MINERALS TECHNOLOGIES INC.
Minerals Technologies Inc.
ANNUAL REPORT 2013
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
December 31, 2013
December 31, 2012
Net sales
Specialty Minerals Segment
PCC Products
Processed Minerals Products
Refractories Segment
Operating Income
Net income attributable to MTI
Diluted Earnings per Share
Research & Development Expenses
Depreciation, Depletion & Amortization
Capital Expenditures/Acquisitions
Net cash provided by operating activities
Number of shareholders of record
Number of employees
* Excludes Special Items
$1,018.2
$996.8
669.8
547.2
122.6
348.4
124.4*
80.3
2.42*
20.1
47.3
43.8
137.5
169
1,978
653.4
537.4
116.0
343.4
113.6
74.1
2.16
20.2
51.1
52.1
142.1
170
1,992
MINERALS TECHNOLOGIES INC.
TABLE OF
CONTENTS
Chairman’s Letter
Geographic Expansion
New Product Innovation
Operational Excellence
10-K
2
8
11
14
17
Corporate Information
Inside Back Cover
2013 NET SALES BY
GEOGRAPHIC AREA
(percentage/
millions of dollars)
United States
55%, $564
Europe/Africa
27%, $269
Asia
11%, $115
Canada/Latin America
7%, $70
2013 NET SALES BY
PRODUCT LINE
(percentage/
millions of dollars)
Paper PCC
47%, $480
Refractory Products
26%, $264
Metallurgical Products
8%, $84
Ground Calcium Carbonate
7%, $72
Specialty PCC
7%, $67
Talc
5%, $51
2
MINERALS TECHNOLOGIES INC.
CHAIRMAN’S LETTER
CHAIRMAN’S LETTER
DEAR
SHAREHOLDERS:
These are exciting times for Minerals Technologies. In addition to
the performance records we set in 2013, along with other notable
accomplishments in executing our strategies, we achieved an
important corporate objective early this year. On March 10, 2014 we
signed a merger agreement to acquire 100-percent of the shares of
AMCOL International Corporation, based in Hoffman Estates, Illinois.
As of this writing, just before going to press with this 2013 Annual
Report, we are in the midst of closing the transaction, which should
be completed before mid-year 2014.
EPS Historical Trend*
(dollars per share)
$2.5
$2.0
$1.5
$1.0
$0.5
$0
1
5
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$
3
6
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92
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94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
*EPS from continuing operations, excluding special items
Adjusted for 2012 Stock Split
CHAIRMAN’S LETTER
MINERALS TECHNOLOGIES INC.
3
THE COMBINATION
will give MTI worldwide leadership positions in both
precipitated calcium carbonate (PCC), a position we have held
for many years, and bentonite.
This is a transformational acquisition for
MTI. We will be able to significantly advance
our position as a U.S.-based global leader in
industrial minerals by doubling our sales to
$2 billion; we will also be able to accelerate
our growth and create significant additional
shareholder value. Within a few years, you’ll
see an MTI with an even more diverse set
of value-added and innovative products
and solutions across an even wider number
of growing markets throughout the world.
We are all very much looking forward to
starting this next phase of our growth and
development and on keeping you updated
on our progress.
AMCOL is the world’s leading producer of
bentonite, an exceptionally versatile mineral
with multiple applications in worldwide
markets. The combination will give MTI
worldwide leadership positions in both
precipitated calcium carbonate (PCC), a
position we have held for many years, and
bentonite. More importantly, we will create
a robust, highly competitive platform from
which to extend our already successful
core strategies of geographic expansion
and new product innovation. A closer
look at AMCOL’s capabilities, products,
and market presence demonstrates that
potential. AMCOL provides technologically
differentiated products to the energy,
environmental and consumer markets.
This enables us to diversify our product
portfolio while maintaining our differentiated
minerals base, and allowing us entry into
new growth markets.
I’m particularly enthusiastic about the
potential value we can create by combining
our respective core competencies in
mineralogy, fine particle technology, surface
treatments and innovative approaches to
solving customer problems. You already
know the story of how MTI has deployed our
own research and development capabilities
to create exciting, new industry-defining
products driven by customer needs.
By combining with AMCOL, we’ll be able
to create a new generation of value-added
products for our customers, helping them
become even more competitive in the
global marketplace.
We expect the acquisition to be immediately
highly accretive, excluding transaction costs.
Importantly, we have identified a significant
set of synergies, short, medium, and longer-
term, that will allow us to grow profitably at
even higher rates than experienced over the
last four years, while we continue to generate
strong cash flows.
As you know, I joined MTI just over seven
years ago with a clear mission: transform the
organization into a strong, high-performing
operating company and generate increasing
levels of shareholder value. I’m pleased that
we have hit several milestones in achieving
Market Capitalization
(in millions)
Earnings Per Share
+48%
$2,063
2013
$1,395
2012
2.5
$
S
P
E
d
e
t
u
l
i
D
2.0
1.5
1.0
2.42
2.16
1.93
1.82
2010
2011
2012
2013
4 MINERALS TECHNOLOGIES INC.
CHAIRMAN’S LETTER
Joseph C. Muscari
Chairman & Chief Executive Officer
that mission this year and we also have
created a momentum that, with the AMCOL
acquisition, I know we can carry into the
foreseeable future.
Our success has been the result of
many factors, not the least of which is
the strength of our management team
and the dedication and hard work of our
employees. Central to that accomplishment
has been the deployment of our employee-
driven Operational Excellence and Lean
processes. Those processes, which we
have considerable experience with, will be
central to our integration plan with AMCOL.
Besides framing much of our approach to the
integration across AMCOL’s operations, it will
enable us to achieve our integration objectives
quickly. That means obtaining the targeted
synergies and a rapid deleveraging of the debt
that we will be taking on with this acquisition.
Over the past few years, I have outlined our
acquisition strategy to you by indicating that
we were focused on minerals companies
with a strong technology bent as well as
diverse, growing end markets such as
energy, environmental and consumer
products, which can offer us higher growth
potential and less cyclicality. AMCOL meets
all of these conditions, and even exceeds
them considering the potential growth
and profitability that we can achieve as
a combined company. We took our time
to focus on the right acquisition for our
shareholders, we fought for it, and we know
what we need to do to deliver on it.
We look forward to working with AMCOL’s
employees to bring them into the MTI family.
We are also looking forward to sharing with
you the results of what we know we can
achieve this year, and the positive trajectory
this sets us on for years to come.
2013 Performance
Now, let’s turn to our 2013 performance.
Minerals Technologies had another
excellent year in 2013. For the fourth year
in a row we achieved record-breaking
earnings and we continued to execute on
our core growth strategies of geographic
expansion, new product innovation and
Operational Excellence.
Let’s look first at the financial performance.
The company recorded operating income
of $124.4 million, which increased by 10
percent over 2012. The operating income
as a percentage of sales was 12.2 percent,
a 7-percent improvement over 2012.
Earnings per share for 2013 were $2.42,
up 12 percent over the $2.16 per share we
recorded in 2012. Net income was $80.3
million, an 8-percent increase over 2012’s
$74.1 million.
Both business segments—Specialty
Minerals and Refractories—contributed
to this outstanding performance through
record-breaking financial results. For
the last three quarters of 2013, Minerals
Technologies’ sales grew, and continued to
gain momentum throughout the year. We
finished the year with a 2-percent increase
in sales over 2012, while in the fourth
quarter sales grew 6 percent. Underlying
sales, excluding the effect of foreign
exchange, grew 3 percent in 2013 and 7
percent in the fourth quarter.
CHAIRMAN’S LETTER
MINERALS TECHNOLOGIES INC.
5
BOTH BUSINESS
SEGMENTS—
Specialty Minerals and Refractories—contributed to this outstanding
performance through record-breaking financial results.
the second in Europe. The plant in China
is a joint venture agreement with Nanning
Jindaxing Paper Industry Co. Ltd. for
the construction of a 45,000-metric ton
satellite PCC facility at Jindaxing Paper’s
papermaking facility in Guangxi Province,
China. The satellite plant, which will
produce PCC for paper filling, will become
operational in the fourth quarter of 2014.
The satellite facility in Europe is for paper
filling and is with a papermaker that wished
to remain unnamed for competitive reasons.
More recently, in early January, we
announced an agreement with UPM-
Kymmene Corporation to build a satellite
PCC plant on site at UPM’s paper mill
in Changshu, China, located in Jiangsu
province. The satellite plant, scheduled to
begin operation early in 2015, will provide
PCC for paper filling and will have an initial
capacity of 100,000 tons.
In total, we are now constructing four
new satellite PCC plants in China. These
include the plant at Jianghe Paper in Henan
Province and the 100,000-ton coating facility
for Sun Paper in Shandong Province, both
of which we signed in the fourth quarter of
2012. Our growth in China will continue.
We have developed the operational capability
through added resources to further expand
in this growing market.
During the year, we also began ramping up
three satellite facilities, two in India and one
in Thailand. MTI now has seven satellite
plants in China and 16 in Asia, which is
now second only to the 25 satellites we
operate in North America. In addition, our
North American PCC plant expansions are
moving forward and we expect them to be
contributing volume in 2014.
Return on Capital*
Quarterly Underlying Sales Growth
9.5
9.2
8.8
8.4
%
C
O
R
10
5
7%
6%
4%
4%
2%
2%
Q2
Q3
Q4
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
Q1
-1%
-2%
2010
2011
2012
2013
* Bloomberg Method
Reported Sales Growth
Underlying Sales Growth
Contributing to these financial results
was excellent execution of our 2013
operating plan initiatives, which included
growth, return on capital, productivity
improvements, expense control, and safety.
Since 2007, the company has improved
productivity by 5 percent compounded
annually and we kept our 2013 expenses
flat with 2012 while continuing to grow
our Asia positions profitably.
The company’s safety performance
continued on a strong track in 2013.
We achieved our lowest lost workday rate
of 0.386 injuries per 100 employees,
which is approaching world class safety
levels, and our recordable injury rate
declined from the previous year to 1.594
injuries per 100 employees. We are
committed to making MTI a safe working
environment for our employees. Our goal is
for our employees to go home each day after
work in the same condition they arrived.
MTI’s Return on Capital continued to
improve. Our return is now 9.5 percent
compared to 9.2 percent in 2012. The
company generated $138 million in cash
from operations and we repurchased $52
million of our shares during the year.
Accomplishments
Let’s take a look at what drove our
outstanding 2013 performance. Our two
major strategies—geographic expansion
and new product innovation—continue to
gain traction. In 2013, we signed contracts
for two new satellites, one in China, and
6 MINERALS TECHNOLOGIES INC.
CHAIRMAN’S LETTER
IN ADDITION TO
the advancements we made in Paper PCC during the year, our
Performance Minerals business unit, which is comprised of Processed
Minerals and Specialty PCC, launched a new calcium carbonate
product for plastic reinforcement.
Financial Performance Trends
Days Working Capital
Cash Flow from Operations
Free Cash Flow
82
79
77
74
90
80
70
60
50
C
W
s
y
a
D
57
57
58
57
100
w
o
F
l
h
s
a
C
50
0
200
85
177
161
150
135
132
141
140
135
134
100
200
52 52
50
x
e
p
a
C
44
50
35
31
28
127
133
101
106
88
92
82
150
100
50
50
w
o
F
l
h
s
a
C
e
e
r
F
0
0
06 07 08 09 10 11 12 13
06 07 08 09 10 11 12 13
06 07 08 09 10 11 12 13
Cash Flow
Cap Ex
$ in Millions
MTI SG&A and R&D Expenses
(percentage)
Safety: Historical Injury Rates
(Injuries/100 Employees)
15%
12.9
12.2
12.3
10%
11.2
11.0
10.9
10.7
10.7
-
l
s
e
a
S
f
o
%
5%
-
s
e
e
y
o
p
m
E
l
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
3.079
2.630
2.560
1.155
0.939
1.414
0.613
World Class Recordable Injury Rate
World Class Workday Injury Rate
2.056
1.577
1.629
1.594
0.748
0.650
0.479
0.386
06 07 08 09 10 11 12 13
06
07
08
09
10
11
12
13
Annual Recordable Injury Rate
Lost Workday Injury Rate
2-Year Indexed Total Shareholder Return*
$220
$200
$180
$160
$140
$120
$100
$80
CHAIRMAN’S LETTER
MINERALS TECHNOLOGIES INC.
7
2012 2013
141.93 214.50 Mineral Technologies Inc.
116.00 153.58 S & P 500
117.88 157.37 S & P MidCap 400
117.87 165.74 Dow Jones US Industries
110.49 133.00 Dow Jones US Basic Materials
125.35 156.81 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.
12/11
12/12
12/13
Our new product innovation through the
FulFill® portfolio of high-filler technologies
also gained momentum during 2013.
During the year, we also added four new
agreements with paper mills around the
world for the adoption of our FulFill® E-325
high-filler technology, bringing the total to 14,
and in January 2014, we signed our fifteenth
agreement with a papermaker in Europe.
We continue to be actively engaged with 20
other paper mills around the world, signing
up and conducting trials to validate the
technology. We continue to commercialize
this technology worldwide, which, in 2013,
generated $2.5 million in operating income.
In addition to the advancements we made in
Paper PCC during the year, our Performance
Minerals business unit, which is comprised
of Processed Minerals and Specialty PCC,
launched a new calcium carbonate product
for plastic reinforcement. This product,
called VICRON® FRP, is a cost-effective
solution that improves productivity and
quality in such applications as sheet molding
compound, bulk molding compound and
thermoset polyesters. Performance Minerals
also completed the first phase of a 10,000-
ton expansion of its production line for
ultrafine Specialty PCC at the company’s
Adams, Massachusetts, facility.
In the Refractories segment, the worldwide
steel market stabilized, and we saw
improvement in sales of refractory products
and metallurgical wire in Europe. In 2012,
we entered into a three-year contract with
United Steel Company B.S.C. (SULB) to
Cash & Short Term Investments
(millions of dollars)
Long Term & Short Term Debt
(millions of dollars)
506
468
414
385
320
$600
$500
$400
$300
$200
$100
76
$0
191
139
$250
$200
$150
$100
$50
$0
21%
15%
14%
12%
11%11%
25
20
15
10%
9%
10
perform all refractory maintenance at a
greenfield steel mill in Bahrain, where we
are responsible for coordinating refractory
maintenance of the steel furnaces and the
other steel production vessels. This new
business model progressed in 2013, and
we continue to explore opportunities with
other steelmakers to adopt this full-service
approach. On the new product front, the
Refractories business unit continues to
develop new, highly durable products and
formulations that will provide added value to
our steel-making customers.
2014
Looking ahead to 2014, we will be focused
on integrating AMCOL into MTI as quickly
as possible while, at the same time,
continuing to advance our key strategies
of geographic expansion and new product
innovation to achieve our growth objectives.
With the AMCOL acquisition, our strong
growth in Asia, the introduction of new
products, strong leadership and focus on
our customers, along with continued support
and active engagement of all our employees
to deliver higher value, we look forward to
continuing on our high performance growth
track for you.
3
0
2
8
2
1
6
1
1
5
0
1
7
9
0
0
1
3
9
9
8
5
0
Joseph C. Muscari
Chairman & Chief Executive Officer
06 07 08 09 10 11 12 13
06 07 08 09 10 11 12 13
Long Term & Short Term Debt
Debt to Capital Ratio
8 MINERALS TECHNOLOGIES INC.
GEOGRAPHIC EXPANSION
GEOGRAPHIC EXPANSION
FOCUS ON ASIA
Geographic expansion has been one of the main pillars of our growth
strategy, and a primary focus has been on increasing our Paper PCC
presence in Asia, where paper production continues to grow between
five and seven percent a year. The execution of that strategy has
been successful. In 2013, we signed our fourth satellite contract
in China in the last 18 months to bring our total in that country to
seven. The Asian region now has 16 satellite plants, and is second
only to North America’s 25 in the number of satellites.
Growing MTI PCC Market Share
MTI
Other
0%
69%
India
2009
50ktpy
2014 year end
350ktpy
China
2009
1,000ktpy
2014 year end
1,455ktpy
35%
49%
This chart illustrates our Paper PCC growth
in India and China. In 2009, MTI did
not have a presence in the Indian paper
industry, which was using approximately
50,000 tons of PCC per year. By the end
of 2014, we will have 69 percent of the
350,000 ton-per-year PCC market in that
country. In the last five years we have
won five of seven contracts for satellite
PCC plants there primarily because of new
technology we made available to Indian
papermakers. MTI has differentiated
itself from competitors as the leading
innovator in PCC through such new product
offering as our FulFill® platform of high-
filling technology.
In 2009, MTI had three satellite plants in
China, or 35 percent of the one million
tons of PCC produced there. We had been
prevented from expanding in China between
2000 and 2010 by an exclusivity agreement
with a major Chinese papermaker. Since
2010, we have been providing Chinese
papermakers with the PCC value equation
that delivers higher quality paper and
reduced costs. Since 2012, we have signed
agreements for four more satellite plants
in China, bringing our total there to seven.
