# Minerals Technologies Inc: Form 10-Q for the period ended Sep 29, 2024

- Company: [Minerals Technologies Inc](/companies/mtx.md) (CIK 891014)
- Form: 10-Q
- Filed: 2024-10-25
- Accepted by EDGAR: Oct 25, 2024, 14:57 ET
- Period: 2024-09-29
- Accession: 0000891014-24-000116
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/891014/000089101424000116/form10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/891014/000089101424000116/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-29.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-29 | $524.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-29 | $1.60bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-29 | $389.5m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-29 | $1.19bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-29 | $135.2m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-29 | $415.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-29 | $5.9m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-29 | $17.3m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-29 | $50.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-29 | $156.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-29 | $76.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-29 | $202.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-29 | $13.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-29 | $43.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-29 | $46.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-29 | $113.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-29 | $1.45 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-29 | $3.49 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-29 | $1.45 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-29 | $3.51 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-29 | 32,300,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-29 | 32,400,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-29 | $166.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-29 | $61.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-29 | $9.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-29 | $57.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-29 | $317.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-29 | $1.14bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-29 | $3.39bn | us-gaap:Assets |
| Current liabilities | at 2024-09-29 | $464.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-29 | $1.65bn | us-gaap:Liabilities |
| Long-term debt | at 2024-09-29 | $894.7m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-29 | $28.2m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2024-09-29 | $60.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-09-29 | $1.71bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,711 characters.

### Executive Summary

Our consolidated sales for the third quarter of 2024 were $524.7 million, a decrease of 4% as compared with $547.8 million in the prior year. Income (loss) from operations was $76.6 million, as compared with $(7.9) million in the prior year. Included in income from operations for the third quarter of 2024 was $2.6 million of litigation expenses incurred in connection with the bankruptcy of the Company's subsidiaries, BMI Oldco Inc. (f/k/a Barretts Minerals Inc.) ("Oldco") and Barretts Ventures Texas LLC ("BVT" and together with Oldco, the "Chapter 11 Debtors"). Included in loss from operations for the third quarter of 2023 was a non-cash impairment charge of $71.7 million for Oldco's fixed assets and $12.9 million of litigation expenses in connection with Oldco's bankruptcy filing and by Oldco to defend against and restore its reserve for claims associated with certain talc products.

Net income (loss) was $46.7 million, as compared to $(19.2) million in the third quarter of 2023. Diluted earnings (loss) in the third quarter ended September 29, 2024 were $1.45 per share, as compared with $(0.59) per share in the third quarter of 2023.

Our balance sheet continues to be strong. Cash, cash equivalents and short-term investments were $324.5 million as of September 29, 2024 and the Company had more than $500 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 Company will also continue to focus on innovation and new product development and other opportunities for sales growth from our existing businesses in 2024, as follows:

#### Consumer & Specialties Segment

- Increase our presence and market share in global pet litter products, including in emerging markets.
- Deploy new products in pet care such as lightweight litter.
- Increase our sales of calcium carbonate products by further penetration into filling and coating applications in the paper and packaging markets.
- Promote the Company's expertise in crystal engineering by developing crystal morphologies that help our customers achieve functional benefits.
- Deploy new calcium carbonate products in paint, coating and packaging applications.
- Continue developing products and processes for waste management and recycling opportunities to reduce the environmental impact for our customers by reducing energy consumption and improving the sustainability of their products.
- Continue to develop innovative applications for our bleaching earth products for edible oil and biofuel industries.
- Develop new mineral-based solutions for personal care applications.
- Increase our presence and market share globally for retinol delivery technology for personal care applications.
- Expand our product solutions for animal health applications.
- Increase our presence and market share in fabric care, including in emerging markets.

#### Engineered Solutions Segment

- Increase our presence and gain penetration of our bentonite-based foundry solutions for the metalcasting industry in emerging markets.
- 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.
- Continue the development and market penetration of our FLUORO-SORB® products which address PFAS contamination in soil, groundwater, drinking water sources, landfill leachate and wastewater.
- Pursue opportunities for the expanded use of our products in environmental, building and construction, infrastructure and oil and gas drilling and water treatment globally.
- Increase our presence and market share for geosynthetic clay liners globally.

