Ladies and gentlemen, welcome to the Koppers Holdings Inc. Fourth Quarter 2011 Earnings Conference Call on the 16th of February 2012. [Operator instructions] I will now hand the conference over to Mr. Michael Snyder. Please go ahead, sir.

Thanks, Carla [ph], and good morning everyone. Welcome to our fourth quarter conference call. My name is Mike Snyder and I'm the Director of Investor Relations for Koppers. At this time, each of you should have received a copy of our press release. If you haven’t, one is available on our website or you can call Rose Helenski at 412-227-2444 and we can either fax or e-mail you a copy. Before we get started, I’d like to remind all of you that certain comments made during this conference call may be characterized as forward-looking under the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be affected by certain risks and uncertainties, including risks described in the company’s filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included in the company’s comments, you should not regard the inclusion of such information as a representation that its objectives, plans and projected results will be achieved. The company’s actual results could differ materially from such forward-looking statements. I'm joined on this morning’s call by Walt Turner, President and CEO of Koppers and Leroy Ball our Chief Financial Officer. At this time I’d like to turn over the call to Walt Turner. Walt?

Thank you, Mike. And welcome, everyone to our 2011 fourth quarter conference call. I’d like to begin by reviewing 2011 in total before focusing specifically on the fourth quarter results. 2011 was a historic year for Koppers. In the year that we celebrated our fifth anniversary as a public company, we posted a record sales year of $1.5 billion which represented a 24% increase over 2010. As a result of that record sales year, we were able to report an adjusted EPS of $2.80 which represents a 21% improvement over our 2010 adjusted EPS of $2.32. When I look back at the challenges that we experienced last year, I am especially pleased with our achievements and earnings growth. In most regions of the world, we were faced with significant increases in coal tar cost that due to the nature of our contracts we were unable to immediately pass on to our customers. For the year, coal tar cost increased on average by approximately 9%. Price increases for our coal tar base products more than offset those increase in terms of dollars. However, we were not able to increase prices to the level that would have allowed us to maintain profit margin percentages. Our carbon black operations in Australia suffered during the fall of 2011 recording an operating loss of $2.6 million compared to an operating profit of $200,000 for 2010. As a strengthening of the Australian dollar made it increasingly difficult for us to compete in what had become primarily an export business. Coupled with an uncertain environment for the cost and supply of raw materials, we were forced to make the difficult decision to cease operations at the plant in December. In Europe, operating issues resulted in our naphthalene plant in Denmark being down for about 45 days beginning…

Thanks, Walt. Looking at the consolidated results, sales for the fourth quarter increased by 25% or $77 million to $385 million compared to the prior year quarter as volume increases in both carbon materials and chemicals and railroad utility products drove significant sales increases in both business units compared to the prior year. Fourth quarter adjusted EBITDA with $29.7 million or $3.1 million higher than 2010 fourth quarter adjusted EBITDA of $26.6 million. As mentioned earlier, fourth quarter EBITDA was negatively impacted by $2.9 million for the carbon black operating loss. And that has been played down [ph] as compared to the fourth quarter of 2010. We continue to see improvement in overall product demand. And as expected, we saw prices as well as volumes increase over the prior year quarter. Adjusted net income and adjusted earnings per share for the fourth quarter of 2011 were $8 million and $0.37 per share compared to $7.9 million and $0.38 per share for the fourth quarter of 2010. During the quarter, we had several items that affected our comparative results. Beginning with tax, our tax expense as the percent of pre-tax earnings for the fourth quarter was 45% compared to 34% in the September year-to-date period due to a non-favorable mix of U.S. and foreign earnings and certain industries tax adjustments. Since the required change in the annual effective tax rate was all pushed into the fourth quarter, the negative impact to adjusted EPS for the fourth quarter was approximately $0.07 per share. We incurred an operating loss of $1.5 million for the carbon black plant in the fourth quarter, which is $1.1 million more than the average loss for the first 3 quarters as operations continue to wind down. The estimated impact of the naphthalene plant outage in the fourth quarter…

