Minerals Technologies Inc (MTX) 2015 Q4 法說會逐字稿

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

Good morning, everyone. Sorry for the delay. We had some technical difficulties. Welcome to our fourth-quarter 2015 earnings call. Today, Chairman and Chief Executive Officer Joe Muscari will provide some insight into the Company's performance and growth prospects and 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 full year and the quarter. Then Joe will conclude with an outlook on the business for 2016.

Before we begin, I need to remind you that on page 8 of our 2014 10-K, we list the various factors and conditions that may affect future results. Statements related to future performance by members of our management are subject to these cautionary remarks and conditions. Now I'll turn the call over to Joe Muscari. Joe?

Thanks, Rick. Good morning, everyone. Before going into our fourth-quarter results and a review of our 2015 performance, I would like to take a step back for a moment with you and share a little wider perspective.

Over the past few weeks, we met with many of our largest shareholders amidst the sharp decline in the market to outline MTI's operations in the current climate. And after numerous discussions, it was clearly apparent that there is a need to provide some additional clarity and insight around the basic fundamentals of the Company and our growth prospects.

In these meetings, we outlined to these investors how we have doubled the size and value of Minerals Technologies through the 2014 acquisition of AMCOL. We do face challenges, clearly, in our service-related businesses, the energy and steel markets. However, these businesses represent a relatively small portion of the Company, around 15% of our operating profits. And we have taken the necessary steps to maximize their profitability under the difficult circumstances that both are facing at the moment.

Our three minerals-based segments, which make up the balance of the Company, some 85%, on the other hand, remain very strong. And, frankly, we remain quite positive and confident in our current and near-term China performance targets, as well as the longer-term growth we see for the PCC and performance materials businesses there, despite the lower rates of growth being projected for China's economy.

It should be noted that MTI actually grew sales and operating income there in 2015, and we have seen a pickup in our metal casting bonding systems over the last several months that carried into January, after we had seen a slowdown during the summer.

As we look forward, we remain committed to doing two things: one, delivering solid quarterly performance and cash flows, as well as continuing to advance on our growth targets to deliver improved shareholder value over time.

So, with that as perspective, let's begin. This slide illustrates the value of the AMCOL acquisition. And as you can see, from 2013 before the deal to today, the earnings-per-share accretion have grown by about 80%, from $2.42 a share to $4.31. And we accomplished this despite the downturn in the oil industry and the commensurate significant loss of revenue from the energy service business, as well as the weakness in the steel industry with its impact on refractories, and more importantly, the slowing of China's growth rate.

Our fourth-quarter profitability of $1 and 2015 free cash flow of $5.26 per share for the year puts an exclamation point on this.

As you can see on this chart, our EBITDA grew from $171 million in 2013 and 16% of sales to $361 million and a little over 20% of sales at the end of 2015. That is more than double in two years.

Let's now look at what we accomplished in 2015. It is a busy slide, so please bear with me.

It was a record year of earnings for Minerals Technologies and our two largest segments, specialty minerals and performance materials, who recorded record performances. Within performance materials, two of its businesses, pet care and fabric care, had record years. Pet care was up 11%, and fabric care increased 8% for the year. And it should be noted that fabric care grew 105% in Asia.

In China, 2015 MTI sales overall grew 18% over 2014, and operating income increased 32%. 2015, our sales in China were $125 million. And we expect that to continue to grow there, despite the lower rate of growth, because we are penetrating our target markets through product substitution, in paper, DCC, and performance materials, basically by adding higher-value products that enable our customers to reduce costs. 2016, we expect sales in China to grow close to $30 million or around 20% to 25%.

In performance materials, volumes for our higher-value premix product for green sand bonds for foundries increased by 18% in China during 2015, and we have currently customer trials underway to increase our penetration by at least 10% in 2016. Household and personal care is also showing good growth in China, as our HPC sales there grew over 200%.

Our global paper PCC volumes increased 3% in the fourth quarter, driven primarily by the new satellite plants coming on stream in China, and we've also seen improvement in the penetration of our FulFill High Filler Technology, adding five new commercial agreements in 2015 to bring the total amount to 24.

Our cash position is solid. We have $230 million in cash and generated $184 million in free cash flow in 2015, and we paid down $190 million in debt during the year.

MTI continues to be a strong operating company with continued productivity improvement, employee engagement, and significant cost savings. In 2015, the Company's productivity improved 9%. And our continued focus on safety has brought us close to world-class safety performance levels, in spite of the challenges of an acquisition.

And employee engagement and our efforts to eliminate waste through continuous improvement is at an all-time high. In 2015, our employees made nearly 40,000 suggestions. That is close to 10 suggestions per employee, the majority of which were implemented.

During the year, employees also conducted nearly 3,000 kaizen events, which means that there were more than eight highly focused improvement workshops a day every day around the world, a 60% increase over 2014, all designed to make MTI better in some way.

The integration of AMCOL is well along and nearing $80 million in synergies, almost $30 million ahead of what we had targeted to reach by the end of 2016.

Despite these accomplishments, 2015 presented significant challenges. The oil price decline significantly disrupted our energy services business, resulting in more than a $130 million drop in revenue. And the weakness in the worldwide steel industry affected sales and profits in our refractories business as well.

That said, we took immediate action to reduce overheads and reduce costs in both of these businesses, resulting in continued profitability, even in the fourth quarter. Over 600 personnel were reduced in these two segments over the course of the year.

Foreign exchange, however, as you are probably all well aware, continued to have a negative impact on us of approximately $95 million in the year.

