Good day, everyone, and welcome to the Third Quarter 2021 Minerals Technologies Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Erik Aldag, Head of Investor Relations for Minerals Technologies. Please go ahead, Mr. Aldag.

Thanks, Cody. Good morning, everyone, and welcome to our third quarter 2021 earnings conference call. Today's call will be led by Chairman and Chief Executive Officer, Doug Dietrich; and Chief Financial Officer, Matt Garth. Following Doug and Matt's prepared remarks, we'll open it up to questions. I'd like to remind you that beginning on Page 15 of our 2020 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, Erik. Good morning, everyone. I appreciate you joining today's call. I'll go through our third quarter results at a high level, including our sales performance and how we managed through a variety of challenging dynamics. I will then take some time to describe the progress we're making with our growth initiatives and our team's solid execution on several fronts. I'll then turn it over to Matt to discuss our financial results in more detail, and expectations for the fourth quarter, and then we'll open the call to questions. Let me start with a recap of the quarter. First and foremost, market demand has remained robust across all of our product lines and geographies. We delivered strong results marked by another record quarter of earnings per share of $1.30. Performance was achieved while managing through a challenging operating landscape and supply chain and inflationary pressures across our businesses. Sales for the quarter were $473 million, or 17% higher on an organic basis, and up 22%, including sales from the recent Normerica acquisition. We saw sales increases in every segment and across every geography. From our perspective on our organic growth, projects we've initiated, and I've discussed with you over the past year, contributed approximately 5% to our organic growth in the quarter. Said another way, about 5% of our growth was delivered from new projects and technologies initiated over the past year, 12% from market growth, and 5% from the acquisition of Normerica. The strength of our operating capabilities is reflected in how we successfully managed through the external conditions we faced this quarter, which enabled us to generate $63 million of operating income, a 23% increase over last year. Performance was achieved within the context of a myriad of external issues including rising costs, truck, rail and shipping logistics challenges, difficulties finding talented people to support expanding production, significant energy cost increases that became more pronounced during the quarter, and continued challenges presented from the COVID pandemic. Despite these issues, we kept our inventory and supply positions for key raw materials and commodities in good shape. We acted quickly to solidify our pricing leadership across our product portfolio, and to address the inflationary cost pressures that accelerated over the past few months. And we tightly controlled expenses and continued to drive productivity improvements. Not to be forgotten, we navigated everything while also seamlessly integrating Normerica into our company. Cash flow remains strong, and through the first nine months of the year, cash from operations is up 10% compared to 2020. We completed our share repurchase authorization last week and initiated a new one-year $75 million program. Strong cash flow and a solid balance sheet gives us the flexibility to continue to allocate capital to shareholders while also investing in attractive organic and inorganic growth opportunities. Overall, we had a very strong quarter in terms of financial and operational performance. Our execution speaks to the capabilities of our team. We did a great job operating the company safely and efficiently while remaining focused on delivering for our customers. Now let me take you through some of the year-to-date sales highlights, outline the contribution from our recent growth projects, and describe the initiatives that will further advance our sales trajectory. We discussed with you the initiatives we've executed over the last year, which have been key contributors to our growth in 2021. We've also advanced several new projects this quarter that will support further sales growth going forward. Very encouraged with our continued progress on our growth strategy, which is focused on geographic expansion, new product development, and acquisitions. Demand trends are favorable across our markets, with sales growth demonstrated in our businesses has been further bolstered by our new projects aimed toward higher growth markets, also from investments we've made to strengthen our portfolio of value-added products. Let me provide some perspective on what we've realized through the third quarter from these projects and then detail our new initiatives, new technologies, and recent acquisitions that will accelerate growth. I'll start with our Household & Personal Care & Specialty Product line where our broad portfolio of consumer-oriented businesses continues to perform very well, resulting in organic sales growth of 13% year-to-date, and 20% including the recent addition of Normerica. This growth is a result of our leading position in structurally growing and stable markets but has been enhanced through our investments in new products, capacity expansions, and by extending the geographical reach of each of these businesses. Our global pet care business is an example of this with its portfolio of premium products, new online sales channels, and broad global presence, which has led to above market growth rates, while also realizing significant sales increases in other consumer specialty applications, such as edible oil purification and personal care. These are businesses where we've made targeted investments to enhance our technology portfolio and expand our manufacturing capabilities to reach a broader customer base in Europe and Asia. The Global Metalcasting business remains on its consistent growth track, with sales up 30% year-to-date driven by strong demand from both North America and Asia foundries, serving a diverse customer base in automotive, heavy truck, and agricultural markets. Specifically, penetration of our blended products continues to expand in Asia as sales increased 30% compared to last year, with 29% growth in China alone. While much of our growth is driven by our penetration in China, we continue to demonstrate our value proposition in other countries with attractive long-term growth fundamentals. India, which is the second largest grey and ductile iron casting market globally, sales of our blended products are up 50% over 2020. The PCC business has been delivering strong performance this year. Sales are up 17% year-to-date as uncoated freesheet paper demand continues to