Good day and welcome to the Koppers Holdings Inc. Third Quarter 2017 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Quynh McGuire, Director of Investor Relations. Please go ahead, ma'am.

Thanks and good morning. I'm Quynh McGuire, Director of Investor Relations and Corporate Communications. Welcome to our third quarter earnings conference call. We issued our quarterly earnings press release earlier today. You may access this announcement via our Web-site at www.koppers.com. As indicated in our earnings release this morning, we have also posted materials to the Investor Relations page of our Web-site that will be referenced in today's call. Consistent with our practice in prior quarterly conference calls, this is being broadcast live on our Web-site and a recording of this call will be available on our site for replay through December 8, 2017. 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 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 Web-site, 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. I'll now turn this discussion over to Leroy Ball.

Thanks, Quynh. Welcome everybody to our 2017 third quarter earnings call. As usual, I'll start by reviewing the latest progress made on our journey to zero harm. In September, we held our second annual Zero Harm Zero Waste Leadership Forum in Pittsburgh, where we convened more than 70 leaders from across the world to reaffirm their commitment to leading states in responsible operations. The forum's agenda included introducing the next phase of our safety development, which is centered on understanding and influencing behavior. In addition, we spent time sharing with each other the challenges, opportunities and lessons learned that we have experienced thus far on our journey to zero. I'm incredibly proud that our team remains steadfast in the belief that if we put our people first, results will follow, and while we're still far from perfect at Koppers, we are demonstrating that safety and profitability can coexist, and when they do, the strength and sustainability of the company improves in a significant way. Now let's talk about our September quarter financial performance, which is our best ever from an adjusted EPS and adjusted EBITDA standpoint, with those numbers finishing at $1.43 per share and $60.5 million respectively. In fact, we shattered our previous high for adjusted EPS, which was $1.20 in the third quarter of 2008, and our previous high for adjusted EBITDA of $57.8 million was also in the third quarter of 2008. Now at a high level, we continued to benefit during the quarter from some market tailwinds in most of our CMC end markets that combined with the benefits we continue to create from our restructuring plan resulted in significant outperformance from an overall Company standpoint. Now the rail business has continued to be soft, which by extension translates to a softer creosote market. Our strategy…

Thanks, Leroy, and hello everyone. Let's begin by referring to the slide presentation that we provided on our Web-site. On Slide 4, sales were $385 million for the third quarter, which was an increase from $371 million in the prior year quarter. Our CMC business reported higher sales prices for carbon pitch and carbon black feedstock in Australasia and Europe, and higher sales volumes for carbon black feedstock and phthalic anhydride. These were partially offset by lower carbon pitch and creosote volumes. The PC business experienced higher sales volumes in North America for copper-based wood preservatives, as this trend continued to be favorable for repair and remodeling markets and existing home sales. As forecasted, the RUPS business was negatively affected by reduced sales volumes of crossties and lower railroad bridge services, and these were partially offset by higher volumes for utility products in Australia. Moving to Slide 5, operating profit was $35 million, compared to $28 million last year. On Slide 6, adjusted EBITDA was $61 million, compared with $51 million in the prior year, and this was due primarily to a higher profitability from the CMC segment partially offset by lower profitability in the RUPS segment. For the quarter, CMC profitability improved significantly from the prior year period, primarily due to lower raw material and logistics costs in North America, higher sales prices in Europe and Australasia related to carbon pitch, and our restructuring savings. PC's profit margins were unfavorably impacted by higher raw material costs and these were offset by benefits from higher sales. The profitability for RUPS was negatively affected by reduced sales volumes of crossties and railroad services, combined with reduced margins on commercial crossties as a result of an inventory oversupply in that market. The negative impact from these factors was slightly offset by favorable…

Thanks Mike. Now taking a look at the outlook for each of our business segments, I'll start with the Railroad and Utility Products and Services business. In general, the railroad has scaled back and they have focused on cutting their operating costs and working capital. Now, while our treating volumes are down only about 10% this year, untreated tie volumes were down around 20% with untreated tie purchases down about 25%, and 30% for untreated tie purchases in the third quarter alone down this year versus last year. During 2017, the Class I railroads have slowed their infrastructure spending, but I believe we are starting to see signs that we are at or pretty well close to the bottom. At the present time, I expect the first half of next year to look a lot like the first half of last year, but volume should start to slightly pick up the further into 2018 that we get. Now according to the Association of American Railroads or AAR, the total U.S. railcar load traffic for the nine months ending September 30, 2017 was up 3.8% year-over-year and intermodal units were 3.5% higher than the prior year period. Now together, the total combined U.S. traffic for the year-to-date period through September 30 increased 3.6% compared to last year and is expected to continue posting mid-single-digit year-over-year growth. Now, while there's been a decline in coal transportation, all other major categories of freight have exceeded expectations thus far this year. Now, the signs of life are still limited and the data can vary by a month. For example, the AAR reported that in September, U.S. railroads originated 2.3% fewer carloads compared with the prior year period, but originated 3.8% more in intermodal traffic. Now in combination, U.S. carload and intermodal originations in September…

[Operator Instructions] We have a question from Liam Burke of B. Riley FBR.

