Minerals Technologies - 10-K annual report

WASHINGTON, D.C. 20549

For the fiscal year ended December 31, 2000

Commission file number 1-3295

(Exact name of registrant as specified in its charter)

(Registrant's telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

                                                                        Yes X  No __

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X

     The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing price at which the stock was sold as of February 1, 2001 was approximately $407.0 million. Shares of common stock held by each officer and director and by each person who owns 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

            As of March 2, 2001, the Registrant had outstanding 19,717,595 shares of common stock, all of one class.

DOCUMENTS INCORPORATED BY REFERENCE

Item 1. Business

     Minerals Technologies Inc. (the "Company") is a resource- and technology-based company that develops, produces and markets worldwide a broad range of specialty mineral, mineral-based and synthetic mineral products. The Company has two operating segments: Specialty Minerals and Refractories. The Specialty Minerals segment produces and sells precipitated calcium carbonate ("PCC") and lime, and mines, processes and sells the natural mineral products limestone and talc. This segment's products are used principally in the paper, building materials, paints and coatings, glass, ceramic, polymers, food and pharmaceutical industries. The Refractories segment produces and markets monolithic and shaped refractory materials and services used primarily by the steel, cement and glass industries. The Company emphasizes research and development. The level of the Company's research and development spending as well as its history of developing and introducing technologically advanced new products have enabled the Company to anticipate and satisfy changing customer requirements and create market opportunities through new product development and product application innovations.

Specialty Minerals Segment

PCC Products and Markets

PCC Products

     Paper can be produced under either acid or alkaline conditions. Historically in North America, paper was produced primarily using acid technologies. In the mid-1980's, North American producers of uncoated wood-free paper encountered significant increases in the cost of wood fiber and other materials, such as titanium dioxide, which are necessary in greater quantities in the acid process. In response, these paper producers sought to convert their paper production to lower-cost alkaline technologies that permit mineral fillers such as PCC to be substituted for more expensive wood fiber and pigments used to increase brightness, resulting in significant cost savings. As a result of these conditions, the Company believed that a significant opportunity existed to provide paper producers with a high performance filler product that could facilitate the transition to the alkaline papermaking process. The Company constructed the first commercial satellite PCC plant at the Wisconsin Rapids paper mill of Consolidated Papers, Inc. (now Stora Enso Oy) in 1986. A satellite plant is located within the paper mill itself, thereby eliminating transportation costs. The Company believes the competitive advantages offered by the improved economics and superior optical characteristics of the paper produced using the PCC products manufactured by the Company's satellite PCC plants resulted in the rapid growth in the number of the Company's satellite PCC plants since 1986. In addition, the Company has constructed satellites to produce PCC for paper coating, and more recently, satellites for the use of PCC in groundwood (wood-containing) paper like newsprint, magazine and catalogue papers. For information with respect to the locations of the Company's satellite PCC plants at December 31, 2000, see Item 2, "Properties" below.

     The Company owns, staffs, operates and maintains all of its satellite PCC plants, including the related technology. The Company and its paper mill customers enter into long-term agreements, generally ten years in length, pursuant to which the Company supplies substantially all of the customer's precipitated calcium carbonate filler requirements. The Company is generally permitted to sell to third parties PCC produced at a satellite plant in excess of the host paper mill's requirements. The Company's satellite PCC plants and customers are listed in Item 2, "Properties."

     The Company currently manufactures several customized PCC product forms using proprietary processes at its satellite PCC plants, each designed to provide optimum brightness, opacity, bulking, paper strength or improved printing properties. The Company's research and development and technical service staffs focus on expanding sales at its existing satellite PCC plants as well as developing new technologies. These include acid-tolerant PCC, which allowed PCC to be introduced to the large wood-containing segment of the printing and writing papers market, and PCC crystal morphologies for coating paper. The Company expects that research and development in coating technology will open up a large market for PCC that will build slowly as paper companies begin to include PCC in their proprietary coating formulations.

     The Company's full range of slurry and dry PCC products are also sold on a merchant basis. In the paper industry, the Company's merchant PCC is used as a coating pigment and as a filler in the production of coated and uncoated wood-free printing and writing papers. The Company sells surface-treated and untreated grades of PCC to the polymers industry for use in rigid polyvinyl chloride products (pipe and profiles), thermoset polyesters (automotive body parts), sealants (automotive and construction applications), adhesives, printing inks and coatings. The Company's PCC is used by the food and pharmaceutical industries as a source of bio-available calcium in tablets and foodstuffs, as a buffering agent in tablets, and as a mild abrasive in toothpaste. The Company also sells PCC to the paints and coatings industry.

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     The Company's PCC product line net sales were $399.2 million, $391.9 million, and $355.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. Sales to International Paper Company represented approximately 13% and 10% of consolidated net sales in 2000 and 1999, respectively, and less than 10% in 1998. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Key Markets

     The principal market for the Company's satellite PCC products is the paper industry. The Company also produces PCC on a merchant basis for sale to companies in the polymers, food and pharmaceutical and paints and coatings industries.

     Sales of PCC to the paper industry have accounted for a steadily increasing percentage of the Company's total sales in the past five years. The Company's sales of PCC have been and are expected to continue to be made primarily to the printing and writing papers segment of the paper industry. The Company's products are currently used primarily by paper mills producing uncoated wood-free paper.

     PCC must compete with other fillers, such as ground limestone and clay. PCC costs more to produce than ground limestone or clay since the production process is inherently more complex. Limestone is mined, crushed and ground; clay is mined, ground and perhaps calcined. PCC is manufactured by a chemical process that dissolves lime (which itself is produced by calcining a mined product, limestone), combines it with carbon dioxide and separates the final product. Drying and transportation can add significantly to the product cost. If shipped wet, additional freight costs are incurred. In many cases this added cost makes PCC from merchant plants uncompetitive with other fillers.

     In response to these conditions and as a result of a concentrated research and development effort, the Company developed the satellite PCC plant concept. The Company's satellite PCC plants have facilitated the conversion of a substantial percentage of the North American uncoated wood-free printing and writing paper producers to alkaline papermaking. The Company estimates that during 2000, more than 90% of North American wood-free paper was produced employing alkaline technology.

     Presently, the Company owns and operates 34 commercial satellite PCC plants located at paper mills that produce wood-free printing and writing papers in North America. Based upon its experience, the Company anticipates that the aggregate volume of PCC used by these paper mills will increase. The Company also estimates that a few additional North American paper mills producing wood-free paper are large enough to support a satellite PCC plant.

     The Company is also placing increased emphasis on the use of PCC to coat paper. PCC increases gloss and printability of the sheet while decreasing paper's cost per ton. The coating paper market is large and the Company believes it will continue to grow at a higher average growth rate than the uncoated paper market, and therefore provides a substantial market opportunity for the Company. PCC coating products are produced at approximately eleven of the Company's satellite PCC plants.

     The Company estimates the amount of uncoated wood-free printing and writing papers produced outside of North America that can be served by its satellite PCC operations is approximately the same size (measured in tons of paper produced) as the North American uncoated wood-free paper market currently served by the Company. The Company believes that the superior brightness, opacity and bulking characteristics offered by its PCC products allow it to compete with suppliers of ground limestone and other filler products outside of North America. Presently, the Company owns and operates 19 commercial satellite PCC plants located at paper mills that produce wood-free printing and writing papers outside of North America.

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Processed Mineral Products and Markets

     The Company mines and processes the natural mineral products limestone and talc, and manufactures lime, a mineral-based product.

     Lime is used as a raw material for the manufacture of PCC at the Company's Adams, Massachusetts facility, and sold commercially to various chemical industries.

     In April 1998, the Company divested its Midwest limestone business in Port Inland, Michigan. Net sales from this facility in 1998 prior to the divestiture were $1.8 million. This was the Company's only business unit competing for sales of limestone aggregate, a commodity business. References to ongoing operations exclude the results from this facility.

