MINERALS TECHNOLOGI ES INC.
ANNUAL REPORT 2017
INNOVATION . LEADERSHIP . EXCELLENCE
MINER ALS TECHNOLOGIES
ANN U AL REPORT 20 17
Minerals Technologies Inc. (MTI) is a global resource- and technology-
based company that develops, produces and markets a broad range of
specialty mineral, mineral-based and synthetic mineral products and
supporting systems and services. The company has four reportable
segments: Specialty Minerals, Performance Materials, Refractories and
Energy Services.
The Specialty Minerals and Performance Materials segments produce
and sell products and technologies based upon the mineral products
calcium carbonate, bentonite, talc 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 application equipment used primarily by the steel, non-ferrous metal
industries, and other industrial refractory applications. 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, MTI has
been able to anticipate and satisfy changing customer requirements and
to create market opportunities through new product development and
product application innovations.
MT I
A $1 .7 BILLION GLOBAL
MIN ERALS -BASE D CO MPANY
T HE WORLD LEAD ER IN PRECIPITATE D
CALCIUM CARBON AT E
T HE WORLD LEAD ER IN BENT ON ITE
A LE AD ER IN M IN ERALS- BAS ED AP PLICATI ON
T ECH NOLOGY AND INN OVAT ION
MTI AT A GLANCE
COUNTRIES
35
WORLDWIDE PRODUCTION
LOCATIONS
15 6
R&D CENTERS
12
EMPLOYEES
Millions of Dollars,
Except Per Share Data
December 31,
2017
December 31,
2016
TABLE OF CONTENTS
CEO Letter
Our Segments and Solutions
Geographic Expansion and
New Product Innovation
Operational Excellence
10-K
2
6
8
16
17
Corporate Information Inside Back Cover
Net Sales
$1,675.7
$1,638.0
Performance Materials Segment
Specialty Minerals Segment
Refractories 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
734.8
584.8
279.4
76.7
263.2*
4.59*
23.7
91.0
76.7
207.6
167
3,657
686.1
591.5
274.5
85.9
257.2*
4.47*
23.8
91.9
62.4
225.1
175
3,583
3, 65 7
* Excludes Special Items
2017 NET SALES BY GEOGRAPHIC AREA
2017 NET SALES BY SEGMENT
(percentage/millions of dollars)
(percentage/millions of dollars)
United States
56%, $939.3
Europe/Africa
21%, $349.0
Asia
18%, $305.8
Canada/Latin America
5%, $81.6
Performance Materials
44%, $734.8
Specialty Minerals
35%, $584.8
Refractories
17%, $279.4
Energy Services
4%, $76.7
2017 NET SALES BY BUSINESS TYPE
2017 OPERATING INCOME BY BUSINESS TYPE*
(percentage/millions of dollars)
(percentage/millions of dollars)
Minerals
78%, $1,320
Services
22%, $356
Minerals
83%, $220.9
Services
17%, $46.6
$263.2 MIL LI ON
2017 TOTAL NET SALES $1.676 BILLION
* excludes special items and unallocated corporate expenses
DEAR SHAREHOLDERS:
IN 2017, MTI MARKED ITS 25TH YEAR OF
LEADERSHIP IN PROVIDING MINERAL SOLUTIONS
TO AN INCREASING NUMBER OF WORLDWIDE
MARKETS. OUR INNOVATION AND GEOGRAPHIC
GROWTH INITIATIVES CONTINUE TO POSITION THE
COMPANY FOR A STRONG FUTURE FINANCIAL
PERFORMANCE. AT THE HEART OF THE COMPANY,
OUR 3,700 EMPLOYEES WERE SHARPLY FOCUSED
ON PURSUING CONTINUOUS IMPROVEMENT
AND VALUE ENHANCEMENT ACTIVITIES THAT
PROPELLED MTI TO ITS EIGHTH CONSECUTIVE YEAR
OF RECORD PROFITABILITY.
We recorded earnings per share of $4.59.
Operating income was $263 million – also a
record level – and again, we generated strong
margins. Cash flow from operations was $208
million and we used this cash to strengthen
the balance sheet through the repayment
of debt.
25 YEARS OF ACHIEVEM E NT
MTI celebrated our 25th anniversary as a
public company on October 23, 2017. This
marked a moment for us to look back at
our achievements over the last quarter of a
century, and to reflect on those who helped
build the company and contribute to our
success. We are in a leadership position today
because our employees around the world are
dedicated and committed to innovation and
operational excellence. The ongoing support
of our customers, shareholders, suppliers,
and the communities in which we operate
are reflective of our sustainable approach to
creating value over the past 25 years.
2 0 17 O V ERVIEW
We made strong advances in executing on our
growth strategies in 2017 by realigning the
organization, and investing in innovation and
targeted expansions around the world.
Early in the year, we combined our Performance
Materials and Construction Technologies
bentonite-based businesses into one operating
segment. We realigned these organizations to
generate operational efficiencies, drive new
product offerings, and better serve customer
needs.
Asia remains an area of focus for MTI’s
geographic expansion given the demand for
our products there. We continued to receive
strong pull for our innovative solutions in
metalcasting, cat litter, laundry detergent,
paper and packaging, along with an increasing
interest in the region for our environmental
technologies. We strengthened our organization
and our ability to drive profitable growth in
Asia by realigning our leadership, improving
our commercial and manufacturing
capabilities, and leveraging our government
marketing initiatives.
P A G E 2
Douglas T. Dietrich | Chief Executive Officer
We continued to invest in our businesses to
deliver value-added solutions to our customers,
with capacity expansions in both Performance
Materials and Specialty Minerals globally.
Our performance in the second half of 2017,
when we grew revenue by 7 percent, reflects
the success of our initiatives and provided
solid momentum going into 2018. Today, we are
well positioned for long-term growth across all
of our businesses.
OPERATING INCOME/MARGIN*
($ in millions)
15.7
15.7
13.6
14.3
12.2
124
13
235
14
257
15
257
16
263
17
Operating Income
Operating Margin
* excludes special items
CEO LETTERMINERALS TECHNOLOGIES INC. | ANNUAL REPORT 2017 MTI Celebrates Its 25th Anniversary
“ WE ACHIEVED OUR EIGHTH
CONSECUTIVE YEAR OF
RECORD EARNINGS PER
SHARE.”
RESULT S – MINERALS BUS I NE S S E S
In the Performance Materials segment, revenue
increased by 7 percent. Metalcasting saw
strong growth of 14 percent, driven by demand
in China, where we continue to penetrate the
foundry market with our high-value blended
greensand bond systems. In our Fabric Care
product line, we ramped up an innovative new
additive for dry laundry detergent, which is
now shipping to global markets. In our Pet
Care business, our new lightweight cat litter
continues to gain traction, particularly in Asia.
We took steps to strengthen our commercial
organizations in Building Materials and
Environmental Products, which resulted in
significantly improved product pipelines in
both businesses.
In Specialty Minerals, revenue decreased by
1 percent. Paper PCC had a challenging year,
with sales declining from 2016, primarily due
to paper machine closures in the U.S.; however,
PCC sales increased in Europe, Latin America
and Asia. Asia, in particular, continues to be
a growth region for our Paper PCC business.
Penetration of our product in North America
is double that of the Asia market, which
continues to represent a significant growth
opportunity for this business. This year, we
signed two new contracts and one expansion
in Indonesia, adding 245,000 metric tons of
new capacity, further driving penetration of
PCC into the market. We are also continuing to
make progress with our innovative technologies
such as NewYield® and FulFill®, further
demonstrating their value to our customers.
EPS HISTORICAL TREND*
(dollars per share)
.
1
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05
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13
14
15
16
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*EPS from continuing operations, excluding special items
Adjusted for 2012 Stock Split
P A G E 3
CEO LETTERANNUAL REPORT 2017 | MINERALS TECHNOLOGIES INC. We took steps to address the closures in North
America by restructuring our organization and
shifting resources to Asia, which will provide
better long term support for the business in
this growth region.
Performance Minerals continues to operate at
a high level. To support continued demand for
new and existing products, we made targeted
capacity investments in our talc facility in
Montana and our two specialty PCC plants in
the U.S. and England.
Our Minerals businesses continue to be the
engine of growth for the company. Each has
significant opportunities for growth and
are where we intend to steer our capital for
new product development and geographic
expansion going forward.
RE S ULTS – SER VICES B USINESSES
Both of our Services Businesses had a stronger
year, recording higher operating margins and
improved profit levels over 2016.
Revenue in the Refractories segment grew
2 percent, benefiting from higher capacity
utilization in worldwide steel markets.
This business posted its second highest
operating income in its history, driven
by strong operating performance and a
record level of sales of our high-tech laser
measurement systems.
We restructured our Energy Services business
in 2016, focusing it primarily on the areas
where we have sustainable technology
differentiation — offshore filtration and well
testing, and produced water. Through the
downturn, we maintained our strong positions
in global oil and gas production markets, and
this business is well positioned to grow as
markets recover.
PL ATFORM FOR GR OWTH
We are committed to our growth strategies of
geographic expansion, new product innovation
and acquisitions. Our actions this year further
strengthened the positions of our businesses
globally, and we made significant progress in
each of our growth regions.
Innovation is a core part of our culture at MTI,
and we continue to develop new products
to meet our customer needs. We have built
a product development portfolio with the
potential to deliver significant future value.
For perspective, we commercialized 81 new
products over the last five years, which
generated approximately $130 million in revenue
in 2017, and which have an expectation to
deliver revenue of approximately $300 million
when fully realized. We will continue to drive
innovation across the company and to apply a
lean approach to speed the development and
introduction of new products.
Acquisitions remain a key component of our
strategy, and we see a number of opportunities
with vertically integrated value-added minerals
where we can apply our capabilities.
“ WE COMMERCIALIZED 81
NEW PRODUCTS OVER THE
LAST FIVE YEARS, WHICH
GENERATED APPROXIMATELY
$130 MILLION IN REVENUE
IN 2017.”
DEBT REPAYMENT
($ in millions)
4.5
4.2
3.8
3.2
3.0
2.9
2.8
2.8
2.7
2.6
2.5
2.5
2.5
2.3
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May-14 Q2 14
Q3 14
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Q3 16
Q4 16
Q1 17
Q2 17
Q3 17
Q4 17
Cash Flow
Leverage Ratio
P A G E 4
• Debt Repayment of $590 Million over past 14 quarters
• 2.2x Net Leverage Ratio at end of 2017
CEO LETTERMINERALS TECHNOLOGIES INC. | ANNUAL REPORT 2017
C E O L E T T E R
OUR FOCU S ON SUSTAINABILITY
MTI’S VALUES ARE ROOTED
IN SUSTAINABILITY AND
HAVE BEEN A CORE TENET
OF OUR COMPANY SINCE
INCEPTION.
We manage our operations, our capital and
our business opportunities in a sustainable
manner, and we place the health and safety
of people ahead of everything else. The
company serves as a good steward of natural
resources, and we employ sound environmental
practices to protect the communities in
which we operate, including comprehensive
land reclamation activities and continuously
improving our processes to prevent
environmental releases.
Just as we focus on continuous improvement
in all facets of our business – processes,
systems, products and services – we also
apply the principles of Operational Excellence
in our labor practices. We promote a culture
of diversity and inclusion in both hiring and
career advancement, and are committed
to protecting and advancing human rights
globally. This commitment also includes
providing all MTI employees with the resources
and training necessary to enable each of
them to assist the company in meeting its
environmental, health and safety, and
business objectives.
P A G E 5
We strengthened our balance sheet to support
this growth by paying down $110 million of
acquisition-related debt in 2017, bringing
our net leverage ratio toward our target of
2 times EBITDA.
LOOKING AHEAD
In 2018, we are committed to advancing our
growth objectives and delivering another year
of strong financial performance.
financial position are the company’s 3,700
engaged employees committed to our high
performance culture and its foundation in
operational excellence. We believe this is a
strategic differentiator for MTI that will drive
the company for the next 25 years.
MTI is well positioned for long-term,
profitable growth and enhanced shareholder
value. Underpinning our strategic and
Douglas T. Dietrich
Chief Executive Officer
SAFETY: HISTORICAL INJURY RATES
(Injuries/100 Employees)
3.08
2.63
1.16
0.94
1.41
0.61
World Class Recordable Injury Rate
World Class Workday Injury Rate
2.06
0.75
1.67
0.65
1.59
1.34
1.23
1.25
1.18
0.97
0.38
0.39
0.40
0.40
0.26
0.26
07
08
09
10
11
12
13
14
15
16
17
Annual Recordable Injury Rate
Lost Workday Injury Rate
ANNUAL REPORT 2017 | MINERALS TECHNOLOGIES INC. O U R S E G M E N T S A N D S O L U T I O N S
MINER ALS TECHNOLOGIES
MI NER ALS BUSINESSE S - $ 1.32 0 BILLI ON REVE N UE
2 0 1 7 M I N E R A L S
B U S I N E S S E S R E S U L T S
FULL YEAR FINANCIALS*
($ in millions)
2017
2016
Sales
1,320
1,278
Operating Income
221
224
% of Sales
16.7% 17.5%
EBITDA
290
298
% of Sales
21.9% 23.3%
* excludes special items
PE R FO RM ANC E MATERIALS
Performance Materials is the world’s leading
producer of bentonite. This segment has five
product lines– Metalcasting; Household,
Personal Care (HPC) & Specialty Products;
Environmental Products; Building Materials;
and Basic Minerals, 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.
SPECIALTY MINERALS
PAPER PCC
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.
PERFORMANCE MINERALS
Performance Minerals consists of Specialty
PCC, ground calcium carbonate (GCC) and
talc. The business unit is vertically integrated
from mine-to-market with three limestone
facilities, two SPCC facilities and one talc
operation. Performance Minerals primarily
serves the construction, automotive and
consumer markets.
2017 NET SALES BY PRODUCT LINE
(millions of dollars)
HISTORICAL ANNUAL
OPERATING RESULTS*
($ in millions)
219
224
221
169
SPECIA LTY MI NE RALS
$584.8
PER FORMANCE MATERIALS
$73 4.8
Paper PCC
$377.7
Ground Calcium
Carbonate
$87.3
Specialty PCC
$66.0
Talc
$53.8
P A G E 6
Building Materials
$78.2
Environmental
Products
$67.7
Metalcasting
$294.3
HPC & Specialty
Products
$169.6
Basic Minerals
& Other Products
$125.0
98
670
13
1,155
1,320
1,278
1,320
14
Sales
15
16
17
Operating Income
*excludes special items
MINERALS TECHNOLOGIES INC. | ANNUAL REPORT 2017 MINER ALS TECHNOLOGIES
SERVI CES BUSINESSES - $356 MILLIO N R EVENU E
O U R S E G M E N T S A N D S O L U T I O N S
REFRAC TORIES
MTI 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. The
Ferrotron unit is the market leader in laser profile
measurement technology for the refractory and
steel industries.
E NE R GY SERVICES
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
off-shore water treatment in the United States,
using its key technologies to remove oil,
hydrocarbons, heavy metals, toxic materials
and other contaminants.
2017 NET SALES BY PRODUCT LINE
(millions of dollars)
RE F RAC TOR IES
$2 7 9.4
Refractories
$226.9
Metallurgical Wire
$52.5
ENE RGY SERVI CES
$76 .7
Energy Services
$76.7
2 0 1 7 S E R V I C E
B U S I N E S S E S R E S U L T S
FULL YEAR FINANCIALS*
($ in millions)
Sales
Operating Income
2017
2016
356
47
360
39
% of Sales
13.1% 10.9%
EBITDA
60
61
% of Sales
16.9% 16.8%
* excludes special items
HISTORICAL ANNUAL
OPERATING RESULTS*
($ in millions)
73
33
348
13
44
39
47
570
14
478
15
360
16
356
17
Sales
Operating Income
*excludes special items
P A G E 7
ANNUAL REPORT 2017 | MINERALS TECHNOLOGIES INC. G E O G R A P H I C E X P A N S I O N A N D N E W P R O D U C T I N N O V A T I O N
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 7
GE O G RAPHI C
EX PA N SION AND
NE W PR ODUCT
IN NO VAT IO N
MINERALS TECHNOLOGIES
WILL CONTINUE TO GROW BY
EXPANDING GEOGRAPHICALLY,
ESPECIALLY IN ASIA, AND BY
DEVELOPING AND LAUNCHING
INNOVATIVE NEW PRODUCTS
WORLDWIDE.
245
34
68
50
42
51
220
34
58
64
36
28
178
18
31
38
51
40
GROWTH THROUGH NEW TECHNOLOGIES
2007-2017 New Product Development Pipeline
Pre-AMCOL Acquisition
73
6
12
16
31
8
63
6
11
24
16
6
68
5
15
19
24
5
61
3
15
12
28
3
66
5
11
12
34
4
74
6
16
22
28
2
26
8
5
11
16
4
5
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
P A G E 8
G E O G R A P H I C E X P A N S I O N A N D N E W P R O D U C T I N N O V A T I O N
SPECIALTY MINERALS
THE FOCUS ON EXPANSION
IN ASIA IS BASED UPON THE
SUBSTANTIAL POTENTIAL
TO PENETRATE THE PAPER
MARKET BY SUBSTITUTING
THE COMPANY’S HIGHER-
VALUE PRODUCTS IN
THIS REGION.
PAPER PCC
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 Asia,
where the paper industry continues to grow.
PCC is the filler of choice for papermakers
worldwide because it improves brightness,
opacity and bulk in the paper sheet, while
saving papermakers considerable costs
because PCC replaces more expensive wood
fiber. Looking at paper in China specifically,
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 other parts of Asia with
good success. The company has signed seven
additional satellite agreements in China since
2012, and two new satellite agreements in
Indonesia. 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 eight years.
We are also 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. FulFill®
technology allows papermakers to increase
the amount of PCC in paper, replacing more
expensive fiber. The NewYield® platform of
technologies converts a papermaker’s 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 prospects for these new
technologies in China are bright, and we are
pursuing more than 20 opportunities in the
region for PCC filler and new satellites.
Further, we are engaged in discussions
with packaging manufacturers in several
locations around the globe for use of our
coating products for various applications,
including white container board and boxboard
packaging. In addition, we have new
technologies for brown box packaging.
P A G E 9
ANNUAL REPORT 2017 | MINERALS TECHNOLOGIES INC. G E O G R A P H I C E X P A N S I O N A N D N E W P R O D U C T I N N O V A T I O N
SP ECIALTY MINERALS
IN THE LAST THREE YEARS, PERFORMANCE MINERALS,
WHICH SERVES THE CONSTRUCTION, AUTOMOTIVE AND
CONSUMER MARKETS, HAS COMMERCIALIZED MORE
THAN 10 NEW GROUND CALCIUM CARBONATE, TALC
AND SPECIALTY PCC PRODUCTS THAT PROVIDE VALUE TO
THEIR CUSTOMERS.
