior year. Total Paper PCC volumes decreased 4% from prior year levels with declines in all regions.
Volume decreases of approximately $20.7 million were offset by contractual price increases and the effects of foreign exchange.
Sales of Specialty PCC increased 10% to $63.6 million from $58.0 million in 2010. This increase was attributable to higher volumes
and the effects of foreign exchange.
Net sales of Processed Minerals products in 2012 were relatively flat at $116.0 million as compared to $115.5 million in 2011.
GCC products decreased 1% to $67.9 million while talc products increased 3% to $48.1 million. Volume decreases of 2% were offset
by price increases.
Net sales of Processed Minerals products in 2011 increased 5% to $115.5 million from $110.4 million in 2010. GCC products and
talc products increased 3% and 7% to $68.6 million and $46.9 million, respectively. The increases in the Processed Minerals product
line was attributable to increased volumes due to slight improvements in the residential and commercial construction markets and
moderate improvements in the automotive market. Volumes increased 7% from the prior year.
Net sales in the Refractories segment in 2012 decreased 7% to $343.4 million from $368.8 million in the prior year. Foreign
exchange had an unfavorable impact on sales of $9.3 million, or approximately 3 percentage points. Sales of refractory products and
systems to steel and other industrial applications decreased 8% to $264.1 million from $287.4 million. Sales of metallurgical products
within the Refractories segment decreased 3% to $79.3 million as compared with $81.4 million last year. The decreases in all product
lines within this segment were primarily due to volume reductions in all regions and the effects of foreign exchange.
Net sales in the Refractories segment in 2011 increased 9% to $368.8 million from $337.4 million in the prior year. Foreign
exchange had a favorable impact on sales of $10.1 million, or approximately 3 percentage points. Sales of refractory products and
systems to steel and other industrial applications increased 9% to $287.4 million from $264.5 million. Sales of metallurgical products
within the Refractories segment increased 12% to $81.4 million as compared with $72.9 million last year. The increases in all product
lines within this segment were primarily due to price increases and the effects of foreign exchange.
Net sales in the United States grew approximately 1% to $562.5 million in 2012 and represented approximately 55.9% of
consolidated net sales. International sales decreased approximately 9% to $443.1 million from $487.4 million. The decrease in sales
was primarily due to lower worldwide volumes and the effects of foreign exchange.
Operating Costs and Expenses
(Dollars in millions)
Cost of goods sold ...................................................... $
Marketing and administrative .................................... $
Research and development ........................................ $
Restructuring charges................................................. $
786.2
89.2
20.2
--
(6) %
(3) %
5 %
(100) %
$
$
$
$
832.7
92.1
19.3
0.5
5 % $
2 % $
(2) % $
(38) % $
2012
Growth
2011 Growth
2010
793.2
90.5
19.6
0.8
Cost of goods sold in 2012 was 78.2% of sales compared with 79.7% in the prior year. Production margin increased $7.2 million,
or 3% as compared with a 4% decrease in sales. In the Specialty Minerals segment, production margin increased 6%, or $8.1 million,
as compared with a 2% decrease in sales. This increase was primarily attributable to increased pricing of $20 million, lower energy
costs $1.3 million, continued productivity improvements and cost improvements of $4 million and combined higher volumes from our
new satellite facilities and processed minerals product lines of $7 million. These items were offset by increased material costs of $12
million, the effects of continued permanent and temporary PCC facility closures and other volume declines of $8 million and the
effects of foreign exchange of approximately $2.7 million. In the Refractories segment, production margin increased $0.9 million, or
1% as compared with a 7% decrease in sales. This was primarily attributable to lower material costs of $9 million and increased
pricing of $1.5 million, which more than offset the combined effect of volume declines and lower equipment sales of $10 million and
the effects of foreign exchange.
25
Cost of goods sold in 2011 was 79.7% of sales compared with 79.1% in the prior year. Production margin increased $3 million, or
1% as compared with a 4% increase in sales. In the Specialty Minerals segment, production margin decreased 1%, or $0.7 million, as
compared with a 2% increase in sales. This segment incurred higher raw materials and energy costs that were not fully recovered by
price increases. In the Refractories segment, production margin increased $3.7 million, or 5% as compared with a 9% increase in
sales. This segment incurred higher raw material costs that were partially offset by price increases, higher equipment sales and the
effects of foreign exchange.
Marketing and administrative costs decreased 3% to $89.2 million in 2012 from $92.1 million in the prior year. Marketing and
administrative costs as a percentage of net sales however, represented 8.9% of net sales as compared with 8.8% in the prior year. In
2011, marketing and administrative expenses were 1.7% higher than in the prior year.
Research and development expenses increased 5% in 2012 to $20.2 million from $19.3 million and represented 2.0% of net sales.
In 2011, research and development expense decreased 2% from 2010 and represented 1.9% of net sales.
Income from Operations
(Dollars in millions)
2012
Growth
2011
Growth
2010
Income from operations .............................. $ 110.0
10 % $ 100.3
2 %
$ 98.3
The Company recorded income from operations in 2012 of $110.0 million as compared with $100.3 million in the prior year.
Included in income from operations in 2011 were restructuring charges of $0.5 million.
The Specialty Minerals segment recorded income from operations of $84.1 million in 2012 as compared with $72.8 million in the
prior year. Included in income from operations in 2011 were restructuring charges of $1.0 million.
The Refractories segment recorded income from operations of $32.6 million in 2012 as compared to $33.2 million in the prior year.
Included in income from operations in 2011 were restructuring reversals of ($0.6) million.
In 2011, the Specialty Minerals segment recorded income from operations of $72.8 million as compared $74.7 million in the prior
year. The Refractories segment recorded income from operations of $33.2 million in 2011 as compared with $28.0 million in the
previous year.
Non-Operating Income (Deductions)
(Dollars in millions)
2012
Growth
2011
Growth
2010
Non-operating income (deductions), net ..... $
* Percentage not meaningful
(3.0)
15 % $
(2.6)
* % $
0.6
The Company recorded non-operating deductions of $3.0 million in 2012 as compared with $2.6 million in the previous year. This
increase primarily relates to lower interest income and slightly higher foreign exchange losses.
The Company recorded non-operating deductions of $2.6 million in 2011 as compared with non-operating income of $0.6 million
in the previous year. Included in non-operating deductions in 2011 were foreign currency losses of $1.4 million recognized upon the
sale of a 50% interest in and deconsolidation of the Company’s joint venture in Korea.
Provision for Taxes on Income
(Dollars in millions)
2012
Growth
2011
Growth
2010
Provision for taxes on income ..................... $
30.8
12 %
$
27.5
(5) % $
29.0
The Company recorded provision for taxes on income of $30.8 million in 2012 as compared with $27.5 million in the previous
year. The effective tax rate for 2012 was 28.8% as compared with 28.1% in the prior year. The increase in the tax rate in the current
year primarily relates to a prior year favorable United States tax court case settlement and the resulting expiration of the statute of
limitations of the tax years related to the tax court case.
The Company recorded provision for taxes on income of $27.5 million in 2011 as compared to $29.0 million in the previous year.
The effective tax rate for 2011 was 28.1% as compared with 29.3% in the previous year. The decrease in the tax rate in the current
year primarily relates to a favorable United States tax court case settlement.
The factors having the most significant impact on our effective tax rates in recent periods are the rate differential related to foreign
earnings indefinitely invested, percentage depletion, and the reversal of tax reserves as a result of a tax court case settlement.
26
Percentage depletion allowances (tax deductions for depletion that may exceed our tax basis in our mineral reserves) are available
to us under the income tax laws of the United States for operations conducted in the United States. The tax benefits from percentage
depletion were $4.1 million in 2012, $4.0 million in 2011, and $3.7 million in 2010.
We operate in various countries around the world that have tax laws, tax incentives and tax rates that are significantly different than
those of the United States. Many of these differences combine to move our overall effective tax rate higher or lower than the United
States statutory rate depending on the mix of income relative to income earned in the United States. The effects of foreign earnings
and the related foreign rate differentials resulted in a decrease of income tax expense of $5.0 million, $0.9 million and $3.1 million in
2012, 2011 and 2010, respectively. The increase of income tax benefits in 2012 as compared with 2011 results from the change in the
mix of earnings in the foreign jurisdictions in 2012, statutory rate changes and a change in the amount of local income and tax
adjustments. The decrease of income tax benefits in 2011 as compared with 2010 results from the change in the mix of earnings in the
foreign jurisdictions in 2011, statutory tax rate changes, and a change in the amount of local income and tax adjustments.
Income from Continuing Operations
(Dollars in millions)
2012
Growth
2011
Growth
2010
Income from continuing operations .................... $
76.3
9 %
$
70.3
0% $
69.9
The Company recognized income from continuing operations of $76.3 million in 2012 as compared to $70.3 million in 2011. In
2010, the company recorded income from operations of $69.9 million.
Non-controlling Interests
(Dollars in millions)
2012
Growth
2011
Growth
2010
Non-controlling interests ............................ $
2.1
(22) % $
2.7
(10) %
$
3.0
The decrease in the income attributable to non-controlling interests is due to the lower profitability in our joint ventures.
Net Income attributable to Minerals
Technologies Inc. (MTI)
(Dollars in millions)
2012
Growth
2011
Growth
2010
Net income attributable to MTI .................. $
74.1
10 %
$
67.5
1 % $
66.9
The Company recorded net income of $74.1 million in 2012 as compared to $67.5 million in 2011. Diluted earnings per share
were $2.09 as compared with $1.86 in the previous year.
In 2010, the Company recorded net income of $66.9 million and diluted earnings per share of $1.79.
Liquidity and Capital Resources
Cash flows provided from operations in 2012 were used principally to fund $52.1 million of capital expenditures, and repurchase
$25.9 million in treasury shares. Cash provided from operating activities totaled $139.9 million in 2012 as compared with $133.7
million in 2011. The increase in cash from operating activities was primarily due to higher net income and lower income tax payments
which were partially offset by increased pension plan funding. Included in cash flow from operations was pension plan funding of
approximately $17.0 million, $6.6 million and $8.5 million for the years ended December 31, 2012, 2011 and 2010, respectively.
Trade working capital is defined as trade accounts receivable, trade accounts payable and inventories. Our total days of trade
working capital increased to 59 days from 55 days in 2011 primarily due to higher receivables and lower payables in our Refractories
segment.
The funding status of the Company’s pension plans was approximately 66% at December 31, 2012 and we have met all minimum
funding requirements. The funding status at December 31, 2011 was 70%. The reduction in our funding status was due to a large
increase in the projected benefit obligation from a change in the discount rate.
In 2011, the Company’s Board of Directors authorized the Company’s management to repurchase, at its discretion, up to $75
million of additional shares over a two-year period. As of December 31, 2012, 633,575 shares have been repurchased under this
program for $30.7 million, or an average price of approximately $48.38 per share.
On January 23, 2013, the Company's Board of Directors declared a regular quarterly dividend on its common stock of $0.05 per
share. No dividend will be payable unless declared by the Board and unless funds are legally available for payment thereof.
27
The Company is required to make future payments under various contracts, including debt agreements and lease agreements. The
Company also has commitments to fund its pension plans and provide payments for other postretirement benefit plans. A summary of
the Company’s outstanding contractual obligations as of December 31, 2012 is as follows:
Contractual Obligations
(millions of dollars)
Debt.............................................................................. $ 85.5 $
Interest related to long term debt .................................
Total
2.7
29.0
Estimated pension and post retirement plan funding
15.1
Other long term liabilities ............................................
Operating lease obligations ..........................................
18.9
Total contractual obligations ................................ $ 151.2
Payments Due by Period
2013
77.0
2.6
11.0
0.4
3.8
94.8
2014-
2015
8.5
0.1
$
18.0
--
5.2
31.8
2016-
2017
After
2017
$
-- $
--
--
--
3.1
3.1
--
--
--
14.7
6.8
21.5
Long-term debt amounts in the preceding table represent the principal amounts of all outstanding long-term debt, including current
portion. Maturities for long-term debt extend to 2014. The Company’s $75 million of private placement debt will mature in October
2013. The Company expects to refinance these notes.
Interest related to long-term debt is based on interest rates in effect as of December 31, 2012 and is calculated on debt with
maturities that extend to 2014. As the contractual interest rates for certain debt are variable, actual cash payments may differ from the
estimates provided in the preceding table.
Estimated minimum required pension funding and post-retirement benefits are based on actuarial estimates using current
assumptions for discount rates, long-term rate of return on plan assets, rate of compensation increases, and health care cost trend rates.
The Company has determined that it is not practicable to present expected pension funding and other postretirement benefit payments
beyond 2015 and, accordingly, no amounts have been included in the table beyond such dates.
Other long term liabilities include asset retirement obligations. The Company will be contractually required to retire intangible
long-lived assets at its PCC satellite facilities and mining operations.
The Company has several non-cancelable operating leases, primarily for office space and equipment. Operating lease obligations
includes future minimum rental commitments under non-cancelable leases.
We have $190.7 million in uncommitted short-term bank credit lines, of which $7.1 million was in use at December 31, 2012. The
credit lines are primarily in the US, with approximately $20.7 million or 11% outside the US. The credit lines are generally one year
in term at competitive market rates at large well-established institutions. The Company typically uses its available credit lines to fund
working capital requirements or local capital spending needs. At the present time, we have no indication that the financial institutions
would be unable to commit to these lines of credit should the need arise. We anticipate that capital expenditures for 2013 should be
between $65 million to $75 million, principally related to the construction of PCC plants and other opportunities that meet our
strategic growth objectives. We expect to meet our other long-term financing requirements from internally generated funds,
uncommitted bank credit lines and, where appropriate, project financing of certain satellite plants. The aggregate maturities of long-
term debt are as follows: 2013 - $77.0 million; 2014 - $8.5 million; 2015 - $-- million; 2016 - $-- million; 2017 - $-- million; thereafter
- $-- million.
The Company's debt to capital ratio is 10%, which is well below the only financial covenant ratio in its debt agreements.
The total amount of contingent obligations associated with gross unrecognized tax benefits for uncertain tax positions, including
positions impacting only the timing of tax benefits, was $5.8 million at December 31, 2012. Payment of these obligations would
result from settlements with taxing authorities. Due to the difficulty in determining the timing of settlements, these obligations are not
included in the table above. We do not expect to make a tax payment related to these obligations within the next year that would
significantly impact liquidity.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these
financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities.
On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, allowance for
doubtful accounts, valuation of inventories, valuation of long-term assets, goodwill and other intangible assets, pension plan
assumptions, income taxes, asset retirement obligations, income tax valuation allowances, stock-based compensation, and litigation
and environmental liabilities. We base our estimates on historical experience and on other assumptions that we believe to be
28
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that cannot readily be determined from other sources. There can be no assurance that actual results will not differ from
those estimates.
We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of
our consolidated financial statements:
(cid:120)
(cid:120)
(cid:120)
Revenue recognition: Revenue from sale of products is recognized at the time the goods are shipped and title
passes to the customer. In most of our PCC contracts, the price per ton is based upon the total number of tons
sold to the customer during the year. Under those contracts, the price billed to the customer for shipments
during the year is based on periodic estimates of the total annual volume that will be sold to the customer.
Revenues are adjusted at the end of each year to reflect the actual volume sold. There were no significant
revenue adjustments in the fourth quarter of 2012 and 2011, respectively. We have consignment arrangements
with certain customers in our Refractories segment. Revenues for these transactions are recorded when the
consigned products are consumed by the customer. Revenues from sales of equipment are recorded upon
completion of installation and receipt of customer acceptance. Revenues from services are recorded when the
services are performed.
Allowance for doubtful accounts: Substantially all of our accounts receivable are due from companies in the
paper, construction and steel industries. Accounts receivable are reduced by an allowance for amounts that
may become uncollectible in the future. Such allowance is established through a charge to the provision for
bad debt expenses. We recorded bad debt expenses of $1.0 million, $0.9 million and $0.1 million in 2012,
2011 and 2010, respectively. In addition to specific allowances established for bankrupt customers, we also
analyze the collection history and financial condition of our other customers considering current industry
conditions and determine whether an allowance needs to be established or adjusted.
Property, plant and equipment, goodwill, intangible and other long-lived assets: Property, plant and equipment
are depreciated over their useful lives. Useful lives are based on management’s estimates of the period that the
assets can generate revenue, which does not necessarily coincide with the remaining term of a customer’s
contractual obligation to purchase products made using those assets. Our sales of PCC are predominately
pursuant to long-term evergreen contracts, initially ten years in length, with paper mills at which we operate
satellite PCC plants. The terms of many of these agreements have been extended, often in connection with an
expansion of the satellite PCC plant. Failure of a PCC customer to renew an agreement or continue to
purchase PCC from our facility could result in an impairment of assets or accelerated depreciation at such
facility.
(cid:120)
Valuation of long-lived assets, goodwill and other intangible assets: We assess the possible impairment of
long-lived assets and identifiable amortizable intangibles whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Goodwill is reviewed for impairment at least annually.
Factors we consider important that could trigger an impairment review include the following:
• Significant under-performance relative to historical or projected future operating results;
• Significant changes in the manner of use of the acquired assets or the strategy for the overall business;
• Significant negative industry or economic trends;
• Market capitalization below invested capital.
The goodwill balance for each reporting unit as of December 31, 2012 and 2011, respectively, was as follows:
($ in millions)
PCC
Processed Minerals
Refractories
Total
$
$
December 31,
2012
December 31,
2011
9.5 $
4.6
51.7
65.8 $
9.2
4.6
50.9
64.7
Annually, the Company performs a qualitative assessment for each of its reporting units to determine if the two
step process for impairment testing is required. If the Company determines that it is more likely than not that
the fair value of a reporting unit is less than its carrying amount, the Company then evaluates the recoverability
of goodwill using a two-step impairment test approach at the reporting unit level. Step one involves a)
developing the fair value of total invested capital of each reporting unit in which goodwill is assigned; and b)
comparing the fair value of total invested capital for each reporting unit to its carrying amount, to determine if
29
there is goodwill impairment. Should the carrying amount for a reporting unit exceed its fair value, then the
step one test is failed, and the magnitude of any goodwill impairment is determined under step two. The
amount of impairment loss is determined in Step Two by comparing the implied fair value of reporting unit
goodwill with the carrying amount of goodwill.