     The Company mines, beneficiates and processes talc at its Barretts site, located near Dillon, Montana, and is sold worldwide in finely ground form for paints and coatings, ceramics and polymers applications. Because of the exceptional chemical purity of the Barretts ore, a majority of the automotive catalytic converter ceramic substrates manufactured in the United States, Japan and Western Europe utilize the Company's Barretts talc.

     The Company's net sales of processed mineral products from ongoing operations were $87.1 million, $87.5 million, and $87.0 million for the years ended December 31, 2000, 1999 and 1998, respectively. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

     The Company's natural mineral products are supported by the Company's limestone reserves located in the western and eastern parts of the United States, and talc reserves located in Montana. The Company estimates these reserves, at current usage levels, to be in excess of 30 years at both its limestone production facilities and at its talc production facility.

Refractories Segment

Refractory Products and Markets

     Refractory Products

     The Company offers a broad range of monolithic refractory products as well as pre-cast refractory shapes. Product sales are usually combined with Company-supplied proprietary applications equipment and on-site technical service support. The Company's proprietary applications equipment is used to apply refractory materials to the walls of steel-making furnaces and other high temperature vessels to maintain and extend their lives. Robotic-type shooters, including the Company's proprietary SEQUAD® sprayer, allow for remote-controlled applications in steel-making furnaces, as well as in steel ladles and blast furnaces. Since the steel-making industry is characterized by intense price competition, which results in a continuing emphasis by steel mills on increased productivity, the SEQUAD® sprayer and the related technologically-advanced blast furnace maintenance materials developed in the Company's research laboratories have been well accepted by the Company's customers. These products allow steel makers to improve their performance through, among other things, the application of monolithic refractories to furnace linings while the furnace is at operating temperature, thereby eliminating the need for furnace cool-down periods and steel-production interruption. This also results in a lower overall refractory cost to steel makers per ton of steel produced. The Company's experienced technical service staff and advanced applications equipment provide greater assurance that the desired productivity objectives of customers are achieved. In addition, laser measurement of refractory wear is conducted by the Company's technicians in certain plants to improve maintenance performance. The Company believes that these services, together with its refractory product offerings, provide the Company with a strategic marketing advantage.

     In the past five years, more than 75% of the Company's refractory product sales have come from new products. In addition to new products, delivery systems and services, the Company has focused on controlling costs and expenses.

     Some of the new refractory products the Company has introduced in the past few years include the MAG-O-STAR® spray coating, MINSCAN application systems and SHOTCRETE castable material. MAG-O-STAR® spray coating is an advanced technique for applying refractory material to the slag line, or at the top of red-hot steel ladles. MINSCAN is a fully automated application system for applying refractory materials to electric arc furnaces. SHOTCRETE is a dense castable material used in a variety of steel-making vessels to improve productivity. The Company has also developed a new product called OPTISHOT™ refractory products, which can completely replace brick in iron and steel ladles.

     In April 2000, the Company acquired Ferrotron Elektronic GmbH, a manufacturer of advanced laser scanner devices, sensors and other instrumentation specially designed for the steel industry.

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     The Company's refractory products are sold in the following three product groups:

     Steel Furnace Refractories. The Company sells gunnable monolithic refractory products to users of basic oxygen furnaces and electric furnaces for application on furnace walls to prolong the life of furnace linings.

     Specialty Products for Iron and Steel. The Company sells monolithic refractory materials and pre-cast refractory shapes for iron and steel ladles, vacuum degassers, continuous casting tundishes, blast furnaces and reheating furnaces. The Company is one of the few monolithic refractory companies offering a full line of materials to satisfy all continuous casting refractory applications. This full line consists of gunnable materials, as well as refractory shapes and permanent linings.

     The Company uses proprietary processes to produce a number of other technologically enhanced products for the steel industry. These include calcium metal, metallurgical wire and a number of metal treatment specialties. The Company manufactures calcium metal at its Canaan, Connecticut facility and purchases calcium in international markets. Calcium metal is used in the manufacture of batteries and magnets. The Company sells metallurgical wires and fluxes for use in the production of steel. The Company's metallurgical wires are injected into molten steel to reduce imperfections. The steel produced is used for high-pressure pipeline and other premium-grade steel applications. The Company's fluxes are mineral products used to help purify steel.

     Non-Steel Refractory Products. This product line encompasses refractory shapes and linings and pyrolytic graphite products that are sold to the glass, cement, aluminum, petrochemical and other non-steel industries.

     The Company's refractory net sales were $184.6 million, $183.1 million, and $187.3 million for the years ended December 31, 2000, 1999 and 1998, respectively. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

     Key Markets

     The principal market for the Company's refractory products is the steel industry. Raw steel production on a worldwide basis has shown only modest growth in the past ten years. However, management believes that certain trends in the steel-making industry will continue to provide growth opportunities for the Company. These trends include the development of improved manufacturing processes such as continuous casting, the need of steel producers for increased productivity and higher grade refractories, as well as a modest shift toward electric steel making.

     The use of the continuous casting method, measured in tons of steel cast on a worldwide basis, has more than doubled in the past ten years. The need for high quality refractory products for this process has generated new market opportunities for the Company's refractory products. Product offerings for continuous casting include advanced maintenance coatings and original linings for tundishes and robotic applications equipment. The Company believes that the trend toward electric steel-making mini-mills and away from integrated steel mills has facilitated the acceptance of new refractory products and technologies. Mini-mills require a broad line of refractory products and certain metallurgical products that are also produced by the Company.

Marketing and Sales

     The Company principally relies on its worldwide direct sales force to market its products. The direct sales force is augmented by technical service teams that are familiar with the industries to which the Company markets its products, and by several regional distributors. The Company's sales force works closely with the Company's technical service staff to solve technical and other issues faced by the Company's customers. The Company's technical service staff assists paper producers in their conversion to alkaline papermaking and provides post-conversion assistance to customers. In addition, the Company's technical service personnel advise with respect to the use of monolithic refractory materials and, in many cases, apply the refractory materials to the customers' furnaces and other vessels pursuant to service agreements. Continued use of skilled technical service teams is an important component of the Company's business strategy.

     The Company works closely with its customers to ensure that the customers' requirements are satisfied and often trains and supports customer personnel in the use of the Company's products. The Company conducts domestic marketing and sales from its headquarters in New York and from regional sales offices in the eastern and western United States. The Company's international marketing effort is directed from Brussels, Belgium; Tokyo, Japan; Sao Paulo, Brazil; and Singapore. The Company believes its refractory manufacturing facilities are strategically located to satisfy the stringent delivery requirements of the steel industry. The Company also believes that its worldwide network of sales personnel and manufacturing sites facilitates the international expansion of its satellite PCC operations.

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Raw Materials

     The Company uses lime in the production of PCC, and is a significant purchaser of lime worldwide. Generally, lime is purchased under long-term supply contracts from unaffiliated suppliers located in close geographic proximity to the Company's satellite PCC plants. If there were to be an interruption in the supply of lime from any particular lime supplier to the Company, the Company believes that alternative sources of lime would be available at effectively the same cost to the Company.

     The principal raw materials used in the Company's monolithic refractory products are refractory-grade magnesia and various forms of aluminosilicates. The Company also purchases calcium metal, calcium silicide, graphite, calcium carbide and various alloys for use in the production of metallurgical wires and uses lime and aluminum in the production of calcium metal. The Company purchases a significant portion of its magnesite requirements from sources in the People's Republic of China. The Company believes that it could obtain adequate supplies from alternate sources in the event of supply interruptions of its refractory raw material requirements.

Competition

     The Company is continually engaged in efforts to develop new products and technologies and refine existing products and technologies in order to remain competitive and, in certain circumstances, to position itself as a market leader.

     With respect to its PCC products, the Company competes for sales to the paper industry based in large part upon technological know-how, patents and processes that allow the Company to deliver PCC that the Company believes imparts superior brightness, opacity and other properties to paper on an economical basis. The Company is the leading manufacturer and supplier of PCC to the North American paper industry. It competes with certain companies both in North America and abroad that sell PCC or offer alternative products for use in paper filling and coating applications. Competition with respect to the Company's PCC sales is based upon availability of materials, price, optical characteristics such as brightness, opacity and paper strength, and the availability of technical support.