To put the Company into a simpler perspective, let's take a brief look at how the minerals and service parts of the Company have performed back to 2013. This slide shows the performance of our minerals-related segments: specialty minerals, performance materials, and construction technologies. These businesses represented around 85% of operating profits in 2015 and actually closer to 90% in the fourth quarter.

And as you can see, quarterly operating income has significantly improved over 2013, actually more than 2X, and we have also improved operating income margins as we integrated AMCOL and leveraged the MTI business system, coming in at 16.6% for the year.

The service-related businesses of energy services and refractories, of course, tell a different story. While sales have declined because of oil prices and weakness in steel, we've been able to maintain reasonable operating income margins of 9% through rigorous overhead and operating cost reductions. And as long as these markets remain under pressure, we will continue to take the necessary steps to stay profitable.

This slide provides a snapshot of the contributions of each business segment for 2015. Again, just showing this to you for perspective purposes, and as you can see, the major contributors comprising more than 60% of sales and 75% of operating income are the specialty minerals and the performance materials segment, which contain our specialty chemicals and higher-value-added enhanced mineral products.

If we look at the geographic distribution of our sales and profitability, you can see that North America and EMEA represent around 80% of MTI's sales and operating income. China, which is the current focus of a good deal of discussion, represents 7% of our sales today and 8% of our operating income. And as you are aware, we are targeting to at least double that by 2020 by focusing on our paper PCC, performance materials, and construction technologies opportunities.

Our paper PCC growth in China continues on a very solid track as our PCC volumes increase through new satellites coming on. In 2010, MTI had three satellite PCC plants in that country. And over the next 12 to 15 months, we will have seven more, and we are actively engaged with more than 15 other papermakers there to bring them our higher-value PCC products, as well as our new technologies of FulFill and NewYield.

The primary reason we are very positive about attaining our targeted growth objectives in China is because PCC is the filler of choice among papermakers worldwide. And as the leading producer in the world, we intend to remain focused on fully penetrating the China market, the largest in the world, paper companies that want to make world-class paper, seek to improve brightness, opacity and bulk through the use of higher-value PCC. We are basically deploying a market substitution strategy which will allow for continued strong PCC growth for some years to come, even in a slower growth environment.

Penetration through substitution strategy is also in play with our performance materials business. In North America and Europe, about 90% of the foundries that utilize the premix green sand bond for foundry castings, which improves yields and reduces the amount of scrap generated, which saves foundries money. In China, only about 5% of foundries use the kind of premix product we supply. And we believe that the Chinese foundry industry will follow over time the practices of most of the rest of the world in changing to the higher-value product to save costs and improve their competitiveness, particularly as they automate.

India, as we have discussed in the past, will follow the same path.

In addition to metal casting, our fabric care business, as I mentioned earlier, also offers excellent growth potential as more people in Asia buy washing machines that use dry detergent. In the fourth quarter, our fabric care business grew 200% in China alone.

We also continue to see significant opportunities for construction technologies' environmental products. As you know, China faces immense environmental challenges, and we are now actively engaged in government marketing activities to promote our products for a number of remediation applications.

Second prong to our growth strategy, new product innovation, is also progressing well. This slide provides some insight into the new technologies that we have commercialized, as well as the number of ideas we are working on in a new product development pipeline. And as you can see, in 2014, the heritage MTI had 74 new product ideas in the pipeline. And today, the combined entities have an even stronger pipeline with new ideas under development. Clearly, the acquisition has broadened our platform for growth through innovation.

Commercialization of some of our key new products continues to track well, as our operating income from FulFill increased 57% over 2014 and our NewYield facility at Sun Paper in China is up and running and providing the papermaker with a cost-saving pigment made from a waste stream. We are also currently engaged with five paper mills to adopt NewYield and have identified an additional 15 that could benefit from the technology.

Our researchers have also developed a lightweight pet litter that we launched in 2015 that will add to our strong market position in the pet litter market.

In construction technologies, we have developed a new geosynthetic clay liner called RESISTEX and other variations of RESISTEX that provides a higher degree of protection for high-alkaline environments, such as coal ash and red mud landfills from alumina facilities.

Not only has the acquisition created a stronger platform for new products, it has also increased our opportunities for future acquisitions. While our major emphasis right now is on reducing debt, we have reengaged in our M&A activities through the team that has been leading the integration. Our objective is to position ourselves to move quickly as opportunities are developed. And our focus remains on acquiring minerals-based businesses that provide a technological differentiation and good growth potential, much like AMCOL did.

The bubbles in this chart represent current potential acquisition opportunities on our screen. They range in size from tens of millions of dollars to nearly $1 billion, and they are classified by their attractiveness and a number of factors that gauge success of completion.

This is a good point to stop, so let me turn things over to Doug, who will provide you with the financial details of the fourth quarter and the full year.

Thanks, Joe. Good morning, everyone. Now let's go deeper into both our fourth-quarter and full-year consolidated results. I will then go through the results in each of our five segments, as well as update you on the progress we're making with synergies, cash flow, debt repayment, and our outlook for the first quarter.

Let's start with the fourth quarter. Earnings per share from continuing operations were $1, excluding special items, compared to $1.22 last year. This was a relatively strong quarter for us, given the weak energy and steel market conditions we faced.

For perspective, combined operating income for the energy services and refractory segments was $18 million lower than last year, or about $0.36 per share. In addition, foreign exchange reduced earnings by an additional $0.08 per share compared to last year. These factors combined reduced earnings by approximately $0.44 per share over last year.

Reported earnings per this quarter were $0.48 per share, including special charges. The Company incurred after-tax special charges of $18.1 million or $0.52 per share, primarily related to restructuring and impairments in the energy services and refractory segments, and acquisition integration charges associated with IT systems integration. We expect annualized savings of approximately $9 million from this program.

