Edgar Filing: MINERALS TECHNOLOGIES INC

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

Commission file number 1-3295

MINERALS TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		25-1190717 (I.R.S. Employer Identification Number)
The Chrysler Building 405 Lexington Avenue New York, New York (Address of principal executive office)		10174-0002 (Zip Code)

(212) 878-1800
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:




Title of each class	Name of each exchange on which registered
Common Stock, $.10 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [X] No [ ]

Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes [ ] No [X]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [X] Accelerated Filer [ ] Non-accelerated Filer [ ]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [ ] No [X]

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing price at which the stock was sold as of July 2, 2006, was approximately $776 million. Solely for the purposes of this calculation, shares of common stock held by officers, directors and beneficial owners of 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of February 5, 2007, the Registrant had outstanding 18,993,677 shares of common stock, all of one class.

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement dated April 3, 2007	Part III


MINERALS TECHNOLOGIES INC. 2006 FORM 10-K ANNUAL REPORT Table of Contents
		Page
	PART I
Item 1.	Business	1

Item 1A.	Risk Factors	7

Item 1B.	Unresolved Staff Comments	8

Item 2.	Properties	8

Item 3.	Legal Proceedings	11

Item 4.	Submission of Matters to a Vote of Security Holders	12

	PART II

Item 5.	Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12

Item 6.	Selected Financial Data	14

Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 8.	Financial Statements and Supplementary Data	26

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	26

Item 9A.	Controls and Procedures	26

Item 9B.	Other Information	26

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	27

Item 11.	Executive Compensation	28

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	28

Item 13.	Certain Relationships and Related Transactions, and Director Independence	28

Item 14.	Principal Accountant Fees and Services	28

	PART IV

Item 15.	Exhibits and Financial Statement Schedules	29


Signatures		31

PART I

Item 1. Business

Minerals Technologies Inc. (the "Company") is a resource- and technology-based company that develops, produces and markets worldwide a broad range of specialty mineral, mineral-based and synthetic mineral products and supporting systems and services. The Company has two reportable segments: Specialty Minerals and Refractories. The Specialty Minerals segment produces and sells the synthetic mineral product precipitated calcium carbonate ("PCC"), processed mineral products quicklime ("lime") and SYNSIL,^® a composite mineral product, and mines or purchases raw mineral ores, then processes and sells other natural mineral products, primarily limestone and talc. This segment's products are used principally in the paper, building materials, paint and coatings, glass, ceramic, polymer, food and pharmaceutical industries. The Refractories segment produces and markets monolithic and shaped refractory materials and specialty products, services and application and measurement equipment, and calcium metal and metallurgical wire products. Refractories segment products are primarily used in high-temperature applications in the steel, non-ferrous metal and glass industries.

The Company emphasizes research and development. The level of the Company's research and development spending, as well as its capability for developing and introducing technologically advanced new products, have enabled the Company to anticipate and satisfy changing customer requirements, creating market opportunities through new product development and product application innovations.

Specialty Minerals Segment

PCC Products and Markets

The Company's PCC product line net sales were $557.0 million, $516.3 million, and $480.0 million for the years ended December 31, 2006, 2005, and 2004, respectively. The Company's sales of PCC have been and are expected to continue to be made primarily to the printing and writing papers segment of the paper industry. The Company also produces PCC for sale to companies in the polymer, food and pharmaceutical industries. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

PCC Products - Paper

In the paper industry, the Company's PCC is used:

.	As a filler in the production of coated and uncoated wood-free printing and writing papers;
.	As a filler for coated and uncoated groundwood (wood-containing) paper such as magazine and catalog papers; and
.	As a coating pigment for both wood-free and groundwood papers.

The Company's Paper PCC product line net sales were $500.6 million, $460.7 million and $429.3 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Approximately 45% of the Company's sales are of PCC sold to papermakers at "satellite" PCC plants. A satellite PCC plant is a PCC manufacturing facility located at a paper mill, thereby eliminating costs of transporting PCC from remote production sites to the paper mill. The Company believes the competitive advantages offered by improved economics and superior optical characteristics of paper produced with PCC manufactured by the Company's satellite PCC plants resulted in substantial growth in the number of the Company's satellite PCC plants since the first such plant was built in 1986. For information with respect to the locations of the Company's PCC plants at December 31, 2006, see Item 2, "Properties," below.

The Company currently manufactures several customized PCC product forms using proprietary processes. Each product form is designed to provide optimum balance of paper properties including brightness, opacity, bulk, strength and improved printability. The Company's research and development and technical service staffs focus on expanding sales from its existing satellite PCC plants as well as developing new technologies for new applications. These technologies include, among others, acid-tolerant ("AT^®")PCC, which allowed PCC to be introduced to the large wood-containing segment of the printing and writing paper market, and OPACARB^® PCC, a family of products for paper coating.

The Company owns, staffs, operates and maintains all of its PCC facilities, and owns or licenses the related technology. Generally, the Company and its paper mill customers enter into long-term evergreen agreements, initially ten years in length, pursuant to which the Company supplies substantially all of the customer's precipitated calcium carbonate filler requirements.

The Company is generally permitted to sell to third-parties PCC produced at a satellite plant in excess of the host paper mill's requirement.

The Company also sells a range of PCC products to paper manufacturers from production sites not associated with paper mills at Adams, Massachusetts; Lifford, England; Hermalle, Belgium; and Walsum, Germany.

PCC Markets - Paper

Uncoated Wood-Free Printing and Writing Papers - North America. Beginning in the mid-1980's, as a result of a concentrated research and development effort, the Company's satellite PCC plants facilitated the conversion of a substantial percentage of North American uncoated wood-free printing and writing paper producers to lower-cost alkaline papermaking technology. The Company estimates that during 2006, more than 90% of North American uncoated wood-free paper was produced employing alkaline technology. Presently, the Company owns and operates 21 commercial satellite PCC plants located at paper mills that produce uncoated wood-free printing and writing papers in North America. The Company anticipates that the aggregate volume of PCC used by these paper mills will increase.

Uncoated Wood-Free Printing and Writing Papers - Outside North America. The Company estimates the amount of uncoated wood-free printing and writing papers produced outside of North America at facilities that can be served by satellite and merchant PCC plants is more than twice as large (measured in tons of paper produced) as the North American uncoated wood-free paper market currently served by the Company. The Company believes that the superior brightness, opacity and bulking characteristics offered by its PCC products allow it to compete with suppliers of ground limestone and other filler products outside of North America. Presently, the Company owns and operates 18 commercial satellite PCC plants located at paper mills that produce uncoated wood-free printing and writing papers outside of North America.

Uncoated Groundwood Paper. The uncoated groundwood paper market, including newsprint, represents approximately 35% of worldwide paper production. Paper mills producing wood-containing paper still generally employ acid papermaking technology. The conversion to alkaline technology by these mills has been hampered by the tendency of wood-containing papers to darken in an alkaline environment. In an attempt to introduce PCC to the wood-containing segments of the paper industry, the Company has developed and patented a system for the manufacture of high-quality groundwood paper in an acidic environment using PCC (AT^® PCC). Furthermore, as groundwood or wood-containing paper mills use larger quantities of recycled fiber, there is a trend toward the use of neutral papermaking technology in this segment for which the Company presently supplies traditional PCC chemistries. The Company now supplies PCC to approximately 43 paper machines at about 21 groundwood paper mills around the world and licenses its technology to a ground calcium carbonate producer to help accelerate the conversion from acid to alkaline papermaking.

Coated Paper. The Company is also placing increased emphasis on the use of PCC to coat paper, and expects that its research and development in coating pigment technology will open up a large market for PCC that will build slowly as more paper companies include PCC in their proprietary coating formulations. PCC may be used to increase gloss, opacity, brightness and printability of the paper or to reduce costs while maintaining comparable quality. The coated paper market is large, and the Company believes this market will continue to grow at a higher average growth rate than the uncoated paper market and therefore provides a substantial market opportunity for the Company. PCC coating products are produced at 14 of the Company's PCC plants worldwide.

Specialty PCC Products and Markets

The Company also produces and sells a full range of slurry and dry PCC products on a merchant basis for non-paper applications. The Company's Specialty PCC product line net sales were $56.4 million, $55.6 million and $50.7 million for the years ended December 31, 2006, 2005 and 2004, respectively. The Company sells surface-treated and untreated grades of PCC to the polymer industry for use in automotive and construction applications, and to the adhesives and printing inks industries. The Company's PCC is also used by the food and pharmaceutical industries as a source of bio-available calcium in tablets and foodstuffs, as a buffering agent in tablets, and as a mild abrasive in toothpaste. The Company produces PCC for specialty applications from production sites at Adams, Massachusetts; Brookhaven, Mississippi; and Lifford, England.

Processed Minerals - Products and Markets

The Company mines or purchases, and processes natural mineral products, primarily limestone and talc. The Company also manufactures lime, a limestone-based product and SYNSIL^®Products, a family of composite minerals for the glass industry. The Company's net sales of all processed mineral products were $154.4 million, $146.7 million and $138.7 million for the years ended December 31, 2006, 2005 and 2004, respectively. Net sales of talc products were $58.5 million, $54.2 million and $51.6 million for the years ended December 31, 2006, 2005 and 2004, respectively. Net sales of other processed minerals products, which are principally lime and limestone, were $85.5 million, $85.9 million and $84.0 million for the years ended December

31, 2006, 2005 and 2004, respectively. Net sales of SYNSIL^® products were $10.4 million $6.6 million and $3.1 million for the years ended December 31, 2006, 2005 and 2004, respectively. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Lime produced at the Company's Adams, Massachusetts, and Lifford, United Kingdom, facilities is used as a raw material for the manufacture of PCC at these sites and at some satellite PCC plants, and is sold commercially to various chemical and other industries.

The Company mines, beneficiates and processes talc at its Barretts site, located near Dillon, Montana, and processes purchased talc in Mt. Vernon and Wellsville, Ohio. Talc is sold worldwide in finely ground form for ceramic applications and in North America for paint and coatings and polymer applications. Because of the exceptional chemical purity of the Barretts ore, a majority of worldwide automotive catalytic converter ceramic substrates contain the Company's Barretts talc.

The Company manufactures its SYNSIL^®Products at its new facility in Chester, South Carolina, and at its customer sampling facility in Woodville, Ohio. The Company is also constructing an additional facility in Cleburne, Texas. SYNSIL^® Products is a family of composite minerals used as a raw material for the glass industry.

The Company's natural mineral products are supported by the Company's limestone reserves located in the western and eastern parts of the United States, and talc reserves located in Montana. The Company estimates these reserves, at current usage levels, to be in excess of 30 years at its limestone production facilities and in excess of 20 years at its talc production facility.

Refractories Segment

Refractory Products and Markets

Refractories Products

The Company offers a broad range of monolithic and pre-cast refractory products and related systems and services. The Company's Refractory segment net sales were $347.9 million, $327.8 million and $300.3 million for the years ended December 31, 2006, 2005 and 2004, respectively. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Refractory product sales are often supported by Company-supplied proprietary application equipment and on-site technical service support. The Company's proprietary application equipment is used to apply refractory materials to the walls of steel-making furnaces and other high temperature vessels to maintain and extend their lives. Net sales of refractory products, including those for non-ferrous applications, were $264.6 million, $239.3 million and $243.0 million for the years ended December 31, 2006, 2005, and 2004. The Company's proprietary SCANTROL™ application system, and other robotic application equipment systems such as its MINSCAN™ system, allow for remote-controlled application of the Company's refractory products in steel-making furnaces, as well as in steel ladles and blast furnaces. Since the steel-making industry is characterized by intense price competition, which results in a continuing emphasis on increased productivity, the SCANTROL™ application system, the MINSCAN™ system, and the related technologically advanced refractory materials developed in the Company's research laboratories have been well accepted by the Company's customers. These products allow steel makers to improve their performance through, among other things, the application of monolithic refractories to furnace linings while the furnace is at operating temperature, thereby eliminating the need for furnace cool-down periods and steel-production interruption. The result is a lower overall cost for steel produced by steel makers.

The Company's experienced technical service staff and advanced application equipment provide customers assurance that they will achieve their desired productivity objectives. The Company's technicians are also able to conduct laser measurement of refractory wear, sometimes in conjunction with robotic application tools, to improve refractory performance at many locations. The Company believes that these services, together with its refractory product offerings, provide it with a strategic marketing advantage.

Over the past several years a significant amount of the Company's refractory product sales have come from new products. Some of the new products the Company has introduced in the past few years included:

.	HOTCRETE™, high durability shotcrete products that can be applied hot through customized equipment;
.	MAG-O-STAR^® and MAG-O-STAR^® ALM spray coatings, an advanced refractory material for application to the slag line at the top of hot steel ladles, increasing availability, balancing wear and extending lining life;
.	the MINSCAN™ application system, an automated application system for applying refractory materials to electric arc furnaces;

.	LACAM^® laser-based refractory measurement systems; and
.	SCANTROL™, a fully integrated application system combining the LACAM^® and MINSCAN™ technologies.

The Company has also expanded its refractories business through selective acquisitions over the past several years. In 2000, the Company acquired Ferrotron Elektronik GmbH, a manufacturer of advanced laser scanning devices, sensors and other measuring equipment designed for the steel industry. In 2001, the Company acquired the refractories business of Martin Marietta Magnesia Specialties Inc. and purchased Rijnstaal B.V., a Netherlands-based producer of cored metal wire products used mainly in the steel and foundry industries. These acquisitions have increased the breadth of the product lines and markets served by the Refractories segment. In 2002, the Company acquired VisionTech, a Finland-based company that develops and manufactures a refractory lining measuring system. In 2003, the Company acquired the assets of ISA Manufacturing, Inc., a U.S.-based company that develops and manufactures pre-cast refractory shapes. In 2005, the Company acquired the metallurgical measurement technology/digital electrode control system product line of ET Electrotechnology GmbH. This technology offers a system that maintains steady state conditions and optimizes power consumption in electric steel making and ladle furnaces. In October 2006, the Company acquired ASMAS, an Istanbul-based Turkish producer of refractories to increase its ability to service the growing steel industries in Eastern Europe and the Middle East, and to provide vertical integration through its own kilns and sources of magnesite.

Refractories Markets

The principal market for the Company's refractory products is the steel industry. Management believes that certain trends in the steel industry will continue to provide growth opportunities for the Company. These trends included rapid growth in select geographic regions (e.g., China, Eastern Europe and the Middle East), the development of improved manufacturing processes such as thin-slab casting, the trend in North America to shift production from integrated mills to electric arc furnaces (mini-mills) and the ever-increasing need for improved productivity and longer lasting refractories. The Company believes that the trend toward electric steel-making mini-mills and away from integrated steel mills in North America and Europe has facilitated the acceptance of a broader offering in new refractory products and technologies.

The Company sells its refractory products in the following markets:

Steel Furnace. The Company sells gunnable monolithic refractory products and application systems to users of basic oxygen furnaces and electric furnaces for application on furnace walls to prolong the life of furnace linings.

Other Iron and Steel. The Company sells monolithic refractory materials and pre-cast refractory shapes for iron and steel ladles, vacuum degassers, continuous casting tundishes, blast furnaces and reheating furnaces. The Company offers a full line of materials to satisfy all continuous casting refractory applications. This full line consists of gunnable materials, refractory shapes and permanent linings.

Industrial Refractory Systems. The Company sells refractory shapes and linings to non-steel refractories consuming industries including glass, cement, aluminum and petrochemicals, power generation and other non-steel industries. The Company also produces a specialized line of carbon composites and pyrolitic graphite primarily sold under the PYROID^® trademark, primarily to the aerospace and electronics industries.

Metallurgical Products and Markets

The Company produces a number of other technologically advanced products for the steel industry, including calcium metal, metallurgical wire products and a number of metal treatment specialty products. Net sales of metallurgical products were $83.3 million, $88.5 million, and $57.3 million for the years ended December 31, 2006, 2005, and 2004. The Company manufactures calcium metal at its Canaan, Connecticut, facility and purchases calcium in international markets. Calcium metal is used in the manufacture of the Company's PFERROCAL^® solid-core calcium wire, and is sold for use in the manufacture of batteries and magnets. The Company sells metallurgical wire products and associated wire-injection equipment for use in the production of high quality steels. These metallurgical wire products are injected into molten steel to improve castability and reduce imperfections. The steel produced is used for high-pressure pipeline and other premium-grade steel applications.

Marketing and Sales

The Company relies principally on its worldwide direct sales force to market its products. The direct sales force is augmented by technical service teams that are familiar with the industries to which the Company markets its products, and by several regional distributors. The Company's sales force works closely with the Company's technical service staff to solve technical and other issues faced by the Company's customers. The Company's technical service staff assists paper producers in ongoing evaluations of the use of PCC for paper coating and filling applications. In the Refractory segment, the Company's

technical service personnel advise on the use of refractory materials, and, in many cases pursuant to service agreements, apply the refractory materials to the customers' furnaces and other vessels. Continued use of skilled technical service teams is an important component of the Company's business strategy.

The Company works closely with its customers to ensure that their requirements are satisfied, and it often trains and supports customer personnel in the use of the Company's products. The Company conducts domestic marketing and sales from Bethlehem, Pennsylvania, and from regional sales offices in the eastern and western United States. The Company's international marketing efforts are directed from regional centers located in Brussels, Belgium; Sao Jose Dos Campos, Brazil; and Shanghai, China. The Company believes its processed minerals and refractory manufacturing facilities are at locations that satisfy the stringent delivery requirements of the industries they serve. The Company also believes that its worldwide network of sales personnel and manufacturing sites facilitates the continued international expansion.

Raw Materials

The Company's ability to achieve anticipated results depends in part on having an adequate supply of raw materials for its manufacturing operations, particularly lime and carbon dioxide for the PCC product line, magnesia for its Refractory operations and talc ore, silica sand and dolomitic lime for its Processed Minerals product line, and on having adequate access to ore reserves at its mining operations.

The Company uses lime in the production of PCC and is a significant purchaser of lime worldwide. Generally, lime is purchased under long-term supply contracts from unaffiliated suppliers located in close geographic proximity to the Company's PCC plants.

The principal raw materials used in the Company's monolithic refractory products are refractory-grade magnesia and various forms of aluminosilicates. The Company also purchases calcium metal, calcium silicide, graphite, calcium carbide and various alloys for use in the production of metallurgical wire products and uses lime and aluminum in the production of calcium metal. The Company purchases a significant portion of its magnesia requirements from sources in China. High demand for bulk raw materials from China has caused price increases of some key raw materials which ultimately could affect the Company's sales to these customers. The Company also purchases a portion of its talc ore for its Processed Minerals product line from China, which has also been affected by higher costs. In addition, higher transportation costs have also increased the delivered cost of raw materials imported from China to North America and Europe. The Company believes that in the event of supply interruptions of its refractory raw material requirements it could obtain adequate supplies from alternate sources in China and elsewhere at reasonable costs.

Competition

The Company is continually engaged in efforts to develop new products and technologies and refine existing products and technologies in order to remain competitive and to position itself as a market leader.

With respect to its PCC products, the Company competes for sales to the paper industry with other fillers, such as ground calcium carbonate ("GCC") and kaolin, based in large part upon technological know-how, patents and processes that allow the Company to deliver PCC that it believes imparts gloss, brightness, opacity and other properties to paper on an economical basis. The Company is the leading manufacturer and supplier of PCC to the North American paper industry.

SYNSIL^®Products compete against lower cost glass formulations by providing greater process throughput and higher yield.

The Company competes in sales of its limestone and talc based primarily upon quality, price, and geographic location.

With respect to the Company's refractory products, competitive conditions vary by geographic region. Competition is based upon the performance characteristics of the product (including strength, consistency and ease of application), price, and the availability of technical support. This competition is with different companies in different geographic areas and in separate aspects of its product line.

Research and Development

Many of the Company's product lines are technologically advanced. The Company's expertise in inorganic chemistry, crystallography and structural analysis, fine particle technology and other aspects of materials science apply to and support all of its product lines.

The Company's business strategy for continued growth in sales and profitability depends to a large extent on the continued success of its research and development activities. Among the significant achievements of the Company's research and

development effort have been the satellite PCC plant concept, AT^® PCC, advanced OPACARB^® PCC crystal morphologies for paper coating, the development of HOTCRETE™, the MAG-O-STAR^® family of refractory spray coatings, OPTISHOT™ shotcrete refractory products, LACAM^® laser-based refractory measurement systems, MINSCAN™ and SCANTROL™ application systems.

The Company's research and development efforts have also resulted in the invention of SYNSIL^® Products, a family of composite mineral products for the glass industry.

For the years ended December 31, 2006, 2005 and 2004, the Company spent approximately $30.0 million, $29.1 million, and $29.0 million, respectively, on research and development. The Company's research and development spending for 2006 was approximately 2.9% of net sales.

The Company maintains its primary research facilities in Bethlehem and Easton, Pennsylvania. It also has research and development facilities in China, Finland, Ireland, Germany, Japan and Turkey. Approximately 143 employees worldwide are engaged in research and development. In addition, the Company has access to some of the world's most advanced papermaking and paper coating pilot facilities.

Patents and Trademarks

The Company owns or has the right to use approximately 425 patents and approximately 736 trademarks related to its business. The Company believes that its rights under its existing patents, patent applications and trademarks are of value to its operations, but no one patent, application or trademark is material to the conduct of the Company's business as a whole.

Insurance

The Company maintains liability and property insurance and insurance for business interruption in the event of damage to its production facilities and certain other insurance covering risks associated with its business. The Company believes such insurance is adequate for the operation of its business. There is no assurance that in the future the Company will be able to maintain the coverage currently in place or that the premiums will not increase substantially.

Employees

At December 31, 2006, the Company employed 2,809 persons, of whom 1,118 were employed outside of the United States.

Environmental, Health and Safety Matters

The Company's operations are subject to federal, state, local and foreign laws and regulations relating to the environment and health and safety. Certain of the Company's operations involve and have involved the use and release of substances that are classified as toxic or hazardous within the meaning of these laws and regulations. Environmental operating permits are, or may be, required for certain of the Company's operations and such permits are subject to modification, renewal and revocation. The Company regularly monitors and reviews its operations, procedures and policies for compliance with these laws and regulations. The Company believes its operations are in substantial compliance with these laws and regulations and that there are no violations that would have a material effect on the Company. Despite these compliance efforts, some risk of environmental and other damage is inherent in the Company's operations, as it is with other companies engaged in similar businesses, and there can be no assurance that material violations will not occur in the future. The cost of compliance with these laws and regulations is not expected to have a material adverse effect on the Company. The Company obtained indemnification for certain potential environmental, health and safety liabilities under agreements entered into between the Company and Pfizer Inc ("Pfizer") or Quigley Company, Inc., a wholly-owned subsidiary of Pfizer, in connection with the initial public offering of the Company in 1992. See "Certain Relationships and Related Transactions" in Item 13.

Available Information

The Company maintains an internet website located at http://www.mineralstech.com. It makes its reports on Forms 10-K, 10-Q and 8-K, and amendments to those reports, as well as its Proxy Statement and filings under Section 16 of the Securities Exchange Act of 1934, available free of charge through the Investor Relations page of its website, as soon as reasonably practicable after they are filed with the Securities and Exchange Commission ("SEC"). Investors may access these reports through the Company's website by navigating to "Investor Relations" and then to "SEC Filings."

Item 1A. Risk Factors

The disclosure and analysis set forth in this report contains certain forward-looking statements, particularly statements relating to 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 "expects," "plans," "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. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially.

The Company undertakes no obligation to update any forward-looking statements. Investors should refer to the Company's subsequent filings under the Securities Exchange Act of 1934 for further disclosures.

As permitted by the Private Securities Litigation Reform Act of 1995, the Company is providing the following cautionary statements which identify factors that could cause the Company's actual results to differ materially from historical and expected results. It is not possible to foresee or identify all such factors. Investors should not consider this list an exhaustive statement of all risks, uncertainties and potentially inaccurate assumptions.

.	Growth Rate
	Sales and income growth of the Company depends upon a number of uncertain events, including the outcome of the Company's strategies of increasing its penetration into geographic markets such as Asia and Europe; increasing its penetration into product markets such as the market for paper coating pigments and the market for groundwood paper pigments; increasing sales to existing PCC customers by increasing the amount of PCC used per ton of paper produced; developing, introducing and selling new product technologies, such as the SYNSIL^® Products family for the glass industry and filler-fiber composite technology for the paper industry; and acquisitions. Difficulties, delays or failure of any of these strategies could affect the future growth rate of the Company.
.	Contract Renewals
	Generally, the Company's sales of PCC are pursuant to long-term evergreen agreements, initially ten years in length, with paper mills where the Company operates satellite PCC plants. The terms of many of these agreements have been extended, often in connection with an expansion of the satellite plant. However, failure of a number of the Company's customers to renew or extend existing agreements on terms as favorable to the Company as those currently in effect could have a substantial adverse effect on the Company's results of operations, and could also result in impairment of the assets associated with the PCC plant.
.	Consolidation in Customer Industries, Principally Paper and Steel
	Several consolidations in the paper industry have taken place in recent years. These consolidations could result in partial or total closure of some paper mills where the Company operates PCC satellites. Such closures would reduce the Company's sales of PCC, except to the extent that they resulted in shifting paper production and associated purchases of PCC to another location served by the Company. Similarly, following a string of bankruptcies, consolidations have occurred in the steel industry. Such consolidations in the two major industries we serve concentrate purchasing power in the hands of a smaller number of papermakers and steel manufacturers, enabling them to increase pressure on suppliers, such as the Company. This increased pressure could have an adverse effect on the Company's results of operations in the future.
.	Litigation; Environmental Exposures
	The Company's operations are subject to international, federal, state and local governmental, tax and other laws and regulations, and potentially to claims for various legal, environmental and tax matters. The Company is currently a party in various litigation matters. While the Company carries liability insurance, which it believes to be appropriate to its businesses, and has provided reserves for such matters, which it believes to be adequate, an unanticipated liability, arising out of such a litigation matter or a tax or environmental proceeding could have a material adverse effect on the Company's financial condition or results of operations.
	In addition, future events, such as changes in or modifications or interpretations of existing laws and regulations, or enforcement polices, or further investigation or evaluation of the potential health hazards of certain products, may give rise to additional compliance and other costs that could have a material adverse effect on the Company.

