Good day, ladies and gentlemen, and welcome to the Minerals Technology Fourth Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator instructions] As a reminder this call is being recorded. I would now like to introduce your host for today’s conference, Rick Honey, Vice President of Investor Relations.

Good morning. Welcome to our fourth quarter 2014 earnings conference call. Today, Chairman and Chief Executive Officer Joe Muscari will provide some insights into our fourth quarter 2014 and full-year performance as well as a brief update on the integration of the former AMCOL which MTI acquired in May 2014. He will then turn the call over to our Chief Financial Officer, Doug Dietrich, who will give you a detailed report of our financial results for the quarter. Before we begin, I need to remind you that on Page 8 of our 2013 10-K we list the various factors and conditions that may affect future results. Statements related to future performance by members of our management are subject to these cautionary remarks and conditions. Now I’ll turn the call over to Joe Muscari. Joe?

Thanks, Rick. Good morning everyone. We have a lot to cover with you today and that we’ll be reviewing both the quarters, performance highlights and overview of the year, further insights into the synergies that we are delivering due to the acquisition of AMCOL as well as what we’re seeing as we looking forward including the impact of the Energy Services business which I know is on the minds of many of you. This is the second full quarter of financial results that include the former AMCOL businesses. MTI earned $1.22 per share, a 100% increase over the fourth quarter of 2013 which clearly illustrates how accretive the acquisition is to the Minerals Technologies. For the full year, the newly acquired business contributed to our strong growth, which are earnings of $4 per share, a 65% increase over 2013. And during the year, each of the former AMCOL businesses improved profit margins significantly. And in the fourth quarter, all five business segments recorded double-digit operating margins. In addition, we grew the former AMCOL businesses 6% over the prior year. In March 2014 we provided a synergy target of $50 million in the first two to three years of ownership of the former AMCOL and up to $70 million within three to five years. I’d like to note that today we are approximately 15 months ahead of that $50-million target and tracking at a run rate of $44 million in the fourth quarter. Doug Dietrich will take you deeper into this later in the call. This performance has resulted in strong cash flows as we generated $120 million in cash flow from operations in the fourth quarter which has enabled us to accelerate our debt reduction and in turn $100 million debt payment in the second half. As you can see…

Thanks, Joe. Good morning everyone. Let me take you through our fourth quarter consolidated and business segment results. This is the second full-quarter results post acquisition for our five reporting segments, Specialty Minerals, Refractory’s, Performance Materials, Construction Technologies and Energy Services. I’ll highlight for you the key market and operational elements of our results in each of these segments. Fourth quarter earnings per share from continuing operations were very strong $1.22 excluding special items, a 100% increase from the $0.61 recorded last year. Earnings were higher than the $1.05 to $1.10 range we communicated on the third quarter. We achieved higher operating income in the Energy Services, Refractory’s and Performance Materials than we had expected. Reported earnings this quarter were $0.61 per share which included special charges of $0.61 related to the acquisition. I’ll provide some additional details on these special charges in a moment. Our sales for the quarter were $516 million, which is 101% higher than the fourth quarter of 2013. On a pro forma basis, foreign exchange had a negative impact on sales of about 2% or $11 million. Operating income excluding special items increased 139% to $74.1 million and represented 14.4% of sales. Each of the five business segments achieved double-digit operating margins again this period. EBITDA for the quarter was $102 million excluding special items, which represented 19.8% of sales. For the full year, our earnings were $4 per share, an increase of 65% over the $2.42 we recorded in 2013. Sequentially, consolidated sales decreased 5% from the third quarter, due largely to lower sales in both our Performance Minerals product line and the Construction Technologies segment. Of those businesses which primarily serve construction markets, entered their seasonally slow period in the fourth quarter. Cash flow for the quarter was $120 million, driven by the…

Thank you. [Operator Instructions] Our first question comes from Rosemarie Morbelli of Gabelli & Company. Your line is now open.

Thank you. Good morning and congratulations the great quarter and a great year.

Thank you, Rosemarie.