The Company has three reporting units; PCC, Processed Minerals and Refractories. We identify our reporting
units by assessing whether the components of our operating segments constitute businesses for which discrete
financial information is available and management regularly reviews the operating results of those components.
In the fourth quarter of 2012, the Company performed a qualitative assessment of each of its reporting units and
determined it was not more likely than not that the fair value of each of its reporting units was less than their
carrying values.
(cid:120)
Accounting for income taxes: As part of the process of preparing our consolidated financial statements, we are
required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves
estimating current tax expense together with assessing temporary differences resulting from differing
treatments of items for tax and accounting purposes. These differences result in deferred tax assets and
liabilities, which are included in the consolidated balance sheet. We must then assess the likelihood that our
deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is
not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or change
this allowance in a period, we must include an expense within the tax provision in the Consolidated Statements
of Operations.
Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in
future years. Such assets arise because of temporary differences between the financial reporting and tax bases
of assets and liabilities, as well as from net operating loss. We evaluate the recoverability of these future tax
deductions by assessing the adequacy of future expected taxable income from all sources, including reversal of
taxable temporary differences and forecasted operating earnings. These sources of income inherently rely
heavily on estimates. We use our historical experience and business forecasts to provide insight. Amounts
recorded for deferred tax assets, net of valuation allowances, were $47.5 million and $44.4 million at December
31, 2012 and 2011, respectively. Such year-end 2012 amounts are expected to be fully recoverable within the
applicable statutory expiration periods. To the extent we do not consider it more likely than not that a deferred
tax asset will be recovered, a valuation allowance is established.
The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and
are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding
our income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations change
over time. As such, changes in our subjective assumptions and judgments can materially affect amounts
recognized in the consolidated balance sheets and statements of operations. See Note 4 to the consolidated
financial statements, "Income Taxes," for additional detail on our uncertain tax positions.
(cid:404)
Pension Benefits: We sponsor pension and other retirement plans in various forms covering the majority of
employees who meet eligibility requirements. Several statistical and actuarial models which attempt to
estimate future events are used in calculating the expense and liability related to the plans. These models
include assumptions about the discount rate, expected return on plan assets and rate of future compensation
increases as determined by us, within certain guidelines. Our assumptions reflect our historical experience and
management's best judgment regarding future expectations. In addition, our actuarial consultants also use
subjective factors such as withdrawal and mortality rates to estimate these assumptions. The actuarial
assumptions used by us may differ materially from actual results due to changing market and economic
conditions, higher or lower withdrawal rates or longer or shorter life spans of participants, among other things.
Differences from these assumptions may result in a significant impact to the amount of pension
expense/liability recorded by us follows:
A one percentage point change in our major assumptions would have the following effects:
Effect on Expense
(millions of dollars)
Discount
Rate
Salary
Scale
Return on
Asset
1% increase ......................................... $
1% decrease ......................................... $
(3.7 )
4.3
$
$
0.5
(0.4 )
$
$
(1.3 )
1.3
30
Effect on Projected Benefit Obligation
(millions of dollars)
1% increase ......................................... $
1% decrease ........................................ $
Discount
Rate
Salary
Scale
(32.8 )
41.1
$
$
2.7
(2.4 )
The investment strategy for pension plan assets is to maintain a broadly diversified portfolio designed to both
preserve and grow plan assets to meet future plan obligations. The Company's average rate of return on assets
from inception through December 31, 2012 was over 9%. The Company’s assets are strategically allocated
among equity, debt and other investments to achieve a diversification level that dampens fluctuations in
investment returns. The Company’s long-term investment strategy is an investment portfolio mix of
approximately 65% in equity securities and 35% in fixed income securities. As of December 31, 2012, the
Company had approximately 70% of its pension assets in equity securities and 30% in fixed income securities.
In 2012, a net charge of $12.0 million ($7.7 million after-tax) was recorded in other comprehensive loss,
primarily due to a change in discount rates. In 2011, a net charge of $41.4 million ($25.6 million after-tax) was
recorded in other comprehensive loss, primarily due to lower discount rates and lower returns on plan assets. In
2010, a net charge of $2.2 million ($1.8 million after-tax) was recorded in other comprehensive loss, primarily
due to changes in plan assumptions.
We recognized pension expense of $20.9 million in 2012 as compared to $15.3 million in 2011, due primarily
to higher amortization of recognized actuarial losses. Accounting guidance on retirement benefits requires
companies to discount future benefit obligations back to today’s dollars using a discount rate that is based on
high-quality fixed-income investments. A decrease in the discount rate increases the pension benefit obligation,
while an increase in the discount rate decreases the pension benefit obligation. This increase or decrease in the
pension benefit obligation is recognized in Accumulated other comprehensive income (loss) and subsequently
amortized into earnings as an actuarial gain or loss. The guidance also requires companies to use an expected
long-term rate of return on plan assets for computing current year pension expense. Differences between the
actual and expected returns are also recognized in Accumulated other comprehensive income (loss) and
subsequently amortized into earnings as actuarial gains and losses. At the end of 2012, total actuarial losses
recognized in Accumulated other comprehensive income (loss) for pension plans were $93.8 million, as
compared to $84.7 million in 2011. The majority of the actuarial losses were due to decreases in the discount
rate in 2011 and 2012 and lower actual rates of return on assets than expected during the financial crisis of
2008.
Actuarial losses for pensions will be impacted in future periods by actual asset returns, discount rate changes,
actual demographic experience and other factors that impact these expenses. These losses, reported in
Accumulated other comprehensive income (loss), will generally be amortized as a component of net periodic
benefit cost on a straight-line basis over the average remaining service period of active employees expected to
receive benefits under the benefit plans. At the end of 2012, the average remaining service period of active
employees or life expectancy for fully eligible employees was 12 years. We expect our amortization of net
actuarial losses to increase by approximately $1.0 million in 2013 as compared to 2012, primarily due to a
decrease in the discount rate. We expect our pension expense to be approximately $23 million in 2013.
(cid:404) Asset Retirement Obligations: We currently record the obligation for estimated asset retirement costs at fair
value in the period incurred. Factors such as expected costs and expected timing of settlement can affect the fair
value of the obligations. A revision to the estimated costs or expected timing of settlement could result in an
increase or decrease in the total obligation which would change the amount of amortization and accretion
expense recognized in earnings over time.
A one-percent increase or decrease in the discount rate would change the total obligation by approximately
$0.1 million.
A one-percent increase or decrease in the inflation rate would change the total obligation by approximately $0.1
million.
(cid:404) Stock Based Compensation: The Company uses the Black-Scholes option pricing model to determine the fair
value of stock options on their date of grant. This model is based upon assumptions relating to the volatility of
the stock price, the life of the option, risk-free interest rate and dividend yield. Of these, stock price volatility
and option life require greater levels of judgment and are therefore critical accounting estimates.
We used a stock price volatility assumption based upon the historical and implied volatility of the Company's
stock. We believe this is a good indicator of future, actual and implied volatilities. For stock options granted in
the period ended December 31, 2012, the Company used a volatility assumption of 31.26%.
31
The expected life calculation was based upon the observed and expected time to post-vesting forfeiture and
exercise. For stock options granted during the fiscal year ended December 31, 2012, the Company used a 6.86
year life assumption.
The Company believes the above critical estimates are based upon outcomes most likely to occur. If we were to
simultaneously increase or decrease the option life by one year and the volatility by 100 basis points,
recognized compensation expense would have changed approximately $0.1 million in either direction for the
year ended December 31, 2012.
For a detailed discussion on the application of these and other accounting policies, see "Summary of Significant Accounting
Policies" in the Notes to the Consolidated Financial Statements in Item 15 of this report, beginning on page F-6. This discussion and
analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report.
Inflation
Historically, inflation has not had a material adverse effect on us. However, in recent years both business segments have been
affected by rapidly rising raw material and energy costs. The Company and its customers will typically negotiate reasonable price
adjustments in order to recover a portion of these rapidly escalating costs. As the contracts pursuant to which we construct and
operate our satellite PCC plants generally adjust pricing to reflect increases in costs resulting from inflation, there is a time lag before
such price adjustments can be implemented.
Cyclical Nature of Customers' Businesses
The bulk of our sales are to customers in the paper manufacturing, steel manufacturing and construction industries, which have
historically been cyclical. The pricing structure of some of our long-term PCC contracts makes our PCC business less sensitive to
declines in the quantity of product purchased. However, we cannot predict the economic outlook in the countries in which we do
business, nor in the key industries we serve.
Recently Issued Accounting Standards
Changes to accounting principles generally accepted in the United States of America (U.S. GAAP) are established by the Financial
Accounting Standards Board (FASB) in the form of accounting standards updates (ASU’s) to the FASB’s Accounting Standards
Codification.
The Company considers the applicability and impact of all ASU’s. ASU’s not listed below were assessed and determined to be
either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.
In May 2011, the FASB issued amendments to disclosure requirements for common fair value measurement. These amendments,
effective for the interim and annual periods beginning on or after December 15, 2011 (early adoption was prohibited), resulted in a
common definition of fair value and common requirements for measurement of and disclosure requirements between U.S. GAAP and
International Financial Reporting Standards. Consequently, the amendments change some fair value measurement principles and
disclosure requirements. The Company adopted this guidance effective January 1, 2012. The implementation of the amended
accounting guidance has not had a material impact on our consolidated financial position or results of operations.
In June 2011, the FASB issued amendments to disclosure requirements for presentation of comprehensive income. This guidance,
effective retrospectively for the interim and annual periods beginning on or after December 15, 2011 (early adoption was permitted),
requires presentation of total comprehensive income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December
2011, the FASB issued an amendment to defer the presentation on the face of the financial statements the effects of reclassifications
out of accumulated other comprehensive income on the components of net income and other comprehensive income for annual and
interim financial statements. The implementation of the amended accounting guidance has not had a material impact on our
consolidated financial position or results of operations. In February 2013, the FASB issued amendments to disclosure requirements for
presentation of comprehensive income. The standard requires presentation (either in a single note or parenthetically on the face of the
financial statements) of the effect of significant amounts reclassified from each component of accumulated other comprehensive
income based on its source and the income statement line items affected by the reclassification. If a component is not required to be
reclassified to net income in its entirety, a cross reference to the related footnote for additional information will be required. The
amendments are effective prospectively for reporting periods beginning after December 15, 2012 (early adoption was permitted). The
Company adopted this guidance effective January 1, 2012. The implementation of the amended accounting guidance is not expected to
have a material impact on our consolidated financial position or results of operations.
In September 2011, the FASB issued amendments to the goodwill impairment guidance which provides an option for companies to
use a qualitative approach to test goodwill for impairment if certain conditions are met. The amendments are effective for annual and
interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 (early adoption was permitted). The
Company early adopted this guidance effective September 15, 2011. The implementation of the amended accounting guidance has not
had a material impact on our consolidated financial position or results of operations.
32
In July 2012, the FASB issued amendments to the indefinite-lived intangible asset impairment guidance which provides an option
for companies to use a qualitative approach to test indefinite-lived intangible assets for impairment if certain conditions are met. The
amendments are effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years
beginning after September 15, 2012 (early adoption is permitted). The Company will adopt this guidance effective January 1, 2013.
The implementation of the amended accounting guidance is not expected to have a material impact on our consolidated financial
position or results of operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risk represents the risk of loss that may have an impact on our financial position, results of operations or cash flows due to
adverse changes in market prices and foreign currency and interest rates. We are exposed to market risk because of changes in foreign
currency exchange rates as measured against the U.S. dollar. We do not anticipate that near-term changes in exchange rates will have
a material impact on our future earnings or cash flows. However, there can be no assurance that a sudden and significant change in
the value of foreign currencies would not have a material adverse effect on our financial condition and results of operations.
Approximately 44% of our bank debt bears interest at variable rates; therefore our results of operations would only be affected by
interest rate changes to such bank debt outstanding. An immediate 10% change in interest rates would not have a material effect on
our results of operations over the next fiscal year.
We do not enter into derivatives or other financial instruments for trading or speculative purposes. When appropriate, we enter into
derivative financial instruments, such as forward exchange contracts and interest rate swaps, to mitigate the impact of foreign
exchange rate movements and interest rate movements on our operating results. The counterparties are major financial institutions.
Such forward exchange contracts and interest rate swaps would not subject us to additional risk from exchange rate or interest rate
movements because gains and losses on these contracts would offset losses and gains on the assets, liabilities, and transactions being
hedged. We had open forward exchange contracts to purchase approximately $0.8 million and $0.2 million of foreign currencies as of
December 31, 2012 and 2011, respectively. These contracts matured in January and February of 2013 and January 2012, respectively.
The fair value of these instruments at December 31, 2012 and December 31, 2011 was an asset of less than $0.1 million and a liability
of less than $0.1 million, respectively.
In 2008, the Company entered into forward contracts to sell 30 million Euros as a hedge of its net investment in Europe. These
contracts mature in October 2013. The fair value of these instruments at December 31, 2012 was an asset of $3.2 million. The fair
value of these instruments at December 31, 2011 was an asset of $3.5 million.
Item 8. Financial Statements and Supplementary Data
The financial information required by Item 8 is contained in Item 15 of Part IV of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, and under the supervision and with participation of the Company’s management,
including the Chief Executive Officer and the Chief Financial Officer, the Company carried out an evaluation of the effectiveness of
the design and operation of the Company’s disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(b). Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and
procedures were effective as of December 31, 2012.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have included a report of management's assessment of the design
and operating effectiveness of our internal controls as part of this report. Management's report is included in our consolidated financial
statements beginning on page F-1 of this report under the caption entitled "Management's Report on Internal Control Over Financial
Reporting."
The Company has substantially completed the upgrade and implementation of a global enterprise resource planning ("ERP")
system to manage its business operations and all of our domestic and European locations are using the new systems. The transition to
the new system has proceeded to date without any adverse effects to internal controls. We believe that the controls as modified are
appropriate and functioning effectively.
33
Changes in Internal Control Over Financial Reporting
There was no change in the Company's internal control over financial reporting during the most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B. Other Information
None
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Set forth below are the names and ages of all Executive Officers of the Registrant indicating all positions and offices with the
Registrant held by each such person, and each such person's principal occupations or employment during the past five years.
Name
Age
Position
Joseph C. Muscari ...............................
Douglas T. Dietrich .............................
Douglas W. Mayger ............................
Thomas J. Meek ..................................
D.J. Monagle, III .................................
Michael A. Cipolla ..............................
Jonathan J. Hastings ............................
Johannes C. Schut ...............................
66
43
55
55
50
55
50
48
Chairman of the Board and Chief Executive Officer
Senior Vice President, Finance and Treasury, Chief Financial Officer
Senior Vice President, Performance Minerals and MTI Supply Chain
Senior Vice President, General Counsel and Secretary, Chief Compliance Officer
Senior Vice President and Managing Director, Paper PCC
Vice President, Corporate Controller and Chief Accounting Officer
Vice President, Corporate Development
Vice President and Managing Director, Minteq International
Joseph C. Muscari was elected Chairman of the Board and Chief Executive Officer effective March 1, 2007. Prior to that, he was
Executive Vice President and Chief Financial Officer of Alcoa Inc. He has served as a member of the Board of Directors since 2005.
Douglas T. Dietrich was elected Senior Vice President, Finance and Treasury, Chief Financial Officer effective January 1, 2011.
Prior to that, he was appointed Vice President, Corporate Development and Treasury effective August 2007. He had been Vice
President, Alcoa Wheel Products since 2006 and President, Latin America Extrusions and Global Rod and Bar Products since 2002.
Douglas W. Mayger was elected Senior Vice President, Performance Minerals and Supply Chain in June 2011. Prior to that, he
was Vice President and Managing Director, Performance Minerals which encompasses the Processed Minerals product line and the
Specialty PCC product line, effective October 1, 2008. Prior to that, he was General Manager- Carbonates West, Performance
Minerals and Business Manager - Western Region. Before joining the Company as plant manager in Lucerne Valley in 2002, he
served as Vice President of Operations for Aggregate Industries.
Thomas J. Meek was elected Senior Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer in
October 2011. Prior to that, he was Vice President, General Counsel and Secretary of the Company effective September 1, 2009.
Prior to that, he served as Deputy General Counsel at Alcoa. Before joining Alcoa in 1999, Mr. Meek worked with Koch Industries,
Inc. of Wichita, Kansas, where he held numerous supervisory positions. His last position there was Interim General Counsel. From
1985 to 1990, Mr. Meek was an Associate/Partner in the Wichita, Kansas law firm of McDonald, Tinker, Skaer, Quinn & Herrington,
P.A.
D.J. Monagle, III was elected Senior Vice President and Managing Director, Paper PCC, effective October 1, 2008. In November
2007, he was appointed Vice President and Managing Director - Performance Minerals. He joined the Company in January of 2003
and held positions of increasing responsibility including Vice President, Americas, Paper PCC and Global Marketing Director, Paper
PCC. Before joining the Company, Mr. Monagle worked for the Paper Technology Group at Hercules between 1990 and 2003, where
he held sales and marketing positions of increasing responsibility. Between 1985 and 1990, he served as an aviation officer in the
U.S. Army’s 11th Armored Cavalry Regiment, leaving the service as a troop commander with a rank of Captain.
Michael A. Cipolla was elected Vice President, Corporate Controller and Chief Accounting Officer in July 2003. Prior to that, he
served as Corporate Controller and Chief Accounting Officer of the Company since 1998. From 1992 to 1998 he served as Assistant
Corporate Controller.
Jonathan J. Hastings was elected Vice President, Corporate Development effective September 2011. Prior to that, he was Senior
Director of Strategy and New Business Development- Coatings, Global at The Dow Chemical Company. Prior to that he held
positions of increasing responsibility at Rohm and Haas, including Vice President & General Manager—Packaging and Building
Materials—Europe.
34
Johannes C. Schut was elected Vice President and Managing Director, Minteq International in March 2011. He joined the
Company in 2004 as Director of Finance- Europe. In 2006, he was named Vice President, Minteq – Europe including Middle East
and India. Before joining Minerals Technologies Inc., Mr. Schut held positions of increasing responsibility with Royal Phillips
Electronics and Royal FrieslandCampina – DMV International.
