Minerals Technologies Inc (MTX) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Minerals Technologies fourth-quarter 2014 earnings conference call. (Operator Instructions) As a reminder, this conference call is being recorded.

At this time, I would like to introduce your host for today's conference, Rick Honey, Vice President of Investor Relations.

Good morning. Welcome to our fourth-quarter 2014 earnings conference call. Today Chairman and Chief Executive Officer Joe Muscari will provide some insights into our fourth-quarter 2014 and full-year performance, as well as a brief update on the integration of the former AMCOL, which MTI acquired in May 2014. He will then turn the call over to our Chief Financial Officer, Doug Dietrich, who will give you a detailed report of our financial results for the quarter.

Before we begin, I need to remind you that on page 8 of our 2013 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.

Thanks, Rick. Good morning, everyone. We have a lot to cover with you today in that we will be reviewing both the quarter's performance highlights, an overview of the year, further insights into the synergies that we are delivering due to the acquisition of AMCOL, as well as what we are seeing as we look forward, including the impact of the Energy Services business, which I know is on the minds of many of you.

This is the second full quarter of financial results that include the former AMCOL businesses. MTI earned $1.22 per share, a 100% increase over the fourth quarter of 2013, which clearly illustrates how accretive the acquisition is to Minerals Technologies. For the full year, the newly-acquired businesses contributed to our strong growth, which are earnings of $4 per share, a 65% increase over 2013.

And during the year each of the former AMCOL businesses improved profit margin significantly. In the fourth quarter, all five business segments recorded double-digit operating margins. In addition, we grew the former AMCOL businesses 6% over the prior year.

In March of 2014 we provided a synergy target of $50 million in the first two to three years of ownership of the former AMCOL and up to $70 million within three to five years. I would like to note that today we are approximately 15 months ahead of that $50 million target and tracking at a run rate of $44 million in the fourth quarter. Doug Dietrich will take you deeper into this later in the call.

This performance has resulted in strong cash flows as we generated $120 million in cash flow from operations in the fourth quarter, which has enabled us to accelerate our debt reduction and in turn a $100 million debt payment in the second half. As you can see on this slide, the accretive effects of the acquisition are quite pronounced, both on a quarterly and annual basis. Also worth noting that the MTI base business profitability has been growing at a very solid rate before the acquisition as well.

The overall results of this focus and intense effort on the part of all MTI employees has been margin improvement in all businesses; strong cash flows, and record profit performances four of the Company's six businesses.

We also saw major turnaround in the Construction Technologies business. The fourth quarter we began realigning parts of the organization by consolidating global manufacturing facilities and administrative offices to support faster growth. The net effect of which we will see in 2015 in the form of organizational momentum that will drive future growth through our main strategies of geographic expansion and new product innovation.

The integration itself has been and continues to be multifaceted, with integration taking place on many fronts. During these last eight months we have concentrated on maintaining the stability and strategic direction of all our businesses while effectively integrating and transforming various aspects of the former AMCOL. Customers have been our first priority in maintaining stability and we have been successful in preserving and improving strong customer relationships.

One of the major factors that allowed us to move quickly in achieving greater synergies is the significant progress in transferring transactional processes into our robust MTI shared services organization. All the functional groups of the former AMCOL have also been transferred into MTI. The Company also made good progress in introducing our operational excellence.

Lean processes to the former AMCOL and the integration of our environmental health and safety practices is well underway. And safety performance actually improved in 2014.

We are also linking research and development teams in a focused way by establishing pilot projects in such development areas as adhesives, sealants, and pet litter. Scientists from the former AMCOL are now also members of the MTI Technology Lead team, the body that oversees the direction of the Company's innovation networks.

Transformation and cultural change, as many of you know, presents many challenges, but with the help and dedication of all employees we are progressing rapidly in transferring the processes and practices that comprise what we call the MTI business system.

Let's take a few minutes to review some of the Company's other 2014 business accomplishments. Our focus on growing PCC business in Asia, especially China where paper production continues to rise, continues to gain traction. We began operation of a new satellite plant in China at midyear and are constructing four additional satellite PCC plants on-site at paper mills there. And when these plants are in operation, we will have eight satellites in China, more to come.

In addition, we are introducing our new yield process technology at a mill owned by Sun Paper, the largest privately-owned papermaker in China. NewYield, as we discussed previously, is unique in that it converts a waste stream from the paper mill into a usable filler pigment for paper allowing the papermaker to avoid the cost of landfilling or burning the waste.

Another exciting developed on the China front is our entry into the packaging market with our coating-grade PCC. We are constructing a 50,000 metric tonne a year satellite PCC plant in Zhejiang province with the Zhengda Paper Group, which is scheduled to begin operation in the fourth quarter. This will be MTI's first on-site satellite plant to produce PCC for the coated packaging market, and it represents an entry point of a potential market opportunity of $100 million.

The end-market for this type of packaging paper is in such areas as containers for food and beverages, cosmetics, pharmaceutical, electronics, and luxury products. Our PCC approach improves performance over the more commonly available brown calcium carbonate and provides papermakers greater cost savings in calcined clay. Our emphasis on coating PCC for packaging will be directed mainly in China, where there is a high potential for growth. There are, however, also potential satellite opportunities that we will be pursuing in other parts of the world.

Our Performance Materials business unit had a record year in 2014 as its strong position in the US foundry industry benefited from strong US automotive and rail markets. This US foundry industry overall has been on you might say a resurgence track. Other parts of performance materials, including pet litter, had a strong second half. In 2014 our construction technologies business very simply executed a dramatic turnaround.

On a pro forma basis, sales increased 9%; profitability was 7 times higher than in 2013. This high performance was driven by a number of large high-value projects in both the environmental products and building materials product lines, as well as significant overhead reductions and organizational realignments.

The Refractory segment recorded a record year with operating income up 25% and the signing of new longer-term cost per ton contracts in the Middle East and the United Kingdom. And despite the recent drop in oil prices, the Energy Services business also had a record year. One of the more significant highlights of 2014 was the signing of a contract to provide well testing services to Saudi Aramco, the world's largest oil company.

In addition, we ended the year with a strong and healthy product development pipeline with over 140 new ideas at various stages of development.

We have also concluded our in-depth strategic review of the three new business segments and I would like to take just a few more minutes here to discuss their strategic focus going forward. Overall, Performance Materials, Construction Technologies, and Energy Services will each focus on geographic expansion and new product development as their overarching strategies to achieve growth. These strategies will be tailored to the specific opportunities and positions that each business has around the globe such that growth and performance can be optimized.

Underpinning these strategies will be the implementation of MTI's operational excellence processes and our focus on cost control. Near term, however, each business will continue to be focused on rapid overhead reduction, albeit with each having different target conditions.

As we look at Performance Materials metal castings business we intend to maintain and grow with the market in North America, while leveraging our strong China position to grow faster. India will also become a more significant part of Performance Materials' growth strategy.

And we also, as you may have seen this morning, we just announced a strategic long-term global agreement with Glencore, which is going to enable us to have a more sustainable and cost-effective supply position for our chromite sands business. And this will allow actually for exiting our South Africa mining and processing position over time. We view this as a significant strategic change for the business as well.