Total sales for the quarter were $430 million, $86 million lower than last year. Foreign exchange accounted for $24 million of the decline. Energy services sales were lower by $43 million, and refractory sales were lower by $25 million. These factors combined reduced sales by $95 million.

Despite these negative issues, we saw many positive areas of sales growth over the last year, particularly in Asia. Sales for our combined businesses in China grew 19% over last year, driven by a 92% increase in paper PCC and a 9% increase in sales from performance materials, driven by fabric care products, which increased 200% over last year.

Outside of Asia, we saw strong growth in talc and GCC, which combined increased 10% over last year, and also in US pet care, which increased 12%.

Operating income, excluding special items, was $59 million and represented 13.7% of sales. Specialty minerals and performance materials' operating income increased 13% and 14%, respectively, on a constant-currency basis over last year.

Order activity was also a highlight this quarter, with each of our segments improving over last year. The acquired AMCOL segments improved by 9%, and the legacy MTI businesses were higher by 3%, which overall improved total productivity by 6% and generated approximately $900,000 in lower costs compared to last year.

You can see from the chart on the lower right-hand side the significant increase in our quarterly operating income post-acquisition.

Moving on, operating cash flow for the quarter was over $75 million. Free cash flow was $60 million, and we made a debt principal payment of $50 million. As Joe mentioned, we continue to execute on our integration synergies, and I will provide further details in a moment.

But before I move on, let me review with you our full-year 2015 results. This was another record year for MTI, with earnings per share of $4.31 excluding special items compared to $4 per share in 2014. Again, let's put this year's earnings in perspective.

Profits this year in energy services and refractories were $0.60 per share lower than last year. Foreign exchange impacted EPS by an additional $0.20.

Total sales for the year were $1.8 billion compared to $1.7 billion last year. However, 2014 only included a partial year of the former AMCOL segments. Foreign exchange had a significant negative impact this year on sales of $95 million or about 5.5%.

Similar to the fourth quarter, we saw some significant areas of growth over last year, again particularly in Asia. Full-year sales from our combined businesses in China were $125 million and grew 18% over last year, driven by a 49% increase in paper PCC, 13% increase in sales in performance materials, driven by higher sales in fabric care products, which increased 105% over last year.

I would like to emphasize that this growth in China has been achieved despite a slowdown in the economy, which I know has caused some concern for many of our shareholders. Our growth in China has been driven by the adoption of our new products into existing applications, supports the penetration strategy that we communicated back on our analyst day in June. We strongly believe that we can continue to grow in China despite the lower rate of growth being projected there.

Outside of Asia, we saw strong growth in our process minerals products of talc and GCC, which increased 5% over last year, and pet care and personal care products, which increased 11% and 13%, respectively.

Operating income, excluding special items, was $257 million and represented 14.3% of sales, a 5% improvement over 2014. Foreign exchange had a negative impact on operating income of $13 million this year, yet four of our five business segments maintained double-digit operating margins.

As Joe mentioned earlier, both our specialty minerals and performance materials businesses achieved record operating income for the year, and within performance materials, both the fabric care and the pet care businesses also had record years.

Each of our five segments improved productivity this year, and we achieved overall gains of 9%, which was worth approximately $6.2 million in lower costs. The acquired AMCOL segments improved by 15%. The legacy MTI businesses improved by 4%.

I would also like to highlight that our minerals-based segments continued on a strong track in 2015, with significant margin improvement over last year. Combined margins for these three segments improved nearly 25% over last year on a pro forma basis.

You can see from the charts on the lower right-hand side our annual operating profits have more than doubled from preacquisition levels. We also improved our operating margins despite the market challenges we faced this year in refractories and energy services.

EBITDA for the year was $361 million, excluding special items, representing 20.1% of sales. Operating cash flow for the year was strong at $270 million, and free cash flow was $184 million, with capital expenditures of $86 million.

We made debt principal payments of $190 million in 2015, which brought our total debt repayments to $290 million over the last six quarters and lowered our net leverage ratio to just below 2.9. We expect to maintain this pace of debt repayment in 2016, which should reduce our leverage ratio to below 2.4 by the end of next year, approaching our target net leverage around 2 times.

Also in the year, the Board of Directors authorized a $150 million share repurchase program. We did not make any purchases under the plan in the fourth quarter.

This slide shows our sequential quarterly earnings over the past several years, and it illustrates the significant earnings growth that we've been able to deliver from the acquisition. You can see our earnings this quarter of $1 per share compared to $1.22 last year. As I mentioned earlier, the combined impact of negative foreign exchange and lower profits in energy services and refractories reduced earnings by approximately $0.44 per share over last year. This highlights the underlying strength and earnings growth in our three minerals-based businesses.

Here is our synergies chart. We achieved slightly over $19 million in savings in the fourth quarter, which was approximately $1 million higher than we expected on the last call. We ended the year at an annualized rate of close to $80 million.

We finalized the implementation of our strategic supply chain organization, absorbed the procurement transactional activities into our shared service organization. This resulted in the expected overhead savings. It also significantly improve and further align our strategic procurement activities.

We continue to focus on IT systems integration, and we are moving along with the deployment of the Oracle ERP platform. We moved our acquired US businesses over to Oracle here in January, and we have simultaneous Oracle implementations going on in Asia and Europe. We do expect some incremental synergies as we continue to align our IT systems and further refine our shared services organization.

Now let's go through the results for each of the business segments. I will start with specialty minerals, which had a record year in 2015. Segment sales were $158 million and on a constant-currency basis grew 4% over last year, driven by the growth of PCC in China and GCC sales in performance minerals.

