# Minerals Technologies Inc: Form 10-Q for the period ended Apr 4, 2021

- Company: [Minerals Technologies Inc](/companies/mtx.md) (CIK 891014)
- Form: 10-Q
- Filed: 2021-05-07
- Accepted by EDGAR: May 7, 2021, 15:48 ET
- Period: 2021-04-04
- Accession: 0000891014-21-000020
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/891014/000089101421000020/form10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/891014/000089101421000020/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-04-04.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-01-01 to 2021-04-04 | $452.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2021-01-01 to 2021-04-04 | $340.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2021-01-01 to 2021-04-04 | $111.8m | us-gaap:GrossProfit |
| Research and development | 3 months, 2021-01-01 to 2021-04-04 | $5.0m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2021-01-01 to 2021-04-04 | $48.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2021-01-01 to 2021-04-04 | $58.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2021-01-01 to 2021-04-04 | $9.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2021-01-01 to 2021-04-04 | $8.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-01-01 to 2021-04-04 | $39.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-01-01 to 2021-04-04 | $1.17 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-01-01 to 2021-04-04 | $1.18 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-01-01 to 2021-04-04 | 34,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2021-01-01 to 2021-04-04 | $50.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2021-01-01 to 2021-04-04 | $17.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2021-01-01 to 2021-04-04 | $1.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2021-01-01 to 2021-04-04 | $20.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2021-04-04 | $371.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-04-04 | $1.04bn | us-gaap:AssetsCurrent |
| Total assets | at 2021-04-04 | $3.21bn | us-gaap:Assets |
| Current liabilities | at 2021-04-04 | $288.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2021-04-04 | $1.71bn | us-gaap:Liabilities |
| Long-term debt | at 2021-04-04 | $933.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2021-04-04 | $900.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2021-04-04 | $1.46bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,955 characters.

### Executive Summary

Our consolidated sales for the first quarter of 2021 were $452.6 million, an increase of 8% as compared with $417.5 million in the prior year. Foreign exchange had a favorable impact on sales of approximately $9 million, or 2 percentage points as compared with prior year. Income from operations was $58.8 million and represented 13.0% of sales, as compared with $57.7 million and 13.8% of sales in the prior year. Included in income from operations for the first quarter of 2020 were $0.6 million of litigation expenses associated with the bankruptcy of Novinda Corp. Net income was $39.9 million, as compared to $38.6 million in the first quarter of 2020. Diluted earnings in the first quarter ended April 4, 2021 were $1.17 per share, as compared with $1.12 per share in the first quarter of 2020.

First quarter 2021 results were strong with sales and operating income growth in each of our segments as demand in many of our end markets continue to improve. In addition, operational measures we have taken to enhance our margin profile have helped us deliver higher earnings. The Company has also made progress with our strategic growth initiatives through the commercialization of new value-added products and geographic expansion, including the signing of a new 50,000-ton PCC satellite contract in China.

Our balance sheet continues to be strong. Cash, cash equivalents and short-term investments were $375.7 million as of April 4, 2021. The Company currently has more than $650 million of available liquidity, including cash on hand as well as availability under its revolving credit facility. We believe that these factors will allow us to meet our anticipated funding requirements.

### Outlook

The COVID-19 pandemic has not had a material effect on our reported results for our first quarter of 2021 and we do not expect it will negatively impact our business and results of operations for our second quarter. However, the extent to which our operations will be impacted by the pandemic will depend largely on future developments, including the severity of future outbreaks and actions by government authorities to contain it or treat its impact. These are highly uncertain and cannot be accurately predicted. We will continue to actively monitor and respond to the COVID-19 pandemic.