     With respect to the Company's refractory products, competitive conditions vary by geographic region. Competition is based upon the performance characteristics of the product (including strength, quality and consistency and ease of application), price, and the availability of technical support. The Company competes with different companies in different geographic areas and in separate aspects of its product line.

     The Company competes in sales of its limestone and talc based primarily upon product quality, price, and geographic location.

Research and Development

     Many of the Company's product lines are technology-based. The Company's business strategy for continued growth in sales and profitability depends to a large extent on the continued success of its research and development activities. Among the significant achievements of the Company's research and development effort have been the satellite PCC plant concept, acid-tolerant PCC, PCC crystal morphologies for coating paper, the SEQUAD® sprayer, MAG-O-STAR® spray coating, MINSCAN application systems and SHOTCRETE castable material.

     The Company maintains its primary research facilities in Bethlehem and Easton, Pennsylvania, where more than 170 employees are engaged in research and development. It also has smaller research and development facilities in Finland, Ireland and Japan. Expertise in inorganic chemistry, crystallography and structural analysis, fine particle technology and other aspects of materials science applies to and supports all of the Company's product lines.

     For the years ended December 31, 2000, 1999 and 1998, the Company expended approximately $26.3 million, $24.8 million, and $21.0 million, respectively, on research and development. The Company believes, based upon its review of publicly available information regarding the reported research and development spending of certain of its competitors, that its investment in research and development as a percentage of net sales exceeds comparable industry norms. The Company's research and development spending for 2000 approximated 3.9% of net sales.

Patents and Trademarks

     The Company owns or has the right to use approximately 303 patents and approximately 731 trademarks related to its business. The Company believes that its rights under its existing patents, patent applications and trademarks are of value to its operations, but no one patent, application or trademark is material to the conduct of the Company's business as a whole.

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Insurance

     The Company maintains liability and property insurance and insurance for business interruption in the event of damage to its production facilities and certain other insurance covering risks associated with its business. The Company believes such insurance is adequate for the operation of its business. From time to time various types of insurance for companies in the specialty minerals business have been very expensive or, in some cases, unavailable. There is no assurance that in the future the Company will be able to maintain the coverage initially obtained or that the premiums therefor will not increase substantially.

Employees

     At December 31, 2000, the Company employed approximately 2,200 persons, of whom approximately 700 were employed by the Company outside of the United States.

Environmental, Health and Safety Matters

     The Company's operations are subject to federal, state, local and foreign laws and regulations relating to the environment and health and safety. Certain of the Company's operations involve and have involved the use and release of substances that are classified as toxic or hazardous substances within the meaning of these laws and regulations. Environmental operating permits are, or may be, required for certain of the Company's operations and such permits are subject to modification, renewal and revocation. The Company regularly monitors and reviews its operations, procedures and policies for compliance with these laws and regulations. The Company believes its operations are in substantial compliance with these laws and regulations and that there are no violations that would have a material effect on the Company. Despite these compliance efforts, some risk of environmental and other damage is inherent in the Company's operations, as it is with other companies engaged in similar businesses, and there can be no assurance that material damage will not occur in the future. The cost of compliance with these laws and regulations is not expected to have a material adverse effect on the Company. However, future events, such as changes in or modifications of interpretations of existing laws and regulations or enforcement policies or further investigation or evaluation of the potential health hazards of certain products may give rise to additional compliance and other costs that could have a material adverse effect on the Company. The Company has a right of indemnification for certain potential environmental, health and safety liabilities under agreements entered into between the Company and Pfizer Inc ("Pfizer") or Quigley Company, Inc. ("Quigley"), a wholly-owned subsidiary of Pfizer, in connection with the reorganization. See "Certain Relationships and Related Transactions" in Item 13.

Cautionary Factors That May Affect Future Results

     The disclosure and analysis set forth in this report contains certain forward-looking statements, particularly statements relating to future actions, performance or results of current and anticipated products, sales efforts, expenditures, and financial results. From time to time, the Company also provides forward-looking statements in other publicly-released materials, both written and oral. Forward-looking statements provide current expectations and forecasts of future events such as new products, revenues and financial performance, and are not limited to describing historical or current facts. They can be identified by the use of words such as "expects," "plans," "anticipates," "will" and other words and phrases of similar meaning.

     Forward-looking statements are necessarily based on assumptions, estimates and limited information available at the time they are made. A broad variety of risks and uncertainties, both known and unknown, as well as the inaccuracy of assumptions and estimates, can affect the realization of the expectations or forecasts in these statements. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially.

     The Company undertakes no obligation to update any forward-looking statements. Investors should refer to the Company's subsequent filings under the Securities Exchange Act of 1934 for further disclosures.

     As permitted by the Private Securities Litigation Reform Act of 1995, the Company is providing the following cautionary statements, which identify factors that could cause the Company's actual results to differ materially from historical and expected results. It is not possible to foresee or identify all such factors. You should not consider this list an exhaustive statement of all potential risks, uncertainties and inaccurate assumptions.

Continuance of the historical growth rate of the Company depends upon a number of uncertain events, including the outcome of the Company's strategies of increasing its penetration into geographical markets such as Asia and Europe; increasing its penetration into product markets such as the market for paper coating pigments and the market for groundwood paper pigments; increasing sales to existing PCC customers by increasing the amount of PCC used per ton of paper produced; and developing, introducing and selling new products. Difficulties, delays or failures of any of these strategies could cause the future growth rate of the Company to differ materially from its historical growth rate.

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• Contract Renewals

The Company's sales of PCC are predominantly pursuant to long-term agreements, generally ten years in length, with paper mills at which the Company operates satellite PCC plants. The terms of many of these agreements have been extended, often in connection with an expansion of the satellite PCC plant. Failure of a number of the Company's customers to renew existing agreements on terms as favorable to the Company as those currently in effect could cause the future growth rate of the Company to differ materially from its historical growth rate, and could have a substantial adverse effect on the Company's results of operations.

• Consolidation in Paper Industry

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

The Company's operations are subject to international, federal, state and local environmental, tax and other laws and regulations, and potentially to claims for various legal, environmental and tax matters. The Company is currently a party to various litigation matters. While the Company carries liability insurance which it believes to be appropriate to its businesses, and has provided reserves for such matters which it believes to be adequate, an unanticipated liability arising out of such a litigation matter or a tax or environmental proceeding could have a material adverse effect on the Company's financial condition or results of operations.

• New Products

The Company is engaged in a continuous effort to develop new products and processes in all of its product lines. Difficulties, delays or failures in the development, testing, production, marketing or sale of such new products could cause actual results of operations to differ materially from expected results.

• Competition; Protection of Intellectual Property

Particularly in its PCC and Refractory product lines, the Company's ability to compete is based in part upon proprietary knowledge, both patented and unpatented. The Company's ability to achieve anticipated results depends in part on its ability to defend its intellectual property against inappropriate disclosure as well as against infringement. In addition, development by the Company's competitors of new products or technologies that are more effective or less expensive than those the Company offers could have a material adverse effect on the Company's financial condition or results of operations.

• Risks of Doing Business Abroad

As the Company expands its operations overseas, it faces the increased risks of doing business abroad, including inflation, fluctuations in interest rates and currency exchange rates, changes in applicable laws and regulatory requirements, export and import restrictions, tariffs, nationalization, expropriation, limits on repatriation of funds, unstable governments and legal systems, and other factors. Adverse developments in any of these areas could cause actual results to differ materially from historical and expected results.

The Company's ability to achieve anticipated results depends in part on having an adequate supply of raw materials for its manufacturing operations, particularly lime and carbon dioxide for PCC operations and magnesia for refractory operations, and on having adequate access to the ore reserves at its mining operations. Unanticipated changes in the costs or availability of such raw materials, or in the Company's ability to have access to its ore reserves, could adversely affect the Company's results of operations.

