Minerals Technologies Inc. (MTX) Q1 2013 Earnings Report, Transcript and Summary

Good afternoon. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2013 Minerals Technologies Inc. Earnings Conference Call. [Operator Instructions] I would like now to turn the call over to your host, Mr. Rick Honey. You may begin.

Good morning. Welcome to our first quarter 2013 earnings conference call. For today's call, we'll begin with Executive Chairman Joe Muscari, who will provide some perspective on our first quarter 2013 performance. Joe will then take a few moments to discuss the transition that will take place this year as he hands over the leadership of the company to our new President and CEO, Bob Wetherbee. Joe will introduce Bob, who will comment on his initial perspectives from his first 2 months of travels, visiting MTI locations around the globe. Bob will then turn the call over to Doug Dietrich, our Chief Financial Officer, who will review the details of our first quarter financial results. Before we begin, I need to remind you that on Page 8 of our 2012 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. Our financial performance for the first quarter continued to be strong, as we recorded $0.53 per share in earnings versus $0.51 in the first quarter a year ago. The $0.53 per share is also a record first quarter for Minerals Technologies. Underlying organic growth was strong in the quarter, as our Paper PCC business benefited from the continued ramp-up of our new facilities in India and Thailand. In the fourth quarter of 2012, we began operation of the satellite PCC plant at a paper mill owned by Quantum Paper in India, as well as another satellite serving Double A Paper in Thailand. And we just recently started operation of the satellite at JK Paper in India. Our Paper PCC business in Asia overall saw an 8% increase in volume this quarter. As a result, our Specialty Minerals segment, which consist of PCC and our Performance Minerals businesses, had a record-breaking first quarter with an operating income of $22.2 million. Our FulFill technology also continues to gain momentum, as we signed 3 commercial agreements during the quarter. Refractory segment, however, had a difficult quarter as a result of continued weakness in the North American and European steel markets. A major factor in the decline was the closure by RG Steel of 2 steel mills in North America, where we had significant positions. We also saw lower sales in our non-steel applications, as well as lower equipment sales, which continues to be a drag on this segment. Looking forward, we remain concerned about the economic conditions in Europe, as well as the softening worldwide steel industry. However, we do expect to stay on an improved earnings track, as our new satellites sustain their ramp-up traction, FulFill usage and new customer penetration continues and our operating performance remains strong. As you can see from this chart, our earnings for the last 6 quarters are on a strong track of more than $0.50 per share. We've successfully managed to overcome the lost income from several steel mill shutdowns over the last year and the 2 paper mill closures in the fourth quarter of 2011 through new satellite PCC volume, new product sales, productivity gains and continued overhead expense savings. Our return on capital, which today is at 8.9%, continues to improve. We're above our cost of capital and also above the first quarter of 2012, when our ROC was 8.7%. Our key organic growth strategies of geographic expansion and new product development are beginning to pay off very nicely in terms of bottom line impact as we effectively execute on both these fronts. The 3 additional satellite PCC plants operating during the quarter that I mentioned in my opening remarks were not operational a year ago. These 3 Asian facilities have an installed capacity to produce 150,000 tons of PCC a year. It should also be noted that we're expanding 4 satellite plants in North America that will add another 75,000 tons by the end of 2013. In addition, we have another 150,000 tons of annual capacity that is scheduled to come on stream in Asia next year from agreements we signed with paper makers there. We also continue to actively pursue new satellite projects, particularly in China, where our backlog of prospective projects is quite strong despite the apparent lower growth rate of the China economy. Our FulFill technology also continues to gain traction and is contributing to the bottom line. Since January, we've announced 3 new commercial agreements. Two of these were with North American papermakers, one of which is actually quite large and global. Both wish to remain unnamed for competitive reasons. And the third was with CMPC Celulose Riograndense at a paper mill in Guaiba, Brazil. In our Performance Minerals business, where we are very well-positioned for economic recovery, we're beginning to see improvement in the building and construction industry, which will have a positive effect on that business. More than 50% of our Performance Minerals go into building and construction. In addition, our Optibloc products, which we've discussed with you before, are continuing to show improved growth. These are new antiblocking products for use in high-clarity film and bag applications to prevent the adhesion of 2 adjacent layers of film, a problem most associated with polyethylene and polypropylene films. Our Specialty PCC product line, which goes into non-paper end products like food, pharmaceuticals, sealants and adhesives, increased 15% in volume in North America. And we are expanding our production capacity at our Adams, Massachusetts, facility to meet this increased demand. We're also in the process of converting another kiln at Adams from fuel oil to natural gas as a further cost savings measure. A bright note for our Refractories business is the operation at the new steel mill owned by SULB in Bahrain, where we serve as the general contractor for all refractory maintenance. As we also have discussed in the past, this is a new business model for us. SULB was actually a major contributor for higher refractory volumes in the quarter. Our initiatives in operations excellence, expense control and new product development, which provides the underpinnings for our growth, continued on track. We've shown you this chart since late 2010 when we launched FulFill, and as you can see, we continue to make progress as the technology continues to be accepted by the paper industry. We now have 13 paper mills around the world under contract: 6 in Asia, 3 in North America, 3 in Europe and 1 in South America. We're also very actively engaged with 22 other paper mills around the globe to validate and commercialize this innovative cost savings technology. On the M&A front, there is nothing new that I can share with you other than to say we continue to be very active in this arena. It's an important part of our growth strategy, and as you know, our objective is to seek out performance-minerals-type companies where we can leverage our expertise in fine particle technology and crystal engineering, as well as move to end markets, such as energy, environmental and consumer products, which would help to reduce our cyclicality. As you're all aware -- well aware that in March, we announced that I would move to the position of Executive Chairman and that Bob Wetherbee would become President and Chief Executive Officer. The transition with Bob -- the process of transitioning Bob is actually going very well, both with myself and the team, and it's going as planned. During the coming months, Bob and I will continue to work together closely to assure a smooth transition. Bob will be taking over responsibility for the day-to-day operations for our 3 business units, and I'll be focusing more on the M&A front, as well as customers related to our geographic expansion strategy. I expect to serve in an active management role as Executive Chairman at least through the end of this year and perhaps, into the first part of 2014. We've worked hard the past 6 years to shape the culture of MTI into that of a high-performing company, and I'm confident that by handing the leadership over to Bob Wetherbee, MTI will continue on that high-performance track, as well as achieve its longer-term growth objectives through continued new product innovation, geographic expansion and acquisitions. On a personal note, I've known Bob for many years, and I have first-hand experience of his many talents and leadership abilities from the time when we worked together at Alcoa. I've asked Bob, who's been traveling around the globe, visiting many of our facilities and spending time with our employees, to share some of his early impressions and thoughts about MTI with you. So I'll now turn it over to Bob. Bob?

