Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers' first quarter 2019 earnings conference call. At this time, all participants are in listen-only mode. [Operator Instructions]. Following the presentation, instructions will be given for question-and-answer session. Please note that this event is being recorded. I would now like to turn the call over to Quynh McGuire. Please go ahead.

Thanks and good morning. I am Quynh McGuire, Director of Investor Relations and Corporate Communications. Welcome to our first quarter 2019 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 in today's call. Consistent with our practice in our 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 3, 2019. Before we get started, I would like to direct your attention to our 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, included in our press release and in our 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 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 today for our call are Leroy Ball, President and CEO of Koppers and Mike Zugay, Chief Financial Officer and Treasurer. I will now turn this call over to Leroy.

Thank you Quynh. Welcome everyone to our first quarter 2019 earnings call. I am pleased to report that for the March quarter we withstood several challenges and still posted results within the range of our expectations. From January through March, the Eastern and Southern U.S. experienced below-average temperatures overall and the resulting weather wreaked havoc on both our supply chain and our end markets. That made for a challenging beginning to the construction season and the incessantly wet weather has made it difficult to build untreated crosstie inventories while also having some impact on utility pole demand. In our railroad products and services business, a strong commercial crosstie market led to better pricing as well compensated for an ongoing lack of dry crossties to treat in order to meet Class I demand. Our performance chemicals segment saw slight softness in its industrial markets, a slower than expected start to the residential construction season and higher average raw material costs. However these factors were mitigated by certain pricing and market share gains, a further displacement of third-party raw material purchases with lower-cost intermediate raw material production and insurance recovery related to our New Zealand plant and operating and administrative cost savings. The hard work and dedication of our 2,200-plus employees across the world enabled us to overcome those issues and remain on track for our 2019 guidance. As expected, our profit mix is shifting back toward our wood preservative and treatment businesses which lines up with our long-term strategy. Let me spend a few minutes giving an update on Zero Harm. We capped off our best ever safety year in 2018 and have begun 2019 once again trending towards another improved year. In total, 37 out of 47 operating locations had zero recordable injuries in the first quarter. We are also…

Thanks Leroy. Let's begin by referring to the slide presentation that's provided on our website. On slide four, revenues were $435 million which was an increase of $29 million, or 7%, from the $406 million in the prior year. As Leroy already mentioned, this was a first quarter revenue record for our company. Excluding a negative impact from foreign currency of $11 million, sales were higher by approximately 10%. The increase was driven by acquisitions as well as growth in our wood treatment business segments. On slide five, adjusted EBITDA was $46 million or approximately 11%, compared with $66 million or 16% in the prior year. RUPS profitability increased considerably primarily due to improved demand in the legacy railroad businesses as well as contributions from recent acquisitions. PC had slightly higher sales, also improved cost efficiencies and an insurance reimbursement amount which, collectively, more than offset higher raw material prices. Financial results for CM&C were more reflective of the normalized earnings as compared with the prior year, which had benefited significantly from favorable market pricing for pitch products in China. Now I would like to discuss several items that are not referenced in our slide presentation. Adjusted net income was $13 million, compared to $26 million in the prior year. Adjusted earnings per share for the quarter was $0.62 per share, compared with the $1.18 per share also in the prior quarter. Both adjusted net income and adjusted earnings per share were lower due to the profitability decline in our CM&C China operations, which has achieved significantly higher earnings in the first quarter of 2018. Income tax expense for the first quarter was favorably affected because we recorded a net benefit upon the finalization of our IRS audits for the tax years of 2013, 2014 and 2015. Excluding this benefit,…

