SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28, 1998 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-3295 -- MINERALS TECHNOLOGIES INC. (Exact name of registrant as specified in its charter) DELAWARE 25-1190717 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 405 Lexington Avenue, New York, New York 10174-1901 (Address of principal executive offices, including zip code) (212) 878-1800 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO ---------- ---------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AT July 24, 1998 Common Stock, $.10 par value 22,268,312
MINERALS TECHNOLOGIES INC. INDEX TO FORM 10-Q Page No. -------- PART I. FINANCIAL INFORMATION --------------------- Item 1. - ------- Financial Statements: Condensed Consolidated Statement of Income for the three-month and six-month periods ended June 28, 1998 and June 29, 1997 3 Condensed Consolidated Balance Sheet as of June 28, 1998 and December 31, 1997 4 Condensed Consolidated Statement of Cash Flows for the six-month periods ended June 28, 1998 and June 29, 1997 5 Notes to Condensed Consolidated Financial Statements 6 Independent Auditors' Report 9 Item 2. - ------- Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION ----------------- Item 1. - ------- Legal Proceedings 13 Item 4. - ------- Submission of Matters to a Vote of Security Holders 13 Item 6. - ------- Exhibits and Reports on Form 8-K 13 Signature 14 Page 2
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) Three Months Ended Six Months Ended ------------------ ---------------- (thousands of dollars, June 28, June 29, June 28, June 29, except per share data) 1998 1997 1998 1997 ---- ---- ---- ---- Net sales.............. $155,752 $151,765 $299,854 $289,391 Operating costs and expenses: Cost of goods sold... 107,256 107,400 206,529 204,501 Marketing, distribution and administrative expenses........... 19,829 19,007 38,683 37,336 Research and development expenses. 5,282 5,179 10,159 10,224 ------- ------- ------- ------- Income from operations. 23,385 20,179 44,483 37,330 Non-operating deductions, net.................. 2,517 1,619 3,826 3,088 ------- ------- ------- ------- Income before provision for taxes on income and minority interests 20,868 18,560 40,657 34,242 Provision for taxes on income............... 6,820 5,940 13,248 10,957 Minority interests..... (609) 259 (49) 356 ------- ------- ------- ------- Net income............. $14,657 $12,361 $27,458 $22,929 ======= ======= ======= ======= Earnings per share: Basic................ $ 0.65 $ 0.55 $ 1.22 $ 1.02 Diluted.............. $ 0.63 $ 0.54 $ 1.18 $ 1.00 Cash dividends declared per common share $ 0.025 $ 0.025 $ 0.050 $ 0.050 Shares used in the computation of earnings per share: Basic................ 22,464 22,563 22,505 22,575 Diluted.............. 23,203 23,036 23,208 23,036 See accompanying Notes to Condensed Consolidated Financial Statements. Page 3
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEET ASSETS (thousands of dollars) June 28, December 31, 1998* 1997** -------- -------- Current assets: Cash and cash equivalents.......... $39,716 $41,525 Accounts receivable, net........... 109,030 108,146 Inventories........................ 57,997 61,166 Other current assets............... 11,212 15,745 ------- ------- Total current assets........... 217,955 226,582 Property, plant and equipment, less accumulated depreciation and depletion - June 28, 1998 - $355,285; Dec. 31, 1997 - $349,538 495,665 500,731 Other assets and deferred charges.... 21,430 14,094 ------- ------- Total assets................... $735,050 $741,407 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt.................... $ 13,471 $ 13,989 Accounts payable................... 32,227 33,163 Other current liabilities.......... 45,791 47,066 ------- ------- Total current liabilities...... 91,489 94,218 Long-term debt..................... 88,323 101,571 Other noncurrent liabilities....... 81,832 78,621 ------- ------- Total liabilities ............. 261,644 274,410 ------- ------- Shareholders' equity: Common stock....................... 2,550 2,537 Additional paid-in capital......... 142,463 139,113 Retained earnings.................. 438,594 412,264 Accumulated other comprehensive loss.............................. (20,907) (14,344) ------- ------- 562,700 539,570 Less treasury stock................ 89,294 72,573 ------- ------- Total shareholders' equity..... 473,406 466,997 ------- ------- Total liabilities and shareholders' equity......... $735,050 $741,407 ======= ======= * Unaudited ** Condensed from audited financial statements. See accompanying Notes to Condensed Consolidated Financial Statements. Page 4