The information concerning the Company's Board of Directors required by this item is incorporated herein by reference to the
Company's Proxy Statement, under the captions "Committees of the Board of Directors" and “Item 1- Election of Directors.”
The information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 required by this Item is
incorporated herein by reference to the Company's Proxy Statement, under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance."
The Board has established a code of ethics for the Chief Executive Officer, the Chief Financial Officer, and the Chief Accounting
Officer entitled "Code of Ethics for the Senior Financial Officers," which is available on our website, www.mineralstech.com, under
the links entitled Corporate Responsibility, Corporate Governance and Policies and Charters.
Item 11. Executive Compensation
The information appearing in the Company's Proxy Statement under the captions “Compensation Discussion and Analysis,”
“Report of the Compensation Committee” and “Compensation of Executive Officers and Directors" is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information appearing in the Company's Proxy Statement under the caption "Security Ownership of Certain Beneficial Owners
and Management" is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information appearing in the Company's Proxy Statement under the caption "Certain Relationships and Related Transactions"
is incorporated herein by reference.
The Board has established Corporate Governance principles which include guidelines for determining Director independence,
which is available on our website, www.mineralstech.com, under the links entitled Corporate Responsibility, Corporate Governance
and Policies and Charters. The information appearing in the Company’s Proxy Statement under the caption “Corporate Governance –
Director Independence” is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information appearing in the Company's Proxy Statement under the caption "Principal Accountant Fees and Services" is
incorporated herein by reference.
35
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this report:
PART IV
1. Financial Statements. The following Consolidated Financial Statements of Mineral Technologies Inc. and subsidiary
companies and Reports of Independent Registered Public Accounting Firm are set forth on pages F-2 to F-33.
Consolidated Balance Sheets as of December 31, 2012 and 2011
Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2012, 2011 and 2010
Notes to the Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
Management's Report on Internal Control Over Financial Reporting
2. Financial Statement Schedule. The following financial statement schedule is filed as part of this report:
Schedule II -
Valuation and Qualifying Accounts ..................................................................... S-1
All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under
the related instructions or are inapplicable and, therefore, have been omitted.
3. Exhibits. The following exhibits are filed as part of, or incorporated by reference into, this report.
Page
3.1
3.2
3.3
- Restated Certificate of Incorporation of the Company (1)
- By-Laws of the Company as amended and restated effective May 25, 2005 (2)
- Certificate of Designations authorizing issuance and establishing designations, preferences and
rights of Series A Junior Preferred Stock of the Company (1)
4.1
10.1
- Specimen Certificate of Common Stock (1)
- Asset Purchase Agreement, dated as of September 28, 1992, by and between Specialty
Refractories Inc. and Quigley Company Inc. (3)
10.1(a)
- Agreement dated October 22, 1992 between Specialty Refractories Inc. and Quigley Company
Inc., amending Exhibit 10.1 (4)
10.1(b)
- Letter Agreement dated October 29, 1992 between Specialty Refractories Inc. and Quigley
Company Inc., amending Exhibit 10.1 (4)
10.2
- Reorganization Agreement, dated as of September 28, 1992, by and between the Company and
Pfizer Inc (3)
10.3
- Asset Contribution Agreement, dated as of September 28, 1992, by and between Pfizer Inc and
Specialty Minerals Inc. (3)
10.4
- Asset Contribution Agreement, dated as of September 28, 1992, by and between Pfizer Inc and
Barretts Minerals Inc. (3)
10.4(a)
- Agreement dated October 22, 1992 between Pfizer Inc, Barretts Minerals Inc. and Specialty
Minerals Inc., amending Exhibits 10.3 and 10.4 (4)
10.5
- Employment Agreement, dated November 27, 2006, between the Company and Joseph C.
Muscari (5) (+)
10.5(a)
- Second to Employment Agreement, dated July 21, 2010, between the Company and Joseph C.
Muscari (6) (+)
10.6
10.6(a)
10.7
10.7(a)
- Form of Employment Agreement between the Company and each of Michael A. Cipolla,
Douglas T. Dietrich, Jonathan J. Hastings, Douglas W. Mayger, Thomas J. Meek and D.J.
Monagle, III (7) (+)
- Form of amendment to Employment Agreement between the Company and each of Joseph C.
Muscari, Michael A. Cipolla, Douglas T. Dietrich, Jonathan J. Hastings, Douglas W. Mayger,
Thomas J. Meek, D.J. Monagle III and Johannes C. Schut (8) (+)
- Form of Severance Agreement between the Company and each of Joseph C. Muscari, Michael
A. Cipolla, Douglas T. Dietrich, Jonathan J. Hastings, Douglas W. Mayger, Thomas J. Meek,
D.J. Monagle and Johannes C. Schut(9) (+)
- Form of amendment to Severance Agreement between the Company and each of Joseph C.
Muscari, Michael A. Cipolla, Douglas T. Dietrich, Jonathan J. Hastings, Douglas W. Mayger,
Thomas J. Meek and D.J. Monagle, III (10) (+)
36
10.8
- Form of Indemnification Agreement between the Company and each of Joseph C. Muscari,
Michael A. Cipolla, Douglas T. Dietrich, Jonathan J. Hastings, Douglas W. Mayger, Thomas J.
Meek, D.J. Monagle, Johannes C. Schut and each of the Company’s non-employee directors III
(11) (+)
10.9
10.10
- Company Employee Protection Plan, as amended August 27, 1999 (12) (+)
- Company Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee
Directors, as amended and restated effective January 1, 2008 (13) (+)
10.10(a)
- First Amendment to the Company Nonfunded Deferred Compensation and Unit Award Plan for
Non-Employee Directors, dated January 18, 2012 (14) (+)
10.11
- 2001 Stock Award and Incentive Plan of the Company, as amended and restated as of March
18, 2009 (15) (+)
10.12
10.13
- Company Retirement Plan, as amended and restated, dated December 21, 2012 (*)
- Company Supplemental Retirement Plan, amended and restated effective December 31, 2009
(16) (+)
10.14
10.15
- Company Savings and Investment Plan, as amended and restated, dated December 21, 2012 (*)
- Company Supplemental Savings Plan, amended and restated effective December 31, 2009 (17)
(+)
10.15(a)
10.16
- Amendment to the Company Supplemental Savings Plan, dated December 28, 2011 (18)(+)
- Company Health and Welfare Plan, effective as of April 1, 2003 and amended and restated as
of January 1, 2006 (19)(+)
10.16(a)
10.17
10.18
- Amendment to the Company Health and Welfare Plan, dated May 19, 2009 (20) (+)
- Company Retiree Medical Plan, effective as of January 1, 2011 (21)(+)
- Amended and Restated Grantor Trust Agreement, dated as of April 1, 2010, by and between the
Company and the Wilmington Trust Company (22)(+)
10.19
10.20
- Note Purchase Agreement, dated as of October 5, 2006, among the Company, Metropolitan Life
Insurance Company and MetLife Insurance Company of Connecticut with respect to the
Company's issuance of $75,000,000 in aggregate principal amount of senior unsecured notes
due October 5, 2013 (23)
Indenture, dated July 22, 1963, between the Cork Harbour Commissioners and Roofchrome
Limited (3)
-
21.1
23.1
24
31.1
- Subsidiaries of the Company (*)
- Consent of Independent Registered Public Accounting Firm (*)
- Power of Attorney (*)
- Rule 13a-14(a)/15d-14(a) Certification executed by the Company's principal executive officer
(*)
31.2
- Rule 13a-14(a)/15d-14(a) Certification executed by the Company's principal financial officer
32
95
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(*)
- Section 1350 Certification (*)
Information Concerning Mine Safety Violations (*)
Incorporated by reference to the exhibit so designated filed with the Company's Annual Report on
Form 10-K for the year ended December 31, 2003.
Incorporated by reference to the exhibit so designated filed with the Company's Current Report on
Form 8-K filed on May 27, 2005.
Incorporated by reference to the exhibit so designated filed with the Company's Registration
Statement on Form S-1 (Registration No. 33-51292), originally filed on August 25, 1992.
Incorporated by reference to the exhibit so designated filed with the Company's Registration
Statement on Form S-1 (Registration No. 33-59510), originally filed on March 15, 1993.
Incorporated by reference to exhibit 10.1 filed with the Company's Current Report on Form 8-K/A
filed on December 1, 2006.
Incorporated by reference to the exhibit 10.1 filed with the Company’s Current Report on form 8-K
filed on July 27, 2010
Incorporated by reference to exhibit 10.5 filed with the Company's Annual Report on Form 10-K for
the year ended December 31, 2006.
Incorporated by reference to exhibit 10.6(a) filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2009.
Incorporated by reference to exhibit 10.6 filed with the Company's Annual Report on Form 10-K for
the year ended December 31, 2005.
Incorporated by reference to exhibit 10.7(a) filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2009.
Incorporated by reference to exhibit 10.1 filed with the Company's Current Report on Form 8-K
filed on May 8, 2009.
Incorporated by reference to exhibit 10.7 filed with the Company's Annual Report on Form 10-K for
the year ended December 31, 2004.
37
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
Incorporated by reference to exhibit 10.8 filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended March 30, 2008.
Incorporated by reference to exhibit 10.11(a) filed with the Company’s Annual Report on Form 10-
K forf the year ended December 31, 2011
Incorporated by reference to exhibit 10.1 filed with the Company's Current Report on Form 8-K
filed on May 11, 2009.
Incorporated by reference to exhibit 10.13 filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2009.
Incorporated by reference to exhibit 10.15 filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2009.
Incorporated by reference to exhibit 10.16(a) filed with the Company’s Annual Report on Form 10-
K for the year ended December 31, 2011.
Incorporated by reference to exhibit 10.14 filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2006.
Incorporated by reference to exhibit 10.16(a) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2009.
Incorporated by reference to exhibit 10.17 filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2010.
Incorporated by reference to exhibit 10.1 filed with the Company's Quarterly Report on Form 10-Q
for the period ended April 4, 2010.
Incorporated by reference to the exhibit 10.1 filed with the Company's Current Report on Form 8-K
filed on October 11, 2006.
(*) Filed herewith.
(+) Management contract or compensatory plan or arrangement required to be filed pursuant to Item
601 of Regulation S-K.
38
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.
By:
/s/Joseph C. Muscari
Joseph C. Muscari
Chairman of the Board
and Chief Executive Officer
February 22, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated:
SIGNATURE
TITLE
DATE
/s/ Joseph C. Muscari
Joseph C. Muscari
Chairman of the Board and Chief Executive Officer
February 22, 2013
(principal executive officer)
/s/ Douglas T. Dietrich
Douglas T. Dietrich
Senior Vice President-Finance and Treasury,
Chief Financial Officer (principal financial officer)
February 22, 2013
/s/ Michael A. Cipolla
Michael A. Cipolla
Vice President - Controller and
February 22, 2013
Chief Accounting Officer (principal accounting officer)
39
SIGNATURE
*
Paula H. J. Cholmondeley
TITLE
Director
DATE
February 22, 2013
*
Robert L. Clark
*
Duane R. Dunham
Steven J. Golub
*
*
Michael F. Pasquale
*
Marc E. Robinson
*
Barbara Smith
* By: /s/ Thomas J. Meek
Thomas J. Meek
Attorney-in-Fact
Director
February 22, 2013
Director
February 22, 2013
Director
February 22, 2013
Director
February 22, 2013
Director
February 22, 2013
Director
February 22, 2013
40
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
_______________________________________
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Financial Statements:
Page
Consolidated Balance Sheets as of December 31, 2012 and 2011 .......................................................................
F-2
Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010 ...........................
F-3
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010
F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010 .....................
F-5
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2012, 2011 and 2010 ......
F-6
Notes to Consolidated Financial Statements .......................................................................................................
F-7
Reports of Independent Registered Public Accounting Firm ..............................................................................
F-31
Management's Report on Internal Control Over Financial Reporting ................................................................
F-33
F-1
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
December 31,
2012
2011
Current assets:
Assets
Cash and cash equivalents ................................................................................... $
Short-term investments, at cost which approximates market ...............................
Accounts receivable, less allowance for doubtful accounts:
2012 - $3,837; 2011 - $3,008……………………………………………
Inventories ...........................................................................................................
Prepaid expenses and other current assets ...........................................................
Total current assets……………………………………..........
454,092
14,178
193,328
84,569
18,318
764,485
$
395,152
18,494
194,317
90,760
21,566
720,289
Property, plant and equipment, less accumulated depreciation and depletion .....
Goodwill ..............................................................................................................
Other assets and deferred charges ........................................................................
Total assets………………………………………………..........
317,669
65,829
63,206
$ 1,211,189
318,134
64,671
61,861
$ 1,164,955
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt...................................................................................................... $
Current maturities of long-term debt .....................................................................
Accounts payable ..................................................................................................
Income taxes payable ...........................................................................................
Accrued compensation and related items .............................................................
Restructuring liabilities .........................................................................................
Other current liabilities .........................................................................................
Total current liabilities .................................................................
Long-term debt ..........................................................................................................
Accrued pension and postretirement benefits .............................................................
Other non-current liabilities ........................................................................................
Total liabilities ..............................................................................
7,111
76,977
98,371
8,862
33,603
318
24,856
250,098
8,478
108,035
30,859
397,470
$
5,846
8,552
103,354
5,334
33,026
1,411
23,379
180,902
85,449
97,318
33,266
396,935
Commitments and contingent liabilities (Notes 15 and 16)
Shareholders' equity:
Preferred stock, without par value; 1,000,000 shares authorized; none issued ...
Common stock at par, $0.10 par value; 100,000,000 shares authorized;
Issued 47,002,939 shares in 2012 and 46,751,260 shares in 2011................
Additional paid-in capital .....................................................................................
Retained earnings .................................................................................................
Accumulated other comprehensive loss ...............................................................
Less common stock held in treasury, at cost; 12,053,319
shares in 2012 and 11,479,279 shares in 2011 ..............................................
Total MTI shareholders' equity..................................................................................
Non-controlling interest ……………………………………………………………
Total shareholders’ equity
--
--
4,700
345,929
1,032,869
(51,198 )
(541,889 )
790,411
23,308
813,719
4,675
333,372
963,130
(45,331)
(514,234)
741,612
26,408
768,020
Total liabilities and shareholders' equity ...................................... $ 1,211,189
$ 1,164,955
See Notes to Consolidated Financial Statements, which are an integral part of these statements.
F-2
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(thousands of dollars, except per share data)
Year Ended December 31,
2011
2010
2012
Net sales .............................................................................................................. $ 1,005,619
786,245
Cost of goods sold ...............................................................................................
219,374
Production margin .........................................................................................
$ 1,044,853 $ 1,002,354
793,161
209,193
832,657
212,196
Marketing and administrative expenses ..............................................................
Research and development expenses ..................................................................
Restructuring and other costs ..............................................................................
89,161
20,172
--
92,058
19,330
470
90,474
19,577
865
Income from operations .................................................................................
110,041
100,338
98,277
Interest income ..............................................................................................
Interest expense .............................................................................................
Foreign exchange gains (losses) ....................................................................
Other income (deductions) ............................................................................
Non-operating income (deductions), net .............................................................
3,168
(3,221 )
(1,348 )
(1,594 )
(2,995 )
3,907
(3,254)
(1,211)
(2,040)
(2,598)
Income from operations before provision for taxes .......................................
Provision for taxes on income ............................................................................
Consolidated net income ..............................................................................
Less: Net income attributable to non-controlling interests .................................
Net income attributable to Minerals Technologies Inc. (MTI) ................ $
107,046
30,777
76,269
(2,122 )
74,147
$
97,740
27,486
70,254
(2,733)
67,521 $
2,765
(3,336)
324
819
572
98,849
28,963
69,886
(3,017)
66,869
Earnings per share:
Basic .............................................................................................................. $
Diluted ........................................................................................................... $
2.10
2.09
$
$
1.87 $
1.86 $
1.80
1.79
See Notes to Consolidated Financial Statements, which are an integral part of these statements.
F-3
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(thousands of dollars)
Year Ended December 31,
2011
2010
2012
Consolidated net income ..................................................................................... $
Other comprehensive income, net of tax:
Foreign currency translation adjustments ......................................................
Pension and postretirement plan adjustments ................................................
Sale of interest in business.............................................................................
Cash flow hedges:
Reclassification adjustments ..................................................................
Net derivative gains (losses) arising during the period...........................
Comprehensive income .......................................................................................
Comprehensive income attributable to non-controlling interest .........................
76,269
$
70,254 $
69,886
1,479
(7,730 )
--
11
(204 )
69,825
(1,545 )
(17,565)
(25,630)
(820)
47
529
26,815
(1,035)
(8,173)
347
--
45
2,020
64,125
(4,039)
Comprehensive income attributable to MTI ......................................................
68,280
25,780
60,086
See Notes to Consolidated Financial Statements, which are an integral part of these statements.
F-4
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
Year Ended December 31,
2011
2010
2012
Operating Activities
Consolidated net income ................................................................................................ $
76,269 $
70,254
$
69,886
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Depreciation, depletion and amortization ..................................................................
Loss on disposal of property, plant and equipment ...................................................
Deferred income taxes ...............................................................................................
Provision for bad debts ..............................................................................................
Stock-based compensation.........................................................................................
Other non-cash items .................................................................................................
Changes in operating assets and liabilities
Accounts receivable ...................................................................................................
Inventories .................................................................................................................
Prepaid expenses and other current assets .................................................................
Pension plan funding .................................................................................................
Accounts payable .......................................................................................................
Restructuring liabilities ..............................................................................................
Income taxes payable .................................................................................................
Tax benefits related to stock incentive programs .......................................................
Other ..........................................................................................................................
Net cash provided by operations .....................................................................................
Investing Activities
Purchases of property, plant and equipment ....................................................................
Purchases of short-term investments ...............................................................................
Proceeds from sales of short-term investments ...............................................................
Proceeds from disposal of property, plant and equipment ...............................................
Net cash used in investing activities ................................................................................
Financing Activities
Issuance of long-term debt ..............................................................................................
