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UNITED STATES [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) For the quarterly period ended June 29, 2008 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) Commission File Number 1-3295 -- MINERALS TECHNOLOGIES INC. 25-1190717 (I.R.S. Employer 405 Lexington Avenue, New York, New York 10174-0002 (212) 878-1800 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 Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of " large accelerated filer,"
"accelerated filer," and "smaller reporting company" in Rule 12b-2 of the
Exchange Act. Large Accelerated Filer [X] Accelerated Filer [ ] Non- accelerated Filer [ ] Smaller Reporting Company [ ] Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). YES Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date. Class Outstanding at July 21, 2008 MINERALS TECHNOLOGIES INC. INDEX TO FORM 10-Q Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements: 3 4 5 6 15 16 24 25 25 26 27 27 28 PART 1. FINANCIAL INFORMATION ITEM 1. Financial Statements MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES Three Months Ended Six Months Ended June 29, 2008 July 1, June 29, July 1, $ 299,794 $ 271,432 577,314 536,915 237,512 211,318 454,297 420,281 62,282 60,114 123,017 116,634 26,590 26,570 52,630 53,469 6,014 6,600 12,134 13,528 899 -- 2,331 -- 28,779 26,944 55,922 49,637 (724 (1,749 (2,238 (4,428 28,055 25,195 53,684 45,209 8,653 8,245 16,598 14,808 713 823 1,566 1,671 18,689 16,127 35,520 28,730 4,646 (1,753 5,022 (3,535 $ 23,335 $ 14,374 40,542 25,195 $ 0.99 $ 0.84 1.87 1.50 0.24 (0.09 0.26 (0.18 $ 1.23 $ 0.75 2.13 1.32 $ 0.98 $ 0.83 1.86 1.48 0.24 (0.09 0.26 (0.18 $ 1.22 $ 0.74 2.12 1.30 $ 0.05 $ 0.05 0.10 0.10 18,937 19,202 19,006 19,133 19,065 19,457 19,114 19,358 See accompanying Notes to Condensed Consolidated Financial
Statements. 3 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES ASSETS June 29, 2008* December 31, $ 138,979 $ 128,985 13,210 9,697 211,906 180,868 128,654 103,373 27,289 22,773 22,099 27,614 542,137 473,310 479,182 489,386 71,816 71,964 54,625 53,667 35,481 40,566 $ 1,183,241 $ 1,128,893 LIABILITIES AND SHAREHOLDERS' EQUITY $ 19,368 $ 9,518 397 7,210 78,016 66,084 4,695 14,479 59,091 65,057 3,312 4,801 164,879 167,149 101,221 111,006 113,872 99,565 379,972 377,720 2,881 2,854 309,733 294,367 840,733 802,096 67,445 45,365 (417,523 (393,509 803,269 751,173 $ 1,183,241 $ 1,128,893 * Unaudited See accompanying Notes to Condensed Consolidated Financial Statements. 4 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES Six Months Ended June 29, July 1, $ 40,542 $ 25,195 5,023 (3,535 35,519 28,730 40,837 43,192 (11,800 -- 1,643 1,830 5,594 4,278 (35,676 (1,894 36,117 76,136 2,003 (3,841 38,120 72,295 (19,906 (23,942 520 8,527 (4,076 (9,840 (23,462 (25,255 7,440 (2,832 (16,022 (28,087 -- 7,741 (16,845 (2,509 9,988 (35,450 (23,717 (7,291 10,921 11,922 610 560 (1,904 (1,914 (20,947 (26,941 8,843 868 9,994 18,135 128,985 67,929 $ 138,979 $ 86,064 $ 2,755 $ 4,992 $ 11,378 $ 9,283 $ 297 $ -- See accompanying Notes to Condensed Consolidated Financial
Statements. 5 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES 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 U.S. 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 Companys Annual Report on Form
10-K for the year ended December 31, 2007. 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
29, 2008 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2008. Note 2. Summary of Significant Accounting Policies Use of Estimates The Company employs accounting policies that are in
accordance with U.S. generally accepted accounting principles and require
management to make estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reported period. Significant estimates include
those related to revenue recognition, allowance for doubtful accounts, valuation
of inventories, valuation of long-lived assets, goodwill and other intangible
assets, pension plan assumptions, income tax, valuation allowances, and
litigation and environmental liabilities. Actual results could differ from those
estimates. Note 3. 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 June 29, 2008 July 1, June 29, July 1, 2007 Income from continuing operations $ 18.7 $ 16.1 $ 35.5 $ 28.7 Income (loss) from discontinued operations 4.6 (1.7 5.0 (3.5 Net income $ 23.3 $ 14.4 $ 40.5 $ 25.2 Weighted average shares outstanding 18,937 19,202 19,006 19,133 Basic earnings per share from continuing operations
$ 0.99 0.84 $ 1.87 $ 1.50 Basic earnings (loss) per share from discontinued
operations 0.24 (0.09 0.26 (0.18 Basic earnings per share $ 1.23 $ 0.75 $ 2.13 $ 1.32 6 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES Three Months Ended Six Months Ended June 29, 2008 July 1, June 29, July 1, Income from continuing operations $ 18.7 $ 16.1 $ 35.5 $ 28.7 Income (loss) from discontinued operations 4.6 (1.7 ) 5.0 (3.5 ) Net income $ 23.3 $ 14.4 $ 40.5 $ 25.2 Weighted average shares outstanding 18,937 19,202 19,006 19,133 Dilutive effect of stock options and stock units 128 255 108 225 19,065 19,457 19,114 19,358 Diluted earnings per share from continuing operations
$ 0.98 $ 0.83 $ 1.86 $ 1.48 Diluted earnings (loss) per share from discontinued
operations 0.24 (0.09 ) 0.26 (0.18 ) Diluted earnings per share $ 1.22 $ 0.74 $ 2.12 $ 1.30 The weighted average diluted common shares outstanding for the six
months ended June 29, 2008 and July 1, 2007 excludes the dilutive effect of
240,300 options and 203,567 options, respectively, as such options had an
exercise price in excess of the average market value of the Companys common
stock during such period. Note 4. Discontinued Operations During the third quarter of 2007, the Company conducted
an in-depth strategic review of its operations. This review resulted in a
realignment of its operations, which included the exiting of certain businesses. Accordingly, during the fourth quarter of 2007, the
Company classified its Synsil operations and its plants at Mount Vernon, Indiana
and Wellsville, Ohio as discontinued operations. These operations were part of
the Companys Specialty Minerals segment. The assets of these operations are
held for disposal. During the second quarter of 2008, the Company sold two of
its idle Synsil operations in Chester, South Carolina and Woodville, Ohio for
approximately $7.5 million. This resulted in a pre-tax gain of approximately
$6.5 million ($4.3 million after-tax). The Company expects the sale of the
remaining assets to be completed during 2008. The Company does not anticipate
the ongoing operating cash flows of these operations to be significant. The following table details selected financial
information for the discontinued operations in the consolidated statements of
operations. The amounts exclude general corporate overhead and interest expense
which were previously allocated to the entities comprising discontinued
operations. Three Months Ended Six Months Ended June 29, July 1, June 29, July 1, $ 6.4 $ 8.0 $ 12.7 $ 16.1 0.7 (1.5 ) 1.5 (3.1 0.2 1.2 0.5 2.4 (0.2 -- (0.3 -- 6.5 -- 6.5 -- $ 7.2 $ (2.7 ) $ 7.8 $ (5.5 $ -- $ -- $ -- $ 0.1 $ 2.6 $ (0.9 ) $ 2.8 $ (1.9 $ 4.6 $ (1.8 ) $ 5.0 $ (3.5 7 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES The major classes of assets and liabilities held for
disposal in the consolidated balance sheets are as follows: June 29, Dec. 31, $ 2.6 $ 4.3 7.8 10.2 10.1 11.5 1.6 1.6 -- -- $ 22.1 $ 27.6 $ 2.2 $ 2.9 1.1 1.9 $ 3.3 $ 4.8 Note 5. Income Taxes Effective January 1, 2007, the Company adopted the provisions of FASB
Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes."