We will focus our household and personal care products on fabric care and pet care. In fabric care we see significant opportunities to advance the use of our surfactants processing know-how with consumer products companies producing detergents in both developed and developing regions.

Pet care, major thrust will be to maintain or improve our position as key supplier of the traditional clumping pet litter and to grow lightweight pet litter, which is gaining acceptance. We intend to grow our specialty products business through the further development and marketing of ENERSOL, an exciting new technology product that uses a natural mineral to enhance crop yields.

Construction Technologies has new differentiated product offerings, especially with its Resistex geosynthetic linings that we will be taking to the market on a global basis very quickly. These lining systems and remediation technologies offer innovative alternatives to the traditional construction options. In addition, our building materials waterproofing systems offer excellent growth potential worldwide.

China will become a point of greater focus and growth for both these areas as part of the Construction Technologies geographic expansion strategy. We also targeting manufacturing efficiencies and improved productivity through realigning and consolidated the Construction Technologies operations globally, as noted in our press release yesterday.

Energy Services we will focus on the higher return businesses of filtration and well testing and significantly reduce overheads and capital spending in the coiled tubing, pipeline, and nitrogen businesses. Rapid overhead reductions, along with improved operating efficiencies, are the key strategic imperatives of this business.

In the last few weeks we have received many questions about the impact on Energy Services because of the drop in oil prices, so I would like to take just a little additional time to share with you what we see at this point looking forward.

From an overall perspective standpoint, Energy Services represents only 14% of the total company revenue, about $300 million. Of that 14%, more than half is generated from offshore and deepwater oil wells that we do not expect to be as significantly affected by the oil price drop because of the long planning horizons involved here, lower operating costs as well. And also very high capital investments are made in these types of operations. Moreover, over 75% of our high-margin businesses, filtration and well testing, are offshore.

The areas that will be impacted and are currently experiencing rig shutdowns are coiled tubing, pipeline, and nitrogen, which represent approximately 70% of the onshore sales. These are more commodity type businesses where we actually began reducing overhead costs when we took over AMCOL last May.

Our objective then was to reduce the breakeven point of the Energy Services business. These cost reductions allowed us to get ahead of the current problem and to actually reduce breakeven levels before the oil price drop. To date we have already reduced overhead by around $15 million.

And to give you an example, when we acquired the coiled tubing business, it was losing money at around an annualized rate of about $7 million. In the third and fourth quarters, through overhead reduction and other cost reductions, we returned coiled tubing to profitability.

Although we are better positioned to deal with the $50 a barrel challenge, we will feel its impact in the first quarter and going forward in 2015. However, we intend to further step up our overhead and cost reduction initiatives beyond what we've targeted to further dampen the effects of the oil price drop. In addition to further reducing breakeven levels, we are also still seeking areas of potential sales growth as the filtration and well testing segments continue to target a number of new international opportunities beyond the recently signed contract to provide well testing to Saudi Aramco.

Although the drop in oil prices will clearly have an impact on us, we expect that with continued cost reductions, Energy Services can remain profitable with oil at around $50 a barrel. Moreover, the contributions from the Company's other businesses and continued acquisition synergies should more than compensate for the negative impact.

Before I turn it over to Doug from more detailed analysis of our financial performance, I would just like to provide some insight into how we are seeing 2015 shaping up. Our overall perspective is positive for many of the reasons I've already touched upon. In the minerals based businesses -- PCC, Performance Materials, Construction Technologies, and Performance Minerals -- we see stable markets and continued opportunities for growth. There is, however, some uncertainty regarding the Refractory segment as we are beginning to see the idling of some steel mills in North America and increased imports. We will be watching this situation very closely in the coming weeks.

As I have already discussed, the Energy Services segment poses the biggest challenge, but as I stated, we will continue to reduce overhead costs in that business to lessen the financial impact.

Looking at the wider perspective, we have made and continue to make excellent progress integrating the former AMCOL businesses. The realization of synergies is well ahead of our stated target and we are actually in line of sight of achieving $70 million in synergies by around the end of 2015, early 2016.

Our cash flow remains very strong, which has allowed us to pay down our acquisition-related debt more quickly than anticipated, $100 million in the second half of 2014 alone. And, overall, I believe that if general economic conditions remain stable, the acquisition of the former AMCOL will continue to be highly accretive and 2015 will be another strong year for MTI.

Now let me turn it over to Doug.

Thanks, Joe. Good morning, everyone. Let me take you through our fourth-quarter consolidated and business segment results.

This is the second full quarter of results post-acquisition for our five reporting segments: Specialty Minerals, Refractories, Performance Materials, Construction Technologies, and Energy Services. I will highlight for you the key market and operational elements of our results in each of these segments.

Fourth-quarter earnings per share from continuing operations were a very strong $1.22, excluding special items, a 100% increase from the $0.61 recorded last year. Earnings were higher than the $1.05 to $1.10 range we communicated on the third-quarter call. We achieved higher operating income in the Energy Services, Refractories, and Performance Materials segments than we expected.

Reported earnings this quarter were $0.61 per share, which includes special charges of $0.61 related to the acquisition. I will provide some additional details on these special charges in a moment.

Sales for the quarter were $516 million, which is 101% higher than the fourth quarter of 2013. On a pro forma basis, foreign exchange had a negative impact on sales of about 2% or $11 million.

Operating income, excluding special items, increased 139% to $74.1 million and represented 14.4% of sales. Each of the five business segments achieved double-digit operating margins again this period.

EBITDA for the quarter was $102 million, excluding special items, which represented 19.8% of sales. For the full year our earnings were $4 per share, an increase of 65% over the $2.42 we recorded in 2013.

Sequentially, consolidated sales decreased 5% from the third quarter, due largely to lower sales in both our Performance Minerals product line and the Construction Technologies segment. Those businesses, which primarily serve construction markets, entered their seasonally slow period in the fourth quarter.

Cash flow for the quarter was $120 million, driven by the strong operating results and continued improvements in working capital in the acquired businesses. We made a debt principal payment of $62 million in the quarter, which brought our total debt repayments to $100 million for the second half of 2014. As Joe highlighted, the synergies from the integration are tracking considerably ahead of our targets and I will go deeper into our progress in a few minutes.

Before we move on to the business results, let me reconcile our earnings of $1.22, which excludes the special items, to our reported earnings from continuing operations of $0.61. Special items this quarter included $2.4 million of additional integration-related costs and $31.4 million in restructuring and impairment charges related to the realignment of the Company's business operations.

We related on the last call that one expected outcome of our strategic review process of the acquired businesses was to realign our business operations to improve efficiencies and profitability through consolidation of certain manufacturing locations. As a result, we are closing two of our Construction Technologies European operations and one in Asia and will consolidate their operations into the others in these regions. We will also close and consolidate the operations of one of our Performance Materials blending facilities in the US.

In addition, we are combining several of the acquired and legacy MTI administrative offices, specifically in Mumbai, Istanbul, and Shanghai, and closing our office in Belgium. In addition, we impaired certain underutilized coiled tubing assets within the Energy Services segment. These changes will result in the reduction of an additional 2% of the Company's workforce, which is in addition to the previously announced 8% reduction.

Savings associated with the impairment and restructuring charges are approximately $8 million. These special charges were partially offset by a favorable litigation settlement of $2.3 million related to our Refractories segment.

