A N N U A L R E P O R T 2 0 1 6
M I N E R A L S T E C H N O L O G I E S I N C .
A Commitment to Growth and Performance
A Commitment to Growth and Performance
M I N E R A L S T E C H N O L O G I E S
Annual Report 2016
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 supporting
systems and services. The company has five reportable
segments: Specialty Minerals, Refractories, Performance
Materials, Construction Technologies and Energy Services.
The Specialty Minerals, Performance Materials and
Construction Technologies segments produce and sell
products and technologies based upon the mineral
products calcium carbonate, bentonite, talc, chromite
and leonardite. These minerals are used principally in the
paper, metalcasting, building materials, paints and coatings,
consumer products, ceramic, polymer, and food and
pharmaceutical industries.
The Refractories and Energy Services segments both
produce and market patented technologies, products and
services. The Refractories segment produces monolithic
refractory materials and specialty products, services and
I N M E M O R I A M
J O S E P H C . M U S C A R I
S E P T E M B E R 1 4 , 1 94 6 - S E P T E M B E R 3 , 2 0 1 6
On September 3, 2016, Minerals Technologies lost its
Chairman and Chief Executive Officer when Joseph C.
Muscari passed away unexpectedly at 69.
Mr. Muscari was elected Chairman and CEO in
March of 2007 and led the transformation of MTI to
a high-performing company. Joe touched all who knew
him through his integrity, intelligence, drive toward
excellence and his rare ability to inspire others to
perform beyond their own expectations.
application equipment used primarily by the steel, non-
ferrous metal and glass industries. Energy Services provides
a range of offshore produced water Filtration and Well
Testing services to the worldwide oil and gas industry.
The company emphasizes research and development.
By investing in the development of new technologies
and advanced 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.
M T I
A $1.6 BILLION MINER ALS-BASED COMPANY
WITH GLOBAL RE ACH
THE WORLD LE ADER IN PRECIPITATED
CALCIUM CARBONATE & BENTONITE
A LE ADER IN MINER ALS-BASED TECHNOLOGY
AND INNOVATION
Millions of Dollars,
Except Per Share Data
December 31,
2016
December 31,
2015
Net Sales
$1,638.0
$1,797.6
Specialty Minerals Segment
Refractories Segment
Performance Materials Segment
Construction Technologies Segment
Energy Services Segment
Operating Income
Diluted Earnings per Share
Research & Development Expenses
Depreciation, Depletion & Amortization
Capital Expenditures
Net Cash Provided by Operating Activities
Number of Shareholders of Record
Number of Employees
* Excludes Special Items
591.5
274.5
502.8
183.3
85.9
257.2*
4.47*
23.8
91.9
62.4
225.1
175
3,583
624.6
295.9
514.8
180.1
182.2
257.4*
4.31*
23.6
98.3
86.0
270.0
169
3,868
M T I A T A G L A N C E
T A B L E O F C O N T E N T S
BASE-OF-OPERATION
COUNTRIES
35
WORLDWIDE
PRODUCTION LOCATIONS
156
R&D CENTERS
12
EMPLOYEES
3,583
OUR BUSINESSES
CEO LETTER
2
4
MTI’S STRATEGIES FOR GROWTH 12
Geographic Expansion
New Product Innovation
Acquisition
OPERATIONAL EXCELLENCE
10-K
13
16
20
20
21
CORPORATE INFORMATION
INSIDE BACK COVER
2016 Net Sales by Geogra phi c Area
201 6 Net Sa les by Segmen t
(percentage/millions of dollars)
(percentage/millions of dollars)
$1,638
MILLION
United States
57%, $936.2
Europe/Africa
21%, $338.8
Asia
17%, $280.4
Canada/Latin America
5%, $82.6
2016 Net Sales by Product Li n e
(percentage/millions of dollars)
Minerals-Based Businesses
$1, 278
MILLION
Paper PCC
24%, $387.9
Metalcasting
16%, $258.0
HPC & Specialty Products
10%, $171.2
Building Materials & Other Products
6%, $104.4
Ground Calcium Carbonate
5%, $83.6
Basic Minerals & Other Products
5%, $73.6
Environmental Products
5%, $78.9
Specialty PCC
4%, $64.3
Talc
3%, $55.7
$1 ,638
MI LLI O N
Specialty Minerals
36%, $591.5
Performance Materials
31%, $502.8
Construction Technologies
11%, $183.3
Energy Services
5%, $85.9
Refractories
17%, $274.5
Service-Based Businesses
$360
MI LLI O N
Refractories
14%, $219.0
Energy Services
5%, $85.9
Metallurgical Wire
3%, $55.5
2 0 1 6 T O T A L N E T S A L E S
$1.638 BILLION
M I N E R A L S T E C H N O L O G I E S I N C .
A N N U A L R E P O R T 2 0 1 6
0 2
O U R B U S I N E S S E S
M I N E R A L S T E C H N O L O G I E S
Minerals &
Service-Related
Businesses
M I N E R A L S - B A S E D
Paper PCC
Per for mance Mater ials
Minerals Technologies is the world’s leading producer of
precipitated calcium carbonate (PCC), a specialty pigment
for filling and coating high-quality paper. PCC provides
brightness, opacity and bulk to paper and is the pigment of
choice for papermakers worldwide for paper filling. In the
1980s, the company was a major factor in revolutionizing
the way paper was made in North America, moving the
industry to acid-free technology for uncoated freesheet paper.
MTI originated the concept of building “satellite” plants
on site at paper mills to produce PCC, which is substituted
for more expensive wood fiber and allows papermakers to
produce brighter, higher quality paper at lower cost. Today,
the company produces the synthesized mineral for more than
30 prestigious papermakers at over 60 paper mills around
the globe. As the paper industry recognized the value of PCC,
MTI developed more advanced technologies that increased
the usage of PCC. These include high-filler technologies and
the conversion of mineral-based waste streams from pulp
mill operations into usable paper fillers. Today, the Paper
PCC business is also the global leader in both high filler and
waste stream conversion to filler technologies serving the
paper industry.
Perfo rmance Mineral s
Performance Minerals, part of MTI’s Specialty Minerals
segment, consists of Specialty PCC, ground calcium
carbonate (GCC) and talc. The business unit is vertically
integrated from mine-to-market with three limestone
facilities and one talc operation in the United States.
Performance Minerals primarily serves the construction,
automotive and consumer markets.
As the world’s leading producer of bentonite, MTI’s
Performance Materials segment is an industry leader in both
pet care and in greensand bonds for ferrous metalcasting.
The business is fully integrated from mine-to-market and
brings to bear extensive technical expertise in customizing
products for specific end-user settings and applications.
Performance Materials consists of Metalcasting; Household,
Personal Care & Specialty Products; and Basic Minerals
& Other Products, which provide a wide range of both
bentonite-based and synthetic materials to various industrial
and consumer markets. The segment is also a major producer
of surfactant and aesthetic granules for the worldwide dry
detergent market.
Const ructi on T echnologi es
Construction Technologies, which consists of Building
Materials & Other Products and Environmental Products,
produces value-added materials for commercial, industrial
and infrastructure construction projects worldwide.
CETCO® Construction Technologies has more than
50 years’ experience in providing industry-leading
waterproofing membranes and accessories for commercial
construction, as well as drilling products for non-oil and
gas drilling. The Environmental Products Group is the
world-leading supplier of geosynthetic clay liners (GCLs) for
industrial, hazardous and municipal solid waste landfills,
mining sites, and for containment of challenging residues
such as coal ash from coal-fired electrical generation and red
mud from alumina processing.
A N N U A L R E P O R T 2 0 1 6
M I N E R A L S T E C H N O L O G I E S I N C .
O U R B U S I N E S S E S
0 3
S E R V I C E - B A S E D
Re fr actories
Energy Services
Minteq International Inc., which manages the Refractories
segment, is the North American leader in the application
of monolithic refractories for iron and steel making. The
segment consists of engineered monolithic refractory lining
systems, metallurgical wire products, bulk calcium and
calcium alloy products, refractory measurement systems,
and advanced carbon products. Minteq is also number one
in North America in production of solid core calcium wire,
which is used to remove impurities in steel for enhanced
castability. The Ferrotron unit is the market leader in laser
profile measurement technology for the refractory and
steel industries.
CETCO® Energy Services offers a range of patented
technologies, products and services for off-shore filtration
and well testing in oil and gas production throughout the
world. The business unit is the leading provider of offshore
water treatment in the United States and Brazil, using its
key technologies to remove oil, hydrocarbons, heavy metals,
toxic materials and other contaminants.
2 016 M T I Sal es
(percentage/millions of dollars)
201 6 MTI OP ERAT ING I NCOM E*
(percentage/millions of dollars)
Minerals
78%, $1,278
Services
22%, $360
Minerals
85%, $223.8
Services
15%, $39.4
$1,638
MILLION
$257.2
MI LLI ON
* excludes special items and unallocated corporate expenses
M I N E R A L S T E C H N O L O G I E S I N C .
A N N U A L R E P O R T 2 0 1 6
0 4
C E O L E T T E R
C E O
L E T T E R
D E A R S H A R E H O L D E R S :
As the new chief executive officer at Minerals
Technologies, I want to share with you my
perspectives on our 2016 performance, MTI’s
strengths as a company and our potential for
long-term growth.
Douglas T. Dietrich
Chief Executive Officer
In 2007, Joe Muscari, our late chairman and CEO, asked
me to join MTI, and together over the past 10 years we
built a strong management team that has transformed the
company into a high-performing, shareholder-value-focused
enterprise—one that is built upon a structured business
system with a foundation of transparency, discipline and
accountability.
2016 Performanc e
In 2016, we posted our seventh consecutive year of record
earnings. For the year, MTI reported earnings per share of
$4.47 compared with earnings of $4.31 per share in 2015,
a 4-percent increase achieved despite a 9-percent decrease in
sales. Operating income for the full year was $257 million,
the same level as 2015. However, we improved operating
margin to 15.7 percent of sales compared with 14.3 percent
in 2015, a 10 percent improvement. Cash flow from
operations for the year was $225 million; and, the company
paid down $190 million of acquisition-related debt in 2016,
bringing our net leverage ratio to 2.5 times EBITDA.
The majority of MTI’s revenues and profits are derived
from our Minerals-based businesses of Specialty Minerals,
Performance Materials and Construction Technologies.
Full-year sales for these segments were $1.278 billion
with operating income of $224 million. During 2016, our
Minerals-based segments recorded double-digit operating
margins and improved profit levels over 2015, increasing
operating margins by 5 percent over 2015 to 17.5 percent.
The Specialty Minerals and Performance Materials segments
posted record-breaking years, and were the two major
contributors to our strong financial performance.
We also continued to make advances in China, which
remains a major pillar of our geographic expansion growth
strategy. In 2016, sales increased 9 percent in China. The
precipitated calcium carbonate (PCC) business grew sales by
12 percent, and Performance Materials increased sales 11
percent. We ramped up a 100,000-ton satellite PCC plant in
Shandong Province; and Performance Materials continued its
progress penetrating the foundry industry in China with its
greensand bond formulations.
A N N U A L R E P O R T 2 0 1 6
M I N E R A L S T E C H N O L O G I E S I N C .
C E O L E T T E R
0 5
“During 2016, our Minerals-based segments recorded double-digit
operating margins and improved profit levels over 2015, increasing
operating margins by 5 percent over 2015 to 17.5 percent.”
We confronted challenging end markets in 2016 for both
Energy Services and Refractories, our Service-related
businesses. The significant deterioration in oil and gas prices
over the past two years had a major impact on Energy
Services, reducing sales by $200 million from 2014; and
weak global steel markets affected Refractories. We took
immediate action to restructure our Energy Services business
to maintain an acceptable level of profitability. We exited the
business unit’s commodity service lines and focused on the
areas where we have sustainable technology differentiation—
offshore filtration and well testing. Today, the Energy
Services business is well-positioned for future growth in
revenues and profits as the oil and gas markets improve.
The Refractories segment faced lower capacity utilization
in worldwide steel markets, but through execution of MTI’s
strong operating principles of productivity improvement and
cost control, the business increased operating profits by 17
percent despite lower revenues.
MTI continued its track of earnings growth and overcame
our challenging end markets in 2016—a major achievement
by all our employees, who drive our high-performance
enterprise every day. A key factor in that achievement was
our ability to improve efficiency across the company through
our commitment to continuous improvement.
Oper ational Excellence
Operational Excellence, what we term OE, is a fundamental
pillar of performance improvement at Minerals
Technologies. The processes and principles of OE have
been adopted and are practiced by all our employees in
both manufacturing and support roles, and have yielded
excellent results in productivity and new product ideas. In
2016, for example, we increased productivity—measured
by tons-produced per hour—by 7 percent, saving nearly
$5 million in costs compared to 2015. What’s more, that
marked the seventh consecutive year we have recorded
productivity improvements of 5 percent or higher, attesting
EPS Historical Trend*
(dollars per share)
1
5
0
$
.
3
6
0
$
.
4
7
0
$
.
6
8
0
$
.
3
9
0
$
.
9
0
1
$
.
5
2
1
$
.
0
4
1
$
.
9
2
1
$
.
4
2
1
$
.
1
3
1
$
.
7
2
1
$
.
4
4
1
$
.
2
4
1
$
.
8
3
1
$
.
3
5
1
$
.
8
7
1
$
.
1
8
0
$
.
2
8
1
$
.
3
9
1
$
.
6
1
2
$
.
2
4
2
$
.
0
0
4
$
.
1
3
4
$
.
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
7
4
4
$
.
16
*EPS from continuing operations, excluding special items
Adjusted for 2012 Stock Split
M I N E R A L S T E C H N O L O G I E S I N C .
A N N U A L R E P O R T 2 0 1 6
0 6
C E O L E T T E R
“During the year, we held nearly 4,000 Kaizen events, which
means that approximately 10 highly focused employee
improvement workshops took place every day around the
world in an effort to make our products or services better,
safer and at lower cost.”
to our commitment to continuous improvement. Employee
engagement is the heart of any company culture, and it is at
a high level at MTI. In 2016, MTI’s 3,600 employees made
more than 45,000 suggestions, a 14-percent increase over
2015—and we implemented 70 percent of those suggestions.
During the year, we held nearly 4,000 Kaizen events, which
means that approximately 10 highly focused employee
improvement workshops took place every day around the
world in an effort to make our products or services better,
safer and at lower cost.
I am also pleased to say that the acquired businesses
have been fully integrated into MTI and the high level of
adoption—nearly 60 percent of OE practices deployed in
three years—is a strong indicator of that integration.
Safety of our employees is a core value at MTI, and one
that is closely aligned with Operational Excellence. In 2016,
the company improved safety performance and reduced
recordable and lost-time incidents by 22 percent.
Pl at form for Growt h
MTI’s growth strategies of geographic expansion, new
product innovation and acquisition remain constant. Our
Minerals-based businesses, which comprise 78 percent of
our sales and 85 percent of our operating income, are the
foundation of MTI’s future growth, and they continue to
progress toward our five-year growth objectives.
Geo gra ph ic Expa nsi on
We made good progress in China in 2016, and the potential
for future growth remains considerable in Asia, primarily
China and India, through our PCC, Performance Materials
and Construction Technologies businesses.
Today, MTI produces about 3.1 million tons of PCC for
paper worldwide. The potential exists to nearly double that
production through new satellite plants at paper mills in
China and India. As the worldwide leader in PCC, we are at
the forefront of driving its penetration in this region because
PCC is the filler of choice for papermakers worldwide—
5-YEAR INDEXED TOTAL SHAR E HOLD E R R ETU RN*
300
200
100
0
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
11
12
13
14
15
16
*$100 invested on 12/31/11 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
A N N U A L R E P O R T 2 0 1 6
M I N E R A L S T E C H N O L O G I E S I N C .
C E O L E T T E R
0 7
and has been for the past 25 years. More to the point, the
percentage of PCC used in printing and writing papers in the
developed world is about 20 percent, whereas in countries
like China and India, where paper production continues to
grow, that penetration is approximately only 10 percent.
D ebt Repayment
4.5
4.2
3.8
We are encouraged by the increased interest from
papermakers conducting trials with our PCC, our FulFill®
high-filler technology, as well as evaluating our NewYield®
platform of technologies that will drive further penetration
of PCC.
In Performance Materials, we continue to pursue
opportunities around the world, especially in Asia, for
our Metalcasting, Household and Personal Care and Basic
Minerals products. MTI has a significant position in the
foundry market in China, which has progressed through
our penetration through substitution strategy. This strategy
allows MTI to grow by substituting existing products
with higher value-added technologies that save customers
money. Metalcasting’s greensand bond formulations—a
premixed blend—will continue to gain traction in China as
foundries move up the value curve and seek ways to improve
productivity. Today, about 90 percent of North American
and European foundries use pre-mixed greensand bond
formulations, like our Additrol® additive, to form their
molds for ferrous castings because these blends increase
throughput, improve quality and reduce scrap. By contrast,
in China and India only about 8 percent of foundries
use a pre-mixed formulation. This difference in levels of
penetration, consequently, offers a great opportunity for MTI
to penetrate these markets by helping foundries reduce costs
and improve quality.
3.2
3.0
2.9
2.8
2.8
2.7
2.6
2.5
n
o
i
t
i
s
i
u
q
c
A
L
O
C
M
A
8
3
$
2
6
$
0
4
$
0
5
$
0
5
$
0
5
$
0
4
$
0
5
$
0
5
$
0
5
$
May-14 Q3 14
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Q3 16
Q4 16
Cash Flow
Leverage Ratio
• Debt Repayment of $480 Million over past 10 quarters
• 2.5x Net Leverage Ratio at end of 2016 ->$1.08B Gross Debt
• Total Liquidity at $400 Million -> $200 Million Cash + $200 Million Credit Facility
“MTI has a significant position in
the foundry market in China,
which has progressed through
our penetration through
substitution strategy.”
Financial Performance Tr e n ds
Cash Flow from Operations/Cap Ex ($ in millions)
Free Cash Flow ($ in millions)
82
86
62
50
52
52
44
35
31
28
7
7
1
07
2
3
1
08
1
6
1
09
1
4
1
10
0
4
1
11
0
4
1
12
5
3
1
13
4
1
3
14
0
7
2
15
5
2
2
16
7
2
1
1
0
1
3
3
1
6
0
1
2
8
8
8
2
9
07
08
09
10
11
12
13
2
3
2
14
4
8
1
15
3
6
1
16
Cash Flow
Cap Ex
M I N E R A L S T E C H N O L O G I E S I N C .
A N N U A L R E P O R T 2 0 1 6
0 8
C E O L E T T E R
Safet y: Historical Injury Rates
(Injuries/100 Employees)
3.079
2.630
2.056
1.666
0.648
1.155
0.939
1.414
0.613
World Class Recordable Injury Rate
World Class Workday Injury Rate
1.594
1.340
1.230
1.250
0.970
0.748
0.383
0.386
0.400
0.400
0.260
07
08
09
10
11
12
13
14
15
16
Annual Recordable Injury Rate
Lost Workday Injury Rate
We have taken a long-term approach to growing in China.
In 2016, we aggressively began to pursue a government
marketing initiative there to assure that government agencies
specify MTI’s technologies for adoption. Part of that
initiative resulted in the company and its partners being
selected for one of six EcoPartnerships announced during the
eighth annual U.S.-China Strategic and Economic Dialogue.
The EcoPartnership was specifically for our NewYield®
process technology that converts a paper mill waste stream
into a usable pigment. We are also enthusiastic about our
efforts to introduce additional NewYield® technologies that
reduce waste in the pulping process, as well as our coating
grade PCC for the high-end packaging market—a market
that continues to grow globally.
Other MTI technologies that have evolved over the last year
that we will be marketing globally include geosynthetic clay
liners—like our Resistex® line—for environmental solutions
to such problems as coal ash and red mud containment.
(Coal ash is an industrial waste byproduct from coal-fired
power plants; red mud is a waste byproduct from the
production of alumina, which is used in manufacturing
aluminum.) We are also focusing on advancing our Enersol®
crop enhancement products, and our Pet Care and Fabric
Care lines around the world.
Our Performance Minerals business, which consists of
ground calcium carbonate, talc and Specialty PCC, is a
high-performing operation that we will seek to expand
worldwide.
The Refractories segment has seen recent success in the
introduction of new monolithic refractory lining technologies
to the worldwide steel markets, which bring higher value to
our steel-making customers.
“Our Performance Minerals business, which consists of ground
calcium carbonate, talc and Specialty PCC, is a high-performing
operation that we will seek to expand worldwide.”
A N N U A L R E P O R T 2 0 1 6
M I N E R A L S T E C H N O L O G I E S I N C .
C E O L E T T E R
0 9
Operating Income/Margin *
($ in millions)
EB I TDA Tren ds*
($ in millions)
13.6
14.3
15.7
11.4
12.2
114
12
124
13
235
14
257
15
257
16
18.8
324
14
16.5
165
12
16.8
171
13
21.5
20.1
361
15
352
16
Operating Income
Operating Margin
EBITDA
% of Sales
*excludes special items
“In the past three years, we have more than tripled the
number of ideas in our new product development
pipeline—from 74 in 2014 to 245 today.”
Our Energy Services segment’s Filtration business has the
most advanced technology for filtering produced water
generated from offshore oil rigs, and we are actively working
with oil companies in every major offshore oil basin, and
most recently onshore in Saudi Arabia. This business has the
potential to double its revenue as the oil sector recovers with
little additional fixed costs.
Innovat ion
Today, through the combination of MTI and AMCOL,
we have more opportunities for organic growth through
innovation. In the past three years, we have more than
tripled the number of ideas in our new product development
pipeline—from 74 in 2014 to 245 today. At the end of
2014, MTI had six ideas in the final stage of product
development compared to 34 today. The company now
generates approximately 15 percent of sales from new
products commercialized in the last five years; and, we have
set targets to double that rate while reducing the time it takes
to move a new product from idea to commercialization. We
accomplish that by working closely with our customers,
having access to broader markets we can address with
our value-added technologies, like the foundry, consumer
products and environmental remediation markets, and by
continuing to adopt lean approaches to accelerate new
product development.
Acq uisi ti ons
Our more diverse end markets and product offerings create
a bigger basket of potential acquisition opportunities.
The types of opportunities we are targeting are minerals
businesses with a technological differentiation that expand
our reach geographically and increase the value we provide
to our customers. We have demonstrated our ability to
assess, transact and integrate a large acquisition, and
we have a healthy pipeline of opportunities that we are
actively pursuing.
Looking Forward
I believe that MTI has the basic fundamentals in place
to assure long-term growth and to further enhance
shareholder value.
M I N E R A L S T E C H N O L O G I E S I N C .
A N N U A L R E P O R T 2 0 1 6
1 0
C E O L E T T E R
“We will move people into new, challenging positions and add to our
talent base where needed, while maintaining control of expenses.”
We will maintain MTI’s culture, which has its foundation
in safety, strong employee engagement, transparency in
our actions and accountability for results. Over the last 10
years, we have developed a highly disciplined and structured
business system to drive profitable growth. We will remain
a high-performing company, with efficient processes, while
always seeking ways to improve. We will continue to keep
tight control on costs and capital, maintain our focus on cash
flow as well as continuing our efforts to improve return on
capital. Executing on our key growth strategies of geographic
expansion, new product development and acquisitions will
remain our highest priority.
I will, however, make changes to increase the speed of
execution on our growth opportunities. We will take
what we do so well operating the company—an efficient,
aligned, and disciplined approach—and apply those same
principles to accelerate revenue growth. This will require
an organizational structure that better aligns our resources
to focus on the needs of our customers, to accelerate
communications, make faster decisions and knock down
barriers. We will position the right talent in the right spots
to provide the necessary focus on growth, and build even
stronger customer relationships. One area in which I have
already made changes is by better aligning our bentonite-
2 016 Minerals Busin esses R es ults
Full Year Financial s
O PERATI NG I NCO ME/ MA RGIN
($ in millions)
Sales
Operating Income
% of Sales
EBITDA
% of Sales
2016
1,278
224
17.5%
298
23.3%
2015
1,320
219
16.6%
297
22.5%
$ 10 2.7
million
17.4 %
$ 97.5
million
19.4 %
$ 23.6
mill ion
12.9%
Specialty
Minerals
Performance
Materials
Construction
Technologies
Historical Annual OP ER ATI NG R esults *
O PERAT ING MA RGI N*
($ in millions)
219
224
169
17.5%
16.6%
14.7%
14.6%
13.4%
88
653
12
98
670
13
1,155
1,320
1,278
14
15
16
12
13
14
15
16
Sales
Operating Margin
*excludes special items
A N N U A L R E P O R T 2 0 1 6
M I N E R A L S T E C H N O L O G I E S I N C .
C E O L E T T E R
1 1
based businesses in Performance Materials and Construction
Technologies into one operating segment. This will better
align manufacturing capabilities, create focus on our core
product lines and streamline communications. Another area
of focus is accelerating the development of our organization
in Asia—particularly China—to add depth and breadth
to our team in the region to better support the growth
opportunities we have.
I will also begin the longer-term process of developing and
enhancing the talent we have in the organization. We will
move people into new, challenging positions and add to
our talent base where needed, while maintaining control of
expenses. Fostering talented people who understand and
contribute to our strong operating culture will provide a
foundation for the leadership we need to carry us into
the future.
In 2017, we remain committed to advancing our growth
objectives and delivering strong financial performance.
Our Minerals-based businesses are very well positioned in
their markets globally, and our Service-related segments are
poised to grow as their markets improve. We are committed
to delivering to you, our shareholders, solid financial
performance, strong cash flows and higher value.
Douglas T. Dietrich
Chief Executive Officer
201 6 Service Busin esses Res ults
Full Year Financial s
O PERATI NG I NCO ME/ MA RGIN
($ in millions)
Sales
Operating Income
% of Sales
EBITDA
% of Sales
2016
360
39
10.9%
61
16.8%
2015
478
44
9.2%
69
14.5%
$ 35.0
million
12.8 %
Refractories
$ 4.4
million
5.1%
Energy
Services
Historical Annual OPER ATI NG R es ults *
O PERAT ING MA RGI N*
($ in millions)
73
12.9%
33
33
343
12
348
13
570
14
44
478
15
39
360
16
Sales
Operating Margin
*excludes special items
9.5%
9.6%
9.2%
10.9%
12
13
14
15
16
M I N E R A L S T E C H N O L O G I E S I N C .
A N N U A L R E P O R T 2 0 1 6
1 2
M T I ’ S S T R A T E G I E S F O R G R O W T H
M T I ’ S
S T R AT E G I E S
F O R G R O W T H
G E O G R A P H I C
E X PA N S I O N
N E W P R O D U C T
I N N OVAT I O N
AC Q U I S I T I O N
Minerals Technologies will continue to grow through
expanding its technologies geographically, especially
in Asia, and developing and launching innovative new
products worldwide. Another path to growth will be
through acquisition.
A N N U A L R E P O R T 2 0 1 6
M I N E R A L S T E C H N O L O G I E S I N C .
G E O G R A P H I C E X P A N S I O N
1 3
Grow in g MTI PCC
M ark et S hare
MTI
Other
CHINA
3 5%
55 %
20 09
1,000
ktpy
20 16
1,768
ktpy
G E O G R A P H I C
E X PA N S I O N
INDIA
0 %
2 00 9
50
ktpy
69 %
20 16
250
ktpy
PA P E R P C C
The focus on expansion in Asia, particularly China, is
based upon the substantial potential to penetrate the
paper market by substituting the company’s higher-
value products in the region.
As the originator of the “satellite” concept where production
facilities are built on site at paper mills, and as the worldwide
leader in production of precipitated calcium carbonate (PCC), MTI
has the potential to nearly double its existing 3.1 million tons of PCC
produced worldwide by executing this strategy in China, where the
paper industry continues to grow.
What is driving this potential? It is important to note first that
PCC is the filler of choice for papermakers worldwide because it
improves brightness, opacity and bulk in the paper sheet, all the
while saving papermakers considerable costs because PCC replaces
more expensive wood pulp. Looking at paper in China, the current
penetration of PCC used as a filling or coating pigment is about
10 percent as measured by tons of PCC produced compared with
tons of printing and writing paper produced. In the United States
and Europe, that ratio of PCC produced to tons of paper produced
is closer to 20 percent. MTI has been actively marketing PCC
to papermakers throughout China—and with good success. The
company has signed seven additional satellite agreements in China
since 2012 and is in various stages of business development with
an additional 10 papermakers interested in the company’s satellite
technology—and MTI has identified 10 more paper mills that could
benefit from the technology. MTI will also continue to advance
its PCC technology in India, where it has been able to establish
leadership in the market with five satellite PCC plants in the last
seven years.
M I N E R A L S T E C H N O L O G I E S I N C .
A N N U A L R E P O R T 2 0 1 6
1 4
G E O G R A P H I C E X P A N S I O N
P E R F O R M A N C E M AT E R I A L S
C hi na Meta lcasti ng Sal es
MTI’s Performance Materials business segment
is a global market leader in producing greensand
bonds for metalcasting, primarily gray and
ductile iron.
($ in millions)
$116
$66
Performance Materials also holds a strong market position in
greensand bonds in China, the world’s largest foundry industry.
Performance Materials is placing a sharp focus on growing that
position through the introduction of its higher-value technology in
China, as well as to grow Metalcasting in India, the world’s second
largest ferrous casting market.
MTI’s penetration through substitution strategy proves true for
Metalcasting because the company’s higher-value products will
allow Chinese foundries to move up the value chain. Now, about
90 percent of foundries in the U.S. and Europe use a pre-mixed
greensand bond formulation—like that made by MTI—to form
their castings. In China, that percentage is closer to 8 percent.
Most Chinese foundries purchase raw materials, like bentonite,
to formulate their own bonding systems. Performance Materials
has been able to introduce formulations like its Additrol® sand
additive brand in China because it allows foundries to save costs by
increasing throughput and reducing scrap rates.
2016 Sales
2020 Target
Pre-Blended Products
Bulk Bentonite
Performance Materials will continue to expand its Pet Care
and Fabric Care lines as well as Enersol®, the company’s crop
enhancement product, worldwide, but especially in Asia. The
company’s Pet Care products have shown double digit growth in
China—albeit from a small base—as the GDP increases and more
people obtain domesticated animals. In Fabric Care, the company
will advance its surfactant and aesthetic granules in laundry
detergents in developing countries with major, worldwide
detergent makers.
C O N S T R U C T I O N T E C H N O L O G I E S
Given China’s efforts to improve its environmental
standards, MTI has developed a long-term strategy
for its Construction Technologies business that
involves working with the government, business and
prominent universities.
(See sidebar: China Government Marketing)
Construction Technologies produces state-of-the-art geosynthetic
clay lining (GCL) technologies, like its Resistex® line, that
the company is seeking to establish as the industry standard
in coordination with the Chinese government to solve such
environmental issues as containment of coal ash generated by
coal-fired power plants, and red mud, which is a highly caustic
byproduct from alumina manufacturing.
A N N U A L R E P O R T 2 0 1 6
M I N E R A L S T E C H N O L O G I E S I N C .
G E O G R A P H I C E X P A N S I O N
1 5
C H I N A G OV E R N M E N T
M A R K E T I N G
In 2016, MTI aggressively began a China government
marketing initiative to assure that the company’s
technologies become the industry standard endorsed
by government agencies.
Part of that initiative resulted in the company, in partnership with
Sun Paper and Tsinghua University School of Environment, being
chosen as one of six EcoPartnerships to pilot innovation with its
NewYield® process technology aimed at reducing soil and ground
water pollution by converting a waste stream from the papermaking
process into a usable filler pigment for paper. The signing took
place on June 6, 2016 in Beijing during the China-U.S. Climate
Leaders Summit held in conjunction with the eighth annual U.S.-
China Strategic and Economic Dialogue.
