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UNITED STATES

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 September 28, 2014

or

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-11430

 

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MINERALS TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

622 Third Avenue, New York, NY  10017-6707

(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 the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

YES o

NO x

 

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

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MINERALS TECHNOLOGIES INC.

INDEX TO FORM 10-Q

 

		Page No.
PART I.    FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Statements of Income for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013 (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income for the three-month and nine-month periods ended September 28, 2014 and September 29, 2013 (Unaudited)	4
	Condensed Consolidated Balance Sheets as of September 28, 2014 (Unaudited) and December 31, 2013	5
	Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 28, 2014 and September 29, 2013 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Review Report of Independent Registered Public Accounting Firm	22
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	39
PART II.    OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	42
Item 2.	Unregistered  Sales of Equity Securities and Use of Proceeds	44
Item 3.	Default Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
Signature		46

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PART 1.  FINANCIAL INFORMATION

ITEM 1.

Financial Statements

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

		Three Months Ended								Nine Months Ended
		Sept. 28,				Sept. 29,				Sept. 28,				Sept. 29,
		2014				2013				2014				2013
		(in millions, except per share data)
Product sales		$	458.1			$	254.2			$	1,075.0			$	761.5
Service revenue			85.4				-				134.0				-
Total net sales			543.5				254.2				1,209.0				761.5
Cost of goods sold			337.8				194.3				812.0				586.9
Cost of service revenue			60.7				-				94.0				-
Total cost of sales			398.5				194.3				906.0				586.9
Production margin			145.0				59.9				303.0				174.6
Marketing and administrative expenses			59.7				21.9				127.4				66.3
Research and development expenses			6.6				5.3				18.0				14.9
Amortization expense of intangible assets acquired			1.9				-				2.9				-
Acquisition related transaction and integration costs			4.2				-				16.7				-
Restructuring and other charges			5.8				-				11.8				-
Income from operations			66.8				32.7				126.2				93.4
Interest expense, net			(16.0	)			(0.1	)			(25.2	)			(0.5	)
Premium on early extinguishment of debt			-				-				(5.8	)			-
Other non-operating income (deductions), net			0.9				(1.1	)			0.5				(2.1	)
Total non-operating deductions, net			(15.1	)			(1.2	)			(30.5	)			(2.6	)
Income from continuing operations before provision for taxes and equity in earnings			51.7				31.5				95.7				90.8
Provision for taxes on income			14.4				8.9				24.8				25.2
Equity in earnings of affiliates, net of tax			0.3				-				0.6				-
Income from continuing operations, net of tax			37.6				22.6				71.5				65.6
Income (loss) from discontinued operations, net of tax			0.2				-				2.0				(5.7	)
Consolidated net income			37.8				22.6				73.5				59.9
Less:
Net income attributable to non-controlling interests			0.8				0.7				2.4				2.2
Net income attributable to Minerals Technologies Inc. (MTI)		$	37.0			$	21.9			$	71.1			$	57.7
Earnings (Loss) per share:
Basic:
Income from continuing operations attributable to MTI		$	1.07			$	0.63			$	2.00			$	1.82
Income (loss) from discontinued operations attributable to MTI			-				-				0.06				(0.16	)
Basic earnings per share attributable to MTI		$	1.07			$	0.63			$	2.06			$	1.66
Diluted:
Income from continuing operations attributable to MTI		$	1.06			$	0.63			$	1.99			$	1.81
Income (loss) from discontinued operations attributable to MTI			-				-				0.06				(0.16	)
Diluted earnings per share attributable to MTI		$	1.06			$	0.63			$	2.05			$	1.65
Cash dividends declared per common share		$	0.05			$	0.05			$	0.15			$	0.15
Shares used in computation of earnings per share:
Basic			34.5				34.6				34.5				34.8
Diluted			34.8				34.9				34.8				35.1

 

See accompanying Notes to Condensed Consolidated Financial Statements.