Looking, you said something to the effect, Joe, I believe it was you, that Energy would remain profitable. Are you expecting lower margin?

We’re expecting that what we’re going to do is what we’ve already, as I’ve indicated, started to do is reduce the breakeven point of the business. And as I indicated it’s something that Mike Johnson and his team began focusing on in May. They’ve been relatively aggressive and the reason for doing that was to better position the business for the future. And as we go into, as we started to go into 2015 and oil prices drop further, Mike and his team have put other actions into place that we expect to, if oil stays at the $50 we expect to stay profitable albeit at lower levels. As Doug indicated our profitability in the quarter is expected to be quite a bit less than the fourth quarter but still profitable. And we’re obviously making more significant adjustments in the more commodity-type parts of the business that I mentioned like coil tubing and nitrogen services.

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

Yes, I would give you two perspectives around that. One is that it’s obviously difficult to predict if oil is going to stay at $50. But our planning, planning that we’ve done assumes it will. And so we are currently adjusting ourselves to get down to the levels needed to be able to make money at that level. So if it stays at that level for the full year, based on the assumptions we’ve made about revenue drops in these various segments we expect to stay profitable. Conversely, if it gets worse, which is possible, we’re going to make the necessary adjustments again to keep the business profitable.

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

Sure. That’s a good question. I know that’s very topical right now. So, Doug Dietrich has got some perspective that he can share with you.

Sure. Rosemarie, so yes, we’ve seen, if you look on a first quarter-over-quarter basis, the most significant currencies we have are the euro, Japanese yen in terms of revenue and the British pound. I mean, if you look at - I mean, the euro first quarter over this year over last year is down almost 17%, 18%. But if you look at the mix of earnings that we have, we see probably about a 3% impact on sales. But we have perhaps a small percent on operating income and that’s largely due to, as I mentioned earlier, the MinTech [ph] business where we buy our magnesium oxide in dollars. For the most part, the rest of the businesses are naturally hedged so we operate in the regions where we sell but the MinTech [ph] does have some exposure that I mentioned in the call.

Okay. And then if I may ask one last question and then I’ll get back on queue. Looking at the chromite in metal casting, is it in metal casting, is it in basic materials, what is its current size and what do you expect from the Glencore agreement, I mean, a little more details in what you talked about already?

Yes, yes. Well, as I indicated, this is a long term adjustment to the strategy which prior was a backward integration strategy. But actually prior to that, the company AMCOL had and an arrangement or arrangements similar to what we are moving back into. And that will help us both on the cost side as well as the long-term supply side and actually will yield increased sales over time. And I’m going to let Gary Castagna give you a little more detail around that. Gary?

Right. Yes, Rosemarie, the chromite sand is more of a specialized application used in a lot of heavy industry-type of castings and Glencore has been a player through distributors in the past actually in that marketplace as well. But we looked at where we are in the market versus where the positioning going forward and really made a lot of sense to set a strategic position now from utilizing our expertise in the field and our global reach and combine really with where Glencore is in terms of manufacturing and knowhow in South Africa. And the synergies to the top line, well, time will tell in a competitive market as it is, but should certainly bode well for boosting both our presence in the existing markets as well as expanding to new geographies. So it’s a significant upside opportunity as much on the sales as it is on, as Joe said, the plans to ultimately restructure our operations in South Africa and ultimately get out of manufacturing ourselves.

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

Yes, in 2014, the top line was approximately $50 million, Rosemarie. The profitability was very modest. It was very low single digit profitability and margins. And if you follow the history, that’s really been one of the major points of it is that the capability there was limited on our manufacturing. The upside, we could see certainly line of sight once we hit the ground running here in the second half of the year an additional $15 million of upside in sales and probably profit margins in the range of 10% plus operating margins.

Okay. Thank you very much. And I’ll get back on queue.

Thank you. Our next question comes from Daniel Moore of CJS Securities. Your line is now open.

Good morning. And, Joe, as always, thank you for all the details, very helpful, particularly this quarter.

Okay, you’re welcome.

