Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
MTX > SEC Filings for MTX > Form 10-K on 17-Feb-2017All Recent SEC Filings

Show all filings for MINERALS TECHNOLOGIES INC

Form 10-K for MINERALS TECHNOLOGIES INC


17-Feb-2017

Annual Report


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement for "Safe Harbor" Purposes under the Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. This report contains statements that the Company believes may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, particularly statements relating to the Company's objectives, plans or goals, future actions, future performance or results of current and anticipated products, sales efforts, expenditures, and financial results. From time to time, the Company also provides forward-looking statements in other publicly-released materials, both written and oral. Forward-looking statements provide current expectations and forecasts of future events such as new products, revenues and financial performance, and are not limited to describing historical or current facts. They can be identified by the use of words such as "believes," "expects," "plans," "intends," "anticipates," and other words and phrases of similar meaning.

Forward-looking statements are necessarily based on assumptions, estimates and limited information available at the time they are made. A broad variety of risks and uncertainties, both known and unknown, as well as the inaccuracy of assumptions and estimates, can affect the realization of the expectations or forecasts in these statements. Many of these risks and uncertainties are difficult to predict or are beyond the Company's control. Consequently, no forward-looking statements can be guaranteed. Actual future results may vary materially. Significant factors affecting the expectations and forecasts are set forth under "Item 1A - Risk Factors" in this Annual Report on Form 10-K.

The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances that arise after the date hereof. Investors should refer to the Company's subsequent filings under the Securities Exchange Act of 1934 for further disclosures.

Executive Summary

The Company reported diluted earnings of $3.79 per share, an increase of 23% from prior year earnings of $3.08 per share.

Worldwide sales were $1.6 billion in 2016 as compared with $1.8 billion in 2015, a decrease of 9%. The decrease in sales was primarily due to our exit from several service lines in our Energy Services segment resulting from continued weaker market conditions in the oil and gas sector, weaker conditions in the steel sector, and to previously announced North American paper mill closures in our Specialty Minerals segment. In addition, foreign exchange had an unfavorable impact on sales of $34.0 million, or 2 percentage points of decline.

Consolidated income from operations was $220.9 million as compared with $200.3 million in the prior year. This increase was due to strong results from our Specialty Minerals and Performance Materials segments, due to company-wide productivity improvements of 7 percent and cost control. In addition, there were lower restructuring costs in 2016 as compared with the prior year. Net income was $133.4 million as compared to $107.9 million in the prior year.

In 2016, the Company continued to advance the execution of its growth strategies of geographic expansion and new product innovation and development. Our businesses in China grew 9 percent in 2016 over prior year and our long-term growth targets in the region remain on track. We began operations of a 100,000 ton satellite plan in China in the third quarter of 2016. The Company continued to see progress in its major growth strategy of developing and commercializing new products. We have twenty-six commercial contracts for FulFill® globally. Earlier this year, we also formed an EcoPartnership in China with the Sun Paper Group and Tsinghua University's School of Environment to pilot innovation with our NewYield™ process technology aimed at reducing soil and ground water pollution by converting a waste stream from the papermaking process into useable filler for paper.

Long term debt as of December 31, 2016 was $1,069.9 million. During the 2016, we repaid $193 million of our long-term debt. Since the acquisition of AMCOL in 2014, we have repaid over $480 million of our Term Loan debt. Cash, cash equivalents and short-term investments were $191 million as of December 31, 2016. Cash flow from operations for 2016 was $225.0 million. Our intention continues to be to use excess cash flow primarily to repay debt and to continue to de-lever as quickly as possible.

Outlook

Looking forward, we remain cautious about the state of the global economy and the impact it will have on our product lines.

The Company will continue to focus on innovation and new product development and other opportunities for sales growth from its existing businesses, as follows:

· Develop multiple high-filler technologies under the FulFill® platform of products, to increase the fill rate in freesheet paper and continue to progress with commercial discussions and full-scale paper machine trials.

· Develop products and processes for waste management and recycling opportunities to reduce the environmental impact of the paper mill, reduce energy consumption and improve the sustainability of the papermaking process, including our New YieldTM products.


Table of Contents
· Further penetration into the packaging segment of the paper industry.

· Increase our sales of PCC for paper by further penetration of the markets for paper filling at both freesheet and groundwood mills, particularly in emerging markets.

· Expand the Company's PCC coating product line using the satellite model.

· Increase our presence and gain penetration of our bentonite based foundry customers for the Metalcasting industry in emerging markets, such as China and India.