Repayment of long-term debt ..........................................................................................
Net issuance (repayment) of short-term debt ..................................................................
Purchase of common shares for treasury .........................................................................
Cash dividends paid ........................................................................................................
Proceeds from issuance of stock under option plan .........................................................
Excess tax benefits related to stock incentive programs ..................................................
Dividends to non-controlling shareholders ......................................................................
Net cash used in financing activities ...............................................................................
Effect of exchange rate changes on cash and cash equivalents .......................................
51,209
1,093
1,257
1,011
5,476
612
537
6,675
3,398
(16,963 )
(5,231 )
(1,103 )
3,748
513
11,417
139,918
(52,130 )
(5,390 )
9,310
169
(48,041 )
--
(8,558 )
1,031
(25,884 )
(4,409 )
8,173
313
(4,645 )
(33,979 )
)
1,042
58,223
288
1,250
878
7,237
41
(14,186 )
(7,340 )
(5,787 )
(6,650 )
24,824
(2,550 )
(712 )
166
7,723
133,659
(52,060 )
(12,423 )
9,380
78
(55,025 )
1,596
(275 )
2,030
(48,004 )
(3,601 )
5,912
6
--
(42,336 )
(8,973 )
Net increase in cash and cash equivalents .......................................................................
Cash and cash equivalents at beginning of year ..............................................................
Cash and cash equivalents at end of year ........................................................................ $
58,940
395,152
454,092 $
27,325
367,827
395,152
$
63,981
941
1,772
49
5,860
189
(7,577 )
(3,713 )
3,164
(8,466 )
6,351
(4,741 )
6,829
136
7,758
142,419
(34,518 )
(10,738 )
4,125
39
(41,092 )
--
(4,600 )
(1,331 )
(27,922 )
(3,720 )
1,086
53
--
(36,434 )
(8,012 )
56,881
310,946
367,827
Non-cash Investing and Financing Activities:
Treasury stock purchases settled after year-end .............................................................. $
1,771 $
--
$
2,069
See Notes to Consolidated Financial Statements, which are an integral part of these statements.
F-5
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Equity Attributable to MTI
Balance as of December 31, 2009 ................. $
4,650 $
316,494 $
836,062
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
3,193
$
Treasury
Stock
Non-controlling
Interests
$
(436,238 ) $
23,582
$
Total
747,743
Net income ...................................................
Currency translation adjustment ....................
Unamortized gains and prior service cost ......
Cash flow hedge:
Net derivative losses arising during the year .
Reclassification adjustment ...........................
Dividends declared ........................................
Dividends to non-controlling interests ...........
Employee benefit transactions .......................
Income tax benefit arising from employee
stock option plans .....................................
Stock-based compensation ............................
Purchase of common stock for treasury .........
Balance as of December 31, 2010 ................. $
Net income ...................................................
Sale of controlling interest.............................
Currency translation adjustment ....................
Unamortized losses and prior service cost .....
Cash flow hedge:
Net derivative losses arising during the year .
Reclassification adjustment ...........................
Dividends declared ........................................
Dividends to non-controlling interests ...........
Employee benefit transactions .......................
Income tax benefit arising from employee
stock option plans .....................................
Stock-based compensation ............................
Purchase of common stock for treasury .........
Balance as of December 31, 2011 ................. $
Net income ...................................................
Currency translation adjustment ....................
Unamortized losses and prior service cost .....
Cash flow hedge:
Net derivative gains arising during the year ..
Reclassification adjustment ...........................
Dividends declared ........................................
Capital contributions by non-controlling
interests ....................................................
Dividends to non-controlling interests ...........
Employee benefit transactions .......................
Income tax benefit arising from employee
stock option plans .....................................
Stock-based compensation ............................
Purchase of common stock for treasury .........
Balance as of December 31, 2012
--
--
--
--
--
--
--
9
--
--
--
4,659 $
--
--
--
--
--
--
--
16
--
--
--
4,675 $
--
--
--
--
--
--
--
--
25
--
--
--
--
--
--
--
1,231
189
3,559
--
321,473 $
66,869
--
--
--
--
(3,720 )
--
--
--
--
--
899,211
$
--
--
--
--
--
--
--
5,895
172
5,832
--
333,372 $
--
--
--
--
--
--
--
--
8,148
67,521
--
--
--
--
--
(3,602 )
--
--
--
--
--
963,130
$
74,147
--
--
--
--
(4,408 )
--
--
--
--
(9,195 )
347
2,020
45
--
--
--
--
--
--
(3,590 )
--
--
(16,687 )
(25,630 )
529
47
--
--
--
--
--
(45,331 )
--
2,056
(7,730 )
(204 )
11
--
--
--
--
--
--
--
--
--
--
--
--
--
--
(29,992 )
(466,230 ) $
$
--
--
--
--
--
--
--
--
--
--
(48,004 )
(514,234 ) $
$
--
--
--
--
--
--
--
--
--
--
--
--
4,700 $
826
3,583
--
--
--
--
345,929 $ 1,032,869
$
$
--
--
--
(51,198 )
$
--
--
(27,655 )
(541,889 ) $
3,017
1,022
--
--
--
--
(449 )
--
--
--
--
27,172
2,733
(820 )
(878 )
--
--
--
(1,799 )
--
--
--
--
26,408
2,122
(577 )
--
--
--
808
(5,453 )
--
--
--
--
23,308
69,886
(8,173 )
347
2,020
45
(3,720 )
(449 )
1,240
189
3,559
(29,992 )
782,695
70,254
(820 )
(17,565 )
(25,630 )
529
47
(3,602 )
(1,799 )
5,911
172
5,832
(48,004 )
768,020
76,269
1,479
(7,730 )
(204 )
11
(4,408 )
808
(5,453 )
8,173
$
$
826
3,583
(27,655 )
813,719
$
See Notes to Consolidated Financial Statements, which are an integral part of these statements.
F-6
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Minerals Technologies Inc. (the "Company")
and its wholly and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.
Certain reclassifications were made to prior year amounts to conform to current year presentation.
Use of Estimates
The Company employs accounting policies that are in accordance with U.S. generally accepted accounting principles and
require management to make estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and
expenses during the reported period. Significant estimates include those related to allowance for doubtful accounts, valuation
of inventories, valuation of long-lived assets, goodwill and other intangible assets, pension plan assumptions, income tax,
valuation allowances, and litigation and environmental liabilities. Actual results could differ from those estimates.
Business
The Company is a resource- and technology-based company that develops, produces and markets on a worldwide basis a
broad range of specialty mineral, mineral-based products and related systems and technologies. The Company's products are
used in the manufacturing processes of the paper and steel industries, as well as by the building materials, polymers,
ceramics, paints and coatings, and other manufacturing industries.
Cash Equivalents and Short-term Investments
The Company considers all highly liquid investments with original maturities of three months or less to be cash
equivalents. Short-term investments consist of financial instruments with original maturities beyond three months, but less
than twelve months. Short-term investments amounted to $14.2 million and $18.5 million at December 31, 2012 and 2011,
respectively.
Trade Accounts Receivable
Trade accounts receivables are recorded at the invoiced amount and do not bear interest. The allowance for doubtful
accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts
receivable. The Company determines the allowance based on historical write-off experience and specific allowances for
bankrupt customers. The Company also analyzes the collection history and financial condition of its other customers,
considering current industry conditions and determines whether an allowance needs to be established. The Company reviews
its allowance for doubtful accounts monthly. Past due balances over 90 days based on payment terms are reviewed
individually for collectability. Account balances are charged off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit
exposure related to its customers.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method.
Additionally, items such as idle facility expense, excessive spoilage, freight handling costs, and re-handling costs are
recognized as current period charges. The allocation of fixed production overheads to the costs of conversion are based upon
the normal capacity of the production facility. Fixed overhead costs associated with idle capacity are expensed as incurred.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Significant improvements are capitalized, while maintenance and
repair expenditures are charged to operations as incurred. The Company capitalizes interest cost as a component of
construction in progress. In general, the straight-line method of depreciation is used for financial reporting purposes. The
annual rates of depreciation are 3% - 6.67% for buildings, 6.67% - 12.5% for machinery and equipment, 8% - 12.5% for
furniture and fixtures and 12.5% - 25% for computer equipment and software-related assets. The estimated useful lives of our
PCC production facilities and machinery and equipment pertaining to our natural stone mining and processing plants and our
chemical plants are 15 years.
Property, plant and equipment are depreciated over their useful lives. Useful lives are based on management's estimates of
the period that the assets can generate revenue, which does not necessarily coincide with the remaining term of a customer's
contractual obligation to purchase products made using those assets. The Company's sales of PCC are predominantly
pursuant to long-term evergreen contracts, initially ten years in length, with paper mills at which the Company operates
satellite PCC plants. The terms of many of these agreements have been extended, often in connection with an expansion of
F-7
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the satellite PCC plant. Failure of a PCC customer to renew an agreement or continue to purchase PCC from a Company
facility could result in an impairment of assets charge or accelerated depreciation at such facility.
Depletion of mineral reserves is determined on a unit-of-extraction basis for financial reporting purposes, based upon
proven and probable reserves, and on a percentage depletion basis for tax purposes.
Stripping Costs Incurred During Production
Stripping costs are those costs incurred for the removal of waste materials for the purpose of accessing ore body that will
be produced commercially. Stripping costs incurred during the production phase of a mine are variable costs that are
included in the costs of inventory produced during the period that the stripping costs are incurred.
Accounting for the Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable, the Company estimates the undiscounted future cash flows (excluding interest), resulting from
the use of the asset and its ultimate disposition. If the sum of the undiscounted cash flows (excluding interest) is less than the
carrying value, the Company recognizes an impairment loss, measured as the amount by which the carrying value exceeds
the fair value of the asset, determined principally using discounted cash flows.
Goodwill and Other Intangible Assets
Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and
identifiable intangible assets of businesses acquired. Goodwill is not amortized, but instead assessed for impairment.
Intangible assets with estimable useful lives are amortized over their respective estimated lives to the estimated residual
values, and reviewed for impairment.
The Company performs a qualitative assessment for each of its reporting units to determine if the two step process for
impairment testing was required. If the Company determines that it was more likely than not that the fair value of a reporting
unit was less than its carrying amount, the Company would then have evaluated the recoverability of goodwill using a two-
step impairment test approach at the reporting unit level. In the first step, the fair value for the reporting unit is compared to
its book value including goodwill. In the case that the fair value of the reporting unit is less than book value, a second step is
performed which compares the fair value of the reporting unit's goodwill to the book value of the goodwill. The fair value for
the goodwill is determined based on the difference between the fair values of the reporting unit and the net fair values of the
identifiable assets and liabilities of such reporting unit. If the fair value of the goodwill is less than the book value, the
difference is recognized as an impairment.
Accounting for Asset Retirement Obligations
The Company provides for obligations associated with the retirement of long-lived assets and the associated asset
retirement costs. The fair value of a liability for an asset retirement obligation is recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. The Company also provides for legal obligations to perform asset retirement
activities where timing or methods of settlement are conditional on future events.
Fair Value of Financial Instruments
The recorded amounts of cash and cash equivalents, receivables, short-term borrowings, accounts payable, accrued
interest, and variable-rate long-term debt approximate fair value because of the short maturity of those instruments or the
variable nature of underlying interest rates. Short-term investments are recorded at cost, which approximates fair market
value.
Derivative Financial Instruments
The Company records derivative financial instruments which are used to hedge certain foreign exchange risk at fair value
on the balance sheet. See Note 9 for a full description of the Company's hedging activities and related accounting policies.
Revenue Recognition
Revenue from sale of products is recognized at the time the goods are shipped and title passes to the customer. In most of
the Company's PCC contracts, the price per ton is based upon the total number of tons sold to the customer during the year.
Under those contracts the price billed to the customer for shipments during the year is based on periodic estimates of the total
annual volume that will be sold to such customer. Revenues are adjusted at the end of each year to reflect the actual volume
sold. The Company also has consignment arrangements with certain customers in our Refractories segment. Revenues for
these transactions are recorded when the consigned products are consumed by the customer.
Revenues from sales of equipment are recorded upon completion of installation and receipt of customer acceptance.
Revenues from services are recorded when the services have been performed.
F-8
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign Currency
The assets and liabilities of the Company's international subsidiaries are translated into U.S. dollars using exchange rates
at the respective balance sheet date. The resulting translation adjustments are recorded in accumulated other comprehensive
income (loss) in shareholders' equity. Income statement items are generally translated at monthly average exchange rates
prevailing during the period. International subsidiaries operating in highly inflationary economies translate non-monetary
assets at historical rates, while net monetary assets are translated at current rates, with the resulting translation adjustments
included in net income. At December 31, 2012, the Company had no international subsidiaries operating in highly
inflationary economies.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company operates in multiple taxing jurisdictions, both within the U.S. and outside the U.S. In certain situations, a
taxing authority may challenge positions that the Company has adopted in its income tax filings. The Company regularly
assesses its tax position for such transactions and includes reserves for those differences in position. The reserves are utilized
or reversed once the statute of limitations has expired or the matter is otherwise resolved.
The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often
ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax
exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes
in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and
statements of operations. The Company's accounting policy is to recognize interest and penalties as part of its provision for
income taxes. See Note 4 to the consolidated financial statements, "Income Taxes," for additional detail on our uncertain tax
positions.
The accompanying financial statements generally do not include a provision for U.S. income taxes on international
subsidiaries' unremitted earnings, which are expected to be permanently reinvested overseas.
Research and Development Expenses
Research and development expenses are expensed as incurred.
Accounting for Stock-Based Compensation
The Company recognizes compensation expense for share-based awards based upon the grant date fair value over the
vesting period.
Pension and Post-retirement Benefits
The Company has defined benefit pension plans covering the majority of its employees. The benefits are generally based
on years of service and an employee's modified career earnings.
The Company also provides post-retirement healthcare benefits for the majority of its retirees and employees in the United
States. The Company measures the costs of its obligation based on its best estimate. The net periodic costs are recognized as
employees render the services necessary to earn the post-retirement benefits.
Environmental
Expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations and which do not contribute to current or future revenue generation are
expensed. Liabilities are recorded when it is probable the Company will be obligated to pay amounts for environmental site
evaluation, remediation or related costs, and such amounts can be reasonably estimated.
Earnings Per Share
Basic earnings per share have been computed based upon the weighted average number of common shares outstanding
during the period.
Diluted earnings per share have been computed based upon the weighted average number of common shares outstanding
during the period assuming the issuance of common shares for all potentially dilutive common shares outstanding.
F-9
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Subsequent events
The Company has evaluated for subsequent events through the date of issuance of its financial statements.
Stock Split
On November 14, 2012 the Company’s Board of Directors authorized a two-for-one stock split of the of the Company’s
outstanding common stock, which was effected in the form of a 100-percent stock distribution payable on December 11,
2012 to shareholders of record on November 27, 2012. Treasury shares were not treated as outstanding shares in the stock
split. The par-value of the Company’s stock remained at $0.10 per share. Unless otherwise noted, all share amounts and per
share calculations have been adjusted for all periods presented to reflect the impact of this split and to provide data on a
comparable basis.
Note 2. Stock-Based Compensation
The Company has a 2001 Stock Award and Incentive Plan (the "Plan"), which provides for grants of incentive and non-
qualified stock options, restricted stock, stock appreciation rights, stock awards or performance unit awards. The Plan is
administered by the Compensation Committee of the Board of Directors. Stock options granted under the Plan generally have
a ten year term. The exercise price for stock options are at prices at or above the fair market value of the common stock on
the date of the grant, and each award of stock options will vest ratably over a specified period, generally three years.
Stock-based compensation expense is recognized in the consolidated financial statements for stock options based on the
grant date fair value.
Net income for years ended 2012, 2011 and 2010 include $2.0 million, $2.7 million and $2.0 million pre-tax
compensation costs, respectively, related to stock option expense as a component of marketing and administrative expenses.
All stock option expense is recognized in the consolidated statements of operations. The related tax benefit included in the
statement of income on the non-qualified stock options was $0.8 million, $1.1 million and $0.8 million for 2012, 2011 and
2010, respectively.
The benefits of tax deductions in excess of the tax benefit from compensation costs that were recognized or would have
been recognized are classified as financing inflows on the consolidated statement of cash flows.
Stock Options
The fair value of options granted is estimated on the date of grant using the Black-Scholes valuation model.
Compensation expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant
based on the Company's historical experience and future expectations. The forfeiture rate assumption used for the period
ended December 31, 2012 was 7.31%.
The weighted average grant date fair value for stock options granted during the years ended December 31, 2012, 2011 and
2010 was $10.74, $11.03 and $8.16, respectively. The weighted average grant date fair value for stock options vested during
2012, 2011 and 2010 was $8.57, $7.58 and $8.50, respectively. The total intrinsic value of stock options exercised during the
years ended December 31, 2012, 2011 and 2010 was $3.3 million, $1.7 million and $0.5 million, respectively.
The fair value for stock awards was estimated at the date of grant using the Black-Scholes option valuation model with
the following weighted average assumptions for the years ended December 31, 2012, 2011 and 2010:
Expected life (years) ......................................
Interest rate ....................................................
Volatility ........................................................
Expected dividend yield ................................
2012
6.9
1.36 %
31.26 %
0.31 %
2011
2010
6.3
2.46 %
30.93 %
0.31 %
6.3
2.92 %
28.80 %
0.41 %
The expected term of the options represents the estimated period of time until exercise and is based on historical
experience of similar awards, based upon contractual terms, vesting schedules, and expectations of future employee behavior.
The expected stock-price volatility is based upon the historical and implied volatility of the Company's stock. The interest
rate is based upon the implied yield on U.S. Treasury bills with an equivalent remaining term. Estimated dividend yield is
based upon historical dividends paid by the Company.
F-10
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes stock option activity for the year ended December 31, 2012:
Weighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
(in thousands)
Shares
Balance December 31, 2011 ........................
Granted ........................................................
Exercised .....................................................
Canceled ......................................................
Balance December 31, 2012 ........................
Exercisable, December 31, 2012 .................