PERFOR MANC E MINERALS
MTI mines and processes natural mineral
products, primarily limestone and talc, and
manufactures lime, a limestone-based product.
We operate three calcium carbonate mines in
the United States and the United Kingdom, and
one talc mine in the United States. Our high
quality limestone, dolomitic limestone, and talc
products are defined primarily by the chemistry
and color characteristics of the ore bodies.
We are currently completing three production
capacity expansions to keep pace with growing
customer demand for our new products.
P A G E 1 0
MINERALS TECHNOLOGIES INC. | ANNUAL REPORT 2017
PERF ORMANCE MATERIALS
METAL CASTING
MTI has a significant and growing position
in the foundry market globally, driven by our
penetration through substitution strategy.
Currently, 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 ratio is
closer to 8 percent. This difference offers MTI
a great opportunity to penetrate this market
by helping foundries reduce costs and improve
quality. The company’s higher-value products
allow Chinese foundries to move up the value
chain.
Additionally, we are beginning to see
accelerating growth in our Metalcasting
business in Southeast Asia as well as
India, the world’s second largest ferrous
casting market.
PET CARE
In our Pet Care business, Performance
Materials continues to roll out its lightweight
cat litter, which is half the weight of normal
litter, to major retailers in North America, and
has opportunities for this product line in Asia.
Pet Care product sales have continued to grow
rapidly in China as GDP increases and more
people obtain domesticated animals.
G E O G R A P H I C E X P A N S I O N A N D N E W P R O D U C T I N N O V A T I O N
FA BR IC C ARE
In Fabric Care, the company is advancing its
surfactant and aesthetic granules in laundry
detergents in developing countries with major,
worldwide detergent makers. We’re currently
scaling up a key new additive for dry laundry
detergent at our U.K. Fabric Care facility and
our customers are beginning to roll out this
product in their formulations to target markets
worldwide. We expect to see demand continue
to increase in 2018.
issues as containment of coal ash generated
by coal-fired power plants, and red mud, which
is a highly caustic byproduct from alumina
manufacturing. In addition, the strengthening
environmental regulations in China are driving
demand for our unique solutions to address
environmental issues in the region.
Our Building Materials and Environmental
Products groups have a growing pipeline of
sales opportunities for our newest technologies.
BASIC MIN ERAL S
Our Basic Minerals group provides drilling fluid
additives, drilling products and ferro alloys
used in a wide variety of end markets and
industrial applications.
BU I LDIN G MATERIALS AND
E NV I RONMENTAL PRO DUCT S
Building Materials provides products worldwide
across a broad range of construction projects,
including bentonite-based waterproofing
for underground structures and drilling
applications including foundation, slurry wall,
tunneling, water well, and horizontal drilling.
Environmental Products provides solutions for
containment and remediation of pollutants,
including groundwater treatment, solidification
and stabilization, and sediment remediation
for commercial, industrial and infrastructure
construction. Its state-of-the-art geosynthetic
clay lining (GCL) technologies, like its
Resistex® line, can solve such environmental
P A G E 1 1
ANNUAL REPORT 2017 | MINERALS TECHNOLOGIES INC.
G E O G R A P H I C E X P A N S I O N A N D N E W P R O D U C T I N N O V A T I O N
P A G E 1 2
MINERALS TECHNOLOGIES INC. | ANNUAL REPORT 2017 G E O G R A P H I C E X P A N S I O N A N D N E W P R O D U C T I N N O V A T I O N
CHINA GOVERNMENT
MARK ETING
MTI IS ACTIVELY ENGAGED
IN 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.
Through the EcoPartnership, Minerals
Technologies, Sun Paper and Tsinghua
University are demonstrating 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 resulted in a pilot plant to test
and demonstrate the new technology in 2017.
The results have been very positive. We will
continue to work with our partners in China
to 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.
P A G E 1 3
ANNUAL REPORT 2017 | MINERALS TECHNOLOGIES INC. G E O G R A P H I C E X P A N S I O N A N D N E W P R O D U C T I N N O V A T I O N
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 7
RE FRACTORIES
MINTEQ R&D HAS DEVELOPED A PORTFOLIO
OF HIGHLY DURABLE MONOLITHIC
REFRACTORY PRODUCTS THAT SPAN A RANGE
OF APPLICATIONS IN BOTH BASIC OXYGEN
AND ELECTRIC ARC FURNACES. THIS NEW
PRODUCT PORTFOLIO IS GAINING BROADER
MARKET ACCEPTANCE AND DEMONSTRATING
THAT IT CAN DELIVER SIGNIFICANT VALUE
TO CUSTOMERS.
Minteq’s refractory products are an economical solution for steel customers,
are especially easy to apply to the furnaces, and provide extended service life.
Minteq’s technical service staff and application equipment assist customers
in achieving desired productivity objectives. Our laser measurement
systems also remain in strong demand and had record sales in 2017. 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 marketplace.
P A G E 1 4
G E O G R A P H I C E X P A N S I O N A N D N E W P R O D U C T I N N O V A T I O N
EN ERG Y S ERVI CES
THE ENERGY SERVICES
SEGMENT IS PRIMARILY
FOCUSED ON OFFSHORE
FILTRATION AND WELL
TESTING.
The 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.
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.
P A G E 1 5
ANNUAL REPORT 2017 | MINERALS TECHNOLOGIES INC. O P E R A T I O N A L E X C E L L E N C E
OP E R AT IO NAL EXCELLENCE
MTI’S CULTURE IS
ROOTED IN OPERATIONAL
EXCELLENCE (OE) AND
CONTINUOUS IMPROVEMENT
IN EVERYTHING WE DO. WE
TRAIN EVERY EMPLOYEE
IN LEAN CONCEPTS AND
THE USE OF LEAN TOOLS
TO HELP THEM SOLVE
PROBLEMS.
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 2017, MTI employees held more than 6,000
Kaizen events, which are highly focused
improvement workshops around the world,
which translates into 15 of these occurring
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.
every day. The company’s 3,700 employees also
made in excess of 53,000 suggestions—of
which nearly 70 percent were implemented.
The result for 2017 was a 6-percent
improvement in productivity that saved
$4 million. Moreover, 2017 marked the
eighth consecutive year MTI has improved
productivity—measured in tons-produced-per-
hour—by more than 5 percent.
KAIZEN EVENTS
# of Kaizen Events (by year)
GLOBAL SUGGESTION SYSTEM
# of Suggestions (by year)
6,161
70%
67%
70%
69%
62%
3,938
3,014
1,850
1,908
P A G E 1 6
13
14
15
16
17
13
14
15
16
17
15,446
17,842
39,693
45,097
53,118
No. of ideas
% Implemented
MINERALS TECHNOLOGIES INC. | ANNUAL REPORT 2017 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, 2017
[ ] 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, smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange
Act
Large Accelerated Filer [X] Accelerated Filer [ ]
Non- accelerated Filer [ ]
(Do not check if smaller reporting company)
Smaller Reporting
Company [ ]
Emerging Growth Company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
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 2, 2017, was
approximately $2.3 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 7, 2018, the Registrant had outstanding 35,434,555 shares of common stock, all of one class.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2018 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form
10-K.
MINERALS TECHNOLOGIES INC.
2017 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
42
43
43
43
43
44
45
45
45
45
46
50
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.
During the first quarter of 2017, the Company announced the reorganization of its Performance Materials and Construction
Technologies business segments into one operating segment, in order to generate greater alignment, speed decision making and
accelerate growth.
The Company now has four reportable segments: Specialty Minerals, Performance Materials, Refractories 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 is a leading supplier globally of PCC products to the paper industry. This
segment's products are used principally in the paper, building materials, paint and coatings, glass, ceramic, polymer, food,
automotive and pharmaceutical industries.
- The Performance Materials segment is a leading supplier of bentonite and bentonite-related products, chromite and
leonardite. This segment also provides products for non-residential construction, environmental and infrastructure projects
worldwide, serving customers engaged in a broad range of construction projects.
- The Refractories segment produces monolithic and shaped refractory materials and specialty products. It also provided
services and sells application and measurement equipment, 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 Energy Services segment provides services to improve the production, costs, compliance, and environmental impact of
activities performed in the 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
Performance Materials
Refractories
Energy Services
Total
2017
2016
2015
35%
44%
17%
4%
100%
36%
42%
17%
5%
100%
35%
39%
16%
10%
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 $443.7 million, $452.2 million and $488.1 million for the years ended December
31, 2017, 2016 and 2015, respectively. The Company's sales of PCC have been, and are expected to continue to be, made primarily to
the printing and writing papers segment of the paper industry. The Company also produces PCC for sale to companies in the polymer,
food and pharmaceutical industries.
PCC Products - Paper
In the paper industry, the Company's PCC is used:
· As a filler in the production of coated and uncoated wood-free printing and writing papers, such as office
papers;
· As a filler in the production of coated and uncoated groundwood (wood-containing) paper such as magazine
and catalog papers; and
· As a coating pigment for both wood-free and groundwood papers.
3
The Company's Paper PCC product line net sales were $377.7 million, $387.9 million and $423.3 million for the years ended
December 31, 2017, 2016 and 2015, respectively.
Approximately 23% 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, 2017, 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
Yield®, 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 2017, 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 29 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 $66.0 million, $64.3 million and $64.8 million for the years ended December
31, 2017, 2016 and 2015, 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 $141.1 million, $139.3 million and $136.5
million for the years ended December 31, 2017, 2016 and 2015, respectively. Net sales of talc products were $53.8 million, $55.7
million and $55.9 million for the years ended December 31, 2017, 2016 and 2015, respectively. Net sales of ground calcium
carbonate ("GCC") products, which are principally lime and limestone, were $87.3 million, $83.6 million and $80.6 million for the
years ended December 31, 2017, 2016 and 2015, 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.
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
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®, RAFINOL® and Hevi-Sand®.
In addition, the 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 Performance Materials segment has five product lines – metalcasting; household, personal care and specialty products; basic
minerals, environmental products and building materials.
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
5
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.
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 supplies specialty sand chromite products from the Glencore-Merafe joint venture
that will be exclusively distributed by the Company in certain territories, including the Americas. 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 three years, the Company has focused on further
investment in China and India, where we saw significant sales growth in 2017.
The Company’s metalcasting product line net sales were $294.3 million in 2017, $258.0 million in 2016 and $266.4 million in
2015.
Household, Personal Care and Specialty Products - 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, surfactants and
fragrances. These fabric care products are not only cost-effective but also provide product development capabilities to adapt along
with our customers’ requirements globally.
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 active ingredients 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 include bentonite and leonardite based proprietary solutions for agricultural and industrial applications.
Agricultural uses include crop harvest enhancements, natural animal heath feed additives and vegetable cooking oil clarification.
The Company’s household, personal care and specialty product line net sales were $169.6 million in 2017, $171.2 million in 2016
and $172.7 million in 2015.
Basic Minerals – 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®.
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
6
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.
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 product
line net sales were $125.0 million in 2017, $103.9 million in 2016 and $106.0 million in 2015.
Environmental Products - 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 $67.7 million in 2017, $78.9 million in 2016 and $69.7 million in 2015.
Building Materials – Products and Markets
The building materials product
line
includes various active and passive products
for waterproofing of
underground structures, commercial building envelopes and tunnels.
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 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.
The Company’s building materials product line net sales were $78.2 million in 2017, $74.1 million in 2016 and $80.0 million in
2015.
Refractories Segment
Refractory - Products and Markets
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 $279.4 million, $274.5 million and $295.9 million for the years ended December 31,
2017, 2016 and 2015, respectively.
Refractory product sales are often supported by Company-supplied proprietary application equipment, laser measurement systems
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 $226.9 million, $219.0 million and $230.7 million for the years ended
December 31, 2017, 2016 and 2015, respectively. The Company's proprietary application systems, such as its MINSCAN®, allow for
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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.
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:
as, steel ladles, electric arc furnaces (EAF) and basic oxygen furnaces (BOF) furnaces.
· HOTCRETE®: High durability shotcrete products for applications at high temperatures in ferrous applications, such
· FASTFIRE®: High durability castable and shotcrete products in the non-ferrous and ferrous industries with the
· OPTIFORM®: A system of products and equipment for the rapid continuous casting of refractories for applications,
· ENDURATEQ®: A high durability refractory shape for glass contact applications, such as, plungers and orifice
added benefit of rapid dry-out capabilities.
such as, steel ladle safety linings.
rings.
making furnaces.
· 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.
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 within select geographic regions (e.g., China, Middle East, Eastern
Europe and India). These trends include growth and quality improvements regarding 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 $52.5
million, $55.5 million and $65.2 million for the years ended December 31, 2017, 2016 and 2015, 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.
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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.
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 the U.S. on-shore Nitrogen and
Well Testing service 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, Saudi Arabia, the United Kingdom, and the U.S., in the Gulf of Mexico. Energy
Services segment’s net sales were $76.7 million, $85.9 million and $182.2 million for the years ended December 31, 2017, 2016 and
2015, respectively.
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 through mechanical and chemical means.
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 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 addition, the sales and distribution of environmental products and building materials 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.
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 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 located 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 and limestone and talc for our Processed
9
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 57% 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, soda ash and 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 segment. 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 2017 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.
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 2017 annualized
usage rates, the Company has reserves of commercially usable leonardite for the next 97 years, and commercially usable chromite for
the next 22 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.
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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.
For the Performance Materials segment, the Company competes on the basis of product quality, price, logistics, service, product
availability 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. With respect to the environmental products 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.
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.
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
Some of our products in the Performance Materials segment within the environmental and building materials product lines 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,
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 filling and coating; FulFill® high filler technology systems;
NewYield® Waste Stream Process Technology; Thixocarb® PCC, Vicality® USP PCC, EMforce®, and Optibloc® 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 has signed agreements with
over 25 paper mills and is actively engaged with additional paper mill sites for further FulFill® deployment. NewYield™ Waste
Stream Process Technology cost-effectively converts a problematic pulp mill waste stream into a functional pigment for filling paper,
11
eliminating the cost of environmental disposal and remediation of certain waste streams to papermakers. Product and Technology has
been validated at commercial scale in a pulping operation and papermaking system in China, with several current projects underway.
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. In
addition, 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.
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.
For the years ended December 31, 2017, 2016 and 2015, the Company spent approximately $23.7 million, $23.8 million and
$23.6 million, respectively, on research and development. The Company's research and development spending for 2017, 2016 and
2015 was approximately 1.4%, 1.5% and 1.3% 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 204 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 447 patents and approximately 1,656 trademarks related to its business.
Our patents expire between 2018 and 2036. Our trademarks continue indefinitely. The Company believes that its rights under its
existing patents, patent applications and trademarks are of value to its operations, but no one patent, application or trademark is
material to the conduct of the Company's business as a whole.
Insurance
The Company maintains liability and property insurance and insurance for business interruption in the event of damage to its
production facilities and certain other insurance covering risks associated with its business. The Company believes such insurance is
adequate for the operation of its business. There is no assurance that in the future the Company will be able to maintain the coverage
currently in place or that the premiums will not increase substantially.
Employees
At December 31, 2017, the Company employed 3,657 persons, of whom 1,923 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
12
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.
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 in the countries in which we operate. 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 global economy could materially and adversely affect our business and operating results.
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.
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 difficult economic conditions, which ultimately may affect the demand for our Performance
Materials segment’s products and services.
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 recent paper mill closures.
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.
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
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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.
Our Environmental Products and Building Materials products 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.
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 Brazil, Russia, India and China as well
as other Asian and Eastern European countries; increasing its penetration into product markets such as the market for
papercoating pigments and the market for groundwood paper pigments; increasing sales to existing PCC customers by
increasing the amount of PCC used per ton of paper produced; developing, introducing and selling new products such as
the FulFill® family of products for the paper industry. Difficulties, delays or failure of any of these strategies could affect
the future growth rate of the Company. Our strategy also anticipates growth through future acquisitions. However, our
ability to identify and consummate any future acquisitions on terms that are favorable to us may be limited by the number
of attractive acquisition targets, internal demands on our resources and our ability to obtain financing. Our success in
integrating newly acquired businesses will depend upon our ability to retain key personnel, avoid diversion of
management’s attention from operational matters, and integrate general and administrative services. In addition, future
acquisitions could result in the incurrence of additional debt, costs and contingent liabilities. Integration of acquired
operations may take longer, or be more costly or disruptive to our business, than originally anticipated, and it is also
possible that expected synergies from future acquisitions may not materialize. We also may incur costs and divert
management attention with regard to potential acquisitions that are never consummated.
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, 2017, the Company had outstanding borrowings of $1.0 billion pursuant to our senior secured credit
facility. 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.
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.
14
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.
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 $377.7 million in 2017, or approximately
23% 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.
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.
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.
The Company is also subject to income tax laws and regulations in the United States and various foreign jurisdictions.
Significant judgment is required in evaluating and estimating our provision and accruals for these taxes. Our income tax
liabilities are dependent upon the location of earnings among these different jurisdictions. Our income tax provision and
income tax liabilities could be adversely affected by the jurisdictional mix of earnings, changes in valuation of deferred tax
assets and liabilities and changes in tax treaties, laws and regulations, including the U.S. Tax Cuts and Jobs Act of 2017,
15
which effected significant changes to the U.S. corporate income tax system. Our preliminary estimate of the effects of this
law, including a mandatory deemed repatriation tax on our foreign subsidiaries’ previously untaxed foreign earnings and
the remeasurement of our deferred tax assets and liabilities, is subject to finalization of management's analysis related to
certain matters, such as developing interpretations of the provisions of the law, changes to certain estimates and amounts
related to the earnings and profits of certain subsidiaries and the filing of our tax returns. Changes to our preliminary
estimate of the effects of this law, which will be recorded in the period completed, could have a material adverse effect on
the Company’s financial condition or results of operations, as well as our effective tax rate in the period in which the
adjustments are made.
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.
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.
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.
The Company’s operations could be impacted by the increased risks of doing business abroad.
The Company does business in many areas internationally. Approximately 44% of our sales in 2017 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, Russia, Saudi Arabia,
Turkey, Brazil, Thailand, China and South Africa. The UK’s decision 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 decision is implemented. As the Company expands its operations overseas, it
faces increased risks of doing business abroad, including inflation, fluctuation in interest rates, changes in applicable laws
and regulatory requirements, export and import restrictions, tariffs, nationalization, expropriation, limits on repatriation of
funds, civil unrest, terrorism, unstable governments and legal systems, and other factors. 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.
16
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 has purchased approximately 57% of its magnesia requirements
from sources in China over the past five years. 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.
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.
Production facilities are subject to operating risks and capacity limitations that may adversely affect the Company’s
financial condition or results of operations.