To give you some insight into our year-over-year earnings growth, this table bridges our earnings of $0.61 in the fourth quarter of last year to the $1.22 this quarter. The MTI-based businesses contributed $0.11 to the earnings growth as both the Specialty Minerals and Refractories segments had higher earnings.

You can see the acquisition continues to be highly accretive to MTI earnings. Acquired businesses contributed $0.59 per share after purchase accounting adjustments made to depreciation and amortization.

We indicated earlier progress with capturing synergies is ahead of our targets and these savings contributed $0.22 in the quarter. As Joe indicated, the integration is going well and we made significant progress with implementing our shared service model and eliminating redundant expenses.

Increased interest expense and amortization of deferred financing costs were $0.31 per share. In total, our quarterly earnings increased 100% over the last year.

As I showed on the last slide, the performance of the three new segments and the captured synergies made a significant contribution to our earnings this quarter. This chart reflects the sales and operating income contribution from each, excluding the special charges.

Total sales this quarter for the three new segments were $263 million and combined operating income was $39.3 million, which was approximately 15% of sales. Total sales for the three segments for the full year on a pro forma basis grew 6%.

Each of the segments operated at or near record levels this quarter. Performance Materials benefited from a strong performance in metal casting and household and pet litter products. Construction Technologies continued with its strong year, generating strong margins in its lowest seasonal period.

Energy Services generated the highest profit for the year in the fourth quarter with strength in the offshore Gulf of Mexico and international locations. You can see all three businesses generated strong operating margins on a fully-absorbed overhead basis. For those of you who previously followed AMCOL, margins in the segments prior to the acquisition were not reported on this fully allocated overhead basis.

As I indicated earlier, I want to outline the progress we have made with capturing synergies and what we project over the next two quarters. If you recall, our target was to achieve $50 million in synergies by the end of year two and $70 million in synergies within five years of the acquisition. We achieved $11 million in actual savings in the fourth quarter, which was higher than the $8 million to $9 million anticipated on the last call.

We have lines of sight to savings of $13 million to $14 million in the first quarter of 2015, which will put us at an annualized rate of $52 million to $56 million, achieving our two-year goal about 15 months ahead of target. Further out to the second quarter, we anticipate quarterly savings to grow to $14 million to $15 million or an annual rate of $56 million to $60 million. With initiatives we have planned throughout this year, we anticipate achieving around $70 million level and run rate synergies by the end of 2015, the target level we had initially anticipated would take much longer to achieve.

As Joe mentioned, we are making good progress on deploying our shared service organization and have embarked upon the implementation of our Oracle ERP platform to the acquired businesses, which will help continue to drive additional synergies. The realignment of our business operations in Construction Technologies and the consolidation of several administrative offices will also deliver additional savings.

Finally, we continue to work with each of the acquired businesses to lower their breakeven points by removing fixed overhead costs. Supporting all of these changes is our continuous improvement culture, driven by operational excellence deployment.

Now let's go through the financial results for each of the business segments. I will now start with Specialty Minerals. This segment achieved a record fourth-quarter operating income of $24.7 million despite lower sales of 4% with an operating margin of 15.5%. Foreign exchange had an unfavorable effect on sales of about $4 million or 2.5%.

Within the segment, paper PCC sales declined 7% over last year, driven primarily by volume decreases in North America. North America uncoated free sheet paper production was down 11% from the fourth quarter of last year and our volumes were also impacted by the closure of the Courtland, Alabama, mill early last year. These lower sales were partially offset from the ramp up of our new satellite in China.

Sales in our Processed Minerals product line were 8% higher than last year, due to sales growth of 9% in our talc product line and 7% growth in ground calcium carbonates. Segment operating income improved 3% over last year, driven by the sales growth in talc and GCC, 5% productivity improvement in the segment, and good cost controls.

Sequentially, segment sales decreased 2% due to an 11% decline in the Processed Minerals product line, which is a typical seasonal drop in that business. Operating income decreased 7% from the third quarter, which was in line with our expectations of the 5% to 10% we communicated on the last call.

As we move to the first quarter, I want to highlight that due to how the dates fall in our accounting period, we will have six fewer days, or over 6% fewer, in the first quarter compared to the fourth quarter. It is important to highlight this because it is a significant reduction and will sequential sales and profits in all five of our segments.

For paper PCC in the first quarter, we expect operating income to be lower by approximately 5%, primarily due to the fewer number of days. We continue with the construction of four PCC satellites and one new yield facility in China. One of these satellites will be commissioned late in the first quarter, two more late in the third quarter along with the new yield facility, and another satellite late in the fourth quarter.

In Performance Minerals, we expect the first quarter to be lower by approximately 5% to 10%, again primarily due to the fewer number of days, but also as we continue through the slower seasonal period. In total for the segment we expect the first-quarter operating income to be around 5% lower than the fourth-quarter levels, which is a similar drop to last year. In comparison to the first quarter of last year, however, we expect them to be 10% higher.

Now let's go through the refractory segment. Sales in the fourth quarter were approximately $93 million, which was 4% higher than last year, driven primarily by refractory product volume growth in North America and Europe. We saw 11% sales growth in North America refractory products on 9% volume increase. We also saw 9% volume increase in Europe, where we captured business with several new customers and continued with our growth track in the Middle East and India.

Operating income for the segment increased 26% to a record $12.1 million and operating margin improved to 13%. This was primarily due to the strong performance in North America and Europe refractory products and higher equipment sales. The business also generated productivity improvements of 9%, which helped improve margins.

Sequentially, refractory segment sales were 3% higher due to a 4% increase in refractory products, driven by the higher equipment sales which typically occur in the fourth quarter. Operating income was 25% higher than the third quarter, which was significantly higher than we expected and communicated on the last call. This was due to the higher-than-expected sales in North America and Asia Refractory products and to the higher equipment profits.

Looking forward to the first quarter, we expect sequential segment operating income to be lower by approximately $3 million to $4 million, and this is due to several factors. First, equipment sales are typically lower in the first quarter as we come off of seasonally strong fourth-quarter sales. This accounts for over half of the operating income drop.

Second, earnings will be an additional 6% lower due to the fewer number of days in the period. Third, margins in this segment are beginning to be affected by the strengthening US dollar. Magnesium oxide, our main raw material for our Refractory products, is typically purchased around the world in US dollars. This will impact our margins, primarily in Europe and Japan.

Increased steel imports to the US as a result of the strong dollar could affect steel production levels and we are beginning to see, as of this week, a few steel mill curtailments in North America, which will lower our refractory volumes.

Now let me take you through the Performance Materials segment. This segment includes three product lines: metal casting, household personal care and specialty products, and basic minerals and other products. Sales in this segment were $141.4 million, with operating income of $21.5 million, which was 4% higher than the third quarter and better than we expected at our last call. On a pro forma basis, sales increased 6% over the fourth quarter of last year.

Within the segment, metal casting sales were up 5%, driven by strong sales of our green sand bonds and specialty sands product lines in the US and from large international bulk bentonite shipments. In household and personal care and specialty products, revenues were up 4% due to strong US shipments of both bulk and packaged pet litter products and higher sales in the US personal care product line.

Basic minerals product line had sales growth of 13% driven by strong shipments of chromite out of South Africa and higher volumes of drilling fluid and iron ore pelletizing products. In addition, the business made good progress on targeted overhead cost reductions, which improved operating margins.