Consequently, by the end of 2014, MTI will
have 49 percent of the 1.5 million tons of
PCC produced in China.
GEOGRAPHIC EXPANSION
MINERALS TECHNOLOGIES INC.
9
PCC – New Asia Business Pipeline
12 Opportunities in Pipeline
t
l
n
e
m
p
o
e
v
e
D
s
s
e
n
i
s
u
B
e
t
i
l
l
e
t
a
S
100 kt
50 kt
0 kt
The three new satellite PCC plants for
Chinese papermakers are being built on
site at paper mills owned by Sun Paper,
Jindaxing Paper and Jianghe Paper. In
January 2014, we announced a contract
for a 100,000-ton satellite at a paper mill
owned by UPM Kymmene in Changshu,
China. We are also in different stages of
business development with a dozen other
Asian papermakers—nine of which are in
China—on adopting our PCC for use in
filling and coating paper. In addition to
the dozen potential satellites shown in the
chart, MTI has identified 11 additional
papermakers in China that could use our
cost-saving technology.
Sun Paper
UPM Kymmene
Jindaxing
Jianghe
Define Project
Scope
Trials
Negotiation
Commercial
Agreement
11 More in China Identified
China
Other Asia
10 MINERALS TECHNOLOGIES INC.
GEOGRAPHIC EXPANSION
Expanding the Market
2013 Market
% PCC Penetration
Americas
20%
Europe
17%
India
9%
China
7%
20%
20%
12.4 Million Tons
11.0 Million Tons
3.5 Million Tons
16.5 Million Tons
0
2
4
6
8
10
12
14
16
18
20
China and India Growth Potential
PCC Penetration to 20%
Near-Term Market Growth
2.6M Tons
1.0M Tons
2013 UWF Paper tons
2013 PCC Tons
Tons (Millions)
Source: RISI for Tons of Paper Produced; Fisher and MTI Estimates for Tons of PCC Produced
This chart illustrates the significant PCC
growth potential in China and India. Today,
India produces about 3.5 million tons of
uncoated woodfree paper, MTI’s primary
end market for PCC, and is growing by more
than seven percent a year. China produces
16.5 million tons of uncoated woodfree—
more than both North and South America
combined—and is growing more than six
percent per year.
In India, the penetration of PCC, defined
as tons of PCC produced and sold into
paper, is nine percent, or a little over
300,000 tons, up from 4 percent. In China,
the penetration of PCC is about 7 percent,
or 1.2 million tons.
As a comparison, the PCC penetration rate in
North America and Europe is approximately
20 percent—two to three times that of
India and China, respectively. These two
countries are installing state-of-the art paper
machines, and there is significant room to
increase PCC penetration to the 20 percent
Western levels.
At a PCC penetration rate of 20 percent—as
indicated by the blue bar—PCC consumed
in these two countries will increase by 2.6
million tons. Additionally, applying the
historical six percent growth rate of paper
production of over a five-year period—as
shown by the green bar—the near-to-
medium-term market potential grows by
another 1 million tons, for a total of 3.6
million tons of PCC.
For perspective, in 2013, Minerals
Technologies sold 3.3 million tons of PCC
for paper, so the Asia growth potential
represents more than a doubling of our
current volume sold to the industry.
In addition, North American satellite PCC
plant expansions are moving forward and
we expect them to be contributing volume
growth in 2014.
Minteq and Performance Minerals
Geographic Expansion
Minteq International
Minteq International also continued to
expand around the world. This business
unit, which consists of Refractories,
Metallurgical Wire and the Ferrotron
equipment product lines, primarily services
the worldwide steel industry.
Refractories growth was driven by a full
service contract for a new steel mill owned
by United Steel Company B.S.C. (SULB) in
Bahrain. This three-year contract, begun in
October 2012, will contribute $25 million to
$30 million in sales over a three-year period.
Traditionally Minteq’s focus has been on
sales of monolithic refractory products that
are applied onto the linings of steel-making
vessels in order to extend service life. Under
this agreement, Minteq, working with other
refractory companies that produce brick,
is responsible for coordinating all refractory
maintenance of the steel furnaces and the
other steel-production vessels.
Also, in the Middle East, Minteq signed
three maintenance contracts for refractory
material, its Minscan® application
equipment and manpower services at
three electric arc furnaces.
In Metallurgical Wire, Minteq’s growth was
primarily driven by geographical expansion
into India, Turkey and Russia.
NEW PRODUCT DEVELOPMENT
MINERALS TECHNOLOGIES INC.
11
NEW PRODUCT DEVELOPMENT
THE SECOND PILLAR
of MTI’s strategy for growth is new product innovation that
differentiates the company from competitors by providing customers
with new, higher-value products. Over the last seven years, we
have revitalized our new product pipeline and have successfully
commercialized several new products.
As this chart indicates, MTI’s new product
development is tracking well. In 2007,
the new product pipeline was nearly dry,
with just 11 ideas. Today, with suggestions
from employees and customers, MTI has
commercially launched 44 new products
and has more than 65 in development
throughout all three business units—
Paper PCC, Refractories and Performance
Minerals. The company tracks new ideas
through a five-phase, stage gate process.
In the first three stages, our scientists and
business professionals analyze the technical
and financial potential of each idea.
As ideas pass through the stage gates, they
are reviewed more stringently for technical
feasibility and potential economic benefit to
the company.
MTI NEW PRODUCT & PROCESS DEVELOPMENT (NPPD) IDEAS
120
Launch (cumulative)
Stage 5
Stage 4
Stage 3
Stage 2
Stage 1
6
3
3
4
2
2
5
8
5
11
s
a
e
d
I
f
o
r
e
b
m
u
N
100
80
60
40
20
0
26
1 1 1
8
6
12
16
31
8
27
10
6
11
24
16
6
44
24
5
15
19
24
5
52
60
34
15
12
28
3
3
44
5
11
12
34
4
2007
2008
2009
2010
2011
2012
2013
12 MINERALS TECHNOLOGIES INC.
NEW PRODUCT DEVELOPMENT
DURING THE YEAR,
Minteq developed a new high performance gunnable refractory
material for the Electric Arc Furnace market that was successfully
trialed at key accounts in North America.
Paper PCC New Product Development Pipeline by Development Theme
Development Stages
Commercialization
“New Products”
Primary Development Theme
Waste Management / Recycling
13
Higher Filler Use
Cost Reduction
Energy / Environment / Sustainability
Packaging
Mechanical Uncoated
Other
8
Filler Fiber
1(FulFill® F)
5
3
1
STAGE 1
STAGE 2
STAGE 3
STAGE 4
STAGE 5
New Product Development Stages
d
e
t
e
l
p
m
o
C
n
o
i
t
a
z
i
l
a
i
c
r
e
m
m
o
C
9
Megafil® 5100 PCC
FulFil® V Series
FulFil® E325
Technology
VELACARB®
HS PCC
VELACARB®
1000-50 PCC
Albacar® LO 2.7 PCC
2.7um (SU)
Albacar® LO 2.6 PCC
2.6um (LA)
Albacar® LO PCC
2.1um
Opacarb® 3000 PCC
Commercial
(< 5-years old)
The new product development pipeline
for MTI’s Paper PCC business unit is
robust. In addition to new PCC products
for filling and coating paper, the business
unit is developing new technologies to
aid papermakers in waste management/
recycling, energy, the environment and
sustainability, and packing. These new
development areas are focused on helping
our papermaker customers reduce costs
and improve efficiency of their operations.
As we view the market today, both of these
approaches for waste management and
operational sustainability represent a market
opportunity of about $150 million to $200
million. They also provide differentiators
for MTI, building upon the environmental
advantages we have already established
and provided for years as our PCC captures
CO2 from the stacks of our customers and
improves the air quality surrounding the
paper mill. We are aggressively pursuing
both market areas and expect to be trialing
products, framing the value and defining the
ultimate market for each in 2014.
NEW PRODUCT DEVELOPMENT
MINERALS TECHNOLOGIES INC.
13
FulFill® High-Filler Technologies
In late 2010, MTI launched its FulFill®
platform of high-filler technologies to provide
papermakers with additional cost savings.
These technologies increase PCC filler rates
in paper and reduce costs by replacing high-
cost fiber. The FulFill® E-325 technology
has been the most widely adopted by the
worldwide paper industry. In 2013, MTI
signed four commercial agreements with
paper companies to bring our total to 15
agreements on four continents.
New Products in Performance
Minerals
The Performance Minerals business unit,
which consists of our Processed Minerals
operations and our Specialty PCC product
line, has also been successful in developing
new, value-added products for customers.
Processed Minerals mines and processes
ground calcium carbonate (GCC) in
California, Connecticut and Massachusetts,
and the company has a large talc mine
and processing plant in Montana. These
products are used primarily in the
construction and automotive industries.
The Specialty PCC product line is directed
to such applications as pharmaceuticals,
calcium fortification and automotive sealants
In the past year, Performance Minerals
launched its VICRON® FRP new calcium
carbonate product for reinforcement of
plastic for such applications as sheet
molding compound, bulk molding
compound and thermoset polyesters.
The product reduces the viscosity of
thermoset compounds to improve the
productivity and quality by providing a
better mold-cavity fill at a faster rate.
Reinforcement with VICRON® FRP calcium
carbonate provides excellent mechanical
properties of the finished thermoset part,
and is a cost-effective solution for reinforced
plastic applications without sacrificing
performance properties.
Performance Minerals has also been
successful in the commercialization of its
Optibloc® talc blends used in high-clarity
film and bag applications. Optibloc® talc
is an antiblocking agent used to prevent the
adhesion of two adjacent layers of film, a
problem most associated with polyethylene
and polypropylene films. They are designed
for high-clarity polyethylene film applications
such as food packaging and clear bags.
The business unit is also in the process of
developing a new process in manufacturing
talc that provides customers with ease of
handling and higher throughputs.
High Filler Portfolio
fulfill series combinations & NPPD Pipeline
fulfill F series & fulfill series synergies
fulfill E series & fulfill V series
fulfill E series
fulfill A series
* Assumes baseline UCWF paper at 20% filler loading
Fulfill® E and V Series Deployment
35 Active Engagements Q4 2013
s
l
l
i
m
5
3
~
n
i
y
t
i
v
i
t
c
a
t
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s
s
e
n
i
s
u
B
31
34
25
23
26
27
28
17
19
33
32
29
18
30
New Products for Minteq International
During the year, Minteq developed a new
high performance gunnable refractory
material for the Electric Arc Furnace market
that was successfully trialed at key accounts
in North America. This new technology
platform will be further developed and
commercialized in 2014.
Minteq also successfully trialed a new
calcium delivery system in North America
that will be rolled out globally in 2014. This
new delivery system has a smaller footprint
and is easier to operate.
Filler
Points
15+
10+
4-9
3-5
1-2
% Filler
Increase
(*)
75+
50+
20-45
15-25
5-10
Papermaker
Savings
($/ton)
Up to 40+
Up to 30
Up to 25
Up to 20
Up to 10
21
35
15
22
14
24
9
7
11
13
12
6
20
8
16
4
10
5
1
2
30
Active
Discussions
Agreement
to Trial
Equipment in
Place
Technology
Validated
Commercial
Agreement
N. America
Europe
L. America
Asia
14 MINERALS TECHNOLOGIES INC.
OPERATIONAL EXELLENCE
OPERATIONAL EXELLENCE
IN 2007,
Minerals Technologies instituted a system of continuous improvement throughout the company that we
call Operational Excellence (OE). The focus early on was to improve productivity and efficiency in our
manufacturing operations, but in 2008 we began to apply the same Lean principles to our staff functions,
like Finance, Human Resources and Legal. We knew that the processes would take employees time to
learn and to institute, but that once embedded, the system would reap multiple benefits, and it has: The
most telling contribution of our continuous improvement effort is the five percent per year compound
annual growth in productivity.
Some of the OE processes that have become
embedded in the company by a thoroughly
engaged workforce are:
• 5S: A foundational way to organize the
workplace, epitomized by the phrase:
“A place for everything and everything in
its place.” This process highlights waste
and serves as a basis for continuous
improvement. The 5 S’s are: Seiri (Sort);
Seiton (Set in Order); Seiso (Shine);
Seiketsu (Standardize); Shitsuke (Sustain).
• Standard Work: A detailed definition of
the most efficient method to perform a
task to ensure a safe, stable, repeatable
and unambiguous process to achieve
the reliable output of processes and
superior quality.
• Total Productive Maintenance: A process
to optimize equipment effectiveness,
eliminate breakdowns and promote
autonomous operator maintenance
through day-to-day activities involving the
total workforce.
• Daily Management Control: A 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.
• Kaizen Events: Highly focused
improvement workshops that address a
specific process or work area. (Kaizen
translates to “change for the better.”)
The events, which can be multi-day or
a few hours, typically involve a cross-
functional group and may include
suppliers and customers.
In 2013, MTI employees held 1,850 kaizen
events to identify ways to reduce waste
in hundreds of processes—more than a
200-percent increase over the number of
kaizen events conducted in 2010.
MTI’s Global Suggestion System uses a
computerized platform to advance our never-
ending journey for continuous improvement.
The system enables and encourages the
generation of ideas for improvement in the
following areas:
• New product and process development
• Expense reduction
• Operational Excellence
• Customer service
• Sales and revenue generation.
As you can see from the chart, in 2013 our
employees submitted more than 15,000
improvement suggestions—that is nearly
eight suggestions for every employee.
Operational Excellence
MTI Kaizen Growth
MTI Suggestion System Performance
1,850
1,191
2,000
1,500
1,000
s
t
n
e
v
E
500
0
722
569
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
s
n
o
i
t
s
e
g
g
u
S
15,446
70%
80%
75%
70%
65%
60%
55%
50%
e
t
a
R
n
o
i
t
a
t
n
e
m
e
p
m
l
I
9,696
65%
64%
6,093
1,613
51%
2010
2011
2012
2013
2010 2011 2012 2013
Suggestions
Implementation Rate
OPERATIONAL EXELLENCE
MINERALS TECHNOLOGIES INC.
15
MTI Productivity
MTI Sales per Employee (thousands of dollars)
$500.0
$483
$468
$444
$462
$404
$390
5% Compound Annual
Growth Rate
$450.0
$400.0
$350.0
$367
$300.0
MTI Tons per Hour Worked Index
117.9
113.3
109.1
106.8
104.8
125
100
75
07 08 09 10 11 12 13
09
10
11
12
13
16 MINERALS TECHNOLOGIES INC.
OPERATIONAL EXELLENCE
AMCOL
On March 10, 2014, Minerals Technologies
entered into a merger agreement to acquire
AMCOL International, which will result in a
$2 billion company that combines the global
leaders in precipitated calcium carbonate
and bentonite. MTI is the largest supplier
of PCC to the worldwide paper industry
and AMCOL is the premier producer of
bentonite, an exceptionally versatile mineral
with multiple applications in worldwide
markets. Both companies are also leaders
in a number of other significant, diverse and
growing product areas.
Combining MTI and AMCOL extends and
deepens our platform for future growth
through geographic expansion and new
product innovation, and will create a
broader portfolio to penetrate new end
markets in energy, environmental and
consumer products.
From a research and development
standpoint, both MTI and AMCOL have
deep resources and extensive expertise in
mineralogy, fine particle technology and
polymer chemistry, which together, we
can leverage to accelerate new product
development and commercialization.
Acquisition of AMCOL accelerates MTI’s growth and creates shareholder value
Over the last seven years, MTI has been
transformed into a strong operating company
through deployment of employee-driven
Operational Excellence and Lean processes
that drives our continuous improvement.
We believe that a prioritized and prompt
integration of AMCOL into our business
system will enable us to realize the targeted
synergies quickly and rapidly deleverage the
debt level that we will be taking on.
Combines global leaders in
PCC and Bentonite
Platform for
accelerated growth
MTI’s performance
track record
Long-term growth in
shareholder value
• Portfolio of market leader
• Diversification into energy,
positions
• Broad portfolio of
environmental and
consumer products
complementary products
• Geographic expansion
• Historical growth and
geographic expansion
• High-performance
operating company
• Strong cash flow
• Immediately accretive
excluding transaction costs
• Rapid deleveraging
• World class innovators in
mineralogy, fine particle
technology and polymer
chemistry
• Continued innovation
• Continuous improvement
expected
Minerals Technologies’ vision for the future
Creating superior return for shareholders
A $2 billion minerals-based company with
global reach based on:
• Mine-to-market value chain management
• Demonstrated process technology and
innovation leadership
• Broad and deep talent pool
• Deeper geographic footprint
• Significant end market overlap
Customer focused
employees
Strong cash flows
Superior performance and
Operational Excellence
Allowing reinvestment in:
• Further market penetration and geographic
expansion, especially in Asia
• Innovating customized technologies to
satisfy future customer needs
• Organic growth across all business
segments.