Thanks, Leroy. During 2011, we saw volume improvements on our carbon materials and chemicals products around the world, driving sales and profitability to higher levels as demand and capacity utilization have increased. The major in-market for the carbon materials and chemicals segment is aluminum. Although pricing for aluminum has fallen during the year, and resulted in capacity reductions in certain regions, the price has rebounded somewhat, and recent projections indicate that global aluminum production will increase by 5% or about 2.3 million tons in 2012. Using a ratio of 1 ton of carbon pitch for every 10 tons of aluminum produced, this needs and additional 230,000 tons of carbon pitch will be required to meet this projected increase in production. According to recent projections, the Middle East expects primary aluminum production, to increase by 1.5 million tons by 2015. This growth includes expansion of the EMAL's smelter at Abu Dhabi, which is expected to increase capacity from 750,000 tons to 1.4 million tons starting in the fourth quarter of 2013. In the [indiscernible] modern facility in Saudi Arabia, which will have a capacity of 740,000 tons with the first metal being produced by the end of 2012. In addition to our carbon pitch products, we saw increased demand for our profitable downstream products, carbon black feedstock which is used in the production of carbon black for tires, and naphthalene used in the production of concrete and textiles. Phthalic anhydride product, continues to be a highly profitable product, and we believe the long term outlook is favorable, as it is tied closely to the U.S. automotive and housing industry. Current projections indicate that 2012 North American automobile production will increase by 860,000 units in 2012, with the U.S. light vehicle sales increasing to 13.6 million units. As mentioned earlier, orthoxylene prices…

Thank you, sir. [Operator instructions] Our first question comes from Saul Ludwig from Northcoast Research. Please go ahead with your question.

I’ve got 2 questions. The first, a simple one. With regard to your negotiations with either rail customers or chemical customers and part of those negotiations where we’re driving for adequate pricing to recover cost, was there any, you might say, pushback or any loss of share or any diminuation [ph] in your relationship with any of your customers? That’s sort of question 1. And question 2 is, you had your margin in the chemical business, the 8.4% in 2011. That 8.4% had a lot of different cross currents in it, you discussed some of them in the fourth quarter. I recall that in the first half of the year, you were, you sort of missed the price increased, you had the coal tar cost increases but didn’t have anywhere near appropriate recovery. And when you look at what your margins have been historically in this chemical sector, you go back 2, 3 years they were well over 10%, 9%. What should we be thinking about the margin sort of target if you will in the carbon material and chemical business in 2012 given that your comments about pricing were made, and you won’t have the plant costs, you shouldn’t have the carbon black loss?

Okay. So thanks for that long question. I’m sorry. I’ll try to remember everything you’ve mentioned there but starting off with negotiating a sales contracts. So as I mentioned, we did negotiate and complete several long-term contracts in both business segments. And yes, one of the priorities here was to make sure that we would negotiate pricing and pricing formulas going forward that would help us with our larger improvement initiatives. I think overall we’ve maintained our market share in both business segments. You might see one area where we did lose a little market share but increased the market share in another contract. So overall I’m pretty confident that we’ll maintain the market shares that we have had historically in both business segments going forward. In regard to the margins that you were talking about and in terms of materials and chemicals, as we mentioned over the last 2 calls, we do have some very strong plans to improve margins going forward. And it’s starting to work, and we’re seeing improvement every quarter. When you look at the current materials and chemicals business, you have to remember that there’s been a fairly strong paradigm shift, I’ll call it, in the aluminum industry. And we’re seeing increased production and, gosh, 2011 was a 10% increase in consumption of aluminum. I don’t recall the exact production but it was in that 8% to 10% range as well. In 2012, we’re looking at aluminum consumption at around 7% or 8% increasing over 2011. We’re also seeing aluminum production at least 5% maybe a tad higher. And as we’ll see in 2012 and we have seen over the last 2 years, an increased production is going to be primarily in the Middle East where we mentioned that there’s another 1.5 million tons of aluminum production coming on by 2015 as well as increased the production of aluminum in China. And as you recall, a lot of the production that we supply in the Middle East is coming out of China out of both joint ventures. And as you recall, we have lower margins coming out of those 2 locations. So with this paradigm shifting of aluminum and coming out of China and coming out of 2 joint ventures, you will see a lower margin as we go forward. So, it’s not really totally looking at margin improvement, per se, but we’re also looking at margin dollar increases as we go forward here.