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

Yeah, actually there are some - I’d say some nearer to things [ph] that are happening right now with the customers, one of the pilot teams that I mentioned that we’ve put together in different areas are actually working on the pet litter area working on a new formulation with a major customer that came out of both companies working together and actually coming up with a product that’s different from what the customer has been using and really is giving them something that meets their current requirements and future requirements. We have similar initiatives going on in the other areas that I mentioned with more to come. We’re at the early stages of actually looking t market segments and accounts that we both are covering and beginning to work through and develop plans for potentially different approaches where we can better leverage the positions that we have there. So I say, as we go through 2015, you can expect to - we expect to see more beginning to come out of this but these are not short-term things that you think of one day and you turn around and do tomorrow. Typically, it requires working with customers to change formulation, do product trials where we evaluate the products and we are situated in customer’s products in many different ways. You have to go through a trial period. But I would tell you that the momentum right now is early but it’s very positive in terms of some of the creative things that are going on, the focus, and the focus that’s both on ways to solve customer problems but also that have good commercial values. So we’re working in putting those kinds of things together. Jon Hastings heads up this initiative for the company. He’s the head of our technology lead team. I’m going to ask him to give a little bit of color to this as well.

Sure, I appreciate it. A couple of points. We’ve used the pilots as a way to integrate the teams and also develop some new technologies. Certainly, we want to draw on the capabilities of both teams. Like Joe says, it’s too early to provide specifics of the pilots but as Joe highlighted the one in pet litter, in pet litter what we’re doing is we’re combining two minerals, both bentonite and carbonates and we see applications both in new lightweight cat litter products and also it allows us to open up some new geographic markets where we haven’t been able to penetrate before. The second one, it has been in at the east [ph] has been sealant and what we’re doing is we’re looking at a new sealant product technology that’s focused on the European market and it draws on both our fine particular and our surface coating capabilities, so really leveraging the capabilities of both businesses. And like I said we’ve got some other retreats focused for the year where we’ll bring in some other market segments and it helps us not only bolster our pipeline but also to further integrate the activities of our technology teams.

Great color. Thank you. And then, just maybe focusing a little bit on metal casting, obviously, it’s been a big focus in terms of opportunity. Beyond Q1 tell us maybe a little bit about what your expectations are for growth in that market as we look after the remainder of 2015.

Yes, I’m going to ask Gary, Gary Castagna to kind of cover that one. Gary, please?

Yes. That market is, and then the US really had a nice resurgence since the recession. Light-weight auto really is the primary driver for the demand in the US side of the market as well as construction-related areas. And we’ll definitely see in the US more of an evening out toward a GDP and/or where the lightweight vehicle market builds progress to. Internationally, which we’ve been, I’d say, the better part of the 20 years in earnest looking to expand our portfolio to principally China, Southeast Asia, Europe, principally the Middle East side and of the continent. Those areas are all in different emerging phases. China, we’ve been there 13 years and we see probably a high single digit still demand improvement over time in China despite the lower economic forecast now. And in Southeast Asia, a little bit less, probably more than 3% to 5% level. And then in Europe, we’ve really not had much of a presence. It’s probably still early to say where we can land over there but our operation is probably still in the low to single - mid single digit levels especially because we have a good base in Turkey. The ultimate big white space, if you will, for us is India. It’s the third largest metal casting market in the world. We have essentially no presence there at this point so we’re starting from near enough zero. But long term we want to see that really become where we are in China today which is the leading player in greensand. So in total today, international represents probably about 25% or so of the revenue in the metal casting business and aspiration really should see that to be 50% of the revenue over the next three or five years.

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

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

Well, I have a last one. PCC valves [ph] were down 11% North America as you said. How much of that was due to the closure in Courtland?

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

Got it. Thank you again.

Thank you. Our next question comes from Silke Kueck of JPMorgan. Your line is now open.

Good morning. How are you?

Hi, good morning, Silke. How are you?