Within the segment, paper PCC's real underlying sales grew 2%, and volumes improved 3%. This is the third consecutive quarter of growth for global PCC volumes. The growth in China was particularly strong, where our PCC sales grew 92% over last year from our three new satellites commissioned this year, one of which was the successful launch of our NewYield technology that converts a waste stream into functional filler for paper.

We see sales growth continuing in Asia in 2016, where we are constructing two new satellites in China that will add an additional 170,000 tons of capacity by the end of the year. We also announced our 23rd and 24th commercial agreements for our FulFill High Filler Technology in the quarter, one with a papermaker in Asia and another with a European papermaker, making this our second agreement with this prestigious paper company. We now have nine agreements in Asia, eight in North America, six in Europe, and one in South America.

Our process minerals business also had a strong quarter, with sales 10% higher than last year, driven by 16% growth in ground calcium carbonate. Operating income for this segment was $25.6 million and grew 13% on a constant-currency basis over last year. Operating margins were very strong at 16.2%, which was almost 5% higher than last year. Margins improved due to a 2% productivity improvement, lower energy costs in performance minerals, and higher fulfilled tech fees in paper PCC.

Moving on to our outlook for the segment for the first quarter, we expect our paper PCC operating income to be slightly lower than the fourth quarter as we realize the full impact of the Verso and Domtar paper machine shutdowns in the early part of the quarter. The impact that these shutdowns have on us is approximately $1 million per quarter in operating income. This will be offset over the year with the continued ramp-up and startup of our new mills in China.

In performance minerals, we expect operating income to increase slightly from the fourth quarter as sales begin to pick up late in the quarter. Overall, we expect first-quarter operating income for this segment to be about the same as the fourth quarter.

Now let me take you through the performance materials segment, which also had a record year in 2015. Sales this quarter were approximately $131 million, 3% lower than last year on a constant-currency basis. Within the segment, metal casting volumes were down 3% due to weakness in the US agricultural sector, where we saw lower chromite sales. Sales were also impacted in the quarter by extended foundry outages in China in October. Those sales in China improved through November and December.

In the household and personal care product line, fabric care sales in Asia increased 115% over last year, driven by sales in China, which were up over 200%. Global pet care sales were 13% higher than last year due to 12% increase in the US, driven by strong bulk shipments and the introduction of our new lightweight pet litter formulation.

In basic minerals, sales were down $8 million over last year, primarily due to lower drilling fluid sales from the continued weak oil and gas drilling activity. Operating income for the segment was $23.9 million, which was 14% higher than the fourth quarter of last year on a constant-currency basis.

Operating margins improved 20% over last year to 18.2% of sales from 15.2%. This performance has been driven by strong sales in household and personal care, as well as an 8% productivity improvement in overhead expense reductions. You can see from the chart on the lower right-hand side the significant improvement in operating income and margin from the preacquisition period.

Looking to the first quarter, we expect segment operating income to be approximately the same as the fourth quarter, with the majority of these product lines continuing their strong performance.

Now let's take a look at the results in our construction technology segment. Sales for this segment were approximately $39 million, 14% lower than last year and 10% lower on a constant-currency basis. Within the segment, sales in environmental products were lower due to the large environmental remediation project that was completed last year, which we do not see again this quarter.

Building materials and drilling product sales were lower, primarily in Europe.

Operating income was $4 million, representing 10.2% of sales this quarter. This business has posted double-digit margins for the past six quarters due to significant overhead reductions and low-margin product rationalizations that have occurred over the past 21 months. In addition, productivity improved 15% over last year.

You can see from the chart in the lower right the significant improvement in operating income and margins post-acquisition.

Looking to the first quarter, we expect operating income to increase slightly from fourth-quarter levels as we move through the seasonally low period for the construction and environmental end markets.

Now let's turn to the energy services segment. This business had sales of $33 million, which was 56% lower than the fourth quarter of last year. Our exit from coiled tubing in the third quarter represented $17 million or 22 percentage points of the decrease.

Operating income for this segment was $1 million, lower than what we expected on the last call. We realized the expected savings from exiting the coiled tubing service line. However, some well testing work in Nigeria and the Gulf of Mexico did not materialize as expected. These shortfalls were partially offset by higher sales and profits in our Brazilian filtration business and the strong performance in Malaysia.

We recorded $15 million of restructuring and impairment charges in this segment this quarter associated with the realignment of our remaining onshore service line and overhead reductions to maintain profitability.

The chart on the lower-right side gives you some perspective of the challenges faced in this segment and our performance managing through them. You can see the significant sales decline over the past several quarters, yet we've managed to maintain positive profits and cash flow for the year.

Headcount in the segment is down over 50% from the time we acquired the business, which is proportionate to the drop in sales. We've initiated another phase of reductions in December associated with this restructuring charge that will reduce headcount further in the first quarter. We expect $7 million in annual savings associated with the impairment and restructuring charges.

Currently, we have two main service lines remaining in this segment, filtration and well testing, which we feel have competitive differentiation in the oil services market. These product lines continue to be profitable, and we are focusing on growing them globally.

Recently, we successfully completed our first well test jobs with Saudi Aramco and are pursuing new filtration projects globally.

Looking to the first quarter, the market environment for this segment continues to be challenging, and forward visibility is limited at best. And presently, we expect our first-quarter profits to be similar to the fourth quarter. We will continue to reduce costs to maximize profitability during this difficult period, and we will be well positioned for improved profitability when the market recovers.

Now let's go through the refractory segment. Sales for the fourth quarter were approximately $68 million, 27% lower than the fourth quarter of last year, with 5% of the decline due to the negative impact of foreign exchange. Crude steel production was down close to 16% in the US compared to the fourth quarter of last year, and both refractory and metallurgical wire sales continue to be impacted by the weak market conditions.