Looking to the first quarter, we expect continued growth in our Asian metal casting business and we see continued strengths in the household and personal care products. In addition, the business continues its progress on achieving targeted overhead cost reductions, which will improve margins further. Total for the segment, we expect similar sequential operating income as the additional overhead savings will be offset this quarter by the fewer number of days in the accounting period.

Now let's take a look at our results in the Construction Technologies segment, which consists of two product lines: environment products and building products. Sales for this segment were $46 million and operating income was $4.6 million, which is 10% of sales. 2014 was a turnaround year for this business with annual pro forma sales up 9% from 2013 and double-digit operating margins for the past three quarters.

The business performance improved significantly over 2013 through growth in key new products like Coreflex in the building products group and Resistex and riverbed remediation technologies in the environmental products group. Margin improvement was driven by sales of these higher-margin products and the significant overhead cost reductions.

Looking to the first quarter, we expect similar sequential operating income as the first quarter continues as a seasonally weak period for the construction and environmental landfill markets. Business will continue with targeted overhead cost reductions to improve profitability. However, for the first quarter these additional savings will be offset by the fewer number of days in the accounting period.

As I mentioned earlier, one outcome of our strategic review of this business is to streamline operations and improve efficiency and profitability. Begin the process of closing three of our operations, two in Europe and one in Asia; consolidating their current production at other facilities in each region. These changes will not only yield fixed cost savings, but also improve product costs and yield working capital improvements. And we will keep you up-to-date with our progress on these moves.

Now let's turn to the Energy Services segment. This business had a very strong fourth quarter with sales of $76.1 million and record operating income of $13.2 million. On a pro forma basis, sales increased 6% over the fourth quarter of last year. This performance was much better than we expected and communicated during the third-quarter call due to stronger-than-expected Gulf of Mexico filtration and well testing jobs and a strong performance from our Malaysia business.

In filtration, deepwater jobs in the Gulf with BP, Chevron, and BHP continued longer than expected. Well testing also had a strong quarter due to a job with McMoRan in the Gulf that is also going longer than expected. Finally, this business has also been able to accelerate the execution of their overhead cost reductions, which contributed to higher profitability.

Looking at the first quarter, there is a tremendous amount of uncertainty in the oilfield services sector. The well testing job I just mentioned in the fourth quarter has been completed and, with crude oil prices below $50 a barrel, we are seeing a slowdown in our onshore coiled tubing, pipeline, and nitrogen service areas.

As Joe indicated, we are keeping a very tight eye on this segment and we will make further cost reductions across the business and particularly in the onshore service areas, where we expected to the most impact from reduced drilling and oil production activity. Our current line of sight has our first-quarter operating income down by $6 million to $7 million from the fourth quarter.

Let's quickly move to our cash flow and capital spending for the quarter. You can see the continued strong cash flows generated post acquisition. Cash flow from operations was $120 million and our cash balance ended the quarter at $250 million.

We tightly managed capital spending, which was $19 million in the quarter, driven primarily by the construction of our new PCC satellite facilities in China. Capital spending for the year was $82 million and we expect it to be between $88 million and $100 million for 2015.

We also focused on working capital across the Company and a portion of the strong cash flows generated in the quarter was due to working capital improvements made in the acquired businesses. Total working capital improvements post acquisition are approximately $60 million.

Cash generation is a major focus for us. We expect to continue to use excess cash flow to delever as quickly as possible. As I previously mentioned, we made a debt principal payment of $62 million in the quarter, which totaled $100 million for the second half.

In summary, our fourth-quarter earnings of $1.22 per share reflect both the strong performance this quarter from all our segments and our ability to accelerate synergies. The 100% earnings growth -- earnings-per-share growth, our working capital improvements, and our debt repayments demonstrate that we are on track with the synergies we set for the acquisition.

So let me summarize what we are currently seeing for the first quarter. We expect operating income in our Specialty Minerals segment to be about 5% lower than the fourth quarter, primarily due to the reduced number of days in the period and the continued seasonal weak period for Performance Minerals.

In Refractories, we expect second operating income to be $3 million to $4 million lower than the fourth quarter. This is due to the lower sequential equipment sales, fewer number of days in the accounting period, and the impact of foreign exchange in Europe and Japan. And we are also beginning to see a few steel mill curtailments in North America, which will lower refractory volumes.

In the Performance Materials segment, we expect similar sequential operating income and continued overhead expense reductions will be offset this quarter by the fewer number of days in the accounting period. In Construction Technologies, we expect similar sequential operating income as that business also continues through its slowest seasonal period.

Similar to Performance Materials, operating income improvements from continued overhead reductions will be offset in the first quarter by the fewer number of days. In the Energy Services segment, we expect a $6 million to $7 million drop in operating income from the fourth-quarter level. With crude oil prices around $50 per barrel, we are beginning to see a slowdown in our onshore coiled tubing pipeline and nitrogen service areas.

Total we expect first-quarter earnings of approximately $1 to $1.05 per share. And as I mentioned several times, this is primarily due to the fewer number of days in the quarter and to the lower sequential profits from Refractories and Energy Services. Also note that we have had a bit slower start to the year in sales than expected, though we do expect them to pick up through the remainder of the quarter.

Compared to last year, however, our projected first-quarter earnings will be 75% higher, which illustrates the continued strong accretion from the acquisition. Now let's open it up to questions.

(Operator Instructions) Rosemarie Morbelli, Gabelli and Company.

Thank you. Good morning and congratulations on the great quarter and great year. Looking -- you have said something to the effect -- Joe, I believe it was you -- that energy would remain profitable. Are you expecting lower margin?

We are expecting that what we are going to do is what we have already, as I indicated, started to do is reduce the breakeven point of the business. As I indicated, that's something that Mike Johnson and his team began focusing on in May. They have been relatively aggressive and the reason for doing that was to better position the business for the future.

And as we go into -- as we started to go into 2015 and oil prices dropped further, Mike and his team have put other actions into place that we expect to -- if oil stays at the $50, we expect to stay profitable, albeit at lower levels. As Doug indicated, our profitability in the quarter is expected to be quite a bit less than the fourth quarter but still profitable.

And we are obviously making more significant adjustments in the more commodity type parts of the business that I mentioned, coiled tubing and nitrogen services.

So do those comments apply only to the first quarter or for full year 2015 as you may be getting some improvement in the following quarters once you have reduced your costs where you want it to be?

Yes, I would give you two perspectives around that. One is that it's obviously difficult to predict if oil is going to stay at $50, but our planning -- planning that we have done assumes it will. So we are currently adjusting ourselves to get down to the levels needed to be able to make money at that level.

So if it stays at that level for the full year, based on the assumptions we have made about revenue drops in these various segments, we expect to stay profitable. Conversely, if it gets worse, which is possible, we are going to make the necessary adjustments again to keep the business profitable.

Thanks. And now looking at FX, Joe; your international this year was about 42% of total revenues. Could you split that between the different main regions so we have a better feel as to the impact of the euro versus the yen or other currencies?

Sure, that's a good question. I know that's very topical right now, so Doug Dietrich has got some perspectives that he can share with you.