FIN 48 specifies the way companies are to account for uncertainty in income tax
reporting and prescribes a recognition threshold and measurement attribute for
tax positions taken or expected to be taken in a tax return. As a result of the
adoption of FIN 48, the Company recognized a $1.9 million decrease in the
liability for unrecognized income tax benefits, resulting in an increase to the
January 1, 2007 balance of retained earnings. As of June 29, 2008, the Company had approximately $10.9 million of
total unrecognized income tax benefits. Included in this amount were a total of
$6.5 million of unrecognized income tax benefits that if recognized would affect
the Companys effective tax rate. While it is expected that the amount of
unrecognized tax benefits will change in the next 12 months, we do not expect
the change to have a significant impact on the results of operations or the
financial position of the Company. The Companys accounting policy prior to the adoption of FIN 48 and upon
the adoption of FIN 48 is to recognize interest and penalties accrued, relating
to unrecognized income tax benefits as part of its provision for income taxes.
The Company accrued approximately $0.2 million and $0.5 million during the
second quarter and first half of 2008, respectively, and has an accrued balance
of $3.4 million of interest and penalties accrued as of June 29, 2008. The Company operates in multiple taxing jurisdictions, both within and
outside the U.S. In certain situations, a taxing authority may challenge
positions that the Company has adopted in its income tax filings. The Company,
with a few exceptions (none of which are material), is no longer subject to U.S.
federal, state, local, and European income tax examinations by tax authorities
for years prior to 2003. 8 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES Note 6. Inventories The following is a summary of inventories by major
category: (millions of dollars) June 29, December 31, Raw materials $ 60.0 $ 42.0 Work-in-process 9.5 8.1 Finished goods 37.0 31.2 Packaging and supplies 22.2 22.1 Total inventories $ 128.7 $ 103.4 Note 7. Goodwill and Other Intangible Assets The Company accounts for goodwill and other intangible
assets in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets."
Under SFAS No. 142, goodwill and other intangible assets with indefinite lives
are not amortized, but instead are tested for impairment, at least annually, in
accordance with the provisions of SFAS No. 142. The carrying amount of goodwill was $71.8 million, and
$72.0 million as of June 29, 2008 and December 31, 2007, respectively. The net
change in goodwill since January 1, 2008 was primarily attributable to the
effect of foreign exchange. Acquired intangible assets subject to amortization as of
June 29, 2008 and December 31, 2007 were as follows: June 29, 2008 December 31, 2007 (millions of dollars) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Patents and trademarks $ 7.8 $ 3.1 $ 7.9 $ 2.7 Customer lists 10.8 1.7 11.1 1.4 Other 0.4 0.1 0.4 0.1 $ 19.0 $ 4.9 $ 19.4 $ 4.2 The weighted average amortization period for acquired
intangible assets subject to amortization is approximately 15 years. Estimated
amortization expense is $1.2 million for each of the next five years through
2012. Included in other assets and deferred charges is an
intangible asset of approximately $4.6 million which represents the non-current
unamortized amount paid to a customer in connection with contract extensions at
eight PCC satellite facilities. In addition, a current portion of $1.8 million
is included in prepaid expenses and other current assets. Such amounts will be
amortized as a reduction of sales over the remaining lives of the customer
contracts. Approximately $0.4 million was amortized in the second quarter of
2008. Estimated amortization as a reduction of sales is as follows: remainder of
2008 - $0.9 million; 2009 - $1.5 million; 2010 - $1.2 million; 2011 - $0.9
million; 2012 - $0.6 million; with smaller reductions thereafter over the
remaining lives of the contracts. Note 8. Restructuring Costs Following an in-depth review of all our operations and
development of a new strategic focus, the Company recorded a pre-tax charge of
$16.0 million for restructuring and other costs during the second half of 2007.
This charge consists of severance and other employee benefit costs, contract
termination costs and other exit costs. Additional restructuring costs of $0.9
million and $2.3 million were recorded in the second quarter and first six 9 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES months of 2008, respectively. The restructuring will result
in a total workforce reduction of approximately 249 employees, of which 185
reductions have been implemented as of June 29, 2008. A reconciliation of the restructuring liability, as of
June 29, 2008, is as follows: Balance as of Additional Provisions Cash Expenditures Other Balance as of June 29, Severance and other employee benefits $ 12.6 $ 1.8 $ (11.2 $ (0.3 $ 2.9 Contract termination costs 1.8 -- -- -- 1.8 Other exit costs 0.1 0.5 (0.6 -- -- $ 14.5 $ 2.3 $ (11.8 $ (0.3 $ 4.7 Note 9. Long-Term Debt and Commitments The following is a summary of long-term debt: (millions of
dollars) June 29, 2008 Dec. 31, $ 50.0 $ 50.0 25.0 25.0 4.0 4.0 4.6 4.6 8.0 8.0 8.2 8.2 -- 5.0 -- 4.8 1.4 7.9 0.4 0.7 101.6 118.2 0.4 7.2 $ 101.2 $ 111.0 As of June 29, 2008, the Company had $193.8 million of
uncommitted short-term bank credit lines, of which approximately $19.4 million
were in use. During the first quarter of 2007, the Company entered
into a series of Renminbi ("RMB") denominated loan agreements through two of its
consolidated joint ventures in China with the Communication Bank of China
totaling RMB 60.0 million. During 2007, the Company repaid RMB 25.0 million of
principal related to these loans. During the first quarter of 2008, the Company
repaid the remaining RMB 35.0 million related to these loans. The interest rate
on these loans was approximately 7.56% for the first quarter of 2008. 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 Brookhaven, Mississippi. This facility has
ceased operations during the first quarter of 2008 and the Company repaid this
obligation on March 31, 2008. 10 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES Note 10. Pension Plans The Company and its subsidiaries have pension plans
covering substantially all eligible employees on a contributory or
non-contributory basis. Components of Net Periodic Benefit Cost Pension Benefits Three Months Ended Six Months Ended June 29, 2008 July 1, 2007 June 29, 2008 July 1, 2007 $ 2.0 $ 2.2 $ 4.2 $ 4.6 2.9 2.8 6.2 6.0 (4.7 (4.5 (9.9 (9.5 0.4 0.7 0.7 1.1 0.5 0.8 1.1 1.7 $ 1.1 $ 2.0 $ 2.3 $ 3.9 Other Benefits Three Months Ended Six Months Ended June 29, 2008 July 1, 2007 June 29, 2008 July 1, 2007 $ 0.6 $ 0.7 $ 1.2 $ 1.4 0.6 0.6 1.2 1.2 -- -- -- -- 0.1 0.1 0.3 0.3 0.1 0.3 0.1 0.5 $ 1.4 $ 1.7 $ 2.8 $ 3.4 Amortization amounts of prior service costs and
recognized net actuarial losses are recorded, net of tax, as increases to
accumulated other comprehensive income. Employer Contributions The Company expects to contribute $10 million to its
pension plan and $2 million to its other post retirement benefit plans in 2008.