Good. Is business condition state exactly the way they are today? Do you think that the first quarter would be the lowest quarter that you’d see for the Energy business or - and for Refractory’s business or if business conditions stayed exactly where they are today there would be quarters that could be worse than what you guided to the first quarter, particularly for Energy and Refractory’s that is?

Well, let me answer this way. I think in - let me start with energy services business. It’s hard to see out where - what could happen to energy prices, Silke. I think there could be further slowdown in our on-shore business in Energy Services past out into Q2 and Q3. It’s hard to tell at this point but we’re starting to see that slowdown. And things take time given the current price of oil. That’ll continue to slow through the second quarter. So in Energy Service, could be lower. I think in Refractory’s, I think we’ve seen some slowness in terms of steel production. I think that’s largely due, at least initially, to pricing due to imports. And I think there’s been some reaction to that in the marketplace. We have seen sales pick up after a slow start as I did mention. So I think in Refractory’s, it remains to be seen. I think we can improve upon the first quarter results in Refractory’s. I don’t see the instability as much there as I do in Energy Services. But I think if you look at in total for the company, we’ve got initiatives in place. The other three segments, I think there’s continued strength. We see that in both performance materials, paper PCC. We’re building four satellites in the [indiscernible] facility. Construction markets and auto markets continue to look pretty good in North America. Plus, we’ve got some initial cost savings targets and synergies. So I think for the company in total, the outlook for the year is pretty good.

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

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

$8 million? And so that’s sort of - go ahead.

Yes. That’s $8 million. And that’s adding to the synergies that we’ve been talking about. So we’ve got some initiatives in place and those will take place over this year so it’s - you’re not going to need all $8 million this year but that’s what we target on the annualized rate for the synergies and the actions taken with the charges.

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

We’ll have to see how we’d go through the year but we’re pretty positive right now that we’ve got initiatives to get us through the 70s, Silke, at a run rate basis.

Okay.

By the end of the year.

On the run rate basis. Okay. That’s helpful. Of the restructuring cost taken in 2014, how much of it was a cash charge and how much of it is left to be paid out in ‘15?

I would say - hold on. Getting some [indiscernible]. We have $4 million to $5 million of that. It’s probably going to be cash of the $31.4 million in total. So a small portion of it is cash and that’ll be paid out through his year.

Okay. And in terms of the 10% headcount reduction which is from my count it’s something like - I don’t know, maybe 400 maybe [ph] people. How many have left the company at the end of ‘14?

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

And do you think the remaining people have left by the end of ‘15 or earlier than that?

Well, it depends on - most likely but look, some of these consolidations are going to take throughout the year and they may end up into the fourth quarter so it really depends on how quickly we’re able to move through this year in some of those [indiscernible] consolidations.

Okay. And my last question is if you look at the - so you now looked at the [indiscernible] business for - if you looked at it before you’ve acquired them, so you have like knowledge of the businesses for maybe a year. And if you think about the businesses, what has like the biggest surprise, if there are any, like which businesses do you think have much bigger opportunities from what you initially expected and in which do you think - in which have done like a little worse than what you may have predicted?

Silke, given the fact that we had been off and on discussions with AMCOL over four years, we got to know the company fairly well. So there have been no major surprises. What has been occurring is we have been able to - I think because of the - a combination of things, we’re very well prepared, had good planning, and we had the direct involvement of the AMCOL business unit leadership in the integration as well as strong integration teams and team leadership. We were able to move faster than we have been targeting. And as we’ve been moving forward, we continue to see more things that just make us even more positive about it. Clearly, the acquisition, as you can see by the results, made a lot of sense. It’s accretive. We’re going to do well with it. We’re going to exceed our return targets. We’re going to exceed our earnings targets. But that’s not just near term. What we’re seeing is the potential that we saw before for growth in other parts of the world is there and there is potentially more than we were estimating before as Gary just walked you through where we are in castings positions around the world. India is wide open to us. China has additional growth potential. Southeast Asia does. So there’s a lot more - if we go deeper and deeper, the positives continue to be there. Yes, it’s not all rosy. It hasn’t been easy. But it’s working. And the businesses and the employees from the former AMCOL have been working very well as they’ve begun to learn what we do, how we do it, understanding the MTI business system. So a lot of things have come together nicely through a combination of leadership but also strong involvement and strong teamwork.