The Company is dependent on the continued operation of its production facilities. Production facilities are subject to
hazards associated with the manufacturing, handling, storage, and transportation of chemical materials and products,
including pipeline leaks and ruptures, explosions, fires, inclement weather and natural disasters, mechanical failure,
unscheduled downtime, labor difficulties, transportation interruptions, and environmental risks. We maintain property,
business interruption and casualty insurance but such insurance may not cover all risks associated with the hazards of our
business and is subject to limitations, including deductibles and maximum liabilities covered. We may incur losses beyond
the limits, or outside the coverage, of our insurance policies. Further, from time to time, we may experience capacity
limitations in our manufacturing operations. In addition, if we are unable to effectively forecast our customers’ demand, it
could affect our ability to successfully manage operating capacity limitations. These hazards, limitations, disruptions in
supply and capacity constraints could adversely affect financial results.
Operating results for some of our segments are seasonal.
Our Energy Services Segment and certain product lines within our Performance Materials segment 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
17
result in volatile demand for services provided by our Energy Services segment. Our Environmental Products and
Building Materials product lines within our Performance Materials segment are 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.
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
Illinois, Belvidere
Illinois, Hoffman Estates
Indiana, Portage
Indiana, Troy
Iowa, Shell Rock
Louisiana, Baton Rouge
Louisiana, Broussard
Louisiana, Lafayette
Houston, TX
Louisiana, New Iberia
Massachusetts, Adams
Michigan, Albion
Mississippi, Aberdeen
Montana, Dillon
Nebraska, Scottsbluff
New York, New York
Plant
Research laboratories; Administrative
office2
Plant
Plant
Plant
Plant
Research laboratories2
Plant
Headquarter, Administrative Office2
Operations base2
Plant; Mine
Plant
Plant
Plant; Mine
Transportation terminal
Headquarters2
North Dakota, Gascoyne
Plant; Mine
Ohio, Archbold
Ohio, Bryan
Ohio, Dover
Pennsylvania, Bethlehem
Pennsylvania, Easton
Pennsylvania, Slippery Rock
Pennsylvania, York
Tennessee, Chattanooga
Texas, Bay City
Wisconsin, Neenah
Plant
Plant
Plant
Administrative Office; Research
laboratories; Sales Offices
Administrative Office; Research
laboratories; Plant; Sales Offices
Plant; Sales Offices
Plant
Plant
Plant
Plant
Wyoming, Colony
Plant; Mine
Wyoming, Lovell
Plant; Mine
Metalcasting, basic minerals and specialty
products
Limestone
Limestone
Limestone, Metallurgical Wire/Calcium
Environmental products and other building
materials products
Metalcasting products
Performance Materials
Specialty Minerals
Specialty Minerals
Specialty Minerals; Refractories
Performance Materials
Performance Materials
All Company Products
All Segments
Refractories/Shapes
Metalcasting products
Metalcasting products
Monolithic Refractories
Filtration and well testing services
Personal care products
Filtration and Well testing services
Limestone, Lime, PCC
Metalcasting products
Performance additive products
Talc
All Company Products
Metalcasting, basic minerals and specialty
products
Metalcasting products
Monolithic Refractories
Monolithic Refractories/Shapes
All Company Products
All Company Products
Monolithic Refractories/Shapes
Metalcasting and pet care products
Metalcasting products
Talc
Metalcasting products
Metalcasting, pet litter, personal care,
specialty and basic minerals products
Basic minerals, Specialty and pet care
products; Environmental and building
materials products
Refractories
Performance Materials
Performance Materials
Refractories
Energy Services
Performance Materials
Energy Services
Energy Services
Specialty Minerals
Performance Materials
Performance Materials
Specialty Minerals
Performance Materials
Headquarters
Performance Materials
Performance Materials
Refractories
Refractories
All Segments
All Segments
Refractories
Performance Materials
Performance Materials
Specialty Minerals
Performance Materials
Performance Materials
Performance Materials
19
Location
Facility
Product Line
Segment
International
Australia, Brisbane
Sales Office/Administrative Office
Metalcasting, specialty and pet care products Performance Materials
Australia, Carlingford
Sales Office2
Monolithic Refractories
Refractories
Australia, Gurulmundi
Plant; Mine
Metalcasting, specialty and pet care products Performance Materials
Australia, Perth
Belgium, Brussels
Brazil, Macae
Brazil, Sao Jose dos Campos
Canada, Pt. Claire
Operations base2
Administrative Office
Operations base2
Sales Office2/Administrative Office
Administrative Office
China, Beijing
Sales Office/Administrative Office
China, Chao Yang, Liaoning
China, Shanghai
Plant; Mine
Administrative Office/Sales Office
China, Suzhou
Plant
Filtration services
Monolithic Refractories/PCC
Filtration services
Energy Services
Refractories
Energy Services
PCC
PCC/Monolithic Refractories
Metalcasting, specialty, fabric care and pet
care products
Metalcasting and fabric care products
PCC/Monolithic Refractories
Environmental and building materials
products
Specialty Minerals
Specialty Minerals; Refractories
Performance Materials
Performance Materials
Specialty Minerals; Refractories
Performance Materials
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, Bhuj
India, Chennai
India, Mumbai
Indonesia, Jakarta
Ireland, Cork
Italy, Brescia
Italy, Nave
Japan, Gamagori
Japan, Tokyo
Plant
Plant
Sales Office2/Administrative Office
Operations base2
Plant; Administrative Office2/ Research
laboratories
Sales Office
Plant
Plant/Research laboratories
Sales Office
Korea, Pyeongtaek
Plant
Malaysia, Kemaman
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; Mine
Plant; Mine
Plant
Sales Office2/Administrative Office
Plant
Turkey, Enez
Plant; Mine
Turkey, Gebze
Plant/Research Laboratories
Turkey, Istanbul
Turkey, Kutahya
Turkey, Usak
United Kingdom, Birkenhead
United Kingdom, Lifford
United Kingdom, Rotherham
United Kingdom, Winsford
Sales Office/Administrative Office
Plant
Plant; Mine
Research laboratories2
Plant
Plant/Sales Office
Plant, Research laboratories
Metalcasting and fabric care products
Laser Scanning Instrumentation/
Probes/Monolithic Refractories
Metallurgical Wire
Environmental
products
Metalcasting products
PCC/Monolithic Refractories/ Metallurgical
Wire
Filtration services
building materials
and
Performance Materials
Refractories
Refractories
Performance Materials
Performance Materials
Specialty Minerals; Refractories
Energy 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
Refractories
Refractories
Refractories
Refractories
Refractories
Performance Materials
Energy Services
Energy Services
Energy Services
Performance Materials
Energy Services
Specialty Minerals
Refractories
Refractories
Metalcasting and basic minerals products
Performance Materials
Metalcasting products
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
Specialty material products
Environmental products
PCC, Lime
Monolithic Refractories/Shapes
Fabric care and other products
Performance Materials
Performance Materials
Refractories
Performance Materials
Performance Materials
Refractories
Refractories
Refractories
Performance Materials
Performance Materials
Specialty Minerals
Refractories
Performance Materials
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
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, 2017. 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
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)
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, Changshu
China, Dagang 1
China, Zhenjiang 1
China, Suzhou1
China, Henan
China, Shandong
Finland, Äänekoski
Finland, Tervakoski
France, Alizay
France, Quimperle
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.
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.
UPM Changshu
Gold East Paper (Jiangsu) Company Ltd.
Gold East Paper (Jiangsu) Company Ltd.
Gold HuaSheng Paper Company Ltd.
Henan Jianghe Paper Co., Ltd.
Shandong Sun Paper Industry Joint Stock Company Ltd
M-real Corporation
Trierenberg Holding
Double A Paper Company Ltd.
PDM Industries
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 2017, and a conversion factor
for the conversion of in-situ materials to saleable products, by major mineral category.
2017 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**
646
597
970
171
2,384
23,742
18,312
41,759
7,939
91,752
205
3,003
52
1,617
800
2,469
-
1
112
192
305
49
160
-
1,207
66,522
37,175
72,831
177,735
1,772
1,560
6,581
4,924
14,837
2,741
3,494
2,997
GRAND TOTALS
5,572
296,559
23,742
18,312
41,759
7,939
91,752
100%
3,003
100%
1,207
66,522
37,175
-
104,904
59%
1,772
1,560
6,581
4,924
14,837
100%
2,741
100%
3,494
100%
-
0%
220,731
74%
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
26%
23,742
18,312
41,759
7,939
91,752
100%
3,003
100%
3,928
16,992
54,815
75,735
43%
1,016
1,978
2,994
20%
-
-
0%
0%
173,484
58%
-
-
-
-
-
0%
-
0%
11,679
15,534
15,048
42,261
24%
44
44
0%
2,019
74%
-
0%
2,997
100%
47,321
16%
-
-
-
-
-
0%
-
0%
1,207
50,915
4,649
2,968
59,739
34%
1,772
500
4,603
4,924
11,799
80%
722
26%
3,494
100%
-
0%
75,754
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 International Corporation (“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. AMCOL won a motion for
judgement on the pleadings that resulted in the successful dismissal of all but one count in the complaint, including a dismissal of all
counts alleging violations of Illinois’ Fraudulent Transfer laws and federal RICO violations. Armada has filed an appeal of the
dismissal and the district court proceedings are stayed pending the appeal. 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 20 pending asbestos cases. To
date, 1,493 silica cases and 53 asbestos cases have been dismissed, not including any lawsuits against AMCOL or American Colloid
Company dismissed prior to our acquisition of AMCOL. Seven new asbestos cases were filed in 2017, including one that was
previously reported on the Company’s 2016 Annual Report on Form 10-K. Four asbestos cases were dismissed during the period. No
silica cases were dismissed during the period. 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. The Company is entitled to
indemnification, pursuant to agreement, for sales prior to the initial public offering. Of the 20 pending asbestos cases, 13 of the non-
AMCOL cases are subject to indemnification, in whole or in part, because the plaintiffs claim liability based on sales of products that
occurred either entirely before the initial public offering, or both before and after the initial public offering. In the six remaining non-
AMCOL cases, the plaintiffs have not alleged dates of exposure. The remaining case is an AMCOL case, which makes no allegation
with respect to periods of exposure. 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
24
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, 2017.
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, 2017.
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.
2017 Quarters
Market price range per share of common stock
High
Low
Close
First
Second
Third
Fourth
$
83.70
72.20
76.60
$
80.20
70.50
73.20
$
75.60
62.95
70.65
$
73.55
66.40
68.85
Dividends paid per common share
$
0.05
$
0.05
$
0.05
$
0.05
2016 Quarters
Market price range per share of common stock
High
Low
Close
$
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
Equity Compensation Plan Information
The following table summarizes information about our equity compensation plans as of December 31, 2017. 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
996,839
$
48.21
Total
996,839
$
48.21
1,036,505
1,036,505
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 October 2015. 64,650 shares were repurchased
under this program for $3.3 million, or, an average price of approximately $51.79 per share. This program has expired.
On September 21, 2017, 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 1, 2017 when the previous program expired.
As of December 31, 2017, no shares have been repurchased under this program.
On January 24, 2018, the Company's Board of Directors declared a regular quarterly dividend on its common stock of $0.05 per
share.
Future dividends are at the discretion of the Board of Directors and subject to the legal availability of funds for payment.
On February 7, 2018, the last reported sales price on the NYSE was $69.05 per share and there were approximately 168 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 12/31/2012 to 12/31/2017.
Minerals Technologies Inc.
S&P 500
S&P Midcap 400
Dow Jones US Industrials
Dow Jones US Basic Materials
S&P MidCap 400 Materials Sector
12/12
12/13
12/14
12/15
12/16
12/17
100.00
100.00
100.00
100.00
100.00
100.00
151.13
132.39
133.50
140.61
120.38
127.95
175.29
150.51
146.54
150.88
124.46
130.87
116.14
152.59
143.35
148.32
108.99
111.60
196.27
170.84
173.08
177.30
131.09
154.01
175.42
208.14
201.20
220.80
163.98
184.35
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
Debt modification costs and fees
Other non-operating income (deductions), net
Total non-operating deductions, net
Income from continuing operations before provision
for taxes and equity in earnings
Provision (benefit) 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,
2017
2016
2015
2014
2013
(in millions, except per share data)
$
1,675.7
1,208.5
$
1,638.0
1,177.6
$
1,797.6
1,326.6
$
1,725.0
1,289.6
$
1,018.2
784.5
467.2
182.4
23.7
-
3.4
15.0
242.7
(43.4)
(3.9)
(4.5)
(51.8)
190.9
(6.6)
1.5
199.0
-
199.0
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
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)
-
-
126.9
(0.2)
-
(3.0)
(3.2)
123.7
34.5
-
89.2
(5.8)
83.4
3.9
195.1
$
3.7
133.4
$
3.7
107.9
$
3.1
92.4
$
3.1
80.3
$
$
$
$
$
$
$
$
$
$
$
5.54
-
5.54
5.48
-
5.48
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
$
$
$
$
$
$
$
$
$
$
Cash dividends declared per common share
$
0.20
$
0.20
$
0.20
$
0.20
$
0.20
Shares used in computation of earnings per share:
Basic
Diluted
35.2
35.6
34.9
35.2
34.7
35.0
34.5
34.8
34.7
35.0
* During the fourth quarter of 2017, the Company recorded a provisional $47 million income tax benefit from the U.S. Tax Cuts and
Job Acts legislation. This benefit is comprised of an $82 million benefit which related primarily to the re measurement of the
Company’s U.S. deferred tax liabilities at a lower U.S. tax rate of 21%, partially offset by tax expense of $35 million for the deemed
repatriation of unremitted earnings of foreign subsidiaries.
Working capital
Total assets
Long-term debt, net of unamortized discount and deferred financing costs
Total debt
Total shareholders' equity
28
Year Ended December 31,
2017
2016
2015
2014
2013
$
542.2
2,970.4
959.8
969.9
1,279.1
$
455.6
2,863.4
1,069.9
1,082.8
1,030.9
(in millions)
485.0
$
2,980.0
1,255.3
1,264.9
937.7
$
552.0
3,157.5
1,429.4
1,435.3
888.9
$
634.2
1,217.5
75.0
88.7
874.4
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 $5.48 per share, an increase of 45% from prior year earnings of $3.79 per share.
Worldwide sales were $1.676 billion in 2017 as compared with $1.638 billion in 2016, an increase of 2%. Consolidated income
from operations increased 10% to $242.7 million as compared with $220.9 million in the prior year. Included in income from
operations for 2017 were restructuring and other items of $15.0 million and included in income from operations in the previous year
were restructuring and other costs of $28.3 million. Net income was $195.1 million, as compared to $133.4 million in the prior year.
During the fourth quarter of 2017, the Company recorded a provisional $47 million income tax benefit from the U.S. Tax Cuts and Job
Acts legislation. This benefit is comprised of an $82 million benefit which related primarily to the re-measurement of the Company’s
U.S. deferred tax liabilities at a lower U.S. tax rate of 21%, partially offset by tax expense of $35 million for the deemed repatriation
of unremitted earnings of foreign subsidiaries.
In 2017, the Company continued to advance the execution of its growth strategies of geographic expansion and new product
innovation and development with a focus on operational excellence and productivity improvements. Our sales in China and Asia
continue to grow, driven by increased penetration in China from our Metalcasting business. The Company announced two new Paper
PCC plants in Asia, in addition to an expansion of an existing facility, totaling 245,000 tons. We combined our Performance Materials
and Construction Technologies businesses into one operating segment, leveraging talent across the business, reducing costs and
increasing the speed of deployment of new products to market. We continued to strengthen our technology pipeline and focused on
advancing technologies more rapidly through the stage gate process. We have commercialized over 81 new products in the last five
years.
Long term debt as of December 31, 2017 was $959.8 million. During 2017, we repaid $119 million of our long-term debt. Since
the acquisition of AMCOL in 2014, we repaid approximately $590 million of our Term Loan debt. We continue to strengthen our
balance sheet. Cash, cash equivalents and short-term investments were $215 million as of December 31, 2017. Cash flow from
operations for 2017 was $207.6 million. Our intention is to maintain a balanced approach to capital deployment, by using excess cash
flow for investments in growth, continued debt reduction and selective share repurchases.
29
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 in
2018 from its existing businesses, as follows:
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.
Develop products and processes for waste management and recycling opportunities to reduce the
environmental impact of the paper mill, reduce energy consumption and improve the sustainability of the
papermaking process, including our NewYield® products.
Further penetration into the packaging segment of the paper industry.
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.
Expand the Company's PCC coating product line using the satellite model.
Increase our presence and gain penetration of our bentonite based foundry customers for the Metalcasting
industry in emerging markets, such as China and India.
Increase our presence and market share in global pet care products, particularly in emerging markets.
Deploy new products in pet care such as lightweight litter.
Promote the Company's expertise in crystal engineering, especially in helping papermakers customize PCC
morphologies for specific paper applications.
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.
Develop unique calcium carbonate and talc products used in the manufacture of novel biopolymers, a new
market opportunity.
Deploy new talc and GCC products in paint, coating and packaging applications.
Deploy value-added formulations of refractory materials that not only reduce costs but improve performance.
Expand our solid core wire product line into BRIC, Middle Eastern and other Asian countries.
Deploy our laser measurement technologies into new applications.
Expand our refractory maintenance model to other steel makers globally.
Increase our presence and market share in Asia and in the global powdered detergent market.
Continue the development of our proprietary Enersol® products for agricultural applications worldwide.
Pursue opportunities for our products in environmental and building and construction markets in the Middle
East, Asia Pacific and South America regions.
Increase our presence and market share for geosynthetic clay liners within the Environmental Products
product line.
Increase our presence and market penetration in offshore produced water and offshore filtration and well
testing within the Energy Services segment.
Deploy operational excellence principles into all aspects of the organization, including system infrastructure
and lean principles.
Continue to explore selective acquisitions to fit our core competencies in minerals and fine particle
technology.
However, there can be no assurance that we will achieve success in implementing any one or more of these opportunities.
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
Acquisition related transaction and integration costs
Restructuring and other items, net
Income from operations
Operating margin %
Interest expense, net
Debt modification costs and fees
Other non-operating income (deductions), net
Total non-operating deductions, net
Income from operations before provision for taxes
and equity in earnings
Provision (benefit) for taxes on income
Effective tax rate
Equity in earnings of affiliates, net of tax
Year Ended December 31,
2017
2016
2015
2017 vs.
2016
2016 vs.