· Increase our presence and market share in global pet care products, particularly in emerging markets.

· Deploy new products in pet care such as lightweight litter.

· Promote the Company's expertise in crystal engineering, especially in helping papermakers customize PCC morphologies for specific paper applications.

· Expand PCC produced for paper filling applications by working with industry partners to develop new methods to increase the ratio of PCC for fiber substitutions.

· Develop unique calcium carbonate and talc products used in the manufacture of novel biopolymers, a new market opportunity.

· Deploy new talc and GCC products in paint, coating and packaging applications.

· Deploy value-added formulations of refractory materials that not only reduce costs but improve performance.

· Expand our solid core wire product line into BRIC, Middle Eastern and other Asian countries.

· Deploy our laser measurement technologies into new applications.

· Expand our refractory maintenance model to other steel makers globally.

· Increase our presence and market share in Asia and in the global powdered detergent market.

· Continue the development of our proprietary Enersol® products for agricultural applications worldwide.

· Pursue opportunities for our products in environmental and building and construction markets in the Middle East, Asia Pacific and South America regions.

· Increase our presence and market share for geosynthetic clay liners within the Environmental Products product line.

· Increase our presence and market penetration in filtration and well testing within the Energy Services segment.

· Increase global market share in services for the floating production storage and offloading (FPSO) market.

· Deploy operational excellence principles into all aspects of the organization, including system infrastructure and lean principles.

· Continue to explore selective small bolt-on type acquisitions to fit our core competencies in minerals and fine particle technology.

However, there can be no assurance that we will achieve success in implementing any one or more of these opportunities.


Table of Contents
Results of Operations

Consolidated Income Statement Review

                                                        Year Ended December 31,
                                                                             2016 vs.       2015 vs.
                                    2016          2015          2014           2015           2014
                                                         (Dollars in millions)
Net sales                         $ 1,638.0     $ 1,797.6     $ 1,725.0           -8.9 %          4.2 %
Cost of sales                       1,177.6       1,326.6       1,289.6          -11.2 %          2.9 %
Production margin                     460.4         471.0         435.4           -2.3 %          8.2 %
Production margin %                    28.1 %        26.2 %        25.2 %

Marketing and administrative
expenses                              179.4         190.1         182.2           -5.6 %          4.3 %
Research and development
expenses                               23.8          23.6          24.4            0.8 %         -3.3 %
Insurance / litigation
settlement (gain)                         -             -          (2.3 )            *              *
Acquisition related transaction
and integration costs                   8.0          11.8          19.1          -32.2 %        -38.2 %
Restructuring and other items,
net                                    28.3          45.2          43.2          -37.4 %          4.6 %

Income from operations                220.9         200.3         168.8           10.3 %         18.7 %
Operating margin %                     13.5 %        11.1 %         9.8 %

Interest expense, net                 (54.4 )       (60.9 )       (41.8 )        -10.7 %         45.7 %
Premium on early extinguishment
of debt                                   -          (4.5 )        (5.8 )       -100.0 %        -22.4 %
Other non-operating income
(deductions), net                       3.8          (2.3 )         1.8              *              *
Total non-operating deductions,
net                                   (50.6 )       (67.7 )       (45.8 )        -25.3 %         47.8 %

Income from continuing
operations before provision for
taxes and equity in earnings          170.3         132.6         123.0           28.4 %          7.8 %
Provision for taxes on income          35.3          22.8          30.8           54.8 %        -26.0 %
Effective tax rate                     20.7 %        17.2 %        25.0 %

Equity in earnings of
affiliates, net of tax                  2.1           1.8           1.2           16.7 %         50.0 %

Income from continuing
operations, net of tax                137.1         111.6          93.4           22.8 %         19.5 %
Income  from discontinued
operations, net of tax                    -             -           2.1              *              *
Net income attributable to
non-controlling interests               3.7           3.7           3.1            0.0 %         19.4 %
Net income attributable to
Minerals Technologies Inc.
(MTI)                             $   133.4     $   107.9     $    92.4           23.6 %         16.8 %



* Not meaningful

Net Sales

                                                          Year Ended December 31,
                                                                               2016 vs.       2015 vs.
                                      2016          2015          2014           2015           2014
                                                           (Dollars in millions)
U.S.                                $   936.2     $ 1,049.6     $ 1,004.4          -10.8 %          4.5 %
International                           701.8         748.0         720.6           -6.2 %          3.8 %
Total sales                         $ 1,638.0     $ 1,797.6     $ 1,725.0           -8.9 %          4.2 %

