# MINERALS TECHNOLOGIES INC (MTX) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from MINERALS TECHNOLOGIES INC's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/891014/000089101422000009/form10k.htm
Accession: 0000891014-22-000009
Filing date: 2022-02-18
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/MTX/
All MD&A years: /company/MTX/mda/
Next year: /company/MTX/mda/fy2022/ (FY 2022)

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

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 statements can be guaranteed. Actual future results may vary materially. Significant factors affecting the expectations and forecasts are set forth under “Item 1A — Risk Factors” in this Annual Report on Form 10-K.

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.

Executive Summary

Worldwide sales increased 17% in 2021 to $1.858 billion as compared with $1.595 billion in 2020.  Foreign exchange had a favorable impact on sales of $27 million or 2%.  Consolidated income from operations was $235.7 million as compared with $187.9 million in the prior year.  Included in income from operations for 2021 was $4.0 million related to acquisition-related expenses and $1.1 million for restructuring and other items, net.  Included in income from operations in 2020 was $10.4 million related to litigation expenses associated with the bankruptcy of Novinda Corp, $7.6 million for assets write-downs and severance-related costs, $3.1 million of acquisition-related expenses and $4.0 million in costs related to system restoration and risk mitigation following a ransomware attack on certain of the Company's information technology systems.  Net income was $164.4 million in 2021, as compared to $112.4 million in the prior year.  The Company reported diluted earnings of $4.86 per share in 2021 as compared with $3.29 per share in the prior year.

In 2021, the Company continued to execute on its key growth initiatives of geographic expansion, new product innovation and acquisitions. In the fourth quarter of 2021, the Company signed two new Paper and Packaging satellite contracts in Asia, advancing geographic expansion of our core product lines.  The Company also continued to advance on its strategic growth initiatives through the commercialization of new value-added products. On July 26, 2021, the Company completed the acquisition of Normerica Inc., a leading North American supplier of premium quality cat litter. As a leader in the pet product industry, they provide premium products, both branded and private label to world-class retailers and their product portfolio consists primarily of bentonite-based cat litter products.  In addition, in November, we acquired the Specialty PCC assets of a company in the Midwest U.S., helping us expand our manufacturing reach and providing us a strategic logistics footprint at a key point along the Mississippi River.

Although the COVID-19 pandemic continues to impact our business operations, we experienced limited disruptions during 2021. We are taking safety measures to protect our employees and monitoring our operations and public health measures implemented by governmental authorities in response to the pandemic.  COVID-19 also continues to impact the global supply chain, causing disruptions to service providers, logistics and the flow and availability of supplies and products.  Despite these challenges, we were able to maintain a stable supply of raw materials to meet our production requirements.

Our balance sheet continues to be strong.  Cash, cash equivalents and short-term investments were $304.4 million as of December 31, 2021.  Cash flow from operations for 2021 was $232.4 million.  The Company currently has more than $500 million of available liquidity, including cash on hand, as well as availability under its revolving credit facility. We believe these factors will allow us to meet our anticipated funding requirements. Our intention is to maintain a balanced approach to capital deployment, by using cash flow for investments in growth, continued debt reduction and selective share repurchases.

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Outlook

The COVID-19 pandemic has not had a material effect on our reported results for 2021 and we do not expect it will negatively impact our business and results of operations for 2022.  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.  Refer to Part I. Item 1A. Risk Factors for further discussion of these risks. We will continue to actively monitor and respond to the COVID-19 pandemic.

The Company will continue to focus on innovation and new product development and other opportunities for sales growth in 2022 from its existing businesses, as follows:

[[GREPCENT_TABLE]]
[["","\u25cf","Increase our presence and gain penetration of our bentonite-based foundry customers for the Metalcasting industry in emerging markets, such as China and India."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Increase our presence and market share in global pet care products"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Deploy new products in pet care such as lightweight litter."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Increase our presence and market share in Asia and in the global powdered detergent market."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Continue the development of our proprietary Enersol\u00ae products for agricultural applications worldwide."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Pursue opportunities for our products in environmental and building and construction markets in the Middle East, Asia Pacific and South America regions."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Increase our presence and market share for geosynthetic clay liners within the Environmental Products product line."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Develop multiple high-filler technologies under the FulFill\u00ae platform of products, to increase the fill rate in freesheet paper and continue to progress with commercial discussions and full-scale paper machine trials."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","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\u00ae and ENVIROFIL\u00ae products."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Further penetration into the packaging segment of the paper industry."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Expand the Company's PCC coating product line using the satellite model."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Promote the Company's expertise in crystal engineering, especially in helping papermakers customize PCC morphologies for specific paper applications."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Develop unique calcium carbonate and talc products used in the manufacture of novel biopolymers, a new market opportunity."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Deploy new talc and GCC products in paint, coating and packaging applications."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Deploy value-added formulations of refractory materials that not only reduce costs but improve performance."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Deploy our laser measurement technologies into new applications."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Expand our refractory maintenance model to other steel makers globally."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Deploy operational excellence principles into all aspects of the organization, including system infrastructure and lean principles."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Continue to explore selective acquisitions to fit our core competencies in minerals and fine particle technology."]]
[[/GREPCENT_TABLE]]