2015
(Dollars in millions)
$
1,675.7
1,208.5
467.2
27.9%
$
1,638.0
1,177.6
460.4
28.1%
$
1,797.6
1,326.6
471.0
26.2%
182.4
23.7
3.4
15.0
242.7
14.5%
(43.4)
(3.9)
(4.5)
(51.8)
190.9
(6.6)
-3.5%
1.5
179.4
23.8
8.0
28.3
220.9
13.5%
(54.4)
-
3.8
(50.6)
170.3
35.3
20.7%
2.1
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%
1.8
2.3%
2.6%
1.5%
1.7%
-0.4%
-57.5%
-47.0%
9.9%
-20.2%
*
*
2.4%
12.1%
*
-28.6%
45.1%
5.4%
46.3%
-8.9%
-11.2%
-2.3%
-5.6%
0.8%
-32.2%
-37.4%
10.3%
-10.7%
*
*
-25.3%
28.4%
54.8%
16.7%
22.8%
0.0%
23.6%
Income from operations, net of tax
Net income attributable to non-controlling interests
Net income attributable to Minerals Technologies Inc. (MTI)
* Not meaningful
199.0
3.9
195.1
$
137.1
3.7
133.4
$
111.6
3.7
107.9
$
Net Sales
U.S.
International
Total sales
Specialty Minerals Segment
Performance Materials Segment
Refractories Segment
Energy Services Segment
Total sales
Year Ended December 31,
2017
2016
2015
2016
2015
(Dollars in millions)
2017 vs.
2016 vs.
$
939.3
736.4
1,675.7
$
$
936.2
701.8
1,638.0
$
$
$
1,049.6
748.0
1,797.6
$
$
$
584.8
734.8
279.4
76.7
1,675.7
591.5
686.1
274.5
85.9
1,638.0
$
$
$
624.6
694.9
295.9
182.2
1,797.6
0.3%
4.9%
2.3%
-1.1%
7.1%
1.8%
-10.7%
2.3%
-10.8%
-6.2%
-8.9%
-5.3%
-1.3%
-7.2%
-52.9%
-8.9%
31
Worldwide net sales in 2017 increased 2% from the previous year to $1,675.7 million. Net sales in the United States increased
slightly to $939.3 million in 2017 and represented 56% of consolidated net sales. International sales increased to $736.4 million from
$701.8 million and represented 44% of consolidated net sales.
Worldwide net sales in 2016 decreased 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%
of consolidated net sales. International sales decreased slightly to $701.8 million from $748.0 million and represented 43% of
consolidated net sales.
Operating Costs and Expenses
Consolidated cost of sales was $1,208.5 million, $1,177.6 million and $1,326.6 million in 2017, 2016 and 2015, respectively.
Production margin as a percentage of net sales was 27.9% in 2017, 28.1% in 2016 and 26.2% in 2015.
Marketing and administrative costs were $182.4 million, $179.4 million and $190.1 million in 2017, 2016 and 2015, respectively.
Marketing and administrative costs as a percentage of net sales were 10.9% in 2017, 10.9% in 2016 and 10.6% in 2015.
Research and development expenses were $23.7 million, $23.8 million and $23.6 million in 2017, 2016 and 2015, respectively.
Research and development expenses as a percentage of net sales were 1.4% in 2017, 1.4% in 2016 and 1.3% in 2015.
The Company incurred $3.4 million, $8.0 million and $11.8 million in 2017, 2016 and 2015, respectively for the acquisition related
transaction and integration costs.
In 2017, the Company recorded a $15.0 million restructuring and non-cash impairment charges from the closure of paper mills in
North America, as well as the alignment of corporate and Paper PCC staffing levels into higher growth regions. This restructuring is
expected to result in approximately $6 million in savings on an annualized basis, of which $3 million is expected to be realized in
2018.
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 2015, the Company recorded a $45.2 million charge for asset impairments, severance and other employee costs resulting from a
restructuring program that was initiated in 2014 to realign business operations and improve efficiencies.
Income from Operations
During 2017, the Company recorded income from operations of $242.7 million as compared with $220.9 million in the prior year.
Income from operations represented 14.5% of sales compared with 13.5% of sales in the prior year. Income from operations in 2017
included acquisition related integration costs of $3.4 million and restructuring and other items of $15.0 million.
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 items of $28.3 million.
Non-Operating Income (Deductions)
The Company recorded non-operating deductions of $51.8 million in 2017 as compared with $50.6 million in the previous year.
Net interest expense was $43.4 million in 2017 as compared to $54.4 million in the prior year, as a result of lower debt balances
due to principal repayments and lower interest costs relating to lower interest rates resulting from debt repricing. The Company
recorded $3.9 million in debt modification costs and fees relating to its repricing of the variable tranche of the Term Loan debt in
February 2017.
During 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 addition, the Company recorded a $7.6 million charge relating to the
write-down of an investment in a development stage enterprise.
Provision (Benefit) for Taxes on Income
Provision (benefit) for taxes was $(6.6) million, $35.3 million and $22.8 million in 2017, 2016 and 2015, respectively. The
effective tax rates were (3.5) %, 20.7% and 17.2% during 2017, 2016 and 2015, respectively. Included in the benefit from taxes in the
current year is a provisional $47.3 million income tax benefit from the U.S. Tax Cuts and Jobs Act (“U.S. Tax Reform”) legislation,
enacted in December 2017. This benefit is comprised of an $82.4 million gain related primarily to the re-measurement of the
32
Company’s U.S. deferred tax liabilities at a lower U.S. tax rate of 21%, partially offset by tax expense of $35.1 million for the deemed
repatriation of unremitted earnings of foreign subsidiaries.
The lower effective tax rate in 2017 was primarily due to the benefit of the re-measurement of the Company’s US deferred tax
liabilities to 21%. Our future effective tax rate will be affected by the U.S. Tax Reform. Effective in 2018, U.S. Tax Reform reduces
the U.S. statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings and certain related-party
payments.
The other 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. 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.
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 $12.9 million in 2017, $11.3 million in 2016 and $11.2 million in 2015.
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 $10.7 million, $14.7 million and $11.0 million in
2017, 2016 and 2015, respectively.
Consolidated Net Income
Consolidated net income was $199.0 million in 2017 and included a $15.5 million charge, net of tax. This charge consisted of
acquisition related transaction and integration costs and restructuring and other items, net. Additionally it includes a $47.3 million tax
benefit from the U.S. Tax Cuts and Jobs Act.
Consolidated net income 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.
Segment Review
The following discussions highlight the operating results for each of our four segments.
Specialty Minerals Segment
Specialty Minerals Segment
2017 vs.
2016 vs.
Year Ended December 31,
2017
2016
2015
2016
2015
(millions of dollars)
Net Sales
Paper PCC
Specialty PCC
PCC Products
Talc
Ground Calcium Carbonate
Processed Minerals Products
$
$
377.7
66.0
443.7
53.8
87.3
141.1
$
$
$
$
$
$
423.3
64.8
488.1
55.9
80.6
136.5
(10.2)
1.7
(8.5)
(1.9)
3.7
1.8
$
$
(35.4)
(0.5)
(35.9)
(0.2)
3.0
2.8
387.9
64.3
452.2
55.7
83.6
139.3
$
$
$
$
$
$
$
$
$
$
Total net sales
$
584.8
$
591.5
$
624.6
$
(6.7)
$
(33.1)
Income from operations
% of net sales
2017 v 2016
$
88.9
15.2%
$
102.7
17.4%
$
100.8
16.1%
$
(13.8)
$
1.9
Net sales in the Specialty Minerals segment decreased 1 percent to $584.8 million from $591.5 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 $8.5
33
million, or 2 percent. The decrease in Paper PCC sales was primarily due to the closure of several paper mills in North America,
which offset growth in Asia, Europe and Latin America.
Income from operations decreased $13.8 million to $88.9 million and represented 15.2% of net sales compared to $102.7 million
and 17.4% of sales in prior year. Included in income from operations were restructuring and impairment charges of $10.3 million and
provision for bad debt related to a customer bankruptcy in Malaysia for $2.1 million.
2016 v 2015
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.
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 2016.
Performance Materials Segment
Performance Materials Segment
Net Sales
Metalcasting
Household, Personal Care & Specialty Products
Environmental Products
Building Materials
Basic Minerals
Total net sales
Income from operations
% of net sales
2017 v 2016
Year Ended December 31,
2017
2016
2015
(millions of dollars)
2017 vs.
2016
2016 vs.
2015
$
$
$
$
$
294.3
169.6
67.7
78.2
125.0
734.8
258.0
171.2
78.9
74.1
103.9
686.1
266.4
172.7
69.8
80.0
106.0
694.9
36.3
(1.6)
(11.2)
4.1
21.1
48.7
(8.4)
(1.5)
9.1
(5.9)
(2.1)
(8.8)
$
$
$
$
$
$
119.7
16.3%
$
121.1
17.7%
$
118.4
17.0%
$
(1.4)
$
2.7
Net sales in the Performance Materials segment of $734.8 million increased $48.7 million in 2017. Metalcasting’s sales increased
$36.3 million or 14 percent primarily due to higher volumes in Asia and North America. Basic Minerals sales increased $21.1 million
or 20 percent primarily due to higher sales of chromite and drilling products. These sales increases were partially offset by lower
Environmental Products sales and lower Fabric Care sales which impacted Household, Personal Care and & Specialty Products.
Income from operations decreased $1.4 million to $119.7 million and represented 16.3% of net sales compared to $121.1 million
and 17.7% of sales in 2016.
2016 v 2015
Net sales in the Performance Materials segment of $686.1 million decreased $8.8 million in 2016. Foreign exchange had an
unfavorable impact on Performance Materials segment sales of approximately $19.0 million, or 3 percent. Excluding the effects of
foreign exchange, higher China Metalcasting sales, increased sales of bulk chromite in our Basic Minerals product line and increased
sales in Environmental Products were partially offset by lower fabric care sales in our Household, Personal Care & Specialty Minerals
product line and lower sales in Building Materials resulting from smaller scale water proofing projects completed in the western
United States and Europe in 2016 as compared to the prior year.
Income from operations increased $2.7 million and represented 17.7% of net sales compared to 17.0% in 2015 as a result of
significant productivity gains and a favorable product mix.
34
Refractories Segment
Refractories Segment
Net Sales
Refractory Products
Metallurgical Products
Total net sales
Income from operations
% of net sales
2017 v 2016
Year Ended December 31,
2017
2016
2015
(millions of dollars)
2017 vs.
2016
2016 vs.
2015
$
$
$
$
$
226.9
52.5
279.4
219.0
55.5
274.5
230.7
65.2
295.9
7.9
(3.0)
4.9
$
$
(11.7)
(9.7)
(21.4)
$
$
$
$
39.8
14.2%
$
37.0
13.5%
$
27.8
9.4%
$
2.8
$
9.2
Net sales in the Refractories segment of $279.4 million increased $4.9 million in 2017 or 2 percent. Higher equipment sales were
partially offset by lower volumes in metallurgical products.
Income from operations increased $2.8 million to $39.8 million and represented 14.2% of net sales compared to $37.0 million or
13.5% of sales in 2016. The increase in income from operations relates primarily to higher equipment sales and improved refractory
operating costs.
2016 v 2015
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.
Energy Services Segment
Energy Services Segment
Year Ended December 31,
2017
2016
2015
(millions of dollars)
2017 vs.
2016
2016 vs.
2015
Net Sales
$
76.7
$
85.9
$
182.2
$
(9.2)
$
(96.3)
Income (Loss) from operations
% of net sales
* Not meaningful
2017 v 2016
$
6.1
8.0%
$
(25.9)
*
$
(27.9)
*
$
32.0
$
2.0
Net sales in the Energy Services segment declined $9.2 million in 2017. The sales decrease was due to continued 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.
The segment recorded income from operations of $6.1 million in 2017. Included in income from operations was $1.7 million of
additional restructuring charges relating to the exit of certain businesses in 2016, which was offset by a $1.1 million gain on sale of
previously impaired assets.
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.
35
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.
Liquidity and Capital Resources
Cash provided from continuing operations in 2017 was $207.6 million, compared with $225.1 million in prior year. Cash flows
provided from operations in 2017 were principally used for repayment of debt, to fund capital expenditures and pay the Company's
dividend to common shareholders. The Company’s intention is to use excess cash flow for investments in growth, continued debt
reduction and selective share repurchases. In 2017, the Company repaid approximately $119 million in principal amount of its long-term
debt.
On May 9, 2014, in connection with the acquisition of AMCOL International Corporation (“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 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, which extended the maturity and lowered the
interest costs by 75 basis points. 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 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. 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. During 2017, the Company repaid $110 million on its Term Facility. As of December 31, 2017, there were no loans and $12.9
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.
The Company has four committed loan facilities for the funding of new manufacturing facilities in China, comprised of
facilities of 94.8 million RMB, (approximately $14.5 million) and a $1.8 million facility. In addition, the Company has one
committed loan facility in Japan in the amount of 680 million Yen (approximately $6.0 million). As of December 31, 2017, on a
combined basis, $8.8 million was outstanding under these facilities. Principal will be repaid in accordance with the payment
schedules ending in 2021. The Company repaid $6.9 million on these loans in 2017.
As of December 31, 2017, the Company had $37.1 million in uncommitted short-term bank credit lines, of which approximately
$6.3 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 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 2018 should be between $70 million and $80 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.
36
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. This swap
agreement hedges a portion of contractual floating rate interest through its expiration in May 2021. As a result of the agreement, the
Company’s effective fixed interest rate on the notional amount floating rate indebtedness will be 4.25%. The fair value of this
instrument at December 31, 2017 was an asset of $2.9 million.
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 2015. As of October 1, 2017, 64,650 shares
were repurchased under this program for $3.3 million, or, an average price of approximately $51.79 per share. This program has
expired.
On September 21, 2017, 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 1, 2017 after the previous program expired.
There were no share repurchases under this program during 2017.
On January 24, 2018, 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.
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, 2017, 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
Repatriation tax liability
Other long term liabilities
Total contractual obligations
Total
2018
$
$
$
$
2019 -
2020
(millions of dollars)
$
2021 -
2022
After
2022
987.0
196.2
31.0
82.3
35.1
22.1
1,353.7
3.8
38.3
15.5
18.1
2.8
1.6
80.1
1.2
76.4
15.5
25.2
5.6
-
123.9
304.0
53.7
-
14.1
5.6
-
377.4
678.0
27.8
-
24.9
21.1
20.5
772.3
$
$
$
$
$
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, 2017, maturities for long-term debt extended to 2024.
Interest related to long-term debt is based on interest rates in effect as of December 31, 2017 and is calculated on debt with
maturities that, on December 31, 2017 extended to 2024. 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.
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 2019 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.
On December 22, 2017, the Tax Cuts and Jobs Act was enacted and we recorded a tax liability for the one-time transition tax on
accumulated foreign subsidiary earnings of $35.1 million. We intend to pay the one-time transition tax in eight annual interest-free
installments beginning in 2018.
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 18 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 $14.7 million at December 31, 2017. 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
37
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, valuation of long-
lived assets, goodwill and other intangible assets, income taxes, including valuation allowances and pension plan assumptions. 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:
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
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 2017 and 2016, 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.
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.
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 five reporting units; PCC, Processed Minerals, Refractories, Performance Materials 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 2017, the Company performed a qualitative assessment of each of its reporting units and
38
determined it was not more likely than not that the fair value of any of its reporting units was less than their carrying values.
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.
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
losses. 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 $133.8 million and $211.7 million at December 31, 2017
and 2016, respectively.
U.S. Tax Reform was enacted on December 22, 2017 and introduces significant changes to U.S. income tax law. Effective in
2018, the legislation reduces the U.S. statutory tax rate from 35% to 21%, creates new taxes on certain foreign-sourced
earnings and certain related-party payments. In addition, in 2017, the Company is subject to a one-time transition tax on
accumulated foreign subsidiary earnings not previously subject to U.S. income tax. Accounting for the income tax effects of
this legislation requires significant judgments and estimates in the interpretation and calculations of its provisions.
Due to the timing of the enactment and the complexity involved in applying the provisions of the U.S. Tax Reform, the
Company has made reasonable estimates of the effects and recorded provisional amounts in our consolidated financial
statements for the year ended December 31, 2017. As we collect and prepare necessary data, and interpret any additional
guidance issued by the U.S. Treasury Department, the IRS or other standard-setting bodies, we may make adjustments to the
provisional amounts. Those adjustments may materially impact the provision for income taxes and the effective tax rate in
the period in which the adjustments are made. The accounting for the tax effects of the enactment of the U.S. Tax Reform
will be completed in 2018.
The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often
ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax
exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes
in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and
statements of operations. See Note 5 to the Consolidated Financial Statements for additional detail on our uncertain tax
positions.
Pension Benefits: We sponsor pension and other retirement plans in various forms covering the majority of employees who
meet eligibility requirements. Several statistical and actuarial models which attempt to estimate future events are used in
calculating the expense and liability related to the plans. These models include assumptions about the discount rate,
expected return on plan assets and rate of future compensation increases as determined by us, within certain guidelines. Our
assumptions reflect our historical experience and management's best judgment regarding future expectations. In addition,
our actuarial consultants also use subjective factors such as withdrawal and mortality rates to estimate these assumptions.
The actuarial assumptions used by us may differ materially from actual results due to changing market and economic
conditions, higher or lower withdrawal rates or longer or shorter life spans of participants, among other things. Differences
from these assumptions may result in a significant impact to the amount of pension expense/liability recorded by us follows:
39
A one percentage point change in our major assumptions would have the following effects:
Effect on Expense
(millions of dollars)
Discount
Rate
Salary
Scale
Return on
Asset
1% increase ......................................... $
1% decrease ......................................... $
(3.2 )
5.9
Effect on Projected Benefit Obligation
(millions of dollars)
1% increase ......................................... $
1% decrease ........................................ $
Discount
Rate
(39.5 )
65.4
$
$
$
$
0.8
(0.6 )
$
$
(1.8 )
2.5
Salary
Scale
5.0
(4.5 )
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, 2017 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, 2017, the Company had approximately
56% of its pension assets in equity securities, 36% in fixed income securities and 8% in other securities.
We recognized pension expense of $12.6 million in 2017 as compared to $14.2 million in 2016. 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 2017, total actuarial losses recognized in Accumulated other
comprehensive income (loss) for pension plans were ($91.3 million), as compared to ($82.0 million) in 2016. 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.
In 2017, included in other comprehensive income, is a net loss of $10.0 million ($8.5 million after-tax) was recorded in
other comprehensive income, primarily due to a change in discount rates. 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.
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 2017, the average remaining service period of active employees or life expectancy for fully
eligible employees was 10 years. We expect our 2018 amortization of net actuarial losses to be approximately $11.5
million.
For a detailed discussion on the application of these and other accounting policies, see "Summary of Significant Accounting
Policies" in 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.
Inflation
While inflation historically has not had a material impact on MTI, our financial performance could be adversely effected by
increases in energy and commodity prices. 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
40
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 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 2017, which had caused exploration companies to reduce their capital
expenditures and production and exploration activities. This has had 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 completed its evaluation
of the provisions of this standard and we have concluded that our adoption of ASU No. 2014-09 will not materially change the amount
or timing of revenues recognized by us, nor will it materially affect our financial position. We have adopted this new standard
effective January 1, 2018. The Company has elected to use the cumulative effect transition method and there will not be a change to
our previously reported financial results.
