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, 1999
Commission file number 1-3295
MINERALS TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Delaware 25-1190717
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
The Chrysler Building
405 Lexington Avenue
New York, New York
(address of principal executive office) 10174-1901
(Zip Code)
(212) 878-1800
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Common Stock, $.10 par value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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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 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
---
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 February 1, 2000 was approximately $576.7
million. Shares of common stock held by each officer and director and
by each person who owns 5% 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 March 3, 2000, the Registrant had outstanding 20,685,594
shares of common stock, all of one class.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement dated April 4, 2000 Part III
<PAGE>
MINERALS TECHNOLOGIES INC.
1999 FORM 10-K ANNUAL REPORT
Table of Contents
Page
PART I
Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security 10
Holders
PART II
Item 5. Market for the Registrant's Common Equity and
Related 10
Stockholder Matters
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of
Financial Condition and 12
Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About 17
Market Risk
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants on
Accounting 17
and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the 17
Registrant
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners 18
and Management
Item 13. Certain Relationships and Related Transactions 18
PART IV
Item 14. Exhibits, Financial Statement Schedule and 18
Reports on Form 8-K
Signatures 21
<PAGE>
PART I
Item 1. Business
Minerals Technologies Inc. (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. The Company has two operating segments: Specialty
Minerals and Refractories. The Specialty Minerals segment produces and
sells precipitated calcium carbonate ("PCC") and lime, and mines, processes
and sells the natural mineral products limestone and talc. This segment's
products are used principally in the paper, building materials, paints and
coatings, glass, ceramic, polymers, food and pharmaceutical industries.
The Refractories segment produces and markets monolithic and shaped
refractory materials and services used primarily by the steel, cement and
glass industries. The Company emphasizes research and development. The
level of the Company's research and development spending as well as its
history of developing and introducing technologically advanced new products
has enabled the Company to anticipate and satisfy changing customer
requirements and create new market opportunities through new product
development and product application innovations.
Specialty Minerals Segment
PCC Products and Markets
PCC Products
Paper can be produced under either acid or alkaline conditions.
Historically in North America paper was primarily produced using acid
technologies. In the mid-1980's, North American producers of uncoated
wood-free paper encountered significant increases in the cost of wood fiber
and other materials, such as titanium dioxide, which are necessary in
greater quantities in the acid process. In response, these paper producers
sought to convert their paper production to lower-cost alkaline-based
technologies, which permit mineral fillers such as PCC to be substituted
for more expensive wood fiber and pigments used to increase brightness,
resulting in significant cost savings. As a result of these conditions,
the Company believed that a significant opportunity existed to provide
paper producers with a high performance filler product that could
facilitate the transition to the alkaline papermaking process. The Company
constructed the first commercial satellite PCC plant at the Wisconsin
Rapids paper mill of Consolidated Papers, Inc. in 1986. A satellite plant
is located within the paper mill itself, thereby eliminating transportation
costs. The Company believes the competitive advantages offered by the
improved economics and superior optical characteristics of the paper
produced using the PCC products manufactured by the Company's satellite PCC
plants resulted in the rapid growth in the number of the Company's
satellite PCC plants since 1986. The Company has also built satellite PCC
plants that replace ground calcium carbonate. In addition, the Company has
constructed satellites for coating PCC, and more recently, satellites for
the use of PCC in groundwood (wood-containing) paper like newsprint,
magazine and catalogue papers. Today the Company operates or has under
construction 56 PCC satellite plants in 16 countries. For information with
respect to the locations of the Company's satellite PCC plants at December
31, 1999, see Item 2, "Properties" below.
The Company owns, staffs, operates and maintains all of its satellite
PCC plants, including the related technology. The Company and its paper
mill customers enter into long-term agreements, generally 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 requirements. The Company's
satellite PCC plants and customers are listed in Item 2, "Properties."
The Company currently manufactures several customized PCC product
forms through proprietary processes at its satellite PCC plants, each
designed to provide optimum brightness, opacity, bulking, paper strength or
coating properties. The Company's research and development and technical
service staffs focus on expanding sales at its existing satellite PCC
plants as well as developing new technologies. These include acid-tolerant
PCC, which allows PCC to be introduced to the large wood-containing segment
of the printing and writing papers market, and PCC crystal morphologies for
coating paper. The Company expects that research and development in
coating technology will open up a larger market for PCC that will build
slowly as paper companies begin to include PCC in their proprietary coating
formulations.
The Company also produces a full range of slurry and dry PCC products
that are sold on a merchant basis. In the paper industry, the Company's
merchant PCC is used as a coating pigment and as a filler in the production
of coated and uncoated wood-free printing and writing papers. The Company
sells surface-treated and untreated grades of PCC to the polymers industry
for use in rigid polyvinyl chloride products (pipe and profiles), thermoset
polyesters (automotive body parts), sealants (automotive and construction
applications), adhesives, printing inks and coatings. The Company's PCC is
used by the food and pharmaceutical industries as a source of bio-available
calcium in tablets and foodstuffs, as a buffering agent in tablets, and as
a mild abrasive in toothpaste. The Company also sells PCC to the paints and
coatings industry.
<PAGE> 1
The Company's PCC product line net sales were $383.5 million, $349.5
million, and $299.9 million for the years ended December 31, 1999, 1998 and
1997, respectively. Specialty Minerals segment sales to International
Paper Company represented approximately 10% of consolidated net sales in
1999 and less than 10% in 1998 and 1997. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Key Markets
The principal market for the Company's satellite PCC products is the
paper industry. The Company also produces PCC on a merchant basis for sale
to companies in the polymers, food and pharmaceutical and paints and
coatings industries.
Sales of PCC to the paper industry have accounted for a steadily
increasing percentage of the Company's total sales in the past five years,
a trend the Company expects to continue. 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's products are
currently used primarily by paper mills producing uncoated wood-free paper.
North American Wood-Free Printing and Writing Papers. In the
mid-1980's, North American producers of uncoated wood-free paper
encountered significant increases in the costs of wood fiber and other
materials. In response, these paper producers sought to convert their
paper production to lower-cost alkaline-based technologies. Ground chalk
has historically been used by European alkaline-based paper producers as a
low-cost substitute for wood fiber. In North America, however, the use of
ground chalk is not practical as there is no naturally occurring chalk.
PCC must compete with other fillers, such as ground limestone and
clay. PCC costs more to produce than ground limestone or clay since the
production process is inherently more complex. Limestone is mined, crushed
and ground; clay is mined, ground and perhaps calcined. PCC is manufactured
via a chemical process that takes lime (which itself is produced by
calcining a mined product, limestone), dissolves it, combines it with
carbon dioxide and separates the final product. Drying and transportation
can add significantly to the product cost. If shipped wet, additional
freight costs are incurred. In many cases this added cost makes PCC from
merchant plants uncompetitive with other fillers.
In response to these conditions and as a result of a concentrated
research and development effort, the Company developed the satellite PCC
plant concept. The Company's satellite PCC plants have facilitated the
conversion of a substantial percentage of the North American uncoated
wood-free printing and writing paper producers to alkaline papermaking. The
Company estimates that during 1999, more than 90% of North American
wood-free paper was produced employing alkaline technology.
Presently, the Company owns and operates 36 commercial satellite PCC
plants located at paper mills that produce wood-free printing and writing
papers in North America. Based upon its experience, the Company
anticipates that the aggregate volume of PCC used by these 36 paper mills
will increase. The Company also estimates that a few additional North
American paper mills producing wood-free paper are large enough to support
a satellite PCC plant.
The Company is also placing increased emphasis on the use of PCC to
coat paper. PCC increases gloss and printability of the sheet while
decreasing paper's cost per ton. The coating market is large and the
Company believes it will continue to grow at a higher average growth rate
than the uncoated market, and therefore provides a substantial market
opportunity for the Company. PCC coating products are produced at
approximately eleven of the Company's satellite PCC plants.
International Wood-Free Printing and Writing Papers. The Company
estimates the amount of uncoated wood-free printing and writing papers
produced outside of North America that can be served by its satellite PCC
operations is approximately the same size (measured in tons of paper
produced) as the North American uncoated wood-free paper market currently
served by the Company. A number of factors have influenced the acceptance
of the Company's satellite PCC technology in foreign markets. In Europe,
PCC is not the prevalent filler. Ground limestone is readily available in
Europe and commonly used as a low-cost filler product in alkaline systems.
In addition, lime suitable for the manufacture of PCC generally is more
expensive than such lime in North America. However, the Company believes
that the superior brightness and opacity characteristics offered by its PCC
products should allow it to compete with suppliers of ground limestone and
other filler products in this market. In Latin America and Asia, supplies
of lime suitable for PCC production are generally readily available.
Worldwide Wood-Containing Printing and Writing Papers. The groundwood
paper market represents nearly half 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 phenomenon of alkaline darkening, the
tendency of wood-containing papers to darken in an alkaline environment. In
an attempt to introduce PCC to the wood-containing segments of the paper
industry, the Company has developed and patented a process for the
manufacture of an acid-tolerant form of PCC (AT PCC) that will facilitate
production of high-brightness, high-quality groundwood paper in an acid
environment. Furthermore, as groundwood or wood-containing paper mills
use larger quantities of recycled fiber, there is a trend towards the
<PAGE> 2
use of neutral paper making technology in this segment for which the
Company presently supplies traditional PCC morphologies. The Company now
supplies PCC to approximately a dozen groundwood paper mills.
The Company believes PCC filler levels for uncoated wood-containing
paper generally will be less than those for uncoated wood-free paper. There
can be no assurance as to the number of producers of wood-containing paper
that will contract with the Company to purchase AT PCC or traditional PCC.
Processed Mineral Products and Markets
The Company mines and processes the natural mineral products limestone
and talc, and manufactures lime, a mineral-based product.
Lime is used as a raw material for the manufacture of PCC at the
Company's Adams, Massachusetts facility, and sold commercially to the steel
and chemical industries.
In April 1998, the Company divested its Midwest limestone business in
Port Inland, Michigan. Net sales from this facility in 1998 prior to the
divestiture were $1.6 million. Net sales of this business in 1997 were
$20.8 million. This was the Company's only business unit competing for
sales of limestone aggregate, a commodity business. References to ongoing
operations exclude the results from this facility.
Talc is mined, beneficiated and processed at the Company's Barretts
site, located near Dillon, Montana, and is sold worldwide in finely ground
form for paints and coatings, ceramics and polymers applications. Because
of the exceptional chemical purity of the Barretts ore, a majority of the
automotive catalytic converter ceramic substrates manufactured in the
United States, Japan and Western Europe utilize the Company's Barretts
talc.
The Company's net sales of processed mineral products from ongoing
operations were $78.2 million, $77.9 million and $82.4 million for the
years ended December 31, 1999, 1998 and 1997, respectively. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company's natural mineral products are supported by the Company's
limestone reserves located in the western and eastern parts of the United
States, and talc reserves located in Montana. The Company estimates these
reserves, at current usage levels, to be in excess of 30 years at both its
limestone production facilities and its talc production facility.
Refractories Segment
Refractory Products and Markets
Refractory Products.
The Company offers a broad range of monolithic refractory products as
well as pre-cast refractory shapes. Product sales are usually combined with
Company-supplied proprietary applications equipment and on-site technical
service support. The Company's proprietary applications equipment is used
to apply refractory materials to the walls of steel-making furnaces and
other high temperature vessels to maintain and extend their lives.
Robotic-type shooters, including the Company's proprietary SEQUAD sprayer,
allow for remote-controlled applications in steel-making furnaces, as well
as in steel ladles and blast furnaces. Since the steel-making industry is
characterized by intense price competition, which results in a continuing
emphasis by steel mills on increased productivity, the SEQUAD sprayer and
the related technologically-advanced blast furnace maintenance 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. This also results in a lower overall
refractory cost to steel makers per ton of steel produced. The Company's
experienced technical service staff and advanced applications equipment
provide greater assurance that the desired productivity objectives of
customers are achieved. In addition, laser measurement of refractory wear
is conducted by the Company's technicians in certain plants to improve
maintenance performance. The Company believes that these services, together
with its refractory product offerings, provide the Company with a strategic
marketing advantage.
In the past four years, more than 75% of the Company's refractory
product sales have come from new products. In addition to new products,
delivery systems and services, the Company has focused on controlling costs
and expenses.
Some of the new refractory products the Company has introduced in the
past few years include the MAG-O-STAR spray coating, MINSCAN application
systems and SHOTCRETE castable material. MAG-O-STAR spray coating is an
advanced technique for applying refractory material to the slag line, or at
the top of red-hot steel ladles. MINSCAN is a fully
<PAGE> 3
automated application system for applying refractory materials to electric
arc furnaces. SHOTCRETE is a dense castable material used in a variety of
steel-making vessels to improve productivity. The Company has also
developed a new product called OPTISHOT refractory products, which can
completely replace brick in iron and steel ladles.
The Company's patented KILNTEQ refractory technology system is a new
concept for lining the interior of lime and cement kilns. The KILNTEQ
system calls for lining the huge, tube-like kilns with refractory material
in a polygonal shape. This shape, rather than the circular linings now
generally used, is believed to increase raw material throughput and to
decrease energy use.
The Company's refractory products are sold in the following three
product groups:
Steel Furnace Refractories. The Company sells gunnable monolithic
refractory products to users of basic oxygen furnaces and electric furnaces
for application on furnace walls to prolong the life of furnace linings.
Specialty Products for 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 is one of the few monolithic refractory
companies offering a full line of materials to satisfy all continuous
casting refractory applications. This full line consists of gunnable
materials, as well as refractory shapes and permanent linings.
The Company uses proprietary processes to produce a number of other
products for the steel industry that are technologically enhanced. These
include calcium metal, metallurgical wire and a number of metal treatment
specialties. The Company manufactures calcium metal at its Canaan,
Connecticut facility and purchases calcium in international markets.
Calcium metal is used in the manufacture of batteries and magnets. The
Company sells metallurgical wires and fluxes for use in the production of
steel. The Company's metallurgical wires are injected into molten steel to
reduce imperfections. The steel produced is used for high-pressure pipeline
and other premium-grade steel applications. The Company's fluxes are
mineral products used to help purify steel.
Non-Steel Refractory Products. This product line encompasses
refractory shapes and linings and pyrolytic graphite products that are sold
to the glass, cement, aluminum, petrochemical and other non-steel
industries.
The Company's refractory net sales were $175.8 million, $180.2 million
and $199.2 million for the years ended December 31, 1999, 1998 and 1997,
respectively. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Key Markets
The principal market for the Company's refractory products is the
steel industry. Raw steel production on a worldwide basis has shown only
modest growth in the past ten years. However, management believes that
certain trends in the steel-making industry will continue to provide growth
opportunities for the Company. These trends include the development of
improved manufacturing processes such as continuous casting, the need of
steel producers for increased productivity and higher grade refractories,
as well as a modest shift toward electric steel making.
The use of the continuous casting method, measured in tons of steel
cast on a worldwide basis, has more than doubled in the past ten years. The
need for high quality refractory products for this process has generated
new market opportunities for the Company's refractory products. Product
offerings for continuous casting include advanced maintenance coatings and
original linings for tundishes and robotic applications equipment. The
Company believes that the trend toward electric steel-making mini-mills and
away from integrated steel mills has facilitated the acceptance of new
refractory products and technologies. Mini-mills require a broad line of
refractory products and certain metallurgical products that are also
produced by the Company.
