Minerals Technologies Inc. (MTX) Earnings Call Transcript & Summary

Welcome to the Minerals Technologies Inc. Annual Meeting. My name is Rafael. I will be your operator. [Operator Instructions] I will now turn the call over to Tom Meek. Please start.

Thank you, and good morning. Welcome to the virtual webcast of the 2020 Minerals Technologies Annual Meeting. I'm Tom Meek, Secretary of the company, and I will act as Secretary of the meeting. It is now 9:00 a.m., and I would like to call the meeting to order. This meeting is held pursuant to a printed notice mailed on or about April 1, 2020, to each stockholder of record as of the close of business on March 17, 2020, each of whom is entitled to vote. All documents concerning the call and notice of the meeting will be filed with the records of the meeting. The polls are now open. There are 4 items upon which stockholders will be asked to vote at this year's meeting. If you would like to vote on any or all of the items at today's meeting, either because you haven't previously voted by proxy or if you previously sent your proxy to us, but you would now like to change your vote, you may do so by clicking on the Vote Here button on the webcast screen. The polls will remain open until the conclusion of the meeting's formal business. In addition to the items on the agenda for stockholder consideration, our Chief Executive Officer, Mr. Doug Dietrich, will provide some remarks about MTI. It may include forward-looking statements about our expectations or predictions about the future. Accordingly, I need to remind you that on Page 15 of our 2019 annual report on Form 10-K and in our most recent 10-Q and other SEC filings, we list certain risk factors and conditions that may cause future results to differ materially from what is said here today. Statements related to future performance by Mr. Dietrich and other members of our management team are subject to those cautionary remarks and conditions. Now let me review some housekeeping items with you. The rules of conduct and procedures are posted at the bottom right corner of the webcast screen. Stockholders may submit questions electronically during the meeting by typing your question in the box located at the bottom left corner of the webcast screen. These questions will not be visible to the other participants. Now let me introduce you to the Chief Executive Officer of Mineral Technologies, Doug Dietrich, who will chair the meeting.

Thank you, Tom. Good morning, stockholders and guests. Let me officially welcome you to the 28th Annual Meeting of Minerals Technologies. This year's format is different than past MTI annual meetings as we are holding the meeting virtually. This decision was made in light of the COVID-19 outbreak, public health concerns and to protect the health and safety of the company's shareholders and employees. The program for today consists of the election of directors, the ratification of the appointment of KPMG LLP as the company's independent auditors for the 2020 fiscal year, an advisory vote on executive compensation and the approval of an amendment to our 2015 stock award and incentive plan. After the voting has been completed, I will update you about MTI. Let me now introduce our directors who are joining us virtually on this webcast. They are Mr. Duane. Dunham, Chairman of the Board of Directors of Minerals Technologies and former Chairman and CEO of Bethlehem Steel Corporation; Mr. Joseph Breunig, Chief Operating Officer at OrthoLite LLC; Mr. Jack Carmola, former Segment President at Goodrich Corporation; Dr. Robert Clark, Provost and Senior Vice President for Research, University of Rochester; Ms. Alison Deans, former Chief Investment Officer at CRT; Mr. Frank Feder, former Regional Chief Executive Officer for Latin America and the Caribbean for Alcoa; Ms. Carolyn Pittman, Senior Vice President and Chief Accounting Officer of Maxar Technologies; Mr. Marc Robinson, Senior Vice President of Enterprise Strategy, CVS Health and Aetna; and Mr. Donald Winter, Professor of Engineering Practice at the University of Michigan and former 74th Secretary of the Navy. I'd like to now introduce the members of our leadership counsel who are also joining us virtually. Mr. Thomas Meek, Senior Vice President, General Counsel, HR and Secretary, Chief Compliance Officer of the company; Mr. Brett Argirakis, Vice President and Managing Director, Minteq International Inc. and MTI Global Supply Chain; Mr. Matt Garth, Senior Vice President, Finance and Treasury and Chief Financial Officer; Mr. Jon Hastings, Group President, Performance Materials; Mr. Andy Jones, Vice President and Managing Director, Energy Services; Mr. Doug Mayger, Senior Vice President and Head of Global Operations, Performance Materials; and Mr. D.J. Monagle, Group President, Specialty Minerals and Refractories. Now our secretary, Tom Meek, will provide some formal matters and introduce the resolutions to be voted on at the meeting. Tom?