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. Based on
the current status of this assessment, the adoption of this guidance is not expected to have a material impact on the Company’s
financial statements.
Intangibles – Goodwill and Other
In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill
Impairment”, which no longer requires an entity to perform a hypothetical purchase price allocation to measure goodwill impairment.
Instead, goodwill will be measured using the difference between the carrying amount and the fair value of the reporting unit. The
guidance is effective for the interim and annual periods beginning on or after December 15, 2019, with early adoption permitted. The
adoption of this guidance is not expected to have a material impact on the Company’s financial statements.
Compensation- Retirement Benefits
In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits: Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which requires companies to present the service cost component
of the net benefit cost in the same line items in which they report compensation cost. All other components of net periodic benefit
cost will be presented outside operating income. The guidance is effective for the interim and annual periods beginning on or after
December 15, 2017. We adopted this new standard effective January 1, 2018. The adoption of this guidance is not expected to have a
material impact on the Company’s financial statements.
41
Derivatives and Hedging
In August 2017, the FASB issued accounting guidance to improve and simplify existing guidance to allow companies to
better reflect their risk management activities in the financial statements. The guidance expands the ability to hedge nonfinancial and
financial risk components, eliminates the requirement to separately measure and recognize hedge ineffectiveness and eases
requirements of an entity’s assessment of hedge effectiveness. This guidance is effective for periods beginning after December 15,
2018 and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s
financial statements.
Adoption of ASU 2016-09, Stock Compensation- Improvements to Employee Share-Based Payment Accounting
On January 1, 2017, the Company adopted the provisions of ASU 2016-09, “Stock Compensation – Improvements to
Employee Share-Based Payment Accounting”, an amendment to account standards codification (“ASC”) 718, which simplifies several
aspects of accounting for share-based payments, including accounting for income taxes, forfeitures, statutory withhold rates as well as
presentation on the statement of cash flows. The Company has elected to adopt the standard on a prospective basis. As a result of this
adoption, the Company recognizes excess tax benefits in the current account period. The cash flow benefit of the excess tax benefit is
included as an operating activity in the Consolidated Statement of Cash Flows for the period ended December 31, 2017. Additionally,
taxes paid for shares withheld for tax-withholding purposes are reported as financing activities in the Condensed Consolidated
Statements of Cash Flows. Previously, this activity was included in operating activities. Prior year Condensed Consolidated Statement
of Cash Flows has not been restated. In accordance with the standard, the Company will continue to account for forfeitures using an
estimated forfeiture rate.
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, 2017, we did not have any 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.
42
Interest Rate Sensitivity
A portion of our long-term bank debt bears interest at variable rates (see Note 12 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 $8.3 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.
Sovereign Debt Risk
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, 2017.
As of December 31, 2017, the Company completed the implementation of a global enterprise resource planning (“ERP”) system
for the businesses acquired from AMCOL. This transition proceeded without material adverse effects. We reviewed each system as it
was being implemented and the controls affected by the implementation of the new systems, and made the appropriate changes to the
affected internal controls as we implemented 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."
Changes in Internal Control Over Financial Reporting
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
43
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 .............................
Brett Argirakis ....................................
Gary L. Castagna ................................
Michael A. Cipolla ..............................
Matthew E. Garth ................................
Jonathan J. Hastings ............................
Andrew M. Jones ................................
Douglas W. Mayger ............................
Thomas J. Meek ..................................
D.J. Monagle, III .................................
48
53
56
60
43
55
59
60
60
55
Chief Executive Officer
Vice President and Managing Director, Minteq International Inc.
Group President, Performance Materials
Vice President, Corporate Controller and Chief Accounting
Officer
Senior Vice President, Finance and Treasury, Chief Financial
Officer
Senior Vice President, Corporate Development
Vice President and Managing Director, Energy Services
Senior Vice President and Director – MTI Supply Chain
Senior Vice President, General Counsel, Human Resources,
Secretary and Chief Compliance Officer
Group President, Specialty Minerals and Refractories
Douglas T. Dietrich was elected Chief Executive Officer effective December 2016 having served previously as Senior Vice
President, Finance and Treasury, Chief Financial Officer effective January 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, Alcoa Latin America Extrusions and Global Rod and Bar Products since 2002.
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.
Gary L. Castagna was named Group President, Performance Materials and Construction Technologies in March 2017. Prior to
that, he was elected Senior Vice President and Managing Director, Performance Materials in May 2014. Prior to that, he was
Executive Vice President of 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.
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.
Matthew E. Garth was elected Senior Vice President, Finance and Treasury, Chief Financial Officer effective January 2017. Mr.
Garth joined 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 Packing from 2014 to 2015; Vice President, Finance- Alcoa Global Packing 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; and Director, Corporate Treasury Alcoa Inc. from 2007 to 2009.
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.
Andrew M. Jones was elected Vice President and Managing Director, Energy Services in October 2016. Prior to that, he was
Vice President and Managing Director, Eastern Hemisphere, Energy Services since 2014. Prior to that, he was the Vice President of
CETCO Oilfield Services West Africa since 2012. Prior to that, he was Managing Director of Africa Oilfield Services since 2009.
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
44
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 Inc.
Before joining Alcoa Inc. in 1999, Mr. Meek worked with Koch Industries, Inc. of Wichita, Kansas, where he held numerous
supervisory positions. His last position there was Interim General Counsel. From 1985 to 1990, Mr. Meek was an Associate/Partner in
the Wichita, Kansas law firm of McDonald, Tinker, Skaer, Quinn & Herrington, P.A.
D.J. Monagle III was named Group President, Specialty Minerals and Refractories in March 2017. Prior to that, he was Senior
Vice President, Chief Operating Officer—Specialty Minerals Inc. and Minteq Group, effective February 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.
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 “Corporate Governance”, “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.
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.
45
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, 2017 and 2016
Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2017, 2016 and 2015
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.
3.1
- Restated Certificate of Incorporation of the Company (Incorporated by reference to exhibit 3.1 filed with the
Company's Annual Report on Form 10-K (file no. 001-11430) for the year ended December 31, 2003)
3.2
- By-Laws of the Company as amended and restated effective March 16, 2016 (Incorporated by reference to
exhibit 3.1 filed with the Company's Current Report on Form 8-K (file no. 001-11430) filed on July 24,
2017)
4.1
- Specimen Certificate of Common Stock (Incorporated by reference to exhibit 4.1 filed with the Company's
10.1
10.1(a)
10.1(b)
10.2
10.3
10.4
10.4(a)
10.5
Annual Report on Form 10-K (file no. 001-11430) for the year ended December 31, 2003)
- Asset Purchase Agreement, dated as of September 28, 1992, by and between Specialty Refractories Inc. and
Quigley Company Inc. (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)
- Agreement dated October 22, 1992 between Specialty Refractories Inc. and Quigley Company Inc.,
amending Exhibit 10.1 (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)
- Letter Agreement dated October 29, 1992 between Specialty Refractories Inc. and Quigley Company Inc.,
amending Exhibit 10.1 (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)
- Reorganization Agreement, dated as of September 28, 1992, by and between the Company and Pfizer Inc.
(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)
- Asset Contribution Agreement, dated as of September 28, 1992, by and between Pfizer Inc. and Specialty
Minerals Inc. (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)
- Asset Contribution Agreement, dated as of September 28, 1992, by and between Pfizer Inc. and Barretts
Minerals Inc. (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)
- Agreement dated October 22, 1992 between Pfizer Inc, Barretts Minerals Inc. and Specialty Minerals Inc.,
amending Exhibits 10.3 and 10.4 (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)
- Employment Agreement, dated December 13, 2016, between the Company and Douglas T. Dietrich
(Incorporated by reference to exhibit 10.1 filed with the Company's Current Report on Form 8-K (file no.
001-11430) filed on December 16, 2016) (+)
46
10.6
10.7
10.8
10.9
10.10
10.11
10.11(a)
10.12
10.13
10.13(a)
10.13(b)
10.13(c)
10.13(d)
10.14
10.14(a)
10.15
10.15(a)
10.15(b)
10.15(c)
10.15(d)
10.16
- Form of Employment Agreement between the Company and each of Brett Argirakis, Gary L. Castagna,
Michael A. Cipolla, Matthew E. Garth, Jonathan J., Hastings, Andrew Jones, Douglas W. Mayger, Thomas
J. Meek, and D.J. Monagle, III (Incorporated by reference to exhibit 10.6 filed with the Company's Annual
Report on Form 10-K (file no. 001-11430) for the year ended December 31, 2016) (+)
- Severance Agreement between the Company and Douglas T. Dietrich (Incorporated by reference to the
exhibit 10.2 filed with the Company’s Current Report on form 8-K (file no. 001-11430) filed on December
16, 2016) (+)
- Form of Severance Agreement between the Company and each of Brette Argirakis, Gary L. Castagna,
Michael A. Cipolla, Matthew E. Garth, Jonathan J., Hastings, Andrew Jones, Douglas W. Mayger, Thomas
J. Meek, and D.J. Monagle, III (Incorporated by reference to exhibit 10.8 filed with the Company's Annual
Report on Form 10-K (file no. 001-11430) for the year ended December 31, 2016) (+)
- 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 (Incorporated by reference to exhibit 10.1 filed with the
Company's Current Report on Form 8-K (file no. 001-11430) filed on May 8, 2009) (+)
- Company Employee Protection Plan, as amended August 27, 1999 (Incorporated by reference to exhibit
10.7 filed with the Company's Annual Report on Form 10-K (file no. 001-11430) for the year ended
December 31, 2004) (+)
- Company Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors, as
amended and restated effective January 1, 2008 (Incorporated by reference to exhibit 10.8 filed with the
Company's Quarterly Report on Form 10-Q (file no. 001-11430) for the quarter ended March 30, 2008) (+)
- First Amendment to the Company Nonfunded Deferred Compensation and Unit Award Plan for Non-
Employee Directors, dated January 18, 2012 (Incorporated by reference to exhibit 10.11(a) filed with the
Company’s Annual Report on Form 10-K (file no. 001-11430)for the year ended December 31, 2011) (+)
- 2015 Stock Award and Incentive Plan of the Company (Incorporated by reference to Appendix B to the
Company’s 2015 Proxy Statement (file no. 001-11430) filed on April 2, 2015) (+)
- Company Retirement Plan, as amended and restated, dated December 21, 2012 (Incorporated by reference
to exhibit 10.12 filed with the Company's Annual Report on Form 10-K (file no. 001-11430) for the year
ended December 31, 2012) (+)
- Second Amendment to Company Retirement Plan, as amended and restated, dated December 22, 2014
(Incorporated by reference to exhibit 10.13(a) filed with the Company's Annual Report on Form 10-K (file
no. 001-11430) for the year ended December 31, 2014)(+)
- Third Amendment to Company Retirement Plan, as amended and restated, dated June 12, 2015
(Incorporated by reference to exhibit 10.2 filed with the Company's Quarterly Report on Form 10-Q (file no.
001-11430) for the quarter ended June 28, 2015)(+)
- Fourth Amendment to Company Retirement Plan, as amended and restated, dated December 16, 2016
(Incorporated by reference to exhibit 10.13(c) filed with the Company's Annual Report on Form 10-K (file
no. 001-11430) for the year ended December 31, 2016)(+)
- Fifth Amendment to Company Retirement Plan, as amended and restated, dated December 6, 2017 (*)(+)
- Company Supplemental Retirement Plan, amended and restated effective December 31, 2009 (Incorporated
by reference to exhibit 10.13 filed with the Company's Annual Report on Form 10-K (file no. 001-11430)
for the year ended December 31, 2009) (+)
- First Amendment to Company Supplemental Retirement Plan, as amended and restated, dated December 22,
2014 (Incorporated by reference to exhibit 10.14(a) filed with the Company's Annual Report on Form 10-K
(file no. 001-11430) for the year ended December 31, 2014)(+)
- Company Savings and Investment Plan, as amended and restated, dated December 21, 2012 (Incorporated
by reference to exhibit 10.14 filed with the Company's Annual Report on Form 10-K (file no. 001-11430)
for the year ended December 31, 2012) (+)
- Amendment to the Company Savings and Investment Plan, as amended and restated, dated December 5,
2013 (Incorporated by reference to exhibit 10.15(a) filed with the Company’s Annual Report on Form 10-K
(file no. 001-11430) for the year ended December 31, 2013) (+)
- Amendment to the Company Savings and Investment Plan, as amended and restated, dated December 5,
2013 (Incorporated by reference to exhibit 10.15(b) filed with the Company’s Annual Report on Form 10-K
(file no. 001-11430) for the year ended December 31, 2013) (+)
- Third Amendment to the Company Savings and Investment Plan, as amended and restated, dated December
22, 2014 (Incorporated by reference to exhibit 10.15(c) filed with the Company's Annual Report on Form
10-K (file no. 001-11430) for the year ended December 31, 2014)(+)
- Amendment to the Company Savings and Investment Plan, as amended and restated, dated December 31,
2015 (Incorporated by reference to exhibit 10.15(d) filed with the Company's Annual Report on Form 10-K
(file no. 001-11430) for the year ended December 31, 2015)(+)
- Company Supplemental Savings Plan, amended and restated effective December 31, 2009 (Incorporated by
reference to exhibit 10.15 filed with the Company's Annual Report on Form 10-K (file no. 001-11430) for
the year ended December 31, 2009) (+)
47
10.16(a)
10.16(b)
10.16(c)
10.16(d)
10.17
10.17(a)
10.17(b)
10.18
10.18(a)
10.19
10.19(a)
10.20
10.20(a)
10.20(b)
10.21
10.21(a)
10.21(b)
10.22
10.23
- Amendment to the Company Supplemental Savings Plan, dated December 28, 2011 (Incorporated by
reference to exhibit 10.16(a) filed with the Company’s Annual Report on Form 10-K (file no. 001-11430)
for the year ended December 31, 2011)(+)
- First Amendment to the Company Supplemental Savings Plan, dated December 22, 2014 (Incorporated by
reference to exhibit 10.16(b) filed with the Company's Annual Report on Form 10-K (file no. 001-11430)
for the year ended December 31, 2014)(+)
- Second Amendment to the Company Supplemental Savings Plan, dated December 22, 2014 (Incorporated
by reference to exhibit 10.16(c) filed with the Company's Annual Report on Form 10-K (file no. 001-11430)
for the year ended December 31, 2014)(+)
- Third Amendment to the Company Supplemental Savings Plan, dated December 16, 2016 (Incorporated by
reference to exhibit 10.16(d) filed with the Company's Annual Report on Form 10-K (file no. 001-11430)
for the year ended December 31, 2016)(+)
- Company Health and Welfare Plan, effective as of April 1, 2003 and amended and restated as of January 1,
2006 (Incorporated by reference to exhibit 10.14 filed with the Company's Annual Report on Form 10-K
(file no. 001-11430) for the year ended December 31, 2006)(+)
- Amendment to the Company Health and Welfare Plan, dated May 19, 2009 (Incorporated by reference to
exhibit 10.16(a) filed with the Company's Annual Report on Form 10-K (file no. 001-11430) for the year
ended December 31, 2009) (+)
- First Amendment to Company Health and Welfare Plan, dated December 22, 2014 (Incorporated by
reference to exhibit 10.17(b) filed with the Company's Annual Report on Form 10-K (file no. 001-11430)
for the year ended December 31, 2014)(+)
- Company Retiree Medical Plan, effective as of January 1, 2011 (Incorporated by reference to exhibit 10.17
filed with the Company's Annual Report on Form 10-K (file no. 001-11430) for the year ended December
31, 2010)(+)
- First Amendment to Company Retiree Medical Plan, dated December 22, 2014 (Incorporated by reference
to exhibit 10.18(a) filed with the Company's Annual Report on Form 10-K (file no. 001-11430) for the year
ended December 31, 2014)(+)
- Amended and Restated Grantor Trust Agreement, dated as of April 1, 2010, by and between the Company
and the Wilmington Trust Company (Incorporated by reference to exhibit 10.1 filed with the Company's
Quarterly Report on Form 10-Q (file no. 001-11430) for the period ended April 4, 2010)(+)
- Agreement and Amendment No. 1, dated October 1, 2017, to the Amended and Restated Grantor Trust
Agreement, dated as of April 1, 2010, by and between the Company and the Wilmington Trust Company
(*)(+)
- AMCOL International Corporation Nonqualified Deferred Compensation Plan, as amended (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 (file no. 0-15661)) (+)
- First Amendment to AMCOL International Corporation Nonqualified Deferred Compensation Plan, as
amended, dated December 22, 2014 (Incorporated by reference to exhibit 10.20(a) filed with the Company's
Annual Report on Form 10-K (file no. 001-11430) for the year ended December 31, 2014)(+)
- Third Amendment to the AMCOL International Corporation Nonqualified Deferred Compensation Plan, as
amended, dated August 21, 2015 (Incorporated by reference to exhibit 10.1 filed with the Company's
Quarterly Report on Form 10-Q (file no. 001-11430) for the quarter ended September 27, 2015)(+)
- AMCOL International Corporation Amended and Restated Supplementary Pension Plan for Employees
(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 (file no. 0-15661)) (+)
- First Amendment to AMCOL International Corporation Amended and Restated Supplementary Pension
Plan for Employees, dated December 22, 2014 (Incorporated by reference to exhibit 10.21(a) filed with the
Company's Annual Report on Form 10-K (file no. 001-11430) for the year ended December 31, 2014)(+)
- Second Amendment to Amended and Restated Supplementary Pension Plan for Employees of AMCOL
International Corporation, dated August 21, 2015 (Incorporated by reference to exhibit 10.2 filed with the
Company's Quarterly Report on Form 10-Q (file no. 001-11430) for the quarter ended September 27,
2015)(+)
- 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, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the other agents
party thereto (Incorporated by reference to the exhibit 10.1 filed with the Company's Current Report on
Form 8-K (file no. 001-11430) filed on February 15, 2017)
Indenture, dated July 22, 1963, between the Cork Harbour Commissioners and Roofchrome Limited
(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)
-
21.1
23.1
24
- Subsidiaries of the Company (*)
- Consent of Independent Registered Public Accounting Firm (*)
- Power of Attorney (*)
48
31.1
31.2
32
95
- Rule 13a-14(a)/15d-14(a) Certification executed by the Company's principal executive officer (*)
- Rule 13a-14(a)/15d-14(a) Certification executed by the Company's principal financial officer (*)
- Section 1350 Certification (*)
Information Concerning Mine Safety Violations (*)
(*) Filed herewith.
(+) Management contract or compensatory plan or arrangement required to be filed pursuant to Item 601 of
Regulation S-K.