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MINERALS TECHNOLOGIES INC.  AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

		Three Months Ended								Nine Months Ended
		Sept. 28,				Sept. 29,				Sept. 28,				Sept. 29,
		2014				2013				2014				2013
		(millions of dollars)
Consolidated net income		$	37.8			$	22.6			$	73.5			$	59.9
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			(27.7	)			7.5				(22.0	)			(15.0	)
Pension and postretirement plan adjustments			0.8				1.9				2.5				5.6
Cash flow hedges:
Net derivative gains (losses) arising during the period			-				-				-				0.5
Total other comprehensive income (loss), net of tax			(26.9	)			9.4				(19.5	)			(8.9	)
Total comprehensive income including non-controlling interests			10.9				32.0				54.0				51.0
Comprehensive (income) loss attributable to non-controlling interest			(0.7	)			(0.6	)			(1.9	)			(0.7	)
Comprehensive income attributable to MTI		$	10.2			$	31.4			$	52.1			$	50.3

 

See accompanying Notes to Condensed Consolidated Financial Statements.

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MINERALS TECHNOLOGIES INC.  AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		Sept. 28,				Dec. 31,
		2014*				2013**
(millions of dollars)
ASSETS
Current assets:
Cash and cash equivalents		$	202.7			$	490.3
Short-term investments, at cost which approximates market			17.7				15.8
Accounts receivable, net			443.7				204.4
Inventories			233.7				89.2
Prepaid expenses and other current assets			72.9				15.4
Total current assets			970.7				815.1
Property, plant and equipment, less accumulated depreciation and depletion –September 28, 2014 - $996.8; December 31, 2013 - $976.3			1,219.0				306.1
Goodwill			767.3				64.4
Intangible assets			217.7				3.0
Other assets and deferred charges			99.1				28.9
Total assets		$	3,273.8			$	1,217.5
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt		$	4.7			$	5.5
Current maturities of long-term debt			3.9				8.2
Accounts payable			184.3				94.9
Other current liabilities			162.6				72.3
Total current liabilities			355.5				180.9
Long-term debt, net of unamortized discount			1,512.3				75.0
Deferred income taxes			318.9				-
Other non-current liabilities			161.4				87.2
Total liabilities			2,348.1				343.1
Shareholders' equity:
Common stock			4.8				4.7
Additional paid-in capital			367.2				361.5
Retained earnings			1,172.2				1,106.3
Accumulated other comprehensive loss			(50.3	)			(31.3	)
Less common stock held in treasury			(593.7	)			(593.7	)
Total  MTI shareholders' equity			900.2				847.5
Non-controlling interest			25.5				26.9
Total shareholders' equity			925.7				874.4
Total liabilities and shareholders' equity		$	3,273.8			$	1,217.5

 

See accompanying Notes to Condensed Consolidated Financial Statements.

