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

Hello, everyone, and welcome to the 2021 Annual Meeting of Stockholders of Mineral Technologies, Inc. I would now like to introduce Mr. Tom Meek, the Secretary of the company.

Thank you, and good morning. Welcome to the virtual webcast of the 2021 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 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, 2021, to each stockholder of record as of the close of business on March 23, 2021, 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 open. There are 3 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 Voting 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 Chairman and Chief Executive Officer, Mr. Doug Dietrich, will provide some remarks about MTI. They 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 2020 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 may be accessed by clicking on the Materials button on the webcast screen. Stockholders may submit questions electronically during the meeting by clicking on the Q&A button on the webcast screen. These questions will not be visible to other participants. Now let me introduce you to the Chairman and Chief Executive Officer of Minerals Technologies, Doug Dietrich, who will chair the meeting.

Good morning, stockholders and guests. Let me officially welcome you to the 29th Annual Meeting of Minerals Technologies. This year, we are again 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 2021 fiscal year and an advisory vote on executive compensation. After the voting has been completed, I will update you about MTI. Let me now introduce our directors who are joining us on this webcast. They are: Mr. Joseph Breunig, Chief Operating Officer at OrthoLite LLC; Mr. Jack Carmola, former Segment President at Goodrich Corporation; Dr. Robert Clark, Lead Independent Director of Minerals Technologies and Provost and Senior Vice President for Research, University of Rochester; Ms. Alison Deans, former Chief Investment Officer at CRT; Mr. Duane Dunham, former Chairman of the Board of Directors of Minerals Technologies and former Chairman and CEO of Bethlehem Steel Corporation; Mr. Franklin Feder, former Regional Chief Executive Officer for Latin America and the Caribbean, Alcoa; Ms. Carolyn Pittman, Senior Vice President and Chief Accounting Officer of Maxar Technologies; and Mr. Marc Robinson, former Senior Vice President, Enterprise Strategy for CVS Health and Aetna; and Mr. Donald Winter, former 74th Secretary of the Navy. I would now like to introduce the members of our leadership counsel who are also joining us virtually. Mr. Thomas Meek, Senior Vice President, General Counsel and Secretary and Chief Compliance Officer of the company; Mr. Brett Argirakis, Senior Vice President and Managing Director, Minteq International Inc. and MTI Global Supply Chain; Ms. Erin Cutler, Vice President, Human Resources; Mr. Matt Garth, Senior Vice President, Finance and Treasury and Chief Financial Officer; Mr. John Hastings, Group President, Performance Materials; Mr. Andy Jones, Vice President and Managing Director, Performance Materials, 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.

Thank you, Doug. Mr. Karl Wagner 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 23, 2021. As of the record date, there were 33,802,867 issued and outstanding shares of common stock of the company. Each share of common stock is entitled to 1 vote. For a quorum to be present, a majority of the shares entitled to vote must be present at the meeting. We are 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 3 nominees for election: Mr. Jack Carmola; Dr. Robert Clark; and Mr. Marc Robinson, 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 2024 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. Carmola, Dr. Clark and Mr. Robinson. The 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 2021. Subject to the approval of stockholders, KPMG has been appointed as our independent auditors by the Audit Committee of your Board of Directors. Two representatives from KPMG are joining us today virtually, 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 2021. Your Board of Directors unanimously recommends approval of this resolution. Third item to be voted upon is an advisory vote on executive compensation. The following resolution is presented for approval. Resolved, that stockholders of the company approve, on an advisory basis, the compensation paid to the company's named executive officers in 2020, as disclosed in the company's proxy statement for the 2021 Annual Meeting of stockholders, pursuant to the compensation disclosure 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. That concludes the matters to be voted on. I declare that the poll is officially closed at 9:08 a.m., May 19, 2021. Now I'll hand the meeting back to Doug Dietrich for some remarks about MTI.