Sure. Rosemarie, we have seen -- if you look on a first quarter over first quarter basis, the most significant currencies we have are the euro, Japanese yen in terms of revenue, and British pound. If you look at -- the euro first quarter over -- this year over year last year is down almost 17%, 18%.

But if you look at the mix of earnings that we have, we see probably about a 3% impact on sales, but we have perhaps a 4% impact on operating income. And that is largely due to, as I mentioned earlier, the Minteq business, where we buy our magnesium oxide in dollars. For the most part the rest of the businesses are naturally hedged, so we operate in the regions where we sell. But the Minteq business does have some exposure that I mentioned on the call.

Okay. Then if I may ask one last question and then I will get back on queue. Looking at the chromite in metal casting, is it in metal casting; is it in basic materials? What is its current size? And what do you expect from the Glencore agreement? A little more detail than what you talked about already.

As I indicated, this is a long-term adjustment to the strategy, which was a backward integration strategy. But actually prior to that the company, AMCOL, had an arrangement or arrangements similar to what we are moving back into. And that will help us both on the cost side as well as the long-term supply side and actually will yield increased sales over time.

I'm going to let Gary Castagna give you a little more detail around that. Gary?

Rosemarie, the chromite sand is more of a specialized application using in a lot of heavy industry type of castings and Glencore has been a player through distributors in the past actually in that marketplace as well. But we looked at where we are in the market versus the positioning going forward and really it made a lot of sense to set a strategic position now from utilizing our expertise in the field and our global reach and combine really with where Glencore is in terms of manufacturing and know-how in South Africa.

The synergies to the top line -- well, time will tell in a competitive market as it is, but should certainly bode well for boosting both our presence in the existing markets as well as expanding to new geographies. So it is a significant upside opportunity as much on the sales as it is on, as Joe said, the plans to ultimately restructure our operations in South Africa and ultimately get out of manufacturing ourselves.

Can you share just about the size of that business currently?

Yes, in 2014 the top line was approximately $50 million, Rosemarie. The profitability was very modest. It was very low single-digit profitability and margins.

If you follow the history, that has really been one of the major points of it is the capability there was limited on our manufacturing. The upside, we could see certainly line of sight, once we hit the ground running here in the second half of the year, an additional $15 million of upside in sales and probably profit margins in the range of 10%-plus operating margins.

Okay, thank you very much. I will get back in queue.

Daniel Moore, CJS Securities.

Good morning and, Joe, as always, thank you for all the detail. It's very helpful, particularly this quarter.

Just going beyond the obvious cost synergies that you've laid out, can you talk a little bit about the opportunities for improvement you are seeing with AMCOL, specifically around marketing, bringing new products to market, and when would we hope to see some tangible benefit from those initiatives?

Yes, actually there are some -- I would say some nearer-term things that are happening right now with the customers. One of the pilot teams that I mentioned that we've put together in different areas are actually working on the pet litter area. Working on a new formulation with a major customer that came out of both companies working together and actually coming up with a product that is different from what the customer has been using and really is giving them something that meets their current requirements and future requirements.

We have similar initiatives going on in the other areas that I mentioned, with more to come. We are at the early stages of actually looking at market segments and accounts that that we both are covering, and beginning to work through and develop plans for potentially different approaches where we can better leverage the positions that we have there.

So I would say as we go through 2015 you can expect to -- we expect to see more beginning to come out of this, but these are not short-term things that you think of one day and you turn around and do tomorrow. Typically it requires working with customers to change formulations, product trials. We are evaluating products and we are situated in customers' products in many different ways. You have to go through a trial period.

But I would tell you that the momentum right now is early but it's very positive in terms of some of the creative things that are going on. The focus -- and the focus that is both on ways to solve customer problems but also that have good commercial value, so we are working on putting those kinds of things together.

Jon Hastings heads up this initiative for the Company. He is the Head of our Technology Lead team. I'm going to ask him to give a little bit of color to this as well.

Sure, I appreciate it. A couple points. We have used the pilots as a way to integrate the teams and also develop some new technologies; certainly we want to draw on the capabilities of both teams.

Like Joe said, it's too early to provide specifics of the pilots, but as Joe highlighted the one in pet litter. In pet litter what we are doing is we are combining two minerals, both bentonite and carbonates, and we see applications both in new lightweight cat litter products and also it allows us to open up some new geographic markets where we haven't been able to penetrate before.

The second one was in -- has been in adhesives and sealants. What we are doing is we are looking at a new sealant product technology that is focused on the European market. And it draws on both our fine particle and our surface coating capabilities, so really leveraging the capabilities of both businesses.

Like I said, we've got some other retreats focused for the year where we will bring in some other market segments. It helps us not only bolster our pipeline, but also to further integrate the activities of our technology teams.

Great color, thank you. Then just maybe focusing a little bit on metal casting. Obviously it's been a big focus in terms of opportunity. Beyond Q1, tell us maybe a little bit about what your expectations are for growth in that market as we look out for the remainder of 2015.

Yes, I'm going to ask Gary, Gary Castagna, to cover that one. Gary, please.

That market is -- in the US has really had a nice resurgence since the recession. Lightweight auto really is the primary driver for the demand in the US side of the market, as well as construction-related areas. We will definitely see in the US more of an evening out toward a GDP and/or where the lightweight vehicle market builds progress to.

Internationally, which we have been I would say on the better part of 20 years in earnest looking to expand our portfolio to principally China, Southeast Asia, Europe, principally the Middle East side of the continent. Those areas are all in different emerging phases. China we have been there 13 years and we see it probably a high single-digit still demand improvement over time in China, despite the lower economic forecasts now.

And then Southeast Asia a little bit less, probably more the 3% to 5% level. Then in Europe, where we have really not had much of a presence, it is probably still early to say where we can land over there, but our operations probably still in the low to mid single-digit levels, especially because we have a good base in Turkey.

The ultimate big white space, if you will, for us is India. It's the third-largest metal casting market in the world. We have essentially no presence there at this point, so we are starting from near enough zero. But long term we want to see that really become where we are in China today, which is the leading player in green sands.

So in total today international represents probably about 25% or so of the revenue in the metal casting business and aspiration really should see that to be 50% of the revenue over the next three to five years.

Excellent. Lastly, Doug, you mentioned I think you were at about a $60 million rate for total savings in terms of working capital post acquisition. I know you had an initial target of $100 million. Is that target still what you are looking at or have you identified additional opportunities?

We constantly look at working capital. We look at working capital improvements in the legacy MTI business as well. I think the $100 million is our current target. We haven't made it through the full cycle here in terms of seasonality of the business to really rack up all the opportunities, but I think we will achieve that and then we will continue to look for improving on it after we get there.

While I have you, last one. PCC vols were down 11% in North America, as you said. How much of that was due to the closure in Courtland?

The volumes were down 7%. The market actually was down 11%, sorry, but primarily due to the closure of the Courtland mill. So there was some demand, lower demand in North America this year; I would say more than half of that was due to Courtland. Courtland was a 100,000 ton satellite for us, so on a year-over-year basis that was the majority of the decline.

Got it. Thank you again.

Silke Kueck, JPMorgan.

If business conditions stay exactly the way they are today, do you think that the first quarter would be the lowest quarter that you would see for the energy business and for the Refractories business? Or if business conditions stayed exactly where they are today, there would be quarters that could be worse than what you guided to for the first quarter? Particularly for Energy and Refractories, that is.