The Company will also continue to focus on innovation and new product development and other opportunities for sales growth from our existing businesses in 2021, as follows:

- Increase our presence and gain penetration of our bentonite-based foundry customers for the Metalcasting industry in emerging markets, such as China and India.
- Increase our presence and market share in global pet care products, particularly in emerging markets.
- Deploy new products in pet care such as lightweight litter.
- Increase our presence and market share in Asia and in the global powdered detergent market.
- Continue the development of our proprietary Enersol® products for agricultural applications worldwide.
- Pursue opportunities for our products in environmental and building and construction markets in the Middle East, Asia Pacific and South America regions.
- Increase our presence and market share for geosynthetic clay liners within the Environmental Products product line.
- Develop multiple high-filler technologies under the FulFill® platform of products, to increase the fill rate in freesheet paper and continue to progress with commercial discussions and full-scale paper machine trials.
- Develop products and processes for waste management and recycling opportunities to reduce the environmental impact of the paper mill, reduce energy consumption and improve the sustainability of the papermaking process, including our NewYield® and ENVIROFIL® products.
- Further penetration into the packaging segment of the paper industry.
- Increase our sales of PCC for paper by further penetration of the markets for paper filling at both freesheet and groundwood mills, particularly in emerging markets.
- Expand the Company's PCC coating product line using the satellite model.
- Promote the Company's expertise in crystal engineering, especially in helping papermakers customize PCC morphologies for specific paper applications.
- Expand PCC produced for paper filling applications by working with industry partners to develop new methods to increase the ratio of PCC for fiber substitutions.
- Develop unique calcium carbonate and talc products used in the manufacture of novel biopolymers, a new market opportunity.
- Deploy new talc and GCC products in paint, coating and packaging applications.
- Deploy value-added formulations of refractory materials that not only reduce costs but improve performance.
- Deploy our laser measurement technologies into new applications.
- Expand our refractory maintenance model to other steel makers globally.
- Increase our presence and market penetration in offshore produced water and offshore filtration and well testing within the Energy Services segment.
- Deploy operational excellence principles into all aspects of the organization, including system infrastructure and lean principles.
- Continue to explore selective acquisitions to fit our core competencies in minerals and fine particle technology.

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

### Results of Operations

### Three months ended April 4, 2021 as compared with three months ended March 29, 2020

### Consolidated Income Statement Review

| (millions of dollars) | Three Months Ended Apr. 4, 2021 | Mar. 29, 2020 | % Change |
| --- | ---: | ---: | ---: |
| Net sales | $452.6 | $417.5 | 8% |
| Cost of sales | 340.8 | 310.7 | 10% |
| Production margin | 111.8 | 106.8 | 5% |
| Production margin % | 24.7% | 25.6% |  |
| Marketing and administrative expenses | 48.0 | 43.4 | 11% |
| Research and development expenses | 5.0 | 5.1 | (2)% |
| Litigation expenses | — | 0.6 | \* |
| Income from operations | 58.8 | 57.7 | 2% |
| Operating margin % | 13.0% | 13.8% |  |
| Interest expense, net | (9.9) | (9.3) | 6% |
| Other non-operating income, net | 0.5 | 0.6 | (17)% |
| Total non-operating deductions, net | (9.4) | (8.7) | 8% |
| Income from operations before tax and equity in earnings | 49.4 | 49.0 | 1% |
| Provision for taxes on income | 8.9 | 9.7 | (8)% |
| Effective tax rate | 18.0% | 19.8% |  |
| Equity in earnings of affiliates, net of tax | 0.5 | 0.3 | 67% |
| Net income | 41.0 | 39.6 | 4% |
| Net income attributable to non-controlling interests | 1.1 | 1.0 | 10% |
| Net income attributable to Minerals Technologies Inc. | $39.9 | $38.6 | 3% |

\* Not meaningful

### Net Sales

| (millions of dollars) | Three Months Ended Apr. 4, 2021 Net Sales | % of Total Sales | % Change | Three Months Ended Mar. 29, 2020 Net Sales | % of Total Sales |
| --- | ---: | ---: | ---: | ---: | ---: |
| U.S. | $227.5 | 50.3% | 0% | $226.9 | 54.3% |
| International | 225.1 | 49.7% | 18% | 190.6 | 45.7% |
| Total sales | $452.6 | 100.0% | 8% | $417.5 | 100.0% |
| Performance Materials Segment | $230.9 | 51.0% | 9% | $211.4 | 50.6% |
| Specialty Minerals Segment | 147.8 | 32.7% | 8% | 137.1 | 32.9% |
| Refractories Segment | 73.9 | 16.3% | 7% | 69.0 | 16.5% |
| Total sales | $452.6 | 100.0% | 8% | $417.5 | 100.0% |

Worldwide net sales increased 8% to $452.6 million in the first quarter from $417.5 million in the prior year. Foreign exchange had a favorable impact on sales of $9 million or 2 percentage points.