As of June 29, 2008, $1.2 million has been contributed to the pension fund and
approximately $0.9 million has been contributed to the post retirement benefit
plans. 11 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES Note 11. Comprehensive Income The following are the components of comprehensive
income: Three Months Ended Six Months Ended (millions of dollars) June 29, July 1, June 29, July 1, Net income $ 23.3 $ 14.4 $ 40.5 $ 25.2 Other comprehensive income, net of tax: Foreign currency translation adjustments 1.6 7.8 20.8 15.0 Pension and postretirement plan adjustments 0.6 1.0 1.2 2.1 Cash flow hedges: Net derivative gains (losses) arising during the period
(0.1 -- 0.1 (0.1 Reclassification adjustment -- -- -- 0.1 Comprehensive income $ 25.4 $ 23.2 $ 62.6 $ 42.3 The components of accumulated other comprehensive gain,
net of related tax, are as follows: (millions of dollars) June 29, December 31, Foreign currency translation adjustments $ 102.5 $ 81.7 Unrecognized pension costs (35.1 (36.2 Net loss on cash flow hedges -- (0.1 Accumulated other comprehensive gain $ 67.4 $ 45.4 Note 12. Accounting for Asset Retirement Obligations SFAS No. 143, "Accounting for Asset Retirement
Obligations" establishes the financial accounting and reporting obligations
associated with the retirement of long-lived assets and the associated asset
retirement costs. The Company records asset retirement obligations in which the
Company will be required to retire tangible long-lived assets. These are
primarily related to its PCC satellite facilities and mining operations. The
Company has also adopted the provisions of FASB Interpretation No. 47,
"Accounting for Conditional Asset Retirement Obligations," related to
conditional asset retirement obligations at its facilities. The Company has
recorded asset retirement obligations at all of its facilities except where
there are no legal or contractual obligations. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset. The following is a reconciliation of asset retirement obligations as of
June 29, 2008: (millions of dollars) Asset retirement liability, December 31, 2007 $ 12.9 Accretion expense 0.4 Foreign currency translation 0.2 Asset retirement liability, June 29, 2008 $ 13.5 Approximately $0.4 million is included in other current
liabilities and $13.1 million is included in other non-current liabilities in
the Condensed Consolidated Balance Sheet as of June 29, 2008. 12 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES Note 13. Non-Operating Income and Deductions Three Months Ended Six Months Ended June 29, 2008 July 1, 2007 June 29, 2008 July 1, 2007 $ 1.0 $ 0.6 $ 2.1 $ 1.1 (1.1 (2.6 (2.6 (5.1 (0.3 0.2 (1.1 (0.1 (0.3 0.1 (0.6 (0.2 $ (0.7 $ (1.7 $ (2.2 $ (4.3 Note 14. Segment and Related Information Segment information for the three and six-month periods
ended June 29, 2008 and July 1, 2007 were as follows: Net Sales Three Months Ended Six Months Ended June 29, 2008 July 1, 2007 June 29, July 1, $ 189.1 $ 180.8 $ 369.9 $ 356.8 110.7 90.6 207.4 180.1 $ 299.8 $ 271.4 $ 577.3 $ 536.9 Income from Operations Three Months Ended Six Months Ended June 29, 2008 July 1, 2007 June 29, July 1, $ 20.1 $ 18.4 $ 38.5 $ 34.4 8.9 8.5 17.8 15.2 $ 29.0 $ 26.9 $ 56.3 $ 49.6 The carrying amount of goodwill by reportable segment as
of June 29, 2008 and December 31, 2007 was as follows: Goodwill Three Months Ended June 29, 2008 December 31, 2007 $ 15.3 $ 15.3 56.5 56.7 $ 71.8 $ 72.0 13 MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES A reconciliation of the totals reported for the
operating segments to the applicable line items in the condensed consolidated
financial statements is as follows: Three Months Ended Six Months Ended June 29, 2008 July 1, 2007 June 29, July 1, $ 29.0 $ 26.9 $ 56.3 $ 49.6 (0.2 -- (0.4 -- 28.8 26.9 55.9 49.6 (0.7 (1.7 (2.2 (4.4 ) $ 28.1 $ 25.2 $ 53.7 $ 45.2 The Companys sales by product category are as follows: Three Months Ended Six Months Ended June 29, 2008 July 1, 2007 June 29, July 1, $ 142.2 $ 133.9 $ 280.0 $ 267.6 15.8 15.6 31.1 30.5 9.5 9.7 18.7 19.1 21.6 21.6 40.1 39.6 89.8 73.1 168.9 144.7 20.9 17.5 38.5 35.4 $ 299.8 $ 271.4 $ 577.3 $ 536.9 14 REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders We have reviewed the condensed consolidated balance
sheet of Minerals Technologies Inc. and subsidiary companies as of June 29, 2008
and the related condensed consolidated statements of income for the three-month
and six-month periods ended June 29, 2008 and July 1, 2007, and the related
condensed consolidated statements of cash flows for the six-month periods ended
June 29, 2008 and July 1, 2007. These condensed consolidated financial
statements are the responsibility of the companys management. We conducted our review in accordance with the standards
of the Public Company Accounting Oversight Board (United States). 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 the standards of the Public Company
Accounting Oversight Board (United States), 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 review, 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 U.S. generally
accepted accounting principles. We have previously audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheet of Minerals Technologies Inc. and subsidiary
companies as of December 31, 2007, 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 February 27, 2008, 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, 2007 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived. /s/ KPMG LLP New York, New York 15 ITEM 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations Income and Expense Items Three Months Ended Six Months Ended June 29, 2008 July 1, 2007 June 29, July 1, 100.0 100.0 100.0 100.0 % 79.2 77.9 78.7 78.3 20.8 22.1 21.3 21.7 8.9 9.8 9.1 10.0 2.0 2.4 2.1 2.5 0.3 -- 0.4 -- 9.6 9.9 9.7 9.2 6.2 5.9 6.1 5.4 1.6 (0.6) 0.9 (0.7) 7.8 5.3 7.0 4.7 % Executive Summary Consolidated sales for the second quarter of 2008
increased 10% over the prior year to $299.8 million from $271.4 million. Foreign
exchange had a favorable impact on sales growth of approximately $14.1 million
or 5 percentage points of growth. Operating income increased 7% to $28.8 million
from $26.9 million in the prior year. Income from continuing operations
increased 16% to $18.7 million from $16.1 million in the prior year. Net income
increased 62% to $23.3 million from $14.4 million. Included in discontinued
operations is a gain of $4.6 million primarily related to the sale of two of our
idle Synsil facilities. Second quarter results were positively affected by the
effects of foreign exchange, benefits derived from the restructuring program
announced in the third quarter of 2007, increased selling prices in all product
lines, particularly in our Refractories segment, expense and manufacturing cost
savings and volume growth in the Metallurgical product line. This was partially
offset by the continued decline in the residential construction and automotive
markets affecting the Processed Minerals product line and significant raw
material and energy cost increases in both segments. The Company will continue to focus on innovation and new
product development and other opportunities for continued growth as follows: Increasing our sales of PCC for paper by further
penetration of the markets for paper filling at both freesheet and
groundwood mills; • Development of the filler-fiber composite program, to
increase the fill-rate for uncoated freesheet paper, which continues to
undergo large-scale paper machine trials. Further development of the Companys PCC coating products
for use in the satellite model. Leverage the Companys expertise in crystal engineering,
especially in helping papermakers customize PCC morphologies for specific
paper applications. Development of unique calcium carbonates used in the
manufacture of novel biopolymers, an emerging market opportunity. Rapid deployment of value-added formulations of
refractory materials that not only reduce costs but improve performance. Continuing our penetration in emerging markets through
our manufacturing facility in China and our 2006 acquisition in Turkey, both
within the Refractories segment. 16 However, there can be no assurance that we will achieve
success in implementing any one or more of these opportunities. We face some significant risks and challenges in the future: Our success depends in part on the performance of the
industries we serve, particularly papermaking and steel making. Some of our
customers may continue to experience consolidations and shutdowns; Consolidations in the paper and steel industries
concentrate purchasing power in the hands of fewer customers, increasing
pricing pressure on suppliers such as Minerals Technologies Inc.; Most of our Paper PCC sales are subject to long-term
contracts that may be terminated pursuant to their terms, or may be renewed
on terms less favorable to us; Our filler-fiber composite technology continues in
development through customer trials, but has yet to be proven on a long-term
commercial scale; We are subject to rapid escalations on raw materials and
energy costs in all product lines, including shipping costs, particularly
for materials sourced from China; We are subject to potential shortages in supply of
magnesium oxide sourced from China due to limited availability of export
licenses; Our Processed Minerals and Specialty PCC product lines
are highly influenced by the ongoing weakness in the domestic building,
construction and automotive markets; and As we expand our operations abroad we face the inherent
risks of doing business in many foreign countries, including foreign
exchange risk, import and export restrictions, and security concerns. Results of Operations Sales Second % of Total Growth Second % of Total Sales Net Sales $ 158.3 52.8 6 $ 148.7 54.8 141.5 47.2 15 122.7 45.2 $ 299.8 100.0 10 $ 271.4 100.0 $ 142.2 47.4 6 $ 133.9 49.3 15.8 5.3 1 15.6 5.8 $ 158.0 52.7 6 $ 149.5 55.1 $ 9.5 3.2 (2) $ 9.7 3.5 21.6 7.2 -- 21.6 8.0 $ 31.1 10.4 (1) $ 31.3 11.5 $ 189.1 63.1 5 $ 180.8 66.6 $ 89.8 29.9 23 $ 73.1 26.9 20.9 7.0 19 17.5 6.5 $ 110.7 36.9 22 $ 90.6 33.4 $ 299.8 100.0 10 $ 271.4 100.0 Worldwide net sales in the second quarter of 2008
increased 10% from the previous year to $299.8 million. Foreign exchange had a
favorable impact on sales of approximately $14.1 million or 5 percentage points
of growth. Sales in the Specialty Minerals segment, which includes the PCC and
Processed Minerals product lines, increased 5% to $189.1 million compared with
$180.8 million for the same period in 2007. Sales in the Refractories segment
grew 22% over the previous year to $110.7 million. 17 Worldwide net sales of PCC, which is primarily used in
the manufacturing process of the paper industry, increased 6% in the
second quarter to $158.0 million from $149.5 million in the prior year. Foreign
exchange had a favorable impact on sales of approximately 5 percentage points of
growth. Paper PCC sales grew 6% to $142.2 million in the second quarter of 2008
from $133.9 million in the prior year. However, total Paper PCC volumes declined
slightly. Weakness in the North American and European markets was partially
offset by volume growth, particularly in Asia, and the impact of foreign
currency. Sales of Specialty PCC increased 1% to $15.8 million from $15.6
million in the prior year. Net sales of Processed Minerals products decreased 1% in
the second quarter to $31.1 million from $31.3 million in the second quarter of
2007. This decrease was attributable primarily to the continued weakness in the
residential and commercial construction markets, as well as the automotive
market. Net sales in the Refractories segment in the second
quarter of 2008 increased 22% to $110.7 million from $90.6 million in the prior
year. This segment was positively affected by increased selling prices to
mitigate significant raw material increases, a more favorable product mix in the
Refractory product line, and volume growth in the metallurgical product line. In
addition, foreign exchange had a favorable impact on sales of $6.0 million or
approximately 7 percentage points of growth. Sales of refractory products and
systems to steel and other industrial applications increased 23 percent to $89.8
million from $73.1 million. Sales of metallurgical products within the
Refractories segment increased 19 percent to $20.9 million as compared with
$17.5 million in the same period last year. This increase was primarily
attributable to higher volumes and favorable mix, particularly in North America. Net sales in the United States increased 6% to $158.3
million in the second quarter of 2008. International sales in the second quarter
of 2008 increased 15% to $141.5 million, primarily due to foreign exchange. Second Second Growth $ 237.5 $ 211.3 12 $ 26.6 $ 26.6 -- $ 6.0 $ 6.6 (9) $ 0.9 $ -- * *
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
Identification No.)