So let me answer it this way: I think in -- let me start with the Energy Services business. It's hard to see out where -- what could happen to energy prices, Silke. I think there could be further slowdown in our onshore business in Energy Services past -- out into Q2 and Q3.

It's hard to tell at this point, but we are starting to see that slow down. And things take time given the current price of oil. That will continue to slow through the second quarter. So Energy Service could be lower.

I think in Refractories I think we have seen some slowness in terms of steel production. I think that's largely due, at least initially to pricing, due to imports, and I think there's been some reaction to that in the marketplace. We have seen sales pickup after a slow start, as I did mention.

So I think in Refractories it remains to be seen. I think we can improve upon the first-quarter results in Refractories. I don't see the instability as much there as I do in Energy Services. But I think if you look at in total for the Company, we have got initiatives in place.

The other three segments I think there is continued strength. We see that both Performance Materials, paper PCC. We're building four satellites and the NewYield facility.

Construction markets and auto markets continue to look pretty good in North America, plus we've got some initial cost savings targets and synergies. So I think for the Company in total the outlook for the year is pretty good.

That's helpful. Secondly, the initiatives that were announced today to curtail some of the plans and to increase headcount by another 2%, do you quantify how much incremental savings -- what the incremental savings from that were? And is that sort of like the addition to the $50 million target that you had?

Yes, the savings from all of the changes that I announced and some of the special charges are about $8 million annually.

$8 million, and so is that sort of (multiple speakers)?

That's $8 million and that is adding to the synergies that we have been talking about, so we have got some initiatives in place. And those will take place over this year, so you are not going to get all eight this year but that is what we had targeted on an annualized rate for the synergies and the actions taken with the charges.

Okay. And so what that means is in order to get to the $70 million run rate there are probably some other initiatives that will be announced and some other charges that have to be taken?

We will have to see how we go through the year, but we are pretty positive right now that we have got initiatives to get us to the $70 million, Silke, at a run rate basis by the end of the year.

On the run rate basis; okay, that's helpful. Of the restructuring costs taken in 2014, how much of it was a cash charge and how much of it is left to be paid out in 2015?

I would say -- hold on, getting some --. We have $4 million to $5 million of that is probably going to be cash of the $31.4 million in total, so a small portion of it is cash and that will be paid out through this year.

Okay. And in terms of the 10% headcount reduction, which was by my count something like, I don't know, maybe 480 people, how many have left the Company at the end of 2014?

We are probably, as of right now, about 60%, 70% of those 400, 480 people. It's about 400-plus people. It's not that high, but it's about 70% there, Silke.

And do you think the remaining people have left by the end of 2015 or earlier than that?

It depends on -- most likely, but look, some of these consolidations are going to take throughout the year and they may end up into the fourth quarter. So it really depends on how quickly and we are able to move through this year in some of those plant consolidations.

My last question is if you look at the -- so you know looked at the AMCOL businesses for -- because you've looked at them before you have acquired so now you have knowledge of the business for maybe a year. If you think about the businesses, what has been the biggest surprises, if there are any?

Like which businesses do you think have much bigger opportunities than what you initially expected? And which do you think -- which have done a little worse than what you may have predicted?

Silke, they all -- given the fact that we had been off and on discussions with AMCOL over four years, got to know the company fairly well, so there have been no major surprises.

What has been occurring is we have been able to I think because of the -- a combination of things. We're very well prepared, had good planning. And we had the direct involvement of the AMCOL business unit leadership in the integration, as well as strong integration teams and team leadership; we were able to move faster than we had been targeting.

And as we have been moving forward, we continue to see more things that just make us even more positive about it. Clearly, the acquisition, as you can see by the results, made a lot of sense. It is accretive. We are going to do well with it. We are going to exceed our return targets. We are going to exceed our earnings targets and --.

But it's not -- that's not just near term. What we are seeing is the potential that we saw before for growth in other parts of the world is there and there is potentially more than we were estimating before.

As Gary just walked you through where we are in castings -- castings positions around the world. India is wide open to us. China has additional growth potential. Southeast Asia does.

So there was a lot more -- if we go deeper and deeper the positives continue to be there. Yes, it's not all rosy. It hasn't been easy, but it's working and the businesses and the employees from the former AMCOL have been working very well as they have begun to learn what we do, how we do it, understanding the MTI business system. So a lot of things have come together nicely through a combination of strong leadership, but also strong involvement and strong teamwork.

That's very helpful. I was wondering whether I can ask -- this is my last question of Doug. I was wondering whether you had a target for debt reduction in 2015.

We do. It is as quickly as possible, so I will say that. I will say that the hundred million dollars in the second half was ahead, but ahead of what we had planned for going into right around the close. And I think that's driven largely because of the strong cash flows we have seen. We've made achievements in working capital reductions and the synergies, of course. And so we are going to continue to look at -- to accelerate what we can through next year.

So I will give you that, but we are looking over the next couple of years, two years to get ourselves down to well below 2.5, 2 times EBITDA.

2 times EBITDA and you think like the fourth-quarter debt paydown, you don't think that's the run rate for other quarters in 2015?

I don't -- well, I think you could probably look at something similar. Again, we had $100 million this half. I think we will probably target somewhere around $160 million to $200 million next year, but we are going to look and see how the year plays out in terms of our earnings and cash flows and capturing additional synergies.

Okay, that's helpful. Thank you very much.

Al Kaschalk, Wedbush Securities.

Good morning. Good afternoon I guess now. I wanted to focus, Joe, on I think your comment was strategic review was completed on the business. And in particular I was hoping you could give us maybe where we stand on the run rate on revenues for Construction Technologies and Energy Services.

In particular on Construction Technologies, I wanted to get a little deeper in there and hear sort of the plan to win in China given that this business historically has been European-centric and North American-centric.

Yes, let me start with Energy Services. Because of what is happening right now it's pretty hard to give you a forward run rate. We are seeing, what, about a 30%-plus drop in revenue. And that's based on -- as we look at the quarter, as we look out, if oil stays where it is, would be 35% would be a little bit more, but we are in that kind of a range based on what we are seeing right now.

The Construction Technologies, let me start with trying to answer your specific questions and I want to turn it over to Patrick to share a little more about what he and his team have actually been doing in that business.

But even though we have had a position in China, we have a facility there -- and by the way that facility is going to play into this longer-term strategy that comes out of the consolidation. But the review basically surfaced the fact that the potential for doing more there is pretty significant and it is going to require doing a number of things differently.

One is how we market, who we market to. That's going to take a little bit of time, but we are talking about one of -- the absolute largest environmental market in the world for environmental products. And we have only scratched the surface; we have a thimble's full worth of business and so we view that strategically as an enormous long-term opportunity.

Not an easy one, but one, given that as a company we've had strong positions -- just AMCOL alone has had a strong castings business. We have a strong paper PCC business. We know how to operate in China.

The strategic change revolves around how we actually market our product, what we go after, how we go after it, and how we really leverage our global products more effectively in places like China. China is not the only place from a strategic standpoint that we are making some changes and that is why we have been mentioning China.

But that is not an overnight thing. That is going to take some additional development work to build on what we have there, but also bring in and educate what our products can actually do for the China market.