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

40

Results of Operations

Consolidated Income Statement Review

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(millions of dollars)","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["Net sales","","$","1,858.3","","","$","1,594.8","","","$","1,791.0","","","","16.5","%","","","(11.0",")%"],["Cost of sales","","","1,411.8","","","","1,189.4","","","","1,350.4","","","","18.7","%","","","(11.9",")%"],["Production margin","","","446.5","","","","405.4","","","","440.6","","","","10.1","%","","","(8.0",")%"],["Production margin %","","","24.0","%","","","25.4","%","","","24.6","%"],["Marketing and administrative expenses","","","186.2","","","","176.5","","","","187.5","","","","5.5","%","","","(5.9",")%"],["Research and development expenses","","","19.5","","","","19.9","","","","20.3","","","","(2.0",")%","","","(2.0",")%"],["Acquisition-related expenses","","","4.0","","","","3.1","","","","\u2014","","","","29.0","%","","","*"],["Litigation expenses","","","\u2014","","","","10.4","","","","10.9","","","","*","","","","(4.6",")%"],["Restructuring and other items, net","","","1.1","","","","7.6","","","","13.2","","","","(85.5",")%","","","(42.4",")%"],["Income from operations","","","235.7","","","","187.9","","","","208.7","","","","25.4","%","","","(10.0",")%"],["Operating margin %","","","12.7","%","","","11.8","%","","","11.7","%"],["Interest expense, net","","","(37.2",")","","","(38.2",")","","","(43.2",")","","","(2.6",")%","","","(11.6",")%"],["Non-cash pension settlement charge","","","(1.8",")","","","(6.4",")","","","\u2014","","","","(71.9",")%","","","*"],["Other non-operating income (deductions), net","","","5.6","","","","(5.3",")","","","(8.2",")","","","*","","","","(35.4",")%"],["Total non-operating deductions, net","","","(33.4",")","","","(49.9",")","","","(51.4",")","","","(33.1",")%","","","(2.9",")%"],["Income from operations before tax and equity in earnings","","","202.3","","","","138.0","","","","157.3","","","","46.6","%","","","(12.3",")%"],["Provision for taxes on income","","","36.6","","","","24.4","","","","22.8","","","","50.0","%","","","7.0","%"],["Effective tax rate","","","18.1","%","","","17.7","%","","","14.5","%"],["Equity in earnings of affiliates, net of tax","","","2.8","","","","2.2","","","","1.9","","","","27.3","%","","","15.8","%"],["Consolidated net income","","","168.5","","","","115.8","","","","136.4","","","","45.5","%","","","(15.1",")%"],["Less: Net income attributable to non-controlling interests","","","4.1","","","","3.4","","","","3.7","","","","20.6","%","","","(8.1",")%"],["Net income attributable to Minerals Technologies Inc. (MTI)","","$","164.4","","","$","112.4","","","$","132.7","","","","46.3","%","","","(15.3",")%"]]
[[/GREPCENT_TABLE]]

*  Not meaningful

Net Sales

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(millions of dollars)","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["U.S.","","$","959.6","","","$","822.5","","","$","962.4","","","","16.7","%","","","(14.5",")%"],["International","","","898.7","","","","772.3","","","","828.6","","","","16.4","%","","","(6.8",")%"],["Total sales","","$","1,858.3","","","$","1,594.8","","","$","1,791.0","","","","16.5","%","","","(11.0",")%"],["Performance Materials Segment","","$","976.0","","","$","825.8","","","$","918.5","","","","18.2","%","","","(10.1",")%"],["Specialty Minerals Segment","","","578.9","","","","510.9","","","","574.4","","","","13.3","%","","","(11.1",")%"],["Refractories Segment","","","303.4","","","","258.1","","","","298.1","","","","17.6","%","","","(13.4",")%"],["Total sales","","$","1,858.3","","","$","1,594.8","","","$","1,791.0","","","","16.5","%","","","(11.0",")%"]]
[[/GREPCENT_TABLE]]

Worldwide net sales in 2021 increased 16.5% from the previous year to $1,858.3 million.  Included in net sales for 2021 are $48.6 million of net sales of Normerica.  Foreign exchange had a favorable impact on sales of approximately $27 million or 2 percentage points.  Net sales in the United States increased 16.7% to $959.6 million in 2021 and represented 52.0% of consolidated net sales.  International sales increased 16.4% to $898.7 million in 2021 and represented 48.0% of consolidated net sales.