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MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Nine Months Ended
		Sept. 28,				Sept. 29,
		2014				2013
		(millions of dollars)
Operating Activities:
Consolidated net income		$	73.5			$	59.9
Gain (loss) from discontinued operations			2.0				(5.7	)
Income from continuing operations			71.5				65.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization			59.8				35.2
Other non-cash items			12.5				5.3
Net changes in operating assets and liabilities			50.5				(12.8	)
Net cash provided by continuing operations			194.3				93.3
Net cash used in discontinued operations			(3.5	)			(2.5	)
Net cash provided by operating activities			190.8				90.8
Investing Activities:
Purchases of property, plant and equipment			(62.4	)			(32.0	)
Acquisition of business, net of cash acquired			(1,802.3	)			-
Proceeds from sale of assets			8.7				-
Net purchases of short-term investments			(1.8	)			(3.0	)
Net cash used in investing activities			(1,857.8	)			(35.0	)
Financing Activities:
Proceeds from issuance of long-term debt			1,545.3				-
Debt issuance and settlement costs			(38.2	)			-
Repayment of long-term debt			(113.2	)			(1.7	)
Net issuance (repayment) of short-term debt			(0.8	)			-
Purchase of common shares for treasury			-				(42.9	)
Proceeds from issuance of stock under option plan			2.8				11.4
Excess tax benefits related to stock incentive programs			0.5				2.1
Purchase of non-controlling interest share			(2.1	)			-
Dividends paid to non-controlling interest			(3.3	)			(0.8	)
Cash dividends paid			(5.2	)			(5.2	)
Net cash provided by (used in) financing activities			1,385.8				(37.1	)
Effect of exchange rate changes on cash and cash equivalents			(6.4	)			(3.1	)
Net increase (decrease) in cash and cash equivalents			(287.6	)			15.6
Cash and cash equivalents at beginning of period			490.3				454.1
Cash and cash equivalents at end of period		$	202.7			$	469.7
Supplemental disclosure of cash flow information:
Interest paid		$	18.6			$	2.1
Income taxes paid		$	17.0			$	21.5
Non-cash financing activities:
Treasury stock purchases settled after period-end		$	-			$	1.1

 See accompanying Notes to Condensed Consolidated Financial Statements.

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

 

Note 1.

Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared by management of Minerals Technologies Inc. (the “Company” or “MTI”)  in accordance with the rules and regulations of the United States Securities and Exchange Commission.  Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted.  Therefore, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2013.  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 nine-month periods ended September 28, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

Company Operations

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 and supporting systems and services.  On May 9, 2014, the Company acquired AMCOL International Corporation (“AMCOL”).  See Note 2.  The accompanying Condensed Consolidated Statements of Income include the results of operations of the acquired AMCOL businesses from May 9, 2014, through September 28, 2014.

As a result of the acquisition of AMCOL, the Company currently has 5 reportable segments: Specialty Minerals, Refractories, Performance Materials, Construction Technologies, and Energy Services compared to 2 reportable segments in prior year (Specialty Minerals and Refractories).

-  The Specialty Minerals segment produces and sells the synthetic mineral product precipitated calcium carbonate ("PCC") and processed mineral product quicklime ("lime"), and mines mineral ores then processes and sells natural mineral products, primarily limestone and talc.

 

Certain reclassifications were made to prior year amounts to conform to current year presentation.

 

During the second quarter of 2013, the Company ceased operations at its Paper PCC merchant plant in Walsum, Germany and reclassified such operations as discontinued.  All prior periods have been restated to reflect such reclassification.

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

Use of Estimates

The Company employs accounting policies that are in accordance with U.S. generally accepted accounting principles and require management to make estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Significant estimates include those related to revenue recognition, valuation of accounts receivable, valuation of inventories, valuation of long-lived assets, goodwill and other intangible assets, pension plan assumptions, valuation of product liability and asset retirement obligation, income tax, income tax valuation allowances, and litigation and environmental liabilities. Actual results could differ from those estimates.

Note 2.

Business Combination

On May 9, 2014, pursuant to the Merger Agreement dated March 10, 2014, the Company acquired AMCOL, based in Hoffman Estates, Illinois, a leading international producer of specialty materials and related products and services for industrial and consumer markets. The Company and AMCOL are both world-renowned innovators in mineralogy, fine particle technology and polymer chemistry. This transaction brings together the global leaders in precipitated calcium carbonate and bentonite, creating an even more robust US-based international minerals supplier. The Company’s management believes that the acquisition of AMCOL will provide substantial synergies through enhanced operational cost efficiencies.

The Company acquired AMCOL by completing a tender offer to purchase AMCOL’s outstanding shares of common stock and the subsequent merger of AMCOL with and into a wholly-owned subsidiary of MTI. At the expiration of the Company’s tender offer, each tendered share of AMCOL common stock was purchased for consideration equal to $45.75 in cash, and at the effective time of the back-end merger, each share of AMCOL common stock not tendered (other than shares owned by the Company or held by AMCOL in treasury) was converted into the right to receive consideration equal to $45.75 in cash. Upon completion of the merger, AMCOL became a wholly owned direct subsidiary of MTI. Through the tender offer and the merger, the Company paid $1,519.4 million in cash to acquire all of the outstanding shares of AMCOL.

