SECURITIES AND EXCHANGE COMMISSION WASHINGTON

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 25, 2000

OR

 

[   ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

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
incorporation or organization)

(I.R.S. Employer
Identification No.)

 

405 Lexington Avenue, New York, New York 10174-1901
(Address of principal executive offices, including zip code)

(212) 878-1800
(Registrant's telephone number, including area code)

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 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

                      CLASS

OUTSTANDING AT July 23, 2000

Common Stock, $ 0.10 par value

20,416,753

 


 

MINERALS TECHNOLOGIES INC.

INDEX TO FORM 10-Q

     

Page No.

PART I.

FINANCIAL INFORMATION

 
       

Item 1.

     
 

Financial Statements:

 
       
   

Condensed Consolidated Statement of Income for the three-month and six-month periods ended June 25, 2000 and June 27, 1999

3

     
   

Condensed Consolidated Balance Sheet as of June 25, 2000
and December 31, 1999

4

       
   

Condensed Consolidated Statement of Cash Flows for the six-month
periods ended June 25, 2000 and June 27, 1999

5

       
   

Notes to Condensed Consolidated Financial Statements

6

       
 

Independent Auditors' Report

9

       

Item 2.

     
 

Management's Discussion and Analysis of Financial Condition and
Results of Operations

10

       

Item 3.

     
 

Quantitative and Qualitative Disclosures about Market Risk

13

       

PART II.

OTHER INFORMATION

 
       

Item 1.

     
 

Legal Proceedings

14

       

Item 4.

     
 

Submission of Matters to a Vote of Security Holders

14

       

Item 6.

     
 

Exhibits and Reports on Form 8-K

14

       

Signature

   

15

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

  Three Months Ended

    Six Months Ended

(thousands of dollars, except per share data)

June 25, 2000   

June 27, 1999   

June 25, 2000   

June 27, 1999   

Net sales

$165,231

$158,837

$319,886

$307,413

Operating costs and expenses:

       Cost of goods sold

111,857

109,106

218,731

212,333

       Marketing, distribution and administrative expenses

20,340

19,255

38,696

37,614

       Research and development expenses

 6,574

 6,223

12,464

12,175

Income from operations

  26,460

  24,253

   49,995

   45,291

Non-operating deductions, net

 819

510

1,772

1,787

Income before provision for taxes
    on income and minority interests

25,641

23,743

48,223

43,504

Provision for taxes on income

8,036

7,417

15,117

13,645

Minority interests

 452

 604

 928

 406

Net income

$   17,153
=====

$  15,722
=====

$   32,178
=====

$   29,453
=====

Earnings per share:

       Basic

$       0.83

$      0.73

$       1.56

$       1.36

       Diluted

$       0.81

$      0.70

$       1.51

$       1.32

Cash dividends declared per common share

$     0.025

$    0.025

$     0.050

$     0.050

Shares used in the computation of earnings per share:

       Basic

20,582

21,518

20,684

21,605

       Diluted

21,227

22,477

21,251

22,388

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

 

 

 

3


 

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET

 

ASSETS

(thousands of dollars)

June 25,
2000*  

 

December 31,
 1999**   

Current assets:

     

       Cash and cash equivalents

$  18,751 

 

$  20,378 

       Accounts receivable, net

123,566 

 

118,327 

       Inventories

65,187 

 

67,427 

       Other current assets

 17,964 

 

 13,815 

            Total current assets

225,468 

219,947 

       

Property, plant and equipment, less accumulated depreciation and    depletion - June 25, 2000 - $457,111;
   December 31, 1999 - $433,047

535,848 

 

521,996 

Other assets and deferred charges

 37,623 

 

27,188 

            Total assets

$798,939 
====== 

$769,131 
====== 

       

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

     

       Short-term borrowings

$  27,393 

 

$           -- 

       Current maturities of long-term debt

 409 

 

13,439 

       Accounts payable

42,808 

 