.		New Products
		The Company is engaged in a continuous effort to develop new products and processes in all of its product lines. Difficulties, delays or failures in the development, testing, production, marketing or sale of such new products could cause actual results of operations to differ materially from our expected results.
.		Competition; Protection of Intellectual Property
		The Company's ability to compete is based in part upon proprietary knowledge, both patented and unpatented. The Company's ability to achieve anticipated results depends in part on its ability to defend its intellectual property against inappropriate disclosure as well as against infringement. In addition, development by the Company's competitors of new products or technologies that are more effective or less expensive than those the Company offers could have a material adverse effect on the Company's financial condition or results of operations.
.		Risks of Doing Business Abroad
		As the Company expands its operations overseas, it faces increased risks of doing business abroad, including inflation, fluctuation in interest rates and currency exchange rates, changes in applicable laws and regulatory requirements, export and import restrictions, tariffs, nationalization, expropriation, limits on repatriation of funds, civil unrest, terrorism, unstable governments and legal systems, and other factors. Adverse developments in any of these areas could cause actual results to differ materially from historical and expected results.
.		Availability of Raw Materials
		The Company's ability to achieve anticipated results depends in part on having an adequate supply of raw materials for its manufacturing operations, particularly lime and carbon dioxide for the PCC product line, magnesia for Refractory operations and talc ore and silica sand and dolomite for the Processed Minerals product line, and on having adequate access to ore reserves at its mining operations. Unanticipated changes in the costs or availability of such raw materials, or in the Company's ability to have access to its ore reserves, could adversely affect the Company's results of operations.
.	Cyclical Nature of Customers' Businesses
	The majority of the Company's sales are to customers in two industries, paper manufacturing and steel manufacturing, which have historically been cyclical. The Company's exposure to variations in its customers' businesses has been reduced in recent years by the growth in the number of plants it operates; by the diversification of its portfolio of products and services; and by its geographic expansion. Also, the Company has structured some of its long-term satellite PCC contracts to provide a degree of protection against declines in the quantity of product purchased, since the price per ton of PCC generally rises as the number of tons purchased declines. In addition, many of the Company's product lines lower its customers' costs of production or increase their productivity, which should encourage them to use its products. However, a sustained economic downturn in one or more of the industries or geographic regions that the Company serves, or in the worldwide economy, could cause actual results of operations to differ materially from historical and expected results.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Set forth below is the location of, and the main customer served by, each of the Company's 51 satellite PCC plants as of December 31, 2006. Generally, the land on which each satellite PCC plant is located is leased at a nominal amount by the Company from the host paper mill pursuant to a lease, the term of which generally runs concurrently with the term of the PCC production and sale agreement between the Company and the host paper mill.

Location	Principal Customer
United States
Alabama, Courtland	International Paper Company
Alabama, Jackson	Boise Cascade LLC
Alabama, Selma	International Paper Company
Arkansas, Ashdown	Domtar Inc.
Florida, Pensacola	International Paper Company
Kentucky, Wickliffe	NewPage Corporation
Louisiana, Port Hudson	Georgia-Pacific Corporation
Maine, Jay	Verso Paper Holdings LLC
Maine, Madison	Madison Paper Industries
Maine, Millinocket	Katahdin Paper Company LLC
Michigan, Quinnesec	Verso Paper Holdings LLC

Location	Principal Customer
Minnesota, Cloquet	Sappi Ltd.
Minnesota, International Falls	Boise Cascade Corporation
New York, Ticonderoga	International Paper Company
North Carolina, Plymouth	Weyerhaeuser Company
Ohio, Chillicothe	P.H. Glatfelter Co.
Ohio, West Carrollton	Appleton Papers Inc.
South Carolina, Eastover	International Paper Company
Virginia, Franklin	International Paper Company
Washington, Camas	Georgia-Pacific Corporation
Washington, Longview	Weyerhaeuser Company
Washington, Wallula	Boise Cascade Corporation LLC
Wisconsin, Kimberly	Stora Enso North America Corp.
Wisconsin, Park Falls	Flambeau River Papers LLC
Wisconsin, Wisconsin Rapids	Stora Enso North America Corp.

International
Brazil, Jacarei	Votorantim Celulose e Papel S.A.
Brazil, Luiz Antonio	Votorantim Celulose e Papel S.A.
Brazil, Mucuri	Suzano Bahia Sul Papel e Celulose S. A.
Brazil, Suzano	Suzano e Celulose S. A.
Canada, Dryden, Ontario	Weyerhaeuser Company Ltd.
Canada, St. Jerome, Quebec	Cascades Fine Papers Group Inc.
Canada, Windsor, Quebec	Domtar Inc.
China, Dagang ¹	Gold East Paper (Jiangsu) Company Ltd.
China, Zhenjiang ¹	Gold East Paper (Jiangsu) Company Ltd.
China, Suzhou¹	Gold HuaSheng Paper Company Ltd.
Finland, Aanekoski¹	M-real Corporation
Finland, Anjalankoski¹	Myllykoski Paper Oy
Finland, Tervakoski¹	Trierenberg Holding
France, Alizay	M-real Corporation
France, Docelles	UPM Corporation
France, Saillat Sur Vienne	International Paper Company
Germany, Schongau	UPM Corporation
Indonesia, Perawang¹	PT Indah Kiat Pulp and Paper Corporation
Japan, Shiraoi¹	Nippon Paper Group Inc.
Malaysia, Sipitang	Sabah Forest Industries Sdn. Bhd.
Mexico, Chihuahua	Copamex, S.A. de C.V.
Poland, Kwidzyn	International Paper - Kwidzyn, S.A
Portugal, Figueira da Foz¹	Soporcel - Sociedade Portuguesa de Papel, S.A.
Slovakia, Ruzomberok	Mondi Business Paper SCP
South Africa, Merebank¹	Mondi Paper Company Ltd.
Thailand, Tha Toom¹	Advance Agro Public Co. Ltd.

^{1These plants are owned through joint ventures.}

The Company also owned at December 31, 2006, 14 plants engaged in the mining, processing and/or production of lime, limestone, precipitated calcium carbonate, talc and SYNSIL^® products and owned or leased approximately 20 refractory manufacturing facilities worldwide. The Company's corporate headquarters, sales offices, research laboratories, plants and other facilities are owned by the Company except as otherwise noted. Set forth below is certain information relating to the Company's plants and office and research facilities:

Location	Facility	Product Line
United States
Arizona, Pima County	Plant; Quarry¹	Limestone
California, Lucerne Valley	Plant; Quarry	Limestone
Connecticut, Canaan	Plant; Quarry	Limestone, Metallurgical Wire/Calcium
Indiana, Mt. Vernon	Plant	Talc/Limestone
Indiana, Portage	Plant	Refractories/Shapes
Louisiana, Baton Rouge	Plant	Monolithic Refractories
Massachusetts, Adams	Plant; Quarry	Limestone, Lime, PCC
Mississippi, Brookhaven	Plant	PCC

Location	Facility	Product Line
Montana, Dillon	Plant; Quarry	Talc
New Jersey, Old Bridge	Plant	Monolithic Refractories
New York, New York	Headquarters²	All Company Products
Ohio, Bryan	Plant	Monolithic Refractories
Ohio, Dover	Plant	Monolithic Refractories/Shapes
Ohio, Wellsville	Plant	Talc/Limestone
Ohio, Woodville	Plant²	SYNSIL^®Products
Pennsylvania, Bethlehem	Administrative Office; Research laboratories; Sales Offices	PCC, Lime, Limestone, Talc
Pennsylvania, Easton	Administrative Office; Research laboratories; Plant; Sales Offices	All Company Products
Pennsylvania, Slippery Rock	Plant; Sales Offices	Monolithic Refractories/Shapes
South Carolina, Chester	Plant	SYNSIL^®Products
Texas, Cleburne	Plant³	SYNSIL^®Products

International
Australia, Carlingford	Sales Office²		Monolithic Refractories
Belgium, Brussels	Sales Office²/Administrative Office		Monolithic Refractories/PCC
Belgium, Hermalle-sous-Huy	Plant		PCC
Brazil, Belo Horizonte	Sales Office²		Monolithic Refractories
Brazil, Sao Jose dos Campos	Sales Office²		PCC/Monolithic Refractories
Brazil, Volta Redonda	Plant		Monolithic Refractories
China, Shanghai	Administrative Office/Sales Office		PCC/Monolithic Refractories
China, Suzhou	Plant/Sales Office/Research laboratories		Monolithic Refractories/PCC
Finland, Kaarina	Research Laboratory²		PCC
Finland, Lappeenranta	Customer Development		PCC
Germany, Moers	Plant/Sales Office/Research laboratories		Laser Scanning Instrumentation/ Probes/Monolithic Refractories
Germany, Walsum	Plant		PCC
Holland, Hengelo	Plant/Sales Office		Metallurgical Wire
Ireland, Cork	Plant; Administrative Office²/Research laboratories		Monolithic Refractories
Italy, Brescia	Sales Office; Plant		Monolithic Refractories/Shapes
Japan, Gamagori	Plant/Research laboratories		Monolithic Refractories/Shapes, Calcium
Japan, Tokyo	Sales Office		Monolithic Refractories
Mexico, Gomez Palacio	Plant²/Sales Office		Monolithic Refractories
Singapore	Sales Office²		PCC
Spain, Santander	Plant/Sales Office²		Monolithic Refractories
South Africa, Pietermaritzburg	Plant/Sales Office		Monolithic Refractories
South Korea, Seoul	Sales Office²		Monolithic Refractories
South Korea, Yangsan	Plant⁴		Monolithic Refractories
Turkey, Gebze	Plant/Research Laboratories		Monolithic Refractories/Shapes/ Application Equipment
Turkey, Istanbul	Administrative Office/Sales Office		Monolithic Refractories
Turkey, Kutahya	Plant		Monolithic Refractories/Shapes
United Kingdom, Lifford	Plant		PCC, Lime
United Kingdom, Rotherham	Plant/Sales Office		Monolithic Refractories/Shapes

^{1 This plant is leased to another company.²Leased by the Company. The facilities in Cork, Ireland, are
operated pursuant to a 99-year lease, the term of which commenced in 1963. The
Company's headquarters in New York, New York, are held under a lease which
expires in 2010.³Under Construction.⁴This plant is owned through a joint venture.

     The Company believes that its facilities, which are of varying ages and
are of different construction types, have been satisfactorily maintained, are in
good condition, are suitable for the Company's operations and generally provide
sufficient capacity to meet the Company's production requirements. Based on past
loss experience, the Company believes it is adequately insured with respect to
these assets and for liabilities which are likely to arise from its operations.

10

Item 3.   Legal Proceedings

     On November 28, 2005, the Company announced that it had reached a
settlement of pending commercial and patent litigation with Omya AG. The
settlement was on a worldwide basis, hence the litigation in both the United
States and Italy have been dismissed. The settlement provides for the
recognition of the Company's intellectual property and patent rights. As part of
the settlement, the Company received an initial payment and granted Omya AG a
non-exclusive license for the terms of the patents in exchange for royalty payments through 2009.
     Certain of the Company's subsidiaries are among numerous defendants in a
number of cases seeking damages for exposure to silica or to asbestos containing
materials. The Company currently has 776 pending silica cases and 26 pending
asbestos cases. In 2006, the Company was named in two new silica cases and in
three new asbestos cases. To date, 655 silica cases have been dismissed, of which 211 were dismissed in 2006. Most of these claims do not provide adequate
information to assess their merits, the likelihood that the Company will be found liable, or the magnitude of such liability, if any. Additional claims of
this nature may be made against the Company or its subsidiaries. At this time,
management anticipates that the amount of the Company's liability, if any, and
the cost of defending such claims, will not have a material effect on its financial position or results of operations.
     The Company has not settled any silica or asbestos lawsuits to date. We are
unable to state an amount or range of amounts claimed in any of the lawsuits
because state court pleading practices do not require identifying the amount of
the claimed damage. The aggregate cost to the Company for 2006 for the legal
defense of these cases was $0.1 million. Our experience has been that the Company is not liable to plaintiffs in any of these lawsuits and the Company
does not expect to pay any settlements or jury verdicts in these lawsuits.

Environmental Matters

     On April 9, 2003, the Connecticut Department of Environmental Protection
("DEP") issued an administrative consent order relating to our Canaan,
Connecticut, plant where both our Refractories and Specialty Minerals segments
have operations. We agreed to the order, which includes provisions requiring
investigation and remediation of contamination associated with historic use of
polychlorinated biphenyls ("PCBs") at a portion of the site. The following is
the present status of the remediation efforts:

. Building Decontamination.
We have completed the investigation of building contamination and submitted
a report characterizing the contamination. We are awaiting review and approval of this report by the regulators. Based on the results of this
investigation, we believe that the contamination may be adequately addressed
by means of encapsulation through painting of exposed surfaces, pursuant to
the Environmental Protection Agency's ("EPA") regulations and have accrued
such liabilities as discussed below. However, this conclusion remains uncertain pending completion of the phased remediation decision process
required by the regulations.

.
Groundwater. We are still
conducting investigations of potential groundwater contamination. To date,
the results of investigation indicate that there is some oil contamination
of the groundwater. We are conducting further investigations of the
groundwater.

.
Soil. We have completed
the investigation of soil contamination and submitted a report
characterizing contamination to the regulators. Based on the results of this
investigation, we believe that the contamination may be left in place and
monitored, pursuant to a site-specific risk assessment, which is underway.
However, this conclusion is subject to completion of a phased remediation
decision process required by applicable regulations.

     We believe that the most likely form of remediation will be to leave
existing contamination in place, encapsulate it, and monitor the effectiveness
of the encapsulation.
     We estimate that the cost of the likely remediation above would
approximate $200,000, and that amount has been recorded as a liability on our
books and records.
     The Company is evaluating options for upgrading the wastewater treatment
facilities at its Adams, Massachusetts, plant. This work is being undertaken
pursuant to an administrative consent order issued by the Massachusetts
Department of Environmental Protection on June 18, 2002. The order required payment of a civil fine in the amount of $18,500, the investigation of options
for ensuring that the facility's wastewater treatment ponds will not result in
discharge to groundwater, and closure of a historic lime solids disposal area.
The Company is committed to identifying appropriate improvements to the
wastewater treatment system by July 1, 2007, and to implementing the
improvements by June 1, 2012. Preliminary engineering reviews indicate that the
estimated cost of these upgrades to operate this facility beyond 2012 may be
between $6 million and $8 million. The Company estimates that remediation costs
would approximate $350,000, which has been accrued as of December 31, 2006.

11

     The Company and its subsidiaries are not party to any other material
pending legal proceedings, other than routine litigation incidental to their
businesses.

Item 4.   Submission of Matters to a Vote of Security Holders

     No matters were submitted to a vote of security holders during the
fourth quarter of 2006.

PART II

Item 5.   Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Securities

     The Company's common stock is traded on the New
York Stock Exchange under the symbol "MTX."
     Information on market prices and dividends is set forth below:

2006 Quarters

First

Second

Third

Fourth

Market Price Range Per Share of Common Stock

High

$

58.93

$

61.27

$

53.40

$

59.31

Low

52.97

51.61

48.01

51.71

Close

58.41

52.00

53.40

58.79

Dividends paid per common share

$

0.05

$

0.05

$

0.05

$

0.05

2005 Quarters

First

Second

Third

Fourth

Market Price Range Per Share of Common Stock

High

$

66.80

$

68.83

$

64.11

$

58.32

Low

60.52

60.02

57.21

51.59

Close

65.30

61.78

57.21

55.89

Dividends paid per common share

$

0.05

$

0.05

$

0.05

$

0.05

Equity Compensation Plan Information

Plan Category

Number of securities to be issued upon exercise of outstanding options

Weighted average exercise price of outstanding options

Number of securities remaining available for future issuance

Equity compensation plans
approved by security holders

1,152,069

$

46.44

729,111

Equity compensation plans not
approved by security holders

--

--

--

            Total

1,152,069

$

46.44

729,111

Issuer Purchases of Equity Securities

Period

Total Number of Shares Purchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of the Publicly
Announced

Program

Dollar Value of Shares That May Yet be Purchased Under the
Program

October 1 - October 29

169,000

$

54.09

774,772

34,101,267

October 30 - November 26

23,900

$

55.07

798,672

32,784,995

November 27 - December 31

--

$

--

798,672

32,784,995

            Total

192,900

$

54.21

12

     On October 23, 2003, the Company's Board of Directors authorized the
Company's Management Committee, at its discretion, to repurchase up to $75 million in additional shares over the next three-year period. As of May 21,
2006, the Company had completed this program by repurchasing 1,286,828 shares at
an average price of approximately $58.28 per share.
     On October 26, 2005, the Company's Board of Directors authorized the
Company's Management Committee, at its discretion, to repurchase up to $75 million in additional shares over the next three-year period. As of December 31,
2006, the Company repurchased 798,672 shares under this program at an average
price of approximately $52.86 per share.
     On January 24, 2007, 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.
     On February 5, 2007, the last reported sales price on the NYSE was
$56.80 per share. As of February 5, 2007, there were approximately 205 holders
of record of the common stock.
     The following graph compares the cumulative 5-year total return to
shareholders on Minerals Technologies Inc.'s common stock relative to the cumulative total returns of the S & P 500 index and the S & P MidCap 400
Materials Sector index. The graph assumes that the value of the investment in
the Company's common stock and in each of the indexes (including reinvestment of
dividends) was $100 on December 31, 2001 and tracks it through December 31, 2006. The ending point is the close of the last trading day of 2006, at which
time the price of our common stock was $58.79.

* $100 invested on 12/31/01 in stock or
index-including reinvestment dividends. Fiscal year ending December 31.

12/01

12/02

12/03

12/04

12/05

12/06

Minerals Technologies
Inc.

100.00

92.72

127.59

144.13

121.16

127.92

S & P 500

100.00

77.90

100.24

111.15

116.61

135.03

S & P MidCap 400
Materials Sector

100.00

95.43

119.42

148.72

178.95

205.10

The stock price performance included in this graph is not
necessarily indicative of future stock price performance.

13

Item 6.   Selected Financial Data

Thousands,
Except Per Share Data

Income
Statement Data:

2006

2005

2004

2003

2002

Net sales

$

1,059,307

$

990,751

$

918,952

$

809,306

$

748,792

Cost of goods
sold

838,015

780,553

706,298

613,118

565,650

Marketing and
administrative expenses

106,016

100,363

92,811

83,797

74,143

Research and
development expenses

30,016

29,062

28,996

25,149

22,695

Bad debt expenses
(recoveries)

377

(518
)

1,576

5,307

6,214

Restructuring
charges

--

--

1,145

3,323

--

Acquisition
termination costs

--

--

997

--

--

Write-down of
impaired assets

--

265

--

3,202

750

Income from
operations

84,883

81,026

87,129

75,410

79,340

Income before provision for taxes on income,

79,579

77,392

82,625

70,535

74,182



minority interests and discontinued operations

Provision for
taxes on income

24,588

22,985

23,637

18,501

19,692

Minority
interests

3,441

1,732

1,710

1,575

1,762

Income from
continuing operations

51,550

52,675

57,278

50,459

52,728

Income (loss)
from discontinued operations, net of tax

(1,599
)

589

1,285

1,160

1,024

Cumulative effect
of accounting change

--

--

--

(3,399
)

--

Net income

$

49,951

$

53,264

$

58,563

$

48,220

$

53,752

Earnings Per
Share

2006

2005

2004

2003

2002

Basic:

Earnings per
share from continuing operations

$

2.63

$

2.59

$

2.79

$

2.50

$

2.61

Earnings (loss)
per share from discontinued operations

(0.08
)

0.03

0.06

0.06

0.05

Cumulative effect
of accounting change

--

--

--

(0.17
)

--

     Basic
earnings per share

$

2.55

$

2.62

$

2.85

$

2.39

$

2.66

Diluted:

Earnings per
share from continuing operations

$

2.61

$

2.56

$

2.76

$

2.47

$

2.56

Earnings (loss)
per share from discontinued operations

(0.08
)

0.03

0.06

0.06

0.05

Cumulative effect
of accounting change

--

--

--

(0.17
)

--

     Diluted
earnings per share

$

2.53

$

2.59

$

2.82

$

2.36

$

2.61

Weighted average
number of common shares outstanding:

       Basic

19,600

20,345

20,530

20,208

20,199

       Diluted

19,738

20,567

20,769

20,431

20,569

Dividends
declared per common share

$

0.20

$

0.20

$

0.20

$

0.10

$

0.10

Balance Sheet
Data:

Working capital

$

199,699

$

145,948

$

242,818

$

216,795

$

167,028

Total assets

1,193,124

1,156,303

1,154,902

1,035,690

899,877

Long-term debt

113,351

40,306

94,811

98,159

89,020

Total debt

203,058

156,851

128,728

131,681

120,351

Total
shareholders' equity

752,557

771,162

799,313

707,381

594,157

14

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

Income and Expense Items as a Percentage of Net Sales

Year Ended December 31,

2006

2005

2004

Net sales

100.0
%

100.0
%

100.0
%

Cost of goods sold

79.1

78.8

76.9

Marketing and administrative expenses

10.0

10.1

10.1

Research and development expenses

2.9

2.9

3.1

Bad debt expenses

--

--

0.2

Restructuring charges

--

--

0.1

Acquisition termination costs

--

--

0.1

Income from operations

8.0

8.2

9.5

Income before
provision for taxes on income,

minority
interests and discontinued operations

7.5

7.8

9.0

Provision for
taxes on income

2.3

2.3

2.6

Minority
interests

0.3

0.2

0.2

Income from
continuing operations

4.9

5.3

6.2

Income (loss)
from discontinued operations

(0.2
)

0.1

0.2


Net income

4.7
%

5.4
%

6.4
%

Executive Summary

     2006 proved to be a difficult year for the Company. Although we achieved
many milestones such as exceeding $1 billion in sales and sold more than 4.0
million tons of PCC, we were unable to leverage our 7% increase in sales to improved operating income performance. This was primarily because of unrecovered
raw material and energy cost increases, paper mill and paper machine shutdowns,
and weakness in our end-use markets, particularly in the fourth quarter. At the
same time, we continued to invest heavily in development programs such as PCC
for paper coating in Europe, our SYNSIL^® Products for the
glass industry, and filler-fiber composites for paper filling. Worldwide net
sales for 2006 grew 7% over the prior year from $991 million to $1.059 billion.
Foreign exchange had a favorable impact on sales of less than 1 percentage point
of growth. Operating income for the full year 2006 increased 5% to $84.9 million
from $81.0 million in the prior year. Operating income represented 8.0% of sales
in 2006 and was 8.2% of sales in 2005. Income from continuing operations
decreased 2% to $51.6 million from $52.7 million in the prior year. Net income
for the full year 2006 declined 6% to $50.0 million from $53.3 million in 2005.
     Our operating income and net income has been affected by
a number of factors over the past year. The positive factors affecting the operating income and net income were primarily attributable to the following:

.
Increased
profitability in the refractory products and systems product line,
particularly in North America and Europe, due to strong demand through the
first nine months of the year and lower costs achieved through product reformulations;

.
Improved operations at our
new satellite PCC facilities in China;

.
Increased worldwide demand
for PCC in all regions, and volume growth from expansions of existing PCC
facilities in Europe; and

.
Royalty income and reduced
litigation expenses from the settlement of patent litigation. The Company
will receive additional royalty income of approximately $1.1 million per
annum through 2009.

     This growth was partially mitigated by the following
factors:

.
Unrecovered cost increases in
the PCC product line due to the delayed pass-through of lim BB   e cost
increases;

.
Paper mill and paper machine
shutdowns affecting several satellite PCC facilities;

.
Operating losses in our
SYNSIL^® Products line primarily due to initial startup costs
associated with our manufacturing facility in South Carolina;

.
Unrecovered energy cost
increases and significant weakness in the end-use markets during the fourth
quarter of 2006 in the Processed Minerals and Specialty PCC product lines;

.
Increased compensation
expense related to the adoption of SFAS No. 123R;

15

.
Decreased margins in the
metallurgical product line; and

.
During the fourth quarter of
2006, we also recognized a loss from discontinued operations of
approximately $1.6 million related to foreign currency translation losses
arising from the liquidation of our investment in Israel.

     The net effect of the aforementioned factors resulted in operating
income growth of approximately 5% over 2005, and a decline in net income of approximately 6% from 2005.
     We face some significant risks and challenges in the
future:

.
Our success depends in part
on the performance of the industries we serve, particularly papermaking and
steel making. Some of our customers may continue to experience
consolidations and shutdowns;

.
Consolidations in the paper
and steel industries concentrate purchasing power in the hands of fewer customers, increasing pricing pressure on suppliers such as Minerals Technologies Inc.;

.
Most of our Paper PCC sales
are subject to long-term contracts that may be terminated pursuant to their
terms, or may be renewed on terms less favorable to us;

.
We are subject to cost
fluctuations on raw materials, including shipping costs, particularly on
magnesia and talc imported from China;

.
We have experienced increased
energy costs in both of our business segments that we may not be able to
pass through to our customers;

.
Although the SYNSIL^®
Products family has received favorable reactions from current and potential customers, this product line is not yet profitable. To date, the
introduction of SYNSIL^® technology to customers has
progressed more slowly than anticipated, resulting in temporary overcapacity
at our facilities. The manufacturing facilities are strategically located in
major market areas for glass making, and we believe our products provide a
suitable value equation for glass manufacturers. However, the commercial
viability of this product line cannot be assured.

.
The cost of employee
benefits, particularly health coverage, has risen significantly in recent
years and continues to do so; and

.
As we expand our operations
abroad we face the inherent risks of doing business in many foreign
countries, including foreign exchange risk, import and export restrictions,
and security concerns.

     Despite these risks and challenges, we are optimistic about the
opportunities for continued growth that are open to us, including:

.
Increasing our sales of PCC
for paper by further penetration of the markets for paper filling at both
freesheet and groundwood mills;

.
Increasing our sales of PCC
for paper coating, particularly from our merchant coating PCC facilities in
Walsum, Germany and Hermalle, Belgium;

.
Achieving commercialization
of a filler-fiber composite technology for the paper industry through our
continued research and development activities;

.
Developing new satellite PCC
opportunities;

.
Achieving continued market
acceptance of the SYNSIL^® Products family of composite
minerals for the glass industry;

.
Continuing our penetration in
emerging markets, including our new manufacturing facility in China and our
recent acquisition in Turkey in the Refractories segment; and

.
Increasing market penetration
in the Refractories segment through development of high-performance products
and equipment systems.

     However, there can be no assurance that we will achieve success in
implementing any one or more of these programs.
     On July 19, 2005, the Company's largest customer, International Paper
Company ("IP"), announced a general plan to restructure certain elements of its
businesses. As a result, IP sold its coated and super calendered papers
business, including four paper mills, to Verso Paper Holdings LLC ("Verso"), an
affiliate of Apollo Management LP. The Company owns and operates PCC satellite
facilities at two of those paper mills, Jay, Maine, and Quinnesec, Michigan,
pursuant to PCC supply contracts, which were transferred by IP to Verso in 2006.
This transaction has not affected the Company's PCC satellite operations or assets.
     On March 21, 2006, the Company temporarily ceased operation of a
one-unit satellite PCC facility in Park Falls, Wisconsin, after the paper company shut down its mill and filed for bankruptcy protection. The Company
recorded a provision for bad debt of approximately $1.0 million in the first
quarter of 2006 in connection with this bankruptcy. The paper mill has since
been sold to Flambeau River Papers, LLC and we resumed production pursuant to a
long-term supply contract from our satellite PCC facility in the third quarter.
     As expected, in April 2006, the Company ceased operation of a one-unit
satellite PCC facility in Hadera, Israel.
16

Results of Operations

Sales
(Dollars in millions)

Net Sales

2006

% of Total Sales

Growth

2005

% of Total Sales

Growth

2004

% of Total Sales

U.S.