In connection with the acquisition of AMCOL, the Company entered into a $1,560.0 million senior secured term loan facility (the “Term Facility”), the net proceeds of which, together with the Company’s cash on hand, were used as cash consideration for the acquisition of AMCOL and to refinance certain existing indebtedness of the Company and AMCOL and to pay fees and expenses in connection with the foregoing.  See Note 9.

The fair value of the total consideration transferred, net of cash acquired, was $1,802.3 million and comprised of the following:

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

The following table summarizes the Company’s preliminary purchase price allocation for the AMCOL acquisition:

The Company used the income, market, or cost approach (or a combination thereof) for the preliminary valuation, and used valuation inputs and analyses that were based on market participant assumptions. Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability. For certain items, the carrying value was determined to be a reasonable approximation of fair value based on the information available. The Company’s estimates related to this valuation are considered to be critical accounting estimates because they are susceptible to change from period to period based on our judgments about a variety of factors and due to the uncontrollable variability of market factors underlying them.  For example, in performing assessments of the fair value of these assets, the Company makes judgments about the future performance business of the acquired business, economic, regulatory, and political conditions affecting the net assets acquired, appropriate risk-related rates for discounting estimated future cash flows, reasonable estimates of disposal values, and market royalty rate.

Goodwill was calculated as the excess of the consideration transferred over the assets acquired and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.  The goodwill is primarily attributable to fair value of expected synergies from combining the MTI and AMCOL businesses and will be mainly allocated to Performance Materials and Construction Technologies segments. The allocation is expected to be completed during the first quarter of 2015.  Goodwill recognized as a result of this acquisition is not deductible for tax purpose.

In connection with the acquisition, the Company recorded an additional deferred tax liability of $309.1 million with a corresponding increase to goodwill. The increase in deferred tax liability represents the tax effect of the difference between the estimated assigned fair value of the tangible and intangible assets and the tax basis of such assets.

Mineral rights were valued using discounted cash flow method, a Level 3 fair value input. Plant, property and equipment were valued using the cost method adjusted for age and deterioration, also a Level 3 fair value input.

Intangible assets acquired mainly included technology and a number of tradenames. Technology was valued using relief-from royalty method, a Level 3 fair value input, with an estimated useful life of 10-20 years. Tradenames were valued using multi-period excess earnings, also a Level 3 fair value input, with an estimated useful life of 25-40 years.

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

 

		Three Months Ended								Nine Months Ended
		Sept. 28,				Sept. 29,				Sept. 28,				Sept. 29,
Pro Forma Results		2014				2013				2014				2013
		(millions of dollars)
Net sales		$	543.5			$	521.4			$	1,582.6			$	1,528.2
Income (loss) from continuing operations before provision for taxes and equity in earnings			61.7				(16.2	)			125.9				48.3
Income (loss) from continuing operations, net of tax			44.4				(12.9	)			85.6				37.3

 

Note 3.

Earnings Per Share (EPS)

 

Basic earnings per share are based upon the weighted average number of common shares outstanding during the period.  Diluted earnings per share are based upon the weighted average number of common shares outstanding during the period assuming the issuance of common shares for all potentially dilutive common shares outstanding.

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

		Three Months Ended				Nine Months Ended
Restructuring Charges		Sept. 28, 2014
		(millions of dollars)
Specialty Minerals		$	0.5			$	2.7
Refractories			-				0.6
Performance Materials			2.0				3.2
Construction Technologies			2.0				3.0
Energy Services			1.3				2.3
Total		$	5.8			$	11.8

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

 

Note 5.