(Address of principal executive offices, including zip code)
(Registrants telephone number, including area code)
NO _____
NO X
Common Stock, $0.10 par value
18,907,040
Condensed Consolidated
Statements of Income for the three-month and six-month periods ended June
29, 2008 and July 1, 2007 (Unaudited)
Condensed
Consolidated Balance Sheets as of June 29, 2008 (Unaudited)
and December 31, 2007
Condensed Consolidated
Statements of Cash Flows for the six-month
periods ended June 29, 2008 and July 1, 2007 (Unaudited)
Notes to Condensed Consolidated
Financial Statements (Unaudited)
Review Report of
Independent Registered Public Accounting Firm
Item 2.
Managements
Discussion and Analysis of Financial Condition and
Results of Operations
Item 3.
Quantitative and
Qualitative Disclosures about Market Risk
Item 4.
Controls and
Procedures
PART II. OTHER
INFORMATION
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales
of Equity Securities and Use of Proceeds
Item 4.
Submission of
Matters to a Vote of Security Holders
Item 6.
Exhibits
Signature
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands,
except per share data)
2007
2008
2007
Net sales
$
$
Cost of goods
sold
Production margin
Marketing and
administrative expenses
Research and
development expenses
Restructuring and
other costs
Income from
operations
Non-operating
income (deductions), net
)
)
)
)
Income before
provision for taxes
on income,
minority interests and
discontinued
operations
Provision for
taxes on income
Minority
interests
Income from
continuing operations
Income (loss)
from discontinued operations, net of tax
)
)
Net income
$
$
Earnings per
share:
Basic:
Income from
continuing operations
$
$
Income (loss)
from discontinued operations
)
)
Basic earnings per share
$
$
Diluted:
Income from
continuing operations
$
$
Income (loss)
from discontinued operations
)
)
Diluted earnings per share
$
$
Cash dividends
declared per common share
$
$
Shares used in
computation of earnings per share:
Basic
Diluted
CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of
dollars)
2007**
Current assets:
Cash and cash
equivalents
Short-term
investments, at cost which approximates market
Accounts
receivable, net
Inventories
Prepaid expenses
and other current assets
Assets held for
disposal
Total current assets
Property, plant
and equipment, less accumulated depreciation and depletion - June 29, 2008 -
907,639; December 31, 2007 - $862,457
Goodwill
Prepaid pension
costs
Other assets and
deferred charges
Total assets
Current
liabilities:
Short-term debt
Current
maturities of long-term debt
Accounts payable
Restructuring
liabilities
Other current
liabilities
Liabilities of
assets held for disposal
Total current liabilities
Long-term debt
Other non-current
liabilities
Total liabilities
Shareholders'
equity:
Common stock
Additional
paid-in capital
Retained earnings
Accumulated other
comprehensive gain
Less common stock
held in treasury
)
)
Total shareholders' equity
Total liabilities and
shareholders' equity
** Condensed from audited financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(thousands
of dollars)
2008
2007
Operating
Activities:
Net income
Income (loss)
from discontinued operations
)
Income from
continuing operations
Adjustments to
reconcile net income to net cash
provided by
operating activities:
Depreciation,
depletion and amortization
Payments
relating to restructuring activities
)
Tax benefits
related to stock incentive programs
Other non-cash
items
Net changes in
operating assets and liabilities
)
)
Net cash
provided by continuing operations
Net cash
provided by (used in) discontinued operations
)
Net cash
provided by operating activities
Investing
Activities:
Purchases of
property, plant and equipment
)
)
Proceeds from
sale of short-term investments
Purchases of
short-term investments
)
)
Net cash used
in investing activities - continuing operations
)
)
Net cash
provided by (used in) investing activities -
discontinued
operations
)
Net cash used
in investing activities
)
)
Financing
Activities:
Proceeds from
issuance of long-term debt
Repayment of
long-term debt
)
)
Net proceeds
(repayment) of short-term debt
)
Purchase of
common shares for treasury
)
)
Proceeds from
issuance of stock under option plan
Excess tax
benefits related to stock incentive programs
Cash dividends
paid
)
)
Net cash used
in financing activities
)
)
Effect of
exchange rate changes on cash and
cash
equivalents
Net increase in
cash and cash equivalents
Cash and cash
equivalents at beginning of period
Cash and cash
equivalents at end of period
Supplemental
disclosure of cash flow information:
Interest paid
Income taxes
paid
Non-cash
financing activities:
Treasury stock
purchases settled after period-end
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basic EPS
(in millions, except per share data)
2007
2008
)
)
$
)
)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Diluted EPS
(in millions, except per share data)
2007
2008
2007
Weighted average shares
outstanding, adjusted
Thousands of Dollars
2008
2007
2008
2007
Net sales
Production margin
)
Expenses
Restructuring and other costs
(reversals)
)
)
Gain on sale of assets
Income (loss) from operations
)
Other income
Provision (benefit) for taxes
on income
)
Income (loss) from
discontinued operations, net of tax
)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Millions of
Dollars
2008
2007
Assets:
Accounts receivable
Inventories
Property, plant and
equipment, net
Goodwill
Other assets
Assets held for
disposal
Liabilities:
Accounts payable
Accrued liabilities
Liabilities of
assets held for disposal
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2008
2007
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(millions of dollars)
December 31, 2007
2008
)
)
)
)
)
2007
5.53% Series
2006A Senior Notes
Due October 5,
2013
Floating Rate
Series 2006A Senior Notes
Due October 5,
2013
Variable/Fixed
Rate Industrial
Development
Revenue Bonds Due 2009
Economic
Development Authority Refunding
Revenue Bonds
Series 1999 Due 2010
Variable/Fixed
Rate Industrial
Development
Revenue Bonds Due August 1, 2012
Variable/Fixed
Rate Industrial
Development
Revenue Bonds Series 1999 Due November 1, 2014
Variable/Fixed
Rate Industrial
Development
Revenue Bonds Due March 31, 2020
Variable Rate
Renminbi Denominated
Loan Agreement
Due 2009
Installment
obligations
Other borrowings
Total
Less: Current
maturities
Long-term debt
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(millions of
dollars)
Service cost
Interest cost
Expected return
on plan assets
)
)
)
)
Amortization:
Prior service
cost
Recognized net
actuarial loss
Net periodic benefit cost
(millions of
dollars)
Service cost
Interest cost
Expected return
on plan assets
Amortization:
Prior service
cost
Recognized net
actuarial loss
Net periodic benefit cost
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2008
2007
2008
2007
)
)
2008
2007
)
)
)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(millions of
dollars)
Interest income
Interest expense
)
)
)
)
Foreign exchange gains
(losses)
)
)
)
Other deductions
)
)
)
Non-operating
income (deductions), net
)
)
)
)
2008
2007
Specialty Minerals
Refractories
Total
2008
2007
Specialty Minerals
Refractories
Total
Specialty Minerals
Refractories
Total
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Income before
provision for taxes on
income, minority interests and
discontinued operations:
2008
2007
Income from
operations for reportable segments
Unallocated
corporate expenses
)
)
Consolidated
income from operations
Non-operating
income (deductions) from operations
)
)
)
Income before
provision for taxes on income,
minority interests and
discontinued operations
2008
2007
Paper PCC
Specialty PCC
Talc
Ground Calcium
Carbonate
Refractory
Products
Metallurgical
Products
Net sales
Minerals Technologies Inc.:
July 29, 2008
as a Percentage of Net Sales
2008
2007
Net sales
%
%
%
Cost of goods sold
Production margin
Marketing and administrative
expenses
Research and development
expenses
Restructuring and other costs
Income from operations
Income from continuing
operations
Income (loss) from
discontinued operations
Net income
%
%
%
•
•
•
•
•
•
•
•
•
•
•
•
•
•
(millions of dollars)
Quarter
2008
Sales
Quarter
2007
U.S
%
%
%
International
%
%
%
Net sales
%
%
%
Paper PCC
%
%
%
Specialty PCC
%
%
%
PCC Products
%
%
%
Talc
%
%
%
Ground Calcium
Carbonate
%
%
%
Processed
Minerals Products
%
%
%
Specialty
Minerals Segment
%
%
%
Refractory
Products
%
%
%
Metallurgical
Products
%
%
%
Refractories
Segment
%
%
%
Net sales
%
%
%
Operating
Costs and Expenses
(millions of dollars)
Quarter
2008
Quarter
2007
Cost of goods sold
%
Marketing and administrative
%
Research and development
%
Restructuring and other costs
%
Cost of goods sold was 79.2% of sales compared with 77.9% of sales in the prior year. In the Specialty Minerals segment, production margin increased 1% as compared with 5% sales growth. This segment has been affected by weakness in the Processed Minerals product line and paper machine and paper mill shutdowns, partially offset by the recovery of raw material costs, the benefits of the restructuring program, foreign exchange and manufacturing cost savings initiatives. In the Refractories segment, production margin increased 7% as compared with the 22% sales growth. This segment has been affected by increased raw material costs, partially offset by price increases, the benefits of the restructuring program, and the impact of foreign exchange.
Marketing and administrative costs remained flat in the second quarter at $26.6 million and represented 8.9% of net sales as compared with 9.8% of net sales in the prior year. This decline was due to the benefits of the restructuring program and other cost savings initiatives.
Research and development expenses decreased 9% to $6.0 million and represented 2.0% of net sales as compared with 2.4% of net sales in the prior year.
Restructuring and other costs during the second quarter relate to additional provisions for severance and other employee benefits.
18
Income from Operations (millions of dollars) |
Second |
Second |
Growth |
|||||
Income from operations |
$ |
28.8 |
$ |
26.9 |
7 |
% |
Income from operations in the second quarter of 2008 increased 7% to $28.8 million from $26.9 million in the prior year. Income from operations represented 9.6% of net sales in the second quarter of 2008 compared with 9.9% in the second quarter of 2007.
Income from operations for the Specialty Minerals segment increased 9% to $20.1 million and was 10.6% of its net sales. Operating income for this segment was impacted by the aforementioned factors affecting production margin but were offset by lower expense levels than in the prior year. Operating income for the Refractories segment increased 5% and was 8.1% of its net sales as compared with 9.4% of its net sales in 2007.
Non-Operating Deductions |
Second |
Second |
||||||||
(millions of dollars) |
2008 |
2007 |
Growth |
|||||||
Non-operating deductions, net |
$ |
(0.7) |
$ |
(1.7) |
(59) |
% |
In the second quarter of 2008, net non-operating deductions decreased 58% to $0.7 million. This decrease was primarily attributable to lower interest expense due to lower interest rates and reduced debt levels. In addition, higher interest income was generated in connection with increased cash on hand.
Provision for Taxes on Income |
Second |
Second |
||||||||
(millions of dollars) |
2008 |
2007 |
Growth |
|||||||
Provision for taxes on income |
$ |
8.7 |
$ |
8.2 |
6 |
% |
The effective tax rate decreased to 30.8% in the second quarter of 2008 from 32.7% in the prior year, primarily due to a change in the geographic mix of earnings.
Income from Continuing Operations |
Second |
Second |
||||||||
(millions of dollars) |
2008 |
2007 |
Growth |
|||||||
Income from continuing operations |
$ |
18.7 |
$ |
16.1 |
16 |
% |
Income from continuing operations increased 16% to $18.7 million from $16.1 million in the prior year.
Income (Loss) from Discontinued Operations |
Second |
Second |
||||||||
(millions of dollars) |
2008 |
2007 |
Growth |
|||||||
Income (loss) from discontinued operations |
$ |
4.6 |
$ |
(1.8) |
* |
% |
*
Percentage not meaningfulIn the second quarter of 2008 the Company recognized income from discontinued operations of $4.6 million as compared with a loss in the prior year of $1.8 million. Included in income from discontinued operations for 2008 is a gain of approximately $4.3 million, net of tax, for the sale of our idle Woodville and Chester facilities. The loss in the prior year was primarily attributable to the results of operations of SYNSIL®.
19
Net Income |
Second |
Second |
||||||||
(millions of dollars) |
2008 |
2007 |
Growth |
|||||||
Net income |
$ |
23.3 |
$ |
14.4 |
62 |
% |
Net income increased 62% in the second quarter of 2008 to $23.3 million. Diluted earnings per common share increased 65% to $1.22 per share in the second quarter of 2008 as compared with $0.74 per share in the prior year.
Six months ended June 29, 2008 as compared with six months ended July 1, 2007
(millions of dollars) |
First Half |
% of Total |
Growth |
First Half |
% of Total Sales |
|||||||||||||
Net Sales |
||||||||||||||||||
U.S |
$ |
306.8 |
53.1 |
% |
5 |
% |
$ |
293.5 |
54.7 |
% | ||||||||
International |
270.5 |
46.9 |
% |
11 |
% |
243.4 |
45.3 |
% | ||||||||||
Net sales |
$ |
577.3 |
100.0 |
% |
8 |
% |
$ |
536.9 |
100.0 |
% | ||||||||
Paper PCC |
$ |
280.0 |
48.5 |
% |
5 |
% |
$ |
267.6 |
49.8 |
% | ||||||||
Specialty PCC |
31.1 |
5.4 |
% |
2 |
% |
30.5 |
5.7 |
% | ||||||||||
PCC Products |
$ |
311.1 |
53.9 |
% |
4 |
% |
$ |
298.1 |
55.5 |
% | ||||||||
Talc |
$ |
18.7 |
3.2 |
% |
(2) |
% |
$ |
19.1 |
3.5 |
% | ||||||||
Ground Calcium Carbonate |
40.1 |
7.0 |
% |
1 |
% |
39.6 |
7.4 |
% | ||||||||||
Processed Minerals Products |
$ |
58.8 |
10.2 |
% |
-- |
% |
$ |
58.7 |
10.9 |
% | ||||||||
Specialty Minerals Segment |
$ |
369.9 |
64.1 |
% |
4 |
% |
$ |
356.8 |
66.4 |
% | ||||||||
Refractory Products |
$ |
168.9 |
29.2 |
% |
17 |
% |
$ |
144.7 |
27.0 |
% | ||||||||
Metallurgical Products |
38.5 |
6.7 |
% |
9 |
% |
35.4 |
6.6 |
% | ||||||||||
Refractories Segment |
$ |
207.4 |
35.9 |
% |
15 |
% |
$ |
180.1 |
33.6 |
% | ||||||||
Net sales |
$ |
577.3. |
100.0 |
% |
8 |
% |
$ |
536.9 |
100.0 |
% | ||||||||
Worldwide net sales in the first half of 2008 increased 8% from the previous year to $577.3 million. Foreign exchange had a favorable impact on sales of approximately $26.1 million or 5 percentage points of growth. Sales in the Specialty Minerals segment, which includes the PCC and Processed Minerals product lines, increased 4% to $369.9 million compared with $356.8 million for the same period in 2007. Sales in the Refractories segment grew 15% over the previous year to $207.4 million.