41

Worldwide net sales in 2020 decreased 11.0% from the previous year to $1,594.8 million.  Foreign exchange had an unfavorable impact on sales of approximately $16 million or 1 percentage point.  Net sales in the United States decreased 14.5% to $822.5 million in 2020 and represented 52.0% of consolidated net sales. International sales decreased 6.8% to $772.3 million in 2020 and represented 48.0% of consolidated net sales.

Operating Costs and Expenses

Consolidated cost of sales was $1,411.8 million, $1,189.4 million and $1,350.4 million in 2021, 2020 and 2019, respectively.  Production margin as a percentage of net sales was 24.0% in 2021, 25.4% in 2020 and 24.6% in 2019.  Production margin decreased primarily in 2021 due to timing of pricing actions relative to higher inflationary costs, including energy and other manufacturing costs as well as supply chain and logistics challenges.

Marketing and administrative costs were $186.2 million, $176.5 million and $187.5 million in 2021, 2020 and 2019, respectively.  Marketing and administrative costs as a percentage of net sales were 10.0% in 2021, 11.1% in 2020 and 10.5% in 2019.  Included in marketing and administrative costs in 2020 was a $4.0 million charge relating to system restoration and risk mitigation following a ransomware attack on certain of the Company's information technology systems.

Research and development expenses were $19.5 million, $19.9 million and $20.3 million in 2021, 2020 and 2019, respectively.  Research and development expenses as a percentage of net sales were 1.0% in 2021, 1.2% in 2020 and 1.1% in 2019.

In 2021, the Company recorded a $4.0 million charge for acquisition-related expenses.  In addition, the Company recorded a $1.1 million charge for asset write-downs and other restructuring costs.

In 2020, the Company recorded a $10.4 million charge related to litigation expenses associated with the bankruptcy of Novinda Corp.  In addition, the Company recorded a $7.6 million charge for asset write-downs and other restructuring costs and $3.1 million for acquisition-related expenses.

In 2019, the Company recorded a $13.2 million charge for asset write-downs and severance-related costs.  In addition, the Company recorded a $10.9 million charge related to litigation expenses associated with the bankruptcy of Novinda Corp.

Income from Operations

During 2021, the Company recorded income from operations of $235.7 million, as compared with $187.9 million in the prior year.  Income from operations represented 12.7% of sales compared with 11.8% of sales in the prior year.  Income from operations in 2021 included a $4.0 million charge for acquisition-related expenses and $1.1 million for asset write-downs and other restructuring costs.

During 2020, the Company recorded income from operations of $187.9 million, as compared with $208.7 million in the prior year.  Income from operations represented 11.8% of sales compared with 11.7% of sales in the prior year.  Income from operations in 2020 included a $10.4 million charge related to litigation expenses associated with the bankruptcy of Novinda Corp, $7.6 million for asset write-downs and severance-related costs, $4.0 million related to system restoration and risk mitigation following a ransomware attack on certain of the Company's information technology systems and $3.1 million of acquisition-related expenses.

Non-Operating Income (Deductions)

The Company recorded non-operating deductions, net of $33.4 million in 2021 as compared with $49.9 million in the previous year.

Included in non-operating deductions was net interest expense of $37.2 million in 2021 as compared to $38.2 million in the prior year, primarily due to lower interest rates. Additionally, the Company recorded at $1.8 million non-cash pension settlement charge relating to some of the Company's retirement plans in the United States.

Included in non-operating deductions was net interest expense of $38.2 million in 2020 as compared to $43.2 million in the prior year, as a result of lower debt balances due to principal repayments and lower interest rates. Additionally, the Company recorded at $6.4 million non-cash pension settlement charge relating to one of the Company's retirement plans in the United States.

Provision for Taxes on Income

Provision for taxes was $36.6 million, $24.4 million and $22.8 million in 2021, 2020 and 2019, respectively.  The effective tax rates were 18.1%, 17.7% and 14.5% during 2021, 2020 and 2019, respectively.