49
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 16, 2018
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 16, 2018
/s/ Matthew E. Garth
Matthew E. Garth
Senior Vice President-Finance and Treasury,
February 16, 2018
Chief Financial Officer (principal financial officer)
/s/ Michael A. Cipolla
Michael A. Cipolla
Vice President - Controller and
February 16, 2018
Chief Accounting Officer (principal accounting officer)
50
*
Joseph C. Breunig
*
*
John J. Carmola
Robert L. Clark
Director
February 16, 2018
Director
February 16, 2018
Director
February 16, 2018
/s/ Douglas T. Dietrich
Douglas T. Dietrich
Director
February 16, 2018
*
Duane R. Dunham
*
Franklin L. Feder
*
Carolyn K. Pittman
*
Marc E. Robinson
*
Donald C. Winter
* By: /s/ Thomas J. Meek
Thomas J. Meek
Attorney-in-Fact
Chairman & Director
February 16, 2018
Director
February 16, 2018
Director
February 16, 2018
Director
February 16, 2018
Director
February 16, 2018
51
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MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
_______________________________________
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Financial Statements:
Page
Consolidated Balance Sheets as of December 31, 2017 and 2016 .......................................................................
F-2
Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015 ...........................
F-3
Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015
F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015 .....................
F-5
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2017, 2016 and 2015 ......
F-6
Notes to Consolidated Financial Statements........................................................................................................
F-7
Reports of Independent Registered Public Accounting Firm ...............................................................................
F-37
Management's Report on Internal Control Over Financial Reporting..................................................................
F-38
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 - 2017 - $4.2; 2016 -$ 7.9
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 48,644,736 shares in 2017 and 48,229,826 shares in 2016
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less common stock held in treasury, at cost;
13,270,391 shares in 2017 and 13,259,839 shares in 2016
Total MTI shareholders' equity
Non-controlling interest
Total shareholders' equity
December 31,
2017
2016
$
212.2
2.7
383.0
219.3
30.1
4.9
852.2
$
188.5
2.0
341.3
186.9
28.0
4.4
751.1
1,061.3
779.3
196.5
25.6
55.5
2,970.4
$
1,051.8
778.7
204.4
27.1
50.3
2,863.4
$
$
6.3
3.8
179.0
8.4
55.4
57.1
310.0
$
6.1
6.8
144.9
21.5
61.3
54.9
295.5
959.8
159.4
155.0
107.1
1,691.3
1,069.9
238.8
147.3
81.0
1,832.5
-
-
4.9
422.7
1,607.2
(186.1)
(597.0)
1,251.7
27.4
1,279.1
4.8
400.0
1,419.1
(221.1)
(596.3)
1,006.5
24.4
1,030.9
Total liabilities and shareholders' equity
$
2,970.4
$
2,863.4
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,
2017
2016
2015
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
Acquisition related transaction and integration costs
Restructuring and other items, net
Income from operations
Interest expense, net
Debt modification costs and fees
Other non-operating income (deductions), net
Total non-operating deductions, net
Income from operations before provision for taxes
and equity in earnings
Provision (benefit) for taxes on income
Equity in earnings of affiliates, 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 operations attributable to MTI
Diluted:
Income from operations attributable to MTI
Cash dividends declared per common share
Shares used in computation of earnings per share:
Basic
Diluted
(millions of dollars, except per share amounts)
$
$
$
1,599.0
76.7
1,675.7
1,552.1
85.9
1,638.0
1,615.4
182.2
1,797.6
1,158.5
50.0
1,208.5
1,117.7
59.9
1,177.6
1,190.0
136.6
1,326.6
467.2
182.4
23.7
3.4
15.0
242.7
(43.4)
(3.9)
(4.5)
(51.8)
190.9
(6.6)
1.5
199.0
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
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
$
3.9
195.1
$
3.7
133.4
$
3.7
107.9
$
5.54
$
3.82
$
3.11
$
5.48
$
3.79
$
3.08
$
0.20
$
0.20
$
0.20
35.2
35.6
34.9
35.2
34.7
35.0
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 income (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,
2017
2016
(millions of dollars)
2015
$
199.0
$
137.1
$
111.6
44.7
(8.5)
0.3
36.5
235.5
3.9
1.5
5.4
(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
Comprehensive income attributable to MTI
$
230.1
$
93.2
$
39.9
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
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization
Loss on disposal of property, plant and equipment
Deferred income taxes
Pension amortization and settlement loss
Provision for bad debts
Stock-based compensation
Asset impairment charge
Non-cash debt modification costs
Other non-cash items
Changes in operating assets and liabilities
Accounts receivable
Inventories
Pension plan funding
Accounts payable
Restructuring liabilities
Income taxes payable
Prepaid expenses and other
Net cash provided by operating activities
Investing Activities:
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
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
Dividends paid to non-controlling interest
Cash dividends paid
Net cash used in financing activities
Effect of exchange rate changes on cash and
cash equivalents
Net increase (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,
2017
2016
2015
(millions of dollars)
$
199.0
$
137.1
$
111.6
91.0
1.8
(76.1)
7.4
3.8
8.1
5.3
1.8
(1.7)
(27.3)
(25.2)
(10.8)
28.0
4.5
(12.6)
10.6
207.6
(76.7)
1.4
3.8
(4.5)
(1.5)
(77.5)
-
(118.9)
(0.2)
(0.7)
14.6
(3.6)
(2.4)
(7.0)
(118.2)
91.9
1.9
(10.9)
7.9
6.2
6.3
18.5
-
(3.1)
(4.9)
3.1
(10.5)
(4.8)
(4.3)
5.4
(14.7)
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)
11.8
(9.6)
98.3
0.1
(2.5)
9.9
2.6
11.2
34.2
-
(0.2)
36.6
3.1
(10.4)
(9.7)
(3.0)
(15.4)
3.6
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)
(21.8)
23.7
188.5
212.2
$
(40.9)
229.4
188.5
$
(20.2)
249.6
229.4
$
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, 2014
$
4.8
$
373.0
$
1,191.8
$
(112.9)
$
(593.7)
$
25.9
$
888.9
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
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, 2017
-
-
-
-
-
-
-
-
-
-
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
$
-
-
-
-
0.1
-
-
-
-
-
14.6
-
195.1
-
(7.0)
-
-
-
-
35.0
-
-
-
-
-
-
-
-
-
-
3.9
1.5
-
(2.4)
-
-
199.0
36.5
(7.0)
(2.4)
14.7
-
-
-
$
4.9
-
8.1
422.7
$
-
-
1,607.2
$
-
-
(186.1)
$
(0.7)
-
(597.0)
$
-
-
27.4
$
(0.7)
8.1
1,279.1
$
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.
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 long-
lived assets, goodwill and other intangible assets, pension plan assumptions, income tax, 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 $2.7 million and $2.0 million at December
31, 2017 and 2016, respectively. There were no unrealized holding gains and losses on the short-term bank investments held
at December 31, 2017.
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 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
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.
F-7
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2017, the book value of Company’s equity method investment was $16.1 million. The Company had no cost
method investments at December 31, 2017.
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
variable nature of underlying interest rates. Short-term investments are recorded at cost, which approximates fair market
value.
F-8
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Derivative Financial Instruments
The Company records derivative financial instruments which are used to hedge certain foreign exchange risk at fair value
on the balance sheet. See Note 9 for a full description of the Company's hedging activities and related accounting policies.
Revenue Recognition
Revenue from sale of products is recognized 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, 2017, the Company had no international subsidiaries operating in highly
inflationary economies.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company operates in multiple taxing jurisdictions, both within the U.S. and outside the U.S. In certain situations, a
taxing authority may challenge positions that the Company has adopted in its income tax filings. The Company regularly
assesses its tax position for such transactions and includes reserves for those differences in position. The reserves are utilized
or reversed once the statute of limitations has expired or the matter is otherwise resolved.
The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often
ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax
exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes
in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and
statements of operations. The Company's accounting policy is to recognize interest and penalties as part of its provision for
income taxes. See Note 5 for additional detail on our uncertain tax positions.
The accompanying financial statements do not include a provision for foreign withholding 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.
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.
F-9
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension and Post-retirement Benefits
The Company has defined benefit pension plans covering the majority of its employees. The benefits are generally based
on years of service and an employee's modified career earnings.
The Company also provides post-retirement healthcare benefits for the majority of its retirees and employees in the United
States. The Company measures the costs of its obligation based on its best estimate. The net periodic costs are recognized as
employees render the services necessary to earn the post-retirement benefits.
Environmental
Expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations and which do not contribute to current or future revenue generation are
expensed. Liabilities are recorded when it is probable the Company will be obligated to pay amounts for environmental site
evaluation, remediation or related costs, and such amounts can be reasonably estimated.
Earnings Per Share
Basic earnings per share have been computed based upon the weighted average number of common shares outstanding
during the period.
Diluted earnings per share have been computed based upon the weighted average number of common shares outstanding
during the period assuming the issuance of common shares for all potentially dilutive common shares outstanding.
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 completed its evaluation of the provisions of this
standard and we have concluded that our adoption of ASU No. 2014-09 will not materially change the amount or timing of
revenues recognized by us, nor will it materially affect our financial position. We have adopted this new standard effective
January 1, 2018. The Company has elected to use the cumulative effect transition method and there will not be a change to
our previously reported financial results.
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. Based on the current status of this assessment, the adoption of this
guidance is not expected to have a material impact on the Company’s financial statements.
F-10
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangibles – Goodwill and Other
In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill
Impairment”, which no longer requires an entity to perform a hypothetical purchase price allocation to measure goodwill
impairment. Instead, goodwill will be measured using the difference between the carrying amount and the fair value of the
reporting unit. The guidance is effective for the interim and annual periods beginning on or after December 15, 2019, with
early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s
financial statements.
Compensation – Retirement Benefits
In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits: Improving the Presentation
of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which requires companies to present the service
cost component of the net benefit cost in the same line items in which they report compensation cost. All other components
of net periodic benefit cost will be presented outside operating income. The guidance is effective for the interim and annual
periods beginning on or after December 15, 2017. We adopted this new standard effective January 1, 2018. The adoption of
this guidance is not expected to have a material impact on the Company’s financial statements.
Derivatives and Hedging
In August 2017, the FASB issued accounting guidance to improve and simplify existing guidance to allow
companies to better reflect their risk management activities in the financial statements. The guidance expands the ability to
hedge nonfinancial and financial risk components, eliminates the requirement to separately measure and recognize hedge
ineffectiveness and eases requirements of an entity’s assessment of hedge effectiveness. The adoption of this guidance is not
expected to have a material impact on the Company’s financial statements.
Adoption of ASU 2016-09, Stock Compensation- Improvements to Employee Share-Based Payment Accounting
On January 1, 2017, the Company adopted the provisions of ASU 2016-09, “Stock Compensation – Improvements
to Employee Share-Based Payment Accounting”, an amendment to account standards codification (“ASC”) 718, which
simplifies several aspects of accounting for share-based payments, including accounting for income taxes, forfeitures,
statutory withhold rates as well as presentation on the statement of cash flows. The Company has elected to adopt the
standard on a prospective basis. As a result of this adoption, the Company recognizes excess tax benefits in the current
account period. The cash flow benefit of the excess tax benefit is included as an operating activity in the Consolidated
Statement of Cash Flows for the period ended December 31, 2017. Additionally, taxes paid for shares withheld for tax-
withholding purposes are reported as financing activities in the Condensed Consolidated Statements of Cash Flows.
Previously, this activity was included in operating activities. Prior year Condensed Consolidated Statement of Cash Flows
has not been restated. In accordance with the standard, the Company will continue to account for forfeitures using an
estimated forfeiture rate.
Note 2. Restructuring and Other Items, net
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 and Energy Services Segments.
In 2017, the Company recognized $15.0 million in restructuring and non-cash impairment charges from the closure of
paper mills in North America, as well as the alignment of corporate and Paper PCC staffing levels into higher growth regions.
The restructuring is expected to result in approximately $6 million (unaudited) in savings on an annualized basis.
F-11
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, 2017
Impairment of assets
Specialty Minerals
Performance Materials
Energy Services
Corporate
Total impairment of assets charges
Severance and other employee costs
Specialty Minerals
Performance Materials
Refractories
Energy Services
Corporate
Total severance and other employee costs
Other
Refractories
Energy Services
2017
2016
(millions of dollars)
2015
5.3
$
-
-
-
$
5.3
-
$
-
18.5
-
18.5
$
-
$
-
33.0
1.2
34.2
$
5.0
$
-
-
1.7
4.1
10.8
$
-
$
-
-
12.7
-
12.7
$
-
$
-
2.0
9.0
-
11.0
$
-
$
(1.1)
$
(2.0)
(0.9)
-
$
-
Total restructuring and other items, net
$
15.0
$
28.3
$
45.2
At December 31, 2017 and 2016, the Company had $8.1 million and $3.6 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 2018.
The following table is a reconciliation of our restructuring liability balance:
Restructuring liability, December 31, 2016
Additional provisions
Cash payments
Restructuring liability, December 31, 2017
Note 3. Stock-Based Compensation
(millions of dollars)
$
$
3.6
10.8
(6.3)
8.1
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 Plans 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 2017, 2016 and 2015 include $4.1 million, $3.5 million and $4.0 million pre-tax
compensation costs, respectively, related to stock option expense as a component of marketing and administrative expenses.
All stock option expense is recognized in the consolidated statements of operations. The related tax benefit included in the
F-12
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
statement of income on the non-qualified stock options was $1.1 million, $1.4 million and $1.6 million for 2017, 2016 and
2015, respectively.
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, 2017, 2016 and 2015 was 8.71%, 7.38% and 7.34%, respectively.
The weighted average grant date fair value for stock options granted during the years ended December 31, 2017, 2016 and
2015 was $30.28, $14.34 and $22.68, respectively. The weighted average grant date fair value for stock options vested
during 2017, 2016 and 2015 was $18.45, $20.94 and $17.83, respectively. The total intrinsic value of stock options exercised
during the years ended December 31, 2017, 2016 and 2015 was $11.7 million, $4.9 million and $2.4 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, 2017, 2016 and 2015:
Expected life (in years)
Interest rate
Volatility
Expected dividend yield
2017
6.4
2.04%
36.61%
0.26%
2016
6.5
1.72%
36.75%
0.54%
2015
6.4
1.52%
36.86%
0.33%
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, 2017:
Awards outstanding at December 31, 2016
Granted
Exercised
Canceled
Awards outstanding at December 31, 2017
Awards exercisable at December 31, 2017
Weighted
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
(Millions)
Weighted
Average
Exercise
Price
Per Share
$
41.66
77.99
41.56
50.47
Awards
1,198,725
187,533
(353,636)
(35,783)
996,839
596,446
$
$
48.21
41.01
6.32
4.94
$
$
22.2
16.60
The aggregate intrinsic value above is calculated before applicable income taxes, based on the Company's closing stock
price of $68.85 as of the last business day of the period ended December 31, 2017 had all options been exercised on that date.
The weighted average intrinsic value of the options exercised during 2017, 2016 and 2015 was $32.95, $32.34 and $32.07 per
share, respectively. As of December 31, 2017, total unrecognized stock-based compensation expense related to non-vested
stock options was approximately $4.5 million, which is expected to be recognized over a weighted average period of
approximately three years.
The Company issues new shares of common stock upon the exercise of stock options
F-13
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-vested stock option activity for the year ended December 31, 2017 is as follows:
Nonvested awards outstanding at December 31, 2016
Granted
Vested
Canceled
Nonvested awards outstanding at December 31, 2017
Restricted Stock
Awards
431,412
187,533
(183,679)
(34,873)
400,393
Weighted
Average
Grant date
Fair Value
Per Share
$
45.61
77.99
48.78
50.08
58.94
$
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 69,539 shares, 155,165
shares and 216,502 shares for the periods ended December 31, 2017, 2016 and 2015, respectively. The fair value was
determined based on the market value of unrestricted shares. As of December 31, 2017, there was unrecognized stock-based
compensation related to restricted stock of $5.1 million, which will be recognized over approximately the next three years.
The compensation expense amortized with respect to all units was approximately $5.9 million, $5.8 million and $8.8 million
for the periods ended December 31, 2017, 2016 and 2015, respectively. In addition, the Company recorded reversals of $2.4
million, $3.8 million and $1.6 million for periods ended December 31, 2017, 2016 and 2015, 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, 2016
Granted
Vested
Canceled
Unvested balance at December 31, 2017
Note 4. Earnings Per Share (EPS)
Awards
227,213
69,539
(61,274)
(55,368)
180,110
Weighted
Average
Grant Date
Fair Value
Per Share
$
49.57
78.00
52.51
52.74
58.57
$
Year Ended December 31,
2017
2016
(in millions, except per share data)
2015
Net income attributable to MTI
$
195.1
$
133.4
$
107.9
Weighted average shares outstanding
Dilutive effect of stock options and stock units
Weighted average shares outstanding, adjusted
Basic earnings per share attributable to MTI
35.2
0.4
35.6
34.9
0.3
35.2
34.7
0.3
35.0
$
5.54
$
3.82
$
3.11
Diluted earnings per share attributable to MTI
$
5.48
$
3.79
$
3.08
Options to purchase 181,003 shares, 784 shares and 386,766 shares of common stock for the years ended December 31,
2017, 2016 and 2015, 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.
F-14
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the first quarter of 2017, the Company adopted the provisions of ASU 2016-09, “Stock Compensation – Improvements
to Employee Share-Based Payment Accounting”. Under the new guidance excess income tax benefits are no longer included
in the calculation of assumed proceeds. As such, the dilutive effect of stock options and stock units for the period ended
December 31, 2017 is reflective of the new guidance.
Note 5. Income Taxes
The U.S. Tax Cuts and Jobs Act (“U.S. Tax Reform”), enacted in December 2017, significantly changes U.S. corporate
income tax laws by, among other things, reducing the U.S. corporate income tax rate to 21% starting in 2018 and creating a
territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of U.S. subsidiaries. Under U.S.
GAAP (specifically, ASC Topic 740), the effects of changes in tax rates and laws on deferred tax balances are recognized in
the period in which the new legislation is enacted.
In response to U.S. Tax Reform, the Staff of the U.S. Securities and Exchange Commission issued Staff Accounting
Bulletin No. 118 (“SAB No. 118”) to provide guidance to registrants in applying ASC Topic 740 in connection with U.S. Tax
Reform. SAB No. 118 provides that in the period of enactment, the income tax effects of U.S. Tax Reform may be reported
as a provisional amount based on a reasonable estimate (to the extent a reasonable estimate can be determined), which would
be subject to adjustment during a “measurement period.” The measurement period begins in the reporting period of the U.S.
Tax Reform enactment date and ends when a registrant has obtained, prepared and analyzed the information that was needed
in order to complete the accounting requirements under ASC Topic 740. SAB No. 118 also describes supplemental disclosure
that should accompany the provisional amounts.