Thank you Mike. Regarding the outlook for each of our businesses, let's start with our railroad utility products and services segment. So in our legacy RUPS business, while 2019 started with a decrease in rail traffic in the first quarter, the industry is forecasting higher crosstie replacements compared with prior year and we are seeing demand levels tick up. The Association of American Railroads or AAR reported that total U.S. carload traffic for the first three months of 2019 was down 3.1%, from the same period last year with intermodal units, defined as container and trailers, down to a lesser degree at 0.6%. Total combined U.S. traffic for the first 13 weeks of 2019 was approximately 6.7 million carloads and intermodal units, a decrease of 1.8% compared to last year. The decline in rail traffic was likely due to a combination of extremely cold weather at the beginning of the year, then flooding in the Midwest region of the U.S. during the month of March. Also, as has been the case for the past several years, the number of heavy haul loads have continued to decline from historical levels, which means lighter weight loads are being transported yielding less wear on tracks and ties. Same time, Class I railroads are still focusing on the general concept of precision railroading, which translates to finding ways to reduce spending and improve asset utilization, operating ratios and cash flows. As a result, crosstie replacement activities remain relatively flat having reverted to below or near historic lows over recent years. According to the Railway Tie Association or RTA, the current industry forecast calls for replacements of a range of a little less than 22 million to nearly 23 million crossties in 2019, contingent on having an adequate supply of lumber. In 2018, tie replacements…

Thank you. [Operator Instructions]. The first question will come from Mike Harrison with Seaport Global Securities. Please go ahead.

Hi. Good morning.

Good morning Mike.

Good morning Mike.

I was wondering if we could maybe start with RUPS. Maybe give an update on what you are seeing in terms of your ability to procure additional untreated ties? Are you seeing that getting back to normal at this point? And what steps are you taking to improve procurement?

So a lot of what goes on in procurement is outside of our hands. There is a lot of it that's weather dependent. And with the pretty wet fall that we have had and again the winter weather conditions, it's made it difficult in getting foresters into basically get the product that we need. So it's been a struggle. While I would say, our untreated crosstie production volumes are up year-over-year and that was one of things that certainly helped us in the first quarter, there were less than what we are projecting them to be for this year. So we continue to obviously do everything we can to get as many ties in the door as we possibly can and we have seen some improvement as we have moved into the second quarter. So we are moving in the right direction. We are trending in the right direction. And the fact that we have been able to see the overall profitability improvement from our business despite the fact that the untreated crossties coming in, they were less than what we were expecting, gives me pretty strong confidence that if we see that trend continue in terms of production picking up, we are going to have a pretty good year this year.

All right. And then maybe an update on the potential for network optimization within the railroad and utility business. When could we expect to see some changes? And just curious, would it be maybe just some plant closures or consolidations? Or would there be asset sales that could come with that to help potentially reduce some of your debt?

All of the above. So there could be some full plant shutdowns. There could be some partial plant shutdowns and consolidation. There could be some asset sales that provides some proceeds back to go towards debt. So we have been working internally through what we think is an optimal configuration and there are certain preliminary decisions that have been made and we are going through activities to go through in implementation process. We are not a point yet where we are ready to announce that and certainly there are many employee considerations that go along with that as well. I would say, my expectation is that certainly, I would say in the second the third quarter timeframe is when we would probably see at least a few of the early decisions being probably announced and implementation beginning on those. But this is likely to be a multi-year processes as we begin a process and evaluate certain moves and how they are reflected within the markets and whether there are other move that can be made or not after the fact. So yes, that's where we stand right now.

All right. And then maybe a last question for now, just on the CMC business. You mentioned that the Q1 results were more normalized. If I annualized that EBITDA number, I get to $68 million. Just curious, how do we get from that $68 million annual rate in Q1 to the $80 million to $84 million that you are guiding to? I know there is a little bit of seasonal pickup, but I believe that the Stickney improvement or the better cost structure from Stickney should already be in Q1.

Yes, right. But there is seasonality in that business that basically prevents you from doing a one times four, especially for the first quarter for that business. We will see stronger results in the second and third quarter as we typically would expect in that business. So with where the first quarter again ended up, given everything that was going on in the various markets, that's what gives me pretty strong confidence that we can get to the $80 million to $84 million number that we have projected. So you can't take Q1 and multiply it by four. That doesn't work for that business. That doesn't work for any of our businesses.