$

628.4

59.3

%

5
%

$

600.1

60.6
%

8
%

$

558.2

60.7
%

International

430.9

40.7

%

10
%

390.7

39.4
%

8
%

360.8

39.3
%

Net sales

$

1,059.3

100.0

%

7
%

$

990.8

100.0
%

8
%

$

919.0

100.0
%

Paper PCC

$

500.6

47.3

%

9
%

$

460.7

46.5
%

7
%

$

429.3

46.7
%

Specialty PCC

56.4

5.3

%

1
%

55.6

5.6
%

10
%

50.7

5.5
%


PCC Products

$

557.0

52.6

%

8
%

$

516.3

52.1
%

8
%

$

480.0

52.2
%

Talc

$

58.5

5.5

%

8
%

$

54.2

5.4
%

5
%

$

51.6

5.6
%

Other Processed
Minerals

85.5

8.1

%

(1)
%

85.9

8.7
%

2
%

84.0

9.1
%

SYNSIL^®

10.4

1.0

%

58
%

6.6

0.7
%

113
%

3.1

0.3
%

Processed Minerals Products

$

154.4

14.6

%

5
%

$

146.7

14.8
%

6
%

$

138.7

15.1
%

Specialty Minerals Segment

$

711.4

67.2

%

7
%

$

663.0

66.9
%

7
%

$

618.7

67.3
%

Refractory Products

$

264.6

25.0

%

11
%

$

239.3

24.2
%

(2)
%

$

243.0

26.4
%

Metallurgical
Products

83.3

7.8

%

(6)
%

88.5

8.9
%

54
%

57.3

6.3
%

Refractories Segment

$

347.9

32.8

%

6
%

$

327.8

33.1
%

9
%

$

300.3

32.7
%

Net sales

$

1,059.3

100.0

%

7
%

$

990.8

100.0
%

8
%

$

919.0

100.0
%

     Worldwide net sales in 2006 increased 7% from the previous year to
$1.059 billion. Foreign exchange had a favorable impact on sales of less than 1
percentage point of growth. Sales in the Specialty Minerals segment, which includes the PCC and Processed Minerals product lines, increased 7% to $711.4
million compared with $663.0 million for the same period in 2005. Sales in the
Refractories segment grew 6% over the previous year to $347.9 million. In 2005,
worldwide net sales increased 8% to $990.8 million from $919.0 million in the
prior year. Specialty Minerals segment sales increased approximately 7% and Refractories segment sales increased approximately 9% in 2005.
     Worldwide net sales of PCC, which is primarily used in the manufacturing
process of the paper industry, increased 8% to $557.0 million from $516.3 million in the prior year. Worldwide net sales of Paper PCC increased 9% to
$500.6 million from $460.7 million in the prior year. Paper PCC volumes grew 5%
for the full year with volumes in excess of 4.0 million tons. In 2006, worldwide
printing and writing paper production totaled approximately 115 million metric
tons and increased 2.5% over 2005. Uncoated freesheet, currently our largest PCC
market, increased an estimated 2.1% in 2006. Paper PCC sales growth was achieved
in all regions with the largest growth occurring in Asia. This was primarily
attributable to the ramp up of two new satellite PCC plants in China, which represented approximately 3 percentage points of the volume growth. Worldwide
demand for uncoated freesheet and expansions of satellite PCC facilities in Europe more than offset paper mill and paper machine shutdowns affecting several
satellite PCC facilities. Sales of Specialty PCC grew 1% to $56.4 million from
$55.6 million in 2005.
     Worldwide net sales of PCC increased 8% in 2005 to $516.3 million from
$480.0 million in the prior year. Net sales of Paper PCC increased 7% to $460.7
million while Paper PCC volumes grew 4%. In 2005, sales growth was achieved in
all regions, except Latin America, with the largest growth occurring in Europe
and Asia where sales volumes grew 7% and 20%, respectively. Sales of Specialty
PCC grew 10% in 2005 to $55.6 million from $50.7 million due to improved
volumes, particularly in automotive and health care applications.
     Net sales of Processed Minerals products in 2006 increased 5% to $154.4
million from $146.7 million in 2005. Talc sales increased 8% to $58.5 million
from $54.2 million in the prior year. This was primarily attributable to strong
global demand in plastics and health-care related markets. Other Processed Minerals products declined 1% to $85.5 million from $85.9 million in the prior
year. This decline was due to weakness in the residential construction market in
the second half of 2006. SYNSIL^® Products sales increased 58%
to $10.4 million due to the initial sales from our new facility in Chester, South Carolina. Processed Minerals net sales in 2005 increased 6% to $146.7
million from $138.7 million in 2004. This increase was primarily attributable to
strong demand in the residential construction markets.
17

     Net sales in the Refractories segment in 2006 increased 6% to $347.9
million from $327.8 million in the prior year. Sales of refractory products and
systems to steel and other industrial applications increased 11% to $264.6 million from $239.3 million in the prior year. This growth was attributable
primarily to increased volume in North America during the first nine months of
2006 and in Europe throughout the year. In addition, approximately 3 percentage
points of growth was due to the recent acquisition of a refractory producer in
Turkey. Sales of metallurgical products within the Refractories segment
decreased 6% to $83.3 million from $88.5 million in the prior year. This decline
was due to lower selling prices as raw material cost reductions were passed on
to customers. Volumes also declined, particularly in the fourth quarter in North
America, due to weakness in the steel industry.
     Net sales in the Refractories segment in 2005 increased 9% to $327.8
million from $300.3 million in the prior year. Foreign exchange represented approximately 1 percentage point of the sales growth. The sales growth was driven globally by the metallurgical product line in which sales grew 54% to
$88.5 million from $57.3 million. This increase was attributable to a
combination of price increases, due to the substantial escalation in the cost of
raw materials for this product line, as well as volume growth. Sales of
refractory products and systems to steel and other industrial applications decreased 2% to $239.3 million from $243.0 million.
     Net sales in the United States increased approximately 5% to $628.4
million in 2006 and represented approximately 60% of consolidated net sales.
International sales increased approximately 10% to $430.9 million. This increase
was primarily attributable to volume growth in both segments. In 2005, both domestic and international sales increased 8%.

Operating Costs and
Expenses

(Dollars in millions)

2006

Growth

2005

Growth

2004

Cost of goods sold

$

838.0

7
%

$

780.6

11
%

$

706.3

Marketing and administrative

$

106.0

6
%

$

100.4

8
%

$

92.8

Research and development

$

30.0

3
%

$

29.1

--
%

$

29.0

Bad debt expenses

$

0.4

*
%

$

(0.5
)

*
%

$

1.6

Acquisition termination costs

$

--

*
%

$

--

*
%

$

1.0

Restructuring charges

$

--

*
%

$

--

*
%

$

1.1

Write-down of impaired assets

$

--

*
%

$

0.3

*
%

$

--

*     Percentage not meaningful

     Cost of goods sold in 2006 was 79.1% of sales compared with 78.8% in the
prior year. Our cost of goods sold grew 7% which had a slightly unfavorable leveraging impact on our sales growth resulting in a 5% increase in production
margin. This unfavorable leveraging occurred in the Specialty Minerals segment
where production margins increased 1% as compared with 7% sales growth. Margins
in this segment were affected by several factors:

.
Unrecovered lime cost
increases in the PCC product line;

.
Paper machine and paper mill
shutdowns;

.
Production losses in our
SYNSIL^® Products line primarily due to initial startup costs
associated with our new facility in South Carolina; and

.
Unrecovered energy cost
increases in the Processed Minerals product line.

     Collectively, these factors had an adverse impact on production margin
and operating income, as compared with the prior year, by approximately $15 million.
     These negative factors largely offset the improvements
in each of the following areas:

.
Ramp-up of our two new
satellite PCC facilities in China;

.
Increased demand for PCC,
particularly in North America;

.
Cost reduction initiatives;
and

.
Expansions of satellite PCC
facilities in Europe.

     In the Refractories segment, production margin increased 12% over the
prior year as compared with 6% sales growth. This was primarily due to improved
steel industry operating conditions in our primary markets during the first nine
months and cost reduction initiatives through the reformulation of refractory
products.
     Cost of goods sold in 2005 was 78.8% of sales compared with 76.9% in
2004. Our cost of goods sold grew 11% which had an unfavorable leveraging impact
on our sales growth resulting in a 1% decrease in production margin. This unfavorable leveraging occurred in both reporting segments. In the Specialty
Minerals segment, production margins declined 3% as compared with 7% sales growth. Margins in this segment were affected by several factors:
18

.
Start-up and ramp-up costs
related to the European coating market development program;

.
The effects of continuing
paper industry capacity rationalization, which lowered demand at several
satellite plants;

.
Unrecovered raw material and
energy costs; and

.
Start-up and ramp-up costs at
two new facilities in China.

     Marketing and administrative costs increased 6% in 2006 to $106.0
million and represented 10.0% of net sales. This was primarily due to increased
worldwide infrastructure costs and other employee benefits, including increased
stock option expense of approximately $2.3 million relating to the adoption of
SFAS No. 123R. We also experienced a reduction in litigation expenses in 2006 of
approximately $3.7 million. In 2005, marketing and administrative costs
increased 8% over 2004 to $100.4 million and represented 10.1% of sales. We incurred higher litigation costs in 2005 to protect our intellectual property.
This litigation was settled in the fourth quarter of 2005 resulting in
non-operating income of $2.1 million, while the costs of such litigation were
included in marketing and administrative expenses.
     Research and development expenses increased 3% in 2006 to $30.0 million
and represented 2.9% of net sales. In 2005, research and development expenses
remained flat at $29.0 million and also represented 2.9% of net sales.
     We recorded bad debt expenses (recoveries) of $0.4 million, $(0.5)
million and $1.6 million in 2006, 2005 and 2004, respectively. In 2006, bad debt
expenses increased due to additional customer bankruptcies. In 2005, the
reduction in bad debt charges was primarily related to recoveries of bad debt in
excess of provisions. In 2004, the provision for bad debt was net of recoveries
of approximately $2.3 million related to steel company bankruptcies, in which we
had previously written off the related accounts receivable.
     During the fourth quarter of 2005, we recorded a write-down of impaired
assets of $0.3 million. The impairment related to the closure in the first quarter of our satellite facility in Cornwall, Ontario, resulting from the paper
mill shutdown.
     In the fourth quarter of 2004, the Company recognized $1.0 million in
pre-tax corporate charges related to due diligence costs from a terminated acquisition effort.
     During the fourth quarter of 2003, we restructured our operations to
reduce operating costs and improve efficiency. This resulted in a 2003
restructuring charge of $3.3 million. As part of that restructuring program, we
recorded $1.1 million in additional charges in 2004. The restructuring charges
relate to workforce reductions from all business units throughout our worldwide
operations and the termination of certain leases. There were no restructuring
costs in 2005 or 2006.

Income from Operations

(Dollars in millions)

2006

Growth

2005

Growth

2004

Income from operations

$

84.9

5
%

$

81.0

(7)
%

$

87.1

     Income from operations in 2006 increased 5% to $84.9
million from $81.0 million in 2005 and was 8.0% of sales as compared with 8.2%
of sales in 2005. Income from operations in 2005 decreased 7% to $81.0 million
from $87.1 million in 2004 and was 8.2% of sales as compared with 9.5% of sales
in 2004.
     Income from operations for the Specialty Minerals
segment increased slightly to $52.9 million and was 7.4% of its net sales. Unfavorable leveraging to operating income for this segment was primarily due to
the aforementioned factors affecting production margin. Operating income for the
Refractories segment increased 13% to $32.0 million and was 9.2% of its net sales. This was primarily attributable to increased profitability of
refractories products and systems partially offset by a reduction in
profitability in metallurgical products. In addition, this segment benefited
from a pension settlement and curtailment gain of approximately $0.8 million in
Asia.
     In 2005, income from operations for the Specialty
Minerals segment decreased 9% to $52.7 million and was 7.9% of its net sales.
Operating income for the Refractories segment decreased 7% to $28.3 million and
was 8.6% of its net sales.

Non-Operating Deductions

(Dollars in millions)

2006

Growth

2005

Growth

2004

Non-operating deductions, net

$

5.3

47
%

$

3.6

(20)
%

$

4.5

19

     Non-operating deductions increased 47% from the prior year. This
increase was primarily due to increased interest expense of $1.9 million over
2005 due to increased borrowings. In addition, in 2006 we recognized an
insurance settlement gain of approximately $1.8 million for property damage sustained at one of our facilities. In 2005, we recognized a litigation
settlement gain of $2.1 million.

Provision for Taxes on
Income

(Dollars in millions)

2006

Growth

2005

Growth

2004

Provision for taxes on income

$

24.6

7

%

$

23.0

(3)
%

$

23.6

     The effective tax rate increased to 30.9% in 2006 as compared with 29.7%
in 2005. This increase was primarily related to a change in the mix of earnings,
an increase in the valuation allowance due to Ohio tax reform legislation and
the impact of FAS 123R.

Minority Interests

(Dollars in millions)

2006

Growth

2005

Growth

2004

Minority interests

$

3.4

100
%

$

1.7

--
%

$

1.7

     The increase in the provision for minority interests was due to improved
profitability from our consolidated joint ventures in China.

Income from Continuing
Operations

(Dollars in millions)

2006

Growth

2005

Growth

2004

Income from continuing operations

$

51.6

(2)
%

$

52.7

(8)
%

$

57.3

     Income from continuing operations decreased 2% in 2006 to $51.6 million.
Diluted earnings per common share from continuing operations increased 2% to
$2.61 in 2006 as compared with $2.56 in the prior year.
     In 2005, income from continuing operations decreased 8% to $52.7
million. Diluted earnings per common share from continuing operations decreased
7% to $2.56 in 2005 as compared with $2.76 in the prior year.

Income (Loss) from
Discontinued Operations

(Dollars in millions)

2006

Growth

2005

Growth

2004

Income (loss) from discontinued operations

$

(1.6)

*
%

$

0.6

(54)
%

$

1.3

*  Percentage not meaningful

     During the fourth quarter, the Company liquidated its wholly-owned
subsidiary in Hadera, Israel, and classified such business as a discontinued
operation. The Company had previously operated a one-unit satellite PCC facility
at this location. The loss from discontinued operations in 2006 of $1.6 million
or $0.08 per share was predominantly related to foreign currency translation
losses recognized upon liquidation of the Company's investment in Israel.

Net Income

(Dollars in millions)

2006

Growth

2005

Growth

2004

Net income

$

50.0

(6)
%

$

53.3

(9)
%

$

58.6

     Net income decreased 6% in 2006 to $50.0 million. Earnings per share on
a diluted basis decreased 2% to $2.53 per share in 2006 as compared with $2.59
per share in the prior year.

Outlook

     We are presently experiencing weakness in the primary industries we
serve -- paper, construction and steel. There were several paper machine
shutdowns that affect our satellite PCC product line as the paper industry continues to consolidate and rationalize capacity. There is continued softening
in the residential construction and automotive markets and we are faced with low
steel-capacity utilization rates in the United States, our largest market. We
expect this weakness to continue into the first half of 2007.

20

     In 2007, we plan to focus on the following growth strategies:

.
Expand regionally into
emerging markets where we have a limited presence.

.
Increase our presence in
regional markets where the manufacturing of paper and steel is shifting,
particularly China and Eastern Europe.

.
Increase market penetration
of PCC in paper filling at both freesheet and groundwood mills.

.
Increase penetration of PCC
into the paper coating market.

.
Continue research and
development activities for new products, including commercialization of a
filler-fiber composite technology for the paper industry.

.
Emphasize higher value
specialty products and application systems to increase market penetration in
the Refractories segment.

.
Continue research and
development and marketing efforts for new and existing products, including
the SYNSIL^® Products' family of composite minerals.

.
Continue to improve our cost
competitiveness.

.
Continue selective acquisitions to complement our existing businesses.

     However, there can be no assurances that we will achieve success in
implementing any one or more of these strategies.
     The following are notable events that may impact our 2007 performance:
     We began operations from our new SYNSIL^® Products
production facility in the first quarter of 2006 and our operating losses for
this product line increased $2.5 million in 2006, primarily as a result of low
volume and startup costs. We expect to commence production from a second
facility in Cleburne, Texas, in the first quarter of 2007. The introduction of
SYNSIL^®technology to consumers has progressed more slowly
than anticipated, resulting in temporary overcapacity at our facilities. The
manufacturing facilities are strategically located in major market areas for
glass making, and we believe our products provide a suitable value equation for
glass manufacturers. However, this product line continues to operate at a significant loss which is expected to continue into 2007 until volumes at our
two new facilities increase. The net book value of the long-lived assets at the
SYNSIL^® facilities were approximately $43.5 million as of
December 31, 2006.
    In 2006, we expected a significant acceleration of our coating program
with improved volumes from our merchant paper coating PCC facilities in Walsum,
Germany and Hermalle, Belgium. While volumes improved, they were well short of
the Company's expectations and the coating development program in Europe
continues to operate at a significant loss. We expect these operations to improve in 2007. The net book value of the long-lived assets at these facilities
were approximately $50 million as of December 31, 2006.
     We began operation of a 100,000-ton capacity refractory manufacturing
facility in China during the third quarter of 2006. We expect this facility to
ramp-up in 2007.
     In October 2006, we acquired ASMAS, an Istanbul-based Turkish producer
of refractories based in Istanbul, Turkey. This acquisition provides our
Refractories segment with an experienced organization and a strong market position in Turkey, as well as excellent manufacturing capabilities and internal
access to our key raw material, magnesia. This acquisition will enable us to
service the rapidly growing markets in the Middle East and Eastern Europe.
    As we continue to expand our operations overseas, we face the inherent
risks of doing business abroad, including inflation, fluctuations in interest
rates and currency exchange rates, changes in applicable laws and regulatory
requirements, export and import restrictions, tariffs, nationalization,
expropriation, limits on repatriation of funds, civil unrest, terrorism,
unstable governments and legal systems and other factors. Some of our operations
are located in areas that have experienced political or economic instability,
including Indonesia, Brazil, Thailand, China and South Africa. In addition, our
performance depends to some extent on that of the industries we serve,
particularly the paper manufacturing, steel manufacturing, and construction industries.
     Our sales of PCC are predominantly pursuant to long-term evergreen
contracts, initially about ten years in length, with paper companies at whose
mills we operate satellite PCC plants. The terms of many of these agreements
generally have been extended, often in connection with an expansion of the satellite PCC plant. Failure of a number of our customers to renew existing
agreements on terms as favorable to us as those currently in effect could cause
our future sales growth rate to differ materially from our historical growth
rate and, if not renewed, could also result in impairment of the assets
associated with the PCC plant.

21

Liquidity and Capital Resources

     Cash flows in 2006 were provided from operations and long-term and
short-term financing and were used principally to fund $85.2 million of capital
expenditures, an acquisition of a refractories business for approximately $32.4
million, and $53.4 million for purchases of common shares for treasury. Cash
provided from operating activities amounted to $135.6 million in 2006 as
compared with $78.5 million in 2005. The increase in cash from operating
activities was primarily due to an improvement of working capital, as compared
to the prior year. Our accounts receivables grew at a lower rate than sales and
our days of sales outstanding decreased to 59 days from 60 days in the prior
year. Growth in inventories were primarily attributable to the timing of raw
materials purchases and increased inventories resulting from our recent
acquisition. Included in cash flow from operations was pension plan funding of
approximately $22.3 million, $12.9 million and $17.6 million for the years ended
December 31, 2006, 2005 and 2004, respectively.
     We expect to utilize our cash reserves to support the aforementioned
growth strategies.
     On October 23, 2003, our Board of Directors authorized our Management
Committee, at its discretion, to repurchase up to $75 million in additional shares over the next three-year period. As of May 21, 2006, the Company had
repurchased 1,286,828 shares under this program at an average price of $58.28
per share.
     On October 26, 2005, our Company's Board of Directors authorized the
Company's Management Committee, at its discretion, to repurchase up to $75 million in additional shares over the next three-year period. As of December 31,
2006, the Company had repurchased 798,672 shares under this program at an average price of approximately $52.86 per share.
     On January 24, 2007, our Board of Directors declared a regular quarterly
dividend on our 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.

     At December 31, 2005, we had $50 million in Guaranteed Senior Notes that
matured on July 24, 2006. On October 5, 2006, the Company issued and sold $75
million aggregate principal of Senior Notes due October 5, 2013, consisting of
(a) $50 million aggregate principal amount 5.53% Series 2006- A Senior Notes;
and (b) $25 million aggregate principal amount Floating Rate Series 2006-A Senior Notes.
     We have $186.9 million in uncommitted short-term bank credit lines, of
which $73.4 million was in use at December 31, 2006. In addition, we have an
$8.5 million committed short-term bank credit line, all of which was in use at
December 31, 2006. We anticipate that capital expenditures for 2007 should approximate $80 million, principally related to the construction of PCC plants
and other opportunities that meet our strategic growth objectives. We expect to
meet our other long-term financing requirements from internally generated funds,
uncommitted bank credit lines and, where appropriate, project financing of certain satellite plants. The aggregate maturities of long-term debt are as
follows: 2007 - $2.1 million; 2008 - $7.1 million; 2009 - $4.0 million; 2010 -
$4.6 million; 2011 - $nil; thereafter - $97.6 million.

Critical Accounting Policies

     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, allowance for doubtful accounts,
valuation of inventories, valuation of long-term assets, goodwill and other intangible assets, pension plan assumptions, income taxes, income tax valuation
allowances and litigation and environmental liabilities. 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 can
not 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
from sale of products is recognized at the time the goods are shipped and
title passes to the customer. 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 2006 and 2005, respectively. We have
consignment arrangements with certain customers in our Refractories segment.
Revenues for these

22

transactions are recorded when the consigned products are consumed by the customer. Revenues from sales of equipment are
recorded upon completion of installation and receipt of customer acceptance.
Revenues from services are recorded when the services are performed.

.

Allowance for doubtful accounts: Substantially all of our
accounts receivable are due from companies in the paper, construction and
steel industries. Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. Such allowance is established through a charge to the provision for bad debt expenses. We
recorded bad debt expenses (recoveries) of $0.4 million, $(0.5) million and
$1.6 million in 2006, 2005 and 2004, respectively. The $1.6 million provision
in 2004 was net of $2.3 million of bad debt recoveries related to steel customer bankruptcies for previously written off accounts receivable. The
charges in 2004 were much higher than historical levels and were primarily
related to bankruptcy filings by some of our customers in the paper and steel industries and to additional provisions associated with risks in the
paper, steel and other industries. In addition to specific allowances established for bankrupt customers, we also analyze the collection history
and financial condition of our other customers considering current industry
conditions and determine whether an allowance needs to be established or
adjusted.

.

Property, plant and equipment, goodwill, intangible and
other long-lived assets: 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.

.

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 and other intangible assets with indefinite lives are reviewed for
impairment at least annually in accordance with the provisions of SFAS No.
142. Factors we consider important that could trigger an impairment review
include the following:

.

significant under-performance relative to
historical or projected future operating results;

.

significant changes in the manner of use of the
acquired assets or the strategy for the overall business;

.

significant negative industry or economic trends.

When we determine that the carrying value of intangibles,
long-lived assets or goodwill may not be recoverable based upon the
existence of one or more of the above indicators of impairment, we
principally measure any impairment by our ability to recover the carrying
amount of the assets from expected future operating cash flow on a
discounted basis. Net intangible assets, long-lived assets, and goodwill
amounted to $736.4 million as of December 31, 2006.

.

Accounting for 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 increase this allowance in a period, we
must include an expense within the tax provision in the Consolidated
Statements of Income.

.

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. Differences from these assumptions may
result in a significant impact to the amount of pension expense/liability
recorded by us follows:

23

       A one percentage point change in our major assumptions
would have the following effects:

Effect on Expense

(Dollars in millions)

Discount Rate

Salary

Scale

Return on Asset

1% increase

$

(1.3

)

$

0.3

$

(1.4

)

1% decrease

$

1.5

$

(0.3

)

$

1.4

Effect on Projected Benefit Obligation

(thousands of dollars)

Discount Rate

Salary

Scale

1% increase

$

(13.5

)

$

1.9

1% decrease

$

16.0

$

(1.7

)

.
Asset Retirement Obligations: We
currently record the obligation for estimated asset retirement costs at a
fair value in the period incurred. Factors such as expected costs and expected timing of settlement can affect the fair value of the obligations.
A revision to the estimated costs or expected timing of settlement could
result in an increase or decrease in the total obligation which would change
the amount of amortization and accretion expense recognized in earnings over
time.A one-percent increase or decrease in the discount rate would change
the total obligation by approximately $0.1 million.
A one-percent increase or decrease in the inflation rate would change the
total obligation by approximately $0.3 million.

.
Accounting for Stock-Based
Compensation: Effective January 1, 2006, the Company adopted the fair value
recognition provisions of SFAS No. 123R, using the modified prospective method. Under this transition method, stock-based compensation expense was
recognized in the consolidated financial statements for stock options granted on and subsequent to January 1, 2006, based on the grant date fair
value estimated in accordance with the provisions of SFAS No. 123R, and the
estimated expense for the portion vesting in the period for options granted
prior to, but not vested as of January 1, 2006, based on the grant date fair
value estimated in accordance with the original provisions of SFAS No. 123.
As provided under the modified prospective method, results for prior periods
have not been restated.The Company uses the Black-Scholes option pricing
model to determine the fair value of stock options on their date of grant.
This model is based upon assumptions relating to the volatility of the stock
price, the life of the option, risk-free interest rate and dividend yield.
Of these, stock price volatility and option life require greater levels of
judgment and are therefore critical accounting estimates.
We used a stock price volatility assumption based upon the historical
implied volatility of the Company's stock. We believe this is a good
indicator of future, actual and implied volatilities. For stock options granted in the period ended December 31, 2006, the Company used a volatility
of 24.78%.
The expected life calculation was based upon the observed and expected
time to post-vesting forfeiture and exercise. For stock options granted during the fiscal year ended December 31, 2006, the Company used a 6.4 year
life.
The Company believes the above critical estimates are based upon outcomes
most likely to occur, however, were we to simultaneously increase or
decrease the option life by one year and the volatility by 100 basis points,
recognized compensation expense would change approximately $0.1 million in
either direction for the year ended December 31, 2006.