• Cyclical Nature of Customers' Businesses

The bulk of the Company's sales are to customers in two industries, paper manufacturing and steel manufacturing, which have historically been cyclical. The Company's exposure to variations in its customers' businesses has been reduced in recent years by the growth in the number of plants it operates; by the diversification of its portfolio of products and services; and by its geographic expansion. Also, the Company has structured some of its long-term satellite PCC contracts to provide a degree of protection against declines in the quantity of product purchased, since the price per ton of PCC rises as the number of tons purchased declines. In addition, many of the Company's product lines lower its customers' costs of production or increase their productivity, which should encourage them to use its products. However, a sustained economic downturn in one or more of the industries or geographic regions that the Company serves, or in the worldwide economy, could cause actual results of operations to differ materially from historical and expected results.

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• Adoption of a Common European Currency

On January 1, 1999, eleven European countries adopted the euro as their common currency. Adoption of a single currency and a common monetary policy by the countries adopting the euro can be expected to have effects on competition in Europe and on the overall economy of the region, which could adversely affect the Company's financial position or results of operations.

 

Item 2. Properties

     Set forth below is the location of, and the main customer served by, each of the Company's satellite PCC plants at December 31, 2000. Generally, the land on which each satellite PCC plant is located is leased at a nominal amount by the Company from the host paper mill pursuant to a lease, the term of which runs concurrently with the term of the PCC production and sale agreement between the Company and the host paper mill.

     The Company also owned at December 31, 2000 seven plants engaged in the mining, processing and/or production of lime, limestone, precipitated calcium carbonate, and talc and directly or indirectly owns or leases approximately 16 refractory manufacturing facilities worldwide. The Company's corporate headquarters, sales offices, research laboratories, plants and other facilities are owned by the Company except as otherwise noted. Set forth below is certain information relating to the Company's plants and office and research facilities.

     The Company believes that its facilities, which are of varying ages and are of different construction types, have been satisfactorily maintained, are in good condition, are suitable for the Company's operations and generally provide sufficient capacity to meet the Company's production requirements. Based on past loss experience, the Company believes it is adequately insured in respect to these assets, and for liabilities which are likely to arise from its operations. 

Item 3. Legal Proceedings

     On or about October 5, 1999, the Company was notified by the U.S. Department of Justice of an enforcement referral from the U.S. Environmental Protection Agency regarding alleged violations by the Company's subsidiary, Barretts Minerals Inc. ("BMI"), of a state-issued permit regulating pit dewatering and storm water discharge at BMI's talc mine in Barretts, Montana. The threatened federal enforcement action would duplicate in part a state enforcement action that was resolved in May 1999 through settlement and payment of a civil penalty of $14,000. BMI has entered into prefiling negotiations with the Department of Justice, and as of March 2, 2001, no complaint had been filed. We anticipate that any settlement of this matter would include a monetary penalty as well as other relief, such as a supplemental environment project at the Barretts site. There can be no assurance that the amount of monetary penalty or the cost of other relief sought by the Department of Justice in any such complaint, if filed, would not be substantially in excess of the amount for which the previous state enforcement action was settled.

     On or about July 14, 2000, MTI, Specialty Minerals Inc. and Minteq International Inc. received from the Connecticut Department of Environmental Protection ("DEP") a proposed administrative consent order relating to the Canaan, Connecticut site at which both Minteq and Specialty Minerals have operations. The proposed order would settle claims relating to an accidental discharge of machine oil alleged to have contained polychlorinated biphenyls at or above regulated levels. The Company's employees immediately took steps to contain and clean up the discharge and notified the Connecticut DEP and the U.S. Environmental Protection Agency ("EPA") as required by law. The proposed order also alleges certain violations of other environmental requirements, including violations of the Canaan site's existing permit for discharge of stormwater, and of regulations governing the management of underground storage tanks. The proposed order would require payment of a civil penalty of $420,605, remediation of certain conditions at the site, and other injunctive relief. MTI and the other respondents dispute many of the factual allegations forming the basis of the proposed order, and plan to contest them vigorously. There can be no assurance, however, that the Company will be successful in doing so, and the amount of any civil penalty to be paid, and the cost of any remediation or other injunctive relief, remains uncertain.

     On February 27, 2001, the U.S. Environmental Protection Agency filed a civil administrative complaint against Minteq International Inc. seeking $192,000 in monetary sanctions for alleged regulatory violations relating to the use, handling and disposal of PCB's at Minteq's Canaan, Connecticut facility. Minteq is preparing a response to the complaint, and plans to contest vigorously many of the factual allegations and legal conclusions asserted by the EPA.

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

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

     No matters were submitted to a vote of security holders during the fourth quarter of 2000.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

     The Company's common stock is traded on the NYSE under the symbol "MTX."

     Information on market prices and dividends is set forth below:

     On March 2, 2001, the last reported sale price on the NYSE was $36.99 per share. As of March 2, 2001, there were approximately 239 holders of record of the common stock.

     On January 25, 2001, the Company's Board of Directors declared a regular quarterly dividend on its common stock of $0.025per share. Subject to satisfactory financial results and declaration by the Board, the Company currently intends to pay quarterly cash dividends of at least $0.025 per share on its common stock. Although the Company believes its historical earnings indicate that this dividend policy is appropriate, it will be reviewed by the Board from time to time in light of the Company's financial condition, results of operations, current and anticipated capital requirements, contractual restrictions and other factors deemed relevant by the Board. No dividend will be payable unless declared by the Board and unless funds are legally available for payment thereof.

     On February 26, 1998, the Company's Board of Directors authorized a $150 million stock repurchase program. The stock is being purchased on the open market from time to time. As of January 28, 2001, the Company had repurchased approximately 3.1 million shares under this program, at an average price of approximately $44 per share.

     The Company expects to complete its current share repurchase program in the second quarter of 2001. The Board has authorized the Company's Management Committee to repurchase up to $25 million in additional shares per year over the next three-year period, at its discretion.

11

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

Overview of 2000 and Outlook

    In 2000, the Company had a difficult year. The first two quarters of the year were very strong with growth in diluted earnings per share of 15% and 16%, respectively. As a result of weakness in the second half in the paper, steel and construction industries, and approximately $10.5 million in charges, which are described below, diluted earnings per share declined 8% for the year as compared with the prior year. The Company expects continued weakness in the first half of 2001.

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     During the second half of 2000, economic trends in the industries the Company serves, particularly in the United States, deteriorated significantly.

• Three paper mills at which the Company has satellite precipitated calcium carbonate (PCC) plants announced their intention to shut down, two owned by International Paper Company and one by Plainwell Inc., which filed a Chapter 11 bankruptcy petition. Other paper makers reduced inventories as a result of weaker paper demand.
• The domestic steel industry experienced an extreme downturn: domestic steel production, which increased approximately 13% in the first half of 2000, decreased approximately 12% in the fourth quarter. Several steel manufacturers, including two major customers of the Company, filed for bankruptcy protection.
• The construction and automotive industries were also affected adversely by the weaker economy and higher energy costs.

     As a consequence of these adverse events the Company recorded a $4.9 million write-down of impaired assets related to the three satellite PCC plants at paper mills that have ceased or will cease operations. The Company also recognized $5.6 million in additional bad debt expenses, primarily related to the bankruptcies of major customers in the steel, paper and construction industries.

     The Company adhered to its strategy of expanding its PCC product line within the Specialty Minerals segment. The Company commenced operations at two new satellite PCC plants, one in Japan and the other in Brazil and began operations at a major three-unit expansion of a satellite PCC plant in Portugal. Together, these plants have production capacity equivalent to approximately seven satellite units. (A satellite unit is equivalent to annual production capacity of between 25,000 and 35,000 tons of PCC.) The Company also added another eight units of volume in 2000 through various expansions at existing satellite facilities. In January 2001, the Company announced a new contract with Great Northern Paper Company in Millinocket, Maine to construct a two-unit satellite plant using the Company's patented AT^TM PCC technology. This plant is expected to be in operation in the third quarter of 2001. The AT^TM PCC technology continues to show growth and the groundwood sector of the worldwide paper industry continues to show widespread interest in this product. The Company presently serves 14 groundwood paper mills on 24 paper machines around the world. As a result, sales of PCC as a percentage of the Company's total net sales, which were 37% in 1992, had risen to approximately 60% by 2000.