Got it. All alright. I will turn it back. Thanks.

Okay. Thank you.

The next question comes from Roger Spitz with Bank of America. Please go ahead.

Thank you and good morning.

Good morning.

Good morning.

Yes. I understand you have some legal considerations on what you can say about the Chinese JV situation. But are there things you can say, like can you just review the raw material supply agreement even if you perhaps cannot talk about the disagreement at all?

No, unfortunately I can't. What I can say is, just the general framework of that whole business model over there is, we operate a plant where we supply a significant amount of the raw material supply to a customer under a very long term contract. And that's the model that was put in place. That was a model that was conceptualized that resulted in us building the plant. And there has been several sort of big market changes that occurred since the time we first signed our framework agreement back in the 2012, 2013 timeframe and today. And it's resulted in sort of differences of opinion along the way. But it's a businesses that we have designed to essentially produce a significant amount of product for a single customer with the balance of our products going out into the general open market. And so that's the overall sort of background on it. But if I could say more about it, I would, but I can't.

I understand you can't say more about that. But perhaps you can say something about, do you have alternatives on what you can do with that product, not with that customer?

Yes. So what we do there is not something that can only be taken by that one particular customer. If, as an example, that agreement was not in place, it's not like that plant is useless and we can't use it for anything else. It produces product that can go into other markets, other industries and things like that. So if that's sort of what you are getting at, then yes, that plant has other uses beyond sort of just serving that one particular customer, if there will be an ultimate breakdown and the long-term contract no longer existed.

Okay. Understood. And then getting onto the self production of the copper intermediates, say BCC, cuprous oxide. Can you give us, you said in your prepared remarks, you doing more yourself. Can you give us a sense of however you like to frame it, is what percent you are now self producing of those products and what percent you are now buying in, which I understand is mainly if not all from China?

Yes. So we now have our capacity additions in place and operating. We are going through startup, typical sort of startup issues, if you will, related to that. So we have been able to significantly increase our own production and we are getting ever closer to being 100%. In fact, in the second quarter, we absolutely will be 100% producing our own BCC. And from a cupric oxide standpoint, that's a little different situation and we are in quite as good a shape there. And I am not sure that we ever will be. But we are less concerned about that because that one is minimal. So it's a minimal cost differential for that particular intermediate. BCC the important one and that's why we have been really focused on that. And the good news is, the capacity in place today and as we continue to improve upon what's been put in place and get all the, if you will, initial bugs worked out, we will be at a 100% level here very, very shortly.

Is there a big merchant, global merchant market for BCC? I am a little bit surprised perhaps the high guys who are selling, perhaps Chinese wouldn't know set the price to dissuade you to further back integrated into BCC?

Well, I can tell you, there the cleanup quality is a big issue. That's certainly one of the things that we have noticed and experienced in terms of the stuff that we had to bring in that was not our product. It's an inferior quality product. It takes longer for us to get it through our process. So not only is it more expensive, but it also is less efficient in terms of how we are able to operate our facilities. So that's why we absolutely want it under our control, under our quality control and we get the cost benefits that come along with that as well as well with the downstream ones that go into the actual production of the finished products.

Got it. Thank you very much.

Yes. You are welcome.

The next question will be from Chris Howe with Barrington Research. Please go ahead.

Good morning everyone. This was a solid quarter.

Thanks Chris.

Thanks Chris.

And I wanted to focus on the PC segment. You had shared on this call and also previously the composition or the different components that lead you to this 5% to 8% unit volume growth, assuming a normalized environment, right. You are performing better than expectations as far as market share gains. Can you dig into that a little bit more? Where did you see the market share gains within this segment? Following up on that, how was the performance of the fire retardant product this past quarter? And how's that going this quarter? And how should we look at those two different components and their performance in the current quarter as well as we try to hit this unit volume target?