Okay, that sounds great. And the tax rate for - you said 2 to 400 basis points lower, what would that get you to, Leroy?

That’d be 32% to 34%.

32% to 34% in 2012?

Yes.

Got you.

Our next question comes from Steve Schwartz from First Analysis Securities Corporation. Please go ahead with your question.

You’ve had some better quarters in China, and I’m wondering, is that solely because you’ve seen lower costs or is the competitive pricing situation also improving in Asia?

It’s really a combination of several things, Steve. I think first of all, as we’ve been telling you the last couple of calls, both of our operations are running at full capacity, in fact, maybe a tad above main plate capacity [ph]. Also, we’ve seen a little bit of a reduction in cost towards this last probably 6 months or so. And on top of that, I think pricing in general has improved primarily because of the carbon pitch demand continues to increase. And so, that puts us in a little bit better position as well as far as pricing of the product.

Okay. So, it sounds like perhaps the oversupply condition in that region has improved.

And I think it will, going forward, a we just mentioned about the Middle East growth in production.

Sure, sure. Okay. And then, let’s see, we’ve got a couple here. But, Walt, for my last one right now, on the railroad business, thank you for your granularity on kind of talking about the short line situation in your backlog. Tell me if this is right then, this perspective; assuming the short line tax credit is not renewed in 2012, it sounds like your railroad business would be flat. And with the tax credit, there could potentially be upside. Is that a correct perspective?

It’s difficult to comment going forward here, but I guess a couple of comments, Steve. First of all, if the tax credits are not extended in 2012, based on what we’re seeing currently, based on the backlog that I mentioned and based on the money that’s going to be spent by the Class I and then also based on additional ties using the borate creosote treatment, I would think it’s going to be maybe a tad higher than flat.

Okay. We finished the year, at least according to the RTA, with I believe a 12-month purchase rate of, like, 23 million ties. You noted that the insertions were about 20 million and are expected to be similar in 2012. Do you believe that there’s a build in inventory right now and that purchases themselves could dip below the level of insertions in ’12?

First, Steve, I have a difficulty with the 23 million number. I really don’t think it was quite that high, but, again, if that’s what RTA is commenting, I can’t argue with RTA. But I would think it was not quite that high. But I can tell you that 2011 was a very strong procurement year for Koppers. As I mentioned, procurement was up about 17%. In raw numbers, we were a little over 1 million ties higher in ’11 than we were at 10.And we continue to hold a pretty, pretty good position on the share that we’re procuring for the railroad industry out there. There was a little bit of inventory perhaps, but I can tell you that with the increased commercial business, 2012 is going to be a very aggressive procurement year as well.

Our next question comes from Laurence Alexander from Jeffries and Co.

Just a couple of questions. First, your comment on CM&C margins and how the focus is less in 2012 on margin improvement than on just profit improvement. Are you implying that you’ve - that there’s a chance that margins will be down this year or are you fairly comfortable margins will be up but it’s just hard to tell how much given all the moving parts?

I’m fairly confident the margins will go up. I think we’ve seen the improvement over the last 2 quarters and our goal is to continue that, as we have had dilution over the last 2 years, and so our focus is on that. It’s focused on managing our raw materials cost better; it’s focused on improving plant operation costs. It’s also on product pricing. We’ve had some good improvement on phthalic pricing - carbon black pricing, naphthalene’s been a little weak in the last, let’s say, 4 or 5 months. But overall, our focus is on getting margins to a point that we’d think it’s justifiable for this business.