     For a detailed discussion on the application of these and other
accounting policies, see "Summary of Significant Accounting Policies" in the
"Notes to the Consolidated Financial Statements" in Item 15 of this report,
beginning on page F-6. This discussion and analysis should be read in
conjunction with the consolidated financial statements and related notes
included elsewhere in this report.

Prospective Information and Factors That May Affect Future Results

     The SEC encourages companies to disclose forward-looking information so
that investors can better understand companies' future prospects and make informed investment decisions. This report may contain forward-looking
statements that set our anticipated results based on management's plans and assumptions. Words such as "expects," "plans," "anticipates," and words and
terms of similar substance, used in connection with any discussion of future
operating or financial performance identify these forward-looking statements.

24

     We cannot guarantee that the outcomes suggested in any forward-looking
statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and the accuracy of assumptions. Should known or unknown risks or
uncertainties materialize, or should underlying assumptions prove inaccurate,
actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking
statements and should refer to the discussion of certain risks, uncertainties
and assumptions in Item 1A, "Risk Factors."

Inflation

     Historically, inflation has not had a material adverse effect on us.
However, in recent years both business segments have been affected by rapidly
rising raw material and energy costs. The Company and its customers will
typically negotiate reasonable price adjustments in order to recover a portion
of these rapidly escalating costs. As the contracts pursuant to which we
construct and operate our satellite PCC plants generally adjust pricing to reflect increases in costs resulting from inflation, there is a time lag before
such price adjustments can be implemented.

Cyclical Nature of Customers' Businesses

     The bulk of our sales are to customers in the paper manufacturing, steel
manufacturing 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.
However, we cannot predict the economic outlook in the countries in which we do
business, nor in the key industries we serve. There can be no assurance that a
recession, in some markets or worldwide, would not have a significant negative
effect on our financial position or results of operations.

Recently Issued Accounting Standards

      In September 2006, the FASB issued Statement No. 157,
"Fair Value
Measurements." This Statement defines fair value, establishes a framework for
measuring fair value under generally accepted accounting principles (GAAP), and
expands disclosures about fair value measurements. This Statement will apply to
all other accounting pronouncements that require fair value measurements. This
Statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently completing an analysis of the ultimate impact
the new pronouncement will have on its financial statements.
     In July 2006, the FASB issued FASB Interpretation No. 48,
"Accounting
for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109"
("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with SFAS No.
109, "Accounting for Income Taxes." FIN 48 also prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. In
addition, FIN 48 provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure and transition. The
provisions of FIN 48 are to be applied to all tax positions upon initial
adoption of this standard. Only tax positions that meet the more-likely-than-not
recognition threshold at the effective date may be recognized or continued to be
recognized upon adoption of FIN 48. The cumulative effect of applying the provisions of FIN 48 should be reported as an adjustment to the opening balance
of retained earnings for that fiscal year. The provisions of FIN 48 are
effective for fiscal years beginning after December 15, 2006. We are presently
evaluating the impact of the adoption of FIN 48 on our consolidated financial
statements.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

     Market risk represents the risk of loss that may impact our financial
position, results of operations or cash flows due to adverse changes in market
prices and foreign currency and interest rates. We are exposed to market risk
because of changes in foreign currency exchange rates as measured against the
U.S. dollar. We do not anticipate that near-term changes in exchange rates will
have a material impact on our future earnings or cash flows. However, there can
be no assurance that a sudden and significant change in the value of foreign
currencies would not have a material adverse effect on our financial condition
and results of operations. Approximately 70% of our bank debt bears interest at
variable rates; therefore our results of operations would only be affected by
interest rate changes to such bank debt outstanding. An immediate 10% change in
interest rates would not have a material effect on our results of operations
over the next fiscal year.
     We do not enter into derivatives or other financial instruments for
trading or speculative purposes. When appropriate, we enter into derivative financial instruments, such as forward exchange contracts and interest rate
swaps, to mitigate the impact of foreign exchange rate movements and interest
rate movements on our operating results. The counterparties are major financial
institutions. Such forward exchange contracts and interest rate swaps would not
subject us to additional risk from exchange rate or interest rate movements because gains and losses on these contracts would offset losses and gains on the
assets,
25

liabilities, and transactions being hedged. We had open forward exchange contracts to purchase approximately $4.7 million and $4.2 million of foreign
currencies as of December 31, 2006 and 2005, respectively. These contracts mature between February and July of 2007. The fair value of these instruments at
December 31, 2006 and December 31, 2005 was a liability of $0.1 million and $0.2
million, respectively.

Item 8.   Financial Statements and Supplementary Data

     The financial information required by Item 8 is contained in Item 15 of
Part IV of this report.

Item 9.   Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

     None.

Item 9A.  Controls and Procedures

Disclosure Controls and Procedures

     The Company's management, under the supervision and with the
participation of the Company's Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of
the period covered by this report pursuant to Exchange Act Rule 13a -15. The
Company's disclosure controls and procedures are designed to ensure that
information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission ("SEC"). Based upon this evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures (as defined in Rules 13(a)-15(b) under the
Securities Exchange Act of 1934) were effective in ensuring that material information required to be disclosed by the Company in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported on
a timely basis.
     Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have
included a report of management's assessment of the design and operating
effectiveness of our internal controls as part of this report. Our independent
registered public accounting firm also attested to, and reported on,
management's assessment of the effectiveness of internal control over financial
reporting. Management's report and the independent registered public accounting
firm's attestation report are included in our consolidated financial statements
beginning on page F-1 of this report under the captions entitled "Management's
Report on Internal Control Over Financial Reporting," and "Report of Independent
Registered Public Accounting Firm on Internal Control Over Financial Reporting."
     On October 2, 2006, the Company completed an acquisition of a refractory
company in Turkey and has excluded this company from our assessment of the effectiveness of our internal control over financial reporting. During 2006,
this company contributed less than 1% of consolidated net revenues and, as of
December 31, 2006, accounted for approximately 2.5% of our total assets,
excluding goodwill.
     The Company is in the process of implementing a global enterprise
resource planning ("ERP") system to manage our business operations. As of
December 31, 2006, all of our domestic locations were using the new systems. The
worldwide implementation is expected to be completed over the next few years and
involves changes in systems that include internal controls. Although the
transition has proceeded to date without material adverse effects, the
possibility exists that the migration to the new ERP system could adversely affect the Company's disclosure controls and procedures or our results of operations in future periods. We are reviewing each system as it is being implemented and the controls affected by the implementation of the new systems,
and are making appropriate changes to affected internal controls as we implement
the new systems. We believe that the controls as modified are appropriate and
functioning effectively.

Changes in Internal Control Over Financial Reporting

     There was no change in the Company's internal control over financial
reporting during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.

Item 9B.  Other Information

     None.
26

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

     Set forth below are the names and ages of all Executive Officers of the
Registrant indicating all positions and offices with the Registrant held by each
such person, and each such person's principal occupations or employment during
the past five years.

Name

Age

Position

Paul R. Saueracker(*)

64

Chairman of the Board; President

and Chief Executive Officer

Alain F. Bouruet-Aubertot

50

Senior Vice President and
Managing Director, Minteq International

Kenneth L. Massimine

57

Senior Vice President and
Managing Director, Paper PCC

John A. Sorel

59

Senior Vice President - Finance,
and Chief Financial Officer

Gordon S. Borteck

49

Vice President, Organization and
Human Resources

Kirk G. Forrest

55

Vice President, General Counsel
and Secretary

D. Randy Harrison

55

Vice President and Managing
Director, Performance Minerals

Michael A. Cipolla

49

Vice President - Corporate
Controller and Chief Accounting Officer

William A. Kromberg

61

Vice President, Taxes

Gregory P. Kelm

53

Treasurer

     Paul R. Saueracker was elected Chairman of the Board on October 18,
2001. Prior to that he became President and Chief Executive Officer effective
August 2000 and December 31, 2000, respectively. Mr. Saueracker served as Senior
Vice President from 1999 to 2000, and Vice President of the Company from 1994 to
1999. He had served as President and CEO of Specialty Minerals Inc. since 1994.
Mr. Saueracker is a former President of the Pulverized Minerals Division of the
National Stone, Sand and Gravel Association and a member of the Board of
Directors of the National Association of Manufacturers.
     (*) As previously announced by the Company on November 14, 2007, Mr.
Saueracker will retire from the Company effective March 1, 2007. Mr. Joseph C.
Muscari, age 60, has been named to succeed Mr. Saueracker effective March 1,
2007 as Chairman of the Board, President and Chief Executive Officer.
     Alain F. Bouruet-Aubertot was elected Senior Vice President and Managing
Director, Minteq International in November 2002. From 1996 to June 2002 he had
been President, Gypsum Division and Corporate Senior Vice President of Lafarge
North America, a supplier of cement, ready-mixed concrete, construction
aggregate and gypsum products.
     Kenneth L. Massimine was elected Senior Vice President and Managing
Director, Paper PCC, effective January 1, 2002. Prior to that he held positions
of increasing authority with the Company, most recently Vice President and Managing Director, Processed Minerals.
     John A. Sorel was elected Senior Vice President, Finance and Chief
Financial Officer in November 2002. Prior to that time he was elected Senior
Vice President, Corporate Development and Finance on January 1, 2002 and prior
to 2002 he held positions of increasing authority with the Company, most
recently Vice President and Managing Director, Paper PCC.
     Gordon S. Borteck was elected Vice President - Organization and Human
Resources effective January 1, 2002. Prior to that he had been Vice President,
Human Resources of Specialty Minerals Inc. since January 1997.
     Kirk G. Forrest was elected Vice President - General Counsel and
Secretary effective January 26, 2005. Prior to that, Mr. Forrest had been Vice
President and General Counsel at SAM'S CLUB, and a Corporate Vice President of
its parent company, Wal-Mart Stores, Inc. and Associate General Counsel at The
Williams Companies, which he joined in 1998.
     D. Randy Harrison was elected Vice President and Managing Director,
Performance Minerals, which encompasses the Processed Minerals product line and
the Specialty PCC product line, effective January 1, 2002. Prior to that he held
positions of increasing authority with Specialty Minerals Inc., most recently
Vice President and General Manager, Specialty PCC.
     Michael A. Cipolla was elected Vice President - Controller and Chief
Accounting Officer in July 2003. Prior to that he served as Corporate Controller
and Chief Accounting Officer of the Company since 1998. From 1992 to 1998 he
served as Assistant Corporate Controller.
     William A. Kromberg has served as Vice President-Taxes of the Company
since 1993.
27

     Gregory P. Kelm was elected Treasurer effective January 21, 2004. Prior
to that he had been Assistant Treasurer since March 2000. From 1994 to 2000 Mr.
Kelm served as Director, Corporate Human Resources Programs.
     The information concerning the Company's Board of Directors required by
this item is incorporated herein by reference to the Company's Proxy Statement,
under the caption "Committees of the Board of Directors."
     The information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 required by this Item is incorporated herein by
reference to the Company's Proxy Statement, under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance."
     The Board has established a code of ethics for the Chief Executive
Officer, the Chief Financial Officer, and the Chief Accounting Officer entitled
"Code of Ethics for the Senior Financial Officers," which is available on our
website, www.mineralstech.com, under the links entitled "Corporate
Responsibility, Corporate Governance and Policies and Charters."

Item 11.  Executive Compensation

     The information appearing in the Company's Proxy Statement under the
caption "Compensation of Executive Officers" is incorporated herein by
reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

     The information appearing in the Company's Proxy Statement under the
caption "Security Ownership of Certain Beneficial Owners and Management and
Related Stockholders Matters as of January 31, 2007" set forth is incorporated
herein by reference.

Item 13.  Certain Relationships and Related Transactions, and Director
Independence

     The information appearing in the Company's Proxy Statement under the
caption "Certain Relationships and Related Transactions" is incorporated herein
by reference.
     Under the terms of certain agreements entered into in connection with
the Company's initial public offering in 1992, Pfizer Inc ("Pfizer") and its
wholly-owned subsidiary Quigley Company, Inc. ("Quigley") agreed to indemnify
the company against certain liabilities being retained by Pfizer and its
subsidiaries including, but not limited to, pending lawsuits and claims, and any
lawsuits or claims brought at any time in the future alleging damages or injury
from the use, handling of or exposure to any product sold by Pfizer's specialty
minerals business prior to the closing of the initial public offering.
     Pfizer and Quigley also agreed to indemnify the Company against any
liability arising from claims for remediation, as defined in the Agreement, of
on-site environmental conditions relating to activities prior to the closing of
the initial public offering. Further, Pfizer and Quigley agreed to indemnify the
Company for 50% of the liabilities in excess of $1 million up to $10 million in
liabilities that may have arisen or accrued within ten years after the closing
of the initial public offering with respect to such remediation of on-site conditions. The Company is responsible for the first $1 million of such
liabilities, 50% of all such liabilities in excess of $1 million up to $10 million, and all such liabilities in excess of $10 million. The Company had
asserted to Pfizer and Quigley a number of indemnification claims pursuant to
this agreement during the ten-year period following the closing of the initial
public offering. On January 30, 2006, Pfizer and the Company agreed to settle
those claims, along with certain other potential environmental liabilities of
Pfizer, in consideration of a payment by Pfizer of $4.5 million. Such payment
was recorded as additional paid-in capital, net of its related tax effect.

Item 14.  Principal Accountant Fees and Services

     The information appearing in the Company's Proxy Statement under the
caption "Principal Accountant Fees and Services" is incorporated herein by
reference.

28

PART IV

Item 15.  Exhibits and Financial Statement Schedules

(a)  The following documents are filed as part of this
report:

1.

Financial Statements. The following Consolidated Financial Statements of Mineral Technologies Inc. and subsidiary companies
and Reports of Independent Registered Public Accounting Firm are set forth
on pages F-2 to F-35.

Consolidated Balance Sheets as of December 31, 2006 and
2005

Consolidated Statements of Income for the years ended
December 31, 2006, 2005, and 2004

Consolidated Statements of Cash Flows for the years ended
December 31, 2006, 2005 and 2004

Consolidated Statements of Shareholders' Equity for the
years ended December 31, 2006, 2005 and 2004

Notes to the Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Management's Report on Internal Control Over Financial
Reporting

2.

Financial Statement Schedule. The following financial
statement schedule is filed as part of this report:

Page

Schedule II -

Valuation and Qualifying Accounts

S-1

     All other schedules for which provision is made in
the applicable accounting regulations of the SEC are not required under the
related instructions or are inapplicable and, therefore, have been omitted.

3.

Exhibits. The following exhibits are filed as part of, or
incorporated by reference into, this report.

3.1

-

Restated Certificate of Incorporation of the Company (1)

3.2

-

By-Laws of the Company as amended and restated effective
May 25, 2005 (5)

3.3

-

Certificate of Designations authorizing issuance and
establishing designations, preferences and rights of Series A Junior
Preferred Stock of the Company (1)

4

-

Rights Agreement, executed effective as of September 13,
1999 (the "Rights Agreement"), between Minerals Technologies Inc. and Chase
Mellon Shareholders Services L.L.C., as Rights Agents, including as Exhibit
B the forms of Rights Certificate and of Election to Exercise (6)

4.1

-

Specimen Certificate of Common Stock (1)

10.1

-

Asset Purchase Agreement, dated as of September 28, 1992,
by and between Specialty Refractories Inc. and Quigley Company Inc. (2)

10.1(a)

-

Agreement dated October 22, 1992 between Specialty Refractories Inc. and Quigley Company Inc., amending Exhibit 10.1 (3)

10.1(b)

-

Letter Agreement dated October 29, 1992 between Specialty
Refractories Inc. and Quigley Company Inc., amending Exhibit 10.1 (3)

10.2

-

Reorganization Agreement, dated as of September 28, 1992,
by and between the Company and Pfizer Inc (2)

10.3

-

Asset Contribution Agreement, dated as of September 28,
1992, by and between Pfizer Inc and Specialty Minerals Inc. (2)

10.4

-

Asset Contribution Agreement, dated as of September 28,
1992, by and between Pfizer Inc and Barretts Minerals Inc. (2)

10.4(a)

-

Agreement dated October 22, 1992 between Pfizer Inc,
Barretts Minerals Inc. and Specialty Minerals Inc., amending Exhibits 10.3
and 10.4 (3)

10.5

-

Form of Employment Agreement (*), together with schedule
relating to executed Employment Agreements (6) (+)

10.6

-

Form of Severance Agreement, together with schedule
relating to executed Severance Agreements (7) (+)

10.7

-

Company Employee Protection Plan, as amended August 27,
1999 (6) (+)

10.8

-

Company Nonfunded Deferred Compensation and Unit Award
Plan for Non-Employee Directors (*)(+)

10.9

-

2001 Stock Award and Incentive Plan of the Company, as
amended and restated as of December 20, 2005 (7) (+)

10.10

-

Company Retirement Plan, as amended and restated effective as of January 1, 2006 (*) (+)

10.11

-

Company Nonfunded Supplemental Retirement Plan, as amended effective April 24, 2003 (8) (+)

10.12

-

Company Savings and Investment Plan, as amended and
restated as of January 1, 2005 (7) (+)

10.13

-

Company Nonfunded Deferred Compensation and Supplemental
Savings Plan, as amended effective April 24, 2003 (8) (+)

10.14

-

Company Health and Welfare Plan, effective as of April 1,
2003 and amended and restated as of January 1, 2006 (*)(+)

29

10.15

-

Grantor Trust Agreement, as amended and restated as of
December 23, 2005, between the Company and The Bank of New York, as Trustee
(7)(+)

10.16

-

Note Purchase Agreement, dated as of October 5, 2006,
among the Company, Metropolitan Life Insurance Company and MetLife Insurance
Company of Connecticut with respect to the Company's issuance of $75,000,000
in aggregate principal amount of senior unsecured notes due October 5, 2013
(9)

10.17

-

Indenture, dated July 22, 1963, between the Cork Harbour
Commissioners and Roofchrome Limited (2)

10.18

-

Agreement of Lease, dated as of May 24, 1993, between the
Company and Cooke Properties Inc. (1)

10.19

-

Employment Agreement, dated November 27, 2006, between
the Company and Joseph C. Muscari (10)

21.1

-

Subsidiaries of the Company (*)

23.1

-

Consent of Independent Registered Public Accounting Firm
(*)

31.1

-

Rule 13a-14(a)/15d-14(a) Certification executed by the
Company's principal executive officer (*)

31.2

-

Rule 13a-14(a)/15d-14(a) Certification executed by the
Company's principal financial officer (*)

32

-

Section 1350 Certification (*)

(1)

Incorporated by reference to the exhibit so designated
filed with the Company's Annual Report on Form 10-K for the year ended December 31, 2003.

(2)

Incorporated by reference to the exhibit so designated
filed with the Company's Registration Statement on Form S-1 (Registration
No. 33-51292), originally filed on August 25, 1992.

(3)

Incorporated by reference to the exhibit so designated
filed with the Company's Registration Statement on Form S-1 (Registration
No. 33-59510), originally filed on March 15, 1993.

(4)

[RESERVED]

(5)

Incorporated by reference to the exhibit so designated
filed with the Company's current Report on Form 8-K filed on May 27, 2005.

(6)

Incorporated by reference to the exhibit so designated
filed with the Company's Annual Report on Form 10-K for the year ended December 31, 2004.

(7)

Incorporated by reference to the exhibit so designated
filed with the Company's Annual Report on Form 10-K for the year ended December 31, 2005.

(8)

Incorporated by reference to the exhibit so designated
filed with the Company's Quarterly Report on Form 10-Q for the quarter ended
March 30, 2003.

(9)

Incorporated by reference to the exhibit 10.1 filed with
the Company's Current Report on Form 8-K filed on October 11, 2006.

(10)

Incorporated by reference to exhibit 10.1 filed with the
Company's Current Report on Form 8-K/A filed on December 1, 2006.

(*)

Filed herewith.

(+)

Management contract or compensatory plan or arrangement
required to be filed pursuant to Item 601 of Regulation S-K.

30

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

By:

/s/Paul R. Saueracker

Paul R. Saueracker

Chairman of the Board and

Chief Executive Officer

February 27, 2007
     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated:

SIGNATURE

TITLE

DATE

/s/
Paul R. Saueracker

Chairman of the Board and Chief Executive Officer

February 27, 2007

Paul R. Saueracker

(principal executive officer)

/s/
John A. Sorel

Senior Vice President-Finance and

February 27, 2007

John A. Sorel

Chief Financial Officer
(principal financial officer)

/s/
Michael A. Cipolla

Vice
President - Controller and

February 27, 2007

Michael A. Cipolla

Chief Accounting Officer
(principal accounting officer)

31

SIGNATURE

TITLE

DATE

/s/ Paula H.J.
Cholmondeley

Director

February 27, 2007

Paula H. J. Cholmondeley

/s/ Duane R.
Dunham

Director

February 27, 2007

Duane R. Dunham

/s/ Steven J.
Golub

Director

February 27, 2007

Steven J. Golub

/s/ Kristina M.
Johnson

Director

February 27, 2007

Kristina M. Johnson

/s/ Joseph C.
Muscari

Director

February 27, 2007

Joseph C. Muscari

/s/ Michael F.
Pasquale

Director

February 27, 2007

Michael F. Pasquale

/s/ John T Reid

Director

February 27, 2007

John T. Reid

/s/ William C.
Stivers

William C. Stivers

Director

February 27, 2007

32

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
_______________________________________
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Audited Financial
Statements:

Page


Consolidated Balance
Sheets as of December 31, 2006 and 2005

F-2

Consolidated
Statements of Income for the years ended December 31, 2006, 2005, and 2004

F-3

Consolidated
Statements of Cash Flows for the years ended December 31, 2006, 2005, and 2004

F-4

Consolidated
Statements of Shareholders' Equity for the years ended December 31, 2006,
2005 and 2004

F-5

Notes to
Consolidated Financial Statements

F-6

Reports of
Independent Registered Public Accounting Firm

F-33

Management's Report
on Internal Control Over Financial Reporting

F-35

F-1

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(thousands of dollars)



December 31,

2006

2005

Assets

Current assets:

Cash and cash
equivalents

$

67,929

$

51,100

Short-term
investments, at cost which approximates market

8,380

2,350

Accounts
receivable, less allowance for doubtful accounts:


2006 - $4,550;
2005 - $5,818

188,784

184,272


Inventories

129,894

118,895

Prepaid expenses
and other current assets

16,775

20,583

Total current
assets

411,762

377,200

Property, plant
and equipment, less accumulated depreciation and depletion

652,797

628,745

Goodwill

68,977

53,612

Prepaid pension
costs (Note 17)

25,717

67,795

Other assets and
deferred charges

33,871

28,951

Total assets

$

1,193,124

$

1,156,303

Liabilities and Shareholders' Equity

Current
liabilities:

Short-term debt

$

87,644

$

62,847

Current
maturities of long-term debt

2,063

53,698

Accounts payable

60,963

61,323

Income taxes
payable

9,425

6,409

Accrued
compensation and related items

22,569

14,956

Other current
liabilities

29,399

32,019

Total current liabilities

212,063

231,252

Long-term debt

113,351

40,306

Accrued pension
and postretirement benefits (Note 17)

55,419

23,214

Deferred taxes on
income

18,605

49,374

Other non-current
liabilities

41,129

40,995

Total liabilities

440,567

385,141

Commitments and
contingent liabilities (Note 19)

Shareholders'
equity:

Preferred stock,
without par value; 1,000,000 shares authorized; none issued

--

--

Common stock at
par, $0.10 par value; 100,000,000 shares authorized;

issued 28,102,001
shares in 2006 and 28,001,874 shares in 2005

2,810

2,800

Additional
paid-in capital

269,101

261,159

Deferred
compensation

--

(3,263
)

Retained earnings

867,512

828,591

Accumulated other
comprehensive income (loss)

(21,248
)

(5,879
)

Less common stock
held in treasury, at cost; 9,016,473

shares in 2006
and 8,015,073 shares in 2005

(365,618
)

(312,246
)

Total
shareholders' equity

752,557

771,162

Total liabilities and
shareholders' equity

$

1,193,124

$

1,156,303

See Notes to Consolidated Financial Statements, which are an integral part of
these statements.