improve in all regions. We have also benefited from the ramp-up of 200,000 tons of new capacity that we've brought online over the past year, which includes a 150,000 ton facility in China, and another 50,000 ton satellite in India. Production at our 40,000 ton expansion for a packaging application in Europe was also just commissioned in the third quarter. In perspective, sales realized from these latest satellites were responsible for 5% of the 17% PCC growth so far this year. Our fourth quarter PCC volumes are currently projected to be above where they were in 2019, more than absorbing the volume loss from our four paper machine shutdowns that occurred since then. Moving forward, we have several other new satellite projects under construction that set this business up for continued sales growth next year. In addition to the capacity that I just mentioned, another 40,000 ton satellite in India will startup this quarter. And we've begun building another 50,000 ton satellite in China, which should be operational in the first half of next year. We also just reached an agreement and expect to sign a contract over the next couple of weeks with a new customer in India for another 22,000 ton satellite. It will be our ninth satellite in India after entering the market with our PCC technology 10 years ago. In total, with the satellites just commissioned and ramping up, combined with these three new satellites, we see the 5% growth rate from new satellites continuing through next year. The pipeline of new satellite projects remains robust. We're expanding our addressable market opportunities with new products and technologies for the packaging market, which I'll describe in a moment. I'll finish up the year-to-date growth highlights with our Refractory segment. It's been a very impressive year for this segment with growth of 22% marked by steel utilization rates noticeably improving over last year. Growth also reflects this team's success in capturing new business. Over the past six months, we've secured seven contracts worth $100 million over the next five years, two of which were signed during the third quarter. We've been able to secure these new contracts in the electric arc furnace market through the deployment of our new portfolio of differentiated refractory products and high-performance laser measurement solutions, which reduced costs and improved furnace safety for our customers. I've discussed how we're investing in several new technologies, and I want to share with you how they're beginning to pay off. Specifically, a few areas where we've broadened our product offering to enter adjacent growing markets. I'll highlight two significant areas. First, our Paper PCC business has been developing new technologies, processes, and products to accelerate our growth beyond high-value filler for uncoated freesheet paper and into the adjacent packaging market. We've made significant progress over the past two years deploying PCC into white top liner board. More recently, we've been developing new products for other packaging applications, including Ground Calcium Carbonate for white carton board, and alternate mineral products for brown packaging. These are attractive in growing packaging markets, and we're developing a more comprehensive product portfolio to reach this broader customer base. Currently, we're working to finalize a long-term contract with a premier white carton board customer in China that would represent a significant step for us into this adjacent market. Also recently concluded customer trials with our alternative mineral products for brown packaging here in the U.S. with an expanding product portfolio and a pipeline of potential customers. We believe the packaging market represents a real avenue for new long-term growth. Give me a second. Another project in our technology pipeline that we're very encouraged with is FLUORO-SORB, which addresses PFAS contamination in groundwater. Last call, I shared with you details about our first major commercialization for a large scale project at a North American Department of Defence location. This project went well, and its success has helped to advance our other opportunities. In fact, we're currently working to secure several other large projects in the drinking water and soil stabilization markets. As this sector continues to develop and regulatory bodies focus on implementing changes, we're well-positioned to capture new opportunities with our patented technology. Finish up the discussion on our growth for the future I'll take you through how we strengthen our business through recent acquisitions. First, we completed the Normerica acquisition during the quarter, and the integration is progressing well. The team has been in place working on a variety of activities with our new colleagues to integrate all facets of the business and deploy our culture of safety and operational excellence. Everyone has done a tremendous job making this a seamless transition. We're still in the early stages with the knowledge we've gained over the past three months has only further validated our thesis when we acquired Normerica. We've identified significant opportunities in the North American cat litter market, where our broader portfolio of private label products and we see a clear pathway to drive higher growth rates and profits in our Pet Care business. In addition, yesterday, we acquired the Specialty PCC assets from Mississippi Lime Company. This bolt-on transaction helps expand our manufacturing reach into the Midwest United States and gives us a strategic logistics footprint at a key point along the Mississippi River. The strategy is to leverage our latest technologies, such as rheology modifiers, for sealant applications throughout our Specialty PCC plant system in the U.S. Let me leave you with a few takeaways. We continue to build MTI into a stronger company on all fronts, taking actions to balance our portfolio to generate higher, more sustainable growth. Sales mix has evolved over the past few years, with 30% of our revenue now coming from stable and growing consumer-oriented markets. The projects I described to you demonstrate how we're leveraging our newest technologies to drive growth in our current markets and enter attractive adjacent markets. They also underscore how we continue to drive penetration of our core product lines in growing geographies. Our recent acquisitions further supplement this momentum. And all taken together, we have meaningfully shifted our sales trajectory going forward. Specifically, for next year, we see our sales growth moving north of 10%. This sales trajectory, along with our strong operating capabilities, provides a powerful combination for significant long-term value generation. With that, let's turn it over to Matt to go through our quarter performance in more detail. Matt?