Sure. So from market share standpoint, we had a couple, actually three nice market wins, adding some very nice size customers that cut across a number of our different products. And we were basically, in the first quarter, is sort of in the conversion mode moving them over to our systems. So from a volume standpoint, we were not ramped up on all three in the first quarter in terms of getting normalized annualized volumes. But that's why I say you coming, as we talked a few months ago, we were still trying to close at least one of those deals and it wasn't a certainty. So we have gotten to the point now where we have been able to bring them home. We have one, we have actually two decent size international opportunities. So those are North America based. We have a couple of international opportunities that we are very close to closing. So we are close to 100% hit rate on the ones that we thought we could add to our portfolio this year. So that's been a great success. Now we have lost a little bit of business from a particular customer that we also happen to compete with in another market. But the net result is, we are much closer, we are tracking much closer to the upper end of the range of what we needed on the market share gains side of things. And as it relates to organic growth, like I said, it started out a little softer than we had hoped. So things starting to pick up, typically that's seasonal nature around this time of the year anyway. So we are still hopeful that things can move up little up. I will say, we will likely not see organic growth at the top end of the range that we were hoping for. We were hopeful to get to that bottom end. And again with where we are at on the market share growth, everything will be fine and we are getting some benefits on the cost side that are also helping to fill some of those gaps. Fire retardants. It's going very successful. We again hold a number two market share. Volumes are up. Well, volumes are up really significantly. We only had a very small amount of product going out in the early parts of last year as we were still commercializing the product. But it's been a great success so far. We have won several big accounts. And like I said, have moved into a strong number two share in a very short period of time. So we are very happy with how the fire retardant product is performing.

Great. That's very helpful. And my next question is, you mentioned the utility pole market, the 160 million of utility poles that are out there and expectation for two to three million replacements. If you haven't mentioned before, perhaps I am not recalling, if these replacements as they fluctuate up and down, let's say go to four to five million, I guess how do you quantify the available potential market opportunity that lies in front of Koppers?

Well, it's a good question. It's tough to get the arms around. It's a pretty desperate market. It's a much different market than sort of our crosstie market in terms of just hundreds and hundreds of customers. It's not concentrated like it on the tie side of things. So it makes it tougher to get your arms around those sorts of things. I would say, from our standpoint we are trying to really focus on getting our operations as efficient and as lean as possible. That will help to make us even more competitive as we go out and try and win more jobs. We service our customers. We take great pride in how we service our customers. And our storm recovery piece of our business is a critical important piece that as well. As these extreme weather-related events continue to occur, demonstrating performance in those times to this customer base helps to forge alliances that will, I think, continue to strengthen that business as we move forward and only give us more opportunities to grow our business grow and grow our market share. So that's what we are focused on and we are also focused on, obviously, additional opportunities if we can add to the utility pole business and continue to grow our share. That's the one area where we really have a significant opportunity as opposed to the other markets where we are already close to half or more of market share in most of the markets that we operate in.

Our next question comes from Laurence Alexander with Jefferies. Please go ahead.

Good morning. Could you help with a couple of things? First of all, can you talk about the CM&C business through the prism of sustainability and what kind of measures you think you can do there or what kind of pressures you see on that business longer term? Secondly, with the utility pole order patterns, are you seeing any or hearing from customers any structural changes in order patterns apart from the one that you mentioned about the wider roads which, I guess, is sort of a long-term trend? And I guess related to that, if utility pole replacement were to pick up, in terms of securing enough raw materials, is it a function of price or time for you to make sure you have the right, adequate raw material supply for that? Or does it become similar to the crosstie market in terms of having the lag effect to secure adequate inventory?