F-2

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF INCOME

(thousands of dollars, except per share data)

Year Ended December 31,



2006

2005

2004

Net sales

$

1,059,307

$

990,751

$

918,952

Operating costs
and expenses:


Cost of goods
sold

838,015

780,553

706,298

Marketing and
administrative expenses

106,016

100,363

92,811

Research and
development expenses

30,016

29,062

28,996

Bad debt expenses
(recoveries)

377

(518
)

1,576

Restructuring
charges

--

--

1,145

Acquisition
termination costs

--

--

997

Write-down of
impaired assets

--

265

--

Income from
operations

84,883

81,026

87,129


Interest income

1,762

1,384

1,589

Interest expense

(7,753
)

(5,847
)

(4,130
)

Foreign exchange
gains (losses)

(268
)

(450
)

(564
)

Other income
(deductions)

955

1,279

(1,399
)

Non-operating
deductions, net

(5,304
)

(3,634
)

(4,504
)

Income before
provision for

taxes on income,
minority interests and discontinued operations

79,579

77,392

82,625

Provision for
taxes on income

24,588

22,985

23,637

Minority
interests

3,441

1,732

1,710

Income from
continuing operations

51,550

52,675

57,278

Income (loss)
from discontinued operations, net of tax

(1,599
)

589

1,285

Net income

$

49,951

$

53,264

$

58,563

Earnings per
share:

Basic:

Income from
continuing operations

$

2.63

$

2.59

$

2.79

Income (loss)
from discontinued operations

(0.08
)

0.03

0.06


Basic earnings per share

$

2.55

$

2.62

$

2.85

Diluted:

Income from
continuing operations

$

2.61

$

2.56

$

2.76

Income (loss)
from discontinued operations

(0.08
)

0.03

0.06


Diluted earnings per share

$

2.53

$

2.59

$

2.82

See Notes to Consolidated Financial Statements, which are an integral part of
these statements.
F-3

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(thousands of dollars)

Year Ended December 31,

2006

2005

2004

Operating
Activities

Net income

$

49,951

$

53,264

$

58,563

Income (loss) from
discontinued operations

(1,599
)

589

1,285

Income from
continuing operations

51,550

52,675

57,278

Adjustments to
reconcile income from continuing operations to net cash provided by
operating activities:

Depreciation, depletion and
amortization

83,204

73,253

70,083

Write-down of impaired assets

--

265

--

Loss on disposal of property,
plant and equipment

918

1,220

1,281

Deferred income taxes

4,345

6,392

(7,965
)

Provisions for bad debts

377

(518
)

3,876

Other

3,475

2,124

1,495

Changes in operating
assets and liabilities, net of effects of acquisitions:


Accounts receivable

5,916

(34,646
)

(3,175
)

Inventories

(6,679
)

(16,839
)

(17,495
)

Prepaid expenses and other
current assets

2,951

280

(2,077
)

Pension plan funding

(22,348
)

(12,874
)

(17,579
)

Accounts payable

(5,059
)

7,867

11,211

Income taxes payable

3,040

(6,080
)

8,638

Tax benefits related to stock
incentive programs

590

2,138

7,220

Other

12,900

1,587

15,461

Net cash provided by
continuing operations

135,180

76,844

128,252

Net cash provided by
discontinued operations

419

1,673

971

Net cash provided by
operations

135,599

78,517

129,223

Investing
Activities

Purchases of
property, plant and equipment

(85,159
)

(111,539
)

(106,423
)

Purchases of
short-term investments

(12,590
)

(2,350
)

(12,875
)

Proceeds from sales
of short-term investments

6,440

7,200

5,675

Proceeds from
disposal of property, plant and equipment

675

311

1,655

Proceeds from
insurance settlement

2,398

--

--

Acquisition of
businesses, net of cash acquired

(32,416
)

(3,170
)

--

Net cash used in
investing activities

(120,652
)

(109,548
)

(111,968
)

Financing
Activities

Proceeds from
issuance of long-term debt

75,000

--

--

Repayment of
long-term debt

(53,754
)

(3,825
)

(2,757
)

Net proceeds from
issuance (repayment) of short-term debt

24,797

32,847

(831
)

Purchase of common
shares for treasury

(53,372
)

(47,618
)

(16,225
)

Cash dividends paid

(3,911
)

(4,070
)

(4,102
)

Proceeds from
issuance of stock under option plan

3,741

8,747

14,173

Excess tax benefits
related to stock incentive programs

152

--

--

Indemnification
proceeds from former parent company

4,500

--

--

Debt issuance costs

(190
)

--

--

Net cash used in
financing activities

(3,037
)

(13,919
)

(9,742
)

Effect of exchange
rate changes on cash and cash equivalents

4,919

(9,717
)

7,739

Net increase
(decrease) in cash and cash equivalents

16,829

(54,667
)

15,252

Cash and cash
equivalents at beginning of year

51,100

105,767

90,515

Cash and cash
equivalents at end of year

$

67,929

$

51,100

$

105,767

Non-cash
Investing and Financing Activities:

Tax liability on
indemnification proceeds from former parent company

$

1,782

$

--

$

--

Property, plant and
equipment additions related to asset retirement obligations

$

--

$

839

$

--



See Notes to Consolidated Financial Statements, which are an integral part of
these statements.
F-4

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)

Common Stock Par Value

Additional

Paid-in Capital

Deferred

Compensation

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss)

Treasury

Stock Cost

Total

Balance as of January 1,
2004

$

2,742

$

225,512

$

(1,220
)

$

724,936

$

3,814

$

(248,403
)

$

707,381

Comprehensive income:

Net income

--

--

--

58,563

--

--

58,563

Currency translation
adjustment

--

--

--

--

33,974

--

33,974

Minimum pension liability
adjustment

--

--

--

--

(2,246
)

--

(2,246
)

Cash flow hedges:

Net derivative losses
arising during the year

--

--

--

--

150

--

150

Reclassification adjustment

--

--

--

--

(68
)

--

(68
)

     Total comprehensive
income

--

--

--

58,563

31,810

--

90,373

Dividends declared

--

--

--

(4,102
)

--

--

(4,102
)

Employee Benefit transactions

36

14,137

--

--

--

--

14,173

Income tax benefit arising
from employee stock option plans

--

7,220

--

--

--

--

7,220

Issuance of restricted
stock

--

1,361

(1,361
)

--

--

--

--

Amortization of restricted
stock

--

--

493

--

--

--

493

Purchase of common stock
for treasury

--

--

--

--

--

(16,225
)

(16,225
)

Balance as of December
31, 2004

2,778

248,230

(2,088
)

779,397

35,624

(264,628
)

799,313

Comprehensive Income:

Net income

--

--

--

53,264

--

--

53,264

Currency translation
adjustment

--

--

--

--

(43,648
)

--

(43,648
)

Minimum pension liability
adjustment

--

--

--

--

1,901

--

1,901

Cash flow hedge:

Net derivative losses
arising during the year

--

--

--

--

(118
)

--

(118
)

Reclassification adjustment

--

--

--

--

362

--

362

     Total comprehensive
income

--

--

--

53,264

(41,503
)

--

11,761

Dividends declared

--

--

--

(4,070
)

--

--

(4,070
)

Employee Benefit transactions

22

8,725

--

--

--

--

8,747

Income tax benefit arising
from employee stock option plans

--

2,138

--

--

--

--

2,138

Issuance of restricted
stock

--

2,066

(2,066
)

--

--

--

--

Amortization of restricted
stock

--

--

891

--

--

--

891

Purchase of common stock
for treasury

--

--

--

--

--

(47,618
)

(47,618
)

Balance as of December
31, 2005

2,800

261,159

(3,263
)

828,591

(5,879
)

(312,246
)

771,162

Comprehensive Income:

Net income

--

--

--

49,951

--

--

49,951

Currency translation
adjustment

--

--

--

--

35,924

--

35,924

Additional minimum
liability

--

--

--

--

2,988

--

2,988

Cash flow hedge:

Net derivative losses
arising during the year

--

--

--

--

(62
)

--

(62
)

Reclassification adjustment

--

--

--

--

124

--

124

     Total comprehensive
income

--

--

--

49,951

38,974

--

88,925

Dividends declared

--

--

--

(3,911
)

--

--

(3,911
)

Opening retained earnings
adjustment due to adoption of EITF 04-06
(Note 23)

--

--

--

(7,119
)

--

--

(7,119
)

Employee Benefit transactions

10

3,731

--

--

--

--

3,741

Income tax benefit arising
from employee stock option plans

--

741

--

--

--

--

741

Reclassification of
unearned compensation

--

(3,263
)

3,263

--

--

--

--

Amortization of restricted
stock

--

1,679

--

--

--

--

1,679

Indemnity proceeds, net of
tax (Note 25)

--

2,718

--

--

--

--

2,718

Adjustment to initially
apply SFAS 158,

     net of tax

--

--

--

--

(54,343
)

--

(54,343
)

Stock option expenses

--

2,336

--

--

--

--

2,336

Purchase of common stock
for treasury

--

--

--

--

--

(53,372
)

(53,372
)

Balance as of December
31, 2006

$

2,810

$

269,101

$

--

$

867,512

$

(21,248
)

$

(365,618
)

$

752,557

See Notes to Consolidated Financial Statements, which are an integral part of
these statements.
F-5

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1.   Summary of Significant Accounting Policies

     Basis of Presentation

     The accompanying consolidated financial statements include the accounts
of Minerals Technologies Inc. (the "Company") and its wholly and majority-owned
subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.
     Use of Estimates

     The Company employs accounting policies that are in accordance with U.S.
generally accepted accounting principles and require management to make
estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Significant estimates include those related
to revenue recognition, allowance for doubtful accounts, valuation of
inventories, valuation of long-lived assets, goodwill and other intangible assets, pension plan assumptions, income tax, valuation allowances, and
litigation and environmental liabilities. Actual results could differ from those
estimates.
     Business

     The Company is a resource- and technology-based company that develops,
produces and markets on a worldwide basis a broad range of specialty mineral,
mineral-based and synthetic mineral products and related systems and
technologies. The Company's products are used in manufacturing processes of the
paper and steel industries, as well as by the building materials, polymers, ceramics, paints and coatings, glass and other manufacturing industries.
     Cash Equivalents and Short-term Investments

     The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Cash equivalents amounted to $4.0 million at December 31, 2006. Short-term investments consist of
financial instruments with original maturities beyond three months. Short-term
investments amounted to $8.4 million and $2.4 million at December 31, 2006 and
2005, respectively.
     Trade Accounts Receivable

     Trade accounts receivables are recorded at the invoiced amount and do
not bear interest. The allowance for doubtful accounts is the Company's best
estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company determines the allowance based on historical
write-off experience and specific allowances for bankrupt customers. The Company
also analyzes the collection history and financial condition of its other customers, considering current industry conditions and determines whether an
allowance needs to be established. The Company reviews its allowance for
doubtful accounts monthly. Past due balances over 90 days based on payment terms
are reviewed individually for collectibility. Account balances are charged off
against the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.
     Inventories

     Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.
     Effective January 1, 2006, the Company has adopted SFAS No. 151,
"Inventory Costs - an Amendment of ARB No. 43, Chapter 4." As required by this
statement, items such as idle facility expense, excessive spoilage, freight handling costs and re-handling costs are recognized as current period charges.
In addition, the allocation of fixed production overheads to the costs of conversion should be based upon the normal capacity of the production facility.
Fixed overhead costs associated with idle capacity are expensed as incurred. SFAS No. 151 did not have a material impact on our results of operations during
the year ended December 31, 2006.
     Property, Plant and Equipment

     Property, plant and equipment are recorded at cost. Significant
improvements are capitalized, while maintenance and repair expenditures are charged to operations as incurred. The Company capitalizes interest cost as a
component of construction in progress. In general, the straight-line method of
depreciation is used for financial reporting purposes and accelerated methods
are used for U.S. and certain foreign tax reporting purposes. The annual rates
of depreciation are 3% - 6.67% for buildings, 6.67% - 12.5% for machinery and
equipment, 8% - 12.5% for furniture and fixtures and 12.5% - 25% for computer
equipment and software-related assets. The estimated useful lives of our PCC
production facilities and machinery and equipment pertaining to our natural stone mining and processing plants and our chemical plants are 15 years.
     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. The Company's sales of PCC are predominantly
F-6

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

pursuant to long-term evergreen contracts, initially ten years in length,
with paper mills at which the Company operates 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 a Company facility could result in an
impairment of assets charge or accelerated depreciation at such facility.
     Depletion of mineral reserves is determined on a unit-of-extraction
basis for financial reporting purposes, based upon proven and probable reserves,
and on a percentage depletion basis of tax purposes.
     Stripping Costs Incurred During Production

     As further discussed in Note 23, effective January 1, 2006, the Company
has adopted the consensus of Emerging Issues Task Force ("EITF") Issue No.
04-06, "Accounting for Stripping Costs Incurred During Production in the Mining
Industry." Stripping costs are those costs incurred for the removal of waste
materials for the purpose of accessing ore body that will be produced
commercially. Stripping costs incurred during the production phase of a mine are
variable costs that are included in the costs of inventory produced during the
period that the stripping costs are incurred.
     Accounting for the Impairment of Long-Lived Assets

     The Company accounts for impairment of long-lived assets in accordance
with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
assets," and EITF 04-3, "Mining Assets: Impairment and Business Combinations." SFAS No. 144 establishes a uniform accounting model for long-lived assets to be
disposed of. Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable, the Company estimates the
undiscounted future cash flows (excluding interest), resulting from the use of
the asset and its ultimate disposition. If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value, the Company
recognizes an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset, determined principally using
discounted cash flows.
     Goodwill and Other Intangible Assets

     Goodwill represents the excess of purchase price and related costs over
the value assigned to the net tangible and identifiable intangible assets of
businesses acquired. The Company accounts for goodwill and other intangible assets under SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS
No. 142, goodwill and other intangible assets with indefinite lives are not amortized, but instead tested for impairment at least annually in accordance
with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible
assets with estimable useful lives be amortized over their respective estimated
lives to the estimated residual values, and reviewed for impairment in
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets."
     The Company evaluates the recoverability of goodwill using a two-step
impairment test approach at the reporting unit level. In the first step, the
fair value for the reporting unit is compared to its book value including goodwill. In the case that the fair value of the reporting unit is less than
book value, a second step is performed which compares the fair value of the reporting unit's goodwill to the book value of the goodwill. The fair value for
the goodwill is determined based on the difference between the fair values of
the reporting unit and the net fair values of the identifiable assets and liabilities of such reporting unit. If the fair value of the goodwill is less
than the book value, the difference is recognized as an impairment.
     Accounting for Asset Retirement Obligations

     The Company accounts for asset retirement obligations in accordance with
SFAS No. 143, "Accounting for Asset Retirement Obligations" and under the
provisions of FASB Interpretation No. 47, "Accounting for Conditional Asset
Retirement Obligations." SFAS No. 143 establishes the financial accounting and
reporting for obligations associated with the retirement of long-lived assets
and the associated asset retirement costs. This statement requires that the fair
value of a liability for an asset retirement obligation be recognized in the
period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. FASB Interpretation No. 47 includes
legal obligations to perform asset retirement activities where timing or method
of settlement are conditional on future events.
     Fair Value of Financial Instruments

     The recorded amounts of cash and cash equivalents, receivables,
short-term borrowings, accounts payable, accrued interest, and variable-rate
long-term debt approximate fair value because of the short maturity of those
instruments or the variable nature of underlying interest rates. Short-term investments are recorded at cost, which approximates fair market value.

F-7

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Derivative Financial Instruments

     The Company enters into derivative financial instruments to hedge
certain foreign exchange and interest rate exposures pursuant to SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities." See the Notes on Derivative Financial Instruments and Hedging
Activities and Financial Instruments and Concentrations of Credit Risk in the
Consolidated Financial Statements for a full description of the Company's hedging activities and related accounting policies.
     Revenue Recognition

     Revenue from sale of products is recognized at the time the goods are
shipped and title passes to the customer. In most of the Company's 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 such customer. Revenues are adjusted at the end of
each year to reflect the actual volume sold. 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.
     Revenues from sales of equipment are recorded upon completion of
installation and receipt of customer acceptance. Revenues from services are recorded when the services have been performed.
     Foreign Currency

     The assets and liabilities of the Company's international subsidiaries
are translated into U.S. dollars using exchange rates at the respective balance
sheet date. The resulting translation adjustments are recorded in accumulated
other comprehensive income (loss) in shareholders' equity. Income statement items are generally translated at monthly average exchange rates prevailing
during the period. Other foreign currency gains and losses are included in net
income. International subsidiaries operating in highly inflationary economies
translate non-monetary assets at historical rates, while net monetary assets are
translated at current rates, with the resulting translation adjustments included
in net income. At December 31, 2006, the Company had no international
subsidiaries operating in highly inflationary economies.
     Income Taxes

     Income taxes are provided for based on the asset and liability method of
accounting pursuant to SFAS No. 109, "Accounting for Income Taxes." Under SFAS
No. 109, deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
     The Company operates in multiple taxing jurisdictions, both within the
U.S. and outside the U.S. In certain situations, a taxing authority may
challenge positions that the Company has adopted in its income tax filings. The
Company regularly assesses its tax position for such transactions and includes
reserves for those differences in position. The reserves are utilized or
reversed once the statute of limitations has expired or the matter is otherwise
resolved.
     The accompanying financial statements generally do not include a
provision for U.S. income taxes on international subsidiaries' unremitted earnings, which are expected to be permanently reinvested overseas.
     Research and Development Expenses

     Research and development expenses are expensed as incurred.

     Accounting for Stock-Based Compensation

     As further discussed in Note 2, effective January 1, 2006, the Company
adopted the fair value recognition provisions of SFAS No. 123R, "Share-Based
Payment," using the modified prospective method. Under this transition method,
stock-based compensation expense was recognized in the consolidated financial
statements for stock options granted on and subsequent to January 1, 2006, based
on the grant date fair value estimated in accordance with the provisions of SFAS
No. 123R, and the estimated expense for the portion vesting in the period for
options granted prior to, but not vested as of January 1, 2006, based on the
grant date fair value estimated in accordance with the original provisions of
SFAS No. 123,"Accounting for Stock-Based Compensation." As provided under the
modified prospective method, results for prior periods have not been restated.
Prior to its adoption of SFAS No. 123R, the Company accounted for stock-based
compensation using the intrinsic value method in APB Opinion No. 25 and
recognized no compensation expense in its financial statements. As permitted by SFAS No. 123, stock-based compensation was included as a pro-forma disclosure in
the notes to the consolidated financial statements.

F-8

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Pension and Post-retirement Benefits

     The Company has defined benefit pension plans covering the majority of
its employees. The benefits are generally based on years of service and an employee's modified career earnings.
     The Company also provides post-retirement healthcare benefits for the
majority of its retirees and employees in the United States. The Company
measures the costs of its obligation based on its best estimate. The net
periodic costs are recognized as employees render the services necessary to earn
the post-retirement benefits.
     Environmental

     Expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations and which do not contribute to current or future revenue generation are expensed. Liabilities are recorded when it is probable
the Company will be obligated to pay amounts for environmental site evaluation,
remediation or related costs, and such amounts can be reasonably estimated.
     Earnings Per Share

     Basic earnings per share have been computed based upon the weighted
average number of common shares outstanding during the period.
     Diluted earnings per share have been computed based upon the weighted
average number of common shares outstanding during the period assuming the issuance of common shares for all potentially dilutive common shares
outstanding.
     Reclassifications

     Certain reclassifications were made to prior year amounts to conform
with the current year presentation.

Note 2.   Stock-Based Compensation

     The Company has a 2001 Stock Award and Incentive Plan (the
"Plan"),
which provides for grants of incentive and non-qualified stock options,
restricted stock, stock appreciation rights, stock awards or performance unit
awards. The Plan is administered by the Compensation Committee of the Board of
Directors. Stock options granted under the Plan generally have a ten year term.
The exercise price for stock options are at prices at or above the fair market
value of the common stock on the date of the grant, and each award of stock options will vest ratably over a specified period, generally three years.
     Effective January 1, 2006, the Company adopted the fair value
recognition provisions of SFAS No. 123R, "Share-Based Payments," using the
modified prospective method. Under this transition method, stock-based
compensation expense was recognized in the consolidated financial statements for
stock options granted on and subsequent to January 1, 2006 based on the grant
date fair value estimated in accordance with the provisions of SFAS No. 123R,
and the estimated expense for the portion vesting in the period for options granted prior to, but not vested as of January 1, 2006, based on the grant date
fair value estimated in accordance with the original provisions of SFAS No. 123.
As provided under the modified prospective method, results for prior periods
have not been restated. The cumulative effect of the adoption of SFAS No. 123R
did not have a significant impact on the financial statements.
     Net income for 2006 includes $2.3 million pretax compensation costs
related to stock option expense as a component of marketing and administrative
expenses. All stock option expense is recognized in income. The related
tax benefit on the non-qualified stock options is $0.5 million for 2006.
      Prior to the adoption of SFAS No. 123R, all income tax benefits
resulting from the exercise of stock options were presented as operating cash
inflows in the consolidated statements of cash flows. As required under SFAS No.
123R, the benefits of tax deductions in excess of the tax benefit of
compensation costs recognized or would have been recognized under SFAS No. 123
for those options are classified as financing inflows on the consolidated statement of cash flows.

F-9

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      The following table shows the pro forma effects on net income and
earnings per share for the years ended December 31, 2005 and 2004 had
compensation cost been recognized in accordance with SFAS No. 123, as amended by
SFAS No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure."

(in millions, except per share data)

Dec. 31, 2005

Dec. 31, 2004

Net income, as
reported

$

53.3

$

58.6

Add: Stock-based
employee compensation included


in reported net
income, net of related tax effects

0.6

0.3

Deduct: Total
stock-based employee compensation


expense
determined under fair value based

method for all
awards, net of related tax effects

(2.1
)

(2.7
)

Pro forma net income

$

51.8

$

56.2

Basic EPS

Net income, as
reported

$

2.62

$

2.85

Pro forma net
income

$

2.54

$

2.73

Diluted EPS

Net income, as
reported

$

2.59

$

2.82

Pro forma net
income

$

2.52

$

2.72

      Disclosures for the period ended December 31, 2006 are not presented
because the amounts are recognized in the consolidated financial statements.

Stock Options

     The fair value of options granted is estimated on the date of grant
using the Black-Scholes valuation model. Compensation expense is recognized only
for those options expected to vest, with forfeitures estimated at the date of
grant based on the Company's historical experience and future expectations. The
forfeiture rate assumption used for the period ended December 31, 2006 was approximately 8%.
     The weighted average grant date fair value for stock options granted
during the years ended December 31, 2006, 2005 and 2004 was $18.97, $24.13 and
$20.73, respectively. The weighted average grant date fair value for stock options vested during 2006 was $20.83. The total intrinsic value of stock options exercised during the year ended December 31, 2006 was $1.8 million.
      The fair value for stock awards was estimated at the date of grant
using the Black-Scholes option valuation model with the following weighted average assumptions for the years ended December 31, 2006, 2005 and 2004:

2006

2005

(pro forma)

2004

(pro forma)

Expected life (years)

6.4

7.0

7.0

Interest rate

4.63
%

4.36
%

3.94
%

Volatility

24.78
%

28.72
%

29.58
%

Expected dividend yield

0.37
%

0.32
%

0.37
%

     The expected term of the options represents the estimated period of time
until exercise and is based on historical experience of similar awards, based
upon contractual terms, vesting schedules, and expectations of future employee
behavior. The expected stock-price volatility is based upon the historical volatility of the Company's stock. The interest rate is based upon the implied
yield on U.S. Treasury bills with an equivalent remaining term. Estimated dividend yield is based upon historical dividends paid by the Company.

F-10

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The following table summarizes stock option activity for the year ended
December 31, 2006:

Shares

Weighted Average Exercise Price Per Share

Weighted Average Remaining Contractual Life (Years)

Aggregate Intrinsic Value (in thousands)

Balance January 1, 2006

1,185,765

$

45.15

Granted

79,200

54.82

Exercised

(103,392
)

39.02

Canceled

(9,504
)

35.80

Balance December 31, 2006

1,152,069

$

46.44

4.78

$

14,228

Exercisable, December 31,
2006

925,180

$

44.22

3.20

$

13,480

     The aggregate intrinsic value above is before applicable income taxes,
based on the Company's closing stock price of $58.79 as of the last business day
of the period ended December 31, 2006 had all options been exercised on that
date. The weighted average intrinsic value of the options exercised during 2006
was $17.48. As of December 31, 2006, total unrecognized stock-based compensation
expense related to nonvested stock options was approximately $2.8 million, which
is expected to be recognized over a weighted average period of approximately
three years.
     The Company issues new shares of common stock upon the exercise of stock
options.
     Non-vested stock option activity for the year ended December 31, 2006 is
as follows:

Shares

Weighted Average Exercise Price Per Share

Nonvested options outstanding
at December 31, 2005

260,846

$

55.00

Options granted

79,200

54.82

Options vested

(112,221
)

53.87

Options forfeited

(936
)

53.89

Nonvested options outstanding, December 31, 2006

226,889

$

55.50

     The following table summarizes additional information concerning options
outstanding at December 31, 2006:

Options Outstanding

Options Exercisable

Range of

Exercise Prices

Number Outstanding at 12/31/06

Weighted Average Remaining Contractual Term (Years)

Weighted Average Exercise Price

Number Exercisable at 12/31/06

Weighted Average Exercise Price

$

34.825

-

$

44.156

513,425

2.5

$

38.85

513,425

$

38.85

$

46.625

-

$

54.225

568,144

6.4

$

51.46

388,851

$

50.28

$

55.840

-

$

66.000

70,500

8.3

$

61.22

22,904

$

61.43

$

34.825

-

$

66.000

1,152,069

4.8

$

46.44

925,180

$

44.22

Restricted Stock

     The Company has granted certain corporate officers rights to receive
shares of the Company's common stock under the Company's 2001 Stock Award and
Incentive Plan (the "Plan"). The rights will be deferred for a specified number
of years of service, subject to restrictions on transfer and other conditions.
Upon issuance of the rights, a deferred compensation expense equivalent to the
market value of the underlying shares on the date of the grant was charged to
stockholders' equity and was being amortized over the estimated average deferral
period of approximately five years. Under the provisions of SFAS No. 123R, the
recognition of unearned compensation is no longer required. Accordingly, in the
first quarter of 2006, the balance of Deferred Equity Compensation was reversed
into Additional Paid-in Capital on the Company's balance sheet. The Company granted 50,300 shares and 36,100 shares for the periods ended December 31, 2006
and 2005, respectively. The fair value was determined based on the market value
of unrestricted shares. The discount for the restriction was not significant. As
of December 31, 2006, there was unrecognized stock-based compensation related to
restricted stock of $4.3 million,
F-11

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

which will be recognized over approximately the next four years. The
compensation expense amortized with respect to all units was approximately $1.7
million and $0.9 million for the periods ended December 31, 2006 and 2005, respectively. Such costs are included in marketing and administrative expenses.
255 restricted stock shares were vested as of December 31, 2006.
     The following table summarizes the restricted stock activity for the
Plan:

Shares

Weighted Average Grant Date Fair Value

Unvested balance at December
31, 2005

84,755

$

54.20

Granted

50,300

$

54.91

Vested

(255
)

$

39.30

Canceled

--

$

--

Unvested balance at December
31, 2006

134,800

$

55.61

Note 3.   Earnings Per Share (EPS)

(thousand of
dollars, except per share amounts)

2006

2005

2004

Basic EPS

Income from
continuing operations

$

51,550

$

52,675

$

57,278

Income (loss) from
discontinued operations

(1,599
)

589

1,285

Net income

$

49,951

$

53,264

$

58,563

Weighted average
shares outstanding

19,600

20,345

20,530

Basic earnings per
share from continuing operations

$

2.63

$

2.59

$

2.79

Basic earnings
(loss) per share from discontinued operations

(0.08
)

0.03

0.06

Basic earnings per share

$

2.55

$

2.62

$

2.85

Diluted EPS

2006

2005

2004

Income from
continuing operations

$

51,550

$

52,675

$

57,278

Income (loss) from
discontinued operations

(1,599
)

589

1,285

Net income

$

49,951

$

53,264

$

58,563

Weighted average
shares outstanding

19,600

20,345

20,530

Dilutive effect of
stock options

138

222

239

Weighted average
shares outstanding, adjusted

19,738

20,567

20,769

Diluted earnings per
share from continuing operations

$

2.61

$

2.56

$

2.76

Diluted earnings
(loss) per share from discontinued operations

(0.08
)

0.03

0.06

Diluted earnings per share

$

2.53

$

2.59

$

2.82

     The weighted average diluted common shares outstanding for the years
ended December 31, 2006 and December 31, 2005 exclude the dilutive effect of
371,587 options and 56,700 options, respectively, since such options had an exercise price in excess of the average market value of the Company's common
stock during such year.
     The weighted average diluted common shares outstanding for the year
ended December 31, 2006 includes the effect of average unearned compensation as
required under SFAS No. 123R.