     The Company expects additional expansions at existing satellite PCC plants to occur in 2001 and also expects to sign contracts for new satellite PCC plants.

In 2001, the Company plans to continue its focus on the following growth strategies for the PCC product line:

• Continued efforts to increase market penetration in North America, Europe, Latin America, and the Pacific Rim.
• Continued expansions of the capacity of existing satellite PCC plants in response to increased demand, which is resulting from increased PCC filler levels in paper, the installation of new paper machines or higher paper machine productivity.
• Continued research and development and marketing efforts for new and existing products.

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

     The Company's sales of PCC are predominantly pursuant to long-term agreements, generally ten years in length, with paper mills at which the Company operates satellite PCC plants. The terms of many of these agreements have been extended, often in connection with an expansion of the satellite PCC plant. Failure of a number of the Company's customers to renew existing agreements on terms as favorable to the Company as those currently in effect could cause the future growth rate of the Company to differ materially from its historical growth rate.

     On February 23, 2001, the Company signed an agreement to purchase the refractories business of Martin Marietta Magnesia Specialties Inc. for $34 million. This transaction is expected to close within the second quarter of 2001. Net sales of this business for the year ended December 31, 2000 were approximately $57 million.

     The Company will continue to emphasize specialty products in its Refractories segment and to develop and commercialize products, processes and equipment resulting from its research and development efforts.

     As the Company continues to expand its operations overseas, it faces the inherent risks of doing business abroad, including exchange rate fluctuations, nationalization, expropriation, limitations on repatriation of funds and other factors. In addition, the Company's performance depends to some extent on that of the industries it serves, particularly the paper manufacturing, steel manufacturing, and construction industries.

13

Results of Operations

     Worldwide net sales in 2000 increased 1.3% from the previous year to $670.9 million. The stronger U.S. dollar had an unfavorable effect of approximately 2 percentage points of sales growth. Sales in the Specialty Minerals segment, which includes the PCC and Processed Minerals product lines, grew 1.4% to $486.3 million compared with $479.4 million for the same period in 1999. Sales in the Refractories segment grew approximately 1% over the previous year to $184.6 million. In 1999, worldwide net sales increased 4.9% over the prior year to $662.5 million. Specialty Minerals segment sales increased 7.9% and Refractories segment sales decreased 2.2% in 1999.

     Worldwide net sales of PCC in 2000 increased 1.9% to $399.2 million from $391.9 million in the prior year. Foreign exchange had an unfavorable impact on PCC sales of approximately $7.9 million or 2 percentage points of growth. The increase in PCC sales was primarily attributable to the commencement of operation at two new satellite PCC plants, the ramp-up of two satellite plants that began operations in 1999, and to volume increases and expansions at several long-standing PCC plants. This growth was partially offset by a 10% decline in sales of Specialty PCC, which is used for non-paper applications, and by weakness in the paper industry in the second half of 2000. PCC sales in 1999 increased 10.2% to $391.9 million from $355.5 million in 1998. This growth was primarily attributable to the start-up of operations at two of the Company's largest satellite plants in 1999. In addition, a full year of operations at several satellite PCC plants that began operations in 1998 and volume increases from the Company's long-standing satellite PCC plants also contributed to the sales growth.

     Net sales of Processed Minerals products in 2000 decreased slightly to $87.1 million from $87.5 million in 1999. This decline was attributable primarily to a slowdown in the construction-related industries. Net sales of Processed Minerals from ongoing operations in 1999 increased slightly. In April 1998, the Company divested its Midwest limestone business in Port Inland, Michigan. References to ongoing operations exclude the results from this facility.

     Net sales in the Refractories segment in 2000 increased approximately 1% to $184.6 million from $183.1 million in the prior year. Foreign exchange had an unfavorable impact on Refractories sales of approximately $4.1 million or 2 percentage points of growth. Unfavorable economic conditions in the worldwide steel industry in the second half of 2000 reduced the 9% sales growth experienced by this product line in the first six months of 2000. In 1999, net sales in the Refractories segment decreased 2.2% from the prior year.

     Net sales in the United States decreased less than 1%. This decrease was attributable to the aforementioned weakness in the steel, paper and construction industries. Foreign sales in 2000 increased 4.7% as a result of the continued international expansion of the Company's PCC product line. In 1999, domestic net sales from ongoing operations were 4.2% higher than in the prior year as a result of increased sales in the Specialty Minerals segment. Foreign sales were approximately 7.1% greater than in the prior year, primarily due to growth in the PCC product line.

     Cost of goods sold was 71.2% of sales compared with 70.5% in the prior year. This increase was primarily attributable to the softening of market conditions in the steel, paper and construction industries in the second half of 2000. In addition, the Company was adversely impacted by higher energy costs, the unfavorable impact of foreign exchange, and costs associated with the delayed ramp-up of the Company's new merchant manufacturing plant in Mississippi. Cost of goods sold in 1999 was 0.4 percentage points higher than in the prior year.

     Marketing and administrative costs decreased 1.1% to $71.4 million and were 10.7% of net sales. In 1999, marketing and administrative costs decreased 3.9% to $72.2 million and were 10.9% of net sales.

14

     Research and development expenses during 2000 increased 6.0% to $26.3 million and represented 3.9% of net sales. A planned increase to develop SYNSIL™ products, a family of synthetic silicate products for the glass industry, was the primary reason for the expense growth in 2000 and 1999.

     The Company recognized additional bad debt expenses of $5.6 million in the fourth quarter of 2000. This charge was primarily related to bankruptcy filings by several of the Company's major customers serving the steel, paper and construction industries.

     During the fourth quarter of 2000, the Company recorded a write-down of impaired assets of $4.9 million for three satellite precipitated calcium carbonate plants at paper mills that have ceased or will cease operations.

     Income from operations in 2000 decreased 13.0% to $84.8 million from $97.5 million in 1999. This decrease was due primarily to weakness in the three major industries the Company serves and to the aforementioned additional bad debt expenses and write-down of impaired assets. In 1999, income from operations rose 5.5% to $97.5 million from $92.4 million in 1998. This increase was due primarily to slightly improved profitability in the PCC product line within the Specialty Minerals segment, and to improved profitability in the Refractories segment.

     Non-operating deductions were approximately the same as in the prior year. Gross interest expense was 18% higher than the prior year but was partially offset by interest capitalized on major construction projects. Non-operating deductions in 1999 decreased from the prior year due primarily to lower foreign exchange losses. Gross interest costs decreased 13.5% from 1998 to $6.1 million. However, interest income was also lower than in the prior year.

     The effective tax rate decreased to 29.8% in 2000 compared with 31.3% in 1999. This decrease was due to higher depletion deductions as a percentage of income before taxes and the mix of profit by country. The effective tax rate was 31.7% in 1998.

     The consolidated joint ventures continue to operate profitably. The decrease in the provision for minority interests in 1999 was primarily due to foreign exchange losses.

     Net income decreased 12.7% in 2000 to $54.2 million. In 1999, net income increased 8.6% to $62.1 million. Earnings per common share, on a diluted basis, decreased 8% to $2.58 in 2000 as compared with $2.80 in the prior year.

Liquidity and Capital Resources

     The Company's financial position remained strong during 2000. Cash flows in 2000 were provided from operations and short-term and long-term financing. The cash was applied principally to fund approximately $103.3 million of capital expenditures, acquire a German producer of advanced laser scanning devices for the Refractories segment, repurchase $43.0 million of common shares for treasury, and repay short-term and long-term debt. Cash provided from operating activities amounted to $91.1 million

15

in 2000, $130.2 million in 1999 and $117.0 million in 1998. The reduction in cash provided from operating activities in 2000 was primarily attributable to a decrease in working capital.

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

     On June 9, 2000 the Company entered into a twenty-year, taxable, Variable/Fixed Rate Industrial Development Revenue Bond agreement to finance a portion of the construction of a merchant manufacturing facility in Mississippi for the production of Specialty PCC. The Company selected the variable rate option for this borrowing and the average interest rate was approximately 7.18% for the period ended December 31, 2000.