And in terms of the new carbon pitch contracts, should we be thinking of this as a multi-year benefit that’s going to roll in slowly in 2012 or is most of the benefit going to be realized in 2012?

Well, I can say that - you know, we’ve made changes in our pricing formulas every chance we get. And I think that you’re going to see more semi-annual and quarterly pricing than you have in the past. And the multi-year contracts would include those. You know, as we go forward here and you continue to see the aluminum industry growing, it could use a 7% CAGR, if you will. Each year is going to continue to be a little tighter on raw materials, right? We’ve got the assets and the capabilities to expand our raw materials supplies, it’s going to be a little costlier, but there’s just going to be some pressure there. But to answer your question Laurence, the emissions are going forward as we’ve been talking about here to improve margins and really providing quality on-time pitch to the smelters.

And then lastly, could you give an update on your thoughts on allocation or capital particularly for pension funding and M&A away from your core businesses into the maintenance of way adjacency?

I’ll take the first - or the second question in regard to acquisitions and what have you. As you know, we did not make an acquisition in 2011 even though we’re working in many different areas and have some fairly good areas that we’re working on. I can tell you this announcement that we made this morning on SUNY [ph] in MOU with Nippon Steel Chemical is a very exciting project and we’re looking at a few others similar to that. So, we’ll continue to focus on M&A, continue to focus on -- in our capital spending which has been running around $32 million to $33 million a year. That will continue. But again, it’s really - I look at Koppers as being a procurement arm for the aluminum industry as well as the other markets that we’re involved in here. And as we see product demand increasing around the world, Koppers will be there working with our current and potential new customers. From the pension, Leroy.

Yes. Laurence, from a pension standpoint, we have acquired contributions this year of approximately $13 million. As we’ve communicated in our investor presentation we are evaluating -- well, let’s put it this way. With our goal to get to a full-refunded status by the end of 2015, that’s certainly going to require additional contributions. So, we’re evaluating at this point how much and the timing of those contributions over the next couple of years. So, we can’t -- I can’t say anything at this point because we haven’t made a decision but certainly, I would think that you would see higher contributions this year.

Your next question comes from Liam Burke from Janney Capital Markets.

Walt, you mentioned briefly about exporting to South America, how do you see that opportunity over time?

Well, it’s a little bit early to comment about the future but I can tell you the purchase order that we received from Vale in Brazil is I think a great opportunity to continue on a longer term basis. Typically, what they’re using in Brazil for example is a eucalyptus species type wood that some is treated, some is not treated, but the life which they’re getting from these eucalyptus species ties has a very short life compared to what we see here in North America. So obviously their interest is to increase that life by using hardwoods and with our large procurement arm in our 10 wood treating plants I guess we’re not denying that without Granada, but with our 9 wood treating plants here in the U.S., we have a great opportunity to supply continually into the long term. And it’s not just Vale, we’re talking to other railroads as well in South America. So there is a great prospect here for a longer term export market for our railroad products including others, the joint bars and other areas that we can be a strong partner with the South American operations.

Now, would you be able to service the growing demand out of North America or would it require actual distribution operations locally?

Where we - I mean we’re just focused on 2012 at the moment and obviously we have treating capacity in the procurement arm to do that with. Going forward, I think you’ll be seeing some other strategies that will be in place to continue on with that.

Our next question comes from Richard Johnson from RBC. Please go ahead with your question.

I have a broad question and it may have been covered during your discussion. But I understand and if your raw materials inputs go up and you can pass those through that your gross profit percent will go down, I understand that. When I look at the quarter-over-quarter of 2011 versus 2010, the gross profit percent went down, which I understand, but the gross profit dollars went down 30% from –- to 27-5 from 39-3. It’s probably a complex question. Are there a couple of major things and what level of gross profit percentage do you think you might come back to, but I’m really mostly asking about the 30% decline in the gross profit dollars quarter-over-quarter.