#### All Segments

- Further operational excellence principles into all aspects of the organization, including system infrastructure and lean principles.
- Continue to explore selective acquisitions to fit our competencies in minerals and our core technologies.

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 September 29, 2024 as compared with three months ended October 1, 2023

### Consolidated Income Statement Review

*(in millions of dollars)*

|  | Three Months Ended Sep. 29, 2024 | Oct. 1, 2023 | % Change |
| --- | ---: | ---: | ---: |
| Net sales | $524.7 | $547.8 | (4)% |
| Cost of sales | 389.5 | 414.7 | (6)% |
| Production margin | 135.2 | 133.1 | 2% |
| Production margin % | 25.8% | 24.3% |  |
| Marketing and administrative expenses | 50.1 | 50.9 | (2)% |
| Research and development expenses | 5.9 | 5.2 | 13% |
| Restructuring and other items, net | — | 0.3 | \* |
| Impairment of assets | — | 71.7 | \* |
| Litigation expenses | 2.6 | 12.9 | (80)% |
| Income (loss) from operations | 76.6 | (7.9) | \* |
| Operating margin % | 14.6% | (1.4)% |  |
| Interest expense, net | (14.0) | (15.3) | (8)% |
| Other non-operating income (deductions), net | (3.1) | 0.6 | \* |
| Total non-operating deductions, net | (17.1) | (14.7) | 16% |
| Income (loss) before tax and equity in earnings | 59.5 | (22.6) | \* |
| Provision (benefit) for taxes on income | 13.7 | (3.5) | \* |
| Effective tax rate | 23.0% | 15.5% |  |
| Equity in earnings of affiliates, net of tax | 1.9 | 1.0 | 90% |
| Net income (loss) | 47.7 | (18.1) | \* |
| Net income attributable to non-controlling interests | 1.0 | 1.1 | (9)% |
| Net income (loss) attributable to Minerals Technologies Inc. | $46.7 | $(19.2) | \* |

\* Not meaningful

### Net Sales

*(in millions of dollars)*

|  | Three Months Ended Sep. 29, 2024 Net Sales | % of Total Sales | % Change | Three Months Ended Oct. 1, 2023 Net Sales | % of Total Sales |
| --- | ---: | ---: | ---: | ---: | ---: |
| U.S. | $268.3 | 51.1% | (8)% | $291.6 | 53.2% |
| International | 256.4 | 48.9% | 0% | 256.2 | 46.8% |
| Total sales | $524.7 | 100.0% | (4)% | $547.8 | 100.0% |
| Consumer & Specialties Segment | $280.3 | 53.4% | (4)% | $291.2 | 53.2% |
| Engineered Solutions Segment | 244.4 | 46.6% | (5)% | 256.6 | 46.8% |
| Total sales | $524.7 | 100.0% | (4)% | $547.8 | 100.0% |

Worldwide net sales decreased 4% to $524.7 million in the third quarter from $547.8 million in the prior year. Included in sales from the prior year were $13.8 million of sales related to Oldco, which was deconsolidated in the fourth quarter of 2023 and primarily impacted sales in the United States.

Net sales in the United States were $268.3 million in the third quarter of 2024, as compared to $291.6 million in the prior year, a decrease of 8%. International sales increased slightly to $256.4 million from $256.2 million in the prior year.

### Operating Costs and Expenses

Cost of sales was $389.5 million and represented 74.2% of sales for the three month period ended September 29, 2024, as compared with $414.7 million and 75.7% of sales in the prior year. Production margin increased from 24.3% of sales in the prior year to 25.8% of sales in the third quarter of 2024. This increase was primarily due to price and cost management as well as productivity improvements.

Marketing and administrative costs were $50.1 million and 9.5% of sales for the three months ended September 29, 2024, as compared to $50.9 million and 9.3% of sales in the prior year.

Research and development expenses were $5.9 million and represented 1.1% of sales for the three months ended September 29, 2024, as compared with $5.2 million and 0.9% of sales in the prior year.