Operating income for the segment decreased 56% from last year to $5.3 million. Foreign exchange had a negative impact of $700,000, or about 5%. In addition to lower refractory and metallurgical wire sales, equipment sales were also lower, further impacting profits.

Operating margin for the fourth quarter was relatively strong at almost 8%, driven by a 7% improvement in manufacturing productivity and overhead cost reductions. We recorded approximately $2 million in restructuring charges in the fourth quarter in this segment and expect to generate approximately $2 million in associated annualized savings.

Looking forward to the first quarter, we expect profits to be about the same as the fourth quarter, as the US steel capacity utilization rates have not improved significantly, and we remain cautious about any near-term market improvements.

In summary, 2015 was another record year for MTI. We achieved record income levels in our two largest segments, specialty minerals and performance materials, and we also achieved significant sales and operating income growth in China. Full-year earnings of $4.31 per share represents close to 80% earnings growth over the last two years, which is a remarkable achievement, considering the challenges we faced in energy services and refractories and the significant negative impact that foreign exchange had on our top and bottom lines.

Okay, so let me summarize what we are seeing for the first quarter of 2016. In specialty minerals, we expect operating income to be similar to the fourth quarter. Paper PCC operating income will be slightly lower as we realize the full impact of the paper machine shutdowns in the early part of the quarter. And in performance minerals, we expect operating income to increase slightly as we move through the seasonally low period for this businesses' end markets.

In performance materials, we expect operating income to also be approximately the same as the fourth quarter, with these product lines containing strong performance.

In construction technologies, we expect operating income to increase slightly from fourth-quarter levels, again as we move through the seasonally low period for the construction and environmental markets.

For both refractories and energy services, we expect first-quarter profits to be similar to the fourth as US steel capacity utilization rates have not increased significantly and the oil markets continue to be challenging. In total, we expect our earnings for the first quarter to be between $0.95 and $1 per share.

One other thing that I would like to remind everyone is that our operating cash flow in the first quarter is usually lower than other quarters due to some typical cash outflows that occur in this period. However, for 2016 in total, we see another strong cash flow year.

Now let me turn it back to Joe some thoughts on 2016. Joe?

Before we open it up for questions, I would just like to take another few minutes to share with you what we see for 2016.

We expect to see continued penetration for higher-value products in paper PCC and metal casting in China, despite the slower growth rate of China's economy. We will continue to generate good cash flows from which we will also continue to primarily pay down our debt and support organic growth, as well as potential acquisitions. The recently approved new buyback program also positions us to buy back stock as deemed appropriate during the course of the year.

Our operational excellence and continuous improvement initiative is gaining strong momentum with our new business units. And we expect to see the same high rates of productivity that we have attained in the last six years, around 5% a year.

On the M&A front, we are evaluating a number of possible acquisitions as we are now very well positioned to acquire and integrate value-adding companies. As a strong operating company, we have clearly demonstrated through AMCOL our capability for integrating acquisitions quickly and successfully to achieve our targets.

Going into 2016, we see continued challenges in the oil and steel markets, which we will continue to manage effectively. It's also important, I believe, to understand that these two service-related businesses comprise a relatively small portion of MTI's profitability today, while the minerals-based businesses will continue to provide a strong foundation for near-term performance and future growth.

To summarize, we believe that MTI's fundamentals are strong and that we expect to grow revenues and profitability in 2016, despite the challenges we face.

Now let's open it up for questions.

(Operator Instructions) Daniel Moore.

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

Clearly M&A is possible because of what we have in the hopper. But that's the toughest aspect of growth for anyone to predict. But it is possible that it could be part of what happens to us or what we do in 2016.

Organically, we don't give guidance in terms of specific targets in the course of a year. We pretty much stick to quarter to quarter, simply because visibility on a total year is very difficult for a business like us, and particularly this year, with the challenges in oil and energy. But I'd say targeting a 5% growth on the top line is a reasonable target for us.

Helpful. In terms of capital allocation, you gave us some really good color. Debt paydown remains a priority. Maybe talk about what types of acquisition opportunities are coming to the forefront in the current environment. Are there operating companies? Are you are looking at acquiring more minerals rights? And maybe just kind of rank order if there has been any change in the order of capital allocation priorities, debt paydown, buybacks, given the stock is at 9 times earnings and M&A.

Yes, I mean, it really is -- the buyback is very attractive right now if you look at it from shareholder value creation perspective. So that is clearly something we are going to continue to look at closely. Debt levels are not where we want them to be, so we are going to continue, as I mentioned in my remarks, give that highest priority in terms of where our focus is.

But on the other hand, in terms of the types of acquisitions that make the most sense for the Company, there are a number of opportunities that really could present themselves during the course of the year. And they are, in terms of what we have on the table right now, they are primarily minerals related, and they run the gamut of proving reserves in some parts of the world to value-added processing facilities to actually some end market types of companies that get us deeper into a particular channel.

So, we are seeing, at least from our perspective, the number of opportunities seems to be increasing for us that we have identified. And so we are working those pretty hard. But as I mentioned, this is the toughest area to predict as to when we are going to be able to pop something. But, clearly, we are very active right now.

And maybe one more for Doug, and I will jump back. Cash generation exceptionally strong in 2015, and I know you said you expect continued strong cash flow. How much of the $100 million working capital improvement from AMCOL have you now achieved? And do you expect working capital to be a benefit or perhaps a headwind as we look at 2016?

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

Thank you again.

Rosemarie Morbelli, Gabelli & Company.