U.S. Tax Reform represents the first significant change in U.S. tax law in over 30 years. As permitted by SAB No. 118,
some elements of the tax expense recorded in the fourth quarter of 2017 due to the enactment of U.S. Tax Reform are based
on reasonable estimates and considered provisional. The Company is continuing to collect and analyze detailed information
about the earnings and profits of its non-U.S. subsidiaries, the related taxes paid, the amounts which could be repatriated, the
foreign taxes which may be incurred on repatriation and the associated impact of these items under U.S. Tax Reform. The
Company may record adjustments to refine those estimates during the measurement period, as additional analysis is
completed.
As a result, we have recorded a net tax benefit of $47.3 million during the fourth quarter of 2017. This amount, which is
reflected within the provision for income taxes in the Consolidated Statement of Income, includes the estimated impact of the
one-time mandatory tax on previously deferred earnings of non-U.S. subsidiaries offset in part by the benefit from
revaluation of net deferred tax liabilities based on the new lower corporate income tax rate. The impact of the U.S. Tax
Reform may differ from this estimate, possibly materially, due to, among other things, changes in interpretations and
assumptions made, additional guidance that may be issued and actions taken by the Company as a result of the U.S. Tax
Reform.
Income from operations before provision for taxes by domestic and foreign source is as follows:
2017
2016
(millions of dollars)
2015
$
$
$
96.7
94.2
190.9
72.9
97.4
170.3
32.6
100.0
132.6
$
$
$
Income from continuing operations before income taxes and income
from affiliates and joint ventures:
Domestic
Foreign
F-15
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision (benefit) for taxes on income consists of the following:
Domestic
Taxes currently payable
Federal
State and local
Deferred income taxes
Domestic tax provision (benefit)
Foreign
Taxes currently payable
Deferred income taxes
Foreign tax provision
Total tax provision (benefit)
2017
2016
(millions of dollars)
2015
$
46.0
2.4
(78.1)
(29.7)
21.1
2.0
23.1
(6.6)
$
$
18.7
4.4
(8.8)
14.3
$
1.4
1.2
(3.2)
(0.6)
23.2
(2.2)
21.0
35.3
$
22.7
0.7
23.4
22.8
$
The provision (benefit) for taxes on income shown in the previous table is classified based on the location of the taxing
authority, regardless of the location in which the taxable income is generated.
The major elements contributing to the difference between the U.S. federal statutory tax rate and the consolidated
effective tax rate are as follows:
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
Impact of US Tax Reform
Other
Consolidated effective tax rate
2017
2016
2015
35.0%
35.0%
35.0%
(6.7)%
(6.6)%
(8.4)%
(3.8)%
1.1%
0.3%
(1.9)%
0.4%
0.8%
(1.6)%
(24.8)%
(2.3)%
(3.5)%
(6.4)%
1.1%
0.6%
(1.1)%
0.4%
0.1%
(2.0)%
0.0%
(0.4)%
20.7%
(8.3)%
0.3%
(0.5)%
(0.9)%
(0.1)%
2.9%
(2.0)%
0.0%
(0.8)%
17.2%
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)
F-16
2017
2016
(millions of dollars)
$
28.6
33.2
40.4
22.0
(21.4)
102.8
$
49.7
34.6
55.4
35.0
(24.8)
149.9
161.6
63.4
11.6
236.6
(133.8)
$
251.3
96.3
14.0
361.6
(211.7)
$
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net deferred tax assets and net deferred tax liabilities are as follows:
2017
2016
(millions of dollars)
Net deferred tax asset, long-term
Net deferred tax liability, long-term
Net deferred tax asset (liability), long-term
$
$
25.6
159.4
(133.8)
27.1
238.8
(211.7)
$
$
The Company has $33.2 million of deferred tax assets arising from tax loss carry forwards which will be realized through
future operations. Carry forwards of approximately $15.5 million expire over the next 20 years, and $17.7 million can be
utilized over an indefinite period.
On December 31, 2017, the Company had $14.7 million of total unrecognized tax benefits. Included in this amount were
a total of $11.9 million of unrecognized income tax benefits that, if recognized, would affect the Company's effective tax
rate. While it is expected that the amount of unrecognized tax benefits will change in the next 12 months, we do not expect
the change to have a significant impact on the results of operations or the financial position of the Company.
The following table summarizes the activity related to our unrecognized tax benefits:
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
2017
(millions of dollars)
2016
$
13.7
1.2
1.2
(1.4)
$
4.0
8.8
0.9
-
$
14.7
$
13.7
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 $0.4 million benefit in interest and penalties
during 2017 and had a total accrued balance on December 31, 2017 of $1.7 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 $47.7 million, $30.6 million and $43.8 million for the years ended December 31,
2017, 2016 and 2015, respectively.
The Company had approximately $531.2 million of foreign subsidiaries' undistributed earnings as of December 31, 2017.
We intend to continue to permanently reinvest these earnings overseas for the foreseeable future and while U.S. federal tax
expense as been recognized as a result of U.S. Tax Reform, no deferred tax liabilities with respect to foreign withholding
taxes or state taxes have been recognized.
F-17
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Inventories
The following is a summary of inventories by major category:
2017
2016
(millions of dollars)
Raw materials
Work-in-process
Finished goods
Packaging and supplies
Total inventories
Note 7. Property, Plant and Equipment
$
$
82.5
7.9
92.3
36.6
219.3
70.6
5.4
80.5
30.4
186.9
$
$
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,
2016
2017
(millions of dollars)
$
545.9
$
547.8
44.5
199.6
1,247.5
132.3
49.8
2,219.6
(1,158.3)
42.7
195.6
1,193.6
123.3
38.4
2,141.4
(1,089.6)
$
1,061.3
$
1,051.8
Depreciation and depletion expense for the years ended December 31, 2017, 2016 and 2015 was $75.6 million, $75.4
million and $82.1 million, respectively.
Note 8. 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 $779.3 million and $778.7 million as of December 31, 2017 and
December 31, 2016, respectively. The net change in goodwill since December 31, 2016 was attributable to the effects of
foreign exchange.
F-18
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The balance of goodwill by segment and the activity occurring in the past two fiscal years is as follows:
S p ecia lty
M in era ls
R efra cto ries
P erfo rm a n ce
M a teria ls
C o n so lid a ted
B alan ce at D ecem b er 3 1 , 2 0 15
$
1 3 .3
$
4 7 .0
$
7 20 .9
$
78 1 .2
(m illio n s o f d o lla rs)
C han ge in good w ill relatin g to:
Foreign exch an ge tran slation
Total C h an ges
$
(1 .2 )
(1 .2 )
$
(1 .3 )
(1 .3 )
-
$
-
$
(2 .5 )
(2 .5 )
B alan ce at D ecem b er 3 1 , 2 0 16
$
1 2 .1
$
4 5 .7
$
7 20 .9
$
77 8 .7
C han ge in good w ill relatin g to:
Foreign exch an ge tran slation
Total C h an ges
0 .6
0 .6
-
-
-
0 .6
0 .6
B alan ce at D ecem b er 3 1 , 2 0 17
$
1 2 .7
$
4 5 .7
$
7 20 .9
$
77 9 .3
Acquired intangible assets subject to amortization as of December 31, 2017 and December 31, 2016 were as follows:
Tradenames
Technology
Patents and trademarks
Customer relationships
Weighted
Average
Useful Life
(Years)
34
12
17
30
28
December 31, 2017
December 31, 2016
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
(millions of dollars)
$
$
$
$
199.8
18.8
6.4
4.5
229.5
20.7
4.8
5.3
2.2
33.0
199.8
18.8
6.4
4.5
229.5
15.3
3.6
4.8
1.4
25.1
$
$
$
$
The weighted average amortization period of the acquired intangible assets subject to amortization is approximately 28
years. Amortization expense was approximately $8.0 million, $8.2 million and $7.9 million for the years ended December
31, 2017, 2016 and 2015, 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 2018-2022, and $157.0
million thereafter.
Note 9. 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.
F-19
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2017 was $200 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 $2.9 million at December 31, 2017 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,
2017, 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, 2017 and 2016 was not significant.
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 (gains) losses of $(1.2) million and $0.6 million in other non-operating
income (deductions), net within the Consolidated Statements of Income for the years ended 2017 and 2016, respectively.
There were no open contracts at December 31, 2017. There were 2 open foreign exchange contracts at December 31, 2016.
The fair value of the 2016 foreign exchange contracts was not significant.
Note 10. 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
F-20
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
12/31/17
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
$
12.9
$
-
$
12.9
$
-
Supplementary pension plan assets
Interest rate swap
11.6
2.9
-
-
11.6
2.9
-
-
Description
Fair Value Measurements Using
Asset /
(Liability)
Balance at
12/31/17
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
$
0.7
$
0.7
$
-
$
-
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 13, and there were no transfers in or out of Level 3 during the year ended
December 31, 2017 and 2016. There were also no changes to the Company's valuation techniques used to measure asset and
liability fair values on a recurring basis.
Note 11. 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
F-21
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2017, 2016 and 2015 was $3.8 million, $6.2 million
and $2.6 million, respectively.
Note 12. Long-Term Debt and Commitments
The following is a summary of long term debt:
Term Loan Facility- Variable Tranche due February 14, 2024,
net of unamortized discount and deferred financing costs of $ 22.7 million and $ 25.8 million
Term Loan Facility- Fixed Tranche due May 9, 2021,
net of unamortized discount and deferred financing costs of $0.5 million and $0.6 million
Japan Loan Facilities
China Loan Facilities
Total
Less: Current maturities
Long-term debt
December 31,
2017
2016
(millions of dollars)
$
655.3
$
762.3
$
$
299.5
5.6
3.2
963.6
3.8
959.8
$
$
$
$
299.4
5.8
9.2
1,076.7
6.8
1,069.9
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, 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, which
extended the maturity and lowered the interest costs by 75 basis points. 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 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. 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, 2017, there were no loans and $12.9 million in
F-22
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 2017, the Company repaid $110 million on its Term Facility.
The Company has four 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 $6.0 million). As of December 31, 2017, on a combined basis, $8.8
million was outstanding. Principal will be repaid in accordance with the payment schedules ending in 2021. The Company
repaid $6.9 million on these loans in 2017.
As of December 31, 2017, the Company had $37.1 million in uncommitted short-term bank credit lines, of which
approximately $6.3 million was in use.
Short-term borrowings as of December 31, 2017 and 2016 were $6.3 million and $6.1 million, respectively. The weighted
average interest rate on short-term borrowings outstanding as of December 31, 2017 and December 31, 2016 was 3.9% and
3.7%, respectively.
The aggregate maturities of long-term debt are as follows: $3.8 million in 2018; $0.6 million in 2019; $0.6 million in 2020,
$304 million in 2021; $0.0 million in 2022 and $678 million thereafter.
During 2017, 2016 and 2015, respectively, the Company incurred interest costs of $45.4 million, $56.5 million and $62.6
million, including $0.2 million, $0.1 million and $0.5 million, respectively, which were capitalized. Interest paid
approximated the incurred interest cost.
Note 13. 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.
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-23
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
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
Foreign exchange impact
Ending fair value
Pension Benefits
Post-Retirement Benefits
2017
2016
2017
(millions of dollars)
2016
$
427.9
7.9
12.6
31.5
(20.4)
-
9.6
0.4
469.5
$
416.6
8.2
13.0
21.2
(18.3)
(0.9)
(11.4)
(0.5)
427.9
289.3
33.8
10.7
0.4
(20.4)
(0.8)
7.2
320.2
282.5
22.9
10.5
0.4
(18.3)
(0.5)
(8.2)
289.3
$
9.3
0.3
0.3
(3.0)
(0.1)
$
9.3
0.3
0.3
(0.6)
-
0.1
-
6.9
-
-
0.1
-
(0.1)
-
-
-
-
9.3
-
-
-
-
-
-
-
-
Funded status of the plan
$
(149.3)
$
(138.6)
$
(6.9)
$
(9.3)
Amounts recognized in the consolidated balance sheet consist of:
Pension Benefits
Post-Retirement Benefits
2017
2016
2017
(millions of dollars)
2016
Current liability
Non-current liability
Recognized liability
$
$
$
$
(0.8)
(148.5)
(149.3)
(0.8)
(137.8)
(138.6)
(0.5)
(6.4)
(6.9)
$
$
$
$
(0.6)
(8.7)
(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
2017
2016
2017
(millions of dollars)
2016
Net actuarial (gain) loss
Prior service cost
Amount recognized end of year
$
$
$
$
91.4
(0.1)
91.3
82.1
(0.1)
82.0
(4.1)
(0.7)
(4.8)
$
$
$
$
(1.7)
(2.4)
(4.1)
The accumulated benefit obligation for all defined benefit pension plans was $435.4 million and $394.5 million at
December 31, 2017 and 2016, respectively.
F-24
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
2017
2016
2017
(millions of dollars)
2016
Current year actuarial gain (loss)
Amortization of actuarial (gain) loss
Amortization of prior service credit (gain) loss
Total recognized in other comprehensive income
$
$
$
$
(15.8)
7.2
-
(8.6)
(8.7)
6.8
0.4
(1.5)
2.6
(0.2)
(2.3)
0.1
$
$
$
$
0.3
(0.1)
(1.9)
(1.7)
The components of net periodic benefit costs are as follows:
Pension Benefits
2016
2017
Post-Retirement Benefits
2015
2017
2016
2015
(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
$
$
$
$
$
$
7.9
12.6
(18.7)
-
10.8
-
12.6
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)
(0.3)
-
(2.8)
0.3
0.3
-
(3.1)
(0.2)
-
(2.7)
$
$
$
$
$
$
0.4
0.3
-
(3.1)
(0.1)
-
(2.5)
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 2018 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
-
$
11.5
11.5
$
$
$
(0.9)
(0.6)
(1.5)
Additional Information
The weighted average assumptions used to determine net periodic benefit cost in the accounting for the pension benefit
plans and other benefit plans for the years ended December 31, 2017, 2016 and 2015 are as follows:
Discount rate
Expected return on plan assets
Rate of compensation increase
2017
2016
2015
3.56%
6.61%
3.01%
3.88%
6.89%
3.03%
3.71%
6.89%
3.04%
F-25
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, 2017, 2016 and 2015 are as follows:
Discount rate
Rate of compensation increase
2017
2016
2015
3.16%
3.01%
3.60%
2.96%
3.89%
3.04%
For 2017, 2016 and 2015, 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 11% in 2017, 8% in 2016 and 1% in 2015.
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, 2017 and 2016 by asset
category are as follows:
Asset Category
Equity securities
Fixed income securities
Real estate
Other
Total
2017
2016
56.0%
36.2%
0.8%
7.0%
100.0%
60.2%
32.7%
0.7%
6.4%
100.0%
The Company's pension plan fair values at December 31, 2017 and 2016 by asset category are as follows:
Asset Category
2017
2016
Equity securities
Fixed income securities
Real estate
Other
Total
$
(millions of dollars)
179.2
116.0
2.4
22.5
320.1
174.1
94.7
1.9
18.6
289.3
$
$
$
The following table presents domestic and foreign pension plan assets information at December 31, 2017, 2016 and 2015
(the measurement date of pension plan assets):
2017
U.S. Plans
2016
2017
2015
(millions of dollars)
International Plans
2016
2015
Fair value of plan assets
$
241.9
$
221.9
$
213.0
$
78.3
$
67.4
$
69.5
F-26
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, 2017:
Pension Assets Fair Value as of December 31, 2017
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
$
156.1
23.1
-
$
-
-
$
-
$
156.1
23.1
82.0
34.0
-
116.0
-
0.2
-
-
2.4
22.4
2.4
22.6
$
261.4
$
34.0
$
24.8
$
320.2
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
U.S. equities—This class included actively and passively managed common equity securities comprised primarily of large-
capitalization stocks with value, core and growth strategies.
Non-U.S. equities—This class included actively managed common equity securities comprised primarily of international
large-capitalization stocks.
Fixed income—This class included debt instruments issued by the US Treasury, and corporate debt instruments.
F-27
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2015
Purchases, sales, settlements
Actual return on plan assets still held at reporting date
Foreign exchange impact
Ending balance at December 31, 2016
Purchases, sales, settlements
Actual return on plan assets still held at reporting date
Foreign exchange impact
Ending balance at December 31, 2017
$
$
$
17.9
-
3.0
(0.6)
20.3
-
3.9
0.5
24.7
There were no transfers in or out of Level 3 during the year ended December 31, 2017 and 2016.
Contributions
The Company expects to contribute $15.0 million to its pension plans and $0.5 million to its other post-retirement benefit
plan in 2018.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
2018
2019
2020
2021
2022
2023-2026
Investment Strategies
Pension
Benefits
Other
Benefits
(millions of dollars)
$
$
$
$
$
$
22.9
24.3
25.5
25.4
26.2
131.6
$
$
$
$
$
$
0.5
0.5
0.5
0.5
0.5
2.7
The investment strategy for pension plan assets is to maintain a broadly diversified portfolio designed to both preserve and
grow plan assets to meet future plan obligations. The Company's average rate of return on assets from inception through
December 31, 2017 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-28
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. Within prescribed limits, the Company bases its contribution to the Savings and Investment Plan on employee
contributions. The Company's contributions amounted to $5.2 million, $5.1 million and $6.3 million for the years ended
December 31, 2017, 2016 and 2015, respectively.
Note 14. Leases
The Company has several non-cancelable operating leases, primarily for office space and equipment. Rent expense
amounted to approximately $19.3 million, $16.2 million and $19.5 million for the years ended December 31, 2017, 2016 and
2015, respectively. Total future minimum rental commitments under all non-cancelable leases for each of the years 2018
through 2022 and in aggregate thereafter are approximately $18.1 million, $14.5 million, $10.7 million, $7.6 million, $6.5
million, respectively, and $24.9 million thereafter. Total future minimum rentals to be received under non-cancelable
subleases were approximately $5.2 million at December 31, 2017.
Total future minimum payments to be received under direct financing leases for each of the years 2018 through 2022 and
the aggregate thereafter are approximately: $0.4 million, $0.1 million, $0 million, $0 million, $0 million and $0 million
thereafter.
Note 15. Litigation
The Company is 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. AMCOL won a motion for judgement on the pleadings that resulted in the successful
dismissal of all but one count in the complaint, including a dismissal of all counts alleging violations of Illinois’ Fraudulent
Transfer laws and federal RICO violations. Armada has filed an appeal of the dismissal and the district court proceedings are
stayed pending the appeal. 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 20 pending
asbestos cases. To date, 1,493 silica cases and 53 asbestos cases have been dismissed, not including any lawsuits against
AMCOL or American Colloid Company dismissed prior to our acquisition of AMCOL. Seven new asbestos cases were filed
in 2017, including one that was previously reported on the Company’s 2016 Annual Report on Form 10-K. Four asbestos
cases were dismissed during the period. No silica cases were dismissed during the period. 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. The Company is entitled to indemnification, pursuant to agreement, for sales prior to the initial
public offering. Of the 20 pending asbestos cases, 13 of the non-AMCOL cases are subject to indemnification, in whole or in
part, because the plaintiffs claim liability based on sales of products that occurred either entirely before the initial public
F-29
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
offering, or both before and after the initial public offering. In the six remaining non-AMCOL cases, the plaintiffs have not
alleged dates of exposure. The remaining case is an AMCOL case, which makes no allegation with respect to periods of
exposure. 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, 2017.