1,573,974
222,250
(330,158)
(70,546 )
1,395,520
1,068,434
$
$
$
27.10
32.04
25.15
27.76
28.31
27.44
5.93
5.11
$
$
16,201
13,337
The aggregate intrinsic value above is calculated before applicable income taxes, based on the Company's closing stock
price of $39.92 as of the last business day of the period ended December 31, 2012 had all options been exercised on that date.
The weighted average intrinsic value of the options exercised during 2012, 2011 and 2010 was $10.11, $7.15 and $8.03 per
share, respectively. As of December 31, 2012, total unrecognized stock-based compensation expense related to non-vested
stock options was approximately $1.5 million, which is expected to be recognized over a weighted average period of
approximately three years.
The Company issues new shares of common stock upon the exercise of stock options.
Non-vested stock option activity for the year ended December 31, 2012 is as follows:
Non-vested options outstanding at December 31, 2011 .............
Options granted ..........................................................................
Options vested ...........................................................................
Options forfeited .................................................................... …
Non-vested options outstanding at December 31, 2012 ..............
Shares
454,634
222,250
(311,152 )
(38,646 )
327,086
Weighted
Average Exercise
Price Per Share
27.14
32.04
25.98
30.63
31.17
$
$
The following table summarizes additional information concerning options outstanding at December 31, 2012:
Options Outstanding
Options Exercisable
Range of
Exercise Prices
19.855 - $
26.257 - $
30.097 - $
19.855 - $
24.753
29.665
34.657
34.657
$
$
$
$
Number
Outstanding
at 12/31/12
413,026
153,718
828,776
1,395,520
Restricted Stock
Weighted
Average
Remaining
Contractual
Term (Years)
3.5
2.1
6.3
4.0
Weighted
Average
Exercise Price
22.14
27.08
31.61
28.31
$
$
$
$
Number
Exercisable
at 12/31/12
376,530
148,706
543,198
1,068,434
Weighted
Average
Exercise Price
21.90
27.08
31.37
27.44
$
$
$
$
The Company has granted key employees rights to receive shares of the Company's common stock under the Company's
2001 Stock Award and Incentive Plan (the "Plan"). The rights will be deferred for a specified number of years of service,
subject to restrictions on transfer and other conditions. Compensation expense for these shares is recognized over the vesting
period. The Company granted 123,446 shares, 136,978 shares and 156,640 shares for the periods ended December 31, 2012,
2011 and 2010, respectively. The fair value was determined based on the market value of unrestricted shares. As of
December 31, 2012, there was unrecognized stock-based compensation related to restricted stock of $2.7 million, which will
be recognized over approximately the next three years. The compensation expense amortized with respect to all units was
approximately $3.4 million, $4.6 million and $3.8 million for the periods ended December 31, 2012, 2011 and 2010,
respectively. In addition, the Company recorded reversals of $-- million, $0.1 million and $0.1 million for periods ended
December 31, 2012, 2011 and 2010, respectively, related to restricted stock forfeitures. Such costs and reversals are included
in marketing and administrative expenses. There were 102,424 restricted stock shares that vested for the year ended
December 31, 2012.
F-11
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the restricted stock activity for the Plan:
Weighted
Average
Grant
Date Fair
Value
$
$
$
$
$
27.21
32.04
25.90
27.08
31.25
Shares
252,024
123,446
(102,424 )
(89,386 )
183,660
Unvested balance at December 31, 2011 .....
Granted ........................................................
Vested ..........................................................
Canceled ......................................................
Unvested balance at December 31, 2012 .....
Note 3. Earnings Per Share (EPS)
(thousands, except per share amounts)
Basic EPS
2012
2011
2010
Net income attributable to MTI ................................................................................ $
74,147 $
67,521 $
66,869
Weighted average shares outstanding .......................................................................
35,340
36,018
37,228
Basic earnings per share attributable to MTI ........................................................... $
2.10 $
1.87 $
1.80
Diluted EPS
2012
2011
2010
Net income attributable to MTI ................................................................................ $
74,147 $
67,521 $
66,869
Weighted average shares outstanding .......................................................................
Dilutive effect of stock options .................................................................................
Weighted average shares outstanding, adjusted ........................................................
35,340
189
35,529
36,018
218
36,236
37,228
158
37,386
Diluted earnings per share ........................................................................................ $
2.09 $
1.86 $
1.79
Options to purchase 2,404 shares, 218,064 shares and 193,602 shares of common stock for the years ended December 31,
2012, December 31, 2011 and December 31, 2010, respectively, were not included in the computation of diluted earnings per
share because they were anti-dilutive, as the exercise prices of the options were greater than the average market price of the
common shares.
Note 4. Income Taxes
Income from operations before provision for taxes by domestic and foreign source is as follows:
Thousands of Dollars
2012
Domestic ...................................................................... $ 56,905
50,141
Foreign .........................................................................
Income from operations before provision for
income taxes ............................................................
$ 107,046
$
2011
46,950
50,790
2010
$
49,484
49,365
$
97,740
$
98,849
F-12
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision (benefit) for taxes on income consists of the following:
Thousands of Dollars
Domestic
Taxes currently payable
2012
2011
2010
Federal ............................................................... $
State and local ....................................................
Deferred income taxes ..................................................
Domestic tax provision .....................................
Foreign
Taxes currently payable................................................
Deferred income taxes ..................................................
Foreign tax provision ........................................
$
14,838
1,318
3,236
19,398
13,364
(1,979 )
11,385
11,793
2,145
(1,886 )
12,052
12,297
3,136
15,433
$
Total tax provision ........................... $
30,777
$
27,486
$
12,287
1,861
411
14,559
13,043
1,361
14,404
28,963
The provision for taxes on income shown in the previous table is classified based on the location of the taxing authority,
regardless of the location in which the taxable income is generated.
The major elements contributing to the difference between the U.S. federal statutory tax rate and the consolidated
effective tax rate are as follows:
Percentages
2012
2011
2010
U.S. statutory tax rate ...................................................
Depletion ......................................................................
Difference between tax provided on foreign earnings
and the U.S. statutory rate .....................................
Change in Mexican law………………………………
State and local taxes, net of Federal tax benefit ...........
Tax credits and foreign dividends ................................
Change in valuation allowance .....................................
Impact of uncertain tax positions…………………….
Impact of officer’s non-deductible compensation ........
Other .............................................................................
Consolidated effective tax rate .....................................
35.0 %
(3.9 )
(4.1 )
(0.5 )
1.5
(0.1 )
(1.1 )
0.9
2.1
(1.1 )
28.8 %
35.0 %
(4.1 )
(1.0 )
(0.2 )
1.2
(0.1 )
(1.2 )
(2.8 )
2.9
(1.6 )
28.1 %
35.0 %
(3.8 )
(3.1 )
0.3
1.2
(0.1 )
(0.1 )
(1.5 )
1.2
0.2
29.3 %
The Company believes that its accrued liabilities are sufficient to cover its U.S. and foreign tax contingencies. The tax
effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are
presented below:
Thousands of Dollars
2012
2011
Deferred tax assets:
Accrued expenses ................................................................................... $
Net operating loss carry forwards...........................................................
Pension and post-retirement benefits costs .............................................
Other .......................................................................................................
Valuation allowance. ..............................................................................
Total deferred tax assets ......................................................................... $
Thousands of Dollars
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation ...... $
Intangible assets .....................................................................................
Mexican tax recapture ............................................................................
Other .......................................................................................................
Total deferred tax liabilities ...................................................................
Net deferred tax assets ............................................................................ $
12,200 $
11,414
43,828
12,850
(5,666)
74,626 $
9,752
11,083
40,584
11,163
(6,860 )
65,722
2012
2011
10,333 $
12,412
429
3,983
27,157
47,469 $
4,832
11,387
1,021
4,067
21,307
44,415
F-13
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The current and long-term portion of net deferred tax assets is as follows:
Thousands of Dollars
2012
2011
Net deferred tax assets, current ................................................. $
Net deferred assets, long term ...................................................
6,253
41,216
$ 47,469
$
4,903
39,512
$ 44,415
The current portion of the net deferred tax assets is included in prepaid expenses and other current assets. The long-term
portion of the net deferred tax assets are included in other assets and deferred charges.
The Company has $7.2 million of deferred tax assets arising from tax loss carry forwards which will be realized through
future operations. Carry forwards of approximately $2.9 million expire over the next 20 years, and $4.3 million can be
utilized over an indefinite period.
On December 31, 2012, the Company had $4.8 million of total unrecognized tax benefits. Included in this amount were a
total of $3.1 million of unrecognized income tax benefits that, if recognized, would affect the Company's effective tax rate.
While it is expected that the amount of unrecognized tax benefits will change in the next 12 months, we do not expect the
change to have a significant impact on the results of operations or the financial position of the Company.
The following table summarizes the activity related to our unrecognized tax benefits:
(Thousands of Dollars)
2012
2011
Balance as of January 1, 2012 .................................................... $
Increases related to current year positions .................................
Increases (decreases) related to new judgments ........................
Decreases related to audit settlements and statute expirations ...
Other ..........................................................................................
Balance as of December 31, 2012 .............................................. $
3,912 $
696
206
--
--
4,814 $
6,473
563
(373 )
(2,751 )
--
3,912
The Company's accounting policy is to recognize interest and penalties accrued, relating to unrecognized income tax
benefits as part of its provision for income taxes. The Company had recorded $0.3 million of interest and penalties during
2012 and had a total accrued balance on December 31, 2012 of $1.0 million.
The Company operates in multiple taxing jurisdictions, both within and outside the U.S. In certain situations, a taxing
authority may challenge positions that the Company has adopted in its income tax filings. The Company, with a few
exceptions (none of which are material), is no longer subject to U.S. federal, state, local, and European income tax
examinations by tax authorities for years prior to 2006.
Net cash paid for income taxes were $21.5 million, $31.9 million and $24.9 million for the years ended December 31,
2012, 2011 and 2010, respectively.
The Company has not provided for U.S. federal and foreign withholding taxes on $334.6 million of foreign subsidiaries'
undistributed earnings as of December 31, 2012 because such earnings are intended to be permanently reinvested overseas.
To the extent the parent company has received foreign earnings as dividends; the foreign taxes paid on those earnings have
generated tax credits, which have substantially offset related U.S. income taxes. However, in the event that the entire $334.6
million of foreign earnings were to be repatriated, incremental taxes may be incurred. We do not believe this amount would
be more than $50.2 million.
Note 5. Inventories
The following is a summary of inventories by major category:
Thousands of Dollars
2012
2011
Raw materials ............................................................... $
Work in process ............................................................
Finished goods..............................................................
Packaging and supplies ................................................
Total inventories ........................................................... $
30,822
6,465
26,485
20,797
84,569
$
$
38,510
6,044
26,055
20,151
90,760
F-14
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Property, Plant and Equipment
The major categories of property, plant and equipment and accumulated depreciation and depletion are presented below:
Thousands of Dollars
2012
2011
Land.............................................................................. $
Quarries/mining properties ...........................................
Buildings ......................................................................
Machinery and equipment ............................................
Construction in progress ...............................................
Furniture and fixtures and other ...................................
26,467
39,596
145,082
937,559
27,805
85,443
1,261,952
Less: Accumulated depreciation and depletion ............
Property, plant and equipment, net ............................... $
(944,283 )
317,669
$
$
27,370
39,596
147,115
911,753
31,060
91,755
1,248,649
(930,515 )
318,134
Depreciation and depletion expense for the years ended December 31, 2012, 2011 and 2010 was $48.7 million, $55.9
million and $61.2 million, respectively.
Note 7. Restructuring Costs
The Company initiated restructuring programs in 2007, 2009, and 2011. A reconciliation of the remaining restructuring
liability relating to those programs as of December 31, 2012, is as follows:
(millions of dollars)
Contract termination costs ..........................$
Severance and other employee benefits .....
Balance as of
December 31,
2011
Additional
Provisions
(Reversals)
0.8 $
0.6
1.4 $
$
Cash
Expenditures
(0.6 )
(0.5 )
(1.1 )
-- $
--
-- $
Balance as of
December 31,
2012
$
$
0.2
0.1
0.3
Approximately $1.1 million and $2.5 million in restructuring payments were paid in 2012 and 2011, respectively. A
restructuring liability of $0.3 million remains at December 31, 2012. Such amounts will be funded from operating cash
flows.
Note 8. Goodwill and Other Intangible Assets
The carrying amount of goodwill was $65.8 million and $64.7 million as of December 31, 2012 and December 31, 2011,
respectively. The net change in goodwill since December 31, 2011 was attributable to the effects of foreign exchange.
Acquired intangible assets subject to amortization included in other assets and deferred charges as of December 31, 2012
and December 31, 2011 was as follows:
(Millions of Dollars)
Patents and trademarks ................... $
Customer lists .................................
$
December 31, 2012
December 31, 2011
Gross
Carrying
Amount
6.2
2.7
8.9
Accumulated
Amortization
4.3
1.5
5.8
$
$
$
$
Gross
Carrying
Amount
6.2
2.7
8.9
Accumulated
Amortization
4.0
1.5
5.5
$
$
The weighted average amortization period for acquired intangible assets subject to amortization is approximately 15
years. Amortization expense was approximately $0.6 million, $0.8 million and $0.5 million for the years ended December 31,
2012, 2011 and 2010, respectively. The estimated amortization expense is $0.6 million for 2013 and $0.4 million for each of
the next four years through 2017.
Included in other assets and deferred charges is an additional intangible asset of approximately $0.5 million which
represents the non-current unamortized amount paid to a customer in connection with contract extensions at seven satellite
PCC facilities. In addition, a current portion of $0.4 million is included in prepaid expenses and other current assets. Such
amounts will be amortized as a reduction of sales over the remaining lives of the customer contracts. Approximately $0.4
million, $0.7 million and $1.0 million was amortized in 2012, 2011 and 2010, respectively. Estimated amortization as a
reduction of sales is as follows: 2013 - $0.4 million; 2014 - $0.4 million; 2015 - $0.1 million.
F-15
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Derivative Financial Instruments and Hedging Activities
The Company is exposed to foreign currency exchange rate fluctuations. As part of its risk management strategy, the
Company uses forward exchange contracts (FEC) to manage its exposure to foreign currency risk on certain raw material
purchases. The Company's objective is to offset gains and losses resulting from these exposures with gains and losses on the
derivative contracts used to hedge them. The Company has not entered into derivative instruments for any purpose other than
to hedge certain expected cash flows. The Company does not speculate using derivative instruments.
By using derivative financial instruments to hedge exposures to changes in interest rates and foreign currencies, the
Company exposes itself to credit risk and market risk. Credit risk is the risk that the counterparty will fail to perform under
the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the
Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company
owes the counterparty, and therefore, it does not face any credit risk. The Company minimizes the credit risk in derivative
instruments by entering into transactions with major financial institutions.
Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates, currency
exchange rates, or commodity prices. The market risk associated with interest rate and forward exchange contracts is
managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
Based on established criteria, the Company designated its derivatives as cash flow hedges. The Company uses FEC's
designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in its forecasted inventory
purchases. The Company had 3 open foreign exchange contracts as of December 31, 2012.
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on
the derivative instrument is initially recorded in accumulated other comprehensive income (loss) as a separate component of
shareholders' equity and subsequently reclassified into earnings in the period during which the hedged transaction is
recognized in earnings. The gains and losses associated with these forward exchange contracts are recognized into cost of
sales. Gains and losses and hedge ineffectiveness associated with these derivatives were not significant.
The location and amounts of derivative fair values on the Consolidated Balance Sheets as of December 31, 2012 and
December 31, 2011 were as follows:
(in thousands)
Asset Derivatives
Liability Derivatives
Foreign Exchange
Forward Contracts
Balance Sheet
Location
Other Current
Assets
Dec.
31,
2012
Dec.
31,
2011
$
3,183
$
3,537
Balance Sheet
Location
Other Current
Liabilities
Dec.
31,
2012
Dec.
31,
2011
$
-- $
31
Refer to Note 11, “Fair Value of Financial Instruments” for further discussion of the determination of the fair value of
derivatives.
Note 10. Short-term Investments
The composition of the Company's short-term investments is as follows:
(in millions of dollars)
Short-term Investments
2012
2011
Short-term bank deposits ................................................. $
14.2
$
18.5
There were no unrealized holding gains and losses on the short-term bank deposits held at December 31, 2012.
Note 11. Fair Value of Financial Instruments
Fair value is an exchange price that would be received for an asset or paid to transfer a liability (exit price) in an orderly
transaction between market participants at the measurement date. The Company utilizes market data or assumptions that
market participants would use in pricing the asset or liability. The Company follows a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted
prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or
F-16
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
indirectly observable; and Level 3, defined as unobservable inputs about which little or no market data exists, therefore
requiring an entity to develop its own assumptions.
Assets and liabilities measured at fair value are based on one or more of three valuation techniques. The three valuation
techniques are as follows:
• Market approach - prices and other relevant information generated by market transactions involving identical or
comparable assets or liabilities.
• Cost approach - amount that would be required to replace the service capacity of an asset or replacement cost.
•
Income approach - techniques to convert future amounts to a single present amount based on market expectations,
including present value techniques, option-pricing and other models.
The Company primarily applies the income approach for foreign exchange derivatives for recurring fair value
measurements and attempts to utilize valuation techniques that maximize the use of observable inputs and minimize the use
of unobservable inputs.
As of December 31, 2012, the Company held certain financial assets and liabilities that were required to be measured at
fair value on a recurring basis. These consisted of the Company's derivative instruments related to foreign exchange rates and
certain investment in money market funds. The fair values of foreign exchange rate derivatives are determined based on
inputs that are readily available in public markets or can be derived from information available in publicly quoted markets
and are categorized as Level 2. The fair values of investments in money market funds are determined by quoted prices in
active markets and are categorized as level 1. The Company does not have any financial assets or liabilities measured at fair
value on a recurring basis categorized as Level 3 and there were no transfers in or out of Level 3 during the year ended
December 31, 2012. There were also no changes to the Company's valuation techniques used to measure asset and liability
fair values on a recurring basis.
The following table sets forth by level within the fair value hierarchy the Company's financial assets and liabilities
accounted for at fair value on a recurring basis as of December 31, 2012. Assets and liabilities are classified in their entirety
based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the
significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value
assets and liabilities and their placement within the fair value hierarchy levels.