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, 2013
[ ] 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 28, 2013, was
approximately $1.2 billion. 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 10, 2014, the Registrant had outstanding 34,429,055 shares of common stock, all of one class.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2014 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form
10-K.
MINERALS TECHNOLOGIES INC.
2013 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
12
12
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 $547.2 million, $537.4 million and $548.6 million for the years ended December
31, 2013, 2012 and 2011, 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 in the production of 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 $480.0 million, $471.5 million and $485.0 million for the years ended
December 31, 2013, 2012 and 2011, respectively.
Approximately 47% 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, 2013, 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 FulFill® 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 and Lifford, United Kingdom.
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 2013, more than 90% of North American uncoated wood-free paper was produced employing alkaline
technology. Presently, the Company owns and operates 16 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 20% 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 10 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 $67.2 million, $65.9 million and $63.6 million for the years ended December
31, 2013, 2012 and 2011, 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 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 $122.6 million, $116.0 million and $115.5
million for the years ended December 31, 2013, 2012 and 2011, respectively. Net sales of talc products were $50.9 million, $48.1
million and $46.9 million for the years ended December 31, 2013, 2012 and 2011, respectively. Net sales of ground calcium carbonate
("GCC") products, which are principally lime and limestone, were $71.7 million, $67.9 million and $68.6 million for the years ended
December 31, 2013, 2012 and 2011, 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 $348.4 million, $343.4 million and $368.8 million for the years ended December 31,
2013, 2012 and 2011, 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 $264.0 million, $264.1 million and $287.4 million for the years ended December 31, 2013, 2012 and 2011.
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.
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 in 2012. Minteq, working with other refractory companies, is responsible for coordinating refractory maintenance of
the steel furnaces and other steel production vessels. We generated sales of $13.9 million from this contract in 2013 and we expect to
generate on average $10 million per year over the 3 year term of the contract. We are exploring the use of this business model for
other operations.
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 todevelop, reformulate, and optimize its products and
application technology to maintain its competitive advantage in the market place. Some of the products the Company has developed
and optimized in the past several years include:
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
benefit of rapid dry-out capabilities.
such as steel ladle safety linings.
making furnaces.
· 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.
5
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.
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 $84.4
million, $79.3 million and $81.4 million for the years ended December 31, 2013, 2012 and 2011. 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, the lime utilized in
our business is readily available from numerous sources and we purchase lime under long-term supply contracts from unaffiliated
suppliers located in close geographic proximity to the Company's PCC plants. We also produce lime at our Adams, Massachusetts
facility and our Lifford, UK facility, although most of the lime produced at our Adams facility and all of the lime produced at our
Lifford facility is consumed in the production of Specialty PCC at the plant. We currently supply some quantities of lime to third
6
parties that are in close proximity to our Adams plant and could supply small quantities of lime to certain of our PCC satellite facilities
that are in close geographic proximity to the Adams plant. 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. Approximately 45% percent of the Company’s magnesia requirements were purchased from sources in China
over the past five years. 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. Presently, we procure the majority of our magnesia requirements
from other locations, including Brazil, Turkey, United States, Netherlands, Russia and Japan. The amount sourced from China and
other locations can vary from year to year depending upon price and availability from each source. The alumina we utilize in our
business is readily available from numerous sources. The 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; FulFill® 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 FulFill® 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 fifteen 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, 2013, 2012 and 2011, the Company spent approximately $20.1 million, $20.2 million and $19.3
million, respectively, on research and development. The Company's research and development spending for 2013, 2012 and 2011 was
approximately 2.0%, 2.0% and 1.9% 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 71 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.
7
Patents and Trademarks
The Company owns or has the right to use approximately 320 patents and approximately 878 trademarks related to its business.
Our patents expire between 2014 and 2036. 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.
Employees
At December 31, 2013, the Company employed 1,978 persons, of whom 1,010 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") 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. Set forth below are all risks that we believe are material at this time. 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,
8
and other challenges. The Company’s business and operating results have been and may continue to be adversely affected by
these global economic conditions. 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 in the past been 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 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 2013, North American and European steel production was
approximately 10% 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 17% 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 2013 averaged approximately 928 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 FulFill® 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.
The Company announced on February 14, 2014 that it has made a proposal to acquire all outstanding shares of AMCOL
International Corporation, a company publicly traded on the New York Stock Exchange, for $42 per share in cash. While the
Company is confident in its ability to finance the transaction, there can be no assurance financing will be available. If the proposal
is accepted, the transaction would be expected to close in the first half of 2014 and would be conditioned upon customary closing
conditions. This transaction, if consummated, would be subject to all of the risks described above.
9
(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 $480.0 million in 2013, or approximately 47% 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. 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 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.
10
(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 45% of our sales in 2013 were derived from outside
the United States and we have significant production facilities which are located outside of the United States. 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, 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 access to ore reserves at its mining
operations. 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 approximately forty-five percent of its magnesia requirements from sources in China.
The majority of magnesia requirements were purchased from other countries. 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. Energy costs typically have the most significant impact in the
production of our Processed Minerals and Specialty PCC products, but also affect the cost of raw materials purchased in our Paper
PCC product line and Refractories Segment. The contracts pursuant to which we construct and operate our satellite PCC plants
generally adjust pricing to reflect the pass-through of increases in costs resulting from inflation, including energy. However, there
is a time lag before such price adjustments can be implemented. The Company and its customers, especially customers for the
Refractories Segment, Processed Minerals and Specialty PCC product lines will typically negotiate reasonable price adjustments
in order to recover these escalating costs, but there can be no assurance that we will be able to recover increasing costs through
such negotiations. In 2013, increased raw materials costs affected our Specialty Minerals segment by $4.7 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.
11
(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 or
under construction as of December 31, 2013. Generally, the land on which each satellite PCC plant is located is leased at a nominal
amount by the Company 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.
12
China, Suzhou1 ............................................................ Gold HuaSheng Paper Company Ltd.
China, Henan2 ............................................................. Henan Jianghe Paper Co., Ltd.
China, Guangxi1, 2 ........................................................ Nanning Jindaxing Paper Industry Company Ltd
China, Shandong2 ........................................................ Shandong Sun Paper Industry Joint Stock Company Ltd
Finland, Äänekoski ...................................................... M-real Corporation
Finland, Tervakoski ..................................................... Trierenberg Holding
France, Alizay .............................................................. 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 .......................................................... 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 ................................................ Double A Paper Company Ltd.
1 These plants are owned through joint ventures.
2 These plants are under construction.
The Company also owned and operated at December 31, 2013, 7 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 17 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
Germany, Duisburg .................... Plant/Sales Office/Research laboratories
Monolithic Refractories
Monolithic Refractories/PCC
PCC
PCC/Monolithic Refractories
PCC/Monolithic Refractories
PCC/Monolithic Refractories
Laser Scanning Instrumentation/
13
Location
Facility
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
Product Line
Probes/Monolithic Refractories
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.
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 2013.
Millions of tons
Location
Arizona, Pima County ................
California, Lucerne Valley .........
Connecticut, Canaan ..................
Massachusetts, Adams ...............
Montana, Dillon .........................
Reserves
8.73
47.07
20.41
25.59
3.76
2013 Usage
0.17
0.87
0.46
0.58
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 15 pending asbestos cases. To date,
1,394 silica cases and 34 asbestos cases have been dismissed. Two new asbestos cases were filed in the fourth quarter of 2013. 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 continues to be insignificant. The majority of the
costs of defense are 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 15 pending asbestos cases, all allege liability based on products sold largely 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.
14
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, 2013.
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 $0.4 million, which has been accrued as of December 31, 2013.
The Company and its subsidiaries are not party to any other material pending legal proceedings, other than routine litigation
incidental to their businesses.
Item 4. Mine Safety Disclosures
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Annual Report on Form
10-K.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Securities
The Company's common stock is traded on the New York Stock Exchange under the symbol "MTX."
Information on market prices and dividends is set forth below. On December 11, 2012, the Company effected a two-for-one stock
split in the form of a stock dividend. Accordingly, all share and per share data presented reflects the effect of the stock split. See Note
1 to the consolidated financial statements “Summary of Significant Accounting Policies,” for additional information.
2013 Quarters
Market Price Range Per Share of Common Stock
High .............................................................................$
Low ..............................................................................
Close ............................................................................
First
Second
Third
Fourth
43.04 $
39.54
41.51
43.12 $
38.43
41.34
49.03 $
42.53
48.95
60.40
49.28
60.07
Dividends paid per common share ...............................$
0.05 $
0.05 $
0.05 $
0.05
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
15
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 .......................................
1,131,415
$
32.42
Total .............................................
1 The Company’s only equity compensation plan has been approved by the Company’s stockholders.
1,131,415
32.42
$
1,144,989
1,144,989
Issuer Purchases of Equity Securities
Period
September 30 – October 27 ......................
October 28 – November 24 ......................
Total
Number of
Shares
Purchased
110,700
35,400
November 25 - December 31 ...................
--
Total ...............................................
146,100
Average Price
Paid Per Share
$
$
$
$
52.06
56.55
--
53.15
Total Number
of Shares
Purchased as
Part of the
Publicly
Announced
Programs
110,700
35,400
Dollar Value
of Shares That
May Yet be
Purchased
Under the
Programs
144,540,946
142,539,032
--
142,539,032
In 2011, the Company’s Board of Directors authorized the Company’s management to repurchase, at its discretion, up to $75
million of shares over a two-year period. The $75 million repurchase program was completed on October 1, 2013. The Company
repurchased 1,646,097 shares at an average price of approximately $45.54 per share under this program.
On September 19, 2013, the Company's Board of Directors authorized the Company’s management to repurchase, at its discretion,
up to $150 million of the Company’s shares over a two-year period commencing upon completion of the repurchase program
authorized in 2011. As of December 31, 2013, 139,900 shares have been repurchased under this program for $7.5 million, or an
average price of approximately $53.33 per share.
On January 22, 2014, 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 10, 2014, the last reported sales price on the NYSE was $51.32 per share. As of February 10, 2014, there were
approximately 169 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 12/31/2012 to 12/31/2013.
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
12/12
12/13
100.00
100.00
100.00
100.00
100.00
100.00
151.13
132.39
133.50
140.61
120.38
125.10
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 12/31/2011 to 12/31/2013.
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
12/13
100.00
100.00
100.00
100.00
100.00
100.00
141.93
116.00
117.88
117.87
110.49
125.35
214.50
153.58
157.37
165.74
133.00
156.81
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 12/31/2010 to 12/31/2013.
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
12/13
100.00
100.00
100.00
100.00
100.00
100.00
86.71
102.11
98.27
99.21
85.28
98.67
123.06
118.45
115.84
116.94
94.23
123.68
185.99
156.82
154.64
164.43
113.43
154.73
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 12/31/2008 to 12/31/2013.
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
12/08
12/09
12/10
12/11
12/12
12/13
100.00
100.00
100.00
100.00
100.00
100.00
133.84
126.46
137.38
126.07
165.51
148.00
161.32
145.51
173.98
158.88
218.03
185.27
139.88
148.59
170.96
157.63
185.94
182.80
198.52
172.37
201.53
185.80
205.44
229.14
300.03
228.19
269.04
261.25
247.30
286.66
20
Item 6. Selected Financial Data
Dollars in Millions, Except Per Share Data
Income Statement Data:
Net sales ............................................................................... $
Cost of goods sold................................................................
Production margin ...........................................................
Marketing and administrative expenses ...............................
Research and development expenses ...................................
Insurance settlement (gain) ..................................................
Impairment of assets ............................................................
Restructuring and other costs ...............................................
Income (loss) from operations.........................................
Non-operating income (deductions), net ..............................
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.......................
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
2013
1,018.2 $
784.5
233.7
89.2
20.1
(2.5)
--
--
126.9
(3.2)
123.7
34.5
89.2
(5.8)
83.4
2012
996.8
774.5
222.3
88.5
20.2
--
--
--
113.6
(3.0)
110.6
31.9
78.7
(2.5)
76.2
(3.1)
(2.1)
2011
2010
$
1,032.9 $
818.7
214.2
989.2 $
779.3
209.9
91.2
19.3
--
--
(0.4)
104.1
(2.7)
101.4
28.7
72.7
(2.5)
70.2
(2.7)
89.4
19.4
--
--
0.8
100.3
0.4
100.7
29.6
71.1
(1.2)
69.9
(3.0)
2009
897.5
740.6
156.9
90.3
19.7
--
39.8
22.0
(14.9)
(6.3)
(21.2)
(4.8)
(16.4)
(4.5)
(20.9)
(2.9)
Technologies Inc. (MTI) ....................................... $
80.3 $
74.1
$
67.5 $
66.9 $
(23.8)
Earnings Per Share
Basic:
Earnings (loss) from continuing operations
attributable to MTI…………………………………..
$
2.48 $
2.17
$
1.94 $
1.83 $
(0.52)
Loss from discontinued operations
attributable to MTI…………………………………..
(0.17 )
(0.07 )
(0.07 )
(0.03 )
(0.12)
Basic earnings (loss) per share attributable to MTI......... $
2.31 $
2.10
$
1.87 $
1.80 $
(0.64)
Diluted:
Earnings (loss) from continuing operations
attributable to MTI…………………………………..
$
2.46 $
2.16
$
1.93 $
1.82 $
(0.52)
Loss from discontinued operations
attributable to MTI…………………………………..
(0.16 )
(0.07 )
(0.07 )
(0.03)
(0.12)
Diluted earnings (loss) per share attributable to MTI...... $
2.30 $
2.09
$
1.86 $
1.79 $
(0.64)
Weighted average number of common shares outstanding:
Basic ..............................................................................
Diluted ...........................................................................
Dividends declared per common share ................................ $
34,690
34,976
0.20 $
35,340
35,529
0.125
Balance Sheet Data:
Working capital .................................................................... $
Total assets ...........................................................................
Long-term debt.....................................................................
Total debt .............................................................................
Total shareholders' equity ....................................................
634.2 $
1,217.5
75.0
88.7
874.4
514.4
1,211.2
8.5
92.6
813.7
$
$
36,018
36,236
37,228
37,386
0.10 $
0.10 $
539.4 $
520.3 $
1,165.0
85.4
99.8
768.0
1,116.1
92.6
97.2
782.7
37,448
37,448
0.10
447.8
1,072.1
92.6
104.1
747.7
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,
2013
2012
2011
Net sales ..............................................................................
Cost of goods sold ...............................................................
Production margin ..........................................................
100.0 %
77.1
22.9
100.0 %
77.7
22.3
100.0%
79.3
20.8
Marketing and administrative expenses ..............................
Research and development expenses ..................................
Insurance settlement (gain) .................................................
Restructuring charges..........................................................
Income from operations .................................................
Income from continuing operations before
provision for taxes on income ...................................
Provision for taxes on income .............................................
Income from continuing operations ...............................
8.8
2.0
(0.3 )
--
12.5
12.2
3.4
8.8
8.9
2.0
--
--
11.4
11.1
3.2
7.9
8.8
1.9
--
--
10.1
9.8
2.8
7.0
Net income .....................................................................
7.9 %
7.4 %
6.5%
Executive Summary
The Company reported record earnings per share for 2013, the fourth consecutive year of record earnings. Earnings from
continuing operations in 2013 were $2.46 per share, an increase of 14% from 2012. The results reflected continued solid financial
performance.
Worldwide sales were $1.02 billion compared with $1.00 billion in 2012, an increase of 2 percent. Foreign exchange had an
unfavorable impact on sales of $11.2 million or 1 percentage point.
Income from operations grew 12 percent to $126.9 million as compared to $113.6 million in the prior year and represented 12.5%
of sales. This increase was due to a strong operating performance highlighted by 5-percent company-wide productivity improvements,
which resulted in savings of $3.3 million, and continued cost and expense control. Income from operations also included a one-time
insurance settlement gain of $2.5 million. The strong operating performance occurred in both segments. The Specialty Minerals
segment’s income from operations increased 12 percent to a record $98.4 million in 2013 and represented 14.7% of sales. This
increase was attributable to a strong performance in Paper PCC due to contributions from the Fulfill® technology, the startup of two
new satellite plants and productivity improvements and price increases in both the PCC and Processed Minerals product lines. The
Refractories segment’s operating income increased 10% to $35.9 million, including the insurance gain, and represented 10.3% of
sales. This segment attained strong productivity improvements, higher metallurgical wire sales and improved profitability in Europe.
22
In 2013, the Company continued to advance the execution of its growth strategies of geographic expansion and new product
innovation and development. During the year, we experienced sales growth of 6% in our Paper PCC operations in Asia due primarily
to the startup 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 and in Europe which will add approximately 60,000 tons of production capacity and should be operational by the
fourth quarter of 2014. In January 2014, we signed an agreement with UPM-Kymmene Corporation for a 100,000-ton satellite in
Changshu, China which should be operational in the first quarter of 2015. We presently have four PCC facilities under construction in
China. The Company continues to see progress in our major growth strategy of developing and commercializing new products in
advancing our FulFill® platform of technologies of high filler loading. We presently have 15 commercial contracts for FulFill®. In
2013 the FulFill® program generated $2.5 million of operating income and we expect to generate operating income between $4.0
million and $4.5 million in 2014. Our agreement with United Steel Company B.S.C. (SULB), to perform all refractory maintenance at
a greenfield steel mill in Bahrain which began operations in the third quarter of 2012, generated sales of $13.9 million in 2013. We
expect to generate on average $10 million per year over the 3 year term of the contract.