The Company recorded litigation expenses in connection with Oldco's bankruptcy filing of $2.6 million during the three-months ended September 29, 2024. In the third quarter of 2023, the Company recorded a $71.7 million non-cash impairment of assets charge related to Oldco's fixed assets within the Consumer & Specialties segment associated with Oldco's bankruptcy filing. The Company also recorded litigation expenses of $12.9 million during the three months ended October 1, 2023, in connection with Oldco's bankruptcy filing and by Oldco to defend against and restore its reserve for claims associated with certain talc products.

### Income (Loss) from Operations

The Company recorded income (loss) from operations of $76.6 million as compared to $(7.9) million in the prior year. Operating income (loss) includes litigation expenses in connection with Oldco's bankruptcy filing of $2.6 million during the three months ended September 29, 2024. In addition, operating income (loss) for the three months ended October 1, 2023 includes a $71.7 million non-cash impairment of assets charge related to Oldco's fixed assets within the Consumer & Specialties segment associated with the bankruptcy filing. The Company also recorded litigation expenses of $12.9 million during the three months ended October 1, 2023, in connection with Oldco's bankruptcy filing and by Oldco to defend against and restore its reserve for claims associated with certain talc products.

### Other Non-Operating Income (Deductions), net

In the third quarter of 2024, non-operating deductions were $17.1 million, as compared with $14.7 million in the prior year. Included in other non-operating deductions in the third quarter of 2024 was net interest expense of $14.0 million, as compared to $15.3 million in the third quarter of the prior year.

### Provision (Benefit) for Taxes on Income

Provision for taxes on income was $13.7 million, as compared to a tax benefit of $(3.5) million in the prior year. The effective tax rate was 23.0%, as compared with a tax benefit in the prior year. The higher tax rate was primarily due to the benefit recorded on the non-cash impairment of assets in the prior year.

### Net Income (Loss) Attributable to MTI Shareholders

Net income attributable to MTI shareholders was $46.7 million for the three months ended September 29, 2024, as compared with a loss of $19.2 million in the prior year.

### Segment Review

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

*(in millions of dollars)*

| Consumer & Specialties Segment Net Sales | Three Months Ended Sep. 29, 2024 | Oct. 1, 2023 | % Change |
| --- | ---: | ---: | ---: |
| Household & Personal Care | $130.9 | $128.9 | 2% |
| Special Additives | 149.4 | 162.3 | (8)% |
| Total net sales | $280.3 | $291.2 | (4)% |
| **Income (loss) from operations** | $41.7 | $(46.6) | \* |
| % of net sales | 14.9% | \* |  |

Net sales in the Consumer & Specialties segment was $280.3 million for the three months ended September 29, 2024, as compared with $291.2 million in the prior year. Household & Personal Care sales increased 2% to $130.9 million, as compared with $128.9 million in the prior year driven by sales in pet care and other consumer-oriented products. Sales in Specialty Additives decreased $12.9 million, or 8% as compared with prior year. Included in sales from the prior year were $13.8 million of sales related to Oldco, which was deconsolidated in the fourth quarter of 2023.

Income (loss) from operations was $41.7 million, as compared to $(46.6) million in the prior year. Included in the third quarter of 2023, are a non-cash impairment of assets charge of $71.7 million and litigation expenses of $12.9 million in connection with Oldco's bankruptcy filing and by Oldco to defend against and restore its reserve for claims associated with certain talc products.

*(in millions of dollars)*

| Engineered Solutions Segment Net Sales | Three Months Ended Sep. 29, 2024 | Oct. 1, 2023 | % Change |
| --- | ---: | ---: | ---: |
| High-Temperature Technologies | $174.8 | $177.4 | (1)% |
| Environmental & Infrastructure | 69.6 | 79.2 | (12)% |
| Total net sales | $244.4 | $256.6 | (5)% |
| **Income from operations** | $38.8 | $40.6 | (4)% |
| % of net sales | 15.9% | 15.8% |  |

Net sales in the Engineered Solutions segment decreased 5% to $244.4 million from $256.6 million in the prior year. High-Temperature Technologies sales decreased 1% to $174.8 million, as compared with $177.4 million in the prior year due to softer demand in some industrial end markets. Environmental & Infrastructure sales decreased 12% to $69.6 million, as compared with $79.2 million in the prior year due to continued weakness in commercial construction markets and large-scale environmental project activity.