The U.S.-China EcoPartnership program was established in 2008
to help address environmental challenges shared by both the
U.S. and China. The program was created to highlight U.S.-China
environmental cooperation pilot projects.
Through the EcoPartnership, Minerals Technologies, Sun Paper and
Tsinghua University will demonstrate the capability to repurpose
essentially 100 percent of a specific waste stream generated in
the papermaking process, providing a roadmap for the Chinese
pulp and paper industry to reduce the adverse impact on soil and
groundwater. The partnership will work to pilot the new technology,
innovate ways to localize the technology to China, evaluate the
results of the technology deployment, recommend policy and
regulatory action, and assess the steps necessary to drive change
throughout the Chinese pulp and paper industry.
Besides NewYield®, MTI also exhibited three additional families
of technologies aimed at reducing environmental impact at the
two-day Climate Leaders Summit. These included solutions
for containment and remediation of pollutants; eco-friendly
buildings; and enhancement of crop yields. The exhibits included
geosynthetic clay linings, groundwater treatment, solidification
and stabilization, and sediment remediation for commercial,
industrial and infrastructure construction. For eco-friendly
buildings, the exhibits focused on green roof systems, geothermal
drilling solutions and advanced waterproofing. MTI also showed
the benefits of the Enersol® crop enhancement product line to
improve plant health, soil bioavailability and crop yield.
A second part of that marketing strategy is the formation of a China
Lead Team made up of senior MTI employees across all businesses
in China. This team will further develop the organization in China
to align with the businesses and support units to ensure faster
decision making and to accelerate growth.
M I N E R A L S T E C H N O L O G I E S I N C .
A N N U A L R E P O R T 2 0 1 6
1 6
N E W P R O D U C T I N N O V A T I O N
N E W P R O D U C T
I N N OVAT I O N
R E S E A R C H A N D D E V E L O P M E N T
I S T H E L I F E B L O O D O F M T I ,
W I T H T H E D E V E L O P M E N T O F
N E W T E C H N O L O G I E S A N D
P R O D U C T S F O R M I N G T H E
F O U N DAT I O N F O R O U R
F U T U R E G R O W T H .
In the last 10 years, Minerals Technologies has
revitalized the new product development process
resulting in increasing the number of new products in
development from 16 to 245, a 15 times improvement.
The R&D efforts are paying off. Fifteen percent of the company’s
revenues in 2016 were generated from products developed and
commercialized in the last five years. And, MTI is enhancing these
efforts by working to double the number of new ideas in the pipeline
and cut in half the time it takes to commercialize a new product.
S P E C I A LT Y
M I N E R A L S
PA P E R P C C
Paper PCC has an impressive portfolio of new
products, which began with the FulFill® High Filler
Technologies that continues to be expanded today.
FulFill® PCC allows papermakers to increase the amount of PCC
in paper, reducing costs for more expensive fiber. Today, MTI has
commercial agreements with 27 paper mills on four continents. The
company also has an agreement to trial our FulFill® F technology,
which is also known as Filler-Fiber, with a papermaker in China. This
technology would increase PCC in paper by up to 30 percent.
In addition to FulFill®, MTI has launched its NewYield® PCC
platform of technologies that converts a papermakers’ waste
stream into a usable pigment. The waste stream in question
is predominantly in China where environmental regulations
prohibit burning or landfilling the material. NewYield® provides
papermakers with a number of benefits. It eliminates landfill costs,
provides an effective paper filler and reduces emissions and energy
costs. The company is also preparing to commercialize a new
application in the NewYield® platform that will help eliminate costs
in the pulping process. The prospects for these new technologies
in China are bright. MTI is currently working with five papermakers
to adopt NewYield® and has identified 15 additional mills that
could benefit from the technology.
P E R F O R M A N C E M I N E R A L S
In the last two years, Performance Minerals, which
serves the construction, automotive and consumer
markets, has commercialized more than 20 new
ground calcium carbonate, talc and Specialty PCC
products to provide value to their customers.
A N N U A L R E P O R T 2 0 1 6
M I N E R A L S T E C H N O L O G I E S I N C .
N E W P R O D U C T I N N O V A T I O N
1 7
Growt h T hro ugh Ne w Tec h no lo gi es
2007-2016 New Product Development Pipeline
245
34
68
50
42
51
178
18
31
38
51
40
Pre-Acquisition
73
6
12
16
31
8
63
6
11
24
16
6
68
5
15
19
24
5
66
5
11
12
34
3
61
15
12
28
74
6
16
22
28
3
4
2
1
1
26
8
5
11
16
4
5
2
3
2
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
M I N E R A L S T E C H N O L O G I E S I N C .
A N N U A L R E P O R T 2 0 1 6
1 8
N E W P R O D U C T I N N O V A T I O N
P E R F O R M A N C E M AT E R I A L S
C O N S T R U C T I O N T E C H N O L O G I E S
Performance Materials will continue to introduce its
higher-value Metalcasting technologies in China and
India as foundries become aware of the increased
productivity these products provide.
The business unit has also developed new surfactant and aesthetic
granules for dry laundry detergent which are being launched in
Europe and Asia.
Performance Materials has also developed new formulations of
Enersol®, the crop enhancement product that improves yields for
various crops. These formulations are being commercialized in Asia
and South America.
In the Pet Care market, Performance Materials continues to roll out
its lightweight cat litter, which is half the weight of normal litter, to
major retailers in North America.
Construction Technologies provides products
worldwide for non-residential construction,
environmental and infrastructure projects across
a broad range of construction projects, including
site remediation, concrete waterproofing for
underground structures, liquid containment on
projects ranging from landfills to flood control, and
drilling applications including foundation, slurry
wall, tunneling, water well, and horizontal drilling.
This business unit continues to refine the technology and
functionality of its Resistex® line of geosynthetic clay liners,
which are utilized in containing corrosive materials.
Construction Technologies has also commercialized new
products for construction drilling and horizontal directional
drilling applications.
A N N U A L R E P O R T 2 0 1 6
M I N E R A L S T E C H N O L O G I E S I N C .
N E W P R O D U C T I N N O V A T I O N
1 9
E N E R G Y S E R V I C E S
R E F R AC T O R I E S
The Energy Services segment, which was
negatively affected with the downturn in oil
prices, is now primarily focused on offshore
filtration and well testing.
In 2016, Minteq R&D developed a portfolio of
highly durable monolithic refractory products that
span a range of applications in both basic oxygen
and electric arc furnaces.
Orca™ consulting services utilizes Energy Services’ expertise to
help customers solve produced water problems. The primary
new technology the segment is commercializing is its Angler™
filtration system that filters produced water from offshore rigs
four times faster than conventional practices and requires one-
tenth the space.
MTI’s refractory products, which are an economical solution for
steel customers, are especially easy to apply to the furnaces and
provide extended service life. Commercialization is underway and
will be completed in 2017.
M I N E R A L S T E C H N O L O G I E S I N C .
A N N U A L R E P O R T 2 0 1 6
2 0
A C Q U I S I T I O N / O P E R A T I O N A L E X C E L L E N C E
AC Q U I S I T I O N
O P E R AT I O N A L
E X C E L L E N C E
Minerals Technologies has demonstrated that it has
the capability to evaluate, acquire and integrate a
large acquisition, as shown with the 2014 purchase of
AMCOL International for $1.8 billion.
For the last decade, MTI initiated and fully integrated
the processes and practices of what we call Operational
Excellence, which is based on the Toyota Production
System and other Lean principles.
That transformational acquisition nearly doubled the size of the
company and broadened MTI’s portfolio of businesses and platform
for growth, both organically and through M&A.
Today, all employees, from senior management to operators on the
shop floor, follow these principles of Continuous Improvement to
seek ways to reduce waste.
In the ensuing three years since acquiring AMCOL, MTI has
steadily paid down $480 million in debt to bring the net leverage
to 2.5 times EBITDA. MTI will continue to generate strong cash
flows to further reduce debt and strengthen the balance sheet.
The company will also maintain its balanced approach to capital
allocation. At the same time, MTI has a robust set of acquisition
opportunities in value-added minerals that are well placed in both
our current end-market segments, geographies and our mineral
and technology portfolios.
In 2016, MTI employees held nearly 4,000 Kaizen events, which are
highly focused improvement workshops around the world, which
translates into 10 of these occurring every day. The company’s
3,600 employees also made in excess of 45,000 suggestion—of
which 70 percent were implemented.
The result for 2016 was a 7-percent improvement in productivity
that saved $5 million. Moreover, 2016 marked the seventh
consecutive year MTI has improved productivity—measured in
tons-produced-per-hour—by more than 5 percent.
OE is an integral part of MTI’s operating philosophy that is deeply
embedded in the company culture as an important vehicle to
make the company leaner, more competitive and ultimately
more profitable.
K aizen Events
# of Kaizen Events (by year)
Glo ba l Suggestio n System
# of Suggestions (by year)
3,938
3,104
65%
70%
67%
70%
62%
1,850
1,908
1,191
12
13
14
15
16
12
13
14
15
16
9,832
15,446
17,842
39,693
45,097
No. of ideas
% Implemented
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, 2016
[ ] 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 July 1, 2016, was
approximately $2.0 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 3, 2017, the Registrant had outstanding 35,037,439 shares of common stock, all of one class.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2016 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form
10-K.
MINERALS TECHNOLOGIES INC.
2016 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
13
18
19
24
25
25
28
29
43
44
44
44
45
45
46
46
46
47
48
52
Item 1. Business
PART I
Minerals Technologies Inc. (together with its subsidiaries, the "Company", “we”, “us” or “our”) is a resource- and technology-
based company that develops, produces, and markets on a worldwide basis a broad range of specialty mineral, mineral-based and
synthetic mineral products and supporting systems and services. On May 9, 2014, the Company acquired AMCOL International
Corporation (“AMCOL”). See Note 2 to the Consolidated Financial Statements for further details.
The Company has five reportable segments: Specialty Minerals, Refractories, Performance Materials, Construction Technologies,
and Energy Services.
-
-
-
-
-
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 Performance Materials segment is a leading supplier of bentonite and bentonite-related products. This segment also
supplies chromite and leonardite and operates more than 25 mining or production facilities worldwide.
The Construction Technologies segment provides products for non-residential construction, environmental and infrastructure
projects worldwide. It serves customers engaged in a broad range of construction projects, including site remediation,
concrete waterproofing for underground structures, liquid containment on projects ranging from landfills to flood control, and
drilling applications including foundation, slurry wall, tunneling, water well, and horizontal drilling.
The Energy Services segment provides services to improve the production, costs, compliance, and environmental impact of
activities performed in oil and gas industry. This segment offers a range of services for off-shore filtration and well testing to
the worldwide oil and gas industry.
The following table sets forth the percentage of our revenues generated from each segment for each of our last three fiscal years:
Percentage of Net Sales
Specialty Minerals
Refractories
Performance Materials
Construction Technologies
Energy Services
Total
2016
2015
2014
36%
17%
31%
11%
5%
100%
35%
16%
29%
10%
10%
100%
38%
21%
20%
9%
12%
100%
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 $452.2 million, $488.1 million and $520.6 million for the years ended December
31, 2016, 2015 and 2014, 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
3
· As a coating pigment for both wood-free and groundwood papers.
The Company's Paper PCC product line net sales were $387.9 million, $423.3 million and $454.5 million for the years ended
December 31, 2016, 2015 and 2014, respectively.
Approximately 24% 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, 2016, 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 staff focuses 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, 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, and New
YieldTM, an innovative technology that converts a paper and pulp mill waste stream into a functional pigment for filling paper.
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.
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 2016, more than 90% of North American uncoated wood-free paper was produced employing alkaline
technology. Presently, the Company owns and operates 14 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 28 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 6 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.
4
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 $64.3 million, $64.8 million and $66.1 million for the years ended December
31, 2016, 2015 and 2014, 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 $139.3 million, $136.5 million and $129.5
million for the years ended December 31, 2016, 2015 and 2014, respectively. Net sales of talc products were $55.7 million, $55.9
million and $55.5 million for the years ended December 31, 2016, 2015 and 2014, respectively. Net sales of ground calcium
carbonate ("GCC") products, which are principally lime and limestone, were $83.6 million, $80.6 million and $74.0 million for the
years ended December 31, 2016, 2015 and 2014, 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.
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 $274.5 million, $295.9 million and $359.7 million for the years ended December 31,
2016, 2015 and 2014, 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 $219.0 million, $230.7 million and $273.9 million for the years ended December 31, 2016, 2015
and 2014, respectively. 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. Since the steel-making industry is
characterized by intense price competition, which results in a continuing emphasis on increased productivity, these application
systems and the technologically advanced refractory materials developed in the Company's research laboratories have been well
accepted by the Company's customers. These products allow steel makers to improve their performance through, among other things,
the application of monolithic refractories to furnace linings while the furnace is at operating temperature, thereby eliminating the need
for furnace cool-down periods and steel-production interruption. The result is a lower overall cost for steel produced by steel makers.
The Company also pursues cost-per-ton refractory contracts, where, together with other refractory companies, the Company is
responsible for coordinating refractory maintenance of the steel furnaces and other steel production vessels. These opportunities
provide longer-term stability and a closer working relationship with the customer.
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.
5
Over the past several years the Refractories segment has continued to develop, 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:
· HOTCRETE®: High durability shotcrete products for applications at high temperatures in ferrous applications such
as steel ladles, electric arc furnaces (EAF) and basic oxygen furnaces (BOF) furnaces.
FASTFIRE®: High durability castable and shotcrete products in the non-ferrous and ferrous industries with the added
benefit of rapid dry-out capabilities.
·
· OPTIFORM®: A system of products and equipment for the rapid continuous casting of refractories for applications
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.
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 $55.5
million, $65.2 million and $85.8 million for the years ended December 31, 2016, 2015 and 2014, respectively. 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.
Performance Materials Segment
The Performance Materials segment is a leading supplier of bentonite and bentonite-related products. Bentonite is a sedimentary
deposit containing greater than 50% montmorillonite and is volcanic in origin. It is surface mined and then dried, crushed, sent
through grinding mills where it is sized to customer requirements, and transferred to silos for automatic bagging or bulk shipment.
The processed bentonite may be chemically modified. Bentonite’s unique chemical structure gives it a diverse range of capabilities,
enabling it to act as a thickener, sealant, binder, lubricant or absorption agent. From a commercial standpoint, there are two primary
types of natural bentonite, sodium and calcium. Sodium-bentonite is characterized by its ability to absorb large amounts of water and
form viscous, thixotropic suspensions. Calcium-bentonite, in contrast, is characterized by its low water absorption and swelling
capabilities and its inability to stay suspended in water. Each type of bentonite has its own unique applications. This segment also
6
supplies chromite and leonardite, which is primarily used in metalcasting, drilling fluid additive, and agricultural applications. The
principal products of this segment are marketed under various registered trade names, including VOLCLAY®, PANTHER CREEK®,
PREMIUM GEL®, ADDITROL®, ENERSOL®, and Hevi-Sand®.
The Performance Materials segment has three product lines – metalcasting; household, personal care and specialty products; and
basic minerals and other products.
Metalcasting Products and Markets
The metalcasting product line produces custom-blended mineral and non-mineral products to strengthen sand molds for casting
auto parts, farm and construction equipment, oil and gas production equipment, power generation turbine castings and rail car
components. These products help our customers in the foundry and casting industry to improve productivity by reducing scrap from
metalcasting defects and poor surface quality. The ADDITROL® blends also improve the efficiency and recycling of sand blends in
mold sand systems by lowering clay consumption, and improve air quality by reducing volatile organic compound emissions. Our
mine to mold operational capability has resulted in providing a consistent high quality product, technical support and reliable on-time
delivery service valued by our customers.
In the ferrous casting market, the Company specializes in blending bentonite of various grades by themselves or with mineral
binders containing sodium bentonite, calcium bentonite, seacoal and other ingredients.
In the steel alloy casting market, the Company sells chromite products with a particle size distribution specific to customers’
needs. One of chromite’s qualities is its ability to conduct heat. Thus, the Company markets the product for use in making very large,
high integrity, steel alloy castings where the chromite is better suited to withstand the high heat and pressure associated with the
casting process. This product line was originally sold into the U.S. by the American Colloid Company (ACC) and over the past 90
years has grown in its use throughout the world including China, Thailand, Korea, Australia and Southeast Asia. Over the past two
years, the Company has focused on further investment in China and establishing a market position in India.
In January 2015, the Company announced that it entered into an agreement with Glencore in South Africa, where the Company
mines chromite. Under the agreement, Glencore will supply chromite products from the Glencore-Merafe joint venture that will be
exclusively distributed by the Company in certain territories, including the Americas.
The Company’s metalcasting product line net sales were $258.0 million in 2016, $266.4 million in 2015 and $181.4 million from
May 9, 2014, through December 31, 2014.
Household, Personal Care and Specialty Products and Markets
The household, personal care and specialty products contain pet litter, fabric care, health and beauty, and agricultural specialty
products.
The pet litter products include sodium bentonite-based scoopable (clumping), traditional and alternative cat litters sold to grocery
and drug stores, mass merchandisers, wholesale clubs and pet specialty stores throughout North America, Europe and Asia. The
Company’s scoopable products’ clump-forming capability traps urine, thereby reducing waste by allowing for easy removal of only
the odor-producing elements from the litter box. The Company is primarily a provider of private-label cat litter to retail partners, as
well as a provider of bulk cat litter to national brands and other private label packaging companies. In North America, these products
are sold from three principal sites from which we package and distribute finished goods, as well as ship bulk material via rail cars. The
Company’s internal transportation group provides logistics services and is a key component of our capability in supplying customers
on a national basis.
The Company supplies fabric care products and additives consisting of high-grade, agglomerated bentonite and other mineral
additives that perform as softening agents in certain powdered-detergent formulations or act as carriers for colorants and fragrances.
These fabric care products are not only cost-effective but also provide product development capabilities to adapt along with our
customers’ requirements.
The Company manufactures personal care products consisting of polymer delivery systems and purified grades of bentonite
ingredients for sale to manufacturers of skin care products. The polymers are used to deliver high-value actives and the bentonite-
based materials act as thickening, suspension and dispersion agent emollients for topical skin care formulations. The personal care
products range from ingredient sales to fully formulated finished goods.
Specialty materials products contain bentonite and leonardite based proprietary solutions for consumer and industrial applications.
Agricultural is the main market segment in this product line.
The Company’s household, personal care and specialty product line net sales were $171.2 million in 2016, $172.7 million in 2015
and $108.0 million from May 9, 2014, through December 31, 2014.
7
Basic Minerals and Other Products and Markets
Basic minerals and other products line contains sales of bentonite, chromite and leonardite to a variety of end markets and
industrial application, including the following:
Drilling Fluid Additives: Sodium bentonite and leonardite are components of certain drilling fluids used in oil and gas well
drilling. Bentonite imparts thickening and suspension properties that facilitate the transport of rock cuttings to the surface during the
drilling process. It also contributes to a drilling fluid’s ability to lubricate the drill bit and coat the underground formations to prevent
hole collapse and drill-bit seizing. We market our drilling fluid additives under our own and private-label trade names. At least two
drilling fluid service competitors have captive bentonite operations while others are party to long-term bentonite supply agreements.
The potential customers for our products, therefore, are generally limited to those service organizations that are neither vertically
integrated nor have long-term supply arrangements with other bentonite producers. Our primary trademark for this application is the
trade name PREMIUM GEL®.
Ferro Alloys: A by-product of our chromite processing operations for foundry products includes a chromite ore which has
physical properties suited for use in producing ferrochrome. The ore generally needs to have chromite content in excess of 42% to
meet metallurgical grade specifications. Manufacturers of stainless steel are the primary users of ferrochrome.
Other Industrial: The Company produces bentonite and bentonite blends for the construction industry to be used as a plasticizing
agent in cement, and plaster and bricks. The Company also supplies bentonite to help pelletize other materials for ease of use.
Examples of this application include the pelletizing of iron ore.
This product line also includes sales from our internal transportation and logistics group. The Company’s basic minerals and
other product line net sales were $73.6 million in 2016, $75.7 million in 2015 and $63.4 million from May 9, 2014, through December
31, 2014.
Construction Technologies Segment
The Construction Technologies segment provides products for non-residential construction, environmental and infrastructure
projects worldwide. It serves customers engaged in a broad range of construction projects, including site remediation, concrete
waterproofing for underground structures, liquid containment on projects ranging from landfills to flood control, and drilling
applications including foundation, slurry wall, tunneling, water well, and horizontal drilling.
This segment has two product lines – environmental products, and building materials and other products.
Environmental Products and Markets
The Environmental Product line includes bentonite and polymer lining technologies, as well as, other environmental remediation
applications.
The Company sells lining and other products for a variety of applications, most of which are directed to preserving or
remediating environmental issues. The Company helps customers protect ground water and soil through the sale of geosynthetic clay
liner products containing bentonite. These products are marketed under the RESISTEX® and BENTOMAT® trade names principally
for lining and capping landfills, mine waste disposal sites and industrial waste storage sites, such as, bauxite residue and coal ash
waste. The Company also provides associated geosynthetic materials for these applications, including geotextiles and drainage
geocomposites.
Environmental Products also includes specialized technologies to mitigate vapor intrusion in new building construction. The
Company’s innovative vapor barrier systems prevent potentially harmful vapors from entering occupied space, thus facilitating low-
risk redevelopment. The Company also provides reactive capping technologies and solutions to effectively contain residual
contamination, reduce costs associated with ex-situ remedies, and aid in environmental protection. Products offered include Liquid
Boot®, a liquid applied vapor barrier system; REACTIVE CORE-MAT™, an in-situ sediment capping material; ORGANOCLAY®,
which absorbs organic containments; and QUIK-SOLID®, a super absorbent media.
The Company’s environmental product line net sales were $78.9 million in 2016, $69.7 million in 2015 and $70.7 million from
May 9, 2014, through December 31, 2014.
Building Materials and Other Products and Markets
The building materials and other products line includes various active and passive products for waterproofing of
underground structures, commercial building envelopes and tunnels. It also includes drilling products for commercial buildings,
construction foundations, and for horizontal directional drilling applications.
Building Materials: The Company offers a wide variety of active and passive waterproofing and greenroof technologies for use in
protecting the building envelope of non-residential construction, including buildings, subways, and parkway systems. Our products
8
include VOLTEX®, a waterproofing composite comprised of two polypropylene geotextiles filled with sodium bentonite;
ULTRASEAL®, an advanced membrane using a unique active polymer core; and COREFLEX®, featuring heat-welded seams for
protection of critical infrastructure. In addition to these membrane materials, we also provide roofing products and a variety of
sealants and other accessories required to create a functional waterproofing system. The end-users of these products are generally
building sub-contractors who are responsible for installing the products.
Drilling Products: Drilling products are used in environmental and geotechnical drilling applications, horizontal directional
drilling, mineral exploration and foundation construction. The products are used to install monitoring wells, facilitate horizontal and
water well drilling, and seal abandoned exploration drill holes. VOLCLAY GROUT™, HYDRAUL-EZ®, BENTOGROUT® and
VOLCLAY TABLETS™ are among the trade names for products used in these applications. Ground source heat loop systems
utilizing GEOTHERMAL GROUT™ represent a developing area for drilling products. The Company also offers a range of drilling
products used in the excavation of foundations for large buildings, bridges and dams; these products include SHORE PAC® and
PREMIUM GEL®. The end-users for these products are typically small well drilling companies and general contractors.
The Company’s building materials and other product line net sales were $104.4 million in 2016, $110.4 million in 2015 and $81.6
million from May 9, 2014, through December 31, 2014.
Energy Services Segment
The Energy Services segment provides services to improve the production, costs, compliance, and environmental impact of
activities performed in the oil and gas industry. The composition of customers within this segment varies from year to year and is
significantly dependent on the type of activities each customer is undertaking within the year, regulations, and overall dynamics of the
oil and gas industry. Due to the weak market conditions in the oil and gas sector, the Company exited U.S. on-shore Nitrogen and
Well Testing services lines during the second quarter of 2016. As a result, the Company currently provides services for off-shore
filtration and well testing to the worldwide oil and gas industry. Services are provided through subsidiaries located in Australia,
Brazil, Malaysia, Nigeria, Mexico, Indonesia, the United Kingdom, and the U.S., in the Gulf of Mexico. Energy Services segment’s
net sales were $85.9 million in 2016, $182.2 million in 2015 and $210.1 million from May 9, 2014, through December 31, 2014.
Principal Services
The Company provides the following principal services:
Water Treatment / Filtration: The Company helps customers comply with regulatory requirements by providing equipment,
technologies, personnel and filtration media to treat waste water generated during oil production.
The Company specializes in water treatment processes and technologies to remove oil, hydrocarbons, heavy metals, solids, toxic
materials and other contaminants from customers’ operation wastewater stream.
Well Testing: The Company provides equipment and personnel to help customers control well production, as well as to clean up,
unload, separate, measure component flow, and capture fluids from oil and gas wells.
The Company delivers complete well testing solutions and effective operations in all testing environments.
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.
In the Specialty Minerals segment, 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.
In the Performance Materials segment, the Company’s industry-specialized sales group and technically oriented sales persons
provide expertise not only to educate our customers on the bentonite blend properties but also to aid them in producing castings
efficiently. Certain of our products are distributed through networks of distributors and representatives, who warehouse specific
products at strategic locations.
In the Construction Technologies segment, sales and distribution of environmental products are primarily performed through the
Company’s own personnel and facilities. Our staff includes sales professionals and technical support engineers who analyze the
suitability of our products in relation to the customer’s specific application and the conditions that products will endure or the
environment in which they will operate. Building materials products are sold through our own sales professionals, as well as through
an integrated distributor and dealer network. Our sales and technical staff typically assist project designers by providing technical data
9
to engineers and architects who specify our products in the design of building structures. Our drilling products are generally sold
through an extensive distribution network coordinated by our regional sales managers.
In the Energy Services segment, the Company’s employees sell the services on a direct basis.
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 principally from Bethlehem,
Pennsylvania and Hoffman Estates, Illinois, and from regional sales offices elsewhere in the United States. The Company's
international marketing and sales efforts are directed from regional centers located in India, the United Kingdom, Brazil, and China.
The Company 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, and magnesia and alumina for its Refractory operations. We also depend on having an
adequate supply of bentonite, leonardite and chromite for our Performance Materials segment, bentonite for our Construction
Technologies segment, and limestone and talc for our Processed Minerals product line. Supplies of bentonite, leonardite, chromite,
limestone and talc are provided through the Company’s own mining operations and we depend on having adequate access to ore
reserves of appropriate quality at such 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
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. 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.
In addition to bentonite, leonardite and chromite provided through our mining operations, our Performance Materials segment’s
principal raw materials are coal and soda ash, and our Construction Technologies segment’s principal raw material is woven and
unwoven polyester material, all of which are readily available from numerous sources.
Mineral Reserves and Mining Process
The Company relies on access to bentonite reserves to support its Performance Materials and Construction Technologies segments.
The Company has reserves of sodium and calcium bentonite at various locations in the U.S., including Wyoming, South Dakota,
Montana and Alabama, as well as in Australia, China, and Turkey. Through the Company’s affiliations and joint ventures, the
Company also has access to bentonite deposits in Egypt, India, and Mexico. Assuming the continuation of 2016 annualized usage
rates, the Company has reserves of commercially usable sodium bentonite for the next 56 years. Under the same assumptions, the
Company has reserves of commercially usable calcium bentonite for the next 49 years. The Company owns or controls the properties
on which the bentonite reserves are located through long-term leases, royalty agreements (including easement and right of way
agreements) and patented and unpatented mining claims. No single or group of mining claims or leases is significant or material to the
financial condition or operations of our Company or our segments. The majority of our current bentonite mining in the U.S. occurs on
reserves where our rights to such reserves accrue to us through over 80 mining leases and royalty agreements and 2,000 mining
claims. A majority of these are with private parties and located in Montana, South Dakota and Wyoming. The bentonite deposits
underlying these claims and leases generally lie in parcels of land varying between 20 and 40 acres.
In general, our bentonite reserves are immediately adjacent to, or within sixty miles of, one of the related processing plants. All of
the properties on which our reserves are located are either physically accessible for the purposes of mining and hauling or the cost of
obtaining physical access would not be material. Access to processing facilities from the mining areas is generally by private road,
public highways, or railroads. For most of our leased properties and mining claims, there are multiple means of access.
10
Bentonite is surface mined, generally with large earthmoving scrapers, and then loaded into trucks and off-highway-haul wagons
for movement to processing plants. The mining and hauling of our bentonite is done by us and by independent contractors. At the
processing plants, bentonite is dried, crushed and sent through grinding mills, where it is sized to customer requirements, then
chemically modified, where needed, and transferred to silos for automatic bagging or bulk shipment. Most of the production is shipped
as processed rather than stored for inventory.
For our Performance Materials segment, we also mine leonardite, a form of oxidized lignite, in North Dakota, and chromite, an iron
chromium oxide, in South Africa, and transport them to nearby processing facilities. Assuming the continuation of 2016 annualized
usage rates, the Company has reserves of commercially usable leonardite for the next 97 years, and commercially usable chromite for
the next 40 years.
The Processed Minerals product line of our Specialty Minerals segment is 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 generally owns and surface
mines these reserves and processes its products at nearby processing plants. The Company estimates these reserves, at current usage
levels, to be in excess of 40 years at its limestone production facilities and in excess of 14 years at its talc production facility.
The Company has ongoing exploration and development activities for all of its mineral interests with the intent to increase its
proven and probable reserves.
See Item 2, “Properties,” for more information with respect to those facilities.
The Company relies on shipping bulk cargos of bentonite from the United States, Turkey and China to customers, as well as our
own subsidiaries, and we are sensitive to our ability to recover these shipping costs. In the last few years, bulk cargo shipping rates
have been very volatile, and, to a lesser extent, the availability of bulk cargo containers has been sporadic.
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.
For the Performance Materials segment, the Company competes on the basis of product quality, price, logistics, service and
technical support. There are numerous major producers of competing products and various regional suppliers in the areas the
Company serves. Some of the competitors, especially in the chromite market, are companies primarily in other lines of business with
substantially greater financial resources than ours.
For the Construction Technologies segment, with respect to its lining technologies product line, the Company competes with
geosynthetic clay liner manufacturers worldwide, several suppliers of alternative lining technologies, and providers of soil and
environmental remediation solutions and products. The building materials product line competes in a highly fragmented market
comprised of a wide variety of alternative technologies. A number of integrated bentonite companies compete with our drilling
products. Competition for all product lines is based on product quality, service, price, technical support and product availability.
The Energy Services segment competes with other oil and gas services companies. However, the Company believes that the
Company offers several competitive advantages, especially in the area of water treatment services, due to superior and innovative
technologies that the Company has developed internally and the combination of services that the Company can provide.
Seasonality
Most of the products in the Construction Technologies segment are impacted by weather and soil conditions. Many of the
products cannot be applied in wet or winter weather conditions and, as such, sales and profits tend to be greater during the period from
April through October. As a result, we consider the business of this segment to be seasonal. Our Processed Minerals product line of
our Specialty Minerals segment is subject to similar seasonal patterns.
Much of the business in the Energy Services segment can be impacted by weather conditions. Our business is concentrated in the
Gulf of Mexico where our customers’ oil and gas production facilities are subject to natural disasters, such as hurricanes. Given this,
11
our Energy Services sales could be lower in the June to November months. However, we can also experience periods of growth after
a hurricane as customers require our services to start their operations back up.
Research and Development
Many of the Company's product lines are technologically advanced. The Company’s internal research team has dedicated years of
experience into analyzing properties of minerals and synthetic materials while developing processes and applications to enhance their
performance. 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.