Thanks, Doug. I will review our third quarter results and performance of our segments as well as our outlook for the fourth quarter. And now let's review the third quarter results. Sales in the third quarter were 22% higher than the prior year and 4% higher sequentially. Organic growth for the company was 17% versus the prior year, and the acquisition of Normerica contributed the remainder of the growth in the quarter. Operating income excluding special items was $63.2 million, up 23% versus the prior year, and was relatively flat versus the second quarter. Operating margin was 13.4%. Worth noting that excluding Normerica, operating margin was 13.8% for the quarter. As we have stated previously, the Normerica acquisition will become income accretive beginning in the fourth quarter as integration activities progress. The year-over-year operating income bridge on the top right of this slide shows volume and mix contributed $14.9 million, driven by our strategic growth initiatives and the broad-based volume growth we've seen across our end markets. You can also see the significant inflationary costs we experienced, $18.4 million in the third quarter alone, driven by energy, freight, and raw materials, such as mine and packaging. To give you some perspective, we saw energy pricing go up by anywhere from 50% to 400% depending on the location and power source, the most dramatic increases in the UK and Europe. We offset $10.7 million of these inflationary costs with continued price increases, including contractual pass-through mechanisms in Paper PCC, and negotiated price actions in the rest of the business. The sequential bridge on the bottom right shows how inflation accelerated from the second quarter to the third quarter by $10 million, more than half the total year-over-year impact. However, this bridge also shows how quickly we acted to implement pricing, offsetting nearly 70% of the sequential increase. In fact, we've implemented a variety of pricing mechanisms in several of our businesses to recoup the higher costs that we had to absorb in the third quarter due to the rapid nature of the increases, particularly on energy. The price adjustments we are making in the fourth quarter will help us to fully catch up on the costs we have absorbed by the first quarter of 2022. Meanwhile, we continue to control overhead expenses with SG&A as a percent of sales at 10.6%, 150 basis points below the prior year, and 70 basis points lower sequentially. Earnings per share excluding special items was $1.30, the second consecutive record quarter for the company and represented 41% growth versus the prior year. And now let's review the segments in more detail starting with Performance Materials. Third quarter sales for Performance Materials were $250.4 million, 23% higher than the prior year, and 5% higher sequentially. The acquisition of Normerica contributed 10% growth versus the prior year, and organic sales contributed an additional 13%. Household Personal Care & Specialty product sales were 30% above the prior year, driven by Normerica and continued strong demand for consumer-oriented products. Sales were 19% higher sequentially, primarily driven by the acquisition. Metalcasting sales were 10% higher than the prior year, driven by stronger demand globally, and continued penetration of greensand bond technologies in Asia. The impact of lower automotive production has been limited on our sales as foundry customer demand has remained strong across a broad set of other industrial markets. Sales were 9% lower sequentially, primarily due to typical seasonal foundry maintenance outages. Environmental product sales grew 32% versus the prior year on improved demand for environmental lining systems, remediation, and wastewater treatment. Building materials sales grew 18% versus the prior year and 3% sequentially on higher levels of project activity. Operating income for the segment was $32.6 million, and operating margin was 13% of sales. Margin was temporarily impacted by unfavorable product mix, the timing of pricing actions relative to cost increases, as well as the incremental sales from Normerica. Operating margin excluding Normerica was 13.9%. We're in the early stages of the integration process with Normerica, and I am pleased to report that the back office and financial process integration is progressing well. Now looking to the fourth quarter, we see continued strong demand for Household and Personal Care. And we expect Metalcasting volumes to improve sequentially as foundry demand remains strong in both North America and Asia. I'd like to remind you that we typically experience higher mining and energy costs in the quarter months, and this could have a temporary impact on our margins. In addition, acceleration of input costs that we saw in the third quarter is resulting in a lag of inflation versus pricing that we expect to continue in the fourth quarter. As I mentioned, we have pricing actions in place to catch up on these increases in the first quarter of 2022. Overall, we expect operating income for this segment to be slightly lower sequentially, as higher operating costs have temporarily offset continued strength across our end markets. There are also some uncertainty with respect to power outages in China, which could also temporarily impact our volumes in the fourth quarter. And now let's move to Specialty Minerals. Specialty Minerals sales were $146.9 million in the third quarter, 17% higher than the prior year and 3% higher sequentially. The PCC sales grew 17% versus the prior year, and 3% sequentially on recovering Paper PCC demand and continued ramp-up with three new satellite plants and higher SPCC demand from automotive construction and consumer end markets. Processed Minerals sales grew 18% versus the prior year, and 2% sequentially on continued strength in residential construction and consumer end markets. Processed Minerals sales, as I just spoke about, did grow to 18%, and segment operating income was $18.4 million, and operating margin was 12.5% of sales. Margin was temporarily impacted by the timing of contractual and negotiated price increases relative to cost increases. This segment has seen the most acute impact from energy and raw material cost increases with inflationary cost increases of $9 million, partially offset by $5 million pricing in the third quarter alone. We have implemented price adjustments to cover these cost increases, and we should be caught up in the first quarter. And as we have demonstrated, we will continue to adjust pricing as necessary to keep pace with additional cost increases. Now moving to the fourth quarter, we expect modestly higher PCC volume sequentially. As the ramp-up of our new satellite in India is partially offset by the paper machine shutdown in Jackson, Alabama. We see continued strength in Specialty PCC and Processed Minerals, in what is typically a seasonally weaker period for our residential construction end markets. In addition, we'll have a timing lag as our price doesn't catch up to the cost increases we have absorbed. We see margins rebounding to more normal levels as pricing actions take hold. Overall for the segment, we expect fourth quarter operating income to be similar to the third quarter. And now let's turn to the review of the Refactories segment. Refactories segment sales were $75.9 million in the third quarter, 28% higher than the prior year and 2% higher sequentially. Demand remained strong for refractory and metallurgical products. We also had modestly higher laser measurement equipment sales in the quarter. However, we continue to experience delays in being able to perform on-site installations and maintenance in this product line. Segment operating income was $13.2 million, a quarterly record and 81% higher than the prior year and 13% higher sequentially. Operating margin was strong at 17.4% of sales and was also a record performance. Looking to the fourth quarter, we expect another strong performance from this segment. However, we expect slightly lower sales, and operating income to be down approximately $2 million. Now let's take a look at our cash flow and liquidity highlights. Cash flow from operations was $163.1 million year-to-date compared to $148.4 million in the prior year, up 10%. Capital expenditures were $63 million year-to-date versus $45.8 million in the prior year, as we continue to invest in high return projects. The company used a portion of free cash flow to repurchase $63 million of shares year-to-date, and the share repurchase authorization from the prior year was completed in October. The board of directors authorized a new $75 million one-year share repurchase program on October 20, 2021. As of the end of the third quarter, total liquidity was over $500 million, and our net leverage ratio was 2.2x EBITDA. Our balance sheet is in a very strong position which provides us with the flexibility we need to continue to invest in high-value, high return growth opportunities. We expect strong cash flow generation to continue in the fourth quarter, the free cash flow in the $150 million range for the full-year. Now let me summarize our outlook for the fourth quarter. Overall, we see robust end market demand across our segments with typical construction end market seasonality. We expect demand for our growing portfolio of consumer-oriented products to remain strong. Inflationary cost pressures have persisted into the fourth quarter, and we have pricing actions in place to mitigate these increases in the quarter and fully catch up by the first quarter of 2022. While still early in the integration process for Normerica, it's progressing well, and we will begin to realize accretion from this acquisition in the fourth quarter. And overall for the company, we expect another strong performance with the operating income around $60 million. As we have demonstrated throughout the year, we have navigated uncertainty and a number of obstacles to deliver a strong financial performance. And we expect to continue to execute well as we close out 2021. We have solid growth momentum across our segments, and with the growth initiatives outlined earlier in the call, we're set up well for a strong 2022. With that, let's turn to Q&A.