So let's go back to number one, CM&C. And I might ask to repeat this as we go through, Laurence. But CM&C, overall that business, the pressures that that business deals with obviously are mostly on the raw material side, right as it relates to coal tar that comes from the blast furnace steel production and which we know has been trending down for a number of years. There is still more than enough coal tar supply to essentially fill the market for the products that we are producing for the end markets and we think it will continue to be the case for some time moving forward. However, we are cognizant of the fact that has been a trend that's been going on for years and actually we are intently focused on how we can without getting into really any specifics again for competitive reasons, we are looking at how we can, if you will, help that situation so that if it does continue to trend down in that direction that we are at a point where we can continue to serve the industry at the levels that we have been able to in the past. So there is some interesting stuff going on there. And within the next couple of years, we hope to be able to handle that. So overall and then beside, I mean, from a sustainability standpoint, we were focused on trying to make sure that we continue to invest in our operations so that environmentally we don't run into any issues with them as regulations continue to get more stringent and w will continue. So what we did in Stickney is a perfect example of that with the new naphthalene unit. And so we will continue to focus on our efforts in terms of reinvesting into our facilities. That won't not stop. Our Nyborg facility in Denmark is in great shape. Our KJCC facility in China is basically brand new. And our Mayfield facility is in pretty decent shape as well. We have got a new naphthalene unit at Stickney. We probably have some work to do in terms of the tar plants and stuff like that. But overall, we are in pretty good shape from the CM&C standpoint. So we feel like we are prime to be able to supply the industry for many years to come and we continue to focus on the supply side of things, knowing that that's a trend that continues to move in the wrong direction from a long term standpoint. So does that help address your first question?

Yes.

Okay. So your second question?

Is just in terms of any structural shift in the utility order patterns?

So from a utility standpoint, I would say that overall that what we are hearing and seeing is the utilities are actually requiring larger poles, which we believe is actually procurement strength of ours. So from that standpoint, that's may be one to sort a trend that we are seeing. In terms of the market in general and sort of how it compares to the crosstie market, it is different, right, because southern yellow pine is the species that's essentially used for utility poles. It is an extremely renewable species. We don't have the same sorts of the issues necessarily in terms of sourcing that product as we do on the hardwood side of things. So we have again a strong procurement network that has continued to develop relationships out in the field that makes us feel pretty good about any expansion that we would see coming along in that particular sector that we would be prepared to handle. So it's a different market than the tie market and that is why we actually have different buyers out there in the field that are handling it as well.

Okay. And then lastly, if there is a demand shift, do you have any inventory management issues or is it solved by price or time?

Yes. It's more, I would say, price. I mean again, unlike the crosstie industry, although you can balkanize ties and essentially speed up the drying process. On the pole side of things, those raw materials are coming in, they are getting debarked and they are getting dried before the are treated, right. So they are not sitting in the yard air drying for a long period of time. You are essentially moving them through the process which is getting more in the door, treated in on the ground and we are in pretty good shape right now. Again, we would welcome an opportunity to see the market grow and us be able to, I think, demonstrate our procurement network and operating network. So that's more a function of price and than time. Time won't be an issue.

Wonderful. Thanks.

The next question comes from Liam Burke with B. Riley FBR. Please go ahead.

Thank you. Good morning Leroy. Good morning Mike.

Hi Liam.

Hi Liam.

Leroy, the last acquisition you made in the RUP space was to create a time management platform and stepping out a competitive advantage against other players that were just treating the ties. Have you made any progress acquiring customers? Or where do you stand in the progress of that effort?

Where we stand is, we continue to have dialogue with a number of different customers from that standpoint. And I think that's going to become recognized as an important piece of our overall supply offering. We certainly believe it's an overall important piece. We think as again things continue to get ramped up from an environmental perspective, that the railroad and utility industries are going to want to partner with a company that with our sort of reputation where they know that when a contract with us to essentially take care of the entire process for them, that it's getting done. It's getting done in the way that they would expect it to get done. So we continue to push that hard. It's not a situation where you just come in and walk in their office and all of a sudden, they award you the business. You have got to earn it. You have got to win it. But again, with where we sit in that whole supply chain network, we think we are in a good spot from a number of perspectives. And we expected that we will see benefits as time moves on. Not only that, but many of these railroads, most of these railroads already have certain contractual relationships in place, right. So you have to let some of that play out as well. So we are basically just doing our best to make our case. So as business comes up that we are in a position to be able to win that business and again demonstrate our capabilities across the entire supply chain.