Let me address the margin issue first. Again, going back to things that we have publicly stated in terms of our goals and Walt has discussed a little bit about earlier in terms of initiative that we have to grow our EBITDA margins and there’s a good piece of that that will come to from growing the gross profit margins as well as keeping our operating expenses in check. Our goal over the next several years is to get a 200 basis point bump from our overall consolidated margins. We expect a good bid of that to be frontend loaded how it might be split between CM&C and R&UP, I’d say probably CM&C would be a little more than the 200 whereas R&UP would be on the lower end of it but with the combination of the 2 we’re shooting for that 200 basis points and the expectation would be that a lot of that would come within the first 2 years. So that’s the overall goals.

Our next question comes from Chris Shaw from Monness Crespi Hardt & Co.

First I just want to confirm, the Dutch plant outage that was just naphthalene and that was $800,000 impact? Did I hear that correctly?

Yes.

That -- there was -- none of the other parts of the plant were down on the pitch or anything like that?

No. We continued to distill coal tar. It was just the naphthalene unit that we found for about 40-some days.

Okay. And then, you might have also mentioned that the SG&A sort of spiked a bit sequentially from third quarter to fourth quarter. What was the reason for that?

The SG&A from the third quarter to the fourth quarter?

Yes, is that normal seasonality and like share-based compensation or something?

Let me go back to take a look at the items that I know. I know I outlined a bunch of them from a year-to-date standpoint. Certainly, we talked about previously our compensation and people costs are up. That I know for sure. Looking at some of the other items here, we had some -- we had some increased benefit cost during the quarter that would have contributed to that. We had some -- we had some costs again for our European consolidation project. So, probably the combination of those would have really contributed to the quarterly increase.

Okay. And then going back to the sort of the raw material and the pricing issue, are there any -- any talk about some contracts that -- new contracts down [ph]? But is there - does the year end or as we enter 2012, is that like a significant date when new pricing can come in or new contracts can be negotiated? I mean, should we see any meaningful step up in the first quarter for pricing?

Well really, I can’t really comment too much about that. But I can tell you that when we negotiate the longer term contracts which we had several going into 2012, that you usually do see an increase in pricing and sort of setting a new standard or a new margin, if you will, for that contract that occurs. But I think you will ultimately see that by the end of the first quarter.

Okay. And then on the China MOU - are you only going to be producing needle coke, does it sound like or are you not going to be doing any pitch as well?

No. This Memorandum of Understanding is primarily with Nippon Steel Chemical who would be building and operating a needle coke plant, and obviously needle coke would be supplied to the electrode industry. And they would also build a carbon black plant next door to the tar installation plant that we, along with a partner would build the distillation unit and supply the necessary pitch feedstock for the needle coke operation.

So, it’s all going to be pretty much self-contained?

Yes. It’s a very exciting project for us. And we’re obviously working on -- we have a lot of work to do here yet. But on the surface, I can tell you it’s one of the more exciting projects that I’ve seen for Koppers in China.

Our final follow up question is from Steve Schwartz again from First Analysis Securities Corporation. Please go ahead, sir.

Walt, if we could just go back to the -- to the new joint venture opportunity. I’m trying to understand what you guys will take from this plant. If you send off all the heavies to the needle coke operation and maybe it’s not all but it’s kind of what I’m asking. If you send off the heavies you don’t have much pitch left. And then it sounds like your creosotes slash carbon black feed goes to the carbon black plant, does that leave you really only with naphthalene? What -- can you kind of give us an idea of what you walk away with?

