Good day, everyone. And welcome to the Fourth Quarter 2018 Minerals Technologies Earnings Call. Today’s call is being recorded. At this time, I would like to turn the call over to Cindi Buckwalter, Head of Investor Relations for Minerals Technologies. Please go ahead, Ms. Buckwalter.

Thank you, Paula. Good morning, everyone. And welcome to our fourth quarter 2018 earnings conference call. Today's call will be led by Chief Executive Officer, Doug Dietrich; and Chief Financial Officer, Matt Garth. Following Doug and Matt's prepared remarks, we will open it up to questions. I would like to remind you that beginning on Page 13 of our 2017 10-K, we list the various risk factors and conditions that may affect our future results. And I'll also point out the Safe Harbor disclaimer on this slide. Statements related to future performance by members of our team are subject to these limitations, cautionary remarks and conditions. Now, I'll turn the call over to Doug. Doug?

Thanks for the introduction Cindi, and good morning, everyone. Thanks for taking the time today to join us as I walk you through our results for the fourth quarter and the full-year of 2018, and give you my insights on the past year along with our key achievements, and then Matt will provide more details on our financial results and outlook for the first quarter of 2019. After that, I'll conclude with my perspective on 2019 and the most notable trends we're seeing across our businesses. To put 2018 in perspective what I’m most encouraged about is our team’s ability to advance our growth strategy and deliver strong financial and operating performance, while having to contend with a number of challenging conditions. Our performance this past year is a testament to our continuous improvement culture, and to the MTI employees who are the backbone of it. Alignment of our entire organization behind our culture, values and performance objectives has been instrumental in expanding MTI’s leadership position in many key markets, product lines and geographies. Now, let me take you through some of the highlights of the fourth quarter. We delivered earnings per share of $1.17, 6% increase compared to last year. We achieve 5% EPS for the full-year. Total sales for the quarter increased 4%, marking our sixth consecutive quarter of sales growth. [Technical Difficulty] provide more detail in my full-year remarks on what's driving our growth and our confidence in the trend continuing. Sales in the minerals businesses grew 3% in the fourth quarter, much of this driven by our performance materials segment, which grew sales by 6%. Despite the recent slowdown in the China automotive market, Metalcasting business drove higher volumes of greensand bonds across Asia and North America, resulting in a 6% sales growth. Household and personal…

Thanks, Doug, and hello everyone. I'll our review our fourth quarter and full-year results, the performance of our four segments and also provide you with our outlook for the first quarter. Fourth quarter sales grew 4% versus the prior year or 5% after adjusting for foreign exchange. Our sales growth was driven by higher pricing and higher volumes across several product lines as well as the acquisition of Sivomatic. Gross margin was 25.2% of sales versus 26.5% in the prior year, as we continued to face higher raw material, freight and energy costs. We’ll detail for you in a few minutes how we are strengthening our margins and advancing on recovering inflationary costs. In the fourth quarter, we reduced both the absolute and percentage SG&A year-over-year, including the addition of Sivomatic overhead. SG&A cost was 10.9% of sales in the quarter, a 100 basis-point reduction from the prior year. As the operating income bridge shows, profitable growth and the actions we have taken on price, productivity and expenses generated $13.5 million of business performance, which more than offset $12.3 million of cost increases in the fourth quarter. Overall, operating income increased 2% versus the prior year to $64.1 million. Earnings per share grew 6% to $1.17, driven by the solid operating performance, as well as a lower tax rate. Reported earnings per share were $1.22, the difference of $0.05 per share, primarily due to a onetime benefit from adjustments related to the U.S. tax law change. Let’s move to the full year. For the full year, sales grew 8% to $1.8 billion, driven by growth across all segments. Notably, Metalcasting sales grew 12% on higher volumes of greensand bonds in North America and continued penetration in Asia. HPC sales grew 47%, primarily due to the contribution of Sivomatic, higher pet…