(in millions of dollars)
Assets (Liabilities) at Fair Value as of December 31, 2012
Quoted Prices
In Active Markets
for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Forward exchange contracts
Money market funds
Total
$
$
$
--
174.7
174.7
$
$
$
3.2
$
-- $
3.2 $
--
--
--
The following table sets forth by level within the fair value hierarchy the Company's financial assets and liabilities accounted
for at fair value on a recurring basis as of December 31, 2011
(in millions of dollars)
Assets (Liabilities) at Fair Value as of December 31, 2011
Quoted Prices
In Active Markets
for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Forward exchange contracts
Money market funds
Total
$
$
$
--
134.7
134.7
$
$
$
3.5
$
-- $
3.5 $
--
--
--
F-17
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Financial Instruments and Concentrations of Credit Risk
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents, short-term investments, accounts receivable and payable: The carrying amounts approximate
fair value because of the short maturities of these instruments.
Short-term debt and other liabilities: The carrying amounts of short-term debt and other liabilities approximate fair value
because of the short maturities of these instruments.
Long-term debt: The fair value of the long-term debt of the Company is estimated based on the quoted market prices for
that debt or similar debt and approximates the carrying amount.
Forward exchange contracts: The fair value of forward exchange contracts (used for hedging purposes) is based on
information derived from active markets. If appropriate, the Company would enter into forward exchange contracts to
mitigate the impact of foreign exchange rate movements on the Company's operating results. It does not engage in
speculation. Such foreign exchange contracts would offset losses and gains on the assets, liabilities and transactions being
hedged. At December 31, 2012, the Company had 3 open foreign exchange contracts with a financial institution to purchase
approximately $0.8 million of foreign currencies. These contracts mature in January and February 2013. The fair value of
these instruments was an asset of less than $0.1 million at December 31, 2012. The fair value of open foreign exchange
contracts at December 31, 2011 was a liability of less than $0.1 million.
Additionally, the Company has entered into forward contracts to sell 30 million Euros as a hedge of its net investment in
Europe. These contracts mature in October 2013. The fair value of these instruments at December 31, 2012 and December
31, 2011 was an asset of $3.2 million and $3.5 million, respectively.
Credit risk: Substantially all of the Company's accounts receivables are due from companies in the paper, construction and
steel industries. Credit risk results from the possibility that a loss may occur from the failure of another party to perform
according to the terms of the contracts. The Company regularly monitors its credit risk exposures and takes steps to mitigate
the likelihood of these exposures resulting in actual loss. The Company's extension of credit is based on an evaluation of the
customer's financial condition and collateral is generally not required.
The Company's bad debt expense for the years ended December 31, 2012, 2011 and 2010 was $1.0 million, $0.9 million
and $0.1 million, respectively.
Note 13. Long-Term Debt and Commitments
The following is a summary of long term debt:
(thousands of dollars)
5.53% Series 2006A Senior Notes
Due October 5, 2013 ...........................................................................
Floating Rate Series 2006A Senior Notes
Due October 5, 2013 ...........................................................................
Variable/Fixed Rate Industrial
Development Revenue Bonds Due August 1, 2012 ............................
Variable/Fixed Rate Industrial
Development Revenue Bonds Series 1999 Due November 1, 2014 ...
Installment obligations
Due 2013 .............................................................................................
Other Borrowings
Due 2014 .............................................................................................
Total .............................................................................................
Less: Current maturities ..........................................................................
Long-term debt .......................................................................................
Dec. 31,
2012
Dec. 31,
2011
$ 50,000
$ 50,000
25,000
25,000
--
8,200
1,421
8,000
8,200
1,421
834
85,455
76,977
$ 8,478
1,380
94,001
8,552
$ 85,449
The Variable/Fixed Rate Industrial Development Revenue Bonds due August 1, 2012 are tax-exempt 15-year instruments
that were issued on August 1, 1997 to finance the construction of a PCC plant in Courtland, Alabama. The bonds bear
interest at either a variable rate or fixed rate, at the option of the Company. Interest is payable semi-annually under the fixed
rate option and monthly under the variable rate option. The Company selected the variable rate option on these borrowings
F-18
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and the average interest rates were approximately 0.22% and 0.31% for the years ended December 31, 2012 and 2011,
respectively. This obligation was repaid in August 2012.
The Variable/Fixed Rate Industrial Development Revenue Bonds due November 1, 2014 are tax-exempt 15-year
instruments and were issued on November 30, 1999 to refinance the bonds issued in connection with the construction of a
PCC plant in Jackson, Alabama. The bonds bear interest at either a variable rate or fixed rate at the option of the Company.
Interest is payable semi-annually under the fixed rate option and monthly under the variable rate option. The Company
selected the variable rate option on these borrowings and the average interest rates were approximately 0.22% and 0.31% for
the years ended December 31, 2012 and 2011, respectively.
On May 31, 2003, the Company acquired land and limestone ore reserves from the Cushenbury Mine Trust for
approximately $17.5 million. Approximately $6.1 million was paid at the closing and $11.4 million was financed through an
installment obligation. The interest rate on this obligation is approximately 4.25%. The remaining principal payment of $1.4
million will be made in 2013.
On October 5, 2006, the Company, through private placement, entered into a Note Purchase Agreement and issued $75
million aggregate principal amount unsecured senior notes. These notes consist of two tranches: $50 million aggregate
principal amount 5.53% Series 2006A Senior Notes (Tranche 1 Notes); and $25 million aggregate principal amount Floating
Rate Series 2006A Senior Notes (Tranche 2 Notes). Tranche 1 Notes bear interest of 5.53% per annum, payable semi-
annually. Tranche 2 Notes bear floating rate interest, payable quarterly. The average interest rate on Tranche 2 for the years
ended December 31, 2012 and December 31, 2011 was 0.92% and 0.77%, respectively. The principal payment for both
tranches is due on October 5, 2013. The Company expects to refinance these notes.
In January 2011, the Company entered into a Renminbi (“RMB”) denominated loan agreement at its Refractories facility
in China with the Bank of America totaling RMB 10.6 million, or $1.6 million. Principal of this loan is payable in
installments over the next three years. Interest is payable semi-annually and is based upon the official RMB lending rate
announced by the People’s Bank of China. The average interest rate for the year ended December 31, 2012 was 7.4%.
The aggregate maturities of long-term debt are as follows: 2013 - $77.0 million; 2014 - $8.5 million; 2015 - $-- million;
2016 - $-- million; 2017 - $-- million; thereafter - $-- million.
The Company had available approximately $190.7 million in uncommitted, short-term bank credit lines, of which $7.1
million was in use at December 31, 2012.
Short-term borrowings as of December 31, 2012 and 2011 were $7.1 million and $5.8 million, respectively. The weighted
average interest rate on short-term borrowings outstanding as of December 31, 2012 and 2011 was 5.8% and 5.3%,
respectively.
During 2012, 2011 and 2010, respectively, the Company incurred interest costs of $3.5 million, $3.5 million and $3.5
million including $0.3 million, $0.3 million and $0.2 million, respectively, which were capitalized. Interest paid
approximated the incurred interest cost.
Note 14. Benefit Plans
Pension Plans and Other Postretirement Benefit Plans
The Company and its subsidiaries have pension plans covering the majority of eligible employees on a contributory or
non-contributory basis.
Benefits under defined benefit plans are generally based on years of service and an employee's career earnings. Employees
generally become fully vested after five years.
The Company provides postretirement health care and life insurance benefits for the majority of its U.S. retired
employees. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of
creditable service. The Company does not pre-fund these benefits and has the right to modify or terminate the plan in the
future.
The funded status of the Company's pension plans and other postretirement benefit plans at December 31, 2012 and 2011
is as follows:
F-19
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension Benefits
2012
2011
Post-retirement Benefits
2011
2012
Obligations and Funded Status
Millions of Dollars
Change in benefit obligation
Benefit obligation at beginning of year ....................... $
Service cost ..................................................................
Interest cost ..................................................................
Actuarial (gain) loss .....................................................
Benefits paid ................................................................
Settlements ..................................................................
Foreign exchange impact .............................................
Other ............................................................................
Benefit obligation at end of year ................................. $
Millions of Dollars
271.9
8.1
11.6
30.4
(12.5 )
(0.6 )
1.9
0.6
311.4
$
$
226.5
7.1
11.6
40.5
(11.7 )
(1.5 )
(0.6 )
0.0
271.9
Pension Benefits
2012
2011
Change in plan assets
Fair value of plan assets beginning of year .................. $
Actual return on plan assets .........................................
Employer contributions ...............................................
Plan participants' contributions ....................................
Benefits paid ................................................................
Settlements ..................................................................
Foreign exchange impact .............................................
Fair value of plan assets at end of year ........................ $
187.5
17.2
16.4
0.5
(12.5 )
(0.6 )
3.3
212.0
Funded status ............................................................... $
(99.4 )
$
$
$
191.6
3.1
6.1
0.4
(11.7 )
(1.5 )
(0.5 )
187.5
(84.4 )
Amounts recognized in the consolidated balance sheet consist of:
$
$
$
$
$
14.4
0.6
0.4
(4.2 )
(0.5 )
--
--
--
10.6
$
$
15.6
0.7
0.6
(2.1 )
(0.5 )
--
--
--
14.4
Post-retirement Benefits
2011
2012
--
--
0.5
--
(0.5 )
--
--
--
10.6
$
$
$
--
--
0.5
--
(0.5 )
--
--
--
(14.4 )
Millions of Dollars
Pension Benefits
2012
2011
Post-retirement Benefits
2011
2012
Current liability ...........................................................
Non-current liability ....................................................
Recognized liability ..................................................... $
(0.3 )
(99.1 )
(99.4 )
$
(0.4 )
(84.0 )
(84.4 )
$
(1.0 )
(9.6 )
(10.6 )
$
(1.2 )
(13.2 )
(14.4 )
The current portion of pension liabilities is included in accrued compensation and related items.
Amounts recognized in accumulated other comprehensive income, net of related tax effects, consist of:
Millions of Dollars
Pension Benefits
2012
2011
Post-retirement Benefits
2011
2012
Net actuarial loss ......................................................... $
Prior service cost .........................................................
Amount recognized end of year ................................... $
93.7
3.0
96.7
$
$
84.7
2.9
87.6
$
$
(10.1 )
(0.8 )
(10.9 )
$
$
1.5
(11.7 )
(10.2 )
The accumulated benefit obligation for all defined benefit pension plans was $287.1 million and $250.5 million at
December 31, 2012 and 2011, respectively.
Changes in the Plan assets and benefit obligations recognized in other comprehensive income:
(Millions of Dollars)
Pension
Benefits
Post
Retirement
Benefits
Current year actuarial gain (loss) ............................... $
Amortization of actuarial loss ....................................
Amortization of prior service credit(gain) loss ..........
Total recognized in other comprehensive income ..... $
(17.6 )
8.4
0.7
(8.5 )
$
$
2.7
(0.1 )
(1.8 )
0.8
F-20
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of net periodic benefit costs are as follows:
Pension Benefits
Millions of Dollars
Service cost ............................................
Interest cost ............................................
Expected return on plan assets ...............
Amortization of prior service cost ..........
Recognized net actuarial (gain) loss .......
Settlement /curtailment loss ...................
Net periodic benefit cost ........................
2012
$
2011
$
8.1
11.6
(13.5)
1.2
13.3
0.2
20.9
$
$
2010
6.6
11.5
(12.6 )
1.4
8.4
--
15.3
$
$
7.1
11.6
(13.8 )
1.3
8.6
0.5
15.3
Post-retirement Benefits
2011
2012
2010
$
$
$
0.6
0.4
--
(3.1 )
(0.1 )
$
(2.2 )
$
0.7
0.6
--
(3.1 )
0.1
--
(1.7 )
$
0.7
0.8
--
(3.1)
0.4
--
(1.2)
Unrecognized prior service cost is amortized over the average remaining service period of each active employee.
The Company's funding policy for U.S. plans generally is to contribute annually into trust funds at a rate that provides for
future plan benefits and maintains appropriate funded percentages. Annual contributions to the U.S. qualified plans are at
least sufficient to satisfy regulatory funding standards and are not more than the maximum amount deductible for income tax
purposes. The funding policies for the international plans conform to local governmental and tax requirements. The plans'
assets are invested primarily in stocks and bonds.
The 2013 estimated amortization of amounts in other comprehensive income are as follows:
(Millions of Dollars)
Amortization of prior service cost
Amortization of net loss
Total costs to be recognized
Pension
Benefits
Post
Retirement
Benefits
$
$
1.0
14.1
15.1
$
$
(3.1 )
--
(3.1 )
Additional Information
The weighted average assumptions used to determine net periodic benefit cost in the accounting for the pension benefit
plans and other benefit plans for the years ended December 31, 2012, 2011 and 2010 are as follows:
2012
2011
2010
Discount rate ..................................................
Expected return on plan assets .......................
Rate of compensation increase ......................
4.32%
7.06 %
3.11%
5.70 %
7.25 %
3.20 %
5.75 %
7.40 %
3.50 %
The weighted average assumptions used to determine benefit obligations for the pension benefit plans and other benefit plans
at December 31, 2012, 2011 and 2010 are as follows:
Discount rate ..................................................
Rate of compensation increase ......................
3.77 %
3.14 %
4.30 %
3.10 %
5.70 %
3.20 %
2012
2011
2010
For 2012, 2011 and 2010, the discount rate was based on a Citigroup yield curve of high quality corporate bonds with cash
flows matching our plans' expected benefit payments. The expected return on plan assets is based on our asset allocation mix
and our historical return, taking into account current and expected market conditions. The actual return on pension assets was
approximately 9% in 2012, 2% in 2011 and 11% in 2010.
The Company maintains a self-funded health insurance plan for its retirees. This plan provided that the maximum health
care cost trend rate would be 5%. Effective June 2010, the Company amended its plan to change the eligibility requirement
for retirees and revised its plan so that increases in expected health care costs would be borne by the retiree.
F-21
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Plan Assets
The Company's pension plan weighted average asset allocation percentages at December 31, 2012 and 2011 by asset
category are as follows:
Asset Category
2012
2011
Equity securities ..............................................
Fixed income securities ...................................
Real estate ........................................................
Other ................................................................
Total ......................................................
56.4%
34.9%
0.5%
8.2%
100.0%
56.5 %
40.8 %
0.1 %
2.6 %
100.0 %
The Company's pension plan fair values at December 31, 2012 and 2011 by asset category are as follows:
Million of Dollars
Asset Category
2012
2011
Equity securities ..............................................
Fixed income securities ...................................
Real estate ........................................................
Other ................................................................
Total ......................................................
$
$
119.5
74.1
1.0
17.4
212.0
$
106.1
76.4
0.2
4.8
187.5
The following table presents domestic and foreign pension plan assets information at December 31, 2012, 2011 and 2010
(the measurement date of pension plan assets):
Millions of Dollars
Fair value of plan assets .................... $ 148.2
2012
U.S. Plans
2011
$ 132.2
International Plans
2010
$ 138.1
2012
2011
$
63.8
$
55.3
2010
$ 53.5
The following table summarizes our defined benefit pension plan assets measured at fair value as of December 31, 2012:
Millions of Dollars
Pension Assets at Fair Value as of December 31, 2012
Asset Class
Quoted
Prices
In Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Total
(Level 2)
(Level 3)
Equity Securities ..........................................................
US equities .............................................................. $
Non-US equities .....................................................
Fixed Income Securities
Corporate debt instruments .....................................
104.5
15.0
43.1
Real estate and other
Real estate ...............................................................
Other .......................................................................
Total Assets ................................................................. $
162.6
$
--
--
31.0
--
--
31.0
$
104.5
15.0
--
--
--
74.1
1.0
17.4
212.0
1.0
17.4
18.4
$
$
U.S. equities—This class included actively and passively managed common equity securities comprised primarily of large-
capitalization stocks with value, core and growth strategies.
Non-U.S. equities—This class included actively managed common equity securities comprised primarily of international
large-capitalization stocks.
Fixed income—This class included debt instruments issued by the US Treasury, and corporate debt instruments.
F-22
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes our defined benefit pension plan assets measured at fair value as of December 31, 2011:
Millions of Dollars
Pension Assets at Fair Value as of December 31, 2011
Asset Class
Quoted
Prices
In Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Total
(Level 2)
(Level 3)
Equity Securities ..........................................................
US equities .............................................................. $
Non-US equities .....................................................
Fixed Income Securities
Government treasuries ............................................
Corporate debt instruments .....................................
72.5
33.6
--
59.5
Real estate and other
Real estate ...............................................................
Other .......................................................................
Total Assets ................................................................. $
--
0.2
165.8
$
--
--
--
16.9
--
--
16.9
$
--
--
--
--
72.5
33.6
--
76.4
0.2
4.6
4.8
$
0.2
4.8
187.5
$
Contributions
The Company expects to contribute $10 million to its pension plans and $1 million to its other postretirement benefit plan
in 2013.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Millions of Dollars
Pension
Benefits
Other
Benefits
2013 .................................................$
2014 .................................................$
2015 .................................................$
2016 .................................................$
2017 .................................................$
2018-2022 .......................................$
13.8 $
14.8 $
16.9 $
17.2 $
19.0 $
98.9 $
1.0
0.9
0.8
0.8
0.8
4.0
Investment Strategies
The investment strategy for pension plan assets is to maintain a broadly diversified portfolio designed to both preserve and
grow plan assets to meet future plan obligations. The Company's average rate of return on assets from inception through
December 31, 2012 was over 9.5%. The Company’s assets are strategically allocated among equity, debt and other
investments to achieve a diversification level that dampens fluctuations in investment returns. The Company’s long-term
investment strategy is an investment portfolio mix of approximately 65% in equity securities and 35% in fixed income
securities. As of December 31, 2012, the Company had approximately 70% of its pension assets in equity securities and 30%
in fixed income securities.
Savings and Investment Plans
The Company maintains a voluntary Savings and Investment Plan (a 401K plan) for most non-union employees in the
U.S. Within prescribed limits, the Company bases its contribution to the Plan on employee contributions. The Company's
contributions amounted to $2.7 million for each of the years ended December 31, 2012, 2011 and 2010.