Leroy, could you give us a sense on the KPC side of the business, how your capacity is matching your current demand or forecasted demand?

Liam, we're still tight from a capacity standpoint. In fact, I had mentioned about some additional productivity projects for next year. Some of them are designed around continuing to debottleneck and improve our capacity at our existing locations. So, we are hopeful that by the time we get through 2018 that we will be pretty much in balance from a capacity and demand standpoint. So, if not right on, then pretty close, but we still have some more work to do, there's still product that we have to go out and buy on the open market in terms of our intermediates, and we think that with the projects for next year we can get most of that taken care of and head into 2019 I think in pretty good shape.

So if I looked at your capacity increase to address your current demand levels, you wouldn't get any benefit in 2018, any offset from the anticipated increase in raw materials costs?

Actually that's not so, Liam, and I'm sorry if I led you to believe that, I mean because we've had capacity increases that we've been putting in place this year which we've not received a full year's benefit. So we will have benefits in 2018 to help offset some of our raw material cost increases. But there will be further capacity increases in 2018 that should help out in 2019. The capacity increases for this year that will help us next year are not going to fully offset what we expect in terms of our raw material cost increases, but they will meaningfully I think offset a good part of that number.

Great. Thanks Leroy. And Mike, on the cash flow statement, you had a pension pay or outflow. You also have increased capital expenditures. There was also a step-up in accounts receivable. Was there something unusual in the quarter or during the year that created that accounts spike?

Liam, actually no. That comparison, it goes back to the December year-end and that's Q4 sales, and our Q4 sales are always the lowest in our four seasonal quarters. So Q3 is normally the highest sales month. So, what we're seeing at the end of September in receivables compared to the end of December of last year is a step-up, a lot of that related to the seasonality. In addition to that, we do have more international sales, and the international customers are slower payers, so that's impacted a little bit as well. And we have had a pickup in CMC sales, and on that side of the business we have a little bit longer payment terms. So when you add all those things together, you see that relatively large increase in accounts receivable from the end of September compared to the end of December of last year.

Okay. So, there should be some trend, a reversal trend in the fourth quarter?

Correct.

Great. Thank you, Leroy. Thank you, Mike.

We'll move next to Chris Shaw of Moness, Crespi.

Wanted to ask about the CMC, the pricing for pitch and carbon black feedstock in Asia and Australia, I'm curious why you expect the pricing to come back down. I would think that the coking capacity is going to come back online in China and all, or was it just really a really big temporary spike and it's just going to moderate, I'm unclear with why that would…

I mean things have moved up quite quickly here over the past couple of quarters, and I think it just – I think there's naturally going to be some market catch-up that will bring pricing back a little bit. I think I mentioned in my prepared comments that we still expect next year to be well above our recent years' average pricing. So, I think we're just trying to be a little bit cautious in terms of our outlook of the sustainability of such a sudden sharp spike upwards. Obviously, none of us can sit here and predict with great accuracy as to where it's going to end up, but with as fast as it's gone up and as strongly as it's gone up, I think we're just figuring that at some point here out over the next 6 to 12 months that we're likely to see some pullback, but still have pricing average, like I said, pretty well above recent historical averages.

Okay, that makes some sense. And then, in rail, I just went through the article just before I got on, but I thought I had seen something from the RTA relative to sort of this disruption from the hurricanes or maybe just wet weather in general, something about lumber causing some disruptions in the rail tie markets, and that was both I think maybe a short-term negative but a longer-term positive. Do you have any idea of what they were suggesting there [indiscernible]?

So, as it relates to tie procurement, you are always dealing with I think the weather in terms of helping you or hurting you in terms of being able to get what you need from a raw material standpoint. When you're dealing with unusually cold winters, wet springs, hurricanes, things like that, they could have temporary disruptions which affect supply, and I'm sure there's some of that going on with the hurricanes. The fact that the hurricanes came through in a timeframe where quite frankly tie procurement has been pretty lackluster anyway, I don't think it's going to have as big of an effect as it would have had in periods where there was stronger demand. So, from that standpoint I don't see it having any real measurable effect in terms of pricing, but sometimes it takes a couple of quarters for that stuff to work through.

Okay, great. Appreciate it.

[Operator Instructions] It appears that we have no further questions at this time. I'd be happy to return the call to Mr. Leroy Ball, President and Chief Executive Officer, for any concluding remarks.

Okay, thank you, Leo. Thanks once again everybody who joined this morning's call. I hope that we were able to give you a good sense about where the Company is at, at the current point in time, and the opportunities that lie ahead for us. So, thanks everyone again. Have a great day.

This does conclude today's Koppers Holdings Inc. Third Quarter 2017 Conference Call. You may now disconnect your lines and everyone have a great day.