Discontinued Operations

		Three Months Ended								Nine Months Ended
		Sept. 28,				Sept. 29,				Sept. 28,				Sept. 29,
		2014				2013				2014				2013
		(millions of dollars)
Net sales		$	-			$	-			$	-			$	1.7
Production margin			-				-				-				(2.3	)
Expenses (income)			(0.2	)			-				(0.2	)			0.4
Facility closure costs accrual (reversal)			-				-				(2.4	)			5.9
Income (loss) from operations		$	0.2			$	-			$	2.6			$	(8.6	)
Provision for taxes on income		$	-			$	-			$	0.6			$	(2.9	)
Income (loss) from discontinued operations, net of tax		$	0.2			$	-			$	2.0			$	(5.7	)

 

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

Note 7.

Inventories

Note 8.

Goodwill and Other Intangible Assets

		Sept. 28, 2014								Dec. 31, 2013
		Gross								Gross
		Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
		(millions of dollars)
Tradenames		$	194.9			$	2.2			$	-			$	-
Technology			18.7				0.6				-				-
Patents and trademarks			6.4				3.9				6.4				3.7
Customer relationships			4.3				0.1				-				-
Customer lists			2.9				2.7				2.9				2.6
		$	227.2			$	9.5			$	9.3			$	6.3

 

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

 

Note 9.

Long-Term Debt and Commitments

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Components of Net Periodic Benefit Cost

		Three Months Ended								Nine Months Ended
		Sept. 28,				Sept. 29,				Sept. 28,				Sept. 29,
		2014				2013				2014				2013
		(millions of dollars)
Service cost		$	2.1			$	1.9			$	6.5			$	6.4
Interest cost			4.0				2.9				10.8				8.5
Expected return on plan assets			(5.0	)			(3.8	)			(14.2	)			(11.1	)
Amortization:
Prior service cost			0.3				0.3				0.9				0.9
Recognized net actuarial loss			1.9				3.4				5.4				10.2
Net periodic benefit cost		$	3.3			$	4.7			$	9.4			$	14.9

		Three Months Ended								Nine Months Ended
		Sept. 28,				Sept. 29,				Sept. 28,				Sept. 29,
		2014				2013				2014				2013
		(millions of dollars)
Service cost		$	-			$	0.2			$	0.3			$	0.5
Interest cost			0.1				0.1				0.3				0.2
Amortization:
Prior service cost			(0.8	)			(0.8	)			(2.3	)			(2.3	)
Recognized net actuarial (gain)/loss			(0.1	)			-				(0.2	)			-
Net periodic benefit cost		$	(0.8	)		$	(0.5	)		$	(1.9	)		$	(1.6	)

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

Note 11.

Comprehensive Income

Note 12.

Accounting for Asset Retirement Obligations

The Company records asset retirement obligations for situations in which the Company will be required to incur costs to retire tangible long-lived assets. These are primarily related to its PCC satellite facilities and mining operations. The Company has also recorded the provisions related to conditional asset retirement obligations at its facilities.  The Company has recorded asset retirement obligations at all of its facilities except where there are no legal or contractual obligations.

The following is a reconciliation of asset retirement obligations as of September 28, 2014:

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

The Company’s Performance Materials segment mines various minerals using a surface mining process that requires the removal of overburden.  In certain areas and under various governmental regulations, the Company is obligated to restore the land comprising each mining site to its original condition at the completion of the mining activity.  The table above includes $8.9 million related to this land reclamation liability assumed in connection with the purchase of AMCOL. This liability will be adjusted to reflect the passage of time, mining activities, and changes in estimated future cash outflows.

The asset retirement costs are capitalized as part of the carrying amount of the associated asset. The current portion of the liability of approximately $2.0 million is included in other current liabilities and the long-term portion of the liability of approximately $21.4 million is included in other non-current liabilities in the Condensed Consolidated Balance Sheet as of September 28, 2014.