42

The higher effective tax rate in 2021 as compared to 2020 was primarily due to mix of earnings.  The higher effective tax rate in 2020 as compared to 2019 was primarily due to tax credits in the prior year resulting from the expiration of a tax statute of limitations.

The other factors having the most significant impact on our effective tax rates in recent periods are the rate differentials related to foreign earnings indefinitely invested, percentage depletion, and the tax benefits on restructuring and impairment charges at a higher rate.

Percentage depletion allowances (tax deductions for depletion that may exceed our tax basis in our mineral reserves) are available to us under the income tax laws of the United States for operations conducted in the United States.  The tax benefits from percentage depletion were $10.9 million in 2021, $8.5 million in 2020 and $7.8 million in 2019.

The U.S. Tax Reform legislation established a new Global Intangible Low-Tax Income provision (“GILTI”) that currently taxes certain income from foreign operations.  The Company has elected, as its accounting policy, to treat the taxes due from GILTI as a current period expense when incurred. The net charge to the Company for GILTI was $1.2 million and $0.6 million for 2021 and 2020, respectively.  There was no charge for GILTI in 2019.

We operate in various countries around the world that have tax laws, tax incentives and tax rates that are significantly different than those of the United States.  These differences combine to move our overall effective tax rate higher or lower than the United States statutory rate depending on the mix of income relative to income earned in the United States.  The effects of foreign earnings and the related foreign rate differentials resulted in increases of $5.2 million, $4.6 million and $6.0 million in 2021, 2020 and 2019, respectively.

Consolidated Net Income Attributable to MTI Shareholders

Consolidated net income was $168.5 million in 2021 and included a $5.3 million charge, net of tax.  This charge consisted of asset write-downs, severance-related costs, acquisition-related costs and a non-cash pension settlement charge.

Consolidated net income was $115.8 million in 2020 and included a $24.1 million charge, net of tax.  This charge consisted of litigation expenses associated with the bankruptcy of Novinda Corp., asset write-downs, severance-related costs, IT incident remediation cost, acquisition-related costs and a non-cash pension settlement charge.

Segment Review

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

Performance Materials Segment

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(millions of dollars)","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["Net Sales"],["Household, Personal Care & Specialty Products","","$","460.5","","","$","380.2","","","$","376.6","","","$","80.3","","","$","3.6"],["Metalcasting","","","319.2","","","","258.1","","","","291.2","","","","61.1","","","","(33.1",")"],["Environmental Products","","","136.3","","","","131.6","","","","181.8","","","","4.7","","","","(50.2",")"],["Building Materials","","","60.0","","","","55.9","","","","68.9","","","","4.1","","","","(13.0",")"],["Total net sales","","$","976.0","","","$","825.8","","","$","918.5","","","$","150.2","","","$","(92.7",")"],["Income from operations","","$","125.0","","","$","108.8","","","$","104.9","","","$","16.2","","","$","3.9"],["% of net sales","","","12.8","%","","","13.2","%","","","11.4","%"]]
[[/GREPCENT_TABLE]]

2021 v 2020

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.

43

Net sales in the Performance Materials segment increased 18.2% to $976.0 million as compared with $825.8 in the prior year. Household, Personal Care & Specialty Products sales increased 21.1% to $460.5 million from $380.2 million the prior year. Included within 2021 net sales for Household, Personal Care & Specialty Products are $48.6 million of net sales for Normerica. The acquisition of Normerica contributed 13 percent growth versus prior year. In addition, organic sales contributed an additional 8 percent driven by strong demand for consumer-oriented products.  Metalcasting’s sales increased 23.7% from $258.1 million in the prior year to $319.2 million in 2021, primarily due to increased foundry demand across a diverse set of foundry customer end markets and continued penetration in Asia.  Environmental Products and Building Materials sales grew 3.6% and 7.3% , respectively on higher levels of project activity that yielded an increase in sales from the prior year of $4.7 million and $4.1 million, respectively.

Income from operations increased $16.2 million, or 14.9% to $125.0 million in 2021 and represented 12.8% of net sales as compared to $108.8 million and 13.2% of sales in 2020.  Margin was impacted by the timing of pricing actions relative to inflationary cost increases and supply chain and logistics issues.

2020 v 2019

Net sales in the Performance Materials segment in 2020 were $825.8 million and decreased $92.7 million, or 10 percent from 2019. Metalcasting’s sales decreased $33.1 million or 11 percent, primarily due to COVID-19 related weaker foundry demand in North America. Household, Personal Care & Specialty Products sales increased $3.6 million or 1 percent from the prior year, primarily driven by strong demand for consumer-oriented products. Environmental Products and Building Materials sales experienced COVID-19 related project delays that yielded a decrease in sales from the prior year of $50.2 million and $13.0 million, respectively.