Note 4.   Discontinued Operations

     In April 2006, the Company ceased operation at its one-unit satellite
PCC facility in Hadera, Israel. In the fourth quarter, the Company recorded a
loss from discontinued operations of approximately $1.7 million upon liquidation
of its investment in Israel. This loss was predominantly related to the
recognition of foreign currency translation losses previously recognized in accumulated other comprehensive income (loss).
F-12

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The following table details selected financial information for the
discontinued operation in the consolidated statements of income:

Thousands of
Dollars

2006

2005

2004

Net sales

$

1,468

$

5,087

$

4,715

Income from
operations

$

77

$

804

$

1,948

Foreign currency
translation

loss upon liquidation

$

(1,563
)

$

--

$

--

Provision for
taxes on income

$

79

$

304

$

662

Income (loss)
from

discontinued operations, net
of tax

$

(1,599
)

$

589

$

1,285

Note 5.   Income Taxes

     Income before provision for taxes, minority interests, and discontinued
operations by domestic and foreign source is as follows:

Thousands of Dollars

2006

2005

2004

Domestic

$

41,095

$

40,468

$

42,070

Foreign

38,484

36,924

40,555

Total income before provision
for income taxes

$

79,579

$

77,392

$

82,625

     The provision for taxes on income consists of the
following:

Thousands of
Dollars

2006

2005

2004

Domestic

Taxes currently
payable

Domestic

Federal

$

6,205

$

5,561

$

13,406

State and local

2,877

876

3,483

Deferred income
taxes

5,044

7,144

(3,890
)

Domestic tax
provision

14,126

13,581

12,999

Foreign

Taxes currently
payable

11,161

10,220

14,717

Deferred income
taxes

(699
)

(816
)

(4,079
)

Foreign tax
provision

10,462

9,404

10,638

Total tax provision

$

24,588

$

22,985

$

23,637

     The provision for taxes on income shown in the previous table is
classified based on the location of the taxing authority, regardless of the location in which the taxable income is generated.
     The major elements contributing to the difference between the U.S.
federal statutory tax rate and the consolidated effective tax rate are as follows:

Percentages

2006

2005

2004

U.S. statutory
tax rate

35.0
%

35.0
%

35.0
%

Depletion

(5.3
)

(4.9
)

(4.1
)

Difference
between tax provided on foreign earnings

and the U.S. statutory rate

(3.8
)

(4.5
)

(3.5
)

State and local
taxes, net of Federal tax benefit

2.4

1.9

1.0

Tax credits and
foreign dividends

0.9

2.3

(0.1
)

Increase in
valuation allowance

1.4

--

--

Other

0.3

(0.1
)

0.4

Consolidated
effective tax rate

30.9
%

29.7
%

28.7
%

F-13

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The Company believes that its accrued liabilities are sufficient to
cover its U.S. and foreign tax contingencies. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets
and deferred tax liabilities are presented below:

Thousands of Dollars

2006

2005

Deferred tax assets:

State and local taxes

$

2,593

$

4,324

Accrued expenses

8,771

10,214

Deferred expenses

1,399

3,037

Net operating loss carry
forwards

13,236

15,204

Pension and post-retirement
benefits costs

15,268

--

Other

11,107

6,852

Total deferred tax assets

$

52,374

$

39,631

Thousands of
Dollars

2006

2005

Deferred tax
liabilities:

Plant and equipment,
principally due to differences in depreciation

$

56,628

$

62,803

Pension and
post-retirement benefits cost deducted for tax purposes

in excess of amounts reported
for financial statements

--

14,673

Other

11,538

6,563

Total deferred tax
liabilities

68,166

84,039

Net deferred tax
liabilities

$

15,792

$

44,408

     The current and long-term portion of net deferred tax (assets)
liabilities is as follows:

Thousands of Dollars

2006

2005

Net deferred tax assets, current

$

(2,813
)

$

(4,966
)

Net deferred tax liabilities, long-term

18,605

49,374

$

15,792

$

44,408

     The current portion of the net deferred tax assets is included in
prepaid expenses and other current assets.
     The Company established a valuation allowance of approximately $0.9
million as of December 31, 2006. This valuation allowance relates to net
operating loss carryforwards in the state of Ohio where there is an uncertainty
regarding their realizability. There was no valuation allowance as of December
31, 2005.
     The Company recorded $13.2 million of deferred tax assets arising from
tax loss carry forwards which will be realized through future operations. Carry
forwards of approximately $1.8 million expire over the next 15 years, and $11.4
million can be utilized over an indefinite period.
     The Company operates in multiple taxing jurisdictions, both within the
U.S. and outside the U.S. In certain situations, a taxing authority may
challenge positions that the Company has adopted in its income tax filings. The
Company regularly assesses its tax position for such transactions and includes
reserves for those differences in position. The reserves are utilized or
reversed once the statute of limitations has expired or the matter is otherwise
resolved.
     Net cash paid for income taxes were $18.0 million, $21.2 million and
$15.3 million for the years ended December 31, 2006, 2005 and 2004,
respectively.
     In December 2004, the FASB issued SFAS No. 109-2,
"Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004," which provides relief concerning the timing
of the SFAS No. 109 requirement to accrue deferred taxes for unremitted earnings
of foreign subsidiaries. On October 22, 2004, the American Jobs Act Creation Act
of 2004 ("AJCA") was signed into law. The AJCA includes a special, one-time, 85%
dividends received deduction for certain foreign earnings that are repatriated.
The Company repatriated $18.5 million in 2005 under this Act, which resulted in
a tax liability of approximately $1.2 million and increased the effective tax
rate by 1.5%.

F-14

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6.   Foreign Operations

     The Company has not provided for U.S. federal and foreign withholding
taxes on $139.2 million of foreign subsidiaries' undistributed earnings as of
December 31, 2006 because such earnings are intended to be permanently
reinvested overseas. To the extent the parent company has received foreign earnings as dividends, the foreign taxes paid on those earnings have generated
tax credits, which have substantially offset related U.S. income taxes. However,
in the event that the entire $139.2 million of foreign earnings were to be repatriated, incremental taxes may be incurred. We do not believe this amount
would be greater than $12.2 million.
     Net foreign currency exchange (losses) gains, included in non-operating
deductions in the Consolidated Statements of Income, were $(268,000),
$(450,000), and $(564,000) for the years ended December 31, 2006, 2005 and 2004,
respectively.

Note 7.   Inventories

     The following is a summary of inventories by major category:

Thousands of Dollars

2006

2005

Raw materials

$

60,013

$

54,471

Work in process

8,321

7,727

Finished goods

38,911

36,264

Packaging and supplies

22,649

20,433

Total inventories

$

129,894

$

118,895

Note 8.   Property, Plant and Equipment

     The major categories of property, plant and equipment and accumulated
depreciation and depletion are presented below:

Thousands of Dollars

2006

2005

Land

$

24,087

$

19,433

Quarries/mining properties

39,123

50,543

Buildings

173,815

157,038

Machinery and equipment

1,071,046

969,537

Construction in progress

52,107

75,852

Furniture and fixtures and
other

118,744

107,895

1,478,922

1,380,298

Less: Accumulated depreciation
and depletion

(826,125
)

(751,553
)

Property, plant and equipment,
net

$

652,797

$

628,745

     Approximately 40% of the balance in construction in progress as of
December 31, 2006 relates to the construction of a new facility for the
SYNSIL^®product line.
     Depreciation and depletion expense for the years ended December 31,
2006, 2005 and 2004 was $79.8 million, $70.9 million, and $69.6 million,
respectively.

Note 9.   Restructuring Charges

     During the fourth quarter of 2003, the Company announced plans to
restructure its operations in an effort to reduce operating costs and to improve
efficiency. The Company recorded a pre-tax restructuring charge of $3.3 million
in the fourth quarter of 2003 to reflect these actions, consisting of severance,
other employee benefits, and lease termination costs. During 2004, additional
costs related to this program of $1.1 million were recorded. As of December 31,
2006, all employees identified in the workforce reduction were terminated and no
liability remains to be paid.

F-15

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10.   Acquisitions

     In October 2006, the Company acquired all of the outstanding stock of
ASMAS, an Istanbul-based Turkish producer of refractories for approximately $32.4 million in cash. The terms of the acquisition provides for an additional
purchase price of up to $5 million to be paid in 2009 based upon performance
criteria through 2008. The operations of this entity have been included in
the Refractories segment of the Company's financial statements since the date of
the acquisition. This acquisition will allow the Company to service the growing
steel industries in Eastern Europe and the Middle East, and to provide vertical
integration through its own kilns and sources of magnesite.
     The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of the acquisition:

(Millions of
Dollars)

2006

Current assets

$

5.1

Property, plant
and equipment

13.5

Intangible assets

8.6

Goodwill

13.8

Total assets acquired

41.0

Liabilities
assumed

8.6

Net cash paid

$

32.4

     The purchase price allocation has not been finalized as of December 31,
2006.
     The weighted average amortization period for the acquired intangible
assets subject to amortization is approximately 13.5 years. Goodwill associated
with this transaction is not tax deductible.
     Pro forma financial information has not been presented since this
business combination was not material to the Company's total assets or results
of operations.
    In the fourth quarter of 2005, the Company made a cash acquisition of the
metallurgical measurement technology/digital electrode control system product
line of ET Electrotechnology GmbH for approximately $3.2 million. This
acquisition and related technology offers a power consumption system in electric
steelmaking and ladle furnaces. The Company recorded tax-deductible goodwill of
approximately $1.3 million in connection with this acquisition.
     In the fourth quarter of 2004, the Company recognized pre-tax corporate
charges of $1.0 million expense related to due diligence for a terminated acquisition effort.

Note 11.  Goodwill and Other Intangible Assets

   The carrying amount of goodwill was $69.0 million and $53.6 million as of
December 31, 2006 and December 31, 2005, respectively. The net change in
goodwill since December 31, 2005 was primarily attributable to the acquisition
of ASMAS and the effect of foreign exchange.
     Acquired intangible assets included in other assets and deferred charges
subject to amortization as of December 31, 2006 and December 31, 2005 were as
follows:

December 31, 2006

December 31, 2005

(Millions of Dollars)

Gross

Carrying

Amount

Accumulated

Amortization

Gross

Carrying

Amount

Accumulated

Amortization

Patents and trademarks

$

7.2

$

1.8

$

6.0

$

1.4

Customer lists

10.0

0.8

2.9

0.4

Other

0.1

--

--

--

$

17.3

$

2.6

$

8.9

$

1.8

     The weighted average amortization period for acquired intangible assets
subject to amortization is approximately 15 years. Amortization expense was approximately $0.8 million, $0.3 million and $0.4 million for the years ended
December 31, 2006,
F-16

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2005 and 2004, respectively. The estimated amortization expense is $1.2
million for each of the next five years through 2011.
     Included in other assets and deferred charges is an additional
intangible asset of approximately $7.3 million which represents the non-current
unamortized amount paid to a customer in connection with contract extensions at
eight satellite PCC facilities. In addition, a current portion of $1.8 million
is included in prepaid expenses and other current assets. Such amounts will be
amortized as a reduction of sales over the remaining lives of the customer contracts. Approximately $1.8 million was amortized in 2006. Estimated
amortization as a reduction of sales is as follows: 2007 - $1.8 million; 2008 -
$1.8 million; 2009 - $1.5 million; 2010 - $1.2 million; 2011 - $0.9 million;
with smaller reductions thereafter over the remaining lives of the contracts.

Note 12.  Accounting for Impairment of Long-Lived Assets

     The Company accounts for impairment of long-lived assets in accordance
with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." SFAS No. 144 establishes a uniform accounting model for disposition of
long-lived assets. This statement also requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If the
carrying amount of the asset exceeds its estimated cash flows, an impairment
charge is recognized in the amount by which the carrying amount of the asset
exceeds the fair value of the asset. During 2005, the Company recorded a writedown of impaired assets of $0.3 million for the closure of our satellite facility at Cornwall, Canada in the first quarter of 2006.

Note 13.   Derivative Financial Instruments and Hedging Activities

     The Company is exposed to foreign currency exchange rate fluctuations
and interest rate changes in the normal course of its business. As part of its
risk management strategy, the Company uses interest-rate related derivative instruments to manage its exposure on its debt instruments, as well as forward
exchange contracts (FEC) to manage its exposure to foreign currency risk on certain raw material purchases. The Company's objective is to offset gains and
losses resulting from these exposures with gains and losses on the derivative
contracts used to hedge them. The Company has not entered into derivative instruments for any purpose other than to hedge certain expected cash flows. The
Company does not speculate using derivative instruments.
     By using derivative financial instruments to hedge exposures to changes
in interest rates and foreign currencies, the Company exposes itself to credit
risk and market risk. Credit risk is the risk that the counterparty will fail to
perform under the terms of the derivative contract. When the fair value of a
derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty, and therefore, it does
not face any credit risk. The Company minimizes the credit risk in derivative
instruments by entering into transactions with major financial institutions.
     Market risk is the adverse effect on the value of a financial instrument
that results from a change in interest rates, currency exchange rates, or commodity prices. The market risk associated with interest rate and forward
exchange contracts is managed by establishing and monitoring parameters that
limit the types and degree of market risk that may be undertaken.
     Based on criteria established by SFAS No. 133, the Company designated
its derivatives as cash flow hedges. During 2001, the Company entered into three-year interest rate swap agreements with notional amounts totaling $30
million that expired in January 2005. These agreements effectively converted a
portion of the Company's floating-rate debt to a fixed-rate basis with an interest rate of 4.5%, thus reducing the impact of the interest rate changes on
future cash flows and income. The Company uses FEC's designated as cash flow
hedges to protect against foreign currency exchange rate risks inherent in its
forecasted inventory purchases. The Company had 12 open foreign exchange
contracts as of December 31, 2006.
     For derivative instruments that are designated and qualify as cash flow
hedges, the effective portion of the gain or loss on the derivative instrument
is initially recorded in accumulated other comprehensive income (loss) as a separate component of shareholders' equity and subsequently reclassified into
earnings in the period during which the hedged transaction is recognized in earnings. The gains and losses associated with these forward exchange contracts
are recognized into cost of sales. Gains and losses and hedge ineffectiveness
associated with these derivatives were not significant.

F-17

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14.  Short-term Investments

     The composition of the Company's short-term investments are as follows:

(in thousands of dollars)

2006

2005

Short-term
Investments -

Available for Sale Securities:

Short-term bank deposits

$

8,380

$

2,350

         There were no unrealized holding gains and losses on the short-term bank
deposits held at December 31, 2006 since the carrying amount approximates fair
market value.

Note 15.  Financial Instruments and Concentrations of Credit Risk

     The following methods and assumptions were used to estimate the fair
value of each class of financial instrument:
     Cash and cash equivalents, short-term investments, accounts
receivable and payable: The carrying amounts approximate fair value because
of the short maturities of these instruments.
     Short-term debt and other liabilities: The carrying amounts of
short-term debt and other liabilities approximate fair value because of the short maturities of these instruments.
     Long-term debt: The fair value of the long-term debt of the
Company is estimated based on the quoted market prices for that debt or similar
debt and approximates the carrying amount.
     Forward exchange contracts: The fair value of forward exchange
contracts (used for hedging purposes) is estimated by obtaining quotes from brokers. If appropriate, the Company would enter into forward exchange contracts
to mitigate the impact of foreign exchange rate movements on the Company's operating results. It does not engage in speculation. Such foreign exchange
contracts would offset losses and gains on the assets, liabilities and
transactions being hedged. At December 31, 2006, the Company had open foreign
exchange contracts with a financial institution to purchase approximately $4.7
million of foreign currencies. These contracts range in maturity from February
9, 2007 to July 10, 2007. The fair value of these instruments was a liability of
$0.1 million at December 31, 2006. The fair value of the open foreign exchange
contracts at December 31, 2005 was a liability of $0.2 million.
     Credit risk: Substantially all of the Company's accounts
receivable are due from companies in the paper, construction and steel
industries. Credit risk results from the possibility that a loss may occur from
the failure of another party to perform according to the terms of the contracts.
The Company regularly monitors its credit risk exposures and takes steps to mitigate the likelihood of these exposures resulting in actual loss. The Company's extension of credit is based on an evaluation of the customer's financial condition and collateral is generally not required.
     The Company's bad debt expense (recoveries) for the years ended December
31, 2006, 2005 and 2004 was $0.4 million, $(0.5) million and $1.6 million, respectively.

F-18

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16.  Long-Term Debt and Commitments

     The following is a summary of long term debt:

(thousands of
dollars)

Dec. 31,

2006



Dec. 31, 2005

5.53% Series
2006A Senior Notes

$  50,000

$          --

Due October 5,
2013

Floating Rate
Series 2006A Senior Notes

25,000

--

Due October 5,
2013

7.49% Guaranteed
Senior Notes Due July 24, 2006

--

  50,000

Yen-denominated
Guaranteed Credit Agreement

Due March 31,
2007

605

3,062

Variable/Fixed
Rate Industrial

Development
Revenue Bonds Due 2009

4,000

4,000

Economic
Development Authority Refunding

Revenue Bonds
Series 1999 Due 2010

4,600

4,600

Variable/Fixed
Rate Industrial

Development
Revenue Bonds Due August 1, 2012

8,000

8,000

Variable/Fixed
Rate Industrial

Development
Revenue Bonds Series 1999 Due November 1, 2014

8,200

8,200

Variable/Fixed
Rate Industrial

Development
Revenue Bonds Due March 31, 2020

5,000

5,000

Installment
obligations

8,812

9,700

Other borrowings

1,197

1,442

Total

115,414

94,004

Less: Current
maturities

2,063

53,698

Long-term debt

$113,351

$ 40,306

     On July 24, 1996, through a private placement, the
Company issued $50 million of 7.49% Guaranteed Senior Notes due July 24, 2006.
The proceeds from the sale of the notes were used to refinance a portion of the
short-term commercial bank debt outstanding. These notes matured and were paid
on July 24, 2006.

     On May 17, 2000, the Company's majority-owned subsidiary, Specialty
Minerals FMT K.K., entered into a Yen-denominated Guaranteed Credit Agreement
with the Bank of New York due March 31, 2007. The proceeds were used to finance
the construction of a PCC satellite facility in Japan. Principal payments began
June 30, 2002. Interest is payable quarterly at a rate of 2.05% per annum.
     The Variable/Fixed Rate Industrial Development Revenue Bonds due 2009
are tax-exempt 15-year instruments issued to finance the expansion of a PCC plant in Selma, Alabama. The bonds are dated November 1, 1994, and provide for
an optional put by the holder (during the Variable Rate Period) and a mandatory
call by the issuer. The bonds bear interest at either a variable rate or fixed
rate at the option of the Company. Interest is payable semi-annually under the
fixed rate option and monthly under the variable rate option. The Company has
selected the variable rate option on these borrowings and the average interest
rates were approximately 3.14% and 2.51% for the years ended December 31, 2006
and 2005, respectively.
     The Economic Development Authority Refunding Revenue Bonds due 2010 were
issued on February 23, 1999 to refinance the bonds issued in connection with the
construction of a PCC plant in Eastover, South Carolina. The bonds bear interest
at either a variable rate or fixed rate, at the option of the Company. Interest
is payable semi-annually under the fixed rate option and monthly under the variable rate option. The Company has selected the variable rate option on these
borrowings and the average interest rates were approximately 3.14% and 2.51% for
the years ended December 31, 2006 and 2005, respectively.
     The Variable/Fixed Rate Industrial Development Revenue Bonds due August
1, 2012 are tax-exempt 15-year instruments that were issued on August 1, 1997 to
finance the construction of a PCC plant in Courtland, Alabama. The bonds bear
interest at either a variable rate or fixed rate, at the option of the Company.
Interest is payable semi-annually under the fixed rate option and monthly under
the variable rate option. The Company has selected the variable rate option on
these borrowings and the average interest rates were approximately 3.14% and
2.51% for the years ended December 31, 2006 and 2005, respectively.
F-19

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    The Variable/Fixed Rate Industrial Development Revenue Bonds
due November 1, 2014 are tax-exempt 15-year instruments and were issued on November 30, 1999 to refinance the bonds issued in connection with the
construction of a PCC plant in Jackson, Alabama. The bonds bear interest at either a variable rate or fixed rate at the option of the Company. Interest is
payable semi-annually under the fixed rate option and monthly under the variable
rate option. The Company has selected the variable rate option on these
borrowings and the average interest rates were approximately 3.14% and 2.51% for
the years ended December 31, 2006 and 2005, respectively.
     On June 9, 2000 the Company entered into a twenty-year, taxable,
Variable/Fixed Rate Industrial Development Revenue Bond agreement to finance a
portion of the construction of a merchant manufacturing facility for the
production of Specialty PCC in Brookhaven, Mississippi. The Company has selected
the variable rate option for this borrowing and the average interest rate was
approximately 5.65% and 3.82% for the years ended December 31, 2006 and 2005,
respectively.
     On May 31, 2003, the Company acquired land and limestone ore reserves
from the Cushenbury Mine Trust for approximately $17.5 million. Approximately
$6.1 million was paid at the closing and $11.4 million was financed through an
installment obligation. The interest rate on this obligation is approximately
4.25%. For the year ending December 31, 2006, $0.9 million of principal was paid
on this debt. Principal payments are as follows: 2007 - $0.9 million; 2008 -
$6.5 million; 2013 - $1.4 million.
     On October 5, 2006, the Company, through private placement, entered into
a Note Purchase Agreement and issued $75 million aggregate principal amount unsecured senior notes. These notes consist of two tranches: $50 million aggregate principal amount 5.53% Series 2006A Senior Notes (Tranche 1 Notes);
and $25 million aggregate principal amount Floating Rate Series 2006A Senior
Notes (Tranche 2 Notes). Tranche 1 Notes bear interest of 5.53% per annum, payable semi-annually. Tranche 2 Notes bear floating rate interest, payable
quarterly. The average interest rate for the year ended December 31, 2006 was
5.82%. The principal payment for both tranches is due on October 5, 2013.
     The aggregate maturities of long-term debt are as follows: 2007
- $2.1
million; 2008 - $7.1 million; 2009 - $4.0 million; 2010 - $4.6 million; 2011 - $ nil;
thereafter - $97.6 million.
     The Company had available approximately $186.9 million in uncommitted,
short-term bank credit lines, of which $73.4 million was in use at December 31,
2006. The Company also has available an $8.5 million committed, short-term bank
credit line, all of which was in use at December 31, 2006.
     Short-term borrowings as of December 31, 2006 and 2005 were $87.6
million and $62.8 million, respectively. The weighted average interest rate on
short-term borrowings outstanding as of December 31, 2006 and 2005 was 5.57% and
4.54%, respectively.
     During 2006, 2005 and 2004, respectively, the Company incurred interest
costs of $8.9 million, $7.2 million and $6.3 million including $1.1 million,
$1.3 million and $2.1 million, respectively, which were capitalized. Interest
paid approximated the incurred interest cost.

Note 17.  Benefit Plans

     Pension Plans and Other Postretirement Benefit Plans

     The Company and its subsidiaries have pension plans covering the
majority of eligible employees on a contributory or non-contributory basis.
     Benefits under defined benefit plans are generally based on years of
service and an employee's career earnings. Employees generally become fully vested after five years.
     The Company provides postretirement health care and life insurance
benefits for the majority of its U.S. retired employees. Employees are generally
eligible for benefits upon retirement and completion of a specified number of
years of creditable service. The Company does not pre-fund these benefits and
has the right to modify or terminate the plan in the future.
     Effective December 31, 2006, the Company adopted the recognition and
disclosure provisions of SFAS No. 158, "Employers' Accounting for Defined
Benefit Pension and Other Post Retirement Plans - An Amendment of FASB
Statements No. 87, 88, 106, and 132(R)." SFAS 158 requires an employer to
recognize the funded status of its defined benefit plans as an asset or
liability on the balance sheet and to recognize changes in the funded status
through comprehensive income.

F-20

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The following table reflects the incremental effects of applying the
provisions of SFAS 158 on the individual line items of the consolidated balance
sheet, based on the funded status of our plans:

December 31, 2006

Millions of Dollars

Pension and Post-retirement Prior to Adopting

SFAS 158

SFAS 158 Adjustments

Pension and Post-retirement After Adopting SFAS 158

Intangible assets

$

15.5

$

(0.8
)

$

14.7

Prepaid pension costs

83.6

(57.9
)

25.7

Total assets

1,251.8

(58.7
)

1,193.1

Current liabilities

209.1

2.4

212.1

Accrued pension and
post-retirement benefits

33.8

21.6

55.4

Deferred taxes

50.0

(31.4
)

18.6

Total liabilities

448.0

(7.4
)

440.6

Accumulated other comprehensive income

30.2

(51.3
)

(21.2
)

Total shareholders' equity

804.0

(51.3
)

752.6

Total liabilities and
shareholders' equity

$

1,251.8

$

(58.7
)

$

1,193.1

     Our adoption of FAS 158 had no impact on our earnings for the year ended
December 31, 2006 and will not affect the Company's consolidated statements of
income in future periods.
     The funded status of the Company's pension plans and other
postretirement benefit plans at December 31, 2006 and 2005 is as follows:

     Obligations and Funded Status

Pension Benefits

Other Benefits

Millions of Dollars

2006

2005

2005

Change in benefit obligation

Benefit obligation at beginning of year

$

177.6

$

156.4

$

36.1

$

31.7

Service cost

7.9

7.2

2.1

1.7

Interest cost

10.1

8.9

2.2

2.0

Actuarial loss

12.3

17.6

3.1

3.5

Benefits paid

(6.4
)

(9.5
)

(2.5
)

(3.1
)

Plan amendments

9.0

--

3.0

--

Other

4.0

(3.0
)

--

0.3

Benefit obligation at end of year

$

214.5

$

177.6

$

44.0

$

36.1

Pension Benefits

Other Benefits

Millions of Dollars

2006

2005

2006

2005

Change in plan assets

Fair value of plan assets beginning of year

$

186.3

$

173.9

$

--

$

--

Actual return on plan assets

21.6

12.1

--

--

Employer contributions

22.3

12.9

2.5

3.1

Plan participants' contributions

0.4

0.2

--

--

Benefits paid

(6.4
)

(9.5
)

(2.5
)

(3.1
)

Other

2.1

(3.3
)

--

--

Fair value of plan assets at end of year

$

226.3

$

186.3

$

--

$

--

Funded status

$

11.8

$

8.7

$

(44.0
)

$

(36.1
)

Unrecognized transition amount

--

--

--

0.1

Unrecognized net actuarial loss

--

51.8

--

12.8

Unrecognized prior service cost

--

3.4

--

--

Prepaid (accrued) benefit cost

$

--

$

63.9

$

--

$

(23.2
)

F-21

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    Amounts recognized in the consolidated balance sheet consist of:

Pension Benefits

Other Benefits

Millions of Dollars

2006

2005

2006

2005

Pension asset

$

25.7

$

--

$

--

$

--

Pension liability

(13.9
)

--

(44.0
)

Prepaid benefit costs

--

67.8

--

--

Accrued benefit liabilities

--

(9.0
)

--

(23.2
)

Intangible asset

--

0.8

--

--

Accumulated other comprehensive (income) loss

43.6

4.3

10.7

--

Net amount recognized

$

55.4

$

63.9

$

(33.3
)

$

(23.2
)

     Included in accrued compensation and related items is the current
portion of pension liabilities of approximately $2.5 million as of December 31,
2006.
     The components of net periodic benefit costs are as follows:

Pension Benefits

Other Benefits

Millions of Dollars

2006

2005

2004

2006

2005

2004

Service cost

$

7.9

$

7.2

$

6.4

$

2.1

$

1.7

$

1.4

Interest cost

10.1

8.9

8.5

2.2

2.0

1.8

Expected return on plan
assets

(15.4
)

(13.9
)

(12.5
)

--

--

--

Amortization of transition
amount

--

--

0.1

--

--

--

Amortization of prior service
cost

1.0

1.1

0.7

1.0

0.8

--

Recognized net actuarial loss

3.2

1.8

1.7

0.2

--

0.5

SFAS No. 88 curtailment (gain) loss

(0.8
)

0.3

0.6

--

--

--

Net periodic benefit cost

$

6.0

$

5.4

$

5.5

$

5.5

$

4.5

$

3.7

     Unrecognized prior service cost is amortized on an accelerated basis
over the average remaining service period of each active employee.
     Under the provisions of SFAS No. 88, lump-sum distributions from
terminations, resulted in a plan curtailment of one of the Company's pension
plans and also caused partial settlement of such plan. As a result, there was a
curtailment gain in income from operations of $0.8 million in 2006.
     Under the provisions of SFAS No. 88, lump-sum distributions from the
Company's Supplemental Retirement Plan caused a partial settlement of such plan,
resulting in a charge of $0.3 million and $0.6 million in 2005 and 2004,
respectively.
     The Company's funding policy for U.S. plans generally is
to contribute annually into trust funds at a rate that provides for future plan
benefits and maintains appropriate funded percentages. Annual contributions to
the U.S. qualified plans are at least sufficient to satisfy regulatory funding
standards and are not more than the maximum amount deductible for income tax
purposes. The funding policies for the international plans conform to local governmental and tax requirements. The plans' assets are invested primarily in
stocks and bonds.
     Amounts recognized in accumulated other comprehensive income consist of:

December 31, 2006

(Millions of
Dollars)

Pension Benefits

Post-retirement

Net actuarial loss

$

36.5

$

9.0

Net prior service
cost

7.1

1.7


Net amount recognized

$

43.6

$

10.7

     The accumulated benefit obligation for all defined benefit pension plans
was $197.9 million and $161.6 million at December 31, 2006 and 2005,
respectively.