Income from operations was $38.8 million and 15.9% of sales as compared with $40.6 million and 15.8% of sales in the prior year as the impact from lower volumes was mitigated by improved input costs and pricing.

### Nine months ended September 29, 2024 as compared with nine months ended October 1, 2023

### Consolidated Income Statement Review

*(in millions of dollars)*

|  | Nine Months Ended Sep. 29, 2024 | Oct. 1, 2023 | % Change |
| --- | ---: | ---: | ---: |
| Net sales | $1,600.4 | $1,645.4 | (3)% |
| Cost of sales | 1,185.4 | 1,263.6 | (6)% |
| Production margin | 415.0 | 381.8 | 9% |
| Production margin % | 25.9% | 23.2% |  |
| Marketing and administrative expenses | 156.4 | 155.0 | 1% |
| Research and development expenses | 17.3 | 16.1 | 7% |
| Provision for credit losses | 30.0 | — | \* |
| Restructuring and other items, net | — | 6.9 | \* |
| Impairment of assets | — | 71.7 | \* |
| Acquisition-related expenses | — | 0.3 | \* |
| Litigation expenses | 8.9 | 26.8 | (67)% |
| Income from operations | 202.4 | 105.0 | 93% |
| Operating margin % | 12.6% | 6.4% |  |
| Interest expense, net | (43.8) | (44.0) | — |
| Other non-operating deductions, net | (4.4) | (1.9) | 132% |
| Total non-operating deductions, net | (48.2) | (45.9) | 5% |
| Income before tax and equity in earnings | 154.2 | 59.1 | 161% |
| Provision for taxes on income | 43.2 | 14.5 | 198% |
| Effective tax rate | 28.0% | 24.5% |  |
| Equity in earnings of affiliates, net of tax | 5.2 | 3.0 | 73% |
| Consolidated net income | 116.2 | 47.6 | 144% |
| Net income attributable to non-controlling interests | 3.1 | 3.2 | (3)% |
| Net income attributable to Minerals Technologies Inc. | $113.1 | $44.4 | 155% |

\* Not meaningful

### Net Sales

*(in millions of dollars)*

|  | Nine Months Ended Sep. 29, 2024 Net Sales | % of Total Sales | % Growth | Nine Months Ended Oct. 1, 2023 Net Sales | % of Total Sales |
| --- | ---: | ---: | ---: | ---: | ---: |
| U.S. | $824.7 | 51.5% | (6)% | $874.3 | 53.1% |
| International | 775.7 | 48.5% | 1% | 771.1 | 46.9% |
| Total sales | $1,600.4 | 100.0% | (3)% | $1,645.4 | 100.0% |
| Consumer & Specialties Segment | $861.5 | 53.8% | (2)% | $878.8 | 53.4% |
| Engineered Solutions Segment | 738.9 | 46.2% | (4)% | 766.6 | 46.6% |
| Total sales | $1,600.4 | 100.0% | (3)% | $1,645.4 | 100.0% |

24

Total sales decreased 3% from the previous year to $1,600.4 million. Included in sales from the prior year were $40.6 million of sales related to Oldco, which was deconsolidated in the fourth quarter of 2023 and primarily impacted sales in the United States. Net sales in the United States decreased 6% to $824.7 million from $874.3 million in the prior year. International sales increased by 1% to $775.7 million from $771.1 million in the prior year.

### Operating Costs and Expenses

Cost of sales decreased 6% from the prior year and was 74.1% of sales, as compared with 76.8% in the prior year. Gross margin increased to 25.9% of sales as compared with 23.2% of sales in the prior year. This increase was primarily due to price and cost management as well as productivity improvements.