In the Specialty Minerals segment, the significant achievements of the Company's research and development efforts include: the
satellite PCC plant concept; PCC crystal morphologies for paper coating; AT® PCC for wood-containing papers; FulFill® high filler
technology systems; New Yield®; Integrated PCC Process Technology; and EMforce®, Optibloc® and Titanium Dioxide (TiO2)
extenders for the Processed Minerals and Specialty PCC product lines.
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 and V 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®. We have signed agreements with twenty-six paper mills and are actively engaged with additional
paper mill sites for further FulFill® deployment. Under the FulFill® platform of products, the Company continues to develop its
filler-fiber composite material and is expanding the technology portfolio for higher filler for fiber replacement with current projects
underway.
In the Refractories segment, the Company’s achievements include the development of FASTFIRE® and OPTIFORM® shotcrete
refractory products; LACAM® laser-based refractory measurement systems; and the MINSCAN® and HOTCRETE® application
systems. The Company will continue to reformulate its refractory materials to be more competitive.
The Company’s Performance Materials segment also offers a strong portfolio of custom blended compounds, formulations and
technology, which have been primarily developed internally by the Company’s research and development efforts. The Additrol®
formulation, a custom blend, meets the need of both ferrous and non-ferrous applications. The Volclay® application is used in green
sand molding applications ranging from the production of iron and steel castings to the production of non-ferrous castings. The Hevi-
Sand® specialty chromite blend prevents metal penetration and can be used with most foundry binders in molds and cores.
Similarly, within the Construction Technologies segment, we offer a strong portfolio of products developed principally by our
internal efforts. The Company’s RESISTEXTM and CONTINUUM® formulation enables withstanding aggressive leachates. The
ORGANOCLAY® technology offers highly effective solutions in effective in removing oils, greases and other high molecular weight,
low solubility organic compounds from aqueous streams. The Company will also continue to seek out promising compounds and
innovative technologies, developed mainly by our internal research team, to incorporate into our product lines.
For the years ended December 31, 2016, 2015 and 2014, the Company spent approximately $23.8 million, $23.6 million and
$24.4 million, respectively, on research and development. The Company's research and development spending for 2016, 2015 and
2014 was approximately 1.5%, 1.3% and 1.4% of net sales, respectively.
The Company maintains its primary research facilities in Bethlehem and Easton, Pennsylvania; Broussard, Louisiana; and
Hoffman Estates, Illinois. It also has research and development facilities in China, England, Germany, Ireland, Japan and Turkey.
Approximately 139 employees worldwide are engaged in research and development. In addition, the Company has access to some of
the world's most advanced papermaking and paper coating pilot facilities.
Patents and Trademarks
The Company owns or has the right to use approximately 452 patents and approximately 1,666 trademarks related to its business.
Our patents expire between 2017 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.
12
Employees
At December 31, 2016, the Company employed 3,583 persons, of whom 1,876 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. In particular, we are subject to certain requirements under the Clean Air Act. In addition, 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. We are also subject to land reclamation
requirements. 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:2) 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 experienced in recent years had caused, among other things, declining consumer and
business confidence, volatile raw material prices, instability in credit markets, high unemployment, fluctuating interest and
exchange rates, and other challenges. The Company’s business and operating results had been and could once again 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 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
13
global economy could materially and adversely affect our business and operating results.
(cid:2) Our customers’ businesses are cyclical or have changing regional demands. Our operations are subject to these trends
and we may not be able to mitigate these risks.
(cid:2) Our Performance Materials segment’s sales are predominantly derived from the metalcasting market. The
metalcasting market is dependent upon the demand for castings for automobile components, farm and
construction equipment, oil and gas production equipment, power generation turbine castings, and rail car
components. Many of these types of equipment are sensitive to fluctuations in demand during periods of
recession or tough economies, which ultimately may affect the demand for our Construction Technologies and
Performance Materials segments’ products and services.
(cid:2)
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 are projected to continue to decrease. The reduced
demand for premium writing paper products has also caused the paper industry to experience a number of
bankruptcies and paper mill closures, including amongst our customers.
(cid:2) Our Refractories segment primarily serves the steel industry. North American and European steel production
continues to be affected by global volatility and overcapacity in the market.
(cid:2) Demand for our Energy Services segment’s products and services is affected by the level of exploration,
development, and production activity of, and the corresponding capital spending by, oil and natural gas
companies, which are heavily influenced by the benchmark price of these commodities. Oil and natural gas prices
decreased significantly in 2014 and 2015, with West Texas Intermediate (WTI) oil spot prices declining from a
high of $108 per barrel in June 2014 to a low of $26 per barrel in February 2016. This has caused oil and natural
gas companies to reduce their capital expenditures and production and exploration activities. This has the effect
of decreasing the demand and increasing competition for the services we provide. In addition, the performance of
our Energy Services segment is affected by changes in technologies, locations of customers’ targeted reserves,
and competition in various geographic markets.
(cid:2) Our Construction Technologies segment’s sales are predominantly derived from the commercial construction and
infrastructure markets. In addition, our Processed Minerals and Specialty PCC product lines are affected by the
domestic building and construction markets, as well as the automotive market.
Demand for our products is subject to trends in these markets. During periods of economic slowdown, our customers often
reduce their capital expenditures and defer or cancel pending projects. Such developments occur even amongst customers
that are not experiencing financial difficulties. 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:2) 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
14
management attention with regard to potential acquisitions that are never consummated.
(cid:2) Servicing the Company’s debt will require a significant amount of cash. This could reduce the Company’s flexibility to
respond to changing business and economic conditions or fund capital expenditures or working capital needs. Our
ability to generate cash depends on many factors beyond our control.
At December 31, 2016, the Company had outstanding borrowings of $1.1 billion pursuant to our senior secured credit
facility, largely incurred to finance the acquisition of AMCOL. This financing will require a significant amount of cash to
make interest payments. Further, the interest rate on a significant portion of our borrowings under our senior secured
credit facility is based on LIBOR interest rates, which could result in higher interest expense in the event of an increase in
interest rates. Our ability to pay interest on our debt and to satisfy our other debt obligations will depend in part upon our
future financial and operating performance and upon our ability to renew or refinance borrowings. Prevailing economic
conditions and financial, business, competitive, regulatory and other factors, many of which are beyond our control, will
affect our ability to make these payments. We cannot guarantee that our business will generate sufficient cash flow from
operations or that future borrowings will be available to us in an amount sufficient to enable us to fund our liquidity needs.
If we are unable to generate sufficient cash flow to meet our debt service obligations, we will have to pursue one or more
alternatives, such as reducing or delaying capital or other expenditures, refinancing debt, selling assets, or raising equity
capital. Further, the requirement to make significant interest payments may reduce the Company’s flexibility to respond to
changing business and economic conditions or fund capital expenditure or working capital needs and may increase the
Company’s vulnerability to adverse economic conditions.
(cid:2) Our senior secured credit facility contains various covenants that limit our ability to take certain actions and our
revolving credit facility, if used, also requires us to meet financial maintenance tests, failure to comply with which could
have a material adverse effect on us.
The agreement governing our senior secured credit facility contains a number of significant covenants that, among other
things, limit our ability to: incur additional debt or liens, consolidate or merge with any other person, alter the business we
conduct, make investments, use the proceeds of asset sales or sale/leaseback transactions, enter into hedging arrangements,
pay dividends or make certain other restricted payments, create dividend or other payment restrictions with respect to
subsidiaries, and enter into transactions with affiliates. In addition, our revolving credit facility, if used, requires us to
comply with specific financial ratios, including a maximum net leverage ratio, under which we are required to achieve
specific financial results. Our ability to comply with these provisions may be affected by events beyond our control. A
breach of any of these covenants would result in a default under the agreements. In the event of any default, our lenders
could elect to declare all amounts borrowed under the agreements, together with accrued interest thereon, to be due and
payable. In such an event, we cannot assure you that we would have sufficient assets to pay debt then outstanding under
the agreements governing our debt. Any future refinancing of the senior secured credit facility is likely to contain similar
restrictive covenants.
(cid:2) 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 $387.9 million in 2016, or approximately
24% 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:2) The Company’s sales could be adversely affected by consolidation in customer industries, principally paper,
foundry 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 foundry and steel industries. Such consolidations in the major industries we serve concentrate purchasing
power in the hands of a smaller number of 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.
15
(cid:2) 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 affect our mining rights or give
rise to additional compliance and other costs that could have a material adverse effect on the Company. Further, certain of
our customers are subject to various federal and international laws and regulations relating to environmental and health and
safety matters, especially our Energy Services customers who are subject to drilling permits, waste water disposal and
other regulations. To the extent that these laws and regulations affecting our customers change, demand for our products
and services could also change and thereby affect our financial results. 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:2) Delays or failures in new product development could adversely affect the Company’s operations.
The Company’s future business success will depend in part upon its ability to maintain and enhance its technological
capabilities, to respond to changing customer needs, and to successfully anticipate or respond to technological changes on
a cost-effective and timely basis. The Company is engaged in a continuous effort to develop new products and processes
in all of its product lines. Difficulties, delays or failures in the development, testing, production, marketing or sale of such
new products could cause actual results of operations to differ materially from our expected results.
(cid:2) 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:2) The Company’s operations could be impacted by the increased risks of doing business abroad.
The Company does business in many areas internationally. Approximately 43% of our sales in 2016 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, the Middle East, and Eastern Europe. Some of our operations are located in areas that
have experienced political or economic instability, including Indonesia, Malaysia, Nigeria, Egypt, Saudi Arabia, Turkey,
Brazil, Thailand, China and South Africa. The June 23, 2016 referendum by British voters to exit the European Union
(referred to as Brexit) has caused additional volatility in the markets and currency exchange rates. Market conditions and
exchange rates could continue to be volatile in the near term as this situation develops over the next couple of years. As the
16
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. Many of these risks are beyond our control and can lead to sudden, and potentially prolonged,
changes in demand for our products, difficulty in enforcing agreements, and losses in the realizability of our assets.
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:2) 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, energy, or shipping 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 45% 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, including petrochemical products, as well as increases in energy prices, have also affected our business. Our
production processes consume a significant amount of energy, primarily electricity, diesel fuel, natural gas and coal. We
use diesel fuel to operate our mining and processing equipment and our freight costs are heavily dependent upon fuel
prices and surcharges. Energy costs also affect the cost of raw materials. On a combined basis, these factors represent a
large exposure to petrochemical and energy products which may be subject to significant price fluctuations. 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 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.
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.
The Company relies on shipping bulk cargos of bentonite from the United States, Turkey and China to customers, as well
as our own subsidiaries, and we are sensitive to our ability to recover these shipping costs. In the last few years, bulk
cargo shipping rates have been very volatile, and, to a lesser extent, the availability of bulk cargo containers has been
suspect. If we cannot secure our container requirements or offset additional shipping costs with price increases to
customers, our profitability could be impacted. We are also subject to other shipping risks. In particular, rail service
interruptions have affected our ability to ship, and the availability of rail service, and our ability to recover increased rail
costs, may be beyond our control.
(cid:2) 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 economic downturns and changes in conditions
within the industries in which we operate and may have significantly greater operating and financial flexibility than we do.
We also face competition for some of our products from alternative products, and some of the competition we face comes
from competitors in lower-cost production countries like China and India. As a result of the competitive environment in
the markets in which we operate, we currently face and will continue to face pressure on the sales prices of our products
from competitors, which could reduce profit margins.
(cid:2) 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,
17
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.
(cid:2) Operating results for some of our segments are seasonal.
Our Energy Services and Construction Technologies segments are affected by seasonal weather patterns. A majority of
our Energy Services revenues are derived from the Gulf of Mexico and surrounding states, which are susceptible to
hurricanes that typically occur June 1st through November 30th. In addition, it is affected by customers’ demands for
natural gas. Natural gas is affected by weather patterns as colder winters increase the demand for natural gas to heat
homes and warmer summers increase the demand for natural gas to fuel generators providing electricity to run air
conditioners. Actual or threatened hurricanes or changes in the demand for natural gas can result in volatile demand for
services provided by our Energy Services segment. Our Construction Technologies segment is affected by weather
patterns which determine the feasibility of construction activities. Typically, less construction activity occurs in winter
months and thus this segment’s revenues tend to be greatest in the second and third quarters when weather patterns in our
geographic markets are more conducive to construction activities. Our Processed Minerals product line is subject to
similar seasonal patterns.
(cid:2) Our operations are subject to cyber-attacks that could have a material adverse impact on our business,
consolidated results of operations, and consolidated financial condition.
Our operations are becoming increasingly dependent on digital technologies and services. We use these technologies for
internal purposes, including data storage, processing, and transmissions, as well as in our interactions with customers and
suppliers. Digital technologies are subject to the risk of cyber-attacks. If our systems for protecting against cybersecurity
risks prove not to be sufficient, we could be adversely affected by, among other things: loss of or damage to intellectual
property, proprietary or confidential information, or customer, supplier, or employee data; interruption of our business
operations; and increased costs required to prevent, respond to, or mitigate cybersecurity attacks. These risks could harm
our reputation and our relationships with customers, suppliers, employees, and other third parties, and may result in claims
against us. In addition, these risks could have a material adverse effect on our business, consolidated results of operations,
and consolidated financial condition.
Item 1B. Unresolved Staff Comments
None.
18
Item 2. Properties
The Company’s corporate headquarters, sales offices, research laboratories, plants, mines and other facilities are owned by the
Company except as otherwise noted. Set forth below is certain information relating to the Company’s principal plants and office and
research facilities.
Location
Facility
Product Line
Segment
United States
Alabama, Sandy Ridge
Arizona, Pima County
California, Lucerne Valley
Connecticut, Canaan
Plant; Mine
Plant; Mine1
Plant; Mine
Plant; Mine
Georgia, Cartersville
Plant
Metalcasting, basic minerals and specialty
products
Limestone
Limestone
Limestone, Metallurgical Wire/Calcium
Environmental products and other building
materials products
Performance Materials
Specialty Minerals
Specialty Minerals
Specialty Minerals; Refractories
Construction Technologies
Illinois, Hoffman Estates
Indiana, Portage
Louisiana, Baton Rouge
Louisiana, Broussard
Houston, TX
Louisiana, New Iberia
Massachusetts, Adams
Montana, Dillon
Research laboratories; Administrative
office2
Plant
Plant
Research laboratories2
Headquarter, Administrative Office2
Operations base2
Plant; Mine
Plant; Mine
All Company Products
Refractories/Shapes
Monolithic Refractories
Filtration and well testing services
Filtration and Well testing services
Limestone, Lime, PCC
Talc
Nebraska, Scottsbluff
Transportation terminal
New York, New York
Headquarters2
North Dakota, Gascoyne
Plant; Mine
Ohio, Bryan
Ohio, Dover
Pennsylvania, Bethlehem
Pennsylvania, Easton
Pennsylvania, Slippery Rock
Texas, Bay City
Plant
Plant
Administrative Office; Research
laboratories; Sales Offices
Administrative Office; Research
laboratories; Plant; Sales Offices
Plant; Sales Offices
Plant
Wyoming, Colony
Plant; Mine
Wyoming, Lovell
Plant; Mine
All Segments
Refractories
Refractories
Energy Services
Energy Services
OilfieldSeg - Energy Services
Specialty Minerals
Specialty Minerals
Performance Materials and
Construction Technologies
Headquarters
Performance Materials
Refractories
Refractories
All Segments
All Segments
All Company Products
Metalcasting, basic minerals and specialty
products
Monolithic Refractories
Monolithic Refractories/Shapes
All Company Products
All Company Products
Monolithic Refractories/Shapes
Talc
Metalcasting, pet litter, personal care,
specialty and basic minerals products
Basic minerals, Specialty and pet care
products; Environmental and building
materials products
Refractories
Specialty Minerals
MineralsSeg - Performance
Materials
Performance Materials and
Construction Technologies
19
Location
Facility
Product Line
Segment
International
Australia, Carlingford
Australia, Perth
Belgium, Brussels
Brazil, Macae
Brazil, Sao Jose dos Campos
Canada, Pt. Claire
China, Chao Yang, Liaoning
China, Shanghai
Sales Office2
Operations base2
Administrative Office
Operations base2
Sales Office2/Administrative Office
Administrative Office
Plant; Mine
Administrative Office/Sales Office
China, Suzhou
Plant
Monolithic Refractories
Filtration services
Monolithic Refractories/PCC
Filtration services
PCC
PCC/Monolithic Refractories
Metalcasting and fabric care products
PCC/Monolithic Refractories
Environmental and building materials
products
Refractories
Energy Services
Refractories
Energy Services
Specialty Minerals
Specialty Minerals; Refractories
Performance Materials
Specialty Minerals; Refractories
Construction Technologies
Plant/Sales Office/Research laboratories
PCC/Monolithic Refractories
Specialty Minerals; Refractories
China, Suzhou
China, Tianjin
Plant; Mine; Research laboratories
Germany, Duisburg
Plant/Sales Office/Research laboratories
Holland, Hengelo
Plant/Sales Office
India, Mumbai
Indonesia, Jakarta
Ireland, Cork
Italy, Brescia
Italy, Nave
Japan, Gamagori
Japan, Tokyo
Sales Office2/Administrative Office
Operations base2
Plant; Administrative Office2/ Research
laboratories
Sales Office
Plant
Plant/Research laboratories
Sales Office
Korea, Pyeongtaek
Plant
Malaysia, Kenamen
Mexico, Villahermosa
Nigeria, Port Harcourt
Poland, Szczytno
Scotland, Aberdeen
Singapore
South Africa, Johannesburg
South Africa, Pietermaritzburg
South Africa, Ruighoek Farm,
Northwest Province
South Korea, Yangbuk-Myeun,
Kyeung-buk
Spain, Cheste
Spain, Santander
Thailand, Laemchabang
Operations base2
Operations base2
Operations base2
Plant
Operations base2
Sales Office2/Administrative Office
Sales Office/Administrative Office2
Plant
Plant
Sales Office2/Administrative Office
Plant
Turkey, Enez
Plant; Mine
Turkey, Gebze
Plant/Research Laboratories
Turkey, Istanbul
Turkey, Kutahya
Sales Office/Administrative Office
Plant
Metalcasting and fabric care products
Laser Scanning Instrumentation/
Probes/Monolithic Refractories
Metallurgical Wire
PCC/Monolithic Refractories/ Metallurgical
Wire
Filtration services
Monolithic Refractories
Monolithic Refractories/Shapes
Monolithic Refractories/Shapes
Monolithic Refractories/Shapes, Calcium
Monolithic Refractories
Environmental, building materials and other
products
Filtration and well testing services
Filtration services
Well Testing services
Environmental products
Filtration services
PCC
Monolithic Refractories
Monolithic Refractories
Performance Materials
Refractories
Refractories
Specialty Minerals; Refractories
Energy Services
Refractories
Refractories
Refractories
Refractories
Refractories
Construction Technologies
Energy Services
Energy Services
Energy Services
Construction Technologies
Energy Services
Specialty Minerals
Refractories
Refractories
Environmental products
Monolithic Refractories
Metalcasting and fabric care products
Metalcasting, specialty and basic minerals
products
Monolithic Refractories/Shapes/ Application
Equipment
Monolithic Refractories
Monolithic Refractories/Shapes
Construction Technologies
Refractories
Performance Materials
Performance Materials
Refractories
Refractories
Refractories
Performance Materials and
Construction Technologies
Specialty Minerals
Refractories
Performance Materials
United Kingdom, Birkenhead
Research laboratories2
Environmental products
United Kingdom, Lifford
United Kingdom, Rotherham
United Kingdom, Winsford
Plant
Plant/Sales Office
Plant, Research laboratories
PCC, Lime
Monolithic Refractories/Shapes
Fabric care and other products
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.
20
Plant; Mine
Plant; Mine
Metalcasting and basic minerals products
Performance Materials
Metalcasting products
Performance Materials
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, within the Specialty Minerals segment, as of December 31, 2016. 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, Jackson
Alabama, Selma
Arkansas, Ashdown
Florida, Pensacola
Louisiana, Port Hudson
Maine, Jay
Michigan, Quinnesec
Minnesota, Cloquet
Minnesota, International Falls
New York, Ticonderoga
Ohio, Chillicothe
South Carolina, Eastover
Washington, Camas
Washington, Longview
Washington, Wallula
Wisconsin, Kimberly
Wisconsin, Park Falls
Wisconsin, Superior
Wisconsin, Wisconsin Rapids
Boise Inc.
International Paper Company
Domtar Inc.
Georgia-Pacific Corporation (Koch Industries)
Georgia-Pacific Corporation (Koch Industries)
Verso Paper Holdings LLC
Verso Paper Holdings LLC
Sappi Ltd.
Boise Inc.
International Paper Company
P.H. Glatfelter Co.
International Paper Company
Georgia-Pacific Corporation (Koch Industries)
North Pacific Paper Corporation
Boise Inc.
Appleton Coated
Flambeau River Papers LLC
New Page Corporation
New Page Corporation
21
Location
Principal Customer
International
Brazil, Guaiba
Brazil, Jacarei
Brazil, Luiz Antonio
Brazil, Mucuri
Brazil, Suzano
Canada, St. Jerome, Quebec
Canada, Windsor, Quebec
China, Dagang 1
China, Zhenjiang 1
China, Suzhou1
China, Henan
China, Guangxi1, 2
China, Shandong2
Finland, Äänekoski
Finland, Tervakoski
France, Alizay
France, Saillat Sur Vienne
Germany, Schongau
India, Ballarshah1
India, Dandeli
India, Gaganapur1
India, Saila Khurd
India, Rayagada1
Indonesia, Perawang1
Japan, Shiraoi1
Malaysia, Sipitang
Poland, Kwidzyn
Portugal, Figueira da Foz1
Slovakia, Ruzomberok
South Africa, Merebank1
Thailand, Namphong
Thailand, Tha Toom1
Thailand, Tha Toom 21
1 These plants are owned through joint ventures.
2 These plants are under construction.
CMPC - Celulose Rio Grandense
Munksjo Brasil Ind e Com de Papeis Especiais Ltda.
International Paper do Brasil Ltda.
Suzano Papel e Celulose S. A.
Suzano Papel e Celulose S. A.
Les Entreprises Rolland Inc
Domtar Inc.
Gold East Paper (Jiangsu) Company Ltd.
Gold East Paper (Jiangsu) Company Ltd.
Gold HuaSheng Paper Company Ltd.
Henan Jianghe Paper Co., Ltd.
Nanning Jindaxing Paper Industry Company Ltd
Shandong Sun Paper Industry Joint Stock Company Ltd
M-real Corporation
Trierenberg Holding
Double A Paper Company Ltd.
International Paper Company
UPM Corporation
Ballarpur Industries Ltd.
West Coast Paper Mill Ltd.
Ballarpur Industries Ltd.
Kuantum Papers Ltd.
JK Paper
PT Indah Kiat Pulp and Paper Corporation
Nippon Paper Group Inc.
Ballarpur Industries Ltd.
International Paper – Kwidzyn, S.A
Navigator Paper Figueira, S.A.
Mondi Business Paper SCP
Mondi Paper Company Ltd.
Phoenix Pulp & Paper Public Co. Ltd.
Double A Paper Company Ltd.
Double A Paper Company Ltd.
22
The following table sets forth, for each of the quarries or mines we own or operate, our current estimate as to the amount of proven
and probable reserves such quarry or mine holds, based on the most recent mine plan, its usage rate in 2016, and a conversion factor
for the conversion of in-situ materials to saleable products, by major mineral category.
2016 Tons
Usage
(000s)
Total Tons
of Reserves
(000s)
Assigned
Reserves
(000s)
Unassigned
Reserves**
(000s)
Conversion
Factor
Owned
Mining Claims
Unpatented
*
Leased
Limestone
Adams, MA
Canaan, CT
Lucerne Valley, CA
Pima County, AZ
Total Limestone
Talc
Dillon, MT
Sodium Bentonite
Australia
Belle/Colony, WY/SD
Lovell, WY
Other SD, WY, MT
Total Sodium Bentonite
Calcium Bentonite
Chao Yang, Liaoning, China
Nevada
Sandy Ridge, AL
Turkey
Total Calcium Bentonite
Leonardite
Gascoyne, ND
Chromite
South Africa
Other
Nevada**
630
594
938
190
2,352
24,388
18,910
42,729
8,129
94,156
215
3,038
21
1,306
561
1,888
33
1
111
159
304
28
80
-
1,259
67,027
38,258
72,831
179,375
1,772
1,561
6,763
4,945
15,041
2,707
3,654
2,997
GRAND TOTALS
4,867
300,968
24,388
18,910
42,729
8,129
94,156
100%
3,038
100%
1,259
67,027
38,258
-
106,544
59%
1,772
1,561
6,763
4,945
15,041
100%
2,707
100%
3,654
100%
-
0%
225,140
75%
80%
90%
95%
90%
85%
80%
77%
86%
79%
78%
76%
75%
77%
72%
75%
80%
-
-
-
-
0%
-
0%
-
-
-
72,831
72,831
41%
-
-
-
-
-
0%
-
0%
-
0%
2,997
100%
75,828
25%
24,388
18,910
42,729
8,129
94,156
100%
3,038
100%
3,894
17,468
54,815
76,177
42%
1,017
1,995
3,012
20%
-
-
0%
0%
176,383
59%
-
-
-
-
-
0%
-
0%
11,952
14,371
15,048
41,371
23%
44
44
0%
2,019
75%
-
0%
2,997
100%
46,431
15%
-
-
-
-
-
0%
-
0%
1,259
51,181
6,419
2,968
61,827
34%
1,772
500
4,768
4,945
11,985
80%
688
25%
3,654
100%
-
0%
78,154
26%
* Quantity of reserves that would be owned if patent was granted.
** Unassigned reserves are reserves which we expect will require additional expenditures for processing facilities.
Our estimates of total reserves in the table above require us to make certain key assumptions. These assumptions relate to
consistency of deposits in relation to drilling samples obtained with respect to both quantity and quality of reserves contained therein;
the ratio of overburden to mineral deposits; any environmental or social impact of mining the minerals; and profitability of extracting
those minerals, including haul distance to processing plants, applicability of minerals to various end markets and selling prices within
those markets, and our past experiences in the deposits, several of which we have been operating in for many decades.
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.
23
Item 3. Legal Proceedings
The Company and its subsidiaries are the subject of various pending legal actions in the ordinary course of their businesses.
Except as described below, none of such legal proceedings are material.
Armada Litigation
On May 8, 2013, Armada (Singapore) PTE Limited, an ocean shipping company now in bankruptcy ("Armada") filed a case in
federal court in the Northern District of Illinois against AMCOL and certain of its subsidiaries ( Armada (Singapore) PTE Limited v.
AMCOL International Corp., et al., United States District Court for the Northern District of Illinois , Case No. 13 CV 3455). We
acquired AMCOL and its subsidiaries on May 9, 2014. A co-defendant is Ashapura Minechem Limited, a company located in
Mumbai, India (“AML”). During the relevant time period, 2008-2010, AMCOL owned slightly over 20% of the outstanding AML
stock through December 2009, after which it owned approximately 19%. In 2008, AML entered into two contracts of affreightment
(“COA”) with Armada for over 60 ship loads of bauxite from India to China. After one shipment, AML made no further shipments,
which led Armada to file arbitrations in London against AML, one for each COA. AML did not appear in the London arbitrations and
default awards of approximately $70 million were entered. The litigation filed by Armada against AMCOL and AML relates to these
awards, which AML has not paid. The substance of the allegations by Armada is that AML and AMCOL engaged in illegal conduct
to thwart Armada’s efforts to collect the arbitration award. The counts in the complaint include both violations of the Illinois
Fraudulent Transfer laws, as well as federal RICO violations. The lawsuit seeks money damages, as well as injunctive relief. Fact
discovery is scheduled to close in the first quarter of 2017. We have accrued an estimate of potential damages for the Armada lawsuit,
the amount of which was not material to our financial position, results of operations or cash flows.
Silica and Asbestos 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 three pending silica cases and 18 pending asbestos cases. To
date, 1,492 silica cases and 48 asbestos cases have been dismissed, not including any lawsuits against AMCOL or American Colloid
Company dismissed prior to our acquisition of AMCOL. Six new asbestos cases were filed in the period, including three new cases in
the fourth quarter of 2016, and one additional case in the first quarter of 2017. No asbestos or silica cases were closed during the
fourth quarter, however, as previously reported, twenty-seven silica cases and two asbestos cases were closed during 2016. 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 settled only one silica lawsuit, for a nominal amount, and no asbestos lawsuits to date (not including any that
may have been settled by AMCOL prior to completion of the acquisition). 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 for these cases, excluding cases against AMCOL or American Colloid, 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 18 pending
asbestos cases all except two 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. The two exceptions pertain to a pending asbestos
case against American Colloid Company, and one for which no period of alleged exposure has been stated by plaintiffs. 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 and assessing site-specific risks. We are awaiting regulators’ approval of
the risk assessment report, which will form the basis for a proposal by the Company concerning eventual remediation.
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. Pursuant to a Consent Decree entered on October 24, 2014, the United States paid the Company $2.3 million
in the 4th quarter of 2014 to resolve the Company’s claim for response costs for investigation and initial remediation activities at this
facility through October 24, 2014. Contribution by the United States to any future costs of investigation or additional remediation has,
24
by agreement, been left unresolved. 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, 2016.
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, 2016.
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 Equity 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.
2016 Quarters
Market price range per share of common stock
High
Low
Close
First
Second
Third
Fourth
$
57.12
37.03
57.12
$
61.66
52.53
57.38
$
72.51
56.00
70.69
$
82.90
66.10
77.25
Dividends paid per common share
$
0.05
$
0.05
$
0.05
$
0.05
2015 Quarters
Market price range per share of common stock
High
Low
Close
$
74.74
59.00
70.65
$
74.21
66.49
69.02
$
68.15
46.69
50.31
$
61.80
45.35
45.86
Dividends paid per common share
$
0.05
$
0.05
$
0.05
$
0.05
Equity Compensation Plan Information
The following table summarizes information about our equity compensation plans as of December 31, 2016. All outstanding
awards relate to our common stock.
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 holders
1,198,725
$
41.66
Total
1,198,725
$
41.66
1,202,426
1,202,426
25
Issuer Purchases of Equity Securities
On September 16, 2015, 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 the expiration of the prior two-year
program in October 2015. As of December 31, 2016, 54,098 shares have been repurchased under this program for $2.6 million, or an
average price of approximately $48.91 per share.
On January 18, 2017, 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 3, 2017, the last reported sales price on the NYSE was $80.00 per share and there were approximately 175 holders of
record of the common stock.
26
Performance Graph
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 12/31/2011 to 12/31/2016.