Marketing and Sales
The Company principally relies on its worldwide direct sales force to
market its products. The direct sales force is augmented by worldwide
technical service teams which are familiar with the industries to which the
Company markets its products, and by several regional distributors. The
Company's sales force works closely with the Company's technical service
staff to solve technical and other issues faced by the Company's customers.
The Company's technical service staff assists paper producers in their
conversion to alkaline papermaking and provides post-conversion assistance
to customers. In addition, the Company's technical service personnel advise
with respect to the use of monolithic refractory materials and, in many
cases, apply the refractory materials to the customers' furnaces and other
vessels pursuant to service agreements. 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 the
customers' requirements are satisfied and often trains and supports
customer personnel in the use of the Company's products. The Company
conducts domestic marketing and sales
<PAGE> 4
from its headquarters in New York and from regional sales offices in the
eastern and western United States. The Company's international marketing
effort is directed from Brussels, Belgium; Tokyo, Japan; and Singapore. The
Company believes its refractory manufacturing facilities are strategically
located to satisfy the stringent delivery requirements of the steel industry.
The Company also believes that its worldwide network of sales personnel and
manufacturing facilities facilitates the international expansion of its
satellite PCC operations.
Raw Materials
The Company uses lime in the production of PCC, and is a significant
purchaser of lime in North America. Generally, lime is purchased under
long-term supply contracts from unaffiliated suppliers located in close
geographic proximity to the Company's satellite PCC plants. If there were
to be an interruption in the supply of lime from any particular lime
supplier to the Company, the Company believes that alternative sources of
lime would be available at effectively the same cost to the Company. In
Europe, supplies of lime suitable for the manufacture of PCC are generally
available.
The principal raw materials used in the Company's monolithic
refractory products are refractory-grade magnesia and various forms of
aluminosilicates. The Company also purchases calcium metal, calcium
silicide, graphite, calcium carbide and various alloys for use in the
production of metallurgical wires and uses lime and aluminum in the
production of calcium metal. The Company purchases a significant portion of
its magnesite requirements from sources in the People's Republic of China.
The Company believes that it could obtain adequate supplies from alternate
sources in the event of supply interruptions of its refractory raw material
requirements.
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, in certain circumstances, to position itself as a
market leader.
With respect to its PCC products, the Company competes for sales to
the paper industry based in large part upon technological know-how, patents
and processes that allow the Company to deliver PCC that the Company
believes imparts superior brightness and opacity properties to paper on an
economical basis. The Company is the leading manufacturer and supplier of
PCC to the North American paper industry. It competes with certain
companies both in North America and abroad that sell PCC or offer
alternative products for use in paper filling and coating applications.
Competition with respect to the Company's PCC sales is based upon
availability of materials, price, optical characteristics such as
brightness, opacity and paper strength, and the availability of technical
support.
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, quality and
consistency and ease of application), price, and the availability of
technical support. The Company competes with different companies in
different geographic areas and in separate aspects of its product line.
The Company competes in sales of its limestone and talc based
primarily upon product quality, price, and geographic location.
Research and Development
Many of the Company's product lines are technology-based, and the
Company's business strategy for continued growth in sales and profitability
depends to a large extent on the continued success of its research and
development activities. Among the significant achievements of the Company's
research and development effort have been the satellite PCC plant concept,
acid-tolerant PCC, production of PCC crystal morphologies for coating
paper, the SEQUAD sprayer, MAG-O-STAR spray coating, MINSCAN application
systems, SHOTCRETE castable material and the KILNTEQ system.
The Company maintains its main research facilities in Bethlehem and
Easton, Pennsylvania, with more than 170 employees engaged in research and
development. It also has smaller research and development facilities in
Finland, Ireland and Japan. Expertise in inorganic chemistry,
crystallography and structural analysis, fine particle technology and other
aspects of materials science applies to and supports all of the Company's
product lines.
For the years ended December 31, 1999, 1998 and 1997, the Company
expended approximately $24.8 million, $21.0 million, and $20.4 million,
respectively, on research and development. The Company believes, based upon
its review of publicly available information regarding the reported
research and development spending of certain of its competitors, that its
investment in research and development as a percentage of net sales exceeds
comparable industry norms. The Company's research and development spending
for 1999 approximated 3.9% of net sales.
<PAGE> 5
Patents and Trademarks
The Company owns or has the right to use approximately 335 patents and
approximately 620 trademarks related to its business. 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. From time to time various types of insurance for companies
in the specialty minerals business have been very expensive or, in some
cases, unavailable. There is no assurance that in the future the Company
will be able to maintain the coverage initially obtained or that the
premiums therefor will not increase substantially.
Employees
At December 31, 1999, the Company employed approximately 2,236
persons, approximately 680 outside the United States. The Company
believes its relationships with its employees are good.
Environmental, Health and Safety Matters
The Company's operations are subject to federal, state, local and
foreign laws and regulations relating to the environment and health and
safety. Certain of the Company's operations involve and have involved the
use and release of substances that are classified as toxic or hazardous
substances within the meaning of these laws and regulations. Environmental
operating permits are, or may be, required for certain of the Company's
operations and such permits are subject to modification, renewal and
revocation. The Company regularly monitors and reviews its operations,
procedures and policies for compliance with these laws and regulations. The
Company believes its operations are in substantial compliance with these
laws and regulations and that there are no violations that should have a
material effect on the Company. Despite these compliance efforts, some risk
of environmental and other damage is inherent in the operation of the
business of the Company, as it is with other companies engaged in similar
businesses, and there can be no assurance that material damage 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. However,
future events, such as changes in or modifications of interpretations of
existing laws and regulations or enforcement policies or further
investigation or evaluation of the potential health hazards of certain
products may give rise to additional compliance and other costs that could
have a material adverse effect on the Company. The Company has a right of
indemnification for certain potential environmental, health and safety
liabilities under agreements entered into between the Company and Pfizer
Inc ("Pfizer") or Quigley Company, Inc. ("Quigley"), a wholly-owned
subsidiary of Pfizer, in connection with the reorganization. See "Certain
Relationships and Related Transactions" in Item 13.
Cautionary Factors That May Affect Future Results
The disclosure and analysis set forth in this report contains certain
forward-looking statements, particularly statements relating to future
actions, 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 "expects," "plans," "anticipated," "will" 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. Consequently, no
forward-looking statement can be guaranteed. Actual future results may
vary materially.
The Company undertakes no obligation to update any forward-looking
statements. Investors should refer to the Company's subsequent filings
under the Securities Exchange Act of 1934 for further disclosures.
As permitted by the Private Securities Litigation Reform Act of 1995,
the Company is providing the following cautionary statements which identify
factors that could cause the Company's actual results to differ materially
from historical and expected results. It is not possible to foresee or
identify all such factors. You should not consider this list an exhaustive
statement of all potential risks, uncertainties and inaccurate assumptions.
<PAGE> 6
- - Historical Growth Rate
Continuance of the historical growth rate of the Company depends upon
a number of uncertain events, including the outcome of the Company's
strategies of increasing its penetration into geographical markets
such as Asia, Latin America and Europe; increasing its penetration
into product markets such as the market for paper coating 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; and developing, introducing and selling new products.
Difficulties, delays or failures of any of these strategies could
cause the future growth rate of the Company to differ materially from
its historical growth rate.
- - Contract Renewals
The Company's sales of PCC are predominantly pursuant to long-term
agreements, generally 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. The Company continues to operate
every PCC plant that it has built. There is no assurance, however,
that this will continue to be the case. Failure of a number of the
Company's customers to renew existing agreements on terms as favorable
to the Company as those currently in effect could cause the future
growth rate of the Company to differ materially from its historical
growth rate, and could have a substantial adverse effect on the
Company's results of operations.
- - Litigation; Environmental Exposures
The Company's operations are subject to international, federal, state
and local environmental, tax and other laws and regulations, and
potentially to claims for various legal, environmental and tax
matters. The Company is currently a party to various litigation
matters. While the Company carries liability insurance which it
believes to be appropriate to its businesses, and has provided
reserves for such matters which it believes to be adequate, an
unanticipated liability arising out of such a litigation matter or a
tax or environmental proceeding could have a material adverse effect
on the Company's financial condition or results of operations.
- - New Products
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 expected results.
- - Competition; Protection of Intellectual Property
Particularly in its PCC and Refractory product lines, 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.
- - Risks of Doing Business Abroad
As the Company expands its operations overseas, it faces the increased
risks of doing business abroad, including inflation, fluctuations in
interest rates and currency exchange rates, changes in applicable laws
and regulatory requirements, export and import restrictions, tariffs,
nationalization, expropriation, limits on repatriation of funds,
unstable governments and legal systems, and other factors. Adverse
developments in any of these areas could cause actual results to
differ materially from historical and expected results.
- - Availability of Raw Materials
The Company's ability to achieve anticipated results depends in part
on having an adequate supply of raw materials for its manufacturing
operations, particularly lime and carbon dioxide for PCC operations
and magnesia for refractory operations, and on having adequate access
to the ore reserves at its mining operations. Unanticipated changes
in the costs or availability of such raw materials, or in the
Company's ability to have access to its ore reserves, could adversely
affect the Company's results of operations.
- - Cyclical Nature of Customers' Businesses
The bulk of the Company's sales are to customers in two industries,
paper manufacturing and steel manufacturing, which have historically
been cyclical. The Company's exposure to variations in its customers'
businesses has been reduced in recent years by the growth in the
number of plants it operates; by the diversification of its portfolio
of products and services; and by its geographic expansion. Also, the
Company has structured some 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 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, a sustained 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.
<PAGE> 7
- - Adoption of a Common European Currency
On January 1, 1999, eleven European countries adopted the euro as
their common currency. Adoption of a single currency and a common
monetary policy by the countries adopting the euro can be expected to
have effects on competition in Europe and on the overall economy of
the region, which could adversely affect the Company's financial
position or results of operations.
Item 2. Properties
Set forth below is the location of, and the main customer served by,
each of the Company's satellite PCC plants at December 31, 1999.
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 runs concurrently with the term of the PCC
production and sale agreement between the Company and the host paper mill.
Location Principal Customer
- -------- ------------------
Alabama, Courtland Champion International Corporation
Alabama, Jackson Boise Cascade Corporation
Alabama, Mobile International Paper Company
Alabama, Selma International Paper Company
Arkansas, Ashdown Georgia-Pacific Corporation
Brazil, Jacarei Votorantim Celulose e Papel
Brazil, Luiz Antonio Votorantim Celulose e Papel
Brazil, Suzano Cia Suzano de Papel e Celulose
California, Anderson Plainwell Inc.
Canada, Cornwall, Ontario Domtar Inc.
Canada, Dryden, Ontario Weyerhaeuser Canada Inc.
Canada, St. Jerome, Quebec Rolland Paper Inc.
Canada, Windsor, Quebec Domtar Inc.
China, Dagang 1 Asia Pulp and Paper Company Ltd.
Finland, Aanekoski 1 Metsa-Serla Group
Finland, Anjalankoski 1 Myllykoski Paper Oy
Finland, Lappeenranta 1, 2 OAO Svetogorsk (a subsidiary of
International Paper Company)
Finland, Tervakoski 1 Enzo-Gutzeit Group
Florida, Pensacola Champion International Corporation
France, Docelles UPM - Kymmene Corporation
France, Saillat Sur Vienne Aussedat Rey (a subsidiary of
International Paper Company)
Germany, Schongau Haindl Papier GmbH
Indonesia, Perawang 1 PT Indah Kiat Pulp and Paper
Corporation
Israel, Hadera American Israeli Paper Mills, Ltd.
Kentucky, Wickliffe Westvaco Corporation
Louisiana, Port Hudson Georgia-Pacific Corporation
Maine, Jay International Paper Company
Maine, Madison Madison Paper Industries
Mexico, Chihuahua Corporativo Copamex, S.A. de C.V.
Michigan, Plainwell Plainwell Inc.
Michigan, Quinnesec Champion International Corporation
Minnesota, Cloquet Potlatch Corporation
Minnesota, International Falls Boise Cascade Corporation
New York, Oswego International Paper Company
New York, Ticonderoga International Paper Company
North Carolina, Plymouth Weyerhaeuser Company
Ohio, Chillicothe The Mead Corporation
Ohio, West Carrollton Appleton Papers Inc.
Pennsylvania, Erie International Paper Company
Pennsylvania, Lock Haven International Paper Company
Poland, Kwidzyn International Paper Company
Portugal, Figueira da Foz 1 Soporcel - Sociedade Portuguesa de
Papel, S.A.
Slovakia, Ruzomberok Severoslovenske Celulozky a Papierne a.s.
South Carolina, Eastover International Paper Company
South Africa, Merebank 1 Mondi Paper Company Ltd.
Tennessee, Kingsport Willamette Industries Inc.
Texas, Pasadena Pasadena Paper Company LP
<PAGE> 8
Thailand, Tha Toom 1 Advance Agro Public Co. Ltd.
Virginia, Franklin International Paper Company
Washington, Camas James River Corporation
Washington, Longview Weyerhaeuser Company
Washington, Wallula Boise Cascade Corporation
Wisconsin, Kimberly Inter Lake Papers, Inc. (a subsidiary
of Consolidated Papers Inc.)
Wisconsin, Park Falls Fraser Papers Inc.
Wisconsin, Wisconsin Rapids Consolidated Papers Inc.
1 These plants are owned through joint ventures.
2 This PCC plant is not located on-site at the paper mill.
The Company also owned at December 31, 1999 six plants engaged in the
mining, processing and/or production of lime, limestone, precipitated
calcium carbonate, and talc and directly or indirectly owns or leases
approximately 14 refractory manufacturing facilities worldwide. The
Company's corporate headquarters, sales offices, research laboratories,
plants and other facilities are owned by the Company except as otherwise
noted. Set forth below is certain information relating to the Company's
plants and office and research facilities.