Marketing and administrative costs were $156.4 million and 9.8% of sales for the nine months ended September 29, 2024, as compared to $155.0 million and 9.4% of sales in the prior year.

Research and development expenses were $17.3 million and represented 1.1% of sales for the nine months ended September 29, 2024, as compared with $16.1 million and 1.0% of sales in the prior year.

In the second quarter of 2024, the Company recorded a $30.0 million provision for credit loss in connection with the DIP Credit Agreement. In addition, during the nine months ended September 29, 2024, the Company recorded litigation expenses of $8.9 million in connection with Oldco's bankruptcy filing.

In the third quarter of 2023, the Company recorded a $71.7 million non-cash impairment of assets charge related to Oldco's fixed assets within the Consumer & Specialties segment associated with the bankruptcy filing. During the nine months ended October 1, 2023, the Company recorded litigation expenses of $26.8 million in connection with Oldco's bankruptcy filing and by Oldco to defend against and restore its reserve for claims associated with certain talc products. In addition, the Company recorded $6.9 million of restructuring and other charges for the nine months ended October 1, 2023 to streamline our cost structure as a result of the organizational efficiencies gained from the Company's 2023 resegmentation.

### Income from Operations

The Company recorded income from operations of $202.4 million for the nine months ended September 29, 2024, as compared to $105.0 million in the prior year. Operating income was 12.6% and 6.4% of sales for the nine months ended September 29, 2024 and October 1, 2023, respectively. Operating income includes a $30.0 million charge related to a provision for credit losses in connection with the DIP Credit Agreement during the nine months ended September 29, 2024.

In addition, operating income during the nine months ended September 29, 2024 includes $8.9 million of litigation expenses in connection with Oldco's bankruptcy filing. Operating income during the nine months ended October 1, 2023 includes $26.8 million of litigation expenses in connection with Oldco's bankruptcy filing and by Oldco to defend against and restore its reserve for claims associated with certain talc products and $6.9 million of restructuring charges.

### Other Non-Operating Income (Deductions), net

The Company recorded non-operating deductions of $48.2 million for the nine months ended September 29, 2024, as compared with $45.9 million in the prior year. Included in non-operating deductions for the nine months ended September 29, 2024 is $43.8 million of net interest expense. Included in non-operating deductions for the nine months ended October 1, 2023 was $44.0 million of net interest expense.

### Provision for Taxes on Income

Provision for taxes was $43.2 million as compared to $14.5 million in the prior year. The effective tax rate was 28.0% as compared to 24.5% in the prior year. The higher tax rate was primarily due to the benefit recorded on the non-cash impairment of assets charge in the prior year and the impact in the current year of the expected credit loss in connection with the DIP Credit Agreement. Such credit loss is not currently deductible as the DIP Credit Agreement is being treated as an equity contribution for tax purposes. The current expected credit loss may become fully deductible in a future period. The timing of such deductibility is dependent on developments in the bankruptcy proceedings.

### Consolidated Net Income Attributable to MTI Shareholders

Consolidated net income was $113.1 million during the nine months ended September 29, 2024, as compared with $44.4 million in the prior year.

### Segment Review

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

*(in millions of dollars)*

| Consumer & Specialties Segment Net Sales | Nine Months Ended Sep. 29, 2024 | Oct. 1, 2023 | % Change |
| --- | ---: | ---: | ---: |
| Household & Personal Care | $396.1 | $383.6 | 3% |
| Specialty Additives | 465.4 | 495.2 | (6)% |
| Total net sales | $861.5 | $878.8 | (2)% |
| **Income from operations** | $127.6 | $5.0 | \* |
| % of net sales | 14.8% | 0.6% |  |

Net sales in the Consumer & Specialties segment decreased 2% to $861.5 million from $878.8 million in the prior year. Household & Personal Care sales increased 3% to $396.1 million as compared to $383.6 million in the prior year on continued strong demand for our pet litter products as well as growth in other high-margin consumer-oriented products. Sales in Specialty Additives decreased 6% to $465.4 million as compared to $495.2 million in the prior year. Included in Specialty Additives' sales from the prior year were $40.6 million of sales related to Oldco, which was deconsolidated in the fourth quarter of 2023.