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
12/14
12/15
12/16
100.00
100.00
100.00
100.00
100.00
100.00
141.93
116.00
117.88
117.87
110.49
119.17
214.50
153.58
157.37
165.74
133.00
153.63
248.78
174.60
172.74
177.84
137.51
160.87
164.83
177.01
168.98
174.83
120.42
138.20
278.56
198.18
204.03
208.98
144.83
185.77
27
Item 6. Selected Financial Data
Net sales
Cost of sales
Production margin
Marketing and administrative expenses
Research and development expenses
Insurance / litigation settlement (gain)
Acquisition related transaction and integration costs
Restructuring and other items, net
Income from operations
Interest expense, net
Premium on early extinguishment of debt
Other non-operating income (deductions), net
Total non-operating deductions, net
Income from continuing operations before provision
for taxes and equity in earnings
Provision for taxes on income
Equity in earnings of affiliates, net of tax
Income from continuing operations, net of tax
Income (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 (Loss) per share attributable to MTI:
Basic:
Income from continuing operations
Income (loss) from discontinued operations
Basic earnings per share
Diluted:
Income from continuing operations
Income (loss) from discontinued operations
Diluted earnings per share
Year Ended December 31,
2016
2015
2014
2013
2012
(in millions, except per share data)
$
1,638.0
1,177.6
$
1,797.6
1,326.6
$
1,725.0
1,289.6
$
1,018.2
784.5
$
996.8
774.5
460.4
179.4
23.8
-
8.0
28.3
220.9
(54.4)
-
3.8
(50.6)
170.3
35.3
2.1
137.1
-
137.1
471.0
190.1
23.6
-
11.8
45.2
200.3
(60.9)
(4.5)
(2.3)
(67.7)
132.6
22.8
1.8
111.6
-
111.6
435.4
233.7
222.3
182.2
24.4
(2.3)
19.1
43.2
168.8
(41.8)
(5.8)
1.8
(45.8)
123.0
30.8
1.2
93.4
2.1
95.5
89.2
20.1
(2.5)
-
-
88.5
20.2
-
-
-
126.9
113.6
(0.2)
-
(3.0)
(3.2)
123.7
34.5
-
89.2
(5.8)
83.4
(0.1)
-
(2.9)
(3.0)
110.6
31.9
-
78.7
(2.5)
76.2
3.7
133.4
$
3.7
107.9
$
3.1
92.4
$
3.1
80.3
$
2.1
74.1
$
$
$
$
$
$
$
$
$
$
$
3.82
-
3.82
3.79
-
3.79
3.11
-
3.11
3.08
-
3.08
2.62
0.06
2.68
2.59
0.06
2.65
2.48
(0.17)
2.31
2.46
(0.16)
2.30
2.17
(0.07)
2.10
2.16
(0.07)
2.09
$
$
$
$
$
$
$
$
$
$
Cash dividends declared per common share
$
0.20
$
0.20
$
0.20
$
0.20
$
0.13
Shares used in computation of earnings per share:
Basic
Diluted
Working capital
Total assets
Long-term debt, net of unamortized discount and deferred financing costs
Total debt
Total shareholders' equity
28
34.9
35.2
34.7
35.0
34.5
34.8
34.7
35.0
35.3
35.5
Year Ended December 31,
2016
2015
2014
2013
2012
$
455.6
2,863.4
1,069.9
1,082.8
1,030.9
$
485.0
2,980.0
1,255.3
1,264.9
937.7
(in millions)
552.0
$
3,157.5
1,429.4
1,435.3
888.9
$
634.2
1,217.5
75.0
88.7
874.4
$
514.4
1,211.2
8.5
92.6
813.7
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.
Executive Summary
The Company reported diluted earnings of $3.79 per share, an increase of 23% from prior year earnings of $3.08 per share.
Worldwide sales were $1.6 billion in 2016 as compared with $1.8 billion in 2015, a decrease of 9%. The decrease in sales was
primarily due to our exit from several service lines in our Energy Services segment resulting from continued weaker market conditions
in the oil and gas sector, weaker conditions in the steel sector, and to previously announced North American paper mill closures in our
Specialty Minerals segment. In addition, foreign exchange had an unfavorable impact on sales of $34.0 million, or 2 percentage
points of decline.
Consolidated income from operations was $220.9 million as compared with $200.3 million in the prior year. This increase was due
to strong results from our Specialty Minerals and Performance Materials segments, due to company-wide productivity improvements
of 7 percent and cost control. In addition, there were lower restructuring costs in 2016 as compared with the prior year. Net income
was $133.4 million as compared to $107.9 million in the prior year.
In 2016, the Company continued to advance the execution of its growth strategies of geographic expansion and new product
innovation and development. Our businesses in China grew 9 percent in 2016 over prior year and our long-term growth targets in the
region remain on track. We began operations of a 100,000 ton satellite plan in China in the third quarter of 2016. The Company
continued to see progress in its major growth strategy of developing and commercializing new products. We have twenty-six
commercial contracts for FulFill® globally. Earlier this year, we also formed an EcoPartnership in China with the Sun Paper Group
and Tsinghua University’s School of Environment to pilot innovation with our NewYield™ process technology aimed at reducing soil
and ground water pollution by converting a waste stream from the papermaking process into useable filler for paper.
Long term debt as of December 31, 2016 was $1,069.9 million. During the 2016, we repaid $193 million of our long-term debt.
Since the acquisition of AMCOL in 2014, we have repaid over $480 million of our Term Loan debt. Cash, cash equivalents and short-
term investments were $191 million as of December 31, 2016. Cash flow from operations for 2016 was $225.0 million. Our intention
continues to be to use excess cash flow primarily to repay debt and to continue to de-lever as quickly as possible.
Outlook
Looking forward, we remain cautious about the state of the global economy and the impact it will have on our product lines.
The Company will continue to focus on innovation and new product development and other opportunities for sales growth from
its existing businesses, as follows:
(cid:2) Develop multiple high-filler technologies 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:2) 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
29
papermaking process, including our New YieldTM products.
(cid:2) Further penetration into the packaging segment of the paper industry.
(cid:2) 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:2) Expand the Company's PCC coating product line using the satellite model.
(cid:2) Increase our presence and gain penetration of our bentonite based foundry customers for the Metalcasting
industry in emerging markets, such as China and India.
(cid:2) Increase our presence and market share in global pet care products, particularly in emerging markets.
(cid:2) Deploy new products in pet care such as lightweight litter.
(cid:2) Promote the Company's expertise in crystal engineering, especially in helping papermakers customize PCC
morphologies for specific paper applications.
(cid:2) 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:2) Develop unique calcium carbonate and talc products used in the manufacture of novel biopolymers, a new
market opportunity.
(cid:2) Deploy new talc and GCC products in paint, coating and packaging applications.
(cid:2) Deploy value-added formulations of refractory materials that not only reduce costs but improve performance.
(cid:2) Expand our solid core wire product line into BRIC, Middle Eastern and other Asian countries.
(cid:2) Deploy our laser measurement technologies into new applications.
(cid:2) Expand our refractory maintenance model to other steel makers globally.
(cid:2) Increase our presence and market share in Asia and in the global powdered detergent market.
(cid:2) Continue the development of our proprietary Enersol® products for agricultural applications worldwide.
(cid:2) Pursue opportunities for our products in environmental and building and construction markets in the Middle
East, Asia Pacific and South America regions.
(cid:2) Increase our presence and market share for geosynthetic clay liners within the Environmental Products
product line.
(cid:2) Increase our presence and market penetration in filtration and well testing within the Energy Services
segment.
(cid:2) Increase global market share in services for the floating production storage and offloading (FPSO) market.
(cid:2) Deploy operational excellence principles into all aspects of the organization, including system infrastructure
and lean principles.
(cid:2) Continue to explore selective small bolt-on type 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.
30
Results of Operations
Consolidated Income Statement Review
Net sales
Cost of sales
Production margin
Production margin %
Marketing and administrative expenses
Research and development expenses
Insurance / litigation settlement (gain)
Acquisition related transaction and integration costs
Restructuring and other items, net
Income from operations
Operating margin %
Interest expense, net
Premium on early extinguishment of debt
Other non-operating income (deductions), net
Total non-operating deductions, net
Income from continuing operations before provision
for taxes and equity in earnings
Provision for taxes on income
Effective tax rate
Year Ended December 31,
2016
2015
2014
2016 vs.
2015
2015 vs.
2014
(Dollars in millions)
$
1,638.0
1,177.6
460.4
28.1%
$
1,797.6
1,326.6
471.0
26.2%
$
1,725.0
1,289.6
435.4
25.2%
179.4
23.8
-
8.0
28.3
220.9
13.5%
(54.4)
-
3.8
(50.6)
170.3
35.3
20.7%
190.1
23.6
-
11.8
45.2
200.3
11.1%
(60.9)
(4.5)
(2.3)
(67.7)
132.6
22.8
17.2%
182.2
24.4
(2.3)
19.1
43.2
168.8
9.8%
(41.8)
(5.8)
1.8
(45.8)
123.0
30.8
25.0%
-8.9%
-11.2%
-2.3%
-5.6%
0.8%
*
-32.2%
-37.4%
10.3%
-10.7%
-100.0%
*
-25.3%
28.4%
54.8%
16.7%
22.8%
*
0.0%
23.6%
4.2%
2.9%
8.2%
4.3%
-3.3%
*
-38.2%
4.6%
18.7%
45.7%
-22.4%
*
47.8%
7.8%
-26.0%
50.0%
19.5%
*
19.4%
16.8%
Equity in earnings of affiliates, net of tax
2.1
1.8
1.2
Income from continuing operations, net of tax
Income from discontinued operations, net of tax
Net income attributable to non-controlling interests
Net income attributable to Minerals Technologies Inc. (MTI)
137.1
-
3.7
133.4
$
111.6
-
3.7
107.9
$
93.4
2.1
3.1
92.4
$
* Not meaningful
Net Sales
U.S.
International
Total sales
Specialty Minerals Segment
Refractories Segment
Performance Materials Segment
Construction Technologies Segment
Energy Services Segment
Total sales
* Not meaningful
Year Ended December 31,
2016
2015
2014
2015
2014
(Dollars in millions)
2016 vs.
2015 vs.
$
936.2
701.8
1,638.0
$
$
$
1,049.6
748.0
1,797.6
$
$
1,004.4
720.6
1,725.0
$
$
$
591.5
274.5
502.8
183.3
85.9
1,638.0
624.6
295.9
514.8
180.1
182.2
1,797.6
$
$
$
650.1
359.7
352.8
152.3
210.1
1,725.0
-10.8%
-6.2%
-8.9%
-5.3%
-7.2%
-2.3%
1.8%
-52.9%
-8.9%
4.5%
3.8%
4.2%
-3.9%
-17.7%
45.9%
18.3%
-13.3%
4.2%
31
Worldwide net sales in 2016 decreased 8.9% from the previous year to $1,638.0 million. Foreign exchange had an unfavorable
impact on sales of $34.0 million or 2 percent. Net sales in the United States decreased to $936.2 million in 2016 and represented
57.2% of consolidated net sales. International sales decreased slightly to $701.8 million from $748.0 million and represented 42.8%
of consolidated net sales.
Worldwide net sales in 2015 increased 4.2% from the previous year to $1,797.6 million. Foreign exchange had an unfavorable
impact on sales of $95.3 million or 6 percentage points of growth. Net sales in the US grew slightly to $1,049.6 million and
represented 58.4% of consolidated net sales. International sales increased 3.8% to $748.0 million from $720.6 million.
Operating Costs and Expenses
Consolidated cost of sales was $1,177.6 million, $1,326.6 million and $1,289.6 million in 2016, 2015 and 2014, respectively.
Production margin as a percentage of net sales was 28.1% in 2016, 26.2% in 2015 and 25.2% in 2014. Improved productivity, supply
chain savings and cost improvements offset the impact of weak market conditions within the Energy Services segment.
Marketing and administrative costs were $179.4 million, $190.1 million and $182.2 million in 2016, 2015 and 2014, respectively.
Marketing and administrative costs as a percentage of net sales were 10.9% in 2016, 10.6% in 2015 and 10.6% in 2014.
Research and development expenses were $23.8 million, $23.6 million and $24.4 million in 2016, 2015 and 2014, respectively.
Research and development expenses as a percentage of net sales were 1.4% in 2016, 1.3% in 2015 and 1.4% in 2014.
The Company incurred $8.0 million, $11.8 million and $19.1 million in 2016, 2015 and 2014, respectively for the acquisition
related transaction and integration costs.
The Company recognized a litigation settlement gain of $2.3 million in 2014.
In 2016, the Company recorded a $28.3 million charge for impairment of assets and other restructuring costs, including lease
termination costs relating to its exit of U.S. on-shore service lines, including the Nitrogen and Pipeline product lines in our Energy
Services segment.
In 2014, the Company initiated a restructuring program to realign its business operations, improve efficiencies, profitability, and
return on invested capital. As a result of this restructuring, the Company recorded $45.2 million and $43.2 million of charges related
to asset impairments, severance and other employee costs in 2015 and 2014, respectively. This restructuring impacted all business
segments of the Company. See Note 3 to the Consolidated Financial Statements for further details.
Income from Operations
During 2016, the Company recorded income from operations of $220.9 million as compared with $200.3 million in the prior year.
Income from operations represented 13.5% of sales compared with 11.1% of sales in the prior year. Income from operations in 2016
included acquisition related integration costs of $8.0 million and restructuring and other charges of $28.3 million.
During 2015, the Company recorded income from operations of $200.3 million as compared with $168.8 million in the prior year.
Income from operations represented 11.1% of sales compared with 9.8% of sales in the prior year. Income from operations in 2015
included acquisition related integration costs of $11.8 million and restructuring and other charges of $45.2 million.
Non-Operating Income (Deductions)
The Company recorded non-operating deductions of $50.6 million in 2016 as compared with $67.7 million in the previous year.
Net interest expense was $54.4 million in 2016 as compared $60.9 million in the prior year, as a result of lower debt balances due
to principal repayments and lower interest costs relating lower rates resulting from the debt repricing in 2015.
In the second quarter of 2015, the Company repriced the outstanding balance of its senior secured loan facility and recorded $4.5
million in non-cash debt modification costs and other debt modification fees.
In the fourth quarter of 2015, the Company recorded a $7.6 million charge relating to the write-down of an investment in a
development stage enterprise.
Provision for Taxes on Income
Provision for taxes was $35.3 million, $22.8 million and $30.8 million in 2016, 2015 and 2014, respectively. The effective tax
rates were 20.7%, 17.2% and 25.0% during 2016, 2015 and 2014, respectively. The higher effective tax rate in 2016 was primarily
due to a lower benefit from depletion as a percentage of earnings and to the mix of earnings. The lower effective tax rate in 2015 was
primarily due to tax benefits on one-time charges at a higher rate and higher depletion deductions.
32
The factors having the most significant impact on our effective tax rates in recent periods are the rate differentials related to foreign
earnings indefinitely invested, percentage depletion, and the tax benefits on restructuring and impairment charges at a higher rate.
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 $11.3 million in 2016, $11.2 million in 2015 and $9.5 million in 2014.
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. 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 $14.7 million, $11.0 million and $11.7 million in
2016, 2015 and 2014, respectively.
Income from Continuing Operations, Net of Tax
Income from continuing operations, net of tax, was $137.1 million in 2016 and included a $24.0 million charge, net of tax. Such
charge consisted of restructuring and other net items, acquisition transaction and integration costs and lease termination costs,
inventory write-offs and impairment of assets relating to the Company’s exit from the Nitrogen and Pipeline product lines and the
restructuring of other onshore services within the Energy Services segment.
Income from continuing operations, net of tax, was $111.6 million during 2015 and included a $43.1 million charge, net of tax.
Such charge consisted of restructuring and other charges, acquisition transaction and integration costs, debt prepayment costs, and the
write down of an investment in a development stage enterprise.
Income from Discontinued Operations, Net of tax
The Company recognized income from discontinued operations, net of tax, of $2.1 million during 2014 relating its discontinued
operations at its merchant PCC facility at Walsum, Germany.
Segment Review
The following discussions highlight the operating results for each of our five segments.
Specialty Minerals Segment
Specialty Minerals Segment
2016 vs.
2015 vs.
Year Ended December 31,
2016
2015
2014
2015
2014
(millions of dollars)
Net Sales
Paper PCC
Specialty PCC
PCC Products
Talc
Ground Calcium Carbonate
Processed Minerals Products
Total net sales
Income from operations
% of net sales
2016 v 2015
$
$
$
$
$
$
(35.4)
(0.5)
(35.9)
$
$
(31.2)
(1.3)
(32.5)
$
$
387.9
64.3
452.2
55.7
83.6
139.3
423.3
64.8
488.1
55.9
80.6
136.5
454.5
66.1
520.6
55.5
74.0
129.5
$
$
$
$
$
$
$
$
$
$
$
591.5
$
624.6
$
650.1
$
(33.1)
$
(25.5)
$
102.7
17.4%
$
100.8
16.1%
$
95.8
14.7%
$
1.9
$
5.0
(0.2)
3.0
2.8
0.4
6.6
7.0
Net sales in the Specialty Minerals segment decreased 5 percent to $591.5 million from $624.6 million. Higher sales in our
Processed Minerals product line, stemming from increased ground calcium carbonate volumes were offset by declines in Paper PCC.
Worldwide net sales of PCC products, which are primarily used in the manufacturing process of the paper industry, decreased $35.9
million, or 7 percent. Foreign exchange had an unfavorable impact on PCC products sales $9.7 million, or 2 percentage points. The
decrease in Paper PCC sales was primarily due to several previously announced paper mill closures in the U.S and weaker printing
and writing paper demand in the U.S. and Europe. This was partially offset by an increase in PCC sales in China of 12 percent over
last year due to the ramp-up of two new facilities and the successful startup of a 100,000 ton satellite in the third quarter of 2016.
33
Income from operations increased $1.9 million to $102.7 million and represented 17.4% of net sales compared to $100.8 million
and 16.1% of sales in prior year.
2015 v 2014
Net sales in the Specialty Minerals segment decreased 4% to $624.6 million from $650.1 million. Foreign exchange had an
unfavorable impact on sales of $33.5 million, or 5 percent. Excluding the effects of foreign exchange, higher sales in ground calcium
carbonate were partially offset by declines in Paper PCC. Worldwide net sales of PCC products decreased $32.5 million, or 6 percent.
Foreign exchange had an unfavorable impact on PCC products sales $30.9 million, or 7 percent. Talc and ground calcium carbonate
sales increased primarily due to increased volumes.
Income from operations increased $5.0 million and represented 16.1% of net sales compared to $95.8 million and 14.7% of sales in
prior year.
Refractories Segment
Refractories Segment
Net Sales
Refractory Products
Metallurgical Products
Total net sales
Income from operations
% of net sales
2016 v 2015
Year Ended December 31,
2016
2015
2014
(millions of dollars)
2016 vs.
2015
2015 vs.
2014
$
$
219.0
55.5
274.5
$
$
$
$
230.7
65.2
295.9
273.9
85.8
359.7
$
$
(11.7)
(9.7)
(21.4)
$
$
(43.2)
(20.6)
(63.8)
$
37.0
13.5%
$
27.8
9.4%
$
43.2
12.0%
$
9.2
$
(15.4)
Net sales in the Refractories segment declined $21.4 million in 2016. Foreign exchange had an unfavorable impact on Refractories
segment sales of approximately $2.3 million, or 1 percent. The remaining sales decrease was primarily due to lower volumes
stemming from continued weak global steel demand.
Income from operations increased $9.2 million to $37.0 million and represented 13.5% of net sales compared to $27.8 million or
9.4% of sales in 2015. The increase in income from operations relates primarily to improved productivity combined with supply chain
savings and lower overhead costs. Additionally, included in income from operations is a $2.1 million gain on the sale of previously
impaired assets in 2016 and restructuring charges of $2.0 million in 2015.
2015 v 2014
Net sales in the Refractories segment declined $63.8 million in 2015. Foreign exchange had an unfavorable impact on Refractories
segment sales of approximately $23.7 million, or 7 percent. The remaining sales decrease was primarily due to lower volumes
stemming from continued weak global steel demand.
Income from operations decreased $15.4 million and represented 9.4% of net sales compared to 12.0% in 2014. Income from
operations includes restructuring charges of $2.0 million and $0.7 million, in 2015 and 2014, respectively. The declines relate
primarily to the aforementioned weakness in global steel demand.
34
Performance Materials Segment
Performance Materials Segment
Net Sales
Metalcasting
Household, Personal Care and Specialty Products
Basic Minerals and Other Products
Total net sales
Income from operations
% of net sales
2016 v 2015
Year Ended December 31,
2016
2015
2014
(millions of dollars)
2016 vs.
2015
2015 vs.
2014
$
$
$
$
$
258.0
171.2
73.6
502.8
266.4
172.7
75.7
514.8
181.4
108.0
63.4
352.8
(8.4)
(1.5)
(2.1)
(12.0)
85.0
64.7
12.3
162.0
$
$
$
$
$
$
97.5
19.4%
$
95.9
18.6%
$
41.0
11.6%
$
1.6
$
54.9
Net sales in the Performance Materials segment of $502.8 million decreased $12.0 million in 2016. Foreign exchange had an
unfavorable impact on Performance Materials segment sales of approximately $15.4 million, or 3 percent. Excluding the effects of
foreign exchange, higher China metalcasting sales and increased sales of bulk chromite in our Basic Minerals and Other Products
product line were partially offset by lower fabric care sales in our Household, Personal Care & Specialty Minerals product line.
Income from operations increased $1.6 million and represented 19.4% of net sales compared to 18.6% in 2015 as a result of
significant productivity gains and a favorable product mix.
2015 v 2014
Net sales in the Performance Materials segment in 2015 were $514.8 million. Foreign exchange had an unfavorable impact on
segment sales of approximately $13.7 million, or 7%. Income from operations was $95.9 million and represented 18.6% of net sales
compared to 11.6% in 2014. Included in income from operations in 2014 were $6.7 million in restructuring and other charges and a
one-time non-cash inventory step charge of $3.6 million. The strong margin improvement in this segment was attributable to
increased sales in consumer products, the realization of acquisition synergies and improved productivity.
This segment’s operating results for the year ended December 31, 2014 includes 237 days of results commencing on May 9, 2014.
Construction Technologies Segment
Construction Technologies Segment
Net Sales
Environmental Products
Building Materials and Other Products
Total net sales
Year Ended December 31,
2016
2015
2014
(millions of dollars)
2016 vs.
2015
2015 vs.
2014
$
$
$
$
$
78.9
104.4
183.3
69.7
110.4
180.1
70.7
81.6
152.3
9.2
(6.0)
3.2
(1.0)
28.8
27.8
$
$
$
$
$
Income (Loss) from operations
% of net sales
$
23.6
12.9%
$
22.5
12.5%
$
(0.8)
-0.5%
$
1.1
$
23.3
2016 v 2015
Net sales in the Construction Technologies segment increased $3.2 million in 2016 to $183.3 million. Foreign exchange had an
unfavorable impact on Construction Technologies segment sales of approximately $3.6 million, or 2 percent. Increased sales in
Environmental Products due to higher volumes was partially offset by lower sales in Building Materials and Other Products resulting
from smaller scale water proofing projects completed in the western United States and Europe this year as compared to the prior year.
Income from operations increased $1.1 million to $23.6 million and represented 12. 9% of net sales compared to 12.5% in 2015.
2015 v 2014
Net sales in the Construction Technologies segment in 2015 were $180.1 million. Foreign exchange had an unfavorable impact
on segment sales of approximately $9.9 million, or 9%. Income from operations was $22.5 million and represented 12.5% of net sales
compared to a loss in 2014. Included in income from operations in the prior year were restructuring charges of $5.8 million, an
35
impairment of assets charge of $11.7 million and a one-time non-cash inventory step up charge of $2.0 million. Sales and operating
income in this business segment were affected by fewer large projects in 2015 as compared with the prior year.
This segment’s operating results for the year ended December 31, 2014 includes 237 days of results commencing on May 9,
2014.
Energy Services Segment
Energy Services Segment
Year Ended December 31,
2016
2015
2014
(millions of dollars)
2016 vs.
2015
2015 vs.
2014
Net Sales
$
85.9
$
182.2
$
210.1
$
(96.3)
$
(27.9)
Income (Loss) from operations
% of net sales
$
(25.9)
-30.2%
$
(27.9)
-15.3%
$
16.3
7.8%
$
2.0
$
(44.2)
2016 v 2015
Net sales in the Energy Services segment declined $96.3 million in 2016. The sales decrease was due to weak market conditions in
the oil and gas sector and the shutdown of U.S. on-shore service lines, including Nitrogen and Pipeline in the second quarter of 2016
and the shutdown of the Coiled Tubing service line in August 2015.
The segment recorded a loss from operations of $25.9 million in 2016. Included in the loss from operations was $30.3 million of
impairment and restructuring charges relating to the Company’s exit from the Nitrogen and Pipeline product lines and restructuring of
other onshore services within the Energy Services segment. Going forward, Energy Services’ primary service offerings will be off-
shore filtration and well testing to the worldwide oil and gas industry.
2015 v 2014
Net sales in the Energy Services segment in 2015 were $182.2 million. Foreign exchange had an unfavorable impact on segment
sales of approximately $8.4 million, or 6%. This segment recorded a loss from operations of $27.9 million in 2015. Included in the
loss from operations in the current year were asset impairment charges of $33.0 million and employee termination costs of $9.0
million. Included in the income from operations in 2014 were asset impairment charges of $11.6 million and employee termination
costs of $3.7 million.
In 2015, the Company exited the Coiled Tubing service line due to continued losses in this service line due to continued losses
in this service line and indications that there will not be any significant improvements in the market in the near or medium turn.
This segment’s operating results for the year ended December 31, 2014 includes 237 days of results commencing on May 9, 2014.
Liquidity and Capital Resources
Cash provided from continuing operations in 2016 was $225.0 million, compared with $270.0 million in prior year. Cash flows
provided from operations in 2016 were principally used for repayment of debt, to fund capital expenditures and pay the Company's
dividend to common shareholders. The Company’s intention continues to be to use excess cash flow primarily to repay debt and to de-
lever as quickly as possible. In 2016, the Company repaid $193 million in principal amount of its long-term debt.
On May 9, 2014, in connection with the acquisition of AMCOL, the Company entered into a credit agreement providing for the
$1.560 billion senior secured term loan facility (the “Term Facility”) and a $200 million senior secured revolving credit facility (the
“Revolving Facility” and, together with the Term Facility, the “Facilities”). The net proceeds of the Term Facility, together with the
Company’s cash on hand, were used as cash consideration for the acquisition of AMCOL and to refinance certain existing
indebtedness of the Company (including the Company’s 3.46% Series A Senior Notes due October 7, 2020 and 4.13% Series B Senior
Notes due October 7, 2023) and AMCOL and to pay fees and expenses in connection with the foregoing. Loans under the Revolving
Facility will be used for working capital and other general corporate purposes of the Company and its subsidiaries.
On June 23, 2015, the Company entered into an amendment (the “First Amendment”) to the credit agreement to reprice the
$1.378 billion then outstanding on the Term Facility. As amended, the Term Facility had a $1.078 billion floating rate tranche and a
$300 million fixed rate tranche. On February 14, 2017, the Company entered into an amendment (the “Second Amendment”) to the
credit agreement to reprice the $788 million floating rate tranche then outstanding. Following the Second Amendment, the loans
outstanding under the floating rate tranche of the Term Facility will mature on February 14, 2024, the loans outstanding under the
fixed rate tranche of the Term Facility will mature on May 9, 2021 and the loans outstanding (if any) and commitments under the
Revolving Facility will mature and terminate, as the case may be, on May 9, 2019. After the Second Amendment, loans under the
36
floating rate tranche of the Term Facility bear interest at a rate equal to an adjusted LIBOR rate (subject to a floor of 0.75%) plus an
applicable margin equal to 2.25% per annum. Loans under the fixed rate tranche of the Term Facility bear interest at a rate of 4.75%.
Loans under the Revolving Facility will bear interest at a rate equal to an adjusted LIBOR rate plus an applicable margin equal to
1.75% per annum. Such rates are subject to decrease by up to 25 basis points in the event that, and for so long as, the Company’s net
leverage ratio (as defined in the credit agreement) is less than certain thresholds. The floating rate tranche of the Term Facility was
issued at par and the fixed rate tranche of the Term Facility was issued at a 0.25% discount in connection with the First Amendment.
The variable rate tranche of the Term Facility was issued at a 0.25% discount in connection with the Second Amendment. The
variable rate tranche has a 1% required amortization per year. The Company will pay certain fees under the credit agreement,
including customary annual administration fees. The loans under the fixed rate tranche of the Term Facility are subject to prepayment
premiums in the event of certain prepayments prior to the third anniversary of the effective date of the First Amendment, and the loans
under the floating rate tranche of the Term Facility are subject to prepayment premiums in the event of certain prepayments prior to
the six-month anniversary of the effective date of the Second Amendment. The obligations of the Company under the Facilities are
unconditionally guaranteed jointly and severally by, subject to certain exceptions, all material domestic subsidiaries of the Company
(the “Guarantors”) and secured, subject to certain exceptions, by a security interest in substantially all of the assets of the Company
and the Guarantors.
The credit agreement contains certain customary affirmative and negative covenants that limit or restrict the ability of the
Company and its restricted subsidiaries to enter into certain transactions or take certain actions. In addition, the credit agreement
contains 3a financial covenant that requires the Company, if on the last day of any fiscal quarter loans or letters of credit were
outstanding under the Revolving Facility (excluding up to $15 million of letters of credit), to maintain a maximum net leverage ratio
(as defined in the credit agreement) of, initially, 5.25 to 1.00 for the four fiscal quarter period preceding such day. Such maximum net
leverage ratio requirement is subject to decrease during the duration of the facility to a minimum level (when applicable) of 3.50 to
1.00. As of December 31, 2016, there were no loans and $12.2 million in letters of credit outstanding under the Revolving Facility.
The Company is in compliance with all the covenants associated with this Revolving Facility as of the end of the period covered by
this report.
The Company has five committed loan facilities for the funding of new manufacturing facilities in China, for a combined 94.8
million RMB and $1.8 million. In December 2016, the Company entered into a committed loan facility in the amount of 680 million
Yen (approximately $5.8 million). As of December 31, 2016, on a combined basis, $15.0 million was outstanding. Principal will be
repaid in accordance with the payment schedules ending in 2021. The Company repaid $3.2 million on these loans in 2016.
As of December 31, 2016, the Company had $34.8 million in uncommitted short-term bank credit lines, of which approximately
$6.1 million was in use. The credit lines are primarily outside the U.S. and are generally one year in term at competitive market rates
at large well- established financial institutions. The Company typically uses its available credit lines to fund working capital
requirements or local capital spending needs. We anticipate that capital expenditures for 2017 should be between $70 million and $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, committed and uncommitted bank credit
lines and, where appropriate, project financing of certain satellite plants.
On April 5, 2016, the Company entered into a floating to fixed interest rate swap for an initial aggregate notional amount of $300
million to limit exposure to interest rate increases related to a portion of the Company’s floating rate indebtedness. The notional
amount at December 31, 2016 was $257 million. This swap hedges a portion of contractual floating rate interest through May 2021.
As a result of the swap, the Company’s effective fixed interest rate on the notional amount of floating rate indebtedness will be 4.25%.
On September 16, 2015, 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 October 3, 2015. During 2016, 54,098 shares have
been repurchased under this program for $2.6 million, or an average price of approximately $48.91 per share.
On January 18, 2017, 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.
37
Contractual Obligations
The Company has committed cash outflow related to long-term debt, interest on long-term debt, pension and post-retirement
benefit obligations, operating lease agreements, and other long-term contractual obligations. As of December 31, 2016, minimum
payments for these obligations were as follows:
Payments Due by Period
Debt
Interest related to long term debt
Estimated pension and post retirement plan funding
Operating lease obligations
Other long term liabilities
Total contractual obligations
1,103.1
194.5
27.2
84.3
21.5
1,430.6
Total
2017
$
$
$
2018 -
2019
(millions of dollars)
$
4.2
88.0
15.0
22.0
-
129.2
6.8
44.4
12.2
14.4
2.1
79.9
2020 -
2021
After
2021
1,092.1
62.1
-
14.8
-
1,169.0
-
$
-
-
33.1
19.4
52.5
$
$
$
$
$
Long-term debt amounts in the preceding table represent the principal amounts of all outstanding long-term debt, including
current portion. As of December 31, 2016, maturities for long-term debt extended to 2021. On February 14, 2017, the Company
extended the maturity of the floating rate tranche of the Term Facility to February 14, 2024.
Interest related to long-term debt is based on interest rates in effect as of December 31, 2016 and is calculated on debt with
maturities that, on December 31, 2016 extended to 2021. As the contractual interest rate for a portion of our debt is variable, actual
cash payments may differ from the estimates provided in the preceding table. On February 14, 2017 the Company extended the
maturity of the floating rate tranche of the Term Facility to February 14, 2024.
