Good morning ladies and gentlemen and thank you for standing by. Welcome to the Koppers First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note that this event is being recorded. I will now turn the conference over to Quynh McGuire. Please go ahead.

Thanks and good morning. I’m Quynh McGuire, Director of Investor Relations and Corporate Communications. Welcome to our first quarter 2018 earnings conference call. We issued our quarterly earnings press release earlier today. You may access this announcement via our website at www.koppers.com. As indicated in our earnings release this morning, we have also posted materials to the Investor Relations page of our website that will be referenced on today’s call. Consistent with our practice in prior quarterly conference calls, this is being broadcast live on our website and a recording of this call will be available on our site for replay through June 4, 2018. Before we get started, I would like to direct your attention to the forward-looking disclosure statement. Certain comments made during this conference call may be characterized as forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of assumptions, risks and uncertainties, including risks described in the cautionary statement including in our press release and 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, performance or achievements may differ materially from those expressed in or implied by such forward-looking statements. The Company assumes no obligation to update any forward-looking statements made during this call. References may also be made today to certain non-GAAP financial measures. The Company has provided with its press release, which is available on our website, reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. Joining me for our call today are, Leroy Ball, President and CEO of Koppers, and Mike Zugay, Chief Financial Officer. I’ll now turn the call over to Leroy.

Thank you, Quynh. Welcome everyone to our first quarter 2018 earnings call. As always, let’s begin with an update on Zero Harm, which continues to remain a top priority here at Koppers. This quarter as part of our efforts to ensure an ongoing focus on protective measures, we introduce the next training workshop called life saving rules. Life saving rules workshop to design to help mitigate our most high-risk activities while giving our people greater peace of mind about their safety on the job. To date 15 of our sites across the globe have completed the training with 11 more sessions scheduled for the second quarter of this year. Now, our people continue to show their active engagement and applying what they’ve learned from our continuing education efforts. And during the first quarter, employees conducted more than 3,800 leading activities such as observations and hazard identification help identify, and mitigate potentially dangerous exposures. As a result, I’m pleased to report thanks to the dedication of our employees, 23 of our 31 operating facilities worked accident free making our total recordable rate for the first quarter of 2018, the lowest has been in the last five years. So recently, we issued our 2017 corporate sustainability report highlighting the achievements that we made to protect our employees, the environment and the communities that we serve. While we printed sustainability summary brochures available upon request, I would encourage you to visit the sustainability section of our corporate website for our in-depth report, which highlights areas, where we have improved our safety and environmental performance. Overall, I’m pleased with the progress that we made to-date to strengthen our Zero Harm culture and we’ll continue to update you as we reach new milestones. Now, let’s talk about our March quarter financial performance. Our RUPS business…

Thanks, Leroy. Let’s begin by referring to the slide presentation that was provided on our website. On Slide 4, sales were $406 million for the quarter, which was an increase of $60 million or 17% from $346 million in the prior year quarter. Our CM&C business reported higher sales prices and volumes for carbon pitch, higher sales volumes for coal tar chemicals, and higher prices for carbon black feedstock and naphthalene. In Australia – in Australasia and Europe, higher sales prices for carbon pitch and carbon black feedstock were driven by reduced supply in those regions. PC had a slight sales increase; however, sales activity in the North American markets was delayed by severe winter weather in various regions throughout the U.S. The RUPS business again reported lower sales volumes of crossties and railroad bridge services. Moving on to Slide 5, adjusted EBTIDA was $66 million or 16% compared with $42 million or 12% in the prior year. This was due to higher profitability from our CM&C business partially offset by lower profitability in the PC and RUPS segments. For the quarter, CM&C’s performance continued to show a significant improvement over the prior year quarter benefiting from favorable market conditions as well as realizing permanent cost savings from the restructuring initiatives that we have undertaken. PC reported lower profitability due to a higher raw material costs and SG&A expenses. The results for RUPS were negatively affected by the continued demand weakness for treated crossties as well as deferred projects related to railroad bridge services Now, I’d like to discuss several items that are not referenced in our slide presentation. Adjusted net income was $26 million for the first quarter and compared with $15 million in the prior year. Adjustments to pretax income for current year – for the current year…