The Company discontinued its operations at its merchant PCC facility at Walsum, Germany in the second quarter of 2013. In
connection with the Company's 2007 restructuring of its European coating PCC operations, the Company recorded an impairment
charge related to its Walsum facility. This facility continued to operate well below capacity levels into 2013. The Company recorded
a pre-tax charge for closure costs of this facility in the second quarter of $5.9 million. The loss from discontinued operations in 2013
was $0.16 per share compared with $0.07 per share in 2012. All prior periods have been restated to reflect the reclassification as a
discontinued operation.
The Company's balance sheet as of December 31, 2013 continues to be very strong. Cash, cash equivalents and short-term
investments at December 31, 2013 were approximately $506.0 million. Our cash flows from continuing operations were $137.5
million in 2013. In addition, we had available lines of credit of $189.7 million, our debt to capital ratio was 9.2%, and our current
ratio was 4.5.
Outlook
Looking forward, we remain cautious about the state of the global economy and the impact it will have on our product lines.
Although we saw market stabilization and improvement in 2013, there remains uncertainty as to the sustainability of the upturn.
In 2014, 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 FulFill® 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) Develop products and processes for waste management and recycling, opportunities to reduce the
environmental impact of the paper mill, reduce energy consumption and improve the sustainability of the
papermaking process and further penetration into the packaging segment of the paper industry
(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.
23
Results of Operations
Sales
(Dollars in millions)
% of
Total
Net Sales
Sales
55.3 %
U.S. ............................................ $
International ...............................
44.7 %
Net sales ................................ $ 1,018.2 100.0 %
563.5
454.7
2013
Paper PCC .................................. $
Specialty PCC.............................
PCC Products ........................ $
Talc ............................................. $
GCC ............................................
Processed Minerals Products $
480.0
67.2
547.2
50.9
71.7
122.6
47.2 %
6.6 %
53.8 %
5.0 %
7.0 %
12.0 %
% of
Total
Sales
56.4 %
43.6 %
100.0 %
47.3 %
6.6 %
53.9 %
4.8 %
6.8 %
11.6 %
2012
562.5
434.3
996.8
471.5
65.9
537.4
48.1
67.9
116.0
Growth
0 % $
5 %
2 % $
2 % $
2 %
2 % $
6 % $
6 %
6 % $
% of
Total
Sales
Growth
1 % $
2011
54.0 %
557.5
(9) %
46.0 %
475.4
(3) % $ 1,032.9 100.0 %
(3) % $
4 %
(2) % $
3 % $
(1) %
0 % $
485.0
63.6
548.6
46.9
68.6
115.5
47.0 %
6.1 %
53.1 %
4.5 %
6.7 %
11.2 %
Specialty Minerals Segment $
669.8
65.8 %
3 % $
653.4
65.5 %
(2) % $
664.1
64.3 %
Refractory Products .................... $
Metallurgical Products................
Refractories Segment............. $
264.0
84.4
348.4
25.9 %
8.3 %
34.2 %
0 % $
6 %
1 % $
264.1
79.3
343.4
26.5 %
8.0 %
34.5 %
(8) % $
(3) %
(7) % $
287.4
81.4
368.8
27.8 %
7.9 %
35.7 %
Net sales ............................... $ 1,018.2 100.0 %
2 % $
996.8
100.0 %
(3) % $ 1,032.9 100.0 %
Worldwide net sales in 2013 increased 2% from the previous year to $1.02 billion. Foreign exchange had an unfavorable impact
on sales of $11.2 million or 1 percentage point of growth. Sales in the Specialty Minerals segment, which includes the PCC and
Processed Minerals product lines, increased 3% to $669.8 million from $653.4 million in 2012. Sales in the Refractories segment
increased 1% to $348.4 million from $343.4 million in the previous year.
In 2012, worldwide net sales decreased 3% to $996.8 million from $1.03 billion in the prior year. Foreign exchange had an
unfavorable impact on sales of $25.7 million, or 2 percentage points of growth. In 2012, Specialty Minerals segment sales decreased
2% and Refractories segment sales decreased 7% from 2011 levels.
In 2013, worldwide net sales of PCC, which is primarily used in the manufacturing process of the paper industry, increased 2% to
$547.2 million from $537.4 million in the prior year. Foreign exchange had an unfavorable impact on 2013 sales of approximately
$6.0 million or 1 percentage point of growth. Worldwide net sales of Paper PCC increased 2% to $480.0 million from $471.5 million
in the prior year. This increase was due to sales growth in Asia of 6%, the re-start of our Alizay, France satellite, increased usage of
FulFill® technology at existing customers, and increased pricing were partially offset by several temporary paper mill and paper
machine shutdowns in North America and Europe. The sales growth in Asia was primarily related to the start-up and ramp-up of three
new PCC satellites. Sales of Specialty PCC increased 2% to $67.2 million from $65.9 million in 2012. This increase was due to higher
volumes in the U.S. as a result of our expansion at Adams, Massachusetts and increased pricing, partially offset by weak demand in
Europe.
In 2012 worldwide net sale of PCC decreased 2% to $537.4 million from $548.6 million in the prior year. Foreign exchange had
an unfavorable impact on 2012 sales of approximately $16.5 million or 3 percentage points of growth. Worldwide net sales of Paper
PCC decreased 3% to $471.5 million from $485.0 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 and the effects of foreign exchange.
Net sales of Processed Minerals products in 2013 increased 6% to $122.6 million from $116.0 million in 2012. Ground Calcium
Carbonate (GCC) products increased 6% to $71.7 million due to volume growth of 3% and increased pricing. Talc products increased
6% to $50.9 million. This growth was attributable to increased pricing and 3% higher volumes.
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 in the Refractories segment in 2013 increased 1% to $348.4 million from $343.4 million in the prior year. Foreign
exchange had an unfavorable impact on 2013 sales of $5.1 million, or approximately 1 percentage point. Sales of refractory products
and systems to steel and other industrial applications decreased slightly to $264.0 million from $264.1 million as new business in
24
Europe, primarily from the operations in Bahrain, were offset by lower demand in North America, and lower sales to non-steel
applications. Sales of metallurgical products within the Refractories segment increased 6% to $84.4 million as compared with $79.3
million last year primarily attributable to higher volumes in North America and Europe.
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 2012 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 in the prior 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 United States grew slightly to $563.5 million in 2013 and represented approximately 55.3% of consolidated net
sales. International sales increased approximately 5% to $454.7 million from $434.3 million.
Operating Costs and Expenses
(Dollars in millions)
2013
Growth
2012 Growth
Cost of goods sold ...................................................... $
Marketing and administrative .................................... $
Research and development ........................................ $
Insurance settlement (gain) ........................................ $
Restructuring charges................................................. $
* Percentage not meaningful
784.5
89.2
20.1
(2.5 )
--
1 % $
1 % $
(1) % $
* % $
* % $
774.5
88.5
20.2
--
--
(5) % $
(3) % $
5 % $
* % $
* % $
2011
818.7
91.2
19.3
--
(0.4)
Cost of goods sold in 2013 was 77.1% of sales compared with 77.7% in the prior year. Production margin increased $11.3 million,
or 5% as compared with a 2% increase in sales. In the Specialty Minerals segment, production margin increased 8%, or $10.9 million,
as compared with a 3% increase in sales. This was primarily attributable to improved profitability in Asia and volume increases of
approximately $3.5 million, price increases, net of raw material cost increases, of $8.5 million, and continued productivity and cost
improvements of $2.9 million. This was partially offset by higher energy costs of $2.6 million and the effect foreign exchange of $1.4
million. In the Refractories segment, production margin increased $0.5 million, or 1% as compared with a 2% increase in sales.
Production Margin increased due to higher sales to SULB in Bahrain, volume increases of metallurgical products, and improved
productivity. This was partially offset by lower profits from equipment sales and to the effects of foreign exchange
Cost of goods sold in 2012 was 77.7% of sales compared with 79.3% in the prior year. Production margin increased $8.1 million,
or 4% as compared with a 4% decrease in sales. In the Specialty Minerals segment, production margin increased 7%, or $9.0 million,
as compared with a 2% decrease in sales. This increase was primarily attributable to increased pricing of $20 million, lower energy
costs of $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 $2.9 million. In the Refractories segment, production margin decreased $0.9 million, or
1% as compared with a 7% decrease in sales. Volume declines, lower equipment sales of $10 million and the effects of foreign
exchange were partially offset by lower material costs of $9 million and increased pricing of $1.5 million.
Marketing and administrative costs increased 1% to $89.2 million in 2013 from $88.5 million in the prior year. Marketing and
administrative costs as a percentage of net sales were 8.8% which was the same as the prior year. In 2012, marketing and
administrative expenses were 3.0% lower than in the prior year.
Research and development expenses decreased 1% in 2013 to $20.1 million from $20.2 million and represented 2.0% of net sales.
In 2012, research and development expense increased 5% from 2011 and represented 2.0% of net sales.
The Company recognized a one-time insurance settlement gain of $2.5 million in the fourth quarter of 2013.
Income from Operations
(Dollars in millions)
2013
Growth
2012
Growth
2011
Income from operations .............................. $ 126.9
12 % $ 113.6
9 % $ 104.1
The Company recorded income from operations in 2013 of $126.9 million as compared with $113.6 million in the prior year.
Income from operations represented 12.5% of sales compared with 11.4% of sales in the prior year. The Specialty Minerals segment
recorded income from operations of $98.4 million in 2013 as compared with $87.7 million in the prior year. The Refractories segment
25
recorded income from operations of $35.9 million in 2013 as compared to $32.6 million in the prior year. Income from operations in
the Refractories segment included an insurance settlement gain of $2.5 million.
In 2012, the Specialty Minerals segment recorded income from operations of $87.7 million as compared with $76.6 million in the
prior year. The Refractories segment recorded income from operations of $32.6 million in 2012 as compared with $33.2 million in the
previous year.
Non-Operating Income Deductions
(Dollars in millions)
2013
Growth
2012
Growth
2011
Non-operating deductions, net .................... $
(3.2)
5% $
(3.0)
15 %
$
(2.6)
The Company recorded non-operating deductions of $3.2 million in 2013 as compared with $3.0 million in the previous year.
The Company recorded non-operating deductions of $3.0 million in 2012 as compared with $2.6 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)
2013
Growth
2012
Growth
2011
Provision for taxes on income ..................... $
34.5
8 % $
31.9
11 % $
28.7
The Company recorded provision for taxes on income of $34.5 million in 2013 as compared with $31.9 million in the previous
year. The effective tax rate for 2013 was 27.9% as compared with 28.9% in the prior year. The decrease in the tax rate in the current
year primarily relates to the settlement of an IRS audit for tax years 2007 and 2008 and the impact of closing those years, the impact
of the reversal of prior year charges resulting from the late extension of expiring corporate income tax provisions by the American
Taxpayer Relief Act of 2012 and additional foreign tax credits generated and utilized.
The Company recorded provision for taxes on income of $31.9 million in 2012 as compared to $28.7 million in the previous year.
The effective tax rate for 2012 was 28.9% as compared with 28.3% in the previous year. The increase in the tax rate 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 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.
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 $4.5 million in 2013, $4.1 million in 2012, and $4.0 million in 2011.
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 $4.4 million, $4.6 million and $1.1 million in
2013, 2012 and 2011, respectively. The increase of income tax benefits in 2013 as compared with 2012 results from the change in the
mix of earnings in the foreign jurisdictions in 2013, statutory rate changes and a change in the amount of local income and tax
adjustments. 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.
Income from Continuing Operations
(Dollars in millions)
2013
Growth
2012
Growth
2011
Income from continuing operations .................... $
89.2
13 % $
78.7
8 % $
72.7
The Company recognized income from continuing operations of $89.2 million in 2013 as compared to $78.7 million in 2012. In
2011, the company recorded income from operations of $72.7 million.
Loss from Discontinued Operations
(Dollars in millions)
2013
Growth
2012
Growth
2011
Loss from discontinued operations ..................... $
* Percentage not meaningful
(5.8 )
132 % $
(2.5)
0 % $
(2.5)
26
The Company recognized a loss from discontinued operations of $5.8 million in 2013 as compared to $2.5 million in 2012. In
2011, the Company recorded a loss from discontinued operations of $2.5 million.
The Company discontinued its operations at its merchant PCC facility at Walsum, Germany in the second quarter of 2013. In
connection with the Company's 2007 restructuring of its European coating PCC operations, the Company recorded an impairment
charge related to its Walsum facility. This facility continued to operate well below capacity levels into 2013. The Company recorded
a pre-tax charge for closure costs of this facility in the second quarter of 2013 of $5.9 million.
Non-controlling Interests
(Dollars in millions)
2013
Growth
2012
Growth
2011
Non-controlling interests ............................ $
3.1
47 % $
2.1
(22) %
$
2.7
The increase in the income attributable to non-controlling interests is due to higher profitability in our joint ventures.
Net Income attributable to Minerals
Technologies Inc. (MTI)
(Dollars in millions)
2013
Growth
2012
Growth
2011
Net income attributable to MTI .................. $
80.3
8 % $
74.1
10 % $
67.5
The Company recorded net income of $80.3 million in 2013 as compared to $74.1 million in 2012. Diluted earnings per share
were $2.30 as compared with $2.09 in the previous year.
In 2011, the Company recorded net income of $67.5 million and diluted earnings per share of $1.86.
Liquidity and Capital Resources
Cash provided from operating activities from continuing operations in 2013 was $137.5 million, compared with $142.1 million in
the prior year. Cash flows provided from operations in 2013 were principally used to fund capital expenditures, pay the Company's
dividend to common shareholders and to repurchase shares. Cash flows used in discontinued operations were not material to the
Company’s liquidity. Included in cash flow from operations was pension plan funding of approximately $11.4 million, $17.0 million
and $6.6 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Trade working capital is defined as trade accounts receivable, trade accounts payable and inventories. Our average total days of
trade working capital were 57 days in 2013 compared with 58 days last year.
The funding status of the Company’s pension plans was approximately 83% at December 31, 2013 and we have met all minimum
funding requirements. The funding status at December 31, 2012 was 66%. The increase in our funded status was due to a decrease in
the projected benefit obligation from an increase in the discount rate and to a higher actual return on assets.
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. The $75 million repurchase program was completed on October 1, 2013. The
Company repurchased 1,646,097 shares at an average price of approximately $45.54 per share under the program.
On September 19, 2013, the Company's Board of Directors authorized the Company’s management to repurchase, at its discretion,
up to $150 million of the Company’s shares over a two-year period commencing upon completion of the repurchase program
authorized in 2011. As of December 31, 2013, 139,900 shares have been repurchased under this program for $7.5 million, or an
average price of approximately $53.33 per share.
On January 22, 2014, 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.
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, 2013 is as follows:
27
Contractual Obligations
(millions of dollars)
Total
Debt.............................................................................. $ 83.2
26.0
Interest related to long term debt .................................
Estimated pension and post retirement plan funding
Other long term liabilities ............................................
Operating lease obligations..........................................
29.1
15.1
14.5
Total contractual obligations................................ $ 167.9
2014
8.2
3.0
11.1
0.4
3.5
26.2
$
$
Payments Due by Period
2015-
2016
--
5.8
$
18.0
--
4.8
$ 28.6
2017-
2018
--
5.8
--
--
2.3
8.1
$
$
$
$
After
2018
75.0
11.4
--
14.7
3.9
105.0
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 2023. In October 2013, the Company refinanced its maturing $75 million of private
placement debt.
Interest related to long-term debt is based on interest rates in effect as of December 31, 2013 and is calculated on debt with
maturities that extend to 2023. 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 2016 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 tangible 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 $189.7 million in uncommitted short-term bank credit lines, of which $5.5 million was in use at December 31, 2013. The
credit lines are primarily in the US, with approximately $19.7 million or 10% 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 2014 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: 2014 - $8.2 million; 2015 - $-- million; 2016 - $-- million; 2017 - $-- million; 2018 - $-- million; thereafter -
$75.0 million.
The Company announced on February 14, 2014 that it has made a proposal to acquire all outstanding shares of AMCOL
International Corporation, a company publicly traded on the New York Stock Exchange, for $42 per share in cash. The Company is
confident in its ability to finance the transaction. If the proposal is accepted, the transaction would be expected to close in the first half
of 2014 and would be conditioned upon customary closing conditions.
On May 31, 2013, the Company paid $1.4 million for its installment obligations on land and limestone ore reserves acquired from
the Cushenbury Mine Trust.