Income from operations increased $3.9 million to $108.8 million in 2020 and represented 13.2% of net sales as compared to $104.9 million and 11.4% of sales in 2019.  Pricing actions, cost control and expense reductions more than offset the impact of lower sales versus the prior year.

Specialty Minerals Segment

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(millions of dollars)","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["Net Sales"],["Paper PCC","","$","349.7","","","$","308.4","","","$","364.9","","","$","41.3","","","$","(56.5",")"],["Specialty PCC","","","77.1","","","","69.3","","","","69.1","","","","7.8","","","","0.2"],["PCC Products","","$","426.8","","","$","377.7","","","$","434.0","","","$","49.1","","","$","(56.3",")"],["Ground Calcium Carbonate","","$","98.1","","","$","89.3","","","$","91.3","","","$","8.8","","","$","(2.0",")"],["Talc","","","54.0","","","","43.9","","","","49.1","","","","10.1","","","","(5.2",")"],["Processed Minerals Products","","$","152.1","","","$","133.2","","","$","140.4","","","$","18.9","","","$","(7.2",")"],["Total net sales","","$","578.9","","","$","510.9","","","$","574.4","","","$","68.0","","","$","(63.5",")"],["Income from operations","","$","72.9","","","$","67.8","","","$","83.1","","","$","5.1","","","$","(15.3",")"],["% of net sales","","","12.6","%","","","13.3","%","","","14.5","%"]]
[[/GREPCENT_TABLE]]

2021 v 2020

Net sales in the Specialty Minerals segment increased 13.3% to $578.9 million in 2021 from $510.9 million in 2020. Worldwide sales of PCC products increased 13.0% to $426.8 million in 2021 from $377.7 million in the prior year 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.  Specialty PCC sales grew 11.3% as compared with prior year driven by strength in construction and automotive markets.  Sales of Processed Minerals products increased 14.2% to $152.1 million in 2021 from $133.2 million in the prior year as demand from automotive, construction and consumer end markets remained strong.

Income from operations increased $5.1 million, or 7.5% to $72.9 million in 2021 and represented 12.6% of net sales compared to $67.8 million and 13.3% of sales in the prior year. Included in income from operations were $1.1 million of restructuring and impairment costs.  Operating margin was impacted by the timing of contractual and negotiated price increases relative to inflationary cost increases including energy and other manufacturing costs.  In addition, logistics and labor challenges impacted both sales and operating performance. 

44

2020 v 2019

Net sales in the Specialty Minerals segment decreased 11 percent to $510.9 million in 2020 from $574.4 million in 2019. Worldwide sales of PCC products decreased to $377.7 million in 2020 from $434.0 million in the prior year largely due to lower paper demand and temporary COVID-19 related customer shutdowns.  Specialty PCC sales remained flat as compared with prior year as automotive and residential construction markets rebounded during 2020 and consumer-oriented markets continue to be strong.  Sales of Processed Minerals products decreased 5 percent to $133.2 million in 2020 primarily driven by the slowdown in residential construction and automotive markets in the second and third quarters.

Income from operations decreased $15.3 million to $67.8 million in 2020 and represented 13.3% of net sales compared to $83.1 million and 14.5% of sales in the prior year. Included in income from operations were $7.6 million of restructuring and impairment costs.

Refractories Segment

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(millions of dollars)","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["Net Sales"],["Refractory Products","","$","237.1","","","$","212.3","","","$","244.8","","","$","24.8","","","$","(32.5",")"],["Metallurgical Products","","","66.3","","","","45.8","","","","53.3","","","","20.5","","","","(7.5",")"],["Total net sales","","$","303.4","","","$","258.1","","","$","298.1","","","$","45.3","","","$","(40.0",")"],["Income from operations","","$","49.3","","","$","35.5","","","$","39.8","","","$","13.8","","","$","(4.3",")"],["% of net sales","","","16.2","%","","","13.8","%","","","13.4","%"]]
[[/GREPCENT_TABLE]]

2021 v 2020

Net sales in the Refractories segment increased 17.6% to $303.4 million in 2021 from $258.1 million in the prior year  driven by a gradual improvement of steel mill utilization rates.  Sales of refractory products and systems to steel and other industrial applications increased 11.6% to $237.1 million from $212.3 million in the prior year and sales of metallurgical products increased 44.8% to $66.3 million from $45.8 million in the prior year.