Thank you, Mike. Regarding the outlook for each of our business segment, let's start with our Railroad Utility Products and Services business. Legacy RUPS revenue will likely show a year-over-year while profitability will now likely be flat to slightly up taking into account a worse than expected first quarter driven by softer demanding constraints on untreated tie supply. Now according to the Association of American Railroads or AAR, the level business activity for the Class I railroads were at one time highly dependent on the oil and gas, and coal mining industries. However, there were currently more correlated to trade relations commodity prices and interest rates. At this time, the AAR believes the economic signal seems to be mostly positive overall. Rail traffic to the March quarter was largely positive particularly in terms of traffic segment that are most sensitive to the economic trends. The full March quarter totaled U.S. carload traffic was down 0.3% in the same period last year, meanwhile in remote units were up 5.5% from the prior year quarter. For the year-to-date period through March 31, 2018 combined U.S. traffic for carloads and intermodal units, is 2.6% higher than prior year. Overall, the demand for crossties is expected to be relatively flat to slightly up over prior year. in terms of raw material, we are seeing less available inventory of untreated crossties from the sawmills and lumber prices have increased dramatically due to a wet winter affecting production combined with higher demand from other industries in overseas markets. That production constraint will test our ability to meet demand although it will have a continued positive impact on commercial pricing, which has already moved up nicely over the past four to six months. Our two new acquisitions; M.A. Energy Resources or MAER, and Cox Industries, which has…

[Operator Instructions] Our first question comes from Laurence Alexander with Jefferies.

Hi guys. This is Dan on for Laurence. How are you?

Good, Dan. how are you?

Hey Dan.

Doing well. Just going through the EBITDA bridge for CM&C. So I guess what you're saying though is that you expect a pretty rapid deceleration for the rest of the year given the strength in the first quarter versus what you're expecting for 2018. I mean is that…

Sort of what we're not noting in is further upside in China through the remainder of the year. Although that could in fact occur. And we are also building in anticipated catch up increases in raw material costs, right because we've been outpacing that as the price has outpaced the pace of the raw material cost increases. So we’ve been out ahead of the curve from a pricing standpoint and that will be catching up as we continue to move out through the remainder of the year.

Will it be like a sequential thing where we’ll catch up slowly but surely by the end of the year is when it should be kind of…

That is correct, yes.

And then with the new segment, I mean so with the new – through the Cox acquisition that's going to be in segments right. I mean I think you said that but I would just make…

Well we actually did not say that right. So today we have a railroad and utility products. So it will run independently and the gentleman running that business will report into me. So it will run independently. As far as our reporting, today it will report into from a financial standpoint the railroad and utility products segment. We’ll continue to evaluate sort of how our segments get pulled together throughout this year. And any changes that we believe need to be made to comply with SEC requirements, we will certainly make. So it could be broken out as we go through that analysis moving forward. But right now it is a part of our existing railroad and utility products business segment.

And Dan just to follow-up on that any of those changes in segment reporting to the SEC will be effective of 1/1/2019.

Okay. Thank you that's helpful. And then last question and I think I know the earliest one, but – so the benefit what's happening in CM&C that has nothing to do with oil anymore. I mean that that's not really a factor in the profitability and Performance Chemicals segment as it has been in the past, correct?

Not any near the magnitude it has in the past.

But it's still somewhat of a tailwind then.

It does have some impact in certain markets, yes.

Okay, right thank you very much guys.

Okay.

The next question comes from Chris Shaw with Moness, Crespi.

Hey good morning everybody how are you doing?

Good.

Hi Chris.

I guess first question, I guess I wasn’t really completely following in the slide decks the outlooks for the individual segment’s EBITDA. They also have a measurement of I guess a negative measurement for most SG&A year-over-year.

Yes.

Did you just point that out is there an accounting treatment that’s different?

So we’re calling it out because it is a little higher, I think, than what it had been. We have due diligence and integration costs that are certainly mixed in there. A good bit of it maybe in the rough part of the segment but there's other general cost that we are incurring as we have been ramping up to be more acquisitive and that’s getting spread out across the business units. With the recent success, I think, in the probability of the business we also have some higher costs related to long-term incentives and things like that for the company. And so those are probably the things that make up the biggest component of that SG&A cost increase to get spread out across three business segments.

Impressive. In PC where you don’t have the acquisition there, that’s sort of a broader expansion of sort of corporate cost that sort of I guess an investment almost into sort of future growth.

Some of that is. Absolutely some of that is, some of it is some one time things or I shouldn’t say one time things, but certainly less recurring or higher maybe than usual in terms of costs that we don't expect to recur, this maybe a $1 million to a $1.5 million of those sorts of costs buried in the SG&A piece of PC. It's a mixture of cats and dogs I’d say. So some of the stuff we would expect there are more of a nonrecurring type nature but that's a smaller piece of it. There's other pieces that certainly are related to continuing to try and grow that business and adding to infrastructure.

Got it. And then the Chinese business the Needle Coke that’d been doing well. Given your sort of, I guess disagreement with the customer over pricing or contractual obligations, is there any chance for you to exit that business? Maybe you can sell to the customer, I mean if things are doing well they might be – they took it internally, they would be more happy with their costs. And you could get – I mean is that still a strategy for you to lower your exposure to that business in that region?