Worldwide net sales of PCC, which is primarily used in the manufacturing process of the paper industry, increased 4% in the first half to $311.1 million from $298.1 million in the prior year. Foreign exchange had a favorable impact on sales of approximately 5 percentage points of growth. Paper PCC sales grew 5% to $280.0 million in the first half of 2008 from $267.6 million in the prior year. However, total paper PCC volumes declined 2 percent. Weakness in the North American and European markets were partially offset by volume growth in Asia. Sales of Specialty PCC increased 2% to $31.1 million from $30.5 million in the prior year.
Net sales of Processed Minerals products remained flat over prior year in the first half of 2008 at $58.8 million. This product line continues to be affected by weakness in the residential and commercial construction markets, as well as the automotive market.
Net sales in the Refractories segment in the first half of 2008 increased 15% to $207.4 million from $180.1 million in the prior year. This segment was positively impacted by price increases to recover significant raw material increases, favorable product mix in the refractory product line, and volume growth in the metallurgical product line.
20
In addition, foreign exchange had a favorable impact on sales of $11.5 million or approximately 6 percentage points of growth. Sales of refractory products and systems to steel and other industrial applications increased 17 percent to $168.9 million from $144.7 million. Sales of metallurgical products within the Refractories segment increased 9 percent to $38.5 million as compared with $35.4 million in the same period last year. This increase was primarily attributable to higher volumes and favorable product mix in North America.
Net sales in the United States increased 5% to $306.8 million in the first half of 2008. International sales in the first half of 2008 increased 11% to $270.5 million, primarily due to foreign exchange.
Operating
Costs and Expenses (millions of dollars) |
First Half |
First Half |
Growth |
|||||
Cost of goods sold |
$ |
454.3 |
$ |
420.3 |
8 |
% | ||
Marketing and administrative |
$ |
52.6 |
$ |
53.5 |
(2) |
% | ||
Research and development |
$ |
12.1 |
$ |
13.5 |
(10) |
% | ||
Restructuring and other costs |
$ |
2.3 |
$ |
-- |
* |
% |
*
Percentage not meaningfulCost of goods sold was 78.7% of sales compared with 78.3% of sales in the prior year. In the Specialty Minerals segment, production margin increased 3% as compared with 4% sales growth. This segment has been affected by weakness in the Processed Minerals product line and paper machine and paper mill shutdowns, partially offset by the recovery of raw material costs, the benefits of the restructuring program, foreign exchange and manufacturing cost savings initiatives. In the Refractories segment, production margin increased 9% as compared with the 15% sales growth. This segment has been affected by increased raw material costs, partially offset by the benefits of the restructuring program, price increases and the impact of foreign exchange.
Marketing and administrative costs decreased 2% in the first half to $52.6 million and represented 9.1% of net sales as compared with 10.0% of net sales in the prior year. This reduction was due to the benefits of the restructuring program and other cost savings initiatives.
Research and development expenses decreased 10% to $12.1 million and represented 2.1% of net sales as compared with 2.5% of net sales in the prior year.
Restructuring and other costs during the first half relate to additional provisions for severance and other employee benefits and to exit costs associated with facilities that are not operating.
Income from Operations (millions of dollars) |
First Half |
First |
Growth |
|||||
Income from operations |
$ |
55.9 |
$ |
49.6 |
13 |
% |
Income from operations in the first half of 2008 increased 13% to $55.9 million from $49.6 million in the prior year. Income from operations represented 9.7% of net sales in the first half of 2008 compared with 9.2% in the first half of 2007.
Income from operations for the Specialty Minerals segment increased 12% to $38.5 million and was 10.4% of its net sales. Operating income for this segment was impacted by the aforementioned factors affecting production margin but were offset by lower expense levels than in the prior year. Operating income for the Refractories segment increased 17% and was 8.6% of its net sales as compared with 8.5% of its net sales in 2007.
Non-Operating Deductions |
First |
First |
||||||||
(millions of dollars) |
2008 |
2007 |
Growth |
|||||||
Non-operating income (deductions), net |
$ |
(2.2) |
$ |
(4.4) |
(49) |
% |
21
In the first half of 2008, net non-operating deductions decreased 49% to $(2.2) million. This decrease was primarily attributable to lower interest expense relating to lower interest rates and reduced debt levels. In addition, higher interest income was generated on increased cash balances.
Provision for Taxes on Income |
First |
First |
||||||||
(millions of dollars) |
2008 |
2007 |
Growth |
|||||||
Provision for taxes on income |
$ |
16.6 |
$ |
14.8 |
12 |
% |
The effective tax rate decreased to 30.9% in the first half of 2008 from 32.8% in the prior year due to a change in the geographic mix of earnings.
Income from Continuing Operations |
First |
First |
||||||||
(millions of dollars) |
2008 |
2007 |
Growth |
|||||||
Income from continuing operations |
$ |
35.5 |
$ |
28.7 |
24 |
% |
Income from continuing operations increased 24% to $35.5 million from $28.7 million in the prior year.
Income (Loss) from Discontinued Operations |
First |
First |
||||||||
(millions of dollars) |
2008 |
2007 |
Growth |
|||||||
Income (loss) from discontinued operations |
$ |
5.0 |
$ |
(3.5) |
* |
% |
*
Percentage not meaningfulIn the first half of 2008 the Company recognized income from discontinued operations of $5.0 million as compared with a loss in the prior year of $(3.5) million. Included in income from discontinued operations for 2008 is a gain of approximately $4.3 million, net of tax, for the sale of our idle Woodville and Chester facilities. The loss in the prior year was primarily attributable to the results of operations of SYNSIL®.
Net Income |
First |
First |
||||||||
(millions of dollars) |
2008 |
2007 |
Growth |
|||||||
Net income |
$ |
40.5 |
$ |
25.2 |
61 |
% |
Net income increased 61% in the first half of 2008 to $40.5 million. Diluted earnings per common share increased 63% to $2.12 per share in the first half of 2008 as compared with $1.30 per share in the prior year.
Liquidity and Capital Resources
Cash flows in the first six months of 2008 provided from operations were applied principally to fund capital expenditures, repay debt and repurchase common shares for treasury. Cash provided from operating activities amounted to $38.1 million in the first six months of 2008 as compared with $72.3 million for the same period last year. The decrease in cash provided from operations was due to payments related to restructuring activities and an increase in working capital when compared with the prior year. Working capital is defined as trade accounts receivable, trade accounts payable and inventories. The working capital increase was primarily due to an increase in accounts receivable, raw materials inventories and the effects of foreign exchange. Our days of working capital increased by 5 days in the second quarter of 2008 from the fourth quarter of 2007, but decreased 8 days from the prior years second quarter.
Our accounts receivable increased 16% from December 31, 2007 as compared with a 9% increase in sales over the fourth quarter of 2007. However, sales increased at an accelerated rate during the latter part of the second quarter of 2008 as compared with the same period in the fourth quarter of 2007 due to the cyclical nature of some of our product lines. This, as well as foreign currency, contributed to the increase in accounts receivable. As a result,
22
our days of sales outstanding increased 3 days from the year-end levels and decreased 2 days from the prior years second quarter.
Our inventory levels also increased from year-end levels as the Company accelerated purchases of higher priced raw materials imported from China due to the build up of magnesium oxide in anticipation of production curtailment related to the Beijing Olympics in China. As a result, our days of inventory on hand were 4 days higher in the second quarter of 2008 as compared to the fourth quarter of 2007.
On October 25, 2005, the Companys Board of Directors authorized the Companys management to repurchase, at its discretion, up to $75 million in additional shares over the next three-year period. As of March 30, 2008, the Company repurchased 1,307,598 shares under this program at an average price of $57.36 per share. This program was completed in February 2008.
On October 24, 2007, the Companys Board of Directors authorized the Companys management to repurchase, at its discretion, up to $75 million of additional shares over the next two-year period. As of June 29, 2008, 305,174 shares have been purchased under this program at an average price of approximately $62.65 per share.
On July 24, 2008, our Board of Directors declared a regular quarterly dividend on our common stock of $0.05 per share. No dividend will be payable unless declared by the Board and unless funds are legally available for payment.