Notes 15. Leases
The Company has several non-cancelable operating leases, primarily for office space and equipment. Rent expense
amounted to approximately $5.0 million, $5.3 million and $6.0 million for the years ended December 31, 2012, 2011 and
2010, respectively. Total future minimum rental commitments under all non-cancelable leases for each of the years 2013
through 2017 and in aggregate thereafter are approximately $3.8 million, $2.7 million, $2.4 million, $1.7 million, $1.4
F-23
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
million, respectively, and $6.8 million thereafter. Total future minimum rentals to be received under non-cancelable subleases
were approximately $1.5 million at December 31, 2012.
Total future minimum payments to be received under direct financing leases for each of the years 2013 through 2017 and
the aggregate thereafter are approximately: $2.2 million, $1.1 million, $0.8 million, $0.4 million, $0.1 million and $-- million
thereafter.
Note 16. Litigation
Certain of the Company's subsidiaries are among numerous defendants in a number of cases seeking damages for
exposure to silica or to asbestos containing materials. The Company currently has 72 pending silica cases and 7 pending
asbestos cases. To date, 1,394 silica cases and 32 asbestos cases have been dismissed. No new asbestos cases were filed in
the fourth quarter of 2012, and twenty-two were dismissed. Most of these claims do not provide adequate information to
assess their merits, the likelihood that the Company will be found liable, or the magnitude of such liability, if any. Additional
claims of this nature may be made against the Company or its subsidiaries. At this time management anticipates that the
amount of the Company's liability, if any, and the cost of defending such claims, will not have a material effect on its
financial position or results of operations.
The Company has not settled any silica or asbestos lawsuits to date. We are unable to state an amount or range of
amounts claimed in any of the lawsuits because state court pleading practices do not require identifying the amount of the
claimed damage. The aggregate cost to the Company for the legal defense of these cases since inception was approximately
$0.2 million, the majority of which has been reimbursed by Pfizer Inc pursuant to the terms of certain agreements entered
into in connection with the Company's initial public offering in 1992. Of the 7 pending asbestos cases, all allege liability
based on products sold mostly or entirely prior to the initial public offering, and for which the Company is therefore entitled
to indemnification pursuant to such agreements. Our experience has been that the Company is not liable to plaintiffs in any of
these lawsuits and the Company does not expect to pay any settlements or jury verdicts in these lawsuits.
Environmental Matters
On April 9, 2003, the Connecticut Department of Environmental Protection issued an administrative consent order
relating to our Canaan, Connecticut, plant where both our Refractories segment and Specialty Minerals segment have
operations. We agreed to the order, which includes provisions requiring investigation and remediation of contamination
associated with historic use of polychlorinated biphenyls ("PCBs") and mercury at a portion of the site. We have completed
the required investigations and submitted several reports characterizing the contamination. We are now conducting a site-
specific risk assessment required by the regulators.
We believe that the most likely form of overall site remediation will be to leave the existing contamination in place
(with some limited soil removal), encapsulate it, and monitor the effectiveness of the encapsulation. We anticipate that a
substantial portion of the remediation cost will be borne by the United States based on its involvement at the site from 1942 –
1964, as historic documentation indicates that PCBs and mercury were first used at the facility at a time of U.S. government
ownership for production of materials needed by the military. Though the cost of the likely remediation remains uncertain
pending completion of the phased remediation decision process, we have estimated that the Company’s share of the cost of
the encapsulation and limited soil removal described above would approximate $0.4 million, which has been accrued as of
December 31, 2012.
The Company is evaluating options for upgrading the wastewater treatment facilities at its Adams, Massachusetts plant.
This work has been undertaken pursuant to an administrative Consent Order originally issued by the Massachusetts
Department of Environmental Protection (“DEP”) on June 18, 2002. This order was amended on June 1, 2009 and on June 2,
2010. The amended Order includes the investigation by January 1, 2022 of options for ensuring that the facility's wastewater
treatment ponds will not result in unpermitted discharge to groundwater. Additional requirements of the amendment include
the submittal by July 1, 2022 of a plan for closure of a historic lime solids disposal area. Preliminary engineering reviews
completed in 2005 indicate that the estimated cost of wastewater treatment upgrades to operate this facility beyond 2024 may
be between $6 million and $8 million. The Company estimates that the remaining remediation costs would approximate $0.4
million, which has been accrued as of December 31, 2012.
The Company and its subsidiaries are not party to any other material pending legal proceedings, other than routine
litigation incidental to their businesses.
F-24
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17. Stockholders' Equity
Capital Stock
The Company's authorized capital stock consists of 100 million shares of common stock, par value $0.10 per share, of
which 34,949,620 shares and 35,271,981 shares were outstanding at December 31, 2012 and 2011, respectively, and
1,000,000 shares of preferred stock, none of which were issued and outstanding.
On November 14, 2012, the Company’s Board of Directors approved a two-for-one stock split of the Company’s
outstanding common stock in the form of a 100-percent stock distribution payable on December 11, 2012 to shareholders of
record on November 27, 2012. The stock split resulted in an increase of 17.6 million shares of common stock outstanding.
Treasury shares were not affected by the stock split.
Cash Dividends
Cash dividends of $4.4 million or $0.125 per common share were paid during 2012. In January 2013, a cash dividend of
approximately $1.8 million or $0.05 per share, was declared, payable in the first quarter of 2013.
Stock Award and Incentive Plan
The Company has adopted its 2001 Stock Award and Incentive Plan (the “Plan”), which provides for grants of incentive
and non-qualified stock options, stock appreciation rights, stock awards or performance unit awards. The Plan is administered
by the Compensation Committee of the Board of Directors. Stock options granted under the Plan have a term not in excess of
ten years. The exercise price for stock options will not be less than the fair market value of the common stock on the date of
the grant, and each award of stock options will vest ratably over a specified period, generally three years.
The following table summarizes stock option and restricted stock activity for the Plan:
Stock Options
Restricted Stock
Weighted
Average
Exercise
Price Per
Share ($)
Shares
$
1,575,060
282,280
(63,394 )
(153,886 )
1,640,060
244,646
(241,196 )
(69,536 )
1,573,974
222,250
(330,158 )
(70,546 )
1,395,520
26.27
24.56
22.44
27.21
27.05
32.06
25.01
26.80
27.10
32.04
25.15
27.76
28.31
Shares
Available
for Grant
2,068,250
(438,920)
--
269,248
1,898,578
(381,624)
--
160,784
1,677,738
(345,696)
--
159,932
1,491,974
Weighted
Average
Exercise
Price Per
Share ($)
$
25.08
24.57
27.22
26.06
23.60
32.08
31.99
30.22
27.21
32.04
25.90
27.08
31.25
Shares
377,436
156,640
(118,174 )
(115,362 )
300,540
136,978
(94,246 )
(91,248 )
252,024
123,446
(102,424 )
(89,386 )
183,660
Balance January 1, 2010 ........................
Granted ...................................................
Exercised/vested .....................................
Canceled .................................................
Balance December 31, 2010 ...................
Granted ...................................................
Exercised/vested……………………….
Canceled .................................................
Balance December 31, 2011 ...................
Granted………………………………
Exercised/vested……………………….
Canceled .................................................
Balance December 31, 2012 ...................
Note 18. Comprehensive Income
Comprehensive income includes changes in the fair value of certain financial derivative instruments that qualify for hedge
accounting to the extent they are effective, the recognition of deferred pension costs, and cumulative foreign currency
translation adjustments.
F-25
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table reflects the accumulated balances of other comprehensive income (loss):
(Millions of Dollars)
Balance at January 1, 2010
Current year net change
$
Balance at December 31, 2010 $
Current year net change
Balance at December 31, 2011 $
Current year net change
Currency
Translation
Adjustment
Unrecognized
Pension
Costs
Net Gain
(Loss) On
Cash Flow
Hedges
55.7 $
(9.2 )
46.6 $
(16.7 )
29.9 $
2.1
$
$
$
(52.2 )
0.3
(51.9 )
(25.6 )
(77.5 )
(7.8 )
(85.3 )
(0.3 )
2.1
1.7
0.6
2.3
(0.2 )
2.1
Accumulated
Other
Comprehensive
Income (Loss)
3.2
(6.8 )
$
$
$
(3.6 )
(41.7 )
(45.3 )
(5.9 )
(51.2 )
Balance at December 31, 2012 $
32.0
The income tax expense (benefit) associated with items included in other comprehensive income (loss) was approximately
$(1.3) million, $(15.5) million and $1.9 million for the years ended December 31, 2012 2011 and 2010, respectively.
Note 19. Accounting for Asset Retirement Obligations
The Company records asset retirement obligations in which the Company will be required to retire tangible long-lived
assets. These are primarily related to its PCC satellite facilities and mining operations. The Company has also recorded the
provisions related to conditional asset retirement obligations at its facilities. The Company has recorded asset retirement
obligations at all of its facilities except where there are no contractual or legal obligations. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset.
The following is a reconciliation of asset retirement obligations as of December 31, 2012 and 2011:
(Millions of Dollars)
Asset retirement liability, beginning of period ............ $
Accretion expense........................................................
Additional obligations .................................................
Reversal of obligations ................................................
Payments......................................................................
Foreign currency translation ........................................
Asset retirement liability, end of period ...................... $
2012
2011
14.7
0.7
0.1
(0.2 )
(0.3 )
--
15.0
$
$
14.7
0.6
0.2
(0.4 )
(0.2 )
(0.2 )
14.7
The current portion of the liability of approximately $0.3 million is included in other current liabilities. The long-term
portion of the liability of approximately $14.7 million is included in other non-current liabilities.
Accretion expense is included in cost of goods sold in the Company's Consolidated Statements of Income.
Note 20. Non-Operating Income and Deductions
(Millions of dollars)
Year Ended December 31,
Interest income ...............................................................$
Interest expense ..............................................................
Foreign exchange gains (losses) .....................................
Foreign currency translation loss upon liquidation .......
Foreign currency translation loss upon deconsolidation
of a foreign entity ...........................................................
Gain on sale of previously impaired assets ....................
Settlement for customer contract terminations .............
Other deductions ...........................................................
Non-operating income (deductions), net ............................ $
2011
3.9
(3.3)
(1.2)
--
)
(1.4
--
--
(0.6)
(2.6)
$
$
$
$
2010
2.7
(3.3 )
0.3
--
--
0.2
0.8
(0.1 )
0.6
2012
3.2
(3.2 )
(1.4 )
--
--
--
--
(1.6 )
(3.0 )
F-26
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the third quarter to 2011, the Company recognized currency translation losses of $1.4 million upon the sale of a
50% interest in and deconsolidation of its previously controlled joint venture in Korea.
During the second quarter of 2010, the Company recognized income of $0.8 million for a settlement related to a customer
contract termination.
Note 21. Segment and Related Information
Operating segments are defined as components of an enterprise about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing
performance. The Company's operating segments are strategic business units that offer different products and serve different
markets. They are managed separately and require different technology and marketing strategies.
The Company has two reportable segments: Specialty Minerals and Refractories. The Specialty Minerals segment
produces and sells precipitated calcium carbonate and lime, and mines, processes and sells the natural mineral products
limestone and talc. This segment's products are used principally in the paper, building materials, paints and coatings, glass,
ceramic, polymers, food, automotive, and pharmaceutical industries. The Refractories segment produces and markets
monolithic and shaped refractory products and systems used primarily by the steel, cement and glass industries as well as
metallurgical products used primarily in the steel industry.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
The Company evaluates performance based on the operating income of the respective business units. Depreciation expense
related to corporate assets is allocated to the business segments and is included in their income from operations. However,
such corporate depreciable assets are not included in the segment assets. Intersegment sales and transfers are not significant.
Segment information for the years ended December 31, 2012, 2011 and 2010 was as follows:
(Millions of Dollars)
2012
Specialty
Minerals
Refractories
Total
Net sales...................................................................................... $
Income from operations ..............................................................
Depreciation, depletion and amortization ...................................
Segment assets ............................................................................
Capital expenditures ...................................................................
$
662.2
84.1
10.3
617.0
41.0
$
343.4
32.6
40.9
355.5
8.0
1,005.6
116.7
51.2
972.5
49.0
(Millions of Dollars)
2011
Specialty
Minerals
Refractories
Total
Net sales...................................................................................... $
Income from operations ..............................................................
Restructuring and other charges .................................................
Depreciation, depletion and amortization ...................................
Segment assets ............................................................................
Capital expenditures ...................................................................
$
676.1
72.8
1.0
47.6
603.8
41.7
$
368.8
33.2
(0.6 )
10.6
355.8
8.0
1,044.9
106.0
0.5
58.2
959.6
49.7
(Millions of Dollars)
2010
Specialty
Minerals
Refractories
Total
Net sales...................................................................................... $
Income from operations ..............................................................
Restructuring and other charges .................................................
Depreciation, depletion and amortization ...................................
Segment assets ............................................................................
Capital expenditures ...................................................................
$
665.0
74.7
0.5
52.6
585.7
23.3
$
337.4
28.0
0.3
11.4
340.5
8.2
1,002.4
102.7
0.8
64.0
926.2
31.5
F-27
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the totals reported for the operating segments to the applicable line items in the consolidated financial
statements is as follows:
(Millions of Dollars)
Income from continuing operations before
provision for taxes:
Income from operations for reportable segments ................. $
Unallocated corporate expenses............................................
Interest income .....................................................................
Interest expense ....................................................................
Other income (deductions) ...................................................
Income from continuing operations before provision
for taxes ......................................................................... $
2012
2011
2010
116.7
$
106.0
$
(6.7 )
3.2
(3.2 )
(3.0 )
(5.7 )
3.9
(3.3 )
(3.2 )
107.0
97.7
102.7
(4.5 )
2.7
(3.3 )
1.2
98.8
Total assets
Total segment assets ............................................................. $
Corporate assets ....................................................................
2012
2011
972.5 $
238.7
$
959.6
205.4
2010
926.2
189.9
Consolidated total assets ................................................ $
1,211.2
$
1,165.0
$
1,116.1
Capital expenditures
Total segment capital expenditures....................................... $
Corporate capital expenditures .............................................
Consolidated total capital expenditures ......................... $
2012
2011
2010
$
49.0
3.1
52.1
$
49.7
2.4
52.1
31.5
3.0
34.5
The carrying amount of goodwill by reportable segment as of December 31, 2012 and December 31, 2011 was as follows:
(Millions of Dollars)
Specialty Minerals ....................................................... $
Refractories ..................................................................
Total ..................................................................... $
2012
14.1
51.7
65.8
$
$
2011
13.8
50.9
64.7
Goodwill
December 31,
December 31,
The net change in goodwill since December 31, 2011 is attributable to the effect of foreign exchange.
Financial information relating to the Company's operations by geographic area was as follows:
(Millions of Dollars)
Net Sales
United States ......................................................................... $
2012
562.5 $
2011
557.5 $
Canada/Latin America ..........................................................
Europe/Africa .......................................................................
Asia .......................................................................................
Total International ................................................................
72.5
257.0
113.6
443.1
74.3
298.4
114.7
487.4
2010
534.3
68.9
288.4
110.8
468.1
Consolidated total net sales ........................................... $
1,005.6
1,044.9
1,002.4
(Millions of Dollars)
Long-lived assets
United States ......................................................................... $
2012
235.8
$
2011
239.8
$
Canada/Latin America ..........................................................
Europe/Africa .......................................................................
Asia .......................................................................................
Total International ................................................................
14.5
69.0
67.3
150.8
Consolidated total long-lived assets .............................. $
386.6
14.6
72.0
59.8
146.4
386.2
2010
239.9
14.9
89.9
59.4
164.2
404.1
Net sales and long-lived assets are attributed to countries and geographic areas based on the location of the legal entity.
No individual foreign country represents more than 10% of consolidated net sales or consolidated long-lived assets.
F-28
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's sales by product category are as follows:
Millions of Dollars
Paper PCC ...................................
Specialty PCC ..............................
Talc ..............................................
GCC .............................................
Refractory Products .....................
Metallurgical Products .................
2012
$ 480.3 $
65.9
48.1
67.9
264.1
79.3
2011
2010
497.0 $
63.6
46.9
68.6
287.4
81.4
496.6
58.0
44.0
66.4
264.5
72.9
Net sales.......................................
$ 1,005.6 $
1,044.9 $
1,002.4
Note 22. Quarterly Financial Data (unaudited)
Millions of Dollars, Except Per Share Amounts
2012 Quarters
First
Second
Third
Fourth
Net Sales by Major Product Line
PCC ................................................................... $
Processed Minerals ...........................................
Specialty Minerals Segment ........................
Refractories Segment ...................................
Net sales................................................................
Gross profit ...........................................................
Income from operations ........................................
Consolidated net income ......................................
Non-controlling interests ......................................
Net income attributable to MTI….. $
Earnings per share:
Basic ..............................................................
$
Diluted ............................................................ $
138.1 $
29.6
167.7
89.4
257.1
54.9
27.0
18.6
(0.6 )
18.0 $
136.3 $
31.8
168.1
85.9
254.0
56.3
29.5
20.2
(0.5 )
19.7 $
$
137.0
28.6
165.6
84.7
250.3
55.0
27.8
19.2
(0.6 )
18.6
$
0.51 $
0.51 $
0.56 $
0.56 $
0.53
0.53
$
$
Market price range per share of common stock:
High ............................................................. $
Low .............................................................. $
Close ............................................................ $
33.96 $
28.78 $
32.70 $
33.60 $
30.81 $
31.89 $
Dividends paid per common share........................ $
0.025 $
0.025 $
36.99
30.50
35.46
0.025
$
$
$
$
134.9
25.9
160.8
83.4
244.2
53.1
25.7
18.2
(0.5 )
17.7
0.50
0.50
39.92
34.25
39.92
0.05
2011 Quarters
Net Sales by Major Product Line
First
Second
Third
Fourth
PCC ................................................................... $
Processed Minerals ...........................................
Specialty Minerals Segment ........................
Refractories Segment ...................................
144.8 $
28.5
173.3
89.2
140.2 $
31.6
171.8
96.6
Net sales................................................................
Gross profit ...........................................................