Thanks, Joe. Hello, everyone. I look forward to meeting many of you face-to-face over the next few months to outline how I plan to keep MTI on a high-performance track and meet our growth targets. What I can tell you after just 2 months on the job is that Minerals Technologies is a high-performing, highly-focused, values-driven company. We have strong market leading positions in many of our businesses, especially in Paper PCC, where we are the largest supplier of precipitated calcium carbonate to the worldwide paper industry. Our Refractories business is a leader in monolithic refractory technology and application methods. The Performance Minerals business is a lean operation that's making strides in new technologies and gaining market share. I am committed to maintaining these leading positions. With our strong management team and the execution of our growth strategies of geographic expansion and new product innovation, we're well-positioned to grow the company. And with our strong cash position, we will continue to aggressively seek opportunities for acquisitions at the right price and in the right products and markets that will fuel that growth and reduce the cyclicality of our product portfolio. I embrace and will continue to aggressively lead the initiatives that have changed the MTI culture and improved our performance over the past 6 years. I come from a culture where safety is paramount. It's a core value for me. I believe it's a leader's responsibility to ensure that our employees leave work each day in the same healthy condition as they arrived. The difference that our operational excellence lean initiative has made in improving productivity and efficiency is evident in our higher performance. We will maintain the processes and practices that are in place. MTI was built on innovative technology. The company originated the satellite concept of building PCC manufacturing facilities on-site at paper mills and soon revolutionized the way paper was made in North America. Innovation in all of our businesses is part of the company's DNA, and it's in my DNA. And I fully intend to nurture new ideas that will continue to contribute to future growth. I am fiscally conservative by nature, and with a financial background, I recognize the importance of stringent expense control to maintain a company's financial health. We will continue on this path to continuously remove waste from our processes. On a personal note, these last few weeks, I've traveled to numerous production and R&D facilities around the world, where I met a dedicated, engaged and empowered workforce that is committed to taking Minerals Technologies to the next level. We have the talent and the resources to continue to grow, and I feel privileged to be the one chosen to lead that effort. As I said earlier, I embrace the MTI vision for growth and operational excellence, and I look forward to meeting each of you in the coming months to discuss my leadership focus. Thank you. Now I'll turn it over to Doug Dietrich, who will take you through the details of the first quarter financial results.