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 2018 and, accordingly, no amounts have been included in the table beyond such dates.
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.
Other long term liabilities include asset retirement obligations relating to the retirement of certain tangible long-lived assets and land
restoration obligations at its PCC satellite facilities and mining operations. See Note 20 to the Consolidated Financial Statements.
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 $13.7 million at December 31, 2016. Payment of these obligations would
result from settlements with taxing authorities. Due to the difficulty in determining the timing of settlements, these obligations are not
included in the table above. We do not expect to make a tax payment related to these obligations within the next year that would
significantly impact liquidity.
Critical Accounting Policies and Estimates
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:2)
Revenue recognition: Revenue from sale of products is recognized when the title passes to the customer, the customer
assumes the risks and rewards of ownership, and collectability is reasonably assured. Generally this occurs when the goods
38
are shipped to 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.
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 2016 and 2015, 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 within our Energy Services segment is service based. Certain contracts within this segment are long-term contracts,
the revenue for which is recorded using percentage-of-completion method. Progress is generally based upon costs incurred to
date as compared to the total estimated costs to complete the work under the contract or the amount of product installed in
relation to the total amount expected to be installed. All known or anticipated losses on contracts are provided when they
become evident. Cost adjustments that are in the process of being negotiated with customers for extra work or changes in
scope of the work are included in revenue when collection is reasonably assured.
(cid:2) Allowance for doubtful accounts: We provide credit to customers in the ordinary course of business and perform ongoing
credit evaluations. Our customer base is diverse and includes customers located throughout the world. Payment terms in
certain of the foreign countries in which we do business are longer than those that are customary in the U.S., and, as a result,
may give rise to additional credit risk related to outstanding accounts receivable from these non-U.S. customers. Likewise, a
change in the financial position, liquidity or prospects of any of our customers could have an impact on our ability to collect
amounts due. While concentrations of credit risk related to trade receivables are somewhat limited by our large customer
base, we do extend significant credit to some of our customers.
We make estimates of the amounts of our gross accounts receivable that will not be collectible, and record an allowance for
doubtful accounts to reduce the carrying value of accounts receivable to the amount that is expected to be realized. 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. We record the increases in the allowance for doubtful accounts as an expense in the period identified
in the marketing and administrative expenses line within our Consolidated Statements of Income. We recorded bad debt
expenses of $6.2 million, $2.6 million and $2.4 million in 2016, 2015 and 2014, respectively.
(cid:2)
Property, plant and equipment: 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.
We evaluate the recoverability of our property, plant and equipment whenever events or change in circumstances indicate
that the carrying value of the assets may not be recoverable. For testing the recoverability, we primarily use discounted cash
flow models or cost approach to estimate the fair value of these assets. Critical assumptions used in conducting these tests
included expectations of our business performance and financial results, useful lives of assets, discount rates and comparable
market data.
(cid:2) 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 evaluated 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.
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.
39
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 six reporting units; PCC, Processed Minerals, Refractories, Performance Materials, Construction
Technologies and Energy Services. 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 2016, 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:2) 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 Income.
Deferred tax liabilities represents amount of income taxes payable in future periods. Such liabilities arise because of
temporary differences between the financial reporting and tax bases of assets and liabilities. 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. The amount recorded for the net deferred tax liability was $211.7 million and $221.4 million at December 31, 2016
and 2015, respectively.
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 7 to the Consolidated Financial Statements for additional detail on our uncertain tax
positions.
(cid:2) Pension Benefits: We sponsor pension and other retirement plans in various forms covering the majority of employees who
meet eligibility requirements, including plans we assumed in the AMCOL acquisition. Several statistical and actuarial
models which attempt to estimate future events are used in calculating the expense and liability related to the plans. These
models include assumptions about the discount rate, expected return on plan assets and rate of future compensation increases
as determined by us, within certain guidelines. Our assumptions reflect our historical experience and management's best
judgment regarding future expectations. In addition, our actuarial consultants also use subjective factors such as withdrawal
and mortality rates to estimate these assumptions. The actuarial assumptions used by us may differ materially from actual
results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of
participants, among other things. Differences from these assumptions may result in a significant impact to the amount of
pension expense/liability recorded by us follows:
A one percentage point change in our major assumptions would have the following effects:
Effect on Expense
(millions of dollars)
Discount
Rate
Salary
Scale
Return on
Asset
1% increase ......................................... $
1% decrease ......................................... $
(4.1 )
6.2
Effect on Projected Benefit Obligation
(millions of dollars)
1% increase ......................................... $
1% decrease ........................................ $
Discount
Rate
(42.3 )
52.3
$
$
$
$
0.9
(0.8 )
$
$
(2.0 )
2.0
Salary
Scale
5.0
(4.4 )
The investment strategy for pension plan assets is to maintain a broadly diversified portfolio designed to both preserve
and grow plan assets to meet future plan obligations. The Company's average rate of return on assets from inception
40
through December 31, 2016 was over 9%. The Company’s assets are strategically allocated among equity, debt and
other investments to achieve a diversification level that dampens fluctuations in investment returns. The Company’s
long-term investment strategy is an investment portfolio mix of approximately 55%-65% in equity securities, 30%-35%
in fixed income securities and 0%-15% in other securities. As of December 31, 2016, the Company had approximately
60% of its pension assets in equity securities, 33% in fixed income securities and 7% in other securities.
In 2016, a net loss of $4.6 million ($3.2 million after-tax) was recorded in other comprehensive income, primarily due
to a change in discount rates. In 2015, a net gain of $10 million ($7 million after-tax) was recorded in other
comprehensive income, primarily due to a change in discount rates and updated mortality tables. In 2014, a net loss of
$48.5 million ($31.1 million after-tax) was recorded in other comprehensive income, primarily due to a change in
discount rates.
We recognized pension expense of $14.2 million in 2016 as compared to $18.9 million in 2015. 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 2016, total actuarial losses recognized in Accumulated other
comprehensive income (loss) for pension plans were ($82.0 million), as compared to ($80.5 million) in 2015. 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 2016, the average remaining service period of active employees or life expectancy for fully
eligible employees was 10 years. We expect our 2017 amortization of net actuarial losses to be approximately the same
level as 2016, which was $10.7 million.
(cid:2) 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:2) 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, 2016, the Company used a volatility assumption of 36.75%.
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, 2016, the Company used a 6.5 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, 2016.
For a detailed discussion on the application of these and other accounting policies, see "Summary of Significant Accounting
Policies" in the Note 1 to the Consolidated Financial Statements. This discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes included elsewhere in this report.
41
Inflation
Historically, inflation has not had a material adverse effect on us. Our production processes consume a significant amount of
energy, primarily electricity, diesel fuel, natural gas and coal. We use diesel fuel to operate our mining and processing equipment and
our freight costs are heavily dependent upon fuel prices and surcharges. Energy costs also affect the cost of raw materials. On a
combined basis, these factors represent a large exposure to petrochemical and energy products which may be subject to significant
price fluctuations. 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 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 within Specialty Minerals, Performance Materials, Construction Technologies and Refractories segments are
to customers in the paper manufacturing, metalcasting, 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. In addition, our customers’ demand for our Energy Services segment’s products and services are
affected by oil and natural gas production activities, which are heavily influenced by the benchmark price of these commodities. Oil
and natural gas prices decreased significantly between 2014 through 2016, which we expect will cause exploration companies to
reduce their capital expenditures and production and exploration activities. This has the effect of decreasing the demand and
increasing competition for the services we provide. 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.
Revenue from Contracts with Customers
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” which will supersede nearly all
existing revenue recognition guidance under U.S. GAAP. The underlying principle is that an entity will recognize revenue to depict
the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or
services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major
provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing
estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also
requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s
contracts with customers. The guidance is effective for the interim and annual periods beginning on or after December 15, 2017. The
guidance permits the use of either a retrospective or cumulative effect transition method. The Company has not yet selected a
transition method and is currently evaluating the impact of this ASU on the Company’s consolidated financial statements and related
disclosures. The Company expects to complete this analysis in early 2017.
Inventory – Simplifying the Measurement of Inventory
In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Under
this accounting guidance, inventory will be measured at the lower of cost and net realizable value and other options that currently exist
for market value will be eliminated. ASU No. 2015-11 defines net realizable value as the estimated selling prices in the ordinary
course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the
current guidance on inventory measurement. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, and
interim periods within fiscal years beginning after December 15, 2017 with early adoption permitted. The adoption of this guidance is
not expected to have a material impact on the Company’s financial statements.
Leases
In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires lessees to recognize most leases on-balance sheet,
thereby increasing their reported assets and liabilities, in some cases very significantly. Lessor accounting remains substantially
similar to current U.S. GAAP. ASU 2016-02 is effective for public business entities for annual and interim periods in fiscal years
beginning after December 15, 2018. ASU 2016-02 mandates a modified retrospective transition method for all entities. The Company
is currently evaluating the impact of this ASU on the Company’s consolidated financial statements and related disclosures; however,
the Company does not expect the adoption of this guidance to have a material impact on the Company’s financial statements.
42
Investments – Equity Method and Joint Ventures
In March 2016, the FASB issued ASU 2016-07, “Simplifying the Transition to the Equity Method of Accounting”, which
eliminates the requirement for an investor to retroactively apply the equity method when its increase in ownership interest (or degree
of influence) in an investee triggers equity method accounting. ASU 2016-07 is effective for all entities for interim and annual periods
in fiscal years beginning after December 15, 2016. The adoption of this guidance is not expected to have a material impact on the
Company’s financial statements.
Stock Compensation – Improvements to Employee Share-Based Payment Accounting
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”, which is
intended to improve the accounting for share-based payment transactions as part of the FASB’s simplification initiative. The ASU
changes seven aspects of the accounting for share-based payment award transactions, including: (1) accounting for income taxes; (2)
classification of excess tax benefits on the statement of cash flows; (3) forfeitures; (4) minimum statutory tax withholding
requirements; (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-
withholding purposes; (6) practical expedient – expected term (nonpublic only); and (7) intrinsic value (nonpublic only). The ASU is
effective for fiscal years beginning after December 15, 2016, and interim periods within those years for public business entities. Early
adoption is permitted in any interim or annual period provided that the entire ASU is adopted. The adoption of this guidance is not
expected to have a material impact on the Company’s financial statements.
Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory
In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than
Inventory", which requires entities to recognize at the transaction date the income tax consequences of intercompany asset transfer
other than inventory. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted for
this ASU, but only at the beginning of an annual period for which no financial statements have already been issued or made available
for issuance. The adoption of this guidance is not expected to have a material impact on the Company's financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from fluctuations in foreign currency exchange rates, interest rates and credit risk. We use a variety
of practices to manage these market risks, including derivative financial instruments when appropriate. Our treasury and risk
management policies prohibit us from using derivative instruments for trading or speculative purposes. We also do not use leveraged
derivative instruments or derivatives with complex features.
Exchange Rate Sensitivity
As we operate in over 30 countries with many international subsidiaries, we are exposed to currency fluctuations related to
manufacturing and selling our products and services. This foreign currency risk is diversified and involves assets, liabilities and cash
flows denominated in currencies other than the U.S. Dollar (USD).
We manage our foreign currency exchange risk in part through operational means, including managing same currency revenues
versus same currency costs as well as same currency assets versus same currency liabilities. We also have subsidiaries with the same
currency exposures which may offset each other, providing a natural hedge against one another’s currency risk. When appropriate, we
enter into derivative financial instruments, such as forward exchange contracts, to mitigate the impact of foreign exchange rate
movements on our operating results. The counterparties are major financial institutions. Such forward exchange contracts would not
subject us to additional risk from exchange rate because gains and losses on these contracts would offset losses and gains on the
assets, liabilities, and transactions being hedged. At December 31, 2016, we did not have any significant foreign currency derivative
contracts outstanding.
Assets and liabilities of our international subsidiaries are translated to their parent company’s reporting currency at current
exchange rates during consolidation; gains and losses stemming from these translations are included as a component of Other
Comprehensive Income and reported within Accumulated Comprehensive Income within our Consolidated Balance Sheets. Income
and expenses of our international subsidiaries are translated at average exchange rates for the period and, when included within
retained earnings in the balance sheet at current exchange rates, the differences to those average exchange rates are included within
Other Comprehensive Income and reported within Accumulated Comprehensive Income. When our subsidiaries transact business in
currencies other than their functional currency, those transactions are revalued in their functional currency and differences resulting
from such revaluations are included within other non-operating income (deduction), net within our Consolidated Statement of Income.
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.
43
Interest Rate Sensitivity
A portion of our long-term bank debt bears interest at variable rates (see Note 14 to the Consolidated Financial Statements) and our
results of operations would be affected by interest rate changes to such bank debt outstanding. The Company utilizes interest rate
swaps to limit exposure to market fluctuations on floating-rate debt. During the second quarter of 2016, the Company entered into a
floating to fixed interest rate swap for an initial aggregate notional amount of $300 million. An immediate 10% increase in the
interest rates would not have a material effect on our results of operations over the next fiscal year. A one percentage point change in
interest rates would cost $5.6 million in incremental interest charges on an annual basis.
Credit Risk
We are exposed to credit risk on certain assets, primarily accounts receivable. We provide credit to customers in the ordinary
course of business and perform ongoing credit evaluations. Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising our customer base. We currently believe our allowance for doubtful accounts is
sufficient to cover customer credit risks. Our accounts receivable financial instruments are carried at amounts that approximate fair
value.
Euro & Sovereign Debt Risk
Certain countries that have adopted the Euro as their currency have experienced recent financial difficulty and are in the process of
stabilizing their finances through various measures, which may include such drastic measures as defaulting on their debt or adopting a
different currency as their national currency. While we do not believe we have significant financial risk resulting from any of these
situations, we cannot predict the disruption that would occur to the European markets in which we compete if such drastic measures
were taken.
We do not have any material credit risk with sovereign governments currently facing this situation as we do not sell our products to
them. We do, however, sell to customers in these countries, but we believe our risk associated with these customers is not material.
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, 2016.
The Company continues to implement a global enterprise resource planning (“ERP”) system for the businesses acquired from
AMCOL. As of December 31, 2016, primarily all of the domestic and European locations of the acquired businesses were
implemented on the new system. The worldwide implementation is expected to be substantially completed over the next six to nine
months and involves changes in the systems that include internal controls. Although the transition has proceeded to date without
material adverse effects, the possibility exists that our migration to the new ERP system could adversely affect the Company’s internal
controls over financial reporting and procedures. We are reviewing each system as it is being implemented and the controls affected
by the implementation of the new systems, and are making appropriate changes to the affected internal controls as we implement the
new systems. We believe that the controls as modified are appropriate and functioning effectively.
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."
44
Changes in Internal Control Over Financial Reporting
Except as described above, there were no changes 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
Douglas T. Dietrich .............................
Matthew E. Garth ................................
D.J. Monagle, III .................................
Gary L. Castagna ................................
Jonathan J. Hastings ............................
Douglas W. Mayger ............................
Thomas J. Meek ..................................
W. Rand Mendez ................................
Brett Argirakis ....................................
Michael A. Cipolla ..............................
Andrew Jones ......................................
47
42
54
55
54
59
59
57
52
59
58
Chief Executive Officer
Senior Vice President, Finance and Treasury, Chief Financial Officer
Senior Vice President, Chief Operating Officer – Specialty Minerals Inc. and Minteq
Group
Senior Vice President and Managing Director, Performance Materials
Senior Vice President, Corporate Development
Senior Vice President and Director-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 and Managing Director, Minteq International Inc.
Vice President, Corporate Controller and Chief Accounting Officer
Vice President and Managing Director, Energy Services
Douglas T. Dietrich was elected Chief Executive Officer effective December 13, 2016, having served previously as Senior Vice
President, Finance and Treasury, Chief Financial Officer beginning on 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.
Matthew E. Garth was elected Senior Vice President, Finance and Treasury, Chief Financial Officer effective January 16, 2017.
Mr. Garth joins the Company from Arconic Inc. (formerly Alcoa Inc.), where most recently he had been Vice President, Financial
Planning & Analysis and Investor Relations since 2015. Prior to his most recent position, he was Vice President, Finance & CFO
Operations – Alcoa Global Packaging from 2014 to 2015; Vice President, Finance – Alcoa Global Packaging from 2011 to 2014; Vice
President, Finance – Alcoa North American Rolled Products from 2010 to 2011; Director, Investor Relations Alcoa, Inc. from 2009 to
2010; Director, Corporate Treasury Alcoa, Inc. from 2007 to 2009.
D.J. Monagle III was elected Chief Operating Officer – Specialty Minerals Inc. and Minteq Group effective February 27, 2014.
Prior to that, he was Senior Vice President and Managing Director, Paper PCC, effective October 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.
Gary L. Castagna was elected Senior Vice President and Managing Director, Performance Materials in June 2014. Prior to that, he
was Executive Vice President of AMCOL International Corporation (AMCOL) and President of Performance Materials segment since
May 2008. Prior to that, he had been the Senior Vice President, Chief Financial Officer and Treasurer of AMCOL since February
2001 and a consultant to AMCOL since June 2000. Prior to that, he was the Vice President of AMCOL and President of Chemdal
International Corporation (former subsidiary of AMCOL) since August 1997.
Jonathan J. Hastings was elected Senior Vice President, Corporate Development effective September 2012. Before that, he was
Vice President, Corporate Development. 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.
45
Douglas W. Mayger was elected Senior Vice President and Director-MTI Supply Chain in November 2015. Prior to that, he was
Senior Vice President, Performance Minerals and Supply Chain. 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. 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 and Secretary, Chief Compliance Officer in October 2012. In
December 2011, he was given the additional responsibility for Human Resources. 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.
W. Rand Mendez was elected Senior Vice President and Managing Director, Paper PCC in July 2015. Prior to that, Mr. Mendez
was with E. I. du Pont de Nemours and Co., where he held a variety of operational and product leadership positions across a number
of businesses. Mr. Mendez joined DuPont in 1982 and assumed positions of increasing responsibility. In 1996, he was appointed
Global Business Manager, DuPont Specialty Chemicals. He was subsequently named Sales and Marketing Director, DuPont
Surfaces; Business Director, DuPont Safety Resources; and in 2008, Corporate Marketing Director, DuPont Corporate Marketing &
Sales.
Brett Argirakis was elected Vice President and Managing Director, Minteq International in January 2016. Prior to that, he was
Global Vice President & General Manager, Refractories. Prior to that, he was Director, Marketing, Minteq Europe. Prior to that, he
served as Director of Sales and Field Operations for Minteq U.S.. Mr. Argirakis joined the Company in 1987 and has held positions of
increasing responsibility.
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.
Andrew Jones was elected Vice President and Managing Director, Energy Services in September 2015. Prior to that, he was Vice
President and Managing Director, Eastern Hemisphere, Energy Services since 2014. Prior to joining the company, he was Managing
Director of Africa Oilfield Services since 2009.
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 Our Company, Corporate Responsibility 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 Our Company, Corporate Responsibility 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.
46
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.
47
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-38.
Consolidated Balance Sheets as of December 31, 2016 and 2015
Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2016, 2015 and 2014
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.
Page
3. Exhibits. The following exhibits are filed as part of, or incorporated by reference into, this report.
2.1
- Agreement and Plan of Merger, dated as of March 10, 2014, by and among Minerals
Technologies Inc., MA Acquisition Inc. and AMCOL International Corporation (1)
3.1
3.2
4.1
10.1
- Restated Certificate of Incorporation of the Company (2)
- By-Laws of the Company as amended and restated effective March 16, 2016 (3)
- Specimen Certificate of Common Stock (2)
- Asset Purchase Agreement, dated as of September 28, 1992, by and between Specialty
Refractories Inc. and Quigley Company Inc. (4)
10.1(a)
- Agreement dated October 22, 1992 between Specialty Refractories Inc. and Quigley Company
Inc., amending Exhibit 10.1 (5)
10.1(b)
- Letter Agreement dated October 29, 1992 between Specialty Refractories Inc. and Quigley
Company Inc., amending Exhibit 10.1 (5)
10.2
- Reorganization Agreement, dated as of September 28, 1992, by and between the Company and
Pfizer Inc. (4)
10.3
- Asset Contribution Agreement, dated as of September 28, 1992, by and between Pfizer Inc. and
Specialty Minerals Inc. (4)
10.4
- Asset Contribution Agreement, dated as of September 28, 1992, by and between Pfizer Inc. and
Barretts Minerals Inc. (4)
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 (5)
10.5
- Employment Agreement, dated December 13, 2016, between the Company and Douglas T.
Dietrich (6) (+)
10.6
- Form of Employment Agreement between the Company and each of Brett Argirakis, Michael
A. Cipolla, Matthew E. Garth, Andrew Jones, Douglas W. Mayger, Thomas J. Meek, W. Rand
Mendez and D.J. Monagle, III (*) (+)
10.6(a)
10.6(b)
- Form of Employment Agreement between the Company and Jonathan J. Hastings (7) (+)
- Form of amendment to Employment Agreement between the Company and Jonathan J.
Hastings (8) (+)
10.6(c)
10.7
10.8
- Form of Employment Agreement between the Company and Gary L. Castagna (9) (+)
- Severance Agreement between the Company and Douglas T. Dietrich (10) (+)
- Form of Severance Agreement between the Company and each of Brette Argirakis, Michael A.
Cipolla, Matthew E. Garth, Andrew Jones, Douglas W. Mayger, Thomas J. Meek, W. Rand
Mendez, and D.J. Monagle, III (*) (+)
10.8(a)
- Form of Severance Agreement between the Company and Jonathan J. Hastings (11) (+)
48
10.8(b)
- Form of amendment to Severance Agreement between the Company and Jonathan J. Hastings
(12) (+)
10.8(c)
10.9
Form of Severance Agreement between the Company and Gary L. Castagna (13) (+)
- Form of Indemnification Agreement between the Company and each of Michael A. Cipolla,
Douglas T. Dietrich, Jonathan J. Hastings, Andrew Jones, Douglas W. Mayger, Thomas J.
Meek, D.J. Monagle III and each of the Company’s non-employee directors (14) (+)
10.10
10.11
- 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
10.12
10.13
10.13(a)
Non-Employee Directors, dated January 18, 2012 (17) (+)
- 2015 Stock Award and Incentive Plan of the Company (18) (+)
- Company Retirement Plan, as amended and restated, dated December 21, 2012 (19) (+)
- Second Amendment to Company Retirement Plan, as amended and restated, dated December
22, 2014 (20)(+)
10.13(b)
- Third Amendment to Company Retirement Plan, as amended and restated, dated June 12, 2015
(21)(+)
10.13(c)
- Fourth Amendment to Company Retirement Plan, as amended and restated, dated December 16,
2016 (*)(+)
10.14
- Company Supplemental Retirement Plan, amended and restated effective December 31, 2009
(22) (+)
10.14(a)
- First Amendment to Company Supplemental Retirement Plan, as amended and restated, dated
December 22, 2014 (23)(+)
10.15
- Company Savings and Investment Plan, as amended and restated, dated December 21, 2012
(24) (+)
10.15(a)
- Amendment to the Company Savings and Investment Plan, as amended and restated, dated
December 5, 2013 (25) (+)
10.15(b)
- Amendment to the Company Savings and Investment Plan, as amended and restated, dated
December 5, 2013 (26) (+)
10.15(c)
- Third Amendment to the Company Savings and Investment Plan, as amended and restated,
dated December 22, 2014 (27)(+)
10.15(d)
- Amendment to the Company Savings and Investment Plan, as amended and restated, dated
December 31, 2015 (28)(+)
10.16
- Company Supplemental Savings Plan, amended and restated effective December 31, 2009 (29)
(+)
10.16(a)
10.16(b)
- Amendment to the Company Supplemental Savings Plan, dated December 28, 2011 (30)(+)
- First Amendment to the Company Supplemental Savings Plan, dated December 22, 2014
(31)(+)
10.16(c)
- Second Amendment to the Company Supplemental Savings Plan, dated December 22, 2014
(32)(+)
10.16(d)
- Third Amendment to the Company Supplemental Savings Plan, dated December 16, 2016
(*)(+)
10.17
- Company Health and Welfare Plan, effective as of April 1, 2003 and amended and restated as
of January 1, 2006 (33)(+)
10.17(a)
10.17(b)
10.18
10.18(a)
10.19
- Amendment to the Company Health and Welfare Plan, dated May 19, 2009 (34) (+)
- First Amendment to Company Health and Welfare Plan, dated December 22, 2014 (35)(+)
- Company Retiree Medical Plan, effective as of January 1, 2011 (36)(+)
- First Amendment to Company Retiree Medical Plan, dated December 22, 2014 (37)(+)
- Amended and Restated Grantor Trust Agreement, dated as of April 1, 2010, by and between the
Company and the Wilmington Trust Company (38)(+)
10.20
- AMCOL International Corporation Nonqualified Deferred Compensation Plan, as amended
(39) (+)
10.20(a)
- First Amendment to AMCOL International Corporation Nonqualified Deferred Compensation
Plan, as amended, dated December 22, 2014 (40)(+)
10.20(b)
- Third Amendment
to
the AMCOL International Corporation Nonqualified Deferred
Compensation Plan, as amended, dated August 21, 2015 (41)(+)
10.21
- AMCOL International Corporation Amended and Restated Supplementary Pension Plan for
Employees (42) (+)
10.21(a)
- First Amendment to AMCOL International Corporation Amended and Restated Supplementary
Pension Plan for Employees, dated December 22, 2014 (43)(+)
10.21
(b)
- Second Amendment to Amended and Restated Supplementary Pension Plan for Employees of
AMCOL International Corporation, dated August 21, 2015 (44)(+)
49
10.22
- Second Amendment, dated as of February 14, 2017, to the Credit Agreement, dated as of May
9, 2014, among Minerals Technologies Inc., the subsidiary borrowers party thereto, the lenders
party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the
other agents party thereto (45)
10.23
-
Indenture, dated July 22, 1963, between the Cork Harbour Commissioners and Roofchrome
Limited (4)
21.1
23.1
24
31.1
- Subsidiaries of the Company (*)
- Consent of Independent Registered Public Accounting Firm (*)
- Power of Attorney (*)
- Rule 13a-14(a)/15d-14(a) Certification executed by the Company's principal executive officer
(*)
31.2
- Rule 13a-14(a)/15d-14(a) Certification executed by the Company's principal financial officer
32
95
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(*)
- Section 1350 Certification (*)
Information Concerning Mine Safety Violations (*)
Incorporated by reference to exhibit 2.1 to the Company’s Current Report on Form 8-K filed March
10, 2014.
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 March 17, 2016.
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
filed on December 16, 2016.
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(b) filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2014.
Incorporated by reference to the exhibit 10.2 filed with the Company’s Current Report on form 8-K
filed on December 16, 2016.
Incorporated by reference to exhibit 10.6 filed with the Company's Annual Report on Form 10-K for
the year ended December 31, 2005.
Incorporated by reference to exhibit 10.7(a) filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2009.
Incorporated by reference to exhibit 10.7(b) filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 2014.
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 for the year ended December 31, 2011.
Incorporated by reference to Appendix B to the Company’s 2015 Proxy Statement filed on April 2,
2015.
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(a) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2014.
Incorporated by reference to exhibit 10.2 filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended June 28, 2015.
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(a) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2014.
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.
50
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)
(36)
(37)
(38)
(39)
(40)
(41)
(42)
(43)
(44)
(45)
Incorporated by reference to exhibit 10.15(a) filed with the Company’s Annual Report on Form 10-
K for the year ended December 31, 2013.
Incorporated by reference to exhibit 10.15(b) filed with the Company’s Annual Report on Form 10-
K for the year ended December 31, 2013.
Incorporated by reference to exhibit 10.15(c) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2014.
Incorporated by reference to exhibit 10.15(d) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2015.
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 10.16(b) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2014.
Incorporated by reference to exhibit 10.16(c) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2014.
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(b) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2014.
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 10.18(a) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2014.
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 exhibit 10.1 filed with the Annual Report on Form 10-K for the year
ended December 31, 2008 of AMCOL International Corporation (Commission File No. 0-15661)
Incorporated by reference to exhibit 10.20(a) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2014.
Incorporated by reference to exhibit 10.1 filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended September 27, 2015.
Incorporated by reference to the exhibit 10.6 filed with the Annual Report on Form 10-K for the
year ended December 31, 2008 of AMCOL International Corporation (Commission File No. 0-
15661)
Incorporated by reference to exhibit 10.21(a) filed with the Company's Annual Report on Form 10-
K for the year ended December 31, 2014.
Incorporated by reference to exhibit 10.2 filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended September 27, 2015.
Incorporated by reference to the exhibit 10.1 filed with the Company's Current Report on Form 8-K
filed on February 15, 2017.
(*) Filed herewith.
(+) Management contract or compensatory plan or arrangement required to be filed pursuant to Item
601 of Regulation S-K.
51
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/ Douglas T. Dietrich
Douglas T. Dietrich
Chief Executive Officer
February 17, 2017
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/ Douglas T. Dietrich
Douglas T. Dietrich
Chief Executive Officer
(principal executive officer)
February 17, 2017
/s/ Matthew E. Garth
Matthew E. Garth
Senior Vice President-Finance and Treasury,
February 17, 2017
Chief Financial Officer (principal financial officer)
/s/ Michael A. Cipolla
Michael A. Cipolla
Vice President - Controller and
February 17, 2017
Chief Accounting Officer (principal accounting officer)
52
*
Joseph C. Breunig
*
*
John J. Carmola
Robert L. Clark
Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
/s/ Douglas T. Dietrich
Douglas T. Dietrich
Director
February 17, 2017
Chairman & Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
Director
February 17, 2017
*
Duane R. Dunham
*
Marc E. Robinson
*
Barbara R. Smith
*
Donald C. Winter
* By: /s/ Thomas J. Meek
Thomas J. Meek
Attorney-in-Fact
53
[THIS PAGE INTENTIONALLY LEFT BLANK]
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
_______________________________________
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Financial Statements:
Page
Consolidated Balance Sheets as of December 31, 2016 and 2015 .......................................................................
F-2
Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014 ...........................
F-3
Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014
F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014 .....................
F-5
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2016, 2015 and 2014 ......
F-6
Notes to Consolidated Financial Statements........................................................................................................
F-7
Reports of Independent Registered Public Accounting Firm ...............................................................................
F-40
Management's Report on Internal Control Over Financial Reporting..................................................................
F-42
Valuation and Qualifying Accounts .....................................................................................................................