46,703 

       Other current liabilities

52,564 

 

 57,400 

            Total current liabilities

123,174 

117,542 

       

Long-term debt

91,436 

 

75,238 

Other non-current liabilities

 94,318 

 

 91,315 

            Total liabilities

308,928 

284,095 

       

Shareholders' equity

     

       Common stock

2,577 

 

2,571 

       Additional paid-in capital

152,332 

 

150,315 

       Retained earnings

558,166 

 

527,022 

       Accumulated other comprehensive loss

(37,071)

 

(28,865)

676,004 

651,043 

Less treasury stock

185,993 

166,007 

            Total shareholders' equity

490,011 
====== 

485,036 
====== 

       

            Total liabilities and shareholders' equity

$798,939 
====== 

 

$769,131 
====== 

* Unaudited
** Condensed from audited financial statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

4

 


 

 

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

    Six Months Ended

(thousands of dollars)

June 25, 2000   

June 27, 1999   

Operating Activities

Net income

$  32,178 

$  29,453 

Adjustments to reconcile net income to net cash
   provided by operating activities:

       Depreciation, depletion and amortization

29,724 

28,759 

       Other non-cash items

2,844 

2,634 

       Net changes in operating assets and liabilities

(13,180)

 3,971 

Net cash provided by operating activities

51,566 

 64,817 

Investing Activities

Purchases of property, plant and equipment

(52,297)

(37,406)

Other investing activities, net

(12,255)

     (435)

Net cash used in investing activities

(64,552)

(37,841)

Financing Activities

Proceeds from issuance of short-term and long-term debt

46,428 

21,898 

Repayment of debt

(16,104)

(35,014)

Purchase of common shares for treasury

(19,986)

(24,864)

Other financing activities, net

 2,872 

 5,388 

Net cash used in financing activities

13,210 

(32,592)

Effect of exchange rate changes on cash and cash equivalents

 (1,851)

 (75)

Net decrease in cash and cash equivalents

(1,627)

(5,691)

Cash and cash equivalents at beginning of period

 20,378 

 20,697 

Cash and cash equivalents at end of period

$  18,751 
===== 

$  15,006 
===== 

Interest paid

$    3,026 
==== 

$    3,128 
==== 

Income taxes paid

$  10,282 
===== 

$    6,438 
==== 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

5


MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1 -- Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for a fair presentation of the financial information for the periods indicated, have been included. The results for the three-month and six-month periods ended June 25, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000.

Note 2 -- Inventories

     The following is a summary of inventories by major category:

(thousands of dollars)

June 25,
2000
   

 

December 31,
1999   

       

Raw materials

$ 22,823

 

$ 25,049

Work-in-process

6,661

 

5,171

Finished goods

18,035

 

19,913

Packaging and supplies

17,668

 

17,294

Total inventories

$ 65,187
=====

 

$ 67,427
=====

 

Note 3 -- Debt and Commitments

       The following is a summary of long-term debt:

(thousands of dollars)

June 25,
2000   

 

December 31,
  1999    

6.04% Guarantied Senior Notes Due June 11, 2000

$           --

 

$  13,000

7.49% Guaranteed Senior Notes Due July 24, 2006

50,000

 

50,000

Yen denominated Guaranteed Credit Agreement
   Due March 31, 2007

11,024

 

--

Variable/Fixed Rate Industrial
   Development Revenue Bonds Due 2009

 4,000

 

  4,000

Economic Development Authority Refunding
   Revenue Bonds Series 1999 Due 2010

4,600

 

4,600

Variable/Fixed Rate Industrial
   Development Revenue Bonds Due August 1, 2012

8,000

 

8,000

Variable/Fixed Rate Industrial
   Development Revenue Bonds Series 1999
   Due November 1, 2014

8,200

 

8,200

Variable/Fixed Rate Industrial
   Development Revenue Bonds Due March 31, 2020

5,000

 

--

Other borrowings

 1,021

 

 877

 

91,845

 

88,677

Less: Current maturities

 409

 

13,439

Long-term debt

$  91,436
=====

 

$  75,238
=====

     On May 17, 2000, the Company's majority owned subsidiary, Specialty Minerals FMT K.K., entered into a Yen denominated Guaranteed Credit Agreement with the Bank of New York due March 31, 2007 for $11.0 million. The proceeds were used to finance the construction of a PCC satellite facility in Japan. Principal payments begin on June 30, 2002. Interest is payable quarterly at a rate of 2.05% per annum.