Thank you. We'll take our first question from Silke Kueck with JPMorgan.

Hi, good morning. How are you?

Good. Silke, how are you?

Good. A couple of questions. My first is I was wondering whether you can talk about what you have offshore/onshore - sorry, offshore and domestic splitters in Paper PCC at the end of the year. And how many tons you think you'd sell this year in total versus next year given the progression of the startup? That's my first question.

So your offshore/onshore volumes. That was -

What your split is like in tonnage terms, like and how much you sell onshore/offshore by the end of the year. And what are the total tons that you think you'll sell this year? And how many tons you think you'd sell next year?

So the split, if we look on a - in the quarter Silke it was about 30%. And when you say onshore, you're talking about North America.

Yes.

So the rest would have been international or offshore. When you look at it on a year-to-date basis, it would be the same. As Doug said, we're growing volumes and that that contributed to the 5% growth that you saw on Paper PCC. And that's coming from mostly international, so that makes us going to grow more internationally as we move forward.

Okay.

Does that answer?

It does. Typically like your tons and PCC are like somewhere on like the roughly making up 3 million tons. And so I was like wondering what you like targeting for the next year?

Yes, so as you saw, I mean you can see the volumes here in Q3 were about 700,000 tons. With that ramp up that's taking place and as we've told you before, we'll be closer to the 3 million ton mark here for the full-year. And then I don't know if you want to talk D.J. any further about anything that's taking place into 2022. But Doug outlined for you that you're going to see another 5% in Paper PCC into next year.

So good, it is D.J. And so just to augment that, Doug had mentioned the two satellites that are just coming online. So those are, one in Europe, we'll continue to grow that's in the packaging sector, and then another one in India, that we will continue to ramp up, China will continue to ramp up over time. And then those - that capacity is coming online is another 50,000 tons in China and then Doug mentioned, we get a very strong level of confidence that we'll also be growing India further with another 20 some thousand tons. So majority of that will be growing offshore. And then we did - we did mention that will there's a restart, that'll be happening in the U.S. at Domtar, which will be changing to paper excellence over time. But that restart is in the neighborhood of 30,000 tons. So still majority is going to be going offshore. I would tell you also that as I look at the business development pipeline, that is ahead of us I would say 70% of those opportunities are offshore opportunities. So that's the split that we're seeing.

Okay, that's helpful. Thank you. And then you mentioned that you've signed several contracts in - on the Refractory side. And I was wondering whether you could also quantify that what you think the contribution from those will be for like next year, or maybe it did has to be looked at over like a longer period of time. I was just wondering whether you can quantify that in any way. And then the second question was the Refractories businesses, I was wondering whether you affected in any way, purchasing dead burnt magnesia, like it's little hard to tell, what the supply/demand issues are and I was just like wondering how you're situated?

Sure, let me start and then I'll hand it over to Brett to give you more, Argirakis to give you more detail on the contracts. So the contracts that we've signed and I mentioned are about $100 million over the next five years. And they're pretty equally spaced; I think some of them will start to accrue to us early in the year. So if you can think about it Silke, this is kind of a $20 million per year over the next five year kind of pace. Business is about $300 million right now. So it's a significant kind of built-in growth right there. The contracts are in more toward the electric arc furnace, and they've been really promoting our new technologies. And so before I answer the MGO question, maybe Brett can do it. Let me pass it over and he will give you a little bit more detail on these contracts and kind of how we've approached them with these new technologies. Brett?

Yes, thanks. Thanks, Silke. The Refractory business, we continue to transform this business into a safer more high-tech company. We've focused our efforts in developing the automated refractory and wire injection equipment to be safer and move people away from really high temperature heat. As Doug mentioned, we did sign seven contracts this year, over $100 million over the next five years. The new equipment that we utilize has our laser technology tied to it. So we're able to measure the electric furnaces or steel ladles, the lining thickness, it feeds the information to our robotic ScanPro equipment and then it applies our refractory products to the appropriate areas. The application, the key to this is being able to do it remotely keeping the operators out of that way away from very high temperatures. Then in addition, the R&D team has done a great job in expanding our product portfolio. So we're now able to apply product in all areas of the furnace rather than specific areas prior to the new developments. And then really lastly is the continuation of our steel mills service group, our customers really have a lot of confidence in these guys. And they're able to support their refractory programs and maintain our equipment as these programs continue to develop. From an MGO standpoint, we are in a pretty good position, we've prepared ourselves. We buy MGO from both China and Turkey. So we've positioned ourselves well and really preparing ahead of schedule for the China Olympics. So we're in pretty good shape there.