Income from operations was $127.6 million and 14.8% of sales as compared to $5.0 million and 0.6% of sales in the prior year. Included in income from operations for the nine months ended October 1, 2023 are a $71.7 million non-cash impairment of assets charge related to Oldco's fixed assets and litigation expenses of $26.8 million in connection with Oldco's bankruptcy filing and by Oldco to defend against and restore its reserve for claims associated with certain talc product.

*(in millions of dollars)*

| Engineered Solutions Segment Net Sales | Nine Months Ended Sep. 29, 2024 | Oct. 1, 2023 | % Change |
| --- | ---: | ---: | ---: |
| High-Temperature Technologies | $536.8 | $538.6 | — |
| Environmental & Infrastructure | 202.1 | 228.0 | (11)% |
| Total net sales | $738.9 | $766.6 | (4)% |
| **Income from operations** | $122.0 | $111.1 | 10% |
| % of net sales | 16.5% | 14.5% |  |

Worldwide sales in the Engineered Solutions segment decreased to $738.9 million from $766.6 million in the prior year. High-Temperature Technologies' sales remained flat at $536.8 million as compared to $538.6 million in the prior year. Environmental & Infrastructure sales decreased 11% to $202.1 million from $228.0 million in the prior year due to continued weakness in commercial construction markets and large-scale environmental project activity.

Income from operations was $122.0 million and 16.5% of net sales as compared to $111.1 million and 14.5% of sales in the prior year. Included in income from operations for the nine months ended October 1, 2023 are $3.2 million of restructuring expenses.

### Liquidity and Capital Resources

Cash provided from operations during the nine months ended September 29, 2024, was approximately $166.0 million. Cash flows provided from operations during the first nine months of 2024 were principally used to fund capital expenditures, repay debt, repurchase shares, and to pay the Company’s dividend to common shareholders. The aggregate maturities of long-term debt are as follows: remainder of 2024 - $10.8 million; 2025 - $31.7 million; 2026 - $41.9 million; 2027 - $443.7 million; 2028 - $400.0 million; thereafter - $0.0 million.

On August 11, 2022, the Company entered into a Refinancing Facility Agreement (the “Amendment”) to amend the Company’s previous credit agreement (the “Previous Credit Agreement”; the previous credit agreement, as amended by the Amendment, being the “Amended Credit Agreement”). The Amendment provides for, among other things, a new senior secured revolving credit facility with aggregate commitments of $300 million (the “Revolving Facility”), a portion of which may be used for the issuance of letters of credit and swingline loans, and a new senior secured term loan facility with aggregate commitments of $550 million (the “Term Loan Facility” and, together with the Revolving Facility, the “Senior Secured Credit Facilities”). The Revolving Facility and the Term Loan Facility replace the facilities under the Previous Credit Agreement, which provided for, among other things, a $788 million senior secured floating rate term loan facility and a $300 million senior secured revolving credit facility. The maturity date for loans under the Senior Secured Credit Facilities is August 11, 2027.

Loans under the Senior Secured Credit Facilities will bear interest at a rate equal to, at the election of the Company, Term SOFR plus a credit spread adjustment equal to 0.100% plus an applicable margin equal to 1.500% per annum or a base rate plus an applicable margin equal to 0.500% per annum, subject in each case to (a) an increase of 25 basis points in the event that, and for so long as, the net leverage ratio (as defined in the Amended Credit Agreement) is greater than or equal to 3.00 to 1.00 as of the last day of the preceding fiscal quarter, (b) a decrease of 12.5 basis points in the event that, and for so long as, the net leverage ratio is less than 2.00 to 1.00 and greater than or equal to 1.00 to 1.00 as of the last day of the preceding fiscal quarter and (c) an decrease of 25 basis points in the event that, and for so long as, the net leverage ratio is less than 1.00 to 1.00 as of the last day of the preceding fiscal quarter. The Company will pay certain fees under the Amended Credit Agreement, including (a) a commitment fee of 0.250% per annum on the undrawn portion of the Revolving Facility (subject to a step-up to 0.300% and step-downs to 0.175% and 0.150% at the same levels described above), (b) a fronting fee of 0.125% per annum on the average daily undrawn amount of, plus unreimbursed amounts in respect of disbursements under, letters of credit issued under the Revolving Facility and (c) 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 tangible and intangible assets of the Company and the Guarantors. In the third quarter of 2023, the Company’s subsidiaries Oldco and BVT were removed as borrowers under, and Guarantors of, the Senior Secured Credit Facilities.