Ms. Linda Piscadlo of American Election Services, LLC, will be our inspector of election this year. I have available the inspector's oath and direct that it be filed with the records of this meeting. The record date established by the Board of Directors for this annual meeting was March 17, 2020. As of the record date, there were 34,222,538 issued and outstanding shares of common stock of the company. Each share of common stock is entitled to one vote. For a quorum to be present, a majority of the shares entitled to vote must be present at the meeting. We're here informed by our inspector that a quorum is deemed present for purposes of conducting the business of the meeting. The first item of business to come before this meeting is the election of directors. As you know, our company has a classified Board. This year, we have 4 nominees for election: Mr. Joseph C. Breunig; Ms. Alison A. Deans; Mr. Duane R. Dunham; and Mr. Franklin L. Feder, all of whom are currently members of the Board. This nomination is for a 3-year term, expiring at the Annual Meeting of Stockholders in 2023 or until the election and qualification of their successors. As to the election of the director, your Board of Directors unanimously recommends the election of Mr. Breunig, Ms. Deans, Mr. Dunham and Mr. Feder. Next item to be voted upon is the proposed ratification of the appointment of KPMG LLP as the company's independent auditors for the year 2020. Subject to the approval of stockholders, KPMG has been appointed as our independent auditor by the Audit Committee of your Board of Directors. Two representatives from KPMG are joining us virtually today, Mr. Brendan Dunn and Ms. Kelly Burdumy. The following resolution is presented for approval. Resolved, that the holders of common stock of Minerals Technologies hereby ratify the appointment by the Audit Committee of the Board of Directors of the company of KPMG LLP as independent auditors for the company for the year 2020. Your Board of Directors unanimously recommends approval of this resolution. The third item to be voted upon is an advisory vote on executive compensation. The following resolution is presented for your approval. Resolved, that stockholders of the company approve, on an advisory basis, the compensation paid to the company's named executive officers in 2019, as disclosed in the company's proxy statement for the 2020 Annual Meeting of Stockholders pursuant to the compensation disclosures rules of the Securities and Exchange Commission, which disclosure includes the compensation discussion and analysis, the compensation tables and any related tables and disclosure. Your Board of Directors unanimously recommends approval of this resolution. The final item to be voted upon is a vote for the approval of the amendment of the 2015 stock award and incentive plan as described in our proxy statement. The following resolution is presented for approval. Resolved, that the stockholders of the company hereby approve the amendment of the 2015 stock award and incentive plan. Your Board of Directors unanimously recommends approval of this resolution. That concludes the matters to be voted on. I declare the polls officially closed at 9:10 a.m., May 13, 2020. Now I'll hand the meeting back to Doug Dietrich for some remarks about MTI. Doug?