Patrick, let me turn it over to you.

Good morning, Al. The CT business, as you've been following, starting back into 2013, well into 2014, Al, has really been able to focus on taking what we have done well in North America and really transfer that into Europe. And as Joe is saying, we will continue to do this in Asia.

As you know, the building materials world it's -- we've had a lot of large successes in 2013, a few that we've mentioned on this call in 2014. And we continue to see our continued -- our success of just the overall products and services we offer that are pretty robust in North America. The newer technology in -- that we are producing out of our Poland plant that is similar to the US technology that allow us to sell the systems approach rather than just product sales. So a higher margin and also getting much more multinational investment money to come along with our systems.

In Asia, China, we have not scratched that surface. We've got a very focused team. The people that you know and have met over the years will be much more involved in that leadership. And also places like China that have very high-value construction going on that bodes well for what we do in building materials, providing that property owner that assurety that we believe we're number one in the world.

The drilling business for non-oil and gas we feel is recovering from a 2014 miss, and we have seen it here in North America already the first part of January. So with that business globally we have not really had the focus in Asia that we have had here in North America, so we will plan to advance those teams in both Europe and Asia to assist in that recovery of the drilling business, non-oil and gas for 2015.

Third part is the environmental products where we have seen just advancements of our technologies, the baseline GCL, the remediation technologies including our organoclay base. Really expands to here in North America we are seeing more work being identified through our specification systems than ever before.

And also we are starting to launch those new technologies in Europe and ultimately capture what Joe had spoke about, the ability to really take on unique challenges that are worldwide and really multinational customers that see us as an opportunity to service them in one region where specifications are being written in a different region. So the ability for our team globally to support the needs of these major applications with our technologies.

It's something we have been working on, Al, for a couple years and we feel we are really going to hit stride here in 2015.

Thanks for the color. If I may try this way in terms of where we are at in the business, obviously the seasonal fourth quarter but it was a little bit weaker than what we had modeled. Are we at a spot in this business in construction technologies where the changes you are taking that are underway and the contract wins will start the ramp in 2015?

In other words, it used to be a high churn business. In other words, a lot of new smaller contracts every year. And the seasonal level that we saw here in Q4 is a function of just the transition of some of these different strategies that you are putting into place.

We still see it as a seasonal. We, as a company, as we advanced into the -- away from just being primarily a northern hemisphere company, Europe and the US, to build that strength in Asia and also in South America will transition away from that seasonality that you have experienced over the years.

It will take the advancement of environmental products to do that globally, but we have seen that already in our building materials. So we feel the seasonal slowdown will be -- again that the rate that's coming through 2015, but we will start to --. When we get into 2016 and further out start to see that even out as we take our products more globally.

Al, if I could just add a little bit to that, I think if you think about three things in the business that are different, and they will continue to be different along these lines, one is rightsizing. So the breakeven point of this business has been reduced and it's going to be reduced even further. That helps dampen seasonality just by the nature of getting the business down to what I call the right size for the markets and the regions that it operates in.

Secondly, there has been realignment of sales and sales distribution that are going to play a role in helping to bring more balance and leverage into the business. The third is going to be global marketing for the business, where there's going to be better -- let's say more effective or speed to market in terms of some of these different -- as new products --. Like this Resistex product would be the best example of Patrick has got a game plan with his team to leverage what we have in this product much more quickly around different parts of the globe and do it in a very segmented and focused way.

An example would be we had a good deal of success with the project in Saudi Arabia with Alcoa, which was a red mud project. Well, red mud is the number one waste product from aluminum refining and there are -- red mud is all over the -- wherever you find an aluminum refinery, you're going to find red mud. It is a universal problem of the aluminum industry.

So when I talk about targeted marketing, it's going after those specific targets in a very disciplined way around the world; that is leveraging. As opposed to, let's say, more regional focus that was in the business before.

Does that sound right, Pat -- in terms of what --? Okay. So if you think of those three things, that is what's different in the business today.

Got it, that's helpful. Finally, if I may, and I don't want to come back and hammer on energy, but I want to understand your comments in light of the environment. But filtration and well testing are the service lines that you seem to be concentrating in and focused on, and maybe that's because of the nature of the customers in which those services are rendered.

Does that imply that you have exited or will be exiting the five others, four or five other service lines that used to be there under the legacy business? Just in terms of pretty solid, sizable business and had a lot of CapEx efforts in it. And I'm just trying to appreciate, given the return thresholds that you have installed in the business, what does this mean for the service lines in Energy Services.

What it really means, Al, is that new capital will only go into filtration of well testing. There will be -- no new capital is going to be going into the other businesses and it fundamentally says filtration is going to be managed for profitable growth. The other businesses are going to be managed for cash and that's the track we basically have been on now for a number of months.

All three of the commodity businesses have varying positions. We're going to leverage those positions. Mike and his team, as I mentioned, have been getting the overheads down. So each one of them we are focused on getting the breakeven points down to where we can make a profit at the revenue levels that they eventually evolve to with this current oil price drop. And that's what we are going through right now. It's a bit of a moving target, but we're trying to get ahead of the target.

So there's no plan to exit. The objective is to keep them profitable and improve their profitability over time without new capital.

Thank you very much.

Eugene Fedotoff, KeyBanc Capital.

Thank you. Good afternoon, guys. Thanks for taking my question. Just to follow-up on the previous question on the energy segment, you mentioned that you already took out $15 million of costs and there's a potential for further reduction of breakeven point. Can you provide magnitude of that potential additional cost savings?

Eugene, so $15 million, there's some actions that we have already taken in the fourth quarter that will increase that through 2015. As Joe mentioned, we are going to continue to look at the segment and as we see revenue come through, especially on the onshore businesses, we will be prepared to take out -- to further adjust our overheads accordingly.

We have plans in place this year; we are going to take out at least another $5 million in that business. But again we will have some others, some other cost savings that will kind of accrete to us through that we've done in the fourth quarter of 2014.

All right, thank you. And I just wanted to make sure, if I understand you correctly, the impact from currency a 3% headwind to the top line and 4% to the operating income, given that currency stay at current levels. Was it comment for the first quarter or was it for the whole year? Just want make sure I understand that.

That's a comment for the first quarter. Of course, you can -- if currencies stay exactly where they were for what we estimate the first quarter to be that would probably be a comment for the year.

Got it, thanks. And just a last question on mercury removal business. Any developments there in the market since the last time you provided an update?

What we have been seeing is that there has been -- with the one-year stay that has been given, we have seen targeted customers that Novinda has been in discussions with that those have primarily pushed out at a fairly high percentage. Something like 70-plus-percentage of the customers have extended themselves out to where Novinda is now targeting early 2016 in terms of first, second quarters to begin to see contracts that they originally thought they were going to be getting in 2015.

So there has been what Novinda has seen as a general push out and delay. There's also a potential Supreme Court decision I believe that will be in June that is also causing companies to delay committing until they see what comes out of that.

As an aside, we have actually increased our equity position a little bit over the last several months, so we still view this, from an MTI standpoint, as an opportunity for the future that warranted us increasing our position a little bit to better position us. So as you know, we also are the main supply company to Novinda.

Got it, thanks a lot.

Rosemarie Morbelli, Gabelli and Company.