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Six Months Ended -------------------- (thousands of dollars) June 28, June 29, 1998 1997 OPERATING ACTIVITIES Net income............................. $27,458 $22,929 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization.................... 26,588 25,860 Other non-cash items.............. 4,226 824 Net changes in operating assets and liabilities................. 5,223 (3,090) ------ ------ Net cash provided by operating activities........................... 63,495 46,523 ------ ------ INVESTING ACTIVITIES Purchases of property, plant and equipment............................ (35,621) (30,126) Acquisition of business................ (33,486) -- Proceeds from disposition of business.. 32,357 -- Other investing activities, net........ 452 3,762 ------ ------ Net cash used in investing activities.. (36,298) (26,364) ------ ------ FINANCING ACTIVITIES Proceeds from issuance of short-term and long-term debt................... 273 11,528 Repayment of debt...................... (13,799) (25,000) Purchase of common shares for treasury. (16,721) (3,576) Dividends paid......................... (1,128) (1,130) Proceeds from issuance of common stock 3,363 878 Other financing activities, net........ -- 1,423 ------- ------- Net cash used in financing activities.. (28,012) (15,877) -------- ------- Effect of exchange rate changes on cash and cash equivalents............ (994) (343) -------- ------- Net increase (decrease) in cash and cash equivalents....................... (1,809) 3,939 Cash and cash equivalents at beginning of period............................ 41,525 15,446 ------- ------- Cash and cash equivalents at end of period............................... $39,716 $19,385 ======= ======= Interest paid.......................... $ 3,601 $ 4,240 ======= ======= Income taxes paid...................... $ 7,489 $ 6,576 ======= ======= See accompanying Notes to Condensed Consolidated Financial Statements. Page 5
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for a fair presentation of the financial information for the periods indicated, have been included. The results for the three-month and six-month periods ended June 28, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. NOTE 2 -- INVENTORIES The following is a summary of inventories by major category: June 28, December 31, (thousands of dollars) 1998 1997 --------- --------- Raw materials.................... $ 17,027 $ 19,605 Work in process.................. 4,727 5,858 Finished goods................... 19,544 19,812 Packaging and supplies........... 16,699 15,891 -------- -------- Total inventories................ $ 57,997 $ 61,166 ======== ======== NOTE 3 -- LONG-TERM DEBT The following is a summary of long-term debt: June 28, December 31, (thousands of dollars) 1998 1997 --------- ----------- 7.75% Economic Development Revenue Bonds Series 1990 Due 2010 (secured)... $4,600 $4,600 Variable/Fixed Rate Industrial Development Revenue Bonds Due 2009..... 4,000 4,000 Variable/Fixed Rate Industrial Develop- ment Revenue Bonds Due April 1, 2012... 7,545 7,545 Variable/Fixed Rate Industrial Develop- ment Revenue Bonds Due August 1, 2012.. 8,000 8,000 6.04% Guarantied Senior Notes Due June 11, 2000.......................... 26,000 39,000 7.49% Guaranteed Senior Notes Due July 24, 2006.......................... 50,000 50,000 Other borrowings......................... 1,649 1,914 ------- ------- 101,794 115,059 Less: Current maturities................. 13,471 13,488 ------- ------- Long-term debt...........................$88,323 $101,571 ======= ======= Page 6
NOTE 4 -- EARNINGS PER SHARE (EPS) Basic earnings per share are based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share are based upon the weighted average number of common shares outstanding during the period assuming the issuance of common shares for all dilutive potential common shares outstanding. The following table sets forth the computation of basic and diluted earnings per share: BASIC EPS THREE MONTHS ENDED ----------------------- (in thousands, except per share data) June 28, June 29, 1998 1997 -------- -------- Net income..............................$ 14,657 $ 12,361 Weighted average shares outstanding..... 22,464 22,563 -------- -------- Basic earnings per share................$ 0.65 $ 0.55 ======== ======== DILUTED EPS Net income..............................$ 14,657 $ 12,361 ------- -------- Weighted average shares outstanding..... 22,464 22,563 Dilutive effect of stock options........ 739 473 ------- ------- Weighted average shares outstanding, adjusted.............................. 23,203 23,036 ------- ------- Diluted earnings per share..............$ 0.63 $ 0.54 ======= ======= BASIC EPS SIX MONTHS ENDED ----------------------- (in thousands, except per share data) June 28, June 29, 1998 1997 -------- -------- Net income..............................$ 27,458 $ 22,929 Weighted average shares outstanding..... 22,505 22,575 -------- -------- Basic earnings per share................$ 1.22 $ 1.02 ======== ======== DILUTED EPS Net income..............................$ 27,458 $ 22,929 -------- -------- Weighted average shares outstanding..... 22,505 22,575 Dilutive effect of stock options........ 703 461 -------- -------- Weighted average shares outstanding, adjusted.............................. 23,208 23,036 -------- -------- Diluted earnings per share.............. $ 1.18 $ 1.00 ======== ======== NOTE 5 -- COMPREHENSIVE INCOME The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which establishes standards for the reporting and display of comprehensive income and its components in general purpose financial statements for the year ending December 31, 1998. The following are the components of comprehensive income: THREE MONTHS ENDED ------------------- (thousands of dollars) June 28, June 29, 1998 1997 -------- -------- Net income................................. $14,657 $12,361 Other comprehensive income, net of tax: Foreign currency translation adjustments.. (5,603) 198 Unrealized holding gains (losses)......... (44) 30 ------- ------- Comprehensive income.................... $ 9,010 $12,589 ======= ======= SIX MONTHS ENDED ------------------- (thousands of dollars) June 28, June 29, 1998 1997 -------- -------- Net income................................. $27,458 $22,929 Other comprehensive income, net of tax: Foreign currency translation adjustments.. (6,565) (7,017) Unrealized holding gains (losses)......... 