 

Note 13.

Contingencies

We are party to a number of lawsuits arising in the normal course of our business.

On May 8, 2013, Armada (Singapore) PTE Limited, an ocean shipping company now in bankruptcy ("Armada") filed a case in federal court in the Northern District of Illinois against AMCOL and certain of its subsidiaries (Armada (Singapore) PTE Limited v. AMCOL International Corp., et al., United States District Court for the Northern District of Illinois, Case No. 13 CV 3455).  We acquired AMCOL and its subsidiaries on May 9, 2014.  A co-defendant is Ashapura Minechem Limited, a company located in Mumbai, India (“AML”).  During the relevant time period, 2008-2010, AMCOL owned slightly over 20% of the outstanding AML stock through December 2009, after which it owned approximately 19%.  In 2008, AML entered into two contracts of affreightment (“COA”) with Armada for over 60 ship loads of bauxite from India to China.  After one shipment, AML made no further shipments, which led Armada to file arbitrations in London against AML, one for each COA.  AML did not appear in the London arbitrations and default awards of approximately $70 million were entered.  The litigation filed by Armada against AMCOL and AML relates to these awards, which AML has not paid.  The substance of the allegations by Armada is that AML and AMCOL engaged in illegal conduct to thwart Armada’s efforts to collect the arbitration award.  The counts in the complaint include both violations of the Illinois Fraudulent Transfer laws as well as federal RICO violations. The lawsuit seeks money damages as well injunctive relief.  The litigation is in the discovery phase. Fact discovery and expert discovery is currently scheduled to last through June 12, 2015. At this time, considering this case is in the discovery phase, management cannot estimate potential losses (if any) and therefore has not established any provisions.

The Company’s Construction Technologies segment is respondent in an arbitration requested by Bentonit União Nordeste Indústria e Comércio Ltda. (“BUN”), the Company’s joint venture partner in Brazil, alleging a breach of the joint venture agreement and claiming, among other things, damages in the amount of 34 million Brazilian real.  The arbitration is in an evidentiary phase and, based on the evidence to date, the Company believes that the BUN claim is unsubstantiated.  At this time management anticipates that the amount of the Company's liability, if any, will not have a material effect on its financial position or results of operations.

Certain of the Company's subsidiaries are among numerous defendants in a number of cases seeking damages for exposure to silica or to asbestos containing materials.  The Company currently has 102 pending silica cases and 13 pending asbestos cases. These totals include 30 silica cases and one asbestos case against AMCOL International Corporation and/or its subsidiary, American Colloid Company, that were pending on the date we acquired AMCOL.  To date, 1,394 silica cases and 37 asbestos cases have been dismissed, not including any lawsuits against AMCOL or American Colloid Company dismissed prior to our acquisition of AMCOL. No new asbestos or silica cases were filed in the third quarter of 2014.

Most of these claims do not provide adequate information to assess their merits, the likelihood that the Company will be found liable, or the magnitude of such liability, if any.  Additional claims of this nature may be made against the Company or its subsidiaries.  At this time management anticipates that the amount of the Company's liability, if any, and the cost of defending such claims, will not have a material effect on its financial position or results of operations.

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

The Company has not settled any silica or asbestos lawsuits to date (not including any that may have been settled by AMCOL prior to completion of the acquisition).  We are unable to state an amount or range of amounts claimed in any of the lawsuits because state court pleading practices do not require identifying the amount of the claimed damage.  The aggregate cost to the Company for the legal defense of these cases since inception continues to be insignificant.  The majority of the costs of defense for these cases, excluding cases against AMCOL or American Colloid, are reimbursed by Pfizer Inc. pursuant to the terms of certain agreements entered into in connection with the Company's initial public offering in 1992. Of the 12 pending asbestos cases excluding the case against AMCOL / American Colloid, all allege liability based on products sold largely or entirely prior to the initial public offering, and for which the Company is therefore entitled to indemnification pursuant to such agreements. Our experience has been that the Company is not liable to plaintiffs in any of these lawsuits and the Company does not expect to pay any settlements or jury verdicts in these lawsuits.