Income from operations increased $13.8 million, or 38.9% to $49.3 million and represented 16.2% of net sales in 2021 compared to $35.5 million or 13.8% of sales in 2020 due to higher sales volumes from improved steel market conditions, strong operating performance and new business development.

2020 v 2019

Net sales in the Refractories segment decreased 13 percent to $258.1 million in 2020, as a result of steel mill utilization rates decline in the second quarter in North America and Europe, which was followed by a gradual improvement in the second half of the year.

Income from operations decreased $4.3 million to $35.5 million and represented 13.8% of net sales in 2020 compared to $39.8 million or 13.4% of sales in 2019 due to lower refractory volumes globally.

Inflation

While inflation historically has not had a material impact on the Company, our financial performance was affected in 2021, and could continue to be adversely affected by increases in energy and commodity prices. Our production processes consume a significant amount of energy, primarily electricity, diesel fuel, natural gas and coal. We use diesel fuel to operate our mining and processing equipment and our freight costs are heavily dependent upon fuel prices and surcharges. Energy costs also affect the cost of raw materials. On a combined basis, these factors represent a large exposure to petrochemical and energy products which may be subject to significant price fluctuations. The contracts pursuant to which we construct and operate our satellite PCC plants generally adjust pricing to reflect the pass-through of increases in costs resulting from inflation, including lime and energy prices. However, there is a time lag before such price adjustments can be implemented. The Company and its customers will typically negotiate reasonable price adjustments in order to recover a portion of these escalating costs, but there can be no assurance that we will be able to recover increasing costs through such negotiations.

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Cyclical Nature of Customers' Businesses

The portions of our sales within Specialty Minerals, Performance Materials and Refractories segments are to customers in the paper manufacturing, metalcasting, steel manufacturing, oil and gas and construction industries, which have historically been cyclical. The pricing structure of some of our long-term PCC contracts makes our PCC business less sensitive to declines in the quantity of product purchased.  Oil and natural gas prices decreased significantly between 2014 through 2017 and again in 2020, which has caused exploration companies to reduce their capital expenditures and production and exploration activities. This has had the effect of decreasing the demand and increasing competition for the services we provide. We cannot predict the economic outlook in the countries in which we do business, nor in the key industries we serve.

Liquidity and Capital Resources

Cash provided from continuing operations in 2021 was $232.4 million, compared with $240.6 million in prior year. Cash flows provided from operations in 2021 were principally used to fund acquisitions and capital expenditures, repay debt, repurchase shares and to pay the Company's dividend to common shareholders. The Company’s intention is to use excess cash flow for investments in growth, continued debt reduction and selective share repurchases.

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 (the “Revolving Facility” and, together with the Term Facility, the “Facilities”).

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. The phase out of LIBOR may affect our obligations under the Facilities.  See the applicable discussion under Item 1A. Risk Factors.

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 105.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

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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 December 31, 2021, there were $80 million in loans and $10.6 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.

The Company has a committed loan facility in Japan. As of December 31, 2021, there was an outstanding balance of $3.0 million on this facility.  Principal will be repaid in accordance with the payment schedules ending in 2021.  The Company repaid $0.8 million on these loans in 2021.

As part of the Company's acquisition of Sivomatic in 2018, 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.  The outstanding loan carries an interest rate of Euribor plus 2.0% and has quarterly repayments.  During 2021, the Company repaid $0.4 million on this loan.

As of December 31, 2021, the Company had $25.9 million in uncommitted short-term bank credit lines, none of which 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 2022 should be between $85 million and $95 million, principally related to opportunities to improve our operations and meet our strategic growth objectives. We expect to meet our other long-term financing requirements from internally generated funds, committed and uncommitted bank credit lines and, where appropriate, project financing of certain satellite plants.

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 December 31, 2021 is a liability of $4.0 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 rate payments in U.S. dollars for monthly fixed-rate interest rate payments in Euros.  The fair value of this instrument at December 31, 2021 is an asset of $8.2 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%.

In addition to long-term debt, the Company has committed cash outflow related to pension and post-retirement benefit obligations, non-cancelable operating leases, primarily for office space and equipment, and other long-term contractual obligations. Other long-term liabilities include tax liabilities, including contingent obligations associated with gross unrecognized tax benefits for uncertain tax positions and a tax liability for the one-time transition tax on accumulated foreign subsidiary earnings under U.S. Tax Reform, asset retirement obligations relating to the retirement of certain tangible long-lived assets and land restoration obligations at the Company’s PCC satellite facilities and mining operations.  See Notes 2, 8, 15, 16 and 20 to the Consolidated Financial Statements.