Net sales in the United States were $227.5 million in the first quarter of 2021, as compared to $226.9 million in the prior year. International sales increased 18% to $225.1 million from $190.6 million in the prior year. Foreign exchange had a favorable impact on sales of $9 million or 5 percentage points.

### Operating Costs and Expenses

Cost of sales was $340.8 million and represented 75.3% of sales for the three month period ended April 4, 2021, as compared with $310.7 million and 74.4% of sales in the prior year. Production margin decreased from 25.6% of sales in the prior year to 24.7% of sales in the first quarter of 2021. Production margin was impacted by seasonally higher energy and mining costs.

Marketing and administrative costs were $48.0 million and 10.6% of sales for the three months ended April 4, 2021, as compared to $43.4 million and 10.4% of sales in the prior year. Marketing and administrative costs were impacted by temporarily higher corporate expenses.

Research and development expenses were $5.0 million and represented 1.1% of sales for the three months ended April 4, 2021, as compared with $5.1 million and 1.2% of sales in the prior year.

In addition, the Company recorded $0.6 million related to litigation expenses associated with the bankruptcy of Novinda Corp. for the three months ended March 29, 2020.

### Income from Operations

The Company recorded income from operations of $58.8 million as compared to $57.7 million in the prior year. Operating income during the three months ended March 29, 2020 includes a $0.6 million charge related to litigation expenses associated with the bankruptcy of Novinda Corp.

### Other Non-Operating Income (Deductions)

In the first quarter of 2021, non-operating deductions were $9.4 million, as compared with $8.7 million in the prior year. Included in other non-operating deductions in the first quarter of 2021 was net interest expense of $9.9 million, as compared to $9.3 million in the prior year. The increase is primarily related to slightly higher debt balances as well as a different mix of debt.

### Provision for Taxes on Income

Provision for taxes on income was $8.9 million and $9.7 million for the three-month periods ended April 4, 2021 and March 29, 2020, respectively. The effective tax rate was 18.0% and 19.8% for the three-month periods ended April 4, 2021 and March 29, 2020, respectively. The lower tax rate was primarily due to discrete items in the quarter.

### Consolidated Net Income Attributable to MTI Shareholders

Consolidated net income was $39.9 million for the three months ended April 4, 2021, as compared with $38.6 million in the prior year.

### Segment Review

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

| Performance Materials Segment Net Sales | Three Months Ended Apr. 4, 2021 (millions of dollars) | Mar. 29, 2020 | % Change |
| --- | ---: | ---: | ---: |
| Metalcasting | $81.7 | $61.7 | 32% |
| Household, Personal Care & Specialty Products | 109.4 | 96.2 | 14% |
| Environmental Products | 26.0 | 36.7 | (29)% |
| Building Materials | 13.8 | 16.8 | (18)% |
| Total net sales | $230.9 | $211.4 | 9% |
| **Income from operations** | $29.8 | $27.3 |  |
| % of net sales | 12.9% | 12.9% |  |

On a regular basis, the Company reviews its segments and the approach used by the chief operating decision maker to assess performance and allocate resources. Accordingly, in the first quarter of 2021, the Company reorganized the management structure for its Energy Services and Performance Materials operating segments to support MTI's key growth initiatives, more closely align complementary technologies, processes and capabilities, and better reflect the way performance is evaluated and resources are allocated. As a result, Energy Services was combined into the Environmental Products product line within the Performance Materials operating segment.

Net sales in the Performance Materials segment increased 9% to $230.9 million from $211.4 million in the prior year. Sales in Metalcasting increased 32% from prior year as the foundry demand remained strong in North America and China. Household, Personal Care & Specialty Products sales increased 14% to $109.4 million, as compared with $96.2 million in the prior year as a result of continued strong demand for consumer-oriented products.

Environmental Products and Building Materials sales decreased 29% and 18%, respectively, primarily due to COVID-19 related project delays.