Environmental Matters

On April 9, 2003, the Connecticut Department of Environmental Protection issued an administrative consent order relating to our Canaan, Connecticut, plant where both our Refractories segment and Specialty Minerals segment have operations. We agreed to the order, which includes provisions requiring investigation and remediation of contamination associated with historic use of polychlorinated biphenyls ("PCBs") and mercury at a portion of the site. We have completed the required investigations and submitted several reports characterizing the contamination. We are now conducting a site-specific risk assessment required by the regulators.

We believe that the most likely form of overall site remediation will be to leave the existing contamination in place (with some limited soil removal), encapsulate it, and monitor the effectiveness of the encapsulation. We anticipate that a substantial portion of the remediation cost will be borne by the United States based on its involvement at the site from 1942 – 1964, as historic documentation indicates that PCBs and mercury were first used at the facility at a time of U.S. government ownership for production of materials needed by the military. Though the cost of the likely remediation remains uncertain pending completion of the phased remediation decision process, we have estimated that the Company’s share of the cost of the encapsulation and limited soil removal described above would approximate $0.4 million, which has been accrued as of September 28, 2014.

The Company is evaluating options for upgrading the wastewater treatment facilities at its Adams, Massachusetts plant. This work has been undertaken pursuant to an administrative Consent Order originally issued by the Massachusetts Department of Environmental Protection (“DEP”) on June 18, 2002. This order was amended on June 1, 2009 and on June 2, 2010.  The amended Order includes the investigation by January 1, 2022 of options for ensuring that the facility's wastewater treatment ponds will not result in unpermitted discharge to groundwater.  Additional requirements of the amendment include the submittal by July 1, 2022 of a plan for closure of a historic lime solids disposal area. Preliminary engineering reviews completed in 2005 indicate that the estimated cost of wastewater treatment upgrades to operate this facility beyond 2024 may be between $6 million and $8 million. The Company estimates that the remaining remediation costs would approximate $0.4 million, which has been accrued as of September 28, 2014.

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

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

Note 14.

Non-controlling interests

The following is a reconciliation of beginning and ending total equity, equity attributable to MTI, and equity attributable to non-controlling interests:

 

		Equity Attributable to MTI
														Accumulated
		Common				Additional Paid-in				Retained				Other Comprehensive				Treasury				Non-controlling
		Stock				Capital				Earnings				Income (Loss)				Stock				Interests				Total
		(millions of dollars)
Balance as of December 31, 2013		$	4.7			$	361.5			$	1,106.3			$	(31.3	)		$	(593.7	)		$	$ 26.9			$	874.4
Net income			-				-				71.1				-				-				2.4				73.5
Other comprehensive income (loss)			-				-				-				(19.0	)			-				(0.5	)			(19.5	)
Dividends declared			-				-				(5.2	)			-				-				-				(5.2	)
Dividends to non-controlling interest			-				-				-				-				-				(3.3	)			(3.3	)
Purchase of non-controlling interest shares			-				(2.1	)			-				-				-				-				(2.1	)
Issuance of shares pursuant to employee stock compensation plans			0.1				2.8				-				-				-				-				2.9
Income tax benefit arising from employee stock compensation plans			-				1.2				-				-				-				-				1.2
Stock based compensation			-				3.8				-				-				-				-				3.8
Balance as of September 28, 2014		$	4.8			$	367.2			$	1,172.2			$	(50.3	)		$	(593.7	)		$	25.5			$	925.7

 

The income attributable to non-controlling interests for the nine-month periods ended September 28, 2014 and September 29, 2013 was from continuing operations. The remainder of income was attributable to MTI.