That’s very helpful. I was wondering whether I can ask. This is my last question after that [ph]. I was wondering whether you had a target for debt reduction in 2015.

We do. It’s as quickly as possible. So I’ll say that - I will say that the $100 million in the second half was ahead but ahead of what we had planned for going into - right around the close. And I think that’s driven largely because of the strong cash flows we’ve seen. We’ve made achievements, working capital reductions and the synergies of course. And so we’re going to continue to look to accelerate what we can through next year, so I’ll give you that. But we’re looking over the next couple of years, two years to get ourselves down to well below two times EBITDA.

Two times EBITDA. And you think the fourth quarter debt paid you think [ph] that’s a good run rate for other quarters in ‘15?

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

And that’s helpful. Thank you very much.

Thank you. Our next question comes from Al Kaschalk of Wedbush Securities. Your line is now open.

Good morning.

Hey, Al.

Afternoon I guess now. I wanted to focus, Joe, on - I think your comment was strategic review was completed on the business. And in particular, I was hoping you could give us maybe where we stand on the run rate on revenues for Construction Technologies and Energy Services? And in particular on Construction Technologies, I wanted to get a little deeper in there and hear sort of the plan to win in China given that this business historically has been European-centric and North American-centric.

Yes. Let me start with Energy Services. Because of what’s happening right now, it’s pretty hard to give you a forward run rate. We’re seeing about a 30% plus drop in revenue and that’s based on as we look at the quarter, as we look out if oil stays where it is, it could be 35%, it could be a little bit more. But we’re in that kind of a range based on what we’re seeing right now. The Construction Technologies - let me start with trying to answer your specific question then I want to turn it over to Patrick to share a little more about what he and his team have actually been doing in that business. But even though we’ve had a position in China, we have a facility there - and by the way, that facility is going to play into this longer term strategy that comes out of the consolidation. But the review basically surfaced the fact that the potential for doing more there is pretty significant and it is going to require doing a number of things differently. One is how we market, who we market to. That’s going to take a little bit of time. But we’re talking about the absolute largest environmental market in the world for environmental products. And we have only scratched the surface. We have a thimble’s full worth of business. And so we view that strategically as an enormous long-term opportunity, not an easy one, but one given that as a company, we’ve had strong positions. Just AMCOL alone has had a strong castings business. We have a strong paper PCC business. We know how to operate in China. The strategic change revolves around how we actually market our product, what we go after, how we go after it, and how we really leverage our global products more effectively in places like China. China is not the only place from a strategic standpoint that we’re making some changes. And that’s why we’ve been mentioning China but that’s not an overnight thing. That is going to take some additional development work to build on what we have there but also bring in and educate what our products can actually do for the China market. Patrick, let me turn it over to you.

Good morning, Al. The [indiscernible] business, as you’ve been following, starting back into ‘13 well into ‘14, Al, it’s really been able to focus on taking what we’ve done well in North America and really transfer that into Europe and, as Joe was saying, we’ll continue to do this in Asia. As you know, the building materials world, we’ve had a lot of large successes in ‘13, a few that we’ve mentioned down in this call in ‘14. We continue to see our success of just the overall products and services we offer that - pretty robust in North America. The newer technology that we’re producing out of our Poland plant that’s similar to the US technology, that allow us to sell the systems approach rather than just product sales. So a higher margin and also getting much more multinational investment money to come along with our systems. In Asia, China, we have not scratched that surface. We’ve got a very focused team, the people that you know and have met over the years, will be much more involved in that leadership. And also, places like China that have very high-value construction going on that bodes well for what we do in building materials providing that property owner that assurity [ph] that we believe we’re number one in the world and the growing business for non-oil and gas, we feel is recovering from a ‘14 miss and we’ve seen it here in North America already in the first part of January. So with that business globally, we have not really had the focus in Asia that we’ve had here in North America. So we’ll plan to advance those teams in both Europe and Asia to assist in that recovery of the drilling business, non-oil and gas, for ‘15. Third part is the environmental products where we’ve seen just advancements of technologies, the baseline GCO, the remediation technology, so including our organically based - really advanced to - here in North America. We’re seeing more work being identified through our specification systems than ever before. And also, we’re starting to launch those new technology in Europe and ultimately capture what Joe has spoke about, the ability to really take on unique challenges that are worldwide and really multinational customers that see us as an opportunity to service them in one region where specifications are being written in a different region. So the ability for our team globally to support the needs of these major applications with our technology. So it’s something we’ve been working on, Al, for a couple of years and we feel we’re really going to hit stride here in ‘15.