2 18 ------- ------- Comprehensive income.................... $20,895 $15,930 ======= ======= The components of accumulated other comprehensive loss, net of related tax are as follows: June 28, December 31, 1998 1997 -------- ----------- Foreign currency translation adjustment........................... $(20,021) $(13,456) Minimum pension liability adjustments.. (1,001) (1,001) Unrealized holding gains............... 115 113 ------- ------- Accumulated other comprehensive loss $(20,907) $(14,344) ======= ======= Page 7
NOTE 6 -- ACQUISITION AND DIVESTITURE On April 30, 1998 the Company acquired for approximately $33.5 million in cash a precipitated calcium carbonate (PCC) manufacturing facility in the United Kingdom from Rhodia Limited. This acquisition allows the Company to establish a base for its specialty PCC business in Europe. The transaction was accounted for as a purchase. The purchase price exceeded the fair value of net assets acquired by approximately $8 million, which is being amortized on a straight-line basis over 25 years. On April 28, 1998 the Company sold its limestone operation in Port Inland, Michigan to Oglebay Norton Company for cash and receivables approximating $34 million. The sales price was equivalent to the net book value of the assets. Page 8
INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Minerals Technologies Inc.: We have reviewed the condensed consolidated balance sheet of Minerals Technologies Inc. and subsidiary companies as of June 28, 1998 and the related condensed consolidated statements of income for each of the three-month and six-month periods ended June 28, 1998 and June 29, 1997 and cash flows for the six- month periods then ended. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Minerals Technologies Inc. and subsidiary companies as of December 31, 1997, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 22, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1997 is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG Peat Marwick LLP New York, New York July 31, 1998 Page 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCOME AND EXPENSE ITEMS As a Percentage of Net Sales ---------------------------- Three Months Ended Six Months Ended ------------------ ---------------- June 28, June 29, June 28, June 29, 1998 1997 1998 1997 -------- -------- -------- -------- Net sales................ 100.0% 100.0% 100.0% 100.0% Cost of goods sold....... 68.9 70.8 68.9 70.7 Marketing, distribution and administrative expenses............... 12.7 12.5 12.9 12.9 Research and development expenses............... 3.4 3.4 3.4 3.5 ----- ----- ----- ----- Income from operations... 15.0 13.3 14.8 12.9 Net income............... 9.4% 8.1% 9.2% 7.9% ===== ===== ===== ==== RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 28, 1998 AS COMPARED WITH THREE MONTHS ENDED JUNE 29,1997 Net sales in the second quarter of 1998 increased 2.6% to $155.8 million from $151.8 million in the second quarter of 1997. Sales growth from ongoing operations, which exclude the divested Midwest limestone business, was 6.3%. The stronger U.S. dollar had an unfavorable impact of approximately $3.5 million or 2.3 percentage points of sales growth. Worldwide sales of Precipitated Calcium Carbonate (PCC), which is used in manufacturing processes of the paper industry, grew 16.6% to $85.6 million from $73.4 million in the second quarter of 1997. This increase was primarily attributable to the startup of seven new satellite plants since the second quarter of 1997 and to initial sales to the paper industry from the acquisition of a specialty PCC business in the United Kingdom. Currently, one PCC satellite facility is under construction, located in Courtland, Alabama. This plant, which will be equivalent to five satellite units, is scheduled to begin operations during the first half of 1999. (A "satellite unit" produces between 25,000 and 35,000 tons of PCC annually.) The Company now operates 53 satellite plants in 12 countries worldwide. Beginning in 1998, sales of pyrolytic graphite products, previously reported in the Processed Minerals product line, are reported in the Refractory product line. Prior year's sales have been reclassified to reflect this change. Net sales for the four quarters of 1997 were $1.1 million, $1.0 million, $0.5 million and $0.7 million respectively. 