Location Facility Product Line
-------- -------- ------------
United States
-------------
Arizona, Pima County Plant; Quarry 4 Limestone
California, Los Angeles Sales Office 1 PCC, Lime, Limestone, Talc
California, Lucerne Plant; Quarry Limestone
Valley
Connecticut, Canaan Plant; Quarry Limestone, Metallurgical
Wire/Calcium
Massachusetts, Adams Plant; Quarry Limestone, Lime, PCC
Montana, Dillon Plant; Quarry Talc
New Jersey, Old Bridge Plant Monolithic
Refractories/Shapes
New York, New York Headquarters 1; Sales All Company Products
Offices 1
Ohio, Bryan Plant Monolithic Refractories
Ohio, Dover Plant Refractories
Pennsylvania, Bethlehem Research PCC, Lime, Limestone,
Laboratories; Sales Talc, Pyrolytic Graphite
Offices
Pennsylvania, Easton Research PCC, Lime, Limestone,
Laboratories; Plant Talc, Pyrolytic Graphite,
Refractories,
Metallurgical Wire
Pennsylvania, Slippery Plant Refractory Shapes
Rock
International
-------------
Australia, Carlingford Sales Office 1 Monolithic Refractories
Belgium, Brussels Sales Office 1 Monolithic
Refractories/PCC
Brazil, Belo Horizonte Sales Office 1 Monolithic Refractories
Brazil, Sao Paulo Sales Office 1 PCC
Brazil, Volta Redonda Sales Office 1 Monolithic Refractories
Canada, Lachine Plant Refractory Shapes
China, Huzhou Plant 2 Monolithic Refractories
Germany, Duisburg Sales Office Monolithic Refractories
Ireland, Cork Plant; Sales Office 1 Monolithic
Refractories/Metallurgical
Wire
Italy, Brescia Sales Office; Plant Monolithic
Refractories/Shapes
Japan, Gamagori Plant Monolithic
Refractories/Shapes,
Calcium
Mexico, Gomez Palacio Plant 1 Monolithic Refractories
Singapore Sales Office 1 PCC
Spain, Santander Sales Office 1 Monolithic Refractories
South Africa, Plant Monolithic Refractories
Pietermaritzburg
South Korea, Seoul Sales Office 1 Monolithic Refractories
South Korea, Yangsan Plant 3 Monolithic Refractories
United Kingdom, Lifford Plant PCC, Lime
United Kingdom, Plant Monolithic
Rotherham Refractories/Shapes
1 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 and sales offices in New York, New York are held
under a lease which expires in 2010.
2 This plant is leased through a joint venture.
3 This plant is owned through a joint venture.
4 This plant is leased to another company.
<PAGE> 9
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 in respect to these assets, and for
liabilities which are likely to arise from its operations.
Item 3. Legal Proceedings
On or about October 5, 1999, the Company was notified by the U.S.
Department of Justice that it had received an enforcement referral from the
U.S. Environmental Protection Agency regarding alleged violations by the
Company's subsidiary, Barretts Minerals Inc. ("BMI"), of a state-issued
permit regulating pit dewatering and storm water discharge at BMI's talc
mine in Barretts, Montana. The threatened federal enforcement action would
duplicate, in part, a state enforcement action that was resolved in May
1999 through settlement and payment of a civil penalty of $14,000. The
Department of Justice has entered into prefiling negotiations with BMI and,
as of March 2, 2000, no complaint had been filed. There can be no
assurance that the amount of monetary penalty or the cost of other relief
sought by the Department of Justice in any such complaint, if filed, would
not be substantially in excess of the amount for which the previous state
enforcement action was settled. Based on settlement negotiations to date,
the Company has no reason to believe that the outcome of this matter will
have a material impact on its financial condition or results of operations.
On August 2, 1999, the Company, without admitting any wrongdoing,
entered into a confidential settlement agreement with the plaintiff, Eaton
Corporation, in a lawsuit captioned Eaton Corporation v. Pfizer Inc,
Minerals Technologies Inc. and Specialty Minerals Inc. which was filed in
1996. The suit alleged that certain materials sold to Eaton for use in
truck transmissions were defective, necessitating repairs for which Eaton
sought reimbursement. The Company's insurance covered a substantial
portion of the settlement, which had no material impact on the Company's
results of operations or financial position.
The Company and its subsidiaries are not party to any other pending
legal proceedings, other than ordinary routine litigation incidental to
their businesses.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of 1999.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock is traded on the NYSE under the symbol
"MTX".
Information on market prices and dividends is set forth below:
1999 Quarters First Second Third Fourth
- ------------- ----- ------ ----- ------
Market Price Range Per Share
of Common Stock
High $49 1/16 $56 1/2 $56 13/16 $50 9/16
Low 38 1/2 46 43 13/16 37
Close 47 3/8 56 1/16 43 13/16 40 1/16
Dividends paid per common $ .025 $ .025 $ .025 $ .025
share
1998 Quarters First Second Third Fourth
- ------------- ----- ------ ----- ------
Market Price Range Per Share
of Common Stock
High $52 5/16 $55 9/16 $54 $51 1/4
Low 40 15/16 48 3/8 35 7/8 36
Close 49 15/16 51 3/4 39 1/4 40 15/16
Dividends paid per common share $ .025 $ .025 $ .025 $ .025
<PAGE> 10
On March 3, 2000, the last reported sale price on the NYSE was $41 1/4
per share. As of March 3, 2000, there were approximately 270 holders of
record of the common stock.
On January 27, 2000, the Company's Board of Directors declared a
regular quarterly dividend on its common stock of $.025 per share. Subject
to satisfactory financial results and declaration by the Board, the Company
currently intends to pay quarterly cash dividends on its common stock of at
least $.025 per share. Although the Company believes its historical
earnings indicate that this dividend policy is appropriate, it will be
reviewed by the Board from time to time in light of the Company's financial
condition, results of operations, current and anticipated capital
requirements, contractual restrictions and other factors deemed relevant by
the Board. No dividend will be payable unless declared by the Board and
unless funds are legally available for payment thereof.
On February 26, 1998, the Company's Board of Directors authorized a
$150 million stock repurchase program. The stock is being purchased on the
open market from time to time. As of January 21, 2000, the Company had
repurchased approximately 2.0 million shares under this program, at an
average price of approximately $47 per share.
Item 6. Selected Financial Data
<TABLE>
Thousands,
Except Per
Share Data 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income Statement
Data:
Net sales $637,519 $609,193 $602,335 $555,988 $524,451
Cost of goods sold 438,640 416,558 424,612 396,345 375,655
Marketing,
distribution and
administrative
expenses 76,548 79,150 77,104 72,485 70,464
Research and
development expenses 24,788 21,038 20,391 19,740 19,658
------ ------ ------ ------ ------
Income from operations 97,543 92,447 80,228 67,418 58,674
Net income 62,116 57,224 50,312 43,097 39,529
Earnings per share
Basic earnings
per share $ 2.90 $ 2.57 $ 2.23 $ 1.91 $ 1.75
===== ===== ====== ===== ======
Diluted earnings
per share $ 2.80 $ 2.50 $ 2.18 $ 1.86 $ 1.72
===== ====== ====== ===== =====
Weighted average
number of common shares
outstanding
Basic 21,394 22,281 22,558 22,621 22,633
Diluted 22,150 22,926 23,113 23,132 23,001
Dividends declared
per common share $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10
Balance Sheet Data:
Working capital $102,405 $112,892 $132,364 $115,540 $86,746
Total assets 769,131 760,912 741,407 713,861 649,144
Long-term debt 75,238 88,167 101,571 104,900 67,927
Total debt 88,677 101,678 115,560 130,239 95,817
Total shareholders'
equity 485,036 489,163 466,997 448,250 416,153
</TABLE>
<PAGE> 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Income and Expense Items as a
Percentage of Net Sales
Year Ended December 31, 1999 1998 1997
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 68.8 68.4 70.5
Marketing, distribution and
administrative expenses 12.0 13.0 12.8
Research and development expenses 3.9 3.4 3.4
---- ---- ----
Income from operations 15.3 15.2 13.3
Net income 9.7% 9.4% 8.4%
==== ==== ====
Overview of 1999 and Outlook
In 1999, the Company adhered to its strategy of expanding its
Precipitated Calcium Carbonate ("PCC") product line within the Specialty
Minerals segment. The Company commenced operations at two new large
satellite PCC plants, one in China and the other in the United States.
Together, these plants have production capacity equivalent to approximately
nine satellite units. (A satellite unit is equivalent to annual production
capacity of between 25,000 and 35,000 tons of PCC.) The Company also signed
a joint venture agreement to construct its first satellite PCC plant in
Japan. This plant is expected to be in operation in the third quarter of
2000 and will be equivalent to two satellite units. In addition, the
Company is also constructing a merchant manufacturing facility in
Brookhaven, Mississippi for the production of Specialty PCC, which is used
in applications other than paper. This facility is expected to be in
operation during the second quarter of 2000 and will be capable of
producing between 50,000 and 70,000 tons of Specialty PCC per year. The
Company's patented acid-tolerant PCC technology continues to show growth
and the groundwood sector of the worldwide paper industry continues to show
widespread interest in this product. In addition, the Company expanded
several satellite plants at various locations around the world and
announced a major expansion for 2000 in Portugal. As a result, sales of
PCC as a percentage of the Company's total net sales, which were 37.4% in
1992, had risen to 60.1% by 1999. The Company expects this trend to
continue as volume growth of PCC continues to outpace growth in the
Processed Minerals product line and the Refractories segment.
The Company now operates or has under construction 56 satellite PCC
plants in 16 countries. The Company expects additional expansions at
existing satellite PCC plants to occur in 2000 and also expects to sign
contracts for additional satellite PCC plants.
In 2000, the Company plans to continue its focus on the following
growth strategies for the PCC product line:
- Continued efforts to increase market penetration in North America,
Europe, Latin America, and the Pacific Rim.
- Continued expansions of the capacity of existing satellite PCC plants
in response to increased demand, which is resulting from increased PCC
filler levels in paper, the installation of new paper machines or higher
paper machine productivity.
- Continued research and development and marketing efforts for new and
existing products.
However, there can be no assurance that the Company will achieve
success in implementing any one or more of these strategies.
The Company's sales of PCC are predominantly pursuant to long-term
agreements, generally 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. The Company continues to operate every PCC plant that
it has built. However, there is no assurance that this will continue to
be the case. Failure of a number of the Company's customers to renew
existing agreements on terms as favorable to the Company as those currently
in effect could cause the future growth rate of the Company to differ
materially from its historical growth rate.
The Company will continue to emphasize specialty products in its
Refractories segment product lines and to commercialize products, processes
and equipment developed through research and development efforts.
As the Company continues to expand its operations overseas, it faces
the inherent risks of doing business abroad, including exchange rate
fluctuations, nationalization, expropriation, limitations on repatriation
of funds and other factors. In addition, the Company's performance depends
to some extent on that of the industries it serves, particularly the paper
manufacturing, steel manufacturing, and construction industries.
<PAGE> 12
Results of Operations
Net Sales
Dollars in Millions 1999 Growth 1998 Growth 1997
---- ------ ---- ------ ----
Net sales $637.5 4.6% $609.2 1.1% $602.3
Worldwide net sales in 1999 increased 4.6% over the previous year to
$637.5 million. The stronger U.S. dollar had an unfavorable effect of
approximately one percentage point on sales growth. Sales in the Specialty
Minerals segment, which includes the PCC and Processed Minerals product
lines, grew 7.6% while sales in the Refractories segment declined 2.4%.
In 1998, worldwide net sales increased 1.1% over the prior year to $609.2
million. Specialty Minerals segment sales increased 6.4% and Refractories
segment sales decreased 9.5% in 1998.
Worldwide net sales of PCC in 1999 increased 9.7% to $383.5 million
from $349.5 million in the prior year. This increase was primarily
attributable to the commencement of operations at two new satellite PCC
plants in 1999, and to the ramp-up of several satellite plants that began
operation in 1998. Volume increases from the Company's long-standing
satellite PCC plants also contributed to the sales growth. The average
price per ton of PCC sold by the Company's satellite PCC plants was
approximately 7% lower than the average selling price per ton in 1998.
Over half of the decline was due to the commencement of operations at two
new large PCC satellite facilities in 1999 and to ramp-ups of volume at
several other satellite facilities. Approximately 20% of the decline was
related to foreign exchange. Other factors, such as price adjustments
associated with contract extensions, accounted for the rest. PCC sales in
1998 increased 16.5% to $349.5 million from $299.9 million in 1997. This
growth was primarily attributable to the start-up of operations at four new
satellite plants that began operations in 1997 and to the acquisition of a
PCC business in the United Kingdom. In addition, a full year of operations
at several satellite PCC plants that began operations in 1997 and volume
increases from the Company's long-standing satellite PCC plants also
contributed to the sales growth.
Net sales of Processed Minerals products from ongoing operations in
1999 increased slightly to $78.2 million from $77.9 million in 1998. In
April 1998, the Company divested its Midwest limestone business in Port
Inland, Michigan. References to ongoing operations exclude the results
from this facility. Net sales of Processed Minerals from ongoing
operations in 1998 decreased 5.5%. This decrease was due largely to the
refocus of the talc product line on higher margin customers and products,
and to the use of the Company's lime to produce PCC instead of selling the
lime to third parties.
Net sales in the Refractories segment in 1999 decreased 2.4% to $175.8
million from $180.2 million in the prior year. Unfavorable economic
conditions in the worldwide steel industry since the third quarter of 1998
affected the growth in the refractory products line for the first nine
months of 1999. However, in the fourth quarter of 1999, the worldwide
steel industry improved and sales of the Company's refractory products grew
approximately 16%. In both 1999 and 1998, strategic replacement of
commodity products with specialty products and systems enhanced the
profitability of this product line. In 1998, net sales in the Refractories
segment decreased 9.5% from the prior year.
Net sales from ongoing operations in the United States in 1999
increased 3.9%. This increase was attributable to the growth in the PCC
product line. Foreign sales in 1999 increased 7.1% as a result of the
continued international expansion of the Company's PCC product line. In
1998, domestic net sales from ongoing operations were 4.2% higher than in
the prior year as a result of increased sales in the Specialty Minerals
segment. Foreign sales were approximately 5.1% greater than in the prior
year, primarily due to growth in the PCC product line.
Operating Costs and
Expenses
Dollars in Millions 1999 Growth 1998 Growth 1997
---- ------ ---- ------ ----
Cost of goods sold $438.6 5.3% $ 416.6 (1.9%) $ 424.6
Marketing, distribution $ 76.5 (3.4%) $ 79.2 2.7% $ 77.1
and administrative
Research and development $ 24.8 18.1% $ 21.0 3.2% $ 20.4
Cost of goods sold was 68.8% of sales compared with 68.4% in the prior
year. This increase was primarily attributable to the PCC product line
within the Specialty Minerals segment, and the Refractories segment, as a
result of weaknesses in the worldwide steel industry for the majority of
the year. Cost of goods sold in 1998 was 2.1 percentage points lower than
in 1997. This was attributable to the improved profitability of the
Refractories segment and the Processed Minerals product lines within the
Specialty Minerals segment.
Marketing, distribution and administrative costs decreased 3.4% to
$76.5 million and were 12.0% of net sales. In 1998, marketing, distribution
and administrative costs increased 2.7% to $79.2 million and were 13.0% of
net sales.
<PAGE> 13
Research and development expenses during 1999 increased 18.1% to $24.8
million and represented 3.9% of net sales. A planned increase to develop
SYNSIL, a family of synthetic silicate products for the glass industry,
was the primary reason for the expense growth.
Income from Operations
Dollars in Millions 1999 Growth 1998 Growth 1997
---- ------ ---- ------ ----
Income from operations $97.5 5.5% $92.4 15.2% $80.2
Income from operations in 1999 increased 5.5% to $97.5 million from
$92.4 million in 1998. This increase was due to slightly improved
profitability in the PCC product line, within the Specialty Minerals
segment, and improved profitability in the Refractories segment, despite a
decline in sales and weakness in the steel industry for the first nine
months of 1999. In 1998, income from operations rose 15.2% to $92.4 million
from $80.2 million in 1997. This increase was due primarily to improved
profitability in both the Specialty Minerals segment and the Refractories
segment and to solid growth in the PCC product line within the Specialty
Minerals segment. The Specialty Minerals segment's improved profitability
was primarily due to the turnaround in the Processed Minerals product line.