Thanks for the color. If I may try this way in terms of where we’re at on the business, obviously, this seasonal fourth quarter but it was a little bit weaker than what we had modeled. Are we on a spot in this business in Construction Technologies where the changes you’re taking that are underway and the contract wins, will start to ramp in ‘15? So in other words, it used to be a high churn business, in other words, a lot of new smaller contracts every year. And the seasonal level that we saw here in Q4 is a function of just the transition of some of these different strategies that you’re putting into place.

We still see it as seasonal. We as a company, as we advance into the - away from just being primarily a northern hemisphere company, Europe and the US, to build that strength in Asia and also in south America, we’ll transition away from that seasonality that you’ve experienced over the years. It will take the advancement of environmental products to do that globally but we have seen that already in our building materials. So we feel that seasonal slowdown will be, again, the weight of coming through ’15. But we’ll start to - when we get into ’16 further out, start to see that even out if we take our products more global.

Al, if I could just add a little bit to that, I think if you think about three things in the business that are different, okay, and they’ll continue to be different along these lines, one is rightsizing. So the breakeven point of this business has been reduced and it’s going to be reduced even further. That helps dampen seasonality. Just by the nature of getting the business down to what I call the right size for the markets and the regions that it operates in. Secondly, there’s been realignment of sales and sales distribution that are going to play a role in helping to bring more balance and leverage into the business. The third is going to be global marketing for the business where there’s going to be better - let’s say more effective or speed to market in terms of some of these differences we have - when as new products such as like this resist x product would be the best example of actually it’s got a game plan with his team to leverage what we have in this product much more quickly around different parts of the globe and do it in a very segmented and focused way. An example would be we have a good deal of success with the project of Saudi Arabia with AMCOL which was a red mud project. Now red mud is the number one waste product from Alumina Refining. And red mud is all over that wherever you find Alumina Refinery, you’re going to find red mud. It’s a universal environmental problem of the aluminum industry. So when I talk about targeted marketing, it’s going after those specific targets in a very disciplined way around the world - that’s leveraging - as opposed to let’s say more regional focus that was in the business before [indiscernible] in terms of what - okay. And so if you think of those three things, that’s what’s different in the business today.

Got it. That’s helpful. Finally, if I may, and I don’t want to come back and hammer on energy, but I want to understand your comments in light of the environment. But filtration and well testing are where are the service lines that you seem to be concentrating in and focused on and maybe that’s because of the nature of the customers of which those services are rendered. Does that imply that you have exited or will be exiting the five other - four or five other services lines that used to be there under the legacy business? This is a pretty solid, sizeable business and have a lot of CapEx efforts in it. And I’m just trying to appreciate giving the return thresholds that you’ve installed on the business. What does this mean for the service lines and energy services?

Yes. And what it really means, Al, is that lien capital will only go into filtration of well testing. But no new capital is going to be going into the other businesses. And it fundamentally says, filtration is going to managed for profitable growth; the other businesses are going to be managed for cash. And that’s the track we’ve basically been on now for a number of months. All of three of the commodity businesses have varying positions. We’re going to leverage those positions. Mike and his team, as I mentioned, have been getting the overheads down. So each one of them were focused on getting the breakeven point down to where we can make a profit at the revenue levels unless they eventually evolve to with this current oil price drop. And that’s what we’re going through right now. It’s a bit of a moving target. But we’re trying to get ahead of the target. So there is no immediate - there’s no plan to exit. The objective is to keep them profitable and improve the profitability over time, without new capital.