That helps, Silke?

Yes.

Of course good start from our inventory positions. And I take that from certainly for the Refractories business, and how we've diversified our supply base, made sure that those inventories are in good shape to support the customers. But I'd say that also across the company, and other businesses.

Last I was wondering if you can talk about where that - where the pricing benefits were flowing for like and all this like $5 million in specially minerals. But I think overall, you got like $11 million, where did the rest of the pricing come in?

It's across the business, I'd say give you a quick example of the dynamics that's gone on this year. A typical year, take our Specialty Minerals business, two pieces, the Paper PCC and kind of the performance process minerals piece, on the Paper PCC side, scheduled price increases, right. So every six months, once a year prices move up and those are contractual. And that continues, and we have those protections in those contracts. So that'll be taken care of on its normal timing. On the Process Mineral side, you see once a year setting the pricing up, I will tell you this year, we changed our prices four times. We're on our fifth increase; we're using different mechanisms to make sure that we're covered. So it's been a very dynamic pricing year. And I think you're probably hearing about that a lot out there in the market. So the majority of that is that, the inflation that we talked about was coming into this business, a lot of that in the third quarter was energy acted very quickly to get our pricing and mechanisms in place to have all of that covered. There is about a month lag between some of that absorption and the pricing change just because it takes some time to move some things through. And that's why fully through the fourth quarter and into - it'll take a month into the first quarter have that covered. However, we expect pricing costs are going to continue to change. And so we'll continue to make those adjustments as necessary to make sure that we keep ourselves covered. So I'd say the majority of that pricing to your question is going into the SMI business. That's not to say that we have another 50% of it, or 40% of it is probably in the Process Mineral or in the Performance Materials segment.

Thank you. We'll take our next question from Daniel Moore with CJS Securities. Please go ahead.

Thank you. Good morning. Thanks for taking the questions. Doug, you got my ears burning in those prepared remarks, you said next year sales trajectory goes north of 10% and I was typing really fast. So is that across the board and walk us through that maybe by segment product end market kind of, where to see the biggest drivers there?

That's a number that we're looking for MTI in total. I think we'll give you more details on how that breaks down by segment as we go forward, Dan but at a high-level what's behind that is a couple of things. And I think in the beginning of my comments, I tried to break out for you the organic growth that's occurring today in this quarter, 5%, so we grew organically 17% this quarter. But if you take away the market aspects, right, that was 12% of our growth, 5% came alone from the organic projects, right so 5% new satellites, new technologies, the market positioning, and the growth in those geographies moving into these adjacencies, the growth of our consumer-oriented products, which is, I think it grew 13%, the consumer growth was 13% year-over-year. So you have a 30% of the company growing at that kind of 11%, 12%, 13% range, you've got the new satellites in the Paper PCC business growing at 5%. It's all told the ins and outs; we grew just in the third quarter organically without market 5%. You then take the Normerica acquisition, another 5%. And that says the market plains over next year; let's say it just stays flat. We think that 10% is delivered both organically and inorganically next year. And honestly, I think we can add to that with some projects that we might pull in between now and in the next six months, right. So we've got a level of confidence that says we can deliver that next year and then further out. My remarks were trying to show you the things that we're investing in and how we're positioning ourselves even as we plan over from Normerica next third quarter, the projects that we have in hand and the momentum we have in our businesses, we think we can keep that going. Now, I've always said this business can grow in mid-single-digits, if not higher, supplemented by acquisitions. And I think next year, you're going to see that thesis come up.

All right, very helpful. Normerica, I guess it should turn accretive by Q4. When does that accretive to operating income margins are neutral doing we kind of see that flipping given potential synergies?

So I will tell you that Normerica right now is not accretive, we showed you that charts in Performance Materials as it sits today, it's not accretive to those Performance Materials margins. That was part of where we saw value in the business being able to operate it differently, capture synergies through that business, and its combination in the vertical integration with our minds. And so it'll take a little bit of time, I think we said last quarter, we'll probably by the second, third quarter of next year, we feel we'll have that fully integrated. And then we feel those margins will be up there at that average if not maybe higher in total for the company. So it will be accretive. But it's not currently. And we need to make sure we move through methodically move through the continuous integration and capture those savings that we saw when we went into it. That's what I mentioned. I think it's not only our thesis, when we bought it is intact. But also that will come from leveraging that position that we have in the packaged calculator business. And we see those sales opportunities out there. So we're working on making sure we get the operation straight, safe, integrate employees, bring them into our culture. And then we think we've got a really nice platform to grow from. So we'll get there, Dan, it's not going to be in the next quarter or two though.

That's perfect. Shifting gears, obviously, you've done a really much better and remarkable job in terms of pricing in a very dynamic environment. That said, if we just focus on sort of logistics, transportation input costs, what's the cadence been over the past few months of direction of that inflation, supply chain challenges and logistics challenges? It's starting to plateau or ease a bit in certain areas. What can you say about that, do we need to continue to play catch-up, that's my question?