The Refractories segment's improved profitability was due to the continued
emphasis on new higher margin specialty products and delivery systems.
However, the downturn in the worldwide steel industry negatively affected
the sales and profitability of the Refractories segment.
Non-Operating Deductions
Dollars in Millions 1999 Growth 1998 Growth 1997
---- ------ ---- ------ ----
Non-operating
deductions, net $(5.0) (18.0%) $(6.1) (24.1%) $(8.0)
Non-operating deductions in 1999 decreased from the prior year due
primarily to lower foreign exchange losses. Gross interest costs decreased
13.5% from the prior year to $6.1 million. However, interest income was
also lower than in the prior year. Non-operating deductions in 1998
decreased from 1997 due to lower foreign exchange losses and lower net
interest expense. Gross interest costs in 1998 decreased 14% from the prior
year to $7.0 million.
Provision for Taxes on
Income
Dollars in Millions 1999 Growth 1998 Growth 1997
---- ------ ---- ------ ----
Provision for taxes on
income $28.9 5.5% $27.4 18.4% $23.1
The effective tax rate decreased to 31.3% in 1999 compared with 31.7%
in 1998. This decrease was due to higher depletion deductions and
utilization of foreign tax credits. The effective tax rate was 32.0% in
1997.
Minority Interests
Dollars in Millions 1999 Growth 1998 Growth 1997
---- ------ ---- ------ ----
Minority interests $1.5 (16.7%) $1.8 N.A. $(1.2)
The consolidated joint ventures continue to operate profitably.
The decline in the provision for minority interests in 1999 is primarily due
to foreign exchange losses.
In 1998, the consolidated joint ventures reflected increased profits as
compared with the prior year, and foreign exchange losses had less of an
effect on joint venture profits in 1998 as compared with 1997.
Net Income
Dollars in Millions 1999 Growth 1998 Growth 1997
---- ------ ---- ------ ----
Net income $62.1 8.6% $57.2 13.7% $50.3
Net income increased 8.6% in 1999 to $62.1 million. In 1998, net
income increased 13.7% to $57.2 million. Earnings per common share, on a
diluted basis, increased 12.0% to $2.80 in 1999 as compared with $2.50 in
the prior year.
Liquidity and Capital Resources
The Company's financial position remained strong during 1999. Cash
provided from operating activities was the primary source of liquidity and
amounted to $130.2 million in 1999, $117.0 million in 1998 and $120.6
million in 1997. In 1999, the cash was applied principally to fund
approximately $73.8 million of capital expenditures, repurchase $50.9
million of
<PAGE> 14
common shares for treasury, and remit the required yearly principal payment
of $13 million under the Company's Guarantied Senior Notes due June 11, 2000.
The Economic Development Authority Refunding Revenue Bonds due 2010
were issued on February 23, 1999 to refinance the bonds issued in connection
with the construction of a PCC plant in Eastover, South Carolina. The bonds
bear interest at either a variable rate or fixed rate at the option of the
Company. Interest is payable semi-annually under the fixed rate option and
monthly under the variable rate option. The Company has selected the
variable rate option on these borrowings and the average interest rate for
the period ended December 31, 1999 was approximately 3.52%.
The Variable/Fixed Rate Industrial Development Revenue Bonds due
November 1, 2014 are tax-exempt 15-year instruments and were issued on
November 30, 1999 to refinance the bonds issued in connection with the
construction of a PCC plant in Jackson, Alabama. The bonds bear interest at
either a variable rate or fixed rate at the option of the Company. Interest
is payable semi-annually under the fixed rate option and monthly under the
variable rate option. The Company has selected the variable rate option on
these borrowings and the average interest rate for the period ended December
31, 1999 was approximately 4.62%.
On November 30, 1999, the Company redeemed $7,545,000 of the
Variable/Fixed Rate Industrial Development Revenue Bonds due April 1, 2012,
the proceeds from which had been used to finance the construction of a PCC
plant in Jackson, Alabama.
On February 26, 1998, the Company's Board of Directors authorized a
$150 million stock repurchase program. The stock is being purchased on the
open market from time to time. As of January 21, 2000, the Company had
repurchased approximately 2.0 million shares under this program, at an
average price of approximately $47 per share.
On April 28, 1998, the Company sold its limestone operation in Port
Inland, Michigan, to Oglebay Norton Company for approximately $34 million,
which approximated its net book value. This high volume commodity operation
no longer complemented the Company's long-term strategic vision.
On April 30, 1998, the Company acquired for approximately $34 million a
PCC manufacturing facility located in England, from Rhodia Limited, a
specialty chemicals company. This acquisition allowed the Company to
establish a base for its Specialty PCC business in Europe. This facility
produces Specialty PCC products for food and pharmaceutical applications, as
well as for use in plastics, sealants and coatings, and paper.
The Company has approximately $75 million in uncommitted short-term
bank credit lines, none of which were in use at December 31, 1999 or
December 31, 1998. The Company anticipates that capital expenditures for
2000 will range between $70-$90 million, principally related to the
construction of satellite PCC plants, expansion projects at existing
satellite PCC plants, a merchant manufacturing facility in Brookhaven,
Mississippi for the production of Specialty PCC, and other opportunities
that meet the strategic growth objectives of the Company. The Company
expects to meet its long-term financing requirements from internally
generated funds, the aforementioned uncommitted bank credit lines and, where
appropriate, project financing of certain satellite plants.
Prospective Information and Factors That May Affect Future Results
The Securities and Exchange Commission encourages companies to
disclose forward-looking information so that investors can better understand
a company's future prospects and make informed investment decisions. This
annual report contains such forward-looking statements that set out
anticipated results based on management's plans and assumptions. Words such
as "expects," "plans," "anticipated," "will," and words and terms of similar
substance used in connection with any discussion of future operating or
financial performance identify these forward-looking statements.
The Company cannot guarantee that any forward-looking statement will be
realized, although it believes it has been prudent in its plans and
assumptions. Achievement of future results is subject to risks,
uncertainties and inaccurate assumptions. Should known or unknown risks or
uncertainties materialize, or should underlying assumptions prove
inaccurate, actual results could vary materially from those anticipated,
estimated or projected. Investors should bear this in mind as they consider
forward-looking statements. Certain risks, uncertainties and assumptions
are discussed under the heading entitled "Cautionary Factors That May Affect
Future Results" in Item 1.
Inflation
Historically, inflation has not had a material adverse effect on the
Company. The contracts pursuant to which the Company constructs and
operates its satellite PCC plants generally adjust pricing to reflect
increases in costs resulting from inflation.
<PAGE> 15
Cyclical Nature of Customers' Businesses
The bulk of the Company's sales are to customers in the paper
manufacturing and steel manufacturing industries, which have historically
been cyclical. Both industries encountered difficulties in 1999 and 1998.
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.
For this reason, and because of the geographical diversification of our
business, the Company's operating results to date have not been materially
affected by the difficult economic environment. However, we cannot predict
the economic outlook in the countries in which we do business, nor in the
key industries we serve. There can be no assurance that a recession, in
some markets or worldwide, would not have a significant negative effect on
the Company's financial position or results of operations.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." The
statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. The
statement, as amended, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. The Company will adopt SFAS 133 by January
1, 2001. Adoption of SFAS 133 is not expected to have a material effect on
the consolidated financial statements.
Year 2000
The "year 2000 issue" arose because many computer programs and
electronically controlled devices denote years using only the last two
digits. Like other companies, the Company uses operating systems,
applications and electronically controlled devices that were produced by
many different vendors at different times, and many of which were not
originally designed to be year 2000 compatible. The Company did not
experience any material adverse effects of the transition to the year 2000,
and while it is possible that such effects may arise in the future,
particularly with respect to computerized interfaces with third parties, the
Company does not expect this to be the case.
In 1996, the Company began a project to install new computer hardware
and software to improve the capability of the Company's information systems,
to harmonize the various information technology platforms in use, and to
centralize certain financial functions. The project encompassed corporate
financial and accounting functions as well as manufacturing and costing,
procurement, planning and scheduling of production and maintenance, and
customer order management.
As of December 31, 1999, the Company had spent approximately $17
million, including internal costs, for new computer hardware and software,
other information technology upgrades and replacements, and upgrades and
replacements to non-IT systems worldwide. These expenditures provided
benefits to the Company including, but not limited to, the achievement of
year 2000 readiness.
The Company financed these expenditures solely from working capital,
and the total cost associated with its plans to address the year 2000 did
not have a material adverse effect on its financial position or results of
operations.
The statements in this section regarding the effect of the year 2000
and the Company's responses to it are forward-looking statements. They are
based on assumptions that the Company believes to be reasonable in light of
its current knowledge and experience. A number of contingencies could cause
actual results to differ materially from those described in forwardlooking
statements made by or on behalf of the Company. Please see "Cautionary
Factors That May Affect Future Results" in Item 1.
Adoption of a Common European Currency
On January 1, 1999, eleven European countries adopted the euro as their
common currency. From that date until January 1, 2002, debtors and
creditors may choose to pay or be paid in euros or in the former national
currencies. On and after January 1, 2002, the affected national currencies
will cease to be legal tender.
The Company's information technology systems are now able to convert
among the former national currencies and the euro and to process
transactions and balances in euros. The financial institutions with which
the Company does business are capable of receiving deposits and making
payments both in euros and in the national currencies. The Company does not
expect that adapting its information technology systems to the euro will
have a material effect on its financial condition or results of operations.
The Company is also reviewing contracts with customers and vendors calling
for payments in currencies that are to be replaced by the euro, and intends
to complete in a timely way any required changes to those contracts.
Adoption of the euro is likely to have competitive effects in Europe,
as prices that had been stated in different national currencies become
directly comparable to one another. In addition, the adoption of a common
monetary policy by the countries adopting the euro can be expected to have
an effect on the economy of the region. These competitive and economic
effects had no material effect on the Company's financial condition or
results of operation during 1999, and the Company does not expect any such
effect to occur. There can be no assurance, however, that the transition to
the euro will not have a material effect on the Company's business in Europe
in the future.
<PAGE> 16
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to various market risks, including the potential
loss arising from adverse changes in foreign currency exchange rates. The
Company does not enter into derivatives or other financial instruments for
trading or speculative purposes. When appropriate, the Company enters into
derivative financial instruments, such as forward exchange contracts, to
mitigate the impact of foreign exchange rate movements on the Company's
operating results. The counterparties are major financial institutions.
Such forward exchange contracts would not subject the Company to additional
risk from exchange rate movements because gains and losses on these
contracts would offset losses and gains on the assets, liabilities and
transactions being hedged. There were no open forward exchange contracts
outstanding at December 31, 1999 or December 31, 1998.
Item 8. Financial Statements and Supplementary Data
The financial information required by Item 8 is contained in Item 14 of
Part IV of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Set forth below are the names and ages, as of December 31, 1999, 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
Jean-Paul Valles 63 Chairman of the Board and Chief Executive
Officer
Paul R. Saueracker 58 Senior Vice President of the Company and
President, Specialty Minerals Inc.
Anton Dulski 58 Senior Vice President of the Company and
President, MINTEQ International Inc.
S. Garrett Gray 61 Vice President, General Counsel and Secretary
Neil M. Bardach 51 Vice President, Finance and Chief Financial
Officer; Treasurer
Howard R. Crabtree 55 Vice President, Organization & Human Resources
William A. Kromberg 54 Vice President, Taxes
Michael A. Cipolla 42 Controller
Jean-Paul Valles has served as Chairman of the Board and a director of
the Company since 1989. He was elected Chief Executive Officer of the
Company in 1992. Dr. Valles is a member of the boards of directors of
Pfizer Inc, the National Association of Manufacturers, Junior Achievement of
New York, Inc. and the New York Chapter of the French-American Chamber of
Commerce in the U.S., Inc., and a member of the Board of Overseers of the
Stern School of Business. He is also chair of the Company's Executive
Committee.
Paul R. Saueracker was appointed a Senior Vice President of the Company
in 1999; prior to that he was a Vice President of the Company. He has
served as President of Specialty Minerals Inc. since 1994. Mr. Saueracker
is a former President of the Pulverized Minerals Division of the National
Stone Association and a member of the Technical Association of the Pulp and
Paper Industry and the Paper Industry Management Association. He is also a
member of the board of trustees of the Institute of Paper Science and
Technology located in Atlanta, Georgia.
Anton Dulski was appointed a Senior Vice President of the Company in
1999; prior to that he was a Vice President of the Company. He has served
as President of Minteq International Inc. since 1996. From 1993 to 1995 he
was Senior Vice President of Minteq with responsibility for European
operations.
S. Garrett Gray has served as Vice President and Secretary of the
Company since 1989. In 1992, Mr. Gray was appointed General Counsel of the
Company.
Neil M. Bardach has served as Vice President-Finance and Chief
Financial Officer of the Company since 1998. From 1994 to 1998, he was
Chief Financial Officer of The Genlyte Group Incorporated, a publicly traded
manufacturer of lighting fixtures.
<PAGE> 17
Howard R. Crabtree was appointed Vice President-Organization & Human
Resources of the Company in 1997, having served as Vice President-Human
Resources since 1992.
William A. Kromberg has served as Vice President-Taxes of the Company
since 1993.
Michael A. Cipolla has served as Controller of the Company since 1998.
From 1992 to 1998 he served as Assistant Corporate Controller.
The information concerning the Company's Board of Directors required by
this Item is incorporated herein by reference to the Company's Proxy
Statement.
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.
Item 11. Executive Compensation
The information appearing in the Company's Proxy Statement under the
caption "Compensation of Executive Officers," excluding the information
under the captions "Performance Graph" and "Report of the Compensation and
Nominating Committee on Executive Compensation," is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information appearing under the caption "Security Ownership of Certain
Beneficial Owners and Management as of February 1, 2000" set forth in the
Company's Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information appearing under the caption "Certain Relationships and
Related Transactions" set forth in the Company's Proxy Statement is
incorporated herein by reference.
Under the terms of certain agreements entered into in connection with the
Company's initial public offering in 1992, Pfizer Inc ("Pfizer") and its
wholly-owned subsidiary Quigley Company, Inc. ("Quigley") agreed to
indemnify the Company against certain liabilities being retained by Pfizer
and its subsidiaries including, but not limited to, pending lawsuits and
claims, and any lawsuits or claims brought at any time in the future
alleging damages or injury from the use, handling of or exposure to any
product sold by Pfizer's specialty minerals business prior to the closing of
the initial public offering.
Pfizer and Quigley also agreed to indemnify the Company against any
liability arising from on-site remedial waste site claims and for other
claims that may be made in the future with respect to waste disposed of
prior to the closing of the initial public offering. Further, Pfizer and
Quigley agreed to indemnify the Company for 50% of the liabilities in excess
of $1 million up to $10 million that may arise or accrue within ten years
after the closing of the initial public offering with respect to remediation
of on-site conditions existing at the time of the closing of the initial
public offering. The Company will be responsible for the first
$1 million of such liabilities, 50% of all such liabilities in excess of $1
million up to $10 million, and all such liabilities in excess of $10
million.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) The following documents are filed as part of this Report:
1.Financial Statements. The following Consolidated Financial Statements
of Minerals Technologies Inc. and Independent Auditors' Report are set
forth on pages F-2 to F-20.