Income from operations ........................................
Consolidated net income ......................................
Non-controlling Interests ......................................
262.5
52.9
24.7
16.7
(0.9 )
268.4
53.7
25.1
17.2
(0.7 )
$
142.5
28.6
171.1
91.1
262.2
52.9
25.4
16.3
(0.7 )
Net income attributable to MTI ..........
$
15.8
$
16.4
$
15.7
$
Earnings per share:
Basic
Diluted
$
$
0.43 $
0.43 $
0.45 $
0.45 $
0.44
0.43
133.1
26.8
159.9
91.8
251.7
52.7
25.2
20.1
(0.4 )
19.6
0.55
0.55
F-29
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Market price range per share of common stock:
High ............................................................. $
Low .............................................................. $
Close ............................................................ $
34.37 $
31.23 $
34.37 $
35.05 $
31.51 $
33.83 $
Dividends paid per common share ................
$
0.025 $
0.025 $
34.32
24.64
24.64
0.025
$
$
$
$
29.00
23.38
28.27
0.025
F-30
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Minerals Technologies Inc.:
We have audited the accompanying consolidated balance sheets of Minerals Technologies Inc. and subsidiary companies as
of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, shareholders'
equity, and cash flows for each of the years in the three-year period ended December 31, 2012. In connection with our audits
of the consolidated financial statements, we also have audited the related financial statement schedule. These consolidated
financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Minerals Technologies Inc. and subsidiary companies as of December 31, 2012 and 2011, and the results of their
operations and their cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with
U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered
in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information
set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Minerals Technologies Inc. and subsidiary companies' internal control over financial reporting as of December 31, 2012,
based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated February 22, 2013 expressed an unqualified
opinion on the effectiveness of the Company's internal control over financial reporting.
/s/ KPMG LLP
New York, New York
February 22, 2013
F-31
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Minerals Technologies Inc.:
We have audited Minerals Technologies Inc. and subsidiary companies' internal control over financial reporting as of
December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Minerals Technologies Inc. and subsidiary companies'
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Minerals Technologies Inc. and subsidiary companies maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Minerals Technologies Inc. and subsidiary companies as of December 31, 2012 and 2011,
and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows and related
financial statement schedule for each of the years in the three-year period ended December 31, 2012, and our report dated
February 22, 2013 expressed an unqualified opinion on those consolidated financial statements and financial statement
schedule.
/s/ KPMG LLP
New York, New York
February 22, 2013
F-32
Management's Report On Internal Control Over Financial Reporting
Management of Minerals Technologies Inc. is responsible for the preparation, integrity and fair presentation of its
published consolidated financial statements. The financial statements have been prepared in accordance with U.S. generally
accepted accounting principles and, as such, include amounts based on judgments and estimates made by management. The
Company also prepared the other information included in the annual report and is responsible for its accuracy and
consistency with the consolidated financial statements.
Management is also responsible for establishing and maintaining effective internal control over financial reporting. The
Company's internal control over financial reporting includes those policies and procedures that pertain to the Company's
ability to record, process, summarize and report reliable financial data. The Company maintains a system of internal control
over financial reporting, which is designed to provide reasonable assurance to the Company's management and board of
directors regarding the preparation of reliable published financial statements and safeguarding of the Company's assets. The
system includes a documented organizational structure and division of responsibility, established policies and procedures,
including a code of conduct to foster a strong ethical climate, which are communicated throughout the Company, and the
careful selection, training and development of our people.
The Board of Directors, acting through its Audit Committee, is responsible for the oversight of the Company's accounting
policies, financial reporting and internal control. The Audit Committee of the Board of Directors is comprised entirely of
outside directors who are independent of management. The Audit Committee is responsible for the appointment and
compensation of the independent registered public accounting firm. It meets periodically with management, the independent
registered public accounting firm and the internal auditors to ensure that they are carrying out their responsibilities. The
Audit Committee is also responsible for performing an oversight role by reviewing and monitoring the financial, accounting
and auditing procedures of the Company in addition to reviewing the Company's financial reports. The independent
registered public accounting firm and the internal auditors have full and unlimited access to the Audit Committee, with or
without management, to discuss the adequacy of internal control over financial reporting, and any other matters which they
believe should be brought to the attention of the Audit Committee.
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control over
financial reporting, including the possibility of human error and the circumvention or overriding of internal control.
Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to
financial statement preparation and may not prevent or detect misstatements. Further, because of changes in conditions, the
effectiveness of internal control over financial reporting may vary over time.
The Company assessed its internal control system as of December 31, 2012 in relation to criteria for effective internal
control over financial reporting described in "Internal Control - Integrated Framework" issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on its assessment, the Company has determined that, as of
December 31, 2012, its system of internal control over financial reporting was effective.
The consolidated financial statements have been audited by the independent registered public accounting firm, which was
given unrestricted access to all financial records and related data, including minutes of all meetings of stockholders, the
Board of Directors and committees of the Board. Reports of the independent registered public accounting firm, which
includes the independent registered public accounting firm's attestation of the effectiveness of the Company's internal control
over financial reporting are also presented within this document.
/s/ Joseph C. Muscari
Chairman of the Board
and Chief Executive Officer
/s/ Douglas T. Dietrich
Senior Vice President, Finance and Treasury,
Chief Financial Officer
/s/ Michael A. Cipolla
Vice President, Corporate Controller
and Chief Accounting Officer
February 22, 2013
F-33
MINERALS TECHNOLOGIES INC. & SUBSIDIARY COMPANIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(thousands of dollars)
Description
Year ended December 31, 2012
Valuation and qualifying accounts deducted from
assets to which they apply:
Allowance for doubtful accounts ..............................
Year ended December 31, 2011
Valuation and qualifying accounts deducted from
assets to which they apply:
Allowance for doubtful accounts ..............................
Year ended December 31, 2010
Valuation and qualifying accounts deducted from
assets to which they apply:
Allowance for doubtful accounts ..............................
Additions
Charged to
Costs,
Provisions
and
Expenses
(b)
Balance at
Beginning
of Period
Deductions
(a)
Balance at
End of
Period
$
3,009
$
1,011
(183 )
3,837
$
2,440
$
877
$
(308 )
$
3,009
$
2,890
$
49
$
(499 )
$
2,440
(a)
Includes impact of translation of foreign currencies.
S-1
Name of the Company
Jurisdiction of Organization
SUBSIDIARIES OF THE COMPANY
EXHIBIT 21.1
Singapore
APP China Specialty Minerals Pte Ltd. .................................................................
Turkey
ASMAS Agir Sanayi Malzemeleri Imal ve Tic. A.S..............................................
Delaware
Barretts Minerals Inc. .............................................................................................
Canada
Centre International de Couchage CIC Inc. ...........................................................
Thailand
Double A Specialty Minerals Co., Ltd. .................................................................
China
Gold Lun Chemicals (Zhenjiang). ..........................................................................
China
Gold Sheng Chemicals (Zhenjiang) Co., Ltd. ........................................................
China
Gold Zuan Chemicals (Suzhou) Co., Ltd. ..............................................................
Thailand
Hi-Tech Specialty Minerals Company, Limited .....................................................
Brazil
Minerals Technologies do Brasil Comercio é Industria de Minerais Ltda.
Belgium
Minerals Technologies Europe N.V. ......................................................................
Delaware
Minerals Technologies Holdings Inc. .....................................................................
United Kingdom
Minerals Technologies Holdings Ltd. ....................................................................
India
Minerals Technologies India Private Limited
Mexico
Minerals Technologies Mexico Holdings, S. de R. L. de C.V. .............................
South Africa
Minerals Technologies South Africa (Pty) Ltd. .....................................................
Canada
Mintech Canada Inc. ..............................................................................................
Japan
Mintech Japan K.K. ................................................................................................
Australia
Minteq Australia Pty Ltd. .......................................................................................
The Netherlands
Minteq B.V. ............................................................................................................
Ireland
Minteq Europe Limited. .........................................................................................
Germany
Minteq International GmbH ...................................................................................
Delaware
Minteq International Inc. ........................................................................................
China
Minteq International (Suzhou) Co., Ltd. ................................................................
Italy
Minteq Italiana S.p.A. ............................................................................................
Ireland
Minteq Magnesite Limited .....................................................................................
Delaware
Minteq Shapes and Services Inc. ............................................................................
United Kingdom
Minteq UK Limited. ...............................................................................................
Bermuda
MTI Bermuda L.P. .................................................................................................
Germany
MTI Holdings GmbH .............................................................................................
Singapore
MTI Holding Singapore Pte. Ltd. ...........................................................................
Delaware
MTI Holdco I LLC .................................................................................................
Delaware
MTI Holdco II LLC................................................................................................
Netherlands
MTI Netherlands B.V. ............................................................................................
Netherlands
MTI Ventures B.V. ................................................................................................
Netherlands
Performance Minerals Netherlands C.V. ................................................................
Indonesia
PT Sinar Mas Specialty Minerals ...........................................................................
India
Rayagada Minerals & Chemicals Private Limited ................................................
India
SMI NewQuest India Private Limited
Poland
SMI Poland Sp. z o.o. .............................................................................................
Bangladesh
Specialty Minerals Bangladesh Limited ................................................................
Belgium
Specialty Minerals Benelux....................................................................................
Brazil
Specialty Minerals do Brasil Participacoes Ltda. ..................................................
Japan
Specialty Minerals FMT K.K. ................................................................................
France
Specialty Minerals France s.p.a.s. ..........................................................................
Delaware
Specialty Minerals Inc. ...........................................................................................
Delaware
Specialty Minerals India Holding Inc.....................................................................
Specialty Minerals International Inc. .....................................................................
Delaware
Specialty Minerals Malaysia Sdn. Bhd. ................................................................. Malaysia
Specialty Minerals (Michigan) Inc. ........................................................................ Michigan
Delaware
Specialty Minerals Mississippi Inc. ........................................................................
Finland
Specialty Minerals Nordic Oy Ab ..........................................................................
Specialty Minerals (Portugal) Especialidades Minerais, S.A. ................................
Portugal
Specialty Minerals S.A. de C.V. ............................................................................ Mexico
Specialty Minerals Servicios S. de R. L. de C.V. ................................................... Mexico
Slovakia
Specialty Minerals Slovakia, spol. sr.o. .................................................................
South Africa
Specialty Minerals South Africa (Pty) Limited ......................................................
Specialty Minerals (Thailand) Limited ..................................................................
Specialty Minerals UK Limited .............................................................................
Tecnologias Minerales de Mexico, S.A. de C.V. ................................................... Mexico
Thailand
United Kingdom
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Minerals Technologies Inc.:
We consent to the incorporation by reference in the registration statements (Nos. 333-160002, 33-59080, 333-62739, and
333-138245) on Form S-8 of Minerals Technologies Inc. of our reports dated February 22, 2013, with respect to the
consolidated balance sheets as of December 31, 2012 and 2011, and the related consolidated statements of income,
comprehensive income, shareholders' equity, and cash flows for each of the years in the three-year period ended December
31, 2012, and the related financial statement schedule and the effectiveness of internal control over financial reporting as of
December 31, 2012, which reports appear in the December 31, 2012 annual report on Form 10-K of Minerals Technologies
Inc.
/s/ KPMG LLP
New York, New York
February 22, 2013
EXHIBIT 31.1
I, Joseph C. Muscari, certify that:
RULE 13a-14(a)/15d-14(a) CERTIFICATION
1.
I have reviewed this Annual Report on Form 10-K of Minerals Technologies 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:
(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: February 22, 2013
/s/ Joseph C. Muscari
Joseph C. Muscari
Chairman of the Board
and Chief Executive Officer
RULE 13a-14(a)/15d-14(a) CERTIFICATION
EXHIBIT 31.2
I, Douglas T. Dietrich, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Minerals Technologies 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 (the registrant’s fourth fiscal quarter in the case of an annual
report)
(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:
(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: February 22, 2013
/s/ Douglas T. Dietrich
Douglas T. Dietrich
Senior Vice President - Finance and Treasury,
Chief Financial Officer
EXHIBIT 32
SECTION 1350 CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350 of Chapter 63 of
Title 18, United States Code), each of the undersigned officers of Minerals Technologies Inc., a Delaware corporation (the
"Company"), does hereby certify that:
The Annual Report on Form 10-K for the year ended December 31, 2012 (the "Form 10-K") of the Company fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and information contained
in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 22, 2013
Dated: February 22, 2013
/s/ Joseph C. Muscari
Joseph C. Muscari
Chairman of the Board and
Chief Executive Officer
/s/ Douglas T. Dietrich
Douglas T. Dietrich
Senior Vice President-Finance and Treasury,
Chief Financial Officer
The foregoing certification is being furnished solely pursuant to Exchange Act Rule 13a-14(b); is not deemed to be
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section;
and is not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act of
1934.
Additional Information Regarding Non-GAAP Financial Measures (unaudited)
The letter to shareholders and other information set forth in the front part of this Annual Report present
financial measures of the Company that exclude certain special items, and are therefore not in accordance
with GAAP. The following is a presentation of the Company's non-GAAP income (loss) and operating
income (loss), excluding special items, for the twelve month periods ended December 31, 2012 and
December 31, 2011 and a reconciliation to GAAP net income and operating income, respectively, for such
periods.
The Company's management believes these non-GAAP measures provide meaningful
supplemental information regarding its performance as inclusion of such special items are not indicative of
the ongoing operating results and thereby affect the comparability of results between periods. The
Company feels inclusion of these non-GAAP measures also provides consistency in its financial reporting
and facilitates investors' understanding of historic operating trends.
(millions of dollars)
Net Income attributable to MTI, as reported
Special items:
Restructuring and other costs
Currency translation losses upon liquidation of foreign entity
Income tax settlement
Related tax effects on special items
Net income attributable to MTI, excluding special items
Basic earnings per share, excluding special items
Diluted earnings per share, excluding special items
Segment Operating Income Data
Specialty Minerals Segment
Refractories Segment
Unallocated Corporate Expenses
Consolidated
Segment Restructuring And Impairment Costs
Specialty Minerals Segment
Refractories Segment
Consolidated
Segment Operating Income, Excluding Special Items
Specialty Minerals Segment
Refractories Segment
Unallocated Corporate Expenses
Consolidated
Year Ended
Dec. 31,
2012
74.1
$
Dec. 31,
2011
$
67.5
0.0
0.0
0.0
0.0
74.1
2.10
2.09
84.1
32.6
(6.7)
110.0
0.0
0.0
0.0
84.1
32.6
(6.7)
110.0
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.5
1.4
(1.0)
(0.1)
68.3
1.90
1.89
72.8
33.2
(5.7)
100.3
1.0
(0.6)
0.5
73.8
32.6
(5.7)
100.8
$
$
$
$
$
$
$
$
$
$
$
$
$
$
DIRECTORS, OFFICERS AND INVESTOR INFORMA
DIRECTORS, OFFICERS AND INVESTOR INFORMATIONTION
Minerals Technologies Inc. and Subsidiary Companies 2012 Annual Report
BOARD OF DIRECTORS
BOARD OF DIRECTORS
Joseph C. Muscari
Executive Chairman
Paula H. J. Cholmondeley
Chief Executive Offi cer
The Sorrel Group
Robert L. Clark
Professor and Dean of the School of Engineering
and Applied Sciences
University of Rochester
Duane R. Dunham
Retired President and Chief Executive Offi cer
Bethlehem Steel Corporation
Steven J. Golub
Retired Vice Chairman and Managing Director
Lazard Frères & Co. LLC
Michael F. Pasquale
Business Consultant, Retired Executive Vice
President and Chief Operating Offi cer
Hershey Foods Corporation
Marc E. Robinson
Senior Executive Advisor
Booz & Company
Barbara R. Smith
Senior Vice President and
Chief Financial Offi cer
Commercial Metals Company
TIONS
TIFICATIONS
CERCERTIFICA
The Company’s chief executive officer submitted the
certification required by Section 303A.12(a) of the
NYSE Listed Company Manual certifying without
qualification to the NYSE that he is not aware of
any violations by the Company of NYSE corporate
governance listing standards as of June 15, 2012.
The Company also filed as an exhibit to its Annual
Report on Form 10-K for the year ended December
31, 2012, the certifications required by Section 302
of the Sarbanes-Oxley Act regarding the quality of the
Company’s public disclosure.
Annual Report design and produced by:
Annual Report design and produced by:
Firefly Design + Communications Inc. www.fi refl ydes.com
Selected photography:
Selected photography:
Wyatt Counts, Peter Razzell
CORPORA
TE OFFICERS
CORPORATE OFFICERS
Joseph C. Muscari *
Executive Chairman
Robert S. Wetherbee*
President and Chief Executive Offi cer
Douglas T. Dietrich *
Senior Vice President Finance and Treasury
and Chief Financial Offi cer
Jonathan J. Hastings*
Vice President, Corporate Development
Douglas W. Mayger *
Senior Vice President and Managing Director,
Performance Minerals and Supply Chain
Thomas J. Meek *
Senior Vice President, General Counsel, Corporate
Secretary and Chief Compliance Offi cer
D.J. Monagle III *
Senior Vice President
and Managing Director, Paper PCC
Han Schut *
Vice President and Managing
Director, Minteq International
Michael A. Cipolla
Vice President, Corporate Controller
and Chief Accounting Offi cer
* Member, MTI Leadership Council
STOCK LISTINGS
STOCK LISTINGS
Minerals Technologies Common Stock is listed
on the New York Stock Exchange
(NYSE) under the symbol MTX.
REGISTRAR AND TRANSFER AGENT
REGISTRAR AND TRANSFER AGENT
Computershare Trust Company, N. A.
P.O. Box 43078
Providence, RI 02940-3078
INVESTOR RELA
TIONS
INVESTOR RELATIONS
Security analysts and investment
professionals should direct their
business-related inquiries to:
Rick B. Honey
Vice President, Investor Relations/
Corporate Communications
Minerals Technologies Inc.
622 Third Avenue, 38th Floor
New York, NY 10017
212-878-1831
Minerals Technologies Inc.
Minerals Technologies Inc.
622 Third Avenue
622 Third Avenue
38th floor
38th fl oor
New York, NY 10017
New York, NY 10017
www.mineralstech.com
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