Just following up on the M&A, Joe, the way I hear you, you are making two more or less contradictive comments. One is you are focusing on paying down debt, and two, you are also looking aggressively, if I can describe it like that, at acquisitions. So, how much debt do you feel you can reasonably add back before you get down to your 2 times target? And is the attraction lately linked to a lower multiple? Can you give us a better feel for that?

Yes, I should have clarified this a little bit. Let's say our ability to do something large is clearly there. It would require us to lever up quite a bit. And as we look at the opportunities we have, it's more likely that we will be doing smaller acquisitions, things that are in the $50 million to $300 million, $400 million range. But I don't want to rule out a larger opportunity if it is something that really makes the most sense relative to what we would call classical shareholder value creation. In other words, it falls right into a sweet spot and we can do a lot with it.

That is not likely to happen in 2016, but I would never rule it out. So, as we are reducing down debt, as I said, we're going to continue to do that until we actually have a targeted opportunity that we can act on. And that has to be, obviously, very, very attractive to us. So until that happens, we are going to continue to work the debt level down as fast as we can.

But it positions as well, particularly given where the financial markets are, from a borrowing standpoint, from a standpoint of being able to lever up if we need to. We are in a good position.

And that $50 million to $300 million, let's call it, is that revenues on the size of the companies you are looking at?

Yes, yes.

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

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

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

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

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

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

Yes. Hi, Rosemary. The growth contributed for lightweight in 2015. About 15% or so of the pet care growth that Doug cited before, 15% -- 15, was on the lightweight. So it was a startup year. The promise certainly in terms of look-forwards, it looks to be like a double-digit type growth market situation, given the uptake in the market as we speak today. About 15%, again, 15% of the total category is lightweight on a dollar basis. And we perceive that to be a growing end of the category here in the US.

So, it certainly seems that the momentum that started early on the year has continued in terms of where lightweight products will be positioned. And our technology has been accepted by a couple of key mass retailers where we are supplying now. And we foresee that in the upcoming year, we have got opportunities to expand, especially in the private label and control brand space.

And that is in the US.

Yes.

Anything happening in Europe and elsewhere?

Well, we have actually jumped over to China quite a bit in terms of our pet care development first. Europe would probably be the next area; certainly we have aspirations in Europe. But at this point, it is probably last in terms of where we are going to focus our next geographic expansion.

So China, which is obviously a nascent market today, under $100 million pet litter market as we speak, so considering the US is $2 billion, it is a pretty small market. But we are trying to get in the ground floor quickly in China with not only standard scoopable, but also a lightweight litter product area that we are beginning to work with in that area with especially the e-tailers who are quite prominent in marketing in China.

Okay, thank you very much, very helpful.

Ivan Marcuse, KeyBanc Capital Markets.

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

Yes, again, keep in mind, primarily where we see that 5% coming from is going to be the minerals part of the business. So, with the uncertainty on the energy services and refractories, it is tough to see any growth there at all. And we will have volume growth; with that should come commensurate revenue growth.

Great. So if you go back to your slide 7, since -- and you pointed to the growth, but really since the third quarter of 2014, when AMCOL and everything was fully in the results, sales had been sort of on a slow grind down, and op income really hasn't done all that much. So what gives you confidence that that -- and I guess -- or confidence that is going to change 2016? When do you expect we sort of hit that point? Is it more of a back half type of function, or how to think about it?

No, actually, it's as we look out, we just see -- I know this is contrary to all the noise in the marketplace right now -- we see a very stable to slightly growing US market. And for us, that is very good. We have got a very strong position in metal casting. We have got a strong position in household and personal care. That will give us room to grow a little bit. But it provides a stable base for being able to bring improvements, as I mentioned, that will occur through cost reductions and productivity improvements to the bottom line.

As we look at China, we have new facilities coming on for PCC. We also have penetration growth available to us in metal casting that I touched on in my remarks. India, India is chugging along very, very nicely. Growth rates are staying on track. We have a decent position there. We expect to be able to continue to grow that.

So, it is taking what the US -- I think the US stability and low growth, I guess you would call it, provides a good platform for us because of the position we have here, while the initiatives that we shared with you and that we've discussed in the past are really getting good traction in the parts of the world that we've been targeting.

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

We do, very much so.

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

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

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

We looked at the -- notice we have a $50 million debt repayment. And again, we still -- we understand where the stock is, and we are going to take a balanced approach as Joe mentioned, to the capital allocation between debt and share repurchase. Certainly an opportunity, but we focused, at least in the fourth quarter, on making a more sizable debt repayment.

Yes. To say it another way, we wanted to get through -- or almost through two years, and we wanted to make a significant dent in the debt level. That's really what Doug is getting it.

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

We see a similar free cash flow year next year to this year. We are going to continue. We have some debt paydown, and we will benefit probably $2 million, $3 million in interest expense next year, probably more -- closer to $3 million. So that will help earnings as well. But free cash flow is still in the similar range to 2015. CapEx, again, is going to be about the same as well, around probably $85 million to $90 million.

Great, thanks for taking my questions.

Al Kaschalk, Wedbush Securities.

I want to push a bit harder on this 5% growth, and in particular, given the seasonality or the cyclical nature of construction technologies, the recent 12-month performance and then the backdrop of the -- on more the macro economy level and to the US economy. So, can you be more specific on which of those segments are going to be the -- equally contribute, one is going to be more than the other, and just more the timing of the ramp in the business?

Yes, I would say -- and you have to put this within the context of what is possible and what our positions are. I would say our construction technologies, North America and Europe, relative to the potential that is available to that business, in both of those regions, is one area that this 5% is going to come from, which means the business actually have to perform better than it did in 2015. And so we are geared towards a higher performance level from the business. But that still has to happen, but I would say there.