Yes and Dan, when you take a look, as we move from the second quarter to the third quarter, right, what we showed you on a quarter-over-quarter basis was about $10 million in inflationary factors moving higher. The biggest component of that delta change was the change in energy. So you had that repetitive move take place, logistics, raw materials, we've seen a steady uptrend in and what we talked about was the fact that that was going to continue into the fourth quarter. And so you're now looking at a fourth quarter that from a cost inflation perspective looks a lot like your third quarter. That being said, the pricing component we're narrowing on and the mechanisms that we have in place, we're catching up on, so that we have by the first quarter, as Doug said, we're moving to be net neutral against those inflationary costs. So you are seeing that take place raw materials have been about two-thirds of what we're going to see this year in terms of the higher costs. Energy is going to make up the largest component of the rest. So call it 60%, raw materials, 30% energy, and 10% logistics. With that logistics condition improving slightly, some of those raw material components improving slightly, but continuing, like I said, to have a fourth quarter that looks just on an inflationary cost year-over-year a lot like the third quarter.

Really helps, Matt. Metalcasting continue to grow despite the well documented auto and chip shortages, supply chain shortages. So, looking out to next year is that the expectation even if our kind of stays down, you see that opportunity to continue to grow at the levels that you described.

Yes, we do see that. I'll pass to Jon for more details, but the foundry markets we serve are not solely focused on automotive, which has become evident. While there has been some impact from the automotive sector on those foundry customers, this has been more than offset by growth in other regions and markets, such as agriculture and heavy equipment, outside of automotive. Those sectors have performed very well, and we expect to see continued growth in penetration rates. Additionally, as I mentioned earlier, we are beginning to see smaller markets we've been cultivating, like India, start to expand, and these growth rates are becoming significant. We believe this will further drive our growth. Jon, would you like to share what we're observing and hearing in the foundry marketplace as we look to next year?

Certainly. Hi, Dan. A couple things to point out. First of all, some of the companies that we serve, the foundries, who supply the auto industry, are relaying to us that the automakers are sending them signals that starting Q1, Q2, they're going to be producing in excess of what they had produced in 2019, so very strong positive outlook, starting in Q1 of next year. As Doug has said, we're pretty well diversified. We're positioned extremely well across the globe. We participate in the markets that have really good, strong casting growth rates. Think about North America, China, India, our penetration strategy continues to work extremely well. We're working with customers who are demanding qualities that are equivalent to Western technologies, especially in India and China. And as a result, they're looking for our high-value blended products. And so, that's one of the key initiatives and key drivers of our growth. Doug mentioned that we are positioning ourselves. We took advantage as a COVID downturn and also some of the outages with chips and the labor shortages that have occurred, but we're positioning ourselves with the new customers. So we're growing our share and our positions in each of these regions. We're introducing the technologies, the high-value technologies. We're supplying those new customers. And we're positioning ourselves, so that when the markets are fully functioning, we're going to be very well positioned for future growth and we will see that in 2022.

Super, lastly, real quick on the capital allocation side, the new share repurchase authorization given it's got kind of one year on it is the expectation that you would execute the full amount in that timeframe. And secondly, does that have any implication for the M&A pipeline or simply that your balance sheet and free cash flow gives you the flexibility to kind of pursue both avenues? Thanks, again.

I think you made a great point, Dan. Yes, we fully plan to execute within the same timeline as before. I also believe this highlights our flexibility, thanks to strong cash flow generation and the expectations for our balance sheet. We are able to return value to shareholders while also pursuing small acquisitions. Additionally, we are in a position to handle larger opportunities if they arise. Overall, this reflects the flexibility we have with our cash flow and balance sheet to manage both strategies effectively.

And as we look out, Dan, just to add one component to that. As you remember, we did have about $100 million that we took on a revolver for the acquisition of Normerica, begin paying that down in the fourth quarter and should have that over the next 12 months taken care of.

Thank you. We'll hear next from David Silver with CL King.

I appreciate the thoughtful questions. I'd like to focus on the broader context of the energy cost environment in which you operate. There was some insightful commentary regarding the foundry sector, but I'm particularly interested in the paper and steel industries, both of which are very energy-intensive. With crude oil prices on the rise and regional natural gas prices climbing sharply, there have been reports of production cutbacks. I'm curious about the potential impact on your PCC business and the steelmaking sector. Specifically, what do you see as the risks of elevated energy costs or energy availability issues, particularly in China or elsewhere, affecting your operating plans in the coming quarters? Thank you.

So, David, I think that in the coming quarters, we face risks related to the inflationary environment. I'll also try to address your longer-term question about the energy intensity of our operations, which is also influenced by inflation. This presents a different set of challenges for countries and industries over time. However, in the short term, we are experiencing a rapidly changing energy market. Here in the third quarter, the situation varies by geography. In North America, especially the West Coast, we've seen more of an electricity-driven increase in costs alongside fluctuations in natural gas pricing. In Europe, the situation is much more severe, with some areas experiencing an instantaneous 400% increase in natural gas prices during the third quarter. We are managing this volatility and ensuring that we secure our energy needs. The challenge is not just availability in our regions but the rapidly changing pricing. In China, the situation is somewhat different, with some curtailments observed in the third quarter, although we weren't significantly affected. Matt pointed out that there is uncertainty heading into the fourth quarter, potentially leading to more curtailments. However, we have noticed some relief in coal prices and electricity has been relatively stable. We've factored this into our fourth-quarter forecast, and our pricing mechanisms and inventory levels are positioned well. We are prepared in the short term and have strategies in place to adapt as energy costs fluctuate over the next year. Looking ahead, energy will remain a concern, and while we can discuss our transition from fossil fuels to greener sources, this is something we will tackle as we move towards sustainable energy. We are sourcing 40% of our electricity from green sources at our Wyoming facilities, and we are actively working to shift our operations from coal to natural gas and cleaner energy sources, with many of our purchases coming from greener options already. You can see our progress in our sustainability report, and I hope this clarifies both our short-term actions and long-term plans.