Specialty Minerals Segment          $   591.5     $   624.6     $   650.1           -5.3 %         -3.9 %
Refractories Segment                    274.5         295.9         359.7           -7.2 %        -17.7 %
Performance Materials Segment           502.8         514.8         352.8           -2.3 %         45.9 %
Construction Technologies Segment       183.3         180.1         152.3            1.8 %         18.3 %
Energy Services Segment                  85.9         182.2         210.1          -52.9 %        -13.3 %
Total sales                         $ 1,638.0     $ 1,797.6     $ 1,725.0           -8.9 %          4.2 %

* Not meaningful


Table of Contents
Worldwide net sales in 2016 decreased 8.9% from the previous year to $1,638.0 million. Foreign exchange had an unfavorable impact on sales of $34.0 million or 2 percent. Net sales in the United States decreased to $936.2 million in 2016 and represented 57.2% of consolidated net sales. International sales decreased slightly to $701.8 million from $748.0 million and represented 42.8% of consolidated net sales.

Worldwide net sales in 2015 increased 4.2% from the previous year to $1,797.6 million. Foreign exchange had an unfavorable impact on sales of $95.3 million or 6 percentage points of growth. Net sales in the US grew slightly to $1,049.6 million and represented 58.4% of consolidated net sales. International sales increased 3.8% to $748.0 million from $720.6 million.

Operating Costs and Expenses

Consolidated cost of sales was $1,177.6 million, $1,326.6 million and $1,289.6 million in 2016, 2015 and 2014, respectively. Production margin as a percentage of net sales was 28.1% in 2016, 26.2% in 2015 and 25.2% in 2014. Improved productivity, supply chain savings and cost improvements offset the impact of weak market conditions within the Energy Services segment.

Marketing and administrative costs were $179.4 million, $190.1 million and $182.2 million in 2016, 2015 and 2014, respectively. Marketing and administrative costs as a percentage of net sales were 10.9% in 2016, 10.6% in 2015 and 10.6% in 2014.

Research and development expenses were $23.8 million, $23.6 million and $24.4 million in 2016, 2015 and 2014, respectively. Research and development expenses as a percentage of net sales were 1.4% in 2016, 1.3% in 2015 and 1.4% in 2014.

The Company incurred $8.0 million, $11.8 million and $19.1 million in 2016, 2015 and 2014, respectively for the acquisition related transaction and integration costs.

The Company recognized a litigation settlement gain of $2.3 million in 2014.

In 2016, the Company recorded a $28.3 million charge for impairment of assets and other restructuring costs, including lease termination costs relating to its exit of U.S. on-shore service lines, including the Nitrogen and Pipeline product lines in our Energy Services segment.

In 2014, the Company initiated a restructuring program to realign its business operations, improve efficiencies, profitability, and return on invested capital. As a result of this restructuring, the Company recorded $45.2 million and $43.2 million of charges related to asset impairments, severance and other employee costs in 2015 and 2014, respectively. This restructuring impacted all business segments of the Company. See Note 3 to the Consolidated Financial Statements for further details.

Income from Operations

During 2016, the Company recorded income from operations of $220.9 million as compared with $200.3 million in the prior year. Income from operations represented 13.5% of sales compared with 11.1% of sales in the prior year. Income from operations in 2016 included acquisition related integration costs of $8.0 million and restructuring and other charges of $28.3 million.

During 2015, the Company recorded income from operations of $200.3 million as compared with $168.8 million in the prior year. Income from operations represented 11.1% of sales compared with 9.8% of sales in the prior year. Income from operations in 2015 included acquisition related integration costs of $11.8 million and restructuring and other charges of $45.2 million.

Non-Operating Income (Deductions)

The Company recorded non-operating deductions of $50.6 million in 2016 as compared with $67.7 million in the previous year.

Net interest expense was $54.4 million in 2016 as compared $60.9 million in the prior year, as a result of lower debt balances due to principal repayments and lower interest costs relating lower rates resulting from the debt repricing in 2015.

In the second quarter of 2015, the Company repriced the outstanding balance of its senior secured loan facility and recorded $4.5 million in non-cash debt modification costs and other debt modification fees.

In the fourth quarter of 2015, the Company recorded a $7.6 million charge relating to the write-down of an investment in a development stage enterprise.