I think we remain open to that possibility without getting into any specific strategies. I think that is something that we remain open to. To provide the most value for our shareholders and so we continue look at that. The one thing I'll say about this because I want to be clear about it is the sort of the disagreement that we currently have, there's nothing reflected in our financial statements that would get clawed back through any resolution of this just everybody understands right. We don't have any – so we believe that we're not getting paid the right price for our product, that it should be higher. None of that is recognized in our financial statements. And if we can come to some positive financial resolution on that it could be a nice upside to the numbers. But none of that is built in.

Got it. And then on the MAER business so they reclaim ties and then they burn them. So I know if you could, someone add, could you give us little more detail on what they do?

They reclaim ties and then they move them into a market to basically be used as a fuel. So it is a logistics business that has relationships on the supply and demand side for the entry to cross-ties. And we like it because it certainly is a nice extension of our business serving the same customer base that we do. We think we know that that issue in terms of cross-tie disposal has been a growing issue for railroads and is a major supplier in that market and a major part of the railroad. We felt that we should be part of working on in helping to provide the solution to them, making things easier for them. And so this business it is we think the best in that market and we're happy to have them and look forward to trying to use that to continue to grow it across our existing network of customers.

Who is the typical customer there? Who they are selling those ties?

They sell, or they take our product primarily from a few of the class ones, but can take product basically from any railroad that is looking to dispose of cross ties in a sustainable fashion.

How they have been selling them to?

I apologize, I really don't want to get into that right now. I think again as we further define our strategy something the we would consider being maybe more open about, but right now I'd rather keep that to ourselves.

I mean, did I get burned like an industrial furnace, or is that kind of used, I don’t understand.

It’s actually multiple outlets that they use.

Okay. Alright, thank you.

You’re welcome.

Our last question comes from Liam Burke with FBR Capital Markets.

Thank you. Good morning Leroy. Good morning Mike.

Hi Liam.

Hi Liam.

Leroy, looks like stick me the consolidation will be almost complete some time next quarter or two. You’re adding capacity on KPC. Are you sized right both on the capacity front how you see your multiple end markets?

I think we are Liam so when we get through this year and basically get to early 2019 we should be fully operational in terms of supplying all of our intermediate raw materials for Performance Chemicals, which is big because we've had to go out and buy certain segment of that on the open market and pay higher prices for that too. So that will help to deflect some of the future cost increases that we expect to incur from copper. But will put us in pretty decent position from an overall standpoint. Now how much further can the market grow, how much more market share can we conceivably get. I’d say we could find ourselves still constrained going out a couple years if the markets continues to grow at a healthy rate and we don't do anything further from a capacity standpoint. We'd rather not get too far out in front of things because we've been in a very healthy environment now for awhile. So best to sort of see how things play out these aren't large dollar outlays that we've been doing in that. In that area it's couple of million dollars here, a couple million dollars there that have all collectively come together and added some nice capacity there. On the CM&C side we’ll be down to one facility here in the U.S., one in Europe. It is those two facilities that more or less supply in combined those two markets. We have more than enough capacity here in the U.S. if certain markets continue to rebound and strength to where we could if we have the raw material, the coal tar on material we could certainly do more. But I'd say overall yes we're in pretty decent shape, there is more than enough capacity for us to provide the Carbon materials and Chemicals business. PC again we will be at full capacity in terms of supplying our needs within the next year or so. And depending upon how the market grows, we might find ourselves a little underwater there out over the next couple of years, but nothing significant.

Great. And on the Cox acquisition you have a history in the utility pole business. Do you feel with the access to creosote that you have a competitive advantage now to Cox’s part of copper.

Look it's not just creosote it is CCA as well. So there's three main preservatives used in that market. You have the CCA which we produce in our performance chemicals business, you have creosote which we produce in our CM&C business and then you have pentachlorophenol which we do not supply, which we do not produce. And so certainly being able to produce two of the three which makes up a fairly significant part of the market, we think does provided some competitive advantage. Certainly we like that model as it relates to what we do on the railroad side. We think being able to provide again a full service solution from beginning to end and now even including disposal services as well in both those businesses, is a key differentiator between us and anybody else in those industries. So we like where we stand.

Great. Thank you Leroy.

You are welcome Liam.

This concludes our question-and-answer session. I'd like to turn the conference back over to the President and CEO, Leroy Ball for any closing remarks.

Thank you to everyone that took the time to participate on the call today. We do remain energized to deliver another great year of performance. And we thank you for your interest in our company and the support you provided. We continue to make positive change. Have a great day, everybody. Thank you.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.