Thanks, Bob. Good morning, everyone. Now I'll take you through our consolidated and business segment results for the first quarter. I'll highlight the key market and operational elements of our financial results in each major product line and comment on comparisons to both the first quarter of 2012 and sequentially to the fourth quarter of 2012. As Joe mentioned, we achieved record first quarter earnings of $0.53 per share versus the $0.51 reported last year. Our solid performance this quarter was led by the Specialty Minerals segment, which also achieved record first quarter profits, as performance was strong enough to more than offset the lower profitability we experienced in the Refractory segment. We also benefited from a strong -- from a positive swing in below the line items, primarily due to foreign exchange and favorable tax items, which added $0.02 to our EPS. Our consolidated sales this quarter decreased 2% or about $6 million from the prior year. Foreign exchange had an unfavorable impact of approximately 1%, and 2 fewer days in the quarter this year accounted for another 2%. Excluding these factors, our underlying sales increased 1%. Underlying sales in the Specialty Minerals segment grew 3%, but declined 3% in Refractories. Operating income of $27.1 million represented 10.8% of sales compared with 10.5% last year, as margin expansion, as a result of strong contribution from our growing Asia PCC business, continued FulFill commercializations and pricing improvements. In addition, overall productivity improved more than 6% versus the first quarter of last year, and we continued keeping our expense levels tightly in control. Return on capital for the quarter increased to 8.9% on an annualized basis. We generated $25 million in cash from operations, of which $9 million was used for capital expenditures and $9.5 million was used to repurchase shares. Cash and short-term investments ended the quarter at $470 million. Sequentially, consolidated sales increased 3% -- 5% on an underlying basis, again, led by the Specialty Minerals segment. Operating income increased 5%, which was higher than expected on our last call. Specialty Minerals segment profits increased 13%, driven by a strong performance from Paper PCC. The Refractories segment, however, declined 8%, which was more than expected as we continue to face challenging steel market conditions. In total, the company remains on a strong earnings performance track. Let me give you a general outline of the improvement in our operating margin over last year. Margins have improved in both Paper PCC and Performance Minerals, but have contracted in Minteq over last year. The increase in Paper PCC was due to higher profitability in Asia, price increases from the contractual pass-through of our lime costs, contribution from our FulFill program and productivity improvements. The improvement in Performance Minerals was due to growth in our North American Specialty PCC product line, price improvements in talc and strong contribution from our Lucerne Valley, California GCC business. Refractories, the loss of business from the RG Steel bankruptcy in North America, continued weak equipment sales and lower profits from our Japan operation contributed to the margin decline. These factors were partially offset by the profit contribution from our new SULB business in Bahrain, which began operations in the third quarter of last year, and volume growth at our Refractories facility in Rotherham, England. This chart highlights the mix conditions we are currently facing in our main market segments and geographies. In North America, uncoated wood-free paper production was down 5% due to the closure of a few paper machines. However, production has increased slightly in Europe. The construction market in the U.S., which includes both residential and commercial markets, continues to strengthen and was up 7% in the first quarter versus the prior year. In Europe, however, construction continues to be lower. North American automotive unit production growth slowed recently after a number of strong quarters, but production levels remain relatively high at 4.1 million units this quarter. Lastly, you can see the challenging steel market conditions we continue to face. Production in North America was 6% lower than the first quarter of last year, and in the United States, production was down 8%. In Europe, production was down 5%. Let's go over the financial results within the Specialty Minerals segment. As I mentioned earlier, this segment had a very strong quarter, and as you can see from the chart, we maintained the performance momentum we generated last year. The $22.2 million of operating income is a first quarter record and was 12% higher than last year. We continue to expand our operating margins in this segment, which increased to 13.2% of sales compared to 11.9% last year. Within this segment, Paper PCC's underlying sales grew 3%, driven by Asia, where volume grew 8%, and Latin America, which was 6% higher. This volume growth was partially offset by slightly lower volumes in North America and Europe, which were about 1% lower. In Performance Minerals, underlying sales grew 3%, driven by Specialty PCC and talc, each growing by 5%. Segment operating income growth, which was driven by a 16% increase in Paper PCC and a 4% increase in Performance Minerals. The increase in Paper PCC was primarily due to strong contribution from our new satellite facilities in Asia, FulFill, higher pricing and a 9% improvement in productivity. The improvement in Performance Minerals was due to growth in our North American Specialty PCC, price increases and strong contribution from our Lucerne Valley GCC business, which is beginning to benefit from the improved construction market. Sequentially, segment sales were 4% higher than the fourth quarter, driven by the seasonal volume improvements in the Performance Minerals business. Operating income from this segment increased 13%, which was more than we had anticipated on our last call, primarily due to strong performance in Asia Paper PCC and higher-than-expected volumes in Performance Minerals. Looking forward to the second quarter, we expect our paper PCC volumes to be down sequentially about 2%, as a number of paper mills in all regions perform their normal annual maintenance outages, which typically occur in the second quarter. This