And on CMC with Stickney, the consolidation is completed. It's up and running. Are there any drags or anything? Or is that project is completed behind you?

Yes. So it depends. So the engineers and the operating folks, they will always tell you, they got different things that they are working on and bugs to work and stuff like that. I would say, big picture, Liam, yes. It's in place. It's running. We are seeing great success with it. We are very happy with it. our people are very happy with it. So yes, it's nice to have that behind us and looking forward on other things. So yes, everything's good.

Great. Thanks Leroy.

You are welcome.

The next question comes from Scott Blumenthal with Emerald Advisers. Please go ahead.

Good morning. Congratulations on the quarter.

Thank you.

Thank you.

Leroy, in terms of the life cycle management for the ties, you mentioned that this is something that railroads have not traditionally done a very good job of. So I guess I have two questions about the whole life cycle management. The first one is, there must be a lot of legacy ties, legacy dumped product out there that's in need of cleanup. I want to know if you see that as a meaningful opportunity? And then I guess on just kind of the whole lifecycle management, how much of that becomes meaningful portion of the RUPS business yet? And if not, when do you expect, how long do you expect that to take?

Okay. So let me start off by, Scott, just wanting to clarify. I don't mean to imply that our railroad customers or the railroad industry has not done a good job with this. It's more to the point that it hasn't really necessarily been a focus of theirs. So we are hoping to come along and help them to understand that it should become a bigger focus. I think they are coming around to that. And so again, we wanted to be and felt we should be just given where we sit in this whole picture that we would be a prime partner to provide a solution for them in that regard. So certainly, you can drive along most railways and see ties at various points stacked along the right-of-ways. I don't know how many are out there overall across the network. Again, to the extent that that's an issue for any particular railroad, certainly we can be helpful. We want to be helpful. And if it provides us an opportunity again to demonstrate our capabilities, then all the better. In terms of that business and where and how it impacts the overall profitability in the RUPS today. It's a small piece. It was a small piece when we bought it. And the expectation was that we could grow it. And again, just provide another linchpin with our overall business model of trying to do everything we can to help our customers solve their biggest challenges. And so when we talk about the $25 million to $40 million of integration and strategic initiative benefits over the next five years, there is certainly a component of that that comes through growing this business. So we have not identified the number that's in there for that. But certainly over the next three, four years, again as certain contracts come up, we would hope to be able to retain some of that business or win some of that business and build that as part of our overall business model. For us, it's probably even less about sort of the dollars that flow through on that. But I think the stickiness that it provides the remainder of our business. I think that's probably the real long term benefit for us from that piece of the business model.

Yes. That certainly seems to be the whole part of the process that's really not been fully addressed until now. In the same segment there, are untreated ties, getting them in an issue in all of your locations? Or is that just concentrated in a few?

In most, but it's really concentrated in our Western plants for sure. That's where we had to pull where we have been hit the hardest. That's where we have seen the biggest impact.

Okay. And there is no opportunity to kind of move things around or that just wouldn't be economically feasible?

It wouldn't be economically feasible. And you would be trading amongst railroads which they are all looking for ties. So it just wouldn't work out.

Understood. Okay. And I guess my last question, if I may, since I know we are coming up on an hour here. The self supply and the PC segment?

Yes.

Can you kind of characterize where we were at this time last year, maybe from a percentage perspective or maybe some other way and compare that to where we are right now?

Mike might have an idea or a better recollection?

Yes. I think we where we are, from a standpoint right now, Scott, is much further ahead. I would say roughly that a year ago at this time we were probably a little over 50% producing ourselves and we are much, much closer to, as Leroy talked earlier in the discussion, much, much closer to where we want to be, especially on the BCC side. So dramatic improvement and quite frankly, when you dollarize it, it's hundreds of thousands of dollars.

I think Scott, you know that was somewhat reflected in the results when you consider the fact that our overall average raw material prices, right, in terms of what we have hedged on the market are a good bit higher this year. So we have probably over close to $2.5 million impact just from higher raw material costs, excluding what goes on in terms of having to buy outside in the market and things like that. So the fact that we were able to have the quarter we had despite those sorts of headwind, I think, is reflective of that change that Mike just talked about it.

