of Operations

                                                      Income and Expense Items
                                                    as a Percentage of Net Sales

                                          Three Months Ended            Nine Months Ended

                                         Sept.
                                          28,          Sept.          Sept.          Sept.
                                         2008         30, 2007       28, 2008       30, 2007

Net sales                                 100.0 %       100.0  %        100.0 %       100.0  %
Cost of goods sold                         79.8           78.9           79.1           78.5


Production margin                          20.2           21.1           20.9           21.5
Marketing and administrative expenses       8.8            9.6            9.0            9.8
Research and development expenses           1.9            2.5            2.0            2.5
Restructuring and other costs               1.7            4.6            0.9            1.5
Impairment of assets                         --           35.3             --           11.7


Income from operations                      7.8              *            9.0              *


Income from continuing operations           5.4              *            5.9              *


Income from discontinued operations         1.0              *            0.9              *

Net income 6.4 % * % 6.8 % * %

*Percentage not meaningful

Executive Summary

Consolidated sales for the third quarter of 2008 increased 11% over the prior year to $294.9 million from $266.5 million. Sales growth was primarily due to increased pricing necessitated by higher raw material costs and to foreign exchange, which had a favorable impact on sales growth of approximately $10.3 million or 4 percentage points of growth. Operating income was $23.0 million as compared to a loss of $82.2 million in the prior year. Included in operating income in the third quarter of 2008 are restructuring costs of $5.0 million. Included in the operating loss of the prior year were restructuring costs of $12.1 million and an impairment of assets charge of $94.1 million. Income from continuing operations was $16.1 million as compared to a loss of $71.7 million in the prior year. Included in income from discontinued operations is a gain of $2.4 million primarily related to the sale of our idle Synsil facility in Cleburne, Texas. Net income was $19.0 million as compared to a loss of $105.5 million.

Third quarter results were positively affected by the benefits derived from the restructuring program announced in the third quarter of 2007, increased selling prices in all product lines, particularly in our Refractories segment, expense and manufacturing cost savings, mix in the refractory and metallurgical product lines and the effects of foreign exchange. This was partially offset by the continued decline in the residential construction and automotive markets affecting the Processed Minerals product line, additional volume losses in PCC due to consolidations in the paper industry, particularly in North America and significant raw material and energy cost increases in both segments.

The Company will continue to focus on innovation and new product development and other opportunities for continued growth as follows:

• Increasing our sales of PCC for paper by further penetration of the markets for paper filling at both freesheet and groundwood mills;
• Development of the filler-fiber composite program, to increase the fill-rate for uncoated freesheet paper, which continues to undergo large-scale paper machine trials;
• Further development of the Company's PCC coating products for use in the satellite model;

• Leverage the Company's expertise in crystal engineering, especially in helping papermakers customize PCC morphologies for specific paper applications;
• Development of unique calcium carbonates used in the manufacture of novel biopolymers, an emerging market opportunity;
• Rapid deployment of value-added formulations of refractory materials that not only reduce costs but improve performance; and
• Continuing our penetration in emerging markets through our manufacturing facility in China and our 2006 acquisition in Turkey, both within the Refractories segment.

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

We face some significant risks and challenges in the future:

• We are facing unprecedented uncertainty in this economic environment as a result of the global financial crisis. Our global business could be adversely affected by general decreases in economic activity. Also, the current tightening of credit in the financial markets could adversely affect the ability of our customers to obtain financing for purchases, negatively impacting our sales;
• The uncertainty in the global economy may also impact our worldwide pension assets. Changes in the fair market value of our pension assets, rates of return on assets, and discount rates could significantly impact our net periodic pension costs in 2009 as well as our funding requirements.
• Our success depends in part on the performance of the industries we serve, particularly papermaking and steel making. Some of our customers may experience further consolidations and shutdowns or may face increased liquidity issues, which could deteriorate the aging of our accounts receivable and increase our bad debt exposure;
• 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;
• Our filler-fiber composite technology continues in development through customer trials, but has yet to be proven on a long-term commercial scale;
• We are subject to rapid escalations on raw material costs in our Paper PCC product line and Refractories segment, including shipping costs, particularly for materials sourced from China. Our ability to recover these escalating costs is uncertain and may become more difficult in this economic environment;
• We are subject to potential shortages in supply of magnesium oxide sourced from China due to limited availability of export licenses;
• The performance of our Processed Minerals and Specialty PCC product lines are subject to fluctuations in energy costs;
• Our Processed Minerals and Specialty PCC product lines are highly influenced by the continued deterioration in the domestic building, construction and automotive markets; 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.