Consolidated Balance Sheet as of December 31, 1999 and 1998
Consolidated Statement of Income for the years ended December 31,
1999, 1998 and 1997
Consolidated Statement of Cash Flows for the years ended December
31, 1999, 1998 and 1997
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1999,
1998 and 1997
Notes to the Consolidated Financial Statements
Independent Auditors' Report
<PAGE> 18
2.Financial Statement Schedule. The following financial statement
schedule is filed as part of this Report:
Page
Schedule II- Valuation and Qualifying Accounts S-1
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
3.1 - Restated Certificate of Incorporation of the Company
(1)
3.2 - Restated By-Laws of the Company (2)
3.3 - Certificate of Designations authorizing issuance and
establishing designations, preferences and rights of
Series A Junior Preferred Stock of the Company (1)
4 - Rights Agreement, executed effective as of September
13, 1999 (the "Rights Agreement"), between Minerals
Technologies Inc. and Chase Mellon Shareholders Services
L.L.C., as Rights Agents, including as Exhibit B the
forms of Rights Certificate and of Election to Exercise
(10)
4.1 - Specimen Certificate of Common Stock (1)
10.1 - Asset Purchase Agreement, dated as of September 28,
1992, by and between Specialty Refractories Inc. and
Quigley Company Inc. (3)
10.1(a) - Agreement dated October 22, 1992 between Specialty
Refractories Inc. and Quigley Company Inc., amending
Exhibit 10.1 (4)
10.1(b) - Letter Agreement dated October 29, 1992 between
Specialty Refractories Inc. and Quigley Company Inc.,
amending Exhibit 10.1 (4)
10.2 - Reorganization Agreement, dated as of September 28,
1992, by and between the Company and Pfizer Inc (3)
10.2(a) - Letter Agreement dated October 29, 1992 between the
Company and Pfizer Inc, amending Exhibit 10.2 (4)
10.3 - Asset Contribution Agreement, dated as of September
28, 1992, by and between Pfizer Inc and Specialty
Minerals Inc. (3)
10.4 - Asset Contribution Agreement, dated as of September
28, 1992, by and between Pfizer Inc and Barretts
Minerals Inc. (3)
10.4(a) - Agreement dated October 22, 1992 between Pfizer Inc,
Barretts Minerals Inc. and Specialty Minerals Inc.,
amending Exhibits 10.3 and 10.4 (4)
10.5 - Form of Employment Agreement (1), together with
schedule relating to executed Employment Agreements
10.6 - Form of Severance Agreement (11), together with
schedule relating to executed Severance Agreements (2)
10.7 - Company Employee Protection Plan, as amended August
27, 1999 (5)
10.8 - Company Nonfunded Deferred Compensation and Unit Award
Plan for Non-Employee Directors, as amended February 26,
1998 (6)
10.9 - Company Stock and Incentive Plan, as amended and
restated as of January 28, 1999 (6)
10.10 - Company Retirement Annuity Plan, as amended and
restated effective February 26, 1998 (6)
10.11 - Company Nonfunded Supplemental Retirement Plan, as
amended January 28, 1999 (6)
10.12 - Company Savings and Investment Plan, as amended and
restated effective April 22, 1999 (6)
10.13 - Company Nonfunded Deferred Compensation and
Supplemental Savings Plan, as amended January 28,
1999 (6)
10.15 - Grantor Trust Agreement, dated as of December 29,
1994, between the Company and The Bank of New York, as
Trustee (7)
10.16 - Note Purchase Agreement, dated as of June 28, 1993,
between the Company and Metropolitan Life Insurance
Company with respect to the Company's issuance of
$65,000,000 in aggregate principal amount of its 6.04%
Guarantied Senior Notes Due June 11, 2000; together
with a schedule regarding other contracts
substantially identical in all material respects to
the foregoing (8)
10.17 - Note Purchase Agreement, dated as of July 24, 1996,
between the Company and Metropolitan Life Insurance
Company with respect to the Company's issuance of
$50,000,000 in aggregate principal amount of its 7.49%
Guaranteed Senior Notes due July 24, 2006 (9)
10.18 - Indenture, dated July 22, 1963, between the
Cork Harbour Commissioners and Roofchrome
Limited (3)
10.19 - Agreement of Lease, dated as of May 24, 1993, between
the Company and Cooke Properties Inc (8)
21.1 - Subsidiaries of the Company
23.1 - Report and Consent of Independent Auditors
27 - Financial Data Schedule
<PAGE> 19
(1) Incorporated by reference to exhibit so designated filed with the
Company's Annual Report on Form 10-K for the year ended December 31,
1997. (2) Incorporated by reference to the exhibit so designated
filed with the Company's Quarterly Report on Form 10-Q for the
quarter ended September 27, 1998.
(3) 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.
(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.
(5) Incorporated by reference to the exhibit so designated filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 26, 1999.
(6) Incorporated by reference to the exhibit so designated filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended March
28, 1999.
(7) Incorporated by reference to the exhibit so designated filed with the
Company's Annual Report on Form 10-K for the year ended December 31,
1994.
(8) Incorporated by reference to the exhibit so designated filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended July 4,
1993.
(9) Incorporated by reference to the exhibit so designated filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996.
(10) Incorporated by reference to the exhibit so designated filed with the
Company's current report on Form 8-K, filed September 3, 1999.
(11) Incorporated by reference to the exhibit so designated filed with the
Company's Annual Report on Form 10-K for the year ended December 31,
1996.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during
the fourth quarter of 1999.
<PAGE> 20
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.
Minerals Technologies Inc.
By: /s/ Jean-Paul Valles
Jean-Paul Valles
Chairman of the Board
and Chief Executive Officer
March 14, 2000
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/ Jean-Paul Valles Chairman of the March 14, 2000
- -------------------- Board and Chief
Jean-Paul Valles Executive Officer
(principal
executive officer)
and Director
/s/Neil M. Bardach Vice President- March 14, 2000
- ------------------ Finance and
Neil M. Bardach Chief Financial
Officer; Treasurer
(principal financial
officer)
/s/Michael A. Cipolla Controller and March 14, 2000
- --------------------- Chief Accounting
Michael A. Cipolla Officer (principal
accounting
officer)
<PAGE> 20
/s/John B. Curcio Director March 14, 2000
- -----------------
John B. Curcio
/s/Steven J. Golub Director March 14, 2000
- ------------------
Steven J. Golub
/s/William L. Lurie Director March 14, 2000
- -------------------
William L. Lurie
/s/Paul M. Meister Director March 14, 2000
- ------------------
Paul M. Meister
/s/Michael F. Pasquale Director March 14, 2000
- ----------------------
Michael F. Pasquale
/s/ William C. Steere, Jr. Director March 14, 2000
- --------------------------
William C. Steere, Jr.
<PAGE> 22
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
-------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Audited Financial Statements:
Consolidated Balance Sheet as of December 31, 1999 and 1998 F-2
Consolidated Statement of Income for the years ended
December 31, 1999, 1998 and 1997 F-3
Consolidated Statement of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-4
Consolidated Statement of Shareholders' Equity for the years
ended December 31, 1999, 1998 and 1997 F-5
Notes to Consolidated Financial Statements F-6
Independent Auditors' Report F-20
<PAGE> F-1
<TABLE>
<CAPTION>
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(thousands of dollars)
December 31,
------------
1999 1998
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 20,378 $ 20,697
Accounts receivable, less
allowance for doubtful accounts:
1999 - $3,100; 1998 - $3,720 118,327 110,192
Inventories 67,427 63,657
Other current assets 13,815 16,284
------ ------
Total current assets 219,947 210,830
Property, plant and equipment,
less accumulated depreciation
and depletion 521,996 524,529
Other assets and deferred charges 27,188 25,553
------ ------
Total assets $ 769,131 $ 760,912
======= =======
Liabilities and Shareholders'
Equity
Current liabilities:
Current maturities of long-term debt $ 13,439 $ 13,511
Accounts payable 46,703 32,084
Income taxes payable 22,839 17,081
Accrued compensation and
related items 12,467 14,329
Other current liabilities 22,094 20,933
------ ------
Total current liabilities 117,542 97,938
Long-term debt 75,238 88,167
Accrued postretirement benefits 19,244 19,376
Deferred taxes on income 50,015 46,316
Other noncurrent liabilities 22,056 19,952
------ ------
Total liabilities 284,095 271,749
======= =======
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock, without par value;
1,000,000 shares
authorized; none issued -- --
Common stock at par, $0.10
par value; 100,000,000 shares
authorized;issued 25,705,035 shares
in 1999 and 25,534,391 shares in
1998 2,571 2,553
Additional paid-in capital 150,315 144,088
Retained earnings 527,022 467,257
Accumulated other
comprehensive loss (28,865) (9,612)
------- -------
651,043 604,286
Less common stock held in
treasury, at cost; 4,819,317
shares in 1999 and 3,720,717
shares in 1998 166,007 115,123
------- -------
Total shareholders'equity 485,036 489,163
Total liabilities and
shareholders' equity $ 769,131 $ 760,912
======= =======
See Notes to Consolidated Financial Statements, which are an
integral part of these statements.
</TABLE>
<PAGE> F-2
<TABLE>
<CAPTION>
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(thousands of dollars, except per share data)
Year Ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $637,519 $609,193 $602,335
Operating costs and expenses:
Cost of goods sold 438,640 416,558 424,612
Marketing, distribution 76,548 79,150 77,104
and administrative expenses `
Research and development expenses 24,788 21,038 20,391
------ ------ ------
Income from operations 97,543 92,447 80,228
------ ------ ------
Interest income 1,193 2,146 1,765
Interest expense (5,141) (5,918) (7,208)
Other deductions (1,060) (2,333) (2,597)
----- ----- -----
Non-operating deductions, net (5,008) (6,105) (8,040)
----- ----- -----
Income before provision for
taxes on income and minority interests 92,535 86,342 72,188
Provision for taxes on income 28,920 27,360 23,104
Minority interests 1,499 1,758 (1,228)
----- ----- -----
Net income $ 62,116 $ 57,224 $ 50,312
======= ======= =======
Basic earnings per share $ 2.90 $ 2.57 $ 2.23
======= ======= =======
Diluted earnings per share $ 2.80 $ 2.50 $ 2.18
======= ======= =======
See Notes to Consolidated Financial Statements, which are an integral
part of these statements.
</TABLE>
<PAGE> F-3
<TABLE>
<CAPTION>
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(thousands of dollars)
Year Ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Operating Activities
Net income $ 62,116 $ 57,224 $ 50,312
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation, depletion
and amortization 58,675 53,084 52,936
Loss on disposal of
property, plant and
equipment 1,041 1,650 947
Deferred income taxes 5,862 1,212 3,689
Other 1,459 2,304 (681)
Changes in operating assets and
liabilities, net of effects of
acquisition and disposition:
Accounts receivable (9,198) (184) (11,195)
Inventories (4,675) (1,744) 7,512
Other current assets 2,215 (699) (1,802)
Accounts payable
and accrued liabilities 9,644 (3,442) 14,506
Income taxes payable 4,835 6,699 4,564
Other (1,774) 850 (174)
----- ----- ------
Net cash provided by operating
activities 130,200 116,954 120,614
------- ------- -------
Investing Activities
Purchases of property, plant and
equipment (73,752) (82,450) (77,331)
Proceeds from disposal of
property, plant and equipment 986 556 3,916
Acquisition of business -- (34,130) --
Proceeds from disposition of
business -- 32,357 --
Other investing activities (604) (1,954) --
------ ------ -------
Net cash used in investing
activities (73,370) (85,621) (73,415)
------- ------- -------
Financing Activities
Proceeds from issuance of short-
term and long-term debt 39,694 743 20,089
Repayment of short-term and long-
term debt (52,398) (14,380) (34,679)
Purchase of common shares for
treasury (50,884) (42,550) (6,688)
Cash dividends paid (2,138) (2,231) (2,258)
Proceeds from issuance of stock 6,245 4,091 2,436
under option plan
Equity and debt proceeds from
minority interests 1,900 2,405 3,214
Other financing activities (213) -- --
------ ------ ------
Net cash used in financing activities (57,794) (51,922) (17,886)
------- ------- -------
Effect of exchange rate changes on
cash and cash equivalents 645 (239) (3,234)
------ ------- -------
Net increase (decrease) in cash
and cash equivalents (319) (20,828) 26,079
Cash and cash equivalents at
beginning of year 20,697 41,525 15,446
------ ------ ------
Cash and cash equivalents at end
of year $ 20,378 $ 20,697 $ 41,525
-------- -------- --------
See Notes to Consolidated Financial Statements, which are an integral
part of these statements.
</TABLE>
<PAGE> F-4
<TABLE>
<CAPTION>
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
Common Stock Additional
------------ Paid-in Retained
Shares Par Value Capital Earnings
------ --------- ------- --------
<S> <C> <C> <C> <C>
Balance as of
January 1,1997 25,260 $2,526 $135,676 $364,210
------ ------ -------- --------
Comprehensive income:
Net income -- -- -- 50,312
Currency translation
adjustment -- -- -- --
Unrealized holding
losses, net of tax -- -- -- --
Minimum pension
liability adjustment -- -- -- --
------ ------ ------ ------
Total comprehensive
income -- -- -- 50,312
------ ------ ------ -------
Dividends declared -- -- -- (2,258)
Employee benefit
transactions 110 11 2,837 --
Income tax benefit
arising from employee
stock option plans -- -- 600 --
Purchase of common stock -- -- -- --
----- ----- ------ ------
Balance as of
December 31, 1997 25,370 2,537 139,113 412,264
------ ----- ------- -------
Comprehensive income:
Net income -- -- -- 57,224
Currency translation
adjustment -- -- -- --
Unrealized holding
losses, net of tax -- -- -- --
----- ----- ------ -------
Total comprehensive
income -- -- -- 57,224
----- ----- ------ -------
Dividends declared -- -- -- (2,231)
Employee benefit
transactions 164 16 4,075 --
Income tax benefit
arising from employee
stock option plans -- -- 900 --
Purchase of common stock -- -- -- --
----- ----- ------ ------
Balance as of
December 31, 1998 25,534 2,553 144,088 467,257
------ ----- ------- -------
Comprehensive income:
Net income -- -- -- 62,116
Currency translation
adjustment -- -- -- --
Reclassification
adjustment of
unrealized holding gains,
net of tax -- -- -- --
------ ----- ------- ------
Total comprehensive
income -- -- -- 62,116
------ ----- ------- ------
Dividends declared -- -- -- (2,138)
Redemption of stock rights -- -- -- (213)
Employee benefit
transactions 171 18 5,232 --
Income tax benefit
arising from employee
stock option plans -- -- 995 --
Purchase of common stock -- -- -- --
----- ----- ------- ------
Balance as of
December 31, 1999 25,705 $2,571 $150,315 $527,022
====== ===== ======= =======
(Continued)
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
Accumulated
Other Treasury Stock
Comprehensive --------------
Income(Loss) Shares Cost Total
------------- ------ ----- -----
Balance as of
January 1, 1997 $ 11,723 (2,660) $ (65,885) $448,250
------- ----- -------- -------
Comprehensive income:
Net income -- -- -- 50,312
Currency translation
adjustment (25,016) -- -- (25,016)
Unrealized holding
losses, net of tax (50) -- -- (50)
Minimum pension
liability adjustment (1,001) -- -- (1,001)
-------- ----- ------- ------
Total comprehensive
income (26,067) -- -- 24,245
------- ----- ------- ------
Dividends declared -- -- -- (2,258)
Employee benefit
transactions -- -- -- 2,848
Income tax benefit
arising from employee
stock option plans -- -- -- 600
Purchase of common stock -- (170) (6,688) (6,688)
------ ----- ------ ------
Balance as of
December 31, 1997 (14,344) (2,830) (72,573) 466,997
------- ------ ------- -------
Comprehensive income:
Net income -- -- -- 57,224
Currency translation
adjustment 4,759 -- -- 4,759
Unrealized holding
losses, net of tax (27) -- -- (27)
------- ------ ------ -----
Total comprehensive
income 4,732 -- -- 61,956
------- ------- ------ ------
Dividends declared -- -- -- (2,231)
Employee benefit
transactions -- -- -- 4,091
Income tax benefit
arising from employee
stock option plans -- -- -- 900
Purchase of common stock -- (891) (42,550) (42,550)
---- ------- ------- -------
Balance as of
December 31,1998 (9,612) (3,721) (115,123) 489,163
------ ------ ------- -------
Comprehensive income:
Net income -- -- -- 62,116
Currency translation
adjustment (19,167) -- -- (19,167)
Reclassification
adjustment of
unrealized holding
gains, net of tax (86) -- -- (86)
------ ----- ------ ------
Total comprehensive
income (19,253) -- -- 42,863
------- ------- ------ ------
Dividends declared -- -- -- (2,138)
Redemption of stock rights -- -- -- (213)
Employee benefit transactions -- -- -- 5,250
Income tax benefit
arising from employee
stock option plans -- -- -- 995
Purchase of common stock -- (1,098) (50,884) (50,884)
----- ------ ------- -------
Balance as of
December 31, 1999 $(28,865) (4,819) $(166,007) $485,036
======= ====== ======== =======
See Notes to Consolidated Financial Statements, which are an integral
part of these statements.