Yes. Very good. Thank you. Really appreciate it.

Yes. Thank you. Welcome.

The next question will be from Chris Shaw with Monness Crespi. Please go ahead.

Yes. Good morning everyone.

Good morning.

Just quickly on the utility pole business again. That $8 million in year-over-year EBITDA that you are guidance suggests, how much of that is organic growth from just more demand? And how much of that is from the acquisition or integration type synergies?

I want to make sure that I am addressing the comment here, Chris. So you are talking about. I see, okay. So going back to the adjusted EBITDA slide, okay. So there is an element there that is having the business for the entire year. There is an element there that is price related. There is an element there that is costs related. It probably touches on just about every lever that you can hit on through the overall business, right. So we are getting it on the price side. We are getting it on having the business for the entire year. We are getting in on the cost side, both operating as well as on the SG&A side as well. So it's coming from all different avenues. Part of it's through synergy benefits that we are getting as a result of integrating into the organization. So I don't want to get into specifics of each of the different components, but it comes from all those different categories.

And on the growth side, I guess I am just trying to think how it could grow in the future. But you said, you have all these old utility poles out there that are, I guess, past their useful life. But it sounds like the real demand is coming from the projects, maybe highway widening, what have you. But what will push those utility company, whatever to actually start replacing the old poles without having to because there are some other projects going on?

Yes. I don't know if there is anything that would because just like we see in just about any of those sorts of businesses, there is nobody out there that's really looking to replace anything that they don't feel have to. At a particular moment, everybody typically hoards their cash as much as they can. And I don't think we see really anything different there. I think it's more helpful than anything else. I think you would have to see some real infrastructure failures and stuff like that before you can see some sort of widespread trend in replacement beyond sort of the normalized levels at this point.

So there is nothing regulatory at all with the utility poles in terms of replacement?

Not that I am aware of. Obviously, they are worried about safety and reliability and all those sorts of things. And all that obviously becomes a bigger issue too as you have seen some of the stuff that's come up related to California and the wildfires out there and stuff like that. So I think it's safety and reliability driven.

And you mentioned how it's one area or segment that's your smallest market share, so you have opportunities there. But do you see that more coming from stealing market share or do you think that you could do some further consolidation in that business?

Yes. I think it's mostly consolidation and certainly we are working on, obviously, improving our ability to compete. So we would hope to be able to win some market share as well. But the majority of our growth will come through most likely consolidation of some form.

Great. Thank you.

You are welcome.

Ladies and gentlemen, our last question is a follow-up question and that will be from Mike Harrison with Seaport Global Securities. Please go ahead.

Hi. Just a quick one for me. In the performance chemicals business, you guys mentioned some insurance proceeds that helped in the quarters. Can you quantify that for us? And is that just one-time? Or is there more to come?

Yes. It was about $1.4 million and it was a one-timer. We are still incurring a higher cost for having to go out and buy raw materials due to the New Zealand fire. And in addition to that, the losses that we had in a beginning in late 2017, early 2018 will run through operations. So the $1.4 million is kind of a refund of things that have already run through the P&L on a negative basis. But it is one time. And then I believe we are finished with it.

And just to clarify a little bit, Mike, because we did have some insurance recovery last year related to this. So we had a fire at one of our plants that destroyed one of our plants in New Zealand. And as a result, we have had to source product at higher costs to serve our customers through that time. We have gotten some insurance recovery. First quarter, we got what we believe is the last of the insurance recovery. But we have been bearing the additional cost and everything else related to that business through operations since that incident occurred in late 2017 throughout 2018 and still today until that new plant comes up and is operable sometime mid-2019.

All right. Thanks very much.

You are very welcome.

You are welcome.

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

Thank you everyone for taking the time to participate on today's call. I really thank you for your interest in Koppers and your continued support. Have a nice day, everybody.

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