S-1
F-1
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(millions of dollars, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments, at cost which approximates market
Accounts receivable, less allowance for doubtful accounts - 2016 - $7.9; 2015 -$ 4.4
Inventories
Prepaid expenses
Other current assets
Total current assets
Property, plant and equipment, less accumulated depreciation and depletion
Goodwill
Intangible assets
Deferred income taxes
Other assets and deferred charges
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt
Current maturities of long-term debt
Accounts payable
Income tax payable
Accrued compensation and related items
Other current liabilities
Total current liabilities
Long-term debt, net of unamortized discount and deferred financing costs
Deferred income taxes
Accrued pension and postretirement benefits
Other non-current liabilities
Total liabilities
Shareholders' equity:
Preferred stock , without par value; 1,000,000 shares authorized; none issued
Common stock, par value at $0.10 per share; 100,000,000 shares authorized;
Issued 48,229,826 shares in 2016 and 47,990,136 shares in 2015
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less common stock held in treasury, at cost;
13,259,839 shares in 2016 and 13,205,741 shares 2015
Total MTI shareholders' equity
Non-controlling interest
Total shareholders' equity
December 31,
2016
2015
$
188.5
2.0
341.3
186.9
28.0
4.4
751.1
$
229.4
2.6
348.7
194.9
24.9
3.1
803.6
1,051.8
778.7
204.4
27.1
50.3
2,863.4
$
1,104.3
781.2
212.7
30.6
47.6
2,980.0
$
$
6.1
6.8
144.9
21.5
61.3
54.9
295.5
$
6.5
3.1
152.4
16.7
64.5
75.4
318.6
1,069.9
238.8
147.3
81.0
1,832.5
1,255.3
252.0
141.8
74.6
2,042.3
-
-
4.8
400.0
1,419.1
(221.1)
(596.3)
1,006.5
24.4
1,030.9
4.8
387.6
1,292.7
(180.9)
(593.7)
910.5
27.2
937.7
Total liabilities and shareholders' equity
$
2,863.4
$
2,980.0
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
Year Ended December 31,
2016
2015
2014
Product sales
Service revenue
Total net sales
Cost of goods sold
Cost of service revenue
Total cost of sales
Production margin
Marketing and administrative expenses
Research and development expenses
Insurance / litigation settlement (gain)
Acquisition related transaction and integration costs
Restructuring and other items, net
Income from operations
Interest expense, net
Premium on early extinguishment of debt
Other non-operating income (deductions), net
Total non-operating deductions, net
Income from continuing operations before provision
for taxes and equity in earnings
Provision for taxes on income
Equity in earnings of affiliates, net of tax
Income from continuing operations, net of tax
Income 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
Income from discontinued operations attributable to MTI
Basic earnings per share attributable to MTI
Diluted:
Income from continuing operations attributable to MTI
Income from discontinued operations attributable to MTI
Diluted earnings per share attributable to MTI
(millions of dollars, except per share amounts)
$
$
$
1,552.1
85.9
1,638.0
1,615.4
182.2
1,797.6
1,514.9
210.1
1,725.0
1,117.7
59.9
1,177.6
1,190.0
136.6
1,326.6
1,141.5
148.1
1,289.6
460.4
179.4
23.8
-
8.0
28.3
220.9
(54.4)
-
3.8
(50.6)
170.3
35.3
2.1
137.1
-
137.1
471.0
190.1
23.6
-
11.8
45.2
200.3
(60.9)
(4.5)
(2.3)
(67.7)
132.6
22.8
1.8
111.6
-
111.6
435.4
182.2
24.4
(2.3)
19.1
43.2
168.8
(41.8)
(5.8)
1.8
(45.8)
123.0
30.8
1.2
93.4
2.1
95.5
$
3.7
133.4
$
3.7
107.9
$
3.1
92.4
$
$
$
$
$
$
$
$
$
$
$
$
3.82
-
3.82
3.79
-
3.79
3.11
-
3.11
3.08
-
3.08
2.62
0.06
2.68
2.59
0.06
2.65
Cash dividends declared per common share
$
0.20
$
0.20
$
0.20
Shares used in computation of earnings per share:
Basic
Diluted
34.9
35.2
34.7
35.0
34.5
34.8
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
Consolidated net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Pension and postretirement plan adjustments
Unrealized gains on cash flow hedges
Total other comprehensive loss, net of tax
Total comprehensive income including non-controlling interests
Less: Net income attributable to non-controlling interest
Less: Foreign currency translation adjustments attributable to non-controlling interest
Comprehensive income attributable to non-controlling interest
Year Ended December 31,
2016
2015
(millions of dollars)
2014
$
137.1
$
111.6
$
95.5
(40.2)
(3.2)
1.6
(41.8)
95.3
3.7
(1.6)
2.1
(76.6)
7.3
-
(69.3)
42.3
3.7
(1.3)
2.4
(51.5)
(31.1)
-
(82.6)
12.9
3.1
(1.0)
2.1
Comprehensive income attributable to MTI
$
93.2
$
39.9
$
10.8
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
Operating Activities:
Consolidated net income
Gain from discontinued operations
Income from continuing operations
Adjustments to reconcile net income
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
Asset impairment charge
Other non-cash items
Changes in operating assets and liabilities
Accounts receivable
Inventories
Pension plan funding
Accounts payable
Restructuring liabilities
Income taxes payable
Tax benefits related to stock incentive programs
Prepaid expenses and other
Net cash provided by continuing operations
Net cash used in discontinued operations
Net cash provided by operating activities
Investing Activities:
Acquisition of business, net of cash acquired
Purchases of property, plant and equipment
Proceeds from sale of assets
Purchases of short-term investments
Proceeds from sale of short-term investments
Other
Net cash used in investing activities
Financing Activities:
Proceeds from issuance of long-term debt
Debt issuance and settlement costs
Repayment of long-term debt
Net issuance (repayment) of short-term debt
Purchase of common shares for treasury
Proceeds from issuance of stock under option plan
Excess tax benefits related to stock incentive programs
Purchase of non-controlling interest share
Dividends paid to non-controlling interest
Cash dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and
cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Year Ended December 31,
2016
2015
2014
(millions of dollars)
$
137.1
-
137.1
$
111.6
-
111.6
$
95.5
2.1
93.4
91.9
1.9
7.9
(10.9)
6.2
6.3
18.5
(3.1)
(4.9)
3.1
(10.5)
(4.8)
(4.3)
5.4
0.3
(15.0)
225.1
-
225.1
-
(62.4)
1.4
(6.7)
8.0
(1.9)
(61.6)
7.2
-
(193.2)
(0.1)
(2.6)
5.5
0.3
-
(4.9)
(7.0)
(194.8)
98.3
0.1
9.9
(2.5)
2.6
11.2
34.2
(0.2)
36.6
3.1
(10.4)
(9.7)
(3.0)
(15.4)
0.4
3.2
270.0
-
270.0
-
(86.0)
5.0
(4.7)
1.1
-
(84.6)
11.8
-
(191.8)
1.3
-
2.5
0.5
-
(1.1)
(7.0)
(183.8)
84.4
0.5
5.1
(21.1)
2.4
5.9
23.7
7.5
5.2
19.5
(7.6)
16.0
14.6
51.0
3.7
9.9
314.1
(3.3)
310.8
(1,802.3)
(81.8)
9.4
(6.3)
18.7
(0.7)
(1,863.0)
1,546.1
(38.2)
(175.0)
0.1
-
3.4
0.7
(2.1)
(3.3)
(6.9)
1,324.8
(9.6)
(21.8)
(13.3)
(40.9)
229.4
188.5
$
(20.2)
249.6
229.4
$
(240.7)
490.3
249.6
$
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
Equity Attributable to MTI
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
(millions of dollars)
Treasury
Stock
Non-controlling
Interests
Total
Balance as of December 31, 2013
$
4.7
$
361.5
$
1,106.3
$
(31.3)
$
(593.7)
$
26.9
$
874.4
Net income
Other comprehensive income (loss)
Dividends declared
Dividends to non-controlling interest
Purchase of non-controlling interest shares
Acquisition of AMCOL
Issuance of shares pursuant to employee stock compensation plans
Income tax benefit arising from employee stock compensation
plans
Stock based compensation
Balance as of December 31, 2014
Net income
Other comprehensive income (loss)
Dividends declared
Dividends to non-controlling interest
Issuance of shares pursuant to employee stock compensation plans
Income tax benefit arising from employee stock compensation
plans
Stock based compensation
Balance as of December 31, 2015
Net income
Other comprehensive income (loss)
Dividends declared
Dividends to non-controlling interest
Issuance of shares pursuant to employee stock compensation plans
Income tax benefit arising from employee stock compensation
plans
Purchase of common stock for treasury
Stock based compensation
Balance as of December 31, 2016
-
-
-
-
-
-
0.1
-
-
-
-
-
(2.1)
-
3.3
4.4
92.4
-
(6.9)
-
-
-
-
-
-
(81.6)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.1
(1.0)
-
(3.3)
0.2
-
-
95.5
(82.6)
(6.9)
(3.3)
(2.1)
0.2
3.4
4.4
-
$
4.8
5.9
373.0
$
-
1,191.8
$
$
-
(112.9)
-
(593.7)
$
$
-
25.9
5.9
888.9
$
-
-
-
-
-
-
-
-
-
-
2.4
1.0
107.9
-
(7.0)
-
-
-
-
(68.0)
-
-
-
-
-
-
-
-
-
-
3.7
(1.3)
-
(1.1)
-
-
111.6
(69.3)
(7.0)
(1.1)
2.4
1.0
-
$
4.8
11.2
387.6
$
-
1,292.7
$
$
-
(180.9)
-
(593.7)
$
$
-
27.2
11.2
937.7
$
-
-
-
-
-
-
-
-
-
-
5.5
0.6
133.4
-
(7.0)
-
-
-
-
(40.2)
-
-
-
-
-
-
-
-
-
-
3.7
(1.6)
-
(4.9)
-
-
137.1
(41.8)
(7.0)
(4.9)
5.5
0.6
-
-
$
4.8
-
6.3
400.0
$
-
-
1,419.1
$
-
-
(221.1)
$
(2.6)
-
(596.3)
$
-
-
24.4
$
(2.6)
6.3
1,030.9
$
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
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 and synthetic mineral products and supporting systems and services.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Minerals Technologies Inc. (the
"Company"), its wholly and majority-owned subsidiaries, as well as variable interest entities for which the Company is the
primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
On May 9, 2014, the Company acquired AMCOL International Corporation (“AMCOL”), see Note 2. The accompanying
Consolidated Statements of Income include the results of operations of the acquired AMCOL businesses from May 9, 2014,
through December 31, 2014.
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 revenue recognition, valuation of accounts
receivables, valuation of inventories, valuation of long-lived assets, goodwill and other intangible assets, pension plan
assumptions, valuation of product liability and asset retirement obligation, income tax, income tax valuation allowances, and
litigation and environmental liabilities. Actual results could differ from those estimates.
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, mainly bank deposits, with original maturities beyond
three months, but less than twelve months. Short-term investments amounted to $2.0 million and $2.6 million at December
31, 2016 and 2015, respectively. There were no unrealized holding gains and losses on the short-term bank investments held
at December 31, 2016.
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. The straight-line method of depreciation is used for substantially for all of the assets for financial
reporting purposes, except for mining related equipment which uses units-of-production method. The annual rates of
depreciation are 3% - 6.67% for buildings, 6.67% - 12.5% for machinery and equipment, 8% - 12.5% for furniture and
fixtures and 12.5% - 25% for computer equipment and software-related assets. The estimated useful lives of our PCC
production facilities and machinery and equipment pertaining to our natural stone mining and processing plants and our
chemical plants are 15 years.
Property, plant and equipment are depreciated over their useful lives. Useful lives are based on management's estimates
of the period that the assets can generate revenue, which does not necessarily coincide with the remaining term of a
F-7
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 on a straight-line basis 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 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 would then evaluate 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 impairment.
Investment in joint ventures
The Company uses the equity method of accounting to incorporate the results of its investments in companies in which it
has significant influence, but does not control; and cost method of accounting in companies in which it cannot exercise
significant control. The Company records the equity in earnings of its investments in joint ventures on a one month lag. At
December 31, 2016, the book value of Company’s equity method investment was $14.4 million. The Company had no cost
method investments at December 31, 2016.
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.
The Company also records liabilities related to land reclamation as a part of the asset retirement obligations. The Company
mines land for various minerals using a surface-mining process that requires the removal of overburden. In many instances,
the Company is obligated to restore the land upon completion of the mining activity. As the overburden is removed, the
Company recognizes this liability for land reclamation based on the estimated fair value of the obligation. The obligation is
adjusted to reflect the passage of time and changes in estimated future cash outflows.
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
F-8
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 11 for a full description of the Company's hedging activities and related accounting policies.
Revenue Recognition
Revenue from sale of products is recognized when title passes to the customer, the customer assumes the risks and
rewards of ownership, and collectability is reasonably assured; generally, this occurs when the goods are shipped 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.
Revenue from sales of equipment is recorded upon completion of installation and receipt of customer acceptance.
Revenue from services is recorded when the services have been performed and collectability is reasonably assured.
Revenue from long-term construction contracts is recorded using the percentage-of-completion method. Progress is
generally based upon costs incurred to date as compared to the total estimated costs to complete the work under the contract
or the amount of product installed in relation to the total amount expected to be installed. All known or anticipated losses on
contracts are provided when they become evident. Cost adjustments that are in the process of being negotiated with
customers for extra work or changes in scope of work are included in revenue when collection is reasonably assured.
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, 2016, 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 7 for additional detail on our uncertain tax positions.
The accompanying financial statements 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
Research and development costs are expensed as incurred.
F-9
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
The Company assumed AMCOL’s qualified defined benefit pension plan which covers substantially all of AMCOL
domestic employees hired before January 1, 2004, and supplementary pension plan which provides benefits in excess of
qualified plan limitation for certain employees.
Environmental
Expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations and which do not contribute to current or future revenue generation are
expensed. Liabilities are recorded when it is probable the Company will be obligated to pay amounts for environmental site
evaluation, remediation or related costs, and such amounts can be reasonably estimated.
Earnings Per Share
Basic earnings per share have been computed based upon the weighted average number of common shares outstanding
during the period.
Diluted earnings per share have been computed based upon the weighted average number of common shares outstanding
during the period assuming the issuance of common shares for all potentially dilutive common shares outstanding.
Subsequent events
The Company has evaluated for subsequent events through the date of issuance of its financial statements.
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.
Revenue from Contracts with Customers
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” which will supersede
nearly all existing revenue recognition guidance under U.S. GAAP. The underlying principle is that an entity will recognize
revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in
exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how
revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of
money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are
resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and
uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The guidance is effective for the
interim and annual periods beginning on or after December 15, 2017. The guidance permits the use of either a retrospective
or cumulative effect transition method. The Company has not yet selected a transition method and is currently evaluating the
impact of this ASU on the Company’s consolidated financial statements and related disclosures. The Company expects to
complete this analysis in early 2017.
Inventory – Simplifying the Measurement of Inventory
In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of
Inventory.” Under this accounting guidance, inventory will be measured at the lower of cost and net realizable value and
other options that currently exist for market value will be eliminated. ASU No. 2015-11 defines net realizable value as the
estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and
transportation. No other changes were made to the current guidance on inventory measurement. ASU 2015-11 is effective for
fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017
F-10
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s
financial statements.
Leases
In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires lessees to recognize most leases on-
balance sheet, thereby increasing their reported assets and liabilities, in some cases very significantly. Lessor accounting
remains substantially similar to current U.S. GAAP. ASU 2016-02 is effective for public business entities for annual and
interim periods in fiscal years beginning after December 15, 2018. ASU 2016-02 mandates a modified retrospective
transition method for all entities. The Company is currently evaluating the impact of this ASU on the Company’s
consolidated financial statements and related disclosures; however, the Company does not expect the adoption of this
guidance to have a material impact on the Company’s financial statements.
Investments – Equity Method and Joint Ventures
In March 2016, the FASB issued ASU 2016-07, “Simplifying the Transition to the Equity Method of Accounting”,
which eliminates the requirement for an investor to retroactively apply the equity method when its increase in ownership
interest (or degree of influence) in an investee triggers equity method accounting. ASU 2016-07 is effective for all entities
for interim and annual periods in fiscal years beginning after December 15, 2016. The adoption of this guidance is not
expected to have a material impact on the Company’s financial statements.
Stock Compensation – Improvements to Employee Share-Based Payment Accounting
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”,
which is intended to improve the accounting for share-based payment transactions as part of the FASB’s simplification
initiative. The ASU changes seven aspects of the accounting for share-based payment award transactions, including: (1)
accounting for income taxes; (2) classification of excess tax benefits on the statement of cash flows; (3) forfeitures; (4)
minimum statutory tax withholding requirements; (5) classification of employee taxes paid on the statement of cash flows
when an employer withholds shares for tax-withholding purposes; (6) practical expedient – expected term (nonpublic only);
and (7) intrinsic value (nonpublic only). The ASU is effective for fiscal years beginning after December 15, 2016, and
interim periods within those years for public business entities. Early adoption is permitted in any interim or annual period
provided that the entire ASU is adopted. The adoption of this guidance is not expected to have a material impact on the
Company’s financial statements.
Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory
In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other
Than Inventory", which requires entities to recognize at the transaction date the income tax consequences of intercompany
asset transfer other than inventory. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017. Early
adoption is permitted for this ASU, but only at the beginning of an annual period for which no financial statements have
already been issued or made available for issuance. The adoption of this guidance is not expected to have a material impact
on the Company's financial statements.
Note 2. Business Combination
On May 9, 2014, pursuant to the Merger Agreement dated March 10, 2014, the Company acquired AMCOL, based in
Hoffman Estates, Illinois, a leading international producer of specialty materials and related products and services for
industrial and consumer markets.
The Company acquired AMCOL by completing a tender offer to purchase AMCOL’s outstanding shares of common
stock and the subsequent merger of AMCOL with and into a wholly-owned subsidiary of MTI. At the expiration of the
Company’s tender offer, each tendered share of AMCOL common stock was purchased for consideration equal to $45.75 in
cash, and at the effective time of the back-end merger, each share of AMCOL common stock not tendered (other than shares
owned by the Company or held by AMCOL in treasury) was converted into the right to receive consideration equal to $45.75
in cash. Upon completion of the merger, AMCOL became a wholly owned direct subsidiary of MTI. Through the tender
offer and the merger, the Company paid $1,519.4 million in cash to acquire all of the outstanding shares of AMCOL.
In connection with the acquisition of AMCOL, the Company entered into a $1,560.0 million senior secured term loan
facility (the “Term Facility”), the net proceeds of which, together with the Company’s cash on hand, were used as cash
consideration for the acquisition of AMCOL and to refinance certain existing indebtedness of the Company and AMCOL and
to pay fees and expenses in connection with the foregoing. See Note 14.
The fair value of the total consideration transferred, net of cash acquired, was $1,802.3 million and comprised of the
following:
F-11
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash consideration transferred to AMCOL shareholders
AMCOL notes repaid at close
Total consideration transferred to debt and equity holders
Cash acquired
Total consideration transferred to debt and equity holders, net of cash acquired
(millions of dollars)
$
$
1,519.4
325.6
1,845.0
42.7
1,802.3
The acquisition of AMCOL has been accounted for using the acquisition method of accounting, which requires,
among other things, the assets acquired and liabilities assumed be recognized at their respective fair values as of the
acquisition date. As of May 9, 2015, the Company has completed its assessment of property, certain reserves (including
environmental, legal, and tax matters), obligations and deferred taxes, as well as our review of AMCOL’s existing accounting
policies. The purchase price allocation has been finalized.
The following table summarizes the final amounts recognized for assets acquired and liabilities assumed as of the
acquisition date, as well as adjustments made in 2015 to the amounts initially recorded in 2014 (measurement period
adjustments). The measurement period adjustments did not have a significant impact on our consolidated statements of
income, balance sheets or cash flows in any period and therefore, we have not retrospectively adjusted our financial
statements.
Accounts receivable
Inventories
Other current assets
Mineral rights
Plant, property and equipment
Goodwill
Intangible assets
Other non-current assets
Total assets acquired
Accounts payable
Accrued expenses
Non-current deferred tax liability
Other non-current liabilities
Total liabilities assumed
Net assets acquired
Preliminary Allocation
Previously Reported on
Form 10-K as of December 2014
(millions of dollars)
$
Final
Allocation
(millions of dollars)
$
Increase
(millions of dollars)
-
$
-
-
-
-
12.8
8.8
9.2
30.8
-
-
1.5
29.3
30.8
$
$
-
$
235.7
157.3
65.0
535.5
371.2
708.1
214.3
51.4
2,338.5
66.4
61.6
322.3
85.9
536.2
1,802.3
$
$
$
$
$
$
235.7
157.3
65.0
535.5
371.2
720.9
223.1
60.6
2,369.3
66.4
61.6
323.8
115.2
567.0
1,802.3
The Company used the income, market, or cost approach (or a combination thereof) for the preliminary valuation, and
used valuation inputs and analyses that were based on market participant assumptions. Market participants are considered to
be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability. For
certain items, the carrying value was determined to be a reasonable approximation of fair value based on the information
available. The Company’s estimates related to this valuation are considered to be critical accounting estimates because they
are susceptible to change from period to period based on our judgments about a variety of factors and due to the
uncontrollable variability of market factors underlying them. For example, in performing assessments of the fair value of
these assets, the Company makes judgments about the future performance business of the acquired business, economic,
regulatory, and political conditions affecting the net assets acquired, appropriate risk-related rates for discounting estimated
future cash flows, reasonable estimates of disposal values, and market royalty rate.
Goodwill was calculated as the excess of the consideration transferred over the assets acquired and represents the
estimated future economic benefits arising from other assets acquired that could not be individually identified and separately
recognized. The goodwill is primarily attributable to fair value of expected synergies from combining the MTI and AMCOL
businesses and will be allocated to the Performance Materials and Construction Technologies segments. Goodwill recognized
as a result of this acquisition is not deductible for tax purposes.
In connection with the acquisition, the Company recorded an additional deferred tax liability of $323.8 million with a
corresponding increase to goodwill. The increase in deferred tax liability represents the tax effect of the difference between
the estimated assigned fair value of the tangible and intangible assets and the tax basis of such assets.
F-12
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mineral rights were valued using discounted cash flow method, a Level 3 fair value input. Plant, property and
equipment were valued using the replacement cost method adjusted for age and deterioration, also a Level 3 fair value input.
Intangible assets acquired mainly included technology and tradenames. Technology was valued using relief-from
royalty method, a Level 3 fair value input, with a weighted average amortization period of 12 years. Tradenames were valued
using multi-period excess earnings, also a Level 3 fair value input, with a weighted average amortization period of 34 years.
The Company incurred $8.0, $11.8 million and $19.1 million of acquisition and integration related cost during the
years ended December 31, 2016, 2015 2014, respectively, which is reflected within the acquisition related transaction and
integration costs line of the Consolidated Statements of Income.
Note 3. Restructuring and Other Items, net
In 2014, the Company initiated a restructuring program and undertook actions to realign its business operations, improve
efficiencies, profitability, and return on invested capital. This restructuring impacted all business segments of the Company
and provided annualized savings of approximately $29 million (unaudited). This restructuring resulted in the following
charges relating to asset impairment and reduction in workforce:
Asset impairment and other restructuring charges:
The asset impairment charges in 2014 related to the consolidation of certain manufacturing operations and administrative
offices. The Company closed three Construction Technologies’ operations – two in Europe and one in Asia – and
consolidated those operations into others in these regions. The Company also closed and consolidated the operations of one
of its Performance Materials blending facilities in the U.S. The fair value of the associated assets was estimated using a
discounted cash flow approach (a Level 3 fair value input).
In 2015, the Company recognized impairment charges for certain underutilized coiled tubing equipment within the Energy
Services segment which have been abandoned by the Company.
In 2016, the Company recognized additional restructuring charges for lease termination costs, inventory write-offs and
impairment of assets relating to its exit from the Nitrogen and Pipeline product lines and restructuring of other onshore
services within the Energy Services segment as a result of the significant reduction in oil prices and overcapacity in the
onshore oil service market. The Company expects to realize further annualized savings from this restructuring program of
$11.5 million (unaudited). In addition, the Company recognized a $2.9 million gain on previously impaired assets in the
Refractories Segment.
Work force reduction:
In 2014, the Company announced a 10% permanent reduction of its workforce including elimination of duplicate
corporate functions, deployment of our shared service model, and consolidation and alignment of various corporate functions
and regional locations across the Company.
F-13
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table outlines the amount of restructuring charges recorded within the Consolidated Statements of Income,
and the segments they relate to:
Restructuring and Other Items, net
Year Ended December 31, 2016
2016
2015
(millions of dollars)
2014
Impairment of assets
Performance Materials
Construction Technologies
Energy Services
Corporate
Total impairment of assets charges
Severance and other employee costs
Specialty Minerals
Refractories
Performance Materials
Construction Technologies
Energy Services
Total severance and other employee costs
Other
Refractories
Performance Materials
-
$
-
18.5
-
18.5
$
-
$
-
33.0
1.2
34.2
$
$
-
-
-
-
12.7
12.7
$
$
-
2.0
-
-
9.0
11.0
$
$
$
$
0.4
11.7
11.6
-
23.7
3.0
0.7
5.6
5.8
3.7
18.8
$
$
(2.9)
-
-
$
-
-
$
0.7
Total restructuring and other items, net
$
28.3
$
45.2
$
43.2
At December 31, 2016 and 2015, the Company had $3.6 million and $7.9 million, respectively, included within other
current liabilities within our Consolidated Balance Sheets for cash expenditures needed to satisfy remaining obligations under
these reorganization initiatives. The Company expects to pay these amounts by the end of 2017.
The following table is a reconciliation of our restructuring liability balance:
Restructuring liability, December 31, 2015
Additional provisions
Cash payments
Restructuring liability, December 31, 2016
Note 4. Stock-Based Compensation
(millions of dollars)
$
$
7.9
12.7
(17.0)
3.6
At the Company’s 2015 Annual Meeting of Stockholders, the Company’s stockholders ratified the adoption of the
Company’s 2015 Stock Award and Incentive Plan (the “2015 Plan”), which provides for grants of incentive and non-
qualified stock options, restricted stock, stock appreciation rights, stock awards or performance unit awards. The 2015 Plan
is substantially similar to the Company’s 2001 Stock Award and Incentive Plan (as amended and restated as of March 18,
2009, the “2001 Plan” and collectively with the 2015 Plan, the “Plans”). The Company established the 2015 Plan to increase
the total number of shares of common stock reserved and available for issuance by 880,000 shares from the number of shares
remaining under the 2001 Plan. With the ratification of the 2015 Plan by the Company’s stockholders, the 2001 Plan was
discontinued as to new grants (however, all awards previously granted under the 2001 Plan remained unchanged). The Plans
are 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 2016, 2015 and 2014 include $3.5 million, $4.0 million and $3.1 million pre-tax
compensation costs, respectively, related to stock option expense as a component of marketing and administrative expenses.
F-14
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $1.4 million, $1.6 million and $1.2 million for 2016, 2015 and
2014, respectively.
The benefits of tax deductions in excess of the tax benefit from compensation costs that were recognized or would have
been recognized are classified as financing inflows on the consolidated statement of cash flows.
Stock Options
The fair value of options granted is estimated on the date of grant using the Black-Scholes valuation model.
Compensation expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant
based on the Company's historical experience and future expectations. The forfeiture rate assumption used for the periods
ended December 31, 2016, 2015 and 2014 was 7.38%, 7.34% and 7.13%, respectively.
The weighted average grant date fair value for stock options granted during the years ended December 31, 2016, 2015 and
2014 was $14.34, $22.68 and $22.89, respectively. The weighted average grant date fair value for stock options vested
during 2016, 2015 and 2014 was $20.94, $17.83 and $13.59, respectively. The total intrinsic value of stock options exercised
during the years ended December 31, 2016, 2015 and 2014 was $4.9 million, $2.4 million and $13.0 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, 2016, 2015 and 2014:
Expected life (in years)
Interest rate
Volatility
Expected dividend yield
2016
6.5
1.72%
36.75%
0.54%
2015
6.4
1.52%
36.86%
0.33%
2014
6.5
2.16%
37.15%
0.34%
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, 2016:
Awards outstanding at December 31, 2015
Granted
Exercised
Canceled
Awards outstanding at December 31, 2016
Awards exercisable at December 31, 2016
Weighted
Average
Exercise
Price
Per Share
$
42.29
38.59
36.66
43.78
41.66
39.43
Awards
1,091,844
383,622
(150,944)
(125,797)
1,198,725
767,313
Weighted
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
(Millions)
6.51
5.31
$
42.7
29.0
The aggregate intrinsic value above is calculated before applicable income taxes, based on the Company's closing stock
price of $77.25 as of the last business day of the period ended December 31, 2016 had all options been exercised on that date.
The weighted average intrinsic value of the options exercised during 2016, 2015 and 2014 was $32.34, $32.07 and $40.17 per
share, respectively. As of December 31, 2016, total unrecognized stock-based compensation expense related to non-vested
stock options was approximately $3.8 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-15
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-vested stock option activity for the year ended December 31, 2016 is as follows:
Nonvested awards outstanding at December 31, 2015
Granted
Vested
Canceled
Nonvested awards outstanding at December 31, 2016
Restricted Stock
Weighted
Average
Grant date
Fair Value
Per Share
$
57.21
38.59
55.01
42.18
45.61
Awards
353,859
383,622
(191,775)
(114,294)
431,412
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 155,165 shares,
216,502 shares and 106,575 shares for the periods ended December 31, 2016, 2015 and 2014, respectively. The fair value
was determined based on the market value of unrestricted shares. As of December 31, 2016, there was unrecognized stock-
based compensation related to restricted stock of $6.1 million, which will be recognized over approximately the next three
years. The compensation expense amortized with respect to all units was approximately $5.8 million, $8.8 million and $4.9
million for the periods ended December 31, 2016, 2015 and 2014, respectively. In addition, the Company recorded reversals
of $3.8 million, $1.6 million and $2.1 million for periods ended December 31, 2016, 2015 and 2014, respectively, related to
restricted stock forfeitures. Such costs and reversals are included in marketing and administrative expenses.
The following table summarizes the restricted stock activity for the Plan:
Unvested balance at December 31, 2015
Granted
Vested
Canceled
Unvested balance at December 31, 2016
Weighted
Average
Grant Date
Fair Value
Per Share
58.63
38.37
57.38
50.72
49.57
Awards
284,245
155,165
(88,746)
(123,451)
227,213
F-16
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Earnings Per Share (EPS)
Basic EPS
Amounts attributable to MTI
Income from continuing operations
Income from discontinued operations
Net income
Weighted average shares outstanding
Earnings per share attributable to MTI
Continuing operations
Discontinued operations
Net income
Diluted EPS
Amounts attributable to MTI
Income from continuing operations
Income from discontinued operations
Net income
Weighted average shares outstanding
Dilutive effect of stock options and stock units
Weighted average shares outstanding, adjusted
Earnings per share attributable to MTI
Continuing operations
Discontinued operations
Net income
Year Ended December 31,
2016
2015
(in millions, except per share data)
2014
$
$
133.4
-
133.4
$
$
107.9
-
107.9
$
$
90.3
2.1
92.4
34.9
34.7
34.5
$
$
$
$
$
$
3.11
-
3.11
2.62
0.06
2.68
3.82
-
3.82
$
$
133.4
-
133.4
$
$
107.9
-
107.9
$
$
90.3
2.1
92.4
34.9
0.3
35.2
34.7
0.3
35.0
34.5
0.3
34.8
$
$
$
$
$
$
3.08
-
3.08
2.59
0.06
2.65
3.79
-
3.79
Options to purchase 784 shares, 386,766 shares and 12,888 shares of common stock for the years ended December 31,
2016, 2015 and 2014, respectively, were not included in the computation of diluted earnings per share because they were
anti-dilutive, as the exercise prices of the options were greater than the average market price of the common shares.
Note 6. Discontinued Operations
During the year ended December 31, 2014, the Company reversed a facility closure accrual of $2.4 million, net of $0.6
million tax expense, for a previously impaired facility.
The following table provides selected financial information for the amounts included within discontinued operations in the
Consolidated Statements of Income.
F-17
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net sales
Production margin
Expenses
Facility closure costs accrual (reversal)
Income from operations
Provision for taxes on income
Year Ended December 31,
2016
2015
2014
(millions of dollars)
$
-
$
-
$
-
-
-
-
-
-
-
-
(0.3)
(2.4)
$
-
$
-
$
2.7
$
-
$
-
$
0.6
Income from discontinued operations, net of tax
$
-
$
-
$
2.1
Note 7. Income Taxes
Income from operations before provision for taxes by domestic and foreign source is as follows:
2016
2015
(millions of dollars)
2014
Income from continuing operations before income taxes and income
from affiliates and joint ventures:
Domestic
Foreign
The provision (benefit) for taxes on income consists of the following:
$
$
$
72.9
97.4
170.3
32.6
100.0
132.6
54.8
68.2
123.0
$
$
$
Domestic
Taxes currently payable
Federal
State and local
Deferred income taxes
Domestic tax provision
Foreign
Taxes currently payable
Deferred income taxes
Foreign tax provision
Total tax provision
2016
2015
(millions of dollars)
2014
$
18.7
4.4
(8.8)
14.3
23.2
(2.2)
21.0
35.3
$
$
1.4
1.2
(3.2)
(0.6)
$
28.1
3.4
(15.1)
16.4
22.7
0.7
23.4
22.8
$
20.3
(5.9)
14.4
30.8
$
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.