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, 2017.
The Company and its subsidiaries are not party to any other material pending legal proceedings, other than routine
litigation incidental to their businesses.
Note 16. 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 35,374,345 shares and 34,969,987 shares were outstanding at December 31, 2017 and 2016, 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 2017. In January 2018, a cash dividend of
approximately $1.7 million or $0.05 per share, was declared, payable in the first quarter of 2018.
Stock Award and Incentive Plan
At the Company’s 2015 Annual Meeting of Stockholders, the Company’s stockholders ratified the adoption of the
Company’s 2015 Stock Award and Incentive Plan (the “2015 Plan”), which provides for grants of incentive and non-
qualified stock options, restricted stock, stock appreciation rights, stock awards or performance unit awards. The 2015 Plan
is substantially similar to the Company’s 2001 Stock Award and Incentive Plan (as amended and restated as of March 18,
2009, the “2001 Plan” and collectively with the 2015 Plan, the “Plans”). The Company established the 2015 Plan to increase
the total number of shares of common stock reserved and available for issuance by 880,000 shares from the number of shares
F-30
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
remaining under the 2001 Plan. With the ratification of the 2015 Plan by the Company’s stockholders, the 2001 Plan was
discontinued as to new grants (however, all awards previously granted under the 2001 Plan remained unchanged). The Plans
are administered by the Compensation Committee of the Board of Directors. Stock options granted under the Plan have a
term not in excess of ten years. The exercise price for stock options will not be less than the fair market value of the common
stock on the date of the grant, and each award of stock options will vest ratably over a specified period, generally three years.
The following table summarizes stock option and restricted stock activity for the Plans:
Stock Options
Restricted Shares
Shares
Available for
Grant
996,127
880,000
(455,275)
-
71,113
1,491,965
(538,787)
-
249,248
1,202,426
(257,072)
-
91,151
1,036,505
Shares
951,079
-
238,773
(74,839)
(23,169)
1,091,844
383,622
(150,944)
(125,797)
1,198,725
187,533
(353,636)
(35,783)
996,839
Weighted
Average
Exercise
Price Per
Share ($)
$
37.46
-
60.40
33.12
60.22
42.29
38.59
36.66
43.78
41.66
77.99
41.56
50.47
48.21
Weighted
Average
Exercise
Price Per
Share ($)
$
50.56
-
60.32
47.51
51.43
58.63
38.37
57.38
50.72
49.57
78.00
52.51
52.74
58.57
Shares
175,488
-
216,502
(59,801)
(47,944)
284,245
155,165
(88,746)
(123,451)
227,213
69,539
(61,274)
(55,368)
180,110
Balance January 1, 2015
Authorized
Granted
Exercised/vested
Canceled
Balance December 31, 2015
Granted
Exercised/vested
Canceled
Balance December 31, 2016
Granted
Exercised/vested
Canceled
Balance December 31, 2017
Note 17. Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) at December 31 comprised of the following components:
2017
2016
(millions of dollars)
$
$
(104.1)
(86.5)
4.5
(186.1)
(147.3)
(78.0)
4.2
(221.1)
$
$
Cumulative foreign currency translation
Unrecognized pension costs (net of tax benefit of $30.7 in 2017 and $39.4 in 2016)
Unrealized gain (loss) on cash flow hedges (net of tax expense of $0.7 in 2017 and $1.8 in 2016)
F-31
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the changes in other comprehensive income (loss) by component:
Pre-Tax
Amount
2017
Tax
(Expense)
Benefit
Net-of-
Tax
Amount
Foreign currency translation adjustment
$
44.70
$
-
$
44.7
Year Ended December 31,
2016
Tax
(Expense)
Benefit
(millions of dollars)
$
-
Net-of-
Tax
Amount
$
(40.2)
Pre-Tax
Amount
$
(40.20)
Pre-Tax
Amount
2015
Tax
(Expense)
Benefit
Net-of-
Tax
Amount
$
(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
(17.6)
7.6
0.2
4.4
(2.9)
0.1
(13.2)
(12.5)
4.7
0.3
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)
$
34.9
$
1.6
$
36.5
$
(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 13) and the related tax amounts are included within provision (benefit) for taxes on income
line within Consolidated Statements of Income.
Note 18. 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, 2017 and 2016:
2017
2016
(millions of dollars)
Asset retirement liability, beginning of period
Accretion expense
Payments
Foreign currency translation
Asset retirement liability, end of period
$
$
21.5
3.3
(3.2)
0.5
22.1
21.4
2.5
(1.6)
(0.8)
21.5
$
$
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 $1.6 million is included in other current liabilities and the long-term
portion of the liability of approximately $20.5 million is included in other non-current liabilities in the Consolidated Balance
Sheet as of December 31, 2017.
Accretion expense is included in cost of goods sold in the Company's Consolidated Statements of Income.
Note 19. 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 Chief Executive Officer, in deciding how to allocate resources and in assessing
performance. Accordingly, in the first quarter of 2017, the Company reorganized the management structure for its
Performance Materials and Construction Technologies business units to better reflect the way performance is evaluated and
resources are allocated. As a result, all of the product lines within these business segments were combined into one operating
segment. 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.
F-32
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company now has four reportable segments: Specialty Minerals, Refractories, Performance Materials 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 global supplier of bentonite and bentonite-related products, chromite
and leonardite. This segment also provides products for non-residential construction, environmental and infrastructure
projects worldwide, serving customers engaged in a broad range of construction projects.
- 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.
Segment information for the years ended December 31, 2017, 2016 and 2015 was as follows:
Net Sales
Income from Operations
Specialty Minerals
Performance Materials
Refractories
Energy Services
Total
Specialty Minerals
Performance Materials
Refractories
Energy Services
Total
Depreciation, Depletion and Amortization
Specialty Minerals
Performance Materials
Refractories
Energy Services
Total
Specialty Minerals
Performance Materials
Refractories
Energy Services
Total
Specialty Minerals
Performance Materials
Refractories
Energy Services
Total
Segment Assets
Capital Expenditures
F-33
2017
2016
2015
(millions of dollars)
$
584.8
734.8
279.4
76.7
1,675.7
$
591.5
686.1
274.5
85.9
1,638.0
$
624.6
694.9
295.9
182.2
1,797.6
88.9
119.7
39.8
6.1
254.5
35.5
40.5
6.8
8.2
91.0
519.4
1,989.6
307.4
110.6
2,927.0
32.6
33.1
5.9
4.5
76.1
102.7
121.1
37.0
(25.9)
234.9
34.9
38.9
6.9
11.2
91.9
491.7
1,942.1
283.4
104.7
2,821.9
40.4
12.8
5.9
1.4
60.5
100.8
118.4
27.8
(27.9)
219.1
34.0
39.4
7.5
17.4
98.3
505.3
1,965.4
292.7
154.7
2,918.1
51.9
11.1
11.1
11.1
85.2
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 (Benefit) 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 (benefit) for taxes on income
Total Assets
Capital Expenditures
Total segment assets
Corporate assets
Consolidated total assets
Total segment capital expenditures
Corporate capital expenditures
Consolidated capital expenditures
2017
2016
2015
(millions of dollars)
$
254.5
(3.4)
(8.4)
242.7
(51.8)
$
234.9
(8.0)
(6.0)
220.9
(50.6)
$
219.1
(11.8)
(7.0)
200.3
(67.7)
190.9
170.3
132.6
2,927.0
43.4
2,970.4
76.1
0.6
76.7
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
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
2017
2016
2015
(millions of dollars)
$
939.3
$
936.2
$
1,049.6
81.6
349.0
305.8
736.4
1,675.7
82.6
338.8
280.4
701.8
1,638.0
86.3
382.1
279.6
748.0
1,797.6
$
1,774.4
$
1,794.5
$
1,829.3
14.8
115.9
132.0
262.7
2,037.1
14.8
98.2
127.3
240.3
2,034.8
13.0
117.6
138.3
268.9
2,098.2
Net sales and long-lived assets are attributed to countries and geographic areas based on the location of the legal entity.
No individual foreign country represents more than 10% of consolidated net sales or consolidated long-lived asset.
The Company's sales by product category are as follows:
F-34
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2017
2016
(millions of dollars)
2015
$
$
$
Paper PCC
Specialty PCC
Talc
Ground Calcium Carbonate
Metalcasting
Household, Personal Care & Specialty Products
Basic Minerals
Environmental Products
Building Materials
Refractory Products
Metallurgical Products
Energy Services
Total
377.7
66.0
53.8
87.3
294.3
169.6
125.0
67.7
78.2
226.9
52.5
76.7
1,675.7
387.9
64.3
55.7
83.6
258.0
171.2
103.9
78.9
74.1
219.0
55.5
85.9
1,638.0
423.3
64.8
55.9
80.6
266.4
172.7
106.0
69.8
80.0
230.7
65.2
182.2
1,797.6
$
$
$
Note 20. Quarterly Financial Data (unaudited)
2017 quarters
First
Fourth
(millions of dollars, except per share amounts)
Second
Third
Net sales by segment
Specialty Minerals segment
Performance Materials segment
Refractories segment
Energy Services segment
Net sales
Gross profit
Income from operations
Consolidated net income
Net income attributable to Minerals Technologies Inc. (MTI)
$
146.2
169.9
70.2
18.7
405.0
$
147.0
180.3
68.9
17.9
414.1
$
147.7
188.8
69.0
19.0
424.5
$
$
$
$
143.9
195.8
71.3
21.1
432.1
113.7
119.7
119.3
114.5
61.7
35.6
34.6
68.5
43.8
43.0
66.8
42.8
41.7
45.7
76.7
75.8
Basic earnings per share attributable to MTI shareholders
$
0.99
$
1.23
$
1.18
$
2.14
Diluted earnings per share attributable to MTI shareholders
$
0.97
$
1.21
$
1.17
$
2.12
Market price range per share of common stock:
High
Low
Close
$
$
$
83.70
72.20
76.60
$
$
$
80.20
70.50
73.20
$
$
$
75.60
62.95
70.65
$
$
$
73.55
66.40
68.85
Dividends paid per common share
$
0.05
$
0.05
$
0.05
$
0.05
F-35
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2016 quarters
First
Fourth
(millions of dollars, except per share amounts)
Second
Third
Net sales by segment
Specialty Minerals segment
Performance Materials segment
Refractories segment
Energy Services segment
Net sales
Gross profit
Income from operations
Consolidated net income
Net income attributable to MTI
$
155.6
159.6
69.2
25.8
410.2
$
150.6
182.5
73.9
20.0
427.0
$
147.3
169.0
63.4
19.8
399.5
$
138.0
175.0
68.0
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
Basic earnings per share attributable to MTI shareholders
$
0.97
$
0.61
$
1.19
$
1.05
Diluted earnings per share attributable to MTI shareholders
$
0.97
$
0.60
$
1.18
$
1.04
Market price range per share of common stock:
High
Low
Close
$
$
$
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-36
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Minerals Technologies Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Minerals Technologies Inc. and subsidiary companies (the
“Company”) as of December 31, 2017 and 2016, 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, 2017, and the related
notes and financial statement schedule (collectively, the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017
and 2016, and the results of its operations and its cash flows for each of the years in the three-year period ended
December 31, 2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 16, 2018 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We
believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 1992.
New York, New York
February 16, 2018
F-37
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Minerals Technologies, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Minerals Technologies Inc. and subsidiary companies’ (the “Company”) internal control over financial
reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, 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, 2017, and the related notes and financial statement schedule (collectively, the consolidated
financial statements), and our report dated February 16, 2018 expressed an unqualified opinion on those consolidated
financial statements.
Basis for Opinion
The Company’s 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 are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ KPMG LLP
New York, New York
February 16, 2018
F-38
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, 2017 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, 2017, 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 16, 2018
F-39
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MINERALS TECHNOLOGIES INC. & SUBSIDIARY COMPANIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(millions of dollars)
Description
Year ended December 31, 2017
Valuation and qualifying accounts deducted from
assets to which they apply:
Allowance for doubtful accounts ..............................
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 ..............................
$
$
$
Additions
Charged to
Costs,
Provisions
and
Expenses
Balance at
Beginning
of Period
Deductions
(a)
Balance at
End of
Period
7.9
3.8
(7.5)
4.2
4.4
6.2
(2.7)
7.9
3.6
2.6
(1.8)
4.4
(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 Ograniczoną Odpowiedzialności (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 Mining & Drilling Chemical Company S.A.E.*……………………………
Egypt
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
Specialty Minerals Nordic Oy Ab ..........................................................................
Specialty Minerals (Portugal) Especialidades Minerais, S.A. ................................
Specialty Minerals-Qishun (Nanning) Co., Ltd. …………………………………
Specialty Minerals Slovakia, spol. sr.o. .................................................................
Specialty Minerals South Africa (Pty) Limited ......................................................
Specialty Minerals (Thailand) Limited ..................................................................
Specialty Minerals UK Limited .............................................................................
Specialty Minerals (Wuzhi) Co., Ltd. ....................................................................
Specialty Minerals (Yanzhou) Co., Ltd. ................................................................
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. ……………………………………………..
Finland
Portugal
China
Slovakia
South Africa
Thailand
United Kingdom
China
China
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 16, 2018, with respect to
the consolidated balance sheets of Minerals Technologies, Inc. as of December 31, 2017 and 2016, 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, 2017, and the related notes and financial statement schedule (collectively, the
“consolidated financial statements”), and the effectiveness of internal control over financial reporting as of December 31,
2017, which reports appear in the December 31, 2017 annual report on Form 10 K of Minerals Technologies Inc.
/s/ KPMG LLP
New York, New York
February 16, 2018
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 16, 2018
/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 16, 2018
/s/ Matthew E. Garth
Matthew E. Garth
Senior Vice President - Finance and Treasury,
Chief Financial Officer
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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, 2017 (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 16, 2018
Dated: February 16, 2018
/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.
[THIS PAGE INTENTIONALLY LEFT BLANK]
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 net income and operating income, excluding special items for
the years ended December 31, 2017 and December 31, 2016 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)
Net income attributable to MTI
Special items:
Acquisition related transaction costs
Restructuring and other charges
Debt modification costs and fees
Write-off of receivables for Malaysia bankruptcy
Related tax effects on special items
Related tax effects on special items
Net income attributable to MTI, excluding special items
Diluted earnings per share, excluding special items
Segment Operating Income Data
Specialty Minerals Segment
Performance Materials Segment
Refractories Segment
Energy Services Segment
Unallocated Corporate Expenses
Acquisition related transaction costs
Consolidated
Special Items
Specialty Minerals Segment
Refractories Segment
Energy Services Segment
Unallocated Corporate Expenses
Acquisition related transaction costs
Consolidated
Segment Operating Income, Excluding Special Items
Specialty Minerals Segment
Performance Materials Segment
Refractories Segment
Energy Services Segment
Unallocated Corporate Expenses
Consolidated
% of Sales
Year Ended
Dec. 31,
2017
195.1
$
Dec. 31,
2016
133.4
$
3.4
15.0
3.9
2.1
(8.9)
(47.3)
163.3
4.59
88.9
119.7
39.8
6.1
(8.4)
(3.4)
242.7
12.3
0.0
0.7
4.1
3.4
20.5
101.2
119.7
39.8
6.8
(4.3)
263.2
15.7%
$
$
$
$
$
$
$
$
8.0
28.3
0.0
0.0
(12.3)
0.0
157.4
4.47
102.7
121.1
37.0
(25.9)
(6.0)
(8.0)
220.9
0.0
(2.0)
30.3
0.0
8.0
36.3
102.7
121.1
35.0
4.4
(6.0)
257.2
15.7%
$
$
$
$
$
$
$
$
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DIRECTORS, OFFICE RS A N D I NV E S TO R IN F O R M AT ION
MINE RALS TECHNOLOGIES INC. AND S UB S ID IA RY C O M P AN I ES 2 017 AN N UA L RE POR T
BOARD OF DIRECT OR S
Duane R. Dunham
Chairman of the Board
Former President and Chief Operating Officer
Bethlehem Steel Corporation
Douglas T. Dietrich
Chief Executive Officer
Joseph C. Breunig
Consultant to Private Equity Companies
Former Executive Vice President, Chemicals
Axiall Corporation
John J. Carmola
Former Segment President at Goodrich Corporation
Robert L. Clark
Provost and Senior Vice President for Research
University of Rochester
Franklin L. Feder
Former Regional Chief Executive Officer for Latin America
and the Caribbean
Alcoa Inc.
Carolyn K. Pittman
Vice President – Finance and Controller
Huntington Ingalls Newport News Shipbuilding
Marc E. Robinson
Senior Vice President, Enterprise Strategy
Aetna
COR PORAT E OFFIC ERS
Douglas T. Dietrich *
Chief Executive Officer
Gary L. Castagna *
Group President, Performance Materials
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,
Secretary and Chief Compliance Officer
D.J. Monagle III *
Group President, Specialty Minerals and Refractories
Brett Argirakis *
Vice President and Managing Director, Minteq International Inc.
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
STO CK L ISTINGS
Donald C. Winter
Independent Consultant
Professor of Engineering Practice at the University of Michigan
Minerals Technologies Common Stock is listed on the New York Stock
Exchange (NYSE) under the symbol MTX.
CERTIFICATIONS
The Company’s chief executive officer submitted the certification
required by Section 303A.12(a) of the NYSE Listed Company Manual
certifying without qualification to the NYSE that he is not aware of
any violations by the Company of NYSE corporate governance listing
standards as of June 9, 2017. The Company also filed as an exhibit
to its Annual Report on Form 10-K for the year ended December 31,
2017, the certifications required by Section 302 of the Sarbanes-Oxley
Act regarding the quality of the Company’s public disclosure.
REGIST RAR AND TR ANSFER AG ENT
Computershare Trust Company, N.A.
PO Box 30170
College Station, TX 77842
INVESTOR REL AT IONS
Cindi Buckwalter
Vice President, Investor Relations/Corporate Communications
Minerals Technologies Inc.
622 Third Avenue, 38th Floor, New York, NY 10017
(212) 878-1831
Annual Report design and produced by:
Firefly Design + Communications Inc. www.fireflydes.com
MINERALS TECHNOLOGI ES INC.
WWW.MINERALSTECH.COM