</TABLE>
<PAGE> F-5
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the
accounts of Minerals Technologies Inc. (the "Company") and its wholly and
majority owned subsidiaries. All intercompany balances and transactions
have been eliminated in consolidation.
Use of Estimates
The Company employs accounting policies that are in accordance with
generally accepted accounting principles in the United States and require
management to make estimates and assumptions relating to the reporting of
assets and liabilities and the disclosure of contingent liabilities at the
date of the financial statements. Actual results could differ from those
estimates.
Business
The Company is a resource- and technology-based company that develops,
produces and markets on a worldwide basis a broad range of specialty
mineral, mineral-based and synthetic mineral products. The Company's
products are used in manufacturing processes of the paper and steel
industries, as well as by the building materials, polymers, ceramics, paints
and coatings, glass and other manufacturing industries.
Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less at the date of purchase to be cash equivalents. Cash
equivalents amounted to $9.0 million and $4.1 million at December 31, 1999
and 1998, respectively.
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Significant
improvements are capitalized. In general, the straight-line method of
depreciation is used for financial reporting purposes and accelerated
methods are used for U.S. and certain foreign tax reporting purposes. The
annual rates of depreciation are 4%-8% for buildings, 8%-12% for machinery
and equipment and 8%-12% for furniture and fixtures.
Depletion of the mineral and quarry properties is provided for on a unit-
of-extraction basis as the related materials are mined for financial
reporting purposes and on a percentage depletion basis for tax purposes.
Mining costs associated with waste gravel and rock removal in excess of
the expected average life of mine stripping ratio are deferred. These costs
are charged to production on a unit-of-production basis when the
ratio of waste to ore mined is less than the average life of mine stripping
ratio.
Goodwill
Goodwill represents the excess of purchase price and related costs over
the value assigned to the net tangible assets of businesses acquired.
Goodwill is amortized on a straight-line basis over 25 years.
Periodically, the Company reviews the recoverability of goodwill. The
determination of possible impairment is based primarily on the ability to
recover the balance of the goodwill from expected future operating cash
flows on an undiscounted basis. In management's opinion, no material
impairment existed at December 31, 1999.
Foreign Currency
The assets and liabilities of most of the Company's international
subsidiaries are translated into U.S. dollars using current exchange rates
at the respective balance sheet date. The resulting translation adjustments
are recorded in accumulated other comprehensive loss in shareholders'
equity. Income statement items are generally translated at average exchange
rates prevailing during the period. Other foreign currency gains and losses
are included in net income.
International subsidiaries operating in highly inflationary economies
translate nonmonetary assets at historical rates, while net monetary assets
are translated at current rates, with the resulting translation adjustments
included in net income.
Income Taxes
Income taxes are provided for based on the asset and liability method
of accounting pursuant to Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS 109''). Under SFAS 109, 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. Under
<PAGE> F-6
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS 109, 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 accompanying financial statements generally do not include a
provision for U.S. income taxes on international subsidiaries' unremitted
earnings which, for the most part, are expected to be reinvested overseas.
Stock-Based Compensation
The Company has elected to recognize compensation cost based on the
intrinsic value of the equity instrument awarded as promulgated in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." The Company has disclosed below under "Capital Stock -- Stock
and Incentive Plan" the pro forma effect of the fair value method on net
income and earnings per share.
Postretirement Benefits
The Company accrues the cost of postretirement benefits during an
employee's active working career as required by Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106").
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 dilutive potential common shares
outstanding.
Income Taxes
Income before provision for taxes, by domestic and foreign source is as
follows:
Thousands of Dollars 1999 1998 1997
---- ---- ----
Domestic $ 65,101 $ 59,428 $ 48,746
Foreign 27,434 26,914 23,442
------ ------ ------
Total income before provision
for income taxes $ 92,535 $ 86,342 $ 72,188
====== ====== ======
The provision for taxes on income consists of the following:
Thousands of Dollars 1999 1998 1997
---- ---- ----
Domestic
Taxes currently payable
Federal $ 12,552 $ 15,714 $ 7,862
State and local 2,735 3,084 2,938
Deferred income taxes 4,069 (524) 4,634
----- ----- -----
Domestic tax provision 19,356 18,274 15,434
------ ------ ------
Foreign
Taxes currently payable 7,771 7,350 8,615
Deferred income taxes 1,793 1,736 (945)
----- ----- -----
Foreign tax provision 9,564 9,086 7,670
----- ----- -----
Total tax provision $ 28,920 $ 27,360 $ 23,104
====== ====== ======
The provision for taxes on income shown in the previous table is
classified based on the location of the taxing authority, regardless of the
location in which the taxable income is generated.
<PAGE> F-7
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The major elements contributing to the difference between the U.S.
federal statutory tax rate and the consolidated effective tax rate are as
follows:
Percentages 1999 1998 1997
---- ---- ----
U.S. statutory tax rate 35.0% 35.0% 35.0%
Depletion (4.1) (3.5) (3.7)
Difference between tax provided on
foreign earnings and the U.S.
statutory rate (0.7) (0.4) (0.8)
State and local taxes 2.6 2.0 2.9
Tax credits (1.9) (2.2) (0.8)
Other 0.4 0.8 (0.6)
--- --- ---
Consolidated effective tax rate 31.3% 31.7% 32.0%
==== ==== ====
The Company believes that its accrued liabilities are sufficient to
cover its U.S. and foreign tax contingencies. The tax effects of temporary
differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities are presented below:
Thousands of Dollars 1999 1998
---- ----
Deferred tax assets:
Pension and postretirement benefits cost
reported for financial statement
purposes in excess of amounts
deductible for tax purposes $ 5,219 $ 7,245
State and local taxes 2,935 2,594
Accrued expenses 2,747 2,812
Other 3,778 3,749
----- -----
Total deferred tax assets 14,679 16,400
------ ------
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation 60,838 60,956
Other 3,856 1,760
----- -----
Total deferred tax liabilities 64,694 62,716
------ ------
Net deferred tax liabilities $50,015 $46,316
====== ======
A valuation allowance for deferred tax assets has not been recorded
since management believes it is more likely than not that the existing net
deductible temporary differences will reverse during periods in which the
Company generates net taxable income.
Net cash paid for income taxes was $14.7 million, $18.3 million and
$14.2 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
Foreign Operations
The Company has not provided for U.S. federal and foreign withholding
taxes on $72.1 million of foreign subsidiaries' undistributed earnings as of
December 31, 1999 because such earnings, for the most part, are intended to
be reinvested overseas. To the extent the parent company has received
foreign earnings as dividends, the foreign taxes paid on those earnings have
generated tax credits, which have substantially offset related U.S. income
taxes. On repatriation, certain foreign countries impose withholding taxes.
The amount of withholding tax that would be payable on remittance of the
entire amount of undistributed earnings would approximate $1.8 million.
Net foreign currency exchange gains (losses), included in other
deductions in the Consolidated Statement of Income, were $(427,000),
$(932,000) and $(1,721,000) for the years ended December 31, 1999, 1998 and
1997, respectively.
<PAGE> F-8
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories
The following is a summary of inventories by major category:
Thousands of Dollars 1999 1998
---- ----
Raw materials $25,049 $21,681
Work in process 5,171 5,483
Finished goods 19,913 19,650
Packaging and supplies 17,294 16,843
------ ------
Total inventories $67,427 $63,657
====== ======
Property, Plant and Equipment
The major categories of property, plant and equipment and accumulated
depreciation and depletion are presented below:
Thousands of Dollars 1999 1998
---- ----
Land $ 21,998 $ 21,224
Quarries/mining properties 20,211 19,256
Buildings 121,435 118,223
Machinery and equipment 681,060 642,767
Construction in progress 43,726 52,709
Furniture and fixtures and other 66,613 52,040
------- -------
955,043 906,219
Less: Accumulated depreciation and
depletion 433,047 381,690
------- -------
$521,996 $524,529
======= =======
Acquisition and Divestiture
On April 30, 1998 the Company acquired, for approximately $34 million
in cash, a precipitated calcium carbonate (PCC) manufacturing facility in
the United Kingdom from Rhodia Limited. This acquisition allowed the
Company to establish a base for its specialty PCC business in Europe. The
transaction was accounted for as a purchase. The purchase price exceeded
the fair value of net assets acquired by approximately $8 million, which is
being amortized on a straight-line basis over 25 years.
On April 28, 1998 the Company sold its limestone operation in Port
Inland, Michigan, to Oglebay Norton Company for cash and receivables
approximating $34 million. The sales price approximated the net book value
of the assets.
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, accounts receivable and payable, and
accrued liabilities:
The carrying amounts approximate fair value because of the short
maturity of these instruments.
Available-for-sale securities:
Available-for-sale securities are presented in accordance with SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
<PAGE> F-9
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair values are based on quoted market prices and are as follows:
1999 1998 1997
----------------- ------------------ ------------------
Gross Gross Gross
Unrealized Unrealized Unrealized
Thousands Market Holding Market Holding Market Holding
of Dollars Value Gains Value Gains Value Gains
------ ---------- ------ ---------- ------ ---------
Common Stock $ -- $ -- $389 $174 $424 $230
The Company recognized gains from sale of securities aggregating
$174,000 in 1999. The unrealized holding gains, net of taxes, were $86,000
and $113,000, respectively, at December 31, 1998 and 1997 and are included
in accumulated other comprehensive loss in the statement of shareholders'
equity.
Short-term debt and other liabilities:
The carrying amounts of short-term debt and other liabilities
approximate fair value because of the short maturity 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 estimated by obtaining quotes from brokers.
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 not subject the Company to additional risk from
exchange rate movements because gains and losses on these contracts would
offset losses and gains on the assets, liabilities and transactions being
hedged. There were no open forward exchange contracts outstanding at
December 31, 1999 or December 31, 1998.
Credit risk:
Substantially all of the Company's accounts receivable are due from
companies in the paper, construction and steel industries. Credit risk
results from the possibility that a loss may occur from the failure of
another party to perform according to the terms of the contract. 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. Credit losses are
provided for in the financial statements and consistently have been within
management's expectations.
Long-Term Debt and Commitments
The following is a summary of long-term debt:
Thousands of Dollars 1999 1998
---- ----
7.75% Economic Development Revenue Bonds
Series 1990 Due 2010.......................... $ -- $ 4,600
Variable/Fixed Rate Industrial Development
Revenue Bonds Due 2009........................ 4,000 4,000
Variable/Fixed Rate Industrial Development
Revenue Bonds Due April 1, 2012............... -- 7,545
Variable/Fixed Rate Industrial Development
Revenue Bonds Due August 1, 2012.............. 8,000 8,000
Economic Development Authority Refunding
Revenue Bond Series 1999 Due 2010............. 4,600 --
Variable/Fixed Rate Industrial Development
Revenue Bond Series 1999 Due November 1, 2014. 8,200 --
6.04% Guarantied Senior Notes Due June 11,2000.. 13,000 26,000
7.49% Guaranteed Senior Notes Due July 24,2006.. 50,000 50,000
Other borrowings................................ 877 1,533
------ -------
88,677 101,678
Less: Current maturities........................ 13,439 13,511
------ -------
Long-term debt.................................. $75,238 $88,167
====== ======
<PAGE>F-10
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Economic Development Authority Refunding Revenue Bonds due 2010
were issued on February 23, 1999 to refinance the bonds issued in connection
with the construction of a PCC plant in Eastover, South Carolina. The bonds
bear interest at either a variable rate or fixed rate, at the option of the
Company. Interest is payable semi-annually under the fixed rate option and
monthly under the variable rate option. The Company has selected the variable
rate option on these borrowings and the average interest rate for the period
ended December 31, 1999 was approximately 3.52%.
The Variable/Fixed Rate Industrial Development Revenue Bonds due 2009
are tax-exempt 15-year instruments issued to finance the expansion of a PCC
plant in Selma, Alabama. The bonds are dated November 1, 1994, and provide
for an optional put by the holder (during the Variable Rate Period) and a
mandatory call by the issuer. The bonds bear interest at either a variable
rate or fixed rate, at the option of the Company. Interest is payable semi
annually under the fixed rate option and monthly under the variable rate
option. The Company has selected the variable rate option on these
borrowings and the average interest rate was approximately 3.44% for the year
ended December 31, 1999.
The Variable/Fixed Rate Industrial Development Revenue Bonds due
November 1, 2014 are tax-exempt 15-year instruments and were issued on
November 30, 1999 to refinance the bonds issued in connection with the
construction of a PCC plant in Jackson, Alabama. The bonds bear interest
at either a variable rate or fixed rate at the option of the Company.
Interest is payable semi-annually under the fixed rate option and monthly
under the variable rate option. The Company has selected the variable rate
option on these borrowings and the average interest rate for the period
ended December 31, 1999 was approximately 4.62%.
On November 30, 1999, the Company redeemed $7,545,000 of the
Variable/Fixed Rate Industrial Development Revenue Bonds due April 1, 2012,
the proceeds from which had been used to finance the construction of a PCC
plant in Jackson, Alabama.