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 from the Midwest limestone business in the second, third and fourth quarters of 1997 were $6.4 million, $8.3 million and $5.9 million, respectively. Net sales from this facility in the second quarter of 1998, prior to the divestiture, were $1.3 million. Net sales from the ongoing operations of processed mineral products decreased 4.1% in the second quarter of 1998 to $20.9 million, compared to $21.8 million reported in second quarter 1997. However, the operating margin as a percentage of sales showed significant improvement over the second quarter of 1997. Net sales of refractory products, primarily used in the steel industry, decreased 4.6% in the second quarter of 1998 to $47.9 million from $50.2 million in the same period last year. Foreign exchange had an unfavorable impact of approximately $1.8 million on refractory product sales. Income from operations rose 15.9% in the second quarter of 1998 to $23.4 million. This increase was due primarily to growth in the PCC product line; improved profitability in refractory products, due primarily to the successful execution of the Company's strategy of introducing high value innovative products, and to increased profitability in the processed minerals product line. Page 10
Non-operating deductions increased primarily as a result of foreign exchange losses in Asia. Net income grew 18.6% to $14.7 million from $12.4 million in the prior year. Earnings per common share, on a diluted basis, were $0.63 as compared to $0.54 in the same period last year. SIX MONTHS ENDED JUNE 28, 1998 AS COMPARED WITH SIX MONTHS ENDED JUNE 29, 1997 Net sales in the first half of 1998 increased 3.6% to $299.9 million from $289.4 million in 1997. Excluding the effect of foreign exchange and the divested Midwest limestone business, sales growth was 8.0%. This increase was due primarily to the continued expansion of the PCC product line. PCC sales increased 14.7% to $165.1 million compared with $144.0 million in the first half of 1997. Worldwide sales from the ongoing operations of processed mineral products decreased 4.5% to $39.4 million. Refractory product sales decreased 3.9% to $93.7 million compared with $97.5 million in the first half of 1997. This decrease was primarily due to unfavorable foreign exchange rates. Net sales in the United States increased 5.3% in the first half of 1998 primarily due to the growth in the PCC product line and solid growth of refractory products. Net foreign sales increased approximately 5.9% in the first half of 1998 as a result of the continued international expansion of the PCC product line. Income from operations rose 19.3% to $44.5 million in the first half of 1998 from $37.3 million in the previous year. Non-operating deductions increased primarily as a result of foreign exchange losses in Asia. Net income increased 19.8% to $27.5 million from $22.9 million in 1997. Diluted earnings per common share were $1.18 as compared with $1.00 for the first six months of 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's financial position remained strong in the first half of 1998. Cash flows in the first half of 1998 were provided from operations and the divested Midwest limestone business and were applied principally to fund $35.6 million of capital expenditures, the acquisition of a specialty PCC business, the repurchase of common shares for treasury and to remit the required principal payment of $13 million under the Company's Guarantied Senior Notes due June 11, 2000. Cash provided from operating activities amounted to $63.5 million in the first half of 1998 as compared to $46.5 million in the prior year. This increase was primarily due to an improvement in working capital. On February 26, 1998, the Company's Board of Directors authorized a $150 million stock repurchase program under which the stock will be purchased on the open market from time to time. As of July 24, the Company had repurchased approximately 384,000 shares under this program at an average price of approximately $52 per share. On April 28, 1998, the Company sold its limestone operation in Port Inland, Michigan to Oglebay Norton Company for approximately $34 million, which was equivalent to its net book value. This high volume commodity operation no longer complemented the Company's long-term strategic vision. Sales for the facility were approximately $21 million in 1997. On April 30, 1998, the Company acquired for approximately $33.5 million a PCC manufacturing facility located near Birmingham in Kings Norton, England from Rhodia Limited, a specialty chemicals company. This acquisition will allow the Company to establish a base for its specialty PCC business in Europe. The Company's specialty PCC products are used in food and pharmaceutical applications, as well as in plastics, sealants and coatings, and paper. Sales of this business in 1997 were about $18 million. The Company has available approximately $110 million in uncommitted, short-term bank credit lines, none of which were in use at June 28, 1998. The Company anticipates that capital expenditures for all of 1998 will approximate $90 million, principally related to the construction of satellite PCC plants, expansion projects at existing satellite PCC plants, and other opportunities which meet the strategic growth objectives of the Company. The Company expects to meet such Page 11