Thank you very much.

Thank you. Our next question comes from Eugene Faras [ph] of KeyBanc Capital. Your line is now open.

Thank you. Good afternoon, guys.

Hi. Hi, Eugene.

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

Eugene, so $15 million, there’s some actions that we’ve already taken in the fourth quarter that will increase that through 2015. As you mentioned, we’re going to continue to look at the segment and as we see revenue come through, especially on the onshore businesses, we’ll be prepared to take out - to further adjust our overheads accordingly. We have plans in place this year. We’re going to take out at least another $5 million in that business. But again, we may have some other cost savings that we’ll kind of accrete [ph] us through what we’ve done in the fourth quarter of 2014.

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

That’s a comment for the first quarter. Of course, if currency stays exactly where they were, so what we estimate the first quarter to be, that would probably be a comment for the year.

Got it. Thanks. And then just a last question on [indiscernible] business. Any developments there in the market since the last time you provided the update?

Yes. What we’ve been seeing is that there’s been - with the one year status we’re given, we’ve seen targeted customers that Novenda [ph] has been in discussions with that those have primarily pushed out fairly high percentage at something like 70% plus of the customers have extended themselves out to where Novenda is now targeting early 16 in terms of first, second quarters to begin to see contracts that they originally thought they were going to be getting in 2015. So there’s been a - what Novenda had seen is a general push-out and delay. There’s also a potential Supreme Court decision, I believe, that will be in June that is also causing companies to delay committing until they see what comes out of that. As an aside, we have actually increased our equity position a little bit over the last several months. So we still view this from an MTI standpoint as an opportunity for the future that warranted us increasing our position a little bit to better position ourselves. And as you know, we also are the main supply company to Novenda.

Go it. Thanks a lot.

Thank you. Our next question is a follow up from Rosemarie Morbelli of Gabelli & Company. Your line is now open.

Thank you. I have a few quick ones. On the paper side, in the U.S. and Europe, are you anticipating more paper mills on machine clothing?

Yes. Let me maybe just share with you or with everyone sort of the macro view we have and then how we approach both regions. Overall, we plan on a 2% a year decline in paper consumption in North America. Europe, actually has been tracking a little bit less. Now within that 2% a year, we have things that we’ve been doing such as fulfill incremental expansions that will add to dampen that 2%. But from year-to-year and in any one year, you can have it be more than the 2% as we discussed earlier in the call, where a plant like Courtman [ph] closes and it takes a hundred that hits us for 100,000 tons. Over time, though, we still expect it to stay - things to stay on the 2% level. Now in terms of specifics, we don’t see major impending right now, but I’m going to turn it over to D. J. Monagle who can share his thoughts with you on that.

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

Okay. And are we at the point, DJ, that the additional steady [ph] lines are enough to affect the decline in the production in the U.S. and Europe?

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

Let me just add onto that, Rosemarie. So we lost about 130,000 tons of capacity between Courtland and Docelles last year. But we gained with our new satellite in Asia, we have a small one in Europe and then the ramp-up of one in India, we pulled back all 50,000 tons of that. So we’re now about 80,000 tons net down. But we’re putting in, as DJ mentioned, about 350,000 tons of capacity into China this year. Again, it will ramp up throughout. So, yes, we do see more than compensating to what was lost to Europe and North America. But as DJ mentioned, that’ll start to come in late in the third, fourth quarter.

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

We’re seeing them better actually. Since probably about September of this year, they’ve improved. A couple of factors, one is we’ve mentioned I think on the last call that we held Kaizen events through all of our western facilities to improve the way we look at the railcars through our system, which has really improved availability and doing everything we can do to make sure that the railcars were available when needed at our western plants. There have been some improvements in the railroads in terms of making power units available to us. And we haven’t seen since September those additional freight costs that we saw - well, pretty significant, as you remember, in the second and third quarter of last year.