Thanks. Matt. Before moving to Q&A, let me provide some high level themes on the year ahead. First and foremost, our team is energized, focused and prepared to build on the momentum from 2018. We continue to pursue our gross strategy, strengthen and deepen the value realized from our operating culture and execute on the opportunities we generated last year. Global economic backdrop that we faced in 2019 is different from what we experienced in 2018. From a macro perspective, we're seeing slowing growth rates in China as well as more modest growth rates in Europe. However, we still expect relatively positive markets in U.S. across most of our product lines. Within this backdrop, we're confident in our ability to advance a number of key growth drivers that I've discussed today. Paper PCC expansion strategy in Asia will continue to build momentum with the addition of 300,000 tons of capacity coming on line, driving volume growth later this year and into 2020. In addition, we have a robust pipeline of satellite targets and new technology opportunities globally and expect to secure additional Paper PCC contracts this year. In our Metalcasting business, we anticipate another solid year and expect overall volumes to continue to grow in China, primarily through strong penetration of our greensand bonds. We see significant opportunities to grow our global pet care platform with increased demand for our products and by leveraging the Sivomatic business to expand our market position. And we’ll be accelerating our new product development and commercialization efforts geared toward providing our customers higher value solutions to address the needs. There’ll be some cost inflation challenges in the year ahead, but as we demonstrated last year, our strong operating performance along with the necessary pricing actions and cost control measures, we'll drive continued margin improvement throughout the year. MTI is entering 2019 with strong alignment on all fronts. We're aligned on our strategy and objectives. We're focused on building MTI for the long-term, profitable growth, strong earnings and high returns for shareholders. We are a company to be counted on in all parts of the economic cycle for a strong operating culture, a solid balance sheet, and our ability to closely control costs. All of this gives us confidence that 2019 will be another year of profitable growth for MTI. With that, let’s open the call for questions.

Doug, Matt, good morning. Thanks for taking the questions. I want to start out, I guess, kind of the bridge between the two -- the Q1 guide and then, Doug, the more optimistic sort of outlook for the full-year as we look into ‘19, earnings growth has lagged top line growth for a few quarters that reversed here this quarter. But, it looks like you Q1 few challenges once again. So, you talked in general terms about continued to operating expansion in the coming year. What are the puts and takes that you see and what kind of range of sort of pretax or EBIT margin expansion do you think is reasonable to think about for fiscal ‘19?

Yes. I think to answer the first part of your question, Dan, first piece of it was -- look, we are seeing a little bit of a slower start to the year, got a couple of challenges just recently actually with some of the cold temperatures, freezing up some logistics and we're working through that right now. We expect that might be a little bit of a cost to us in the quarter. But, we did see some, right out of the gate in the first couple weeks of the year, some slower pull from some of the markets. We don't see that that's going to continue. Foreign exchange, Matt said that over the past several quarters that started to become a little bit more of a drag. So, we think it's a little bit slower start to the quarter and the guidance we gave, but what I'm trying to contrast there is we got a lot of things coming at us for the rest of the year. The pricing actions that we know will take hold. We're building, we have some expansions that came on line. We see some strong pull from customers in our newest products. Some of our new commercializations; there were new products commercialized late last year that we feel have some good traction moving into the year. Later this year, 300,000 tons of capacity in paper PCC is going to be coming on line. So, there's a number of kind of forward, upward momentum that we started last year that will continue to take hold through the year that we think will offset kind of a slower start and continue to drive those earnings. As far as margins, we think at a normalized rate, this company, certainly at 15%, can I tell you that that's going to happen this year. I think as we see costs continue to go up, Matt mentioned, contractually, we're going to lag a little bit that. We see they might play it over for the second half of the year and I think will catch up. I think as we get to kind of average pricing, those normalized margins will get back to 15%. So, do I see the end of our cost inflation? No, I haven't seen it yet. I think that's going to continue through the first half. But should that go over? I think, we start with our pricing actions, operating costs structure we'll get back to that kind of normalized rate of 15%.

Very helpful. The Port Hudson, with the expected -- the impact of the closure, can you give us a sense for both Q1 and full-year ‘19, either tons and/or revenue on a year-over-year basis?