As of September 29, 2024, there were $60.0 million in loans and $9.2 million in letters of credit outstanding under the Revolving Facility.

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 “Indenture”). 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. In the third quarter of 2023, the Company’s subsidiaries Oldco and BVT were removed as guarantors of the Notes.

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.

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 Amended Credit Agreement and the Indenture both 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, as well as customary events of default. In addition, the Amended Credit Agreement contains financial covenants that require the Company to maintain, as of the last day of any fiscal quarter, (x) a maximum net leverage ratio (as defined in the Amended Credit Agreement) of 4.00 to 1.00 for the four fiscal quarter period preceding such day (subject to an increase to 5.00 to 1.00 for four quarters in connection with certain significant acquisitions) and (y) a minimum interest coverage ratio (as defined in the Amended Credit Agreement) of 3.00 to 1.00. The Company is in compliance with all the covenants contained in the Amended Credit Agreement throughout the period covered by this report.

The Company has a committed loan facility in Japan. As of September 29, 2024, $1.1 million was outstanding under this loan facility. Principal will be repaid in accordance with the payment schedule ending in 2026. The Company repaid $0.1 million on this facility during 2024.

As part of the Concept Pet acquisition, the Company assumed $1.9 million in long-term debt, recorded at fair value, consisting of two terms loans, one that matures in 2025 and one that matures in 2027. Both loans have annual payments and carry a variable interest rate. The Company repaid $0.1 million on these loans during 2024.

As of September 29, 2024, the Company had $25.5 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 2024 should be about $90 million, principally related to opportunities to improve our operations and meet our strategic growth objectives.

In the second quarter of 2023, the Company entered into a new floating to fixed interest rate swap for a notional amount of $150 million. The fair value of this instrument at September 29, 2024 is a liability of $0.9 million.

On October 18, 2023, 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 September 29, 2024, 990,510 shares have been repurchased under this program for $71.6 million, or an average price of approximately $72.30 per share. This program has been completed in October 2024.

On October 16, 2024, the Company's Board of Directors authorized the Company's management to repurchase, at its discretion, up to $200 million of the Company's shares.

On October 16, 2024, the Company's Board of Directors declared a regular quarterly dividend on its common stock of $0.11 per share. No dividend will be payable unless declared by the Board and unless funds are legally available for payment thereof.

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 nine months ended September 29, 2024, there were no material changes in the Company’s contractual obligations.