We have $193.8 million in uncommitted short-term bank credit lines, of which $19.4 million were in use at June 29, 2008. We anticipate that capital expenditures for 2008 should approximate $75 million, principally related to the construction of PCC plants and other opportunities that meet our strategic growth objectives. We expect to meet our other long-term financing requirements from internally generated funds, uncommitted bank credit lines and, where appropriate, project financing of certain satellite plants. The aggregate maturities of long-term debt are as follows: remainder of 2008 - $0.4 million; 2009 - $4.0 million; 2010 - $4.6 million; 2011 - $-- million; 2012 - $8.0 million; thereafter - $84.6 million.
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 managements plans and assumptions. Words such as "believes," "expects," "plans," "anticipates," "estimates" and words and terms of similar substance, used in connection with any discussion of future operating or financial performance identify these forward-looking statements.
Although we believe we have been prudent in our plans and assumptions, we cannot guarantee that the outcomes suggested in any forward-looking statement will be realized. 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 entitled "Cautionary Factors That May Affect Future Results" in Exhibit 99 to this Quarterly Report.
Recently Issued Accounting Standards
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), "Business Combinations" ("Statement No. 141(R)"). Statement No. 141(R) changes the requirements for an acquirers recognition and measurement of the assets acquired and the liabilities assumed in a business combination. Statement No. 141(R) is effective for annual periods beginning after December 15, 2008 and should be applied prospectively for all business combinations entered into after the date of adoption.
In December 2007, the FASB issued Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" ("Statement No. 160"). Statement No. 160 requires (i) that noncontrolling (minority) interests be reported as a component of shareholders' equity, (ii) that net income attributable to the parent and to the noncontrolling interest be separately identified in the consolidated
23
statement of operations, (iii) that changes in a parents ownership interest while the parent retains its controlling interest be accounted for as equity transactions, (iv) that any retained noncontrolling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value, and (v) that sufficient disclosures are provided that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.. Statement No. 160 is effective for annual periods beginning after December 15, 2008 and should be applied prospectively. However, the presentation and disclosure requirements of the statement shall be applied retrospectively for all periods presented. The adoption of the provisions of Statement No. 160 is not anticipated to materially impact the Companys consolidated financial position and results of operations.
In February 2008, the FASB issued FSP FAS 157-1, "Application of FASB No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements that Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13" and FSP FAS 157-2, "Effective Date of FASB Statement No. 157." FSP 157-1 excludes fair measurements for purposes of lease classification or measurement under FASB Statement 13 from the fair value measurement under FASB Statement 157. FSP 157-2 defers the effective date of Statement 157 for non-financial assets and non-financial liabilities to fiscal years beginning after November 15, 2008.
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, " Disclosures About Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133." This statement amends the disclosure requirements under SFAS 133 and requires companies with derivative instruments to provide enhanced disclosures that would enable financial statement users to understand how derivative instruments affect a companys financial position, financial performance and cash flows. This statement is effective for fiscal years beginning on or after November 15, 2008, with early adoption encouraged.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, allowance for doubtful accounts, valuation of inventories, valuation of long-lived assets, pension plan assumptions, stock-based compensation assumptions, income taxes, income tax valuation allowances and litigation and environmental liabilities. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that can not readily be determined from other sources. There can be no assurance that actual results will not differ from those estimates.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse changes in market prices and foreign currency and interest rates. We are exposed to market risk because of changes in foreign currency exchange rates as measured against the U.S. dollar. We do not anticipate that near-term changes in exchange rates will have a material impact on our future earnings or cash flows. However, there can be no assurance that a sudden and significant decline in the value of foreign currencies would not have a material adverse effect on our financial condition and results of operations. Approximately 60% of our bank debt bear interest at variable rates; therefore our results of operations would only be affected by interest rate changes to such outstanding bank debt. An immediate 10 percent change in interest rates would not have a material effect on our results of operations over the next fiscal year.
We do not enter into derivatives or other financial instruments for trading or speculative purposes. When appropriate, we enter into derivative financial instruments, such as forward exchange contracts and interest rate swaps, to mitigate the impact of foreign exchange rate movements and interest rate movements on our operating results. The counterparties are major financial institutions. Such forward exchange contracts and interest rate swaps would not subject us to additional risk from exchange rate or interest rate movements because gains and losses on
24
these contracts would offset losses and gains on the assets, liabilities, and transactions being hedged. We have open forward exchange contracts to purchase approximately $5.5 million of foreign currencies as of June 29, 2008. The contracts mature between July 2008 and January of 2009. The fair value of these instruments at June 29, 2008 was an asset of $0.2 million.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, and under the supervision and with participation of the Companys management, including the Chief Executive Officer and the Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Companys disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys periodic filings with the Securities and Exchange Commission.
Changes in Internal Control Over Financial Reporting
The Company is in the process of implementing a global enterprise resource planning ("ERP") system to manage its business operations. As of June 29, 2008, all of our domestic locations were using the new system. The worldwide implementation is expected to be completed over the next few years and involves changes in systems that include internal controls. Although the transition has proceeded to date without material adverse effects, the possibility exists that our migration to the new ERP system could adversely affect the Companys internal controls over financial reporting and procedures. We are reviewing each system as it is being implemented and the controls affected by the implementation of the new systems, and are making appropriate changes to affected internal controls as we implement the new systems. We believe that the controls as modified are appropriate and functioning effectively.
There was no change in the Companys internal control over financial reporting (other than the ongoing implementation of the ERP system discussed above) during the quarter ended June 29, 2008 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
As previously reported, certain of the Companys subsidiaries are among numerous defendants in a number of cases seeking damages for exposure to silica or to asbestos containing materials. The Company currently has 307 pending silica cases and 26 pending asbestos cases. To date, 1,158 silica cases and 1 asbestos case have been dismissed. Most of these claims do not provide adequate information to assess their merits, the likelihood that the Company will be found liable, or the magnitude of such liability, if any. Additional claims of this nature may be made against the Company or its subsidiaries. At this time management anticipates that the amount of the Companys liability, if any, and the cost of defending such claims, will not have a material effect on its financial position or results of operations.
The Company has not settled any silica or asbestos lawsuits to date. We are unable to state an amount or range of amounts claimed in any of the lawsuits because state court pleading practices do not require identifying the amount of the claimed damage. The aggregate cost to the Company for the legal defense of these cases since inception was approximately $0.1 million. Our experience has been that the Company is not liable to plaintiffs in any of these lawsuits and the Company does not expect to pay any settlements or jury verdicts in these lawsuits.
25
Environmental Matters
On April 9, 2003, the Connecticut Department of Environmental Protection ("DEP") issued an administrative consent order relating to our Canaan, Connecticut, plant where both our Refractories segment and Specialty Minerals segment have operations. We agreed to the order, which includes provisions requiring investigation and remediation of contamination associated with historic use of polychlorinated biphenyls ("PCBs") at a portion of the site. The following is the present status of the remediation efforts:
• |
Building Decontamination. We have completed the investigation of building contamination and submitted a report characterizing the contamination. We are awaiting review and approval of this report by the regulators. Based on the results of this investigation, we believe that the contamination may be adequately addressed by means of encapsulation through painting of exposed surfaces, pursuant to the Environmental Protection Agencys ("EPA") regulations and have accrued such liabilities as discussed below. However, this conclusion remains uncertain pending completion of the phased remediation decision process required by the regulations. |
• | Groundwater. We have completed investigations of potential groundwater contamination and are preparing a report on the investigations finding that there is no PCB contamination, but some oil contamination of the groundwater. We expect the regulators to require confirmatory long term groundwater monitoring at the site. |
• |
Soil. We have completed the investigation of soil contamination and submitted a report characterizing contamination to the regulators. Based on the results of this investigation, we believe that the contamination may be left in place and monitored, pursuant to a site-specific risk assessment, which is underway. However, this conclusion is subject to completion of a phased remediation decision process required by applicable regulations. |
We believe that the most likely form of remediation will be to leave existing contamination in place, encapsulate it, and monitor the effectiveness of the encapsulation.
We estimate that the cost of the likely remediation above would approximate $400,000, and that amount has been recorded as a liability on our books and records.