On October 7, 2013, the Company entered into, through private placement, a Note Purchase Agreement and issued $75 million
aggregate principal amount of senior unsecured notes, consisting of (a) $30,000,000 aggregate principal amount 3.46% Senior Notes,
Series A, due October 7, 2020 (the “Series A Notes”), and (b) $45,000,000 aggregate principal amount 4.13% Senior Notes, Series B,
due October 7, 2023 (the “Series B Notes” and, together with the Series A Notes, the “Notes”). The Company has used the proceeds
of the Notes to repay its $75 million aggregate principal amount of senior unsecured notes due October 5, 2013.
The Company's debt to capital ratio is 9.2%, 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 $3.9 million at December 31, 2013. 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.
28
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
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 2013 and 2012, 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 $0.6 million, $1.0 million and $0.9 million in 2013,
2012 and 2011, 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 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.
29
The goodwill balance for each reporting unit as of December 31, 2013 and 2012, respectively, was as follows:
($ in millions)
PCC
Processed Minerals
Refractories
Total
$
$
December 31,
2013
December 31,
2012
9.7 $
4.6
50.1
64.4 $
9.5
4.6
51.7
65.8
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
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 2013, 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 any 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 $19.8 million and $47.5 million at December
31, 2013 and 2012, respectively. Such year-end 2013 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 5 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
30
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 ......................................... $
(5.6 )
6.7
$
$
0.7
(0.6 )
$
$
(2.0 )
2.0
Effect on Projected Benefit Obligation
(millions of dollars)
1% increase ......................................... $
1% decrease ........................................ $
Discount
Rate
Salary
Scale
(38.6 )
47.7
$
$
3.0
(2.7 )
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, 2013 was over 10%. 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, 2013, the
Company had approximately 65% of its pension assets in equity securities and 35% in fixed income securities.
In 2013, a net gain of $56.1 million ($34.3 million after-tax) was recorded in other comprehensive income,
primarily due to a change in discount rates. In 2012, a net charge of $12.0 million ($7.7 million after-tax) was
recorded in other comprehensive income, 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 income, primarily due to lower
discount rates and lower returns on plan assets.
We recognized pension expense of $19.8 million in 2013 as compared to $20.9 million in 2012. 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 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 2013, total actuarial losses recognized in Accumulated other comprehensive income
(loss) for pension plans were ($58.4 million), as compared to ($93.7 million) in 2012. The majority of the
actuarial losses were due to decreases in the discount rate in 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 2013, 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 decrease by approximately $6 million in 2014 as compared to 2013, primarily due to an
increase in the discount rate in 2013 from 2012. We expect our pension expense to be approximately $15
million in 2014.
31
(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, 2013, the Company used a volatility assumption of 37.82%.
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, 2013, the Company used a 6.85
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, 2013.
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. Energy costs typically have the most significant impact in the production of our
Processed Minerals and Specialty PCC products, but also affect the cost of raw materials purchased in our Paper PCC product line and
Refractories Segment (most significantly, prices for lime and magnesia, respectively). The contracts pursuant to which we construct
and operate our satellite PCC plants generally adjust pricing to reflect the pass-through of increases in costs resulting from inflation,
including lime and energy prices. However, there is a time lag before such price adjustments can be implemented. The Company and
its customers in both the Refractories Segment and Processed Minerals and Specialty PCC product lines will typically negotiate
reasonable price adjustments in order to recover a portion of these escalating costs, but there can be no assurance that we will be able
to recover increasing costs through such negotiations.
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 (ASUs) to the FASB’s Accounting Standards
Codification.
The Company considers the applicability and impact of all ASUs. ASUs 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.
32
Comprehensive Income
In February 2012, the FASB issued ASU No. 2013-11, “Comprehensive Income: Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income (“AOCI”)” which improves the reporting of reclassifications out of AOCI. This ASU
requires an entity to report the effect of significant reclassifications out of AOCI on the respective line items in net income. For other
amounts not required to be reclassified to net income, an entity is required to cross-reference other disclosures required under U.S.
GAAP that provide additional detail about these amounts. This ASU became effective January 1, 2013 and the effect of adopting this
updated guidance did not have an impact on the Company’s financial position or results of operations.
Presentation of Unrecognized Tax Benefits
In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” which improves the reporting of
unrecognized tax benefits. This ASU requires an entity to present an unrecognized tax benefit as a reduction to deferred tax assets for
NOLs or tax credit carryforwards, unless the NOL or tax credit carryforward is not available under the tax law or not intended to be
used as of the reporting date to settle any additional income taxes that would be due from the disallowance of a tax position. Under
that exception, the unrecognized tax benefit should be presented as a liability instead of being netted against deferred tax assets for
NOLs or tax credit carryforwards. This ASU is effective for fiscal quarters and years beginning after December 15, 2013. The
Company is currently evaluating the impact of adopting ASU No. 2013-11 on the Company’s Consolidated Balance Sheet.
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 15% 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 $0.5 million and $0.8 million of foreign currencies as of
December 31, 2013 and 2012, respectively. These contracts matured in January of 2014 and January and February of 2013,
respectively. The fair value of these instruments at December 31, 2013 and December 31, 2012 was an asset 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 matured in October 2013. From inception of the contracts, the Company has realized in comprehensive income an after-tax
gain of $2.4 million, of which $0.5 million was reflected in 2013.
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, 2013.
33
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."
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 ...............................
Robert S. Wetherbee ...........................
Douglas T. Dietrich .............................
Jonathan J. Hastings ............................
Douglas W. Mayger ............................
Thomas J. Meek ..................................
D.J. Monagle, III .................................
Michael A. Cipolla ..............................
Johannes C. Schut ...............................
67
54
44
51
56
56
51
56
49
Executive Chairman
President and Chief Executive Officer
Senior Vice President, Finance and Treasury, Chief Financial Officer
Senior Vice President, Corporate Development
Senior Vice President, Performance Minerals and MTI Supply Chain
Senior Vice President, General Counsel, Human Resources, Secretary and Chief
Compliance Officer
Senior Vice President and Managing Director, Paper PCC
Vice President, Corporate Controller and Chief Accounting Officer
Vice President and Managing Director, Minteq International
Joseph C. Muscari was elected Executive Chairman effective March 2013, having served as Chief Executive Officer prior to that
since March 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.
Robert S. Wetherbee was elected President and Chief Executive Office effective March 2013. Prior to that, he was President of
ATI Tungsten Materials, a business unit of Allegheny Technologies, Inc. Before joining Allegheny Technologies, Mr. Wetherbee
spent 29 years at Alcoa Inc. in positions of increasing responsibility including Vice President, Market Strategy for Alcoa from 2006
through 2010 and President of Alcoa Rigid Packaging, from 2004 to 2006.
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.
Jonathan J. Hastings was elected Senior Vice President, Corporate Development effective March 2013. Prior to that he 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.
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, Human Resources, 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.
34
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.
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, 2013 and 2012
Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2013, 2012 and 2011
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
4.1
10.1
- Restated Certificate of Incorporation of the Company (1)
- By-Laws of the Company as amended and restated effective May 25, 2005 (2)
- 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 Amendment to Employment Agreement, dated July 21, 2010, between the Company
and Joseph C. Muscari (6) (+)
10.5(b)
- Third Amendment to Employment Agreement, dated February 21, 2013, by and between
Joseph C. Muscari and the Company (7) (+)
10.6
Employment Agreement, dated February 4, 2013, between the Company and Robert S.
Wetherbee (8) (+)
10.7
10.7(a)
10.8
10.8(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 (9) (+)
- 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 (10) (+)
- Form of Severance Agreement between the Company and each of Joseph C. Muscari, Robert S.
Wetherbee, Michael A. Cipolla, Douglas T. Dietrich, Jonathan J. Hastings, Douglas W.
Mayger, Thomas J. Meek, D.J. Monagle and Johannes C. Schut (11) (+)
- Form of amendment to Severance Agreement between the Company and each of Joseph C.
Muscari, Robert S. Wetherbee, Michael A. Cipolla, Douglas T. Dietrich, Jonathan J. Hastings,
Douglas W. Mayger, Thomas J. Meek and D.J. Monagle, III (12) (+)
36
10.8(b)
Form of amendment to Severance Agreement between the Company and Robert S. Wetherbee
(13) (+)
10.9
- Form of Indemnification Agreement between the Company and each of Joseph C. Muscari,
Robert S. Wetherbee, 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 (14) (+)
10.10
10.110
- Company Employee Protection Plan, as amended August 27, 1999 (15) (+)
- Company Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee
Directors, as amended and restated effective January 1, 2008 (16) (+)
10.11(a)
- First Amendment to the Company Nonfunded Deferred Compensation and Unit Award Plan for
Non-Employee Directors, dated January 18, 2012 (17) (+)
10.12
- 2001 Stock Award and Incentive Plan of the Company, as amended and restated as of March
18, 2009 (18) (+)
10.13
10.14
- Company Retirement Plan, as amended and restated, dated December 21, 2012 (19) (+)
- Company Supplemental Retirement Plan, amended and restated effective December 31, 2009
(20) (+)
10.15
- Company Savings and Investment Plan, as amended and restated, dated December 21, 2012
(21) (+)
10.15(a)
- Amendment to the Company Savings and Investment Plan, as amended and restated, dated
December 5, 2013 (*) (+)
10.15(b)
- Amendment to the Company Savings and Investment Plan, as amended and restated, dated
December 5, 2013 (*) (+)
10.16
- Company Supplemental Savings Plan, amended and restated effective December 31, 2009 (22)
(+)
10.16(a)
10.17
- Amendment to the Company Supplemental Savings Plan, dated December 28, 2011 (23)(+)
- Company Health and Welfare Plan, effective as of April 1, 2003 and amended and restated as
of January 1, 2006 (24)(+)
10.17(a)
10.18
10.19
- Amendment to the Company Health and Welfare Plan, dated May 19, 2009 (25) (+)
- Company Retiree Medical Plan, effective as of January 1, 2011 (26)(+)
- Amended and Restated Grantor Trust Agreement, dated as of April 1, 2010, by and between the
Company and the Wilmington Trust Company (27)(+)
10.20
10.21
- Note Purchase Agreement, dated as of October 7, 2013, among the Company and New York
Life Insurance Company, New York Life Insurance And Annuity Corporation, New York Life
Insurance And Annuity Corporation Institutionally Owned Life Insurance Separate Account
(BOLI 30c), Forethought Life Insurance Company, Prudential Retirement Insurance And
Annuity Company, Prudential Arizona Reinsurance Captive Company, Physicians Mutual
Insurance Company, The Prudential Insurance Company of America, Prudential Retirement
Insurance And Annuity Company, United of Omaha Life Insurance Company and Great-West
Life & Annuity Insurance Company (28)
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)
(*)
- 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 the Exhibit 10.1 filed with the Company's Current Report on form 8-K
filed on February 21, 2013
37
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
Incorporated by reference to the Exhibit 10.1 filed with the Company's Current Report on form 8-K
filed on March 4, 2013
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 the Exhibit 10.1 filed with the Company's Current Report on form 8-K
filed on March 25, 2013
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.
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 10.12 filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2012.
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 10.14 filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2012.
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, 2013.
(*) 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/Robert S. Wetherbee
Robert S. Wetherbee
President and Chief Executive Officer
February 21, 2014
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/ Robert S. Wetherbee
Robert S. Wetherbee
President and Chief Executive Officer
(principal executive officer)
February 21, 2014
/s/ Douglas T. Dietrich
Douglas T. Dietrich
Senior Vice President-Finance and Treasury,
Chief Financial Officer (principal financial officer)
February 21, 2014
/s/ Michael A. Cipolla
Michael A. Cipolla
Vice President - Controller and
February 21, 2014
Chief Accounting Officer (principal accounting officer)
39
*
Paula H. J. Cholmondeley
Director
February 21, 2014
Director
February 21, 2014
Director
February 21, 2014
Director
February 21, 2014
Executive Chairman and Director
February 21, 2014
Director
February 21, 2014
Director
February 21, 2014
Director
February 21, 2014
John J. Carmola
*
*
Robert L. Clark
*
Duane R. Dunham
*
Joseph C. Muscari
*
Marc E. Robinson
*
Barbara Smith
*
Donald C. Winter
* By: /s/ Thomas J. Meek
Thomas J. Meek
Attorney-in-Fact
40
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
_______________________________________
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Financial Statements:
Page
Consolidated Balance Sheets as of December 31, 2013 and 2012 .......................................................................
F-2
Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011 ...........................
F-3
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011 .....................
F-5
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2013, 2012 and 2011 ......
F-6
Notes to Consolidated Financial Statements .......................................................................................................
F-7
Reports of Independent Registered Public Accounting Firm ...............................................................................
F-32
Management's Report on Internal Control Over Financial Reporting.................................................................
F-34
F-1
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
December 31,
2013
2012
Current assets:
Assets
Cash and cash equivalents ................................................................................... $
Short-term investments, at cost which approximates market ...............................
Accounts receivable, less allowance for doubtful accounts:
2013 - $1,715; 2012 - $3,837……………………………………………
Inventories ...........................................................................................................
Prepaid expenses and other current assets ...........................................................
Total current assets……………………………………..........
490,267
15,769
204,449
89,169
15,463
815,117
$
454,092
14,178
193,328
84,569
18,318
764,485
Property, plant and equipment, less accumulated depreciation and depletion .....
Goodwill ..............................................................................................................
Other assets and deferred charges ........................................................................
Total assets………………………………………………..........
306,071
64,432
31,927
$ 1,217,547
317,669
65,829
63,206
$ 1,211,189
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 .............................................................
Other current liabilities .........................................................................................
Total current liabilities .................................................................
Long-term debt ..........................................................................................................
Accrued pension and postretirement benefits .............................................................
Other non-current liabilities ........................................................................................
Total liabilities ..............................................................................
5,504
8,200
94,855
7,103
37,868
27,364
180,894
75,000
57,893
29,352
343,139
$
7,111
76,977
98,371
8,862
33,603
25,174
250,098
8,478
108,035
30,859
397,470
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 47,555,927 shares in 2013 and 47,002,939 shares in 2012................
Additional paid-in capital .....................................................................................
Retained earnings .................................................................................................
Accumulated other comprehensive loss ...............................................................
Less common stock held in treasury, at cost; 13,205,741
shares in 2013 and 12,053,319 shares in 2012 ..............................................
Total MTI shareholders' equity..................................................................................
Non-controlling interest ……………………………………………………………
Total shareholders’ equity
--
--
4,756
361,460
1,106,252
(31,265 )
(593,665 )
847,538
26,870
874,408
4,700
345,929
1,032,869
(51,198)
(541,889)
790,411
23,308
813,719
Total liabilities and shareholders' equity ...................................... $ 1,217,547
$ 1,211,189
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)
Net sales .............................................................................................................. $ 1,018,181
784,536
Cost of goods sold ...............................................................................................
233,645
Production margin .........................................................................................
2013
Year Ended December 31,
2012
996,764 $ 1,032,933
818,743
774,466
214,190
222,298
2011
$
Marketing and administrative expenses ..............................................................
Research and development expenses ..................................................................
Insurance settlement (gain) .................................................................................
Restructuring and other costs ..............................................................................
89,231
20,053
(2,491 )
--
88,485
20,173
--
--
91,212
19,330
--
(411)
Income from operations .................................................................................
126,852
113,640
104,059
Interest income ..............................................................................................
Interest expense .............................................................................................
Foreign exchange losses ................................................................................
Other deductions ............................................................................................
Non-operating deductions, net ............................................................................
Income from continuing operations before provision
for taxes on income ..................................................................................
Provision for taxes on income .............................................................................
Income from continuing operations, net of tax ..............................................
Loss from discontinued operations, net of tax ...............................................
Consolidated net income ................................................................................
Less: Net income attributable to non-controlling interests .................................
Net income attributable to Minerals Technologies Inc. (MTI) ................ $
Earnings per share:
Basic:
Income from continuing operations attributable to MTI ............................... $
Loss from discontinued operations attributable to MTI ................................
Basic earnings per share attributable to MTI ...................................... $
Diluted:
Income from continuing operations attributable to MTI ............................... $
Loss from discontinued operations attributable to MTI ................................
Diluted earnings per share attributable to MTI ................................... $
3,016
(3,263 )
(2,109 )
(786 )
(3,142 )
123,710
34,515
89,195
(5,744 )
83,451
(3,121 )
80,330
2.48
(0.17 )
2.31
2.46
(0.16 )
2.30
$
$
$
$
$
3,168
(3,221 )
(1,348 )
(1,594 )
(2,995 )
3,907
(3,254)
(1,211)
(2,040)
(2,598)
110,645
31,926
78,719
(2,450 )
76,269
(2,122 )
74,147 $
101,461
28,675
72,786
(2,532)
70,254
(2,733)
67,521
2.17 $
(0.07 )
2.10 $
2.16 $
(0.07 )
2.09 $
1.94
(0.07)
1.87
1.93
(0.07)
1.86
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,
2012
2011
2013
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 .........................
