Aug. 1, 2020 - Minerals Technologies Inc. reported worldwide net sales of $357.2 million, 23 percent lower than the prior year, primarily driven by the global economic conditions related to the COVID-19 pandemic. Foreign exchange had an unfavorable impact on sales of approximately $9.9 million or 2 percentage points. Operating income was $27.2 million and represented 7.6 percent of sales. Operating income excluding special items was $42.0 million and represented 11.8 percent of sales. Cash from operations was $63.8 million and free cash flow was $48.9 million, similar levels to the prior year.
"During one of the most challenging quarters in recent times, we maintained our unwavering focus on the health and safety of our employees and efficiently managing our operations. While significant end-market changes and COVID-19 related customer shutdowns impacted overall sales, we navigated through these conditions to deliver a solid operating performance, characterized by double-digit operating margins and strong cash flow generation. Our consumer-oriented products, including Pet Care, Fabric Care and Personal Care, continued to demonstrate their resiliency and strength throughout the quarter by delivering healthy sales growth,” said Douglas T. Dietrich, Chief Executive Officer. “We also took steps to further strengthen our balance sheet by increasing flexibility in our capital structure. We remained focused on advancing our growth initiatives, highlighted by the signing of two new satellite PCC contracts in India and the U.S. and the continued commercialization of new products.”
Mr. Dietrich continued, “Our team has worked tirelessly and safely through the COVID-19 pandemic, serving our customers and communities with critical products and demonstrating our agility and culture of continuous improvement. Early on, we acted quickly to deploy rigorous health, safety, and wellness protocols at all of our facilities in order to protect our employees. As we move through the rest of 2020, we will continue to focus on the health and safety of our employees, meeting our customers' needs, and advancing our growth strategy.”
The Company incurred special charges of $14.6 million after-tax in the second quarter, or $0.43 per share. The charges included a litigation settlement and a non-cash pension settlement charge. In addition, the Company recorded a non-cash impairment of assets charge and severance related costs for its Paper PCC satellite facilities at two U.S. paper mills that were idled indefinitely in June 2020.
Private Offering
On June 30, 2020, the Company completed a $400 million private offering of 5.00 percent senior notes due 2028 at par. The Company used the net proceeds to repay $148 million of fixed rate term loans, $100 million of borrowings under its revolving credit facility, and the remainder for general corporate purposes. As a result, the Company has more than $675 million of available liquidity, including cash on hand as well as availability under its revolving credit facility.
Segment Information
Performance Materials and Specialty Minerals
Sales in the Minerals businesses, which include the Performance Materials and Specialty Minerals segments, decreased 21 percent in the second quarter versus the prior year to $283.6 million. Operating income for the Minerals businesses was $30.0 million and represented 10.6 percent of sales. Operating income, excluding special items, was $36.3 million and represented 12.8 percent of sales.
Performance Materials segment sales decreased 19 percent versus the prior year to $173.8 million.
Metalcasting sales were impacted primarily by the COVID-19 related automotive production slowdown in North America and parts of Asia. Metalcasting sales grew in China versus the prior year, as economic activity rebounded following the COVID-19 related shutdowns, and we continued to penetrate the market with our pre-blended greensand bond formulations. Household, Personal Care & Specialty Products were resilient, with continued strong performance from our global Pet Care, Fabric Care and Personal Care businesses. The growth in these consumer-oriented businesses was offset by weakness in specialty drilling products. Environmental Products and Building Materials sales were both lower due to COVID-19 related project delays.
Operating income for the segment was $21.0 million and represented 12.1 percent of sales. The impact of lower sales on operating income versus the prior year was partially mitigated by continued pricing actions, strong cost control and expense reductions.
The Performance Materials segment provides a wide range of bentonite-based and synthetic materials for industrial and consumer markets and for non-residential construction, environmental remediation and infrastructure projects worldwide.
Specialty Minerals segment sales, which consist of the Precipitated Calcium Carbonate (PCC) and Processed Minerals product lines, decreased 24 percent in the second quarter to $109.8 million.
Worldwide sales of PCC, which is used mainly in the manufacturing processes of the paper industry, decreased primarily due to the decline in printing and writing paper demand resulting from the COVID-19 pandemic. Paper PCC sales in China grew versus the prior year on continued penetration and strong pull from our customers. Specialty PCC sales were lower as demand slowed late in the first quarter and remained at lower levels through the second quarter. Specialty PCC products are sold to the polymer industry for use in automotive and construction applications, to the adhesives and printing inks industry, as well as to the food and pharmaceutical industries.
Processed Minerals sales decreased due to the slowdown in construction and automotive activity. Processed Minerals products are used in the building materials, polymers, ceramics, consumer products, paints and coatings, glass and other manufacturing industries.
Segment operating income was $9.0 million and represented 8.2 percent of sales. Operating income excluding special items was $15.3 million and represented 13.9 percent of sales. The impact from the lower volume was partially offset by continued pricing actions and cost control.
Refractories and Energy Services
Sales in the Service businesses, which include the Refractories and Energy Services segments, decreased 29 percent versus the prior year to $73.6 million. Operating income for the Service businesses was $7.3 million and represented 9.9 percent of sales.
Refractories segment sales decreased 28 percent to $55.9 million, due to lower sales of Refractory and Metallurgical Products globally as steel mills reduced production in response to weaker demand from construction and automotive markets.
Segment operating income was $5.9 million and represented 10.6 percent of sales. The Refractories segment provides products and services primarily to the worldwide steel industry.
Energy Services segment sales decreased 31 percent to $17.7 million, driven by the decrease in activity due to COVID-19 related customer project delays.
Segment operating income was $1.4 million and represented 7.9 percent of sales. Energy Services offers a range of patented technologies, products and services for off-shore filtration and well testing to the worldwide oil and gas industry.
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