F-22

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The 2007 estimated amortization of amounts in other comprehensive income
are as follows:

(Millions of Dollars)

Pension Benefits

Post Retirement Benefits

Amortization of prior service
cost

$

3.6

$

1.0

Amortization of net loss

1.5

0.5

     Total costs be
recognized

$

5.1

$

1.5

Additional Information

     The weighted average assumptions used to determine net periodic benefit
cost in the accounting for the pension benefit plans and other benefit plans for
the years ended December 31, 2006, 2005 and 2004 are as follows:

2006

2005

2004

Discount rate

5.75
%

6.00
%

6.25
%

Expected return on plan assets

8.50
%

8.50
%

8.50
%

Rate of compensation increase

3.50
%

3.50
%

3.50
%

     The weighted average assumptions used to determine benefit obligations
for the pension benefit plans and other benefit plans at December 31, 2006, 2005
and 2004 are as follows:

2006

2005

2004

Discount rate

5.75
%

5.75
%

6.00
%

Rate of compensation increase

3.50
%

3.50
%

3.50
%

     The Company considers a number of factors to determine its expected rate
of return on plan assets assumptions, including historical performance of plan
assets, asset allocation and other third-party studies and surveys. The Company
reviewed the historical performance of plan assets over a ten-year period (from
1994 to 2004), the results of which exceed the 8.50% rate of return assumption
that the Company ultimately selected for domestic plans. The Company also considered plan portfolio asset allocations over a variety of time periods and
compared them with third-party studies and surveys of annualized returns of similarly balanced portfolio strategies. The historical return of this universe
of similar portfolios also exceeded the return assumption that the Company ultimately selected. Finally, the Company reviewed performance of the capital
markets in recent years and, upon advice from various third parties, such as the
pension plans' advisers, investment managers and actuaries, selected the 8.50%
return assumption used for domestic plans.
      For measurement purposes, health care cost trend rates of approximately
10% for pre-age-65 and post-age-65 benefits were used in 2006. These trend rates
were assumed to decrease gradually to 5.0% for 2011 and remain at that level
thereafter. However, the Company will only absorb a 5% increase.
     A one percentage-point change in assumed health care cost trend rates
would have the following effects:

Thousands of Dollars

1-Percentage Point

Increase

1-Percentage Point

Decrease

Effect on total service and interest cost components

$

--

$

(2)

Effect on postretirement benefit obligations

$

--

$

(2,727)

Plan Assets

     The Company's pension plan weighted average asset allocations at
December 31, 2006 and 2005 by asset category are as follows:

Asset Category

2006

2005

Equity securities

66.4
%

66.2
%

Fixed income
securities

31.5
%

31.4
%

Real estate

0.3
%

0.4
%

Other

1.8
%

2.0
%

Total

100
%

100
%

F-23

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The following table presents domestic and foreign pension plan assets
information at December 31, 2006, 2005 and 2004 (the measurement date of pension
plan assets):

U.S. Plans

International Plans

Millions of Dollars

2006

2005

2004

2006

2005

2004

Fair value of plan assets

$

177.9

$

149.7

$

139.3

$

48.4

$

36.6

$

34.6

     Contributions

     The Company expects to contribute $15.0 million to its pension plans and
$2.0 million to its other postretirement benefit plan in 2007.
     Estimated Future Benefit Payments

     The following benefit payments, which reflect expected future service,
as appropriate, are expected to be paid:

Millions of Dollars

Pension

Benefits

Other

Benefits

2007

$

10.4

$

1.8

2008

$

9.6

$

1.8

2009

$

12.3

$

2.0

2010

$

14.1

$

2.2

2011

$

14.2

$

2.6

2012 - 2016

$

89.9

$

17.7

     Investment Strategies

     The Plan Assets Committee has adopted an investment policy for domestic
pension plan assets designed to meet or exceed the expected rate of return on
plan assets assumption. To achieve this, the pension plans retain professional
investment managers that invest plan assets, primarily in equity and fixed income securities. The Company has targeted an investment mix of 65% in equity
securities and 35% in fixed income securities.
     Savings and Investment Plans

     The Company maintains a voluntary Savings and Investment Plan for most
non-union employees in the U.S. Within prescribed limits, the Company bases its
contribution to the Plan on employee contributions. The Company's contributions
amounted to $3.3 million, $3.0 million and $3.1 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Notes 18.  Leases

     The Company has several non-cancelable operating leases, primarily for
office space and equipment. Rent expense amounted to approximately $6.1 million,
$4.6 million and $4.1 million for the years ended December 31, 2006, 2005 and
2004, respectively. Total future minimum rental commitments under all
non-cancelable leases for each of the years 2007 through 2011 and in aggregate
thereafter are approximately $4.6 million, $3.6 million, $3.1 million, $2.3 million, $1.0 million, respectively, and $7.8 million thereafter. Total future
minimum rentals to be received under non-cancelable subleases were approximately
$7.0 million at December 31, 2006.
     Total future minimum payments to be received under direct financing
leases for each of the years 2007 through 2011 and the aggregate thereafter are
approximately: $4.9 million, $3.7 million, $2.7 million, $1.9 million, $1.3 million, and $2.3 million thereafter.

Note 19.  Litigation

     On November 28, 2005, the Company announced that it had reached a
settlement of pending commercial and patent litigation with Omya AG. The
settlement was on a worldwide basis, hence the litigation in both the United
States and Italy have been dismissed. The settlement provides for the
recognition of the Company's intellectual property and patent rights. As part of
the settlement, the Company received a settlement payment and granted Omya AG a
non-exclusive license for the terms of the patents in exchange for royalty payments through 2009.
     Certain of the Company's subsidiaries are among numerous defendants in a
number of cases seeking damages for exposure to silica or to asbestos containing
materials. The Company currently has 776 pending silica cases and 26 pending
F-24

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

asbestos cases. In 2006, the Company was named in two new silica cases and in
three new asbestos cases. To date, 655 silica cases have been dismissed, of which 211 were dismissed in 2006. Most of these claims do not provide adequate
information to assess their merits, the likelihood that the Company will be found liable, or the magnitude of such liability, if any. Additional claims of
this nature may be made against the Company or its subsidiaries. At this time
management anticipates that the amount of the Company's liability, if any, and
the cost of defending such claims, will not have a material effect on its financial position or results of operations.
The Company has not settled any silica or asbestos lawsuits to date. We are
unable to state an amount or range of amounts claimed in any of the lawsuits
because state court pleading practices do not require identifying the amount of
the claimed damage. The aggregate cost to the Company for 2006 for the legal
defense of these cases was $0.1 million. The Company expenses legal costs when
incurred. Our experience has been that MTI is not liable to plaintiffs in any of
these lawsuits and MTI does not expect to pay any settlements or jury verdicts
in these lawsuits.

Environmental Matters

On April 9, 2003, the Connecticut Department of Environmental Protection ("DEP")
issued an administrative consent order relating to our Canaan, Connecticut, plant where both our Refractories segment and Specialty Minerals segment have
operations. We agreed to the order, which includes provisions requiring
investigation and remediation of contamination associated with historic use of
polychlorinated biphenyls (PCBs) at a portion of the site. The following is the
present status of the remediation efforts:

.
Building Decontamination.
We have completed the investigation of building contamination and submitted
a report characterizing the contamination. We are awaiting review and approval of this report by the regulators. Based on the results of this
investigation, we believe that the contamination may be adequately addressed
by means of encapsulation through painting of exposed surfaces, pursuant to
the Environmental Protection Agency's ("EPA") regulations and have accrued
such liabilities as discussed below. However, this conclusion remains uncertain pending completion of the phased remediation decision process
required by the regulations.

.
Groundwater. We are still
conducting investigations of potential groundwater contamination. To date,
the results of investigation indicate that there is some oil contamination
of the groundwater. We are conducting further investigations of the
groundwater.

.
Soil. We have completed
the investigation of soil contamination and submitted a report
characterizing contamination to the regulators. Based on the results of this
investigation, we believe that the contamination may be left in place and
monitored, pursuant to a site-specific risk assessment, which is underway.
However, this conclusion is subject to completion of a phased remediation
decision process required by applicable regulations.

     We believe that the most likely form of remediation will be to leave
existing contamination in place, encapsulate it, and monitor the effectiveness
of the encapsulation.
     We estimate that the cost of the likely remediation above would
approximate $200,000, and that amount has been recorded as a liability on our
books and records.
     The Company is evaluating options for upgrading the wastewater treatment
facilities at its Adams, Massachusetts, plant. This work is being undertaken
pursuant to an administrative consent order issued by the Massachusetts
Department of Environmental Protection on June 18, 2002. The order required payment of a civil fine in the amount of $18,500, the investigation of options
for ensuring that the facility's wastewater treatment ponds will not result in
discharge to groundwater, and closure of a historic lime solids disposal area.
The Company is committed to identifying appropriate improvements to the
wastewater treatment system by July 1, 2007, and to implementing the improvements by
June 1, 2012. Preliminary engineering reviews indicate that the estimated cost
of these upgrades to operate this facility beyond 2012 may be between $6 million
and $8 million. The Company estimates that remediation costs would approximate
$350,000, which has been accrued as of December 31, 2006. It is reasonably possible that a change in estimate may occur.
     The Company and its subsidiaries are not party to any other material
pending legal proceedings, other than routine litigation incidental to their
businesses.

Note 20.  Stockholders' Equity

Capital Stock

     The Company's authorized capital stock consists of 100 million shares of
common stock, par value $0.10 per share, of which 19,085,528 shares and
19,986,801 shares were outstanding at December 31, 2006 and 2005, respectively,
and 1,000,000 shares of preferred stock, none of which were issued and
outstanding.

F-25

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Dividends

     Cash dividends of $3.9 million or $0.20 per common share were paid
during 2006. In January 2007, a cash dividend of approximately $0.9 million or
$0.05 per share, was declared, payable in the first quarter of 2007.

Preferred Stock Purchase Rights

     Under the Company's Preferred Stock Purchase Rights Plan, each share of
the Company's common stock carries with it one preferred stock purchase right.
Subject to the terms and conditions set forth in the plan, the rights will become exercisable if a person or group acquires beneficial ownership of 15% or
more of the Company's common stock or announces a tender or exchange offer that
would result in the acquisition of 30% or more thereof. If the rights become
exercisable, separate certificates evidencing the rights will be distributed,
and each right will entitle the holder to purchase from the Company a new series
of preferred stock, designated as Series A Junior Preferred Stock, at a
predefined price. The rights also entitle the holder to purchase shares in a
change-of-control situation. The preferred stock, in addition to a preferred
dividend and liquidation right, will entitle the holder to vote on a pro rata
basis with the Company's common stock.
     The rights are redeemable by the Company at a fixed price until 10 days
or longer, as determined by the Board, after certain defined events or at any
time prior to the expiration of the rights on September 13, 2009 if such events
do not occur.

Stock and Incentive Plan

     The Company has adopted a Stock Award and Incentive Plan (the
"Plan"),
which provides for grants of incentive and non-qualified stock options, stock
appreciation rights, stock awards or performance unit awards. The Plan is administered by the Compensation Committee of the Board of Directors. Stock
options granted under the Plan have a term not in excess of ten years. The exercise price for stock options will not be less than the fair market value of
the common stock on the date of the grant, and each award of stock options will
vest ratably over a specified period, generally three years.
     The following table summarizes stock option and restricted stock
activity for the Plan:

Under Option

Restricted Stock

Shares Available for Grant

Shares

Weighted Average Exercised Price Per Share ($)

Shares

Weighted Average Exercise Price Per Share ($)

Balance January 1, 2004

1,190,737

1,482,766

40.85

27,855

49.12

Granted

(297,650
)

270,750

54.09

26,900

50.59

Exercised

--

(363,300
)

39.01

--

--

Canceled

23,998

(21,998
)

46.25

(2,000
)

49.12

Balance December 31, 2004

917,085

1,368,218

43.87

52,755

49.88

Granted

(86,800
)

50,700

61.97

36,100

60.59

Exercised

--

(218,431
)

40.69

--

--

Canceled

18,822

(14,722
)

51.51

(4,100
)

51.56

Balance December 31, 2005

849,107

1,185,765

45.15

84,755

54.20

Granted

(129,500
)

79,200

54.82

50,300

54.91

Exercised

--

(103,392
)

39.02

(255
)

39.30

Canceled

9,504

(9,504
)

35.80

--

--

Balance December 31, 2006

729,111

1,152,069

46.44

134,800

55.61

Note 21.  Comprehensive Income

      Comprehensive income includes changes in the fair value of certain
financial derivative instruments that qualify for hedge accounting to the extent
they are effective, the recognition of deferred pension costs, and cumulative
foreign currency translation adjustments.

F-26

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The following table reflects the accumulated balances of other
comprehensive income (loss):

Millions of Dollars

Currency Translation Adjustment

Unrecognized

Pension

Costs

Net Gain (Loss) On Cash Flow Hedges

Accumulated Other Comprehensive Income (Loss)

Balance at January 1, 2004

$

6.9

$

(2.7
)

$

(0.4
)

$

3.8

Current year net change

34.0

(2.2
)

0.1

31.8

Balance at December 31, 2004

40.9

(4.9
)

(0.3
)

35.6

Current year net change

(43.7
)

1.9

0.2

(41.5
)

Balance at December 31, 2005

(2.8
)

(3.0
)

(0.1
)

(5.9
)

Current year net change

36.0

(51.3
)

--

(15.3
)

Balance at December 31, 2006

$

33.2

$

(54.3
)

$

(0.1
)

$

(21.2
)

     The income tax expense (benefit) associated with items included in other
comprehensive income (loss) was approximately $1.9 million, $(1.3) million and
$(0.2) million for the years ended December 31, 2006, 2005 and 2004,
respectively.

Note 22.  Accounting for Asset Retirement Obligations

     SFAS No. 143, "Accounting for Asset Retirement Obligations," establishes
the financial accounting and reporting for obligations associated with the retirement of long-lived assets and the associated asset retirement costs. The
Company records asset retirement obligations in which the Company will be required to retire tangible long-lived assets. These are primarily related to
its PCC satellite facilities and mining operations. The Company has also applied
the provisions of FIN 47 related to conditional asset retirement obligations at
its facilities. The Company has recorded asset retirement obligations at all of
its facilities except where there are no contractual or legal obligations. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset.
     The following is a reconciliation of asset retirement obligations as of
December 31, 2006:

Thousands of Dollars

Asset retirement liability,
beginning of period

$

10,968

Accretion expense

723

Settlements

(283
)

Foreign currency translation

242

Asset retirement liability,
end of period

$

11,650

     The current portion of the liability of approximately $0.2 million is
included in other current liabilities. The long-term portion of the liability of
approximately $11.5 million is included in other noncurrent liabilities.
     Accretion expense is included in cost of goods sold in the Company's
Consolidated Statements of Income.

Note 23.  Accounting for Stripping Costs

     Effective January 1, 2006, the Company adopted the consensus of EITF No.
04-06, "Accounting for Stripping Costs Incurred During Production in the Mining
Industry." This consensus states that stripping costs incurred during the
production phase of a mine are variable production costs that should be included
in the costs of inventory produced during the period that the stripping costs
are incurred. The Company had previously deferred stripping costs in excess of
the average life of mine stripping ratio and amortized such costs on a unit of
production method when the ratio of waste to ore mined is less than the average
life of mine stripping ratio. As a result, the Company recorded an after-tax
charge of $7.1 million to its opening retained earnings and increased its opening inventory by $0.8 million.

F-27

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The following is a reconciliation of opening retained earnings:

(thousands of dollars)

Ending retained earnings,
December 31, 2005

$

828,591

Adoption of EITF 04-06, net of
tax

7,119

Opening retained earnings,
January 1, 2006

$

821,472

     The change did not have a significant impact on earnings in 2006.

Note 24.  Non-Operating Income and Deductions

(thousands of
dollars)

Dec. 31, 2006

Dec. 31, 2005

Dec. 31, 2004

Interest income

$

1,762

$

1,384

$

1,589

Interest expense

(7,753
)

(5,847
)

(4,130
)

Gain on insurance settlement

1,822

--

--

Litigation settlement

--

2,100

--

Foreign exchange losses

(268
)

(451
)

(564
)

Other income (deductions)

(867
)

(820
)

(1,399
)

Non-operating
deductions, net

$

(5,304
)

$

(3,634
)

$

(4,504
)

     During the first quarter of 2006, the Company recognized an insurance
settlement gain of $1.8 million, net of related deductible, for property damage
sustained at one of our facilities in 2004 as a result of Hurricane Ivan. Claims
submitted to the insurance carrier for damages related to a combination of replacement costs for fixed assets and reimbursement of expenses associated with
the clean-up and repairs at the facility. The insurance settlement gain related
to the reimbursement of replacement costs for fixed assets in excess of the net
book value of such assets.
     During the fourth quarter of 2005, the Company recognized a litigation
settlement gain of $2.1 million relating to the worldwide settlement of its pending commercial and patent litigation with Omya AG.

Note 25.  Transaction with Former Parent Company

     Under the terms of certain agreements entered into in connection with
the Company's initial public offering in 1992, Pfizer Inc ("Pfizer") agreed to
indemnify the Company against any liability arising from claims for remediation,
as defined in the agreements, of on-site environmental conditions relating to
activities prior to the closing of the initial public offering. The Company had
asserted to Pfizer a number of indemnification claims pursuant to those
agreements during the ten-year period following the closing of the initial public offering. Since the initial public offering, the Company has incurred and
expensed approximately $6 million of environmental claims under these
agreements. On January 20, 2006, Pfizer and the Company agreed to settle those
claims, along with certain other potential environmental liabilities of Pfizer,
in consideration of a payment by Pfizer of $4.5 million. Such payment was recorded as additional paid-in-capital, net of its related tax effect.

Note 26.  Segment and Related Information

     Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance. The Company's operating segments are strategic business
units that offer different products and serve different markets. They are managed separately and require different technology and marketing strategies.
     The Company has two reportable segments: Specialty Minerals and
Refractories. The Specialty Minerals segment produces and sells precipitated
calcium carbonate and lime, and mines, processes and sells the natural mineral
products limestone and talc. This segment's products are used principally in the
paper, building materials, paints and coatings, glass, ceramic, polymers, food,
and pharmaceutical industries. The Refractories segment produces and markets
monolithic and shaped refractory products and systems used primarily by the steel, cement and glass industries as well as metallurgical products used primarily in the steel industry.
     The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based on the operating income of the respective business units. Depreciation expense related to corporate assets is allocated to the business
segments and is included in their income from operations. However, such
corporate depreciable assets are not included in the segment assets.
Intersegment sales and transfers are not significant.

F-28

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Segment information for the years ended December 31, 2006, 2005 and 2004
was as follows (in millions):

2006

Specialty Minerals

Refractories

Total

Net sales

$

711.4

$

347.9

$

1,059.3

Income from operations

52.9

32.0

84.9

Bad debt expenses

0.8

(0.4
)

0.4

Depreciation, depletion and
amortization

68.8

14.4

83.2

Segment assets

795.8

356.2

1,152.0

Capital expenditures

67.8

16.0

83.8

2005

Specialty Minerals

Refractories

Total

Net sales

$

663.0

$

327.8

$

990.8

Income from operations

52.7

28.3

81.0

Impairment of assets

0.3

--

0.3

Bad debt expenses

0.3

(0.8
)

(0.5
)

Depreciation, depletion and
amortization

61.2

12.1

73.3

Segment assets

768.1

293.4

1,061.5

Capital expenditures

85.3

21.8

107.1

2004

Specialty Minerals

Refractories

Total

Net sales

$

618.7

$

300.3

$

919.0

Income from operations

57.7

30.4

88.1

Restructuring charges

0.7

0.4

1.1

Bad debt expenses

1.3

0.3

1.6

Depreciation, depletion and
amortization

57.9

12.2

70.1

Segment assets

769.6

297.4

1,067.0

Capital expenditures

83.1

17.8

100.9

     A reconciliation of the totals reported for the operating segments to
the applicable line items in the consolidated financial statements is as follows
(in millions):

Income before
provision for taxes on


income and
minority interests

2006

2005

2004

Income from
operations for reportable segments

$

84.9

$

81.0

$

88.1

Unallocated
corporate expenses

--

--

(1.0
)

Consolidated
income from operations

84.9

81.0

87.1

Interest income

1.8

1.4

1.6

Interest expense

(7.8
)

(5.8
)

(4.1
)

Other deductions

0.7

0.8

(2.0
)


Income before
provision for taxes on income,


minority interests and
discontinued operations

$

79.6

$

77.4

$

82.6

Total
assets

2006

2005

2004

Total segment
assets

$

1,152.0

$

1,061.5

$

1,067.0

Corporate assets

41.1

94.8

87.9




Consolidated total assets

$

1,193.1

$

1,156.3

$

1,154.9

F-29

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capital expenditures

2006

2005

2004

Total segment
capital expenditures

$

83.8

$

107.1

$

100.9

Corporate capital
expenditures

1.4

4.4

5.5




Consolidated total capital
expenditures

$

85.2

$

111.5

$

106.4

     The carrying amount of goodwill by reportable segment as of December 31,
2006 and December 31, 2005 was as follows:

Goodwill

(Thousands of
Dollars)

2006

2005

Specialty
Minerals

$

16,560

$

15,371

Refractories

52,417

38,241


Total

$

68,977

$

53,612

     The net change in goodwill since December 31, 2005 was primarily
attributable to the acquisition of ASMAS and the effect of foreign exchange.
     Financial information relating to the Company's operations by geographic
area was as follows (in millions):

Net Sales

2006

2005

2004

United States

$

628.4

$

600.1

$

558.2

Canada/Latin
America

80.7

80.0

81.7

Europe/Africa

278.4

248.7

222.7

Asia

71.8

62.0

56.4

Total
International

430.9

390.7

360.8




Consolidated total net sales

$

1,059.3

$

990.8

$

919.0

     Net sales and long-lived assets are attributed to countries and
geographic areas based on the location of the legal entity. No individual foreign country represents more than 10% of consolidated net sales or
consolidated long-lived assets.



Long-lived assets

2006

2005

2004

United States

$

425.2

$

424.0

$

412.4

Canada/Latin
America

18.8

21.1

23.7

Europe/Africa

217.1

176.8

194.0

Asia

75.3

67.6

43.7

Total
International

311.2

265.5

261.4




Consolidated total long-lived
assets

$

736.4

$

689.5

$

673.8

     The Company's sales by product category are as follows:

Millions of Dollars

2006

2005

2004

Paper PCC

$

500.6

$

460.7

$

429.3

Specialty PCC

56.4

55.6

50.7

Talc

58.5

54.2

51.6

SYNSIL^®

10.4

6.6

3.1

Other Processed Minerals

85.5

85.9

84.0

Refractory Products

264.6

239.3

243.0

Metallurgical Products

83.3

88.5

57.3

Net Sales

$

1,059.3

$

990.8

$

919.0

F-30

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 27.  Quarterly Financial Data (unaudited)

     The financial information for all periods presented has been
reclassified to reflect discontinued operations. See Note 4 to the Consolidated
Financial Statements for further information.