Income from operations was $29.8 million and 12.9% of sales as compared to $27.3 million and 12.9% of sales in the prior year. Operating margin was temporarily impacted by seasonally higher energy and mining costs as well as lower Environmental Products sales.

| Specialty Minerals Segment Net Sales | Three Months Ended Apr. 4, 2021 (millions of dollars) | Mar. 29, 2020 | % Change |
| --- | ---: | ---: | ---: |
| Paper PCC | $89.6 | $85.1 | 5% |
| Specialty PCC | 20.4 | 17.5 | 17% |
| PCC Products | $110.0 | $102.6 | 7% |
| Ground Calcium Carbonate | $24.0 | $22.6 | 6% |
| Talc | 13.8 | 11.9 | 16% |
| Processed Minerals Products | $37.8 | $34.5 | 10% |
| Total net sales | $147.8 | $137.1 | 8% |
| **Income from operations** | $21.1 | $20.3 | 4% |
| % of net sales | 14.3% | 14.8% |  |

Worldwide sales in the Specialty Minerals segment were $147.8 million, as compared with $137.1 million in the prior year, an increase of 8%.

Worldwide net sales of PCC, which is primarily used in the manufacturing process of the paper industry, increased 7% to $110.0 million from $102.6 million in the prior year. Paper PCC sales increased 5% to $89.6 million from $85.1 million in the prior year, primarily due to increased paper machine operating rates as well as the ramp-up of three new satellite plants in China, India and the U.S. Sales of Specialty PCC increased 17% to $20.4 million from $17.5 million in the prior year as the automotive, construction and consumer demand remained strong.

Net sales of Processed Minerals products increased 10% to $37.8 million due to strength in residential construction and automotive markets. Ground Calcium Carbonate sales increased 6% to $24.0 for the three month periods ending April 4, 2021 as compared to $22.6 million in the prior year. Talc sales increased 16% to $13.8 million as compared with $11.9 million in the prior year.

Income from operations for Specialty Minerals was $21.1 million as compared with $20.3 million in the prior year and represented 14.3% of sales.

| Refractories Segment Net Sales | Three Months Ended Apr. 4, 2021 (millions of dollars) | Mar. 29, 2020 | % Change |
| --- | ---: | ---: | ---: |
| Refractory Products | $58.8 | $55.8 | 5% |
| Metallurgical Products | 15.1 | 13.2 | 14% |
| Total net sales | $73.9 | $69.0 | 7% |
| **Income from operations** | $12.0 | $11.2 | 7% |
| % of net sales | 16.2% | 16.2% |  |

Net sales in the Refractories segment increased 7% to $73.9 million from $69.0 million in the prior year driven by a gradual improvement in steel mill utilization rates. Sales of refractory products and systems to steel and other industrial applications increased 5% to $58.8 million and sales of metallurgical products increased 14% to $15.1 million.

Income from operations was $12.0 million and 16.2% of sales as compared with $11.2 million and 16.2% of sales in the prior year due to lower volumes.

### Liquidity and Capital Resources

Cash provided from operations during the three months ended April 4, 2021, was approximately $51 million. Cash flows provided from operations during 2021 were principally used to fund capital expenditures, repurchase shares and to pay the Company's dividend to common shareholders. The aggregate maturities of long-term debt are as follows: remainder of 2021 - $3.7 million; 2022 - $0.2 million; 2023 - $0.0 million; 2024 - $548.0 million; 2025 - $0.0 million; thereafter - $400.0 million.

On May 9, 2014, in connection with the acquisition of AMCOL International Corporation (“AMCOL”), the Company entered into a credit agreement providing for the $1.560 billion senior secured term loan facility (the “Term Facility”) and a $200 million senior secured revolving credit facility.