Thanks, Tom. While the ballots are being counted, I'll make some comments about MTI, our 2020 performance and how we see this year shaping up. I'll begin with a quick overview of MTI. We're a global company with over 3,500 employees across 33 countries and operate 12 innovation, research and development centers. We reported on 4 business segments in 2020: Performance Materials, Specialty Minerals, Refractories and Energy Services. Our total sales were $1.6 billion. And on the slide, you can see our revenue breakdown by segment and by end market. To characterize 2020, the pandemic tested the strength and capabilities of our company in many ways, and I am very proud of our employees for their unwavering commitment, agility and execution focus, all key qualities that define our culture. Our performance reflected the strength of our diverse mix of businesses and high-value product portfolio, which enabled us to expand our positions with existing customers and capture opportunities with new ones. We continue to advance our growth strategy, focused on geographic expansion, new product development and acquisitions. Proactive operational measures to reduce costs and increased pricing led to an improved margin profile. In addition, we implemented virtual tools and evolved our processes to help improve efficiency and connectivity with our employees and customers. Protecting the health and safety of our employees has been our key focus. And since the onset of the pandemic, we implemented robust protocols to protect our employees while ensuring the safe and efficient operations of our facilities. While working in this new environment, our employees stayed focused on improving our safety performance, which resulted in the lowest recordable injury rate in MTI's history. It's a testament to our employees and their engagement with our continuous improvement culture that we successfully managed through significant market and customer challenges to deliver solid results. Conditions in our end markets were dynamic, with our consumer-oriented businesses experiencing consistently strong demand, while our demand and others dropped dramatically, especially in the second and third quarters. With our diverse sales portfolio balanced across sectors and geographies, we were able to effectively mitigate the impact. On the operational front, we aggressively controlled costs, drove productivity improvements, continued with pricing actions and increased our sales of new products. These actions put us in a good position to deliver strong earnings performance as volumes increase toward the latter part of the year. In fact, our overall operating and EBITDA margins for 2020 were above 2019. During 2020, generating sustained cash flow and creating flexibility around our capital structure were key priorities. We delivered robust free cash flow of $175 million, which was used to reduce net debt by $122 million and returned $48 million to shareholders through share repurchases and dividends. We're also focused on deepening our operational excellence foundation and high-performance culture and our commitment to sustainability and diversity and inclusion. Specific to sustainability, we're on track to meet or exceed our environmental reduction targets in 6 areas. To sum it up, as we adjusted to a new reality and managed through difficult circumstances, MTI exited 2020 in a better position than when we began the year. Now I'll briefly touch on what we're expecting for this year. With the positive momentum we generated across many of our businesses, highlighted by strong demand conditions in the majority of our markets, 2021 is shaping up to be a solid year for MTI. Across our portfolio, we have several attractive projects in hand that will accrue to volume growth this year. We are focused on accelerating our geographic expansion and our core product lines. Asia is a key region for that growth. Some examples to highlight include the ramp-up of 200,000 tons of new PCC capacity that recently came online at our sites in China and India and the continued penetration of our greensand bond products and an expanding customer base in fabric care, pet care and edible oil purification. New product development is also a key priority. We've made significant progress to improve the speed of execution, increase the number of products commercialized and enhance the impact of our latest solutions. Over the past 5 years, we've cut the time from development to market in half and, at the same time, increased our sales from new products by more than 50%. These metrics should continue to strengthen during 2021. With our solid financial footing, we have the resources to execute on a broad range of growth initiatives. In addition, we have the flexibility to deploy capital to shareholders through dividends and share repurchases as well as toward acquisitions. Lastly, sustainability leadership has been a focus of ours for a long time. And over the past several years, we've taken meaningful steps to embed these activities deeper into our company. We will continue to strengthen our broad ESG initiatives this year, including progress advancing our environmental targets and plan to publish our 13th Annual Report in July. The COVID pandemic continues to challenge our normal ways of working, but our culture of connectivity and collaboration has enabled us to differentiate MTI with customers while driving forward our safety and operating culture. We will continue to build on these attributes during 2021. With the favorable demand trends in our markets, new technology launches, capacity additions and continued strong operating performance, we have the elements in place to deliver a very strong year at MTI. In closing, I'd like to extend my appreciation to our employees for their engagement and commitment to MTI. I also want to thank our shareholders for your ongoing support. Now let me turn the meeting back over to Tom Meek to share 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 majority of the votes cast are in favor of election of Mr. Carmola, Dr. Clark and Mr. Robinson to the Board of Directors for a 3-year term expiring at the Annual Meeting of Stockholders in the year 2024. 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. Finally, 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 2020.

Thank you, Mr. Meek, for that report. Based on these results, I now declare that Mr. Carmelo, Mr. Clark and Mr. Robinson have been duly elected directors of the company to serve until the Annual Meeting of Stockholders in 2024 or until their successors are elected and qualified. My congratulations to them on their reelection to our Board. I also declare that the action of appointing KPMG as independent auditors for the company for the year 2021 has been duly ratified. I also declare that the compensation paid to the company's named executive officers in 2020 has been approved. At this time, I'd like to ask if there are any questions. There are no questions. So I want to thank all of you for attending the annual meeting, and we appreciate your support of Minerals Technologies. The meeting is now adjourned.

Thank you for attending the 2021 Annual Meeting of Stockholders of Mineral Technologies Inc. The meeting has now concluded. You may now disconnect.