During the third quarter of 2008, Katahdin Paper Company shut down indefinitely one of its paper machines in Millinocket, Maine due to increased energy costs. The Company's two unit satellite PCC facility has also shut down indefinitely in conjunction with the paper machine shut down. Katahdin Paper Company is currently evaluating the possibility of decreasing energy consumption with a bio mass boiler. If the Millinocket mill does not resume operations, the Company would incur an impairment of assets charge of approximately $7.0 million.

Results of Operations

Sales


(millions of dollars)                             Third                                 Third       % of
                                                 Quarter   % of Total                  Quarter     Total
                 Net Sales                        2008       Sales        Growth        2007       Sales

U.S                                            $   154.2         52.3 %        6 %   $   144.8       54.3 %
International                                      140.7         47.7 %       16 %       121.7       45.7 %

       Net sales                               $   294.9        100.0 %       11 %   $   266.5      100.0 %


Paper PCC                                      $   141.7         48.0 %        5 %   $   134.9       50.6 %
Specialty PCC                                       15.5          5.3 %        1 %        15.4        5.8 %

       PCC Products                            $   157.2         53.3 %        5 %   $   150.3       56.4 %

Talc                                           $     9.8          3.3 %        5 %   $     9.3        3.5 %
Ground Calcium Carbonate                            19.7          6.7 %       (1 )        19.9        7.5 %

       Processed Minerals Products             $    29.5         10.0 %        1 %   $    29.2       11.0 %

       Specialty Minerals Segment              $   186.7         63.3 %        4 %   $   179.5       67.4 %

Refractory Products                            $    86.7         29.4 %       25 %   $    69.5       26.1 %
Metallurgical Products                              21.5          7.3 %       23 %        17.5        6.5 %

       Refractories Segment                    $   108.2         36.7 %       24 %   $    87.0       32.6 %


                      Net sales                $   294.9        100.0 %       11 %   $   266.5      100.0 %

Worldwide net sales in the third quarter of 2008 increased 11% from the previous year to $294.9 million. The increase in sales was primarily due to higher pricing, necessitated by significant raw material increases and volume growth in our metallurgical product line. In addition, foreign exchange had a favorable impact on sales of approximately $10.3 million or 4 percentage points of growth. Sales in the Specialty Minerals segment, which includes the PCC and Processed Minerals product lines, increased 4% to $186.7 million compared with $179.5 million for the same period in 2007. Sales in the Refractories segment grew 24% over the previous year to $108.2 million.

Worldwide net sales of PCC, which is primarily used in the manufacturing process of the paper industry, increased 5% in the third quarter to $157.2 million from $150.3 million in the prior year. This growth was due to contractual price increases and energy surcharges. In addition, foreign exchange had a favorable impact on sales of approximately 4 percentage points of growth. Unit volumes declined in both product lines. Paper PCC sales grew 5% to $141.7 million in the third quarter of 2008 from $134.9 million in the prior year. However, total Paper PCC volumes declined 3%. Weakness in the North American and European markets was partially offset by volume growth, particularly in Asia, and the impact of foreign currency. Sales of Specialty PCC increased 1% to $15.5 million from $15.4 million in the prior year.