Sure. I think last year that facility or the past couple of years has probably bounced between 70,000, 80,000 tons of PCC. What we know now is that that's going to start to ramp down this quarter, I think probably late February, March. That will impact the quarter, as Matt mentioned. We do though -- one of the things that's interesting about this is with operating rates -- this closure came with operating rates in North American in the low 90s, around 90%. Typically, we see a closure like that, as you've seen in the past, you see something when the operating rates dip below around 80%. So ,this one is a little different. And what we're feeling right now is some pull from customers PCC pull from other customers, and that gives us an indication that this paper is probably going to shift around. We're not exactly sure of that yet. We don't have any indication exactly where but we're getting some customer, higher customer pull from PCC and other facilities, which leads us to believe that probably some of this will be absorbed elsewhere and most likely where we have some facilities. I can't give you the full impact on the year. But that's the range it was in terms of total turns for last year.

Very helpful, understood. And then, maybe one more and I'll jump back in queue. In terms of just looking back to the quarter, basic materials, are we through now with the tough comps as far as chromite has concerns, did we have any revenue in Q1, Q2 of ‘18? And besides chromite, was there anything else that sort of contributed to the decline in Q4, maybe a little sharper than what was experienced over the last few quarters?

You characterized it the right way. We are done with both chromite impacting us on the revenue and on the operating income line within basic minerals. So, you won't see that going forward; in the quarter, it did have a little bit of drag as I spoke to you, but on a go forward basis, fully out. Beyond bulk chromite what you have in the other parts of performance materials, you do have some drilling fluids that go into the Permian basin for the energy markets. And you are starting to see with a little bit of a drilling slowdown and some of the rig counts coming down onshore that some of our business may be slowing a bit related to our drilling muds in the energy sector.

And moving on, we’ll go to Silke Kueck with JP Morgan.

I was wondering whether you can identify like what's the magnitude of the price increase was this quarter and how much freight pass-through contributed to sales? And also what the magnitude of like the Sivomatic acquisition was on sales this quarter?

When you step through the bridge on the 4% increase, you did have that FX headwind against us by about a 1%. Pure price pass-through related to freight and lime was about 1 percentage point. And then, you had other pricing that we were driving which was about another 2 percentage points. The remainder of that is really the net from lower bulk chromite sales and the addition of Sivomatic in the quarter.

Total Sivomatic sales for the year included in our results of $62 million on an -- that's only nine months, eight months it was. So, on an annualized rate, it's about 4% higher than what we had described when we purchased the Company back in April. So, that gives you a rate. That's how were saying Sivomatic is really performing well for us, that's still growing sales, and we've seen a strong performance out of it for the eight months that it has been part of the Company.

Secondly, what's your total PCC production capacity, like how many tons did you make in 2018?

Capacity or tons, we’re selling around 3 million tons I think in total for the year. Capacity, we generally run pretty high in that capacity. We’re probably -- 85%, 90% is typical. And we make sure that we have enough room, and there for [indiscernible] technologies when we deploy them, we have enough room for customer growth and expansions. And also some of that is just efficient to capital deployments, when we build the facility the other half of the carbonator, you’re putting it in. So, we run about 85% to 90% total capacity. I can’t give you exact capacity number, but that's around it.

And lastly, so, it was yet again like the SG&A costs were like managed very well, given all the headwinds and given the acquisitions. Do you think you have the right headcount, or do you think you may need more people to grow the business as you expand like bentonite offshore with foundry to Metalcasting in China and India and other opportunities?

Yes. I mean, the question you’re asking, do we have the right headcount. I think, we’ve not held back on headcount required to ensure that we’re efficiently growing sales, producing our products, innovating et cetera. That said, we are always looking for opportunities. And I don’t want to call it just in heads, just in discretionary expenses. We're always looking for ways to leverage our platform that we have in the Company through shared services and our resource units. We want to make sure that sales deployment as we grow that we are not -- we don't feel we need to incrementally grow that overhead fixed cost base. We put in a system to be able to leverage it and that's what we look to do. How that ends up in number of heads? No, we're always looking at opportunities and making sure that they have the right horsepower and people power to make sure we secure it. So, I can't really tell you whether we have the right or not, but we're -- in the context, we're open to making sure it's the right headcount for what we need to do and execute our strategy.

And the last question for Matt, if I may. Will you plan to continue your share program in 2019, just like goal what you want to accomplish in terms of what you want to return to shareholder, if you have a free cash flow target in mind for 2019?