F-18
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The major elements contributing to the difference between the U.S. federal statutory tax rate and the consolidated
effective tax rate are as follows:
U.S. statutory 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
Manufacturing deduction
Other
Consolidated effective tax rate
2016
2015
2014
35.0%
35.0%
35.0%
(6.6)%
(8.4)%
(7.8)%
(6.4)%
1.1%
0.6%
(1.1)%
0.4%
0.1%
(2.0)%
(0.4)%
20.7%
(8.3)%
0.3%
(0.5)%
(0.9)%
(0.1)%
2.9%
(2.0)%
(0.8)%
17.2%
(9.5)%
1.0%
4.1%
1.7%
0.4%
2.7%
(3.3)%
0.7%
25.0%
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:
Deferred tax assets attributable to:
Accrued liabilities
Net operating loss carry forwards
Pension and post-retirement benefits costs
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities attributable to:
Plant and equipment, principally due to differences in depreciation
Intangible assets
Other
Total deferred tax liabilities
Net deferred tax asset (liability)
Net deferred tax assets and net deferred tax liabilities are as follows:
Net deferred tax asset, long-term
Net deferred tax liability, long-term
Net deferred tax asset (liability), long-term
2016
2015
(millions of dollars)
$
49.7
34.6
55.4
35.0
(24.8)
149.9
$
36.1
37.6
55.0
29.1
(28.8)
129.0
251.3
96.3
14.0
361.6
(211.7)
$
247.2
98.7
4.5
350.4
(221.4)
$
2016
2015
(millions of dollars)
$
$
27.1
238.8
(211.7)
30.6
252.0
(221.4)
$
$
Net deferred tax assets are included in other assets and deferred charges.
The Company has $34.6 million of deferred tax assets arising from tax loss carry forwards which will be realized through
future operations. Carry forwards of approximately $17.5 million expire over the next 20 years, and $17.1 million can be
utilized over an indefinite period.
On December 31, 2016, the Company had $13.7 million of total unrecognized tax benefits. Included in this amount were
a total of $9.5 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.
F-19
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the activity related to our unrecognized tax benefits:
Balance at beginning of the year
Increases related to current year tax positions
Increases related to new judgements
Decreases related to audit settlements and statue expirations
Balance at the end of the year
2016
(millions of dollars)
2015
$
4.0
8.8
0.9
-
$
5.0
0.5
0.8
(2.3)
$
13.7
$
4.0
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 a $0.3 million benefit in interest and penalties
during 2016 and had a total accrued balance on December 31, 2016 of $1.2 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 2010.
Net cash paid for income taxes were $30.6 million, $43.8 million and $5.7 million for the years ended December 31,
2016, 2015 and 2014, respectively.
The Company has not provided for U.S. federal and foreign withholding taxes on $560.3 million of foreign subsidiaries'
undistributed earnings as of December 31, 2016 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 $560.3
million of foreign earnings were to be repatriated, incremental taxes may be incurred. We do not believe this amount would
be more than $89.7 million.
Note 8. Inventories
The following is a summary of inventories by major category:
2016
2015
(millions of dollars)
$
$
70.6
5.4
80.5
30.4
186.9
73.4
5.4
86.1
30.0
194.9
$
$
Raw materials
Work-in-process
Finished goods
Packaging and supplies
Total inventories
F-20
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Property, Plant and Equipment
The major categories of property, plant and equipment and accumulated depreciation and depletion are presented below:
Mineral rights and reserves
Land
Buildings
Machinery and equipment
Furniture and fixtures and other
Construction in progress
Less: accumulated depreciation and depletion
Property, plant and equipment, net
December 31,
2015
2016
(millions of dollars)
$
547.8
$
553.8
42.7
195.6
1,193.6
123.3
38.4
2,141.4
(1,089.6)
39.8
179.7
1,130.7
209.7
53.6
2,167.3
(1,063.0)
$
1,051.8
$
1,104.3
Depreciation and depletion expense for the years ended December 31, 2016, 2015 and 2014 was $75.4 million, $82.1
million and $76.6 million, respectively.
Note 10. Goodwill and Other Intangible Assets
Goodwill and other intangible assets with indefinite lives are not amortized, but instead are assessed for impairment, at
least annually. The carrying amount of goodwill was $778.7 million and $781.2 million as of December 31, 2016 and
December 31, 2015, respectively. The net change in goodwill since December 31, 2015 was attributable to the effects of
foreign exchange.
The balance of goodwill by segment and the activity occurring in the past two fiscal years is as follows:
Specialty
Minerals
Refractories
Performance
Materials
Construction
Technologies
Consolidated
Balance at December 31, 2014
$
13.7
$
49.0
(millions of dollars)
$
453.2
$
255.0
$
770.9
Change in goodwill relating to:
Purchase price finalization
Foreign exchange translation
Total Changes
$
(0.4)
(0.4)
$
(2.0)
(2.0)
91.1
(0.1)
91.0
$
(78.3)
-
(78.3)
$
12.8
(2.5)
10.3
$
Balance at December 31, 2015
$
13.3
$
47.0
$
544.2
$
176.7
$
781.2
Change in goodwill relating to:
Purchase price finalization
Foreign exchange translation
Total Changes
-
(1.2)
(1.2)
-
(1.3)
(1.3)
-
-
-
-
-
-
-
(2.5)
(2.5)
Balance at December 31, 2016
$
12.1
$
45.7
$
544.2
$
176.7
$
778.7
F-21
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Acquired intangible assets subject to amortization as of December 31, 2016 and December 31, 2015 were as follows:
Tradenames
Technology
Patents and trademarks
Customer relationships
Weighted
Average
Useful Life
(Years)
34
12
17
30
28
December 31, 2016
December 31, 2015
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
(millions of dollars)
$
$
$
$
199.8
18.8
6.4
4.5
229.5
15.3
3.6
4.8
1.4
25.1
199.8
18.8
6.4
4.5
229.5
9.3
2.5
4.4
0.6
16.8
$
$
$
$
The weighted average amortization period of the acquired intangible assets subject to amortization is approximately 28
years. Amortization expense was approximately $8.2 million, $7.9 million and $4.6 million for the years ended December
31, 2016, 2015 and 2014, respectively and is recorded within the Marketing and administrative expenses line within the
Consolidated Statements of Income. The estimated amortization expense is $7.9 million annually for 2017-2021, and $164.9
million thereafter.
Note 11. Derivative Financial Instruments and Hedging Activities
As a multinational corporation with operations throughout the world, the Company is exposed to certain market risks.
The Company uses a variety of practices to manage these market risks, including, when considered appropriate, derivative
financial instruments. The Company's objective is to offset gains and losses resulting from interest rates and foreign currency
exposures with gains and losses on the derivative contracts used to hedge them. The Company uses derivative financial
instruments only for risk management and not for trading or speculative purposes.
By using derivative financial instruments to hedge exposures to changes in interest rates and foreign currencies, the
Company exposes itself to credit risk and market risk. Credit risk is the risk that the counterparty will fail to perform under
the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the
Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company
owes the counterparty, and therefore, it does not face any credit risk. The Company minimizes the credit risk in derivative
instruments by entering into transactions with major financial institutions.
Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates, currency
exchange rates, or commodity prices. The market risk associated with interest rate and forward exchange contracts is
managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
Cash flow hedges:
For derivative instruments that are designated and qualify as cash flow hedges, the Company records the effective portion
of the gain or loss in accumulated other comprehensive income (loss) as a separate component of shareholders' equity. The
Company subsequently reclassifies the effective portion of gain or loss into earnings in the period during which the hedged
transaction is recognized in earnings.
The Company utilizes interest rate swaps to limit exposure to market fluctuations on floating-rate debt. During the
second quarter of 2016, the Company entered into a floating to fixed interest rate swap for an initial aggregate notional
amount of $300 million. The notional amount at December 31, 2016 was $257 million. This interest rate swap is designated
as a cash flow hedge. The gains and losses associated with this interest rate swap are recorded in accumulated other
comprehensive income (loss). The fair value of this swap was an asset of $2.5 million at December 31, 2016 and is recorded
in other assets and deferred charges on the Consolidated Balance Sheet.
In addition, the Company uses foreign exchange forward contracts 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,
2016, designated as cash flow hedges. 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 fair
value of these contracts at December 31, 2016 and 2015 was not significant.
F-22
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other:
The Company is exposed to potential gains or losses from foreign currency fluctuations affecting net investments and
earning denominated in foreign currencies. The Company is particularly sensitive to currency exchange rate fluctuations for
the following currencies: British pound sterling (GBP), Chinese renminbi (CYN), Euro, Malaysian ringgit (MYR), Polish
zloty (PLN), South African Rand (ZAR), Thai baht (THB) and Turkish lira (TRY). When considered appropriate, the
Company enters into foreign exchange derivative contracts to mitigate the risk of fluctuations on these exposures. The
Company does not designate these contracts for hedge accounting treatment and the changes in fair value of these contracts
are recorded in earnings. The Company recorded losses of $0.6 million and $0.3 million in other non-operating income
(deductions), net within the Consolidated Statements of Income for the years ended 2016 and 2015, respectively. There were
2 open contracts at December 31, 2016. The fair value of these contracts at December 31, 2016 was not significant. There
were no open foreign exchange rate contracts at December 31, 2015.
Refer to Note 12 for further discussion of the determination of the fair value of derivatives.
Note 12. 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.
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.
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 at the end of each of the past two years. 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.
Description
Fair Value Measurements Using
Asset /
(Liability)
Balance at
12/31/16
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
(millions of dollars)
Significant
Unobservable
Inputs
(Level 3)
Deferred compensation plan assets
$
10.8
$
-
$
10.8
$
-
Supplementary pension plan assets
Interest rate swap
-
-
10.4
2.5
-
-
10.4
2.5
F-23
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Description
Fair Value Measurements Using
Asset /
(Liability)
Balance at
12/31/16
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(milliions of dollars)
Money market funds
$
7.5
$
7.5
$
-
$
-
The fair value of investment in the money market funds is determined by quoted prices in active markets and is
categorized as Level 1.
The fair value of foreign exchange contracts is 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. Deferred compensation
and supplementary pension plan assets related to the acquisition of AMCOL businesses and are valued using quoted prices
for similar assets in active markets.
The Company does not have any financial assets or liabilities measured at fair value on a recurring basis categorized as
Level 3, except for pension assets discussed in Note 15, and there were no transfers in or out of Level 3 during the year ended
December 31, 2016 and 2015. There were also no changes to the Company's valuation techniques used to measure asset and
liability fair values on a recurring basis.
Note 13. Financial Instruments and Concentrations of Credit Risk
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents, short-term investments, accounts receivable and payable: The carrying amounts approximate
fair value because of the short maturities of these instruments.
Short-term debt and other liabilities: The carrying amounts of short-term debt and other liabilities approximate fair value
because of the short maturities of these instruments.
Long-term debt: The fair value of the long-term debt of the Company is estimated based on the quoted market prices for
that debt or similar debt and approximates the carrying amount.
Forward exchange contracts: The fair value of forward exchange contracts (used for hedging purposes) is based on
information derived from active markets. If appropriate, the Company would enter into forward exchange contracts to
mitigate the impact of foreign exchange rate movements on the Company's operating results. It does not engage in
speculation. Such foreign exchange contracts would offset losses and gains on the assets, liabilities and transactions being
hedged.
Credit risk: The Company provides credit to customers in the ordinary course of business. The Company’s customer base
is diverse and includes customers located throughout the world. 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, 2016, 2015 and 2014 was $6.2 million, $2.6 million
and $2.4 million, respectively.
F-24
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Long-Term Debt and Commitments
The following is a summary of long term debt:
Term Loan Facility, due May 9, 2021, net of unamortized discount and deferred financing costs
of $26.4 million and $30.9 million as of December 31, 2016 and December 31, 2015, respectively.
$
1,061.7
$
1,246.4
December 31,
2016
2015
(millions of dollars)
Japan Loan Facilities
China Loan Facilities
Total
Less: Current maturities
Long-term debt
5.8
9.2
1,076.7
6.8
1,069.9
$
$
$
$
-
12.0
1,258.4
3.1
1,255.3
On May 9, 2014, in connection with the acquisition of AMCOL International Corporation (“AMCOL”), the
Company entered into a credit agreement providing for a $1,560 million senior secured term loan facility (the “Term
Facility”) and a $200 million senior secured revolving credit facility (the “Revolving Facility” and, together with the Term
Facility, the “Facilities”).
On June 23, 2015, the Company entered into an amendment (the “First Amendment”) to the credit agreement to
reprice the $1.378 billion then outstanding on the Term Facility. As amended by the First Amendment, the Term Facility had
a $1.078 billion floating rate tranche and a $300 million fixed rate tranche. On February 14, 2017, the Company entered into
an amendment (the “Second Amendment”) to the credit agreement to reprice the $788 million floating rate tranche then
outstanding. See Note 24. The maturity date for loans under the Term Facility was not changed by the First Amendment.
As amended by the First Amendment, the loans outstanding under the Term Facility matured on May 9, 2021 and the loans
outstanding (if any) and commitments under the Revolving Facility will mature and terminate, as the case may be, on May 9,
2019. After the First Amendment and until the Second Amendment, loans under the variable rate tranche of the Term
Facility bore interest at a rate equal to an adjusted LIBOR rate (subject to a floor of 0.75%) plus an applicable margin equal
to 3.00% per annum. Loans under the fixed rate tranche of the Term Facility bear interest at a rate of 4.75%. Loans under
the Revolving Facility will bear interest at a rate equal to an adjusted LIBOR rate plus an applicable margin equal to 1.75%
per annum. Such rates are subject to decrease by up to 25 basis points in the event that, and for so long as, the Company’s
net leverage ratio (as defined in the credit agreement) is less than certain thresholds. The variable rate tranche of the Term
Facility was issued at par and had a 1% required amortization per year under the First Amendment. The obligations of the
Company under the Facilities are unconditionally guaranteed jointly and severally by, subject to certain exceptions, all
material domestic subsidiaries of the Company (the “Guarantors”) and secured, subject to certain exceptions, by a security
interest in substantially all of the assets of the Company and the Guarantors.
The credit agreement contains certain customary affirmative and negative covenants that limit or restrict the ability of
the Company and its restricted subsidiaries to enter into certain transactions or take certain actions. In addition, the credit
agreement contains a financial covenant that requires the Company, if on the last day of any fiscal quarter loans or letters of
credit were outstanding under the Revolving Facility (excluding up to $15 million of letters of credit), to maintain a
maximum net leverage ratio (as defined in the credit agreement) of, initially, 5.25 to 1.00 for the four fiscal quarter period
preceding such day. Such maximum net leverage ratio requirement is subject to decrease during the duration of the facility to
a minimum level (when applicable) of 3.50 to 1.00. As of December 31, 2016, there were no loans and $12.2 million in
letters of credit outstanding under the Revolving Facility. The Company is in compliance with all the covenants associated
with the Revolving Facility as of the end of the period covered by this report.
During 2016, the Company repaid $190 million on its Term Facility.
The Company has five committed loan facilities for the funding of new manufacturing facilities in China, for a
combined 94.8 million RMB and $1.8 million. In December 2016, the Company entered into a committed loan facility in
Japan in the amount of 680 million Yen (approximately $5.8 million). As of December 31, 2016, on a combined basis, $15.0
million was outstanding. Principal will be repaid in accordance with the payment schedules ending in 2021. The Company
repaid $3.2 million on these loans in 2016.
As of December 31, 2016, the Company had $34.8 million in uncommitted short-term bank credit lines, of which
approximately $6.1 million was in use.
F-25
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Short-term borrowings as of December 31, 2016 and 2015 were $6.1 million and $6.5 million, respectively. The weighted
average interest rate on short-term borrowings outstanding as of December 31, 2016 and December 31, 2015 was 3.7% and
3.4%, respectively.
The aggregate maturities of long-term debt are as follows: $6.8 million in 2017; $3.6 million in 2018; $0.6 million in 2019,
$0.6 million in 2020; $1,091.5 million in 2021 and $0.0 million thereafter.
During 2016, 2015 and 2014, respectively, the Company incurred interest costs of $56.5 million, $62.6 million and $44.6
million, including $0.1 million, $0.5 million and $0.6 million, respectively, which were capitalized. Interest paid
approximated the incurred interest cost.
Note 15. 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 also 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.
In May 2014, as a part of its acquisition of AMCOL businesses, the Company assumed AMCOL’s qualified defined
benefit pension plan, supplementary pension plan (SERP) and defined contribution plan. The defined benefit pension plan
covers substantially all of AMCOL’s domestic employees hired before January 1, 2004. The SERP plan provides benefit in
excess of qualified plan limitation for certain employees. AMCOL’s domestic employees hired on or after January 1, 2004
participate in AMCOL’s defined contribution plan whereby the Company will make a retirement contribution into the
employee’s savings plan equal to 3% of their compensation. For more information on the AMCOL acquisition, see Note 2.
The Company’s disclosures for the U.S. plans have been combined with those outside of the U.S. as the international
plans do not have significantly different assumptions, and together represent less than 25% of our total benefit obligation.
F-26
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table set forth Company's pension obligation and funded status at December 31:
Change in benefit obligations:
Beginning projected benefit obligation
Service cost
Interest cost
Actuarial (gain)/loss
Benefits paid
Settlements
Acquisition
Foreign exchange impact
Other
Ending projected benefit obligation
Change in plan assets:
Beginning fair value
Actual return on plan assets
Employer contributions
Plan participants' contributions
Benefits paid
Settlements
Acquisition
Foreign exchange impact
Ending fair value
Pension Benefits
Post-Retirement Benefits
2016
2015
2016
(millions of dollars)
2015
$
416.6
8.2
13.0
21.2
(18.3)
(0.9)
$
433.8
10.3
15.4
(17.0)
(19.5)
$
9.3
0.3
0.3
(0.6)
-
$
10.1
0.4
0.3
(0.9)
(0.4)
(11.4)
(0.5)
427.9
282.5
22.9
10.5
0.4
(18.3)
(0.5)
-
(8.2)
289.3
(7.0)
0.6
416.6
295.8
1.2
10.0
0.5
(19.5)
-
-
(5.5)
282.5
-
9.3
-
-
-
-
-
-
-
-
-
(0.2)
9.3
-
-
0.4
-
(0.4)
-
-
-
-
Funded status of the plan
$
(138.6)
$
(134.1)
$
(9.3)
$
(9.3)
Amounts recognized in the consolidated balance sheet consist of:
Pension Benefits
Post-Retirement Benefits
2016
2015
2016
(millions of dollars)
2015
Current liability
Non-current liability
Recognized liability
$
$
$
$
(0.8)
(137.8)
(138.6)
(0.9)
(133.2)
(134.1)
(0.6)
(8.7)
(9.3)
$
$
$
$
(0.7)
(8.6)
(9.3)
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:
Pension Benefits
Post-Retirement Benefits
2016
2015
2016
(millions of dollars)
2015
Net actuarial (gain) loss
Prior service cost
Amount recognized end of year
$
$
$
$
82.1
(0.1)
82.0
80.3
0.2
80.5
(1.7)
(2.4)
(4.1)
$
$
$
$
(1.5)
(4.3)
(5.8)
The accumulated benefit obligation for all defined benefit pension plans was $394.5 million and $382.6 million at
December 31, 2016 and 2015, respectively.
F-27
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in the Plan assets and benefit obligations recognized in other comprehensive income:
Pension Benefits
Post-Retirement Benefits
2016
2015
2016
(millions of dollars)
2015
Current year actuarial gain (loss)
Amortization of actuarial (gain) loss
Amortization of prior service credit (gain) loss
Total recognized in other comprehensive income
(8.7)
6.8
0.4
(1.5)
0.3
(0.1)
(1.9)
(1.7)
0.6
(0.1)
(1.9)
(1.4)
$
$
$
$
$
$
$
$
The components of net periodic benefit costs are as follows:
Pension Benefits
2015
2016
Post-Retirement Benefits
2014
2016
2015
2014
(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
$
$
$
$
$
$
8.2
13.0
(18.6)
0.6
10.7
0.3
14.2
10.3
15.4
(19.7)
0.8
12.1
-
18.9
0.3
0.3
-
(3.1)
(0.2)
-
(2.7)
0.4
0.3
-
(3.1)
(0.1)
-
(2.5)
0.4
0.4
-
(3.1)
(0.2)
-
(2.5)
$
$
$
$
$
$
0.5
7.7
0.5
8.7
8.9
14.9
(19.4)
1.0
7.4
-
12.8
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 2017 estimated amortization of amounts in other accumulated comprehensive income are as follows:
Pension Benefits
Post-Retirement
Benefits
(millions of dollars)
Amortization of prior service credit (gain) loss
Amortization of net (gain) loss
Total cost to be recognized
Additional Information
$
$
$
$
0.1
10.6
10.7
(3.1)
(0.3)
(3.4)
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, 2016, 2015 and 2014 are as follows:
Discount rate
Expected return on plan assets
Rate of compensation increase
2016
2015
2014
3.88%
6.89%
3.03%
3.71%
6.89%
3.04%
4.39%
7.34%
3.08%
F-28
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average assumptions used to determine benefit obligations for the pension benefit plans and other benefit
plans at December 31, 2016, 2015 and 2014 are as follows:
Discount rate
Rate of compensation increase
2016
2015
2014
3.60%
2.96%
3.89%
3.04%
3.66%
3.05%
For 2016, 2015 and 2014, the discount rate was based on a Citigroup yield curve of high quality corporate bonds with cash
flows matching our plans' expected benefit payments. The expected return on plan assets is based on our asset allocation mix
and our historical return, taking into account current and expected market conditions. The actual return on pension assets
was approximately 8% in 2016, 1% in 2015 and 7% in 2014.
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, 2016 and 2015 by asset
category are as follows:
Asset Category
Equity securities
Fixed income securities
Real estate
Other
Total
2016
2015
60.2%
32.7%
0.7%
6.4%
100.0%
58.9%
34.7%
0.9%
5.5%
100.0%
The Company's pension plan fair values at December 31, 2016 and 2015 by asset category are as follows:
Asset Category
2016
2015
Equity securities
Fixed income securities
Real estate
Other
Total
$
$
(millions of dollars)
174.1
94.7
1.9
18.6
289.3
166.4
98.0
2.5
15.6
282.5
The following table presents domestic and foreign pension plan assets information at December 31, 2016, 2015 and 2014
(the measurement date of pension plan assets):
2016
U.S. Plans
2015
2016
2014
(millions of dollars)
International Plans
2015
2014
Fair value of plan assets
$
221.9
$
213.0
$
224.1
$
67.4
$
69.5
$
71.7
F-29
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes our defined benefit pension plan assets measured at fair value as of December 31, 2016:
Pension Assets Fair Value as of December 31, 2016
Equity securities
US equities
Non-US equities
Fixed income securities
Corporate debt instruments
Real estate and other
Real estate
Other
Total assets
Quoted
Prices In
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(millions of dollars)
Total
$
155.0
18.9
0.2
$
-
-
$
-
$
155.2
18.9
63.4
31.3
-
94.7
-
-
-
0.2
1.9
18.4
1.9
18.6
$
237.3
$
31.7
$
20.3
$
289.3
The following table summarizes our defined benefit pension plan assets measured at fair value as of December 31, 2015:
Pension Assets Fair Value as of December 31, 2015
Equity securities
US equities
Non-US equities
Fixed income securities
Corporate debt instruments
Real estate and other
Real estate
Other
Total assets
Quoted
Prices In
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(millions of dollars)
Total
$
143.7
22.5
$
0.2
-
$
-
-
$
143.9
22.5
65.4
32.6
-
98.0
-
-
231.6
-
0.2
33.0
2.5
15.4
2.5
15.6
17.9
282.5
U.S. equities—This class included actively and passively managed common equity securities comprised primarily of large-
capitalization stocks with value, core and growth strategies.
Non-U.S. equities—This class included actively managed common equity securities comprised primarily of international
large-capitalization stocks.
F-30
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fixed income—This class included debt instruments issued by the US Treasury, and corporate debt instruments.
Real Estate and other— This class includes assets related to real estate and other assets such as insurance contracts.
Asset classified as Level 1 are valued using quoted prices on major stock exchange on which individual assets are traded.
Our Level 2 assets are valued using net asset value. The net asset value is quoted on a private market that is not active;
however, the unit price is based on the underlying investments that are traded on an active market. Our Level 3 assets are
estimated at fair value based on the most recent financial information available for the underlying securities, which are not
traded on active market, and represents significant unobservable input.
The following is a reconciliation of changes in fair value measurement of plan assets using significant unobservable inputs
(Level 3):
(millions of dollars)
Beginning balance at December 31, 2014
Purchases, sales, settlements
Actual return on plan assets still held at reporting date
Foreign exchange impact
Ending balance at December 31, 2015
Purchases, sales, settlements
Actual return on plan assets still held at reporting date
Foreign exchange impact
Ending balance at December 31, 2016
$
$
$
26.6
-
(8.4)
(0.3)
17.9
-
3.0
(0.6)
20.3
There were no transfers in or out of Level 3 during the year ended December 31, 2016 and 2015
Contributions
The Company expects to contribute $12.2 million to its pension plans and $0.6 million to its other post-retirement benefit
plan in 2017.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
2017
2018
2019
2020
2021
2022-2026
Investment Strategies
Pension
Benefits
Other
Benefits
(millions of dollars)
$
$
$
$
$
$
20.2
21.2
22.4
23.0
23.2
123.8
$
$
$
$
$
$
0.6
0.7
0.7
0.7
0.8
4.0
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, 2016 was over 9%. The Company’s assets are strategically allocated among equity, debt and other
investments to achieve a diversification level that dampens fluctuations in investment returns. The Company’s long-term
investment strategy is an investment portfolio mix of approximately 55%-65% in equity securities, 30%-35% in fixed income
securities and 0%-15% in other securities.
F-31
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Savings and Investment Plans
The Company maintains a voluntary Savings and Investment Plan (a 401(k) plan) for most non-union employees in the U.S.
On January 1, 2015, as a result of the acquisition and subsequent integration of AMCOL, the AMCOL 401(k) plan was
merged into the Minerals Technologies Inc. Savings and Investment Plan. Within prescribed limits, the Company bases its
contribution to the Savings and Investment Plan on employee contributions. The Company's contributions amounted to $5.1
million, $6.3 million and $2.9 million for the years ended December 31, 2016, 2015 and 2014, respectively. The Company
also contributed $2.6 million to the AMCOL 401(k) plan in 2014.
Note 16. Leases
The Company has several non-cancelable operating leases, primarily for office space and equipment. Rent expense
amounted to approximately $16.2 million, $19.5 million and $19.8 million for the years ended December 31, 2016, 2015 and
2014, respectively. Total future minimum rental commitments under all non-cancelable leases for each of the years 2017
through 2021 and in aggregate thereafter are approximately $14.4 million, $12.1 million, $9.9 million, $8.2 million, $6.6
million, respectively, and $33.1 million thereafter. Total future minimum rentals to be received under non-cancelable
subleases were approximately $4.2 million at December 31, 2016.
Total future minimum payments to be received under direct financing leases for each of the years 2017 through 2021 and
the aggregate thereafter are approximately: $0.3 million, $0.3 million, $0.2 million, $0.1 million, $0.1 million and $-- million
thereafter.
Note 17. Litigation
We are party to a number of lawsuits arising in the normal course of our business.
On May 8, 2013, Armada (Singapore) PTE Limited, an ocean shipping company now in bankruptcy ("Armada") filed a
case in federal court in the Northern District of Illinois against AMCOL and certain of its subsidiaries ( Armada (Singapore)
PTE Limited v. AMCOL International Corp., et al., United States District Court for the Northern District of Illinois , Case
No. 13 CV 3455). We acquired AMCOL and its subsidiaries on May 9, 2014. A co-defendant is Ashapura Minechem
Limited, a company located in Mumbai, India (“AML”). During the relevant time period, 2008-2010, AMCOL owned
slightly over 20% of the outstanding AML stock through December 2009, after which it owned approximately 19%. In 2008,
AML entered into two contracts of affreightment (“COA”) with Armada for over 60 ship loads of bauxite from India to
China. After one shipment, AML made no further shipments, which led Armada to file arbitrations in London against AML,
one for each COA. AML did not appear in the London arbitrations and default awards of approximately $70 million were
entered. The litigation filed by Armada against AMCOL and AML relates to these awards, which AML has not paid. The
substance of the allegations by Armada is that AML and AMCOL engaged in illegal conduct to thwart Armada’s efforts to
collect the arbitration award. The counts in the complaint include both violations of the Illinois Fraudulent Transfer laws, as
well as federal RICO violations. The lawsuit seeks money damages, as well as injunctive relief. Fact discovery is scheduled
to close in the first quarter of 2017. We have accrued an estimate of potential damages for the Armada lawsuit, the amount of
which was not material to our financial position, results of operations or cash flows.
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 three pending silica cases and 18 pending
asbestos cases. To date, 1,492 silica cases and 48 asbestos cases have been dismissed, not including any lawsuits against
AMCOL or American Colloid Company dismissed prior to our acquisition of AMCOL. Six new asbestos cases were filed in
the period, including three new cases in the fourth quarter of 2016, and one additional case in the first quarter of 2017. No
asbestos or silica cases were closed during the fourth quarter, however, as previously reported, twenty-seven silica cases and
two asbestos cases were closed during 2016. 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 settled only one silica lawsuit, for a nominal amount, and no asbestos lawsuits to date (not including
any that may have been settled by AMCOL prior to completion of the acquisition). 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 for these cases, excluding cases against AMCOL or American Colloid,
are reimbursed by Pfizer Inc. pursuant to the terms of certain agreements entered into in connection with the Company's
F-32
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
initial public offering in 1992. Of the 18 pending asbestos cases all except two 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. The two exceptions pertain to a pending asbestos case against American Colloid Company, and one for
which no period of alleged exposure has been stated by plaintiffs. 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 and assessing site-specific risks.
We are awaiting regulators’ approval of the risk assessment report, which will form the basis for a proposal by the Company
concerning eventual remediation.
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. Pursuant to a Consent Decree entered on October 24, 2014, the
United States paid the Company $2.3 million in the 4th quarter of 2014 to resolve the Company’s claim for response costs for
investigation and initial remediation activities at this facility through October 24, 2014. Contribution by the United States to
any future costs of investigation or additional remediation has, by agreement, been left unresolved. 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, 2016.
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, 2016.
The Company and its subsidiaries are not party to any other material pending legal proceedings, other than routine
litigation incidental to their businesses.
Note 18. 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 34,969,987 shares and 34,784,395 shares were outstanding at December 31, 2016 and 2015, respectively, and
1,000,000 shares of preferred stock, none of which were issued and outstanding.
Cash Dividends
Cash dividends of $7.0 million or $0.20 per common share were paid during 2016. In January 2017, a cash dividend of
approximately $1.7 million or $0.05 per share, was declared, payable in the first quarter of 2017.