And I touched on our performance minerals business, which is pretty heavily exposed to building and construction, which has been tracking very well. It tracked well in the fourth quarter. We are off to a good start in January. That forms the part of the basis for the outlook we have right now, why we do believe we can grow, as well as the internal targets that we've set for ourselves in terms of what we are actually shooting at. So, that is in North America.

And China we have talked about. It's basically keeping those growth initiatives on track and continuing to aggressively go after them in spite of some of the challenges we have. But we have shown, I think, clearly in 2015, and if you look at the fourth quarter, the whole question -- and there were a number of questions raised with us at the conferences we've been to and some of the meetings -- about China growth, and China slowing and impact on us.

I would hope we have put most of those to rest now with what we have shared in terms of what we've actually been able to do. And again, it is in part because of how we are growing. And we are growing through product substitution, which does not rely on the absolute GDP growth rate of the country that we are targeting or that we are working in.

So, those are the things that sort of give us the foundation to take a -- we are taking a positive look at -- for us, 2016 looks a little more positive than I think many others are looking at it. But those are the reasons why.

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

Yes, I think a perspective to keep in mind is the cash flows for these businesses are good. We've been able to keep good cash flows. And historically, particularly for the refractories business, it has been very good. And I think it is a fair question. It is something we have looked at from a strategic standpoint, and it is something we are going to continue to look at.

We don't have a formal plan in place that addresses that specifically, other than to say this is on our screen for evaluation to continue to go -- as we continue to look forward. But selling businesses at a low point is not always the best thing to do, particularly when they are contributing good cash flows. And so you look at it, how can we create the most value for shareholders by doing what we are doing as they were hit and we were working through them. We're kind of getting the profit levels back up to better position the businesses. So, that is what we are concentrating on right now.

Joe, I hear you about not selling at the trough, but it's also -- people have a challenge selling at the peak, where they will be maximizing value. So on the flipside, if we look at -- I was struck, I guess, by the amount of M&A discussion that you've put forth. And therefore, it only would question me as to why, if we continue to be good acquirers of business, good acquirers of business are also good sellers of businesses.

So that is sort of the root of my question, I guess, as to why refractories and energy services could remain, particularly when you look at the three other bubbles, the specialty minerals, performance materials and construction technologies, the so-called minerals businesses, why those can't be areas you can leverage on with further M&A, reduce and shrink the footprint, but also grow by exiting.

Yes, you know, let me kind of -- that is a good perspective, and kind of maybe allows me to go back to why we shared and why we concentrated some remarks on minerals and the services businesses.

We had a vision five, seven years ago, and we implemented a strategy to achieve the vision. And we are still a work in process. And part of the vision was to create a stronger minerals business, but not just a minerals business, a very value-added minerals and specialty chemicals business, because we had a core of specialty chemicals that we want to build on. With the acquisition of AMCOL, we are building on both minerals and specialty chemicals.

And so, as you look at where we've been and where we are, you can see that picture emerging of a stronger, larger minerals business in the Company in terms of what MTI is. And as we look forward, we are going to continue to go down that track.

At the same time, the heritage MTI had a very and still has a very, very strong position in monolithic refractories. We are -- Minteq is the premier monolithic refractories business in the world. But it has a very strong aspect of service with it. And the vision has been to create more value with that, and that could come through, as we have looked at in the past, partnering with someone else, making it a part of a joint venture.

So it is something we look at, again, from a strategic standpoint of where are we trying to take the Company. Energy services came to us with the acquisition. And so, what we are doing now is, given the circumstances, oil price drop, it is how do we make the most of, by refocusing what that business is good at, and what we did immediately, even before the price drop, is simply take it back to its basics of its core strength of filtration.

Where we go with it in the future is something that we are still kind of working through in terms of what's going to make the most sense from the standpoint of pure value creation for shareholders. That is what we are dedicated to.

Got it. Thanks, Joe, for the color.

Jeff Zekauskas, JPMorgan.

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

Jeff, let me take the CapEx first. CapEx should probably be about $85 million to $90 million, similar to this year. Total restructuring outlay so far from the beginning of the acquisition have been about $30 million. If you recall, when we did the transaction, we targeted $50 million in synergies, and we thought the cost of those restructuring charges would be about 1 for 1. So we have outlaid about $30 million, a little over $30 million in restructuring, to capture $80 million. There will still be some restructuring charges going into 2016. It will probably -- probably another $5 million to $10 million in 2016. So I think we have done pretty well with the charges associated with the savings, but there still will be some more in 2016.

So the cash outlays next year are $20 million?

Probably another $10 million, $5 million to $10 million in restructuring, and we have $85 million to $90 million in CapEx.

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

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

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

I am not going to comment on that, Jeff, at the moment.

Okay.

Jeff, I think we commented earlier that we do find, obviously, the current multiples and valuation of the Company attractive, and we are going to balance continued debt repayments with opportunistic share repurchase. But I just don't want to comment right now on whether we have done that this month.

Okay. And then lastly, I think as another caller mentioned, there is an emphasis on acquisition, and your leverage levels are still relatively high in the scheme of things. So, if you were to do a larger acquisition, I would imagine it would involve some equity.

So, that is, are there sort of possibilities that are out there? However, the probability that you would execute would be quite a bit below 50%. But do you think in those sorts of terms for 2016 as a possibility?

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

Okay, great. Thank you so much.

Silke Kueck, JPMorgan.

There were a couple of percentages that you gave in terms of productivity improvement, or percentage of productivity improvement, and I was wondering whether you can put some dollar terms on that.

Well, I gave you a couple of them. We had a 9% productivity overall for the Company, manufacturing productivity. That was worth about $6 million to us this year. I would caution you a little bit in saying that that's, again, ratable because it really depends on where those productivity improvements are being achieved, whether it's North America, Europe, Asia, etc.