The Variable/Fixed Rate Industrial Development Revenue Bonds due
August 1, 2012 are tax-exempt 15-year instruments that were issued on August
1, 1997 to finance the construction of a PCC plant in Courtland,
Alabama. The bonds bear interest at either a variable rate or fixed rate,
at the option of the Company. Interest is payable semi-annually under the
fixed rate option and monthly under the variable rate option. The Company
has selected the variable rate option on these borrowings and the average
interest rate was approximately 3.42% for the year ended December 31, 1999.
On June 28, 1993, through a private placement, the Company issued $65
million of 6.04% Guarantied Senior Notes (the "Notes") due June 11, 2000.
The proceeds from the sale of the Notes were used to finance the purchase of
2.5 million shares of treasury stock, and for other corporate purposes.
Interest on the Notes is payable semi-annually.
On July 24, 1996, through a private placement, the Company issued $50
million of 7.49% Guaranteed Senior Notes due July 24, 2006. The proceeds
from the sale of the notes were used to refinance a portion of the shortterm
commercial bank debt outstanding. These notes rank pari passu with the
Company's other unsecured senior obligations. No required principal
payments are due until July 24, 2006. Interest on the notes is payable semi-
annually.
The aggregate maturities of long-term debt are as follows: 2000 $13.4
million; 2001 - $0.5 million; 2002 - $-- million; 2003 - $-- million; 2004 -
$--million; thereafter - $74.8 million.
The Company has approximately $75 million in uncommitted, short-term
bank credit lines. There were no borrowings on these credit lines on
December 31, 1999 or December 31, 1998.
During 1999, 1998 and 1997, respectively, the Company incurred interest
costs of $6,098,000, $7,047,000 and $8,198,000 including $957,000,
$1,129,000 and $990,000, respectively, which were capitalized. Interest
paid approximated the incurred interest costs.
Benefit Plans
Pension Plans and Other Postretirement Benefit Plans
The Company and its subsidiaries have pension plans covering
substantially all eligible employees on a contributory or non-contributory
basis.
<PAGE> F-11
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The funded status of the Company's pension plans and other
postretirement benefit plans at December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
Millions of Dollars 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation
at beginning of year $ 92.7 $ 80.4 $ 16.8 $ 14.0
Service cost 5.2 4.8 1.0 0.9
Interest cost 6.0 5.7 1.1 1.0
Amendments -- 4.0 -- --
Actuarial(gain)loss (8.0) 7.4 (1.7) 1.5
Benefits paid (8.6) (10.4) (0.6) (0.6)
Other (0.5) 0.8 -- --
---- ---- ---- ----
Benefit obligation
at end of year $ 86.8 $ 92.7 $ 16.6 $ 16.8
===== ===== ===== =====
Change in plan assets
Fair value of plan assets
at beginning of year $ 92.0 $ 84.6 $ -- $ --
Actual return on plan assets 10.1 13.2 -- --
Employer contributions 5.2 3.9 0.6 0.6
Plan participants'
contributions 0.2 0.7 -- --
Benefits paid (8.6) (10.4) (0.6) (0.6)
Other (1.4) -- -- --
---- ---- ---- ----
Fair value of plan assets
at end of year $ 97.5 $ 92.0 $ -- $ --
===== ===== ==== ====
Funded status $ 10.7 $ (0.7) $(16.6) $(16.8)
Unrecognized
transition amount 1.6 2.3 -- --
Unrecognized net
actuarial (gain) loss (13.6) (4.0) 1.2 2.8
Unrecognized prior
service cost 5.9 6.5 (3.8) (5.4)
---- ---- ---- ----
Prepaid (accrued)
benefit cost $ 4.6 $ 4.1 $(19.2) $(19.4)
===== ===== ===== =====
Amounts recognized in the consolidated
balance sheet consist of:
Prepaid benefit cost $ 11.2 $ 10.5 $ -- $ --
Accrued benefit liabilities (10.0) (9.4) (19.2) (19.4)
Intangible asset 1.8 2.0 -- --
Accumulated other
comprehensive loss 1.6 1.0 -- --
---- ---- ---- ----
Net amount recognized $ 4.6 $ 4.1 $(19.2) $(19.4)
===== ===== ===== =====
The weighted average assumptions used in the accounting for the
pension benefit plans and other benefit plans as of December 31 are as
follows:
1999 1998
---- ----
Discount rate 7.75% 6.75%
Expected return on plan assets 9.00% 9.00%
Rate of compensation increase 4.50% 4.00%
For measurement purposes, health care cost trend rates of
approximately 9.2% for pre-age-65 benefits and 7.7% for post-age-65
benefits were used. These trend rates were assumed to decrease gradually
to 5.3% for 2005 and remain at that level thereafter.
<PAGE>F-12
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of net periodic benefit costs are as follows:
Pension Benefits Other Benefits
------------------ ------------------
Millions of Dollars 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
Service cost $ 5.2 $ 4.8 $ 4.1 $ 1.0 $ 0.9 $ 0.8
Interest cost 6.0 5.7 5.2 1.1 1.0 0.9
Expected return on plan assets (7.9) (7.3) (6.2) -- -- --
Amortization of transition amount 0.7 0.7 0.7 -- -- --
Amortization of prior service cost 0.5 0.4 0.2 (1.7) (1.7) (1.7)
Recognized net actuarial gain -- (0.6) -- -- -- --
---- ---- ---- ---- ---- ----
Net periodic benefit cost $ 4.5 $ 3.7 $ 4.0 $ 0.4 $ 0.2 $ --
==== ==== ==== ==== ==== ====
Benefits under defined benefit plans are generally based on years of
service and an employee's career earnings. Employees become fully vested
after five years.
The Company's funding policy for U.S. plans generally is to contribute
annually into trust funds at a rate that is intended to remain at a level
percentage of compensation for covered employees. The funding policy for the
international plans conforms to local governmental and tax requirements. The
plans' assets are invested primarily in stocks and bonds.
The Company provides postretirement health care and life insurance
benefits for substantially all 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.
A one-percentage-point change in assumed health care cost trend rates
would have the following effects:
1-Percentage-Point 1-Percentage-Point
Increase Decrease
------------------ ------------------
Effect on total service and
interest cost components $ 3,000 $ (4,000)
Effect on postretirement
benefit obligation $ 40,000 $ (50,000)
Savings and Investment Plans
The Company maintains a voluntary Savings and Investment Plan for most
non-union employees in the U.S. Within prescribed limits, the Company bases
its contribution to the Plan on employee contributions. The Company's
contributions amounted to $3.0 million, $3.1 million and $3.1 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
Leases
Rent expense amounted to approximately $4.6 million, $3.4 million and
$4.2 million for the years ended December 31, 1999, 1998 and 1997,
respectively. Total future minimum rental commitments under all
noncancelable leases for the years 1999 through 2004 and thereafter are
approximately $1.8 million, $1.6 million, $1.5 million, $1.4 million, $1.3
million and $11.1 million, respectively.
Total future minimum payments to be received under direct financing
leases for the years 2000 through 2004 and thereafter are approximately $0.2
million, $0.2 million, $0.2 million, 0.2 million, $0.2 million and $2.9
million, respectively.
Litigation
Under the terms of certain agreements entered into in connection with
the reorganization prior to the initial public offering of the Company's
common stock in October 1992, Pfizer and its wholly owned subsidiary, Quigley
Company, Inc. ("Quigley") agreed to indemnify the Company against certain
liabilities being retained by Pfizer and its subsidiaries including, but not
limited to, pending lawsuits and claims and any lawsuits or claims brought at
any time in the future alleging damages or injury from the use, handling of
or exposure to any product sold by Pfizer's specialty minerals business prior
to the closing of the initial public offering.
Pfizer and Quigley also agreed to indemnify the Company against any
liability arising from on-site remedial waste site claims and for other
claims that may be made in the future with respect to wastes disposed of
prior to the closing of the initial public offering. Further, Pfizer and
Quigley agreed to indemnify the Company for 50% of the liabilities in excess
of $1 million up to $10 million that may arise or accrue within ten years
after the closing of the initial public offering with respect to
<PAGE>F-13
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
remediation of on-site conditions existing at the time of the closing of
the initial public offering. The Company will be responsible for the first
$1 million of such liabilities, 50% of such liabilities in excess of
$1 million up to $10 million, and all such liabilities in excess of
$10 million.
The transfer by Quigley of certain real property in New Jersey to the
Company pursuant to the reorganization, including the former Quigley facility
in Old Bridge, New Jersey, triggered certain obligations under the New Jersey
Environmental Cleanup Responsibility Act ("ECRA"). Quigley retained
liability for compliance with ECRA including the assessment and, if
necessary, remediation of the Old Bridge property. Quigley's obligations
under ECRA are embodied in an Administrative Consent Order with the New
Jersey Department of Environmental Protection and Energy ("NJDEPE") that
requires Quigley to perform any necessary remediation and to provide
financial assurance of its ability to cover the costs of remediation as
estimated by NJDEPE with no obligation to the Company.
On August 2, 1999, the Company, without admitting any wrongdoing,
entered into a confidential settlement agreement with the plaintiff, Eaton
Corporation, in a lawsuit captioned Eaton Corporation v. Pfizer Inc, Minerals
Technologies Inc. and Specialty Minerals Inc., which was filed in 1996. The
suit alleged that certain materials sold to Eaton for use in truck
transmissions were defective, necessitating repairs for which Eaton sought
reimbursement. The Company's insurance covered a substantial portion of the
settlement and there was no material impact on the Company's results of
operations or financial position as a result of this settlement.
The Company and its subsidiaries are not party to any other pending
legal proceedings, other than ordinary routine litigation that is incidental
to their businesses.
Capital Stock
The Company's authorized capital stock consists of 100 million shares of
common stock, par value $.10 per share, of which 20,885,718 shares and
21,813,674 shares were outstanding at December 31, 1999 and 1998,
respectively, and 1,000,000 shares of preferred stock, none of which were
issued and outstanding.
Cash Dividends
Cash dividends of $2.1 million or $.10 per common share were paid during
1999. In January 2000, a cash dividend of approximately $522,000 or $.025
per share, was declared, payable in the first quarter of 2000.
Preferred Stock Purchase Rights
On August 27, 1999, the Company's Board of Directors redeemed the
Company's current rights plan effective September 13, 1999 and simultaneously
replaced it with a new rights plan. The redemption price
for the old rights of $0.01 per right was paid to the stockholders of record
as of September 13, 1999.
Under the Company's new Preferred Stock Purchase Rights Plan, each share
of the Company's common stock carries with it one preferred stock purchase
right. Subject to the terms and conditions set forth in the plan, the rights
will become exercisable if a person or group acquires beneficial ownership of
15% or more of the Company's common stock or announces a tender or exchange
offer that would result in the acquisition of 30% or more thereof. If the
rights become exercisable, separate certificates evidencing the rights will
be distributed, and each right will entitle the holder to purchase from the
Company a new series of preferred stock, designated as Series A Junior
Preferred Stock, at a predefined price. The rights also entitle the holder
to purchase shares in a change-of-control situation. The preferred stock, in
addition to a preferred dividend and liquidation right, will entitle the
holder to vote on a pro rata basis with the Company's common stock.
The rights are redeemable by the Company at a fixed price until 10 days
or longer as determined by the Board, after certain defined events or at any
time prior to the expiration of the rights on October 26, 2002 if such events
do not occur.
Stock and Incentive Plan
The Company has adopted a Stock and Incentive Plan (the "Plan"), which
provides for grants of incentive and non-qualified stock options, stock
appreciation rights, stock awards or performance unit awards. The Plan is
administered by the Compensation and Nominating 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.
<PAGE>F-14
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 1998, the Shareholders approved an amendment to the Plan to increase
the number of shares of common stock available under the Plan by an
additional 1.5 million.
The following table summarizes stock option activity for the Plan:
Under Option
-------------------------------
Weighted Average
Shares Available Exercise Price
For Grant Shares Per Share($)
--------- ------ ------------
Balance January 1,1997.... 1,101,891 1,747,780 26.36
Exercised................. -- (96,290) 24.38
Canceled ................. 23,473 (23,473) 30.35
--------- --------- -----
Balance December 31,1997.. 1,125,364 1,628,017 26.41
Authorized................ 1,500,000 -- --
Granted................... (22,500) 22,500 45.86
Exercised................. -- (162,835) 25.17
Canceled.................. 27,451 (27,451) 30.48
--------- --------- -----
Balance December 31,1998.. 2,630,315 1,460,231 26.77
Granted................... (1,322,151) 1,322,151 39.57
Exercised................. -- (170,195) 25.72
Canceled.................. 31,388 (31,388) 38.90
--------- --------- -----
Balance December 31,1999.. 1,339,552 2,580,799 33.25
========= ========= =====
In 1996, the Company adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." There were 1,322,151 stock
options granted in 1999 and 22,500 stock options granted in 1998. The
weighted-average fair value per option at the date of grant for options
granted during 1999 was $17.69, and 1998 was $15.47. The fair value was
estimated using the Black-Scholes option pricing model, modified for
dividends, and the following weighted-average assumptions:
1999 1998
---- ----
Expected life (years)......... 7 5
Interest rate................. 6.65% 5.03%
Volatility.................... 28.20% 28.10%
Expected dividend yield....... 0.25% 0.22%
Pro forma net income and earnings per share reflecting compensation
cost for the fair value of stock options awarded in 1999, 1998 and 1997
were as follows:
(Millions of Dollars,
Except Per Share Amounts) 1999 1998 1997
------------------------- ---- ---- ----
Net income As reported $ 62.1 $57.2 $50.3
Pro forma $ 57.6 $55. $48.8
Basic earnings per share As reported $ 2.90 $2.57 $2.23
Pro forma $ 2.69 $2.49 $2.16
Diluted earnings per share As reported $ 2.80 $2.50 $2.18
Pro forma $ 2.60 $2.42 $2.11
The amounts disclosed may not be representative of the effects on
reported net income for future years.
<PAGE>F-15
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information concerning Plan options
outstanding at December 31, 1999:
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------- ----------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Excercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/31/99 Term (Years) Price at 12/31/99 Price
------ ----------- ------------ ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$22.625-
29.75 659,732 3.2 $22.85 659,732 $22.85
$30.625-
52.375 1,921,067 8.1 $36.82 619,835 $30.94
Earnings Per Share (EPS)
Basic EPS 1999 1998 1997
---- ---- ----
Net income $62,116 $57,224 $50,312
------ ------ ------
Weighted average shares outstanding 21,394 22,281 22,558
------ ------ ------
Basic earnings per share $ 2.90 $ 2.57 $ 2.23
====== ====== ======
Diluted EPS 1999 1998 1997
---- ---- ----
Net income $62,116 $57,224 $50,312
------ ------ ------
Weighted average shares outstanding 21,394 22,281 22,558
Dilutive effect of stock options 756 645 555
------ ------ ------
Weighted average shares
outstanding,adjusted 22,150 22,926 23,113
------ ------ ------
Diluted earnings per share $ 2.80 $ 2.50 $ 2.18
====== ====== ======
</TABLE>
Comprehensive Income
The following table reflects the accumulated balances of other
comprehensive income (loss) (in millions):
<TABLE>
<CAPTION>
Accumulated
Currency Minimum Unrealized Other
Translation Pension Holding Comprehensive
Adjustment Liability Gains Income (Loss)
---------- --------- ----- -------------
<S> <C> <C> <C> <C>
Balance at
January 1,1997 $ 11.5 $ -- $ 0.2 $ 11.7
Current year change (25.0) (1.0) (0.1) (26.1)
----- ---- ---- -----
Balance at
December 31,1997 (13.5) (1.0) 0.1 (14.4)
Current year change 4.8 -- -- 4.8
---- ---- ---- -----
Balance at
December 31,1998 (8.7) (1.0) 0.1 (9.6)
Current year change (19.2) -- (0.1) (19.3)
----- ---- ---- -----
Balance at
December 31,1999 $ (27.9) $(1.0) $ -- $(28.9)
===== ==== ==== =====
</TABLE>
The tax benefit associated with items included in other comprehensive
income (loss) was $0.5 million, $0.5 million and $1.0 million for 1999, 1998
and 1997, respectively.