volume decline is consistent with prior years. In Asia, we commissioned our latest satellite PCC operation last week at JK Paper in India. We will not see a significant volume from this new mill in the second quarter as it's only beginning to ramp up. Current indications are that second quarter profits in our Paper PCC product line will decrease from the first quarter due to the lower volumes from the maintenance outages and to the startup expenses of the JK Paper PCC satellite. This sequential decrease is consistent with prior years. In Performance Minerals, we expect profits to increase from the first quarter, as the second quarter is typically the strongest seasonal period for this business. We also expect some profit contribution from our Specialty PCC expansion, which will come online at our Adams facility. Overall, we expect the second quarter operating income for this segment to increase 10%. Before I move on, I'd like to mention 2 other items regarding the Paper PCC business in Europe. First, we plan to discontinue our operations at our merchant coating PCC facility at Walsum, Germany, in the second quarter. If you recall, we recorded an impairment charge related to Walsum in 2007 in connection with the restructuring of our European coating PCC business. Since that time, the facility has continued to operate well below capacity levels. We anticipate the residual closure costs of this facility will result in a second quarter charge of up to $6 million. Going forward, all costs associated with Walsum will be separated from our continuing operation results. Second, the latest indication we have is that our Alizay PCC satellite, which has been idled for about the past 18 months and serves the paper mill that was recently purchased by Double A Paper, will most likely come back online late in the second quarter and will ramp up gradually over the remainder of the year. We are currently in discussions with Double A to finalize all necessary agreements. This chart highlights the components of the 11% improvement in the Specialty Minerals operating margin over last year. As I mentioned, segment operating margins increased to 13.2% from 11.9%. Margin was negatively impacted by higher energy costs in Performance Minerals, as well as higher lime costs in Paper PCC. These were offset by contractual price increases in Paper PCC and price increases in our talc product line. We continue to drive productivity improvements in each business, which contributed almost 0.5 percentage points to the margin growth. In addition, we're seeing strong performance from our new satellites in Asia, along with contribution from our FulFill technology program. Now let's go through the results within the Refractory segment. Sales in the first quarter were 6% lower compared to last year, driven primarily by North America and Japan. Foreign exchange accounted for about 1 percentage point of this decline, and 2 fewer days in the quarter contributed another 2 percentage points. The decline in North America was primarily due to the closure of RG Steel Sparrows Point and Warren mills last June, as well as to lower sales in our non-steel application business. Japan, it was driven by lower refractory volumes and foreign exchange. Equipment sales were also lower compared to last year, as steel producers continued to restrict their capital spend. And Europe, despite the steel production declines of more than 5% that I related to you earlier, refractory sales increased by over 9% due to volume growth at SULB in Bahrain and to improved volumes at our refractory facility in England. Operating income for this segment decreased $2.2 million in the quarter to $6.9 million. Again, this decline was due to RG Steel mill closures, lower equipment sales and the lower profits this quarter in our Japanese business. This resulted in a segment operating income ratio of 8.3% of sales for the quarter. Sequentially, Refractory sales were at the same level as the fourth quarter, and operating income decreased 8%, which was a little more than we had expected on our last call. We anticipated profits to be lower from our non-steel applications, however, volumes in Japan were weaker than expected. Looking forward to the second quarter, steel production levels in both North America and Europe remain weak, and we still do not see any significant improvement in our equipment sales. As a result, we expect that our second quarter operating income for the full segment to be similar to the first quarter. This is a summary of the changes in the Refractory segment operating income margin. You can see that the first quarter ratio of 8.3% is well below the 10.2% achieved last year. Refractory volume decline in North America and Japan, significantly lower equipment sales and lower profits in our non-steel product lines negatively impacted margins by 2.2 percentage points. These factors were only partially offset by improved productivity levels and cost and expense control programs. These charts illustrate our working capital and cash flow trends. Total days of working capital decreased to 55 days. This decrease was driven by improvements in all businesses and in all components of working capital. Our cash flow from operations was $25 million in the first quarter, and as I mentioned, capital spending was $9 million. We do expect capital spending to increase throughout the year as we begin construction of 2 new satellite facilities in China with Sun Paper and Jianghe Paper and also begin the expansion of 4 PCC satellites here in the U.S. and 2 in Brazil. As I mentioned earlier, our first quarter earnings of $0.53 per share was above our expectations, primarily due to a record performance in our Specialty Minerals segment. Looking to the second quarter, we expect profits to increase in the Specialty Minerals segment, driven by the seasonal improvement in Performance Minerals. In Refractories, however, we expect second quarter profits to be similar to the first quarter, as we do not currently see any upward movement in steel production levels in both North America and Europe nor do we see any improvement in equipment sales. In addition, we will not see the same below the line benefit from taxes and foreign exchange in the second quarter. But overall, we expect around 7% to 10% sequential earnings growth for the full company. Now let's go to questions.