Net sales of Processed Minerals products increased 1% in the third quarter to $29.5 million from $29.2 million in the third quarter of 2007 due primarily to price increases. This product line continues to be affected by weakness in the residential and commercial construction markets, as well as the automotive market. As a result, volumes have declined 10% from the prior year.

Net sales in the Refractories segment in the third quarter of 2008 increased 24% to $108.2 million from $87.0 million in the prior year. This segment was positively affected by the aforementioned increased selling prices necessitated by significant raw material increases and to the favorable effects of foreign currency. Sales of refractory products and systems to steel and other industrial applications increased 25 percent to $86.7 million from $69.5 million. Sales of metallurgical products within the Refractories segment increased 23 percent to $21.5 million as compared with $17.5 million in the same period last year. This increase was primarily attributable to slightly higher volumes and favorable mix, particularly in North America.

                                 Third       Third
Operating Costs and Expenses    Quarter     Quarter
(millions of dollars)            2008        2007     Growth

Cost of goods sold            $   235.5   $   210.2      12  %
Marketing and administrative  $    26.0   $    25.6       2  %
Research and development      $     5.4   $     6.7     (19) %
Impairment of assets          $      --        94.1       *
Restructuring and other costs $     5.0   $    12.1       *

* Percentage not meaningful

Cost of goods sold was 79.8% of sales compared with 78.9% of sales in the prior year. In the Specialty Minerals segment, production margin decreased 9% as compared with 4% sales growth. This segment has been affected by weakness in the Processed Minerals product line, additional volume loss in the Paper PCC product line due to consolidations in the paper industry, particularly in North America, price concessions in the Paper PCC product line and higher energy and raw material costs. This was partially offset by the recovery of raw material costs, the benefits of the restructuring program and manufacturing cost savings initiatives. In the Refractories segment, production margin increased 31% as compared with the 24% sales growth. This segment benefited from increased selling prices necessitated by higher raw material costs, the benefits of the restructuring program, and favorable product mix in the refractory and metallurgical product lines.

Marketing and administrative costs increased 2% in the third quarter to $26.0 million from $25.6 million in the prior year, but represented 8.8% of net sales as compared with 9.6% of net sales in the prior year.

Research and development expenses decreased 19% to $5.4 million and represented 1.9% of net sales as compared with 2.5% of net sales in the prior year.

Restructuring and other costs during the third quarter of 2008 relate primarily to a SFAS No. 88 pension settlement loss in our defined benefit plan in the U.S. as well as additional provisions for severance and other employee benefits.

During the third quarter of 2007, the Company initiated a plan to realign its operations as a result of an in-depth strategic review of all of its operations. This realignment resulted in impairment of assets charges and restructuring charges as follows:

Impairment of assets charges:

Paper PCC                     $ 65.3
Specialty PCC                   12.7

Total PCC                       78.0
Processed Minerals               1.3

   Specialty Minerals Segment   79.3
   Refractories Segment         14.8

$ 94.1

Restructuring and other costs:

Severance and other employee benefits $  9.2
Contract termination costs               2.3
Other exit costs                         0.6

$ 12.1

The restructuring also resulted in inventory write-downs of $1.4 million which were included in cost of goods sold.

                                 Third       Third
Income (Loss) from Operations   Quarter     Quarter
(millions of dollars)            2008        2007     Growth


Income (loss) from operations $    23.0   $   (82.2 )      * %

The Company recorded income from operations in the third quarter of 2008 of $23.0 million as compared with a loss from operations of $82.2 million in the prior year. Included in income from operations are restructuring charges of $5.0 million. The loss in the prior year was attributable to an impairment of assets charge of $94.1 million and restructuring and other exit costs of $12.1 million.

Income from operations in the third quarter of 2008 for the Specialty Minerals segment was $13.5 million, including a restructuring charge of $3.3 million, as compared to a loss of $70.7 million in the prior year. Operating income for the Refractories segment was $9.9 million, including a restructuring charge of $1.7 million, as compared to a loss of $11.5 million in the prior year.