On June 23, 2015, the Company entered into an amendment (the “First Amendment”) to the credit agreement to reprice the $1.378 billion then outstanding on the Term Facility. As amended, the Term Facility had a $1.078 billion floating rate tranche and a $300 million fixed rate tranche. On February 14, 2017, the Company entered into an amendment (the “Second Amendment”) to the credit agreement to reprice the $788 million floating rate tranche then outstanding, which extended the maturity and lowered the interest costs by 75 basis points. On April 18, 2018, the Company entered into an amendment (the “Third Amendment”) to the credit agreement to refinance its then existing senior secured revolving credit facility. In connection with the Third Amendment, the existing senior secured revolving credit facility was replaced with a new revolving credit facility with $300 million of aggregate commitments (the “Revolving Credit Facility” and, together with the Term Facility, the “Senior Secured Credit Facilities”). Following the amendments, the loans outstanding under the floating rate tranche of the Term Facility are scheduled to mature on February 14, 2024, the loans outstanding (if any) and commitments under the Revolving Facility will mature and terminate, as the case may be, on April 18, 2023. Loans under the fixed rate tranche of the Term Facility were repaid in full in June 2020. Loans under the floating rate tranche of the Term Facility bear interest at a rate equal to an adjusted LIBOR rate (subject to a floor of 0.75%) plus an applicable margin equal to 2.25% per annum. Loans under the Revolving Facility bear interest at a rate equal to an adjusted LIBOR rate plus an applicable margin equal to 1.625% per annum. Such rates are subject to decrease by up to 25 basis points in the event that, and for so long as, the Company’s net leverage ratio (as defined in the credit agreement) is less than certain thresholds. The variable rate tranche has a 1% required amortization per year. The Company will pay certain fees under the credit agreement, including customary annual administration fees. The obligations of the Company under the Senior Secured Credit Facilities are unconditionally guaranteed jointly and severally by, subject to certain exceptions, all material domestic subsidiaries of the Company (the “Guarantors”) and secured, subject to certain exceptions, by a security interest in substantially all of the assets of the Company and the Guarantors.

On June 30, 2020, the Company issued $400 million aggregate principal amount of 5.0% Senior Notes due 2028 (the "Notes"). The Notes were issued pursuant to an indenture, dated as of June 30, 2020, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The Company used the net proceeds of its offering of the Notes to repay all of its outstanding loans under the fixed rate tranche of the Term Facility, repay all of its outstanding borrowings under its Revolving Credit Facility, and the remainder for general corporate purposes.

The Notes bear an interest rate of 5.0% per annum payable semi-annually on January 1 and July 1 of each year, beginning on January 1, 2021. The Notes are unconditionally guaranteed on a senior unsecured basis by each of the Company's existing and future wholly owned domestic restricted subsidiaries that is a borrower under or that guarantees the Company's obligations under its Senior Secured Credit Facilities or that guarantees the Company's or any of the Company's wholly owned domestic subsidiaries’ long-term indebtedness in an aggregate amount in excess of $50 million.

At any time and from time to time prior to July 1, 2023, the Company may redeem some or all of the Notes for cash at a redemption price equal to 100% of their principal amount, plus the “make-whole” premium described in the Indenture and accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. Beginning on July 1, 2023, the Company may redeem some or all of the Notes at any time and from time to time at the applicable redemption prices listed in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, at any time and from time to time prior to July 1, 2023, the Company may redeem up to 40% of the aggregate principal amount of the Notes with funds from one or more equity offerings at a redemption price equal to 105% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

If the Company experiences a change of control (as defined in the indenture), the Company is required to offer to repurchase the Notes at 101% of the principal amount of such Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

The credit agreement and the Notes contain certain customary affirmative and negative covenants that limit or restrict the ability of the Company and its restricted subsidiaries to enter into certain transactions or take certain actions. In addition, the credit agreement contains a financial covenant that requires the Company, if on the last day of any fiscal quarter loans or letters of credit were outstanding under the Revolving Facility (excluding up to $25 million of letters of credit), to maintain a maximum net leverage ratio (as defined in the credit agreement) of 3.50 to 1.00 for the four fiscal quarter periods preceding such day. As of April 4, 2021, there were no outstanding loans and $8.3 million in letters of credit outstanding under the Revolving Facility. The Company is in compliance with all the covenants associated with the Revolving Facility as of the end of the period covered by this report.

As part of the Sivomatic acquisition, the Company assumed $10.7 million in long term debt, recorded at fair value, consisting of two term loans, one of which matured in the third quarter of 2020 and the other of which matures in 2022. In the first quarter of 2021, the Company repaid $0.2 million on these loans.