Thank you. I have a few quick ones on the paper side in the US and Europe. Are you anticipating more paper mills or machine closings?

Let me maybe just share with you or with everyone sort of the macro view we have and then how we approach both regions. Overall, we plan on a 2% a year decline in paper consumption in North America. Europe actually has been tracking a little bit less.

Now within that 2% a year, we have things that we have been doing, such as fulfill incremental expansions, that have -- that will add to dampen that 2%. But from year to year in any one year you can have it be more than the 2% with, as we discussed earlier in the call, where a plant like Courtland closes and it takes -- it hits us for 100,000 tonnes. Over time, though, we still expect it to stay -- things to stay on the 2% level.

Now in terms of specifics, we don't see anything major impending right now, but I'm going to turn it over to D.J. Monagle, who could share his thoughts with you on that.

Rosemarie, first 2015 right now we don't see any mill shutdowns looming. There may be some further machine adjustments that happen, but right now there's nothing major on the radar.

Okay. And are we at the point, D.J., that the additional cellulites are enough to offset the decline in the production in the US and Europe?

As Doug had highlighted, Rosemarie, I think what will start seeing is we got a pretty big facility coming online at the end of the first quarter in China. That one is 120,000 tonnes or so. And then we've got the three additional that are coming on through the remainder of the year and then also the NewYield that kicks in. So depending on how they ramp up, we should be moving that needle second half of this year and certainly into next.

Just to add on to that, Rosemarie; we lost about 130,000 tonnes of capacity between Courtland and [Dassault] last year. But we've gained with our new satellite in Asia and we have a small one in Europe and then the ramp up of one in India and we pulled back about 50,000 tonnes of that. So about 80,000 tonnes net down.

But we are putting in, D.J. mentioned about 350,000 tonnes of capacity into China this year. Again, it will ramp up throughout. So, yes, we do see more than compensating for what was lost through Europe and North America, but as D.J. mentioned, that will start to come in late in the third, fourth quarter.

Okay, thanks. I was wondering also, with the slowdown on the shale part of our world, are you seeing railcar issues getting better? Are they resolved? Are there enough or are they still taking everything into the shale world?

We are seeing them better, actually. We have -- since probably about September of this year they have improved. A couple of factors: one is -- we mentioned I think on the last call that we held a Kaizen event through all of our Western facilities to improve the way we look at the railcars through our system, which has really improved availability. And doing everything we can do to make sure that the railcars were available when needed at our Western plants.

There has been some improvements in the railroads in terms of making power units available to us. We haven't seen since September those additional freight costs that we saw were pretty significant as you remember in the second and third quarter of last year.

Okay, great. That is great. And when you talk about growing AMCOL with an emphasis in China and India, am I correct in assuming that this is going to be what you are doing internally as opposed to acquisitions?

I would say for the most part, yes, but there could be variations on that. But that would be smaller types of acquisitions, Rosemarie. But there could be some.

Okay. Just numbers: R&D for 2015, please, Doug, as well as DNA and interest expense expectations for the full year?

R&D is probably about 2% of sales, Rosemarie. It was about 1.9% in 2014. We look to continue at that level.

Total annual interest, which also includes financing, deferred financing costs about $45 million -- I'm sorry, that was in 2014. So it's going to be about $60 million, $64 million in 2015. D&A is about $103 million in total for the year.

Okay, thank you very much and congratulations again.

Steve Schwartz, First Analysis.

Good afternoon, guys. Thanks for being generous with your time here.

Forgive me, my landline dropped me when you were responding to our, but if you've already answered this; in your basic materials business you sell bentonite into drilling muds and you loosely referenced that in today's call. Have you not more specifically addressed it because it's not big enough to worry about?

Well, that's a very interesting question because we are doing a couple --. One of the things you will see drilling muds in -- actually all three businesses of the former AMCOL are involved in drilling muds in various ways, both the -- and it has an effect on the income statements of those three businesses. Primarily it has been with CT, Construction Technologies, and Performance Materials.

However, Energy Services is also as involved in the selling of drilling products. What we have been -- what we have done actually is we formed a drilling products team in the Company that came out of the strategic analysis that we did, which I didn't get a chance to touch on in the remarks, but that basically suggests that we have a pretty good opportunity in the drilling products area, but that we needed to bring more focus across the Company's businesses. And have increased the level of coordination and marketing that is actually done for the product.

So as we go forward with that, we are going to be sharing more of that, but it is a business that within the Company is significant enough to warrant a dedicated and focused effort. So because we believe that in spite of what, let's say, the downturn that may be occurring in that product segment today, over the longer term it does offer us some pretty good growth potential.

Okay. So, Joe, in other words you have indirectly addressed the potential downturn in that part of the business through your commentary on Energy Services?

We have done it through Energy Services commentary but also within the other businesses. Now, keep in mind in Construction Technologies that it's the -- that's water-related and water-based for drilling fluids so that we don't expect that to be affected. If anything that will continue to grow as the construction industry grows in the coming year. So it is primarily then going to be in the Performance Materials segment and they have built that in to their forecasts we have and how we are looking at 2015.

Okay. Then speaking of 2015, can you give us some guidance on how you expect earnings to rollout for the year? Maybe at a minimum of at least a percentage split of earnings first half versus second half?

Steve, normally we try to -- because it is -- type of businesses we are in, it's very hard to predict the whole year, but I did try to give everyone a sense. We are positive around the year on a net basis. We expect it to be a strong year.

Even in the -- as we are projecting in the first quarter when you seasonally adjust the count for --. I know it's a bit confusing with all the things we have going on in terms of between less days in the quarter, currency impact, and other things that -- because there's a lot of moving parts going. If you adjust all this, we are continuing the positive momentum that we had in the third and fourth quarters. Those things are carrying over.

With the exception of a very, very specific hit to -- impact on the Energy Services business. And now we are beginning to see some things in the Refractories business that we just started to see over the last week or so. But even with those things we still believe it's going to be a positive year for us.

Okay, very good. Then my last one if I could, Doug in your commentary you mentioned that some filtration jobs ran longer than expected in the quarter.

Two things. Can you disaggregate what that contribution was to the fourth quarter? And it wasn't quite clear to me if those jobs are still running going into the first quarter.

I can -- if you look back to -- first, the fourth quarter was our highest quarter so over $13 million of operating income. Higher than the second quarter, which is one of the stronger quarters typically without hurricanes, so it did contribute probably a few million dollars in terms of well testing and those filtration jobs.

One of the stronger areas, the well testing job did cease in the fourth quarter and that's one of the things that is not going to come through in the first quarter, which is contributing to the $6 million to $7 million down that I mentioned.

We do see -- look, filtration jobs really depend on how those platforms continue to operate and come online. Some of them are very large and they've been operating -- we've been operating on them for the past year plus. We do see some of those projects moving through the first quarter, but as we get into the second quarter, we will be moving on to newer ones and some of these ones will be coming off. That's why I'm giving you some color that says, given the onshore market and the filtration jobs, one of which might cease, depends on the platform, in the second quarter, we could see a softer second quarter than the first in Energy Services.

Very good. Thank you and great presentation today.

Thank you. At this time I'm not showing any further questions. I would like to turn the call back to management for closing comments.

Thank you for your interest in Minerals Technologies and, everyone, have a nice day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a wonderful day.