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 October 3, 2021, 1,016,088 shares have been repurchased under this program for $74.1 million, or an average price of approximately $72.90 per share.  This program has been completed.

On October 20, 2021, 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 December 31, 2021, 164,882 shares have been repurchased under this program for $11.8 million, or an average price of approximately $70.15 per share.

On January 26, 2022, the Company's Board of Directors declared a regular quarterly dividend on its common stock of $0.05 per share.  No dividend will be payable unless declared by the Board and unless funds are legally available for payment thereof.

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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.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements.

Revenue Recognition

Revenue is recognized at the point in time when the customer obtains control of the promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services.  The Company's revenues are primarily derived from the sale of products.  Our primary performance obligation is satisfied upon shipment or delivery to our customer based on written sales terms, which is also when control is transferred.   Revenue where our performance obligations are satisfied in phases is recognized over time using certain input measures based on the measurement of the value transferred to the customer, including milestones achieved.  Revenues from sales of equipment are recorded upon completion of installation and transfer of control to the customer.   Revenues from services are recorded when the services are performed.

In most of our PCC contracts, the price per ton is based upon the total number of tons sold to the customer during the year. Under those contracts, the price billed to the customer for shipments during the year is based on periodic estimates of the total annual volume that will be sold to the customer. Revenues are adjusted at the end of each year to reflect the actual volume sold. There were no significant revenue adjustments in the fourth quarter of 2021 and 2020, respectively. We have consignment arrangements with certain customers in our Refractories segment.  Revenues for these transactions are recorded when the consigned products are consumed by the customer.

Valuation of Long-lived Assets, Goodwill and Other Intangible Assets

We assess the possible impairment of long-lived assets and identifiable amortizable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Goodwill is evaluated for impairment at least annually.  Factors we consider important that could trigger an impairment review include the following:

[[GREPCENT_TABLE]]
[["","\u25cf","Significant under-performance relative to historical or projected future operating results;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Significant changes in the manner of use of the acquired assets or the strategy for the overall business;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Significant negative industry or economic trends;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Market capitalization below invested capital."]]
[[/GREPCENT_TABLE]]

Annually, the Company performs a qualitative assessment for each of its reporting units to determine if the two-step process for impairment testing is required.  If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company then evaluates the recoverability of goodwill using a two-step impairment test approach at the reporting unit level.  Step one involves a) developing the fair value of total invested capital of each reporting unit in which goodwill is assigned; and b) comparing the fair value of total invested capital for each reporting unit to its carrying amount, to determine if there is goodwill impairment.  Should the carrying amount for a reporting unit exceed its fair value, then the step one test is failed, and the magnitude of any goodwill impairment is determined under step two.  The amount of impairment loss is determined in step two by comparing the implied fair value of reporting unit goodwill with the carrying amount of goodwill.

The Company has four reporting units; Performance Materials, PCC, Processed Minerals and Refractories. We identify our reporting units by assessing whether the components of our operating segments constitute businesses for which discrete financial information is available and management regularly reviews the operating results of those components.  In the fourth quarter of 2021, the Company performed a qualitative assessment of each of its reporting units and determined it was not more likely than not that the fair value of any of its reporting units was less than their carrying values.

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Property, plant and equipment are depreciated over their useful lives. Useful lives are based on management’s estimates of the period that the assets can generate revenue, which does not necessarily coincide with the remaining term of a customer’s contractual obligation to purchase products made using those assets.  Our sales of PCC are predominately pursuant to long-term evergreen contracts, initially ten years in length, with paper mills at which we operate satellite PCC plants.  The terms of many of these agreements have been extended, often in connection with an expansion of the satellite PCC plant.  Failure of a PCC customer to renew an agreement or continue to purchase PCC from our facility could result in an impairment of assets or accelerated depreciation at such facility.

We evaluate the recoverability of our property, plant and equipment whenever events or change in circumstances indicate that the carrying value of the assets may not be recoverable.  For testing the recoverability, we primarily use discounted cash flow models or cost approach to estimate the fair value of these assets.  Critical assumptions used in conducting these tests included expectations of our business performance and financial results, useful lives of assets, discount rates and comparable market data.