83,451
$
76,269 $
70,254
(16,533 )
34,281
--
(2 )
514
101,711
(1,448 )
1,479
(7,730 )
--
11
(204 )
69,825
(1,545 )
(17,565)
(25,630)
(820)
47
529
26,815
(1,035)
Comprehensive income attributable to MTI ...................................................... $
100,263
$
68,280
$
25,780
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,
2012
2011
2013
Operating Activities
Consolidated net income ............................................................................................... $
Loss from discontinued operations .................................................................................
Income from continuing operations ................................................................................
83,451 $
(5,744 )
89,195
$
76,269
(2,450 )
78,719
70,254
(2,532)
72,786
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 ...................................................
Pension amortization and settlement loss ..................................................................
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 continuing operations ..................................................................
Net cash used in discontinued operations ........................................................................
Net cash provided by operating activities.......................................................................
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 .......................................
47,289
1,187
11,836
4,421
586
5,249
515
(10,460 )
(6,534 )
706
(11,407 )
(776 )
(254 )
(1,505 )
485
7,015
137,548
(2,751 )
134,797
(43,831 )
(5,407 )
3,049
28
(46,161 )
75,000
(77,277 )
(1,179 )
(51,776 )
(6,946 )
12,108
2,303
(2,445 )
(50,212 )
)
(2,249 )
51,124
1,093
11,497
1,257
1,011
5,476
612
(158 )
6,361
3,398
(16,963 )
(4,375 )
(1,103 )
3,748
513
(61 )
142,149
(2,231 )
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
Net increase in cash and cash equivalents .......................................................................
Cash and cash equivalents at beginning of year ..............................................................
Cash and cash equivalents at end of year ........................................................................ $
36,175
454,092
490,267 $
58,940
395,152
454,092
$
58,175
288
7,417
1,250
878
7,237
41
(14,541)
(7,059)
(5,787)
(6,650)
25,426
(2,550)
(712)
166
305
136,670
(3,011)
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)
27,325
367,827
395,152
Non-cash Investing and Financing Activities:
Treasury stock purchases settled after year-end .............................................................. $
-- $
1,771
$
--
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, 2010 ................. $
4,659 $
321,473 $
899,211 $
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
(3,590 )
Treasury
Stock
Non-controlling
Interests
$
(466,230 ) $
27,172
$
Total
782,695
--
--
(16,687 )
(25,630 )
529
47
--
--
--
--
--
(45,331 )
--
2,056
(7,730 )
(204 )
11
--
--
--
--
--
--
--
(51,198 )
--
(14,860 )
34,281
514
(2 )
--
--
--
--
--
--
--
--
--
--
--
--
--
--
(48,004 )
(514,234 ) $
$
--
--
--
--
--
--
--
--
--
--
--
(27,655 )
(541,889 ) $
$
--
--
--
--
--
--
--
--
--
--
--
--
(31,265 )
$
--
--
(51,776 )
(593,665 ) $
2,733
(820)
(878)
--
--
--
(1,799)
--
--
--
--
26,408
2,122
(577 )
--
--
--
808
(5,453 )
--
--
--
--
23,308
3,121
(1,673)
--
--
--
--
(2,445)
--
4,559
--
--
--
26,870
$
$
$
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
83,451
(16,533)
34,281
514
(2)
(6,946)
(2,445)
12,108
--
2,788
5,249
(51,776)
874,408
--
--
--
--
--
--
--
16
--
--
--
4,675 $
--
--
--
--
--
--
--
--
25
--
--
--
4,700 $
--
--
--
--
--
--
--
56
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 ................. $
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 ........................................
Dividends to non-controlling interests ...........
Employee benefit transactions .......................
Equity reclassification adjustment to
non-controlling interests ...........................
Income tax benefit arising from employee
stock option plans .....................................
Stock-based compensation ............................
Purchase of common stock for treasury .........
Balance as of December 31, 2013
--
--
--
--
--
--
--
5,895
172
5,832
--
67,521
--
--
--
--
--
(3,602 )
--
--
--
--
--
333,372 $
963,130 $
--
--
--
--
--
--
--
--
8,148
826
3,583
--
74,147
--
--
--
--
(4,408 )
--
--
--
--
--
--
345,929 $ 1,032,869 $
--
--
--
--
--
--
--
12,052
2,788
5,249
--
80,330
--
--
--
--
(6,946 )
--
--
--
--
--
--
--
(4,559)
--
--
--
4,756 $
$
361,459 $ 1,106,253 $
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.
During the second quarter of 2013, the Company ceased its operations at its Paper PCC merchant plant in Walsum,
Germany and reclassified such operations as discontinued. All prior periods have been restated to reflect such
reclassification.
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 $15.8 million and $14.2 million at December 31, 2013 and 2012,
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.
F-7
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
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.
F-8
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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, 2013, 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 5, "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.
F-9
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
Recently Issued accounting Standards
Comprehensive Income
In February 2012, the FASB issued ASU No. 2013-02, “Comprehensive Income: Reporting of Amounts Reclassified Out
of Accumulated Other Comprehensive Income (“AOCI”)” which improves the reporting of reclassifications out of AOCI.
This ASU requires an entity to report the effect of significant reclassifications out of AOCI on the respective line items in net
income. For other amounts not required to be reclassified to net income, an entity is required to cross-reference other
disclosures required under U.S. GAAP that provide additional detail about these amounts. This ASU became effective
January 1, 2013 and the effect of adopting this updated guidance did not have an impact on the Company’s financial position
or results of operations.
Presentation of Unrecognized Tax Benefits
In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes: Presentation of an Unrecognized Tax Benefit When a
Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” which improves the reporting of
unrecognized tax benefits. This ASU requires an entity to present an unrecognized tax benefit as a reduction to deferred tax
assets for NOLs or tax credit carryforwards, unless the NOL or tax credit carryforward is not available under the tax law or
not intended to be used as of the reporting date to settle any additional income taxes that would be due from the disallowance
of a tax position. Under that exception, the unrecognized tax benefit should be presented as a liability instead of being netted
against deferred tax assets for NOLs or tax credit carryforwards. This ASU is effective for fiscal quarters and years beginning
after December 15, 2013. The Company is currently evaluating the impact of adopting ASU No. 2013-11 on the Company’s
Consolidated Balance Sheet.
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 2013, 2012 and 2011 include $2.8 million, $2.0 million and $2.7 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 $1.1 million, $0.8 million and $1.1 million for 2013, 2012 and
2011, 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.
F-10
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 periods
ended December 31, 2013 and 2012 was 7.50% and 7.31%, respectively.
The weighted average grant date fair value for stock options granted during the years ended December 31, 2013, 2012 and
2011 was $15.83, $10.74 and $11.03, respectively. The weighted average grant date fair value for stock options vested during
2013, 2012 and 2011 was $10.29, $8.57 and $7.58, respectively. The total intrinsic value of stock options exercised during
the years ended December 31, 2013, 2012 and 2011 was $10.0 million, $3.3 million and $1.7 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, 2013, 2012 and 2011:
Expected life (years) ......................................
Interest rate ....................................................
Volatility ........................................................
Expected dividend yield ................................
2013
6.9
1.22%
37.82 %
0.48%
2012
2011
6.9
1.36 %
31.26 %
0.31 %
6.3
2.46 %
30.93 %
0.31 %
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.
The following table summarizes stock option activity for the year ended December 31, 2013:
Weighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
(in thousands)
Shares
Balance December 31, 2012 ........................
Granted ........................................................
Exercised .....................................................
Canceled ......................................................
Balance December 31, 2013 ........................
Exercisable, December 31, 2013 .................
1,395,520
239,770
(501,222)
(2,653 )
1,131,415
758,014
$
$
$
28.31
41.42
25.26
37.24
32.42
29.67
6.16
4.95
$
$
31,283
23,046
The aggregate intrinsic value above is calculated before applicable income taxes, based on the Company's closing stock
price of $60.07 as of the last business day of the period ended December 31, 2013 had all options been exercised on that date.
The weighted average intrinsic value of the options exercised during 2013, 2012 and 2011 was $20.03, $10.11 and $7.15 per
share, respectively. As of December 31, 2013, total unrecognized stock-based compensation expense related to non-vested
stock options was approximately $2.4 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.
F-11
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-vested stock option activity for the year ended December 31, 2013 is as follows:
Shares
Weighted
Average Exercise
Price Per Share
Non-vested options outstanding at December 31, 2012.............
Options granted..........................................................................
Options vested ...........................................................................
Options forfeited .................................................................... …
Non-vested options outstanding at December 31, 2013..............
327,086
239,770
(190,802 )
(2,653)
373,401
$
$
31.17
41.42
30.57
37.24
38.01
The following table summarizes additional information concerning options outstanding at December 31, 2013:
Options Outstanding
Options Exercisable
Range of
Exercise Prices
19.855 - $
26.257 - $
30.097 - $
19.855 - $
24.753
29.665
42.415
42.415
$
$
$
$
Number
Outstanding
at 12/31/13
140,018
50,828
940,569
1,131,415
Restricted Stock
Weighted
Average
Remaining
Contractual
Term (Years)
6.1
2.0
6.4
4.8
Weighted
Average
Exercise Price
23.13
27.15
34.09
32.42
$
$
$
$
Number
Exercisable
at 12/31/13
140,018
48,322
569,674
758,014
Weighted
Average
Exercise Price
23.13
27.16
31.49
29.67
$
$
$
$
The Company has granted key employees rights to receive shares of the Company's common stock pursuant to 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 112,225 shares, 123,446
shares and 136,978 shares for the periods ended December 31, 2013, 2012 and 2011, respectively. The fair value was
determined based on the market value of unrestricted shares. As of December 31, 2013, there was unrecognized stock-based
compensation related to restricted stock of $3.4 million, which will be recognized over approximately the next three years.
The compensation expense amortized with respect to all units was approximately $3.9 million, $3.4 million and $4.6 million
for the periods ended December 31, 2013, 2012 and 2011, respectively. In addition, the Company recorded reversals of $0.1
million, $-- million and $0.1 million for periods ended December 31, 2013, 2012 and 2011, respectively, related to restricted
stock forfeitures. Such costs and reversals are included in marketing and administrative expenses. There were 107,956
restricted stock shares that vested for the year ended December 31, 2013.
The following table summarizes the restricted stock activity for the Plan:
Weighted
Average
Grant
Date Fair
Value
$
$
$
$
$
31.25
41.44
30.71
36.39
37.65
Shares
183,660
112,225
(107,956 )
(2,357)
185,572
Unvested balance at December 31, 2012 .....
Granted ........................................................
Vested ..........................................................
Canceled ......................................................
Unvested balance at December 31, 2013 .....
Note 3.
Earnings Per Share (EPS)
(thousands, except per share amounts)
Basic EPS
Income from continuing operations attributable to MTI .......................................... $
Loss from discontinued operations attributable to MTI............................................
Net income attributable to MTI............................................................................. $
Weighted average shares outstanding.......................................................................
34,690
35,340
F-12
2013
2012
2011
86,074
(5,744)
80,330
$
$
76,597
(2,450)
74,147
$
$
70,053
(2,532)
67,521
36,018
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basic earnings per share from continuing operations attributable to MTI ................ $
Basic loss per share from discontinued operations attributable to MTI ....................
Basic earnings per share attributable to MTI ........................................................ $
2.48 $
(0.17 )
2.31 $
2.17 $
(0.07)
2.10 $
1.94
(0.07)
1.87
Diluted EPS
Income from continuing operations attributable to MTI .......................................... $
Loss from discontinued operations attributable to MTI............................................
Net income attributable to MTI ............................................................................. $
2013
2012
2011
86,074 $
(5,744 )
80,330 $
76,597 $
(2,450)
74,147 $
Weighted average shares outstanding .......................................................................
Dilutive effect of stock options .................................................................................
Weighted average shares outstanding, adjusted ........................................................
34,690
286
34,976
35,340
189
35,529
Diluted earnings per share from continuing operations attributable to MTI ............. $
Diluted loss per share from discontinued operations attributable to MTI.................
Diluted earnings per share attributable to MTI ..................................................... $
2.46 $
(0.16 )
2.30 $
2.16 $
(0.07)
2.09 $
70,053
(2,532)
67,521
36,018
218
36,236
1.93
(0.07)
1.86
Options to purchase 2,404 shares and 218,064 shares of common stock for the years ended December 31, 2012 and
December 31, 2011, 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. No options
were excluded for the year ended December 31, 2013.
Note 4. Discontinued Operations
During the second quarter of 2013, the Company ceased its operations at its Paper PCC merchant plant in Walsum,
Germany and reclassified such operations as discontinued. The remaining assets at this facility are not material and are being
disposed. All prior periods have been restated to reflect such reclassification. These operations were part of the Company's
Specialty Minerals segment.
The following table provides selected financial information for the Walsum plant included within discontinued operations
in the Consolidated Statements of Income. The amounts exclude general corporate overhead and interest expense which
were previously allocated to the entity comprising the discontinued operations.
Millions of Dollars
2013
2012
2011
Net sales...............................................................................$
1.6 $
Production margin ...............................................................
(2.1 )
Expenses ..............................................................................
Facility closure costs ...........................................................
Restructuring costs ..............................................................
Loss from operations ...........................................................$
Benefit for taxes on income .................................................$
Loss from discontinued operations, net of tax .....................$
0.5
5.9
--
(8.5 )
(2.7 )
(5.8 )
$
$
$
8.9 $
(2.9 )
0.7
--
--
(3.6 ) $
(1.1 ) $
(2.5 ) $
11.9
(2.0 )
0.8
--
0.9
(3.7 )
(1.2 )
(2.5 )
Note 5. Income Taxes
Income from operations before provision for taxes by domestic and foreign source is as follows:
Millions of Dollars
Domestic ...................................................................... $
Foreign .........................................................................
Income from operations before provision for
income taxes ............................................................
$
2013
2012
2011
$
66.6
57.1
$
56.9
53.7
47.0
54.5
123.7
$
110.6
$
101.5
F-13
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision (benefit) for taxes on income consists of the following:
Millions of Dollars
Domestic
Taxes currently payable
2013
2012
2011
Federal ............................................................... $
State and local ....................................................
Deferred income taxes ..................................................
Domestic tax provision .....................................
Foreign
Taxes currently payable................................................
Deferred income taxes ..................................................
Foreign tax provision ........................................
$
13.7
2.6
2.5
18.8
13.8
1.9
15.7
$
14.9
1.3
3.2
19.4
14.3
(1.8 )
12.5
Total tax provision ........................... $
34.5
$
31.9
$
11.8
2.2
(1.9)
12.1
13.1
3.5
16.6
28.7
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
2013
2012
2011
U.S. statutory tax rate ...................................................
Depletion ......................................................................
Difference between tax provided on foreign earnings
and the U.S. statutory rate .....................................
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 %
(3.6 )
(3.6 )
1.7
(1.7 )
0.3
(0.6 )
2.3
(1.9 )
27.9 %
35.0 %
(3.8 )
(4.0 )
1.5
(0.1 )
(1.1 )
0.9
2.1
(1.6 )
28.9 %
35.0%
(4.0)
(1.0)
1.2
(0.1)
(1.2)
(2.7)
2.9
(1.8)
28.3%
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:
Millions of Dollars
2013
2012
Deferred tax assets:
Accrued expenses ................................................................................... $
Net operating loss carry forwards...........................................................
Pension and post-retirement benefits costs .............................................
Other .......................................................................................................
Valuation allowance. ..............................................................................
Total deferred tax assets ......................................................................... $
Millions of Dollars
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation ...... $
Intangible assets .....................................................................................
Other .......................................................................................................
Total deferred tax liabilities ...................................................................
Net deferred tax assets ............................................................................ $
9.4 $
9.6
21.6
14.3
(5.9)
49.0 $
12.2
11.4
43.8
12.9
(5.7)
74.6
2013
2012
14.3 $
13.3
1.6
29.2
19.8 $
10.3
12.4
4.4
27.1
47.5
F-14
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:
Millions of Dollars
2013
2012
Net deferred tax assets, current ................................................. $
Net deferred assets, long term ...................................................
$
4.0
15.8
19.8
$
$
6.3
41.2
47.5
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 $4.8 million of deferred tax assets arising from tax loss carry forwards which will be realized through
future operations. Carry forwards of approximately $2.3 million expire over the next 20 years, and $2.5 million can be
utilized over an indefinite period.
On December 31, 2013, the Company had $3.9 million of total unrecognized tax benefits. Included in this amount were a
total of $2.5 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:
Millions of Dollars
2013
2012
Balance as of January 1, 2013 .................................................... $
Increases related to current year positions .................................
Increases related to new judgments ............................................
Decreases related to audit settlements and statute expirations ...
Other ..........................................................................................
Balance as of December 31, 2013 .............................................. $
4.8 $
0.6
--
(1.5 )
--
3.9 $
3.9
0.7
0.2
--
--
4.8
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 $0.4 million of interest and penalties during
2013 and had a total accrued balance on December 31, 2013 of $0.6 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 $25.5 million, $21.5 million and $31.9 million for the years ended December 31,
2013, 2012 and 2011, respectively.