[Operator Instructions] Your first question comes from the line of Daniel Rizzo from Sidoti & Company. Daniel D. Rizzo - Sidoti & Company, LLC: The improvements you made in the operating margin in PCC -- I'm sorry, in the Specialty Minerals segment, is that from -- does FulFill have a lot to do with that, or is it just increased productivity? I mean, is FulFill actively contributing to improve margins in that segment?

Yes, it is, Dan. I put up on the chart that both the Asia PCC satellites and FulFill are contributing to that margin growth. I think it was -- total was about 0.6% in total.

And your next question comes from the line of Rosemarie Morbelli from Gabelli & Company. Rosemarie J. Morbelli - Gabelli & Company, Inc.: So, Joe, it looks as though you are now going to focus in M&A. Does that -- could that translate into a transaction before year end?

Well, I have been focusing on M&A, just for the record, but what it'll allow me to do is to spend even more time in the M&A area, working with folks like John Hastings, the Head of our M&A group, and it does not necessarily -- one does not necessarily follow the other. And as much as I'd like to give you more insight, I think the way to look at it is -- or think about it, it does allow us to increase the intensity of our efforts, as well as increase some of the breadth, but I would say more on the intensity side. And as I've related in the past, at any given point in time, we have a number of things going and the period of time -- going in a sense of in discussions with other companies, and this period is no exception. Rosemarie J. Morbelli - Gabelli & Company, Inc.: Okay. And I was wondering if you could give us some details on the price increases that you had in several of the areas and particularly, in the new contracts. It sounded as though you had price increases on the new contract.

Yes, Rosemarie, this is Doug. We -- there are 2 components to the price increases. One of them was PCC. Those were largely the contractual price increases as we absorbed lime cost increases in the fourth quarter. We passed them through in the first quarter. We've benefited from some stability in our -- in some of the raw materials and energy. So lime cost increases weren't as severe this year over last, so we benefited from some good pricing there. The other component is in Performance Minerals, and I highlighted, we had some pricing improvement in our talc product line. Rosemarie J. Morbelli - Gabelli & Company, Inc.: And in talc, I suppose, that because it is linked to construction, the price increase is due to the stronger demand and a better competitive environment, or are you offering that industry some different products?