Millions of Dollars, Except Per Share Amounts

2006 Quarters

First

Second

Third

Fourth

Net Sales by Major Product Line

PCC

$

141.9

$

137.7

$

138.9

$

138.5

Processed Minerals

39.2

41.8

38.9

34.5

Specialty
Minerals Segment

181.1

179.5

177.8

173.0

Refractories Segment

83.6

86.9

87.5

89.9

Net sales

264.7

266.4

265.3

262.9

Gross profit

53.7

56.1

57.8

53.7

Income from continuing operations

12.7

12.6

14.1

12.2

Income from discontinued operations

0.1

(0.1
)

--

(1.7
)

Net income

$

12.8

$

12.5

$

14.1

$

10.5

Earnings per
share:

Basic:

Earnings per
share

from continuing operations

$

0.64

$

0.63

$

0.72

$

0.64

Earnings per share

discontinued operations

--

--

--

(0.09
)

Basic earnings per share

$

0.64

$

0.63

$

0.72

$

0.55

Diluted:

Earnings per share

from continuing operations

$

0.64

$

0.63

$

0.72

$

0.63

Earnings per share

from discontinued operations

--

--

--

(0.08
)

Diluted earnings per share

$

0.64

$

0.63

$

0.72

$

0.55

Market price
range per share of common stock:

High

$

58.93

$

61.27

$

53.40

$

59.31

Low

$

52.97

$

51.61

$

48.01

$

51.71

Close

$

58.41

$

52.00

$

53.40

$

58.79

Dividends paid per common share

$

0.05

$

0.05

$

0.05

$

0.05

F-31

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2005 Quarters

First

Second

Third

Fourth

Net Sales by Major Product Line

PCC

$

132.8

$

121.6

$

129.3

$

132.5

Processed Minerals

35.8

37.8

36.7

36.5

Specialty
Minerals Segment

168.6

159.4

166.0

169.0

Refractories Segment

81.0

84.0

79.5

83.2

Net sales

249.6

243.4

245.5

252.2

Gross profit

57.3

51.3

50.9

50.6

Income from continuing operations

14.9

13.0

12.1

12.5

Income from discontinued operations

0.3

0.1

0.1

0.1

Net income

$

15.2

$

13.1

$

12.2

$

12.6

Earnings per
share:

Basic:

Earnings per share

from continuing operations

$

0.72

$

0.63

$

0.60

$

0.63

Earnings per share

from discontinued operations

0.02

0.01

0.01

--

Basic earnings per share

$

0.74

$

0.64

$

0.61

$

0.63

Diluted:

Earnings per share

from continuing operations

$

0.71

$

0.62

$

0.60

$

0.63

Earnings per share

from discontinued operations

0.02

0.01

--

--

Diluted earnings per share

$

0.73

$

0.63

$

0.60

$

0.63

Market price
range per share of common stock:

High

$

66.80

$

68.83

$

64.11

$

58.32

Low

$

60.52

$

60.02

$

57.21

$

51.59

Close

$

65.78

$

61.60

$

57.21

$

55.89

Dividends paid per common share

$

0.05

$

0.05

$

0.05

$

0.05

     In the fourth quarter of 2005, the Company recorded a
$0.3 million writedown of impaired assets relating to the planned closure of the
Company's operations in Cornwall, Canada.

F-32

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Minerals Technologies Inc.:
We have audited the accompanying consolidated balance sheets of Minerals Technologies Inc. and subsidiary companies as of December 31, 2006 and 2005, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 2006. In
connection with our audits of the consolidated financial statements, we also
have audited the related financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with the
standards of the Public
Company Accounting Oversight Board (United
States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Minerals
Technologies Inc. and subsidiary companies as of December 31, 2006 and 2005, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2006, in conformity with U.S.
generally accepted
accounting principles. Also in
our opinion, the related financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

As discussed in the notes to the consolidated financial statements, effective
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 123R, "Shared-Based Payment," SFAS No. 151, "Inventory Costs
- an
Amendment of ARB No. 43, Chapter 4," and Emerging Issues Task Force Issue No.
04-06, "Accounting for Stripping Costs Incurred During Production in the Mining
Industry." Also as discussed in the notes to the consolidated financial
statements, effective December 31, 2006, the Company adopted SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Post Retirement
Plans - An Amendment of FASB Statements No. 87, 88, 106, and 132(R)."
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Minerals Technologies Inc. and subsidiary companies' internal control over financial
reporting as of December 31, 2006, based on
criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and our report dated February 27, 2007 expressed an unqualified opinion
on management's assessment of, and the effective operation of, internal control
over financial reporting.

/s/ KPMG LLP

New York, New York

February 27, 2007

F-33

Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting

The Board of Directors and Shareholders

Minerals Technologies Inc.:

We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that
Minerals Technologies Inc. and subsidiary companies maintained effective
internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Minerals Technologies Inc. and subsidiary companies' management is responsible
for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the Company's internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles. A company's internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with U.S. generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management's Report on
Internal Control Over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did
not include the internal controls of a refractories company in Turkey acquired
on October 2, 2006. This refractories company, excluding goodwill, constituted approximately 2.5% of consolidated
total assets of the Company and less than 1% of consolidated net sales.
Our audit of internal control over financial reporting of the Company also did
not include an evaluation of the internal control over financial reporting of
this acquired company.
In our opinion, management's assessment that Minerals Technologies Inc. and
subsidiary companies maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects,
based on criteria established in Internal Control - Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Also, in our opinion, Minerals Technologies Inc. and subsidiary companies
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of Minerals Technologies Inc. and subsidiary companies as of December 31,
2006 and 2005, and the related consolidated statements of income, shareholders'
equity, and cash flows and related financial statement schedule for each of the
years in the three-year period ended December 31, 2006, and our report dated
February 27, 2007 expressed an unqualified opinion on those consolidated
financial statements and financial statement schedule. Our report refers to the
adoption in 2006 of Statement of Financial Accounting Standards ("SFAS") No.
123R, "Shared-Based Payment," SFAS No. 151, "Inventory Costs - an Amendment of ARB No. 43, Chapter 4," Emerging Issues Task Force Issue No. 04-06,
"Accounting
for Stripping Costs Incurred During Production in the Mining Industry," and SFAS
No. 158, "Employers' Accounting for Defined Benefit Pension and Other Post
Retirement Plans - An Amendment of FASB Statements No. 87, 88, 106, and 132(R)."

/s/ KPMG LLP

New York, New York

February 27, 2007

F-34

Management's Report On Internal Control Over Financial Reporting

     Management of Minerals Technologies Inc. is responsible for the
preparation, integrity and fair presentation of its published consolidated financial statements. The financial statements have been prepared in accordance
with U.S. generally accepted accounting principles and, as such, include amounts
based on judgements and estimates made by management. The Company also prepared
the other information included in the annual report and is responsible for its
accuracy and consistency with the consolidated financial statements.
     Management is also responsible for establishing and maintaining
effective internal control over financial reporting. The Company's internal control over financial reporting includes those policies and procedures that
pertain to the Company's ability to record, process, summarize and report reliable financial data. The Company maintains a system of internal control over
financial reporting, which is designed to provide reasonable assurance to the
Company's management and board of directors regarding the preparation of
reliable published financial statements and safeguarding of the Company's assets. The system includes a documented organizational structure and division
of responsibility, established policies and procedures, including a code of conduct to foster a strong ethical climate, which are communicated throughout
the Company, and the careful selection, training and development of our people.
     The Board of Directors, acting through its Audit Committee, is
responsible for the oversight of the Company's accounting policies, financial
reporting and internal control. The Audit Committee of the Board of Directors is
comprised entirely of outside directors who are independent of management. The
Audit Committee is responsible for the appointment and compensation of the independent registered public accounting firm. It meets periodically with management, the independent registered public accounting firm and the internal
auditors to ensure that they are carrying out their responsibilities. The Audit
Committee is also responsible for performing an oversight role by reviewing and
monitoring the financial, accounting and auditing procedures of the Company in
addition to reviewing the Company's financial reports. The independent
registered public accounting firm and the internal auditors have full and unlimited access to the Audit Committee, with or without management, to discuss
the adequacy of internal control over financial reporting, and any other matters
which they believe should be brought to the attention of the Audit Committee.
     Management recognizes that there are inherent limitations in the
effectiveness of any system of internal control over financial reporting, including the possibility of human error and the circumvention or overriding of
internal control. Accordingly, even effective internal control over financial
reporting can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect misstatements. Further,
because of changes in conditions, the effectiveness of internal control over
financial reporting may vary over time.
     The Company assessed its internal control system as of December 31, 2006
in relation to criteria for effective internal control over financial reporting
described in "Internal Control - Integrated Framework" issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on its assessment,
the Company has determined that, as of December 31, 2006, its system of internal
control over financial reporting was effective.
     On October 2, 2006, the Company completed an acquisition of a
refractories company in Turkey and has excluded this company from our assessment
of the effectiveness of our internal control over financial reporting. During
2006, this company contributed less than 1% of consolidated net sales and, as
of December 31, 2006, accounted for approximately 2.5% of our consolidated total assets,
excluding goodwill.
     The consolidated financial statements have been audited by the
independent registered public accounting firm, KPMG LLP, which was given
unrestricted access to all financial records and related data, including minutes
of all meetings of stockholders, the Board of Directors and committees of the
Board. Reports of the independent registered public accounting firm, which includes the independent registered public accounting firm's attestation of
management's assessment of internal controls, are also presented within this
document.

/s/
Paul R. Saueracker

Chairman of the Board, President and

Chief Executive Officer
/s/
John A. Sorel

Senior Vice President, Finance

and Chief Financial Officer

/s/
Michael A. Cipolla

Vice President, Corporate Controller

and Chief Accounting Officer

February 27, 2007

F-35

MINERALS TECHNOLOGIES INC. & SUBSIDIARY COMPANIES

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

(thousands of dollars)

Description

Balance at Beginning of Period

Additions Charged to Costs, Provisions and Expenses
(c)

Deductions (a) (b)

Balance at End of Period

Year ended
December 31, 2006

Valuation and
qualifying accounts deducted from

assets to which they apply:

Allowance for
doubtful accounts

$

5,818

$

377

$

(1,645)

$

4,550

Year ended
December 31, 2005

Valuation and
qualifying accounts deducted from

assets to which they apply:

Allowance for
doubtful accounts

$

7,143

$

(518)

$

(807)

$

5,818

Year ended
December 31, 2004

Valuation and
qualifying accounts deducted from

assets to which they apply:

Allowance for
doubtful accounts

$

7,010

$

1,576

$

(1,443)

$

7,143

(a)
Includes impact of translation
of foreign currencies.

(b)
Uncollectible accounts charged
against allowance for doubtful accounts, net of recoveries of $2.3 million
in 2004.

(c)
Provision for bad debts, net of
reversal of recoveries of $0.6 million in 2006 and $1.0 million in 2005.

S-1

=}

	12/01	12/02	12/03	12/04	12/05	12/06

Minerals Technologies Inc.	100.00	92.72	127.59	144.13	121.16	127.92
S & P 500	100.00	77.90	100.24	111.15	116.61	135.03
S & P MidCap 400 Materials Sector	100.00	95.43	119.42	148.72	178.95	205.10

.	Building Decontamination. We have completed the investigation of building contamination and submitted a report characterizing the contamination. We are awaiting review and approval of this report by the regulators. Based on the results of this investigation, we believe that the contamination may be adequately addressed by means of encapsulation through painting of exposed surfaces, pursuant to the Environmental Protection Agency's ("EPA") regulations and have accrued such liabilities as discussed below. However, this conclusion remains uncertain pending completion of the phased remediation decision process required by the regulations.
.	Groundwater. We are still conducting investigations of potential groundwater contamination. To date, the results of investigation indicate that there is some oil contamination of the groundwater. We are conducting further investigations of the groundwater.
.	Soil. We have completed the investigation of soil contamination and submitted a report characterizing contamination to the regulators. Based on the results of this investigation, we believe that the contamination may be left in place and monitored, pursuant to a site-specific risk assessment, which is underway. However, this conclusion is subject to completion of a phased remediation decision process required by applicable regulations.

2006 Quarters	First		Second		Third		Fourth

Market Price Range Per Share of Common Stock
High	$	58.93	$	61.27	$	53.40	$	59.31
Low		52.97		51.61		48.01		51.71
Close		58.41		52.00		53.40		58.79

Dividends paid per common share	$	0.05	$	0.05	$	0.05	$	0.05

2005 Quarters	First		Second		Third		Fourth

Market Price Range Per Share of Common Stock
High	$	66.80	$	68.83	$	64.11	$	58.32
Low		60.52		60.02		57.21		51.59
Close		65.30		61.78		57.21		55.89

Dividends paid per common share	$	0.05	$	0.05	$	0.05	$	0.05

Plan Category	Number of securities to be issued upon exercise of outstanding options	Weighted average exercise price of outstanding options		Number of securities remaining available for future issuance


Equity compensation plans approved by security holders	1,152,069	$	46.44	729,111

Equity compensation plans not approved by security holders	--		--	--


Total	1,152,069	$	46.44	729,111

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of the Publicly Announced Program	Dollar Value of Shares That May Yet be Purchased Under the Program


October 1 - October 29	169,000	$	54.09	774,772	34,101,267

October 30 - November 26	23,900	$	55.07	798,672	32,784,995

November 27 - December 31	--	$	--	798,672	32,784,995


Total	192,900	$	54.21

Thousands, Except Per Share Data

Income Statement Data:		2006			2005				2004				2003						2002


Net sales		$	1,059,307		$	990,751			$		918,952		$		809,306				$			748,792
Cost of goods sold			838,015			780,553					706,298				613,118							565,650
Marketing and administrative expenses			106,016			100,363					92,811				83,797							74,143
Research and development expenses			30,016			29,062					28,996				25,149							22,695
Bad debt expenses (recoveries)			377			(518	)				1,576				5,307							6,214
Restructuring charges			--			--					1,145				3,323							--
Acquisition termination costs			--			--					997				--							--
Write-down of impaired assets			--			265					--				3,202							750

Income from operations			84,883			81,026					87,129				75,410							79,340

Income before provision for taxes on income,			79,579			77,392					82,625				70,535							74,182
	minority interests and discontinued operations
Provision for taxes on income			24,588			22,985					23,637				18,501							19,692
Minority interests			3,441			1,732					1,710				1,575							1,762


Income from continuing operations			51,550			52,675					57,278				50,459							52,728
Income (loss) from discontinued operations, net of tax			(1,599	)		589					1,285				1,160							1,024
Cumulative effect of accounting change			--			--					--				(3,399			)				--


Net income		$	49,951		$	53,264			$		58,563		$		48,220				$			53,752




Earnings Per Share		2006			2005			2004						2003						2002


Basic:
Earnings per share from continuing operations		$	2.63		$	2.59		$		2.79				$		2.50				$	2.61
Earnings (loss) per share from discontinued operations			(0.08	)		0.03				0.06						0.06					0.05
Cumulative effect of accounting change			--			--				--						(0.17	)				--


Basic earnings per share		$	2.55		$	2.62		$		2.85				$		2.39				$	2.66




Diluted:
Earnings per share from continuing operations		$	2.61		$	2.56		$		2.76				$		2.47				$	2.56
Earnings (loss) per share from discontinued operations			(0.08	)		0.03				0.06						0.06					0.05
Cumulative effect of accounting change			--			--				--						(0.17	)				--


Diluted earnings per share		$	2.53		$	2.59		$		2.82				$		2.36				$	2.61



Weighted average number of common shares outstanding:
Basic			19,600			20,345				20,530					20,208						20,199
Diluted			19,738			20,567				20,769					20,431						20,569
Dividends declared per common share		$	0.20		$	0.20		$		0.20		$			0.10				$		0.10

Balance Sheet Data:
Working capital		$	199,699		$	145,948		$		242,818		$			216,795				$		167,028
Total assets			1,193,124			1,156,303				1,154,902					1,035,690						899,877
Long-term debt			113,351			40,306				94,811					98,159						89,020
Total debt			203,058			156,851				128,728					131,681						120,351
Total shareholders' equity			752,557			771,162				799,313					707,381						594,157

Year Ended December 31,			2006		2005		2004


Net sales			100.0	%	100.0	%	100.0	%
Cost of goods sold			79.1		78.8		76.9
Marketing and administrative expenses			10.0		10.1		10.1
Research and development expenses			2.9		2.9		3.1
Bad debt expenses			--		--		0.2
Restructuring charges			--		--		0.1
Acquisition termination costs			--		--		0.1

Income from operations			8.0		8.2		9.5

Income before provision for taxes on income,
	minority interests and discontinued operations		7.5		7.8		9.0
Provision for taxes on income			2.3		2.3		2.6
Minority interests			0.3		0.2		0.2

Income from continuing operations			4.9		5.3		6.2
Income (loss) from discontinued operations			(0.2	)	0.1		0.2


		Net income	4.7	%	5.4	%	6.4	%

.	Increased profitability in the refractory products and systems product line, particularly in North America and Europe, due to strong demand through the first nine months of the year and lower costs achieved through product reformulations;
.	Improved operations at our new satellite PCC facilities in China;
.	Increased worldwide demand for PCC in all regions, and volume growth from expansions of existing PCC facilities in Europe; and
.	Royalty income and reduced litigation expenses from the settlement of patent litigation. The Company will receive additional royalty income of approximately $1.1 million per annum through 2009.

.	Unrecovered cost increases in the PCC product line due to the delayed pass-through of lim BB e cost increases;
.	Paper mill and paper machine shutdowns affecting several satellite PCC facilities;
.	Operating losses in our SYNSIL^® Products line primarily due to initial startup costs associated with our manufacturing facility in South Carolina;
.	Unrecovered energy cost increases and significant weakness in the end-use markets during the fourth quarter of 2006 in the Processed Minerals and Specialty PCC product lines;
.	Increased compensation expense related to the adoption of SFAS No. 123R;

.	Decreased margins in the metallurgical product line; and
.	During the fourth quarter of 2006, we also recognized a loss from discontinued operations of approximately $1.6 million related to foreign currency translation losses arising from the liquidation of our investment in Israel.

.	Our success depends in part on the performance of the industries we serve, particularly papermaking and steel making. Some of our customers may continue to experience consolidations and shutdowns;
.	Consolidations in the paper and steel industries concentrate purchasing power in the hands of fewer customers, increasing pricing pressure on suppliers such as Minerals Technologies Inc.;
.	Most of our Paper PCC sales are subject to long-term contracts that may be terminated pursuant to their terms, or may be renewed on terms less favorable to us;
.	We are subject to cost fluctuations on raw materials, including shipping costs, particularly on magnesia and talc imported from China;
.	We have experienced increased energy costs in both of our business segments that we may not be able to pass through to our customers;
.	Although the SYNSIL^® Products family has received favorable reactions from current and potential customers, this product line is not yet profitable. To date, the introduction of SYNSIL^® technology to customers has progressed more slowly than anticipated, resulting in temporary overcapacity at our facilities. The manufacturing facilities are strategically located in major market areas for glass making, and we believe our products provide a suitable value equation for glass manufacturers. However, the commercial viability of this product line cannot be assured.
.	The cost of employee benefits, particularly health coverage, has risen significantly in recent years and continues to do so; and
.	As we expand our operations abroad we face the inherent risks of doing business in many foreign countries, including foreign exchange risk, import and export restrictions, and security concerns.

.	Increasing our sales of PCC for paper by further penetration of the markets for paper filling at both freesheet and groundwood mills;
.	Increasing our sales of PCC for paper coating, particularly from our merchant coating PCC facilities in Walsum, Germany and Hermalle, Belgium;
.	Achieving commercialization of a filler-fiber composite technology for the paper industry through our continued research and development activities;
.	Developing new satellite PCC opportunities;
.	Achieving continued market acceptance of the SYNSIL^® Products family of composite minerals for the glass industry;
.	Continuing our penetration in emerging markets, including our new manufacturing facility in China and our recent acquisition in Turkey in the Refractories segment; and
.	Increasing market penetration in the Refractories segment through development of high-performance products and equipment systems.

Net Sales			2006	% of Total Sales		Growth			2005	% of Total Sales		Growth			2004	% of Total Sales

U.S.		$	628.4	59.3	%	5	%	$	600.1	60.6	%	8	%	$	558.2	60.7	%
International			430.9	40.7	%	10	%		390.7	39.4	%	8	%		360.8	39.3	%

	Net sales	$	1,059.3	100.0	%	7	%	$	990.8	100.0	%	8	%	$	919.0	100.0	%




Paper PCC		$	500.6	47.3	%	9	%	$	460.7	46.5	%	7	%	$	429.3	46.7	%
Specialty PCC			56.4	5.3	%	1	%		55.6	5.6	%	10	%		50.7	5.5	%

	PCC Products	$	557.0	52.6	%	8	%	$	516.3	52.1	%	8	%	$	480.0	52.2	%


Talc		$	58.5	5.5	%	8	%	$	54.2	5.4	%	5	%	$	51.6	5.6	%
Other Processed Minerals			85.5	8.1	%	(1)	%		85.9	8.7	%	2	%		84.0	9.1	%
SYNSIL^®			10.4	1.0	%	58	%		6.6	0.7	%	113	%		3.1	0.3	%

	Processed Minerals Products	$	154.4	14.6	%	5	%	$	146.7	14.8	%	6	%	$	138.7	15.1	%


	Specialty Minerals Segment	$	711.4	67.2	%	7	%	$	663.0	66.9	%	7	%	$	618.7	67.3	%


Refractory Products		$	264.6	25.0	%	11	%	$	239.3	24.2	%	(2)	%	$	243.0	26.4	%
Metallurgical Products			83.3	7.8	%	(6)	%		88.5	8.9	%	54	%		57.3	6.3	%

	Refractories Segment	$	347.9	32.8	%	6	%	$	327.8	33.1	%	9	%	$	300.3	32.7	%

	Net sales	$	1,059.3	100.0	%	7	%	$	990.8	100.0	%	8	%	$	919.0	100.0	%

Operating Costs and Expenses (Dollars in millions)		2006	Growth			2005		Growth			2004


Cost of goods sold	$	838.0	7	%	$	780.6		11	%	$	706.3
Marketing and administrative	$	106.0	6	%	$	100.4		8	%	$	92.8
Research and development	$	30.0	3	%	$	29.1		--	%	$	29.0
Bad debt expenses	$	0.4	*	%	$	(0.5	)	*	%	$	1.6
Acquisition termination costs	$	--	*	%	$	--		*	%	$	1.0
Restructuring charges	$	--	*	%	$	--		*	%	$	1.1
Write-down of impaired assets	$	--	*	%	$	0.3		*	%	$	--

.	Unrecovered lime cost increases in the PCC product line;
.	Paper machine and paper mill shutdowns;
.	Production losses in our SYNSIL^® Products line primarily due to initial startup costs associated with our new facility in South Carolina; and
.	Unrecovered energy cost increases in the Processed Minerals product line.

.	Ramp-up of our two new satellite PCC facilities in China;
.	Increased demand for PCC, particularly in North America;
.	Cost reduction initiatives; and
.	Expansions of satellite PCC facilities in Europe.

.	Start-up and ramp-up costs related to the European coating market development program;
.	The effects of continuing paper industry capacity rationalization, which lowered demand at several satellite plants;
.	Unrecovered raw material and energy costs; and
.	Start-up and ramp-up costs at two new facilities in China.

Income from Operations (Dollars in millions)		2006	Growth			2005	Growth			2004


Income from operations	$	84.9	5	%	$	81.0	(7)	%	$	87.1

Non-Operating Deductions (Dollars in millions)		2006	Growth			2005	Growth			2004


Non-operating deductions, net	$	5.3	47	%	$	3.6	(20)	%	$	4.5

Provision for Taxes on Income (Dollars in millions)		2006	Growth			2005	Growth			2004


Provision for taxes on income	$	24.6	7	%	$	23.0	(3)	%	$	23.6

Minority Interests (Dollars in millions)		2006	Growth			2005	Growth			2004


Minority interests	$	3.4	100	%	$	1.7	--	%	$	1.7

Income from Continuing Operations (Dollars in millions)		2006	Growth			2005	Growth			2004


Income from continuing operations	$	51.6	(2)	%	$	52.7	(8)	%	$	57.3

Net Income (Dollars in millions)		2006	Growth			2005	Growth			2004


Net income	$	50.0	(6)	%	$	53.3	(9)	%	$	58.6

.	Expand regionally into emerging markets where we have a limited presence.
.	Increase our presence in regional markets where the manufacturing of paper and steel is shifting, particularly China and Eastern Europe.
.	Increase market penetration of PCC in paper filling at both freesheet and groundwood mills.
.	Increase penetration of PCC into the paper coating market.
.	Continue research and development activities for new products, including commercialization of a filler-fiber composite technology for the paper industry.
.	Emphasize higher value specialty products and application systems to increase market penetration in the Refractories segment.
.	Continue research and development and marketing efforts for new and existing products, including the SYNSIL^® Products' family of composite minerals.
.	Continue to improve our cost competitiveness.
.	Continue selective acquisitions to complement our existing businesses.

	transactions are recorded when the consigned products are consumed by the customer. Revenues from sales of equipment are recorded upon completion of installation and receipt of customer acceptance. Revenues from services are recorded when the services are performed.
.	Allowance for doubtful accounts: Substantially all of our accounts receivable are due from companies in the paper, construction and steel industries. Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. Such allowance is established through a charge to the provision for bad debt expenses. We recorded bad debt expenses (recoveries) of $0.4 million, $(0.5) million and $1.6 million in 2006, 2005 and 2004, respectively. The $1.6 million provision in 2004 was net of $2.3 million of bad debt recoveries related to steel customer bankruptcies for previously written off accounts receivable. The charges in 2004 were much higher than historical levels and were primarily related to bankruptcy filings by some of our customers in the paper and steel industries and to additional provisions associated with risks in the paper, steel and other industries. In addition to specific allowances established for bankrupt customers, we also analyze the collection history and financial condition of our other customers considering current industry conditions and determine whether an allowance needs to be established or adjusted.
.	Property, plant and equipment, goodwill, intangible and other long-lived assets: 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.
.	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 and other intangible assets with indefinite lives are reviewed for impairment at least annually in accordance with the provisions of SFAS No. 142. Factors we consider important that could trigger an impairment review include the following:

.	significant under-performance relative to historical or projected future operating results;
.	significant changes in the manner of use of the acquired assets or the strategy for the overall business;
.	significant negative industry or economic trends.

	When we determine that the carrying value of intangibles, long-lived assets or goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we principally measure any impairment by our ability to recover the carrying amount of the assets from expected future operating cash flow on a discounted basis. Net intangible assets, long-lived assets, and goodwill amounted to $736.4 million as of December 31, 2006.
.	Accounting for 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 increase this allowance in a period, we must include an expense within the tax provision in the Consolidated Statements of Income.
.	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. Differences from these assumptions may result in a significant impact to the amount of pension expense/liability recorded by us follows:

(Dollars in millions)		Discount Rate			Salary Scale			Return on Asset


1% increase	$	(1.3	)	$	0.3		$	(1.4	)
1% decrease	$	1.5		$	(0.3	)	$	1.4

(thousands of dollars)		Discount Rate			Salary Scale

1% increase	$	(13.5	)	$	1.9
1% decrease	$	16.0		$	(1.7	)

Name	Age	Position

Paul R. Saueracker(*)	64	Chairman of the Board; President
		and Chief Executive Officer
Alain F. Bouruet-Aubertot	50	Senior Vice President and Managing Director, Minteq International
Kenneth L. Massimine	57	Senior Vice President and Managing Director, Paper PCC
John A. Sorel	59	Senior Vice President - Finance, and Chief Financial Officer
Gordon S. Borteck	49	Vice President, Organization and Human Resources
Kirk G. Forrest	55	Vice President, General Counsel and Secretary
D. Randy Harrison	55	Vice President and Managing Director, Performance Minerals
Michael A. Cipolla	49	Vice President - Corporate Controller and Chief Accounting Officer
William A. Kromberg	61	Vice President, Taxes
Gregory P. Kelm	53	Treasurer