The Company is evaluating options for upgrading the wastewater treatment facilities at its Adams, Massachusetts, plant. This work is being undertaken pursuant to an administrative Consent Order issued by the Massachusetts Department of Environmental Protection on June 18, 2002. The Order required payment of a civil fine in the amount of $18,500, the investigation of options for ensuring that the facilitys wastewater treatment ponds will not result in discharge to groundwater, and closure of a historic lime solids disposal area. The Company informed the Massachusetts Department of Environmental Protection of proposed improvements to the wastewater treatment system on June 29, 2007, and is committed to implementing the improvements by June 1, 2012. Preliminary engineering reviews indicate that the estimated cost of these upgrades to operate this facility beyond 2012 may be between $6 million and $8 million. The Company estimates that remediation costs would approximate $500,000, which has been accrued as of June 29, 2008.
The Company and its subsidiaries are not party to any other material pending legal proceedings, other than routine litigation incidental to their businesses.
ITEM 1A. Risk Factors
There have been no material changes to our risk factors from those disclosed in our 2007 Annual Report on Form 10-K. For a description of Risk Factors, see Exhibit 99 attached to this report.
26
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Period |
Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of the Publicly Announced Program |
Dollar Value of Shares that May Yet be Purchased Under the Program |
|||||||
March 31 - April 27 |
46,500 |
$ |
63.83 |
260,574 |
$ |
58,942,946 |
|||||
April 28 - May 25 |
27,200 |
$ |
68.87 |
287,774 |
$ |
57,069,643 |
|||||
May 26 - June 29 |
17,400 |
$ |
68.35 |
305,174 |
$ |
55,880,314 |
|||||
Total |
91,100 |
$ |
66.20 |
||||||||
On October 25, 2005, the Companys Board of Directors authorized the Companys management to repurchase, at its discretion, up to $75 million in additional shares over the next three-year period. As of March 30, 2008, the Company repurchased 1,307,598 shares under this program at an average price of $57.36 per share. This program was completed in February 2008.
On October 24, 2007, the Companys Board of Directors authorized the Companys management to repurchase, at its discretion, up to $75 million of additional shares over the next two-year period. As of June 29, 2008, 305,174 shares have been purchased under this program at an average price of approximately $62.65 per share.
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 28, 2008, the following two items were submitted to a vote of the stockholders of the Company:
Votes regarding the election of three directors were as follows: |
Term Expiring in 2011 |
Votes For |
Votes Withheld |
Paula H.J. Cholmondeley |
16,019,274 |
981,450 |
Duane R. Dunham |
16,558,802 |
441,922 |
Steven J. Golub |
16,265,187 |
735,537 |
2. |
Votes regarding ratification of the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the 2008 fiscal year were as follows: |
16,745,386 |
votes for approval |
251,319 |
votes against |
26,397 |
abstentions |
ITEM 6. Exhibits
Exhibit No. |
Exhibit Title |
|||
15 |
Letter Regarding Unaudited Interim Financial Information. |
|||
31.1 |
Rule 13a-14(a)/15d-14(a) Certification executed by the Companys principal executive officer. |
|||
31.2 |
Rule 13a-14(a)/15d-14(a) Certification executed by the Companys principal financial officer. |
|||
32 |
Section 1350 Certifications. |
|||
99 |
Statement of Cautionary Factors That May Affect Future Results. |
27
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/John A. Sorel |
|
John A. Sorel | ||
Senior Vice President-Finance and | ||
Chief Financial Officer | ||
(principal financial officer) |
July 29, 2008
28
EXHIBIT 15
ACCOUNTANTS' ACKNOWLEDGEMENT
Board of Directors
Minerals Technologies Inc.:
Re: Registration Statement Nos. 33-59080, 333-62739 and 333-138245
With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated July 29, 2008, 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 independent registered public accounting firm or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.
/s/ KPMG LLP
New York, New York
July 29, 2008
EXHIBIT 31.1
RULE 13a-14(a)/15d-14(a) CERTIFICATION
I, Joseph C. Muscari, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Minerals Technologies Inc.; | |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
||
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
||
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
||
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
||
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: |
|
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
||
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: July 29, 2008
By: |
/s/ Joseph C. Muscari |
|
Joseph C. Muscari | ||
Chairman of the Board | ||
and Chief Executive Officer |
EXHIBIT 31.2
RULE 13a-14(a)/15d-14(a) CERTIFICATION
I, John A. Sorel, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Minerals Technologies Inc.; | |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
||
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
||
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
||
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
||
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: |
|
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
||
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: July 29, 2008
By: |
/s/John A. Sorel |
|
John A. Sorel | ||
Senior Vice President-Finance and | ||
Chief Financial Officer | ||
(principal financial officer) |
EXHIBIT 32
SECTION 1350 CERTIFICATIONS
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350 of Chapter 63 of Title 18, United States Code), each of the undersigned officers of Minerals Technologies Inc., a Delaware corporation (the "Company"), does hereby certify that:
The Quarterly Report on Form 10-Q for the quarter ended June 29, 2008 (the "Form 10-Q") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: July 29, 2008
By: |
/s/Joseph C. Muscari |
|
Joseph C. Muscari | ||
Chairman of the Board | ||
and Chief Executive Officer |
Date: July 29, 2008
By: |
/s/John A. Sorel |
|
John A. Sorel | ||
Senior Vice President-Finance and | ||
Chief Financial Officer | ||
(principal financial officer) |
The foregoing certification is being furnished solely pursuant to Exchange Act Rule 13a-14(b); is not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section; and is not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act of 1934.
EXHIBIT 99
RISK FACTORS
The disclosure and analysis set forth in this report contains certain forward-looking statements, particularly statements relating to future actions, future performance or results of current and anticipated products, sales efforts, expenditures, and financial results. From time to time, the Company also provides forward-looking statements in other publicly-released materials, both written and oral. Forward-looking statements provide current expectations and forecasts of future events such as new products, revenues and financial performance, and are not limited to describing historical or current facts. They can be identified by the use of words such as "expects," "plans," "anticipates," and other words and phrases of similar meaning.
Forward-looking statements are necessarily based on assumptions, estimates and limited information available at the time they are made. A broad variety of risks and uncertainties, both known and unknown, as well as the inaccuracy of assumptions and estimates, can affect the realization of the expectations or forecasts in these statements. 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. Investors should not consider this list an exhaustive statement of all risks, uncertainties and potentially inaccurate assumptions.
• |
Growth Rate |
Sales and income growth of the Company depends upon a number of uncertain events, including the outcome of the Company's strategies of increasing its penetration into geographic markets such as Asia 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; developing, introducing and selling new products such as filler-fiber composite materials for the paper industry; and acquisitions. Difficulties, delays or failure of any of these strategies could affect the future growth rate of the Company. |
|
• |
Contract Renewals |
Generally, the Company's sales of PCC are pursuant to long-term evergreen agreements, initially ten years in length, with paper mills where 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 plant. However, failure of a number of the Company's customers to renew or extend existing agreements on terms as favorable to the Company as those currently in effect could have a substantial adverse effect on the Company's results of operations, and could also result in impairment of the assets associated with the PCC plant. |
|
• |
Consolidation in Customer Industries, Principally Paper and Steel |
Several consolidations in the paper industry have taken place in recent years. These consolidations could result in partial or total closure of some paper mills where the Company operates PCC satellites. Such closures would reduce the Company's sales of PCC, except to the extent that they resulted in shifting paper production and associated purchases of PCC to another location served by the Company. Similarly, following a string of bankruptcies, consolidations have occurred in the steel industry. Such consolidations in the two major industries we serve concentrate purchasing power in the hands of a smaller number of papermakers and steel manufacturers, enabling them to increase pressure on suppliers, such as the Company. This increased pressure could have an adverse effect on the Company's results of operations in the future. |
|
• |
Litigation; Environmental Exposures |
The Company's operations are subject to international, federal, state and local governmental, tax and other laws and regulations, and potentially to claims for various legal, environmental and tax matters. The Company is currently a party in 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. |
In addition, future events, such as changes in or modifications or interpretations of existing laws and regulations, or enforcement polices, 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. |
||
• |
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 our expected results. |
||
• |
Competition; Protection of Intellectual Property | |
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 increased risks of doing business abroad, including inflation, fluctuation 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, civil unrest, terrorism, 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 the PCC product line, and magnesia and alumina for Refractory operations and on having adequate access to ore reserves of appropriate quality 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. |
||
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Cyclical Nature of Customers' Businesses | |
The majority 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 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 generally rises as the number of tons purchased declines. In addition, many of the Company's product lines lower its customers' costs of production or increase their productivity, which should encourage them to use its products. In addition, our Processed Minerals and Specialty PCC product lines are impacted by the domestic building and construction markets. The residential component of this market is experiencing a significant slowdown which could adversely impact growth. 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. |