6


 

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     On June 9, 2000, the Company entered into a twenty-year, taxable, Variable/Fixed Rate Industrial Development Revenue Bond agreement to finance a portion of the construction of a merchant manufacturing facility for the production of specialty PCC in Mississippi. The Company has selected the variable rate option in this borrowing and the average interest rate was approximately 7% for the period ended June 25, 2000.

     On June 11, 2000, the Company remitted its final principal payment under the 6.04% Guarantied Senior Notes.

     The Company had available approximately $85 million in uncommitted, short-term bank credit lines, of which $27.4 million were in use at June 25, 2000. The interest rate on these borrowings was approximately 6.9% for the period ended June 25, 2000.

Note 4 -- Earnings Per Share (EPS)

     Basic earnings per share are based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share are 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. The following table sets forth the computation of basic and diluted earnings per share:

 

Three Months Ended

   Six Months Ended

Basic EPS
(in thousands, except per share data)

June 25,
2000  

 

June 27,
1999  

 

June 25,
2000  

 

June 27,
1999  

               

Net income

$ 17,153

 

$ 15,722 

 

$ 32,178

 

$ 29,453 

               

Weighted average shares outstanding

20,582

 

21,518 

 

20,684

 

21,605 

               

Basic earnings per share

$    0.83
===

 

$     0.73 
 === 

 

$    1.56
===

 

$    1.36 
=== 

Diluted EPS

             
               

Net income

17,153

 

15,722 

 

32,178

 

29,453 

               

Weighted average shares outstanding

20,582

 

21,518 

 

20,684

 

21,605 

Dilutive effect of stock options

 645

 

 959 

 

 567

 

 783 

               

Weighted average shares outstanding, adjusted

21,227

 

22,477 

 

21,251

 

22,388 

               

Diluted earnings per share

$    0.81
===

 

$     0.70 
=== 

 

$    1.51
===

 

$    1.32 
=== 

Note 5 -- Comprehensive Income (Loss)

     The following are the components of comprehensive income (loss):

 

  Three Months Ended

    Six Months Ended

(in thousands of dollars)

June 25,
2000  

 

June 27,
1999  

 

June 25,
2000  

 

June 27,
1999  

               

Net income

$ 17,153 

 

$ 15,722 

 

$ 32,178 

 

$ 29,453 

Other comprehensive income, net of tax:

             

Foreign currency translation adjustments

(4,262)

 

(564)

 

(8,206)

 

(22,333)

Unrealized holding gains (losses),
   net of reclassification adjustments

     -- 

 

     -- 

 

     -- 

 

    (86)

Comprehensive income

$ 12,891 
===== 

 

$ 15,158 
===== 

 

$ 23,972 
===== 

 

$  7,034 
==== 

7


 

MINERALS TECHNOLOGIES AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    The components of accumulated other comprehensive loss, net of related tax, are as follows:

June 25,
2000   

December 31,
1999    

Foreign currency translation adjustments

$ (36,070)

$ (27,864)

Minimum pension liability adjustments

 (1,001)

 (1,001)

Accumulated other comprehensive loss

$ (37,071)
=====  

$ (28,865)
=====  

Note 6 -- Segment and Related Information

     Segment information for the three-month and six-month periods ended June 25, 2000 and June 27, 1999 was as follows:

(thousands of dollars)