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

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

Okay. And just numbers, R&D for 2015 please, Doug, as well as D&A and interest expense expectation for the full year.

R&D is probably about 2% of sales, Rosemarie. It was about 1.9% in 2014. We look to continue at that level. Total annual interest which also includes deferred financing costs, about $45 million and - I’m sorry, $60 million sort of that was in 2014 - to continue about $54 million in 2015. D&A is about $103 million in total for the year.

Okay, thank you very much and congratulations again.

Thank you, Rosemarie.

Thank you. Our next question comes from Steve Schwartz of First Analysis. Your line is now opened.

Good afternoon, guys, and --

Hi, Steve.

-- thank you for being generous with your time here. Forgive me, my landline dropped me when you were responding to Al but if you’ve already answered this. In your basic materials business, you sell bentonite into drilling mods. And you loosely referenced that in today’s call. Have you not more specifically addressed it because it’s not big enough to worry about?

Well, that’s a very interesting question because we’re doing - one of the things is you’ll see drilling mods in actually all three businesses of the former AMCOL are involved in drilling mods in various ways, both the - and it has an effect on the income statements of those three businesses. Primarily, it’s been with CT, Construction Technologies, and Performance Materials. However, Energy Services also is involved in the selling of drilling products. What we’ve done, actually, is we formed a drilling products team in the company that came out of the strategic analysis that we did, which I didn’t get a chance to touch on in the remarks. But they basically suggest that we have a pretty good opportunity in the drilling products area but that we needed to bring more focus across the company’s businesses and have - increase the level of coordination and marketing that’s actually done for the product. So as we go forward with that, we’re going to be sharing more of that. But it is a business that within the company is significant enough to warrant a dedicated and focused effort. So because we believe that in spite of what the, let’s say, the downturn that may be occurring in that product segment today, over the longer term, it does offer us some pretty good growth potential.

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

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

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

Steve, normally, we try to because it is - type of businesses we’re in, I think it’s very hard to predict the whole year. But I did try to give everyone a sense. We are positive around the year on the net basis. We expect it to be a strong year. With even in the - as we’re projecting in the first quarter, when you seasonally adjust the count for - I know it’s a bit confusing with all the things we have going on in terms of between less days in the quarter, currency impact and other things that - because there’s a lot of moving parts. So when we - if you adjust all this, we’re continuing the positive momentum that we had in the third and fourth quarters, that those things are carrying over with the exception of a very specific hit to impact on the Energy Services business. And now we’re beginning to see some things in the Refractory’s business that we just started to see over the last week or so. But then even with those things, we still believe it’s going to be a positive year for us.

Yes, okay, very good. And then my last one, if I could. Doug, in your commentary you mentioned that some filtration jobs ran longer than expected in the quarter. Two things - can you disaggregate what that contribution was to the fourth quarter and it wasn’t quite clear to me if those jobs are still running, going into the first quarter.

Well, I can - if you look back to - first, the fourth quarter was our highest quarter. So over $13 million of operating income, higher than the second quarter which is one of the stronger quarters typically without hurricanes. So it did contribute probably a few million dollars in terms of well testing and those filtration jobs. One of the stronger areas, the well testing job did cease in the fourth quarter and that’s one of the things that’s not going to come through in the first quarter which is contributing to the $6 million to $7 million down that I mentioned. We do see filtration jobs really depend on how those platforms have continued to operate and come online. Some of them are very large and they’ve been operating - we’ve been operating on them for the past year plus. We do see some of those projects moving through the first quarter. But as we get into the second quarter, we’ll be moving on to newer ones and some of these ones will be coming off. So that’s why I’m giving you some color that says, given the onshore market and the filtration jobs, one of which might cease, depends on the platform, in the second quarter, we could see a softer second quarter than the first in Energy Services.

Okay, very good. Thank you and great presentation today.

Thank you.

Thank you. And at this time, I’m not showing any further questions. I’d like to turn the call back to management for closing comments.

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

Thank you.