Well, we are. We're -- I mean, it's obviously, due to the quality of our products and the value we bring to the customers, we've managed to increase some pricing. But also, some of the Optibloc products that Joe had mentioned, those are pretty high price point type products, high-value as well, and so we've seen an increase in some of those. Rosemarie J. Morbelli - Gabelli & Company, Inc.: What about the TiO2 extenders. You didn't mention any of that. Could you talk about the demand and the pricing? Or because TiO2 is more stable at the moment, there is somewhat of a slowdown in the growth in there?

Rosemarie, yes, we have seen -- we are still active with a number of companies where we're running trials. And we are actually selling to 1 particular company, 2 -- actually 2 now, Doug tells me. So the activity continues, but with the price reductions in TiO2, the degree of pull that we experienced a year ago has slowed down, without a doubt. But we're still active in it. We have a good product. And we expect to see continued sales growth there albeit at a, let's say, a slower rate than we were thinking last year. Rosemarie J. Morbelli - Gabelli & Company, Inc.: Okay. And then if I could -- in Germany, did you have some kind of a hit to operating income from the operation you aren't going to -- discontinuing?

No, Rosemarie, that's -- so that's been part of our continuing operations since 2007. We did -- you probably remember, we did take an impairment on that facility back then as we restructured away from the merchant model in Europe. That facility is a merchant PCC coating facility. And as we had shifted more to the satellite model in coating, as you can see Sun Paper, our new facility China is a satellite coating PCC, that business has continued to run at lower volumes. So we're looking at -- right now is a good time to close that facility given where we are with it, and that's going to be done this quarter. And so really, it's going to be moved to discontinued ops, and we'll have some closure costs associated with it. That answer your question? Rosemarie J. Morbelli - Gabelli & Company, Inc.: Yes, it does. And one last question, on the PCC new contracts, any change in terms of what you are able to get?

In terms of price? Rosemarie J. Morbelli - Gabelli & Company, Inc.: When your satellites -- the contracts for the satellite, the multi-years, expire, you are renewing those contracts at similar prices, or do you have to take them down, or because of the value you are offering in FulFill potential, you can actually renew those contracts at a higher price?

Rosemarie, this is D.J. So what we're experiencing right now that we've got about a normal number of renewals that are going on, and that's between 6 and 10 every year. We've been -- we're continuing along at that rate, and we're getting, I would say, favorable renewals based on a couple of elements, one of them being FulFill. And then as we're going forward, these new PCC contracts -- Doug had mentioned the 2 that we're building right now and we're pursuing many, especially in China and in Asia. As we're pursuing these new contracts, we're finding that FulFill is a key strategic lever for us to get those contracts, and so we remain optimistic that they'll be at similar pricing levels to what we've been experiencing in the past.

And your next question comes from the line of Daniel Moore with CJS Securities.

First, a quick clarification on the -- your comments for Q2 in Specialty Minerals, you expect operating income up 10%, is that the year-over-year or sequentially?

That's sequentially.

Sequential. Perfect. And in the not-too-recent past, you've talked about growing FulFill, the impact you would have there, doubling its impact on operating profits from $1.4 million to closer to $3 million in 2013. Given the 3 new contracts in Q1, is that still a reasonable goal, is there upside? And given the various stages of business development, what type of growth do you expect to see in '14?

We had indicated on the last call that we expected 2013 to have op income from FulFill in the range of $2.5 million to $3 million. In the first quarter, we were tracking at around $450,000 of op income, so we're at a rate in the first quarter of a $1.8 million. And in terms of what we're looking at last quarter, we're right on track. I'd say the potential is higher, but it's a little early to call that. As we get through the second quarter, we're going to be in, obviously, a better position to do it. But we are definitely seeing a firming up and stability around FulFill. I don't know if you recall, at the last call, I discussed the fact that we will be accepted. We'll run our trials, and we'll start to run and then a grade of paper changes, and we have to make modifications, sometimes come off a machine, so it's not a linear process in a sense of once you're on, you just keep going, that we have to typically get through the different types of papermaker is going to be using on that machine or other machines on a site. What we're seeing now is we've been on machines for a period of time. We are beginning to see more stability. And so, that should also lead to more sustainable earnings over time as well.

Great. And one quick follow-up, perhaps an update on the product development pipeline. I think you launched 34 new products in '12. You may have given this previously, I apologize, but what's the split between Specialty Minerals and Refractories, and how much incremental revenue do you expect from those products in '13 and '14?