The Company has not provided for U.S. federal and foreign withholding taxes on $334.8 million of foreign subsidiaries'
undistributed earnings as of December 31, 2013 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 $334.8
million of foreign earnings were to be repatriated, incremental taxes may be incurred. We do not believe this amount would
be more than $46.0 million.
Note 6. Inventories
The following is a summary of inventories by major category:
Millions of Dollars
2013
2012
Raw materials ............................................................... $
Work in process ............................................................
Finished goods..............................................................
Packaging and supplies ................................................
Total inventories ........................................................... $
35.1
6.3
26.3
21.5
89.2
$
$
30.8
6.5
26.5
20.8
84.6
F-15
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Property, Plant and Equipment
The major categories of property, plant and equipment and accumulated depreciation and depletion are presented below:
Millions of Dollars
2013
2012
Land.............................................................................. $
Quarries/mining properties ...........................................
Buildings ......................................................................
Machinery and equipment ............................................
Construction in progress ...............................................
Furniture and fixtures and other ...................................
Less: Accumulated depreciation and depletion ............
Property, plant and equipment, net ............................... $
$
24.1
39.6
145.7
956.0
28.6
88.3
1,282.3
(976.2 )
306.1
$
26.5
39.6
145.1
937.6
27.8
85.4
1,262.0
(944.3 )
317.7
Depreciation and depletion expense for the years ended December 31, 2013, 2012 and 2011 was $44.7 million, $48.7
million and $55.9 million, respectively.
Note 8. Goodwill and Other Intangible Assets
The carrying amount of goodwill was $64.4 million and $65.8 million as of December 31, 2013 and December 31, 2012,
respectively. The net change in goodwill since December 31, 2012 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, 2013
and December 31, 2012 was as follows:
Millions of Dollars
Patents and trademarks ................... $
Customer lists .................................
$
December 31, 2013
December 31, 2012
Gross
Carrying
Amount
6.4
2.9
9.3
Accumulated
Amortization
3.7
2.6
6.3
$
$
Gross
Carrying
Amount
6.0
2.9
8.9
Accumulated
Amortization
3.4
2.4
5.8
$
$
The weighted average amortization period for acquired intangible assets subject to amortization is approximately 15
years. Amortization expense was approximately $0.6 million, $0.6 million and $0.8 million for the years ended December 31,
2013, 2012 and 2011, respectively. The estimated amortization expense is $0.4 million for 2014, $0.4 million for 2015-2016
and $0.3 million for 2017-2018.
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, $0.4 million and $0.7 million were amortized in 2013, 2012 and 2011, respectively. Estimated amortization as a
reduction of sales is as follows: 2014 - $0.4 million; 2015 - $0.1 million; 2016 - $0.0 million.
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
F-16
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 2 open foreign exchange contracts as of December 31, 2013.
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, 2013 and
December 31, 2012 were as follows:
Millions of Dollars
Asset Derivatives
Liability Derivatives
Foreign Exchange
Forward Contracts
Balance Sheet
Location
Other Current
Assets
Dec.
31,
2013
Dec.
31,
2012
$
--
$
3.2
Balance Sheet
Location
Other Current
Liabilities
Dec.
31,
2013
Dec.
31,
2012
$
-- $
--
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:
Millions of Dollars
Short-term Investments
2013
2012
Short-term bank deposits ................................................. $
15.8
$
14.2
There were no unrealized holding gains and losses on the short-term bank deposits held at December 31, 2013.
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
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.
F-17
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2013, 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, 2013. 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, 2013. 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.
Millions of Dollars
Assets (Liabilities) at Fair Value as of December 31, 2013
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
$
$
$
--
203.2
203.2
$
$
$
--
$
-- $
-- $
--
--
--
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, 2012.
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 $
--
--
--
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
F-18
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2013, the Company had 2 open foreign exchange contracts with a financial institution to purchase
approximately $0.5 million of foreign currencies. These contracts matured in January 2013. The fair value of these
instruments was an asset of less than $0.1 million at December 31, 2013. The fair value of open foreign exchange contracts
at December 31, 2012 was an asset 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 matured in October 2013 and from inception the Company realized in comprehensive income an
after-tax gain of $2.4 million, of which $0.5 million was reflected in 2013. The fair value of these instruments at December
31, 2012 was an asset of $3.2 million.
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, 2013, 2012 and 2011 was $0.6 million, $1.0 million
and $0.9 million, respectively.
Note 13. Long-Term Debt and Commitments
The following is a summary of long term debt:
Millions of Dollars
5.53% Series 2006A Senior Notes
Dec. 31,
2013
Dec. 31,
2012
Due October 5, 2013 ...........................................................................
$ --
$ 50.0
Floating Rate Series 2006A Senior Notes
Due October 5, 2013 ...........................................................................
3.46% Series A Senior Notes
Due October 7, 2020 ...........................................................................
4.13% Series B Senior Notes
Due October 7, 2023 ...........................................................................
Variable/Fixed Rate Industrial
Development Revenue Bonds Series 1999 Due November 1, 2014 ...
Installment obligations
Due 2013 .............................................................................................
Other Borrowings
--
30.0
45.0
8.2
--
Due 2014 .............................................................................................
Total .............................................................................................
Less: Current maturities ..........................................................................
Long-term debt .......................................................................................
--
83.2
8.2
$ 75.0
25.0
--
--
8.2
1.4
0.9
85.5
77.0
$ 8.5
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 0.13% and 0.22% for
the years ended December 31, 2013 and 2012, 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%. This obligation was repaid 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
F-19
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2013 and December 31, 2012 was 0.73% and 0.92%, respectively. The principal payment for both
tranches was due on October 5, 2013. The Company repaid this obligation in 2013.
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 was payable in
installments over three years. Interest was payable semi-annually and was 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, 2013 was 6.8%. This
obligation was repaid in 2013.
On October 7, 2013, the Company entered into, through private placement, a Note Purchase Agreement and issued $75
million aggregate principal amount of senior unsecured notes, consisting of (a) $30,000,000 aggregate principal amount
3.46% Senior Notes, Series A, due October 7, 2020 (the “Series A Notes”), and (b) $45,000,000 aggregate principal amount
4.13% Senior Notes, Series B, due October 7, 2023 (the “Series B Notes” and, together with the Series A Notes, the
“Notes”). The Company used the proceeds of the Notes to repay its $75 million aggregate principal amount of senior
unsecured notes which were due October 5, 2013.
The aggregate maturities of long-term debt are as follows: 2014 - $8.2 million; 2015 - $-- million; 2016 - $-- million; 2017
- $-- million; 2018 - $-- million; thereafter - $75.0 million.
The Company had available approximately $189.7 million in uncommitted, short-term bank credit lines, of which $5.5
million was in use at December 31, 2013.
Short-term borrowings as of December 31, 2013 and 2012 were $5.5 million and $7.1 million, respectively. The weighted
average interest rate on short-term borrowings outstanding as of December 31, 2013 and 2012 was 4.8% and 5.8%,
respectively.
During 2013, 2012 and 2011, respectively, the Company incurred interest costs of $3.4 million, $3.5 million and $3.5
million including $0.1 million, $0.3 million and $0.3 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, 2013 and 2012
is as follows:
F-20
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension Benefits
2013
2012
Post-retirement Benefits
2012
2013
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
311.4
8.4
11.3
(28.0 )
(14.0 )
--
0.3
0.5
289.9
$
$
271.9
8.1
11.6
30.4
(12.5 )
(0.6 )
1.9
0.6
311.4
Pension Benefits
2013
2012
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 ........................ $
212.0
31.0
10.9
0.5
(14.0 )
--
0.3
240.7
Funded status ............................................................... $
(49.2 )
$
$
$
187.5
17.2
16.4
0.5
(12.5 )
(0.5 )
3.4
212.0
(99.4 )
Amounts recognized in the consolidated balance sheet consist of:
$
$
$
$
$
10.6
0.6
0.3
(1.1 )
(0.5 )
--
--
--
9.9
$
$
14.4
0.6
0.4
(4.3)
(0.5)
--
--
--
10.6
Post-retirement Benefits
2012
2013
--
--
0.5
--
(0.5 )
--
--
--
(9.9 )
$
$
$
--
--
0.5
--
(0.5)
--
--
--
(10.6)
Millions of Dollars
Pension Benefits
2013
2012
Post-retirement Benefits
2012
2013
Current liability ........................................................... $
Non-current liability ....................................................
Recognized liability ..................................................... $
(0.3 )
(48.9 )
(49.2 )
$
$
(0.3 )
(99.1 )
(99.4 )
$
$
(0.8 )
(9.1 )
(9.9 )
$
$
(1.0)
(9.6)
(10.6)
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
2013
2012
Post-retirement Benefits
2012
2013
Net actuarial (gain) loss ............................................... $
Prior service cost .........................................................
Amount recognized end of year ................................... $
58.4
2.2
60.6
$
$
93.7
3.0
96.7
$
$
(1.6 )
(8.1 )
(9.7 )
$
$
(10.1)
(0.8)
(10.9)
The accumulated benefit obligation for all defined benefit pension plans was $269.0 million and $287.1 million at
December 31, 2013 and 2012, respectively.
F-21
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in the Plan assets and benefit obligations recognized in other comprehensive income:
Millions of Dollars
Pension Benefits
2013
2012
Post-retirement Benefits
2012
2013
Current year actuarial gain (loss) ................................. $
Amortization of actuarial (gain) loss ...........................
Amortization of prior service credit (gain) loss ...........
Total recognized in other comprehensive income ....... $
26.1
8.8
0.6
35.5
$
$
(17.6 )
8.4
0.7
(8.5 )
$
$
0.7
--
(1.9 )
(1.2 )
$
$
2.7
(0.1)
(1.8)
0.8
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 ........................
2013
$
2012
$
8.4
11.3
(14.8)
1.0
13.9
--
19.8
$
$
2011
7.1
11.6
(13.8 )
1.3
8.6
0.5
15.3
$
$
$
$
8.1
11.6
(13.5 )
1.2
13.3
0.2
20.9
2013
2011
$
Post-retirement Benefits
2012
0.6
$
0.4
--
(3.1 )
(0.1 )
--
(2.2 )
0.6
0.3
--
(3.1 )
--
--
(2.2 )
$
$
0.7
0.6
--
(3.1)
0.1
--
(1.7)
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 2014 estimated amortization of amounts in other accumulated comprehensive income are as follows:
Millions of Dollars
Pension
Benefits
Post-
Retirement
Benefits
Amortization of prior service credit (gain) loss $
Amortization of net (gain) loss
Total costs to be recognized
$
1.0
7.2
8.2
$
$
(3.1 )
(0.1 )
(3.2 )
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, 2013, 2012 and 2011 are as follows:
2013
2012
2011
Discount rate ..................................................
Expected return on plan assets .......................
Rate of compensation increase ......................
3.80%
7.18%
3.16%
4.32 %
7.06 %
3.11 %
5.70 %
7.25 %
3.20 %
The weighted average assumptions used to determine benefit obligations for the pension benefit plans and other benefit plans
at December 31, 2013, 2012 and 2011 are as follows:
Discount rate ..................................................
Rate of compensation increase ......................
4.37%
3.10%
3.77 %
3.14 %
4.30 %
3.10 %
2013
2012
2011
For 2013, 2012 and 2011, 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
F-22
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and our historical return, taking into account current and expected market conditions. The actual return on pension assets was
approximately 14% in 2013, 9% in 2012 and 2% in 2011.
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.
Plan Assets
The Company's pension plan weighted average asset allocation percentages at December 31, 2013 and 2012 by asset
category are as follows:
Asset Category
2013
2012
Equity securities ..............................................
Fixed income securities ...................................
Real estate ........................................................
Other ................................................................
Total ......................................................
56.4%
35.0%
0.5%
8.1%
100.0%
56.4 %
34.9 %
0.5 %
8.2 %
100.0 %
The Company's pension plan fair values at December 31, 2013 and 2012 by asset category are as follows:
Millions of Dollars
Asset Category
2013
2012
Equity securities ..............................................
Fixed income securities ...................................
Real estate ........................................................
Other ................................................................
Total ......................................................
$
$
135.9
84.2
1.1
19.5
240.7
$
$
119.5
74.1
1.0
17.4
212.0
The following table presents domestic and foreign pension plan assets information at December 31, 2013, 2012 and 2011
(the measurement date of pension plan assets):
Millions of Dollars
Fair value of plan assets .................... $ 170.6
2013
U.S. Plans
2012
$ 148.2
International Plans
2011
$ 132.2
2013
2012
$
70.1
$
63.8
2011
$ 55.3
The following table summarizes our defined benefit pension plan assets measured at fair value as of December 31, 2013:
Millions of Dollars
Pension Assets at Fair Value as of December 31, 2013
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 .....................................................
116.8
19.0
$
$
--
--
Fixed Income Securities
Corporate debt instruments .....................................
Real estate and other
Real estate ...............................................................
Other .......................................................................
Total Assets ................................................................. $
53.7
--
--
189.5
$
30.6
--
--
30.6
$
--
--
--
1.1
19.5
20.6
$
$
116.8
19.0
84.3
1.1
19.5
240.7
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.
F-23
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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 .....................................................
104.5
15.0
$
$
--
--
Fixed Income Securities
Corporate debt instruments .....................................
Real estate and other
Real estate ...............................................................
Other .......................................................................
Total Assets ................................................................. $
43.1
--
--
162.6
$
31.0
--
--
31.0
$
--
--
--
1.0
17.4
18.4
$
$
104.5
15.0
74.1
1.0
17.4
212.0
Contributions
The Company expects to contribute $10 million to its pension plans and $1 million to its other post-retirement benefit plan
in 2014.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Millions of Dollars
Pension
Benefits
Other
Benefits
2014 .................................................$
2015 .................................................$
2016 .................................................$
2017 .................................................$
2018 .................................................$
2019-2023 .......................................$
14.1 $
15.4 $
17.3 $
18.1 $
18.0 $
101.4 $
0.8
0.8
0.8
0.7
0.8
3.4
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, 2013 was over 10%. 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, 2013, the Company had approximately 65% of its pension assets in equity securities and 35%
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 $2.8 million for each of the years ended December 31, 2013, 2012 and 2011.
F-24
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15. Leases
The Company has several non-cancelable operating leases, primarily for office space and equipment. Rent expense
amounted to approximately $4.5 million, $5.0 million and $5.3 million for the years ended December 31, 2013, 2012 and
2011, respectively. Total future minimum rental commitments under all non-cancelable leases for each of the years 2014
through 2018 and in aggregate thereafter are approximately $3.5 million, $2.6 million, $2.2 million, $1.2 million, $1.1
million, respectively, and $3.9 million thereafter. Total future minimum rentals to be received under non-cancelable subleases
were approximately $1.0 million at December 31, 2013.
Total future minimum payments to be received under direct financing leases for each of the years 2014 through 2018 and
the aggregate thereafter are approximately: $2.0 million, $0.9 million, $0.4 million, $0.1 million, $-- 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 15 pending
asbestos cases. To date, 1,394 silica cases and 34 asbestos cases have been dismissed. Two new asbestos cases were filed in
the fourth quarter of 2013. 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 continues to be
insignificant. The majority of the costs of defense are 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 15 pending asbestos cases, all allege
liability based on products sold largely 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, 2013.
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, 2013.
F-25
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company and its subsidiaries are not party to any other material pending legal proceedings, other than routine
litigation incidental to their businesses.
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 34,350,186 shares and 34,949,620 shares were outstanding at December 31, 2013 and 2012, 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 $6.9 million or $0.20 per common share were paid during 2013. In January 2014, a cash dividend of
approximately $1.7 million or $0.05 per share, was declared, payable in the first quarter of 2014.
Stock Award and Incentive Plan
The Company has adopted its 2001 Stock Award and Incentive Plan (the “Plan”), which provides for grants of incentive
and non-qualified stock options, stock appreciation rights, stock awards or performance unit awards. The Plan is administered
by the Compensation Committee of the Board of Directors. Stock options granted under the Plan have a term not in excess of
ten years. The exercise price for stock options will not be less than the fair market value of the common stock on the date of
the grant, and each award of stock options will vest ratably over a specified period, generally three years.
The following table summarizes stock option and restricted stock activity for the Plan:
Stock Options
Restricted Stock
Shares
Available
for Grant
1,898,578
(381,624)
--
160,784
1,677,738
(345,696)
--
159,932
1,491,974
(351,995)
--
5,010
1,144,989
Shares
1,640,060
244,646
(241,196 )
(69,536 )
1,573,974
222,250
(330,158 )
(70,546 )
1,395,520
239,770
(501,222 )
(2,653 )
1,131,415
Weighted
Average
Exercise
Price Per
Share ($)
27.05
32.06
25.01
26.80
27.10
32.04
25.15
27.76
28.31
41.42
25.26
37.24
32.42
Shares
300,540
136,978
(94,246 )
(91,248 )
252,024
123,446
(102,424 )
(89,386 )
183,660
112,225
(107,956 )
(2,357 )
185,572
Weighted
Average
Exercise
Price Per
Share ($)
23.60
32.08
31.99
30.22
27.21
32.04
25.90
27.08
31.25
41.44
30.71
36.39
37.65
Balance January 1, 2011 ........................