In May 2014, the Company acquired the remaining 20% non-controlling interest in CETCO Lining Technologies India Pvt. Ltd. (“CETCO India)”, a part of our Construction Technologies operations for $2.0 million. The following table sets forth the effects of this transaction on equity attributable to MTI shareholders:

		Three Months Ended								Nine Months Ended
		Sept. 28, 2014				Sept. 29, 2013				Sept. 28, 2014				Sept. 29, 2013
	(millions of dollars)
Net income attributable to MTI		$	37.0			$	21.9			$	71.1			$	57.7
Transfer from non-controlling interest:
Decrease in additional paid-in capital for purchase of the remaining non-controlling interest in CETCO India			-				-				(2.1	)			-
Change from net income attributable to MTI and transfers from non-controlling interest		$	37.0			$	21.9			$	69.0			$	57.7

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

Note 15.

Segment and Related Information

As a result of the acquisition of AMCOL, the Company currently has 5 reportable segments: Specialty Minerals, Refractories, Performance Materials, Construction Technologies, and Energy Services, compared to 2 reportable segments in the prior year (Specialty Minerals and Refractories).  See Note 1.  Segment information for the three and nine-month periods ended September 28, 2014 and September 29, 2013 were as follows:

		Three Months Ended								Nine Months Ended
		Sept. 28,				Sept. 29,				Sept. 28,				Sept. 29,
		2014				2013				2014				2013
		(millions of dollars)
Net Sales
Specialty Minerals		$	163.0			$	167.4			$	490.5			$	502.5
Refractories			90.4				86.8				266.8				259.0
Performance Materials			135.6				-				211.4				-
Construction Technologies			69.1				-				106.3				-
Energy Services			85.4				-				134.0				-
Total		$	543.5			$	254.2			$	1,209.0			$	761.5
Income from Operations
Specialty Minerals		$	26.0			$	26.0			$	71.4			$	74.4
Refractories			9.7				8.4				29.0				23.8
Performance Materials			18.7				-				23.0				-
Construction Technologies			8.3				-				9.0				-
Energy Services			10.2				-				16.1				-
Total		$	72.9			$	34.4			$	148.5			$	98.2

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

		Income from operations before provision for taxes on income
		Three Months Ended								Nine Months Ended
		Sept. 28,				Sept. 29,				Sept. 28,				Sept. 29,
		2014				2013				2014				2013
		(millions of dollars)
Income from operations for reportable segments		$	72.9			$	34.4			$	148.5			$	98.2
Acquisition Related Transaction and Integration Costs			(4.2	)			-				(16.7	)			-
Unallocated corporate expenses			(1.9	)			(1.7	)			(5.6	)			(4.8	)
Consolidated income from operations			66.8				32.7				126.2				93.4
Non-operating deductions, net			(15.1	)			(1.2	)			(30.5	)			(2.6	)
Income from continuing operations before provision for taxes on income		$	51.7			$	31.5			$	95.7			$	90.8

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

The Company's sales by product category are as follows:

		Three Months Ended								Nine Months Ended
		Sept. 28,				Sept. 29,				Sept. 28,				Sept. 29,
		2014				2013				2014				2013
		(millions of dollars)
Paper PCC		$	113.4			$	119.3			$	341.3			$	357.9
Specialty PCC			16.5				16.6				50.7				50.8
Talc			13.8				12.8				41.7				38.2
Ground Calcium Carbonate			19.3				18.7				56.8				55.6
Refractory Products			69.7				66.3				201.4				195.9
Metallurgical Products			20.7				20.5				65.4				63.1
Metalcasting			70.0				-				109.4				-
Household, Personal Care and Specialty Products			42.8				-				66.2				-
Basic Minerals and Other Products			22.8				-				35.8				-
Environmental Products			34.5				-				51.8				-
Building Materials and Other Products			34.6				-				54.5				-
Energy Services			85.4				-				134.0				-
Total		$	543.5			$	254.2			$	1,209.0			$	761.5