Sure, Steve. It’s -- well we still have a little bit of work to do here but I can assure you that we will have more than -- more products as we go forward from that operation. I mean, you’re right. The product that we would be selling for the needle coke application, you would have a naphthalene stream that would come off that which would be hard. And maybe a little bit of carbon light feedstock, per se. But we will be producing more than just the requirements for the needle coke plant. So it would be more product line than what we’re talking about just on the MOU.

Okay. So but if you’re distilling 250 KMT, you’re getting about 125 KMT in pitch just to use basic numbers, how much of the pitch do you actually get to sell? What doesn’t go to needle coke?

I really can’t comment on that just yet.

Okay. What kind of capital requirements for the facility? In the past, you’ve been able to offer your technological expertise. Will this be the first one that actually requires dollars?

No. This is - again, it’s a tad early but the total investment for the tar distillation fees -- we just built a plant 3 years ago, the TKK joint venture and we’re probably looking at somewhere around $55 million to $60 million in investment. And obviously, we’ve got a lot of interested parties there to assist us in looking at the borrowings and so forth. So, I really cannot comment yet how much cash we’ll put up front but it would be similar to what we’ve done in the past.

Okay. And Leroy, you confirmed for Chris the $800,000 impact, I think that’s to profit, but you guys were also in your prepared remarks using $2.9 million. Is that the revenue impact?

No. The $2.9 million included the carbon black.

Included the carbon black as well as naphthalene.

Yes, included the difference in the carbon black operating loss compared to the carbon black loss for the year. Are we talking about the full year number?

No. That sounds right then. So, you’d have $2.1 million - for the carbon black facility.

That’s right.

Okay. And for the carbon black facility, Leroy, you mentioned, it’s probably a draw down in working capital but for the first quarter of ’12 should we expect any kind of impact to margin or gross profit from this facility, a sell out of inventory or anything like that?

Yes. It will take maybe a quarter or 2 before this gets classified as discontinued operation. But we would expect maybe $0.5 million or so of impact probably over the first quarter or 2 but it will ultimately be classified as discontinued operation. It’s just a question of whether it would be in the first or second quarter.

Okay. And then with respect to this tie opportunity in Latin America, I recall seeing that Axion, the composite tie producer has opened a facility in the area. Did you have to compete against like composite ties and so forth to get this business? And how would you classify the profitability of this opportunity?

I’m sorry, I really can’t comment on whether we were competing with Axion or not but I do know that Vale and other railroads there in Brazil are looking at a very good quality wood tie which is -- is what we negotiated on. Again, I’ve not heard too much recently about this Axion tie but I think they’ve got a ways to go to really prove the credibility of the tie.

Okay. Would you rate the profitability of this Latin American above, at or below your typical where the tie business overall stands?

Well, I think we’re certainly have to be at or above or we wouldn’t provide that product.

Sure. Will you be borate-treating these ties going down there?

Not in the beginning but that could lead to something further down the road, Steve.

Because that could boost profitability, is that right?

It could. But at the moment it’s not -- does not include the borate.

Yes.

Thank you, Mr. Turner. This concludes the Q&A session. Please continue with any points you wish to raise.

Thank you, Carla [ph]. We thank you all for participating in today’s call. And I appreciate your continued interest in the company. We are optimistic that sales growth we enjoyed throughout 2011 will be sustained and will increase in 2012. Our acquisitions over the last several years have helped us capitalize on our growth -- global growth and demand for in-products and we will continue to pursue our strategy of expanding our presence in the key end markets in the geographic regions where we make and sell our core products. While we didn’t complete any acquisitions during 2011, be assured that this continues to be a strong focus for us in 2012. And we are hopeful that we will be able to successfully grow our business and profitability through the acquisitions as the year progresses. And finally, we remain firmly committed to enhancing shareholder value by executing our strategy and providing our customers with the highest quality product and services while continuing to focus on safety health and environmental initiatives that we have. Thank you.

Thank you. This does conclude the Koppers Holdings Inc. fourth quarter of 2011 earnings conference call. Thank you for your participation. You may now disconnect.