The Company has a committed loan facility in Japan. As of April 4, 2021, $3.5 million was outstanding under this loan facility. Principal will be repaid in accordance with the payment schedule ending in 2021. The Company repaid $0.3 million on this facility during the first quarter of 2021.

As of April 4, 2021, the Company had $25.3 million in uncommitted short-term bank credit lines, of which none were in use. The credit lines are primarily outside the U.S. and are generally one year in term at competitive market rates at large, well-established institutions. The Company typically uses its available credit lines to fund working capital requirements or local capital spending needs. We anticipate that capital expenditures for 2021 should be between $75 million and $85 million, principally related to the construction of PCC plants and other opportunities that meet our strategic growth objectives.

On April 5, 2016, the Company entered into a floating to fixed interest rate swap for an initial aggregate notional amount of $300 million to limit exposure to interest rate increases related to a portion of the Company’s floating rate indebtedness. This swap agreement hedges a portion of contractual floating rate interest through its expiration in May 2021. As a result of the agreement, the Company’s effective fixed interest rate on the notional amount floating rate indebtedness will be 4.25%. The fair value of this instrument at April 4, 2021 was a liability of less than $0.1 million.

During the second quarter of 2018, the Company entered into a floating to fixed interest rate swap for a notional amount of $150 million. The fair value of this instrument at April 4, 2021 is a liability of $6.8 million. Additionally, the Company entered into a cross currency rate swap with a total notional value of $150 million to exchange monthly fixed-rate interest payments in U.S. dollars for monthly fixed-rate interest rate payments in Euros. The fair value of this instrument at April 4, 2021 is an asset of $6.1 million. These swaps mature in May 2023. As a result of these swaps, the Company’s effective fixed interest rate on the notional floating rate indebtedness will be 2.5%.

On October 21, 2020, the Company's Board of Directors authorized the Company's management to repurchase, at its discretion, up to $75 million of the Company's shares over a one-year period. As of April 4, 2021, 465,003 shares have been repurchased under this program for $31.1 million, or an average price of approximately $66.83 per share.

The Company is required to make future payments under various contracts, including debt agreements and lease agreements. The Company also has commitments to fund its pension plans and provide payments for other postretirement benefit plans. During the three months ended April 4, 2021, there were no material changes in the Company’s contractual obligations. For an in-depth discussion of the Company's contractual obligations, see "Liquidity and Capital Resources" in "Management's Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

As we cannot predict the duration or scope of the COVID-19 pandemic and its impact on our customers and suppliers, the negative financial impact to our results cannot be reasonably estimated, but could be material. We are actively managing the business to maintain cash flow and we have significant liquidity. We believe that these factors will allow us to meet our anticipated funding requirements.

### Cautionary Statement for “Safe Harbor” Purposes under the Private Securities Litigation Reform Act of 1995

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

Forward-looking statements are necessarily based on assumptions, estimates and limited information available at the time they are made. A broad variety of risks and uncertainties, both known and unknown, as well as the inaccuracy of assumptions and estimates, can affect the realization of the expectations or forecasts in these statements. Many of these risks and uncertainties are difficult to predict or are beyond the Company’s control. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially. Significant factors that could affect the expectations and forecasts include the duration and scope of the COVID-19 pandemic, and government and other third-party responses to it; worldwide general economic, business, and industry conditions, including the effects of the COVID-19 pandemic on the global economy; the cyclicality of our customers’ businesses and their changing demands; the dependence of certain of our product lines on the commercial construction and infrastructure markets, the domestic building and construction markets, and the automotive market; our ability to effectively achieve and implement our growth initiatives; our ability to service our debt; our ability to comply with the covenants in the agreements governing our debt; our ability to renew or extend long term sales contracts for our PCC satellite operations; consolidation in customer industries, principally paper, foundry and steel; compliance with or changes to regulation in the areas of environmental, health and safety, and tax; claims for legal, environmental and tax matters or product stewardship issues; our ability to successfully develop new products; our ability to ability to defend our intellectual property; the increased risks of doing business abroad; the availability of raw materials and access to ore reserves at our mining operations; increases in costs of raw materials, energy, or shipping; our ability to compete in very competitive industries; operating risks and capacity limitations affecting our production facilities; seasonality of some of our segments; cybersecurity and other threats relating to our information technology systems; and other risks set forth under “Item 1A — Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, and in Exhibit 99 to this Quarterly Report on Form 10-Q.