Yes, Silke. So, if you recall, in 2018 free cash flow ended up being $128 million, but I'm going to go ahead and add back the discretionary pension contributions in my view. So, that gave us about $143 million and overall free cash flow. With that, I think we detailed for you -- look, we acquired Sivomatic, we paid down $80 million in debt, we returned about $29 million in shareholder value that included $22 million of share repurchases. Those were done on an opportunistic basis. And we'll very much keep the opportunistic stance going forward. Looking to 2019, we're targeting a higher level of free cash flow generation in that $150 million range, and we'll continue to manage that with a very sound, balanced approach, making sure that our balance sheet approaches our target level of 2 times net leverage against EBITDA as well as funding strong investment within the company organically, looking for inorganic opportunities and making opportunistic share purchases and returns to shareholders.

I think, Silke, just to add to that. We've always taken the approach that says internal MTI investments in growth are probably the number one focus of the Company. So, [Technical Difficulty] our cash to our organic opportunities around the world, if that makes sense, high returns and also to maintain our facilities. We balanced then -- keeping our balance sheet in the right spot. And as we see acquisition opportunities, kind of move up and move down, come forward or wane, we look to opportunistically steer that capital as they wane toward shareholders and share repurchases or the mechanisms we use. So, we're going to continue with that approach. We have -- we see as we meet regularly to talk about acquisition opportunities. I can't give you anything that -- where we are in those, but it's a healthy pipeline of things that we continue to look at. And as they move forward and they make sense for the Company, similar type of acquisition, like Sivomatic, we think that's -- strategically that's where we see a value to deploy cash. Outside of that, we can move it back to shareholders through share repurchases. I hope that helps you frame it up.

Yes. Thanks very much for your thoughts on that.

And next, we’ll go to Steve Schwartz with First Analysis.

Good morning, everyone. First question, just with respect to freight costs. I want to make sure I understand clearly when you talk about -- you mentioned in the prepared remarks higher rail, but I'm also wondering if the expansion in the growth you're seeing in Asia isn't also a part of higher freight costs or is that considered a completely different element within the discussion.

No. It's part of it, Steve. I think, the majority of our higher freight costs we've seen here in North America, partially Europe, we've seen a real tightness in being able to get trucks and rail freight increases just general across the board, and even specific types of trucks. So, we do use flatbed trucks here in North America, and those have been particularly tight in 2018. In China, freight costs were a piece of it, a little bit different kind of influence there. And that was a little bit of tightening of regulations in terms of weights on roads. And so, as we saw those regulations come through and lower loading levels of trucks, that required more trucks and that more expense and that had to be purchased or pushed through on a per ton basis. So, that same truck, fewer tons of the customer, and so it did increase our cost there, albeit a little bit smaller than what we saw in North America. But yes, we had to manage through that as well.

Okay. But it’s -- for the most part, those costs are regional. So, in other words, it's not -- you're not talking about higher freight costs, because the growth in the Asian business and pursuing that business is causing you to have to shift things farther at higher rates. There's nothing like that in this conversation. Correct?

We're largely -- correct. We're largely localized, meaning we supply customers produce -- source produce and supply customers largely within the same region. So, we do ship bentonite around the world, we ship other products around the world, but we highlighted on a call or two ago that those numbers are relatively small, less than 5% of kind of our sales. The majority is localized in region.

Okay, got it. And my second question just with respect to your gross growth in the paper PCC business, talk about the additional 300,000 tons coming on. Just wondering from a gross growth standpoint, how much is -- are programs like fulfill and new yield, adding to your growth as compared to the new facilities?

So, let me take it off, frame it and then I’ll let D.J. talk a little bit more specifically about some of these technologies and the filler contracts that we're building, our satellites for building. Filler tons, obviously hitting revenue, that's the volume. The revenue associated with those tons is different around the world. You'll see a lower per ton revenue sometimes in Asia region than you will in North America and Europe, and that's just because the input costs tend to be little bit lower, so lime cost in particular. So, on a revenue basis, we sometimes like to talk in tons because that ton generates the same EBITDA around the world. New yield is a kind of a per ton revenue. For Fill, we've always mentioned before, it's priced a little bit differently. It's more technology and technology fees. So, that it's not necessarily revenue; it kind of drops right to the bottom line. So, FulFill doesn't move the needle on revenue; it does move the needle in operating income. But, I’ll let D.J. talk to you about -- a little bit about what we're building and some of what's happening with NewYield and in Asia and other parts.

