Good morning and welcome to our second quarter 2016 earnings conference call. For today's call we will follow the usual format with Chairman and Chief Executive Officer, Joe Muscari providing an overview our results, key drivers and strategies, followed by a more detailed update on our financial performance and condition from our chief financial officer, Doug Dietrich. Before we begin, I need to remind you that beginning on Page 13 of our 2015 10-K, we list the various factors and conditions that may affect future results. And I’ll also point out the Safe Harbor disclaimer on Slide2, here. Statements related to future performance by members of our management are subject to these limitations, cautionary remarks and conditions. Now I'll turn the call over to Joe Muscari. Joe?

Thanks [Paul] (Ph). Good morning everyone. We again had a solid results for the second quarter giving us an excellence first half earnings per share of $2.22 and our EPS for the quarter of $1.20 represents the best second quarter performance in the history of the company. We achieved an operating margin of 16.4% as the MTI business system combined with our operational excellence initiatives and a very high level of employee involvement have enabled us to achieve high productivity improvement in the quarter. Lower material and energy prices also provided some lift to us. Safety performance also continues to be excellent for the first half of 2016. We were better than what we consider to be world-class performance levels for recordable injuries and our loss workday rate was down from 2015’s by more than 50%. Our minerals base businesses were again the primary drivers of our results, posting and operating margin of over 18% for the quarter with the specialty minerals segment, which includes our PCC, GCC and talc product lines generating record Q2 operating income of $27.6 million. Our focus on the opportunities for growth in China continues to bear fruit, as overall China sales were up 5%, while PCC sales were up 17%. For the half, China sales were actually up 9% over last year and as we have discussed in the past, we continue to see considerable room for further growth and development of our mineral-based businesses in China. We recently also formed a China lead team for the company to ensure that we execute on all of the opportunities available to us. And this multi disciplinary team will coordinates upward across all MTI operations and growth initiatives in China. Also during the quarter, we took further significant action to adjust our energy services segment to…

Thanks, Joe. Good morning everyone. Now let's go onto our second quarter results and I'll cover performance in each of our five segments. I'll review the restructuring and special charges in the quarter. I'll give you an update on our debt repayment and leverage targets and then I'll give you an outlook for the third quarter. As Joe mentioned, it's the strong quarter for us with earnings per share from continuing operations of $1.20 excluding special items, compared to $1.18 last year. Reported earnings this quarter was $0.60 per share including the special charges associated with additional restructuring of energy services, which I'll provide more details on in a moment. Total sales for the quarter were $427 million, $36 million lower than last year. This was primarily due to $29 million of lower energy service segment sales and negative foreign exchange which should accounted for additional $6.5 million of the decline. So the increase over last year in several product line and global fabric, pet care products increased 25%, healthcare grew 7% and environmental products increased 20% and GCC sales grew 6%. In addition sales are up for our combined businesses in China grew 5% this quarter over the last year, driven by a 7% increase on our minerals business. For the first half, our sales in China grew 9% over the last year, with a 12% increase in our minerals businesses. Our progress in China was also highlighted this quarter by the Ecopartnership we formed which show just outline for you. Operating income and excluding special items was $70 million compared to $72 million in the prior year. On a constant currency basis our minerals businesses improved by $2 million, or offset by a decline of $3 million in our two services businesses and further by a $1.4 million…

[Operator Instruction] And we will move to our first caller from Silke Kueck with JPMorgan. Please go ahead.

I was wondering whether you can quantify the raw material and energy saving for the company as a whole, and how may it affected the performance materials business specifically?

Silke most of our energy savings are in the performance minerals business would be in the specialty mineral segment. And so far this year we have probably for the first half of about $3 million to $4 million of energy savings. This year raw material savings are primarily in the refractory business, we have had some line savings, but as you know those gets faster in pricing, our magnesium oxide savings have been around $4 million, $5 million this year, but some of that could pass through the customers in this market conditions, sometimes pricing gets reflected with the lower magnesium oxide cost.

Helpful. And secondly, do the energy business run at a profit level of $11 million to $12 million next when the savings are realized?

Yes, I would say its indicated, we are expecting in the coming to be $1 million, $1.5 million to $2 million higher. But the trajectory we have for that business is it has to be in the $1 million to $2 million a quarter range as we go forward with a targeting of 10% operating income, which we would foresee $100 million plus next year, which would get us in that $10 million to $12 million range.

[indiscernible] second question, is the growth in the fabric care and the pet care end market, is that due to end market demand or is it due to your own product initiatives and share gains?

You can ask Gary, who is here with us today to answer that. Gary.

Hi, Silke. In type care it would be more in the line of share gain, domestic as well maturity bit also they continued want to be likely capital business align. And then fabric care which is principally in Asia that has been more technology adoption and involve with certain key accounts in the region.

And if I can add Silke, as relates to the light weight cat leader, it's important to keep in mind that since our last call that China has probably added 2 million to 3 million cats to its cat population, so that certainly must be storing some of the growth. Right Gary?

Yes, it's certainly we are getting ahead of that end market, yes.

And my last question is I wondering how lumpy the environmental products is in general and with sort of like the longer term targets on, like I remember the business maybe you are running excess like $90 million in sales. Is it something that achievable and how long is this?

I guess the lumpiness, the nature of the business because it's driven by some of the larger products and it's true as it was this quarter in building products as well. Some of the projects are small construction or small landfill type projects and then some of them can be very large. I think this early 2015 we had a large project Redmond project with Alcoa, in Saudi Arabia I don’t know if you remember. That was on the tail end of that project, but that was almost $20 million project somewhat. So if you have a $5 million project one quarter and that project doesn't show up exactly in the next, you can have some lumpy kind of comparison sales year-over-year, and that's both environmental and building. As far growth there's a tremendous amount of growth for us in this business. Construction technologies, our 2020 targets were to grow that business about $150 million and that's true innovation, geographic expansion and also new products like Resistex here in the United States and abroad. So China as Joe mentioned with the Ecopartnership and what is happening with this current five year plan opens up a lot of environmental opportunities for us to growth that business in China. Did that help?

Yes. Thanks very much.

And we will move next to Rosemarie Morbelli with Gabelli and Company.

I was wondering if you had any surprises during the quarter and then linked to that because it result into that question. Q3 is usually strong seasonally and a lot stronger than the second quarter and based on what Doug gave us it looks as though it will be more or less flat sequentially. I did all of the puts and take correctly, so could you I guess help us understand what was a more positive thing you anticipated in Q2 and what could be slightly lower not due to what you are doing but due to the different markets in the third quarter?

Yes, let me start, one of the surprises I think that's, first surprise in our refractories business, I think we had a number of lasers that we have been working on, that were kind of in the pipeline for deployment and installation. Those one are very well and we received a notification from customers that they accepted them all in the quarter and that was a positive surprise for us and I noted that. So I think that was one of the surprises in the quarter. But from your question in terms of kind of Q3 being stronger than Q2, generally they are very similar, I would say certainly Q2 and Q3 are stronger than the first and the fourth, but they are usually pretty similar. The two businesses that really drove that performance minerals, as it comes out of the winter, Q2 is usually the strongest month or strongest quarter, Q3 a little bit weaker; and construction technologies and I showed the seasonality of that business but we see Q2 and Q3 being about the same in CT. So the third quarter is not always stronger, it's similar in many cases and its depending on some of the projects we have in CT.

And I was wondering if you could give us an update on the replacement with already mixed win sense in China which I believe is really the source of growth for that particular business?

Gary, why don't you answer Rosemarie please? Gary is going to give you some more, some color around that Rosemarie.

Hi Rosemarie. The business again in China especially now with the moderation, let's say in the general economy is our strategy of the substitution through a higher value added prices is much more of our emphasis. So that growth is really based upon existing cost customers, existing markets and migrating those customers to higher value products as Joe mentioned that they pre-blended and formulated products that we supply in those markets, which we have in the U.S. forever. So that’s really the source of our particular growth and the strategy that we have going toward our 2020 objectives.

So have you made progress in the past six months for example, in terms of substituting your product lines to whatever they do currently?

Yes, because really what it is taking what is a sort of a basic level of product and moving it then as I said to the more formulated product. And we have had several accounts that where we migrated now to this newer, let's call it more advanced technology and it represents more significant portion of our sales probably closer to a quarter of our sales in China, metal casting now are the more formulated products indeed that a higher level than where we were a year ago at this time.

And that would translate into higher margin, correct?

Margin as well as it's driving sales, because the price point of the formulated product will be higher than the basic level product. So that’s the general approach to the strategy.

Thanks. And then on the paper side, are you expecting more or have they have been any announcement for more machine shutdown in the U.S. and in Europe? And then if you could touch on the acceptance of new yield also in the U.S., Europe and Latin America based on your comments, it's sounds as though China is mostly the one adopting it or looking at it more seriously?

As of right now, there are no additional or new announcements that have been made with regard to any shutdown. It appears that North American market has stabilized somewhat the higher import tariffs that have been imposed on the various paper makers from around the world who were accused of dumping and resulted in the higher tariff rates. The utilization rate is good in North American paper, so we are 90% right now, which is a nice level. And with regards to new yield, new yield actually was design for the China market, it was design to solve Chinese paper makers problems that revolved around effluence that we were being discharged from their paper making process. And they primarily were land filling the product. The government changed the regulations that force them to discontinue the land filling at some point in time and burn it. So they have to make capital investment. So we translated that three, four years ago into an opportunity for a new products that resulted in new yield. It came out of basically spending time which Chinese paper customers better understating the major problems that they had and that’s one of the product solutions that came out of - that early awards that that was done there. So the primary demand that we have for new yield will be China for at some point, right now we must have 10 to 12 potential customers that have an interest in that product. One of the things it also helped us to do is with that product it - and what I touched on during my remarks, it's building our reputation as an innovator in China and innovator in environmental products. So that's been the key part of our government marketing and this Ecopartnership is actually designed to have the Chinese government if we are successful, and we expect to be successful, actually promote this product within the Chinese Paper companies and that's what in large part government marketing in China is all about. So new yield has become a bit of a springboard for us that let us also surface and promote products such as Enersol or Resistex products are some of our building materials products and so that one innovation has actually sprung many tentacles that came about through simply better understanding with some of the Chinese customer issues were. I'm going to ask Rand if he has, if he would like to add any color to that from the new yield standpoint.

Yes, I will add. I think you mentioned that we have 10 to 12 very active targets with our current new yield product but we are also in development of a second new yield product to address a different type of a waste stream that is going to open up for us an even equal size opportunity to the existing new yield products. So that's just another ongoing growth of a product line actually that's been developed with China.

And that second product line is still targeting the paper mills, I mean the paper production in China and so that is the question and then can you export that into India which I'm assuming they are having similar environmental issues?

Yes, they have - both of those is yes, it is the same paper market that we are supporting with that and there are opportunities around the world including in India for a new yield and we actually have some targets around the world.

And lastly if I may the fact that the tariff rates has increased on the paper side, it is helping the U.S. paper makers, is that's going to be high enough that it will affect the growth of the paper makers in China exporting into the U.S.?

I think it contributes somewhat, what it's actually the way we think it begins to manifest itself is that the higher costs more producers are having a lot more trouble competing, as China has to focus more on the domestic market. We haven't seen it affecting any of the major Chinese paper mills that we deal with in terms of signing of some of their projects yet. As we have talked about it in the past that could happen, we just haven't seen it yet. And China has moved paper that it was sending to the U.S. and to other parts of the world. So we have those two things going on right now.

Thank you very much.

[Operator Instruction] And we will move next to Daniel Moore with CJS Securities. Please go ahead.

Touch on refractories, thanks for the colors. You mentioned that Q4 could see some a pick in equipment sales. Do you see Q4 being potentially as good as Q2 or more likely somewhere in between?

Well typically Dan. Q4 is when we sell most of our lesser in a year, usually we take an orders then they are all commissioned that’s historically been the pattern, little bit different for second quarter as we have been working actually with our customers to kind of even this out, commission more and get them more level alluded to our peer and I think this is an example of the business unit ability to get these things closed out sooner. We do have a number of them in the pipeline for completions; I think it could use similar type level a quarter for us. But that really is going to depend on how the refractory markets go as well. We have some real strength here in the North America refractory markets. Pricing for steel here, as you know is really high, hopefully that continues to be stable, and stated that point that’s a good help for the steel makers that helped us. So we will be watching that. But as I mentioned in my comments Europe, India and the Middle East have been very weak. Now there has been some tariffs put into Europe recently, we will see how that plays out, that could help production, but we will be looking. So I think long way of answering, yes it could be that type of quarter in the fourth, but it really is going to depend on the our refractory markets how they play out for rest of the year.

Got you, very helpful. And just switching gears, in metal casting have been solid revenues tweaked down a little bit in the quarter maybe just talk about the outlook for Q3 and the remainder of the year there?

There are two thing there, one was the agriculture market, the heavy equipments casting market still down, it's not projected to at least to the remainder of this year. It's a increase I think, the large kind of John Deere type machinery. The other piece of that was our exports sales, we do export Wyoming clay out of the United States, we had little bit lower shipments of that play around the world. We think right now probably little bit more due to kind of some inventory corrections and less from demand. So I do think that the outlook for the rest of the year pretty solid expect for that agriculture market in U.S.

Are not seeing any ship to lower quality clay, just more of the inventory issue as far as you go?

No it's we are not seeing shift to different type of clay just in more, I think at least for the first two quarters, big, big shipments in the later part of last year and then just in working through that. So I think that it's correct in itself and going forward we will have better export shipments.

And lastly, smaller pieces but GCC continues to grow, maybe your outlook there in the near term as well as talc?

Yes, both them we have certain positive outlook, talc and GCC types of construction markets, talc also the automotive, but we have seen some strong markets in the North East. So far, our GCC business this past quarter we see that continuing to the third and our talc sales as well, we have had a pretty strong year thus far until. So we see that continue through the year.

And last one and I'll leave it, but in terms of capital allocation obviously you talked about Joe, M&A remains the priority, so you could get into those 2020 goals, but as the balance sheet continues to improve if you can't find other opportunities over the next six to 12-months. Are you comfortable sort of building cash and continuing to pay down debt or consider other alternative uses?

Well, as it was actually demonstrated in the test, but what the approach we will take is, first priority as we reinforce is to pay the debt down and then going forward we are looking very aggressively for good opportunities from an acquisition standpoint. And to your question of, should we not let's say find the things that we think makes sense for the company, what all should we do? We have always taken a balanced approach when we are in that position and we are going to continue to do that. But I would say our priorities are debt repayment and acquisitions right now, but even within that context it's supporting the green field that key part of the growth strategy within satellites, which is what is happening in China right now, so obviously that's going to be a priority for us to capital or fund those. And there are some things we are looking at for some of the other businesses that are primarily green field that could use some of that capital, those are things in the hopper that we are not in a position to talk about right now for competitive reasons. But that we are looking at very closely.

Very helpful. thanks for the color.

And our final question will come from Ivan Marcuse with KeyBanc Capital Markets. Please go ahead.

Real quick, looking at your PCC business and you went over your 2020 goals, and still looking at $400 million to $500 million of growth, if you take the lower end of that still sort of doubling the business. So I wonder if sales really haven’t been growing in this business, they are actually been declining for past three-years. So when do we start to see an acceleration of growth I guess mid to high teens cage or that you will need head to growth targets by 2020?

So Ivan, we have got a number of facets in that $400 million to $500 million part of that is being geographic growth in China, in India, in other regions. But also a lot of innovation growth. It's got a number of products Rand mentioned, we have got a number of new yield products coming through, we have got our first satellite in packaging starting up in the first half of next year that's another avenue for us to pursue, we have got a number of targets for coated packaging in Asia. So I think what you are saying is yes, we are still in the - we have said this that this filler growth is going to be lumpy. We still see that positive trajectory going, again, average growth over the past four quarters is about 3% in volume. The first half was still 3% even though we had a down second quarter. I think if you see the Sun Paper facility coming on this year, two more next year, the targets of new yield are starting to take hold through some other things we are working on with our Ecopartnership. And we have yet to really move into in a strong way in that packaging business and this first one will help us do so. So I think it's the first year, I understand your question, but I think you will see some of that growth starting to come through as we get further on in our five to seven year plan.

And Ivan, the thing I would re-emphasize relative to the point that Doug made is that this is not linear and that as we look out, as we look at our position today versus a year ago, we have advanced our position those haven't totally manifest itself and the top-line yet. But the fundamental thing that you need to do to generate to get new yield or base filler satellites or packaging, it's about the opportunities that are being formed in the company so to speak. All of those are very much tracking the way we envision that they need it track to hit that kind of a target.

Okay, so I guess I understand what you are saying. But at one point the sales are going to start to inflect, right. So we will start to see some pretty consistent year-over-year growth holding currency, where it is today, which is tougher function. But is it the 2017 that we start to see sales inflect or is this more 2018, 2019 can be backend loaded type of…

Yes, for instance we have satellites coming on, we have new projects coming on in 2017. So you will see an uptake. And as we announced more satellites, right or more fulfilled contracts in China, then you will see those come on. But they are not going to necessarily be living there. We will have just as we had a quarter where we dipped a little bit, following quarter we should start to see a come up again, because these are projects with 10 to 12-month lean times, right. So from the time, we get a contract that takes 12-months. And they are not coming in one contract per month, they tend to come in as that’s the last set, we have three within I think in two month period. So these all to tend to come in that way which lends itself to the lumpiness that Doug talked about. But to your point yes, at some point in time you will see the revenues should start to overwrite the lumping nature of things in North America and Europe detracting from those sort of thing. That’s really what you are dealing with. We have got three different pieces that go into making up that curve.

Ivan if I can really give you one more perspective and that is I know its seems vague that we are being when this timing will be, but there is one thing for sure we have the market opportunity to grow the best size. The amounts of penetration remaining in paper in China from where we are today could double the volumes of our PCC as of that packaging PCC in the new yield and the market opportunity is absolutely there. The timing of it right now as we move forward, it's not going to be linear, but that market opportunity exist for the business.

Okay, thanks for the details. The next question is in terms of the energy business, what is of it I understand it's all offshore, what would sales and profitability of - would they go forward business, what would they look like couple of years ago?

Let me give you a perspective. So…

Kindly figure out what sort of the earnings power would be of what is remaining essentially?

Okay, I’m going to answer a different way. We have removed about $45 million of fixed cost from this you and since the time we acquired, so that’s to give you an idea of how the business has changed, we are going forward. The restructuring that we undertook was to really model and I think Joe mentioned as earlier was to model this business to be able to generate 10% operating income in the current market environment and that current market environment is of current sales are around $100 million. So that's 10% of current market environment, the capacity in this business in terms of what we have in terms of capital installed is to double the business. We have the current capital and capacity to double the business to $200 million, which we think, then could take a profitable levels of the company, much higher. I can't right now say back to where they were in 2014 because we have trimmed in terms of number of service lines but significant profit growth potentially on the business as the energy markets recover.

A couple of quickies. CapEx what are you looking at for the year and then interest expense and tax rates?

So, CapEx for the year, positive around $80 million, we are currently seeing it. Tax rates 24.5% to 25% in that range similar to the past quarters. Interest expense is around $14 million to $14.5 million. That's per quarter and that’s interest and so, that's short financing charge, it's all-in gross interest expense.

Okay. Great. Thank you.

And that does conclude today's question-and-answer session. I would like to turn the conference back over to today's presenters for additional or closing remarks.

Thanks for joining us. That's all the time we have for today. We look forward to speaking to you on next quarter. Thank you.

And this concludes today's call. Thank you for your participation. You may now disconnect.