<PAGE>F-16
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment and Related Information
Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. The Company's operating segments
are strategic business units that offer different products and serve
different markets. They are managed separately and require different
technology and marketing strategies.
The Company has two operating segments: Specialty Minerals and
Refractories. The Specialty Minerals segment produces and sells precipitated
calcium carbonate and lime, and mines, processes and sells the natural
mineral products limestone and talc. This segment's products are used
principally in the paper, building materials, paints and coatings, glass,
ceramic, polymers, food, and pharmaceutical industries. The Refractories
segment produces and markets monolithic and shaped refractory materials and
services used primarily by the steel, cement and glass industries.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based on the operating income of the respective business units.
Depreciation expense related to corporate assets is allocated to the business
segments and is included in their income from operations. However, such
corporate depreciable assets are not included in the segment assets.
Specialty Minerals' segment sales to International Paper Company and
affiliates represented approximately 10% of consolidated net sales in 1999,
and less than 10% of consolidated net sales in 1998 and 1997. Intersegment
sales and transfers are not significant.
Segment information for the years ended December 31, 1999, 1998 and
1997 was as follows (in millions):
1999
Specialty Minerals Refractories Total
Net sales $461.7 $175.8 $637.5
Income from operations 70.9 26.6 97.5
Depreciation, depletion and amortization 49.1 9.6 58.7
Segment assets 563.8 169.7 733.5
Capital expenditures 61.6 7.7 69.3
1998
Specialty Minerals Refractories Total
Net sales $429.0 $180.2 $609.2
Income from operations 66.2 26.9 93.1
Depreciation, depletion and amortization 45.3 7.8 53.1
Segment assets 562.7 167.5 730.2
Capital expenditures 63.1 9.4 72.5
1997
Specialty Minerals Refractories Total
Net sales $403.1 $199.2 $602.3
Income from operations 54.7 25.5 80.2
Depreciation, depletion and amortization 44.3 8.6 52.9
Segment assets 537.3 170.1 707.4
Capital expenditures 66.6 8.2 74.8
<PAGE>F-17
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 (in millions):
1999 1998 1997
---- ---- ----
Income before provision for taxes on
income and minority interests
Income from operations for
reportable segments $ 97.5 $ 93.1 $ 80.2
Unallocated corporate expenses -- (0.7) --
----- ----- -----
Consolidated income from operations 97.5 92.4 80.2
Interest income 1.2 2.1 1.8
Interest expense (5.1) (5.9) (7.2)
Other deductions (1.1) (2.3) (2.6)
----- ----- -----
Income before provision
for taxes on income
and minority interests $ 92.5 $ 86.3 $ 72.2
----- ----- -----
1999 1998 1997
---- ---- ----
Total assets
Total segment assets $733.5 $730.2 $707.4
Corporate assets 35.6 30.7 34.0
----- ----- -----
Consolidated total assets $769.1 $760.9 $741.4
===== ===== =====
1999 1998 1997
---- ---- ----
Capital expenditures
Total segment capital expenditures $ 69.3 $ 72.5 $ 74.8
Corporate capital expenditures 4.5 10.0 2.5
---- ---- ----
Consolidated total
capital expenditures $ 73.8 $ 82.5 $ 77.3
---- ---- ----
Financial information relating to the Company's operations
by geographic area was as follows (in millions):
Net sales 1999 1998 1997
---- ---- ----
United States $425.9 $411.7 $414.4
----- ----- -----
Canada/Latin America 56.8 59.4 59.9
Europe/Africa 113.6 103.7 83.4
Asia 41.2 34.4 44.6
----- ----- -----
Total International 211.6 197.5 187.9
----- ----- -----
Consolidated total net sales $637.5 $609.2 $602.3
===== ===== =====
Net sales are attributed to countries and geographic areas
based on the location of the legal entity. No individual foreign
country represents more than 10% of consolidated net sales or
consolidated long-lived assets.
Long-lived assets 1999 1998 1997
---- ---- ----
United States $364.0 $349.9 $367.6
----- ----- -----
Canada/Latin America 27.7 34.7 37.9
Europe/Africa 106.7 116.5 72.1
Asia 31.9 31.6 23.1
----- ----- -----
Total International 166.3 182.8 133.1
----- ----- -----
Consolidated total long-lived assets $530.3 $532.7 $500.7
===== ===== =====
<PAGE>F-18
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Quarterly Financial Data (unaudited)
Thousands of Dollars,
Except Per Share Amounts
1999 Quarters First Second Third Fourth
----- ------ ----- ------
<S> <C> <C> <C> <C>
Net sales............... $148,576 $158,837 $159,807 $170,299
Gross profit............ 45,349 49,731 49,559 54,240
Net income.............. 13,731 15,722 15,908 16,755
Earnings per share:
Basic.............. 0.63 0.73 0.75 0.80
Diluted............ 0.62 0.70 0.71 0.78
Market Price Range Per
Share of Common Stock
High.................... 49 1/16 56 1/2 56 13/16 50 9/16
Low..................... 38 1/2 46 43 13/16 37
Close................... 47 3/8 56 1/16 43 13/16 40 1/16
Dividends paid per
common share $ .025 $ .025 $ .025 $ .025
Thousands of Dollars,
Except Per Share Amounts
1998 Quarters First Second Third Fourth
----- ------ ----- ------
Net sales............... $144,102 $155,752 $154,119 $155,220
Gross profit............ 44,829 48,496 49,449 49,861
Net income.............. 12,801 14,657 15,451 14,315
Earnings per share:
Basic.............. 0.57 0.65 0.70 0.65
Diluted............ 0.55 0.63 0.68 0.64
Market Price Range Per
Share of Common Stock
High.................... 52 5/16 55 9/16 54 51 1/4
Low..................... 40 15/16 48 3/8 35 7/8 36
Close 49 15/16 51 3/4 39 1/4 40 15/16
Dividends paid per
common share............ $ .025 $ 0.25 $ .025 $ .025
</TABLE>
<PAGE>F-19
Independent Auditors' Report
- ---------------------------------------------------------------------------
The Board of Directors and Shareholders
Minerals Technologies Inc.:
We have audited the accompanying consolidated balance sheet of Minerals
Technologies Inc. and subsidiary companies as of December 31, 1999 and 1998
and the related consolidated statements of income, shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1999. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Minerals
Technologies Inc. and subsidiary companies as of December 31, 1999 and 1998
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1999 in conformity with
generally accepted accounting principles.
KPMG LLP
New York, New York
January 19, 2000
<PAGE>F-20
Management's Responsibility for Financial Statements and System of
Internal Control
- ---------------------------------------------------------------------------
The consolidated financial statements and all related financial
information herein are the responsibility of the Company's management. The
financial statements, which include amounts based on judgments, have been
prepared in accordance with generally accepted accounting principles.
Other financial information in the annual report is consistent with that in
the financial statements.
The Company maintains a system of internal control over financial
reporting, which it believes provides reasonable assurance that transactions
are executed in accordance with management's authorization and are properly
recorded, that assets are safeguarded, and that accountability for assets is
maintained. Even an effective internal control system, no matter how well
designed, has inherent limitations and, therefore, can provide only
reasonable assurance with respect to financial statement preparation. The
system of internal control is characterized by a controloriented environment
within the Company, which includes written policies and procedures, careful
selection and training of personnel, and audits by a professional staff of
internal auditors.
The Company's independent accountants have audited and reported on the
Company's consolidated financial statements. Their audits were performed in
accordance with generally accepted auditing standards.
The Audit Committee of the Board of Directors is composed solely of
outside directors. The Audit Committee meets periodically with our
independent auditors, internal auditors and management to review accounting,
auditing, internal control and financial reporting matters. Recommendations
made by the independent auditors and the Company's internal auditors are
considered and appropriate action is taken with respect to these
recommendations. Both our independent auditors and internal auditors have
free access to the Audit Committee.
Jean-Paul Valles
Chairman of the Board and Chief Executive Officer
Neil M. Bardach
Vice President, Finance and Chief Financial Officer
Michael A. Cipolla
Controller and Chief Accounting Officer
January 19, 2000
<PAGE>F-21
<TABLE>
<CAPTION>
MINERALS TECHNOLOGIES INC. & SUBSIDIARY COMPANIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(thousands of dollars)
Additions
Balance Charged to
at Costs, Balance
Beginning Provisions Deductions at End
Description of Period and Expenses (a)(b) of Period
- ----------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31,1999
Valuation and qualifying
accounts deducted from
assets to which they
apply:
Allowance for doubtful
accounts.................... $3,720 $1,234 $1,854 $3,100
===== ===== ===== =====
Year ended December 31,1998
Valuation and qualifying
accounts deducted from
assets to which they
apply:
Allowance for doubtful
accounts.................... $3,266 $507 $ 53 $3,720
===== === === =====
Year ended December 31,1997
Valuation and qualifying
accounts deducted from
assets to which they
apply:
Allowance for doubtful
accounts.................... $2,497 $1,554 $785 $3,266
===== ===== === =====
(a) Includes impact of translation of foreign currencies.
(b) Uncollectible accounts charged against allowance for doubtful
accounts,net of recoveries.
</TABLE>
<PAGE>S-1
Exhibit 10.1
Employment Agreements have been executed by the Company and
the indicated employees, each substantially identical in all
material respects to the form of agreement filed as Exhibit 10.5
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, except as noted below. Each Employment
Agreement was executed for the Company by Dr. Valles, except the
agreement with Dr. Valles, which was executed for the Company by
Mr. Gray.
TERMINATION
EMPLOYEE AND BASE DATE OF DATE OF
POSITION SALARY AGREEMENT AGREEMENT
Neil M. Bardach $247,500 October 22, 1999 October 22, 2001
Vice President -
Finance and Chief
Financial Officer
Howard R. Crabtree $204,347 October 22, 1998 October 21, 2001
Vice President,
Organization and
Human Resources
Anton Dulski $233,352 October 22, 1998 October 21, 2001
Senior Vice
President;
President and Chief
Executive Officer
of Minteq
International Inc.
S. Garrett Gray $209,576 October 22, 1998 October 21, 2001
Vice President,
General Counsel and
Secretary
Paul R. Saueracker $241,146 October 22, 1998 October 21, 2001
Senior Vice
President;
President and Chief
Executive Officer
of Specialty
Minerals Inc.
Jean-Paul Valles $738,972 October 22, 1997 October 17, 2001
Chairman and Chief
Executive Officer
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
Name of the Company Place of Incorporation
APP China Specialty Minerals Pte Ltd. Singapore
Barretts Minerals Inc. Delaware
ComSource Trading Ltd. Delaware
Gold Sheng Chemicals (Zhenjiang) Co., Ltd. China
Gulf State Carbonates Inc. Delaware
Hi-Tech Specialty Minerals Company, Limited Thailand
Huzhou Minteq Refractory Co. Ltd. China
Minerals Technologies Europe N.V. Belgium
Minerals Technologies Holdings Ltd. United Kingdom
Minerals Technologies South Africa (Pty) Ltd. South Africa
Mintech Canada Inc. Canada
Mintech do Brasil Comercio Ltda. Brazil
Mintech Japan K.K. Japan
Minteq Australia Pty Ltd. Australia
Minteq Europe Limited. Ireland
Minteq International GmbH Germany
Minteq International Inc. Delaware
Minteq Italiana S.p.A. Italy
Minteq Korea Inc. Korea
Minteq Magnesite Limited Ireland
Minteq UK Limited. United Kingdom
MTX Finance Inc. Delaware
MTX Finance Ireland Ireland
PT Sinar Mas Specialty Minerals Indonesia
Specialty Minerals do Brasil - Comercio e
Industria Ltda. Brazil
Specialty Minerals FMT K.K. Japan
Specialty Minerals France S.A.R.L. France
Specialty Minerals Inc. Delaware
Specialty Minerals Inc. Poland Sp. z o.o. Poland
Specialty Minerals International Inc. Delaware
Specialty Minerals Israel Limited Israel
Specialty Minerals (Mauritius) Private Limited Mauritius
Specialty Minerals (Michigan) Inc. Michigan
Specialty Minerals Nordic Oy Ab Finland
Specialty Minerals Philippines, Inc. Philippines
Specialty Minerals (Portugal) Especialidades
Minerais, S.A. Portugal
Specialty Minerals, S.A. de C.V. Mexico
Specialty Minerals Slovakia, spol. sr.o. Slovakia
Specialty Minerals South Africa (Pty.) Limited South Africa
Specialty Minerals (Thailand) Limited Thailand
Specialty Minerals UK Limited United Kingdom
Specialty Pigments (India) Private Limited India
Synsil Products Inc. Delaware
Tecnologias Minerales de Mexico, S.A. de C.V. Mexico
EXHIBIT 23.1
REPORT AND CONSENT OF INDEPENDENT AUDITORS
------------------------------------------
The Board of Directors and Shareholders
Minerals Technologies Inc.:
The audits referred to in our report dated January 19, 2000, included
the related financial statement schedule for each of the years in the three
year period ended December 31, 1999, as listed in Item 14 of this Annual
Report on Form 10-K. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our
audits. In our opinion, such financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
We consent to the use of our reports included herein and incorporated
by reference in the Registration Statements on
Form S-8 (Nos. 33-59080, 33-65268, 33-96558 and 333-62739).
KPMG LLP
New York, New York
March 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Minerals Technologies Inc., and
is qualified in its entirety by reference to such consolidated financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 20,378
<SECURITIES> 000
<RECEIVABLES> 121,427
<ALLOWANCES> 3,100
<INVENTORY> 67,427
<CURRENT-ASSETS> 219,947
<PP&E> 955,043
<DEPRECIATION> 433,047
<TOTAL-ASSETS> 769,131
<CURRENT-LIABILITIES> 117,542
<BONDS> 75,238
0
0
<COMMON> 2,571
<OTHER-SE> 677,337
<TOTAL-LIABILITY-AND-EQUITY> 769,131
<SALES> 637,519
<TOTAL-REVENUES> 637,519
<CGS> 438,640
<TOTAL-COSTS> 438,640
<OTHER-EXPENSES> 24,788
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 5,141
<INCOME-PRETAX> 92,535
<INCOME-TAX> 28,920
<INCOME-CONTINUING> 62,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,116
<EPS-BASIC> 2.90
<EPS-DILUTED> 2.80
</TABLE>