When we acquire a company, we determine fair value on the acquisition date of assets acquired and liabilities assumed.  We use the income, market or cost approach (or a combination thereof) for the valuation and use valuation inputs and analyses that are based on market participant assumptions. Changes in assumptions can have a significant impact on the fair value of tangible assets. Goodwill is calculated as the excess of the consideration transferred over the assets acquired and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

Income Taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate.  This process involves estimating current tax expense together with assessing temporary differences resulting from differing treatments of items for tax and accounting purposes.  These differences result in deferred tax assets and liabilities, which are included in the consolidated balance sheet.  We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we must establish a valuation allowance.  To the extent we establish a valuation allowance or change this allowance in a period, we must include an expense within the tax provision in the Consolidated Statements of Income.

Deferred tax liabilities represent the amount of income taxes payable in future periods.  Such liabilities arise because of temporary differences between the financial reporting and tax bases of assets and liabilities.  Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years.  Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating losses.  We evaluate the recoverability of these future tax deductions by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences and forecasted operating earnings.  These sources of income inherently rely heavily on estimates. We use our historical experience and business forecasts to provide insight.  The amount recorded for the net deferred tax liability was $165.1 million and $138.4 million at December 31, 2021 and 2020, respectively.

The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations. See Note 8 to the Consolidated Financial Statements for additional detail on our uncertain tax positions.

Pension Benefits

We sponsor pension and other retirement plans in various forms covering the majority of employees who meet eligibility requirements.  Several statistical and actuarial models which attempt to estimate future events are used in calculating the expense and liability related to the plans.  These models include assumptions about the discount rate, expected return on plan assets and rate of future compensation increases as determined by us, within certain guidelines.  Our assumptions reflect our historical experience and management's best judgment regarding future expectations.  In addition, our actuarial consultants also use subjective factors such as withdrawal and mortality rates to estimate these assumptions.  The actuarial assumptions used by us may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants, among other things.

The investment strategy for pension plan assets is to maintain a broadly diversified portfolio designed to both preserve and grow plan assets to meet future plan obligations. The Company's average rate of return on assets from inception through December 31, 2021 was approximately 10%.  The Company’s assets are strategically allocated among equity, debt and other investments to achieve a diversification level that dampens fluctuations in investment returns.  The Company’s long-term investment strategy is an investment portfolio mix of approximately 55%-65% in equity securities, 30%-35% in fixed income securities and 0%-15% in other securities.  As of December 31, 2021, the Company had approximately 54% of its pension assets in equity securities, 31% in fixed income securities and 15% in other securities.

49

The Company recognized pension expense of $9.1 million in 2021 as compared to $18.4 million in 2020.  Accounting guidance on retirement benefits requires companies to discount future benefit obligations back to today’s dollars using a discount rate that is based on high-quality fixed-income investments.  A decrease in the discount rate increases the pension benefit obligation, while an increase in the discount rate decreases the pension benefit obligation.  This increase or decrease in the pension benefit obligation is recognized in Accumulated other comprehensive income (loss) and subsequently amortized into earnings as an actuarial gain or loss.  The guidance also requires companies to use an expected long-term rate of return on plan assets for computing current year pension expense.  Differences between the actual and expected returns are also recognized in Accumulated other comprehensive income (loss) and subsequently amortized into earnings as actuarial gains and losses.  At the end of 2021, total actuarial losses recognized in Accumulated other comprehensive income (loss) for pension plans were ($73.3) million as compared to ($119.1) million in 2020.  The majority of the actuarial losses were due to decreases in the discount rate and lower actual rates of return on assets than expected during the financial crisis of 2008.

A net gain of $60.6 million ($45.2 million after-tax) primarily due to actuarial gains, driven by a change in discount rates is included in other comprehensive income in 2021. In 2020, a net loss of $24.5 million ($18.7 million after-tax) was recorded in other comprehensive income, primarily due to a change in discount rates. In 2019, a net loss of $21.2 million ($16.1 million after-tax) was recorded in other comprehensive income, primarily due to a change in discount rates and updated mortality tables.

Actuarial losses for pensions will be impacted in future periods by actual asset returns, discount rate changes, actual demographic experience and other factors that impact these expenses.  These losses, reported in Accumulated other comprehensive income (loss), will generally be amortized as a component of net periodic benefit cost on a straight-line basis over the average remaining service period of active employees expected to receive benefits under the benefit plans.  At the end of 2021, the average remaining service period of active employees or life expectancy for fully eligible employees was 9 years.

For a detailed discussion on the application of these and other accounting policies, see "Summary of Significant Accounting Policies" in Note 1 to the Consolidated Financial Statements. This discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report.

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.

Adoption of 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.

Adoption of 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.