Yes. Thanks for the question, Steve. Couple of things. So, regarding the, just details on the 300,000, we've got the start up in China with the trending paper company now becoming online in the second half, coming towards the -- in the second quarter. So, half we’ll be ramping up the facility in Indonesia. Those two make up in their standard PCC, they make up the 300,000 tons. FulFill will be offered in both of those locations, but probably not part of the ramp-up. We usually get things stabilized before the next level of technology goes in. One of the other things that we had mentioned or alluded to during the third quarter call, was the discussion of expansions with folks. And so, we've also been able to get agreement on somewhere between 25,000 and 50,000 tons that we will be putting in India as expansions. And that's just part of us applying the latest technology in helping our customers growing their use of PCC. So, those will be coming on in the second half as well. With regard to the other technologies, like NewYield, and Doug had also mentioned ENVIROFIL in the past. Both of those right now just have -- are being deployed, one location each. But, I will tell you, as I look at the pipeline that's going on, and we've got about a dozen or so satellites in the pipeline, a couple of them are ENVIROFIL, a couple of them are you NewYield, and the majority are still standard PCC. Majority of that being in Asia, but we are seeing increased interest in these new technologies in South America, primarily Brazil and getting some pull in Europe as well. So, that's, that's kind of how the public pipeline is looking right now. Does that?

That's very helpful. Just to keep all of these different growth elements in perspective with each other. So, no, I appreciate that.

Steve, I will add to that a little bit as D.J. mentioned, certainly, we see that opportunity to grow the base filler level, but we are seeing a lot more interest in of interest in and it’s what’s heating our new product development pipeline in more environmental, sustainable recycling solutions. D.J. mentioned ENVIROFIL, that is the recycling solution, NewYield is a recycling solution, we've got other in our environmental products business, we talk a lot about environmental solutions like Fluoro-Sorb that's helping with wastewater clean-up. We've got some low mission demand for low mission greensand bond products. So, as of the casting process, the emissions are reduced. We see some of that pull from customer. I'd tell you a lot of the 35 products, and a lot of what's in the pipeline is geared toward helping those customers with these types of solutions and certainly leveraging our position on that paper mill. We’re there every day, 24x7 and helping them to expand where they have issues, they are facing issues water recycling and reducing fiber consumption with the higher PCC. So just to give you a flavor, that's not just in PCC, it's kind of across the company where we’re innovating in this way.

And moving on, we will go to Rosemarie Morbelli with G.Research.

I was wondering if you could talk about the revenues for the quarter, it was below my expectations. And I am just wondering how it stood against your own internal projections, whether you were positively surprised in some areas and negatively in others?

Rosemarie, as we went through the quarter, we generated 5% growth adjusting for foreign exchange that was very much consistent with I think how we were trying to look at the opportunities that laid against us and also consistent with what we were thinking about in terms of profitable growth over the course of the quarter on a year over year basis. Also, trend line where we were for most of the year in terms of overall growth. And I think it lays the groundwork and Doug will want to probably provide a little more detail, again around the actions and activities we were taken in 2018, capturing some of those this year, laying the groundwork for continued topline growth in 2019 as we look forward.

Rosemarie, I think I'll add to that. I don't think we were -- I think you’re saying, are we surprised by and is this something, is this a trend that's going to continue? What we're looking at right now, I think at the end of the year, sometimes it's a, Matt mentioned 5% and that's a little bit below our kind of full year average of 8%. But at the end of the year, sometimes what happens, especially in these markets, you do see some orders shift around. And I’m not exactly sure when that's going to happen. I think it happened a little bit in PCC in China. We had one individual customer kind of slow down the last two weeks of the year, but I will tell you that they're pulling strong as they get into the beginning of the year. That tells me there's a little bit of destocking going on. I think in the construction, sometimes an automotive builds. We did see a slowdown in Metalcasting in China, I think that contributed to some of it. But again, I think if you want to go into the full-year, and we're seeing a little bit of that persistent in here in January. But, what we think going into the full year with what we have in terms of big projects that we've put in place started last year that'll be coming on line, pricing actions, the new volume, the new products and certainly with the PCC that'll be coming on later half, we think that that growth trend continues. That said, we are seeing some softening markets. Do I think that 8% again is possible? Not sure. Right now, we think we can continue with our kind of mid single digits growth throughout the year. Might be a little bit lower than last year given where we are in China with some of the softness we're seeing in Europe. But right now, we're pretty confident we can continue our growth trend.