The Company and certain of the Company’s subsidiaries are among numerous defendants in over six hundred cases seeking damages for alleged exposure to asbestos-contaminated talc products sold by the Company’s subsidiary Oldco. The Company’s position is that these cases are meritless and all talc products sold by Oldco are safe. On October 2, 2023 (the “Petition Date”), notwithstanding the Company’s confidence in the safety of Oldco’s talc products, the Chapter 11 Debtors filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas (the “Chapter 11 Cases”) to address and comprehensively resolve Oldco’s liabilities associated with talc. Minerals Technologies Inc. and the Company’s other subsidiaries were not included in the Chapter 11 filing. In the second quarter of 2024, Oldco sold its talc assets under section 363 of the U.S. Bankruptcy Code. In addition, in the second quarter of 2024, the Company entered into a Debtor-in-Possession Credit Agreement with Oldco (the "DIP Credit Agreement") and recorded a provision for credit loss of $30 million for the maximum principal amount under such DIP Credit Agreement. Proceeds of the sale of Oldco's talc assets, as well as the funds drawn by Oldco under the DIP Credit Agreement, will be used to fund the Chapter 11 Cases. The Chapter 11 Debtors' ultimate goal in the Chapter 11 Cases is to confirm a plan of reorganization under Section 524(g) of the U.S. Bankruptcy Code and utilize this provision of the Bankruptcy Code to establish a trust that will address all current and future talc-related claims. In January 2024, the Chapter 11 Debtors and Minerals Technologies Inc. commenced a court-approved mediation process with the Official Committee of Unsecured Creditors (appointed in the Chapter 11 Cases as the representative of current talc claimants) and the Future Claimants Representative (appointed in the Chapter 11 Cases as the representative of future talc claimants) regarding the terms of a potential consensual plan of reorganization and the ultimate amount to be contributed to any trust. The mediation process is ongoing, and was recently extended through December 11, 2024 (subject to further extensions). During the pendency of the Chapter 11 Cases, the Company anticipates that the Chapter 11 Debtors will benefit from the operation of the automatic stay, which stays ongoing litigation in connection with talc-related claims against Oldco. In addition, subject to certain exceptions, the filing or continued prosecution of all talc-related claims against Oldco’s non-debtor affiliates is temporarily stayed through December 11, 2024 (subject to further extensions), the date on which a hearing is scheduled on the status of the Chapter 11 Cases. The Chapter 11 Debtors have been deconsolidated from the Company’s financial statements since the Petition Date. Although the Chapter 11 Cases are progressing, it is not possible to predict the form of any ultimate resolution or when an ultimate resolution might occur at this time. Accordingly, the amount that will be necessary to fully and finally resolve all of the Chapter 11 Debtors' current and future talc-related claims in connection with a confirmed Chapter 11 plan of reorganization cannot be estimated with certainty at this time. See Note 13 to the Condensed Consolidated Financial Statements included in this report for more information.

### 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 “outlook,” “forecast,” “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 worldwide general economic, business, and industry conditions; the cyclicality of our customers’ businesses and their changing regional demands; our ability to compete in very competitive industries; consolidation in customer industries, principally paper, foundry and steel; our ability to renew or extend long term sales contracts for our satellite operations; our ability to generate cash to service our debt; our ability to comply with the covenants in the agreements governing our debt; our ability to effectively achieve and implement our growth initiatives or consummate the transactions described in the statements; our ability to successfully develop new products; our 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, or increases in costs of raw materials, energy, or shipping; compliance with or changes to regulation in the areas of environmental, health and safety, and tax; risks and uncertainties related to the voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code filed by our subsidiaries BMI Oldco Inc. (f/k/a Barretts Minerals Inc.) and Barretts Ventures Texas LLC; claims for legal, environmental and tax matters or product stewardship issues; operating risks and capacity limitations affecting our production facilities; seasonality of some of our businesses; cybersecurity and other threats relating to our information technology systems; and other risk factors set forth under “Item 1A — Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, 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. ASUs not listed below 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.

#### Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which requires entities to report incremental information about significant segment expenses included in a segment’s profit or loss measure, as well as the name and title of the chief operating decision maker. The guidance also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually. The new standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2023. The adoption of this standard is not expected to have a material impact on the Company’s financial statements.

#### Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, that requires entities to disclose additional information about federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and income taxes paid. The new standard also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The new standard is effective for annual periods beginning after December 15, 2024. The adoption of this standard is not expected to have a material impact on the Company’s financial statements.

### Critical Accounting Policies and Estimates

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.

There have been no material changes to the critical accounting estimates that our accounting policies require us to make in the preparation of our consolidated financial statements, as described in the 2023 Annual Report on Form 10-K.

## Market risk

As filed, 2,064 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 $4.4 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.

In the second quarter of 2023, 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 September 29, 2024 is a liability of $0.9 million.

## Controls and procedures

As filed, 966 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 September 29, 2024 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 2023 Annual Report on Form 10-K.

Filed Oct 25, 2024.
Source: SEC EDGAR, the filing index for accession 0000891014-24-000116. Last ingested by Listed: Oct 30, 2026, 15:40 ET. No prices; not investment advice.