requirements from internally generated funds, the aforementioned uncommitted bank credit lines and, where appropriate, project financing of certain satellite plants. PROSPECTIVE INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. This report may contain such forward-looking statements that set out anticipated results based on management's plans and assumptions. Words such as "anticipate," "estimate," "expects," "projects," and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify these forward-looking statements. The Company cannot guarantee that any forward-looking statement will be realized, although it believes it has been prudent in its plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements 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 of the Company's Annual Report on Form 10-K for 1997. RECENTLY ISSUED ACCOUNTING STANDARDS In February 1998, the Financial Accounting Standards Board issued SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits," which revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans. The statement is effective for fiscal years beginning after December 15, 1997. The adoption of this statement has no impact on the consolidated financial statements. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The statement is effective for fiscal years beginning after December 15, 1998. Earlier application is encouraged in fiscal years for which annual financial statements have not been issued. The statement defines which costs of computer software developed or obtained for internal use are capitalized and which costs are expensed. The Company adopted SOP 98-1 in 1998. The adoption of SOP 98-1 does not materially affect the consolidated financial statements. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up Activities." The statement is effective for fiscal years beginning after December 15, 1998. The statement requires costs of start-up activities and organization costs to be expensed as incurred. The Company will adopt SOP 98-5 for calendar year 1999. The adoption of SOP 98-5 will not materially affect the consolidated financial statements. 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 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company will adopt SFAS 133 by January 1, 2000. Adoption of SFAS 133 is not expected to have a material effect on the consolidated financial statements. YEAR 2000 CONVERSION Management has initiated an enterprise-wide program to improve the capability of the current information systems and to prepare the Company's computer systems and applications for the year 2000. The Company is presently in the midst of installing systems which are year 2000-compliant and will replace the majority of the legacy information technology systems and applications. It is anticipated that such systems will be installed by the middle of 1999. The Company does not expect Page 12
the total cost of the year 2000 conversion to have a material adverse effect on the Company's future results of operations and financial condition. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company and its subsidiary Specialty Minerals Inc. are defendants in a lawsuit, captioned EATON CORPORATION V. PFIZER INC, MINERALS TECHNOLOGIES INC. AND SPECIALTY MINERALS INC., which was filed on July 31, 1996 and is pending in the U.S. District Court for the Western District of Michigan. The suit alleges that certain materials sold to Eaton for use in truck transmissions were defective, necessitating repairs for which Eaton now seeks reimbursement. While all litigation contains an element of uncertainty, the Company and Specialty Minerals Inc. believe that they have valid defenses to the claims asserted by Eaton in this lawsuit, are continuing to vigorously defend all such claims, and believe that the outcome of this matter will not have a material adverse effect on the Company's consolidated financial position or results of operations. The Company and its subsidiaries are not party to any other material pending legal proceedings, other than ordinary routine litigation incidental to their businesses. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its annual meeting on May 28, 1998. At the meeting, (1) John B. Curcio was elected a director of the Company, by a plurality of 20,032,017 votes, with 304,608 votes being withheld; (2) William C. Steere, Jr. was elected a director of the Company, by a plurality of 20,044,448 votes, with 292,177 votes being withheld; (3) the appointment of KPMG Peat Marwick LLP as independent auditors of the Company for the year 1998 was approved by a vote of 20,285,133 for and 21,278 against, with 30,214 abstentions; and (4) an amendment to the Company's Stock and Incentive Plan was approved by a vote of 11,387,347 for and 7,435,610 against, with 57,283 abstentions. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: 10.1 - Sale of Business Agreement dated 5 April 1998 among Minteq U.K. Limited, Specialty Minerals Inc., John & E. Sturge Limited and Rhodia Limited. 10.2 - Asset Sale Agreement dated as of April 27, 1998 between Specialty Minerals (Michigan) Inc. and Oglebay Norton Limestone Company. 15 - Accountants' Acknowledgment (Part I Data). 27.1 - Financial Data Schedule for the six months ended June 28, 1998. 27.2 - Financial Data Schedule for the six months ended June 29, 1997. b) No reports on Form 8-K were filed during the second quarter of 1998. Page 13
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Minerals Technologies Inc. By: /s/ John R. Stack ------------------------ John R. Stack Vice President-Finance and Chief Financial Officer August 6, 1998 Page 14