Provision for Taxes on Income

Provision for taxes was $35.3 million, $22.8 million and $30.8 million in 2016, 2015 and 2014, respectively. The effective tax rates were 20.7%, 17.2% and 25.0% during 2016, 2015 and 2014, respectively. The higher effective tax rate in 2016 was primarily due to a lower benefit from depletion as a percentage of earnings and to the mix of earnings. The lower effective tax rate in 2015 was primarily due to tax benefits on one-time charges at a higher rate and higher depletion deductions.


Table of Contents
The factors having the most significant impact on our effective tax rates in recent periods are the rate differentials related to foreign earnings indefinitely invested, percentage depletion, and the tax benefits on restructuring and impairment charges at a higher rate.

Percentage depletion allowances (tax deductions for depletion that may exceed our tax basis in our mineral reserves) are available to us under the income tax laws of the United States for operations conducted in the United States. The tax benefits from percentage depletion were $11.3 million in 2016, $11.2 million in 2015 and $9.5 million in 2014.

We operate in various countries around the world that have tax laws, tax incentives and tax rates that are significantly different than those of the United States. These differences combine to move our overall effective tax rate higher or lower than the United States statutory rate depending on the mix of income relative to income earned in the United States. The effects of foreign earnings and the related foreign rate differentials resulted in a decrease of income tax expense of $14.7 million, $11.0 million and $11.7 million in 2016, 2015 and 2014, respectively.

Income from Continuing Operations, Net of Tax

Income from continuing operations, net of tax, was $137.1 million in 2016 and included a $24.0 million charge, net of tax. Such charge consisted of restructuring and other net items, acquisition transaction and integration costs and lease termination costs, inventory write-offs and impairment of assets relating to the Company's exit from the Nitrogen and Pipeline product lines and the restructuring of other onshore services within the Energy Services segment.

Income from continuing operations, net of tax, was $111.6 million during 2015 and included a $43.1 million charge, net of tax. Such charge consisted of restructuring and other charges, acquisition transaction and integration costs, debt prepayment costs, and the write down of an investment in a development stage enterprise.

Income from Discontinued Operations, Net of tax

The Company recognized income from discontinued operations, net of tax, of $2.1 million during 2014 relating its discontinued operations at its merchant PCC facility at Walsum, Germany.

 Segment Review

The following discussions highlight the operating results for each of our five
segments.

Specialty Minerals Segment

                                  Year Ended December 31,
Specialty Minerals Segment                                          2016 vs.       2015 vs.
                                2016        2015        2014          2015           2014
                                                  (millions of dollars)
Net Sales
Paper PCC                     $  387.9     $ 423.3     $ 454.5     $    (35.4 )   $    (31.2 )
Specialty PCC                     64.3        64.8        66.1           (0.5 )         (1.3 )
PCC Products                  $  452.2     $ 488.1     $ 520.6     $    (35.9 )   $    (32.5 )

Talc                          $   55.7     $  55.9     $  55.5     $     (0.2 )   $      0.4
Ground Calcium Carbonate          83.6        80.6        74.0            3.0            6.6
Processed Minerals Products   $  139.3     $ 136.5     $ 129.5     $      2.8     $      7.0

Total net sales               $  591.5     $ 624.6     $ 650.1     $    (33.1 )   $    (25.5 )

Income from operations        $  102.7     $ 100.8     $  95.8     $      1.9     $      5.0
% of net sales                    17.4 %      16.1 %      14.7 %

2016 v 2015

Net sales in the Specialty Minerals segment decreased 5 percent to $591.5 million from $624.6 million. Higher sales in our Processed Minerals product line, stemming from increased ground calcium carbonate volumes were offset by declines in Paper PCC. Worldwide net sales of PCC products, which are primarily used in the manufacturing process of the paper industry, decreased $35.9 million, or 7 percent. Foreign exchange had an unfavorable impact on PCC products sales $9.7 million, or 2 percentage points. The decrease in Paper PCC sales was primarily due to several previously announced paper mill closures in the U.S and weaker printing and writing paper demand in the U.S. and Europe. This was partially offset by an increase in PCC sales in China of 12 percent over last year due to the ramp-up of two new facilities and the successful startup of a 100,000 ton satellite in the third quarter of 2016.


Table of Contents
Income from operations increased $1.9 million to $102.7 million and represented 17.4% of net sales compared to $100.8 million and 16.1% of sales in prior year.