                                          Third         Third
Non-Operating Income (Deductions)        Quarter       Quarter
(millions of dollars)                     2008          2007       Growth

Non-operating income (deductions), net $     0.3     $   (1.3)          * %

In the third quarter of 2008, net non-operating income increased to $0.3 million. This increase was primarily attributable to lower interest expense due to lower interest rates and reduced debt levels. In addition, higher interest income was generated in connection with increased cash on hand.

                                                  Third         Third
Provision (Benefit) for Taxes on Income (Loss)   Quarter       Quarter
(millions of dollars)                             2008          2007       Growth


Provision (benefit) for taxes on income (loss) $     6.3     $  (12.3)          * %

The full year effective tax rate is expected to be approximately 30.0 %, which reduced the effective tax rate to 27.2% in the third quarter of 2008. This reduction was primarily due to a change in the geographic mix of earnings. The tax benefit in the prior year was 14.7%. This reduced benefit was primarily attributable to restructuring and impairment losses recorded in certain jurisdictions in which we were unable to record a tax benefit.

                                            Third         Third
Income (Loss) from Continuing Operations   Quarter       Quarter
(millions of dollars)                       2008          2007       Growth

Income (loss) from continuing operations $    16.1     $  (71.7)          * %

The Company recorded income from continuing operations of $16.1 million as compared with a loss of $71.7 million in the prior year.

                                              Third         Third
Income (Loss) from Discontinued Operations   Quarter       Quarter
(millions of dollars)                         2008          2007       Growth

Income (loss) from discontinued operations $     3.0     $  (33.7)          * %

* Percentage not meaningful

In the third quarter of 2008 the Company recognized income from discontinued operations of $3.0 million as compared with a loss in the prior year of $33.7 million. Included in income from discontinued operations for 2008 is

                         Third         Third
Net Income (Loss)       Quarter       Quarter
(millions of dollars)    2008          2007       Growth

Net income (loss)     $    19.0     $ (105.5)          * %

Net income was $19.0 million in the third quarter of 2008 as compared with a loss of $105.5 million in the prior year. Diluted earnings per common share were $1.00 per share in the third quarter of 2008 as compared with a loss per common share of $5.47 per share in the prior year.

Nine Months Ended September 28, 2008 as compared with Nine Months Ended September 30, 2007

(millions of dollars)                                                                                        % of
                                                  Nine Months   % of Total                   Nine Months     Total
                  Net Sales                          2008         Sales        Growth           2007         Sales

U.S                                             $       461.0         52.9 %         5 %   $       438.4      54.6 %
International                                           411.2         47.1 %        13 %           365.1      45.4 %

       Net sales                                $       872.2        100.0 %         9 %   $       803.5     100.0 %


Paper PCC                                       $       421.7         48.3 %         5 %   $       402.4      50.1 %
Specialty PCC                                            46.6          5.4 %         1 %            46.0       5.7 %

       PCC Products                             $       468.3         53.7 %         4 %   $       448.4      55.8 %

Talc                                            $        28.5          3.3 %        -- %   $        28.4       3.5 %
Ground Calcium Carbonate                                 59.8          6.8 %         1 %            59.5       7.4 %

       Processed Minerals Products              $        88.3         10.1 %        -- %   $        87.9      10.9 %


       Specialty Minerals Segment               $       556.6         63.8 %         4 %   $       536.3      66.7 %


Refractory Products                             $       255.6         29.3 %        19 %   $       214.3      26.7 %
Metallurgical Products                                   60.0          6.9 %        13 %            52.9       6.6 %

       Refractories Segment                     $       315.6         36.2 %        18 %   $       267.2      33.3 %


                      Net sales                 $       872.2        100.0 %         9 %   $       803.5     100.0 %

Worldwide net sales in the nine months ended September 28, 2008 increased 9% from the previous year to $872.2 million. The sales growth was primarily attributable to increased pricing and the effect of foreign exchange which had a favorable impact on sales of approximately $36.4 million or 4 percentage points of growth. Sales in the Specialty Minerals segment, which includes the PCC and Processed Minerals product lines, increased 4% to $556.6 million compared with $536.3 million for the same period in 2007. Sales in the Refractories segment grew 18% over the previous year to $315.6 million.