We typically have not split that out in terms of what we have where, and it's something actually off the top of my head, I couldn't even give you a percentage approximation, but that's something on a future call we can probably do to give you a sense. By and large, I'd say the -- if you look at the revenue split and the percent of new products driven by the different businesses, it would be PCC plus in terms of potential future revenue. The higher growth new development will be -- is primarily or a large majority of it is driven by the PCC business. I'd say Performance Minerals would be #2, and Refractories, third.

Your next question comes from the line of Steve Schwartz with First Analysis.

I guess, first question, Joe, you mentioned in your prepared remarks the pipeline in China. Were you referring to refractories, or was that just for the Paper PCC?

It is primarily Paper PCC and in terms of new satellites and FulFill. As you recall, we've talked in terms of we have in this pipeline of new potential projects some 12 to 15 applications for satellites that we're active in, and that's as we look out over the next 1.5 years to 2 years. So that's one of the key areas that I'll be spending more time with D.J. and with the Asia team with some of the major Asian papermakers there, and that's both for new satellites, as well as the FulFill product. Having said that, we also are looking at a talc positions in China, as well as Specialty PCC in China. So I'll be working with Doug Mayger and his team around those as well.

Okay. So quite a bit going on. And then from a raw material inflation standpoint, what does the outlook look like there? So you obviously, got some very good pricing in the first quarter, what about refractories in MgO?

Sure. Steve, we've seen actually some stability in the magnesium oxide area, so we don't see, at least going forward, a lot of cost pressure there. Where we are seeing some raw material increases, and maybe you have as well, is seeing the natural gas, electricity, so really, the energy arena, and that's primarily in the Performance Minerals business. I highlighted we had some impact on that in the first quarter over last year. So largely stable raw materials except for energy.

Okay. And that actually rolls into my next question about the conversion in natural gas at the Adams kiln, I think the last one you did saved you about $1 million a year, is that correct?

Yes, it was a little higher than that. It was probably about $2.5 million a year.

$2.5 million, okay. And then just lastly some nuts and bolts on the discontinued ops for Walsum, as we back that out of our models for continuing ops, is there any meaningful revenue or op income that we need to factor into our numbers?

So the revenue is largely out. That mill is operating at very low capacities right now. And largely, the volume decline you've seen in Europe this quarter over the last is primarily due to Walsum. There'll probably be some benefit from -- in the operating income, and we're currently going through kind of those costs and the timing of those costs as they get pulled out. So there will be some benefit in operating income.

And it will start in the second quarter that you reported as discontinued ops?

Correct.

Your next question comes from the line of Jeff Zekauskas with JPMorgan. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: This is Silke Kueck for Jeff. Post the closure of the Walsum plant in Germany, how much coatings for a PCC exposure is there, and then in which region? If you can just put it in perspective, what's filler grade PCC and what's coatings grade PCC.

That mill is a merchant mill. It services just Europe, and it's all coating PCC. Probably revenue on an annual basis is about $4 million, $5 million -- $6 million, I think it is. Let me get that for you. $6 million on an annualized basis.

I think in terms of coating per se in the different regions, to your question -- further to your question, Silke, the -- most of our other sites are satellite sites, and if you recall, we withdrew from the -- we withdrew the merchant model, primarily from Europe and other places, and basically adopted a strategy that says, if we do coating such as we're going to be doing at our new facility in China, it will be using the satellite model. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. How many coatings plants do you have today excluding Walsum?

Silke, it's D.J. Let me quick give you that number. It would be about 10 when we're done with -- when Walsum is out of that number, in that ballpark. And Silke, just to highlight that, that Walsum -- we said in 2007, Walsum just didn't fit our strategic profile, being that merchant facility. So when we put in Sun Paper, which is a 100,000 ton facility, that will be an add to the coating side. So we still see a place for coating in our portfolio, but it's got to fit with the satellite model where we know we bring other value to that customer. So we're -- that's the -- Walsum just wasn't a strategic fit.

Silke, I just have the number for you. This is Doug. Walsum revenue last year was about $8 million and dropped to basically nothing in the first. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. On the Refractory side, are there -- is there more restructuring coming given that the industry is going through another round of contraction, or is it rightsized to where it should be?