                                                                Net Sales                                                   

          Three Months Ended

         Six Months Ended

June 25,
2000
  

June 27,
1999
  

June 25,
2000
  

June 27,
1999
  

Specialty Minerals Segment

$ 118,311

$ 116,297

$ 229,332

$ 224,086

Refractories Segment

46,920

 42,540

90,554

 83,327

        Total

$ 165,231
======

$ 158,837
======

$ 319,886
======

$ 307,413
======

     The Company's largest customer, International Paper Company, acquired Union Camp Corporation in 1999 and Champion International Corporation in 2000, increasing the number of the Company's PCC satellite plants located at International Paper mills from nine to fourteen. Sales to International Paper, including these acquisitions, represented approximately 14% of consolidated net sales for the first six months of 2000 and for the full year of 1999.

(thousands of dollars)

                                                   Income from Operations                                       

          Three Months Ended

            Six Months Ended

June 25,
2000
  

June 27,
1999  

June 25,
2000  

June 27,
1999  

Specialty Minerals Segment

$ 18,591

$ 17,423

$ 35,375

$ 32,984

Refractories Segment

 7,869

 6,830

14,620

12,307

        Total

$ 26,460
=====

$ 24,253
=====

$ 49,995
=====

$ 45,291
=====

 

     A reconciliation of the totals reported for the operating segments to the applicable line items in the consolidated financial statements is as follows:

(thousands of dollars)

  Three Months Ended

   Six Months Ended

June 25,
2000  

June 27,
1999  

June 25,
2000  

June 27,
1999  

Income before provision for taxes on
   income and minority interests

             

Income from operations for reportable segments

$ 26,460

 

$ 24,253

 

$ 49,995

 

$ 45,291

Non-operating deductions, net

 819

 

 510

 

 1,772

 

 1,787

Income before provision for taxes on income
   and minority interests

$ 25,641
=====

 

$ 23,743
=====

 

$ 48,223
=====

 

$ 43,504
=====

 

                 8


 

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Minerals Technologies Inc.:

          We have reviewed the condensed consolidated balance sheet of Minerals Technologies Inc. and subsidiary companies as of June 25, 2000 and the related condensed consolidated statements of income for each of the three-month and six-month periods ended June 25, 2000 and June 27, 1999, and cash flows for the six-month periods then ended. These financial statements are the responsibility of the company's management.

          We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

          Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles.

          We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Minerals Technologies Inc. and subsidiary companies as of December 31, 1999, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 19, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1999 is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

                                                                                        KPMG LLP

New York, New York
July 13, 2000

 

 

 

 

 

 

 

 

 

 

9


 

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Income and Expense Items
As a Percentage of Net Sales

      Three Months Ended

       Six Months Ended

 

June 25,
2000  

 

June 27,
1999   

June 25,
2000  

 

June 27,
1999   

             

Net sales

100.0%

 

100.0%

100.0%

 

100.0%

Cost of goods sold

67.7   

 

68.7   

68.4   

  

69.1   

Marketing, distribution and administrative expenses

12.3   

 

 12.1   

12.1   

 

12.2   

Research and development expenses

 4.0   

 

3.9   

 3.9   

 

4.0   

Income from operations

16.0   

 

15.3   

15.6   

 

14.7   

Net income

     10.4%
===   

 

  9.9%
===   

 10.1%
===   

 

  9.6%
===   

Results of Operations

Three Months Ended June 25, 2000 as Compared with Three Months Ended June 27, 1999

     Net sales in the second quarter of 2000 increased 4.0% to $165.2 million from $158.8 million in the second quarter of 1999. Foreign exchange had a negative effect on sales of approximately $2.3 million, or 1.5 percentage points of sales growth.

     Net sales in the Specialty Minerals segment, which includes the Precipitated Calcium Carbonate ("PCC") and Processed Minerals product lines, grew 1.7% in the second quarter of 2000 to $118.3 million as compared with $116.3 million in the prior year.