Granted ...................................................
Exercised/vested .....................................
Canceled .................................................
Balance December 31, 2011 ...................
Granted ...................................................
Exercised/vested……………………….
Canceled .................................................
Balance December 31, 2012 ...................
Granted………………………………
Exercised/vested……………………….
Canceled .................................................
Balance December 31, 2013 ...................
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-26
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, 2011
Current year net change
$
Balance at December 31, 2011 $
Current year net change
Balance at December 31, 2012 $
Current year net change
Currency
Translation
Adjustment
Unrecognized
Pension
Costs
46.6 $
(16.7 )
29.9 $
2.1
32.0 $
(14.9 )
(51.9 ) $
(25.6 )
(77.5 ) $
(7.8 )
(85.3 ) $
34.3
Net Gain
(Loss) On
Cash Flow
Hedges
1.7 $
0.6
Accumulated
Other
Comprehensive
Income (Loss)
(3.6)
(41.7)
2.3 $
(0.2 )
2.1 $
0.5
(45.3)
(5.9)
(51.2)
19.9
(31.3)
Balance at December 31, 2013 $
17.1 $
(51.0 ) $
2.6 $
The income tax expense (benefit) associated with items included in other comprehensive income (loss) was approximately
$22.6 million, $(1.3) million and $(15.5) million for the years ended December 31, 2013, 2012 and 2011, respectively.
The following are the reclassifications out of accumulated other comprehensive income, net of related tax:
(millions of dollars)
Year Ended
Dec. 31,
2013
Amortization of prior service cost ............................................$
Amortization of actuarial gains (losses) ...................................
Total reclassifications from accumulated other
comprehensive income .............................................................$
(1.2 )
8.8
7.6
The above amounts are included in net periodic pension costs. Please see note 14 to the condensed consolidated financial
statements.
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, 2013 and 2012:
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 ...................... $
2013
2012
15.0
0.7
0.2
(0.4 )
(0.6 )
(0.2 )
14.7
$
$
14.7
0.7
0.1
(0.2 )
(0.3 )
--
15.0
The current portion of the liability of approximately $0.4 million is included in other current liabilities. The long-term
portion of the liability of approximately $14.3 million is included in other non-current liabilities.
Accretion expense is included in cost of goods sold in the Company's Consolidated Statements of Income.
F-27
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 20. Non-Operating Income and Deductions
Millions of Dollars
Year Ended December 31,
Interest income ...............................................................$
Interest expense ..............................................................
Foreign exchange losses .................................................
Foreign currency translation loss upon deconsolidation
of a foreign entity ...........................................................
Other deductions ...........................................................
Non-operating deductions, net .............................................$
2013
3.0
(3.3 )
(2.1 )
--
(0.8 )
(3.2 )
2012
3.2
(3.2)
(1.4)
--
(1.6)
(3.0)
$
$
$
$
2011
3.9
(3.3)
(1.2)
(1.4
)
(0.6)
(2.6)
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.
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, 2013, 2012 and 2011 was as follows:
Millions of Dollars
2013
Specialty
Minerals
Refractories
Total
Net sales...................................................................................... $
Income from operations ..............................................................
Depreciation, depletion and amortization ...................................
Segment assets ............................................................................
Capital expenditures ...................................................................
$
669.8
98.4
38.6
605.6
33.6
$
348.4
35.9
8.7
378.1
8.3
1,018.2
134.3
47.3
983.7
41.9
Millions of Dollars
2012
Specialty
Minerals
Refractories
Total
Net sales...................................................................................... $
Income from operations ..............................................................
Depreciation, depletion and amortization ...................................
Segment assets ............................................................................
Capital expenditures ...................................................................
$
653.4
87.7
40.8
617.0
41.0
$
343.4
32.6
10.3
355.5
8.0
996.8
120.3
51.1
972.5
49.0
F-28
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 ...................................................................
$
664.1
76.6
0.2
47.6
603.8
41.7
$
368.8
33.2
(0.6 )
10.6
355.8
8.0
1,032.9
109.8
(0.4)
58.2
959.6
49.7
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 deductions ...................................................................
Income from continuing operations before provision
for taxes ......................................................................... $
2013
2012
2011
134.3
$
120.3
$
(7.4 )
3.0
(3.3 )
(2.8 )
(6.7 )
3.2
(3.2 )
(3.0 )
109.8
(5.7)
3.9
(3.3)
(3.2)
123.8
$
110.6
$
101.5
Total assets
Total segment assets ............................................................. $
Corporate assets ....................................................................
2013
2012
$
983.7
233.8
$
972.5
238.7
2011
959.6
205.4
Consolidated total assets ................................................ $
1,217.5
$
1,211.2
$
1,165.0
Capital expenditures
Total segment capital expenditures....................................... $
Corporate capital expenditures .............................................
Consolidated total capital expenditures ......................... $
2013
2012
2011
41.9
1.9
43.8
$
$
49.0
3.1
52.1
$
$
49.7
2.4
52.1
The carrying amount of goodwill by reportable segment as of December 31, 2013 and December 31, 2012 was as follows:
Millions of Dollars
Specialty Minerals ....................................................... $
Refractories ..................................................................
Total ..................................................................... $
2013
14.3
50.1
64.4
$
$
2012
14.1
51.7
65.8
Goodwill
December 31,
December 31,
The net change in goodwill since December 31, 2012 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 ......................................................................... $
2013
563.5
$
2012
562.5
$
Canada/Latin America ..........................................................
Europe/Africa .......................................................................
Asia .......................................................................................
Total International ................................................................
70.3
269.2
115.2
454.7
72.5
248.2
113.6
434.3
2011
557.5
74.3
286.4
114.7
475.4
Consolidated total net sales ........................................... $
1,018.2
$
996.8
$
1,032.9
F-29
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Millions of Dollars
Long-lived assets
United States ......................................................................... $
2013
235.2
$
2012
235.8
$
Canada/Latin America ..........................................................
Europe/Africa .......................................................................
Asia .......................................................................................
Total International ................................................................
12.1
64.9
60.5
137.5
14.5
69.0
67.3
150.8
Consolidated total long-lived assets .............................. $
372.7
$
386.6
$
2011
239.8
14.6
72.0
59.8
146.4
386.2
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.
The Company's sales by product category are as follows:
Millions of Dollars
Paper PCC ...................................
Specialty PCC ..............................
Talc ..............................................
GCC .............................................
Refractory Products .....................
Metallurgical Products .................
2013
2012
2011
$ 480.0 $
67.2
50.9
71.7
264.0
84.4
471.5 $
65.9
48.1
67.9
264.1
79.3
485.0
63.6
46.9
68.6
287.4
81.4
Net sales.......................................
$ 1,018.2 $
996.8 $
1,032.9
Note 22. Quarterly Financial Data (unaudited)
Millions of Dollars, Except Per Share Amounts
2013 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 ........................................
Income from continuing operations ......................
Loss from discontinued operations .......................
Net income attributable to MTI….. $
Basic EPS:
Income from continuing operations attributable
to MTI ............................................................
Loss from discontinued operations attributable to
MTI .................................................................
Net Income attributable to MTI common
shareholders ....................................................
Diluted EPS:
Income from continuing operations attributable
to MTI ............................................................
Loss from discontinued operations attributable to
MTI .................................................................
Net
to MTI common
shareholders ....................................................
Income attributable
$
$
$
$
$
$
137.2 $
29.6
166.8
83.6
250.4
56.0
28.2
20.3
(0.7 )
18.7 $
0.56
(0.02 )
0.54
0.55
(0.02 )
0.53
$
$
$
$
$
$
135.6 $
32.7
168.3
88.5
256.8
58.8
32.4
22.7
(5.0 )
17.1 $
0.63
(0.14 )
0.49
0.63
(0.14 )
0.49
$
$
$
$
$
$
135.9
31.5
167.4
86.8
254.2
59.9
32.8
22.6
--
21.9
$
$
0.63
--
0.63
0.63
--
0.63
$
$
$
$
$
$
138.3
28.8
167.1
89.5
256.6
59.0
33.5
23.6
--
22.6
0.66
--
0.66
0.65
--
0.65
F-30
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Market price range per share of common stock:
High ............................................................. $
Low .............................................................. $
Close ............................................................ $
43.04 $
39.54 $
41.51 $
43.12 $
38.43 $
41.34 $
Dividends paid per common share........................ $
0.05 $
0.05 $
49.03
42.53
48.95
0.05
$
$
$
$
60.40
49.28
60.07
0.05
2012 Quarters
Net Sales by Major Product Line
First
Second
Third
Fourth
PCC ................................................................... $
Processed Minerals ...........................................
Specialty Minerals Segment ........................
Refractories Segment ...................................
Net sales................................................................
Gross profit ...........................................................
Income from operations ........................................
Income from continuing operations ......................
Loss from discontinued operations .......................
Net income attributable to MTI .......... $
135.5 $
29.6
165.1
89.4
254.5
55.6
27.9
19.2
(0.6 )
18.0 $
Basic EPS:
Income from continuing operations attributable
to MTI ............................................................
Loss from discontinued operations attributable to
MTI .................................................................
Net
to MTI common
shareholders ....................................................
Income attributable
Diluted EPS:
Income from continuing operations attributable
to MTI ............................................................
Loss from discontinued operations attributable to
MTI .................................................................
Net
to MTI common
shareholders ....................................................
Income attributable
$
$
$
$
$
$
0.53
(0.02 )
0.51
0.53
(0.02 )
0.51
$
$
$
$
$
$
133.7 $
31.8
165.5
85.9
251.4
56.8
30.1
20.7
(0.5 )
19.7 $
0.57
(0.01 )
0.56
0.57
(0.01 )
0.56
$
$
$
$
$
$
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 $
Note 23. Subsequent Event
$
134.5
28.6
163.1
84.7
247.8
55.6
28.6
19.7
(0.5 )
18.6
$
0.54
(0.01 )
0.53
0.54
(0.01 )
0.53
$
$
$
$
$
$
36.99
30.50
35.46
0.025
$
$
$
$
133.7
26.0
159.7
83.4
243.1
54.3
27.0
19.1
(0.9)
17.7
0.53
(0.03)
0.50
0.53
(0.03)
0.50
39.92
34.25
39.92
0.05
The Company announced on February 14, 2014 that it has made a proposal to acquire all outstanding shares of AMCOL
International Corporation, a company publicly traded on the New York Stock Exchange, for $42 per share in cash. The
Company is confident in its ability to finance the transaction. If the proposal is accepted, the transaction would be expected
to close in the first half of 2014 and would be conditioned upon customary closing conditions.
F-31
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, 2013 and 2012, 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, 2013. 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, 2013 and 2012, and the results of their
operations and their cash flows for each of the years in the three-year period ended December 31, 2013, in conformity with
U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
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, 2013,
based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated February 21, 2014 expressed an unqualified
opinion on the effectiveness of the Company's internal control over financial reporting.
/s/ KPMG LLP
New York, New York
February 21, 2014
F-32
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, 2013, based on criteria established in Internal Control - Integrated Framework (1992) 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, 2013, based on criteria established in Internal Control - Integrated Framework
(1992) 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, 2013 and 2012,
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, 2013, and our report dated
February 21, 2014 expressed an unqualified opinion on those consolidated financial statements and financial statement
schedule.
/s/ KPMG LLP
New York, New York
February 21, 2014
F-33
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, 2013 in relation to criteria for effective internal
control over financial reporting described in "Internal Control - Integrated Framework (1992)" issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on its assessment, the Company has determined that, as of
December 31, 2013, 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/ Robert S. Wetherbee
President 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 21, 2014
F-34
MINERALS TECHNOLOGIES INC. & SUBSIDIARY COMPANIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(thousands of dollars)
Description
Year ended December 31, 2013
Valuation and qualifying accounts deducted from
assets to which they apply:
Allowance for doubtful accounts ..............................
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 ..............................
Additions
Charged to
Costs,
Provisions
and
Expenses
(b)
Balance at
Beginning
of Period
Deductions
(a)
Balance at
End of
Period
$
3,837
586
(2,708)
1,715
$
3,009
$
1,011
(183 )
3,837
$
2,440
$
877
$
(308 )
$
3,009
(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. .................................................................
Specialty Minerals South Africa (Pty) Limited ......................................................
Specialty Minerals (Thailand) Limited ..................................................................
Specialty Minerals UK Limited .............................................................................
Specialty Minerals (Changshu) Co., Ltd. ...............................................................
Specialty Minerals (Yanzhou) Co., Ltd. .................................................................
Tecnologias Minerales de Mexico, S.A. de C.V. ................................................... Mexico
South Africa
Thailand
United Kingdom
China
China
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 21, 2014, with respect to the
consolidated balance sheets as of December 31, 2013 and 2012, 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, 2013, and the related financial statement schedule and the effectiveness of internal control over financial reporting as of
December 31, 2013, which reports appear in the December 31, 2013 annual report on Form 10-K of Minerals Technologies
Inc.
/s/ KPMG LLP
New York, New York
February 21, 2014
EXHIBIT 31.1
I, Robert S. Wetherbee, 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 21, 2014
/s/ Robert S. Wetherbee
Robert S. Wetherbee
President 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 21, 2014
/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, 2013 (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 21, 2014
Dated: February 21, 2014
/s/ Robert S. Wetherbee
Robert S. Wetherbee
President 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, 2013 and
December 31, 2012 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)
Diluted earnings per share from continuing operations
attributable to MTI, as reported
Special items:
Insurance settlement gain, net of tax
Year Ended
Dec. 31,
2013
Dec. 31,
2012
$
2.46
$
2.16
(0.04)
0.00
Diluted earnings per share from continuing operations
attributable to MTI, excluding special items
$
2.42
$
2.16
Segment Operating Income Data
Specialty Minerals Segment
Refractories Segment
Unallocated Corporate Expenses
Consolidated
Special Item: Insurance Settlement Gain
Refractories Segment
Consolidated
Segment Operating Income, Excluding Special Items
Specialty Minerals Segment
Refractories Segment
Unallocated Corporate Expenses
Consolidated
$
$
$
$
$
$
$
$
$
$
98.4
35.9
(7.4)
126.9
(2.5)
(2.5)
98.4
33.4
(7.4)
124.4
$
$
$
$
$
$
$
$
$
$
87.7
32.6
(6.7)
113.6
0.0
0.0
87.7
32.6
(6.7)
113.6
2013 Underlying Sales Growth
Sales Growth,
As Reported
Unfavorable
Foreign Exchange Sales Growth
Underlying
Specialty Minerals Segment 2.5% 1.0% 3.5%
Refractories Segment 1.5% 1.5% 3.0%
Consolidated 2.1% 1.2% 3.3%
MINERALS TECHNOLOGIES INC.
DIRECTORS, OFFICERS AND INVESTOR INFORMATION
Minerals Technologies Inc. and Subsidiary Companies 2013 Annual Report
BOARD OF DIRECTORS
Joseph C. Muscari
Chairman and Chief Executive Officer
John J. Carmola
Business Consultant
Retired Former Segment President at Goodrich
Corporation
Paula H. J. Cholmondeley
Chief Executive Officer
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 Officer
Bethlehem Steel Corporation
Marc E. Robinson
Senior Executive Advisor
Booz & Company
Barbara R. Smith
Senior Vice President and Chief Financial Officer
Commercial Metals Company
Donald C. Winter
Independent Consultant
Professor of Engineering Practice at the University of
Michigan, Former Secretary of the Navy
CERTIFICATIONS
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 12, 2013.
The Company also filed as an exhibit to its Annual
Report on Form 10-K for the year ended December
31, 2013, 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:
Firefly Design + Communications Inc. www.fireflydes.com
Selected photography:
Wyatt Counts
CORPORATE OFFICERS
Joseph C. Muscari *
Chairman and Chief Executive Officer
Douglas T. Dietrich *
Senior Vice President, Finance and Treasury
and Chief Financial Officer
Jonathan J. Hastings*
Senior 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,
Chief Compliance Officer and Human Resources
D.J. Monagle III *
Chief Operating Officer and Senior Vice President, Paper PCC
Han Schut *
Vice President and Managing Director, Minteq International
Michael A. Cipolla
Vice President, Corporate Controller
and Chief Accounting Officer
* Member, MTI Leadership Council
STOCK LISTINGS
Minerals Technologies Common Stock is listed
on the New York Stock Exchange
(NYSE) under the symbol MTX.
REGISTRAR AND TRANSFER AGENT
Computershare Trust Company, N. A.
P.O. Box 43078
Providence, RI 02940-3078
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.
622 Third Avenue
38th floor
New York, NY 10017
www.mineralstech.com