Thanks, Tom. While the ballots are being counted, I'd like to provide some remarks about MTI, our 2019 performance and our actions taken related to the COVID-19 pandemic. I'd first like to express my thanks to everyone on the call and hope you've been staying safe and healthy. I'll begin with a quick overview of our company. We're a global company with over 3,600 employees at more than 150 locations across 35 countries and operate 12 innovation, research and development centers. We report our 4 business segments to our minerals-based, Performance Materials and Specialty minerals; and to our service-based business segments, Refractories and Energy Services. Our total sales for 2019 were $1.8 billion. And on the slide, you can see our revenue breakdown by geography and major product lines. To provide a recap of 2019, it was a year of tangible progress advancing our growth strategy and disciplined operational execution against the backdrop of challenging market conditions. We strengthened positions in core product lines while extending further into new geographies, capitalized on customer demand for our latest innovative products and generated strong cash flow to support our financial flexibility. Our growth initiatives, focused on geographic expansion and new product development and investments in our capabilities, led to sales of $1.8 billion and operating income of $235 million. In 2019, we continued with our balanced approach to capital allocation and remain focused on improving our financial position. Our cash generation remains strong with free cash flow up 36% to $173 million. We used this cash flow generation to continue with debt payments, ending the year at 2.1x EBITDA and approaching our target net leverage ratio of 2x EBITDA. We also returned $48 million to shareholders through dividends and share repurchases. We also are focused on deepening our operational excellence foundation and high-performance culture and our commitment to safety, sustainability and diversity and inclusion. We took steps to advance our sustainability initiatives by establishing 2025 environmental reduction targets in 6 specific focus areas. 2020 has already been quite a unique year, and I thought it would be helpful to discuss how COVID-19 is impacting our company and the actions we've been taking across our operations. We've been facing the realities of the COVID-19 pandemic since early on when it was first reported in China in January. As we dealt with these issues in China, we developed robust plans to protect our employees, manage our worldwide operations and support our customers. These include heightened virus-related safety protocols such as cemetery procedures and social distancing, arrangements for remote working and contingencies for our global supply chain. The best practices that we developed in China helped to provide the blueprint for business continuity plans and safety and operating procedures and we've implemented across all of our global operations. First and foremost, consistent with MTI's core values, our focus has been and continues to be on protecting the health and safety of our employees. We have teams in place at all levels working to ensure the safety of our people and the continuity of our operations while monitoring the status of each location and recommending specific risk mitigation actions. The challenges are unique in each location, but our actions have been compassionate, systematic and based on facts and experience. Nearly all of our global production facilities continue to operate as our products have been deemed essential for the markets we serve. As we run our facilities, we have implemented standardized COVID-19-related protocols for all locations. In addition, wherever possible, our employees are working remotely. With everything that we've had to overcome and adapt to recently, I'd like to recognize our employees for their efforts. I credit our team for their engagement, their perseverance, their agility and their people-centered focus. We're managing through the evolving challenges of today while also staying focused on our values, longer-term goals and strategies, including taking measures to strengthen our foundation and the enduring health of our company. Our underlying business fundamentals are intact. And we remain committed to our long-term growth strategy. Our business model, supported by geographic, customer and market diversification is resilient, and we are in strong financial position with $418 million of liquidity and expect continued stable cash flow generation. We are confident that our team's experience and agility, disciplined execution, cost management focus and our strong balance sheet position us to navigate through these more uncertain times. We have effectively managed challenging times in the past. We will make the adjustments needed to align our business to evolving market conditions. As we move forward, we'll be focused on supporting our employees, meeting our priorities to serve our customers and ensuring we remain in strong financial position. In closing, I'd like to express my appreciation to our employees for their engagement and commitment to MTI. I also want to thank our shareholders for your ongoing support, confidence and trust. Now let me turn the meeting back over to Tom Meek, who will give you the results of the balloting. Tom?

Thanks, Doug. The inspector of elections has completed the tabulation of ballots and issued a report of the results of the vote. More than a plurality of the votes cast are in favor of the election of Mr. Breunig, Ms. Deans, Mr. Dunham and Mr. Feder to the Board of Directors for a 3-year term expiring at the Annual Meeting of Stockholders in the year 2023. In addition, more than a majority of the votes cast have been voted in favor of the ratification of the appointment of KPMG LLP to serve as the company's independent registered public accounting firm for the current fiscal year. More than a majority of the votes cast have been voted in favor of the proposal to approve the compensation paid to the company's named executive officers in 2019. Finally, more than a majority of the votes cast have been voted in favor of the proposal to approve the amendment of the 2015 stock award and incentive plan.

Thank you, Tom, for that report. Based on these results, I now declare that Mr. Breunig, Ms. Deans, Mr. Dunham and Mr. Feder have been duly elected Directors of the company to serve until the Annual Meeting of Stockholders in 2023 and or until their successors are elected and qualified. My congratulations to them on their reelection to our Board. I also declare that the actions of appointing KPMG as independent auditors for the company for the year 2020 has been duly ratified. I also declare that the compensation paid to the company's named executive officers in 2019 has been approved. And I declare that the amendment to the 2015 stock award and incentive plan has been approved. At this time, I'd like to ask if there are any questions.

Doug, there are no pending questions.

Okay. I want to thank all of you for attending the Annual Meeting, and we appreciate your support of Minerals Technologies. The meeting is adjourned.