Good day and welcome to the Q4 2015 Minerals Technologies Inc. Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Rick Honey. Please go ahead Sir.

Good morning, everyone. Sorry for the delay. We had some technical difficulties. Welcome to our fourth quarter 2015 earnings call. Today Chairman and Chief Executive Officer, Joe Muscari will provide some insights into the company's performance and growth prospects and we'll then turn the call over to our Chief Financial Officer, Doug Dietrich, who will give you a detailed report of our financial results for the full year and the quarter. Then Joe will conclude with an outlook on the business for 2016. Before we begin, I need to remind you that on Page 8 of our 2014 10-K, we list the various factors and conditions that may affect future results. Statements related to future performance by members of our Management are subject to these cautionary remarks and conditions. Now, I’ll turn the call over to Joe Muscari. Joe.

Thanks Rick. Good morning, everyone. Before going into our fourth quarter results and a review of our 2015 performance, I would like to take a step back for a moment with you and share a little wider perspective. For the past few weeks, we met with many of our larger shareholders, amidst the sharp decline in the market to outline MTI's operations in the current climate and after numerous discussions, it was clearly apparent that there is a need to provide some additional clarity and insight around the basic fundamentals of the company and our growth prospects. In these meetings, we outlined to these investors how we've doubled the size and value of Minerals Technologies through the 2014 acquisition of AMCOL. We do faced challenges clearly in our service-related businesses, the energy and steel markets. However, these businesses represent a relatively small portion of the company around 15% of our operating profits. And we've taken the necessary steps to maximize their profitability under the difficult circumstances that both are facing at the moment. Our three minerals-based segments, which make up the balance of the company some 85% on the other hand remain very strong. And frankly we remain quite positive and confident in our current and near-term China performance targets as well as the longer term growth we see for the PCC and Performance Materials businesses there, despite the lower rates of growth being projected for China's economy. It should be noted that MTI actually grew sales and operating income there in 2015 and we've seen a pickup in our metal casting bonding systems over the last several months that carried into January after we had seen a slowdown during the summer. As we looked forward, we remain committed to doing two things. One, delivering solid quarterly performance in cash…

Thanks Joe. Good morning, everyone. Now let's go deeper into both our fourth quarter and full year consolidated results. I'll then go through the results in each of our five segments as well as update you on the progress we're making with synergies, cash flow debt repayment and our outlook for the first quarter. Let’s start with the fourth quarter. Earnings per share from continuing operations were $1 excluding special items compared to $1.22 last year. This was a relatively strong quarter for us given the weak energy and steel market conditions we faced. For perspective, combined operating income, excuse me, for the Energy Services and refractory segments was $18 million lower than last year or about $0.36 per share. In addition foreign exchange reduced earnings by an additional $0.08 per share compared to last year, besides just combined, reduced earnings by approximately $0.44 per share over last year. Reported earnings this quarter were $0.48 per share including special charges. The company incurred after-tax special charges of $18.1 million or $0.52 per share primarily related to restructuring and impairments in the Energy Services in refractory segments and acquisitions and integrations charges associated with IT systems integration. We expect annualized savings of approximately $9 million from this program. Total sales for the quarter were $430 million, $86 million lower than last year. Foreign exchange accounted for $24 million of the decline. Energy Services sales were lower by $43 million and refractory sales were lower by $25 million, and these factors combined, reduced sales by $95 million.