Yes, that is very helpful. I'd like to ask one more question regarding the M&A and balance sheet topics. You have recently completed a few transactions, including your largest acquisitions since Amcol in terms of purchase price. I was wondering if you could comment on a couple of points. First, Doug, how would you describe your M&A funnel or project pipeline now compared to a year or two ago after these two deals? Secondly, Matt, could you remind me about your interest in projects of various sizes, including larger ones? How high might the company be willing to go above today's 2.1 times net debt to trailing 12 month EBITDA for the right acquisition? Additionally, how crucial is it for you to maintain your current credit ratings if an unusually attractive larger target were to arise? Thank you.

Okay, let me start with the first question, David. Regarding the pipeline, I can quickly say that it has two fewer projects than it did a couple of months ago, but I’m just joking. We have a solid pipeline of projects that align with our growth strategies to support our global business. As you've noticed, we have opportunities to expand our consumer-oriented product lines. Although we've completed two projects from our pipeline recently, I believe there are other opportunities that have emerged and are becoming more actionable. We have kept a similar-sized pipeline of projects that we are interested in if they become actionable compared to earlier this year, around the same size. Within that pipeline, there are smaller projects that typically generate tens of millions of dollars in revenue, and there are larger projects in the hundreds of millions of dollars range. How far are we willing to go for the larger ones? I've mentioned before that it truly depends on the specific target. Over time, we've assessed how much we would be willing to engage with it. If the risks align with our understanding and company culture, the technologies we possess, and our comfort level with the markets, we find opportunities that integrate well with our company. We also consider potential synergies and evaluate them on both a pre and post-synergy basis to ensure they will add value to the company. We take considerable time in this evaluation process. How high are we willing to go? Well, with Amcol, we reached about 4.4 times. While I can't say there are any limits to this, that was on the higher end of the scale. I don't believe the items in our pipeline necessitate reaching that level, but if we find the right opportunity and feel confident about it, we are prepared to ensure we pay an appropriate amount for it.

Yes. David, as Doug mentioned and as we've demonstrated in our recent acquisitions, we are effectively managing small and medium bolt-on acquisitions using our available cash and revolving credit, which we pay down rapidly due to our strong free cash flow. This flexibility has been a consistent theme for us over the last couple of years. Doug also discussed our strong engagement with credit rating agencies, and I believe our ratings reflect our solid metrics. Their reports indicate that our portfolio has flexibility, which contributes to our current ratings. Some of the deal structures we consider are factored into these ratings.

I just say we're very, very disciplined with that capital. I think, there's not a lot that you see, sometimes they're not public, but I'd say we will walk away from. There's more than we've walked away from because we're just not willing to pay that. We don't see the value in it. So, we keep to our knitting. We make sure we look at things very robustly. And we're really disciplined about how we're going to put that capital out acquisition.

Thank you. We'll take our next question from Marisa Hernandez with Sidoti & Company.

So question on your commentary about implementing price increases during the fourth quarter that would allow you to catch up with cost inflation by the end of the year? What does that mean exactly? How do you think about it in terms of percentage margin? Where would you like to be at perhaps relative to prior quarter for the beginning of 2021?

I want to ensure I understand your question regarding the margin we are targeting. We will absorb costs in several instances, and there is a timing aspect related to when we can pass those costs through contractually. There is a delay when costs rise before we can increase pricing, and similarly, when costs decrease, there's a lag before we lower prices. This is particularly relevant in our paper business and some other contracts. Additionally, there's a practical limit to how quickly we can adjust prices for our customers. In our Specialty Minerals business, for instance, energy prices rose sharply in the third quarter, and we experienced about a month delay in adjusting prices. For example, costs from the third quarter were absorbed, and a price change was made on November 1st. By the end of January, we will have fully absorbed that tranche of costs. We are continually making adjustments in this dynamic environment, which is why we believe we are set up to capture these increases. Consequently, our margins are returning to historical averages as mentioned. We also aim to recover our margins as prices rise, ensuring protection on both an absolute and margin basis. However, it's important to note that there is a timing element to these changes.

And just Marisa, one clarification there. What we said not by the end of the year, but in the first quarter of 2022 is when we're going to see us catch up with the costs that we've absorbed so far this year in '21.

Got it. Okay, so you talk also about cost inflation persisting into the fourth quarter. Curious as to what the pace has been lately. Have you seen any slowdown or pickup of inflation in generally speaking, and specifically in some pockets?

When we entered the second quarter, we indicated that inflationary pressures were around $7 million, which increased to approximately $18 million year-over-year in the third quarter. I previously mentioned that the fourth quarter would show a similar trend, estimated to be between $17 million and $18 million. The sources of inflation began in the second and third quarters, initially affecting energy and now extending to raw materials. Logistics costs have remained consistent throughout this inflationary phase. On a full-year basis, the raw materials bucket has expanded, making up about 60% of our projected overall inflationary factors. Additionally, we noted that pricing strategies are also accelerating, and in the fourth quarter, we expect the gap to narrow significantly at the $17 million to $18 million level. We have pricing measures in place intended to help capture more of these costs. Looking ahead to the first quarter, we believe we can address the costs we’ve incurred so far this year.