Stock Award and Incentive Plan
At the Company’s 2015 Annual Meeting of Stockholders, the Company’s stockholders ratified the adoption of the
Company’s 2015 Stock Award and Incentive Plan (the “2015 Plan”), which provides for grants of incentive and non-
qualified stock options, restricted stock, stock appreciation rights, stock awards or performance unit awards. The 2015 Plan
is substantially similar to the Company’s 2001 Stock Award and Incentive Plan (as amended and restated as of March 18,
2009, the “2001 Plan” and collectively with the 2015 Plan, the “Plans”). The Company established the 2015 Plan to increase
F-33
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the total number of shares of common stock reserved and available for issuance by 880,000 shares from the number of shares
remaining under the 2001 Plan. With the ratification of the 2015 Plan by the Company’s stockholders, the 2001 Plan was
discontinued as to new grants (however, all awards previously granted under the 2001 Plan remained unchanged). The Plans
are administered by the Compensation Committee of the Board of Directors. Stock options granted under the Plan have a
term not in excess of ten years. The exercise price for stock options will not be less than the fair market value of the common
stock on the date of the grant, and each award of stock options will vest ratably over a specified period, generally three years.
The following table summarizes stock option and restricted stock activity for the Plans:
Stock Options
Restricted Shares
Shares
Available for
Grant
1,190,964
(279,643)
-
84,806
996,127
880,000
(455,275)
-
71,113
1,491,965
-
(538,787)
-
249,248
1,202,426
Shares
1,131,415
173,068
(323,636)
(29,768)
951,079
-
238,773
(74,839)
(23,169)
1,091,844
-
383,622
(150,944)
(125,797)
1,198,725
Weighted
Average
Exercise
Price Per
Share ($)
$
32.42
58.25
30.57
41.88
37.46
-
60.40
33.12
60.22
42.29
-
38.59
36.66
43.78
41.66
Weighted
Average
Exercise
Price Per
Share ($)
$
37.65
59.16
36.51
38.73
50.56
-
60.32
47.51
51.43
58.63
-
38.37
57.38
50.72
49.57
Shares
185,572
106,575
(61,621)
(55,038)
175,488
-
216,502
(59,801)
(47,944)
284,245
-
155,165
(88,746)
(123,451)
227,213
Balance January 1, 2014
Granted
Exercised/vested
Canceled
Balance December 31, 2014
Authorized
Granted
Exercised/vested
Canceled
Balance December 31, 2015
Authorized
Granted
Exercised/vested
Canceled
Balance December 31, 2016
Note 19. Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) at December 31 comprised of the following components:
2016
2015
(millions of dollars)
$
$
(147.3)
(78.0)
4.2
(221.1)
(108.7)
(74.8)
2.6
(180.9)
$
$
Cumulative foreign currency translation
Unrecognized pension costs (net of tax benefit of $39.4 in 2016 and $38.7 in 2015)
Unrealized gain (loss) on cash flow hedges (net of tax expense of $1.8 in 2016 and $1.0 in 2015)
F-34
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the changes in other comprehensive income (loss) by component:
Year Ended December 31,
2016
2015
Pre-Tax
Amount
Tax
(Expense)
Benefit
Net-of-
Tax
Amount
Pre-Tax
Amount
Tax
(Expense)
Benefit
Net-of-
Tax
Amount
(millions of dollars)
Foreign currency translation adjustment
(40.2)
-
$
(40.2)
(76.6)
-
$
(76.6)
Pension plans:
Net actuarial gains (losses) and prior service costs arising during the
period
Amortization of net actuarial (gains) losses and prior service costs
Unrealized gains (losses) on cash flow hedges
(12.5)
8.0
2.4
4.1
(2.8)
(0.8)
(8.4)
5.2
1.6
0.5
9.6
-
0.5
(3.3)
-
1.0
6.3
-
Total other comprehensive income (loss)
$
(42.3)
$
0.5
$
(41.8)
$
(66.5)
$
(2.8)
$
(69.3)
The pre-tax amortization amounts of pension plans in the table above are included within the components of net periodic
pension benefit costs (see note 15) and the related tax amounts are included within provision for taxes on income line within
Consolidated Statements of Income.
Note 20. 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, 2016 and 2015:
2016
2015
(millions of dollars)
$
$
Asset retirement liability, beginning of period
Accretion expense
Reversals
Payments
Foreign currency translation
Asset retirement liability, end of period
21.4
2.5
-
(1.6)
(0.8)
21.5
23.0
2.8
(1.0)
(1.9)
(1.5)
21.4
$
$
The Company mines various minerals using a surface mining process that requires the removal of overburden. In certain
areas and under various governmental regulations, the Company is obligated to restore the land comprising each mining site
to its original condition at the completion of the mining activity. This liability will be adjusted to reflect the passage of time,
mining activities, and changes in estimated future cash outflows
The current portion of the liability of approximately $2.1 million is included in other current liabilities and the long-term
portion of the liability of approximately $19.4 million is included in other non-current liabilities in the Consolidated Balance
Sheet as of December 31, 2016.
Accretion expense is included in cost of goods sold in the Company's Consolidated Statements of Income.
F-35
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 21. Non-Controlling Interests
In May 2014, the Company acquired the remaining 20% non-controlling interest in CETCO Lining Technologies India
Pvt. Ltd. (“CETCO India”), a part of our Construction Technologies operations for $2.1 million. The following table sets
forth the effects of this transaction on equity attributable to MTI shareholders:
Net income attributable to MTI
Transfer from non-controlling interest:
Decrease in additional paid-in capital for purchase of the remaining
non-controlling interest in CETCO India
2016
Year Ended December 31,
2015
(millions of dollars)
2014
$
133.4
$
107.9
$
92.4
-
-
(2.1)
Change from net income attributable to MTI and transfers from non-controlling interest
$
133.4
$
107.9
$
90.3
Note 22. Segment and Related Information
The Company determines its operating segments based on the discrete financial information that is regularly evaluated by
its chief operating decision maker, our President and Chief Executive Officer, 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 5 reportable segments: Specialty Minerals, Refractories, Performance Materials, Construction
Technologies, and Energy Services.
- 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.
- 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.
- The Performance Materials segment is a leading supplier of bentonite and bentonite-related products. This segment
also supplies chromite and leonardite and operates more than 25 mining or production facilities worldwide.
- The Construction Technologies segment provides products for non-residential construction, environmental and
infrastructure projects worldwide. It serves customers engaged in a broad range of construction projects, including site
remediation, concrete waterproofing for underground structures, liquid containment on projects ranging from landfills to
flood control, and drilling applications including foundation, slurry wall, tunneling, water well, and horizontal drilling.
- The Energy Services segment provides services to improve the production, costs, compliance, and environmental
impact of activities performed in oil and gas industry. This segment offers a range of services for off-shore filtration and well
testing to the worldwide oil and gas 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. The costs deducted to
arrive at operating profit do not include several items, such as net interest or income tax expense. 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.
F-36
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment information for the years ended December 31, 2016, 2015 and 2014 was as follows:
Net Sales
Income from Operations
Specialty Minerals
Refractories
Performance Materials
Construction Technologies
Energy Services
Total
Specialty Minerals
Refractories
Performance Materials
Construction Technologies
Energy Services
Total
Depreciation, Depletion and Amortization
Specialty Minerals
Refractories
Performance Materials
Construction Technologies
Energy Services
Total
Specialty Minerals
Refractories
Performance Materials
Construction Technologies
Energy Services
Total
Specialty Minerals
Refractories
Performance Materials
Construction Technologies
Energy Services
Total
Segment Assets
Capital Expenditures
2016
2015
2014
(millions of dollars)
$
591.5
274.5
502.8
183.3
85.9
1,638.0
$
624.6
295.9
514.8
180.1
182.2
1,797.6
$
650.1
359.7
352.8
152.3
210.1
1,725.0
102.7
37.0
97.5
23.6
(25.9)
234.9
34.9
6.9
30.4
8.5
11.2
91.9
491.7
283.4
1,606.4
335.7
104.7
2,821.9
40.4
5.9
11.2
1.6
1.4
60.5
100.8
27.8
95.9
22.5
(27.9)
219.1
34.0
7.5
31.7
7.7
17.4
98.3
505.3
292.7
1,626.0
339.4
154.7
2,918.1
51.9
11.1
9.8
1.3
11.1
85.2
95.8
43.2
41.0
(0.8)
16.3
195.5
35.6
10.8
18.7
5.8
13.5
84.4
494.4
357.3
1,584.4
447.7
228.9
3,112.7
44.4
11.7
7.3
1.0
16.7
81.1
F-37
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the totals reported for the operating segments to the applicable line items in the consolidated financial
statements is as follows:
Income from Operations before Provision for Taxes on Income
Income from operations for reportable segments
Acquisition related transaction and integration costs
Unallocated corporate expenses
Consolidated income from operations
Non-operating deductions, net
Income from continuing operations before
provision for taxes on income
Total Assets
Total segment assets
Corporate assets
Consolidated total assets
Capital Expenditures
Total segment capital expenditures
Corporate capital expenditures
Consolidated capital expenditures
2016
2015
2014
(millions of dollars)
$
234.9
(8.0)
(6.0)
220.9
(50.6)
$
219.1
(11.8)
(7.0)
200.3
(67.7)
$
195.5
(19.1)
(7.6)
168.8
(45.8)
170.3
132.6
123.0
2,821.9
41.5
2,863.4
60.5
1.9
62.4
2,918.1
61.9
2,980.0
85.2
0.8
86.0
3,112.7
44.8
3,157.5
81.1
0.7
81.8
Financial information relating to the Company's operations by geographic area was as follows:
Net Sales
United States
Canada/Latin America
Europe/Africa
Asia
Total International
Consolidated net sales
Long-Lived Assets
United States
Canada/Latin America
Europe/Africa
Asia
Total International
Consolidated long-lived assets
2016
2015
2014
(millions of dollars)
$
936.2
$
1,049.6
$
1,004.4
82.6
338.8
280.4
701.8
1,638.0
86.3
382.1
279.6
748.0
1,797.6
90.2
407.7
222.7
720.6
1,725.0
$
1,794.5
$
1,829.3
$
1,865.2
14.8
98.2
127.3
240.3
2,034.8
13.0
117.6
138.3
268.9
2,098.2
18.8
136.8
144.3
299.9
2,165.1
Net sales and long-lived assets are attributed to countries and geographic areas based on the location of the legal entity.
No individual foreign country represents more than 10% of consolidated net sales or consolidated long-lived assets.
F-38
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's sales by product category are as follows:
Paper PCC
Specialty PCC
Talc
Ground Calcium Carbonate
Refractory Products
Metallurgical Products
Metalcasting
Household, Personal Care and Specialty Products
Basic Minerals and Other Products
Environmental Products
Building Materials and Other Products
Energy Services
Total
Note 23. Quarterly Financial Data (unaudited)
Net sales by segment
Specialty Minerals segment
Refractories segment
Performance Materials segment
Construction Technologies segment
Energy Services segment
Net sales
Gross profit
Income from operations
Income from continuing operations
Net income attributable to Minerals Technologies Inc. (MTI)
Basic earnings per share attributable to MTI shareholders:
Income from continuing operations
Loss from discontinued operations
Net income
Diluted earnings per share attributable to MTI shareholders:
Income from continuing operations
Loss from discontinued operations
Net income
Market price range per share of common stock:
High
Low
Close
2016
2015
(millions of dollars)
2014
$
387.9
64.3
55.7
83.6
219.0
55.5
258.0
171.2
73.6
78.9
104.4
85.9
1,638.0
$
423.3
64.8
55.9
80.6
230.7
65.2
266.4
172.7
75.7
69.7
110.4
182.2
1,797.6
$
454.5
66.1
55.5
74.0
273.9
85.8
181.4
108.0
63.4
70.7
81.6
210.1
1,725.0
2016 quarters
First
Fourth
(millions of dollars, except per share amounts)
Second
Third
$
155.6
69.2
119.0
40.6
25.8
410.2
$
150.6
73.9
128.6
53.9
20.0
427.0
$
147.3
63.4
119.5
49.5
19.8
399.5
$
$
$
$
$
138.0
68.0
135.7
39.3
20.3
401.3
112.7
121.1
115.2
111.4
57.6
34.8
33.9
39.5
22.3
21.2
67.3
42.5
41.6
56.5
37.5
36.7
$
$
0.97
-
0.97
$
$
0.61
-
0.61
$
$
1.19
-
1.19
$
$
0.97
-
0.97
$
$
0.60
-
0.60
$
$
1.18
-
1.18
$
$
1.05
-
1.05
$
$
1.04
-
1.04
$
$
$
57.12
37.03
57.12
$
$
$
61.66
52.53
57.38
$
$
$
72.51
56.00
70.69
$
$
$
82.90
66.10
77.25
Dividends paid per common share
$
0.05
$
0.05
$
0.05
$
0.05
F-39
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2015 quarters
Net sales by segment
Specialty Minerals segment
Refractories segment
Performance Materials segment
Construction Technologies segment
Energy Services segment
Net sales
Gross profit
Income from operations
Income from continuing operations
Income (loss) from discontinued operations
Net income attributable to MTI
Basic earnings per share attributable to MTI shareholders:
Income from continuing operations
Loss from discontinued operations
Net income
Diluted earnings per share attributable to MTI shareholders:
Income from continuing operations
Loss from discontinued operations
Net income
Market price range per share of common stock:
High
Low
Close
First
Fourth
(millions of dollars, except per share amounts)
Second
Third
$
154.0
73.9
127.9
38.9
58.6
453.3
$
156.5
76.4
129.1
52.1
49.3
463.4
$
156.5
77.4
126.5
49.7
40.9
451.0
$
157.6
68.2
131.3
39.4
33.4
429.9
116.6
126.2
118.9
109.3
59.9
36.0
35.1
52.8
27.5
26.6
49.9
30.3
29.2
37.7
17.8
17.0
$
$
1.01
-
1.01
$
$
0.77
-
0.77
$
$
0.84
-
0.84
$
$
0.49
-
0.49
$
$
1.01
-
1.01
$
$
0.76
-
0.76
$
$
0.83
-
0.83
$
$
0.48
-
0.48
$
$
$
74.74
59.00
70.65
$
$
$
74.21
66.49
69.02
$
$
$
68.15
46.69
50.31
$
$
$
61.80
45.35
45.86
Dividends paid per common share
$
0.05
$
0.05
$
0.05
$
0.05
Note 24. Subsequent Events
In February 2017, the Company entered into the Second Amendment to the credit agreement to reprice the $788 million
floating rate tranche then outstanding. The Second Amendment extended the maturity for this tranche under the Term
Facility February 14, 2024. After the Second Amendment, loans under the floating rate tranche of the Term Facility bear
interest at a rate equal to an adjusted LIBOR rate (subject to a floor of 0.75%) plus an applicable margin equal to 2.25% per
annum. The floating rate tranche of the Term Facility was issued at a 0.25% discount and has a 1% required amortization per
year. The $300 million fixed rate tranche remains unchanged.
F-40
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, 2016 and 2015, 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, 2016. 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, 2016 and 2015, and the results of their
operations and their cash flows for each of the years in the three-year period ended December 31, 2016, 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, present 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, 2016,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated February 17, 2017 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
New York, New York
February 17, 2017
F-41
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, 2016, based on criteria established in Internal Control – Integrated Framework (2013) 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, 2016, based on criteria established in Internal Control – Integrated
Framework (2013) 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, 2016 and 2015,
and the related consolidated statements of income, comprehensive income, shareholder’s equity, cash flows and related
financial statement schedule for each of the years in the three-year period ended December 31, 2016, and our report dated
February 17, 2017 expressed an unqualified opinion on those consolidated financial statements and financial statement
schedule.
/s/ KPMG LLP
New York, New York
February 17, 2017
F-42
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, 2016 in relation to criteria for effective internal
control over financial reporting described in "Internal Control - Integrated Framework (2013)" issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on its assessment, the Company has determined that, as of
December 31, 2016, 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/ Douglas T. Dietrich
Chief Executive Officer
/s/ Matthew E. Garth
Senior Vice President, Finance and Treasury,
Chief Financial Officer
/s/ Michael A. Cipolla
Vice President, Corporate Controller
and Chief Accounting Officer
February 17, 2017
F-43
[THIS PAGE INTENTIONALLY LEFT BLANK]
MINERALS TECHNOLOGIES INC. & SUBSIDIARY COMPANIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(millions of dollars)
Description
Year ended December 31, 2016
Valuation and qualifying accounts deducted from
assets to which they apply:
Allowance for doubtful accounts ..............................
Year ended December 31, 2015
Valuation and qualifying accounts deducted from
assets to which they apply:
Allowance for doubtful accounts ..............................
Year ended December 31, 2014
Valuation and qualifying accounts deducted from
assets to which they apply:
Allowance for doubtful accounts ..............................
$
$
$
Additions
Charged to
Costs,
Provisions
and
Expenses
Balance at
Beginning
of Period
Deductions
(a)
Balance at
End of
Period
4.4
6.2
(2.7)
7.9
3.6
2.6
(1.8)
4.4
1.7
$
2.4
(0.5)
3.6
(a)
Includes impact of translation of foreign currencies.
S-1
SUBSIDIARIES OF THE COMPANY
EXHIBIT 21.1
Jurisdiction of Organization
UK
Name of the Company
ADAE, Cetco Sp. Z o.o., s.k.a. (Short Name: ADAE SKA )………………………. Poland
Alex Mining & Oil Service Company*...…………………………………………... Egypt
Amcol Australia Pty. Ltd. ....................................................................................... Australia
AMCOL CETCO do Brasil Serviços e Produtos de Construção Ltda. ................... Brazil
AMCOL Dongming Industrial Minerals Company Limited ……………………… China
AMCOL Health & Beauty Solutions, Incorporated ………………………………. Delaware
AMCOL (Holdings) Ltd.
……………………………………………………………
Netherlands
Amcol International B.V. ………………………………………………………..
AMCOL International Corporation ……………………………………………….
Delaware
AMCOL International Holdings Corporation ……………………………………. Delaware
Thailand
Amcol International (Thailand) Limited ………………………………………….
AMCOL Korea Limited …………………………………………………………... S. Korea
Amcol Mauritius ………………………………………………………………….. Mauritius
Amcol Minchem Jianping Co., Ltd ………………………………………………. China
Turkey
Amcol Mineral Madencilik Sanayi ve Ticaret A.S. (Turkey) ……………………..
Amcol Minerals EU Limited ……………………………………………………… UK
UK
Amcol Minerals Europe Limited ………………………………………………….
India
Amcol Minerals and Materials (India) Private Limited …………………………..
China
AMCOL (Tianjin) Industrial Minerals Company Limited ……………………….
China
AMCOL Tianyu Industrial Minerals Co. Ltd. ……………………………………
Mexico
AMCOL de México, S.A., de C.V. ………………………………………………
American Colloid Company ………………………………………………………
Delaware
Ameri-Co Carriers, Inc. …………………………………………………………… Nebraska
Nebraska
Ameri-Co Logistics, Inc. …………………………………………………………
Singapore
APP China Specialty Minerals Pte Ltd. .................................................................
Turkey
ASMAS Agir Sanayi Malzemeleri Imal ve Tic. A.S (has branch office in Bahrain).
................................................................................................................................
Barretts Minerals Inc. .............................................................................................
Batlhako Mining Ltd. …………………………………………………………….
Bonmerci Investments 103 (Pty) Ltd. ……………………………………………
CCS, Cetco Sp. Z o.o., s.k.a. ……………………………………………………
Centre International de Couchage CIC Inc. ...........................................................
CETCO Czech S.R.O. …………………………………………………………….
CETCO do Brasil Serviços E Produtos Minerais E De Meio-Ambiente Ltda. .......
CETCO Energy Services Company LLC ................................................................
CETCO Energy Services de México, S.A. de C.V. ................................................ Mexico
CETCO Energy Services Limited ………………………………………………… UK
CETCO Energy Services (Malaysia) Sdn. Bhd. ………………………………….. Malaysia
CETCO (Europe) Ltd.
(has branch offices in Ireland, Sweden, Norway, Denmark) ………………………
CETCO Germany GmbH………………………………………………………….. Germany
CETCO Iberia S.L. …………………………………………………………….
CETCO Iberia Construcciones y Servicios S.L. ………………………………
CETCO Korea , Ltd………………………………………………………….
CETCO Lining Technologies India Private Limited ………………………………
CETCO Oilfield Services Asia Ltd. ………………………………………………. Malaysia
CETCO Oilfield Services Company Limited ……………………………………..
CETCO Oilfield Services Company Nigeria Limited …………………………….
CETCO Oilfield Services Pty. Ltd. ……………………………………………….
CETCO Poland, Cetco Sp. Zo.o. S.K.A. (aka CETCO Poland) ………………….
CETCO Poland Fundusz Investycyjny Zamkniety Aktywów Niepublicznych (aka
CETCO Investment Fund) ………………………………………………………
CETCO Sp. Zo.o. …………………………………………………………….
CETCO Technologies (Suzhou) Co., Ltd. (China) ……………………………
Colloid Environmental Technologies Company LLC (Has a branch in Canada) …. Delaware
Comercializadora y Exportadora CETCO Latino América Limitada (aka CVE
Delaware
South Africa
South Africa
Poland
Canada
Czech Rep
Brazil
Delaware
Canada
Nigeria
Australia
Poland
Poland
Spain
Spain
S. Korea
India
Poland
China
Chile
UK
Poland
CETCO Latino America) ………………………………………………………
Construction Technologies Poland Spólka Z Ograniczon(cid:2) Odpowiedzialno(cid:3)ci (aka
CT Poland SP Z.O.O.) …………………………………………………………….
COS Employment Services de México, S.A. de C.V. ............................................ Mexico
Thailand
Double A Specialty Minerals Co., Ltd. .................................................................
Egypt
Egypt Nano-Technologies Company S.A.E.*……………………………………..
Egypt
Egypt Mining & Drilling Chemical Company S.A.E.*……………………………
Egypt Bentonite & Derivatives Company S.A.E.*………………………………… Egypt
China
Gold Lun Chemicals (Zhenjiang) Co., Ltd. . ..........................................................
China
Gold Sheng Chemicals (Zhenjiang) Co., Ltd. ........................................................
Gold Zuan Chemicals (Suzhou) Co., Ltd. ..............................................................
China
Green Roof Insurance Co LLC …………………………………………………… Vermont
Thailand
Hi-Tech Specialty Minerals Company Limited ......................................................
Ingeniería y Construcción CETCO ICC Limitada ..................................................
Chile
Maprid Tel Cast de S.A. de C.V.*............................................................................ Mexico
Minerals Technologies do Brasil Comercio é Industria de Minerais Ltda. ……..
Minerals Technologies Europe S.A. (has branch office in France) ........................
Minerals Technologies Holding China Co., Ltd. ………………………………..
Minerals Technologies Holdings Inc. .....................................................................
Minerals Technologies Holdings Ltd. ....................................................................
Minerals Technologies India Private Limited ........................................................
Minerals Technologies Mexico Holdings, S. de R. L. de C.V. .............................
Minerals Technologies South Africa (Pty) Ltd. .....................................................
Mintech Canada Inc. ..............................................................................................
Mintech Japan K.K. ................................................................................................
Minteq Australia Pty Ltd. .......................................................................................
Minteq B.V. ............................................................................................................
Minteq Europe Limited. .........................................................................................
Minteq International GmbH (has branch office in Schongau) ...............................
Minteq International Inc. ........................................................................................
Minteq International (Suzhou) Co., Ltd. ................................................................
Minteq Italiana S.p.A. ............................................................................................
Minteq Korea Inc* .................................................................................................
Minteq Magnesite Limited (has a branch office in Spain) .....................................
Minteq Shapes and Services Inc. ............................................................................
Minteq UK Limited. ...............................................................................................
Montana Minerals Development Company ……………………………………..
MTI Bermuda L.P. .................................................................................................
MTI Holding Singapore Pte. Ltd. ...........................................................................
MTI Holdco I LLC .................................................................................................
MTI Holdco II LLC ................................................................................................
MTI Netherlands B.V. ............................................................................................
MTI Technologies UK Limited ………………………………………………….
MTI Ventures B.V. ................................................................................................
MTX Singapore Holdings Pte. Ltd. .......................................................................
Nanocor LLC …………………………………………………………………….
Performance Minerals Netherlands C.V. ................................................................
PT. CETCO Oilfield Services Indonesia ………………………………………..
PT Sinar Mas Specialty Minerals ...........................................................................
Rayagada Minerals & Chemicals Private Limited ................................................
SMI NewQuest India Private Limited ...................................................................
SMI Poland Sp. z o.o. .............................................................................................
Specialty Minerals Bangladesh Limited ................................................................
Specialty Minerals Benelux SA ............................................................................
Specialty Minerals (Changshu) Co., Ltd. ………………………………………..
Specialty Minerals do Brasil Participacoes Ltda. ..................................................
Specialty Minerals FMT K.K. ................................................................................
Specialty Minerals France S.A.S. . .........................................................................
Specialty Minerals (Fuyang) Cp., Ltd. ..................................................................
Specialty Minerals Inc. ...........................................................................................
Specialty Minerals India Holding Inc. ....................................................................
Brazil
Belgium
China
Delaware
United Kingdom
India
Mexico
South Africa
Canada
Japan
Australia
The Netherlands
Ireland
Germany
Delaware
China
Italy
Korea
Ireland
Delaware
United Kingdom
Montana
Bermuda
Singapore
Delaware
Delaware
Netherlands
United Kingdom
Netherlands
Singapore
Delaware
Netherlands
Indonesia
Indonesia
India
India
Poland
Bangladesh
Belgium
China
Brazil
Japan
France
China
Delaware
Delaware
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 ..........................................................................
Portugal
Specialty Minerals (Portugal) Especialidades Minerais, S.A. ................................
China
Specialty Minerals-Qishun (Nanning) Co., Ltd. …………………………………
Specialty Minerals Servicios S. de R. L. de C.V. ................................................... Mexico
Slovakia
Specialty Minerals Slovakia, spol. sr.o. .................................................................
South Africa
Specialty Minerals South Africa (Pty) Limited ......................................................
Thailand
Specialty Minerals (Thailand) Limited ..................................................................
United Kingdom
Specialty Minerals UK Limited .............................................................................
China
Specialty Minerals (Wuzhi) Co., Ltd. ....................................................................
Specialty Minerals (Yanzhou) Co., Ltd. ................................................................
China
Technologias Minerales de Mexico, S.A. de C.V. ................................................. Mexico
Volclay de México, S.A. de C.V.*.......................................................................... Mexico
Volcay International LLC ………………………………………………………..
Volclay Japan Co., Ltd. …………………………………………………………. Japan
Volclay South Africa (Proprietary) Limited …………………………………….
Volclay Trading Co. ……………………………………………..
South Africa
South Africa
Delaware
*Indicates MTI ownership is less than 50%
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, 333-
138245 and 333-206244) on Form S-8 of Minerals Technologies Inc. of our reports dated February 17, 2017, with respect to
the consolidated balance sheets as of December 31, 2016 and 2015, 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, 2016, and the related financial statement schedule and the effectiveness of internal control over financial reporting as of
December 31, 2016, which reports appear in the December 31, 2016 annual report on Form 10-K of Minerals Technologies
Inc.
/s/ KPMG LLP
New York, New York
February 17, 2017
EXHIBIT 31.1
I, Douglas T. Dietrich, 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 17, 2017
/s/ Douglas T. Dietrich
Douglas T. Dietrich
Chief Executive Officer
RULE 13a-14(a)/15d-14(a) CERTIFICATION
EXHIBIT 31.2
I, Matthew E. Garth, 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 17, 2017
/s/ Matthew E. Garth
Matthew E. Garth
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, 2016 (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 17, 2017
Dated: February 17, 2017
/s/ Douglas T. Dietrich
Douglas T. Dietrich
Chief Executive Officer
/s/ Matthew E. Garth
Matthew E. Garth
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 and operating income, excluding special items, and
EBITDA for the years ended December 31, 2016 and December 31, 2015 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, except per share data)
Year Ended
Income from continuing operations attributable to MTI
Special items:
Acquisition related transaction and integration costs
Restructuring and other charges
Debt extinguishment costs and fees
Write-down of investment
Related tax effects on special items
Income from continuing operations attributable to MTI, excluding special
items
Diluted earnings per share, excluding special items
Segment Operating Income Data
Specialty Minerals Segment
Performance Materials Segment
Construction Technologies Segment
Refractories Segment
Energy Services Segment
Unallocated Corporate Expenses
Acquisition related transaction costs
Consolidated
Special Items
Refractories Segment
Energy Services Segment
Unallocated Corporate Expenses
Acquisition related transaction costs
Consolidated
Segment Operating Income, Excluding Special Items
Specialty Minerals Segment
Refractories Segment
Performance Materials Segment
Construction Technologies Segment
Energy Services Segment
Unallocated Corporate Expenses
Consolidated
% of Sales
Dec. 31,
2016
133.4
8.0
28.3
0.0
0.0
(12.3)
157.4
4.47
102.7
97.5
23.6
37.0
(25.9)
(6.0)
(8.0)
220.9
(2.0)
30.3
0.0
8.0
36.3
102.7
97.5
23.6
35.0
4.4
(6.0)
257.2
15.7%
$
$
$
$
$
$
$
$
$
Dec. 31,
2015
107.9
11.8
45.2
4.5
7.6
(26.0)
151.0
4.31
100.8
95.9
22.5
27.8
(27.9)
(7.0)
(11.8)
200.3
2.0
42.0
1.3
11.8
57.1
100.8
29.8
95.9
22.5
14.1
(5.7)
257.4
14.3%
$
$
$
$
$
$
$
$
$
Reconciliation of EBITDA
(millions of dollars)
Income from continuing operations before provision
for taxes and equity in earnings
Add back interest, depreciation & amortization and special items:
Interest expense
Premium on early extinguishment of debt
Depreciation & amortization
Restructuring and other charges
Acquisition related transaction and integration costs
Write-down of investment
Other
Consolidated
Year Ended
Dec. 31,
2016
Dec. 31,
2015
$
170.3
$
132.6
54.4
0.0
91.9
28.3
8.0
0.0
0.1
353.0
$
60.9
4.5
98.3
45.2
11.8
7.6
0.1
361.0
$
D I R E C T O R S , O F F I C E R S A N D I N V E S T O R I N F O R M AT I O N
Minerals Technologies Inc. and Subsidiary Companies 2016 Annual Report
BOARD OF DIRECTORS
CORPORATE OFFICERS
Duane R. Dunham
Chairman of the Board
Retired President and Chief Executive Officer
Bethlehem Steel Corporation
Douglas T. Dietrich
Chief Executive Officer
Joseph C. Breunig
Consultant to Private Equity
Former Executive Vice President
Axiall Corporation
John J. Carmola
Retired Former Segment President at Goodrich Corporation
Robert L. Clark
Provost and Senior Vice President for Research
University of Rochester
Marc E. Robinson
Managing Director
PwC Strategy&
Barbara R. Smith
President and Chief Operating Officer
Commercial Metals Company
Donald C. Winter
Independent Consultant
Professor of Engineering Practice at the University of Michigan,
Former Secretary of the Navy
CE RTIFI CATIONS
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 8, 2016. The Company also filed as
an exhibit to its Annual Report on Form 10-K for the year ended
December 31, 2016, 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
Douglas T. Dietrich *
Chief Executive Officer
Gary L. Castagna *
Group President, Performance Materials and
Construction Technologies
Matthew E. Garth *
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 Director, MTI Supply Chain
Thomas J. Meek *
Senior Vice President, General Counsel, Human Resources,
Corporate Secretary and Chief Compliance Officer
W. Rand Mendez *
Senior Vice President and Managing Director, Paper PCC
D.J. Monagle III *
Group President, Specialty Minerals Inc. and Refractories
Brett Argirakis *
Vice President and Managing Director, Minteq
Andrew M. Jones *
Vice President and Managing Director, Energy Services
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 AG ENT
Computershare Trust Company, N. A.
PO Box 30170
College Station, TX 77842
INVESTOR REL ATIONS
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
M I N E R A L S T E C H N O L O G I E S I N C .
W W W . M I N E R A L S T E C H . C O M