Outside of Asia we saw strong growth in talc and GCC, which combined increased 10% over last year and also in U.S. pet care, which increased 12%. Operating income excluding special items was $59 million and represented 13.7% of sales. Specialty Minerals and Performance Materials' operating income increased 13% and 14% respectively on a constant currency bases over last year. Productivity is also high this quarter with each of our segments improving over last year. The acquired AMCOL segments improved by 9% and the legacy MTI businesses were higher by 3% which overall improved total productivity by 6% and generated approximately $900,000 in lower cost compared to last year. You can see from the chart on the lower right hand side the significant increase in our quarterly operating income post acquisition. Moving on, operating cash flow for the quarter was over $75 million. Free cash flow was $60 million and we made a debt principle payment of $50 million. Now as Joe mentioned, we continue to execute on our integration synergies and I'll provide further details in a moment. Before I move on, let me review with you our full year 2015 results. This was another record year for MTI with earnings per share of $4.31, excluding special items, compared with $4 per share in 2014. Again to put this year's earnings in perspective, profits this year in Energy Services and Refractories were $0.60 per share lower than last year and foreign exchange impacted EPS by an additional $0.20. Total sales for the year were $1.8 billion compared to $1.7 billion last year. However, 2014 only included a partial year of the former AMCOL segments. Foreign exchange had a significant negative impact this year on sales of $95 million or about 5.5%. Similar to the fourth quarter, we saw some…

Before we open it up for questions, I would just like to take another few minutes to share with you what we see for 2016. We expect to see continued penetration of our higher value products in Paper PCC and metal casting in China despite the slower growth rate of China's economy. We'll continue to generate good cash flows from which we'll also continue to primarily pay down our debt and support organic growth as well as potential acquisitions. The recently approved new buyback program also positions us to buy back stock as deemed appropriate during the course of the year. Our operational excellence and continuous improvement initiative is gaining strong momentum with our new business units and we expect to see the same high rates of productivity that we've attained in the last six years around 5% a year. On the M&A front, we're evaluating a number of possible acquisitions as we are now very well positioned to acquire and integrate value adding companies. As a strong operating company, we've clearly demonstrated through AMCOL, our capability for integrating acquisitions quickly and successfully to achieve our targets. Going into 2016, we see continued challenges in the oil and steel markets, which we'll continue to manage effectively. And it's also important, I believe, to understand that these two service-related businesses comprise a relatively small portion of MTI's profitability today while the minerals-based businesses will continue to provide a strong foundation for near-term performance and future growth. To summarize, we believe that MTI's fundamentals are strong and that we expect to grow revenues and profitability in 2016 despite the challenges we face. Now, let's open it up for questions.

Thank you. [Operator Instructions] And we'll take our next question from Daniel Moore. Please go ahead.

Good morning, Joe and good morning, Doug. Thank you for all the color.

Good morning.

Joe, you mentioned and just repeated again, you expect profitability to improve in 2016. Just curious what type of organic revenue growth range do you think you need to achieve to grow earnings in light of some of the headwinds that we're facing in near term? And is that expectation entirely organic or perhaps includes some M&A as well.

Well, clearly M&A is possible because of what we have in the hopper. But that's the toughest aspect of growth for anyone to predict. But it is possible that it could be part of what happens to us in -- or what we do in 2016. Organically, we don't give guidance in terms of specific targets in a course of a year. We pretty much stick to quarter-to-quarter simply because of our visibility on a total year is very difficult for a business like us and particularly this year with the challenges in the oil and energy, but I'd say targeting 5% growth on the topline is a reasonable target for us.

Helpful. And in terms of capital allocation, you gave us some really good color. Debt pay down remains a priority. Maybe talk about what types of acquisition opportunities are coming to the forefront in the current environment? Are there operating companies that you're looking at acquiring more mineral rates? And maybe just rank quarter if there has been any change in the order of capital allocation priorities, debt pay down buybacks given the stocks at nine times earnings and M&A.

Yes. It really is. The buyback is very attractive right now. If you look at it from a shareholder value creation perspective, so that's clearly something we're going to continue to look at closely. Debt levels are not where we want them to be. So we're going to continue as I mentioned in my remarks. We give that highest priority in terms of where our focus is. But on the other hand, in terms of the types of acquisitions that make the most sense for the company, there are a number of opportunities that really could present themselves during the course of the year and they are in terms of what we have on the table right now. They are primarily mineral related and they run the gamut of improving reserves in some parts of the world to value-added processing facilities to actually some end-market types of companies that get us deeper into a particular channel. So we're seeing at least from our perspective, the number of opportunities seems to be increasing for us that we've identified and so we're working on those pretty hard. But as I mentioned, this is the toughest area to predict as to when we're going to be able to pop something, but clearly we're very active right now.

And maybe one more for Doug and I'll jump back, cash generation is exceptionally strong in '15 and I know you said you expect continued strong cash flow. How much of the $100 million working capital improvement from AMCOL have you now achieved and do you expect working capital to your benefit or perhaps the headwind as we look at '16?

Yes. We had -- we're probably about $50 million to $60 million of it. So probably about half way to our target, Dan. It's been a bit more challenging given the sales decline in later half of the year some of the working capital and I think if working capital deficiency. So we've had a significant working capital drop due to the sales drop, but we've only -- I probably claim about half of that in terms of efficiency. So about halfway there we're going to continue to work on it next year should be a contributor to some of the cash flow.

Thank you, again.

And we'll take our next question from Rosemarie Morbelli with Gabelli & Company.

Good morning, everyone.

Good morning.

Just following up on the M&A, Joe the way I see you're making two more or less contradictory comments. One is you're focusing on paying down debt. And two, you're also looking aggressively if I can describe it like that at acquisitions. So how much debt do you feel you can reasonably add back before you get down to your two times target and is the attraction lately linked to a lower multiple. Can you give us a better feel for that?

Yes, what can I -- should have clarified this a little bit, our -- let's say our ability to do something large is clearly there and would require us to lever up quite a bit and as we look at the opportunities we have, it's more likely that we will be doing smaller acquisitions, things that are in the $50 million, to $300 million, $400 million range. But I don't want to rule out a larger opportunity. It is something that really makes the most sense relative to what we would call classical shareholder value creation. In other words it falls right into a sweet spot and we can do a lot with it. That's not likely to happen in 2016, but I would never rule it out. So as we're reducing down debt, as I said we're going to continue to do that until we actually have a targeted opportunity that we can act on and that has to be obviously very attractive to us. So until that happens, we're going to continue to work the debt level down as fast as we can. But I think that positions us well particularly given where the financial markets from a borrowing standpoint, from a standpoint of being able to lever up if we need to, we're in a good position.

And that $50 million to $300 million, let's call it, is that revenues the size of the companies you're addressing that.

Yes.

Okay. And the multiples Joe, are they -- have they come down in this environment?

We have seen multiples come down some and we actually expect them to come down further in the coming months.

Thank you. And so when we look at Refractories and energy getting the negative out of the way, you had a 7.8% EBIT margin in the fourth quarter from our refractory and 3% for energy. Can those margins go down some more? Are they the bottom of what you can accomplish with the different additional restructuring that you are taking? So if revenues decline another 50% in the first half of this year in order to get to last year's second half level, can you still hang on to those margins?

I would say maybe the best way to think about this is the way we think about it. We're going at this very aggressively to work at keeping those as bottoms. But that's a function of what happens further from a steel industry standpoint and an oil pricing standpoint. But we've taken very aggressive actions to actually hold the level that we're on right now and we've got a very I would call it a positive attitude. We've got strong teams in place that are managing both of these businesses and they're very dedicated to keeping both businesses profitable and holding those profit level.

Okay. And then lastly and then I'll get back in queue, looking at pet care, strong growth, was some of it due to general feel of your lightweight pet cat litter and what would be a reasonable long-term type of growth rate?

I am going to let Gary Castagna answer that and he can give a little more background of what's actually been happening in this area. Gary?

Yes, hi Rosemarie. The growth contributed for lightweight in 2015 was about 15% or so of the pet care growth that Doug cited before, 15% was on the lightweight. So it was a start-up year. The promise certainly in terms of look forwards, it looks to be double-digit type growth market situation given the uptake in the market as we speak today about 15%. Again 15% of the total category is lightweight on a dollar basis and we foresee that to be a growing end of the category here in the U.S. So it certainly seems that the momentum that’s started early on the year has continued in terms where lightweight products will be positioned and our technology has been accepted by a couple of key mass retailers where we're supplying now and we foresee that in the upcoming year we’ve opportunities to expand the special and the private label and control brand space.

And that is in the U.S. anything happening Europe and elsewhere?

Well, we've actually jumped over to China quite a bit in terms of our pipe care development first. Europe would probably the next area, certainly we have aspirations in Europe, but at this point, it’s probably last in terms of where we're going to our focus our next geographic expansion. So China, which is obviously a nascent market today under a $100 million liter market as we speak. So considering the U.S. is $2 billion, it’s a pretty small market, but we’re trying to get in the ground forward quickly in China with not only standard scoop able but also a lightweight litter product area that we're beginning to work within in that area with especially the e-tailers were quite prominent in marketing in China.

Okay. Thank you very much. Very helpful.

And we’ll take our next question from Ivan Marcuse with KeyBanc Capital Markets.

Hi, thanks for taking my questions. So you pointed the 5% growth for 2016, did that include a currency or is that more of a volume or sales ex-currency type of comment?

Yeah, again keep in mind primarily where we see that 5% coming from is going to be the minerals part of the business right. So we uncertainty on the Energy Services and Refractories. It's tough to see any growth there at all and we will have volume growth with that should commensurate revenue growth.

Great. So if you go back to your Slide 7 since you’ve pointed the growth, but really since the third quarter of '14 when AMCOL and everything was fully in the results sales have been certainly going to slope right down and Op income really hasn’t done all that much. So if you -- what gives you confidence that and I guess or confidence that that’s going to change 2016 when do you expect to hit that point? Is this more of a back half type of function or how to think about it?

No, actually it's as we look out we just see -- I know this is contrary to all the noise in the marketplace right now, we see a very stable to slightly growing U.S. market and for us that's very good. We’ve got a very strong position in metal casting. We've got a strong position in household and personal care that will give us room to grow a little bit, but it provides a stable base for being able to bring improvements as I mentioned that will occur through cost reductions and productivity improvements to the bottom line. As we look at China, we have new facilities coming on for PCC. We also have penetration growth available to us in metal casting that I touched on in my remarks. India, India is striking along very, very nicely. Growth rates are staying on track. We have a decent position there. We expect to be able to continue to growth that. So it’s taking what the U.S. -- I think the U.S. stability at low growth you would call it provides a good platform for us because of the position we have here while the initiatives that we shared with you and that we've discussed in the past are really getting good traction in the parts of the world that we've been targeting.

Great. So it sounds like you have a reasonably positive outlook for your core minerals business.

We do very much so.

And there is a disconnect between what your stock has been doing relative to what your overall opportunities in the markets are.

Yes and look I totally passed over the building and construction market in the U.S. which is very strong right now. We participate in that through construction technologies, through our Performance Minerals business. So that's actually right now it's expanding at a multiple of the U.S. GDP growth rate.

Great. So when you and the Board look at your share repurchase program that you have out there, I understand there is reasons to do it or reasons not to do it. So looking at where your stock is today during the fourth quarter, what were the reasons not to buyback your stock?

We’ve looked -- now that we have a $50 million debt repayment and again we still -- we understand where the stock is and we’re going to take balanced approach as Joe mentioned for the capital allocation between debt and share purchases. Certainly an opportunity, but we focused at least in the fourth quarter on making a more sizeable debt repayment.

Yes to say it another way, we wanted to get through -- we’re almost through two years and we wanted to make a significant dent in the debt level but that’s really what Doug is getting at.

Great. And then just couple of quick questions, you mentioned the free cash flow, do you expect this -- what's your free cash flow target for 2016 and how to think about interest expense as we move through the year with the debt that you paid down and what you're targeting for 2016. Thanks.

We see some of our free cash year next year to this year Ivan. We're going to continue -- we have some debt pay down and it will benefit probably $2 million, $3 million in interest expense next year probably bit more closer to $3 million. So that will help earnings as well, but free cash flow still in the same similar range to 2015 CapEx, again is going to be about the same as well around probably $85 million to $90 million.

Great, thanks for taking my questions.

And we will take our next question from Al Kaschalk with Wedbush Securities. Please go ahead.

Good morning, everybody.

Hey Al.

I want to push a bit harder on this 5% growth and in particular given the seasonality or the cyclical nature of Construction Technologies the recent 12 month performance and then the backdrop in the more than macro economy little on to the U.S. economy. So can you be more specific on what are those segments are going to be equally contribute one it's going to contribute more than the other and just more of the timing of the ramp in the business?

Yes I would say and here we have got put this within the context of what's possible all right and what our positions are. I would say our construction technologies in North America and Europe relative to the potential that's available to that business in both of those regions is one area that is 5% is going to come from, which means the business actually has to perform better than it did in 2015 and so we're geared towards a higher performance level from the business, but that still has to happen. But I would say there and I touched on our Performance Materials business, which is pretty heavily exposed to building and construction, which has been tracking very well or tracked well in the fourth quarter. We're off to a good start in January that forms the part of the basis for the outlook we have right now why we do believe we can grow as well as the internal targets that we set for ourselves in terms of what we're actually shooting at. So that's in North America. And China we've talked about it's basically keeping those growth initiatives on track and continuing to aggressively go after them and in spite of some of the challenges we have, but we show and I think clearly in 2015 and if you look at the fourth quarter, the whole question and there were number of questions raised with us at conferences we've been to and some of the meetings about China growth and China showing an impact on us. And I would hope we've put most of those to rest now with what we have shared in terms of what we've actually been able to do and again it’s in part because of how we're growing and we're growing through product substitution, which does not rely on the absolute GDP growth rate of the country that were targeting or that will working in. So those are things that give us the foundation to be -- to take a -- we're taking a positive look at -- for us, 2016 looks little more positive than I think many others are looking at it, but those are the reasons why.

Okay. And the second is just a little bit as you look at Refractories and Energy Services, I can't help to ask why these two businesses remain in the portfolio particularly if you think structurally what’s going on the macro side has more than just a quarter or two. And as we know your business is much longer duration, but why are these businesses that you think can return back to levels maybe I won't say historical profitability because there certainly was an unusual strength in the demand for these services, but why not at least to certainly better performance on the margin side than what they may have showed on an adjusted basis particularly in Q4?

Yeah I think -- perspectives to keep in mind is the cash flows for these business are good. We’ve been able to keep good cash flows and historically particularly for the Refractories business it's been very good. And I think it’s a fair question. It's something we have looked at from a strategic standpoint and it's something we’re going to continue to look at. We don’t have a formal plan in place that addresses that specifically other than to say this is on our screen for evaluation to continue to go, as we continue to look forward. But selling business at a low point is not always the best thing to do particularly when they're contributing good cash flows and so you look at it how can we create the most value for shareholders by doing what we’re doing as they were hit and we're working through them we're kind of getting the profit levels back up to better position new business. So that’s what we're concentrating on right now.

Joe I hear you about not selling off the trough but it's also people have a challenge selling up at the peak where that will be maximizing value. So on the flip side if we look at -- I was struck by the amount of M&A discussion that you've put forth and therefore it only would question me as to why if we can continue to be good acquirers of business -- good acquires of business but also good sellers of businesses. So the root in my question is to why Refractories and Energy Services could remain particularly when you look at the three other bubbles, the Specialty Minerals and Performance Materials and Construction Technologies, just for minerals business why those can’t be areas you can leverage on with further M&A. And you have reduced the strength of footprint, but also drove by exiting…

Al, let me -- that’s a good perspective and it kind of maybe allows me to go back to why we shared and why we concentrated some remarks on minerals and the services businesses. We had a vision five-seven years ago and we implemented a strategy to achieve the vision. And we’re still a work in process and part of the vision was to create a stronger minerals business, but not just a mineral business, a very value added minerals and specialty chemicals business, right because we had a core specialty chemicals that we wanted to build on with the acquisition of AMCOL we’re building on both minerals and specialty chemicals. And so as you look at where we've been and where we are, you can see that picture emerging of a stronger, larger minerals business in the company in terms of what MTI is and as we look forward, we’re going to continue to go down that track. At the same time, the Heritage MTI had a very and still has a very, very strong position in monolithic refectories. We are -- Mintek is the premier monolithic refractory’s business in the world and so -- but it has a very strong aspect of service with it and the vision has been to A, create more value with that and that could come through as we have looked at in the past partnering with someone else making it a part of the joint venture. So we're -- it's something we look at again from a strategic standpoint of where we're trying to take the company. Energy Services came to us with the acquisition right okay. And so what we're doing now is given the circumstances oil price dropped it's how we make the most of by refocusing what that business is good it and what we did immediately even before the price drop is simply take it back to its basics of its core strengths of filtration. Where we go with it in the future is something that we're still working through in terms of what's going to make the most sense from the standpoint of pure value creation for shareholders and that's what we're dedicated to.

Thanks Joe for the color.

And we will take our next question from Jeff Zekauskas with JPMorgan. Please go ahead.

Hi good morning.

Hi Jeff.

Hi. What are your cash outlays for restructuring in 2016 and what are your capital expenditures and with those restructuring outlays are you done?

Jeff well let me take the CapEx first, CapEx should probably be about $85 million to $90 million or similar to this year. Total restructuring outlays so far from the beginning of the acquisition have been about $30 million. As you recall when we did the transaction, we targeted $50 million in synergies and we thought the cost of restructuring charges will be about one for one. So we've outlaid about $30 million, little over $30 million in restructuring to capture $80 million and will still be some restructuring charges going into 2016, it will probably take about probably another $5 million to $10 million in 2016. So maybe we've done pretty well with the charges associated with the savings, but there still will be some more in 2016.

So the cash outlays next year are $20 million?

Probably another $10 million, inside of $10 million in restricting and we have $85 million to $90 million in CapEx.

Okay. Is your cash balance too high at $250 million?

Our current cash balance is $230 million. I don’t -- majority of that cash Jeff is offshore. So we use -- we're using domestic cash flow at the moment to service the acquisition or service the debt. We do repatriate funds occasionally where its tax advantage to help that, but most of that cash is offshore and that cash can be used offshore for acquisitions. And some of the items that are on their helping our organic growth in terms of maybe some bolt-on acquisitions in other geographies. So, I don’t think it’s too high, but we do look at bringing it back cost effectively -- tax effectively.

You mentioned previously that you hadn’t bought any shares back in the fourth quarter of 2015? Have you bought any shares back this year and if you have how many?

Not going to comment on that Jeff at the moment.

Okay/.

Jeff I think we commented earlier that we do find obviously the current multiples and valuation of the company attractive and we're going to balance -- continue debt repayments with opportunistic share repurchases, but I just don’t want to comment right now on whether we’ve done that this month.

Okay. And then lastly I think as another caller mentioned there is an emphasis on acquisition and your leverage levels are still relatively high in the steep of things. So if you were to do a larger acquisition, I would imagine it would involve some equity. So that is -- are there possibilities that are out there? However, the probability that you would execute would be quite a bit below 50%, but are you still think -- or do you think in those terms for 2016 as a possibility?

Yes, we do. That is something that is always a potential and as we think about the array of things we have that is a possibility for us or potential although I would agree with you not a high probability or greater than 50% at this moment.

Okay, great. Thank you so much.

Thanks Jeff.

Thank you.

And we’ll take our next question from Silke Kueck with JPMorgan. Please go ahead.

How are you?

Great.

I was -- there were a couple of percentages that you gave in terms of productivity improvement, a percentage of productivity improvement and I was wondering whether you can put some dollar returns on that?

Right, I give you couple of them. We had a 9% productivity overall for the company, manufacturing productivity that was worth above $6 million to us this year that cost a little bit and saying that that’s you can ratable because it really depends on why those productivity improvements are being achieved, whether its North America, Europe, Asia etcetera. But this year, we almost had a 15% productivity improvement in the acquired businesses. We had a 4% productivity improvement in the legacy businesses, the Refractories and Specialty Minerals. So in total that ended up to be about 9% pretty strong year for us.

Okay. In terms of the metal casting business can you break out how big the automotive part is and how big the agriculture and markets may be?

Yeah, Gary can give us a little more color. So for total metal casting I’d say probably 50%, probably higher than that 60% of its really automotive. I think you have other breakdowns are heavy truck and off highway and then you have the agriculture, it's probably a smaller segment 15%, Gary is that right?

Right, yeah and this is a North America that we’re talking. The U.S. it would be about in the proportion as Doug is talking about. Lightweight automotive probably between 50% to 60% ultimately the end market in terms of weight of castings and then the agricultural probably of the remaining several segments is probably the largest after that it may be about 10%.

And when we look at estimates for global auto production, it seems to be higher in '16 versus '15. So do you think your metal castings business should grow next year or should grow in 2016?

On a global basis, yeah footprint again is balanced primarily between the U.S. and Asia, a bit in Europe as well where we are expecting a little bit better year in Auto in Europe. But of course China, the statistics I haven’t actually seen the most recent statistics for China next year. I think they're on a pace around $24 million, $25 million in units this year and the late surge that we saw in China at the end of the year, last year after the government reduced a purchase tax from like 10% to 5% we saw nice volume pick up in China. And that automotive category seems to be carrying through the next year. So I think your promise in terms of the overall growth and particularly for us China, India as well our biggest points to add to the business the metal casting business next year.

I guess if I take that together, the answer is yes, that you expect to grow in '16, the metal castings business?

Yes, yes. We see the emerging markets definitely in a gross path.

Thank you. And I wanted to ask a question or two questions on the PCC business. The first is I was wondering whether you can identify, like, the sales and the operating income that you are now getting from FulFill. Maybe you can just sort of give, like, a rough ballpark for 2016. And secondly, I was wondering whether you expect the paper PCC business to grow in 2016, given -- so there's satellite expansions that you expect, and then there are the headwinds from the reduction of the Verso mill capacity and the Domtar capacity.

So FulFill had a relatively strong year for FulFill. It was about $3.5 million of operating income that’s almost 60% higher than last year. So relatively strong. We don’t give the sales of that. I think you called that an equivalent sales of almost $35 million at PCC average margins around the world. So, pretty good year for FulFill. As far as growth next year, absolutely we see -- we’re building -- we put 250,000 tons of capacity in China in 2015. I mention we’re going to put another 170,000 tons of capacity in 2016 in China. Our volumes have grown 3% this year, 4% sales underlying excluding currencies. You have to pull in some of the currency effects. We see that the three satellites, two of the three satellites in China that we built this year are going to continue to ramp up. They haven’t fully ramped up yet by the end in the fourth quarter and they’re going to continue to do so. And we’re going to be building another satellite in the second quarter, very large one in Sun Paper about 100,000 ton satellite and then another one will come online late next year probably won’t see any volume from it. So we see the continuing growth that's at least 3% volume growth in PCC over next year. You’re going to see a little impact to Verso in the first quarter Verso and Domtar in the first quarter, but I think on average for the year, you’re going to see the continued volume growth.

It looks like the conditions will be more difficult in the first half of the year, but maybe better in the second half of the year.

Yes I think it’s internally, we’re going to continue to ramp up. So you might see a flatter growth in the first quarter but then when the Sun Paper filler satellite in Sun Paper in the second quarter gets online and then starts to fully ramp up through the third, I think you will see the volumes. But on average again I think we’ll have good year another 3% of at least volume growth.

And if I can ask a last question on cost savings, in the $9 million that you're pulling out of the energy and refractory businesses, will you get the savings in the first half of the year or the second half of the year? And once you get those savings, do you think the energy business should operate at a higher level than the $1 million in profit than it generated this quarter?

As I mentioned there is probably about $2 million of the $9 million in Refractories. We should be capturing that through the first half of the year. The $7 million in Energy Services, we’re working on that currently. You'll probably see that run rate -- most of that at least from a quarterly basis in the second in the third. So you're going to see the majority of it in the first half of the year.

Thank you very much.

And we will now take a follow-up question from Rosemarie Morbelli with Gabelli & Co.

Hello again. Thanks for taking my questions. You are expecting the PCC volume in China to more or less triple between 2015 and 2020. Are you expecting a similar trend in both revenues and operating income? Or is that going to be a bit slower rate?

No commensurate, so price per ton of PCC on a global basis little bit lower in China and that's just driven by line pricing right. So you'll see the tonnage may grow a little bit faster than revenues in China on an average basis, but the operating income and the cash flows, the ways we have our contract set up should follow along those ratios. So as we add -- as we triple the volumes, we may not triple the revenues exactly on an average basis, but you should see the operating incomes follow along in China.

Okay. That is great, thank you. And then just quickly, as you just mentioned that you are expecting the 3% type of volume growth for paper PCC, I am assuming that is excluding, obviously, FX, since we are talking about volume. But are you including in that the step-down of Verso and Domtar in the machines?

Yes.

Is that the net number that you are anticipating 2016 over 2015?

Yes. That's the net number on average for the year.

And then, assuming that the paper industry kind of stabilizes in the mature markets, what kind of a volume growth rate overall, if this one is flat, can we anticipate over the next three years to five years as you grow in China and India and then it stabilizes here?

Well I guess stable -- a stable North America will certainly help that number because this year where we have about 50,000 tons of impact annualized from just the Verso and Domtar. So right now we're looking at North America paper industry little bit healthier than it was perhaps last year operating rates are probably in the low 90s. They have not been that high past several years. They were in the 80s past few years. So that at least bodes well for continued -- for fewer closures. Now that remains to be same. Europe a little bit different. So we see about little flat in North America and Europe maybe little different but right now our projections we saw probably down 1.5% in Europe, but that’s a typical decline usually its 2% per year in both of the regions. So, it looks like right now a more favorable year in both Europe and North America at least more stability and so it's not carried through that should certainly help our volumes higher than the 3% that I mentioned at least for this year.

And a reasonable number is somewhere around 5% volume growth?

Yeah, I think, hitting our 20-20 targets in terms of sales growth for this Paper PCC business was around 7% to 8% per year. So what we're talking about this year is gaining those satellites ramped up. We still have additional FulFill and FulFill products. Our New Yield we only had one satellite with New Yield but we're pursuing -- we're pursing fifteen other opportunities in New Yield. We have a number -- we've shown a number of times other base GCC projects in China that are in our pipeline. We’re pursing coating. We have a coating -- that last satellite that will come up late in the fourth quarter is our first -- is a coating facility associated with packaging in China. So that’s our first one there. And we've got a number of other opportunities that we pursue in coating and packaging in China. So I think you're going to see as those opportunities come through, you'll see that growth start to accelerate over '17, '18, '19.

Great. Thank you very much.

And we’ll take our next question as a follow up from Daniel Moore with CJS Securities.

A relatively easy one, Doug, just the tax rate you are assuming for Q1 as well as full year '16.

Tax rate is going to go back up a little bit Dan next year. In the first quarter it's probably going to be about 24%, 25%, which is the average and we’re going to see for next year, which was the average of this year. So little bit higher, tax rate is little lower in the fourth quarter due to R&D tax credits that came through in the fourth quarter we had a settlement with the IRS from a prior year. So that helped the rate in the fourth quarter, but it will go back up probably around 24%, 25% next year.

Thank you.

And there are no further questions at this time.

That concludes today’s conference call. Thank you very much for your interest in Minerals Technologies. Have a good day.

Thank you.