     Worldwide net sales of PCC grew 1.7% to $97.5 million from $95.9 million in the second quarter of 1999. Foreign exchange had a negative effect of approximately $1.7 million. This was primarily due to the stronger U.S. dollar as compared to the European currencies. Growth in sales of PCC products was also adversely affected by a slight slowdown in the paper industry to adjust inventories and a continued decline in sales of specialty PCC. The Company believes that growth in sales of specialty PCC will improve through the remainder of the year as the Company begins operations at a large merchant manufacturing facility for specialty PCC in Mississippi. In addition, growth in sales of PCC for paper should improve during the third quarter as the Company will begin operations at two new satellite PCC plants at paper mills in Brazil and Japan, as well as at a major satellite expansion in Portugal. Combined, these new satellite PCC plants and expansion should be equivalent to approximately seven satellite units. A satellite unit produces between 25,000 and 35,000 tons of PCC per year.

     Net sales of Processed Minerals products increased 2.0% in the second quarter to $20.8 million from $20.4 million in 1999. A slight softening in demand for the Company's ground calcium carbonate products in the construction-related industries affected the sales growth.

     Net sales in the Refractories segment were $46.9 million for the second quarter of 2000, a 10.3% increase compared with the same period last year. Approximately four percentage points of the sales growth was attributable to the recent acquisition of Ferrotron Elektronik GmbH.

     Net sales in the United States in the second quarter of 2000 increased approximately 3% from the comparable period in 1999. Foreign sales increased approximately 7% in the second quarter of 2000.

     Income from operations was $26.5 million, an increase of 9.1% from $24.3 million in the second quarter of 1999. Operating income in the Specialty Minerals segment increased 6.7% in the second quarter to $18.6 million, which represented 15.7% of net sales. This increase was due to the growth in the PCC product line. Income from operations in the Refractories segment increased 15.2% in the second quarter to $7.9 million and was 16.8% of net sales.

     Non-operating deductions increased primarily as a result of foreign exchange losses in 2000 as compared to foreign exchange gains in the same period of 1999.

10

 


     Net income increased 9.1% to $17.2 million from $15.7 million in the prior year. Diluted earnings per share were $0.81 in the second quarter of 2000 as compared with $0.70 in the prior year.

Six Months Ended June 25, 2000 as Compared with Six Months Ended June 27, 1999

     Net sales in the first half of 2000 increased 4.1% to $319.9 million from $307.4 million in 1999. Foreign exchange had an unfavorable impact on sales of approximately $4 million.

     Net sales in the Specialty Minerals segment increased 2.3% in the first half of 2000 to $229.3 million. Worldwide net sales in the PCC product line grew 2.6% to $190.4 million for the first six months of 2000. Sales growth was adversely affected by foreign exchange and a decline in sales of specialty PCC. Net sales in the Processed Minerals product line increased 1.0% in the first half of 2000.

     Net sales in the Refractories segment increased 8.7% to $90.6 million as compared with $83.3 million in the prior year.

     Income from operations rose 10.4% to $50.0 million in the first half of 2000 from $45.3 million in the previous year. Income from operations in the Specialty Minerals segment increased 7.2% in the first half of 2000 and represented 15.4% of net sales. Income from operations in the Refractories segment increased 18.8% for the first six months of 2000 to $14.6 million and was 16.1% of net sales.

     The provision for minority interests increased as a result of higher profits from the consolidated joint ventures in the first six months of 2000 as compared with the prior year.

     Net income increased 9.3% to $32.2 million from $29.5 million in 1999. Diluted earnings per common share were $1.51 as compared with $1.32 for the first six months of 1999.

Liquidity and Capital Resources

     The Company's financial position remained strong in the second quarter of 2000. Cash flows in the second quarter of 2000 were provided from operations and from short-term and long-term financing and were applied principally to fund capital expenditures, to repurchase common shares for treasury, and to remit the required principal payment of $13 million under the Company's Guarantied Senior Notes due June 11, 2000. Cash provided from operating activities amounted to $51.6 million in the second quarter of 2000 as compared with $64.8 million in the prior year.