We don't anticipate anything significant at least as we look out through this year, Silke. I mean, it's possible, but it would be nothing of the magnitude of the restructuring we did post-2008 and 2009, when we had the significant drop in revenue. Europe is being affected the most right now, and I think we're at a pretty good position with regard to where our facilities are now. So as I said, right now, we don't anticipate any further restructuring there. We could see some adjustments and some smaller changes, adjustments in Asia, potentially in Europe as well, but they wouldn't -- I don't see them as being large. Doug, do you or [indiscernible]?

I don't see -- I agree with Joe. That's what we're looking at. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. And lastly, you've done a wonderful job and now signing on, like, 13 commercial customers for FulFill and then these various satellite plants coming on in Thailand, and in India, and in China and -- but also the underlying business is going through a period of contraction. And so, as you look out a few years, is it still possible to reach the growth targets that you set out a while ago, I think, you hope to achieve maybe sales in the range of $1.4 billion, $1.5 billion by 2015. Given the industry conditions, it just seems -- that's a harder target to achieve.

Yes, as I indicated in the -- when we discussed this previously, 1 or 2 calls ago, that as we look at those -- we're at the revenue targets, right? The -- what we were anticipating to come from economic recovery, we're going to be short. And we had -- just from pure economic recovery, we had $100 million in that number. Also, as you look at Refractories has actually had a setback from where we were tracking before. So we've lost ground on the Refractories business as we set that target. So revenue associated in there with economic recovery is -- will fall short. As we look to Asia growth, Asia growth in terms of the geographic expansion strategy and what we had anticipated or what we were targeting, is actually right on track. That is tracking very, very well. The FulFill is a little shallower than what we were targeting, but the potential for FulFill is actually -- has -- still has the potential. If you recall, we were targeting about $125 million in revenue, but it really is revenue and equivalent op income, so you're looking at an op income target of -- in the $10 million to $12 million range; $12 million to $15 million, actually, if you look at the 10% op income margin. So that's tracking well. Question marks right now are around our -- some of our, let's say, larger technology projects that we had built as part of those targets, such as filler fiber. We still have filler fiber. The probability of that actually getting into that timeframe is lower, but post-2015, that's still there. We're still active with the FulFill app. In terms of the other targets' margin, we're tracking to that 12% margin. I'd say we're right on. We're a little under this year, but relative to that target, we're there. ROC, we're also tracking very well from an ROC standpoint, particularly as you think about the cash that is in the denominator of the way we calculate it. We use, as you recall, the Bloomberg method, so cash is in our denominator. So we're tracking above that target right now when you look at the underlying return of the current business.

And there are no further questions at this time. Sir?

Are there any further questions?

[Operator Instructions] You do have a follow-up question from the line of Jeff Zekauskas with JPMorgan. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Did you purchase any shares in the quarter?

We did, Silke. We purchased $9.5 million worth of them. I'm sorry, that's 228,000 shares.

Year-to-date, we're about $11.5 million.

This year, that is, yes.

Yes, this year. Yes. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. And how much is left under your program?

About $35 million is left in the program. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. So that means we are probably done by the summer?

No comment. The authorizations -- Silke, just to give you the details. So we have $35 million remaining, and the authorization runs through beginning of October -- current authorization.

[Operator Instructions] Your next question comes from the line of Steve Schwartz from First Analysis.

This one just on refractory equipment. Isn't the first quarter typically a seasonally weak, so to speak, quarter for equipment, and is it only normally like $1 million or $2 million in revenue?

It is, Steve. It's seasonally weak, but I think what highlights this year is that it's weaker than last first quarter is what I was trying to mention. Usually, the fourth quarter is the strongest. And if you remember last quarter, we didn't see the sales in equipment. Usually, those orders will come in throughout the year and we'll build them throughout the year and commission the majority of them in the fourth quarter; that didn't happen. And we're still seeing that same level of low equipment orders through the first quarter of this year.

Would you describe 1Q '12 as a tough comp for equipment then, or was it more of a standard quarter that you were up against?

I think last quarter, that's probably a decent comp. There's nothing significant in the first quarter.

I mean, for that impact to operating income that you showed on the one slide, it almost makes it look like equipment sales were in the hundreds of thousands instead of $1 million or $2 million?

Correct.

[Operator Instructions] There no further questions at this time.

I'd like to thank everyone for your interest in Minerals Technologies, and that concludes today's call.

Thank you.

Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.