     The Economic Development Authority Refunding Revenue Bonds due 2010 were issued on February 23, 1999 to refinance the bonds issued in connection with the construction of a PCC plant in Eastover, South Carolina. The bonds bear interest at either a variable rate or fixed rate at the option of the Company. Interest is payable semi-annually under the fixed rate option and monthly under the variable rate option. The Company has selected the variable rate option on these borrowings and the average interest rate for the year ended December 31, 2000 was approximately 4.33%.

     The Variable/Fixed Rate Industrial Development Revenue Bonds due November 1, 2014 are tax-exempt 15-year instruments and were issued on November 30, 1999 to refinance the bonds issued in connection with the construction of a PCC plant in Jackson, Alabama. The bonds bear interest at either a variable rate or fixed rate at the option of the Company. Interest is payable semi-annually under the fixed rate option and monthly under the variable rate option. The Company has selected the variable rate option on these borrowings and the average interest rate for the year ended December 31, 2000 was approximately 4.33%.

     On February 26, 1998, the Company's Board of Directors ("Board") authorized a $150 million stock repurchase program. The stock is being purchased on the open market from time to time. As of January 28, 2001, the Company had repurchased approximately 3.1 million shares under this program, at an average price of approximately $44 per share.

     The Company expects to complete its current share repurchase program in the second quarter of 2001. The Board has authorized the Company's Management Committee to repurchase up to $25 million in additional shares per year over the next three-year period, at its discretion.

     The Company has approximately $85 million in uncommitted short-term bank credit lines, of which $48.1 million was in use at December 31, 2000. The Company anticipates that capital expenditures for 2001 should approximate $100 million, principally related to the construction of satellite PCC plants, and other opportunities that meet the strategic growth objectives of the Company. The Company expects to meet its long-term financing requirements from internally generated funds, the aforementioned uncommitted bank credit lines and, where appropriate, project financing of certain satellite plants.

     Prospective Information and Factors That May Affect Future Results

     The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand companies' future prospects and make informed investment decisions. This report may contain forward-looking statements that set out anticipated results based on management's plans and assumptions. Words such as "expects," "plans," "anticipates," "will," and words and terms of similar substance, used in connection with any discussion of future operating or financial performance identify these forward-looking statements.

     The Company cannot guarantee that the outcomes suggested in any forward-looking statement will be realized, although it believes it has been prudent in its plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements and should refer to the discussion of certain risks, uncertainties and assumptions under the heading "Cautionary Factors That May Affect Future Results" in Item 1.

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

16

     The Company's largest customer, International Paper Company, has decided to reduce U.S. production capacity by closing two paper mills in which the Company has satellite PCC plants. These paper mills are located in Mobile, Alabama, and Lock Haven, Pennsylvania. In addition, Plainwell Inc. filed for bankruptcy protection and closed its paper mill in Plainwell, Michigan. The Company operates a small satellite PCC plant at that location. As a result of these plant closings, the Company recorded a $4.9 million write-down of impaired assets.

     Excluding the plants to be closed, there are three satellite locations, serving two customers, at which our contracts have recently expired or are due to expire by the end of 2001. The Company continues to supply PCC at all of these locations and expects to negotiate long-term contract extensions at all of them. There is no assurance, however, that these negotiations will be successful.

     Historically, inflation has not had a material adverse effect on the Company. The contracts pursuant to which the Company constructs and operates its satellite PCC plants generally adjust pricing to reflect increases in costs resulting from inflation.

     The bulk of the Company's sales are to customers in the paper manufacturing, steel manufacturing industries and construction industries, which have historically been cyclical. These industries encountered difficulties in 2000. The pricing structure of some of our long-term PCC contracts makes our PCC business less sensitive to declines in the quantity of product purchased. For this reason, and because of the geographical diversification of our business, the Company's operating results to date have not been materially affected by the difficult economic environment. However, we cannot predict the economic outlook in the countries in which we do business, nor in the key industries we serve. There can be no assurance that a recession, in some markets or worldwide, would not have a significant negative effect on the Company's financial position or results of operations.

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The statement, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company will adopt SFAS 133 by January 1, 2001. Adoption of SFAS 133 will not have a material effect on the consolidated financial statements.

     The Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue 00-10, "Accounting for Shipping and Handling Fees and Costs." This pronouncement was effective in the fourth quarter of 2000 and all prior periods were reclassified to comply with the classification guidelines of this issue. EITF Issue 00-10 stipulates that all amounts billed to a customer in a sale transaction related to shipping and handling represent revenues earned for the goods provided and should be classified as revenue. In addition, costs incurred for shipping and handling should preferably be classified as costs of goods sold. The Company has historically recorded the net costs of shipping and handling in marketing and administrative expenses since the majority of such costs are a direct pass-through of costs to the customer. Adjustments were reflected in the statement of income and related footnotes in order to comply with this pronouncement.

     On January 1, 1999, eleven European countries adopted the euro as their common currency. From that date until January 1, 2002, debtors and creditors may choose to pay or be paid in euros or in the former national currencies. On and after January 1, 2002, the affected national currencies will cease to be legal tender.

     The Company's information technology systems are now able to convert among the former national currencies and the euro and to process transactions and balances in euros. The financial institutions with which the Company does business are capable of receiving deposits and making payments both in euros and in the national currencies. The Company does not expect that adapting its information technology systems to the euro will have a material effect on its financial condition or results of operations. The Company is also reviewing contracts with customers and vendors calling for payments in currencies that are to be replaced by the euro, and intends to complete in a timely way any required changes to those contracts.

     Adoption of the euro is likely to have competitive effects in Europe, as prices that had been stated in different national currencies become directly comparable to one another. In addition, the adoption of a common monetary policy by the countries adopting the euro can be expected to have an effect on the economy of the region. These competitive and economic effects had no material effect on the Company's financial condition or results of operation during 2000, and the Company does not expect any such effect to occur. There can be no assurance, however, that the transition to the euro will not have a material effect on the Company's business in Europe in the future.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

     The Company is exposed to various market risks, including the potential loss arising from adverse changes in foreign currency exchange rates. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. When appropriate, the Company enters into derivative financial instruments, such as forward exchange contracts, to mitigate the impact of foreign exchange rate movements on the Company's operating results. The counterparties are major financial institutions. Such forward exchange contracts would not subject the Company to additional risk from exchange rate movements because gains and losses on these contracts would offset losses and gains on the assets, liabilities and transactions being hedged. At December 31, 2000, the Company had open forward exchange contracts to purchase $0.8 million of foreign currencies. These contracts mature on March 31, 2001. The fair value of these instruments was not significant at December 31, 2000.

Item 8. Financial Statements and Supplementary Data

     The financial information required by Item 8 is contained in Item 14 of Part IV of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     None.

Item 10. Directors and Executive Officers of the Registrant

     Set forth below are the names and ages, as of December 31, 2000, of all Executive Officers of the Registrant indicating all positions and offices with the Registrant held by each such person, and each such person's principal occupations or employment during the past five years.

     Paul R. Saueracker was elected Chief Executive Officer on December 31, 2000; prior to that he was a President of the Company since August 2000, Senior Vice President from 1999 to 2000, and Vice President of the Company from 1994 to 1999. He has served as President of Specialty Minerals Inc. since 1994. Mr. Saueracker is a former President of the Pulverized Minerals Division of the National Stone Association and a member of the Technical Association of the Pulp and Paper Industry and the Paper Industry Management Association. He is also a member of the board of trustees of the Institute of Paper Science and Technology located in Atlanta, Georgia.

     Anton Dulski was elected Chief Operating Officer of the Company in October 2000; prior to that he was appointed a Senior Vice President of the Company in 1999; and was a Vice President of the Company since 1996. He has also served as President of Minteq International Inc. since 1996. From 1993 to 1995 he was Senior Vice President of Minteq with responsibility for European operations.

     Neil M. Bardach has served as Vice President-Finance and Chief Financial Officer of the Company since 1998. From 1994 to 1998, he was Chief Financial Officer of The Genlyte Group Incorporated, a publicly traded manufacturer of lighting fixtures.