So, but this year, we had almost a 15% productivity improvement in the acquired businesses. We had a 4% productivity improvement in the legacy businesses and refractories and specialty minerals. So in total, that ended up to be about 9%. It was a pretty strong year for us.

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

Yes, I would say Gary can give us a little bit more color. So, for total metal casting, I would say probably 50 -- 60 -- probably a little higher than that. 60% of it is really automotive. I think you have other breakdowns are kind of heavy truck and off-highway, and then you have the agriculture. It's probably a smaller segment, [about 10%]. Gary, is that right?

Yes, and this is North America, Silke, that we are talking, yes. The US, it would be about in the proportions Doug is talking about -- lightweight automotive probably between 50% to 60%, ultimately, the end market, in terms of weighted castings. And then the agriculture, probably of the remaining several segments, is probably the largest after that, at maybe about 10%.

And when we look at estimates for global auto production, it seems to be higher in 2016 versus 2015. So do you think your metal castings business should grow next year or should grow in 2016?

On a global basis, yes. Our footprint, again, is balanced primarily between the US and Asia, a bit in Europe as well, where we are expecting a little bit better year in auto in Europe. But of course, China, the statistics, I haven't actually seen the most recent statistics for China next year. I think they are on a pace around 24 million or 25 million in units this year. And the late surge that we saw in China at the end of the year last year, or after the government reduced a purchase tax from like 10% to 5%, we saw nice volume pickup in China. And that automotive category seems to be carrying through to next year.

So, I think your premise in terms of the overall growth, and particularly for us, China, India as well, ought to be our biggest point to add to the business, the metal casting business, next year.

I guess if I take that together, the answer is yes, that you expect to grow in 2016, the metal castings business?

Yes, yes, we see that emerging markets definitely in a growth path.

Thank you. And I wanted to ask a question or two questions on the PCC business. The first is I was wondering whether you can identify, like, the sales and the operating income that you are now getting from FulFill. Maybe you can just sort of give, like, a rough ballpark for 2016.

And secondly, I was wondering whether you expect the paper PCC business to grow in 2016, given -- so there's satellite expansions that you expect, and then there are the headwinds from the reduction of the Verso mill capacity and the Domtar capacity.

So, FulFill, had a relatively strong year for FulFill this year. It was about $3.5 million of operating income. That is almost 60% higher than last year, so, relatively strong. We don't, obviously, give you the sales of that. You'd call that an equivalent sales of almost $35 million at kind of PCC average margins around the world.

So, a pretty good year for FulFill. As far as growth next year, absolutely we see -- we are building -- we put 250,000 tons of capacity in China in 2015. I mentioned we are going to put another 170,000 tons of capacity in 2016 in China. Our volumes have grown 3% this year, 4% sales underlying, excluding currency, so you have to pull away some of the currency effects.

We see that the three satellites, two of the three satellites in China that we built this year are going to continue to ramp up. They have not fully ramped up yet in the fourth quarter, and they are going to continue to do so. And we are going to be building another satellite in the second quarter, a very large one with Sun Paper, about 100,000-ton satellite, and then another one will come online late next year. Probably won't see any volume from it.

So, we see the continued growth, at least 3% volume growth in PCC over next year. You are going to see a little impact of Verso in the first core Verso and Domtar in the first quarter, but I think on average for the year, you're going to see the continued volume growth.

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

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

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

Yes, I mentioned there's probably about $2 million of the $9 million is in refractories. We should be capturing that through the first half of the year. The $7 million in energy services, we are working on that currently. You will probably see that run rate, most of that, at least from a quarterly basis, in the second and the third. So you're going to see the majority of it in the first half of the year.

Thank you very much.

Rosemarie Morbelli, Gabelli & Company.

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

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

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

I am.

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

Yes, that is the net number on average for the year.

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

Well, I think -- I guess a stable North America will certainly help that number, because this year we have about 50,000 tons of impact annualized from just the Verso and Domtar. So right now, we are looking at North America paper industry, little bit healthier than it was perhaps last year. Operating rates are probably in the low 90s. They have not been that high the past several years. They were in the 80s the past few years. So that at least bodes well for continued -- for fewer closures. Now, that remains to be seen.

Europe, a little bit different. So we see about a little flat in North America. In Europe, maybe a little different. Right now, our projections, we see probably down 1.5% in Europe. But that is a typical decline. Usually it is 2% per year in both of the regions. So, it looks like right now a more favorable year in both Europe and North America, at least more stability. And so if that carries through, that should certainly help our volumes higher than the 3% that I mentioned, at least in this year.

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

Yes, I think hitting our 2020 targets in terms of sales growth for this paper PCC business was around 7% to 8% per year. So, what we're talking about this year is getting those satellites ramped up. We still have additional FulFill and FulFill products. Our NewYield, we have only had one satellite with NewYield, but we are pursuing 15 other opportunities in NewYield. We have shown a number of times other base PCC projects in China that are in our pipeline. We are pursuing coating. We have a coating -- that last satellite that will come up late in the fourth quarter is our first -- is a coating facility associated with packaging in China. So that is our first one there.

We've got a number of other opportunities that we pursue in coating and packaging in China.

So, I think you're going to see, as those opportunities come through, you will see that growth start to accelerate over 2017, 2018, 2019.

Great, thank you very much.

Daniel Moore, CJS Securities.

A relatively easy one, Doug, just the tax rate you are assuming for Q1 as well as full-year 2016.

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

Thank you.

There are no further questions at this time.

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

Thank you.

That does conclude today's conference. We thank you all for your participation.