2015 v 2014

Net sales in the Specialty Minerals segment decreased 4% to $624.6 million from $650.1 million. Foreign exchange had an unfavorable impact on sales of $33.5 million, or 5 percent. Excluding the effects of foreign exchange, higher sales in ground calcium carbonate were partially offset by declines in Paper PCC. Worldwide net sales of PCC products decreased $32.5 million, or 6 percent. Foreign exchange had an unfavorable impact on PCC products sales $30.9 million, or 7 percent. Talc and ground calcium carbonate sales increased primarily due to increased volumes.

Income from operations increased $5.0 million and represented 16.1% of net sales compared to $95.8 million and 14.7% of sales in prior year.

Refractories Segment

                             Year Ended December 31,
Refractories Segment                                           2016 vs.       2015 vs.
                           2016        2015        2014          2015           2014
                                             (millions of dollars)
Net Sales
Refractory Products      $  219.0     $ 230.7     $ 273.9     $    (11.7 )   $    (43.2 )
Metallurgical Products       55.5        65.2        85.8           (9.7 )        (20.6 )
Total net sales          $  274.5     $ 295.9     $ 359.7     $    (21.4 )   $    (63.8 )

Income from operations   $   37.0     $  27.8     $  43.2     $      9.2     $    (15.4 )
% of net sales               13.5 %       9.4 %      12.0 %

2016 v 2015

Net sales in the Refractories segment declined $21.4 million in 2016. Foreign exchange had an unfavorable impact on Refractories segment sales of approximately $2.3 million, or 1 percent. The remaining sales decrease was primarily due to lower volumes stemming from continued weak global steel demand.

Income from operations increased $9.2 million to $37.0 million and represented 13.5% of net sales compared to $27.8 million or 9.4% of sales in 2015. The increase in income from operations relates primarily to improved productivity combined with supply chain savings and lower overhead costs. Additionally, included in income from operations is a $2.1 million gain on the sale of previously impaired assets in 2016 and restructuring charges of $2.0 million in 2015.

2015 v 2014

Net sales in the Refractories segment declined $63.8 million in 2015. Foreign exchange had an unfavorable impact on Refractories segment sales of approximately $23.7 million, or 7 percent. The remaining sales decrease was primarily due to lower volumes stemming from continued weak global steel demand.

Income from operations decreased $15.4 million and represented 9.4% of net sales compared to 12.0% in 2014. Income from operations includes restructuring charges of $2.0 million and $0.7 million, in 2015 and 2014, respectively. The declines relate primarily to the aforementioned weakness in global steel demand.


Table of Contents
Performance Materials Segment

                                         Year Ended December 31,
Performance Materials Segment                                                 2016 vs.       2015 vs.
                                     2016          2015          2014           2015           2014
                                                         (millions of dollars)
Net Sales
Metalcasting                      $    258.0     $   266.4     $   181.4     $     (8.4 )   $     85.0
Household, Personal Care and
Specialty Products                     171.2         172.7         108.0           (1.5 )         64.7
Basic Minerals and Other
Products                                73.6          75.7          63.4           (2.1 )         12.3
Total net sales                   $    502.8     $   514.8     $   352.8     $    (12.0 )   $    162.0

Income from operations            $     97.5     $    95.9     $    41.0     $      1.6     $     54.9
% of net sales                          19.4 %        18.6 %        11.6 %

2016 v 2015

Net sales in the Performance Materials segment of $502.8 million decreased $12.0 million in 2016. Foreign exchange had an unfavorable impact on Performance Materials segment sales of approximately $15.4 million, or 3 percent. Excluding the effects of foreign exchange, higher China metalcasting sales and increased sales of bulk chromite in our Basic Minerals and Other Products product line were partially offset by lower fabric care sales in our Household, Personal Care & Specialty Minerals product line.

Income from operations increased $1.6 million and represented 19.4% of net sales compared to 18.6% in 2015 as a result of significant productivity gains and a favorable product mix.

2015 v 2014

Net sales in the Performance Materials segment in 2015 were $514.8 million. Foreign exchange had an unfavorable impact on segment sales of approximately $13.7 million, or 7%. Income from operations was $95.9 million and represented 18.6% of net sales compared to 11.6% in 2014. Included in income from operations in 2014 were $6.7 million in restructuring and other charges and a one-time non-cash inventory step charge of $3.6 million. The strong margin improvement in this segment was attributable to increased sales in consumer products, the realization of acquisition synergies and improved productivity.

This segment's operating results for the year ended December 31, 2014 includes 237 days of results commencing on May 9, 2014.

. . .

  Add MTX to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for MTX - All Recent SEC Filings
Copyright © 2017 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.