That is very helpful. Thank you. And then, looking at the Metalcasting, yes, auto has slowed down in China, but on the other hand you are working on substitution and gaining share versus the two parts, greensand or whatever it is called. I was wondering if you could talk about the success in substitution and whether you could grow faster than the overall market in that particular category.

Yes. Let me start and then I’ll let Jon Hastings take you through kind of the specifics. We mentioned that yes, we think we see continued growth in China. We've probably averaged 12% to 15% type of growth over the past three years; given the base demand, it'll probably be a little bit lower. China is still growing, it's just albeit slower in some of our casting products, and it's not all just automotive. But our penetration strategy has been a success and will continue to be this year offsetting some of that slower base volume growth. Jon, do you want to -- how we do that and how we put resources to it?

Sure. Rosemarie, I’ll echo a lot of the comments that Doug just made. Overall, the casting industry, you can look at it in a couple of different ways. Automotive certainly has been impacted by changes in the tax policy and the lending practices, but the remainder, industrial and heavy equipment seems to be a little bit more robust. You asked about our blended product strategy, that does continue to work. What we're seeing is consolidations in the foundry industry. We're also seeing new investments in highly automated casting lines that are producing castings that are equivalent to the quality that we see in North America. In order to do that, those customers require a high quality, high consistency products that we offer to our customers. As you know, we tailor our products specifically to the needs of each foundry. So, we continue to innovate with them. And those products continue to be in fairly high demand. So, as we get into 2019, although we don't expect the double-digit growth, we do continue to see the mid-single-digit growth as we continue to penetrate with the blending strategy.

And those blending products, I'll just add, Jon mentioned, but from the base clay to that kind of engineered solution, that's a different profit profile as well. And so, though sales may be a little bit lower than last year or lower than last year, I do see that that will help our margin expansion. That's one of the elements that continues to drive margins higher.

Thank you. And if I may ask one last question before getting back on queue. I was wondering if you could talk about the growth of the pet business excluding to Sivomatic.

Sure. Jon, do you want to take that one as well?

Yes. So, certainly, you know the Sivomatic story but in North America, we continue to grow as well. What we have found is that now that we have a premium position in both Europe and North America, we've got a lot of customers that are asking to expand business with us. The reason for that is multiple fold. Some of it is related to innovation. We continue to deploy new products like lightweight litters, but now we're expanding into other fragrance products as well. So while we continue to work pricing to offset costs as our customers are looking at us as a premier supplier in pet care, and we continue to have growth in North America.

So, I know that you are selling the pet care both under the private labels and under your own name, and I should know that. But what is the MTI name it is sold under?

Premium Choice. There's a wide variety; Premium Choice is one but again you can find those in many different ways. We can come back to you with a full list of what we do…

The MTI brand is called Premium Choice but because we're private label, you'll see to kind of our bentonite and packaging throughout a number of stores, Walmart, you also see through Tractor Supply and et cetera, et cetera. So, there's a number of outlets where you'll see private label brands. There's a good chance that we're probably the one supplying that bentonite and/or packaging it. But ours is Premium Choice. I hope you have a cat, you pick up that one.

Thank you. And no, I no longer have a cat.

Rosemarie, also, we should mention that we continue to grow that pet care business in Asia. In Asia, outside of Sivomatic, but Asia, especially in China, but also other countries, we continue to penetrate small base right now. But same value proposition continues to play over in Asia as well.

Okay. Thank you.

Thanks, Rosemarie.

At this time, I'd like to turn the call back to Ms. Buckwalter for any closing remarks.

Thank you, Paula. Thank you all for joining us today. We look forward to speaking with you again very soon, and hope you have a good day. Thank you.

And once again, that does conclude today's conference. We'd like to thank everyone for their participation. You may now disconnect.