     Howard R. Crabtree was appointed Vice President-Organization & Human Resources of the Company in 1997, having served as Vice President-Human Resources since 1992.

     Michael A. Cipolla has served as Controller and Chief Accounting Officer of the Company since 1998. From 1992 to 1998 he served as Assistant Corporate Controller.

     S. Garrett Gray has served as Vice President and Secretary of the Company since 1989. In 1992, Mr. Gray was appointed General Counsel of the Company.

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     William A. Kromberg has served as Vice President-Taxes of the Company since 1993.

     The information concerning the Company's Board of Directors required by this Item is incorporated herein by reference to the Company's Proxy Statement.

     The information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 required by this Item is incorporated herein by reference to the Company's Proxy Statement.

Item 11. Executive Compensation

     The information appearing in the Company's Proxy Statement under the caption "Compensation of Executive Officers," excluding the information under the captions "Performance Graph" and "Report of the Compensation and Nominating Committee on Executive Compensation," is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The information appearing under the caption "Security Ownership of Certain Beneficial Owners and Management as of February 1, 2001" set forth in the Company's Proxy Statement is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

     The information appearing under the caption "Certain Relationships and Related Transactions" set forth in the Company's Proxy Statement is incorporated herein by reference.

     Under the terms of certain agreements entered into in connection with the Company's initial public offering in 1992, Pfizer Inc ("Pfizer") and its wholly-owned subsidiary Quigley Company, Inc. ("Quigley") agreed to indemnify the Company against certain liabilities being retained by Pfizer and its subsidiaries including, but not limited to, pending lawsuits and claims, and any lawsuits or claims brought at any time in the future alleging damages or injury from the use, handling of or exposure to any product sold by Pfizer's specialty minerals business prior to the closing of the initial public offering.

     Pfizer and Quigley also agreed to indemnify the Company against any liability arising from on-site remedial waste site claims and for other claims that may be made in the future with respect to waste disposed of prior to the closing of the initial public offering. Further, Pfizer and Quigley agreed to indemnify the Company for 50% of the liabilities in excess of $1 million up to $10 million that may arise or accrue within ten years after the closing of the initial public offering with respect to remediation of on-site conditions existing at the time of the closing of the initial public offering. The Company will be responsible for the first $1 million of such liabilities, 50% of all such liabilities in excess of $1 million up to $10 million, and all such liabilities in excess of $10 million.

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K

(a) The following documents are filed as part of this Report:

1. Financial Statements. The following Consolidated Financial Statements of Minerals Technologies Inc. and Independent Auditors' Report are set forth on pages F-2 to F-21.               

Consolidated Balance Sheet as of December 31, 2000 and 1999
Consolidated Statement of Income for the years ended December 31, 2000, 1999 and 1998
Consolidated Statement of Cash Flows for the years ended December 31, 2000, 1999 and 1998
Consolidated Statement of Shareholders' Equity for the years ended December 31, 2000,
1999 and 1998
Notes to the Consolidated Financial Statements
Independent Auditors' Report

2. Financial Statement Schedule. The following financial statement schedule is filed as part of this Report:

     All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.

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3. Exhibits. The following exhibits are filed as part of or incorporated by reference into this Report.

20

1. Incorporated by reference to exhibit so designated filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
2. [RESERVED]
3. Incorporated by reference to the exhibit so designated filed with the Company's Registration Statement on Form S-1 (Registration No. 33-51292), originally filed on August 25, 1992.
4. Incorporated by reference to the exhibit so designated filed with the Company's Registration Statement on Form S-1 (Registration No. 33-59510), originally filed on March 15, 1993.
5. Incorporated by reference to the exhibit so designated filed with the Company's Quarterly Report on Form 10-Q for the quarter ended September 26, 1999.
6. Incorporated by reference to the exhibit so designated filed with the Company's Quarterly Report on Form 10-Q for the quarter ended March 28, 1999.
7. Incorporated by reference to the exhibit so designated filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
8. Incorporated by reference to the exhibit so designated filed with the Company's Quarterly Report on Form 10-Q for the quarter ended July 4, 1993.
9. Incorporated by reference to the exhibit so designated filed with the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
10. Incorporated by reference to the exhibit so designated filed with the Company's current report on Form 8-K, filed September 3, 1999.
11. [RESERVED]
12. Incorporated by reference to the exhibit so designated filed with the Company's Quarterly Report on Form 10-Q for the quarter ended September 24, 2000.

(b)     Reports on Form 8-K

There were no reports on Form 8-K filed by the Company during the fourth quarter of 2000.

21

 

 

 

 

SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

March 20, 2001

          Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

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F-1

F-2

F-3

F-4

F-5

     Basis of Presentation
     The accompanying consolidated financial statements include the accounts of Minerals Technologies Inc. (the "Company") and its wholly and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

     Change in Accounting Principle
     The Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue 00-10, "Accounting for Shipping and Handling Fees and Costs." This pronouncement was effective in the fourth quarter of 2000 and all prior periods were reclassified to comply with the classification guidelines of this Issue. EITF Issue 00-10 stipulates that all amounts billed to a customer in a sale transaction related to shipping and handling represent revenues earned for the goods provided and should be reclassified as revenue. In addition, costs incurred for shipping and handling should preferably be classified as costs of goods sold. The Company has historically recorded the net costs of shipping and handling in marketing and administrative expenses since the majority of such costs are a direct pass-through of costs to the customer. The following represents shipping and handling fees reclassified to net sales and cost of goods sold by product line for the years ended December 31, 2000, 1999 and 1998, respectively, and reclassifications from marketing and administrative expenses to cost of goods sold. These adjustments are reflected in the statement of income and related footnotes in order to comply with the new pronouncement.

F-6

MINERALS TECHNOLOGIES AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Depletion of the mineral and quarry properties is provided for on a unit-of-extraction basis as the related materials are mined for financial reporting purposes and on a percentage depletion basis for tax purposes.

     Mining costs associated with waste gravel and rock removal in excess of the expected average life of mine stripping ratio are deferred. These costs are charged to production on a unit-of-production basis when the ratio of waste to ore mined is less than the average life of mine stripping ratio.

     Accounting for the Impairment of Long-Lived Assets
     The Company accounts for impairment of long-lived assets in accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. In accordance with SFAS No. 121, the Company uses an estimate of the future undiscounted net cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. During the fourth quarter of 2000, the Company recorded a write-down of impaired assets of $4.9 million, based upon discounted future cash flows, for three satellite precipitated calcium carbonate plants at paper mills that have ceased or will cease operations.

     Goodwill
     Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible assets of businesses acquired. Goodwill is amortized on a straight-line basis over 20-25 years. Periodically, the Company reviews the recoverability of goodwill. The determination of possible impairment is based primarily on the ability to recover the balance of the goodwill from expected future operating cash flows on an undiscounted basis. In management's opinion, no impairment existed at December 31, 2000.

     Revenue Recognition
     Revenue from sales of product is recognized at the time the goods are shipped and title passes to the customer.

     International subsidiaries operating in highly inflationary economies translate nonmonetary assets at historical rates, while net monetary assets are translated at current rates, with the resulting translation adjustments included in net income.

     The accompanying financial statements generally do not include a provision for U.S. income taxes on international subsidiaries' unremitted earnings which, for the most part, are expected to be reinvested overseas.

F-7

MINERALS TECHNOLOGIES AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Diluted earnings per share have been computed based upon the weighted average number of common shares outstanding during the period assuming the issuance of common shares for all dilutive potential common shares outstanding.

     Reclassifications
     Certain reclassifications have been made in prior years' financial statements to conform to classifications used in the current year.

Income Taxes

     Income before provision for taxes, by domestic and foreign source is as follows:

     The provision for taxes on income consists of the following:

     The provision for taxes on income shown in the previous table is classified based on the location of the taxing authority, regardless of the location in which the taxable income is generated.