     On February 26, 1998, the Company's Board of Directors authorized a $150 million program to repurchase Company stock on the open market from time to time. The Company has repurchased approximately 2.4 million shares under this program at an average price of approximately $46 per share.

     On May 17, 2000, the Company's majority owned subsidiary, Specialty Minerals FMT K.K., entered into a
Yen denominated Guaranteed Credit Agreement with the Bank of New York due March 31, 2007 for $11.0 million. The proceeds were used to finance the construction of a PCC satellite facility in Japan. Principal payments begin on June 30, 2002. Interest is payable quarterly at a rate of 2.05% per annum.

     On June 9, 2000, the Company entered into a twenty-year, taxable, Variable/Fixed Rate Industrial Development Revenue Bond agreement to finance a portion of the construction of a merchant manufacturing facility for the production of specialty PCC in Mississippi. The Company has selected the variable rate option in this borrowing and the average interest rate was approximately 7% for the period ended June 25, 2000.

     The Company had available approximately $85 million in uncommitted, short-term bank credit lines, of which $27.4 million were in use at June 25, 2000. The interest rate on these borrowings was approximately 6.9% for the period ended June 25, 2000. The Company anticipates that capital expenditures for all of 2000 will be between $80-$100 million, principally related to 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 such requirements from internally generated funds, the aforementioned uncommitted bank credit lines and, where appropriate, project financing of certain satellite plants.

 

11

 


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 companies' future prospects and make informed investment decisions. This report may contain forward-looking statements that set out anticipated results based on management's plans and assumptions. Words such as "expects," "plans," "anticipate," "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 the outcomes suggested in 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 and should refer to the discussion of certain risks, uncertainties and assumptions under the heading "Cautionary Factors That May Affect Future Results" in Exhibit 99 to this Quarterly Report.

     Several acquisitions in the paper industry have taken place in recent months. Such acquisitions could result in partial or total closure of some paper mills at which Minerals Technologies Inc. ("MTI") operates PCC satellites. Such closures would reduce MTI's sales of PCC, except to the extent that they resulted in shifting paper production and associated purchases of PCC to another location served by MTI. There can be no assurance, however, that this will occur. In addition, such acquisitions concentrate purchasing power in the hands of a smaller number of papermakers, enabling them to increase competitive pressure on their suppliers, such as MTI. Such increased pressure could have an adverse effect on MTI's results of operations in the future.

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.

     In March 2000, the FASB issued Interpretation No. 44, which provides guidance for applying APB Opinion No. 25, "Accounting for Stock Issued to Employees." It applies prospectively to new awards, exchanges of awards in a business combination, modifications to outstanding awards, and changes in grantee status on or after July 1, 2000, except for provisions related to repricings and the definition of an employee, which apply to awards issued after December 15, 1998. Adoption of this Interpretation on July 1, 2000 will not have a material effect on the Company's financial position and results of operations.

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 former 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, as required. 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 impact 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

12


competitive and economic effects had no material effect on the Company's financial condition or results of operations during the second quarter of 2000, 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.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

     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 June 25, 2000 or June 27,1999.

 

 

 

 

 

 

 

 

 

 

 

 

13


 

PART II. OTHER INFORMATION

ITEM 1.  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. BMI has entered into prefiling negotiations with the Department of Justice, and as of August 2, 2000, no complaint had been filed. We anticipate that any settlement of this matter would include a monetary penalty as well as other relief, such as a supplemental environment project at the Barretts site. 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.

     On or about July 14, 2000, MTI, Specialty Minerals Inc. and Minteq International Inc. received from the Connecticut Department of Environmental Protection ("DEP") a proposed administrative consent order relating to the Canaan, Connecticut site at which both Minteq and Specialty Minerals have operations. The proposed order would settle claims relating to an accidental discharge of machine oil alleged to have contained polychlorinated biphenyls at or above regulated levels. The Company's employees immediately took steps to contain and clean up the discharge and notified the Connecticut DEP as required by law. The proposed order also alleges certain violations of other environmental requirements, including violations of the Canaan site's existing permit for discharge of stormwater, and of regulations governing the management of underground storage tanks. The proposed order would require payment of a civil penalty of $515,750, remediation of certain conditions at the site, and other injunctive relief. MTI and the other respondents dispute many of the factual allegations forming the basis of the proposed order, and plan to contest them vigorously. There can be no assurance, however, that the Company will be successful in doing so.

     The Company and its subsidiaries are not party to any other material pending legal proceedings, other than ordinary routine litigation incidental to their businesses.

 

ITEM 4.  Submission of Matters to a Vote of Security Holders

     The Company held its annual meeting on May 25, 2000. At the meeting, (1) Kristina M. Johnson was elected a director of the Company, by a plurality of 15,993,816 votes, with 2,297,022 votes being withheld; (2) Paul M. Meister was elected a director of the Company, by a plurality of 15,984,831 votes, with 2,306,007 votes being withheld; (3) Michael F. Pasquale was elected a director of the Company, by a plurality of 15,994,152 votes, with 2,296,686 votes being withheld; and (4) the appointment of KPMG LLP as independent auditors of the Company for the year 2000 was approved by a vote of 18,254,387 for and 23,847 against, with 12,604 abstentions.

 

ITEM 6.  Exhibits and Reports on Form 8-K

a)  Exhibits:

    15 - Accountants' Acknowledgment.
    27 - Financial Data Schedule for the six months ended June 25, 2000.
    99 - Statement of Cautionary Factors That May Affect Future Results.

b) No reports on Form 8-K were filed during the second quarter of 2000.

 

 

 

 

 

           14


 

                                                                                    SIGNATURE

 

       Pursuant to the requirements 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/Neil M. Bardach                     

 

Vice President-Finance and

 

Chief Financial Officer, Treasurer

 

(principal financial officer)

August 2, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

EXHIBIT 15

                                                                                                                                                                                                              EXHIBIT 15

 

ACCOUNTANTS' ACKNOWLEDGMENT



The Board of Directors
Minerals Technologies Inc.:

Re:  Registration Statement Nos. 33-59080, 33-65268, 33-96558 and 333-62739

     With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated July 13, 2000, related to our review of interim financial information.

     Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act.

                                                                                                                                                         Very truly yours,

                                                                                                                                                           KPMG LLP

New York, New York
August 2, 2000

EXHIBIT 99

 

                                                                                                                                                                                               EXHIBIT 99

 

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," "anticipate," "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.

.       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.

.      Consolidation in Paper Industry

Several acquisitions in the paper industry have taken place in recent months. Such acquisitions could result in partial or total closure of some paper mills at which MTI operates PCC satellites. Such closures would reduce MTI's sales of PCC, except to the extent that they resulted in shifting paper production and associated purchases of PCC to another location served by MTI. There can be no assurance, however, that this will occur. In addition, such acquisitions concentrate purchasing power in the hands of a smaller number of papermakers, enabling them to increase competitive pressure on their suppliers, such as MTI. Such increased pressure could have an adverse effect on MTI's results of operations in the future.

 

 


 

.      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.

.        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.

 

  

5 This schedule contains summary financial information extracted from the condensed consolidated financial statements of Minerals Technologies Inc., and is qualified in its entirety by reference to such condensed consolidated financial statements. 1,000 6-MOS DEC-31-2000 JUN-25-2000 18,751 0 123,566 0 65,187 225,468 992,959 457,111 798,939 123,174 91,436 0 0 2,577 710,498 798,939 319,886 319,886 218,731 218,731 12,464 0 0 48,233 15,117 32,178 0 0 0 32,178 1.56 1.51