That's very helpful. Thank you. And finally, on the sales growth for 2022, nor to 5%, 10%. Does that require additional acquisitions in 2022 or not necessarily?

No, not necessarily. So we think that that's with current acquisitions from the back half of this year, plus our growth rates and the projects that we have in hand that we're executing on and as they ramp up in the new technologies. That's how that number is derived.

Thank you. We'll now take our final question from Mike Harrison with Seaport Research Partners.

Hi, good morning. I was wondering if you could give some details around the Specialty PCC assets? What kind of revenue or EBITDA contribution would you expect to see? And I guess, maybe give a little bit more detail on what made those assets attractive to Minerals Technology?

Let me start, and then I'll put through to D.J., but look, this is a small bolt-on acquisition. We're not highlighting it, because it's significant in terms of our system of our platform of Specialty PCC production here in the United States. It helps us from a logistic standpoint, and at the moment, relatively underutilized asset that we're going to upgrade to put in some technology. So, we're not necessary disclosing the revenue size of it and what we paid for it. But it will, it's a small bolt-on acquisition. And D.J. do you want to give us a little more kind of what we're going to do with it?

Sure, Mike. So a good way of thinking about it is as if it's a PCC plant that we've been deploying. So that's a good way of just thinking about the level of revenue contribution that it would do.

$10 million.

In the neighborhood of $10 million. But what we're excited about the most is, is that capacity that it gives us to what Doug was referring to that allows us to work with our team that's in Adams, Massachusetts. With this asset now in Missouri, we can introduce the new products. We can seek some growth that we think we've got a unique access to versus the previous owner. And then we also feel that we can it gives us great flexibility to work with product mix and really better serve the market. So we're very excited about that opportunity. It's a nice augmentation to what we've built in Adams, Massachusetts, and it complements our position in both the construction and transportation markets, that's probably 75% or so of where those current tons go. And then a little bit of it goes into the publication grade. So there's a little bit of paper business that's in there, and some business that goes into Inc's. But we're excited mostly about the overlap in the construction and transportation.

So Mike, it's a small acquisition. We're not trying to exaggerate the modest revenue base of around $10 million. The focus is on what we will achieve with it in the future. Given its capacity, we plan to implement new technology and streamline operations. We will leverage this alongside our Adams facility, and we believe it has the potential for significant growth. More updates will follow as we integrate it. I want to welcome our new employees and will keep you informed about our progress over the coming year.

Understood. Appreciate the color there. And then wanted to ask about the packaging opportunity. You talked about that as being kind of a key technology for your PCC business. Maybe just take a step back and help us understand how PCC that goes into packaging applications, is different from PCC used as a filler in uncoated freesheet. And maybe help us understand that I guess for a similar size mill, is it the same amount of PCC in terms of volume per amount of paper? And what are the margins look like compared to a traditional PCC application?

Yes, I'll begin, and then D.J. can elaborate. This is not our PCC, but there is PCC used in packaging. PCC is utilized as a white top liner board. As we previously mentioned regarding some of our packaging applications, PCC serves as a high-end coating in certain packaging uses. However, these involve different mineral types, including ground calcium carbonate and others that go into white and brown boxes. We emphasize this today because we have been working on it for some time and have seen positive results. We are also engaged in advanced discussions in those packaging markets that align with our technologies. We appreciate the base paper market, but this opens opportunities in other growing markets that our technology can serve in the regions we currently operate. D.J. will provide more technical insights on how we've employed those pigments in packaging.

Sure. So Mike, let's start with the stuff that we're doing today. And then I'll walk you through this kind of a sequence chronologically of how you'll be seeing these technologies get exposed. Doug mentioned there is white top liner, think of that as pizza box. And there's new higher end stuff that's coming out that you'll see fully printed Amazon box for instance. The value equation for PCC there is that we provide a better coverage and a better sheet. So we're enabling this upgrade of that capability and upgrade of that product performance. And the margins and things that you should see from there typical with what you see with our current PCC plan. Doug talked about a penetration in white board basically. And it's hardened board that we've got. So what you'll recognize that in the marketplace on high end stuff, which is where our PCC goes, that's the high end would be stuff that you buy up a bottle of liquor in or you get a case of golf balls in. You go lower in that. And you've got things like ice cream board and those sorts of things. And, and what we've introduced and what we're commercializing and working on these contracts on in China is a GCC. Now, what we've done here is combined our capabilities that we have at Adams and Lucerne Valley where we're very familiar with the mineral GCC. Combined that with some new processing technology, and our operational excellence and satellite model. And so we'll be introducing satellite models in China. That is what we're doing there. And much like the PCC business, these are discrete investments, that will yield an appropriate return. Then the last thing that Doug had referred to is really towards the brown box. This is our first machine trial. We're very excited about it. It is not a carbonate-based technology, it's an alternate mineral. And first trials were good. We will probably have a better feeling for how quickly we can commercialize that in the first half of next year, it'll take this first trial. We're analyzing the data for, it was successful enough that we already have a second trial lined up. We'll get the full data and economic impact understood in that first quarter of next year. And we'll be able to give you some more insight on that, but really pleased with how that paper group has pursued the strategic objective.

Thank you. And that does conclude today's question-and-answer session. I'd like to turn the conference back over to management for any additional or closing remarks.

Thank you very much for attending the call today. I do appreciate you taking any extra time to stick with us and ask the questions. We'll get back to you in another three months. Thanks again.

Thank you. And that does conclude today's conference. Thank you for your participation. And you may now disconnect.