F-8

MINERALS TECHNOLOGIES AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The major elements contributing to the difference between the U.S. federal statutory tax rate and the consolidated effective tax rate are as follows:

     The Company believes that its accrued liabilities are sufficient to cover its U.S. and foreign tax contingencies. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

     A valuation allowance for deferred tax assets has not been recorded since management believes it is more likely than not that the existing net deductible temporary differences will reverse during periods in which the Company generates net taxable income.

     Net cash paid for income taxes was $24.9 million, $14.7 million, and $18.3 million for the years ended December 31, 2000, 1999 and 1998, respectively.

Foreign Operations

     The Company has not provided for U.S. federal and foreign withholding taxes on $82.9 million of foreign subsidiaries' undistributed earnings as of December 31, 2000 because such earnings, for the most part, are intended to be reinvested overseas. To the extent the parent company has received foreign earnings as dividends, the foreign taxes paid on those earnings have generated tax credits, which have substantially offset related U.S. income taxes. On repatriation, certain foreign countries impose withholding taxes. The amount of withholding tax that would be payable on remittance of the entire amount of undistributed earnings would approximate $2.0 million.

     Net foreign currency exchange losses, included in other deductions in the Consolidated Statement of Income, were $425,000, $427,000, and $932,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

F-9

MINERALS TECHNOLOGIES AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories

     The following is a summary of inventories by major category:

Property, Plant and Equipment

     The major categories of property, plant and equipment and accumulated depreciation and depletion are presented below:

Acquisitions and Divestiture

     In April 2000 the Company acquired, for approximately $12.6 million, Ferrotron Elektronik GmbH, a manufacturer of advanced laser scanning devices, sensors and other instrumentation specially designed for the steel industry. The transaction was accounted for as a purchase. The purchase price exceeded the fair value of the net assets acquired by approximately $5 million, which is being amortized on a straight-line basis over 20 years.

     On April 30, 1998 the Company acquired, for approximately $34 million in cash, a precipitated calcium carbonate (PCC) manufacturing facility in the United Kingdom from Rhodia Limited. This acquisition allowed the Company to establish a base for its specialty PCC business in Europe. The transaction was accounted for as a purchase. The purchase price exceeded the fair value of the net assets acquired by approximately $8 million, which is being amortized on a straight-line basis over 25 years.

     On April 28, 1998 the Company sold its limestone operation in Port Inland, Michigan, to Oglebay Norton Company for cash and receivables approximating $34 million. The sales price approximated the net book value of the assets.

Financial Instruments and Concentrations of Credit Risk

     The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

     The carrying amounts approximate fair value because of the short maturity of these instruments.

     Available-for-sale securities are presented in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities."

F-10

MINERALS TECHNOLOGIES AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The fair values are based on quoted market prices and are as follows:

     The Company recognized gains from sale of securities aggregating $174,000 in 1999. The unrealized holding gains, net of taxes, were $86,000 at December 31, 1998 and are included in accumulated other comprehensive loss in the statement of shareholders' equity.

     If appropriate, the Company would enter into forward exchange contracts to mitigate the impact of foreign exchange rate movements on the Company's operating results. It does not engage in speculation. Such foreign exchange contracts would not subject the Company to additional risk from exchange rate movements because gains and losses on these contracts would offset losses and gains on the assets, liabilities and transactions being hedged. At December 31, 2000, the Company had open forward exchange contracts to purchase $0.8 million of foreign currencies. These contracts mature on March 31, 2001. The fair value of these instruments was not significant at December 31, 2000.

     The Company recognized an additional bad debt expense of $5.6 million in the fourth quarter of 2000. This charge was primarily related to bankruptcy filings by several of the Company's major customers serving the steel, paper and construction industries. Total bad debt expense for the years ended December 31, 2000, 1999 and 1998 was $6.0 million, $1.2 million and $0.5 million, respectively.

F-11

MINERALS TECHNOLOGIES AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt and Commitments

     The following is a summary of long-term debt:

     On June 28, 1993, through a private placement, the Company issued $65 million of 6.04% Guarantied Senior Notes (the "Notes") due June 11, 2000. The proceeds from the sale of the Notes were used to finance the purchase of 2.5 million shares of treasury stock, and for other corporate purposes. Interest on the Notes is payable semi-annually. On June 11, 2000 the Company remitted its final principal payment.

     On July 24, 1996, through a private placement, the Company issued $50 million of 7.49% Guaranteed Senior Notes due July 24, 2006. The proceeds from the sale of the notes were used to refinance a portion of the short-term commercial bank debt outstanding. These notes rank pari passu with the Company's other unsecured senior obligations. No required principal payments are due until July 24, 2006. Interest on the notes is payable semi-annually.

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

     The Variable/Fixed Rate Industrial Development Revenue Bonds due 2009 are tax-exempt 15-year instruments issued to finance the expansion of a PCC plant in Selma, Alabama. The bonds are dated November 1, 1994, and provide for an optional put by the holder (during the Variable Rate Period) and a mandatory call by the issuer. The bonds bear interest at either a variable rate or fixed rate, at the option of the Company. Interest is payable semi-annually under the fixed rate option and monthly under the variable rate option. The Company has selected the variable rate option on these borrowings and the average interest rates were approximately 4.33% and 3.44% for the years ended December 31, 2000 and 1999, respectively.

     The Economic Development Authority Refunding Revenue Bonds due 2010 were issued on February 23, 1999 to refinance the bonds issued in connection with the construction of a PCC plant in Eastover, South Carolina. The bonds bear interest at either a variable rate or fixed rate, at the option of the Company. Interest is payable semi-annually under the fixed rate option and monthly under the variable rate option. The Company has selected the variable rate option on these borrowings and the average interest rates were approximately 4.33% and 3.52% for the years ended December 31, 2000 and the period ended December 31, 1999, respectively.

     The Variable/Fixed Rate Industrial Development Revenue Bonds due August 1, 2012 are tax-exempt 15-year instruments that were issued on August 1, 1997 to finance the construction of a PCC plant in Courtland, Alabama. The bonds bear interest at either a variable rate or fixed rate, at the option of the Company. Interest is payable semi-annually under the fixed rate option and monthly under the variable rate option. The Company has selected the variable rate option on these borrowings and the average interest rates were approximately 4.33% and 3.42% for the years ended December 31, 2000 and 1999, respectively.

     The Variable/Fixed Rate Industrial Development Revenue Bonds due November 1, 2014 are tax-exempt 15-year instruments and were issued on November 30, 1999 to refinance the bonds issued in connection with the construction of a PCC plant in Jackson, Alabama. The bonds bear interest at either a variable rate or fixed rate at the option of the Company. Interest is payable semi-annually under the fixed rate option and monthly under the variable rate option. The Company has selected the variable rate option on these borrowings and the average interest rates were approximately 4.33% and 4.62% for the year ended December 31, 2000 and the period ended December 31, 1999, respectively.

F-12

MINERALS TECHNOLOGIES AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     On June 9, 2000 the Company entered into a twenty-year, taxable, Variable/Fixed Rate Industrial Development Revenue Bond agreement to finance a portion of the construction of a merchant manufacturing facility for the production of specialty PCC in Mississippi. The Company has selected the variable rate option for this borrowing and the average interest rate was approximately 7.18% for the period ended December 31, 2000.

     The aggregate maturities of long-term debt are as follows: 2001 - $0.8 million; 2002 - $0.8 million; 2003 - $1.4 million; 2004 - - $2.3 million; 2005 - $2.5 million; thereafter - $82.8 million.

     The Company had available approximately $85 million in uncommitted, short-term bank credit lines, of which $48.1 million was in use at December 31, 2000. The interest rate for these borrowings was approximately 7% for the year ended December 31, 2000. There were no borrowings on these credit lines at December 31, 1999.

     During 2000, 1999 and 1998, respectively, the Company incurred interest costs of $7,232,000, $6,098,000, and $7,047,000 including $1,921,000, $957,000, and $1,129,000, respectively, which were capitalized. Interest paid approximated the incurred interest costs.

Benefit Plans

     The Company and its subsidiaries have pension plans covering substantially all eligible employees on a contributory or non-contributory basis.

     The funded status of the Company's pension plans and other postretirement benefit plans at December 31, 2000 and 1999 is as follows: