Minerals Technologies Inc (MTX) 2007 Q3 法說會逐字稿

Good day, everyone. And welcome to this Minerals Technologies Incorporated third quarter 2007 analyst conference call. This call is being recorded. At this time, I would like to turn the call over to Mr. Rick Honey, Vice President of Investor Relations. Please go ahead, sir.

Good morning. Welcome to our third quarter 2007 earnings conference call. We will be begin today's call with Joe Muscari, Chairman and Chief Executive Officer who will provide an overview of the realignment we announced yesterday. He will be followed by John Sorel, Senior Vice President and Chief Financial Officer, who will review our third quarter financial results and provide some details on the financial impact of the realignment. After the review of our financial performance, Joe will provide some further thoughts on the realignment of operations and the path forward. This call is being webcast from the Company web site, www.mineralstech.com. To view the webcast, just go to investor information, presentations and conference calls. If you are viewing the presentation on the webcast, please note that we have provided a pdf file for a clearer viewing of the charts.

Before we begin, I need to remind you that on page 7 of our 2006 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 will turn the call over to Joe Muscari. Joe.

Thank you Rick. Good morning everyone. Last night in our earnings release, we announced that we are realigning our operations and we are taking a pretax charge of $157 million as a result of these actions. There will also be a reduction of over 200 employees, around 7% of our workforce as part of this restructuring process. These actions will, I believe, allow the Company to become much more focused on the programs and business segments that will result in greater success in our market, higher levels of profitable growth and better returns for our shareholders. What I would like to do in the first part of this call is share with you the primary reasons we are making the major changes that we are and what the implications will be going forward. John Sorel will provide you with more detail on the restructuring as well as discuss our third quarter performance and fourth quarter outlook.

Early on in my tenure as many of you are aware, I began an extensive strategic review process with the top leadership of the Company, a process that I shared with and involved the Board in as well. We examined all aspects of the Company's operations and businesses in terms of strengths, weaknesses and future potential.

I also met with many employees and customers over this period, along with a number of shareholders and analysts who provided me with valuable feedback about the Company. It became clear to me that the Company's major strengths were its strong focus on customers and relationships with them, the basic value propositions being offered by its businesses was solid, with some exceptions that I will touch on in a moment. Our R&D capabilities were also solid but needed to be better focused. Our market positions in paper PCC filler was strong and well positioned in all parts of world. The refractories business has a strong position in North America, and an improving one in Europe. But it is also well positioned with global customers such as Mittal and [Koristata]. In terms of strengths, our dedicated employees and value systems in place were also clearly strong.

As we looked at the performance track over the last five years, in terms of profitable growth and return on capital, it also became clear that the Company had lost focus on the things it does best in terms of its core competencies. This restructuring then is primarily designed to reestablish focus on those things that the Company does well in order to better leverage the strengths that we have in terms of market position and technology. This realignment is also about stepping up to the reality of some of our business positions, eliminating distractions and clearing the way to enable more profitable growth.

Let's now spend a few minutes on the major pieces of the restructuring and how they relate to the going forward strategy of each business unit. We have, at this announcement, indicated decided to exit the Synsil business and stop further development on the current product form. We concluded after further in-depth assessment of the product's efficacy and performance at higher operating rate that the original commercial objectives and vision could not be achieved. The initial success experienced in certain market segments proved unsustainable and the company clearly got too far in front of itself in terms of the commercialization, investments that were made. We will be selling or liquidating the commercial facilities in South Carolina and Texas and the customer trial facility in Ohio will be liquidated.

Let's move to performance minerals where our restructuring is targeted to enable a more focused integrated mine-to-market strategy. Our operations at Brookhaven, Mississippi, will be consolidated into our Adams, Massachusetts mining and processing facility and the assets at Brookhaven will be sold. This specialty PCC plant has not met its primary commercial objectives since starting up in 2000 as a specialized facility targeted at the vinyl siding market with our ToughGard product. The business acquired in 2002 from Polar Minerals will also be sold because it does not fit the mine-to-market strategy. Our Mount Vernon, Indiana, and Wellsville, Ohio plants will be affected by this sale. Of the four integrated operations that will be the focus of the mine-to-market strategy, three are regional ground calcium carbonate facilities located in California, Massachusetts, and Connecticut and the fourth is our talc mining operation located in Montana, serving global markets.

In the coating PCC business, we are moving from the merchant business model that we have been deploying in Europe to a satellite model. The satellite model in which we have manufacturing facilities on site at paper mills has been and continues to be successful for us, primarily because it is a core competency of the paper PCC business. The Company has some 50 plus satellite facilities around the world, 10 of which produce coating products. The facility in Hermalle, Belgium is intended to be sold or liquidated and its production is consolidated into Walsum, Germany -- into the Walsum, Germany coating plant. This will help to lower the cost to further develop and penetrate the European coatings market as well as bring a more focused effort to what we are trying to accomplish there.

The Company's refractory business in China will be reorganized to reflect the slower and more difficult than anticipated market penetration for our products and services. The business model for refractories in China will become much more focused on specific companies and areas, as well as support structures and alignments where we can achieve profitable growth faster. There's a commensurate impairment charge at the facility there to reflect this.

Refractories business is still very much committed to growing in the high growth markets but it is refining its strategy to make those moves more in line with the needs of our larger global customers, such as Mittal, [Koristata], U.S. Steel and Thyssen as they grow in regions of the world like Eastern Europe, Brazil, Russia, India and China. The Company also wrote down a number of underutilized assets, the largest of which was our Pensacola facility. Our satellite PCC filler plant in Pensacola, Florida, will be dismantled because the paper mill there changed the grade of paper it manufactures and no longer needs PCC. The changes that I just described, realignment, restructuring and consolidation are all geared to putting the Company on a more stable, more focused and leaner platform for profitable growth. Technology leadership and operational excellence will be the key enablers that we will utilize to drive the performance level and the value creating differentiation needed to achieve higher shareholder return.

Our points of focus for innovation in new products will be the filler fiber composites program to increase filler rates for uncoated freesheet paper, further development of coating PCC products which utilize the satellite model, development of calcium carbonates and talcs for use in the manufacture of biopolymers, continued rapid deployment of new refractory formulations and systems, further leveraging of the Company's crystal engineering expertise to provide greater product customization for paper makers, as well as applying this knowledge to other areas. And we also are forming a technology lead team to better guide and enhance the Company's technology base, as well as being able to evaluate new areas for the Company. Let me stop at this point and turn things over to John.

Thank you Joe and good morning everyone. I will now provide you with an overview of our consolidated and segment financial results for the quarter and discuss the key market and operational elements of our performance. For purposes of this discussion, I will be providing an analysis of the product line results before the effect of the business realignment program. However, during my review of the Company's consolidated results, I will also provide you with a reconciliation to the reported results which include the realignment program.

The Company reported a net loss of $105.5 million, or $5.40 per share, in the third quarter, which includes a major refocusing of our product line strategies as just outlined by Joe. The loss included pretax special charges of $156.6 million, most of which were noncash items. Of that amount, $140.9 million related to impairment of assets affecting all product lines, restructuring and exit costs of $14.3 million, and the write-down of inventories associated with facility shutdowns. The tax benefit recorded with the realignment is only 24% due to the write-off of a deferred tax asset and the write-down of other assets in jurisdictions where a tax benefit cannot be realized.

The net effect of charges on a per share basis was $6.16. Earnings, excluding the realignment program, were $13.4 million for the quarter, $0.69 per diluted share. My following financial overview comments will describe our performance on this basis. Sales for the third quarter were $274.2 million, 3% above prior year. Overall, the net income of $13.4 million for the quarter represents a decrease of 5% from the $14.1 million earned in the prior year's third quarter. Diluted earnings per share were $0.69, 4% below the $0.72 earned in the prior year. Cash generated from operations in the third quarter of 2007 was strong at approximately $48 million, which includes a decrease in working capital. Year-to-date cash generated from operations was approximately $120 million. Capital expenditures for the quarter totaled $14 million while depreciation and amortization were about $23 million. Year-to-date capital expenditures totaled $41 million. Our return on capital on a trailing 12-month basis to the first nine months of 2007 was 6.0% and continues to be a major focus area for MTI's management. The third quarter annualized rate was 6.2%.

This income statement was prepared to summarize the P&L excluding the effect of realignment program. From this table, I will highlight the significant changes as compared with the prior year. The net sales for the quarter of $274.2 million represented an increase of $8.9 million or 3% compared to prior year. Foreign exchange had a favorable impact on sales of approximately $7 million or about 2.5 percentage points of the increase.

A second major element of the sales increase was our recent acquisition of a Turkish refractories business which provided incremental sales of $4.5 million, or 1.5 percentage points over the third quarter of 2006. Together, these two factors account for all of the growth. In total, a strong PCC sales growth of 8% was offset by revenue decreases of 5% in process minerals and 17% in the metallurgical product line. Our expenses were slightly below the prior year. This was primarily attributable to an expense control program introduced early in the second quarter which allowed us to offset increased expenses associated with our acquisition in Turkey, and the impact of foreign currency. MTI's income from operations decreased 8% to $22.3 million from $24.4 million.

For the quarter, the operating ratio was 8.1% of net sales, as compared with 9.2% of net sales in the prior year. Specialty minerals income from operations of $16.8 million was an increase of 7% from $15.6 million in the prior year, and was 9.0% of its sales. The growth was primarily due to improved profitability in the paper PCC product line, whose performance more than offset market weakness and process minerals and production losses in the Synsil product line. Refractory segment operating income was $5.6 million, 36% below prior year, and was 6.4% of sales. Both the refractory and metallurgical product lines recorded decreases in profitability due primarily to lower volumes in North America and higher magnesia costs globally. Net income was 5% or $0.7 million lower than prior year.

Sales in the Specialty Minerals segment for the quarter were $187.2 million, a $9.4 million increase or 5% growth, with foreign exchange accounting for 3 percentage points of the net increase. Sales of PCC increased 8% or $11.4 million to $150.3 million from $138.9 million in the same period last year. This increase was primarily the result of higher selling prices related to the pass-through of raw material cost increases, foreign exchange, and increased volumes in Europe. Synsil product sales for the quarter were only $1.3 million, down 55%. Sales of ground calcium carbonate decreased in the quarter due to a continued decline in residential construction activity and a weak automotive market in the United States. The Refractory segment sales in the third quarter decreased 1% to $87.0 million from $87.5 million in the prior year. Sales of refractory products and systems for steel and other industrial applications increased 5% to $69.5 million from $66.3 million in the prior year. Volume declines in North America were more than offset by incremental sales from the recent acquisition in Turkey and by the favorable effect of foreign currency. However, sales of metallurgical products decreased 17%, to $17.5 million, as compared with $21.1 million in the same period last year.

The decline in sales was primarily attributable to lower volumes in North America and to lower prices, which result from a reduction in the cost of raw materials that are passed through to the customer. In the Specialty Minerals segment, the financial performance graph for the last 11 quarters reflects a positive trend in sales despite the market weakness affecting the process minerals product line. Fluctuations in both sales and operating income have been primarily driven by paper mill shutdowns, costs associated with our paper PCC growth and development projects, investments in the Synsil program and seasonality in the process minerals product line.

During the third quarter, some of the markets that we serve were weak, particularly within the residential construction and automotive industries. However, segment profitability improved over the prior year as a result of the paper PCC business. The paper PCC product line reflected improved profitability over the prior year with growth of 18%, and 14% over the second quarter. Operating income represented 11.0% of net sales in the third quarter of 2007. This was due to higher pricing of PCC from the pass-through of raw material cost increases, favorable currency, and higher volumes in Europe. This more than offset weakness in the process minerals product line and continued losses within the Synsil product line.

We expect some further market softening in the fourth quarter in all product lines in this segment due to down time in the paper industry and forecasted weakness in uncoated freesheet paper production, as well as continued weakness in the construction and the automotive industries. The Refractory segment's financial performance graph also reflects the sales and operating income performance for the last 11 quarters. Although sales in the last four quarters have benefited significantly from the Turkish acquisition and foreign exchange, weakness in both the refractory product and metallurgical product lines have mitigated that growth. Sales and operating income quarterly fluctuations have been driven by several factors including the cost of magnesia imported from China, timing of refractory equipment systems installation, steel industry conditions in each regional market which may vary independently and raw material pricing volatility within our metallurgical product line. During the third quarter, most of the steel production growth was in emerging markets. In our two largest markets, North America and Europe, steel industry conditions were approximately the same as the prior year. Our weaker income performance this year was due to higher magnesia cost, volume declines in metallurgical products, and volume declines in refractory products in North America despite similar steel production levels.

In the prior year, furnaces and integrated steel mills reached the end of their life cycle which resulted in the maximum usage rate for our refractory materials. We expect our profitability in this segment to improve in the fourth quarter despite continued cost increases of magnesia imported from China as we expect the partially mitigate this cost pressure through the introduction of price increases. In addition, we expect to complete additional equipment and system installations and to see an improvement in North American demand.

The working capital chart reflects our operating working capital trends, which are defined as trade accounts receivable, inventories and trade accounts payable. Our days of sales outstanding averaged over 60 days throughout 2006 and our days on hand of inventory have also averaged nearly 60 days. This is the major focus area for the Company's management as it strives to improve return on capital.

The business heads have developed specific programs to achieve and improve performance by year end and we are beginning to make progress as evidenced by a decrease of five days of working capital in the quarter. This was due to a significant improvement in days of inventory on hand and improvement in our accounts receivable cycle. Our cash flow remains very strong with improved performance continuing into the fourth quarter. Year-to-date cash from operation is about $120 million, the strongest performance to date in the Company's history. Our debt-to-capital ratio has been relatively low over the past few years and we have paid down the debt in each of the last two quarters.

In summary, excluding the effect of the restructuring program, our diluted earnings per share were $0.69 which represented a decrease of $0.03 from the prior year. Through our corporate initiatives, we have been able to reduce the level of expenses and have instituted capital conservation and control programs for our businesses. These measures are beginning to have a positive effect on our financial performance and our return on capital. We expect business conditions in the fourth quarter to be weaker in the paper PCC and process minerals products line, and to improve somewhat in our Refractory segment.

For the paper PCC product line, production of uncoated freesheet paper, our key market is projected to be down about 2.3%, versus prior year and down about 3% versus the third quarter. In Process Minerals, we expect continued weakness in the residential construction and automotive markets. Although steel demand remains steady, we expect the escalating cost of our key raw material, MGO, to continue to pressure Refractory segment performance. However, these escalating costs will be partially mitigated by increased selling prices. We also expect demand for our products, including equipment and systems installations to increase during the fourth quarter. As I will discuss in more detail in a moment, we also expect additional restructuring costs in the fourth quarter and into 2008.

Now, I would like to address the financial effect of the realignment program on the Company. Of the total $156.6 million pretax special charges, $143 million represent noncash adjustments. The adjustments were primarily recorded on the restructuring and impairment lines with a small amount of inventory adjustment recorded in cost of sales. As I mentioned earlier, the effective tax rate on the discrete adjustment was low at 24%, due to the write-off of a deferred tax asset, resulting from operating losses associated with one of the programs. In addition, it was a write-down of assets in jurisdictions where a tax benefit cannot be realized. A small amount of underperforming assets were in a joint venture affecting a minority interest line.

Therefore, the net income effect of the restructuring program was a loss of $119 million or $6.16 per share, which resulted in a net loss for the quarter of $105.5 million, or $5.47 per share. As noted in footnote two of the earnings release statement of income, the majority of the asset impairment charges were related to the realignments in the PCC and the Synsil product lines. It should be noted that the Synsil business will be transferred to a discontinued operations in the fourth quarter, as will the assets associated with the production of imported ores which will be held for sale. Restructuring costs relate primarily to severance and employee benefit cost and a termination of certain long-term contracts. In addition to the costs recorded in the third quarter, there will be additional charges both in the fourth quarter and to next year related to the realignment program. These include additional severance costs that could not be recorded in the third quarter due to accounting requirements. In addition, certain carrying and exit costs on facilities to be disposed of will be recorded when they are incurred. Combined these costs are expected to total $10 to $12 million with approximately half of this amount recorded in the fourth quarter. To capture all of the planned savings from the 7% work force reduction, the Company will also have to reengineer certain business processes and systems. The cost associated with this transformation effort will also continue over the next year.

It should be noted that the exit of the Synsil business and the two Midwestern facilities located at Mount Vernon, Indiana, and Wellsville, Ohio, which are being held for sale will be reclassified to discontinued operations in the fourth quarter. We expect the total realignment program to generate a pretax net savings of $15 to $20 million in 2008 as the savings associated with the planned reduction in force will be phased in over the next year as we begin to shut down facilities and reengineer our processes. We expect the fourth quarter to be one of transition as we initiate the execution phase of this transformation plan.

As I mentioned earlier, we will incur some additional costs associated with this program during the fourth quarter, but we'll also begin to realize savings on our ongoing operations.

As a result, we expect our fourth quarter earnings, excluding additional restructuring costs, to be above the prior year's fourth quarter, and close to third quarter earnings levels. Now, I will turn the call back to Joe for closing comments.

Thanks, John. Before opening up for questions, I would like to just share some additional thoughts about this realignment and refocusing of priorities for the Company.

The realignment of MTI will allow us to exit those operations that fundamentally reduced our profitability and will enable us to put our efforts into those core businesses and programs that will once again return value to our shareholders. Our focus will continue to be on profitable growth, product innovation, operational excellence and most importantly, our customers. We have been working to improve our return on capital, as quickly as possible, by making future capital spending both efficient and effective.

We are also focusing on expense reduction, as John had indicated, beginning to see some impact of that, working on -- focusing on working capital efficiencies, global sourcing opportunities, value pricing, and selective acquisitions that can improve our global positions, products and technologies. We have made a number of changes in our research organization with the intent of improving product innovation, which has, as I said a number of times before, long been one of the core strengths of the Company. We will become better focused at developing and commercializing new products and finding new applications and improvements for our existing products. We'll continue to move forward with the previously established continuous improvement process throughout the Company, giving us a more disciplined approach to operations and process management.

We are now implementing such sustainable improvement processes as 5s total productive maintenance and daily management control and we are also becoming a safer place to work. Operational excellence will become part of how we do business every day, and as a result, we will stabilize our processes and eliminate waste, which will help us to achieve higher levels of return over time. Decisions to take the actions we announced yesterday -- exiting businesses, consolidations, realignments, impairments and employment reductions -- are difficult to make but I believe absolutely necessary to move forward. These actions are intended to return MTI to a track of sustainable growth and improved return for our shareholders. As John mentioned, we expect and we are targeting to save $15 to $20 million in 2008 as a result of these actions. And we also see improved cash flow as we look forward and a stock buyback of $75 million, which combined with the unused portion of the previous share repurchase program, will allow us to buy back $100 million of stock over the next two years.

In closing, let's review where we are in the process I initiated when I joined the Company. We've reviewed, reshaped, and refined our discrete business strategy. We have now taken the steps that I believe are necessary to enable our businesses to move forward more rapidly to achieve higher levels of growth and performance and going forward, we will begin to more closely examine further opportunities to enhance our business portfolio. Our primary objective in 2008 will be to deliver better results and our key points of focus will be centered around execution, performance and return. We may now open it up for questions.

Thank you. (OPERATOR INSTRUCTIONS). Our first question is from Bob Koort with Goldman Sachs.

Thanks. Good morning Joe.

Hi Bob.

You have now filled us in on the plans in terms of restructuring the business and what you think make sense from the asset set going forward. I think we are still to hear about what you think the asset base that will be continuing to deliver in terms of margin potential, return on capital potential, or growth potential. Do you have anything you can share with us around what the new look minerals technology can do?

As you can well appreciate, the focus of the organization in the last several months has been around pulling what you see the result as together. As part of our strategic planning process, it basically allowed us to get to this position but we are also -- we have moved into the detailed planning phase of 2008 and 2009 which are really subsets of our five-year plan. What I intend to do in our call, our fourth quarter call, which I think is going to be beginning of February, the plan would be to share some longer term views on growth potential that we see for the Company, some very specific targets that we're setting for our business units, and the specifics of some of those are frankly still being -- being developed by the business units. But we -- we have tried here in this call to give you a clear indication of earnings per share or earnings improvement that we are going to be focused on delivering next year, that will be above where we are today. So that's the beginning of trying to do a better job of sharing some of our targets with you.

Got you. I certainly don't want to minimize what you had to announce last night. In terms of maybe for John the write-downs that were taken. There's numerous assets that are either for sale or potential closure, I suppose. Do you have any sense of what the book value of those assets are and what the proceeds ballpark numbers might be?

The gross values that you will see when we issue the Q here were about $173 million. Of that, we wrote down $141 million. And we wrote them down to a value that we feel we can realistically recover. That's yet to play out from a number of different scenarios on this wide range of assets. So, we think we are in a fairly stable situation there.

And John, from a bookkeeping standpoint, can you give us some indication on an annualized basis what your D&A, maintenance CapEx and maybe if there is any quick look at growth CapEx might be?

You are speaking as going forward, new capital forecast?

That's right, after the write-downs and after the right-sizing the asset base, how will it, the depreciation schedule change. How will the CapEx budgeting change?

The capital budget -- let me try to address that one first. These were all -- these were significantly, for the most significant, part newer assets. So they really don't have a big impact on the maintenance capital side of it. Going forward, you can estimate that the value, the $173 million gross value had an average life to it. So that would imply a depreciation change in the range of $10 or $11 million.

Okay. And so the prior plans of running a CapEx load around $100 million a year still makes sense?

Bob, let me -- is it still Bob on the line? Yes Bob, let me try to address that. The spending plan or the, say, budget that I put into place when I came into the Company was we put a limit of $75 million this year. But more importantly we set up an allocation process to really allow capital to go to those businesses that are performing better and getting above cost of capital return. That process is going to continue into next year and the year after. We haven't set the level for next year, as I indicated we are still reviewing the plans from the business unit. And I would expect it, though, to be around that range, a $75, $80 million, based on what I'm seeing right now, but that could change between now and the end of the year. I should add, we are going to come up short of the 75. That's the other piece that I wanted to add. I think we will be --

In my prepared comments, I mentioned that the year-to-date was about $40 million.

Yes. So we are going to be probably under 60 or, you know, around 60 max. Max.

Got it. And my last question and thanks for your patience, in terms of changing your process minerals strategies to a mine to market, do you risk jeopardizing some customers who are buying from both facilities and creating some customer problems there?

That potential exists but I really believe it is going to be minimum. In part that obviously we closely examined that. There could be some -- some, you know, some potential issues but we've got strong relationships with our customers, particularly out of Barretts, our talc mine, very strong position. So, we're really not expecting much of an impact. I am going to let Randy Harrison elaborate on that a little bit.

Yes, Bob. I would embellish what Joe said. In the Barretts facility, we have been in a number of markets for many, many years, providing a lot of what I call good solid leading technology in various applications and we have built up very strong relationships up and down to chain in these organizations from the corporate level down to the operating level at the plant. Even though you have some of these companies that do buy products from both locations we don't foresee in our modeling any serious risk of attrition coming from this type of a change.

Great. Thanks very much.

We have a question from Mike Judd with Greenwich Consultants.

Yes. Good morning. Thanks for taking my question. Just want to make sure I understand this. The expected pretax savings of $15 to $20 million next year, is that on an average basis? Is that the rate you expect to achieve during the year or is it sort of the run rate by the end of next year?

I'm going to let John elaborate, but that's what we expect to achieve in 2008. The total savings that -- from the restructuring are expected to be higher but as John indicated, that the flow through of both the cost and the effect of the restructuring, in terms of positive effects would not be fully realized until we are into the 2009 period. John, do you want to add something to that?

I think that covers it, Mike. I mean the thinking here is it will take some time to implement these things. There are some services that have to be employed to help us through the process in case some of the transformation activities we have to accomplish. So, it will take some time. I think it won't start off at the beginning of year, anything like that, that kind of number. It will take a year to achieve it.

Okay and then with the share repurchase of, you know, $100 million, you know, that seems to be almost like you could fund that out of your cash flow, you know if you are doing it over a two-year period. You know, why not, you know, basically given your capital structure here, you know, basically do something either sooner or, you know, to raise the repurchase amount by a greater amount?

I think that's a fair question, and we've talked about this before, in some of the prior calls. I think you will note the really this $100 million or the $75 million is now over two years instead of three. So there is an acceleration of what we are doing, you know, in terms of returning in this case, returning cash to the shareholders. It could be viewed as a bit conservative. I feel at this point in time, it feels like the right thing to do given, you know, what we are looking at. But, again, that's subject to change. We are going to continue to evaluate this thing as we go forward. Right now we saw it accelerating, making it over a shorter period of time, given what we see in terms of cash flow improvement made a lot of sense.

Okay. And then just lastly, there's a comment here about the development of, you know, filler fiber composite programs, you know, continues to undergo large scale trials. I'm just wondering -- we ask the same question every quarter and I quite frankly, I always end up, you know, just really being a little confused by what's actually going on and whether there's progress, and, you know, what is your timeline for actually seeing something significant happen there.

Yes, first of all, I -- you know, let me say, it's not intentional intent to confuse. It is the nature of the type of development work that the Company does, particularly something like this, where, where we do it, how we do, it is something competitors that could be of use to competitors but is just also in terms of what we are doing with, in this case, an individual customer requires a good deal of maintenance of confidentiality. However, but just the nature of the trials themselves, how we go about doing them, how results are interpreted and then used to redesign future trials are, you know, very complex -- it's a very complex process.

I don't want to make it more complicated than it is, but this is new development and it's now being done on the beginnings of a very large scale. And that, perhaps, is the reason why you leave with a feeling of gee, when is thing going to pop? It is not of a so-called pop nature, per se. We are not quite at that point yet keep working towards it.

The difficult part is that you can't put a time dimension on that next period of when we can say, yes, we're running a trial and now we have seen enough, the customer has seen enough, they could actually make a commitment to go forward and make the investment. Ken, you want to add some perspectives and maybe share where we are today?

Well, again, just maybe to add a few comments to what you said. You always that the - you know, it still is very clearly a development program. And we do have additional trials planned in the fourth quarter, but the comment that I -- that I really would like to make, which really echoes what you just said is in this particular case, it is -- it's a step change in terms of the filler level that people are running at today versus what we are looking at.

And so therefore, definitely because it is a step change, progress is slow. There's a lot of evaluation that goes on, a lot of planning then for the next trial because, again, once a customer ultimately will make that commitment, it really is going to be a market change with respect to how that paper will look and feel in the market place.

So in any event, the program is moving forward but albeit maybe slower than we would all like, but it's still a development program.

Yes, and I think it would be helpful just to, you know, remind everyone, these are trials now on paper mills, large paper mills that are operational. So when we are running the trials, they are not, you know, necessarily running -- or they run the risk that the paper they are making during these trials they are not going to be able to sell. In many cases, they can but what's fundamentally happening, the paper maker is turning over their machine to us to run the trial, which is a big deal for them in terms of the amount of down time that they have to be willing to take to run the trial.

Thanks for the help.

You bet.

JP Morgan's Jeff Zekauskas has a question.

Hi good morning.

Hi Jeff.

I was hoping you could just clarify a couple of issues for me. I think in the second quarter conference call you said that your early stage efforts had led the Company to lose about $0.45 a share in the first half of 2007. So if we annualize that, that's something like $0.90 or $25 million pretax. Now what you are going to do is you are going -- you have a large restructuring program where 200 employees are going to go and there are cost savings from that. What I'm a little bit confused about is what happens when you add all of these different efforts together? In other words if you are losing $0.90 on your early stage efforts, by the end of '08, how much will you still be losing on an annual basis on the early stage efforts? And to what extent are the employee reductions incremental benefits and to what extent are they are not?

Yes, Jeff you are referring to really the growth expanse, the chart we showed on the last call that tried to dimension the expenses that go into growth projects and these were development projects, the growth project we -- you know, the growth investment we made for Turkey in the ASMAS acquisition, China, so it was a mix of things. We're going to give you more clarity on that in the -- you know, as we get -- when we get through with the fourth quarter. But this will, because that included Synsil which was a large part of it, it is going to have a big impact on that. I think, you know, it's about at the moment as good as I can do from a dimensioning standpoint. But Synsil and the coatings in Europe development costs probably make up a good part of that piece.

Now the reason why I can't give you a number, we are going to be in -- for instance, in the case of filler fiber composites, as we go into next year, we expect to be spending more money in that area. So this is not just an elimination. Yes, it will be -- it's going to be cut significantly, but, remember, as I also mentioned this is in part where the seed corn of the future growth comes from.

It's through these investments that take the form of expense spending that we are able to, you know, target things like growing or getting our breakthrough on the filler fiber business. So, it will be significant but that isn't something that goes away because you really don't want it to go away.

Of the 200 people that you are letting go, what percentage or what number of them are attached to businesses that you are closing?

I'm going to look to John. I thought that rather me give you an estimate also top of my head.

It's about 35%.

Okay. 35%. Because in answering one of the previous questions, I think John said that depreciation charges would go down about 10 million on an annualized basis and I take it that is not part of the $15 to $20 million of cost reductions that you are talking about for next year, or is it?

It is. It is part of that, Jeff. So you have to be careful also that -- I mentioned some of these things we moved to discontinued ops as well. And so then you will be moving the whole cost including depreciation down into that line. So, we are trying to give you a picture on the net, but remember that we said there are ongoing costs for both restructuring activities yet both this year and next year and there is additional cost to be incurred regarding the transformation process.

Are there working capital benefits to all of these steps and what's the magnitude?

I'm not sure. I can't frame that up for you right now, Jeff.

But they are positive?

They are positive, of course yes.

And also Jeff some of those, again you may not see until we actually sell and complete the shutdowns as well, which will -- you know, particularly the shutdowns we are targeting some at the end of the year, some into next year, and depending when the sales go will determine when those working capitals are going down as well.

For example, Jeff, one of them that will be held for sale is the -- the Midwest plants that import the ore from China. So they have a substantial inventory carrying portion of that business. It will take sometime to sell that and work down -- or work down the inventory over time.

Just as a last question, in terms of your refractories business, by how much were you squeezed in magnesia costs this quarter? That is either on a pretax or an earnings per share basis and what do you expect the squeeze to be like in the fourth quarter?

We are going to ask Alain to answer that, Jeff.

Thank you.

Hi, Jeff. Yes, we talked about at the last -- at the last conference call, we saw really the increase starting in the third quarter and this increase is going to be higher in the fourth quarter. The price of magnesia is -- has been increasing dramatically and there is a flow through also between the time we buy and the growth for the inventory, which is about 5 to 6 months. So the pricing that we -- that we see today is much higher than what was it was and there's still a time lag between the two. So, we can estimate to about $1 million quarter over quarter from the third quarter to second quarter and this cost is still going to go up in the fourth quarter with a number somewhat higher than the increased quarter over quarter.

But what we are implementing, which was announced a couple of weeks ago is the price increase, which has been started in Europe prior to the end of the third quarter, and starting in the fourth quarter in North America and in other regions as well. And this price increase is going to ramp up, unfortunately it's a catch-up. That means there's time lag between the full effect of this price increase and when we get the cost of the magnesia. So we are only going to partially offset the cost increase we are going to have in the fourth quarter. We expect to have a better -- a higher magnitude of the benefit of the price increase going into next year.

I can say that -- that the industry is facing a challenge that the raw materials are a key component of our economics and I would say we have, I think, more success to make our case with the customers than we had a couple of years ago. So in this regard we see a good traction from the price increase but we have to deal with the time lag.

Okay. Thank you very much.

You have a question from John Roberts with Buckingham Research Group.

Good morning, guys.

Hi, John.

Is the filler fiber composite strategy solely satellite? I hadn't really thought about that until you were getting out of the coating grade. But it's a much larger potential volume opportunity down the road but I didn't know if it would be handled only by satellite.

Yes. The plan we have in this strategy is built around, totally built around a satellite model.

And then secondly, how long has Pensacola been serving just the merchant customers? I lost track of that, and I didn't know whether Pensacola is a heads up for us that we ought to think about some other facilities that might drop the uncoated freesheet application.

No, there's no issue with any other, with any other issues that way in terms of customers dropping. As a matter of fact, any customer -- any of the merchant customers that we had, for example, at Pensacola, we have transferred to other satellites.

And, Ken, these were customers you had while you were running (MULTIPLE SPEAKERS) --

While we running Pensacola.

Right, and that's an important point. So, that gave you added volume at that site, so when it dropped off, you had it.

And so when Pensacola lost its captive demand and was just merchant supply?

John, I think it was essentially the second quarter.

The second quarter? Okay. Thank you.

Next up will be Steve Schwartz with First Analysis.

Hi, good morning gentlemen.

Good morning, Steve.

In China, what's the issue there? Why the problem gaining traction? And I'm wondering with the change in strategy, why would that require a write down?

I am going to start this off and then I'm going to ask Alain to further elaborate.

But fundamentally as you look at the refractory business, we've had a good deal of success in North America with the value proposition that centers around value-added refractory reformulations that help the steel maker extend furnace life, combined with servicing in terms of having our own people in the steel mills doing that and combined with measurement systems and equipment. And that's worked very, very well in North America. It also works well in Europe.

When we moved to China, the original model that we went into -- the Company went into China with was a similar value proposition. As the business was established there, we went forward, that was attempted to be deployed across a vast array of steel companies and what we found was that it was not working.

The basis for purchase, for buying in China is different by the steel mills than it is in North America and Europe. And our selling proposition in the western regions are based on total cost of ownership by a steel mill meaning that they will integrate and understand the higher price you pay for the integrated service results in greater savings.

It's that model that the vast majority of Chinese steel companies have not matured to yet. They buy at price, and they are not buying on a total cost of ownership basis.

The exceptions are a few companies like [File] Steel where we have refocused and concentrated our efforts on the few companies that actually do have a cost of ownership, understanding and focus. So the original volumes that we estimated, we have over time, that justified the investment, as we now look at where we are, they are much lower, as we look forward. It's going to take longer with this more focused effort. Still a good opportunity for the Company long term, but that's what drives the impairment charge.

Alain?

Yes, Joe, I mean, just to give more detail or so on the selling process, there's still value in our technology in the Chinese steel industry. We are still increasing productivity and at the rate they are growing, there's still a lot of value in terms of productivity increase. There are also cost savings in terms of refractory consumption and improvement or so in the quality of steel with the use of our products and technologies.

The problem is to -- when you sell value is too have value buyers. That means people that can determine being decision makers that it's the right thing to do for the steel operation. And we are facing an industry which is still evolving, where the decision making process is very decentralized between the operators, the purchasing departments, one not talking to the other. And the decentralized decisions don't always reflect what is good at a higher level for the steel operation.

Combined with the factor so that there are longstanding relationships with local suppliers which are not always transparent make it for a company like MTI very challenging in terms of the things we can do or we cannot do or we don't want to do.

So as a result, as Joe said, there is a number of companies that we have been working with and we are going to continue to work with that are more sophisticated, appreciate the value and see value in our proposal proposition for selling our technology. And we can see also going forward that with the consolidation in the steel industry which has happened but at a very slow rate is going to make the industry more competitive, meaning looking for the value, and we see it as an opportunity the same way or so as foreign-owned companies will try to get into the Chinese steel market. But as one can see also, this is going to be a longer process.

So, as Joe indicated, it's more a reflection of the gap between our (inaudible) business plan and what we had when we moved forward at the beginning of our project.

If I could add just one additional piece to that, because this may not have been as clear as I would have liked it, but this also reflects a modification in the strategy for refractories to where, again what we have is the investment in a facility, not unlike a merchant strategy, but investment in a facility before we had a customer base established.

What -- we believe we can do a much better job of leveraging the relationships and supply positions we have, which are really excellent with the large global steel makers and work with them as they pull us into regions where we don't have sales. It makes a world of difference to have a contract in your hands for supply from the standpoint of the economics that you can get to from a timing stand.

You can get there and make money a lost faster and not have to work your way up through both what it takes to fill a facility like we have in China but also to develop customers. So the customer development process, by leveraging the strong positions we have is another key aspect of this strategy change for refractories.

Okay. That's -- that's very helpful. Moving into the satellites, if I may one more question here, obviously Courtland had some -- you know, was under utilized because you were able to move the merchant from Pensacola into it. That makes me wonder what your other 50 or so satellites are running at. Can you give me a feel for maybe the average utilization rate and a range of utilization rates among the satellites? You know, is there a potential for some more consolidation there?

Well, Steve, this is Ken Massimine. Let me take that question on. I think in terms of, you know, you are always faced with continued consolidations in the industry as if something in the future could be impacted. But at this point, you know, we don't necessarily see or envision anything in the near term, where that could be the case, like another Pensacola. In terms of the ability to -- an opportunity to continue to improve our utilization in our existing satellites, the answer is that's something that we work at on an ongoing basis. You know, for example, in terms of getting filler levels up. So, for example filler fiber composites that we have talked about early would be an opportunity. Even in cases where people are looking to increase just their incremental filler levels. These are things that we are working on an ongoing basis in terms of improving the overall return on the capital and the utilization of those satellites.

Okay. In your agreements with these paper makers, do you have the kind of flexibility to consolidate satellites and then ship, you know, so-called merchant product from another satellite to a mill?

Well, we do have an opportunity where there are some satellites where we have offsite customers that are, again, from a logistics standpoint, making it -- make sense because, again, the products generally dilute and therefore freight plays a big piece in this, in terms of the overall cost if you are shipping from offsite. But where it does make sense, you know, obviously we do develop offsite customers.

Okay. Great. Thank you, gentlemen.

We have a question from Rosemarie Morbelli of Ingalls & Snyder.

Good morning all. Thank you for taking my question after 12:00. One of the reasons for pushing the Synsil product and therefore, the third leg was that there was only a limited amount of growth that seemingly was achievable within the refractory and PCC business. Could you talk about what kind of a growth rate you see in the future based on the steps you are taking in those two businesses?

Yes. I was going to begin my remarks about the third leg in the stool, but in terms of, you know, thinking of three legs, it's not a very stable chair. So, I have never been a proponent of a third leg. I would rather have four than three.

And what we are basically trying to do with one, in recognizing that this was not going to be a third leg, if you will, in terms of what the company had envisioned but by refocusing on the core strengths, the core businesses, and core technologies that perhaps don't even reside in any existing business, per se, but are part of the corporate DNA. We are going to begin to look at other areas but frankly, we have some really good potential areas already on the table that we need to bring home.

It is about focusing on filler fiber composites, achieving the levels of penetration that are possible there. Once we are able to break through at one customer, I think we will begin to see that come to fruition. But we have other areas that I mentioned such as the biopolymer area that we are, in fact, working on, that's part of the performance minerals group. It's an area that today offers, you know, I think some good potential.

I wouldn't call it a third leg in the stool, but it could become an important part of the company down the road. If again, we're successful with some of the early development work that Randy Harrison is doing. Randy, you might want to elaborate on that.

Yes, Rosemarie, what's occurring in the plastics industry right now is that there's a mainstream movement, very much on the green lines that's taking place beyond what you already hear about current footprints and the atmosphere. That is in the whole aspect of getting plastics to be compostable and not just recyclable, and so what is that creating, there's a lot of new resins, bioresins that are coming into the market now that replace fossil fuels. And then inherently, they provide the compostability and the recylability that the market is looking for, but they have inherent efficiencies in terms of their ultimate performance, be it reinforcement or film blowing. So, we're in the process of developing some interesting and unique calcium carbonates and talc which we think provide performance attributes to allow these polymers to take a foothold. And that works in concert with the market pull that's coming from municipalities like San Francisco which has mandated compostable bags. They will no longer allow fossil fuel bags into the city, to people like Wal-Mart which has demanded all of their packaging be green. So, there's a lot of opportunity here, but as Joe has said, there's a lot of technical work that has to be pushed through and then established from that, the commercial efficacy. But it does appear to be very promising.

How long do you think you need for the green products to maybe take hold in the market place? Because that has been attempted before and I agree no one was focusing on global warming then as much as they are now. But nevertheless, those are not given in terms of results and with the -- you know, it will really occur.

That's really hard to say, but what we are seeing, and Randy can elaborate even further on this, is what we are seeing much more interest today, much more interest, to where it -- the economics that perhaps didn't make sense 5 to 10 years ago to folks are beginning to make sense today. And so that's a difference. How that is going to play out in terms of what that can lead to and how soon, it's still not as clear as it needs to be. But we are seeing very strong signs that the interest is growing and -- that interest is translating into people willing to pay prices for certain products.

Yes, Rosemarie, it's not simply a case of people willing to pay the price right now because there's that strong push made by people like Wal-Mart and Procter & Gamble. But, they're on the supply side. There is some fairly sizable players putting some big out money out there, that are putting in capital to install capacity, to make some of these bioresins, people like Archer Daniels Midland, NatureWorks, which is a subsidiary of Cargill. Even Toyota Corporation has signaled over a ten-year strategic period that they are looking to get into the biopolymers for all its auto manufacturing. So, there's a lot at play here, but there's a long way to go, and I want to stress very clearly to get the technical solutions all resolved, so that it will get a placement in the market place. But I can tell you, there's some limited acceptance out there in the market right now and it has been all on a market pull.

Okay. That is helpful. And then on the filler fiber composite, I mean, I understand you are doing those launch trials, I am assuming there's that one paper mill, and let's assume that they are very happy with the results and they go along with that. How long do you think it will take before it actually makes a dent in your growth rate? Because if I go back to the PCC, you know, years and years ago, it took ten years for that to actually start growing because every single mill had to do their own test and so on, and you didn't have IP looking at it at one mill and saying okay, it is working here, we are putting it everywhere. It doesn't work that way -- or it didn't work that way. Will it be different for the filler composite fibers?

Rosemary, this is Ken Massimine. And let me try to address your question this way. You know, again, definitely (MULTIPLE SPEALERS) is still a development program, but assuming that it continues to be positive and we were able to commercialize a large customer, then I think again as Joe indicated earlier, that really does give you some kind of a validation in terms of the technology definitely has value. I think, again, the speed at which it would be embraced by other customers then I think there would be a certain amount of -- they are going to have to try it for themselves and they would have to move it along, you know, at their own pace. This is truly my speculation now, is the fact that the PCC model is such that PCC is the filler of choice in uncoated freesheet and it's used day in and day out. The people then have made that transition to PCC. So, what we are really talking about here is being able to put more PCC in the sheet. So while this technical hurdle is associated with that, that we are overcoming, my speculation would be is that once a customer did commercialize, that the speed could be faster. Because at this point, PCC is something that they are used to using, obviously they are going to be using more of it. But I clearly would have to still state that people are going to take their time in terms of running it through their own process to make sure that it works properly for them.

And, Ken, would that mean that the filler fiber can go through the existing satellite or do they have to do -- to make a lot of investment in terms of getting a different source for that?

No, in other words, it's really -- what you would be using the basic satellite and then you are adding investment to that.

Okay. And then one last question if I may, on the savings, you are talking about $15 to $20 million in 2008, which obviously is reasonably small, when you take a $157 million tranche. What would be the total savings you would be expecting to get after 2008?

Yes, you know, as you know, you can appreciate, we have a lot of ins and outs in terms of movements that we have occurring. It will be greater. We will be able to give you a little more visibility on that after we get through this quarter and that will be -- it's more around timing of -- you know you might say that perhaps we were being a bit conservative on the $15 to $20 million. We will have a better feel for that once we get through this quarter, where we will have a better sense of the layoffs, the closings and the timing of some of those and then how that is going to flow into 2008 and 2009 which will add to the $15 to $20 million savings.

Okay and actually, I am sorry, I do have one other question. All of the 200 people -- well, let me rephrase this. Are there any changes in the top management of the different business use -- units that you are expecting as a result of all of this reshuffling?

Well, that would be very inappropriate of me to discuss here with the leadership of the Company here, but as you know, I have brought in additional people to the Company to help us so, you know, in terms of helping now with the restructuring that we have been doing, we have brought in Doug Dietrich who has been an integral part of the restructuring process. We've brought in Bill Wilkins, who is very focused on supply chain and supply chain management. That's beginning to have an impact on the Company. But frankly, I am focused on performance in each individual business unit. That is what is going to determine who will be here, who won't be here and it is about performance. It is about delivering. And so that's where I'm focused with each of the business unit heads right now.

Thank you. I really appreciate your addressing it.

We have time for one more question.

Thank you and the last question will come from Steve Wilson, Lapides Asset Management.

Thank you. I appreciate you guys letting the call run so an actual shareholder can pose a question. I'm just curious, if we reconstructed CapEx, since it looks like about $200 million went into all of these failed ventures, wouldn't it be about $50 million a year, that went into what will our ongoing businesses going forward and wouldn't that be obviously contingent on any, you know, major new satellite contracts being assigned? But wouldn't that be a more appropriate base level of CapEx going forward.

Well, I never thought of it that way, but that's an interesting observation. You might -- you might get to that number if you looked at it that way. I'm looking at it more from the standpoint of business opportunities that we have, and the one area that could quite frankly, even with -- with -- if you take filler fiber composites out of the equation, which could really require the additional capital for us and perhaps you might say that's why I'm being a bit conservative with the stock buyback program, but even if you take that out, the draw on capital for our basic filler business, where the growth opportunities are still quite good, as we look at -- particularly as we look at the latter part of -- of 2008, and 2009, basic satellite for filler outside the U.S. are pretty strong. And even inside the U.S. there still may be some opportunities for us. But the Asia the growth, which is where we are quite focused, additional growth in Europe, are still there and they are still pretty strong. And this is going to be an area where earlier the question was asked about targets but I think it's about trying to provide a little more visibility on growth potential, even though it's probabilistic. The reality is that there's good growth potential that could draw more than the $50 million of capital just on the basic PCC business combined with sort of minimum in the other two businesses.

(MULTIPLE SPEAKERS) And these would be -- I need to add -- these are all good returns. The PCC paper business is a very good return business. So these are all value added and would all be value added type investments.

And I don't think anyone has complained about the returns you have earned on that. It's obvious the stuff that you just recently addressed, that's a chronic drain. Just help me in terms of -- of Walsum, because I struggle with the size of that facility, you know, and the new thought of we really just want satellites and obviously stuffing as much as volume as you can from Hermalle, but that still is going to be woefully underutilized and I assume still generating significant losses because it's not going to be filled sufficiently based on its original design. Is that a proper assessment there, that you are sort of salvaging it as best you can but we're (MULTIPLE SPEAKERS) in a position to make that profitable?

I think that's probably a good assessment. And the way to -- to envision this to one penetrate the European market, I think that was part of the rationale of originally going in with these facilities, you need large quantities because they really don't want to trial the coating, unless you have the large quantities. So what we have done though is scaled back how much we really need to support the development. We don't two plants, and we're going to be utilizing and focusing Walsum for large trials to -- that would then lead to satellites. That's the current game plan. So it's minimizing and getting to the minimum level needed to continue with further penetration of the market.

So even though the original plan was based on a circle of so many paper mills in reasonable proximity to that location, if you were to sign, you know, the volume-type customer for coatings you would then as opposed to fill out more of Walsum, keep that underutilized and then commit new capital to build a new satellite, you know, on site facility?

Potentially, yes. And the reason for this is -- again, this is very conditional in terms of how successful we are there, but the most economic model for making the product and penetrating is the satellite, without a doubt. It also --

But, but, but that's on a pro form of clean sheet of paper. If you have already committed the capital for this site, the economics have to be different versus new capital to get the equivalent capacity out of the satellite, right?

Well, you have that. Keep in mind that to actually penetrate the market, the transportation costs out of Walsum into some of these other sites makes it prohibitive. So you are looking at penetrating a site that you otherwise would never be able to get. So Walsum I think should be viewed becoming more of a developmental facility to support us, and this -- I would keep the perspective we have on it, is that there's a time limit on this. This is not going to go on in perpetuity that it's very focused to achieved certain objective over a reasonable period of time.

And just one last facet on this, because clearly in the past if one of those potential customers had said, well, I would like the material but not on a merchant basis, so on a satellite, you would not have said no, and now suddenly said yes. You would have obviously met their needs however possible. But you have been trying for several years now to find appropriate customers who have sort of been able to see, you know, where it would come from. So what is going to be different now in terms of customer acceptance or willingness to commit in fact, requiring more of a commitment because now they would need to sign some kind of long-term contract, you know, because of on-site investment? What's changed besides, you know, your needs to sort of revamp the strategy here that the customers in that area have tested this, have seen this and obviously seen your level of support for it, you know, already? So why would they be more willing to commit to this product today, versus in the past where obviously they have been unwilling?

Well, I think it is a good observation. We are doing more than simply reshifting. We are developing a different value proposition, both on the -- on the cost side and the capital investment side from our standpoint that, let's put it this way, would put us in a more competitive position. We could end up at the same place. That's a possibility. We believe we have a better chance of -- and there are still opportunities there -- of penetrating through this approach. And one of the things, I think, to keep a perspective on without getting too deep into competitive dynamics, we're taking something that just to -- again, share with you, we are taking what has not been a strength of the Company, the merchant process and going up against a competitor who is - that is their absolute strength is their merchant approach to the marketplace in Europe. So we have been taking weakness against strength. What we are attempting to do now remains to be seen if we can be successful but we are going to take a hard run at it, is we are going to take our strength, which is the satellite model which directly addresses distribution costs. And if we are successful at lowering product costs in terms of manufacturing, then we have a good opportunity to compete and begin to penetrate. Coatings per se in terms of utilizing satellite is not new. We have it in other parts of the world. It just has never become a large business for the Company and so the European investment, you know, from my review of where we have been was attempted to -- to penetrate in a large way the coatings market that is dominated by another player.

And just so I understand the original sort of premise was based on a coatings grade PCC that was selling at a much higher price than what you were doing on the satellite grade filler. When you go to a satellite model for coating, does that sort of bring that product price back down to a filler level or is there still a noticeable premium for satellite-sourced coating product versus filler?

There is still a premium, but now you are getting into the area that I really shouldn't be going further with from a discussion standpoint. I'm not trying to evade your question, but it really gets to in part the heart of our strategy.

Okay. Well, thank you very much and good luck.

Okay. Thank you.

That will conclude our third quarter 2007 conference call. Thank you for your interest in Minerals Technologies.

Thank you.

Once again, thank you all very much for joining us. That concludes the presentation. Have a great afternoon and enjoy your weekend.