Worldwide net sales of PCC increased 4% in the first nine months to $468.3 million from $448.4 million in the prior year. Foreign exchange had a favorable impact on sales of approximately 5 percentage points of growth. Paper PCC sales grew 5% to $421.7 million in the first nine months of 2008 from $402.4 million in the prior year. However, total paper PCC volumes declined 2.5 percent. Weaknesses in the North American and European markets were partially offset by volume growth in Asia and Latin America. Sales of Specialty PCC increased 1% to $46.6 million from $46.0 million in the prior year.

Net sales of Processed Minerals products increased slightly over prior year in the first nine months of 2008 to $88.3 million, despite volume decreases of 3%, due to price increases to recover energy costs. This product line continues to be affected by weakness in the residential and commercial construction markets, as well as the automotive market.

Net sales in the Refractories segment in the first nine months of 2008 increased 18% to $315.6 million from $267.2 million in the prior year. This segment was positively impacted by price increases to recover significant raw material increases, favorable product mix in the refractory and metallurgical product line, and volume growth in the metallurgical product line. In addition, foreign exchange had a favorable impact on sales of $15.7 million or approximately 6 percentage points of growth. Sales of refractory products and systems to steel and other industrial applications increased 19 percent to $255.6 million from $214.3 million. Sales of metallurgical products within the Refractories segment increased 13 percent to $60.0 million as compared with $52.9 million in the same period last year. This increase was primarily attributable to higher volumes and favorable product mix in North America.

Net sales in the United States increased 5% to $461.0 million in first nine months of 2008. International sales in the first nine months of 2008 increased 13% to $411.2 million, primarily due to foreign exchange.

                                 Nine       Nine
Operating Costs and Expenses    Months     Months
(millions of dollars)            2008       2007    Growth

Cost of goods sold            $  689.8   $  630.5       9  %
Marketing and administrative  $   78.6   $   79.1      --  %
Research and development      $   17.6   $   20.2     (13) %
Impairment of assets          $     --   $   94.1       *
Restructuring and other costs $    7.3   $   12.1       *  %

* Percentage not meaningful

Cost of goods sold was 79.1% of sales compared with 78.5% of sales in the prior year. In the Specialty Minerals segment, production margin decreased 1% as compared with 4% sales growth. This segment has been affected by weakness in the Processed Minerals product line, additional volume loss in the Paper PCC product line due to consolidations in the paper industry, particularly in North America, price concessions in the Paper PCC product line and higher energy and raw material costs. This was partially offset by the recovery of raw material costs, the benefits of the restructuring program and manufacturing cost savings initiatives. In the Refractories segment, production margin increased 16% as compared with the 18% sales growth. This segment has been affected by increased raw material costs, partially offset by the benefits of the restructuring program, price increases, foreign exchange and favorable mix in the refractory and metallurgical product lines.

Marketing and administrative costs decreased slightly in the first nine months to $78.6 million and represented 9.0% of net sales as compared with 9.8% of net sales in the prior year. This reduction was due to the benefits of the restructuring program and other cost savings initiatives.

Research and development expenses decreased 13% to $17.6 million and represented 2.0% of net sales as compared with 2.5% of net sales in the prior year.

Restructuring and other costs in the first nine months relate to the aforementioned pension settlement loss, additional provisions for severance and other employee benefits and other exit costs associated with facilities that are not operating.

During the third quarter of 2007, the Company initiated a plan to realign its operations as a result of an in-depth strategic review of all of its operations. This realignment resulted in impairment of assets charges and restructuring charges as follows:

Impairment of assets charges:

. . .