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

### Recently Issued Accounting Standards

Changes to accounting principles generally accepted in the United States of America (U.S. GAAP) are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (ASUs) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. All recently issued ASUs were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.

#### Recently Adopted Accounting Standards

#### Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes", to simplify the accounting for income taxes and improve consistent application by clarifying or amending existing guidance. The Company adopted this guidance on January 1, 2021. Adoption of this standard did not have a material impact on the Company's consolidated financial statements.

#### Investments - Equity Securities, Investments - Equity Method and Joint Ventures, and Derivatives and Hedging

In January 2020, the FASB issued ASU 2020-01, "Investments - Equity Securities, Investments - Equity Method and Joint Ventures, and Derivatives and Hedging", which addresses the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. The Company adopted this guidance on January 1, 2021. Adoption of this standard did not have a material impact on the Company's consolidated financial statements.

### Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, valuation of long-lived assets, goodwill and other intangible assets, income taxes, including valuation allowances and pension plan assumptions. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that cannot readily be determined from other sources. There can be no assurance that actual results will not differ from those estimates.

## Market risk

As filed, 3,130 characters.

Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse changes in market prices and foreign currency and interest rates. We are exposed to market risk because of changes in foreign currency exchange rates as measured against the U.S. dollar. We do not anticipate that near-term changes in exchange rates will have a material impact on our future earnings or cash flows. However, there can be no assurance that a sudden and significant decline in the value of foreign currencies would not have a material adverse effect on our financial condition and results of operations. A portion of our long-term bank debt bears interest at variable rates; therefore, our results of operations would be affected by interest rate changes to the extent of such outstanding bank debt. An immediate 10 percent change in interest rates would have a material effect on our results of operations over the next fiscal year. A one-percent change in interest rates, inclusive of the impact of our interest rate derivatives, would result in $1.4 million in incremental interest charges on an annual basis.

We do not enter into derivatives or other financial instruments for trading or speculative purposes. When appropriate, we enter into derivative financial instruments, such as forward exchange contracts, hedges and interest rate swaps, to mitigate the impact of foreign exchange rate movements and interest rate movements on our operating results. The counterparties are major financial institutions. Such forward exchange contracts, hedges and interest rate swaps would not subject us to additional risk from exchange rate or interest rate movements because gains and losses on these contracts would offset losses and gains on the assets, liabilities, and transactions being hedged.

On April 5, 2016, the Company entered into a floating to fixed interest rate swap for an initial aggregate notional amount of $300 million to limit exposure to interest rate increases related to a portion of the Company’s floating rate indebtedness. This swap agreement hedges a portion of contractual floating rate interest through its expiration in May 2021. As a result, the Company’s effective fixed interest rate on the notional amount floating rate indebtedness will be 4.25% through May 2021. The fair value of this instrument at April 4, 2021 was a liability of less than $0.1 million.

During the second quarter of 2018, the Company entered into a floating to fixed interest rate swap for a notional amount of $150 million. The fair value of this instrument at April 4, 2021 is a liability of $6.8 million. Additionally, the Company entered into a cross currency rate swap with a total notional value of $150 million to exchange monthly fixed-rate interest payments in U.S. dollars for monthly fixed-rate interest rate payments in Euros. The fair value of this instrument at April 4, 2021 is an asset of $6.1 million. These swaps mature in May 2023. As a result of these swaps, the Company’s effective fixed interest rate on the notional floating rate indebtedness will be 2.5%.

## Controls and procedures

As filed, 961 characters.

### Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, and under the supervision and with participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report the Company’s disclosure controls and procedures were effective.

### Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal controls over financial reporting during the quarter ended April 4, 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

## Risk factors

As filed, 191 characters.

For a description of Risk Factors, see Exhibit 99 attached to this report. There have been no material changes to our risk factors from those disclosed in our 2020 Annual Report on Form 10-K.

Filed May 7, 2021.
Source: SEC EDGAR, the filing index for accession 0000891014-21-000020. Last ingested by Listed: Oct 30, 2026, 15:40 ET. No prices; not investment advice.